FUN 10-Q Quarterly Report Sept. 23, 2018 | Alphaminr

FUN 10-Q Quarter ended Sept. 23, 2018

CEDAR FAIR L P
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10-Q 1 cedarfair-10qx3x2018.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 23, 2018
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 every Interactive Data File required to be submitted 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 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
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 26, 2018
Units Representing
Limited Partner Interests
56,440,459

Page 1 of 46 pages





CEDAR FAIR, L.P.
FORM 10-Q CONTENTS




PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
9/23/2018
12/31/2017
9/24/2017
ASSETS
Current Assets:
Cash and cash equivalents
$
190,756

$
166,245

$
249,946

Receivables
58,398

37,722

52,303

Inventories
36,549

29,719

34,240

Other current assets
21,875

13,297

18,624

307,578

246,983

355,113

Property and Equipment:
Land
272,186

271,021

272,213

Land improvements
435,513

421,593

416,629

Buildings
729,108

693,899

707,964

Rides and equipment
1,817,601

1,740,653

1,740,826

Construction in progress
61,474

72,847

57,605

3,315,882

3,200,013

3,195,237

Less accumulated depreciation
(1,727,183
)
(1,614,241
)
(1,614,727
)
1,588,699

1,585,772

1,580,510

Goodwill
182,004

183,830

185,010

Other Intangibles, net
37,131

38,064

38,532

Other Assets
13,536

9,510

17,407

$
2,128,948

$
2,064,159

$
2,176,572

LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt
$
3,750

$

$

Accounts payable
32,989

24,621

33,710

Deferred revenue
102,326

86,131

83,340

Accrued interest
21,893

8,124

23,928

Accrued taxes
48,372

43,975

78,657

Accrued salaries, wages and benefits
30,578

18,740

30,666

Self-insurance reserves
25,923

25,107

27,549

Other accrued liabilities
22,232

18,796

20,562

288,063

225,494

298,412

Deferred Tax Liability
74,637

74,798

112,671

Derivative Liability

8,722

14,849

Other Liabilities
16,292

11,684

15,732

Long-Term Debt:
Term debt
720,846

723,788

723,385

Notes
937,440

936,727

936,241

1,658,286

1,660,515

1,659,626

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

5,290

5,290

General partner



Limited partners, 56,441, 56,359 and 56,238 units outstanding as of September 23, 2018, December 31, 2017 and September 24, 2017, respectively
78,464

81,589

74,155

Accumulated other comprehensive income (loss)
7,916

(3,933
)
(4,163
)
91,670

82,946

75,282

$
2,128,948

$
2,064,159

$
2,176,572

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
9/23/2018
9/24/2017
9/23/2018
9/24/2017
Net revenues:
Admissions
$
358,923

$
361,279

$
590,091

$
598,723

Food, merchandise and games
210,426

205,137

361,428

356,512

Accommodations, extra-charge products and other
94,354

86,273

147,227

138,570


663,703

652,689

1,098,746

1,093,805

Costs and expenses:

Cost of food, merchandise, and games revenues
53,891

52,647

94,912

92,376

Operating expenses
206,505

202,710

462,750

447,379

Selling, general and administrative
67,114

71,663

149,837

151,142

Depreciation and amortization
74,374

70,060

132,114

126,237

Loss on impairment / retirement of fixed assets, net
3,247

1,347

7,959

3,057

Gain on sale of investment

(1,877
)

(1,877
)

405,131

396,550

847,572

818,314

Operating income
258,572

256,139

251,174

275,491

Interest expense
21,464

21,638

62,563

62,472

Net effect of swaps
(1,217
)
(952
)
(5,751
)
3,717

Loss on early debt extinguishment


1,073

23,115

Loss (gain) on foreign currency
(13,054
)
(29,193
)
12,024

(35,047
)
Other income
(698
)
(416
)
(1,186
)
(464
)
Income before taxes
252,077

265,062

182,451

221,698

Provision for taxes
38,770

73,747

33,301

63,769

Net income
213,307

191,315

149,150

157,929

Net income allocated to general partner
3

1

2

1

Net income allocated to limited partners
$
213,304

$
191,314

$
149,148

$
157,928

Net income
$
213,307

$
191,315

$
149,150

$
157,929

Other comprehensive income (loss), (net of tax):
Foreign currency translation adjustment
(5,276
)
(11,143
)
5,990

(13,085
)
Unrealized loss on cash flow hedging derivatives
2,116

1,994

6,250

5,981

Other comprehensive income (loss), (net of tax)
(3,160
)
(9,149
)
12,240

(7,104
)
Total comprehensive income
$
210,147

$
182,166

$
161,390

$
150,825

Basic income per limited partner unit:
Weighted average limited partner units outstanding
56,231

56,078

56,205

56,062

Net income per limited partner unit
$
3.79

$
3.41

$
2.65

$
2.82

Diluted income per limited partner unit:
Weighted average limited partner units outstanding
56,696

56,591

56,753

56,631

Net income per limited partner unit
$
3.76

$
3.38

$
2.63

$
2.79

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
9/23/2018
9/24/2017
Limited Partnership Units Outstanding
Beginning balance
56,359

56,201

Limited partnership unit options exercised
6

9

Limited partnership unit forfeitures
(2
)
(3
)
Issuance of limited partnership units as compensation
78

31

56,441

56,238

Limited Partners’ Equity
Beginning balance
$
81,589

$
52,288

Net income
149,148

157,928

Partnership distribution declared ($2.67 and $2.565 per limited partnership unit)
(150,850
)
(144,516
)
Reclassification of stranded tax effect
391


Exercise of limited partnership unit options
125


Tax effect of units involved in treasury unit transactions
(3,049
)
(2,560
)
Issuance of limited partnership units as compensation
1,110

11,015

78,464

74,155

General Partner’s Equity
Beginning balance


Net income
2

1

Partnership distribution declared
(2
)
(1
)


Special L.P. Interests
5,290

5,290

Accumulated Other Comprehensive Income
Foreign currency translation adjustment:
Beginning balance
4,042

18,891

Period activity, net of tax $1,247 and $0
5,990

(13,085
)
10,032

5,806

Unrealized loss on cash flow hedging derivatives:
Beginning balance
(7,975
)
(15,950
)
Period activity, net of tax ($845) and ($1,113)
6,250

5,981

Reclassification of stranded tax effect
(391
)

(2,116
)
(9,969
)
7,916

(4,163
)
Total Partners’ Equity
$
91,670

$
75,282

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
9/23/2018
9/24/2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
149,150

$
157,929

Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization
132,114

126,237

Loss on early debt extinguishment
1,073

23,115

Non-cash foreign currency loss (gain) on debt
13,093

(39,296
)
Other non-cash expenses
8,512

26,942

Net change in working capital
25,788

24,244

Net change in other assets/liabilities
4,704

3,447

Net cash from operating activities
334,434

322,618

CASH FLOWS FOR INVESTING ACTIVITIES
Capital expenditures
(145,716
)
(152,439
)
Proceeds from sale of investment

3,281

Net cash for investing activities
(145,716
)
(149,158
)
CASH FLOWS FOR FINANCING ACTIVITIES
Term debt borrowings

750,000

Note borrowings

500,000

Term debt payments

(617,850
)
Note payments, including amounts paid for early termination

(515,458
)
Distributions paid to partners
(150,852
)
(144,517
)
Payment of debt issuance costs and original issue discount
(2,521
)
(19,684
)
Exercise of limited partnership unit options
125


Tax effect of units involved in treasury unit transactions
(3,049
)
(2,560
)
Payments related to tax withholding for equity compensation
(6,943
)
(2,053
)
Net cash for financing activities
(163,240
)
(52,122
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(967
)
5,892

CASH AND CASH EQUIVALENTS
Net increase for the period
24,511

127,230

Balance, beginning of period
166,245

122,716

Balance, end of period
$
190,756

$
249,946

SUPPLEMENTAL INFORMATION
Cash payments for interest expense
$
48,128

$
48,729

Interest capitalized
2,173

1,770

Cash payments for income taxes, net of refunds
35,403

44,090

Capital expenditures in accounts payable
4,333

5,582

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 23, 2018 AND SEPTEMBER 24, 2017

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:
Except for the changes described below, the Partnership’s unaudited condensed consolidated financial statements for the periods ended September 23, 2018 and September 24, 2017 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, 2017 , which were included in the Form 10-K filed on February 23, 2018 . 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.

