Six Flags Entertainment Corp (FUN) 2017 Q4 法說會逐字稿

Good day, and welcome to the Cedar Fair Fourth Quarter and Year-end 2017 Earnings Conference Call. Today's conference is being recorded.

At this time, I'd like to turn our conference over to Stacy Frole. Please go ahead.

Thank you, Evan. Good morning, and welcome to our 2017 year-end conference call. I'm Stacy Frole, Cedar Fair's Vice President of Investor Relations. This morning, we issued our 2017 fourth quarter and year-end earnings release. A copy of that release can be obtained on our corporate Investor Relations' website at ir.cedarfair.com or by contacting our Investor Relations officers at (419) 627-2233. On the call this morning are Richard Zimmerman, our President and Chief Executive Officer; and Brian Witherow, our Executive Vice President and Chief Financial Officer.

Before we begin, I need to caution you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements.

You may refer to filings by the company with the SEC for a more detailed discussion of these risks. In addition, in accordance with Regulation G, non-GAAP financial measures used on the conference call today are required to be reconciled to the most directly comparable GAAP measures. During today's call, we will make reference to adjusted EBITDA as defined in our earnings release. The required reconciliation of adjusted EBITDA is in the earnings release and is also available to investors on our website via the conference call access page.

In compliance with SEC Regulation FD, this 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 Richard Zimmerman. Richard?

Thanks, Stacy. Good morning, everyone, and thank you for joining us. As you can see from our earnings release this morning, we delivered record revenues in 2017, driven by record attendance and guest spending as well as the strong performance of our employees throughout all of our operations. However, our full year 2017 adjusted EBITDA, which was down less than 1% from last year's record results was softer than we had expected due to higher operating costs combined with lower-than-anticipated attendance growth. On our third quarter call, we discussed the attendance challenges for our parks in the Great Lakes region during the peak vacation months of July and August due to the unfavorable weather patterns on traditionally high attendance days. Although, we saw record results in the fourth quarter with strong guest demand for our Haunt and WinterFest events, this was not enough to fully overcome the shortfalls we experienced earlier in the year.

At the same time, it is important to note that we made many core capital investments in 2017, which will have significant long-term benefits well beyond this past year. For example, the major water park expansions at Cedar Point and Knott's Berry Farm created additional capacity, expanded the regional destination appeal of both parks and proved to be compelling draws for our Season Passholders. This resulted in record revenues for each of these properties in 2017, and we expect both of them to be equally impactful in 2018.

During the year, we also expanded our food and beverage capacity at all of our parks, along with new group catering facilities to help service our popular All Season Dining and all-season beverage programs as well as the continued build up of our B2B group business. The addition of our WinterFest events at 3 more parks was yet another step in the process of extending our seasons and broadening these attractive offerings to our guests.

Other 2017 investments that will serve us well for many years include the introduction of a world-class wooden roller coaster at Kings Island, the addition of the Cedar Point's sports complex and the renovation and expansion of the Cedar Point Express Hotel. Largely because of these new attractions and the excitement around a robust capital program in 2018, I'm pleased to report that sales from our 2018 advanced purchase commitments led by season passes are up 10% through the end of January when compared with the same time last year. This increase is across all advanced purchase channels and more importantly, it results from increases in both the number of units sold as well as the price per unit.

Our strategy has been and will continue to be focused on leveraging our strengths to achieve both near-term and long-term growth, so we can confidently deliver the distributions our investors rely on year after year. While we would have preferred to report another year of record adjusted EBITDA, we are pleased with our ability to maintain adjusted EBITDA at the record levels we produced last year. We firmly believe we are well positioned to produce record results again in 2018 and maintain our average 4% growth trajectory well into the future, similar to the growth we have achieved over the past 6 years. In doing so, we remain committed to a steady 4% increase in our annual distribution rate going forward, making FUN an attractive investment for many years to come.

At this point in time, I will turn the call over to Brian to review our 2017 results in more detail, and then I will discuss our plans for 2018 and our longer-term outlook. Brian?

Thanks, Richard. While this past year presented its share of unique challenges, I want to take a moment to highlight the impressive achievements of our parks. In 2017, we achieved record revenue through increases in both the tenants and average in-park guest per capita spending. We completed a $1.5 billion refinancing to lock-in historically low interest rates, extend maturities and optimize capital structure flexibility. And we announced a 4% increase in our annualized distribution rate to $3.56 per unit for 2018, which became effective for the December 2017 distribution payment.

And as Richard said, we achieved these accomplishments while also advancing many key long-term initiatives that we expect to fuel additional growth. Looking forward to the 2018 season, although, still very early in the year, we are already seeing positive trends in long-lead indicators, including season pass sales, All Season Dining and beverage programs, group bookings and advanced reservations at our resort properties.

Now onto the financials. Our value-creation strategy is rooted in our 30-plus year history of delivering steadily increasing results. In 2017, we reported revenue growth of $33 million or 3% to $1.32 billion. This was driven by record attendance of 25.7 million guests and record average in-park guest per capita spending of $47.30. For modeling purposes. During the fourth quarter, we entertained 4.4 million guests, reported average in-park guest per capita spending of $47.59 and generated out-of-park revenues totaling $24 million.

