Six Flags Entertainment Corp (FUN) 2017 Q2 法說會逐字稿

Good day, and welcome to the Cedar Fair second quarter conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Stacy Frole.

Please go ahead, ma'am.

Thank you.

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 2017 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 this call the morning are Matt Ouimet, our Chief Executive Officer; Richard Zimmerman, our President and Chief Operating 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'd like to turn the call over to Matt Ouimet.

Matt?

Thank you, Stacy, and good morning, everyone.

On today's call, Richard, Brian and I will context for our results to date as well as provide some perspective on our expectation for the balance of the year.

As we stated in this morning's release, we expect 2017 to be another record year.

Although results for the first half of the year were softer than we would have preferred, there are several factors which support our forecast of an eighth record year.

First, our July results were solid.

In fact, this was one of the best Julys in the company's history.

Second, record sales of season passes and season pass related products produced a $20 million increase in deferred revenue as of the end of the second quarter.

Obviously all of this will ultimately be recognized over the balance of the year.

Third, group bookings for the balance of 2017 are trending meaningfully ahead of the prior year.

This validates the recent upgrading of our catering facilities and the expansion of our sales teams.

We have roughly 40% of our anticipated attendance still in front of us, including our Halloween programming, which produce some of our biggest days of the year.

And new this year, we are expanding WinterFest to 3 more parks, which will add roughly 70 more operating days in 2017 and will serve as a strong incentive for 2018 season pass sales.

I know our investors have always valued our commitment to transparent communication, including snapshot updates beyond the quarter end.

In return, I'd appreciate it that our investors understand it is difficult to extrapolate short-term trends to full year results.

With that caveat, I want to be clear that while we expect this to be another record year, our path to achieving our long-term adjusted EBITDA target of $500 million a year earlier than originally planned has gotten more difficult.

It will be important for us to maintain the strong attendance and revenue trends from July into the busy month of August, and for our parks to deliver on their multi-week Halloween and WinterFest events.

While the math supports our 2017 forecast, on a more qualitative basis, the experience we are delivering to our guests is the ultimate underpinning to our success in both the near and long term.

Richard can do a better job than me of helping you understand how the decisions we make drive a very real difference in the quality of the guest experience, and in return our financial performance.

Richard?

Thank you, Matt, and good morning, everyone.

As you know, continuing to invest in new rides and attractions is an important lever in our business model.

Over the past several years, we have created a disciplined internal process that supports our capital investment decisions.

Through this process, we are transforming our parks into the place to be for fun for guests of all ages.

Our investments are focused on a balanced mix of thrill and family-friendly offerings at each of our parks to sustain our valuable family themed audience mix.

Our 3 largest capital investments in 2017 are exceeding our expectations.

Kings Island is forecasted to deliver the best year in its history, driven by Mystic Timbers, its new world-class wooden roller coaster as well as the anticipation of the return of the park's WinterFest event this year.

Our other 2 major investments, the water park transformations at Cedar Point and Knott's Berry Farm, have not only delivered a great guest experience, but they have also enhanced the water park business model by improving the quality and capacity of our food and beverage offerings, and increasing the length of stay of our guests at these 2 parks.

It is also clear that our ongoing investment in high-quality group catering facilities has differentiated Cedar Fair from other group entertainment options.

Modernizing our catering facilities and our group business model has been a multiyear effort that continues to produce results, both in the year of investment and over the long term.

We continue to view this advance purchase channel as a key area of growth in our parks going forward.

Finally, the expansion of our children's area at Kings Dominion, combined with the introduction of a new Pre-K season pass program, have that park on pace for its best attendance year in more than a decade.

The success of the Pre-K program here and at 2 other parks this year, have us working on plans to roll the program out to additional parks in the near future.

As many of you know, over the last several years we have placed an additional focus on multi-week special events that leverage our unique regional brands, and in some cases extend our operating season.

These events offer a complete immersive experience at a quality and scale no other regional amusement park or entertainment venue can match.

We've already mentioned our award-winning Halloween events in October, when some of our busiest and most profitable days take place.

This year for Halloween, our parks will offer more than 120 haunted attractions, more than 40 hair raising shows and we'll have more than 5,000 monsters roaming our midways.

We plan to carry the success into the months of November and December with the introduction of WinterFest at Kings Island, Carowinds and Worlds of Fun.

This event not only extends the productivity of our parks established asset bases, but also enhances the appeal of our season pass programs.

