Fiesta Entertainment Corporation Fiesta Entertainment Corporation (Fiesta) owns and operates 10 elite theme parks including: Fiesta Florida,
Question:
Fiesta Entertainment Corporation
Fiesta Entertainment Corporation (Fiesta) owns and operates 10 elite theme parks including: Fiesta Florida, Adventure World, River Adventures New York, Fiesta California, Fiesta Texas, Water World South Carolina, Aqua Adventures, Water World LA, River Adventures TN, and Fiesta Frenzy.
Each of the Company's 10 theme parks engages in similar business activities (e.g.,ticketing, food, parking, and games). Revenues are earned for each of the separatebusinessactivitiesconductedatthe10parks.Eachparkisdesignedtohaveasmall,full-time employee base with a large seasonal staff that is hired each year. Employee costsrepresent the most significant annual expenditure by each park. Employees within thepark are assigned to a base business activity but have the ability to assist other businessactivities within the park (i.e., a parking employee can also serve the food stands ifnecessary) and regularly do so. The movement of employees between businesses is nottracked for financial reporting purposes, and general park expenses are not allocated tothe various business activities within each park. The operating results of each park arereviewed monthly by each park's president and chief operating officer (COO). EachCOO reports to the Company's chief executive officer (CEO) to discuss operatingactivities, financial results, forecasts, and future plans. In addition, the CEO meets witheach park's COO and president several times a year to discuss budget/actual andforecasts.
Fiesta has a strategy committee that act together to make operationalrecommendations such as allocating resources. Fiesta's CEO participates as amember of the strategy committee but is ultimately responsible for the allocation ofresources and has the ability to make independent decisions that may not be in line withthe strategy committee's recommendations. The board of directors of Fiesta doesnothaveinvolvement with theday-to-day operations oftheparks.
Theparksaredesignedtoprovideasimilarguestexperienceand providethesamebasicbusiness activities (e.g., ticketing, food, parking, and games) even though the rides andattractionsoftheparks vary.
Each park caters to families seeking leisure or tourist activities. The large parks have amore diverse (international) group of customers because of location. While Fiesta does not market its products differently to those customers, it does provide a fewadditional services, including bilingual staff and certain internationally themedcelebrations.Regardlessofthelocationorcustomerbase,Fiesta'soverallstrategy isto ensureeach park isapremierethemepark.
Although Fiesta operates parks in several states throughout the continental United States,theindustrythroughwhichitoperates,includingfoodhandling,waterquality,rideoperations, and animal-related permitting, are all monitored nationally; there are nosignificant differences in laws or regulations in the states in which Fiesta operatesitsparks.
ManagementReporting
The CEO receives a monthly reporting package that includes a consolidated profit andloss statement (P&L) for all the parks, as well as a P&L for each of the 10 parks. Theconsolidated P&L and the P&Ls by park include revenues by business activity (e.g.,ticketing, food, parking, and games) as well as total revenue. Expenses, including wagesand other general overhead, are allocated to each park and are included in each park'sP&L that is presented to the CEO. Expenses are reported in total in the P&L for eachindividual park since expenses are not allocated to each business activity. Although theCEO receives park-level data, the CEO makes decisions on a company-wide oraggregated basis as opposed to a park-by-park basis (i.e., rides, attractions, shows, andseasonalevents aresimilarin each park).
The consolidated P&L and the P&L by park within the monthly reporting packageinclude certain financial metrics considered to be important by the CEO. Those metricsare total revenue and adjusted earnings before interest, taxes, depreciation, andamortization (EBITDA) margin. A summary of some of the information presented to theCEOis included at theend ofthecase.
Discussions with the CEO and a review of competitors indicate that attendance is acritical business metric used by competitors in the industry. The CEO, however, usesadjusted EBITDA to make investment and allocation decisions to drive attendancegrowth. In addition, adjusted EBITDA is a significant factor in compliance with debtcovenants because it includes an allocation of both employee and other overhead costsandthecompensation oftop executives oftheCompany.
Since total revenue ultimately drives profit, it is also included in the monthly reportingpackage. The Company analyzes long-term growth rates of revenue in its analysis, notingthe compound annual growth rate (CAGR) over a 10-year period is between 2 percentand 4 percent, with the higher range occurring because of the attractions at newer parks.TheCAGRprojectedfor 2023-2027isbetween2percentand3percent for eachpark.
Financial metrics analyzed by the CEO are highly dependent on the opening of new attractionsand,therefore,themetricsmayfluctuateslightly fromyeartoyearonthebasis ofthecapital spending timeframeand opening ofnewattractions.
InformationProvidedtoBoardofDirectors
The board of directors is provided with a consolidated P&L that includes total revenueand adjusted EBITDA similar to the P&L received by the CEO. The board of directorsdoesnotreceive information onapark-by-parkbasis oranyothersegmented grouping.