Has Fool's Munarriz lost it, re: Cedar Fair?

Monday, May 7, 2007 10:22 AM
The way I see it, FUN is a stable investment, and nothing more. It's not likely to disappear or get flushed down the toilet, but it's not going to grow a lot either. For people looking for something that isn't going to screw them in the end, FUN sounds just fine. I just continue to wonder what's going to happen in the future as the Paramount parks get rolled into the company.
Monday, May 7, 2007 1:11 PM
Jeff, I think you may be reading too much negativity into the article. Paramount is not being portrayed as a fixer upper. However, part of Kinzel's thesis in buying Paramount Parks was that Cedar Fair would help prop up operating margins at the acquired parks to Cedar Fair's standards.

That clearly didn't happen last year. Yes the deal didn't close until June (noted in the article) but the reason for the "rocky start" is that if you combine all of the Cedar Fair and Paramount Parks last year -- which Cedar Fair does (in the 10-K, as well as the fourth quarter of 2006 press release) -- you see that both revenues and EBITDA fell in 2006.

No, they didn't fall by much but the company never predicted a step back on those fronts in 2006 until the season was done. Whether it was Paramount Parks underperforming during the transitory year or the company losing focus on its original parks as it unhinged its jaws to swallow Paramount whole, whatever happened, added up to steps back on the top line and adjusted EBITDA front.

Still, the piece isn't intended to be negative, only suggesting that for ONCE in this sleepy yet steady market performer's life, there are lofty expectations in 2007.

Questions to ponder (for those who want to play along):

1. Would Cedar Fair's original properties have performed better in 2006 without the Paramount Parks distraction?

2. If your answer to the first question is somehting along the lines of "perhaps, but it's going to be a really sweet deal in the long-run, debt and all" wouldn't you be agreeing with the article's thesis?

3. Is the company stretching itself too thin with its distributions and annual payout hikes now that the I in EBITDA has skyrocketed?

The article essentially says that this may be the year that makes or breaks that annual dividend hike streak from going to 21 come early year.

Monday, May 7, 2007 1:30 PM
It is no surprise that the effects of Cedar Fair control of the Paramount parks wasn't realized last season. The WORST thing Cedar Fair could have done was go in and shake up those parks, laying off staff, changing policies, etc while they were bearing down on the height of the season.

Imagine the environment in those parks had they done that? It would have been pretty bad. They might have lost key people, it could have transferrred down to seasonal managers, etc.

To Paris' points:

1. I don't think Cedar Fair's original properties were affected at all by the Paramount Parks "distraction". The key people at the original parks weren't going to be bogged down in that. In fact, many of the full time managers didn't know about the purchase until almost the time we did.

2. Since my answer to first question was no...this question becomes moot.

3. Stretching itself too thin? I don't think so. The only way growth was going to happen was to buy or build new parks. They weren't going to build. When CBS let it be known they were going to sell, anyone who follows CFair had to know they were going to be a player. Will the distributions increase at a smaller rate? Probably. But, as an investor, I would expect them too.

I'm comfortable with where things are and, given CFair's track record I'm surprised by the Fool take on it. The only questioable decision by Kinzel et al has been Geauga Lake...and I'm not sure anyone could have predicted all of the variables that went into the less than stellar performance thus far.

Monday, May 7, 2007 4:02 PM
As far as investing goes, like Jeff, I invest in FUN and as well as SIX more because of an emotional attachment more than anything. They make up a very small portion of my overall portfolio, but they are stocks that I love to follow.

Several people have mentioned that you should not invest based on what you read on an enthusiast site, which if that is your sole source of information then I agree with that. But many an expert, including Warren Buffet, would advise that you should invest in things that you have a passion for, and therefore will probably have more insite on. If you follow the industry religiously, and you keep up with the trade publications and web sites like this, then you probably already know more then a good deal of the investors out there.

Put it this way, I am a lot more comfortable investing in a couple of amusement park/entertainment stocks than I am a bio-genetics company that I know zero about.

Tuesday, May 8, 2007 10:46 AM
Jeff's avatar The Paramount Parks were fat by Cedar Fair standards. Very fat. I'm not entirely sure I agree with the scope of the cuts they made in terms of full-time staff at the parks, but it was pretty extensive.

But as Wahoo said, it sure wasn't a good time to come in and start shaking things up. A lot of things looked similar on the surface, but the background was pretty chaotic. I get a different sense this year about things so far, but then again, it involves a lot of different people.

I still wouldn't characterize things as "rocky." More like, "expected."

Jeff - Editor - CoasterBuzz.com - My Blog - Silly Nonsense

Tuesday, May 8, 2007 11:19 AM
rollergator's avatar

Jeff said:Paramount Parks were not a fixer-upper.

Exactly. I wouldn't say that CF has been in any blind rush to "integrate" the Paramount Parks...almost the opposite. But Paramount has always been profitable and doing pretty well. GL might be described as a "rocky" situation, but CF, before and after the PP acquisition, has been solid....like a....rock? ;)

Tuesday, May 8, 2007 11:27 AM
That seems to be a common practice when one company takes over another one. There is perception and there is reality, and while things may not look "right" at first, it doesn't always make sense to move and and make decisions that seem obvious. It seems the most successful mergers are the ones where the company in control takes things slowly and analyzes everything before making drastic moves.
Tuesday, May 8, 2007 12:53 PM
Jeff's avatar The thing I never expected was that the "old" company actually adopted and integrated many of the IT systems of the Paramount Parks. I was shocked to see my CP pass scanned at KI and see my photo, which has lived in a computer at CP for five or six years, appear on the screen.

Jeff - Editor - CoasterBuzz.com - My Blog - Silly Nonsense

Tuesday, May 8, 2007 1:00 PM
Kinzel resisted computers/technology for YEARS. Maybe someone he respected finally got in his ear. The strange thing is that is fairly easy to show ROI on computers/software these days so why he resisted remains a mystery. Maybe he was never good with the kids' Atari.
Tuesday, May 8, 2007 2:01 PM
Is it possible that some aspects of the Paramount Parks were superior to those in place at the Cedar Fair parks? I remember when Gamestop (Software Etc., Funcoland, etc.) merged with EB Games a few years ago, the employees of one chain (forget which one) were surprised that the computer system of the smaller of the two companies (again, I forget which one) was being used. It came down to one system being superior to the other, even though that wasn't obvious at first.
Tuesday, May 8, 2007 2:28 PM
I think there is no doubt that some aspects of what Paramount Parks did was better than what Cedar Fair was doing. But, that doesn't explain the technology void at Cedar Fair. That can be attributed to Kinzel directly. Back in the 90's we were pusing for PCs and there was some time when only the folks in the Accommodations division had one (outside Planning & Zoning). And, the Accomodations VP at the time bought that one himself because Kinzel wouldn't budget it.

Sometimes I think 100 people could tell Dick the exact same thing but if he really admired the 101st guy who said it then change would happen...only to that guy's credit.

There were smart IT people working for Cedar Fair before Paramount came around. They were just ignored. *** Edited 5/8/2007 6:30:07 PM UTC by wahoo skipper***


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