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 June 28, 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 August 1, 1998
(Representing Limited Partner Interests) 52,229,566
<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
Analysis of Financial
Condition and Results of
Operations
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Index to Exhibits 12
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CEDAR FAIR, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
<S> <C> <C>
6/28/98 12/31/97
ASSETS
Current Assets:
Cash $9,950 $2,520
Receivables 14,299 6,530
Inventories 17,333 9,055
Prepaids 6,102 3,849
47,684 21,954
Land, Buildings, Rides and Equipment:
Land 127,050 123,550
Land improvements 88,554 84,134
Buildings 162,839 158,550
Rides and equipment 358,507 331,342
Construction in progress 20,242 17,333
757,192 714,909
Less accumulated depreciation (160,631) (147,772)
596,561 567,137
Intangibles, net of amortization 10,482 10,528
$654,727 $599,619
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable $36,999 $ 15,644
Distribution payable to partners 16,797 14,768
Accrued interest 4,099 1,576
Accrued taxes 9,314 4,602
Accrued salaries, wages and benefits 12,097 11,305
Self-insurance reserves 7,295 8,946
Other accrued liabilities 12,556 5,585
99,157 62,426
Other Liabilities 10,984 10,312
Long-Term Debt:
Revolving credit loans 149,300 139,750
Term debt 100,000 50,000
249,300 189,750
Redeemable Limited Partnership Units 28,187 51,750
Partners' Equity:
Special L.P. interests 5,290 5,290
General partner 227 413
Limited partners, 52,230 and 52,403 units
outstanding at June 28, 1998 and 261,582 279,678
December 31, 1997, respectively
267,099 285,381
$654,727 $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>
<S> Three months ended Twelve months ended
<C> <C> <C> <C>
6/28/98 6/29/97 6/28/98 6/29/97
Net revenues $120,545 $79,237 $322,038 $251,051
Costs and expenses:
Cost of products sold 14,072 8,256 34,587 25,079
Operating expenses 51,932 35,856 139,083 101,520
Selling, general and 15,637 9,979 38,677 29,502
administrative
Depreciation and amortization 10,535 8,187 26,107 19,806
92,176 62,278 238,454 175,907
Operating income 28,369 16,959 83,584 75,144
Interest expense, net 4,441 2,542 11,483 7,167
Net income before taxes 23,928 14,417 72,101 67,977
Provision for taxes 4,155 - 4,816 -
Net income 19,773 14,417 67,285 67,977
Net income allocated to 99 144 336 680
general partner
Net income allocated to $19,674 $14,273 $66,949 $67,297
limited partners
Earnings per limited partner
unit:
Weighted average limited partner
units outstanding - basic 51,165 45,920 48,557 45,920
Net income per limited partner $ .38 $ .31 $ 1.38 $ 1.46
unit - basic
Weighted average limited partner
units outstanding - diluted 52,582 46,199 49,416 46,165
Net income per limited partner $ .37 $ .31 $ 1.35 $ 1.46
unit - diluted
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 $285,381
31, 1997
Expiration of redemption
rights on limited - - 7,187 7,187
partnership units
Allocation of net - (117) (23,370) (23,487)
loss
Distribution declared - (84) (16,726) (16,810)
($.32 per limited
partner unit)
Balance at March 29, 5,290 212 246,769 252,271
1998
Expiration of redemption
rights on limited - - 11,852 11,852
partnership units
Allocation of net - 99 19,674 19,773
income
Distribution declared - (84) (16,713) (16,797)
($.32 per limited
partner unit)
Balance at June 28, $ 5,290 $ 227 $261,582 $267,099
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>
6/28/98 6/29/97 6/28/98 6/29/97
CASH FLOWS FROM (FOR) OPERATING
ACTIVITIES
Net income $19,773 $14,417 $67,285 $67,977
Adjustments to reconcile net income
to net cash from operating activities
Depreciation and amortization 10,535 8,187 26,107 19,806
Change in assets and liabilities, net
of effects from acquisitions:
(Increase) decrease in inventories (3,223) (2,107) (1,584) 474
(Increase) in current and other (10,218) (9,919) (658) (737)
assets
Increase in accounts payable 12,258 4,307 9,288 2,059
Increase (decrease) in self- (1,035) 373 (1,964) 529
insurance reserves
Increase (decrease) in other 15,000 9,763 8,397 (170)
current liabilities
Increase in other liabilities 70 702 2,763 3,374
Net cash from operating activities 43,160 25,723 109,634 93,312
CASH FLOWS FROM (FOR) INVESTING
ACTIVITIES
Capital expenditures (21,447) (17,750) (58,108) (35,936)
Acquisition of Knott's Berry Farm:
Land, buildings, rides and equipment - - (263,030) -
acquired
Negative working capital assumed, net - - 11,626 -
of cash acquired
Acquisition of JHW Limited Partnership:
Land, buildings and equipment - - - (16,295)
acquired
Negative working capital assumed, net - - - 442
of cash acquired
Net cash (for) investing (21,447) (17,750) (309,512) (51,789)
activities
CASH FLOWS FROM (FOR) FINANCING
ACTIVITIES
Net borrowings (payments) on 4,900 10,700 (26,800) (1,075)
revolving credit loans
Refinancing of revolving credit - - 50,000 -
with term debt
Repayment of term debt - - (4,500) -
Distributions paid to partners (16,810) (14,495) (60,842) (56,821)
Withdrawal of Special General - - (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 (1,024) - (4,524) -
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 (12,934) (3,795) 205,040 (41,921)
activities
Cash:
Net increase (decrease) for the 8,779 4,178 5,162 (398)
period
Balance, beginning of period 1,171 610 4,788 5,186
Balance, end of period $ 9,950 $ 4,788 $ 9,950 $ 4,788
SUPPLEMENTAL INFORMATION
Cash payments for interest expense $ 2,365 $ 1,437 $ 9,337 $ 6,887
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
JUNE 28, 1998 AND JUNE 29, 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 June 28, 1998 and June 29, 1997 to
accompany the quarterly results. Because amounts for the 12
months ended June 28, 1998 include actual 1997 peak season
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 June 28, 1998 and June 29, 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 second quarter, the
Partnership repurchased 38,000 units at an aggregate price of
$1.0 million, and the redemption rights on 462,000 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 June 29, 1997.