For WinterFest, these 3 parks combined are projected to entertain an incremental 500,000 guests or 2% of our overall attendance during the last 2 months of the year.

I can assure you that our park general managers and their teams are very much aware of this expectation and are prepared to light up the parks and deliver and immersive experience in a way our guests have never seen before.

The success of our investment so far this year has been somewhat muted by unfavorable early season weather and the related softness in attendance at several of our parks, including our largest amusement park, Cedar Point.

However, with more than 40% of our full year attendance still to come over the next several months, we believe we still have an opportunity to recoup those early season shortfalls.

When weather and more importantly forecasts have been good, attendance at our parks has been strong, and more importantly guests are staying longer and spending more.

We continue with our long-held belief that inconsistencies in weather will average out over the course of a full operating season.

This belief, combined with the solid outlooks for our Halloween and WinterFest events at our parks, gives us confidence 2017 will again be a record year for Cedar Fair.

Now I will turn the call over to Brian to discuss second quarter financials and results through this past weekend in more detail.

Brian?

Thanks, Richard, and good morning.

As Matt noted at the beginning of this call, it's always difficult to extrapolate partial season performance into full year results.

As of this past Sunday, July 30, more than 40% of our forecasted attendance and some of our most profitable operating days are still to come.

First, I'd like to briefly discuss our results for the second quarter before moving on to more current revenue and attendance trends.

As detailed in our earnings release this morning, net revenues for the second quarter ended July 25, 2017, were $393 million which is up $5 million or 1% when compared with the second quarter of 2016.

In the quarter, attendance increased 2% or 134,000 visits to 8.1 million guests.

Out-of-park revenues increased 3% or $1 million to $42 million and average in-park guest per capita spending was comparable with the same period last year.

Excluding the closure of a noncore, standalone water park in September of 2016, attendance on a same-park basis was up 3% or 203,000 visits.

Our attendance growth during the quarter was the result of our strong capital program in 2017, the success of our early season multi-week special events and the later Easter holiday which fell into the second quarter this year versus the first quarter last year.

This was somewhat offset by an anticipated shift in attendance into the peak vacation months of July and August due to the significant investment in our 2 separately gated outdoor water parks this year, combined with higher-than-average rainfall in the Great Lakes region the last 2 weeks of June.

In regards to average in-park guest per capita spending, we saw pure in-park guest spending increase by 1% in the quarter, primarily within our food and beverage category which was driven by the continued growth of our all-season dining and beverage programs.

This increase was offset by a 1% decrease in admissions revenue per cap which we attribute to a higher season pass attendance mix and the recognition of season pass revenue over a greater number of park visits at 3 of our parks that will now be open in November and December.

If you take out the accounting noise from our season pass program and the recognition of revenue on incremental visits over a longer period of time, admissions per cap on a non-season pass base increased 3% during the second quarter.

Sales from season passes and the related all-season products for 2017 have increased almost 10% when compared with the record sales from last year.

The growth in season pass sales is the direct result of increases in both the number of passes sold as well as the average price paid per pass.

Through this past weekend, 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 $193 million, representing an increase of $20 million from the second quarter of 2016.

The 12% year-over-year increase in deferred revenues is largely attributable to the increased sales of season passes and all-season products, and to a lesser extent the recognition of this revenue on the incremental visits at 3 of our parks over a longer period of time due to the addition of WinterFest.

All of this deferred revenue will be fully recognized in the second half of this year.

Moving on to the cost front.

Operating costs and expenses for the second quarter of the year totaled $246 million, representing a modest increase of 1% or $3 million from the second quarter of 2016.

The increase in operating expenses was attributable to normal merit wage increases and the timing of operating supply expenses related to several large capital projects that opened in the second quarter.

I want to assure you that as a team we remain highly focused on managing operating costs as we pursue our long-term strategy to maintain our historically high adjusted EBITDA margins while continuing to invest in the guest experience.

A disciplined approach to expense and capital investment management remains a core initiative to the long-term success of the business.

Meanwhile, adjusted EBITDA, which we believe is a meaningful measure of park-level operating results, totaled $150 million for the second quarter of 2017, up 2% when compared with the same period a year ago.

Turning our attention to results through this past Sunday, July 30.

Based on preliminary results, same-park net revenues during the first 5 weeks of the third quarter were up 1% or approximately $4 million compared with the same period a year ago.

This increase was largely due to a 2% or 106,000 visit increase in attendance.

