Six Flags Entertainment Corporation (FUN) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Cedar Fair Entertainment Company 2020 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Michael Russell, Corporate Director of Investor Relations. Please go ahead.

Thanks, Amy, and good morning, everyone. Welcome to our 2020 Third Quarter Earnings Conference Call. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is available under the News tab of our Investors website at ir.cedarfair.com. On the call with me this morning are Richard Zimmerman, Cedar Fair President and CEO; and Brian Witherow, our Executive Vice President and CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those distributed in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC's Reg 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 on this call will be considered fully disclosed. With that, I would like to introduce our CEO, Richard Zimmerman. Richard?

Thank you, Michael, and thanks to everyone for joining us this morning. Let me take just a minute here at the outset of our call to wish you and your family all the best as we approach the holidays. I hope you're all staying safe and finding ways to navigate through this uncertain and challenging time. Before Brian gets into the details behind our third quarter results, I want to begin this morning's call by stressing this point. Having the opportunity to open and operate seven of our 13 properties after the March shutdown was very important and extremely valuable for our team and our company. While it felt humbling at times not having all our parks up and running, not to mention the impact it has had on our results, nothing can replace the experience and learnings we gained by interacting with our guests and associates under the season's unique set of circumstances. Our parks did a great job, adjusting their operations to provide our guests with the best possible experience within the necessary health and safety guidelines. Importantly, we are using what we tested and learned this year to help us improve our operating plans for next season, including the programming elements of our extremely popular event calendars. It's equally important to note that all parks that reopened this year generated positive cash flow with revenues covering variable operating cost. Furthermore, I want to take a moment and thank our team. I could not be prouder of what they have achieved this season in such an unusual and dynamic environment. Their level of dedication, professionalism and accomplishment during the pandemic has been nothing short of exceptional, especially given the difficult circumstances and the level of uncertainty under which they were asked to operate. Our team recently received well-deserved recognition and high praise for its development and implementation of COVID-19 safety protocols when the State of Ohio contacted us for counsel on how best to manage the long lines at the polls for yesterday's election. This is one of many examples of the culture of excellence that drives our company's long-term success. I would also like to emphasize that we have done everything possible this season to open every park in our portfolio when it was appropriate to do so. We vigorously pursued permission to reopen from state and local authorities in each of our markets and once granted that approval, assessed the financial feasibility of opening our parks within the required restrictions. Kings Dominion in Richmond, Virginia is an example where initially it did not make economic sense to open, given the parks in - given the states in-park limitation of 1,000 guests. We continue to maintain an active dialog in that market with a hope of reopening the park, even on a limited basis, yet this year. Meanwhile, just last week, we announced that Carowinds will open later this month to host an updated version of its WinterFest event, called Taste of the Season, which will run through the end of December. Having a chance to welcome guests back to our Charlotte Park is something we've been actively working on since we were forced to close the park back in March. Along the same lines, we remain diligent in our efforts to Canada's Wonderland, two of our largest parks. Both jurisdictions governing these major parks continue to maintain a very conservative posture towards amusement parks in general. Nevertheless, as we await permission to fully reopen Knott's Berry Farm, the park has successfully hosted a growing number of outdoor family-friendly dining and retail experiences, such as Taste of Knott's, Taste of Fall-O-Ween and the upcoming Taste of Merry Farm, where guests enjoy specialty food and beverage selections created by the park's executive chef and culinary staff. Looking ahead, we believe that Knott's sold-out series of non-traditional events, which have generated some of our highest guest satisfaction ratings ever, offer a strategy that can be successfully rolled out at other parks in the future. While few businesses in our sector have escaped the pandemic's impact on demand, our company's ability to rebound from past disruptions gives us confidence that a recovery is a matter of when, not if. Our business model has withstood the test of time regardless of disrupted macro factors, which underscores our confidence in an eventual recovery. In the meantime, our team has taken full advantage during park closures to ensure we emerge from the disruption with a leaner, more efficient and lower cost infrastructure. While our review of the business continues, we believe the improvements we've made thus far, plus other cost savings initiatives we are working on, will reset our consolidated spending to lower levels for major OpEx and SG&A cost categories such as labor, advertising and general procurement. These cost savings should have a positive impact on gross margins over the long term; something we will be prepared to outline in more detail over the coming quarters. Before I ask Brian to review our third quarter results, I want to review the purpose and the reasoning of our recent bond offering and how it fits within our current strategy. As you know, in early October, we completed the issuance of $300 million of senior unsecured notes at 6.5%. We believe it was a sensible option to further strengthen our liquidity position as a reasonably priced insurance policy against the possibility of the disruption lasting longer than anticipated. With limited market clarity heading into 2021, our long-tenured bank group fully understood and supported our strategy to further strengthen our capital structure. And we are grateful for their continued confidence in our business. Ultimately, reestablishing the record momentum we worked so hard to achieve in 2019, we'll require renewed broad-based consumer confidence and a return of demand. That is why the value operating during this year's abbreviated summer and fall seasons cannot be overstated, nor can our guest experience of safely visiting our parks during a worldwide pandemic. In hindsight, we better understand why many guests opted out this year; many of the reasons confirmed by our own research. Yes; as our guest shared with others that they enjoyed their park visits, attendance levels consistently increased, even topping 50% of last year's levels on a number of days and more recently, reaching capacity limits at Cedar Point and Kings Island. These are encouraging signs, as we build out our operating plans and prepare for the 2021 season. I'll pause here to allow Brian to review our third quarter results. Brian?

