SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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☒Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
for the fiscal year ended December 31, | ||
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
For the transition period from to | ||
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Commission File Number: 1-13703
SIX FLAGS ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware (State or other jurisdiction of incorporation or organization) | 13-3995059 (I.R.S. Employer Identification No.) | |
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1000 Ballpark Way, Suite 400 Arlington, Texas (Address of principal executive offices) | | 76011 (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common | | SIX | | New York Stock Exchange |
Preferred Stock Purchase Rights | | SIX | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1993. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes
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
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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | Accelerated filer ◻ | | Non-accelerated filer | | Smaller reporting company ☐ | Emerging growth company ☐ |
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. ☒
On the last business day of the registrant'sregistrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock of the registrant held by non-affiliates was approximately $5,573.7$1,628.2 million based on the closing price $70.05$19.21 of the common stock on The New York Stock Exchange on such date. Shares of common stock beneficially held by each executive officer and director have been excluded from this computation because these persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purposes.
On February 14, 2019,19, 2021, there were 84,074,57385,172,488 shares of common stock, par value $0.025, of the registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the information required in Part III by Items 10, 11, 12, 13 and 14 are incorporated by reference to the registrant'sregistrant’s proxy statement for the 20192021 annual meeting of stockholders, which will be filed by the registrant within 120 days after the close of its 20182020 fiscal year.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (the "Annual Report") and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.amended, including statements regarding (i) the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto including efficacy and deployment of the COVID-19 vaccines, (ii) the timing and conditions under which we may open our parks and our expectations regarding the continued operations of our parks, (iii) the operation of our parks in light of the COVID-19 pandemic including, among other things, the effectiveness of cost-saving and health and safety measures implemented in response to the COVID-19 pandemic, (iv) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, including in the event of a prolonged closure of one or more of our parks, (v) our ability to improve operating results, profitability and resilience by adopting and implementing a new strategic plan, including strategic cost reductions and organizational and personnel changes, without adversely affecting our business, (vi) our plans and ability to roll out our capital enhancements and planned initiatives in a timely and cost effective manner, and our expectations regarding the anticipated timing, costs, benefits and results of such enhancements and initiatives, (vii) our plans and expectations regarding future actions and initiatives to increase profitability, including expectations regarding the anticipated focus, timing, costs, benefits and results of our transformation plan, as well as our incremental annual run-rate Adjusted EBITDA and anticipated earnings baseline resulting from the plan; (viii) the extent to which having parks in many geographical locations protects our consolidated results against the effects of adverse weather and other events, (ix) our ongoing compliance with laws and regulations, and the effect of and cost and timing of compliance with newly enacted laws, regulations and accounting policies, (x) our ability to obtain additional financing, (xi) our expectations regarding future interest payments, (xii) our expectations regarding the effect of certain accounting pronouncements, (xiii) our expectations regarding the cost or outcome of any litigation or other disputes, (xiv) our annual income tax liability and the availability of net operating loss carryforwards and other tax benefits, (xv) our expectations regarding uncertain tax positions, (xvi) our expectations regarding our deferred revenue growth, and (xvii) our expectations regarding our employee recruitment, development, engagement or retention programs and initiatives. Forward-looking statements include all statements that are not historical facts and can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "may," "should," "could" and variations of such words or similar expressions.
Forward-looking statements are based on our current beliefs, expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are by their nature, subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, but are not limited to, statements we make regarding: (i)among others, the adequacy of cash flows from operations, available cash and available amounts under our credit facilities to meet our future liquidity needs, (ii) our ability to roll out our capital enhancements and planned initiatives in a timely and cost effective manner, (iii) our ability to improve operating results by implementing strategic cost reductions and organizational and personnel changes without adversely affecting our business, (iv) our dividend policy and ability to pay dividends on our common stock, (v) the effect of and cost and timing of compliance with newly enacted laws, regulations and accounting policies, and (vi) our operations and results of operations. Additional important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and include, but are not limited to, the following:
factors impacting attendance, such as local conditions, natural disasters,contagious diseases, including the COVID-19 pandemic, or the perceived threat of contagious diseases, events, disturbances and terrorist activities;
regulations and guidance of federal, state and local governments and health officials regarding the response to the COVID-19 pandemic, including with respect to business operations, safety protocols and public gatherings (such as voluntary and in some cases, mandatory, quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities);
political or military events;
recall of food, toys and other retail products sold at our parks;
accidents or contagious disease outbreaks occurring at our parks or other parks in the industry and adverse publicity concerning our parks or other parks in the industry;
availability of commercially reasonable insurance policies at reasonable rates;
inability to achieve desired improvements and financial performance targets set forth in our aspirational financial performance goals;
adverse weather conditions such as excess heat or cold, rain and storms;
general financial and credit market conditions;conditions, including our ability to access credit or raise capital;
economic conditions (including customer spending patterns);
changes in public and consumer tastes;
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construction delays in capital improvements or ride downtime;
competition with other theme parks, and waterparks and entertainment alternatives;
dependence on a seasonal workforce;
unionization activities and labor disputes;
laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, and healthcare reform;
environmental laws and regulations;
laws and regulations affecting corporate taxation;
pending, threatened or future legal proceedings and the significant expenses associated with litigation;
cyber security risks; and
other factors or uncertainties described in "Item 1A. Risk Factors" included elsewhere inof this Annual Report.
A more complete discussion of these factors and other risks applicable to our business is contained in "Part I, Item"Item 1A. Risk Factors" included elsewhere inof this Annual Report. All forward-looking statements in this report, or that are made on our behalf by our directors, officers or employees related to the information contained herein, apply only as of the date of this report or as of the date they were made. While we believe that the expectations reflected in such forward-looking statements are reasonable, we can givemake no assurance that such expectations will be realized and actual results could vary materially. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation, except as required by applicable law, to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
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As used in this Annual Report, unless the context requires otherwise, the terms "we," "our," "Six Flags," "the Company" and "SFEC" refer collectively to Six Flags Entertainment Corporation and its consolidated subsidiaries, and "Holdings" refers only to Six Flags Entertainment Corporation, without regard to its consolidated subsidiaries.
Looney Tunes
characters, names and all related indicia are trademarks of Warner Bros., a division ofiii
We are the largest regional theme park operator in the world and the largest operator of waterparks in North America based on the number of parks we operate. Of our 2526 regional theme parks and waterparks, 2223 are located in the United States, two are located in Mexico and one is located in Montreal, Canada. Our U.S. parks serve each of the top 1011 designated market areas, as determined by a survey of television households within designated market areas published by A.C. Nielsen Media Research in September 2018.2019. Our diversified portfolio of North American parks serves an aggregate population of approximately 130145 million people and 230250 million people within a radius of 50 miles and 100 miles, respectively, with some of the highest per capita gross domestic product in the U.S.
Our parks occupy approximately 5,9006,000 acres of land, and we own approximately 800700 additional acres of other potentially developable land.land with development potential. Our parks are located in geographically diverse markets across North America. Our parks generally offer a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and retail outlets, and thereby provide a complete family-oriented entertainment experience. In the aggregate, during 2018,2020, our parks offeredcontained approximately 920940 rides, including over 150 roller coasters, making us the leading provider of "thrill rides" in the industry.
In 1998, we acquired the former Six Flags Entertainment Corporation ("Former SFEC", a corporation that has been merged out of existence and that had always been a separate corporation from Holdings), which had operated regional theme parks and waterparks under the Six Flags name for nearly forty years and established an internationally recognized brand name. We own the "Six Flags" brand name in the U.S. and foreign countries throughout the world. To capitalize on this name recognition, 2122 of our parks are branded as "Six Flags" or "Hurricane Harbor" parks, and in 2014, we also began the development, with third-party partners,a third party partner, of a Six Flags-branded parks outside of North America.
We hold exclusive long-term licenses for theme park usage of certain Warner Bros. and DC Comics characters throughout the U.S. (except the Las Vegas metropolitan area), Canada, Mexico and other countries. These characters include
Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman, Superman, The Joker, Wonder Woman, The Flash, Green Lantern, Harley Quinn, Aquaman, and others. We use these charactersWe believe our parks benefit from limited direct theme park competition. A limited supply of real estate appropriate for theme park development, substantial initial capital investment requirements, long development lead-time, and zoning restrictions provide each of our parks with a significant degree of protection from competitive new theme park openings. Based on our knowledge of the development of our own and other regional theme parks, we estimate it would cost $500 million to $700 million and would take a minimum of four years to construct a new regional theme park comparable to one of our major Six Flags-branded theme parks.
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The impact of the COVID-19 pandemic on our business has been more substantial than any other event throughout our history. In response to the COVID-19 pandemic, federal, state and local governments implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. The pandemic and these containment measures have had, and may continue to have, a material negative impact on our business and financial performance. On March 13, 2020, we temporarily suspended operations at all our theme parks and waterparks due to the COVID-19 pandemic. Through concerted action, we quickly implemented plans to mitigate the crisis and position us for future success while ensuring the health and safety of our employees and guests. As a result of these actions, all of our theme parks and some of our waterparks operated in at least some capacity for a portion of the season, albeit pursuant to reduced capacity and other operating limitations. Highlights included (i) implementation of cost controls, including company-wide salary reductions, and curtailed advertising, marketing and capital expenditures, (ii) strengthening of liquidity, including increased revolving credit, suspended testing of certain covenants in our credit facility, and raising of additional debt, (iii) development of industry-leading safety measures, including a reservation system to control park capacity, protocols to ensure proper social distancing, contactless security, and enhanced sanitization measures, (iv) development of measures to retain our season pass holders and members, including extending all 2020 season passes through the end of 2021, offering members the option to pause payments, and offering higher-tiered benefits to members who maintain their payment schedule, and (v) creation of new sources of revenue including the Six Flags Wild Safari Drive-Through Adventure, Six Flags Discovery Kingdom Marine World Experience and Holiday in the Park Drive-Through and Walk-Through Experiences.
Transformation Plan
Prior to the pandemic, we initiated a transformation plan. The transformation plan consists of five revenue initiatives and three cost initiatives designed to improve our core operational effectiveness and to support our strategy, delivering sustainable value creation over time. Our strategy is to create thrilling, memorable experiences at our regional parks, delivered by a diverse and empowered team, through industry-leading innovation and technology. The strategy is driven by three focus areas: (i) modernizing the guest experience through technology, (ii) continuously improving operational efficiency, and (iii) driving financial excellence. We plan to focus on our core business over the next two to three years; during this time, we will be cautious about expanding into adjacent domestic markets or entering into new international agreements.
Due to the outbreak of the COVID-19 pandemic in early 2020 and the resulting park closures, management redirected its focus on steering us through this crisis, causing a delay in our transformation plan. However, in the latter half of 2020, we made significant progress on each of the initiatives. For example, in October 2020, we reduced our full-time headcount costs by approximately 10%. We closed two satellite offices; initiated centralized negotiations with several vendors to reduce procurement costs; and piloted a model to optimize park level variable labor. From a revenue perspective, we improved our menu assortment, pricing and merchandizing strategy; developed a new tool to optimize media spending; improved our website; and made progress on our initiative to attract more single day visitors.
We expect the transformation plan to generate an incremental $80 to $110 million in annual run-rate Adjusted EBITDA. We expect to realize $30 to $35 million of benefits in 2021, independent of attendance levels, and to achieve the remaining benefits through incremental revenue opportunities and lower variable costs once the plan is fully implemented and the Company is operating in a normal business environment. Relative to the mid-point of the Company’s pre-pandemic guidance range of $450 million, this implies a new earnings baseline of $530 to $560 million once the plan is fully implemented and the Company is operating in a normal business environment.
Description of Parks and Segment Information
Our parks provide similar products and services through a similar process to the same class of customer through a consistent method. We also believe our parks share common economic characteristics. Based on these factors, we have only one reportable segment—theme parks. The following chart summarizes key business and geographical information about our parks.
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Name of Park and Location | Description | Designated Market Area and Rank* | Population Within Radius from Park Location | External Park Competition / Location / Approximate Distance | ||||
Frontier City Six Flags Hurricane Harbor Oklahoma City Oklahoma City, OK | | 113 acres— theme park 24 acres— waterpark | | Oklahoma City (45) | | 1.6 million—50 miles | | Andy Norman, OK / 20 miles |
La Ronde Montreal, Canada | | 146 acres—theme | | N/A | | 4.3 million—50 miles 6.3 million—100 miles | | Quebec City Water Park / Quebec City, Quebec, Canada / 130 miles Canada’s Wonderland / Vaughan, Ontario, Canada / 370 miles |
Six Flags Hurricane Harbor Rockford Rockford, IL | | 43 acres—waterpark | | Chicago (3) Milwaukee (36) | | 2.7 million—50 miles | | Several waterparks / |
Six Flags America | | 515 acres—combination theme park and waterpark and approximately 300 acres of potentially developable land | | Washington, D.C. (6) Baltimore (26) | | 8.5 million—50 miles 14.0 million—100 miles | | Kings Dominion / Doswell, VA (near Richmond) / 120 miles Hershey Park / Hershey, PA / 130 miles Busch Gardens / Williamsburg, VA / 180 miles |
Six Flags Darien Lake Darien, NY | | 982 acres— combination theme park and waterpark, hotel and campground | | Buffalo (52) | | 2.6 million—50 miles 10.9 million—100 miles | | Marineland / Niagara Falls, Ontario, Canada / 50 miles Fantasy Island / Grand Island, NY / 40 miles |
Six Flags Discovery Vallejo, CA Six Flags Hurricane Harbor Concord Concord, CA | | 159 acres— separately gated theme park with marine and land animal exhibits, and waterpark on 135 acres and 24 acres, respectively | | San Francisco / Oakland (8) Sacramento (20) | | 6.4 million—50 miles 12.0 million—100 miles | | Aquarium of the Bay at Pier 39 / San Francisco, CA / 30 miles Academy of Science Center / San Francisco, CA / 30 miles California Great America / Santa Clara, CA / 60 miles Gilroy Gardens / Gilroy, CA / 100 miles Outer Bay at Monterey Bay Aquarium / Monterey, CA / 130 miles |
Six Flags Fiesta Texas San Antonio, TX | | 220 acres—combination theme park and waterpark | | Houston (7) San Antonio (31) Austin (40) | | 2.8 million—50 miles 5.1 million—100 miles | | Sea World of Texas / San Antonio, TX / 20 miles Schlitterbahn / New Braunfels, TX / 30 miles |
Six Flags Great Adventure & Safari / Six Flags Hurricane Harbor Jackson, NJ | | 2,111 acres—separately gated theme park/safari and waterpark and approximately | | New York City (1) Philadelphia (4) | | 14.5 million—50 miles 29.6 million—100 miles | | Hershey Park / Hershey, PA / 150 miles Dorney Park / Allentown, PA / 80 miles Morey’s Piers Wildwood / Wildwood, NJ / 100 miles Coney Island / Brooklyn, NY / 80 miles American Dream Park East Rutherford, NJ / 70 miles |
Six Flags Great America Gurnee, IL | | 304 acres—combination theme park and waterpark and approximately 30 acres of potentially developable land | | Chicago (3) Milwaukee (36) | | 9.0 million—50 miles 13.9 million—100 miles | | Kings Island / Cincinnati, OH / 350 miles Cedar Point / Sandusky, OH / 340 miles Several waterparks / Wisconsin Dells Area / 170 miles |
Six Flags Hurricane Harbor Oaxtepec, Mexico | | 67 acres—waterpark | | N/A | | 22.6 million—50 miles 32.6 million—100 miles | | El Rollo / Tlaquiltenango, Mexico / 20 miles Parque Acuatico Ojo de Agua / Temixco, Mexico / 20 miles Ixtapan Aquatic Park / Ixtapan de la Sal, Mexico / 50 miles |
Six Flags Hurricane Harbor Phoenix Glendale, AZ | | 33 acres—waterpark | | Phoenix (12) | | 4.9 million—50 miles 5.2 million—100 miles | | Big Surf / Tempe, AZ / 30 miles Golfland Sunsplash / Mesa, AZ / 40 miles Castles & Coasters / Phoenix, AZ / 10 miles |
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Name of Park and Location | Description | Designated Market Area and Rank* | Population Within Radius from Park Location | External Park Competition / Location / Approximate Distance | |||||
Six Flags Hurricane Harbor Spring, TX | | 46 acres—waterpark | | Houston (7) | | 7.1 million—50 miles 8.1 million—100 miles | | Big Rivers Waterpark / New Caney, TX / 20 miles Typhoon Texas Water Park / Katy, TX / 40 miles Schlitterbahn Galveston / Galveston, TX / 70 miles | |
Six Flags Magic Mountain / Valencia, CA | | 262 acres—separately gated theme park and waterpark on 250 acres and 12 acres, respectively | | Los Angeles (2) | | 10.2 million—50 miles | | Disneyland Resort / Anaheim, CA / 60 miles Universal Studios Hollywood / Universal City, CA / 20 miles Knott’s Berry Farm / Soak City USA Buena Park, CA / 50 miles Sea World of California / San Diego, CA / 150 miles Legoland / Carlsbad, CA / 130 miles Raging Waters / San Dimas, CA / 50 miles | |
Six Flags Mexico Mexico City, Mexico | | 110 acres—theme park | | N/A | | 24.5 million—50 miles 33.2 million—100 miles | | Mexico City Zoo / Mexico City, Mexico / 10 miles La Feria / Mexico City, Mexico / 10 miles | |
Six Flags New England Agawam, MA | | 262 acres—combination theme park and waterpark | | Boston (9) Hartford / New Haven (33) Providence (53) Springfield (108) | | 3.2 million—50 miles 16.8 million—100 miles | | Lake Compounce / Bristol, CT / 50 miles Canobie Lake Park / Salem, NH / 140 miles | |
Six Flags Over Georgia Austell, GA Six Flags White Water Atlanta Marietta, GA | | 352 acres—separately gated theme park and waterpark on 283 acres and waterpark on 69 acres, respectively | | Atlanta (10) | | 6.2 million—50 miles 8.8 million—100 miles | | Georgia Aquarium / Atlanta, GA / 20 miles Carowinds / Charlotte, NC / 250 miles Alabama Splash Adventures / Birmingham, AL / 160 miles Dollywood and Splash Country / Pigeon Forge, TN / 200 miles Wild Adventures / Valdosta, GA / 240 miles | |
Six Flags Over Texas / Six Flags Hurricane Harbor Arlington, TX | | 264 acres—separately gated theme park and waterpark on 217 and 47 acres, respectively | | Dallas/Fort Worth (5) | | 7.4 million—50 miles 8.8 million—100 miles | | Sea World of Texas / San Antonio, TX / 280 miles NRH2O Water Park / North Richland Hills, TX / 10 miles Epic Waters / Grand Prairie, TX / 5 miles Hawaiian Falls Water parks / Multiple Locations / 15 - 35 miles | |
Six Flags St. Louis Eureka, MO | | 320 acres—combination theme park and waterpark and approximately 17 acres of potentially developable land | | St. Louis (21) | | 2.8 million—50 miles | | Worlds of Fun / Kansas City, MO / 250 miles Silver Dollar City / Branson, MO / 250 miles Holiday World / Santa Claus, IN / 150 miles | |
The Great Escape and Hurricane Harbor / Six Flags Great Escape Lodge & Indoor Waterpark Queensbury, NY | | 345 acres—combination theme park and waterpark, plus 200 room hotel and 38,000 square foot indoor waterpark | | Albany | | 1.1 million—50 miles 3.0 million—100 miles | | Huck Albany, New York / 60 miles Several hotels/indoor waterparks / Poconos and New England Areas / 200 miles |
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Based on a September |
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Partnership Park Arrangements
In connection with our 1998 acquisition of Former SFEC, we guaranteed certain obligations relating to Six Flags Over Texas ("SFOT") and Six Flags Over Georgia, including Six Flags White Water Atlanta ("SFOG", and together with SFOT, the "Partnership Parks"). These obligations continue until 2027, in the case of SFOG, and 2028, in the case of SFOT. Such obligations include (i) minimum annual distributions (including rent) of approximately $72.5$75.2 million in 20192021 (subject to cost of living adjustments in subsequent years) to the limited partners in the Partnerships Parks (based on our ownership of units as of December 31, 2018,2020, our share of the distribution will be approximately $31.7$33.3 million) and (ii) minimum capital expenditures at each park during rolling five-year periods based generally on 6% of Partnership Park revenues. Cash flow from operations at the Partnership Parks is used to satisfy these requirements before any funds are required from us. We also guaranteed the obligation of our subsidiaries to annually purchase all outstanding limited partnership units to the extent tendered by the unit holders (the "Partnership Park Put").
After payment of the minimum distribution, we are entitled to a management fee equal to 3% of prior year gross revenues and, thereafter, any additional cash will be distributed first to management fee in arrears, then repayment of any interest and principal on intercompany loans, with any additional cash being distributed 95% to us, in the case of SFOG, and 92.5% to us, in the case of SFOT.
The agreed price for units tendered in the Partnership Park Put is based on a valuation of each of the respective Partnership Parks (the "Specified Price") that is the greater of (i) a valuation for each of the respective Partnership Parks derived by multiplying such park'spark’s weighted average
Pursuant to the 20182020 annual offer, we did not purchase anypurchased 0.375 units from the Georgia partnership for approximately $1.5 million and we purchased 0.17501.5675 units from the Texas partnership for approximately $0.4$3.4 million in May 2018.2020. The $350 million accordion feature on the Second Amended and Restated Term Loan B under the Second Amended and Restated Credit Facility (as defined in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources"Note 8 to the consolidated financial statements included elsewhere in Item 7 of this Annual Report) is available for borrowing for future "put" obligations if necessary.
In connection with our acquisition of the Former SFEC, we entered into the Subordinated Indemnity Agreement with certain of the Company'sCompany’s entities, Time Warner, and an affiliate of Time Warner (an indirect subsidiary of AT&T Inc. as a result of a merger in 2018), pursuant to which, among other things, we transferred to Time Warner (which has guaranteed all of our obligations under the Partnership Park arrangements) record title to the corporations whichthat own the entities that have purchased and will purchase limited partnership units of the Partnership Parks, and we received an assignment from Time Warner of all cash flow received on such limited partnership units, and we otherwise control such entities. In addition, we issued preferred stock of the managing partner of the partnerships to Time Warner. In the event of a default by us under the Subordinated Indemnity Agreement or of our obligations to our partners in the Partnership Parks, these arrangements would permit Time Warner to take full control of both the entities that own limited partnership units and the managing partner. If we satisfy all such obligations, Time Warner is required to transfer to us the entire equity interests of these entities. The 2018 merger of Time Warner and AT&T Inc. did not affect the Time Warner guarantee of our obligations under the Subordinated Indemnity Agreement.
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We incurred $21.2$9.1 million of capital expenditures at these parks during the 20182020 season, and intend to incur approximately $17 million of capital expenditures at these parks for the 2019 season, an amount in excess of the minimum required expenditure.expenditure in 2021. Cash flows from operations at the Partnership Parks will be used to satisfy the annual distribution and capital expenditure requirements before any funds are required from us. The two partnerships generatedused approximately $77.6$8.4 million of cash in 2018 from2020 in operating activities after deduction of capital expenditures and excluding the impact of short-term intercompany advances from or payments to Holdings, as the case may be. As of December 31, 20182020 and 2017,2019, we had total loans receivable outstanding of $239.3$288.3 million and $239.3 million, respectively, from the partnerships that own the Partnership Parks. The proceeds from these loans were primarily used to fund the acquisition of Six Flags White Water Atlanta and to make capital improvements and distributions to the limited partners in prior years.
Marketing and Promotion
We attract visitors through multi-mediamultichannel marketing and promotional programs for each of our parks. The programs are designed to attract guests and enhance the Six Flags brand name and are tailored to address the different characteristics of our various markets and to maximize the impact of specific park attractions and product introductions. All marketingMarketing and promotional programs are updated or completely changedreplaced each year to address new developments. These initiatives are supervised by our Senior Vice President, Marketingsenior marketing and Sales,sales leadership teams, with the assistance of our senior management and advertising and promotion agencies.
We also develop alliance, sponsorship and co-marketing relationships with well-known national, regional and local consumer goods companies and retailers to supplement our advertising efforts and to provide attendance incentives in the form of discounts.
We also arrange for popular local radio and television programs to be filmed or broadcast live from our parks.
Our season pass holders and members are among our most valuable customers. To incentivize members to maintain their patronage and loyalty during the pandemic, we offer discounts onoffered one bonus month for each month that they paid while their home park was closed. Members that continued to make their monthly membership payments also received a free upgrade to the next tier of membership valid until the end of 2022. In recognition of the unique challenges many of our guests faced due to the pandemic, we offered all of them the opportunity to pause their memberships (and payments) until their home park opens in 2021. All 2020 season passes, multi-visitpass holders received a free extension of their pass until the end of the 2021 season, along with a variety of in-park benefits to recognize their loyalty and continued commitment to the Company.
Our Group Sales team offers discounted tickets ticketsand catered meals for specific dates and tickets to affiliatedlarge groups such as businesses, schools, and religious, fraternal and similar organizations.
We also implementuse promotional programs as a means of targeting specific market segments and locations not generally reached through group or retail sales efforts. The promotional programs utilize coupons, sweepstakes, reward incentives and rebates to attract additional visitors. These programs are implemented through online promotions, digital and social marketing activities, search engine marketing, radio and television advertising, direct mail, telemarketing, direct-response media,and sponsorship marketing and targeted multi-media programs.marketing. The special promotional offers are usually available for a limited time and offer a reduced admission price or provide some additional incentive to purchase a ticket.
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Licenses
We have the exclusive right on a long-term basis to theme park usage of the Warner Bros. and DC Comics animated characters throughout the U.S. (except for the Las Vegas metropolitan area), Canada, Mexico and certain other countries. In particular, our license agreements entitle us to use, subject to customary approval rights of Warner Bros. and, in limited circumstances, approval rights of certain third parties, all animated, cartoon and comic book characters that Warner Bros. and DC Comics have the right to license, including Batman, The Joker, Superman, Wonder Woman, The Flash, Green Lantern, Harley Quinn,Aquaman, Aquaman, Bugs Bunny, Daffy Duck, Tweety Bird and Yosemite Sam. They also include the right to sell merchandise using the characters. In addition to annual license fees, we are required to pay a royalty fee on any merchandise manufactured by or for us and sold that use the licensed characters. Warner Bros. has the right to terminate the license agreements under certain circumstances, including if any persons involved in the movie or television industries obtain control of us or, in the case of Warner Bros., upon a default under the Subordinated Indemnity Agreement.
Park Operations
We currently operate in geographically diverse markets in North America. The parks are generallyEach park is managed by a park president who reports to a senior vice president of the Company. The park presidents areis responsible for all operations and management of the individual parks.park. Each park president directs a full-time, on-site management team. Local advertising, ticket sales, community relations and hiring and training of personnel are the responsibility of individual park management in coordination with corporate support teams.
Each park president directs a full-time, on-site management team. Each management team includes senior personnel responsible for operations and maintenance; in-park food, beverage, merchandising and games; marketing and promotion; sponsorships;sales; human resources and finance. Finance directors at our parks report to a corporate senior vice president of the Company, and, with their support staff, provide financial services to their respective parks and park management teams. Park management compensation structures are designed to provide financial incentives for individual park managers to execute our strategy and to maximize revenue and free cash flow.
Our parks are generally open daily from Memorial Day through Labor Day. In addition, most of our parks are open weekends prior to and following their daily seasons, often in conjunction with themed events such as Fright Fest
® and Holiday in the Park®. Due to their location, certain parks have longer operating seasons. Six Flags Magic Mountain operates year-round, and our parks in Mexico, Six Flags Fiesta Texas and Six Flags Over Texas operate weekends year-round outside of their traditional operating season. Typically, the parks charge a basic daily admission price that allows unlimited use of all rides and attractions, although in certain cases special rides and attractionsWe suspended operations of our parks beginning on March 13, 2020, due to the spread of COVID-19 and local government mandates, which had a significant negative impact on the Company’s financial performance. We resumed partial operations at many of our parks on a staggered basis near the end of the second quarter using a cautious and phased approach, including limiting attendance, in accordance with local conditions and government guidelines. Attendance trends in 2020 continued to improve throughout the year, increasing from 35% of prior year levels in the third quarter to 51% in the fourth quarter, for the parks that were open. Several of our parks modified their operations by providing drive-through or walk-through experiences for the holiday season, and our parks in Mexico were able to operate weekends year-round outsidefor a portion of their traditionalthe fourth quarter. As a result, all of the Company’s theme parks and some of its water parks operated in at least some capacity for a portion of the season, albeit pursuant to reduced capacity and other operating season. Beginninglimitations. Comparisons of open parks to prior year in January 2019, ourthe third quarter exclude attendance from Six Flags Fiesta Texas park will operate weekends year-round outsideDiscovery Kingdom and Six Flags Great America, as these parks had modified operations with minimal attendance in the third quarter of its traditional operating season.
See Note
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Capital Improvements and Other Initiatives
We regularly make capital investments primarily for new rides and attractions in our parks, which total approximately 9% of revenues annually.parks. We purchase both new and used rides and attractions. On occasion, we also relocate rides among parks to provide fresh attractions. We believe the selective introduction of new rides and attractions, including family entertainment attractions, is an important factor in promoting each of the parks to draw higher attendance and encourage longer visits, which can lead to higher in-park sales.
In response to curtailed operations, and to preserve our liquidity position and prepare for multiple contingencies, we took actions to reduce operating expenses and defer or eliminate certain discretionary capital projects planned for 2020 and 2021. We deferred or eliminated $50 to $60 million of our discretionary capital improvement projects planned for 2020. We are currently planning to complete the installation of many of the rides and attractions planned for 2020 during 2019,the 2021 season, but will remain flexible regarding the completion of these projects.
We believe the selective introduction of new rides and attractions, including family entertainment attractions, together with making general investments in the appearance and infrastructure of our parks, are important factors in promoting each of the parks to draw higher attendance and encourage longer visits, which can lead to higher in-park sales. We opened one of the world’s tallest pendulum rides at Six Flags Mexico (Mexico City, Mexico) during 2020. All other previously announced rides and attractions had openings deferred until 2021 or later.
Planned initiatives for 2021 include (i) the tallest, fastest and longest single rail coaster at Six Flags Great Adventure (Jackson, NJ); (ii) a record breaking water coaster at Six Flags Hurricane Harbor Gurnee (Gurnee, IL); (iii) a pendulum ride at Six Flags America (Largo, MD); (iv) a high-flying 360-degree rotating ride that stands 16 stories high at The Great Escape (Queensbury, NY); (v) a new seven-story spinning ride at Six Flags New England (Agawam, MA); (vi) the Midwest’s first tailspin waterslide at Six Flags Hurricane Harbor Rockford (Rockford, IL); (vii) a new 12,000 square-foot activity pool at Six Flags Hurricane Harbor Phoenix (Glendale, AZ); (viii) a four-story slide complex featuring three new waterslides at Six Flags Hurricane Harbor Arlington (Arlington, TX); (ix) a six-story waterslide complex at Six Flags Hurricane Harbor Splashtown (Houston, TX); (x) the tallest ride-of-its-kind aerial flying machine ride at Six Flags Fiesta Texas, (San Antonio, TX); (xi) rebranding Magic Waters and White Water Bay to Six Flags Hurricane Harbor Rockford and Six Flags Hurricane Harbor Oklahoma City, respectively; and (xii) the new Six Flags Hurricane Oklahoma City will also debut a high speed multi-lane racing water complex.
During 2021, we also plan to continue (i) our targeted marketing strategies to attract guests, including focusing on our breadth of product and value offerings; (ii) improving and expanding upon our branded product offerings and guest-focused initiatives to continue driving guest spending growth, including membership and newour associated loyalty reward programs, and the all season dining pass program, which enables season pass holders and members to eat meals and snacks any day they visit the park for one upfront payment; (iii) focusing efforts to increase single-day attendance visitation including targeted discount strategies; and (iii)(iv) growing sponsorship and international revenue opportunities.
