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EX-32 - SECTION 906 CERTIFICATION - CEDAR FAIR L Pcedarfair-q2xex322016.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - CEDAR FAIR L Pcedarfair-q2xex3122016.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - CEDAR FAIR L Pcedarfair-q2xex3112016.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 2016
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission File Number: 1-9444
CEDAR FAIR, L.P.
(Exact name of registrant as specified in its charter)
 
DELAWARE
 
34-1560655
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
One Cedar Point Drive, Sandusky, Ohio 44870-5259
(Address of principal executive offices) (Zip Code)
(419) 626-0830
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No  o 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
 
 
 
Title of Class
 
Units Outstanding as of August 1, 2016
Units Representing
Limited Partner Interests
 
56,076,294



CEDAR FAIR, L.P.
INDEX
FORM 10 - Q
 




PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
6/26/2016
 
12/31/2015
 
6/28/2015
ASSETS
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
68,085

 
$
119,557

 
$
35,447

Receivables
 
78,006

 
29,494

 
70,019

Inventories
 
46,207

 
25,029

 
46,627

Prepaid advertising
 
20,915

 
1,521

 
18,648

Other current assets
 
11,559

 
8,425

 
11,156

 
 
224,772

 
184,026

 
181,897

Property and Equipment:
 
 
 
 
 
 
Land
 
272,534

 
267,782

 
271,593

Land improvements
 
392,436

 
381,191

 
385,451

Buildings
 
674,251

 
647,514

 
654,619

Rides and equipment
 
1,655,689

 
1,561,234

 
1,593,907

Construction in progress
 
26,095

 
50,962

 
16,756

 
 
3,021,005

 
2,908,683

 
2,922,326

Less accumulated depreciation
 
(1,444,511
)
 
(1,393,805
)
 
(1,347,595
)
 
 
1,576,494

 
1,514,878

 
1,574,731

Goodwill
 
217,026

 
210,811

 
221,662

Other Intangibles, net
 
36,833

 
35,895

 
37,278

Other Assets
 
17,256

 
17,410

 
18,269

 
 
$
2,072,381

 
$
1,963,020

 
$
2,033,837

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
Current maturities of long-term debt
 
$

 
$
2,475

 
$

Accounts payable
 
40,242

 
17,122

 
39,917

Deferred revenue
 
173,062

 
69,514

 
147,943

Accrued interest
 
11,710

 
9,910

 
12,455

Accrued taxes
 
30,829

 
41,937

 
12,143

Accrued salaries, wages and benefits
 
33,962

 
26,916

 
32,233

Self-insurance reserves
 
25,588

 
23,996

 
24,020

Current derivative liability
 

 

 
6,895

Other accrued liabilities
 
14,047

 
6,801

 
15,433

 
 
329,440

 
198,671

 
291,039

Deferred Tax Liability
 
138,229

 
129,763

 
133,021

Derivative Liability
 
30,900

 
22,918

 
18,806

Other Liabilities
 
12,474

 
17,983

 
16,061

Long-Term Debt:
 
 
 
 
 
 
Revolving credit loans
 
55,000

 

 
42,000

Term debt
 
595,902

 
598,346

 
599,691

Notes
 
938,863

 
938,330

 
936,750

 
 
1,589,765

 
1,536,676

 
1,578,441

Commitments and Contingencies (Note 10)
 

 

 

Partners’ Equity:
 
 
 
 
 
 
Special L.P. interests
 
5,290

 
5,290

 
5,290

General partner
 
(1
)
 

 

Limited partners, 56,072, 56,018 and 56,008 units outstanding at June 26, 2016, December 31, 2015 and June 28, 2015, respectively
 
(29,525
)
 
48,428

 
(3,049
)
Accumulated other comprehensive income
 
(4,191
)
 
3,291

 
(5,772
)
 
 
(28,427
)
 
57,009

 
(3,531
)
 
 
$
2,072,381

 
$
1,963,020

 
$
2,033,837

    
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

3


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per unit amounts)
 
Three months ended
 
Six months ended
 
6/26/2016
 
6/28/2015
 
6/26/2016
 
6/28/2015
Net revenues:
 
 
 
 
 
 
 
Admissions
$
214,338

 
$
207,568

 
$
242,998

 
$
230,351

Food, merchandise and games
129,924

 
128,633

 
151,691

 
146,577

Accommodations, extra-charge products and other
43,772

 
41,207

 
51,783

 
47,297


388,034

 
377,408

 
446,472

 
424,225

Costs and expenses:

 
 
 
 
 
 
Cost of food, merchandise, and games revenues
34,566

 
33,106

 
40,803

 
38,694

Operating expenses
157,525

 
157,325

 
242,129

 
235,455

Selling, general and administrative
51,371

 
46,065

 
76,983

 
71,883

Depreciation and amortization
48,299

 
47,105

 
53,490

 
51,116

Loss on impairment / retirement of fixed assets, net
1,415

 
780

 
4,027

 
3,683


293,176

 
284,381

 
417,432

 
400,831

Operating income
94,858

 
93,027

 
29,040

 
23,394

Interest expense
21,125

 
21,473

 
40,912

 
42,005

Net effect of swaps
5,410

 
(1,407
)
 
7,252

 
(1,523
)
Unrealized/realized foreign currency (gain) loss
(11,455
)
 
(7,911
)
 
(31,016
)
 
30,307

Interest income
(8
)
 
(5
)
 
(26
)
 
(45
)
Income (loss) before taxes
79,786

 
80,877

 
11,918

 
(47,350
)
Provision (benefit) for taxes
21,803

 
23,294

 
2,421

 
(21,100
)
Net income (loss)
57,983

 
57,583

 
9,497

 
(26,250
)
Net income (loss) allocated to general partner

 
1

 

 

Net income (loss) allocated to limited partners
$
57,983

 
$
57,582

 
$
9,497

 
$
(26,250
)
 
 
 
 
 
 
 
 
Net income (loss)
$
57,983

 
$
57,583

 
$
9,497

 
$
(26,250
)
Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
(2,449
)
 
(1,758
)
 
(6,844
)
 
5,456

Unrealized gain (loss) on cash flow hedging derivatives
1,993

 
1,841

 
(638
)
 
(598
)
Other comprehensive income (loss), (net of tax)
(456
)
 
83

 
(7,482
)
 
4,858

Total comprehensive income (loss)
$
57,527

 
$
57,666

 
$
2,015

 
$
(21,392
)
Basic income (loss) per limited partner unit:
 
 
 
 
 
 
 
Weighted average limited partner units outstanding
55,940

 
55,734

 
55,909

 
55,696

Net income (loss) per limited partner unit
$
1.04

 
$
1.03

 
$
0.17

 
$
(0.47
)
Diluted income (loss) per limited partner unit:
 
 
 
 
 
 
 
Weighted average limited partner units outstanding
56,358

 
56,285

 
56,406

 
55,696

Net income (loss) per limited partner unit
$
1.03

 
$
1.02

 
$
0.17

 
$
(0.47
)
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

4


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(In thousands)
 
Six months ended
 
6/26/2016
 
6/28/2015
Limited Partnership Units Outstanding
 
 
 
Beginning balance
56,018

 
55,828

Limited partnership unit options exercised
10

 
48

Limited partnership unit forfeitures

 
(1
)
Issuance of limited partnership units as compensation
44

 
133

 
56,072

 
56,008

Limited Partners’ Equity
 
 
 
Beginning balance
$
48,428

 
$
101,556

Net income (loss)
9,497

 
(26,250
)
Partnership distribution declared ($1.65 and $1.50 per limited partnership unit)
(92,675
)
 
(84,153
)
Expense recognized for limited partnership unit options
5

 
353

Tax effect of units involved in treasury unit transactions
(1,604
)
 
(2,048
)
Issuance of limited partnership units as compensation
6,824

 
7,493

 
(29,525
)
 
(3,049
)
General Partner’s Equity
 
 
 
Beginning balance

 
1

Partnership distribution declared
(1
)
 
(1
)
 
(1
)
 

Special L.P. Interests
5,290

 
5,290

Accumulated Other Comprehensive Income
 
 
 
Cumulative foreign currency translation adjustment:
 
 
 
Beginning balance
22,591

 
5,936

Period activity, net of tax $3,934 and ($3,136)
(6,844
)
 
5,456

 
15,747

 
11,392

Unrealized loss on cash flow hedging derivatives:
 
 
 
Beginning balance
(19,300
)
 
(16,566
)
Period activity, net of tax $92 and $185
(638
)
 
(598
)
 
(19,938
)
 
(17,164
)
 
(4,191
)
 
(5,772
)
Total Partners’ Equity
$
(28,427
)
 
$
(3,531
)
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.


5


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Six months ended
 
6/26/2016
 
6/28/2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income (loss)
$
9,497

 
$
(26,250
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation and amortization
53,490

 
51,116

Non-cash foreign currency (gain) loss on debt
(31,429
)
 
29,559

Other non-cash expenses
31,028

 
798

Net change in working capital
40,406

 
18,526

Net change in other assets/liabilities
(5,819
)
 
(472
)
Net cash from operating activities
97,173

 
73,277

CASH FLOWS FOR INVESTING ACTIVITIES
 
 
 
Capital expenditures
(106,233
)
 
(120,380
)
Purchase of preferred equity investment

 
(2,000
)
Net cash for investing activities
(106,233
)
 
(122,380
)
CASH FLOWS FOR FINANCING ACTIVITIES
 
 
 
Net borrowings on revolving credit loans
55,000

 
42,000

Term debt payments
(6,000
)
 

Distributions paid to partners
(92,676
)
 
(84,154
)
Tax effect of units involved in treasury unit transactions
(1,604
)
 
(2,048
)
Net cash for financing activities
(45,280
)
 
(44,202
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
2,868

 
(3,088
)
CASH AND CASH EQUIVALENTS
 
 
 
Net decrease for the period
(51,472
)
 
(96,393
)
Balance, beginning of period
119,557

 
131,840

Balance, end of period
$
68,085

 
$
35,447

SUPPLEMENTAL INFORMATION
 
 
 
Cash payments for interest expense
$
38,557

 
$
39,378

Interest capitalized
1,474

 
1,943

Cash payments for income taxes, net of refunds
6,989

 
4,256

Capital expenditures in accounts payable
1,265

 
8,360

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

6


CEDAR FAIR, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 26, 2016 AND JUNE 28, 2015

The accompanying unaudited condensed consolidated financial statements have been prepared from the financial records of Cedar Fair, L.P. (the Partnership) without audit and reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to fairly present the results of the interim periods covered in this report. Due to the seasonal nature of the Partnership's amusement and water park operations, the results for any interim period may not be indicative of the results expected for the full fiscal year.

