Posted Wednesday, May 24, 2006 10:43 AM | Contributed by Jeff
Stockholders should expect their dividends to remain steady for the next year or two while five Paramount Parks pay for themselves, according to a financial presentation from Cedar Fair Monday and interviews with officials Tuesday. Revenue aside, Cedar Fair will accumulate liabilities from the move. The purchase will grow the company's debt to almost $2 billion, with annual interest payments reaching about $100 million. Cedar Fair paid about $26 million on debt interest in 2005. Added revenues from the Paramount Parks, as well as reducing expenditures such as further expansion and park acquisition, will fund much of that debt, Kinzel said.
Read more from The Sandusky Register via PointBuzz.
I, too, was surprised that Wall Street hasn't reacted to Cedar Fair's side of the deal. It appears that investors are happy with CBS which has seen a sudden influx in cash.
Good time to buy if you have the resources to do so, in my opinion.
I'm a bit surprised too that there hasn't been much of a reaction from Wall Street. I am a little worried about the 2 billion debt and the 100mil interest payment but I have faith in those at the top to run the company correctly.
I agree, that with the price hanging out near $26, now is a very good time to buy. That's a nice 7% return on the distribution alone at $1.88 per unit annually.
All the paying off of debt assumes the economy will stay in the shape it is now, but one terrorist attack or the ecomony tanking could make all these plans go far off course.
By "expansion" do they mean creating new parks in new markets OR are they talking about "expanding" their current parks (ie adding new rides, etc). In other words is this little sentence indicating that we should not expect much in the way of new rides in the next few years? Ambiguous sentence or idiot reader...I can't tell! :-)
By comparison, Premier bought three waterparks in CA, then bought FunTime, then bought Elitch Gardens, then bought Kentucky Kingdom, then bought The Great Escape, then paid way too much to buy Six Flags. They got themselves into $2B of debt before they had the revenue in place to service it. Cedar Fair is a little more cautious.
Consider this: How many outstanding shares are there of FUN? How much does it cost them to give that nice quarterly divedend? $1.88/unit/year on 54,400,000 units is 102 million dollars. So they are paying unitholders an amount slightly more than the interest they are paying on their debt. Someone correct me if I am wrong, but isn't the net revenue (160 million) what is left of their gross revenue AFTER operating expenses, taxes, interest payments and dividends? So in other words, they can service their debt, pay their unit holders, and still have $100,000,000 left over? When was the last time PKS had a profit like that?
--Dave Althoff, Jr
* Merely naming the one other park chain I know of that might be for sale. Think nothing of it.
Of course, Busch might be interested in picking up a couple of the Six Flags parks if the opportunity presents itself. SFFT would be one possibility because they could tie it in with Sea World of Texas. Another would be SFSL because of its hometown location.
As for Universal, this is a situation like Disney where much of the value of the parks is tied in with the movie operations of the parent companies. If the parks were sold, their value would drop because of the potential licenseing problems that would result. Both Disney and Universal control both ends of the licensing at their parks. This is not true at Six Flags or Paramount now but these parks don't need the tie-ins so much. If they have difficulties in the future retaining their rights, they will just look for some other characters or shows to theme instead.
They have nice parks, but I'd rather drink a urine specimen than a Bud.
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