Parks! America Inc

Good afternoon, everyone. Welcome to Parks America's first quarter fiscal year 2025 earnings call. My name is Ralph Molina, and I will be your operator for today's call. Today's call is being webcast and recorded. Before we begin, I'd like to remind everyone that our comments today will contain 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 forward-looking statements. For a more detailed discussion of those risks, you may refer to the company's filings with the SEC. In addition, we may reference non-GAAP financial measures and other financial metrics on the call. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our Form 10-Q. Last Friday, we followed our quarterly earnings release and our 10Q with the SEC. In our quarterly earnings release, you will find summary information related to the year-to-date fiscal 2025 segment financial results. We encourage all of our shareholders to read our complete 10Q. In a few moments, I will turn the call over to our President, Jeff Gannon, to answer any questions. First, we will begin by responding to questions previously submitted via email. Then we will take any follow-up questions from live participants on today's call. For those who would like to ask a follow-up question, you can use the raise hand feature at the bottom of your screen at any time to indicate that you have a question. When you're called on to ask a question, your line will be unmuted. When you're finished asking your question, please state that you have no further questions. Your line will be muted afterwards. We will take as many questions as possible within a 30-minute window. That concludes my instructions. I will now turn the call over to Jeff Gannon for opening remarks.

So I just wanted to update, same as I did in other quarters, that we're a highly seasonal business. And since I've come in, both advertising and sales have probably been lower than they might normally be just because our advertising expense has been lower than normal. And that will probably change soon. But the quarter that we're talking about here is earlier for reporting that than that change would happen. Our season really starts in March. And so you should expect that once we start reporting March type numbers and from then on, you'll maybe see seasonally higher advertising and all of that. So just keep that in mind when looking at it, both advertising expense and possibly sales, the extent they're driven by advertising might be a bit lower over this offseason than is normal. And that this should be the last quarter. I tell you that basically. That's that's it, Ralph. We can go to the questions.

All right, at this time, we will proceed to respond to questions previously submitted via email. If you have a follow-up question, please raise your hand and we will get back to you. First question. With extra time managing the parks, can you comment on any meaningful trends, either confirming prior issues or possibly pointing to pathways to higher revenues moving into this 2025 season?

I can comment on some things. I think marketing was a really big issue and maybe even a bigger issue than I thought. We have a new agency and that I think is really terrific and going to do a great job for us. But because of seasonal issues has done their research and everything, but hasn't done a lot of implementing what we have because it doesn't really make sense to do that. outside of the season when people would come. Uh, I think in the, you know, real soon, next few weeks or something, you're going to see, um, probably new websites for some things you might start to see, you know, within the next month after that, um, advertisements and things. If you happen to, to look for those things where the parks are, um, you know, most of our shareholders would be in places where they're not going to be served up ads, but if you are, then you might see new advertising campaigns and all that. I think that's important. And then the other trend is just, um, Missouri, you know, I think there's a lot of positive momentum in Missouri, which is purely due to who we have managing that, Patty, who's doing an amazing job there. And, you know, before coming in, I think that it would be hard to know from the outside what has caused that change and assuming that it's more external factors than just, you know, having a real big improvement in management. So those are the two things that I'd say are different than what I expected is that the marketing situation was you know, a lot worse than I thought. And then Patty in Missouri was a lot more responsible for that turning around in a big way. Those are the two things.

All right. Next question. You previously noted the appraisal of a Texas property. Do the asset values for Georgia and Missouri also reflect a current appraisal? If not, can you indicate what those values are based on?

Sure. So what you see on the balance sheet and that we break out in the. Release for the press release that we put out quarterly, that does like a calculation of the assets at each segment, you know, and each segment is basically a park, less the cash that we have. Those are based on accounting values. So, no, those are not based on the appraisals you don't undergap. re-appraised land. I'm sorry, you don't change the value of the land that you carried on the books for just because you've had an appraisal that's different. We have appraised all three properties recently. That's just because of mostly purposes for financing and to some extent purposes for accounting purposes for impairment testing, but mainly for considering different financing options. And so With those, I'd say by I don't want to say by far, but the biggest difference, certainly in dollar terms, let's not talk about percentages, but in dollar terms, Texas would be the one where the biggest difference is between the carrying value that we have it on the books at and probably what the land would be worth, you know, the appraisal value. In terms of Georgia and Missouri, the answer there would just be COVID. You know, there's been a lot of inflation since COVID in some things. And so, like, for example, we actually have a ton of paved road in Missouri. And so that would affect the appraised value a lot. I wouldn't say that should affect the economic value that someone's going to pay a ton more for road just because it's a lot more expensive to drive. to pave a road now than it was before COVID. But so there are things like that, like actual physical property has gone up a lot in some cases, purely due to inflation. I think in real terms, it hasn't really changed radically since 2020 or something. I think that it's just nominal terms that it's changed. But no, the relationship between what you see on the list on the books and the appraised value, there's no relationship between those two things. Under GAAP, we don't restate those things just because they appraise differently. And so things you own for a really long time eventually end up at values that are you know, their economic value, their appraisal value are way different than they're carried on the books for.

