FUN 10-Q Quarterly Report Sept. 24, 2017 | Alphaminr

FUN 10-Q Quarter ended Sept. 24, 2017

CEDAR FAIR L P
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10-Q 1 cedarfair-10qx3x2017.htm 10-Q Document

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 24, 2017
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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 27, 2017
Units Representing
Limited Partner Interests
56,237,988

Page 1 of 39 pages





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)
9/24/2017
12/31/2016
9/25/2016
ASSETS
Current Assets:
Cash and cash equivalents
$
249,946

$
122,716

$
187,302

Receivables
52,303

35,414

51,536

Inventories
34,240

26,276

31,059

Other current assets
18,624

11,270

13,809

355,113

195,676

283,706

Property and Equipment:
Land
272,213

265,961

267,175

Land improvements
416,629

402,013

394,141

Buildings
707,964

663,982

675,440

Rides and equipment
1,740,826

1,643,770

1,653,274

Construction in progress
57,605

58,299

34,918

3,195,237

3,034,025

3,024,948

Less accumulated depreciation
(1,614,727
)
(1,494,805
)
(1,498,908
)
1,580,510

1,539,220

1,526,040

Goodwill
185,010

179,660

215,460

Other Intangibles, net
38,532

37,837

36,430

Other Assets
17,407

20,788

21,473

$
2,176,572

$
1,973,181

$
2,083,109

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

$
2,775

$
1,200

Accounts payable
33,710

20,851

32,891

Deferred revenue
86,732

82,765

65,748

Accrued interest
23,928

9,986

10,939

Accrued taxes
78,657

58,958

69,916

Accrued salaries, wages and benefits
30,666

30,358

42,744

Self-insurance reserves
27,549

27,063

26,820

Other accrued liabilities
20,562

9,927

12,348

301,804

242,683

262,606

Deferred Tax Liability
112,671

104,885

137,712

Derivative Liability
14,849

17,721

30,185

Other Liabilities
12,340

13,162

12,488

Long-Term Debt:
Term debt
723,385

594,228

595,253

Notes
936,241

939,983

939,418

1,659,626

1,534,211

1,534,671

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

5,290

5,290

General partner


1

Limited partners, 56,238, 56,201 and 56,091 units outstanding at September 24, 2017, December 31, 2016 and September 25, 2016, respectively
74,155

52,288

100,956

Accumulated other comprehensive income (loss)
(4,163
)
2,941

(800
)
75,282

60,519

105,447

$
2,176,572

$
1,973,181

$
2,083,109

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
9/24/2017
9/25/2016
9/24/2017
9/25/2016
Net revenues:
Admissions
$
361,279

$
361,949

$
598,723

$
604,947

Food, merchandise and games
205,137

202,341

356,512

354,032

Accommodations, extra-charge products and other
86,273

85,993

138,570

137,776


652,689

650,283

1,093,805

1,096,755

Costs and expenses:

Cost of food, merchandise, and games revenues
52,647

52,057

92,376

92,860

Operating expenses
202,710

199,292

447,379

441,421

Selling, general and administrative
71,663

65,099

151,142

142,082

Depreciation and amortization
70,060

64,685

126,237

118,175

Loss on impairment / retirement of fixed assets, net
1,347

1,355

3,057

5,382

Gain on sale of investment
(1,877
)

(1,877
)


396,550

382,488

818,314

799,920

Operating income
256,139

267,795

275,491

296,835

Interest expense
21,638

20,957

62,472

61,869

Net effect of swaps
(952
)
1,650

3,717

8,902

Loss on early debt extinguishment


23,115


(Gain) loss on foreign currency
(29,193
)
7,341

(35,047
)
(23,675
)
Other income
(416
)
(58
)
(464
)
(84
)
Income before taxes
265,062

237,905

221,698

249,823

Provision for taxes
73,747

62,918

63,769

65,339

Net income
191,315

174,987

157,929

184,484

Net income allocated to general partner
1

2

1

2

Net income allocated to limited partners
$
191,314

$
174,985

$
157,928

$
184,482

Net income
$
191,315

$
174,987

$
157,929

$
184,484

Other comprehensive income (loss), (net of tax):
Foreign currency translation adjustment
(11,143
)
1,397

(13,085
)
(5,447
)
Unrealized gain on cash flow hedging derivatives
1,994

1,994

5,981

1,356

Other comprehensive income (loss), (net of tax)
(9,149
)
3,391

(7,104
)
(4,091
)
Total comprehensive income
$
182,166

$
178,378

$
150,825

$
180,393

Basic income per limited partner unit:
Weighted average limited partner units outstanding
56,078

55,948

56,062

55,922

Net income per limited partner unit
$
3.41

$
3.13

$
2.82

$
3.30

Diluted income per limited partner unit:
Weighted average limited partner units outstanding
56,591

56,365

56,631

56,392

Net income per limited partner unit
$
3.38

$
3.10

$
2.79

$
3.27

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
9/24/2017
9/25/2016
Limited Partnership Units Outstanding
Beginning balance
56,201

56,018

Limited partnership unit options exercised
9

29

Limited partnership unit forfeitures
(3
)

Issuance of limited partnership units as compensation
31

44

56,238

56,091

Limited Partners’ Equity
Beginning balance
$
52,288

$
48,428

Net income
157,928

184,482

Partnership distribution declared ($2.565 and $2.475 per limited partnership unit)
(144,516
)
(139,041
)
Expense recognized for limited partnership unit options

5

Tax effect of units involved in treasury unit transactions
(2,560
)
(1,903
)
Issuance of limited partnership units as compensation
11,015

8,985

74,155

100,956

General Partner’s Equity
Beginning balance


Net income
1

2

Partnership distribution declared
(1
)
(1
)

1

Special L.P. Interests
5,290

5,290

Accumulated Other Comprehensive Income
Foreign currency translation adjustment:
Beginning balance
18,891

22,591

Period activity, net of tax $0 and $3,131
(13,085
)
(5,447
)
5,806

17,144

Unrealized loss on cash flow hedging derivatives:
Beginning balance
(15,950
)
(19,300
)
Period activity, net of tax ($1,113) and ($279)
5,981

1,356

(9,969
)
(17,944
)
(4,163
)
(800
)
Total Partners’ Equity
$
75,282

$
105,447

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
9/24/2017
9/25/2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
157,929

$
184,484

Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization
126,237

118,175

Loss on early debt extinguishment
23,115


Non-cash foreign currency gain on debt
(39,296
)
(23,891
)
Other non-cash expenses
26,942

36,004

Net change in working capital
27,625

31,267

Net change in other assets/liabilities
66

(5,337
)
Net cash from operating activities
322,618

340,702

CASH FLOWS FOR INVESTING ACTIVITIES
Capital expenditures
(152,373
)
(126,864
)
Proceeds from sale of investment
3,281


Purchase of identifiable intangible assets
(66
)

Net cash for investing activities
(149,158
)
(126,864
)
CASH FLOWS FOR FINANCING ACTIVITIES
Term debt borrowings
750,000


Note borrowings
500,000


Term debt payments
(617,850
)
(6,000
)
Note payments, including amounts paid for early termination
(515,458
)

Distributions paid to partners
(144,517
)
(139,042
)
Payment of debt issuance costs
(19,684
)

