Cedar Fair Forging Its Future

By Greg Sushinsky | November 04, 2010 AAA

Amusement park owner Cedar Fair LP (NYSE:FUN) reported revenue and attendance increases for the third quarter. Net income fell due to debt refinancing and costs related to the earlier failed takeover attempt by Apollo Management, as well as other charges. Cedar Fair also announced it planned to resume quarterly dividend payments next year.

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Earnings Overview
For the third quarter, Cedar Fair earned $75.7 million or $1.36 per partnership unit, compared to $107.6 million or $1.92 per partnership unit in last year's quarter. A $35 million loss was taken for the early extinguishment of debt. The company believes adjusted EBITDA is a more meaningful measurement of its performance, and its adjusted EBITDA was $299.7 million compared to $276.9 million in Q3 last year.

Consumers Return to the Parks
Cedar Fair increased attendance at its parks by 5% or 547,000 during the third quarter. The company cited new rides and innovative marketing plans, as well as gains in season pass visits, group sales and greater occupancy at its resorts. For the first nine months of the year, attendance was 19.8 million, an increase of 6%. October attendance, after the end of the third quarter on September 30, showed a 29% increase from last year's October figures, and puts Cedar Fair's attendance at 22.2 million compared to 20.6 million for the first ten months of 2009.

Cedar Fair's Turnaround
Cedar Fair's performance shows its business turnaround compared to the depths of the recession. Saddled with debt from its purchase of Paramount's Parks, along with falling attendance and revenue, the company suspended its dividend payment and had to fend off a takeover attempt. That Cedar Fair has fought its way back in a difficult industry is impressive. Six Flags Entertainment (NYSE:SIX), which traveled through bankruptcy, is trying to rebuild its business and stabilize its earnings. Great Wolf Resorts (Nasdaq: WOLF) is facing possible loan defaults and shrinking business.

The difficulties in the travel and leisure industry aren't confined to the amusement park operators, as Vail Resorts (NYSE:MTN) has seen earnings and revenue fall off throughout the recession. On the other hand, some gaming resorts, Las Vegas Sands (NYSE:LVS) and Wynn Resorts (Nasdaq:WINN), are flush with business and their skyrocketing stock prices have been the market's reward.

Cedar Fair's Position
Cedar Fair has been restructuring its balance sheet, refinancing its loans, and so pushing out its debt maturities. The company currently holds cash and equivalents of $61.7 million, with long-term debt still at $1.574 billion but without the press of so much near-term repayment. Due to its refinancing activities, cost-cutting, and improved cash flow, Cedar Fair is in a better liquidity position than it was prior to Apollo's takeover bid.

Add to this the steady improvement in its business the company now projects $965 to $980 million in 2010 for its full year revenue, the scheduled resumption of $20 million in distribution payments to shareholders scheduled to begin next March, and it's clear that the breathing room Cedar Fair fashioned for itself after the takeover attempt is clearly paying off. Cedar Fair is still a true pure play amusement park owner and by far the best of a limited group, if you include Six Flags and Great Wolf. The stock has steadily climbed in the last year, as Cedar Fair moves from the survival mode onto better things. (Learn why it may be profitable to invest in beaten down stocks in Buy When There's Blood In The Streets.)

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