(1) Significant Accounting and Reporting Policies:
The Partnership’s unaudited condensed consolidated financial statements for the periods ended June 26, 2016 and June 28, 2015 included in this Form 10-Q report have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the year ended December 31, 2015, which were included in the Form 10-K filed on February 26, 2016. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission). These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K referred to above.
Reclassifications
Certain prior year operating activity amounts in the unaudited condensed consolidated statements of cash flows have been reclassified to conform to fiscal 2016 presentation.
Adopted Accounting Pronouncements

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying value of the corresponding debt liability, consistent with debt discounts. This ASU requires retrospective adoption and is effective for annual and interim periods beginning after December 15, 2015. The adoption of ASU 2015-03 did not have an impact on our unaudited condensed consolidated statements of operations or unaudited condensed consolidated statements of cash flows. The impact of the adoption of this guidance resulted in the reclassification of the unamortized debt issuance cost amounts from other assets to long-term debt on the unaudited condensed consolidated balance sheets for the prior periods, of $19.7 million and $22.4 million at December 31, 2015 and June 28, 2015, respectively.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"). The amendments in ASU 2015-17 require that deferred tax assets and liabilities be classified as non-current in the balance sheet. This ASU is effective for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. The guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We adopted this guidance early and applied retrospective treatment. The impact of the adoption of this guidance resulted in the reclassification of the current deferred tax assets to net against the deferred tax liability in the unaudited condensed consolidated balance sheets, which reduced both the current deferred tax asset and deferred tax liability for the prior periods by $12.2 million and $20.0 million at December 31, 2015 and June 28, 2015, respectively.
New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The amendments in ASU 2014-09 provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition guidance. ASU 2014-09 is effective for annual and interim periods beginning on or after December 15, 2017 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is not permitted. The Partnership has not yet selected a transition method and is in the process of evaluating the effect this standard will have on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases ("ASU 2016-02"). The amendments in ASU 2016-02 provide that most leases will now be recorded on the balance sheet. ASU 2016-02 is effective for annual and interim periods beginning on or after January 1, 2019 and will replace most existing lease guidance under U.S. GAAP when it becomes effective. This ASU requires a modified transition method for existing leases and applies to the earliest period presented in the

7


financial statements. The Partnership is in the process of evaluating the effect this standard will have on the consolidated financial statements and related disclosures.

(2) Interim Reporting:
The Partnership owns and operates eleven amusement parks, three separately gated outdoor water parks, one indoor water park and five hotels. Virtually all of the Partnership’s revenues from its seasonal amusement parks, as well as its outdoor water parks and other seasonal resort facilities, are realized during a 130- to 140-day operating period beginning in early May, with the major portion concentrated in the third quarter during the peak vacation months of July and August. Knott's Berry Farm is open daily on a year-round basis. Castaway Bay is generally open daily from Memorial Day to Labor Day, plus a limited daily schedule for the balance of the year.
To assure that these highly seasonal operations will not result in misleading comparisons of current and subsequent interim periods, the Partnership has adopted the following accounting and reporting procedures for its seasonal parks: (a) revenues on multi-use products are recognized over the estimated number of uses expected for each type of product and are adjusted periodically during the operating season prior to the ticket or product expiration, which occurs no later than the close of the operating season or December 31 each year, (b) depreciation, advertising and certain seasonal operating costs are expensed during each park’s operating season, including certain costs incurred prior to the season which are amortized over the season, and (c) all other costs are expensed as incurred or ratably over the entire year. Revenues on multi-use products for the next operating season are deferred in the year received and recognized as revenue in the following operating season.

(3) Long-Lived Assets:
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. In order to determine if an asset has been impaired, assets are grouped and tested at the lowest level for which identifiable, independent cash flows are available. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in equity price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

The long-lived operating asset impairment test involves a two-step process. The first step is a comparison of each asset group's carrying value to its estimated undiscounted future cash flows expected to result from the use of the assets, including disposition. Projected future cash flows reflect management's best estimates of economic and market conditions over the projected period, including growth rates in revenues and costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates and future estimates of capital expenditures. If the carrying value of the asset group is higher than its undiscounted future cash flows, there is an indication that impairment exists and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of the asset group to its carrying value in a manner consistent with the highest and best use of those assets.

The Partnership estimates fair value of operating assets using an income, market, and/or cost approach. The income approach uses an asset group's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital reflective of current market conditions. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The cost approach is based on the amount currently required to replace the service capacity of an asset adjusted for obsolescence. If the implied fair value of the assets is less than their carrying value, an impairment charge is recorded for the difference.

Non-operating assets are evaluated for impairment based on changes in market conditions. When changes in market conditions are observed, impairment is estimated using a market-based approach. If the estimated fair value of the non-operating assets is less than their carrying value, an impairment charge is recorded for the difference.


8


(4) Goodwill and Other Intangible Assets:
In accordance with the applicable accounting rules, goodwill is not amortized, but, along with indefinite-lived trade names, is evaluated for impairment on an annual basis or more frequently if indicators of impairment exist. As of June 26, 2016, there were no indicators of impairment. The Partnership's annual testing date is the first day of the fourth quarter.
There were no impairments for any period presented.
A summary of changes in the Partnership’s carrying value of goodwill for the six months ended June 26, 2016 and June 28, 2015 is as follows:
(In thousands)
 
Goodwill
(gross)
 
Accumulated
Impairment
Losses
 
Goodwill
(net)
Balance at December 31, 2015
 
$
290,679

 
$
(79,868
)
 
$
210,811

Foreign currency translation
 
6,215

 

 
6,215

Balance at June 26, 2016
 
$
296,894

 
$
(79,868
)
 
$
217,026

 
 
 
 
 
 
 
Balance at December 31, 2014
 
$
308,159

 
$
(79,868
)
 
$
228,291

Foreign currency translation
 
(6,629
)
 

 
(6,629
)
Balance at June 28, 2015
 
$
301,530

 
$
(79,868
)
 
$
221,662

At June 26, 2016, December 31, 2015, and June 28, 2015 the Partnership’s other intangible assets consisted of the following:
June 26, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
(In thousands)
 
 
 
 
 
 
Other intangible assets:
 
 
 
 
 
 
Trade names
 
$
36,086

 
$

 
$
36,086

License / franchise agreements
 
1,476

 
729

 
747

Total other intangible assets
 
$
37,562

 
$
729

 
$
36,833

 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
Other intangible assets:
 
 
 
 
 
 
Trade names
 
$
35,208

 
$

 
$
35,208

License / franchise agreements
 
1,067

 
380

 
687

Total other intangible assets
 
$
36,275

 
$
380

 
$
35,895

 
 
 
 
 
 
 
June 28, 2015
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
Other intangible assets:
 
 
 
 
 
 
Trade names
 
$
36,744

 
$

 
$
36,744

License / franchise agreements
 
877

 
343

 
534

Total other intangible assets
 
$
37,621

 
$
343

 
$
37,278

Amortization expense of other intangible assets is expected to be immaterial going forward.

9


(5) Long-Term Debt:
Long-term debt as of June 26, 2016, December 31, 2015, and June 28, 2015 consisted of the following:
(In thousands)
June 26, 2016
 
December 31, 2015
 
June 28, 2015
 
 
 
 
 
 
Revolving credit facility (due 2018)
$
55,000

 
$

 
$
42,000

Term debt (1)
 
 
 
 
 
March 2013 U.S. term loan averaging 3.25% (due 2013-2020)
602,850

 
608,850

 
608,850

Notes
 
 
 
 
 
June 2014 U.S. fixed rate note at 5.375% (due 2024)
450,000

 
450,000

 
450,000

March 2013 U.S. fixed rate note at 5.25% (due 2021)
500,000

 
500,000

 
500,000

 
1,607,850

 
1,558,850

 
1,600,850

Less current portion

 
2,475

 

 
1,607,850

 
1,556,375

 
1,600,850

Less debt issuance costs
18,085

 
19,699

 
22,409

 
$
1,589,765

 
$
1,536,676

 
$
1,578,441

(1) The average interest rate does not reflect the effect of interest rate swap agreements (see Note 6).
In June of 2014, the Partnership issued $450 million of 5.375% senior unsecured notes ("June 2014 notes"), maturing in 2024. The net proceeds from the offering of the June 2014 notes were used to redeem in full all of the Partnership’s $405 million of 9.125% July 2010 senior unsecured notes that were scheduled to mature in 2018 (and which included $5.6 million of Original Issue Discount ("OID") to yield 9.375%), to satisfy and discharge the indenture governing the notes that were redeemed and for general corporate purposes.
The Partnership's June 2014 notes pay interest semi-annually in June and December, with the principal due in full on June 1, 2024. Prior to June 1, 2017, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.375% together with accrued and unpaid interest. The notes may be redeemed, in whole or in part, at any time prior to June 1, 2019 at a price equal to 100% of the principal amount of the notes redeemed plus a “make-whole” premium together with accrued and unpaid interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
In March 2013, the Partnership issued $500 million of 5.25% senior unsecured notes ("March 2013 notes"), maturing in 2021. The Partnership's March 2013 notes pay interest semi-annually in March and September, with the principal due in full on March 15, 2021. The notes may be redeemed, in whole or in part, at any time prior to March 15, 2017 at a price equal to 103.938% of the principal amount of the notes redeemed, together with accrued and unpaid interest, if any, to the redemption date. The notes may be redeemed after this date, in whole or in part, at various prices depending on the date redeemed.

Concurrently with this offering, the Partnership entered into a new $885 million credit agreement (the "2013 Credit Agreement"), which included a $630 million senior secured term loan facility and a $255 million senior secured revolving credit facility. The terms of the senior secured term loan facility include a maturity date of March 6, 2020 and an interest rate of LIBOR ("London InterBank Offering Rate") plus 250 bps with a LIBOR floor of 75 bps. The term loan amortizes at $6.3 million annually and allows interest to be paid on a 30-, 60-, or 90-day basis. The Partnership is currently paying interest on a 30-day basis. The net proceeds from the notes and borrowings under the 2013 Credit Agreement were used to repay in full all amounts outstanding under the previous credit facilities. The facilities provided under the 2013 Credit Agreement are collateralized by substantially all of the assets of the Partnership.

Terms of the 2013 Credit Agreement include a revolving credit facility of a combined $255 million. Under the 2013 Credit Agreement, the Canadian portion of the revolving credit facility has a sub-limit of $15 million. U.S. denominated and Canadian denominated loans made under the revolving credit facility bear interest at a rate of LIBOR plus 225 bps (with no LIBOR floor). The revolving credit facility is scheduled to mature in March 2018 and also provides for the issuance of documentary and standby letters of credit. The 2013 Credit Agreement requires the Partnership to pay a commitment fee of 38 bps per annum on the unused portion of the credit facilities.

