Cedar Fair LP
05/09/2024 | Press release | Distributed by Public on 05/09/2024 12:28
Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)
fun-20240331
Table of Contents
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 March 31, 2024
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.) |
One Cedar Point Drive, Sandusky, Ohio44870-5259
(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 |
|
Depositary 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. xYes ☐ 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). xYes ☐ 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 | x | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes xNo
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 May 3, 2024 | |
| Depositary Units (Representing Limited Partner Interests) | 51,252,360 |
Page 1 of 25 pages
Table of Contents
CEDAR FAIR, L.P.
FORM 10-Q CONTENTS
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Part I - Financial Information
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Item 1.
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Financial Statements
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3
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Index for Notes to Unaudited Condensed Consolidated Financial Statements
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7
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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15
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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22
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Item 4.
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Controls and Procedures
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22
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Part II - Other Information
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Item 1A.
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Risk Factors
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23
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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23
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Item 5.
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Other Information
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23
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Item 6.
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Exhibits
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24
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Signatures
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25
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Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2024 | December 31, 2023 | March 26, 2023 | ||||
| ASSETS | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 35,128 | $ | 65,488 | $ | 33,562 |
| Receivables | 61,530 | 79,513 | 54,386 | |||
| Inventories | 55,875 | 44,097 | 56,790 | |||
| Prepaid insurance | 10,496 | 4,925 | 9,927 | |||
| Other current assets | 27,158 | 14,817 | 29,498 | |||
| 190,187 | 208,840 | 184,163 | ||||
| Property and Equipment: | ||||||
| Land | 287,102 | 288,761 | 286,895 | |||
| Land improvements | 522,517 | 523,336 | 491,777 | |||
| Buildings | 987,558 | 991,424 | 930,054 | |||
| Rides and equipment | 2,119,743 | 2,125,726 | 2,033,143 | |||
| Construction in progress | 132,283 | 74,948 | 119,971 | |||
| 4,049,203 | 4,004,195 | 3,861,840 | ||||
| Less accumulated depreciation | (2,365,627) | (2,368,862) | (2,240,995) | |||
| 1,683,576 | 1,635,333 | 1,620,845 | ||||
| Goodwill | 263,182 | 264,625 | 262,273 | |||
| Other Intangibles, net | 48,796 | 49,062 | 48,707 | |||
| Right-of-Use Asset | 77,267 | 81,173 | 89,681 | |||
| Other Assets | 1,257 | 1,500 | 4,072 | |||
| $ | 2,264,265 | $ | 2,240,533 | $ | 2,209,741 | |
| LIABILITIES AND PARTNERS' DEFICIT | ||||||
| Current Liabilities: | ||||||
| Accounts payable | $ | 52,847 | $ | 37,595 | $ | 66,196 |
| Deferred revenue | 225,692 | 183,689 | 198,532 | |||
| Accrued interest | 51,597 | 32,587 | 49,432 | |||
| Accrued taxes | 14,720 | 45,296 | 12,405 | |||
| Accrued salaries, wages and benefits | 13,674 | 37,421 | 23,942 | |||
| Self-insurance reserves | 27,389 | 30,784 | 27,384 | |||
| Other accrued liabilities | 38,347 | 35,354 | 33,627 | |||
| 424,266 | 402,726 | 411,518 | ||||
| Deferred Tax Liability | 56,958 | 63,403 | 62,679 | |||
| Lease Liability | 68,626 | 71,951 | 79,273 | |||
| Other Liabilities | 9,393 | 9,964 | 11,236 | |||
| Long-Term Debt: | ||||||
| Revolving credit loans | 158,000 | - | 170,000 | |||
| Notes | 2,277,941 | 2,275,451 | 2,268,275 | |||
| 2,435,941 | 2,275,451 | 2,438,275 | ||||
|
Commitments and Contingencies (Note 1)
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||||||
| Partners' Deficit | ||||||
| Special L.P. interests | 5,290 | 5,290 | 5,290 | |||
| General partner | (7) | (6) | (8) | |||
|
Limited partners, 51,252, 51,013 and 51,502 units outstanding as of March 31, 2024, December 31, 2023 and March 26, 2023, respectively
|
(751,215) | (602,947) | (815,254) | |||
| Accumulated other comprehensive income | 15,013 | 14,701 | 16,732 | |||
| (730,919) | (582,962) | (793,240) | ||||
| $ | 2,264,265 | $ | 2,240,533 | $ | 2,209,741 |
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
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Table of Contents
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per unit amounts)
| Three months ended | ||||
| March 31, 2024 | March 26, 2023 | |||
| Net revenues: | ||||
| Admissions | $ | 45,441 | $ | 39,529 |
| Food, merchandise and games | 38,858 | 32,064 | ||
| Accommodations, extra-charge products and other | 17,316 | 12,961 | ||
| 101,615 | 84,554 | |||
| Costs and expenses: | ||||
| Cost of food, merchandise, and games revenues | 11,611 | 10,381 | ||
| Operating expenses | 141,938 | 133,340 | ||
| Selling, general and administrative | 61,424 | 46,465 | ||
| Depreciation and amortization | 10,312 | 13,681 | ||
| Loss on impairment / retirement of fixed assets, net | 2,614 | 3,636 | ||
| 227,899 | 207,503 | |||
| Operating loss | (126,284) | (122,949) | ||
| Interest expense | 34,696 | 32,129 | ||
| Loss on foreign currency | 5,240 | 3,999 | ||
| Other income | (337) | (441) | ||
| Loss before taxes | (165,883) | (158,636) | ||
| Benefit for taxes | (32,416) | (24,090) | ||
| Net loss | (133,467) | (134,546) | ||
| Net loss allocated to general partner | (1) | (1) | ||
| Net loss allocated to limited partners | $ | (133,466) | $ | (134,545) |
| Net loss | $ | (133,467) | $ | (134,546) |
| Other comprehensive income, (net of tax): | ||||
| Foreign currency translation | 312 | 1,123 | ||
| Other comprehensive income, (net of tax) | 312 | 1,123 | ||
| Total comprehensive loss | $ | (133,155) | $ | (133,423) |
| Basic loss per limited partner unit: | ||||
| Weighted average limited partner units outstanding | 50,667 | 51,645 | ||
| Net loss per limited partner unit | $ | (2.63) | $ | (2.61) |
| Diluted loss per limited partner unit: | ||||
| Weighted average limited partner units outstanding | 50,667 | 51,645 | ||
| Net loss per limited partner unit | $ | (2.63) | $ | (2.61) |
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
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Table of Contents
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(In thousands, except per unit amounts)
| For the three months ended | Limited Partnership Units Outstanding | Limited Partners' Deficit | General Partner's Deficit | Special L.P. Interests | Accumulated Other Comprehensive Income |
Total Partners' Deficit |
|||||
| Balance as of December 31, 2022 | 52,563 | $ | (612,497) | $ | (4) | $ | 5,290 | $ | 15,609 | $ | (591,602) |
| Net loss | - | (134,545) | (1) | - | - | (134,546) | |||||
| Repurchase of limited partnership units | (1,246) | (54,646) | (3) | - | - | (54,649) | |||||
|
Partnership distribution declared ($0.300 per unit)
|
- | (15,568) | - | - | - | (15,568) | |||||
| Limited partnership units related to equity-based compensation | 185 | 2,255 | - | - | - | 2,255 | |||||
| Tax effect of units involved in treasury unit transactions | - | (253) | - | - | - | (253) | |||||
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Foreign currency translation adjustment, net of tax $656
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- | - | - | - | 1,123 | 1,123 | |||||
| Balance as of March 26, 2023 | 51,502 | $ | (815,254) | $ | (8) | $ | 5,290 | $ | 16,732 | $ | (793,240) |
| Balance as of December 31, 2023 | 51,013 | $ | (602,947) | $ | (6) | $ | 5,290 | $ | 14,701 | $ | (582,962) |
| Net loss | - | (133,466) | (1) | - | - | (133,467) | |||||
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Partnership distribution declared ($0.300 per unit)
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- | (15,313) | - | - | - | (15,313) | |||||
| Limited partnership units related to equity-based compensation | 239 | 631 | - | - | - | 631 | |||||
| Tax effect of units involved in treasury unit transactions | - | (120) | - | - | - | (120) | |||||
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Foreign currency translation adjustment, net of tax $832
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- | - | - | - | 312 | 312 | |||||
| Balance as of March 31, 2024 | 51,252 | $ | (751,215) | $ | (7) | $ | 5,290 | $ | 15,013 | $ | (730,919) |
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
5
Table of Contents
CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Three months ended | ||||
| March 31, 2024 | March 26, 2023 | |||
| CASH FLOWS FOR OPERATING ACTIVITIES | ||||
| Net loss | $ | (133,467) | $ | (134,546) |
| Adjustments to reconcile net loss to net cash for operating activities: | ||||
| Depreciation and amortization | 10,312 | 13,681 | ||
| Non-cash foreign currency loss on USD notes | 5,227 | 3,756 | ||
| Non-cash equity based compensation expense | 5,284 | 5,053 | ||
| Non-cash deferred income tax benefit | (5,559) | (6,047) | ||
| Other non-cash expenses | 3,106 | 4,287 | ||
| Changes in assets and liabilities: | ||||
| (Increase) decrease in receivables | 17,866 | 16,465 | ||
| (Increase) decrease in inventories | (11,874) | (11,550) | ||
| (Increase) decrease in other assets | (16,949) | (10,421) | ||
| Increase (decrease) in accounts payable | 9,218 | 9,703 | ||
| Increase (decrease) in deferred revenue | 41,982 | 35,661 | ||
| Increase (decrease) in accrued interest | 19,010 | 17,259 | ||
| Increase (decrease) in accrued taxes | (30,325) | (24,169) | ||
| Increase (decrease) in accrued salaries, wages and benefits | (23,703) | (29,344) | ||
