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EX-32 - SECTION 906 CERTIFICATION - CEDAR FAIR L Pcedarfair-q3xex322016.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - CEDAR FAIR L Pcedarfair-q3xex3122016.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - CEDAR FAIR L Pcedarfair-q3xex3112016.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 September 25, 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 October 31, 2016
Units Representing
Limited Partner Interests
 
56,160,377



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)
 
 
9/25/2016
 
12/31/2015
 
9/27/2015
ASSETS
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
187,302

 
$
119,557

 
$
196,323

Receivables
 
51,536

 
29,494

 
44,979

Inventories
 
31,059

 
25,029

 
30,162

Other current assets
 
13,809

 
9,946

 
14,085

 
 
283,706

 
184,026

 
285,549

Property and Equipment:
 
 
 
 
 
 
Land
 
267,175

 
267,782

 
270,358

Land improvements
 
394,141

 
381,191

 
380,356

Buildings
 
675,440

 
647,514

 
651,564

Rides and equipment
 
1,653,274

 
1,561,234

 
1,577,635

Construction in progress
 
34,918

 
50,962

 
25,231

 
 
3,024,948

 
2,908,683

 
2,905,144

Less accumulated depreciation
 
(1,498,908
)
 
(1,393,805
)
 
(1,390,062
)
 
 
1,526,040

 
1,514,878

 
1,515,082

Goodwill
 
215,460

 
210,811

 
214,319

Other Intangibles, net
 
36,430

 
35,895

 
36,249

Other Assets
 
21,473

 
17,410

 
17,553

 
 
$
2,083,109

 
$
1,963,020

 
$
2,068,752

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
Current maturities of long-term debt
 
$
1,200

 
$
2,475

 
$

Accounts payable
 
32,891

 
17,122

 
21,418

Deferred revenue
 
65,748

 
69,514

 
51,944

Accrued interest
 
10,939

 
9,910

 
11,898

Accrued taxes
 
69,916

 
41,937

 
49,735

Accrued salaries, wages and benefits
 
42,744

 
26,916

 
42,555

Self-insurance reserves
 
26,820

 
23,996

 
24,402

Current derivative liability
 

 

 
3,770

Other accrued liabilities
 
12,348

 
6,801

 
15,474

 
 
262,606

 
198,671

 
221,196

Deferred Tax Liability
 
137,712

 
129,763

 
144,964

Derivative Liability
 
30,185

 
22,918

 
24,042

Other Liabilities
 
12,488

 
17,983

 
15,488

Long-Term Debt:
 
 
 
 
 
 
Term debt
 
595,253

 
598,346

 
600,262

Notes
 
939,418

 
938,330

 
937,658

 
 
1,534,671

 
1,536,676

 
1,537,920

Commitments and Contingencies (Note 10)
 

 

 

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

 
5,290

 
5,290

General partner
 
1

 

 
2

Limited partners, 56,091, 56,018 and 56,008 units outstanding at September 25, 2016, December 31, 2015 and September 27, 2015, respectively
 
100,956

 
48,428

 
120,912

Accumulated other comprehensive income (loss)
 
(800
)
 
3,291

 
(1,062
)
 
 
105,447

 
57,009

 
125,142

 
 
$
2,083,109

 
$
1,963,020

 
$
2,068,752

    
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
 
Nine months ended
 
9/25/2016
 
9/27/2015
 
9/25/2016
 
9/27/2015
Net revenues:
 
 
 
 
 
 
 
Admissions
$
361,949

 
$
361,106

 
$
604,947

 
$
591,457

Food, merchandise and games
202,341

 
201,408

 
354,032

 
347,985

Accommodations, extra-charge products and other
85,993

 
82,123

 
137,776

 
129,420


650,283

 
644,637

 
1,096,755

 
1,068,862

Costs and expenses:

 
 
 
 
 
 
Cost of food, merchandise, and games revenues
52,057

 
52,174

 
92,860

 
90,868

Operating expenses
199,292

 
188,565

 
441,421

 
424,020

Selling, general and administrative
65,099

 
61,394

 
142,082

 
133,277

Depreciation and amortization
64,685

 
59,059

 
118,175

 
110,175

Loss on impairment / retirement of fixed assets, net
1,355

 
5,753

 
5,382

 
9,436


382,488

 
366,945

 
799,920

 
767,776

Operating income
267,795

 
277,692

 
296,835

 
301,086

Interest expense
20,957

 
22,159

 
61,869

 
64,164

Net effect of swaps
1,650

 
(1,439
)
 
8,902

 
(2,962
)
Unrealized/realized foreign currency (gain) loss
7,341

 
33,891

 
(23,675
)
 
64,198

Interest income
(58
)
 
(4
)
 
(84
)
 
(49
)
Income before taxes
237,905

 
223,085

 
249,823

 
175,735

Provision for taxes
62,918

 
58,934

 
65,339

 
37,834

Net income
174,987

 
164,151

 
184,484

 
137,901

Net income allocated to general partner
2

 
2

 
2

 
2

Net income allocated to limited partners
$
174,985

 
$
164,149

 
$
184,482

 
$
137,899

 
 
 
 
 
 
 
 
Net income
$
174,987

 
$
164,151

 
$
184,484

 
$
137,901

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
1,397

 
7,688

 
(5,447
)
 
13,144

Unrealized gain (loss) on cash flow hedging derivatives
1,994

 
(2,978
)
 
1,356

 
(3,576
)
Other comprehensive income (loss), (net of tax)
3,391

 
4,710

 
(4,091
)
 
9,568

Total comprehensive income
$
178,378

 
$
168,861

 
$
180,393

 
$
147,469

Basic income per limited partner unit:
 
 
 
 
 
 
 
Weighted average limited partner units outstanding
55,948

 
55,770

 
55,922

 
55,721

Net income per limited partner unit
$
3.13

 
$
2.94

 
$
3.30

 
$
2.47

Diluted income per limited partner unit:
 
 
 
 
 
 
 
Weighted average limited partner units outstanding
56,365

 
56,282

 
56,392

 
56,141

Net income per limited partner unit
$
3.10

 
$
2.92

 
$
3.27

 
$
2.46

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)
 
Nine months ended
 
9/25/2016
 
9/27/2015
Limited Partnership Units Outstanding
 
 
 
Beginning balance
56,018

 
55,828

Limited partnership unit options exercised
29

 
48

Limited partnership unit forfeitures

 
(1
)
Issuance of limited partnership units as compensation
44

 
133

 
56,091

 
56,008

Limited Partners’ Equity
 
 
 
Beginning balance
$
48,428

 
$
101,556

Net income
184,482

 
137,899

Partnership distribution declared ($2.48 and $2.25 per limited partnership unit)
(139,041
)
 
(126,266
)
Expense recognized for limited partnership unit options
5

 
466

Tax effect of units involved in treasury unit transactions
(1,903
)
 
