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 endedJune 24, 2001
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 number1-9444
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.)
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
Depositary Units
(Representing Limited Partner Interests)
Units Outstanding As Of
August 1, 2001
50,614,299
CEDAR FAIR, L.P.
INDEX
FORM 10 - Q
Part I - Financial Information | ||||||
Item 1. | Financial Statements | 3-9 | ||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 | ||||
Part II - Other Information | ||||||
Item 2. | Changes in Securities | 11 | ||||
Item 6. | Exhibits and Reports on Form 8-K | 11 | ||||
Signatures | 12 | |||||
Index to Exhibits | 13 |
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CEDAR FAIR, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
6/24/01 | 12/31/00 | |||
ASSETS | ||||
Current Assets: | ||||
Cash | $ 11,409 | $ 2,392 | ||
Receivables | 14,248 | 5,270 | ||
Inventories | 24,376 | 13,358 | ||
Prepaids | 5,693 | 4,358 | ||
55,726 | 25,378 | |||
Land, Buildings, Rides and Equipment: | ||||
Land | 148,524 | 136,564 | ||
Land improvements | 120,615 | 112,927 | ||
Buildings | 250,354 | 238,446 | ||
Rides and equipment | 510,159 | 466,545 | ||
Construction in progress | 2,835 | 10,918 | ||
1,032,487 | 965,400 | |||
Less accumulated depreciation | (251,982) | (236,481) | ||
780,505 | 728,919 | |||
Intangibles, net of amortization | 10,593 | 9,846 | ||
$ 846,824 | $ 764,143 | |||
LIABILITIES AND PARTNERS' EQUITY | ||||
Current Liabilities: | ||||
Short-term borrowings | $ 143,450 | $ 38,550 | ||
Revolving credit loans - current maturities | 200,000 | - | ||
Accounts payable | 43,805 | 16,562 | ||
Distribution payable to partners | 19,053 | 19,837 | ||
Accrued interest | 3,069 | 3,474 | ||
Accrued taxes | 9,251 | 14,293 | ||
Accrued salaries, wages and benefits | 12,153 | 9,776 | ||
Self-insurance reserves | 9,744 | 10,156 | ||
Other accrued liabilities | 7,125 | 1,376 | ||
447,650 | 114,024 | |||
Other Liabilities | 32,809 | 19,530 | ||
Long-Term Debt: | ||||
Revolving credit loans | - | 200,000 | ||
Term debt | 100,000 | 100,000 | ||
100,000 | 300,000 | |||
Partners' Equity: | ||||
Special L.P. interests | 5,290 | 5,290 | ||
General partner | 48 | 110 | ||
Limited partners, 50,614 and 50,813 units outstanding at | ||||
June 24, 2001 and December 31, 2000, respectively | 259,758 | 325,189 | ||
Limited partnership unit options | 5,735 | - | ||
Accumulated other comprehensive loss | (4,466) | - | ||
266,365 | 330,589 | |||
$ 846,824 | $ 764,143 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per unit data)
Three months ended | Twelve months ended | ||||||||
6/24/01 | 6/25/00 | 6/24/01 | 6/25/00 | ||||||
Net revenues: | |||||||||
Admissions | $ 59,336 | $ 62,682 | $ 232,123 | $ 218,597 | |||||
Food, merchandise and games | 52,904 | 55,909 | 190,865 | 184,248 | |||||
Accommodations and other | 11,425 | 10,913 | 43,482 | 37,808 | |||||
123,665 | 129,504 | 466,470 | 440,653 | ||||||
Costs and expenses: | |||||||||
Cost of products sold | 14,056 | 14,671 | 51,148 | 49,136 | |||||
Operating expenses | 57,829 | 57,851 | 203,082 | 191,929 | |||||
Selling, general and administrative | 17,943 | 16,371 | 56,312 | 51,713 | |||||
Non-cash unit option expense | 3,550 | - | 5,735 | - | |||||
Depreciation and amortization | 12,900 | 11,831 | 40,474 | 34,825 | |||||
Non-recurring cost to terminate general partner fees | - | - | 7,827 | - | |||||
106,278 | 100,724 | 364,578 | 327,603 | ||||||
Operating income | 17,387 | 28,780 | 101,892 | 113,050 | |||||
Interest expense | 6,420 | 5,710 | 23,754 | 17,162 | |||||