Excluding a non-core standalone water park that was closed in September of 2016, attendance on a same-park basis for the full year 2017 increased 3% or 856,000 visits and average in-park guest per capita spending was up $0.17. We are very pleased with the balanced growth we continue to generate across all areas of our business. In 2017, guest spending on food and beverage was the lead driver of higher in-park spending, driven by the continued growth of our All Season Dining and beverage programs. Non-season pass admissions per capita spending also increased, reflecting our ability to continue to take pricing at the front gate and the high-value our guests place on our product offerings. Particularly our new rides and attractions in group entertainment facilities.

In addition, we continue to refine our product and attraction offerings to better suit the demands of our guests. For example, our advanced purchase channels experienced the biggest growth in 2017, driven in large part by enhancements to the products within those channels and the marketing efforts behind them. In particular, we continue to produce great growth out of the season pass channel, which grew to represent roughly half of our total attendance in 2017. We attribute this success to our capital spending strategy combined with our seasons of fun marketing initiative we've begun to establish at multiple parks.

We found offering immersive multi-week special events provides our parks with 3 to 4 very distinct seasons, creating urgency to visit multiple times a year. We expect our season pass sales to continue to be a significant driver of attendance growth going forward, as we introduced our Pre-K season pass program to three more parks in 2018. This program allows children ages 3 to 5 years old to receive a free season pass, so young families are encouraged to visit our parks more often. In addition, our WinterFest celebration continues to be a popular attraction that has extended the season at many of our parks, and we are expanding WinterFest to a fifth park, Kings Dominion for 2018.

Turning to out-of-park revenues for the year. The decline of $2 million to $144 million was the result of prior year revenues received from a Super Bowl 50 special event and a shift in timing of other miscellaneous revenues. Revenues from our resort accommodations, which is the primary source of our out-of-park revenues were comparable with last year. Going forward, we continue to see strong demand for our resort accommodations, which we believe are beneficial in extending the average length-of-stay of our guests and which allow us to market more aggressively outside our core markets. In fact, advanced reservations for our resorts in 2018 are up 15% from the same time last year.

Moving on to the cost front. Operating costs and expenses for 2017 totaled $863 million, up $35 million or 4% from 2016. The higher costs resulted largely from an increase in labor cost due to increased market and minimum wage rates, along with higher operating costs related to new multi-week special events and expanded multiyear initiative to more aggressively market certain parks as regional destinations and a nonrecurring legal settlement.

Regarding higher labor costs. We went into 2017 anticipating less pressure from mandated wage rate increases, but an ever-tightening labor market continued to put pressure on wage rates as we remained focused on adequately staffing our parks and delivering high guest service levels. We were able to reduce some of the impact of labor -- of higher labor rates by implementing productivity improvements at all of our parks. We expect to benefit further from these initiatives over the next several years, and we continue to look for new ways to identify and activate additional labor efficiencies. With that said, as we head into 2018, we expect to see pressure on labor costs similar to what we experienced in 2017 both in terms of mandated and market wage adjustments. Cost of food, merchandise and games also contributed to the increase on operating costs as a result of higher attendance and increased sales volume, as a percentage of sales these costs remain comparable with last year.

Adjusted EBITDA, which we believe is a meaningful measure of our park level operating results was $479 million for 2017, down $2 million or less than 1% when compared with our record results from last year. The decrease in adjusted EBITDA for 2017 was due to higher planned operating costs and the lower-than-anticipated attendance growth. Adjusted EBITDA margin for 2017 was down 110 basis points to 36.2% as a result of the lower-than-anticipated attendance growth and the introduction of WinterFest, which is a lower-margin event, especially in its first year due to startup costs. Overall, our park GMs and our teams have done a very good job of keeping actual operating costs inside our budget in response to the shortfalls in attendance, while at the same time ensuring that we delivered on the quality guest experience our parks are known for. I can assure you that we remain highly focused on managing operating costs in the near term, as we pursue our long-term strategy of maintaining our historically high adjusted EBITDA margins, while continuing to invest in and enhance the guest experience.

I do want to call out the strong momentum we had in our fourth quarter as we continue to expand our popular fall and winter events. In 2017, we reported record fourth quarter revenues of $228 million, an increase of $36 million from a year ago, and a record fourth quarter adjusted EBITDA of $61 million, up $8 million from last year. The strength of our fourth quarter results validates our ongoing investment in the shoulder seasons, which we believe represents some of the best growth opportunities for Cedar Fair.

Now let me highlight a few items on the balance sheet. As we stated in our earnings release this morning, our liquidity, cash flow and capital structure remained strong. And we continue to have great financial flexibility heading into 2018. We ended the year with $166 million in cash on hand, no outstanding borrowings under our revolving credit facility and a consolidated leverage ratio of 3.5x, which is well within our comfort range based on current market conditions.

