Cedar Fair CaseCompanion Case to Six Flags CaseFrom 1998-2006 there were four large, well-funded competitors in the regional theme park industry. Inorder: Six Flags, Cedar Fair, Paramount Parks, and Busch Entertainment. Of these, Cedar Fair wasregarded as having the best operating team.In March 2004, Cedar Fair bought Six Flags Worlds of Adventure (the troubled park in Ohio that doomedSix Flags) for $145 million. Cedar Fair shut it down, presumably to remove a competitor to its flagshippark (Cedar Point, only 70 miles away).In June 2006, Cedar Fair bought Paramount Parks for $1.24 billion. Presumably, Cedar Fair overpaidbecause they thought they could run the parks better than Paramount and extract more profit fromthem. They quickly found out that this was a false assumption, and that Paramount actually had beenan excellent operator. This made Cedar Point massively overleveraged heading into the recession.The Beta of Cedar Fair in 2008 is 0.78, and the standard deviation of annual returns is about 25%.Download Cedar Fair?s 2008 annual report from Blackboard. Financial statements are on pages 34-38,Debt Schedule is on page 49, previously contracted CapEx requirements are on page 29, and EBITDAcalculation is on page 17.Your assignment is to write a report answering the following questions. You must submit an ExecutiveSummary (1/2 page ? 1 page long), and you must include appendices with all of your calculations.

1) Determine a sustainable debt load for Cedar Fair as of the end of 2008.2) How do these measures compare to the actual level of debt? Is the firm at risk of becominginsolvent? Pay special attention to the terms of the credit agreement (page 29).You will primarily be graded on the Executive Summary. Treat this as a professional document that youwould give to your boss?s boss.

Attendance of Largest Theme Parks in North America * Lists Theme Parks that are in the top 50 in attendance 1997-2005 according to Amusement Business; top 20 in attendance 2006-2008 according to Themed Entertainment As * Attendance in Thousands Walt Disney Attractions Park Name The Magic Kingdom at Walt Disney World Disneyland Epcot at Walt Disney World Disney MGM Studios at Walt Disney World Disney's Animal Kingdom at Walt Disney World Disney California Adventure Park Location Lake Buena Vista, FL Anaheim, CA Lake Buena Vista, FL Lake Buena Vista, FL Lake Buena Vista, FL Anaheim, CA Universal Studios Recreation Group Park Name Universal Studios Orlando Universal Studios Hollywood Universal Studios Island of Adventure 1997 17,000 14,250 11,773 10,526 N/A 1998 15,640 13,680 10,596 9,473 6,000 1999 15,200 13,450 10,100 8,700 8,600 2000 15,400 13,900 10,600 8,900 8,300 2001 14,784 12,350 9,010 8,366 7,772 5,000 2002 14,044 12,750 8,289 8,031 7,306 4,700 2003 14,044 12,720 8,620 7,870 7,300 5,311 Location Orlando Universal City, CA Orlando 1997 8,900 5,368 1998 8,900 5,100 1999 8,100 5,100 3,400 2000 8,100 5,200 6,000 2001 7,290 4,732 5,520 2002 6,853 5,200 6,072 2003 6,850 4,570 6,072 Anheuser-Busch Theme Parks Park Name Sea World Florida Busch Gardens Sea World California Busch Gardens the Old Country Sea World Texas Location Orlando Tampa Bay, FL San Diego Williamsburg, VA San Antonio 1997 4,900 4,200 3,978 2,500 1,700 1998 4,900 4,200 3,700 2,400 1,700 1999 4,700 3,900 3,600 2,300 1,700 2000 5,200 5,000 3,600 2,300 1,700 2001 5,100 4,500 4,100 2,700 1,800 2002 5,000 4,600 4,000 2,600 1,600 2003 5,200 4,300 4,000 2,500 1,700 Sea World Ohio Aurora, OH 1,400 1,400 1,400 1,300 Six Flags Inc Park Name Six Flags Great Adventure Location Jackson, NJ 1997 3,718 1998 3,421 1999 3,800 2000 3,500 2002 3,250 2003 3,150 Sold 2001 3,560 Six Flags Magic Mountain Six Flags Great America Six Flags Over Texas Six Flags Over Georgia Six Flags Fiesta Texas Six Flags Marine World Six Flags New England Six Flags St, Louis Six Flags Astroworld Valencia, CA Gurnee, IL Arlington, TX Atlanta San Antonio Vallejo, CA Agawam, MA Eureka, MO Houston, TX 3,374 3,090 3,098 2,796 1,700 1,103 1,272 2,047 2,088 3,070 2,905 2,819 2,321 1,700 1,831 1,590 1,556 1,900 3,200 3,100 2,700 2,500 2,400 2,100 1,600 2,050 1,900 3,300 2,875 2,775 2,400 2,200 2,100 2,000 1,900 1,825 3,200 2,900 3,000 2,400 2,075 2,120 1,950 1,860 1,775 3,100 2,700 2,675 2,250 1,875 1,900 1,875 1,750 1,800 3,050 2,575 2,600 2,100 2,600 1,725 1,750 1,675 1,700 Geauga Lake / Six Flags Ohio Aurora, OH 1,300 1,300 1,200 1,700 Six Flags Worlds of Adventure Aurora, OH 1,700 2,750 2,150 2,000 Six Flags Darien Lake Six Flags America Six Flags Elitch Gardens Six Flags Kentucky Kingdom Darien Center, NY Largo, MD Denver Louisville 1,670 983 1,500 1,105 1,520 1,170 1,500 1,348 1,704 1,700 1,600 1,300 1,625 1,600 1,525 1,235 1,640 1,620 1,500 1,190 1,525 1,550 1,500 N/A 1,460 1,425 1,350 N/A Laronde Montreal 1,111 1,200 1,000 1,154 1,200 1,350 1,275 Cedar Fair Ltd Park Name Knott's Berry Farm Cedar Point Knott's Camp Snoopy Dorney Park Location Buena Park, CA Sandusky, OH Bloomington, MN Allentown, PA 1997 3,400 3,208 2,600 1,300 1998 3,400 3,400 2,600 1,300 1999 3,600 3,300 2,600 1,400 2000 3,456 3,432 2,600 1,260 2001 3,589 3,100 2,418 1,510 2002 3,625 3,250 2,520 1,600 2003 3,800 3,300 2,469 1,400 Paramount Parks Park Name Paramount's Kings Island Paramount's Canada Wonderland Paramount's Kings Dominion Paramount's Carowinds Paramount's Great America Location Mason, OH Maple, Ontario Richmond, VA Charlotte, NC Santa Clara, CA 1997 3,301 2,881 2,279 1,838 2,253 1998 3,400 3,025 2,325 1,875 2,050 1999 3,320 2,900 2,200 1,900 1,800 2000 3,200 2,975 2,150 1,900 1,800 2001 3,350 2,975 2,250 1,850 1,750 2002 3,183 2,826 2,093 1,850 1,820 2003 3,280 2,680 2,100 1,776 1,911 Others - not owned by a chain Park Name Hershey Park Morey's Piers Santa Cruz Beach Boardwalk Adventuredome at Circus Circus Dollywood Silver Dollar City Casino Pier Legoland California Kennywood Knoebels Amusement Resort Lagoon Location Hershey, Pa Wildwood, NJ Santa Cruz, CA Las Vegas Pigeon Forge, TN Branson, MO Seaside Heights, NJ Carlsbad, CA West Miffin, PA Elysburg, PA Farmington, UT 1997 2,162 2,885 3,200 2,667 1,947 1,951 1,589 1998 2,400 3,000 3,040 2,800 2,200 2,010 1,700 1,302 1,101 1,111 1,380 1,200 1,200 1999 2,340 3,300 3,000 2,800 2,300 2,060 1,610 1,450 1,380 1,250 1,230 2000 2,450 3,300 3,000 2,977 2,300 2,000 1,600 1,450 1,380 1,250 1,150 2001 2,560 3,400 3,000 3,400 2,060 2,080 1,650 1,375 1,380 1,300 1,118 2002 2,629 3,400 3,000 4,500 2,300 2,080 1,700 1,300 1,250 1,326 1,094 2003 2,551 3,230 3,000 4,300 2,150 1,900 1,580 1,300 1,300 1,215 1,150 ed Entertainment Association/Economics Research Associates 2004 15,170 13,360 9,400 8,260 7,820 5,830 2005 16,160 14,550 9,917 8,670 8,210 5,830 2006 16,600 14,700 10,400 9,100 8,900 5,950 2007 17,000 14,800 10,900 9,510 9,490 5,680 2008 17,000 14,700 10,900 9,600 9,540 5,560 2004 6,700 5,000 6,130 2005 6,130 4,700 5,760 2006 6,000 4,700 5,300 2007 6,200 4,700 5,430 2008 6,230 4,580 