-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BQgJ9DhJQT/jqdEWqKKu8BVstCiEdS9x03Skj//+chE+lBnrl79adrFTosgoPiXD 6hwLFIcbkIxExdhgrWUlKQ== 0000950152-06-007676.txt : 20060918 0000950152-06-007676.hdr.sgml : 20060918 20060918170042 ACCESSION NUMBER: 0000950152-06-007676 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060630 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060918 DATE AS OF CHANGE: 20060918 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEDAR FAIR L P CENTRAL INDEX KEY: 0000811532 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 341560655 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09444 FILM NUMBER: 061096181 BUSINESS ADDRESS: STREET 1: ONE CEDAR POINT DRIVE CITY: SANDUSKY STATE: OH ZIP: 44870 BUSINESS PHONE: 4196260830 MAIL ADDRESS: STREET 1: ONE CEDAR POINT DRIVE CITY: SANDUSKY STATE: OH ZIP: 44870 8-K/A 1 l22333ae8vkza.htm CEDAR FAIR 8-K/A Cedar Fair 8-K/A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K/A
(Amendment No. 1)
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 2006
 
CEDAR FAIR, L.P.
(Exact name of registrant as specified in its charter)
 
         
Delaware   1-9444   34-1560655
         
(State or other jurisdiction
of incorporation) 		  (Commission File Number)   (I.R.S. Employer
Identification Number)
     
One Cedar Point Drive    
Sandusky, Ohio   44870-5259
(Address of principal executive offices)   (Zip Code)
(419) 626-0830
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 

TABLE OF CONTENTS

Item 9.01 Financial Statements and Exhibits.
SIGNATURES
INDEX TO EXHIBITS
EX-23.1
EX-99.1
EX-99.2
EX-99.3

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On July 7, 2006, Cedar Fair, L.P. (“Cedar Fair”) filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Initial Report”), on which, among other things, Cedar Fair reported the acquisition of all of the outstanding shares of capital stock of Paramount Parks (“Paramount Parks”) under Item 2.01. Cedar Fair hereby amends the Initial Report in order to provide the financial information required by Items 9.01(a) and (b) of Form 8-K.
Item 9.01 Financial Statements and Exhibits.
  (a)   Financial Statements of Businesses Acquired.
 
      The following audited financial statements of Paramount Parks are being filed with this report as Exhibit 99.1:
  •   Report of Independent Auditors;
 
  •   Combined Statements of Operations for each of the three years in the period ended December 31, 2005;
 
  •   Combined Balance Sheets at December 31, 2005 and 2004;
 
  •   Combined Statements of Invested Equity and Comprehensive Income for each of the three years in the period ended December 31, 2005;
 
  •   Combined Statements of Cash Flows for each of the three years in the period ended December 31, 2005;
 
  •   Notes to Combined Financial Statements.
      The following unaudited interim financial statements of Paramount Parks are being filed with this report as Exhibit 99.2:
  •   Unaudited Condensed Combined Statements of Operations for the six months ended June 30, 2006 and 2005;
 
  •   Unaudited Condensed Combined Balance Sheet as of June 30, 2006;
 
  •   Unaudited Condensed Combined Statements of Cash Flows for the six months ended June 30, 2006 and 2005;
 
  •   Notes to Unaudited Condensed Combined Financial Statements.
  (b)   Unaudited Pro Forma Financial Information.
 
      The following unaudited pro forma financial information is being filed with this report as Exhibit 99.3:
  •   Unaudited Pro Forma Condensed Combined Balance Sheet as of June 25, 2006;
 
  •   Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as of June 25, 2006;
 
  •   Unaudited Pro Forma Condensed Combined Statement of Operations for the six month period ended June 25, 2006;
 
  •   Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2005;
 
  •   Notes to Unaudited Pro Forma Condensed Combined Statements of Operations.
  (d)   Exhibits.
     
Number   Exhibit
 
    
Exhibit 23.1
  Consent of PricewaterhouseCoopers LLP
 
    
Exhibit 99.1
  Audited Financial Statements listed in Item 9.01(a)
 
    
Exhibit 99.2
  Unaudited Interim Financial Statements listed in Item 9.01(a)
 
    
Exhibit 99.3
  Unaudited Pro Forma Financial Information listed in Item 9.01(b)

2

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SIGNATURES
     Pursuant to the requirements of The Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, hereunto duly authorized.
         
  Cedar Fair, L.P.
 
(Registrant)
 		  
September 18, 2006  /s/ Peter J. Crage    
  Peter J. Crage   
  Corporate Vice President — Finance and Chief Financial Officer   
 

