Cedar Fair Announces 2020 Park Closures

The amusement industry has been trying to deal with the onset of Covid-19 since it’s initial onset in mid March.

Cedar Fair, operators of twelve amusement parks, four outdoor water parks, one indoor water park, and five hotels in the US and Canada, was only able to open Cedar Point, Dorney Park, Kings Island, Michigan’s Adventure (waterpark side), and Worlds of Fun. Most of their properties still have yet to re-open.

On August 4th, the chain outlined the policies for most of their parks. The decisions ranged from closure for the 2020 season to shortened seasons. Listed below is the highlights of each park’s latest COVID response release

Dorney Park:

•  Last operating day of the 2020 season is expected to be Monday, September 7, 2020.
•  Wildwater Kingdom would remain closed through 2020.
• Seaside Splashworks would debut in 2021

California’s Great America:

• Park would remain closed for the rest of 2020
• The debut of its all-new waterpark, South Bay Shores, featuring seven new water attractions, new food and shopping locations, premium cabanas and a family-friendly lagoon play area with eight kid-sized water slides—all richly themed to reflect the excitement and fun of the Northern California coast and South Bay regions- would be pushed to 2021.
• The return of popular seasonal events, such as Halloween Haunt, The Great Pumpkin Fest, WinterFest and more.
• Introduction of Pass Perks Loyalty Program providing pass holders money to be used in the park ($35 for gold and $25 for silver)

Carowinds:

•  Park would remain closed for the rest of 2020
•  Boogie Board Racer, the longest mat racing slide in the Southeast, would debut next summer at Carolina Harbor waterpark;
•  Grand Carnivale, a nighttime international festival and street party celebrating global culture would debut next summer.
•  Introduction of Pass Perks Loyalty Program providing pass holders money to be used in the park ($50 for gold and $35 for silver)

Cedar Point:

• Post Labor Day, Cedar Point will be open Saturdays & Sundays only, with the last operating day of the 2020 season expected to be Sunday, November 1.
• A new “Tricks and Treats Fall Fest” will be introduced starting September 12. This event will take the place of HalloWeekends for 2020 only, and has been designed with unique entertainment, food and activities for all ages. This event will enable better social distancing and capacity management. You’ll hear more exciting details in the coming weeks.
• All 2020 additions and events pushed back to 2021

Kings Dominion:

•  Park would remain closed for the rest of 2020
•  The opening of a reimagined area in Soak City, Coconut Shores, featuring an all-new multi-level aqua play structure, a mini wave pool for kids, and a new dining experience;
•  Grand Carnivale, a nighttime international festival and street party celebrating global culture would return next summer.
•  Introduction of Pass Perks Loyalty Program providing pass holders money to be used in the park ($50 for gold and $35 for silver)

Kings Island:

• Post Labor Day, Kings Island will be open Saturdays & Sundays only, with the last operating day of the 2020 season expected to be Sunday, November 1.
• Winterfest would be cancelled.
• A new “Tricks and Treats Fall Fest” will be introduced starting September 26. This event will take the place of Haunt for 2020 only, and has been designed with unique entertainment, food and activities for all ages. This event will enable better social distancing and capacity management. You’ll hear more exciting details in the coming weeks.

Knott’s Berry Farm:

• Starting August 21, guests can enjoy an all-new outdoor dining and retail experience in a way that only Knott’s Berry Farm could offer, with the all-new Taste of Knott’s. Expanding upon the Taste of Calico experience, Taste of Knott’s will celebrate 100 years of classic flavors from around the park with unique food, drink and merchandise offerings. Guests may enjoy Taste of Knott’s throughout Ghost Town, Fiesta Village and the Boardwalk area on weekends through September 13. We look forward to offering more of these unique dining and retail experiences until we are able to reopen the theme park fully.
• Also, on August 21, the Knott’s Berry Farm Hotel will reopen for lodging.  Guests may learn more about special Taste of Knott’s hotel packages at Knotts.com.
• In the meantime, guests may continue to enjoy select offerings from the California Marketplace including alfresco dining on Grand Avenue from Mrs. Knott’s Chicken Dinner Restaurant, Knott’s Chicken-to-Go Restaurant, the Farm Bakery and Berry Market as well as items from our specialty retail stores.
• Regrettably, due to continued operating restrictions related to the pandemic, we have had to make the very difficult decision to cancel our highly anticipated 2020 Knott’s Scary Farm event. The unique features of Scary Farm will not allow us to operate within the constraints recommended by the CDC and public health experts.  We know that this news is disappointing, but we look forward with great enthusiasm to making 2021 Knott’s Scary Farm our best year ever.
• When we can fully reopen the park, we look forward to introducing Knott’s Bear-y Tales: Return to the Fair, our all-new 4D interactive dark ride that celebrates a beloved classic attraction with a reimagined gaming twist.  Guests will climb aboard themed vehicles equipped with “jelly blasters” to try to recover stolen boysenberry pies as they travel through whimsical environments such as the Boysenberry Pie Factory, Frog Forest, Fortune Teller Camp and Weird Woods.  The ride culminates in a celebration at the County Fair.