During the same period, average in-park guest per capita spending and out-of-park revenues were comparable with the same 5-week period a year ago.

When factoring in these preliminary July results year-to-date, net revenues on a same-park basis through this past Sunday were up $1 million to $767 million.

This increase in preliminary top line revenue was driven by a 62,000 visit increase in attendance to 15.1 million guests through the first 7 months of the year and a $1 million increase in out-of-park revenues to $87 million.

Over that same period, average in-park guest per capita spending was down less than 1% to $46.57, due largely to the meaningful shift in attendance mix towards season passes.

The strength of our July performance gives us confidence in our 2017 plans.

Our long-term strategy is working and the fundamentals of our business model remain strong.

Given where we are in the operating season, it will be challenging to fully recover some of the attendance and revenue shortfalls we experienced during the first half of the year, however, not impossible, especially when we take into consideration the addition of 3 new WinterFest holiday celebrations in November and December, and the second year benefit of WinterFest at Great America.

We do believe weather will average itself out this year and our long-term strategic plan is not dependent on any one quarter.

We will continue to monitor trends and make adjustments where we deem appropriate.

But as we've said in the past, if it rains on any given Saturday, you don't change your strategy on Monday.

Now let me shift focus to our balance sheet for just a moment.

We ended the second quarter in strong position in terms of liquidity and financial flexibility.

Our receivables and inventories are at normal seasonal levels and we have credit facilities in place to fund current liabilities, capital expenditures and operating expenses as needed.

At the end of the second quarter, we had $101 million in cash on hand and $739 million in variable rate term debt, before giving consideration to fixed rate interest swaps.

We also had $937 million of fixed rate bonds and no borrowings under our revolving credit facilities.

Of our total term debt, only $8 million is scheduled to mature within the next 12 months.

Based on our current adjusted EBITDA expectations, we anticipate our total leverage ratio at the end of 2017 will be approximately 3.4 times debt to adjusted EBITDA, which is well within our comfort level.

Finally, we're pleased to report that our Board of Directors declared a $0.855 per limited partner unit cash distribution to be paid on September 15.

This is consistent with our previously announced annualized rate of $3.42 per limited partner unit, which represents an attractive 5% yield at today's prices.

And with that, I'd like to pass the call back over to Matt.

Matt?

Thank you, Brian.

Before we turn the call over to questions, I just want to say how proud I am of our team for their hard work and dedication to successfully bolster our talent and competencies in a number of new areas.

We are much better positioned today to optimize each and every interaction with our guests.

And not only does this drive profitability, it delivers a better guest experience as well.

We have high expectations for the remainder of 2017, and we have even higher expectations for 2018.

On August 16, our parks will be announcing their capital plans for the 2018 season and we have a very strong lineup of new rides and attractions, including 4 new rollercoasters and an additional 158-room tower at the Hotel Breakers located on Cedar Point's mile-long beach.

As always, we will continue to work toward generating greater excitement for our guests as well as long-term value for our unit holders.

Now we will open up the call for questions.

(Operator Instructions) Our first question comes from Tim Conder with Wells Fargo.

Just a few questions here, gentlemen, relating to weather.

Can you talk about the -- you talked about how there was some impact in late June.

July, any impact there that you can call out, given the comparables of last year?

And then also discuss how your August weather was last year, and just I guess the setup here for this key month.

Tim, this is Matt.

Look, I think July weather we would tell you was a little bit inconsistent, but not anything that we would say abnormal in one direction or the other.

In August, as you recall last year, had a couple weeks where the weather was extremely warm.

But most importantly, and I think this is what's really important for this call particularly, we're expecting the balance of the year to be average.

And if we just get our average weather that we've had in the last several years, we should be in good shape.

Okay, and then a couple things on your programs here.

The Pre-K program that you called out, maybe you could expand on that a little bit.

And then just give us an update on a year-to-date basis how your unique visitors are trending on the season pass, your daily walk-up visitor, and then your group visitor.

Yes, I'm going to ask Richard to do Pre-K.

Let me take uniques first, Rich.

So we would be down in unique visitors so far year-to-date.

Some of that is obviously reflected in the attendance mix that we talked about that had a greater season pass mix.

But the reality is the largest portion of our unique visitors happen in the July, August and the Halloween timeframes.

And so as Kelley Semmelroth reminds me every year, it's tough to measure uniques in the middle of the year.

