http://www.fool.com/News/mft/2006/mf...gvisit=y&npu=y

By Rick Aristotle Munarriz (TMFBreakerRick)
August 1, 2006

Blue Streak isn't just one of the oldest rides at Cedar Fair's (NYSE: FUN) flagship Cedar Point amusement park. After last night's second quarter report that found the regional operator coming up short for the fourth time over the past five quarters, investors are coping with a different kind of blue streak.

Sluggish attendance at several key parks found the top and bottom line dipping at a time when analysts figured the company would be taking steps in the right direction. Net revenues dipped 2% during the June quarter to hit $145.4 million. Profits per unit fell from $0.22 to $0.20. Wall Street was looking for earnings to check in at $0.30 a unit on a 4% uptick in net revenues.

It's a problem. Cedar Fair figured that the best way to combat last year's flat performance was to decrease admission prices at many of its key parks like Cedar Point and Knott's Berry Farm. It also came up with a novel gimmick of selling sticks of cotton candy for a quarter.

The easy assumption was that attendance was going to spike at the parks but per-capita spending would suffer. That logic has been flawed on both counts. Through the end of July -- a month deeper into the telltale summer season -- attendance has fallen by 2% throughout its parks but in-park spending is only down less than 1%.

Knott's Berry Farm has held up better than Cedar Point. It joins Worlds of Fun as the two Cedar Fair parks that improved during the period, even if a lot of the gains at Knott's are due to the conversion of a Radisson hotel adjacent to the park into a park-branded resort.

Cedar Fair is going to be even harder to figure now that the $1.24 billion acquisition of the Paramount Parks chains from CBS (NYSE: CBS) was completed the day that the second quarter came to a close. There are synergies worth tapping into and opportunities worth unlocking even though the more likely scenario is that the favorable impacts of the merger won't materialize until the 2007 operating season.

We have Six Flags (NYSE: SIX) set to report later this week. It will provide an interesting contrast, since Six Flags chose to raise prices in order to subsidize experience improvements at the park level.

These are challenging times for Cedar Fair. The units haven't traded this low since the summer of 2003. Helping offset the malaise is the juicy 7.4% yield. That may help soften the blow, but maintaining the generous payout ratio that investors have come to expect out of Cedar Fair is going to be a real challenge if the company's finances don't improve.

Next year should be better. For starters, Cedar Point will finally get a new marquee coaster to market. Another kicker waiting to happen is for margins at the Paramount Parks chain to begin approaching the historical Cedar Fair metrics. Yes, there's plenty of upside in 2007, but even with so much of the current season yet to play itself out, 2006 is shaping up to be a wash.

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Longtime Fool contributor Rick Munarriz enjoys taking his family on coaster treks over the summer. He did his part by staying over at Cedar Point for a few days back in June. He owns units in Cedar Fair. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.