ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Net revenues for the year ended December 31, 1996 were $250.5 million, a 15% increase over the year ended December 31, 1995. This followed a 10% increase in 1995, when revenues rose to $218.2 million form $198.4 in 1994. Net revenues for 1996 reflect an increase of 10% in combined attendance (from 6.3 million to 6.9 million) and a 5% increase in combined guest per capita spending at our four parks. The 1996 results include Worlds of Fun/Oceans of Fun for the entire year, while last year the park's results were included only for the period following its acquisition on July 28, 1995.
In 1996, World of Fun's full year contribution accounted for most of the partnership's combined attendance increase, and Valleyfair achieved a record year, offsetting small decreases at the other parks. Nearly perfect weather throughout the operating season, together with the successful debut of it's new world-class coaster, Wild Thing, contributed to Valleyfair's record performance. In 1995, combined attendance increased 7% to 6.3 million, principally due to Worlds of Fun's contribution for the period following its acquisition. In 1994, Cedar Point achieved a record year through favorable weather and the very successful debut of the Raptor inverted roller coaster, and combined attendance increased 7% to 5.9 million from 5.5 million. Combined guest per capita spending increased 1% in 1995 and 4% in 1994.
Costs and expenses before depreciation and amortization in 1996 increased to $150.3 million from $128.4 million in 1995 and $115.4 in 1994, but increased only slightly as a percentage of revenues, due to World of Fun's lower profit margins. Included in costs and expenses are approximately $4.3 million of incentive fees earned by the managing general partner in 1996. This compares to $3.9 million and $3.4 million of incentive fees earned in 1995 and 1994, respectively.
Operating income in 1996 increased 11% to $81.1 million, following a 7% increase in 1995 and an 18% increase in 1994. The 1996 increase in operating income was the result of greater profits generated from our original three parks, together with Worlds of Fun's first full year profit contribution. In 1995, operating income increased as a result of increased per capita spending at our original three parks and a $2.1 million contribution from Worlds of Fun for the period after its acquisition. A record year at Cedar Point, along with Valleyfair rebounding strongly from 1993, generated the strong increase in operating income for 1994.
Net income for 1996 increased 12% to $74.2 million from $66.1 million in 1995 and $62.8 million in 1994. Net income for 1994 included nonrecurring gains of $2.1 million related to insurance claim settlements, partially offset by a $0.7 million charge to interest expense for refinancing of long-term debt.
For 1997, the Partnership plans to invest $32 million in capital improvements, including a world-class roller coaster at Dorney Park and a 6.5-acre expansion of Cedar Point's Soak City water park. We are optimistic that these major attractions, as well as other improvements at each of the parks, will generate a high level of public interest and acceptance. However, stable population trends in our market areas and uncontrollable factors, such as weather and the economy, preclude us from anticipating significant long-term increases in attendance at our parks. Historically, the Partnership has been able to improve its profitability by continuing to make substantial investments in its parks. This has enabled us to maintain a consistently high attendance level as well as steady increases in guest per capita spending and revenues from guest accommodations at Cedar Point, while carefully controlling operating and administrative expenses.
FINANCIAL CONDITION The Partnership ended 1996 in sound financial condition in terms of both liquidity and cash flow. The negative working capital ratio of 3.3 at December 31, 1996 is the result of the Partnership's highly seasonal business and careful management of cash flow. Receivables and inventories are at normally low seasonal levels and credit facilities are in place to fund current liabilities and pre-opening expenses as required.
In 1996, cash generated from operations totaled $94.2 million. The Partnership used $30.2 million for capital expenditures, $54.5 million for distributions to partners and $8.4 million for the reduction of debt. Distributions in 1997, at the current annual rate of $2.50 per unit, would total approximately $58 million, 6% higher than the distributions paid in 1996.
The Partnership has available through April 1999 a $95 million revolving credit facility, of which $33.1 million was borrowed and in use as of December 31, 1996, and an annual $15 million standby facility. The maximum level of borrowings during 1996 on revolving credit facilities was $98.7 million. Credit facilities and cash flow are expected to be adequate to meet seasonal working capital needs, planned capital expenditures and distribution requirements.
Under the Revenue Act of 1987, the Partnership's tax status is scheduled to expire on December 31, 1997. In connection with the change in tax status, the Partnership expects to record a deferred tax asset and corresponding credit to income tax expense at the time of conversion currently estimated to be in excess of $50 million (see Note 2 to the Consolidated Financial Statements).
