Cedar Fair's CEO Discusses Q4 2012 Results - Earnings Call Transcript

Feb.19.13 | About: Cedar Fair, (FUN)

Cedar Fair, L.P. (NYSE:FUN)

Q4 2012 Earnings Conference Call

February 19, 2013 10:00 a.m. ET

Executives

Stacy Frole - Director, Investor Relations

Matthew Ouimet - President and Chief Executive Officer

Brian Witherow - Executive Vice President and Chief Financial Officer

Richard Zimmerman - Chief Operating Officer

Analysts

James Hardiman – Longbow Research

Scott Hamann – KeyBanc Capital Markets

Sri Raja – Deutsch Bank

Michael Needleman – Preservation Asset Management

Tim Conder – Wells Fargo Securities

Operator

Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Cedar Fair fourth quarter and yearend earnings conference call. (Operator Instructions) I would now like to turn the conference over to Stacy Frole.

Stacy Frole

Thank you, Ian. Good morning, and welcome to our fourth quarter and yearend earnings conference call. I'm Stacy Frole, Cedar Fair's Director of Investor Relations. This morning, we issued our 2012 fourth quarter and yearend earnings release. A copy of that release can be obtained on our corporate website at www.cedarfair.com or by contacting our Investor Relations Offices at 419-627-2233.

Joining us on the call this morning is Matt Ouimet, our President and Chief Executive Officer; and Brian Witherow, our Executive Vice President and Chief Financial Officer. Richard Zimmerman, our Chief Operating Officer, is also with us today for the call.

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 Matt Ouimet.

Matthew Ouimet

Thank you, Stacy. I’m pleased to report 2012 was another strong year for Cedar Fair. We achieved record net revenues of $1.068 billion and record adjusted EBITDA of $3391 million. As I mentioned on our last call, we firmly believe the execution of the FUNforward initiatives we announced this time last year were largely responsible for our record results, including solid increases in our average in-park guest per capita spending, while we maintained our record attendance levels. This is our third straight year of record results and we expect this trend to continue into 2013.

During the year, we had the pleasure of entertaining 23.3 million guests at our parks, which is comparable to the record attendance we reported last year. Our attendance is divided between season-pass customers, group business and advance and front gate purchases. This year we experienced a solid increase in our season-pass customer base, which was part of our concert effort to transition our single day customers to season-pass holders. We believe the success of our new e-commerce platform which was implemented only in February of 2012 helped drive record season-pass sales. The growth in this program confirms the consumer strong value possession of owning a season-pass to our parks. It also provides them with the ability to enjoy our parks at a more comfortable pace and in time increments that are aligned with their busy schedules. Additionally, season-pass holders tend to be the some of the best goodwill ambassadors to our parks, influencing the visitation of friends and family.

Season passes are one of the best examples of advance purchase commitments, which provides some protection against the distraction of other entertainment offerings. Advance purchase commitments also support spending elasticity in terms of in-park guest spending and to some degree, signal the level of market demand which helps us execute against our broader dynamic pricing objective. The increase in season pass attendance was offset by a decrease in our other sales channels as consumers migrated over to season pass. While much of this migration was intentional, we still have opportunities to optimize our indirect distribution channels, including significant efforts in expanding our sales force.

This past year we identified and hired a new sales leadership team. We trained our existing sales force and introduced the new sales incentive program, something that did not exist in the prior years. Early results from these changes were positive and we believe this is an area of additional opportunities for us heading into 2013 as our new team is able to build upon their existing relationships, have more flexibility in the types of products we have, as well as the quality of products we offer, such as improved catering facilities for corporate, school and family events. We are also exercising more discipline in the cooperative marketing support we require from all of our promotional partners.

Despite the fact that season pass visits grew to almost 40% of our total attendance in 2012, and the fact that season-pass guests typically spend less per visit than other guests, we were quite pleased to see our average in-park guest per capita spending increase 5% to a record of $41.95 per visit. In fact, our admissions per cap increased approximately 4.4% and the remaining in-park spend increased 7% year over year.

