Buying it to close it?

Responding to the reoccuring, "they're gonna sell, sell, sell that land theory:"

Why would you pay for all that land, and then go and sell it to a developer to build houses/condos? All you're doing there is inviting more people to the City Counsil Meetings to complain about the traffic and noise generated by the park. There are already enough people in that area that think they remember a kinder/quieter time before Geauga Lake was there.

It's been said that it will be difficult to "turn the park around."

What's to turn around? The park has been making money. Not a lot of money, but it has been profitable. Six Flags' biggest problem with the park is that they tried to go head-to-head with Cedar Point, and Cedar Point ate their lunch. They promised Disney World and delivered Old Town. Meanwhile, just down the road, Cedar Point promises Cedar Point and delivers Cedar Point. The park was "hemhorraging money" only in the cap-ex required to try and beat Cedar Point.

What Cedar Fair is going to do now is what Six Flags should have done for the past three years. They're going to promise Geauga Lake. They're going to deliver Geauga Lake. They're not going to try and out-class Cedar Point. Unless Cedar Fair does some cross-promotional stuff, they will probably ignore the fact that Cedar Point even exists. And I expect it will pay off handsomely in the end.

I said it years ago: The pie is big enough to go around. But instead of joining in, Six Flags decided they would rather try to have the whole thing. They gambled that the Six Flags name was a more powerful marketing tool than Cedar Point's 130 years of reputation. They paid their money, they took their chances, and they lost.

--Dave Althoff, Jr.

My point isn't that Cedar Point got robbed on this deal, only that the deal wouldn't make any sense to buy the park and canabalize it for the assets themselves or as someone suggested to wait out Six Flags until they go bankrupt to pick up the park cheaper.

Dave's analysis of Six Flags marketing mistake is dead on I believe. Even a Six Flag exec told some analyst a while back that it was a big mistake to try to market the park as better than Cedar Point.

I'm not sure I'd say that the park was making money. Remember that the $16 million is an EBIDTA (earnings before interest, depreciation, taxes and amoritizaton) figure. Consider that all of those things had to be taking a huge chunk out of that for Six Flags.

------------------
Jeff - Webmaster - GTTP - My Blog
Blogs, photo albums - CampusFish
What time does the water show start?

Is it? The Cedar Fair press release isn't that specific, and says, "...over the past three years the park has averaged revenues of approximately $64 million and cash operating profit of approximately $16 million."

I wasn't sure if "cash operating profit" would be EBITDA or net.

In any case, it sounds like the park is at least breaking even. If it does that, there's no ROI, but there's no loss either.

--Dave Althoff, Jr.

Jeff, the $16M is "operating income." Here's the quote from Cedar Fair's press release: over the past three years the park has averaged...cash operating profit of approximately $16 million.

It's actually absurd for a capital-intensive company like Six Flags to try and use EBITDA in any meaningful fashion (that doesn't stop them from quoting it as a measure in their SEC filings, LOL.)

Here what Six Flags did (overall) in 2003:
Operating profit: $186M
Net income: MINUS $95M

Assuming similar performance among parks, it implies GL was losing $8M a year (probably not a bad guess if you want to start somewhere...)

Again, it's not inconceivable that Cedar Fair can turn the park around. I just question whether the money spent there will EVER pay off as it would if it were spent at CP or any of their other parks.

Looking at it another way, can GL really survive with a $5.25 gate admission increase and $21 seasons pass price increase? BTW, that would just get them to "break even," based on the above numbers (assuming season pass holders go 4 times a year and 2003 attendance was 1.5M.)

------------------
Hey, I heard a rumor that Millennium Force is sinking...

Using EBIDTA as a measure of success for a company that carries that much debt makes a ton of sense. Their interest payments are huge!

Regardless of what the press release says, they said in the conference call that the $16 million was an EBIDTA figure.

------------------
Jeff - Webmaster - GTTP - My Blog
Blogs, photo albums - CampusFish
What time does the water show start?

---

"Using EBIDTA as a measure of success...makes a ton of sense.

---

Gee, it would be nice to evaluate how I was doing by ignoring payments on all my loans plus my federal, state & local income taxes (a pseudo-consumer EBITDA if you will.) I'd feel rich beyond my wildest dreams! Ah, but that's far from the truth. LOL! Those expenses are real.

Not only does looking at EBITDA make no sense for a capital-intensive operation like an amusement park, it borders on "fraudulently misleading" IF presented alone without a corresponding "net income" number (or some statement of reconciliation between the two.)

If the accounting profession had any integrity left, they wouldn't allow a press release stating ONLY an EBITDA number for an amusement park. (Don't worry, I'm not holding my breath waiting for the day it changes. I'll just continue digging through the SEC filings and making my own judgments.)

