10-K 1 cedarfair-10kx2016.htm ANNUAL REPORT ON FORM 10-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2016
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission file number 1-9444
CEDAR FAIR, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE
 
34-1560655
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
One Cedar Point Drive
 
 
Sandusky, Ohio
 
44870-5259
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (419) 626-0830
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Depositary Units (Representing Limited Partner Interests)
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
x
  
Accelerated filer
 
o
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No x



    
The aggregate market value of Depositary Units held by non-affiliates of the Registrant based on the closing price of such units on June 24, 2016 of $58.15 per unit was approximately $3,196,504,279.

Number of Depositary Units representing limited partner interests outstanding as of February 2, 2017: 56,199,709

DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference certain information from the Registrant's definitive proxy statement to be used in connection with its annual meeting of unitholders to be held in June.
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The Exhibit Index is located on page 67
Page 1 of 74 pages



CEDAR FAIR, L.P.
2016 FORM 10-K CONTENTS
 
 
 
 
 
  
PAGE
 
 
 
 
  

 
 
 
 
  

 
 
 
 
  

 
 
 
 
  

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
  
 
 
 
 
 
  

 
 
 
 
  

 
 
 
 
  

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
  

 
 
  

 
 
 
 
 
Consent
 
 
 
71

 
 
 
 
 
Certifications
 
 
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PART I

ITEM 1. BUSINESS.

Introduction

Cedar Fair, L.P. (together with its affiliated companies, the "Partnership") is a publicly traded Delaware limited partnership formed in 1987 and managed by Cedar Fair Management, Inc., an Ohio corporation (the "General Partner"), whose shares are held by an Ohio trust. The Partnership is one of the largest regional amusement park operators in the world and owns eleven amusement parks, two separately gated outdoor water parks, one indoor water park and five hotels.

In 2016, the Partnership entertained more than 25 million visitors. All of the Partnership's parks are family-oriented, with recreational facilities for people of all ages, and provide clean and attractive environments with exciting rides and entertainment. The amusement parks include: Cedar Point, located on Lake Erie between Cleveland and Toledo in Sandusky, Ohio; Knott's Berry Farm, near Los Angeles, California; Canada's Wonderland, near Toronto, Canada; Kings Island, near Cincinnati, Ohio; Carowinds, in Charlotte, North Carolina; Dorney Park & Wildwater Kingdom (“Dorney Park”), in Allentown, Pennsylvania; Kings Dominion, near Richmond, Virginia; California's Great America, in Santa Clara, California; Valleyfair, near Minneapolis/St. Paul, Minnesota; Worlds of Fun, in Kansas City, Missouri; and Michigan's Adventure, in Muskegon, Michigan. The Partnership manages and operates Gilroy Gardens Family Theme Park in Gilroy, California.

The Partnership also owns and operates the Castaway Bay Indoor Waterpark Resort in Sandusky, Ohio, and two separately gated outdoor water parks located adjacent to Cedar Point and Knott's Berry Farm. With limited exceptions, all rides and attractions at the amusement and water parks are owned and operated by the Partnership. The Partnership owns land on which Cedar Point Sports Center is located. The sports park will open in 2017 and will be operated by a third party.

The Partnership's seasonal amusement parks are generally open during weekends beginning in April or May, and then daily from Memorial Day until Labor Day, after which they are open during weekends in September and, in most cases, October. The two separately gated outdoor water parks also operate seasonally, generally from Memorial Day to Labor Day, plus some additional weekends before and after this period. As a result, virtually all of the operating revenues of these parks are generated during an approximately 130- to 140-day operating season. Beginning in 2016, California's Great America extended its operating season to include WinterFest, a new holiday event operating during November and December extending the operating season by approximately 20 to 25 days. In 2017, Carowinds, Worlds of Fun, and Kings Island will also extend their operating seasons to include WinterFest. 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, plus a limited daily schedule for the balance of the year. Each park charges a basic daily admission price, which allows unlimited use of most rides and attractions.

The demographic groups that are most important to the parks are young people ages 12 through 24 and families. Families are believed to be attracted by a combination of rides, live entertainment and the clean, wholesome atmosphere. Young people are believed to be attracted by the action-packed rides. During their operating season, the parks conduct active television, radio, newspaper and internet advertising campaigns in their major market areas geared toward these two groups.

Description of Parks

Cedar Point
Cedar Fair's flagship park, Cedar Point, was first developed as a recreational area in 1870. Located on a peninsula in Sandusky, Ohio bordered by Lake Erie and Sandusky Bay, the park is approximately 60 miles west of Cleveland and 100 miles southeast of Detroit. Cedar Point is believed to be the largest seasonal amusement park in the United States, measured by the number of rides and attractions and the hourly ride capacity. Attractive to both families and thrill-seekers, the park features 17 world-class roller coasters, including many record-breakers, and three children's areas. Cedar Point serves a six-state region which includes nearly all of Ohio and Michigan, western Pennsylvania and New York, northern West Virginia and Indiana, as well as southwestern Ontario, Canada. The park's market area includes Cleveland, Toledo, Akron and Columbus, Ohio; and Detroit, Grand Rapids, Flint and Lansing, Michigan.

Located adjacent to the park is Soak City, to be renamed in 2017 as Cedar Point Shores Water Park, a separately gated water park that features more than 15 water rides and attractions.

The Partnership also owns and operates four hotels at Cedar Point. The park's only year-round hotel is Castaway Bay Indoor Waterpark Resort, which is located adjacent to the Causeway entrance to the park. Castaway Bay features tropical, Caribbean theme hotel rooms centered around an indoor water park. The park's largest hotel, the historic Hotel Breakers, has various dining and lounge facilities, a mile-long beach, lake swimming, a conference/meeting center, an indoor pool and two outdoor pools. Located near the Causeway entrance to the park, Breakers Express, renamed Cedar Point's Express Hotel in 2017, is a limited-service seasonal hotel. In addition to Hotel Breakers and Breakers Express, Cedar Point offers the lake-front Sandcastle Suites Hotel, which features suites, a courtyard pool, tennis courts and a contemporary waterfront restaurant.
The Partnership also owns and operates the Cedar Point Marina, Castaway Bay Marina and Lighthouse Point. Cedar Point Marina is a full-service marina and provides dock facilities, including floating docks and full guest amenities. In addition, Cedar Point Marina features two restaurants accessible by the general public. Castaway Bay Marina is a full-service marina. Lighthouse Point offers lake-front cottages, cabins and full-service RV campsites.

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The Partnership owns and operates the Cedar Point Causeway across Sandusky Bay. This Causeway is a major access route to Cedar Point. The Partnership also owns dormitory facilities located near the park that houses approximately 4,000 of the park's seasonal employees.

Cedar Point Sports Center is a sports park consisting of various playing fields and training areas for soccer, baseball, softball and lacrosse tournaments and clinics in Sandusky, Ohio. The Partnership owns the land on which the sports park is located. The sports park is operated by a third party.

The Partnership owns the acreage from the former Wildwater Kingdom seasonal water-park located near Cleveland, Ohio. The Partnership ceased operations of this water park during the third quarter of 2016. The remaining land is available for sale.

Knott's Berry Farm
Knott's Berry Farm, located near Los Angeles in Buena Park, California, first opened in 1920 and was acquired by the Partnership in late 1997. The park is one of several year-round theme parks in Southern California and serves a market area centered in Orange County with a large national and international tourism population.
The park is renowned for its seasonal events, including a special holiday event, Knott's Merry Farm, and a Halloween event, Knott's Scary Farm, which has been held for more than 40 years and is annually rated one of the best Halloween events in the industry by Amusement Today's international survey.
Adjacent to Knott's Berry Farm is Knott's Soak City, a separately gated seasonal water park that features multiple water rides and attractions.
The Partnership also owns and operates the Knott's Berry Farm Hotel, a full-service hotel located adjacent to Knott's Berry Farm, which features a pool, tennis courts and meeting/banquet facilities.

Canada's Wonderland
Canada's Wonderland, a combination amusement and water park located near Toronto in Vaughan, Ontario, first opened in 1981 and was acquired by the Partnership in June 2006. It contains numerous attractions, including 15 roller coasters, and is one of the most attended regional amusement parks in North America. Canada's Wonderland is in a culturally diverse metropolitan market with large populations of different ethnicities and national origins. Each year the park showcases an extensive entertainment and special event line-up, which includes cultural festivals featuring music artists from around the world.

Kings Island
Kings Island, a combination amusement and water park located near Cincinnati, Ohio, first opened in 1972 and was acquired by the Partnership in June 2006. Kings Island is one of the largest seasonal amusement parks in the United States, measured by the number of rides and attractions and the hourly ride capacity. The park features a children's area that has been consistently named the "Best Kids' Area in the World" by Amusement Today. In 2017, Kings Island will host WinterFest, a seasonal event in November and December including holiday shows and festivities. The park's market area includes Cincinnati, Dayton and Columbus, Ohio; Louisville and Lexington, Kentucky; and Indianapolis, Indiana.

Carowinds
Carowinds, a combination amusement and water park located in Charlotte, North Carolina, first opened in 1973 and was acquired by the Partnership in June 2006. In 2017, Carowinds will host WinterFest, a seasonal event in November and December including holiday shows and festivities. Carowinds' major markets include Charlotte, Greensboro, and Raleigh, North Carolina; as well as Greenville and Columbia, South Carolina.

The park also offers Camp Wilderness Resort, a camping area that features a convenience and merchandise store, laundry facilities, and a swimming pool. The campground features RV sites, tent and pop-up sites, and luxury cabins.

Dorney Park
Dorney Park, a combination amusement and water park located in Allentown, Pennsylvania, was first developed as a summer resort area in 1884 and was acquired by the Partnership in 1992. Dorney Park is one of the largest amusement parks in the Northeastern United States and the park's major markets include Philadelphia, Lancaster, Harrisburg, York, Scranton, Wilkes-Barre, Hazleton and the Lehigh Valley, Pennsylvania; New York City; and New Jersey.

Kings Dominion
Kings Dominion, a combination amusement and water park located near Richmond, Virginia, first opened in 1975 and was acquired by the Partnership in June 2006. The park's market area includes Richmond and Norfolk, Virginia; Raleigh, North Carolina; Baltimore, Maryland and Washington, D.C.

Additionally, the park offers Kings Dominion Camp Wilderness Campground, a camping area featuring luxury cabins, a swimming pool, playground, volleyball courts, and laundry facilities.

The Partnership also owns a dormitory facility located adjacent to Kings Dominion that houses up to 400 of the park's seasonal employees.



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California's Great America
California's Great America, a combination amusement and water park located in Santa Clara, California, first opened in 1976 and was acquired by the Partnership in June 2006. In 2016, California's Great America hosted the inaugural WinterFest, a seasonal event in November and December including holiday shows and festivities. The park draws its visitors primarily from San Jose, San Francisco, Sacramento, Modesto and Monterey, among other cities in northern California.

Valleyfair
Valleyfair, which opened in 1976 and was acquired by the Partnership's predecessor in 1978, is a combination amusement and water park located near Minneapolis-St. Paul in Shakopee, Minnesota. It is the largest amusement park in Minnesota. Valleyfair's market area is centered in Minneapolis-St. Paul, but the park also draws visitors from other areas in Minnesota and surrounding states.

The Partnership also owns a dormitory facility located adjacent to Valleyfair that houses approximately 400 of the park's seasonal employees.