International Agreements
We have signed agreements to assist third parties in the development and management of Six Flags-branded parks outside of North America.our core markets. As compensation for exclusivity, brand licensing rights, and design, development and management services,
We currently have agreements to develop a Six Flags-branded park in Saudi Arabia. As previously reported, our partner in China had well publicized liquidity challenges and defaulted on its payment obligations to us. During 2020, we terminated our agreement with our partner in China to discontinue the development of Six Flags-branded parks in China,China.
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We will be cautious about signing new international agreements outside of Saudi Arabia and Dubai.
Maintenance and Inspection
Rides are inspected at various levels and frequencies in accordance with manufacturer specifications. Our rides are inspected daily during the operating season by our maintenance personnel. These inspections include safety checks, as well as regular maintenance, and are made through both visual inspection and test operations of the rides. Our senior management and the individual park personnel evaluate the risk aspects of each park's operations. Potentialpark’s operations, potential risks to employees and staff as well as to the public are evaluated.public. In addition, contingency response plans for potential emergency situations have been developed for each facility. During the off-season, maintenance personnel examine the rides and repair, refurbish and rebuild them when necessary. This process includes x-raying and magnafluxing (a further examination for minute cracks and defects) steel portions of certain rides at high-stress points. A large portion of our full-time workforce devotes substantially all of its time to maintaining the parks and our rides and attractions. We use a computerized maintenance-management system across all of our domestic parks to assist us in executing our maintenance programs.
In addition to the performance of our internal maintenance and inspection procedures, third-party consultants are retained by us or our insurance carriers to perform an annual inspection of each park and all attractions. The results of these inspections are reported in written evaluation and inspection reports and include suggestions on various aspects of park operations. In certain states, state inspectors conduct additional annual ride inspections before the beginning of each season. Other portions of each park are subject to inspections by local fire marshals and health and building department officials. Furthermore, we use Ellis & Associates as water safety consultants at all of our waterparks to train lifeguards and audit safety procedures.
Insurance
We maintain insurance of the types and in amounts we believe are commercially reasonable and are available to businesses in our industry. We maintain multi-layered general liability policies that provide for excess liability coverage of up to
We generally renegotiate our insurance policies on an annual basis. The majority of our current insurance policies expire on December 31, 2019.2021. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.
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Competition
Our parks compete directly with other theme parks, waterwaterparks and amusement parks and indirectly with all other types of recreational facilities and forms of out of home entertainment within their market areas, including movies, sporting events, home entertainment options, restaurants and vacation travel. Accordingly,Principal direct competitors of our parks include SeaWorld Entertainment, Inc. and Cedar Fair, L.P. In addition, our business is and will continuesubject to be subject tovarious factors affecting the recreation and leisure time industries generally, such as general economic conditions and changes in discretionary consumer spending habits. See "Item 1A. Risk Factors." Within each park'spark’s regional market area, the principal factors affecting direct theme park competition include location, price, the uniqueness and perceived safety and quality of the rides and attractions in a particularthe park, the atmosphere and cleanliness of athe park, and the quality of itspark food and entertainment, and ease of travel to the park. Our theme parks have several advantages over other forms of entertainment.
Seasonality
Our operations are highly seasonal, with approximately 75% of park attendance and revenues in a typical year occurring in the second and third calendar quarters of each year, with the most significant period falling between Memorial Day and Labor Day.
Environmental and Other Regulations
Our operations are subject to federal, state and local environmental laws and regulations including laws and regulations governing water and sewer discharges, air emissions, soil and groundwater contamination, the maintenance of underground and aboveground storage tanks and the disposal of waste and hazardous materials. In addition, our operations are subject to other local, state and federal governmental regulations including, without limitation, labor, health, safety, zoning and land use and minimum wage regulations applicable to theme park and waterpark operations, and local and state regulations applicable to restaurant operations at each park. Finally, certain of our facilities are subject to laws and regulations relating to the care of animals. We believe that we are in substantial compliance with applicable environmental and other laws and regulations and, although no assurance can be given, we do not foresee the need for any significant expenditures in this area in the near future.
Portions of the undeveloped areas at certain of our parks are classified as wetlands. Accordingly, we may need to obtain governmental permits and other approvals prior to conducting development activities that affect these areas and future development may be prohibited in some or all of these areas. Additionally, the presence of wetlands in portions of our undeveloped land could adversely affect our ability to dispose of such land and/or the price we receive in any such disposition.
Human Capital
Employees
As of December 31, 2018,2020, we employed approximately 2,4001,950 full-time employees, and over the course of the 20182020 operating season we employed approximately 52,00029,000 seasonal employees. In this regard, we compete with other local employers for qualified students and other candidates on a season-by-season basis. As part of the seasonal employment program, we employ a significant number of teenagers, which subjects us to child labor laws.
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Approximately 17%12% of our full-time and approximately 11% of our seasonal employees are subject to labor agreements with local chapters of national unions. These labor agreements expire in December 2019 (Six Flags Over Georgia), January, 2020 (Six Flags St. Louis), December 2020 (Six Flags Magic Mountain), January 2021 (Six Flags Over Texas),May and December 2021 (Six Flags Great Adventure), December 2021 (Six Flags Magic Mountain), January 2024 (Six Flags Over Texas), December 2024 (Six Flags Over Georgia) and January 2025 (Six Flags St. Louis). The labor agreements for La Ronde expire in various years ranging from December 20192021 through December 2022.2024. We consider our employee relations to be good.
Diversity and Inclusion
We are committed to creating an inclusive environment that fully embraces the diversity of our employees and guests, regardless of ethnicity, gender, age, disability, cultural background, sexual orientation, or religious beliefs. In that regard, we are focused on the following:
Listen | to team members and other stakeholders about how we can become more diverse and inclusive through our Diversity and Inclusion Council, and through regular team member surveys, which provide feedback directly to senior management, including the CEO | |
Train | leaders on how to embrace inclusion, creating awareness, understanding and recognizing explicit and implicit bias including by providing instruction on how to lead open and honest conversations with team members | |
Address Unconscious Biases | by updating our grooming, social media, and hiring policies, and changing any ride or attraction names that could be viewed as offensive | |
Build a Diverse Team | with a leadership team that represents the diversity of our marketplace and through updating recruiting, people planning, and talent management programs to foster more objective processes for all team members | |
Partner with Communities | by proactively working with minority suppliers to develop long-term alliances |
Employee Development
We seek to continuously elevate employee development and training through a variety of different programs, opportunities, and resources. In 2020, we launched a partnership with the International Board of Credentialing and Continuing Education Standards to provide our guest-facing team members with specialized training to earn a Certificate in Autism Competency to further our commitment to better serve the special needs community, provide a more inclusive environment in our parks and continue our efforts in educating our team members on diversity and inclusion. In 2021, we will enhance our talent development program by providing our employees with access to virtual classrooms and online courses on topics including general safety, Office 365, harassment, and discrimination. Also in 2021, we plan to augment our succession planning process by establishing programs to better support the development of our talent bench for roles in management, maintenance and operations. Our senior leadership team reviews our talent development program annually with a particular focus on our top 20% of high performing, high potential talent including a focus on diversity. We are committed to identifying and developing the talents of our future leaders.
Employee Engagement and Recruitment
We conduct ongoing employee satisfaction surveys that provide actionable feedback from employees to management. The survey responses are anonymous and measure employee satisfaction and solicit honest feedback. Management from both corporate and the parks meet routinely to review the survey results and develop action plans in response to the employee feedback.
We work diligently to attract the best talent from a diverse range of sources in order to meet the current and future demands of our business. We have established relationships with high schools, trade schools, universities, professional associations and industry partners to proactively attract new talent.
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Our recruiting practices and candidate selection are among our most important activities. In a year with unprecedented business disruption, we prioritized filling open positions with active team members to minimize layoffs and remained focus on retaining and recalling talent to select our most experienced people for park positions. In addition, we utilize social media, virtual job fairs and organizations across the United States to find diverse, enthusiastic and qualified employees.
Competitive Benefits
Attracting, motivating, developing and retaining the best people is crucial to all aspects of our business and long-term success, and is central to our mission, vision and values. Our compensation programs are designed to align the compensation of our employees with our performance and to provide the proper incentives to attract, motivate and retain employees to achieve superior results. The structure of our compensation programs includes incentives based on both short-term and long-term performance. Specifically:
● | We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. |
● | We engage nationally recognized outside compensation and benefits consulting firms to independently evaluate the effectiveness of our executive compensation and benefit programs. |
● | We align our executives’ long-term equity compensation with our stockholders’ interests by linking a significant portion of total compensation opportunity to business and individual performance. All full-time employees (other than participants in a collective bargaining agreement) have the opportunity to participate in our long-term equity incentive program. |
● | All full-time employees are eligible for health insurance, paid and unpaid leaves, and life and disability/accident coverage. We also offer a variety of voluntary benefits that allow employees to select the options that meet their needs, including telemedicine, paid parental leave, prescription savings solutions, an educational assistance program, health savings accounts, flexible spending accounts, legal insurance, identity theft insurance, pet insurance and a wellness program. |
● | A unique Six Flags perquisite offers full-time employees a Diamond Elite membership, our highest membership tier of benefits that includes free admission to any of our parks and discounts on in-park products. Full-time employees are also provided complimentary tickets. |
Safety
The health and safety of our employees is our highest priority. It is the shared responsibility of every employee to actively participate in creating a safe and secure environment and to minimize injuries. The hallmarks of the Company’s safety and security programs are:
● | Resources and education to ensure safe and secure operating environments at the parks, including compliance with Occupational Safety and Health Administration (OSHA) standards, as well as to improve overall workplace safety and health. This includes regular and ongoing safety training and assessments as well as annual safety audits. |
● | A highly trained workforce that proactively assesses risks, strives to eliminate unsafe conditions, and integrates learning from incidents to prevent future occurrences. |
● | Dedicated leadership, accountability, and employee empowerment. |
During 2020, we acted quickly to implement extensive measures to proactively mitigate the spread of COVID-19 and provide a safe working environment for our employees. We consulted with an epidemiologist and a viral expert, and
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relied on recommendations from the Centers for Disease Control and Prevention and other governmental agencies to develop core strategies to enhance the safety of our employees and guests. To support these strategies we:
● | implemented daily health screenings of employees, |
● | distributed a personal protective equipment pack to all employees, |
● | significantly enhanced sanitization measures, |
● | enforced social distance requirements, |
● | added training to ensure compliance with the additional health and safety protocols, |
● | implemented procedures to address actual and suspected COVID-19 cases and potential exposure, |
● | required masks to be worn in all locations (with limited exceptions pursuant to applicable law), and |
● | rolled out contactless recruiting and hiring to reduce potential COVID-19 exposure. |
We received favorable responses from our employees as evidenced by our team member voice survey scores. In addition, we offered guests the ability to obtain cash cards from kiosks throughout the parks to facilitate electronic transactions as an option in lieu of using cash, and implemented mobile food ordering at all of our domestic parks during 2020.These innovations added contactless means to enhance our guests’ experience through faster, more convenient transactions while elevating our enhanced safety guidelines.
Information about our Executive Officers and Certain Significant Employees
The following table sets forth the name of the members of the Company'sCompany’s senior leadership team and executive officers, the position held by such officerperson and the age of such officerperson as of the date of this report. The officers of the Company are generally elected each year at the organizationala meeting of Holdings'Holdings’ Board of Directors which followsat the time of Holdings’ annual meeting of stockholders, and at other Board of Directors meetings, as appropriate.
| | | | | |
Name | Age | Title | |||
Michael Spanos* | | 56 | | ||
President and Chief Executive Officer | | ||||
Laura W. Doerre* | | 53 | | Executive Vice President, | |
Sandeep Reddy* | | 50 | | Executive Vice President and Chief Financial Officer | |
Mark Kupferman | | 52 | | Senior Vice President, | |
Stephen R. Purtell | | 54 | | Senior Vice President, Investor Relations, Treasury and Strategy | |
Leonard A. Russ | | 47 | | Senior Vice President, Operations Services | |
Rafael A. Sanchez | | 59 | | Senior Vice President, Information Systems and Chief Information Officer | |
Bonnie Sherman Weber | | 56 | | Senior Vice President, Park Operations | |
Taylor | | 34 | | Vice President and Chief Accounting Officer | |
* | Executive Officers |
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Michael Spanos was appointed as a member of Holdings’ Board of Directors in October 2019. Mr. Spanos was named Chairman, President and Chief Executive Officer of Six Flags in July 2017. From February 2016November 2019. Prior to July 2017joining Six Flags, he served as Chief Executive ChairmanOfficer, Asia, Middle East and North Africa, of Six FlagsPepsiCo, Inc., a leading global food and beverage company, from August 2010January 2018 to February 2016,November 2019. Mr. Reid-AndersonSpanos previously served as Chairman,interim head of PepsiCo, Inc.’s Asia, Middle East and North Africa division from October 2017 to January 2018 and as President and Chief Executive Officer, of Six Flags. Under his leadership Six Flags set a new strategic direction and achieved all-time high guest and employee satisfaction ratings, significant operational improvements and a ten-times return on investment for Six Flags' shareholders.PepsiCo Greater China Region, from September 2014 to January 2018. Prior to that, Mr. Reid-Anderson had previouslySpanos served as Chairman,Senior Vice President and Chief ExecutiveCustomer Officer, of Dade Behring Inc., a manufacturer and distributor of medical diagnostics equipment and supplies, where he drove a tenfold increase in Dade Behring's share price along with significant employee morale improvements and customer satisfaction increases, all achieving record levels.PepsiCo North America Beverages from October 2011 to September 2014. Mr. Reid-Anderson negotiated the sale of Dade Behring to Siemens in 2007 and subsequently assumed various roles including becoming a member of Siemens AG’s managing board and Chief Executive Officer of Siemens’ $20 billion Healthcare Sector. Earlier in his career Mr. Reid-AndersonSpanos previously held management roles of increasing responsibility at PepsiCo, DiageoInc. since 1993 in North America, Europe, Asia, and Mobil, and as adviserthe Middle East. Before joining PepsiCo, Inc. Mr. Spanos served in the United States Marines Corps from 1987 to Apollo Management L.P., a private equity firm.1993. Mr. Reid-Anderson is a fellow of the Association of Chartered Certified Accountants, U.K. andSpanos holds a Bachelor of CommerceB.S. degree from the BirminghamU.S. Naval Academy and he received a Master’s degree in Organizational Behavior from the University U.K.
Laura W. Doerre was named General Counsel of Six Flags in September 2010. Mr. BalkMarch 2020 and Chief Administrative Officer in October 2020. Ms. Doerre previously served as SeniorExecutive Vice President, General Counsel and Chief Compliance Officer of JELD-WEN Holding, Inc., a window and door manufacturer, from September 2016 to March 2020. Prior to joining JELD-WEN Holding, Inc., Ms. Doerre served as Vice President and General Counsel of Siemens Healthcare Diagnosticsfor Nabors Industries Ltd. from November 20072008 to January 2010.August 2016. Prior to Dade Behring's acquisition by Siemens AG, he servedjoining Nabors in the same capacity at Dade Behring from May 2006 to November 2007. In these roles Mr. Balk was responsible for global legal matters. Before joining Dade Behring, Mr. Balk was a partner at1996, Ms. Doerre practiced commercial litigation with the law firm KirklandMayor, Day, Caldwell & Ellis LLP, where he co-founded the firm's New York corporate and securities practices. Mr. BalkKeeton LLP. Ms. Doerre holds a J.D. and an M.B.A.B.S. in Business Administration from the University of Chicago,North Carolina at Chapel Hill, and a B.A. degree in PhilosophyJ.D. from Northwestern University.
Sandeep Reddy was named Executive Vice President and Chief Financial Officer of Six Flags in February 2016July 2020. Mr. Reddy previously served as Chief Financial Officer of Guess?, Inc., a contemporary clothing and accessories retailer, from July 2013 through December 2019. Prior to that role, since 2010, he served as Vice President and European Chief Financial Officer of Guess, where he was responsible for all aspects of Guess’ European finance functions, including financial planning, treasury, accounting, and tax. From 1997 to 2010, Mr. Reddy served in a number of positions of increasing responsibility for Mattel Inc., a leading global toy manufacturer, ultimately serving as Vice President Finance and Supply Chain for the SEUR (France, Spain, Portugal, Italy) cluster. Mr. Reddy has a BA (Honors) in Economics from Delhi University and an M.B.A. from Cornell University.
Mark Kupferman was named Senior Vice President, Consumer and Guest Experience of Six Flags in August 2020 and is responsible for consumer insights, consumer strategy, and architecting the financeguest end-to-end experience. He also oversees Six Flags’ customer relationship management, website, revenue management, and information technology functions at Six Flags.guest-facing innovation initiatives. Mr. BarberKupferman previously served as Vice President, Insights and Interactive Marketing of Business Planning for Six Flags from July 2006since April 2011. Prior to February 2016. He also held various other park-level and corporate-level financial positions since joining Six Flags in October 1996.that, Mr. Kupferman oversaw Consumer Insights for Universal Orlando. Prior to joining Six Flags,Universal, he was Vice President, Insights and Interactive Marketing for Paramount Parks. Mr. Barber held financial positions at FoxMeyer Drug and G. D. Searle from 1994 to 1996 and with Electrocom Automation from 1989 to 1994. Mr. Barber holds a B.B.A. degree in Finance from the University of Texas at Arlington andKupferman has an M.B.A. from Texas Christian University.
Stephen R. Purtell was named Senior Vice President, Investor Relations, Treasurer and TreasurerStrategy of Six Flags in October 2016 and is responsible for investor relations and treasury.December 2020. Mr. Purtell previously served as Senior Vice President, Investor Relations and Treasurer since October 2016. Prior to that, Mr. Purtell was Vice President, Business Development and Treasurer forof Six Flags from July 2012 to October 2016. Prior to joining Six Flags, Mr. Purtell served as VP, Sales Operations and Market Research for Siemens Healthcare Diagnostics after it acquired Dade Behring in 2007. Mr. Purtell joined Dade Behring in 2003 and held financial positions including Assistant Treasurer, VP Corporate Planning &and Analysis, and Treasurer. Prior to joining Dade Behring, Mr. Purtell held financial and engineering positions at IMC Global and GATX Terminals Corporation, and was an officer in the U.S. Army. Mr. Purtell has a B.S. in Civil Engineering from the U.S. Military Academy at West Point and an M.B.A. from the Wharton School of the University of Pennsylvania, and is a Certified Public Accountant.
Leonard A. Russ was named Senior Vice President, Operations Services of Six Flags in August 2020 and is responsible for all in-park services, including food and beverage, retail, games, rentals, parking and other services offered throughout Six Flags’ parks, along with engineering, design, maintenance, procurement, and international development. Mr. Russ previously served as Interim Chief Financial Officer since February 2020 and Senior Vice President of Strategic Planning and Analysis of Six Flags insince February 2016. From October 2010 until February 2016,Prior to that, Mr. Russ was Vice President and Chief Accounting Officer of Six Flags since October 2010, where he was responsible for overseeing the Six Flags'Flags’ accounting function and the finance functions of the western region parks. Mr. Russ began his career at Six Flags in 1989 as a
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seasonal employee and became a full-time employee in 1995. He held a number of management positions within Six Flags before being named Director of Internal Audit in 2004. In 2005, Mr. Russ was promoted to Controller, a position he held until being promoted to Chief Accounting Officer. Mr. Russ holds a B.B.A. degree in Accounting from the University of Texas at Arlington.
Rafael A. Sanchez was named Senior Vice President, Information Systems and Chief Information Officer of Six Flags in January 2021. Mr. Sanchez previously served as Chief Information Officer at Feld Entertainment from April 2013 to December 2020, where he was responsible for Feld Entertainment’s global IT function. Prior to joining Feld Entertainment, Mr. Sanchez served as Chief Information Officer of Brightstar Corporation, a global leader of end-to-end mobile device lifecycle solutions, from 2009 to 2013. From 2005 to 2009, he served as Group CIO for Carnival Corporation & plc, and prior to that as Chief Information Officer for Burger King Corporation. Mr. Sanchez holds a B.S. in Business Administration from Louisiana State University.
Bonnie Sherman Weber was named Senior Vice President, Park Operations of Six Flags in September 2020 and is responsible for the management of Six Flags’ parks. Ms. Weber had previously served as Senior Vice President, In-Park Services of Six Flags insince January 2018 and is responsible for culinary, retail, games, rentals, parking and other services offered throughout Six Flags' 25 parks.2018. Prior to that, Ms. Weber had previously served as Park President of Six Flags Magic Mountain and Hurricane Harbor since August 2010. Ms. Weber began her career at Six Flags Magic Mountain in 1985 as a food service employee. Throughout her years atin L.A., she held the roles of Six Flags she has assumed the role of Park Publicist, Manager of Advertising and Promotions, and Director of Marketing. She previously worked at The Walt Disney Company and was also the Director of Worldwide Marketing at Warner Bros. Consumer Products for four years. A Southern California native, Ms. Weber holds a B.S. in Marketing from California State Northridge.
Taylor Brooks was named the Vice President and Chief Accounting Officer of Six Flags effective June 2018. Mr. Brooks is responsible for overseeing the Company’s accounting function. Mr. Brooks joined the Company in 2013 as the Financial Reporting Manager and in 2015 was named Director of Accounting and Assistant Controller. Prior to joining the Company, Mr. Brooks was the Financial Reporting and Technical Research Senior Accountant at DynCorp International, LLC, and prior to DynCorp he worked for Ernst & Young LLP. Mr. Brooks holds a Bachelor’s degree and a Master’s degree in Accounting from Abilene Christian University Northridge.
Available Information
Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge through our website at investors.sixflags.com. References to our website in this Annual Report are provided as a convenience and do not constitute an incorporation by reference of the information contained on, or accessible through, the website. Therefore, such information should not be considered part of this Annual Report. These reports, and any amendments to these reports, are made available on our website as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the United States Securities and Exchange Commission (the "SEC"). Copies are also available, without charge, by sending a written request to Six Flags Entertainment Corporation, 924 Avenue J East, Grand Prairie,1000 Ballpark Way, Suite 400, Arlington, TX 75050,76011, Attn: Investor Relations.
Our website, investors.sixflags.com, also includes items related to corporate governance matters, including the charters of our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and our Code of Ethics for Senior Management. Copies of these materials are also available, without charge, by sending a written request to Six Flags Entertainment Corporation, 924 Avenue J East, Grand Prairie,1000 Ballpark Way, Suite 400, Arlington, TX 75050,76011, Attn: Investor Relations.
ITEM 1A.RISK FACTORS
Set forth below are the principal risks that we believe are materialmost significant to our business and should be considered by our security holders. We operate in a continually changing business environment and, therefore, new risks emerge from time to time. This section contains forward-looking statements. For an explanation of the qualifications and limitations on forward-looking statements, see "Cautionary Note Regarding Forward-Looking Statements."
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Risks Relating to Our Business
The COVID-19 pandemic has disrupted our business and will continue to adversely affect our results of operations, liquidity, cash flows and financial condition.
In response to the COVID-19 pandemic, federal, state and local governments have implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. These actions, in addition to concerns relating to the public health impacts of the virus, have prevented us and our employees, contractors, suppliers, and other business partners from conducting business activities at full capacity, have led to the temporary cessation of certain business activities altogether, and may continue to have an adverse impact on our business for an unknown period of time. Ongoing concern regarding the virus and its evolving impact, as well as containment actions imposed in response to the pandemic, have had, and will likely continue to have a negative effect on economies and financial markets. Future developments relating to the virus, including severity, rate of transmission, mutations, treatment and availability of a vaccine, are uncertain and difficult to predict. As a result, the extent and duration of the impacts over the longer term on our business of the COVID-19 pandemic and the measures implemented in response to the COVID-19 pandemic remain largely uncertain and cannot be accurately predicted at this time.
In accordance with government guidelines concerning the COVID-19 pandemic, we temporarily suspended operations at all of our theme parks and waterparks in March 2020. During the period of suspended operations, we experienced a significant decrease in revenues. We also implemented a number of mitigation efforts, including eliminating seasonal labor costs, effecting salary and wage reductions for our executives and employees, increasing the available borrowings under our credit facilities, issuing senior secured notes to repay certain short-term borrowings and for working capital purposes, deferring or eliminating certain discretionary capital projects, and developing incentives to maintain monthly membership commitments. These efforts may not be sufficient, however, to counteract the adverse impact the COVID-19 pandemic has had and may continue to have on our revenues or prevent any further adverse impact, and some of our mitigating actions may have an adverse impact on our business. In addition, the effect of the COVID-19 pandemic on capital markets could impact our cost of borrowing or result in reduced or delayed capital expenditures and the impairment of certain of our assets and could adversely affect our strategic plans. Even as we begin to operate our parks that had previously suspended operations, the COVID-19 pandemic could continue to have a significant adverse impact on our business including future park closures and additional costs, such as the costs associated with operating our parks and restarting business activities, and costs to implement or enhance health and safety measures.We could also suffer damage to our reputation as a result of an outbreak of COVID-19 at one of our properties or if our response is inappropriate or is perceived by our guests or other stakeholders to be inappropriate,which could significantly and adversely affect our business, results of operations, liquidity, cash flows and financial condition.
Due to the pandemic, our 2020 season pass holders received a free extension of their pass until the end of the 2021 season and we offered our members one bonus month for each month that they paid while their home park was closed, or in the alternative, we offered members the opportunity to pause their memberships (and payments) until their home park opens in 2021. As a result, our cash flows during 2021 may be reduced, and if sales of 2021 memberships and season passes are lower than prior years, it could have a negative impact on attendance, revenue and per capita spending at our theme parks and waterparks. This negative impact could materially adversely affect our business, results of operations, liquidity, cash flows, financial condition and prospects.
While governmental authorities have begun to ease restrictions, increased COVID-19 case numbers or other developments relating to the COVID-19 pandemic may result in the implementation of additional government measures, orders and mandates in some or all of the states and regions in which we operate, such as orders requiring park closures or further restrictions on travel or public gatherings. Any of these measures could further disrupt, or exacerbate the current impact of the COVID-19 pandemic on, our business, results of operations, liquidity, cash flows and financial condition. In addition, in light of certain future developments, we may determine that a voluntary temporary closure of certain properties or portions thereof is in the best interest of our guests, employees and reputation. If any of the recent disruptions to our business are prolonged or extended, or if future developments require subsequent disruptive measures
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to be implemented, our business, financial condition, results of operations and reputation may be materially and adversely affected.
The COVID-19 pandemic has also significantly increased economic uncertainty. The demand for parks, entertainment, recreation activities and discretionary travel is highly sensitive to downturns in the economy and the corresponding impact on discretionary consumer spending. Any actual or perceived deterioration or weakness in general, regional or local economic conditions, unemployment levels, the job or housing markets, consumer debt levels or consumer confidence, as well as other adverse economic or market conditions due to COVID-19 or otherwise, may reduce our customers’ discretionary income to spend on parks, entertainment, recreation activities and travel. In addition, the COVID-19 pandemic could have longer-term impacts on consumer tastes and preferences and could shift consumer entertainment and recreation behaviors toward digital entertainment experiences and other off-premises experiences and technologies. As a result, attendance, revenue and per capita spending at our theme parks and waterparks could be adversely affected, which could materially adversely affect our business, results of operations, liquidity, cash flows, financial condition, and prospects.
The ultimate impact of the COVID-19 pandemic on our business and financial results is highly uncertain and subject to change. The extent and duration of the impact to our business and financial results depends on numerous factors including without limitation the efficacy and deployment of the COVID-19 vaccines and future developments that vary by market and cannot be accurately predicted at this time. The impacts could, however, have a material effect on our results, operations, financial conditions and liquidity and heighten many of our known risks contained in this Annual Report.
General economic conditions throughout the world may have an adverse impact on our business, financial condition or results of operations.
Our success dependsresults can be impacted by a number of macroeconomic factors, including but not limited to a large extent on discretionary consumer spending, which is heavily influenced by general economic conditions and the availability of discretionary income. Difficult economic conditions and recessionary periods may have an adverse impact on our business and our financial condition. Negative economic conditions, coupled with high volatility and uncertainty as to the future global economic landscape, have at times had a negative effect on consumers' discretionary income and consumer confidence and similar impacts can be expected should such conditions recur.spending levels, tax rates, unemployment, consumer credit availability, raw materials costs, pandemics (such as the ongoing COVID-19 pandemic) and natural disasters, fuel and energy costs (including oil prices), and credit market conditions. The COVID-19 pandemic has severely impacted and will likely continue to impact many of these factors. A general economic slowdown or recession resulting in a decrease in discretionary spending due to decreases in consumer confidence in the economy or us, or a continued economic slowdown or deterioration in the economy, could adversely affect the frequency with which guests choose to visit our parks and the amount that our guests spend when they visit. The actual or perceived weakness in the economy could also lead to decreased spending by our guests. Both attendance and guest spending at our parks are key drivers of our revenue and profitability, and reductions in either could materially adversely affect our business, financial condition and results of operations.
Additionally, difficult economic conditions throughout the world could impact our ability to obtain supplies, services and credit as well as the ability of third parties to meet their obligations to us, including, for example, manufacturers’ ability to supply rides,payment of claims by our insurance carriers, the funding of our lines of credit, or payment by our international agreement partners. Changes in exchange rates for foreign currencies could reduce international demand for our products, increase our labor and supply costs in non-U.S. markets or reduce the U.S. dollar value of revenue we earn in other markets.
Our growth strategy and strategic plan may not achieve the anticipated results.
Our future success will dependdepends on our ability to grow and evolve our business, including through capital investments to improve existing parks, rides, attractions and shows,other entertainment offerings, technological advancements and improvements to enhance the guest experience and to increase productivity, as well as in-park servicesthrough our food and productbeverage and retail offerings.
Our business strategy, for growth may also include selective expansion, both domestically and internationally, through acquisitions of assets or other strategic initiatives, such as international agreements, joint ventures and partnerships that allow us to profitably expand our business and leverage our brand. Our growth and innovation strategies require significant commitments of management resources and capital investments andincluding the transformation plan, may not growenhance guest experiences or increase productivity as planned, may not increase our revenues at the rate we expect or at all. Our business strategyall, and may require the expenditure of capital resources or operating costs in excess of what we originally budgeted and allocated for growth also requires the other partiessuch purposes. If we are unable to achieve our international agreements, joint venturesstrategic objectives and partnerships to perform their obligations. The success of any acquisitions also depends on effective integration of acquired businessesgrow and assets into our operations, which is subject to risks and uncertainties, including realization of anticipated synergies and cost savings, the ability to retain and attract personnel, the diversion of management's attention from other business concerns, and undisclosed or potential legal liabilities of acquired businesses or assets. 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 materially adversely affectevolve our business, our financial condition orand results of operations.operations may be adversely affected.
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Bad or extreme weather conditions and forecasts of bad or mixed weather conditions can adversely impact attendance at our parks.
Because most of the attractions at our parks are outdoors, attendance at our parks is adversely affected by bad or extreme weather conditions and forecasts of bad or mixed weather conditions, which negatively affects our revenues. The effects of bad weather on attendance can be more pronounced at our waterparks. We believe our operating results in certain years were adversely affected by abnormally hot, cold and/or wet weather in a number of our major U.S. markets. In addition, since a number of our parks are geographically concentrated in the eastern portion of the United States, a weather pattern that affects that area could adversely affect a number of our parks and disproportionately impact our results of operations. In addition, our parks in California and Texas are more likely to be impacted by extreme heat, wildfires, mudslides and floods than our parks in other locations. Bad weather and forecasts of bad weather on weekends, holidays or other peak periods will typically have a greater negative impact on our revenues and could disproportionately impact our results of operations.
Conditions beyond our control could damage our properties and could adversely impact attendance at our parks and result in decreased revenues.