Net revenues $111,932,000
Net income 16,498,000
Net income per limited
partner unit - diluted $ .31
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.
(5) Earnings per Unit:
Net income per limited partner unit is calculated based on the
following unit amounts:
<TABLE>
<CAPTION>
<S> Three months ended Twelve months ended
<C> <C> <C> <C>
6/28/98 6/29/97 6/28/98 6/29/97
(in thousands except per unit data)
Basic weighted average 51,165 45,920 48,557 45,920
units outstanding
Effect of dilutive
units:
Deferred units 346 278 323 245
Contingent units - 1,071 - 536 -
Knott's acquisition
Diluted weighted average 52,582 46,199 49,416 46,165
units outstanding
Net income per unit - $ .38 $ .31 $ 1.38 $ 1.46
basic
Net income per unit - $ .37 $ .31 $ 1.35 $ 1.46
diluted
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Net revenues for the quarter ended June 28, 1998, increased 52%
to $120.5 million, from $79.2 million for the quarter ended June
29, 1997. Operating income increased 67% to $28.4 million from
$17.0 million, and net income for the period increased 37% to
$19.8 million, or $.37 per limited partner unit, from $14.4
million, or $.31 per unit, in 1997.
Operating results for the second quarter were significantly
impacted by the addition of Knott's Berry Farm, which was
acquired in December 1997. Excluding operations at Knott's Berry
Farm, net revenues and operating income for the period increased
11% and 41%, respectively, on an 8% increase in combined
attendance, a 5% increase in combined in-park guest per capita
spending, and a 3% 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 and a $4.2 million ($.08 per unit) charge
related to the new tax on publicly traded partnerships.
Combined early-season attendance is 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 cold
and rainy spring last year. Guest comments regarding our new
rides have been extremely favorable. The growth in in-park guest
per capita spending at each of the parks has also been strong.
Supreme Scream, a new world-class thrill ride which debuted on
July 3 at Knott's Berry Farm, is also generating tremendous
enthusiasm and has the potential to make the rest of 1998 an
outstanding period of growth for the park.
Financial Condition:
The Partnership has available through April 2002 a $200 million
revolving credit facility, of which $149.3 million was borrowed
and in use as of June 28, 1998. Current assets and liabilities
are at normal seasonal levels at June 28, 1998, and the negative
working capital ratio of 2.1 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 liabilities and quarterly
distributions to partners.
Year 2000 Compliance:
The Partnership is currently taking the steps necessary to insure
its computer systems and equipment are Year 2000 compliant and
does not expect to incur any material costs in the process. The
Partnership also has no reason to believe that any third party
with whom it has a material relationship will not be Year 2000
compliant, and is taking the steps necessary to verify the Year
2000 readiness of any third party whose lack of Year 2000
preparation could cause a material impact on the Partnership's
business.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
(a) Exhibit (20) - 1998 Second 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: August 10, 1998 /s/ Bruce A. Jackson
Bruce A. Jackson
Vice President
(Chief Financial Officer)
/s/ Charles M. Paul
Charles M. Paul
Corporate Controller
(Chief Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Page Number
Exhibit (20) 1998 Second Quarter Press Release. 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-28-1998
<CASH> 9,950
<SECURITIES> 0
<RECEIVABLES> 14,299
<ALLOWANCES> 0
<INVENTORY> 17,333
<CURRENT-ASSETS> 47,684
<PP&E> 757,192
<DEPRECIATION> 160,631
<TOTAL-ASSETS> 654,727
<CURRENT-LIABILITIES> 99,157
<BONDS> 0
0
0
<COMMON> 261,809
<OTHER-SE> 5,290
<TOTAL-LIABILITY-AND-EQUITY> 654,727
<SALES> 120,545
<TOTAL-REVENUES> 120,545
<CGS> 14,072
<TOTAL-COSTS> 92,176
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,441
<INCOME-PRETAX> 23,928
<INCOME-TAX> 4,155
<INCOME-CONTINUING> 19,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,773
<EPS-PRIMARY> .38
<EPS-DILUTED> .37
</TABLE>