| Increase (decrease) in other liabilities | (738) | 3,069 | ||
| Net cash for operating activities | (110,610) | (107,143) | ||
| CASH FLOWS FOR INVESTING ACTIVITIES | ||||
| Capital expenditures | (57,086) | (54,697) | ||
| Net cash for investing activities | (57,086) | (54,697) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Net borrowings on revolving credit loans | 158,000 | 170,000 | ||
| Repurchase of limited partnership units | - | (54,851) | ||
| Distributions paid to partners | (15,313) | (15,568) | ||
| Payment of debt issuance costs | - | (2,353) | ||
| Payments related to tax withholding for equity compensation | (4,653) | (2,798) | ||
| Other | (120) | (253) | ||
| Net cash from financing activities | 137,914 | 94,177 | ||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (578) | 36 | ||
| CASH AND CASH EQUIVALENTS | ||||
| Net decrease for the period | (30,360) | (67,627) | ||
| Balance, beginning of period | 65,488 | 101,189 | ||
| Balance, end of period | $ | 35,128 | $ | 33,562 |
| SUPPLEMENTAL INFORMATION | ||||
| Cash payments for interest | $ | 14,476 | $ | 14,154 |
| Interest capitalized | 1,281 | 1,747 | ||
| Net cash payments for income taxes | 2,587 | 5,351 | ||
| Capital expenditures in accounts payable | 19,511 | 16,274 |
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
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Table of Contents
CEDAR FAIR, L.P.
INDEX FOR NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Note 1
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Description of the Business and Significant Accounting Policies
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8
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Note 2
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Interim Reporting
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8
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Note 3
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Revenue Recognition
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9
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Note 4
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Long-Lived Assets
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10
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Note 5
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Goodwill and Other Intangible Assets
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10
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Note 6
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Long-Term Debt
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11
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Note 7
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Fair Value Measurements
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12
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Note 8
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Loss per Unit
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13
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Note 9
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Income and Partnership Taxes
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13
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Note 10
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Partners' Equity
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13
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Note 11
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Subsequent Events
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14
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Table of Contents
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," "we," "us," or "our") 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 our 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) Description of the Business and Significant Accounting Policies:
Our 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, 2023, which were included in the Form 10-K filed on February 16, 2024. 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" or the "SEC"). These financial statements should be read in conjunction with the financial statements and the notes included in the Form 10-K referred to above.
Merger Agreement with Six Flags
On November 2, 2023, we announced that we entered into a definitive merger agreement to combine with Six Flags Entertainment Corporation ("Six Flags") (NYSE: SIX). Subject to the terms and conditions set forth in the merger agreement, each issued and outstanding unit of limited partnership interest in Cedar Fair will be converted into the right to receive one (1) share of common stock of the new combined entity (subject to certain exceptions and as the same may be adjusted). Following the close of the transaction, the holders of units of Cedar Fair limited partnership interest will own approximately 51.2% of the outstanding shares of the combined company and the holders of Six Flags common stock will own approximately 48.8% of the outstanding shares of the combined company. The merger is expected to close in the first half of 2024, following regulatory approvals and satisfaction of other customary closing conditions. On March 12, 2024, Six Flags' stockholders voted to approve the adoption of the merger agreement. During the three months ended March 31, 2024, we incurred costs related to the proposed merger totaling $10.1 million, which included $6.4 million of third-party legal and consulting costs related to the transaction and $3.7 million of third-party integration consulting costs. These costs were recorded within "Selling, general and administrative" in the consolidated statement of operations and comprehensive loss.
Contingencies
We are a party to a number of lawsuits in the normal course of business. In the opinion of management, none of these matters, beyond what has been disclosed in this Form 10-Q, are expected to have a material effect in the aggregate on the unaudited condensed consolidated financial statements.
New Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires the disclosure of incremental segment information on an annual and interim basis, including the disclosure of significant segment expense categories. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are in the process of evaluating the effect this standard will have on the consolidated financial statement disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires additional income tax disclosures, including amendments to the rate reconciliation and income taxes paid disclosure. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis, but retrospective application is permitted. We are in the process of evaluating the effect this standard will have on the consolidated financial statement disclosures.
(2) Interim Reporting:
We are one of the largest regional amusement park operators in the world with 13 properties in our portfolio consisting of amusement parks, water parks and complementary resort facilities. Our parks operate seasonally except for Knott's Berry Farm, which is open daily on a year-round basis. Our seasonal parks are generally open daily from Memorial Day until Labor Day. Outside of daily operations, our seasonal parks are open during select weekends, including at most properties in the fourth quarter for Halloween and winter events. As a result, a substantial portion of our revenues from these seasonal parks are generated from Memorial Day through Labor Day with the major portion concentrated during the peak vacation months of July and August.
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To assure that these highly seasonal operations will not result in misleading comparisons of current and subsequent interim periods, we have adopted the following accounting procedures: (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 associated with each product; (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. For those operating costs that are expensed over each park's operating season, we recognize expense over each park's planned operating days.
(3) Revenue Recognition:
As disclosed within the unaudited condensed consolidated statements of operations and comprehensive loss, revenues are generated from sales of (1) admission to our 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 our 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 net 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 for the periods presented.
| Three months ended | ||||
| (In thousands) | March 31, 2024 | March 26, 2023 | ||
| In-park revenues | $ | 81,646 | $ | 68,303 |
| Out-of-park revenues | 23,265 | 19,225 | ||
| Concessionaire remittance | (3,296) | (2,974) | ||
| Net revenues | $ | 101,615 | $ | 84,554 |
Due to our highly seasonal operations, a substantial portion of our revenues are generated from Memorial Day through Labor Day. Most revenues are recognized on a daily basis based on actual guest spend at our 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 associated with that product. The number of uses is estimated based on historical usage adjusted for current period trends. 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. We do not typically provide for refunds or returns.
Many products, including season-long products, are sold to customers in advance, resulting in a contract liability ("deferred revenue"). Deferred revenue is typically at its highest immediately prior to the peak summer season, and at its lowest after the peak summer and important fall seasons, as well as at the beginning of the calendar year following the close of our parks' operating seasons. Season-long products represent most of the deferred revenue balance in any given period.
Of the $183.7 million of current deferred revenue recorded as of January 1, 2024, 89% was related to season-long products. The remainder was related to deferred online transaction fees charged to customers, advanced resort reservations, advanced ticket sales, prepaid games cards, marina deposits and other deferred revenue. Approximately $14 million of the current deferred revenue balance as of January 1, 2024 was recognized during the three months ended March 31, 2024. As of March 31, 2024 and March 26, 2023, we had recorded $7.5 million and $9.5 million of non-current deferred revenue, respectively. The non-current deferred revenue balances in both periods primarily represented prepaid lease payments for a portion of the California's Great America parking lot. The prepaid lease payments are being recognized through 2027, or through the sale-leaseback period for the land under California's Great America.