But given our attendance trends, we would obviously be down so far this year.

But we'd expect, particularly with WinterFest, to end the year on a positive situation.

Rich, Pre-K?

With regard to Pre-K Tim, important program for us.

As we looked at ways to generate an incremental audience and we looked at the potential barriers to visitation; when we look at the youngest member of the family, we found that that was often one of the decision factors.

So we rolled out our Pre-K program, which targets someone at an early age, gives them a free season pass to come, as long as you register by a certain time in late spring.

The mechanics work for us.

We're very pleased with the penetration rates and the response we got in all 3 markets, but particularly at Kings Dominion, marrying it up with the children's product we put in there in Planet Snoopy this year, really the message resonated.

So we were pleased with its performance and think it's got potential in rollout next year.

So the Pre-K ticket, if they register by a certain point, paired up with obviously a parent or a caretaker's season pass, and it's at Kings Dominion, and what other 2 parks, Richard?

This year, Worlds of Fun and Valleyfair.

And I want to just add, the reason that we're so confident in that program is because of our CRM system and because of our revenue management system.

We've really been able to measure the incrementality of that and so it gives us great confidence that on balance we picked up a significant number of people who we wouldn't have seen before.

And so that's why Richard, I think, is leaning into it.

Our next question comes from Christopher Prykull with Goldman Sachs.

So just trying to get a better sense for when you look at the first half or results through July, beyond weather, it just seems like industry-wide trends have been a little bit softer.

Are you seeing anything in consumer behavior either before the customer gets to the park or once they're actually there that's concerning as we head into the back half or into next year?

And then has there been any notable resistance to price increases year-to-date?

I'm not surprised you asked the question.

So the way we think about is there are 3 things that you've got be reflective on.

One is consumer behavior.

Is there a change, a systemic change in consumer behavior?

With 11 parks, we have the opportunity to look across a wide spectrum.

And if it was a systemic issue, you would see it across at least the majority of the parks.

And that is not the case.

As Richard referenced, I think Brian referenced as well; several of our parks are having outstanding years.

So we don't see a systemic change in consumer behavior.

The second thing you have to look at is your strategy.

How do we feel about the quality of the investments we've put in place?

Did they open on time, those type of things?

And we feel really good about our strategy, particularly water parks have helped us this year, the 2 largest of our parks.

And then the third is execution.

And you have to ask yourself, did we get sloppy.

Did we lose urgency?

And that clearly is not the case for us.

So I don't think there was anything evident in the first half of the year that I could tell you we would have done differently.

But obviously we're paying close attention.

And then as I mentioned earlier, we're kind of leaning into the product that we have for '18, and quite honestly 4 rollercoasters across some of our biggest parks should make an impact in '18.

Chris, this is Brian.

As far as pricing is concerned, with a bifurcated economy, there's always going to be pressure in certain channels when it comes to pricing.

With that said, we continue to lean into a period where demand is high.

So as you can imagine weekends, Saturdays during the core season, and then as we get into haunt, those are high-demand periods.

Then we'll lean into pricing.

But at the same time, we've got programs out that are geared towards the value-oriented consumer.

So as I said on the call in the prepared remarks, if we sort out the noise of season pass and some of the accounting related to those deferred revenues getting spread over a longer period of time with visitation from season pass, and we look at just the non-season pass tickets; we're driving a 3% admission per cap increase year-to-date, which we feel really good about in this economy.

And then when we look at how guests are spending in the park, our in-park spend on pure in-park items, food and beverage primarily, usually the big leader, merchandise, et cetera; that's up year-to-date.

So I think as we think of pricing, it's again, it's got to be geared towards both the bifurcated economy, the haves and the have-nots, or the benefit-oriented folks and the value-oriented folks.

But we feel really good about where we're at right now.

That was helpful.

And then I guess just on the $500 million target, given the results through July obviously implies an acceleration in growth in the back half.

I'm just trying to gauge your confidence in that target.

And can you maybe help frame the puts and takes that would get you there, versus what would happen for you to come in slightly below?

Chris, this is Matt.

We don't try to be very coy on these calls.

This is going to be a little bit of a challenge for us to get to the $500 million a year earlier than we had originally forecasted on our long-term plan.

That being said, if the July trends continue, we would expect that would drive us to the point.

It was 2% up in attendance in July.

If that continues, we'd feel pretty good about our $500 million.

And then I will tell you, and we're not as good of salespeople as maybe others are.