3

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INDEX TO EXHIBITS
             
Number   Exhibit   Page
 
            
23.1
  Consent of PricewaterhouseCoopers LLP     5  
 
            
99.1
  Audited Financial Statements listed in Item 9.01(a)     6  
 
            
99.2
  Unaudited Interim Financial Statements listed in Item 9.01(a)     25  
 
            
99.3
  Unaudited Pro Forma Financial Information listed in Item 9.01(b)     30  

4

EX-23.1 2 l22333aexv23w1.txt EX-23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-116711) and Form S-8 (No. 333-99043) of Cedar Fair, L.P. of our report dated April 5, 2006 relating to the financial statements of CBS Corporation's Paramount Parks, which appears in the Current Report on Form 8-K of Cedar Fair, L.P. dated September 18, 2006. /s/ PricewaterhouseCoopers LLP New York, New York September 18, 2006 5 EX-99.1 3 l22333aexv99w1.txt EX-99.1 EXHIBIT 99.1 PARAMOUNT PARKS COMBINED FINANCIAL STATEMENTS AT DECEMBER 31, 2005 AND 2004 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2005 6 PARAMOUNT PARKS INDEX TO COMBINED FINANCIAL STATEMENTS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2005
Page(s) ------- Report of Independent Auditors 8 Combined Financial Statements: Combined Statements of Operations for each of the three years in the period ended December 31, 2005 9 Combined Balance Sheets at December 31, 2005 and 2004 10 Combined Statements of Invested Equity and Comprehensive Income for each of the three years in the period ended December 31, 2005 11 Combined Statements of Cash Flows for each of the three years in the period ended December 31, 2005 12 Notes to Combined Financial Statements 13-24
7 REPORT OF INDEPENDENT AUDITORS To the Management of CBS Corporation: In our opinion, the accompanying combined balance sheets and the related combined statements of operations, invested equity and comprehensive income, and cash flows present fairly, in all material respects, the financial position of Paramount Parks (the "Company"), consisting of the themed-park businesses of CBS Corporation ("CBS") as defined in Note 1 to the combined financial statements, at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Company is wholly owned by CBS. As disclosed in Note 1 and Note 3 to the combined financial statements, the Company relies on CBS for certain general and administrative services and engages in related party transactions with CBS and certain companies affiliated with CBS. The amounts recorded for these transactions are not necessarily representative of the amounts that would have been reflected in the combined financial statements had the Company been operated as a stand-alone company for the periods presented. /s/ PricewaterhouseCoopers LLP New York, New York April 5, 2006 8 PARAMOUNT PARKS COMBINED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 2005 2004 2003 -------- -------- -------- Revenues: Admissions $235,415 $226,257 $205,801 Food, merchandise and games 155,778 153,171 139,569 Other 31,898 30,033 30,046 -------- -------- -------- Total revenues 423,091 409,461 375,416 -------- -------- -------- Expenses: Operating 202,049 194,303 176,992 Selling, general and administrative 69,538 69,608 64,973 Cost of goods sold 41,730 39,968 36,847 Depreciation and amortization 49,561 51,633 45,503 -------- -------- -------- Total expenses 362,878 355,512 324,315 -------- -------- -------- Operating income 60,213 53,949 51,101 Other items, net 1,089 1,410 201 -------- -------- -------- Income before income taxes 61,302 55,359 51,302 Income tax expense 24,049 21,667 20,532 -------- -------- -------- Net income $ 37,253 $ 33,692 $ 30,770 ======== ======== ========
See Notes to Combined Financial Statements. 9 PARAMOUNT PARKS COMBINED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AT DECEMBER 31, ------------------- 2005 2004 -------- -------- ASSETS Current Assets: Cash and cash equivalents $ 8,369 $ 7,433 Receivables, less allowances of $494 in 2005 and $342 in 2004 6,681 8,322 Inventory 6,341 5,744 Prepaid insurance 9,163 1,683 Other current assets 6,714 2,923 -------- -------- Total current assets 37,268 26,105 Property and equipment, net (Note 2) 487,329 489,532 Spare parts inventory 11,243 10,399 Goodwill 274,480 274,480 Other assets 9,596 394 -------- -------- Total Assets $819,916 $800,910 ======== ======== LIABILITIES AND INVESTED EQUITY Current Liabilities: Accounts payable $ 7,590 $ 4,855 Accrued compensation 7,574 8,213 Deferred income 27,243 18,041 Accrued expenses and other current liabilities 19,340 14,140 -------- -------- Total current liabilities 61,747 45,249 Deferred tax liabilities, net (Note 4) 95,792 96,939 Other liabilities 875 836 Commitments and contingencies (Note 5) Invested Equity: Invested capital 649,626 650,142 Cumulative translation adjustments 11,876 7,744 -------- -------- Total Invested Equity 661,502 657,886 -------- -------- Total Liabilities and Invested Equity $819,916 $800,910 ======== ========
See Notes to Combined Financial Statements. 10 PARAMOUNT PARKS COMBINED STATEMENTS OF INVESTED EQUITY AND COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 2005 2004 2003 -------- -------- -------- Invested Equity: Invested capital Balance, beginning of year $650,142 $665,082 $673,568 Net income 37,253 33,692 30,770 Net distribution to CBS (37,769) (48,632) (39,256) -------- -------- -------- Balance, end of year 649,626 650,142 665,082 -------- -------- -------- Cumulative Translation Adjustments: Balance, beginning of year 7,744 (55) (17,468) Activity 4,132 7,799 17,413 -------- -------- -------- Balance, end of year 11,876 7,744 (55) -------- -------- -------- Total Invested Equity $661,502 $657,886 $665,027 ======== ======== ========
YEAR ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- Comprehensive Income: Net income $37,253 $33,692 $30,770 Cumulative translation adjustments 4,132 7,799 17,413 ------- ------- ------- Total Comprehensive Income $41,385 $41,491 $48,183 ======= ======= =======
See Notes to Combined Financial Statements. 11 PARAMOUNT PARKS COMBINED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 2005 2004 2003 -------- -------- -------- Operating activities: Net income $ 37,253 $ 33,692 $ 30,770 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation and amortization 49,561 51,633 45,503 Bad debt expense 452 114 252 Changes in operating assets and liabilities: Decrease (increase) in receivables 1,261 (3,087) 4,230 (Increase) decrease in inventory (1,341) (139) 507 (Increase) decrease in prepaid insurance and other current assets (11,275) (38) 2,119 Increase in accounts payable and accrued expenses 6,933 6,079 294 Other, net 4,456 4,273 (1,641) -------- -------- -------- Net cash flow provided by operating activities 87,300 92,527 82,034 -------- -------- -------- Investing activities: Capital expenditures (48,595) (44,321) (42,947) -------- -------- -------- Net cash flow used for investing activities (48,595) (44,321) (42,947) -------- -------- -------- Financing activities: Net distribution to CBS (37,769) (48,632) (39,256) -------- -------- -------- Net cash flow used for financing activities (37,769) (48,632) (39,256) -------- -------- -------- Net increase (decrease) in cash and cash equivalents 936 (426) (169) Cash and cash equivalents at beginning of year 7,433 7,859 8,028 -------- -------- -------- Cash and cash equivalents at end of year $ 8,369 $ 7,433 $ 7,859 ======== ======== ========
