Cedar Fair posts small net loss for 2007, largely attributed to Geauga Lake

Posted Thursday, February 7, 2008 10:12 AM | Contributed by Jeff

Cedar Fair today announced results for its fourth quarter and year ended December 31, 2007. The 2006 comparable figures include the results of the Paramount Parks since their acquisition from CBS Corporation on June 30, 2006.

Cedar Fair’s combined operations generated full-year revenues of $987.0 million, with income before taxes of $9.7 million and a net loss of $4.5 million, or $0.08 per diluted limited-partner (LP) unit. In 2006, combined revenues for the company were $831.4 million, with income before taxes of $126.6 million and net income of $87.5 million, or $1.59 per diluted LP unit. Included in the 2007 results is a non-cash impairment charge of $54.9 million, or $1.00 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 9.8% to $340.7 million from $310.3 million a year ago. See the attached table for a reconciliation of adjusted EBITDA to net income.

For comparison, excluding the effects of the acquisition and corporate costs, Cedar Fair’s 2007 full-year results generated adjusted EBITDA of $224.1 million compared to $203.6 million in 2006, on a same-park basis. The increase in adjusted EBITDA is the result of a $19.1 million, or 3%, increase in revenues to $584.2 million, and a $1.5 million decrease in cash operating costs to $360.1 million.

The increase in revenues is the result of a 5% increase in average in-park guest per capita spending and a 1%, or $1.3 million, increase in out-of-park revenues. These gains were offset slightly by a 2% decrease in combined, same-park attendance. “Our Northern Region produced solid increases in guest per capita spending and out-of-park revenues, largely due to the successful introduction of world-class roller coasters at both Cedar Point and Valleyfair,” said Kinzel. “Attendance at these two parks, as well as Dorney Park, was also up between years, which more than offset attendance shortfalls at our other parks in the region. Revenues on a same-park basis in our Western Region were also up from a year ago, the result of solid increases in guest per capita spending levels at those parks.”

The decrease in cash operating costs between years was primarily attributable to reduced cash operating costs at Geauga Lake in 2007, offset somewhat by higher cash operating costs at Knott’s Berry Farm.

Read the press release from Cedar Fair.

Thursday, February 7, 2008 10:15 AM
You don't have to read into it much to see that Geauga Lake was a pretty serious drain on the company. I am curious about what the "non-cash impairment charge of $54.9 million" includes. If it includes things like relocating rides, that's interesting accounting, even if it does indicate a cost they will not incur next year.
+0
Thursday, February 7, 2008 10:19 AM
They don't seem to be as bad as shape that some make them out to be.

I'm willing to wait a couple more years to see how the new properties turn out.

+0
Thursday, February 7, 2008 10:53 AM
But what is the so-called "Geauga Lake restructuring"? Is that the cost of building a new waterpark? Or as Jeff said, relocating rides to other parks like Steel Venom, X-Flight and Thunderhawk? If so, I find it hard to believe how that means the park itself was a drain on the company since it wouldn't have anything to do with actual operating costs.

I'm not spinning a conspiracy theory, I'm just well aware of how numbers can be manipulated to show pretty much anything you want them to show.

*** This post was edited by Rob Ascough 2/7/2008 10:59:17 AM ***

+0
Thursday, February 7, 2008 10:58 AM
There is nothing in that press release that indicates Geauga Lake was losing money. I think its pretty clear that the closing of Geauga Lake was the result of a change of strategy after they realized they could make more money selling portions of the property and relocating assets than they could operating the property as a combined amusement and water park. There is no doubt the park wasn't making very much money but I have heard from pretty reliable sources that the park was not losing money.
+0
Thursday, February 7, 2008 10:59 AM
"Restructuring" means "divesting and relocating assets." Those buildings aren't going to come down on their own.
+0
Thursday, February 7, 2008 11:01 AM
So that means the costs associated with the relocation of Geauga Lake's rides is the reason why the park didn't post a profit. That's pretty slick. Maybe I should buy a whole bunch of stuff and then show a loss on my income taxes for 2007.
+0
Thursday, February 7, 2008 11:05 AM
No, it doesn't mean that it all. They haven't said if the park posted a profit or not. They're just giving the line item of a one time charge to costs related to changing it.

Why is it so difficult to believe the park wasn't making money?

+0
Thursday, February 7, 2008 11:07 AM
Geauga Lake is clearly mentioned for a reason. Let's see what gets blamed next year when there's another small net loss.
+0
Thursday, February 7, 2008 11:12 AM
I'm all for being skeptical, but your skepticism is baseless, and I suspect based in your distaste for GL closing.