I have real high optimism around the WinterFest activities.

These are compelling.

We're investing pretty heavily to deliver the WinterFest.

And if that meets or exceeds our expectation that would be the trigger to get us to over the $500 million.

Okay, great, and just one last one.

Can you provide any further color or details on the Cedar Point sports complex year-to-date in terms of performance?

Is there an update on new facilities at other parks?

I believe you announced a new indoor facility at Cedar Point.

Anything interesting to share there?

And then sort of how has the visitation related to sports translated to park spend and attendance or length of stay at your hotels?

So I'm going to give you a little abbreviated answer here, Chris.

Because there are still negotiations going on, on the indoor in Sandusky and on another location.

But the macro I'll give you is the sports complex has booked and is delivering more than twice our expectation of tournaments in the first year.

And so we feel really good about that.

We are working closely with those to translate those into ticket admissions into the park, but we're not going to quantify that separately.

So I would tell you, the amateur sports initiative remains very healthy with us.

It also obviously drives not only incremental admissions, but certainly incremental hotel rooms.

And that season of sports complex season, even the outdoor, is expanding beyond the period of time when the park is open.

So it will help our hotels when generally they're empty.

So we're very positive so far, but still in, and it seems appropriate to say, early innings.

Our next question comes from Steve Wieczynski with Stifel.

So I want to go back to the $500 million target.

I'm probably beating a dead horse a little bit here.

And I'm probably actually reading into this too much.

But if I go back and we look at your July 6 release language around the $500 million target, to me it sounded a little bit more pronounced that you guys felt more comfortable 4 weeks ago versus what you put in the release today.

So I guess what I'm getting at here is am I reading too much into that or were you guys maybe expecting a little bit more out of July?

No.

You're not reading too much into it.

I think if you were sitting at our table, you would have heard those same conversations.

And I think we were hoping for a little more out of July.

The building blocks to still get there, as we started to talk about, including the $20 million of deferred revenue that's sitting in the balance sheet; is one of the reasons that we still feel confident in our ability to approach that number.

But I never want to get out over our skis when we talk to our investors.

And so it's going to be a challenge, but we still feel like we're going to get there.

And then second question on pass sales.

It sounds obviously like pass sales continue to move along pretty nicely at this point.

Is there any way you can break down where you're seeing an uptick in pass sales?

And what I'm getting at here is the parks where you've invested more or adding additional days, have you seen those regions seen a pretty nice uptick in pass sales?

Yes, the best example we've got is Kings Island, which has always been one of our largest season pass bases to start with.

But the announcement of WinterFest, which did exist there for a small number of years, has really served as a catalyst for more season pass sales there.

And they're not the only example this year.

But quite honestly, our CRM system which has now been in place for 4 or 5 years, has allowed us to not only renew at higher rates across the board, but prospect for new season passes.

And then Richard mentioned a very successful program which was our Pre-K program.

So I think you're going to continue to see season pass units grow.

And we didn't touch on it much today, but the season pass related products, such as dining and beverage and photo and even Fast Lane, season pass Fast Lane, all continue to increase in penetration rates.

Our next question comes from James Hardiman with Wedbush Securities.

I guess if Steve beat the dead horse on the $500 million, I'm going to pretty much bury this thing at this point.

But I was hoping we could run through some numbers.

So basically revenues are down a percent in the first half, EBITDA is down 8%.

It needs to grow 4% to get to that $500 million.

So you're talking about pretty significant growth in the second half by my math, about 7% EBITDA growth.

So I guess hopefully I got that math right.

But my 2 questions would be I guess, one, what do revenues need to grow for you to get to that $500 million?

I guess another way of asking that is what's the sort of margin benefit?

And secondly, to the point about July relative to the rest of the second quarter, July revenues being up 1%, is 3Q growth of 1% in revenues going to be enough to get you to that $500 million?

Because it would imply a pretty massive increase in the fourth quarter just given how small it is relative to the rest of the year.

And I know you have WinterFest going on.

But just want to make sure that I've generally got the phasing correct as I think about modeling the back half.

James, it's Brian.

And I won't get into necessarily all the specifics.

But I will tell you that your general math is pretty much spot on.

A 1% continuation from July, which is a little north of 1. It's maybe a little closer to 1.5.

That isn't going to be enough.

We need to see more lift in August.

