Cedar Fair reduces annual distribution to $1.00, wants to sell Valleyfair and Worlds of Fun

Posted Monday, March 9, 2009 9:30 AM | Contributed by Jeff

Cedar Fair Entertainment Company, a leader in regional amusement resorts, water parks and active entertainment, today announced it will decrease its annual distribution rate to $1.00 per limited partner unit. On a quarterly basis, the Company’s distribution rate will be $0.25 per unit and will begin with the distribution that is expected to be declared in the second quarter of 2009.

“Although Cedar Fair has continued to report solid earnings and cash flows with some of the best operating margins among regional amusement parks, the Board of Directors is taking this action in order to retain additional cash flow to delever the Company over the next several years,” said Dick Kinzel, Cedar Fair’s chairman, president and chief executive officer. “The current macro environment requires us to balance the distribution of excess cash flow to our unitholders with the Company’s strategic objective of strengthening our balance sheet.”

The Company currently pays approximately $105 million in distributions to its investors on an annual basis. A $0.92 reduction in the per-unit rate, along with scheduled debt repayments and interest savings on the lower debt balance, will allow the Company to reduce its debt by approximately $200 million over the next three fiscal years. This distribution reduction is a first step in Cedar Fair’s strategy to reduce debt and strengthen its balance sheet.

In addition, the Company continues to pursue the sale of excess land in the Toronto and Cleveland markets and continues to discuss the potential sale of California’s Great America, in Santa Clara, California, with the San Francisco 49ers. It has also completed a strategic review of its assets and has decided to explore the potential sale of Worlds of Fun, in Kansas City, Missouri and Valleyfair, in Shakopee, Minnesota. The Company said it would be premature to speculate on either the price or timing of any potential transaction.

“In light of current economic and market conditions, reducing our debt and strengthening our balance sheet must continue to be a priority,” added Kinzel. “These actions are designed to reiterate our commitment to create long-term value for our unitholders. We feel confident that we are proactively taking steps to reduce our leverage and strengthen our financial position over the long term.”

Read the entire press release from Cedar Fair.

Wednesday, March 11, 2009 3:07 AM

The idea of selling off VF and WOF was good for business clearly. And it would help them with their current goal if they in fact did sell. But they've recently made significant and solid investments into these parks so allowing these investments to pay off is what I think would be the smartest overall for both CedarFair and guests. CF does a good job with these properties and I'd hate to see them in less capable hands.

Last edited by aerodynamic, Wednesday, March 11, 2009 3:08 AM
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Wednesday, March 11, 2009 9:55 AM

sws: I think you've sussed it. Clearly, Cedar Fair is playing a very careful game with the announcements...what they say, and when they say it. Go back and look at the discussion from when they announced that they were going to reexamine their dividend. All of the discussion seemed to imply that changes to the dividend would be all or nothing. And yet they never said that they would eliminate the annual distribution; in fact, I don't think they ever even raised that as a possibility. It got a lot of chatter, and their unit price took a beating (it must really **** to be Mr. Kinzel right now; he apparently sold a bunch of his units a week ago to raise cash and I'll bet he'd be happier if he'd been able to wait until today...) but nobody ever talked about them simply cutting the distribution by a little less than half. And yet that's exactly what they did.

I think the announcement about WoF and VF! is just a way of reminding the shareholders, "We have more than one way to achieve our financial goals." For some reason, the market looks very kindly on companies that are willing to sacrifice large pieces of themselves to raise short-term cash. Cedar Fair has said that if it becomes necessary and if the right offer comes along, they're willing to do that. It's language the markets like to hear.

--Dave Althoff, Jr.

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Wednesday, March 11, 2009 10:15 AM

Make no mistake... they don't want Great America. Viacom then CBS didn't want Great America, but they wouldn't sell the chain without it.

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Wednesday, March 11, 2009 11:03 AM

^That place COULD have been a good property - but when you're fourth-best in your market (behind SCBB, SFDK, and Bonfante in no particular order)...then you've got serious problems. You could be fourth in Orlando and still do well, but not in NorCal. CF got some great properties in the Paramounts, but when PP insiders openly recognize that PGA is "far and away our weakest park", then you know the place is an albatross...

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Thursday, March 12, 2009 1:46 PM

Sorry I missed the memo guys.

My two cents, I also found the wording awfully "convenient". I think it was a plan to try to reassure the shareholders.

I do find the comments about the long-term stability interesting though.

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