The Partnership adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") effective January 1, 2018 using the modified retrospective method. The adoption of the standard did not have a material effect on the consolidated financial statements. The Partnership's accounting policy as a result of adopting ASU 2014-09 is discussed below:
Revenue Recognition and related receivables and contract liabilities
As disclosed within the consolidated statements of operations and comprehensive income, revenues are generated from sales of (1) admission to the Partnership's amusement parks and water parks, (2) food, merchandise and games both inside and outside the parks, and (3) accommodations, extra-charge products, and other revenue sources. Admission revenues include amounts paid to gain admission into the Partnership's parks, including parking fees. Revenues related to extra-charge products, including premium benefit offerings such as front-of-line products, and online advanced purchase transaction fees charged to customers are included in "Accommodations, extra-charge products and other". Due to the Partnership's highly seasonal operations, a substantial portion of the Partnership's revenues are generated during an approximate 130 - to 140 -day operating season. Most revenues are recognized on a daily basis based on actual guest spend at the properties. Revenues from multi-use products, including season-long products for admission, dining, beverage and other products, are recognized over the estimated number of uses expected for each type of product. The estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally occurs no later than the close of the operating season. The number of uses is estimated based on historical usage adjusted for current period trends. For any bundled products that include multiple performance obligations, revenue is allocated using the retail price of each distinct performance obligation and any inherent discounts are allocated based on the gross margin and expected redemption of each performance obligation. The Partnership does not typically provide for refunds or returns.

In some instances, the Partnership arranges with outside parties ("concessionaires") to provide goods to guests, typically food and merchandise, and the Partnership acts as an agent, resulting in net revenue recorded within the income statement. Concessionaire arrangement revenues are recognized over the operating season and are variable. Sponsorship revenues and marina revenues, which are classified as "Accommodations, extra-charge products and other" within the income statement, are recognized over the park operating season which represents the period in which the performance obligations are satisfied. Sponsorship revenues are typically fixed. However, some sponsorship revenues are variable based on achievement of specified operating metrics. The Partnership estimates variable revenues and performs a constraint analysis using both historical information and current trends to determine the amount of revenue that is not probable of a significant reversal.

Many products, including season-long products, are sold to customers in advance, resulting in a contract liability ("deferred revenue"). Deferred revenue is at its highest immediately prior to the peak summer season, and at its lowest in the fall after the peak summer season and at the beginning of the selling season for the next year's products. Season-long products represent the majority of the deferred revenue balance in any given period.

Of the $86.1 million of deferred revenue recorded as of January 1, 2018 , 88% was related to season-long products. The remainder was related to deferred online advanced purchase transaction fees charged to customers, advanced ticket sales, marina deposits, advanced resort reservations, and other deferred revenue. Most deferred revenue outstanding as of January 1, 2018 will be

7


recognized by December 31, 2018 with the exception of an immaterial amount of deferred revenue for prepaid products such as gift cards and prepaid games cards. During the nine months ended September 23, 2018 , approximately $70.8 million of the deferred revenue balance as of January 1, 2018 was recognized. The difference in the opening and closing balances of the Partnership's deferred revenue balance in the current period was attributable to additional season-long product sales during the current year for both the 2018 and 2019 operating seasons, offset by revenue recognized during the first nine months of 2018.

Payment is due immediately on the transaction date for most products. The Partnership's receivable balance includes outstanding amounts on installment purchase plans which are offered for season-long products (and other select products for specific time periods), and includes sales to retailers, group sales and catering activities which are billed. Installment purchase plans vary in length from three monthly installments to twelve monthly installments. Payment terms for billings are typically net 30 days . Receivables are highest in the peak summer months and the lowest in the winter months. The Partnership is not exposed to a significant concentration of customer credit risk. As of September 23, 2018 , December 31, 2017 and September 24, 2017 , the Partnership recorded a $10.7 million , $2.2 million and $10.6 million allowance for doubtful accounts, respectively, representing estimated defaults on installment purchase plans. The default estimate is calculated using the historical default rate adjusted for current period trends. The allowance for doubtful accounts is recorded as a reduction of deferred revenue to the extent revenue has not been recognized on the corresponding season-long products.

Most deferred revenue from contracts with customers is classified as current within the balance sheet. However, a portion of deferred revenue from contracts with customers is classified as non-current during the third quarter related to season-long products sold in the current season for use in the subsequent season. Season-long products are sold beginning in August of the year preceding the operating season. Season-long products may be recognized 12 to 16 months after purchase depending on the date of sale. The Partnership estimates the number of uses expected outside of the next twelve months for each type of product and classifies the related deferred revenue as non-current.

With the exception of the non-current deferred revenue described above, the Partnership's contracts with customers have an original duration of one year or less. For these short-term contracts, the Partnership uses the practical expedient, a relief provided in the accounting standard to simplify compliance, applicable to such contracts and has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. Further, the Partnership has elected to recognize incremental costs of obtaining a contract as an expense when incurred as the amortization period of the asset would be less than one year. Lastly, the Partnership has elected not to adjust consideration for the effects of significant financing components in the form of installment purchase plans as the period between when the entity transfers the promised service to the customer and when the customer pays for that service does not exceed one year.
New Accounting Pronouncements
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. The ASU can be adopted using either the modified retrospective approach, which requires application of the new standard at the beginning of the earliest comparative period presented, or the comparative reporting approach allowable under ASU 2018-11, which requires application of the new standard at the adoption date. The Partnership expects to adopt this standard in the first quarter of 2019 using the comparative reporting approach. While the Partnership is still in the process of evaluating the effect this standard will have on the consolidated financial statements and related 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.
Other Adopted Accounting Pronouncements
In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Comprehensive Income ("ASU 2018-02"). The ASU allows a reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU 2018-02 is effective for fiscal years after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period, and the amendments can be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Partnership elected to adopt ASU 2018-02 in the first quarter of 2018. The amendment was applied in the period of adoption and resulted in a $0.4 million reclassification from accumulated other comprehensive income to limited partners' equity during the first quarter ended March 25, 2018.

8


In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract ("ASU 2018-15"). The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs of a hosting arrangement that is a service contract will be expensed over the term of the hosting arrangement. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The amendments can be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. The Partnership has adopted this standard in the third quarter of 2018 using the prospective method. The Partnership anticipates the standard to lengthen the timing of expense recognition associated with upcoming cloud-based projects.

(2) Interim Reporting:
The Partnership owns and operates eleven amusement parks, two separately gated outdoor water parks, one indoor water park and four 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 for Halloween events. 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. Five of the seasonal properties are open an additional 20 to 25 days to include WinterFest, a holiday event operating during November and December showcasing holiday shows and festivities. 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 from multi-use products are recognized over the estimated number of uses expected for each type of product; and the estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally 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.

(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.

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. In the fourth quarter of 2017, the Partnership recorded a $7.6 million impairment charge based on information from ongoing marketing activities. The amount was recorded in "Loss on impairment / retirement of fixed assets, net" in the consolidated statement of operations and comprehensive income. 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 ( $9.0 million as of September 23, 2018 , $9.0 million as of December 31, 2017 and $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 23, 2018 , 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 23, 2018 and September 24, 2017 is as follows:
(In thousands)
Goodwill
(gross)
Accumulated
Impairment
Losses
Goodwill
(net)
Balance as of December 31, 2017
$
263,698

$
(79,868
)
$
183,830

Foreign currency translation
(1,826
)

(1,826
)
Balance as of September 23, 2018
$
261,872

$
(79,868
)
$
182,004

Balance as of December 31, 2016
$
259,528

$
(79,868
)
$
179,660

Foreign currency translation
5,350


5,350

Balance as of September 24, 2017
$
264,878

$
(79,868
)
$
185,010


As of September 23, 2018 , December 31, 2017 , and September 24, 2017 , the Partnership’s other intangible assets consisted of the following:
(In thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
September 23, 2018
Other intangible assets:
Trade names
$
36,125

$

$
36,125

License / franchise agreements
3,351

(2,345
)
1,006

Total other intangible assets
$
39,476

$
(2,345
)
$
37,131

December 31, 2017
Other intangible assets:
Trade names
$
36,531

$

$
36,531

License / franchise agreements
3,360

(1,827
)
1,533

Total other intangible assets
$
39,891

$
(1,827
)
$
38,064

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


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 23, 2018 , December 31, 2017 , and September 24, 2017 consisted of the following:
(In thousands)
September 23, 2018
December 31, 2017
September 24, 2017
Term debt (1)
April 2017 U.S. term loan averaging 3.59% (due 2017-2024)
$
735,000

$
735,000

$
735,000

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

500,000

500,000

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

450,000

450,000

1,685,000

1,685,000

1,685,000

Less current portion
(3,750
)


1,681,250

1,685,000

1,685,000

Less debt issuance costs and original issue discount
(22,964
)
(24,485
)
(25,374
)
$
1,658,286

$
1,660,515

$
1,659,626

(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 $7.7 million and debt premium payments of $15.5 million . Accordingly, the Partnership recorded a loss on early debt extinguishment of $23.1 million during 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 2017 Credit Agreement was amended on March 14, 2018 (subsequently referred to as the "Amended 2017 Credit Agreement"). Specifically, the interest rate for the senior secured term loan facility was amended to London InterBank Offered Rate ("LIBOR") plus 175 basis points (bps). The pricing terms for the amendment reflected $0.9 million of Original Issue Discount ("OID") and resulted in the write-off of debt issuance costs of $1.1 million which was recorded as a loss on early debt extinguishment during the first quarter of 2018. The senior secured term loan facility matures April 15, 2024 and amortizes at $7.5 million annually. The facilities provided under the Amended 2017 Credit Agreement are collateralized by substantially all of the assets of the Partnership.