Thanks, Jeff. Relating to assets and capital, we have a question here asking if you could talk about the status in CapEx virtually for the Georgia Park. Also, any anticipated CapEx for the other parks?

Okay. Well, I'll have to be careful about that one exactly because of what you were You know, so quarterly reporting to you, you know, most of those things are GAAP on a cruel basis. But for the CapEx, what you're seeing is the cash flow. So, you know, a project has often been approved a long time before. Like if you look at the big spend in Georgia this quarter, like the final approval for that was given the week I came in. You know, the week actually was the week between when the annual meeting was and when I came in. So we're talking like. Before mid June, even early to mid June, that was the final approval for something that you're only now seeing reported to you in capital spending. And that project's not over in terms of the capital spending that you'll see. So big projects can be a really long lag. I think I kind of suggested this a little bit. I don't want to get more exact on threading the needle on this, but I would say you're going to see a lot of capex at Georgia for this fiscal year. And I would say at least 50% of that is due to one project. I don't want to get more precise on exactly. So if you see a million dollars of CapEx, if you see 1.5 million, if it's a million, probably 500,000 of that is one single project. It's 1.5 million, it's probably 750,000. Let's not get more precise than that. But I would say... Because any more precise than that, we're basically giving you guidance. But let's put it this way. It will drop probably 50 percent from what this year's capex is going to be to what like a maintenance level capex or normal level or whatever you want to say, because we're not going to repeat that project. We've said it before. It's a restroom project. And, you know, once you build that, you will not need to repeat that. We have porta potties right now in Georgia and have for a while that's being replaced by a permanent capex. restroom to replace that for the first time since, you know, the tornado and all that. And that's not something that needs to be replaced every year. It's a really big project and I don't envision a project like that happening anytime soon in any of the parks. But, you know, I can't know exactly if something happens that we're not expecting. They weren't expecting there to be a tornado, right? So you don't know. There's no other project that I could think of that's unusual that's more than even rises to a hundred thousand or something. The other stuff is normal that you're seeing there. You know, it's not normal. Like it's an every year thing. Some of it is an every five or 10 years thing, but yeah, it's normal. The other stuff you're seeing, I would say you should just take us pretty normal CapEx. And then Georgia, you should probably be seeing a like double, you know, what you're seeing right now might be double what is kind of normal, but that's about as far as I want to go with exactly what it should look like normally.

Great. Jeff, moving over to corporate level items, we have a shareholder that asks, have you assessed the maximum expense to the company for the stock split, assuming the small shareholders' ownership interests are retired?

We've Done a lot of work. Ralph has done a lot of work and there have been other calculations done, too, of all different possible scenarios for what could happen in terms of, you know, what ranges of outcomes you could have, what it could cost, all of that. And that's based on the number of shareholders and what the price would be and all those kinds of things. I want to be a little careful because I don't want to give anything away about like. details on that that isn't for the annual meeting. So basically, like we've assessed it, thought about it, thought about that in relationship to cash things, how much would be spent on it and all of that thoroughly. But if I give any more details on that, it kind of suggests things about what we expect to happen, basically, like how many shareholders we expect to to um be cashed out and things like that and and just more details on that than i want to get into but we've we've assessed a range of different outcomes and are comfortable that we would go through with them only if we had sufficient cash and under probabilities that you know things were more a lot more people ended up cashed out than you would expect based on you know the numbers and stuff you know we built in a margin of safety on that stuff great just

We have a question on liquidity. Do you anticipate any need to further enhance liquidity with any type of credit facility?

That's a really good question. It depends on the word need and all that. Will we explore the possibility of credit facilities? Yeah, that's something we might explore instead of just term loans at times. Right now, we have some cash, and if things get termed out enough, then you can be holding enough cash. Really, it's The low point for cash should probably be the first week of March. It could get about that low like starting around now till March be pretty flat. I don't have an exact prediction on that. But let's say we're getting close to what the low point will be for cash and then it kind of builds through there through September. So, you know, we have projections on that. We're looking at that historically. The company, you know, except for when it was in a much worse position, didn't really need to draw on credit lines except during the offseason. Normally, we would want to run things such that we have cash on hand without having to tap any credit facility or anything that would be sufficient anyway. So, yeah. You know, we plan to hold some cash, you know, whether that's borrowed money or or money that, you know, just isn't paid out or used to do buybacks or done whatever. You have a cushion for that in terms of cash. So we're not going to run it down until it's close to zero or something ever on the offseason. And, you know, but yeah, it is, you know, we will look at. the possibility of some revolving credit stuff sometimes, but I don't know that that means that there's a need for it so much as just like, it's a good thing to have as a backup in the sort of an emergency case. And so in case something happened, mainly it's looking at it like, okay, what if you had something like what happened with the tornado or something, you know, it takes a while to get insurance proceeds and things like that. We kind of stress test it that way and look like, is this something that we need to consider? So yeah, it's something I've thought about, but we're not close to actually doing anything with that, that I can think of right now.

