Cedar Fair 3Q revenue up 5% on higher per cap, slightly lower attendance

Posted Tuesday, November 6, 2007 9:01 AM | Contributed by Jeff

Net revenues for the quarter ended September 30, 2007, which included additional operating days when compared with the prior year’s third quarter, increased 5%, or $25.4 million, to $567.5 million from $542.1 million in 2006. Net income for the quarter was $54.1 million, or $0.98 per diluted limited partner unit, versus net income of $132.9 million, or $2.42 per diluted limited partner unit, a year ago. The decrease in net income is largely attributable to two non-cash items totaling $70.5 million. The first item is a non-cash charge for impairment of assets relating to the Geauga Lake restructuring previously announced. The second item is an increase to provision for taxes, which is a non-cash item that is expected to substantially reverse in the fourth quarter.

Consolidated adjusted EBITDA for the quarter, which management believes is a meaningful measure of the company’s park-level operating results, increased $5.8 million to $291.4 million from $285.5 million for the same period a year ago. See the attached table for a reconciliation of adjusted EBITDA to net income.

“While attendance trends were soft through August, operating results during the month of September improved,” said Dick Kinzel, Cedar Fair chairman, president and chief executive officer. “The increase in revenues for the third quarter of 2007 is due to a 5% improvement in in-park guest per capita spending across all of the parks and an increase in out-of-park revenues, including resort hotels, of 4%, or $2.2 million. This was offset somewhat by a decrease in attendance of 1%, or 150,000 visits, primarily in our southern and western regions.”

For the month of October, successful execution of late season programs across our parks, along with favorable weather conditions in the Company’s northern region resulted in an increase in revenue of 11%, or $8.6 million, from the same period a year ago. This increase was the result of a 9% increase in attendance, or 160,000 visits, a 2% increase in average in-park guest per capita spending, and an increase in out-of-park revenues of 8%, or $494,000.

Read the rest of the press release from Cedar Fair.

Tuesday, November 6, 2007 9:25 AM
Jeff's avatar Can't say I'm entirely happy with the results, but we could I suppose conclude that attendance shedding has slowed and is hopefully leveling off. It feels like good news, but with all of the great weather, pretty much everywhere, how good is it really? Interesting that it was the south and west that saw the attendance hits.
Tuesday, November 6, 2007 10:23 AM
According to Mr. Kinzel, some of GL's assets have been identified to be "disposed".

Let the speculation begin...

Ray P.

Tuesday, November 6, 2007 10:56 AM

we could I suppose conclude that attendance shedding has slowed

Even with the extra operating days?
Tuesday, November 6, 2007 11:07 AM
Jason Hammond's avatar If anyone cares, here's some math on the attendance.

160,000 is a 9% increase in attendance for the northern region in October.


Last years October attendance for the northern region was 1,777,800 +/-

This years October attendance for the northern region was 1,937,800 +/-

150,000 is a 1% decrease in attendance chainwide, primarily in the Western and Southern regions in the 3rd Qtr.


Last years 3rd Qtr attendance chainwide was 15,000,000 +/-

This years 3rd Qtr attendance chainwide was 14,850,000 +/-

The obvious northern parks would be Cedar Point, Dorney Park, Canada's Wonderland, Michigan's Adventure & Geauga Lake.

Does Kings Island count as a Northern or Southern park.

Does Valley Fair count as a Northern or a Western park.

The obvious Southern and western parks would be Great America, Knotts, Worlds of Fun, Kings Dominion, Carrowinds & the Soak City's.

Does Gilroy Gardens or Star Trek: The Experience figure into the attendance and revenues?
*** This post was edited by Jason Hammond 11/6/2007 6:23:53 PM ***

Tuesday, November 6, 2007 11:26 AM
VF is in Minnesota. I think that would make it Northern. Very much so :)
Tuesday, November 6, 2007 11:33 AM
It states what parks are in what region in the press release.

"in the company’s Northern Region include two in Ohio: Cedar Point, consistently voted “Best Amusement Park in the World” in Amusement Today polls and Kings Island; as well as Canada’s Wonderland, near Toronto; Dorney Park, PA; Valleyfair, MN; and Michigan’s Adventure, MI. In the Southern Region are Kings Dominion, VA; Carowinds, NC; and Worlds of Fun, MO. Western parks in California include: Knott’s Berry Farm; Great America; and Gilroy Gardens, which is managed under contract. Also included in that region is Star Trek: The Experience, a Las Vegas-based interactive adventure."

