Cedar Fair Reports Strong 3rd Quarter, 9 Month Results

[BoddaH1994]

• For the nine-month period, revenues increase $37 million to $848 million
  
• Attendance and revenues continue upward trend through October
  
• Company increases guidance for full-year adjusted EBITDA to be in the range of $345 million and $355 million
  
• Company to return to quarterly distributions in 2011
  

SANDUSKY, OHIO, November 2, 2010 - Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced results for the third quarter ended September 26, 2010, and provided attendance and revenue trends through October. (Note: the Company also announced executive promotions as part of its ongoing leadership succession planning process.)

Nine-Month Results

Net revenues for the nine-month period increased $37.4 million to $847.9 million from $810.5 million on 40 fewer operating days in 2010. Net income for this same period totaled $31.6 million, or $0.57 per diluted limited partner unit, compared with net income of $61.7 million, or $1.10 per diluted limited partner unit, for the nine months ended September 27, 2009. Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, increased $30.3 million to $339.3 million for the nine months ended September 26, 2010, compared with $309.0 million during the same period last year. The increase in adjusted EBITDA is primarily attributable to an increase in attendance and out-of-park revenues combined with relatively flat operating expenses. See the attached table for a reconciliation of adjusted EBITDA to net income.

“Through the end of the third quarter, our parks entertained 19.8 million visitors, an increase of 6 percent - or approximately 1 million more visitors than this time last year,” said Dick Kinzel, Cedar Fair's chairman, president and chief executive officer. “During this same period out-of-park revenues were up 7 percent, or approximately $6 million, to $92.2 million while average in-park guest per capita spending was down slightly at $39.35, a decrease of approximately 1 percent.”

The Company reported strong increases in revenues in all regions, thanks in large part to innovative marketing, continual capital investment in the parks and favorable weather. Revenues increased in the southern and western regions due to higher attendance, slightly offset by a decrease in average in-park guest per capita spending. Revenues also improved in the northern region due to an increase in average in-park guest per capita spending coupled with improved attendance trends and out-of-park revenues.

“We experienced a significant improvement in season pass visits and group visits when compared with 2009,” added Kinzel. “The increase in visits by season passholders is due to an increase in the number of passes sold, particularly in our southern and western regions. In addition, attendance through the first nine months benefited from an increase in group sales business as many of our parks saw the return of numerous group bookings that did not occur in 2009.”

For the first nine months, operating costs and expenses increased $8.4 million, to $522.8 million for the period ended September 26, 2010, versus $514.4 million for the period ended September 27, 2009. This increase reflects $10.5 million of costs incurred in connection with the terminated Apollo merger and an increase in scheduled maintenance expense across the parks of approximately $6.0 million during the nine-month period. Reflected in the 2009 nine-month results was a $9.5 million settlement of a California class-action lawsuit and a $2.0 million settlement of a licensing dispute with Paramount Pictures. After depreciation, amortization and all other non-cash costs, operating income for the 2010 first nine months was $211.8 million compared with $205.4 million in 2009.

In July 2010, the Company completed a refinancing of its outstanding debt by issuing $405.0 million of 9.125% senior unsecured notes and entering into a new $1,435.0 million credit agreement, resulting in the recognition of a $35.3 million loss during the period on the early extinguishment of its previously existing debt. As a result of the 2010 refinancing, as well as the August 2009 amend and extend of $900.0 million of term debt, interest-rate spreads were higher for the first nine months of 2010 than the same period a year ago. Based on the higher interest-rate spreads, interest expense for the nine months ended September 26, 2010, increased $12.9 million to $103.9 million.

A provision for taxes of $37.4 million was recorded to account for publicly traded partnership taxes and the tax attributes of the Company's corporate subsidiaries during the first nine months of 2010, compared with a provision for taxes of $48.3 million in the same period a year ago.