The 2013 Credit Agreement includes two Financial Condition Covenants, which if breached for any reason and not cured, could result in an event of default. At the end of the second quarter of 2016, the first of these, the Consolidated Leverage Ratio, was set at a maximum of 5.50x consolidated total debt (excluding the revolving debt)-to-consolidated EBITDA. This required ratio

10


decreased by 0.25x at the beginning of the second quarter of 2016. The final decrease will occur at the beginning of the second quarter of 2017 when the ratio will reach its minimum of 5.25x. The second of these required ratios, the Consolidated Fixed Charge Coverage Ratio, is set at a minimum of 1.1x (consolidated total fixed charges-to-consolidated EBITDA). As of June 26, 2016, the Partnership was in compliance with these Financial Condition Covenants and all other covenants under the 2013 Credit Agreement.

The Partnership is allowed to make Restricted Payments, as defined in the 2013 Credit Agreement, of up to $60 million annually, so long as no default or event of default has occurred and is continuing and so long as the Partnership would be in compliance with certain financial ratios after giving effect to the payments. Additional Restricted Payments are allowed to be made based on an Excess-Cash-Flow formula, should the Partnership’s pro-forma Consolidated Leverage Ratio be less than or equal to 5.0x. Pursuant to the terms of the indentures governing the Partnership's June 2014 and March 2013 notes, the Partnership can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing, and our ability to make additional Restricted Payments in 2016 and beyond is permitted should the Partnership's pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.0x.

As market conditions warrant, the Partnership may from time to time repurchase debt securities issued by the Partnership, in privately negotiated or open market transactions, by tender offer, exchange offer or otherwise.

(6) Derivative Financial Instruments:
Derivative financial instruments are used within the Partnership’s overall risk management program to manage interest rate risk. By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, the Partnership is exposed to counterparty credit risk, in particular the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, hedging instruments are placed with a counterparty that the Partnership believes poses minimal credit risk. The Partnership does not use derivative financial instruments for trading purposes.
In the first quarter of 2016, the Partnership amended each of its four interest rate swap agreements to extend each of the maturities by two years to December 31, 2020, and to fix LIBOR at a rate of 2.64%. As a result of the amendments, the previously existing interest rate swap agreements were de-designated and the amounts recorded in AOCI will be amortized into earnings through the original December 2018 maturity. The newly amended interest rate swap agreements are not designated as hedging instruments. There were no other changes to the terms of the agreements beyond those disclosed.
The fair value of derivative financial instruments and their classification within the unaudited condensed consolidated balance sheets as of June 26, 2016, December 31, 2015, and June 28, 2015 are as follows:
(In thousands)
 
Unaudited Condensed Consolidated
Balance Sheet Location
 
Fair Value as of
 
Fair Value as of
 
Fair Value as of
June 26, 2016
 
December 31, 2015
 
June 28, 2015
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Derivative Liability
 
$

 
$
(22,918
)
 
$
(18,806
)
Total derivatives designated as hedging instruments
 
 
 
$

 
$
(22,918
)
 
$
(18,806
)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Current Derivative Liability
 
$

 
$

 
$
(6,895
)
Interest rate swaps
 
Derivative Liability
 
$
(30,900
)
 
$

 
$

Total derivatives not designated as hedging instruments
 
 
 
$
(30,900
)
 
$

 
$
(6,895
)
Net derivative liability
 
 
 
$
(30,900
)
 
$
(22,918
)
 
$
(25,701
)
 
Derivatives Designated as Hedging Instruments
Changes in fair value of highly effective hedges are recorded as a component of AOCI in the balance sheet. Any ineffectiveness is recognized immediately in income. Amounts recorded as a component of accumulated other comprehensive income are reclassified into earnings in the same period the forecasted transactions affect earnings. As a result of the first quarter of 2016 amendments, the previously existing interest rate swap agreements were de-designated and the newly amended interest rate swap agreements are not designated as hedging instruments. As of June 26, 2016 we have no designated derivatives and thus no amounts for designated derivatives that are forecasted to be reclassified into earnings in the next twelve months.

11


Derivatives Not Designated as Hedging Instruments
Certain interest rate swap contracts were deemed ineffective in prior years and no longer qualified for hedge accounting. As a result of discontinued hedge accounting, the instruments are prospectively adjusted to fair value each reporting period through "Net effect of swaps" within the unaudited condensed consolidated statements of operations and comprehensive income. The amounts that were previously recorded as a component of AOCI prior to the de-designation are reclassified to earnings and a corresponding realized gain or loss will be recognized when the forecasted cash flow occurs. As a result of the first quarter 2016 amendments, the previously existing interest rate swap agreements were de-designated and the amounts previously recorded in AOCI will be amortized into earnings through the original December 2018 maturity. As of June 26, 2016, approximately $23.6 million of losses remain in AOCI related to the effective cash flow hedge contracts prior to de-designation, $9.5 million of which will be reclassified to earnings within the next twelve months.
The following table summarizes the effect of derivative instruments on income (loss) and other comprehensive income (loss) for the three-month periods ended June 26, 2016 and June 28, 2015:

(In thousands)
 
Amount of Gain (Loss)
recognized in OCI on
Derivatives
(Effective Portion)
 
Amount and Location of Gain (Loss)
Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Amount and Location of Gain (Loss) Recognized
in Income on Derivatives
Designated Derivatives
 
Three months ended 6/26/2016
 
Three months ended 6/28/2015
 
Designated Derivatives
 
Three months ended 6/26/2016
 
Three months ended 6/28/2015
 
Derivatives
Not Designated
 
Three months ended 6/26/2016
 
Three months ended 6/28/2015
Interest rate swaps
 
$

 
$
446

 
Interest Expense
 
$

 
$

 
Net effect of swaps
 
$
(3,046
)
 
$
3,093

During the quarter ended June 26, 2016, the Partnership recognized $3.0 million of losses on the derivatives not designated as cash flow hedges and $2.4 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $5.4 million recorded in “Net effect of swaps.”

During the quarter ended June 28, 2015, the Partnership recognized $3.1 million of gains on the derivatives not designated as cash flow hedges and $1.7 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $1.4 million recorded in “Net effect of swaps.”

The following table summarizes the effect of derivative instruments on income (loss) and other comprehensive income (loss) for the six-month periods ended June 26, 2016 and June 28, 2015:

(In thousands)
 
Amount of Gain (Loss)
recognized in OCI on
Derivatives
(Effective Portion)
 
Amount and Location of Gain (Loss)
Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Amount and Location of Gain (Loss) Recognized
in Income on Derivatives
Designated Derivatives
 
Six months ended 6/26/2016
 
Six months ended 6/28/2015
 
Designated Derivatives
 
Six months ended 6/26/2016
 
Six months ended 6/28/2015
 
Derivatives
Not Designated
 
Six months ended 6/26/2016
 
Six months ended 6/28/2015
Interest rate swaps
 
$
(4,671
)
 
$
(4,156
)
 
Interest Expense
 
$
(851
)
 
$

 
Net effect of swaps
 
$
(3,311
)
 
$
4,896

During the six-month period ended June 26, 2016, the Partnership recognized $3.3 million of losses on the derivatives not designated as cash flow hedges and $3.9 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $7.3 million recorded in “Net effect of swaps.”

During the six-month period ended June 28, 2015, the Partnership recognized $4.9 million of gains on the derivatives not designated as cash flow hedges and $3.4 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $1.5 million recorded in “Net effect of swaps.”

(7) Fair Value Measurements:
The FASB Accounting Standards Codification (ASC) relating to fair value measurements emphasizes that fair value is a market-based measurement that should be determined based on assumptions (inputs) that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable, and valuation techniques used to measure fair value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Accordingly, the FASB’s ASC establishes a hierarchal disclosure framework that ranks the quality and reliability of information used to determine fair values. The hierarchy

12


is associated with the level of pricing observability utilized in measuring fair value and defines three levels of inputs to the fair value measurement process. Quoted prices are the most reliable valuation inputs, whereas model values that include inputs based on unobservable data are the least reliable. Each fair value measurement must be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety.
The three broad levels of inputs defined by the fair value hierarchy are as follows:
 
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The table below presents the balances of assets and liabilities measured at fair value as of June 26, 2016, December 31, 2015, and June 28, 2015 on a recurring basis as well as the fair values of other financial instruments:
(In thousands)
Unaudited Condensed 
Consolidated Balance Sheet Location
Fair Value Hierarchy Level
June 26, 2016
 
December 31, 2015
 
June 28, 2015
Carrying Value
Fair 
Value
 
Carrying Value
Fair 
Value
 
Carrying Value
Fair 
Value
Financial assets (liabilities) measured on a recurring basis:
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreements not designated as cash flow hedges
Current derivative liability
Level 2


 


 
(6,895
)
(6,895
)
Interest rate swap agreements not designated as cash flow hedges
Derivative Liability
Level 2
(30,900
)
(30,900
)
 


 


Interest rate swap agreements designated as cash flow hedges
Derivative Liability
Level 2


 
(22,918
)
(22,918
)
 
(18,806
)
(18,806
)
Other financial assets (liabilities):
 
 
 
 
 
 
 
 
 
 
Term debt
Long-Term Debt (1)
Level 2
(602,850
)
(604,357
)
 
(606,375
)
(604,859
)
 
(608,850
)
(610,372
)
March 2013 notes
Long-Term Debt (1)
Level 1
(500,000
)
(518,750
)
 
(500,000
)
(507,500
)
 
(500,000
)
(513,750
)
June 2014 notes
Long-Term Debt (1)
Level 1
(450,000
)
(465,750
)
 
(450,000
)
(453,375
)
 
(450,000
)
(455,625
)
(1)
Carrying values of long-term debt balances are before reductions for debt issuance cost amounts of $18.1 million, $19.7 million, and $22.4 million as of June 26, 2016, December 31, 2015, and June 28, 2015.
Fair values of the interest rate swap agreements are determined using significant inputs, including the LIBOR forward curves, which are considered Level 2 observable market inputs. In addition, the Partnership considered the effect of its credit and non-performance risk on the fair values provided, and recognized an adjustment decreasing the net derivative liability by approximately $1.3 million as of June 26, 2016, $0.6 million as of December 31, 2015, and $0.7 million as of June 28, 2015.
The carrying value of cash and cash equivalents, revolving credit loans, accounts receivable, current portion of term debt, accounts payable, and accrued liabilities approximates fair value because of the short maturity of these instruments. There were no assets measured at fair value on a non-recurring basis at June 26, 2016, December 31, 2015, or June 28, 2015.