We attribute this strength in our admissions per cap to our ability to strategically and successfully price into areas of high demand, as well as the more disciplined approach with our promotional partners that I just mentioned. The significant increase in the remaining in-park guest spend is largely the result of success introduction of new premium product offerings such as Fast Lane and preferred parking at all of our properties, along with our new food initiative which focused on providing higher quality food offerings.

The successful introduction of our new e-commerce platform which in turns creates spending elasticity upon the guest business, also contributed nicely to the higher in-park per capita spending levels.

Of course we must always recognize the impact that our marketable investments have on our results. In 2012, Canada’s Wonderland introduced Leviathan, a 306 foot tall, 92 miles per hour steel coaster which is one of the tallest and fastest coasters in the world. In 2012, this park experienced the largest increase in attendance out of our portfolio as well as one of the largest increases in average in-park guest per capita spending. Clearly this world class rollercoaster contributed nicely to Canada’s Wonderland success.

The solid increase in revenues combined with our continued efforts to diligently manage our costs resulted in record adjusted EBITDA of $391 million, or approximately $6.99 per diluted limited partner unit. As we announced on our third quarter call, with the strength of these results and our confidence heading into 2013, our Board of Directors expect to pay a record $2.50 per unit distribution to unitholders in 2013. The first quarter distribution is 62.5 cents is expected to be declared in the near future and is expected to be paid on March 25 to unitholders of record on March 15.

Before I turn the call over to Brian to discuss our financial results in more detail, I would like to emphasize that the past three years of record results would simply not have happened without the dedication and hard work of our employees. Our employees have a special passion for entertaining our guests and providing the best day of summer experience for every guest at every park, every day. We are extremely proud of the collective efforts our employees have put forth to make this another record setting year for Cedar Fair and we thank them all.

Now I’d like to turn the call over to Brian to discuss our financial results in more detail and then I will provide an update on our 2013 outlook. Brian?

Brian Witherow

Thanks Matt. From a financial perspective, we’re very pleased with our results as we continue to build on the back to back record years in 2010 and 2011. In 2012, we achieved record levels of net revenues and adjusted EBITDA through record in-park guest per capita spending. We reduced our consolidated leverage ratio to 3.9 times debt to adjusted EBITDA, down from 4.2 times in 2011. We had no borrowings under our revolving credit facility at yearend and in fact, ended 2012 with $79 million in cash on hand and as Matt just mentioned, we announced our intent to pay a $2.50 per unit distribution to our unitholders in 2013, a more than 50% increase from the 2012 distribution rate of $1.60. This successes demonstrate the strength of our long term strategy which has enabled us to substantially increase the return to unitholders, making 2013 our 27th consecutive year of paying a distribution.

Now taking a closer look at the financials. For the year we reported revenue growth of $40 million or 3.9% to $1.068 billion. This was driven by a 4.8% or $1.92 increase in average in-park guest per capita spending to $41.95, which was partially offset by a modest decline in attendance of approximately 86,000 visits, as well as a less than 1% or $789,000 decrease in out of park revenues. It’s important to note that average in-park guest per capita spending represents the amount spend per attendee to gain admission to our parks, plus all amounts spent while inside the park gates.

Out of park revenues primarily represent the sale of hotel rooms, food, merchandize and other complimentary activities outside the park gates. On a total revenue basis, revenue per attendee increased 4.3% or $1.87 to $45.85 per guest compared with $43.98 per guest in 2011.

As Matt mentioned earlier, we're particularly pleased with the 4.8% increase in average in-park guest per capita spending, with our continued emphasis on growing our season pass business, our success at growing per-caps while maintaining our record attendance levels as a result of the strength of our pricing philosophy and our FUNforward initiatives.

