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

Q1 2012 Earnings Call

May 3, 2012 10:00 AM ET

Executives

Stacy Frole – Director, IR

Matt Ouimet – President and CEO

Brian Witherow – EVP and CFO

Analysts

James Hardiman – Longbow Research

Scott Hamann – KeyBanc Capital Markets

Tim Conder – Wells Fargo Securities

Sri Raja – Deutsche Bank

Jeffrey Thomison – Hilliard Lyons

Jeremy Con – Bow Street

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cedar Fair First Quarter Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)

I would now like to turn the conference over to Stacy Frole. Please go ahead.

Stacy Frole

Thank you. Good morning, and welcome to our First Quarter Earnings Conference Call. I’m Stacy Frole, Cedar Fair’s Director of Investor Relations. Earlier today, we issued our 2012 first quarter 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. On the call this morning are 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 available for comment during 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 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 will turn the call over to Matt Ouimet.

Matt Ouimet

Thank you Stacy, and good morning, everyone. We intend to keep our prepared remarks brief this morning as the first quarter is a relatively quiet time of the year for us. Only three of our 17 properties were in operation during the first quarter including Knott’s Berry Farm, our only year-round park.

As a result, the first quarter typically represents less than 5% of our full-year revenues, so we do not advise drawing any conclusions about the full-year based upon the first quarter numbers alone.

Overall, our first quarter results were in line with our expectations. Net revenues for the quarter were up 5% primary as the result of increased attendance and guest spending per capita spending at Knott’s Berry Farm.

Our preseason operating costs were also in line with our expectations for the quarter. Our largest seasonal park, Cedar Point, Kings Island and Canada’s Wonderland were idle during the quarter as those teams finalize preparations to open for their operating seasons.

Both Kings Island and Canada’s Wonderland opened this past week while Cedar Point is scheduled to open on May 12. Brian will review the details behind the first quarter results in just a bit. But first, I’d like to discuss our outlook for the upcoming 2012 operating season.

Although it is much too early to determine the kind of year we ultimately will have, we are encouraged by the initial positive trends in seasons pass and group business sales at our parks. Overall, season pass sales are up when compared with the first quarter last year in terms of both units sold and total revenue. We believe this is due in large part to our lineup of new rising attractions combined with new marketing strategies and our new e-commerce platform. Our focus is to encourage people to make their plans early in the year and buy their season passes now at a great value which we believe will lead to a greater number of visits throughout the year.

Approximately 45% of our budgeted season pass sales have taken place to date. In addition, our group business book to-date is up slightly compared with this time last year. While it is still too early to call this a trend, we are pleased to see an uptick in early season sales in this category that makes up approximately one-third of our overall attendance. We believe this is an indicator of the continued strengthening of the local economies that we serve.

We’re also quite pleased with the new corporate sponsorship deals we already put in place. As previously announced, Pepsi will sponsor Luminosity, our new nighttime show at Cedar Point. We’re thrilled to have Pepsi involved in this special family event and believe their music and live event experience as well as the promotional leverage that they provide will be invaluable to us.

Similarly, we’re excited to offer Crave as the exclusive flavored milk at select Cedar Fair properties across the country this summer. Such sponsorships are yet another way for us to achieve our goal of providing our guests with the best-day-of-the-year experience they expect and deserve.

Regarding our new attractions for this year, we have embarked on one of the most diverse investment programs in the company’s history. These investments include roller coasters, thrill rides, water attractions, family attractions, and a new nighttime entertainment concept. All of this, along with general improvements in our overall infrastructure, such as better access for our guests with disabilities, will add to the best-in-class offerings of our parks and improve the overall quality of the guest experience.

As we’ve said before, we expect capital expenditures to approximate $90 million in 2012. Our capital program, premium guest experiences, new marketing strategies and sponsorship initiatives will be key drivers to the company’s 2012 success. By continuing to focus on improving the operations and the entertainment offerings of our parks, we expect to generate significant cash flow to support our ongoing efforts to reward our unit holders and make further investments in our business.

As long as our parks perform as we anticipate they will, we expect to generate revenues between $1.055 billion to $1.075 billion and full-year adjusted EBITDA in the range of $385 million to $395 million in 2012. Based on this forecast, 2012 would be our third consecutive record performance in terms of both revenues and cash flow.