As I previously mentioned, this past year, we completed $1.5 million refinancing, which included the issuance of $500 million in new 10-year senior unsecured notes, a new 7-year $750 million term loan and a new 5-year $275 million revolving credit facility. With this refinancing, our nearest term maturity is our revolving credit facility in 2022, and our average cost of debt going forward is expected to remain inside of 5.2%. For modeling purposes, cash interest costs are expected to be between $85 million and $90 million for the foreseeable future.

Before I turn the call back over to Richard, I'd also like to briefly discuss the impact to recent Tax Cuts that were passed in December are expected to have on Cedar Fair and our free cash flow. Our MLP structure has been an extremely efficient structure both -- for both us and our unitholders from a tax perspective. And I'm pleased to say that we will further benefit from the recent tax reform. At this point in time, we expect to see annual cash savings between $10 million to $15 million, bringing our annual cash tax payments down to between $40 million and $55 million. These projected lower cash tax payments will provide ongoing benefit to our customers, employees, communities and unitholders as we invest a portion of our tax savings in each of these important constituencies going forward. In the near term, our focus will be on reinvesting these tax savings back into the business to address the seasonal labor pressures we've faced over the past few years.

In summary, we ended 2017 in a very solid financial position. We continue to generate significant amount of free cash flow, and our capital structure provides us with substantial operating flexibility. We are well-positioned heading into 2018, and will continue to prudently manage our cash flows to maximize value for our unitholders both in the short and long term.

And with that, I'll turn the call back over to Richard.

Thank you, Brian. Let me remind you, again, that we are running our business for both the short and long term. So while the small decrease in adjusted EBITDA for 2017 is disappointing to us, our record fourth quarter results and strong early-season sales trends give us great confidence in the strength of our business model and the strong demand for consumer demand for our offerings. And even more importantly, the investments we are making in new attractions and accommodations are going to continue to strengthen our model and drive growth well into the future. As our guests have come to expect, we have a solid capital lineup of new attractions for 2018, all of which are scheduled to open on time and on budget. One of the most notable investments will be Steel Vengeance, the world's first hyper-hybrid roller coaster at Cedar Point. And Knott's Berry Farm will introduce, HangTime, the West Coast's first dive coaster enhancing its position as a must-visit destination among Southern California theme parks.

We also continue our aggressive investment in the growing Charlotte market with a major renovation and expansion of Carowinds' PEANUTS-themed children's area, Camp Snoopy with 5 new rides and an 8,000 square foot climbing play area. In addition to the new rides and attractions, we are looking to create a level of quality and immersive experience that will drive demand and value creation for many years to come. For example, at the end of January, Knott's Berry Farm introduced a brand-new season of fun with a PEANUTS-themed celebration featuring the beloved PEANUTS characters. With the early-season success of this new event, we're in the process of reviewing opportunities to expand this concept to our other parks, possibly allowing us to expand our operating calendar where it makes sense in building additional demand in the early part of our operating season.

We are also providing innovative and fun food offerings at all of our parks, and introducing new or upgraded restaurants and catering areas at 5 parks. These facilities will provide a more diverse array of regional specialty foods, catered to increase group business and accommodate more food-theme special events. As we look to the end of this year, 5 of our seasonal amusement parks will remain open through November and December, as we add WinterFest to 1 more park, Kings Dominion.

As part of our resort expansion initiative, Cedar Point will strengthen its appeal as a multi-day family destination with the opening of the new 5-story 158-room tower at its historic Hotel Breakers. This new tower will have balconies with views of lake area in the park and an outdoor pool and sun deck adjacent to the beach will complete the new facility. The park will also expand its popular lighthouse point campground area with the addition of 25 new luxury RV sites. We also have recently finalized the deal to build a 129-room Springhill Suites Hotel adjacent to Carowinds in Charlotte, North Carolina. This project is scheduled to break ground later this year and should come online in late 2019.

As Brian previously mentioned, we'll be expanding our successful Pre-K Pass program allowing more children ages 3 to 5 to receive a free season pass. In 2018, we'll have a total of 6 parks offering this program, including Cedar Point, Carowinds and Kings Dominion. Also at Cedar Point in 2017, we began a multiyear marketing campaign to strengthen the park's position as a regional resort destination. We want to appeal to a broader range of guests who will see all of the attractions, including the park, beach activities, Hotel Breakers and a diverse array of food and entertainment as part of a unique multi-day experience that will create memories to last a lifetime. In 2018, we will continue to aggressively lean into the regional resort destination message as we look to expand Cedar Point's reach beyond its core markets.

In summary, we are excited about our prospects for 2018 and the strong momentum that has continued through the first few weeks of the year, driven by the growth in early-season sales. Cedar Fair is attractively positioned with unique regional brands that compare favorably with other regional entertainment options for consumers. Because of this, we will continue to aggressively market our advantages and invest in all areas of our business. The popularity of our new attractions for 2018, along with the continued benefit of prior year investments, gives us great confidence that this will be another record year for Cedar Fair. We expect growth across all key top line metrics, attendance, guest spending and resort accommodations.

