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 endedSeptember 30, 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
November 9, 2001
50,513,599
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 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)
9/30/01 | 12/31/00 | |||
ASSETS | ||||
Current Assets: | ||||
Cash | $ 6,078 | $ 2,392 | ||
Receivables | 21,505 | 5,270 | ||
Inventories | 16,095 | 13,358 | ||
Prepaids | 3,050 | 4,358 | ||
46,728 | 25,378 | |||
Land, Buildings, Rides and Equipment: | ||||
Land | 148,707 | 136,564 | ||
Land improvements | 119,666 | 112,927 | ||
Buildings | 248,844 | 238,446 | ||
Rides and equipment | 494,955 | 466,545 | ||
Construction in progress | 11,030 | 10,918 | ||
1,023,202 | 965,400 | |||
Less accumulated depreciation | (252,475) | (236,481) | ||
770,727 | 728,919 | |||
Intangibles, net of amortization | 10,571 | 9,846 | ||
$ 828,026 | $ 764,143 | |||
LIABILITIES AND PARTNERS' EQUITY | ||||
Current Liabilities: | ||||
Short-term borrowings | $ 43,950 | $ 38,550 | ||
Current maturities of long-term debt | 165,000 | - | ||
Accounts payable | 29,724 | 16,562 | ||
Distribution payable to partners | 20,732 | 19,837 | ||
Accrued interest | 1,780 | 3,474 | ||
Accrued taxes | 14,759 | 14,293 | ||
Accrued salaries, wages and benefits | 17,040 | 9,776 | ||
Self-insurance reserves | 11,992 | 10,156 | ||
Other accrued liabilities | 4,869 | 1,376 | ||
309,846 | 114,024 | |||
Other Liabilities | 33,354 | 19,530 | ||
Long-Term Debt: | ||||
Revolving credit loans | - | 200,000 | ||
Term debt | 140,000 | 100,000 | ||
140,000 | 300,000 | |||
Partners' Equity: | ||||
Special L.P. interests | 5,290 | 5,290 | ||
General partner | 134 | 110 | ||
Limited partners, 50,514 and 50,813 units outstanding at | ||||
September 30, 2001 and December 31, 2000, respectively | 343,613 | 325,189 | ||
Limited partnership unit options | 2,624 | - | ||
Accumulated other comprehensive loss | (6,835) | - | ||
344,826 | 330,589 | |||
$ 828,026 | $ 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 | ||||||||
9/30/01 | 9/24/00 | 9/30/01 | 9/24/00 | ||||||
Net revenues: | |||||||||
Admissions | $ 147,410 | $ 136,523 | $ 243,010 | $ 231,309 | |||||
Food, merchandise and games | 109,251 | 103,912 | 196,204 | 191,839 | |||||
Accommodations and other | 28,974 | 26,388 | 46,068 | 43,654 | |||||
285,635 | 266,823 | 485,282 | 466,802 | ||||||
Costs and expenses: | |||||||||
Cost of products sold | 28,761 | 26,451 | 53,458 | 50,946 | |||||
Operating expenses | 86,969 | 80,443 | 209,608 | 201,958 | |||||
Selling, general and administrative | 28,337 | 23,996 | 60,653 | 54,182 | |||||
Depreciation and amortization | 21,424 | 18,961 | 42,937 | 38,027 | |||||
Non-cash unit option expense (credit) | (3,111) | - | 2,624 | - | |||||
Non-recurring cost to terminate general partner fees | - | 7,838 | (11) | 7,838 | |||||
162,380 | 157,689 | 369,269 | 352,951 | ||||||
Operating income | 123,255 | 109,134 | 116,013 | 113,851 | |||||
Interest expense | 6,289 | 5,548 | 24,495 | 18,987 | |||||
Income before taxes | 116,966 | 103,586 | 91,518 | 94,864 | |||||
Provision for taxes | 9,720 | 9,107 | 16,854 | 16,061 | |||||
Net income | 107,246 | 94,479 | 74,664 | 78,803 | |||||
Net income allocated to general partner | 107 | 94 | 75 | 48 | |||||
Net income allocated to limited partners | $ 107,139 | $ 94,385 | $ 74,589 | $ 78,755 | |||||
Basic earnings per limited partner unit: | |||||||||
Weighted average limited partner units outstanding | 50,592 | 51,350 | 50,854 | 51,622 | |||||
Net income per limited partner unit | $ 2.12 | $ 1.84 | $ 1.47 | $ 1.53 | |||||
Diluted earnings per limited partner unit: | |||||||||