If you take out that charge, you're looking at a $50 million profit instead of a loss. Are you suggesting they're going to tank the business by $50 million next year?

+0
Thursday, February 7, 2008 11:28 AM
To me the most interesting number was EBITDA of $340.7m. Their estimate had been $325-335m, so they blew past it.

"'Restructuring' means 'divesting and relocating assets.'"

It also includes the hit for unemployment payouts, any penalties for early termination of contracts, and--big time--probably a huge write down for "asset impairment" i.e. they have to admit that GL was not worth what they paid for it. My guess is that is the overwhelming % of the restructuring charge.

The numbers say nothing about whether GL was making or losing money

+0
Thursday, February 7, 2008 11:34 AM
So take away the Geauga write off and you get 2007 net revs of $50.4 million. 2006 net revs were $87.5 million.

Where did that other loss of $37.10 million at the bottom line come from?

If revs were up 19%, how come costs were up 24% - making ebitda up only 10%.

To me, anyway, it seems as though the Paramount Parks are still not making any money for Cedar Fair. Then take into the account the 65% raise in interest expense from that same acquisition and things seem worse.

Sorry to be all doomandgloom but these numbers make me feel iffy.

Mike

+0
Thursday, February 7, 2008 11:40 AM

For the year, interest expense increased $57.3 million to $145.6 million due to a full year of interest on the acquisition financing compared to only six months in 2006.

Well, that explains some of it. But only some.

The real question they aren't answering...what were the attendance numbers per park? Where did the 'what's good for Cedar Point is good for the Paramount chain' approach hit a brick wall? That's what I'd like to know.

-CO

+0
Thursday, February 7, 2008 11:56 AM
I too wouldn't mind seeing a breakdown for that "non-cash impairment charge". It says nothing about what GL's operating profit/loss for 2007 was.
+0
Thursday, February 7, 2008 2:25 PM
I got in on the conference call late, but is another public offering on the way?

UPDATE: When asked directly, they DID say GL lost money.

-'Playa

*** This post was edited by CoastaPlaya 2/7/2008 2:27:40 PM ***

+0
Thursday, February 7, 2008 2:34 PM
Just listened to the call. Very short call - hardly any questions.

A couple major points:

• 22.1 Million guests entertained last year.
• Softness in attendance at some parks – attributed to pricing adjustments.
• Cedar Point hit record revenues this year.
• Geauga Lake did lose money last year.
• Season pass sales are down so far, but revenue on those sales is up.

I was very surprised by the lack of questions. I was really hoping someone would ask them to break out attendance and revenue on a park-by-park basis.

I guess the big story is that Geauga Lake did lose money. From my visits to the park, I would have guessed that this was their turn-around year. I wonder how much of their Geauga Lake loss was attributed to taxes paid to the city of Aurora and the county/township.

+0
Thursday, February 7, 2008 2:49 PM
http://www.cedarfair.com/_upload/yearend-2007-earnings-table.pdf

Read the table. Do the math. At least for me, numbers make more sense in tabular form instead of reading paragraphs.

Interesting that it appears the "impairment charge" seems to have been spread out over the full year. (Only 15 of the 54 million is applied for the 4th quarter). Don't know if it means anything-- but then wouldn't that charge have showed up in previous quarterly reports? Or can they just apply it now and spread it over the full year, in effect revising the previous reports?

+0
Thursday, February 7, 2008 3:03 PM

So take away the Geauga write off and you get 2007 net revs of $50.4 million. 2006 net revs were $87.5 million.

Where did that other loss of $37.10 million at the bottom line come from?


You're not terming that right. It wasn't net revenue, it was net income, which is the money left after expenses. There isn't a loss if you take away the GL charge, there's just less profit. Why? If I had to guess it would be because they did not get the margins they wanted out of the Paramount Parks, due in part to their wholesale change in ticketing strategies.
+0
Thursday, February 7, 2008 3:23 PM
Which would be a compelling reason not to 'break out park figures individually' and let unitholders see that for themselves...
+0
Thursday, February 7, 2008 3:54 PM
I'm not sure the unitholders care about specific parks. Enthusiasts care about specific parks.

The unitholders probably do care about Paramount vs. "Cedar Fair Classic," though, because the story was bringing the fabled Cedar Fair discipline to those sloppy Paramount parks.

+0

You must be logged in to post

POP Forums - ©2018, POP World Media, LLC
Loading...