FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file number 1-9444
CEDAR FAIR, L.P.
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1560655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 5006, Sandusky, Ohio 44871-5006
(Address of principal executive offices)
(zip code)
(419) 626-0830
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant
(1) has filed all reports required to be
filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter
period that the Registrant was required to
file such reports), and (2) has been subject
to such filing requirements for the past 90
days.
Yes X No
Title of Class Units Outstanding As Of
Depositary Units November 1, 1998
(Representing Limited Partner 52,124,566
Interests)
<PAGE>
CEDAR FAIR, L.P.
INDEX
FORM 10 - Q
Part I - Financial Information
Item 1. Financial Statements 3-8
Item 2. Management's Discussion and 9-10
Analysis of Financial
Condition and Results of
Operations
Part II - Other Information
Item 6. Exhibits and Reports on Form 11
8-K
Signatures 12
Index to Exhibits 13
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CEDAR FAIR, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
<S> <C> <C>
9/27/98 12/31/97
ASSETS
Current Assets:
Cash $ 5,728 $ 2,520
Receivables 18,925 6,530
Inventories 10,179 9,055
Prepaids 1,634 3,849
36,466 21,954
Land, Buildings, Rides and Equipment:
Land 127,049 123,550
Land improvements 84,065 84,134
Buildings 179,205 158,550
Rides and equipment 356,026 331,342
Construction in progress 17,905 17,333
764,250 714,909
Less accumulated depreciation (172,351) (147,772)
591,899 567,137
Intangibles, net of amortization 10,401 10,528
$ 638,766 $ 599,619
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable $ 23,398 $ 15,644
Distribution payable to partners 17,026 14,768
Accrued interest 1,130 1,576
Accrued taxes 17,618 4,602
Accrued salaries, wages and benefits 14,217 11,305
Self-insurance reserves 7,755 8,946
Other accrued liabilities 12,121 5,585
93,265 62,426
Other Liabilities 10,726 10,312
Long-Term Debt:
Revolving credit loans 65,150 139,750
Term debt 100,000 50,000
165,150 189,750
Redeemable Limited Partnership Units 12,500 51,750
Partners' Equity:
Special L.P. interests 5,290 5,290
General partner 614 413
Limited partners, 52,125 and 52,403 units
outstanding at September 27, 1998 and
December 31, 1997, respectively 351,221 279,678
357,125 285,381
$ 638,766 $ 599,619
The accompanying Notes to Consolidated Financial Statements are an
integral part of these balance sheets.
<PAGE>
CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per unit data)
<CAPTION>
Three months ended Twelve months ended
9/27/98 9/28/97 9/27/98 9/28/97
<S> <C> <C> <C> <C>
Net revenues $ 234,226 $ 174,786 $ 381,478 $ 258,334
Costs and expenses:
Cost of products sold 24,610 16,414 42,783 25,239
Operating expenses 66,866 45,491 160,458 106,290
Selling, general and 21,253 14,935 44,995 30,235
administrative
Depreciation and 15,875 12,268 29,714 21,098
amortization
128,604 89,108 277,950 182,862
Operating income 105,622 85,678 103,528 75,472
Interest expense, net 3,378 1,733 13,128 7,430
Net income before taxes 102,244 83,945 90,400 68,042
Provision for taxes 7,939 - 12,755 -
Net income 94,305 83,945 77,645 68,042
Net income allocated to
general partner 472 420 388 261
Net income allocated to
limited partners $ 93,833 $ 83,525 $ 77,257 $ 67,781
Earnings per limited
partner unit:
Weighted average
limited partner units
outstanding - basic 51,098 45,920 49,851 45,920
Net income per limited
partner unit - basic $ 1.84 $ 1.82 $ 1.55 $ 1.48
Weighted average
limited partner units
outstanding - diluted 52,508 46,203 50,993 46,190
Net income per limited
partner unit - diluted $ 1.79 $ 1.81 $ 1.52 $ 1.47
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(In thousands)
<CAPTION>
Special General Limited Total
L.P. Partner's Partners' Partners'
Interests Equity Equity Equity
<S> <C> <C> <C> <C>
Balance at December $ 5,290 $ 413 $ 279,678 $ 285,381
31, 1997
Expiration of redemption
rights on limited
partnership units - - 7,187 7,187
Allocation of net
loss - (117) (23,370) (23,487)
Distribution
declared - (84) (16,726) (16,810)
($.32 per limited
