No joy for Six Flags

SANDUSKY Six Flags is flagging. But financial analysts who follow Cedar Fair, Cedar P
Tom Jackson
May 24, 2010



Six Flags is flagging.

But financial analysts who follow Cedar Fair, Cedar Point's parent company, say the rival amusement park's woes haven't hurt the Sandusky-based company.

On Saturday, Six Flags, which operates 20 theme parks in North America, filed for Chapter 11 bankruptcy. The company said it will continue normal operations at its amusement parks.

In a letter to employees, Six Flags president and CEO Mark Shapiro explained the step was necessary because the management team had inherited "an unsustainable $2.4 billion debt load."

"Furthermore, we have over $400 million of debt coming due within the next 12 months that cannot be refinanced in these financial markets," Shapiro wrote.

A competitor's bankruptcy has little to do with how Cedar Fair is doing, said Jeff Thomison, vice president of the research department at Hilliard Lyons, a wealth management company in Louisville, Ky.

"Cedar Fair has a long history of excellent operating results and superior guest feedback," Thomison said.

He noted that although 2008 was a recession year, Cedar Fair rose 1 percent in net revenues and 3 percent in attendance at its amusement parks.

And while Cedar Fair has its own problems with debt -- it's about $1.7 billion -- analysis of the company's cash flow suggests the situation is manageable, Thomison said. A Hilliard Lyons report estimates that in 2009, after the company pays interest on its debt, makes capital improvements, pays its taxes and makes its cash distribution to unit holders, it will have $86.2 million of cash left over.

Cedar Fair reduced its annual distribution per unit this year from $1.92 per unit to $1, but the figures suggest further cuts are unlikely, Thomison said.

Most of Cedar Fair's debt doesn't come due for three to five years, he said.

"I feel pretty confident they will be able to refinance that debt, possibly at lower rates," Thomison said.

Tim Conder, managing director for Leisure Equity Research at Wachovia Capital Markets, issued a statement saying his company continues to rate Cedar Point's units (listed FUN on the New York Stock Exchange) as ones that investors should buy.

"We believe regional amusement parks offer consumers a very affordable family getaway/vacation in the context of the challenging economic environment," he wrote.

Cedar Fair could pick up some extra attendance in markets where the two companies overlap, although "we believe this will be limited," Conder wrote.

Stacy Frole, director of investor relations for Cedar Fair, said what happens at Six Flags has little to do with her company.

"We really don't compete with them," Frole said, explaining that there is little market overlap between Cedar Fair's amusement parks and Six Flags. For example, the Six Flags park closest to Cedar Point is in Chicago, she said.

Cedar Fair's employees know they work for a profitable company, Frole said.

She said Dick Kinzel, Cedar Fair's CEO, was out of town and unavailable to comment on Six Flags' problems.