Payment is due immediately on the transaction date for most products. Our receivable balance includes outstanding amounts on installment purchase plans which are offered for season-long products, and includes sales to retailers, group sales and catering activities which are billed. Installment purchase plans vary in length from three monthly installments to 12 monthly installments. Payment terms for billings are typically net 30 days. Receivables in a typical operating year are highest in the peak summer months and lowest in the winter months. We are not exposed to a significant concentration of customer credit risk. As of March 31, 2024, December 31, 2023 and March 26, 2023, we recorded a $9.2 million, $6.3 million and $7.9 million allowance for doubtful accounts, respectively, representing estimated defaults on installment purchase plans. The default estimate is calculated using historical default rates 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.
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(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 decrease in the market price of a long-lived asset; a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition; a significant adverse change in legal factors or in the business climate; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; past, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset; and a current expectation that a long-lived asset will be sold or disposed significantly before the end of its previously estimated useful life. 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 unaudited condensed consolidated financial statements. We concluded no indicators of impairment existed during the first three months of 2024 and the first three months of 2023. We based our conclusions on our financial performance projections, as well as an updated analysis of macroeconomic and industry-specific conditions.
(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. We concluded no indicators of impairment existed during the first three months of 2024 and the first three months of 2023. We based our conclusions on our financial performance projections, as well as an updated analysis of macroeconomic and industry-specific conditions.
Changes in the carrying value of goodwill for the three months ended March 31, 2024 and March 26, 2023 were:
| (In thousands) | Goodwill | |
| Balance as of December 31, 2023 | $ | 264,625 |
| Foreign currency translation | (1,443) | |
| Balance as of March 31, 2024 | $ | 263,182 |
| Balance as of December 31, 2022 | $ | 263,206 |
| Foreign currency translation | (933) | |
| Balance as of March 26, 2023 | $ | 262,273 |
As of March 31, 2024, December 31, 2023, and March 26, 2023, other intangible assets consisted of the following:
| (In thousands) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Value |
|||
| March 31, 2024 | ||||||
| Other intangible assets: | ||||||
| Trade names (1) | $ | 48,613 | $ | (193) | $ | 48,420 |
| License / franchise agreements | 1,320 | (944) | 376 | |||
| Total other intangible assets | $ | 49,933 | $ | (1,137) | $ | 48,796 |
| December 31, 2023 | ||||||
| Other intangible assets: | ||||||
| Trade names (1) | $ | 48,934 | $ | (190) | $ | 48,744 |
| License / franchise agreements | 1,249 | (931) | 318 | |||
| Total other intangible assets | $ | 50,183 | $ | (1,121) | $ | 49,062 |
| March 26, 2023 | ||||||
| Other intangible assets: | ||||||
| Trade names (1) | $ | 48,411 | $ | (86) | $ | 48,325 |
| License / franchise agreements | 1,243 | (861) | 382 | |||
| Total other intangible assets | $ | 49,654 | $ | (947) | $ | 48,707 |
(1) Trade name amortization represents amortization of the California's Great America trade name. The gross carrying amount of the California's Great America trade name totals $0.7 million. Our other trade names are indefinite-lived.
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(6) Long-Term Debt:
Long-term debt as of March 31, 2024, December 31, 2023, and March 26, 2023 consisted of the following:
| (In thousands) | March 31, 2024 | December 31, 2023 | March 26, 2023 | |||
|
Revolving credit facility 9.1% YTD 2024; 8.4% YTD 2023
|
$ | 158,000 | $ | - | $ | 170,000 |
| Notes | ||||||
|
2025 U.S. fixed rate senior secured notes at 5.500%
|
1,000,000 | 1,000,000 | 1,000,000 | |||
|
2027 U.S. fixed rate senior unsecured notes at 5.375%
|
500,000 | 500,000 | 500,000 | |||
|
2028 U.S. fixed rate senior unsecured notes at 6.500%
|
300,000 | 300,000 | 300,000 | |||
|
2029 U.S. fixed rate senior unsecured notes at 5.250%
|
500,000 | 500,000 | 500,000 | |||
| 2,458,000 | 2,300,000 | 2,470,000 | ||||
| Less current portion | - | - | - | |||
| 2,458,000 | 2,300,000 | 2,470,000 | ||||
| Less debt issuance costs and original issue discount | (22,059) | (24,549) | (31,725) | |||
| $ | 2,435,941 | $ | 2,275,451 | $ | 2,438,275 |
Term Debt and Revolving Credit Facilities
In April 2017, we amended and restated our credit agreement (the "2017 Credit Agreement") which included a senior secured revolving credit facility and a senior secured term loan facility. During 2022, we fully repaid the term loan facility.
As of March 31, 2024, our total senior secured revolving credit facility capacity under the 2017 Credit Agreement, as amended, was $300 million with a Canadian sub-limit of $15 million. The senior secured revolving credit facility bore interest at Secured Overnight Financing Rate ("SOFR") plus 350 basis points ("bps") with a SOFR adjustment of 10 bps per annum and a floor of zero, required the payment of a 62.5 bps commitment fee per annum on the unused portion of the revolving credit facility, in each case without any step-downs, and was collateralized by substantially all of the assets of the Partnership. The senior secured revolving credit facility would have matured on February 10, 2028, provided that the maturity date would have been (x) January 30, 2025 if at least $200 million of the 2025 senior notes remained outstanding as of that date, or (y) January 14, 2027 if at least $200 million of the 2027 senior notes remained outstanding as of that date. Prior to an amendment entered into on February 10, 2023, borrowings under the senior secured revolving credit facility bore interest at LIBOR plus 350 bps or Canadian Dollar Offered Rate ("CDOR") plus 250 bps and matured in December 2023. There was $158.0 million of outstanding borrowings under the revolving credit facility as of March 31, 2024. The 2017 Credit Agreement, as amended, also provided for the issuance of documentary and standby letters of credit. After letters of credit of $19.9 million, we had $122.1 million of availability under our revolving credit facility as of March 31, 2024.
In May 2024, we entered into a new credit agreement (the "2024 Credit Agreement") that includes a new senior secured term loan facility and revolving credit facility. The revolving credit facility under the 2024 Credit Agreement replaced the revolving credit facility under the 2017 Credit Agreement. See the Subsequent Events footnote at Note 11for additional information.
Notes
In April 2020, as a result of the anticipated effects of the COVID-19 pandemic, we issued $1.0 billion of 5.500% senior secured notes due 2025 ("2025 senior notes") in a private placement. The 2025 senior notes and the related guarantees were secured by first-priority liens on the issuers' and the guarantors' assets that secured all the obligations under the 2017 Credit Agreement, as amended. Interest was payable under the 2025 senior notes semi-annually in May and November, with the principal due in full on May 1, 2025. The 2025 senior notes were redeemed in full in May 2024 with proceeds from the new senior secured term loan facility under the 2024 Credit Agreement. See the Subsequent Events footnote at Note 11for additional information.
In April 2017, we issued $500 million of 5.375% senior unsecured notes due 2027 ("2027 senior notes"). Interest is payable under the 2027 senior notes semi-annually in April and October, with the principal due in full on April 15, 2027. The 2027 senior notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
In June 2019, we issued $500 million of 5.250% senior unsecured notes due 2029 ("2029 senior notes"). Interest is payable under the 2029 senior notes semi-annually in January and July, with the principal due in full on July 15, 2029. The 2029 senior 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 2029 senior notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
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In October 2020, in response to the continuing effects of the COVID-19 pandemic, we issued $300 million of 6.500% senior unsecured notes due 2028 ("2028 senior notes"). Interest is payable under the 2028 senior notes semi-annually in April and October with the principal due in full on October 1, 2028. The 2028 senior notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
As market conditions warrant, we may from time to time repurchase our outstanding debt securities in privately negotiated or open market transactions, by tender offer, exchange offer or otherwise.
Covenants
The 2017 Credit Agreement, as amended, included a senior secured leverage ratio of 3.75x Total First Lien Senior Secured Debt-to-Consolidated EBITDA (as defined in the 2017 Credit Agreement). This financial covenant was only required to be tested at the end of any fiscal quarter in which revolving credit facility borrowings were outstanding. We were in compliance with the applicable financial covenants under our credit agreement during the three months ended March 31, 2024.