Worlds of Fun
Worlds of Fun, which opened in 1973 and was acquired by the Partnership in 1995, is a combination amusement and water park located in Kansas City, Missouri. In 2017, Worlds of Fun will host WinterFest, a seasonal event in November and December including holiday shows and festivities. Worlds of Fun serves a market area centered in Kansas City, as well as most of Missouri and portions of Kansas and Nebraska.

Worlds of Fun also features Worlds of Fun Village, an upscale camping area that offers overnight guest accommodations next to the park with wood-side cottages, log cabins and deluxe RV sites. Included within the Village is a clubhouse with a swimming pool and arcade games.

Michigan's Adventure
Michigan's Adventure, which was acquired by the Partnership in 2001, is the largest amusement park in Michigan. The combination amusement and water park located in Muskegon, Michigan serves a market area principally from central and western Michigan and eastern Indiana.


CAPITAL EXPENDITURES AND WORKING CAPITAL

The Partnership believes that annual park attendance is influenced by annual investments in new attractions. Capital expenditures are planned on a seasonal basis with the majority of such capital expenditures made from October through May, prior to the beginning of the peak operating season. Capital expenditures made in a calendar year may differ materially from amounts identified with a particular operating season because of timing considerations such as weather conditions, site preparation requirements and availability of ride components, which may result in accelerated or delayed expenditures around calendar year-end.

During the operating season, the Partnership carries significant receivables and inventories of food and merchandise, as well as payables and payroll-related accruals. Amounts are substantially reduced in non-operating periods. Seasonal working capital needs are funded from current operations and revolving credit facilities. Revolving credit facilities are established at levels sufficient to accommodate the Partnership's peak borrowing requirements in April and May as the seasonal parks complete preparations for opening. Revolving credit borrowings are reduced with the Partnership's positive cash flow during the seasonal operating period.


COMPETITION

The Partnership competes for discretionary spending with all aspects of the recreation industry within its primary market areas, including other destination and regional amusement parks. The Partnership also competes with other forms of entertainment and recreational activities, including movies, sports events, restaurants and vacation travel.

The principal competitive factors in the amusement park industry include the uniqueness and perceived quality of the rides and attractions in a particular park, its proximity to metropolitan areas, the atmosphere and cleanliness of the park, and the quality and variety of the food and entertainment available. The Partnership believes that its amusement parks feature a sufficient quality and variety of rides and attractions, restaurants, gift shops and family atmosphere to make them highly competitive with other parks and forms of entertainment.


GOVERNMENT REGULATION

The Partnership's properties and operations are subject to a variety of federal, state and local environmental, health and safety laws and regulations. Currently, the Partnership believes it is in substantial compliance with applicable requirements under these laws and regulations. However, such requirements have generally become more strict over time, and there can be no assurance that new requirements, changes in enforcement policies or newly discovered conditions relating to its properties or operations will not require significant expenditures in the future.

All rides are operated and inspected daily by both the Partnership's maintenance and ride operations personnel before being placed into operation for our guests. The parks are also periodically inspected by the Partnership's insurance carrier and, at all parks except Valleyfair, Worlds of Fun, and Carowinds' South Carolina rides, by state or county ride-safety inspectors. Valleyfair, Worlds of Fun and Carowinds each contract with a third party to inspect its rides pursuant to Minnesota, Missouri, and South Carolina law, respectively, and submit the third-party report to the

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respective state agency. Additionally, all parks have added ride maintenance and operation inspections completed by third party qualified inspectors to make sure our standards are being maintained.


EMPLOYEES

The Partnership has approximately 2,100 full-time employees. During the operating season, the Partnership employs in aggregate approximately 43,500 seasonal and part-time employees, many of whom are high school and college students. Approximately 4,000 of Cedar Point's seasonal employees, 400 of Kings Dominion's, and 400 of Valleyfair's seasonal employees live in dormitories owned by the Partnership. Approximately 350 of Dorney Park's seasonal employees, 200 of Carowinds' seasonal employees, 100 of Worlds of Fun's seasonal employees, and 100 of Kings Island's seasonal employees live in dormitories rented by the Partnership. The Partnership maintains training programs for all new employees and believes that it maintains good relations with its employees.


AVAILABLE INFORMATION

Copies of the Partnership's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and all amendments to those reports as filed or furnished with the SEC are available without charge upon written request to the Partnership's Investor Relations Office or through its website (www.cedarfair.com).

We use our website www.cedarfair.com as a channel of distribution of the Partnership's information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our news releases, SEC filings, and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference.

You may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that contains the Partnership's reports, proxy statements and other information. See Item 6 for Selected Financial Data, including net revenues, net income (loss) and total assets. See Note 13 to the Consolidated Financial Statements for condensed financial information for Canada's Wonderland Company.

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SUPPLEMENTAL ITEM. Executive Officers of Cedar Fair

Name
 
Age
 
Position(s)
 
 
 
 
 
Matthew A. Ouimet
 
58

 
Matt Ouimet has served as Chief Executive Officer since January 2012 and served as President from June 2011 through October 2016. Before joining Cedar Fair, he served in multiple roles from 2009 through 2010 at Corinthian Colleges, including President and Chief Executive Officer. Prior to joining Corinthian Colleges, he served as President, Hotel Group for Starwood Hotels and Resorts Worldwide from 2006 through 2008. In addition, Matt is a 20-year veteran of the amusement park and hospitality industry, including 17 years at the Walt Disney Company, where he held positions including Senior Vice President, Finance and Business Development, and Chief Financial Officer of the Disney Development Company; Executive General Manager of Disney Vacation Club; and President of Disney Cruise Line and of Disneyland Resort.
Richard A. Zimmerman
 
56

 
Richard Zimmerman was promoted to President in October 2016, and has served as Chief Operating Officer since October 2011. Prior to that, he served as Executive Vice President since November 2010, previously serving as Regional Vice President since June 2007 and has been with Cedar Fair since 2006. Richard served as Vice President and General Manager of Kings Dominion from 1998 through 2006.
Brian C. Witherow
 
50

 
Brian Witherow has served as Executive Vice President and Chief Financial Officer since January 2012. Prior to that, he served as Vice President and Corporate Controller beginning in July 2005. Brian has been with Cedar Fair in various other positions since 1995.
Kelley S. Semmelroth
 
52

 
Kelley Semmelroth has served as Executive Vice President and Chief Marketing Officer since February 2012. Prior to joining Cedar Fair, she served as Senior Vice President, Marketing Planning Director for TD Bank from 2010 through 2012. Prior to joining TD Bank, Kelley served as Senior Vice President of Brand Strategy and Management at Bank of America from 2005 through 2010.
Duffield E. Milkie
 
51

 
Duff Milkie has served as Executive Vice President and General Counsel since January 2015 and has served as Corporate Secretary since February 2012. He served as Corporate Vice President and General Counsel from February 2008 to January 2015. Prior to joining Cedar Fair, Duff was a partner in the law firm of Wickens, Herzer, Panza, Cook, & Batista from 1998 through 2008.
H. Philip Bender
 
61

 
Phil Bender has served as Executive Vice President, Operations since November 2010, previously serving as Regional Vice President beginning in June 2006. Prior to being promoted to a corporate executive, he served as Vice President and General Manager of Worlds of Fun / Oceans of Fun from 2000 through 2006.
Robert A. Decker
 
56

 
Rob Decker has served as Senior Vice President of Planning & Design since January 2015. Prior to that, he served as Corporate Vice President of Planning & Design since the end of 2002, and he has been with Cedar Fair since 1999. Prior to joining Cedar Fair, Rob served as Design Director at Jack Rouse Associates, Inc., a consultant firm to the entertainment industry, from 1989 through 1999.
David R. Hoffman
 
48

 
Dave Hoffman has served as Senior Vice President and Chief Accounting Officer since January 2012. Prior to that, he served as Vice President of Finance and Corporate Tax since November 2010. He served as Vice President of Corporate Tax from October 2006 until November 2010. Prior to joining Cedar Fair, Dave served as a business advisor with Ernst & Young from 2002 through 2006.
Craig A. Heckman
 
53

 
Craig Heckman joined Cedar Fair as Senior Vice President, Human Resources in January 2017. Prior to joining Cedar Fair, he served as Vice President, Human Resources for Vestis Retail Group, a retail operator, from December 2014 through December 2016. Prior to joining Vestis Retail Group, Craig served as Vice President, Human Resources - Stores and International for Express/L Brands, a fashion retailer, from 2006 to 2014.


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ITEM 1A. RISK FACTORS.

We compete for discretionary spending and discretionary free-time with many other entertainment alternatives and are subject to factors that generally affect the recreation and leisure industry, including general economic conditions.
Our parks compete for discretionary spending and discretionary free-time with other amusement, water and theme parks and with other types of recreational activities and forms of entertainment, including movies, sporting events, restaurants and vacation travel. Our business is also subject to factors that generally affect the recreation and leisure industries and are not within our control. Such factors include, but are not limited to, general economic conditions, including relative fuel prices, and changes in consumer tastes and spending habits. Uncertainty regarding regional economic conditions and deterioration in the economy generally may adversely impact attendance figures and guest spending patterns at our parks, and disproportionately affect different demographics of our target customers within our core markets. For example, group sales and season-pass sales, which represent a significant portion of our revenues, are disproportionately affected by general economic conditions. Both attendance (defined as the number of guest visits to the Partnership's amusement parks and separately gated outdoor water parks) and in-park per capita spending (calculated as all amusement park, outdoor water park, tolls and parking revenues for the amusement park and water park operating seasons divided by total attendance) at our parks are key drivers of our revenues and profitability, and reductions in either can directly and negatively affect revenues and profitability.

Uncertain economic conditions, such as unemployment rates, affect our guests' levels of discretionary spending. A decrease in discretionary spending due to a decline in consumer confidence in the economy, an economic slowdown or deterioration in the economy could adversely affect the frequency with which our guests choose to attend our amusement parks and the amount that our guests spend on our products when they visit. The materialization of these risks could lead to a decrease in our revenues, operating income and cash flows.

The operating season at most of our parks is of limited duration, which can magnify the impact of adverse conditions or events occurring within that operating season.
Ten of our amusement parks are seasonal, generally operating during a portion of April or May, then daily from Memorial Day through Labor Day, and during weekends in September and, in most cases, October. Four of our amusement parks have or will have extended operations into November and December for winter events. Our outdoor water parks also operate seasonally, generally from Memorial Day through Labor Day and during some additional weekends before and after that period. Most of our revenues are generated during a 130- to 140-day annual operating season. As a result, when conditions or events described as risk factors occur during the operating season, particularly during the peak vacation months of July and August or the important fall season, there is only a limited period of time during which the impact of those conditions or events can be mitigated. Accordingly, the timing of such conditions or events may have a disproportionate adverse effect upon our revenues.

Bad or extreme weather conditions can adversely impact attendance at our parks, which in turn would reduce our revenues.
Because most of the attractions at our parks are outdoors, attendance at our parks can be adversely affected by continuous bad or extreme weather and by forecasts of bad or mixed weather conditions, which would negatively affect our revenues. We believe that our ownership of many parks in different geographic locations reduces, but does not completely eliminate, the effect that adverse weather can have on our consolidated results.

Our growth strategy may not achieve the anticipated results.
Our future success will depend on our ability to grow our business, including capital investments to improve our parks through new rides and attractions, as well as in-park product offerings and product offerings outside of our parks. Our growth and innovation strategies require significant commitments of management resources and capital investments and may not grow our revenues at the rate we expect or at all. As a result, we may not be able to recover the costs incurred in developing our new projects and initiatives or to realize their intended or projected benefits, which could have a material adverse effect on our business, financial condition or results of operations.