As we stated in our last call in February, we intend to pay $1.60 per unit in distributions in 2012 and are on track for a record distribution of more than $2 per unit in 2013. To that end, the board has declared a quarterly cash distribution of $0.40 per limited partner unit payable on June 15.

Before I turn the call over to Brian, I’d like to briefly comment on our upcoming annual meeting of unit holders. As we announced in February, we engaged Spencer Stuart to identify and help evaluate potential candidates to serve on our Board of Directors. Under the direction of independent director, Eric Affeldt, the chairman of our nominating and corporate governance committee, a committee of independent directors, in conjunction with Spencer Stuart, reviewed the qualifications of more than 70 potential nominees.

We were extremely pleased with the number of highly qualified candidates who are interested in serving on our Board. From this list of strong candidates, we were able to identify three excellent nominees: Dan Hanrahan, Laurie Shanahan, and Debra Smithart-Oglesby, who we believe are highly additive to our board in terms of experience, skill set and leadership style.

For those of you who would like more detail, their impressive credentials are available on our website within the news release section. I would also like to take this opportunity to thank Tom Harvie, Michael Kwiatkowski and Steven Tishman for their years of service to Cedar Fair. These three gentlemen had played a critical role in ensuring a smooth leadership transition at both the executive management and Board levels while, at the same time, the company produced back-to-back record results. It has been a pleasure to work with each of them.

On that note, I’d like to turn the call over to Brian to discuss our first quarter financial results in more detail.

Brian Witherow

Thanks, Matt. As Matt pointed out, our first quarter represents less than 5% of our full-year results. Given the highly seasonal nature of our business, the majority of our revenues are realized during 130 to 140-day timeframe beginning in our second quarter, and most of that revenue is concentrated in the peak vacation months of July and August, with a growing percentage starting to emerge in and around the Halloween season.

Overall, results for the first quarter were in line with our expectations. Consolidated net revenues for the three months ended March 25, 2012 were $28.2 million, up $1.3 million or 5% from $26.9 million for the first quarter a year ago. As mentioned earlier, this increase in net revenues was due primarily to an increase in both attendance and average in part guest per capita spending at Knott’s Berry Farm, our only year-round park and our only park with meaningful first quarter operations.

On a cost front, cost and expenses for the first quarter increased $3.2 million or 3.6% to $93.4 million from $90.2 million in 2011. Operating results for the first quarter include normal off-season operating, maintenance, and administrative expenses at our seasonal amusement and water parks, as well as daily operations at Knott’s Berry Farm and Castaway Bay.

The year-over-year increase in cost and expenses was largely anticipated in the results of incremental cost to support the company’s 2012 initiatives, including our new e-commerce platform and general infrastructure improvements. Both operating supplies and maintenance expenses were slightly higher in the current period due to favorable weather conditions in many regions that allowed certain pre-opening projects to be accelerated into the first quarter.

During the quarter, we also saw an increase in employment-related costs due largely to nonrecurring severance payments, normal merit-based increases and an increase in wage expense related to equity-based compensation plans. This resulted from the increase in the market price of our units during the quarter.

There was also an increase in self-insurance costs due to increases in our overall public liability and workers comp reserves based on our estimates of future claims, as well as the settlement of a specific claim during the quarter. These increases were somewhat offset by a decrease in first-quarter SG&A expenses due primarily to a reduction and expenses related to litigation and unit holder special meeting requests.

For the quarter, interest expense decreased to $26.8 million compared with $41.1 million a year ago, resulting from an overall improvement in our average cost of borrowing. As we mentioned on our last call, $1 billion of fixed rates swap agreements matured in October of 2011 and were replaced with $800 million of fixed rate swaps at more favorable rates.

As a result, our annual cash interest costs are expected to be lower by approximately $50 million per year going forward. For 2012, we expect our average cost of debt to be just over 6%, representing a decline of more than 300 basis points from last year, this resulting in total cash interest cost of approximately $100 million this year.

Now let me highlight a few items from our balance sheet. We ended the first quarter of 2012 well positioned in terms of both liquidity and cash flow. Our receivables and inventories are at normal seasonal levels, and we have the credit facilities in place to fund current liabilities, capital expenditures, distributions and pre-opening expenses as needed.

At the end of the first quarter, we had $1.16 billion of variable rate term debt, of which $800 million has been converted to fixed rates to the swaps I mentioned. We also have $400.4 million of fixed rate bonds, $155 million in borrowings under our revolving credit facilities and $7.3 million in cash on hand. Of our total term debt, only $15.9 million is scheduled to mature within the next 12 months.