13


(8) Earnings per Unit:
Net income (loss) per limited partner unit is calculated based on the following unit amounts:
 
Three months ended
 
Six months ended
 
6/26/2016
 
6/28/2015
 
6/26/2016
 
6/28/2015
 
(In thousands
except per unit amounts)
Basic weighted average units outstanding
55,940

 
55,734

 
55,909

 
55,696

Effect of dilutive units:
 
 
 
 
 
 
 
Deferred units
30

 
21

 
28

 

Performance units

 

 
64

 

Restricted units
253

 
366

 
273

 

Unit options
135

 
135

 
132

 

Phantom units

 
29

 

 

Diluted weighted average units outstanding
56,358

 
56,285

 
56,406

 
55,696

Net income (loss) per unit - basic
$
1.04

 
$
1.03

 
$
0.17

 
$
(0.47
)
Net income (loss) per unit - diluted
$
1.03

 
$
1.02

 
$
0.17

 
$
(0.47
)
 
 
 
 
 
 
 
 

The effect of out-of-money and/or antidilutive unit options on the three and six months ended June 26, 2016 and June 28, 2015, respectively, had they not been out of the money or antidilutive, would have been immaterial in all periods presented.

(9) Income and Partnership Taxes:
Under the applicable accounting rules, income taxes are recognized for the amount of taxes payable by the Partnership’s corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The income tax provision (benefit) for interim periods is determined by applying an estimated annual effective tax rate to the quarterly income (loss) of the Partnership’s corporate subsidiaries. In addition to income taxes on its corporate subsidiaries, the Partnership is subject to a publicly traded partnership tax (PTP tax) on partnership-level gross income (net revenues less cost of food, merchandise and games). As such, the Partnership’s total provision (benefit) for taxes includes amounts for both the PTP tax and for income taxes on its corporate subsidiaries.
As of the second quarter of 2016, the Partnership has recorded $1.1 million of unrecognized tax benefits including interest and/or penalties related to state and local tax filing positions. The Partnership recognizes interest and/or penalties related to unrecognized tax benefits in the income tax provision. The Partnership does not anticipate that the balance of the unrecognized tax benefit will change significantly over the next 12 months.
(10) Contingencies:
The Partnership is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, none of these matters are expected to have a material effect in the aggregate on the Partnership's financial statements.



14


(11) Changes in Accumulated Other Comprehensive Income by Component:
The following tables reflect the changes in accumulated other comprehensive income related to limited partners' equity for the three-month periods ended June 26, 2016 and June 28, 2015:

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
 
 
 
 
 
 
 
 
 
Gains and Losses on Cash Flow Hedges
 
Foreign Currency Items
 
Total
Balance at March 27, 2016
 
$
(21,931
)
 
$
18,196

 
$
(3,735
)
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications, net of tax $1,414
 

 
(2,449
)
 
(2,449
)
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($371) (2)
 
1,993

 

 
1,993

 
 
 
 
 
 
 
 
Net other comprehensive income
 
1,993

 
(2,449
)
 
(456
)
 
 
 
 
 
 
 
 
Balance at June 26, 2016
 
$
(19,938
)
 
$
15,747

 
$
(4,191
)

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
 
 
 
 
 
 
 
 
 
Gains and Losses on Cash Flow Hedges
 
Foreign Currency Items
 
Total
Balance at March 29, 2015
 
$
(19,005
)
 
$
13,150

 
$
(5,855
)
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications, net of tax $(67) and $1,011, respectively
 
379

 
(1,758
)
 
(1,379
)
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($224) (2)
 
1,462

 

 
1,462

 
 
 
 
 
 
 
 
Net other comprehensive income
 
1,841

 
(1,758
)
 
83

 
 
 
 
 
 
 
 
Balance at June 28, 2015
 
$
(17,164
)
 
$
11,392

 
$
(5,772
)

Reclassifications Out of Accumulated Other Comprehensive Income (1)
(In thousands)
 
 
 
 
 
 
Details about Accumulated Other Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
Three months ended
6/26/16
 
Three months ended
6/28/15
 
 
Interest rate contracts
 
$
2,364

 
$
1,686

 
Net effect of swaps
Provision for taxes
 
(371
)
 
(224
)
 
Provision for taxes
 
 
 
$
1,993

 
$
1,462

 


(1) All amounts are net of tax. Amounts in parentheses indicate debits.
(2) See Reclassifications Out of Accumulated Other Comprehensive Income table below for reclassification details.

15


The following tables reflect the changes in accumulated other comprehensive income (loss) related to limited partners' equity for the six-month periods ended June 26, 2016 and June 28, 2015:

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
 
 
 
 
 
 
 
 
 
Gains and Losses on Cash Flow Hedges
 
Foreign Currency Items
 
Total
Balance at December 31, 2015
 
$
(19,300
)
 
$
22,591

 
$
3,291

 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications, net of tax $711 and $3,934, respectively
 
(3,960
)
 
(6,844
)
 
(10,804
)
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($619) (2)
 
3,322

 

 
3,322

 
 
 
 
 
 
 
 
Net other comprehensive income
 
(638
)
 
(6,844
)
 
(7,482
)
 
 
 
 
 
 
 
 
Balance at June 26, 2016
 
$
(19,938
)
 
$
15,747

 
$
(4,191
)

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
 
 
 
 
 
 
 
 
 
Gains and Losses on Cash Flow Hedges
 
Foreign Currency Items
 
Total
Balance at December 31, 2014
 
$
(16,566
)
 
$
5,936

 
$
(10,630
)
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications, net of tax $634 and ($3,136), respectively
 
(3,522
)
 
5,456

 
1,934

 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($449) (2)
 
2,924

 

 
2,924

 
 
 
 
 
 
 
 
Net other comprehensive income
 
(598
)
 
5,456

 
4,858

 
 
 
 
 
 
 
 
Balance at June 28, 2015
 
$
(17,164
)
 
$
11,392

 
$
(5,772
)

Reclassifications Out of Accumulated Other Comprehensive Income (1)
(In thousands)
 
 
 
 
 
 
Details about Accumulated Other Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
Six months ended
6/26/16
 
Six months ended
6/28/15
 
 
Interest rate contracts
 
$
3,941

 
$
3,373

 
Net effect of swaps
Provision for taxes
 
(619
)
 
(449
)
 
Provision for taxes
 
 
 
$
3,322

 
$
2,924

 


(1) All amounts are net of tax. Amounts in parentheses indicate debits.
(2) See Reclassifications Out of Accumulated Other Comprehensive Income table below for reclassification details.


16


(12) Consolidating Financial Information of Guarantors and Issuers:
Cedar Fair, L.P., Canada's Wonderland Company ("Cedar Canada"), and Magnum Management Corporation ("Magnum") are the co-issuers of the Partnership's June 2014 and March 2013 notes (see Note 5). The notes have been fully and unconditionally guaranteed, on a joint and several basis, by each 100% owned subsidiary of Cedar Fair (other than Cedar Canada and Magnum) that guarantees the Partnership's senior secured credit facilities. There are no non-guarantor subsidiaries.

The following consolidating schedules present condensed financial information for Cedar Fair, L.P., Cedar Canada, and Magnum, the co-issuers, and each 100% owned subsidiary of Cedar Fair (other than Cedar Canada and Magnum), the guarantors (on a combined basis), as of June 26, 2016, December 31, 2015, and June 28, 2015 and for the three- and six-month periods ended June 26, 2016 and June 28, 2015. In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the Partnership has included the accompanying condensed consolidating financial statements.


17


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 26, 2016
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$

 
$
43,844

 
$
24,894

 
$
(653
)
 
$
68,085

Receivables
 
(9
)
 
1,565

 
23,381

 
567,888

 
(514,819
)
 
78,006

Inventories
 

 

 
3,169

 
43,038

 

 
46,207

Other current assets
 
377

 
26,236

 
2,205

 
29,564

 
(25,908
)
 
32,474

 
 
368

 
27,801

 
72,599

 
665,384

 
(541,380
)
 
224,772

Property and Equipment (net)
 

 
885

 
189,226

 
1,386,383

 

 
1,576,494

Investment in Park
 
667,710

 
830,528

 
184,964

 
295,114

 
(1,978,316
)
 

Goodwill
 
674

 

 
96,746

 
119,606

 

 
217,026

Other Intangibles, net
 

 

 
13,743

 
23,090

 

 
36,833

Deferred Tax Asset
 

 
2,549

 

 

 
(2,549
)
 

Other Assets
 

 
2,000

 
183

 
15,073

 

 
17,256

 
 
$
668,752

 
$
863,763

 
$
557,461

 
$
2,504,650

 
$
(2,522,245
)
 
$
2,072,381

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
377,726

 
$
142,024

 
$
3,139

 
$
32,825

 
$
(515,472
)
 
$
40,242

Deferred revenue
 

 

 
17,154

 
155,908

 

 
173,062

Accrued interest
 
4,825

 
3,343

 
1,771

 
1,771

 

 
11,710

Accrued taxes
 
2,499

 

 
5,993

 
48,245

 
(25,908
)
 
30,829

Accrued salaries, wages and benefits
 

 
31,881

 
2,081

 

 

 
33,962

Self-insurance reserves
 

 
11,842

 
1,483

 
12,263

 

 
25,588

Other accrued liabilities
 
1,846

 
2,737

 
1,157

 
8,307

 

 
14,047

 
 
386,896

 
191,827

 
32,778

 
259,319

 
(541,380
)
 
329,440

Deferred Tax Liability
 

 

 
18,913

 
121,865

 
(2,549
)
 
138,229

Derivative Liability
 
18,540

 
12,360

 

 

 

 
30,900

Other Liabilities
 

 
1,388

 

 
11,086

 

 
12,474

Long-Term Debt:
 
 
 
 
 
 
 
 
 
 
 
 
Revolving credit loans
 

 

 

 
55,000

 

 
55,000

Term debt
 

 
124,244

 
13,624

 
458,034

 

 
595,902

Notes
 
291,743

 
202,910

 
444,210

 

 

 
938,863

 
 
291,743

 
327,154

 
457,834

 
513,034

 

 
1,589,765

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
(28,427
)
 
331,034

 
47,936

 
1,599,346

 
(1,978,316
)
 
(28,427
)
 
 
$
668,752

 
$
863,763

 
$
557,461

 
$
2,504,650

 
$
(2,522,245
)
 
$
2,072,381



 


18


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
77,007

 
$

 
$
39,106

 
$
3,444

 
$

 
$
119,557

Receivables
 

 
1,292

 
27,788

 
547,361

 
(546,947
)
 
29,494

Inventories
 

 
121

 
1,222

 
23,686

 

 
25,029

Other current assets
 
188

 
1,261

 
1,332

 
8,781

 
(1,616
)
 
9,946

 
 
77,195

 
2,674

 
69,448

 
583,272

 
(548,563
)
 
184,026

Property and Equipment (net)
 

 
5,593

 
176,390

 
1,332,895

 

 
1,514,878

Investment in Park
 
724,592

 
911,910

 
179,529

 
27,862

 
(1,843,893
)
 

Goodwill
 
674

 

 
90,531

 
119,606

 

 
210,811

Other Intangibles, net
 

 

 
12,832

 
23,063

 

 
35,895

Deferred Tax Asset
 

 
14,080

 

 