The high fixed cost structure of amusement park operations can result in significantly lower margins if revenues decline.
A large portion of our expenses is relatively fixed because the costs for full-time employees, maintenance, utilities, advertising and insurance do not vary significantly with attendance. These fixed costs may increase at a greater rate than our revenues and may not be able to be reduced at the same rate as declining revenues. If cost-cutting efforts are insufficient to offset declines in revenues or are impractical, we could experience a material decline in margins, revenues, profitability and cash flows. Such effects can be especially pronounced during periods of economic contraction or slow economic growth.

Our business depends on our ability to meet our workforce needs.
Our success depends on our ability to attract, motivate and retain qualified employees to keep pace with our needs. If we are unable to do so, our results of operations and cash flows may be adversely affected. In addition, we employ a significant seasonal workforce. We recruit year-round to fill thousands of seasonal staffing positions each season and work to manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place. There is no assurance that we will be able to recruit and hire adequate seasonal personnel as the business requires or that we will not experience material increases in the cost of securing our seasonal workforce in the future.

Increased costs of labor and employee health and welfare benefits may impact our results of operations.
Labor is a primary component in the cost of operating our business. Increased labor costs, due to competition, increased minimum wage or employee benefit costs, including health care costs, or otherwise, could adversely impact our operating expenses. The Patient Protection and Affordable Care Act of 2010 contains provisions which could impact our future health-care costs. Continued increases to both market wage rates and the statutory minimum wage rates could also materially impact our future seasonal labor rates. It is possible that these changes could significantly increase our labor costs, which would adversely affect our operating results and cash flows.


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If we lose key personnel, our business may be adversely affected.
Our success depends in part upon a number of key employees, including our senior management team, whose members have been involved in the leisure and hospitality industries for an average of 20 years. The loss of services of our key employees could have a material adverse effect on our business.

Cyber-security risks and the failure to maintain the integrity of internal or customer data could result in damages to our reputation and/or subject us to costs, fines or lawsuits.
In the normal course of business, we collect and retain large volumes of internal and customer data, including credit card numbers and other personally identifiable information, which is used for target marketing and promotional purposes, and our various information technology systems enter, process, summarize and report such data. We also maintain personally identifiable information about our employees. The integrity and protection of such data is critical to our business, and our guests and employees have a high expectation that we will adequately protect their personal information. The regulatory environment, as well as the requirements imposed on us by the credit card industry, governing information, security and privacy laws is increasingly demanding and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs and/or adversely impact our ability to market our parks, products and services to our guests. Furthermore, if a person is able to circumvent our security measures, he or she could destroy or steal valuable information or disrupt our operations.  Any security breach could expose us to risks of data loss, which could harm our reputation and result in remedial and other costs, fines or lawsuits. Although we carry liability insurance to cover this risk, there can be no assurance that our coverage will be adequate to cover liabilities, or that we will be able to obtain adequate coverage should a catastrophic incident occur.

There is a risk of incidents occurring at amusement parks, which may reduce attendance and negatively impact our revenues.
The safety of our guests and employees is one of our top priorities. All of our amusement parks feature thrill rides. There are inherent risks involved with these attractions, and an accident or a serious injury at any of our amusement parks may result in negative publicity and could reduce attendance and result in decreased revenues. In addition, accidents or injuries at parks operated by our competitors could influence the general attitudes of amusement park patrons and adversely affect attendance at our amusement parks. Other types of incidents such as food borne illnesses which have either been alleged or proved to be attributable to our parks or our competitors, could adversely affect attendance revenues.

Our operations, our workforce and our ownership of property subject us to various laws and regulatory compliance, which may create uncertainty regarding future expenditures and liabilities.
We may be required to incur costs to comply with regulatory requirements, such as those relating to employment practices, environmental requirements, and other regulatory matters, and the costs of compliance, investigation, remediation, litigation, and resolution of regulatory matters could be substantial. We are subject to extensive federal and state employment laws and regulations, including wage and hour laws and other pay practices and employee record-keeping requirements. We periodically may have to defend against lawsuits asserting non-compliance. Such lawsuits can be costly, time consuming and distract management, and adverse rulings in these types of claims could negatively affect our business, financial condition or results.

We also are subject to federal, state and local environmental laws and regulations such as those relating to water resources; discharges to air, water and land; the handling and disposal of solid and hazardous waste; and the cleanup of properties affected by regulated materials. Under these laws and regulations, we may be required to investigate and clean up hazardous or toxic substances or chemical releases from current or formerly owned or operated facilities or to mitigate potential environmental risks. Environmental laws typically impose cleanup responsibility and liability without regard to whether the relevant entity knew of or caused the presence of the contaminants. The costs of investigation, remediation or removal of regulated materials may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use, transfer or obtain financing regarding our property.

Instability in general economic conditions could impact our profitability and liquidity while increasing our exposure to counter-party risk.
The existence of unfavorable general economic conditions, such as high unemployment rates, constrained credit markets, and higher prices for consumer goods, may hinder the ability of those with which we do business, including vendors, concessionaires and customers, to satisfy their obligations to us. Our exposure to credit losses will depend on the financial condition of our vendors, concessionaires and customers and other factors beyond our control, such as deteriorating conditions in the world economy or in the theme/amusement park industry. The presence of market turmoil, coupled with a reduction of business activity, generally increases our risks related to being an unsecured creditor of most of our vendors, concessionaires and customers. Credit losses, if significant, would have a material adverse effect on our business, financial condition and results of operations. Moreover, these issues could also increase the counter-party risk inherent in our business, including with our suppliers, vendors and financial institutions with which we enter into hedging agreements and long-term debt agreements, including our credit facilities. The soundness of these counter-parties could adversely affect us. Our credit evaluations may be inaccurate and we cannot assure you that credit performance will not be materially worse than anticipated, and, as a result, materially and adversely affect our business, financial position and results of operations.

Unanticipated construction delays in completing capital improvement projects in our parks and resort facilities, significant ride downtime, or other unplanned park closures could adversely affect our revenues.
A principal competitive factor for an amusement park is the uniqueness and perceived quality of its rides and attractions in a particular market area. Accordingly, the regular addition of new rides and attractions is important, and a key element of our revenue growth is strategic capital spending on new rides and attractions. Any construction delays or ride down-time can adversely affect our attendance and our ability to realize revenue growth. Further, when rides, attractions, or an entire park, have unplanned downtime and/or closures, our revenue could be adversely affected.


9


Variable rate indebtedness subjects us to the risk of higher interest rates, which could cause our future debt service obligations to increase.
As of December 31, 2016, after giving consideration to current outstanding interest-rate swap arrangements, most of our indebtedness under our term loan facility accrues interest that is either fixed or swapped to a fixed rate. After the expiration of outstanding interest-rate swap agreements, certain of our borrowings may be at variable rates of interest and expose us to interest rate risk. If interest rates increase, our annual debt service obligations on any variable-rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.

Our debt agreements contain restrictions that could limit our flexibility in operating our business.
Our credit agreement and the indentures governing our notes contain, and any future indebtedness of ours will likely contain, a number of covenants that could impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries' ability to, among other things:
pay distributions on or make distributions in respect of our capital stock or units or make other Restricted Payments;
incur additional debt or issue certain preferred equity;
make certain investments;
sell certain assets;
create restrictions on distributions from restricted subsidiaries;
create liens on certain assets to secure debt;
consolidate, merge, amalgamate, sell or otherwise dispose of all or substantially all of our assets;
enter into certain transactions with our affiliates; and
designate our subsidiaries as unrestricted subsidiaries.

The 2013 Credit Agreement includes two Financial Condition Covenants, which if breached for any reason and not cured, could result in an event of default under the agreement. At the end of the fourth quarter of 2016 and 2015, the first of these, the Consolidated Leverage Ratio, was set at a maximum of 5.50x and 5.75x consolidated total debt (excluding the revolving debt)-to-consolidated EBITDA, respectively. The ratio decreased by 0.25x at the beginning of the second quarter of 2016. The final decrease will occur at the beginning of the second quarter of 2017 when the ratio will reach its minimum of 5.25x. The second of these ratios, the Consolidated Fixed Charge Coverage Ratio, is set at a minimum of 1.1x (consolidated total fixed charges-to-consolidated EBITDA). As of December 31, 2016 and 2015, we were in compliance with these Financial Condition Covenants and all other covenants under the 2013 Credit Agreement. The 2013 Credit Agreement allows Restricted Payments of up to $60 million annually so long as no default or event of default has occurred and is continuing and so long as the Partnership would be in compliance with certain financial ratios after giving effect to the payments. Additional Restricted Payments are allowed to be made based on an Excess-Cash-Flow formula should our pro-forma Consolidated Leverage Ratio be less than or equal to 5.00x.

The indentures governing our notes also include annual Restricted Payment limitations and additional permitted payment formulas. We can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing. Our ability to make additional Restricted Payments is permitted should our pro forma Total Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.00x.

The amount of our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from fulfilling our obligations under our debt agreements.
We had $1,568.7 million of outstanding indebtedness as of December 31, 2016 (after giving effect to $15.9 million of outstanding letters of credit under our revolving credit facility).
The amount of our indebtedness could have important consequences. For example, it could:
limit our ability to borrow money for our working capital, capital expenditures, debt service requirements, strategic initiatives or other purposes;
limit our flexibility in planning or reacting to changes in business and future business operations; and
make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing other indebtedness.

In addition, we may not be able to generate sufficient cash flow from operations, or be able to draw under our revolving credit facility or otherwise, in an amount sufficient to fund our liquidity needs, including the payment of principal and interest on our debt obligations. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt in the future will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of our existing or future debt agreements, including our credit agreement and the indenture governing our notes, may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due.


10


Despite the amount of our indebtedness, we may be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with the amount of our indebtedness.

Our tax treatment is dependent on our status as a partnership for federal income tax purposes. If the tax laws were to treat us as a corporation or we become subject to a material amount of entity-level taxation, it may substantially reduce the amount of cash available for distribution to our unitholders.
We are a limited partnership under Delaware law and are treated as a partnership for federal income tax purposes. A change in current tax law may cause us to be taxed as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity. If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our entire taxable income at the corporate tax rate, rather than only on the taxable income from our corporate subsidiaries, and may be subject to additional state taxes at varying rates. Further, unitholder distributions would generally be taxed again as corporate distributions or dividends and no income, gains, losses, or deductions would flow through to unitholders. Because additional entity level taxes would be imposed upon us as a corporation, our cash available for distribution could be substantially reduced. Although we are not currently aware of any legislative proposal that would adversely impact our treatment as a partnership, we are unable to predict whether any changes or other proposals will ultimately be enacted.

Our insurance coverage may not be adequate to cover all possible losses that we could suffer, and our insurance costs may increase.
Companies engaged in the amusement park business may be sued for substantial damages in the event of an actual or alleged accident. An accident occurring at our parks or at competing parks could reduce attendance, increase insurance premiums, and negatively impact our operating results. Although we carry liability insurance to cover this risk, there can be no assurance that our coverage will be adequate to cover liabilities, that we will be able to obtain coverage at commercially reasonable rates, or that we will be able to obtain adequate coverage should a catastrophic incident occur at our parks or at other parks.

Other factors, including local events, natural disasters and terrorist activities, could adversely impact park attendance and our revenues.
Lower attendance may result from various local events, natural disasters or terrorist activities, all of which are outside of our control.


11


ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.