(2,048
)
Issuance of limited partnership units as compensation
8,985

 
9,305

 
100,956

 
120,912

General Partner’s Equity
 
 
 
Beginning balance

 
1

Net income
2

 
2

Partnership distribution declared
(1
)
 
(1
)
 
1

 
2

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 $3,131 and ($7,554)
(5,447
)
 
13,144

 
17,144

 
19,080

Unrealized loss on cash flow hedging derivatives:
 
 
 
Beginning balance
(19,300
)
 
(16,566
)
Period activity, net of tax ($279) and $758
1,356

 
(3,576
)
 
(17,944
)
 
(20,142
)
 
(800
)
 
(1,062
)
Total Partners’ Equity
$
105,447

 
$
125,142

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)
 
Nine months ended
 
9/25/2016
 
9/27/2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
184,484

 
$
137,901

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
118,175

 
110,175

Non-cash foreign currency (gain) loss on debt
(23,891
)
 
64,143

Other non-cash expenses
35,084

 
16,492

Net change in working capital
31,267

 
16,803

Net change in other assets/liabilities
(5,337
)
 
(1,442
)
Net cash from operating activities
339,782

 
344,072

CASH FLOWS FOR INVESTING ACTIVITIES
 
 
 
Capital expenditures
(126,864
)
 
(144,476
)
Purchase of preferred equity investment

 
(2,000
)
Net cash for investing activities
(126,864
)
 
(146,476
)
CASH FLOWS FOR FINANCING ACTIVITIES
 
 
 
Term debt payments
(6,000
)
 

Distributions paid to partners
(139,042
)
 
(126,267
)
Tax effect of units involved in treasury unit transactions
(1,903
)
 
(2,048
)
Net cash for financing activities
(146,945
)
 
(128,315
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
1,772

 
(4,798
)
CASH AND CASH EQUIVALENTS
 
 
 
Net increase for the period
67,745

 
64,483

Balance, beginning of period
119,557

 
131,840

Balance, end of period
$
187,302

 
$
196,323

SUPPLEMENTAL INFORMATION
 
 
 
Cash payments for interest expense
$
61,558

 
$
61,043

Interest capitalized
1,699

 
1,890

Cash payments for income taxes, net of refunds
33,141

 
15,926

Capital expenditures in accounts payable
3,179

 
1,158

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 SEPTEMBER 25, 2016 AND SEPTEMBER 27, 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 September 25, 2016 and September 27, 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. We adopted this guidance and applied retrospective treatment. 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 $20.9 million at December 31, 2015 and September 27, 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 $9.3 million at December 31, 2015 and September 27, 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 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 after December 15, 2018 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.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). The amendments in ASU 2016-09 are meant to simplify the current accounting for share-based payment transactions, specifically the accounting for income taxes, award classification, cash flow presentation, and accounting for forfeitures. ASU 2016-09 is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. 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, two 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 with an additional limited daily schedule for the balance of the year.
To assure that these highly seasonal operations will not result in misleading comparisons of current and subsequent interim periods, the Partnership has adopted the following accounting and reporting procedures for its seasonal parks: (a) revenues 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.

8


(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.

During the third quarter of 2016, the Partnership ceased operations of one of its separately gated outdoor water parks, Wildwater Kingdom, located near Cleveland in Aurora, Ohio. In 2014, the carrying value of the long-lived operating assets related to Wildwater Kingdom was deemed to be impaired and the associated loss was recognized. At the date that Wildwater Kingdom ceased operations, the only remaining long-lived asset was the approximate 670 acres of land owned by the Partnership. This land has an associated carrying value of $17.1 million. As of September 25, 2016, the Partnership assessed the remaining asset and concluded there was no impairment. The associated acreage is classified as assets held-for-sale within "Other Assets" in the unaudited condensed consolidated balance sheet.


9


(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 September 25, 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 nine months ended September 25, 2016 and September 27, 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
 
4,649

 

 
4,649

Balance at September 25, 2016
 
$
295,328

 
$
(79,868
)
 
$
215,460

 
 
 
 
 
 
 
Balance at December 31, 2014
 
$
308,159

 
$
(79,868
)
 
$
228,291

Foreign currency translation
 
(13,972
)
 

 
(13,972
)
Balance at September 27, 2015
 
$
294,187

 
$
(79,868
)
 
$
214,319

At September 25, 2016, December 31, 2015, and September 27, 2015, the Partnership’s other intangible assets consisted of the following:
September 25, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
(In thousands)
 
 
 
 
 
 
Other intangible assets:
 
 
 
 
 
 
Trade names
 
$
35,866

 
$

 
$
35,866

License / franchise agreements
 
1,475

 
911

 
564

Total other intangible assets
 
$
37,341

 
$
911

 
$
36,430

 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
September 27, 2015
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
Other intangible assets:
 
 
 
 
 
 
Trade names
 
$
35,705

 
$

 
$
35,705

License / franchise agreements
 
905

 
361

 
544

Total other intangible assets
 
$
36,610

 
$
361

 
$
36,249

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

10


(5) Long-Term Debt:
Long-term debt as of September 25, 2016, December 31, 2015, and September 27, 2015 consisted of the following:
(In thousands)
September 25, 2016
 
December 31, 2015
 
September 27, 2015
 
 
 
 
 
 
Revolving credit facility (due 2018)
$

 
$

 
$

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

 
1,552,850

 
1,558,850

 
1,558,850

Less current portion
1,200

 
2,475

 

 
1,551,650

 
1,556,375

 
1,558,850

Less debt issuance costs
16,979

 
19,699

 
20,930

 
$
1,534,671

 
$
1,536,676

 
$
1,537,920

(1) The average interest rate does not reflect the effect of interest rate swap agreements (see Note 6).
In June 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 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 third 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

11


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 September 25, 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 are being 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 September 25, 2016, December 31, 2015, and September 27, 2015 are as follows:
(In thousands)
 
Unaudited Condensed Consolidated
Balance Sheet Location
 
Fair Value as of
 
Fair Value as of
 
Fair Value as of
September 25, 2016
 
December 31, 2015
 
September 27, 2015
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Derivative Liability
 
$

 
$
(22,918
)
 
$
(24,042
)
Total derivatives designated as hedging instruments
 
 
 
$

 
$
(22,918
)
 
$
(24,042
)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Current Derivative Liability
 
$

 
$

 
$
(3,770
)
Interest rate swaps
 
Derivative Liability
 
$
(30,185
)
 
$

 
$

Total derivatives not designated as hedging instruments
 
 
 
$
(30,185
)
 
$

 
$
(3,770
)
Net derivative liability
 
 
 
$
(30,185
)
 
$
(22,918
)
 
$
(27,812
)
 
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 September 25, 2016, we have no designated derivatives; therefore, no amount of designated derivatives are forecasted to be reclassified into earnings in the next twelve months.

