Six Flags Entertainment Corporation
Q2 2016 Earnings Call Transcript

Published: 3 Aug 2016

[Operator:]

Good day everyone, and welcome to today's Cedar Fair Second Quarter Conference Call. Today's conference is being recorded and at this time, I would like to turn the call over to Stacy Frole. Please go ahead.

[Stacy Frole:]

Thank you Lisa. Good morning, and welcome to our second quarter earnings conference call. I’m Stacy Frole, Cedar Fair's Vice President of Investor Relations. Earlier today, we issued our 2016 second quarter earnings release. A copy of that release can be obtained on our website at www.cedarfair.com under the investors tab or by contacting our investor relation offices at 419-627-2233. On the call this morning are Matthew Ouimet, our President and Chief Executive Officer; and Brian Witherow, our Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. For a more detailed discussion of these risks you can refer to filings made by the company with the SEC. In addition in accordance with Regulation G, non GAAP financial measures used on the conference call today are required to be required to the most directly comparable GAAP measures. During today’s call we’ll make reference to adjusted as to find in our earnings releases. It required reconciliation of adjusted EBITDA is in the earnings release and it’s also available to investors on our website be as a conference call at that page. In compliance with the SECs Regulation FD, this webcast is being made available to the media and the general public as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed. Now I will turn the call over to Matt Ouimet.

[Matthew Ouimet:]

Thank you Stacey and good morning everyone. As you read in this morning’s earning release, we expect 2016 to be another record year and we remain on-track to achieve our long-term adjusted EBITDA goal of $500 million earlier than our original target of 2018. It is important to note our confidence is supported by certain data points, including preliminary year-to-date revenues through July 31, which were up 2%, season pass sales are up 15% and second quarter differed deferred revenues are up $25 million or 17% over the prior year. The growth in top-line revenue is the result of increases across all areas of our business, including record levels of attendance and guest spending. Out-of-park revenues including resort accommodations are also up and room reservations for the reminder of the year are trending ahead of the same period a year ago. In a moment Brian will address many of the details you need to update your financial models, but first, I want to proactively address what we experienced in July. We know our investors value having visibility into not just the previous quarter, but the most recent results as well. The shallow side of this transparency is the risk that smaller periods of time are not representative of what we expect for the full-year. We knew coming into this July, we would have tough year-over-year comps. In 2015, the July weather was nearly perfect. This year was different with extended heat wave and related storms negatively impacting many of our parks towards the end of the month. Even though we experienced the pull back in revenues during the month, we have the second best July in our history and as I said earlier we remained firmly on track to deliver record results again this year. To complete the transparency there is always the risk that management team overreact short-term trends both positive and negative. That behavior is not unique to stock analysts. At this time, we see nothing that would change our promotional programs for the balance of the year. Our Halloween events continue to increase in popularity and we continue to price into this demand. We also expect the introduction of Winterfest at Great America and Santa Clara California to be just the first of several such events, which increase the productivity of our parks established asset basis and enhance the appeal of our season pass programs. My read of our year-to-date results confirms our strategy is working. Part of our improvement in the first seven months of your stems from our new approach to early season value pricing, which I have talked about before. Unlike the destination parks where most people could readily identified between the peak and value seasons, the regional amusement park industry historically did not have similar clarity. With this in mind, last year we started multiyear revenue management and marketing campaign that will let value sensitive consumers know that the May, June in timeframe provides both a great value and the great experience. Besides the direct impacts on our early season results, this also provides this would greater pricing confidence through the balance of the season. It was a successful strategy for us last year and we are certainly seeing the benefits continuing to this year. Today our record attendance reflects increases in the number of unique visitors to our park as well as more visits from our loyal season pass customers. I would also like to say that quality and efficiency of our operations had never been better. Our guests are staying longer, riding more rides and visiting more often. Our attractions and building are freshly painted, we have more comfortable places for people to relax and there is more mid way entertainment to experience. The quality and diversity of our merchandise and food and beverage offerings has significantly improved. We now offer park-wide Wi-Fi, new mobile apps and a digital imaging platform that amplifies our social media presence by allowing our guest to share their experiences with families and friends all season long. Our parks have definitely become more than the place ride rides. They are the place to be for FUN. Many of our full-time employees including our general managers have more than 20 years of experience within the amusement park industry. They are the reason we have reported steadily increasing revenues and adjusted EBITDA throughout the years and have paid a distribution to our investors for 30 consecutive years. Even better as the successive or FUNforward 2.0 initiative has indicated, our team is constantly looking towards the future. We have many new initiatives coming online next year and many more in developer. Before I discuss our plans for 2017 and beyond, I will let Brian discuss our current year results in more detail. Brian.

