Cedar Fair Reports Results for 2008

[Cory Butcher]

Cedar Fair Reported Results for 2008

Also, Cedar Fair reported no change to the dividend policy, only that they were still considering all options to lower the debt and nothing has been finalized.

http://www.cedarfair.com/ir/press_releases...mp;story_id=187

Cedar Fair REPORTS RESULTS FOR 2008

· GENERATES A RECORD $356 MILLION IN ADJUSTED EBITDA, A 4.5% INCREASE OVER 2007

· NET REVENUES INCREASE TO $996 MILLION

SANDUSKY, OHIO, February 12, 2009 -- Cedar Fair (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced results for its fourth quarter and year ended December 31, 2008.

Cedar Fair’s operations generated full-year net revenues of $996.2 million and net income of $5.7 million, or $0.10 per diluted limited-partner (LP) unit. In 2007 the Company achieved net revenues of $987.0 million and reported a net loss of $4.5 million, or $0.08 per diluted LP unit. Included in the 2008 results are non-cash impairment charges totaling $95.4 million, or $1.71 per diluted LP unit. Of these total non-cash charges, the majority, or $87.0 million, relates to a preliminary estimate of impairment of goodwill and other long-lived intangibles we recorded when we acquired the Paramount Parks in 2006. The 2007 results include a non-cash impairment charge of $54.9 million, or $1.01 per diluted LP unit, relating to the Geauga Lake restructuring.

Adjusted EBITDA, which management believes is a meaningful measure of the company’s park-level operating results, increased 4.5% to $355.9 million from $340.7 million a year ago. See the attached table for a reconciliation of adjusted EBITDA to net income.

“I am pleased to report that 2008 was another successful year for the company,” said Dick Kinzel, Cedar Fair’s chairman, president and chief executive officer. “While 2008 was not without its economic challenges, we were able to position ourselves as an affordable vacation alternative. In 2008, our combined parks entertained 22.7 million visitors, up 3% from 2007 and generated average in-park guest per capita spending of $40.13. The result of this solid operating performance was a record $355.9 million in adjusted EBITDA.”

Operating income for the year was $133.9 million compared with $154.6 million in 2007. Cash operating costs decreased 1% to $640.3 million versus $646.3 million in the prior year. The decrease in cash operating costs is a result of our continued focus on controlling operating costs and expenses, as well as the closure of the company’s Star Trek: The Experience operation in Las Vegas in September due to the expiration of its lease. Non-cash costs increased to $222.0 million from $186.1 million in 2007, due entirely to the charge for impairment of intangible assets we recorded when we acquired the Paramount Parks. Although the acquisition continues to meet our collective operating and profitability goals, the performance of the individual properties has been somewhat mixed, with certain parks outperforming others to this point. Based on the accounting rules which require us to evaluate our goodwill and trade-names for impairment at the individual reporting unit, or park level, the performance of those parks that have fallen below our original expectations, coupled with a higher cost of capital, have resulted in the estimated recognition of full impairment of goodwill at two of the acquired parks and the additional estimated impairment of trade names at several of the parks.

For the year, interest expense decreased $16.0 million to $129.6 million due to lower interest rates on our variable-rate debt and our ability to fix $300 million of term debt at a favorable rate through an interest rate swap agreement entered into during the first quarter of 2008, coupled with a lower average daily balance on our revolving credit facilities compared with 2007. In 2008, a benefit for taxes of $935,000 was recorded to account for the tax attributes of our corporate subsidiaries and publicly traded partnership (PTP) taxes, compared to a provision of $14.2 million in 2007. After interest expense and the provision (benefit) for taxes, combined net income for the year totaled $5.7 million, or $0.10 per LP unit. In 2007, the company reported a net loss of $4.5 million, or $0.08 per LP unit.

“I am pleased our parks continue to perform consistently well in this volatile environment,” said Kinzel. “We pride ourselves on our attention to customer service and continued investment in our parks, offering a variety of entertainment through new roller coasters, thrill rides, family attractions and live shows for our guests. This entertainment package, along with employees who are among the best in the industry, is what has made and will continue to make this company successful year after year.”