The senior secured revolving credit facility under the Amended 2017 Credit Agreement has a combined limit of $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 Amended 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"). The 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 Amended 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 23, 2018 , the Partnership was in compliance with this financial condition covenant and all other financial covenants under the Amended 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 can make additional Restricted Payments if the Partnership's pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is 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.

During the first quarter of 2016, the Partnership amended its four interest rate swap agreements to extend each of the maturities to December 31, 2020 and convert $500 million of variable-rate debt to a rate of 4.39% . During the second quarter of 2018, the Partnership entered into four additional interest rate swap agreements that convert the same notional amount to a rate of 4.63% for the period December 31, 2020 through December 31, 2023 . None of the interest rate swap agreements are designated as hedging instruments. The fair market value of the swap portfolio was recorded on the unaudited condensed consolidated balance sheets within "Other Assets" as of September 23, 2018 and within "Derivative Liability" as of December 31, 2017 and September 24, 2017 as follows:
(In thousands)
September 23, 2018
December 31, 2017
September 24, 2017
Derivatives not designated as hedging instruments:
Interest rate swaps
$
4,123

$
(8,722
)
$
(14,849
)
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 is 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 for these agreements are being amortized into earnings through the original December 31, 2018 maturity. As of September 23, 2018 , approximately $2.4 million of losses remain in AOCI related to the effective cash flow hedge contracts prior to de-designation, all of which will be reclassified to earnings by December 31, 2018 .
The (gains) losses recognized in income on derivatives not designated as cash flow hedges were recorded in "Net effect of swaps" within the income statement for the periods presented as follows:
Three months ended
Nine months ended
(In thousands)
September 23, 2018
September 24, 2017
September 23, 2018
September 24, 2017
Change in fair market value
$
(3,581
)
$
(3,318
)
$
(12,845
)
$
(3,378
)
Amortization of amounts in AOCI
2,364

2,366

7,094

7,095

Net effect of swaps
$
(1,217
)
$
(952
)
$
(5,751
)
$
3,717


12


(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 23, 2018 , December 31, 2017 , and September 24, 2017 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 23, 2018
December 31, 2017
September 24, 2017
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
$
1,081

$
1,081

$
736

$
736

$
688

$
688

Interest rate swaps
Other Assets (Derivative Liability)
Level 2
$
4,123

$
4,123

$
(8,722
)
$
(8,722
)
$
(14,849
)
$
(14,849
)
Other financial assets (liabilities):
April 2017 term debt
Long-Term Debt (1)
Level 2
$
(731,250
)
$
(734,906
)
$
(735,000
)
$
(742,350
)
$
(735,000
)
$
(740,513
)
June 2014 notes
Long-Term Debt (1)
Level 1
$
(450,000
)
$
(450,000
)
$
(450,000
)
$
(469,125
)
$
(450,000
)
$
(472,500
)
April 2017 notes
Long-Term Debt (1)
Level 1 (2)
$
(500,000
)
$
(485,000
)
$
(500,000
)
$
(525,000
)
$
(500,000
)
$
(527,500
)

(1)
Carrying values of long-term debt balances are before reductions for debt issuance costs and original issue discount of $23.0 million , $24.5 million , and $25.4 million as of September 23, 2018 , December 31, 2017 , and September 24, 2017 , respectively.
(2)
The April 2017 notes were based on Level 1 inputs as of September 23, 2018 and Level 2 inputs as of December 31, 2017 and September 24, 2017 .

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.

As of December 31, 2017 , the Partnership measured the remaining land at Wildwater Kingdom, one of the Partnership's separately gated outdoor water parks which ceased operations in 2016, at fair value less cost to sell based on Level 3 unobservable market input. In the fourth quarter of 2017, the Partnership recorded a $7.6 million impairment charge based on information from ongoing marketing activities. This amount was recorded in "Loss on impairment / retirement of fixed assets, net" in the consolidated statement of operations and comprehensive income.

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 23, 2018 or September 24, 2017 .


13


(8) Earnings per Unit:
Net income per limited partner unit is calculated based on the following unit amounts:
Three months ended
Nine months ended
9/23/2018
9/24/2017
9/23/2018
9/24/2017
(In thousands, except per unit amounts)
Basic weighted average units outstanding
56,231

56,078

56,205

56,062

Effect of dilutive units:
Deferred units
46

44

46

41

Performance units


49

48

Restricted units
277

284

289

292

Unit options
142

185

164

188

Diluted weighted average units outstanding
56,696

56,591

56,753

56,631

Net income per unit - basic
$
3.79

$
3.41

$
2.65

$
2.82

Net income per unit - diluted
$
3.76

$
3.38

$
2.63

$
2.79


(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 2018, the Partnership has recorded $0.5 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.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Act"), was signed into law.  The Act includes numerous tax law changes, including a reduction in the federal corporate income tax rate from 35% to 21% .  The change in tax rates necessitated the remeasurement of deferred tax balances that are expected to reverse following enactment using the applicable tax rates.  As a result of the remeasurement of the net deferred tax liability, the Partnership realized a $49.2 million deferred tax benefit during the fourth quarter of 2017.  The amounts recorded to reflect the effects of the Act were and remain provisional and are subject to change in accordance with SAB 118.  The Partnership expects to complete these calculations and record the final effects of the Act before the end of the fourth quarter of 2018.

(10) Contingencies:
The Partnership is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, none of these matters are expected to have a material effect in the aggregate on the Partnership's financial statements.

14


(11) Changes in Accumulated Other Comprehensive Income by Component:
The following tables reflect the changes in accumulated other comprehensive income (loss) related to limited partners' equity for the three months ended September 23, 2018 and September 24, 2017 :

Changes in Accumulated Other Comprehensive Income by Component
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
Total
Balance as of June 24, 2018
$
(4,232
)
$
15,308

$
11,076

Other comprehensive income before reclassifications, net of tax ($1,055)

(5,276
)
(5,276
)
Amounts reclassified from accumulated other comprehensive income, net of tax ($249)
2,116


2,116

Net other comprehensive income (loss)
2,116

(5,276
)
(3,160
)
Balance as of September 23, 2018
$
(2,116
)
$
10,032

$
7,916


Changes in Accumulated Other Comprehensive Income by Component
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
Total
Balance as of 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)
1,994


1,994

Net other comprehensive income (loss)
1,994

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

$
(4,163
)

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
9/23/2018
Three months ended
9/24/2017
Interest rate contracts
$
2,365

$
2,365

Net effect of swaps
Provision for taxes
(249
)
(371
)
Provision (benefit) for taxes
Losses on cash flow hedges
$
2,116

$
1,994

Net of tax

15


The following tables reflect the changes in accumulated other comprehensive income (loss) related to limited partners' equity for the nine months ended September 23, 2018 and September 24, 2017 :

Changes in Accumulated Other Comprehensive Income by Component
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
Total
Balance as of December 31, 2017
$
(7,975
)
$
4,042

$
(3,933
)
Other comprehensive income before reclassifications, net of tax $1,247

5,990

5,990

Amounts reclassified from accumulated other comprehensive income, net of tax ($845)
6,250


6,250

Net other comprehensive income (loss)
6,250

5,990

12,240

Reclassification of stranded tax effect
(391
)

(391
)
Balance as of September 23, 2018
$
(2,116
)
$
10,032

$
7,916


Changes in Accumulated Other Comprehensive Income by Component
(In thousands)
Gains and Losses on Cash Flow Hedges
Foreign Currency Translation
Total
Balance as of 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)
5,981


5,981

Net other comprehensive income (loss)
5,981

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

$
(4,163
)

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
9/23/2018
Nine months ended
9/24/2017
Interest rate contracts
$
7,095

$
7,094

Net effect of swaps
Provision for taxes
(845
)
(1,113
)
Provision (benefit) for taxes
Losses on cash flow hedges
$
6,250

$
5,981

Net of tax


16


(12) Consolidating Financial Information of Guarantors and Issuers of June 2014 Notes:
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 23, 2018 , December 31, 2017 , and September 24, 2017 and for the three- and nine -month periods ended September 23, 2018 and September 24, 2017 . In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the accompanying unaudited condensed consolidating financial statements have been included.