Tax effect of units involved in treasury unit transactions
(2,560
)
(1,903
)
Payments related to tax withholding for equity compensation
(2,053
)
(920
)
Net cash for financing activities
(52,122
)
(147,865
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
5,892

1,772

CASH AND CASH EQUIVALENTS
Net increase for the period
127,230

67,745

Balance, beginning of period
122,716

119,557

Balance, end of period
$
249,946

$
187,302

SUPPLEMENTAL INFORMATION
Net cash payments for interest expense
$
48,729

$
61,558

Interest capitalized
1,770

1,699

Cash payments for income taxes, net of refunds
44,090

33,141

Capital expenditures in accounts payable
5,582

3,179

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 24, 2017 AND SEPTEMBER 25, 2016

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 24, 2017 and September 25, 2016 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, 2016 , which were included in the Form 10-K filed on February 24, 2017 . 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.
Adopted Accounting Pronouncements
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. The Partnership adopted this guidance in the first quarter of 2017. The impact of the guidance included: (1) prospective recognition of excess tax benefits and tax deficiencies as income tax expense (as opposed to the previous recognition in additional paid-in-capital), approximately $0.7 million of excess tax benefits were recognized in provision for taxes for the nine months ended September 24, 2017 ; (2) prospective exclusion of future excess tax benefits and deficiencies in the calculation of diluted shares, which had an immaterial impact on net income per limited partner unit for the nine months ending September 24, 2017 ; (3) prospective classification of excess tax benefits as an operating activity within the statement of cash flows (as opposed to the previous classification as a financing activity), approximately $0.7 million of excess tax benefits were classified as an operating activity for the nine months ended September 24, 2017 ; (4) the formal accounting policy election to recognize forfeitures as they occur (as opposed to estimating a forfeiture accrual), which did not have a material impact on the Partnership's financial statements; (5) retrospective classification of employee taxes paid when an employer withholds shares for tax withholding purposes as a financing activity within the statement of cash flows (as opposed to the previous classification as an operating activity), approximately $0.9 million was reclassified for the nine months ended September 25, 2016 .
New Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The ASU provides 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 modified retrospective transition method, and early adoption is permitted only as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. The Partnership expects to adopt this standard in the first quarter of 2018 using the modified retrospective method. The Partnership anticipates the primary impact of the adoption on the consolidated financial statements will be the additional required disclosures around revenue recognition in the notes to the consolidated financial statements. The Partnership does not anticipate adoption of the standard to have a material effect on the consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases ("ASU 2016-02"). The ASU requires the recognition of lease assets and lease liabilities within the balance sheet by lessees for operating leases, as well as requires additional disclosures in the consolidated financial statements regarding the amount, timing, and uncertainty of cash flows arising from leases. The ASU does not significantly change the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee, nor does the ASU change the accounting applied by a lessor. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018. This ASU requires a modified retrospective method and applies to the earliest period presented in the financial statements. The Partnership expects to adopt this standard in the first quarter of 2019. While the Partnership is still in the process of evaluating the effect this standard will have on the consolidated financial statements and related

7


disclosures, the Partnership anticipates recognizing a right-of-use asset and corresponding lease liability on the consolidated balance sheet for the Santa Clara land lease, as well as other operating leases, upon adoption.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates step two from the goodwill impairment test. Instead, an entity should recognize an impairment charge for the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual and any interim impairment tests for periods beginning after December 15, 2019 on a prospective basis. Early adoption is permitted for annual and any interim impairment tests occurring after January 1, 2017. The Partnership has adopted the standard for its 2017 annual impairment test which is currently in process. The Partnership does not anticipate the adoption of the standard to have a material effect on the consolidated financial statements.

(2) Interim Reporting:
The Partnership owns and operates eleven amusement parks, two separately gated outdoor water parks, one indoor water park and five hotels. The Partnership's seasonal amusement parks are generally open during weekends beginning in April or May, and then daily from Memorial Day until Labor Day, after which they are open during weekends in September and, in most cases, October. The two separately gated outdoor water parks also operate seasonally, generally from Memorial Day to Labor Day, plus some additional weekends before and after this period. As a result, a substantial portion of the Partnership’s revenues from these parks are generated during an approximate 130 - to 140 -day operating season with the major portion concentrated in the third quarter during the peak vacation months of July and August. In 2017, four of the seasonal properties will extend their operating seasons approximately 20 to 25 days to include WinterFest, a holiday event operating during November and December. Knott's Berry Farm continues to be 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, (b) depreciation, certain advertising and certain seasonal operating costs are expensed over each park’s operating season, including some costs incurred prior to the season, which are deferred and amortized over the season, and (c) all other costs are expensed as incurred or ratably over the entire year.


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 the Partnership's 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. 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 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 (discounted cash flows) approach, which 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. If the 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. 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 had an associated carrying value of $17.1 million . The Partnership assessed the remaining asset and concluded there was no impairment during the third quarter of 2016. The remaining Wildwater Kingdom acreage, reduced by acreage sold, is classified as assets held-for-sale within "Other Assets" in the unaudited condensed consolidated balance sheet ( $16.5 million as of September 24, 2017 ).

9


(4) Goodwill and Other Intangible Assets:
Goodwill and other indefinite-lived intangible assets, including trade-names, are reviewed for impairment annually, or more frequently if indicators of impairment exist. As of September 24, 2017 , 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 24, 2017 and September 25, 2016 is as follows:
(In thousands)
Goodwill
(gross)
Accumulated
Impairment
Losses
Goodwill
(net)
Balance at December 31, 2016
$
259,528

$
(79,868
)
$
179,660

Foreign currency translation
5,350


5,350

Balance at September 24, 2017
$
264,878

$
(79,868
)
$
185,010

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


During the fourth quarter of 2016, management reassessed its accounting for the deferred income tax effects related to its Canadian disregarded entity temporary differences that were recorded in purchase accounting at the time of the acquisition. As a result, to appropriately reflect these tax effects, the Partnership recorded an adjustment that reduced goodwill and deferred tax liabilities by $33.9 million as of December 31, 2016. The adjustment did not impact the statement of operations and comprehensive income or the statement of cash flows for any period presented.

