Leland Wykoff

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.

Cedar Fair will see it's largest unitholder reduce its position over the next couple of years. Q Investments plans to sell 3 million of its 10 million unit holdings, subject to certain conditions and market realities, according to filings with the SEC. For a fuller story please see: http://www.toledoblade.com/State/2011/12/14/Mutual-fund-to-sharply-cut-holdings-in-Cedar-Fair.html

Cedar Fair did not receive a break-up fee from JMA Ventures LLC to walk-away from the deal. This suggests either one or more parties were sure of one of two things: 1) the transaction would close, or 2) the transaction would never close. If the parties were certain the transaction would never close (and thus did not require a break-up fee) it may indicate the deal was a tactic to bring reluctant parties to the negotiating table. Reluctant parties could have been Santa Clara, the NFL, the 49ers, or, of course, the Cedar Fair Board, or CEO Mr. Kinzel. If the parties were certain the transaction would close the absence of a break-up fee is odd. There would be nothing to loose for either party to include such a fee if completion of the deal was certain. Given the timing of the public hearings concerning the stadium funding it seems likely this was a cleaver maneuver to gain concessions or agreements which had otherwise eluded Cedar Fair. Cedar Fair confirmed it will "continue to manage Gilroy Gardens under our management contract." Again, it seems The Interpreter got it right; hats off to Mr. Ouimet for a negotiated resolution.

The Interpreter gets it right; Matt Ouimet's fingerprints are all over this transaction. See this paragraph from insidebayarea.com: "Santa Clara officials indicated Cedar Fair's new president, Matt Ouiment, a former top Disney executive, was determined parking concerns would be addressed. The 49ers released a statement praising the Ohio-based company's decision to retain control of the park." Full story here: http://www.insidebayarea.com/news/ci_19482475 Keep in mind Great America Park was reported by Cedar Fair to be one of the top performing parks last quarter. This could be due to many factors. Consider many people may have visited Great America due to the impending sale--kind of a "best visit now before it is gone" situation. The parks finances were no doubt helped by the significant write-down which Cedar Fair took on the asset. Significant modifications and or improvements to the park may very well take place during the disruption which will be caused by stadium and parking construction. Recall Ouimet oversaw the rehabilitation of Disneyland on a tight schedule for it's 50 anniversary. Once again Cedar Fair is quiet concerning the Gilroy Gardens management contract. The only news we have is what is leaking out around the edges. Developments will be interesting to watch.

Mad Money, with host Jim Cramer, featured a segment on Cedar Fair complete with an interview with incoming CEO Matt Ouimet: http://video.cnbc.co...ideo=3000058509 Cramer was bullish on the stock due to the quickly rising dividend, refinanced debt, and new Disney alumni management. In a terrible day for the market, FUN actually increased in share price, and Ouimet again suggested an appetite for acquisitions.

Q Investments filed a Form 4 with the SEC. Interesting: http://www.istockanalyst.com/article/viewsecfiling/articleid/5558868

Agreed that Cedar Fair and Six Flags expanded to rapidly. However, Six Flags was structured not to produce earnings but rather to produce debt and highly compensated corporate level jobs. This explains why SF had only two profitable quarters in the history of the publicly traded company, and why the capital expenses (and acquisitions) were so expensive but they could never find time to get around to monetizing those investments. They were grow and borrow, not market and operate. Cedar Fair could have made strategic acquisitions of properties such as Madame Tussauds which are much cheaper than acquiring another park. Plus they are much cheaper to operate. And provide year round income streams. Tend to be businesses with the same, or similar, market and customer bases. The core competencies of Theme Park operators overlap with the skills necessary to exploit such acquisitions--namely proficiency in working with a mostly low-wage, seasonal employe, pushing a highly marketed and promoted product, which offers an exhibition type product, an key element is the ability to create positive memories often through some entertainment leisure component. The return on capital is much higher at a Madame Tusssauds than a Cedar Point. In addition the company would have a developed stable of secondary products they could place around existing amusement and water parks thus gaining a larger portion of the sales occurring off park. This is a clever way to monetize the marketing dollars spent to get people to parks. It also affords the added value of brands and the extension opportunities they create. Look at Herschend Family Entertainment as well as Merlin Entertainments to see the cash flow, revenue, and profit opportunities of owning, and thus leveraging core competencies, with product offerings such as museums, aquariums, sky lifts, excursion boat trips, conference centers, time shares, campgrounds, inns and hotels, caves, dinner attractions, and the like. This is the boat Cedar Fair has refused to board. Under Mr. Kinzel Cedar Fair insisted, and believed, it was simply an amusement park operator. Compare that to Merlin Entertainments. A name that is plural, not singular, and says "if it involves making money by creating positive memories involving exhibition and entertainment, we can deliver." Mr. Ouimet appears to have a broader vision and scope of the possibilities for Cedar Fair expansion. Look for him to begin making the targeted, sensible, acquisitions which should have occurred years ago.