Natural disasters, public heath crises, epidemics, pandemics, such as an earthquake, hurricane, forest fire, floodthe outbreak of COVID-19, terrorist activities, power outages or landslide,other events outside our control could interruptdisrupt our operations, impair critical systems, damage our properties andor reduce the number of guests who visitattendance at our parks in affected areas.or require temporary park closures. Damage to our properties could take a long time to repair and there is no guarantee that we would have adequate insurance to cover the costs of repair or the expense of the interruption to our business. Furthermore, natural disasters such a disasteras fires, earthquakes or hurricanes may interrupt or impede access to our affected properties or require evacuations and may cause visits toattendance at our affected properties to decrease for an indefinite period. For example, our waterpark in Oaxtepec, Mexico was closed for several months during the fall of 2017 following the earthquakes in central Mexico. The occurrence of such natural disastersevents could have a material adverse effect on our business, financial condition and results of operations.
In addition, since some of our 2020 Performance Award is highly unlikely;parks are near major urban areas and appeal to teenagers and young adults, there may be disturbances at one or more parks that could negatively affect our reputation or brand. This may result in a minimum, we are still striving for late achievementdecrease in attendance at the affected parks and could adversely impact our results of operations.
We cannot predict the target in 2021.
Our operations are seasonal.
Our operations are seasonal. ApproximatelyIn a typical year, approximately 75% of our annual park attendance and revenue occurs during the second and third calendar quarters of each year. As a result, when conditions or events described in the above risk factors occur during the operating season, particularly during the peak months of July and August, 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 on our revenues and cash flow. In addition, most of our expenses for maintenance and costs of adding new attractionscapital expenses are incurred when the parks are closed in the mid to late autumn and winter months.off-season. For this reason, a sequential quarter-to-quarter comparison is not a good indication of our performance or of how we will perform in the future.
Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could adversely affect our financial condition or results of operations.
We are subject to allegations, claims and legal actions arising in the ordinary course of our business, which may include claims by third parties, including guests who visit our parks, our employees or regulators. The outcome of these proceedings cannot be predicted. If any of these proceedings is determined adversely to us, or if we receive a judgment, a fine or a settlement involving a payment of a material sum of money, or injunctive relief is issued against us, our business, financial condition and results of operations could be materially adversely affected. Litigation can also be expensive, lengthy and disruptive to normal business operations, including to our management due to the increased time and resources required to respond to and address the litigation.
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Additionally, from time to time, animal activist and other third-party groups may make negative public statements about us or bring claims before government agencies or lawsuits against us. Such claims and lawsuits sometimes are based on allegations that we do not properly care for some of our featured animals. On other occasions, such claims and/or lawsuits are specifically designed to change existing law or enact new law in order to impede our ability to retain, exhibit, acquire or breed animals. While we seek to comply with all applicable federal and state laws and vigorously defend ourselves in any lawsuits, there are no assurances as to the outcome of future claims and lawsuits that could be brought against us. An unfavorable outcome in any legal proceeding could have a material adverse effect on our business, financial condition and results of operations. In addition, associated negative publicity could adversely affect our reputation, financial condition and results of operations.
Failures in, material damage to, or interruptions in our information technology systems, software or websites and difficulties in updating our systems or software or implementing new systems or software could adversely affect our business or operations.
We rely extensively on our information technology systems in the conduct of our business. We ownuse software and license or otherwise contract for sophisticatedother technology systems, among other things, to sell tickets and admit guests to our parks, to sell food, beverages and other products in our parks, to manage our workforce, to manage our inventory, and to monitor and manage our business on a day-to-day basis. We also use mobile devices, social networking and other online platforms to connect with our employees, business partners and customers. These technology systems for the operation ofand our business. Such systemsuses thereof are subjectvulnerable to damage or interruptiondisruption from circumstances beyond our control including fire, natural disasters, power outages, computersystem and telecommunicationsequipment failures, computer viruses, malicious attacks, security breaches, theft, and natural and man-made disasters. We require continued and unimpeded accessinadvertent release of information. Damage or disruption to these systems. Damage or interruption to our information technology systems may require a significant investment to update, remediate or replace with alternate systems, and we may suffer interruptionsdisruptions in our operations as a result. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our systems, including those that may result from our failure to adequately develop, implement and maintain a robust disaster
We rely on third parties for the performance of a significant portion of our information technology functions. In particular, our ticket, season pass and membership sales system relies on data communications networks and technology systems and software operated by unaffiliated third parties. The success of our business depends in part on maintaining our relationships with these third parties and their continuing ability to perform these functions and services in a timely and satisfactory manner. If we experience a loss or disruption in the provision of any of these functions or services, or they are not performed in a satisfactory manner, we may have difficulty in finding alternate providers on terms favorable to us, in a timely manner or at all, and our business could be adversely affected.
Further, as we implement our strategy to pursue new initiatives that improve our operations and cost structure, we are also expanding and upgrading our information technologies. Potential problems and disruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our systems, including those that may result from our failure to adequately develop, implement and maintain a robust disaster recovery plan and backup systems could severely affect our ability to conduct normal business operations and, as a result, could adversely affect our business operations and financial performance.
Cyber-attacks could have a disruptive effect on our business.
Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including guests’ personal information, private information about employees and financial and strategic information about the Company and our third-party service providersbusiness.
We have experienced and continue to experience cyber-attacks, attemptedcybersecurity threats and actual breachesvulnerabilities in our systems and those of our or theirthird party providers, including cyber-attacks targeting our information technology systems and networks or similar events,, which could result in a loss of sensitive business or customer information, systems interruption or the disruption of our operations. The techniques
Further, implementing our strategy to pursue new initiatives that improve our operations and cost structure will result in a larger technological presence and corresponding exposure to cybersecurity risk. Failure to adequately assess and identify cybersecurity risks associated with new initiatives would increase our vulnerability to such risks.
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Due to the increased remote workforce, we must increasingly rely on information technology systems that are usedoutside our direct control. These systems are potentially vulnerable to obtain unauthorized access, disablecyber-based attacks and security breaches. In addition, cyber criminals are increasing their attacks on individual employees, utilizing interest in pandemic-related information to increase business email compromise scams designed to trick victims into transferring sensitive data or degrade servicefunds, or sabotage systems change frequently and are difficult to detect for long periods of time, and we are accordingly unable to anticipate and prevent all data security incidents.
Even if we are fully compliant with legal standards and contractual or other requirements, we still may not be able to prevent security breaches involving sensitive data. We have, and require certain of our third party service providers to have, programs in place to detect, contain and respond to data security incidents. However, the actions and controls we have implemented and continue to implement, or which we seek to cause or have caused third party service providers to implement, may be insufficient to protect our systems, information or other intellectual property. In addition, the techniques used to obtain unauthorized access or interfere with systems change frequently and may be difficult to detect for long periods of time, and we may be unable to anticipate these techniques or implement adequate preventive measures. The sophistication of efforts by hackers to gain unauthorized access to information technology systems has continued to increase in recent years. Breaches, thefts, losses or fraudulent uses of guest,customer, employee or company data could cause consumerscustomers to lose confidence in the security of our websites, mobile applications, point of sale systems and other information technology systems and choose not to purchase from us. Such security breaches also could expose us to risks of data loss, business disruption, litigation and other costs or liabilities, any of which could adversely affect our business.
To date, these incidentscybersecurity threats have not beenhad a material toimpact on our business, financial condition or results of operations. If weHowever, the potential consequences of a future material cybersecurity attack on us or our vendors experience significant data security breachesthird party service providers include business disruption; disruption to systems; theft, destruction, loss, corruption, misappropriation or fail to detectunauthorized release of sensitive and/or confidential information or intellectual property (including personal information in violation of one or more privacy laws); reputational and appropriately respond to significant data security breaches, we could be exposed tobrand damage; and potential liability, including litigation fines or other legal actions against us or the imposition by governmental authorities of penalties, fines, fees or liabilities, which, in turn, could cause us to incur significantly increased cybersecurity protection and remediation costs our operations could be disrupted, and our guests could lose confidence inthe loss of customers.
Data privacy regulation and our ability to protectcomply could harm our business.
We are subject to laws that regulate the collection, use, retention, security, and transfer of our customer’s data. Data privacy is subject to frequently changing rules and regulations, such as California’s Consumer Privacy Act (the “CCPA”) that became effective January 1, 2020, which provides a private right of action for data breaches and requires companies that process information on California residents to make certain disclosures to consumers about their information, whichdata collection, use and sharing practices and allow consumers to opt out of certain data sharing with third parties. Compliance with the CCPA, and other current and future applicable privacy and related laws can be costly and time-consuming, and violations of privacy-related laws can result in significant damages and penalties. These laws continue to evolve in ways we cannot predict, both through regulatory and legislative action and judicial decisions, and that may harm our business.
Our privacy policies and practices concerning the collection, use and disclosure of user data are available on our website. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any regulatory requirements or orders or other privacy or consumer protection-related laws and regulations, including the CCPA, could cause themresult in proceedings or actions against us by governmental entities or others (e.g., class action privacy litigation), subject us to stop purchasing tickets, memberships or season passes fromsignificant penalties and negative publicity, require us or visitingto change our parks altogether.business practices, increase our costs and adversely affect our business. Data collection, privacy and security have become the subject of increasing public concern. If internet and mobile users were to reduce their use of our websites, mobile platforms, products, and services as a result of these concerns, our business could be harmed.
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Failure to keep pace with developments in technology could adversely affect our operations or competitive position.
The theme park and waterpark industry demands the use of sophisticated technology and systems for operation of our parks, ticket, membership and season pass sales and management, and labor and inventory management. TheseInformation technology systems continue to evolve and, in order to remain competitive, we must implement new technologies may require refinements and upgrades.systems in a timely and efficient manner. The development and maintenance of these technologies may require significant investment by us. As various systemsus and technologies become outdated or new technology is required, we may not be able to replace or introduce them as quickly as needed or in a cost-effective and timely manner. We may not achieve the anticipated benefits we may have been anticipating from anysuch new technologydevelopments or system.
There is a risk of accidents occurring at our parks or competing parks which may reduce attendance and negatively impact our operations.
Our brand and our reputation are among our most important assets. Our ability to attract and retain customers depends, in part, upon the external perceptions of the Company, the quality and safety of our parks, services and rides, and our corporate and management integrity. While we carefully maintain the safety of our rides, there are inherent risks involved with these attractions. An accident or an injury (including water-borne illnesses at waterparks)water- or air-borne illnesses) at any of our parks or at parks operated by competitors, particularly an accident or injury involving the safety of guests and employees, that receives media attention, could negatively impact our brand or reputation, cause loss of consumer confidence in the Company, reduce attendance at our parks, and negatively impact our results of operations. For example, in September 2019, a coaster accident at La Feria, a competing park in Mexico, resulted in two fatalities. We believe that the publicity surrounding this accident had a significant negative impact on attendance at our park in Mexico during that period. The considerable expansion in the use of social media over recent years has compounded the impact of negative publicity. If any such incident occurs during a time of high seasonal demand, the effect could disproportionately impact our results of operations for the year.
We depend on a seasonal workforce, many of whom are paid at minimum wage.
Our park operations are dependent in part on a seasonal workforce, many of whom are paid at minimum wage. We seek to manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place for peak and low seasons,seasons; however, we may be unable to recruit and hire sufficient personnel to meet our business needs. In addition, we cannot guarantee that material increases in the cost of securing our seasonal workforce will not occur in the future. Increased state or federal minimum wage requirements, seasonal wages or an inadequate workforce could have an adverse impact on our results of operations. We anticipate that the recent increases to the minimum wage rates will increase our salary, wage and benefit expenses in 20192021 and future years and further legislative changes or competitive wage rates could continue to increase these expenses in the future.
The theme park and waterpark industry competes with numerous entertainment alternatives and such competition may have an adverse impact on our business, financial condition or results of operations.
Our parks compete with other theme parks, waterparks and amusement parks and with other types of recreational facilities and forms of entertainment, including movies, home entertainment options, sporting events, restaurants and vacation travel. Our business is also subject to factors that affect the recreation and leisure time industries generally, such as general economic conditions, including relative fuel prices, and changes in consumer spending habits. The principal competitive factors of a park include location, price, the uniqueness and perceived quality of the rides and attractions, the atmosphere and cleanliness of the park and the quality of its food and entertainment. If we are unable to compete effectively against entertainment alternatives or on the basis of principal competitive factors of the park, our business, financial condition or results of operations may be adversely affected.
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We could be adversely affected by changes in consumer tastes and preferences for entertainment and consumer products.
The success of our parks depends substantially on consumer tastes and preferences that can change in often unpredictable ways and on our ability to ensure that our parks meet the changing preferences of the broad consumer market. We conduct research and analysis before acquiring new parks or opening new rides or attractions and often invest substantial amounts before we learn the extent to which these new parks and new rides or attractions will earn consumer acceptance. If visitor volumes at our parks were to decline significantly or if new rides and entertainment offerings at our parks do not achieve sufficient consumer acceptance, revenues and margins may decline. Our results of operations may also be adversely affected if we fail to retain long-term customer loyalty or provide satisfactory customer service.
Our insurance coverage may not be adequate to cover all possible losses that we could suffer, and our insurance costs may increase.
Although we maintain various safety and loss prevention programs and carry property and casualty insurance to cover certain risks, our insurance policies do not cover all types of losses and liabilities. Additionally, there can be no assurance our insurance will be sufficient to cover the full extent of all losses or liabilities for which we are insured. The majority of our current insurance policies have annual terms and expire on December 31, 2019,2021, and we cannot guarantee we will be able to renew our current insurance policies on favorable terms, or at all. In addition, if we or other theme or waterpark operators sustain significant losses or make significant insurance claims, then our ability to obtain future insurance coverage at
If we are not able to fund capital expenditures and invest in future attractions and projects in our parks, our revenues could be negatively impacted.
Because a principal competitive factor for a theme park or a waterpark is the uniqueness and perceived quality of its rides and attractions, we need to make continued capital investments through maintenance and the regular addition of new rides and attractions. A key element for our revenue growth is strategic capital spending on such investments. Our ability to fund capital expenditures will depend on our ability to generate sufficient cash flow from operations and to raise capital from third parties. We cannot provide assurance our operations will be able to generate sufficient cash flow to fund such costs, or that we will be able to obtain sufficient financing on adequate terms, or at all, which could cause us to delay or abandon certain projects or plans. In addition, any construction delays or ride downtime can adversely affect our attendance and our ability to realize revenue growth.
Incidents involving food contamination, product recalls, product liability claims and associated costs could adversely affect our reputation and our financial condition.
The sale of food, toys and other retail products involves legal and other risks. While we dedicate substantial resources to food safety matters to enable customers to enjoy safe, quality food products, food safety events, including instances of food-borne illness (such as salmonella or E. Coli) could occur in our parks. Instances or reports, whether true or not, of food-safety issues could negatively affect our sales and reputation and could possibly lead to product liability claims, litigation (including class actions), or other damages. We may need to recall food products if they become contaminated, and we may need to recall toys, games or other retail merchandise if there is a design or product defect. Even though we are resellers of food, toys and other retail products, we may be liable if the consumption or purchase of any of the products we sell causes illness or injury. A recall could result in losses due to the cost of the recall, the destruction of product and lost sales due to the unavailability of product for a period of time. A significant food or retail product recall could also result in adverse publicity, damage to our reputation and loss of consumer confidence in our parks, which could have a material adverse effect on our business, financial condition or results of operations.
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We may be unable to purchase or contract with third parties to manufacture theme park or waterpark rides and attractions.
We may be unable to purchase or contract with third parties to build high quality rides and attractions and to continue to service and maintain those rides and attractions at competitive or beneficial prices, or to provide the replacement parts needed to maintain the operation of such rides. In addition, if our third-party suppliers'suppliers’ financial condition deteriorates or they go out of business, we may not be able to obtain the full benefit of manufacturer warranties or indemnities typically contained in our contracts or may need to incur greater costs for the maintenance, repair, replacement or insurance of these assets.
We may not be able to realize the benefits of our international agreements.
Various external factors, including difficult economic and political conditions throughout the world, could negatively affect the progress of our initiatives to develop new Six Flags-branded parks outside of North America. These initiatives could be delayed, and the ultimate success of such parks may be uncertain. For example, the projecton February 14, 2020, we terminated our agreements with our partner in Dubai is currently on hold and someChina to build parks as a result of the China parks' opening schedules have been delayed.
Some factors that will be important to the success of our international agreement initiatives are different than those affecting our existing parks. Tastes naturally vary by region, and consumers in new international markets into which we expand our brand may not embrace the parks’ offerings to the same extent as consumers in our existing markets. International agreements are also subject to additional risks, including the performance of our partners and their ability to obtain financing and government approvals; the impact of economic fluctuations in economies outside of the U.S.; difficulties and costs of staffing and managing foreign operations due to distance, language and cultural differences; changes or uncertainties in economic, legal, regulatory, social and political conditions; the enforceability of intellectual property and contract rights; and foreign currency exchange rate fluctuations, currency controls, and potentially adverse tax consequences of overseas operations. If we do not realize the benefits of such transactions, it could have an adverse effect on our financial performance.
Our leases contain default provisions that, if enforced or exercised by the landlord, could significantly impact our operations at those parks.
Of our 2526 theme parks and waterparks, 1112 are located on property that we lease and do not own. Certain of our leases permit the landlord to terminate the lease if there is a default under the lease, including, for example, our failure to pay rent, utilities and applicable taxes in a timely fashion or to maintain certain insurance. If a landlord were to terminate a lease, it would halt our operations at that park and, depending on the size of the park, could have a negative impact on our financial condition and results of operations. In addition, any disputes that may result from such a termination may be expensive to pursue and may divert money and management'smanagement’s attention from our other operations and adversely affect our business, financial condition or results of operations.
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Our intellectual property rights are valuable, and any inability or material increase in the cost to protect them could adversely affect our business.
Our intellectual property, including our trademarks and domain names and other proprietary rights, constitutes a significant part of our value. To protect our intellectual property rights, we rely upon a combination of trademark, trade secret and unfair competition laws of the United States and other countries, as well as contract provisions and third-party policies and procedures governing internet/domain name registrations. However, there can be no assurance these measures will be successful in any given case, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. We may be unable to prevent the misappropriation, infringement or violation of our intellectual property rights, breach of any contractual obligations to us, or independent development of intellectual property that is similar to ours, any of which could reduce or eliminate any competitive advantage we have developed, adversely affect our revenues or otherwise harm our business.
Increased labor costs and employee health and welfare benefits may reduce our results of operations.
Labor is a primary component in the cost of operating our business. We devote significant resources to recruiting and training our managers and employees. Increasedemployees in order to meet our guests’ high expectations for service. Our ability to control labor costs dueis subject to competition, increasednumerous external factors, including market pressures with respect to prevailing wage rates, unemployment levels, and health and other insurance costs, as well as the impact of legislation or regulations governing labor relations, minimum wage, or employee benefit costs or otherwise, would adversely impact our operating expenses. The Patient Protection and Affordable Care Act of 2010 and the amendments thereto contain provisions which will impact our future healthcare costs. We do not anticipate these changes will result in a material increase in our operating costs. benefits. Our results of operations are also substantially affected by costs of retirement, including as a result of macro-economicmacroeconomic factors beyond our control, such as declines in investment returns on pension plan assets and changes in discount rates used to calculate pension and related liabilities.
Additionally, we contribute to multiple defined benefit multiemployer pension plans on behalf of our collectively bargained employees of Six Flags Great Adventure LLC. If we were to cease contributing to or otherwise incur a withdrawal from any such plans, we could be obligated to pay withdrawal liability assessments based on the underfunded status (if any) of such plans at the time of the withdrawal. The amount of any multiemployer pension plan underfunding can fluctuate from year to year, and thus there is a possibility that the amount of withdrawal liability that we could incur in the future could be material, which could materially adversely affect our financial condition.
Unionization activities or labor disputes may disrupt our operations and affect our profitability.
As of December 31, 2018,2020, approximately 17%12% of our full-time and approximately 11% of our seasonal employees were subject to labor agreements with local chapters of national unions. We have collective bargaining agreements in place for certain employees at Six Flags Over Georgia, Six Flags Magic Mountain, Six Flags Great Adventure, Six Flags Over Texas, Six Flags St. Louis, and La Ronde. New unionization activity or a labor dispute involving our employees could disrupt our operations and reduce our revenues, and resolution of unionization activities or labor disputes could increase our costs. Litigation relating to employment and/or wage and hour disputes could also increase our operating expenses. Such disrupted operations, reduced revenues or increased costs could have a material adverse effect on our financial condition and results of operations.
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Our operations and our ownership of property subject us to environmental, health and safety and other regulations, which create uncertainty regarding future expenditures and liabilities.
Our operations involve wastewater and stormwater discharges and air emissions, and as a result are subject to environmental, health and safety laws, regulations and permitting requirements. These requirements are administered by the U.S. Environmental Protection Agency and the states and localities where our parks are located (and can also often be enforced through citizen suit provisions), and include the requirements of the Clean Water Act and the Clean Air Act. Our operations also involve maintaining underground and aboveground storage tanks, and managing and disposing of hazardous substances, chemicals and materials and are subject to federal, state and local laws and regulations regarding the use, generation, manufacture, storage, handling and disposal of these substances, chemicals and materials, including the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). A portion of our capital expenditures budget is intended to ensure continued compliance with environmental, health and safety laws, regulations and permitting requirements. In the event of contamination or injury as a result of a release of or exposure to regulated materials, we could be held liable for any resulting damages. For example, pursuant to CERCLA, past and current owners and operators of facilities and persons arranging for disposal of hazardous substances may be held strictly, jointly and severally liable for costs to remediate releases and threatened releases of hazardous substances. The costs of investigation, remediation or removal of regulated materials may be substantial, and the presence of those substances, or the failure to remediate property properly, may impair our ability to use, transfer or obtain financing regarding our property. Our activities may be affected by new legislation or changes in existing environmental, health and safety laws. For example, the state or federal government having jurisdiction over a given area may enact legislation and the U.S. Environmental Protection Agency or applicable state entity may propose new regulations or change existing regulations that could require our parks to reduce certain emissions or discharges. Such action could require our parks to install costly equipment or increase operating expenses. We may be required to incur costs to remediate potential environmental hazards, mitigate environmental risks in the future, or comply with other environmental requirements.
We also are subject to federal and state laws, which prohibit discrimination and other laws regulating the design and operation of facilities, such as the Americans With Disabilities Act. Compliance with these laws and regulations can be costly and increase our exposure to litigation and governmental proceedings, and a failure or perceived failure to comply with these laws could result in negative publicity that could harm our reputation, which could adversely affect our business.
Risks Related to Our Indebtedness and Common Stock
A portion of our cash flow is required to be used to fund our substantial monetary obligations.
We must satisfyhave significant financial obligations under our debt instruments and the following Partnership Park arrangements. See the Partnership Parks section in Note 15 (Commitments and Contingencies) to the consolidated financial statements in Item 8 for a detailed discussion of our obligations with respect to the Partnership Parks:
If we are unable to make payments on our capital expenditures in 2019 and beyond will be made on a discretionary basis, although such expenditures are important to the parks' ability to sustain and grow revenues. We spent $133.1 million on capital expenditures, net of property insurance recoveries, for all of our continuing operations in the 2018 calendar year. Our business plan includes targeted annual capital spending of approximately 9% of revenues in 2019. We may not, however, achieve our targeted rate of capital spending, which may cause us to spend in excess of,debt or less than, our anticipated rate.
We may not be ableplan to satisfy allstrategically reinvest in our properties to improve the guest experience and our business plan includes targeted annual capital spending. However, depending on various factors including strategic initiatives, the duration of the COVID-19 pandemic, unanticipated delays in the completion of our obligations, including, but not limited to, our obligations under the instruments governing our outstanding debt, which may cause a cross-default or cross-acceleration on other debtprojects, weather conditions, increased labor costs, and availability and cost of ride components, we may have incurred.
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We cannot be sure that cash generated from our parks will be as high as we expect or that our expenses will not be higher than we expect. Because a portion of our expenses are fixed in any given year, our operating cash flows are highly dependent on revenues, which are largely driven by attendance levels, in-park sales, accommodations and sponsorship and international agreement activity. A lower amount of cash generated from our parks or higher expenses than expected, when coupled with our debt obligations, could adversely affect our ability to fund our operations.
We may be unable to service our indebtedness.
Our ability to make scheduled payments on and to refinance our debt, including the Second Amended and Restated Credit Facility and the 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes (each as defined below), depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the banking and capital markets. We cannot provide assurance our business will generate sufficient cash flow from operations or future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If we are unable to meet our debt obligations or to fund our other liquidity needs, we may be forced to reduce or delay scheduled expansion and capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. If we are required to dispose of material assets or operations or restructure our debt to meet our debt service and other obligations, we cannot provide assurance the terms of any such transaction will be satisfactory to us or if, or how soon, any such transaction could be completed.
The Second Amended and Restated Term Loan B has interest payments calculated on a London Inter-Bank Offered Rate (“LIBOR”) plus an additional percentage based on credit risk. LIBOR is the subject of recent proposals for reform. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading and compelling banks to submit LIBOR rates after 2021. These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established or the establishment of an alternative reference rate. The consequences cannot be entirely predicted and could have an adverse impact on our current interest payments. Changes in market interest rates may influence our future financing costs and could reduce our earnings and cash flows.
The stock price of Holdings'Holdings’ common stock may change significantly, and you may not be able to sell shares of Holdings’ common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.
The trading price of Holdings’ common stock has been, and may continue to be, volatile. In addition to the risk factors discussed in this Annual Report, the trading price of Holdings’ common stock may be volatile, which could cause the value of an investment in Holdings' common stockadversely affected due to decline.
In addition, our business and long-range planning process is designed to maximize our long-term strength, growth, and profitability. We believe that this longer-term focus is in the best interests of the Company and stockholders. At the same time, however, we recognize that, when possible, it is helpful to provide investors with guidance as to our forecast of EBITDA and other financial metrics or projections from time to time. We do not have any responsibility to provide guidance or to update any of our forward-looking statements at such times or otherwise. In addition, any longer-term guidance that we provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years. However, such long-range targets are difficult to predict. For example, in 2016 we established a long-term aspirational goal to achieve Modified EBITDA of $750 million by 2020 but this goal was not ultimately achieved. If, or when, we announce actual results that differ from those that have been predicted by us, outside investment analysts, or others, our stock price could be adversely affected. Investors who rely on these stated goals
26
when making investment decisions with respect to our securities do so at their own risk. We take no responsibility for any losses suffered as a result of such changes in our stock price.
We periodically return value to investors through payment of quarterly dividends and common stock repurchases. In April 2020 and August 2020, in connection with amendments to the Second Amended and Restated Credit Agreement, we announced we were suspending our quarterly dividend payment and stock repurchase program due to the impact of the COVID-19 pandemic until the earlier December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to test covenant compliance. However, given the uncertainty associated with the ultimate impact of the COVID-19 pandemic on our business and operations, we may determine that it is prudent to continue these suspensions for longer depending on any then-existing limitations on our working capital. Investors may have an expectation that we will resume our dividend at a certain time and at certain levels or repurchase shares available under Holdings’ repurchase program. The stock price of Holdings’ common stock could be adversely affected if our cash dividend rate or common stock repurchase activity differs from investors’ expectations.
The instruments governing our indebtedness include financial and other covenants that will impose restrictions on our financial and business operations.
The instruments governing our indebtedness restrict our ability to, among other things, incur additional indebtedness, incur liens, make investments, sell assets, pay dividends, repurchase stock or engage in transactions with affiliates. In addition, the Second Amended and Restated Credit Facility contains financial covenants that will require us to maintain a maximum senior secured leverage ratio. These covenants may have a material impact on our operations. If we fail to comply with the covenants in the Second Amended and Restated Credit Facility or the indentures governing Holdings’ 4.875% senior unsecured notes due 2024 (the "2024 Notes"), add-on 4.875% senior unsecured notes due 2024 (the "2024 Notes Add-on"), 7.00% senior secured notes due 2025 (the “2025 Notes”), and 5.50% senior unsecured notes due 2027 (the "2027 Notes") and are unable to obtain a waiver or amendment, an event of default would result under the applicable debt instrument.
Events beyond our control, such as weather and economic, financial and industry conditions, may affect our ability to continue meeting our financial covenant ratios under the Second Amended and Restated Credit Facility. The need to comply with these financial covenants and restrictions could limit our ability to execute our strategy and expand our business or prevent us from borrowing more money when necessary.
The Second Amended and Restated Credit Facility and the indentures governing the 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes also contain other events of default customary for financings of these types, including cross defaults to certain other indebtedness, cross acceleration to other indebtedness and certain change of control events. If an event of default were to occur, the lenders under the Second Amended and Restated Credit Facility could declare outstanding borrowings under the Second Amended and Restated Credit Facility immediately due and payable and the holders of the 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes could elect to declare the 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes to be due and payable, together with accrued and unpaid interest. We cannot provide assurance we would have sufficient liquidity to repay or refinance such indebtedness if it was accelerated upon an event of default. In addition, an event of default or declaration of acceleration under the Second Amended and Restated Credit Facility could also result in an event of default under other indebtedness.
In connection with the amendments to the Second Amended and Restated Credit Facility, we agreed to suspend the repurchase of Holdings’ common stock and payment of dividends until the earlier of December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to calculate covenant compliance. However, given the present uncertainty associated with the ultimate impact of COVID-19 on our business and operations, we may determine that it is prudent to continue suspending the repurchase of Holding’s common stock and payment of dividends after the restrictions under the Second Amended and Restated Credit Facility are terminated depending on any then-existing limitations on our working capital.
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We can make no assurances we will be able to comply with these restrictions in the future or that our compliance would not cause us to forego opportunities that might otherwise be beneficial to us.
Changes in our credit ratings could adversely affect the price of Holdings'Holdings’ common stock.
We receive debt ratings from the major credit rating agencies in the United States. Factors that may impact our credit ratings include the sizable attendance and revenue generated from our portfolio of geographically diversified regional theme parks and waterparks, vulnerability to cyclical discretionary consumer spending, and seasonality of our operations. As the result of the COVID-19 pandemic and impact of expanding restrictions and quarantines on the entertainment industry, the credit rating agencies lowered the ratings on several theme park companies. In March 2017, in connection with the issuance of the 2027 Notes, Moody's assigned a B22020, Standard and Poor’s lowered our issuer credit rating to the 2027 Notes, upgraded the 2024 NotesB+ from B3 to B2,BB with a “negative outlook.” Additionally, Standard and reaffirmed our Ba1Poor’s lowered the rating on the credit facility and our B1 corporate family rating. In March 2017, Standard & Poor's assigned a BB- rating to the 2027 Notes, and reaffirmed our BB- rating on the 2024 Notes and 2027 Notes to B from BB- with a “negative outlook” and lowered the rating on our senior secured credit facility to BB corporatefrom BBB- with “negative” outlook. In April 2020, Moody’s lowered our issuer credit rating to B2 from B1 with a “negative outlook.” Additionally, Moody’s lowered the rating on our 2024 Notes and 2027 Notes to B3 from B2 with a “negative outlook” and lowered the rating on our senior secured credit facility to Ba2 from Ba1 with a “negative outlook.” In April 2020, the newly issued 2025 Notes were assigned a rating of BB and Ba2 from Standard and Poor’s and Moody’s, respectively, consistent with our senior secured credit rating. BothIn September 2020, Standard and Poor’s further lowered our issuer credit rating agencies have placedto B- from B+ and our issue-level ratings to B from BB- and CCC from B- on "stableour senior secured and senior unsecured issuances, respectively, while maintaining a “negative outlook."” We cannot provide assurance our ratings will improve or remain the same. A negative change in our ratings or the perception such a change might occur could adversely affect the market price of Holdings'Holdings’ common stock.
Holdings is a holding company and is dependent on dividends and other distributions from its subsidiaries.
