Company Quick10K Filing
Quick10K
Cedar Fair
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$53.09 57 $3,000
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-23 Quarter: 2018-09-23
10-Q 2018-06-24 Quarter: 2018-06-24
10-Q 2018-03-25 Quarter: 2018-03-25
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-24 Quarter: 2017-09-24
10-Q 2017-06-25 Quarter: 2017-06-25
10-Q 2017-03-26 Quarter: 2017-03-26
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-25 Quarter: 2016-09-25
10-Q 2016-06-26 Quarter: 2016-06-26
10-Q 2016-03-27 Quarter: 2016-03-27
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-27 Quarter: 2015-09-27
10-Q 2015-06-28 Quarter: 2015-06-28
10-Q 2015-03-29 Quarter: 2015-03-29
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-28 Quarter: 2014-09-28
10-Q 2014-06-29 Quarter: 2014-06-29
10-Q 2014-03-30 Quarter: 2014-03-30
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-10 Officers, Regulation FD, Exhibits
8-K 2019-02-13 Earnings, Exhibits
8-K 2018-09-06 Regulation FD, Exhibits
8-K 2018-07-11 Regulation FD, Exhibits
8-K 2018-06-07 Shareholder Vote
8-K 2018-03-14 Enter Agreement, Other Events, Exhibits
8-K 2018-02-14 Earnings, Exhibits
8-K 2017-06-01 Amend Bylaw, Exhibits
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FUN 2018-12-31
Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5. Market for Registrant's Depositary Units, Related Unitholder Matters and Issuer Purchases of Depositary Units.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10-K Summary.
EX-21 exhibit212018subsidiaries.htm
EX-23 exhibit232018consent.htm
EX-31.1 cedarfair-q4x2018xex311.htm
EX-31.2 cedarfair-q4x2018xex312.htm
EX-32 cedarfair-q4x2018xex32.htm

Cedar Fair Earnings 2018-12-31

FUN 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 cedarfair-10kx2018.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, 2018
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission file number 1-9444
CEDAR FAIR, L.P.
(Exact name of registrant as specified in its charter) 
DELAWARE
 
34-1560655
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
One Cedar Point Drive, Sandusky, Ohio 44870-5259
(Address of principal executive offices) (Zip Code)
(419) 626-0830
(Registrant’s telephone number, including area code)

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x No o
Indicate by check mark 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. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x 



The aggregate market value of Depositary Units held by non-affiliates of the Registrant based on the closing price of such units on June 22, 2018 of $64.09 per unit was approximately $3,540,385,307.
Number of Depositary Units representing limited partner interests outstanding as of February 1, 2019: 56,566,681

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 limited partner unitholders to be held in June 2019.
************
Page 1 of 76 pages



CEDAR FAIR, L.P.
2018 FORM 10-K CONTENTS
 
 
 
 
 
  
PAGE
 
 
 
 
  
 
 
 
 
  
 
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
  
 
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 





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 four hotels.

In 2018, the Partnership entertained approximately 26 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 two separately gated outdoor water parks located adjacent to Cedar Point and Knott's Berry Farm, three hotels at Cedar Point (including the Castaway Bay Indoor Waterpark Resort in Sandusky, Ohio) and one hotel at 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 is 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 for Halloween events. The two separately gated outdoor water parks also operate seasonally, generally from Memorial Day to Labor Day, plus some additional weekends before and after this period. As a result, a substantial portion of the Partnership's revenues from these parks are generated during an approximate 130- to 140-day operating season with the major portion concentrated in the third quarter during the peak vacation months of July and August. In 2018, California's Great America, Carowinds, Worlds of Fun, Kings Island and Kings Dominion also hosted WinterFest, a 20 to 25 day holiday event operating during November and December showcasing holiday shows and festivities. In 2019, Canada's Wonderland will also extend its operating season by 20 to 25 days to include WinterFest. Knott's Berry Farm continues to be open daily on a year-round basis. Castaway Bay is also generally open daily from Memorial Day to Labor Day with an additional 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 families and young people ages 12 through 24. 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. Attractive to both families and thrill-seekers, the park features 18 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 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 three 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 multiple outdoor pools. Located near the Causeway entrance to the park, Cedar Point's Express Hotel is a limited-service seasonal hotel.
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.
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 house approximately 4,100 of the park's seasonal employees.

3



Cedar Point Sports Center is an outdoor 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 land from the former Wildwater Kingdom seasonal water-park located near Cleveland, Ohio, which ceased operations during the third quarter of 2016. The 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 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 45 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, fitness facilities 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 2006. It contains numerous attractions, including 16 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. In 2019, Canada's Wonderland will begin hosting WinterFest.

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 2006. Kings Island is one of the most attended regional amusement parks in North America. The park features a children's area that has been consistently named the "Best Kids' Area in the World" by Amusement Today. 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 2006. 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, an upscale camping area that includes luxury cabins, RV sites, and tent and pop-up sites. The campground features a convenience store and a swimming pool.

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 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, an upscale camping area featuring luxury cabins, RV sites, and tent and pop-up sites. The campground also features a swimming pool, playground, and convenience store.

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

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 2006. The park draws its visitors primarily from San Jose, San Francisco, Sacramento, Modesto and Monterey, among other cities in northern California.

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's major markets include Philadelphia, Lancaster, Harrisburg, York, Scranton, Wilkes-Barre, Hazleton and the Lehigh Valley, Pennsylvania; New York City; and New Jersey.

4



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. 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 a convenience store.

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. 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.

Michigan's Adventure
Michigan's Adventure, which opened in 1956 as Deer Park and was acquired by the Partnership in 2001, is a combination amusement and water park located in Muskegon, Michigan. Michigan's Adventure 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 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 stricter 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 respective state agency. Additionally, all parks have added ride maintenance and operation inspections completed by third party qualified inspectors to make sure the Partnership's standards are being maintained.


5


EMPLOYEES

The Partnership has approximately 2,200 full-time employees. During the operating season, the Partnership employs in aggregate approximately 45,100 seasonal and part-time employees, many of whom are high school and college students. Approximately 4,100 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, 350 of Carowinds' seasonal employees, 200 of Kings Island's seasonal employees, 100 of Cedar Point's seasonal employees and 150 of Worlds of Fun'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.

The SEC maintains an Internet site at http://www.sec.gov that contains the Partnership's reports, proxy statements and other information.

6


SUPPLEMENTAL ITEM. Executive Officers of Cedar Fair

Name
 
Age
 
Position(s)
 
 
 
 
 
Matthew A. Ouimet
 
60

 
Matt Ouimet has been the Executive Chairman of the Board of Directors since January 2018 and a member of the Board of Directors since August 2011. Previously, he served as Chief Executive Officer from January 2012 through December 2017 and served as President from June 2011 to 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
 
58

 
Richard Zimmerman has been President and Chief Executive Officer since January 2018. Prior to that, he served as President and Chief Operating Officer from October 2016 through December 2017 and 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
 
52

 
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.
Tim V. Fisher
 
58

 
Tim Fisher joined Cedar Fair as Chief Operating Officer in December 2017. Prior to joining Cedar Fair, he served as Chief Executive Officer of Village Roadshow Theme Parks International, an Australian-based theme park operator, since March 2017. Prior to this appointment with Village Roadshow Theme Parks International, Tim served as Chief Executive Officer of Village Roadshow Theme Parks since January 2009.
Kelley S. Semmelroth
 
54

 
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
 
53

 
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
 
63

 
Phil Bender has served as Executive Vice President, Operations since November 2010, previously serving as Regional Vice President beginning in June 2006. Prior to that, he served as Vice President and General Manager of Worlds of Fun / Oceans of Fun from 2000 through 2006.
Robert A. Decker
 
58

 
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
 
50

 
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
 
55

 
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.