5,290 2004 6,300 4,100 4,000 2,400 1,400 2005 5,600 4,300 4,100 2,600 2,100 2006 5,700 4,360 4,260 2,813 N/A 2007 5,800 4,400 4,260 3,150 N/A 2008 5,920 4,410 4,140 3,090 N/A Comments Opened April 22, 1998 Opened in 2001 Comments Opened in May 1999 Comments Sold to Six Flags in 2001 and later re-branded Six Flags Ohio in 2000 2004 2,800 2005 2,968 2006 2,730 2007 2,720 2008 2,760 Comments 2,700 2,300 2,200 1,950 1,800 1,450 1,500 1,350 1,400 2,835 2,825 2,310 2,050 2,310 1,537 1,695 1,377 1,330 2,550 2,620 N/A N/A N/A N/A N/A N/A N/A N/A 2,630 N/A N/A N/A N/A N/A N/A N/A N/A 2,660 N/A N/A N/A N/A N/A N/A N/A Attendance fell out of the top 20 in 2007 Formerly Riverside Park Shut Down in 2005 Major expansion in 2000. Combined with Sea World Ohio to become Six Flags Worlds of Adventure in 2001 Formerly Six Flags Ohio & Sea World Ohio. From 2001-2003 Six Flags Worlds of Adventure, Sold in 2004 to Cedar Fair & most of the big rides were taken away to other parks. Sold 1,250 1,150 1,050 N/A 1,275 1,180 1,155 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1,200 1,254 N/A N/A La Ronde was owned and administered by the City N/A of Montreal until it was sold to Six Flags on May 4, 2001 Formerly Adventure World Attendance fell out of the top 50 in 2002. 2004 3,580 3,170 2,590 1,430 2005 3,470 3,110 2,200 1,500 2006 3,670 3,070 N/A N/A 2007 3,630 3,120 N/A N/A 2008 3,560 3,190 N/A N/A Comments 2004 3,330 3,420 2,180 2,010 1,930 2005 3,330 3,660 2,220 2,130 2,070 2006 3,050 3,230 N/A N/A N/A 2007 3,050 3,250 N/A N/A N/A 2008 3,120 3,380 N/A N/A N/A Comments 2004 2,500 3,100 3,000 4,400 2,100 1,800 1,580 1,430 1,330 1,250 1,170 2005 2,700 3,130 3,000 4,500 2,360 1,910 1,750 1,430 1,200 1,288 1,152 2006 2,690 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2007 2,940 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2008 2,840 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Comments Park is inside the Mall of America Opened in 1999 Form 10-K Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2008 Commission file number 1-9444 CEDAR FAIR, L.P. State of incorporation: DELAWARE I.R.S. Employer Identification No.: 34-1560655 Principal executive offices: One Cedar Point Drive, Sandusky, Ohio 44870-5259 Registrants telephone number: (419) 626-0830 Table of Contents 1 Form 10-K 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 No x 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 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 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 registrants 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. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 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 29, 2008 of $18.99 per unit was approximately $996,444,666. Number of Depositary Units representing limited partner interests outstanding as of February 1, 2009: 55,129,378 DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates by reference certain information from the Registrants definitive proxy statement for its annual meeting of unitholders to be held in May 2009, which will be filed by the Registrant within 120 days after the close of its 2008 fiscal year. ********************************* The Exhibit Index is located on page 54 Page 1 of 66 pages Table of Contents 2 Form 10-K Table of Contents 3 Form 10-K Table of Contents CEDAR FAIR, L.P. INDEX PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. PAGE Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Submission of Matters to a Vote of Security Holders 3 9 10 10 11 11 Market for Registrants Depositary Units, Related Unitholder Matters and Issuer Purchases of Depositary Units Selected Financial Data Managements Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information 12 13 14 24 25 47 47 49 Directors, Executive Officers of Registrant and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services 49 49 49 50 50 Exhibits and Financial Statement Schedules 51 PART II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. PART III Item 10. Item 11. Item 12. Item 13. Item 14. PART IV Item 15. Signatures 53 Exhibit Index 54 Consent 63 Certifications 64 2 Table of Contents 4 Form 10-K Table of Contents 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 whose shares are held by an Ohio trust (the General Partner). The Partnership is one of the largest regional amusement park operators in the world and owns eleven amusement parks, six outdoor water parks, one indoor water park and five hotels. In 2008, the Partnership entertained more than 22 million visitors. All of the Partnerships 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; Kings Island near Cincinnati, Ohio; Canadas Wonderland near Toronto, Canada; Dorney Park & Wildwater Kingdom (Dorney Park), located near Allentown in South Whitehall Township, Pennsylvania; Valleyfair, located near Minneapolis/St. Paul in Shakopee, Minnesota; Michigans Adventure located near Muskegon, Michigan; Kings Dominion near Richmond, Virginia; Carowinds in Charlotte, North Carolina; Worlds of Fun located in Kansas City, Missouri; Knotts Berry Farm, located near Los Angeles in Buena Park, California; and Californias Great America (Great America) located in Santa Clara, California. Additionally, the Partnership has a management contract for Gilroy Gardens Family Theme Park in Gilroy, California. Star Trek: The Experience (Star Trek), an interactive adventure in Las Vegas, Nevada, closed to the public on September 2, 2008, after management concluded it would not renew a contract scheduled to expire on December 31, 2008. The results of operations of Star Trek are not material to the consolidated financial statements. The Partnership also owns and operates the Castaway Bay Indoor Waterpark Resort in Sandusky, Ohio, and six separate-gated outdoor water parks. Three of the outdoor water parks are located adjacent to Cedar Point, Knotts Berry Farm and Worlds of Fun, the fourth is located near San Diego, the fifth is in Palm Springs, California, and the sixth is Geauga Lakes Wildwater Kingdom (Geauga Lake) located near Cleveland in Aurora, Ohio, which was previously operated as an amusement park and water park, but began operating solely as a water park in 2008. All rides and attractions at the amusement and water parks are owned and operated by the Partnership. The Partnerships seasonal amusement parks are generally open during weekends beginning in April or May, and then daily from Memorial Day until Labor Day, after which they are open during weekends in September and, in most cases, October. The six outdoor water parks also operate seasonally, generally from Memorial Day to Labor Day, plus some additional weekends before and after this period. As a result, virtually all of the operating revenues of these parks are generated during an approximate 130 to 140-day operating season. Both Knotts Berry Farm and Castaway Bay Resort are open daily on a year-round basis. Castaway Bays indoor water park is open daily generally from Memorial Day to Labor Day, plus a limited daily schedule for the balance of the year. Each park charges a basic daily admission price, which allows unlimited use of most rides and attractions. The demographic groups that are most important to the parks are young people ages 12 through 24 and families. Families are believed to be attracted by a combination of rides and live entertainment and the clean, wholesome atmosphere. Young people are believed to be attracted by the action-packed rides. During their operating seasons, the parks conduct active television, radio, newspaper and internet advertising campaigns in their major market areas geared toward these two groups. 