Income before taxes | 10,967 | 23,070 | 78,138 | 95,888 | |||||
Provision for taxes | 4,329 | 4,427 | 16,241 | 15,401 | |||||
Net income | 6,638 | 18,643 | 61,897 | 80,487 | |||||
Net income allocated to general partner | 7 | 93 | 62 | 402 | |||||
Net income allocated to limited partners | $ 6,631 | $ 18,550 | $ 61,835 | $ 80,085 | |||||
Basic earnings per limited partner unit: | |||||||||
Weighted average limited partner units outstanding | 51,086 | 51,573 | 51,049 | 51,769 | |||||
Net income per limited partner unit | $ .13 | $ .36 | $ 1.21 | $ 1.55 | |||||
Diluted earnings per limited partner unit: | |||||||||
Weighted average limited partner units outstanding | 51,519 | 52,053 | 51,284 | 52,250 | |||||
Net income per limited partner unit | $ .13 | $ .36 | $ 1.21 | $ 1.53 | |||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(In thousands)
Accumulated | ||||||||||||
Special | General | Limited | Other | Total | ||||||||
L.P. | Partner's | Partners' | L.P. Unit | Comprehensive | Partners' | |||||||
Interests | Equity | Equity | Options | Loss | Equity | |||||||
Balance at March 25, 2001 | $ 5,290 | $ 60 | $274,783 | $ 2,185 | $ (4,208) | $278,110 | ||||||
Comprehensive income: | ||||||||||||
Net income | - | 7 | 6,631 | - | - | 6,638 | ||||||
Other comprehensive loss on interest rate swap agreements: | ||||||||||||
Unrealized loss for the quarter | - | - | - | - | (258) | (258) | ||||||
Total comprehensive income | 6,380 | |||||||||||
Vested value of L.P. unit options | - | - | - | 3,550 | - | 3,550 | ||||||
Issuance of 1,250,000 L.P. units Adventure | - | - | 27,613 | - | - | 27,613 | ||||||
Units repurchased | - | - | (30,235) | - | - | (30,235) | ||||||
Distribution declared | ||||||||||||
($.39 per limited partner unit) | - | (19) | (19,034) | - | - | (19,053) | ||||||
Balance at June 24, 2001 | $ 5,290 | $ 48 | $259,758 | $ 5,735 | $ (4,466) | $266,365 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended | Twelve months ended | ||||||||
6/24/01 | 6/25/00 | 6/24/01 | 6/25/00 | ||||||
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES | |||||||||
Net income | $ 6,638 | $ 18,643 | $ 61,897 | $ 80,487 | |||||
Adjustments to reconcile net income to net cash from | |||||||||
operating activities | |||||||||
Depreciation and amortization | 12,900 | 11,831 | 40,474 | 34,825 | |||||
Non-cash unit option expense | 3,550 | - | 5,735 | - | |||||
Change in assets and liabilities, net of effects from acquisitions: | |||||||||
(Increase) in inventories | (4,558) | (4,019) | (2,332) | (1,649) | |||||
(Increase) decrease in current and other assets | (10,767) | (14,355) | 1,597 | 57 | |||||
Increase (decrease) in accounts payable | 16,718 | 15,502 | (965) | 3,992 | |||||
Increase (decrease) in accrued taxes | 1,694 | 3,730 | (16,114) | 8,879 | |||||
Increase (decrease) in self-insurance reserves | (674) | 58 | 911 | 106 | |||||
Increase (decrease) in other current liabilities | 11,039 | 13,104 | (5,338) | 2,250 | |||||
Increase (decrease) in other liabilities | 592 | (100) | 17,426 | (388) | |||||
Net cash from operating activities | 37,132 | 44,394 | 103,291 | 128,559 | |||||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES | |||||||||
Capital expenditures | (19,874) | (40,260) | (54,034) | (113,336) | |||||
Acquisition of Michigan's Adventure: | |||||||||
Land, buildings, rides and equipment acquired | (27,959) | - | (27,959) | - | |||||
Negative working capital assumed | 358 | - | 358 | - | |||||
Acquisition of Oasis Water Park: | |||||||||
Land, buildings, rides and equipment acquired | (9,311) | - | (9,311) | - | |||||
Acquisition of White Water Canyon: | |||||||||
