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Leland Wykoff

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  1. Pricing model is difficult and a multifaceted puzzle. In seasonal operations prices are always higher as the revenue must cover the capital costs of the down time of the off season. Building, maintenance, and equipment costs continue year round. Revenues must cover those costs year round as well. That said, quality of the experience should be a fair value. Whilst on-park the dining experience is effected by the overall ambiance of the park, specific sub themed area, restaurant design and service style, and of course, cuisine offering. A variety of offerings enhance the overall experience. Having stand-out offerings go quite a way toward enlivening the park and the total guest experience. Examples abound. Who would think of going to Knott's Berry Farm and skipping the chicken? Or how Kennywood has elevated the lowly French Fry to a dish worthy of the cuisine label? Pinks at Cedar Point has done the same--making it not just another hot dog. The fresh baked cinnamon bread at the mill at Dollywood is worth the trip. Pricing is a sticky wicket. The price must be adequate to cover the added costs of seasonal operations. Captive audience pricing also commands a premium. To address Shark6495's question, the park would make more money selling the $12 dollar combo over doubling business with two $6 meals. The math makes it simple: two meals revenue $12 minus food cost for two meals would leave less revenue to cover all other costs--known as the "contribution margin"--than one twelve dollar meal minus the food cost of one meal. Thus the park would make more on the $12 meal. The real question becomes the caring capacity of the specific location and if that capacity is adequately being utilized. If utilization is sub par, due primarily to price, revenues and profit can be increased by adjusting price to generate additional sales. Simply lowering prices will not necessarily make more money. Increasing quality and the overall experience for the money is often the better tactic. That drops more dollars to the bottom line.
  2. Once again it appears Great Wolf has extended the deadline for change in control permission from debt holders. This process is sure going sluggish and may well sink the deal. The mortgage holders do not seem eager to give permission for the Apollo deal. One wonders if the debt is held by some of the same institutions holding large chunks of WOLF stock shares? See story here: http://finance.yahoo.com/news/great-wolf-resorts-inc-extends-123000453.html
  3. Matt Ouimet is the right hire at the right time. Once again his visionary leadership, which builds upon a solid foundation, respects tradition whilst at the same time looking forward to the future. The balancing of thrill and family friendly elements is brilliant. The new guest services, sales tracking, online web consolidation, and marketing focus and hires is superb. All will meet the twin requirements of significantly improving the guest experience as well as providing superior returns to Unitholders. Beginning the process of visualizing a relationship with the guest, rather than just as a customer, opens a two way street for dialogue and communication. This will strengthen the brand presence and guest response to our offerings. It is getting Cedar Fair on the road to knowing what it takes to create the "best of year experience" now guiding the mission. The improvements to the softer side of the parks will be noticed by guests immediately. Moving away from food to a more cuisine oriented offering will be well received. Making it desirable for guests to stay on-park longer with delectable cuisine will assist in boosting on-park revenues and guest perception of value and new evening entertainment such as Luminosity: Ignite the Nite. Addressing back-of-house issues such as antiquated cash management and turning to customer sales tracking is a must. The new promotion and web presence brings added revenues and additional benefits to guests. Developing phone apps and other services is most exciting. Guests will be thrilled with Cedar Fair's up to date technological hand-held improvements. Improving visual appeals and sight-lines within the parks will make for a more planned and themed ambiance. The addition of two additional Peanuts characters signal a more branded approach to the parks offerings. Great job CEO Ouimet. Hat tip to all those working so hard on the Cedar Fair team to make such a grand transition. Keep up the good vision and work!