Thanks, Richard, and good morning to everyone. I'll start with results for our third quarter, before reviewing internal initiatives underway to strengthen the core business. First, I need to remind you that due to the effects of the pandemic, results for the third quarter of 2020 are not comparable to prior year, as regular operations remain suspended at six of our 13 properties during the period. At the seven parks in operation, it's soft early demand combined with capacity limitations and other COVID-related protocols impacted attendance. With six of our properties remaining closed and the reopened parks' abbreviated operating calendars, the third quarter had a total of 314 operating days compared to 1,035 operating days in the prior year period and compared to 1,069 operating days originally planned for the quarter. As Richard noted, we've been very pleased with how attendance trends have improved since parks reopened. Upon initially reopening, attendance averaged 20% to 25% of comparable prior year levels. That improved during the third quarter from 23% in July to as high as 55% in September. For the month of August through October, attendance was solid, averaging close to 40% of prior year, up against some of our biggest attendance days in 2019. Total attendance for the quarter was 1.3 million guests, a decline of 11.9 million guests from the same period last year. As a result of the 90% decline in attendance and a $47 million decrease in out-of-park revenues, third quarter net revenues decreased $627 million or 88% to $87 million. In-park per capita spending in the period decreased by 5% to $47.29 compared to $49.94 in the third quarter of 2019. Per capita spending increases in food and beverage, merchandise and games collectively up 18% in the period were more than offset by decreases in guest spending on admissions and extra charge attractions, primarily are from the line Fast Lane products. The decrease in admissions per cap was the result of a higher mix of season pass visitation in the quarter compared to the same period last year. In the current year, season pass visitation represented 55% of third quarter attendance compared to 46% a year ago. Excluding the impact of season passes, non-season pass admission spending on all other ticket types was up 4% in the quarter. On the cost side; operating costs and expenses for the third quarter totaled $141 million compared with $369 million for the third quarter of 2019. Abbreviated operating calendars and fewer offerings at our parks combined with cost-saving measures led to the year-over-year decline. The $229 million decrease in operating costs and expenses reflected in an 80% or $47 million decrease in cost of goods sold, a 56% or $127 million decrease in operating expenses and a 66% or $55 million decrease in SG&A expense. Approximately 57% of the decrease in operating costs was related to a reduction in seasonal labor in the quarter, while 49% of the reduction in SG&A was attributable to reduced advertising spend. Two priority areas for capturing cost savings once park operations were disrupted. As we previously noted, the flexibility of our business model affords us the opportunity to quickly and impactfully reduce expenditures across the board when needed, including costs we generally consider fixed during normal operations. Consistent with Richard's earlier comments, there were both strategic and economic value in getting even a fraction of our properties reopened this year. Operating our seven parks with modify schedules and limited offerings reduced the adjusted EBITDA loss during the quarter by roughly $30 million compared to an internal third quarter projections under a scenario where no parks reopened. As Richard mentioned, we generated positive cash flow with revenues covering variable operating cost at each of the parts that reopened, even at the reduced attendance levels. As we noted on prior calls, in order to achieve EBITDA breakeven on a consolidated basis next year, we estimate needing to generate attendance in the range of 45% to 55% of 2019 levels. And in terms of free cash flow breakeven for the company, which would cover our interest cost, attendance needs to average 70% to 75% of historical levels. Looking at deferred revenues for a moment; at the end of the third quarter, deferred revenues totaled $193 million, which was up 30% compared to $148 million at the end of the third quarter last year. The year-over-year increase reflects the impact of less season pass attendance in the third quarter versus the prior year and the carry-forward of 2020 season pass benefits and use privileges through the 2021 season. We're pleased to report that since our parks began reopening in mid-June, we sold approximately 90,000 additional season passes, generating more than $10 million in incremental sales. At this point in time, we have approximately 1.8 million season passes outstanding or close to 70% of our 2019 full-year base, providing solid momentum in that critical attendance channel as we head into the 2021 season. Of the $193 million of deferred revenues on the books at the end of the third quarter, we expect to recognize approximately $10 million yet in the fourth quarter of 2020 with a balance extending into 2021 or beyond. This is in large part due to our decision to extend the use privileges of our season passes and all season products through the 2021 season. Turning to our outlook around liquidity; with only two parks currently planned to operate in December for holiday events, we continue to closely manage our cash burn rate, while ensuring that we appropriately maintain our properties and remain prepared to reopen as many parts as possible as soon as fiscally appropriate. At the end of the third quarter, total liquidity was $585 million, which included $359 million of undrawn revolver capacity and $225 million of cash on hand. This compares to a total liquidity position of $661 million as of the end of the second quarter, representing a reduction of $76 million in the quarter or approximately $25 million per month of net cash outflows. As Richard mentioned, to provide for incremental liquidity should COVID-19 create an extended disruption, we recently completed a $300 million notes offering, we amended our credit agreement to further suspend and revise certain financial covenants by an additional year and we obtained agreement to extend the tenure on $300 million of our revolving credit facilities through the end of 2023. The combination of these steps successfully enhancing our financial flexibility, going