News Cedar Fair Merging with Six Flags

[MaxxForceFan]

From Cedar Fair's earnings call today:

Richard Zimmerman -- President and Chief Executive Officer

Thank you, Michael. Good morning and thanks to everyone for joining us today. We're excited to be here today to discuss another very solid performance by Cedar Fair in 2023, including a record performance over the second half of the year. But before we review our results, let me briefly bring everyone up to speed regarding where we stand in terms of the proposed merger with Six Flags.

I am pleased to say that we passed a key milestone at the end of January when the S-4 was declared effective and the related definitive documents were subsequently filed, including the Six Flags' proxy statement and prospectus. Meanwhile, we continue to work through the antitrust approval process after receiving a second request from the Department of Justice on January 22nd. This was an anticipated part of the process that our respective teams had prepared for, and we continue to expect the transaction to close within the first half of the year, as originally contemplated. Since announcing the proposed merger in early November, we have engaged in many conversations with Cedar Fair unitholders, as well as the broader investment community, and we are encouraged by the strong support we've heard from many investors.

We look forward to closing the transaction in the coming months and unlocking the compelling value-creation opportunities ahead for our combined company, which we are confident are greater than either company could have achieved independently. Naturally, as this process moves forward, we will keep the market apprised of other material events.

Cedar Fair (FUN) Q4 2023 Earnings Call Transcript | The Motley Fool

 

[Riboflavenus]

From Cedar Fair's earnings call today:

Richard Zimmerman -- President and Chief Executive Officer

Thank you, Michael. Good morning and thanks to everyone for joining us today. We're excited to be here today to discuss another very solid performance by Cedar Fair in 2023, including a record performance over the second half of the year. But before we review our results, let me briefly bring everyone up to speed regarding where we stand in terms of the proposed merger with Six Flags.

I am pleased to say that we passed a key milestone at the end of January when the S-4 was declared effective and the related definitive documents were subsequently filed, including the Six Flags' proxy statement and prospectus. Meanwhile, we continue to work through the antitrust approval process after receiving a second request from the Department of Justice on January 22nd. This was an anticipated part of the process that our respective teams had prepared for, and we continue to expect the transaction to close within the first half of the year, as originally contemplated. Since announcing the proposed merger in early November, we have engaged in many conversations with Cedar Fair unitholders, as well as the broader investment community, and we are encouraged by the strong support we've heard from many investors.

We look forward to closing the transaction in the coming months and unlocking the compelling value-creation opportunities ahead for our combined company, which we are confident are greater than either company could have achieved independently. Naturally, as this process moves forward, we will keep the market apprised of other material events.

Cedar Fair (FUN) Q4 2023 Earnings Call Transcript | The Motley Fool

From the transcript:
"The reduction in second half operating costs was primarily driven by efficiencies in operating supplies and entertainment costs, as well as reductions in both seasonal and full-time labor. Over the second half of the year, our park teams reduced total seasonal labor hours by more than 550,000 hours, while our average seasonal labor rate was up a modest 1%. The changes we have made to our seasonal pay structure continue to help flatten the growth curve along -- around labor rates, which is particularly important given that seasonal labor rates -- or seasonal labor represents our single largest operating costs. For the full year, our average 2023 seasonal labor rate was up 2% from last year, in line with the expectations coming into the year.

The recent success of our cost saving measures gives us confidence going forward that we have the right strategies in place to drive incremental operating efficiencies and expand margins while still delivering a park experience that meets the demands and expectations of our guests. On the adjusted EBITDA front, for the full year, adjusted EBITDA totaled 528 million, compared to 552 million in 2022. The $24 million decrease was primarily attributable to the year-over-year decreases in attendance and net revenues and, to a lesser extent, by the higher advertising, land lease, and insurance-related costs in 2023. "

-That explains the staffing issues. They're deliberate. THAT is bullshit. They consider not having adequate staff a success, and they think they're still meeting guest expectations. CF can't handle staffing the parks they already have responsibly. This merger will be a travesty.

