CEDAR FAIR L P - Quarter Report: 2019 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2019
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 incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) (Zip Code)
(419) 626-0830
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Units Representing Limited Partner Interests | FUN | New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Title of Class | Units Outstanding as of August 2, 2019 | |
Units Representing Limited Partner Interests | 56,597,354 | |
Page 1 of 49 pages
CEDAR FAIR, L.P.
FORM 10-Q CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 2019 | December 31, 2018 | June 24, 2018 | ||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 324,742 | $ | 105,349 | $ | 60,119 | ||||||
Receivables | 89,546 | 51,518 | 85,379 | |||||||||
Inventories | 46,860 | 30,753 | 47,000 | |||||||||
Prepaid advertising | 20,719 | 2,215 | 22,210 | |||||||||
Other current assets | 17,715 | 10,374 | 18,434 | |||||||||
499,582 | 200,209 | 233,142 | ||||||||||
Property and Equipment: | ||||||||||||
Land | 422,764 | 268,411 | 266,849 | |||||||||
Land improvements | 443,282 | 434,501 | 433,505 | |||||||||
Buildings | 768,050 | 732,666 | 728,243 | |||||||||
Rides and equipment | 1,874,085 | 1,813,489 | 1,804,512 | |||||||||
Construction in progress | 59,257 | 77,716 | 36,569 | |||||||||
3,567,438 | 3,326,783 | 3,269,678 | ||||||||||
Less accumulated depreciation | (1,767,972 | ) | (1,727,345 | ) | (1,650,680 | ) | ||||||
1,799,466 | 1,599,438 | 1,618,998 | ||||||||||
Goodwill | 181,199 | 178,719 | 180,186 | |||||||||
Other Intangibles, net | 36,696 | 36,376 | 36,991 | |||||||||
Right-of-Use Asset | 4,354 | — | — | |||||||||
Other Assets | 11,509 | 9,441 | 9,899 | |||||||||
$ | 2,532,806 | $ | 2,024,183 | $ | 2,079,216 | |||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Current maturities of long-term debt | $ | 7,500 | $ | 5,625 | $ | 1,875 | ||||||
Accounts payable | 49,284 | 23,314 | 49,551 | |||||||||
Deferred revenue | 217,242 | 107,074 | 211,173 | |||||||||
Accrued interest | 8,176 | 7,927 | 9,265 | |||||||||
Accrued taxes | 16,276 | 29,591 | 12,740 | |||||||||
Accrued salaries, wages and benefits | 21,706 | 18,786 | 26,228 | |||||||||
Self-insurance reserves | 21,427 | 24,021 | 25,272 | |||||||||
Other accrued liabilities | 18,137 | 18,381 | 24,395 | |||||||||
359,748 | 234,719 | 360,499 | ||||||||||
Deferred Tax Liability | 88,854 | 81,717 | 93,474 | |||||||||
Derivative Liability | 23,862 | 6,705 | — | |||||||||
Lease Liability | 2,365 | — | — | |||||||||
Other Liabilities | 10,302 | 11,058 | 10,982 | |||||||||
Long-Term Debt: | ||||||||||||
Revolving credit loans | — | — | 25,000 | |||||||||
Term debt | 716,828 | 719,507 | 722,186 | |||||||||
Notes | 1,431,047 | 938,061 | 937,146 | |||||||||
2,147,875 | 1,657,568 | 1,684,332 | ||||||||||
Partners’ Equity: | ||||||||||||
Special L.P. interests | 5,290 | 5,290 | 5,290 | |||||||||
General partner | (2 | ) | (1 | ) | (2 | ) | ||||||
Limited partners, 56,597, 56,564 and 56,441 units outstanding as of June 30, 2019, December 31, 2018 and June 24, 2018, respectively | (119,088 | ) | 5,845 | (86,435 | ) | |||||||
Accumulated other comprehensive income (loss) | 13,600 | 21,282 | 11,076 | |||||||||
(100,200 | ) | 32,416 | (70,071 | ) | ||||||||
$ | 2,532,806 | $ | 2,024,183 | $ | 2,079,216 | |||||||
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
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CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per unit amounts)
Three months ended | Six months ended | ||||||||||||||
June 30, 2019 | June 24, 2018 | June 30, 2019 | June 24, 2018 | ||||||||||||
Net revenues: | |||||||||||||||
Admissions | $ | 229,722 | $ | 204,447 | $ | 262,939 | $ | 231,168 | |||||||
Food, merchandise and games | 150,377 | 129,947 | 175,081 | 151,002 | |||||||||||
Accommodations, extra-charge products and other | 56,091 | 45,922 | 65,147 | 52,873 | |||||||||||
436,190 | 380,316 | 503,167 | 435,043 | ||||||||||||
Costs and expenses: | |||||||||||||||
Cost of food, merchandise, and games revenues | 39,808 | 35,018 | 47,457 | 41,021 | |||||||||||
Operating expenses | 177,771 | 167,417 | 275,976 | 256,245 | |||||||||||
Selling, general and administrative | 59,781 | 54,041 | 91,447 | 82,723 | |||||||||||
Depreciation and amortization | 55,904 | 52,219 | 69,493 | 57,740 | |||||||||||
Loss on impairment / retirement of fixed assets, net | 682 | 3,372 | 2,106 | 4,712 | |||||||||||
Gain on sale of investment | — | — | (617 | ) | — | ||||||||||
333,946 | 312,067 | 485,862 | 442,441 | ||||||||||||
Operating income (loss) | 102,244 | 68,249 | 17,305 | (7,398 | ) | ||||||||||
Interest expense | 22,927 | 21,337 | 43,847 | 41,099 | |||||||||||
Net effect of swaps | 10,779 | (906 | ) | 17,158 | (4,534 | ) | |||||||||
Loss on early debt extinguishment | — | — | — | 1,073 | |||||||||||
(Gain) loss on foreign currency | (9,472 | ) | 14,984 | (18,141 | ) | 25,078 | |||||||||
Other expense (income) | 36 | (139 | ) | 125 | (488 | ) | |||||||||
Income (loss) before taxes | 77,974 | 32,973 | (25,684 | ) | (69,626 | ) | |||||||||
Provision (benefit) for taxes | 14,676 | 13,730 | (5,309 | ) | (5,469 | ) | |||||||||
Net income (loss) | 63,298 | 19,243 | (20,375 | ) | (64,157 | ) | |||||||||
Net income (loss) allocated to general partner | 1 | — | — | (1 | ) | ||||||||||
Net income (loss) allocated to limited partners | $ | 63,297 | $ | 19,243 | $ | (20,375 | ) | $ | (64,156 | ) | |||||
Net income (loss) | $ | 63,298 | $ | 19,243 | $ | (20,375 | ) | $ | (64,157 | ) | |||||
Other comprehensive income (loss), (net of tax): | |||||||||||||||
Foreign currency translation adjustment | (4,632 | ) | 6,662 | (7,682 | ) | 11,266 | |||||||||
Cash flow hedging derivative activity | — | 2,116 | — | 4,134 | |||||||||||
Other comprehensive income (loss), (net of tax) | (4,632 | ) | 8,778 | (7,682 | ) | 15,400 | |||||||||
Total comprehensive income (loss) | $ | 58,666 | $ | 28,021 | $ | (28,057 | ) | $ | (48,757 | ) | |||||
Basic income (loss) per limited partner unit: | |||||||||||||||
Weighted average limited partner units outstanding | 56,474 | 56,231 | 56,334 | 56,192 | |||||||||||
Net income (loss) per limited partner unit | $ | 1.12 | $ | 0.34 | $ | (0.36 | ) | $ | (1.14 | ) | |||||
Diluted income (loss) per limited partner unit: | |||||||||||||||
Weighted average limited partner units outstanding | 56,886 | 56,727 | 56,334 | 56,192 | |||||||||||
Net income (loss) per limited partner unit | $ | 1.11 | $ | 0.34 | $ | (0.36 | ) | $ | (1.14 | ) | |||||
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
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CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(In thousands)
For the three months ended | Limited Partnership Units Outstanding | Limited Partners’ Equity | General Partner’s Equity | Special L.P. Interests | Accumulated Other Comprehensive Income (Loss) | Total Partners’ Equity | ||||||||||||||||
Balance as of March 25, 2018 | 56,416 | $ | (58,550 | ) | $ | (1 | ) | $ | 5,290 | $ | 2,298 | $ | (50,963 | ) | ||||||||
Net income | — | 19,243 | — | — | — | 19,243 | ||||||||||||||||
Partnership distribution declared ($0.890 per unit) | — | (50,291 | ) | (1 | ) | — | — | (50,292 | ) | |||||||||||||
Issuance of limited partnership units related to compensation | 25 | 3,169 | — | — | — | 3,169 | ||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (6 | ) | — | — | — | (6 | ) | ||||||||||||||
Foreign currency translation adjustment, net of tax $1,157 | — | — | — | — | 6,662 | 6,662 | ||||||||||||||||
Cash flow hedging derivative activity, net of tax ($249) | — | — | — | — | 2,116 | 2,116 | ||||||||||||||||
Balance as of June 24, 2018 | 56,441 | $ | (86,435 | ) | $ | (2 | ) | $ | 5,290 | $ | 11,076 | $ | (70,071 | ) | ||||||||
Balance as of March 31, 2019 | 56,587 | $ | (133,118 | ) | $ | (2 | ) | $ | 5,290 | $ | 18,232 | $ | (109,598 | ) | ||||||||
Net income | — | 63,297 | 1 | — | — | 63,298 | ||||||||||||||||
Partnership distribution declared ($0.925 per unit) | — | (52,351 | ) | (1 | ) | — | — | (52,352 | ) | |||||||||||||
Issuance of limited partnership units related to compensation | 10 | 3,224 | — | — | — | 3,224 | ||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (140 | ) | — | — | — | (140 | ) | ||||||||||||||
Foreign currency translation adjustment, net of tax ($746) | — | — | — | — | (4,632 | ) | (4,632 | ) | ||||||||||||||
Balance as of June 30, 2019 | 56,597 | $ | (119,088 | ) | $ | (2 | ) | $ | 5,290 | $ | 13,600 | $ | (100,200 | ) | ||||||||
For the six months ended | Limited Partnership Units Outstanding | Limited Partners’ Equity | General Partner’s Equity | Special L.P. Interests | Accumulated Other Comprehensive Income (Loss) | Total Partners’ Equity | ||||||||||||||||
Balance as of December 31, 2017 | 56,359 | $ | 81,589 | $ | — | $ | 5,290 | $ | (3,933 | ) | $ | 82,946 | ||||||||||
Net loss | — | (64,156 | ) | (1 | ) | — | — | (64,157 | ) | |||||||||||||
Partnership distribution declared ($1.780 per unit) | — | (100,557 | ) | (1 | ) | — | — | (100,558 | ) | |||||||||||||
Issuance of limited partnership units related to compensation | 82 | (657 | ) | — | — | — | (657 | ) | ||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (3,045 | ) | — | — | — | (3,045 | ) | ||||||||||||||
Foreign currency translation adjustment, net of tax $2,302 | — | — | — | — | 11,266 | 11,266 | ||||||||||||||||
Cash flow hedging derivative activity, net of tax ($596) | — | — | — | — | 4,134 | 4,134 | ||||||||||||||||
Reclassification of stranded tax effect | — | 391 | — | — | (391 | ) | — | |||||||||||||||
Balance as of June 24, 2018 | 56,441 | $ | (86,435 | ) | $ | (2 | ) | $ | 5,290 | $ | 11,076 | $ | (70,071 | ) | ||||||||
Balance as of December 31, 2018 | 56,564 | $ | 5,845 | $ | (1 | ) | $ | 5,290 | $ | 21,282 | $ | 32,416 | ||||||||||
Net loss | — | (20,375 | ) | — | — | — | (20,375 | ) | ||||||||||||||
Partnership distribution declared ($1.850 per unit) | — | (104,685 | ) | (1 | ) | — | — | (104,686 | ) | |||||||||||||
Issuance of limited partnership units related to compensation | 33 | 1,688 | — | — | — | 1,688 | ||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (1,561 | ) | — | — | — | (1,561 | ) | ||||||||||||||
Foreign currency translation adjustment, net of tax ($1,620) | — | — | — | — | (7,682 | ) | (7,682 | ) | ||||||||||||||
Balance as of June 30, 2019 | 56,597 | $ | (119,088 | ) | $ | (2 | ) | $ | 5,290 | $ | 13,600 | $ | (100,200 | ) | ||||||||
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
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CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six months ended | |||||||
June 30, 2019 | June 24, 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net loss | $ | (20,375 | ) | $ | (64,157 | ) | |
Adjustments to reconcile net loss to net cash from operating activities: | |||||||
Depreciation and amortization | 69,493 | 57,740 | |||||
Loss on early debt extinguishment | — | 1,073 | |||||
Non-cash foreign currency (gain) loss on debt | (18,926 | ) | 26,541 | ||||
Other non-cash expenses | 30,938 | 24,123 | |||||
Net change in working capital | 40,377 | 40,996 | |||||
Net change in other assets/liabilities | (2,823 | ) | (551 | ) | |||
Net cash from operating activities | 98,684 | 85,765 | |||||
CASH FLOWS FOR INVESTING ACTIVITIES | |||||||
Capital expenditures | (262,853 | ) | (100,637 | ) | |||
Proceeds from sale of investment | 617 | — | |||||
Net cash for investing activities | (262,236 | ) | (100,637 | ) | |||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | |||||||
Net borrowings on revolving credit loans | — | 25,000 | |||||
Note borrowings | 500,000 | — | |||||
Term debt payments | (1,875 | ) | — | ||||
Distributions paid to partners | (104,686 | ) | (100,558 | ) | |||
Payment of debt issuance costs and original issue discount | (7,712 | ) | (2,512 | ) | |||
Exercise of limited partnership unit options | — | 125 | |||||
Tax effect of units involved in treasury unit transactions | (1,561 | ) | (3,045 | ) | |||
Payments related to tax withholding for equity compensation | (4,142 | ) | (6,930 | ) | |||
Net cash from (for) financing activities | 380,024 | (87,920 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 2,921 | (3,334 | ) | ||||
CASH AND CASH EQUIVALENTS | |||||||
Net increase (decrease) for the period | 219,393 | (106,126 | ) | ||||
Balance, beginning of period | 105,349 | 166,245 | |||||
Balance, end of period | $ | 324,742 | $ | 60,119 | |||
SUPPLEMENTAL INFORMATION | |||||||
Cash payments for interest expense | $ | 43,498 | $ | 39,854 | |||
Interest capitalized | 1,824 | 1,771 | |||||
Cash payments for income taxes, net of refunds | 7,204 | 11,101 | |||||
Capital expenditures in accounts payable | 4,830 | 7,859 | |||||
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
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CEDAR FAIR, L.P.
INDEX FOR NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CEDAR FAIR, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been prepared from the financial records of Cedar Fair, L.P. (the Partnership) without audit and reflect all adjustments (consisting of normal recurring 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 seasonal nature of the Partnership's amusement and water park operations, the results for any interim period may not be indicative of the results expected for the full fiscal year.
(1) Significant Accounting and Reporting Policies:
Except for the changes described below, the Partnership’s unaudited condensed consolidated financial statements 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, 2018, which were included in the Form 10-K filed on February 22, 2019. 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 (the 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.
Adopted Accounting Pronouncements
The Partnership adopted Accounting Standards Update No. 2016-02, Leases ("ASU 2016-02") effective January 1, 2019 using the comparative reporting approach, which requires application of the new standard at the adoption date. The ASU requires the recognition of lease assets and lease liabilities within the balance sheet by lessees for operating leases, as well as requires additional disclosures in the condensed consolidated financial statements regarding the amount, timing, and uncertainty of cash flows arising from leases. The ASU does not significantly change the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee, nor does the ASU significantly change the accounting applied by a lessor. The adoption of the standard resulted in the recognition of right-of-use assets and corresponding lease liabilities for the Partnership's Santa Clara land lease, as well as its other operating leases, of $73.5 million and the addition of required disclosures (see Note 11). The Partnership elected not to reassess: whether any expired or existing contracts are or contain leases; the lease classification of any expired or existing leases; and the initial direct costs for any existing leases. On June 28, 2019, the Partnership purchased the land at California's Great America from the lessor, the City of Santa Clara, for $150.3 million. Following the purchase, the Partnership's remaining lease commitments were immaterial to the condensed consolidated financial statements at June 30, 2019. However, the Partnership assumed a material lease commitment when it completed its subsequent event acquisition on July 1, 2019 (see Note 15). The material lease commitment is for the land on which one of the acquired properties is located. This land lease is expected to result in the recognition of an additional right-of-use asset between $6 million and $8 million and an additional corresponding lease liability between $4 million and $6 million in the third quarter of 2019.