It would appear the Board at Cedar Fair delayed the appointment of a new COO until such time as the new CEO hire occurred in order to give the Mr. Ouimet the opportunity to put his own team into place. His tenure with Paramount Parks makes this a most interesting development. In the most positive sense. Like Mr. Ouimet, Mr. Zimmerman has operations and finance experience. The new team, and the bright new days at Cedar Fair, seem to be dawning.

Today the New York Times has an article examining the US growth plans of Merlin Entertainments particularly as it relates to theme park development with the Legoland brand: http://www.nytimes.com/2011/10/17/business/media/merlin-entertainment-brings-its-amusement-parks-to-america.html?_r=1 Of special interest is the look at Merlin's Madame Tussauds wax museum's holdings which they acquired many years ago. Also operating the London Eye Merlin Entertainments hosts over 40 million guests annually. The CEO Nick Varney makes his intentions clear, "Our ambitions for this market place [uSA] are tremendous" the Times quotes him. Which begs the question, why did Cedar Fair not branch out years ago when properties such as Madame Tussauds were available? Cedar Fair certainly were made aware of the potential for such business combinations. Yet they chose to ignore the opportunities. Perhaps incoming CEO Matt Ouimet will be more proactive and cease such revenue and brand building engines. The failure of his predecessor, Mr. Kinzel, to grasp the value in such moves restricted the growth and scope of Cedar Fair.

Will be interesting to see how Mr. Ouimet continues building his team. Looks like he has brought on some strong players. Creating the new position of Strategic Alliances signals new directions for Cedar Fair. Both gentlemen have strong Disney connections. That Mr. Ouimet was able to bring them on-board says a lot about both his leadership and the industry view of Cedar Fair's future.

For an example of how Cedar Fair missed an excellent opportunity to expand the Nickelodeon license it received in the purchase of the Paramount Parks franchise, please this excellent article by Thomas Lee in today's Star Tribune: http://www.startribune.com/blogs/130570388.html The article examines how the Nickelodeon characters have new fresh life and the limitations of the Camp Snoopy concept. Recall Mr. Kinzel saw no value in the Nickelodeon license and let it expire. The Mall of America attributes much of the 9.4% gain in total mall sales to the Nickelodeon Universe which replaced Camp Snoopy, a Cedar Fair property. It is doubtful incoming CEO, and current president, Matt Ouimet would have made the same blunder as Kinzel in letting these valuable brands slip through the fingers of Cedar Fair. The Star Trek license, which was part of the Paramount acquisition, was also terminated by Mr. Kinzel. Penny wise, and pound foolish.

Dorney Park & Wildwater Kingom is reported to be the next recipient of a "Dinosaurs Alive!" attraction, to open in 2012: http://southwhitehall.patch.com/article ... osaur-park Interesting to note Dorney Park is adding this exhibit, in part, to qualify for student field trips and school visits. This could help account for why Cedar Fair is adding this attraction at so many locations. The news of this addition came about due to zoning issues being taken up by the South Whitehall township commissioners.

Well, now this transaction explains a lot. Great America was sold to reduce the uncertainty of, and secure a certain payment for, the asset. Given the threat of eminent domain to take the lease from Cedar Fair this establishes a price. Reports seem confused as to whether JMA Ventures also acquired the management contract for Gilroy Gardens. Cedar Fair spokesperson Stacy Froley has been quoted as saying the deal included the Gilroy management contract. Confusion is swirling around this point. Perhaps Ms. Froley inadvertently let the cat out of the bag concerning a management contract with JMA to continue operating Great America. Given Cedar Fair had a loss last year, due primarily to the right-off of a large part of the value of Great America. That right down, in the fourth quarter of 2010, was for a $62.4 million dollar impairment charge, attributed to lower than expected performance at Great America. JMA Ventures deal is reported to also involve the York family, owners of the San Francisco 49ers, and has been purchased to pave the way for stadium and parking expansion on the property controlled by Cedar Fair. It is possible Cedar Fair may receive the contract to manage Great America until such time as stadium redevelopment takes place. That the impairment charge of $62.4 million dollars last year is almost equal to the size of the sale price of $70 million dollars speaks volumes about the inflated price Cedar Fair paid for the former Paramount Parks. The cash out will allow Cedar Fair to improve the liquidity and balance sheet. Chalk this bit of financial wisdom up to our new President and CEO, in waiting, Matt Ouimet.

