Cedar Fair flirts with $1 billion in revenue for 2008

Posted Thursday, February 12, 2009 9:17 AM | Contributed by Jeff

[Note: The following is an unedited press release. -J]

Cedar Fair (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced results for its fourth quarter and year ended December 31, 2008.

Cedar Fair’s operations generated full-year net revenues of $996.2 million and net income of $5.7 million, or $0.10 per diluted limited-partner (LP) unit. In 2007 the Company achieved net revenues of $987.0 million and reported a net loss of $4.5 million, or $0.08 per diluted LP unit. Included in the 2008 results are non-cash impairment charges totaling $95.4 million, or $1.71 per diluted LP unit. Of these total non-cash charges, the majority, or $87.0 million, relates to a preliminary estimate of impairment of goodwill and other long-lived intangibles we recorded when we acquired the Paramount Parks in 2006. The 2007 results include a non-cash impairment charge of $54.9 million, or $1.01 per diluted LP unit, relating to the Geauga Lake restructuring.

Adjusted EBITDA, which management believes is a meaningful measure of the company’s park-level operating results, increased 4.5% to $355.9 million from $340.7 million a year ago. See the attached table for a reconciliation of adjusted EBITDA to net income.

“I am pleased to report that 2008 was another successful year for the company,” said Dick Kinzel, Cedar Fair’s chairman, president and chief executive officer. “While 2008 was not without its economic challenges, we were able to position ourselves as an affordable vacation alternative. In 2008, our combined parks entertained 22.7 million visitors, up 3% from 2007 and generated average in-park guest per capita spending of $40.13. The result of this solid operating performance was a record $355.9 million in adjusted EBITDA.” [Ed. note: The 2007 annual report indicated per cap spending was $40.60, indicating about a 1% decrease.]

Operating income for the year was $133.9 million compared with $154.6 million in 2007. Cash operating costs decreased 1% to $640.3 million versus $646.3 million in the prior year. The decrease in cash operating costs is a result of our continued focus on controlling operating costs and expenses, as well as the closure of the company’s Star Trek: The Experience operation in Las Vegas in September due to the expiration of its lease. Non-cash costs increased to $222.0 million from $186.1 million in 2007, due entirely to the charge for impairment of intangible assets we recorded when we acquired the Paramount Parks. Although the acquisition continues to meet our collective operating and profitability goals, the performance of the individual properties has been somewhat mixed, with certain parks outperforming others to this point. Based on the accounting rules which require us to evaluate our goodwill and trade-names for impairment at the individual reporting unit, or park level, the performance of those parks that have fallen below our original expectations, coupled with a higher cost of capital, have resulted in the estimated recognition of full impairment of goodwill at two of the acquired parks and the additional estimated impairment of trade names at several of the parks.

For the year, interest expense decreased $16.0 million to $129.6 million due to lower interest rates on our variable-rate debt and our ability to fix $300 million of term debt at a favorable rate through an interest rate swap agreement entered into during the first quarter of 2008, coupled with a lower average daily balance on our revolving credit facilities compared with 2007. In 2008, a benefit for taxes of $935,000 was recorded to account for the tax attributes of our corporate subsidiaries and publicly traded partnership (PTP) taxes, compared to a provision of $14.2 million in 2007. After interest expense and the provision (benefit) for taxes, combined net income for the year totaled $5.7 million, or $0.10 per LP unit. In 2007, the company reported a net loss of $4.5 million, or $0.08 per LP unit.

“I am pleased our parks continue to perform consistently well in this volatile environment,” said Kinzel. “We pride ourselves on our attention to customer service and continued investment in our parks, offering a variety of entertainment through new roller coasters, thrill rides, family attractions and live shows for our guests. This entertainment package, along with employees who are among the best in the industry, is what has made and will continue to make this company successful year after year.”

Fourth Quarter Results

For the fourth quarter, net revenues increased $3.9 million to $119.3 million from $115.4 million a year ago. The 3% increase in net revenues is attributable to an 8% increase, or 205,000 visits, in attendance due to strong fall promotions and a favorable October calendar, where many of our parks were able to remain open for one additional weekend. The operating loss for this same period was $79.4 million compared with an operating loss of $19.6 million in the fourth quarter a year ago. The increase in operating loss is primarily attributable to the $87.0 million non-cash charge for impairment of intangible assets recognized during the fourth quarter of 2008, offset slightly by a $6.8 million improvement in operating costs and expenses in the period.