3 Table of Contents 5 Form 10-K Table of Contents Description of Parks Cedar Point Cedar Point, which was first developed as a recreational area in 1870, is located on a peninsula in Sandusky, Ohio bordered by Lake Erie and Sandusky Bay, approximately 60 miles west of Cleveland and 100 miles southeast of Detroit. Cedar Point is believed to be the largest seasonal amusement park in the United States, measured by the number of rides and attractions and the hourly ride capacity, and has been named the Best Amusement Park in the World for eleven consecutive years by Amusement Todays international survey. It serves a six-state region in the Midwestern United States, which includes nearly all of Ohio and Michigan, western Pennsylvania and New York, northern West Virginia and Indiana, and southwestern Ontario, Canada. The parks total market area includes approximately 26 million people, and the major areas of dominant influence in this market area, which are Cleveland, Detroit, Toledo, Akron, Columbus, Grand Rapids, Flint, and Lansing, include approximately 15 million people. Located adjacent to the park is Soak City, a separate-gated water park that features more than 20 water rides and attractions, as well as Challenge Park, which features several extra-charge attractions including two 18-hole themed miniature golf courses and two go-kart tracks. Cedar Point also owns and operates four hotel facilities. The parks only year-round hotel is Castaway Bay Indoor Waterpark Resort, an indoor water park resort, which is located at the Causeway entrance to the park. Castaway Bay features a tropical Caribbean theme with 237 hotel rooms centered around a 38,000-square-foot indoor water park. The parks largest hotel, the historic Hotel Breakers, has more than 600 guest rooms. Hotel Breakers has various dining and lounge facilities, a private beach, lake swimming, a conference/meeting center, one indoor pool and two outdoor pools. Located near the Causeway entrance to the park is Breakers Express, a 350-room, limited-service seasonal hotel. In addition to the Hotel Breakers and Breakers Express, Cedar Point offers the lakefront Sandcastle Suites Hotel, which features 187 suites, a courtyard pool, tennis courts and a contemporary waterfront restaurant. Cedar Point also owns and operates the Cedar Point Marina, Castaway Bay Marina and Camper Village. Cedar Point Marina is one of the largest full-service marinas on the Great Lakes and provides dockage facilities for more than 740 boats, including floating docks and full guest amenities. In addition, Cedar Point Marina features a Famous Daves Bar-B-Que restaurant and an upscale seafood restaurant, called Bay Harbor, both of which are accessible by the general public. Castaway Bay Marina is a full-service marina featuring 160 slips and full guest amenities. Camper Village includes campsites for more than 100 recreational vehicles and Lighthouse Point which offers lakefront cottages, cabins and full-service recreation vehicle campsites. The Partnership, through a wholly owned subsidiary, 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 up to 2,800 of the parks approximately 4,100 seasonal and part-time employees. Knotts Berry Farm Knotts Berry Farm, located near Los Angeles in Buena Park, California, first opened in 1920 and was acquired by the Partnership late in 1997. The park is one of several year-round theme parks in Southern California and serves a total market area of approximately 20 million people centered in Orange County and a large national and international tourism population. The park is renowned for its seasonal events, including a special Christmas promotion, Knotts Merry Farm, and a Halloween event called Knotts Scary Farm, which has been held for more than 30 years and was named Best Halloween Event in the industry by Amusement Todays international survey in 2007. 4 Table of Contents 6 Form 10-K Table of Contents The Partnership also owns and operates three water parks in California. Adjacent to Knotts Berry Farm is Knotts Soak City-Orange County, a separate-gated seasonal water park that features more than 20 water rides and attractions. Just south of San Diego in Chula Vista, California is Knotts Soak City-San Diego, a seasonal water park which offers its guests more than 20 water rides and attractions. Knotts Soak City-Palm Springs is a 16-acre seasonal water park, located in Palm Springs, California, that offers 20 separate water rides and attractions, including 13 water slides, a giant wave pool, a lazy river inner tube ride and a childrens activity area, as well as various food and merchandise shops. The Partnership also owns and operates the Knotts Berry Farm Resort Hotel, a 320-room, full-service hotel located adjacent to Knotts Berry Farm, which features a pool, tennis courts and meeting/banquet facilities. Kings Island Kings Island, a combination amusement and water park located near Cincinnati, Ohio, first opened in 1972 and was acquired by the Partnership in June of 2006. Kings Island is one of the largest seasonal amusement parks in the United States, measured by the number of rides and attractions and the hourly ride capacity. The park has received recognition for the Best Kids Area in the World for eight consecutive years by Amusement Todays international survey. The parks total market area includes approximately 15 million people, and the major areas of dominant influence in this market area, which are Cincinnati, Dayton and Columbus, Ohio, Louisville and Lexington, Kentucky, and Indianapolis, Indiana, include approximately 8 million people. Canadas Wonderland Canadas Wonderland, a combination amusement and water park located near Toronto in Vaughan, Ontario, first opened in 1981 and was acquired by the Partnership in June of 2006. It is one of the most attended regional amusement parks in North America. Canadas Wonderland is in a culturally diverse metropolitan market with large populations of different ethnicities and national origins. Each year, more than 20 cultural festivals featuring renowned music artists from across the world perform in the Kingswood Music Theatre located within the park. The parks