Look who was charged with making the announcement: the new President and CEO (in waiting) Matt Ouimet. Kinzel's absence from recent announcements and pronouncements should be noted. The silence from the current CEO's office is deafening. Sounds like a muzzle is in place.

Amusement and Theme Parks are generally considered mature industries and thus with limited growth potential. The capital costs of opening a new park is astronomical. Available land suitable to large markets is limited and tends to be prohibitively expensive. Zoning creep and planning departments make siting new parks impossible in many instances. These negatives are also where the potential of park investing exists. Many parks are located on large desirable tracts. Ripe for sale and redevelopment. While this "land bank" possibility is not, given current real estate markets, a big factor, times will change and the real estate wheel will turn. Amusement parks, when tightly managed, can be cash cows. Example: Cedar Fair's stable of parks. Poor park management can lead to razor thin margins, or worse, huge annual losses. Example: Six Flags. Savvy operators of large resort parks, such as Disney and Comcast/Universal, are active across so many business divisions it is difficult, if not impossible, to isolate park earnings and revenues from the rest of the company. Thus it can be difficult to "invest" in those company park assets. Much upside potential exists. Six Flags, recently fresh from bankruptcy has shed much of the traditional capital costs associated with the carrying cost of parks. Thus it will be relatively easier for them to achieve profitability [note; prior to bankruptcy Six Flags only had two profitable quarters over its entire history]. Growth will be achieved by wrenching more revenues from the existing infrastructure and locating/creating new revenue streams and ancillary product and service offerings. Examples: line jump passes, adjacent hospitality offerings such as hotels, restaurants, water parks, resorts, arena shows, sport parks, catering, river and lake excursions, sponsorship revenues, timeshare sales, video game offerings, content/character creation, merchandising, cuisine sales, meeting sales, cruise line development, weddings, and shoulder season creation. This is a tall order requiring a multitude of management expertise and abilities. Cedar Fair, having hired a new CEO in waiting, and Six Flags with a crack management team under considerably less debt, may be able to pull off these tasks. One thing we know for sure: private equity firms have entered the business as they are certain growth opportunities exist in what is mistakenly viewed as a mature industry. The growth likely will come from new technologies and product offerings which successfully exploit the captive audiences enjoyed by amusement park operators.

Here are a couple of links to articles about Ouimet tour of Kings Island. Note the article indicates he will be making the cap announcement for next season. Note also Ouimet indicates a park type acquisition is not on the planning board at this time. But other acquisitions might be under consideration: http://news.cincinnati.com/article/20110713/BIZ01/307130124/Cedar-Fair-high-K-?odyssey=nav|head http://www.bizjournals.com/cincinnati/blog/2011/07/cedar-fair-ceo-ouimet-hints-at-new.html?page=all Interesting Kinzel is no where in the picture.

Concerning Great Wolf Lodge: I had the pleasure of attending the Great Wolf Annual Shareholders Meeting last year. Other than board and management shareholders, I was the only stockholder in attendance. The CEO was gracious, and welcoming, as was the non-management, independent, Chair of the Board. Great Wolf has worked hard developing the Great Wolf brand, as well as other brands, including an ice cream shop brand, the first stand-alone of which opened recently at the Mall of America. GW also has acquired controlling interest in MagicQuest an amusement operated at several of their Lodges. The decline in the economy has been brutal to the capital intensive hotel sector. Great Wolf has suffered under declining property values, and is, in fact, upside down on at least two properties. Those are two of the first generation Lodges which have fewer guest rooms than the second generation Lodges, which they view as the growth vehicle. Revenues per available room, as well as average daily revenues per room, held up well during the recent economic distress. This will make going-forward comparables tough. Great Wolf will fail to show large year-over-year increases in ADR--but this is due to the ADR having held up under the economic downturn. Make no mistake, Great Wolf has sever challenges. But they have a fantastic Board of Directors exhibiting some of the most forward corporate governance policies of any company. They understand they are in large measure a content company delivering superior guest experiences. They have developed proprietary brands and guest services that set them apart from the pack (sorry for the pun!). Great Wolf is the largest operator of indoor water park resorts. They have transitioned from a development company to an operating company under the harshest and most difficult circumstances. They may, or may not, survive intact. Great Wolf has grasped the necessity of improving operations, lowering costs, developing efficient business practices, all the while maintaining high quality and guest experiences. In a cruel twist of irony Great Wolf Lodges is the employer of two of Richard Kinzel's children (yes, that Dick Kinzel). Makes one wonder why Cedar Fair failed to develop more water park resorts.