17


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Guarantor Subsidiaries
Eliminations
Total
ASSETS
Current Assets:
Cash and cash equivalents
$

$

$
77,878

$
116,511

$
(3,633
)
$
190,756

Receivables

991

47,193

895,263

(885,049
)
58,398

Inventories


2,260

34,289


36,549

Other current assets
293

1,170

3,594

19,546

(2,728
)
21,875

293

2,161

130,925

1,065,609

(891,410
)
307,578

Property and Equipment, net

811

178,522

1,409,366


1,588,699

Investment in Park
648,414

1,205,086

259,710

246,968

(2,360,178
)

Goodwill
674


61,725

119,605


182,004

Other Intangibles, net


13,763

23,368


37,131

Deferred Tax Asset

19,870



(19,870
)

Other Assets
1,197

2,926

39

9,374


13,536

$
650,578

$
1,230,854

$
644,684

$
2,874,290

$
(3,271,458
)
$
2,128,948

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

$
656

$

$
3,094

$

$
3,750

Accounts payable
553,952

334,696

2,868

30,155

(888,682
)
32,989

Deferred revenue


9,397

92,929


102,326

Accrued interest
113

75

7,601

14,104


21,893

Accrued taxes
1,551

38,538


11,011

(2,728
)
48,372

Accrued salaries, wages and benefits

28,162

2,416



30,578

Self-insurance reserves

10,459

1,635

13,829


25,923

Other accrued liabilities
3,292

6,796

585

11,559


22,232

558,908

419,382

24,502

176,681

(891,410
)
288,063

Deferred Tax Liability


12,562

81,945

(19,870
)
74,637

Other Liabilities

968

390

14,934


16,292

Long-Term Debt:
Term debt

126,800


594,046


720,846

Notes


445,846

491,594


937,440


126,800

445,846

1,085,640


1,658,286

Equity
91,670

683,704

161,384

1,515,090

(2,360,178
)
91,670

$
650,578

$
1,230,854

$
644,684

$
2,874,290

$
(3,271,458
)
$
2,128,948


18


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

$

$
85,758

$
81,582

$
(1,095
)
$
166,245

Receivables

1,184

15,574

857,205

(836,241
)
37,722

Inventories


1,891

27,828


29,719

Other current assets
164

28,297

3,454

10,983

(29,601
)
13,297

164

29,481

106,677

977,598

(866,937
)
246,983

Property and Equipment, net

835

181,673

1,403,264


1,585,772

Investment in Park
588,684

1,045,640

238,132

234,238

(2,106,694
)

Goodwill
674


63,551

119,605


183,830

Other Intangibles, net


14,177

23,887


38,064

Deferred Tax Asset

20,956



(20,956
)

Other Assets


40

9,470


9,510

$
589,522

$
1,096,912

$
604,250

$
2,768,062

$
(2,994,587
)
$
2,064,159

LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable
$
497,558

$
344,410

$
1,379

$
18,610

$
(837,336
)
$
24,621

Deferred revenue


6,237

79,894


86,131

Accrued interest
27

18

2,055

6,024


8,124

Accrued taxes
352



73,224

(29,601
)
43,975

Accrued salaries, wages and benefits

17,498

1,242



18,740

Self-insurance reserves

10,947

1,618

12,542



25,107

Other accrued liabilities
3,406

5,094

157

10,139


18,796

501,343

377,967

12,688

200,433

(866,937
)
225,494

Deferred Tax Liability


13,809

81,945

(20,956
)
74,798

Derivative Liability
5,233

3,489




8,722

Other Liabilities

873


10,811


11,684

Long-Term Debt:
Term debt

127,437


596,351


723,788

Notes


445,156

491,571


936,727


127,437

445,156

1,087,922


1,660,515

Equity
82,946

587,146

132,597

1,386,951

(2,106,694
)
82,946

$
589,522

$
1,096,912

$
604,250

$
2,768,062

$
(2,994,587
)
$
2,064,159


19


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


6,876

76,464


83,340

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

42,010

214,101

(834,494
)
298,412

Deferred Tax Liability


19,511

125,350

(32,190
)
112,671

Derivative Liability
8,933

5,916




14,849

Other Liabilities

1,398

261

14,073


15,732

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



20


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
71,751

$
182,833

$
81,265

$
613,094

$
(285,240
)
$
663,703

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


7,020

46,871


53,891

Operating expenses

122,455

20,145

349,145

(285,240
)
206,505

Selling, general and administrative
185

20,666

4,582

41,681


67,114

Depreciation and amortization

8

8,379

65,987


74,374

Loss on impairment / retirement of fixed assets, net



3,247


3,247

185

143,129

40,126

506,931

(285,240
)
405,131

Operating income
71,566

39,704

41,139

106,163


258,572

Interest expense, net
5,879

4,072

5,986

4,997


20,934

Net effect of swaps
265

(1,482
)



(1,217
)
(Gain) loss on foreign currency

15

(13,069
)


(13,054
)
Other (income) expense
63

(28,849
)
1,484

27,134


(168
)
Income from investment in affiliates
(153,756
)
(100,629
)
(16,509
)
(56,985
)
327,879


Income before taxes
219,115

166,577

63,247

131,017

(327,879
)
252,077

Provision for taxes
5,808

12,823

6,261

13,878


38,770

Net income
$
213,307

$
153,754

$
56,986

$
117,139

$
(327,879
)
$
213,307

Other comprehensive income (loss), (net of tax):
Foreign currency translation adjustment
(5,276
)

(5,276
)

5,276

(5,276
)
Unrealized gain on cash flow hedging derivatives
2,116

728



(728
)
2,116

Other comprehensive income (loss), (net of tax)
(3,160
)
728

(5,276
)

4,548

(3,160
)
Total comprehensive income
$
210,147

$
154,482

$
51,710

$
117,139

$
(323,331
)
$
210,147


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 Nine Months Ended September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
84,921

$
275,214

$
111,184

$
1,023,713

$
(396,286
)
$
1,098,746

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


10,204

84,708


94,912

Operating expenses

258,162

40,115

560,759

(396,286
)
462,750

Selling, general and administrative
1,870

50,754

8,818

88,395


149,837

Depreciation and amortization

24

14,319

117,771


132,114

Loss on impairment / retirement of fixed assets, net


67

7,892


7,959

1,870

308,940

73,523

859,525

(396,286
)
847,572

Operating income (loss)
83,051

(33,726
)
37,661

164,188


251,174

Interest expense, net
16,519

13,031

17,637

14,565


61,752

Net effect of swaps
(2,266
)
(3,485
)



(5,751
)
Loss on early debt extinguishment

187


886


1,073

Loss on foreign currency

36

11,988



12,024

Other (income) expense
186

(61,404
)
3,270

57,573


(375
)
Income from investment in affiliates
(89,426
)
(74,345
)
(21,578
)
(22,798
)
208,147


Income before taxes
158,038

92,254

26,344

113,962

(208,147
)
182,451

Provision for taxes
8,888

2,829

3,545

18,039


33,301

Net income
$
149,150

$
89,425

$
22,799

$
95,923

$
(208,147
)
$
149,150

Other comprehensive income (loss), (net of tax):
Foreign currency translation adjustment
5,990


5,990


(5,990
)
5,990

Unrealized gain on cash flow hedging derivatives
6,250

2,085



(2,085
)
6,250

Other comprehensive income (loss), (net of tax)
12,240

2,085

5,990


(8,075
)
12,240

Total comprehensive income
$
161,390

$
91,510

$
28,789

$
95,923

$
(216,222
)
$
161,390


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 CASH FLOWS
For the Nine Months Ended September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Guarantor Subsidiaries
Eliminations
Total
NET CASH FROM OPERATING ACTIVITIES
$
95,426

$
13,190

$
41,319

$
188,005

$
(3,506
)
$
334,434

CASH FLOWS FOR INVESTING ACTIVITIES
Intercompany receivables (payments) receipts


(31,877
)
(21,515
)
53,392


Capital expenditures


(16,355
)
(129,361
)

(145,716
)
Net cash for investing activities


(48,232
)
(150,876
)
53,392

(145,716
)
CASH FLOWS FOR FINANCING ACTIVITIES
Intercompany payables (payments) receipts
56,394

(3,002
)


(53,392
)

Distributions paid to partners
(151,820
)



968

(150,852
)
Payment of debt issuance costs and original issue discount

(321
)

(2,200
)

(2,521
)
Exercise of limited partnership unit options

125




125

Tax effect of units involved in treasury unit transactions

(3,049
)



(3,049
)
Payments related to tax withholding for equity compensation

(6,943
)



(6,943
)
Net cash for financing activities
(95,426
)
(13,190
)

(2,200
)
(52,424
)
(163,240
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


(967
)


(967
)
CASH AND CASH EQUIVALENTS
Net increase (decrease) for the period


(7,880
)
34,929

(2,538
)
24,511

Balance, beginning of period


85,758

81,582

(1,095
)
166,245

Balance, end of period
$

$

$
77,878

$
116,511

$
(3,633
)
$
190,756


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

Capital expenditures

(25
)
(5,679
)
(146,735
)

(152,439
)
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


(13) Consolidating Financial Information of Guarantors and Issuers of April 2017 Notes:
Cedar Fair, L.P., Canada's Wonderland Company ("Cedar Canada"), Magnum Management Corporation ("Magnum"), and Millennium Operations LLC ("Millennium") are the co-issuers of the Partnership's April 2017 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, Magnum and Millennium) 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, Magnum, and Millennium, the co-issuers, and each 100% owned subsidiary of Cedar Fair (other than Cedar Canada, Magnum and Millennium), the guarantors (on a combined basis), as of September 23, 2018 , December 31, 2017 , and September 24, 2017 and for the three- and nine -month periods ended September 23, 2018 and September 24, 2017 . In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the accompanying unaudited condensed consolidating financial statements have been included.