forward the covenant waiver period was extended through the end of 2021 and the covenant modification period was extended through the end of 2022, along with the widening of the senior secured leverage requirements. Under terms of the amendment, we must maintain a minimum liquidity level of $125 million and we may not make restricted payments, such as distribution payments, generally through the end of 2022. Considering the net proceeds from the recent bond issuance, which closed in early October, our pro forma liquidity position at the end of the third quarter totaled approximately $877 million. Regarding capital expenditures; since the shutdown in mid-March, we effectively suspended our largest capital projects to minimize cash outflows while operations were suspended. Through the first nine months of the year, we spent approximately $120 million on capital expenditures with the expectation of investing minimal capital during the fourth quarter. For the full year, we are projecting capital investments of $120 million to $125 million, reflecting a savings of approximately $60 million to $65 million from our original 2020 CapEx budget. At this point, we remain current on all payables for all active capital projects and we have no material long-term commitments for new attractions, providing us maximum flexibility to tailor our 2021 and 2022 capital programs based on the speed of the recovery and our outlook around liquidity. With nearly half of our parks unable to open this year, many new rides and attractions originally planned for 2020 have yet to be introduced to our guests. Meaning, our capital investments for the 2021 season will be a fraction of what we've invested in previous years and will be focused on completing projects already in process that are critical to reopening next year, plus any necessary compliance or infrastructure work. Because of uncertainty around the recovery and the flexibility we've built into our capital planning process, we are not going to commit to or provide specific guidance on calendar year 2021 capital expenditures at this time. Once business conditions normalize, we will be in better position to frame up what our capital programs for the 2021 and 2022 seasons will [indiscernible]. Looking at the cash burn; given how fluid the environment is, it's difficult to project more than three months out. With that said, we know that the second and fourth quarters consume more cash due to the timing of interest payments on our outstanding bonds. And we know that the first quarter has historically consumed more cash than the balance of the year, as we have fewer properties in operations and many parks ramping up operating costs in preparation for spring openings. Along those lines, we estimate that our net cash outflows will average $40 million to $45 million per month over the next few quarters, including operating costs associated with our current plans for park reopenings next year; interest payments, which will average $30 million per month; and a modest amount of capital investment. We'll have better visibility into the operating environment in each of our markets by the time we report fourth quarter results early next year. However, should operations again be suspended across our portfolio, we have the ability to adjust operating plans and remain within our previously disclosed average monthly cash burn rate of $30 million to $40 million, covering operating costs and interest payments. Under either scenario, based on the steps we've taken to date, we've concluded that we will have sufficient liquidity to meet our cash obligations and remain in compliance with our debt covenants through the end of 2021. Following up on what Richard mentioned earlier, the pursuit of our goal to emerge stronger from this disruption is well underway. Stronger in our terms means being smarter, more flexible and more efficient, which applies to all areas of our business. One of the initiatives implemented immediately after the March shutdown was the elimination of almost 100% of our seasonal and part-time positions and the suspension of back-billing full-time positions left empty through attrition. Thus far, that policy, plus positions taken out of the system through streamlining initiatives, has reduced our full-time headcount by more than 250 positions or approximately 10% of our permanent workforce, with incremental reductions under review. Additionally, during the shutdown we have pushed forward with our rollout of a new workforce management system designed to build efficiencies and cost-saving measures into our - into the management of our seasonal labor force, which totals more than 45,000 associates and represents roughly 50% of our total labor cost. Another major budget item historically is advertising, which we meaningfully pulled back on consistent with our broader efforts to minimize cash outflows. As we received approval to reopen parks, our marketing teams relied almost exclusively on lower cost digital and social media advertising to share the news of park reopenings, which proved to be a successful strategy overall. Although traditional media will continue to be a part of our marketing strategy going forward, our experience this year has given us confidence there are significant cost savings to be realized by adjusting our advertising to include more cost-efficient alternatives whenever possible. Reductions to labor and advertising costs are just two examples of where we are focusing for needle-moving cost savings, procurement being the third major area. Combined with the savings produced in other areas of our business, we believe that the potential exists to realize margin expansion under a scenario where the business recovers to historical attendance levels. Finally, until marketplace clarity returns, we will be withholding long-term financial guidance. Given how fluid the current environment remains, it is difficult to project more than three months out and our own forecasting is being performed under multiple scenarios. As I mentioned on our second quarter call, we will remain on the sidelines relative to guidance until market visibility improves and we have a clear line of sight into the reopening of our entire portfolio of parks. In the meantime, our near-term capital allocation strategy remains unchanged. That of reestablishing growth in our core business and paying down debt to return our net leverage ratio back inside five times adjusted EBITDA as quickly and responsibly as possible. With that, I'll turn the call back over to Richard.