Now, we will open the call for any questions you might have.

(Operator Instructions) Our first question comes from Steve Wieczynski from Stifel.

So I guess the first question would be around margins. If you look at your margin, as Brian said, it was down about 110 basis points year-over-year. Just trying to get my arms around how we should be thinking about margins in the near term as you continue to battle a little bit of wage pressure and also the increased costs as you grow your events business?

Yes, Steve, this is Brian. As we alluded to in the prepared remarks, margin compression in '17 was the direct result of new lower-margin initiatives like WinterFest along with the attendance shortfalls we experienced in the peak summer months of July and August, which represent 2 of our highest margin months of operation. So as we continue to balance driving higher margins with efforts to enhance the guest experience, introduce new events like WinterFest, we will see often, I think, in the short-term pressure like that. It remains a key metric for us. It's not the only metric. Otherwise we would have maybe thought differently about WinterFest, but we're really excited about where that can go to. And I would expect, as Richard said, startup costs in year 1 of WinterFest probably weighed on margins in Q4 this year more than we would expect going forward. And I think as a small example of that, we can look at the second year of the event in Great America and see not only the growth in the event from an attendance and revenue base, but also how the costs were more in line with maybe where we see them long term developing.

Steve, and let me jump in here, this is Richard, good morning. We look at that historical 36% to 38% range depending on the year being the zone that we always kind of fall into and where we're pretty comfortable with that range broadly.

Okay. So if I can add on to that a little bit. I guess, I don't think you'll answer this. But would you had any idea of what margins would have looked like if you normalized attendance? And the reason I ask that is because as we try to think about that 4% EBITDA growth. What I'm trying to think about is should we be thinking about that off of the $479 million number that you reported? Or are you guys thinking about that as some other adjusted number, if that makes sense.

Yes, Steve. So it's hard to -- probably hard for us to answer in terms of what the attendance shortfall impact is, because it's just difficult to often isolate completely the impacts of weather and what that might mean. As I said in the prepared remarks, clearly, one of our highest margin period for the year is July and August. As I look at WinterFest and the impact of some of the decisions to activate those events and other decisions we made to spend in 2017 on initiatives that are going to benefit us more for the long term, I would say that you're probably looking 30 to 40 basis points of compression related specifically to those. So hopefully that helps a little bit.

Yes. That's actually very helpful. Thanks a lot. And then one quick housekeeping question. Brian, can you help us think about D&A for 2018?

The SG&A?

No, your depreciation for the year.

I'm sorry. Yes, I mean, I think if you look at the capital programs that we've rolled out, I would expect that the capital -- the size of the capital programs the last couple of years will be comparable as we get into '18, when you layer in -- we've talked about roughly a 10% of revenue on marketable capital and infrastructure, which would approximate 130 -- $130 million to $140 million. Layer on that, another $20 million to $30 million maybe for some of the business development projects we've talked about. So if capital program is staying roughly the same, I think something in that $150 million, $155 million range, which is where we sorted for '17, that's probably above where it will be.

Our next question comes from Brett Andress from KeyBanc Capital Markets.

If I can start with the $480 million to $490 million EBITDA range you gave last quarter. You came in a little bit below that, then you said operating expenses were as planned, but revenues were less than expected. So I guess, can you elaborate on what happened in the fourth quarter, because I mean that implies revenues were less than you expected, but you came in above the Street. I mean, was this just the WinterFest ramp coming in a little bit below your expectations? Just trying to square that with where we -- we were tracking coming out of the third quarter?

Yes, Brett, let me -- it's Richard. Good morning, great question. Let me jump in here then I'll ask Brian to weigh in. When we look at the fourth quarter, we were extremely pleased with the Haunt event and when we look at WinterFest, I would tell you, you've always heard us talk more strategically about taking events to scale. We've really launched it really well. And when we went into WinterFest, we had a pretty good idea from our first year of Great America what to expect. We're moving into some more significant markets. What I can tell you that I'm most pleased about is the high guest satisfaction scores, the high intent to return score. So we hit on a lot of our key metrics, and we wanted to make sure going into the first year in those key markets that we really delivered on the guest experience. So when I think about WinterFest, that's the piece that I go to. Brian?

Yes, I mean, just to add on to Richard's comment, Brett. I think the other piece that I would call out is, and I alluded to this just a few moments ago. There were a number of decisions that we made in the fourth quarter around activating some initiatives and some spend that was not about delivering on specifically a '17 EBITDA, but more about seeding for 2018 and beyond, In particular, in a couple of markets, we've ramped up some advertising dollars related to our early fall and winter season pass sales for 2018. The results of which, I think, are evident in the -- as Richard alluded to, a 10% lift in season pass revenues coming into 2018. So we feel really good about the results, but clearly made those decisions without really a concern for what their impact was going to be on '17 and more or so what it was going to do for us going forward.