[Brian Witherow:]

Thanks Matt and good morning everyone. Before I begin and following with Matt’s earlier comments, I want to remind everyone on the call that it’s always difficult to extrapolate partial season performance into full-year results. Essentially, all of the revenues from our seasonal amusement parks, water parks and other resort facilities are realized during the 130 day to 140 day operating period beginning in the second quarter with a vast majority of revenues concentrated in the third quarter, during the peak vacation month of July and August. Only Knott’s Berry Farm is opened year-round and the third quarter is also their highest level of attendance. As of this past Sunday, July 31, approximately 40% of our operating results are still to come. First, I would like to briefly discuss our results through the second quarter before moving on to more current revenue and attendance trends. As noted in our earnings release issued earlier this morning, the 2016 season is off to a strong start with meaningful increases in both revenues and adjusted EBITDA. Net revenues for the second quarter months ended June 26, 2016 were $446 million up 5% or $22 million when compared with the same six-month period a year ago. Our revenue growth over this period was largely driven by a 4% or 337,000 visit increase in attendance to 9 million guests and a 1% or $0.59 increase in-park guest per capita spending to $45.16. Over the same period, out-of-park revenues increased 7% or $3 million to $54 million when excluding the impact of changes in foreign currency exchange rates, guest per capita spending will be up 2% year-over-year. This revenue growth we've produced over the first half of the year is balanced across all areas of our business. The 4% growth in attendance is largely attributable to our focus on attracting more value-oriented customers, through dynamically priced ticket offerings early in the season. At the same time, we remain committed to creating urgency for our growing season pass holder base to visit early and to visit often through multi-week special events. Attendance from our season pass and advanced sales ticketing categories were particularly strong during the first six months of the year. In regards to season pass sales, total revenue for 2016 has increased by 15% when compared with our record sales from last year. This growth in season pass revenue is the direct results of increases in both the number of passes sold as well as the average price paid per pass. Through the end of June, we have now sold a record number of season passes and the average visitation per pass is also up year-over-year. At the end of second quarter, our deferred revenue balance totaled $173 million representing an increase of $25 million from the second quarter of 2015. The year-over-year increase in deferred revenues reflects our record season pass sales as well as the strong second year adoption of our all season dining program and the addition of a new all season beverage program, which was introduced across all of our parks for the first time this year. Given the continued shift in attendance mix towards season passes, we are very pleased in our ability to generate continued improvement in guest per capita spending levels through the first half of the year. Slightly more than 1% increase and per capital spending was driven by improved spending across all major categories including admission, food and beverage and premium product offerings. The 7% or $3 million increase in out-of-park revenues we generated through the first half of the year, reflects the continued growth of our resort properties led largely by the second year performance of the renovated historic hotel breakers at our flagship Park Cedar Point. Average occupancy rates and ADR’s are up, year-over-year across the system and the forward-booking curve looks solid for the balance of the year. Out-of-park revenues through the first half of the year have been boosted by the continued growth and special event and catering facilities across our products. Inducing our Great America Park in Santa Clara California, which is adjacent to the 49 Niners Stadium. Moving on to the cost front. Operating cost and expenses through the second quarter, totaled $360 million representing an increase of $14 million or 4% from the same six month period in 2015. The increase in operating cost are in line with our expectations and reflect higher cost associated with the record attendance and guest spending levels through the first six months of the year. The increased operating cost also reflect higher labor cost due to normal merit increases and seasonal wage increases as well is higher operating and maintenance supplies and expenses as we