Weighted average limited partner units outstanding | 50,925 | 51,673 | 51,092 | 52,072 | |||||
Net income per limited partner unit | $ 2.10 | $ 1.83 | $ 1.46 | $ 1.51 | |||||
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 June 24, 2001 | $ 5,290 | $ 48 | $259,758 | $ 5,735 | $ (4,466) | $266,365 | ||||||
Comprehensive income: | ||||||||||||
Net income | - | 107 | 107,139 | - | - | 107,246 | ||||||
Other comprehensive loss on interest rate swap agreements: | ||||||||||||
Unrealized loss for the quarter | - | - | - | - | (2,369) | (2,369) | ||||||
Total comprehensive income | 104,877 | |||||||||||
Vested value of L.P. unit options | - | - | - | (3,111) | - | (3,111) | ||||||
Units repurchased | - | - | (1,866) | - | - | (1,866) | ||||||
Distribution declared | ||||||||||||
($.41 per limited partner unit) | - | (21) | (21,418) | - | - | (21,439) | ||||||
Balance at September 30, 2001 | $ 5,290 | $ 134 | $ 343,613 | $ 2,624 | $ (6,835) | $344,826 |
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 | ||||||||
9/30/01 | 9/24/00 | 9/30/01 | 9/24/00 | ||||||
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES | |||||||||
Net income | $107,246 | $ 94,479 | $ 74,664 | $ 78,803 | |||||
Adjustments to reconcile net income to net cash from | |||||||||
operating activities: | |||||||||
Depreciation and amortization | 21,424 | 18,961 | 42,937 | 38,027 | |||||
Non-cash unit option expense (credit) | (3,111) | - | 2,624 | - | |||||
Change in assets and liabilities, net of effects from acquisitions: | |||||||||
(Increase) decrease in inventories | 8,281 | 7,268 | (1,319) | (1,415) | |||||
(Increase) in current and other assets | (4,689) | (794) | (2,298) | (1,293) | |||||
Increase (decrease) in accounts payable | (14,081) | (19,044) | 3,998 | (5,684) | |||||
Increase (decrease) in accrued taxes | 5,508 | (11,865) | 1,259 | (7,697) | |||||
Increase in self-insurance reserves | 2,248 | 1,022 | 2,137 | 783 | |||||
Increase (decrease) in other current liabilities | 1,342 | (2,944) | (1,052) | 308 | |||||
Increase (decrease) in other liabilities | (1,824) | 8,947 | 6,655 | 9,050 | |||||
Net cash from operating activities | 122,344 | 96,030 | 129,605 | 110,882 | |||||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES | |||||||||
Capital expenditures | (11,550) | (15,537) | (51,049) | (110,224) | |||||
Acquisition of Michigan's Adventure: | |||||||||
Land, buildings, rides and equipment acquired | - | - | (27,959) | - | |||||
Negative working capital assumed | - | - | 358 | - | |||||
Acquisition of Oasis Water Park: | |||||||||
Land, buildings, rides and equipment acquired | - | - | (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 | (11,550) | (15,537) | (87,961) | (121,793) | |||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | |||||||||
Net borrowings (payments) on revolving credit loans | (144,500) | (63,050) | (4,961) | 86,231 | |||||
Borrowings of term debt | 50,000 | - | 50,000 | - | |||||
Distributions paid to partners | (19,759) | (19,437) | (79,379) | (76,670) | |||||
Repurchase of limited partnership units | (1,866) | (11,897) | (42,817) | (19,445) | |||||
Issuance of units for vested deferred compensation | - | 8,858 | - | 8,858 | |||||
Reduction of general partner interest | - | (847) | - | (847) | |||||
Acquisition of Michigan's Adventure: | |||||||||
Issuance of 1,250,000 units | - | - | 27,613 | - | |||||
Acquisition of Oasis Water Park: | |||||||||
Borrowings on revolving credit loans | - | - | 9,311 | - | |||||
Acquisition of White Water Canyon: | |||||||||
Borrowings on revolving credit loans | - | - | - | 11,569 | |||||