Non-Cash Investing Activities: In 2005, the Company invested $6.0 million in Mason Family Resorts, LLC by contributing certain land and campground facilities. See Notes to Combined Financial Statements. 12 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Paramount Parks ("the Company"), is operated through wholly-owned subsidiaries and affiliates of CBS Corporation ("CBS"). The Company owns and operates five regional theme parks and a themed attraction in the U.S. and Canada: Paramount's Carowinds, in Charlotte, North Carolina; Paramount's Great America, in Santa Clara, California; Paramount's Kings Dominion, located near Richmond, Virginia; Paramount's Kings Island, located near Cincinnati, Ohio; Paramount's Canada's Wonderland, located near Toronto, Ontario; and the themed attraction, Star Trek: The Experience, in the Las Vegas Hilton, a futuristic interactive environment based on the popular television and movie series. Each of the theme parks features attractions, products and live shows based on various intellectual properties of the Company. In addition, the Company manages and operates Bonfante Gardens, a family oriented garden theme park in Gilroy, California. In 2004 and 2003, the Company managed the operations of Terra Mitica, a theme park in Benidorm, Spain, under a management agreement. This management agreement was terminated on December 31, 2004. In August 2004, the Company entered into an agreement with Tianjin Economic Development Agency ("TEDA") for concept and schematic design services related to the development of a new theme park located Tianjin, China. This agreement is effective through April 15, 2006. The Company also has a 16% interest in an investment in Mason Family Resorts, LLC (see Note 2), which is in the construction phase of a hotel and themed indoor waterpark in Cincinnati, Ohio, located adjacent to Paramount's Kings Island. In January 2006, CBS announced its intention to divest the Company and to complete the divestiture in the second half of 2006. The accompanying combined financial statements of the Company are presented on a carve-out basis and reflect the combined historical results of operations, financial position and cash flows of the Company. The combined historical financial statements include allocations of certain CBS Corporate expenses (see Note 3). Management believes that the assumptions and estimates used in preparation of the underlying combined statements are reasonable. However, the combined financial statements herein may not necessarily reflect the Company's results of operations, financial position or cash flows in the future, or what its results of operations, financial position or cash flows would have been if the Company had been a stand-alone company during the periods presented. Because of the nature of these combined financial statements, CBS' net investment in the Company is shown as Invested Capital. Other transactions with CBS and related parties have been identified in Note 3. A substantial amount of Paramount Parks' income is generated during its seasonal operating period beginning April through the end of October. Factors such as local economic conditions, competitors and their actions, and weather conditions during the operating season may impact the performance of the business. 13 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of the Company's combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Areas involving estimates include: allowance for doubtful accounts; testing for impairment of long-lived assets and net realizable value of inventories; depreciable lives of long-lived assets; accruals and reserves; methodologies used to allocate corporate expenses; certain tax accruals and tax-related accounts; and reporting and disclosure of contingent liabilities. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand and short-term (maturities of three months or less at the date of purchase) highly liquid investments. RECEIVABLES Receivables are stated net of an allowance for doubtful accounts. The provision for doubtful accounts charged to expense was $.5 million (2005), $.1 million (2004), and $.3 million (2003). INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market value and primarily consist of products for resale including merchandise, food, games and miscellaneous supplies. Spare parts inventories consist of parts that are used in the maintenance of rides and attractions. These items are expensed as the repair or maintenance of rides and attractions occur. PREPAID INSURANCE Prepaid insurance is expensed during the coverage period which is normally one year. OTHER CURRENT ASSETS Other current assets were $6.7 million and $2.9 million at December 31, 2005 and 2004, respectively. In 2005, other current assets include capitalized design costs related to the TEDA agreement, which are accounted for under the percentage of completion method. 14 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (TABULAR DOLLARS IN THOUSANDS) PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Depreciation is computed principally by the straight-line method over the estimated useful lives as follows: Amusement park rides and attractions 15 years Buildings and improvements 20 to 25 years Furniture, equipment and other 5 to 7 years Land improvements 20 years Leasehold improvements Over lease term, up to a maximum of 15 years
Balances of major classes of assets, and accumulated depreciation at December 31, are as follows:
AT DECEMBER 31, ----------------------- 2005 2004 ---------- ---------- Amusement park rides and attractions $ 742,123 $ 696,036 Land 107,711 111,726 Buildings and improvements 109,034 104,583 Furniture, equipment and other 66,966 64,961 Land improvements 50,271 47,983 Leasehold improvements 17,130 16,973 ---------- ---------- Total 1,093,235 1,042,262 Less: accumulated depreciation 605,906 552,730 ---------- ---------- Property and equipment, net $ 487,329 $ 489,532 ========== ==========
Maintenance and repair costs that are incurred to maintain property and equipment in their original operating condition are charged to expense as incurred, and upgrades, renewals and improvements that extend the useful life of the assets are capitalized. When an asset is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed and the resulting gain or loss is recognized. INVESTMENT In 2005, the Company contributed certain land and campground facilities at a book value of $6.0 million in exchange for a 16% minority interest in Mason Family Resorts, LLC. In accordance with EITF Issue 03-16, "Accounting for Investments in Limited Liability Companies", the Company accounts for this investment under the equity method of accounting. The Company evaluates its investment for impairment loss by comparing the estimated fair value of the investment to the balance sheet carrying amount, and considers other factors, as appropriate, when determining whether an other-than-temporary decline in fair value has occurred. 15 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) IMPAIRMENT OF LONG-LIVED ASSETS In accordance with Statement of Financial Accounting Standards (SFAS) 144, "Accounting for the Impairment or Disposal of Long-lived Assets", the Company assesses long-lived assets other than goodwill for impairment whenever there is an indication that the carrying amount of the asset may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows generated by those assets to the respective assets' carrying value. In accordance with SFAS 142, "Goodwill and Other Intangible Assets", the Company performs an annual (as of October 31st) fair value-based impairment test for goodwill. Under SFAS 142, the first step of the test requires a determination of whether or not the book value of a reporting unit exceeds its corresponding fair value. If the book value of a reporting unit exceeds its respective fair value, the second step of the test compares the implied fair value of the reporting unit's goodwill with the book value of the goodwill. As a result of the annual impairment test, the Company determined that there was no impairment of goodwill for the years ended December 31, 2005, 2004 and 2003. REVENUE RECOGNITION Revenues are primarily recognized at the time of admission to the parks, provision of services, or when products are delivered to customers. For season pass and other multi-use admissions purchased in advance for entrance to the park in future periods, amounts are initially deferred and recognized in income over the applicable periods covered by the pass. For the years ended December 31, 2005 and 2004, the Company has recorded $18.3 million and $15.3 million, respectively, as income related to season passes purchased by customers in advance. Amounts remitted to concessionaires, representing the concessionaire's portion of earned revenue, have been netted against food, merchandise and games revenue in accordance with EITF issue 99-19, "Reporting Revenue Gross as a Principal verses Net as an Agent". The amounts netted against revenues were $19.0 million (2005), $18.9 million (2004), and $17.0 million (2003). Other revenues consist of management fees, design fees, parking, sponsorships, concerts and other miscellaneous revenues. Management fee revenue, generated from the management of two theme parks, Bonfante Gardens and Terra Mitica, is recognized as earned over the life of the agreements. Design revenue earned from the agreement with TEDA for the design of a theme park in China is recognized using the percentage of completion method in accordance with Statement of Position (SOP) 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts". 