Thanks, Brian. This is the time of year when our teams turn its attention to nailing down specifics for the upcoming season. And I can't recall a more important season for which to plan and to plan well. With little visibility to bank on, our list of priorities will address what we can control, as we await additional market clarity. Our near-term focus will center on the following. First, as Brian mentioned, we will aggressively manage cash burn. Second, we will complete capital projects critical for the 2021 season. Third, we will continue the examination of our infrastructure and operations to identify additional cost savings opportunities with a focus on the big-ticket areas of labor, advertising and procurements. Fourth, as parks reopen and our business begins to normalize, we will optimize our capital allocation with a focus on paying down debt and returning our net leverage ratio back inside five times adjusted EBITDA. And last but certainly not least, we will focus on recapturing demand and drive attendance volumes back to historical levels. As we approach the start of the 2021 season, it is critical our teams and operating plans are flexible with a host of actionable options available to match conditions on the ground. Options may include changes in operating days and hours, including delaying park openings if we believe demand could be compromised by the pandemic. As you've heard me say before, we are at advantage to some extent with the majority of our revenues, EBITDA and cash flow being generated in the second half of the year. It also gives us additional runway while a vaccine or other therapeutics are developed and distributed, which, in the end, could be the biggest game changer for a speedy and efficient recovery. If we proved anything to ourselves in 2020, it is that no challenge is insurmountable. There were times early this season when attracting more than 50% of historical attendance or reaching our restricted capacity seemed unlikely. Yet, we did it. We are fortunate to have the most seasoned and talented team in the space because that's a time-tested business model that has recovered from past disruptions and owns some of the most treasured entertainment properties in the industry. We have always been respected for the quality of the guest experience and the professionalism of our park operators. We have also been known as strong financial stewards, on behalf of our investors. Despite the limitations and challenges placed on us by the COVID outbreak, these three fundamental characteristics remain. You can be assured that we will continue to focus on disciplined execution in all areas of our business, while remaining responsive to this unusually dynamic environment. That concludes our prepared remarks. Amy, please open up the call for questions.

