Attendance and revenues had started to perk up at Cedar Fair (NYSE: FUN) this summer, and now shareholders have solid evidence of the improvement. The company grew third-quarter operating income by 6.3% on revenue increases of 5.5% for the quarter. Adjusted EBITDA, which the company says (and I agree) is the best way to judge park operating performance, screamed up almost 10%, to $339 million. These results were assisted by a $4.2 million drop in operating expenses and a $4.8 million bungee-drop in selling, general, and administrative expenses, but don't be fooled -- the earnings are impressive.
These results must come as a welcome relief to management. Attendance is on the rise, and it's only getting more crowded at the parks. The first 10 months of the year saw an 8% increase in park attendance. This represents 1.4 million additional paying customers. With average in-park guest per-capita spending of $39.30, that's a huge addition to the top line and it makes all the difference in the bottom-line results.
October, in particular, was fun for the company and customers. Revenues were up 25% on a 20% increase in attendance. Those are blockbuster numbers for a company that was on the verge of a below-market value buyout earlier this year.
How encouraging is all this news? With Great Wolf Resorts (Nasdaq: WOLF) howling in pain from continued losses, Vail Resorts (Nasdaq: MTN) still struggling to emerge from the tough economy, and Six Flags Entertainment (NYSE: SIX) having had to restructure under Chapter 11, Cedar Fair is actually going to start making distributions again early next year of $0.35 per limited partner unit, which is a yield of 2.5%.
More conservative investors seeking a more diversified entertainment business can always invest in Walt Disney Co. (NYSE: DIS). However, investors interested in a pure-play amusement park company should give Cedar Fair's rides a serious look. The turnaround has clearly taken hold, and the stock remains only $3 above its $11.50 buyout offer.
Matthew Brown does not own shares of any company mentioned. Walt Disney is a Motley Fool Inside Value selection. Walt Disney is a Motley Fool Stock Advisor recommendation. Vail Resorts is a Motley Fool Hidden Gems selection. The Fool owns shares of Vail Resorts. 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. The Motley Fool has a disclosure policy.