Agreed. Acquisitions are difficult to conceive of given Cedar Fair's debt load. But, consider that Mr. Ouimet is the one who raised the prospect of acquisitions. He must have something in mind, or up his sleeve. Perhaps an acquisition of a bankruptcy, or a non-cash acquisition such as a merger with a weak competitor. Small acquisitions such as hotels adjacent to CF properties might make sense, while requiring rather small amounts of capital outlay. Think of the recent land acquisition adjacent to one of CF's smaller parks. No doubt the capital budget will have the fingerprints of both Kinzel and Ouimet for next season. Consider WindSeeker and the Camp Snoopy additions the swan song of Kinzel. I believe next seasons capital budget will be influenced by our new CEO. That will help him make a splash and mark his new tenure at the helm of Cedar Fair. Ouimet may even be given the job of announcing the new cap expenditures. Ouimet is a finance guy and an operations guy. Watch for him to figure out additional ways to reduce the debt load. CF had a "loss" last year due to the write-down of goodwill at Great America. That park may yet be taken for stadium development. In that event CF would have a cash infusion as well as a stable of rides to relocate and re-theme at other properties. It struck me as odd CF took a write-down of value on a park which may be subject to eminent domain. One would think CF would desire to argue the park is under valued--not over valued--when facing a potential government taking. This is a clue to either the future of the park, or a sign of a huge management mistake. Cedar Fair's Board of Directors must be extreamly eager to put the recent unpleasantness behind them. The Kinzel Jack Falfas firing episode alone is a corporate embarrassment which had to strike deep at the board. The board will give Mr. Ouimet wide latitude.

The light of day can been seen at the end of the tunnel. Cedar Fair is exiting the dark ride of its recent past. As other posters have noted, Mr. Ouimet will most likely raise the level of guest experience to the price--not discount the experience. Mr. Ouimet is an excellent executive choice for Cedar Fair. Unitholders applaud his selection as well as the Board for taking such a fresh bold new direction. The path Mr. Ouimet will blaze is quite a new trail for Cedar Fair. Clues that he has the Board of Directors support for new directions is clear: look at recent departures and additions to both management and the Board. Mr. Ouimet has the opportunity to fill the CFO position with a selection of his choice. No doubt he will be supported in his selection by the newest member of the Board, Ms. Gina France, who has a superb background in finance. Mr. Ouimet has spoken of his "team" at other professional endeavors and the recent departure of CF's CFO paves the way for Mr. Ouimet to begin putting his Cedar Fair team together. Other clues about the direction Mr. Ouimet will take Cedar Fair include his stated interest in additional acquisitions. Look for hotels, resorts, water-park facilities (both indoor and outdoor), branded entertainment, shows, concerts, as well as growth in off-park properties which can be fed customers through the marketing efforts of the parks. It is highly likely Ouimet will seek to garner a greater share of the park visitors expenditures when visiting a CF park by capturing revenues currently lost to adjacent competing properties. It is expected Mr. Ouimet will seek and lead brand extension opportunities, licensing revenues, sponsorship revenues, and a more efficient and effective capital expenditure program. Guest services and the guest experience will be enhanced quickly and at minimal additional cost. Mr. Ouimet has seven months to transition Kinzel out of the company and himself into the CEO position. The Board, taking the hard learned lessons from revolting shareholders, will protect Ouimet. His new vision for the future will be clearly expressed when the capital budget for next season is announced. Welcome aboard Mr. Ouimet. The guests, capital community, unitholders, and amusement industry are all glad you have arrived.