Tuesday, November 6, 2007 12:39 PM
Jason Hammond's avatar Doh! I guess it would have helped if actualy read the press release instead of just the summary. :)*** This post was edited by Jason Hammond 11/6/2007 12:39:41 PM ***
Tuesday, November 6, 2007 12:55 PM
I was going to say, KI has to be in that northern section, because without a doubt it was packed this fall.
Tuesday, November 6, 2007 2:14 PM
The missed earnings estimates by $1.27 and reported a 59% drop in net income - I'm not sure I care what the excuse is, thats really bad.

Here is something to consider based on the CapEx release the other day and the earnings release today:

2007 EBITDA estimate: $325-$335M

Interest Expense: $140M
Distribution: $103M
CapEx Expense: $88M
Taxes + other: ?

Assuming a best case scenario, thats $335M - $140M - $103M - $88M = $4M

They've got $1.7B debt on the books according the this most recent release. Unless they expect the creditors to accept "interest only" payments for an indefinite period of time, something here has to give.

Looking at the company completely sans the financial statements... consider that this year had the most amazing weather anyone could have asked for, a brand new coaster at the company's premier park, and all the "synergies" that Dick promised between CF and the Paramount parks.

Based on the fact that these "improvements" are now almost fully implemented, I'd love to see how they plan on making improvements going forward or generate enough cash to pay down some debt.

Before the Paramount acquisition this company may have been a good investment due to the distribution. Dick has lost sight of his company and I would not be surprised to see Dick forced to offer a secondary, slash the dividend, or something else that would screw the investors.

If you're still holding onto this dog I think you have to ask... is this REALLY the best high yield stock in the market? I think you have to have a lot of blind faith in Dick and co. to say yes to that.

*** This post was edited by Paul Blackstone 11/7/2007 9:32:25 AM ***

Tuesday, November 6, 2007 4:23 PM
^ Taxes are $0. The unitholders are responsible for those.

Assuming the interest rate is fixed, the amount to pay off debt will increase through inflation. Dick said that the new parks would be "slightly accretive" to earnings for the first two years and the synergies would kick in in years 3-5. So far, he's been right.

(BTW the capex figure for this year is $72m. The $88m figure is next year's figure.)

I haven't checked, but the stock is yielding over 6%. It is not a growth stock, it is more like an oldtime regulated utility stock--more like a bond than anything else.

Citi, Merril Lynch, Countrywide--now those are dogs at the moment. A company whose revenue is up--and expects revenue to increase next year as a result of the new ticket pricing structure--is not the one you should be railing on. FUN may not be Google or Apple, but it is profitable and growing.

Tuesday, November 6, 2007 4:27 PM
Jeff's avatar High yield? Who ever called it that? It's average at best, or maybe predictable is the word.

I think Dick Kinzel has to go, and I've been saying that since he "agreed" to stay on. I don't think he's qualified to deal with a company that is twice as complex as it was two years ago.

The synergy and efficiency is far from implemented at this point. I'm even hearing that they're scaling back the deployment of "Gate Central," the Paramount ticketing/pass system, and it will not appear at all parks next year. If that's the case, I can only assume that other areas in terms of procurement and HR aren't well consolidated either. That concerns me a lot more than the financials.

Did anyone listen to the call? How is the financing going?

Tuesday, November 6, 2007 4:38 PM
Jason, are you sure about those numbers? Something doesn't seem right.

CF, KI, CW, DP, MA and VF had less than 2 million visitors, while KD Carowinds, WoF, KBF, GG and GA had almost 15 million visitors in the same time frame?

I think maybe it should read that chain-wide attendance was down 150,000 visits for the 3rd quarter. And I think they mean the 9% increase was for October (Halloween) events vs. last year, again chain-wide.

Interesting that they say that per cap spending was up 5% for the 3rd quarter, but only 2% for October (compared to the previous year). Maybe this means while the parks were crowded, people weren't spending as much aas they were during the summer. Maybe the parks were too crowded in October.

Tuesday, November 6, 2007 4:38 PM
I did listen to the call, but it is very difficult for me to gauge how the financing is going because Kinzel and Crage paint an overly rosy picture about everything, and it doesn't help that none of the analysts ask the hard questions.