In 2012, we achieved a more than 10% increase in the number of season passes sold as well as a 6% increase in the average price per pass. We believe these record sales are a direct result of the aggressive initiatives we’ve put in place, including the very successful introductions of our new e-commerce platform and installment sales. Considering installment sales were not introduced until February of 2012, we’re confident that we can build upon these results for the 2013 operating season. Our current year installment programs begin in September in conjunction with our announcement of new rides and attractions for the 2013 season. This compares with the February launch date for installment sales in 2012 when the e-commerce platform was first implemented.

The strong increase in in-park revenue was slightly offset by a less than 1% or $789,000 decrease in out of park revenues which was the result of softness in the performance of some of our hotel properties.

In 2012, operating costs and expenses increased $21.4 million or 3.2% to $684.7 million. The year over year increase in costs which was in line with our expectations, was driven by a $3 million increase in cost of goods sold and a $20.5 million increase in operating expenses. These increases were somewhat offset by a $2.1 million decrease in selling, general and administrative costs. The $3 million increase in cost of goods sold was principally driven by our initiatives to improve the overall quality and value of our food and other product offerings at our parks in 2012.

The increase in operating expenses was due to several factors, including higher employment related costs, higher operating supply cost and higher self-insurance expenses. Employment related costs increased approximately $11 million due to normal merit increases, increases in health related benefit costs, additional staffing levels associated with new initiatives aimed at improving the overall guest experience and non-recurring severance payments.

Operating supplies and expenses increased approximately $5 million due to initiatives to expand or enhance the live entertainment offerings at our parks as well as the incremental costs associated with our new e-commerce platform.

During the year, public liability and workers compensation expense increased approximately $3 million due to claim settlements and an increase in our general reserve based on estimates of future clients.

The decrease in SG&A was largely driven by year over year reduction of professional and administrative costs which more than offset increases in advertising costs and operating supplies.

Adjusted EBITDA which we believe is a meaningful measure of our park level operating results, increased 4.4% or $16.4 million to $391 million for 2012. This increase is a direct result fo the record level revenue and average in-park guest per capita spending trends produced by our parks this year, combined with strict control over cost.

We were also pleased with our adjusted EBITDA margin which was 36.6%, up 20 basis points from our 2011 adjusted EBITDA margin of 36.4%. we would note that adjusted EBITDA margin growth was somewhat constrained by reinvestment into the parks in order to implement new initiatives and premium offerings, which we believe position the company for longer term success through constant improvement of the overall guest experience.

Touching on our fourth quarter results for a moment, revenues for the quarter were $129.2 million, down approximately 11% of $15.6 million from last year’s fourth quarter. As we mentioned on our last call, we experienced a modest decrease in attendance during the month of October. We believe this decrease was due to the less than favorable weather conditions when compared with the same period a year ago and was not a reflection of economic factors. In fact, we believe that the first year implementation of several front forward initiatives such as increases in pass sales and advance purchase commitments help to ease the impact of a less than favorable fall weather. As we’ve stated in the past, we believe the weather’s impact averages itself out over the duration of a full operating system, but it can impact comparisons when looking at a short period of time.

As expected, operating costs in the fourth quarter decreased approximately 14% or $17.2 million. This decrease in cost was largely attributable to a $9 million decrease in operating expenses and a $7 million decrease in SG&A. as we’ve discussed in past calls, we accelerated some off season maintenance projects into the first half of 2012 due to favorable weather trends, which resulted in lowering operating expense in the fourth quarter. During the quarter we also experienced a reduction in legal and related professional costs when compared with the fourth quarter of 2011.

Now let me highlight a few items on our balance sheet. As states on our news release this morning, we’re pleased with our liquidity and cash flow as we continue to build upon the strength of our balance sheet. We ended the year with no outstanding borrowings under our revolving credit facility and with $79 million in cash on hand. Our record 2012 performance, along with debt repayments totaling $25 million has enabled us to further reduce our leverage in 2012. At the end of 2012 our consolidated leverage ratio was 3.9 times which is down significantly from 4.9 times as recently as three years ago and at below 4 times which we have stated was a near term objective.

