40 slides from Six Flags Entertainment's proxy contest presentation, Dec 22, 2010
Slide 1: Schedule 14A Definitive Additional Materials
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy
Slide 2: Filing fee information
¨ Fee paid previously with preliminary materials. ¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule
Slide 3: Presentation materials made available to ISS
On December 22, 2010, Cedar Fair made available the following presentation materials to be used by Cedar Fair at a meeting with Institutional Shareholder Services:
Slide 4: Presentation to ISS
Presentation to ISS December 22, 2010
Slide 5: Forward-Looking Statements
Forward-Looking Statements Some slides and comments included here, particularly related to estimates, comments on expectations about future performance or business conditions, may contain forward looking statements. These statements may involve risks and uncertainties that are difficult to predict,
Slide 6: Additional Information About The Special Meeting Request
Additional Information About The Special Meeting Request This may be deemed to be solicitation material in respect of the Company's Special Meeting of Unitholders scheduled for January 11, 2011. On December 10, 2010, in connection with the Special Meeting, the Company filed a definitive proxy statem
Slide 7: Agenda
Agenda I. Overview of Company and Corporate Growth Goals II. Summary of Our Brief History with Q Investments III. Review of Q Investments’ Proposals IV. Appendix A: Details on Long-term Strategy V. Appendix B: EBITDA Reconciliation 4
Slide 8: Company Overview
Section I Company Overview 5
Slide 9: FUN: Attractive Value Proposition for Long-Term Investors
FUN: Attractive Value Proposition for Long-Term Investors Recognized innovative leader in regional amusement parks, water parks, resorts and active entertainment Attractive park locations and diverse geographical footprint High-margin, seasonal industry niche Significant barriers to entry Strong and
Slide 10: Growth Strategy in Place…
Growth Strategy in Place… Steadily grow attendance and revenues through continued investment in trend- setting new rides and attractions along with new targeted marketing programs Maintain strict controls over operating costs while maintaining “best-in-class” visitor experience Further reduce debt t
Slide 11: … and Delivering Desired Results in 2010
… and Delivering Desired Results in 2010 Revenues expected between $965 million and $980 million Projected Adjusted EBITDA between $345 million and $355 million 2010 Projected Cash Flow (in millions) Adjusted EBITDA $345 -$355 Cash Interest Costs ~$130 Cash Taxes ~$19 Capital Expenditures ~$85 Cash
Slide 12: Company on Strong Growth Trajectory – with Measurable Metrics in Place
Company on Strong Growth Trajectory – with Measurable Metrics in Place Our proven and stable business model should allow us to: Grow revenues by 10% to 14% by 2015 (~2.3% CAGR) Grow adjusted EBITDA by 10% to 14% by 2015 (~2.3% CAGR) Achieve free cash flows of $120 million to $140 million on an annua
Slide 13: Brief History with Q Investments
Section II Brief History with Q Investments 10
Slide 14: Brief History with Q Investments
Brief History with Q Investments Q Investments has held FUN units for just one year Since that time… Its principal – Geoffrey Raynor – was offered a seat on the Board (he declined) It has stated in an SEC filing its interest in merging the company with Six Flags, a company that just emerged from ban
Slide 15: Brief History with Q Investments
Brief History with Q Investments Q Investments’ actions over the past 11 months suggest that the short-term interests of their hedge fund investors are not aligned with the best interests of all Cedar Fair unitholders The short-term focus of Q Investments is evident by the fact that, according to it
Slide 16: Review of Q Investments' Proposals
Section III Review of Q Investments’ Proposals 13
Slide 17: Summary – Overview
Summary – Overview Special Meeting of Unitholders: January 11, 2011 Proposal 1: to consider and vote upon a proposal from Q Investments to amend the Partnership Agreement to require the implementation of a policy providing that the Chairman of the Board of Directors of the General Partner be an inde
Slide 18: Summary – Implications
Summary – Implications Proposal 1: Weakens Cedar Fair by requiring changes to the Company’s by- laws that puts unnecessary restrictions on the pool of qualified succession candidates going forward Proposal 2: Favors Q Investments’ short-term hedge funds investors over the Company’s long-term investo
Slide 19: Proposal 1: Succession Planning
Proposal 1: Succession Planning 16
Slide 20: Proposal 1: Succession Planning
Proposal 1: Succession Planning Proposal Would Restrict FUN’s Growth Potential by Unnecessarily Shrinking Pool of Qualified Candidates Implementing such a policy that so restricts who could be considered as a possible CEO successor will not result in strengthening the Company’s corporate governance
Slide 21: FUN Has a Strong Track Record of Sound Corporate Governance Practices
FUN Has a Strong Track Record of Sound Corporate Governance Practices While there is no set policy regarding Executive Chairman, the Board believes the most effective leadership model for the Company at this time is for Dick Kinzel to continue as Chairman and CEO through his contract term ending Jan
Slide 22: Current Board and Committee Structure Ensures Independence
Current Board and Committee Structure Ensures Independence Lead independent director – Michael Kwiatkowski Seven of nine Board members meet NYSE independence requirements All members of Audit, Governance and Compensation committees are independent Two directors designated by Q Investments recently j
Slide 23: Proposal 2: Use of Cash
Proposal 2: Use of Cash i een
Slide 24: Proposal 2: Use of Cash
Proposal 2: Use of Cash Q Investments’ proposal needlessly jeopardizes FUN’s financial flexibility by putting short-term gains ahead of the long-term health and total returns of the Company In the first half of 2010, the Board carefully evaluated a wide range of financing options and use-of-cash sce
Slide 25: Commitment to Distributions Is Critical Piece of MLP Structure
Commitment to Distributions Is Critical Piece of MLP Structure FUN has demonstrated its commitment to distributions to unitholders over its history and has reconfirmed its commitment to growing distributions moving forward $2.50 More than $1.4 billion paid in distributions since 1987 $2.00 $1.87 $1.