Based on our current adjusted EBITDA guidance and our expected debt reduction of at least $25 million in 2012, we expect our total leverage ratio, excluding our revolving credit facility, to be below four times debt-to-adjusted EBITDA, and we expect our senior secured debt-to-adjusted EBITDA ratio to be below three times by the end of this year.

Based on these performance ratios, we will have full discretion to optimize total unit holder return through a balanced approach of debt prepayments, distributions to unit holders and investment in our business.

At this time, we’d like to open the call up for your questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And the first question comes from the line of James Hardiman with Longbow Research. Please go ahead.

James Hardiman – Longbow Research

Hi. Good morning. Thanks for taking my call. Matt, once upon a time, you were asked about uses of cash, and this essentially speaks to the very last piece of the prepared remarks. And the answer was basically that you’re going to ramp up your distribution from the $1 last year to $2 plus next year. And then over and above that, you’d wait and see to how the market reacted to the increasing distribution to determine how you may go about using that excess cash.

Obviously, the stock has reacted very favorably, up almost 70% since you came onboard. Should that give us some incremental information in terms of to the extent that you have well over $2 of free cash flow to play with next year? How you’re going to go about using that?

Matt Ouimet

Yeah, James. Let me address that, and I think we’re going to see you next week. So I look forward to that. Our plan is still the same, and I would always start with, particularly this time of year, say we are very optimistic about how the business will perform this year, and if we are fortunate enough to deliver that performance, we will go through the discipline of deciding what the best use of that cash is.

Obviously, we are pleased by the market’s response to the Board’s decision to do $1.60 this year. And we will go through the discipline of deciding what the best uses of that as we get into the fall and actually deliver the cash through operating results. I would say there is no reason – we said $2 or more than $2, and so obviously that is not a commitment, but it’s certainly the direction that we plan on going in assuming we deliver this year.

James Hardiman – Longbow Research

Got it. Thanks. And then in terms of the attendance breakdown, you sort of talked about last year if you were to split up front gate, group business and seasons pass, essentially being equally weighted a third, a third, a third, roughly, how should we think about where that gets to in 2012 and what do you think is the optimal mix of those three?

Matt Ouimet

Well, I would – it’s so early. It’s hard to extrapolate anything. So with that caveat, I would say we’re still generally thinking about it as a third, a third, a third.

James Hardiman – Longbow Research

Got it. And then in terms of the fast pass that you’re going to be rolling out to the rest of your parks this year, is there anything that you’ve been able to gleam this early in the season? Obviously, you started to get some of the seasons pass business, but is there anything you can take away in terms of some of those initiatives as we look forward to the start of the season?

Matt Ouimet

James, what I will say is that we are very well-prepared to execute it against from an operational standpoint. I’m looking across the table at Richard Zimmerman. This is for that particular example and the other premium products we’re offering this year really have to be executed well for two reasons. One is to make sure the guests who buy a premium product get the experience that they paid for. And the second is to make sure that it doesn’t materially affect, in a negative way, those guests who choose not to. So I think what I’d like to just say is we are prepared to execute very well against it. We still believe that it is a product that belongs in our parks and will help our unit holders increase the value of our stock.

James Hardiman – Longbow Research

Excellent. Thanks, and good luck this year, guys.

Matt Ouimet

Thanks a lot.

Brian Witherow

Thanks.

Operator

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

Scott Hamann – KeyBanc Capital Markets

Hey. Good morning, guys. Just in terms of your guidance for 2012, the underlying assumptions driving revenue, are you thinking – how are you thinking about the breakdown between attendance and per capita spending?

Matt Ouimet

Scott, we’re not going to break that out. There are – as you are well aware, there are a lot of new initiatives embedded in that revenue, and what I would say for the people in this call particularly is that I think we all need to be respectful of the time it takes to educate the consumer on the availability of those products and in terms of our yield management to make sure they start to understand which products work the best for them or the best value for them. So I’m not going to break that out. We feel good about the range of revenue that we put in our release.

Scott Hamann – KeyBanc Capital Markets

Okay. And just in terms of reception that you’re seeing to the installment plan as well as maybe driving people to the E-Commerce website and upselling some of the premium stuff kind of early in the season?