(2) Interim Reporting:
As of June 30, 2019, the Partnership owned and operated eleven amusement parks, two separately gated outdoor water parks, one indoor water park and four hotels. The Partnership's seasonal amusement parks are generally open during weekends beginning in April or May, and then daily from Memorial Day until Labor Day, after which they are open during weekends in September and, in most cases, October for Halloween events. The two separately gated outdoor water parks also operate seasonally, generally from Memorial Day to Labor Day, plus some additional weekends before and after this period. As a result, a substantial portion of the Partnership’s revenues from these parks are generated during an approximate 130- to 140-day operating season with the major portion concentrated in the third quarter during the peak vacation months of July and August. In 2019, six of the seasonal properties will each be open an additional 20 to 25 days to include WinterFest, a holiday event operating during November and December showcasing holiday shows and festivities. Knott's Berry Farm continues to be open daily on a year-round basis. Castaway Bay is generally open daily from Memorial Day to Labor Day with an additional limited daily schedule for the balance 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 accounting and reporting procedures for its seasonal parks: (a) revenues from multi-use products are recognized over the estimated number of uses expected for each type of product; and the estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally occurs no later than the close of the operating season; (b) depreciation, certain advertising and certain seasonal operating costs are expensed over each park’s operating season, including some costs incurred prior to the season, which are deferred and amortized over the season; and (c) all other costs are expensed as incurred or ratably over the entire year.
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(3) Revenue Recognition:
As disclosed within the unaudited condensed consolidated statements of operations and comprehensive income, revenues are generated from sales of (1) admission to the Partnership's amusement parks and water parks, (2) food, merchandise and games both inside and outside the parks, and (3) accommodations, extra-charge products, and other revenue sources. Admission revenues include amounts paid to gain admission into the Partnership's parks, including parking fees. Revenues related to extra-charge products, including premium benefit offerings such as front-of-line products, and online transaction fees charged to customers are included in "Accommodations, extra-charge products and other".
The following table presents the Partnership's revenues disaggregated by revenues generated within the parks and revenues generated from out-of-park operations less amounts remitted to outside parties under concessionaire arrangements, described below, for the periods presented:
Three months ended | Six months ended | |||||||||||||||
(In thousands) | June 30, 2019 | June 24, 2018 | June 30, 2019 | June 24, 2018 | ||||||||||||
In-park revenues | $ | 401,383 | $ | 349,525 | $ | 455,596 | $ | 393,135 | ||||||||
Out-of-park revenues | 49,344 | 43,491 | 64,105 | 56,177 | ||||||||||||
Concessionaire remittance | (14,537 | ) | (12,700 | ) | (16,534 | ) | (14,269 | ) | ||||||||
Net revenues | $ | 436,190 | $ | 380,316 | $ | 503,167 | $ | 435,043 | ||||||||
Due to the Partnership's highly seasonal operations, a substantial portion of the Partnership's revenues are generated during an approximate 130- to 140-day operating season. Most revenues are recognized on a daily basis based on actual guest spend at the properties. Revenues from multi-use products, including season-long products for admission, dining, beverage and other products, are recognized over the estimated number of uses expected for each type of product. The estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally occurs no later than the close of the operating season. The number of uses is estimated based on historical usage adjusted for expected usage. For any bundled products that include multiple performance obligations, revenue is allocated using the retail price of each distinct performance obligation and any inherent discounts are allocated based on the gross margin and expected redemption of each performance obligation. The Partnership does not typically provide for refunds or returns.
In some instances, the Partnership arranges with outside parties ("concessionaires") to provide goods to guests, typically food and merchandise, and the Partnership acts as an agent, resulting in net revenue recorded within the condensed consolidated statement of operations and comprehensive income. Concessionaire arrangement revenues are recognized over the operating season and are variable. Sponsorship revenues and marina revenues, which are classified as "Accommodations, extra-charge products and other" within the condensed consolidated statement of operations and comprehensive income, are recognized over the park operating season which represents the period in which the performance obligations are satisfied. Sponsorship revenues are typically fixed. However, some sponsorship revenues are variable based on achievement of specified operating metrics. The Partnership estimates variable revenues and performs a constraint analysis using both historical information and current trends to determine the amount of revenue that is not probable of a significant reversal.
Many products, including season-long products, are sold to customers in advance, resulting in a contract liability ("deferred revenue"). Deferred revenue is at its highest immediately prior to the peak summer season, and at its lowest in the fall after the peak summer season and at the beginning of the selling season for the next year's products. Season-long products represent the majority of the deferred revenue balance in any given period.
Of the $107.1 million of deferred revenue recorded as of January 1, 2019, 88% was related to season-long products. The remainder was related to deferred online transaction fees charged to customers, advanced ticket sales, marina deposits, advanced resort reservations, and other deferred revenue. During the six months ended June 30, 2019, approximately $41.9 million of the deferred revenue balance as of January 1, 2019 was recognized. The remaining difference in the opening and closing balances of the Partnership's deferred revenue balance in the current period was attributable to additional season-long product sales during the first six months of 2019.
Payment is due immediately on the transaction date for most products. The Partnership's receivable balance includes outstanding amounts on installment purchase plans which are offered for season-long products (and other select products for specific time periods), and includes sales to retailers, group sales and catering activities which are billed. Installment purchase plans vary in length from three monthly installments to twelve monthly installments. Payment terms for billings are typically net 30 days. Receivables are highest in the peak summer months and the lowest in the winter months. The Partnership is not exposed to a significant concentration of customer credit risk. As of June 30, 2019, December 31, 2018 and June 24, 2018, the Partnership recorded an $8.2 million, $2.6 million and $7.3 million allowance for doubtful accounts, respectively, representing estimated
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defaults on installment purchase plans. The default estimate is calculated using the historical default rate adjusted for current period trends. The allowance for doubtful accounts is recorded as a reduction of deferred revenue to the extent revenue has not been recognized on the corresponding season-long products.
Most deferred revenue from contracts with customers is classified as current within the balance sheet. However, a portion of deferred revenue from contracts with customers is classified as non-current during the third quarter related to season-long products sold in the current season for use in the subsequent season. Season-long products are sold beginning in August of the year preceding the operating season. Season-long products may be recognized 12 to 16 months after purchase depending on the date of sale. The Partnership estimates the number of uses expected outside of the next twelve months for each type of product and classifies the related deferred revenue as non-current.
With the exception of the non-current deferred revenue described above, the Partnership's contracts with customers have an original duration of one year or less. For these short-term contracts, the Partnership uses the practical expedient, a relief provided in the accounting standard to simplify compliance, applicable to such contracts and has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. Further, the Partnership has elected to recognize incremental costs of obtaining a contract as an expense when incurred as the amortization period of the asset would be less than one year. Lastly, the Partnership has elected not to adjust consideration for the effects of significant financing components in the form of installment purchase plans as the period between when the entity transfers the promised service to the customer and when the customer pays for that service does not exceed one year.
(4) Long-Lived Assets:
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. In order to determine if an asset has been impaired, assets are grouped and tested at the lowest level for which identifiable, independent cash flows are available. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in equity price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Partnership's condensed consolidated financial statements.
Non-operating assets are evaluated for impairment based on changes in market conditions. When changes in market conditions are observed, impairment is estimated using a market-based approach. If the estimated fair value of the non-operating assets is less than their carrying value, an impairment charge is recorded for the difference.
During the third quarter of 2016, the Partnership ceased operations of one of its separately gated outdoor water parks, Wildwater Kingdom, located near Cleveland in Aurora, Ohio. At the date that Wildwater Kingdom ceased operations, the only remaining long-lived asset was approximately 670 acres of land. The Wildwater Kingdom acreage, reduced by acreage sold, is recorded within "Other Assets" in the unaudited condensed consolidated balance sheet ($9.0 million as of June 30, 2019, December 31, 2018 and June 24, 2018).
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(5) Goodwill and Other Intangible Assets:
Goodwill and other indefinite-lived intangible assets, including trade-names, are reviewed for impairment annually, or more frequently if indicators of impairment exist. As of June 30, 2019, there were no indicators of impairment. The Partnership's annual testing date is the first day of the fourth quarter. There were no impairments for any period presented.
A summary of changes in the Partnership’s carrying value of goodwill for the six months ended June 30, 2019 and June 24, 2018 is as follows:
(In thousands) | Goodwill (gross) | Accumulated Impairment Losses | Goodwill (net) | ||||||||
Balance as of December 31, 2018 | $ | 258,587 | $ | (79,868 | ) | $ | 178,719 | ||||
Foreign currency translation | 2,480 | — | 2,480 | ||||||||
Balance as of June 30, 2019 | $ | 261,067 | $ | (79,868 | ) | $ | 181,199 | ||||
Balance as of December 31, 2017 | $ | 263,698 | $ | (79,868 | ) | $ | 183,830 | ||||
Foreign currency translation | (3,644 | ) | — | (3,644 | ) | ||||||
Balance as of June 24, 2018 | $ | 260,054 | $ | (79,868 | ) | $ | 180,186 | ||||
As of June 30, 2019, December 31, 2018, and June 24, 2018, the Partnership’s other intangible assets consisted of the following:
(In thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | ||||||||
June 30, 2019 | |||||||||||
Other intangible assets: | |||||||||||
Trade names | $ | 35,945 | $ | — | $ | 35,945 | |||||
License / franchise agreements | 3,390 | (2,639 | ) | 751 | |||||||
Total other intangible assets | $ | 39,335 | $ | (2,639 | ) | $ | 36,696 | ||||
December 31, 2018 | |||||||||||
Other intangible assets: | |||||||||||
Trade names | $ | 35,394 | $ | — | $ | 35,394 | |||||
License / franchise agreements | 3,379 | (2,397 | ) | 982 | |||||||
Total other intangible assets | $ | 38,773 | $ | (2,397 | ) | $ | 36,376 | ||||
June 24, 2018 | |||||||||||
Other intangible assets: | |||||||||||
Trade names | $ | 35,720 | $ | — | $ | 35,720 | |||||
License / franchise agreements | 3,357 | (2,086 | ) | 1,271 | |||||||
Total other intangible assets | $ | 39,077 | $ | (2,086 | ) | $ | 36,991 | ||||
Amortization expense of other intangible assets is expected to continue to be immaterial going forward.
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(6) Long-Term Debt:
Long-term debt as of June 30, 2019, December 31, 2018, and June 24, 2018 consisted of the following:
(In thousands) | June 30, 2019 | December 31, 2018 | June 24, 2018 | ||||||||
Revolving credit facility (due 2022) | $ | — | $ | — | $ | 25,000 | |||||
U.S. term loan averaging 4.24% YTD 2019; 3.83% in 2018; 3.71% YTD 2018 (due 2017-2024) (1) | 733,125 | 735,000 | 735,000 | ||||||||
Notes | |||||||||||
2024 U.S. fixed rate notes at 5.375% | 450,000 | 450,000 | 450,000 | ||||||||
2027 U.S. fixed rate notes at 5.375% | 500,000 | 500,000 | 500,000 | ||||||||
2029 U.S. fixed rate notes at 5.250% | 500,000 | — | — | ||||||||
2,183,125 | 1,685,000 | 1,710,000 | |||||||||
Less current portion | (7,500 | ) | (5,625 | ) | (1,875 | ) | |||||
2,175,625 | 1,679,375 | 1,708,125 | |||||||||
Less debt issuance costs and original issue discount | (27,750 | ) | (21,807 | ) | (23,793 | ) | |||||
$ | 2,147,875 | $ | 1,657,568 | $ | 1,684,332 | ||||||
(1) |
Term Debt and Revolving Credit Facilities
In April 2017, the Partnership amended and restated its existing credit agreement. The $1,025 million amended and restated credit agreement (the "2017 Credit Agreement") includes a $750 million senior secured term loan facility and a $275 million senior secured revolving credit facility. The 2017 Credit Agreement was amended on March 14, 2018 (subsequently referred to as the "Amended 2017 Credit Agreement"). Specifically, the interest rate for the senior secured term loan facility was amended to London InterBank Offered Rate ("LIBOR") plus 175 basis points (bps). The pricing terms for the amendment reflected $0.9 million of Original Issue Discount ("OID") and resulted in the write-off of debt issuance costs of $1.1 million which was recorded as a loss on early debt extinguishment during the first quarter of 2018. The senior secured term loan facility matures April 15, 2024 and $7.5 million is payable annually. The facilities provided under the Amended 2017 Credit Agreement are collateralized by substantially all of the assets of the Partnership.
The senior secured revolving credit facility under the Amended 2017 Credit Agreement has a combined limit of $275 million with a Canadian sub-limit of $15 million. Borrowings under the senior secured revolving credit facility bear interest at LIBOR or Canadian Dollar Offered Rate ("CDOR") plus 200 bps. The revolving credit facility is scheduled to mature in April 2022 and also provides for the issuance of documentary and standby letters of credit. As of June 30, 2019, no amounts were outstanding under the revolving credit facility. The Amended 2017 Credit Agreement requires the payment of a 37.5 bps commitment fee per annum on the unused portion of the credit facilities.
Notes
In June 2014, the Partnership issued $450 million of 5.375% senior unsecured notes ("2024 senior notes"). The 2024 senior notes pay interest semi-annually in June and December, with the principal due in full on June 1, 2024. The notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
In April 2017, concurrently with amending and restating its credit facilities, the Partnership issued $500 million of 5.375% senior unsecured notes maturing in 2027 ("2027 senior notes"). The net proceeds from the offering of the 2027 senior notes, together with borrowings under the 2017 Credit Agreement, were used to redeem all of the Partnership's 5.25% senior unsecured notes due 2021 ("2021 senior notes"), and pay accrued interest and transaction fees and expenses, to repay in full all amounts outstanding under its existing credit facilities and for general corporate purposes. The redemption of the 2021 senior notes and repayments of the amounts outstanding under the existing credit facilities resulted in the write-off of debt issuance costs of $7.7 million and debt premium payments of $15.5 million. Accordingly, the Partnership recorded a loss on early debt extinguishment of $23.1 million during 2017.
The 2027 senior notes pay interest semi-annually in April and October, with the principal due in full on April 15, 2027. Prior to April 15, 2020, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.375% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to April 15, 2022 at a price equal to 100% of the principal amount of the
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notes redeemed plus a "make-whole" premium together with accrued and unpaid interest and additional interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
In June 2019, in conjunction with its subsequent event acquisition (see Note 15), the Partnership issued $500 million of 5.250% senior unsecured notes maturing in 2029 ("2029 senior notes"). The net proceeds from the offering of the 2029 senior notes were used to complete the acquisition, complete the purchase of land at California's Great America (see Note 11), to pay transaction fees and expenses, and for general corporate purposes and repayment of the revolving credit facility.
The 2029 senior notes pay interest semi-annually in January and July, with the principal due in full on July 15, 2029. Prior to July 15, 2022, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.250% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to July 15, 2024 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium together with accrued and unpaid interest and additional interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
As market conditions warrant, the Partnership may from time to time repurchase debt securities issued by the Partnership, in privately negotiated or open market transactions, by tender offer, exchange offer or otherwise.
Covenants
The Amended 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50x Consolidated Total Debt-to-Consolidated EBITDA. As of June 30, 2019, the Partnership was in compliance with this financial condition covenant and all other financial covenants under the Amended 2017 Credit Agreement.
The Partnership's long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing the Partnership's 2024 senior notes, which includes the most restrictive of these Restricted Payments provisions, the Partnership can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing; and the Partnership can make additional Restricted Payments if the Partnership's pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00x.
(7) Derivative Financial Instruments:
Derivative financial instruments are used within the Partnership’s overall risk management program to manage certain interest rate and foreign currency risks. By utilizing a derivative instrument to hedge exposure to LIBOR rate changes, the Partnership is exposed to counterparty credit risk, in particular the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, hedging instruments are placed with a counterparty that the Partnership believes poses minimal credit risk. The Partnership does not use derivative financial instruments for trading purposes.
The Partnership has four interest rate swap agreements that mature on December 31, 2020 and convert $500 million of variable-rate debt to a rate of 4.39%. The Partnership also has four additional interest rate swap agreements that convert the same notional amount to a rate of 4.63% for the period December 31, 2020 through December 31, 2023. None of the interest rate swap agreements are designated as hedging instruments. The fair market value of the swap portfolio was recorded in the unaudited condensed consolidated balance sheets within "Derivative Liability" as of June 30, 2019 and December 31, 2018 and within "Other Assets" as of June 24, 2018 as follows:
(In thousands) | June 30, 2019 | December 31, 2018 | June 24, 2018 | |||||||||
Derivatives not designated as hedging instruments: | ||||||||||||
Interest rate swaps | $ | (23,862 | ) | $ | (6,705 | ) | $ | 542 | ||||
Instruments that do not qualify for hedge accounting or were de-designated are prospectively adjusted to fair value each reporting period through "Net effect of swaps" within the unaudited condensed consolidated statements of operations and comprehensive income. The amounts that were previously recorded as a component of AOCI prior to the de-designation are reclassified to earnings, and a corresponding realized gain or loss is recognized when the forecasted cash flow occurs. As a result of the first quarter 2016 amendments, the previously existing interest rate swap agreements were de-designated, and the amounts previously recorded in AOCI were amortized into earnings through the original December 31, 2018 maturity. Therefore, all losses in AOCI related to the effective cash flow hedge contracts prior to de-designation have been reclassified into earnings as of December 31, 2018.
