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 27, 1999
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
(State or other jurisdiction of
incorporation or organization)
34-1560655
(I.R.S. Employer
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
Depositary Units
(Representing Limited Partner
Interests)
Units Outstanding As Of
August 9, 1999
51,980,183
<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 10
Condition and Results of
Operations
Part II - Other Information
Item 6. Exhibits and Reports on Form 11
8-K
Signatures 12
Index to 13
Exhibits
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CEDAR FAIR, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
<S> <C> <C>
6/27/99 12/31/98
ASSETS
Current Assets:
Cash $10,409 $ 1,137
Receivables 16,577 6,253
Inventories 19,911 10,245
Prepaids 5,914 3,332
52,811 20,967
Land, Buildings, Rides and Equipment:
Land 130,008 127,050
Land improvements 93,617 88,924
Buildings 210,019 178,795
Rides and equipment 386,484 368,138
Construction in progress 5,880 12,691
826,008 775,598
Less accumulated depreciation (188,370) (175,554)
637,638 600,044
Intangibles, net of amortization 10,314 10,314
$ 700,763 $ 631,325
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable $ 40,249 $ 17,031
Distribution payable to partners 18,285 16,979
Accrued interest 3,375 3,154
Accrued taxes 16,337 18,956
Accrued salaries, wages and benefits 11,886 9,170
Self-insurance reserves 8,727 8,174
Other accrued liabilities 9,670 3,767
108,529 77,231
Other Liabilities 11,305 11,753
Long-Term Debt:
Revolving credit loans 178,100 100,350
Term debt 100,000 100,000
278,100 200,350
Partners' Equity:
Special L.P. interests 5,290 5,290
General partner 297 492
Limited partners, 51,980 units outstanding 297,242 336,209
302,829 341,991
$ 700,763 $ 631,325
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
6/27/99 6/28/98 6/27/99 6/28/98
<S> <C> <C> <C> <C>
Net revenues $124,203 $120,545 $428,344 $322,038
Costs and expenses:
Cost of products sold 14,392 14,072 48,973 34,587
Operating expenses 54,542 51,932 180,779 139,083
Selling, general and 14,962 15,637 49,994 38,677
administrative
Depreciation and 12,048 10,535 34,373 26,107
amortization
95,944 92,176 314,119 238,454
Operating income 28,259 28,369 114,225 83,584
Interest expense 4,486 4,441 14,597 11,483
Income before taxes 23,773 23,928 99,628 72,101
Provision for taxes 4,534 4,155 15,065 4,816
Net income 19,239 19,773 84,563 67,285
Net income allocated to 96 99 423 336
general partner
Net income allocated to $ 19,143 $ 19,674 $ 84,140 $ 66,949
limited partners
Earnings per limited
partner unit:
Weighted average limited
partner units 51,940 51,165 51,530 48,557
outstanding - basic
Net income per limited $ .37 $ .38 $ 1.63 $ 1.38
partner unit - basic
Weighted average limited
partner units 52,381 52,582 52,375 49,416
outstanding - diluted
Net income per limited $ .37 $ .37 $ 1.61 $ 1.35
partner 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 31, $ 5,290 $ 492 $ 336,209 $ 341,991
1998
Allocation of net loss - (109) (21,722) (21,831)
Distribution declared - (91) (18,194) (18,285)
($.35 per limited
partner unit)
Balance at March 28, 296,293 301,875
1999 5,290 292
Allocation of net - 96 19,143 19,239
income
Distribution declared - (91) (18,194) (18,285)
($.35 per limited
partner unit)
Balance at June 27, $ 5,290 $ 297 $ 297,242 $ 302,829
1999
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
6/27/99 6/28/98 6/27/99 6/28/98
<S> <C> <C> <C> <C>
CASH FLOWS FROM (FOR) OPERATING
ACTIVITIES
Net income $19,239 $19,773 $84,563 $67,285
Adjustments to reconcile net
income to net cash from
operating activities