After interest expense, loss on early extinguishment of debt, a $12.9 million non-cash charge to income for the net effect of swaps, the provision for taxes, $8.2 million in unrealized/realized foreign currency gains, and other income, the net income for the first nine months of 2010 totaled $31.6 million, or $0.57 per diluted limited partner unit, compared with net income of $61.7 million, or $1.10 per unit in 2009.

Third-Quarter Results

Cedar Fair generated net revenues of $545.0 million in the third quarter of 2010 and net income of $75.7 million, or $1.36 per diluted limited partner unit. For the same period last year, the Company reported net revenues of $519.9 million and net income of $107.6 million, or $1.92 per diluted limited partner unit. During the third quarter of 2010, the Company recognized a loss of $35.3 million for the early extinguishment of debt due to the previously announced debt refinancing.

For the third quarter, adjusted EBITDA increased $22.8 million, or 8 percent, to $299.7 million from $276.9 million in 2009. This increase in adjusted EBITDA was attributable to the increase in revenues, which was driven by attendance gains in season pass visits and group-sales business and improved occupancy at our resort hotels, as well as the decline in operating costs and expenses in the period.

“Our strong growth in the third quarter is further evidence of the meaningful momentum we continue to build for Cedar Fair,” said Kinzel. “During the quarter, thanks in large part to our innovative marketing plans and new rides and attractions, we were able to increase attendance by approximately 5 percent, or 547,000 visitors, compared with a year ago, with out-of-park revenues increasing approximately 10 percent, or $4.7 million.”

Kinzel noted that the average in-park guest per capita spending remained essentially unchanged during the quarter.

Performance Remains Very Strong in October

Based on preliminary October results, revenues for the first ten months of the year were $974 million compared with $914 million for the same period a year ago. This is a result of an 8 percent, or 1.6 million-visit, increase in attendance to 22.2 million visitors compared with 20.6 million in 2009, a decrease of approximately 1 percent in average in-park guest per capita spending to approximately $39.30, and an increase in out-of-park revenues of $6 million to approximately $101 million, due to increases in hotel occupancy.

For the month of October, revenues were up 25 percent, or approximately $21 million. This improvement during our fall events was largely due to a 29% increase in attendance and an approximate $300,000, or 3 percent, increase in out-of-park revenues. For the same period, average in-park guest per capita spending was down roughly one percent to last year.

“The strength of our fall events continues to draw more and more visitors each year,” added Kinzel. “A strong marketing program, continual investment in the fall events and favorable weather conditions in the northern and southern regions contributed to our strong results.”

Cash and Liquidity

As of September 26, 2010, the Company had $1.175 billion of variable-rate term debt, $405 million of fixed-rate debt (before original issue discounts), no outstanding borrowings under its revolving credit facilities, and cash on hand of $61.7 million. Of the term debt outstanding at the end of the third quarter, $11.8 million is scheduled to mature within the next 12 months. The Company's credit facilities and cash flow from operations are expected to be sufficient to meet working capital needs, debt service, planned capital expenditures and distributions for the foreseeable future.

Peter Crage, executive vice president finance and chief financial officer, said, “In terms of both liquidity and cash flow, we are comfortable with where we ended the third quarter of 2010. Throughout the year, we have remained vigilant in our strict controls over operating costs while ensuring a 'best-in-class' visitor experience. This prudent fiscal policy, coupled with the recent refinancing provides us with the flexibility to create value for our unitholders through a combination of EBITDA and cash flow growth, distributions and a reduction in debt.”

Crage reiterated the Company's previously announced plan to pay a distribution of $0.25 per limited partner unit on December 15, 2010, to holders of record on December 3, 2010. This will represent the 24th consecutive year in which Cedar Fair has paid a distribution to its unitholders.

Outlook

“As we head into the final quarter of 2010, we feel very good about our near-term outlook and long-range potential,” said Kinzel. “Based on our performance to date and our expectations through the end of the year, we now expect to achieve full-year revenues between $965 million and $980 million and adjusted EBITDA between $345 million and $355 million.”