After interest expense, which was down $4.3 million between years, and a benefit for taxes in the period, net loss for the quarter was $56.7 million, or $1.02 per LP unit, in 2008 compared with a net loss of $9.0 million, or $0.17 per LP unit, last year.

2009 Outlook

For the 2009 season, Kinzel reported that the company will be investing approximately $62 million in capital improvements across its properties, highlighted by the addition of a new world-class roller coaster at Kings Island in Cincinnati. The company will also introduce two additional coasters: Prowler, a wooden coaster, at Worlds of Fun in Kansas City and Carolina Cobra, a boomerang-style coaster, at Carowinds in Charlotte, North Carolina. In addition, family attractions will be introduced at Valleyfair in Shakopee, Minnesota and Kings Dominion in Doswell, Virginia. Finally, several parks will debut a variety of exciting live shows, including the expansion of the “All Wheels Extreme” stunt show to several properties.

“It is important for us to reinvest in our parks on an annual basis,” said Kinzel. “Capital reinvestment has always been a high priority for the company, and it is why we have been able to maintain and improve our operating results over the years. Our strategy has always been to offer a variety of activities to our guests, and I believe our 2009 program will again capture their attention.”

Kinzel added, “As we head into 2009, we also continue to evaluate our current capital structure and various alternatives for reducing the Company’s debt levels. In light of current economic and market conditions, reducing our debt and strengthening our balance sheet must continue to be a priority. We are considering a wide range of alternatives for reducing debt and no decisions have been finalized on any of these alternatives at this time.”

Read this and other press releases from Cedar Fair.

Thursday, February 12, 2009 9:55 AM

I had to make the note about the per cap, because I think it's too important to leave out. I'm annoyed that they left it out.

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Thursday, February 12, 2009 11:10 AM

You may be annoyed, but you shouldn't be surprised.

Anyone care to discuss which two of the Paramount Parks are now suffering Impairment?

That's a SURE sign that they overpaid for the Paramount assets.

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Thursday, February 12, 2009 11:12 AM

Stock was as low as $9.11 in intraday trading this morning. I think the market is speaking.

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Thursday, February 12, 2009 11:21 AM

Unless I missed something through my VERY QUICK read, it looks like they made next to no headway on the debt. My rough calculation is that they reduced debt by a total of $28MM. ($1.724B vs $1.752B)

That's with "Record EBITDA of $355M".

There is NO way that the Distribution survives at current levels.

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Thursday, February 12, 2009 11:28 AM

I don't think the market is speaking nearly as loudly as you indicate, relative to the market in general.

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Thursday, February 12, 2009 11:48 AM

Per cap spending was down slightly. Hopefully this is just the beginning of folks showing they want lower food prices.

CP wasn't even mentioned in the capital improvements for 2009. Yet, they continue hyping 'nothing' on the blog. Stupid.

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Thursday, February 12, 2009 12:12 PM

New office furniture for Tony is not 'nothing' . . . ;)

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Thursday, February 12, 2009 4:58 PM

It is funny how Dick and the gang have started moving the goal line around. For years they hung their hat on the "attendance down, per cap up" line. Now, attendance is up but per cap is down.

Ok, why is that? Could it be that your in park pricing is actually hurting you now?

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Thursday, February 12, 2009 5:30 PM

wahoo skipper said:
It is funny how Dick and the gang have started moving the goal line around. For years they hung their hat on the "attendance down, per cap up" line. Now, attendance is up but per cap is down.

Ok, why is that?


Because common sense dictates emphasizing the good and pushing the bad to the background. If the suits suddenly sprouted hairy third arms from their foreheads and it benefited the bottom line somehow, the report would read like it was the plan all along.

Could it be that your in park pricing is actually hurting you now?

Nah, I still think you guys are overreacting to a slight drop. A 1% drop in the face of the worst economy in quite a while? Meh. Attendance grew 3%. That's the balancing game between attendance and per caps in action.

And an increase in attendance would seem to indicate a perception of value.

The high in-park approach might not be the best given the current consumer economic fears, but the hard truth is that the per cap is still 3.75% higher than in 2006 and is 13% higher than it was 5 years ago (35.48 in 2003)

Do you really think they could have grown attendance 13% in the last 5 years? Probably not even close. But they did drive per caps that far.