12


Derivatives Not Designated as Hedging Instruments
Instruments that do not qualify for hedge accounting or were de-designated are prospectively adjusted to fair value each reporting period through "Net effect of swaps" in 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 are being amortized into earnings through the original December 2018 maturity. As of September 25, 2016, approximately $21.3 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 and other comprehensive income for the three-month periods ended September 25, 2016 and September 27, 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 9/25/2016
 
Three months ended 9/27/2015
 
Designated Derivatives
 
Three months ended 9/25/2016
 
Three months ended 9/27/2015
 
Derivatives
Not Designated
 
Three months ended 9/25/2016
 
Three months ended 9/27/2015
Interest rate swaps
 
$

 
$
(5,237
)
 
Interest Expense
 
$

 
$

 
Net effect of swaps
 
$
715

 
$
3,125

During the quarter ended September 25, 2016, the Partnership recognized $0.7 million of gains 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 $1.7 million recorded in “Net effect of swaps.”

During the quarter ended September 27, 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 and other comprehensive income for the nine-month periods ended September 25, 2016 and September 27, 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
 
Nine months ended 9/25/2016
 
Nine months ended 9/27/2015
 
Designated Derivatives
 
Nine months ended 9/25/2016
 
Nine months ended 9/27/2015
 
Derivatives
Not Designated
 
Nine months ended 9/25/2016
 
Nine months ended 9/27/2015
Interest rate swaps
 
$
(4,671
)
 
$
(9,393
)
 
Interest Expense
 
$
(851
)
 
$

 
Net effect of swaps
 
$
(2,596
)
 
$
8,021

During the nine-month period ended September 25, 2016, the Partnership recognized $2.6 million of losses on the derivatives not designated as cash flow hedges and $6.3 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $8.9 million recorded in “Net effect of swaps.”

During the nine-month period ended September 27, 2015, the Partnership recognized $8.0 million of gains on the derivatives not designated as cash flow hedges and $5.1 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $3.0 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 is associated with the level of pricing observability utilized in measuring fair value and defines three levels of inputs to the fair

13


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 September 25, 2016, December 31, 2015, and September 27, 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
September 25, 2016
 
December 31, 2015
 
September 27, 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


 


 
$
(3,770
)
$
(3,770
)
Interest rate swap agreements not designated as cash flow hedges
Derivative Liability
Level 2
$
(30,185
)
$
(30,185
)
 


 


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


 
$
(22,918
)
$
(22,918
)
 
$
(24,042
)
$
(24,042
)
Other financial assets (liabilities):
 
 
 
 
 
 
 
 
 
 
Term debt
Long-Term Debt (1)
Level 2
$
(601,650
)
$
(603,154
)
 
$
(606,375
)
$
(604,859
)
 
$
(608,850
)
$
(609,611
)
March 2013 notes
Long-Term Debt (1)
Level 1
$
(500,000
)
$
(520,000
)
 
$
(500,000
)
$
(507,500
)
 
$
(500,000
)
$
(507,500
)
June 2014 notes
Long-Term Debt (1)
Level 1
$
(450,000
)
$
(477,000
)
 
$
(450,000
)
$
(453,375
)
 
$
(450,000
)
$
(454,500
)
(1) 
Carrying values of long-term debt balances are before reductions for debt issuance cost amounts of $17.0 million, $19.7 million, and $20.9 million as of September 25, 2016, December 31, 2015, and September 27, 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 $0.9 million as of September 25, 2016, $0.6 million as of December 31, 2015, and $0.8 million as of September 27, 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 as of September 25, 2016, December 31, 2015, or September 27, 2015.

14


(8) Earnings per Unit:
Net income per limited partner unit is calculated based on the following unit amounts:
 
Three months ended
 
Nine months ended
 
9/25/2016
 
9/27/2015
 
9/25/2016
 
9/27/2015
 
(In thousands,
except per unit amounts)
Basic weighted average units outstanding
55,948

 
55,770

 
55,922

 
55,721

Effect of dilutive units:
 
 
 
 
 
 
 
Deferred units
33

 
21

 
30

 
15

Performance units

 

 
43

 
9

Restricted units
253

 
365

 
266

 
271

Unit options
131

 
126

 
131

 
102

Phantom units

 

 

 
23

Diluted weighted average units outstanding
56,365

 
56,282

 
56,392

 
56,141

Net income per unit - basic
$
3.13

 
$
2.94

 
$
3.30

 
$
2.47

Net income per unit - diluted
$
3.10

 
$
2.92

 
$
3.27

 
$
2.46


The effect of out-of-money and/or antidilutive unit options on the three and nine months ended September 25, 2016 and September 27, 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 third quarter of 2016, the Partnership has recorded $0.9 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.



15


(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 September 25, 2016 and September 27, 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 June 26, 2016
 
$
(19,938
)
 
$
15,747

 
$
(4,191
)
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications, net of tax ($803)
 

 
1,397

 
1,397

 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($371) (2)
 
1,994

 

 
1,994

 
 
 
 
 
 
 
 
Net other comprehensive income
 
1,994

 
1,397

 
3,391

 
 
 
 
 
 
 
 
Balance at September 25, 2016
 
$
(17,944
)
 
$
17,144

 
$
(800
)

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
 
 
 
 
 
 
 
 
 
Gains and Losses on Cash Flow Hedges
 
Foreign Currency Items
 
Total
Balance at June 28, 2015
 
$
(17,164
)
 
$
11,392

 
$
(5,772
)
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications, net of tax $797 and $(4,418), respectively
 
(4,440
)
 
7,688

 
3,248

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

 

 
1,462

 
 
 
 
 
 
 
 
Net other comprehensive income
 
(2,978
)
 
7,688

 
4,710

 
 
 
 
 
 
 
 
Balance at September 27, 2015
 
$
(20,142
)
 
$
19,080

 
$
(1,062
)

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
9/25/2016
 
Three months ended
9/27/2015
 
 
Interest rate contracts
 
$
2,365

 
$
1,686

 
Net effect of swaps
Provision for taxes
 
(371
)
 
(224
)
 
Provision for taxes
 
 
 
$
1,994

 
$
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.

16


The following tables reflect the changes in accumulated other comprehensive income related to limited partners' equity for the nine-month periods ended September 25, 2016 and September 27, 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 $3,131, respectively
 
(3,960
)
 
(5,447
)
 
(9,407
)
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($990) (2)
 
5,316

 

 
5,316

 
 
 
 
 
 
 
 
Net other comprehensive income
 
1,356

 
(5,447
)
 
(4,091
)
 
 
 
 
 
 
 
 
Balance at September 25, 2016
 
$
(17,944
)
 
$
17,144

 
$
(800
)

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 $1,431 and ($7,554), respectively
 
(7,962
)
 
13,144

 
5,182

 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income, net of tax ($673) (2)
 
4,386

 

 
4,386

 
 
 
 
 
 
 
 
Net other comprehensive income
 
(3,576
)
 
13,144

 
9,568

 
 
 
 
 
 
 
 
Balance at September 27, 2015
 
$
(20,142
)
 
$
19,080

 
$
(1,062
)

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
 
Nine months ended
9/25/2016
 
Nine months ended
9/27/2015
 
 
Interest rate contracts
 
$
6,306

 
$
5,059

 
Net effect of swaps
Provision for taxes
 
(990
)
 
(673
)
 
Provision for taxes
 
 
 
$
5,316

 
$
4,386

 


(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.