As of September 24, 2017 , December 31, 2016 , and September 25, 2016 , the Partnership’s other intangible assets consisted of the following:
(In thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
September 24, 2017
Other intangible assets:
Trade names
$
36,794

$

$
36,794

License / franchise agreements
3,361

(1,623
)
1,738

Total other intangible assets
$
40,155

$
(1,623
)
$
38,532

December 31, 2016
Other intangible assets:
Trade names
$
35,603

$

$
35,603

License / franchise agreements
3,326

(1,092
)
2,234

Total other intangible assets
$
38,929

$
(1,092
)
$
37,837

September 25, 2016
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


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 24, 2017 , December 31, 2016 , and September 25, 2016 consisted of the following:
(In thousands)
September 24, 2017
December 31, 2016
September 25, 2016
Term debt (1)
April 2017 U.S. term loan averaging 3.38% (due 2017-2024)
$
735,000

$

$

March 2013 U.S. term loan averaging 3.25% (due 2013-2020)

602,850

602,850

Notes
April 2017 U.S. fixed rate notes at 5.375% (due 2027)
500,000



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

450,000

450,000

March 2013 U.S. fixed rate notes at 5.25% (due 2021)

500,000

500,000

1,685,000

1,552,850

1,552,850

Less current portion

(2,775
)
(1,200
)
1,685,000

1,550,075

1,551,650

Less debt issuance costs
(25,374
)
(15,864
)
(16,979
)
$
1,659,626

$
1,534,211

$
1,534,671

(1)
The average interest rate is calculated over the life of the instrument and does not reflect the effect of interest rate swap agreements (see Note 6).
In April 2017, the Partnership issued $500 million of 5.375% senior unsecured notes ("April 2017 notes"), maturing in 2027 . The net proceeds from the offering of the April 2017 notes, together with borrowings under the 2017 Credit Agreement (defined below), were used to redeem all of the Partnership's 5.25% senior unsecured notes due 2021 ("March 2013 notes"), and pay accrued interest and transaction fees and expenses, to repay in full all amounts outstanding under its existing credit facilities and for general corporate purposes. The redemption of the March 2013 notes and repayments of the amounts outstanding under the existing credit facilities resulted in the write-off of debt issuance costs of $7.6 million and debt premium payments of $15.5 million . Accordingly, the Partnership recorded a loss on debt extinguishment of $23.1 million during the second quarter of 2017.

Concurrently with the April 2017 notes issuance, the Partnership amended and restated its existing $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 $1,025 million amended and restated credit agreement (the "2017 Credit Agreement") includes a $750 million senior secured term loan facility and a $275 million senior secured revolving credit facility. The terms of the senior secured term loan facility include a maturity date of April 15, 2024 and an interest rate of London InterBank Offered Rate ("LIBOR") plus 225 basis points (bps). The term loan amortizes at $7.5 million annually. The facilities provided under the 2017 Credit Agreement are collateralized by substantially all of the assets of the Partnership.

Terms of the 2017 Credit Agreement include a revolving credit facility of a combined $275 million with a Canadian sub-limit of $15 million . Borrowings under the senior secured revolving credit facility bear interest at LIBOR or Canadian Dollar Offered Rate ("CDOR") plus 200 bps. The revolving credit facility is scheduled to mature in April 2022 and also provides for the issuance of documentary and standby letters of credit. The 2017 Credit Agreement requires the payment of a 37.5 bps commitment fee per annum on the unused portion of the credit facilities.

The April 2017 notes pay interest semi-annually in April and October, with the principal due in full on April 15, 2027 . Prior to April 15, 2020 , 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% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to April 15, 2022 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium together with accrued and unpaid interest and additional interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.

In June 2014, the Partnership issued $450 million of 5.375% senior unsecured notes ("June 2014 notes"), maturing in 2024 . The Partnership's June 2014 notes pay interest semi-annually in June and December, with the principal due in full on June 1, 2024 . 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 together 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.


11


The 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50 x consolidated total debt-to-consolidated EBITDA. As of September 24, 2017 , the Partnership was in compliance with this financial condition covenant and all other covenants under the 2017 Credit Agreement.

The Partnership's long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing the Partnership's June 2014 notes, which includes the most restrictive of these Restricted Payments provisions, 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 the Partnership's ability to make additional Restricted Payments is permitted should the Partnership's pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.00 x.

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 certain interest rate and foreign currency risks. By utilizing a derivative instrument to hedge 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 effectively convert $500 million of variable-rate debt to 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 31, 2018 maturity. The amended interest rate swap agreements are not designated as hedging instruments.

The fair market value of the Partnership's swap portfolio was recorded within "Derivative Liability" on the unaudited condensed consolidated balance sheets as of September 24, 2017 , December 31, 2016 , and September 25, 2016 as follows:
(In thousands)
September 24, 2017
December 31, 2016
September 25, 2016
Derivatives not designated as hedging instruments:
Interest rate swaps
$
(14,849
)
$
(17,721
)
$
(30,185
)

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 amended interest rate swap agreements are not designated as hedging instruments. As of September 24, 2017 , the Partnership has no designated derivatives; therefore, no amount of designated derivatives are forecasted to be reclassified into earnings in the next twelve months.

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 31, 2018 maturity. As of September 24, 2017 , approximately $11.8 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.


12


The following table summarizes the effect of derivative instruments on income and other comprehensive income for the three months ended September 24, 2017 and September 25, 2016 :
(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 9/24/2017
Three months ended 9/25/2016
Designated Derivatives
Three months ended 9/24/2017
Three months ended 9/25/2016
Derivatives
Not Designated
Three months ended 9/24/2017
Three months ended 9/25/2016
Interest rate swaps
$

$

Interest Expense
$

$

Net effect of swaps
$
3,318

$
715


During the quarter ended September 24, 2017 , the Partnership recognized $3.3 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 benefit to earnings of $1.0 million recorded in “Net effect of swaps.”

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 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.”

The following table summarizes the effect of derivative instruments on income and other comprehensive income for the nine months ended September 24, 2017 and September 25, 2016 :
(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 9/24/2017
Nine months ended 9/25/2016
Designated Derivatives
Nine months ended 9/24/2017
Nine months ended 9/25/2016
Derivatives
Not Designated
Nine months ended 9/24/2017
Nine months ended 9/25/2016
Interest rate swaps
$

$
(4,671
)
Interest Expense
$

$
(851
)
Net effect of swaps
$
3,378

$
(2,596
)

During the nine -month period ended September 24, 2017 , the Partnership recognized $3.4 million of gains on the derivatives not designated as cash flow hedges and $7.1 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $3.7 million recorded in “Net effect of swaps.”

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 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.”


13


(7) Fair Value Measurements:
The FASB's Accounting Standards Codification (ASC) 820 - Fair Value Measurements and Disclosures 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, FASB ASC 820 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 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 24, 2017 , December 31, 2016 , and September 25, 2016 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 24, 2017
December 31, 2016
September 25, 2016
Carrying Value
Fair
Value
Carrying Value
Fair
Value
Carrying Value
Fair
Value
Financial assets (liabilities) measured on a recurring basis:
Short-term investments
Other current assets
Level 1
$
688

$
688





Interest rate swap agreements not designated as cash flow hedges
Derivative Liability
Level 2
$
(14,849
)
$
(14,849
)
$
(17,721
)
$
(17,721
)
$
(30,185
)
$
(30,185
)
Other financial assets (liabilities):
March 2013 term debt
Long-Term Debt (1)
Level 2


$
(600,075
)
$
(603,075
)
$
(601,650
)
$
(603,154
)
April 2017 term debt
Long-Term Debt (1)
Level 2
$
(735,000
)
$
(740,513
)




March 2013 notes
Long-Term Debt (1)
Level 1


$
(500,000
)
$
(510,000
)
$
(500,000
)
$
(520,000
)
June 2014 notes
Long-Term Debt (1)
Level 1
$
(450,000
)
$
(472,500
)
$
(450,000
)
$
(462,375
)
$
(450,000
)
$
(477,000
)
April 2017 notes
Long-Term Debt (1)
Level 2
$
(500,000
)
$
(527,500
)





(1)
Carrying values of long-term debt balances are before reductions for debt issuance costs of $25.4 million , $15.9 million , and $17.0 million as of September 24, 2017 , December 31, 2016 , and September 25, 2016 , respectively.