7


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 our amusement parks and separately gated outdoor water parks) and in-park per capita spending (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) 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.

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 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 for Halloween events. Six of our seasonal 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 adverse conditions or events 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.

The high fixed cost structure of amusement park operations can result in significantly lower margins if revenues do not meet expectations.
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.

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. 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.

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.



8


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 more than 20 years. The loss of services of our key employees could cause disruption in important operational, financial and strategic functions and 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, or third parties on our behalf, 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.

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 credit performance could be materially worse than anticipated, which may materially and adversely affect our business, financial position and results of operations.

There is a risk of accidents or other 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 and 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.

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


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 $1,700.4 million of outstanding indebtedness as of December 31, 2018 (after giving effect to $15.4 million of outstanding letters of credit under our revolving credit facility and before reduction of debt issuance costs and original issue discount).

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 and credit 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 indentures governing our notes, may restrict us from adopting some of these alternatives. In the absence of sufficient 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.

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.

Variable rate indebtedness could subject us to the risk of higher interest rates, which could cause our future debt service obligations to increase.
As of December 31, 2018, 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 Amended 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50x Consolidated Total Debt-to-Consolidated EBITDA. As of December 31, 2018, we were in compliance with this financial condition covenant and all other covenants under the Amended 2017 Credit Agreement.

Our long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing the June 2014 notes, which includes the most restrictive of these Restricted Payments provisions, we can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing, and we may make additional Restricted Payments if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00x.

10


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
Cedar Point Shores
(1), (3)
Sandusky, Ohio
685

540

145

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

175


Canada's Wonderland
 
Vaughan, Ontario, Canada
295

295


Kings Island
 
Mason, Ohio
680

330

350

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

300

100

Kings Dominion
 
Doswell, Virginia
740

280

460

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

165


Dorney Park
 
Allentown, Pennsylvania
210

180

30

Worlds of Fun
 
Kansas City, Missouri
350

250

100

Valleyfair
 
Shakopee, Minnesota
190

110

80

Michigan's Adventure
 
Muskegon, Michigan
260

120

140


(1) Cedar Point and Cedar Point Shores 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 320 acres of property on the mainland adjoining the approach to the Cedar Point Causeway with approximately 145 acres undeveloped. Cedar Point's Express Hotel, Castaway Bay Indoor Waterpark Resort and an adjoining restaurant, Castaway Bay Marina, two seasonal-employee housing complexes, and 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. The lease is renewable in 2039 with options to renew at the Partnership's discretion and has a right of first refusal clause to purchase the land. See Note 10 to the Consolidated Financial Statements for further information.

(3) In addition to the acreage above, the Partnership owns approximately 640 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 Amended 2017 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.
Freddie Ramos vs. Cedar Fair, L.P., Cedar Fair Management Company
The Partnership and Cedar Fair Management, Inc. are defendants in a lawsuit filed in Superior Court of the State of California for Orange County on November 23, 2016 by Freddie Ramos seeking damages and injunctive relief for claims related to certain employment and pay practices at our parks in California, including those related to certain check-out, time reporting, discharge, meal and rest period, and pay statement practices. The Partnership filed an answer on January 13, 2017 denying the allegations in the complaint and requesting a dismissal of all claims.  On January 17, 2017, the Partnership filed a Notice of Removal of the case from the state court to the United States District Court for the Central District of California. The class has not been certified. On August 29, 2017, the Partnership participated in a mediation relating to the claims alleged in the lawsuit. Following this mediation, the Partnership negotiated a $4.2 million settlement with the named Plaintiff on a class wide basis. As part of the settlement, the case was remanded back to the Superior Court of the State of California for Orange County for a preliminary hearing and final court approval of the proposed settlement. On October 19, 2018, the Court granted preliminary approval of the proposed settlement. Notice of the Settlement was mailed to class members on December 19, 2018. The final approval hearing is scheduled for February 22, 2019. Based upon the information available, the Partnership believes the liability recorded as of December 31, 2018 is adequate and does not expect the terms of the negotiated settlement or final briefing to materially affect its financial results in future periods.


ITEM 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 1, 2019, there were approximately 5,100 registered holders of Cedar Fair, L.P. Depositary Units, representing limited partner interests. Item 12 in this Form 10-K includes information regarding the Partnership's equity incentive plan, which is incorporated herein by reference.

The Partnership's long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing the Partnership's June 2014 notes, which includes the most restrictive of these Restricted Payment provisions, the Partnership can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing, and the Partnership can make additional Restricted Payments if the Partnership's pro forma Total Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00x.


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 31, 2013.
chart-9bae9de8d13a581ca6d.jpg
 
 
 
Base Period
 
 
Return
 
 
 
2013
 
 
2014
 
2015
 
2016
 
2017
 
2018
Cedar Fair, L.P.
 
 
$
100.00

 
 
$
102.19

 
$
125.98

 
$
152.97

 
$
162.87

 
$
125.98

S&P 500
 
 
100.00

 
 
113.69

 
115.26

 
129.04

 
157.21

 
150.33

S&P 400
 
 
100.00

 
 
109.77

 
107.38

 
129.65

 
150.70

 
134.00

S&P Movies and Entertainment
 
 
100.00

 
 
117.82

 
106.93

 
118.02

 
123.94

 
124.70


14



ITEM 6. SELECTED FINANCIAL DATA.

 
 
Years Ended December 31,
 
 
2018
 
2017 (1)
 
2016
 
2015 (2)
 
2014 (3)
 
 
(In thousands, except per unit and per capita amounts)
Statement of Operations
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
1,348,530

 
$
1,321,967

 
$
1,288,721

 
$
1,235,778

 
$
1,159,605

Operating income
 
290,519

 
295,211

 
316,939

 
295,331

 
278,332

Income before taxes
 
161,396

 
216,588

 
249,106

 
134,414

 
114,100

Net income
 
126,653

 
215,476

 
177,688

 
112,222

 
104,215

Net income per unit - basic
 
$
2.25

 
$
3.84

 
$
3.18

 
$
2.01

 
$
1.88

Net income per unit - diluted
 
$
2.23

 
$
3.79

 
$
3.14

 
$
1.99

 
$
1.86

Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Total assets 
 
$
2,024,183

 
$
2,064,159

 
$
1,973,181

 
$
1,963,020

 
$
2,004,448

Working capital surplus (deficit)
 
(34,510
)
 
21,489

 
(47,007
)
 
(14,645
)
 
(3,767
)
Long-term debt
 
1,657,568

 
1,660,515

 
1,534,211

 
1,536,676

 
1,534,244

Partners' equity
 
32,416

 
82,946

 
60,519

 
57,009

 
96,217

Distributions
 
 
 
 
 
 
 
 
 
 
Declared per limited partner unit
 
$
3.595

 
$
3.455

 
$
3.330

 
$
3.075

 
$
2.850

Paid per limited partner unit
 
$
3.595

 
$
3.455

 
$
3.330

 
$
3.075

 
$
2.850

Other Data
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
155,529

 
$
153,222

 
$
131,876

 
$
125,631

 
$
124,286

Adjusted EBITDA (4)
 