total market area includes approximately 9 million people. Kings Dominion Kings Dominion, a combination amusement and water park located near Richmond, Virginia, first opened in 1975 and was acquired by the Partnership in June of 2006. The parks total market area includes approximately 19 million people and the major areas of dominant influence in this market area, which are Richmond and Norfolk, Virginia, Raleigh, North Carolina, Baltimore, Maryland and Washington, D.C, include approximately 12 million people. Additionally, the park offers Kings Dominion Campground, a camping area featuring a swimming pool, playground, volleyball courts, miniature golf, and laundry facilities. The campground also offers a free shuttle service between the campground and amusement park. The Partnership also owns a dormitory facility located adjacent to the park that houses up to 440 of the parks approximately 3,700 seasonal employees. Dorney Park Dorney Park, a combination amusement and water park located near Allentown in South Whitehall Township, Pennsylvania, was first developed as a summer resort area in 1884 and was acquired by the Partnership in 1992. Dorney Park is one of the largest amusement parks in the Northeastern United States and serves a total market area of approximately 35 million people. The parks major markets include Philadelphia, New Jersey, New York City, Lancaster, Harrisburg, York, Scranton, Wilkes-Barre, Hazleton and the Lehigh Valley. 5 Table of Contents 7 Form 10-K Table of Contents Carowinds Carowinds, a combination amusement and water park located in Charlotte, North Carolina, first opened in 1973 and was acquired by the Partnership in June of 2006. Carowinds major markets include Charlotte, Greensboro, and Raleigh, North Carolina as well as Greenville and Columbia, South Carolina. The parks total market area includes approximately 14 million people. The park also offers Camp Wilderness Resort, a camping area that offers a convenience and merchandise store, laundry facilities, a swimming pool, miniature golf, shuffleboard, and sand volleyball courts. The campground has over 140 RV sites and 57 spacious tent and pop-up sites. The campground also offers a free shuttle service between the campground and amusement park. Valleyfair Valleyfair, which opened in 1976 and was acquired by the Partnerships predecessor in 1978, is a combination amusement and water park located near Minneapolis-St. Paul in Shakopee, Minnesota. It is the largest amusement park in Minnesota. Valleyfairs market area is centered in Minneapolis-St. Paul, which has a population of approximately 3 million, but the park also draws visitors from other areas in Minnesota and surrounding states with a combined population base of 9 million people. The Partnership also owns a dormitory facility located adjacent to the park that houses up to 420 of the parks approximately 1,700 seasonal employees. Worlds of Fun Worlds of Fun, which opened in 1973, and Oceans of Fun, the adjacent separate-gated water park that opened in 1982, were acquired by the Partnership in 1995. Located in Kansas City, Missouri, Worlds of Fun serves a total market area of approximately 7 million people centered in Kansas City, but also including most of Missouri, as well as portions of Kansas and Nebraska. The park also features Worlds of Fun Village, an upscale camping area that offers overnight guest accommodations next to the park in 20 wood-side cottages, 22 log cabins and 80 deluxe RV sites. Also, included within the Village is a clubhouse with a swimming pool and arcade games. Oceans of Fun, which requires a separate admission fee, is located adjacent to Worlds of Fun and features a wide variety of water attractions. Californias Great America Californias Great America, a combination amusement and water park located in Santa Clara, California, first opened in 1976 and was acquired by the Partnership in June of 2006. The parks total market area includes approximately 13 million people and draws its visitors primarily from San Jose, San Francisco, Sacramento, Modesto and Monterey, among other cities in northern California. Michigans Adventure Michigans Adventure, which was acquired by the Partnership in 2001, is the largest amusement park in Michigan. The combination amusement and water park located near Muskegon, Michigan serves a total market area of approximately 5 million people, principally from central and western Michigan and eastern Indiana. Geauga Lakes Wildwater Kingdom Geauga Lakes Wildwater Kingdom (Geauga Lake), near Cleveland, Ohio, was first developed as a recreational area in 1888, and was acquired by the Partnership in 2004. Beginning with the 2008 season, Geauga Lake 6 Table of Contents 8 Form 10-K Table of Contents converted from what was historically a combination amusement park and water park to a stand-alone water park. This family-oriented water park serves a total market area of approximately 17 million people. The parks major markets include Cleveland/Akron, Youngstown and Pittsburgh. WORKING CAPITAL AND CAPITAL EXPENDITURES 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 with revolving credit facilities, which are established at levels sufficient to accommodate the Partnerships peak borrowing requirements in April and May as the seasonal parks complete preparations for opening. Revolving credit borrowings are reduced daily with the Partnerships strong positive cash flow during the seasonal operating period. The Partnership believes that annual park attendance is influenced to some extent by the investment in new attractions from year to year. Capital expenditures are planned on a seasonal basis with the majority of such capital expenditures made in the period from October through May, prior to the beginning of the peak operating season. Capital expenditures made in a calendar year may differ materially from amounts identified with a particular operating season because of timing considerations such as weather conditions, site preparation requirements and availability of ride components, which may result in accelerated or delayed expenditures around calendar year-end. COMPETITION In general, the Partnership competes for discretionary spending with all phases of the recreation industry within its primary market areas, including several 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 All rides are run and inspected daily by both the Partnerships maintenance and ride operations personnel before being put into operation. The parks are also periodically inspected by the Partnerships insurance carrier and, at Cedar Point, Knotts Berry Farm, Kings Island, Kings Dominion, Carowinds, Great America, Dorney Park, Geauga Lake, Worlds of Fun and Michigans Adventure, by state ride-safety inspectors. Valleyfair contracts with a third party to inspect its rides per Minnesota law and submits the third-party report to the state agency. EMPLOYEES The