Got it. That's helpful. And if I could switch over to wages and the wage pressures, if we kind of -- can start to look in that to 2018 the tight labor market, there's some controversy around J-1 Visas. So I guess, I mean, what kind of inflation on the wage side should we be putting in our models for '18? I mean, what markets are you going to see the most impact? And maybe what kind of initiatives are you doing to mitigate some of that?

Yes, let me -- great question, Brett. Let me take specifically to the J-1. We always speak to that program, which we like and very supportive of. We've got great partners. The J-1 program's a very important part of our labor strategy. We've been acknowledged by the State Department for the program we've put on and the impact on the kids we bring over. So we don't see any current issue with that program changing in any significant way. We think it'll continue to play the same role it has in the past. I'll let Brian comment on the specifics of wage pressure.

Yes, Brett. As we look back at the last couple of years, just to give you a little context, '16 was a lot about mandated wage adjustments that we had to respond to. And we came into '17, expecting to see less from that. I think your comments about the tightening labor markets sums up basically our experience in '17, where more of the pressure that we felt there was about adjustments that needed to be made from a market perspective. As we go into '18, I would say, put that all together, I'd expect the pressures to be, as I said in my prepared remarks, comparable in '18, probably a little bit of a blend of the 2 though, because in California and Toronto, to answer your question specifically about 2 markets, where we are seeing mandated wage adjustments, that's going to drive the 2 California parks as well as Canada's Wonderland, our park in Toronto. And then in the other markets, I think it's going to be a little bit about, again, the tightening labor market. I do want to call out, we've made some changes and put in place some initiatives to help us in the near-term try and broaden the applicants pool. We've made adjustments and put in place a new application tracking system that we think is a little bit more intuitive and easier for our employees and potential employees to use. That went in late in 2017. So I think there's some value to be gathered out of that. And then we've made some adjustments to our screening processes around potential applicants. So I think what our objective is in the near term is to try and affect as many things as we can to broaden the applicant pool to help to address the tightening of the labor markets. And then longer term, we'll work on other initiatives that may take us a year or 2 to get full benefit from.

Our next question comes from Tim Conder from Wells Fargo Securities.

Just to continue on, I guess, on one of the prior questions relating to overall expenses. Brian, if we look at here the sort of the breakdown that you gave, you accelerated maybe pulled forward some spending, you and Richard made the decision to do that to benefit '18. I guess, as you ramp up, Richard or Brian, whoever wants to take this, but how -- the WinterFest here and so forth. How should we think about those expenses repeating going forward? And then any detail that you can give us on the legal settlement, how much of that one time? Should we consider that one time on the year?

Tim, thanks for the question, it's Richard. I'll take the first part then I'll let Brian comment on the legal settlement. When we've rolled out -- when I thought about our rollout of WinterFest, we went back and really studied hard, how we rolled out our Halloween Haunt program over a decade ago and the ramp up and how that was positioned. We took a lot of lessons from that, very successful rollout. We took a period of time in the fall that wasn't as popular, certainly it is now. And we created a lot of demand. And once we ramped up the volume in the attendance, we leaned into pricing. I think you can think of the build-out of WinterFest the same way we think about and look back at Halloween Haunt. We think it has tremendous appeal. It's very broad. Appeals to a very broad age range. And when we look at the specifics of it, I think you're going to see the attendance growth as we build this out over a few years, I'll go back to our strategic look. We build events to scale, the markets clearly reacted. We're pleased with not just the first year response, but certainly the guest satisfaction. And again, I got to stress the high intent to return, which is what we see in our Halloween event in the fall, people come back year after year. So I think what you can see is and think about, Tim, is the continued demand of us leaning aggressively into that, but we certainly see the first two or three years as a build out. We thought it would take three to four years to reach maturity. We're well on track there. And as we do that we'll be able to aggressively lean into that demand, as we've done at Halloween over the past several years where we continue to generate huge record amounts of attendance in October, but also lean heavily into price.

Yes, Tim, and then on the legal settlements. This relates to a class action suit that was brought against us at our parks in California around break and meal time. I call your attention, if you take a look back at the third quarter 10-Q, we disclosed sort of the history behind that, and that we had negotiated essentially a settlement for a slightly more than $4 million. So that's the backdrop behind that, but you can get some more detail out of the third quarter 10-Q on the specifics.

Okay, okay. And then, gentlemen, more on the attendance side and price mix. Richard, you had commented in your preamble that both price and unit volume are up in your season passes. Any color you can give us just on average what you're seeing in price, whether you're taking that on the dining side, whether you're taking that on the fast lane stuff, whether you're taking that on the ticket. Just an overall sort of a blended price that you're looking at this year? And then I have one other follow up.

All right. Well as you look at the season pass channel, in particular. We've been getting depending on the park mid to high single-digits depending. Again, we tend to get a little more aggressive at those parks that have the bigger capital attractions every year. So that switches year by year. But on average, as we saw this year, the season pass in '17, we got that mid to high single-digit, particularly solidly mid-single digit increase in pricing. The other thing I'd call out is when you factor out season pass, and I think Brian may have alluded to this, when you factor those out, we're also seeing mid-single digit in terms of price taking price on all the rest of the tickets, the average ticket price, when -- once you exclude season pass. So we're able to see that flow through and continue to see higher attendance along with that. So...