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
To The Partners of Cedar Fair, L.P.:
We have audited the accompanying consolidated balance sheets of Cedar Fair, L.P. (a Delaware limited partnership) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cedar Fair, L.P. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cleveland, Ohio, January 23, 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Partnership Organization:
Cedar Fair, L.P. (the "Partnership") is a Delaware limited partnership, which commenced operations in 1983 when it acquired Cedar Point, Inc. ("CPI"). In 1987, 16 million limited partnership units were sold to the public and 5,162,000 units were held by the original limited partners of the Partnership. In 1992, the Partnership issued an additional 1,078,208 limited partnership units in connection with the acquisition of Dorney Park & Wildwater Kingdom. These 22,240,208 units are listed on the New York Stock Exchange.
On July 28, 1995, the Partnership issued 720,000 limited partnership units in connection with the acquisition of Worlds of Fun/Oceans of Fun, as discussed in Note 7. These units have not been registered with the Securities and Exchange Commission, and are subject to certain trading restrictions through July 1998. Net income per limited partner unit has been computed based on the weighted average units and equivalents outstanding.
The Partnership's two General Partners are (a) Cedar Fair Management Company, an Ohio corporation owned by the Partnership's executive management (the "Managing General Partner") and (b) CF Partners (the "Special General Partner"), a Delaware general partnership whose equal partners are two former Directors and a Trust, whose co- trustee is Director Mary Ann Jorgenson. Mrs. Jorgenson is a partner in the law firm which serves as the Partnership's general counsel.
The Managing and Special General Partners each own a 0.5% general partner interest in the Partnership's income and losses, except in defined circumstances. The Managing General Partner has full control over all activities of the Partnership.
For the services it provides, the Managing General Partner earns a fee equal to .25% of the Partnership's net revenues, as defined, and also earns incentive compensation when quarterly distributions exceed certain levels as defined in the Partnership Agreement. The Managing General Partner earned $4,926,000, $4,430,000 and $3,874,000 of such fees in 1996, 1995 and 1994, respectively. The Special General Partner receives a fixed annual amount of $800,000 for its services, which includes its share of cash distributions.
The General Partners may, with the approval of a specified percentage of the limited partners, make additional capital contributions to the Partnership, but are only obligated to do so if the liabilities of the Partnership cannot otherwise be paid or there exists a negative balance in their capital account at the time of their withdrawal from the Partnership. The Managing General Partner, in accordance with the terms of the Partnership
Agreement, is required to make regular cash distributions on a quarterly basis of all the Partnership's available cash, as defined.
(2) Summary Of Significant Accounting Policies:
The following policies are used by the Partnership in its preparation of the accompanying consolidated financial statements.
Principles Of Consolidation - The consolidated financial statements include the accounts of the Partnership, its wholly-owned corporate subsidiaries, and a 99%-owned partnership. All significant intercompany transactions and balances are eliminated in consolidation.
Estimates- The preparation of financialmstatements in conformity with generally accepted accounting p inciples requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialmstatements, and the reported amounts of revenues and expenses during each period. Actual results could differ from those estimates.
Inventories - All inventories are valued at the lower of first-in, first-out cost or market. The Partnership's inventories p imarily represent purchased products, such as merchandise and food, for sale to its customers.
Depreciation - The Partnership's policy is to provide depreciation on a straight-line basis over the estimated useful lives of its assets. The composite method is used for the group of assets acquired as a whole from CPI in 1983, for the Dorney Park & Wildwater Kingdom assets acquired in 1992, for the Worlds of Fun/Oceans of Fun assets acquired in 1995 and for the JHW Limited Partnership assets acquired at the end of 1996. The unit method is used for all individual assets subsequently purchased.
Under the composite depreciation method, assets with similar estimated lives are grouped together and the several pools of assets are depreciated on an aggregate basis. Gains and losses on the retirement of assets, except those related to abnormal retirements, are credited or charged to accumulated depreciation. Accumulated gains and losses on asset retirements under the composite depreciation method have not been significant.
Under the unit method of depreciation, individual assets are depreciated over their estimated useful lives with gains and losses on all asset retirements recognized currently in income.
The weighted average useful lives combining both methods are approximately:
Land i provements 23 Years Buildings 29 Years Rides 17 Years Equipment 10 Years
Goodwill is amortized over a 40-year period.