continue to support investment made in the infrastructures of our parks. Meanwhile, adjusted EBITDA, which we believe the meaningful measure of our park level operating results, totaled $92 million for the first half of 2016, up 10% or $8 million in 2015. Adjusted EBITDA margins during the same six month period improved by approximately 90 basis points, compared with the prior period. The increase in adjusted EBITDA and adjusted EBITDA margins is attributable to top-line revenue growth outpacing the growth in operating costs as we continue to focus on effectively managing our fixed cost base. Consistent with the prior year it's important to note that our year over year operating comparisons continue to be impacted by foreign currency translation from our Park in Canada. Adjusting from the impact of foreign currency exchange rates, our revenues through the first six months of the year grew 6% or $24 million and operating expenses were up 5% or $15 million. The net effect of foreign exchange rate on reported adjusted EBITDA for the first half of the year was nominal and based on current rates, we estimate the full-year impact on 2016 reported adjusted EBITDA will be in material when compared with 2015. Turning our attention to operating results for this past Sunday July 31, based on preliminary results, year to date net revenues through July 31, were up 2% or $16 million to $769 million. The increase with the result of a 1% increase in attendance, a 1% in average in-park guest per capita spending an approximate 4% increase out-of-park revenues when compared with July 2015. Today we have producing guest spending across all major categories while also increasing attendance from the record levels we achieved last year. As Matt mentioned, while we did experience pull back in attendance in July, we do not believe this is indicative of a broader trend or a change in the underlying business fundamentals. Throughout the season, when we have seen with weather, we produced the attendance levels and operating results, we expected coming into the year. Based on the nature of the attendance patterns we have generated to-date and the strength of our advanced purchase commitments, such as season pass sales, group bookings and hotel reservations. We continue to believe the underlying demand for our business remains strong. To quote Matt, if it rains on any given Saturday, you don't change your strategy on Monday. With that in mind, we remain confident in the capital and marketing programs we have in place, as well as the dynamic pricing programs and operational initiatives we have implemented. We will continue to run our 2016 playbook and execute against our long-term growth strategy as we look to deliver our seventh straight year of record results. Now let me shift focus to our balance sheet for a moment. At the close of the second quarter, our balance sheet remains in excellent condition in terms of providing both liquidity and financial flexibility. Our receivables and inventories are at normal seasonal levels and we have long-term credit facilities in place to fund current liabilities, capital expenditures and operating expenses. At the end of the quarter, we had $68 million in cash on hand and $596 million of variable rate debt before giving consideration in straight swaps. We also had $939 million of fixed rate bonds and $55 million in outstanding borrowing under our revolving credit facilities. In 2016, our revolver usage levels were similar to 2015. Over the past five years, we have significantly improved our balance sheet and financial flexibility. We have reduced our consolidated leverage ratio from 4.1 times debt to adjusted EBITDA at the end of 2011 to insight 3.4 times debt to adjusted EBITDA today. Our cash interest costs have decreased to approximately $80 million on an annual basis, down from approximately $150 million five years ago. Over that same timeframe, we have gone from drawing on our revolver during the fourth quarter to having approximately $120 million in cash on hand at the end of the year. Finally, we have increased our annual distribution rate from $1 per limited partner unit in 2011 to $3.30 per limited partner unit this year while still aggressively investing in growth opportunities at our parks. And we expect our distributions to keep growing. As I'm hoping to we are pleased with our operating results through the first seven months of the year and we remain confident in our long-term strategy. We will continue to opportunistically take advantage of market conditions to maintain a strong balance sheet and growing distribution, while at the same time having flexibility to invest in strategic growth opportunities. With that, I’ll turn the call back over to Matt.