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The (gains) losses recognized in income on derivatives not designated as cash flow hedges were recorded in "Net effect of swaps" within the unaudited condensed consolidated statements of operations and comprehensive income for the periods presented as follows:
Three months ended | Six months ended | |||||||||||||||
(In thousands) | June 30, 2019 | June 24, 2018 | June 30, 2019 | June 24, 2018 | ||||||||||||
Change in fair market value | $ | 10,779 | $ | (3,271 | ) | $ | 17,158 | $ | (9,264 | ) | ||||||
Amortization of amounts in AOCI | — | 2,365 | — | 4,730 | ||||||||||||
Net effect of swaps | $ | 10,779 | $ | (906 | ) | $ | 17,158 | $ | (4,534 | ) | ||||||
(8) Fair Value Measurements:
The FASB's Accounting Standards Codification (ASC) 820 - Fair Value Measurements and Disclosures emphasizes that fair value is a market-based measurement that should be determined based on assumptions (inputs) that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable, and valuation techniques used to measure fair value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Accordingly, the standard establishes a hierarchal disclosure framework that ranks the quality and reliability of information used to determine fair values. The hierarchy is associated with the level of pricing observability utilized in measuring fair value and defines three levels of inputs to the fair value measurement process. Quoted prices are the most reliable valuation inputs, whereas model values that include inputs based on unobservable data are the least reliable. Each fair value measurement must be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety.
The three broad levels of inputs defined by the fair value hierarchy are as follows:
• | Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
• | Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
• | Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The table below presents the balances of assets and liabilities measured at fair value as of June 30, 2019, December 31, 2018, and June 24, 2018 on a recurring basis as well as the fair values of other financial instruments:
(In thousands) | Unaudited Condensed Consolidated Balance Sheet Location | Fair Value Hierarchy Level | June 30, 2019 | December 31, 2018 | June 24, 2018 | ||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||
Financial assets (liabilities) measured on a recurring basis: | |||||||||||||||||||||||
Short-term investments | Other current assets | Level 1 | $ | 362 | $ | 362 | $ | 511 | $ | 511 | $ | 932 | $ | 932 | |||||||||
Interest rate swaps | Other Assets (Derivative Liability) | Level 2 | $ | (23,862 | ) | $ | (23,862 | ) | $ | (6,705 | ) | $ | (6,705 | ) | $ | 542 | $ | 542 | |||||
Other financial assets (liabilities): | |||||||||||||||||||||||
Term debt | Long-Term Debt (1) | Level 2 | $ | (725,625 | ) | $ | (725,625 | ) | $ | (729,375 | ) | $ | (707,494 | ) | $ | (733,125 | ) | $ | (736,791 | ) | |||
2024 senior notes | Long-Term Debt (1) | Level 1 | $ | (450,000 | ) | $ | (461,250 | ) | $ | (450,000 | ) | $ | (441,000 | ) | $ | (450,000 | ) | $ | (451,125 | ) | |||
2027 senior notes | Long-Term Debt (1) | Level 1 | $ | (500,000 | ) | $ | (516,250 | ) | $ | (500,000 | ) | $ | (475,000 | ) | $ | (500,000 | ) | $ | (496,250 | ) | |||
2029 senior notes | Long-Term Debt (1) | Level 2 | $ | (500,000 | ) | $ | (510,000 | ) | — | — | — | — | |||||||||||
(1) | Carrying values of long-term debt balances are before reductions for debt issuance costs and original issue discount of $27.8 million, $21.8 million, and $23.8 million as of June 30, 2019, December 31, 2018, and June 24, 2018, respectively. |
Fair values of the interest rate swap agreements are determined using significant inputs, including the LIBOR forward curves, which are considered Level 2 observable market inputs.
The carrying value of cash and cash equivalents, revolving credit loans, accounts receivable, current portion of term debt, accounts payable, and accrued liabilities approximates fair value because of the short maturity of these instruments. There were no assets measured at fair value on a non-recurring basis as of June 30, 2019, December 31, 2018 or June 24, 2018.
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(9) Earnings per Unit:
Net income (loss) per limited partner unit is calculated based on the following unit amounts:
Three months ended | Six months ended | ||||||||||||||
June 30, 2019 | June 24, 2018 | June 30, 2019 | June 24, 2018 | ||||||||||||
(In thousands, except per unit amounts) | |||||||||||||||
Basic weighted average units outstanding | 56,474 | 56,231 | 56,334 | 56,192 | |||||||||||
Effect of dilutive units: | |||||||||||||||
Deferred units | 47 | 46 | — | — | |||||||||||
Restricted units | 243 | 277 | — | — | |||||||||||
Unit options | 122 | 173 | — | — | |||||||||||
Diluted weighted average units outstanding | 56,886 | 56,727 | 56,334 | 56,192 | |||||||||||
Net income (loss) per unit - basic | $ | 1.12 | $ | 0.34 | $ | (0.36 | ) | $ | (1.14 | ) | |||||
Net income (loss) per unit - diluted | $ | 1.11 | $ | 0.34 | $ | (0.36 | ) | $ | (1.14 | ) | |||||
(10) Income and Partnership Taxes:
Under the applicable accounting rules, income taxes are recognized for the amount of taxes payable by the Partnership’s corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The income tax provision (benefit) for interim periods is determined by applying an estimated annual effective tax rate to the quarterly income (loss) of the Partnership’s corporate subsidiaries. In addition to income taxes on its corporate subsidiaries, the Partnership is subject to a publicly traded partnership tax (PTP tax) on partnership-level gross income (net revenues less cost of food, merchandise, and games revenues). As such, the Partnership’s total provision (benefit) for taxes includes amounts for both the PTP tax and for income taxes on its subsidiaries.
The Partnership's unrecognized tax benefits, including accrued interest and penalties, were not material in any period presented. The Partnership recognizes interest and penalties related to unrecognized tax benefits as income tax expense.
(11) Lease Commitments and Contingencies:
Lease Commitments
The Partnership has commitments under various operating leases at its parks. The most significant lease commitment was for the land on which California's Great America is located in the City of Santa Clara, which had an initial term through 2039 with renewal options through 2074. On June 28, 2019, the Partnership purchased the land at California's Great America from the lessor, the City of Santa Clara, for $150.3 million. Following the purchase, the Partnership's remaining lease commitments were immaterial to the condensed consolidated financial statements at June 30, 2019. However, the Partnership assumed a material lease commitment when it completed its subsequent event acquisition on July 1, 2019 (see Note 15). The material lease commitment is for the land on which one of the acquired properties is located. This land lease is expected to result in the recognition of an additional right-of-use asset between $6 million and $8 million and an additional corresponding lease liability between $4 million and $6 million in the third quarter of 2019.
The Partnership leases a portion of the California's Great America parking lot to the Santa Clara Stadium Authority during Levi's Stadium events. The lease is effective through the life of the stadium, or approximately 25 years, from the opening of the stadium through 2039. The lease payments were prepaid and the corresponding income is being recognized over the life of the stadium.
The Partnership has also entered into various operating leases at its parks for office space, office equipment, vehicles, and revenue-generating assets. These lease commitments are immaterial to the condensed consolidated financial statements. As a practical expedient, the Partnership recognizes lease payments for short-term leases in the condensed consolidated statement of operations and comprehensive income on a straight-line basis over the lease term and has elected to not separate lease components from non-lease components.
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The Partnership's total lease cost and related supplemental information as of June 30, 2019 is listed below:
(In thousands, except for lease term and discount rate) | June 30, 2019 | |||
Operating lease expense | $ | 3,935 | ||
Variable lease expense | 803 | |||
Short-term lease expense | 1,808 | |||
Sublease income | (244 | ) | ||
Total lease cost | $ | 6,302 | ||
Weighted-average remaining lease term | 6.2 years | |||
Weighted-average discount rate | 4.9 | % | ||
Operating cash flows for operating leases | $ | 4,113 | ||
Leased assets obtained in exchange for new operating lease liabilities (non-cash activity) | $ | 1,131 | ||
Lease expense, which includes short-term rentals for equipment and machinery, for the six months ended June 24, 2018 totaled $7.1 million.
Future undiscounted cash flows under the Partnership's operating leases and a reconciliation to the operating lease liabilities recognized as of June 30, 2019 is included below:
(In thousands) | June 30, 2019 | |||
Undiscounted cash flows | ||||
Remainder of 2019 | $ | 1,049 | ||
2020 | 1,608 | |||
2021 | 777 | |||
2022 | 323 | |||
2023 | 159 | |||
Thereafter | 931 | |||
Total | $ | 4,847 | ||
Present value of cash flows | ||||
Current lease liability | $ | 1,768 | ||
Lease Liability | 2,365 | |||
Total | $ | 4,133 | ||
Difference between undiscounted cash flows and discounted cash flows | $ | 714 | ||
Contingencies
The Partnership is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, none of these matters are expected to have a material effect in the aggregate on the Partnership's condensed consolidated financial statements.
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(12) Changes in Accumulated Other Comprehensive Income by Component:
The following tables reflect the changes in accumulated other comprehensive income (loss) related to limited partners' equity for the three- and six-month periods ended June 30, 2019 and June 24, 2018:
(In thousands) | Foreign Currency Translation | Cash Flow Hedging Derivative Activity | Total | |||||||||
For the three months ended | ||||||||||||
Balance as of March 25, 2018 | $ | 8,646 | $ | (6,348 | ) | $ | 2,298 | |||||
Other comprehensive income before reclassifications, net of tax $1,157 | 6,662 | — | 6,662 | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax ($249) | — | 2,116 | 2,116 | |||||||||
Balance as of June 24, 2018 | $ | 15,308 | $ | (4,232 | ) | $ | 11,076 | |||||
Balance as of March 31, 2019 | $ | 18,232 | $ | — | $ | 18,232 | ||||||
Other comprehensive income before reclassifications, net of tax ($746) | (4,632 | ) | — | (4,632 | ) | |||||||
Balance as of June 30, 2019 | $ | 13,600 | $ | — | $ | 13,600 | ||||||
For the six months ended | Foreign Currency Translation | Cash Flow Hedging Derivative Activity | Total | |||||||||
Balance as of December 31, 2017 | $ | 4,042 | $ | (7,975 | ) | $ | (3,933 | ) | ||||
Other comprehensive income before reclassifications, net of tax $2,302 | 11,266 | — | 11,266 | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax ($596) | — | 4,134 | 4,134 | |||||||||
Reclassification of stranded tax effect | — | (391 | ) | (391 | ) | |||||||
Balance as of June 24, 2018 | $ | 15,308 | $ | (4,232 | ) | $ | 11,076 | |||||
Balance as of December 31, 2018 | $ | 21,282 | $ | — | $ | 21,282 | ||||||
Other comprehensive income before reclassifications, net of tax ($1,620) | (7,682 | ) | — | (7,682 | ) | |||||||
Balance as of June 30, 2019 | $ | 13,600 | $ | — | $ | 13,600 | ||||||
Reclassifications Out of Accumulated Other Comprehensive Income | ||||||||||||||||
(In thousands) | Affected Income Statement Location | Three months ended | Six months ended | |||||||||||||
AOCI Component | June 30, 2019 | June 24, 2018 | June 30, 2019 | June 24, 2018 | ||||||||||||
Interest rate contracts | Net effect of swaps | $ | — | $ | 2,365 | $ | — | $ | 4,730 | |||||||
Provision for taxes | Provision for taxes | — | (249 | ) | — | (596 | ) | |||||||||
Losses on cash flow hedges | Net of tax | $ | — | $ | 2,116 | $ | — | $ | 4,134 | |||||||
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(13) Consolidating Financial Information of Guarantors and Issuers of 2024 Senior Notes:
Cedar Fair, L.P., Canada's Wonderland Company ("Cedar Canada"), and Magnum Management Corporation ("Magnum") are the co-issuers of the Partnership's 2024 senior notes (see Note 6). The notes have been fully and unconditionally guaranteed, on a joint and several basis, by each 100% owned subsidiary of Cedar Fair (other than Cedar Canada and Magnum) that guarantees the Partnership's senior secured credit facilities. There are no non-guarantor subsidiaries.
The following consolidating schedules present condensed financial information for Cedar Fair, L.P., Cedar Canada, and Magnum, the co-issuers, and each 100% owned subsidiary of Cedar Fair (other than Cedar Canada and Magnum), the guarantors (on a combined basis), as of June 30, 2019, December 31, 2018, and June 24, 2018 and for the three- and six-month periods ended June 30, 2019 and June 24, 2018. In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the accompanying unaudited condensed consolidating financial statements have been included.