Matt Ouimet

Yeah. Early in the season, those decisions seem to be getting validated. But again, the volume is so low. It’s hard to extrapolate that. I continue to believe that the installment purchase programs that the industry is now offering provide the consumer with the type of payment plan that it helps them in this economy. I hope to continue to that – I hope we see continued success with it, and quite honestly, I hope the industry continues to expand this practice.

Scott Hamann – KeyBanc Capital Markets

Okay. And, Brian, just – do you have an adjusted EBITDA number for the quarter as you guys kind of define it?

Brian Witherow

Sure, Scott. The adjusted EBITDA number for our first quarter, it’s actually sits at a loss. It’s an adjusted EBITDA loss of $61.8 million versus $59.1 million a year ago.

Scott Hamann – KeyBanc Capital Markets

Okay. Thanks. And then, Brian, just finally on SG&A, I know it was down year-over-year due to a lot of different things, but as we look out through the rest of the year is – should that normalize to kind of – even with last year or slightly up or how are these operating expenses going to flow?

Brian Witherow

On the SG&A specifically, Scott, as you’re aware last year, there were a number of costs that we incurred during the course of the year that were specifically related to special meeting requests and others non-recurring that at this point in time, we wouldn’t anticipate those reoccurring this year. But we’ll see how those develop.

Scott Hamann – KeyBanc Capital Markets

All right. Thanks a lot.

Operator

And the next question comes from the line of Tim Conder with Wells Fargo Securities. Please go ahead.

Tim Conder – Wells Fargo Securities

Thank you. A couple of questions here . Matt, you mentioned the season passes. We’re about 45% already of your budget for the year. Do you have a comparable number from last year?

Matt Ouimet

What we said, our overall revenue is slightly up from where we were last year. I’m going to leave it at that for the first quarter.

Tim Conder – Wells Fargo Securities

Okay. But you’re basically, if I understood your statement right, you’ve sold 45% of your budgeted season passes at this point, correct?

Matt Ouimet

Yeah. That’s in the earnings release, yes. (inaudible). Yes.

Tim Conder – Wells Fargo Securities

Okay. And your budgeted – and what was the comparable number?

Matt Ouimet

Yeah. It is just hard to extrapolate it, Tim. This is such a small – we’re still so early. I wouldn’t want to extrapolate that.

Tim Conder – Wells Fargo Securities

Okay. And then you said your group sales, again, were up a little bit. Any percentage that is up at this point, at this – on the year-over-year basis?

Matt Ouimet

No, Tim, we’re not going to be that specific. But we feel good about it. I think this is the – it’s some way a leading indicator, I think, of how the local economies are feeling.

Tim Conder – Wells Fargo Securities

Okay, okay. Another question, more on your calendar. I think you have a few more operating days this year in the second quarter, a few less in the third. Could you give us a little more color on that? And then given that you’ve got a little bit less in your key third quarter, do you anticipate that maybe making a little bit more difficult comparisons or maybe how you guys are adjusting to that on a year-over-year basis?

Brian Witherow

Yeah. Tim, it’s Brian. From a calendar perspective overall, we look at the operating calendar over the full year. They’re fairly comparable, a day or two here or there just based on which park. Based on the way our fiscal quarters end, there’s going to be a hundred, roughly a hundred operating-day shift between the third quarter and the second quarter, so – compared to last year. So in the current second quarter, we’d be looking at roughly about a hundred more operating days in 2012 than the second quarter of 2011, and then that would be made up in the third quarter where we’ll give up a lot of a hundred operating days in the third quarter of 2012 versus 2011.

Tim Conder – Wells Fargo Securities

Okay. But then there’s no, in your view, you don’t see too much of an issue here with given that the second quarter historically isn’t quite as robust as the third as far as maybe having a lost opportunity with some of that revenue or was it you feel very comfortable that that will be offset with some of the – obviously the new measures and things that have been put in place?

Brian Witherow

Yeah. And really all it is, is it’s not related to any operational changes. It’s just what the ending – the fiscal end of the quarter that’s driving us out. It will be made up by – when we get into the end of the third quarter, we should be back to more of an apples-to-apples comparison.

Tim Conder – Wells Fargo Securities

Okay, okay, okay. And then the other thing, just a couple more housekeeping items, the CapEx in the quarter, Brian, and then if you could get that and then maybe one other question. Should there be some pull-forwarded projects into the first quarter? Should there be some timing of some of the incremental expenses year-over-year difference here? I think it’s maybe alluded to one of the earlier questions.