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.

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 24, 2017 , December 31, 2016 , or September 25, 2016 .

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
9/24/2017
9/25/2016
9/24/2017
9/25/2016
(In thousands, except per unit amounts)
Basic weighted average units outstanding
56,078

55,948

56,062

55,922

Effect of dilutive units:
Deferred units
44

33

41

30

Performance units


48

43

Restricted units
284

253

292

266

Unit options
185

131

188

131

Diluted weighted average units outstanding
56,591

56,365

56,631

56,392

Net income per unit - basic
$
3.41

$
3.13

$
2.82

$
3.30

Net income per unit - diluted
$
3.38

$
3.10

$
2.79

$
3.27


(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 subsidiaries.

As of the end of the third quarter of 2017, the Partnership has recorded $0.7 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 months ended September 24, 2017 and September 25, 2016 :

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
Total
Balance at June 25, 2017
$
(11,963
)
$
16,949

$
4,986

Other comprehensive income before reclassifications

(11,143
)
(11,143
)
Amounts reclassified from accumulated other comprehensive income, net of tax ($371) (2)
1,994


1,994

Net other comprehensive income
1,994

(11,143
)
(9,149
)
Balance at September 24, 2017
$
(9,969
)
$
5,806

$
(4,163
)

(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.

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
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
)

(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.

Reclassifications Out of Accumulated Other Comprehensive Income
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
(In thousands)
Three months ended
9/24/2017
Three months ended
9/25/2016
Interest rate contracts
$
2,365

$
2,365

Net effect of swaps
Provision for taxes
(371
)
(371
)
Provision for taxes
Losses on cash flow hedges
$
1,994

$
1,994

Net of tax



16


The following tables reflect the changes in accumulated other comprehensive income related to limited partners' equity for the nine months ended September 24, 2017 and September 25, 2016 :

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
Total
Balance at December 31, 2016
$
(15,950
)
$
18,891

$
2,941

Other comprehensive income before reclassifications

(13,085
)
(13,085
)
Amounts reclassified from accumulated other comprehensive income, net of tax ($1,113) (2)
5,981


5,981

Net other comprehensive income
5,981

(13,085
)
(7,104
)
Balance at September 24, 2017
$
(9,969
)
$
5,806

$
(4,163
)

(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.

Changes in Accumulated Other Comprehensive Income by Component (1)
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
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
)

(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.

Reclassifications Out of Accumulated Other Comprehensive Income
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
(In thousands)
Nine months ended
9/24/2017
Nine months ended
9/25/2016
Interest rate contracts
$
7,094

$
6,306

Net effect of swaps
Provision for taxes
(1,113
)
(990
)
Provision for taxes
Losses on cash flow hedges
$
5,981

$
5,316

Net of tax




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 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 24, 2017 , December 31, 2016 , and September 25, 2016 and for the three-month and nine -month periods ended September 24, 2017 and September 25, 2016 . 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 24, 2017
(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
$

$

$
92,047

$
160,593

$
(2,694
)
$
249,946

Receivables

1,285

33,158

837,594

(819,734
)
52,303

Inventories


2,423

31,817


34,240

Other current assets
275

12,843

743

16,829

(12,066
)
18,624

275

14,128

128,371

1,046,833

(834,494
)
355,113

Property and Equipment, net

842

183,205

1,396,463


1,580,510

Investment in Park
566,548

1,016,857

224,464

222,953

(2,030,822
)

Goodwill
674


64,730

119,606


185,010

Other Intangibles, net


14,443

24,089


38,532

Deferred Tax Asset

32,190



(32,190
)

Other Assets


53

17,354


17,407

$
567,497

$
1,064,017

$
615,266

$
2,827,298

$
(2,897,506
)
$
2,176,572

LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable
$
478,416

$
345,150

$
6,431

$
26,141

$
(822,428
)
$
33,710

Deferred revenue


7,137

79,595


86,732

Accrued interest
292

195

9,209

14,232


23,928

Accrued taxes
1,589


14,910

74,224

(12,066
)
78,657

Accrued salaries, wages and benefits

28,306

2,360



30,666

Self-insurance reserves

12,090

1,725

13,734


27,549

Other accrued liabilities
2,985

7,772

499

9,306


20,562

483,282

393,513

42,271

217,232

(834,494
)
301,804

Deferred Tax Liability


19,511

125,350

(32,190
)
112,671

Derivative Liability
8,933

5,916




14,849

Other Liabilities

1,398


10,942


12,340

Long-Term Debt:
Term debt

127,402


595,983


723,385

Notes


444,874

491,367


936,241


127,402

444,874

1,087,350


1,659,626

Equity
75,282

535,788

108,610

1,386,424

(2,030,822
)
75,282

$
567,497

$
1,064,017

$
615,266

$
2,827,298

$
(2,897,506
)
$
2,176,572





19


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 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
$

$

$
65,563

$
58,178

$
(1,025
)
$
122,716

Receivables

1,409

28,019

576,975

(570,989
)
35,414

Inventories


1,371

24,905


26,276

Other current assets
173

796

2,229

9,833

(1,761
)
11,270

173

2,205

97,182

669,891

(573,775
)
195,676

Property and Equipment, net

844

175,358

1,363,018


1,539,220

Investment in Park
798,076

937,626

200,075

324,282

(2,260,059
)

Goodwill
674


59,381

119,605


179,660

Other Intangibles, net


13,255

24,582


37,837

Deferred Tax Asset

33,303



(33,303
)

Other Assets

2,000

108

18,680


20,788

$
798,923

$
975,978

$
545,359

$
2,520,058

$
(2,867,137
)
$
1,973,181

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

$
572

$
64

$
2,139

$

2,775

Accounts payable
428,396

145,258

740

18,471

(572,014
)
20,851

Deferred revenue


5,601

77,164


82,765

Accrued interest
4,613

3,207

2,057

109


9,986

Accrued taxes
405

18,653


41,661

(1,761
)
58,958

Accrued salaries, wages and benefits

29,227

1,131



30,358

Self-insurance reserves

12,490

1,321

13,252



27,063

Other accrued liabilities
2,282

3,018

193

4,434


9,927

435,696

212,425

11,107

157,230

(573,775
)
242,683

Deferred Tax Liability


12,838

125,350

(33,303
)
104,885

Derivative Liability
10,633

7,088




17,721

Other Liabilities

1,236


11,926


13,162

Long-Term Debt:
Term debt

123,672

13,598

456,958


594,228

Notes
292,075

203,140

444,768



939,983

292,075

326,812

458,366

456,958


1,534,211

Equity
60,519

428,417

63,048

1,768,594

(2,260,059
)
60,519

$
798,923

$
975,978

$
545,359

$
2,520,058

$
(2,867,137
)
$
1,973,181


20


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



21


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended September 24, 2017
(In thousands)
Cedar Fair L.P. (Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
69,999

$
169,429

$
85,963

$
596,837

$
(269,539
)
$
652,689

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


7,735

44,912


52,647

Operating expenses

118,614

19,627

334,008

(269,539
)
202,710

Selling, general and administrative
327

21,752

4,539

45,045


71,663

Depreciation and amortization

9

7,856

62,195


70,060

Loss on impairment / retirement of fixed assets, net


87

1,260


1,347

Gain on sale of investment

(1,877
)