Our credit agreement and fixed rate note agreements include restricted payment provisions, which could limit our ability to pay partnership distributions. Pursuant to the terms of the indenture governing the 2027 senior notes, which includes the most restrictive of these restricted payments provisions under the terms of our outstanding notes, if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio (as defined in the indenture governing the 2027 senior notes) is greater than 5.25x, we can still make restricted payments of $100 million annually so long as no default or event of default has occurred and is continuing. If our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.25x, we can make restricted payments up to our restricted payment pool. Our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio was less than 5.25x as of March 31, 2024.
On November 9, 2023, we entered into supplemental indentures related to the 2025 senior notes, 2027 senior notes, 2028 senior notes and 2029 senior notes (the "Amendments") following receipt of requisite consents from the holders of the notes. The Amendments enable us to select November 2, 2023, the date the merger agreement with Six Flags was entered into, as the testing date for purposes of calculating, with respect to the proposed merger and related transactions, any and all ratio tests under those notes, each of which was satisfied when tested on November 2, 2023. To become operative, the Amendments require a payment upon or immediately prior to the consummation of the proposed merger.
See the Subsequent Events footnote at Note 11for information regarding our financial covenants and restricted payment provisions under the 2024 Credit Agreement, which was entered into in May 2024.
(7) Fair Value Measurements:
The table below presents the balances of assets and liabilities measured at fair value as of March 31, 2024, December 31, 2023, and March 26, 2023 on a recurring basis as well as the fair values of other financial instruments, including their locations within the unaudited condensed consolidated balance sheets:
| (In thousands) | Balance Sheet Location | Fair Value Hierarchy Level | March 31, 2024 | December 31, 2023 | March 26, 2023 | |||||||||
| 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 | $ | 293 | $ | 293 | $ | 319 | $ | 319 | $ | 366 | $ | 366 |
| Other financial assets (liabilities): | ||||||||||||||
| 2025 senior notes |
Long-Term Debt (1)
|
Level 2 | $ | (1,000,000) | $ | (997,500) | $ | (1,000,000) | $ | (996,250) | $ | (1,000,000) | $ | (987,500) |
| 2027 senior notes |
Long-Term Debt (1)
|
Level 1 | $ | (500,000) | $ | (491,250) | $ | (500,000) | $ | (490,000) | $ | (500,000) | $ | (476,875) |
| 2028 senior notes |
Long-Term Debt (1)
|
Level 1 | $ | (300,000) | $ | (300,000) | $ | (300,000) | $ | (298,125) | $ | (300,000) | $ | (290,250) |
| 2029 senior notes |
Long-Term Debt (1)
|
Level 1 | $ | (500,000) | $ | (472,500) | $ | (500,000) | $ | (472,500) | $ | (500,000) | $ | (456,250) |
(1)Carrying values of long-term debt balances are before reductions for debt issuance costs and original issue discount of $22.1 million, $24.5 million and $31.7 million as of March 31, 2024, December 31, 2023 and March 26, 2023, respectively.
The carrying value of cash and cash equivalents, revolving credit loans, accounts receivable, 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 March 31, 2024, December 31, 2023 or March 26, 2023.
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(8) Loss per Unit:
Net loss per limited partner unit was calculated based on the following unit amounts:
| Three months ended | ||||
| (In thousands, except per unit amounts) | March 31, 2024 | March 26, 2023 | ||
| Basic weighted average units outstanding | 50,667 | 51,645 | ||
| Diluted weighted average units outstanding | 50,667 | 51,645 | ||
| Net loss per unit - basic | $ | (2.63) | $ | (2.61) |
| Net loss per unit - diluted | $ | (2.63) | $ | (2.61) |
There were approximately 0.9 million and 0.6 million potentially dilutive units excluded from the computation of diluted loss per limited partner unit for the three month periods ended March 31, 2024 and March 26, 2023, respectively, as their effect would have been anti-dilutive due to the net loss in the periods.
(9) Income and Partnership Taxes:
We are subject to publicly traded partnership tax ("PTP tax") on certain partnership level gross income (net revenues less cost of food, merchandise, and games revenues), state and local income taxes on partnership income, U.S. federal, state and local income taxes on income from our corporate subsidiaries and foreign income taxes on our foreign subsidiary. As such, the total provision (benefit) for taxes includes amounts for the PTP gross income tax and federal, state, local and foreign income taxes. Under applicable accounting rules, the total provision (benefit) for income taxes includes the amount of taxes payable for the current year and the impact of deferred tax assets and liabilities, which represents future tax consequences of events that are recognized in different periods in the financial statements than for tax purposes.
The total tax provision (benefit) for interim periods is determined by applying an estimated annual effective tax rate to the applicable quarterly income (loss). Our consolidated estimated annual effective tax rate differs from the statutory federal income tax rate primarily due to state, local and foreign income taxes, and certain partnership level income not being subject to federal tax.
Unrecognized tax benefits, including accrued interest and penalties, were not material in any period presented. We recognize interest and penalties related to unrecognized tax benefits as income tax expense.
The Inflation Reduction Act was signed into law on August 16, 2022 and created a new 15% corporate alternative minimum tax ("CAMT") based on adjusted financial statement income. The effective date of the provision was January 1, 2023. We will not be subject to CAMT as our reported earnings for each of the past three years did not exceed $1 billion.
The Canadian government has issued draft Pillar Two legislation, which it intends to enact in 2024, that includes the Income Inclusion Rule and Qualified Domestic Minimum Top-Up Tax (as defined in the Global Minimum Tax Act). The Canadian legislation is expected to be effective for our fiscal year beginning January 1, 2024. We have performed an assessment of the potential exposure to Pillar Two income taxes. This assessment is based on the most recent information available regarding the financial performance of the constituent entities in the Partnership. We considered the applicable tax law changes on Pillar Two implementation in the relevant countries, and there is no material impact to our tax provision for the three months ended March 31, 2024. We will continue to evaluate the impact of these tax law changes on future reporting periods.
(10) Partners' Equity:
On August 3, 2022, we announced that our Board of Directors approved a unit repurchase program authorizing the Partnership to repurchase units for an aggregate amount of not more than $250 million. There were 1.2 million limited partnership units repurchased under the August 2022 repurchase program during the three months ended March 26, 2023 at an average price of $43.84 per limited partner unit for an aggregate amount of $54.6 million. There was no remaining availability under the August 2022 repurchase program following our repurchase of units under that program during April 2023. Accordingly, there were no limited partnership units repurchased under the August 2022 repurchase program during the three months ended March 31, 2024.
On May 4, 2023, we announced that our Board of Directors authorized the Partnership to repurchase additional units for an aggregate amount of not more than $250 million. There were no units repurchased under the May 2023 repurchase program during the three months ended March 31, 2024. There was $238.0 million of remaining availability under the May 2023 repurchase program as of March 31, 2024.
Subject to applicable rules and regulations, we can repurchase units from time-to-time in the open market or by negotiated transactions. The amount and timing of repurchases are based on a variety of factors, including liquidity, capital needs of the business, market conditions, regulatory requirements, and other business considerations. No limit was placed on the duration of either repurchase program. The Partnership is not obligated to repurchase any minimum dollar amount or specific number of units, and can modify, suspend, or discontinue the program at any time.
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(11) Subsequent Events:
On May 1, 2024, we entered into the 2024 Credit Agreement, which includes a $1.0 billion senior secured term loan facility and a $300 million revolving credit facility. The revolving credit facility replaced the existing revolving credit facility under the 2017 Credit Agreement, as amended. The facilities provided under the 2024 Credit Agreement are collateralized by substantially all of the assets of the Partnership and its wholly owned domestic subsidiaries, subject to customary exceptions set forth in the 2024 Credit Agreement.
The senior secured term loan facility amortizes at 25 bps quarterly, or $10.0 million per year; matures on May 1, 2031; and bears interest at Term SOFR plus a margin of 200 bps per annum or base rate plus a margin of 100 bps per annum.
The revolving credit facility bears interest at Term SOFR or Term Canadian Overnight Repo Rate Average plus a margin of 200 bps per annum, or base rate or Canadian prime rate plus a margin of 100 bps per annum; matures on February 10, 2028, subject to a springing maturity date on the date that is 91 days prior to the final maturity of certain indebtedness in an aggregate outstanding principal amount greater than $200 million on such date; requires a commitment fee of 50 bps per annum on the unused portion of the revolving credit facility, which is subject to decrease to 37.5 bps upon achievement of a 3.0x Net First Lien Leverage Ratio (as defined in the 2024 Credit Agreement); and provides for the issuance of documentary and standby letters of credit.