Brian Witherow

So Tim, on the CapEx side, the cash CapEx spent for the quarter was $27.5 million.

Tim Conder – Wells Fargo Securities

Okay.

Brian Witherow

For the quarter, as far as the operating expenses, as you know, having followed us for as long as you have, we’ve always been extremely disciplined cost managers. That’s not going to change. So while costs in the first quarter are up compared to the prior year, they’re in line with our expectations going into the year. So some of these accelerated projects were anticipated. Others that weren’t were offset a little bit. So we still feel very good about our full-year outlook for costs.

James Hardiman – Longbow Research

Okay. That’s always a thought. Thanks for the confirmation. Thank you, gentlemen.

Brian Witherow

Thanks, Jim.

Operator

And the next question comes from the line of Sri Raja with Deutsche Bank. Please go ahead.

Sri Raja – Deutsche Bank

Good morning. In terms of uses of cash, how are you thinking about – obviously, it’s a very strong free cash flow business. How are you thinking about – are you thinking at all about any permanent acquisition standpoint or use of the land you acquired last year at Dorney Park and Carowinds? Just wanting to get a sense of whether there’s any shift towards that.

Matt Ouimet

Yeah. I don’t think there’s any significant shift. What I always say when we talk about our uses of cash is because we’re an MLP and because we have – a lot of our unit holders rely on us in terms of distribution, the Board continues to consider the distribution as one of the primary considerations whenever we have extra cash.

That being said, we are pretty disciplined about the amount of cash that needs to be invested in the continuing operations to maintain the free cash flow levels that you mentioned. And we will still have the flexibility to do acquisitions as we’ve done in the past, what we call one-off tuck-in acquisitions of individual parks should they become available.

And I would say that pool of acceptable candidates probably gets smaller as time goes by. But our plans are about the same as they’ve always been, including continuing to modestly pay down debt as it makes sense so that we can protect not only the amount of the distribution, but the sustainability of the distribution.

Sri Raja – Deutsche Bank

Fair enough. And with the groundbreaking recently at the new 49ers Stadium, are you expecting any disruptions for this Santa Clara property?

Matt Ouimet

Not significant. We’ve been able to work with both the city and the 49ers. And to the extent that we do feel any disruption, I think the marketing leverage that we’re getting through the 49ers and with the city probably offsets anything we would see there.

Sri Raja – Deutsche Bank

All right. Thank you, guys.

Matt Ouimet

Thank you very much.

Operator

And the next question comes from the line of Jeffrey Thomison with Hilliard Lyons. Please go ahead.

Jeffrey Thomison – Hilliard Lyons

Great. Thank you. I think you hit on pieces of this question during your prepared remarks, but I wanted to make sure all was clear, and the question relates to the takeaways from expected adjusted EBITDA. To get a rough free cash flow figure, that is expectations for cash taxes, interest and CapEx. And would your CapEx figure that you gave earlier – would that be what you expect to spend in calendar 2012?

Matt Ouimet

Yes. We generally are about 9% of revenue, and we think the number we put out for 2012 is roughly $90 million.

Brian Witherow

Yeah, the $27.5 million that I commented on earlier, Jeff, was just the first quarter number.

Jeffrey Thomison – Hilliard Lyons

Okay. And did you mentioned cash interest expectation earlier?

Brian Witherow

Yes. In our prepared remarks, we anticipate roughly $100 million in cash interest costs. Cash taxes should be something in the $10 million to $12 million range.

Jeffrey Thomison – Hilliard Lyons

Okay. And then finally, on the $25 million debt reduction in 2012, what piece is that coming from and when will that happen? And could that recur in 2013?

Brian Witherow

Sure, Jeff. The $25 million payment that we are anticipating making this year for 2012 we’re projecting to make, $16 million of that is required to be made by the of June under the excess cash flow covenant or construct within the credit agreement. The remaining $9 million will be discretionary. And so that will be made sometime before the end of the year. And it will go all against term. And then next year, we will, in theory based on those leverage ratios that I outlined being below four on total, being below three on senior secured, will take us outside of that excess cash flow count where the $25 million payment next year will be fully discretionary.

Jeffrey Thomison – Hilliard Lyons

Okay, got you. Okay, thank you.

Operator

(Operator Instructions) And our next question comes from the line of Jeremy Con with Bow Street. Please go ahead.

Jeremy Con – Bow Street

Hi, Matt. I was wondering if you can talk about where your expectations are for speed pass and also sponsorship in the guidance.