16 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) EXPENSES Operating expenses primarily include the costs of park operations, including salaries and wages, employee benefits, advertising, outside services, maintenance, utilities and insurance. Advertising expenses are expensed as incurred. Advertising expenses, which are included in operating expenses, were $25.6 million (2005), $26.6 million (2004) and $23.1 million (2003). Selling, general and administrative expenses primarily include the costs associated with personnel recruitment, benefits, and administrative departments which support the operations of the business. Cost of goods sold includes costs of inventory for food, merchandise and games, related freight and other product-related costs. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS The Company's foreign subsidiary's assets and liabilities are translated at exchange rates in effect at the balance sheet date, while results of operations are translated at average exchange rates for the respective periods. The resulting translation gains and losses are included as a component of Invested Equity. Foreign currency transaction gains have been included in "Other items, net" in the Combined Statements of Operations and were $1.0 million (2005), $.5 million (2004) and $.2 million (2003). INCOME TAXES The Company's income taxes as presented herein are calculated on a separate return basis, although the Company's operating results are included in the consolidated tax return of CBS. CBS manages its tax position for the benefit of its entire portfolio of businesses, and, as such, the assumptions, methodologies and calculations made for purposes of determining the Company's tax provision and related tax accounts in the combined financial statements herein, may differ from those made by CBS and, in addition, are not necessarily reflective of the tax strategies that the Company would have followed as a separate stand-alone company. Income taxes are accounted for under the asset and liability method of accounting pursuant to SFAS 109, "Accounting for Income Taxes". Deferred income taxes are recorded to reflect the tax benefits and consequences of future years' differences between the tax bases of assets and liabilities and their related financial reporting basis. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. ASSET RETIREMENT OBLIGATIONS In accordance with SFAS 143, "Accounting for Asset Retirement Obligations," the Company recorded an asset retirement obligation of $.8 million in 2003 and reflected the related liability on the Combined Balance Sheets under the caption "Other liabilities". As of December 31, 2005 and 2004, the amounts of these obligations were $.9 million and $.8 million, respectively. 17 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (TABULAR DOLLARS IN THOUSANDS) STOCK-BASED COMPENSATION CBS, under its Long-Term Incentive Plans (the "Plans"), grants stock options and Restricted Stock Units ("RSUs") to certain employees of the Company. Prior to the adoption of SFAS 123R, "Share-Based Payment," CBS followed the disclosure-only provisions of SFAS 123, "Accounting for Stock-Based Compensation." SFAS 123R also superseded APB 25, "Accounting for Stock Issued to Employees". CBS applied APB 25, and, accordingly, did not recognize compensation expense for the stock option grants because CBS typically does not issue options at exercise prices below the market value at the date of the grant. SFAS 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the vesting period during which an employee is required to provide service in exchange for the award. Effective on January 1, 2006, CBS adopted SFAS 123R and, accordingly, the Company will recognize compensation cost for equity based compensation for all new or modified grants after the date of adoption. In addition, the Company will recognize the unvested portion of the grant date fair value of awards issued prior to the adoption based on the fair values previously calculated for disclosure purposes. At December 31, 2005, the aggregate value of unvested options as determined using a Black-Scholes option valuation model was approximately $1.0 million, which will be recognized over the remaining vesting period of these options. On March 8, 2005, the Compensation Committee of the Board of Directors of CBS approved the acceleration of the vesting of unvested stock options having a then exercise price of $38.00 or greater. Stock option awards granted from 1999 through 2004 were subject to this acceleration which was effective as of March 8, 2005. Incremental pre-tax expense of $1.5 million associated with the acceleration of the Company's employee stock options was reflected in the 2005 pro forma disclosure and is included in the table below. The following table reflects the effect on net income as if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation. These pro forma effects may not be representative of future stock compensation expense since the estimated fair value of stock options on the date of grant is amortized to expense over the vesting period, and the vesting of certain options was accelerated on March 8, 2005. See Note 7 for detailed assumptions.
YEARS ENDED DECEMBER 31, 2005 2004 2003 - ------------------------ ------- ------- ------- Net income $37,253 $33,692 $30,770 Option expense, net of tax (2,881) (1,895) (1,839) ------- ------- ------- Net income after option expense $34,372 $31,797 $28,931 ======= ======= =======
Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the grant date and expensed over the vesting period. For the year ended December 31, 18 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) 2005, the Company recorded pre-tax compensation expense of $0.2 million. There were no RSU grants issued in 2004 and 2003. NOTE 3 - RELATED PARTY TRANSACTIONS The Company is wholly owned by CBS and enters into transactions with CBS for, among other things, the daily transfer of net cash collections, daily cash funding to be used in operations, payment of taxes on income and allocations of corporate expenses. For purposes of these combined financial statements, the net amount due to CBS has been classified as Invested Capital. CBS provides the Company with certain general and administrative services such as insurance, technology systems, tax, and certain other services. The combined financial statements reflect expenses which were allocated based on specific identification of costs, assets and liabilities. Management believes that the methodologies used to allocate expenses for the services described above are reasonable. However, the Company's expenses as a stand-alone company may be different from those reflected in the Combined Statements of Operations. See Note 6 for pension and other employee benefit costs charged by CBS to the Company. On December 31, 2005, the separation of the former Viacom Inc. ("Former Viacom") into two publicly traded entities, CBS Corporation ("CBS") and new Viacom Inc. ("New Viacom") was completed (the "Viacom Separation"). The Company has several licensing agreements with CBS and New Viacom, allowing the Company the right to license certain CBS and New Viacom products. Total amounts paid to CBS and New Viacom under these agreements were $2.7 million (2005), $2.6 million (2004) and $1.8 million (2003), and are included in selling, general and administrative expenses in the Combined Statements of Operations. Subsequent to the Viacom Separation, at December 31, 2005, a new licensing agreement was entered into with New Viacom, superseding the prior licensing agreements. Under the terms of the new licensing agreement, the anticipated license payment to New Viacom for 2006 is approximately $4.2 million. The Company also has arrangements with Blockbuster Inc. ("Blockbuster"), a former subsidiary of Former Viacom. Blockbuster stores sold admission tickets to the Company's parks during 2003 and 2004, up to and through the split-off of Blockbuster from Former Viacom in October 2004. Commissions were paid to Blockbuster on a per ticket sold basis. Total amounts collected by Blockbuster for such sales were $20.7 million (2004) and $13.6 million (2003), and commissions paid to Blockbuster by the Company were $1.2 million (2004) and $.7 million (2003). NOTE 4 - INCOME TAXES The Company's operating results have been included in consolidated federal, state and local income tax returns as well as the applicable tax returns in non-U.S. jurisdictions filed by CBS. The tax payments related to the returns were paid by CBS. However, the income tax expense reflected in the Combined Statements of Operations and deferred tax liabilities reflected in the Combined Balance Sheets have been prepared as if these amounts were computed on a separate return basis. Tax losses generated by the Company have been utilized by CBS to reduce its consolidated taxable income. 19 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (TABULAR DOLLARS IN THOUSANDS) U.S. and foreign income, before income taxes are as follows:
