Q Funding wants two new board members for Cedar Fair

Posted Thursday, April 29, 2010 12:51 PM | Contributed by Jeff

Q Funding has filed a letter with the SEC, sent to the Cedar Fair board of directors, announcing its intent to nominate two new board members prior to the June meeting.

Read the filing as posted to the Securities and Exchange Commission Web site.

Sunday, May 2, 2010 11:38 AM

Jeff said:
...I happen to think that throwing roller coasters at every park is not a sure thing anymore. I mean, look at Dorney...

...And look what happened to Geauga Lake.

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Sunday, May 2, 2010 1:49 PM

If you;re going to throw roller coasters at a park, there is a right way and a wrong way to do it. Six Flags threw a bunch of coasters into Geauga Lake, but failed to do anything else. I mean, there were places in that park where you had to walk halfway around the lake to get to the nearest toilet, for crying out loud...because Six Flags never improved the infrastructure.

Dorney Park is a bit overbuilt, but at least it is comprehensively overbuilt. When you go down that long path to Steel Force, there's not *nothing else* down there. And they have at least done a nice job with the landscaping. Although the last time I was there, the wood coaster desperately needed trackwork and a paint job.

--Dave Althoff, Jr.

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Sunday, May 2, 2010 1:52 PM

Jeff said:
First off, two board members aren't a majority, second, my point was that you're completely wrong about how cutting cap ex makes them more money. If attendance and spending slides because they don't spend any money on shiny stuff, how do you expect a build-and-flip? That doesn't make sense.

And yes, they measure ROI for everything. So what? I happen to think that throwing roller coasters at every park is not a sure thing anymore. I mean, look at Dorney... how over-built is that park?

I've never been to Dorney so I must defer to your specific knowledge. However, the last new coaster CF put in there was in 2005, prior to that 2001. If CF didn't already own Possessed from Geauga Lake, they never would have put it in. Certainly, they didn't spend much $$$ on it.

DP has 9 coasters in a park that draws about 1.4-1.6m people. Kings Dominion has 14 in a park that draws 2-2.2m people. Even taking out a coaster that you say KD needed and one that CF relocated that leaves 12--about the same ratio as at DP. And Paramount set that ratio, not Kinzel.

Most investment trusts don't care if attendance slides--they will be out of the investment long before. If Q cut the 2011 capex budget that gives them $80m. Assuming percap of $40 attendance would have to decrease by 2m IN 2011 to make that not pay off. (Actually, even more, because Q would save operating costs as well.) In reality, the drop would not come until 2012--and it is quite possible Q has the stock price up to $16 and sells out in Fall 2011. The new owner deals with declining attendance because of the capex cut.

Last edited by Captain Hawkeye, Sunday, May 2, 2010 1:54 PM
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Sunday, May 2, 2010 2:14 PM

Captain Hawkeye said:

Most investment trusts don't care if attendance slides--they will be out of the investment long before. If Q cut the 2011 capex budget that gives them $80m. Assuming percap of $40 attendance would have to decrease by 2m IN 2011 to make that not pay off. (Actually, even more, because Q would save operating costs as well.) In reality, the drop would not come until 2012--and it is quite possible Q has the stock price up to $16 and sells out in Fall 2011. The new owner deals with declining attendance because of the capex cut.

I think your forgetting that their are quarterly reports that come out as well. People will see the cut back in capital exp. they will see the decrease in attendance that you say will happen so the stock would not go up. Not to mention they would have a minority on the board, no one in actual management to carry out these cuts, and I believe that these big expenditures are planned 3 years in advance and possibly money put down when they sign the contract so I doubt they would get in and get out in 2 years time.

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Sunday, May 2, 2010 4:02 PM

Cedar Fair attendance has been declining for a few years now, and look what that did to the value of the company. Things got so bad that the Board tried to cash out for $3/share less than what the company is worth right now!

Q bought into Cedar Fair because it was undervalued and has tremendous upside potential. But when you're buying at the bottom, you have to do those things that will *build* the value of the company. You can't bleed it and dump it. In the amusement industry, anybody who has been watching for even a short time knows that this is a very capital intensive, weather dependent, and service driven business. The value of the company is not measured by its assets, but by its ability to generate income from those assets. That means improving attendance, improving per-caps, and in general making money the traditional way the amusement industry has always done it. Q, not being stupid, understands this. I don't think they're in it for a quick flip, but I think they understand what needs to happen to make their money back.