 

[warfelg]

From the transcript:
"The reduction in second half operating costs was primarily driven by efficiencies in operating supplies and entertainment costs, as well as reductions in both seasonal and full-time labor. Over the second half of the year, our park teams reduced total seasonal labor hours by more than 550,000 hours, while our average seasonal labor rate was up a modest 1%. The changes we have made to our seasonal pay structure continue to help flatten the growth curve along -- around labor rates, which is particularly important given that seasonal labor rates -- or seasonal labor represents our single largest operating costs. For the full year, our average 2023 seasonal labor rate was up 2% from last year, in line with the expectations coming into the year.

The recent success of our cost saving measures gives us confidence going forward that we have the right strategies in place to drive incremental operating efficiencies and expand margins while still delivering a park experience that meets the demands and expectations of our guests. On the adjusted EBITDA front, for the full year, adjusted EBITDA totaled 528 million, compared to 552 million in 2022. The $24 million decrease was primarily attributable to the year-over-year decreases in attendance and net revenues and, to a lesser extent, by the higher advertising, land lease, and insurance-related costs in 2023. "

-That explains the staffing issues. They're deliberate. THAT is bullshit. They consider not having adequate staff a success, and they think they're still meeting guest expectations. CF can't handle staffing the parks they already have responsibly. This merger will be a travesty.

Also snuck in there that they continue to change seasonal pay rates so there’s no increase year over year.

 

[jscll]

More from the transcript:
As we have seen before, the 2023 operating season was a tale of two halves. By midseason, the effects created by anomalous macro factors, namely unprecedented rainfall in California and uncontrolled wildfires in Canada, resulted in shortfalls in early season attendance and spring season pass sales, which posed a challenge to our potential full year results. Consequently, we modestly adjusted ticket pricing at several key parks while also investing more in our advertising and promotional campaigns. Along with the return to more normal weather conditions, these midseason adjustments were successful in generating incremental demand and led to a 3% increase in attendance over the balance of the season, recouping a meaningful portion of our early season deficit.
Ever notice in these conference calls, if your attendance is down, it's the weather's fault. They fixed the issue by lowering prices. Why can't any executive ever admit maybe they raised prices more than the market will support?

 

[Blauer]

The current management thinks that keeping profit margins by cutting costs instead of growing revenues is a success. It’s not. Cost cutting leads to revenue reduction in the long term and a vicious spiral downward. Especially in an industry that is based on entertainment.

Their stock is a bad investment at this point. They have no plan to actually grow the company. Only to squeeze as much as possible out of the current customer base while cutting costs.

 

[warfelg]

Sorry for the incoming rant, but the more I think about this the more upset (? maybe, I don't know the word for sure) about the news about staffing.

To me the most annoying part, and why I make comments like two steps forward and one step back, is that they do stuff like allow the F&B program to improve while cutting staffing and relying on volunteers. I took some flack for saying it was more about saving money than being properly staffed and it looks like it's a little worse than I thought, where the volunteers are about being at minimum staffing and saving money. So they can make it look to everyone else like they are doing as much as they can to improve the experience while cutting on the back end as much as possible.

I think CF as a whole, and the greater SF/CF merger should be under the microscope some with admitting something like this. With them being to operate almost all parks like normal but cut staffing at the same time to boost profits, with less hiring competition out there I predict the quality of regional parks will continue to decline. We know both of those chains have started to pull back to have people work more at HQ overseeing parks, what would stop them from doing something like SFA/KD being managed from the same park level team taking care of both parks? SFGA/Dorney? SGOG/Caro?

I'm going to sabe myself from going on a greater rant about employment issues going on, but my prediction isn't great for these parks. I think we might come to see the 2020's like the era right after to Coaster Wars which is marred by more condensing and closure of parks than anything else. I think we're on the cusp of seeing some great little parks owned by bigger chains either getting sold or closed due to "staffing" issues that were self inflicted.

 

[nick]

merger should be under the microscope some with admitting something like this

An investor may look at this favorably, though. We might hear this message again because it’s a positive to investors’ ears.

Economically, “lean” staff is where it’s at. That’s why you self-serve, self-bag, and self-order. That’s a net positive to someone uninterested in guest experience and interested in squeezing out a solid balance sheet.

