Edgar Filing: CEDAR FAIR L P

Large accelerated filer

Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 1-9444

CEDAR FAIR, L.P.

(Exact name of registrant as specified in its charter)



DELAWARE		34-1560655
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Cedar Point Drive, Sandusky, Ohio 44870-5259

(Address of principal executive offices) (Zip Code)

(419) 626-0830

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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




Title of Class		Units Outstanding as of October 30, 2015
Units Representing Limited Partner Interests		56,031,776

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CEDAR FAIR, L.P.

INDEX

FORM 10 - Q




Part I - Financial Information

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

Part II - Other Information

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 6.	Exhibits	36

Signatures		37

Index to Exhibits		38

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CEDAR FAIR, L.P.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)



	9/27/2015			12/31/2014			9/28/2014
ASSETS
Current Assets:
Cash and cash equivalents	$	196,323		$	131,840		$	189,374
Receivables	44,979			27,395			41,262
Inventories	30,162			25,883			30,461
Current deferred tax asset	9,264			9,265			9,675
Other current assets	14,085			9,334			13,985
	294,813			203,717			284,757
Property and Equipment:
Land	270,358			276,297			279,350
Land improvements	380,356			366,863			372,145
Buildings	651,564			599,907			607,065
Rides and equipment	1,577,635			1,535,705			1,562,070
Construction in progress	25,231			70,431			39,058
	2,905,144			2,849,203			2,859,688
Less accumulated depreciation	(1,390,062		)	(1,322,652		)	(1,341,557		)
	1,515,082			1,526,551			1,518,131
Goodwill	214,319			228,291			232,513
Other Intangibles, net	36,249			38,191			38,766
Other Assets	38,483			41,569			42,909
	$	2,098,946		$	2,038,319		$	2,117,076
LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	—		$	—		$	4,600
Accounts payable	21,418			23,933			21,866
Deferred revenue	51,944			61,161			48,141
Accrued interest	11,898			9,916			12,008
Accrued taxes	49,735			21,800			38,407
Accrued salaries, wages and benefits	42,555			34,102			42,139
Self-insurance reserves	24,402			23,377			23,931
Current derivative liability	3,770			11,791			—
Other accrued liabilities	15,474			12,139			8,392
	221,196			198,219			199,484
Deferred Tax Liability	154,228			152,513			157,389
Derivative Liability	24,042			14,649			25,802
Other Liabilities	15,488			17,871			16,595
Long-Term Debt:
Term debt	608,850			608,850			614,250
Notes	950,000			950,000			950,000
	1,558,850			1,558,850			1,564,250
Commitments and Contingencies (Note 10)
Partners’ Equity:
Special L.P. interests	5,290			5,290			5,290
General partner	2			1			3
Limited partners, 56,008, 55,828 and 55,859 units outstanding at September 27, 2015, December 31, 2014 and September 28, 2014, respectively	120,912			101,556			161,157
Accumulated other comprehensive loss	(1,062		)	(10,630		)	(12,894		)
	125,142			96,217			153,556
	$	2,098,946		$	2,038,319		$	2,117,076

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

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CEDAR FAIR, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per unit amounts)



	Three months ended						Nine months ended
	9/27/2015			9/28/2014			9/27/2015			9/28/2014
Net revenues:
Admissions	$	361,106		$	340,101		$	591,457		$	566,126
Food, merchandise and games	201,408			184,038			347,985			322,025
Accommodations, extra-charge products and other	82,123			71,179			129,420			110,647
	644,637			595,318			1,068,862			998,798
Costs and expenses:
Cost of food, merchandise, and games revenues	52,174			46,812			90,868			82,887
Operating expenses	188,565			178,649			424,020			406,191
Selling, general and administrative	61,394			57,205			133,277			125,226
Depreciation and amortization	59,059			58,244			110,175			109,525
Gain on sale of other assets	—			—			—			(921		)
Loss on impairment / retirement of fixed assets, net	5,753			1,475			9,436			2,687
	366,945			342,385			767,776			725,595
Operating income	277,692			252,933			301,086			273,203
Interest expense	22,159			21,462			64,164			74,101
Net effect of swaps	(1,439		)	(1,087		)	(2,962		)	(1,031		)
Loss on early debt extinguishment	—			(246		)	—			29,027
Unrealized/realized foreign currency loss	33,891			21,515			64,198			22,597
Interest income	(4		)	(16		)	(49		)	(95		)
Income before taxes	223,085			211,305			175,735			148,604
Provision for taxes	58,934			49,403			37,834			26,340
Net income	164,151			161,902			137,901			122,264
Net income allocated to general partner	2			2			2			1
Net income allocated to limited partners	$	164,149		$	161,900		$	137,899		$	122,263

