Dueling Fools: Cedar Fair Bear Rebuttal

Like a carnival sideshow barker, my Foolish rival Chuck Saletta does a great job of titillating an audience. When he points out that operating income has clocked in 61% higher over the trailing four quarters than it did over the 12 previous months, I begin to wonder whether I'm wrong to cast myself as the bear this week.

However, just as Chuck asked you to dig deeper, I'll ask you to dig deeper still. Tiptoe past Chuck's praise, a few line items further into Cedar Fair's (NYSE: FUN) income statement, and you'll get to the real freakshow taking place here.

	12 Months Ending 6/24/07	12 Months Ending 6/24/06	Y/Y Change
Operating Income	$216,595	$134,584	60.9%
Interest Expense	$143,513	$28,097	410.8%
Pre-tax Income	$69,007	$106,487	(35.2%)

All amounts in thousands.

Operating income is mostly fair, in that it comes after deducting the huge chunk of depreciation and amortization expenses that Cedar Fair has incurred in its feeding frenzy. What about the debt, though? The company may have generated $82 million more in operating profit over the past year, but it also had to fork over $115 million more in interest payments.

I'll concede Chuck's point that the cash flow picture doesn't look too shabby, but I wouldn't wait for Cedar Fair to keep the distribution hikes coming -- especially with so many hungry venues to feed. If Cedar Fair wants to take its regional parks to the next level, do you really think it can keep forking over $100 million to its unitholders every year?

Here's a related question: What do the following major theme park attractions have in common?

• Expedition: Everest at Disney's Animal Kingdom
• Mission: Space at EPCOT Center
• Tower of Terror at Disney's California Adventure
• Spider-Man at Universal's Islands of Adventure

Well, they each cost about $100 million to build. Obviously, Cedar Fair can't spend that kind of money on turnstile magnets. Disney (NYSE: DIS) and Universal Orlando -- a park with well-financed investors from General Electric (NYSE: GE) and Blackstone (NYSE: BX) -- have the luxury of year-round operation.

However, Cedar Fair stresses the need to add new E-ticket attractions to bring guests back guests. I can't be the only one concerned that a slow Cedar Fair will have to be stingy to stretch its stagnant greenbacks across a wider swath of parks. With turnstiles getting rusty at many of the company's locations, we may get to the point where it's forced to improve its attractions at the expense of yield-demanding investors.

That day may be coming sooner than we think.  

Think you're done with the Duel? Think again! Go back and read the other entries, sound off on Motley Fool CAPS, then vote for the winner.

Disney is a recommendation for Motley Fool Stock Advisor subscribers. Cedar Fair is an Income Investor selection. Go for a free ride on either newsletter service with a 30-day trial subscription.

Longtime Fool contributor Rick Munarriz enjoys taking his family on coaster treks over the summer. He does own shares in Disney and 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's disclosure policy advises against riding the Tilt-A-Whirl.