partner unit)
Balance at March 29, 5,290 212 246,769 252,271
1998
Expiration of redemption
rights on limited
partnership units - - 11,852 11,852
Allocation of net
income - 99 19,674 19,773
Distribution
declared - (84) (16,713) (16,797)
($.32 per limited
partner unit)
Balance at June 28, 5,290 227 261,582 267,099
1998
Expiration of redemption
rights on limited
partnership units - - 12,747 12,747
Allocation of net
income - 472 93,833 94,305
Distribution
declared - (85) (16,941) (17,026)
($.325 per limited
partner unit)
Balance at September $ 5,290 $ 614 $ 351,221 $ 357,125
27, 1998
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Three months ended Twelve months ended
<S> <C> <C> <C> <C>
9/27/98 9/28/97 9/27/98 9/28/97
CASH FLOWS FROM (FOR) OPERATING
ACTIVITIES
Net income $94,305 $ 83,945 $77,645 $68,042
Adjustments to reconcile net
income to net cash from
operating activities
Depreciation and amortization 15,875 12,268 29,714 21,098
Change in assets and liabilities,
net of effects from acquisitions:
(Increase) decrease in inventories 7,154 6,616 (1,046) (168)
(Increase) decrease in current and (168) 1,280 (2,107) 1,797
other assets
Increase (decrease) in accounts (13,601) (12,606) 8,293 1,113
payable
Increase (decrease) in accrued 8,304 (298) 13,613 154
taxes
Increase (decrease) in self- 460 77 (1,581) (281)
insurance reserves
Increase (decrease) in other (1,296) (485) 2,575 252
current liabilities
Increase (decrease) in other (258) 377 2,128 2,974
liabilities
Net cash from operating 110,775 91,174 129,234 94,981
activities
CASH FLOWS FROM (FOR) INVESTING
ACTIVITIES
Capital expenditures (11,110) (5,523) (63,694) (38,270)
Acquisition of Knott's Berry Farm:
Land, buildings, rides and - - (263,042) -
equipment acquired
Negative working capital assumed, - - 11,638 -
net of cash acquired
Acquisition of JHW Limited
Partnership:
Land, buildings and equipment - - - (16,295)
acquired
Negative working capital assumed, - - - 442
net of cash acquired
Net cash (for) investing (11,110) (5,523) (315,098) (54,123)
activities
CASH FLOWS FROM (FOR) FINANCING
ACTIVITIES
Net payments on revolving credit (84,150) (74,300) (41,150) (4,175)
loans
Refinancing of revolving credit - - 50,000 -
with term debt
Distributions paid to partners (16,797) (14,495) (63,144) (57,980)
Withdrawal of Special General - (196) - (196)
Partner
Acquisition of Knott's Berry Farm:
Borrowings on revolving credit - - 94,500 -
loans
Issuance of limited partnership - - 157,402 -
units
Redemption of limited partnership (2,940) - (7,464) -
units
Acquisition of JHW Limited
Partnership:
Borrowings on revolving credit - - - 11,475
loans
Long-term debt of JHW Limited - - - 4,500
Partnership
Net cash from (for) financing (103,887) (88,991) 190,144 (46,376)
activities
CASH
Net increase (decrease) for the (4,222) (3,340) 4,280 (5,518)
period
Balance, beginning of period 9,950 4,788 1,448 6,966
Balance, end of period $ 5,728 $ 1,448 $ 5,728 $ 1,448
SUPPLEMENTAL INFORMATION
Cash payments for interest $ 6,347 $ 3,195 $ 12,489 $ 7,400
expense
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE>
CEDAR FAIR, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED
SEPTEMBER 27, 1998 AND SEPTEMBER 28, 1997
The accompanying consolidated financial statements have been prepared
from the financial records of Cedar Fair, L.P. (the Partnership)
without audit and reflect all adjustments which are, in the opinion of
management, necessary to fairly present the results of the interim
periods covered in this report.
Due to the highly seasonal nature of the Partnership's amusement park
operations, the results for any interim period are not indicative of
the results to be expected for the full fiscal year. Accordingly, the
Partnership has elected to present financial information regarding
operations for the preceding twelve month periods ended September 27,
1998 and September 28, 1997 to accompany the quarterly results.
Because amounts for the 12 months ended September 27, 1998 include
actual 1997 fourth quarter operating results and exclude Knott's Berry
Farm's results prior to its acquisition on December 29, 1997, they are
not indicative of 1998 full calendar year operations.