And Tim just dovetailing off Richard's comments. As far as the dining and beverage. I think that what I would tell you there is, right now our focus is more on continuing to drive penetration efforts there through our in-park advertising, our CRM efforts. We've seen penetration rates on both the dining and the beverage program growing each year since they have been introduced. Most of our parks are moving into their third year on the dining program. And so, while we tweak pricing a little bit here and there dynamically, it's really more about penetration because we think we have a lot of opportunity there in terms of volume.

Okay. And my last question, gentlemen, just to circle back to a prior on attendance. I know, you've said previously in other calls that when you had normalized weather, you saw very nice -- what you had expected in attendance and everything in the parks. So given that, any color that you can give here just on the annual basis on the attendance as to how that was maybe impacted? And then the other thing would be Toronto, Brian, any timing there on the hotel development there?

I'll take the first part. It's tough to, as Brian has said earlier extrapolate the weather impact as you look at the days that were disrupted. I can tell you I go back to what we've always said, Tim, on days where we saw what I would call normal, not exceptional weather, more guests came, they stayed longer and they spent more. So our key metrics on all those days saw some -- saw high demand. Now some of that high demand, particularly, in October was recapturing some of maybe what we didn't get in the summer. But I will tell you, it's also driven by the strength of the Halloween program and in November/December the strength of the WinterFest event.

Yes, and then Tim, as far as the Toronto hotel, I mean, as we've said that's one of the 2 core markets that we were focused on from a resort development perspective, in addition to Sandusky. I don't want to leave that behind, Sandusky remains a core focus for us as it relates to resort development, in fact we'll be debuting our new 158-room tower addition to the Breakers hotel this year and continue to believe there may be more opportunities to add additional rooms in that market. Very pleased to get the Charlotte deal over the goal line and are now running fast on that. I will tell you Toronto is sort of in the same -- tracking in the same pattern. Working through the last of sort of throws in terms of the flag that will be on that hotel. My hope would be that we would be in a position to announce that deal before our next earnings call.

Our next question comes from Barton Crockett from B. Riley FBR.

I realized this is a little bit of an imponderable, but you have a pretty good sense of the business. When you look ahead to 2018, does it feel like your -- with the cost pressures, with the revenue opportunity that would be trending maybe in line with your kind of 4% long-term EBITDA target or below or above? What's your kind of gut sense of it entering the year with the presales success but the extra spending that you're juggling?

Barton, great question, thanks, and good morning. As we think about 2018, and I go back to the guidance we've given. We're not going to comment on any specific year in terms of guidance and percentages and numbers. We've given out the long-term guidance of 4% on average. We've recognized it's going to be a little bit lumpy. But I will tell you, as over time -- but I'd tell you, if I look at 2018, I look to the strength of the capital program with coasters that are 2 largest most significant parks, I look at a growing market like Charlotte with the Camp Snoopy expansion, and we're touching the children's area there. We haven't touched that area in over a decade and the continued growth in Charlotte supports that. When I look at the events we're doing, the second year or 3 WinterFest, the addition of another WinterFest, and then fold in the Pre-K Pass, you're going to hear us talk a lot about attracting an incremental audience. All of these things are teed up to broaden our reach. So do we feel good about '18? Yes. We feel good about '18 and the start we're off to, knocks us off to an extremely good start as we finish up January and head here in the middle of February. Having said that, there's some challenges every year, Barton. We keep our eye on it and make sure that we meet head on. So we feel good about '18. There'll be some challenges that come along that we're not expecting. But I will tell you, I think we're teed up.

Okay. And then on the advanced purchase being up 10% here at this point going into the year. Just remind us, how does that compare to where advanced purchases were trending up last year at this time?

Barton, this is Brian. It's always a little challenging, law of small numbers. But we've typically seen our ability over the last few years to drive high single towards double-digit increases in the advanced purchase in the channels. I don't want to say that this is entirely just season pass. It's a season pass, it's a season pass-related products. But we're as equally encouraged by the 15% lift in advanced reservations in our resort properties as well as the early indications on group bookings. So it's definitely all of those channels that have us really sort of jazzed.

And Bart, if I can jump to one of the things as we look at deeper into our data analytics, and you've heard me talk about this. We have found that our Season Passholders who purchase All Season Dining have a much higher renewal rate. So as we continue to increase our penetration, we think that's both good for this year and good for the long term.

Okay, that's great. And then just one other kind of maybe smaller thing, but here in the fourth quarter, I know you called out weather impacts in the third quarter, but it would seem that maybe weather could have been an issue in the fourth quarter with, I think, Cincinnati and Kansas City getting really cold in the last week in December. And I'm just wondering if that had a noticeable impact on the WinterFest launch in those markets or even Charlotte probably wasn't cold for some people, but maybe for people who live there, it was a little chilly. So how do you feel about the weather as we exited December impacting WinterFest?