There's only two factors that determine revenue - how many people pay and how much they're paying. The problem seems to be that Cedar Fair has reached the ceiling on what they can do in both areas at many of their parks.

Last edited by Lord Gonchar, Thursday, February 12, 2009 5:31 PM
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Thursday, February 12, 2009 8:14 PM

You can't look at it that one-dimensionally. If parking went up around 10% across the chain, and even that didn't prop up per cap, there's a pretty serious problem. And again, factor inflation in, and at the very least, assuming everything is constant, it should match that.

FUN closed up slightly, by the way. If the market was "speaking," it must have been saying it was indifferent.

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Thursday, February 12, 2009 9:00 PM

Jeff said:


FUN closed up slightly, by the way. If the market was "speaking," it must have been saying it was indifferent.

As that was aimed at me, I'll take the bait. Yes, I couldn't resist the urge this morning to mention a one day, intra-day price movement. It was hard not to after the conference call and the Press Release. I should have known better. But temptation got the better of me. In fact, in prior posts I explicitly stated that this stock would be ripe for wild (%) fluctuations due to the (relative) low share price, and small average daily volume.

so at the end of the day, fun was up a tad over 1.5% when the broader averages were relatively flat., on higher than average daily volume.

However, does taking that shot make you feel better about sitting on units at $10.15?

I hope so, because in after market trading FUN is down another $0.50. That's a five percent drop. (after hours trading pricing can often be exaggerated by small volume/desperate traders, and is not necessarily indicative of next day opening price).

Not trying to pick a fight with you Jeff, I've just been trying to point out that FUN is a bad place to have your money.

Last edited by CreditWh0re, Thursday, February 12, 2009 9:09 PM
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Thursday, February 12, 2009 9:24 PM

Jeff said:
You can't look at it that one-dimensionally. If parking went up around 10% across the chain, and even that didn't prop up per cap, there's a pretty serious problem. And again, factor inflation in, and at the very least, assuming everything is constant, it should match that.

Jeff is exactly correct here. Parking price increases alone should have amounted to more than that (obviously parking is not paid by each turnstile click, as people arrive at the park by typically more than one per vehicle). Either way, Parking has increased dramatically over the last 5 years, and should have added substantially to the Per Cap spending increase. (I'm assuming that Parking is included in Per Caps, I've never known it to be otherwise).

However, if they were just able to raise Per Caps 13% over 5 years, then they didn't even stay relative to the CPI increases over the same time. Now, we all know that 2007-2008 were exceptional years, with the cost of fuel going up, and now down, but averaging the 5 years would have given a rough cumulative CPI increase of 19%. They missed "staying even" by +/-5PP. (now this is not an exact calc, but should point out that they've done miserable at increasing Per Caps relative to the rise in costs). I'm assuming that the numbers are weighted for the Paramount Parks over the whole term (although FUN has proven that they are willing to mislead when it comes to analyses overlapping the acquisition date).

here's the government link to the Social Security COLA page, which is based on the CPI changes for the preceding year (Q3-Q3):

http://www.ssa.gov/OACT/COLA/colaseries.html

So, either they were able to extract price increases at the Paramount Parks (increasing Per Caps for the subset), and if so, then that means that they haven't been able to increase Per Caps at the legacy FUN parks AT ALL, OR they haven't been able to extract meaningful Per Cap increases over the WHOLE CHAIN in five years. Either, way it's a sad story, and one that Dick would prefer you not ponder too closely.

Over $50 Million in impairment charges had to be recorded this year (and weren't mentioned in any press release before now). I believe that is just the start of the impairment issues to be dealt with. Impairment issues are Accounting Speak for you've got assets on your books (Paramount Parks) that aren't worth what you paid for them (with borrowed money that you haven't repaid yet). That's the piece of this equation that I am frankly more concerned with.

Last edited by CreditWh0re, Thursday, February 12, 2009 9:35 PM
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Thursday, February 12, 2009 10:17 PM

Jesus, man, let it go. You make it out like I have my life savings wrapped up in FUN units. That's not the case.

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Thursday, February 12, 2009 10:22 PM

"Much of our success this year can be directly attributed to the strong performance of Canada's Wonderland."

Dick Kinzel on the Conference Call.