27


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
ASSETS
Current Assets:
Cash and cash equivalents
$

$

$
77,878

$
115,323

$
1,188

$
(3,633
)
$
190,756

Receivables

991

47,193

36,711

858,552

(885,049
)
58,398

Inventories


2,260

28,205

6,084


36,549

Other current assets
293

1,170

3,594

15,871

3,675

(2,728
)
21,875

293

2,161

130,925

196,110

869,499

(891,410
)
307,578

Property and Equipment, net

811

178,522


1,409,366


1,588,699

Investment in Park
648,414

1,205,086

259,710

1,490,666

246,968

(3,850,844
)

Goodwill
674


61,725

8,388

111,217


182,004

Other Intangibles, net


13,763


23,368


37,131

Deferred Tax Asset

19,870




(19,870
)

Other Assets
1,197

2,926

39

312

9,062


13,536

$
650,578

$
1,230,854

$
644,684

$
1,695,476

$
2,669,480

$
(4,762,124
)
$
2,128,948

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

$
656

$

$
3,094

$

$

$
3,750

Accounts payable
553,952

334,696

2,868

23,330

6,825

(888,682
)
32,989

Deferred revenue


9,397

66,342

26,587


102,326

Accrued interest
113

75

7,601

14,104



21,893

Accrued taxes
1,551

38,538


9,569

1,442

(2,728
)
48,372

Accrued salaries, wages and benefits

28,162

2,416




30,578

Self-insurance reserves

10,459

1,635

11,856

1,973


25,923

Other accrued liabilities
3,292

6,796

585

6,937

4,622


22,232

558,908

419,382

24,502

135,232

41,449

(891,410
)
288,063

Deferred Tax Liability


12,562


81,945

(19,870
)
74,637

Other Liabilities

968

390

3,304

11,630


16,292

Long-Term Debt:
Term debt

126,800


594,046



720,846

Notes


445,846

491,594



937,440


126,800

445,846

1,085,640



1,658,286

Equity
91,670

683,704

161,384

471,300

2,534,456

(3,850,844
)
91,670

$
650,578

$
1,230,854

$
644,684

$
1,695,476

$
2,669,480

$
(4,762,124
)
$
2,128,948



28


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2017
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
ASSETS
Current Assets:
Cash and cash equivalents
$

$

$
85,758

$
80,430

$
1,152

$
(1,095
)
$
166,245

Receivables

1,184

15,574

26,130

831,075

(836,241
)
37,722

Inventories


1,891

22,528

5,300


29,719

Other current assets
164

28,297

3,454

9,341

1,642

(29,601
)
13,297

164

29,481

106,677

138,429

839,169

(866,937
)
246,983

Property and Equipment, net

835

181,673


1,403,264


1,585,772

Investment in Park
588,684

1,045,640

238,132

1,392,761

234,237

(3,499,454
)

Goodwill
674


63,551

8,387

111,218


183,830

Other Intangibles, net


14,177


23,887


38,064

Deferred Tax Asset

20,956




(20,956
)

Other Assets


40

402

9,068


9,510

$
589,522

$
1,096,912

$
604,250

$
1,539,979

$
2,620,843

$
(4,387,347
)
$
2,064,159

LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable
$
497,558

$
344,410

$
1,379

$
13,572

$
5,038

$
(837,336
)
$
24,621

Deferred revenue


6,237

59,307

20,587


86,131

Accrued interest
27

18

2,055

6,024



8,124

Accrued taxes
352



6,176

67,048

(29,601
)
43,975

Accrued salaries, wages and benefits

17,498

1,242




18,740

Self-insurance reserves

10,947

1,618

10,156

2,386


25,107

Other accrued liabilities
3,406

5,094

157

5,649

4,490


18,796

501,343

377,967

12,688

100,884

99,549

(866,937
)
225,494

Deferred Tax Liability


13,809


81,945

(20,956
)
74,798

Derivative Liability
5,233

3,489





8,722

Other Liabilities

873


120

10,691


11,684

Long-Term Debt:
Term debt

127,437


596,351



723,788

Notes


445,156

491,571



936,727


127,437

445,156

1,087,922



1,660,515

Equity
82,946

587,146

132,597

351,053

2,428,658

(3,499,454
)
82,946

$
589,522

$
1,096,912

$
604,250

$
1,539,979

$
2,620,843

$
(4,387,347
)
$
2,064,159



29


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)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
ASSETS
Current Assets:
Cash and cash equivalents
$

$

$
92,047

$
158,904

$
1,689

$
(2,694
)
$
249,946

Receivables

1,285

33,158

32,049

805,545

(819,734
)
52,303

Inventories


2,423

26,158

5,659


34,240

Other current assets
275

12,843

743

12,874

3,955

(12,066
)
18,624

275

14,128

128,371

229,985

816,848

(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

1,370,295

222,953

(3,401,117
)

Goodwill
674


64,730

8,388

111,218


185,010

Other Intangibles, net


14,443


24,089


38,532

Deferred Tax Asset

32,190




(32,190
)

Other Assets


53

447

16,907


17,407

$
567,497

$
1,064,017

$
615,266

$
1,609,115

$
2,588,478

$
(4,267,801
)
$
2,176,572

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

$
345,150

$
6,431

$
21,094

$
5,047

$
(822,428
)
$
33,710

Deferred revenue


6,876

53,120

23,344


83,340

Accrued interest
292

195

9,209

14,232



23,928

Accrued taxes
1,589


14,910

9,024

65,200

(12,066
)
78,657

Accrued salaries, wages and benefits

28,306

2,360




30,666

Self-insurance reserves

12,090

1,725

11,525

2,209


27,549

Other accrued liabilities
2,985

7,772

499

4,722

4,584


20,562

483,282

393,513

42,010

113,717

100,384

(834,494
)
298,412

Deferred Tax Liability


19,511


125,350

(32,190
)
112,671

Derivative Liability
8,933

5,916





14,849

Other Liabilities

1,398

261

2,081

11,992


15,732

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

405,967

2,350,752

(3,401,117
)
75,282

$
567,497

$
1,064,017

$
615,266

$
1,609,115

$
2,588,478

$
(4,267,801
)
$
2,176,572



30


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
71,751

$
182,833

$
81,265

$
474,711

$
189,672

$
(336,529
)
$
663,703

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


7,020

38,134

8,737


53,891

Operating expenses

122,455

20,145

388,158

12,276

(336,529
)
206,505

Selling, general and administrative
185

20,666

4,582

34,578

7,103


67,114

Depreciation and amortization

8

8,379


65,987


74,374

Loss on impairment / retirement of fixed assets, net



422

2,825


3,247

185

143,129

40,126

461,292

96,928

(336,529
)
405,131

Operating income
71,566

39,704

41,139

13,419

92,744


258,572

Interest (income) expense, net
5,879

4,072

5,986

12,940

(7,943
)

20,934

Net effect of swaps
265

(1,482
)




(1,217
)
(Gain) loss on foreign currency

15

(13,069
)



(13,054
)
Other (income) expense
63

(28,849
)
1,484


27,134


(168
)
Income from investment in affiliates
(153,756
)
(100,629
)
(16,509
)

(56,985
)
327,879


Income before taxes
219,115

166,577

63,247

479

130,538

(327,879
)
252,077

Provision for taxes
5,808

12,823

6,261

479

13,399


38,770

Net income
$
213,307

$
153,754

$
56,986

$

$
117,139

$
(327,879
)
$
213,307

Other comprehensive income (loss), (net of tax):
Cumulative foreign currency translation adjustment
(5,276
)

(5,276
)


5,276

(5,276
)
Unrealized gain on cash flow hedging derivatives
2,116

728




(728
)
2,116

Other comprehensive income (loss), (net of tax)
(3,160
)
728

(5,276
)


4,548

(3,160
)
Total comprehensive income
$
210,147

$
154,482

$
51,710

$

$
117,139

$
(323,331
)
$
210,147


31


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)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
69,999

$
169,429

$
85,963

$
457,530

$
189,586

$
(319,818
)
$
652,689

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


7,735

36,301

8,611


52,647

Operating expenses

118,614

19,627

371,768

12,519

(319,818
)
202,710

Selling, general and administrative
327

21,752

4,539

36,021

9,024


71,663

Depreciation and amortization

9

7,856


62,195


70,060

Loss on impairment / retirement of fixed assets, net


87

738

522


1,347

Gain on sale of investment

(1,877
)