Cedar Fair stock, as CoasterRZ notes above, has been on the rise, on heavy volume. It is difficult, if not impossible, to know exactly why a stock price moves. It is generally believed dividends, and news of dividend directions, may affect a stocks price. Cedar Fair, in the first quarter conference call, announced an intention to pay a dividend of $1.00 per unit this year (starting with a ten cent dividend to be paid soon). Further Cedar Fair announced the additional intention of raising the dividend to the level of $2.00 per share by 2013. Cedar Fair explained the financing mechanisms which would enable it to reach this goal--conditioned upon various loan covenants and meeting revenue and profit projections. Looking at the performance of Six Flags stock may also have the market in an up mood about Cedar Fair. Add to this mix the impending departure of the current CEO Richard Kinzel (scheduled to retire early January 2012) as well as activist investors clamoring, for the most part successfully, for broad change in the board of directors, governance policies, revenue generation, and top and mid tear management, well, it may just look like an opportunity to many investors.

Q Funding has filed a federal lawsuit against Board Members at Cedar Fair alleging the board members propagated incomplete and misleading statements to be made to Unitholders and the SEC. Particularly in the areas concerning nominating and voting rights. Here is the breaking story from the Sandusky Register: http://www.sanduskyregister.com/sandusky/news/2011/may/10/texas-investor-sues-cedar-fair-board The court filing is accessible as a link within the story. An interesting read.

Stay tuned for more big Cedar Fair news. Should see developments Wednesday.

One minute, thirty four seconds. The exact time it took Kinzel to end a thirty plus year business relationship with the man who was to succeed him as CEO. The man who Kinzel assured the board of directors, just days earlier, was the right person for the job. It is called "succession planning" for a strategic reason; this task is not fly-by-the-seat-of-your-pants, rash decision making. Succession planning is characterized by rational, well considered, thoughtful weighing of options and consequences. Mr. Kinzel acted in the moment, with little regard for the ramifications of his heated reaction, to the detriment of the organization. One minute, thirty four seconds. Ample time to demonstrate the CEO position is held by the wrong person.

What to make of the Cedar Fair Proxy response? Significant details concerning CF's two proposed alternative measures for the Special Unitholders Meeting are not spelled out, such as: Will a staggered Board exist in the future? If so, Unitholder attempts to reform the Board are stymied, and it could take three years to effect change sufficient to result in new direction. Will Unitholders be able to nominate, and elect, Directors utilizing the proposed CF procedure for the next Annual Unitholders Meeting this summer? If not, CF simply will have stonewalled Unitholders and prevented significant changes in the Board of Directors for an additional year. Will the practice of allowing a Director candidate to be elected with as little as one affirmative vote continue? If so, CF could simply block Unitholder candidates by restricting the ballot to "qualifying candidates." Will Board of Director seats be contested elections where by the highest vote getter(s) gain the seat? Will the Board define "qualified nominee" as, amongst other criteria, a candidate nominated by the board? What qualifications and information about proposed nominees will CF demand? Why is CF willing to make such a radical structural change? Did the actions of activist investors drive these changes? These are the issues which came quickly to mind upon reading the Cedar Fair filing. The devil will be in the fleshed out details. Unitholders should proceed with caution to avoid getting painted into a corner by Kinzel and Company.

Regarding Cedar Fair's response (see Interpreter's post above): Talk about splitting hairs. Cedar Fair in its statement seems to agree with the arbitration panel that Mr. Falfas was terminated and did not resign. What Cedar Fair disputes is the action imposed: "...convinced that the arbitrators exceeded their authority by creating a remedy not legally available to Mr. Falfas under his contract with Cedar Fair. The Company is seeking the Court’s review of the arbitration award, as it is entitled to do." This is a complicated way of challenging the order to place Mr. Falfas back in his COO position and restore his salary. If the arbitration panel finds, as it did, Jack was terminated unjustly what other remedy could the panel order but a back to work order? It would seem Cedar Fair would rather buy-out Mr. Falfas remaining contract than have him back at work. Here is the tell, "While the Company disagrees with the conclusions reached by this arbitration panel, it will meet its legal obligations, if any, to Mr. Falfas, as they ultimately may be determined." Cedar Fair seems to be angling for a monetary judgment over the back to work order. No doubt they will seek a confidentiality agreement as well as Jack's repudiation of the findings of the arbitration panel. That would fix any SEC filing violations. To get clarity on this issue simply ask yourself this, "If COO Falfas resigned as Cedar Fair claims, then why would they not be thrilled to welcome him back to the fold?" The reasonable answers seem to sound something like this, "They will not take him back because they terminated him." If it had gone down as Cedar Fair insists, they would be delighted to have him back on board.