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 26, 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 34-1560655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Cedar Point Drive, Sandusky, Ohio 44870-5259
(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, 1999
(Representing Limited Partner 51,980,183
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>
9/26/99 12/31/98
ASSETS
Current Assets:
Cash $ 5,882 $ 1,137
Receivables 19,911 6,253
Inventories 12,877 10,245
Prepaids 2,025 3,332
40,695 20,967
Land, Buildings, Rides and Equipment:
Land 130,009 127,050
Land improvements 94,398 88,924
Buildings 209,606 178,795
Rides and equipment 385,935 368,138
Construction in progress 18,434 12,691
838,382 775,598
Less accumulated depreciation (197,767) (175,554)
640,615 600,044
Intangibles, net of amortization 10,226 10,314
$ 691,536 $ 631,325
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable $ 30,881 $ 17,031
Distribution payable to partners 18,937 16,979
Accrued interest 1,062 3,154
Accrued taxes 21,048 18,956
Accrued salaries, wages and benefits 14,816 9,170
Self-insurance reserves 9,072 8,174
Other accrued liabilities 8,051 3,767
103,867 77,231
Other Liabilities 10,814 11,753
Long-Term Debt:
Revolving credit loans 96,800 100,350
Term debt 100,000 100,000
196,800 200,350
Partners' Equity:
Special L.P. interests 5,290 5,290
General partner 684 492
Limited partners, 51,980 units outstanding 374,081 336,209
380,055 341,991
$ 691,536 $ 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
9/26/99 9/27/98 9/26/99 9/27/98
<S> <C> <C> <C> <C>
Net revenues $240,674 $234,226 $434,792 $381,478
Costs and expenses:
Cost of products sold 24,641 24,610 49,004 42,783
Operating expenses 70,414 66,866 184,327 160,458
Selling, general and 21,527 21,253 50,268 44,995
administrative
Depreciation and 15,759 15,875 34,257 29,714
amortization
132,341 128,604 317,856 277,950
Operating income 108,333 105,622 116,936 103,528
Interest expense 3,723 3,378 14,942 13,128
Income before taxes 104,610 102,244 101,994 90,400
Provision for taxes 8,447 7,939 15,573 12,755
Net income 96,163 94,305 86,421 77,645
Net income allocated to 481 472 432 388
general partner
Net income allocated to $ 95,682 $ 93,833 $ 85,989 $ 77,257
limited partners
Earnings per limited partner
unit:
Weighted average limited
partner units 51,940 51,098 51,742 49,851
outstanding - basic
Net income per limited $ 1.84 $ 1.84 $ 1.66 $ 1.55
partner unit - basic
Weighted average limited
partner units 52,388 52,508 52,381 50,993
outstanding - diluted
Net income per limited $ 1.83 $ 1.79 $ 1.64 $ 1.52
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 $ 5,290 $ 492 $ 336,209 $ 341,991
31, 1998
Allocation of net loss - (109) (21,722) (21,831)
Distribution declared - (91) (18,194) (18,285)
($.35 per limited
partner unit)
Balance at March 28, 5,290 292 296,293 301,875
1999
Allocation of net income - 96 19,143 19,239
Distribution declared - (91) (18,194) (18,285)
($.35 per limited
partner unit)
Balance at June 27, 5,290 297 297,242 302,829
1999
Allocation of net income - 481 95,682 96,163
Distribution declared - (94) (18,843) (18,937)
($.3625 per limited
partner unit)
Balance at September $ 5,290 $ 684 $ 374,081 $ 380,055
26, 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 Twelve months
ended ended
9/26/99 9/27/98 9/26/99 9/27/98
<S> <C> <C> <C> <C>
CASH FLOWS FROM (FOR) OPERATING
ACTIVITIES
Net income $96,163 $94,305 $86,421 $77,645
Adjustments to reconcile net
income to net cash from
operating activities
Depreciation and amortization 15,759 15,875 34,257 29,714
Change in assets and liabilities,
net of effects from acquisitions:
(Increase) decrease in inventories 7,034 7,154 (1,383) (1,046)
(Increase) decrease in current and 555 (168) (1,172) (2,107)
other assets
Increase (decrease) in accounts (9,368) (13,601) 7,347 8,293
payable
Increase in accrued taxes 4,711 8,304 3,430 13,613
Increase (decrease) in self- 345 460 1,317 (1,581)
insurance reserves
Increase (decrease) in other (1,002) (1,296) (3,521) 2,575
current liabilities
Increase (decrease) in other (491) (258) 88 2,128
liabilities
Net cash from operating 113,706 110,775 126,784 129,234
activities
CASH FLOWS FROM (FOR) INVESTING
ACTIVITIES
Capital expenditures (18,648) (11,110) (70,270) (63,694)
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 - - - (263,042)
equipment acquired
Negative working capital assumed, - - - 11,638
net of cash acquired
Net cash (for) investing (18,648) (11,110) (87,706) (315,098)
activities
CASH FLOWS FROM (FOR) FINANCING
ACTIVITIES
Net borrowings (payments) on (81,300) (84,150) 14,214 (41,150)
revolving credit loans
Refinancing of revolving credit - - - 50,000
with term debt
Distributions paid to partners (18,285) (16,797) (70,574) (63,144)
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 - (2,940) - (7,464)
units
Net cash from (for) financing (99,585) (103,887) (38,924) 190,144
activities
CASH
Net increase (decrease) for the (4,527) (4,222) 154 4,280
period
Balance, beginning of period 10,409 9,950 5,728 1,448
Balance, end of period $ 5,882 $ 5,728 $ 5,882 $ 5,728
SUPPLEMENTAL INFORMATION
Cash payments for interest expense $ 6,036 $ 6,347 $15,010 $12,489
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
SEPTEMBER 26, 1999 AND SEPTEMBER 27, 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 September 26,
1999 and September 27, 1998 to accompany the quarterly results.