Net income	$	164,151		$	161,902		$	137,901		$	122,264
Other comprehensive income, (net of tax):
Cumulative foreign currency translation adjustment	7,688			2,975			13,144			2,279
Unrealized income (loss) on cash flow hedging derivatives	(2,978		)	2,726			(3,576		)	(165		)
Other comprehensive income (loss), (net of tax)	4,710			5,701			9,568			2,114
Total comprehensive income	$	168,861		$	167,603		$	147,469		$	124,378
Basic income per limited partner unit:
Weighted average limited partner units outstanding	55,770			55,439			55,721			55,448
Net income per limited partner unit	$	2.94		$	2.92		$	2.47		$	2.21
Diluted income per limited partner unit:
Weighted average limited partner units outstanding	56,282			55,855			56,141			55,855
Net income per limited partner unit	$	2.92		$	2.90		$	2.46		$	2.19

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

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CEDAR FAIR, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY

(In thousands)



	Nine months ended			Nine months ended
	9/27/2015			9/28/2014
Limited Partnership Units Outstanding
Beginning balance	55,828			55,716
Limited partnership unit options exercised	48			19
Limited partnership unit forfeitures	(1		)	—
Issuance of limited partnership units as compensation	133			128
	56,008			55,863
Limited Partners’ Equity
Beginning balance	$	101,556		$	148,847
Net income	137,899			122,263
Partnership distribution declared ($2.25 and $2.10 per limited partnership unit)	(126,266		)	(117,468		)
Expense recognized for limited partnership unit options	466			668
Tax effect of units involved in option exercises and treasury unit transactions	(2,048		)	(785		)
Issuance of limited partnership units as compensation	9,305			7,632
	120,912			161,157
General Partner’s Equity
Beginning balance	1			2
Net income	2			1
Partnership distribution declared	(1		)	—
	2			3
Special L.P. Interests	5,290			5,290
Accumulated Other Comprehensive Income (Loss)
Cumulative foreign currency translation adjustment:
Beginning balance	5,936			5
Period activity, net of tax ($7,554) and ($1,310)	13,144			2,279
	19,080			2,284
Unrealized loss on cash flow hedging derivatives:
Beginning balance	(16,566		)	(15,013		)
Period activity, net of tax $758 and $6	(3,576		)	(165		)
	(20,142		)	(15,178		)
	(1,062		)	(12,894		)
Total Partners’ Equity	$	125,142		$	153,556

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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CEDAR FAIR, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Nine months ended
	9/27/2015			9/28/2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	137,901		$	122,264
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	110,175			109,525
Loss on early debt extinguishment	—			29,027
Unrealized foreign currency loss	64,143			22,523
Other non-cash expenses	16,492			11,379
Net change in working capital	16,803			10,546
Net change in other assets/liabilities	(1,442		)	6,455
Net cash from operating activities	344,072			311,719
CASH FLOWS FOR INVESTING ACTIVITIES
Capital expenditures	(144,476		)	(137,013		)
Sale of non-core asset	—			1,377
Purchase of preferred equity investment	(2,000		)	—
Net cash for investing activities	(146,476		)	(135,636		)
CASH FLOWS FOR FINANCING ACTIVITIES
Note borrowings	—			450,000
Note payments, including amounts paid for early termination	—			(426,148		)
Distributions paid to partners	(126,267		)	(117,468		)
Payment of debt issuance costs	—			(9,795		)
Tax effect of units involved in option exercises and treasury unit transactions	(2,048		)	(785		)
Net cash for financing activities	(128,315		)	(104,196		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(4,798		)	(569		)
CASH AND CASH EQUIVALENTS
Net increase for the period	64,483			71,318
Balance, beginning of period	131,840			118,056
Balance, end of period	$	196,323		$	189,374
SUPPLEMENTAL INFORMATION
Cash payments for interest expense	$	61,043		$	80,203
Interest capitalized	1,890			1,167
Cash payments for income taxes, net of refunds	15,926			10,283
Capital expenditures in accounts payable	1,158			3,414

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

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CEDAR FAIR, L.P.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 27, 2015 AND SEPTEMBER 28, 2014

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

(1) Significant Accounting and Reporting Policies:

The Partnership’s unaudited condensed consolidated financial statements for the periods ended September 27, 2015 and September 28, 2014 included in this Form 10-Q report have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the year ended December 31, 2014, which were included in the Form 10-K filed on February 26, 2015. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission). These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K referred to above.