This is an update from the guidance issued on October 5, 2010, when the Company reiterated its initial annual guidance for revenues of $940 million to $965 million, and adjusted EBITDA between $320 million and $340 million.

“These results provide an even stronger base from which we can execute on the long-term plan we outlined for you in early October,” added Kinzel. “We are very excited and even more confident now that we will be able to grow our profitability while steadily increasing the distribution and strengthening the balance sheet. Based on these results, I am pleased to announce we will return to quarterly distributions beginning next year. The Board intends to pay $20 million of distributions in 2011, which is approximately $0.35 per limited partner unit. The quarterly distribution would begin with an $0.08 per limited partner unit distribution in March of 2011. We believe the return of a quarterly distribution properly reflects our financial stability and further demonstrates our confidence in the future of Cedar Fair.”

Subject to further authorization of the board of directors, the Company plans to pay a quarterly cash distribution on each of March 15, June 15, September 15 and December 15, 2011, to unitholders of record at the close of business on March 3, June 3, September 5 and December 5, 2011, respectively.

Conference Call

The Company will host a conference call with analysts today, November 2, 2010, 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, Tuesday, November 2, 2010, until 11:59 p.m. ET, Tuesday, November 16, 2010. In order to access the replay of the earnings call, please dial 1-877-870-5176 followed by the access code 4373483.

About Cedar Fair

Cedar Fair is a publicly traded partnership headquartered in Sandusky, Ohio, and one of the largest regional amusement-resort operators in the world. The Company 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; California's Great America; and Gilroy Gardens, which is managed under contract.

Forward-Looking Statements

Some of the statements contained in this news release constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including statements as to the Company's expectations, beliefs and strategies regarding the future. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors, including general economic conditions, competition for consumer leisure time and spending, adverse weather conditions, unanticipated construction delays and other factors discussed from time to time by the Company in reports filed with the Securities and Exchange Commission (the “SEC”) could affect attendance and guest spending at its parks and cause actual results to differ materially from the Company's expectations. Additional information on risk factors that may affect the business and financial results of the Company can be found in filings the Company has made with the SEC. The Company undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

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[RailRider]

More group sales and large increases in out of park revenues. Signs that the economy is turning around.

Still the park is missing on in park revenue. Honestly if folks are staying at resorts and spending mutliple days in the park, in park revenue should increase. Time to scrutinize food and merchandise quality offered within the parks. I think there are some huge strides to be made in these areas and will only make the company stronger.

Im sure many are happy at the return of the dividend.

[Pillsberry123]

Honestly if folks are staying at resorts and spending mutliple days in the park, in park revenue should increase. Time to scrutinize food and merchandise quality offered within the parks. I think there are some huge strides to be made in these areas and will only make the company stronger.

I agree 100%. It's good to see that the company is turning around, but it's going to take more if the full potential of the parks are to be met.

[IndyGuy4KI]

Thanks for posting Ryan!

Way to go CF! I am glad to see this, hopefully this helps add more rides and attractions to the park!

[The Interpreter]

Transcript here:

http://seekingalpha.com/article/234117-cedar-fair-ceo-discusses-q3-2010-results-earnings-call-transcript

My thoughts later this evening....

[The Interpreter]

Okay...a VERY interesting call.

My thoughts:

* Carowinds and Michigan's Adventure had record attendance this year.

* The increase in attendance company wide is "largely" attributed to season pass and group sales.

* "Per capita spending increased in the northern region, but declined in the southern and western region due to the shift in attendance mix toward group and season pass sales."

* Net income for the first three quarters was down more than 48 percent.

* in JUST the third quarter, $2,700,000 was saved due to the termination of the Nick licensing agreement (and now we know who paid whom for that deal...what a sweet deal Viacom had...structure a deal internally between company units, split, let CBS sell the parks, then just sit and collect the money. Looks like the Planet Snoopys will very, very quickly pay for themselves...if Snoopy were costing more, the company would have disclosed that).