Through the prudent management of our cash flows, we’re able to maximize our financial flexibility and our ability to create value for unitholders in both the short term and long term through a combination of debt reduction, capital investments and cash distributions.

To summarize, we’re pleased with our record 2012 operating results as well as the company’s solid financial position. We continue to generate a significant amount of free cash flow which has enabled us to strategically balance debt repayment, growth and unitholder return. We’re well positioned heading into 2013 and we’ll continue to prudently manage our cash flows to maximize value for our unitholders.

Now I’ll turn the call back over to Matt.

Matthew Ouimet

Thank you, Brian. Looking ahead to 2013 and beyond, we continue to be confident in the fundamentals of our business model and growth opportunities. Consumers continue to choose to spend their discretionary entertainment dollars in our parks and given the ongoing budgetary constraints all consumers are experiencing, this is a particularly strong endorsement of the price value we provide.

For the 2013 operating season we believe we have a very strong lineup of new rides and attractions. The construction of Gatekeeper, a new Wing Coaster at Cedar Point and the highlight of our 2013 capital plan, is coming along on schedule and on budget. In fact, I encourage you to visit Cedar Point’s website and view the webcams we have posted of Gatekeeper’s construction. It is truly transforming the entrance and overall landscape of the best amusement park in the world. This ride is receiving national attention and the animation video on YouTube has already been viewed by more than 2 million people. We are positive guests will be talking about this ride all summer long.

Our 2013 marketable capital program of approximately $100 million also includes a new world-class wooden rollercoaster at our California’s Great America Park in Santa Clara, California, a massive water park expansion at our Worlds of Fun and Oceans of Fun Park iin Kansas City, Missouri and new family attractions at several of our other parks. All of these projects remain on schedule and on budget. We are confident that this lineup of new rides and attractions will continue to provide our guests with the best day of summer experience each and every time they visit our parks.

On our last call we also mentioned that we expected to spend an additional $15 million to $20 million annually over the next several years on incremental capital programs. For 2013 this will include the acceleration of four point-of-sale systems prior to the start of the upcoming operating season as well as investments in employee dormitories and guest accommodations starting in the second half of the year. The acceleration of the point of sale systems will provide a better guest experience in the near term as lines are shortened due to faster transaction processing times. These new systems will also provide additional growth opportunities over the long term as we’re able to obtain better, real time data across all of our properties.

In addition to improving how we interact with our guests inside the parks, we’re making a meaningful investment in the development of a guest marketing and analytics database which will enable us to develop new customer relationship management strategies or CRM as I’ll refer to it in the future. This investment will be accounted for as an incremental expense line item in 2013.

The integration of our e-commerce platform and a new CRM strategy, will allow us to be more effective in our marketing efforts and provide us with valuable decision support data. We will implement CRM in 2013, but I believe its full impact will begin in 2014 and beyond.

Our Net Promoter Score or NPS for 2012 tell us our parks are already doing a great job in providing a memorable experience for our guests. In fact Cedar Point, our flagship park, has one of the highest NPS scores that I’ve ever seen. While the NPS scores across all of our parks are very strong, we always believe there are opportunities to improve and we challenge our general managers accordingly. We can never forget the number one reason guests come back to our parks is because they had a great and memorable experience during their prior visit. It is this focus on the guest experience that will allow us to continue to report record results year after year.

From an investment standpoint, our total return to our investors in 2012, combining distributions and unit depreciation, was 63%. We plan to continue our aggressive investor outreach program into 2013 and I hope to see many of you at Cedar Point this year when we host an analyst day towards the end of June. This event will allow you to meet with the members of our executive management team and will also provide you with the firsthand opportunity to experience Gatekeeper. Save the date notices will be sent out within the next several weeks.