New Accounting Pronouncements

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

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying value of the corresponding debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for annual and interim periods beginning on or after December 15, 2015 with early adoption permitted. We do not expect adoption of ASU 2015-03 to have an impact on our unaudited condensed consolidated statements of operations or unaudited condensed consolidated statements of cash flows. The impact of the adoption of this guidance will result in the reclassification of the unamortized debt issuance costs on the unaudited condensed consolidated balance sheets, which were $20.9 million, $24.6 million, and $25.9 million at September 27, 2015, December 31, 2014, and September 28, 2014, respectively.

(2) Interim Reporting:

The Partnership owns and operates eleven amusement parks, three separately gated outdoor water parks, one indoor water park and five hotels. Virtually all of the Partnership’s revenues from its seasonal amusement parks, as well as its outdoor water parks and other seasonal resort facilities, are realized during a 130- to 140-day operating period beginning in early May, with the major portion concentrated in the third quarter during the peak vacation months of July and August. Knott's Berry Farm is open daily on a year-round basis. Castaway Bay is generally open daily from Memorial Day to Labor Day, plus a limited daily schedule for the balance of the year.

To assure that these highly seasonal operations will not result in misleading comparisons of current and subsequent interim periods, the Partnership has adopted the following accounting and reporting procedures for its seasonal parks: (a) revenues on multi-use tickets are recognized over the estimated number of visits expected for each type of ticket and are adjusted periodically during the operating season prior to the ticket expiration, which occurs no later than the close of the operating season or December 31 each year, (b) depreciation, advertising and certain seasonal operating costs are expensed during each park’s operating season, including certain costs incurred prior to the season which are amortized over the season, and (c) all other costs are expensed as incurred or ratably over the entire year.

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(3) Long-Lived Assets:

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

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

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

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

(4) Goodwill and Other Intangible Assets:

In accordance with the applicable accounting rules, goodwill is not amortized, but, along with indefinite-lived trade-names, is evaluated for impairment on an annual basis or more frequently if indicators of impairment exist. As of September 27, 2015, there were no indicators of impairment. The Partnership tested goodwill and other indefinite-lived intangibles for impairment on December 31, 2014 and no impairment was indicated.

A summary of changes in the Partnership’s carrying value of goodwill for the nine months ended September 27, 2015 and September 28, 2014 is as follows:



(In thousands)	Goodwill (gross)			Accumulated Impairment Losses			Goodwill (net)
Balance at December 31, 2013	$	317,957		$	(79,868	)	$	238,089
Foreign currency translation	(5,576		)	—			(5,576		)
Balance at September 28, 2014	$	312,381		$	(79,868	)	$	232,513

Balance at December 31, 2014	$	308,159		$	(79,868	)	$	228,291
Foreign currency translation	(13,972		)	—			(13,972		)
Balance at September 27, 2015	$	294,187		$	(79,868	)	$	214,319

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At September 27, 2015, December 31, 2014, and September 28, 2014 the Partnership’s other intangible assets consisted of the following:



September 27, 2015	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
(In thousands)
Other intangible assets:
Trade names	$	35,705	$	—	$	35,705
License / franchise agreements	905		361		544
Total other intangible assets	$	36,610	$	361	$	36,249

December 31, 2014
(In thousands)
Other intangible assets:
Trade names	$	37,683	$	—	$	37,683
License / franchise agreements	818		310		508
Total other intangible assets	$	38,501	$	310	$	38,191

September 28, 2014
(In thousands)
Other intangible assets:
Trade names	$	38,280	$	—	$	38,280
License / franchise agreements	899		413		486
Total other intangible assets	$	39,179	$	413	$	38,766

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

(5) Long-Term Debt:

In June of 2014, the Partnership issued $450 million of 5.375% senior unsecured notes ("June 2014 notes"), maturing in 2024, in a private placement. The net proceeds from the offering of the June 2014 notes were used to redeem in full all of the Partnership’s $405 million of 9.125% July 2010 senior unsecured notes that were scheduled to mature in 2018 (and which included $5.6 million of Original Issue Discount ("OID") to yield 9.375%), to satisfy and discharge the indenture governing the notes that were redeemed and for general corporate purposes.