(1,877
)
327

138,498

39,844

444,828

92,871

(319,818
)
396,550

Operating income
69,672

30,931

46,119

12,702

96,715


256,139

Interest (income) expense, net
4,857

4,305

6,152

12,167

(6,194
)

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

535

135,901

(306,442
)
265,062

Provision for taxes
6,715

19,526

26,432

535

20,539


73,747

Net income
$
191,315

$
132,699

$
58,381

$

$
115,362

$
(306,442
)
$
191,315

Other comprehensive income (loss), (net of tax):
Cumulative 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


32


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Nine Months Ended September 23, 2018
(In thousands)
Cedar Fair L.P.
(Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
84,921

$
275,214

$
111,184

$
807,575

$
310,159

$
(490,307
)
$
1,098,746

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


10,204

69,628

15,080


94,912

Operating expenses

258,162

40,115

622,643

32,137

(490,307
)
462,750

Selling, general and administrative
1,870

50,754

8,818

73,572

14,823


149,837

Depreciation and amortization

24

14,319


117,771


132,114

Loss on impairment / retirement of fixed assets, net


67

1,868

6,024


7,959

1,870

308,940

73,523

767,711

185,835

(490,307
)
847,572

Operating income (loss)
83,051

(33,726
)
37,661

39,864

124,324


251,174

Interest (income) expense, net
16,519

13,031

17,637

37,539

(22,974
)

61,752

Net effect of swaps
(2,266
)
(3,485
)




(5,751
)
Loss on early debt extinguishment

187


886



1,073

Loss on foreign currency

36

11,988




12,024

Other (income) expense
186

(61,404
)
3,270


57,573


(375
)
Income from investment in affiliates
(89,426
)
(74,345
)
(21,578
)

(22,798
)
208,147


Income before taxes
158,038

92,254

26,344

1,439

112,523

(208,147
)
182,451

Provision for taxes
8,888

2,829

3,545

1,439

16,600


33,301

Net income
$
149,150

$
89,425

$
22,799

$

$
95,923

$
(208,147
)
$
149,150

Other comprehensive income (loss), (net of tax):
Cumulative foreign currency translation adjustment
5,990


5,990



(5,990
)
5,990

Unrealized gain on cash flow hedging derivatives
6,250

2,085




(2,085
)
6,250

Other comprehensive income (loss), (net of tax)
12,240

2,085

5,990



(8,075
)
12,240

Total comprehensive income
$
161,390

$
91,510

$
28,789

$

$
95,923

$
(216,222
)
$
161,390


33


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)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
Net revenues
$
92,672

$
262,739

$
114,141

$
788,737

$
322,763

$
(487,247
)
$
1,093,805

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


10,569

66,537

15,270


92,376

Operating expenses

248,047

37,701

616,134

32,744

(487,247
)
447,379

Selling, general and administrative
2,254

51,358

8,592

73,098

15,840


151,142

Depreciation and amortization

26

12,869


113,342


126,237

Loss on impairment / retirement of fixed assets, net


542

1,511

1,004


3,057

Gain on sale of investment

(1,877
)




(1,877
)
2,254

297,554

70,273

757,280

178,200

(487,247
)
818,314

Operating income (loss)
90,418

(34,815
)
43,868

31,457

144,563


275,491

Interest (income) expense, net
18,285

13,893

18,317

26,747

(15,169
)

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

1,754

164,649

(301,286
)
221,698

Provision (benefit) for taxes
8,917

(1,223
)
23,473

1,754

30,848


63,769

Net income
$
157,929

$
108,836

$
58,649

$

$
133,801

$
(301,286
)
$
157,929

Other comprehensive income (loss), (net of tax):
Cumulative 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




34


CEDAR FAIR, L.P.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 23, 2018
(In thousands)
Cedar Fair L.P. (Parent)
Co-Issuer Subsidiary (Magnum)
Co-Issuer Subsidiary (Cedar Canada)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
NET CASH FROM OPERATING ACTIVITIES
$
95,426

$
13,190

$
41,319

$
136,066

$
51,939

$
(3,506
)
$
334,434

CASH FLOWS FOR INVESTING ACTIVITIES
Intercompany receivables (payments) receipts


(31,877
)

(21,515
)
53,392


Capital expenditures


(16,355
)
(98,973
)
(30,388
)

(145,716
)
Net cash for investing activities


(48,232
)
(98,973
)
(51,903
)
53,392

(145,716
)
CASH FLOWS FOR FINANCING ACTIVITIES
Intercompany payables (payments) receipts
56,394

(3,002
)



(53,392
)

Distributions paid to partners
(151,820
)




968

(150,852
)
Payment of debt issuance costs and original issue discount

(321
)

(2,200
)


(2,521
)
Exercise of limited partnership unit options

125





125

Tax effect of units involved in treasury unit transactions

(3,049
)




(3,049
)
Payments related to tax withholding for equity compensation

(6,943
)




(6,943
)
Net cash for financing activities
(95,426
)
(13,190
)

(2,200
)

(52,424
)
(163,240
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


(967
)



(967
)
CASH AND CASH EQUIVALENTS
Net increase (decrease) for the period


(7,880
)
34,893

36

(2,538
)
24,511

Balance, beginning of period


85,758

80,430

1,152

(1,095
)
166,245

Balance, end of period
$

$

$
77,878

$
115,323

$
1,188

$
(3,633
)
$
190,756


35


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)
Co-Issuer Subsidiary (Millennium)
Guarantor Subsidiaries
Eliminations
Total
NET CASH FROM (FOR) OPERATING ACTIVITIES
$
61,966

$
(3,954
)
$
40,125

$
103,553

$
124,035

$
(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

Capital expenditures

(25
)
(5,679
)
(125,726
)
(21,009
)

(152,439
)
Net cash from (for) investing activities
338,000

18,756

(5,679
)
(125,726
)
(122,699
)
(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

101,079

1,336

(1,669
)
127,230

Balance, beginning of period


65,563

57,825

353

(1,025
)
122,716

Balance, end of period
$

$

$
92,047

$
158,904

$
1,689

$
(2,694
)
$
249,946



36


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

Business Overview:
We generate our revenues from sales of (1) admission to our amusement parks and water parks, (2) food, merchandise and games both inside and outside our parks, and (3) accommodations, extra-charge products, and other revenue sources. Our principal costs and expenses, which include salaries and wages, operating supplies, maintenance, advertising, 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 of 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
Revenue Recognition
Income Taxes
We adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") effective January 1, 2018 using the modified retrospective method. The adoption of the standard did not have a material effect on the consolidated financial statements. Our accounting policy as a result of adopting ASU 2014-09 is discussed below. There were no other 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, 2017 during the third quarter of 2018 .
Revenue Recognition and related receivables and contract liabilities
As disclosed within the consolidated statements of operations and comprehensive income, revenues are generated from sales of (1) admission to our amusement parks and water parks, (2) food, merchandise and games both inside and outside the parks, and (3) accommodations, extra-charge products, and other revenue sources. Admission revenues include amounts paid to gain admission into our parks, including parking fees. Revenues related to extra-charge products, including premium benefit offerings such as front-of-line products, and online advanced purchase transaction fees charged to customers are included in "Accommodations, extra-charge products and other". Due to our highly seasonal operations, a substantial portion of our revenues are generated during an approximate 130- to 140-day operating season. Most revenues are recognized on a daily basis based on actual guest spend at the properties. Revenues from multi-use products, including season-long products for admission, dining, beverage and other products, are recognized over the estimated number of uses expected for each type of product. The estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally occurs no later than the close of the operating season. The number of uses is estimated based on historical usage adjusted for current period trends. For any bundled products that include multiple performance obligations, revenue is allocated using the retail price of each distinct performance obligation and any inherent discounts are allocated based on the gross margin and expected redemption of each performance obligation. We do not typically provide for refunds or returns.

In some instances, we arrange with outside parties ("concessionaires") to provide goods to our guests, typically food and merchandise, and we act as an agent, resulting in net revenue recorded within the income statement. Concessionaire arrangement revenues are recognized over the operating season and are variable. Sponsorship revenues and marina revenues, which are classified as "Accommodations, extra-charge products and other" within the income statement, are recognized over the park operating season which represents the period in which the performance obligations are satisfied. Sponsorship revenues are typically fixed. However,

37


some sponsorship revenues are variable based on achievement of specified operating metrics. We estimate variable revenues and perform a constraint analysis using both historical information and current trends to determine the amount of revenue that is not probable of a significant reversal. For additional information on our revenue recognition and related receivables and contract liabilities, see Note 1.
Income Taxes
The Tax Cuts and Jobs Act (the "Act") was signed into law on December 22, 2017. The Act makes significant changes to U.S. tax law and, among other things, reduces federal corporate tax rates from 35% to 21%. The accounting treatment of these tax law changes is complex, and the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain tax effects of the Act. We recognized the provisional tax impacts related to the reduction in tax rates including the revaluation of deferred tax assets and liabilities in our consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions we have made, additional regulatory or accounting guidance that may be issued, and actions the Partnership may take as a result of the Act. We expect to complete our analysis of the effects of the Act within the measurement period in accordance with SAB 118.