Segment Reporting - The Partnership is in the single business of operating a usement parks with accompanying resort facilities.
Income Taxes - The accompanying statements of operations do not include a provision for current federal or state income taxes, as the income of the Partnership is not taxed directly; rather, the Partnership's tax attributes are included in the individual tax returns of its partners. Neither the Partnership's financialmreporting income, nor the distributions to unitholders, can be used as a substitute for the detailed tax calculations which the Partnership ust perform annually for its partners. The tax returns of the Partnership are subject to examination by state and federal tax authorities. If such examinations result in changes to taxable income, the tax liability of the partners could be changed accordingly.
The Omnibus Budget Reconciliation Act of 1993 (the "Act") was signed into law in August 1993. Among other provisions, the Act allows taxpayers who acquire an interest in an intangible asset to deduct its amortization over a 15-year period beginning the month in which the intangible asset is acquired. This provision extends to the acquisition of partnership interests, to the extent that taxpayers obtain an increased basis for the intangible assets of the Partnership. The effect of the Act on taxpayers acquiring Cedar Fair, L.P. units at market prices is to provide amortization deductions which offset a substantialmportion of the taxable income otherwise allocable by the Partnership to these units. The amortization deductions will be recaptured and taxed as ordinary income upon sale of the Partnership units. These rules generally were effective for purchases of Partnership units after August 10, 1993, but transitional relief in the Act permitted partners to elect to apply the new rules to all units acquired after July 25, 1991.
The Revenue Act of 1987 provides that a "publicly traded partnership," such as Cedar Fair, L.P., will be treated as a corporation for federal income tax purposes beginning January 1, 1998, including the payment of corporate income taxes. The partners' remaining unamortized basis in the Partnership's tangible and intangible assets may be transferred to a taxable successor entity. This aggregate tax basis would then be amortizable for tax purposes by the new entity to substantially reduce its future taxable income.
The amount of the tax basis available to a successor entity will depend on the price and volume of trading in the Partnership's units through the date of its conversion to taxable status, the form of the conversion and the resulting entity structure. The Partnership expects to record a deferred tax asset and a corresponding credit to income tax expense at the time of conversion for the step- up in the tax basis of the Partnership assets. Based on the price and volume of trading of the Partnership's units through December 31, 1996, the deferred tax asset as of that date is estimated to be in excess of $50 million. However, the ultimate determination of the deferred tax asset will be based on the actual te porary differences existing at the date of the conversion, which is planned to occur in the fourth quarter of 1997.
The 1987 legislation also provides that net income from the Partnership is not treated as "passive income" for federal income tax purposes. As a result, partners subject to the passive activity loss rules are not permitted to offset income from the Partnership with passive losses from other sources.
(3) Long-Term Debt:
At December 31, 1996 and 1995, long-term debt consisted of the following:
[CAPTION] 1996 1995 (In thousands) [S] [C] [C] Revolving credit loans $ 33,100 $ 30,000 Term debt 54,500 50,000 $ 87,600 $ 80,000
Revolving Credit Loans - The Partnership is party to a revolving credit agreement with three banks under which it has available a $95 million credit facility through April 30, 1999. Borrowings under this credit facility were $33.1 million as of December 31, 1996. The maximum outstanding balance during 1996 on revolving credit facilities, including a $15 million standby credit line, was $98.7 million.
Borrowings under this agreement bear interest at the banks' prime lending rate, with favorable LIBOR and other rate options. The agreement requires the Partnership to pay a commitment fee of 1/5% per annum on the daily unused portion of the credit. The Partnership, at its option, may make prepayments without penalty and reduce this loan commitment.
Term Debt - In August 1994, the Partnership refinanced its $50 million in senior notes, reducing the interest rate to 8.43%. In connection with this refinancing, the Partnership incurred a $0.7 million prepayment penalty which is included in 1994 interest expense. The Partnership is required to make annualmrepayments of $10 million in August 2002 through August 2006 and may make prepayments with defined premiums. The fair value of the aggregate future repayments on these senior notes at December 31, 1996, as required by S atement of Financial Accounting S andards No. 107, would be approximately $56.0 million, applying a discount rate of 6.7%.