YEAR ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- United States $34,323 $30,090 $35,933 Foreign 26,979 25,269 15,369 ------- ------- ------- $61,302 $55,359 $51,302 ======= ======= =======
Components of the income tax expense are as follows:
YEAR ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- Current: Federal $13,723 $11,207 $10,227 State and Local 4,253 3,473 3,169 Foreign 8,875 8,169 9,141 ------- ------- ------- 26,851 22,849 22,537 Deferred (2,802) (1,182) (2,005) ------- ------- ------- Provision for incomes taxes $24,049 $21,667 $20,532 ======= ======= =======
The difference between income taxes as expected at the U.S. federal statutory tax rate of 35% and income taxes provided on income before taxes are summarized as follows:
YEAR ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- Taxes on income at U.S. statutory rate $21,456 $19,376 $17,956 State and local taxes, net of federal tax benefit 2,205 1,934 2,303 Foreign income taxed at different rates 267 244 178 Other, net 121 113 95 ------- ------- ------- Total income taxes $24,049 $21,667 $20,532 ======= ======= =======
20 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) (TABULAR DOLLARS IN THOUSANDS) The following is a summary of the deferred tax accounts in accordance with SFAS 109:
AT DECEMBER 31, ------------------- 2005 2004 -------- -------- Deferred tax assets: Provision for expenses and losses $ 424 $ 371 -------- -------- Total deferred tax assets 424 371 Deferred tax liabilities: Property, equipment, and intangible assets (96,216) (97,310) Total deferred tax liabilities (96,216) (97,310) -------- -------- Deferred tax liabilities, net $(95,792) $(96,939) ======== ========
The tax expense recognized and the deferred taxes recorded in the accompanying combined financial statements may not necessarily reflect the tax expense or deferred taxes of the Company had it been a separate stand-alone Company during the periods presented. NOTE 5 - COMMITMENTS AND CONTINGENCIES The Company has long-term noncancelable lease commitments for various real property and office space which expire at various dates. Certain leases contain renewal and escalation clauses. At December 31, 2005, minimum rental payments under noncancelable operating leases are as follows: 2006 $ 6,284 2007 5,920 2008 5,734 2009 5,501 2010 1,629 2011 and thereafter 1,515 ------- Total minimum lease payments $26,583 =======
Rent expense was $7.6 million (2005), $7.4 million (2004) and $7.8 million (2003). As of December 31, 2005, the Company had purchase and other future commitments, primarily related to ride purchase contracts and design service contracts, totaling $14.9 million. 21 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) The Company is involved in ordinary and routine litigation incidental to its business. Management believes that any ultimate liability resulting from those actions or claims will not have a material adverse effect on the Company's results of operations, financial position or cash flows. NOTE 6 - PENSION AND OTHER EMPLOYEE BENEFITS The employees of the Company participate in certain noncontributory defined benefit pension plans of CBS. Retirement benefits are based principally on years of service and salary. In addition, CBS sponsors a health and welfare plan that provides certain postretirement healthcare and life insurance benefits to the Company's retired employees and their covered dependents. Retiring employees are eligible for their benefits if they meet certain age and service requirements at the time of the retirement. CBS also provides other employee benefits to the Company's employees, including certain post employment benefits, medical, dental, and life and disability insurance costs and it also offers participation in a 401k savings plan to the employees of the Company. CBS has charged the Company for the above benefits in the amount of $4.3 million (2005), $3.9 million (2004) and $4.9 million (2003). These charges have been included in selling, general and administrative expenses in the accompanying Combined Statements of Operations. The liabilities that are recorded by CBS related to the pension and other employee benefit plans are not allocated to the Company. Management believes that the methodologies used to allocate pension and other employee benefit charges to the Company are reasonable. However, the Company's pension and other employee benefit expenses may differ if the Company were a separate, stand-alone company. NOTE 7 - STOCK COMPENSATION PLANS LONG-TERM INCENTIVE PLANS Employees of the Company are granted stock options under the Plans. The stock options and RSUs generally vest over a three-to five-year period from the date of grant. Options granted in 2005 expire eight years from the date of grant and options granted prior to 2005 expire ten years after the date of grant. On the effective date of the Viacom Separation, all outstanding unexercised options to purchase shares of Former Viacom class B common stock held by employees of the Company were converted into options to purchase shares of CBS Corp. Class B Common Stock in a manner designed to preserve their intrinsic value. As a result, each outstanding stock option to purchase shares of Former Viacom class B common stock was converted into 1.273438 stock options to purchase shares of CBS Corp. Class B Common Stock ("Stock Option and RSU Conversion"). Any options to purchase fractional shares resulting from the stock option and RSU conversion were paid out in cash. 22 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes the Company's stock option activity under the Plans:
OPTIONS WEIGHTED-AVERAGE OUTSTANDING EXERCISE PRICE ----------- ---------------- Balance at December 31, 2002 676,810 $37.72 --------- Granted 187,200 39.33 Exercised (74,575) 27.70 Canceled (89,126) 43.88 --------- Balance at December 31, 2003 700,309 38.43 --------- Granted 185,200 40.39 Exercised (45,442) 17.34 Canceled (31,474) 43.41 --------- Balance at December 31, 2004 808,593 39.87 --------- Granted 140,260 37.38 Exercised (26,934) 16.45 Canceled (22,785) 40.32 --------- Balance at December 31, 2005 - before Stock Option Conversion (a) 899,134 40.17 --------- Conversion of Former Viacom stock options to CBS Corp. stock options 245,738 --------- Balance at December 31, 2005 - after Stock Option Conversion 1,144,872 $31.55 =========
(a) All stock option activity prior to this balance reflects activity for stock options to purchase shares of Former Viacom common stock. Stock options exercisable at year end were as follows: December 31, 2003 (before Stock Option and RSU Conversion) 375,878 December 31, 2004 (before Stock Option and RSU Conversion) 446,201 December 31, 2005 (after Stock Option and RSU Conversion) 989,732
23 PARAMOUNT PARKS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) The weighted-average fair value of each option as of the grant date was $10.04, $18.40 and $18.32 in 2005, 2004 and 2003, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
2005 2004 2003 ----- ----- ----- Expected dividend yield .75% .59% -- Expected stock price volatility 24.00% 38.98% 39.62% Risk-free interest rate 3.78% 4.02% 3.63% Expected life of options (years) 5.2 7.3 6.7
The following table summarizes information concerning outstanding and exercisable stock options to purchase CBS Corp. Class B Common Stock under the Plans at December 31, 2005. This information reflects the impact of the Viacom Separation as the number of options and the exercise price is shown after the Stock Option and RSU Conversion.