 
(14,080
)
 

Other Assets
 

 
14,414

 
210

 
2,786

 

 
17,410

 
 
$
802,461

 
$
948,671

 
$
528,940

 
$
2,089,484

 
$
(2,406,536
)
 
$
1,963,020

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
 
$

 
$
1,008

 
$
57

 
$
1,410

 
$

 
2,475

Accounts payable
 
433,621

 
115,135

 
810

 
14,503

 
(546,947
)
 
17,122

Deferred revenue
 

 
85

 
4,397

 
65,032

 

 
69,514

Accrued interest
 
4,602

 
3,221

 
2,056

 
31

 

 
9,910

Accrued taxes
 
1,066

 

 

 
42,487

 
(1,616
)
 
41,937

Accrued salaries, wages and benefits
 

 
22,166

 
1,026

 
3,724

 

 
26,916

Self-insurance reserves
 

 
7,437

 
1,400

 
15,159

 


 
23,996

Other accrued liabilities
 
1,355

 
1,531

 
167

 
3,748

 

 
6,801

 
 
440,644

 
150,583

 
9,913

 
146,094

 
(548,563
)
 
198,671

Deferred Tax Liability
 

 

 
21,979

 
121,864

 
(14,080
)
 
129,763

Derivative Liability
 
13,396

 
9,522

 

 

 

 
22,918

Other Liabilities
 

 
6,705

 

 
11,278

 

 
17,983

Long-Term Debt:
 
 
 
 
 
 
 
 
 
 
 
 
Term debt
 

 
244,101

 
13,691

 
340,554

 

 
598,346

Notes
 
291,412

 
202,679

 
444,239

 

 

 
938,330

 
 
291,412

 
446,780

 
457,930

 
340,554

 

 
1,536,676

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
57,009

 
335,081

 
39,118

 
1,469,694

 
(1,843,893
)
 
57,009

 
 
$
802,461

 
$
948,671

 
$
528,940

 
$
2,089,484

 
$
(2,406,536
)
 
$
1,963,020


19


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
June 28, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$

 
$
15,485

 
$
20,740

 
$
(778
)
 
$
35,447

Receivables
 
1

 
108,653

 
119,015

 
635,647

 
(793,297
)
 
70,019

Inventories
 

 
228

 
3,143

 
43,256

 

 
46,627

Other current assets
 
434

 
1,658

 
2,681

 
26,476

 
(1,445
)
 
29,804

 
 
435

 
110,539

 
140,324

 
726,119

 
(795,520
)
 
181,897

Property and Equipment (net)
 

 
5,612

 
204,916

 
1,364,203

 

 
1,574,731

Investment in Park
 
663,494

 
814,861

 
164,516

 
24,292

 
(1,667,163
)
 

Goodwill
 
674

 

 
101,383

 
119,605

 

 
221,662

Other Intangibles, net
 

 

 
14,371

 
22,907

 

 
37,278

Deferred Tax Asset
 

 
39,602

 

 

 
(39,602
)
 

Other Assets
 

 
14,409

 
321

 
3,539

 

 
18,269

 
 
$
664,603

 
$
985,023

 
$
625,831

 
$
2,260,665

 
$
(2,502,285
)
 
$
2,033,837

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
310,462

 
$
213,778

 
$
3,983

 
$
305,769

 
$
(794,075
)
 
$
39,917

Deferred revenue
 

 
592

 
16,235

 
131,116

 

 
147,943

Accrued interest
 
5,487

 
4,211

 
1,874

 
883

 

 
12,455

Accrued taxes
 
3,082

 

 
1,771

 
8,735

 
(1,445
)
 
12,143

Accrued salaries, wages and benefits
 

 
22,318

 
1,989

 
7,926

 

 
32,233

Self-insurance reserves
 

 
7,925

 
1,456

 
14,639

 

 
24,020

Current derivative liability
 
4,127

 
2,768

 

 

 

 
6,895

Other accrued liabilities
 

 
4,587

 
1,067

 
9,779

 

 
15,433

 
 
323,158

 
256,179

 
28,375

 
478,847

 
(795,520
)
 
291,039

Deferred Tax Liability
 

 

 
49,021

 
123,602

 
(39,602
)
 
133,021

Derivative Liability
 
10,927

 
7,879

 

 

 

 
18,806

Other Liabilities
 
968

 
3,574

 

 
11,519

 

 
16,061

Long-Term Debt:
 
 
 
 
 
 
 
 
 
 
 
 
Revolving credit loans
 
42,000

 

 

 

 

 
42,000

Term debt
 

 
244,769

 
13,687

 
341,235

 

 
599,691

Notes
 
291,081

 
202,449

 
443,220

 

 

 
936,750

 
 
333,081

 
447,218

 
456,907

 
341,235

 

 
1,578,441

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
(3,531
)
 
270,173

 
91,528

 
1,305,462

 
(1,667,163
)
 
(3,531
)
 
 
$
664,603

 
$
985,023

 
$
625,831

 
$
2,260,665

 
$
(2,502,285
)
 
$
2,033,837



20


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 26, 2016
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
41,344

 
$
90,525

 
$
30,354

 
$
371,023

 
$
(145,212
)
 
$
388,034

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of food, merchandise, and games revenues
 

 

 
2,974

 
31,592

 

 
34,566

Operating expenses
 
3

 
87,506

 
13,087

 
202,141

 
(145,212
)
 
157,525

Selling, general and administrative
 
761

 
14,709

 
3,581

 
32,320

 

 
51,371

Depreciation and amortization
 

 
9

 
5,398

 
42,892

 

 
48,299

Loss on impairment / retirement of fixed assets, net
 

 

 
5

 
1,410

 

 
1,415

 
 
764

 
102,224

 
25,045

 
310,355

 
(145,212
)
 
293,176

Operating income (loss)
 
40,580

 
(11,699
)
 
5,309

 
60,668

 

 
94,858

Interest expense (income), net
 
7,754

 
5,625

 
6,313

 
1,425

 

 
21,117

Net effect of swaps
 
3,215

 
2,195

 

 

 

 
5,410

Unrealized / realized foreign currency gain
 

 

 
(11,455
)
 

 

 
(11,455
)
Other (income) expense
 
63

 
(20,767
)
 
875

 
19,829

 

 

Income from investment in affiliates
 
(31,140
)
 
(30,419
)
 
(8,909
)
 
(14,937
)
 
85,405

 

Income before taxes
 
60,688

 
31,667

 
18,485

 
54,351

 
(85,405
)
 
79,786

Provision for taxes
 
2,705

 
531

 
3,548

 
15,019

 

 
21,803

Net income
 
$
57,983

 
$
31,136

 
$
14,937

 
$
39,332

 
$
(85,405
)
 
$
57,983

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
(2,449
)
 

 
(2,449
)
 

 
2,449

 
(2,449
)
Unrealized gain on cash flow hedging derivatives
 
1,993

 
605

 

 

 
(605
)
 
1,993

Other comprehensive income (loss), (net of tax)
 
(456
)
 
605

 
(2,449
)
 

 
1,844

 
(456
)
Total comprehensive income
 
$
57,527

 
$
31,741

 
$
12,488

 
$
39,332

 
$
(83,561
)
 
$
57,527




21


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended June 28, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
38,071

 
$
60,260

 
$
28,003

 
$
348,613

 
$
(97,539
)
 
$
377,408

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of food, merchandise, and games revenues
 

 
71

 
2,592

 
30,443

 

 
33,106

Operating expenses
 
122

 
51,419

 
14,390

 
88,759

 
2,635

 
157,325

Selling, general and administrative
 
574

 
8,996

 
2,464

 
34,031

 

 
46,065

Depreciation and amortization
 

 
9

 
5,496

 
41,600

 

 
47,105

Loss on impairment / retirement of fixed assets, net
 

 

 
104

 
676

 

 
780

 
 
696

 
60,495

 
25,046

 
195,509

 
2,635

 
284,381

Operating income (loss)
 
37,375

 
(235
)
 
2,957

 
153,104

 
(100,174
)
 
93,027

Interest expense (income), net
 
8,158

 
7,217

 
6,305

 
(212
)
 

 
21,468

Net effect of swaps
 
(757
)
 
(650
)
 

 

 

 
(1,407
)
Unrealized / realized foreign currency gain
 

 

 
(7,911
)
 

 

 
(7,911
)
Other (income) expense
 
187

 
(3,015
)
 
659

 
2,169

 

 

Income from investment in affiliates
 
(30,931
)
 
(33,397
)
 
(8,591
)
 
(10,890
)
 
83,809

 

Income before taxes
 
60,718

 
29,610

 
12,495

 
162,037

 
(183,983
)
 
80,877

Provision (benefit) for taxes
 
3,135

 
(1,322
)
 
1,595

 
19,886

 

 
23,294

Net income
 
$
57,583

 
$
30,932

 
$
10,900

 
$
142,151

 
$
(183,983
)
 
$
57,583

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
(1,758
)
 

 
(1,758
)
 

 
1,758

 
(1,758
)
Unrealized gain on cash flow hedging derivatives
 
1,841

 
475

 

 

 
(475
)
 
1,841

Other comprehensive income (loss), (net of tax)
 
83

 
475

 
(1,758
)
 

 
1,283

 
83

Total comprehensive income
 
$
57,666

 
$
31,407

 
$
9,142

 
$
142,151

 
$
(182,700
)
 
$
57,666


























22


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended June 26, 2016
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
38,844

 
$
98,366

 
$
30,473

 
$
429,339

 
$
(150,550
)
 
$
446,472

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of food, merchandise, and games revenues
 

 

 
2,972

 
37,831

 

 
40,803

Operating expenses
 
12

 
127,484

 
18,364

 
246,819

 
(150,550
)
 
242,129

Selling, general and administrative
 
1,654

 
27,895

 
4,344

 
43,090

 

 
76,983

Depreciation and amortization
 

 
18

 
5,398

 
48,074

 

 
53,490

Loss on impairment / retirement of fixed assets, net
 

 

 
26

 
4,001

 

 
4,027

 
 
1,666

 
155,397

 
31,104

 
379,815

 
(150,550
)
 
417,432

Operating income (loss)
 
37,178

 
(57,031
)
 
(631
)
 
49,524

 

 
29,040

Interest expense (income), net
 
15,792

 
12,071

 
12,349

 
674

 

 
40,886

Net effect of swaps
 
4,658

 
2,594

 

 

 

 
7,252

Unrealized / realized foreign currency gain
 

 

 
(31,016
)
 

 

 
(31,016
)
Other (income) expense
 
125

 
(40,138
)
 
1,749

 
38,264

 

 

(Income) loss from investment in affiliates
 
3,541

 
(16,275
)
 
(5,434
)
 
(15,662
)
 
33,830

 

Income (loss) before taxes
 
13,062

 
(15,283
)
 