467,773

 
478,977

 
481,248

 
459,238

 
431,280

Capital expenditures
 
189,775

 
188,084

 
160,656

 
175,865

 
166,719

Attendance (5)
 
25,912

 
25,723

 
25,104

 
24,448

 
23,305

In-park per capita spending (6)
 
$
47.69

 
$
47.30

 
$
46.90

 
$
46.20

 
$
45.54


(1)
Operating results for 2017 include a tax benefit of $54.2 million due to tax law changes, in particular the Tax Cuts and Jobs Act, a charge of $23.1 million for the loss on early debt extinguishment and a charge of $7.6 million for the impairment of the remaining land at Wildwater Kingdom, one of the Partnership's separately gated outdoor water parks which ceased operations in 2016.
(2)
Operating results for 2015 include a charge of $8.6 million for the impairment of a long-lived asset at Cedar Point.
(3)
Operating results for 2014 include a charge of $29.3 million for the loss on early debt extinguishment and a charge of $2.4 million for the impairment of long-lived assets at Wildwater Kingdom.
(4)
Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the Amended 2017 Credit Agreement and prior credit agreements. 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 may not be comparable to similarly titled measures of other companies. A reconciliation of net income to Adjusted EBITDA is provided below.
(5)
Attendance includes number of guest visits to the Partnership's amusement parks and separately gated outdoor water parks.
(6)
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. Revenues from resort, marina, sponsorship, online transaction fees charged to customers and all other out-of-park operations are excluded from in-park per capita spending statistics. Net revenues consist of in-park revenues and out-of-park revenues less amounts remitted to outside parties under concessionaire arrangements, see Note 2 for further information.


15


We believe that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the Amended 2017 Credit Agreement and prior credit agreements) is a meaningful measure as it is widely used by analysts, investors and comparable companies in our industry to evaluate our operating performance on a consistent basis, as well as more easily compare our results with those of other companies in our industry. Further, management believes Adjusted EBITDA is a meaningful measure of park-level operating profitability and we use it for measuring returns on capital investments, evaluating potential acquisitions, determining awards under incentive compensation plans, and calculating compliance with certain loan covenants. Adjusted EBITDA is provided in the discussion of results of operations that follows as a supplemental measure of our operating results and is not intended to be a substitute for operating income, net income or cash flows from operating activities as defined under generally accepted accounting principles. In addition, Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The table below sets forth a reconciliation of Adjusted EBITDA to net income for the periods indicated:
 
 
Years Ended December 31,
(In thousands)
 
2018
 
2017
 
2016
 
2015
 
2014
Net income
 
$
126,653

 
$
215,476

 
$
177,688

 
$
112,222

 
$
104,215

Interest expense
 
85,687

 
85,603

 
83,863

 
86,849

 
96,286

Interest income
 
(1,515
)
 
(855
)
 
(177
)
 
(64
)
 
(126
)
Provision for taxes
 
34,743

 
1,112

 
71,418

 
22,192

 
9,885

Depreciation and amortization
 
155,529

 
153,222

 
131,876

 
125,631

 
124,286

EBITDA
 
401,097

 
454,558

 
464,668

 
346,830

 
334,546

Loss on early debt extinguishment
 
1,073

 
23,121

 

 

 
29,261

Net effect of swaps
 
7,442

 
(45
)
 
(1,197
)
 
(6,884
)
 
(2,062
)
Non-cash foreign currency (gain) loss
 
36,294

 
(29,041
)
 
(14,345
)
 
80,946

 
40,883

Non-cash equity compensation expense
 
11,243

 
13,789

 
18,496

 
15,470

 
12,536

Loss on impairment/retirement of fixed assets, net
 
10,178

 
12,728

 
12,587

 
20,873

 
9,757

Gain on sale of other assets
 
(112
)
 
(1,877
)
 

 

 
(921
)
Employment practice litigation costs
 

 
4,867

 

 
259

 
4,953

Other (1)
 
558

 
877

 
1,039

 
1,744

 
2,327

Adjusted EBITDA
 
$
467,773

 
$
478,977

 
$
481,248

 
$
459,238

 
$
431,280


(1) Consists of certain costs as defined in the Partnership's Amended 2017 Credit Agreement and prior credit agreements. These items are excluded in the calculation of Adjusted EBITDA and have included certain legal expenses, costs associated with certain ride abandonment or relocation expenses, and severance expenses. This balance also includes unrealized gains and losses on short-term investments.


16


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

Business Overview

We generate our revenues from sales of (1) admission to our amusement parks and water parks, (2) food, merchandise and games both inside and outside our parks, and (3) accommodations, extra-charge products, and other revenue sources. Our principal costs and expenses, which include salaries and wages, operating supplies, maintenance, advertising, utilities and insurance, are relatively fixed for an operating season 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 in-park 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.

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,
 
 
2018
 
2017
 
2016
 
 
(In thousands, except per capita spending and percentages)
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Admissions
 
$
737,676

 
54.7
 %
 
$
734,060

 
55.5
 %
 
$
716,189

 
55.6
 %
Food, merchandise and games
 
433,315

 
32.1
 %
 
422,469

 
32.0
 %
 
407,673

 
31.6
 %
Accommodations, extra-charge products and other
 
177,539

 
13.2
 %
 
165,438

 
12.5
 %
 
164,859

 
12.8
 %
Net revenues
 
1,348,530

 
100.0
 %
 
1,321,967

 
100.0
 %
 
1,288,721

 
100.0
 %
Operating costs and expenses
 
892,416

 
66.2
 %
 
862,683

 
65.3
 %
 
827,319

 
64.2
 %
Depreciation and amortization
 
155,529

 
11.5
 %
 
153,222

 
11.6
 %
 
131,876

 
10.2
 %
Loss on impairment / retirement of fixed assets, net
 
10,178

 
0.8
 %
 
12,728

 
1.0
 %
 
12,587

 
1.0
 %
Gain on sale of investment
 
(112
)
 
 %
 
(1,877
)
 
(0.1
)%
 

 
 %
Operating income
 
290,519

 
21.5
 %
 
295,211

 
22.3
 %
 
316,939

 
24.6
 %
Interest and other expense, net
 
84,354

 
6.3
 %
 
84,633

 
6.4
 %
 
83,686

 
6.5
 %
Net effect of swaps
 
7,442

 
0.6
 %
 
(45
)
 
 %
 
(1,197
)
 
(0.1
)%
Loss on early debt extinguishment
 
1,073

 
0.1
 %
 
23,121

 
1.7
 %
 

 
 %
(Gain) loss on foreign currency
 
36,254

 
2.7
 %
 
(29,086
)
 
(2.2
)%
 
(14,656
)
 
(1.1
)%
Provision for taxes
 
34,743

 
2.6
 %
 
1,112

 
0.1
 %
 
71,418

 
5.5
 %
Net income
 
$
126,653

 
9.4
 %
 
$
215,476

 
16.3
 %
 
$
177,688

 
13.8
 %
Other data:
 
 
 
 
 
 
 
 
 
 
 
 
Attendance
 
25,912

 
 
 
25,723

 
 
 
25,104

 
 
In-park per capita spending
 
$
47.69

 
 
 
$
47.30

 
 
 
$
46.90

 
 


17


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 asset, including disposition, are less than the carrying value of the asset. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying amounts of the asset. 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.

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.

We completed the review of goodwill and other indefinite-lived intangibles as of the first days of the fourth quarter of 2018 and 2017 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 valuation, 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.