You seem to be saying it makes "a ton of sense" to ignore the cost of the rides (depreciation) when evaluating a company like Six Flags (or Geauga Lake.) Those costs are EXCLUDED in an EBITDA number.

------------------
Hey, I heard a rumor that Millennium Force is sinking...

I never said it made common sense, just sense in terms of making things look better than they actually are (as you've described). Every dot-com did this, and in fact my former employer did the same thing. It painted a much more rosy picture in press releases. We're arguing the same thing!

------------------
Jeff - Webmaster - GTTP - My Blog
Blogs, photo albums - CampusFish
What time does the water show start?

I understand that the parks are two hours apart, and I believe that they wouldn't buy it to close it. They are close, but they can reach two totally different markets. Geauga Lakes reaches out to Pennsylvania, and has a committed local following while Cedar Point has that market and much more. But the two parks both have great numbers and revenue would be great, so why close both parks when they both are very successful.

------------------
Life has it's ups and downs, might as well make it on a coaster!

Thats a good point khommy84. I don't think that they will close the park because they benifit from people going to either park.

I understand that WOA never saw a profit, after all it's been three years since bonuses were handed out. But that should be chaulked up to poor management more than anything i think. GLP/SFO always saw great profit margins even with attendance half that of CP. Cutting the overhead and putting their own people into place should make the odds of turning a profit with GLP this year quite feasable, even if attendance drops to old GLP attendance numbers around or under 1.5 mil. I can't see any reason why CF would close the park, in the long run it can make incredible dollars for the parent company. The market is just to strong i think.

This is truly an undertaking in the theme park industry, what to do with a 'White Elephant' (Sea World) side of the park,, The Geuaga Lake side is rather simple and CF can bring back the fond traditions and memories and do it welll (their cornerstone of management). however the current search for an answer to the "Other Side" is still up in the air ,, Move all the swimming (Water Park) attractions to the Sea World side seems to be a choice (inside rumors) and to build a smaller Breakers (convention style) indoor water park.... good idea ,,,,, But ,,,, In the next few years , From what my insiders tell me , It will be a slow go .. If we all support Geauga Lake will be the teller !,, they get tax breaks if they dont use the other side!! Hint Hint

I seriously dont believe that CF bought this park to close it. Parks two hours from each other can co-exist just fine. For over 100 yrs these two parks have survived, Kwood is two hours from GLP and those two parks did fine for over 100yrs. Its kinda like fast food, how many times do you see McDonalds, Burger King, Wendy's and Arby's all on the same street corner and all have full lots? Will this be the next CP? Hell, Maybe, they have the land but it'll take years to get to that level. In reality both "super" parks can co-exist we see it in Florida and Californa. With PKI 3-4hrs from either park building GLP to CP status could creat a Florida-like area in Ohio. Again in reality will CF do this, probably not, but its also another possiblity. All things are possible, theres even rumors flying now that Busch is back looking at the old Sea World property. If you told me this a month ago I would have said you're an idiot but I would have said the same thing about CF buying SFWoA. All things are possible, but the thought of closing this park down and relocating the rides is ridiculus in my opinion. CF will make a butt load of money from this park, it'll just take time bringing the people back, and removing the SF name is the first step.

------------------
GL rides sup 2004

One other thing...

Don't count on Cedar Fair cutting overhead and expenses. I'll wager that Cedar Fair will find that they spend MORE on Geauga Lake than Six Flags did (well, on the portion that they are using, anyway). The difference is in HOW the money is spent.

The key here is a difference in operating philosophy. Cedar Fair is operated by amusement park experts who know where to spend money to maximize their ROI. If that means spending a large fortune to keep a signature attraction operating, that's what they do...because they know that expenditure will ultimately pay for itself. Six Flags, on the other hand, is operated by business people who don't understand the amusement park business well enough to know where they are wasting money and where they desperately need to spend a few bucks to make the company work better.

Personally, I think that a park dominated by merchandise is going to be taken over by operations and maintenance this year. And ultimately merchandise will benefit.

--Dave Althoff, Jr.

There has been some talk for the past few years that Anheuser Busch may be looking to get out of the theme park business in the not-too-distant future. As is happening with a lot of corporations these days they may be looking to focus on what they do best...beer.

If that is the case then it would be logical that they would sell of the two Busch Gardens parks as well as the three Sea World Parks. Here is a BIG hypothetical:

Say Cedar Fair were to get it's hands on the Busch parks. Would it be completely out of the question for Shamu to return to Aurora at some point? I'm not sure I really take this idea seriously but it is interesting food for thought.

------------------
"You can dream, create, design and build the most wonderful place in the world...but it requires people to make the dreams a reality."