Cedar Fair announces first half results

Posted | Contributed by Jeff

Due to timing of the quarter, company cautions that increases in revenue and attendance are difficult with extra week. Including July, revenues for the first seven months of the year increased 2%, or approximately $11 million, on a comparable-park (excluding Geauga Lake) and operating week basis. This increase reflects a 3%, or 359,000-visit, increase in combined attendance through the end of July, a slight decrease in average in-park guest per capita spending, and a 2% decrease in out-of-park revenues.

Over the past five weeks, consolidated revenues, on a comparable-park and operating week basis, were up 5%, or approximately $14 million, largely due to a 6% increase in combined attendance, or 379,000 visits, and an $800,000 increase in out-of-park revenues. Over the same five-week period, average in-park guest per capita spending was down slightly, consistent with the trend experienced through the first six months of the year. Fueling the strong July attendance figures was the solid performance of our parks in the northern and southern regions, which saw attendance increases of approximately 388,000 visits and 37,000 visits, respectively.

Read the press release from Cedar Fair.

It's up $1.87 on this news... but is the market really just ignoring the fact that they have 113 extra operating days in there?

You take those out and things look rather flat, but with the overall economy maybe that's not bad?

Mike

Up 14% today... I can't imagine that there won't be an adjustment tomorrow. Reading between the lines, the part about per cap and external spending going down, says to me that they've been pricing hotel rooms and food too high. But still, they're barely pacing inflation. The reason that's troubling to me is that they've not realized the savings they said they would by trimming the fat of the Paramount Parks. That either says they're not making the right decisions or there wasn't as much fat as they thought.

But yeah, I suppose some of the enthusiasm on the part of investors comes from the fact that the crappy economy isn't particularly hurting the business.

I am happy to see that per-caps were actually down for once.

-Sam

Then clearly you're not an investor. Or you are and you hate money. And freedom.

In the call, it's stated that the vacant land at Canada's Wonderland will be sold. 82 acres that is estimated to fetch $600,000 to $1m per acre. All proceeds from the sale of the land, that is said to be unnecessary for future development of the park, will be used to pay down the company's debt.

Sounds like some fat being trimmed, or just a really bad decision. So much for Wonderland's hotel.

Wonderland is a huge park in its current form with lots of empty spaces for new rides and expansion. Sounds like a good idea to sell off the land to reduce debt.

Too bad they're being forced to sell this land (to pay off debt) in such a piss poor real estate market. I'm sure Toronto isn't Detroit or Cleveland or Florida, but I can't imagine it's the greatest time to be selling either.

Has anyone heard anything about what those bids for the Geauga Lake land contained?

Too bad they're being forced to sell this land (to pay off debt) in such a piss poor real estate market.

They're not being forced, it's thier choice, and the market in Toronto is HOT, did you not see above how much the land will go for? The problems with the US real estate market, are contained to the US real estate market. There's spill over in other ways, but not to the Canadian land and housing markets. They stand to make a ton of money on this land and pay down thier debt, not a bad move to show investors that they're agressively managing the finances.

If CW has as much room as others have suggested, I don't see any reason to retain the land. Unless you can demonstrate how it's going to generate revenue, it's like having unsold inventory for an extended period of time. It just costs you money.

Wonderland is a huge park in its current form with lots of empty spaces for new rides and expansion. Sounds like a good idea to sell off the land to reduce debt.

Agreed. Two great examples (of many): ALL the wasted queue space around Flight Deck, and right next to it, the LONG walk of empty space to their skycoaster!

Toronto real estate is booming---I was just there visiting folks at U of T, and got an earful about how Canada is crushing the States. ;)

I agree selling the land is the right thing to do, but I still maintain that their debt load and lack of any significant revenue growth prospects are forcing them to do it.

$600,000-1 million an acre does sound like a lot, but it is also a huge range and I have no idea what it would have been a year or two ago. Many people said NYC wouldn't be affected by the real estate trouble, but now it is. Maybe they can unload it at a fair price before the Toronto Real Estate market cools, but just like the troubles in US real estate and financials weren't contained in just real estate and financials (they've spread to many other parts of they economy as well), they're not going to be contained in just the US either. International stock index funds (both emerging markets and developed markets) are down farther than US indexes year to date.

How are they being forced? What indicators do you see that show they're being crushed by their debt?

I think that Peter Crage mentioning the sale of the Toronto land (for the second time in the call) immediately following this little gem is a pretty good indication of why they're looking to unload "non-core assets."

"The other covenant is the distribution suspension provision. This provision is computed similarly to the leverage ratio but has tighter parameters. Based on the second quarter results excluding the additional week we are currently at 5.1 times debt to EBITDA compared with the maximum 5.5 times as permitted by the loan agreement. This will decrease to 5.25 times in the fourth quarter of 2008 and further to 4.75 times in the fourth quarter of 2009."

So I guess technically, they're not being forced to sell the land. They're doing it to reduce the chances of them being forced to suspend their dividend.

I think it's the right thing to do, but it's like selling your bike to pay off your credit cards. It's not your primary means of transportation so you're better to sell it (even if you might want to use it in the future) than to suffer the consequences of not paying the cards.

I just think they're fortunate that they have some "non-core" assets to sell.

I think you're way reading into things. Again, I haven't been there, but others seem to be of the opinion that this isn't going to limit development in any way. If they can sell land while the real estate there is hot, and it reduces debt while the rates are still low, sounds like a good plan to me.

In the call they mention that there have been several interested parties in the Wonderland property, including a cash sale and also joint-development oppertunities. Joint development to me could easily be hotel or other park-suited opportunites. I don't see anything wrong with this approach as long the park is allowed to continue to develop and grow. Now if only the upwards of $80 million would be put back into Wonderland! That would be great!

From earnings call transcript:

"Before I turn the call over to Peter for a more detailed review of our second quarter results, I would like to briefly discuss land we have recently decided to market near Toronto. After a feasibility study of the 82-acre parcel of land located adjacent to Canada’s Wonderland near Toronto, we have concluded that this land is not necessary for the future expansion of the park. We believe this land is to be valuable and we have contracted with Colliers to market the 82 acres. To date we have received several inquiries and bids on this land for both cash purchases and joint venture opportunities. While we do not have a specific date in mind, we do hope to make a final decision regarding this land over the next few months. Any funds raised from this sale will be used to pay down our existing debt. The sale of non-earning assets is another step in bringing our total debt outstanding down to a more suitable level."

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