18
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 34,520 | $ | 292,717 | $ | (2,495 | ) | $ | 324,742 | |||||||||||
Receivables | — | 1,214 | 37,121 | 1,018,249 | (967,038 | ) | 89,546 | |||||||||||||||||
Inventories | — | — | 3,804 | 43,056 | — | 46,860 | ||||||||||||||||||
Other current assets | 400 | 14,347 | 9,710 | 34,453 | (20,476 | ) | 38,434 | |||||||||||||||||
400 | 15,561 | 85,155 | 1,388,475 | (990,009 | ) | 499,582 | ||||||||||||||||||
Property and Equipment, net | — | 785 | 186,578 | 1,612,103 | — | 1,799,466 | ||||||||||||||||||
Investment in Park | 524,449 | 1,160,193 | 269,259 | 203,690 | (2,157,591 | ) | — | |||||||||||||||||
Goodwill | 674 | — | 60,919 | 119,606 | — | 181,199 | ||||||||||||||||||
Other Intangibles, net | — | — | 13,582 | 23,114 | — | 36,696 | ||||||||||||||||||
Deferred Tax Asset | — | 12,733 | — | — | (12,733 | ) | — | |||||||||||||||||
Right-of-Use Asset | — | — | 92 | 4,262 | — | 4,354 | ||||||||||||||||||
Other Assets | — | — | 38 | 11,471 | — | 11,509 | ||||||||||||||||||
$ | 525,523 | $ | 1,189,272 | $ | 615,623 | $ | 3,362,721 | $ | (3,160,333 | ) | $ | 2,532,806 | ||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 1,313 | $ | — | $ | 6,187 | $ | — | $ | 7,500 | ||||||||||||
Accounts payable | 616,886 | 356,792 | 4,867 | 40,272 | (969,533 | ) | 49,284 | |||||||||||||||||
Deferred revenue | — | — | 25,057 | 192,185 | — | 217,242 | ||||||||||||||||||
Accrued interest | 6 | 4 | 1,955 | 6,211 | — | 8,176 | ||||||||||||||||||
Accrued taxes | 2,176 | — | — | 34,576 | (20,476 | ) | 16,276 | |||||||||||||||||
Accrued salaries, wages and benefits | — | 19,642 | 2,064 | — | — | 21,706 | ||||||||||||||||||
Self-insurance reserves | — | 9,541 | 1,459 | 10,427 | — | 21,427 | ||||||||||||||||||
Other accrued liabilities | 2,629 | 5,959 | 650 | 8,899 | — | 18,137 | ||||||||||||||||||
621,697 | 393,251 | 36,052 | 298,757 | (990,009 | ) | 359,748 | ||||||||||||||||||
Deferred Tax Liability | — | — | 14,071 | 87,516 | (12,733 | ) | 88,854 | |||||||||||||||||
Derivative Liability | 4,026 | 19,836 | — | — | — | 23,862 | ||||||||||||||||||
Lease Liability | — | — | 73 | 2,292 | — | 2,365 | ||||||||||||||||||
Other Liabilities | — | 657 | — | 9,645 | — | 10,302 | ||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||
Term debt | — | 125,975 | — | 590,853 | — | 716,828 | ||||||||||||||||||
Notes | — | — | 446,443 | 984,604 | — | 1,431,047 | ||||||||||||||||||
— | 125,975 | 446,443 | 1,575,457 | — | 2,147,875 | |||||||||||||||||||
Equity | (100,200 | ) | 649,553 | 118,984 | 1,389,054 | (2,157,591 | ) | (100,200 | ) | |||||||||||||||
$ | 525,523 | $ | 1,189,272 | $ | 615,623 | $ | 3,362,721 | $ | (3,160,333 | ) | $ | 2,532,806 | ||||||||||||
19
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 73,326 | $ | 32,715 | $ | (692 | ) | $ | 105,349 | |||||||||||
Receivables | — | 1,093 | 34,497 | 938,397 | (922,469 | ) | 51,518 | |||||||||||||||||
Inventories | — | — | 2,135 | 28,618 | — | 30,753 | ||||||||||||||||||
Other current assets | 179 | 1,411 | 5,462 | 10,544 | (5,007 | ) | 12,589 | |||||||||||||||||
179 | 2,504 | 115,420 | 1,010,274 | (928,168 | ) | 200,209 | ||||||||||||||||||
Property and Equipment, net | — | 802 | 172,344 | 1,426,292 | — | 1,599,438 | ||||||||||||||||||
Investment in Park | 601,706 | 1,182,345 | 262,462 | 218,575 | (2,265,088 | ) | — | |||||||||||||||||
Goodwill | 674 | — | 58,440 | 119,605 | — | 178,719 | ||||||||||||||||||
Other Intangibles, net | — | — | 13,030 | 23,346 | — | 36,376 | ||||||||||||||||||
Deferred Tax Asset | — | 18,224 | — | — | (18,224 | ) | — | |||||||||||||||||
Other Assets | — | — | 36 | 9,405 | — | 9,441 | ||||||||||||||||||
$ | 602,559 | $ | 1,203,875 | $ | 621,732 | $ | 2,807,497 | $ | (3,211,480 | ) | $ | 2,024,183 | ||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 984 | $ | — | $ | 4,641 | $ | — | $ | 5,625 | ||||||||||||
Accounts payable | 565,472 | 359,953 | 2,430 | 18,620 | (923,161 | ) | 23,314 | |||||||||||||||||
Deferred revenue | — | — | 8,460 | 98,614 | — | 107,074 | ||||||||||||||||||
Accrued interest | 1 | 1 | 2,054 | 5,871 | — | 7,927 | ||||||||||||||||||
Accrued taxes | 443 | 6,668 | — | 27,487 | (5,007 | ) | 29,591 | |||||||||||||||||
Accrued salaries, wages and benefits | — | 17,552 | 1,234 | — | — | 18,786 | ||||||||||||||||||
Self-insurance reserves | — | 10,214 | 1,433 | 12,374 | 24,021 | |||||||||||||||||||
Other accrued liabilities | 3,318 | 4,903 | 136 | 10,024 | — | 18,381 | ||||||||||||||||||
569,234 | 400,275 | 15,747 | 177,631 | (928,168 | ) | 234,719 | ||||||||||||||||||
Deferred Tax Liability | — | — | 12,425 | 87,516 | (18,224 | ) | 81,717 | |||||||||||||||||
Derivative Liability | 909 | 5,796 | — | — | — | 6,705 | ||||||||||||||||||
Other Liabilities | — | 1,169 | — | 9,889 | — | 11,058 | ||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||
Term debt | — | 126,525 | — | 592,982 | — | 719,507 | ||||||||||||||||||
Notes | — | — | 446,241 | 491,820 | — | 938,061 | ||||||||||||||||||
— | 126,525 | 446,241 | 1,084,802 | — | 1,657,568 | |||||||||||||||||||
Equity | 32,416 | 670,110 | 147,319 | 1,447,659 | (2,265,088 | ) | 32,416 | |||||||||||||||||
$ | 602,559 | $ | 1,203,875 | $ | 621,732 | $ | 2,807,497 | $ | (3,211,480 | ) | $ | 2,024,183 | ||||||||||||
20
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 38,934 | $ | 21,874 | $ | (689 | ) | $ | 60,119 | |||||||||||
Receivables | — | 1,198 | 66,120 | 869,175 | (851,114 | ) | 85,379 | |||||||||||||||||
Inventories | — | — | 3,821 | 43,179 | — | 47,000 | ||||||||||||||||||
Other current assets | 398 | 3,293 | 2,429 | 36,476 | (1,952 | ) | 40,644 | |||||||||||||||||
398 | 4,491 | 111,304 | 970,704 | (853,755 | ) | 233,142 | ||||||||||||||||||
Property and Equipment, net | — | 819 | 174,962 | 1,443,217 | — | 1,618,998 | ||||||||||||||||||
Investment in Park | 476,659 | 1,009,725 | 243,201 | 186,540 | (1,916,125 | ) | — | |||||||||||||||||
Goodwill | 674 | — | 59,907 | 119,605 | — | 180,186 | ||||||||||||||||||
Other Intangibles, net | — | — | 13,362 | 23,629 | — | 36,991 | ||||||||||||||||||
Other Assets | 74 | 467 | 38 | 9,320 | — | 9,899 | ||||||||||||||||||
$ | 477,805 | $ | 1,015,502 | $ | 602,774 | $ | 2,753,015 | $ | (2,769,880 | ) | $ | 2,079,216 | ||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 328 | $ | — | $ | 1,547 | $ | — | $ | 1,875 | ||||||||||||
Accounts payable | 542,730 | 313,605 | 5,069 | 39,950 | (851,803 | ) | 49,551 | |||||||||||||||||
Deferred revenue | — | — | 20,950 | 190,223 | — | 211,173 | ||||||||||||||||||
Accrued interest | 137 | 92 | 1,571 | 7,465 | — | 9,265 | ||||||||||||||||||
Accrued taxes | 1,453 | — | 3,668 | 9,571 | (1,952 | ) | 12,740 | |||||||||||||||||
Accrued salaries, wages and benefits | — | 23,837 | 2,391 | — | — | 26,228 | ||||||||||||||||||
Self-insurance reserves | — | 10,355 | 1,482 | 13,435 | — | 25,272 | ||||||||||||||||||
Other accrued liabilities | 3,556 | 7,014 | 670 | 13,155 | — | 24,395 | ||||||||||||||||||
547,876 | 355,231 | 35,801 | 275,346 | (853,755 | ) | 360,499 | ||||||||||||||||||
Deferred Tax Liability | — | 22 | 11,507 | 81,945 | — | 93,474 | ||||||||||||||||||
Other Liabilities | — | 839 | — | 10,143 | — | 10,982 | ||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||
Revolving credit loans | — | — | — | 25,000 | — | 25,000 | ||||||||||||||||||
Term debt | — | 127,075 | — | 595,111 | — | 722,186 | ||||||||||||||||||
Notes | — | — | 445,790 | 491,356 | — | 937,146 | ||||||||||||||||||
— | 127,075 | 445,790 | 1,111,467 | — | 1,684,332 | |||||||||||||||||||
Equity | (70,071 | ) | 532,335 | 109,676 | 1,274,114 | (1,916,125 | ) | (70,071 | ) | |||||||||||||||
$ | 477,805 | $ | 1,015,502 | $ | 602,774 | $ | 2,753,015 | $ | (2,769,880 | ) | $ | 2,079,216 | ||||||||||||
21
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
Net revenues | $ | 30,240 | $ | 107,811 | $ | 38,374 | $ | 410,780 | $ | (151,015 | ) | $ | 436,190 | |||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of food, merchandise, and games revenues | — | 51 | 3,874 | 35,883 | — | 39,808 | ||||||||||||||||||
Operating expenses | 2 | 102,173 | 15,034 | 211,577 | (151,015 | ) | 177,771 | |||||||||||||||||
Selling, general and administrative | 186 | 16,000 | 3,847 | 39,748 | — | 59,781 | ||||||||||||||||||
Depreciation and amortization | — | 8 | 5,682 | 50,214 | — | 55,904 | ||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 25 | 657 | — | 682 | ||||||||||||||||||
188 | 118,232 | 28,462 | 338,079 | (151,015 | ) | 333,946 | ||||||||||||||||||
Operating income (loss) | 30,052 | (10,421 | ) | 9,912 | 72,701 | — | 102,244 | |||||||||||||||||
Interest expense, net | 6,673 | 4,996 | 6,045 | 5,132 | — | 22,846 | ||||||||||||||||||
Net effect of swaps | 2,126 | 8,653 | — | — | — | 10,779 | ||||||||||||||||||
(Gain) loss on foreign currency | — | 12 | (9,484 | ) | — | — | (9,472 | ) | ||||||||||||||||
Other (income) expense | 64 | (24,465 | ) | 926 | 23,592 | — | 117 | |||||||||||||||||
Income from investment in affiliates | (45,594 | ) | (45,111 | ) | (11,401 | ) | (23,567 | ) | 125,673 | — | ||||||||||||||
Income before taxes | 66,783 | 45,494 | 23,826 | 67,544 | (125,673 | ) | 77,974 | |||||||||||||||||
Provision (benefit) for taxes | 3,485 | (102 | ) | 256 | 11,037 | — | 14,676 | |||||||||||||||||
Net income | $ | 63,298 | $ | 45,596 | $ | 23,570 | $ | 56,507 | $ | (125,673 | ) | $ | 63,298 | |||||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||
Foreign currency translation adjustment | (4,632 | ) | — | (4,632 | ) | — | 4,632 | (4,632 | ) | |||||||||||||||
Other comprehensive income (loss), (net of tax) | (4,632 | ) | — | (4,632 | ) | — | 4,632 | (4,632 | ) | |||||||||||||||
Total comprehensive income | $ | 58,666 | $ | 45,596 | $ | 18,938 | $ | 56,507 | $ | (121,041 | ) | $ | 58,666 | |||||||||||
22
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
Net revenues | $ | 23,937 | $ | 91,527 | $ | 29,648 | $ | 360,832 | $ | (125,628 | ) | $ | 380,316 | |||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of food, merchandise, and games revenues | — | — | 3,184 | 31,834 | — | 35,018 | ||||||||||||||||||
Operating expenses | — | 93,036 | 14,254 | 185,755 | (125,628 | ) | 167,417 | |||||||||||||||||
Selling, general and administrative | 926 | 15,638 | 3,556 | 33,921 | — | 54,041 | ||||||||||||||||||
Depreciation and amortization | — | 8 | 5,940 | 46,271 | — | 52,219 | ||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 27 | 3,345 | — | 3,372 | ||||||||||||||||||
926 | 108,682 | 26,961 | 301,126 | (125,628 | ) | 312,067 | ||||||||||||||||||
Operating income (loss) | 23,011 | (17,155 | ) | 2,687 | 59,706 | — | 68,249 | |||||||||||||||||
Interest expense, net | 5,736 | 4,592 | 6,068 | 4,886 | — | 21,282 | ||||||||||||||||||
Net effect of swaps | (324 | ) | (582 | ) | — | — | — | (906 | ) | |||||||||||||||
Loss on foreign currency | — | 62 | 14,922 | — | — | 14,984 | ||||||||||||||||||
Other (income) expense | 64 | (22,751 | ) | 932 | 21,671 | — | (84 | ) | ||||||||||||||||
(Income) loss from investment in affiliates | (4,198 | ) | (2,531 | ) | (8,982 | ) | 13,602 | 2,109 | — | |||||||||||||||
Income (loss) before taxes | 21,733 | 4,055 | (10,253 | ) | 19,547 | (2,109 | ) | 32,973 | ||||||||||||||||
Provision (benefit) for taxes | 2,490 | (143 | ) | 3,346 | 8,037 | — | 13,730 | |||||||||||||||||
Net income (loss) | $ | 19,243 | $ | 4,198 | $ | (13,599 | ) | $ | 11,510 | $ | (2,109 | ) | $ | 19,243 | ||||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||
Foreign currency translation adjustment | 6,662 | — | 6,662 | — | (6,662 | ) | 6,662 | |||||||||||||||||
Cash flow hedging derivative activity | 2,116 | 727 | — | — | (727 | ) | 2,116 | |||||||||||||||||
Other comprehensive income (loss), (net of tax) | 8,778 | 727 | 6,662 | — | (7,389 | ) | 8,778 | |||||||||||||||||
Total comprehensive income (loss) | $ | 28,021 | $ | 4,925 | $ | (6,937 | ) | $ | 11,510 | $ | (9,498 | ) | $ | 28,021 | ||||||||||
23
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
Net revenues | $ | 14,598 | $ | 111,096 | $ | 38,670 | $ | 470,685 | $ | (131,882 | ) | $ | 503,167 | |||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of food, merchandise, and games revenues | — | 51 | 3,926 | 43,480 | — | 47,457 | ||||||||||||||||||
Operating expenses | 2 | 150,345 | 20,745 | 236,766 | (131,882 | ) | 275,976 | |||||||||||||||||
Selling, general and administrative | 1,625 | 30,552 | 4,865 | 54,405 | — | 91,447 | ||||||||||||||||||
Depreciation and amortization | — | 16 | 5,682 | 63,795 | — | 69,493 | ||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 35 | 2,071 | — | 2,106 | ||||||||||||||||||
Gain on sale of investment | — | (617 | ) | — | — | — | (617 | ) | ||||||||||||||||
1,627 | 180,347 | 35,253 | 400,517 | (131,882 | ) | 485,862 | ||||||||||||||||||
Operating income (loss) | 12,971 | (69,251 | ) | 3,417 | 70,168 | — | 17,305 | |||||||||||||||||
Interest expense, net | 13,064 | 10,026 | 11,758 | 8,685 | — | 43,533 | ||||||||||||||||||
Net effect of swaps | 3,117 | 14,041 | — | — | — | 17,158 | ||||||||||||||||||
(Gain) loss on foreign currency | — | 1 | (18,142 | ) | — | — | (18,141 | ) | ||||||||||||||||
Other (income) expense | 123 | (35,971 | ) | 2,025 | 34,262 | — | 439 | |||||||||||||||||
(Income) loss from investment in affiliates | 12,855 | (30,452 | ) | (6,798 | ) | (17,377 | ) | 41,772 | — | |||||||||||||||
Income (loss) before taxes | (16,188 | ) | (26,896 | ) | 14,574 | 44,598 | (41,772 | ) | (25,684 | ) | ||||||||||||||
Provision (benefit) for taxes | 4,187 | (14,041 | ) | (2,803 | ) | 7,348 | — | (5,309 | ) | |||||||||||||||
Net income (loss) | $ | (20,375 | ) | $ | (12,855 | ) | $ | 17,377 | $ | 37,250 | $ | (41,772 | ) | $ | (20,375 | ) | ||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||
Foreign currency translation adjustment | (7,682 | ) | — | (7,682 | ) | — | 7,682 | (7,682 | ) | |||||||||||||||
Other comprehensive income (loss), (net of tax) | (7,682 | ) | — | (7,682 | ) | — | 7,682 | (7,682 | ) | |||||||||||||||
Total comprehensive income (loss) | $ | (28,057 | ) | $ | (12,855 | ) | $ | 9,695 | $ | 37,250 | $ | (34,090 | ) | $ | (28,057 | ) | ||||||||
24
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
Net revenues | $ | 13,170 | $ | 92,381 | $ | 29,919 | $ | 410,619 | $ | (111,046 | ) | $ | 435,043 | |||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of food, merchandise, and games revenues | — | — | 3,184 | 37,837 | — | 41,021 | ||||||||||||||||||
Operating expenses | — | 135,707 | 19,970 | 211,614 | (111,046 | ) | 256,245 | |||||||||||||||||
Selling, general and administrative | 1,685 | 30,088 | 4,236 | 46,714 | — | 82,723 | ||||||||||||||||||
Depreciation and amortization | — | 16 | 5,940 | 51,784 | — | 57,740 | ||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 67 | 4,645 | — | 4,712 | ||||||||||||||||||
1,685 | 165,811 | 33,397 | 352,594 | (111,046 | ) | 442,441 | ||||||||||||||||||
Operating income (loss) | 11,485 | (73,430 | ) | (3,478 | ) | 58,025 | — | (7,398 | ) | |||||||||||||||
Interest expense, net | 10,640 | 8,959 | 11,651 | 9,568 | — | 40,818 | ||||||||||||||||||
Net effect of swaps | (2,531 | ) | (2,003 | ) | — | — | — | (4,534 | ) | |||||||||||||||
Loss on early debt extinguishment | — | 187 | — | 886 | — | 1,073 | ||||||||||||||||||