Revenue Recognition
As disclosed within the consolidated statements of operations and comprehensive income, revenues are generated from sales of (1) admission to our amusement parks and water parks, (2) food, merchandise and games both inside and outside the parks, and (3) accommodations, extra-charge products, and other revenue sources. Admission revenues include amounts paid to gain admission into our parks, including parking fees. Revenues related to extra-charge products, including premium benefit offerings such as front-of-line products, and online transaction fees charged to customers are included in "Accommodations, extra-charge products and other". Due to our highly seasonal operations, a substantial portion of our revenues are generated during an approximate 130- to 140-day operating season. Most revenues are recognized on a daily basis based on actual guest spend at the properties. Revenues from multi-use products, including season-long products for admission, dining, beverage and other products, are recognized over the estimated number of uses expected for each type of product. The estimated number of uses is reviewed and may be updated periodically during the operating season prior to the ticket or product expiration, which generally occurs no later than the close of the operating season. The number of uses is estimated based on historical usage adjusted for current period trends. For any bundled products that include multiple performance obligations, revenue is allocated using the retail price of each distinct performance obligation and any inherent discounts are allocated based on the gross margin and expected redemption of each performance obligation. We do not typically provide for refunds or returns.

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

18


and other" within the income statement, are recognized over the park operating season which represents the period in which the performance obligations are satisfied. Sponsorship revenues are typically fixed. However, some sponsorship revenues are variable based on achievement of specified operating metrics. We estimate variable revenues and perform a constraint analysis using both historical information and current trends to determine the amount of revenue that is not probable of a significant reversal. For additional information on our revenue recognition and related receivables and contract liabilities, see Note 2 to our Consolidated Financial Statements.

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. The need for this allowance is 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.

As of December 31, 2018, we had recorded a $6.4 million valuation allowance related to an $8.8 million deferred tax asset for foreign tax credit carryforwards. During the fourth quarter of 2018, we recognized a $2.3 million increase in the valuation allowance based on management's updated projection of future foreign tax credit utilization.

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.

The Tax Cuts and Jobs Act (the "Act") was signed into law on December 22, 2017. The Act made significant changes to U.S. tax law and, among other things, reduced federal corporate tax rates from 35% to 21%. The accounting treatment of these tax law changes was complex, and the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant did not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain tax effects of the Act. We recognized the final tax impacts related to the reduction in tax rates including the revaluation of deferred tax assets and liabilities in our consolidated financial statements for the year ended December 31, 2018. The final impact differed from our provisional amounts by $1.3 million.

19


Results of Operations

We believe the following are key operational measures in our management and operational reporting, and they are used as major factors in significant operational decisions:

Attendance is defined as the number of guest visits to our amusement parks and separately gated outdoor water parks.

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

Out-of-park revenues are defined as revenues from resort, marina, sponsorship, online transaction fees charged to customers and all other out-of-park operations.

Net revenues consist of in-park revenues and out-of-park revenues less amounts remitted to outside parties under concessionaire arrangements. See Note 2 - Summary of Significant Accounting Policies for further information.

2018 vs. 2017

The year ended December 31, 2018 included 2,061 operating days compared with 2,049 operating days for the year ended December 31, 2017. The following table presents key financial information and operating statistics for the years ended December 31, 2018 and December 31, 2017:
 
 
 
 
 
 
Increase (Decrease)
 
 
12/31/2018
 
12/31/2017
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
1,348,530

 
$
1,321,967

 
$
26,563

 
2.0
 %
Operating costs and expenses
 
892,416

 
862,683

 
29,733

 
3.4
 %
Depreciation and amortization
 
155,529

 
153,222

 
2,307

 
1.5
 %
Loss on impairment/retirement of fixed assets, net
 
10,178

 
12,728

 
(2,550
)
 
N/M

Gain on sale of investment
 
(112
)
 
(1,877
)
 
1,765

 
N/M

Operating income
 
$
290,519

 
$
295,211

 
$
(4,692
)
 
(1.6
)%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
 
$
467,773

 
$
478,977

 
$
(11,204
)
 
(2.3
)%
Adjusted EBITDA margin (2)
 
34.7
%
 
36.2
%
 

 
(1.5
)%
Attendance
 
25,912

 
25,723

 
189

 
0.7
 %
In-park per capita spending
 
$
47.69

 
$
47.30

 
$
0.39

 
0.8
 %
Out-of-park revenues
 
$
152,216

 
$
143,763

 
$
8,453

 
5.9
 %

(1) For additional information regarding Adjusted EBITDA, including how we define and use Adjusted EBITDA, as well as a reconciliation from net income, see Item 6, "Selected Financial Data", on page 16.
(2) Adjusted EBITDA margin (Adjusted EBITDA divided by net revenues) is not a measurement computed in accordance with generally accepted accounting principles ("GAAP") or a substitute for measures computed in accordance with GAAP and may not be comparable to similarly titled measures of other companies. We provide Adjusted EBITDA margin because we believe the measure provides a meaningful metric of operating profitability.

Consolidated net revenues totaled $1,348.5 million for the year ended December 31, 2018, increasing $26.6 million, from $1,322.0 million for 2017. This reflects the impact of increases in attendance, in-park per capita spending, and out-of-park revenues compared with the prior year. The 189,000 visit, or 0.7%, increase in attendance was driven by higher season pass visitation in the last five months of the year, including increased attendance during WinterFest, a holiday event operating during November and December. The increase in WinterFest attendance related primarily to a new event held at Kings Dominion. Attendance in the first seven months of 2018 was lower than the prior year driven by the impact of inclement weather at our seasonal amusement parks and a decline in season pass sales at Kings Island. The $0.39, or 0.8%, increase in in-park per capita spending was attributable to growth in our food and beverage programs, extra charge attractions and merchandise. The $8.5 million, or 5.9%, increase in out-of-park revenues was largely attributable to increases in resort property revenues driven by higher occupancy rates and an increase in average daily room rates, particularly at Cedar Point. The increase in net revenues was net of a $2.3 million unfavorable impact of foreign currency exchange related to our Canadian park.

Operating costs and expenses for the year increased 3.4%, or $29.7 million, to $892.4 million from $862.7 million for 2017. This increase was the result of a $3.9 million increase in cost of goods sold, a $26.2 million increase in operating expenses, and comparable selling, general, and administrative expenses ("SG&A"). The $3.9 million increase in cost of goods sold related to the growth in our food and beverage programs. Cost of goods sold, as a percentage of food, merchandise, and games revenue, was comparable for both periods. Approximately half of the

20


$26.2 million increase in operating expenses was due to increased seasonal wages driven by planned hourly rate increases. The increase in operating expenses was also attributable to increased full-time and maintenance labor driven by both planned head count and rate increases. Lastly, the increase in operating expenses was due to increased operating supplies for personnel related costs including associate housing and for incremental costs related to WinterFest, particularly for the new event at Kings Dominion. SG&A expense was comparable due to higher merchant fees and increased technology related costs in 2018 offset by a reserve established in 2017 for an employment practice claim settlement of $4.9 million. The increase in operating costs and expenses was net of a $1.2 million favorable impact of foreign currency exchange related to our Canadian park.