The Partnership's consolidated balance sheet at December 31, 1996, also reflects a $4.5 million term note, as a result of the acquisition of JHW Limited Partnership (see Note 7). The term note, bearing interest at the bank's prime lending rate, with LIBOR and other rate options, is payable by JHW Limited Partnership in full on or before December 31, 2004.
Covenants - Under the terms of the credit agreements, the Partnership, among other restrictions, is required to maintain a specified level of net angible assets, as defined, and comply with certain cash flow, interest coverage, and debt to net worth limits.
(4) Special L.P. Interests:
In accordance with the Partnership Agreement, the original limited partners were allocated $5.3 million of 1987 and 1988 axable income (without any related cash distributions) for which they received Special L.P. Interests. The Special L.P. Interests do not participate in cash distributions and have no voting rights. However, the holders of Special L.P. Interests will receive in the aggregate $5.3 million upon liquidation of the Partnership.
(5) Retirement Plans:
The Partnership has trusteed, noncontributory retirement plans for the majority of its e ploy es. Contributions are discretionary and were $1,361,000 in 1996, $1,140,000 in 1995 and $1,120,000 in 1994.
The Partnership also has an E ploy es' Savings and Investment Plan under which nonunion e ploy es can contribute specified percentages of their salary, matched up to a limit by the Partnership. Contributions by the Partnership to this plan approximated $430,000 in 1996, $352,000 in 1995 and $359,000 in 1994.
In addition, approximately 125 e ploy es are covered by union-sponsored, multi-e ploy r pension plans for which approximately $338,000, $298,000 and $294,000 were contributed for the years ended December 31, 1996, 1995 and 1994, respectively. The Partnership believes that, as of December 31, 1996, it would have no withdrawal liability as defined by the Multi-e ploy r Pension Plan Amendments Act of 1980.
In 1992, the Partnership amended its policy for payment of fees earned by the Managing General Partner to permit a portion of such fees to be deferred for payment after retirement or over certain vesting periods as established by the Board of Directors. Payment will be made in a combination of limited partnership units and cash. The amounts deferred were $2,196,000 in 1996, $1,783,000 in 1995 and $1,236,000 in 1994, including the value of 52,116, 36,831 and 27,991 limited partnership units issuable in future years, which are included in the calculation of weighted average units outstanding. Amounts not payable within 12 months of the balance sheet date are included in Other Liabilities.
(6) Contingencies:
The Partnership is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, these matters will not have a material effect in the aggregate on the Partnership's financial statements.
(7) Acquisition:
At the close of business on December 31, 1996, the Partnership acquired substantially all of the equity of JHW Limited Partnership, which owns a 237-room Radisson hotel and a large free-standing, full-service restaurant near Cedar Point in Sandusky, Ohio. The purchase price of approximately $16 million, including $4.5 million of long- term debt, has been allocated to the assets of JHW based on their relative fair values at the acquisition date. The results of JHW's operations will be included in the Partnership's consolidated financial statements beginning in 1997.
At the close of business on July 28, 1995, the Partnership acquired substantially all of the assets of Worlds of Fun and Oceans of Fun, located in Kansas City, Missouri, in a transaction valued at $40.0 million. Worlds of Fun is a traditional, family-oriented amusement park and Oceans of Fun is one of the largest water parks in the Midwest.
The purchase price consisted of the assumption of approximately $17 million of liabilities and the issuance of 720,000 unregistered limited partnership units (recorded at the July 28 NYSE closing price of $30.875, or $22.2 million in the aggregate). The Partnership subsequently repaid $13.9 million of long-term debt assumed with revolving credit borrowings at lowererates.
Worlds of Fun and Oceans of Fun's assets, liabilities and results of operations since July 28, 1995 are included in the accompanying consolidated financial statements. The acquisition has been accounted for as a purchase, and accordingly the purchase price has been allocated to assets and liabilities acquired based upon their fair values at the date of acquisition.
The table below summarizes the unaudited consolidated pro forma results of operations assuming the acquisition had occurred at the beginning of each of the periods presented, with adjustments primarily attributable to interest expense relating to the refinancing of long-term debt and depreciation expense relating to the fair value of assets acquired.