Fourth Quarter Results

For the fourth quarter, net revenues increased $3.9 million to $119.3 million from $115.4 million a year ago. The 3% increase in net revenues is attributable to an 8% increase, or 205,000 visits, in attendance due to strong fall promotions and a favorable October calendar, where many of our parks were able to remain open for one additional weekend. The operating loss for this same period was $79.4 million compared with an operating loss of $19.6 million in the fourth quarter a year ago. The increase in operating loss is primarily attributable to the $87.0 million non-cash charge for impairment of intangible assets recognized during the fourth quarter of 2008, offset slightly by a $6.8 million improvement in operating costs and expenses in the period.

After interest expense, which was down $4.3 million between years, and a benefit for taxes in the period, net loss for the quarter was $56.7 million, or $1.02 per LP unit, in 2008 compared with a net loss of $9.0 million, or $0.17 per LP unit, last year.

2009 Outlook

For the 2009 season, Kinzel reported that the company will be investing approximately $62 million in capital improvements across its properties, highlighted by the addition of a new world-class roller coaster at Kings Island in Cincinnati. The company will also introduce two additional coasters: Prowler, a wooden coaster, at Worlds of Fun in Kansas City and Carolina Cobra, a boomerang-style coaster, at Carowinds in Charlotte, North Carolina. In addition, family attractions will be introduced at Valleyfair in Shakopee, Minnesota and Kings Dominion in Doswell, Virginia. Finally, several parks will debut a variety of exciting live shows, including the expansion of the “All Wheels Extreme” stunt show to several properties.

“It is important for us to reinvest in our parks on an annual basis,” said Kinzel. “Capital reinvestment has always been a high priority for the company, and it is why we have been able to maintain and improve our operating results over the years. Our strategy has always been to offer a variety of activities to our guests, and I believe our 2009 program will again capture their attention.”

Kinzel added, “As we head into 2009, we also continue to evaluate our current capital structure and various alternatives for reducing the Company’s debt levels. In light of current economic and market conditions, reducing our debt and strengthening our balance sheet must continue to be a priority. We are considering a wide range of alternatives for reducing debt and no decisions have been finalized on any of these alternatives at this time.”

Management will host a conference call with analysts today, February 12, 2009, at 10:00 a.m. Eastern Time, which will be web cast live in “listen only” mode via the Cedar Fair web site (www.cedarfair.com). It will also be available for replay starting at approximately 1:00 p.m. ET, Thursday, February 12, 2009, until 11:59 p.m. ET, Thursday, February 26, 2009. In order to access the replay of the earnings call, please dial 1-800-406-7325 followed by the access code 3963219.

Cedar Fair is a publicly traded partnership headquartered in Sandusky, Ohio, and one of the largest regional amusement-resort operators in the world. The Partnership owns and operates 11 amusement parks, six outdoor water parks, one indoor water park and five hotels. Amusement parks in the company’s northern region include two in Ohio: Cedar Point, consistently voted “Best Amusement Park in the World” in Amusement Today polls and Kings Island; as well as Canada’s Wonderland, near Toronto; Dorney Park, PA; Valleyfair, MN; and Michigan’s Adventure, MI. In the southern region are Kings Dominion, VA; Carowinds, NC; and Worlds of Fun, MO. Western parks in California include: Knott’s Berry Farm; Great America; and Gilroy Gardens, which is managed under contract.

[RailRider]

Cedar Fair 4th-quarter loss widens on large impairment charge; shares hit new year low

Heck of a discount for CP stock currently and two things that stick out.

revenue from accommodations and other sources grew to $10.3 million from $7.3 million

Sales of food, merchandise and games slipped to $36.6 million from $37.9 million.

Folks seem to be spending more than one day at the parks, but holding back on what they spend in the park.

Also I think this could lead to more parks receiving resort hotels and possibly camp grounds like Light House Point in the future.

[The Interpreter]

Impressions from today's conference call, in light of what the typical reader here would find interesting (full text of conference call will probably appear on the web later today, or you can listen to it yourself until 11:59 p.m. ET, Thursday, February 26, 2009. In order to access the replay of the earnings call, please dial 1-800-406-7325 followed by the access code 3963219.)

* 2008 had record cash flow.

* Canada's Wonderland was the star performer of the chain, and, not uncoincidentally, had Behemoth, a new steel roller coaster.

* Attendance at the company parks was up 8 percent in quarter 4.

* The parks acquired in 06 performed well, with Canada's Wonderland being a stellar performer and Kings Island "contributing nicely."

* Reducing debt and strengthening the balance sheet must remain priorities.