--Dave Althoff, Jr.

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Sunday, May 2, 2010 4:30 PM

^ No one knows if Q is in it for the quick flip or not--which was my original point.

When Q makes it clear they are in it for anything other than the short term THEN the rejoicing can begin. Until then, wait and see is the most realistic approach

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Sunday, May 2, 2010 7:46 PM

It doesn't matter if they are in it for a quick turn around, because a) they don't own anywhere near a majority of units and b) as others have said, not spending money isn't going to build the value of the company.

Captain Hawkeye said:
I've never been to Dorney so I must defer to your specific knowledge. However, the last new coaster CF put in there was in 2005, prior to that 2001. If CF didn't already own Possessed from Geauga Lake, they never would have put it in. Certainly, they didn't spend much $$$ on it.

If you believe what Dick says, and I figure we should since he says it in analyst conference calls, a relocated ride costs about half of what it would new (or something like that. A $12 million coaster still ain't cheap. Regardless, your stats about attendance don't matter to the extent that all that shiny goes unused significant portions of the day as the crowds flock to the water park. I can't think of any park with that many coasters that are walk-ons in the middle of summer.

Most investment trusts don't care if attendance slides--they will be out of the investment long before.

Not only is that a completely unqualified statement, but it assumes some kind of time warp. Unless they're planning to sell before the next quarterly earnings statement, there's no time to react. That, and if they could have any dominant influence (which they can't with only two board members), they're in no position to cut cap ex that's two or three years out.

Again, outside of selling at $15 when they bought in at $13, there is no quick flipping to be had, and they don't own enough to have dominant influence.

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Sunday, May 2, 2010 8:51 PM

^
Now I'm confused. Is it "And there was cheering throughout the land" or " they don't own enough to have dominant influence?" Either they can effect change or they can't.

And I was very careful to qualify my statement: Most investment trusts don't care if attendance slides--they will be out of the investment long before.

None of us knows what direction Q wants to take CF in--or, as you point out, if they can change the direction at all.

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Sunday, May 2, 2010 9:50 PM

How many amusement/theme parks have been owned, operated or managed by investment companies before? Is there a precedent to how long the firm holds the business before selling it? And by the way, Q's various holdings only amount to 18 or so percent, and CF is still a publicly held company. Quite different than being privately held by an investment company.

Eventually an investment company wants to increase the value of the company to the point it can make a public offering once again, that's where it makes its money. Who would want shares in a company where nothing was reinvested for several years? I don't care if you're talking theme parks or snuggies. If the company remains stagnant and doesn't improve or keep up, it's not going to be an attractive investment to others. Like others have pointed out, they want to show prospective shareholders that money can be made on the company by the way it operates, not by never spending another dime in expenses again.

Another thing to remember, the nominees have to be voted in by the unitholders. They are not being appointed by Q or anybody else. I don't recall ever actually seeing a choice on a BOD ballot before, it's always been the number of nominees equaled the number of openings on any I've gotten. I'm assuming there would be 5 names listed (the 2 current directors being targeted), Kinzel, who holds the other position whose term is expiring, and the 2 nominees vetted by Stuart. The unitholders would be instructed to select no more than three. It's possible that none, one or both of the new nominees would be elected.

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Sunday, May 2, 2010 10:19 PM

I agree that new blood on the board might not be a reason for rejoicing. In with the new and out with the old could mean speakers and flame throwers on all of the major coasters.

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Sunday, May 2, 2010 10:24 PM

I'm not sure the Carowinds ride was necessary either.

I won't say that it was 'necessary' in the sense of Carowinds needed it to maintain attendance, however, that doesn't mean it wasn't a good investment. Charlotte is the center of NASCAR, and I can tell you from experience, the park is already more packed this early in the season than I've seen it in years, and lots of that is due to Intimidator. Even if something isn't necessary doesn't mean it isn't going to bring in more guests.

Last nite was the first time this early in the season that I've seen the park literally packed until closing in a long time.

I too was surprised that they added this so soon after adding Cobra, but last year, other than SCarowinds, the park seemed to do it's normal attendance. I would almost guarantee that this year they'll see a decent increase with Intimidator, who's namesake was just from around 20 minutes away from Charlotte. And if they market it anywhere near the new NASCAR Hall of Fame opening next week, I can see even more attendance.