(1,877
)
327

138,498

39,844

487,420

(269,539
)
396,550

Operating income
69,672

30,931

46,119

109,417


256,139

Interest expense, net
4,857

4,305

6,152

5,973


21,287

Net effect of swaps
(578
)
(374
)



(952
)
Gain on foreign currency

(27
)
(29,166
)


(29,193
)
Other (income) expense
62

(26,676
)
1,163

25,386


(65
)
Income from investment in affiliates
(132,699
)
(98,522
)
(16,843
)
(58,378
)
306,442


Income before taxes
198,030

152,225

84,813

136,436

(306,442
)
265,062

Provision for taxes
6,715

19,526

26,432

21,074


73,747

Net income
$
191,315

$
132,699

$
58,381

$
115,362

$
(306,442
)
$
191,315

Other comprehensive income (loss), (net of tax):
Foreign currency translation adjustment
(11,143
)

(11,143
)

11,143

(11,143
)
Unrealized gain on cash flow hedging derivatives
1,994

605



(605
)
1,994

Other comprehensive income (loss), (net of tax)
(9,149
)
605

(11,143
)

10,538

(9,149
)
Total comprehensive income
$
182,166

$
133,304

$
47,238

$
115,362

$
(295,904
)
$
182,166




22


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, net
7,984

5,759

6,323

833


20,899

Net effect of swaps
959

691




1,650

Loss on foreign currency


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):
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

























23


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Nine Months Ended September 24, 2017
(In thousands)
Cedar Fair L.P. (Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
92,672

$
262,739

$
114,141

$
1,019,399

$
(395,146
)
$
1,093,805

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


10,569

81,807


92,376

Operating expenses

248,047

37,701

556,777

(395,146
)
447,379

Selling, general and administrative
2,254

51,358

8,592

88,938


151,142

Depreciation and amortization

26

12,869

113,342


126,237

Loss on impairment / retirement of fixed assets, net


542

2,515


3,057

Gain on sale of investment

(1,877
)



(1,877
)
2,254

297,554

70,273

843,379

(395,146
)
818,314

Operating income (loss)
90,418

(34,815
)
43,868

176,020


275,491

Interest expense, net
18,285

13,893

18,317

11,578


62,073

Net effect of swaps
2,162

1,555




3,717

Loss on early debt extinguishment
11,773

8,188

198

2,956


23,115

Gain on foreign currency

(27
)
(35,020
)


(35,047
)
Other (income) expense
187

(56,623
)
2,640

53,731


(65
)
Income from investment in affiliates
(108,835
)
(109,414
)
(24,389
)
(58,648
)
301,286


Income before taxes
166,846

107,613

82,122

166,403

(301,286
)
221,698

Provision (benefit) for taxes
8,917

(1,223
)
23,473

32,602


63,769

Net income
$
157,929

$
108,836

$
58,649

$
133,801

$
(301,286
)
$
157,929

Other comprehensive income (loss), (net of tax):
Foreign currency translation adjustment
(13,085
)

(13,085
)

13,085

(13,085
)
Unrealized gain on cash flow hedging derivatives
5,981

1,816



(1,816
)
5,981

Other comprehensive income (loss), (net of tax)
(7,104
)
1,816

(13,085
)

11,269

(7,104
)
Total comprehensive income
$
150,825

$
110,652

$
45,564

$
133,801

$
(290,017
)
$
150,825




24


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, net
23,776

17,830

18,672

1,507


61,785

Net effect of swaps
5,617

3,285




8,902

(Gain) loss on foreign currency


(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):
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


























25


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 24, 2017
(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
$
61,966

$
(3,954
)
$
40,125

$
227,588

$
(3,107
)
$
322,618

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



(248,190
)
248,190


Proceeds from returns on investments
338,000

15,500


146,500

(500,000
)

Proceeds from sale of investment

3,281




3,281

Purchase of identifiable intangible assets



(66
)

(66
)
Capital expenditures

(25
)
(5,679
)
(146,669
)

(152,373
)
Net cash from (for) investing activities
338,000

18,756

(5,679
)
(248,425
)
(251,810
)
(149,158
)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Intercompany payables (payments) receipts
50,003

198,187



(248,190
)

Payments for returns of capital



(500,000
)
500,000


Term debt borrowings

131,000


619,000


750,000

Note borrowings



500,000


500,000

Term debt payments

(126,619
)
(13,854
)
(477,377
)

(617,850
)
Note payments, including amounts paid for early termination
(304,014
)
(211,444
)



(515,458
)
Distributions paid to partners
(145,955
)



1,438

(144,517
)
Payment of debt issuance costs

(1,313
)

(18,371
)

(19,684
)
Tax effect of units involved in treasury unit transactions

(2,560
)



(2,560
)
Payments related to tax withholding for equity compensation

(2,053
)



(2,053
)
Net cash from (for) financing activities
(399,966
)
(14,802
)
(13,854
)
123,252

253,248

(52,122
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


5,892



5,892

CASH AND CASH EQUIVALENTS
Net increase for the period


26,484

102,415

(1,669
)
127,230

Balance, beginning of period


65,563

58,178

(1,025
)
122,716

Balance, end of period
$

$

$
92,047

$
160,593

$
(2,694
)
$
249,946


26


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

$
(54,042
)
$
41,273

$
256,105

$
(1,866
)
$
340,702

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 to partners
(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
)
Payments related to tax withholding for equity compensation

(920
)



(920
)
Net cash from (for) financing activities
(176,239
)
54,042

(138
)
(4,625
)
(20,905
)
(147,865
)
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



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, extra-charge attractions, and 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 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, Regional Vice Presidents 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 2017 , 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, 2016 .

28


Adjusted EBITDA:
We believe that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the 2017 Credit Agreement and the 2013 Credit Agreement) is a meaningful measure as it is widely used by analysts, investors and comparable companies in our industry to evaluate our operating performance on a consistent basis, as well as more easily compare our results with those of other companies in our industry. Further, management believes Adjusted EBITDA is a meaningful measure of park-level operating profitability and we use it for measuring returns on capital investments, evaluating potential acquisitions, determining awards under incentive compensation plans, and calculating compliance with certain loan covenants. Adjusted EBITDA is 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 24, 2017 and September 25, 2016 .
Three months ended
Nine months ended
(In thousands)
9/24/2017
9/25/2016
9/24/2017
9/25/2016
Net income
$
191,315

$
174,987

$
157,929

$
184,484

Interest expense
21,638

20,957

62,472

61,869

Interest income
(351
)
(58
)
(399
)
(84
)
Provision for taxes
73,747

62,918

63,769

65,339

Depreciation and amortization
70,060

64,685

126,237

118,175

EBITDA
356,409

323,489

410,008

429,783

Loss on early debt extinguishment


23,115


Net effect of swaps
(952
)
1,650

3,717

8,902

Non-cash foreign currency (gain) loss
(29,156
)
7,360

(34,985
)
(23,535
)
Non-cash equity compensation expense
3,126

2,160

9,728

6,909

Loss on impairment / retirement of fixed assets, net
1,347

1,355

3,057

5,382

Gain on sale of investment
(1,877
)

(1,877
)

Employment practice litigation costs
4,696


4,696


Other (1)
49

1

397

341

Adjusted EBITDA
$
333,642

$
336,015

$
417,856

$
427,782


(1)
Consists of certain costs as defined in the Company's 2017 Credit Agreement and prior credit agreements. 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, and severance expenses. This balance also includes unrealized gains and losses on short-term investments.

