The Amusement Park Ride Isn't Over

By Rick Aristotle Munarriz | More Articles
January 12, 2011 | Comments (3)

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The past year has been a good one for the amusement park industry.

Shares of Six Flags (NYSE: SIX ) have soared roughly 60% since emerging from bankruptcy this summer. Analysts now see a profitable operator after its burdensome debt has been largely lifted, and Six Flags even initiated its first common stock dividend last month.

Universal Orlando's Islands of Adventure -- jointly owned by Blackstone (NYSE: BX ) and General Electric's (NYSE: GE ) NBC Universal -- is basking in the success of its new Harry Potter attraction. The park actually had to lock its entry turnstiles during several days over the holidays because it was at capacity, something that had yet to happen in the park's 11-year history.

Cedar Fair (NYSE: FUN ) beat the market in 2010 and recently announced an 8% uptick in attendance at its regional attractions on the year.

It may all add up to a good year for the industry, but Cedar Fair investors aren't impressed.

In a humbling vote yesterday, unit holders voted to strip CEO Dick Kinzel of his chairmanship. An independent chairperson will now be required. The second matter put to a vote -- incredulously proposing that Cedar Fair's emphasis should be on restoring its once chunky yield over paying down its debt -- is actually too close to call as of last night.

Yes, investors haven't exactly forgiven Cedar Fair since it accepted a buyout proposal 13 months ago. It represented a 27% premium at the time, but the price is far lower than where Cedar Fair is today. Unit holders voted down the offer under activist prodding, and it turned out to be the right call. Winning back trust has been a challenge ever since.

Making high quarterly disbursements a priority is nonsense, though. The thrill-park specialist recently reinitiated its distributions. Didn't these investors learn from Six Flags investors that were wiped out when its burdensome debt forced it into bankruptcy reorganization?

Despite the seemingly good year for regional operators, the coast isn't exactly clear. Bellwether Disney (NYSE: DIS ) posted flat results at its theme parks in fiscal 2010. Great Wolf Resorts (Nasdaq: WOLF ) is trading at a fraction of its post-IPO highs, as the operator of resorts with gargantuan indoor water parks is fighting a losing battle with its equally massive debt load.

Cedar Fair's investors appear to be getting the last laugh. Their message is being heard loud and clear. However, yield-chasing investors better be careful if they get what they wish for.

Regional parks taking on too much debt often leads to locked turnstiles -- and not in the Islands of Adventure "at capacity" way.

Are amusement park operators a good bet for 2011? Share your thoughts in the comment box below.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

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Walt Disney is a Motley Fool Inside Value recommendation. Walt Disney is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz loves hitting amusement parks, and he hit more than a few this past summer. He does own shares in Disney. 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.

Read/Post Comments (3) | Recommend This Article (2)

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Report this Comment On January 12, 2011, at 10:45 AM, LelandWykoff wrote:

Management got it wrong.
Again.
Kinzel and the Board of Directors were so confident in their plans and vision of the company.
If only those pesky owners of the company would leave them alone.
Why then they could extend golden-parachute plans to more relatives, grant stock options while keeping the unit price depressed via twenty-five cent dividends (then reap the value of the vested options expected to escalate once historic dividend levels are restored), and installing the Kinzel Kids to run the company.
Once again Management has failed to grasp the direction the owners of the company demanded to go.
While we do not have the final results on the dividend/payout, the fact the vote was so close as to be difficult to call sends a strong message to the Board--increase the dividend.
Today Unitholders fixed the staying on and hanging around problem Mr. Kinzel seems to suffer.
Retirement was scheduled years ago. Then he stayed on. Recently Mr. Kinzel made a generous offer to unitholders to stick around and serve as the Chairman of the Board following his retirement.
Thanks, but no thanks, Mr. Kinzel.
Cedar Fair has, quite frankly, grown beyond your skills to manage it. The vision for Cedar Fair must be more than amusement and water parks with a few hotels tossed in, almost as an after thought.
This day ushers in new fresh leadership, while ushering old stale ideas out.
To grow and prosper CF must have a wider vision and mission. This is a vision the company has failed to embrace.
Unitholders must now assist with the transition of the Board of Directors and top management to assure Cedar Fair moves quickly to a bright future.
A future which will build upon our past but will not be hindered by our past.
Thanks to all fellow Unitholders who voted with such conviction.
Unitholders rejoice.
Today the healing begins.
Report this Comment On January 12, 2011, at 11:32 AM, jumperky wrote:

If FUN goes bankrupt who benefits?
Report this Comment On January 14, 2011, at 9:52 PM, LelandWykoff wrote:

FUN has plenty of money to toss around. Without a care or concern of bankruptcy.
Rather than pay down debt, or issue dividends, Mr. Kinzel finds the priority to support local high school football:
http://www.sanduskyregister.com/2010/dec/02/footballmoneyjs1...
Notice Mr. Kinzel did not donate $500,000.00 of his own personal wealth.
No.
Rather Mr. Kinzel gave away our dividend.
Having taken home over $4 million in executive compensation Mr. Kinzel can well afford to fund his own charitable causes.
No two ways about it, 1) Debt is crushing and the top priority, for the survival of the company, is to pay it off quickly, or 2) funds are plentiful enough to allow Cedar Fair to grant $500,000.00 gifts with no material adverse impacts.
Which is it? It can not be both. Cedar Fair's actions say it is option 2.
So why not pay your investors their dividend?

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