Loss on foreign currency | — | 21 | 25,057 | — | — | 25,078 | ||||||||||||||||||
Other (income) expense | 123 | (32,555 | ) | 1,786 | 30,439 | — | (207 | ) | ||||||||||||||||
(Income) loss from investment in affiliates | 64,330 | 26,284 | (5,069 | ) | 34,187 | (119,732 | ) | — | ||||||||||||||||
Loss before taxes | (61,077 | ) | (74,323 | ) | (36,903 | ) | (17,055 | ) | 119,732 | (69,626 | ) | |||||||||||||
Provision (benefit) for taxes | 3,080 | (9,994 | ) | (2,716 | ) | 4,161 | — | (5,469 | ) | |||||||||||||||
Net loss | $ | (64,157 | ) | $ | (64,329 | ) | $ | (34,187 | ) | $ | (21,216 | ) | $ | 119,732 | $ | (64,157 | ) | |||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||
Foreign currency translation adjustment | 11,266 | — | 11,266 | — | (11,266 | ) | 11,266 | |||||||||||||||||
Cash flow hedging derivative activity | 4,134 | 1,357 | — | — | (1,357 | ) | 4,134 | |||||||||||||||||
Other comprehensive income (loss), (net of tax) | 15,400 | 1,357 | 11,266 | — | (12,623 | ) | 15,400 | |||||||||||||||||
Total comprehensive loss | $ | (48,757 | ) | $ | (62,972 | ) | $ | (22,921 | ) | $ | (21,216 | ) | $ | 107,109 | $ | (48,757 | ) | |||||||
25
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
NET CASH FROM (FOR) OPERATING ACTIVITIES | $ | 53,711 | $ | (28,342 | ) | $ | 9,120 | $ | 66,441 | $ | (2,246 | ) | $ | 98,684 | ||||||||||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES | ||||||||||||||||||||||||
Intercompany receivables (payments) receipts | — | — | — | (47,144 | ) | 47,144 | — | |||||||||||||||||
Proceeds from returns on investments | — | 38,030 | — | — | (38,030 | ) | — | |||||||||||||||||
Proceeds from sale of investment | — | 617 | — | — | — | 617 | ||||||||||||||||||
Capital expenditures | — | — | (12,817 | ) | (250,036 | ) | — | (262,853 | ) | |||||||||||||||
Net cash from (for) investing activities | — | 38,647 | (12,817 | ) | (297,180 | ) | 9,114 | (262,236 | ) | |||||||||||||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | ||||||||||||||||||||||||
Intercompany payables (payments) receipts | 51,418 | (4,274 | ) | — | — | (47,144 | ) | — | ||||||||||||||||
Payments for returns of capital | — | — | (38,030 | ) | — | 38,030 | — | |||||||||||||||||
Note borrowings | — | — | — | 500,000 | — | 500,000 | ||||||||||||||||||
Term debt payments | — | (328 | ) | — | (1,547 | ) | — | (1,875 | ) | |||||||||||||||
Distributions paid to partners | (105,129 | ) | — | — | — | 443 | (104,686 | ) | ||||||||||||||||
Payment of debt issuance costs and original issue discount | — | — | — | (7,712 | ) | — | (7,712 | ) | ||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (1,561 | ) | — | — | — | (1,561 | ) | ||||||||||||||||
Payments related to tax withholding for equity compensation | — | (4,142 | ) | — | — | — | (4,142 | ) | ||||||||||||||||
Net cash from (for) financing activities | (53,711 | ) | (10,305 | ) | (38,030 | ) | 490,741 | (8,671 | ) | 380,024 | ||||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | — | — | 2,921 | — | — | 2,921 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS | ||||||||||||||||||||||||
Net increase (decrease) for the period | — | — | (38,806 | ) | 260,002 | (1,803 | ) | 219,393 | ||||||||||||||||
Balance, beginning of period | — | — | 73,326 | 32,715 | (692 | ) | 105,349 | |||||||||||||||||
Balance, end of period | $ | — | $ | — | $ | 34,520 | $ | 292,717 | $ | (2,495 | ) | $ | 324,742 | |||||||||||
26
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Guarantor Subsidiaries | Eliminations | Total | |||||||||||||||||||
NET CASH FROM (FOR) OPERATING ACTIVITIES | $ | 56,049 | $ | 48,573 | $ | 2,897 | $ | (21,498 | ) | $ | (256 | ) | $ | 85,765 | ||||||||||
CASH FLOWS FOR INVESTING ACTIVITIES | ||||||||||||||||||||||||
Intercompany receivables (payments) receipts | — | — | (37,892 | ) | 31,123 | 6,769 | — | |||||||||||||||||
Capital expenditures | — | — | (8,495 | ) | (92,142 | ) | — | (100,637 | ) | |||||||||||||||
Net cash for investing activities | — | — | (46,387 | ) | (61,019 | ) | 6,769 | (100,637 | ) | |||||||||||||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | ||||||||||||||||||||||||
Intercompany payables (payments) receipts | 45,171 | (38,402 | ) | — | — | (6,769 | ) | — | ||||||||||||||||
Net borrowings on revolving credit loans | — | — | — | 25,000 | — | 25,000 | ||||||||||||||||||
Distributions paid to partners | (101,220 | ) | — | — | — | 662 | (100,558 | ) | ||||||||||||||||
Payment of debt issuance costs and original issue discount | — | (321 | ) | — | (2,191 | ) | — | (2,512 | ) | |||||||||||||||
Exercise of limited partnership unit options | — | 125 | — | — | — | 125 | ||||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (3,045 | ) | — | — | — | (3,045 | ) | ||||||||||||||||
Payments related to tax withholding for equity compensation | — | (6,930 | ) | — | — | — | (6,930 | ) | ||||||||||||||||
Net cash from (for) financing activities | (56,049 | ) | (48,573 | ) | — | 22,809 | (6,107 | ) | (87,920 | ) | ||||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | — | — | (3,334 | ) | — | — | (3,334 | ) | ||||||||||||||||
CASH AND CASH EQUIVALENTS | ||||||||||||||||||||||||
Net decrease for the period | — | — | (46,824 | ) | (59,708 | ) | 406 | (106,126 | ) | |||||||||||||||
Balance, beginning of period | — | — | 85,758 | 81,582 | (1,095 | ) | 166,245 | |||||||||||||||||
Balance, end of period | $ | — | $ | — | $ | 38,934 | $ | 21,874 | $ | (689 | ) | $ | 60,119 | |||||||||||
27
(14) Consolidating Financial Information of Guarantors and Issuers of 2027 and 2029 Senior Notes:
Cedar Fair, L.P., Canada's Wonderland Company ("Cedar Canada"), Magnum Management Corporation ("Magnum"), and Millennium Operations LLC ("Millennium") are the co-issuers of the Partnership's 2027 and 2029 senior notes (see Note 6). The notes have been fully and unconditionally guaranteed, on a joint and several basis, by each 100% owned subsidiary of Cedar Fair (other than Cedar Canada, Magnum and Millennium) that guarantees the Partnership's senior secured credit facilities. There are no non-guarantor subsidiaries.
The following consolidating schedules present condensed financial information for Cedar Fair, L.P., Cedar Canada, Magnum, and Millennium, the co-issuers, and each 100% owned subsidiary of Cedar Fair (other than Cedar Canada, Magnum and Millennium), the guarantors (on a combined basis), as of June 30, 2019, December 31, 2018, and June 24, 2018 and for the three- and six-month periods ended June 30, 2019 and June 24, 2018. In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the accompanying unaudited condensed consolidating financial statements have been included.
28
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 34,520 | $ | 287,935 | $ | 4,782 | $ | (2,495 | ) | $ | 324,742 | |||||||||||||
Receivables | — | 1,214 | 37,121 | 60,487 | 957,762 | (967,038 | ) | 89,546 | ||||||||||||||||||||
Inventories | — | — | 3,804 | 35,627 | 7,429 | — | 46,860 | |||||||||||||||||||||
Other current assets | 400 | 14,347 | 9,710 | 29,374 | 5,079 | (20,476 | ) | 38,434 | ||||||||||||||||||||
400 | 15,561 | 85,155 | 413,423 | 975,052 | (990,009 | ) | 499,582 | |||||||||||||||||||||
Property and Equipment, net | — | 785 | 186,578 | — | 1,612,103 | — | 1,799,466 | |||||||||||||||||||||
Investment in Park | 524,449 | 1,160,193 | 269,259 | 1,747,364 | 203,690 | (3,904,955 | ) | — | ||||||||||||||||||||
Goodwill | 674 | — | 60,919 | 8,388 | 111,218 | — | 181,199 | |||||||||||||||||||||
Other Intangibles, net | — | — | 13,582 | — | 23,114 | — | 36,696 | |||||||||||||||||||||
Deferred Tax Asset | — | 12,733 | — | — | — | (12,733 | ) | — | ||||||||||||||||||||
Right-of-Use Asset | — | — | 92 | 3,771 | 491 | — | 4,354 | |||||||||||||||||||||
Other Assets | — | — | 38 | 2,483 | 8,988 | — | 11,509 | |||||||||||||||||||||
$ | 525,523 | $ | 1,189,272 | $ | 615,623 | $ | 2,175,429 | $ | 2,934,656 | $ | (4,907,697 | ) | $ | 2,532,806 | ||||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 1,313 | $ | — | $ | 6,187 | $ | — | $ | — | $ | 7,500 | ||||||||||||||
Accounts payable | 616,886 | 356,792 | 4,867 | 32,468 | 7,804 | (969,533 | ) | 49,284 | ||||||||||||||||||||
Deferred revenue | — | — | 25,057 | 147,756 | 44,429 | — | 217,242 | |||||||||||||||||||||
Accrued interest | 6 | 4 | 1,955 | 6,211 | — | — | 8,176 | |||||||||||||||||||||
Accrued taxes | 2,176 | — | — | 8,873 | 25,703 | (20,476 | ) | 16,276 | ||||||||||||||||||||
Accrued salaries, wages and benefits | — | 19,642 | 2,064 | — | — | — | 21,706 | |||||||||||||||||||||
Self-insurance reserves | — | 9,541 | 1,459 | 8,703 | 1,724 | — | 21,427 | |||||||||||||||||||||
Other accrued liabilities | 2,629 | 5,959 | 650 | 6,871 | 2,028 | — | 18,137 | |||||||||||||||||||||
621,697 | 393,251 | 36,052 | 217,069 | 81,688 | (990,009 | ) | 359,748 | |||||||||||||||||||||
Deferred Tax Liability | — | — | 14,071 | — | 87,516 | (12,733 | ) | 88,854 | ||||||||||||||||||||
Derivative Liability | 4,026 | 19,836 | — | — | — | — | 23,862 | |||||||||||||||||||||
Lease Liability | — | — | 73 | 1,992 | 300 | — | 2,365 | |||||||||||||||||||||
Other Liabilities | — | 657 | — | 87 | 9,558 | — | 10,302 | |||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||
Term debt | — | 125,975 | — | 590,853 | — | — | 716,828 | |||||||||||||||||||||
Notes | — | — | 446,443 | 984,604 | — | — | 1,431,047 | |||||||||||||||||||||
— | 125,975 | 446,443 | 1,575,457 | — | — | 2,147,875 | ||||||||||||||||||||||
Equity | (100,200 | ) | 649,553 | 118,984 | 380,824 | 2,755,594 | (3,904,955 | ) | (100,200 | ) | ||||||||||||||||||
$ | 525,523 | $ | 1,189,272 | $ | 615,623 | $ | 2,175,429 | $ | 2,934,656 | $ | (4,907,697 | ) | $ | 2,532,806 | ||||||||||||||
29
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 73,326 | $ | 30,663 | $ | 2,052 | $ | (692 | ) | $ | 105,349 | |||||||||||||
Receivables | — | 1,093 | 34,497 | 36,242 | 902,155 | (922,469 | ) | 51,518 | ||||||||||||||||||||
Inventories | — | — | 2,135 | 23,402 | 5,216 | — | 30,753 | |||||||||||||||||||||
Other current assets | 179 | 1,411 | 5,462 | 8,980 | 1,564 | (5,007 | ) | 12,589 | ||||||||||||||||||||
179 | 2,504 | 115,420 | 99,287 | 910,987 | (928,168 | ) | 200,209 | |||||||||||||||||||||
Property and Equipment, net | — | 802 | 172,344 | — | 1,426,292 | — | 1,599,438 | |||||||||||||||||||||
Investment in Park | 601,706 | 1,182,345 | 262,462 | 1,517,897 | 218,574 | (3,782,984 | ) | — | ||||||||||||||||||||
Goodwill | 674 | — | 58,440 | 8,388 | 111,217 | — | 178,719 | |||||||||||||||||||||
Other Intangibles, net | — | — | 13,030 | — | 23,346 | — | 36,376 | |||||||||||||||||||||
Deferred Tax Asset | — | 18,224 | — | — | — | (18,224 | ) | — | ||||||||||||||||||||
Other Assets | — | — | 36 | 417 | 8,988 | — | 9,441 | |||||||||||||||||||||
$ | 602,559 | $ | 1,203,875 | $ | 621,732 | $ | 1,625,989 | $ | 2,699,404 | $ | (4,729,376 | ) | $ | 2,024,183 | ||||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 984 | $ | — | $ | 4,641 | $ | — | $ | — | $ | 5,625 | ||||||||||||||
Accounts payable | 565,472 | 359,953 | 2,430 | 14,995 | 3,625 | (923,161 | ) | 23,314 | ||||||||||||||||||||
Deferred revenue | — | — | 8,460 | 74,062 | 24,552 | — | 107,074 | |||||||||||||||||||||
Accrued interest | 1 | 1 | 2,054 | 5,871 | — | — | 7,927 | |||||||||||||||||||||
Accrued taxes | 443 | 6,668 | — | 8,087 | 19,400 | (5,007 | ) | 29,591 | ||||||||||||||||||||
Accrued salaries, wages and benefits | — | 17,552 | 1,234 | — | — | — | 18,786 | |||||||||||||||||||||
Self-insurance reserves | — | 10,214 | 1,433 | 10,308 | 2,066 | — | 24,021 | |||||||||||||||||||||
Other accrued liabilities | 3,318 | 4,903 | 136 | 5,471 | 4,553 | — | 18,381 | |||||||||||||||||||||
569,234 | 400,275 | 15,747 | 123,435 | 54,196 | (928,168 | ) | 234,719 | |||||||||||||||||||||
Deferred Tax Liability | — | — | 12,425 | — | 87,516 | (18,224 | ) | 81,717 | ||||||||||||||||||||
Derivative Liability | 909 | 5,796 | — | — | — | — | 6,705 | |||||||||||||||||||||
Other Liabilities | — | 1,169 | — | 87 | 9,802 | — | 11,058 | |||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||
Term debt | — | 126,525 | — | 592,982 | — | — | 719,507 | |||||||||||||||||||||
Notes | — | — | 446,241 | 491,820 | — | — | 938,061 | |||||||||||||||||||||
— | 126,525 | 446,241 | 1,084,802 | — | — | 1,657,568 | ||||||||||||||||||||||
Equity | 32,416 | 670,110 | 147,319 | 417,665 | 2,547,890 | (3,782,984 | ) | 32,416 | ||||||||||||||||||||
$ | 602,559 | $ | 1,203,875 | $ | 621,732 | $ | 1,625,989 | $ | 2,699,404 | $ | (4,729,376 | ) | $ | 2,024,183 | ||||||||||||||
30
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 38,934 | $ | 19,014 | $ | 2,860 | $ | (689 | ) | $ | 60,119 | |||||||||||||
Receivables | — | 1,198 | 66,120 | 55,433 | 813,742 | (851,114 | ) | 85,379 | ||||||||||||||||||||
Inventories | — | — | 3,821 | 35,343 | 7,836 | — | 47,000 | |||||||||||||||||||||
Other current assets | 398 | 3,293 | 2,429 | 30,599 | 5,877 | (1,952 | ) | 40,644 | ||||||||||||||||||||
398 | 4,491 | 111,304 | 140,389 | 830,315 | (853,755 | ) | 233,142 | |||||||||||||||||||||
Property and Equipment, net | — | 819 | 174,962 | — | 1,443,217 | — | 1,618,998 | |||||||||||||||||||||
Investment in Park | 476,659 | 1,009,725 | 243,201 | 1,464,956 | 186,539 | (3,381,080 | ) | — | ||||||||||||||||||||
Goodwill | 674 | — | 59,907 | 8,388 | 111,217 | — | 180,186 | |||||||||||||||||||||
Other Intangibles, net | — | — | 13,362 | — | 23,629 | — | 36,991 | |||||||||||||||||||||
Other Assets | 74 | 467 | 38 | 251 | 9,069 | — | 9,899 | |||||||||||||||||||||
$ | 477,805 | $ | 1,015,502 | $ | 602,774 | $ | 1,613,984 | $ | 2,603,986 | $ | (4,234,835 | ) | $ | 2,079,216 | ||||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 328 | $ | — | $ | 1,547 | $ | — | $ | — | $ | 1,875 | ||||||||||||||
Accounts payable | 542,730 | 313,605 | 5,069 | 33,393 | 6,557 | (851,803 | ) | 49,551 | ||||||||||||||||||||
Deferred revenue | — | — | 20,950 | 141,272 | 48,951 | — | 211,173 | |||||||||||||||||||||
Accrued interest | 137 | 92 | 1,571 | 7,465 | — | — | 9,265 | |||||||||||||||||||||
Accrued taxes | 1,453 | — | 3,668 | 7,515 | 2,056 | (1,952 | ) | 12,740 | ||||||||||||||||||||
Accrued salaries, wages and benefits | — | 23,837 | 2,391 | — | — | — | 26,228 | |||||||||||||||||||||
Self-insurance reserves | — | 10,355 | 1,482 | 11,348 | 2,087 | — | 25,272 | |||||||||||||||||||||
Other accrued liabilities | 3,556 | 7,014 | 670 | 8,991 | 4,164 | — | 24,395 | |||||||||||||||||||||
547,876 | 355,231 | 35,801 | 211,531 | 63,815 | (853,755 | ) | 360,499 | |||||||||||||||||||||
Deferred Tax Liability | — | 22 | 11,507 | — | 81,945 | — | 93,474 | |||||||||||||||||||||
Other Liabilities | — | 839 | — | 87 | 10,056 | — | 10,982 | |||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||
Revolving credit loans | — | — | — | 25,000 | — | — | 25,000 | |||||||||||||||||||||
Term debt | — | 127,075 | — | 595,111 | — | — | 722,186 | |||||||||||||||||||||
Notes | — | — | 445,790 | 491,356 | — | — | 937,146 | |||||||||||||||||||||
— | 127,075 | 445,790 | 1,111,467 | — | — | 1,684,332 | ||||||||||||||||||||||
Equity | (70,071 | ) | 532,335 | 109,676 | 290,899 | 2,448,170 | (3,381,080 | ) | (70,071 | ) | ||||||||||||||||||
$ | 477,805 | $ | 1,015,502 | $ | 602,774 | $ | 1,613,984 | $ | 2,603,986 | $ | (4,234,835 | ) | $ | 2,079,216 | ||||||||||||||
31
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