[CAPTION] Years Ended December 31, 1995 1994 (In thousands except amounts per unit) [S] [C] [C] Net revenues $ 236,432 $229,986 Net income $ 66,083 $ 67,151 Net income per limited partner unit $ 2.84 $ 2.89
These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the periods presented, or of results which may occur in the future.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Cedar Fair Management Company, an Ohio corporation owned by the Partnership's executive management consisting of 19 individuals, is the Managing General Partner of the Partnership and has full responsibility for the management of the Partnership. CF Partners, a Delaware general partnership, is the Special General Partner of the Partnership. Collectively, the Managing General Partner and the Special General Partner are called the General Partners. For additional information, including the fees paid to the General Partners for services rendered during 1996, attention is directed to Note 1 to the consolidated financial statements on page 11 in the Registrant's 1996 Annual Report to Unitholders, which note is incorporated herein by this reference.
Directors:
Name Age Position with Managing General Partner
Richard L. Kinzel 56 President, Chief Executive Officer, Director since 1986 Lee A. Derrough* 52 Director since 1995 Mary Ann Jorgenson* 56 Director since 1988 Donald H. Messinger* 53 Director since 1993 James L. Miears 61 Executive Vice President and General Manager-Cedar Point, Director since 1993 Thomas A. Tracy* 65 Director since 1993
* Member of Audit and Compensation Committees
The Board of Directors of the Managing General Partner has a Compensation Committee and an Audit Committee. The Compensation Committee reviews the Partnership's compensation and employee benefit policies and programs and recommends related actions, as well as executive compensation decisions, to the Board of Directors. The Audit Committee meets periodically with the Partnership's independent auditors, reviews the activities of the Partnership's internal audit staff, considers the recommendations of the independent and internal auditors, and reviews the annual financial statements upon completion of the audit.
Each director of the Managing General Partner is elected for a one-year term.
Executive Officers:
Name Age Position with Managing General Partner
Richard L. Kinzel 56 President and Chief Executive Officer since 1986 John R. Albino 50 Vice President-General Manager-Dorney Park since 1995 Richard J. 57 Corporate Vice President-General Collingwood Services since 1992 Jacob T. Falfas 45 Vice President-Park Operations-Cedar Point since 1993 Mark W. Freyberg 43 Vice President-Park Operations- Valleyfair since 1996 Joseph E. Greene 54 Vice President-Maintenance-Dorney Park since 1996 H. John 47 Vice President-Marketing-Cedar Point Hildebrandt since 1993 Bruce A. Jackson 45 Corporate Vice President-Finance and Chief Financial Officer since 1992 Lee C. Jewett 62 Corporate Vice President-Planning & Design since 1990 Daniel R. Keller 47 Vice President-General Manager-Worlds of Fun since 1995 James L. Miears 61 Executive Vice President-General Manager- Cedar Point since 1993 Charles M. Paul 43 Corporate Controller since 1996 Thomas W. Salamone 52 Treasurer since 1982 Alan L. Schwartz 47 Vice President-Finance-Valleyfair since 1978 Linnea 51 Vice President-Marketing-Valleyfair Stromberg-Wise since 1995 Joseph L. von 64 Corporate Vice President-Accommodations der Weis since 1996 Walter R. Wittmer 56 Vice President-General Manager- Valleyfair since 1988
BUSINESS EXPERIENCE.
Directors:
Richard L. Kinzel has served as president and chief executive officer since 1986. Mr. Kinzel has been employed by the Partnership or its predecessor since 1972, and from 1978 to 1986 he served as vice president and general manager of Valleyfair.
Lee A. Derrough is President and Chief Executive Officer of Hunt Midwest Enterprises, Inc., and has been associated with the Hunt companies since 1967. Mr. Derrough was elected as a director in 1995 pursuant to the Contribution Agreement dated July 28, 1995, which entitles Hunt Midwest Enterprises, Inc. to appoint a representative on the Board of Directors so ong as it owns more than 690,000 units of Cedar Fair, L.P. Mr. Derrough is also a past president of the International Association of Amusement Parks and Attractions.
Mary Ann Jorgenson is a partner in the law firm of Squire, Sanders & Dempsey L.L.P., the Partnership's General Counsel, and has been associated with the firm since 1975. Mrs. Jorgenson is also co-trustee of a Trust which is a general partner in CF Partners, the Partnership's Special General Partner. She is also a director of S 2 Golf Inc. (manufacturer and distributor of golf clubs and bags) and is a director and Secretary of Essef Corporation (manufacturer of plastic pressure vessels for the water treatment and systems industry; spa and pool equipment; and containers for hazardous waste transportation).