In conclusion, we continue to target adjusted EBITDA of $415 million or more by 2016, which reflects a 4% cumulative average growth rate. As we’ve traditionally done, we plan on providing our annual net revenue and adjusted EBITDA guidance in May with our first quarter earnings. At this point in time I will say that we are very confident heading into 2013 that we’ll be targeting another record year for Cedar Fair. We will continue to generate a significant amount of free cash flow and we’ll prudently manage these cash flows to ensure a quality and growing distribution that our unitholders can depend on year after year. At the same time we will continue investing in future growth opportunities for the business to ensure its long term success.

Now we will open up the call for any questions or comments you may have.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question is from the line of James Hardiman - Longbow Research. Please go ahead.

James Hardiman – Longbow Research

Good morning. Thanks for taking my call. First, just a quick clarification, just want to make sure I understand the per capita color that you gave us. You said 4% growth essentially at the gate, 7% the rest of the park. The 4% does not include the additional Fast Pass option in terms of paying double to skip the line. That’s incorporated in the 7%, correct? The 4% is essentially an apples to apples?

Brian Witherow

That’s correct, James. The 4% is without the Fast Pass.

James Hardiman – Longbow Research

Okay, very helpful. And then just if I think then about the trade-off between per capita spending and attendance during 2012, I think at the end of the day, everybody is pretty happy with what you've been able to do with your overall topline. So however you're able to get there, I'll take it. But do you think that the attendance was negatively impacted by the increase in average ticket costs? And how should I think about the interplay of those two going forward?

Matthew Ouimet

It’s a good question, James. Good morning. The short answer to that is no. we don’t believe that we suppress attendance because of pricing and I think more importantly, what I like to think about is two things. One is you don’t change your pricing strategy because you have a rainy October. The second is we believe we have the opportunity to continue to build on pricing year over year, unlike capturing episodic attendance. So I would tell you we’re still very confident and although we didn’t touch on it today, I suspect someone to ask us along the way about our season pass sales to date and even though we’ve again taken price increase going into our 2013, we’re well ahead of where we were at this time last year on season pass which is the earliest indicator we have of macro demand. So I hope that helps connect the dots for you.

James Hardiman – Longbow Research

It does. Very helpful. And then a follow-up, the per capita growth in 2012, certainly I think better than the investor base expected. Talk about if that outperformed your own expectations. And I think ultimately when you originally talked about some of these new programs, the expectation was for 2013 to actually be a bigger year than 2012 in terms of the per capita increases. When I think about that 5% growth, was some of that pull-forward, meaning that we’re taking that out of 2013, or do you still actually think that 2013 could be a bigger year from that perspective?

Matthew Ouimet

I suspect if you ask my management team they would tell you I’m never happy with our performance, but the real reality is some activities or initiatives such as Fast Lane got traction faster than we would have anticipated, although we still believe there’s meaningful opportunity there as we study that program and then others are still in the very early inning and we should see more impact in 2013, particularly impact from our new advertising agency which only came on board in the spring of last year and some of the other initiatives that really take – sales force I talked about earlier. I think now that we have the sales team in place that we want and they’ve been trained up in the incentive programs into second year, those are examples where I think we’re still in the early inning.

Operator

Our next question is from the line of Scott Hamann with KeyBanc Capital Markets. Please go ahead.

Scott Hamann – KeyBanc Capital Markets

Good morning, everyone. I know you don't want to use weather as an excuse in any given year, but I'm just curious how you would characterize the overall weather in 2012?

Matthew Ouimet

Less favorable than the prior year.

Scott Hamann – KeyBanc Capital Markets

Okay. And I guess just a follow-up question on the – you mentioned that season pass sales were obviously strong, and some of the other segments were a little bit softer. Does that include the corporate group biz and what’s (inaudible)?

Matthew Ouimet

Actually our corporate group business actually grew last year as well. And so what you’re really seeing is a migration from a person who maybe was visiting a time to time and a half before who sees the value in the season pass program. So the primary offset if you are is the migration of people over to season pass.

Scott Hamann – KeyBanc Capital Markets

Okay. And just in terms of operating days for '13 versus 2012, are there any major variances that we should take note of?

Matthew Ouimet

There is not at this time.