Depreciation and amortization expense for 2018 increased $2.3 million compared with the prior year. The increase in expense was attributable to growth in capital improvements offset by the impact of changes in the estimated useful lives of specific long-lived assets, in particular at Cedar Point and Dorney Park in the prior period. The loss on impairment / retirement of fixed assets for 2018 was $10.2 million, reflecting the retirement of a specific asset in the second quarter of 2018 and the impairment of two specific assets in the third quarter of 2018. This is compared with the $12.7 million loss on impairment / retirement of fixed assets for 2017 reflecting a charge of $7.6 million for the impairment of the remaining land at Wildwater Kingdom, one of our separately gated outdoor water parks which ceased operations in 2016, and the impairment of assets in the normal course of business at several of our properties. A $0.1 million and $1.9 million gain on sale of investment was recognized for the liquidation of a preferred equity investment during the fourth quarter of 2018 and third quarter of 2017, respectively.

After the items above, operating income decreased $4.7 million to $290.5 million for 2018 from operating income of $295.2 million for 2017.

Interest expense for 2018 was comparable to the prior year. The net effect of our swaps resulted in a $7.4 million charge to earnings for 2018 compared with an immaterial impact to earnings for 2017. The difference reflects changes in fair market value for these swaps. During 2018, we recognized a $1.1 million loss on early debt extinguishment in connection with amending our 2017 Credit Agreement, as compared with a $23.1 million loss on early debt extinguishment related to our refinancing in the first half of 2017, as described in Note 5 to the Consolidated Financial Statements. We also recognized a $36.3 million net charge to earnings for foreign currency gains and losses in 2018 compared with a $29.1 million net benefit to earnings for 2017. Both amounts primarily represented remeasurement of the U.S.-dollar denominated debt recorded at our Canadian entity from the applicable currency to the legal entity's functional currency.

For 2018, a provision for taxes of $34.7 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compares with a provision for taxes recorded for 2017 of $1.1 million. The increase in tax provision in the current year relates primarily to the prior year implementation of the Tax Cuts and Jobs Act (the "Act"), which was signed into law on December 22, 2017. The Act included numerous changes to the tax law, including a reduction in the federal corporate income tax rate from 35% to 21%. Since our corporate subsidiaries have a March tax year end, the applicable tax rate for the tax year ended March 25, 2018 was a 31.8% blended rate that was based on the applicable statutory rates and the number of days in each period within the taxable year before and after the effective date of the change in tax rate. For tax years following March 2018, the applicable tax rate will be 21%. Also, the change in tax rate required that we remeasure deferred tax balances that are expected to be realized following enactment using the applicable tax rates. As a result of the Act, we recognized a $49.2 million deferred tax benefit and a $6.1 million current income tax benefit in 2017 compared with a $1.3 million deferred tax benefit and an $8.6 million current income tax benefit in 2018. The $1.3 million deferred tax benefit in 2018 reflects the adjustment from our 2017 provisional amounts under SAB 118 to the final impact of the Act. Cash taxes paid in 2018 were $42.2 million compared with $56.0 million in 2017 due to a decrease in pretax income from our corporate subsidiaries and the decrease in federal statutory income tax rate from the Act. For 2019, cash taxes to be paid or payable are estimated to be approximately $45 million.

After the items above, net income for 2018 totaled $126.7 million, or $2.23 per diluted limited partner unit, compared with net income of $215.5 million, or $3.79 per diluted unit, for 2017.

For 2018, Adjusted EBITDA decreased to $467.8 million from $479.0 million for 2017. The $11.2 million decrease in Adjusted EBITDA is a result of higher operating costs and expenses associated with labor, especially seasonal wages due to planned rate increases, operating supplies and other planned spending out-pacing revenue growth. As a result, our Adjusted EBITDA margin decreased by 150 basis points.

21


Results of Operations

2017 vs. 2016

The year ended December 31, 2017 included 2,049 operating days compared with 2,080 operating days for the year ended December 31, 2016. On a same-park basis (excluding Wildwater Kingdom, one of the Partnership's separately gated outdoor water parks which was closed after the 2016 operating season), the year ended December 31, 2016 included a total of 1,997 operating days. The following table presents key financial information and operating statistics for the years ended December 31, 2017 and December 31, 2016:
 
 
 
 
 
 
Increase (Decrease)
 
 
12/31/2017
 
12/31/2016
 
$
 
%
 
 
(Amounts in thousands, except for per capita spending)
Net revenues
 
$
1,321,967

 
$
1,288,721

 
$
33,246

 
2.6
 %
Operating costs and expenses
 
862,683

 
827,319

 
35,364

 
4.3
 %
Depreciation and amortization
 
153,222

 
131,876

 
21,346

 
16.2
 %
Loss on impairment/retirement of fixed assets, net
 
12,728

 
12,587

 
141

 
N/M

Gain on sale of investment
 
(1,877
)
 

 
(1,877
)
 
N/M

Operating income
 
$
295,211

 
$
316,939

 
$
(21,728
)
 
(6.9
)%
N/M - Not meaningful
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
 
$
478,977

 
$
481,248

 
$
(2,271
)
 
(0.5
)%
Adjusted EBITDA margin (2)
 
36.2
%
 
37.3
%
 

 
(1.1
)%
Attendance
 
25,723

 
25,104

 
619

 
2.5
 %
In-park per capita spending
 
$
47.30

 
$
46.90

 
$
0.40

 
0.9
 %
Out-of-park revenue
 
$
143,763

 
$
146,137

 
$
(2,374
)
 
(1.6
)%

(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 16.
(2) Adjusted EBITDA margin (Adjusted EBITDA divided by net revenues) is not a measurement computed in accordance with generally accepted accounting principles ("GAAP") or a substitute for measures computed in accordance with GAAP and may not be comparable to similarly titled measures of other companies. We provide Adjusted EBITDA margin because we believe the measure provides a meaningful metric of operating profitability.

Consolidated net revenues totaled $1,322.0 million for the year ended December 31, 2017, increasing $33.2 million, from $1,288.7 million for 2016. This reflected an increase in both attendance and in-park per capita spending. Out-of-park revenues decreased $2.4 million compared with 2016. The 619,000 visit, or 2.5%, increase in attendance was driven by higher season pass visitation and increased attendance during WinterFest, a holiday event operating during November and December. The increase in WinterFest attendance related primarily to three new events in 2017 held at Kings Island, Carowinds, and Worlds of Fun. The $0.40, or 0.9%, increase in in-park per capita spending was primarily attributable to growth in our food and beverage programs, and the closure of Wildwater Kingdom. The $2.4 million, or 1.6%, decrease in out-of-park revenues was due to revenues received in 2016 from Super Bowl 50 special events and a decrease in transaction fee revenue recognized during 2017. Foreign currency exchange rates had an immaterial impact on net revenues.

Operating costs and expenses for 2017 increased 4.3%, or $35.4 million, to $862.7 million from $827.3 million for 2016. This increase was the result of a $4.2 million increase in cost of goods sold, a $19.2 million increase in operating expenses, and an $11.9 million increase in SG&A expense. The $4.2 million increase in cost of goods sold related to the growth in our food and beverage programs, as well as higher attendance levels. Cost of goods sold, as a percentage of food, merchandise, and games revenue, was comparable for both 2017 and 2016. The $19.2 million increase in operating expenses was primarily due to higher seasonal labor costs driven by rate increases, especially in California, as well as incremental labor hours especially related to WinterFest. In addition, full-time wages increased as a result of incremental head count and normal merit increases, as well as increased maintenance labor associated with WinterFest. Lastly, operating supply expense increased due to incremental special and seasonal events, especially for WinterFest, and the opening of several large capital projects that began operation in 2017. The $11.9 million increase in SG&A expense was attributable to a reserve for an employment practice settlement claim of $4.9 million, increased marketing expense, higher merchant fees, and increased technology related costs. Foreign currency exchange rates had an immaterial impact on operating costs and expenses.