ITEM 2. PROPERTIES.

Park
 
Location
Approximate Total
Acreage
Approximate Developed Acreage
Approximate Undeveloped Acreage
Cedar Point
Soak City
(1), (3)
Sandusky, Ohio
625

515

110

Knott's Berry Farm
Knott's Soak City-Orange County
 
Buena Park, California
175

175


Kings Island
 
Mason, Ohio
680

330

350

Canada's Wonderland
 
Vaughan, Ontario, Canada
295

295


Kings Dominion
 
Doswell, Virginia
740

280

460

Dorney Park
 
Allentown, Pennsylvania
210

180

30

Carowinds
 
Charlotte, North Carolina and Fort Mill, South Carolina
400

300

100

Valleyfair
 
Shakopee, Minnesota
190

110

80

Worlds of Fun
Oceans of Fun
 
Kansas City, Missouri
350

250

100

California's Great America
(2)
Santa Clara, California
165

165


Michigan's Adventure
 
Muskegon, Michigan
260

120

140


(1) Cedar Point and Soak City are located on approximately 365 acres, virtually all of which have been developed, on the Cedar Point peninsula in Sandusky, Ohio. The Partnership also owns approximately 260 acres of property on the mainland adjoining the approach to the Cedar Point Causeway with approximately 110 acres undeveloped. The Breakers Express hotel, the Castaway Bay Indoor Waterpark Resort and an adjoining restaurant, Castaway Bay Marina, two seasonal-employee housing complexes, and the Cedar Point Sports Center are located on this property.

The Partnership controls, through ownership or an easement, a six-mile public highway and owns approximately 40 acres of vacant land adjacent to this highway, which is a secondary access route to Cedar Point and serves about 250 private residences. The roadway is maintained by the Partnership pursuant to deed provisions. The Cedar Point Causeway, a four-lane roadway across Sandusky Bay, is the principal access road to Cedar Point and is owned by a subsidiary of the Partnership.

(2) The Partnership leases the land at California's Great America from the City of Santa Clara through a long-term lease agreement that is renewable in 2039 with options to terminate at the Partnership's discretion.

(3) In addition to the acreage above, the Partnership also owns approximately 670 acres in Aurora, Ohio (near Cleveland, Ohio) which is available for sale. The land is the location of the former Wildwater Kingdom waterpark. See Note 3 to the Consolidated Financial Statements for further information regarding the closure of the waterpark.

All of the Partnership's property is owned in fee simple, with the exception of California's Great America in Santa Clara, California and portions of the six-mile public highway that serves as secondary access route to Cedar Point, and is encumbered by the Partnership's 2013 Credit Agreement. The Partnership considers its properties to be well maintained, in good condition and adequate for its present uses and business requirements.


12


ITEM 3. LEGAL PROCEEDINGS.

Not applicable.


ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.


PART II

ITEM 5. MARKET FOR REGISTRANT'S DEPOSITARY UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF DEPOSITARY UNITS.

Cedar Fair, L.P. Depositary Units representing limited partner interests are listed for trading on The New York Stock Exchange under the symbol "FUN". As of February 2, 2017, there were approximately 5,500 registered holders of Cedar Fair, L.P. Depositary Units, representing limited partner interests. Attention is directed to Item 12 in this Form 10-K for information regarding the Partnership's equity incentive plan, which information is incorporated herein by reference. The cash distributions declared and the high and low prices of the Partnership's units for each quarter of the past two years are shown in the table below:

Quarters
 
 
LP Unit Price
Distributions per LP Unit
 
High
 
Low
2016
 
 
 
 
 
Fourth Quarter
$
0.855

 
$
64.90

 
$
56.23

Third Quarter
0.825

 
63.40

 
56.30

Second Quarter
0.825

 
60.03

 
56.17

First Quarter
0.825

 
60.23

 
48.46

 
 
 
 
 
 
2015
 
 
 
 
 
Fourth Quarter
$
0.825

 
$
59.00

 
$
50.60

Third Quarter
0.750

 
58.12

 
48.94

Second Quarter
0.750

 
60.64

 
54.78

First Quarter
0.750

 
58.94

 
47.00


The Partnership's 2013 Credit Agreement includes provisions that allow the Partnership to make Restricted Payments up to $60 million annually at the discretion of the Board of Directors, so long as no default or event of default has occurred and is continuing and so long as the Partnership would be in compliance with certain financial ratios after giving effect to the payments. Additional Restricted Payments are allowed to be made based on an Excess-Cash-Flow formula should the Partnership’s pro-forma Consolidated Leverage Ratio be less than or equal to 5.00x.

Pursuant to the terms of the indentures governing the Partnership's June 2014 and March 2013 notes, the Partnership can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing; and the Partnership's ability to make additional Restricted Payments is permitted should the Partnership's pro forma Total Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.00x.



13


Unitholder Return Performance Graph

The graph below shows a comparison of the five-year cumulative total return (assuming all distributions/dividends reinvested) for Cedar Fair, L.P. limited partnership units, the S&P 500 Index, the S&P 400 Index, and the S&P - Movies and Entertainment Index, assuming investment of $100 on December 30, 2011.

cedarfair-10_chartx42138a02.jpg
 
 
 
Base Period
 
 
Return
 
 
 
2011
 
 
2012
 
2013
 
2014
 
2015
 
2016
Cedar Fair, L.P.
 
 
$
100.00

 
 
$
163.76

 
$
257.55

 
$
263.18

 
$
324.45

 
$
393.98

S&P 500
 
 
100.00

 
 
116.00

 
153.57

 
174.60

 
177.01

 
198.18

S&P 400
 
 
100.00

 
 
117.88

 
157.37

 
172.74

 
168.98

 
204.03

S&P Movies and Entertainment
 
 
100.00

 
 
134.64

 
209.45

 
246.78

 
223.97

 
245.01


14



ITEM 6. SELECTED FINANCIAL DATA.

 
 
Years Ended December 31,
 
 
2016
 
2015 (1)
 
2014 (2)
 
2013 (3)
 
2012 (4)
 
 
(In thousands, except per unit and per capita amounts)
Statement of Operations
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
1,288,721

 
$
1,235,778

 
$
1,159,605

 
$
1,134,572

 
$
1,068,454

Operating income
 
316,939

 
295,331

 
278,332

 
301,761

 
233,675

Income before taxes
 
249,106

 
134,414

 
114,100

 
128,447

 
133,614

Net income
 
177,688

 
112,222

 
104,215

 
108,204

 
101,857

Net income per unit - basic
 
$
3.18

 
$
2.01

 
$
1.88

 
$
1.95

 
$
1.83

Net income per unit - diluted
 
$
3.14

 
$
1.99

 
$
1.86

 
$
1.94

 
$
1.82

Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Total assets 
 
$
1,973,181

 
$
1,963,020

 
$
2,004,448

 
$
1,975,406

 
$
1,964,475

Working capital surplus (deficit)
 
(47,007
)
 
(14,645
)
 
(3,767
)
 
18,023

 
(5,280
)
Long-term debt
 
1,534,211

 
1,536,676

 
1,534,244

 
1,491,086

 
1,484,974

Partners' equity 
 
60,519

 
57,009

 
96,217

 
139,131

 
154,451

Distributions
 
 
 
 
 
 
 
 
 
 
Declared per limited partner unit
 
$
3.33

 
$
3.08

 
$
2.85

 
$
2.58

 
$
1.60

Paid per limited partner unit
 
$
3.33

 
$
3.08

 
$
2.85

 
$
2.58

 
$
1.60

Other Data
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization 
 
$
131,876

 
$
125,631

 
$
124,286

 
$
122,487

 
$
126,306

Adjusted EBITDA (5)
 
481,248

 
459,238

 
431,280

 
425,430

 
390,954

Capital expenditures
 
160,656

 
175,865

 
166,719

 
120,488

 
96,232

Attendance (6)
 
25,104

 
24,448

 
23,305

 
23,519

 
23,300

In-park per capita spending (7)
 
$
46.90

 
$
46.20

 
$
45.54

 
$
44.15

 
$
41.95


(1)
Operating results for 2015 include a non-cash charge of $8.6 million for the impairment of a long-lived asset at Cedar Point. Balance Sheet Data measures for 2015 have been restated to include the impact of ASU 2015-03 resulting in the reclassification of unamortized debt issuance cost amounts from other assets to long-term debt of $19.7 million, and to include the impact of ASU 2015-17 resulting in the reclassification of current deferred tax assets to net against deferred tax liabilities which reduced both amounts by $12.2 million.
(2)
Operating results for 2014 include a charge of $29.3 million for the loss on early debt extinguishment and a non-cash charge of $2.4 million for the impairment of long-lived assets at Wildwater Kingdom. Balance Sheet Data measures for 2014 have been restated to include the impact of ASU 2015-03 resulting in the reclassification of unamortized debt issuance cost amounts from other assets to long-term debt of $24.6 million, and to include the impact of ASU 2015-17 resulting in the reclassification of current deferred tax assets to net against deferred tax liabilities which reduced both amounts by $9.3 million.
(3)
Operating results for 2013 include a non-cash charge of $34.6 million for the loss on early debt extinguishment. Balance Sheet Data measures for 2013 have been restated to include the impact of ASU 2015-03 resulting in the reclassification of unamortized debt issuance cost amounts from other assets to long-term debt of $29.5 million, and to include the impact of ASU 2015-17 resulting in the reclassification of current deferred tax assets to net against deferred tax liabilities which reduced both amounts by $9.7 million.
(4)
Operating results for 2012 include a non-cash charge of $25.0 million for the impairment of long-lived assets at Wildwater Kingdom. Balance Sheet Data measures for 2012 have been restated to include the impact of ASU 2015-03 resulting in the reclassification of unamortized debt issuance cost amounts from other assets to long-term debt of $47.2 million, and to include the impact of ASU 2015-17 resulting in the reclassification of current deferred tax assets to net against deferred tax liabilities which reduced both amounts by $8.2 million.
(5)
Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the 2013 Credit Agreement. Adjusted EBITDA is not a measurement of operating performance computed in accordance with GAAP and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with GAAP. We believe that Adjusted EBITDA 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 the Partnership's 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. Adjusted EBITDA

15


may not be comparable to similarly titled measures of other companies. A reconciliation of net income to Adjusted EBITDA is provided below.
(6)
Attendance includes number of guest visits to the Partnership's amusement parks and separately gated outdoor water parks.
(7)
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, excluding the expense related to concessionaire arrangements, divided by total attendance. Revenues from resort, marina, sponsorship and all other out-of-park operations are excluded from per capita statistics.

We believe that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the 2013 Credit Agreement) is a meaningful measure 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 periods indicated:
 
 
Years Ended December 31,
(In thousands)
 
2016
 
2015
 
2014
 
2013
 
2012
Net income
 
$
177,688

 
$
112,222

 
$
104,215

 
$
108,204

 
$
101,857

Interest expense
 
83,863

 
86,849

 
96,286

 
103,071

 
110,619

Interest income
 
(177
)
 
(64
)
 
(126
)
 
(154
)
 
(68
)
Provision for taxes
 
71,418

 
22,192

 
9,885

 
20,243

 
31,757

Depreciation and amortization
 
131,876

 
125,631

 
124,286

 
122,487

 
126,306

EBITDA
 
464,668

 
346,830

 
334,546

 
353,851

 
370,471

Loss on early debt extinguishment
 

 

 
29,261

 
34,573

 

Net effect of swaps
 
(1,197
)
 
(6,884
)
 
(2,062
)
 
6,883

 
(1,492
)
Non-cash foreign currency (gain) loss
 
(14,345
)
 
80,946

 
40,883

 
29,085

 
(9,181
)
Equity-based compensation
 
18,496

 
15,470

 
12,536

 
5,535

 
3,265

Loss on impairment/retirement of fixed assets, net
 
12,587

 
20,873

 
9,757

 
2,539

 
30,336

Gain on sale of other assets
 

 

 
(921
)
 
(8,743
)
 
(6,625
)
Class action settlement costs
 

 
259

 
4,953

 

 

Other (1)
 
1,039

 
1,744

 
2,327

 
1,707

 
4,180

Adjusted EBITDA
 
$
481,248

 
$
459,238

 
$
431,280

 
$
425,430

 
$
390,954


(1) Consists of certain costs as defined in the Company's 2013 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, contract termination costs, and severance expenses.