Valleyfair:

• Park would remain closed for the rest of 2020
• Peanuts Celebration, a special event honoring the classic cartoons of Minnesota native Charles Schulz would be pushed to 2021.
• Corn Feast, the park’s longest-standing event featuring 30,000 lbs. of free corn on the cob and corn eating competitions will resume in 2021.
• The new Lakeshore Landing event space, a new Corn Cart building where guests can watch corn roasting and popping through giant glass windows, and restroom renovations for an improved guest experience will debut in 2021.
• Introduction of Pass Perks Loyalty Program providing pass holders money to be used in the park ($35 for gold and $25 for silver)

Worlds of Fun:

• Worlds of Fun will close for the season following Labor Day Weekend. Our final day of operation this year will be Monday, September 7; and
• Oceans of Fun waterpark will remain closed for the remainder of the season.
• Riptide Raceway would debut in 2021

The status of the company was reiterated on August 5th during the company’s 2Q investor’s call:

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced results for its second quarter ended June 28, 2020, and provided an update on strategic actions being taken that are positioning the Company to emerge stronger from the ongoing COVID-19 pandemic.

“I am proud and inspired by the way our team has risen to the challenge of this season and confident we will emerge on the other side better positioned for future success,” said Cedar Fair President and CEO Richard A. Zimmerman. “In very uncertain market conditions, we are pleased to have opened to date 7 of our 13 properties, all following the recommended protocols designed to provide our guests and associates with the safest entertainment environment possible. Upon reopening these parks, we have managed to generate modest positive cash flow by adjusting operating calendars to better meet demand, consolidating seasonal labor hours into fewer operating days, implementing effective cost saving measures, and creatively generating incremental revenues within our parks and adjacent facilities. Where possible, we will continue to actively work with authorities in an attempt to get additional parks open yet this season, while at the same time building operating plans and programming for the 2021 season that will meet evolving consumer tastes and needs,” said Zimmerman.

Second-Quarter Results

As previously announced, the Company suspended operations of its parks beginning on March 14, 2020, in response to the spread of COVID-19 and local government mandates, which had a significant impact on the Company’s financial performance. The Company resumed partial operations at many of its parks on a staggered basis beginning late in the second quarter, in accordance with local and state guidelines.

Due to the effects of the coronavirus pandemic on the Company’s operations, results for the second quarter ended June 28, 2020, include the partial operation of only three parks – Worlds of Fun, Schlitterbahn Waterpark & Resort New Braunfels and Schlitterbahn Waterpark Galveston – and are not directly comparable to results for the 2019 second quarter ended June 30, 2019, which included the full operation of the legacy Cedar Fair parks and excluded the two Schlitterbahn water parks acquired on July 1, 2019. Due to park closures in mid-March, the 2020 second quarter had a total of 39 operating days, compared to 726 operating days in the prior-year period and 827 operating days originally planned for the quarter.

Net revenues for the second quarter ended June 28, 2020, were $7 million versus $436 million for the second quarter of 2019. The decrease in net revenues was the direct result of an 8 million-visit decrease in attendance and a $44 million decrease in out-of-park revenues, both shortfalls due to COVID-19-related park closures in the current period.

Fewer operating days, combined with cost-saving measures implemented in response to suspended park operations in the second quarter, led to a decrease in operating costs and expenses in the period. For the second quarter, operating costs and expenses totaled $93 million compared with $277 million for the second quarter of 2019. Depreciation and amortization expense in the quarter was $55 million versus $56 million for the 2019 second quarter.

After the items noted above, the operating loss for the second quarter totaled $142 million, compared with operating income of $102 million in the second quarter of 2019. The operating loss was the result of the 98% decline in net revenues, offset by a $185 million decrease in operating costs and expenses compared with the second quarter of 2019.

