Leland Wykoff

Significant news concerning hotel investments and returns were covered in the Q&A portion of the call. Steve Litt of 4010 Capital inquired about rate opportunities and possibilities of completion delays and the direct and indirect benefits associated with the renovations. CEO Matt Ouimet expressed confidence the Breakers project was progressing on or near schedule despite surprises which have been encountered when opening the walls within a 120 year old property. Ouimet reiterated the hotel project(s) were projected to have returns below the generally expected range of 15 to 20 percent. He referred to "primarily an episodic investment" and catch-up capital investment. The CEO indicated the occupancy gains would be minimal as they run near full already. He hinted any gains would come from rate increases and the gains of extended stays with additional on park time and spending. This represents a pulling back from earlier statements when Cedar Fair indicated rate increases tied to the three tiered strategy of "good, better, best." Also of note was the lack of any mention of hotel refreshment progress at any Cedar Point properties other than Hotel Breakers. Room inventory at Hotel Breakers will be reduced modestly following the renovations. Major surprise was in the answer to a question by Ray Cheesman of Anfield Capital concerning early bookings for Hotel Breakers. Ouimet indicated they do not see significant hotel bookings until spring. This may suggest rates are not yet set or are under review given the trends from this past season. The sudden pull back from dynamic, tiered, increasing, pricing is puzzling and perhaps troubling. One wonders if the extensive Hotel Breakers rebuild project was necessitated by new regulations which would not allow for the removal and replacement of the hotel on the current foot print so near shore. Cedar Fair seems intent on anchoring the underutilized mile beach front with the Breakers. No doubt additional investments will be necessary to monetize the beach given the lack of positive guidance for hotel revenue increases. Please see the Seeking Alpha transcript of the 3rd quarter conference call, page 6, for more information: http://seekingalpha.com/article/2651655-cedars-fun-ceo-matt-ouimet-on-q3-2014-results-earnings-call-transcript

Hotel Breakers Remodel Extensive, Beyond Refreshment New photos documenting the extensive interior demolition, renovation, rebuild, and restoration of Hotel Breakers at Cedar Point: https://www.cedarpoint.com/blog-article/online-fun/Hotel-Breakers-Progress Note photos of interior stripped down to framing bare bones and new space layout underway. For a good follow-up article please see: http://www.morningjournal.com/general-news/20141030/hotel-breakers-entrance-demolished-as-cedar-point-plans-renovations This article reports the rotunda will be preserved to its original glory, will restore guest rooms to the rotunda, re imaged front entrance, refrigerators, LCD terminals, new and refreshed walk-in beach style pool with hot tubs and water play areas, the lobby, reception, and rotunda areas will be restored to near original look while guest and public rooms will be realigned and receive new fixtures and furniture. All of this seems to be well beyond the originally announced "hotel refreshment" program. Having considered, in this forum, the costs per room Cedar Fair likely planned to expend the scope of the project comes as no surprise. See my post above (comment 13) from November 7, 2012.

Not all relatives are upset. Some just wish it could have been a more positive remembrance. Nice letter to the editor from one relative: http://www.mcall.com/opinion/letters/mc-dorney-park-plarr-name-weinstein-20141011-story.html

Seems the road to heck is paved with zombies and good intentions: http://www.mcall.com/news/local/mc-dorney-park-plarr-family-halloween-20141003-story.html

Legal analysis of Ohio Supreme Court ruling: http://www.exemplify.com/employment-agreement-dispute Legal eagles will enjoy this read.

Excellent analysis and brief on the Jack Falfas Ohio Supreme Court ruling: http://www.legallyspeakingohio.com/2014/09/merit-decision-former-cedar-fair-coo-does-not-get-his-job-back-cedar-fair-l-p-v-falfas/

Preview of Supreme Court Ruling here: http://www.sconet.state.oh.us/rod/docs/pdf/0/2014/2014-Ohio-3943.pdf Note this is not the published and final ruling--some minor changes may occur prior to it being reported [published]. This is a bad omen for binding arbitration. This sets the mold for challenge of a variety of rulings by arbitration panels. It is the job of those drafting agreements to be clear as to the terms, conditions, and remedies of those agreements. The court should not have placed its noise under the tent of arbitration. No abuse legal occurred here. Just poor drafting of an employment contract. For the pitiful, detail starved, Sandusky Register report please see: http://www.sanduskyregister.com/news/business/6110506

Interesting feature article and comments at the New York Times about Dollywood: http://www.nytimes.com/2014/08/24/travel/dollywood-a-little-bit-country-a-little-bit-gay.html?_r=2 Appeared in the print edition Sunday, August 24th, on the front page of the Travel section.