21,721

 
26,248

 
(33,830
)
 
11,918

Provision (benefit) for taxes
 
3,565

 
(11,739
)
 
6,058

 
4,537

 

 
2,421

Net income (loss)
 
$
9,497

 
$
(3,544
)
 
$
15,663

 
$
21,711

 
$
(33,830
)
 
$
9,497

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
(6,844
)
 

 
(6,844
)
 

 
6,844

 
(6,844
)
Unrealized loss on cash flow hedging derivatives
 
(638
)
 
(151
)
 

 

 
151

 
(638
)
Other comprehensive loss, (net of tax)
 
(7,482
)
 
(151
)
 
(6,844
)
 

 
6,995

 
(7,482
)
Total comprehensive income (loss)
 
$
2,015

 
$
(3,695
)
 
$
8,819

 
$
21,711

 
$
(26,835
)
 
$
2,015




23


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Six Months Ended June 28, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
36,688

 
$
64,280

 
$
28,081

 
$
395,350

 
$
(100,174
)
 
$
424,225

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of food, merchandise, and games revenues
 

 
71

 
2,592

 
36,031

 

 
38,694

Operating expenses
 
256

 
74,476

 
19,361

 
141,362

 

 
235,455

Selling, general and administrative
 
1,373

 
22,271

 
4,207

 
44,032

 

 
71,883

Depreciation and amortization
 

 
18

 
5,496

 
45,602

 

 
51,116

Loss on impairment / retirement of fixed assets, net
 

 

 
104

 
3,579

 

 
3,683

 
 
1,629

 
96,836

 
31,760

 
270,606

 

 
400,831

Operating income (loss)
 
35,059

 
(32,556
)
 
(3,679
)
 
124,744

 
(100,174
)
 
23,394

Interest expense (income), net
 
15,994

 
14,054

 
12,425

 
(513
)
 

 
41,960

Net effect of swaps
 
(743
)
 
(780
)
 

 

 

 
(1,523
)
Unrealized / realized foreign currency gain
 

 

 
30,307

 

 

 
30,307

Other (income) expense
 
375

 
(7,831
)
 
1,705

 
5,751

 

 

Income from investment in affiliates
 
41,855

 
18,348

 
(5,088
)
 
24,599

 
(79,714
)
 

Income (loss) before taxes
 
(22,422
)
 
(56,347
)
 
(43,028
)
 
94,907

 
(20,460
)
 
(47,350
)
Provision (benefit) for taxes
 
3,828

 
(14,494
)
 
(18,429
)
 
7,995

 

 
(21,100
)
Net income (loss)
 
$
(26,250
)
 
$
(41,853
)
 
$
(24,599
)
 
$
86,912

 
$
(20,460
)
 
$
(26,250
)
Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
5,456

 

 
5,456

 

 
(5,456
)
 
5,456

Unrealized loss on cash flow hedging derivatives
 
(598
)
 
(302
)
 

 

 
302

 
(598
)
Other comprehensive income (loss), (net of tax)
 
4,858

 
(302
)
 
5,456

 

 
(5,154
)
 
4,858

Total comprehensive income (loss)
 
$
(21,392
)
 
$
(42,155
)
 
$
(19,143
)
 
$
86,912

 
$
(25,614
)
 
$
(21,392
)
























24


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 26, 2016
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
NET CASH FROM (FOR) OPERATING ACTIVITIES
 
$
73,921

 
$
(30,306
)
 
$
7,756

 
$
47,717

 
$
(1,915
)
 
$
97,173

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany receivables (payments) receipts
 

 

 

 
23,844

 
(23,844
)
 

Capital expenditures
 

 

 
(5,747
)
 
(100,486
)
 

 
(106,233
)
Net cash from (for) investing activities
 

 

 
(5,747
)
 
(76,642
)
 
(23,844
)
 
(106,233
)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Net borrowings on revolving credit loans
 

 

 

 
55,000

 

 
55,000

Term debt (payments) borrowings
 

 
(1,236
)
 
(139
)
 
(4,625
)
 

 
(6,000
)
Distributions paid
 
(93,938
)
 

 

 

 
1,262

 
(92,676
)
Intercompany payables (payments) receipts
 
(56,990
)
 
33,146

 

 

 
23,844

 

Tax effect of units involved in treasury unit transactions
 

 
(1,604
)
 

 

 

 
(1,604
)
Net cash from (for) financing activities
 
(150,928
)
 
30,306

 
(139
)
 
50,375

 
25,106

 
(45,280
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 

 

 
2,868

 

 

 
2,868

CASH AND CASH EQUIVALENTS
 
 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) for the period
 
(77,007
)
 

 
4,738

 
21,450

 
(653
)
 
(51,472
)
Balance, beginning of period
 
77,007

 

 
39,106

 
3,444

 

 
119,557

Balance, end of period
 
$

 
$

 
$
43,844

 
$
24,894

 
$
(653
)
 
$
68,085

 
 
 
 
 
 
 
 
 
 
 
 
 

25


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 28, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
NET CASH FROM (FOR) OPERATING
ACTIVITIES
 
$
3,954

 
$
(55,759
)
 
$
(2,970
)
 
$
129,912

 
$
(1,860
)
 
$
73,277

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany receivables (payments) receipts
 

 

 
(10,576
)
 
(282
)
 
10,858

 

Purchase of preferred equity investment
 

 
(2,000
)
 

 

 

 
(2,000
)
Capital expenditures
 

 

 
(5,551
)
 
(114,829
)
 

 
(120,380
)
Net cash from (for) investing activities
 

 
(2,000
)
 
(16,127
)
 
(115,111
)
 
10,858

 
(122,380
)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Net borrowings on revolving credit loans
 
42,000

 

 

 

 

 
42,000

Distributions paid
 
(85,236
)
 

 

 

 
1,082

 
(84,154
)
Intercompany payables (payments) receipts
 
(40,718
)
 
59,425

 
(7,849
)
 

 
(10,858
)
 

Tax effect of units involved in treasury unit transactions
 

 
(2,048
)
 

 

 

 
(2,048
)
Net cash from (for) financing activities
 
(83,954
)
 
57,377

 
(7,849
)
 

 
(9,776
)
 
(44,202
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 

 

 
(3,088
)
 

 

 
(3,088
)
CASH AND CASH EQUIVALENTS
 
 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) for the period
 
(80,000
)
 
(382
)
 
(30,034
)
 
14,801

 
(778
)
 
(96,393
)
Balance, beginning of period
 
80,000

 
382

 
45,519

 
5,939

 

 
131,840

Balance, end of period
 
$

 
$

 
$
15,485

 
$
20,740

 
$
(778
)
 
$
35,447

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


26


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview:
We generate our revenues primarily from sales of (1) admission to our parks, (2) food, merchandise and games inside our parks, and (3) hotel rooms, food and other attractions both inside and outside our parks. Our principal costs and expenses, which include salaries and wages, advertising, maintenance, operating supplies, utilities and insurance, are relatively fixed and do not vary significantly with attendance.

Each of our properties is overseen by a park general manager and operates autonomously. Management reviews operating results, evaluates performance and makes operating decisions, including allocating resources on a property-by-property basis.

Along with attendance and guest per capita statistics, discrete financial information and operating results are prepared at the individual park level for use by the CEO, who is the Chief Operating Decision Maker (CODM), as well as by the Chief Financial Officer, the Chief Operating Officer, the Executive Vice President - Operations, and the park general managers.

Critical Accounting Policies:
Management’s discussion and analysis of financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in the United States of America. These principles require us to make judgments, estimates and assumptions during the normal course of business that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions.
Management believes that judgment and estimates related to the following critical accounting policies could materially affect our consolidated financial statements:
  
Impairment of Long-Lived Assets
 
Goodwill and Other Intangible Assets
 
Self-Insurance Reserves
 
Derivative Financial Instruments
 
Revenue Recognition

Income Taxes
In the second quarter of 2016, there were no changes in the above critical accounting policies from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

27


Adjusted EBITDA:
We believe that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the 2013 Credit Agreement) is a meaningful measure of park-level operating profitability because we use it for measuring returns on capital investments, evaluating potential acquisitions, determining awards under incentive compensation plans, and calculating compliance with certain loan covenants. Adjusted EBITDA is provided in the discussion of results of operations that follows as a supplemental measure of our operating results and is not intended to be a substitute for operating income, net income or cash flows from operating activities as defined under generally accepted accounting principles. In addition, Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
The table below sets forth a reconciliation of Adjusted EBITDA to net income for the three- and six-month periods ended June 26, 2016 and June 28, 2015.
 
 
Three months ended
 
Six months ended
 
6/26/2016
 
6/28/2015
 
6/26/2016
 
6/28/2015
 
(In thousands)
Net income (loss)
$
57,983

 
$
57,583

 
$
9,497

 
$
(26,250
)
Interest expense
21,125

 
21,473

 
40,912

 
42,005

Interest income
(8
)
 
(5
)
 
(26
)
 
(45
)
Provision (benefit) for taxes
21,803

 
23,294

 
2,421

 
(21,100
)
Depreciation and amortization
48,299

 
47,105

 
53,490

 
51,116

EBITDA
149,202

 
149,450

 
106,294

 
45,726

Net effect of swaps
5,410

 
(1,407
)
 
7,252

 
(1,523
)
Unrealized foreign currency (gain) loss
(11,181
)
 
(8,004
)
 
(30,895
)
 
30,254

Non-cash equity compensation expense
2,281

 
2,876

 
4,749

 
5,261

Loss on impairment / retirement of fixed assets, net
1,415

 
780

 
4,027

 
3,683

Class action settlement costs

 
27

 

 
177

Other non-recurring items (as defined) (1)
96

 
502

 
340

 
199

Adjusted EBITDA
$
147,223

 
$
144,224

 
$
91,767

 
$
83,777

 
 
 
 
 
 
 
 
(1) The Company's 2013 Credit Agreement references certain costs as non-recurring or unusual. These items are excluded in the calculation of Adjusted EBITDA and have included certain legal expenses, costs associated with certain ride abandonment or relocation expenses, contract termination costs, and severance expenses.