Net cash from (for) financing activities | (116,125) | (86,373) | (40,233) | 9,696 | |||||
CASH | |||||||||
Net increase (decrease) for the period | (5,331) | (5,880) | 1,411 | (1,215) | |||||
Balance, beginning of period | 11,409 | 10,547 | 4,667 | 5,882 | |||||
Balance, end of period | $ 6,078 | $ 4,667 | $ 6,078 | $ 4,667 | |||||
SUPPLEMENTAL INFORMATION | |||||||||
Cash payments for interest expense | $ 7,578 | $ 7,590 | $ 23,926 | $ 18,838 | |||||
Interest capitalized | 68 | 130 | 535 | 2,155 | |||||
Cash payments for income taxes | 4,100 | 4,226 | 5,634 | 8,157 |
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
SEPTEMBER 30, 2001 AND SEPTEMBER 24, 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 calendar year. Accordingly, the Partnership has elected to present financial information regarding operations and cash flows for the preceding twelve-month periods ended September 30, 2001 and September 24, 2000 to accompany the quarterly results. Because amounts for the twelve months ended September 30, 2001 include actual 2000 fourth quarter 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 September 30, 2001 and September 24, 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 near San Diego and in Palm Springs, California, and adjacent to Cedar Point, Knott's Berry Farm and Worlds of Fun. The Partnership also operates 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 opera tes 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 other 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 September 30, 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 September 30, 2001, the market price of limited partnership units exceeded the exercise price of the vested variable-priced unit options, but by a lesser amount than at the end of the preceding quarter, resulting in a current period credit of $3.1 million, which is reflected as non-cash unit option expense (credit) on the consolidated statement of operations.
(5) Long-Term Debt:
In August 2001, the Partnership entered into a new note agreement for the issuance of $50 million in 6.40% senior notes to refinance a portion of our variable-priced revolving credit loans at favorable rates. The Partnership is required to make annual repayments of $10 million in August 2004 through August 2008 and may make prepayments with defined premiums.
(6) 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.
(7) Earnings per Unit:
Net income per limited partner unit is calculated based on the following unit amounts:
Three months ended | Twelve months ended | |||||||
9/30/01 | 9/24/00 | 9/30/01 | 9/24/00 | |||||
(in thousands except per unit data) | ||||||||
Basic weighted average units outstanding | 50,592 | 51,350 | 50,854 | 51,622 | ||||
Effect of dilutive units: | ||||||||
Unit options | 333 | - | 238 | - | ||||
Deferred units | - | 323 | - | 440 | ||||
Contingent units - Knott's acquisition | - | - | - | 10 | ||||
Diluted weighted average units outstanding | 50,925 | 51,673 | 51,092 | 52,072 | ||||
Net income per unit - basic | $ 2.12 | $ 1.84 | $ 1.47 | $ 1.53 | ||||
Net income per unit - diluted | $ 2.10 | $ 1.83 | $ 1.46 | $ 1.51 | ||||
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Net revenues for the quarter ended September 30, 2001, increased 7% to $285.6 million from $266.8 million in 2000, on a 9% increase in combined attendance, a 6% increase in out-of-park revenues, including resort hotels, and flat combined in-park guest per capita spending. During this same period, earnings before interest, taxes, depreciation and amortization, and non-recurring items (adjusted EBITDA) increased 4% to $141.6 million, before a non-cash accounting credit for unit option expense.