Slide 26: FUN Maintains an Unwavering Focus on Sustainable, Long-Term Value Creation
FUN Maintains an Unwavering Focus on Sustainable, Long-Term Value Creation for All Unitholders The Company’s long-term growth strategy is designed to provide unitholders with a strong and sustainable distribution and comprises: steady reinvestment in the parks and targeted marketing programs to gene
Slide 27: Debt Refinancing Critical Component of Prudent Fiscal Policy
Debt Refinancing Critical Component of Prudent Fiscal Policy Cedar Fair is targeting a long-term capital structure that provides a low cost of capital, cushion against downside scenarios and ample liquidity to finance future growth and distributions Stronger credit ratings will provide lower cost of
Slide 28: Since Our Focus Turned to Debt Reduction, the Units have Recovered and Outperformed
Since Our Focus Turned to Debt Reduction and Capital Structure, the Units have Recovered and Outperformed Unit price performance one year prior to distribution suspension Unit price performance since distribution suspension FUN S&P500 FUN S&P500 150% 225% 112% 200% 125% 14% 175% 100% 150% 75% 125% 1
Slide 29: Analysts Support Debt Refinancing
Analysts Support Debt Refinancing Four out of five equity research analysts recommend FUN with a “buy” rating “We believe debt retirement is a more compelling use of “We believe fears surrounding maturities and covenants cash flow in the near term and consider that to be the on debt were the biggest
Slide 30: Achieving Long-term Growth
Achieving Long-term Growth The Company’s long-term goals are obtainable because the Company refinanced its debt in July 2010 to provide the financial flexibility – and balance sheet strength – necessary to take full advantage of its long-term growth potential 27
Slide 31: Board Unanimously Recommends Unitholders Vote AGAINST the Proposals
Cedar Fair’s Board Unanimously Recommend Unitholders Vote AGAINST the Proposals Submitted by Q Investments 28
Slide 32: Appendix A: Details on Long-term Strategy
Section IV Appendix A: Details on Long- term Strategy 29
Slide 33: Achieving Long-term Growth: Revenue Goal
Achieving Long-term Growth Goal: Grow revenues by 10% to 14% by 2015 (~2.3% CAGR) Create Value Create Buzz Trademark new rides and attractions Media placement Unique experience customer cannot Online social networks (Facebook, recreate at home Twitter) Increased focus on special events Digital marke
Slide 34: Achieving Long-term Growth: Adjusted EBITDA Goal
Achieving Long-term Growth Goal: Grow adjusted EBITDA by 10% to 14% by 2015 (~2.3% CAGR) Revenue Growth Expanding market share and visitor spend Strict cost controls Proven history of controlling operating costs Low corporate overhead Remain focused on our four cornerstones: Safety, Cleanliness, Cou
Slide 35: Achieving Long-term Growth: Free Cash Flow Goal
Achieving Long-term Growth Goal: Achieve free cash flows of $120 million to $140 million on an annual basis during 2012 to 2015 Adjusted EBITDA CAGR of ~2.3% to 2015 required to meet cash flow goals Cash FOR: Cash Interest Expense 2011 ~$160 million (due to “old” swaps which mature in 2011 and 2012)
Slide 36: Achieving Long-term Growth: Reduce Consolidated Leverage Ratio to 4.0x by 2013
Achieving Long-term Growth Goal: Reduce Consolidated Leverage Ratio to 4.0x by 2013 We have stabilized our capital structure: Long-term debt includes: $1.175 billion senior secured term loan (matures Dec. 2016) $405 million senior unsecured notes (mature Dec. 2018) $260 million available through a s
Slide 37: Achieving Long-term Growth
Achieving Long-term Growth Stabilizing the capital structure has put us in a position to reward unitholders as we execute our plan: Excess Cash Flow distribution capacity per Credit Agreement 50% available senior secured leverage ratio is >3.25x 75% available senior secured leverage ratio is 2.75x t
Slide 38: Achieving Long-term Growth: Distribution Goal
Achieving Long-term Growth Goal: $1.25 - $1.75 annual distribution per LP unit by 2015; however, should cash flows exceed our expectations this distribution could be higher Declared 2010 distribution of $0.25 per unit Payable on December 15, 2010 to unitholders of record on December 3, 2010 24 th co
Slide 39: Appendix B: EBITDA Reconciliation
Section V Appendix B: EBITDA Reconciliation 36
Slide 40: EBITDA Reconciliation
EBITDA Reconciliation EBITDA Adjustments ($ in thousands) LTM 9/26/2010 Net income $5,308 Interest expense 137,598 Interest (income) (1,076) Provision for taxes 4,093 Depreciation and amortization 130,675 EBITDA $276,688 Loss on early debt extinguishment 35,289 Net effect of swaps 19,001 Unrealized