The Partnership's June 2014 notes pay interest semi-annually in June and December, with the principal due in full on June 1, 2024. 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. 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.

In March 2013, the Partnership issued $500 million of 5.25% senior unsecured notes ("March 2013 notes"), maturing in 2021, in a private placement. Concurrently with this offering, the Partnership entered into a new $885 million credit agreement (the "2013 Credit Agreement"), which included a $630 million senior secured term loan facility and a $255 million senior secured revolving credit facility. The terms of the senior secured term loan facility include a maturity date of March 6, 2020 and bear interest at a rate of LIBOR ("London InterBank Offering Rate") plus 250 bps with a LIBOR floor of 75 bps. The term loan amortizes at $6.3 million annually and allows interest to be paid on a 30-, 60-, or 90-day basis. The Partnership is currently paying interest on a 30-day basis. The net proceeds from the notes and borrowings under the 2013 Credit Agreement were used to repay in full all amounts outstanding under the previous credit facilities. The facilities provided under the 2013 Credit Agreement are collateralized by substantially all of the assets of the Partnership.

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

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letters of credit. The 2013 Credit Agreement requires the Partnership to pay a commitment fee of 38 bps per annum on the unused portion of the credit facilities.

The 2013 Credit Agreement requires the Partnership to maintain specified financial ratios, which if breached for any reason, including a decline in operating results, could result in an event of default under the agreement. The most restrictive of these ratios is the Consolidated Leverage Ratio. At the end of the third quarter of 2015, this ratio was set at 5.75x consolidated total debt (excluding the revolving debt)-to-consolidated EBITDA. The ratio decreased by 0.25x at the beginning of the second quarter and will decrease each second quarter until it reaches 5.25x. As of September 27, 2015, we were in compliance with this ratio 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 in 2015 and beyond is permitted should the Partnership's pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio be less than or equal to 5.00x.

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, 2016 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. Prior to March 15, 2016, up to 35% of the notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 105.25% together with accrued and unpaid interest.

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

(6) Derivative Financial Instruments:

Derivative financial instruments are used within the Partnership’s overall risk management program to manage certain interest rate and foreign currency risks. By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, the Partnership is 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 the Partnership believes poses minimal credit risk.

The Partnership does not use derivative financial instruments for trading purposes.

We have entered into several interest rate swaps that fix all of our variable rate term-debt payments. As of September 27, 2015, we have $800 million of variable-rate debt to fixed rates swaps that mature in December 2015 and fix LIBOR at a weighted average rate of 2.38%. These swaps have been de-designated as cash flow hedges. During the third quarter and fourth quarter of 2013, we entered into four forward-starting interest rate swap agreements that will effectively convert $500 million of variable-rate debt to fixed rates beginning in December of 2015. These swaps, which were designated as cash flow hedges, mature on December 31, 2018 and fix LIBOR at a weighted average rate of 2.94%.

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Fair Value of Derivative Instruments and the Classification in Condensed Consolidated Balance Sheet:



(In thousands)	Condensed Consolidated Balance Sheet Location	Fair Value as of			Fair Value as of			Fair Value as of
(In thousands)	Condensed Consolidated Balance Sheet Location	September 27, 2015			December 31, 2014			September 28, 2014
Derivatives designated as hedging instruments:
Interest rate swaps	Derivative Liability	$	(24,042	)	$	(14,649	)	$	(10,044	)
Total derivatives designated as hedging instruments		$	(24,042	)	$	(14,649	)	$	(10,044	)
Derivatives not designated as hedging instruments:
Interest rate swaps	Current Derivative Liability	$	(3,770	)	$	(11,791	)	$	—
Interest rate swaps	Derivative Liability	$	—		$	—		$	(15,758	)
Total derivatives not designated as hedging instruments		$	(3,770	)	$	(11,791	)	$	(15,758	)
Net derivative liability		$	(27,812	)	$	(26,440	)	$	(25,802	)

Derivatives Designated as Hedging Instruments

Changes in fair value of highly effective hedges are recorded as a component of accumulated other comprehensive loss in the unaudited condensed consolidated balance sheets. Any ineffectiveness is recognized immediately in income. Amounts recorded as a component of accumulated other comprehensive loss are reclassified into earnings in the same period the forecasted transactions affect earnings. As of September 27, 2015 we have no amounts that are forecasted to be reclassified into earnings in the next twelve months.