Holdings is a holding company and substantially all of its operations are conducted through direct and indirect subsidiaries. As a holding company, it has no significant assets other than its equity interests in its subsidiaries. Accordingly, Holdings is dependent on dividends and other distributions from its subsidiaries to meet its obligations, including the obligations under the AmendedCompany’s debt agreements, and, Restated Credit Facility, the 2024 Notes, the 2024 Notes Add-on, and the 2027 Notes, andat such time as dividend payments by Holdings are no longer suspended, to pay the dividenddividends on Holdings'Holdings’ common stock. If these dividends and other distributions are not sufficient for Holdings to meets its financial obligations, or not available to Holdings due to restrictions in the instruments governing our indebtedness, it could cause Holdings to default on ourits debt obligations, which would impair our liquidity and adversely affect our financial condition and our business. We had $44.6$157.8 million of cash and cash equivalents on a consolidated basis at December 31, 2018,2020, of which $2.2$24.0 million was held at Holdings.
Holdings’ short-term stockholder rights plan, as well as provisions in Holdings’ charter, bylaws and Delaware law, and change of control provisions in certain of our debt and other agreements could delay or prevent an acquisition of us by a changethird party.
On March 31, 2020, Holdings’ Board of Directors approved the adoption of a short-term stockholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of the Company’s common stock. The rights plan has a one-year term, expiring on March 30, 2021. The rights are designed to enable the Company’s stockholders to realize the long-term value of their investment, ensure that all stockholders receive fair and equal treatment in the event of any proposed takeover of the Company, and to guard against tactics to gain control even ifof the Company without paying all stockholders an appropriate premium for that changecontrol. The stockholder rights plan would be beneficialcause substantial dilution to stockholdersany person or could have a materially negative impactgroup that attempts to acquire us on our business.
In addition, Holdings’ charter and debt agreements contain provisions that could have the effect of delaying, deferring or other rights of the holders of the common stock. If issued, the preferred stock could also dilute the holders of Holdings'preventing a transaction or a change in control that might involve a premium price for Holdings’ common stock and couldor otherwise be used to discourage, delay or prevent a changein the best interest of control of us.
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GeneralRisk Factors
We may not be able to repayattract and retain key management and other key employees.
Our employees, particularly our key management, are vital to our success and difficult to replace. We may be unable to retain them or to attract other highly qualified employees, particularly if we do not offer employment terms competitive with the rest of the market. Failure to attract and retain highly qualified employees, or failure to develop and implement a viable succession plan, could result in inadequate depth of institutional knowledge or skill sets, adversely affecting our business.
Risk related to tariffs and other duties
We source merchandise for resale and other products used in our business from entities located outside of North America. Additionally, some of our ride manufacturers may be located in foreign countries or may utilize components or materials manufactured or sourced from foreign countries. Our business exposes us to risks associated with global commerce, including changes to tariffs, quotas and other restrictions on imports. While existing tariffs and duties have not had a material impact on our business, the U.S. government may impose additional tariffs on thousands of products sourced from foreign countries and has expressed a willingness to impose additional or increased tariffs on goods imported from China, including many items that we purchase for our business. While the impact has been immaterial to date, tariffs or duties could lower our gross margin on impacted products. Additionally, even if the products that we import are not affected directly by tariffs or other duties, the imposition of such indebtedness.
We may be subject to claims for infringing the intellectual property rights of others, which could be costly and result in the loss of intellectual property rights.
We cannot be certain that we do not and will not infringe the intellectual property rights of others. We have the exclusive right to use certain Warner Bros. and DC Comics characters in our parksbeen in the U.S. (exceptpast, and may be in the Las Vegas metropolitan area), Canada, Mexicofuture, subject to litigation and certain other countries. Warner Bros. can terminate these licenses under certain circumstances, including the acquisition of us by persons engagedclaims in the movieordinary course of our business based on allegations of infringement or television industries. This could deterother violations of the intellectual property rights of others. Regardless of their merits, intellectual property claims can divert the efforts of our personnel and are often time-consuming and expensive to litigate or settle. In addition, to the extent claims against us are successful, we may have to pay substantial monetary damages or discontinue, modify, or rename certain parties from seekingproducts or services that are found to acquire us.
ITEM 1B.UNRESOLVED STAFF COMMENTS
We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our 20182020 fiscal year and that remain unresolved.
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ITEM 2.PROPERTIES
Set forth below is a brief description of our material real estate as of December 31, 2018.2020. See also "Business—Description of Parks."
● | Six Flags America, Largo, Maryland—515 acres (owned) |
● | Six Flags Discovery Kingdom, Vallejo, California—135 acres (owned) |
● | Six Flags Fiesta Texas, San Antonio, Texas—220 acres (owned) |
● | Six Flags Great Adventure & Safari and Hurricane Harbor, Jackson, New Jersey—2,111 acres (owned) |
● | Six Flags Great America, Gurnee, Illinois—304 acres (owned) |
● | Six Flags Hurricane Harbor, Arlington, Texas—47 acres (owned) |
● | Six Flags Hurricane Harbor, Valencia, California—12 acres (owned) |
● | Six Flags Hurricane Harbor, Oaxtepec, Mexico—67 acres (leasehold interest)(1) |
● | Six Flags Magic Mountain, Valencia, California—250 acres (owned) |
● | Six Flags Mexico, Mexico City, Mexico—110 acres (occupied pursuant to a permit agreement)(2) |
● | Six Flags New England, Agawam, Massachusetts—262 acres (substantially all owned) |
● | Six Flags Over Georgia, Austell, Georgia—283 acres (leasehold interest)(3) |
Six Flags Over Texas, Arlington, Texas—217 acres (leasehold interest)(3) |
● | Six Flags St. Louis, Eureka, Missouri—320 acres (owned) |
● | Six Flags White Water Atlanta, Marietta, Georgia—69 acres (owned)(4) |
La Ronde, Montreal, Canada—146 acres (leasehold interest)(5) |
● | The Great Escape and Lodge, Queensbury, New York—345 acres (owned) |
● | Six Flags Hurricane Harbor Concord, Concord, California—24 acres (leasehold)(6) |
Six Flags Darien Lake, Buffalo, New |
Frontier City, Oklahoma City, |
Six Flags Hurricane Harbor Phoenix, Glendale, |
Six Flags Hurricane Harbor Splashtown, Spring, |
● | Six Flags Hurricane Harbor Rockford, Rockford, IL—43 acres (leasehold) (9) |
(1) | The site is leased from the Mexican Social Security Institute. The lease expires in 2036. The waterpark opened to the public in 2017. |
(2) | The permit agreement is with the Federal District of Mexico City. The agreement expires in 2024. |
(3) | Lessor is the limited partner of the partnership that owns the park. The SFOG and SFOT leases expire in 2027 and 2028, respectively, at which time we have the option to acquire all of the interests in the respective lessor that we have not previously acquired. |
(4) | Owned by the Georgia partnership. |
(5) | The site is leased from the City of Montreal. The lease expires in 2065. |
(6) | The site is leased from EPR Parks, LLC pursuant to a sublease that expires in 2035 or the earlier expiration of the ground lease. We began operating the waterpark in 2017. |
(7) | These sites are leased from EPR Parks, LLC pursuant to a lease that expires in 2037. We began operating these parks in 2018. |
(8) | This site is leased from EPR Parks, LLC pursuant to a lease that expires in 2033. We began operating the waterpark in 2018. |
(9) | This site is leased from the Rockford Park District. The lease expires in 2029. We began operating the waterpark in 2019. |
In addition to the foregoing, we also lease office space and a limited number of rides and attractions at our parks.parks and office space. See Note 1416 to the consolidated financial statements included elsewhere in Item 8 of this Annual Report for a discussion of lease commitments. We consider our properties to be well maintained, in good condition and adequate for their present uses and business requirements. We have granted to our lenders under the Second Amended and Restated Credit Facility agreement and the collateral agent under the indenture governing our 2025 Notes, a mortgage on substantially all of our owned United States properties.
ITEM 3.LEGAL PROCEEDINGS
Information regarding legal proceedings is included in Note 15, Commitments and Contingencies, to the consolidated financial statements in Item 8 of this Annual Report.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Holdings’ common stock tradesis listed on the New York Stock Exchange under the ticker symbol "SIX."
Sales Price Per Share | Dividends Declared Per Share | ||||||||||
High | Low | ||||||||||
2019 | |||||||||||
First Quarter (through February 14, 2019) | $ | 64.28 | $ | 52.50 | $ | 0.82 | |||||
2018 | |||||||||||
Fourth Quarter | $ | 69.82 | $ | 49.79 | $ | 0.82 | |||||
Third Quarter | $ | 72.39 | $ | 62.67 | $ | 0.78 | |||||
Second Quarter | $ | 73.38 | $ | 58.93 | $ | 0.78 | |||||
First Quarter | $ | 70.44 | $ | 59.50 | $ | 0.78 | |||||
2017 | |||||||||||
Fourth Quarter | $ | 67.94 | $ | 58.76 | $ | 0.70 | |||||
Third Quarter | $ | 61.66 | $ | 51.25 | $ | 0.64 | |||||
Second Quarter | $ | 65.19 | $ | 57.01 | $ | 0.64 | |||||
First Quarter | $ | 62.63 | $ | 57.05 | $ | 0.64 |
Dividends
Prior to the temporary suspension of Directors increasedpark operations on March 13, 2020 due to the COVID-19 pandemic, Holdings announced a quarterly cash dividend from $0.78of $0.25 per share of common stock, representing a 70% reduction from the dividend declared in February 2019. Holdings did not declare a dividend during the remainder of the year ended December 31, 2020. In connection with the amendment to $0.82 per share of common stock.
Issuer Purchases of Equity Securities
On June 7, 2016, Holdings announced that its Board of Directors approved a new stock repurchase program that permitted Holdings to repurchase an incremental $500.0 million in shares of Holdings'Holdings’ common stock (the "June 2016 Stock Repurchase Plan"). Holdings fully utilized the availability under the June 2016 Stock Repurchase Plan by May 2017. Throughout the program, Holdings repurchased 8,392,000 shares at a cumulative cost of approximately $500.0 million and an average price per share of $59.58.
On March 30, 2017, Holdings announced that its Board of Directors approved a new stock repurchase plan that permits Holdings to repurchase an incremental $500.0$500 million in shares of Holdings'Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of February 14, 2019,19, 2021, Holdings had repurchased 4,603,0004,607,000 shares at a cumulative cost of approximately $268.2$268.3 million and an average price per share of $58.27$58.25 under the March 2017 Stock Repurchase Plan, leaving approximately $231.8$231.7 million available for permitted repurchases.
In connection with the recent amendments to the Second Amended and Restated Credit Facility in April 2020 and August 2020, we agreed to suspend the repurchase of Holdings'Holdings’ common stock and payment of dividends until the earlier of December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to calculate covenant compliance. However, given the present uncertainty associated with the ultimate impact of COVID-19 on our business and operations, we may determine that it is prudent to continue suspending the repurchase of Holdings’ common stock after the restrictions under the March 2017 Stock Repurchase Plan during the three months ended December 31, 2018:Second Amended and Restated Credit Facility are terminated depending on any then-existing limitations on our working capital.
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Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plans or programs | |||||||||||
Month 1 | October 1 - October 31 | — | — | — | $ | 261,779,000 | |||||||||
Month 2 | November 1 - November 30 | 518,212 | $ | 57.15 | 518,212 | $ | 232,165,000 | ||||||||
Month 3 | December 1 - December 31 | 6,657 | $ | 57.97 | 6,657 | $ | 231,779,000 | ||||||||
524,869 | $ | 57.16 | 524,869 | $ | 231,779,000 |
Performance Graph
The following graph shows a comparison of the five-year cumulative total stockholder return on Holdings'Holdings’ common stock (assuming all dividends were reinvested), The Standard & Poor'sPoor’s ("S&P") 500 Stock Index, The S&P Midcap 400 Index and The S&P Entertainment Movies & Entertainment Index. The stock price performance shown in the graph is not necessarily indicative of future price performance.
12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | ||||||||||||||||||
| | | | | | | | | | | | | |||||||||||
|
| 12/31/2015 |
| 12/31/2016 |
| 12/31/2017 |
| 12/31/2018 |
| 12/31/2019 |
| 12/31/2020 | |||||||||||
Six Flags Entertainment Corporation | 100.00 | 123.10 | 163.96 | 187.18 | 217.16 | 190.47 |
| 100.00 |
| 114.16 |
| 132.45 |
| 116.17 | | 100.44 | | 76.72 | |||||
S&P 500 | 100.00 | 113.69 | 115.26 | 129.05 | 157.22 | 150.33 |
| 100.00 |
| 111.96 |
| 136.40 |
| 130.42 | | 171.49 | | 203.04 | |||||
S&P Midcap 400 | 100.00 | 109.77 | 107.38 | 129.65 | 150.71 | 134.01 |
| 100.00 |
| 120.74 |
| 140.35 |
| 124.80 | | 157.49 | | 179.00 | |||||
S&P Movies & Entertainment | 100.00 | 117.82 | 106.93 | 118.02 | 123.94 | 124.69 |
| 100.00 |
| 110.37 |
| 115.91 |
| 116.61 | | 147.78 | | 205.52 |
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ITEM 6.SELECTED FINANCIAL DATA
The following financial data is derived from our audited financial statements. You should review this information in conjunction with "Management's"Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Annual Report and the historical financial statements and related notes contained in this Annual Report.
| | | | | | | | | | | | | | | |
|
| Year Ended December 31, | |||||||||||||
(Amounts in thousands, except per share data) |
| 2020 |
| 2019 |
| 2018 |
| 2017 |
| 2016 | |||||
Statement of Operations Data: |
| |
|
| |
|
| |
|
| |
|
| |
|
Park admissions | | $ | 202,646 | | $ | 815,782 | | $ | 810,064 | | $ | 741,275 | | $ | 715,413 |
Park food, merchandise and other | |
| 126,306 | |
| 574,440 | |
| 553,527 | |
| 524,582 | |
| 521,167 |
Sponsorship, international agreements and accommodations | |
| 27,623 | |
| 97,361 | |
| 100,116 | |
| 93,217 | |
| 82,818 |
Total revenues | |
| 356,575 | |
| 1,487,583 | |
| 1,463,707 | |
| 1,359,074 | |
| 1,319,398 |
Operating expenses (excluding depreciation and amortization shown separately below) | |
| 389,726 | |
| 607,791 | |
| 574,724 | |
| 511,873 | |
| 490,116 |
Selling, general and administrative expenses (excluding depreciation and amortization shown separately below) | |
| 147,295 | |
| 199,194 | |
| 132,168 | |
| 159,070 | |
| 293,005 |
Costs of products sold | |
| 34,119 | |
| 130,304 | |
| 121,803 | |
| 110,374 | |
| 109,579 |
Other net periodic pension benefit | |
| (5,190) | |
| (4,186) | |
| (5,169) | |
| (3,322) | |
| (1,920) |
Depreciation and amortization | |
| 120,173 | |
| 118,230 | |
| 115,693 | |
| 111,671 | |
| 106,893 |
Loss on disposal of assets | |
| 7,689 | |
| 2,162 | |
| 1,879 | |
| 3,959 | |
| 1,968 |
Interest expense, net | |
| 154,723 | |
| 113,302 | |
| 107,243 | |
| 99,010 | |
| 81,872 |
Loss on debt extinguishment, net | |
| 6,106 | |
| 6,484 | |
| — | |
| 37,116 | |
| 2,935 |
Other expense, net | |
| 24,993 | |
| 2,542 | |
| 3,508 | |
| 271 | |
| 1,684 |
(Loss) income before income taxes | |
| (523,059) | |
| 311,760 | |
| 411,858 | |
| 329,052 | |
| 233,266 |
Income tax (benefit) expense | |
| (140,967) | |
| 91,942 | |
| 95,855 | |
| 16,026 | |
| 76,539 |
Net (loss) income | |
| (382,092) | |
| 219,818 | |
| 316,003 | |
| 313,026 | |
| 156,727 |
Net income attributable to noncontrolling interests | |
| (41,288) | |
| (40,753) | |
| (40,007) | |
| (39,210) | |
| (38,425) |
Net (loss) income attributable to Six Flags Entertainment Corporation | | $ | (423,380) | | $ | 179,065 | | $ | 275,996 | | $ | 273,816 | | $ | 118,302 |
| | | | | | | | | | | | | | | |
Weighted-average common shares outstanding: | |
|
| |
|
| |
|
| |
|
| |
|
|
Basic: | |
| 84,800 | |
| 84,348 | |
| 84,100 | |
| 86,802 | |
| 92,349 |
Diluted: | |
| 84,800 | |
| 84,968 | |
| 85,445 | |
| 88,494 | |
| 94,398 |
| | | | | | | | | | | | | | | |
Net (loss) earnings per average common share outstanding: | | | | | | | | | | | | | | | |
Basic: | | $ | (4.99) | | $ | 2.12 | | $ | 3.28 | | $ | 3.15 | | $ | 1.28 |
Diluted: | | $ | (4.99) | | $ | 2.11 | | $ | 3.23 | | $ | 3.09 | | $ | 1.25 |
| | | | | | | | | | | | | | | |
Cash dividends declared per common share | | $ | 0.25 | | $ | 3.29 | | $ | 3.16 | | $ | 2.62 | | $ | 2.38 |
34
| | | | | | | | | | | | | | | |
|
| December 31, | |||||||||||||
(Amounts in thousands) |
| 2020 |
| 2019 |
| 2018 |
| 2017 |
| 2016 | |||||
Balance Sheet Data: |
| |
|
| |
|
| |
|
| |
|
| |
|
Cash and cash equivalents(1) | | $ | 157,760 | | $ | 174,179 | | $ | 44,608 | | $ | 77,496 | | $ | 137,385 |
Total assets | |
| 2,772,691 | |
| 2,882,540 | |
| 2,517,328 | |
| 2,456,676 | |
| 2,487,672 |
Deferred revenue | |
| 205,125 | |
| 144,040 | |
| 146,227 | |
| 142,014 | |
| 123,955 |
Total long-term debt (excluding current maturities) | |
| 2,622,641 | |
| 2,266,884 | |
| 2,063,512 | |
| 2,021,178 | |
| 1,624,486 |
Total debt, net | |
| 2,622,641 | |
| 2,274,884 | |
| 2,106,512 | |
| 2,021,178 | |
| 1,653,647 |
Redeemable noncontrolling interests | |
| 523,376 | |
| 529,258 | |
| 525,271 | |
| 494,431 | |
| 485,876 |
Stockholders' deficit | |
| (1,158,547) | |
| (716,118) | |
| (643,093) | |
| (505,112) | |
| (186,490) |
| | | | | | | | | | | | | | | |
|
| Year Ended December 31, | |||||||||||||
(Amounts in thousands) |
| 2020 |
| 2019 |
| 2018 |
| 2017 |
| 2016 | |||||
Other Data: |
| |
|
| |
|
| |
|
| |
|
| |
|
Net cash (used in) provided by operating activities | | $ | (190,880) | | $ | 410,573 | | $ | 413,132 | | $ | 445,067 | | $ | 463,235 |
Stock repurchases | |
| (54) | |
| (52) | |
| (110,990) | |
| (499,442) | |
| (211,751) |
Payment of cash dividends | |
| (22,499) | |
| (278,951) | |
| (267,044) | |
| (227,101) | |
| (220,314) |
Year Ended December 31, | |||||||||||||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||
Statement of Operations Data: | |||||||||||||||||||
Park Admissions | $ | 810,064 | $ | 741,275 | $ | 715,413 | $ | 687,819 | $ | 641,535 | |||||||||
Park food, merchandise and other | 553,527 | 524,582 | 521,167 | 500,190 | 460,131 | ||||||||||||||
Sponsorship, international agreements and accommodations | 100,116 | 93,217 | 82,818 | 75,929 | 74,127 | ||||||||||||||
Total revenue | 1,463,707 | 1,359,074 | 1,319,398 | 1,263,938 | 1,175,793 | ||||||||||||||
Operating expenses (excluding depreciation and amortization shown separately below) | 574,724 | 511,873 | 490,116 | 466,491 | 430,450 | ||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization shown separately below) | 132,168 | 159,070 | 293,005 | 235,046 | 309,901 | ||||||||||||||
Costs of products sold | 121,803 | 110,374 | 109,579 | 100,709 | 90,515 | ||||||||||||||
Other net periodic pension (benefit) expense | (5,169 | ) | (3,322 | ) | (1,920 | ) | (1,508 | ) | 8,035 | ||||||||||
Depreciation and amortization | 115,693 | 111,671 | 106,893 | 107,411 | 108,107 | ||||||||||||||
Loss on disposal of assets | 1,879 | 3,959 | 1,968 | 9,882 | 5,860 | ||||||||||||||
Gain on sale of investee | — | — | — | — | (10,031 | ) | |||||||||||||
Interest expense, net | 107,243 | 99,010 | 81,872 | 75,903 | 72,589 | ||||||||||||||
Loss on debt extinguishment, net | — | 37,116 | 2,935 | 6,557 | — | ||||||||||||||
Other expense, net | 3,508 | 271 | 1,684 | 223 | 356 | ||||||||||||||
Income from continuing operations before income taxes and discontinued operations | 411,858 | 329,052 | 233,266 | 263,224 | 160,011 | ||||||||||||||
Income tax expense | 95,855 | 16,026 | 76,539 | 70,369 | 46,522 | ||||||||||||||
Income from continuing operations before discontinued operations | 316,003 | 313,026 | 156,727 | 192,855 | 113,489 | ||||||||||||||
Income from discontinued operations | — | — | — | — | 545 | ||||||||||||||
Net income | 316,003 | 313,026 | 156,727 | 192,855 | 114,034 | ||||||||||||||
Net income attributable to noncontrolling interests | (40,007 | ) | (39,210 | ) | (38,425 | ) | (38,165 | ) | (38,012 | ) | |||||||||
Net income attributable to Six Flags Entertainment Corporation | $ | 275,996 | $ | 273,816 | $ | 118,302 | $ | 154,690 | $ | 76,022 | |||||||||
Amounts attributable to Six Flags Entertainment Corporation common stockholders: | |||||||||||||||||||
Income from continuing operations | $ | 275,996 | $ | 273,816 | $ | 118,302 | $ | 154,690 | $ | 75,477 | |||||||||
Income from discontinued operations | — | — | — | — | 545 | ||||||||||||||
Net income | $ | 275,996 | $ | 273,816 | $ | 118,302 | $ | 154,690 | $ | 76,022 | |||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||
Basic: | 84,100 | 86,802 | 92,349 | 93,580 | 94,477 | ||||||||||||||
Diluted: | 85,445 | 88,494 | 94,398 | 97,981 | 98,139 | ||||||||||||||
Net income per average common share outstanding—basic: | |||||||||||||||||||
Income from continuing operations | $ | 3.28 | $ | 3.15 | $ | 1.28 | $ | 1.65 | $ | 0.79 | |||||||||
Income from discontinued operations | — | — | — | — | 0.01 | ||||||||||||||
Net income | $ | 3.28 | $ | 3.15 | $ | 1.28 | $ | 1.65 | $ | 0.80 | |||||||||
Net income per average common share outstanding—diluted: | |||||||||||||||||||
Income from continuing operations | $ | 3.23 | $ | 3.09 | $ | 1.25 | $ | 1.58 | $ | 0.76 | |||||||||
Income from discontinued operations | — | — | — | — | 0.01 | ||||||||||||||
Net income | $ | 3.23 | $ | 3.09 | $ | 1.25 | $ | 1.58 | $ | 0.77 | |||||||||
Cash dividends declared per common share | $ | 3.16 | $ | 2.62 | $ | 2.38 | $ | 2.14 | $ | 1.93 |
December 31, | |||||||||||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||
Balance Sheet Data: | |||||||||||||||||||
Cash and cash equivalents(1) | $ | 44,608 | $ | 77,496 | $ | 137,385 | $ | 99,760 | $ | 73,884 | |||||||||
Total assets | 2,517,328 | 2,456,676 | 2,487,672 | 2,428,440 | 2,416,896 | ||||||||||||||
Deferred revenue | 146,227 | 142,014 | 123,955 | 97,334 | 71,598 | ||||||||||||||
Total long-term debt (excluding current maturities) | 2,063,512 | 2,021,178 | 1,624,486 | 1,498,022 | 1,373,605 | ||||||||||||||
Total debt, net | 2,106,512 | 2,021,178 | 1,653,647 | 1,505,528 | 1,379,906 | ||||||||||||||
Redeemable noncontrolling interests | 525,271 | 494,431 | 485,876 | 435,721 | 437,545 | ||||||||||||||
Stockholders' (deficit) equity | (643,093 | ) | (505,112 | ) | (186,490 | ) | 24,216 | 223,895 | |||||||||||
Year Ended December 31, | |||||||||||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||
Other Data: | |||||||||||||||||||
Net cash provided by operating activities | $ | 413,132 | $ | 445,067 | $ | 463,235 | $ | 473,761 | $ | 392,323 | |||||||||
Stock repurchases | (110,990 | ) | (499,442 | ) | (211,751 | ) | (245,114 | ) | (195,353 | ) | |||||||||
Payment of cash dividends | (267,044 | ) | (227,101 | ) | (220,314 | ) | (200,957 | ) | (184,300 | ) |
(1) | Excludes restricted cash in |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Significant components of the Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations section include:
● | Overview. The overview section provides a summary of Six Flags and the principal factors affecting our results of operations. |
● | Critical Accounting Policies. The critical accounting policies section provides detail with respect to accounting policies that are considered by management to require significant judgment and use of estimates and that could have a significant impact on our financial statements. |
● | Recent Events. The recent events section provides a brief description of recent developments at the Company. |
● | Results of Operations. The results of operations section provides an analysis of our results for the years ended December 31, 2020 and 2019 and a discussion of items affecting the comparability of our financial statements for those years. Please refer to the results of operations section described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the year ended December 31, 2019, for our discussion and analysis of our results for the years ended December 31, 2019 and 2018 and a discussion of items affecting the comparability of our financial statements for those years. |
● | Liquidity, Capital Commitments and Resources. The liquidity, capital commitments and resources section provides a discussion of our cash flows for the year ended December 31, 2020, and our outstanding debt and commitments existing as of December 31, 2020. |
● | Market Risks and Security Analyses. We are principally exposed to market risk related to interest rates and foreign currency exchange rates, which are described in the market risks and security analyses section. |
● | Recently Issued Accounting Pronouncements. This section provides a discussion of recently issued accounting pronouncements applicable to Six Flags, including a discussion of the impact or potential impact of such standards on our financial statements when applicable. |
The following discussion and analysis contains forward-looking statements relating to future events or our future financial performance, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included under the caption "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" for a discussion of some of the uncertainties, risks and assumptions associated with these statements.
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The following discussion and analysis presents information that we believe is relevant to an assessment and understanding of our consolidated balance sheets and results of operations. This information should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in Item 8 of this Annual Report.
Overview
We are the largest regional theme park operator in the world and the largest operator of waterparks in North America based on the number of parks we operate. Of our 2526 regional theme and waterparks, 2223 are located in the United States, two parks are located in Mexico and one is located in Montreal, Canada. Our parks are located in geographically diverse markets across North America and generally offer a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and retail outlets, thereby providing a complete family-oriented entertainment experience. We work continuously to improve our parks and our guests'guests’ experiences and to meet our guests'guests’ evolving needs and preferences.
During 2020, we, like many companies worldwide, experienced a significant negative impact on our business as a result of the COVID-19 pandemic. In part, our results reflect several strategic adjustments we made in response to the temporary park closures and additional health and safety requirements we experienced in our 2020 operating environment. These adjustments were precipitated by rapid changes in public health requirements and guidelines and reflected our efforts to address the significant operating challenges they presented to protect the safety of our employees and guests. Our revenue is derived from (i) the sale of tickets for entrance to our parks (which accounted for approximately 57% of total revenue during the year ended December 31, 2020, and approximately 55% of total revenue during the years ended December 31, 20182019 and 2017, and 54% of total revenues during the year ended December 31, 2016)2018), (ii) the sale of food and beverages, merchandise, games and attractions, parking and other services inside our parks, and (iii) sponsorship, international agreements and accommodations. RevenuesRevenue from ticket sales and in-park sales are primarily impacted by park attendance.attendance and, as anticipated, we sold significantly fewer season passes and memberships while many of our parks remained closed compared to the same period in 2019. As a result, the number of all members and season pass holders, decreased 51% as of the end of the fourth quarter of 2020 compared to the fourth quarter of 2019. We had 1.7 million members, 19% of whom had paused their memberships, and 2.1 million season pass holders as of the end of 2020 compared to 2.6 million members and 5.1 million season pass holders at the end of 2019. Revenues from sponsorship, international agreements and accommodations can be impacted by the term, timing and extent of services and fees under these arrangements, which can result in fluctuations from year to year. During 2018,2020, our earnings from park operations excluding the impact of interest, taxes, depreciation, amortization and any other non-cash income or expenditures ("(“Park EBITDA"EBITDA”) improved primarilydecreased relative to the prior year, as a result of revenue growth, partially offset by an increase in cash operating costs. The increase in revenue was primarily driven by a 5% increasethe temporary suspension of park operations related to the COVID-19 pandemic outbreak and the resulting decrease in attendance a 2% increaserelated to the reduction in total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue and a 7% increase in sponsorship, international agreements and accommodations revenue.
Our principal costs of operations include salaries and wages, employee benefits, advertising, third party services, repairs and maintenance, utilities, rent and insurance. A large portion of our expenses is relatively fixed as our costs for full-time employees, maintenance, utilities, rent, advertising and insurance do not vary significantly with attendance.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective and complex estimates and judgments. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from the continuing changes in the economic environment will be reflected in the financial statements in future periods. The following discussion addresses the items we have identified as our critical accounting estimates and discusses our review of applicable accounting pronouncements that have been issued by the Financial Accounting Standards Board (“FASB”). See Note
2 to the consolidated financial statementsValuation of Long-Lived Assets
Goodwill and intangible assets with indefinite useful lives are tested for impairment annually, or more frequently if events or circumstances indicate that the assets may not be impaired.recoverable. We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to the reporting unit. We then determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit. All of our parks are operated in a similar manner and have comparable characteristics in that they produce and distribute similar services and products using similar processes, have similar types of customers, are subject to similar regulations and exhibit similar economic characteristics. As such, we are a single reporting unit. For each year, the fair value of the single reporting unit exceeded our carrying amount (provided that we have one reporting unit at the same level for which our Holdings'Holdings’ common stock is traded, we believe our market capitalization is the best indicator of our reporting unit'sunit’s fair value). In September 2012, the FASB amended Accounting Standards Update ("ASU") Topic 350,
The fair value of indefinite-lived intangible assets is generally determined based on a discounted cash flow analysis. An impairment loss occurs to the extent that the carrying value exceeds the fair value. For goodwill, if the fair value of the reporting unit were to be less than the carrying amount, an impairment loss would be recognized to the extent that the carrying amount of the reporting unit exceeds its fair value.