Because amounts for the 12 months ended September 26, 1999 include
actual 1998 fourth quarter operating results, they may not be
indicative of 1999 full calendar year operations.
(1) Significant Accounting and Reporting Policies:
The Partnership's consolidated financial statements for the quarters
ended September 26, 1999 and September 27, 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.
In addition, on October 14, 1999, the Partnership announced that it
had reached agreement in principle for the acquisition of White Water
Canyon, a seasonal water park located near San Diego in Chula Vista,
California. The acquisition is expected to be completed by the end of
1999.
(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
9/26/99 9/27/98 9/26/99 9/27/98
(in thousands except per unit data)
<S> <C> <C> <C> <C>
Basic weighted average 51,940 51,098 51,742 49,851
units outstanding
Effect of dilutive
units:
Deferred units 408 339 401 339
Contingent units - 40 1,071 238 803
Knott's acquisition
Diluted weighted 52,388 52,508 52,381 50,993
average units
outstanding
Net income per unit - $ 1.84 $ 1.84 $ 1.66 $ 1.55
basic
Net income per unit - $ 1.83 $ 1.79 $ 1.64 $ 1.52
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 September 26, 1999, increased 3% to
$240.7 million, from $234.2 million for the quarter ended September
27, 1998, and earnings before interest, taxes, depreciation and
amortization (EBITDA) for the quarter increased 2% to $124.1 million
from $121.5 million for the same period last year. Operating income
for the period increased 3% to $108.3 million from $105.6 million, and
net income increased 2% to $96.2 million, or $1.83 per limited partner
unit (diluted), from $94.3 million, or $1.79 per unit, in 1998.
For the quarter, we achieved a 3% increase in in-park guest per capita
spending and a 27% increase in out-of-park revenues, including our
hotels. These gains were partially offset by a 4% decrease in
combined third-quarter attendance, due to inconsistent weather and the
lack of a major new thrill ride at several of our parks. Through the
first nine months of 1999, net revenues were up 4% over last year on a
4% increase in in-park guest per capita spending and a 20% increase in
out-of-park revenues, which were offset slightly by a 2% decrease in
combined attendance. Over the same period, EBITDA increased 5%
between years.
Included in costs and expenses are approximately $1,654,000 of
incentive fees payable to the general partner relating to the 1999
third quarter distribution, which exceeds the minimum distribution as
defined in the partnership agreement by 17.5 cents per unit, or
$9,142,000 in the aggregate. This compares to $1,362,000 of incentive
fees in the 1998 third quarter.
Financial Condition:
The Partnership has available through April 2002 a $200 million
revolving credit facility, of which $96.8 million was borrowed and in
use as of September 26, 1999, and has reached agreement with its bank
group for an additional $90 million short-term credit facility.
Current assets and liabilities are at normal seasonal levels at
September 26, 1999, 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 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 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 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 Third Quarter Press Release. 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-26-1999
<CASH> 5,882
<SECURITIES> 0
<RECEIVABLES> 19,911
<ALLOWANCES> 0
<INVENTORY> 12,877
<CURRENT-ASSETS> 40,695
<PP&E> 838,382
<DEPRECIATION> 197,767
<TOTAL-ASSETS> 691,536
<CURRENT-LIABILITIES> 103,867
<BONDS> 0
0
0
<COMMON> 374,765
<OTHER-SE> 5,290
<TOTAL-LIABILITY-AND-EQUITY> 691,536
<SALES> 240,674
<TOTAL-REVENUES> 240,674
<CGS> 24,641
<TOTAL-COSTS> 132,341
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,723
<INCOME-PRETAX> 104,610
<INCOME-TAX> 8,447
<INCOME-CONTINUING> 96,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,163
<EPS-BASIC> 1.84
<EPS-DILUTED> 1.83
</TABLE>