  4. Wednesday WOLF closed up 2 cents at $5.66. This on a down day for the market. In addition to the cooperation of bond holders it appears 50% of shares must be tendered for the merger deal to close. They may be having a bit of trouble on this front as well--the trading price well above offer is the tell on that dynamic. Management must brace itself for an overhaul when this merger fails. Shareholders will be in no mood to coddle those who pushed this deal. It is clear fresh new talent must be brought to bear. Marketing talent to get more heads in beds, and CEO CFO talent to refinance/restructure debt. It seems current management were either not up to the tasks, or not capable of the tasks. Remember WOLF has [or had] large blocks of shares controlled by institutional shareholders. Some of those holders also prevailed in defeating the Cedar Fair deal. Such institutional holders often feel the real value in a distressed company is in unlocking revenue streams and plugging expense holes. They often feel little can be gained by selling out on the cheap to private equity as it robs shareholders of the upside potential [if any]. I concur with The Interpreter and believe this deal to be in trouble. The continued extensions of deadlines does not bode well. Developments should soon dictate the outcome.
  5. The news surrounding Great Wolf Lodges Apollo proposed merger just keeps getting worse. Bloomberg News is out with a story of just what putting WOLF into the Black would mean for shareholders. http://www.bloomberg.com/news/2012-03-23/leon-black-s-bid-gets-no-respect-as-great-wolf-surges-real-m-a.html As an example of the inadequacy of the Apollo offer Bloomberg offers up "The stock rose again today and is now 12 percent higher than the offer, more than any agreed- upon deal in the U.S., according to data compiled by Bloomberg." Mean while, back on the ranch, Great Wolf and CEO Kimberly Schaefer are strangely quiet. Ms. Schaefer has given new spin to being the "Undercover Boss." Schaefer continues to stand by her pronouncement, when the deal was first hatched, the $5.00 deal offered “compelling opportunity for shareholders.” Oddly enough, Schaefer may have hit the nail on the head with this statement, shareholders have been presented a "compelling opportunity" to refuse to tender shares and thus perhaps end this abusive merger offer. Like Cedar Fair the future of Great Wolf may best be left in the hands of the current shareholders. The potential to improve the company performance lies in getting more heads in beds and refinancing/restructuring debt. These are challenges an appropriate management team, possessing the right skill set, should be more than able to conquer. It is looking more and more like the real challenge at Great Wolf Lodges will be addressing the management deficiencies. After all, is that not the primary strategies Apollo would employ? Investors do not need Apollo to clean out the executive suite. Investors can achieve that task simply by holding its Directors feet to the fire. Goddess knows Cedar Fair experience has taught us all that lesson well.
  6. The New York Post is reporting a battle between Apollo Management and shareholders at Great Wolf Lodges: http://www.nypost.co...fsCtXyJVspFQLMK The opening paragraph of the NYPost story, in reference to the recent failed Apollo attempt to take Cedar Fair private, speaks volumes, "Leon Black’s Apollo Global Management must be hoping that history does not repeat itself." Why is Apollo once again at odds with shareholders? Shareholders may not wish to surrender the upside potential at Great Wolf just as the light at the end of the tunnel is coming into focus. The deal discounts any "tax loss credit" advantage--and thus many believe it to be significantly under priced. Many shareholders know the best returns are not necessarily to be found in selling out to private equity funds. Shareholders question sweet-heart deals made to retain and reward current management with bonuses when deals close. What challenges does Apollo face to consummate this deal? The deal calls for fifty percent of the shares to be tendered at the $5.00 offer price or the deal is off (as I understand the documents--keep in mind I am not a lawyer--never even played one on television). This is a high hurdle when approximately 50% of the share float was recently held by institutional investors and many of those institutions insist share have a today value in the $8 to $9 range. Great Wolf shares continue to briskly trade at prices well above the offered tender price--closing Thursday at $5.52 a share. About half of the share float has changed hands since the merger announcement. One must wonder, "who is buying all those shares, and why would they pay more than $5.00 each?" You can pretty well bet the answer is not, "So they can transfer them in a $5.00 tender taking and be rewarded with a fifty-plus cents loss per share." That works out to an annualized loss in the neighborhood of 260%. What if shares are being acquired by the institutions already holding shares? What if a significant number of retail investors decide not to tender shares? Doing the math it seems a strong possibility Apollo may not reach the threshold of 50% required to effect the merger. What does Great Wolf have to say? Bloomberg reports managements stated belief, "the sale would maximize shareholder value." What does Apollo have to say? The NY Post reports, "An Apollo spokesman declined comment." Ah, right. Sounds a lot like the proposed Cedar Fair Apollo marriage.