Partnership has approximately 1,700 full-time employees. During the peak operating season, it has approximately 35,000 seasonal and part-time employees, most of whom are high school and college students. Approximately 2,800 of Cedar Points seasonal employees, 400 of Valleyfairs seasonal employees, and 440 of Kings Dominions seasonal employees live in dormitories owned by the Partnership. The Partnership maintains training programs for all new employees and believes that its relations with its employees are good. 7 Table of Contents 9 Form 10-K Table of Contents SUPPLEMENTAL ITEM. Executive Officers of Cedar Fair Name Richard L. Kinzel Age 68 Position with General Partner Dick Kinzel has served as Chairman since 2003 and President and Chief Executive Officer since 1986. Mr. Kinzel has been employed by the Partnership or its predecessor since 1972, and from 1978 to 1986 he served as vice president and general manager of Valleyfair. Jacob T. Falfas 57 Jack Falfas has served as Chief Operating Officer since April 2005. Prior to that, he served as Vice President & General Manager of West Coast Operations from 2001 through 2005 and as Vice President & General Manager of Knotts Berry Farm from December 1997 through 2000. Peter J. Crage 47 Peter Crage has served as Corporate Vice President of Finance and Chief Financial Officer since July 2005. In August 2004, he rejoined Cedar Fair to serve as Vice President and Corporate Controller after having served as Vice President of Finance at Delaware North Companies in their Parks and Resorts Division. Prior to that Mr. Crage served as Corporate Treasurer of Cedar Fair from 1999 to 2002. Robert A. Decker 48 Rob Decker has served as Corporate Vice President of Planning & Design since the end of 2002. Prior to that, he served as Corporate Director of Planning and Design since 1999. Craig J. Freeman 55 Craig Freeman has served as Vice President of Administration since September 2005. Prior to that, he served as Vice President and General Manager of Knotts Camp Snoopy at the Mall of America from 1996 through 2005. Duffield E. Milkie 43 Duffield Milkie has served as Corporate Vice President General Counsel since February 2008. Prior to that, he was a partner in the law firm of Wickens, Herzer, Panza, Cook, & Batista since 1998. Brian C. Witherow 42 Brian Witherow has served as Vice President and Corporate Controller since July 2005. Prior to that, he served as Corporate Treasurer from May 2004 to June 2005 and as Corporate Director of Investor Relations from 1995 through 2004. H. Philip Bender 53 Phil Bender has served as a Regional Vice President since June 2006. Prior to that, he served as Vice President & General Manager of Worlds of Fun / Oceans of Fun since the end of 2000. Richard A. Zimmerman 48 Richard Zimmerman has served as Regional Vice President since June 2007. Prior to that, he served as Vice President and General Manager of Kings Dominion since 1998. AVAILABLE INFORMATION Copies of the Partnerships 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 Securities and Exchange Commission are available without charge upon written request to the Partnerships Investor Relations Office or through its web site (www.cedarfair.com). You may read and copy any materials filed with the SEC at the SECs Public Reference Room at Headquarters Office, 100 F Street, N.E., Room 1580, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that contains the Partnerships reports, proxy statements and other information. 8 Table of Contents 10 Form 10-K Table of Contents ITEM 1A. RISK FACTORS. Risks Related to Our Business We compete for discretionary spending with many other entertainment alternatives and are subject to factors that generally affect the recreation and leisure industry, including the current economic downturn. Our parks compete for discretionary spending with other amusement, water and theme parks and with other types of recreational activities and forms of entertainment, including movies, sports 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 and changes in consumer tastes and spending habits. The difficult regional economic conditions and recessionary periods may adversely impact attendance figures and guest spending patterns at our parks, and disproportionately affect different segments of our target customers within our core markets. Both attendance and guest per capita spending at our parks are key drivers of our revenues and profitability, and reductions in either can directly and negatively affect revenues and profitability. Our credit agreement contains certain restrictions that if not met, may limit or suspend future distributions. Our credit agreement governs, among other things, the amount of distributions we are permitted to pay. Certain restrictions exist when cash flow from operations, although positive, is not sufficient per the requirements of the credit agreement. Also, we are required to meet certain debt to EBITDA levels to maintain or increase our distribution. The terms of our credit agreement could, under certain circumstances, impose limitations upon our activities. The agreement governing our term debt and our revolving credit facilities includes covenants that under some circumstances could limit, among other things, our ability to: incur additional debt; pay distributions to our unitholders; create liens; make certain investments; consolidate or transfer assets; and enter into certain transactions with our affiliates. Our credit agreement also requires us to maintain specified financial ratios and satisfy certain other financial tests. A breach of any of these covenants for any reason, including a decline in operating results due to economic conditions, could result in an event of default under our credit agreement. If an event of default occurs and continues, our lenders could elect to cause our outstanding debt to become immediately due and payable, requiring it to be refinanced under market conditions at that time. Our inability to reduce our total debt, as well as a continuation of current credit market conditions, could negatively impact our financial condition in the future. As provided in our credit agreement, our revolving credit facilities mature in August 2011 and our term debt matures in February 2012 and August 2012. Our inability to reduce our debt and reduce our leverage ratios, as well as a continuation of current credit market conditions, could result in higher cash interest costs in the future and/or may limit our ability to refinance the debt. 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 also can be adversely affected by forecasts of bad or mixed weather conditions. 