[Matthew Ouimet:]

Thank you, Brian. As Brian just mentioned we continue to have great confidence in the resilience of our business model, the value of our strategic plan and our ability to successfully implement it. We also have a great degree of confidence in the quality of our total entertainment package and the value proposition is provides. This includes our upcoming following the events, which continued to be an important part of our operating season. In fact, weekends in October are often the highest volume and most profitable weekends of the year. We remain focused on ensuring, we continue to deliver and add to the high quality experience, our guests have come to expect from our notorious haunt events. This year, we will have new skeleton key rooms, which are actor driven experiences included with the purchase of fright line, new themes for many of our mazes, new parades and more family day experiences around the 50th anniversary of it’s The Great pumpkin Charlie Brown. Also, we will be testing a new upon virtual reality attraction in several of our parks. This is just another example of our broad approach or testing VR in our parks, as we look for finding the operational and commercial sweet spot for tech payment offerings that will appeal to the consumers. More details around our Halloween events will be release in the near future. Beyond Halloween period, we will expanding Great Americas’ operating schedule with the addition of Winterfest and new holiday experience at the park. During Winterfest ,guests will be able to ice-skate in front of the parks iconic double-decor carousel, enjoy magnificent light display, view spectacular live holiday shows and enjoy a wide variety of food and beverage offerings specifically tailored to the event. While Knott's Berry Farm is been a huge success Knott for some time now this is the first phase of broadest strategy to introduce winter holiday experiences at our seasonal parks. We are extremely excited about the potential Winterfest represents for extending our season and extending the entertainment offerings to our guests. While our comments so far a primarily focused on the current operating season, I assure you we are already actively engaged in the execution of all strategic aspects of the upcoming 2017 season. This includes Mystic Timbers a world-class wooden roller coaster at Kings Island, which we just announced last week. Our major water park expansion at our Soak City Waterpark adjacent to Knot Berry farm and the extension of our operating season in three more parks where Winterfest will be introduced. More new risen attractions at our parks will be announced over the coming weeks. We also continue to move forward with our branding initiatives. As I mentioned on our last call, we have found that embracing the heritage of our unique brands and strategically operationalizing those brands leads to a guest experience unmatched by other generic amusement parks. The in-depth analysis we are performing in each of our parts directly informs our investment strategy works across all departments and functions and supports strong consumer loyalty. To-date we have completed the brand research and positioning plans at five of our largest parks and we expect that three more completed by the end of next year. Finally, our 1300 acres of undeveloped plant adjacent to our parks continues to be large opportunity for growth. We are not prepared to announce all of our plans at this time, but I will say our focuses on projects that will drive both direct value adding mission synergies. A great example of this is the construction of Cedar Point Sport Center, which is currently ahead of schedule and is expected to be completed by the end of this year. Sports Force the company that will be managing these fields has already begun taking tournament registrations beginning next spring. Imbedded within this tournament is a length of event ticket Cedar Point in Soak City for the athletes along with ticket packages available for their families and friends. We are more aggressively positioning Cedar Point at a true regional destination with the companies of this new huge sport facility, the ongoing evolution of the parks resort offerings including expanding the amenities and entertainment on its mile-along Lake Erie Beach and the completion of the parks brand positioning as the place to take thrills to the next level. At Cedar Point the average length of stay and the average rise per guest, two key performance metrics in our world have both steadily been increasing and based on future plans we would expect to see this trend to continue. Unfortunately, our marketing team won't let even me announce any specifics today, but will look for their announced in the coming weeks. Speaking of water parks the expansion of rebranding of our water park at Carowinds has been extremely successful this year. The attractive growing Charlotte market continues to be an area we planned to invest in. This park has 100 acres of undeveloped land and similar to the playbook at Cedar Point we believe this area is to be well position for amateur-use sports facilities and resort development. Discussions and analysis are ongoing, we will be sure to keep you updated as our long-term strategic plan continue to progress for this market. In addition, we continue to develop our CRM platform, our dynamic pricing models, our food and beverage programs, our mobile app and digital emerging platform, our rezoning efforts to Great America and our immersive live entertainment offerings. Each of these initiatives represents an exciting and lucrative area of growth for us both in the near-term and the long-term. In conclusion, we remain very confident in our ability to deliver record results this year and remain on-track to achieve our long term adjusted EBITDA goal of $500 million earlier than our original target of 2018. Our top priorities remain to grow our distribution while we continue to invest in our business to create greater value. We are a total return investment with extremely attractive tax advantage 5.6% yield and valuation growth opportunities when compared to our closest peers. With that, we will now open up the call to questions.

[Operator:]