We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of an asset or groups of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to the future undiscounted net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
37
Accounting for Income Taxes
As part of the process of preparing consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation periods for our property and equipment and recognition of our deferred revenue, for tax and financial accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets (primarily net operating loss carryforwards) will be recovered by way of offset against taxable income. To the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a
A high degree of management judgment is required in determining our provision or benefit for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Variables that will impact whether our deferred tax assets will be utilized prior to their expiration include, among other things, attendance, spending per capita spending and other revenues, foreign taxable income, capital expenditures, levels of debt, interest rates, operating expenses, sales of assets, and changes in state or federal tax laws. In determining the valuation allowance, we do not consider, and under generally accepted accounting principles cannot consider, the possible changes in state or federal tax laws until the laws change. To the extent we reduce capital expenditures, our future accelerated tax deductions for our rides and equipment will be reduced, and our interest expense deductions could correspondingly decrease as cash flows that previously would have been utilized for capital expenditures could be utilized to lower our outstanding debt balances. Increases in capital expenditures without corresponding increases in net revenues would reduce short-term taxable income and increase the likelihood of additional valuation allowances being required as net operating loss carryforwards could expire prior to their utilization. Conversely, increases in revenues in excess of operating expenses would reduce the likelihood of additional valuation allowances being required as the short-term taxable income would increase the utilization of net operating loss carryforwards prior to their expiration. We utilize deferred tax assets related to foreign tax credit attributes through foreign-sourced income as well as the recapture of overall domestic loss amounts re-characterized as domestic-source income. See Note
38
Revenue Recognition
FASB Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers (together with the series of Accounting Standards Updates described in the firstsecond paragraph under "Recently Adopted Accounting Pronouncements" below,in Note 2 to the consolidated financial statements in Item 8 of this Annual Report, "Topic 606") is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We recognize revenue upon admission into our parks, provision of our services, or when products are delivered to our guests. Revenue is presented in the accompanying consolidated statements of operations net of sales taxes collected from our guests that are remitted or payable to government taxing authorities. For season passes, memberships in the initial twelve-month term and other multi-use admissions, we estimate a redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable and recognize a pro-rata portion of the revenue as the guest attends our parks. Due to COVID-19, we extended the expiration date by one year on our 2020 season pass product, allowed the pause of membership payments and granted additional months to membership contracts post-cancellation equal to the number of closed months at the park where the membership was purchased. For any bundled products with multiple performance obligations, revenue is allocated using the retail price of each distinct performance obligation and products that are not sold on a stand-alone basis are treated as residual. In contrast to our season pass and other multi-use offerings (such as our all season dining pass program, which enables season pass holders and members to eat meals and snacks any day they visit the park for one upfront payment) that expire at the end of each operating season, the membership program continues on a month-to-month basis after the initial twelve-month membership term and can be canceled any time after the initial term pursuant to the terms of the membership program. Guests enrolled in the membership program can visit our parks an unlimited number of times anytime the parks are open as long as the guest remains enrolled in the membership program. We review the estimated redemption rate regularly and on an ongoing basis and revise it as necessary throughout the year.year, including impact of changes to our season pass and memberships described above. Amounts owed or received for multi-use admissions in excess of redemptions are recognized in deferred revenue. For active memberships after the initial twelve-month term, we recognize revenue monthly as payments are received.
39
Recent Events
COVID-19 Pandemic
We have entered into international agreementsbegan 2020 by launching a transformation plan to assist third partiesreinvigorate revenue growth in our business, reduce operating expenses, and focus on improving our guests’ experience in the planning, design, developmentparks. However, the COVID-19 pandemic had significant impacts on our business. As a result, while we remain confident in our long-term strategy, our short-term focus pivoted towards adapting to the operating challenges resulting from the pandemic.
In response to the COVID-19 pandemic, federal, state and operationlocal governments implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. On March 13, 2020, we temporarily suspended operations at all of Six Flags-brandedour theme parks outside of North America. These agreements typically consist of a brand licensing agreement, project services agreement, and management services agreement. Under Topic 606, we treat these agreements as one contract because they were negotiated with a single commercial objective. We have identified three distinct promises withinwaterparks due to the agreement with each third-party partner as brand licensing, project services and management services. Each of these promises is its own performance obligation and distinct as the third party could benefit from each service on its own with other readily available resources and each service is separately identifiable from other services in the contextCOVID-19 pandemic. During 2020, 20 of the contract. Company’s 26 parks operated for portions of the season but several of our larger parks could not operate rides. Parks that did operate had capacity and other operating limitations.
We recognize revenue underquickly implemented plans to mitigate the impact of the COVID-19 pandemic on our international agreements overbusiness and ensure the relevant service periodhealth and safety of each performance obligation based on its relative stand-alone selling price, as determined by our best estimate of selling price. We review the service period of each performance obligation on an ongoing basisemployees and revise it as necessary throughout the year. Revisionsguests. In response to the relevant service periodschallenging environment, we focused on the following actions:
● | Implementing immediate cost controls by right-sizing marketing and temporarily reducing salaries of all full-time employees by 25%; |
● | Strengthening liquidity through expansion of our revolving credit facility, suspension of testing of certain maintenance covenants in our credit facility, issuance of senior secured notes and suspension of dividend payments and our stock repurchase program; |
● | Enhancing financial flexibility by delaying or reducing capital expenses related to new rides and attractions; |
● | Developing measures to preserve our season pass holders and members; |
● | Opening parks as quickly as possible, while following governmental and public health guidelines; and |
● | Creating new sources of revenue by introducing animal and holiday drive-thru experiences at many parks. |
We will continue to consider near-term exigencies and the long-term financial health of the performance obligations may resultbusiness as clear steps are taken to mitigate the consequences of the COVID-19 pandemic.
Management and Board Changes
In March 2020, Laura W. Doerre became our Executive Vice President and General Counsel, and in revisionsOctober 2020, she assumed the additional duties of Chief Administrative Officer when Kathy Aslin, the Senior Vice President, Human Resources, resigned. Also in October 2020, Brett Petit, Senior Vice President, Marketing and Sales, resigned. In July 2020, Sandeep Reddy became our Executive Vice President and Chief Financial Officer. In August 2020, we enhanced the gender and ethnic diversity of Holdings’ board of directors when Esi Eggleston Bracey and Enrique Ramirez Mena joined as directors. In August 2020, Richard Roedel and Kurt Cellar, each a director since 2010, advised us of their intention to revenue in future periodsretire from Holdings’ board of directors at the end of their current term and are recognized inthat they will not stand for re-election at our 2021 annual meeting of stockholders. In February 2021, Holdings’ board of directors determined that Selim Bassoul would succeed Richard Roedel as Non-Executive Chairman effective immediately, and Nancy Krejsa, a director since 2017, advised us of her intention to retire from Holdings’ board of directors at the period in whichend of her current term and that she will not stand for re-election at our 2021 annual meeting of stockholders.
Amendments to Credit Facility
In April 2020, we increased the change is identified. On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under FASB ASC 605, Revenue Recognition ("Topic 605"). See Note 3revolving credit commitments to the consolidated financial statements included elsewhere in this Annual Report for additional information.
40
with these amendments to the Second Amended and Restated Credit Facility, we agreed to suspend the repurchase of Holdings’ common stock and payment of dividends until the earlier of December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to calculate covenant compliance. However, given the present uncertainty associated with the ultimate impact of COVID-19 on our business and operations, we may determine that it is prudent to continue suspending the repurchase of Holdings’ common stock and payment of dividends after the restrictions under the Second Amended and Restated Credit Facility are terminated depending on any then-existing limitations on our working capital.
2025 Notes Issuance
In April 2020, SFTP issued $725 million in aggregate principal amount of 7.00% senior secured notes in a private offering. The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan, $315.0 million of the Second Amended and Restated Term Loan B by 25 basis points through a reduction in the applicable margin from LIBOR plus 2.00% to LIBOR plus 1.75%. Excluding the cost to execute the transaction, the lower borrowing rate will save the Company approximately $1.4 million annually in interest costs.
Fiscal Year Change
Holdings’ Board of Directors declareddetermined that it is in the best interests of the Company to change its fiscal year end from December 31 to a first quarter cash dividend of $0.82 per share of common stock payable March 4, 201952-53 week fiscal year ending on the Sunday closest to stockholders of recordDecember 31, effective as of February 18, 2019.the commencement of the Company’s fiscal year on January 1, 2021, to align the Company’s reporting calendar with how the Company operates its business and improve comparability across periods. The Company’s current fiscal year will end on January 2, 2022.
41
The following table sets forth summary financial information for the years ended December 31,
Year Ended December 31, | Percentage Changes | ||||||||||||||||
(Amounts in thousands, except percentage and per capita data) | 2018 | 2017 | 2016 | 2018 vs 2017 | 2017 vs 2016 | ||||||||||||
Total revenue | $ | 1,463,707 | $ | 1,359,074 | $ | 1,319,398 | 8 | % | 3 | % | |||||||
Operating expenses | 574,724 | 511,873 | 490,116 | 12 | % | 4 | % | ||||||||||
Selling, general and administrative expenses | 132,168 | 159,070 | 293,005 | (17 | )% | (46 | )% | ||||||||||
Cost of products sold | 121,803 | 110,374 | 109,579 | 10 | % | 1 | % | ||||||||||
Other net periodic pension benefit | (5,169 | ) | (3,322 | ) | (1,920 | ) | 56 | % | 73 | % | |||||||
Depreciation and amortization | 115,693 | 111,671 | 106,893 | 4 | % | 4 | % | ||||||||||
Loss on disposal of assets | 1,879 | 3,959 | 1,968 | (53 | )% | N/M | |||||||||||
Interest expense, net | 107,243 | 99,010 | 81,872 | 8 | % | 21 | % | ||||||||||
Loss on debt extinguishment | — | 37,116 | 2,935 | N/M | N/M | ||||||||||||
Other expense, net | 3,508 | 271 | 1,684 | N/M | (84 | )% | |||||||||||
Income before income taxes | 411,858 | 329,052 | 233,266 | 25 | % | 41 | % | ||||||||||
Income tax expense | 95,855 | 16,026 | 76,539 | N/M | (79 | )% | |||||||||||
Net income | 316,003 | 313,026 | 156,727 | 1 | % | 100 | % | ||||||||||
Less: Net income attributable to noncontrolling interests | (40,007 | ) | (39,210 | ) | (38,425 | ) | 2 | % | 2 | % | |||||||
Net income attributable to Six Flags Entertainment Corporation | $ | 275,996 | $ | 273,816 | $ | 118,302 | 1 | % | 131 | % | |||||||
Other Data: | |||||||||||||||||
Attendance | 32,024 | 30,421 | 30,108 | 5 | % | 1 | % | ||||||||||
Total revenue per capita | $ | 45.71 | $ | 44.68 | $ | 43.82 | 2 | % | 2 | % |
| | | | | | | | | |
| | Year Ended | | Percentage | |||||
(Amounts in thousands, except per capita data) |
| December 31, 2020 |
| December 31, 2019 |
| Change (%) | |||
Total revenue |
| $ | 356,575 |
| $ | 1,487,583 | | (76) | % |
Operating expenses | |
| 389,726 | |
| 607,791 | | (36) | % |
Selling, general and administrative expenses | |
| 147,295 | |
| 199,194 | | (26) | % |
Costs of products sold | |
| 34,119 | |
| 130,304 | | (74) | % |
Other net periodic pension benefit | |
| (5,190) | |
| (4,186) | | 24 | % |
Depreciation and amortization | |
| 120,173 | |
| 118,230 | | 2 | % |
Loss on disposal of assets | |
| 7,689 | |
| 2,162 | | N/M | % |
Interest expense, net | |
| 154,723 | |
| 113,302 | | 37 | % |
Loss on debt extinguishment | |
| 6,106 | |
| 6,484 | | (6) | % |
Other expense, net | |
| 24,993 | |
| 2,542 | | N/M | % |
(Loss) income before income taxes | |
| (523,059) | |
| 311,760 | | N/M | % |
Income tax (benefit) expense | |
| (140,967) | |
| 91,942 | | N/M | % |
Net (loss) income | | | (382,092) | | | 219,818 | | N/M | % |
Less: Net income attributable to noncontrolling interests | |
| (41,288) | |
| (40,753) | | 1 | % |
Net (loss) income attributable to Six Flags Entertainment Corporation | | $ | (423,380) | | $ | 179,065 | | N/M | % |
| | | | | | | | | |
Other Data: | |
|
| |
|
| |
| |
Attendance | |
| 6,789 | |
| 32,811 | | (79) | % |
Total revenue per capita | | $ | 52.52 | | $ | 45.34 | | 16 | % |
Year Ended December 31, 20182020 vs. Year Ended December 31, 2017
Revenue
Revenue for the year ended December 31, 2018,2020, totaled $1,463.7$356.6 million, an 8% increasea 76% decrease compared to $1,359.1$1,487.6 million for the year ended December 31, 2017.2019. The increasedecrease was driven primarily by a 79% decrease in attendance due to the ongoing COVID-19 pandemic, including as a result of the temporary suspension of operations of our theme parks and waterparks on March 13, 2020, and the limited capacity at our parks that operated during 2020. The decrease in revenue was primarilyalso attributable to (i) a 5% increasedecrease in attendancesponsorship, international agreements and accommodations revenue, due primarily driven byto the termination of our five new parks acquired on June 1, 2018, the benefit of 365-day operations at Six Flags Magic Mountain, strong growthcontracts in MexicoChina and growth at our waterparks, and growth in our Fright Fest
Total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, and (iii) a $6.9 million, or 7%, increase in sponsorship, international agreements and accommodations revenue.
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Operating expenses
Operating expenses for the year ended December 31, 2018, increased $62.92020, decreased $218.1 million, or 12%36%, relativecompared to the year ended December 31, 2017,2019, primarily as a result of (i) increasesfewer operating days and the cost mitigation measures introduced in operatingresponse to the COVID-19 pandemic, including a 25% reduction in full-time salaries and wages for the full-time employees and the elimination of nearly all seasonal labor costs including lease expense,at our parks that remained closed. Salaries for our five newfull-time salaried employees at the parks (ii) Six Flags Magic Mountain movingwere restored to a 365-day operating calendar, (iii) a full-year of operations of our newly added waterparks in Concord, California and Oaxtepec, Mexico, which100% two weeks prior to their respective park opening date. In December 2020, we began operating in 2017, (iv) increased costs from statutory minimum wage rate increases and competitive market rate increases at manyreinstated full salaries for almost all remaining employees subject to the reduction. The closure of our parks and (v)reduced operating hours and operating days at our parks that are operating resulted in additional savings in utilities and other costs. These savings were partially offset by the increased costs related to enhanced sanitization and additional preventative measures to help minimize the spread of COVID-19 and an increase in expenses related to the expansion of our Holiday in the Park
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended December 31, 2018,2020, decreased $26.9$51.9 million, or 17%26%, compared to the same period in the prior year, ended December 31, 2017, primarily asdriven by a resultreduction in advertising expense and salary, wage and benefit expense, including the reduction in executive officer salaries and the salaries of a net decrease in stock-based compensation expense
Cost of products sold
Costs of products sold for the year ended December 31, 2018, increased $11.42020, decreased $96.2 million, or 10%74%, compared to the same period in the prior year, ended December 31, 2017, primarily as a result of increasedreduced sales of food, merchandise and merchandise sales. Cost of products sold as a percentage of non-admission revenue for the years ended December 31, 2018, increased slightly as comparedother services due to the year ended December 31, 2017.
Depreciation and amortization expense
Depreciation and amortization expense for the year ended December 31, 2018,2020, increased $4.0$1.9 million, or 4%2%, compared to the year ended December 31, 2017.2019. The increase in depreciation and amortization expense is primarily the result of new asset additions related to our ongoing capital investments, partially offset by asset retirements.
Loss on disposal of assets
Loss on disposal of assets for the year ended December 31, 2020 totaled $7.7 million due primarily to the write-off of $9.7 million in conjunction with our ongoing Transformation Plan which was partially offset by the sale of assets in conjunction with our ongoing capital plan. Loss on disposal of assets for the year ended December 31, 2019 totaled $2.2 million which was primarily as a result of write-offs in conjunction with our ongoing capital plan.
Interest expense, net
Interest expense, net increased by $2.0$41.4 million, or 101%37%, for the year ended December 31, 2017 relative2020, compared to the year ended December 31, 2016,2019, primarily as a result of the disposal of more assets during 2017 in conjunction with our ongoing capital program relativeadditional interest expense related to the comparable period2025 Notes issued in 2016 as well asApril 2020 and the de-designation of the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement, which resulted in a gain recognized on the sale of underutilized assets$14.9 million reclassification from accumulated other comprehensive loss to interest expense in the prior year.consolidated statement of operations for the period ended December 31, 2020. For a more detailed description of our interest rate swap agreements, see Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report. These increases were partially offset by lower borrowings under the Second Amended and Restated Revolving Loan and the Second Amended and Restated Term Loan B and the interest savings related to the prepayment of $50.5 million of the outstanding 2024 Notes in March 2020.
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Other expense, net
Other expense, net increased $17.1 million, or 21%, for the year ended December 31, 2017 relative to the year ended December 31, 2016 as a result of the incremental interest incurred on a higher debt balance resulting from the issuance of the 2024 Notes Add-on and the 2027 Notes.
Income tax expense
Income tax benefit for the overall borrowing rate on the Amended and Restated Term Loan B by 25 basis points. In conjunction with this amendment, we recognized a loss on debt extinguishmentyear ended December 31, 2020 was $141.0 million compared to income tax expense of $0.2$91.9 million for the year ended December 31, 2017.
Liquidity, Capital Commitments and Resources
General
Our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash include the funding of working capital obligations, debt service, investments in parks (including capital projects), common stock dividends, payments to our partners in the Partnership Parks and common stock repurchases.
During the years ended December 31, 2018, 20172020, 2019 and 2016,2018, Holdings paid $267.0$22.5 million, $227.1$279.0 million and $220.3$267.0 million, respectively, in cash dividends on its common stock. One of our fundamental business goals is to generate superior returns for our stockholders over the long term. As part of our strategy to achieve this goal, we have declared and paid quarterly cash dividends each quarter beginning with the fourth quarter of 2010. Holdings' Board of Directors has since increased the quarterly cash dividend multiple times and in November 2018, Holdings' Board of Directors declared another increase in our ongoing quarterly cash dividend from $0.78 per share of common stock to $0.82 per share of common stock. Additionally, in February 2019, Holdings' Board of Directors declared a quarterly cash dividend of $0.82 per share of common stock. The amount and timing of any future dividends payable on Holdings' common stock are within the sole discretion of Holdings' Board of Directors. Based on (i) our current number of shares outstanding and (ii) estimates of share repurchases, restricted stock vesting and option exercises, we currently anticipate paying approximately $280 million in total cash dividends on our common stock during the 2019 calendar year.
On March 30, 2017, Holdings announced that its Board of Directors approved a new stock repurchase plan that permits Holdings to repurchase an incremental $500.0$500 million in shares of Holdings'Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of February 14, 2019,19, 2021, Holdings had repurchased 4,603,0004,607,000 shares at a cumulative cost of approximately $268.2$268.3 million and an average price per share of $58.27$58.25 under the March 2017 Stock Repurchase Plan, leaving approximately $231.8$231.7 million available for permitted repurchases.
In connection with the amendments to the Second Amended and Restated Credit Facility in April and August 2020, we agreed to suspend the repurchase of Holdings’ common stock and payment of dividends until the earlier of December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to calculate covenant compliance. However, given the present uncertainty associated with the ultimate impact of COVID-19 on our business and operations, we may determine that it is prudent to continue suspending the repurchase of Holdings’ common stock and payment of dividends after the restrictions under the Second Amended and Restated Credit Facility are terminated depending on any then-existing limitations on our working capital.
The repurchase of common stock and the payment of cash dividends are reflected in our consolidated financial statements as a reduction of stockholders'stockholders’ equity.
On June 16, 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due July 31, 2024.the 2024 Notes. We used $150.0 million of the proceeds from the issuance of the 2024 Notes to reduce our borrowings under the Amended and Restated2015 Term Loan B. The remaining net proceeds were used for general corporate and working capital purposes, which primarily included repurchases of our common stock.
On April 13, 2017, weHoldings issued the 2024 Notes Add-on and the 2027 Notes. A portion of the net proceeds from the issuance of these notes was used to redeem all of the outstanding 2021 Notes (as defined in Note 8 to the consolidated financial statements in Item 8 of this Annual Report) and to satisfy and discharge the indenture governing the 2021 Notes, including to pay accrued and unpaid interest to the redemption date and the related redemption premium on the 2021 Notes, and to pay related fees and expenses.
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On March 26, 2018, we entered into an amendment to the Amended and Restated2015 Credit Facility (as defined in Note 8 to the consolidated financial statements in Item 8 of this Annual Report) that reduced the overall borrowing rate on the Amended and Restated2015 Term Loan B by 25 basis points through a reduction in the applicable margin from LIBOR plus 2.00% to LIBOR plus 1.75%. We capitalized $0.5 million of debt issuance costs directly associated with the issuance of this amendment.
On April 18, 2018, we entered into an amendment to the Amended and Restated2015 Credit Facility that increased our Amended and Restated2015 Term Loan B borrowings by $39.0 million. We capitalized $0.3 million of debt issuance costs directly associated with the issuance of this amendment. The proceeds of the additional borrowings were used for general corporate purposes, including repurchases of our common stock.
On April 17, 2019, we amended and restated the 2015 Credit Facility (as previously amended) with a Second Amended and Restated Credit Facility comprised of a $350.0 million revolving credit loan facility and an $800.0 million Tranche B term loan facility. In connection with entering into the Second Amended and Restated Credit Facility, we repaid the amounts outstanding on the 2015 Revolving Loan and the outstanding 2015 Term Loan B and we recognized a loss on debt extinguishment of $6.2 million. The remaining proceeds from the Second Amended and Restated Credit Facility were used for general corporate purposes, including payment of refinancing fees. We capitalized $8.9 million of debt issuance costs directly associated with the issuance of the Second Amended and Restated Credit Facility.
On October 18, 2019, we entered into an amendment to the Second Amended and Restated Credit Facility, which reduced the overall borrowing rate on the Second Amended and Restated Term Loan B by 25 basis points by reducing the applicable margin from LIBOR plus 2.00% to LIBOR plus 1.75%. Excluding the cost to execute the transaction, the lower borrowing rate reduced interest expense by approximately $2.0 million annually.
During March of 2020, we prepaid $50.5 million of the outstanding 2024 Notes principal, reducing the outstanding amount to $949.5 million. We recognized a loss on debt extinguishment of $1.0 million. Interest payments of $23.1 million for the 2024 Notes and the 2024 Notes Add-on are due semi-annually on January 31 and July 31 of each year.
On April 15, 2020, we received sufficient consents from the continuing lenders under the Second Amended and Restated Credit Facility (the “Credit Agreement Amendment”) substantially concurrently with the closing of the $725 million 2025 Notes discussed below to, among other things, (i) permit the issuance of the 2025 Notes, including specifically, permitting the 2025 Notes to mature inside the Second Amended and Restated Term Loan B, (ii) suspend the testing of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2020, (iii) re-establish the financial maintenance covenant thereafter (provided that for the first, second, and third quarters in 2021 that such covenant is tested, we will be permitted to use the quarterly Borrower Consolidated Adjusted EBITDA (as defined in the Second Amended and Restated Credit Facility) from the second, third and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2020) and (iv) add a minimum liquidity covenant that will apply from the date of the Credit Agreement Amendment through December 31, 2021. The Credit Agreement Amendment became effective on April 22, 2020, after giving effect to the repayment of a portion of the Second Amended and Restated Term Loan B with a portion of the proceeds from the 2025 Notes.
On April 22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025 (the “2025 Notes”). The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B and for general corporate and working capital purposes, including expenses relating to the offering. In conjunction with the $315.0 million repayment of the Second Amended and Restated Term Loan B, certain of our hedging instruments that were entered into to mitigate the risk of an increase in the LIBOR interest rate and which are discussed in Note 5, Derivative Financial Instruments, were de-designated. Consistent with policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into counter-agreements designed to economically offset the impact of the de-designated swap agreements. Interest payments of $25.4 million are due semi-annually on January 1 and July 1 of each year, with the exception of January 1, 2021, which included the interest from April 22, 2020 through July 1, 2020 and totaled $35.1 million.
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On August 26, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility which, among other things, (i) extended the previously effectuated suspension of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2021, (ii) re-established the senior secured leverage ratio financial maintenance covenant thereafter (provided that for each quarter in 2022 (other than the fourth quarter) that the financial maintenance covenant is tested, SFTP will be permitted to use its quarterly Borrower Consolidated Adjusted EBITDA (as defined in the credit agreement governing the Second Amended and Restated Credit Facility) from the second, third, and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2021), (iii) reduced the commitment fee on the revolving credit facility, and (iv) extended the minimum liquidity covenant that will apply through December 31, 2022. The extension of the modifications to the financial covenant and other provisions in the Second Amended and Restated Credit Facility pursuant to the August 2020 amendment will be in effect from the date of the amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the financial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the 2019 figures as outlined above. In addition, all of SFTP’s existing incremental revolving credit lenders agreed to extend the incremental $131 million revolving credit commitments to the Second Amended and Restated Revolving Loan by one year to December 31, 2022.
Based on historical and anticipated operating results, we believe cash flows from operations, available cash and amounts available under the Second Amended and Restated Credit Facility will be adequate to meet our liquidity needs for at least the next twelve months, including any anticipated requirements for working capital, capital expenditures, common stock dividends, scheduled debt service and obligations under arrangements relating to the Partnership Parks and discretionary common stock repurchases.Parks. Additionally, we expect to be able to use our current federal net operating loss carryforwards to reduce our federal income tax liability until 2024.for several years. For the years 20182019 through 2024, we have significant federal net operating loss carryforwards subject to an annual limitation that we expect will offset approximately $32.5 million of taxable income per year. We became a federal tax payerexpect taxable income in 2018.
Our current and future liquidity is greatly dependent upon our operating results, which are driven largely by overall economic conditions as well as the price and perceived quality of the entertainment experience at our parks. Our liquidity could also be adversely affected by a disruption in the availability of credit as well as unfavorable weather; natural disasters; contagious diseases, such as Ebola, Zika, swine flu, COVID-19 or swine or avian flu;other diseases; accidents or the occurrence of an event or condition at our parks, including terrorist acts or threats inside or outside of our parks; negative publicity; or significant local competitive events, which could significantly reduce paid attendance and revenue related to that attendance at any of our parks. While we work with local police authorities on security-related precautions to prevent certain types of disturbances, we can make no assurance that these precautions will be able to prevent these types of occurrences. However, we believe our ownership of many parks in different geographic locations reduces the effects of adverse weather and these other types of occurrences on our consolidated results. If such an adverse event were to occur, we may be unable to borrow under the Second Amended and Restated Revolving Loan or may be required to repay amounts outstanding under the Second Amended and Restated Credit Facility and/or may need to seek additional financing. In addition, we expect we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity, requiring us to potentially seek additional financing.maturity. The degree to which we are leveraged could adversely affect our ability to obtain any additional financing. See "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" included elsewhere inof this Annual Report.
As of December 31, 2018,2020, our total indebtedness, net of discount and deferred financing costs, was $2,106.5$2,622.6 million which included $988.6$942.5 million of the 2024 Notes $497.8and 2024 Notes Add-on, $710.1 million of the 2025 Notes, $498.3 million of the 2027 Notes, and $620.1$471.7 million outstanding under the Second Amended and Restated Credit Facility. Based on (i) non-revolving credit debt outstanding on that date, (ii) anticipated levels of working capital revolving borrowings during 20192021 and 2020,2022, (iii) estimated interest rates for floating-rate debt and (iv) the 2024 Notes, the 2025 Notes and the 2027 Notes, we anticipate annual cash interest payments of approximately $105 million$156.4 and $110$146.1 million during 20192021 and 2020,2022, respectively. Under the Second Amended and Restated Credit Facility, all remaining outstanding principal of the Second Amended and Restated Term Loan B is due and payable on June 30, 2022.April 17, 2026.
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As of December 31, 2018,2020, we had approximately $44.6$157.8 million unrestricted cash and $188.9$460.0 million available for borrowing under the Second Amended and Restated Revolving Loan. Our ability to borrow under the Second Amended and Restated Revolving Loan is dependent upon compliance with certain conditions, including a maximum senior secured net leverage maintenance covenant, a minimum interest coverageliquidity covenant and the absence of any material adverse change in our business or financial condition. If we were to become unable to borrow under the Second Amended and Restated Revolving Loan, and we failed to meet our projected results from operations significantly, we might be unable to pay in full our off-season obligations. A default under the Second Amended and Restated Revolving Loan could permit the lenders under the Second Amended and Restated Credit Facility to accelerate the obligations thereunder. The Second Amended and Restated Revolving Loan expires on June 30, 2020.April 17, 2024. The terms and availability of the Second Amended and Restated Credit Facility and other indebtedness are not affected by changes in the ratings issued by rating agencies in respect of our indebtedness. For a more detailed description of our indebtedness, see Note 78 to the consolidated financial statements included elsewhere in Item 8 of this Annual Report.
We currently plan on spending approximately 9% of annual revenues onto strategically reinvest in our properties to improve the guest experience. For more information about our planned capital expenditures, during the 2019 calendar year.
During the year ended December 31, 2018,2020, net cash used in operating activities was $190.9 million, compared to net cash provided by operating activities of $410.6 million during the year ended December 31, 2019. The significant decrease in net cash provided by operating activities was $413.1 million.due to the decrease in operations during 2020 attributable to our temporary suspension of park operations due to the COVID-19 pandemic. Net cash used in investing activities during the year ended December 31, 2018 was $152.12020, decreased $48.2 million to $90.9 million from $139.1 million, consisting primarily of capital expenditures, net of insurance proceeds, and the purchase of five new parks on June 1, 2018, partially offset by proceeds received from the disposal of assets. The decrease is attributable to the reduction in spending on capital expenditures due to COVID-19. Net cash provided by financing activities during the year ended December 31, 2020, was $266.7 million and was primarily due to the issuance of the 2025 Notes, partially offset by the $315.0 million repayment of the Second Amended and Restated Term Loan B, the $50.5 million of the outstanding 2024 Notes principal we prepaid in March 2020, and the payment of $22.5 million in cash dividends. Net cash used in financing activities during the year ended December 31, 20182019 was $293.5$143.0 million primarilyand was mostly attributable to the payment of $279.0 million in cash dividends stock repurchases,and $40.8 million of distributions to our noncontrolling interests, offset by net proceeds from entering into the Second Amended and the paymentRestated Credit Facility after repayment of debt issuance costs in connection with the amendment to the Amended and Restated Credit Facility on March 26, 2018. These uses of cash were partially offset by proceeds from the exercise of stock options, the proceeds from borrowings under our Amended and Restated Revolving Loan and the upsize to our Amended and Restated Term Loan B.
Since our business is both seasonal in nature and involves significant levels of cash transactions, our net operating cash flows are largely driven by attendance and guest spending per capita spending levels because mostlevels. Most of our cash-based expenses are relatively fixed and do not vary significantly with either attendance or spending per capita spending.assuming that the parks are operational. During 2020, we had significant cash savings due to the suspension of park operations at our properties. These cash-based operating expenses include salaries and wages, employee benefits, advertising, third party services, repairs and maintenance, utilities and insurance.
Partnership Park Obligations
We guarantee certain obligations relating to the Partnership Parks. These obligations include (i) minimum annual distributions (including rent) of approximately
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After payment of the minimum distribution, we are entitled to a management fee equal to 3% of prior year gross revenues and, thereafter, any additional cash will be distributed first to management fee in arrears and then towards the repayment of any interest and principal on intercompany loans with anyloans. Any additional cash, beingto the extent available, is distributed 95% to us, in the case of SFOG, and 92.5% to us, in the case of SFOT.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2018.
Contractual Obligations
Set forth below is certain information regarding our debt, lease and purchase obligations as of December 31, 2018:
| | | | | | | | | | | | | | | |
(Amounts in thousands) |
| 2021 |
| 2022 - 2023 |
| 2024 - 2025 |
| 2026 and beyond |
| Total | |||||
Long term debt — including current portion (1) | | $ | — |
| $ | — |
| $ | 1,674,490 | | $ | 979,000 | | $ | 2,653,490 |
Interest on long-term debt (2) | |
| 156,676 |
| | 291,419 |
| | 172,900 | |
| 46,317 | |
| 667,312 |
Operating and finance leases (3) | |
| 27,256 |
| | 45,854 |
| | 39,245 | |
| 261,746 | |
| 374,101 |
Purchase obligations (4) | |
| 87,047 |
| | 10,755 |
| | 8,000 | |
| 108,000 | |
| 213,802 |
Total | | $ | 270,979 | | $ | 348,028 | | $ | 1,894,635 | | $ | 1,395,063 | | $ | 3,908,705 |
Payment Due by Period | |||||||||||||||||||
(Amounts in thousands) | 2019 | 2020 - 2021 | 2022 - 2023 | 2024 and beyond | Total | ||||||||||||||
Long term debt ��� including current portion (1) | $ | — | 43,000 | 583,750 | $ | 1,500,000 | $ | 2,126,750 | |||||||||||
Interest on long-term debt (2) | 105,028 | 204,213 | 189,802 | 145,000 | 644,043 | ||||||||||||||
Real estate and operating leases (3) | 23,936 | 45,650 | 43,189 | 314,799 | 427,574 | ||||||||||||||
Purchase obligations (4) | 175,998 | 9,000 | 9,000 | 4,500 | 198,498 | ||||||||||||||
Total | $ | 304,962 | $ | 301,863 | $ | 825,741 | $ | 1,964,299 | $ | 3,396,865 |
(1) | |
Payments are shown at principal amount. See Note |
(2) | See Note 2020. |
(3) |
(4) | Represents obligations as of December 31, |
Other Obligations
During eachthe year ended December 31, 2020, we made contributions to our defined benefit pension plan of $1.5 million. During the years ended December 31, 2018, 20172019 and 2016,2018, we made contributions to our defined benefit pension plan of $6.0 million. To control increases in costs, our pension plan was "frozen" effective March 31, 2006, pursuant to which most participants (excluding certain union employees whose benefits have subsequently been frozen) no longer continued to earn future pension benefits. Effective February 16, 2009, the remaining participants in the pension plan no longer earned future benefits. See Note 1213 to the consolidated financial statements included elsewhere in Item 8 of this Annual Report for more information on our pension benefit plan.