Net revenues | $ | 30,240 | $ | 107,811 | $ | 38,374 | $ | 316,198 | $ | 132,511 | $ | (188,944 | ) | $ | 436,190 | |||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of food, merchandise and games revenues | — | 51 | 3,874 | 29,089 | 6,794 | — | 39,808 | |||||||||||||||||||||
Operating expenses | 2 | 102,173 | 15,034 | 238,566 | 10,940 | (188,944 | ) | 177,771 | ||||||||||||||||||||
Selling, general and administrative | 186 | 16,000 | 3,847 | 32,499 | 7,249 | — | 59,781 | |||||||||||||||||||||
Depreciation and amortization | — | 8 | 5,682 | — | 50,214 | — | 55,904 | |||||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 25 | 407 | 250 | — | 682 | |||||||||||||||||||||
188 | 118,232 | 28,462 | 300,561 | 75,447 | (188,944 | ) | 333,946 | |||||||||||||||||||||
Operating income (loss) | 30,052 | (10,421 | ) | 9,912 | 15,637 | 57,064 | — | 102,244 | ||||||||||||||||||||
Interest (income) expense, net | 6,673 | 4,996 | 6,045 | 15,165 | (10,033 | ) | — | 22,846 | ||||||||||||||||||||
Net effect of swaps | 2,126 | 8,653 | — | — | — | — | 10,779 | |||||||||||||||||||||
(Gain) loss on foreign currency | — | 12 | (9,484 | ) | — | — | — | (9,472 | ) | |||||||||||||||||||
Other (income) expense | 64 | (24,465 | ) | 926 | — | 23,592 | — | 117 | ||||||||||||||||||||
Income from investment in affiliates | (45,594 | ) | (45,111 | ) | (11,401 | ) | — | (23,567 | ) | 125,673 | — | |||||||||||||||||
Income before taxes | 66,783 | 45,494 | 23,826 | 472 | 67,072 | (125,673 | ) | 77,974 | ||||||||||||||||||||
Provision (benefit) for taxes | 3,485 | (102 | ) | 256 | 472 | 10,565 | — | 14,676 | ||||||||||||||||||||
Net income | $ | 63,298 | $ | 45,596 | $ | 23,570 | $ | — | $ | 56,507 | $ | (125,673 | ) | $ | 63,298 | |||||||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | (4,632 | ) | — | (4,632 | ) | — | — | 4,632 | (4,632 | ) | ||||||||||||||||||
Other comprehensive income (loss), (net of tax) | (4,632 | ) | — | (4,632 | ) | — | — | 4,632 | (4,632 | ) | ||||||||||||||||||
Total comprehensive income | $ | 58,666 | $ | 45,596 | $ | 18,938 | $ | — | $ | 56,507 | $ | (121,041 | ) | $ | 58,666 | |||||||||||||
32
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
Net revenues | $ | 23,937 | $ | 91,527 | $ | 29,648 | $ | 279,133 | $ | 118,781 | $ | (162,710 | ) | $ | 380,316 | |||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of food, merchandise and games revenues | — | — | 3,184 | 25,595 | 6,239 | — | 35,018 | |||||||||||||||||||||
Operating expenses | — | 93,036 | 14,254 | 211,865 | 10,972 | (162,710 | ) | 167,417 | ||||||||||||||||||||
Selling, general and administrative | 926 | 15,638 | 3,556 | 27,351 | 6,570 | — | 54,041 | |||||||||||||||||||||
Depreciation and amortization | — | 8 | 5,940 | — | 46,271 | — | 52,219 | |||||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 27 | 795 | 2,550 | — | 3,372 | |||||||||||||||||||||
926 | 108,682 | 26,961 | 265,606 | 72,602 | (162,710 | ) | 312,067 | |||||||||||||||||||||
Operating income (loss) | 23,011 | (17,155 | ) | 2,687 | 13,527 | 46,179 | — | 68,249 | ||||||||||||||||||||
Interest (income) expense, net | 5,736 | 4,592 | 6,068 | 13,046 | (8,160 | ) | — | 21,282 | ||||||||||||||||||||
Net effect of swaps | (324 | ) | (582 | ) | — | — | — | — | (906 | ) | ||||||||||||||||||
Loss on foreign currency | — | 62 | 14,922 | — | — | — | 14,984 | |||||||||||||||||||||
Other (income) expense | 64 | (22,751 | ) | 932 | — | 21,671 | — | (84 | ) | |||||||||||||||||||
(Income) loss from investment in affiliates | (4,198 | ) | (2,531 | ) | (8,982 | ) | — | 13,602 | 2,109 | — | ||||||||||||||||||
Income (loss) before taxes | 21,733 | 4,055 | (10,253 | ) | 481 | 19,066 | (2,109 | ) | 32,973 | |||||||||||||||||||
Provision (benefit) for taxes | 2,490 | (143 | ) | 3,346 | 481 | 7,556 | — | 13,730 | ||||||||||||||||||||
Net income (loss) | $ | 19,243 | $ | 4,198 | $ | (13,599 | ) | $ | — | $ | 11,510 | $ | (2,109 | ) | $ | 19,243 | ||||||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | 6,662 | — | 6,662 | — | — | (6,662 | ) | 6,662 | ||||||||||||||||||||
Cash flow hedging derivative activity | 2,116 | 727 | — | — | — | (727 | ) | 2,116 | ||||||||||||||||||||
Other comprehensive income (loss), (net of tax) | 8,778 | 727 | 6,662 | — | — | (7,389 | ) | 8,778 | ||||||||||||||||||||
Total comprehensive income (loss) | $ | 28,021 | $ | 4,925 | $ | (6,937 | ) | $ | — | $ | 11,510 | $ | (9,498 | ) | $ | 28,021 | ||||||||||||
33
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
Net revenues | $ | 14,598 | $ | 111,096 | $ | 38,670 | $ | 380,785 | $ | 141,228 | $ | (183,210 | ) | $ | 503,167 | |||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of food, merchandise and games revenues | — | 51 | 3,926 | 36,330 | 7,150 | — | 47,457 | |||||||||||||||||||||
Operating expenses | 2 | 150,345 | 20,745 | 268,117 | 19,977 | (183,210 | ) | 275,976 | ||||||||||||||||||||
Selling, general and administrative | 1,625 | 30,552 | 4,865 | 46,061 | 8,344 | — | 91,447 | |||||||||||||||||||||
Depreciation and amortization | — | 16 | 5,682 | — | 63,795 | — | 69,493 | |||||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 35 | 793 | 1,278 | — | 2,106 | |||||||||||||||||||||
Gain on sale of investment | — | (617 | ) | — | — | — | — | (617 | ) | |||||||||||||||||||
1,627 | 180,347 | 35,253 | 351,301 | 100,544 | (183,210 | ) | 485,862 | |||||||||||||||||||||
Operating income (loss) | 12,971 | (69,251 | ) | 3,417 | 29,484 | 40,684 | — | 17,305 | ||||||||||||||||||||
Interest (income) expense, net | 13,064 | 10,026 | 11,758 | 28,549 | (19,864 | ) | — | 43,533 | ||||||||||||||||||||
Net effect of swaps | 3,117 | 14,041 | — | — | — | — | 17,158 | |||||||||||||||||||||
(Gain) loss on foreign currency | — | 1 | (18,142 | ) | — | — | — | (18,141 | ) | |||||||||||||||||||
Other (income) expense | 123 | (35,971 | ) | 2,025 | — | 34,262 | — | 439 | ||||||||||||||||||||
(Income) loss from investment in affiliates | 12,855 | (30,452 | ) | (6,798 | ) | — | (17,377 | ) | 41,772 | — | ||||||||||||||||||
Income (loss) before taxes | (16,188 | ) | (26,896 | ) | 14,574 | 935 | 43,663 | (41,772 | ) | (25,684 | ) | |||||||||||||||||
Provision (benefit) for taxes | 4,187 | (14,041 | ) | (2,803 | ) | 935 | 6,413 | — | (5,309 | ) | ||||||||||||||||||
Net income (loss) | $ | (20,375 | ) | $ | (12,855 | ) | $ | 17,377 | $ | — | $ | 37,250 | $ | (41,772 | ) | $ | (20,375 | ) | ||||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | (7,682 | ) | — | (7,682 | ) | — | — | 7,682 | (7,682 | ) | ||||||||||||||||||
Other comprehensive income (loss), (net of tax) | (7,682 | ) | — | (7,682 | ) | — | — | 7,682 | (7,682 | ) | ||||||||||||||||||
Total comprehensive income (loss) | $ | (28,057 | ) | $ | (12,855 | ) | $ | 9,695 | $ | — | $ | 37,250 | $ | (34,090 | ) | $ | (28,057 | ) | ||||||||||
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CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
Net revenues | $ | 13,170 | $ | 92,381 | $ | 29,919 | $ | 332,864 | $ | 120,487 | $ | (153,778 | ) | $ | 435,043 | |||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of food, merchandise and games revenues | — | — | 3,184 | 31,494 | 6,343 | — | 41,021 | |||||||||||||||||||||
Operating expenses | — | 135,707 | 19,970 | 234,485 | 19,861 | (153,778 | ) | 256,245 | ||||||||||||||||||||
Selling, general and administrative | 1,685 | 30,088 | 4,236 | 38,994 | 7,720 | — | 82,723 | |||||||||||||||||||||
Depreciation and amortization | — | 16 | 5,940 | — | 51,784 | — | 57,740 | |||||||||||||||||||||
Loss on impairment / retirement of fixed assets, net | — | — | 67 | 1,446 | 3,199 | — | 4,712 | |||||||||||||||||||||
1,685 | 165,811 | 33,397 | 306,419 | 88,907 | (153,778 | ) | 442,441 | |||||||||||||||||||||
Operating income (loss) | 11,485 | (73,430 | ) | (3,478 | ) | 26,445 | 31,580 | — | (7,398 | ) | ||||||||||||||||||
Interest (income) expense, net | 10,640 | 8,959 | 11,651 | 24,599 | (15,031 | ) | — | 40,818 | ||||||||||||||||||||
Net effect of swaps | (2,531 | ) | (2,003 | ) | — | — | — | — | (4,534 | ) | ||||||||||||||||||
Loss on early debt extinguishment | — | 187 | — | 886 | — | — | 1,073 | |||||||||||||||||||||
Loss on foreign currency | — | 21 | 25,057 | — | — | — | 25,078 | |||||||||||||||||||||
Other (income) expense | 123 | (32,555 | ) | 1,786 | — | 30,439 | — | (207 | ) | |||||||||||||||||||
(Income) loss from investment in affiliates | 64,330 | 26,284 | (5,069 | ) | — | 34,187 | (119,732 | ) | — | |||||||||||||||||||
Income (loss) before taxes | (61,077 | ) | (74,323 | ) | (36,903 | ) | 960 | (18,015 | ) | 119,732 | (69,626 | ) | ||||||||||||||||
Provision (benefit) for taxes | 3,080 | (9,994 | ) | (2,716 | ) | 960 | 3,201 | — | (5,469 | ) | ||||||||||||||||||
Net loss | $ | (64,157 | ) | $ | (64,329 | ) | $ | (34,187 | ) | $ | — | $ | (21,216 | ) | $ | 119,732 | $ | (64,157 | ) | |||||||||
Other comprehensive income (loss), (net of tax): | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | 11,266 | — | 11,266 | — | — | (11,266 | ) | 11,266 | ||||||||||||||||||||
Cash flow hedging derivative activity | 4,134 | 1,357 | — | — | — | (1,357 | ) | 4,134 | ||||||||||||||||||||
Other comprehensive income (loss), (net of tax) | 15,400 | 1,357 | 11,266 | — | — | (12,623 | ) | 15,400 | ||||||||||||||||||||
Total comprehensive loss | $ | (48,757 | ) | $ | (62,972 | ) | $ | (22,921 | ) | $ | — | $ | (21,216 | ) | $ | 107,109 | $ | (48,757 | ) | |||||||||
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CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2019
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
NET CASH FROM (FOR) OPERATING ACTIVITIES | $ | 53,711 | $ | (28,342 | ) | $ | 9,120 | $ | (2,965 | ) | $ | 69,406 | $ | (2,246 | ) | $ | 98,684 | |||||||||||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES | ||||||||||||||||||||||||||||
Intercompany receivables (payments) receipts | — | — | — | — | (47,144 | ) | 47,144 | — | ||||||||||||||||||||
Proceeds from returns on investments | — | 38,030 | — | — | — | (38,030 | ) | — | ||||||||||||||||||||
Proceeds from sale of investment | — | 617 | — | — | — | — | 617 | |||||||||||||||||||||
Capital expenditures | — | — | (12,817 | ) | (230,504 | ) | (19,532 | ) | — | (262,853 | ) | |||||||||||||||||
Net cash from (for) investing activities | — | 38,647 | (12,817 | ) | (230,504 | ) | (66,676 | ) | 9,114 | (262,236 | ) | |||||||||||||||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | ||||||||||||||||||||||||||||
Intercompany payables (payments) receipts | 51,418 | (4,274 | ) | — | — | — | (47,144 | ) | — | |||||||||||||||||||
Payments for returns of capital | — | — | (38,030 | ) | — | — | 38,030 | — | ||||||||||||||||||||
Note borrowings | — | — | — | 500,000 | — | — | 500,000 | |||||||||||||||||||||
Term debt payments | — | (328 | ) | — | (1,547 | ) | — | — | (1,875 | ) | ||||||||||||||||||
Distributions paid to partners | (105,129 | ) | — | — | — | — | 443 | (104,686 | ) | |||||||||||||||||||
Payment of debt issuance costs and original issue discount | — | — | — | (7,712 | ) | — | — | (7,712 | ) | |||||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (1,561 | ) | — | — | — | — | (1,561 | ) | |||||||||||||||||||
Payments related to tax withholding for equity compensation | — | (4,142 | ) | — | — | — | — | (4,142 | ) | |||||||||||||||||||
Net cash from (for) financing activities | (53,711 | ) | (10,305 | ) | (38,030 | ) | 490,741 | — | (8,671 | ) | 380,024 | |||||||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | — | — | 2,921 | — | — | — | 2,921 | |||||||||||||||||||||
CASH AND CASH EQUIVALENTS | ||||||||||||||||||||||||||||
Net increase (decrease) for the period | — | — | (38,806 | ) | 257,272 | 2,730 | (1,803 | ) | 219,393 | |||||||||||||||||||
Balance, beginning of period | — | — | 73,326 | 30,663 | 2,052 | (692 | ) | 105,349 | ||||||||||||||||||||
Balance, end of period | $ | — | $ | — | $ | 34,520 | $ | 287,935 | $ | 4,782 | $ | (2,495 | ) | $ | 324,742 | |||||||||||||
36
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 24, 2018
(In thousands)
Cedar Fair L.P. (Parent) | Co-Issuer Subsidiary (Magnum) | Co-Issuer Subsidiary (Cedar Canada) | Co-Issuer Subsidiary (Millennium) | Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||||||||
NET CASH FROM (FOR) OPERATING ACTIVITIES | $ | 56,049 | $ | 48,573 | $ | 2,897 | $ | (13,826 | ) | $ | (7,672 | ) | $ | (256 | ) | $ | 85,765 | |||||||||||
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES | ||||||||||||||||||||||||||||
Intercompany receivables (payments) receipts | — | — | (37,892 | ) | — | 31,123 | 6,769 | — | ||||||||||||||||||||
Capital expenditures | — | — | (8,495 | ) | (70,399 | ) | (21,743 | ) | — | (100,637 | ) | |||||||||||||||||
Net cash from (for) investing activities | — | — | (46,387 | ) | (70,399 | ) | 9,380 | 6,769 | (100,637 | ) | ||||||||||||||||||
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES | ||||||||||||||||||||||||||||
Intercompany payables (payments) receipts | 45,171 | (38,402 | ) | — | — | — | (6,769 | ) | — | |||||||||||||||||||
Net borrowings on revolving credit loans | — | — | — | 25,000 | — | — | 25,000 | |||||||||||||||||||||
Distributions paid to partners | (101,220 | ) | — | — | — | — | 662 | (100,558 | ) | |||||||||||||||||||
Payment of debt issuance costs and original issue discount | — | (321 | ) | — | (2,191 | ) | — | — | (2,512 | ) | ||||||||||||||||||
Exercise of limited partnership unit options | — | 125 | — | — | — | — | 125 | |||||||||||||||||||||
Tax effect of units involved in treasury unit transactions | — | (3,045 | ) | — | — | — | — | (3,045 | ) | |||||||||||||||||||
Payments related to tax withholding for equity compensation | — | (6,930 | ) | — | — | — | — | (6,930 | ) | |||||||||||||||||||
Net cash from (for) financing activities | (56,049 | ) | (48,573 | ) | — | 22,809 | — | (6,107 | ) | (87,920 | ) | |||||||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | — | — | (3,334 | ) | — | — | — | (3,334 | ) | |||||||||||||||||||
CASH AND CASH EQUIVALENTS | ||||||||||||||||||||||||||||
Net increase (decrease) for the period | — | — | (46,824 | ) | (61,416 | ) | 1,708 | 406 | (106,126 | ) | ||||||||||||||||||
Balance, beginning of period | — | — | 85,758 | 80,430 | 1,152 | (1,095 | ) | 166,245 | ||||||||||||||||||||
Balance, end of period | $ | — | $ | — | $ | 38,934 | $ | 19,014 | $ | 2,860 | $ | (689 | ) | $ | 60,119 | |||||||||||||
37
(15) Acquisition Subsequent Events:
On July 1, 2019, the Partnership completed the acquisition of two water parks and one resort in Texas, the Schlitterbahn Waterpark & Resort New Braunfels and the Schlitterbahn Waterpark Galveston ("Schlitterbahn"), for a cash purchase price of $258.9 million, subject to certain working capital adjustments. Schlitterbahn will be included within the Partnership's single reportable segment of amusement/water parks with accompanying resort facilities. The purchase price allocation remains preliminary as management completes the valuation assessment of property acquired and finalizes the working capital adjustment. Acquisition related transaction costs totaled $0.9 million for the six months ended June 30, 2019 and are included in Selling, general and administrative expenses within the unaudited condensed consolidated statement of operations and comprehensive income.