Derivatives Not Designated as Hedging Instruments

Certain interest rate swap contracts were deemed ineffective in prior years and no longer qualified for hedge accounting. As a result of discontinued hedge accounting, the instruments are prospectively adjusted to fair value each reporting period through "Net effect of swaps" on the unaudited condensed consolidated statements of operations and comprehensive income. The amounts that were previously recorded as a component of accumulated other comprehensive loss prior to the de-designation are reclassified to earnings and a corresponding realized gain or loss will be recognized when the forecasted cash flow occurs. As of September 27, 2015, approximately $0.2 million of gains remain in accumulated comprehensive loss related to the effective cash flow hedge contracts prior to de-designation and all of which will be reclassified to earnings within the next twelve months.

The following table presents our derivative portfolio along with their notional amounts and their fixed interest rates as of September 27, 2015.



	Interest Rate Swaps
($'s in thousands)	Derivatives designated as hedging instruments				Derivatives not designated as hedging instruments
	Notional Amounts		Fixed Rate		Notional Amounts		Fixed Rate
	$	200,000	3.00	%	$	200,000	2.27	%
	100,000		3.00	%	150,000		2.43	%
	100,000		3.00	%	75,000		2.30	%
	100,000		2.70	%	70,000		2.54	%
					50,000		2.54	%
					50,000		2.54	%
					50,000		2.43	%
					50,000		2.29	%
					50,000		2.29	%
					30,000		2.54	%
					25,000		2.30	%
Total $'s / Average Rate	$	500,000	2.94	%	$	800,000	2.38	%

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Effects of Derivative Instruments on Income (Loss) and Other Comprehensive Income (Loss) for the three-month periods ended September 27, 2015 and September 28, 2014:



(In thousands)	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)
Derivatives designated as Cash Flow Hedging Relationships	Three months ended			Three months ended
Derivatives designated as Cash Flow Hedging Relationships	9/27/2015			9/28/2014
Interest rate swaps	$	(5,237	)	$	1,235



(In thousands)		Amount and Location of Gain (Loss) Recognized in Income on Derivative
Derivatives not designated as Cash Flow Hedging Relationships		Three months ended		Three months ended
		9/27/2015		9/28/2014
Interest rate swaps	Net effect of swaps	$	3,125	$	3,073

During the quarter ended September 27, 2015, the Partnership recognized $3.1 million in income for the gain on the derivatives not designated as cash flow hedges and $1.7 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $1.4 million recorded in “Net effect of swaps.”

During the quarter ended September 28, 2014, the Partnership recognized $3.1 million in income for the gain on the derivatives not designated as cash flow hedges and $2.0 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $1.1 million recorded in “Net effect of swaps.”

Effects of Derivative Instruments on Income (Loss) and Other Comprehensive Income (Loss) for the nine-month periods ended September 27, 2015 and September 28, 2014:



(In thousands)	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)
Derivatives designated as Cash Flow Hedging Relationships	Nine months ended			Nine months ended
Derivatives designated as Cash Flow Hedging Relationships	9/27/2015			9/28/2014
Interest rate swaps	$	(9,393	)	$	(6,129	)



(In thousands)		Amount and Location of Gain (Loss) Recognized in Income on Derivative
Derivatives not designated as Cash Flow Hedging Relationships		Nine months ended		Nine months ended
		9/27/2015		9/28/2014
Interest rate swaps	Net effect of swaps	$	8,021	$	6,991

During the nine-month period ended September 27, 2015, the Partnership recognized $8.0 million in income for the gain on the derivatives not designated as cash flow hedges and $5.1 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $3.0 million recorded in “Net effect of swaps.”

During the nine-month period ended September 28, 2014, the Partnership recognized $7.0 million in income for the gain on the derivatives not designated as cash flow hedges and $6.0 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $1.0 million recorded in “Net effect of swaps.”

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(7) Fair Value Measurements:

The FASB Accounting Standards Codification (ASC) relating to fair value measurements emphasizes that fair value is a market-based measurement that should be determined based on assumptions (inputs) that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable, and valuation techniques used to measure fair value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Accordingly, the FASB’s ASC establishes a hierarchal disclosure framework that ranks the quality and reliability of information used to determine fair values. The hierarchy is associated with the level of pricing observability utilized in measuring fair value and defines three levels of inputs to the fair value measurement process. Quoted prices are the most reliable valuation inputs, whereas model values that include inputs based on unobservable data are the least reliable. Each fair value measurement must be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety.