17


(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 September 25, 2016, December 31, 2015, and September 27, 2015 and for the three- and nine-month periods ended September 25, 2016 and September 27, 2015. In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the Partnership has included the accompanying unaudited condensed consolidating financial statements.


18


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
September 25, 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
 
$

 
$

 
$
75,562

 
$
111,740

 
$

 
$
187,302

Receivables
 
(5
)
 
1,387

 
24,964

 
585,190

 
(560,000
)
 
51,536

Inventories
 

 

 
1,519

 
29,540

 

 
31,059

Other current assets
 
275

 
24,479

 
680

 
12,800

 
(24,425
)
 
13,809

 
 
270

 
25,866

 
102,725

 
739,270

 
(584,425
)
 
283,706

Property and Equipment (net)
 

 
876

 
179,172

 
1,345,992

 

 
1,526,040

Investment in Park
 
820,465

 
963,870

 
197,538

 
347,137

 
(2,329,010
)
 

Goodwill
 
674

 

 
95,180

 
119,606

 

 
215,460

Other Intangibles, net
 

 

 
13,519

 
22,911

 

 
36,430

Deferred Tax Asset
 

 
3,651

 

 

 
(3,651
)
 

Other Assets
 

 
1,999

 
123

 
19,351

 

 
21,473

 
 
$
821,409

 
$
996,262

 
$
588,257

 
$
2,594,267

 
$
(2,917,086
)
 
$
2,083,109

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

 
$
247

 
$
28

 
$
925

 
$

 
$
1,200

Accounts payable
 
399,384

 
164,335

 
1,342

 
27,830

 
(560,000
)
 
32,891

Deferred revenue
 

 

 
5,091

 
60,657

 

 
65,748

Accrued interest
 
875

 
597

 
7,784

 
1,683

 

 
10,939

Accrued taxes
 
3,325

 

 
14,109

 
76,907

 
(24,425
)
 
69,916

Accrued salaries, wages and benefits
 

 
40,588

 
2,156

 

 

 
42,744

Self-insurance reserves
 

 
12,394

 
1,567

 
12,859

 

 
26,820

Other accrued liabilities
 
2,358

 
3,532

 
510

 
5,948

 

 
12,348

 
 
405,942

 
221,693

 
32,587

 
186,809

 
(584,425
)
 
262,606

Deferred Tax Liability
 

 

 
19,497

 
121,866

 
(3,651
)
 
137,712

Derivative Liability
 
18,111

 
12,074

 

 

 

 
30,185

Other Liabilities
 

 
1,520

 

 
10,968

 

 
12,488

Long-Term Debt:
 
 
 
 
 
 
 
 
 
 
 
 
Term debt
 

 
123,996

 
13,616

 
457,641

 

 
595,253

Notes
 
291,909

 
203,025

 
444,484

 

 

 
939,418

 
 
291,909

 
327,021

 
458,100

 
457,641

 

 
1,534,671

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
105,447

 
433,954

 
78,073

 
1,816,983

 
(2,329,010
)
 
105,447

 
 
$
821,409

 
$
996,262

 
$
588,257

 
$
2,594,267

 
$
(2,917,086
)
 
$
2,083,109



 


19


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


20


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
September 27, 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
 
$
132,000

 
$

 
$
49,512

 
$
16,632

 
$
(1,821
)
 
$
196,323

Receivables
 
478

 
139,898

 
117,605

 
701,212

 
(914,214
)
 
44,979

Inventories
 

 
124

 
1,496

 
28,542

 

 
30,162

Other current assets
 
285

 
25

 
747

 
13,028

 

 
14,085

 
 
132,763

 
140,047

 
169,360

 
759,414

 
(916,035
)
 
285,549

Property and Equipment (net)
 

 
5,602

 
183,842

 
1,325,638

 

 
1,515,082

Investment in Park
 
760,412

 
876,248

 
178,052

 
42,485

 
(1,857,197
)
 

Goodwill
 
674

 

 
94,040

 
119,605

 

 
214,319

Other Intangibles, net
 

 

 
13,330

 
22,919

 

 
36,249

Deferred Tax Asset
 

 
27,659

 

 

 
(27,659
)
 

Other Assets
 

 
14,413

 
240

 
2,900

 

 
17,553

 
 
$
893,849

 
$
1,063,969

 
$
638,864

 
$
2,272,961

 
$
(2,800,891
)
 
$
2,068,752

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
456,209

 
$
155,898

 
$
3,062

 
$
322,284

 
$
(916,035
)
 
$
21,418

Deferred revenue
 

 
30

 
4,582

 
47,332

 

 
51,944

Accrued interest
 
1,199

 
2,793

 
7,906

 

 

 
11,898

Accrued taxes
 
2,548

 
36,440

 
991

 
9,756

 

 
49,735

Accrued salaries, wages and benefits
 

 
31,277

 
2,012

 
9,266

 

 
42,555

Self-insurance reserves
 

 
7,861

 
1,391

 
15,150

 

 
24,402

Current derivative liability
 
2,257

 
1,513

 

 

 

 
3,770

Other accrued liabilities
 
1,183

 
3,641

 
601

 
10,049

 

 
15,474

 
 
463,396

 
239,453

 
20,545

 
413,837

 
(916,035
)
 
221,196

Deferred Tax Liability
 

 

 
49,021

 
123,602

 
(27,659
)
 
144,964

Derivative Liability
 
14,065

 
9,976

 

 
1

 

 
24,042

Other Liabilities
 

 
4,088

 

 
11,400

 

 
15,488

Long-Term Debt:
 
 
 
 
 
 
 
 
 
 
 
 
Term debt
 

 
244,938

 
13,724

 
341,600

 

 
600,262

Notes
 
291,246

 
202,565

 
443,847

 

 

 
937,658

 
 
291,246

 
447,503

 
457,571

 
341,600

 

 
1,537,920

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
125,142

 
362,949

 
111,727

 
1,382,521

 
(1,857,197
)
 
125,142

 
 
$
893,849

 
$
1,063,969

 
$
638,864

 
$
2,272,961

 
$
(2,800,891
)
 
$
2,068,752



21


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended September 25, 2016
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
92,371

 
$
172,703

 
$
77,164

 
$
606,823

 
$
(298,778
)
 
$
650,283

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

 

 
6,417

 
45,640

 

 
52,057

Operating expenses
 
(10
)
 
119,140

 
17,885

 
361,055

 
(298,778
)
 