In conjunction with the acquisition, the Partnership issued $500 million of 5.250% senior unsecured notes maturing in 2029 (see Note 6). The net proceeds from the offering of the notes were used to complete the Schlitterbahn acquisition, complete the purchase of land at California's Great America (see Note 11), to pay transaction fees and expenses, and for general corporate purposes and repayment of the revolving credit facility. In addition to the water parks and resort acquired on July 1, 2019, the Partnership has the right to acquire an additional property located in Kansas City, Kansas for a cash payment of $6.0 million.
The Partnership completed an immaterial acquisition of Sawmill Creek Resort located in Huron, Ohio on July 3, 2019. Sawmill Creek Resort is a 236-room resort lodge located on 235 acres with a marina, a half-mile beach and 50 acres of undeveloped land.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Overview:
We generate our revenues from sales of (1) admission to our amusement parks and water parks, (2) food, merchandise and games both inside and outside our parks, and (3) accommodations, extra-charge products, and other revenue sources. Our principal costs and expenses, which include salaries and wages, operating supplies, maintenance, advertising, utilities and insurance, are relatively fixed for an operating season and do not vary significantly with attendance.
Each of our properties is overseen by a park general manager and operates autonomously. Management reviews operating results, evaluates performance and makes operating decisions, including allocating resources, on a property-by-property basis.
Along with attendance and in-park per capita spending statistics, discrete financial information and operating results are prepared at the individual park level for use by the CEO, who is the Chief Operating Decision Maker (CODM), as well as by the Chief Financial Officer, the Chief Operating Officer, the Executive Vice President of Operations, Regional Vice Presidents and the park general managers.
Critical Accounting Policies:
Management’s discussion and analysis of financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in the United States of America. These principles require us to make judgments, estimates and assumptions during the normal course of business that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions.
Management believes that judgment and estimates related to the following critical accounting policies could materially affect our condensed consolidated financial statements:
•Impairment of Long-Lived Assets
•Goodwill and Other Intangible Assets
•Self-Insurance Reserves
•Revenue Recognition
• | Income Taxes |
In the second quarter of 2019, there were no changes in the above critical accounting policies from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.
Adjusted EBITDA:
We believe that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the Amended 2017 Credit Agreement and prior credit agreements) is a meaningful measure as it is widely used by analysts, investors and comparable companies in our industry to evaluate our operating performance on a consistent basis,
38
as well as more easily compare our results with those of other companies in our industry. Further, management believes Adjusted EBITDA is a meaningful measure of park-level operating profitability and we use it for measuring returns on capital investments, evaluating potential acquisitions, determining awards under incentive compensation plans, and calculating compliance with certain loan covenants. Adjusted EBITDA is provided in the discussion of results of operations that follows as a supplemental measure of our operating results and is not intended to be a substitute for operating income, net income or cash flows from operating activities as defined under generally accepted accounting principles. In addition, Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
The table below sets forth a reconciliation of Adjusted EBITDA to net income (loss) for the three- and six-month periods ended June 30, 2019 and June 24, 2018.
Three months ended | Six months ended | ||||||||||||||
(In thousands) | June 30, 2019 | June 24, 2018 | June 30, 2019 | June 24, 2018 | |||||||||||
Net income (loss) | $ | 63,298 | $ | 19,243 | $ | (20,375 | ) | $ | (64,157 | ) | |||||
Interest expense | 22,927 | 21,337 | 43,847 | 41,099 | |||||||||||
Interest income | (81 | ) | (55 | ) | (314 | ) | (281 | ) | |||||||
Provision (benefit) for taxes | 14,676 | 13,730 | (5,309 | ) | (5,469 | ) | |||||||||
Depreciation and amortization | 55,904 | 52,219 | 69,493 | 57,740 | |||||||||||
EBITDA | 156,724 | 106,474 | 87,342 | 28,932 | |||||||||||
Loss on early debt extinguishment | — | — | — | 1,073 | |||||||||||
Net effect of swaps | 10,779 | (906 | ) | 17,158 | (4,534 | ) | |||||||||
Non-cash foreign currency (gain) loss | (9,481 | ) | 14,992 | (18,145 | ) | 25,090 | |||||||||
Non-cash equity compensation expense | 3,287 | 3,180 | 5,830 | 6,148 | |||||||||||
Loss on impairment / retirement of fixed assets, net | 682 | 3,372 | 2,106 | 4,712 | |||||||||||
Gain on sale of investment | — | — | (617 | ) | — | ||||||||||
Acquisition-related costs | 946 | — | 946 | — | |||||||||||
Other (1) | 124 | (76 | ) | 283 | 93 | ||||||||||
Adjusted EBITDA | $ | 163,061 | $ | 127,036 | $ | 94,903 | $ | 61,514 | |||||||
(1) | Consists of certain costs as defined in the Partnership's Amended 2017 Credit Agreement and prior credit agreements. These items are excluded from the calculation of Adjusted EBITDA and have included certain legal expenses and severance expenses. This balance also includes unrealized gains and losses on short-term investments. |
Results of Operations:
We believe the following are key operational measures in our management and operational reporting, and they are used as major factors in significant operational decisions:
Attendance is defined as the number of guest visits to our amusement parks and separately gated outdoor water parks.
In-park per capita spending is calculated as revenues generated within our amusement parks and separately gated outdoor water parks along with related tolls and parking revenues (in-park revenues), divided by total attendance.
Out-of-park revenues are defined as revenues from resort, marina, sponsorship, online transaction fees charged to customers and all other out-of-park operations.
Net revenues consist of in-park revenues and out-of-park revenues less amounts remitted to outside parties under concessionaire arrangements. See Note 3 for further information.
Results for the first six months of 2019 do not include the results of Schlitterbahn, which we acquired on July 1, 2019. See Note 15.
39
Six months ended June 30, 2019
The fiscal six-month period ended June 30, 2019 consisted of a 26-week period and included a total of 827 operating days compared with 25 weeks and 754 operating days for the fiscal six-month period ended June 24, 2018. The results for these periods are not directly comparable as the current period includes an additional week of operations due to the timing of the fiscal second quarter close. Since many differences in our operating results relate to the additional week in the current period, we have also included a discussion of operating results through July 1, 2018 on a 26-week basis.
The following table presents key financial information for the six months ended June 30, 2019 and June 24, 2018:
(26 weeks) | (25 weeks) | ||||||||||||||
Six months ended | Six months ended | Increase (Decrease) | |||||||||||||
June 30, 2019 | June 24, 2018 | $ | % | ||||||||||||
(Amounts in thousands, except for per capita spending) | |||||||||||||||
Net revenues | $ | 503,167 | $ | 435,043 | $ | 68,124 | 15.7 | % | |||||||
Operating costs and expenses | 414,880 | 379,989 | 34,891 | 9.2 | % | ||||||||||
Depreciation and amortization | 69,493 | 57,740 | 11,753 | 20.4 | % | ||||||||||
Loss on impairment / retirement of fixed assets, net | 2,106 | 4,712 | (2,606 | ) | N/M | ||||||||||
Gain on sale of investment | (617 | ) | — | (617 | ) | N/M | |||||||||
Operating income (loss) | $ | 17,305 | $ | (7,398 | ) | $ | 24,703 | N/M | |||||||
N/M - Not meaningful | |||||||||||||||
Other Data: | |||||||||||||||
Adjusted EBITDA (1) | $ | 94,903 | $ | 61,514 | $ | 33,389 | 54.3 | % | |||||||
Attendance | 9,675 | 8,655 | 1,020 | 11.8 | % | ||||||||||
In-park per capita spending | $ | 47.09 | $ | 45.42 | $ | 1.67 | 3.7 | % | |||||||
Out-of-park revenues | $ | 64,105 | $ | 56,177 | $ | 7,928 | 14.1 | % | |||||||
(1) | For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation to net income (loss), see page 39. |
For the six months ended June 30, 2019, net revenues increased 15.7%, or $68.1 million, to $503.2 million, from $435.0 million for the six months ended June 24, 2018. This reflects the impact of a 1.0 million-visit increase in attendance and a $1.67 increase in in-park per capita spending. Out-of-park revenues increased $7.9 million compared with the six months ended June 24, 2018. The increase in net revenues was net of a $4.0 million unfavorable impact of foreign currency exchange related to our Canadian park.
Operating costs and expenses for the six months ended June 30, 2019 increased 9.2%, or $34.9 million, to $414.9 million from $380.0 million for the six months ended June 24, 2018. The increase was the result of a $6.4 million increase in cost of goods sold, a $19.7 million increase in operating expenses and an $8.7 million increase in SG&A expense. The increase in operating costs and expenses was net of a $2.1 million favorable impact of foreign currency exchange related to our Canadian park.
Depreciation and amortization expense for the six months ended June 30, 2019 increased $11.8 million compared with the six months ended June 24, 2018 due to the change in the estimated useful life of a long-lived asset at Kings Dominion, as well as the additional week in the current period. For both the six months ended June 30, 2019 and the six months ended June 24, 2018, the loss on impairment / retirement of fixed assets was attributable to the retirements of assets in the normal course of business at several of our properties, including the retirement of a specific asset in the second quarter of 2018. During the first quarter of 2019, a $0.6 million gain on sale of investment was recognized for additional proceeds from the liquidation of a preferred equity investment.
After the items above, operating income for the six months ended June 30, 2019 increased $24.7 million to $17.3 million compared with an operating loss of $7.4 million for the six months ended June 24, 2018.
Interest expense for the six months ended June 30, 2019 increased $2.7 million due to incremental revolving credit facility borrowings in the current period. We recognized a $1.1 million loss on early debt extinguishment during the first quarter of 2018 in connection with amending our 2017 Credit Agreement, as described in Note 6. The net effect of our swaps resulted in a charge to earnings of $17.2 million for the six months ended June 30, 2019 compared with a $4.5 million benefit to earnings for the six months ended June 24, 2018. The difference reflects the change in fair market value movements in our swap portfolio offset by
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the prior period amortization of amounts in OCI for our de-designated swaps. During the current period, we also recognized an $18.1 million net benefit to earnings for foreign currency gains and losses compared with a $25.1 million net charge to earnings for the six months ended June 24, 2018. Both amounts primarily represent remeasurement of the U.S.-dollar denominated debt recorded at our Canadian entity from the applicable currency to the legal entity's functional currency.
During the six months ended June 30, 2019, a benefit for taxes of $5.3 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This was comparable to the benefit for taxes recorded for the six months ended June 24, 2018 of $5.5 million.
After the items above, the net loss for the six months ended June 30, 2019 totaled $20.4 million, or $0.36 per diluted limited partner unit, compared with a net loss of $64.2 million, or $1.14 per diluted limited partner unit, for the six months ended June 24, 2018.
The results for the six months ended June 30, 2019 included an additional week of operations as compared with the six months ended June 24, 2018 due to the timing of the second quarter close. Comparing both 2019 and 2018 on a 26-week basis, net revenues increased by $10.7 million, or 2%. The increase reflects the impact of a $1.48 increase in in-park per capita spending offset by the impact of a 97,000-visit decrease in attendance on a 26-week basis. The increase in in-park per capita spending was attributable to higher guest spending in food and beverage, and to a lesser extent, admission, extra-charge and merchandise. The decrease in attendance, particularly season pass visitation, was driven by unfavorable weather conditions through early June. Out-of-park revenues increased $1.4 million on a 26-week basis largely due to an increase in online transaction fees charged to customers. Amounts remitted to outside parties under concessionaire arrangements increased $0.6 million on a 26-week basis.
Operating costs and expenses on a comparable 26-week basis increased by $10.7 million, or 3%. The increase was the result of a $1.7 million increase in cost of goods sold, a $3.6 million increase in operating expenses and a $5.4 million increase in SG&A expense for the comparable 26-week periods. Cost of goods sold as a percentage of food, merchandise, and games net revenue was comparable. Operating expenses grew by $3.6 million primarily due to increased labor costs for seasonal, full-time and maintenance labor largely driven by planned wage and rate increases, as well as, incremental operating costs associated with new immersive events. These increases in operating expenses were somewhat offset by a decrease in maintenance expense attributable to the timing of repairs. The seasonal rate increase was partially offset by a decrease in labor hours during the comparable periods. The $5.4 million increase in SG&A expense was primarily attributable to increased legal and consulting fees for our subsequent event acquisition and other current management initiatives, and higher technology related costs. Depreciation and amortization expense on a comparable 26-week basis increased $5.2 million due to the change in the estimated useful life of a long-lived asset at Kings Dominion.
After the 26-week basis fluctuations described above, and the fluctuations of loss on impairment / retirement of fixed assets and gain on sale of investment, which were not materially impacted by the additional week of activity, operating income on a comparable 26-week basis decreased $1.9 million. The fluctuations in interest expense, loss on early debt extinguishment, net effect of swaps, foreign currency (gain) loss, and benefit for taxes on a 26-week basis were not materially impacted by the additional week of activity. After these items, net loss on a comparable 26-week basis decreased $17.3 million from $37.7 million for the six months ended July 1, 2018 to $20.4 million for the six months ended June 30, 2019.
For the six months ended June 30, 2019, Adjusted EBITDA increased $33.4 million to $94.9 million from $61.5 million for the six months ended June 24, 2018. Adjusted EBITDA on a 26-week basis was comparable year-over-year due to increased net revenues attributable to higher in-park per capita spending offset by increased operating costs, particularly related to labor, legal and technology-related costs. Adjusted EBITDA was computed in the same manner for both 26-week periods(3).
(3) | Adjusted EBITDA for the six months ended July 1, 2018 was calculated as net loss of $37.7 million plus interest expense of $41.1 million, benefit for taxes of $5.4 million, depreciation and amortization expense of $64.4 million, loss on early debt extinguishment of $1.1 million, net effect of swaps benefit of $4.5 million, non-cash foreign currency loss of $25.1 million, non-cash equity compensation expense of $6.1 million, and loss on impairment / retirement of fixed assets of $4.7 million. |
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Three months ended June 30, 2019
The fiscal three-month period ended June 30, 2019 included a total of 726 operating days compared with 662 operating days for the fiscal three-month period ended June 24, 2018. The results for these periods are not directly comparable as the current period includes 64 additional operating days due to the timing of the fiscal second quarter close. Since many differences in our operating results relate to the additional operating days in the current period, we have also included a discussion of operating results through July 1, 2018 on a same-week basis (the 13-week period ended June 30, 2019 compared with the 13-week period ended July 1, 2018).