(1) Significant Accounting and Reporting Policies:
The Partnership's consolidated financial statements for the quarters
ended September 27, 1998 and September 28, 1997 included in this Form
10-Q report have been prepared in accordance with the accounting
policies described in the Notes to Consolidated Financial Statements
for the year ended December 31, 1997, which were included in the Form
10-K filed on March 31, 1998. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements should
be read in conjunction with the financial statements and the notes
thereto included in the Form 10-K referred to above.
(2) Interim Reporting:
The Partnership owns and operates five amusement parks: Cedar Point in
Sandusky, Ohio; Valleyfair in Shakopee, Minnesota; Dorney Park &
Wildwater Kingdom near Allentown, Pennsylvania; Worlds of Fun / Oceans
of Fun in Kansas City, Missouri; and Knott's Berry Farm in Buena Park,
California. Virtually all of the Partnership's revenues from its four
seasonal parks are realized during a 130-day operating period
beginning in early May, with the major portion concentrated in the
third quarter during the peak vacation months of July and August.
Knott's Berry Farm is open year-round but operates at its highest
level of attendance during the third quarter of the year.
To assure that these highly seasonal operations will not result in
misleading comparisons of current and subsequent interim periods, the
Partnership has adopted the following reporting procedures: (a)
depreciation, advertising and certain seasonal operating costs are
expensed ratably during the operating season, including certain costs
incurred prior to the season at the seasonal parks which are amortized
over the season and (b) all other costs are expensed as incurred or
ratably over the entire year.
<PAGE>
(3) Acquisitions:
As discussed in Note (7) in the 1997 Annual Report to unitholders, on
December 29, 1997 the Partnership acquired all of the partnership
interests in Knott's Berry Farm, which owns and operates Knott's Berry
Farm theme park in Buena Park, California and manages Knott's Camp
Snoopy at the Mall of America in Bloomington, Minnesota. Knott's
Berry Farm's results of operations are included in these consolidated
financial statements for periods following the acquisition.
Under terms of the acquisition, the Partnership agreed to repurchase
during 1998 up to an aggregate of 500,000 limited partnership units
per quarter at market prices upon demand from the partners of Knott's
Berry Farm. In the third quarter, the Partnership repurchased 105,000
units at an aggregate price of $2.94 million, and the redemption
rights on 395,000 units expired without exercise.
The table below summarizes the unaudited consolidated pro forma
results of operations assuming the acquisition of Knott's Berry Farm
had occurred at the beginning of the three-month period ended
September 28, 1997.
Net revenues $212,963,000
Net income 89,509,000
Net income per limited
partner unit - diluted $ 1.68
These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have occurred
had the acquisition been made at the beginning of the period
presented, or of results which may occur in the future.
(4) Provision for Taxes:
Beginning in 1998, the Partnership is subject to a new federal tax of
3.5% of its gross income (net revenues less cost of products sold)
plus an additional 1% state tax on California-source gross income.
<PAGE>
(5) Earnings per Unit:
Net income per limited partner unit is calculated based on the
following unit amounts:
<TABLE>
<CAPTION>
Three months ended Twelve months ended
<S> <C> <C> <C> <C>
9/27/98 9/28/97 9/27/98 9/28/97
(in thousands except per unit data)
Basic weighted average
units outstanding 51,098 45,920 49,851 45,920
Effect of dilutive
units:
Deferred units 339 283 339 270
Contingent units -
Knott's acquisition 1,071 - 803 -
Diluted weighted average
units outstanding 52,508 46,203 50,993 46,190
Net income per unit - $ 1.84 $ 1.82 $ 1.55 $ 1.48
basic
Net income per unit - $ 1.79 $ 1.81 $ 1.52 $ 1.47
diluted
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Net revenues for the quarter ended September 27, 1998, increased 34%
to $234.2 million, from $174.8 million for the quarter ended September
28, 1997. Operating income increased 23% to $105.6 million from $85.7
million, and net income for the period increased 12% to $94.3 million,
or $1.79 per limited partner unit, from $83.9 million, or $1.81 per
unit, in 1997.
Operating results for the third quarter were significantly impacted by
a $7.9 million, or $.15 per unit, charge related to the new tax on
publicly traded partnerships, and by the addition of Knott's Berry
Farm, which was acquired in late December 1997. Without the new tax,
earnings per limited partner unit would have increased 7% to $1.94 in
the quarter ended September 27, 1998. Excluding operations at Knott's
Berry Farm, net revenues and operating income for the period increased
11% and 16%, respectively, on a 7% increase in combined attendance, a
4% increase in combined in-park guest per capita spending, and a 10%
increase in out-of-park revenues at the Partnership's original four
parks. These gains were partially offset by higher interest expense
resulting from the acquisition of Knott's Berry Farm.