199,292

Selling, general and administrative
 
610

 
21,412

 
4,413

 
38,664

 

 
65,099

Depreciation and amortization
 

 
9

 
7,624

 
57,052

 

 
64,685

Loss on impairment / retirement of fixed assets, net
 

 

 
57

 
1,298

 

 
1,355

 
 
600

 
140,561

 
36,396

 
503,709

 
(298,778
)
 
382,488

Operating income
 
91,771

 
32,142

 
40,768

 
103,114

 

 
267,795

Interest expense (income), net
 
7,984

 
5,759

 
6,323

 
833

 

 
20,899

Net effect of swaps
 
959

 
691

 

 

 

 
1,650

Unrealized / realized foreign currency loss
 

 

 
7,337

 
4

 

 
7,341

Other (income) expense
 
62

 
(29,663
)
 
1,302

 
28,299

 

 

Income from investment in affiliates
 
(98,451
)
 
(62,240
)
 
(12,574
)
 
(28,737
)
 
202,002

 

Income before taxes
 
181,217

 
117,595

 
38,380

 
102,715

 
(202,002
)
 
237,905

Provision for taxes
 
6,230

 
19,142

 
9,643

 
27,903

 

 
62,918

Net income
 
$
174,987

 
$
98,453

 
$
28,737

 
$
74,812

 
$
(202,002
)
 
$
174,987

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
1,397

 

 
1,397

 

 
(1,397
)
 
1,397

Unrealized gain on cash flow hedging derivatives
 
1,994

 
606

 

 

 
(606
)
 
1,994

Other comprehensive income (loss), (net of tax)
 
3,391

 
606

 
1,397

 

 
(2,003
)
 
3,391

Total comprehensive income
 
$
178,378

 
$
99,059

 
$
30,134

 
$
74,812

 
$
(204,005
)
 
$
178,378




22


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended September 27, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
96,104

 
$
140,898

 
$
74,383

 
$
565,908

 
$
(232,656
)
 
$
644,637

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

 
301

 
5,911

 
45,962

 

 
52,174

Operating expenses
 
1,167

 
67,890

 
16,884

 
102,624

 

 
188,565

Selling, general and administrative
 
483

 
16,979

 
4,417

 
39,515

 

 
61,394

Depreciation and amortization
 

 
10

 
7,399

 
51,650

 

 
59,059

Loss on impairment / retirement of fixed assets, net
 

 

 
240

 
5,513

 

 
5,753

 
 
1,650

 
85,180

 
34,851

 
245,264

 

 
366,945

Operating income
 
94,454

 
55,718

 
39,532

 
320,644

 
(232,656
)
 
277,692

Interest expense (income), net
 
8,640

 
6,994

 
6,356

 
165

 

 
22,155

Net effect of swaps
 
(775
)
 
(664
)
 

 

 

 
(1,439
)
Unrealized / realized foreign currency loss
 

 

 
33,891

 

 

 
33,891

Other (income) expense
 
189

 
(7,803
)
 
1,518

 
6,096

 

 

Income from investment in affiliates
 
(84,099
)
 
(48,408
)
 
(13,536
)
 
(12,510
)
 
158,553

 

Income before taxes
 
170,499

 
105,599

 
11,303

 
326,893

 
(391,209
)
 
223,085

Provision (benefit) for taxes
 
6,348

 
21,979

 
(1,207
)
 
31,814

 

 
58,934

Net income
 
$
164,151

 
$
83,620

 
$
12,510

 
$
295,079

 
$
(391,209
)
 
$
164,151

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
7,688

 

 
7,688

 

 
(7,688
)
 
7,688

Unrealized loss on cash flow hedging derivatives
 
(2,978
)
 
(934
)
 

 

 
934

 
(2,978
)
Other comprehensive income (loss), (net of tax)
 
4,710

 
(934
)
 
7,688

 

 
(6,754
)
 
4,710

Total comprehensive income
 
$
168,861

 
$
82,686

 
$
20,198

 
$
295,079

 
$
(397,963
)
 
$
168,861


























23


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Nine Months Ended September 25, 2016
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
131,215

 
$
271,069

 
$
107,637

 
$
1,036,162

 
$
(449,328
)
 
$
1,096,755

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

 

 
9,389

 
83,471

 

 
92,860

Operating expenses
 
2

 
246,624

 
36,249

 
607,874

 
(449,328
)
 
441,421

Selling, general and administrative
 
2,264

 
49,307

 
8,757

 
81,754

 

 
142,082

Depreciation and amortization
 

 
27

 
13,022

 
105,126

 

 
118,175

Loss on impairment / retirement of fixed assets, net
 

 

 
83

 
5,299

 

 
5,382

 
 
2,266

 
295,958

 
67,500

 
883,524

 
(449,328
)
 
799,920

Operating income (loss)
 
128,949

 
(24,889
)
 
40,137

 
152,638

 

 
296,835

Interest expense (income), net
 
23,776

 
17,830

 
18,672

 
1,507

 

 
61,785

Net effect of swaps
 
5,617

 
3,285

 

 

 

 
8,902

Unrealized / realized foreign currency (gain) loss
 

 

 
(23,679
)
 
4

 

 
(23,675
)
Other (income) expense
 
187

 
(69,801
)
 
3,051

 
66,563

 

 

Income from investment in affiliates
 
(94,910
)
 
(78,515
)
 
(18,008
)
 
(44,399
)
 
235,832

 

Income before taxes
 
194,279

 
102,312

 
60,101

 
128,963

 
(235,832
)
 
249,823

Provision for taxes
 
9,795

 
7,403

 
15,701

 
32,440

 

 
65,339

Net income
 
$
184,484

 
$
94,909

 
$
44,400

 
$
96,523

 
$
(235,832
)
 
$
184,484

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
(5,447
)
 

 
(5,447
)
 

 
5,447

 
(5,447
)
Unrealized gain on cash flow hedging derivatives
 
1,356

 
455

 

 

 
(455
)
 
1,356

Other comprehensive income (loss), (net of tax)
 
(4,091
)
 
455

 
(5,447
)
 

 
4,992

 
(4,091
)
Total comprehensive income
 
$
180,393

 
$
95,364

 
$
38,953

 
$
96,523

 
$
(230,840
)
 
$
180,393




24


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Nine Months Ended September 27, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
132,792

 
$
205,178

 
$
102,464

 
$
961,258

 
$
(332,830
)
 
$
1,068,862

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

 
372

 
8,503

 
81,993

 

 
90,868

Operating expenses
 
1,423

 
142,366

 
36,245

 
243,986

 

 
424,020

Selling, general and administrative
 
1,856

 
39,250

 
8,624

 
83,547

 

 
133,277

Depreciation and amortization
 

 
28

 
12,895

 
97,252

 

 
110,175

Loss on impairment / retirement of fixed assets, net
 

 

 
344

 
9,092

 

 
9,436

 
 
3,279

 
182,016

 
66,611

 
515,870

 