[Operator Instructions] Your first question today comes from the line of Steve Wieczynski with Stifel. Please proceed with your question.

Hey, good morning, guys. So, Brian, I don't know if I heard you right. I mean, there's a lot going on this morning, but - I hope I did hear this right, but you guys lost $50 million in the quarter on the EBITDA side of things. And did you say that that was $30 million better than your kind of so-called internal projections?

Yes, Steve. Under a scenario where all our parks remain closed, if you think back to the burn rate that we talked about and you look at just the operating side of that, set aside interest and CapEx, we would have been in that mid-20 range per month; something in that $24 million, $26 million per month under that scenario, which pushes up around that $80 million kind of level, all in. So, our internal projections would have been $30 million worth had we not gotten those seven parks opened.

Okay, got you. And so I guess, maybe, what kind of helped on the improvement side? Was it - obviously, the parks being open. But was it kind of across the board, both on the cost side and attendant side, or was it more on the cost side? I guess, I'm just trying to figure out what the difference was there?

Yes, no, it's really, as we've been saying all along, in a scenario where we're trying to maintain the properties and stay ready to open, we can only take our operating cost down to a certain level. And the teams have done a very good job at doing that. At that point in time, the ability to minimize that burn rate any further really lies almost entirely on your ability to get open and start generating attendance and revenue. So, I would say that that delta was driven largely, almost entirely, by our ability to open and operate on even at these lower attendance levels, still at a point where, as we said, cash flow positive in terms of covering the incremental variable costs associated with reopening.

Okay, got you. And then second question would be around your pass sales. And I think in a normal year, your pass sales for the following year would have gone on sale in, call it, I don't know, mid-August to late August, runs through the fall, opens back up in the spring. And I guess the question now is, as we look to next year, when you guys have the opportunity to get a little bit more aggressive on that end in terms of really being able to push those '21 season passes and maybe having that longer runway, should that ultimately be kind of a net positive for you guys? Does that make sense?

Well, as we said on the call, Steve, I would underscore again, we're very pleased with the better momentum that we are able to gain in getting parks reopening and selling a little more than 90,000 season passes since mid-June and the start of reopening parks. Clearly, as you're aware, the fall is an important time of the year for season pass sales as is the spring. There is no doubt, not having all of our parks open and not having our traditional event portfolio running this fall and winter will hurt sales on a comparative basis. That said, spring is a huge sales cycle or window for us. And so, we are going to lean in as aggressively as we need to be and trying to build out that 1.8 million unit base that we have, going into 2021. But having parks open, there is a clear delineation in terms of momentum in sales at parks that were reopened this year versus ones that weren't. And so getting all of our parks reopen will - is the first big step towards building that momentum in the spring next year.

Okay, got you. If I can ask one more, super quick one, you guys talked about that you reached restricted - your restricted capacity levels at certain parks through the quarter over the last couple of weeks. Is there any way to help us understand which parks kind of hit that level or how many days you kind of sold - you guys hitting that capacity level?

Yes. It was, Steve, the parks that were open after Labor Day, and as you know, some of our biggest attendance days happen in September and October with the popularity of the fall events. While we didn't host our traditional Haunt at Cedar Point and in Kings Island, we did host fall festivals that were very popular. Those were the two parks that bumped up against those capacity numbers, just a few days. And so, like we said on the call, encouraged by the fact that demand continued to build, the longer we stayed open and that gives us confidence as we look ahead towards 2021.

Okay, great. Thanks, guys. Appreciate it.

Your next question today comes from the line of James Hardiman. Please proceed with your question.

Hey, good morning. Thanks for taking my call, guys. So, I guess more in the main thing, I'm just trying to handicap your ability to reach those breakeven, whether it's EBITDA or cash flow levels, in the absence of a vaccine. And I guess if I look at that 55% of prior year in September, obviously, September is kind of a different animal than the summer time is. But is that a decent assumption as to where we are likely to start the spring season in terms of attendance levels? I mean, it basically sounds like at least at the open parks, you're short of air in terms of EBITDA, cash flow. So, just moving issue of getting the incremental parks back open. Was there something special about September and just the weekends being open that - maybe, that sort of overshoots the momentum at this point?

James, it's Richard. Good morning. It's a great question. Listen, as I think through demand that we saw and the appeal of our product, as Brian referenced in his remarks, I referenced in mine, the strength in demand really relates to, I think, the desire of consumers to get out and do something. The benefit of our model is we are outdoors and we're really, really pleased with the way we've been able to put in the health and safety COVID protocols and procedures and operate in a safe and fun environment. So, paying attention to everybody's safety in both our employees and our guest is hugely important, which was our priority. And when I think about what we saw this year, we did see the benefit of being able to get out there and open. But we also saw the benefit, as I said, of word of mouth in the market and I think we started to see consumer confidence, you could call it consumer sentiment, improve over the course of the last few months. So, what we don't know and can't give guidance in terms of percentage is of attendance in the next year. What we do know is that consumers are showing willingness to do things outdoors in particular and that there is a desire to go places where they can spend time together in a comfortable and safe environment. So, I think we fit that bill. I think it's one of the benefits of our business model, and I think it will serve us well as we end in 2021.