But as Matt said, knowing that we're sitting on $20 million worth of deferred revenue at the end of Q2, that sitting there, knowing what we know in terms of our bookings on not only resorts but groups the rest of the year, some of those initiatives gives us confidence that there is a path.

But you're exactly right.

It's not necessarily the easiest, which is hopefully what came through in our prepared remarks.

$500 million is not off the table, but it's going to be really hard.

Okay, that's very helpful actually.

And just as the follow-up to that, the deferred revenue in 2Q, the reason for some of that, I was assuming that you'd get a lot more of that in 4Q.

But how should I think about realizing those deferred revenues in the back half?

Is that -- do you get a significant amount of that in the third quarter as well?

No doubt, I mean the parks we've got essentially 5 parks that are going to have operations in Q4, right, the 3 new WinterFest parks, a second year at Great America's WinterFest and then Knott's Berry Farm.

So the balance of the properties, that deferred revenue that's their portion, is going to all be coming through essentially a big chunk in Q3.

Of course, haunt is big for a lot of our parks.

So that will happen in October as well.

But there's definitely pent-up demand.

I think we saw that in July, right, I mean the pent-up demand from Q2 started to come through in that attendance lift that we talked about for the month of July.

We would fully expect there's more of that to happen in August.

And if we are going to get to $500 million a year earlier than originally planned, we're going to need that pent-up demand to happen in August and September as well.

Got it.

And then lastly from me and I think we all agree that maybe the first half wasn't quite where we expected it to be.

But one of your comments, Brian, made it seem like maybe what you guys were expecting wasn't exactly in phase with what The Street was expecting in part due to the accounting noise that you spoke to.

Can you just walk us one more time through how we should think about the longer operating season for the year, and then how that impacted, whether you want to do a second quarter or the first half, how that impacted attendance per cap EBITDA, how we should think about all that?

Yes, sure, James.

So as we think about this, I think one of the things that you have to keep in mind and we keep reminding ourselves of this as well is that this is the first time through this for a multitude of parks as far as WinterFest is concerned.

And so as I said on the call, we are spreading revenues related to season passes and multi-visit tickets as well as the all-season products like dining and beverage over a longer period of time or maybe what's more appropriate to say is over more visits.

And so we've assumed a certain visitation at each one of the parks, as Matt mentioned.

A park like Kings Island with WinterFest, it's one of our largest season pass based parks.

So we think a big chunk of that visitation for that event will be season pass related.

So it's probably having a bigger effect on spreading their revenue out a little bit more than maybe say a park like Worlds of Fun, which while having a nice season pass base, it's not nearly as big.

We would anticipate their mix of visitation may be a little bit more skewed toward single-day visits.

So we think there is definitely a spreading out of revenues related to those all-season or multi-visit types of products.

But we're going to learn.

This is the first year.

And so I can tell you one thing for sure.

We'll be smarter after we see how the visitation happens this year.

For the most part, we've assumed about a little more than one visit on average per pass related to the WinterFest at those parks.

And so that's having a meaningful effect, whether you look at the second quarter or you look at the year-to-date numbers.

That definitely has an impact on the draw and the early season revenues.

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

I wanted to ask about, I guess, bonuses and incentive compensation given that it's become something of an issue for the group with your peers accruing meaningful compensation.

Can you hear me all right?

(inaudible) for us.

We are bonus based upon an adjusted EBITDA target established by the board.

And then we have a long-term incentive that's a 3-year cumulative adjusted EBITDA.

Okay.

So my specific question was, if you guys don't hit the $500 million forward target a year early this year, is there any impact in terms of accruals for bonuses or incentives that would be meaningful?

Yes.

So the way our program works is there's 2 primary components for incentive comp, very different than maybe some others in the industry.

But there's the STI, the short term incentive, which is based upon an adjusted EBITDA target that the board establishes annually with a significant -- the comp committee determines and the board approves.

And then there is a cumulative.

At that time, they establish a cumulative 3-year adjusted EBITDA target, which is our LTI target that is the 3-year cumulative effect.

So if we miss this year both STI in the current year and the LTI over time for its part, this year's role in 3 years, programs would be -- would result in a reduction in the compensation for management.

There's also a cliff associated with that.

And it's a 90%.

If we miss our target of the 90%, at least on the STI -- I don't remember the LTI off the top of my head -- then it would be 0.

Can you give us some sense of the magnitude of that compensation that we're talking about?

Probably not appropriate for this call.

It's all disclosed, if you will, if you want to look in the proxy.