Depreciation and amortization expense for 2017 increased $21.3 million compared with 2016. The increase was attributable to a change in the estimated useful lives of specific long-lived assets, in particular at Cedar Point and Dorney Park, as well as growth in capital improvements. The loss on impairment / retirement of fixed assets for 2017 was $12.7 million, reflecting a charge of $7.6 million for the impairment of the remaining land at Wildwater Kingdom and the retirement of assets in the normal course of business at several of our properties. This was compared with the $12.6 million loss on impairment / retirement of fixed assets for 2016 reflecting the retirement of assets in the normal course

22


of business. During the third quarter of 2017, a $1.9 million gain on sale of investment was recognized for the liquidation of a preferred equity investment.

After the items above, operating income decreased $21.7 million to $295.2 million for 2017 from operating income of $316.9 million for 2016.

Interest expense for 2017 increased $1.7 million compared with 2016. The increase was attributable to an increase in outstanding term debt. The net effect of our swaps resulted in an immaterial impact to earnings for 2017 compared with a $1.2 million benefit to earnings for 2016. The difference reflected the amortization of amounts in OCI in our de-designated swap portfolio offset by changes in fair market value for these swaps. We recognized a $23.1 million loss on early debt extinguishment during 2017 as a result of the April 2017 debt refinancing. We also recognized a $29.1 million net benefit to earnings for foreign currency gains and losses in 2017 compared with a $14.7 million net benefit to earnings for 2016. Both amounts primarily represented remeasurement of the U.S.-dollar denominated debt recorded at our Canadian entity from the applicable currency to the legal entity's functional currency.

For 2017, a provision for taxes of $1.1 million was recorded to account for PTP taxes and income taxes on our corporate subsidiaries. This compared with a provision for taxes recorded for 2016 of $71.4 million. The decrease in tax provision in 2017 related primarily to implementation of the Tax Cuts and Jobs Act (the "Act"), which was signed into law on December 22, 2017. The Act included numerous changes to the tax law, including a reduction in the federal corporate income tax rate from 35% to 21%. Since our corporate subsidiaries have a March tax year end, the applicable tax rate for the tax year ended March 25, 2018 was a 31.8% blended rate based on the applicable statutory rates and the number of days in each period within the taxable year before and after the effective date of the change in tax rate. For tax years following March 2018, the applicable tax rate will be 21%. As a result of the reduction in the federal corporate income tax rate, we recognized a $6.1 million current income tax benefit. Also, the change in tax rate required that we remeasure deferred tax balances that are expected to be realized following enactment using the applicable tax rates. As a result of this remeasurement of our net deferred tax liability, we recognized a $49.2 million deferred tax benefit. The sum of these effects was recorded as a tax benefit in the consolidated statement of operations and comprehensive income for the year ended December 31, 2017. Cash taxes paid in 2017 were $56.0 million compared with $44.5 million in 2016. The change in cash taxes related to 2016 utilization of employment and foreign tax credits.

After the items above, net income for 2017 totaled $215.5 million, or $3.79 per diluted limited partner unit, compared with net income of $177.7 million, or $3.14 per diluted unit, for 2016.

For 2017, Adjusted EBITDA decreased to $479.0 million from $481.2 million for 2016. The $2.3 million decrease in Adjusted EBITDA was a result of higher operating costs and expenses associated with labor, marketing, merchant fees, and other planned spending out-pacing revenue growth, specifically attendance growth. As a result, our Adjusted EBITDA margin decreased by 110 basis points.

On a same-park basis (excluding Wildwater Kingdom), net revenues increased by $38.7 million to $1,322.0 million for the year ended December 31, 2017 from $1,283.3 million for 2016. This was the result of an 856,000-visit increase in attendance and a $0.17 increase in in-park per capita spending on a same-park basis. Operating costs and expenses (including depreciation and amortization, loss on impairment of fixed assets and gain on sale of investment) on a same-park basis increased $61.2 million resulting in a $22.5 million decrease in same-park operating income.

23


Financial Condition

We ended 2018 in sound condition with respect to both liquidity and cash flow. The working capital ratio (current assets divided by current liabilities) was 0.9 as of December 31, 2018 and was 1.1 as of December 31, 2017. There was a $60.9 million decrease in cash and cash equivalents as of December 31, 2018 compared with the balance as of December 31, 2017. The net cash proceeds from our debt refinancing in 2017 significantly impacted the working capital ratio and change in cash position. 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 2018 increased $19.6 million to $350.7 million from $331.2 million in 2017. Net cash from operating activities in 2017 decreased $27.2 million to $331.2 million from $358.3 million in 2016. The fluctuations in operating cash flows between years was largely attributable to changes in working capital driven primarily by changes in deferred revenue and income tax payments.

Investing Activities
Investing activities consist principally of capital investments we make in our parks and resort properties. During 2018, cash spent on capital expenditures totaled $189.8 million attributable to capital for marketable new rides and attractions, and to a lesser extent, infrastructure and resort properties. During 2017, cash spent on capital expenditures totaled $188.1 million. During 2017, we also received $3.3 million of proceeds from the sale of a preferred equity investment in a non-public entity. During 2016, cash spent on capital expenditures totaled $160.7 million. During 2016, we also purchased identifiable intangible assets for $0.6 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 2019 operating season, we will be investing approximately $140 million on infrastructure and marketable new rides and attractions, and anticipate investing an additional $30 million to $40 million in incremental opportunities such as resort properties, employee housing and an indoor sports facility near Cedar Point. Infrastructure and marketable capital investments will include two thrill-packed roller coasters in unique themed areas at Canada's Wonderland and Carowinds, and a new, immersive experience attraction at Cedar Point. In addition, we will add new attractions to appeal to kids, tweens and families, introduce new and upgraded dining venues and catering areas, and expand our festival and event offerings. In particular, we will extend the operating season at Canada's Wonderland for a new WinterFest holiday event, bringing the total to seven of our amusement parks with winter holiday events. Lastly, a new hotel at Carowinds is expected to open in late 2019, strengthening our appeal for a multi-day guest experience.

In addition, during November 2018, we exercised our right of first refusal under the Santa Clara land lease to purchase the land at California's Great America from the lessor, the City of Santa Clara, for $150 million. We are in the process of negotiating a purchase agreement to acquire the land, which will be subject to the approval of the Successor Agency to the Redevelopment Agency of the City of Santa Clara and the Oversight Board for Successor Agency to the City of Santa Clara Redevelopment Agency and certain other conditions. We also are evaluating different options to finance the purchase.

Financing Activities
Net cash utilized for financing activities in 2018 totaled $216.6 million, compared with $106.4 million in 2017. This increase is primarily due to incremental borrowings under our senior secured term loan facility under the Amended 2017 Credit Agreement in the prior year as a result of the April 2017 refinancing.

Net cash utilized for financing activities in 2017 totaled $106.4 million, compared with $194.5 million in 2016. This decrease reflects incremental debt borrowings due to the April 2017 refinancing, offset by other impacts of the April 2017 refinancing including payment of debt issuance costs and early termination penalties.