OUTSTANDING AFTER SEPARATION EXERCISABLE AFTER SEPARATION ------------------------------------------- ---------------------------- REMAINING WEIGHTED- RANGE OF EXERCISE NUMBER OF CONTRACTUAL WEIGHTED-AVERAGE NUMBER OF AVERAGE PRICE OPTIONS LIFE (YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE - ----------------- --------- ------------ ---------------- --------- -------------- 10 to 19.99 54,120 1.39 $12.31 54,120 $12.31 20 to 29.99 203,804 6.15 $28.31 48,664 $24.98 30 to 39.99 753,053 5.78 $31.67 753,053 $31.67 40 to 49.99 131,221 4.39 $43.35 131,221 $43.35 50 to 59.99 2,674 4.58 $54.97 2,674 $54.97 --------- ------- 1,144,872 989,732 ========= =======
Beginning in 2005, CBS granted awards of RSUs to employees. Compensation expense for RSUs is determined based upon the market price of the shares underlying the awards on the grant date and expensed over the vesting period. RSUs vest over a four year period. For the year ended December 31, 2005, the Company recorded pre-tax compensation expense of $0.2 million in the Combined Statements of Operations. During 2005, CBS granted 26,604 RSUs to the Company's employees. At December 31, 2005, upon conversion to RSUs for CBS Class B Common Stock, there were 31,103 RSUs outstanding at a weighted average grant date fair value of $29.35. 24 EX-99.2 4 l22333aexv99w2.txt EX-99.2 EXHIBIT 99.2 PARAMOUNT PARKS UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS AT JUNE 30, 2006 AND FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005 25 PARAMOUNT PARKS UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------------- 2006 2005 -------- -------- Revenues: Admissions $ 81,360 $ 85,366 Food, merchandise and games 55,670 58,058 Other 21,874 9,896 -------- -------- Total revenues 158,904 153,320 -------- -------- Expenses: Operating 83,225 88,143 Selling, general and administrative 30,759 33,323 Cost of goods sold 20,287 16,063 Depreciation and amortization 26,408 23,838 -------- -------- Total expenses 160,679 161,367 -------- -------- Operating loss (1,775) (8,047) Other items, net (2,208) 838 -------- -------- Loss before income taxes (3,983) (7,209) Income tax benefit (1,562) (2,822) -------- -------- Net loss $ (2,421) $ (4,387) ======== ========
See Notes to Unaudited Condensed Combined Financial Statements. 26 PARAMOUNT PARKS UNAUDITED CONDENSED COMBINED BALANCE SHEET (IN THOUSANDS)
AS OF JUNE 30, 2006 ------------- ASSETS Current assets: Cash and cash equivalents $ 10,471 Receivables, net 26,519 Inventory 15,610 Prepaids and other current assets 21,585 -------- Total current assets 74,185 Property and equipment, net 500,587 Goodwill 274,480 Other assets 15,228 -------- Total assets $864,480 ======== LIABILITIES AND INVESTED EQUITY Current liabilities: Accounts payable $ 25,366 Accrued compensation 7,410 Deferred income 49,525 Accrued expenses and other current liabilities 21,560 -------- Total current liabilities 103,861 Deferred tax liabilities, net 95,792 Other liabilities 875 Invested equity: Invested capital 663,523 Cumulative translation adjustments 429 -------- Total invested equity 663,952 -------- Total liabilities and invested equity $864,480 ========
See Notes to Unaudited Condensed Combined Financial Statements. 27 PARAMOUNT PARKS UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------------- 2006 2005 -------- -------- Operating activities: Net loss $ (2,421) $ (4,387) Adjustments to reconcile net loss to net cash flow provided by operating activities: Depreciation and amortization 26,408 23,838 Bad debt expense 174 81 Changes in operating assets and liabilities: Increase in receivables (19,557) (26,914) Increase in inventory (9,112) (7,222) Increase in prepaids and other current assets (5,532) (15,956) (Increase) decrease in other assets 332 (1,059) Increase in accounts payable and accrued expenses 7,093 17,880 Increase in deferred income 22,277 33,056 Other, net 569 217 -------- -------- Net cash flow provided by operating activities 20,231 19,534 -------- -------- Investing activities: Capital expenditures (34,447) (32,863) -------- -------- Net cash flow used for investing activities (34,447) (32,863) -------- -------- Financing activities: Net contribution from CBS 16,318 6,264 -------- -------- Net cash flow provided by financing activities 16,318 6,264 -------- -------- Net increase (decrease) in cash and cash equivalents 2,102 (7,065) Cash and cash equivalents at beginning of period 8,369 7,433 -------- -------- Cash and cash equivalents at end of period $ 10,471 $ 368 ======== ========
See Notes to Unaudited Condensed Combined Financial Statements. 28 PARAMOUNT PARKS NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005 NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Paramount Parks, Inc. ("Paramount Parks") is operated through wholly-owned subsidiaries and affiliates of CBS Corporation. Paramount Parks owns and operates five regional theme parks and a themed attraction in the U.S. and Canada: Paramount's Carowinds, in Charlotte, North Carolina; Paramount's Great America, in Santa Clara, California; Paramount's Kings Dominion, located near Richmond, Virginia; Paramount's Kings Island, located near Cincinnati, Ohio; Paramount's Canada's Wonderland, located near Toronto, Ontario; and the themed attraction, Star Trek: The Experience, in the Las Vegas Hilton, a futuristic interactive environment based on the popular television and movie series. Each of the theme parks feature attractions, products and live shows based on various intellectual properties of Paramount Parks. In addition, Paramount Parks manages and operates Bonfante Gardens, a family oriented garden theme park in Gilroy, California. The accompanying unaudited condensed combined financial statements of Paramount Parks have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Paramount Parks' management, all adjustments considered necessary for a fair statement of the results of the interim periods covered in this report have been included. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the exhibit 99.1. NOTE 2 - RELATED PARTY TRANSACTIONS Paramount Parks is wholly-owned by CBS and enters into transactions with CBS for, among other things, the daily transfer of net cash collections, daily cash funding to be used in operations, payment of taxes on income and allocations of corporate expenses. For purposes of these unaudited condensed combined financial statements, the net amount due to CBS has been classified as Invested Capital. CBS provides Paramount Parks with certain general and administrative services such as insurance, technology systems, tax, and certain other services. The combined financial statements reflect expenses which were allocated based on specific identification of costs, assets and liabilities. Management believes that the methodologies used to allocate expenses for the services described above are reasonable. However, Paramount Parks' expenses as a stand-alone company may be different from those reflected in the Unaudited Condensed Combined Statements of Operations. NOTE 3 - SUBSEQUENT EVENT On June 30, 2006, Cedar Fair acquired all of the outstanding shares of capital stock of Paramount Parks from a subsidiary of CBS Corporation. 29 EX-99.3 5 l22333aexv99w3.txt EX-99.3 EXHIBIT 99.3 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following unaudited pro forma condensed combined financial information has been derived by the application of pro forma adjustments to the historical combined financial statements of Cedar Fair, L.P. ("Cedar Fair") and Paramount Parks, Inc. ("Paramount Parks") as of June 25, 2006 and for the six-month period ended June 25, 2006 and the year ended December 31, 2005. The unaudited pro forma condensed combined balance sheet gives effect to the proposed acquisition of Paramount Parks by Cedar Fair and permanent financing thereof as if they had occurred on June 25, 2006. The unaudited pro forma condensed combined statements of operations for the six-month and twelve-month periods give effect to the acquisition and permanent financing thereof as if they had occurred on January 1, 2005. Cedar Fair's interim fiscal periods end on the last Sunday of the month, which is June 25, 2006 in the case of the interim period presented. For purposes of the pro forma combined financial information, the historical financial statements of Paramount Parks as of June 30, 2006 and for the six months ended June 30, 2006 have been combined with Cedar Fair's financial statements as of June 25, 2006 and for the six months ended June 25, 2006. Assumptions underlying the pro forma adjustments necessary to reasonably present this pro forma information are described in the accompanying notes, which should be read in conjunction with this pro forma condensed