I will say, as we headed into the event, Barton, the weather was good in early December. It got frigid almost Arctic in the later half. So the typical ramp up of the attendance patterns for WinterFest is the deeper you get an event and closer to the holidays, we start to see a build. There's some extremely hearty souls who came out and had a good time in some extremely cold temperatures. And we appreciate all of them coming out. So I do think there's some opportunity as we look at 2018.

Our next question comes from James Hardiman from Wedbush Securities.

Lot of my questions have been answered and maybe this is going to sound repetitive. But I maybe wanted to ask some of the cost questions in a slightly different way. At the end of the day, it's tough for us to figure out if any lost attendance comes back in 2018. But on the cost side, there is a lot of things that seem like they're onetime in nature. Do you get any of those costs back in 2018? And, I guess, as I think about margins, you're goal for some time has been to sort of maintain the margin level. Is the new goal to stay flat with where you were in '17? Or is the goal to get back to where you were in previous years, sort of the high water mark with respect to peak margins?

Yes, James, this is Brian. As I said earlier, I would reiterate. Margin is a very important metric for us. I mean, each one of our GMs would tell you if you ask them that they are held to margin -- maintaining margins or growing margins depending on their capital program each year, and those conversations get quite excited sometimes when we see some margin compression. When you look at it on an average basis, I think the thing that we have to keep in mind is that a lot of times the mix of attendance has a bigger impact on the average margin than maybe we would like to admit. And when we look back on '17, we don't want to necessarily again dwell on weather. As I said in my prepared remarks, July and August, 2 of our highest margin months, we saw pressure and we unfortunately saw that pressure in the Great Lakes region more than anywhere else, which includes 3 of our largest parks, Cedar Point, Kings Island and Canada's Wonderland. Kings Island had the big coaster that, I think, helped cut through that, that macro factor noise a little bit better than maybe Canada and Cedar Point had. And when the high margin, the big parks are feeling the pressure, the overall average is feeling even greater. So tying it back to Richard's comment on outlook for '18, we feel really good about where the capital is going in in terms of which parks. The big parks in a lot of cases are getting some of the new capital. So we're not promising anything, but I think the expectation would be for margin expansion in '18 in large part just because the mix is a little bit better where the growth is coming from.

Got it. That's really helpful. And then my second question, so obviously the last couple of years we've had disappointing peak seasons, July and August in particular, and then that was followed up by really strong fall and winter seasons. I guess, you've got 2 years of data on this, obviously weather plays a role. But from a consumer perspective, are these things connected? Are you seeing maybe as you extend the calendar in some of these specific markets that some people that would have otherwise opted to come in July and August are instead waiting until October or November? Obviously that would have a negative pricing impact, because I think the tickets are a little bit cheaper. But is there anything that you're seeing that would connect those 2 phenomena that we've seen the last couple of years?

Yes, James, as we look through the last few years, and certainly, and as we try to evaluate our business from a strategic standpoint, we look through and read through the consumer and really what you're getting out is there any secular change in the consumer. We don't see any, and I will tell you the strength we've seen in shifting the shoulder periods is driven heavily to the events and the programmings that I referenced. As we look at the peak summer months, there is tremendous value and tremendous appeal. So we're concentrating, as we did last year, on events and programming, not just capital. The Canada's 150th celebration is a great example of driving demand in the summer months. So over the course of 2, 3, 4 years, weather patterns change. But we think there -- everything we see, sees high demand in the peak summer months when there is normalized weather. So we don't see anything that suggests there is a shift. If anything, I'll go back to, I think, (inaudible) events is broadening who we are. It's one of the things that's underpinned our movement from closer to 4x visits on a season pass to now at 5x. So we're enhancing the appeal of the shoulder seasons in many respect. And with things like Ghost Town alive at Knott's Berry Farm, we've seen tremendous response to our summertime program.

Next question comes from Michael Schwartz from SunTrust.

Just wanted to ask a few questions around the, I guess, enhanced marketing program that you rolled out in 2017. And, I guess, it's a 2-part question. One, can you give us any kind of granularity or detail as to how much incremental you spent? And then the second part of it would be around just maybe some of the learnings that you found and how that plays out in 2018?

Mike, thanks for the question. As we look at the enhanced marketing program, we're really rolling out Cedar Point as an increased destination. Last year, we went heavily into Chicago and really expanded our movement into Chicago. You'll see us in more key markets this year, Indianapolis and elsewhere. So we're starting to expand the capturing. We've also, for the first time this year, got a dedicated creative campaign that really positions Cedar Point as the resort destination it is, really emphasizes all of the quality attributes, the mile-long beach, the long length-of-stay, the multi-day aspect that I referred to in our prepared remarks. What I will say is, as we think about it in terms of an incremental spend, we've challenged ourselves to go in and see what we can do to become a little more efficient within the marketing world. So as an example, I'll give you, we went to one of the smaller parks this year. And even though we've seen an acceleration of our switch from more traditional channels, broadcast or cable to digital channels, we went hard after 1 park and one of our smaller parks and really accelerated that shift into digital as a way to find a few dollars within the mix to support our continued expansion. So we're looking to improve the efficiency and the productivity of the marketing spend, just as we do all the things that are on the OpEx side. So we're really trying hard to find ways to fund the growth initiatives we have, and are willing to go out there and test a few things to see if we can't do that.