With respect to the revolving credit facility only, the 2024 Credit Agreement includes a maximum Net First Lien Leverage Ratio (as defined in the 2024 Credit Agreement) financial maintenance covenant tested as of the last day of each quarter (beginning with the quarter ending June 30, 2024) except for the quarter in which the consummation of the proposed merger occurs. The maximum Net First Lien Leverage Ratio will be 3.75x prior to the consummation of the proposed merger, with step-ups in respect of quarters ending thereafter.
The 2024 Credit Agreement includes restricted payment provisions, which could limit our ability to pay partnership distributions. If our pro forma Net Secured Leverage Ratio (as defined in the 2024 Credit Agreement) is less than or equal to 2.50x, prior to the consummation of the merger, we can make unlimited restricted payments so long as no default or event of default has occurred and is continuing. If our pro forma Net Total Leverage Ratio (as defined in the 2024 Credit Agreement) is less than or equal to 5.25x, we can make restricted payments up to our Cumulative Credit (as defined in the 2024 Credit Agreement). Irrespective of any leverage calculations, we can make restricted payments not to exceed the greater of 7.0% of our Market Capitalization (as defined in the 2024 Credit Agreement) and $100 million annually prior to the consummation of the merger.
On May 2, 2024, the net proceeds from the senior secured term loan facility and cash on hand were used to redeem all of our 2025 senior notes. The redemption price was $1.0 billion in aggregate principal amount, plus accrued interest to the redemption date.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to facilitate an understanding of our business and results of operations and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q. This discussion should also be read in conjunction with our consolidated financial statements and related notes thereto, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended December 31, 2023.
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 and advertising, are relatively fixed for a typical operating season and do not vary significantly with attendance.
Each of our properties is overseen by a general manager and operates autonomously. Management reviews operating results, evaluates performance and makes operating decisions, including allocating resources, on a property-by-property basis. 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, Senior Vice Presidents and the general managers of the parks. We operate within a single reportable segment of amusement/water parks with accompanying resort facilities.
Merger Agreement with Six Flags:
On November 2, 2023, we announced that we entered into a definitive merger agreement to combine with Six Flags. Subject to the terms and conditions set forth in the merger agreement, each issued and outstanding unit of limited partnership interest in Cedar Fair will be converted into the right to receive one (1) share of common stock of the new combined entity (subject to certain exceptions and as the same may be adjusted). Following the close of the transaction, the holders of units of Cedar Fair limited partnership interest will own approximately 51.2% of the outstanding shares of the combined company and the holders of Six Flags common stock will own approximately 48.8% of the outstanding shares of the combined company. The merger is expected to close in the first half of 2024, following receipt of regulatory approvals and satisfaction of other customary closing conditions. On March 12, 2024, Six Flags' stockholders voted to approve the adoption of the merger agreement.
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 unaudited condensed consolidated financial statements:
•Impairment of Long-Lived Assets
•Goodwill and Other Intangible Assets
•Self-Insurance Reserves
•Revenue Recognition
•Income Taxes
In the first quarter of 2024, 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, 2023.
Results of Operations:
The following operational measures are key performance metrics in our managerial and operational reporting. They are used as major factors in significant operational decisions as they are primary drivers of our financial and operational performance, measuring demand, pricing and consumer behavior. In-park revenues, in-park per capita spending and out-of-park revenues are non-GAAP measures.
Attendanceis defined as the number of guest visits to our amusement parks and separately gated outdoor water parks.
In-park per capita spendingis calculated as revenues generated within our amusement parks and separately gated outdoor water parks along with related parking revenues (in-park revenues), divided by total attendance.
Out-of-park revenuesare defined as revenues from resorts, out-of-park food and retail locations, online transaction fees charged to customers, sponsorships and all other out-of-park operations.
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Net revenues consist of in-park revenuesand out-of-park revenuesless amounts remitted to outside parties under concessionaire arrangements; see Note 3for a reconciliation of in-park revenuesand out-of-park revenues to net revenues.
Three months ended March 31, 2024 vs. Three months ended March 26, 2023
First quarter operating results represent approximately 5% of our full-year net revenues and attendance. First quarter results include normal off-season operating, maintenance and administrative expenses at our seasonal amusement and water parks, daily operations at Knott's Berry Farm which is open year-round, limited operating days at a few of our seasonal amusement parks, and some out-of-park attractions, including limited hotel operations. The current three-month period included 117 operating days compared with 161 operating days for the three-month period ended March 26, 2023. The 44 operating day decrease was primarily attributable to fewer operating days at Carowinds, Kings Dominion and California's Great America. These parks were open additional days in January and February in the prior period that were not planned in the current period. This decrease in days was somewhat offset by an additional calendar week in the current period due to a fiscal calendar shift. As a result of the fiscal calendar shift, the current quarter included 13 weeks of results while the prior quarter included 12 weeks of results.
The following table presents key financial information for the three months ended March 31, 2024 and March 26, 2023:
| Three months ended | Increase (Decrease) | |||||||
| March 31, 2024 | March 26, 2023 | $ | % | |||||
| (Amounts in thousands, except per capita and operating days) | ||||||||
| Net revenues | $ | 101,615 | $ | 84,554 | $ | 17,061 | 20.2 | % |
| Operating costs and expenses | 214,973 | 190,186 | 24,787 | 13.0 | % | |||
| Depreciation and amortization | 10,312 | 13,681 | (3,369) | (24.6) | % | |||
| Loss on impairment / retirement of fixed assets, net | 2,614 | 3,636 | (1,022) | N/M | ||||
| Operating loss | $ | (126,284) | $ | (122,949) | $ | (3,335) | (2.7) | % |
| Other Data: | ||||||||
| Attendance | 1,349 | 1,059 | 290 | 27.4 | % | |||
| In-park per capita spending | $ | 60.53 | $ | 64.47 | $ | (3.94) | (6.1) | % |
| Out-of-park revenues | $ | 23,265 | $ | 19,225 | $ | 4,040 | 21.0 | % |
| Operating days | 117 | 161 | (44) | (27.3) | % |
N/M Not meaningful due to the nature of the expense line-item.
For the three months ended March 31, 2024, net revenues increased $17.1 million, or 20.2%, compared with the three months ended March 26, 2023. The increase in net revenues reflected the impact of a 0.3 million-visit, or 27.4%, increase in attendance and a 21.0%, or $4.0 million, increase in out-of-park revenues, partially offset by the impact of a 6.1% decrease in in-park per capita spending to $60.53. The increase in attendance was primarily driven by higher season pass sales and improved weather at Knott's Berry Farm, and the inclusion of an additional calendar week in the current period. These factors were partially offset by the impact of fewer planned operating days during January and February. The decrease in in-park per capita spending was primarily attributable to a planned decrease in average season pass pricing and a higher mix of season pass visitation at Knott's Berry Farm, partially offset by improved in-park per capita spending at the other parks with limited first quarter operations. The increase in out-of-park revenues was largely attributable to the additional calendar week in the current period, as well as increased revenues from the Knott's Hotel following a recent renovation. The increase in net revenues was not materially impacted by foreign currency exchange rates at our Canadian park.
Operating costs and expenses for the three months ended March 31, 2024 increased $24.8 million, or 13.0%, compared with the three months ended March 26, 2023. The increase in operating costs and expenses was the result of a $15.0 million increase in selling, general and administrative ("SG&A") expenses, an $8.6 million increase in operating expenses and a $1.2 million increase in cost of goods sold. The increase in SG&A expenses was primarily attributable to $10.1 million of costs associated with the proposed merger with Six Flags, as well as the impact of the additional calendar week in the current period and higher information technology costs. The increase in operating expenses was due to the additional calendar week in the current period somewhat offset by a reduction in full-time wages and related benefits. Cost of goods sold as a percentage of food, merchandise and games revenue decreased approximately 2.5% driven by planned reductions in food and beverage costs. The increase in operating costs and expenses was not materially impacted by foreign currency exchange rates at our Canadian park.
Depreciation and amortization expense for the three months ended March 31, 2024 decreased $3.4 million compared with the three months ended March 26, 2023 due to fewer planned operating days in the current period. The loss on impairment / retirement of fixed assets for both periods was due to retirement of assets in the normal course of business.