Big changes. Remember, satellite corporate office is now located in Charlotte. A review of the sales, food and beverage, and other job descriptions from the past year all indicated they are about to make much bigger changes than the drapes (hat tip to Cloris Leachman in High Anxiety). Season likely will be extended due to the temperate climate of the South. Much opportunity exists with this park located within a days drive of such a large percentage of the population.

Something smells fishy.

Gays will not be welcomed aboard, even two by two, at the Ark Park: http://www.huffingtonpost.com/2014/08/19/ark-encounter-gay-employees_n_5691874.html?utm_hp_ref=gay-voices Thinking of what the protest Twitter accounts and Facebook pages names might be: ArkEnemy, DeciplesDisciplined, ArkBack, BilgePump, ShipOfFools, NoahOverboard, SlipperyKY, or who knows what else.

Busch Gardens Williamsburg is experiencing many issues under Seas Management. Ride closures, failure to inject large marketable capital projects, perception of food quality decline, not to mention significant labor issues. Thus they may be eager to offload this property. Cedar Fair could be a likely acquirer. Recall Cedar Fair has a recent transaction relationship with Sea World due to the sale of Soak City. Sea World stock has been clobbered. Given Busch properties do not prominently feature live animal attractions Sea World may see them as being outside management expertise and perceive a lack of opportunity to leverage the core competency associated with wrangling cash out of what amounts to for profit zoos. Seas has announced a significant stock buy back program. The cash has to come from somewhere. Cedar Fair is now in much better financial shape with a much improved balance sheet. The CEO reminds us they are always evaluating opportunities to make selective additions and are in a position to do so. Seas may be underwater with Busch Gardens Williamsburg. Is it likely Cedar Fair could acquire Busch Gardens properties from Seas? Tough question. But stranger things have been know to happen.

America's finest news source reporting new super long coaster: http://www.theonion.com/articles/busch-gardens-unveils-new-9600milelong-endurance-c,36691/

Ran across this essay and though it worthy of sharing: http://illusion0flife.wordpress.com/2014/08/12/defining-our-medium-a-k-a-what-the-hell-is-a-theme-park-anyway/ It explores questions such as are theme parks "art?" and what is a theme park? The writer settles upon a good working definition incorporating elements such as immersion, artificial environments, entertainment and education. The writer compares and contrasts Knott's Berry Farm and Disneyland as he constructs his essay. Interesting observations and analysis of Knott's to be sure. Enjoy the read.

An excellent case review featuring specific observations concerning the supreme court arguments and analysis. Worth the read: http://www.legallyspeakingohio.com/2014/04/whats-on-their-minds-enforcing-a-shotgun-marriage-cedar-fair-l-p-v-jacob-falfas/

So much for the idea of "free federal funding." Bet the locals did not count on that twist. The big lesson here is all money is money. Federal tax dollars are "your" dollars just like local tax dollars are "your" dollars. Or debt. Depending on which way you look at it. Walkable cities are not a product of streetcars. It is much more involved. Compare the public cost of the streetcar with the public cost of reopening Kentucky Kingdom and one quickly sees how expensive public transportation actually is. It is a very poor allocation of capital. Rental cars are cheaper to provide than public transportation schemes. Wisconsin elected a governor in large measure due to his promise to kill the high speed rail funding from Washington. Seems the operating losses going forward were to great for the state to carry. “Disbelief in magic can force a poor soul into believing in government and business.” -- Tom Robbins

Golden rule of business and economics "Sunk costs are irrelevant costs." This is an often broken, and more often misunderstood, rule. In essence the rule means you do not keep spending money on a bad decision just because you already have "sunk" money into the decision. I predict future problems for this streetcar project if Cincinnati failed to get performance bonds from those civic organizations and businesses who today promise to cover operating losses. That will prove to be a hard debt to collect years down the road when the project is complete. The concept of walkable cities is predicated upon much more than streetcar lines. Many components must first be in place to create viable pedestrian zones and bring back downtown areas. For and excellent read on this topic please see Jeff Speck's interview and book link: http://www.npr.org/2012/11/17/165239291/what-makes-a-city-walkable-and-why-it-matters

More details: http://www.nytimes.com/2013/12/23/us/cincinnati-streetcar-plan-pits-desire-for-growth-against-fiscal-restraint.html?_r=0 Mayor won election based in part on the promise to kill the streetcar.