The three broad levels of inputs defined by the fair value hierarchy are as follows:


•	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.


•	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The table below presents the balances of assets and liabilities measured at fair value as of September 27, 2015, December 31, 2014, and September 28, 2014 on a recurring basis as well as the fair values of other financial instruments:



(In thousands)	Condensed Consolidated	Fair Value	September 27, 2015				December 31, 2014				September 28, 2014
(In thousands)	Balance Sheet Location	Hierarchy Level	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets (liabilities) measured on a recurring basis:
Interest rate swap agreements not designated as cash flow hedges	Current derivative liability	Level 2	(3,770	)	(3,770	)	(11,791	)	(11,791	)	—		—
Interest rate swap agreements not designated as cash flow hedges	Derivative Liability	Level 2	—		—		—		—		(15,758	)	(15,758	)
Interest rate swap agreements designated as cash flow hedges	Derivative Liability	Level 2	(24,042	)	(24,042	)	(14,649	)	(14,649	)	(10,044	)	(10,044	)
Other financial assets (liabilities):
Term debt	Long-Term Debt	Level 2	(608,850	)	(609,611	)	(608,850	)	(605,806	)	(614,250	)	(609,609	)
March 2013 notes	Long-Term Debt	Level 1	(500,000	)	(507,500	)	(500,000	)	(501,250	)	(500,000	)	(487,500	)
June 2014 notes	Long-Term Debt	⁽¹⁾	(450,000	)	(454,500	)	(450,000	)	(451,125	)	(450,000	)	(432,000	)


(1)	The June 2014 notes were based on Level 1 inputs as of September 27, 2015 and Level 2 inputs as of both December 31, 2014 and September 28, 2014.

Fair values of the interest rate swap agreements are determined using significant inputs, including the LIBOR forward curves, which are considered Level 2 observable market inputs. In addition, the Partnership considered the effect of its credit and non-performance risk on the fair values provided, and recognized an adjustment decreasing the net derivative liability by approximately $0.8 million as of September 27, 2015, $0.8 million as of December 31, 2014, and $0.6 million as of September 28, 2014.

The carrying value of cash and cash equivalents, revolver, accounts receivable, current portion of term debt, accounts payable, and accrued liabilities approximates fair value because of the short maturity of these instruments. There were no assets measured at fair value on a non-recurring basis at September 27, 2015, December 31, 2014, or September 28, 2014.

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(8) Earnings per Unit:

Net income per limited partner unit is calculated based on the following unit amounts:



	Three months ended				Nine months ended
	9/27/2015		9/28/2014		9/27/2015		9/28/2014
	(In thousands except per unit amounts)
Basic weighted average units outstanding	55,770		55,439		55,721		55,448
Effect of dilutive units:
Deferred units	21		—		15		—
Performance Units	—		—		9		—
Restricted units	365		123		271		186
Unit options	126		213		102		131
Phantom units	—		80		23		90
Diluted weighted average units outstanding	56,282		55,855		56,141		55,855
Net income per unit - basic	$	2.94	$	2.92	$	2.47	$	2.21
Net income per unit - diluted	$	2.92	$	2.90	$	2.46	$	2.19

The effect of out-of-the-money and/or antidilutive unit options on the three and nine months ended September 27, 2015 and September 28, 2014, respectively, had they not been out of the money or antidilutive, would have been immaterial in all periods presented.

(9) Income and Partnership Taxes:

Under the applicable accounting rules, income taxes are recognized for the amount of taxes payable by the Partnership’s corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The income tax provision (benefit) for interim periods is determined by applying an estimated annual effective tax rate to the quarterly income (loss) of the Partnership’s corporate subsidiaries. In addition to income taxes on its corporate subsidiaries, the Partnership is subject to a publicly traded partnership tax (PTP tax) on partnership-level gross income (net revenues less cost of food, merchandise and games). As such, the Partnership’s total provision (benefit) for taxes includes amounts for both the PTP tax and for income taxes on its corporate subsidiaries.

As of the third quarter of 2015, the Partnership has recorded $1.1 million of unrecognized tax benefits including interest and/or penalties related to state and local tax filing positions. The Partnership recognizes interest and/or penalties related to unrecognized tax benefits in the income tax provision. The Partnership does not anticipate that the balance of the unrecognized tax benefit will change significantly over the next 12 months.

(10) Contingencies:

The Partnership is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, none of these matters, beyond what has been disclosed within this document, are expected to have a material effect in the aggregate on the Partnership's financial statements.

