Tuesday, November 6, 2012

Cedar Fair's Record Financial Results

Cedar Fair is on a bit of a streak with their earnings releases, as today they've again revealed record numbers through the end of the third quarter 2012.  The end of the third quarter - and October - marks the end of the big season for the company, with only a handful of properties still open for the rest of the year.

The full press release can be viewed here, and a conference call was also held today.  If there's any interesting news from that I'll update this article.*

All around, the numbers are up for the company:  Revenues increased $41 million, in-park per capita spending is up 4%, and attendance is up 1%.  Costs appear to have been held steady, as EBITDA was also up $15 million.

Much to the pleasure of investors, the company also announced an increase in the quarterly dividend for 2013, bringing it up to $2.50 per unit for the year.

October results were largely even with last year's record numbers, though revenues for the month were up slightly.  Halloween continues to prove to be a cash cow.

Leviathan © Canada's Wonderland
The release also noted that both Canada's Wonderland and Cedar Point were the leaders in improved performance this year - so Leviathan paid off, and Cedar Point maybe did keep guests in the park longer - and with open wallets - with the addition of Luminosity.

Cedar Fair recently sent out a different press release trumpeting the chain's 2013 additions, though there really wasn't any big news in it that wasn't previously available.  From what I can tell a handful of parks have no 2013 capital news thus far, including Michigan's Adventure, Kings Island, Dorney Park, and Canada's Wonderland.

Luminosity © Cedar Point
The release does mention "numerous new shows and entertainment offerings" for the other parks, so perhaps Luminosity will indeed spread next year?  I would wager that it wouldn't be as big as it is at Cedar Point for many parks, but for those in need of keeping guests in the park longer it could be a great addition.  Taking the scale of the show down slightly to fit in better with smaller parks could be a smart way to spend some additional capital in 2013.

*  There have been some additional details that were in the conference call:

First, more specifics on which parks did well this year, which were listed as Cedar Point and Canada's Wonderland, but additionally Knott's Berry Farm and Dorney Park.

Mr. Ouimet also pointed out that they believe that keeping a portion of their cash flow set aside for construction and potential acquisitions is something they consider smart.  It has been some time since the words acquisition floated around in these calls, so while a small bit that's interesting to me.  Could be nothing, though.

There were record season pass sales in 2012, and those for 2013 are currently trending ahead of last year.  Even with all those pass holders, which usually decrease per caps, the company saw an increase of 6% in in-park spending.  Thank you, Fast Lane!

It sounds like the Thrills Connect ad campaign was deemed a success, and a second generation version of it will be used again next year.

The company recorded a $25 million impairment charge for Wildwater Kingdom in Ohio during the third quarter.  I suppose they've realized that all that land under Geauga Lake is worth... not much.

Mr. Ouimet also pointed out some interesting future capital expansion plans.  Typically the chain spends about 9% of gross revenues on capital expansions, but over the next few years they plan to spend an addition $15 to $20 million each year for the next three years. 

First off they plan to spend money to renovate the 800 plus hotel rooms on property at Cedar Point.  They want to be able to market them as good, better, best and have the pricing to match those categories.

Four parks do not have up to date and modern point of sale systems in place (Knott's, Worlds of Fun, Valleyfair, and California's Great America), but they will acquire them next season.  Once those are done all parks except for Michigan's Adventure will have modern systems in place.

The employee dormitories on Cedar Point will be relocated and modernized to open up space for future development on site.  Whether that's for more park space, or more rooms, or even retail/food I'm not sure.

Other "growth investments" in mid-tier parks will be done to help diversify the company's EBITDA, oh how I wish Mr. Ouimet would have expanded upon that idea!  Sadly, he did not.  That sounds like it could be anything from hotels to larger park expansions, an attempt at growing attendance base to a higher level.  Those are guesses, but I'd love to know what they're considering.