Liquidity and Capital Resources

As of December 31, 2018, our outstanding debt, before reduction for debt issuance costs and original issue discount, consisted of the following:

$500 million of 5.375% senior unsecured notes, maturing in April 2027, issued at par. Prior to April 15, 2020, up to 35% of the notes may be redeemed with net cash proceeds of certain equity offerings at a price equal to 105.375% of the principal amount thereof, together with accrued and unpaid interest and additional interest, if any. The notes may be redeemed, in whole or in part, at any time prior to April 15, 2022 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium, together with accrued and unpaid interest and additional interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in April and October.
$450 million of 5.375% senior unsecured notes, maturing in June 2024, issued at par. The notes may be redeemed, in whole or in part, at any time prior to June 1, 2019 at a price equal to 100% of the principal amount of the notes redeemed plus a "make-whole" premium, together with accrued and unpaid interest, if any, to the redemption date. Thereafter, the notes may be redeemed, in whole or in part, at various prices depending on the date redeemed. The notes pay interest semi-annually in June and December.
$735 million of senior secured term debt, maturing in April 2024 under our Amended 2017 Credit Agreement. The term debt bears interest at London InterBank Offering Rate ("LIBOR") plus 175 basis points (bps), under amendments we entered into on March 14, 2018. The pricing terms for the amendment reflected $0.9 million of Original Issue Discount ("OID"). The term loan amortizes $7.5 million annually. We have $5.6 million of current maturities as of December 31, 2018.

24


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

As of December 31, 2018 and December 31, 2017, before reduction for debt issuance costs and original issue discount, we had $735.0 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 $15.4 million as of December 31, 2018 and $15.9 million as of December 31, 2017, we had available borrowings under our revolving credit facility of $259.6 million and $259.1 million, respectively. The maximum outstanding balance under our revolving credit facility was $60.0 million during the year ended December 31, 2018 and $110.0 million during the year ended December 31, 2017.

As of December 31, 2018, we have eight interest rate swap agreements that convert $500 million of variable-rate debt to a fixed rate. Four of these agreements fix our variable-rate debt at 4.39% and mature on December 31, 2020. The other four agreements fix our variable-rate debt at 4.63% for the period December 31, 2020 through December 31, 2023. As of December 31, 2017, we had four interest rate swap agreements that convert $500 million of variable-rate debt to a fixed rate of 4.39% and mature on December 31, 2020. None of our interest rate swaps were designated as cash flow hedges in the periods presented. As of December 31, 2018, the fair market value of our swap portfolio was a liability of $6.7 million compared with a liability of $8.7 million as of December 31, 2017. In both periods presented, the fair value of our swap portfolio was classified as long-term and recorded in "Derivative Liability". Additional detail regarding our swap arrangements is provided in Note 6 to our Consolidated Financial Statements.

The Amended 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50x Consolidated Total Debt-to-Consolidated EBITDA. As of December 31, 2018, we were in compliance with this financial condition covenant and all other covenants under the Amended 2017 Credit Agreement.

Our long-term debt agreements include Restricted Payment provisions. Pursuant to the terms of the indenture governing the June 2014 notes, which includes the most restrictive of these Restricted Payments provisions, we can make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing, and we can make additional Restricted Payments if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00x.

As market conditions warrant, we 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 our debt provisions, on October 30, 2018, we announced the declaration of a distribution of $0.925 per limited partner unit, which was paid on December 17, 2018.

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

Contractual Obligations

The following table summarizes certain obligations (on an undiscounted basis) as of December 31, 2018:
 
Payments Due by Period
(In thousands)
Total
 
2019
 
2020-2021
 
2022-2023
 
2024 - Thereafter
Long-term debt (1)
$
2,205,956

 
$
87,694

 
$
178,394

 
$
177,325

 
$
1,762,543

Capital expenditures (2)
82,921

 
70,828

 
12,093

 

 

Lease & other obligations (3)
147,951

 
22,087

 
17,840

 
16,515

 
91,509

Total
$
2,436,828

 
$
180,609

 
$
208,327

 
$
193,840

 
$
1,854,052


(1)
Represents maturities and mandatory payments on long-term debt obligations, fixed interest on senior notes, variable interest on term debt assuming LIBOR interest rates as of December 31, 2018, 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, 2018.
(3)
Represents contractual lease and purchase obligations in place at year-end. Obligations not denominated in U.S. dollars have been converted based on the currency exchange rates as of December 31, 2018.

Off-Balance Sheet Arrangements

We had $15.4 million of letters of credit, which are primarily in place to backstop insurance arrangements, outstanding on our revolving credit facility as of December 31, 2018. We have no other significant off-balance sheet financing arrangements.


25


Quantitative and Qualitative Disclosures about Market Risk

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

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

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

As of December 31, 2018, on an adjusted basis after giving effect to the impact of interest rate swap agreements and before reduction for debt issuance costs and original issue discount, $1,450 million of our outstanding long-term debt represented fixed-rate debt and $235 million represented variable-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $13.2 million, a hypothetical 100 bps increase in 30-day LIBOR on our variable-rate debt (not considering the impact of our interest rate swaps) would lead to an increase of approximately $7.5 million in annual cash interest costs.

Assuming a hypothetical 100 bps increase in 30-day LIBOR, the amount of net cash interest paid on our derivative portfolio would decrease by $5.0 million over the next 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, the majority of our employees are seasonal and are paid hourly rates which are consistent with federal and state minimum wage laws. In addition, increases in full-time labor, supplies, taxes, and utility expenses could have an impact on our operating results. 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.

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 to differ materially from our expectations. In addition, the proposed purchase of the land currently leased from the City of Santa Clara is subject to the risk that we may be unable to obtain the required governmental approval, that any conditions to the purchase are not satisfied or that required approvals may not be able to be obtained on expected or acceptable terms, which could cause the parties to abandon the transaction. 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" of this Report is incorporated herein by reference.


26



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Quarterly operating results for 2018 and 2017 are presented in the table below:
Unaudited
(In thousands, except per unit amounts)
 
Net revenues
 
Operating income (loss)
 
Net income (loss)
 
Net income (loss) per limited partner unit-basic
 
Net income (loss) per limited partner unit-diluted
2018
 
 
 
 
 
 
 
 
 
 
1st Quarter
 
$
54,727

 
$
(75,647
)
 
$
(83,400
)
 
$
(1.49
)
 
$
(1.49
)
2nd Quarter
 
380,316

 
68,249

 
19,243

 
0.34

 
0.34

3rd Quarter
 
663,703

 
258,572

 
213,307

 
3.79

 
3.76

4th Quarter
 
249,784

 
39,345

 
(22,497
)
 
(0.40
)
 
(0.40
)
 
 
$
1,348,530

 
$
290,519

 
$
126,653

 
2.25

 
2.23

2017
 
 
 
 
 
 
 
 
 
 
1st Quarter
 
$
48,318

 
$
(75,961
)
 
$
(64,754
)
 
$
(1.16
)
 
$
(1.16
)
2nd Quarter
 
392,798

 
95,313

 
31,368

 
0.56

 
0.55

3rd Quarter
 
652,689

 
256,139

 
191,315

 
3.41

 
3.38

4th Quarter (1)
 
228,162

 
19,720

 
57,547

 
1.03

 
1.01

 
 
$
1,321,967

 
$
295,211

 
$
215,476

 
3.84

 
3.79


(1)
The fourth quarter of 2017 includes a $62.7 million benefit for taxes compared with a $1.4 million provision for taxes for the fourth quarter of 2018 primarily due to a $55.3 million tax benefit recorded in 2017 related to the Tax Cuts and Jobs Act (refer to Note 9 to the Consolidated Financial Statements).