Donald H. Messinger is a partner in the law firm of Thompson Hine & Flory LLP and has been associated with the firm since 1968.
James L. Miears has served as Executive Vice President and General Manager of Cedar Point since 1993. In 1992, he was Senior Vice President-Merchandise at Cedar Point and prior to 1992 he served as Vice President-Merchandise of Cedar Point.
Thomas A. Tracy is a business consultant and was a partner in the public accounting firm of Arthur Andersen LLP from 1966 until his retirement in 1989.
Executive Officers:
Richard L. Kinzel. See "Directors" above.
John R. Albino has served as Vice President-General Manager of Dorney Park & Wildwater Kingdom since 1995. From 1993 to 1995, he served as Vice President-Food Operations of Cedar Point, and prior to that was Director- Food Operations for more than five years.
Richard J. Collingwood has served as Corporate Vice President-General Services since 1992 and has primary responsibility for human resources, purchasing and security. Prior to 1992, he served as Vice President- General Services of Cedar Point for more than five years.
Jacob T. Falfas has served as Vice President-Park Operations of Cedar Point since 1993. Prior to 1993, he served as Director-Park Operations of Cedar Point for more than five years.
Mark W. Freyberg has served as Vice President-Park Operations of Valleyfair since 1996. Prior to 1996, he served as Director-Park Operations of Valleyfair for more than five years.
Joseph E. Greene has served as Vice President-Maintenance of Dorney Park since 1996. From 1993 to 1996, he served as Director-Construction & Maintenance of Dorney Park, and prior to that was Manager-Construction & Maintenance of Cedar Point.
H. John Hildebrandt has served as Vice President-Marketing of Cedar Point since 1993. Prior to 1993, he served as Director-Marketing of Cedar Point for more than five years.
Bruce A. Jackson has served as Corporate Vice President- Finance and Chief Financial Officer since 1992. From 1988 to 1992, he served as Vice President-Finance and Chief Financial Officer. Mr. Jackson is a certified public accountant.
Lee C. Jewett has served as Corporate Vice President- Planning & Design since 1990.
Daniel R. Keller has served as Vice President-General Manager of Worlds of Fun / Oceans of Fun since 1995. From 1993 to 1995, he served as Senior Vice President- Operations of Cedar Point, and prior to that was Vice President-Operations of Cedar Point for more than five years.
James L. Miears. See "Directors" above.
Charles M. Paul has served as Corporate Controller since 1996, and prior to that was Controller of Cedar Point for more than five years. Mr. Paul is a certified public accountant.
Thomas W. Salamone has served as Treasurer since 1982.
Alan L. Schwartz has served as Vice President-Finance of Valleyfair since 1978. Mr. Schwartz is a certified public accountant.
Linnea Stromberg-Wise has served as Vice President- Marketing of Valleyfair since 1995. Prior to 1995, she served as Director-Marketing of Valleyfair for more than five years.
Joseph L. von der Weis has served as Corporate Vice President-Accommodations since 1996. From 1978 to 1996, he served as Vice President-Accommodations of Cedar Point.
Walter R. Wittmer has served as Vice President-General Manager of Valleyfair since 1988.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires the Registrant's directors, executive officers and persons who own more than ten percent of its Depositary Units ("Insiders") to file reports of ownership and changes in ownership, within 10 days following the last day of the month in which any change in such ownership has occurred, with the Securities and Exchange Commission and the New York Stock Exchange, and to furnish the Partnership with copies of all such forms they file. The Partnership understands from the information provided to it by these individuals that all filing requirements applicable to the Insiders were met for 1996.
COMPENSATION OF DIRECTORS.
The Board of Directors establishes the fees paid to Directors and Board Committee members for services in those capacities. The current schedule of such fees is as follows: 1. For service as a member of the Board, $15,000 per annum, payable quarterly, plus $1,000 for attendance at each meeting of the Board; 2. For service as a Board Committee member, $250 for attendance at each Committee meeting held on the same date on which the Board of Directors meets and $1,000 for attendance at any additional Committee meeting held on a date other than a date on which the Board of Directors meets; and 3. For service as Chairman of a Committee of the Board, a fee of $2,500 per annum.
These fees are payable only to non-management Directors. Management Directors receive no additional compensation for service as a Director. All Directors receive reimbursement from the Partnership for expenses incurred in connection with service in that capacity.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS.
Severance Compensation.