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. Our 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 this 130 to 140-day annual operating season. As a result, when conditions or events described as risk factors occur during the operating Table of Contents 11 Form 10-K 9 Table of Contents 12 Form 10-K Table of Contents season, particularly during the peak 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, such conditions or events may have a disproportionately adverse effect upon our revenues. Unanticipated construction delays in completing capital improvement projects in our parks and resort facilities can 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. There is a risk of accidents occurring at amusement parks, which may reduce attendance and negatively impact our revenues. All of our amusement parks feature thrill rides. Although we are safety conscious, there are inherent risks involved with these attractions, and an accident or a serious injury at any of our amusement parks may reduce attendance and result in decreased revenues. In addition, accidents or injuries at parks operated by our competitors may influence the general attitudes of amusement park patrons and adversely affect attendance at our amusement parks. 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 amusement park industry for an average of more than 20 years. The loss of the services of our key employees could have a materially adverse effect on our business. With the exception of four executive officers, we do not have employment agreements with our key employees. Other factors, including local events, natural disasters and terrorist activities, can 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. ITEM 1B. None. UNRESOLVED STAFF COMMENTS. ITEM 2. PROPERTIES. Cedar Point and Soak City are located on approximately 365 acres, virtually all of which have been developed, owned by the Partnership on the Cedar Point peninsula in Sandusky, Ohio. The Partnership also owns approximately 100 acres of property on the mainland adjoining the approach to the Cedar Point Causeway. The Breakers Express hotel, the Castaway Bay Indoor Waterpark Resort and adjoining TGI Fridays restaurant, Castaway Bay Marina and two seasonal-employee housing complexes are located on this property. The Partnership controls, through ownership or an easement, a six-mile public highway and owns approximately 38 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. Knotts Berry Farm and Knotts Soak City, located in California, are situated on approximately 147 acres and 13 acres, respectively, virtually all of which have been developed. Knotts Soak City-San Diego is located on 60 acres, of which 27 acres have been developed and 33 acres remain available for future expansion. Knotts Soak City-Palm Springs is located on 23 acres, of which 17 acres have been developed and 6 acres remain available for future expansion. Table of Contents 13 Form 10-K 10 Table of Contents 14 Form 10-K Table of Contents Kings Island, located in Ohio, is situated on approximately 677 acres, of which 318 acres have been developed and 359 acres remain available for future expansion. Canadas Wonderland, located near Toronto near Vaughn, Ontario, is situated on approximately 295 acres, virtually all of which have been developed. The Partnership also owns approximately 82 acres of property adjacent to the park. At Kings Dominion, approximately 279 acres have been developed and 459 acres remain available for future expansion. Kings Dominion is located in Virginia. Carowinds, located in North Carolina, is situated on approximately 337 acres, of which 299 acres have been developed and 38 acres remain available for future expansion. Great America, located in California, is situated on approximately 181 acres, virtually all of which have been developed. Dorney Park, located in Pennsylvania, is situated on approximately 201 acres, of which 178 acres have been developed and 23 acres remain available for future expansion. Valleyfair is situated on approximately 180 acres, of which 113 acres have been developed, and approximately 77 additional acres remain available for future expansion. Valleyfair is located in Minnesota. Worlds of Fun, in Missouri, is located on approximately 350 acres, of which 250 acres have been developed and 100 acres remain available for future expansion or other uses. At Geauga Lake, the Partnership owns approximately 671 total acres, of which 65 acres have been developed and are in use at the water park and an additional 35 acres are being held for future expansion. The remaining acreage is being held for sale or future development as part of the operational restructuring there. Geauga Lake is located in Ohio. Michigans Adventure, located in Michigan, is situated on approximately 250 acres, of which 119 acres have been developed and 131 acres remain available for future expansion. The Partnership, through its subsidiary Cedar Point of Michigan, Inc., also owns approximately 450 acres of land in southern Michigan. All of the Partnerships property is owned in fee simple, with the exception of Great America in Santa Clara, California, and encumbered by the February 15, 2007 Amended and Restated credit agreement. The Partnership leases this land from the City of Santa Clara through a long-term lease agreement that automatically renews through 2039 with options to terminate at the Partnerships discretion. The Partnership considers its properties to be well maintained, in good condition and adequate for its present uses and business requirements. ITEM 3. LEGAL PROCEEDINGS. The Partnership is involved in various claims and routine litigation incidental to its business. The Partnership believes that these claims and proceedings are unlikely to have a material adverse effect on its financial statements. ITEM 4. None. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 11 Table of Contents 15 Form 10-K Table of Contents PART II ITEM 5. MARKET FOR REGISTRANTS 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 January 31, 2009, there were approximately 8,700 registered holders of Cedar Fair, L.P. Depositary Units, representing limited partner interests. Attention is directed to Item 12 in this Form 10-K for information regarding the Partnerships equity incentive plans. The cash distributions declared and the high and low prices of the Partnerships units are shown in the table below: 2008 (1) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Distribution $ 0.480 $ 0.480 $ 0.480 $ 0.475 2007 (2) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Distribution $ 0.475 $ 0.475 $ 0.475 $ 0.470 $ $ High 20.71 23.32 24.71 23.95 High 24.75 29.80 29.28 29.89 $ $ Low 11.56 16.69 18.99 19.73 Low 21.00 23.84 28.20 27.55 NOTE 1 The declaration of the 2008 fourth quarter distribution, which was payable February 17, 2009, did not occur until January 2009. NOTE 2 The declaration of the 2007 fourth quarter distribution, which was payable February 15, 2008, did not occur until January 2008. Unitholder Return Performance Graph The graph below shows a comparison of the five-year cumulative total return (assuming all distributions/dividends