This always takes me back to “It’s a Wonderful Life.” You have George as the banker with a heart and Mr. Potter as the snatch-it-up banker. Even in the movie, Mr. Potter is doing far better than George. Investors don’t care about long-term, heart-involved decision-making. They want the snatch it all up, cut corners, decimate, and when that avenue runs dry, they’ll do it to the next industry.

 

[tursiops]

An investor may look at this favorably, though. We might hear this message again because it’s a positive to investors’ ears.

Economically, “lean” staff is where it’s at. That’s why you self-serve, self-bag, and self-order. That’s a net positive to someone uninterested in guest experience and interested in squeezing out a solid balance sheet.

This always takes me back to “It’s a Wonderful Life.” You have George as the banker with a heart and Mr. Potter as the snatch-it-up banker. Even in the movie, Mr. Potter is doing far better than George. Investors don’t care about long-term, heart-involved decision-making. They want the snatch it all up, cut corners, decimate, and when that avenue runs dry, they’ll do it to the next industry.

I think you are dead on correct, but it only works until people get fed up enough and quit going.

 

[warfelg]

Economically, “lean” staff is where it’s at. That’s why you self-serve, self-bag, and self-order. That’s a net positive to someone uninterested in guest experience and interested in squeezing out a solid balance sheet.

I can find the article again if I need to but many companies are going to be moving away from that because the labor savings has been out paced by customer complaints and shrink.

I picked up on classes again and in one class we were talking about this whole issue at hand with employment and the professor talked about how we’re on those conditions that created many of the labor laws to begin with. The demands of the job far outpace the compensation, employees fought right now through silent quitting, employers are starting to do what’s call quiet firing.

The two Safeways near me used to have 9 self checkouts each, recently they both cut back to 3 with a max of 15 items, and reopened 2 other checkout lanes for 5 being open. And checkout has never been faster. Postmates, Instacart are starting to see a slowing in the number of ”members” but are also seeing the number of non-delivered items rise. Heck I know this is a singular story and not the full story, but my last 3 times using DoorDash for groceries, I’ve ordered Death Water’s Iced Tea varieties. In the store it’s in the ice tea area, however every time the dasher selected “no pickup” and then sent me, after they checked out, a picture of the water isle saying it’s out of stock. My breaking point came the other day when I was sick, ordered Chicken Noodle Soup, Ginger Ale, and Saltines, and I got Cream of Chicken and Cream of Mushroom, Coke, and Oyster Crakers with all three items saying out of stock. I would give that a 0% chance of being true.

Anyways back to the topic. There’s already pushback to the ‘lean’ staff concept across the board and I think The parks are just behind that with standing and late to respond.

 

[nick]

I think you are dead on correct, but it only works until people get fed up enough and quit going.

And until the eventual, the stockholder wins!

@warfelg I welcome this news! Let’s see what large brand gets on the proper trend and is financially rewarded for it.

 

[halfabee]

Investors don’t care about long-term, heart-involved decision-making. They want the snatch it all up, cut corners, decimate, and when that avenue runs dry, they’ll do it to the next industry.

Yep. Reap to the bare dirt, in fields others spent years sowing while taking just a little less for themselves (which was still a lot, but sustainable).

Until and unless customers start voting in greater numbers with their feet and wallets, it absolutely will continue.

 

[warfelg]

Yep. Reap to the bare dirt, in fields others spent years sowing while taking a just little less for themselves (which was still a lot, but sustainable).

Until and unless customers start voting in greater numbers with their feet and wallets, it absolutely will continue.

Yup. A big part of why I think that the conversation of the issue is much bigger than just talking about a park. For the longest time we’ve gad regulations that protected consumers, and a lot of that has been undone over time.

 

[Jonesta6]

Yup. A big part of why I think that the conversation of the issue is much bigger than just talking about a park. For the longest time we’ve gad regulations that protected consumers, and a lot of that has been undone over time.

In a way our mutual interests in theme parks is a lens for which we can understand the greater world and how it works.