Matt Ouimet

Yes. Yeah, great. So two of the most common questions I get, Jeremy. So on the fast lane pass, I have – I’m strongly encouraged by what we saw last year at King’s Island. I’m also encouraged by the yearly results of this year although that is a product that certainly is much more valuable and sought after during our peak periods of the summer which we’re yet to enter into. So I haven’t – we have decided we don’t disclose any specific numbers around it. I will tell you, I look at it like a lot of the other stuff we’re working on as what I call industry validated initiatives that we are now operationalizing in our parks. So if you’re looking for a reference point, it’s probably best to take a look at it throughout the industry and see where how more mature programs are doing. I feel very confident in it, but it’s still going to ramp up over the course of the year.

Sponsorship, the same is true, only I think the sponsorship is a little more complicated because it happens over multiple years. You can think about it like layering a portfolio. Some agreements will be as long as 10 years. Some will be as brief as a single year or three to five years.

And as we are out there starting to educate people on the out-of-home impression market that we represent, we’re seeing very good receptivity. But those things take much more time to bring to the table and bring to fruition.

Jeremy Con – Bow Street

Got it. And those two initiatives are both in your EBITDA guidance for the year?

Matt Ouimet

They are. They’re both – I would say, the first year ramp up of those are in our EBITDA guidance.

Jeremy Con – Bow Street

Thank you.

Operator

And the next question is a follow-up question from the line of James Hardiman with Longbow Research. Please go ahead.

James Hardiman – Longbow Research

Yeah. Just a couple of quick follow ups here. I believe you also terminated the cross currency swap in the first quarter, and there was a charge associated with that. Was that the case? And was it – I think you would guide it to $50 million. Did that happen in 1Q?

Brian Witherow

It did, James. And it was just a hair over $50 million.

James Hardiman – Longbow Research

Okay. And so as I think about the first quarter run rate from an interest expense perspective, that should step down a little bit as we work our way through the rest of the year?

Brian Witherow

Well, the cross currency termination did not impact that. That (inaudible) basically flown – float through interest expense over the life of the swaps. So we term that basically near the beginning of the quarter.

So as we said, the interest costs are going to decline second quarter versus the second quarter year ago, but that’s more so driven by the current – the swaps that were in place, the billion that I have mentioned or referenced that were in place a year ago versus the $800 million at more favorable rate this year.

Overall, our cast interest costs, as I said, are going to be about $100 million roughly for the full year.

James Hardiman – Longbow Research

And so I guess what I’m trying to get at is if I take – I know there a difference in your cash interest costs and your income statement interest costs, but what we’ve got is basically a $27 million for – $27 million number for the first quarter. You annualize that, you’re at closer to $108 million for the year. Is that going to step down just as a function of lower debt as you pay down some of that debt or is there more just a difference between cash and income statement?

Brian Witherow

It’s more driven, James, by the impact of those swaps going away. They went away in October, so they were a fourth quarter item. So that the first through third quarters of this year are going to be more favorable rates. So you will see that begin to step down.

James Hardiman – Longbow Research

Got it. And then just last piece here. You spoke to a weather drag or weather driven increase in some of your operating expenses in the first quarter. Care to quantify that? And I guess conversely, does that then roll into a little bit of a benefit in 2Q?

Brian Witherow

It’s not material. And you know, it’s interesting because we’re talking about favorable weather that essentially allowed us to do some of our maintenance, and some of the painting earlier than we normally would do it. But I would say it’s immaterial relative to our total operating costs.

James Hardiman – Longbow Research

Got it. Thanks, guys.

Brian Witherow

It just happens to stand out in a quarter that’s as small as this quarter.

Operator

And I’m showing no further questions. I’d like to hand over to management for any closing remarks.

Matt Ouimet

Thank you. So on behalf of the Board and our management team, I’d like to thank you again for your time this morning. I’d also like to acknowledge in appreciation for the continued dialogue with and support of our unit holders.

As we head into our full operating season, we feel very good about Cedar Fair’s progress and potential driven by the highly talented personnel at our parks, with the support of our team here in Sandusky and our Board of Directors.

We remain committed to acting in the best interest of all unit holders by executing a strategy that creates maximum value for the long term. 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. We look forward to speaking with you again in about three months to discuss our second quarter results.

Matt Ouimet

Take care all.

Operator

Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation, and you may now disconnect.

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