And James, just adding on to Richard's comment. Mathematically, I think the other point to make is that all - two-thirds or better - let's say, two-thirds to 70% of our attendance comes in the second half of the year. And so, those trends that Richard just mentioned, I think it's all - we all sort of ascribe to the idea that the second half of '21 is likely to have more tailwinds than the first half of the year. And that fits our model a lot better just purely from a mathematical perspective, when you look at where attendance comes from.

Got it. That's really helpful. And then just from a longer-term perspective. Obviously, 2021 is going to be probably a mess in terms of how it ends up and where it goes over the course of the year. But I guess if we look half 2021, obviously, you guys are talking to your consumers on a regular basis, what are your consumers telling you about their willingness to return to the park once there is a vaccine in place. And then on the cost side. You probably won't answer this, but maybe in order of magnitude, how much do you think you might be able to generate in savings? Maybe way too early to say, but obviously, you're going to be dealing with some incremental interest costs, given the financing. Any chance that the cost saving could offset that on a cash flow basis? Thanks.

James, I'll take the first question and let Brian take the second on the cost side. But everything we see in our research, whether it was early in the year and how consumers felt about the second half of the year or we now see in the later stages of 2020 and 2021, everything that we see says consumers - and our consumers and our guests and our visitors want to come back next year. There is a great desire to do that. We've held onto our season pass base, our most loyal customer. And I think we've got that opportunity that Brian said, to really get into the meat of next summer when we traditionally do our bigger days. And while we don't know and my crystal ball is very cloudy on vaccines therapeutics and other things, I do think the further out you look, the more comfortable consumers are with saying that they want to come back and that they think they'll come back. Brian, on the cost side?

Yes. James, on the cost saving side, too early to put specific numbers around it. I will tell you the three big areas that we highlighted in our prepared remarks; on the labor side, advertising and general procurement across the company. Those initiatives continue, and the analysis around each of those continue - is ongoing. But we think those can't be material over the long term. In terms of interest costs, as Richard noted in his comments, the most recent financing, the $300 million bond issuance, was really done for insurance purposes and it plays out as purely insurance and proves that we won't need it as we start to see the recovery in '21 and head into '22 with a lot of momentum. You will see us take that incremental free cash flow on the balance sheet and pay down debt quickly, hopefully bringing those interest costs back in line with more historic levels as fast as possible. So hopefully, that helps a little bit. We'll definitely be in a better position, I think, to start framing up the cost opportunities over the next quarter or two, as we continue to work through our efforts internally.

Got it. Richard and Brian, thanks a lot.

Thanks, James.

Your next question comes from the line of Michael Swartz with Truist Securities. Please proceed with your question.

Hey, good morning, guys. Just wanted to touch on some of the attendance trends that you spoke due to the - during the - in July, averaging about 23% of 2019 level. I am sort of making sure that I heard correctly; did you say that in September the average was 55%, or it got to highest 55% in certain parks? And maybe give us a sense of where August did as well. Thank you.

Yes. Mike, it's Brian. So, that's correct. Attendance in July was in that 20%, 25% kind of range. Keep in mind, our parks were still opening on a staggered basis and what we saw pretty much at each one of the parks was soft early demand. And then as word of mouth sort of spread, guest experience was strong back out into the markets and we saw each of our park sort of build. So then in September, those - the number was averaging 55% for the month. Now keep in mind couple of things. As James noted, September is a little bit of a different animal than July or August, both in terms of you're only open weekends. And so, the numbers that you're up against maybe aren't quite as big as we were in the month of August. August, basically, sort of sat between those numbers and was in the range for that overall average that I talked about for August through October. The other thing to note is that September was largely just our two biggest parks, which helps probably skew that a little bit higher because demand was very strong at Cedar Point and Kings Island in this disrupted and abbreviated operating year.

Okay, great. Thank you for that. And then just second question, in terms of the profit earlier [ph], just not ready to quantify it, but I think you said in your prepared remarks you've been back to more historical margin levels based on the attendance and values of the bubbles as well. So, are you talking about the 34% level in 2019, or do you think it's moving to back more than 36%, 37% range that you operated at a few years ago?