[Operator Instructions] We will take our first question from Tim Conder with Wells Fargo Securities. Timothy Conder Matt if you could maybe just go over a little bit on the July weather comments, so if you can get that fully off the table here. Did you see where the impact from the season pass guests and which parks in particular if you maybe call out the top two or three that were impacted? Matthew Ouimet Yes, Tim look I’m not going to go into too much detail and again I thinks the risk of extrapolating this beyond what it should be. I would also have said the same thing about our good results at the end of the second quarter. The way we sort to it though if I could give you a little bit of color, the reason I’m so confident it was weather related it, the only two parks that outperformed our expectations in the month were in California. And so, I think that we are very confident that, that’s what we experienced and we will look for better results over the next couple of weeks. Timothy Conder Okay that’s fine. And then, you touched a little bit on VR and how you are doing some exploration there? Also a little bit of the augmented reality given the Pokemon Go and things like that, how do you see VR versus potential for augmented reality or is there any potential that you could maybe talk about here at this point? Matthew Ouimet Yes, Tim I think what we have done is really I think appropriate which is we talk about tech payment more broadly. I have got a guy I enormously respect who ran Ocean Park in Hong Kong Tom Merriman and Tom said “just because you can, doesn’t mean you should” and so what we are looking for and I think we have cracked code on virtual reality in the coaster. We will have a plan for it next year and how to do it in a way that doesn’t provide a disservice to those who want to ride it without VR et cetera. But you can continue to see us play in this arena, particularly define how you commercialize it in a way that makes the guests happy, but makes such money as well. So VR as I mentioned we are going to experiment with it as how we haunt this year of VR, where you also may see us continue to expand on augmented reality, but I have got nothing specific for you at this point Tim. Timothy Conder Okay, okay. And then Brian, just wanted to delve into the capital deployment a little bit and Matt you alluded to looking at resorts maybe and the tailwinds that you talked about before. Any timing that you gentlemen can talk about of when we could see some ramped up resort cabin roll-out and then the potential maybe for even some modest unit repo here to maybe offset any dilution at minimum or anything like that? Brian Witherow Yes, sure Tim. So on the resort side, what I can tell you at this point is that we are currently in the due diligence process on several potential projects across the system. Nothing specific I can give you at this point in time, but I would say it would be fair to expect to hear more on specifics on some of these projects on one of our upcoming earnings call, later this year. As it relates then to buybacks, I would say at this point, buyback remains a topic of conversation with our Board on a regular basis. To-date our efforts and use of free cash flow has been concentrated on reinvesting in the parks and the opportunities presented better as we look to growth of business. So in the near-term, I would say that’s where we will remain focused, but it tool and the tool belt for us and we will take opportunistic chances or take opportunities to buy back shares at the right time, based on those other uses. Timothy Conder Okay. Thank you gentlemen.

[Operator:]

Our next question comes from James Hardiman with Wedbush Securities. James Hardiman Hi good morning, thanks for taking my call. I promise, I’m not going to overreact on the July numbers, but I was hoping you could just… Matthew Ouimet I think that, you were listening closely. James Hardiman Yes, very closely. I wondering if you could help us handicap , what the weakness in July being for the quarter. I guess first if we would may be try to do that math is that how for down July was, any help with that would be great. How much is the third quarterly is actually left, could you give us some facts on sort of, how much of the year is complete? I guess I’m just trying to figure if August and September return to 5% type revenue growth and what does that mean for the third quarter, just based on the math, any help you could give us there will be great? Brian Witherow Well James as we said, the third quarter is the key quarter for the year, as I commented on the prepared remarks. A t the end of July, we still have 40% of the year in front of us, so with that in mind, I would say our ability, if we look broadly and we are not going specific guidance as it’s relates to the quarter itself. But as we look at the balance of the year, we are still very confident as Matt said on the call as well in our ability to deliver our seventh straight record year. So while we had a little bit of a bump in a road, towards the end of July, those last couple of weeks in July you know we are confident that there is more than enough runway for us to recover. And it’s not unusual for us to see for the course of the year where we have ups and downs. This one just happened to come against an earnings call and you know us, we tend to be very transparent and this is one of the outcomes of being overly transparent. Matthew Ouimet You know James, the other thing I would call out is, obviously the deferred revenue is sitting on the balance sheet and buying these season pass sales, that been are yet to flow through the income statement or provide a substantial cushion for the effect we saw here in July. James Hardiman That’s helpful but before we got the 40% of the year is left, can you just may be give us a number for much is the quarter is left? Brian Witherow Not at this time James, I mean what we told you in past. I will give you a little bit more color and we will leave it at this is that after Labor Day the business has grown with the introduction of Halloween and the growth of the haunt events over the year that post Labor Day represents about 15% of our full-year. So you can do the rough math there to give you an idea as to how important August is. James Hardiman Okay that’s perfect, I can do the math there. Just want to make sure I understand may be some other shift that is going on here? I guess first the early season value pricing, is there a possibility here that as more people come to the park earlier that some of those people you might have pulling may be and visitation out of 3Q and into Q2. And then I guess secondly help me understand sort of the dynamic of the season passes. Initially looking at 15% growth there and only 2% revenue growth overall year-to-date I would think that maybe there is more of that to release as we work our way through the year. But then, I think there was a comment that the average visitation per pass was actually up year-over-year. So maybe either less revenue through book as we move forward and some of it comes down how you account for the season passes. Once you release sort of unused visits in revenues. But help me understand some of the shits going on here? Matthew Ouimet All right so I will take the first part and then let Brian to take sight. Look, we don’t believe there is been a significant pull forward, but that being said. We did change our strategy, so there is a little bit of that in the back of our mind as well James, but we haven’t been able to quantify at this point. James Hardiman And Brian on the price, on the revenue. Brian Witherow Well just to add on there to the pull forward, I think one of the fact, I’ll give you that helps us get comfortable with that James is, we are having this call a couple of weeks ago prior to the heat wave that hit most of our parks. Our July attendance was looking really good about midpoint of the month. So we definitely didn’t just pull forward peak vacation time visitors into May and June, the attendance was there in the first half of the month of July. As it relates the season pass, we did say that the average visitation is up per pass holder year-over-year. The draws that each one of our parks books revenue towards on a season pass visitation basis, I guess reviewed on a weekly basis. I will tell you and as Matt alluded to in his remarks as did I and we are sitting on a good chunk of deferred revenue associated with the season pass programs, as well as the related programs all season dining, all season beverage et cetera. We continue to review those, but there is no doubt that there is more visitation that we expect. And so that one of the things, I think gives us comfort in the balance of the years that we still have a good chunk of visitation based on historic visitation patterns that we would expect to see over the balance of the year from season pass holders. James Hardiman Great. It’s really helpful. Thanks guys. Matthew Ouimet Thanks James.