  7. Great Wolf Lodges seems to have stumbled into a briar patch. Tuesday WOLF shares closed at $5.46. Almost a 10% premium above the Apollo offer price. Approximately half the WOLF share float has traded above the offer price since the announcement of the proposed merger. PWK Partners, a significant WOLF shareholder, has announced "serious concerns" with the proposed acquisition and has sent the Board of Directors a sternly worded letter and asking for an immediate withdraw of the recommendation to merge with Apollo. Tellingly PWK also asks for the Poison Pill to be redeemed. Perhaps signaling an interest in acquiring a larger percentage of the company. The PWK letter outlines the financial rational for calling off the proposed merger and offers an insightful view of the likely future of WOLF. They laboriously review RevPAR positive trends, strength of the company through the Great Recession, prospective growth areas, significant cost savings-- refinancing of debt would shave off more than $13 million annually by 2015, all the while improving the balance sheet. Great Wolf Lodge management continues to bury its head in the sand like an ostrich and is failing to respond to shareholders with questions or concerns. This strategy is not wise. Most likely it will lead to a much more antagonistic and activist shareholder base. They could have at least learned that from the Cedar Fair Apollo debacle. A situation they must have plenty of knowledge about considering two of former Cedar Fair CEO Richard Kinzel's kids hold significant positions with Great Wolf. More law firms are circling, investigating, filing, and preparing to file additional actions. Investors are agitated. Institutional holders are beginning the siren call for board positions. Neuberger Berman Group LLC, the fifth largest WOLF shareholder, is reported to value Great Wolf at $8.00 to $9.00 per share. Cedar Fair investors will recall Neuberger Berman as a significant holder who agitated and voted against that Apollo merger. It appears NB is peeking its head out once more. Other observers see a hidden value in the losses which WOLF has incurred in the past. They suggest tax advantages of those losses may be quite significant but are not acknowledged in the pricing of the current Apollo offer. It is simply unclear what Apollo can bring to the table to improve the company that prudent management practices and initiatives could not also deliver to current shareholders. It appears Apollo wants WOLF, but shareholders do not want Apollo. Apollo is in search of a bargain. That alone should tip-off shareholders to the real value of the company. The payoff bargain for shareholders may be to retain the company and improve management. Given WOLF's performance in the recent tough economic times, and its ability to maintain occupancy and Average Daily Revenues per room, well, it seems not to be an opportune time to sell at a fire sale price. Apollo knows the numbers and sees the light of day. Shareholders may be well advised to think as smart as Apollo--and reject this offer.
  8. Interesting. Does this new technology offer any advantage by lowering costs? Cost of manufacture? Cost of design? Installation costs? Erection costs? What about short and long term maintenance costs? Any insights you can offer would be appreciated. Luff.
  9. Merlin Entertainment continues the push to expand into retail and localized amusement business with Legoland brand. They have now opened a new store in the upscale Atlanta mall Phipps Plaza. Story below gives many details: http://www.knoxnews.com/news/2012/mar/17/atlanta-pieces-together-legoland-in-buckhead/
  10. Great Wolf Lodge closed Thursday at $5.44, increasing the gulf between the market value and the Apollo take-private offer price. Great Wolf has begun sending out tender offers to some shareholders who hold the stock in street name. Management has been rather quiet and has offered little or no additional information concerning the low-ball Apollo offer. More law firms are entering the fray.