combined financial information. The pro forma adjustments described in the accompanying notes have been made based on available information and, in the opinion of management, are reasonable. The pro forma condensed combined financial information should not be considered indicative of actual results that would have been achieved had the transactions occurred on the respective dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or for any future period. The acquisition of Paramount Parks by Cedar Fair will be accounted for as a purchase in conformity with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," with intangible assets recorded in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." The total cost of the acquisition will be allocated as a change in basis to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the date of the acquisition. The excess of the purchase price over the historical basis of the net assets to be acquired has been allocated in the accompanying pro forma financial information based on preliminary valuation estimates and certain assumptions that management believes are reasonable. The actual allocation will be subject to the final valuation of Paramount Parks' assets and liabilities and, therefore, that allocation and the resulting effect on income from operations may differ from the pro forma amounts included herein. In addition, in accordance with the provisions of SFAS No. 142, no amortization of indefinite-lived intangible assets or goodwill will be recorded. The unaudited pro forma condensed combined statements of operations do not include any cost reduction opportunities expected to result from operating synergies between Cedar Fair and Paramount Parks or certain non-recurring costs and charges that Cedar Fair has or will record on or following the closing of the acquisition. These non-recurring costs and charges include, but are not limited to, penalties incurred upon repayment of existing debt and the write off of debt issuance costs. 30 CEDAR FAIR, L.P. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 25, 2006 (In thousands)
CEDAR FAIR PARAMOUNT HISTORICAL PARKS PRO FORMA CEDAR FAIR (1) HISTORICAL (2) ADJUSTMENTS (3) PRO FORMA ---------- -------------- --------------- ---------- ASSETS Current assets: Cash $ 18,751 $ 10,471 $ (15,206) (a) $ 14,016 Receivables 16,339 26,519 (507) (c) 42,351 Inventories 30,138 15,610 45,748 Prepaids and other current assets 10,159 21,585 (5,860) (h) 24,067 (4,026) (f) 2,209 (b) ---------- -------- ---------- ---------- Total current assets 75,387 74,185 (23,390) 126,182 Property and equipment, net 980,639 500,587 567,540 (b) 2,048,766 Goodwill -- 274,480 51,347 (b) 334,888 9,061 (d) Intangibles and other assets, net 16,223 15,228 65,800 (b) 109,963 28,034 (b) (9,061) (d) (4,806) (e) (1,455) (i) ---------- -------- ---------- ---------- Total assets $1,072,249 $864,480 $ 683,070 $2,619,799 ========== ======== ========== ========== LIABILITIES & EQUITY Current liabilities: Current maturities of long-term debt $ 40,000 $ -- $ (22,550) (j) $ 17,450 Accounts payable 29,833 25,366 55,199 Distributions payable to partners 25,343 -- 25,343 Deferred revenue 26,136 49,525 75,661 Accrued expenses and other current liabilities 52,986 28,970 12,163 (b) 90,195 (810) (c) (3,114) (g) ---------- -------- ---------- ---------- Total current liabilities 174,298 103,861 (14,311) 263,848 Other liabilities 7,743 875 (2,811) (i) 5,807 Long-term debt: Revolving credit loans 196,600 -- (94,600) (j) 102,000 Term debt 325,000 -- 1,402,550 (j) 1,727,550 ---------- -------- ---------- ---------- 521,600 -- 1,307,950 1,829,550 Deferred tax liabilities -- 95,792 65,697 (b) 156,683 (4,806) (e) ---------- -------- ---------- ---------- Total liabilities 703,641 200,528 1,351,719 2,255,888 ---------- -------- ---------- ---------- Equity 368,608 663,952 (663,952) (k) 363,911 (4,697) (i) ---------- -------- ---------- ---------- Total liabilities & equity $1,072,249 $864,480 $ 683,070 $2,619,799 ========== ======== ========== ==========
The accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet are an integral part of this statement. 31 CEDAR FAIR, L.P. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 25, 2006 (1) The amounts in this column represent the reported results for Cedar Fair as of June 25, 2006. (2) The amounts in this column represent the reported results for Paramount Parks as of June 30, 2006. (3) The amounts in this column represent the adjustments necessary to give effect to the acquisition of Paramount Parks as of June 25, 2006. The adjustments are based on a preliminary allocation of the purchase price, which is expected to be finalized within one year of the acquisition date. (a) Set forth below are the estimated sources and uses of funds pertaining to the acquisition. The sources and uses below assume that the acquisition was consummated on June 25, 2006. SOURCES AND USES Sources: Permanent financing: Revolving credit facility (1) $ 102,000 Term loan facility (2) 1,745,000 Existing cash balances (3) 15,206 ---------- $1,862,206 ========== Uses: Common stock acquisition consideration (4) $1,250,572 Repayment of existing term debt (5) 374,167 Repayment of existing revolver 196,600 Transaction costs (6) 40,867 ---------- $1,862,206 ==========
(1) Represents the amount to be drawn on a $150 million (global) revolver credit loan to help complete the acquisition. (2) Represents the amount expected to be drawn on a $1,745 million term loan facility bearing interest at LIBOR plus 2.50% to provide funds to repay the temporary bridge financing. (3) Represents the portion of existing cash balances that are expected to be used to pay the costs and expenses directly associated with the acquisition. (4) Represents the estimated total consideration given in the acquisition, including the base purchase price plus adjustments for closing cash-on-hand and working capital as specified in the acquisition Agreement. (5) Includes accrued interest of $3.1 million, $6.1 million of prepayment penalties and $365.0 million of principal payments. (6) Represents costs incurred or expected to be incurred by Cedar Fair directly associated with the acquisition and obtaining the related financing. 32 (b) The preliminary allocation of purchase price to the fair values of the net assets acquired in connection with the acquisition is as follows (in thousands): PURCHASE PRICE ALLOCATION Common stock acquisition consideration $1,250,572 Direct acquisition costs 12,833 ---------- Total consideration and direct acquisition costs 1,263,405 Less - historical cost of net asset value acquired: Equity 663,952 Net assets and liabilities not acquired by Cedar Fair and the affect of accounting conformity changes (9,583) (654,369) ------- ---------- 609,036 Debt issuance costs - new bank financing (1) 28,034 ---------- Excess purchase price over net asset value $ 637,070 ========== Preliminary allocation of excess purchase price over net assets acquired and related purchase accounting adjustments (2): Property and equipment $ 567,540 Other current assets - current deferred income taxes (4) 2,209 Goodwill 51,347 Other intangible assets (3) 65,800 Other assets - debt issuance costs - new debt 28,034 Accrued expenses and other current liabilities (5) (12,163) Non-current deferred income taxes (4) (65,697) ---------- $ 637,070 ==========
(1) Represents fees and commissions expected to be incurred to issue the permanent financing. (2) The final appraisal and purchase price allocation is expected to be finalized within one year after the completion of the acquisition. (3) The adjustment to other intangible assets based on management's preliminary estimate of identifiable intangible assets is as follows (dollars in thousands):
Est. Useful Estimated Intangible Asset Life (years) Fair Value - ---------------- ------------ ---------- Trade names Indefinite $52,300 License agreements 10 12,900 Non-compete agreements 5 200 Customer relationships 1-2 400 ------- 65,800 Paramount Park's intangible assets as of June 30, 2006 -- ------- Net adjustment $65,800 =======