Land, buildings, rides and equipment acquired | - | - | - | (11,796) | |||||
Negative working capital assumed | - | - | - | 227 | |||||
Net cash (for) investing activities | (56,786) | (40,260) | (91,946) | (124,905) | |||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | |||||||||
Net borrowings on revolving credit loans | 41,689 | 23,300 | 76,489 | 67,981 | |||||
Distributions paid to partners | (19,834) | (19,437) | (78,893) | (75,518) | |||||
Reduction of general partner interest | - | - | (1,000) | - | |||||
Repurchase of limited partnership units | (30,235) | - | (52,861) | (7,548) | |||||
Issuance of units for vested deferred compensation | - | - | 8,858 | - | |||||
Acquisition of Michigan's Adventure: | |||||||||
Issuance of 1,250,000 units | 27,613 | - | 27,613 | - | |||||
Acquisition of Oasis Water Park: | |||||||||
Borrowings on revolving credit loans | 9,311 | - | 9,311 | - | |||||
Acquisition of White Water Canyon: | |||||||||
Borrowings on revolving credit loans | - | - | - | 11,569 | |||||
Net cash from (for) financing activities | 28,544 | 3,863 | (10,483) | (3,516) | |||||
CASH | |||||||||
Net increase for the period | 8,890 | 7,997 | 862 | 138 | |||||
Balance, beginning of period | 2,519 | 2,550 | 10,547 | 10,409 | |||||
Balance, end of period | $ 11,409 | $ 10,547 | $ 11,409 | $ 10,547 | |||||
SUPPLEMENTAL INFORMATION | |||||||||
Cash payments for interest expense | $ 5,207 | $ 3,556 | $ 24,087 | $ 17,284 | |||||
Interest capitalized | 149 | 745 | 597 | 2,025 | |||||
Cash payments for income taxes | 1,276 | 870 | 7,505 | 7,838 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CEDAR FAIR, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED
JUNE 24, 2001 AND JUNE 25, 2000
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 and cash flows for the preceding twelve-month periods ended June 24, 2001 and June 25, 2000 to accompany the quarterly results. Because amounts for the twelve months ended June 24, 2001 include actual 2000 peak season operating results, they may not be indicative of 2001 full calendar year operations.
(1) Significant Accounting and Reporting Policies:
The Partnership's consolidated financial statements for the quarters ended June 24, 2001 and June 25, 2000 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, 2000, which were included in the Form 10-K filed on March 30, 2001, except for the change described in Note 3 of these statements. 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 six 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; Worlds of Fun in Kansas City, Missouri; and Michigan's Adventure near Muskegon, Michigan. The Partnership also owns and operates five seasonal water parks located in Chula Vista, California, near San Diego, and Palm Springs, California; and adjacent to Cedar Point, Knott's Berry Farm and Worlds of Fun. The Partnership also operates Knott's Camp Snoopy at the Mall of America in Bloomington, Minnesota under a management contract. Virtually all of the Partnership's revenues from its five seasonal amusement parks, as well as its five water 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 for its 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.
(3) Derivative Financial Instruments:
Effective January 1, 2001, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" and related amendments. This statement requires that all derivative instruments be recorded on the balance sheet at their fair values. Changes in the fair values of derivatives that effectively hedge a business transaction are recorded each period in an equity account called "other comprehensive income (loss)."