Depreciation and amortization 12,048 10,535 34,373 26,107
Change in assets and liabilities,
net of effects from acquisitions:
(Increase) in inventories (3,693) (3,223) (1,263) (1,584)
(Increase) in current and other (14,378) (10,218) (1,896) (658)
assets
Increase in accounts payable 12,911 12,258 3,114 9,288
Increase (decrease) in accrued (3,838) 3,411 7,023 5,011
taxes
Increase (decrease) in self- 392 (1,035) 1,432 (1,964)
insurance reserves
Increase (decrease) in other 12,314 11,589 (3,803) 3,386
current liabilities
Increase (decrease) in other (465) 70 321 2,763
liabilities
Net cash from operating 34,530 43,160 123,864 109,634
activities
CASH FLOWS FROM (FOR) INVESTING
ACTIVITIES
Capital expenditures (18,567) (21,447) (62,743) (58,108)
Acquisition of the Buena Park
Hotel:
Land, buildings, and equipment - - (17,230) -
acquired
Working capital acquired - - (206) -
Acquisition of Knott's Berry
Farm:
Land, buildings, rides and - - - (263,030)
equipment acquired
Negative working capital assumed, - - - 11,626
net of cash acquired
Net cash (for) investing (18,567) (21,447) (80,179) (309,512)
activities
CASH FLOWS FROM (FOR) FINANCING
ACTIVITIES
Net borrowings (payments) on 10,400 4,900 11,364 (26,800)
revolving credit loans
Refinancing of revolving credit - - - 50,000
with term debt
Repayment of term debt - - - (4,500)
Distributions paid to partners (18,285) (16,810) (69,086) (60,842)
Withdrawal of Special General - - - (196)
Partner
Acquisition of the Buena Park
Hotel:
Borrowings on revolving credit - - 17,436 -
loans
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) (2,940) (4,524)
units
Net cash from (for) financing (7,885) (12,934) (43,226) 205,040
activities
CASH
Net increase for the period 8,078 8,779 459 5,162
Balance, beginning of period 2,331 1,171 9,950 4,788
Balance, end of period $ $ 9,950 $ $ 9,950
10,409 10,409
SUPPLEMENTAL INFORMATION
Cash payments for interest $ 2,419 $ 2,365 $ 15,321 $ 9,337
expense
Reduction of final purchase price $ - $ - $ 3,506 $ -
of Knott's Berry Farm
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 27, 1999 AND JUNE 28, 1998
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 27, 1999
and June 28, 1998 to accompany the quarterly results. Because amounts
for the 12 months ended June 27, 1999 include actual 1998 peak season
operating results, they are not indicative of 1999 full calendar year
operations.
(1) Significant Accounting and Reporting Policies:
The Partnership's consolidated financial statements for the quarters
ended June 27, 1999 and June 28, 1998 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, 1998, which were included in the Form 10-K
filed on March 31, 1999. 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; Knott's Berry Farm located near Los Angeles in Buena
Park, California; Dorney Park & Wildwater Kingdom near Allentown,
Pennsylvania; Valleyfair in Shakopee, Minnesota; and Worlds of Fun /
Oceans of Fun in Kansas City, Missouri. 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 also 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 for its
four seasonal parks: (a) depreciation, advertising and certain
seasonal operating costs are expensed ratably during the operating
season, including certain costs incurred prior to the season 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 (8) in the 1998 Annual Report to unitholders, on
February 18, 1999, the Partnership acquired the 320-room Buena Park
Hotel, which is located adjacent to Knott's Berry Farm in Buena Park,
California, for a cash purchase price of $17.5 million. The results
of the hotel's operations are included in these consolidated financial
statements only for the period following the acquisition.