* The company is pleased with its performance in light of the poor economy.

* The company locked in the cost of most of the food and merchandise early last season, so was able to avoid the cost increases experienced by most of its competition.

* The company took an $87 million charge for impairment to goodwill related to the former Paramount Parks, some of which have performed better than others. Two of the parks are associated with a total impairment of intangibles.

* As of December 31, 2008, there was $1.72 billion in outstanding debt. The current average cost of that debt is about 6.5%.

* 2009's capital budget is $62 million across 17 parks. Of that, $22 million is for Diamondback at Kings Island, which will be "King of the Hills." At Worlds of Fun, a wooden coaster called Prowler is being built, while Carolina Cobra debuts at Carowinds. Family attractions will be added at Kings Dominion and Valleyfair, and the All Wheels Extreme stunt show will expand to other properties.

* It is too early to predict what effect the economy will have on company performance this year.

* There are alternatives to cutting the distribution. The company realizes many unitholders depend on the distribution. Mr. Kinzel's own mother and father and mother-in-law and father-in-law lived on the distribution when they were living, so he knows how important it is. They are looking at disposing of non-core assets, such as land at Canada's Wonderland, Geauga Lake and even mentioned the potential stadium at Great America as being a possibility of selling the lease there as they do not see the park and stadium as compatible.

*** Cedar Point, Canada's Wonderland and Kings Island normally get a major capital investment every other year, while the smaller parks get one every third year.

* The gate has gone up about a dollar at most parks for 09, but this is still a value compared to competitors. There are also many opportunities for park/hotel combo discounts in California and at Cedar Point.

* As part of cost-cutting, there have been layoffs at the parks, and unnecessary perks have been eliminated, while seasonal positions are "being monitored."

[The Interpreter]

Impressions from the earnings release:

....Included in the 2008 results are non-cash impairment charges totaling $95.4 million, or $1.71 per diluted LP unit. Of these total non-cash charges, the majority, or $87.0 million, relates to a preliminary estimate of impairment of goodwill and other long-lived intangibles we recorded when we acquired the Paramount Parks in 2006. The 2007 results include a non-cash impairment charge of $54.9 million, or $1.01 per diluted LP unit, relating to the Geauga Lake restructuring.

...Non-cash costs increased to $222.0 million from $186.1 million in 2007, due entirely to the charge for impairment of intangible assets we recorded when we acquired the Paramount Parks. Although the acquisition continues to meet our collective operating and profitability goals, the performance of the individual properties has been somewhat mixed, with certain parks outperforming others to this point. Based on the accounting rules which require us to evaluate our goodwill and trade-names for impairment at the individual reporting unit, or park level, the performance of those parks that have fallen below our original expectations, coupled with a higher cost of capital, have resulted in the estimated recognition of full impairment of goodwill at two of the acquired parks and the additional estimated impairment of trade names at several of the parks....

So two of the former Paramount Parks have performed so much less well than expected that the value of the goodwill and other intangibles is now zero? And the trade names at several of the parks are now worth much less than before? What gives? And this is probably California's Great America and what? Carowinds or Kings Dominion? Or could it be Star Trek: The Experience?

[The Interpreter]

The call transcript:

http://seekingalpha.com/article/120342-ced...pt?source=yahoo

FUN closed today at $10.09, up 15 cents, though at the moment it is trading at $9.53, down 56 cents in after hours trading....

[RailRider]

I would say Great America, might also be why the woodie got put on hold for them, and the second is probably Carowinds. Kings Dominion got Dominator last year which was a great addition for the park. Thats why I am just guessing that it is Carowinds and not Kings Dominion that strugled last year.

[The Interpreter]

...whatever two Paramount Parks struggled, they did so to such an extent that the company now views those respective parks goodwill and intangibles as being valued at 0. Wow. Just wow. And "several" of the other former Paramount Parks' trade names were also devalued. Yet the conference call began with an observation that the acquired parks were doing well.

[The Interpreter]

Now my head definitely hurts. Look at this:

A write-down tied to weaker-than-expected performance at Paramount Parks sent parent Cedar Fair LP to a loss of more than $50 million in the final three months of 2008....