[Operator:]

Our next question comes from Ben Chaiken with Credit Suisse. Benjamin Chaiken Hey guys. Matthew Ouimet Hey Ben. Benjamin Chaiken Just on the cogs side, you caught up higher cogs, I guess from higher attendance and spending, but still looks like as a percentage of revenues these expenses were higher anything to read into here. Was there any impact from the rollout of your all season dining and deploy to that number or any reason why cost could be more front end loaded this year? Brian Witherow No. It’s a little bit in a couple of those programs Ben, where all season dining continues to evolve and for some of our parks they are only in the second year of it. And so we continue to get a little bit smarter, our guests continue to change their use of the program. So similar to the season pass draws, our parks are constantly reviewing the draws on deferred revenue related to those programs. So some of that a little bit at play as earlier in the season we get maybe more season pass visitors in the park, they tend to use that those programs and put a little bit of pressure. I would anticipate by the end of the year that you will see cost of goods on across the board be pretty comparable to where they were this past year. Not a lot of pressures in that area is probably a little more of a time related item. The biggest area pressure as we said on the call that we are seeing an operating cost and expense is from the pressures in seasonal labor arena. Matthew Ouimet The other thing I would say Ben is, the team is doing a really good job and I think you will see a lot of these as we grow in the 2017 of modifying our facilities to reduce the amount of labor required to address these programs. So as an example we have dedicated a beverage refill stations now that don’t clog up the lines or require the labor that typically is at food and beverage stations. Its exclusive too those who have all season beverage programs as an example, we are introducing more tablet ordering at our fast food locations in some of our sit down restaurants. So I think the plus sign of this is you should expect to see a lot more those programs roll out to reduce our reliance on labor somewhat. Benjamin Chaiken Got it. And just real quick. You mentioned cogs similar to last year, you are talking about your percentage revenue basis for the full year? Brian Witherow Yes. Benjamin Chaiken Okay and then on the labor side, were there any specifically like tight labor market that impacted this or was it a normal minimum wage increases? Matthew Ouimet It was generally more in the minimum wage although I would say broadly, although I wouldn’t call a tight, I would call and those are specific positions that we usually have a challenge with. I won't call all that on this call, but we get a weekly report Brian and I that comes up from Richard Zimmerman about where we are on staffing and whether we need to respond in certain markets and right now we are exactly where we would like to be. Benjamin Chaiken Okay. Thanks a lot. That helpful. Matthew Ouimet Sure. Thanks Ben.