28


Results of Operations:
Six months ended June 26, 2016

The fiscal six-month period ended June 26, 2016, included a total of 804 operating days compared with 847 operating days for the fiscal six-month period ended June 28, 2015. The following table presents key financial information for the six months ended June 26, 2016 and June 28, 2015:
 
 
Six months ended
 
Six months ended
 
Increase (Decrease)
 
 
6/26/2016
 
6/28/2015
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
446,472

 
$
424,225

 
$
22,247

 
5.2
%
Operating costs and expenses
 
359,915

 
346,032

 
13,883

 
4.0
%
Depreciation and amortization
 
53,490

 
51,116

 
2,374

 
4.6
%
Loss on impairment / retirement of fixed assets, net
 
4,027

 
3,683

 
344

 
N/M

Operating income
 
$
29,040

 
$
23,394

 
$
5,646

 
24.1
%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
$
91,767

 
$
83,777

 
$
7,990

 
9.5
%
Adjusted EBITDA margin
 
20.6
%
 
19.7
%
 

 
0.9
%
Attendance
 
8,980

 
8,643

 
337

 
3.9
%
Per capita spending
 
$
45.16

 
$
44.57

 
$
0.59

 
1.3
%
Out-of-park revenues
 
$
53,956

 
$
50,517

 
$
3,439

 
6.8
%

For the six months ended June 26, 2016, net revenues increased by $22.2 million, to $446.5 million, from $424.2 million for the first six months of 2015. This reflects an increase in both attendance and average in-park guest per capita spending, as well as an increase in out-of park revenues, compared to the same period in the prior year. The 337,000 visit, or 3.9%, increase in attendance for the first six months reflects strong season pass visitation in the period, while the $0.59, or 1.3%, increase in per capita spending was mainly attributable to the continued growth in admissions and our food and beverage programs. The $3.4 million, or 6.8%, increase in out-of-park revenues reflects improved results at our resort properties, an increase in special events at several parks, and increased transaction fees from online pre-purchases. The overall increase in net revenues is net of the unfavorable impact of foreign currency exchange rates of $1.5 million for the first six months of the year for our Canadian park.

Operating costs and expenses for the six months increased 4.0%, or $13.9 million, to $359.9 million from $346.0 million for the first six months of 2015. The increase is the result of a $2.1 million increase in cost of goods sold, a $6.7 million increase in operating expenses, and a $5.1 million increase in selling, general, and administrative expenses ("SG&A"). The $2.1 million increase in cost of goods sold reflects the higher attendance levels for the first half of the year. As a percentage of revenues, cost of goods sold was comparable for both periods. The $6.7 million increase in operating expenses was primarily due to higher labor costs and to a lesser extent higher operating supply costs. Labor costs increased due to both normal merit increases and market / minimum-wage rate increases. The impact of higher wage rates was slightly offset by staffing efficiencies that allowed for a reduction of seasonal labor hours. Operating supply costs increased slightly due to incremental special events and other early-season planned spending on our new initiatives. The $5.1 million increase in SG&A expense was primarily due to increases in media and other marketing costs, the continued focus on supporting our technological and security infrastructures, and higher merchant fees. The overall increase in operating costs and expenses is net of the favorable impact of foreign currency exchange rates of $1.6 million for the first six months of the year for our Canadian park.

Depreciation and amortization expense for the first six months increased $2.4 million. For the first six months of 2016, the loss on impairment / retirement of fixed assets was $4.0 million, reflecting the retirement of assets during the period at several of our properties, as compared to $3.7 million for the first six months of 2015. After depreciation, amortization, loss on impairment/retirement of fixed assets, and all other non-cash costs, operating income increased $5.6 million to $29.0 million for the first six months of 2016 compared to operating income of $23.4 million for the first six months of 2015.

29


Interest expense for the first six months of 2016 decreased slightly to $40.9 million from $42.0 million for the first six months of 2015. The net effect of our swaps resulted in a non-cash charge to earnings of $7.3 million for the first six months of 2016 compared with a $1.5 million non-cash benefit to earnings in 2015 for the same period. The difference reflects the change in fair market value movements in our de-designated swap portfolio offset by the amortization of amounts in OCI for these swaps. During the period, we also recognized a $31.0 million net benefit to earnings for unrealized/realized foreign currency gains compared with a $30.3 million net charge to earnings for the same period in 2015. Both amounts primarily represented foreign currency movements on the U.S.-dollar denominated debt held at our Canadian property.

For the first six months of 2016, a provision for taxes of $2.4 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compares to a $21.1 million benefit for taxes recorded for the first six months of 2015. The decrease in tax benefit between periods relates largely to a decrease in pretax loss in the current period for our corporate subsidiaries when compared to the same period a year ago. Cash taxes to be paid or payable in 2016 are estimated to be in the $50 million to $55 million range, compared to $20.0 million in cash taxes paid in 2015. The projected increase in cash taxes relates to the continuing strong business performance and the fact that net operating loss carryforwards were fully utilized during 2015.

After the items above, net income for the first six months totaled $9.5 million, or $0.17 per diluted limited partner unit, compared with a net loss of $26.3 million, or $0.47 per diluted unit, for the same period a year ago.

We believe Adjusted EBITDA is a meaningful measure of our operating results (for additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see page 28). For the six month period, our Adjusted EBITDA increased to $91.8 million from $83.8 million for the same period in 2015. The approximate $8.0 million increase in Adjusted EBITDA is a direct result of higher attendance, higher average guest per capita spending, and stronger out-of-park revenues during the period, when compared with the same period in the prior year. Partially offsetting these revenue increases were increases in operating costs and expenses associated with increased labor costs, higher attendance, special events and other planned spending on current year initiatives. Over this same period, our Adjusted EBITDA margins (Adjusted EBITDA divided by net revenues) improved by 90 basis points to 20.6%, from 19.7% for the same period last year. The margin growth is directly attributable to top-line revenue growth out-pacing expense growth, period over period, as previously discussed.
Three months ended June 26, 2016

The fiscal three-month period ended June 26, 2016, included a total of 708 operating days compared with 750 operating days for the fiscal three-month period ended June 28, 2015. The following table presents key financial information for the three months ended June 26, 2016 and June 28, 2015:
 
 
Three months ended
 
Three months ended
 
Increase (Decrease)
 
 
6/26/2016
 
6/28/2015
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
388,034

 
$
377,408

 
$
10,626

 
2.8
%
Operating costs and expenses
 
243,462

 
236,496

 
6,966

 
2.9
%
Depreciation and amortization
 
48,299

 
47,105

 
1,194

 
2.5
%
Loss on impairment / retirement of fixed assets, net
 
1,415

 
780

 
635

 
N/M

Operating income
 
$
94,858

 
$
93,027

 
$
1,831

 
2.0
%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
$
147,223

 
$
144,224

 
$
2,999

 
2.1
%
Attendance
 
7,927

 
7,781

 
146

 
1.9
%
Per capita spending
 
$
45.23

 
$
44.78

 
$
0.45

 
1.0
%
Out-of-park revenues
 
$
40,766

 
$
39,219

 
$
1,547

 
3.9
%

For the quarter ended June 26, 2016, net revenues increased by $10.6 million, to $388.0 million, from $377.4 million in the second quarter of 2015. This reflects an increase in both attendance and average in-park guest per capita spending and an increase in out-of park revenues compared to the same period in the prior year. The 146,000 visit, or 1.9%, increase in attendance for the quarter reflects strong season pass visitation in the quarter, while the $0.45, or 1.0%, increase in per capita spending was mainly attributable to the continued growth in admissions and our food and beverage programs. The $1.5 million, or 3.9%, increase in out-of-park revenues primarily reflects improved results at our resort properties and increased transaction fees from online pre-purchases. The

30


overall increase in net revenues is net of the unfavorable impact of foreign currency exchange rates of $1.5 million in the period for our Canadian park.

Operating costs and expenses for the quarter increased 2.9%, or $7.0 million, to $243.5 million from $236.5 million in the second quarter of 2015. The increase is the result of a $1.5 million increase in cost of goods sold, a $0.2 million increase in operating expenses, and a $5.3 million increase in SG&A. The $1.5 million increase in cost of goods sold reflects the higher attendance levels in the quarter. As a percentage of revenues, cost of goods sold was comparable for both periods. The $0.2 million increase in operating expenses was the result of higher labor costs, offset by net savings on spending in other operating areas. Labor costs increased due to both normal merit increases and market / minimum-wage rate increases. The impact of higher wage rates was slightly offset by staffing efficiencies that allowed for a reduction in seasonal labor hours. The net increase in labor costs was offset by decreases in operating supply costs and maintenance costs. The $5.3 million increase in SG&A expense was primarily due to increases in media and other marketing costs, the continued focus on supporting our technological and security infrastructure, and merchant fees. The increase in operating costs and expenses is net of the favorable impact of foreign currency exchange rates of $1.0 million for the second quarter of 2016 for our Canadian park.

Depreciation and amortization expense for the quarter increased $1.2 million. For the second quarter of 2016, the loss on impairment / retirement of fixed assets was $1.4 million, reflecting the retirement of assets during the period at several of our properties, as compared to $0.8 million in the second quarter of 2015. After depreciation, amortization, loss on impairment/retirement of fixed assets, and all other non-cash costs, operating income increased $1.8 million to $94.9 million for the second quarter of 2016 compared to operating income of $93.0 million for the second quarter of 2015.

Interest expense for the second quarter of 2016 decreased slightly to $21.1 million from $21.5 million in the second quarter of 2015. The net effect of our swaps resulted in a non-cash charge to earnings of $5.4 million for the second quarter of 2016 compared with a $1.4 million non-cash benefit to earnings in the second quarter of 2015. The difference reflects the change in fair market value movements in our de-designated swap portfolio offset by the amortization of amounts in OCI for these swaps. During the current quarter, we also recognized an $11.5 million net benefit to earnings for unrealized/realized foreign currency gains compared with a $7.9 million net benefit to earnings for the second quarter in 2015. Both amounts primarily represented foreign currency movements on the U.S.-dollar denominated debt held at our Canadian property.

During the second quarter, a provision for taxes of $21.8 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compares to a provision for taxes recorded in the second quarter of 2015 of $23.3 million. This decrease in tax provision relates largely to a slight decrease pretax income in our corporate subsidiaries compared to the same period a year ago.

After the items above, net income for the quarter totaled $58.0 million, or $1.03 per diluted limited partner unit, compared with net income of $57.6 million, or $1.02 per diluted unit, for the second quarter a year ago.

We believe Adjusted EBITDA is a meaningful measure of our operating results (for additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see page 28). For the current quarter, our Adjusted EBITDA increased to $147.2 million from $144.2 million for the fiscal second quarter of 2015. The approximate $3.0 million increase in Adjusted EBITDA is a direct result of higher attendance, higher average guest per capita spending, and stronger out-of-park revenues during the period compared with the same period in the prior-year. Partially offsetting these revenue increases were increases in operating costs and expenses associated with increased labor costs, higher attendance, and other planned spending on our current year initiatives.

July 2016

Based on preliminary results, net revenues through July 31, 2016 were approximately $769 million, up 2%, or $16 million, compared with $753 million for the same period last year. The increase was the result of an approximate 1%, or 138,000-visit, increase in attendance to 15.2 million guests, a 1%, or $0.51, increase in average in-park guest per capita spending to $46.39, and a 4%, or $4 million, increase in out-of-park revenues to $86 million compared with 2015.