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Thursday, February 12, 2009 11:27 PM

Jeff said:
You can't look at it that one-dimensionally. If parking went up around 10% across the chain, and even that didn't prop up per cap, there's a pretty serious problem.

Seems to me parking is a very small portion of that per cap number. Just the fact that it's divided by multiple guests and passholders aren't paying it. What percentage of visitors are passholders? How many people visit per car? If the numbers are what I suspect they are, that $10 parking fee gets broken down pretty small, pretty quick.

According to the 2007 numbers, 'Accommodations and Other' amount to 7.6% of the revenue. I'm assuming this includes parking...as just a bit...of this already small percentage.

Parking isn't that big a chunk of the big picture. They could probably raise it 100% to modest effect on the bottom line.

CreditWh0re said:
Parking price increases alone should have amounted to more than that (obviously parking is not paid by each turnstile click, as people arrive at the park by typically more than one per vehicle). Either way, Parking has increased dramatically over the last 5 years, and should have added substantially to the Per Cap spending increase. (I'm assuming that Parking is included in Per Caps, I've never known it to be otherwise).

Well, if you consider $2 dramatic, then sure. And yes, you can be scary and call it a 25% increase, but the fact remains that it's just $2 extra per car paying it. Seriously, we're talking 30, 40, maaayyybe 50 cents per guest. And I'm being generous.

That 25% parking increase translates to a 1 to 1.5 % increase in per cap over the 2003 number.

They missed "staying even" by +/-5PP. (now this is not an exact calc, but should point out that they've done miserable at increasing Per Caps relative to the rise in costs).

Great, but that has nothing to do with our little back and forth - we want to know why per caps suffer...not that they do or don't. We all know they went down this year and now you've given us a nice look at how far off the mark they are.

Now tell us why. :)

So, either they were able to extract price increases at the Paramount Parks (increasing Per Caps for the subset), and if so, then that means that they haven't been able to increase Per Caps at the legacy FUN parks AT ALL, OR they haven't been able to extract meaningful Per Cap increases over the WHOLE CHAIN in five years. Either, way it's a sad story, and one that Dick would prefer you not ponder too closely.


Interesting. But it's still not the 'why' that we're talking about. And combined with the previous quoted bit, I can tell you exactly where they're leaving money on the table...

...the gate.

Admission is woefully underpriced at the CF parks and they've tried to make it up everywhere else. It's not going to happen.

In-park pricing is about as high as it can go. I'm of the mindset that attendance can't grow much more. Parking is alongside the top tier of industry pricing. There only one place to make and real continuous revenue growth - get the gate price up where it should have been all along. That's been the missing ingredient.

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Thursday, February 12, 2009 11:32 PM

You're getting too stuck on parking. Like I said, at the very least, per cap has to keep pace with inflation or it's essentially down. It's like not getting a raise from year to year, because the value of everything else goes up, and your pay stays the same.

Although did we finally have a negative number for January, or do we not know? I remember that December was almost completely negligible.

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Thursday, February 12, 2009 11:37 PM

I get that and you're right.

I just don't think the in-park pricing is the issue. Just like I was saying in the previous post, I don't think we disgree that it doesn't look good, but we disagree on what's making it be not good.

By the way, did you get a walk down on Superman that one time, Jeff?

Last edited by Lord Gonchar, Thursday, February 12, 2009 11:39 PM
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Friday, February 13, 2009 12:13 AM

Cash Flow (EBITDA) is up. No one in the financial community is overly concerned if that is due to percap or to attendance. $$$ is $$$.

BTW, CF said they would have cash flow in 2008 in excess of $340m. They easily hit that mark ($355.9m)--despite many people claiming the fact they had a paper loss in 07 spelled gloom and doom.

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Friday, February 13, 2009 12:55 AM

Captain Hawkeye said:
No one in the financial community is overly concerned if that is due to percap or to attendance. $$$ is $$$.

Luckily, as one who doesn't hold stock in the company or care how high or low their stock goes, I'm not concerned as one of the financial community.

I'm concerned as an enthusiast with an interest in the business side of the industry and a slant towards consumer trends and tolerances - more park GM than financial analyst.

In other words, I don't give a crap about EBITDA. However, I find the question of whether the average park guest will pay $5 for fries or $15 to park their car to be very interesting. :)

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