Okay, and we have one last written question. Before I move on to the written question at this time, I would like to invite all participants on today's call to ask a question. If you have a question, please use the raise hand feature at the bottom of your screen, and I will call on you after the question is addressed. The last question that we have here is a longer one, Jeff. Given the investing background of Focus Compounding and their knowledge of Markel, Berkshire Hathaway, Fairfax Financial, and other companies, have successfully used an operating company as a platform to build assets, are there any plans or might they consider doing the same at Parks America once things settle down? So instead of paying dividends and buying back stock as only forms of capital allocation, might Parks America use the future free cash flows, if any, to buy equities for parts of businesses or complete private businesses? So basically, what are the odds of using Parks America's free cash flow as a long-term investing legal for other items?

So... OK, I'll start with like the timing. Right. So there's some thing about that in there. Basically, we don't have a lot of cash lying around right now. Obviously, you can see what the cash is, what the debt is. Even going through the season, that wouldn't be something that we can be feeling any pressure to. OK, we have to decide what to do about cash. Right. So that's the first thing. There's no immediate needs to be determining what to do with cash right now. There's other things, annual meeting or split things. getting through the current season that we have then and then considering what the capital budget is for next winter. And then you'd be thinking, OK, do we have excess capital and that kind of thing? So we're not at a point where we'd even be considering that anyway. There was a bunch of different items in that list, like buying other private businesses, buying private businesses. Sorry. You know, that is a normal thing that public companies do. Sure. We look at acquisition targets. That's that's something that we might do. The other ones, I guess I should get a little bit into why you would or wouldn't do that, the efficiency of it and everything. So a public company like we are is not optimally efficient for doing some of the things that you're talking about there that the companies you mentioned, the three companies there, do. Some of those have... Well, actually, all of those have insurance operations. But in addition to that, there's just... I mean, one, there's a there's a balance sheet test. I mean, for the SEC, for, you know, you wouldn't have more than probably, you know, 40 percent or something of your balance sheet ever. And investment type things before the SEC would probably be asking questions about are you an investment company or something? There's some leeway, I think, on that while you're in a big transition period. But basically, you know, you don't there be limits on that before you turn into a different kind of company. I don't think we would get near that. I think the. If you look at the history of the company, right, it is true that if the company had instead like bought stock in, you know, other entertainment type companies instead of, you know, Cedar Fairs and Disney's and whatever, instead of directly buying these other parks. Yes, they would have done better. The stock would have a much better long term result by doing that. OK, that's one way of looking at it. But the opposite side, I want to look at it is you do have to consider that you would just as a shareholder be better off buying these things yourself than having a company like ParkSpy for you and you hold through them. Right. So it's just inefficient from that perspective. So I just it's something to think about that. It's usually much more efficient to do the things we talked about, the buybacks, the dividends, all of that. What you want to do is something that's both smart and efficient. And sometimes there's a trade off on those things. Like it would be great to buy private businesses that are aligned with what we already do. But the multiples on that might be high or something. Sure. So we will try to do something, I think, as much as possible. That's both intelligent on the numbers, but also efficient in that there's not a lot of leakage for people. for tax things and all that stuff for you the shareholder you know we'll consider both of those things always we'll consider kind of what the after tax whatever things look like for you that's kind of the way that we want to think about it and some of the things that you mentioned there might work for some of those companies but for your average public company there's serious inefficiencies there that you would want to take into account and we would take them into account. So we'll try to do the things that for the end shareholder makes the most sense on an after tax basis. That's how we would consider it. And then finally, none of these things have been talked about and stuff at the board level and discussed really at all, except for, you know, we've kind of mentioned to you in these calls that obviously we're all aware of, you know, Aggieland and and that it hasn't been performing, you know, the way that it should versus appraisal and all that. And so that's the only like asset thing that we've we've talked about really in depth for a while. So there's no talk about pivoting to taking the company totally different direction like that.

All right, Jeff, I think that's a great point to end the call. At this time, there are no more questions in the queue. That concludes today's call. A transcript of the call will be available on the company's website. Thank you for joining us today. You may now disconnect.