Interest expense for the second quarter was $37 million, up from $23 million in the second quarter of 2019 due to incremental interest incurred on the Company’s 2025 senior notes issued in April 2020 and the 2029 senior notes issued in June 2019, offset somewhat by less interest incurred on term debt and revolver borrowings. The net effect of the Company’s swaps resulted in a $2 million charge to earnings during the second quarter of 2020, compared with an $11 million charge to earnings in the same period last year. The difference reflects the change in fair market value movements in the Company’s swap portfolio. During the second quarter of 2020, the Company also recognized a $13 million net benefit to earnings for foreign currency gains and losses related to the U.S.-dollar denominated Canadian notes, compared with a $9 million net benefit to earnings for the second quarter of 2019.

During the second quarter of 2020, a benefit for taxes of $37 million was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes compared to a tax provision of $15 million in the second quarter of 2019. The benefit for taxes was attributable to an increase in pretax loss, as well as expected benefits from the Coronavirus Aid, Relief and Economic Security Act.

After the items above, the Company reported a net loss of $133 million, or $2.35 per diluted LP unit, in the 2020 second quarter. This compares with net income of $63 million, or $1.11 per diluted LP unit, for the 2019 second quarter. The 2020 second quarter produced an Adjusted EBITDA loss of $85 million compared with Adjusted EBITDA of $163 million for the same quarter in 2019. The net loss and the Adjusted EBITDA loss in the second quarter are attributable to a majority of the Company’s parks being closed for the entire period, offset in part by effective cost management. See the attached table for a reconciliation of the net loss to the Adjusted EBITDA loss.

Liquidity and Balance Sheet Update

As of June 28, 2020, the Company had cash on hand of $301 million and $360 million available under its revolving credit facility, net of $15 million of letters of credit, or total liquidity of $661 million. Based on the recently updated park operating calendars and the slate of parks that are currently open, the Company estimates that its average cash burn rate(1) through the end of 2020 will be $30-40 million per month.

Commenting on liquidity, Zimmerman said, “While our balance sheet remains solid and we are confident in our overall liquidity position, given the ongoing uncertainty surrounding COVID-19 and the unknown nature of the longer-term impact on operating results, we remain focused on managing our cash burn rate and on maximizing liquidity even as we have brought parks back online.”

Zimmerman added that the resiliency and flexibility of Cedar Fair’s business model is extremely helpful in a disrupted marketplace. As an example, he noted Knott’s Berry Farm, which has yet to fully reopen, recently announced the introduction of the Taste of Calico, a new limited-time, special outdoor food and merchandise event that sold out in days. “New programming like this reflects our ability to adapt to a changing market, giving us a chance to reinforce our brand positioning and stay connected with our guests,” said Zimmerman. “We will continue to evaluate other opportunities to introduce similar experiences at other parks in our portfolio going forward.”

The Company anticipates it will have sufficient liquidity to meet its cash obligations through the end of 2021, even if parks currently open are forced to close. “Regardless of the park operating model, we will continue to explore ways to enhance our liquidity position and reduce cash outflows,” said Zimmerman.

Outlook

The Company noted that initial attendance upon the reopening of its parks has been below original expectations, likely reflecting the public’s continued concerns around the COVID-19 pandemic. The Company also noted the timing of park openings from mid-June through mid-July coincided with growing concerns about recent spikes in COVID-19 cases and hospitalizations across a wide swath of the country.

“Based on the soft demand trends, we have removed our reservation system and adjusted park calendars and operating models to better align with attendance levels, while remaining focused on providing guests with the best possible experience when visiting our parks,” said Zimmerman. “Health concerns in the marketplace around the pandemic could present a headwind for attendance until consumer confidence improves. Until such time, we are staying engaged with our customers while offering guests the best possible entertainment experience within the required safety protocols. Additionally, the learnings and experience from current park operations are invaluable to our team as we reassess operating plans and strategies for the 2021 season and beyond.”

Zimmerman added that the Company remains committed to emerging stronger from the pandemic by strengthening the brand reputation of its parks with stakeholders, positioning its parks to remain the top choice for safe, family entertainment in the new reality, and maintaining the strong underlying economics of its business model.

The Company is accelerating its strategies to accomplish these goals, including:

• Staying closely engaged with guests and associates, even while park operations are currently disrupted.
• Embracing the experiences and learnings from this season to inform investment decisions operating strategies and park programming going forward.
• Supporting the portfolio through a refreshed marketing approach, with an increased focus on marketing investment effectiveness and efficiency.
• Evaluating, testing and improving operating and safety protocols, with an increased focus on scalable, technology-based initiatives.
• Maintaining a disciplined approach around cash burn, while also identifying and driving incremental system-wide operating efficiencies.
• Investing in new capabilities to capitalize on emerging shifts in consumer behavior and preferences.

Zimmerman concluded by noting that due to the high degree of uncertainty around the COVID-19 pandemic, the Company is currently not in a position to reinstate or provide additional color around near or long-term guidance.