 
767,776

Operating income
 
129,513

 
23,162

 
35,853

 
445,388

 
(332,830
)
 
301,086

Interest expense (income), net
 
24,634

 
21,048

 
18,781

 
(348
)
 

 
64,115

Net effect of swaps
 
(1,518
)
 
(1,444
)
 

 

 

 
(2,962
)
Unrealized / realized foreign currency loss
 

 

 
64,198

 

 

 
64,198

Other (income) expense
 
564

 
(15,634
)
 
3,223

 
11,847

 

 

(Income) loss from investment in affiliates
 
(42,244
)
 
(30,060
)
 
(18,624
)
 
12,089

 
78,839

 

Income (loss) before taxes
 
148,077

 
49,252

 
(31,725
)
 
421,800

 
(411,669
)
 
175,735

Provision (benefit) for taxes
 
10,176

 
7,485

 
(19,636
)
 
39,809

 

 
37,834

Net income (loss)
 
$
137,901

 
$
41,767

 
$
(12,089
)
 
$
381,991

 
$
(411,669
)
 
$
137,901

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
13,144

 

 
13,144

 

 
(13,144
)
 
13,144

Unrealized loss on cash flow hedging derivatives
 
(3,576
)
 
(1,236
)
 

 

 
1,236

 
(3,576
)
Other comprehensive income (loss), (net of tax)
 
9,568

 
(1,236
)
 
13,144

 

 
(11,908
)
 
9,568

Total comprehensive income
 
$
147,469

 
$
40,531

 
$
1,055

 
$
381,991

 
$
(423,577
)
 
$
147,469

























25


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 25, 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
 
$
99,232

 
$
(54,962
)
 
$
41,273

 
$
256,105

 
$
(1,866
)
 
$
339,782

CASH FLOWS FOR INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany receivables (payments) receipts
 

 

 

 
(22,771
)
 
22,771

 

Capital expenditures
 

 

 
(6,451
)
 
(120,413
)
 

 
(126,864
)
Net cash for investing activities
 

 

 
(6,451
)
 
(143,184
)
 
22,771

 
(126,864
)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Term debt payments
 

 
(1,237
)
 
(138
)
 
(4,625
)
 

 
(6,000
)
Distributions paid
 
(140,908
)
 

 

 

 
1,866

 
(139,042
)
Intercompany payables (payments) receipts
 
(35,331
)
 
58,102

 

 

 
(22,771
)
 

Tax effect of units involved in treasury unit transactions
 

 
(1,903
)
 

 

 

 
(1,903
)
Net cash from (for) financing activities
 
(176,239
)
 
54,962

 
(138
)
 
(4,625
)
 
(20,905
)
 
(146,945
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 

 

 
1,772

 

 

 
1,772

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

 
36,456

 
108,296

 

 
67,745

Balance, beginning of period
 
77,007

 

 
39,106

 
3,444

 

 
119,557

Balance, end of period
 
$

 
$

 
$
75,562

 
$
111,740

 
$

 
$
187,302

 
 
 
 
 
 
 
 
 
 
 
 
 

26


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 27, 2015
(In thousands)
 
 
Cedar Fair L.P. (Parent)
 
Co-Issuer Subsidiary (Magnum)
 
Co-Issuer Subsidiary (Cedar Canada)
 
Guarantor Subsidiaries
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
NET CASH FROM OPERATING
ACTIVITIES
 
$
76,056

 
$
30

 
$
31,546

 
$
239,848

 
$
(3,408
)
 
$
344,072

CASH FLOWS FOR INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany receivables (payments) receipts
 

 

 
(8,296
)
 
(91,289
)
 
99,585

 

Purchase of preferred equity investment
 

 
(2,000
)
 

 

 

 
(2,000
)
Capital expenditures
 

 

 
(6,610
)
 
(137,866
)
 

 
(144,476
)
Net cash for investing activities
 

 
(2,000
)
 
(14,906
)
 
(229,155
)
 
99,585

 
(146,476
)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
Distributions paid
 
(127,854
)
 

 

 

 
1,587

 
(126,267
)
Intercompany payables (payments) receipts
 
103,798

 
3,636

 
(7,849
)
 

 
(99,585
)
 

Tax effect of units involved in treasury unit transactions
 

 
(2,048
)
 

 

 

 
(2,048
)
Net cash from (for) financing activities
 
(24,056
)
 
1,588

 
(7,849
)
 

 
(97,998
)
 
(128,315
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 

 

 
(4,798
)
 

 

 
(4,798
)
CASH AND CASH EQUIVALENTS
 
 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) for the period
 
52,000

 
(382
)
 
3,993

 
10,693

 
(1,821
)
 
64,483

Balance, beginning of period
 
80,000

 
382

 
45,519

 
5,939

 

 
131,840

Balance, end of period
 
$
132,000

 
$

 
$
49,512

 
$
16,632

 
$
(1,821
)
 
$
196,323

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


27


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 third 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.

28


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 nine-month periods ended September 25, 2016 and September 27, 2015.
 
 
Three months ended
 
Nine months ended
 
9/25/2016
 
9/27/2015
 
9/25/2016
 
9/27/2015
 
(In thousands)
Net income
$
174,987

 
$
164,151

 
$
184,484

 
$
137,901

Interest expense
20,957

 
22,159

 
61,869

 
64,164

Interest income
(58
)
 
(4
)
 
(84
)
 
(49
)
Provision for taxes
62,918

 
58,934

 
65,339

 
37,834

Depreciation and amortization
64,685

 
59,059

 
118,175

 
110,175

EBITDA
323,489

 
304,299

 
429,783

 
350,025

Net effect of swaps
1,650

 
(1,439
)
 
8,902

 
(2,962
)
Unrealized foreign currency (gain) loss
7,360

 
33,889

 
(23,535
)
 
64,143

Non-cash equity compensation expense
2,160

 
1,934

 
6,909

 
7,195

Loss on impairment / retirement of fixed assets, net
1,355

 
5,753

 
5,382

 
9,436

Class action settlement costs

 

 

 
177

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

 
1,205

 
341

 
1,404

Adjusted EBITDA
$
336,015

 
$
345,641

 
$
427,782

 
$
429,418

 
 
 
 
 
 
 
 
(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.