This is proof of that... Though for me to say more would further drift into political territory.

 

[Riboflavenus]

I think you are dead on correct, but it only works until people get fed up enough and quit going.

And I'm about there at this point - the dramatic shift to openly caring about shareholders THAT much more than guest experience has left a bitter taste in my mouth. Amusement Parks aren't the only way to enjoy the summer, and they're certainly already not the cheapest. We haven't renewed for 2024 yet. And I don't think we're going to.

 

[warfelg]

And I'm about there at this point - the dramatic shift to openly caring about shareholders THAT much more than guest experience has left a bitter taste in my mouth. Amusement Parks aren't the only way to enjoy the summer, and they're certainly already not the cheapest. We haven't renewed for 2024 yet. And I don't think we're going to.

Side note:
I live in Annapolis, so perfect dead zone for parks. Last year I had a BGW pass, KD, SFA, and Hershey. I dropped BGW telling them it’s because they have inflated in park costs beyond a reasonable amount dampening my desire to get a hotel to visit. I kept Hershey.

CF and SF I explained my displeasure over closings, staffing, and their impending merger. I explained that I didn’t trust their ability to deliver a quality experience as a combined company and that 4/6 major parks near me would be under their combined leadership, their is little incentive to ensure a high quality experience.

 

[Riboflavenus]

Side note:
I live in Annapolis, so perfect dead zone for parks. Last year I had a BGW pass, KD, SFA, and Hershey. I dropped BGW telling them it’s because they have inflated in park costs beyond a reasonable amount dampening my desire to get a hotel to visit. I kept Hershey.

CF and SF I explained my displeasure over closings, staffing, and their impending merger. I explained that I didn’t trust their ability to deliver a quality experience as a combined company and that 4/6 major parks near me would be under their combined leadership, their is little incentive to ensure a high quality experience.

I was thinking about taking the family up to Hershey for a couple of days rather than get the CF Passes this summer. With my oldest already in college, and the next two in middle and high school, their summer schedules are already packed as it is. Might be nice to just find a couple days when everyone is free and go do this instead.

 

[warfelg]

I was thinking about taking the family up to Hershey for a couple of days rather than get the CF Passes this summer. With my oldest already in college, and the next two in middle and high school, their summer schedules are already packed as it is. Might be nice to just find a couple days when everyone is free and go do this instead.

There’s ups and downs with Hershey. It’s now a two day, maybe three day park. Their own done F&B is really good, but there are so many chains in there. Waits are really long, but dispatch is really good.

 

[Riboflavenus]

There’s ups and downs with Hershey. It’s now a two day, maybe three day park. Their own done F&B is really good, but there are so many chains in there. Waits are really long, but dispatch is really good.

Any thoughts on Dollywood instead? Any place that isn't CF or SEAS is fine at this point. Gotta vote with my wallet.

 

[horsesboy]

Another quick thought on this is two of the biggest items that the Biden Administration has said they look at closely in mergers in the effect on consumer pricing and the effects on employees especially in the pay area and if the larger company coming out of the merger will negatively effect the two. I recent weeks we seen SF raise the price on legacy passes. I am not going to argue that they are not justified in doing so because I believe they are just pointing to the fact it happened and the timing. Now CF is cutting wages back. Seems like an interesting strategy to tick two of the boxes that regulators are concerned about why still waiting for approval of the merger and it could be seen as an ominous sign fir the post merger combined company.

 

[warfelg]

Another quick thought on this is two of the biggest items that the Biden Administration has said they look at closely in mergers in the effect on consumer pricing and the effects on employees especially in the pay area and if the larger company coming out of the merger will negatively effect the two. I recent weeks we seen SF raise the price on legacy passes. I am not going to argue that they are not justified in doing so because I believe they are just pointing to the fact it happened and the timing. Now CF is cutting wages back. Seems like an interesting strategy to tick two of the boxes that regulators are concerned about why still waiting for approval of the merger and it could be seen as an ominous sign fir the post merger combined company.

The interesting thing I heard from an ex—SF management person is that these are to align with each other so when (if) it happens there is little complaint about the crossover of pay/costs.