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.