16


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Business Overview

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

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

Along with attendance and per capita spending 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.







17


The following table presents certain financial data expressed as a percent of total net revenues and selective statistical information for the periods indicated.
 
 
Years Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(In thousands, except per capita spending and percentages)
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Admissions
 
$
716,189

 
55.6
 %
 
$
687,442

 
55.6
 %
 
$
661,455

 
57.0
 %
Food, merchandise and games
 
407,673

 
31.6
 %
 
398,019

 
32.2
 %
 
365,528

 
31.5
 %
Accommodations, extra-charge products and other
 
164,859

 
12.8
 %
 
150,317

 
12.2
 %
 
132,622

 
11.4
 %
Net revenues
 
1,288,721

 
100.0
 %
 
1,235,778

 
100.0
 %
 
1,159,605

 
100.0
 %
Operating costs and expenses
 
827,319

 
64.2
 %
 
793,943

 
64.2
 %
 
748,151

 
64.5
 %
Depreciation and amortization
 
131,876

 
10.2
 %
 
125,631

 
10.2
 %
 
124,286

 
10.7
 %
Loss on impairment / retirement of fixed assets, net
 
12,587

 
1.0
 %
 
20,873

 
1.7
 %
 
9,757

 
0.8
 %
Gain on sale of other assets
 

 
 %
 

 
 %
 
(921
)
 
(0.1
)%
Operating income
 
316,939

 
24.6
 %
 
295,331

 
23.9
 %
 
278,332

 
24.0
 %
Interest and other expense, net
 
83,686

 
6.5
 %
 
86,785

 
7.0
 %
 
96,160

 
8.3
 %
Net effect of swaps
 
(1,197
)
 
(0.1
)%
 
(6,884
)
 
(0.6
)%
 
(2,062
)
 
(0.2
)%
Loss on early debt extinguishment
 

 
 %
 

 
 %
 
29,261

 
2.5
 %
Unrealized / realized foreign currency (gain) loss
 
(14,656
)
 
(1.1
)%
 
81,016

 
6.6
 %
 
40,873

 
3.5
 %
Provision for taxes
 
71,418

 
5.5
 %
 
22,192

 
1.8
 %
 
9,885

 
0.9
 %
Net income
 
$
177,688

 
13.8
 %
 
$
112,222

 
9.1
 %
 
$
104,215

 
9.0
 %
Other data:
 
 
 
 
 
 
 
 
 
 
 
 
Attendance
 
25,104

 
 
 
24,448

 
 
 
23,305

 
 
In-park per capita spending
 
$
46.90

 
 
 
$
46.20

 
 
 
$
45.54

 
 

Critical Accounting Policies

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our 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 Consolidated Financial Statements and related notes. The following discussion addresses our critical accounting policies, which are those that are most important to the portrayal of our financial condition and operating results or involve a higher degree of judgment and complexity (see Note 2 to our Consolidated Financial Statements for a complete discussion of our significant accounting policies). Application of the critical accounting policies described below involves the exercise of judgment and the use of assumptions as to future uncertainties, and as a result, actual results could differ from these estimates and assumptions.

Impairment of Long-Lived Assets
The carrying values of long-lived assets, including property and equipment, are reviewed whenever events or changes in circumstances indicate that the carrying values of the assets may not be recoverable. An impairment loss may be recognized when estimated undiscounted future cash flows expected to result from the use of the assets, including disposition, are less than the carrying value of the assets. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying amounts of the assets. Fair value is generally determined based on a discounted cash flow analysis. 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.

The determination of both undiscounted and discounted cash flows requires management to make significant estimates and consider an anticipated course of action as of the balance sheet date. Subsequent changes in estimated undiscounted and discounted cash flows arising from changes in anticipated actions could impact the determination of whether impairment exists, the amount of the impairment charge recorded and whether the effects could materially impact the consolidated financial statements.

At the end of the fourth quarter of 2014, the Partnership concluded based on 2014 operating results and updated forecasts, that a review of the carrying value of operating long-lived assets at Wildwater Kingdom was warranted. After performing its review, the Partnership determined that the park's fixed assets, excluding land, were impaired by $2.4 million. A charge for this amount was recorded in "Loss on impairment / retirement of fixed assets, net" on the consolidated statement of operations and comprehensive income.


18


At the end of the fourth quarter of 2015, the Partnership decided to permanently remove from service a long-lived asset at Cedar Point. Accordingly, the Partnership recognized and recorded an $8.6 million charge for impairment equal to the remaining net book value of this long-lived asset. The amount was recorded in "Loss on impairment / retirement of fixed assets, net" on the consolidated statement of operations and comprehensive income.

During the third quarter of 2016, the Partnership ceased operations of Wildwater Kingdom. At the closure date, the only remaining long-lived asset was the approximate 670 acres of land owned by the Partnership. This land has an associated carrying value of $17.1 million. The Partnership assessed the remaining asset and concluded there was no impairment during the third quarter of 2016. The associated acreage is classified as assets held-for-sale within "Other Assets" in the consolidated balance sheet.

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. 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; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

An impairment loss may be recognized if the carrying value of the reporting unit is higher than its fair value, which is estimated using both an income (discounted cash flow) and market approach. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill is less than the recorded goodwill, an impairment charge is recorded for the difference. Goodwill and trade-names have been assigned at the reporting unit, or park level, for purposes of impairment testing.

We completed the review of goodwill and other indefinite-lived intangibles as of the first day of the fourth quarter of 2016 and 2015 and determined goodwill and other indefinite-lived intangibles were not impaired at these testing dates.

It is possible that our assumptions about future performance, as well as the economic outlook and related conclusions regarding the valuation of our reporting units (parks), could change adversely, which may result in additional impairment that would have a material effect on our financial position and results of operations in future periods.

Self-Insurance Reserves
Reserves are recorded for the estimated amounts of guest and employee claims and expenses incurred each period. Reserves are established for both identified claims and incurred but not reported (IBNR) claims. Such amounts are accrued for when claim amounts become probable and estimable. Reserves for identified claims are based upon our own historical claims experience and third-party estimates of settlement costs. Reserves for IBNR claims, which are not material to our consolidated financial statements, are based upon our own claims data history. All self-insurance reserves are periodically reviewed for changes in facts and circumstances and adjustments are made as necessary.

Derivative Financial Instruments
Derivative financial instruments are used within our overall risk management program to manage certain interest rate and foreign currency risks. By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, we are exposed to credit risk. Credit risk is 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 we believe poses minimal credit risk. We do not use derivative financial instruments for trading purposes.

Derivative financial instruments used in hedging transactions are assessed both at inception and quarterly thereafter to ensure they are effective in offsetting changes in either the fair value or cash flows of the related underlying exposures. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value of the derivative instrument is reported as a component of “Other comprehensive income (loss)” and reclassified into earnings in the period during which the hedged transaction affects earnings. Any ineffectiveness is recognized immediately in income. 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”. Additionally, the “Accumulated other comprehensive income (loss)” related to interest rate swaps that become ineffective is amortized over the remaining life of the interest rate swap, and reported as a component of “Net effect of swaps” in the consolidated statements of operations.

Revenue Recognition
Revenues on multi-use products are recognized over the estimated number of uses expected for each type of product and are adjusted periodically during the operating season prior to the ticket or product expiration, which occurs no later than the close of the operating season or December 31 each year. Other revenues are recognized on a daily basis based on actual guest spending at our facilities, or over the park operating season in the case of certain marina revenues and certain sponsorship revenues.  Revenues on multi-use products for the next operating season are deferred in the year received and recognized as revenue in the following operating season.

Admission revenues include amounts paid to gain admission into our parks, including parking fees. Revenues related to extra-charge attractions, including our premium benefit offerings like our front-of-line products, are included in Accommodations, extra-charge products and other revenue.


19


Income Taxes
Our legal structure includes both partnerships and corporate subsidiaries. As a publicly traded partnership, we are subject to an entity-level tax (the "PTP tax"). Accordingly, the Partnership itself is not subject to corporate income taxes; rather, the Partnership's tax attributes (except those of the corporate subsidiaries) are included in the tax returns of our partners. Our corporate subsidiaries are subject to entity-level income taxes. Our "Provision for taxes" includes both the PTP tax and the income taxes from the corporate subsidiaries.

Our corporate subsidiaries account for income taxes under the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future book and tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply in the year in which those temporary differences are expected to be recovered or settled.

We record a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Through December 31, 2015, we had recorded a $5.7 million valuation allowance related to a $7.6 million deferred tax asset for foreign tax credit carryforwards. The need for this allowance was based on several factors including the ten-year carryforward period allowed for excess foreign tax credits, experience to date of foreign tax credit limitations, and management's long term estimates of domestic and foreign source income.

During the third quarter of 2016, the Partnership recognized a $1.5 million tax benefit per a release of valuation allowance based on management's updated projection of future foreign tax credit utilization. As of December 31, 2016, we had recorded a $4.2 million valuation allowance related to a $7.7 million deferred tax asset for foreign tax credit carryforwards.

There is inherent uncertainty in the estimates used to project the amount of foreign tax credit carryforwards that are more likely than not to be realized. It is possible that our future income projections, as well as the economic outlook and related conclusions regarding the valuation allowance could change, which may result in additional valuation allowance being recorded or may result in additional valuation allowance reductions, and which may have a material negative or positive effect on our reported financial position and results of operations in future periods.

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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 the Partnership's amusement parks and separately gated outdoor water parks.

In-park per capita spending is calculated as revenues generated within our amusement parks and separately gated outdoor water parks along with related tolls and parking revenues, divided by total attendance.

Out-of-park revenues are defined as revenues from resort, marina, sponsorship and all other out-of-park operations.

Both in-park per capita and out-of-park revenues exclude amounts remitted for concessionaire arrangements.

2016 vs. 2015

The following table presents key operating and financial information for the years ended December 31, 2016 and 2015:
 
 
 
 
 
 
Increase (Decrease)
 
 
12/31/2016
 
12/31/2015
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
1,288,721

 
$
1,235,778

 
$
52,943

 
4.3
%
Operating costs and expenses
 
827,319

 
793,943

 
33,376

 
4.2
%
Depreciation and amortization
 
131,876

 
125,631

 
6,245

 
5.0
%
Loss on impairment/retirement of fixed assets, net
 
12,587

 
20,873

 
(8,286
)
 
N/M

Operating income
 
$
316,939

 
$
295,331

 
$
21,608

 
7.3
%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
 
$
481,248

 
$
459,238

 
$
22,010

 
4.8
%
Adjusted EBITDA margin (2)
 
37.3
%
 
37.2
%
 

 
0.1
%
Attendance
 
25,104

 
24,448

 
656

 
2.7
%
In-park per capita spending
 
$
46.90

 
$
46.20

 
$
0.70

 
1.5
%
Out-of-park revenues
 
$
146,137

 
$
137,698

 
$
8,439

 
6.1
%

(1) For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see Item 6, "Selected Financial Data", on page 15.
(2) Adjusted EBITDA margin (Adjusted EBITDA divided by net revenues) is not a measurement computed in accordance with generally accepted accounting principles ("GAAP") or a substitute for measures computed in accordance with GAAP and may not be comparable to similarly titled measures of other companies. The Partnership provides Adjusted EBITDA margin because it believes the measure provides a meaningful metric of operating profitability.