(4) Includes the tax effect of the preliminary allocation of the purchase price over the net assets to be acquired. (5) Represents the establishment of additional self-insurance reserves, which were previously recorded at the parent company of Paramount Parks, and the accrual of severance costs. (c) This adjustment represents the elimination of other assets and liabilities not acquired by Cedar Fair in the acquisition. 33 (d) This adjustment reclassifies Cedar Fair's goodwill to conform to Paramount Parks' classification and the presentation going forward. (e) This adjustment reclassifies Cedar Fair's non-current deferred tax asset against the non-current deferred tax liability recorded for Paramount Parks. (f) This adjustment represents the elimination of prepaid insurance costs not acquired by Cedar Fair as part of the acquisition. (g) This adjustment represents the payment of accrued interest in connection with the repayment of Cedar Fair's existing debt. (h) This adjustment represents the elimination of certain deferred operating costs of Paramount Parks to conform to Cedar Fair's accounting policy. (i) This adjustment represents the net cost of the early extinguishment of Cedar Fair's debt as it relates to the acquisition: Write-off of debt issuance costs $ 1,455 Write-off of deferred interest rate swap gains (2,811) Penalties on early repayment of existing debt 6,053 ------- $ 4,697 =======
(j) This adjustment represents the recognition of expected borrowings under the new permanent financing, net of the repayment of all existing debt of Cedar Fair as detailed below (in thousands):
Paramount Cedar Fair Parks Pro Forma Cedar Fair Historical Historical Adjustments Pro Forma ---------- ---------- ----------- ---------- REVOLVING CREDIT LOAN: Existing revolving credit loans $196,600 $-- $ (196,600) $ -- Borrowings under new revolving credit loan -- -- 102,000 102,000 -------- --- ---------- ---------- 196,600 -- (94,600) 102,000 -------- --- ---------- ---------- TERM DEBT: Current portion of long-term debt 40,000 -- (22,550) 17,450 Existing term debt 325,000 -- (325,000) -- Borrowings under new term loan facility -- -- 1,727,550 1,727,550 -------- --- ---------- ---------- Total long-term debt, less current portion 325,000 -- 1,402,550 1,727,550 -------- --- ---------- ---------- TOTAL DEBT $561,600 $-- $1,285,400 $1,847,000 ======== === ========== ==========
(k) This adjustment represents the elimination of Paramount Parks' invested capital balance at June 30, 2006. 34 CEDAR FAIR, L.P. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS SIX MONTH PERIOD ENDED JUNE 25, 2006 (In thousands, except per unit amounts)
PARAMOUNT CEDAR FAIR PARKS PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS CEDAR FAIR (1) (2) (3) PRO FORMA ---------- ---------- ----------- ---------- Net revenues $169,374 $158,904 $ 1,291(a) $329,569 Costs and expenses 155,504 134,271 1,291(a) 296,926 5,860(d) Depreciation and amortization 21,692 26,408 765(b) 45,760 (3,105)(c) -------- -------- -------- -------- Operating loss (7,822) (1,775) (3,520) (13,117) Interest expense 15,241 -- 59,355(e) 74,596 Other expense -- 2,208 -- 2,208 -------- -------- -------- -------- Loss before taxes (23,063) (3,983) (62,875) (89,921) Benefit for taxes (7,619) (1,562) (13,246)(f) (22,427) -------- -------- ------- -------- Net loss $(15,444) $ (2,421) $(49,629) $(67,494) ======== ======== ======== ======== Net loss per limited partner unit: Basic $ (0.29) $ (1.25) Diluted $ (0.29) $ (1.25) Weighted average limited partner untis and equivalents outstanding: Basic 53,884 53,884 Diluted 53,884 53,884
The accompanying Notes to Unaudited Pro Forma Condensed Combined Statements of Operations are an integral part of this statement. 35 CEDAR FAIR, L.P. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2005 (In thousands, except per unit amounts)
PARAMOUNT CEDAR FAIR PARKS PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS CEDAR FAIR (1) (2) (3) PRO FORMA ---------- ---------- ----------- ---------- Net revenues $568,707 $423,091 $ 2,720(a) $994,518 Costs and expenses 375,620 313,317 2,720(a) 691,657 Depreciation and amortization 55,765 49,561 1,530(b) 120,231 13,375(c) -------- -------- --------- -------- Operating income (loss) 137,322 60,213 (14,905) 182,630 Interest expense 26,205 -- 121,677(e) 147,882 Other (income) expense (459) (1,089) -- (1,548) -------- -------- --------- -------- Income (loss) before taxes 111,576 61,302 (136,582) 36,296 Provision (benefit) for taxes (49,276) 24,049 (29,580)(f) (54,807) -------- -------- --------- -------- Net income (loss) $160,852 $ 37,253 $(107,002) $ 91,103 ======== ======== ========= ======== Net income per limited partner unit: Basic $ 3.00 $ 1.70 Diluted $ 2.93 $ 1.66 Weighted average limited partner units and equivalents outstanding: Basic 53,659 53,659 Diluted 54,950 54,950
The accompanying Notes to Unaudited Pro Forma Condensed Combined Statements of Operations are an integral part of this statement. 36 CEDAR FAIR, L.P. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 25, 2006 AND THE YEAR ENDED DECEMBER 31, 2005 (1) The amounts in this column represent the reported results for Cedar Fair for the six months ended June 25, 2006 or the twelve months ended December 31, 2005. (2) The amounts in this column represent the reported results for Paramount Parks for the six months ended June 30, 2006 or the twelve months ended December 31, 2005. (3) The amounts in this column represent the adjustments necessary to give pro forma effect to the acquisition of Paramount Parks. Adjustments (b) and (c) are based on a preliminary allocation of the purchase price, which is expected to be finalized within one year of the acquisition date. a. This adjustment represents the reclassification of Paramount Parks' historical expense for credit card fees to conform to Cedar Fair's classification. b. This adjustment represents the change in amortization expense resulting from the amortization of the additional intangible assets recorded in connection with the acquisition using the straight-line method based on the following (dollars in thousands):
Est. Useful Estimated Six Twelve Life Fair months months Amortizable Intangibles (years) Value 06/25/06 12/31/05 - ----------------------- ------- --------- -------- -------- License agreements 10 $12,900 $645 $1,290 Non-compete agreements 5 200 20 40 Customer relationships 1-2 400 100 200 ---- ------ 765 1,530 Paramount Parks' historical amortization expense -- -- ---- ------ $765 $1,530 ==== ======
c. This adjustment represents the change in depreciation expense resulting from the adjustment of the assets to their fair market value and estimated useful lives going forward (dollars in thousands):
Est. Useful Estimated Est. Annual Fixed Asset Class Life (years) Fair Value Deprec. Exp. - ----------------- ------------ ---------- ------------ Building and improvements 19 $414,569 $21,819 Rides 14 421,895 30,135 Equipment 7 69,143 9,878 Other assets 5 5,520 1,104 -------- ------- $911,127 $62,936 ======== =======
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Twelve Six months months 06/25/06 12/31/05 ---------- -------- Recording of Cedar Fair's depreciation on new assets $ 23,303 $ 62,936 Elimination of Paramount Parks' historic depreciation (26,408) (49,561) -------- -------- Net pro forma adjustment $ (3,105) $ 13,375 ======== ========
Pro forma depreciation expense for the six months ended reflects Cedar Fair's policy of depreciating certain assets over each park's operating season. d. Represents the recognition of certain Paramount Parks' deferred operating costs to conform to Cedar Fair's accounting treatment. e. The adjustment to interest expense reflects the following (in thousands):
Six Twelve months months 06/25/06 12/31/05 ---------- ---------- LIBOR for period 5.30% 5.30% Average revolver borrowings for period $ 115,000 $ 80,000 Average term debt for period 1,725,000 1,740,000 Interest expense on Cedar Fair existing debt to be retired in connection with the acquisition (15,241) (26,205) Interest expense (including commitment fee) on new revolver (at LIBOR + 2.50%) 4,985 7,490 Interest expense on new term notes (at LIBOR + 2.50%) 67,275 135,720 Amortization of debt issuance costs on new debt 2,336 4,672 ---------- ---------- Net pro forma adjustment $ 59,355 $ 121,677 ========== ==========
A 0.125% increase or decrease in the weighted average interest rate applicable to Cedar Fair's debt outstanding under the new credit facility and term loans would change the pro forma interest expense by $1.2 million for the six months ended June 25, 2006 and by $2.3 million for the year ended December 31, 2005. f. This adjustment represents the tax effect of pro forma adjustments to income before income taxes and is based on the estimated applicable statutory tax rates. 38 -----END PRIVACY-ENHANCED MESSAGE-----