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Focused Compounding’s Plan for Parks! America
Return Capital to Shareholders
Capital will be returned in two phases:
· Phase one will consist of multiple one-time events intended to return the greatest amount of cash to shareholders in the shortest amount of time.
· Phase two will consist of ongoing cash returns to shareholders.
Phase One
· Sell the two unprofitable parks: (1) Aggieland, and (2) Missouri.
· Add prudent leverage to the Georgia park (e.g. 3x debt/EBITDA).
· Pay out all cash beyond what’s needed to maintain a prudent leverage ratio.
Cash could be returned through:
· A tender offer or stock buyback, and
· One or two special dividends.
Total cash returned as a result of all Phase One actions combined (i.e. selling both parks and adding leverage) is expected to be between 10 cents and 25 cents per share (example: 25-65% of current market cap based on the May 7, 2024 closing share price).
Phase Two
· If the company receives a high EBITDA multiple offer for the Georgia park, sell the entire Company.
· Otherwise: each year, pay out a special dividend equal to all cash above the amount needed to maintain the prudent leverage ratio (example: 3x debt/EBITDA).
Cash returned annually during phase two is expected to be around 2 cents per share (example: 5% dividend yield on current stock price).
Improve Investor Relations
· Conduct a reverse stock split of 1-for-100 (example: new share price of $20 to $60 a share)
· Add a head of investor relations
· Host quarterly calls with the majority of time spent on investor Q&A
· Host in-person annual shareholder meetings (with a Q&A session) held at the Georgia Park
· Host an in-person investor day (with a Q&A session) at a location that is easily accessible for finance professionals to attend
Divide Capital Allocation and Park Operating Responsibilities
After selling both unprofitable parks, there will be two remaining entities:
· Wild Animal Safari Georgia – The Georgia park. A pure operating subsidiary responsible for 100% of the company’s earnings. The president will be an experienced amusement park executive, paid a base salary plus incentive compensation based on increases in the Georgia Park’s EBITDA. We believe incentive compensation should represent greater than 50% of this executive’s total pay.
· Parks! America, Inc. – A pure holding company with no operations. The president would be Geoff Gannon, holding an unpaid position.
The board’s “Strategic Growth Committee” will be replaced by a “Capital Allocation Committee.” This committee will meet very frequently.
Improve Incentivization of Employees
The President of Wild Animal Safari Georgia (the operating subsidiary) and all employees at the Georgia park will participate in a bonus pool the size of which will be determined by year-over-year improvements in EBITDA. No bonuses will be paid when there is no year-over-year improvement in EBITDA.
Andrew Kuhn
Geoff Gannon
About Focused Compounding
The Focused Compounding Fund is a long-only, equity-focused hedge fund launched by Andrew Kuhn and Geoff Gannon in 2020.
In 2020, the Focused Compounding Fund became the third-largest shareholder in Parks! America by acquiring 17% of the outstanding shares, with the majority purchased from three separate shareholders.
During Q4 of 2023, the Focused Compounding Fund acquired an additional 21% of the outstanding shares in Parks! America from the company's former Chief Executive Officer, solidifying their position as the company’s largest shareholder with a 38.5% ownership stake.
Following the increase in their ownership to 38.5%, the Focused Compounding Fund notified Parks! America of their intent to launch a proxy contest, aiming to bring a new, owner-driven shareholder democracy to the board.
Board Nominees
Geoff Gannon
Geoff Gannon is the Portfolio Manager at Focused Compounding Fund, LP, and has served in that position since 2020. The Focused Compounding Fund owns 38.5% of Parks! America. Prior to launching the Focused Compounding Fund, LP in 2020, Geoff served as the Portfolio Manager of Focused Compounding Capital Management, a separately managed accounts firm that was launched in 2018 and is still active today. Since 2005, Mr. Gannon has been writing and sharing information on numerous topics surrounding value investing. Since 2018, Mr. Gannon has regularly produced a podcast jointly with Mr. Kuhn on which they efficiently and effectively explain investment strategy to their followers who look to them for in-depth but understandable advice.
Andrew Kuhn
Andrew Kuhn is the Managing Member of the General Partner and the Operations Manager at Focused Compounding Fund, LP, and has served in such position since 2020. The Focused Compounding Fund owns 38.5% of Parks! America. Prior to launching the Focused Compounding Fund, LP in 2020, Andrew served as the Operations Manager of Focused Compounding Capital Management, a separately managed accounts firm that was launched in 2018 and is still active today. Through his X (formerly known as Twitter) account, Mr. Kuhn regularly engages with over 40,000 users and provides key insight and thoughts on investment and business strategies. Since 2018, Mr. Kuhn has regularly produced a podcast jointly with Mr. Gannon on which they efficiently and effectively explain investment strategy to their followers who look to them for in-depth but understandable advice.
Jacob McDonough
Jacob McDonough is the Founder and Portfolio Manager of McDonough Investments, which was founded in 2021. McDonough Investments is a capital management firm that manages capital for clients as a registered investment adviser. From 2017 to 2021, Mr. McDonough served as an investment analyst for New Constructs, LLC, an independent research technology firm that provides insights into the fundamentals and valuation of thousands of publicly traded businesses. During Mr. McDonough’s time at New Constructs, he reviewed and analyzed thousands of Forms 10-K and 10-Q to reverse accounting distortions and built reverse discounted cash flow models that gauge expectations implied in stock prices. Neither McDonough Investments nor New Constructs is a parent, subsidiary, or other affiliate of Parks! America, Inc. In 2014, Mr. McDonough earned a Bachelor of Arts in Finance from Michigan State University. Mr. McDonough produces content regarding complex financial topics to provide investors with key financial information in easy-to-understand formats. He is the author of “Capital Allocation: The Financials of a New England Textile Mill (1955-1985),” a book that covers Warren Buffett’s capital reallocation from a failing textile mill to other profitable companies during the early days of his control over Berkshire Hathaway. In addition, Mr. McDonough runs a podcast called “The 10-K Podcast” in which he analyzes prior annual reports for industry-leading companies. He also regularly posts blog articles with research and analysis. We believe that Mr. McDonough’s experience in capital management and financial analysis will allow him to maximize shareholder value as a director.
Ralph Molina
Ralph Molina brings more than seven years of experience across investor relations, small business consulting, investment research, mergers and acquisitions, and venture capital. He currently serves as a Senior Investor Relations Analyst at The Cheesecake Factory (NASDAQ:CAKE). In this role, he is responsible for executing all strategic and tactical elements of the investor relations program, from quarterly earnings to the Annual Shareholder Meeting. Additionally, he currently serves as an Advisor to the San Diego State University’s Aztec Consulting Program, an award-winning program that has served nearly one thousand small and medium sized businesses in the San Diego region. From 2021 to 2023, Mr. Molina served as an Investor Relations Analyst at Edison International (NYSE: EIX). From 2019 to 2020, he served as a Deals Associate at PricewaterhouseCoopers, specializing in valuations related to mergers and acquisitions. From 2018 to 2019, he served as a Venture Capital Associate at University Growth Fund, investing in Airbnb and Postmates, among other companies. From 2017 to 2018, he served as the Founder and President of Business Consulting Group. Mr. Molina has a Bachelor of Science in Finance from San Diego State University. We believe that Mr. Molina’s experience in managing investor relations programs, valuing businesses related to investments, mergers and acquisitions, and developing strategic plans for small businesses would make him a valuable addition to the Board. Based on his experience, he would be able to engage with shareholders and existing company structures and personnel to formulate and effectively communicate a plan for continued business health and growth.
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