27


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

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cedar Fair, L.P. and subsidiaries (the "Partnership") as of December 31, 2018 and 2017, 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, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United Stated of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership's internal control over financial reporting as of December 31, 2018, 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 22, 2019 expressed an unqualified opinion on the Partnership's internal control over financial reporting.

Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio
February 22, 2019

We have served as the Partnership’s auditor since 2004.










28


CEDAR FAIR, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
105,349

 
$
166,245

Receivables
 
51,518

 
37,722

Inventories
 
30,753

 
29,719

Other current assets
 
12,589

 
13,297

 
 
200,209

 
246,983

Property and Equipment:
 
 
 
 
Land
 
268,411

 
271,021

Land improvements
 
434,501

 
421,593

Buildings
 
732,666

 
693,899

Rides and equipment
 
1,813,489

 
1,740,653

Construction in progress
 
77,716

 
72,847

 
 
3,326,783

 
3,200,013

Less accumulated depreciation
 
(1,727,345
)
 
(1,614,241
)
 
 
1,599,438

 
1,585,772

Goodwill
 
178,719

 
183,830

Other Intangibles, net
 
36,376

 
38,064

Other Assets
 
9,441

 
9,510

 
 
$
2,024,183

 
$
2,064,159

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
Current Liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
5,625

 
$

Accounts payable
 
23,314

 
24,621

Deferred revenue
 
107,074

 
86,131

Accrued interest
 
7,927

 
8,124

Accrued taxes
 
29,591

 
43,975

Accrued salaries, wages and benefits
 
18,786

 
18,740

Self-insurance reserves
 
24,021

 
25,107

Other accrued liabilities
 
18,381

 
18,796

 
 
234,719

 
225,494

Deferred Tax Liability
 
81,717

 
74,798

Derivative Liability
 
6,705

 
8,722

Other Liabilities
 
11,058

 
11,684

Long-Term Debt:
 
 
 
 
Term debt
 
719,507

 
723,788

Notes
 
938,061

 
936,727

 
 
1,657,568

 
1,660,515

Commitments and Contingencies (Note 10)
 

 

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

 
5,290

General partner
 
(1
)
 

Limited partners, 56,564 and 56,359 units outstanding at December 31, 2018 and December 31, 2017, respectively
 
5,845

 
81,589

Accumulated other comprehensive income (loss)
 
21,282

 
(3,933
)
 
 
32,416

 
82,946

 
 
$
2,024,183

 
$
2,064,159

    

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

29


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

 
 
Years Ended December 31,
 
 
2018
 
2017
 
2016
Net revenues:
 
 
 
 
 
 
Admissions
 
$
737,676

 
$
734,060

 
$
716,189

Food, merchandise and games
 
433,315

 
422,469

 
407,673

Accommodations, extra-charge products and other
 
177,539

 
165,438

 
164,859

 
 
1,348,530

 
1,321,967

 
1,288,721

Costs and expenses:
 

 
 
 
 
Cost of food, merchandise and games revenues
 
114,733

 
110,811

 
106,608

Operating expenses
 
584,350

 
558,102

 
538,881

Selling, general and administrative
 
193,333

 
193,770

 
181,830

Depreciation and amortization
 
155,529

 
153,222

 
131,876

Loss on impairment / retirement of fixed assets, net
 
10,178

 
12,728

 
12,587

Gain on sale of investment
 
(112
)
 
(1,877
)
 

 
 
1,058,011

 
1,026,756

 
971,782

Operating income
 
290,519

 
295,211

 
316,939

Interest expense
 
85,687

 
85,603

 
83,863

Net effect of swaps
 
7,442

 
(45
)
 
(1,197
)
Loss on early debt extinguishment
 
1,073

 
23,121

 

(Gain) loss on foreign currency
 
36,254

 
(29,086
)
 
(14,656
)
Other income
 
(1,333
)
 
(970
)
 
(177
)
Income before taxes
 
161,396

 
216,588

 
249,106

Provision for taxes
 
34,743

 
1,112

 
71,418

Net income
 
126,653

 
215,476

 
177,688

Net income allocated to general partner
 
1

 
2

 
2

Net income allocated to limited partners
 
$
126,652

 
$
215,474

 
$
177,686

 
 
 
 
 
 
 
Net income
 
$
126,653

 
$
215,476

 
$
177,688

Other comprehensive income (loss), (net of tax):
 
 
 
 
 
 
Foreign currency translation adjustment
 
17,240

 
(14,849
)
 
(3,700
)
Cash flow hedging derivative activity
 
8,366

 
7,975

 
3,350

Other comprehensive income (loss), (net of tax)
 
25,606

 
(6,874
)
 
(350
)
Total comprehensive income
 
$
152,259

 
$
208,602

 
$
177,338

Basic earnings per limited partner unit:
 
 
 
 
 
 
Weighted average limited partner units outstanding
 
56,212

 
56,061

 
55,933

Net income per limited partner unit
 
$
2.25

 
$
3.84

 
$
3.18

Diluted earnings per limited partner unit:
 
 
 
 
 
 
Weighted average limited partner units outstanding
 
56,860

 
56,800

 
56,562

Net income per limited partner unit
 
$
2.23

 
$
3.79

 
$
3.14



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

30


CEDAR FAIR, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(In thousands, except per unit amounts)
 
Limited Partnership Units Outstanding
 
Limited Partners’ Equity
 
General Partner’s Equity
 
Special L.P. Interests
 
Accumulated Other Comprehensive Income (Loss)
 
Total Partners’ Equity
Balance as of December 31, 2015
56,018

 
$
48,428

 
$

 
$
5,290

 
$
3,291

 
$
57,009

Net income

 
177,686

 
2

 

 

 
177,688

Partnership distribution declared ($3.330)

 
(187,180
)
 
(2
)
 

 

 
(187,182
)
Issuance of limited partnership units related to compensation
183

 
13,776

 

 

 

 
13,776

Tax effect of units involved in treasury unit transactions

 
(422
)
 

 

 

 
(422
)
Foreign currency translation adjustment, net of tax $2,127

 

 

 

 
(3,700
)
 
(3,700
)
Cash flow hedging derivative activity, net of tax ($650)

 

 

 

 
3,350

 
3,350

Balance as of December 31, 2016
56,201

 
$
52,288

 
$

 
$
5,290

 
$
2,941

 
$
60,519

Net income

 
215,474

 
2

 

 

 
215,476

Partnership distribution declared ($3.455)

 
(194,754
)
 
(2
)
 

 

 
(194,756
)
Issuance of limited partnership units related to compensation
158

 
13,021

 

 

 

 
13,021

Tax effect of units involved in treasury unit transactions

 
(4,440
)
 

 

 

 
(4,440
)
Foreign currency translation adjustment, net of tax ($4,330)

 

 

 

 
(14,849
)
 
(14,849
)
Cash flow hedging derivative activity, net of tax ($1,484)

 

 

 

 
7,975

 
7,975

Balance as of December 31, 2017
56,359

 
$
81,589

 
$

 
$
5,290

 
$
(3,933
)
 
$
82,946

Net income

 
126,652

 
1

 

 

 
126,653

Partnership distribution declared ($3.595)

 
(203,197
)
 
(2
)
 

 

 
(203,199
)
Issuance of limited partnership units related to compensation
205

 
2,940

 

 

 

 
2,940

Tax effect of units involved in treasury unit transactions

 
(2,530
)
 

 

 

 
(2,530
)
Foreign currency translation adjustment, net of tax $3,862

 

 

 

 
17,240

 
17,240

Cash flow hedging derivative activity, net of tax ($1,094)