29


Results of Operations:
We believe the following are significant measures in the structure of our management and operational reporting, and they are used as major factors in key operational decisions:
Attendance is defined as the number of guest visits to our amusement parks and separately gated outdoor water parks.
In-park per capita spending is calculated as revenues generated within our amusement parks and separately gated outdoor water parks along with related tolls and parking revenues, divided by total attendance.
Out-of-park revenues are defined as revenues from resort, marina, sponsorship and all other out-of-park operations.
Both in-park per capita spending and out-of-park revenues exclude amounts remitted for concessionaire arrangements.
Nine months ended September 24, 2017

The fiscal nine -month period ended September 24, 2017 included a total of 1,722 operating days compared with 1,825 operating days for the fiscal nine -month period ended September 25, 2016 . On a same-park basis (excluding Wildwater Kingdom, one of the Partnership's separately gated outdoor water parks which was closed after the 2016 operating season), the fiscal nine -month period ended September 25, 2016 included a total of 1,742 operating days. The following table presents key financial information for the nine months ended September 24, 2017 and September 25, 2016 :
Nine months ended
Nine months ended
Increase (Decrease)
9/24/2017
9/25/2016
$
%
(Amounts in thousands, except for per capita spending)
Net revenues
$
1,093,805

$
1,096,755

$
(2,950
)
(0.3
)%
Operating costs and expenses
690,897

676,363

14,534

2.1
%
Depreciation and amortization
126,237

118,175

8,062

6.8
%
Loss on impairment / retirement of fixed assets, net
3,057

5,382

(2,325
)
N/M

Gain on sale of investment
(1,877
)

(1,877
)
N/M

Operating income
$
275,491

$
296,835

$
(21,344
)
(7.2
)%
N/M - Not meaningful
Other Data:
Adjusted EBITDA (1)
$
417,856

$
427,782

$
(9,926
)
(2.3
)%
Adjusted EBITDA margin (2)
38.2
%
39.0
%

(0.8
)%
Attendance
21,293

21,472

(179
)
(0.8
)%
In-park per capita spending
$
47.24

$
46.82

$
0.42

0.9
%
Out-of-park revenues
$
120,165

$
121,859

$
(1,694
)
(1.4
)%

(1)
For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation to 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. We provide Adjusted EBITDA margin because we believe the measure provides a meaningful measure of operating profitability.

For the nine months ended September 24, 2017 , net revenues decreased by $3.0 million , to $1,093.8 million , from $1,096.8 million for the first nine months of 2016. This reflects a 179,000 -visit decrease in attendance which was partially offset by the impact of a $0.42 increase in in-park per capita spending. Out-of-park revenues decreased $1.7 million compared with the same period in the prior year. The decrease in attendance for the first nine months of 2017 relates primarily to the closure of Wildwater Kingdom after the 2016 operating season. The increase in in-park per capita spending was largely attributable to an increase in revenues from our all-season dining and beverage programs, as well as our premium product offerings. The increase was partially offset by a decrease in in-park per capita spending related to admissions resulting from a higher season pass attendance mix, and from a shift of a portion of the estimated number of uses per season pass into the fourth quarter with three additional parks extending their operating seasons to include WinterFest, a holiday event operating during November and December. The decrease in out-of-park revenues was due to prior period revenues received from a Super Bowl 50 special event and a decline in accommodations revenue. Foreign currency exchange rates had an immaterial impact on net revenues.

30



Operating costs and expenses for the first nine months of 2017 increased 2.1% , or $14.5 million , to $690.9 million from $676.4 million for the first nine months of 2016. The increase is the result of a $9.1 million increase in SG&A expense, a $6.0 million increase in operating expense offset by a $0.5 million decrease in cost of goods sold. Cost of goods sold, as a percentage of food, merchandise, and games net revenue, was comparable for both periods. Operating expenses grew by $6.0 million primarily due to increased seasonal wages which were driven by hourly rate increases, and increased operating supply expense attributable to incremental special and seasonal events and the opening of several large capital projects. The $9.1 million increase in SG&A expense was primarily attributable to a reserve established for an employment practice claim, higher merchant fees, increased technology related costs, and increased full-time wages and related employee benefits and taxes. Foreign currency exchange rates had an immaterial impact on operating costs and expenses.

Depreciation and amortization expense for the first nine months of 2017 increased $8.1 million to $126.2 million from $118.2 million for the same period in the prior year. The increase is attributable to a change in the estimated useful lives of a long-lived asset at Cedar Point and a series of other long-lived assets across the portfolio. For the first nine months of 2017, the loss on impairment / retirement of fixed assets was $3.1 million , reflecting retirements of assets in the normal course of business at several of our properties. During the third quarter of 2017, a $1.9 million gain on sale of investment was recognized for the liquidation of a preferred equity investment.

After the items above, operating income for the first nine months of 2017 decreased $21.3 million to $275.5 million compared with operating income of $296.8 million for the first nine months of 2016.

Interest expense for the first nine months of 2017 was comparable to the same period in the prior year. We recognized a $23.1 million loss on early debt extinguishment during the nine months ended September 24, 2017 attributable to the April 2017 debt refinancing. The net effect of swaps resulted in a charge to earnings of $3.7 million for the first nine months of 2017 compared with a $8.9 million charge to earnings in 2016 for the same period. The difference reflects the amortization of amounts in OCI for our de-designated swap portfolio offset by fair market value movements for these swaps. During the period, we also recognized a $35.0 million net benefit to earnings for foreign currency gains and losses compared with a $23.7 million net benefit to earnings for the same period in 2016. Both amounts primarily represent remeasurement of the U.S.-dollar denominated debt held at our Canadian property from the applicable currency to the legal entity's functional currency.

During the first nine months of 2017, a provision for taxes of $63.8 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compares with a $65.3 million provision for taxes recorded for the first nine months of 2016. The decrease in provision for taxes relates largely to the tax effect of foreign currency exchange related to our Canadian property partially offset by an increase in pretax income from our corporate subsidiaries compared with the same period a year ago.

After the items above, net income for the first nine months totaled $157.9 million , or $2.79 per diluted limited partner unit, compared with net income of $184.5 million , or $3.27 per diluted limited partner unit, for the same period a year ago.

For the nine month period, our Adjusted EBITDA decreased to $417.9 million from $427.8 million for the same period in 2016. The approximate $9.9 million decrease in Adjusted EBITDA is due to decreased attendance and lower out-of-park revenue, as well as higher operating costs and expenses associated with labor, merchant fees and other planned spending. Our Adjusted EBITDA margin also decreased 80 basis points as a result of lower net revenues and expense growth.

On a same-park basis (excluding Wildwater Kingdom), net revenues increased by $2.5 million to $1,093.8 million for the nine months ended September 24, 2017 from $1,091.3 million in the same period in the prior year. This is the result of a 59,000-visit increase in attendance and a $0.15 increase in in-park per capita spending on a same-park basis. Operating costs and expenses (including depreciation and amortization, loss on impairment of fixed assets and gain on sale of investment) on a same-park basis increased $23.8 million resulting in a $21.3 million decrease in same-park operating income.