Consolidated net revenues totaled $1,288.7 million in 2016, increasing $52.9 million, from $1,235.8 million in 2015. This reflects an increase in both attendance and in-park per capita spending, as well as an increase in out-of park revenues compared to the prior year. The 656,000 visit, or 2.7%, increase in attendance was driven by higher season pass visitation as the result of new rides and attractions, including live entertainment and multi-week special events during the traditional summer season, as well as growth in our fall and winter seasonal events. The new WinterFest event at California's Great America resulted in incremental attendance and revenue and some shifting of season pass related revenue into the fourth quarter. We expect this to also occur as new WinterFest events open at three additional parks in 2017. The $0.70, or 1.5%, increase in in-park per capita spending was attributable to increases in admissions pricing and growth in our food and beverage programs. The $8.4 million, or 6.1%, increase in out-of-park revenues reflects favorable performance at our resort properties, increased transaction fees from on-line advanced purchases, an increase in special events at several parks, and proceeds received from a business interruption claim relating to an early season electrical outage at Cedar Point. The overall increase in net revenues is net of an unfavorable impact of foreign currency exchange rates of $3.7 million related to our Canadian property for fiscal year 2016 compared to the impact of foreign currency for fiscal year 2015.

Operating costs and expenses for the year increased 4.2%, or $33.4 million, to $827.3 million from $793.9 million for 2015. The increase is the result of a $1.8 million increase in cost of goods sold, a $21.3 million increase in operating expenses, and a $10.3 million increase in selling, general, and administrative expenses ("SG&A"). The $1.8 million increase in cost of goods sold relates to the higher attendance levels, as well as additional volume in our meal and beverage plan programs. Cost of goods sold, as a percentage of food, merchandise, and games revenue, was comparable for both periods. The $21.3 million increase in operating expenses was primarily due to higher seasonal and maintenance labor costs. These costs increased due to planned market-based adjustments and statutory minimum-wage rate increases along with related employer

21


taxes. The $10.3 million increase in SG&A expense was primarily due to increases in media and other marketing costs, technology related costs, and higher e-commerce and merchant fees. The increase in operating costs and expenses is net of a favorable impact of foreign currency exchange rates of $2.3 million related to our Canadian property for fiscal year 2016 compared to the impact of foreign currency for fiscal year 2015.

Depreciation and amortization expense for 2016 increased $6.2 million compared to the prior year due to growth in capital improvements. The loss on impairment / retirement of fixed assets, net for 2016 was $12.6 million, reflecting the impairment of assets in the normal course of business at several of our properties, as compared to $20.9 million in 2015 which reflected an $8.6 million impairment for a certain long-lived asset at Cedar Point (as discussed in detail in Note 3 to our Consolidated Financial Statements), as well as the retirement of assets during the period at several of our properties.

After the items above, operating income increased $21.6 million to $316.9 million for 2016 from operating income of $295.3 million for 2015.

Interest expense for 2016 decreased to $83.9 million from $86.8 million in 2015 relating to a decline in the outstanding notional amounts of our derivative contracts and the corresponding reductions in required settlement payments. The net effect of our swaps resulted in a non-cash benefit to earnings of $1.2 million for 2016 compared with a $6.9 million non-cash benefit to earnings for 2015. The difference reflects the change in fair market value movements in our de-designated swap portfolio offset by the amortization of amounts in OCI for these swaps. During the year, we also recognized a $14.7 million net benefit to earnings for unrealized/realized foreign currency compared with a $81.0 million charge to earnings for 2015. Amounts in both periods primarily represented foreign currency movements on the U.S.-dollar denominated debt held at our Canadian property.

For 2016, a provision for taxes of $71.4 million was recorded to account for publicly traded partnership ("PTP") taxes and income taxes on our corporate subsidiaries. This compares to a provision for taxes recorded for 2015 of $22.2 million. This increase in tax provision in the current year relates largely to improved operating results and the full utilization of net operating loss carryforwards during 2015, and to accounting for a change in U.S. tax law that increased the provision by $7.4 million. Cash taxes paid in 2016 were $44.5 million compared to $20.0 million in 2015. For 2017, cash taxes to be paid or payable are estimated to range from $55 million to $65 million. The increase in cash taxes relates to continuing strong business performance.

After the items above, net income for 2016 totaled $177.7 million, or $3.14 per diluted limited partner unit, compared with net income of $112.2 million, or $1.99 per diluted unit, for 2015.

For 2016, Adjusted EBITDA increased to $481.2 million from $459.2 million for 2015. The $22.0 million increase in Adjusted EBITDA is a result of higher attendance, in particular from growth in the Partnership's fall and winter seasonal events, higher in-park per capita spending, and stronger out-of-park revenues compared to the prior year. Partially offsetting these revenue increases were increases in operating costs and expenses associated with planned increases in labor costs, higher attendance, and other spending on marketing, technology and e-commerce fees. Over this same period, our Adjusted EBITDA margin increased by 10 basis points as a result of increased attendance and guest spending trends, offset by higher labor costs described above.


22


Results of Operations

2015 vs. 2014

The following table presents key operating and financial information for the years ended December 31, 2015 and 2014:
 
 
 
 
 
 
Increase (Decrease)
 
 
12/31/2015
 
12/31/2014
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
1,235,778

 
$
1,159,605

 
$
76,173

 
6.6
%
Operating costs and expenses
 
793,943

 
748,151

 
45,792

 
6.1
%
Depreciation and amortization
 
125,631

 
124,286

 
1,345

 
1.1
%
Loss on impairment/retirement of fixed assets, net
 
20,873

 
9,757

 
11,116

 
N/M

Gain on sale of other assets
 

 
(921
)
 
921

 
N/M

Operating income
 
$
295,331

 
$
278,332

 
$
16,999

 
6.1
%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
 
$
459,238

 
$
431,280

 
$
27,958

 
6.5
%
Adjusted EBITDA margin (2)
 
37.2
%
 
37.2
%
 

 
%
Attendance
 
24,448

 
23,305

 
1,143

 
4.9
%
In-park per capita spending
 
$
46.20

 
$
45.54

 
$
0.66

 
1.4
%
Out-of-park revenue
 
$
137,698

 
$
127,156

 
$
10,542

 
8.3
%

(1) For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see Item 6, "Selected Financial Data", on page 15.
(2) Adjusted EBITDA margin (Adjusted EBITDA divided by net revenues) is not a measurement computed in accordance with generally accepted accounting principles ("GAAP") or a substitute for measures computed in accordance with GAAP and may not be comparable to similarly titled measures of other companies. The Partnership provides Adjusted EBITDA margin because it believes the measure provides a meaningful metric of operating profitability.

Consolidated net revenues totaled $1,235.8 million in 2015, increasing $76.2 million, from $1,159.6 million in 2014. This reflected an increase in attendance and in-park per capita spending and an increase in out-of park revenues compared to 2014. Attendance for the year was positively impacted by strong season pass visitation, which we believe was driven by our strong capital program. The 1.4%, or $0.66, increase in in-park per capita spending was mainly attributable to the continued increases in admissions pricing and growth in our food and beverage programs. The 8.3%, or $10.5 million, increase in out-of-park revenues was due primarily to improved results at our resort properties, in particular at Hotel Breakers at Cedar Point. The increase in net revenues was net of a $20.1 million unfavorable impact of foreign currency exchange in 2015 compared to 2014.

Operating costs and expenses in 2015 increased $45.8 million, or 6.1%, to $739.9 million from $748.2 million in 2014. The increase was the result of a $9.6 million increase in cost of goods sold, a $21.5 million increase in operating expenses, and a $14.6 million increase in selling, general, and administrative expenses ("SG&A"). The $9.6 million increase in cost of goods sold was largely related to increases in attendance levels. Cost of goods sold as a percentage of revenues was comparable for both years. The $21.5 million increase in operating expenses was due to several items. First, we experienced an increase in labor costs due to normal merit increases, market-based and minimum-wage rate increases, and additional operating hours. Second, maintenance expense increased primarily due to increases in ride maintenance and infrastructure improvements, in particular at Cedar Point. Third, operating supplies increased primarily due to increased attendance and operating hours year-over-year. Lastly, self-insurance costs increased due to increases in estimated reserves based on higher attendance volume and wage levels. The $14.6 million increase in SG&A was primarily due to two items. First, we experienced an increase in labor costs due to normal merit increases and incentive compensation. Second, operating supplies increased due primarily to costs associated with special event promotional activities, continued expenditures related to our technology and security initiatives, and merchant fees. The increase in operating costs and expenses was net of a $10.2 million favorable impact of foreign currency exchange in 2015 compared to 2014.

Depreciation and amortization expense for 2015 increased 1.1%, or $1.3 million. Loss on impairment/retirement of fixed assets, net for 2015 was $20.9 million, reflecting the impairment of a certain long-lived asset at Cedar Point (as discussed in detail in Note 3 to our Consolidated Financial Statements) and the retirement of assets during the period at several of our properties, as compared to $9.8 million in 2014 which reflected a $2.4 million impairment of assets at Wildwater Kingdom and the retirement of assets during the period at several of our properties.

After the items above, operating income for the period decreased $17.0 million to $295.3 million for 2015 from operating income of $278.3 million for 2014.


23


Interest expense for 2015 decreased by $9.4 million to $86.8 million, from $96.3 million for 2014. The decrease was due to the lower interest rate on the June 2014 notes compared to the July 2010 notes which were outstanding for half of 2014.

The net effect of our swaps resulted in a non-cash benefit to earnings of $6.9 million for 2015 compared with a $2.1 million non-cash benefit to earnings for 2014. The difference reflected the change in fair market value movements in our de-designated swap portfolio offset by the amortization of amounts in OCI for these swaps. During 2015, we also recognized a $81.0 million charge to earnings for unrealized/realized foreign currency losses compared with a $40.9 million charge to earnings for 2014. Both amounts primarily represented foreign currency movements on the U.S.-dollar denominated debt held at our Canadian property.

For 2015, a provision for taxes of $22.2 million was recorded to account for publicly traded partnership ("PTP") taxes and income taxes on our corporate subsidiaries. This compares to a provision for taxes recorded for 2014 of $9.9 million. This increase in tax provision in 2015 related largely to improved operating results and due to the valuation allowance reduction of $1.1 million recorded in 2014. Cash taxes paid in 2015 were $20.0 million compared to $11.2 million in 2014.

After the items above, net income for 2015 totaled $112.2 million, or $1.99 per diluted limited partner unit, compared with net income of $104.2 million, or $1.86 per diluted unit, for 2014.

For 2015, Adjusted EBITDA increased to $459.2 million from $431.3 million for 2014. The $28.0 million increase in Adjusted EBITDA was a direct result of higher attendance, higher in-park per capita spending, and stronger out-of-park revenues compared to 2014. Partially offsetting these revenue increases were increases in operating costs and expenses associated with increased labor, initiatives, and other planned year-over-year cost increases. Over this same period, our Adjusted EBITDA margin remained flat.