  11. Great Wolf Lodges, the largest owner and operator of in-door water park resorts, has recommended to shareholders the sale of the company to private equity firm Apollo Management at just $5.00 per share. WOLF closed at $5.32 per share Tuesday, the day of the announcement, or thirty-two cents above the offer price. Apollo Management attempted to take Cedar Fair (FUN) private approximately eighteen months ago in a deal priced at $11.50 per Unit. Unitholders fought that acquisition and prevailed in defeating the sale, about a year ago. Tuesday Cedar Fair units closed at $29.82 and enjoys a dividend yield of 5.5%. Unitholders succeeded in replacing the CEO, Board Chair, CFO, various VP's, board members, and forcing the refinancing of debt, the restoration of a dividend--which will substantially increase next year, holding two Special Called Unitholder Meetings, and seeing new management totally redirect promotion/advertising spending to better leverage those costs. Come what may of the proposed Apollo acquisition of Great Wolf Lodge, those in the Travel and Tourism industry should watch the transaction carefully. This deal may tip the hand and show the cards of the overall health or lack of health of large water park resort operators. Note the failure of WOLF to earn a profit--even on increased revenues and reduced expenses. And this from perhaps the most cost savvy and revenue aware operator in the business. True the past year has seen tremendous improvements. WOLF has reduced costs, shed under productive and upside down resorts, and increased revenues and occupancy. WOLF has operating partnerships/agreements with Ripley's Entertainment, controls valuable service/trade marks, and owns MagiQuest and Scoooops Kids Spa stand alone concepts/brands. Over capitalized projects, particularly those with high fixed cost ratios, remain a risk. It is the paradox of the "big box" wherein the business is very profitable at a high occupancy/utilization/revenue level but looses money hand-over-fist with small revenue/occupancy/utilization depletion. it is much the problem shared by airlines--a highly perishable product exhibiting both high fixed costs and low variable costs. Hotels suffer this same perish-ability of product and cost structure, as do amusement parks. Note, Apollo is acquiring and renovating hotels across the country. How will the proposed acquisition shake-out? Hard to say at this point. But I am evaluating my WOLF holdings. It could get FUN.
  12. Many Luminosity: Ignite the Night details emerge in this story at The Toledo Blade: http://www.toledoblade.com/business/2012/03/13/Details-come-to-light-on-new-park-attraction.html If the Cedar Point Luminosity introduction is successful, CF plans to roll out the experience to all its parks.
  13. Dollywood and Skyline Eco Adventures have settled a lawsuit in which Skyline alleged Dollywood breached the contract by allowing damage to ziplines. In the settlement Dollywood will acquire the interest of Skylines ziplines on park from the Hawaii operator. The zipline operations were reported to be interrupted last season when a tree fell onto and damaged one of the ziplines. That damage is believed to have been caused as a complication of the installation of the new coaster WildEagle. Few details of the dismissal with prejudice of the lawsuit have been released, other than to stipulate no blame was accepted by either party.
  14. SeaWorld has inaugurated a Free All-Day Dining option when purchasing a full price park admission. Some exclusions apply, such as, advanced three day purchase requirement, wrist band requirement, no sharing, meals available only in certain restaurants and park locations, not take-away food, alcohol beverages not included, among other restrictions. Meals are unlimited but must be consumed thirty minutes prior to park closing times. Offer is good thru August 31, 2012. For more details and promotional materials please see: http://seaworldparks.com/seaworld-orlando/pages/eat-free?utm_source=Accuen&utm_medium=Display&utm_term=SourceMarketDisplay&utm_campaign=SWF12DomesticSource
  15. Sandusky Register posts story concerning court ruling: http://www.sanduskyregister.com/sandusky/news/cedar-point-ex-exec-falfas-wont-get-job-back Interesting read.
  16. Jack Falfas has been awarded $2 million plus by court for removal from previous job at Cedar Fair. The new court order vacates the ruling of the arbitration panel which ordered Falfas returned to his job. The court cites case law which establishes job return orders are not allowed. Stacy Froley is quoted by the Sandusky Register in response to the breaking news. Froley would not comment as to the economic damage CF must ultimately pay Falfas. However, the court did order payment from the time of Falfas departure til the end of his contract term in November 2012. Falfas or CF can appeal the decision. While reported in the Sandusky Register the news has not, as yet, been posted to their website. However, I have called to verify the story with the Register, and requested they post this story. I had the pleasure of having the story read to me over the phone as a verification of the following report: http://geaugalaketoday.freepowerboards.com/viewtopic.php?f=8&t=2564 Hat tip, and congratulations to, CoasterDad at Geauga Lake Today for web breaking this story. Great catch! UPDATE: The SanduskyRegister.com site should have the full story posted no later than Sunday afternoon. Perhaps earlier.
