Cedar Fair LP said Thursday it expects a record dividend in 2013 and foresees higher revenues because of new initiatives that include a fresh ad campaign, more e-commerce via updated Web sites, a nighttime light show at Cedar Point to get customers to stay longer, and "fast lane" programs at all 11 parks that let customers pay extra to bypass long lines on popular rides.
"We believe there are substantial growth opportunities available to us," Matt Ouimet, Cedar Fair's new chief executive officer, told Wall Street analysts in New York during his first investor presentation since replacing the company's longtime leader, Dick Kinzel, this month.
During the two-hour presentation, Mr. Ouimet, 53, a former executive with the Disney Co. who was chosen in June to replace Mr. Kinzel, outlined his vision for the Sandusky-based amusement park company, a plan he called "New Fun" -- a word play on the company's FUN ticker symbol on the New York Stock Exchange.
Financially, Mr. Ouimet said Cedar Fair's primary goal is attractive returns for its shareholders. He said the company will continue its $1.60-a-share dividend this year, but expects a record dividend "of more than $2" a share in 2013. On Thursday, Cedar Fair's stock closed up 60 cents a share at $24.53.
With a debt load still at $1.56 billion and 2011 revenues expected to be at $1.03 billion when the company reports its earnings Feb. 21, Cedar Fair said it expects modest sales growth in 2012. But the company ended 2011 with $35 million in free cash flow and it expects to increase its free cash flow by $50 million beginning in 2013 because of interest reduction on its outstanding debt, Brian Witherow, the company's chief financial officer, said. By 2016, Cedar Fair expects to show a compounded annual growth rate of 4 percent, with its adjusted earnings before interest, taxes, depreciation, and amortization, or ebitda, reaching $450 million.
Mr. Witherow said 2011 adjusted ebitda earnings are expected to be $375 million.
Mr. Ouimet said Cedar Fair's expected higher dividends will hinge on earnings growth. The company expects to achieve growth through a number of moves, some already implemented and others announced Thursday by the CEO.
In November, Cedar Fair hired a new ad agency, Cramer-Krasselt of Chicago, to handle its strategic planning, branding, advertising, media buying, and other duties for its 10 U.S. amusement parks. Mr. Ouimet said the agency created a new ad campaign based on multigenerational memories of the company's parks with the goal of getting customers to come to the parks as a family.
Cedar Fair also is updating its parks' Web sites to accommodate more e-commerce and drive customers, Mr. Ouimet said. On Wednesday, Cedar Point debuted its new Web site and unveiled a two-price ticket strategy -- a one-day adult ticket for $44.99 if bought online, and $51.99 if bought at the gate.
"We want to train the consumer to know the best ticket value is on our Web site," the CEO said.
Another change recently implemented is allowing Cedar Point and other parks to offer season passes paid for on an installment plan of four equal payments.
Mr. Ouimet said the installment plan could be "one of the most impactful changes the industry could make" and eventually embed visits to a Cedar Fair park into a customer's routine by giving them time to budget for it, essentially paying a portion each month like a cable TV bill.
"For us, such a model would improve cash flow, reduce annual insurance, reduce our marketing costs for seasonal passes, particularly where we spend a good chunk of our marketing money, and most probably increase the seasonal pass holders' spending when they do visit," he said.
The CEO said he is implementing several small changes at the company's parks, including never-frozen fresh hamburgers at all its hamburger stands, and early entry programs for guests staying at Cedar Fair resorts or its resort partners.
In the future, Cedar Fair will continue testing new ideas at one park and, if successful, deploying them at its other parks the next year.
Based on a test last season, the company will implement "Fast Lane" -- a program tested in July and August at Kings Island park near Cincinnati -- at all of its amusement parks this season.
Fast Lane charges customers $50 over the admission price for the privilege of jumping to the front of the line for every popular ride. Each park will limit the number of Fast Lane passes sold each day so as not to disrupt customers who do not buy Fast Lane.
Mr. Ouimet said that for the half-season Fast Lane was used at Kings Island, it generated close to $1 million in revenue.
This season Cedar Fair will test a new light show, "Luminosity -- Ignite the Night," at Cedar Point. If successful, the combination of lights, fireworks, and music will be duplicated at all Cedar Fair parks.
Cedar Point spokesman Robin Innes said the park is finalizing details of Luminosity, but it will be held at a fixed spot on the Cedar Point midway nightly beginning in June. The idea had been under consideration for a while, he added.
Mr. Ouimet said that from his 17 years working at Disney, he learned that there are just two things that keep people at a park through dinner -- lights and fireworks.
"You are trying to keep them through the dinner or keep them late enough. They stay in a resort and come the next day. … We've tried everything throughout the industry forever and the only thing is lights and fireworks, and the reason that works is because you can't do it 'til after dark. It's just structural," he said.
Contact Jon Chavez at: firstname.lastname@example.org or 419-724-6128.