Cedar Fair's Big Fat Geek Wedding

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In a transitional year that found Cedar Fair (NYSE: FUN) swallowing down amusement-park rival Paramount Parks, this morning's fourth-quarter results from the thrill haven won't leave much of a mark.

The regional park chain posted a small operating loss for the quarter that ended in December. That's a contrast to the slight profit the company squeezed out a year earlier, but it's understandable. This is a seasonal business, and most of the company's parks close when October's Halloween-themed events wrap up. In fact, if you back out the new parks, Cedar Fair actually improved its financial performance for the typically sleepy three-month period.

However, dig one line below the operating results, and you see the biggest difference between the 2006 and 2005 incarnations of Cedar Fair. Interest expense shot up from $6.4 million to $38.1 million because of the debt that the company incurred in acquiring the Paramount Parks properties from CBS (NYSE: CBS). Cedar Fair used to have less than $500 million in long-term debt; now it's lugging around $1.8 billion.

Don't freak out on me, now! This is perfectly reasonable. Go back to the very top of the income statement, and you'll find that revenues shot up 54% during the period. This is the price -- and the benefit -- of non-organic growth.

The real key to Cedar Fair as we head into 2007 will be how well it integrates the new parks. In pitching the deal, Cedar Fair promised margins superior to what Paramount Parks had been generating. Unfortunately, we'll have to wait another season or two to see whether that's true.

You can't lay too much blame on Cedar Fair for that rosy outlook. It struck the deal for Paramount Parks just as the 2006 operating season was getting started. The same caveat applies to rival Six Flags (NYSE: SIX), where new leadership took over just months before the start of the 2006 summer season.

This doesn't mean that we can let Cedar Fair off easy, though. On a same-park basis, revenue and adjusted EBITDA actually dipped slightly for all of 2006, even if you back out the Paramount purchase.

Cedar Fair has a lot of questions to answer in 2007. Will a new coaster at its flagship Cedar Point park get attendance climbing again? Will the Paramount Parks properties live up to their pre-deal billing? Can Cedar Fair's Knott's Berry Farm hold up in California, after its nearby neighbor Disneyland saw a 5% attendance dip in the most recent quarter?

The turnstiles know, but they're not telling.

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Longtime Fool contributor Rick Munarriz enjoys taking his family on coaster treks over the summer. He did his part by staying over at Cedar Point for a few days back in June. He owns units in Cedar Fair. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.