  17. Great summation of this mornings call Intrepreter. The fact only two questions were offered speaks to the transparancy CEO Ouimet displayed at the recent New York invester conference. Simply put, new management layed out the business plan in concise, digestible, detailed bits of information that made sense. Analysts and investors did not find it necessary to ask lawyer-like questions to get to the heart of the issues. This is quite a radical departure from prior management handling of information and calls. Congratulations to the new team spirit and open acessable management at Cedar Fair. The new CEO has set the tone for leadership that rings crisply; we are a team working together towards common goals. Brand extention and park utilization will increase with more events, festivals, and hosting of special groups. Look for revenue opportunities and low-hanging fruit to be picked which was overlooked by prior management. Cuisine opportunities and additional revenues can be harvested by managing the neglected breakfast business at many CF Parks. Shoulder season(s) desirability will be enhanced, and demand created, via pricing, promotion, and special events. No longer will management allow guest park expenditures to linger or stay in the pocket. Ouimet will pry every penny loose. Removing people from queing releases them to spend more money on park during the now "free" time. FastLane thus has two pronged benefits. Other ride management programs will free additional guest time. It will be interesting to watch developments.
  18. Interpreter, Please! Sing us the sweet little song the bird sung to you!
  19. Today the Los Angeles Times reports Cedar Fair is planning to build the large wooden coaster which has been delayed on numerous occasions at Great America: http://www.latimes.com/travel/deals/themeparks/la-trb-californias-great-america-wooden-coaster-02201215,0,6148224.story
  20. Gems from today's Analyst presentation in New York: 2012 Distribution will be $1.60, payable in four equal quarterly installments. 2013 Distribution guidance is still somewhat up in the air, however, it is expected to increase. Loan covenants are no longer an issue as FUN has outgrown the covenants and are free to award distributions as they see fit. FUN's goal is to continue increasing distributions across time. Distribution increases will be a function of increasing earnings following the next couple of years spent restoring the distribution to historic levels. Great America Deal--Brian and general council worked to rationalize a 35 year lease extension featuring a generous cash payment to offset disruption costs. Only park located on leased land. Had a great year, but not quite a record year. Water park expansions are profitable and quick. Coaster costs are not, generally, as productive a capital investment. To protect the base coaster investments are often required. Growth projected at 4% based upon industry trends. Yield management borrowed from the hotel industry will assist in achieving the growth. Refreshment of resorts will be a priority in order to maintain and grow the family market that stay on park longer and spend more money. This is a significant departure from Kinzel management. Lights and Fireworks are the method to keep people on park after dark. This is the only method successful in the Theme Park industry to extend stays. Thus you keep the guests for Dinner and increase on park revenues. Price increases at parks are expected to be in the neighborhood of inflation this coming season. Growth will be achieved by increasing earnings from on park sales, cementing the season pass holder relationship, exploring a subscription based model of passes, pre-selling more on park activities in order to increase day of visit spending (such as pre-pay parking and meals), entering partnerships and/or sponsorships, reducing ticketing costs and leakage by eliminating or restricting third party ticketing sales, and growing attendance. Less reliance on revenue sharing will be a hallmark. Revenue enhancements such as FastPass programs will expand after having been tested last season. Yield increases are expected to drop significant sums to the bottom line. The presentation featured graphs identifying individual park revenues/profitability and thus has increased transparency to a great extent. New measurement and evaluation metrics will be imported from the broader hospitality industry including ADR and yield management practices. Best practices will be implemented from the cruise industry. Best practices will be shared across the system from the individual parks. Incremental tuck-in acquisition opportunities will continue to potentially play a role in growth. However, at this time no specific acquisitions are under active consideration. Mr. Ouimett expressed an interest in the write-up of Carnival Cruise Line by one of the analysts. Ouimett stated "That is a lesson in do the right thing." This suggests Ouimett will invest the proper funds in maintenance and safety training. Capital investments in new attractions are expected to remain at the 9% of revenue peg. Maintenance investments/costs are also expected to remain in the 9% of revenue range. Sorry if this post is a bit disjointed—I have written it on the fly as the conference was taking place.