24


Financial Condition

We ended 2016 in sound condition with respect to both liquidity and cash flow. The working capital ratio (current assets divided by current liabilities) was 0.8 as of December 31, 2016 and was 0.9 as of December 31, 2015. Receivables and inventories are at normally low seasonal levels and cash and credit facilities are in place to fund current liabilities, capital expenditures, partnership distributions, and pre-opening expenses as required.

Operating Activities

Net cash from operating activities in 2016 increased $15.2 million to $357.4 million from $342.2 million in 2015. The increase in operating cash flows between years was primarily attributable to changes in working capital.

Net cash from operating activities in 2015 increased $5.1 million to $342.2 million from $337.1 million in 2014. The increase in operating cash flows between years was primarily attributable to the increase in the operating results of our parks in 2015 over 2014 and a decrease in interest payments.

Investing Activities

Investing activities consist principally of capital investments we make in our parks and resort properties. During 2016, cash spent on capital expenditures totaled $160.7 million as we continued to reinvest in our properties. During 2016, we also purchased identifiable intangible assets for $0.6 million. During 2015, cash spent on capital expenditures totaled $175.9 million. During 2015, we also purchased a preferred equity investment in a non-public entity for $2.0 million. During 2014, cash spent on capital expenditures totaled $166.7 million. During 2014, we also sold a non-core asset for net proceeds of $1.4 million.

Historically, we have been able to improve our revenues and profitability by continuing to make substantial capital investments in our park and resort facilities. This has enabled us to maintain or increase attendance levels, as well as to generate increases in in-park per capita spending and revenues from guest accommodations. For the 2017 operating season, we will be investing approximately $135 million on infrastructure and marketable capital, and anticipate investing an additional $30 million to $40 million as we invest in incremental opportunities such as WinterFest, resort properties and sports facilities. Infrastructure and marketable capital investments will include a new world-class wooden roller coaster at Kings Island, Mystic Timbers, an expanded and newly themed water park at Cedar Point (renamed Cedar Point Shores Water Park), an expanded water park at Knott's Berry Farm, and many other new attractions at all of our parks. As stated, we are also looking forward to Carowinds, Worlds of Fun and Kings Island joining California's Great America in extending their seasons with a new WinterFest holiday event. In addition, the inaugural season of Cedar Point Sports Center, a state-of-the-art youth sporting complex with multi-purpose fields for various events and tournaments, will occur in 2017. Lastly, in combination with the new sports park, the Partnership has begun the expansion of Cedar Point's resort accommodations, including a complete transformation of Breakers Express into Cedar Point's Express Hotel in 2017.

Financing Activities

Net cash utilized for financing activities in 2016 totaled $193.6 million, compared with $174.2 million in 2015. This increase in net cash utilized for financing activities is due to an increase in distributions paid to partners in 2016, as well as a $6.0 million pre-payment of term debt in the current year.

Net cash utilized for financing activities in 2015 totaled $174.2 million, compared with $155.2 million in 2014. This increase in net cash utilized for financing activities is due to an increase in distributions paid to partners in 2015.

Liquidity and Capital Resources

In June 2014, the Partnership issued $450 million of 5.375% senior unsecured notes ("June 2014 notes"), maturing in 2024. The net proceeds from the offering of the June 2014 notes were used to redeem in full all of the Partnership’s $405 million of 9.125% July 2010 senior unsecured notes that were scheduled to mature in 2018, to satisfy and discharge the indenture governing the notes that were redeemed and for general corporate purposes.

The Partnership's June 2014 notes pay interest semi-annually in June and December, with the principal due in full on June 1, 2024. Prior to June 1, 2017, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.375% together with accrued and unpaid interest. The notes may be redeemed, in whole or in part, at any time prior to June 1, 2019 at a price equal to 100% of the principal amount of the notes redeemed plus a “make-whole” premium together with accrued and unpaid interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.

In March 2013, the Partnership issued $500 million of 5.25% senior unsecured notes ("March 2013 notes"), maturing in 2021. Concurrently with this offering, we entered into an $885 million credit agreement (the "2013 Credit Agreement"), which included a $630 million senior secured term loan facility and a $255 million senior secured revolving credit facility. The terms of the senior secured term loan facility include a maturity date of March 6, 2020 and bear an interest rate at a rate of London InterBank Offering Rate ("LIBOR") plus 250 basis points (bps) with a LIBOR floor of 75 bps. The term loan amortizes at $6.3 million annually. The net proceeds from the notes and borrowings under the 2013 Credit Agreement were used to repay in full all amounts outstanding under the previous credit facilities. The facilities provided under the 2013 Credit agreement are collateralized by substantially all of the assets of the Partnership.

25



The Partnership's March 2013 notes pay interest semi-annually in March and September, with the principal due in full on March 15, 2021. The notes may be redeemed, in whole or in part, at any time prior to March 15, 2017 at a price equal to 103.938% of the principal amount of the notes redeemed plus a “make-whole” premium together with accrued and unpaid interest, if any, to the redemption date. The notes may be redeemed after this date, in whole or in part, at various prices depending on the date redeemed.

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

As of December 31, 2016, before reduction for debt issuance costs, we had $602.9 million of variable-rate term debt, $950.0 million of outstanding fixed-rate notes, and no borrowings outstanding under our revolving credit facility. As of December 31, 2015, before reduction of debt issuance costs, we had $608.9 million of variable-rate term debt, $950.0 million of outstanding fixed-rate notes, and no borrowings outstanding under our revolving credit facility. After letters of credit, which totaled $15.9 million at December 31, 2016 and $16.3 million at December 31, 2015, we had available borrowings under our revolving credit facility of $239.1 million and $238.7 million respectively. The maximum outstanding balances under our revolving credit facility was $101.0 million during 2016 and $85.0 million during 2015. During the second quarter of 2016, $6.0 million of term debt was prepaid, which has resulted in no principal payments due until the third quarter of 2017.

As of December 31, 2016, we have four interest rate swap agreements that effectively convert $500 million of variable-rate debt to fixed rates. These swaps, which mature on December 31, 2020 and fix LIBOR at a weighted average rate of 2.64%, were not designated as cash flow hedges. In January 2016, the Partnership amended each of its four interest rate swap agreements to extend each of the maturities by two years and fix LIBOR at a rate of 2.64%. As of December 31, 2015, the four interest rate swap agreements, prior to amendment, were designated as cash flow hedges, matured on December 31, 2018 and fixed LIBOR at a weighted average rate of 2.94%. Additional detail regarding our swap arrangements is provided in Note 6 to our Consolidated Financial Statements.

On December 31, 2016, the fair market value of our swap portfolio was a liability of $17.7 million compared to a liability of $22.9 million in 2015. The fair value of our swap portfolio at 2016 and 2015 was classified as long-term and recorded in "Derivative Liability". Additional detail regarding our current and historical swap arrangements is provided in Note 6 to our Consolidated Financial Statements.

The 2013 Credit Agreement includes two Financial Condition Covenants, which if breached for any reason and not cured, could result in an event of default. At the end of the fourth quarter of 2016 and 2015, the first of these, the Consolidated Leverage Ratio, was set at a maximum of 5.50x and 5.75x consolidated total debt (excluding the revolving debt)-to-consolidated EBITDA, respectively. This required ratio decreased by 0.25x at the beginning of the second quarter of 2016. The final decrease will occur at the beginning of the second quarter of 2017 when the ratio will reach its minimum of 5.25x. The second of these ratios, the Consolidated Fixed Charge Coverage Ratio, is set at a minimum of 1.1x (consolidated total fixed charges-to-consolidated EBITDA). As of December 31, 2016 and 2015, the Partnership was in compliance with these Financial Condition Covenants and all other covenants under the 2013 Credit Agreement.

The Partnership is allowed to make Restricted Payments, as defined in the 2013 Credit Agreement, of up to $60 million annually, so long as no default or event of default has occurred and is continuing and so long as the Partnership would be in compliance with certain financial ratios after giving effect to the payments. Additional Restricted Payments are allowed to be made based on an Excess-Cash-Flow formula should the Partnership's pro-forma Consolidated Leverage Ratio be less than or equal to 5.00x. Pursuant to the terms of the indentures governing the Partnership's June 2014 and March 2013 notes, the Partnership can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing; and our ability to make additional Restricted Payments is permitted should the Partnership's pro forma Total Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.00x.

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.

In accordance with these debt provisions, on November 2, 2016, we announced the declaration of a distribution of $0.855 per limited partner unit, which was paid on December 15, 2016. Also, on February 22, 2017, we announced the declaration of a distribution of $0.855 per limited partner unit, which will be payable on March 15, 2017.

Existing credit facilities and cash flows from operations are expected to be sufficient to meet working capital needs, debt service, partnership distributions and planned capital expenditures for the foreseeable future.


26


Contractual Obligations

The following table summarizes certain obligations (on an undiscounted basis) as of December 31, 2016:

 
Payments Due by Period
(In thousands)
Total
 
2017
 
2018-2019
 
2020-2021
 
2022 - Thereafter
 

 

 
 
 
 
 
 
Long-term debt (1)
$
1,962,500

 
$
86,186

 
$
178,799

 
$
1,186,702

 
$
510,813

Capital expenditures (2)
50,236

 
35,005

 
15,231

 

 

Lease & other obligations (3)
150,828

 
24,391

 
17,030

 
12,749

 
96,658

Total
$
2,163,564

 
$
145,582

 
$
211,060

 
$
1,199,451

 
$
607,471


(1)
Represents maturities and mandatory prepayments on long-term debt obligations, fixed interest on senior notes, variable interest on term debt assuming current LIBOR interest rates, and the impact of our various derivative contracts. See Note 5 to our Consolidated Financial Statements for further information.
(2)
Represents contractual obligations in place at year-end for the purchase of new rides, facilities, and attractions. Obligations not denominated in U.S. dollars have been converted based on the currency exchange rates as of December 31, 2016.
(3)
Represents contractual lease and purchase obligations in place at year-end.

Off-Balance Sheet Arrangements

We had $15.9 million of letters of credit, which are primarily in place to backstop insurance arrangements, outstanding on our revolving credit facility as of December 31, 2016. We have no other significant off-balance sheet financing arrangements.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks from fluctuations in interest rates, and to a lesser extent on currency exchange rates on our operations in Canada, and from time to time, on imported rides and equipment. The objective of our financial risk management is to reduce the potential negative impact of interest rate and foreign currency exchange rate fluctuations to acceptable levels. We do not acquire market risk sensitive instruments for trading purposes.

We manage interest rate risk through the use of a combination of fixed-rate long-term debt, interest rate swaps that fix a portion of our variable-rate long-term debt, and variable-rate borrowings under our revolving credit facility. Translation exposures with regard to our Canadian operations are not hedged.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value of the derivative instrument is reported as a component of “Other comprehensive income (loss)” and reclassified into earnings in the period during which the hedged transaction affects earnings. Changes in fair value of derivative instruments that do not qualify as effective hedging activities are reported as “Net effect of swaps” in the consolidated statement of operations. Additionally, the “Other comprehensive income (loss)” related to interest rate swaps that become ineffective is amortized over the remaining life of the interest rate swap and reported as a component of “Net effect of swaps” in the consolidated statement of operations.