[Operator:]

Our next question comes from Barton Crockett with FBR Capital Markets. Barton Crockett Okay. Thank you for taking the question. I wanted to ask a little bit bigger picture just related to get this applicable on you had a little bit of a slowdown you have said its weather. But just to be I mean there has been tons of news reporting about terrible events in public venues. Does that have any impact in any way that you can detect on peoples interest in coming to your theme parks? Matthew Ouimet The short answer is no. I have been in the industry 30 years and I have seen events happened overtime. And my radar is pretty damn good on this. I have heard from not a single person as I travelled around that this is a barrier for people visiting our parks. Barton Crockett Okay that’s helpful and on the kind of trend towards expanding the season, which is interesting. You called that you are introduce this Winterfest I think at Great America, can you just update us on how many parks you think have an opportunity - what percentage of your portfolio has an opportunity to have a Winterfest like I don’t know it’s off the table in a cold place like Canada or if that the only that matters? Brian Witherow I think we are going to learn a lot, what we said is we do in Winterfest at Great America this year and we are internally committed to three additional ones next year. I suspect Canada is a little harder for the reasons you described, but the ones we picked generally have more favorable weather and also have a population base and strong season pass base to leverage all those. Barton Crockett Okay all right. I mean do you think there is something that most of your park could do or just kind of a - which may be close… Brian Witherow I think it's probably won't end up being this comment as how lien, but it will be more than half of our parks, if I had to give your number today. Barton Crockett Okay all right. And then on the VR commentary, which is interesting. I mean you have got kind of a lab to look right, I mean Six Flags has given people after those classes… Brian Witherow We have our own lab about 400 yards from my office and so... Barton Crockett So you have two labs, you can look at that we can also look at how it's doing outside of lab in a real world experience and use that as an observation point. Are you seeing anything of what Six Flags is doing that makes you think that’s approach you should copy or should stay away from in terms of giving VR on a coaster the in most product. Brian Witherow I can't speak to what they do, I mean that would not be appropriate. What I can tell you it is that our parks, because it's [indiscernible] that our park, we would never mass market of product that the vast majority of you guys can't handle from a capacity standpoint. And so what we are first assuming and I'm very comfortable with it, since I have met with our leadership team is the strategy that make sure that when guests who come and wants to ride VR he can ride VR, and guest who come who want to ride the coaster without VR can ride the coaster. And we just don’t have any coasters really where the ridership is so low that you would want to convert it to a 100% VR at this point. I think go more broadly though and I think is probably helper button. Where there is new technology available whether that be VR, digital entertainment or would be something that the coaster manufactures come up with. I think everybody is really pretty good at trying to find out how to put that over top of the existing asset base, but at this point, I think we have plan, we are confident in that will keep our guests happy and that's where I'll leave it. Barton Crockett Okay, the one final thing on one of the numbers you threw out the 15% kind of growth in season pass revenues. Can you give us another metric kind of related to that and that is a census or percentage of attendance from season pass has that changed much, is it' still around, I think you have given a number in the past that has changed much? Brian Witherow Yes, the number we traditionally given out is low 40s it continues to creep up. Barton Crockett Okay, great. Thank you. Matthew Ouimet All right. Thank you.

[Operator:]

Our next question comes from Joel Edelstein with Stephens Inc. Joel Edelstein Hi good morning everyone. I wanted to follow-up to the question that was asked earlier whether there was a pull forward on the attendants and I think you address that side of the question. But my question is more related to just in-park spending per cap metrics, it look like that was down a little bit. Did you see any mix shift in terms of your quest profile whether it's a family group teams mix really - I'm thinking likely from the impact of those value secret that you were trying to go after in the early season, but if you could just confirm any trend there that would be helpful? Brian Witherow Sure Joe. As we said with season pass being up year-over-year and we are pleased with the growth that were generating in-park spends I mean we are getting it in all of the core revenue channels that we would expect admissions happen to be extra charge or premium product offering like fast lane. And this is I think true for everybody in the industry that season pass orders on a per visit basis are necessarily going to spend as much as the single day visitor might spend and there could some of that truth as well with the value-oriented consumer. I think typically what we expect as the is growth in per capita spending improves as we work through the season as we get into July and August we tend to see per caps picking up as we get more towards that peak vacation season and maybe our season pass mix for the those months is a little bit lower. That will also be true as we get into October, which happen to have some of our higher percentages of non-season pass attendants. So we are comfortable and happy with where per capita spending is, particularly as we look at as the fact of season pass as the higher percentage of attendants at this point. Matthew Ouimet And Joe I think I may have miss heard you but per caps are up 1% to 2% when you take the FX out of it. So I have actually have been pretty pleased given that you would think that you would have a little pressure from the math volume season pass orders and perhaps when the new value-oriented customers were attracting, but we’re actually up 2% when you take out the FX. Joel Edelstein Okay appreciate that detail and just the clarification Matt. I just want to also just try to clarify some thing on the number of events and perhaps you could even talk about it in terms of number of extra days that you might be putting into the calendar as it relates to Halloween and certainly Winterfest is new at the Great Americas. Matthew Ouimet Other than Winterfest, the balance for the year the days don’t materially shift from the prior year and Winterfest is a little over three weeks, other than incremental days. Joel Edelstein And Matt also wanted to just give or take on, weather and M&A opportunities are out in the market today and if you were looking to expand through that avenue what type criteria you would be measuring against. Matthew Ouimet It’s interesting because these company really was very good at M&A or the year. That’s how we got [indiscernible] that how we got Knott's Berry farm and Worlds of farm et cetera. One of the advantages we have in these is generally our longstanding relationships with the families or individuals who control these assets. The other is the fact we have generally been successfully using the MLP structures. The units with the associated distribution is attractive to many of these families itself. So if there was a quality park out there that was available we would be an active player in that arena. Joel Edelstein I appreciate the comments and I will yield to the next. Thank you. Matthew Ouimet Thanks Joe.