After the items above, the operating loss for the three months ended March 31, 2024 totaled $126.3 million compared with $122.9 million for the three months ended March 26, 2023.
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Interest expense for the three months ended March 31, 2024 increased $2.6 million as a result of the additional calendar week in the current period. During the current period, we also recognized a $5.2 million net charge to earnings for foreign currency gains and losses compared with a $4.0 million net charge to earnings in the prior period. Both amounts primarily represented the remeasurement of U.S. dollar denominated notes to the Canadian entity's functional currency.
During the three months ended March 31, 2024, a benefit for taxes of $32.4 million was recorded to account for PTP taxes and federal, state, local and foreign income taxes compared with $24.1 million for the three months ended March 26, 2023. The increase in benefit for taxes was primarily attributable to a higher estimated annual effective tax rate resulting from the effect of proposed merger related costs on partnership pre-tax income.
After the items above, net loss for the three months ended March 31, 2024 totaled $133.5 million, or $2.63 per diluted limited partner unit, compared with a net loss of $134.5 million, or $2.61 per diluted limited partner unit, for the three months ended March 26, 2023.
As stated above, the results for the three months ended March 31, 2024 included an additional calendar week as compared with the three months ended March 26, 2023. On a same-week basis, or comparing the three months ended March 31, 2024 with the three months ended April 2, 2023, net revenues would have increased $2.9 million, or 3%, and attendance would have increased 0.1 million visits, or 10%. In-park per capita spending would have decreased $5.39, or 8%, and out-of-park revenues would have increased $2 million, or 8%. Operating costs and expenses, including costs related to the proposed merger, on a same-week basis would have increased $10.3 million, or 5%, as a result of a $12.6 million increase in SG&A expenses offset by a $2.0 million decrease in operating expenses and a $0.3 million decrease in cost of goods sold. The fluctuations in depreciation and amortization, loss on impairment / retirement of fixed assets, interest expense, foreign currency loss, and benefit for taxes on a same-week basis were not materially impacted by the additional calendar week in the current period. After these items, net loss on a same-week basis would have decreased $3.8 million, or 3%. For purposes of reconciling in-park revenues and out-of-park revenues to net revenues, concessionaire remittance on a same-week basis totaled $3.6 million for the three months ended April 2, 2023.
Adjusted EBITDA
Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in our current and prior credit agreements. Adjusted EBITDA is not a measurement of operating performance computed in accordance with generally accepted accounting principles ("GAAP") and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with GAAP. 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 widely used by analysts, investors and comparable companies in our industry to evaluate our operating performance on a consistent basis, as well as more easily compare our results with those of other companies in our industry. This measure is provided as a supplemental measure of our operating results and may not be comparable to similarly titled measures of other companies.
The table below sets forth a reconciliation of Adjusted EBITDA to net loss for the three-month periods ended March 31, 2024 and March 26, 2023.
| Three months ended | ||||
| (In thousands) | March 31, 2024 | March 26, 2023 | ||
| Net loss | $ | (133,467) | $ | (134,546) |
| Interest expense | 34,696 | 32,129 | ||
| Interest income | (360) | (514) | ||
| Benefit for taxes | (32,416) | (24,090) | ||
| Depreciation and amortization | 10,312 | 13,681 | ||
| EBITDA | (121,235) | (113,340) | ||
| Non-cash foreign currency loss | 5,239 | 3,703 | ||
| Non-cash equity compensation expense | 5,284 | 5,053 | ||
| Loss on impairment / retirement of fixed assets, net | 2,614 | 3,636 | ||
|
Costs related to proposed merger (1)
|
10,147 | - | ||
|
Other (2)
|
771 | (116) | ||
| Adjusted EBITDA | $ | (97,180) | $ | (101,064) |
(1) Consists of $6.4 million of third-party legal and consulting transaction costs and $3.7 million of third-party integration consulting costs related to the proposed merger with Six Flags. See Note 1for additional information. These costs are added back to net loss to calculate Adjusted EBITDA as defined in our current and prior credit agreements and were
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recorded within "Selling, general and administrative" in the unaudited condensed consolidated statement of operations and comprehensive loss.
(2) Consists of certain costs as defined in our current and prior credit agreements. These costs are added back to net loss to calculate Adjusted EBITDA and have included certain legal expenses, severance and related benefits and contract termination costs. This balance also includes unrealized gains and losses on short-term investments.
For the three months ended March 31, 2024, the Adjusted EBITDA loss decreased $3.9 million compared with the three months ended March 26, 2023. On a same-week basis, or comparing the three months ended March 31, 2024 with the three months ended April 2, 2023, the Adjusted EBITDA loss would have decreased $4.3 million, or 4%. The decrease in Adjusted EBITDA loss was primarily due to an increase in net revenues driven by higher attendance as a result of more season pass sales and improved weather at Knott's Berry Farm.
Adjusted EBITDA loss for the three months ended April 2, 2023 (i.e. the same-week prior period) was calculated as a net loss of $137.3 million plus interest expense of $32.1 million, interest income of $0.5 million, benefit for taxes of $24.1 million, depreciation and amortization expense of $15.0 million, non-cash foreign currency loss of $4.6 million, non-cash equity compensation expense of $5.1 million, loss on impairment / retirement of fixed assets of $3.7 million, and other net benefit of $0.1 million.
Liquidity and Capital Resources:
Our principal sources of liquidity include cash from operating activities, funding from our long-term debt obligations and existing cash on hand. Due to the seasonality of our business, we fund pre-opening operations with revolving credit borrowings, which are reduced with positive cash flow during the seasonal operating period. Our primary uses of liquidity include operating expenses, capital expenditures, interest payments, partnership distributions, income tax obligations, and, in 2022 and 2023, limited partnership unit repurchases. As of March 31, 2024, we had cash on hand of $35.1 million and availability under our revolving credit facility of $122.1 million. Based on this level of liquidity, we concluded that we will have sufficient liquidity to satisfy cash obligations at least through the second quarter of 2025.
We expect to invest between $210 million and $220 million in capital expenditures during 2024, which includes the debut of a world-class roller coaster at Cedar Point, a dive coaster at Dorney Park, the expansion of the children's areas at both Knott's Berry Farm and Kings Island, new water park attractions at Canada's Wonderland, the world's first water coaster for kids at Schlitterbahn New Braunfels, and other rides and attractions, as well as upgraded and expanded food and beverage facilities across the portfolio.
We paid a partnership distribution of $0.30 per limited partner unit on March 20, 2024. On May 9, 2024, we announced that our Board declared an additional partnership distribution of $0.30 per limited partner unit, which will be payable on June 19, 2024 to unitholders of record on June 5, 2024.
In August 2022, we announced the Board of Directors approved a unit repurchase program authorizing the Partnership to repurchase units for an aggregate amount of not more than $250 million. As of April 12, 2023, we had repurchased the full amount that had been authorized under the August 2022 repurchase program resulting in a total of 6.0 million units repurchased at an average price of $41.93 per limited partner unit. On May 4, 2023, we announced that our Board of Directors authorized the Partnership to repurchase more units for an additional aggregate amount of not more than $250 million. During 2023, we repurchased 0.3 million units under the May 2023 repurchase program at an average price of $38.27 per limited partner unit. We have not repurchased any units in 2024. See Note 10for additional information.
We anticipate cash interest payments between $140 million and $150 million during 2024, including the impact of the refinancing activities described in Note 11. We anticipate cash payments for income taxes to range from $50 million to $60 million in 2024.
As of March 31, 2024, deferred revenue totaled $233.2 million, including non-current deferred revenue. This represented an increase of $25.2 million compared with total deferred revenue as of March 26, 2023. The increase in total deferred revenue was primarily attributable to higher season-long product sales for the 2024 operating season.
Operating Activities
Net cash for operating activities for the first three months of 2024 totaled $110.6 million, an increase of $3.5 million compared with the same period in the prior year. The increase was primarily due to costs associated with the proposed merger with Six Flags offset somewhat by improved operating results in the current period.
Investing Activities
Net cash for investing activities for the first three months of 2024 totaled $57.1 million, an increase of $2.4 million compared with the same period in the prior year. The increase was due to the timing of capital expenditures.