As of December 31, 2016, before reduction for debt issuance costs, we had $950.0 million of fixed-rate senior unsecured notes and $602.9 million of variable-rate term debt. After considering the impact of interest rate swap agreements, most of our outstanding long-term debt represents fixed-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $23 million, a hypothetical 100 bps increase in 30-day LIBOR on our variable-rate debt (not considering the impact of our interest rate swaps) would lead to an increase of approximately $6.3 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 year.

A uniform 10% strengthening of the U.S. dollar relative to the Canadian dollar would result in a $3.0 million decrease in annual operating income.

Impact of Inflation

Substantial increases in costs and expenses could impact our operating results to the extent such increases could not be passed along to our guests. In particular, increases in labor, supplies, taxes, and utility expenses could have an impact on our operating results. The majority of our employees are seasonal and are paid hourly rates which are consistent with federal and state minimum wage laws. Historically, we have been able to pass along cost increases to guests through increases in admission, food, merchandise and other prices, and we believe that we will continue to have the ability to do so over the long term. We believe that the effects of inflation, if any, on our operating results and financial condition have been and will continue to be minor.

27


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 this Form 10-K could adversely affect our future financial performance and cause actual results, or our beliefs or strategies, 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information appearing under the subheading “Quantitative and Qualitative Disclosures about Market Risk” under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” on page 27 of this Report is incorporated herein by reference.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Quarterly operating results for 2016 and 2015 are presented in the table below (in thousands, except per unit amounts):

Unaudited
 
Net revenues
 
Operating income (loss)
 
Net income (loss)
 
Net income (loss) per limited partner unit-basic
 
Net income (loss) per limited partner unit-diluted
2016
 
 
 
 
 
 
 
 
 
 
1st Quarter
 
$
58,438

 
$
(65,818
)
 
$
(48,486
)
 
$
(0.87
)
 
$
(0.87
)
2nd Quarter
 
388,034

 
94,858

 
57,983

 
1.04

 
1.03

3rd Quarter
 
650,283

 
267,795

 
174,987

 
3.13

 
3.10

4th Quarter (1)
 
191,966

 
20,104

 
(6,796
)
 
(0.12
)
 
(0.12
)
2016 Total
 
$
1,288,721

 
$
316,939

 
$
177,688

 
3.18

 
3.14

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
1st Quarter
 
$
46,817

 
$
(69,633
)
 
$
(83,833
)
 
$
(1.50
)
 
$
(1.50
)
2nd Quarter
 
377,408

 
93,027

 
57,583

 
1.03

 
1.02

3rd Quarter
 
644,637

 
277,692

 
164,151

 
2.94

 
2.92

4th Quarter (2)
 
166,916

 
(5,755
)
 
(25,679
)
 
(0.46
)
 
(0.46
)
2015 Total
 
$
1,235,778

 
$
295,331

 
$
112,222

 
2.01

 
1.99


(1)
The fourth quarter of 2016 includes favorable results from fall and winter seasonal events as well as the benefit of strong post-season expense management.
(2)
The fourth quarter of 2015 included a non-cash charge of $8.6 million for the impairment of a long-lived asset at Cedar Point.

Note:
To assure that our highly seasonal operations will not result in misleading comparisons of interim periods, the Partnership has adopted the following reporting procedures: (a) seasonal operating costs are expensed over the operating season, including some costs incurred prior to the season, which are deferred and amortized over the season, and (b) all other costs are expensed as incurred or ratably over the entire year.

28


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Unitholders of Cedar Fair, L.P.
Sandusky, Ohio

We have audited the accompanying consolidated balance sheets of Cedar Fair, L.P. and subsidiaries (the "Partnership") as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income, partners' equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cedar Fair, L.P. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Partnership's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2017 expressed an unqualified opinion on the Partnership's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio
February 24, 2017










29


CEDAR FAIR, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
12/31/2016
 
12/31/2015
ASSETS
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
122,716

 
$
119,557

Receivables
 
35,414

 
29,494

Inventories
 
26,276

 
25,029

Other current assets
 
11,270

 
9,946

 
 
195,676

 
184,026

Property and Equipment:
 
 
 
 
Land
 
265,961

 
267,782

Land improvements
 
402,013

 
381,191

Buildings
 
663,982

 
647,514

Rides and equipment
 
1,643,770

 
1,561,234

Construction in progress
 
58,299

 
50,962

 
 
3,034,025

 
2,908,683

Less accumulated depreciation
 
(1,494,805
)
 
(1,393,805
)
 
 
1,539,220

 
1,514,878

Goodwill
 
179,660

 
210,811

Other Intangibles, net
 
37,837

 
35,895

Other Assets
 
20,788

 
17,410

 
 
$
1,973,181

 
$
1,963,020

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
Current Liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
2,775

 
$
2,475

Accounts payable
 
20,851

 
17,122

Deferred revenue
 
82,765

 
69,514

Accrued interest
 
9,986

 
9,910

Accrued taxes
 
58,958

 
41,937

Accrued salaries, wages and benefits
 
30,358

 
26,916

Self-insurance reserves
 
27,063

 
23,996

Other accrued liabilities
 
9,927

 
6,801

 
 
242,683

 
198,671

Deferred Tax Liability
 
104,885

 
129,763

Derivative Liability
 
17,721

 
22,918

Other Liabilities
 
13,162

 
17,983

Long-Term Debt:
 
 
 
 
Term debt
 
594,228

 
598,346

Notes
 
939,983

 
938,330

 
 
1,534,211

 
1,536,676

Commitments and Contingencies (Note 10)
 

 

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

 
5,290

General partner
 

 

Limited partners, 56,201 and 56,018 units outstanding at December 31, 2016 and December 31, 2015, respectively
 
52,288

 
48,428

Accumulated other comprehensive income
 
2,941

 
3,291

 
 
60,519

 
57,009

 
 
$
1,973,181

 
$
1,963,020

    

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

30


CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per unit amounts)

 
 
Years Ended December 31,
 
 
2016
 
2015
 
2014
Net revenues:
 
 
 
 
 
 
Admissions
 
$
716,189

 
$
687,442

 
$
661,455

Food, merchandise and games
 
407,673

 
398,019

 
365,528

Accommodations, extra-charge products and other
 
164,859

 
150,317

 
132,622

 
 
1,288,721

 
1,235,778

 
1,159,605

Costs and expenses:
 

 
 
 
 
Cost of food, merchandise and games revenues
 
106,608

 
104,827

 
95,208

Operating expenses
 
538,881

 
517,626

 
496,079

Selling, general and administrative
 
181,830

 
171,490

 
156,864

Depreciation and amortization
 
131,876

 
125,631

 
124,286

Loss on impairment / retirement of fixed assets, net
 
12,587

 
20,873

 
9,757

Gain on sale of other assets
 

 

 
(921
)
 
 
971,782

 
940,447

 
881,273

Operating income
 
316,939

 
295,331

 
278,332

Interest expense
 
83,863

 
86,849

 
96,286

Net effect of swaps
 
(1,197
)
 
(6,884
)
 
(2,062
)
Loss on early debt extinguishment
 

 

 
29,261

Unrealized/realized foreign currency (gain) loss
 
(14,656
)
 
81,016

 
40,873

Interest income
 
(177
)
 
(64
)
 
(126
)
Income before taxes
 
249,106

 
134,414

 
114,100

Provision for taxes
 
71,418

 
22,192

 
9,885

Net income
 
177,688

 
112,222

 
104,215

Net income allocated to general partner
 
2

 
1

 
1

Net income allocated to limited partners
 
$
177,686

 
$
112,221

 
$
104,214

 
 
 
 
 
 
 
Net income
 
$
177,688

 
$
112,222

 
$
104,215

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
Cumulative foreign currency translation adjustment
 
(3,700
)
 
16,655

 
5,931

Unrealized gain (loss) on cash flow hedging derivatives
 
3,350

 
(2,734
)
 
(1,553
)
Other comprehensive income (loss), (net of tax)
 
(350
)
 
13,921

 
4,378

Total comprehensive income
 
$
177,338

 
$
126,143

 
$
108,593

Basic earnings per limited partner unit:
 
 
 
 
 
 
Weighted average limited partner units outstanding
 
55,933

 
55,745

 
55,548

Net income per limited partner unit
 
$
3.18

 
$
2.01

 
$
1.88

Diluted earnings per limited partner unit:
 
 
 
 
 
 
Weighted average limited partner units outstanding
 
56,562

 
56,362

 
55,992

Net income per limited partner unit
 
$
3.14

 
$
1.99

 
$
1.86



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

31


CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 
Years Ended December 31,
 
 
2016
 
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 
$
177,688

 
$
112,222

 
$
104,215

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
131,876

 
125,631

 
124,286

Loss on early debt extinguishment
 

 

 
29,261

Non-cash foreign currency (gain) loss on debt
 
(14,771
)
 
81,608

 
39,088

Non-cash equity based compensation expense
 
10,958

 
7,265

 
9,668

Non-cash deferred income tax expense (benefit)
 
10,662

 
(16,056
)
 
(2,961
)
Other non-cash expenses
 
13,300

 
15,321

 
11,236

Change in operating assets and liabilities:
 
 
 
 
 
 
(Increase) decrease in receivables
 
(5,887
)
 
(2,276
)
 
(6,235
)
(Increase) decrease in inventories
 
(1,208
)
 
607

 
46

(Increase) decrease in other assets
 
(53
)
 
(875
)
 
3,021

Increase (decrease) in accounts payable
 
(407
)
 
3,243

 
884

Increase (decrease) in deferred revenue
 
13,099

 
9,149

 
16,965

Increase (decrease) in accrued interest
 
13

 
359

 
(12,554
)
Increase (decrease) in accrued taxes
 
16,888

 
20,965

 
2,319

Increase (decrease) in accrued salaries and wages
 
5,804

 
(6,997
)
 
4,998

Increase (decrease) in self-insurance reserves
 
3,026

 
881

 
(133
)
Increase (decrease) in other liabilities
 
(3,561
)
 
(8,830
)
 
12,999

Net cash from operating activities
 
357,427

 
342,217

 
337,103

CASH FLOWS FOR INVESTING ACTIVITIES
 
 
 
 
 
 
Capital expenditures
 
$
(160,656
)
 
$
(175,865
)
 
$
(166,719
)
Proceeds from sale of assets
 

 

 
1,377

Purchase of preferred equity investment
 

 
(2,000
)
 

Purchase of identifiable intangible assets
 
(577
)
 

 

Net cash for investing activities
 
(161,233
)
 
(177,865
)
 
(165,342
)
CASH FLOWS FOR FINANCING ACTIVITIES
 
 
 
 
 
 
Note borrowings
 

 

 
450,000

Term debt payments
 
(6,000
)
 

 
(10,000
)
Note payments, including early termination penalties
 

 

 
(426,148
)
Distributions paid to partners
 
(187,182
)
 
(172,614
)
 
(159,432
)
Payment of debt issuance costs
 

 

 
(9,795
)
Tax effect of units involved in treasury unit transactions
 
(422
)
 
(1,589
)
 
140

Net cash for financing activities
 
(193,604
)
 
(174,203
)
 
(155,235
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 
569

 
(2,432
)
 
(2,742
)
CASH AND CASH EQUIVALENTS
 
 
 
 
 
 
Net increase (decrease) for the year
 
3,159

 
(12,283
)
 
13,784

Balance, beginning of year
 
119,557

 
131,840

 
118,056

Balance, end of year
 
$
122,716

 
$
119,557

 
$
131,840

 
 
 
 
 
 
 
SUPPLEMENTAL INFORMATION
 
 
 
 
 
 
Cash payments for interest expense
 
$