  21. Yes, indeed, this is an interesting deal. The story reveals Cedar Fair has not hit the $56 million revenue figure in five years at Great America. Analysts take note. The revenue cap to trigger additional rent payments will rise from $56 million to $64 million sometime after 2020. Future rent payments will be reduced as well. Not reveled by the story (see Interpreter's link above) is the revenue destination of parking fees during NFL games. Will the parking revenues accrue to Cedar Fair or to the 49ers? If Cedar Fair looses the parking revenues the other concessions in the deal may not be sufficient to cover the parking revenue losses. The story hints that Cedar Fair will not be the recipient of the parking revenues when it reports "City leaders say the lost revenue will be a worthwhile exchange for the parking rights, noting they'll make money from the parking..." Requiring Cedar Fair to make only a modest $10 million capital improvement at Great America seems a bit odd. Considering the coaster The Interpreter also reports on Cedar Fair will be well on the road to satisfying this requirement. Considering the rides Cedar Fair has removed from the park it is not clear why the threshold of investment is so low. Developments will no doubt be interesting!
  22. Dollywood has the same type ride. Seems to be the same problems. See story, with video, below: http://www.wbir.com/news/article/172946/2/Dollywoods-Timber-Tower-still-not-operational
  23. Today Cedar Fair announces the appointment of a new member Mr. Tom Klein to the Board. Klein was identified as a potential candidate by Korn/Ferry in a national search and is identified as an independent board member. Mr. Klein has an extensive background in hospitality related businesses as well as technology. He has quite a bit of experience in distribution channel maximization. Mr. Klein has an impressive career at Sabre Holdings. Here is the link to the Cedar Fair Press Release: http://www.cedarfair.com/ir/press_releases/index.cfm?current_root=15&mode=story&story_id=337 That Cedar Fair has selected as an independent board member a person with such extensive background in technology suggests a complete make-over in the marketing, staffing, distribution, purchasing, and guest relations will continue to blossom. It looks to me to be a great choice and addition to the Cedar Fair board.
  24. Sorry, did not realize the story was attached to the other thread. My bad. I do think a reduction of 30% holdings is significant. Perhaps not quite a sharp reduction, but that characterization was a reflection of the judgement of the Toledo Blade, as expressed in their headline. Yes, Q Investments will remain as a significant force at Cedar Fair. And thankfully so. Please see my comment on the other thread.
  25. The Interpreter has excellent insight and analysis on this story. With out a doubt had Apollo gained control of the company all the extraordinary gains would have fallen to them, and Kinzel and company who would have stayed around for the party, and the spoils. We all owe a debt of gratitude to those who fought so long and diligently to stop this abusive merger and then to continue the real battle which was the over haul of the Board of Directors, improving corporate governance issues, and replacing significant elements in the Executive Suite. Had Bart Kinzel been advanced (I will refrain for using the term "promoted") as many had reason to believe was the plan after the disposal of Jack Falfas, it would have been a disaster for Unitholders. The hire of Mr. Ouimet was only possible once the Board was shaken up. Not stirred, shaken. Make no mistake Q Investments will still be around in abundance as a holder of 7 million shares. Assuming other large holders do not significantly reduce positions Q will no longer be the largest single unitholder. Q Investments has been good for the individual unitholders, they have been good for the Board of Directors, they have been good for the Company. We, and by "we" I include the posters and questioners at KICentral.com, have all been good for promoting the concept of better corporate governance issues.
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