Orlando Sentinel article interviews, reports, and gives good background on the growing influence of technology on the amusement park industry: http://www.orlandosentinel.com/business/os-cfb-talking-with-tom-burnett-20131201,0,1753496.story Of interest is the news concerning Cedar Fair and Disney developments. An overview of the consolidation occurring among service provides of tech support companies provides a good basis to understand the influences bearing down upon the industry.

Knott's Berry Farm announces the expansive refurbishment of the Calico Mine ride and the refreshment, expansion, and integration of Camp Snoopy: http://www.4-traders.com/CEDAR-FAIR-LP-12697/news/Cedar-Fair-LP--Knotts-Announces-Major-Plans-For-2014-17477824/ The announced improvements continues the trend established last year of honoring and updating the historical features and themed elements of the iconic park.

In a broader move into the entertainment business Herschend, operator of amusement and theme parks such as Dollywood, purchases the Harlem Globetrotters. See New York Times Dealbook column for more details: http://dealbook.nytimes.com/2013/10/01/new-owner-for-harlem-globetrotters/?_r=0

Negative reviews and reactions to granting of tax abatement's for Carowinds: http://www.carolinajournal.com/daily_journal/display.html?id=10524

Perhaps Cedar Fair will take advantage of "executive bonus claw back provisions" to cost recover part of the losses due to the Falfas episode. When performance bonuses are granted and paid based upon false numbers, the SEC allows for a claw back of the overpaid benefit. If I were Richard Kinzel, or his council, I would be concerned. Given Mr. Kinzel may have filed a false report with the SEC concerning the Jack Falfas departure, well, it could result in recovery efforts by Cedar Fair. For an interesting read concerning poor corporate governance (involving another party with Cleveland ties) please see this recent Plain-Dealer article: http://www.cleveland.com/business/index.ssf/2013/05/pilot_flying_j_director_overse.html The SEC moved to strengthen corporate governance by allowing for executive bonus claw backs following the shenanigans at Saks Fifth Avenue. In the Saks case the resigning executives who allegedly engineered the fraud, and profited by receiving quarterly bonuses, for which they did not in reality qualify, kept the ill gotten gains. Saks was not by any means the only such case of poor corporate governance related to executive over-payments. But it helped end the practice and spur the SEC onto tighter rules and regulations.

Ohio Supreme Court agrees to review Jack Falfas arbitration ruling reinstating Falfas to the position of COO: http://www.morningjournal.com/general-news/20130925/ohio-supreme-court-to-consider-case-of-former-cedar-fair-executive See order of Court here: http://www.sconet.state.oh.us/pdf_viewer/pdf_viewer.aspx?pdf=196457.pdf It appears from the Morning Journal report Cedar Fair seeks the Ohio Supreme Court to overturn a binding arbitration ruling principally on the grounds the outcome was not agreeable. The binding arbitration agreement may well be found to be the controlling instrument--not state law in general. Had Cedar Fair intended to restrict an arbitration panel from ordering back-to-work findings they could have simply written the binding arbitration agreement to bar (or forbid) such awards. Other equitable solutions were possible, such as, for example, monetary awards and damage schedules containing loss caps. If the court finds this was a contract of adhesion [when one party offers up a contract for acceptance by a second party in which they must accept the terms and sign the contract without benefit of term negotiation] disputes as to intent of contract always fall to the accepting party. The legal principal being that those drafting and offering such contracts of adhesion should carefully consider the terms of said contracts. Put another way, the drafting party has the upper hand and must act with extreme care. Cases of contract confusion are by default found to be in the favor of the signing party. At least that is my uneducated understanding of the legal principals.

More details From the Charlotte Observer: "The city economic development office had given council members more details about plans for the park in June. The new 300-foot roller coaster would cost $30 million. In addition, the park would spend $2.5 million on a new water slide, $7 million on a new food complex and $4 million on ticket booth and parking lot improvements, according to Peter Zeiler of the city." The $4 million ticket booth and parking improvements again suggest a Gatekeeper type coaster. Such a coaster could fly guests over two states. Read more here: http://www.charlotteobserver.com/2013/09/18/4323933/new-carowinds-ride-to-be-70-feet.html#storylink=cpy http://www.charlotteobserver.com/2013/09/18/4323933/new-carowinds-ride-to-be-70-feet.html#.UjteLD_xvIU Another Observer article included this tid-bit: "The company predicts the expansion would increase yearly attendance by 385,000 customers and create 15 full-time jobs with an annual average salary of $43,000."