We expect to make contributions of approximately $6.0 millionare currently assessing making a contribution in 20192021 to our pension plan based on the 2018 actuarial valuation.our operating results during 2021. We plan to make a contributioncontribute to our 401(k) Plan in 2019,2021, and our estimated expense for employee health insurance for 20192021 is $19$17 million.
We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to businesses in our industry. See "Insurance" under "Item 1. Business." Our insurance premiums and self-insurance retention levels have remained relatively constant during the three-year period ended December 31, 2018.2020. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.
We are party to various legal actions arising in the normal course of business. See "Legal"Item 3. Legal Proceedings" of this Annual Report and Note
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We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on the prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
The vast majority of our capital expenditures in 2021 and beyond are expected to be made on a discretionary basis.
Recently Issued Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“Update 2019-12”), which removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. Update 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. We are in the process of evaluating the impact of this amendment on our consolidated financial statements; however, we do not expect a material impact.
In August 2018, FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans: (“Update 2018-14”), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. Update 2018-14 is effective for annual periods beginning after January 1, 2021, with early adoption permitted. Adoption is required to be applied on a retrospective basis to all periods presented. We are in the process of evaluating the impact of this amendment on our consolidated financial statements; however, we do not expect a material impact.
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. Our adoption of ASU 2020-04 did not have a material impact on our consolidated financial statements and related disclosures.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks relating to fluctuations in interest rates and currency exchange rates. The objective of our financial risk management is to minimize the negative impact of interest rate and foreign currency exchange rate fluctuations on our operations, cash flows and equity. We do not acquire market risk sensitive instruments for trading purposes or speculative purposes.
In April 2014,June 2019, we entered into three separate interest rate swap agreements (collectively, the "Interest Rate Swap Agreements") that we designated and documented as cash flow hedges. We entered into the Interest Rate Swap Agreements with a notional amount of $200.0$300.0 million (the “June 2019 Swap Agreements”). In August 2019, we entered into two separate interest rate swap agreements with a notional amount of $400.0 million (the “August 2019 Swap Agreements”). These swaps were entered into to mitigate the risk of an increase in the LIBOR interest rate above the 0.75% minimum LIBOR rate in effect on the Term Loan B.
49
In March 2020, we executed a strategy commonly known as a “blend and extend” on $100.0 million of the June 2019 Swap Agreements (the “Modified June 2019 Swap Agreement”) that extended the length of one of the June 2019 Swap Agreements through April 2026. We extended the existing pay-fixed swap rate over a longer period than its original term at a lower interest rate, while maintaining the same overall value of the swap. The remaining $200.0 million of the June 2019 Swap Agreements (the “Unmodified June 2019 Swap Agreements”) did not change. Upon execution, we designated and documented the Modified June 2019 Swap Agreement as a cash flow hedge. The Modified June 2019 Swap Agreement serves as an economic hedge and provides protection against rising interest rates.
On April 22, 2020, we repaid $315.0 million of the Second Amended and Restated Term Loan B. In conjunction, the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement were de-designated, since the hedged items were no longer probable to occur due to the consolidated financial statements included elsewhere in this Annual Report) duringrepayment of the year ended December 31, 2017. Subsequent to the de-designation, the amounts recorded indebt. As a result, $14.9 million was reclassified from accumulated other comprehensive loss were amortizedto interest expense in the consolidated statement of operations. Consistent with company policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into earnings through$300.0 million of notional amount counter-agreements (the “April 2020 Counter-agreements”) designed to economically offset the original December 2017 maturity date. Asimpact of December 31, 2017, the Interest Rate Swap Agreements expired and all related amounts previously held as derivative assets and liabilities on our consolidated balance sheets and previously recorded in accumulated other comprehensive income ("AOCI") were realized in earnings.
The following is an analysis of the sensitivity of the market value, operations and cash flows of our market-riskmarket risk financial instruments to hypothetical changes in interest rates as if these changes occurred as of December 31, 2018.2020. The range of potential change in the market chosen for this analysis reflects our view of changes that are reasonably possible over a one-year period. Market values are the present values of projected future cash flows based on the interest rate assumptions. These forward-looking disclosures are selective in nature and only address the potential impacts from financial instruments. They do not include other potential effects which could impact our business as a result of these changes in interest and foreign currency exchange rates.
As of December 31, 2018,2020, we had total debt excluding the impact of $2,106.5debt issuance costs and discounts of $2,653.5 million, of which $1,486.4$2,574.5 million represents fixed-rate debt. The remaining
Assuming other variables remain constant (such as foreign exchange rates and debt levels), the pre-tax operating and cash flow impact resulting from a one percentage point increase in interest rates would be approximately $6.2$0.8 million. See Note
50
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SIX FLAGS ENTERTAINMENT CORPORATION
Index to Consolidated Financial Statements
51
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31,The effectiveness of our internal control over financial reporting as of December 31, 20182020 has been audited by KPMG LLP, the independent registered public accounting firm that audited our financial statements included herein, as stated in their report which is included herein.
| |
| /s/ MICHAEL SPANOS |
| |
Michael Spanos | |
| |
| /s/ |
| Sandeep Reddy Executive Vice President and Chief Financial Officer |
February 25, 2021
52
To the Stockholders and Board of Directors
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Six Flags Entertainment Corporation and subsidiaries (the Company) as of December 31, 20182020 and 2017,2019, the related consolidated statements of operations, comprehensive income (loss), equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2018,2020, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2018,2020, based on criteria established in
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018,2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2020 based on criteria established in
Change in Accounting Principle
As discussed in Notes 2 and 3Note 16 to the consolidated financial statements, the Company has changed its method of accounting for revenue recognition onleases as of January 1, 2108,2019 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company 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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
53
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Estimated redemption rate used to determine season pass and membership programs deferredrevenue
As discussed in Notes 2(l) and 3 to the consolidated financial statements, guests enrolled in the Company’s season pass and membership programs can visit parks an unlimited number of times during the specified period. For such programs, the Company estimates a redemption rate based on the historical experience and other factors and assumptions the Company believes to be customary and reasonable and recognizes a pro-rata portion of the revenue as the guests visit the parks. The Company reviews the estimated redemption rate on an ongoing basis and revises it as necessary throughout the year. As of December 31, 2020, $205 million of deferred revenue was recognized related to the consideration received for season pass, membership programs, and other offerings in excess of redemptions.
We identified the evaluation of the estimated redemption rate used to determine the season pass and membership programs deferred revenue as a critical audit matter. Subjective auditor judgment was required to evaluate the Company’s assumptions about how future guest attendance patterns may differ from historical attendance patterns due to changes in the parks’ operations.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s season pass and membership programs deferred revenue process, including controls related to the development of the estimated redemption rate. We evaluated the impact of park closures and the extension of season pass and membership programs on the estimate of future guest attendance patterns and redemption rates. We assessed outstanding season pass and membership sales utilized by the Company to derive the deferred revenue balance by comparing it to relevant underlying sales documentation. We tested the mathematical accuracy and consistent application of the deferred revenue calculations supporting the recorded deferred revenue account balance.
54
KPMG LLP
We have served as the Company’s auditor since 1993.
Dallas, Texas
55
December 31, | |||||||
(Amounts in thousands, except share data) | 2018 | 2017 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 44,608 | $ | 77,496 | |||
Accounts receivable, net | 116,043 | 72,693 | |||||
Inventories | 28,779 | 24,960 | |||||
Prepaid expenses and other current assets | 52,499 | 45,923 | |||||
Total current assets | 241,929 | 221,072 | |||||
Property and equipment, net: | |||||||
Property and equipment, at cost | 2,204,678 | 2,095,887 | |||||
Accumulated depreciation | (950,996 | ) | (857,930 | ) | |||
Total property and equipment, net | 1,253,682 | 1,237,957 | |||||
Other assets: | |||||||
Debt issuance costs | 1,793 | 2,991 | |||||
Deposits and other assets | 11,277 | 12,821 | |||||
Goodwill | 659,618 | 630,248 | |||||
Intangible assets, net of accumulated amortization | 349,029 | 351,587 | |||||
Total other assets | 1,021,717 | 997,647 | |||||
Total assets | $ | 2,517,328 | $ | 2,456,676 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 32,905 | $ | 28,998 | |||
Accrued compensation, payroll taxes and benefits | 30,468 | 26,576 | |||||
Accrued insurance reserves | 39,183 | 39,347 | |||||
Accrued interest payable | 30,697 | 26,288 | |||||
Other accrued liabilities | 45,880 | 34,617 | |||||
Deferred revenue | 146,227 | 142,014 | |||||
Short-term borrowings | 43,000 | — | |||||
Total current liabilities | 368,360 | 297,840 | |||||
Noncurrent Liabilities: | |||||||
Long-term debt, net | 2,063,512 | 2,021,178 | |||||
Other long-term liabilities | 29,280 | 41,488 | |||||
Deferred income taxes | 173,998 | 106,851 | |||||
Total noncurrent liabilities | 2,266,790 | 2,169,517 | |||||
Total liabilities | 2,635,150 | 2,467,357 | |||||
Redeemable noncontrolling interests | 525,271 | 494,431 | |||||
Stockholders' deficit: | |||||||
Preferred stock, $1.00 par value | — | — | |||||
Common stock, $0.025 par value, 140,000,000 shares authorized and 83,962,182 and 84,488,433 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively | 2,099 | 2,112 | |||||
Capital in excess of par value | 1,037,640 | 1,086,265 | |||||
Accumulated deficit | (1,611,334 | ) | (1,529,608 | ) | |||
Accumulated other comprehensive loss, net of tax | (71,498 | ) | (63,881 | ) | |||
Total stockholders' deficit | (643,093 | ) | (505,112 | ) | |||
Total liabilities and deficit | $ | 2,517,328 | $ | 2,456,676 |
| | | | | | |
|
| As of | ||||
|
| December 31, 2020 |
| December 31, 2019 | ||
(Amounts in thousands, except share data) | | | | | | |
ASSETS |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | 157,760 | | $ | 174,179 |
Accounts receivable, net | |
| 36,610 | |
| 108,679 |
Inventories | |
| 39,191 | |
| 32,951 |
Prepaid expenses and other current assets | |
| 73,179 | |
| 60,431 |
Total current assets | |
| 306,740 | |
| 376,240 |
Property and equipment, net: | |
|
| |
|
|
Property and equipment, at cost | |
| 2,408,690 | |
| 2,345,283 |
Accumulated depreciation | |
| (1,157,403) | |
| (1,061,287) |
Total property and equipment, net | |
| 1,251,287 | |
| 1,283,996 |
Other assets: | |
|
| |
|
|
Right-of-use operating leases, net | | | 196,711 | | | 201,128 |
Debt issuance costs | |
| 7,034 | |
| 3,624 |
Deposits and other assets | |
| 7,103 | |
| 12,722 |
Goodwill | |
| 659,618 | |
| 659,618 |
Intangible assets, net of accumulated amortization | |
| 344,198 | |
| 345,212 |
Total other assets | |
| 1,214,664 | |
| 1,222,304 |
Total assets | | $ | 2,772,691 | | $ | 2,882,540 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
|
| |
|
|
Current liabilities: | |
|
| |
|
|
Accounts payable | | $ | 26,582 | | $ | 32,904 |
Accrued compensation, payroll taxes and benefits | |
| 22,031 | |
| 19,556 |
Accrued insurance reserves | |
| 31,060 | |
| 35,376 |
Accrued interest payable | |
| 60,184 | |
| 26,128 |
Other accrued liabilities | |
| 93,369 | |
| 63,019 |
Deferred revenue | |
| 205,125 | |
| 144,040 |
Current portion of long-term debt | | | — | | | 8,000 |
Short-term lease liabilities | | | 14,054 | | | 10,709 |
Total current liabilities | |
| 452,405 | |
| 339,732 |
Noncurrent liabilities: | |
|
| |
|
|
Long-term debt | |
| 2,622,641 | |
| 2,266,884 |
Long-term lease liabilities | | | 187,432 | | | 188,149 |
Other long-term liabilities | |
| 43,553 | |
| 27,514 |
Deferred income taxes | |
| 101,831 | |
| 247,121 |
Total noncurrent liabilities | |
| 2,955,457 | |
| 2,729,668 |
Total liabilities | |
| 3,407,862 | |
| 3,069,400 |
| | | | | | |
Redeemable noncontrolling interests | |
| 523,376 | |
| 529,258 |
| | | | | | |
Stockholders' deficit: | |
|
| |
|
|
Preferred stock, $1.00 par value | |
| — | |
| — |
Common stock, $0.025 par value, 280,000,000 shares authorized; 85,075,901 and 84,633,845 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively | |
| 2,126 | |
| 2,116 |
Capital in excess of par value | |
| 1,089,199 | |
| 1,066,223 |
Accumulated deficit | |
| (2,153,368) | |
| (1,709,747) |
Accumulated other comprehensive loss | |
| (96,504) | |
| (74,710) |
Total stockholders' deficit | |
| (1,158,547) | |
| (716,118) |
Total liabilities and stockholders' deficit | | $ | 2,772,691 | | $ | 2,882,540 |
See accompanying notes to consolidated financial statements.
56
Year Ended December 31, | |||||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | 2016 | ||||||||
Park admissions | $ | 810,064 | $ | 741,275 | $ | 715,413 | |||||
Park food, merchandise and other | 553,527 | 524,582 | 521,167 | ||||||||
Sponsorship, international agreements and accommodations | 100,116 | 93,217 | 82,818 | ||||||||
Total revenue | 1,463,707 | 1,359,074 | 1,319,398 | ||||||||
Operating expenses (excluding depreciation and amortization shown separately below) | 574,724 | 511,873 | 490,116 | ||||||||
Selling, general and administrative expenses (including a net reversal of stock-based compensation of $46,684 in 2018 and $22,697 in 2017, and stock-based compensation of $116,339 in 2016 and excluding depreciation and amortization shown separately below) | 132,168 | 159,070 | 293,005 | ||||||||
Costs of products sold | 121,803 | 110,374 | 109,579 | ||||||||
Other net periodic pension benefit | (5,169 | ) | (3,322 | ) | (1,920 | ) | |||||
Depreciation | 113,246 | 109,206 | 104,290 | ||||||||
Amortization | 2,447 | 2,465 | 2,603 | ||||||||
Loss on disposal of assets | 1,879 | 3,959 | 1,968 | ||||||||
Interest expense | 108,034 | 99,766 | 82,377 | ||||||||
Interest income | (791 | ) | (756 | ) | (505 | ) | |||||
Loss on debt extinguishment | — | 37,116 | 2,935 | ||||||||
Other expense, net | 3,508 | 271 | 1,684 | ||||||||
Income before income taxes | 411,858 | 329,052 | 233,266 | ||||||||
Income tax expense | 95,855 | 16,026 | 76,539 | ||||||||
Net income | 316,003 | 313,026 | 156,727 | ||||||||
Less: Net income attributable to noncontrolling interests | (40,007 | ) | (39,210 | ) | (38,425 | ) | |||||
Net income attributable to Six Flags Entertainment Corporation | $ | 275,996 | $ | 273,816 | $ | 118,302 | |||||
Weighted-average common shares outstanding: | |||||||||||
Basic: | 84,100 | 86,802 | 92,349 | ||||||||
Diluted: | 85,445 | 88,494 | 94,398 | ||||||||
Net income per average common share: | |||||||||||
Basic: | $ | 3.28 | $ | 3.15 | $ | 1.28 | |||||
Diluted: | $ | 3.23 | $ | 3.09 | $ | 1.25 | |||||
Cash dividends declared per common share | $ | 3.16 | $ | 2.62 | $ | 2.38 |
| | | | | | | | | | |
| | | Year Ended December 31, | |||||||
(Amounts in thousands, except per share data) | | | 2020 | | 2019 | | 2018 | |||
Park admissions | | | $ | 202,646 | | $ | 815,782 | | $ | 810,064 |
Park food, merchandise and other | | |
| 126,306 | |
| 574,440 | |
| 553,527 |
Sponsorship, international agreements and accommodations | | |
| 27,623 | |
| 97,361 | |
| 100,116 |
Total revenues | | |
| 356,575 | |
| 1,487,583 | |
| 1,463,707 |
Operating expenses (excluding depreciation and amortization shown separately below) | | |
| 389,726 | |
| 607,791 | |
| 574,724 |
Selling, general and administrative expenses (including stock-based compensation of $19,530 and $13,274 in 2020 and 2019, respectively, and a net reversal of stock-based compensation of $46,684 in 2018, and excluding depreciation and amortization shown separately below) | | |
| 147,295 | |
| 199,194 | |
| 132,168 |
Costs of products sold | | |
| 34,119 | |
| 130,304 | |
| 121,803 |
Other net periodic pension benefit | | |
| (5,190) | |
| (4,186) | |
| (5,169) |
Depreciation | | |
| 119,159 | |
| 115,825 | |
| 113,246 |
Amortization | | |
| 1,014 | |
| 2,405 | |
| 2,447 |
Loss on disposal of assets | | |
| 7,689 | |
| 2,162 | |
| 1,879 |
Interest expense | | |
| 155,411 | |
| 114,703 | |
| 108,034 |
Interest income | | |
| (688) | |
| (1,401) | |
| (791) |
Loss on debt extinguishment | | |
| 6,106 | |
| 6,484 | |
| 0 |
Other expense, net | | |
| 24,993 | |
| 2,542 | |
| 3,508 |
(Loss) income before income taxes | | |
| (523,059) | |
| 311,760 | |
| 411,858 |
Income tax (benefit) expense | | |
| (140,967) | |
| 91,942 | |
| 95,855 |
Net (loss) income | | | | (382,092) | |
| 219,818 | |
| 316,003 |
Less: Net income attributable to noncontrolling interests | | |
| (41,288) | |
| (40,753) | |
| (40,007) |
Net (loss) income attributable to Six Flags Entertainment Corporation | | | $ | (423,380) | | $ | 179,065 | | $ | 275,996 |
| | | | | | | | | | |
Weighted-average common shares outstanding: | | |
| | |
| | |
| |
Basic: | | |
| 84,800 | |
| 84,348 | |
| 84,100 |
Diluted: | | |
| 84,800 | |
| 84,968 | |
| 85,445 |
| | | | | | | | | | |
Net (loss) earnings per average common share outstanding: | | | | | |
| | |
| |
Basic: | | | $ | (4.99) | | $ | 2.12 | | $ | 3.28 |
Diluted: | | | $ | (4.99) | | $ | 2.11 | | $ | 3.23 |
| | | | | | | | | | |
Cash dividends declared per common share | | | $ | 0.25 | | $ | 3.29 | | $ | 3.16 |
See accompanying notes to consolidated financial statements.
57
SIX FLAGS ENTERTAINMENT CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
| | | | | | | | | |
|
| Years Ended December 31, | |||||||
(Amounts in thousands) | | 2020 | | 2019 | | 2018 | |||
Net (loss) income | | $ | (382,092) | | $ | 219,818 | | $ | 316,003 |
Other comprehensive (loss) income, net of tax: | |
|
| |
|
| |
|
|
Foreign currency translation adjustment (1) | |
| (4,053) | |
| 4,081 | |
| 1,161 |
Defined benefit retirement plan (2) | |
| (6,259) | |
| (6,167) | |
| 661 |
Change in cash flow hedging (3) | |
| (11,482) | |
| (1,126) | |
| — |
Other comprehensive (loss) income, net of tax | |
| (21,794) | |
| (3,212) | |
| 1,822 |
Comprehensive (loss) income | |
| (403,886) | |
| 216,606 | |
| 317,825 |
Less: Comprehensive income attributable to noncontrolling interests | |
| (41,288) | |
| (40,753) | |
| (40,007) |
Comprehensive (loss) income attributable to Six Flags Entertainment Corporation | | $ | (445,174) | | $ | 175,853 | | $ | 277,818 |
Years Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Net income | $ | 316,003 | $ | 313,026 | $ | 156,727 | |||||
Other comprehensive income (loss), net of tax: | |||||||||||
Foreign currency translation adjustment (1) | 1,161 | 1,376 | (4,639 | ) | |||||||
Defined benefit retirement plan (2) | 661 | 1,402 | 3,543 | ||||||||
Change in cash flow hedging (3) | — | 525 | 470 | ||||||||
Other comprehensive income (loss), net of tax | 1,822 | 3,303 | (626 | ) | |||||||
Comprehensive income | 317,825 | 316,329 | 156,101 | ||||||||
Comprehensive income attributable to noncontrolling interests | (40,007 | ) | (39,210 | ) | (38,425 | ) | |||||
Comprehensive income attributable to Six Flags Entertainment Corporation | $ | 277,818 | $ | 277,119 | $ | 117,676 |
(1) | Foreign currency translation adjustment is presented net of tax benefit of $1.2 million for the year ended December 31, 2020, and net of tax expense of |
(2) | Defined benefit retirement plan is presented net of tax 2019, and tax expense of $0.2 million for the year ended December 31, 2018. |
(3) | Change in cash flow hedging is presented net of tax 2019, respectively. |
See accompanying notes to consolidated financial statements.
58
Common stock | Capital in excess of par value | Accumulated deficit | Accumulated other comprehensive loss | Total Equity (Deficit) | ||||||||||||||||||
(Amounts in thousands, except share data) | Shares issued | Amount | ||||||||||||||||||||
Balances at December 31, 2015 | 91,550,851 | $ | 2,289 | $ | 1,041,710 | $ | (953,225 | ) | $ | (66,558 | ) | $ | 24,216 | |||||||||
Issuance of common stock | 3,004,648 | 75 | 34,606 | — | — | 34,681 | ||||||||||||||||
Stock-based compensation | — | — | 116,339 | — | — | 116,339 | ||||||||||||||||
Dividends declared to common shareholders | — | — | — | (219,093 | ) | — | (219,093 | ) | ||||||||||||||
Repurchase of common stock | (3,742,275 | ) | (94 | ) | (27,833 | ) | (183,824 | ) | — | (211,751 | ) | |||||||||||
Employee stock purchase plan | 36,204 | 1 | 1,819 | — | — | 1,820 | ||||||||||||||||
Fresh start valuation adjustment for SFOG units purchased | — | — | — | 36 | — | 36 | ||||||||||||||||
Change in redemption value of partnership units | — | — | (50,414 | ) | — | — | (50,414 | ) | ||||||||||||||
Net income attributable to Six Flags Entertainment Corporation | — | — | — | 118,302 | — | 118,302 | ||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | (626 | ) | (626 | ) | ||||||||||||||
Balances at December 31, 2016 | 90,849,428 | $ | 2,271 | $ | 1,116,227 | $ | (1,237,804 | ) | $ | (67,184 | ) | $ | (186,490 | ) | ||||||||
Cumulative effect adjustment - adoption of ASU 2016-09 | — | — | — | 98,657 | — | 98,657 | ||||||||||||||||
Balances at January 1, 2017 | 90,849,428 | 2,271 | 1,116,227 | (1,139,147 | ) | (67,184 | ) | (87,833 | ) | |||||||||||||
Issuance of common stock | 1,980,939 | 50 | 60,533 | — | — | 60,583 | ||||||||||||||||
Stock-based compensation | — | — | (22,697 | ) | — | — | (22,697 | ) | ||||||||||||||
Dividends declared to common shareholders | — | — | — | (226,078 | ) | — | (226,078 | ) | ||||||||||||||
Repurchase of common stock | (8,377,729 | ) | (210 | ) | (61,001 | ) | (438,231 | ) | — | (499,442 | ) | |||||||||||
Employee stock purchase plan | 35,795 | 1 | 1,918 | — | — | 1,919 | ||||||||||||||||
Fresh start valuation adjustment for SFOT units purchased | — | — | — | 32 | — | 32 | ||||||||||||||||
Change in redemption value of partnership units | — | — | (8,715 | ) | — | — | (8,715 | ) | ||||||||||||||
Net income attributable to Six Flags Entertainment Corporation | — | — | — | 273,816 | — | 273,816 | ||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 3,303 | 3,303 | ||||||||||||||||
Balances at December 31, 2017 | 84,488,433 | $ | 2,112 | $ | 1,086,265 | $ | (1,529,608 | ) | $ | (63,881 | ) | $ | (505,112 | ) | ||||||||
Cumulative effect adjustment (Note 2) | — | — | — | 4,557 | (9,439 | ) | (4,882 | ) | ||||||||||||||
Balances at January 1, 2018 | 84,488,433 | 2,112 | 1,086,265 | (1,525,051 | ) | (73,320 | ) | (509,994 | ) | |||||||||||||
Issuance of common stock | 1,264,497 | 31 | 41,626 | — | — | 41,657 | ||||||||||||||||
Stock-based compensation | — | — | (46,684 | ) | — | — | (46,684 | ) | ||||||||||||||
Dividends declared to common shareholders | — | — | — | (265,755 | ) | — | (265,755 | ) | ||||||||||||||
Repurchase of common stock | (1,827,991 | ) | (45 | ) | (14,341 | ) | (96,604 | ) | — | (110,990 | ) | |||||||||||
Employee stock purchase plan | 37,243 | 1 | 2,047 | — | — | 2,048 | ||||||||||||||||
Fresh start valuation adjustment for SFOT units purchased | — | — | — | 80 | — | 80 | ||||||||||||||||
Change in redemption value of partnership units | — | — | (31,273 | ) | — | — | (31,273 | ) | ||||||||||||||
Net income attributable to Six Flags Entertainment Corporation | — | — | — | 275,996 | — | 275,996 | ||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 1,822 | 1,822 | ||||||||||||||||
Balances at December 31, 2018 | 83,962,182 | $ | 2,099 | $ | 1,037,640 | $ | (1,611,334 | ) | $ | (71,498 | ) | $ | (643,093 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | Accumulated | | | |||||||
| | |
| Capital in | | |
| other |
| Total | |||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | |||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | |||||
Balances at December 31, 2017 |
| 84,488,433 | | $ | 2,112 | | $ | 1,086,265 | | $ | (1,529,608) | | $ | (63,881) | | $ | (505,112) |
Cumulative effect adjustment - adoption of ASU 2018-02 and ASU 2014-09 | | — | |
| — | |
| — | |
| 4,557 | |
| (9,439) | |
| (4,882) |
Balances at January 1, 2018 | | 84,488,433 | | $ | 2,112 | | $ | 1,086,265 | | $ | (1,525,051) | | $ | (73,320) | | $ | (509,994) |
Issuance of common stock |
| 1,264,497 | |
| 31 | |
| 41,626 | |
| — | |
| — | |
| 41,657 |
Stock-based compensation |
| — | |
| — | |
| (46,684) | |
| — | |
| — | |
| (46,684) |
Dividends declared to common stockholders |
| — | |
| — | |
| — | |
| (265,755) | |
| — | |
| (265,755) |
Repurchase of common stock |
| (1,827,991) | |
| (45) | |
| (14,341) | |
| (96,604) | |
| — | |
| (110,990) |
Employee stock purchase plan |
| 37,243 | |
| 1 | |
| 2,047 | |
| — | |
| — | |
| 2,048 |
Fresh start valuation adjustment for SFOT units purchased |
| — | |
| — | |
| — | |
| 80 | |
| — | |
| 80 |
Change in redemption value of partnership units |
| — | |
| — | |
| (31,273) | |
| — | |
| — | |
| (31,273) |
Net income attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| 275,996 | |
| — | |
| 275,996 |
Other comprehensive income, net of tax |
| — | |
| — | |
| — | |
| — | |
| 1,822 | |
| 1,822 |
Balances at December 31, 2018 |
| 83,962,182 | | $ | 2,099 | | $ | 1,037,640 | | $ | (1,611,334) | | $ | (71,498) | | $ | (643,093) |
Issuance of common stock |
| 622,787 | |
| 16 | |
| 17,480 | |
| — | |
| — | |
| 17,496 |
Stock-based compensation |
| — | |
| — | |
| 13,274 | |
| — | |
| — | |
| 13,274 |
Dividends declared to common stockholders |
| — | |
| — | |
| — | |
| (277,523) | |
| — | |
| (277,523) |
Repurchase of common stock |
| (882) | |
| — | |
| (52) | |
| — | |
| — | |
| (52) |
Employee stock purchase plan |
| 49,758 | |
| 1 | |
| 2,130 | |
| — | |
| — | |
| 2,131 |
Fresh start valuation adjustment for SFOT units purchased |
| — | |
| — | |
| — | |
| 45 | |
| — | |
| 45 |
Change in redemption value of partnership units |
| — | |
| — | |
| (4,249) | |
| — | |
| — | |
| (4,249) |
Net income attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| 179,065 | |
| — | |
| 179,065 |
Other comprehensive loss, net of tax |
| — | |
| — | |
| — | |
| — | |
| (3,212) | |
| (3,212) |
Balances at December 31, 2019 |
| 84,633,845 | | $ | 2,116 | | $ | 1,066,223 | | $ | (1,709,747) | | $ | (74,710) | | $ | (716,118) |
Issuance of common stock |
| 371,182 | |
| 8 | |
| 2,237 | |
| — | |
| — | |
| 2,245 |
Stock-based compensation |
| — | |
| — | |
| 19,530 | |
| — | |
| — | |
| 19,530 |
Dividends declared to common stockholders |
| — | |
| — | |
| — | |
| (21,165) | |
| — | |
| (21,165) |
Repurchase of common stock |
| (2,291) | |
| — | |
| (54) | |
| — | |
| — | |
| (54) |
Employee stock purchase plan |
| 73,165 | |
| 2 | |
| 1,281 | |
| — | |
| — | |
| 1,283 |
Fresh start valuation adjustment for SFOG and SFOT units purchased |
| — | |
| — | |
| — | |
| 924 | |
| — | |
| 924 |
Change in redemption value of partnership units |
| — | |
| — | |
| (18) | |
| — | |
| — | |
| (18) |
Net loss attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| (423,380) | |
| — | |
| (423,380) |
Other comprehensive loss, net of tax |
| — | |
| — | |
| — | |
| — | |
| (21,794) | |
| (21,794) |
Balances at December 31, 2020 |
| 85,075,901 | | $ | 2,126 | | $ | 1,089,199 | | $ | (2,153,368) | | $ | (96,504) | | $ | (1,158,547) |
See accompanying notes to consolidated financial statements.