The Partnership only uses derivative financial instruments to reduce its exposure to fluctuations in interest rates and foreign exchange rates. The Partnership has entered into several interest rate swap agreements as a means of converting a portion of its variable rate bank debt into fixed rate debt. Cash flows related to these interest rate swap agreements are included in interest expense over the terms of the agreements, which range from one to four years in maturity. The fair market value of all interest rate swap agreements, which was obtained from broker quotes, is included in other liabilities on the consolidated balance sheet as of June 24, 2001, and the changes in fair market value are reflected in other comprehensive income (loss) on the consolidated statement of partners' equity.
(4) Unit Options:
The Partnership accounts for unit options under APB Opinion No. 25, "Accounting for Stock Issued to Employees." As of June 24, 2001, the market price of the limited partnership units exceeded the exercise price of the vested variable priced unit options, resulting in a current period expense of $3.6 million, which is reflected as non-cash unit option expense on the consolidated statements of operations.
(5) Acquisitions:
Effective June 1, 2001, the Partnership acquired Michigan's Adventure amusement park, located near Muskegon, Michigan, for 1,250,000 unregistered limited partnership units valued at approximately $27.6 million. The park's assets, liabilities and results of operations since the acquisition date are included in the accompanying financial statements and the purchase price has been allocated to assets and liabilities based on their fair values at the date of acquisition.
On May 29, 2001, the Partnership acquired Oasis Water Park, which is located in Palm Springs, California, for a cash purchase price of $9.3 million. The purchase price has been allocated to assets and liabilities acquired based on their relative fair values at the date of acquisition, and the park's results of operations are included in these consolidated financial statements for the period following the acquisition.
(6) Repurchase of Limited Partnership Units:
On June 22, 2001, the Partnership reacquired 1,440,000 limited partnership units in a private transaction with Hunt Midwest Enterprises, Inc. The units were originally issued to Hunt Midwest in the Partnership's acquisition of Worlds of Fun and Oceans of Fun in 1995, and represented approximately a 2.7% equity interest in the Partnership. The units were repurchased at a price of approximately $21.00, while the Partnership's units closed at $22.67 on June 21, 2001.
(7) Earnings per Unit:
Net income per limited partner unit is calculated based on the following unit amounts:
Three months ended | Twelve months ended | |||||||
6/24/01 | 6/25/00 | 6/24/01 | 6/25/00 | |||||
(in thousands except per unit data) | ||||||||
Basic weighted average units outstanding | 51,086 | 51,573 | 51,049 | 51,769 | ||||
Effect of dilutive units: | ||||||||
Unit options | 433 | - | 153 | - | ||||
Deferred units | - | 480 | 82 | 461 | ||||
Contingent units - Knott's acquisition | - | - | - | 20 | ||||
Diluted weighted average units outstanding | 51,519 | 52,053 | 51,284 | 52,250 | ||||
Net income per unit - basic | $ .13 | $ .36 | $ 1.21 | $ 1.55 | ||||
Net income per unit - diluted | $ .13 | $ .36 | $ 1.21 | $ 1.53 | ||||
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Net revenues for the quarter ended June 24, 2001, decreased 4.5% to $123.7 million from $129.5 million in 2000, on a 5% decrease in combined attendance and a 2% increase in out-of-park revenues, including resort hotels. During this same period, in-park guest per capita spending increased 2-4% at the Partnership's amusement parks, but due to the mix of attendance, weighted average per capita spending remained relatively flat compared with last year.
Excluding depreciation and non-cash charges, total operating costs and expenses for the quarter increased 1% to $89.8 million, due to the recent acquisitions of Michigan's Adventure Amusement Park and Oasis Water Park. After depreciation and a $3.6 million ($.07 per unit) non-cash charge for unit options, operating costs totaled $106.3 million, and operating income decreased to $17.4 million from $28.8 million in 2000. Net income for the quarter, after higher interest expense resulting from acquisitions and large unit repurchases, was $6.6 million, or $.13 per limited partner unit, compared to $18.6 million, or $.36 per unit, a year ago.