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(11) Changes in Accumulated Other Comprehensive Income (Loss) by Component:

The following tables reflect the changes in Accumulated Other Comprehensive Income (Loss) related to limited partners' equity for the three-month periods ended September 27, 2015 and September 28, 2014:



	Changes in Accumulated Other Comprehensive Income by Component ⁽¹⁾
(In thousands)
		Gains and Losses
		on Cash Flow Hedges			Foreign Currency Items
							Total
Balance at June 28, 2015		$	(17,164	)	$	11,392	$	(5,772	)

Other comprehensive income before reclassifications, net of tax $797 and ($4,418), respectively		(4,440		)	7,688		3,248

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

Net other comprehensive income		(2,978		)	7,688		4,710

Balance at September 27, 2015		$	(20,142	)	$	19,080	$	(1,062	)



	Changes in Accumulated Other Comprehensive Income by Component ⁽¹⁾
(In thousands)
		Gains and Losses
		on Cash Flow Hedges			Foreign Currency Items
								Total
Balance at June 29, 2014		$	(17,904	)	$	(691	)	$	(18,595	)

Other comprehensive income before reclassifications, net of tax ($187) and ($1,713), respectively		1,048			2,975			4,023

Amounts reclassified from accumulated other comprehensive income, net of tax ($307) ⁽²⁾		1,678			—			1,678

Net other comprehensive income		2,726			2,975			5,701

Balance at September 28, 2014		$	(15,178	)	$	2,284		$	(12,894	)



Reclassifications Out of Accumulated Other Comprehensive Income ⁽¹⁾
(In thousands)
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges	Three months ended 9/27/15			Three months ended 9/28/14
Interest rate contracts	$	1,686		$	1,985		Net effect of swaps
Provision for taxes	(224		)	(307		)	Provision for taxes
	$	1,462		$	1,678

(1) All amounts are net of tax. Amounts in parentheses indicate debits.

(2) See Reclassifications Out of Accumulated Other Comprehensive Income table below for reclassification details.

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The following tables reflect the changes in Accumulated Other Comprehensive Income (Loss) related to limited partners' equity for the nine-month periods ended September 27, 2015 and September 28, 2014:



	Changes in Accumulated Other Comprehensive Income by Component ⁽¹⁾
(In thousands)
		Gains and Losses
		on Cash Flow Hedges			Foreign Currency Items
							Total
Balance at December 31, 2014		$	(16,566	)	$	5,936	$	(10,630	)

Other comprehensive income before reclassifications, net of tax $1,431 and ($7,554), respectively		(7,962		)	13,144		5,182

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

Net other comprehensive income		(3,576		)	13,144		9,568

Balance at September 27, 2015		$	(20,142	)	$	19,080	$	(1,062	)



	Changes in Accumulated Other Comprehensive Income by Component ⁽¹⁾
(In thousands)
		Gains and Losses
		on Cash Flow Hedges			Foreign Currency Items
							Total
Balance at December 31, 2013		$	(15,013	)	$	5	$	(15,008	)

Other comprehensive income before reclassifications, net of tax $928 and ($1,310), respectively		(5,200		)	2,279		(2,921		)

Amounts reclassified from accumulated other comprehensive income, net of tax ($922) ⁽²⁾		5,035			—		5,035

Net other comprehensive income		(165		)	2,279		2,114

Balance at September 28, 2014		$	(15,178	)	$	2,284	$	(12,894	)



Reclassifications Out of Accumulated Other Comprehensive Income ⁽¹⁾
(In thousands)
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges	Nine months ended 9/27/15			Nine months ended 9/28/14
Interest rate contracts	$	5,059		$	5,957		Net effect of swaps
Provision for taxes	(673		)	(922		)	Provision for taxes
	$	4,386		$	5,035

(1) All amounts are net of tax. Amounts in parentheses indicate debits.

(2) See Reclassifications Out of Accumulated Other Comprehensive Income table below for reclassification details.

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(12) Consolidating Financial Information of Guarantors and Issuers:

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

The following consolidating schedules present condensed financial information for Cedar Fair, L.P., Cedar Canada, and Magnum, the co-issuers, and each 100% owned subsidiary of Cedar Fair (other than Cedar Canada and Magnum), the guarantors (on a combined basis), as of September 27, 2015, December 31, 2014, and September 28, 2014 and for the three- and nine-month periods ended September 27, 2015 and September 28, 2014. In lieu of providing separate unaudited financial statements for the guarantor subsidiaries, the Partnership has included the accompanying condensed consolidating financial statements.