31


Liquidity and Capital Resources:
With respect to both liquidity and cash flow, we ended the second quarter of 2016 in sound condition. The working capital ratio (current assets divided by current liabilities) of 0.7 at June 26, 2016 is the result of normal seasonal activity. Receivables, inventories, and payables are at normal seasonal levels.
Operating Activities
During the six-month period ended June 26, 2016, net cash provided by operating activities increased $23.9 million from the same period a year ago, primarily due to improved operating results and favorable working capital changes offset by changes in other non-current assets and liabilities.
Investing Activities
Net cash used in investing activities for the first six months of 2016 was $106.2 million, a decrease of $16.1 million compared with the same period ended June 28, 2015 in the prior year. This decrease reflects lower capital expenditures in the period and a $2.0 million preferred equity investment made in a non-public entity in the prior year.
Financing Activities
Net cash used in financing activities for the first six months of 2016 was $45.3 million, an increase of $1.1 million compared with the same period ended June 28, 2015 in the prior year. This increase reflects both an increase in unitholder distributions and a term debt payment of $6.0 million which was made in 2016 being partially offset by increased revolver draws in 2016.
As of June 26, 2016, our outstanding debt, before reduction for debt issuance costs, consisted of the following:
$450 million of 5.375% senior unsecured notes, maturing in 2024, issued at par. Prior to June 1, 2017, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.375% together with accrued and unpaid interest. The notes may be redeemed, in whole or in part, at any time prior to June 1, 2019 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the redemption date. The notes may be redeemed after this date, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in June and December.
$500 million of 5.25% senior unsecured notes, maturing in 2021, issued at par. The notes may be redeemed, in whole or in part, at any time prior to March 15, 2017 at a price equal to 103.938% of the principal amount of the notes redeemed, together with accrued and unpaid interest, if any, to the redemption date. The notes may be redeemed after this date, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in March and September.
$602.9 million of senior secured term debt, maturing in March 2020 under our 2013 Credit Agreement. The term debt bears interest at a rate of LIBOR plus 250 bps with a LIBOR floor of 75 bps. The term loan amortizes at $6.3 million annually. Due to the prepayment made during 2016, we have no current maturities as of June 26, 2016.
$55 million of borrowings under the $255 million senior secured revolving credit facility under our 2013 Credit Agreement. Under the 2013 Credit Agreement, the Canadian portion of the revolving credit facility has a sub-limit of $15 million. U.S. denominated and Canadian denominated loans made under the revolving credit facility bear interest at a rate of LIBOR plus 225 bps (with no LIBOR floor). The revolving credit facility is scheduled to mature in March 2018 and also provides for the issuance of documentary and standby letters of credit. The 2013 Credit Agreement requires that we pay a commitment fee of 38 bps per annum on the unused portion of the credit facilities. After letters of credit, which totaled $15.9 million at June 26, 2016, we had $184.1 million of available borrowings under the revolving credit facility and cash on hand of $68.1 million.
As of June 26, 2016, we have $500 million of interest rate swaps in place that effectively convert variable-rate debt to fixed rates. These swaps, which mature in December 2020 and fix LIBOR at a weighted average rate of 2.64%, were not designated as cash flow hedges. Additional detail regarding our current and historical swap arrangements is provided in Note 6 to our Unaudited Condensed Consolidated Financial Statements and in Note 6 to the Audited Consolidated Financial Statements included in our Form 10-K filed on February 26, 2016.
At June 26, 2016, the fair market value of our derivative portfolio was $30.9 million and was recorded in "Derivative Liability."

The 2013 Credit Agreement includes two Financial Condition Covenants, which if breached for any reason and not cured, could result in an event of default. At the end of the second quarter of 2016, the first of these, the Consolidated Leverage Ratio, was set at a maximum of 5.50x consolidated total debt (excluding the revolving debt)-to-consolidated EBITDA. The required ratio decreased by 0.25x at the beginning of the second quarter of 2016. The final decrease will occur at the beginning of the second

32


quarter of 2017 when the ratio will reach its minimum of 5.25x. The second of these required ratios, the Consolidated Fixed Charge Coverage Ratio, was set at a minimum of 1.1x (consolidated total fixed charges-to-consolidated EBITDA). As of June 26, 2016, we were in compliance with these Financial Condition Covenants and all other covenants under the 2013 Credit Agreement.

The 2013 Credit Agreement allows restricted payments of up to $60 million annually so long as no default or event of default has occurred and is continuing and so long as the Partnership would be in compliance with certain financial ratios after giving effect to the payments. Additional restricted payments are allowed to be made based on an excess-cash-flow formula, should our pro-forma Consolidated Leverage Ratio be less than or equal to 5.0x.

The indentures governing our notes also include annual restricted payment limitations and additional permitted payment formulas. We can make restricted payments of $60 million annually so long as no default or event of default has occurred and is continuing. Our ability to make additional restricted payments is permitted should our pro forma Total Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.0x.
In accordance with these debt provisions, on May 4, 2016, we announced the declaration of a distribution of $0.825 per limited partner unit, which was paid on June 15, 2016. Also, on August 3, 2016, we announced the declaration of a distribution of $0.825 per limited partner unit, which will be payable on September 15, 2016.
Existing credit facilities and cash flows from operations are expected to be sufficient to meet working capital needs, debt service, partnership distributions and planned capital expenditures for the foreseeable future.
Off Balance Sheet Arrangements:
We had $15.9 million in letters of credit, which are primarily in place to backstop insurance arrangements, outstanding on our revolving credit facility as of June 26, 2016. We have no other significant off-balance sheet financing arrangements.

Forward Looking Statements
Some of the statements contained in this report (including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section) that are not historical in nature are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements as to our expectations, beliefs and strategies regarding the future. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond our control and could cause actual results to differ materially from those described in such statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors, including those listed under Item 1A in the Company’s Annual Report on Form 10-K, could adversely affect our future financial performance and cause actual results to differ materially from our expectations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from fluctuations in interest rates, and to a lesser extent on currency exchange rates on our operations in Canada and, from time to time, on imported rides and equipment. The objective of our financial risk management is to reduce the potential negative impact of interest rate and foreign currency exchange rate fluctuations to acceptable levels. We do not acquire market risk sensitive instruments for trading purposes.
We manage interest rate risk through the use of a combination of fixed-rate long-term debt, interest rate swaps that fix a portion of our variable-rate long-term debt, and variable-rate borrowings under our revolving credit facility. Translation exposures with regard to our Canadian operations are not hedged.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value of the derivative instrument is reported as a component of “Other comprehensive income (loss)” and reclassified into earnings in the period during which the hedged transaction affects earnings. Changes in fair value of derivative instruments that do not qualify as effective hedging activities are reported as “Net effect of swaps” in the unaudited condensed consolidated statements of operations. Additionally, the “Other comprehensive income (loss)” related to interest rate swaps that become ineffective is amortized over the remaining life of the interest rate swap, and reported as a component of “Net effect of swaps” in the unaudited condensed consolidated statements of operations.
As of June 26, 2016, before reduction for debt issuance costs, we had $950.0 million of fixed-rate senior unsecured notes and $602.9 million of variable-rate term debt. After considering the impact of interest rate swap agreements, most of our outstanding long-term debt represents fixed-rate debt. Assuming an average balance on our revolving credit borrowings of approximately

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$23.2 million, a hypothetical 100 bps increase in 30-day LIBOR on our variable-rate debt (not considering the impact of our interest rate swaps) would lead to an increase of approximately $4.8 million in annual cash interest costs.
Assuming a hypothetical 100 bps increase in 30-day LIBOR, the amount of net cash interest paid on our derivative portfolio would decrease by $3.8 million over the next year.
A uniform 10% strengthening of the U.S. dollar relative to the Canadian dollar would result in a $2.8 million decrease in annual operating income.
ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures - 
The Partnership maintains a system of controls and procedures designed to ensure that information required to be disclosed by the Partnership in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Commission and that such information is accumulated and communicated to the Partnership’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of June 26, 2016, the Partnership's management, with the participation of the Partnership's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Partnership's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Partnership's disclosure controls and procedures were effective as of June 26, 2016.


(b)Changes in Internal Control Over Financial Reporting -
There were no changes in the Partnership’s internal control over financial reporting that occurred during the fiscal quarter ended June 26, 2016 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Not applicable.

ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2015.


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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities:
The following table presents information about repurchases of Cedar Fair, L.P. Depositary Units representing limited partner interests made by the Partnership during the second quarter of fiscal 2016:








Period
 
(a)






Total Number of Units Purchased (1)
 
(b)






Average Price Paid per Unit
 
(c)



Total Number of Units Purchased as Part of Publicly Announced Plans or Programs
 
(d)

Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs
March 27 - April 30
 
104

 
$
58.19

 

 
$

May 1 - May 31
 

 

 

 

June 1 - June 26
 
89

 
58.58

 

 

Total
 
193

 
$
58.37

 

 
$


(1) 
All of the units reported as purchased are attributable to units that were reacquired by the Partnership in satisfaction of tax obligations related to the vesting of restricted units which were granted under the Cedar Fair, L.P. 2008 Omnibus Incentive Plan.

ITEM 6. EXHIBITS
Exhibit (10.1)
 
Amended and Restated Employment Agreement, dated June 8, 2016, by and among Cedar Fair L.P., Cedar Fair Management, Inc., Magnum Management Corporation, and Matthew A. Ouimet. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on June 9, 2016.
 
 
 
Exhibit (10.2)
 
Cedar Fair L.P., 2016 Omnibus Incentive Plan. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on June 14, 2016.
 
 
 
Exhibit (31.1)
  
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit (31.2)
  
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit (32)
  
Certifications Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit (101)
  
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended June 26, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flow, (iv) the Condensed Consolidated Statement of Equity, and (v) related notes.
 

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
CEDAR FAIR, L.P.
 
 
 
(Registrant)
 
 
 
 
 
 
 
By Cedar Fair Management, Inc.
 
 
 
General Partner
 
 
 
 
Date:
August 3, 2016
/s/ Matthew A. Ouimet
 
 
Matthew A. Ouimet
 
 
President and Chief Executive Officer
 
 
 
 
Date:
August 3, 2016
/s/ Brian C. Witherow
 
 
Brian C. Witherow
 
 
Executive Vice President and
 
 
Chief Financial Officer

 

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INDEX TO EXHIBITS
 
Exhibit (10.1)
 
Amended and Restated Employment Agreement, dated June 8, 2016, by and among Cedar Fair L.P., Cedar Fair Management, Inc., Magnum Management Corporation, and Matthew A. Ouimet. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on June 9, 2016.
 
 
 
Exhibit (10.2)
 
Cedar Fair L.P., 2016 Omnibus Incentive Plan. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on June 14, 2016.
 
 
 
Exhibit (31.1)
  
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit (31.2)
  
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit (32)
  
Certifications Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit (101)
  
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended June 26, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flow, (iv) the Condensed Consolidated Statement of Equity, and (v) related notes.
 

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