reinvested) on Cedar Fair 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, 2003. Base Period 2003 100.00 100.00 100.00 100.00 Cedar Fair, L.P. S&P 500 S&P 400 S&P Movies and Entertainment Return 2004 113.17 110.88 116.48 101.09 Return 2005 111.32 116.32 131.11 89.28 Return 2006 110.54 134.70 144.64 114.51 Return 2007 81.49 142.10 156.18 103.59 Return 2008 36.40 89.52 99.59 60.22 12 Table of Contents 16 Form 10-K Table of Contents ITEM 6. SELECTED FINANCIAL DATA. 2008 Operating Data Net Revenues Operating income Income before taxes Net income (loss) Net income (loss) per unit - basic Net income (loss) per unit - diluted Financial Position Total assets Working capital (deficit) Long-term debt Partners equity Distributions Declared per limited partner unit Paid per limited partner unit (2) Other Data Depreciation and amortization (3) Adjusted EBITDA Capital expenditures (4) Combined attendance Combined in-park guest per capita spending (5) $ (1) 2006 2007 2005 (In thousands, except per unit and per capita amounts) 996,232 133,923 4,771 5,706 0.10 0.10 $ 986,973 154,571 9,738 (4,491) (0.08) (0.08) $ 831,389 219,496 126,564 87,477 1.62 1.59 $ 568,707 137,322 111,576 160,852 3.00 2.93 2004 $ 541,972 117,830 97,030 78,315 1.51 1.47 $ 2,186,083 (50,705) 1,724,075 106,786 $ 2,418,668 (59,960) 1,752,911 285,092 $ 2,510,921 (54,750) 1,777,163 410,615 $ 1,024,794 (90,123) 470,850 434,234 $ 993,208 (88,557) 462,084 370,483 $ $ 1.92 1.92 $ $ 1.90 1.90 $ 1.41 1.87 $ 1.84 1.83 $ $ 125,838 355,890 83,481 22,720 40.13 $ 130,623 340,668 78,522 22,113 40.60 $ 90,703 310,274 59,458 19,317 38.71 $ 55,765 194,200 75,655 12,738 37.68 $ $ $ $ $ 1.80 1.79 50,690 173,018 75,878 12,635 $ 36.59 NOTE 1 Operating results for the Paramount Parks are included for the period subsequent to their acquisition date in June 2006. NOTE 2 The declaration of the 2006 fourth quarter distribution, which was payable February 15, 2007, did not occur until January 2007. Therefore, 2006 distributions declared reflect only three quarterly distribution declarations, while four quarterly payments were made in the year. NOTE 3 Adjusted EBITDA represents earnings before interest, taxes, depreciation, and certain other non-cash costs. 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 of park-level operating profitability because 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 may not be comparable to similarly titled measures of other companies. A reconciliation of adjusted EBITDA to operating income (the most comparable financial measure) is provided below. 13 Table of Contents 17 Form 10-K Table of Contents 2008 2007 Operating income Depreciation and amortization Equity-based compensation Loss on impairment of goodwill and other intangibles Loss on impairment/retirement of fixed assets $ 133,923 125,838 716 86,988 8,425 $ 154,571 130,623 576 54,898 Adjusted EBITDA $ 355,890 $ 340,668 2006 2005 (in thousands) $ 219,496 $ 137,322 90,703 55,765 75 1,113 $ 310,274 $ 194,200 2004 $ 117,830 50,690 4,498 $ 173,018 NOTE 4 Combined attendance includes attendance figures from the eleven amusement parks, six separately gated outdoor water parks, and Star Trek: The Experience. NOTE 5 Combined guest per capita spending includes all amusement park, outdoor water park, causeway tolls and parking revenues for the amusement park and water park operating seasons. Revenues from indoor water park, hotel, campground, marina and other out-of-park operations are excluded from per capita statistics. ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Business Overview We generate our revenues primarily from sales of (1) admission to our parks, (2) food, merchandise and games inside our parks, and (3) hotel rooms, food and other attractions outside our parks. Our principal costs and expenses, which include salaries and wages, advertising, maintenance, operating supplies, utilities and insurance, are relatively fixed and do not vary significantly with attendance. In order to efficiently manage our properties, we created regional designations for our parks. The northern region, which is the largest, includes Cedar Point and the adjacent Soak City water park, Kings Island, Canadas Wonderland, Dorney Park, Valleyfair, Geauga Lakes Wildwater Kingdom and Michigans Adventure. The southern region includes Kings Dominion, Carowinds, Worlds of Fun and Oceans of Fun. Finally, our western region includes Knotts Berry Farm, Great America and the Soak City water parks located in Palm Springs, San Diego and adjacent to Knotts Berry Farm. This region also includes the management contract with Gilroy Gardens Family Theme Park in Gilroy, California and Star Trek: The Experience, an interactive adventure in Las Vegas, which closed to the public on September 2, 2008, after management concluded it would not renew a contract scheduled to expire on December 31, 2008. The results of operations of Star Trek: The Experience are not material to the consolidated financial statements. 14 Table of Contents 18 Form 10-K Table of Contents The table below presents certain financial data expressed as a percent of total net revenues and selective statistical information for the periods indicated. For the years ended December 31, Net revenues: Admissions Food, merchandise and games Accomodations and other 2008 (In millions) 2007 (In millions) 2006 (In millions) $ 566.3 355.9 74.0 56.9% 35.7% 7.4% $ 552.1 360.1 74.8 55.9% 36.5% 7.6% $ 459.5 306.9 65.0 55.3% 36.9% 7.8% Net revenues 996.2 100.0% 987.0 100.0% 831.4 100.0% Cash operating costs and expenses 640.3 64.3% 646.3 65.5% 521.1 62.7% Adjusted EBITDA (1) 355.9 35.7% 340.7 34.5% 310.3 37.3% Depreciation and amortization Equity-based compensation Loss on impairment of goodwill and other intangibles Loss on impairment / retirement of fixed assets 125.9 0.7 12.6% 0.1% 130.6 0.6 13.2% 0.1% 90.7 0.1 10.9% 0.0% 87.0 8.4 8.7% 0.9% 54.9 0.0% 8.5% - 0.0% 0.0% Operating income 133.9 13.4% 154.6 15.7% 219.5 26.4% Interest and other expense, net Loss on early extinguishment of debt 129.1 - 12.9% 0.0% 144.9 - 14.8% 0.0% 88.2 4.7 10.6% 0.6% (0.9) (0.1%) 14.2 1.4% 39.1 4.7% 5.7 0.6% (4.5) (0.5%) 87.5 10.5% Provision (benefit) for taxes Net income (loss) Selective Statistical Information: Combined attendance (in thousands) Combined in-park guest per capita spending $ 22,720 $ 40.13 $ 22,113 $ 40.60 $ 19,317 $ 38.71 (1) Adjusted EBITDA represents earnings before interest, taxes, depreciation, and certain other non-cash costs. For additional information regarding adjusted EBITDA, including a reconciliation of adjusted EBITDA to operating income (the most comparable financial measure), see Note 3 in Item 6, Selected Financial Data, on page 13. Critical Accounting Policies Managements 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. In addition, other companies may utilize different estimates and assumptions, which may impact the comparability of our results of operations to similar businesses. Table of Contents 19 Form 10-K 15 Table of Contents 20 Form 10-K Table of Contents Accounting for Business Combinations Business combinations are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions at the reporting unit, or park level, are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by management, taking into consideration information obtained during the due diligence process, valuations supplied by independent appraisal experts and other relevant information. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to present value. The determination of fair values requires significant judgment both by management and outside experts engaged to assist in this process. Property and Equipment Property and equipment are recorded at cost. Expenditures made to maintain such assets in their original operating condition are expensed as incurred, and improvements and upgrades are capitalized. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The composite method is used for the group of assets acquired as a whole in 1983, as well as for the groups of like assets of each subsequent business acquisition. The unit method is used for all individual assets purchased. Impairment of Long-Lived Assets The carrying values of long-lived assets, including property and equipment, are reviewed whenever events or changes in circumstances indicate that the carrying values of the assets may not be recoverable. An impairment loss may be recognized when estimated undiscounted future cash flows expected to result from the use of the assets, including disposition, are less than the carrying value of the assets. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying amounts of the assets. Fair value is generally determined based on a discounted cash flow analysis. In order to determine if an asset has been impaired, assets are grouped and tested at the lowest level (park 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. Long-lived Intangible Assets Goodwill and indefinite-lived trade-names are reviewed for impairment annually, or more frequently if indicators of impairment exist. Goodwill and trade-names have been assigned at the reporting unit, or park level, for purposes of impairment testing. Goodwill related to parks acquired prior to 2006 is annually tested for impairment as of October 1st. We completed this review during the fourth quarter in 2008 and determined the goodwill was not impaired. Goodwill and trade-names related to the Paramount Parks (PPI) acquisition in 2006 (see Note 3 in the Notes to Consolidated Financial Statements) is annually tested for impairment as of April 1st. We completed this review during the second quarter in 2008 and determined that such goodwill and trade-names were not impaired at that time. 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. 16 Table of Contents 21 Form 10-K Table of Contents An impairment loss may be recognized if the carrying value of the reporting unit is higher than its fair value, which is estimated using both an income (discounted cash flow) and market approach. See Note 4 in the Notes to Consolidated Financial Statements for a more detailed discussion of these approaches. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill is less than the recorded goodwill, an impairment charge is recorded for the difference. At the end of the fourth quarter of 2008, due to present uncertainty surrounding the economy and general stock price volatility, and volatility in our unit price in particular, we concluded a triggering event had occurred indicating potential impairment and performed an interim impairment test of goodwill and other indefinite-lived intangible assets. At December 31, 2008 substantially all of our goodwill and trade-name assets relate to the acquisition of the five parks in 2006. After performing a preliminary goodwill and trade-names impairment test as of December 31, 2008, we recognized $79.9 million of estimated goodwill impairment and $7.1 million of trade-names impairment, as the carrying values of goodwill and trade-names for certain parks acquired in 2006 exceeded their fair values. This impairment was driven mainly by an increase in our cost of capital in the fourth quarter of 2008 and lower projected growth rates for certain parks. The preliminary estimate of the goodwill impairment charge will be refined in the first quarter of 2009 after valuation (step 2) procedures have been completed. It is possible that our assumptions about future performance, as well as the economic outlook, and related conclusions regarding the valuation of our reporting units (parks), could change adversely, which may result in additional impairment that would have a material effect on our financial position and results of operations, in future periods. Self-Insurance Reserves Reserves are recorded for the estimated amounts of guest and employee claims and expenses incurred each period that are not covered by insurance. 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, as well as industry averages. All reserves are periodically reviewed for changes in facts and circumstances and adjustments are made as necessary. Derivative Financial Instruments Derivative financial instruments are only used within our overall risk management program to manage certain interest rate and foreign currency risks from time to time. We do not use derivative financial instruments for trading purposes. The use of derivative financial instruments is accounted for according to Financial Accounting Standards Boards (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities and related amendments. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value of the derivative instrument is reported as a component of Other comprehensive income (loss) and reclassified into earnings in the period during which the hedged transaction affects earnings. Derivative financial instruments used in hedging transactions are assessed both at inception and quarterly thereafter to ensure they are effective in offsetting changes in the cash flows of the related underlying exposures. 17 Table of Contents 22 Form 10-K Table of Contents Revenue Recognition Revenues on multi-day admission tickets are recognized over the estimated number of visits expected for each type of ticket, and are adjusted periodically during the season. All other revenues are recognized on a daily basis based on actual guest spending at our facilities, or over the park operating season in the case of certain marina dockage revenues and certain sponsorship revenues. Results of Operations 2008 vs. 2007 The following table presents key operating and financial information for the years ended December 31, 2008 and 2007. Attendance Per capita spending Out-of-park revenues Increase (Decrease) 12/31/08 12/31/07 $ % (Amounts in thousands except per capita spending) 22,720 22,113 607 2.7 $ 40.13 $ 40.60 $ (0.47) (1.2) $