Cedar Fair parks have been closed since March because of the coronavirus pandemic. Now, the company has outlined the financial measures it has taken in response.
Social distancing remains in effect in America, with no set date on when these rules will be relaxed. Due to this uncertainty, the Cedar Fair Entertainment Company has taken several proactive cost-reduction measures. This will allow the company to maintain an enhanced financial flexibility while its parks are closed.
Reducing operating costs
The company has taken several steps to reduce operating expenses. These include suspending advertising and marketing expenses and reducing most seasonal and part-time labour costs until the parks reopen.
Furthermore, the CEO’s base salary will be reduced by 40% and all other executive base salaries will be reduced by 25% from April 27. The scheduled hours for full-time hourly staff has been reduced by 25% to 30 hours per week. The company has also deferred base salaries for all salaried employees by 25%, subject to minimum thresholds.
“As we work to ensure the safety and well-being of our employees, guests and business partners from the effects of COVID-19, it’s important we also embrace measures that will ensure our financial flexibility through this difficult period,” said Richard Zimmerman, President and CEO of Cedar Fair.
Ensuring enhanced financial flexibility
Cedar Fair has also reduced its capital spending for 2020. It has suspended between $75-100 million of non-essential capital projects planned for 2020 and 2021. The Company has revised capital improvement spending to $85-100 million in 2020.
The company has also suspended its quarterly distribution in the best interests of its unitholders. This will be in effect until operating visibility improves.
Working with season pass holders
Since the parks’ reopening date is uncertain, Cedar Fair has suspended collecting payments on instalment season passes. This will ensure guests receive a full season of value from their pass. Cedar Fair is also working on extending season pass privileges into the 2021 season.
Zimmerman said that “After social distancing recommendations by the authorities are lifted, we look forward to opening our parks as soon as reasonably possible. The actions we are announcing today help put us in a better position to do so as we navigate the unknown environment ahead.”
Keeping parks in a state of readiness to reopen for the 2020 season, Cedar Fair has an average “cash burn rate” of $25-35 million per month. The Company says that should closures extend beyond this additional cost cutting measures will be taken, and that it has taken action to ensure liquidity.
Cedar Fair expects Q1 revenues to be around $10-15 million down on the same period in 2019.
As regards a longer term outlook the Company says that, “due to the uncertainty surrounding the magnitude and duration of the COVID-19 pandemic at this time, the Company is unable to predict the impact on its business and operating results, both in the near term and long term. As such, the Company is withdrawing its previously provided long-term Adjusted EBITDA target of $600 million by 2024.”
Universal recently announced that its theme parks in Orlando and LA will remain closed until at least 31 May.