* Net income for Q3 was down nearly 30 percent, even with increased revenue and attendance and out of park spending.

* October revenues were up 25% largely due to a 29% increase in attendance and a 3% increase in out of park revenues, mostly due to higher hotel occupancy. "For the same period, average park guest per capita spending was down roughly 1%."

* As of September 26, 2010, FUN was $2.155 billion in debt, with $61.7 million cash in hand.

* A STRONG hint that Mr. Kinzel will almost certainly leave the company when his current contract expires, which is to say January 2, 2012.

* Expected 35 cents per unit distribution for next year.

* The current weighted average cost of debt is 8.6%. If that's not bad enough (and it is breath taking), next year is projected to be about 9.5%. In 2012, the projection is high 6's to low 7's.

* Extended hours next year at Carowinds, to 10 p.m. instead of 8. Intend to increase per capita spending by having light shows and fireworks at that park.

* Capital spending for 2011 will only be about $70 million...

And the stunner quote to end all stunner quotes:

"We've learned that a seasonal business should not be highly leveraged."

A more stunning rebuke of the aborted Apollo takeover could not possibly be imagined...and this from the self same Mr. Kinzel who recommended the sale of the company at $11.50 a unit to what amounts to a leveraged buyout firm!

I live for days like this.--Mr. Terpy

[PREMiERdrum]

* As of September 26, 2010, FUN was $2.155 billion in debt, with $61.7 million cash in hand.

This alarms me. They have a long, long way to go.

[The Interpreter]

At an average cost of debt of 8.6 percent. This is a company that largely operated on a cash--never borrow basis until it began its very own acquisition spree round about the Worlds of Fun acquisition...capped off with swallowing Paramount Parks...

[pkiboy]

Let me just add that Timmy at Carowinds Helped out a lot this year. even Diamondback is better than Timmy. Congrats to Carowinds on a Very good season.

[CoastersRZ]

I`m still amazed at the increase in attendance through October. 29%! Which begs the question, with as light as attendance is at Kings Island on Sundays in October, why hasn`t Kings Island experimented with Haunt on Sundays like the other Cedar Fair parks?

[The Interpreter]

I suspect they don't want to compete with churches...

But given what passes for entertainment in that park during Haunt the other days. . .

In any event, to those who wanted Haunt to go away...look...and learn.

[CoastersRZ]

Well, Cincinnati is not necessarily in the bible belt. And doesn`t Carowinds do their Haunt on Sunday nights? Still seems like a missed revenue opportunity to me.

And only $70 million in cap ex. in 2011? Sure seems like Cedar Fair is cutting back and trying to take the cheap route. Especially with four rides of the same name and specs, going to what they have in the past cited as their four premier parks.

[The Interpreter]

I strongly suspect that one of the conditions of the lenders is that they get to approve any capital expenditures until certain targets are met. Not all debt covenants have been disclosed...which is typical. I somehow doubt that Richard Kinzel wanted to install three identical rides at other parks, comparable to the spectacular installed at his self styled "crown jewel," in whose parking lot he (currently) resides.

[PhantomTheater]

^and yet he drives to said park.

[The Interpreter]

These days, he has probably been advised it is not wise from a security standpoint to walk to the park...

Some unit holders are doubtless less than pleased with him.

[TylerRider]

I have probably spent $300 out of the 30 times I went this year. Yikes! But last year if I went as much as I did this year the numbers would be in the $500s. I have spent less money each trip this year. I do believe it is the prices that keep me away. I do love most of the food. It really does leave a sour taste in my stomach to spend $10.00 on a meal.

This Is how I look at it...................

8.00 a meal. I will buy one meal

5.00 a meal. I will buy two meals

5.00+5.00=10.00-8.00=2.00

WOW that's a 2.00 Increase!

