Parks! America (OTCMKTS:PRKA) President Geoff Gannon said the company refinanced a loan at its Aggieland park in Texas, reduced expected insurance costs for the next fiscal year through program changes, and is pursuing marketing changes intended to improve advertising returns and attendance.
Gannon said the Aggieland refinancing, which was disclosed in the company’s 8-K and 10-Q filings, carries a seven-year term with a 25-year amortization schedule. The loan is fixed at just under 7%, replacing a floating-rate arrangement. He emphasized that the loan amount did not change and that the refinancing did not provide cash back to the company.
Insurance and Feed Costs
Gannon said insurance policies generally renewed effective Aug. 1. While he had previously expected insurance costs to rise about 5% in the next fiscal year if the company made no changes to its program, he now expects costs to decline by roughly 8% because of program adjustments.
On inflation, Gannon said the company is not generally seeing the same cost pressures it faced previously, including pressure from wage increases. However, he pointed to animal feed as a notable exception, particularly at the Georgia park.
According to Gannon, the consolidated increase in cost of goods sold during the quarter was attributable primarily to animal food rather than merchandise or food sold to guests. He described animal-feed pricing as commodity-driven and said prices had risen sharply since the start of the Iran war. Hay prices, another component of animal feed, have not changed, he said.
“That’s not due to a higher volume, that’s due to just higher prices,” Gannon said of the increase in Georgia’s animal-feed costs, which he characterized as approximately 40%. He added that the company does not expect such year-over-year increases to persist indefinitely, although commodity prices for certain inputs have recently climbed by 20% to 40%.
Texas Park Schedule and Profitability
Addressing questions about Aggieland’s decision to close Tuesdays and Wednesdays, Gannon said the change was made by the park’s general manager, who joined more than a year ago. The revised operating schedule helped reduce expenses, with every expense line the company breaks out declining during the quarter at the Texas location, he said.
Segment income at the park nevertheless fell because revenue declined, according to Gannon. He said Tuesdays and Wednesdays together historically account for about 15% of attendance at Aggieland and at the company’s other parks, while the remaining five days represent about 85% of attendance.
Closing on those days can reduce staffing needs and allow employees and managers to perform non-guest-facing work, he said. But Gannon also acknowledged that fewer operating days can complicate marketing and create friction for guests who want to visit at any time.
The company has no immediate plans to alter the five-day schedule, but Gannon said management will continue evaluating whether the approach is appropriate. Aggieland’s attendance has declined, he said, and the company has observed that attendance on the five operating days is no longer exceeding prior levels as it did initially following the schedule change.
Gannon said Texas reported EBITDA margins of roughly 34% to 35% even in what he described as a poor quarter for attendance. He said the key issue at the location is not necessarily margin improvement, but rather raising sales relative to the asset base invested in the park.
- Texas can be profitable at its current margin levels, Gannon said, if sales increase without requiring higher asset investment.
- Georgia generated more than three times the sales of Texas during the quarter, though it also had higher expenses.
- Management’s focus is on cash-flow returns on invested capital rather than simply maximizing EBITDA margins.
Marketing Initiatives Target Ad Returns
Gannon said the company is adding social-media capabilities, including coordinators at Georgia and Aggieland, while an employee at the Missouri park will support companywide marketing work. The initiatives include more internally produced materials, organic social-media content, influencer efforts and user-generated content.
Parks! America is also working on digital signage at all parks, website updates, billboard campaigns and a new agency for paid digital advertising, particularly on Meta platforms and Google. Gannon said the company expects most of these changes to be in place by around November, although physical installation of digital signage could take longer.
Aggieland is expected to be the first location to test several initiatives during September and October, in connection with promotions around football home-game weekends and Halloween. The company is not repeating a prior program that offered free admission on certain days, Gannon said.
The primary objective is to improve returns on advertising spending, which Gannon called the company’s largest operational concern. He said paid online advertising represents more than half of advertising and marketing spending and has produced the weakest return on ad spend, even though results have improved each year.
If the new agency and campaigns do not improve results, the company may sharply reduce paid online advertising after this year, he said. Gannon expects any material financial effects from the changes to be more visible beginning in March, given the seasonally slow November-through-February period.
Capital Allocation and Potential Acquisitions
Gannon said the company does not intend to rapidly pay down debt, noting that cash generation is expected to exceed the pace of debt amortization under the refinanced loan. He said Parks! America would likely show increased liquidity rather than a major decrease in leverage.
Management views stock repurchases as a better use of capital than paying down debt at the current fixed borrowing cost, based on the after-tax cost of debt and the current share price, Gannon said. However, the company’s low public float makes sizable open-market repurchases difficult. It has changed transfer agents in an effort to improve trading activity and make transactions easier to execute.
The company expects to continue repurchasing shares periodically and remains open to buying meaningful blocks from shareholders at an appropriate price, according to Gannon.
He also said Parks! America has recently seen more potential acquisition opportunities among animal attractions. Before this year, he said, potential deals generally did not appear attractive even at an initial review. Since January, the company has encountered a couple of opportunities that appeared to make financial sense on paper and advanced to questions about management, financing and due diligence.
Gannon said a single acquisition could use most of the cash the company considers available for deployment. As a result, he said the company may maintain what appears to be excess cash if it is holding funds for a potential transaction rather than attempting to fine-tune its cash position each quarter.
About Parks! America (OTCMKTS:PRKA)
Parks! America, Inc, through its subsidiaries, engages in acquiring, developing, and operating local and regional theme parks and attractions in the United States. The company owns and operates three Wild Animal Safari theme parks located in Pine Mountain, Georgia; Strafford, Missouri; and Bryan/College Station, Texas. The company was formerly known as Great American Family Parks, Inc and changed its name to Parks! America, Inc in June 2008. Parks! America, Inc is based in Pine Mountain, Georgia.