Okay, that's helpful, thank you for that. And then just wanted to touch on WinterFest. And I think you made the comment in prepared remarks that you expect to see growth in the 3 new parks where you introduced that in 2017. And as I go back in time, I think in the second quarter of '17, you said you expected 500,000 incremental visitors from those 3 new parks in '17. So I guess, one, did that kind of play out as expected? And then 2, what type of growth over that 500,000 should we expect to see are you anticipating in 2018?

So if you look at what we said -- we had the 3 additional parks debuting in 2017. We said 500,000, so you can do the math on the average. We would look at Kings Dominion as the incremental Park being a mid-tier park. So maybe a little inside that average in terms of the new event. And then when you look at what Great America grew last year, we were up nicely in the second year. So we would anticipate in very round numbers, a couple of hundred thousand increase, taking into account the new WinterFest at Kings Dominion.

Our next question comes from Matthew Brooks from Macquarie.

I was wondering can you perhaps expand on the tax impact of the tax reform in the U.S. given the MLP structure is a little bit more confusing. And also say a little bit more about how you plan to spend that benefit?

Matt, as we said in our prepared remarks, from a cash flow perspective, we're estimating $10 million to $15 million of savings based on structure that currently stands. And I say that from the standpoint, we're in the process of doing a little bit of a deeper dive into the new tax regs as they get written-out they'll start to clarify some further points. But we'll look for additional efficiencies and if there are changes structurally that we need to make, we'll try and take advantage. But at this point in time, we're estimating about $10 million to $15 million of cash tax savings. If I just step back really quick to sort of more of the provision that you see on the income statement, as you know, as you just alluded to the MLP structure, our structure is a little complicated, it's not a pure structure. And so it's not as easy as me telling you, we're going to see our corporate rate go from 35% to 21%. We've talked in the past about our effective tax rate pushing everything together the MLP structure, the C Corp entities, that we were in the low- to mid-20s. So let's say, 22%, 25% kind of effective tax rate, I would estimate at this time, again, based on the fact patterns in place that we're probably starting towards the high-teens. And you're coming down maybe in that 17% and 19% kind of range based on what we know right now. So hopefully that gives you a little bit of visibility and to what it means from the provision perspective. But from a cash tax savings, $10 million to $15 million, and as I said in the prepared remarks, our focus in the near term is going to be on addressing some of the pressures we've seen on the labor front. I think that couple of things that we have -- we've had on our list -- that we've been spending a lot of time in terms of due diligence on that maybe get moved up from a priority perspective are addressing our human capital management systems, modernizing those. We'll be ramping up those efforts. And then, we have dormitories currently at 3 of our existing parks. That allow us to really go out and attract an employment or an employee base from a broader market. It's what allows us to activate the J-1 Visa program. So we've been in the process of evaluating the potential for dormitories at more parks. And I think these cash tax savings, this $10 million to $15 million a year, may allow us to prioritize those efforts a little bit quicker.

Okay. So it sounds like this is sort of a multiyear investment with those benefits rather than it's a one-off and then next year. So how this benefit from may be higher returns?

Yes, I think that's fair. I think it's probably something that we're looking at the first year or 2 of the cash savings going towards that. It's not something that's going to be spent overnight necessarily.

Right. And also again coupled with strategic about the ride investments. For example, Mass Effect I think was a popular ride when you introduced it at California's Great America. Do you have any plans of more rides like that? I know this is a coaster year, this year, but how are you thinking about the contribution that makes to your multiyear plan?

Strategically, Mass Effect was a great addition to California's Great America, Matthew. But when we think about it, we think very broadly about our capital menu. Whether it's Mass Effect or some of the other things that could draw IP into our world. We're thinking about events and programming, again, as much as we think about hard rides. You've heard us say, we want to become a place not just to ride rides, but a place to be for fun and we want to broaden out. So we're thinking probably a little bit more broadly about our capital menu as we get into 2019 and 2020. Certainly the sequencing lined up for 4 coasters this year. I wouldn't expect that going forward to be the case. But you'll continue to see us lean into the food and beverage investments that we're making and the support we've got behind the events and programmings. I think you'll see us continue to lean into that both from a resource perspective, but also making sure we spend the capital we need to take them to scale.

There appears to be no other questions at this time. I'd like to turn it back to Richard Zimmerman for any additional or closing remarks.

Thank you all for joining us today and for your interest in Cedar Fair. We are committed to providing great value for our consumers as the place to be for fun as well as great value for the investors looking for strong returns in both the short and the long term. Thank you.

Thank you, everyone, for joining us on the call today. Should you have any follow-up questions, please feel free to contact me at (419) 627-2227. We look forward to speaking with you again in about 3 months to discuss our first quarter results.

This does conclude our conference for today. Thank you for your participation. You may disconnect.