We think that there is margin upside from where we were at in 2019, based on some of the things that we're looking at in those cost savings areas I just mentioned. But it does all hinge on the ability to get back towards more historical attendance or revenue levels. Right? I mean, it's - as you understand, Mike, this is an attendance driven and the leverage comes from the attendance side of it. And so getting back to those historical levels of attendance, or something very close to it with maybe a slightly higher per cap, is critical. It's not - we're not going to be able to get above that 34%, 35% range in margin without the volume side of things.

Okay, great. Thank you.

Thanks, Mike.

Your next question comes from the line of Paul Golding with Macquarie Capital. Please proceed with your question.

Hey, Brian and Richard. Thanks so much for taking the question. I wanted to ask on sort of the optimistic side here. Given the strong swell in attendance metrics toward the end of last quarter, if there was some progress made, is there any opening where you think you might bring some parks back online earlier than the traditional Memorial Day window. And then along those lines, my follow-up is going to be around any thoughts on the California guidelines and any progress there, given those two parks there. Thanks so much.

Thanks, Paul. Really good question. Let me take that. The first one, we're in the process of evaluating our spring calendar now. And as I said on my prepared remarks, I think what we showed this year in 2020 is an ability to really configure the operating calendar to reflect the demand we see. The other thing that we did this year, and it's very specific to Knott's out in that California marketplace, is start rolling out these limited duration events, which have really resonated well with our consumers. So, I think we're going to look at what the opportunity is in each market, look at the timing of that opportunity and how to configure the events. Just like we did out in Knott's, where, I've got to stress this, we saw some of our highest guest satisfaction ratings in our company's history in reacting to that. That tells me and that reiterates to us that there is a strong desire and appeal for people to come out. And once they come out, they're both very appreciative that we're open, but they really have a good time. So, we're going to take a hard look at the operating calendar for the spring and look at local conditions in all the markets. Out in California, traditionally, Knott's Berry Farm is our only year-round park and they would be open every day. So, we've got an opportunity in Southern California versus Northern California to look at when we can get Knott's open under the health and safety guidelines, both at the state and the local level, and then do that same process and look at how is the conditions on the ground in Northern California. As we said, our priority is to try and get every park open and we're going to go through that drill again next year. I think as consumer sentiment changes, I think as conditions around the pandemic change, we'll have an opportunity to really lean into that and open up and give our guests a good time.

Great, thanks so much.

[Operator Instructions] Your next question comes from the line of Ben Chaiken. Please proceed with your question.

Hey, how is it going? I think in the past you implied that roughly 75% of the season pass revs this year would be allocated to '21, just based on all moving parts. Could you provide an updated number this quarter? So I guess it would be like, of the deferred revenue of $193 million, I guess, how much would be recognized this year and how much will be recognized next year, or however you want to think about it? I guess, that's the first one.

Yes. It's Brian. As of right now, based on our outlook for visitation over the balance of this year as well as our outlook for estimated visitation in '21, roughly $10 million of the deferred revenue balance of $193 million is estimated to be recognized here in 2020, with the balance carrying into '21 or beyond.

Okay, awesome. That's helpful. And then on the cash taxes side, can you remind us how much of the business sits inside the MLP structure that's not subject to, I guess, the federal tax rate? Correct me, if I'm wrong there.

Yes. So, I guess, the way I would describe - I would try to answer that for you [indiscernible] get pretty complicated with the variety or the entities that sit underneath the broader MLP structure. Our effective tax rate, when you look at the PTP tax and the C-Corp taxes, has sat in the high teens on the last few years. And so I think, as we think about the potential for corporate taxes going up, it will have an impact on us, albeit a modest one comparatively speaking to a straight C-Corp structure.

Okay. That's really helpful. And then just last one and just to clarify one of your earlier comments on the margins, if I may. So back in '13, '14, '15, you were kind of at this 36%, 37%, 38% margin. That wasn't much lower revenues than you ended 2019. I think back in the '13, '14, '15 timeframe, you were kind of in the 1.1, 1.2 range; relative to 2019, which was closer to 1.5. So, just - And I know it's still early. So not to, like, press the issue overly, but just trying to figure out. Like, could you be back at the kind of the high - mid to high 30s margins on revenues that we saw in '13, '14, or would you need to be back to more the 1.5 range that we saw in 2019. And if that's too granular and not able to answer that now, it's - also I get it as well.