Excluding results from the Partnership's two newest properties, Michigan's Adventure and Oasis Water Park, net revenues for the quarter increased 3% on a 2% increase in combined attendance, a 6% increase in out-of-park revenues, and only a slight increase in in-park guest per capita spending, due to aggressive promotions offered to address soft early-season attendance at several of our parks. Adjusted EBITDA, excluding the acquired parks, was level with the third quarter of 2000.
Total operating costs and expenses for the quarter increased 10% to $144.1 million, excluding depreciation and non-cash or non-recurring charges, due in part to the Partnership's two new parks. After depreciation and a $3.1 million ($.06 per unit) non-cash credit for unit options, operating income increased 13% to $123.3 million from $109.1 million a year ago. Net income for the quarter, after higher interest expense resulting from acquisitions and large unit repurchases, increased 14% to $107.2 million, or $2.10 per limited partner unit, from $94.5 million, or $1.83 per unit, in 2000.
The 2001 season was a difficult one for several of the Partnership's parks, with the overall weakness in the economy being the most significant factor negatively impacting the year's results. Dorney Park performed very well this season with the introduction of another world-class roller coaster, but attendance at the Partnership's other parks remained below expectations. Through the first nine months of the year, combined attendance was up 3% from 2000, but excluding results from the Partnership's two newest properties was down 2%. Over this same nine-month period, guest per capita spending remained relatively flat and out-of-park revenues increased 5%.
In the weeks that followed the terrorist attacks of September 11, attendance at the Partnership's parks was understandably below normal levels, although the effect on third-quarter results was not significant, with the peak season already concluded at the Partnership's seasonal parks, and only Knott's Berry Farm open on a daily basis at that time of the year. In October, attendance at the parks' popular Halloween events began to improve, including attendance at Knott's Berry Farm, which represents the largest portion of the Partnership's fourth quarter revenues. For the month, combined attendance was relatively flat with last year, and based on this, management expects to see no material impact on fourth quarter or full-year results.
Security efforts at the Partnership's parks were immediately increased after September 11 and those measures will continue in the future. Management does not expect the impact of increased security at the parks to be material to the Partnership's overall results. In addition, although the insurance market has hardened considerably since September 11, the Partnership was able to renew coverage at adequate levels for next year, with premium increases kept to a manageable level.
Financial Condition and Liquidity:
The Partnership has available through April 2002 a $200 million revolving credit facility and has an additional $25 million revolving credit facility available through November 2001 to fund seasonal requirements. Borrowings under these credit facilities were $199.0 million as of September 30, 2001. Because of their favorable terms, the Partnership has delayed replacing these credit facilities until the last quarter of 2001; accordingly, borrowings under both facilities must be shown as current liabilities as of September 30, 2001.
The Partnership is in the process of finalizing an agreement with its bank group and expects to have a new 3-year revolving credit facility in place by the end of the year. Management expects the new credit facility will carry somewhat higher rates than the previous credit facilities, but does not expect the impact on interest expense to be material. The total amount of credit available to the Partnership from all sources is expected to be adequate to fund seasonal working capital needs, planned capital expenditures and regular quarterly distributions to partners.
Current assets and liabilities are at normal seasonal levels at September 30, 2001, and the negative working capital is the result of the Partnership's highly seasonal business and careful management of cash flow.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (10.1) - Senior Series C Notes issued pursuant to the Private Shelf Agreement with The Prudential Insurance Company of America dated January 28, 1998 for $50,000,000, 6.40% Series C Notes due August 24, 2008.
Exhibit (20) - 2001 Third 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: November 14, 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 (10.1) Senior Series C Notes issued pursuant to the Private Shelf Agreement
with The Prudential Insurance Company of America dated January 28,
1998 for $50,000,000, 6.40% Series C Notes due August 24, 2008. 14
Exhibit (20) 2001 Third Quarter Press Release. 26