Operator

Our next question is from the line of Tim Conder with Wells Fargo Securities. Please go ahead. Mr. Conder, you line is open. (Operator instructions). We do have a question from the line of Sri Raja with Deutsch Bank. Please go ahead.

Sri Raja – Deutsch Bank

Strong end to the year. Good job, guys. Quick question. What are you thinking in terms of the bonds, given where it’s trading at, and the recent capital markets, with Six Flags recently doing a deal and where at that price, are you guys are thinking of refi-ing those bonds?

Brian Witherow

Sure Sri. So as we’ve said in previous calls, we’re constantly monitoring the credit market and we’ll look for opportunities to improve both our average cost of debt as well as extending tender and improving covenants where we can. That’s the high yield bonds, 9, 8 bonds that we currently have placed. They are a little bit of a hang-up at this point as they’re not callable until August of ’14. So that’s just a little wrinkle that we have to consider when monitoring those markets.

Operator

Our next question is from the line of Michael Needleman with Preservation Asset Management. Please go ahead.

Michael Needleman – Preservation Asset Management

Good morning, gentlemen, and congratulations on a great year. Just a couple of questions if I can. I wonder if you might just address in terms of the CRM, one, when is the software going to be implemented? Two, how is it that you are going to define the success of the implementation of the CRM platform? And if you don't mind also, maybe talk a little bit about in terms of the analytic side of the equation, the same questions in regards to returns and how you’re monetizing that. And if I can, which CRM system are you implementing?

Matthew Ouimet

The latter I’m going to avoid, Michael just because I consider the approach we’re taking to be proprietary. But the system will be up and running by the March, April timeframe. The great thing about CRM, it sounds like you do have some experience with them past, it is probably the most finite measurable type of marketing approach you can have because you can actually see individual responses based upon testing control groups, etc. so we are expecting for very good things, both on an efficiency basis, how we spend our marketing dollars and on effectiveness basis in terms of being able to have more dollars available to go after those incremental audiences. And so we would expect a very solid return north of, candidly, what the other stuff we expect where normally we expect at least a 15% IRR and on some of our capital investments we would expect this to be well north of that.

Michael Needleman – Preservation Asset Management

That's very helpful. Just a couple other quick questions, if I can. In terms of the capital expenditures planned – rising over the course of the next couple of years that you talked about, should we expect that to – the range of $100 million plus to be what you are speaking of over the course of that accelerated CapEx plan? Is that about the number?

Matthew Ouimet

No. What we’ve said to date is about $15 million to $20 million for the next three to four years, three years I think is what we said and that’s the range we’re working in primarily at the refreshment of the hotels as well as other initiatives related to what we would call non-marketable capital for the most part. The $100 million number you saw or I referenced earlier is we spend about 9% of revenue each year on marketable capital. So you should expect about $100 million a year for marketable capital and then for the next three years or so you should expect $15 million to $20 million a year.

Michael Needleman – Preservation Asset Management

Two last questions. In terms of marketing dollars in absolute dollar terms, is that because of your new switch over to your new agency? Are you planning to increase that and recognizing that that dollar flow will flow to a number of different verticals? But is that number absolutely going to be going up?

Matthew Ouimet

It is but only in a very small amount and quite honestly we tend to think of marketing as a percentage of admissions revenue and on that basis it’s just constant.

Michael Needleman – Preservation Asset Management

And my last question is if everyone comes – if I come to the analyst meeting, do I have to wait in line for the ride?

Matthew Ouimet

Depends whether you buy Fast Lane.

Operator

We do have a question from the line of Tim Conder again with Wells Fargo Securities. Please go ahead.

Tim Conder – Wells Fargo Securities

Thank you and we apologize there earlier. Matt, a couple of questions here. On your season passes, you talked about the installment plan was rolled out this past February of 2012 for 2012. What percent roughly or just color can you give us of season passes in '12 were sold on that? And again, granted you didn't have a full year. And then how is that tracking so far here for 2013?