No, it's a fair question, Ben. I think what makes it challenging often, comparing periods of time, are what are the other factors that have changed. To that, I would call out maybe headwinds towards just easily getting back to those numbers. One is where the labor market lies today in terms of minimum wage, right? As I think back five or six years ago, where minimum wage rates were versus where they are today and the corrections that we've seen across the country is a pretty stark difference, right? And for - as I mentioned on the call, about 50% of our labor - overall labor costs are seasonal and part-time, which are directly impacted by that. So, that has definitely changed. If we went back in time and sort of applied a more comparable labor environment to that, I don't think you'd see margins quite where they were. So, that's one difference that we still need to work our way through. And that's why something like our new workforce management platform and that initiative is so critical. Our ability to take hours out of the system is our best remedy for offsetting some of that pressure. The other is when you look at the portfolio and the mix of properties and where we stand today, we've added parks, like the Schlitterbahn parks, in 2019. We've added hotel properties and expanded our resort portfolio. Those are all very good lines of business for us, but they aren't at the same margin as maybe some of the big parks that were carrying us to those higher margins back down at Cedar Point, Kings Island, Knott's Berry Farm, etc. So, there are some things working against us. But I do want to underscore, we definitely do believe there is margin upside, but it's not an easy path. There are some headwinds that we have to work through.

Got it. I appreciate it, gentlemen. Thanks.

Thanks, Ben.

Your next question comes from the line of Steven Grambling with Goldman Sachs. Please proceed with your question.

Hi, thanks for taking the questions. These are two unrelated topics. The first, as we think about the cadence of next year that you described, can you just talk about how you might change your approach to really focusing on season passes, if at all. And then the second question, which again is unrelated, just as you think about the current environment, has your thought process around ways to, I would say, surface value of the underlying real estate that you spent on where are you even thinking about capital allocation evolves?

Yes, Steven. Fair question. Let me take the first one. In regards to season passes, as you know, and we've seen season pass go from about a third of our business to 53% of our business in 2019, it's an important program, one of our center pieces of our longer-term strategy. So, we're going to continue to focus on season pass, listen to the customers, focus on the value side of the price value equation within that channel. We've seen tremendous growth over the last several years as we've expanded the season and been able to put these limited duration events another ten-fold strategy of our long-range plan into both spring and ultimately winter. So, I think being able to return to our normal calendar over the course of the next year or two, lets us play to our strength our seasons of fun messaging and provide more reasons to visit more often during the season. That creates a lot of value. So, I wouldn't say that we're going to change anything, I think we're looking to always enhance the appeal of our season pass, listen to our customer, trying to add values and benefits that provide a lot of perceived value to the passes. So, I think - we think we're in good shape in terms of our approach and we like the format and the timing of our program. Relative to the rest of the broader capital allocation, as Brian said, listen, we're - our priority is to delever as quickly as possible and get down under five times, where we're doing a host of items that can help us get there. But the easiest way to get there is to stand the business back up on its feet and generate the revenues, get back to those more traditional revenue levels and then work on the margin attached to those. So, Brian, anything you want to add on capital allocation?

No, I think just underscore on what you said and as we said in our prepared remarks, Steve, deleveraging remains a top priority for us, but not at the detriment necessarily of growth in the core business. We will continue to review, as Richard alluded to, the variety of options that we have available to us, including any non-strategic underlying assets that we can liquidate, as well as taking some of that insurance - as I mentioned earlier, that insurance from proceeds from the recent bond issuance and paying down debt as we go forward. So, I think there is a number of levers that we'll have at our disposal, but it really all hedges, as Richard just said, on standing the core business back up for it to have - any of those levers to have real value.

Sounds good. Thanks so much.

And that concludes our question-and-answer session for today. I will now turn the call back to Richard Zimmerman for any closing remarks.

Thank you, everybody, for joining us on today's call and for your interest and ongoing support of Cedar Fair. We look forward to putting this year behind us and are excited about returning our parks to the premier entertainment destinations for which they are known. We look forward to keeping you apprised of our progress. In the meantime, please take care and stay safe. Thank you again. Michael?

Thanks, Richard. Should you have any follow-up questions, please feel free to contact our Investor Relations Department at 419-627-2233. We look forward to speaking with you again in February to discuss our 2020 full-year results. Thank you, operator. Amy, that's the end of our call.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.