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CEDAR FAIR, L.P.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

September 27, 2015

(In thousands)



	Cedar Fair L.P. (Parent)		Co-Issuer Subsidiary (Magnum)		Co-Issuer Subsidiary (Cedar Canada)		Guarantor Subsidiaries		Eliminations			Total
ASSETS
Current Assets:
Cash and cash equivalents	$	132,000	$	—	$	49,512	$	16,632	$	(1,821	)	$	196,323
Receivables	478		139,898		117,605		702,444		(915,446		)	44,979
Inventories	—		124		1,496		28,542		—			30,162
Current deferred tax asset	—		4,547		674		4,043		—			9,264
Other current assets	285		25		747		13,028		—			14,085
	132,763		144,594		170,034		764,689		(917,267		)	294,813
Property and Equipment (net)	—		5,602		183,842		1,325,638		—			1,515,082
Investment in Park	760,412		876,248		178,052		42,485		(1,857,197		)	—
Goodwill	674		—		94,040		119,605		—			214,319
Other Intangibles, net	—		—		13,330		22,919		—			36,249
Deferred Tax Asset	—		23,112		—		—		(23,112		)	—
Other Assets	4,883		19,903		6,660		7,037		—			38,483
	$	898,732	$	1,069,459	$	645,958	$	2,282,373	$	(2,797,576	)	$	2,098,946
LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable	$	457,441	$	155,898	$	3,062	$	322,284	$	(917,267	)	$	21,418
Deferred revenue	—		30		4,582		47,332		—			51,944
Accrued interest	1,199		2,793		7,906		—		—			11,898
Accrued taxes	2,548		36,440		991		9,756		—			49,735
Accrued salaries, wages and benefits	—		31,277		2,012		9,266		—			42,555
Self-insurance reserves	—		7,861		1,391		15,150		—			24,402
Current derivative liability	2,257		1,513		—		—		—			3,770
Other accrued liabilities	1,183		3,641		601		10,049		—			15,474
	464,628		239,453		20,545		413,837		(917,267		)	221,196
Deferred Tax Liability	—		—		49,695		127,645		(23,112		)	154,228
Derivative Liability	14,065		9,976		—		1		—			24,042
Other Liabilities	—		4,088		—		11,400		—			15,488
Long-Term Debt:
Term debt	—		247,890		13,991		346,969		—			608,850
Notes	294,897		205,103		450,000		—		—			950,000
	294,897		452,993		463,991		346,969		—			1,558,850

Equity	125,142		362,949		111,727		1,382,521		(1,857,197		)	125,142
	$	898,732	$	1,069,459	$	645,958	$	2,282,373	$	(2,797,576	)	$	2,098,946

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CEDAR FAIR, L.P.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2014

(In thousands)



	Cedar Fair L.P. (Parent)		Co-Issuer Subsidiary (Magnum)		Co-Issuer Subsidiary (Cedar Canada)		Guarantor Subsidiaries		Eliminations			Total
ASSETS
Current Assets:
Cash and cash equivalents	$	80,000	$	382	$	45,519	$	5,939	$	—		$	131,840
Receivables	8		143,931		85,838		634,112		(836,494		)	27,395
Inventories	—		2,074		1,594		22,215		—			25,883
Current deferred tax asset	—		4,547		674		4,044		—			9,265
Other current assets	680		2,079		23,818		5,905		(23,148		)	9,334
	80,688		153,013		157,443		672,215		(859,642		)	203,717
Property and Equipment (net)	470,851		5,630		218,260		831,810		—			1,526,551
Investment in Park	544,340		812,549		163,904		43,659		(1,564,452		)	—
Goodwill	9,061		—		108,012		111,218		—			228,291
Other Intangibles, net	—		—		15,312		22,879		—			38,191
Deferred Tax Asset	—		24,827		—		—		(24,827		)	—
Other Assets	10,615		20,874		8,034		2,046		—			41,569
	$	1,115,555	$	1,016,893	$	670,965	$	1,683,827	$	(2,448,921	)	$	2,038,319
LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable	$	352,518	$	203,895	$	32,691	$	271,323	$	(836,494	)	$	23,933
Deferred revenue	—		60		4,592		56,509		—			61,161
Accrued interest	4,637		3,223		2,056		—		—			9,916
Accrued taxes	4,309		—		—