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Financing Activities
Net cash from financing activities for the first three months of 2024 totaled $137.9 million, an increase of $43.7 million compared with the same period in the prior year. The increase was primarily attributable to repurchases of limited partnership units in the prior period offset somewhat by less revolving credit facility borrowings in the current period.
Contractual Obligations
As of March 31, 2024, our primary contractual obligations consisted of outstanding long-term debt agreements. Before reduction for debt issuance costs, our long-term debt agreements consisted of the following:
•$1.0 billion of 5.500% senior secured notes, which would have matured in May 2025, issued at par. The 2025 senior notes and the related guarantees were secured by first-priority liens on the issuers' and the guarantors' assets that secured all the obligations under the 2017 Credit Agreement, as amended. Interest was payable under the 2025 senior notes semi-annually in May and November. The 2025 senior notes were redeemed in full in May 2024 with proceeds from the new senior secured term loan facility under the 2024 Credit Agreement. See the Subsequent Events footnote at Note 11for additional information.
•$500 million of 5.375% senior unsecured notes, maturing in April 2027, issued at par. The 2027 senior notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. Interest is payable under the 2027 senior notes semi-annually in April and October.
•$300 million of 6.500% senior unsecured notes, maturing in October 2028, issued at par. The 2028 senior notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. Interest is payable under the 2028 senior notes semi-annually in April and October.
•$500 million of 5.250% senior unsecured notes, maturing in July 2029, issued at par. The 2029 senior 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 2029 senior notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. Interest is payable under the 2029 senior notes semi-annually in January and July.
•$158.0 million borrowings under the $300 million senior secured revolving credit facility under the 2017 Credit Agreement, as amended, with a Canadian sub-limit of $15 million. The revolving credit facility bore interest at SOFR plus 350 bps with a SOFR adjustment of 10 bps per annum and a floor of zero, and required the payment of a 62.5 bps commitment fee per annum on the unused portion of the credit facilities. The senior secured revolving credit facility would have matured on February 10, 2028, provided that the maturity date would have been (x) January 30, 2025 if at least $200 million of the 2025 senior notes remained outstanding as of that date, or (y) January 14, 2027 if at least $200 million of the 2027 senior notes remained outstanding as of that date. The credit agreement provided for the issuance of documentary and standby letters of credit. After letters of credit, which totaled $19.9 million as of March 31, 2024, we had $122.1 million of availability under the revolving credit facility. Our letters of credit were primarily in place to backstop insurance arrangements. In May 2024, we entered into the 2024 Credit Agreement that includes a new senior secured term loan facility and revolving credit facility. The revolving credit facility under the 2024 Credit Agreement replaced the revolving credit facility under the 2017 Credit Agreement. See the Subsequent Events footnote at Note 11for additional information.
The 2017 Credit Agreement, as amended, included a senior secured leverage ratio of 3.75x Total First Lien Senior Secured Debt-to-Consolidated EBITDA (as defined in the 2017 Credit Agreement). This financial covenant was only required to be tested at the end of any fiscal quarter in which revolving credit facility borrowings were outstanding. We were in compliance with the applicable financial covenants under our credit agreement during the three months ended March 31, 2024.
Our credit agreement and fixed rate note agreements include restricted payment provisions, which could limit our ability to pay partnership distributions. Pursuant to the terms of the indenture governing the 2027 senior notes, which includes the most restrictive of these restricted payments provisions under the terms of our outstanding notes, if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio (as defined in the indenture governing the 2027 senior notes) is greater than 5.25x, we can still make restricted payments of $100 million annually so long as no default or event of default has occurred and is continuing. If our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.25x, we can make restricted payments up to our restricted payment pool. Our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio was less than 5.25x as of March 31, 2024.
On November 9, 2023, we entered into supplemental indentures related to the 2025 senior notes, 2027 senior notes, 2028 senior notes and 2029 senior notes (the "Amendments") following receipt of requisite consents from the holders of the notes. The Amendments enable us to select November 2, 2023, the date the merger agreement with Six Flags was entered into, as the testing date for purposes of calculating, with respect to the proposed merger and related transactions, any and all ratio tests under those notes, each of which was satisfied when tested on November 2, 2023. To become operative, the Amendments require a payment upon or immediately prior to the consummation of the proposed merger.
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See the Subsequent Events footnote at Note 11for information regarding our financial covenants and restricted payment provisions under the 2024 Credit Agreement, which was entered into in May 2024.
Financial and Non-Financial Disclosure About Issuers and Guarantors of our Registered Senior Notes
As discussed within the Long-Term Debt footnote at Note 6, we had four tranches of fixed rate senior notes outstanding at March 31, 2024: the 2025, 2027, 2028 and 2029 senior notes. The 2027, 2028 and 2029 senior notes were registered under the Securities Act of 1933. The 2025 senior notes were sold in a private placement in reliance on exemptions from registration under the Securities Act of 1933. 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 2027, 2028 and 2029 senior notes. Our senior notes have been irrevocably and unconditionally guaranteed, on a joint and several basis, by each wholly owned subsidiary of Cedar Fair (other than the co-issuers) that guarantees our credit facilities under our credit agreement. A full listing of the issuers and guarantors of our registered senior notes can be found within Exhibit 22, and additional information with respect to our registered senior notes and the related guarantees follows.
The 2027, 2028 and 2029 senior notes each rank equally in right of payment with all of each issuer's existing and future senior unsecured debt, including the other registered senior notes. However, the 2027, 2028 and 2029 senior notes rank effectively junior to any secured debt under the 2024 Credit Agreement to the extent of the value of the assets securing such debt (and previously ranked effectively junior to any secured debt under the 2017 Credit Agreement, as amended, and the 2025 senior notes).
In the event that the co-issuers (except for Cedar Fair, L.P.) or any subsidiary guarantor is released from its obligations under our senior secured credit facilities, such entity will also be released from its obligations under the registered senior notes. In addition, the co-issuers (except for Cedar Fair, L.P.) or any subsidiary guarantor can be released from its obligations under the 2027, 2028 and 2029 senior notes under the following circumstances, assuming the associated transactions are in compliance with the applicable provisions of the indentures governing the 2027, 2028 and 2029 senior notes: i) any direct or indirect sale, conveyance or other disposition of the capital stock of such entity following which the entity ceases to be a direct or indirect subsidiary of Cedar Fair or a sale or disposition of all or substantially all of the assets of such entity; ii) if such entity is dissolved or liquidated; iii) if we designate such entity as an Unrestricted Subsidiary (as defined in each indenture); iv) upon transfer of such entity in a qualifying transaction if following such transfer the entity ceases to be a direct or indirect Restricted Subsidiary (as defined in each indenture) of Cedar Fair or is a Restricted Subsidiary that is not a guarantor under any credit facility; or v) in the case of the subsidiary guarantors, upon a discharge of the indenture or upon any legal defeasance or covenant defeasance of the indenture.
The obligations of each guarantor are limited to the extent necessary to prevent such guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law. This provision may not, however, protect a guarantee from being voided under fraudulent transfer law, or may reduce the applicable guarantor's obligation to an amount that effectively makes its guarantee worthless. If a guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness of the guarantor, and depending on the amount of such indebtedness, could reduce the guarantee to zero. Each guarantor that makes a payment or distribution under a guarantee is entitled to a pro rata contribution from each other guarantor based on the respective net assets of the guarantors.
The following tables provide summarized financial information for each of our co-issuers and guarantors of the 2027, 2028 and 2029 senior notes (the "Obligor Group"). We presented each entity that is a co-issuer of the registered senior notes separately. The subsidiaries that guarantee the registered senior notes are presented on a combined basis with intercompany balances and transactions between entities in such guarantor subsidiary group eliminated. Intercompany balances and transactions between the co-issuers and guarantor subsidiaries have not been eliminated. Certain subsidiaries of Cedar Fair did not guarantee our credit facilities or senior notes as the assets and results of operations of these subsidiaries were immaterial (the "non-guarantor" subsidiaries). The summarized financial information excludes results of the non-guarantor subsidiaries and does not reflect investments of the Obligor Group in the non-guarantor subsidiaries. The Obligor Group's amounts due from, amounts due to, and transactions with the non-guarantor subsidiaries have not been eliminated and included intercompany receivables from non-guarantors of $14.0 million and $14.3 million as of March 31, 2024 and December 31, 2023, respectively.