[The Interpreter]

Yes, but if their cost for either meal is $2.75 (just sayin)...they make $5.25 if you buy one meal at $8, but only $4.50 if you buy two meals at $5 each.

Terp, just sayin'

[bkroz]

I have probably spent $300 out of the 30 times I went this year. Yikes! But last year if I went as much as I did this year the numbers would be in the $500s. I have spent less money each trip this year. I do believe it is the prices that keep me away. I do love most of the food. It really does leave a sour taste in my stomach to spend $10.00 on a meal.

This Is how I look at it...................

8.00 a meal. I will buy one meal

5.00 a meal. I will buy two meals

5.00+5.00=10.00-8.00=2.00

WOW that's a 2.00 Increase!

Right, that's what I'm sayin'! Not claiming to have crunched any numbers or anything, but I swear that if the food cost half as much, three times as many people would buy it... How that wouldn't end up as at least a little more income, I do not know. We're not talking about gourmet food, here... It's hamburgers, hot dogs, and soft drinks. If the price of a soft drink dropped from $4.00 to $2.25, they'd sell at least twice as much, right? And how could that not be straight income, considering it's the same soft drink that McDonalds can sell for $1.00? It seems so elementary to me, but what do I know of finances?

Terp makes a good point with the $5.25 and the $4.50... But if the theoretical price drop were to happen, we're talking 1000(meals sold) x $5.25, or 2000 (meals sold) x $4.50... Even 1500 x 4.50 is a significantly greater income. That's under the assumption that lower prices would incite more people to buy the food, which I truly think it would.

[The Interpreter]

There is a point at which profit is maximized...charge less and you give up money.

That being said, I still think food pricing can keep people from coming to the park at all...though attendance figures this year would seem to suggest that level has not been reached.

I do NOT understand why they don't offer a season pass across the board discount on food and merchandise...they already know season pass people buy less stuff....make it worth their while and they will buy more...incremental profits!

[bkroz]

I do NOT understand why they don't offer a season pass across the board discount on food and merchandise...they already know season pass people buy less stuff....make it worth their while and they will buy more...incremental profits!

Right. When I go to the park, I have very little use for "four pizzas for the price of three" or "a half-off buffet when you get five adult ones!" It's a gimmick at best, and seems more of an afterthought than a true benefit. Besides that, I often visit the park with friends, all of whom have their own passes. The last thing on our minds is to have one person pay for four and a half buffets, then have everyone trying to find cash to divide the total price by five and pay that person back and then have I.O.U.s floating around forever and such... Even if we did, half off one buffet? That would save everyone about $1.00...

And even if they did invent a semi-convenient dining system (like Disney, 10% off across the board with one pass, 15% with another), there's no denying that, for young, mobile, hungry teens, it would still be more convenient to walk to the car, pig out at Wendy's for $7.00, and then drive back. Unless there's a real deal that makes the in-park food at least comparable to that outside of the park, why would those who have the means to leave chose to stay? Kings Island is highly season-pass driven. It is not a destination park for everyone. At Cedar Point, people may plan for months and move the family across state lines to visit - they anticipate and expect to buy park food. At Kings Island, that's not as realistic, and they should know that.

[The Interpreter]

Sunday night, I had an excellent meal in the Fest Haus...a fine Italian dish, exquisitely prepared, and no more expensive than I would expect anywhere else...a delightful salad with crisp greens seemingly just picked, and scrumptious carrot cake of the highest quality, and an iced tea....The server was cheery, and there was a nice atmosphere in which to sit and eat...I could even see my food!

Oh, wait...that was Busch Gardens Williamsburg!

[bkroz]

Meanwhile, I once had a meal in Kings Island's Festhaus. Amid the spectacular, authentic German setting (complete with giant claw machine), I had $12.00 sweet and sour Asian chicken with one (count 'em, one) microwaved egg roll while tapping my feet along to the vocal stylings of "Down Home Country!" Yeehaw!

It was an experience that attacked my cultural senses from most every level (or, three continents, at the very least).