31


Three months ended September 24, 2017

The fiscal three-month period ended September 24, 2017 consisted of a total of 960 operating days compared with 1,021 operating days for the fiscal three-month period ended September 25, 2016 . On a same-park basis (excluding Wildwater Kingdom, one of the Partnership's separately gated outdoor water parks which was closed after the 2016 operating season), the fiscal three-month period ended September 25, 2016 included a total of 965 operating days. The following table presents key financial information for the three months ended September 24, 2017 and September 25, 2016 :
Three months ended
Three months ended
Increase (Decrease)
9/24/2017
9/25/2016
$
%
(Amounts in thousands, except for per capita spending)
Net revenues
$
652,689

$
650,283

$
2,406

0.4
%
Operating costs and expenses
327,020

316,448

10,572

3.3
%
Depreciation and amortization
70,060

64,685

5,375

8.3
%
Loss on impairment / retirement of fixed assets, net
1,347

1,355

(8
)
N/M

Gain on sale of investment
(1,877
)

(1,877
)
N/M

Operating income
$
256,139

$
267,795

$
(11,656
)
(4.4
)%
N/M - Not meaningful
Other Data:
Adjusted EBITDA (1)
$
333,642

$
336,015

$
(2,373
)
(0.7
)%
Attendance
12,428

12,492

(64
)
(0.5
)%
In-park per capita spending
$
48.73

$
48.01

$
0.72

1.5
%
Out-of-park revenues
$
65,103

$
67,903

$
(2,800
)
(4.1
)%

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

For the quarter ended September 24, 2017 , net revenues increased by $2.4 million , to $652.7 million , from $650.3 million in the third quarter of 2016. This reflects a $0.72 increase in in-park per capita spending, partially offset by the impact of a 64,000 -visit decrease in attendance. Out-of-park revenues decreased $2.8 million compared with the same period in the prior year. The increase in in-park per capita spending was largely attributable to an increase in revenues from our all-season dining and beverage programs, as well as our premium product offerings and non-season pass admissions. The increase was partially offset by a decrease in in-park per capita spending related to season pass admissions resulting from a shift of a portion of the estimated number of uses per season pass into the fourth quarter with three additional parks extending their operating seasons to include WinterFest, a holiday event operating during November and December. The decrease in attendance for the third quarter relates to the closure of Wildwater Kingdom after the 2016 operating season. The decrease in out-of-park revenues was attributable to prior period proceeds received during the third quarter of 2016 from a business interruption claim at Cedar Point and a decrease in out-of-park food revenue. The increase in net revenues is net of a $0.9 million favorable impact of foreign currency exchange related to our Canadian park.

Operating costs and expenses for the quarter increased 3.3% , or $10.6 million , to $327.0 million from $316.4 million in the third quarter of 2016. The increase is the result of a $6.6 million increase in SG&A expense, a $3.4 million increase in operating expense, and a $0.6 million increase in cost of goods sold. Cost of goods sold, as a percentage of food, merchandise, and games net revenue, was comparable for both periods. Operating expenses grew by $3.4 million primarily due to increased seasonal wages which were driven by hourly rate increases, and to a lesser extent, increased operating supply expense attributable to additional seasonal events and the timing of maintenance projects. The $6.6 million increase in SG&A expense was primarily attributable to a reserve established for an employment practice claim, higher merchant fees, and increased technology related costs. The increase in operating costs and expenses is net of a $0.4 million unfavorable impact of foreign currency exchange related to our Canadian park.

Depreciation and amortization expense for the quarter increased $5.4 million to $70.1 million compared to $64.7 million for the same period in the prior year. The increase is attributable to a change in the estimated useful lives of a long-lived asset at Cedar Point and a series of other long-lived assets across the portfolio. For the third quarter of 2017, the loss on impairment / retirement of fixed assets was $1.3 million , reflecting the retirements of assets in the normal course of business at several of our properties. A $1.9 million gain on sale of investment was recognized during the quarter for the liquidation of a preferred equity investment.


32


After the items above, operating income for the third quarter of 2017 decreased $11.7 million to $256.1 million compared with an operating income of $267.8 million for the third quarter of 2016.

Interest expense for the third quarter of 2017 was comparable to the same period in the prior year. The net effect of our swaps resulted in a benefit to earnings of $1.0 million for the third quarter of 2017 compared with a $1.7 million charge to earnings in the third quarter of 2016. 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 $29.2 million net benefit to earnings for foreign currency gains and losses compared with a $7.3 million net charge to earnings for the third quarter in 2016. Both amounts primarily represent remeasurement of the U.S.-dollar denominated debt held at our Canadian property from the applicable currency to the legal entity's functional currency.

During the third quarter of 2017, a provision for taxes of $73.7 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compares with a provision for taxes recorded in the third quarter of 2016 of $62.9 million . This increase in provision for taxes relates largely to an increase in pretax income from our corporate subsidiaries compared with the same period a year ago.

After the items above, net income for the current quarter totaled $191.3 million , or $3.38 per diluted limited partner unit, compared with a net income of $175.0 million , or $3.10 per diluted limited partner unit, for the third quarter a year ago.

For the current quarter, our Adjusted EBITDA decreased to $333.6 million from $336.0 million for the fiscal third quarter of 2016. The approximate $2.4 million decrease in Adjusted EBITDA is attributable to decreased attendance and lower out-of-park revenue, as well as increased operating costs and expenses associated with labor, merchant fees, maintenance expense and other planned spending.

On a same-park basis (excluding Wildwater Kingdom), net revenues increased by $6.5 million to $652.7 million for the quarter ended September 24, 2017 from $646.2 million in the same period in the prior year reflecting a 103,000-visit increase in attendance and a $0.39 increase in in-park per capita spending on a same-park basis. Operating costs and expenses (including depreciation and amortization, loss on impairment of fixed assets and gain on sale of investment) on a same-park basis increased $17.3 million resulting in a $10.8 million decrease in same-park operating income.

October 2017

Based on preliminary results, net revenues through October 29, 2017 were approximately $1.24 billion, up 1%, or $6 million, compared with the same period last year. The increase in net revenues was the result of a 1%, or $0.57, increase in in-park guest per capita spending to $47.40 offset by a 45,000-visit, decrease in attendance to 24.1 million visits. During this same period, out-of-park revenues decreased 2%, or $3 million, to $133 million compared with 2016.

On a same-park basis (excluding Wildwater Kingdom), net revenues were up approximately 1%, or $12 million, compared with the same period last year. The increase in net revenues on a same-park basis was the result of a 1%, or 192,000-visit, increase in attendance and a 1%, or $0.33, increase in in-park guest per capita spending. The fluctuation in out-of-park revenues was comparable on a same-park basis.