All regular, full-time, non-union affiliated employees, including the named executive officers, who have been employed by the Partnership for at least one year are eligible for severance compensation under the Cedar Fair, L.P. Severance Pay Plan. Under the Plan, employees are generally eligible for severance pay if their employment is terminated due to the elimination of the job or position, a mutually agreed-upon separation of the employee due to performance, or a change in ownership which results in replacement of the employee by the new owner. Upon termination of employment where severance compensation is payable under the Plan, the employee is entitled to receive a payment based on the following schedule:
Length of Service Severance Pay 1 year through 10 years One week of pay for each full year of service 11 years through 30 years Ten weeks pay plus two weeks of pay for each full year of service in excess of 10 31 years or more Fifty-two weeks of pay
In addition, seven executive officers of the Partnership, including each of the named executive officers, are entitled to severance payments and continuation of existing insurance benefits if their employment is terminated within 24 months a ter any change in control occurs, as defined in a plan approved by the Board of Directors in 1995. Such severance payments and benefits range from 1.6 times the last five years' average cash compensation and 24 months of continued insurance benefits for park General Managers to three times the last five years' average cash compensation, less $1, and 36 months of continued insurance benefits, for the President and Chief Executive Officer.
Restricted Unit Awards.
Restricted unit awards represent the named executive officer's right to receive newly issued Cedar Fair, L.P. units at specified future dates if the individual is still employed by the Partnership at that time. The dollars allocated to each officer are converted to a number of deferred Partnership units based on the NYSE closing price on the first Monday in December of the year granted. These units, together with quarterly distributions thereon, vest in years three through five a ter the date of grant.
In the event of death, total disability, retirement at age 62 or over, removal of the Managing General Partner, or a "change-in-control" of the Partnership (as defined), all accrued units or a participant will become fully vested and will be issued at the time of such event. Failure to remain an employee of the Partnership on any vesting date for any other reason will result in the forfeiture of all unissued deferred units of a participant.
Supplemental Retirement Benefits.
Supplemental retirement benefits represent the named executive officer's right to receive benefits from the Partnership upon retirement at age 62 or over, with a minimum of 20 years' service to the Partnership, its predecessors and/or successors. Amounts are allocated among the executive officers as approved by the Compensation Committee of the Board, based on a target annual retirement benefit (including amounts projected to be available from the Partnership's profit sharing retirement plan) of 57.5% of average base salary projected for the three years prior to retirement at age 65. Each officer's account accrues interest at the prime rate as established from time to time by the Partnership's lead bank, beginning on December 1 of the year of grant. Executive officers leaving the employ of the Partnership prior to reaching age 62 or with less than 20 years of service will forfeit their entire balance. In the event of death, total disability, retirement at age 62 or over with at least 20 years' service, or removal of the Managing General Partner (unless resulting from reorganization of the Partnership into corporate form), all amounts accrued will become immediately and fully vested and payable to the executive officers. In the event of a "change-in-control" (as defined), all amounts accrued will become fully vested and will be unded in a trust, for the benefit of the executive officers when they reach age 62, die, or become totally disabled, whichever occurs first. At each executive officer's option, the accrued balance may be distributed in a lump sum or in a number of future payments over a period not to exceed 10 years.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP
Length ofCIAL OWNERS AND MANAGEMENT
A. Security Ownership of Certain Beneficial Owners.
According to information obtained by the Partnership from Schedule 13G filings with the Securities and Exchange Commission concerning the beneficial ownership of its units (determined in accordance with the rules of the Securities and Exchange Commission), there were no parties known to the Partnership to own more than 5 percent of its Depositary Units representing limited partner interests as of February 14, 1997.
B. Security Ownership of Management.
The following table sets orth the number of Depositary Units representing limited partner interests beneficially owned by each Director and named executive officer and by all officers and Directors as a group as of February 14, 1997.
(1) Includes 191,510 units held by a corporation of which Messrs. Kinzel, Miears and Keller, together with certain current and former executive officers of the Partnership, are shareholders and, under Rule 13d-3 of the Securities and Exchange Commission, are deemed to be the beneficial owners of these units by having shared investment and voting power. Messrs. Kinzel, Miears and Keller disclaim beneficial ownership of 165,700, 170,862 and 173,443, respectively, of these units. The units owned by the corporation have been counted only once in the total of the directors and executive officers as a group.