The 2001 season has been a difficult one for several of the Partnership's parks. Cool temperatures and heavy rainfall during the early part of the season led to attendance shortfalls that the parks have been unable to recoup in spite of improved weather during most of June and July. Dorney Park has performed very well this season with the introduction of another world-class roller coaster, but attendance at the other parks has remained below our expectations. Combined attendance through the first seven months of the year is up 2% from last year, but excluding results from our two newest properties is down 3%.
The overall weakness in the economy is believed to be the most significant factor negatively impacting this year's results, particularly at Cedar Point. Over the past ten years, the Partnership has successfully developed Cedar Point into more of a multi-day resort destination featuring more than 1,400 hotel rooms. However, as a "destination" park, Cedar Point has become more susceptible to soft economic cycles, and the park has not been able to keep up with last year's pace, which benefited from the very successful debut of Millennium Force. Through the end of July, attendance at Cedar Point remained almost 9% behind last year, spread across virtually all segments of its market.
For the month of July, the Partnership's combined attendance increased 7%, due to the addition of its two newest parks. On a same-park basis, attendance was down slightly from July of 2000, and combined in-park guest per capita spending for the month was relatively flat due to aggressive promotions offered to address the soft early-season attendance at several of the parks.
Financial Condition and Liquidity:
The Partnership has available through April 2002 a $200 million revolving credit facility and has an additional $150 million revolving credit facility available through November 2001 to fund peak seasonal requirements. Borrowings under these credit facilities were $343.5 million as of June 24, 2001. Because of its very favorable interest rates, the Partnership has delayed replacing the $200 million facility until the last half of 2001; accordingly, borrowings under this facility must be shown as current liabilities as of June 24, 2001.
In July of 2001, the Partnership reached agreement with an institutional lender for the issuance of $50 million in 6.40% senior notes to refinance a portion of the revolving credit borrowings over an average period of five years.
Current assets and liabilities are at normal seasonal levels at June 24, 2001, and the negative working capital 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 through November of 2001, by which time new revolving credit facilities are expected to be completed.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
Effective June 1, 2001, the Partnership acquired all issued and outstanding stock of Michigan's Adventure, Inc., which owns and operates Michigan's Adventure amusement park, located near Muskegon, Michigan, in exchange for 1,250,000 unregistered limited partnership units valued at approximately $27.6 million. If any of the units are sold during the period beginning on May 31, 2002 through July 30, 2003 at a price below $18.00 per unit, the Partnership has agreed to pay the difference between the proceeds valued at $18.00 per unit and the actual proceeds received (as defined in the Contribution Agreement).
On June 22, 2001, the Partnership reacquired 1,440,000 limited partnership units in a private transaction with Hunt Midwest Enterprises, Inc. The units were originally issued to Hunt Midwest in the Partnership's acquisition of Worlds of Fun and Oceans of Fun in 1995, and represented approximately a 2.7% equity interest in the Partnership. The units were repurchased at a price of approximately $21.00, while the Partnership's units closed at $22.67 on June 21, 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (4.01) - Contribution Agreement by and among Roger D. Jourden and Mary L. Jourden and the Registrant dated May 31, 2001. (All exhibits described in the Agreement have been omitted. Upon request, the Registrant will furnish to the Commission a copy of any omitted exhibits.)
Exhibit (20) - 2001 Second Quarter Press Release
(b) Reports on Form 8-K: None.
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 8, 2001 | Bruce A. Jackson |
Bruce A. Jackson | |
Corporate Vice President - Finance | |
(Chief Financial Officer) | |
Charles M. Paul | |
Charles M. Paul | |
Vice President and Corporate Controller | |
(Chief Accounting Officer) |
INDEX TO EXHIBITS
Page Number
Exhibit (4.01) Contribution Agreement by and among Roger D. Jourden and Mary
L. Jourden and the Registrant dated May 31, 2001. 14
Exhibit (20) 2001 Second Quarter Press Release. 44