Liquidity and Capital Resources:
With respect to both liquidity and cash flow, we ended the third quarter of 2017 in sound condition. The working capital ratio (current assets divided by current liabilities) of 1.2 at September 24, 2017 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 24, 2017 , net cash from operating activities was $322.6 million , a decrease of $18.1 million from the same period a year ago, primarily due to lower earnings.
Investing Activities
Net cash used for investing activities for the first nine months of 2017 was $149.2 million , an increase of $22.3 million compared with the same period in the prior year. This increase reflects planned higher capital expenditures in the period.
Financing Activities
Net cash for financing activities for the first nine months of 2017 was $52.1 million , a decrease of $95.7 million compared with the same period in the prior year. This decrease reflects incremental debt borrowings due to the increase in our senior secured

33


term loan facility under the 2017 Credit Agreement, offset by other impacts of the April 2017 refinancing including payment of debt issuance costs and early termination penalties.

As of September 24, 2017 , our outstanding debt, before reduction for debt issuance costs, consisted of the following:

$500 million of 5.375% senior unsecured notes, maturing in April 2027 , issued at par. Prior to April 15, 2020 , up to 35% of the notes may be redeemed with net cash proceeds of certain equity offerings at a price equal to 105.375% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to April 15, 2022 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. The notes pay interest semi-annually in April and October.

$450 million of 5.375% senior unsecured notes, maturing in June 2024 , issued at par. 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. The notes pay interest semi-annually in June and December.

$735 million of senior secured term debt, maturing in April 2024 under our 2017 Credit Agreement. The term debt bears interest at London InterBank Offering Rate ("LIBOR") plus 225 basis points (bps). The term loan amortizes $7.5 million annually. We paid $15.0 million of amortization during the third quarter of 2017. Therefore, we have no current maturities as of September 24, 2017 .

No borrowings under the $275 million senior secured revolving credit facility under our 2017 Credit Agreement with a Canadian sub-limit of $15 million . Borrowings under the senior secured revolving credit facility bear interest at LIBOR or Canadian Dollar Offered Rate ("CDOR") plus 200 bps. The revolving credit facility is scheduled to mature in April 2022 and also provides for the issuance of documentary and standby letters of credit. The 2017 Credit Agreement requires the payment of a 37.5 bps commitment fee per annum on the unused portion of the credit facilities. After letters of credit, which totaled $15.9 million at September 24, 2017 , we had $259.1 million of available borrowings under the revolving credit facility and cash on hand of $249.9 million .

As of September 24, 2017 , we have four interest rate swap agreements that effectively convert $500 million of variable-rate debt to a fixed rate. These swaps, which mature on December 31, 2020 and fix LIBOR at a weighted average rate of 2.64% , were not designated as cash flow hedges. As of September 24, 2017 , the fair market value of our derivative liability was $14.8 million and was recorded in "Derivative Liability."

The 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50 x consolidated total debt-to-consolidated EBITDA. As of September 24, 2017 , we were in compliance with this financial condition covenant and all other covenants under the 2017 Credit Agreement.

Our long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing our June 2014 notes, which includes the most restrictive of these Restricted Payments provisions, we 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 is permitted should our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.00 x.

In accordance with the 2017 Credit Agreement debt provisions, on August 2, 2017, we announced the declaration of a distribution of $0.855 per limited partner unit, which was paid on September 15, 2017. Also, on November 2, 2017, we announced the declaration of a distribution of $0.89 per limited partner unit, which will be payable on December 15, 2017.

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 24, 2017 . We have no other significant off-balance sheet financing arrangements.


34


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 24, 2017 , on an adjusted basis after giving affect to the impact of interest rate swap agreements, $1,450.0 million of our outstanding long-term debt represented fixed-rate debt and $235.0 million represented variable-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $7.2 million, a hypothetical 100 bps increase in 30-day LIBOR on our variable-rate debt (not considering the impact of our interest rate swaps) would lead to an increase of approximately $7.4 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 $5.0 million over the next twelve months.

A uniform 10% strengthening of the U.S. dollar relative to the Canadian dollar would result in a $3.3 million decrease in annual operating income.


35


ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures -
We maintain a system of controls and procedures designed to ensure that information required to be disclosed by us in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Commission and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 24, 2017 , management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 24, 2017 .


(b) Changes in Internal Control Over Financial Reporting -
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 24, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

36


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Freddie Ramos vs. Cedar Fair, L.P., Cedar Fair Management Company
The Partnership and Cedar Fair Management, Inc. are defendants in a lawsuit filed in Superior Court of the State of California for Orange County on November 23, 2016 by Freddie Ramos seeking damages and injunctive relief for claims related to certain employment and pay practices at our parks in California, including those related to certain check-out, time reporting, discharge, meal and rest period, and pay statement practices. The Partnership filed an answer on January 13, 2017 denying the allegations in the complaint and requesting a dismissal of all claims.  On January 17, 2017, the Partnership filed a Notice of Removal of the case from the state court to the United State District Court for the Central District of California. The class has not been certified. On August 29, 2017, the Partnership participated in a mediation relating to the claims alleged in the lawsuit. Following this mediation, the Partnership negotiated a $4.2 million settlement with the named Plaintiff on a class wide basis. As part of the settlement the case will be remanded back to the Superior Court of the State of California for Orange County for a preliminary hearing and final court approval of the proposed settlement. The Partnership and the named Plaintiff are required to file a brief in support of the settlement with the court. The hearing to approve the final settlement is not expected to occur until at least the first quarter of 2018. Based upon the information available, the Partnership believes the liability recorded as of September 24, 2017 is adequate and does not expect the terms of the negotiated settlement or final briefing to materially affect its financial results in future periods.

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, 2016 .


37


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

Issuer Purchases of Equity Securities:
The following table summarizes repurchases of Cedar Fair, L.P. Depositary Units representing limited partner interests by the Partnership during the three months ended September 24, 2017 :








Period
(a)






Total Number of Units Purchased (1)
(b)






Average Price Paid per Unit
(c)



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

Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs
June 26 - July 30
1,928

$
70.80


$

July 31 - August 27




August 28 - September 24




Total
1,928

$
70.80


$


(1)
All repurchased units were reacquired by the Partnership in satisfaction of tax obligations related to the vesting of restricted units which were granted under the Partnership's Omnibus Incentive Plan.

ITEM 6. EXHIBITS
Exhibit (101)
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 24, 2017 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.

38


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, 2017
/s/ Matthew A. Ouimet
Matthew A. Ouimet
Chief Executive Officer
Date:
November 2, 2017
/s/ Brian C. Witherow
Brian C. Witherow
Executive Vice President and
Chief Financial Officer


39
TABLE OF CONTENTS
Part I - Financial InformationprintItem 1. Financial StatementsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II - Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 6. Exhibitsprint

Exhibits

Exhibit (10.1) Employment Agreement, dated October 4, 2017, by and among Cedar Fair, L.P., Cedar Fair Management, Inc., Magnum Management Corporation, and Richard A. Zimmerman. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed October 5, 2017. Exhibit (10.2) Employment Agreement, dated October 4, 2017, by and among Cedar Fair, L.P., Cedar Fair Management, Inc., Magnum Management Corporation, and Matthew A. Ouimet. Incorporated herein by reference to Exhibit 10.2 to the Registrants Form 8-K filed October 5, 2017. Exhibit (10.3) 2016 Omnibus Incentive Plan (Fall 2017 Version) Form of Restricted Unit Award Declaration. Exhibit (10.4) 2016 Omnibus Incentive Plan (Fall 2017 Version) Form of Performance Award Declaration. 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.