59
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Cash flow from operating activities: | |||||||||||
Net income | $ | 316,003 | $ | 313,026 | $ | 156,727 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 115,693 | 111,671 | 106,893 | ||||||||
Stock-based compensation | (46,684 | ) | (22,697 | ) | 116,339 | ||||||
Interest accretion on notes payable | 1,344 | 1,056 | 413 | ||||||||
Loss on debt extinguishment | — | 37,116 | 2,935 | ||||||||
Amortization of debt issuance costs | 3,979 | 4,061 | 4,503 | ||||||||
Other, including loss on disposal of assets | 574 | 6,875 | 992 | ||||||||
Increase in accounts receivable | (39,193 | ) | (3,108 | ) | (6,157 | ) | |||||
Increase in inventories, prepaid expenses and other current assets | (3,769 | ) | (1,847 | ) | (4,948 | ) | |||||
Decrease (increase) in deposits and other assets | 1,633 | (3,597 | ) | (2,011 | ) | ||||||
(Decrease) increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities | (13,750 | ) | 5,478 | 16,134 | |||||||
Increase (decrease) in accrued interest payable | 4,409 | (1,396 | ) | 8,129 | |||||||
Deferred income tax expense (benefit) | 72,893 | (1,571 | ) | 63,286 | |||||||
Net cash provided by operating activities | 413,132 | 445,067 | 463,235 | ||||||||
Cash flow from investing activities: | |||||||||||
Additions to property and equipment | (135,624 | ) | (135,219 | ) | (129,258 | ) | |||||
Property insurance recovery | 2,500 | 523 | 320 | ||||||||
Purchase of identifiable intangible assets | — | — | (125 | ) | |||||||
Acquisition of park assets | (19,059 | ) | — | — | |||||||
Sale (purchase) of restricted-use investments, net | — | 3,926 | (890 | ) | |||||||
Proceeds from sale of assets | 71 | 607 | 2,212 | ||||||||
Net cash used in investing activities | (152,112 | ) | (130,163 | ) | (127,741 | ) | |||||
Cash flow from financing activities: | |||||||||||
Repayment of borrowings | (274,000 | ) | (949,161 | ) | (333,426 | ) | |||||
Proceeds from borrowings | 356,000 | 1,313,000 | 481,170 | ||||||||
Payment of debt issuance costs | (793 | ) | (37,336 | ) | (6,278 | ) | |||||
Net proceeds from issuance of common stock | 43,705 | 62,502 | 36,501 | ||||||||
Stock repurchases | (110,990 | ) | (499,442 | ) | (211,751 | ) | |||||
Payment of cash dividends | (267,044 | ) | (227,101 | ) | (220,314 | ) | |||||
Purchase of redeemable noncontrolling interest | (353 | ) | (128 | ) | (223 | ) | |||||
Noncontrolling interest distributions | (40,007 | ) | (39,210 | ) | (38,425 | ) | |||||
Net cash used in financing activities | (293,482 | ) | (376,876 | ) | (292,746 | ) | |||||
Effect of exchange rate on cash | (426 | ) | 2,083 | (5,123 | ) | ||||||
(Decrease) increase in cash and cash equivalents | (32,888 | ) | (59,889 | ) | 37,625 | ||||||
Cash and cash equivalents at beginning of period | 77,496 | 137,385 | 99,760 | ||||||||
Cash and cash equivalents at end of period | $ | 44,608 | $ | 77,496 | $ | 137,385 | |||||
Supplemental cash flow information | |||||||||||
Cash paid for interest | $ | 98,302 | $ | 96,045 | $ | 69,320 | |||||
Cash paid for income taxes | $ | 30,009 | $ | 14,473 | $ | 17,267 |
| | | | | | | | | |
| | Year Ended December 31, | |||||||
(Amounts in thousands) | | 2020 | | 2019 | | 2018 | |||
Cash flows from operating activities: | | | | | | | | | |
Net (loss) income | | $ | (382,092) | | $ | 219,818 | | $ | 316,003 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |
|
| |
|
| |
|
|
Depreciation and amortization | |
| 120,173 | |
| 118,230 | |
| 115,693 |
Stock-based compensation | |
| 19,530 | |
| 13,274 | |
| (46,684) |
Interest accretion on notes payable | |
| 1,157 | |
| 1,310 | |
| 1,344 |
Loss on debt extinguishment | |
| 6,106 | |
| 6,484 | |
| 0 |
Amortization of debt issuance costs | |
| 6,535 | |
| 3,563 | |
| 3,979 |
Other, including loss on disposal of assets | |
| (4,028) | |
| (1,029) | |
| 574 |
Gain on sale of investee | | | 0 | | | (724) | | | 0 |
Deferred income taxes (benefit) expense | |
| (134,199) | |
| 78,386 | |
| 72,893 |
Change in accounts receivable | |
| 71,654 | |
| 7,725 | |
| (39,193) |
Change inventories, prepaid expenses and other current assets | |
| (19,452) | |
| (14,709) | |
| (3,769) |
Change in deposits and other assets | |
| 5,604 | |
| (1,665) | |
| 1,633 |
Change in ROU operating leases | | | 4,477 | | | 7,865 | | | 0 |
Change in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities | |
| 79,075 | |
| (15,472) | |
| (13,750) |
Change in operating lease liabilities | | | 524 | | | (7,914) | | | 0 |
Change in accrued interest payable | |
| 34,056 | |
| (4,569) | |
| 4,409 |
Net cash (used in) provided by operating activities | |
| (190,880) | |
| 410,573 | |
| 413,132 |
| | | | | | | | | |
Cash flows from investing activities: | |
|
| |
|
| |
|
|
Additions to property and equipment | |
| (100,878) | |
| (143,913) | |
| (135,624) |
Property insurance recoveries | |
| 2,514 | |
| 3,737 | |
| 2,500 |
Acquisition of park assets, net of cash acquired | |
| 0 | |
| 0 | |
| (19,059) |
Proceeds from sale of assets | |
| 7,470 | |
| 1,050 | |
| 71 |
Net cash used in investing activities | |
| (90,894) | |
| (139,126) | |
| (152,112) |
| | | | | | | | | |
Cash flows from financing activities: | |
|
| |
|
| |
|
|
Repayment of borrowings | |
| (526,510) | |
| (802,750) | |
| (274,000) |
Proceeds from borrowings | |
| 884,000 | |
| 970,000 | |
| 356,000 |
Payment of debt issuance costs | |
| (24,987) | |
| (9,911) | |
| (793) |
Payment of cash dividends | |
| (22,499) | |
| (278,951) | |
| (267,044) |
Proceeds from issuance of common stock | | | 3,528 | | | 19,627 | | | 43,705 |
Stock repurchases | | | (54) | | | (52) | | | (110,990) |
Reduction in finance lease liability | | | (493) | | | 0 | | | 0 |
Purchase of redeemable noncontrolling interest | |
| (4,976) | |
| (217) | |
| (353) |
Distributions to noncontrolling interests | | | (41,288) | | | (40,753) | | | (40,007) |
Net cash provided by (used in) financing activities | |
| 266,721 | |
| (143,007) | |
| (293,482) |
| | | | | | | | | |
Effect of exchange rate on cash | |
| (1,366) | |
| 1,131 | |
| (426) |
| | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | |
| (16,419) | |
| 129,571 | |
| (32,888) |
Cash and cash equivalents at beginning of period | |
| 174,179 | |
| 44,608 | |
| 77,496 |
Cash and cash equivalents at end of period | | $ | 157,760 | | $ | 174,179 | | $ | 44,608 |
| | | | | | | | | |
Supplemental cash flow information | |
|
| |
|
| |
|
|
Cash paid for interest | | $ | 99,239 | | $ | 114,398 | | $ | 98,302 |
Cash paid for income taxes | | $ | 5,917 | | $ | 28,209 | | $ | 30,009 |
See accompanying notes to consolidated financial statements.
60
1. | |
Description of Business |
We own and operate regional theme parks and waterparks andwaterparks. We are the largest regional theme park operator in the world and the largest operator of waterparks in North America. Of the 2526 parks we currently own or operate, 2223 parks are located in the United States, two2 parks are located in Mexico and one1 park is located in Montreal, Canada.
On April 1, 1998, we acquired the former Six Flags Entertainment Corporation ("Former SFEC", a corporation that has been merged out of existence and that has always been a separate corporation from the current Six Flags Entertainment Corporation ("Holdings")), which had operated regional theme parks and waterparks under the Six Flags name for nearly 40 years, and established an internationally recognized brand name. We own the "Six Flags" brand name in the United States and foreign countries throughout the world. To capitalize on this name recognition, 2122 of our current parks are branded as "Six Flags" parks and beginning in 2014 we also began the development, with third-party partners, of Six Flags-branded parks outside of North America.
COVID-19 Considerations
In response to the COVID-19 pandemic, federal, state and local governments implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. On March 13, 2020, we temporarily suspended operations at all of our theme parks and waterparks due to the COVID-19 pandemic. During 2020, 20 of our 26 parks operated for portions of the season but several of our larger parks could not operate rides. Parks that did operate had capacity and other operating limitations.
We quickly implemented plans to mitigate the impact of the COVID-19 pandemic on our business and ensure the health and safety of our employees and guests. In response to the challenging environment, we focused on the following actions:
● | Implementing immediate cost controls by right-sizing marketing and temporarily reducing salaries of all full-time employees by 25%; |
● | Strengthening liquidity through expansion of our revolving credit facility, suspension of testing of certain maintenance covenants in our credit facility, issuance of senior secured notes, and suspension of dividend payments and stock repurchase program; |
● | Enhancing financial flexibility by delaying or reducing capital expenses related new ride and attractions; |
● | Developing measures to preserve our season pass holders and members; |
● | Opening parks as quickly as possible, while following governmental and public health guidelines; and |
● | Creating new sources of revenue by introducing animal and holiday drive-thru experiences at many parks. |
We resumed partial operations at many of our parks on a staggered basis near the end of the second quarter using a cautious and phased approach, including limiting attendance, in accordance with local conditions and government guidelines. Attendance trends in 2020 continued to improve throughout the year for the parks that were open. Several of our parks modified their operations by providing drive-through or walk-through experiences for the holiday season, and our parks in Mexico were able to operate for a portion of the fourth quarter. As a result, all of our theme parks and some of its water parks operated in at least some capacity for a portion of the season, albeit pursuant to reduced capacity and other operating limitations. Comparisons of open parks to prior year in the third quarter exclude attendance from Six Flags Discovery Kingdom and Six Flags Great America, as these parks had modified operations with minimal attendance in the third quarter of 2020.
We have taken measures to ensure sufficient liquidity to meet our cash flow needs and covenant compliance obligations for at least the next twelve months from the issuance of the financial statements. Additionally, we believe we have sufficient liquidity to meet our cash obligations through the end of 2021 even if our open parks are required to close. In addition to reducing expenses including capital expenditures, in April 2020, we increased the revolving credit
61
commitments under the Second Amended and Restated Revolving Loan by $131.0 million, increasing the facility from $350.0 million to $481.0 million. Also, in April, Six Flags Theme Parks Inc. (“SFTP”), Holdings’ indirect, wholly owned subsidiary, completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025. In August 2020, we extended the increased revolving credit commitments under the Second Amended and Restated Revolving Loan through December 31, 2022 and extended the suspension of our senior secured leverage ratio financial maintenance covenant through the end of 2021. See Note 3, Long-Term Indebtedness, for more information on these transactions. In connection with the Second Amended and Restated Credit Agreement, we suspended our quarterly dividend payment and stock repurchase program until the earlier December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to calculate covenant compliance.
The COVID-19 pandemic continues to present material uncertainty and risk with respect to our performance and financial results, including the ability to open all of our parks to guests. We will continue to consider near-term exigencies and the long-term financial health of the business as clear steps are taken to mitigate the consequences of the COVID-19 pandemic. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including additional actions taken to contain COVID-19 or treat its impact, among others. Our business and financial results could be materially and adversely impacted.
Transformation Plan
Prior to the pandemic, we initiated a transformation plan. The transformation plan consists of 5 revenue initiatives and 3 cost initiatives designed to improve our core operational effectiveness and to support our strategy, delivering sustainable value creation over time. Our strategy is to create thrilling, memorable experiences at our regional parks, delivered by a diverse and empowered team, through industry-leading innovation and technology. The strategy is driven by three focus areas: (i) modernizing the guest experience through technology, (ii) continuously improving operational efficiency, and (iii) driving financial excellence. We plan to focus on our core business over the next two to three years; during this time, we will be cautious about expanding into adjacent domestic markets or entering into new international agreements.
Due to the outbreak of the COVID-19 pandemic in early 2020 and the resulting park closures, management redirected its focus on steering us through this crisis, causing a delay in our transformation plan. However, in the latter half of 2020, we made significant progress on each of the initiatives. We closed 2 satellite offices; reduced our full-time headcount costs; initiated centralized negotiations with several vendors to reduce procurement costs; and piloted a model to optimize park level variable labor. From a revenue perspective, we improved our menu assortment, pricing and merchandizing strategy; developed a new tool to optimize media spending; improved our website; and made progress on our initiative to attract more single day visitors.
| | | |
Transformation Costs Breakout | |||
| | | |
| | Year Ended | |
| | December 31, 2020 | |
Amounts included in "Other expense, net" | | | |
Consultant costs | | $ | 20,460 |
Employee termination costs | | | 4,362 |
Amounts included in "Loss on disposal of assets" | | | |
Ride / asset write-offs | | | 9,754 |
Total transformation costs | | $ | 34,576 |
62
2. | Summary of Significant Accounting Policies |
a. | |
Basis of Presentation |
The consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. We also consolidate the partnerships that own Six Flags Over Texas ("SFOT") and Six Flags Over Georgia (including Six Flags White Water Atlanta) ("SFOG", and together with SFOT, the "Partnership Parks") as subsidiaries in our consolidated financial statements as we have determined that we have the power to direct the activities of those entities that most significantly impact the entities'entities’ economic performance and we have the obligation to absorb losses and receive benefits from the entities that can be potentially significant to these entities. The equity interests owned by non-affiliated parties in the Partnership Parks are reflected in the accompanying consolidated balance sheets as redeemable noncontrolling interests. The portion of earnings or loss attributable to non-affiliated parties in the Partnership Parks is reflected as net income attributable to noncontrolling interests in the accompanying consolidated statements of operations. See Note
Intercompany transactions and balances have been eliminated in consolidation.
b. | |
Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and liabilitiesexpenses and the disclosure of contingent assets and liabilities at the date of thein our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.accompanying notes. Actual results could differ from those estimates. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in thosethese estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
c. | |
Fair Value Measurement |
Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820,
Fair Value Measurement, defines fair value as the exchange prices that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. In accordance with FASB ASC Topic 820, Fair Value Measurement, these two types of inputs have created the following fair value hierarchy:● | Level 1: quoted prices in active markets for identical assets; |
● | Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument; and |
● | Level 3: inputs to the valuation methodology are unobservable for the asset or liability. |
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. We use a market approach for our recurring fair value measurements, and we endeavor to use the best information available. Accordingly, valuation techniques that maximize the use of observable impacts are favored. We present the estimated fair values and classifications of our financial instruments in accordance with FASB Accounting Standards Consideration ("ASC") Topic 820, Fair Value Measurement.
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The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
● | The carrying values of cash and cash equivalents, accounts receivable, notes receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. |
The measurement of the fair value of long-term debt is based on market prices that generally are observable for similar liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement. Refer to Note 8 for additional information. |
● | The measurement of the fair value of derivative assets and liabilities is based on market prices that generally are observable for similar assets and liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement. Derivative assets and liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid expenses and other current assets and other accrued liabilities, respectively. Derivative assets and liabilities that have maturity dates greater than twelve months from the balance sheet date are included in deposits and other assets and other long-term liabilities, respectively. See Note 7 for additional information on our derivative instruments. |
d. | Cash Equivalents |
Cash equivalents consists of short-term highly liquid investments with a remaining maturity as of the date of purchase of three months or less, which are readily convertible into cash.less. For purposes of the consolidated statements of cash flows, we consider all highly liquid debt instruments with remaining maturities as of their date of purchase of three months or less to be cash equivalents. Cash equivalents were not significant as of December 31, 20182020 and 2017.
e. | |
Inventories |
Inventories are stated at lower of weighted average cost or net realizable value and primarily consist of products purchased for resale, including merchandise, food and miscellaneous supplies. Products are removed from inventory at weighted average cost. We have recorded a nominal valuation$0.7 million and a $0.4 million allowance for slow moving inventory as of December 31, 20182020 and $0.3 million as of December 31, 2017.
f. | |
Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets include $22.9$21.6 million and $21.1$22.9 million of spare parts inventory for existing rides and attractions as of December 31, 20182020 and 2017, respectively.2019. These items are expensed as the repair or maintenance of rides and attractions occur.
g. | |
Advertising Costs |
Production costs of commercials and programming are charged to operations in the year first aired. The costs of other advertising, promotion, and marketing programs are charged to operations when incurred with the exception of direct-response advertising which is charged to the period it will benefit. As of December 31, 20182020 and 2017,2019, we had $1.6 million and $1.9$1.8 million in prepaid advertising, respectively. The amounts capitalized are included in prepaid expenses.
Advertising and promotions expense was $68.4$19.6 million, $63.7$69.5 million and $62.8$68.4 million for the years ended December 31, 2020, 2019 and 2018, 2017 and 2016, respectively.
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h. | |
Debt Issuance Costs |
We capitalize costs related to the issuance of debt. Debt issuance costs directly related to ourthe Second Amended and Restated Revolving Loan are presented within other assets as debt issuance costs in our consolidated balance sheets. Debt issuance costs directly related to ourthe Second Amended and Restated Term Loam B and our senior unsecured notes are presented within noncurrent liabilities as a reduction of long-term debt in our consolidated balance sheets. The amortization of such costs is recognized as interest expense using the interest method over the term of the respective debt issue. Amortization related to deferred debt issuance costs was $4.0$6.5 million, $4.1$3.6 million and $4.5$4.0 million for the years ended December 31, 2018, 20172020, 2019 and 20162018, respectively. See Note 78 for further discussion.
i. | |
Property and Equipment |
Property and equipment additions are recorded at cost and the carrying value is depreciated using the straight-line method over the estimated useful lives of the assets. Maintenance and repair costs that do not improve service potential or extend economic life are charged directly to expense as incurred, while betterments and renewals are generally capitalized as property and equipment. When an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed and the resulting gain or loss is recognized. See Note 4 for further detail of the components of our property and equipment.
The estimated useful lives of the assets are as follows:
| | |
Rides and attractions | 5 - 25 years | |
Land improvements | | 10 - 15 years |
Buildings and improvements | | Approximately 30 years |
Furniture and equipment | | 5 - 10 years |
j. | |
Goodwill and Indefinite-Lived Intangible Assets |
Goodwill and intangible assets with indefinite useful lives are tested for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate that the assets might be impaired. We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to the reporting unit. We then determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit. All of our parks are operated in a similar manner and have comparable characteristics in that they produce and distribute similar services and products using similar processes, have similar types of customers, are subject to similar regulations and exhibit similar economic characteristics. As such, we are a single reporting unit. For each year, the fair value of the single reporting unit exceeded our carrying amount (provided that, we have one1 reporting unit at the same level for which our Holdings common stock is traded, we believe our market capitalization is the best indicator of our reporting unit'sunit’s fair value). In September 2012, the FASB amended FASB ASC Topic 350,
The fair value of indefinite-lived intangible assets is generally determined based on a discounted cash flow analysis. An impairment loss occurs to the extent that the carrying value exceeds the fair value. For goodwill, if the fair value of the reporting unit were to be less than the carrying amount, an impairment loss would be recognized to the extent that the carrying amount of the reporting unit exceeds its fair value.
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k. | |
Valuation of Long-Lived Assets |
We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
l. | |
Revenue Recognition |
We account for revenue from Contractscontracts with Customers
In connection with the temporary closure of our parks due to COVID-19, we added one additional month of membership privileges for every month a member paid but could not visit their home park. Season pass holders were granted an additional year of admission to the parks due to the COVID-19 pandemic. All 2020 passes now expire at the end of the 2021 season. The membership payments received for multi-use admissions in excesswhile parks were temporarily closed due to the pandemic were deferred and will be recognized as revenue when these additional months are utilized at the end of redemptions are recognized in deferred revenue.the respective membership periods. For active memberships after the initial twelve-month term, we recognize revenue monthly as payments are
As of December 31, 2018,2020, deferred revenue was primarily comprised of (i) advance sales ofunredeemed season passes, all seasonpass and all-season dining passes and other admissions for the 2019 operating season,pass revenue, (ii) unredeemed portions of the membership program and member dining program that will be recognized in 2019,2021, and (iii) sponsorship, international agreementspre-sold single-day admissions revenue for the 2020 operating season which now expire at the end of the 2021 season.
Certain contracts with customers, primarily memberships, may include bundled products with multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the observable retail prices charged to customers and other fee-based revenue that will beuse residual for any products not sold on a stand-alone basis. We generally expense (i) sales commissions when incurred, and (ii) certain costs to obtain a contract where the amortization period would have been one year or less. These costs are recognized in 2019."Selling, general and administrative expenses." We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less or (ii) contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed. For certain of our
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contracts that have an original expected length of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money.
We have entered into international agreements to assist a third partiesparty in the planning, design, development and operation of a Six Flags-branded parkspark outside of North America. These agreements typically consist of a brand licensing agreement, project services agreement, and management services agreement. Under Topic 606, weWe treat these agreements as one1 contract because each wasthey were negotiated with a single commercial objective. We have identified three3 distinct promises within the agreement with each third partythe third-party partner as brand licensing, project services and management services. Each of these promises is its own performance obligation and distinct, as the third party could benefit from each service on its own with other readily available resources, and each service is separately identifiable from other services in the context of the contract. We recognize revenue under our international agreements over the relevant service period of each performance obligation based on its relative stand-alone selling price, as determined by our best estimate of selling price. We review the service period of each performance obligation on an ongoing basis and revise it as necessary throughout the year. Revisions to the relevant service periods of the performance obligations may result in revisions to revenue in future periods and are recognized in the period in which the change is identified.
m. | |
Accounts Receivable, Net |
Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products, including season passes and the membership program. We are not exposed to a significant concentration of credit risk, however, based on the age of the receivables, our historical experience and other factors and assumptions we believe to be customary and reasonable, we do record an allowance for doubtful accounts. As of December 31, 20182020 and 2017,2019, we have recorded an allowance for doubtful accounts of $7.4$3.1 million and $4.2$8.3 million, respectively. The allowance for doubtful accounts is primarily comprised of estimated defaults under our membership plans.
n. | |
Derivative Instruments and Hedging Activities |
We account for derivatives and hedging activities in accordance with FASB ASC Topic 815,
We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and our strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. We also assess, both at the hedge'shedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.
Change in the fair value of a derivative that is effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive (loss) income (loss) until operations are affected by the variability in cash flows of the designated hedged item, at which point they are reclassified to interest expense. Change in fair value of a derivative that is not designated as a hedge are recorded in other income (expense),expense, net in the consolidated statements of operations on a current basis. As of December 31, 2017, the
In June 2019, we entered into 3 separate interest rate swap agreements expired and all related amounts previously held as derivative assets and liabilitieswith a notional amount of $300.0 million (collectively, the “June 2019 Swap Agreements”) to mitigate the risk of an increase in the LIBOR interest rate in effect on the consolidated balance sheetsSecond Amended and previously recordedRestated Term Loan B. In August 2019, we entered into 2 additional separate interest rate swap agreements with a notional amount of $400.0 million (collectively, the “August 2019 Swap Agreements”) to mitigate the risk of an increase in accumulated other comprehensive incomethe LIBOR interest rate in effect on the Second Amended and Restated Term Loan B.
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In March 2020, we executed a strategy commonly known as a “blend and extend” on $100.0 million of the June 2019 Swap Agreements (the “Modified June 2019 Swap Agreement”) that extended the length of one of the June 2019 Swap Agreements through April 2026. We extended the existing pay-fixed swap rate over a longer period than its original term at a lower interest rate, while maintaining the same overall value of the swap. The remaining $200.0 million of the June 2019 Swap Agreements (the “Unmodified June 2019 Swap Agreements”) did not change. Upon execution, we designated and documented the Modified June 2019 Swap Agreement as a cash flow hedge. The Modified June 2019 Swap Agreement serves as an economic hedge and provides protection against rising interest rates.
On April 22, 2020, we repaid $315.0 million of the Second Amended and Restated Term Loan B. In conjunction, the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement were realized in earnings.
See Note 7 for a further discussion.
o. | |
Commitments and Contingencies |
We are involved in various lawsuits and claims that arise in the normal course of business. Amounts associated with lawsuits or claims are reserved for matters in which it is believed that losses are probable and can be reasonably estimated. In addition to matters in which it is believed that losses are probable, disclosure is also provided for matters in which the
p. | |
Income Taxes |
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, including net operating loss and other tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We have a valuation allowance of $115.2$128.2 million and $113.5$130.6 million as of December 31, 20182020 and 2017,2019, respectively, due to uncertainties related to our ability to utilize some of our deferred tax assets, primarily consisting of certain state net operating loss, foreign tax credits and other tax carryforwards, before they expire. The valuation allowance was based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets were recoverable. For the foreseeable future, we project taxable income that will allow for the utilization of all of our federal net operating loss carryforwards before they expire.
Our liability for income taxes is finalized as auditable tax years pass their respective statutes of limitations in the various jurisdictions in which we are subject to tax. However, these jurisdictions may audit prior years for which the statute of limitations is closed for the purpose of making an adjustment to our taxable income in a year for which the statute of limitations has not closed. Accordingly, taxing authorities of these jurisdictions may audit prior years of the group and its predecessors for the purpose of adjusting net operating loss carryforwards to years for which the statute of limitations has not closed.
We classify interest and penalties attributable to income taxes as part of income tax expense. As of December 31, 20182020 and 2017,2019, we had no0 accrued interest and penalties liability.
Because we do not permanently reinvest foreign earnings, United States deferred income taxes have been provided on unremitted foreign earnings to the extent that such foreign earnings are expected to be taxable upon repatriation.
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For global intangible low taxed income ("GILTI") under the Tax Cuts and Jobs Act, was signed into law. The Tax Act contained significant changeswe have elected to corporate taxation, including reductionaccount for GILTI as a component of tax expense in the corporate tax rate from 35%period in which we are subject to 21% effective January 1, 2018, limitation of the tax deduction for interest expense, limitation of the deduction for net operating losses and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), new taxes concerning global intangible low-tax income (GILTI), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits including the limitation on deductions for certain executive compensation arrangements under Section 162(m) of the Internal Revenue Code. All corporation taxation aspects of the Tax Act are included in our year ended December 31, 2017 tax provision. rules (the "period cost method").
See Note 1011 for further discussion.
q. | |
(Loss) earnings Per Common Share |
Basic (loss) earnings per common share is computed by dividing net (loss) income attributable to Holdings'Holdings’ common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income attributable to Holdings'Holdings’ common stockholders by the weighted average number of common shares outstanding during the period including the effect of all dilutive common stock equivalents using the treasury stock method. In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.
r. | |
Stock-Based Compensation |
Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance and cash-settled awards and dividend equivalents to select employees, officers, directors and consultants of Holdings and its affiliates. We recognize the fair value of each grant as compensation expense on a straight-line basis over the vesting period using the graded vesting terms of the respective grant. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing valuation model. The fair value of stock, restricted stock units and restricted stock awards is the quoted market price of Holdings'Holdings’ stock on the date of grant. See Note 910 for further discussion of stock-based compensation and related disclosures.
s. | |
Comprehensive (Loss) Income |
Comprehensive (loss) income consists of net (loss) income, changes in the foreign currency translation adjustment, changes in the fair value of derivatives that are designated as hedges and changes in the net actuarial gains (losses) and amortization of prior service costs on our defined benefit retirement plan.
t. | |
Redeemable Noncontrolling Interest |
We record the carrying amount of our redeemable noncontrolling interests at their fair value at the date of issuance. We recognize the changes in their redemption value immediately as they occur and adjust the carrying value of these redeemable noncontrolling interests to equal the redemption value at the end of each reporting period, if greater than the redeemable noncontrolling interest carrying value.
This method would view the end of the reporting period as if it were also the redemption date for the redeemable noncontrolling interests. We conduct an annual review to determine if the fair value of the redeemable units is less than the redemption amount. If the fair value of the redeemable units is less than the redemption amount, there would be a charge to earnings per share allocable to common stockholders. The redemption amount at the end of each reporting period did not exceed the fair value of the redeemable units.
u. | Leases |
We or certain of our subsidiaries are a lessee in various noncancelable operating and finance (formerly “capital”) leases, primarily for operating rights to amusement parks, land, office space, warehouses, office equipment and machinery. We account for leases in accordance with FASB ASC 842, Leases (“Topic 842”); see below for additional information on recently adopted accounting pronouncements and Note 16 for additional information regarding our leases. We determine if an arrangement is or contains a lease at contract inception and recognize a right-of-use ("ROU") asset and lease liability at the lease commencement date.
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For both our operating and finance leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments include how we determine (i) the discount rate used to discount the unpaid lease payments to present value, (ii) the lease term and (iii) the lease payments. Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate ("IBR"). Generally, we cannot determine the interest rate implicit in the lease and therefore we use the IBR as a discount rate for our leases. The IBR reflects the rate of interest we would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The lease term for all of our leases includes the noncancelable period of the lease plus any additional periods covered by an option to extend the lease that are reasonably certain to be executed by us. Lease payments included in the measurement of the lease liability comprise fixed payments owed over the lease term, variable lease payments that depend on an index or rate, and the exercise price of an option to purchase the underlying asset if it is reasonably certain that we will exercise the option.
The ROU asset is initially measured at cost, which comprises the initial amount of lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives received. For our operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, and adjusted for any prepaid or accrued lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the term of the operating lease.
Variable lease payments associated with our leases are recognized upon the occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Variable lease payments for operating leases are presented as operating expense in our consolidated statements of operations in the same line item as expense arising from fixed lease payments. Property taxes and insurance paid on behalf of our lessors is included within variable lease payments.
Operating lease ROU assets net of accumulated amortization are presented as "Right-of-use operating leases, net" on the consolidated balance sheets. The current portion of operating lease liabilities is presented as "Short-term operating lease liabilities" and the long-term portion is presented separately as "Long-term operating lease liabilities" on the consolidated balance sheets.
Finance lease ROU assets are presented within “Property and equipment, at cost” and the related lease amortization within “Accumulated depreciation” on our consolidated balance sheets. The current portion of the finance lease liabilities is presented as “Short-term lease liabilities” and the long-term portion is presented separately as “Long-term lease liabilities” on our consolidated balance sheets.
We have elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. We recognize the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with short-term leases are recognized and presented in the same manner as for all other leases.
The ROU assets for operating leases may be periodically reduced by impairment losses. We use the long-lived assets impairment guidance to determine whether an ROU asset is impaired and if so, the amount of the impairment loss to recognize. We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the remeasurement of a lease liability, an adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in our consolidated statements of operations.
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v. | Acquisition of Park Assets |
On May 22, 2018, we entered into an asset purchase agreement with Premier Parks, LLC and its affiliates to acquire the lease rights to operate five5 parks owned by EPR Properties, LLC (the "five"5 new parks"). We completed the transaction on June 1, 2018. In connection with the purchase agreement, we entered into operating leases with EPR Properties, LLC, under which we are the tenant. The
w. | |
Recently Adopted Accounting Pronouncements |
On January 1, 2020, we adopted Accounting Standards Update No. 2014-09,
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2017-07 shouldUpdate 2020-04 apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the consolidated statements of operations. On January 1, 2018, we adopted ASU 2017-07 using a retrospective transition method to each period presented. Accordingly, the service cost component of net periodic pension cost allocated to our park employees and corporate employees was included within "Operating expenses" and "Selling, general and administrative expenses," respectively, while the other cost components were included in "Other net periodic pension benefit" in the condensed consolidated statements of operations.
x. | Recent Accounting Pronouncements Not Yet Adopted |
In December 2019, the years ended December 31, 2017 and 2016, the Company reclassified $2.7 million and $0.7 million, respectively, from "Operating expenses" to "Other net periodic pension benefit." This amount represents the non-service cost component of net periodic pension costs allocable to our park level employees. For the years ended December 31, 2017 and 2016, the Company reclassified $0.6 million and $1.2 million, respectively, from "Selling, general and administrative expenses" to "Other net periodic pension benefit". This amount represents the non-service cost component of net periodic pension costs allocable to our corporate employees. A nominal amount of non-service cost components remains in "Other (income) expense, net" and is not reclassified to "Other net periodic pension benefit." These amounts directly relate to certain other parks that we no longer operate but continue to service pension benefits for former employees of those parks.