29


Results of Operations:
Nine months ended September 25, 2016

The fiscal nine-month period ended September 25, 2016 included a total of 1,825 operating days compared with 1,876 operating days for the fiscal nine-month period ended September 27, 2015. The following table presents key financial information for the nine months ended September 25, 2016 and September 27, 2015:
 
 
Nine months ended
 
Nine months ended
 
Increase (Decrease)
 
 
9/25/2016
 
9/27/2015
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
1,096,755

 
$
1,068,862

 
$
27,893

 
2.6
 %
Operating costs and expenses
 
676,363

 
648,165

 
28,198

 
4.4
 %
Depreciation and amortization
 
118,175

 
110,175

 
8,000

 
7.3
 %
Loss on impairment / retirement of fixed assets, net
 
5,382

 
9,436

 
(4,054
)
 
N/M

Operating income
 
$
296,835

 
$
301,086

 
$
(4,251
)
 
(1.4
)%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
 
$
427,782

 
$
429,418

 
$
(1,636
)
 
(0.4
)%
Adjusted EBITDA margin (2)
 
39.0
%
 
40.2
%
 

 
(1.2
)%
Attendance
 
21,472

 
21,189

 
283

 
1.3
 %
In-park per capita spending
 
$
46.82

 
$
46.30

 
$
0.52

 
1.1
 %
Out-of-park revenues
 
$
121,859

 
$
115,124

 
$
6,735

 
5.9
 %
(1) For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see page 29.
(2) Adjusted EBITDA margin (Adjusted EBITDA divided by net revenues) is not a measurement computed in accordance with generally accepted accounting principles ("GAAP") or a substitute for measures computed in accordance with GAAP and may not be comparable to similarly titled measures of other companies. The Partnership provides Adjusted EBITDA margin because it believes the measure provides a meaningful metric of operating profitability.

For the nine months ended September 25, 2016, net revenues increased by $27.9 million, to $1,096.8 million, from $1,068.9 million for the first nine months of 2015. This reflects an increase in both attendance and in-park per capita spending, as well as an increase in out-of park revenues compared to the same period in the prior year. The 283,000 visit, or 1.3%, increase in attendance was driven by higher season pass visitation as the result of new rides and attractions, including live entertainment and multi-week special events. The $0.52, or 1.1%, increase in in-park per capita spending was attributable to increases in admissions pricing and growth in our food and beverage programs during the first nine months of the year. The $6.7 million, or 5.9%, increase in out-of-park revenues reflects favorable performance at our resort properties, increased transaction fees from on-line advanced purchases, an increase in special events at several parks, and proceeds received from a business interruption insurance claim relating to an early season electrical outage at Cedar Point. The overall increase in net revenues is net of an unfavorable impact of foreign currency exchange rates of $1.6 million related to our Canadian property for the first nine months of the year.

Operating costs and expenses for the nine months increased 4.4%, or $28.2 million, to $676.4 million from $648.2 million for the first nine months of 2015. The increase is the result of a $2.0 million increase in cost of goods sold, a $17.4 million increase in operating expenses, and an $8.8 million increase in selling, general, and administrative expenses ("SG&A"). The $2.0 million increase in cost of goods sold relates to the higher attendance levels, as well as meal and beverage plan program growth. As a percentage of net revenue, cost of goods sold was comparable for both periods. The $17.4 million increase in operating expenses was primarily due to higher seasonal and maintenance labor costs. These labor costs are increasing due to planned market-based adjustments and minimum-wage rate increases along with related employer taxes. The $8.8 million increase in SG&A expense was primarily due to increases in media and other marketing costs, technology and security related costs, and higher e-commerce and merchant fees. The overall increase in operating costs and expenses is net of a favorable impact of foreign currency exchange rates of $1.6 million related to our Canadian property for the first nine months of the year.

Depreciation and amortization expense for the first nine months increased $8.0 million due to growth in capital improvements. For the first nine months of 2016, the loss on impairment / retirement of fixed assets was $5.4 million, reflecting the retirement of assets in the normal course of business at several of our properties, as compared to $9.4 million for the first nine months of

30


2015. After depreciation, amortization, loss on impairment/retirement of fixed assets, and all other non-cash costs, operating income decreased $4.3 million to $296.8 million for the first nine months of 2016 compared to operating income of $301.1 million for the first nine months of 2015.

Interest expense for the first nine months of 2016 decreased to $61.9 million from $64.2 million for the first nine months of 2015 relating to a decline in the outstanding notional amounts of our derivative contracts and the corresponding reductions in required settlement payments. The net effect of our swaps resulted in a non-cash charge to earnings of $8.9 million for the first nine months of 2016 compared with a $3.0 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 $23.7 million net benefit to earnings for unrealized/realized foreign currency compared with a $64.2 million net charge to earnings for the same period in 2015. Amounts in both periods primarily represented foreign currency movements on the U.S.-dollar denominated debt held at our Canadian property.

For the first nine months of 2016, a provision for taxes of $65.3 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compares to a $37.8 million provision for taxes recorded for the first nine months of 2015. The increase in tax provision between periods relates largely to an increase in pretax income from our corporate subsidiaries, in particular from the change in unrealized foreign currency gains and losses. The increase in provision for taxes is net of a $1.5 million tax benefit recognized in the third quarter of 2016 related to a release of valuation allowance based on management's updated projection of future foreign tax credit utilization. Total cash taxes to be paid or payable in 2016 are estimated to range from $50 million to $55 million, compared to $20.0 million in cash taxes paid in 2015. The expected increase in cash taxes relates to improving business performance and the fact that net operating loss carryforwards were fully utilized in 2015.

After the items above, net income for the first nine months totaled $184.5 million, or $3.27 per diluted limited partner unit, compared with a net income of $137.9 million, or $2.46 per diluted unit, for the same period a year ago.

For the first nine months of 2016, our Adjusted EBITDA was $427.8 million, an amount comparable to the same period a year ago. Our Adjusted EBITDA margins decreased by 120 basis points for the first nine months of 2016 to 39.0%, from 40.2% for the same period last year. The margin decline is directly attributable to planned expenses outpacing modest revenue growth, period over period.

Three months ended September 25, 2016

The fiscal three-month period ended September 25, 2016 included a total of 1,021 operating days compared with 1,029 operating days for the fiscal three-month period ended September 27, 2015. The following table presents key financial information for the three months ended September 25, 2016 and September 27, 2015:
 
 
Three months ended
 
Three months ended
 
Increase (Decrease)
 
 
9/25/2016
 
9/27/2015
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
650,283

 
$
644,637

 
$
5,646

 
0.9
 %
Operating costs and expenses
 
316,448

 
302,133

 
14,315

 
4.7
 %
Depreciation and amortization
 
64,685

 
59,059

 
5,626

 
9.5
 %
Loss on impairment / retirement of fixed assets, net
 
1,355

 
5,753

 
(4,398
)
 
N/M

Operating income
 
$
267,795

 
$
277,692

 
$
(9,897
)
 
(3.6
)%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
 
$
336,015

 
$
345,641

 
$
(9,626
)
 
(2.8
)%
Attendance
 
12,492

 
12,546

 
(54
)
 
(0.4
)%
In-park per capita spending
 
$
48.01

 
$
47.49

 
$
0.52

 
1.1
 %
Out-of-park revenues
 
$
67,903

 
$
64,607

 
$
3,296

 
5.1
 %
(1) For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see page 29.