Adjusted EBITDA:
We believe that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the Amended 2017 Credit Agreement and prior credit agreements) 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 23, 2018 and September 24, 2017 .
Three months ended
Nine months ended
(In thousands)
9/23/2018
9/24/2017
9/23/2018
9/24/2017
Net income
$
213,307

$
191,315

$
149,150

$
157,929

Interest expense
21,464

21,638

62,563

62,472

Interest income
(530
)
(351
)
(811
)
(399
)
Provision for taxes
38,770

73,747

33,301

63,769

Depreciation and amortization
74,374

70,060

132,114

126,237

EBITDA
347,385

356,409

376,317

410,008

Loss on early debt extinguishment


1,073

23,115

Net effect of swaps
(1,217
)
(952
)
(5,751
)
3,717

Non-cash foreign currency (gain) loss
(13,064
)
(29,156
)
12,026

(34,985
)
Non-cash equity compensation expense
1,906

3,126

8,054

9,728

Loss on impairment / retirement of fixed assets, net
3,247

1,347

7,959

3,057

Gain on sale of investment

(1,877
)

(1,877
)
Employment practice litigation costs

4,696


4,696

Other (1)
(120
)
49

(27
)
397

Adjusted EBITDA
$
338,137

$
333,642

$
399,651

$
417,856


(1)
Consists of certain costs as defined in the Partnership's Amended 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.

38


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, online advanced purchase transaction fees charged to customers 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 23, 2018

The fiscal nine -month period ended September 23, 2018 included a total of 1,710 operating days compared with 1,722 operating days for the fiscal nine -month period ended September 24, 2017 . The following table presents key financial information for the nine months ended September 23, 2018 and September 24, 2017 :
Nine months ended
Nine months ended
Increase (Decrease)
9/23/2018
9/24/2017
$
%
(Amounts in thousands, except for per capita spending)
Net revenues
$
1,098,746

$
1,093,805

$
4,941

0.5
%
Operating costs and expenses
707,499

690,897

16,602

2.4
%
Depreciation and amortization
132,114

126,237

5,877

4.7
%
Loss on impairment / retirement of fixed assets, net
7,959

3,057

4,902

N/M

Gain on sale of investment

(1,877
)
1,877

N/M

Operating income
$
251,174

$
275,491

$
(24,317
)
(8.8
)%
N/M - Not meaningful
Other Data:
Adjusted EBITDA (1)
$
399,651

$
417,856

$
(18,205
)
(4.4
)%
Adjusted EBITDA margin (2)
36.4
%
38.2
%

(1.8
)%
Attendance
21,026

21,293

(267
)
(1.3
)%
In-park per capita spending
$
47.80

$
47.24

$
0.56

1.2
%
Out-of-park revenues
$
126,306

$
120,165

$
6,141

5.1
%

(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 38.
(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 23, 2018 , net revenues increased by $4.9 million , to $1,098.7 million , from $1,093.8 million for the first nine months of 2017. This reflects a $6.1 million increase in out-of-park revenues and a $0.56 increase in in-park per capita spending offset by the impact of a 267,000 -visit decrease in attendance. The increase in out-of-park revenues was attributable to increases in resort property revenues driven by higher occupancy rates and an increase in average daily room rates, particularly at Cedar Point. The increase in in-park per capita spending was attributable to higher revenues from our food and beverage programs, extra charge attractions and merchandise. The increase was somewhat offset by a decrease in admission spending due to a higher season pass attendance mix and the expansion of our free season pass program for guests aged 3 to 5 ("Pre-K pass") to three more parks in 2018 for a total of six properties. The decrease in attendance was driven by the impact of inclement weather at our seasonal amusement parks, a decline in season pass sales at Kings Island, and a delayed ride opening at California's Great America. The decrease in attendance largely occurred during the first seven months of 2018 and was partially offset by attendance growth in the months of August and September. The increase in net revenues was net of a $1.8 million unfavorable impact of foreign currency exchange related to our Canadian park.


39


Operating costs and expenses for the nine months ended September 23, 2018 increased 2.4% , or $16.6 million , to $707.5 million from $690.9 million for the first nine months of 2017. The increase was the result of a $15.4 million increase in operating expenses and a $2.5 million increase in cost of goods sold offset by a $1.3 million decrease in SG&A expense. Operating expenses grew by $15.4 million primarily due to increased seasonal wages which were driven by planned hourly rate increases. The increase in operating expenses was also attributable to increased full-time and maintenance labor driven by both planned head count and rate increases, increased employee health benefit claims, and increased operating supplies for personnel related costs including associate housing. We expect to continue to see higher labor costs during the fourth quarter due to both mandated and market wage rate adjustments. The $2.5 million increase in cost of goods sold was primarily related to the growth in our food and beverage programs. Cost of goods sold as a percentage of food, merchandise, and games net revenue was comparable for both periods. The $1.3 million decrease in SG&A expense was primarily attributable to a prior year reserve established for an employment practice claim offset by increased technology related costs and higher merchant fees. The increase in operating costs and expenses was net of an $0.8 million favorable impact of foreign currency exchange related to our Canadian park.

Depreciation and amortization expense for the first nine months of 2018 increased $5.9 million compared with the same period in the prior year due to the change in the estimated useful life of a long-lived asset at Kings Island, as well as growth in capital improvements over the past several years. For the first nine months of 2018, the loss on impairment / retirement of fixed assets was $8.0 million compared with $3.1 million in the prior period. The increase was attributable to the retirement of a specific asset in the second quarter of 2018 and the impairment of two specific assets in the third quarter of 2018. 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 2018 decreased $24.3 million to $251.2 million compared with operating income of $275.5 million for the first nine months of 2017.

Interest expense for the first nine months of 2018 was comparable to the same period in the prior year. We recognized a $1.1 million loss on early debt extinguishment during the first quarter of 2018 in connection with amending our 2017 Credit Agreement, as compared to a $23.1 million loss on early debt extinguishment related to our refinancing in the first half of 2017, as described in Note 5. The net effect of our swaps resulted in a benefit to earnings of $5.8 million for the first nine months of 2018 compared with a $3.7 million charge to earnings for the comparable period in 2017. The difference reflects the change in fair market value movements in our swap portfolio offset by the amortization of amounts in OCI for our de-designated swaps. During the current period, we also recognized a $12.0 million net charge to earnings for foreign currency gains and losses compared with a $35.0 million net benefit to earnings for the comparable period in 2017. Both amounts primarily represent remeasurement of the U.S.-dollar denominated debt recorded at our Canadian entity from the applicable currency to the legal entity's functional currency.

During the first nine months of 2018, a provision for taxes of $33.3 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 first nine months of 2017 of $63.8 million . This decrease in provision for taxes relates to a decrease in pretax income from our corporate subsidiaries and the decrease in the federal statutory income tax rate resulting from the implementation of the 2017 Tax Cuts and Jobs Act.

After the items above, net income for the first nine months of 2018 totaled $149.2 million , or $2.63 per diluted limited partner unit, compared with net income of $157.9 million , or $2.79 per diluted limited partner unit, for the same period a year ago.

For the first nine months of 2018, Adjusted EBITDA decreased $18.2 million to $399.7 million from $417.9 million for the same period in 2017. The decrease in Adjusted EBITDA was attributable to lower attendance and to increased operating costs and expenses associated with labor, especially seasonal wages due to planned rate increases, operating supplies and other planned spending slightly offset by an increase in net revenues attributable to increased out-of-park revenues. Our Adjusted EBTIDA margin for the first nine months of 2018 decreased 180 basis points when compared to the same period in 2017 as a result of expense growth outpacing revenue growth.