Combined attendance was up, due to the very successful debuts of Cedar
Point's new world-class thrill ride, Power Tower, and Worlds of Fun's
new super-coaster, Mamba, as well as improved weather at Cedar Point
compared with the cool and wet weather experienced during the peak
vacation months of July and August last year. In addition, Dorney
Park continued to perform strongly and contributed another record year
in 1998. Although attendance at Knott's Berry Farm has not completely
caught up from its disappointing early-season performance caused by an
unusually rainy spring on the West Coast, it has shown signs of
improvement since early June, and the Partnership remains hopeful that
it can regain what is left of the attendance shortfall.
Financial Condition:
The Partnership has available through April 2002 a $200 million
revolving credit facility, of which $65.15 million was borrowed and in
use as of September 27, 1998. Current assets and liabilities are at
normal seasonal levels at September 27, 1998, and the negative working
capital ratio of 2.6 is the result of the Partnership's highly
seasonal business and careful management of cash flow. Seasonal cash
flow and available credit facilities are expected to be adequate to
fund current working capital needs, planned capital expenditures and
quarterly distributions to partners.
Year 2000 Compliance:
The Year 2000 issue is the result of many computer programs being
written using two digits rather than four digits to define a year.
Such programs may recognize a year containing "00" as the year 1900
rather than the year 2000. This could result in equipment or system
failures or miscalculations causing disruptions of daily operations
for some organizations.
<PAGE>
The Partnership has completed its assessment of its computer-dependent
rides and equipment and its internal information systems that support
business applications, and believes that with minor modifications to
existing hardware and software, the Year 2000 issue will pose no
significant internal operational problems. The Partnership is also
assessing the readiness of its major utility and financial service
providers to be Year 2000 compliant. Information requests have been
distributed and replies are being evaluated. These efforts should be
substantially complete during the first quarter of 1999, which is well
before any anticipated impact on operations.
Based upon the information obtained and accomplishments to date, no
contingency plans are expected to be necessary and therefore none have
been developed. In addition, as daily operations at the Partnership's
four seasonal parks will not begin until April and May of 2000, the
Partnership believes adequate time will be available if necessary to
insure alternative plans can be developed, assessed and implemented
prior to the Year 2000 issue having any unforeseen significant
negative impact on most of its principal operations. However, if
these system modifications are not properly made or are not completed
on a timely basis, or if one or more of our principal suppliers of
utilities or financial services fail to achieve compliance, the Year
2000 issue could have a material impact on our operations.
Both internal and external resources are being used to reprogram
and/or replace non-compliant hardware and software, and to
appropriately test Year 2000 modifications, all funded through current
operating cash flows. The estimated total cost associated with
required modifications to become Year 2000 compliant is not expected
to exceed $1 million and thus will not be material to the
Partnership's financial position.
The cost of the project and the date on which the Partnership believes
it will substantially complete the Year 2000 modifications are based
on management's best estimates, which were derived from numerous
assumptions of future events, including the continued availability of
computer programming expertise and other factors. Because none of
these estimates can be guaranteed, actual results could differ
materially from those anticipated. Specific factors that might cause
material differences include, but are not limited to, the availability
and cost of trained personnel, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
(a) Exhibit (20) - 1998 Third Quarter Press Release
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CEDAR FAIR, L.P.
(Registrant)
By Cedar Fair Management Company
General Partner
Date: November 10, 1998 Bruce A. Jackson
Bruce A. Jackson
Corporate Vice President - Finance
(Chief Financial Officer)
Charles M. Paul
Charles M. Paul
Corporate Controller
(Chief Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Page Number
Exhibit (20) 1998 Third Quarter Press Release. 13
</TABLE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-27-1998
<CASH> 5,728
<SECURITIES> 0
<RECEIVABLES> 18,925
<ALLOWANCES> 0
<INVENTORY> 10,179
<CURRENT-ASSETS> 36,466
<PP&E> 764,250
<DEPRECIATION> 172,351
<TOTAL-ASSETS> 638,766
<CURRENT-LIABILITIES> 93,265
<BONDS> 0
0
0
<COMMON> 351,835
<OTHER-SE> 5,290
<TOTAL-LIABILITY-AND-EQUITY> 638,766
<SALES> 234,226
<TOTAL-REVENUES> 234,226
<CGS> 24,610
<TOTAL-COSTS> 128,604
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,378
<INCOME-PRETAX> 102,244
<INCOME-TAX> 7,939
<INCOME-CONTINUING> 94,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,305
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.79
</TABLE>