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|
Summarized Financial Information (In thousands) |
Cedar Fair, L.P. (Parent) |
Magnum (Co-Issuer Subsidiary) |
Cedar Canada (Co-Issuer Subsidiary) |
Millennium (Co-Issuer Subsidiary) |
Guarantor Subsidiaries | |||||
| Balance as of March 31, 2024 | ||||||||||
| Current Assets | $ | 182 | $ | 39,320 | $ | 39,335 | $ | 342,620 | $ | 1,648,348 |
| Non-Current Assets | (419,033) | 1,822,685 | 621,549 | 2,435,958 | 1,951,662 | |||||
| Current Liabilities | 157,852 | 1,536,227 | 195,784 | 283,529 | 115,653 | |||||
| Non-Current Liabilities | 149,083 | 1,858 | 16,099 | 2,300,793 | 138,253 | |||||
| Balance as of December 31, 2023 | ||||||||||
| Current Assets | $ | 445 | $ | 13,876 | $ | 46,641 | $ | 346,820 | $ | 1,618,550 |
| Non-Current Assets | (269,050) | 1,916,183 | 627,130 | 2,387,798 | 1,955,628 | |||||
| Current Liabilities | 160,560 | 1,525,756 | 188,975 | 223,098 | 107,007 | |||||
| Non-Current Liabilities | 148,854 | 2,019 | 16,985 | 2,141,096 | 141,402 |
|
Three Months Ended March 31, 2024
|
||||||||||
| Net revenues | $ | 57 | $ | 24,871 | $ | 1,247 | $ | 100,904 | $ | 11,545 |
| Operating (loss) income | (48,528) | (77,075) | (9,711) | 31,289 | (22,137) | |||||
| Net loss | (133,278) | (80,626) | (19,121) | - | (19,283) | |||||
|
Twelve Months Ended December 31, 2023
|
||||||||||
| Net revenues | $ | 87,790 | $ | 478,478 | $ | 173,321 | $ | 1,935,516 | $ | 447,639 |
| Operating income (loss) | 84,005 | (153,697) | 67,459 | 126,165 | 182,687 | |||||
| Net income | 125,284 | 72,213 | 98,108 | - | 263,071 |
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 the federal securities laws, including 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, goals and strategies regarding the future. These forward-looking statements may involve current plans, estimates, expectations and ambitions that are subject to risks, uncertainties and assumptions 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, that our growth and operational strategies will achieve the target results, that the proposed transaction with Six Flags will close or that the Company will realize the anticipated benefits thereof. Important risk factors that may cause such a difference and could adversely affect attendance at our parks, our future financial performance, our growth strategies and/or the proposed transaction, and could cause actual results to differ materially from our expectations or otherwise to fluctuate or decrease, include, but are not limited to: general economic conditions; the impacts of public health concerns; adverse weather conditions; competition for consumer leisure time and spending; unanticipated construction delays; changes in our capital investment plans and projects; the expected timing and likelihood of completion of the proposed transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed transaction; anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company's operations and other conditions to the completion of the proposed transaction, including the possibility that any of the anticipated benefits of the proposed transaction will not be realized or will not be realized within the expected time period; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that may be instituted against Cedar Fair, Six Flags or their respective directors and others following announcement of the merger agreement and proposed transaction; the inability to consummate the transaction due to the failure to satisfy other conditions to complete the transaction; the potential adverse effects on the market price of either or both Cedar Fair units or Six Flags common stock; risks that the proposed transaction disrupts and/or harms current plans and operations of Cedar Fair or Six Flags, including that management's time and attention will be diverted on transaction-related issues; the amount of the costs, fees, expenses and charges related to the transaction, including the possibility that the transaction may be more expensive to complete than anticipated; the ability of Cedar Fair and Six Flags to successfully integrate their businesses and to achieve anticipated synergies and value creation; potential adverse restrictions during the pendency of the proposed transaction to pursue certain business opportunities and strategic transactions; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction; legislative, regulatory and economic developments and changes in laws, regulations, and policies affecting Cedar Fair and Six Flags; potential business uncertainty, including the outcome of commercial negotiations and changes to existing business relationships during the
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pendency of the proposed transaction that could affect Cedar Fair's and/or Six Flags' financial performance and operating results; acts of terrorism or outbreak of war, hostilities, civil unrest, and other political or security disturbances; the impacts of pandemics or other public health crises, including the effects of government responses on people and economies; risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction; other factors we discuss from time to time in our reports filed with the SEC; and those risks that are described in the registration statement on Form S-4 and the accompanying proxy statement/prospectus. Additional information on risk factors that may affect our business and financial results can be found in our Annual Report on Form 10-K and in the filings we make from time to time with the SEC, including this Form 10-Q. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from fluctuations in interest rates and 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 typically manage interest rate risk using a combination of fixed-rate long-term debt, interest rate swaps that fix variable-rate long-term debt, and variable-rate borrowings under a revolving credit facility. Translation exposures with regard to our Canadian operations are not hedged.
We repaid all of our then-outstanding variable-rate long-term debt during 2022 and subsequently terminated our interest rate swap agreements. Therefore, as of March 31, 2024, all of our outstanding long-term debt represented fixed-rate debt except for revolving credit borrowings. Assuming the daily average balance over the past twelve months on revolving credit borrowings of approximately $71.9 million, a hypothetical 100 bps increase in 30-day SOFR on our variable-rate debt would lead to an increase of approximately $0.7 million in cash interest costs over the next twelve months. In May 2024, we entered into the 2024 Credit Agreement, which includes a variable-rate senior secured term loan facility and replaced the revolving credit facility under the 2017 Credit Agreement. A hypothetical 100 bps increase in 30-day SOFR on the senior secured term loan facility under the 2024 Credit Agreement would lead to an increase of $10.0 million in cash interest costs over the next twelve months. See the Subsequent Events footnote at Note 11for additional information.
A uniform 10% strengthening of the U.S. dollar relative to the Canadian dollar would result in a $6.7 million decrease in annual operating income for the trailing twelve months ended March 31, 2024.
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 March 31, 2024, 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 March 31, 2024.
(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 March 31, 2024 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 our Annual Report on Form 10-K for the year ended December 31, 2023.
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 March 31, 2024:
| (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 (2)
|
Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs (2)
|
||
| January 1 - January 31 | - | - | - | $ | 237,962,641 | |
| February 1 - February 29 | 59,942 | $ | 39.24 | - | $ | 237,962,641 |
| March 1 - March 31 | - | - | - | $ | 237,962,641 | |
| Total | 59,942 | $ | 39.24 | - | $ | 237,962,641 |
(1)All units purchased were repurchased 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.
(2)On May 4, 2023, we announced that our Board of Directors authorized the Partnership to repurchase units for an additional aggregate amount of not more than $250 million. There were no units repurchased under the May 2023 repurchase program during the three months ended March 31, 2024. See Note 10.
ITEM 5. OTHER INFORMATION
During the three months ended March 31, 2024, no director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
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ITEM 6. EXHIBITS
|
Exhibit (10.1)
|
2016 Omnibus Incentive Plan Form of Restricted Unit Award Declaration (2024 Employment Agreement Version)
|
|
|
Exhibit (10.2)
|
2016 Omnibus Incentive Plan Form of Restricted Unit Award Declaration (2024 Severance Plan Version)
|
|
|
Exhibit (10.3)
|
2016 Omnibus Incentive Plan Form of Performance Award Agreement (2024 Employment Agreement Version)
|
|
|
Exhibit (10.4)
|
2016 Omnibus Incentive Plan Form of Performance Award Declaration (2024 Severance Plan Version)
|
|
|
Exhibit (31.1)
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Exhibit (31.2)
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Exhibit (32)
|
Certifications Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
| Exhibit (101) |
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 formatted in Inline XBRL: (i) the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statements of Cash Flow, (iv) the Unaudited Condensed Consolidated Statements of Partners' Deficit, and (v) related notes, tagged as blocks of text and including detailed tags.
|
|
| Exhibit (104) |
The cover page from the Partnership's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 formatted in Inline XBRL (included as Exhibit 101).
|
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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: | May 9, 2024 | /s/ Richard A. Zimmerman |
| Richard A. Zimmerman | ||
| President and Chief Executive Officer | ||
| Date: | May 9, 2024 | /s/ Brian C. Witherow |
| Brian C. Witherow | ||
| Executive Vice President and | ||
| Chief Financial Officer |
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