Cedar Fair flirts with $1 billion in revenue for 2008

Posted | 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.

In the last 2 years food prices at KBF have increased dramatically, which caused me to start leaving the park to eat. I also have a season pass which includes parking. The only time I spend money inside the park is for maybe one soda per visit or on the very rare occasion that I buy a t-shirt to replace a shirt which has worn out. The bottom line is they aren't making much money off of me. If they cut food prices back to 2005 levels, which were still high, but not unbearably high, I would probably start eating there again for convenience. The way it is now, I can walk 2-3 blocks and get fast food for 1/4 to 1/3 of what I would pay at the park. Currently having me as a customer is not helping their per cap spending.

My mother (1946-2009) once asked me why I go to Magic Mountain so much. I said I feel the most alive when I'm on a roller coaster.
2010 total visits: SFMM-9, KBF-2
2010 total ride laps: 437

While you can't ignore all of the financial issues I look at this information more as a barometer of the effectiveness of the current leadership. This information continues to reinforce my belief that the current leadership either isn't up to the task of leading what is, essentially, a new company in unchartered economic times.

Or, at the very least, the current leader is not empowering his leadership team to look for new ways to operate.

I think its fair to say that you came to that conclusion long ago. Not that I disagree with you, but still.

The real question, for me, is how is CF doing compared to similar businesses in the current economic climate. I don't know the answer to that offhand, but it would be interesting to compare FUN's admissions and guest-spending trends to SIX and TWDC.

rollergator's avatar

^I think the more fair comparisons (as opposed to TWDC) would be to HFEC, A-B, and even "looking backward" at the old PP data. I think you'd find that the three I mentioned all did, or are doing, better than CF/SF. And to me at least, the difference is contained in that old argument about "hospitality"...

You still have Zoidberg.... You ALL have Zoidberg! (V) (;,,;) (V)

I don't think you can compare "did" to "doing", so the Paramount comparison is out. The landscape today is radically different from three years ago.

A-B, to the best of my knowledge, never reported parks' performance separately, because it was such a small fraction of their business. I could be wrong about that. But, if they did report per-capita park spending, it would be interesting to compare.

HFEC is private and doesn't report these numbers at all, so unless you know someone on the "inside" we're not going to get the numbers for comparison.

The reason I want to compare those three is that I know they publish per-capita spending numbers. Even Disney is tough, because they report a single number world-wide, and I really want to know what their domestic parks did.

Last edited by Brian Noble,
rollergator's avatar

^Fair enough on all counts, but I'm just thinking that Disney's in-park spending isn't in the same reality as that of "regional themers". And while today isn't the same as yesterday, we COULD theoretically compare everyone in the same time-frame...*assuming* we could even acquire that data (which we know we can't). My theory goes that the better "face" you show your customers, the higher in-park spending you get. Oh, wait, maybe I did just bring Disney back into the discussion...LOL! ;)

Lord Gonchar's avatar

rollergator said:
My theory goes that the better "face" you show your customers, the higher in-park spending you get. Oh, wait, maybe I did just bring Disney back into the discussion...LOL! ;)

While I felt that Disney was better than the rest, there were plenty of 'yikes' moments on our visit last week.

The reason I hesitate to include Disney is that the operation they run is barely comparable to anything outside of Orlando - sure they have theme parks there, but that's where the similarities end. They're so much more and even the experience in the parks is different from the regional or local theme parks and amusement parks.

Unless you're a local, what you do in Orlando is probably vastly different from what you do at more traditional theme parks.

Last edited by Lord Gonchar,

The Canadian Dollar hit parity with the U.S. Dollar last summer. Now it's back to about 80 cents U.S., about where it's been several years. CW isn't likely to be the cash cow in 2009 it was in 2008.

Unless you're a local, what you do in Orlando is probably vastly different from what you do at more traditional theme parks.

This is an interesting question. I wonder what the real average length-of-stay/visits-per-guest is for WDW. Most of the people I "know" who go are rabid theme/amusement park fans, and consider one week sort of the minimum acceptable trip. I wonder if that's typical or not.

Based on the ticket pricing structure, I'm guessing it might not be. The payback on longer tickets happens as soon as day four. That tells me that Disney is looking at three-day visitors and trying to convert them to longer stays, because that's where they start discounting for real.

Same thing for the various dining plans. I suspect that, for the "average" guest, the "regular" plan is an upsell in disguise as a discount.

Lord Gonchar's avatar

Brian Noble said:
Same thing for the various dining plans. I suspect that, for the "average" guest, the "regular" plan is an upsell in disguise as a discount.

I think that's the kind of thing Disney does best - convincing you you're getting a deal and getting you to spend more in the process.

I even think the ticket prices are an example of that - I don't think the prices become discounted at day 4, I think they're penalized up through day 3. Staying longer convinces you that it's a much better value (it is, but you're just paying the 'real' price, not the penalized price) and in turn the longer stay mangifies all your costs (food, lodging, etc.)

Heck the current "Buy 4, Get 3" promotion proves that Disney knows they make it up once you're there. I think that promotion gives a lot of insight into how they work.

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