The thing I want to go on the record as saying is this management team is going to do its absolute best independent of the compensation program.

It's just the way we're wired.

And obviously, it's to our economic advantage to deliver better results.

And history would say we've done that.

But it's enough to keep the pressure on us, but it's not the primary driver.

Okay, that's fair.

Now one other thing I was just bigger picture, wondering if you could address.

One of the fundamental investment theses for the group has been that there's not really construction of meaningful new theme parks happening.

It hasn't been happening for a long time.

No sense that that's changing right now.

I think there's been some discussion from some other quarters arguing that that's a bunch of baloney.

That, in fact, there's meaningful new construction pointing to some LEGOLAND development, some park coming back to Houston, a shopping mall in New Jersey.

Just big picture, I was wondering, Matt, if you could give us your sense.

Is supply an issue in this group?

Is it an advantage relative to others?

How would you describe the supply dynamics in the theme park industry at this point?

Yes, it's a fair question, Barton.

And I like your term, baloney.

I'm not sure what to do with it right now.

But look, I've been in the industry as long as anybody in the regional amusement park industry.

And I do know that the barriers to entry are real.

I think you could see a couple additions.

LEGO is probably the most likely to occur, assuming they can get through the zoning.

But it's also evidence of just how difficult it is to get something done.

There's been the rumor mill about -- I think it's called Greenland in New Jersey or at the Meadowlands Park.

That's been out there for a long time.

I can't tell you the probability of those at this point in time.

But history would tell you, not only is it difficult to get one open, it's difficult to make one successful.

So I don't really -- at least for our portfolio, I don't worry about those elements.

Candidly, one of our most successful parks sits in the most -- the second most competitive market in the country, which is Knott's Berry Farm in Southern California.

But I would not be shorting a stock simply because they're talking about Greenland in New Jersey.

Our next question comes from Mike Swartz with SunTrust.

Just wanted to kind of drill into the impact of the closure of Wildwater Kingdom last fall and the impact, I guess, in second quarter was about, looks like 69,000 visits.

Maybe quantify what the impact was to per caps revenue, and then maybe how to think about the similar impact as we sit here in third quarter.

Mike, this is Brian.

So as it relates to Wildwater Kingdom, let me say part of the motivation for closing that park after '16 was as you look at it on a full year basis, it wasn't a meaningful contributor at the revenue or EBITDA level, particularly at the EBITDA level.

Last year for the full year, it would have generated attendance probably a little north of 200,000 visits.

Now as we look at results through the end of July, and you're probably looking at maybe 3/4 or so of that is the impact through those July results.

So as we think of the balance of the year, there will be a little bit more impact to attendance, but not a meaningful needle mover in terms of EBITDA contribution.

And then just I think on your July update you had indicated that currency had an impact on some of the per caps revenue.

But it doesn't seem like you've outlined that here.

What was the overall impact of currency in the quarter?

And then just given where the Canadian dollar has gone since, call it June-July, how to think about that in the third quarter.

Yes, sure.

So I would tell you year-to-date the impact of currency, Mike, has probably been comparable or in line with where it was last year, not materially different.

No doubt within the last several weeks we've seen the Canadian dollar strengthen.

And so as we look going forward, that's encouraging.

But again, that's something that is so far beyond our control.

That's one of those macro factors like weather that we're not necessarily doing anything to hedge it.

And so it will be what it will be.

But we definitely like the momentum that we've seen over the last several weeks.

(Operator Instruction) Our next question comes from Matthew Brooks with Macquarie.

First, a follow-up on the sports park one; was it a tailwind at all for the second quarter results, or was it still too early, given it's just opened?

I know you referred to double the expectation in terms of --

Yes.

No, it was not.

It was not part of the tailwind.

I guess maybe I'm not interpreting your question.

It has been a net positive versus what we anticipated.

Right, and more generally on sort of the acquisition landscape for the industry, I just wonder if you can sort of review what kinds of assets do you think would sort of fit into your portfolio, and maybe as well how your MLP structure would actually give you an advantage perhaps.

Yes.

I think history kind of describes why we make a good acquirer, for 2 reasons.

One is I think we're very good at integrating these into our overall systems and structure.

And so we bought -- I can name both a handful of family parks we bought using current -- in each case, we used our MLP structure and used the unit as currency.

And then in the Paramount acquisition, we obviously raised debt and paid some cash.

So we're a good acquirer.