The following table presents key financial information for the three months ended June 30, 2019 and June 24, 2018:
(726 operating days) | (662 operating days) | ||||||||||||||
Three months ended | Three months ended | Increase (Decrease) | |||||||||||||
June 30, 2019 | June 24, 2018 | $ | % | ||||||||||||
(Amounts in thousands, except for per capita spending) | |||||||||||||||
Net revenues | $ | 436,190 | $ | 380,316 | $ | 55,874 | 14.7 | % | |||||||
Operating costs and expenses | 277,360 | 256,476 | 20,884 | 8.1 | % | ||||||||||
Depreciation and amortization | 55,904 | 52,219 | 3,685 | 7.1 | % | ||||||||||
Loss on impairment / retirement of fixed assets, net | 682 | 3,372 | (2,690 | ) | N/M | ||||||||||
Operating income | $ | 102,244 | $ | 68,249 | $ | 33,995 | 49.8 | % | |||||||
N/M - Not meaningful | |||||||||||||||
Other Data: | |||||||||||||||
Adjusted EBITDA (1) | $ | 163,061 | $ | 127,036 | $ | 36,025 | 28.4 | % | |||||||
Attendance | 8,500 | 7,698 | 802 | 10.4 | % | ||||||||||
In-park per capita spending | $ | 47.22 | $ | 45.40 | $ | 1.82 | 4.0 | % | |||||||
Out-of-park revenues | $ | 49,344 | $ | 43,491 | $ | 5,853 | 13.5 | % | |||||||
(1) | For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation to net income (loss), see page 39. |
For the three months ended June 30, 2019, net revenues increased 14.7%, or $55.9 million, to $436.2 million, from $380.3 million for the three months ended June 24, 2018. This reflects the impact of an 0.8 million visit increase in attendance and a $1.82 increase in in-park per capita spending. Out-of-park revenues increased $5.9 million compared with the three months ended June 24, 2018. Currency exchange rates had an immaterial impact on net revenues for the quarter.
Operating costs and expenses for the three months ended June 30, 2019 increased 8.1%, or $20.9 million, to $277.4 million from $256.5 million for the three months ended June 24, 2018. The increase was the result of a $4.8 million increase in cost of goods sold, a $10.4 million increase in operating expenses and a $5.7 million increase in SG&A expense. The increase in operating costs and expenses was not materially impacted by foreign currency exchange rates during the second quarter.
Depreciation and amortization expense for the three months ended June 30, 2019 increased $3.7 million compared with the three months ended June 24, 2018 due to the additional week in the current period. For both the three months ended June 30, 2019 and the three months ended June 24, 2018, the loss on impairment / retirement of fixed assets was attributable to the retirements of assets in the normal course of business at several of our properties, including a specific asset in the second quarter of 2018.
After the items above, operating income for the three months ended June 30, 2019 increased $34.0 million to $102.2 million compared with $68.2 million for the three months ended June 24, 2018.
Interest expense for the three months ended June 30, 2019 increased $1.6 million due to incremental revolving credit facility borrowings in the current period. The net effect of our swaps resulted in a charge to earnings of $10.8 million for the three months ended June 30, 2019 compared with a $0.9 million benefit to earnings for the three months ended June 24, 2018. The difference reflects the change in fair market value movements in our swap portfolio offset by the prior period amortization of amounts in OCI for our de-designated swaps. During the current period, we also recognized a $9.5 million net benefit to earnings for foreign currency gains and losses compared with a $15.0 million net charge to earnings for the three months ended June 24, 2018. Both amounts primarily represent remeasurement of the U.S.-dollar denominated debt recorded at our Canadian entity from the applicable currency to the legal entity's functional currency.
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During the three months ended June 30, 2019, a provision for taxes of $14.7 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This was comparable to the provision for taxes recorded for the three months ended June 24, 2018 of $13.7 million.
After the items above, net income for the three months ended June 30, 2019 totaled $63.3 million, or $1.11 per diluted limited partner unit, compared with $19.2 million, or $0.34 per diluted limited partner unit, for the three months ended June 24, 2018.
The results for the three months ended June 30, 2019 included 64 additional operating days compared with the three months ended June 24, 2018 due to the timing of the second quarter close. Comparing both 2019 and 2018 on a same-week basis, net revenues increased by $14.1 million, or 3%. The increase reflects the impact of a $1.81 increase in in-park per capita spending offset by the impact of a 47,000-visit decrease in attendance on a same-week basis. The increase in in-park per capita spending was attributable to higher guest spending in food and beverage, and to a lesser extent, admission, extra-charge and merchandise. The decrease in attendance, particularly season pass visitation, was driven by unfavorable weather conditions through early June. Out-of-park revenues increased $1.7 million on a same-week basis due to an increase in online transaction fees charged to customers. Amounts remitted to outside parties under concessionaire arrangements increased $0.8 million on a same-week basis.
Operating costs and expenses on a comparable same-week basis increased by $7.8 million, or 3%. The increase was the result of a $1.7 million increase in cost of goods sold, a $2.4 million increase in operating expenses and a $3.7 million increase in SG&A expense for the comparable same-week periods. Cost of goods sold as a percentage of food, merchandise, and games net revenue was comparable. Operating expenses grew by $2.4 million primarily due to increased labor costs for seasonal, full-time and maintenance labor largely driven by planned wage and rate increases, as well as, incremental operating costs associated with new immersive events. These increases in operating expenses were somewhat offset by a decrease in maintenance expense attributable to the timing of repairs. The seasonal rate increase was partially offset by a decrease in labor hours during the comparable periods. The $3.7 million increase in SG&A expense was primarily attributable to increased legal and consulting fees for our subsequent event acquisition and higher technology-related costs. Depreciation and amortization expense on a comparable same-week basis decreased $1.5 million.
After the same-week basis fluctuations described above, and the loss on impairment / retirement of fixed assets fluctuation, which was not materially impacted by the additional week of activity, operating income on a comparable same-week basis increased $10.5 million. The fluctuations in interest expense, net effect of swaps, foreign currency (gain) loss, and provision for taxes on a same-week basis were not materially impacted by the additional week of activity. After these items, net income on a comparable same-week basis increased $21.2 million from $42.1 million for the three months ended July 1, 2018 to $63.3 million for the three months ended June 30, 2019.
For the three months ended June 30, 2019, Adjusted EBITDA increased $36.0 million to $163.1 million from $127.0 million for the three months ended June 24, 2018. Adjusted EBITDA on a comparable same-week basis increased $7.4 million, or 5%, due to increased net revenues attributable to higher in-park per capita spending somewhat offset by increased operating costs, particularly related to labor, legal and technology-related costs. Adjusted EBITDA was computed in the same manner for both same-week periods(3).
(3) | Adjusted EBITDA for the three months ended July 1, 2018 was calculated as net income of $42.1 million plus interest expense of $21.3 million, provision for taxes of $13.7 million, depreciation and amortization expense of $57.4 million, net effect of swaps benefit of $0.9 million, non-cash foreign currency loss of $15.7 million, non-cash equity compensation expense of $3.2 million, and loss on impairment / retirement of fixed assets of $3.2 million. |
Seven Month Results
These preliminary results include results from the Schlitterbahn parks which we acquired on July 1, 2019 (see Note 15). Net revenues for the seven months ended August 4, 2019 were approximately $877 million. Attendance totaled 16.5 million guests, in-park per capita spending was $48.59 and out-of-park revenues totaled $104 million.
On a same-park basis (excluding results from the Schlitterbahn parks), net revenues for the seven months ended August 4, 2019 were approximately $850 million, up $31 million, or 4%, compared with the seven months ended August 5, 2018. The increase reflects the impact of a 1%, or 213,000- visit, increase in attendance, a 3% increase in in-park per capita spending and a 4%, or $4 million, increase in out-of-park revenues compared with the prior period.
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Liquidity and Capital Resources:
The working capital ratio (current assets divided by current liabilities) was 1.4 as of June 30, 2019 and 0.6 as of June 24, 2018. There was a $264.6 million increase in cash and cash equivalents as of June 30, 2019 compared with the balance as of June 24, 2018 due to the net cash proceeds from the 2029 senior notes issuance. This cash was used to complete our subsequent event acquisition on July 1, 2019 (see Note 15).
Operating Activities
During the six-month period ended June 30, 2019, net cash from operating activities was $98.7 million, an increase of $12.9 million compared with the same period a year ago. The increase was largely attributable to the additional week of operations in the current period due to the timing of the fiscal second quarter close.
Investing Activities
Net cash for investing activities for the first six months of 2019 was $262.2 million, an increase of $161.6 million compared with the same period in the prior year. The increase was largely attributable to the purchase of the land at California's Great America from the City of Santa Clara for $150.3 million (see Note 11).
Financing Activities
Net cash from financing activities for the first six months of 2019 was $380.0 million, an increase of $467.9 million compared with net cash for financing activities during the same period in the prior year. The increase was primarily due to the net cash proceeds from the 2029 senior notes issuance (see Note 6).
As of June 30, 2019, our outstanding debt, before reduction for debt issuance costs and original issue discount, consisted of the following:
• | $733 million of senior secured term debt, maturing in April 2024 under our Amended 2017 Credit Agreement. The term debt bears interest at the London InterBank Offering Rate ("LIBOR") plus 175 basis points (bps), under amendments we entered into on March 14, 2018. The pricing terms for the amendment reflected $0.9 million of Original Issue Discount ("OID"). The term loan is payable $7.5 million annually. We have $7.5 million of current maturities as of June 30, 2019. |
• | $450 million of 5.375% senior unsecured notes, maturing in June 2024, issued at par. The notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in June and December. |
• | $500 million of 5.375% senior unsecured notes, maturing in April 2027, issued at par. Prior to April 15, 2020, up to 35% of the notes may be redeemed with net cash proceeds of certain equity offerings at a price equal to 105.375% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to April 15, 2022 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium, together with accrued and unpaid interest and additional interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in April and October. |
• | $500 million of 5.250% senior unsecured notes, maturing in July 2029, issued at par. Prior to July 15, 2022, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.250% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to July 15, 2024 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium together with accrued and unpaid interest and additional interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in January and July. |
• | No borrowings under the $275 million senior secured revolving credit facility under our Amended 2017 Credit Agreement with a Canadian sub-limit of $15 million. Borrowings under the senior secured revolving credit facility bear interest at LIBOR or Canadian Dollar Offered Rate ("CDOR") plus 200 bps. The revolving credit facility is scheduled to mature in April 2022 and also provides for the issuance of documentary and standby letters of credit. The Amended 2017 Credit Agreement requires the payment of a 37.5 bps commitment fee per annum on the unused portion of the credit facilities. After letters of credit, which totaled $15.4 million as of June 30, 2019, we had $259.6 million of available borrowings under the revolving credit facility and cash on hand of $324.7 million. |
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As of June 30, 2019, we have eight interest rate swap agreements that convert $500 million of variable-rate debt to a fixed rate. Four of these agreements fix our variable-rate debt at 4.39% and mature on December 31, 2020. The other four fix our variable-rate debt at 4.63% for the period December 31, 2020 through December 31, 2023. None of our interest rate swap agreements were designated as cash flow hedges in the periods presented. As of June 30, 2019, the fair market value of our derivatives was a liability of $23.9 million recorded in "Derivative Liability" within the unaudited condensed consolidated balance sheet.
The Amended 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50x Consolidated Total Debt-to-Consolidated EBITDA. As of June 30, 2019, we were in compliance with this financial condition covenant and all other financial covenants under the Amended 2017 Credit Agreement.
Our long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing our 2024 senior notes, which includes the most restrictive of these Restricted Payments provisions, we can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing; and we can make additional Restricted Payments if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00x.
In accordance with the Amended 2017 Credit Agreement debt provisions, on May 8, 2019, we announced the declaration of a distribution of $0.925 per limited partner unit, which was paid on June 17, 2019. Also, on August 7, 2019, we announced the declaration of a distribution of $0.925 per limited partner unit, which will be payable on September 17, 2019.
Existing credit facilities and cash flows from operations are expected to be sufficient to meet working capital needs, debt service, partnership distributions and planned capital expenditures for the foreseeable future.
Off Balance Sheet Arrangements:
We had $15.4 million in letters of credit, which are primarily in place to backstop insurance arrangements, outstanding on our revolving credit facility as of June 30, 2019. We have no other significant off-balance sheet financing arrangements.
Forward Looking Statements
Some of the statements contained in this report (including the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section) that are not historical in nature are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements as to our expectations, beliefs and strategies regarding the future. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond our control and could cause actual results to differ materially from those described in such statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors, including those listed under Item 1A in the Company’s Annual Report on Form 10-K, could adversely affect our future financial performance and cause actual results to differ materially from our expectations. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this document.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from fluctuations in interest rates, and to a lesser extent on currency exchange rates on our operations in Canada, and from time to time, on imported rides and equipment. The objective of our financial risk management is to reduce the potential negative impact of interest rate and foreign currency exchange rate fluctuations to acceptable levels. We do not acquire market risk sensitive instruments for trading purposes.
We manage interest rate risk through the use of a combination of fixed-rate long-term debt, interest rate swaps that fix a portion of our variable-rate long-term debt, and variable-rate borrowings under our revolving credit facility. Translation exposures with regard to our Canadian operations are not hedged.
None of our interest rate swap agreements are designated as hedging instruments. Changes in fair value of derivative instruments that do not qualify for hedge accounting or were de-designated are reported as "Net effect of swaps" in the unaudited condensed consolidated statements of operations and comprehensive income. Additionally, the "Other comprehensive income (loss)" related to interest rate swaps that have been de-designated was amortized through the original maturity of the interest rate swap and reported as a component of "Net effect of swaps" in the unaudited condensed consolidated statements of operations and comprehensive income.
As of June 30, 2019, on an adjusted basis after giving affect to the impact of interest rate swap agreements and before reduction for debt issuance costs and original issue discount, $1,950 million of our outstanding long-term debt represented fixed-rate debt and $233 million represented variable-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $34.7 million, a hypothetical 100 bps increase in 30-day LIBOR on our variable-rate debt (not considering the impact of our interest rate swaps) would lead to an increase of approximately $7.7 million in annual cash interest costs.
Assuming a hypothetical 100 bps increase in 30-day LIBOR, the amount of net cash interest paid on our derivative portfolio would decrease by $5.0 million over the next twelve months.
A uniform 10% strengthening of the U.S. dollar relative to the Canadian dollar would result in a $3.0 million decrease in annual operating income.
ITEM 4. CONTROLS AND PROCEDURES
(a)Evaluation of Disclosure Controls and Procedures -
We maintain a system of controls and procedures designed to ensure that information required to be disclosed by us in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Commission and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of June 30, 2019, management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2019.
(b)Changes in Internal Control Over Financial Reporting -
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2018.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities:
The following table summarizes repurchases of Cedar Fair, L.P. Depositary Units representing limited partner interests by the Partnership during the three months ended June 30, 2019:
(a) | (b) | (c) | (d) | |||||||||||
Period | Total Number of Units Purchased (1) | Average Price Paid per Unit | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs | ||||||||||
April 1 - April 30 | — | — | — | $ | — | |||||||||
May 1 - May 31 | 93 | $ | 50.69 | — | — | |||||||||
June 1 - June 30 | — | — | — | — | ||||||||||
Total | 93 | $ | 50.69 | — | $ | — | ||||||||
(1) | All repurchased units were reacquired by the Partnership in satisfaction of tax obligations related to the vesting of restricted units which were granted under the Partnership's Omnibus Incentive Plan. |
ITEM 5. OTHER INFORMATION
Amendment to the Sixth Amended and Restated Agreement of Limited Partnership of Cedar Fair, L.P., as amended
On August 2, 2019, Cedar Fair Management, Inc., the general partner of the Partnership, entered into the Second Amendment (the "Amendment") to its Sixth Amended and Restated Agreement of Limited Partnership, as amended (the "Partnership Agreement"), in response to changes to the Internal Revenue Code of 1986, as amended, enacted by the Bipartisan Budget Act of 2015 relating to partnership audit and adjustment procedures.
The foregoing description of the Amendment does not purport to be complete and is qualified by the text of the Amendment. A complete copy of the Partnership's Partnership Agreement, including the text of the Amendment, is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q.
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ITEM 6. EXHIBITS
Exhibit (101) | The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in Inline XBRL: (i) the Unaudited Condensed Consolidated Statements of Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statements of Cash Flow, (iv) the Unaudited Condensed Consolidated Statement of Equity, and (v) related notes. | |
Exhibit (104) | The cover page from the Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline XBRL. | |
* | Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Cedar Fair hereby undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the SEC; provided, however, that Cedar Fair may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 for any exhibits or schedules so furnished. A list identifying the contents of all omitted exhibits and schedules can be found in Exhibit 2.1. |
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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, Inc. | |||
General Partner | |||
Date: | August 7, 2019 | /s/ Richard A. Zimmerman | |
Richard A. Zimmerman | |||
President and Chief Executive Officer | |||
Date: | August 7, 2019 | /s/ Brian C. Witherow | |
Brian C. Witherow | |||
Executive Vice President and | |||
Chief Financial Officer | |||
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