And yes, I know attendance isn't everything, but the gift shop has been packed on both of my visits. I work 2 hours from the park, and even there, everyone has been talking about the new NASCAR ride (and without me even brining it up, I haven't let my knew fellow employees know I'm a coaster geek yet ;) ).

As for Dorney, they have a great collection of coasters...and all you need is 2 hours to ride them all. If there were any park that needed less coasters and more water park attractions, its Dorney (thats not the enthusiast speaking in me, BTW, obviously).

Last edited by Tekwardo, Sunday, May 2, 2010 10:25 PM
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Monday, May 3, 2010 12:37 AM

Captain Hawkeye said:
Now I'm confused. Is it "And there was cheering throughout the land" or " they don't own enough to have dominant influence?" Either they can effect change or they can't.

That's not what you were suggesting. You suggested they could stop all cap ex spending, which they can't. They can certainly shake up the culture of "yes sir, as you wish," and demonstrate the ineptitude of the rest of the board or executives.

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Tuesday, May 4, 2010 12:00 PM

Not being an expert, I suspect that the following might hold true:

#1 Less expenditures on big cap items (i.e. coasters) and more emphasis on less expensive items. This may involve more investment in water parks (or at least a more balanced approach) that CF has done in the past.

#2 Possibly a more family based approach. As an example, I've got a 30 month old. She had a ball at Disney, riding all of the coasters she could ride and everything else. Right now, we haven't thought of a CF trip until she is at least 48" tall. Why? Too many things she can't ride (aka most of the rollercoasters). This may be liability or otherwise, but versus smaller parks, there just is no comparison as to what she can do. I recently looked at Waldameer. I think there were 4 - 5 rides she can not go on (Ravine Flyer III, Steel Dragon, etc.) Beyond that, just about everything else she can ride. Couple that with a reduced gate, and I'll probably go there before Cedar Point. Some of these rides also may be cheaper than the big coasters of CF.

#3 Less emphasis on new ride technology and more on proven ride technology. How many rides have been big and had serious downtime issues?

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Tuesday, May 4, 2010 12:46 PM

Waldameer does not have a gate. Parents can take their kids and never pay a dime if they chose not to ride with the kids. It's a great park for families young and old.

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Tuesday, May 4, 2010 2:26 PM

Aha...another parent comes around to my thinking. For as many things my entire family can do TOGETHER at Disney there are as many (or more) things the family cannot do together at Cedar Point. And, I really do love Cedar Point. I just think the reliance on the thrill ride has left a lot of families...families that can spend some $$$...on the outside.

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Tuesday, May 4, 2010 2:50 PM

Maybe, but what about all the families that can do thrill rides?

Seems to me they would be 'older' families with tweens/teens - and I would guess that those families are more likely to be more established and able to spend.

Just playing devil's advocate, really. I totally see your point. Seems like there's a middle ground they're potentially missing. They have multiple kiddie areas. They have the big bad rides. They just don't seem to have a huge selection of stuff inbetween.

With that said my family is totally looking forward to visiting this year as the kids are finally old enough/big enough that we can all do pretty much everything together.

The trade off is that it makes it harder to carry the camera(s) around when no one is left behind to "watch the stuff." :)

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Tuesday, May 4, 2010 3:18 PM

I've been going to CP since my youngest was not quite two. He's nine now---and still won't ride most of the taller coasters, despite being well over 54". We've never had a problem finding ways to keep occupied, and we generally don't split up for more than one or two things that my more-daring daughter *really* wants to do.

Edited: As for in-between stuff: many of the flats fit this for me (e.g. Troika, Monster, etc.). There are a couple of 46" coasters.

Last edited by Brian Noble, Tuesday, May 4, 2010 3:20 PM
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Tuesday, May 4, 2010 5:30 PM

There's stuff to do, and stuff everyone can do together. That's where I see Cedar Point lacking. Plenty that you can watch your kid do, but not as much that you can do together (relative to other parks, anyway).

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Tuesday, May 4, 2010 9:32 PM

A new dark ride or two might help a bit. :)

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Tuesday, May 4, 2010 9:35 PM

I asked this question in another thread months ago and other than "a Dark Ride" never really got a satisfactory answer.

What kind of ride can satisfy a 5 year old, her 10 year old sister, their 13 year old brother, and their 35 year old parents? (I leave out 60 year old grandpa & grandma)

Yeah a few coasters and water rides, but, really, what else? The reason CP doesn't have them is that unless you spend Disney $$$ on theming, they really don't exist much.

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