31


For the quarter ended September 25, 2016, net revenues increased by $5.6 million, to $650.3 million, from $644.6 million in the third quarter of 2015. This reflects an increase in in-park per capita spending and an increase in out-of park revenues. The increases are offset by a slight decline in attendance of 54,000 visits, or 0.4%, for the quarter which is attributable primarily to unseasonably high temperatures during July and August. The $0.52, or 1.1%, increase in in-park per capita spending was due to increases in admissions pricing and growth in our food and beverage programs. The $3.3 million, or 5.1%, increase in out-of-park revenues primarily reflects favorable performance at our resort properties and proceeds received from a business interruption insurance claim relating to an early season electrical outage at Cedar Point. The overall increase in net revenues was not materially impacted by foreign currency exchange rates during the period.

Operating costs and expenses for the quarter increased 4.7%, or $14.3 million, to $316.4 million from $302.1 million in the third quarter of 2015. The increase is the result of a $10.7 million increase in operating expenses and a $3.7 million increase in SG&A. Cost of goods sold was flat for the quarter. As a percentage of net revenue, cost of goods sold was comparable for both periods. The $10.7 million increase in operating expenses was primarily due to higher seasonal and maintenance labor costs. These labor costs are increasing due to planned market-based adjustments and minimum-wage rate increases along with related employer taxes. The increase in labor costs was partially offset by decreases in maintenance costs. The $3.7 million increase in SG&A expense was attributable to increases in media and other marketing costs, technology and security related costs, and higher e-commerce and merchant fees. The increase in operating costs and expenses was not materially impacted by foreign currency exchange rates during the third quarter.

Depreciation and amortization expense for the quarter increased $5.6 million due to growth in capital improvements. For the third quarter of 2016, the loss on impairment / retirement of fixed assets was $1.4 million, reflecting the retirement of assets in the normal course of business at several of our properties, compared to $5.8 million in the third quarter of 2015. After depreciation, amortization, loss on impairment/retirement of fixed assets, and all other non-cash costs, operating income decreased $9.9 million to $267.8 million for the third quarter of 2016 compared to operating income of $277.7 million for the third quarter of 2015.

Interest expense for the third quarter of 2016 decreased to $21.0 million from $22.2 million in the third quarter of 2015 relating to a decline in the outstanding notional amounts of our derivative contracts and the corresponding reductions in required settlement payments. The net effect of our swaps resulted in a non-cash charge to earnings of $1.7 million for the third quarter of 2016 compared with a $1.4 million non-cash benefit to earnings in the third 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 a $7.3 million net charge to earnings for unrealized/realized foreign currency compared with a $33.9 million net charge to earnings for the third quarter in 2015. Both amounts primarily represented foreign currency movements on the U.S.-dollar denominated debt held at our Canadian property.

During the third quarter, a provision for taxes of $62.9 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 third quarter of 2015 of $58.9 million. This increase in tax provision relates largely to an increase in pretax income from our corporate subsidiaries compared to the same period a year ago. The increase in provision for taxes is net of a $1.5 million tax benefit from the release of valuation allowance in the third quarter of 2016 based on management's updated projection of future foreign tax credit utilization.

After the items above, net income for the quarter totaled $175.0 million, or $3.10 per diluted limited partner unit, compared with net income of $164.2 million, or $2.92 per diluted unit, for the third quarter a year ago.

For the current quarter, our Adjusted EBITDA decreased to $336.0 million from $345.6 million for the fiscal third quarter of 2015. The approximate $9.6 million decrease in Adjusted EBITDA is due to the slight attendance decline caused by unseasonably high temperatures during July and August which negatively impacted revenue growth during the period, and planned increases in seasonal labor costs compared with the same period in the prior year.

October 2016

Based on preliminary results, net revenues through October 30, 2016, were approximately $1.23 billion, up 4%, or $42 million, compared with $1.19 billion for the same period last year. The rise in net revenues was the result of a 2%, or 558,000-visit, increase in attendance to a record 24.2 million visits, a 1%, or $0.52, increase in in-park per capita spending to a record $46.82 and a 6%, or $8 million, increase in out-of-park revenues to a record $135 million compared with 2015.


32


Liquidity and Capital Resources:
With respect to both liquidity and cash flow, we ended the third quarter of 2016 in sound condition. The working capital ratio (current assets divided by current liabilities) of 1.1 at September 25, 2016 is the result of normal seasonal activity. Receivables, inventories and payables are at normal seasonal levels.
Operating Activities
During the nine-month period ended September 25, 2016, net cash provided by operating activities was $340.0 million, an amount comparable to the same period a year ago.
Investing Activities
Net cash used in investing activities for the first nine months of 2016 was $126.9 million, a decrease of $19.6 million compared with the same period ended September 27, 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 nine months of 2016 was $146.9 million, an increase of $18.6 million compared with the same period ended September 27, 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 the second quarter of 2016.
As of September 25, 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. Current maturities totaled $1.2 million as of September 25, 2016.
No 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 September 25, 2016, we had $239.1 million of available borrowings under the revolving credit facility and cash on hand of $187.3 million.
As of September 25, 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 September 25, 2016, the fair market value of our derivative portfolio was $30.2 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 third 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

33


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 September 25, 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 August 3, 2016, we announced the declaration of a distribution of $0.825 per limited partner unit, which was paid on September 15, 2016. Also, on November 2, 2016, we announced the declaration of a distribution of $0.855 per limited partner unit, which will be payable on December 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 September 25, 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 September 25, 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

34


long-term debt represents fixed-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $23.4 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 $6.1 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 $4.9 million over the next year.
A uniform 10% strengthening of the U.S. dollar relative to the Canadian dollar would result in a $2.7 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 September 25, 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 September 25, 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 September 25, 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 6. EXHIBITS
Exhibit (10.1)
 
2016 Omnibus Incentive Plan Form of Restricted Unit Award Agreement. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed October 26, 2016.

 
 
Exhibit (10.2)
 
2016 Omnibus Incentive Plan Form of Performance Award Agreement. Incorporated herein by reference to Exhibit 10.2 to the Registrant's Form 8-K filed October 26, 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 September 25, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) the Unaudited Condensed Consolidated Statements of Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statements of Cash Flow, (iv) the Unaudited Condensed Consolidated Statement of Equity, and (v) related notes.
 

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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:
November 2, 2016
/s/ Matthew A. Ouimet
 
 
Matthew A. Ouimet
 
 
Chief Executive Officer
 
 
 
 
Date:
November 2, 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)
 
2016 Omnibus Incentive Plan Form of Restricted Unit Award Agreement. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed October 26, 2016.

 
 
Exhibit (10.2)
 
2016 Omnibus Incentive Plan Form of Performance Award Agreement. Incorporated herein by reference to Exhibit 10.2 to the Registrant's Form 8-K filed October 26, 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 September 25, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) the Unaudited Condensed Consolidated Statements of Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statements of Cash Flow, (iv) the Unaudited Condensed Consolidated Statement of Equity, and (v) related notes.
 

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