40


Three months ended September 23, 2018

The fiscal three-month period ended September 23, 2018 included a total of 956 operating days compared with 960 operating days for the fiscal three-month period ended September 24, 2017 . The following table presents key financial information for the three months ended September 23, 2018 and September 24, 2017 :
Three months ended
Three months ended
Increase (Decrease)
9/23/2018
9/24/2017
$
%
(Amounts in thousands, except for per capita spending)
Net revenues
$
663,703

$
652,689

$
11,014

1.7
%
Operating costs and expenses
327,510

327,020

490

0.1
%
Depreciation and amortization
74,374

70,060

4,314

6.2
%
Loss on impairment / retirement of fixed assets, net
3,247

1,347

1,900

N/M

Gain on sale of investment

(1,877
)
1,877

N/M

Operating income
$
258,572

$
256,139

$
2,433

0.9
%
N/M - Not meaningful
Other Data:
Adjusted EBITDA (1)
$
338,137

$
333,642

$
4,495

1.3
%
Attendance
12,371

12,428

(57
)
(0.5
)%
In-park per capita spending
$
49.47

$
48.73

$
0.74

1.5
%
Out-of-park revenues
$
70,129

$
65,103

$
5,026

7.7
%

(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 38.
For the quarter ended September 23, 2018 , net revenues increased by $11.0 million , to $663.7 million , from $652.7 million in the third quarter of 2017. This reflects a $0.74 increase in in-park per capita spending and a $5.0 million increase in out-of-park revenues partially offset by the impact of a 57,000 -visit decrease in attendance. The increase in in-park per capita spending was attributable to higher revenues from our food and beverage programs, extra charge attractions and merchandise. This increase was somewhat offset by a decrease in admission spending due to the expansion of our Pre-K pass program to three more parks in 2018 for a total of six properties. The increase in out-of-park revenues was attributable to increases in resort property revenues driven by higher occupancy rates and an increase in average daily room rates, particularly at Cedar Point. The decrease in attendance was driven by less guest visitation in the month of July followed by attendance growth in the months of August and September compared to the same months in 2017. Inclement weather throughout July and the impact of Hurricane Florence in September contributed to the decline. The increase in net revenues was net of a $2.6 million unfavorable impact of foreign currency exchange related to our Canadian park.

Operating costs and expenses for the quarter were comparable to the prior quarter due to a $3.8 million increase in operating expenses and a $1.2 million increase in cost of goods sold offset by a $4.5 million decrease in SG&A expense. Operating expenses grew by $3.8 million primarily due to increased seasonal wages driven by planned hourly rate increases. The increase in operating expenses was also attributable to increased employee health benefit claims, and increased full-time and maintenance labor driven by both planned head count and rate increases. The $1.2 million increase in cost of goods sold was primarily related to the growth in our food and beverage programs. Cost of goods sold as a percentage of food, merchandise, and games net revenue was comparable to the prior quarter. The $4.5 million decrease in SG&A expense was primarily attributable to a prior year reserve established for an employment practice claim. The increase in operating costs and expenses was net of a $1.5 million favorable impact of foreign currency exchange related to our Canadian park.

Depreciation and amortization expense for the quarter increased $4.3 million compared with the same period in the prior year largely due to the change in the estimated useful life of a long-lived asset at Kings Island. For the third quarter of 2018, the loss on impairment / retirement of fixed assets was $3.2 million compared with $1.3 million in the prior period. The increase was attributable to the impairment of two specific assets in the third quarter of 2018. 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 third quarter of 2018 increased $2.4 million to $258.6 million compared with $256.1 million for the third quarter of 2017.


41


Interest expense for the third quarter of 2018 was comparable to the same period in the prior year. The net effect of our swaps resulted in a benefit to earnings of $1.2 million for the third quarter of 2018 compared with a $1.0 million benefit to earnings in the third quarter of 2017. Both amounts reflect the change in fair market value movements in our swap portfolio offset by the amortization of amounts in OCI for our de-designated swaps. During the current quarter, we also recognized a $13.1 million net benefit to earnings for foreign currency gains and losses compared with a $29.2 million net benefit to earnings for the third quarter in 2017. Both amounts primarily represent remeasurement of the U.S.-dollar denominated debt recorded at our Canadian entity from the applicable currency to the legal entity's functional currency.

During the third quarter of 2018, a provision for taxes of $38.8 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 2017 of $73.7 million . This decrease in provision for taxes relates to the decrease in the federal statutory income tax rate resulting from the implementation of the 2017 Tax Cuts and Jobs Act and a decrease in pretax income from our corporate subsidiaries.

After the items above, net income for the current quarter totaled $213.3 million , or $3.76 per diluted limited partner unit, compared with net income of $191.3 million , or $3.38 per diluted limited partner unit, for the third quarter a year ago.

For the current quarter, our Adjusted EBITDA increased $4.5 million to $338.1 million from $333.6 million for the same period in 2017. The increase in Adjusted EBITDA was attributable to an increase in net revenues due to increased in-park per capita spending and out-of-park revenues combined with comparable operating costs and expenses.

October 2018

Based on preliminary results, net revenues for the ten months ended October 28, 2018 were up approximately $9 million, or 1%, to $1.25 billion when compared with the ten months ended October 29, 2017. The increase was the result of a 1% increase in in-park per capita spending and a 5% increase in out-of-park revenues, offset slightly by a 1% decline in attendance compared with the prior period.

Liquidity and Capital Resources:
With respect to both liquidity and cash flow, we ended the third quarter of 2018 in sound condition. The working capital ratio (current assets divided by current liabilities) of 1.1 as of September 23, 2018 is the result of normal seasonal activity. Receivables, inventories and payables are at normal seasonal levels. There was a $59.2 million decrease in cash and cash equivalents as of September 23, 2018 compared with the balance as of September 24, 2017 . The net cash proceeds from our debt refinancing in the first nine months of 2017 significantly impacted the change in cash position.
Operating Activities
During the nine -month period ended September 23, 2018 , net cash from operating activities was $334.4 million , an increase of $11.8 million compared with the same period a year ago.
Investing Activities
Net cash for investing activities for the first nine months of 2018 was $145.7 million , a decrease of $3.4 million compared with the same period in the prior year. This decrease reflects less planned capital expenditures in the current period offset by prior period proceeds from the sale of a preferred equity investment in a non-public entity.
Financing Activities
Net cash for financing activities for the first nine months of 2018 was $163.2 million , an increase of $111.1 million compared with the same period in the prior year. This increase is primarily due to incremental term debt borrowings in the prior year from the April 2017 refinancing.

As of September 23, 2018 , our outstanding debt, before reduction for debt issuance costs and original issue discount, 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.

42



$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 Amended 2017 Credit Agreement. The term debt bears interest at the London InterBank Offering Rate ("LIBOR") plus 175 basis points (bps), under amendments we entered into on March 14, 2018 . The pricing terms for the amendment reflected $0.9 million of Original Issue Discount ("OID"). The term loan amortizes $7.5 million annually. We have $3.8 million of current maturities as of September 23, 2018 .

No borrowings under the $275 million senior secured revolving credit facility under our Amended 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 Amended 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 $15.4 million as of September 23, 2018 , we had $259.6 million of available borrowings under the revolving credit facility and cash on hand of $190.8 million .

As of September 23, 2018 , we have eight interest rate swap agreements that convert $500 million of variable-rate debt to a fixed rate. Four of these agreements fix our variable-rate debt at 4.39% and mature on December 31, 2020 . The other four fix our variable-rate debt at 4.63% for the period December 31, 2020 through December 31, 2023 . None of the interest rate swap agreements are designated as cash flow hedges. As of September 23, 2018 , the fair market value of our derivatives was $4.1 million and was recorded in "Other Assets".

The Amended 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 23, 2018 , we were in compliance with this financial condition covenant and all other financial covenants under the Amended 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 we can make additional Restricted Payments if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00 x.

In accordance with the Amended 2017 Credit Agreement debt provisions, on August 1, 2018, we announced the declaration of a distribution of $0.89 per limited partner unit, which was paid on September 17, 2018. Also, on October 30, 2018, we announced the declaration of a distribution of $0.925 per limited partner unit, which will be payable on December 17, 2018.

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 $15.4 million in letters of credit, which are primarily in place to backstop insurance arrangements, outstanding on our revolving credit facility as of September 23, 2018 . We have no other significant off-balance sheet financing arrangements.


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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. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this document.

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.

None of our interest rate swap agreements are designated as hedging instruments. Changes in fair value of derivative instruments that do not qualify for hedge accounting or were de-designated are reported as "Net effect of swaps" in the unaudited condensed consolidated statements of operations and comprehensive income. Additionally, the "Other comprehensive income (loss)" related to interest rate swaps that have been de-designated is amortized through the original maturity of the interest rate swap and reported as a component of "Net effect of swaps" in the unaudited condensed consolidated statements of operations and comprehensive income.

As of September 23, 2018 , on an adjusted basis after giving affect to the impact of interest rate swap agreements, $1,450 million of our outstanding long-term debt represented fixed-rate debt and $235 million represented variable-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $13.2 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 $7.5 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 $3.4 million decrease in annual operating income.


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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 23, 2018 , 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 23, 2018 .


(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 23, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 expected to occur in the fourth quarter of 2018. Based upon the information available, the Partnership believes the liability recorded as of September 23, 2018 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, 2017 .

ITEM 6. EXHIBITS
Exhibit (101)
The following materials from the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 23, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Unaudited Condensed Consolidated Statements of Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statements of Cash Flow, (iv) the Unaudited Condensed Consolidated Statement of Equity, and (v) related notes.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CEDAR FAIR, L.P.
(Registrant)
By Cedar Fair Management, Inc.
General Partner
Date:
October 30, 2018
/s/ Richard A. Zimmerman
Richard A. Zimmerman
President and Chief Executive Officer
Date:
October 30, 2018
/s/ Brian C. Witherow
Brian C. Witherow
Executive Vice President and
Chief Financial Officer


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