(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>
Three months Twelve months
ended ended
6/27/99 6/28/98 6/27/99 6/28/98
(in thousands except per unit data)
<S> <C> <C> <C> <C>
Basic weighted average 51,940 51,165 51,530 48,557
units outstanding
Effect of dilutive
units:
Deferred units 401 346 384 323
Contingent units - 40 1,071 461 536
Knott's acquisition
Diluted weighted 52,381 52,582 52,375 49,416
average units
outstanding
Net income per unit - $ .37 $ .38 $ 1.63 $ 1.38
basic
Net income per unit - $ .37 $ .37 $ 1.61 $ 1.35
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 27, 1999, increased 3% to
$124.2 million, from $120.5 million for the quarter ended June 28,
1998, and earnings before interest, taxes, depreciation and
amortization (EBITDA) for the quarter increased 4% to $40.3 million
from $38.9 million for the same period last year. Operating income,
after a significant increase in depreciation expense, decreased
slightly to $28.3 million from $28.4 million, and net income for the
period remained essentially flat at $.37 per limited partner unit
(diluted).
The increase in depreciation expense for the quarter was the result of
more than $60 million of capital expenditures put in place for the
1999 season, as well as the addition of the Buena Park Hotel, which
was acquired in the first quarter of the year. Excluding
depreciation, operating costs as a percent of revenues have remained
level between years.
For the quarter, we achieved a 4% increase in in-park guest per capita
spending and a 17% increase in out-of-park revenues, including our
hotels. These gains were partially offset by a 3% decrease in
combined second-quarter attendance, due to some poor early-season
weather. Through the first six months of 1999, net revenues were up
6% over last year on a 1% increase in combined attendance and a 5%
increase in in-park guest per capita spending. Over the same period,
EBITDA increased 18% between years.
Included in costs and expenses are approximately $1,536,000 of
incentive fees payable to the general partner relating to the 1999
second quarter distribution, which exceeds the minimum distribution as
defined in the partnership agreement by 16.25 cents per unit, or
$8,489,000 in the aggregate. This compares to $1,318,000 of incentive
fees in the 1998 second quarter.
Financial Condition:
The Partnership has available through April 2002 a $200 million
revolving credit facility, of which $178.1 million was borrowed and in
use as of June 27, 1999. Current assets and liabilities are at normal
seasonal levels at June 27, 1999, 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
seasonal working capital needs, planned capital expenditures and
regular 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.
The Partnership has completed its assessment of its computer-dependent
rides and equipment and its internal information systems that support
business activities. We believe that with minor modifications to
existing hardware and software, the Year 2000 issue will pose no
significant internal operational problems. In addition, the
Partnership has also received assurances about readiness from its
major utility and financial service providers, and we have no reason
to believe that any third party with whom we have a material
relationship will not be Year 2000 compliant.
<PAGE>
Year 2000 Compliance (continued):
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
system modifications are not properly made or are not completed on a
timely basis, or if one or more of our principal suppliers of
essential utilities or financial services fail to operate normally,
particularly at Knott's Berry Farm which operates year-round, 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, the actual readiness of our major
utility and financial service providers, 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) - 1999 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 9, 1999 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) 1999 Second Quarter Press Release. 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-27-1999
<CASH> 10,409
<SECURITIES> 0
<RECEIVABLES> 16,577
<ALLOWANCES> 0
<INVENTORY> 19,911
<CURRENT-ASSETS> 52,811
<PP&E> 826,008
<DEPRECIATION> 188,370
<TOTAL-ASSETS> 700,763
<CURRENT-LIABILITIES> 108,529
<BONDS> 0
0
0
<COMMON> 297,539
<OTHER-SE> 5,290
<TOTAL-LIABILITY-AND-EQUITY> 700,763
<SALES> 124,203
<TOTAL-REVENUES> 124,203
<CGS> 14,392
<TOTAL-COSTS> 95,944
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,486
<INCOME-PRETAX> 23,773
<INCOME-TAX> 4,534
<INCOME-CONTINUING> 19,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,239
<EPS-BASIC> .37
<EPS-DILUTED> .37
</TABLE>