Matthew Ouimet

Tim, I’m not going to be able to give you or I’m not going to give you the percentage because I do think that has some private advantage to us. But let me give you a couple of points and if I don’t answer your question you can circle back. But to remind the audience, we’ve put in in February of last year we started installment payments for season passes that was either three or four payments and saw very successful pickup from consumers who are trying to budget responsibly these days, thankfully for all of us. And so in September we actually launched the program so to make six payments. You can do the same thing that we did last year, over six payments and most recently, we now have let, you started to pay in advance over three or four payments for your hotel stay at either Cedar Point, any of our camp grounds at the other parks or the Knott’s hotel.

And in all cases Tim we believe we are seeing both incremental pickup which is clearly important and as I’ve mentioned we’re running ahead of where we were last year. But we’re also seeing that advance purchase commitment from people who might have waited to buy at the gate and that is equally if not more valuable to us because it makes sure that we are their entertainment option for next summer and maybe not a ball game somewhere else. So it’s all positive, Tim. I’m sorry I just don’t want to give you the specific numbers.

Tim Conder – Wells Fargo Securities

That's fine, Matt. Not a problem, well understood. On your POS rollout, I think you referenced four parks. Can you just kind of walk us through what parks and what years or what time period that POS will be rolled out at your primary parks?

Brian Witherow

Sure, Tim. So coming out of 2012 we had six of our 11 properties were on POS. the four parks that POS is being implemented for or introduced for 2013 are Valley Fair, Worlds of Fun, Great America and Knott's Berry Farm. That would – the only park left then is our smallest property, Michigan’s Adventure which we would intend to try and tackle for 2014 once we work on some infrastructure items. The Knott implementation was just completed this past week and that property is now up and running on POS as of today.

Tim Conder – Wells Fargo Securities

Okay, great. And then I guess lastly to ask here, it was alluded to what you’re looking at on attendance and the trade-off here and again, as was mentioned earlier, we’ll take that the way you guys are running it any day. But given the fact, let's assume that weather is normalized, would you anticipate a modest uptick, all else being equal, in attendance looking into 2013 at this point?

Matthew Ouimet

Yeah. I think we’d be disingenuous and inconsistent if we didn’t say that we would hope that would normalize this year, but as we always say too, weather tends to balance itself out over the course of the season. But I would hope it’d be – we’d obviously like to see it a little sunnier and a little warmer.

Tim Conder – Wells Fargo Securities

Okay. And lastly, I'll ask here, just remind us the severance that occurred during 2012, and that was pretty heavily skewed towards fourth quarter, if I recall right here.

Brian Witherow

Yes. Severance from an operations perspective, Tim, we took a hard look at the staffing levels as well as individuals and certain decisions across the properties and there was a little bit of severance towards the latter part of the year after the season wrapped up in addressing some changes that need to be made on that level.

Tim Conder – Wells Fargo Securities

And Brian, just any total quantification, and was the payment to Dick Kinzel also included in that number?

Brian Witherow

No. there was no payment to Dick Kinzel that would be included in that. There was a payment under the settlement of his contract from a cash flow perspective. But the amount we’re talking about is roughly $1 million across the system, Tim.

Operator

(Operator instructions). And we have no further questions at this time. Ill turn it back to management for any closing remarks.

Matthew Ouimet

Well, first of all, thanks for the questions and certainly thanks for your ongoing interest in Cedar Fair. Thre’s no question, 2012 was a solid year for us and I assure you that our management team and our Board of Directors look forward to building on this positive momentum and creating value for our unitholders as we move forward. I also encourage all of you to plan a trip to our parks this summer to experience your investments and fun firsthand. Stacy?

Stacy Frole

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 or Lisa Broussard at 419-609-5929. We look forward to speaking with you again in about three months to discuss our 2013 first results.

Operator

Ladies and gentlemen, this concludes the Cedar Fair fourth quarter and yearend earnings conference call. Thank you for your participation. You may now disconnect.

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