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Published: Tuesday, 6/8/2010

Cedar Fair fun runs short

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER

SANDUSKY - As he looked at Cedar Fair LP's board of directors seated on a stage before him, Dan Hellriegel of suburban Cleveland could barely control his anger.

"They should be hung," he said prior to the Sandusky amusement-park firm's annual shareholders meeting downtown yesterday. "This stock has been very good for many years, but they have ruined it for many people," he said.

Several of about 150 investors asked Chief Executive Officer Richard Kinzel about the firm's suspended dividend and executive compensation levels after a poor fiscal year.

The firm suspended its quarterly dividend in November, when it paid out 25 cents a share, or equal to $1 a year. Two years ago, it paid $1.90 a share dividend. Smaller shareholders coveted that payout, which offset some tax liability for those investors.

"You guys are the ones that pretty much drove this thing into a ditch, and I think your compensation package is a crime," Patrick Lysobey of North Royalton, Ohio, said. "More of the compensation should be coming down to the real owners of the company, the [shareholders]. I really think it is unfortunate that bonuses of any kind were paid for last year."

Mr. Kinzel's salary was $1.3 million last year and he was paid a bonus of $1.196 million, the first up by $50,000 from the year before and the second down by $79,000 from 2008. He also received stock awards and other benefits. Other senior executives received salary increases but bonus decreases last year.

With limited other venues to express their displeasure, some shareholders withheld their votes from three directors up for re-election, including Mr. Kinzel. But they won three-year terms without opposition and with majority support.

"They have a right to be disappointed," Mr. Kinzel said later. "The distribution [dividend] went away. We had 22 straight years of increased distributions where it went up every year. It was almost like an entitlement program. Unfortunately, with what we faced in the economy and the weather last year, we just weren't able to sustain it."

The firm, which owns Cedar Point and more than 16 other amusement and water parks nationwide and in Canada, is expected to name two new board members by this morning.

Its main shareholder, Q Funding III LP and Q4 Funding LP - together called Q Funding Investments - reached a deal with management to add two board members. Q Funding has sought more input into the reorganization of Cedar Fair's $1.6 billion debt and a dividend reinstatement to at least 50 cents a share a year.

Responding to a question, Mr. Kinzel explained the dividend suspension. He said Cedar Fair's economics turned upside down in 2009 when the economy collapsed and its debt came due. "Unfortunately, the world changed and we really got up against the wall with what is, in effect, our mortgage," he said.

He later said that paying a dividend when its debt ratio was more than 4 times its annual pretax earnings would be in violation of its loan covenants. The ratio is above 5 times its annual pretax earnings.

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.



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