[Operator:]

[Operator Instructions] Our next question comes from Michael Bunyaner with TLF Capital. Michael Bunyaner I just wanted to ask two questions, one is bigger picture and the other is little bit shorter-term. On the bigger picture, your free cash flow should start accelerating this year and then to next year and beyond unless the capital spending needs and opportunities in terms of reinvesting back into the business will continue. What is your view of the total CapEx and how you thinking about the free cash flow to go forward? Brian Witherow Yes Michael it’s Brian. As we discussed in the past, I think you are alluding to it, we would expect that the CapEx spend this year and going forward is going to be down from the peak. I will call it artificially during peak numbers of the last couple of years as we invested in infrastructure projects like the Breakers remodeling, as well as some ramp up investment in Carowinds, which will start to level off a little bit our at least normalize. So going forward from modeling purposes what have been using internally, I will give you little inside baseball. In that $140 million to $150 million range as the level of investment that we think it’s necessary to drive the core growth in the business. That said, on a free cash flow basis there is some movement in the opposite direction. As we talked about cash in tax payments are going to be accelerating from the low $20 million this past year to probably 50-ish million in 2016 and over the next several years being in that $55 million to $60 million range going forward. So those two are sort of offsetting one another, and then quite frankly the incremental projects that we have talked to, funding of those, will look at various ways. Funding some of those on a free cash flow to possibility. Funding some of those through incremental borrowings depending on the scale of the investment is another possibility. So that’s sort of I'll look right now as a relates to free cash flows, at least as a relates to say 2016 and 2017. Michael Bunyaner Thank you very much. The second question is you have been exceedingly successful over the last four plus years. And you have been able to execute your strategy without increasing your [indiscernible] distributions at nearly double-digit rate over this year. Matt, when you think about the company three to five years from now. Clearly, you will have that opportunity to use your free cash flow either to grow the business and/or to return your capital back to the shareholder side via increased distributions and/or share buybacks. As you think about the share repurchase or unit repurchase, because it will allow you to permanently reduce the capital [indiscernible] in terms of distributions. How do you value that these vis-à-vis the rest of the priorities for capital and how valuable is it, or at what yield or rate that becomes exceedingly attractive to you. How does the Board and how do you think and [indiscernible] think about that? Matthew Ouimet So Michael I think a couple of thing is. No surprise to the people on this call, but the distribution remain kind of our top priority, when we talk about alternative uses of the cash. I will tell you that the Board is very much in favor of continuing to grow our core assets that we own today. So we still believe opportunities like Great America will provide more than double-digit returns, once we get that rezoning done et cetera. Will there come a point, I don’t want to speculate here, but I suspect three or four years from now, hopefully not that much sooner, but three or four years from now, there will be a more rigorous debate about whether we are going to buy back stock at scale. Today that doesn’t remain the priorities for the Board and the conversations we have.

[Operator:]

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

[Matthew Ouimet:]

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

[Stacy Frole:]

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 our Investor Relations department at 419-627-2233. We look forward to speaking with you again in about three months to discuss our third quarter results.

[Operator:]

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