Cedar Fair told investors that performance at the parks has been mixed but generally fell below original expectations. The company wrote down the full goodwill value of two Paramount parks, which it didn’t identify, and wrote down the value of trade names at several others....

http://www.bizjournals.com/losangeles/stor...09/daily31.html

So were those two parks' performances so bad they resulted in this write down? We know that Canada's Wonderland and Kings Island did very well, according to the call.

[King Maple The Tree King]

Hmm, something interesting to note:

Of course bigger parks like Cedar Point, King’s Island, and Canada’s Wonderland, we usually get an infusion of a major capital expenditure every other year while the smaller parks will get every three years, and we found that formula works very well.

From page 6 :: http://seekingalpha.com/article/120342-ced...ahoo&page=6

Maverick was what year? 2007. So what's CP getting this year?

[The Interpreter]

Perhaps the "All Wheels Extreme" Stunt Show?

[CedarPointer]

[oops, read that post wrong]

[The Interpreter]

For 2009?

[Vortex]

Planet Snoopy?

That was new last year at Cedar Point. So Cedar Point and Canada's Wonderland are taking a year off from a new ride or area. Kings Island did this last year by getting nothing but shows.

[CedarPointer]

For 2009?

All Wheels Extreme was last year also.

[The Interpreter]

Again and again during the call, the company made clear that it cannot yet be determined how much and how the current economy will affect the company's business. That's the real rub. In this business, you must invest to make money, in good times and bad.

[windshawne]

Huh. I guess time will tell. I dont think any company is doing really well right now except healthcare, and believe me, its not all roses there either.

[The Interpreter]

The Toledo Blade apparently heard something during the conference call that I did not, nor did I find it in the transcript:

...Chief Executive Dick Kinzel told industry analysts that the firm's dividend would not be cut, as company officials last month said might happen. It pays $1.92 a share per year.

http://toledoblade.com/apps/pbcs.dll/artic...ESS03/902120248

What I heard is no decision has been made to cut the dividend, and the company would do what it could to be sure it didn't have to, but no assurance can be made that the dividend will not be cut. In fact, one analyst even asked if there could be assurance that if the dividend is cut, it won't be by as much as 50 percent. Even that could not be answered with total certainty. Mr. Kinzel pointed out his own parents and his parents-in-law had lived on the dividends while they were alive, and he understood the importance of the dividend. But he did not go so far as assuring the dividend would not be cut.

[raptor]

I wouldn't have called Planet Snoopy a major investment, they owned all that stuff already, I believe. I'm surprised that there isn't going to be much of anything new at Cedar Point this year, I didn't expect a major investment, but I thought we would see some kind of new attraction, if only something small. However we may still see something, sometimes it happens at the last minute.

[The Interpreter]

With 17 parks in the chain, and a total of $62 million in capital expenditures for all 17 of them, I remain stunned that more than 1/3 is being spent on Diamondback at Kings Island! It's quite the commitment, especially in these times.

[The Interpreter]

The Toledo Blade apparently heard something during the conference call that I did not, nor did I find it in the transcript:

...Chief Executive Dick Kinzel told industry analysts that the firm's dividend would not be cut, as company officials last month said might happen. It pays $1.92 a share per year.

http://toledoblade.com/apps/pbcs.dll/artic...ESS03/902120248

What I heard is no decision has been made to cut the dividend, and the company would do what it could to be sure it didn't have to, but no assurance can be made that the dividend will not be cut. In fact, one analyst even asked if there could be assurance that if the dividend is cut, it won't be by as much as 50 percent. Even that could not be answered with total certainty. Mr. Kinzel pointed out his own parents and his parents-in-law had lived on the dividends while they were alive, and he understood the importance of the dividend. But he did not go so far as assuring the dividend would not be cut.

HA! This morning they contradict their own story of yesterday, and now get it right:

...But Mr. Kinzel said the dividend would be reduced only under extraordinary circumstances.The dividend payout is $1.92 a share per year.

"Unless there was a compelling reason long term going down the road in 2012 when we have to refinance the debt, we certainly would not want to cut the distribution," he said....

http://toledoblade.com/apps/pbcs.dll/artic...0213/BUSINESS03

/902130337

There's actually quite a bit of new 'color' in this morning's article.

Of particular interest, there is this:

...Rick Munarriz, an analyst who follows Cedar Fair for the Motley Fool online investing site, said preserving the distribution was a "no-brainer" just a couple of years ago. "But now that the company has all that debt it took on to buy Paramount Parks, they have very little wiggle room," he said....