The closest anyone came was the analyst who asked how close CF is going to come to violating loan covenants. Crage responded by saying something to the effect of, "it's pretty complicated.. but we'll be ok. We are within the limits of the loan covenants." I would have really liked to hear some more depth on that but I guess it would be asking too much.

Honestly, I don't know how much I can trust these guys when they say things are going great, because my own financial statement analysis leads me to believe very much otherwise.

I also think Kinzel needs to go ASAP. His handling of the company for most of its history was fine - but I honestly believe he has lost touch with the company and has no idea what to do with this mountain of debt. Its not just about figuring out how much money to give back to the investors or what to buy with each year's profits - based on the way he talks, I'm not so sure Dick understands that.

Tuesday, November 6, 2007 5:52 PM
Jeff's avatar Well I disagree about the "mountain of debt." You don't go into something like that without a very specific and deliberate plan to deal with it, especially in a company that's about as no-frills as Cedar Fair when it comes to compensation, infrastructure and technology. They're ridiculously conservative. My distaste for him comes out of not letting the very smart people around him add value to the company where it's obvious, especially in terms of technology.
Tuesday, November 6, 2007 6:22 PM
Jason Hammond's avatar As much as it pains me to admit, RatherGoodBear, your right. ;)
Tuesday, November 6, 2007 7:34 PM
The report does jump around all over the place. In one paragraph they talk about 150,000 fewer guests in one quarter, then in the next there's 304,000 more guests in one week. It reads like a "numbers" person tried to write a narrative version of a bunch of columns and charts.
Wednesday, November 7, 2007 9:27 AM
A "plan" to get the company out of debt and make the Paramount Parks a profitable addition to the company is a guarantee of nothing. Did Cedar Fair "plan" to close (sorry, "scale-down") Geauga Lake 4 years after acquiring it? Since the answer around here seems to be an astounding "No, Cedar Fair tried really hard to make it work," then it seems to me that this company's "plans" don't always pan out so well...

I honestly have no idea how you can look at this company and not see a "mountain of debt." On every metric used to measure it I don't like what I see: debt/equity, debt/ebitda, or just looking at the fact that debt exceeds current market cap.

debt/equity = 5.5
debt/ebitda = 5.0
total debt = 1.7B
market cap = 1.3B

A debt/equity ratio of 5.5 is generally unnacceptable for even the most capital intensive industries - especially those with limited organic growth. If you have any question as to why Cedar Fair deserves "junk" credit status, look here first. And the debt/ebitda ratio comes dangerously close, in my book, to the 2008 maximum of 5.5 before they violate the first loan covenant. Its too bad that this stuff is "too complicated" for Peter to answer on the call, since most investors will continue to be clueless about whats actually going on. What happens if the weather is anything less than perfect next spring/summer/fall or god-forbid it rains a lot! In the past Dick was able to spew his littany of excuses (rain, snow, gasoline prices, Cleveland/Detroit economy, schools getting out too late and going back too early) without major consequences. That game isn't going to work anymore.

A "very specific and deliberate plan" to get through this does not change whats on the books and whats on the books now is not good.

Also, something else I want to throw out there... I find it interesting that Dick went on the defensive at the beginning of the call talking about ways to reduce the debt without a shelf offering. My guess is that once the bankers and lawyers told him about how little demand there would be for the additional units they'd have to offer he probably got a little spooked. He did make the first mention of changes to the "financial structure." What this means is anyones guess - but I wouldn't want to be holding the bag on any company talking about this kind of stuff.*** This post was edited by Paul Blackstone 11/7/2007 9:41:22 AM ***

Wednesday, November 7, 2007 9:59 AM
Mr, Blackstone welcome to the thread.

Let's hope you keep your posts here non-vacuous.

Wednesday, November 7, 2007 11:07 AM
CreditWh0re, I partially get the reference... I know who you are talking about... although I'm not quite sure what its supposed to mean.

When it comes to any stock in the market, there are always going to be the people who read financial statements, listen to conference calls, and do their own homework on a company.

And there will be the crowd who likes to "trust someone else" - whether that be analysts, media talking heads, the company's management, bloggers, Uncle John the teller at Bank of America, or whoever.

If people want to spend their money buying units of FUN because they like amusement parks, think Dick is a good-looking guy, or whatever other silly reason - thats fine by me. But those aren't refutations to numbers, which is what matters to me when it comes to this stuff. Saying these like "they've got a plan" or "they've been doing it for decads" is no consolation to me, and it shouldn't be to any prudent investor.


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