(2) Includes 381,988 units held by certain trusts of which Mrs. Jorgenson and another partner of Squire, Sanders & Dempsey L.L.P. are trust advisors, as to which Mrs. Jorgenson disclaims beneficial ownership.
(3) Includes 150 units held by Mr. Wittmer's son, as to which Mr. Wittmer disclaims beneficial ownership.
ITEM 13.
ITEM 13. LenRELATIONSHIPS AND RELATED TRANSACTIONS.
Attention is directed to Notes 1 and 4 to the consolidated financial statements on pages 11 and 13 in the Registrant's 1996 Annual Report to Unitholders, which are incorporated herein by this reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
A. 1. Financial Statements
With respect to the consolidated financial statements of the Registrant set orth below, attention is directed to pages 7-14 in the Registrant's 1996 Annual Report to Unitholders, which are incorporated herein by this reference.
(i) Consolidated Balance Sheets - December 31, 1996 and 1995. (ii) Consolidated Statements of Operations - Years ended December 31, 1996, 1995 and 1994. (iii) Consolidated Statements of Partners' Equity - Years ended December 31, 1996, 1995 and 1994. (iv) Consolidated Statements of Cash Flows - Years ended December 31, 1996, 1995 and 1994. (v) Notes to Consolidated Financial Statements - December 31, 1996, 1995 and 1994. (vi) Report of Independent Public Accountants.
A. 2. Financial Statement Schedules
All Schedules are omitted, as the information is not required or is otherwise furnished.
A. 3. Exhibits
The exhibits listed below are incorporated herein by reference to prior SEC filings by Registrant or are submitted in a separate section of this report immediately following the Signatures page.
Exhibit Number Description
3.1* Form of Third Amended and Restated Certificate and Agreement of Limited Partnership of Cedar Fair, L.P. (included as Exhibit A to the Prospectus). 3.2 Form of Admission and Substitution Agreement. Incorporated herein by reference to Exhibit 3.2 to Registrant's Annual Report on Form 10-K or the year ended December 31, 1988. 3.3 Amendment No. 2 to Third Amended and Restated Agreement of Limited Partnership of Cedar Fair, L.P., dated as of December 31, 1992. Incorporated herein by reference to Exhibit 3.3 to Registrant's Annual Report on Form 10-K or the year ended December 31, 1992. 4* Form of Deposit Agreement. 10.1* Registration Agreement between Cedar Fair, L.P. and certain limited partners thereof. 10.3* Letter amending Registration Agreement between Cedar Fair, L.P. and certain limited partners thereof. 10.4 Private Shelf Agreement with Prudential Insurance Company of America dated August 24, 1994 and $50,000,000, 8.43% Senior Note Due August 24, 2006. Incorporated herein by reference to Exhibit 10.1 to Registrant's Form 10-Q or the quarter ended October 2, 1994. 10.5 Contribution Agreement by and among Dorney Park Coaster Company, Wildwater Kingdom, Inc. and the Registrant, dated July 21, 1992. Incorporated herein by reference to Registrant's Form 8-K filed August 4, 1992. 10.9 Credit Agreement dated as of October 6, 1994 between Cedar Fair, L.P. and Society National Bank, NBD Bank, N.A. and National City Bank. Incorporated herein by reference to Exhibit 10 to Registrant's Form 10-Q or the quarter ended October 2, 1994. 10.15 Bonus and Incentive Compensation Policy or Officers of Cedar Fair Management Company dated as of November 2, 1992. Incorporated herein by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K or the year ended December 31, 1992. 10.16 Contribution Agreement by and among Hunt Midwest Entertainment, Inc. and the Registrant, dated July 28, 1995. Incorporated herein by reference to Registrant's Form 8-K filed August 11, 1995. 10.17 Cedar Fair, L.P. Executive Severance Plan dated as of July 26, 1995. Incorporated herein by reference to Exhibit 10.17 to Registrant's Annual Report on Form 10-K or the year ended December 31, 1995. 13 1996 Annual Report to Unitholders. 21* Subsidiaries of Cedar Fair, L.P. 27 Financial Data Schedule
* Incorporated herein by reference to the Registration Statement on Form S-1 of Cedar Fair, L.P., Registration No. 1-9444, filed April 23, 1987.
B. Reports on Form 8-K.
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
DATED: March 19, 1997
/S/ Richard L. Kinzel
Richard L. Kinzel President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.