We can tuck things in under the MLP if, in fact, the seller is motivated to do that, which most of the individual owners would be.

So we're an acquirer if the right assets come to market.

There's only a handful of assets out there that would probably fit well in our portfolio.

But we're an acquirer if that would happen.

And if you were looking to add something, is there sort of like a critical mass or size of a park where you would start to look at it?

Like, maybe it has to have a million visits or something like that.

Yes, there are some that would fall below the radar.

I don't know that it's an absolute filter of a million.

But there are some that would fall below the radar, because they probably would not get prioritized from a capital allocation standpoint.

But again, the ones that are out there that are running and are running successfully, are all public knowledge.

On capital spending, can you tell us first, how much you spent in this last quarter?

And just remind us, what do you expect to spend for the full year?

And I know you're going to make an announcement soon.

But maybe how much the budget you think is in total for next year.

Sure, Matt.

As we think about going forward -- what we've said in recent conversations, in calls, is that the capital program to drive the kind of growth that we're looking for in top line revenue and EBITDA is probably going to be in that $130 million to $140 million range for the core.

As we think about those projects that sit outside of that Matt alluded to earlier on the call, the sports complex.

You know we've talked on previous calls about expanding our accommodations portfolio.

Those amounts or those projects would sit on top of that investment.

I think what you can expect us to do in the next long-term plan is to begin to articulate our capital program, at least around the core in terms of a percent of revenue again.

I think we like the discipline internally that that drives.

And I would expect that that will sort some place probably into that 9.5% to 10% type of range going forward.

As far as current year is concerned, we have spent -- I know that number isn't out there.

But what you'll see on the cash flow statement in the Q is something close to about $125 million in CapEx through the first half of the year.

Our next question comes from Tyler Batory with Janney Capital Markets.

Just 2 quick ones from me.

Can you talk a little bit more about the results at the water park expansions and how those compared against your expectations?

And then also, when you look at the new events here, WinterFest, can you talk about your expectations for how those could end up driving pass sales in 2018?

Let me take that one, Tyler.

It's Richard.

When we think about the WinterFest impact, I'll take that one first.

I referenced in my remarks that it could be as much as 500,000 expectation, in terms of total attendance, 2% of our total.

What we saw last year in our first year at Great America, was substantial and significant interest.

So we anticipate that it will be very meaningful in terms of its impact on 2018 sales, which typically we would go on sale in late August.

So we would expect to see this year, what we saw last year in the first year at Great America, and we were pleased with that.

In terms of the 2 water parks, in spite of some weather issues that we referenced in the upper Midwest, I will tell you that from a portfolio perspective, the investments in the water parks have performed really, really well.

A couple things we did, we brought both of the water parks up to what I call our water park standard.

We have been investing in our water parks for several years.

We think it's an important key component in driving value to the season pass.

But the other thing we also did, and this is, I think, part of our longer-term strategy, we invested in high-end food engines, and really upgraded our food and beverage capacity within the water park setting.

So part of the challenge you always have in a water park is our guests don't always have their wallets with them.

But what we've seen is a tremendous increase in our all-season products.

And from a season pass perspective, particularly with all-season dining and beverage, our guests and our season pass holders want to use them not only in the hard ride parks, but also in the water parks.

So as you continue to see our emphasis on season pass, we think water park plays a meaningful role.

Yes.

I just want to punctuate a couple things he said.

One is water parks play a very meaningful role in the appeal of the season pass program.

And both Cedar Point and Knott's Berry Farm, I expect have record attendance at their water parks this year.

The second is we've improved the economic engine of the water park by finally giving guests enough food options and capacity, so that they can comfortably buy something, sit in the shade and stay longer in the water park.

So I think not only is it a better experience, it's a better economic model.

That concludes the question-and-answer portion for today's call.

I will now turn the call to Matt Ouimet for closing remarks.

So I'm going to go off script a little bit, which will make Stacy nervous.

But look, I thought the quality of the questions today were spot on.

So I appreciate the diligence and the investment everybody makes in following and supporting Cedar Fair.

I know many of you on the call have had the opportunity to visit a Cedar Fair park this summer.

For those of you that haven't, I encourage you to take time to visit one or more of our parks to truly experience what differentiates Cedar Fair from others.

Back to you, Stacy.

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, and we look forward to speaking with you again in about 3 months to discuss our third quarter results.

That concludes today's call.

Thank you for your participation.

You may now disconnect.