In August 2018, we adopted Topic 606 usingFASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the modified retrospective method applied to those contractsDisclosure Requirements for Defined Benefit Plans: (“Update 2018-14”), which were not completed as of January 1, 2018. Resultsmodifies the disclosure requirements for reportingemployers that sponsor defined benefit pension or other post-retirement plans. Update 2018-14 is effective for annual periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue2021, with early adoption permitted. Adoption is required to be reportedapplied on a retrospective basis to all periods presented. We are in accordance with our historic accounting under Topic 605.
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SIX FLAGS ENTERTAINMENT CORPORATION
Notes to our international agreements revenue. During the year ended December 31, 2018 we recognized $0.9 million less revenue as a result of applying Topic 606.Consolidated Financial Statements
Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.
(Amounts in thousands) | Balance at December 31, 2018 | ||||||||||
Balance Sheet | As Reported | Balances Without Adoption | Effect of Change Higher/(Lower) | ||||||||
Assets | |||||||||||
Accounts receivable, net | $ | 116,043 | $ | 121,209 | $ | (5,166 | ) | ||||
Liabilities | |||||||||||
Deferred revenue | 146,227 | 148,183 | (1,956 | ) | |||||||
Deferred income taxes | 173,998 | 172,502 | 1,496 | ||||||||
Stockholders' Deficit | |||||||||||
Accumulated deficit | (1,611,334 | ) | (1,616,960 | ) | 5,626 | ||||||
Total stockholders' deficit | (643,093 | ) | (648,719 | ) | 5,626 |
(Amounts in thousands) | Year Ended December 31, 2018 | ||||||||||
Statement of Operations | As Reported | Balances Without Adoption | Effect of Change Higher/(Lower) | ||||||||
Revenues | |||||||||||
Sponsorship, international agreements and accommodations | $ | 100,116 | $ | 101,058 | $ | (942 | ) | ||||
Costs and expenses | |||||||||||
Income tax expense | 95,855 | 96,053 | (198 | ) | |||||||
Net income | 275,996 | 276,740 | (744 | ) |
The following tables present our revenues disaggregated by contract duration for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively. Long-term and short-term contracts consist of our contracts with customers with terms greater than one year and less than or equal to one year, respectively. Sales and usage-based taxes are excluded from revenues.
| | | | | | | | | | | | |
| | Year Ended December 31, 2020 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 28,627 | | $ | 2,431 | | $ | 20,762 | | $ | 51,820 |
Short-term contracts and other (a) | |
| 174,019 | |
| 123,875 | |
| 6,861 | |
| 304,755 |
Total revenues | | $ | 202,646 | | $ | 126,306 | | $ | 27,623 | | $ | 356,575 |
| | | | | | | | | | | | |
| | Year Ended December 31, 2019 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 106,233 | | $ | 20,381 | | $ | 71,893 | | $ | 198,507 |
Short-term contracts and other (a) | |
| 709,549 | |
| 554,059 | |
| 25,468 | |
| 1,289,076 |
Total revenues | | $ | 815,782 | | $ | 574,440 | | $ | 97,361 | | $ | 1,487,583 |
| | | | | | | | | | | | |
| | Year Ended December 31, 2018 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 115,612 | | $ | 25,383 | | $ | 71,589 | | $ | 212,584 |
Short-term contracts and other (a) | |
| 694,452 | |
| 528,144 | |
| 28,527 | |
| 1,251,123 |
Total revenues | | $ | 810,064 | | $ | 553,527 | | $ | 100,116 | | $ | 1,463,707 |
(Amounts in thousands) | Year Ended December 31, 2018 | ||||||||||||||
Park Admissions | Park Food, Merchandise and Other | Sponsorship, international agreements and accommodations | Consolidated | ||||||||||||
Long-term contracts | $ | 115,612 | $ | 25,383 | $ | 71,589 | $ | 212,584 | |||||||
Short-term contracts and other (a) | 694,452 | 528,144 | 28,527 | 1,251,123 | |||||||||||
Total revenues | $ | 810,064 | $ | 553,527 | $ | 100,116 | $ | 1,463,707 |
(a) | Other revenues primarily include sales of single-use tickets and short-term transactional sales for which we have the right to invoice. |
(Amounts in thousands) | Year Ended December 31, 2017 | ||||||||||||||
Park Admissions | Park Food, Merchandise and Other | Sponsorship, international agreements and accommodations | Consolidated | ||||||||||||
Long-term contracts | $ | 109,943 | $ | 20,498 | $ | 57,934 | $ | 188,375 | |||||||
Short-term contracts and other (a) | 631,332 | 504,084 | 35,283 | 1,170,699 | |||||||||||
Total revenues | $ | 741,275 | $ | 524,582 | $ | 93,217 | $ | 1,359,074 |
(Amounts in thousands) | Year Ended December 31, 2016 | ||||||||||||||
Park Admissions | Park Food, Merchandise and Other | Sponsorship, international agreements and accommodations | Consolidated | ||||||||||||
Long-term contracts | $ | 88,594 | $ | 12,610 | $ | 53,670 | $ | 154,874 | |||||||
Short-term contracts and other (a) | 626,819 | 508,557 | 29,148 | 1,164,524 | |||||||||||
Total revenues | $ | 715,413 | $ | 521,167 | $ | 82,818 | $ | 1,319,398 |
Long-term Contracts
Our long-term contracts consist of season passes withpurchased by customers in the year preceding the operating season to which they relate, sponsorship contracts and international agreements with third parties. Due to the COVID-19 pandemic, we have extended all 2020 season passes through the 2021 season. Due to the extension of term on the 2020 season passes, all 2020 season passes have a length greater than one year and are thus considered long-term contracts. We earn season pass revenue when our customers purchase a season pass for a fixed fee, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks'parks’ operating season. Current year season passes classified as long-term contracts are sold in the year preceding the operating season to which they relate. We earn sponsorship revenue from separately-priced contracts with third parties pursuant to which we sell and advertise the third party'sparty’s products within the parks in exchange for consideration. Advertisements may include, but are not limited to, banners, signs, radio ads, association with certain events, sponsorship of rides within our parks and retail promotions. We earn international agreements revenue pursuant to arrangements in which we assist in the development and management of Six Flags-branded parks outside of North America. Within our international agreements, we have identified three3 distinct performance obligations as brand licensing, project services and management services. We do
72
not consider revenue recognized for the performance obligations related to our long-forminternational agreements to be significant, neither individually nor in the aggregate, to any period presented. In future filings, we will include such a statement in our revenue footnote, subject to modification as appropriate. Refer toSee Note 21 for additional information on our accounting for performance obligations inunder these contracts.
The transaction price for our long-term contracts is explicitly stated within the contracts. Our sponsorship contracts and international agreements may include estimated variable consideration such as penalties for delay in performance of contract terms, and certain volume-based discounts and rebates. There wereWe do not believe there will be significant changes to our estimates of variable consideration. Our brand licensing and management services performance obligationsagreements include royalty payments and management fees, respectively, based on gross sales from Six Flags-branded parks.parks once opened. We have elected to apply the sales-based royalty exemption to the brand licensing performance obligation, and accordingly, do not estimate revenue attributable to the gross sales-based royalty. We have also elected to apply the direct allocation exemption to the management services performance obligation, and accordingly, do not estimate revenue attributable to the gross sales basedsales-based management fee.
We recognize season pass revenue in "Park admissions" over the estimated redemption rate, as we believe this appropriately depicts the transfer of service to our customers. We estimate the redemption rate based on historical experience and other factors and assumptions that we believe to be customary and reasonable. We review the estimated redemption rate regularly, on an ongoing basis, and revise it as necessary throughout the year. Amounts received for multi-use admissions in excess of redemptions are recognized in "Deferred revenue." We recognize sponsorship and international agreements revenue over the term of the agreements using the passage of time as a measure of complete satisfaction of the performance obligations in "Sponsorship, international agreements and accommodations." Amounts received for unsatisfied sponsorship and international agreements performance obligations are recognized in "Deferred revenue." As a result
At January 1, 2019, $100.8 million of the adoption of Topic 606, weunearned revenue associated with outstanding long-term contracts was reported in “Deferred revenue,” and $161.0 million was recognized an increase to "Sponsorship, international agreements and accommodations"as revenue previously recognized in prior periods of $0.9 millionfor long-term contracts during the year ended December 31, 2018, respectively.
Short-term Contracts and Other
Our short-term contracts consist primarily of season passes and memberships with customers, certain sponsorship contracts and international agreements with third parties. We earn revenue from customer'sa customer’s purchase of our season pass and membership products, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks'parks’ operating season for a fixed fee. Some membership products include other benefits and discounts for our guests during their visits. We earn sponsorship and international agreements revenue from contracts with third parties, pursuant to which we sell and advertise the third party'sparty’s products within our parks on a short-term basis that generally coincides with our annual operating season, and pursuant to certain activities in connection with our international agreements. The transaction price for our short-term contracts is explicitly stated within the contracts.
We generally recognize revenue from short-term contracts over the passage of time, with the exception of season pass and membership revenues. We recognize season pass and membership revenues in "Park admissions" over the estimated redemption rate, as we believe this appropriately depicts the transfer of service to our customers. We estimate the redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable. We review the estimated redemption rate regularly and on an ongoing basis and revise it as necessary throughout the year. Amounts received for multi-use admissions in excess of redemptions are recognized in "Deferred revenue". There was no change in the pattern of recognition for season pass and membership revenue during the year ended December 31, 2018 under Topic 606, as compared to historic accounting under Topic 605.revenue."
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Other revenues consist primarily of revenues from single-use tickets for entrance to our parks, in-park services (such as the sale of food and beverages, merchandise, games and attractions, standalone parking sales and other services inside our parks), accommodations revenue, and other miscellaneous products and services. Due to the short-term transactional nature of such purchases, we apply the practical expedient to recognize revenue for single-use ticket sales, in-park services, accommodations, and other miscellaneous services and goods for which we have the right to invoice.
Arrangements with Multiple Performance Obligations
Certain contracts with customers, primarily memberships, may include bundled products with multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the observable retail prices charged to customers.
Practical Expedients and Exemptions
We generally expense (i) sales commissions when incurred, and (ii) certain costs to obtain a contract where the amortization period would have been one year or less. These costs are recorded within Selling, general and administrative expenses.
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount tofor which we have the right to invoice for services performed.
For certain of our contracts that have an original expected length of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money.
4. | |
Property and Equipment |
As of December 31, 20182020, and 2017,2019, property and equipment was classified as follows:
December 31, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
Land | $ | 221,616 | $ | 221,345 | |||
Land improvements | 251,295 | 236,135 | |||||
Buildings and improvements | 302,957 | 295,124 | |||||
Rides and attractions | 1,118,141 | 1,059,720 | |||||
Equipment and other | 310,669 | 283,563 | |||||
Property and equipment, at cost | 2,204,678 | 2,095,887 | |||||
Accumulated depreciation | (950,996 | ) | (857,930 | ) | |||
Property and equipment, net | $ | 1,253,682 | $ | 1,237,957 |
| | | | | | |
| | December 31, | ||||
(Amounts in thousands) |
| 2020 |
| 2019 | ||
Land | | $ | 219,453 | | $ | 221,616 |
Land improvements | |
| 274,089 | |
| 264,417 |
Buildings and improvements | |
| 324,943 | |
| 318,960 |
Rides and attractions | |
| 1,207,029 | |
| 1,213,543 |
Equipment and other | |
| 383,176 | |
| 326,747 |
Property and equipment, at cost | |
| 2,408,690 | |
| 2,345,283 |
Accumulated depreciation | |
| (1,157,403) | |
| (1,061,287) |
Property and equipment, net | | $ | 1,251,287 | | $ | 1,283,996 |
5. | |
Goodwill and Intangible Assets |
For the year ended December 31, 2018,2020, we performed a qualitative analysis of our goodwill and indefinite-lived intangible assets and noted no indicators of impairment. Through that analysis, we determined that it is not likely that the carrying value of goodwill and indefinite-lived intangible assets exceeded their respective fair values. As of each of December 31, 20182020 and 2017,2019, the carrying amount of goodwill was $659.6 million and $630.2 million, respectively. We paid $19.1 million in cashmillion.
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SIX FLAGS ENTERTAINMENT CORPORATION
Notes to Premier Parks, LLC for the five new parks, which reflects the $23.0 million purchase price, less net working capital and other adjustments. We recorded $29.4 million of goodwill in connection with the acquisition, which is attributable to the excess of the purchase price over the net working capital liabilities we assumed. Consolidated Financial Statements
As of December 31, 2018 | |||||||||||||
(Amounts in thousands, except years) | Weighted-Average Remaining Amortization Period (Years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||
Indefinite-lived intangible assets: | |||||||||||||
Trade names, trademarks and other | $ | 344,075 | $ | — | $ | 344,075 | |||||||
Finite-lived intangible assets: | |||||||||||||
Third party licensing rights | 1.5 | 24,361 | (20,821 | ) | 3,540 | ||||||||
Other | 42.9 | 1,726 | (312 | ) | 1,414 | ||||||||
Total intangible assets, net | $ | 370,162 | $ | (21,133 | ) | $ | 349,029 |
As of December 31, 2017 | |||||||||||||
(Amounts in thousands, except years) | Weighted-Average Remaining Amortization Period (Years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||
Indefinite-lived intangible assets: | |||||||||||||
Trade names, trademarks and other | $ | 344,075 | $ | — | $ | 344,075 | |||||||
Finite-lived intangible assets: | |||||||||||||
Third party licensing rights | 2.5 | 24,361 | (18,419 | ) | 5,942 | ||||||||
Other | 30.0 | 2,735 | (1,165 | ) | 1,570 | ||||||||
Total intangible assets, net | $ | 371,171 | $ | (19,584 | ) | $ | 351,587 |
| | | | | | | | | | | |
|
| As of December 31, 2020 | |||||||||
|
| Weighted-Average |
| | |
| | |
| | |
|
| Remaining |
| | |
| | |
| | |
|
| Amortization Period | | Gross | | Accumulated | | Net | |||
(Amounts in thousands, except years) |
| (Years) | | Carrying Value | | Amortization | | Carrying Value | |||
Indefinite-lived intangible assets: |
|
|
| |
|
| |
| | | |
Trade names, trademarks and other |
|
| | $ | 344,075 | | $ | — | | $ | 344,075 |
| | | | | | | | | | | |
Finite-lived intangible assets: |
|
| |
|
| |
|
| |
|
|
Third party licensing rights |
| 5.5 | |
| 361 | |
| (238) | |
| 123 |
| | | | | | | | | | | |
Total intangible assets, net |
|
| | $ | 344,436 | | $ | (238) | | $ | 344,198 |
| | | | | | | | | | | |
|
| As of December 31, 2019 | |||||||||
|
| Weighted-Average |
| | |
| | |
| | |
|
| Remaining |
| | |
| | |
| | |
|
| Amortization Period | | Gross | | Accumulated | | Net | |||
(Amounts in thousands, except years) |
| (Years) | | Carrying Value | | Amortization | | Carrying Value | |||
Indefinite-lived intangible assets: |
|
|
| |
|
| |
| | | |
Trade names, trademarks and other |
|
| | $ | 344,075 | | $ | — | | $ | 344,075 |
| | | | | | | | | | | |
Finite-lived intangible assets: |
|
| |
|
| |
|
| |
|
|
Third party licensing rights |
| 0.5 | |
| 24,361 | |
| (23,224) | |
| 1,137 |
Other |
| — | |
| — | |
| — | |
| — |
| | | | | | | | | | | |
Total intangible assets, net |
|
| | $ | 368,436 | | $ | (23,224) | | $ | 345,212 |
Amortization expense related to finite-lived intangible assets totaled $2.4$1.0 million $2.5 millionduring the year ended December 31, 2020 and 2.6$2.4 million for the years ended December 31, 2018, 20172019 and 2016. respectively.2018. During the year we wrote off a fully amortized finite life intangible totaling $24.0 million. We expect that amortization expense on our existing intangible assets subject to amortization for the succeeding five years and thereafter will approximate the following:
(Amounts in thousands) | |||
For the year ending December 31: | |||
2019 | $ | 2,437 | |
2020 | 1,048 | ||
2021 | 57 | ||
2022 | 57 | ||
2023 | 57 | ||
2024 and thereafter | 1,298 | ||
$ | 4,954 |
| | | |
(Amounts in thousands) |
|
| |
For the year ending December 31: | |
| |
2021 | | $ | 22 |
2022 | | | 22 |
2023 | | | 22 |
2024 | | | 22 |
2025 | | | 22 |
2026 and thereafter | | | 13 |
| | $ | 123 |
6. | |
Noncontrolling Interests, Partnerships and Joint Ventures |
Redeemable Noncontrolling Interests
Redeemable noncontrolling interests represent the non-affiliated parties'parties’ share of the assets of the Partnership Parks that are less than wholly-owned: SFOT, SFOG and Six Flags White Water Atlanta, which is owned by the partnership that owns SFOG.
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The following table presents a rollforward of redeemable noncontrolling interests in the Partnership Parks:
(Amounts in thousands) | SFOT | SFOG | Total | ||||||||
Balance at December 31, 2016 | $ | 227,620 | $ | 258,256 | $ | 485,876 | |||||
Fresh start accounting fair market value adjustment for purchased units | (32 | ) | — | (32 | ) | ||||||
Purchases of redeemable units of SFOT | (128 | ) | — | (128 | ) | ||||||
Change in redemption value of partnership units | 133 | 8,582 | 8,715 | ||||||||
Net income attributable to noncontrolling interests | 19,701 | 19,509 | 39,210 | ||||||||
Distributions to noncontrolling interests | (19,701 | ) | (19,509 | ) | (39,210 | ) | |||||
Balance at December 31, 2017 | 227,593 | 266,838 | 494,431 | ||||||||
Fresh start accounting fair market value adjustment for purchased units | (80 | ) | — | (80 | ) | ||||||
Purchases of redeemable units of SFOT | (353 | ) | — | (353 | ) | ||||||
Change in redemption value of partnership units | 16,596 | 14,677 | 31,273 | ||||||||
Net income attributable to noncontrolling interests | 20,086 | 19,921 | 40,007 | ||||||||
Distributions to noncontrolling interests | (20,086 | ) | (19,921 | ) | (40,007 | ) | |||||
Balance at December 31, 2018 | $ | 243,756 | $ | 281,515 | $ | 525,271 |
| | | | | | | | | |
(Amounts in thousands) |
| SFOT |
| SFOG |
| Total | |||
Balance at December 31, 2018 | | $ | 243,756 | | $ | 281,515 | | $ | 525,271 |
Fresh start accounting fair market value adjustment for purchased units | | | (45) | | | 0 | | | (45) |
Purchases of redeemable units | | | (217) | | | 0 | | | (217) |
Change in redemption value of partnership units | | | 3,250 | | | 999 | | | 4,249 |
Net income attributable to noncontrolling interests | | | 20,452 | | | 20,301 | | | 40,753 |
Distributions to noncontrolling interests | | | (20,452) | | | (20,301) | | | (40,753) |
Balance at December 31, 2019 | | | 246,744 | | | 282,514 | | | 529,258 |
Fresh start accounting fair market value adjustment for purchased units | | | (720) | | | (204) | | | (924) |
Purchases of redeemable units | | | (3,440) | | | (1,536) | | | (4,976) |
Change in redemption value of partnership units | | | 11 | | | 7 | | | 18 |
Net income attributable to noncontrolling interests | | | 20,634 | | | 20,654 | | | 41,288 |
Distributions to noncontrolling interests | | | (20,634) | | | (20,654) | | | (41,288) |
Balance at December 31, 2020 | | $ | 242,595 | | $ | 280,781 | | $ | 523,376 |
See Note
7. Derivative Financial Instruments
In June 2019, we entered into the June 2019 Swap Agreements with an aggregate notional amount of $300.0 million to mitigate the risk of an increase in the LIBOR interest rate on the Second Amended and Restated Term Loan B. The term of the June 2019 Swap Agreements began in June 2019 and expires in June 2023. Upon execution, we designated and documented the June 2019 Swap Agreements as cash flow hedges. The June 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.
In August 2019, we entered into the August 2019 Swap Agreements with an aggregate notional amount of $400.0 million to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. The term of the August 2019 Swap Agreements began in August 2019 and expires in August 2024. Upon execution, we designated and documented the August 2019 Swap Agreements as cash flow hedges. The August 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.
In March 2020, we executed a
On April 22, 2020, we repaid $315.0 million of the Second Amended and Restated Term Loan B. In conjunction, the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement were de-designated, since the hedged interest was no longer probable of occurring due to the repayment of the debt. As a result, $14.9 million was reclassified from accumulated other comprehensive loss to interest expense in the consolidated statement of operations. Consistent with company policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into $300.0 million of notional amount counter-agreements (the “April 2020 Counter-agreements”) designed to economically offset the impact of the de-designated swap agreements.
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By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, we are exposed to credit agreement (the "2011risk and market risk. Credit Facility")risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, hedging instruments are placed with several lenders including Wells Fargo Bank National Association, as administrative agent, and related loan and security documentation agents. The 2011 Credit Facility was comprisedcounterparties that we believe pose minimal credit risk. Market risk is the adverse effect on the value of a 5-year $200.0financial instrument that results from a change in interest rates, commodity prices or currency exchange rates. We manage the market risk associated with derivative instruments by establishing and monitoring parameters that limit the types and degree of market risk that we may undertake. We hold and issue derivative instruments for risk management purposes only and do not utilize derivatives for trading or speculative purposes.
We record derivative instruments at fair value on our consolidated balance sheets. When in qualifying relationships, the gains and losses on cash flow designated derivatives are deferred in accumulated other comprehensive loss (“AOCL”) and are reclassified to interest expense when the forecasted transaction takes place. The fair value of derivatives that are not designated as hedging instruments are recorded directly to “interest expense”. Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid expenses and other current assets and other accrued liabilities, respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in deposits and other assets and other long-term liabilities, respectively.
Our derivatives are measured on a recurring basis using Level 2 inputs and the income approach. The fair value measurements of our derivatives are based on quoted prices and other inputs that are observable.
Derivative assets recorded at fair value in our consolidated balance sheets as of December 31, 2020 and 2019, respectively, consisted of the following:
| | | | | |
| Derivative Assets | ||||
(Amounts in thousands) | December 31, 2020 |
| December 31, 2019 | ||
Derivatives Designated as Cash Flow Hedges | | | | | |
Interest Rate Swap Agreements — Current | $ | — |
| $ | 485 |
Interest Rate Swap Agreements — Noncurrent | | — | | | 1,440 |
Derivatives Not Designated as Hedging Instruments | | | | | |
Interest Rate Swap Agreements - Current |
| 877 | |
| — |
Interest Rate Swap Agreements - Noncurrent | | 585 | | | — |
| $ | 1,462 |
| $ | 1,925 |
Derivative liabilities recorded at fair value in our consolidated balance sheets as of December 31, 2020 and December 31, 2019, respectively, consisted of the following:
| | | | | | |
| | Derivative Liabilities | ||||
(Amounts in thousands) | | December 31, 2020 |
| December 31, 2019 | ||
Derivatives Designated as Cash Flow Hedges | | | | | | |
Interest Rate Swap Agreements — Current | | $ | (5,251) |
| $ | (788) |
Interest Rate Swap Agreements — Noncurrent | | | (11,633) | | | (2,667) |
Derivatives Not Designated as Hedging Instruments | | | | | | |
Interest Rate Swap Agreements - Current | |
| (4,875) | |
| — |
Interest Rate Swap Agreements - Noncurrent | | | (9,032) | | | — |
| | $ | (30,791) |
| $ | (3,455) |
Losses before taxes on derivatives not designated as a cash flow hedge of $0.6 million were presented in “Interest expense” in the consolidated statement of operations for the year ended December 31, 2020.
77
Gains and losses before taxes on derivatives designated as hedging instruments were presented in “Interest expense” in the consolidated statement of operations for the years ended December 31, 2020, 2019 and 2018 were as follows:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Loss | | Loss Reclassified from | ||||||||||||||
| | Recognized in AOCL | | AOCL into Operations | ||||||||||||||
(Amounts in thousands) |
| 2020 |
| 2019 |
| 2018 |
| 2020 |
| 2019 |
| 2018 | ||||||
Interest Rate Swap Agreements | | $ | (33,902) | | $ | (484) |
| $ | — |
| $ | (3,685) | | $ | 1,046 |
| $ | — |
Total |
| $ | (33,902) | | $ | (484) |
| $ | — |
| $ | (3,685) | | $ | 1,046 |
| $ | — |
As of December 31, 2020, we expect to reclassify net losses of $5.3 million, currently recorded in AOCL, into “Interest expense, net” within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.
During the year ended December 31, 2020, we recognized in AOCL a loss of $33.9 million related to our swap agreements. This loss was caused by a decrease in both current interest rates, the interest rate forward curve and the expectation of future payment by us to our hedging counterparties based on current assumptions of the market. Upon de-designation of the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement, we reclassified $14.9 million from accumulated other comprehensive loss to interest expense in the consolidated statement of operations.
8. | Long-Term Indebtedness |
Credit Facility
As part of our ongoing operations, we periodically refinance our existing credit facility. As of December 31, 2020, our credit facility consisted of a $481.0 million revolving credit loan facility (the "Revolving Loan"), a 5-year $75.0 million Tranche A Term Loan facility ("Term Loan A"“Second Amended and Restated Revolving Loan”) and a 7-year $860.0$479.0 million Tranche B Term Loan facility ("(the “Second Amended and Restated Term Loan B"B”) pursuant to the amended and together with the Term Loan A, the "Term Loans"). In certain circumstances, the Term Loan B could be increased by $300.0 million. The proceeds from the $935.0 million Term Loans were used, along with $15.0 million of existing cash, to retire the $950.0 million senior term loan from the prior facility. Interest on the 2011 Credit Facility accrued based on pricing rates corresponding with the senior secured leverage ratios of Six Flags Theme Parks Inc. ("SFTP") as set forth in therestated credit agreement.
On April 17, 2019, we amended and restated the 2015 Credit Facility (as previously amended). Additionally, theThe Second Amended and Restated Credit Facility increasedwas comprised of the additional flexibility under$350.0 million Second Amended and Restated Revolving Loan and the $800.0 million Second Amended and Restated Term Loan B to $350.0 million.B. In connection with entering into the Second Amended and Restated Credit Facility, we repaid the amounts outstanding on the 2015 Revolving Loan and the outstanding 2015 Term Loan B.B and we recognized a loss on debt extinguishment of $6.2 million. The remaining proceeds from the Second Amended and Restated Credit Facility were used for share repurchases andgeneral corporate purposes, including payment of refinancing fees.
On December 20, 2016,October 18, 2019, we entered into an amendment to the Second Amended and Restated Credit Facility, thatwhich reduced the overall borrowing rate on the Second Amended and Restated Term Loan B by 25 basis points through a reduction in the applicable margin from LIBOR plus 2.50% to LIBOR plus 2.25%, with the elimination of the minimum LIBOR rate requirement. We capitalized a nominal amount of debt issuance costs directly associated with the issuance of this amendment and recognized a loss on debt extinguishment of $0.5 million.
On April 8, 2020, certain of our revolving credit lenders agreed to provide an incremental $131.0 million of debt issuance costs directly associatedrevolving credit commitments to the Second Amended and Restated Revolving Loan, increasing the facility from $350.0 million to $481.0 million.
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On April 15, 2020, we received sufficient consents from the continuing lenders under the Second Amended and Restated Credit Facility (the “Credit Agreement Amendment”) substantially concurrently with the closing of the $725 million 2025 Notes discussed below to, among other things, (i) permit the issuance of this amendment.
On April 18, 2018,22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025 (discussed below). The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B and for general corporate and working capital purposes, including expenses relating to the offering. We recognized a loss on debt extinguishment of $5.1 million related to the transaction.
On August 26, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility that increased ourwhich, among other things, (i) extended the previously effectuated suspension of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Term Loan B borrowings by $39.0 million. We capitalized $0.3 millionCredit Facility through the end of debt issuance costs directly associated2021, (ii) re-established the senior secured leverage ratio financial maintenance covenant thereafter (provided that for each quarter in 2022 (other than the fourth quarter) that the financial maintenance covenant is tested, SFTP will be permitted to use its quarterly Borrower Consolidated Adjusted EBITDA (as defined in the credit agreement governing the Second Amended and Restated Credit Facility) from the second, third, and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2021), (iii) reduced the commitment fee on the revolving credit facility, and (iv) extended the minimum liquidity covenant that will apply through December 31, 2022. The extension of the modifications to the financial covenant and other provisions in the Second Amended and Restated Credit Facility pursuant to this amendment will be in effect from the date of the amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the issuance of this amendment. The proceedsfinancial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the additional borrowings were used for general corporate purposes, including share repurchases.
As of December 31, 2020 and 2019, 0 amounts were outstanding under the Second Amended and Restated Revolving Loan (excluding amounts reserved for letters of credit in the amount of $18.1 million). As of December 31, 2017, no amounts under the Amended$21.0 million and Restated Revolving Loan were outstanding (excluding amounts reserved for letters of credit in the amount of $18.7 million)$20.8 million, respectively). Interest on the Second Amended and Restated Revolving Loan accrues at an annual rate of LIBOR plus an applicable margin with an unused commitment fee based on our senior secured leverage ratio. As of December 31, 2018 and 2017,2020, the Second Amended and Restated Revolving Loan unused commitment fee was 0.375%0.30%. The principal amount of the Second Amended and Restated Revolving Loan is due and payable on June 30, 2020.
As of December 31, 20182020 and 2017, $583.82019, $479.0 million and $544.8$796.0 million, respectively, was outstanding under the Second Amended and Restated Term Loan B. Interest on the Second Amended and Restated Term Loan B accrues at an annual rate of LIBOR plus an applicable margin, based on our consolidated leverage ratio. In April 2014,June 2019, we entered into the Interest RateJune 2019 Swap Agreements with a notional amount of $200.0 million to mitigate the risk of an increase in the LIBOR interest rate abovein effect on the 0.75% minimumSecond Amended and Restated Term Loan B. In August 2019, we entered into the August 2019 Swap Agreements to further mitigate the risk of an increase in the LIBOR interest rate in effect on the Term Loan B. The Interest Rate Swap Agreements continued to mitigate an increase in the LIBOR rate in effect on theSecond Amended and Restated Term Loan B through December 2017.B. See Note 7 for further discussion of interest rate swaps. As of December 31, 20182020 and 2017,2019, the applicable interest rate on the Second Amended and Restated Term Loan B was 4.26%3.01% and 3.36%3.48%, respectively. Beginning on September 30, 2015, the Amended and Restated Term Loan B became payable in equal quarterly installments of
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Amounts outstanding under the Second Amended and Restated Credit Facility are guaranteed by Holdings, Six Flags Operations Inc. ("SFO") and certain of the domestic subsidiaries of SFTP (collectively, the "Loan Parties"). The Second Amended and Restated Credit Facility is secured by a first priority security interest in substantially all of the assets of the Loan Parties. The Second Amended and Restated Credit Facility agreement contains certain representations, warranties, affirmative covenants and financial covenants (specifically, (i) a minimum interest coverage covenant and (ii) a maximum senior secured net leverage maintenance covenant). In addition, the Second Amended and Restated Credit Facility agreement contains restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the incurrence of indebtedness and liens, fundamental changes, restricted payments, capital expenditures, investments, prepayments of certain indebtedness, transactions with affiliates, changes in fiscal periods, modifications of certain documents, activities of the Company and SFO and hedging agreements, subject, in each case, to certain carve-outs.
2024 Notes, to Consolidated Financial Statements
On June 16, 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due July 31, 2024 (the "2024 Notes"). We capitalized $4.7 million of debt issuance costs directly associated with the issuance of the 2024 Notes. We used approximately $150.0 million of the proceeds from the issuance of the 2024 Notes to reduce our borrowings under the Amended and Restated2015 Term Loan B. We used the remaining net proceeds of the sale of the 2024 Notes for general corporate and working capital purposes, which primarily included repurchases of our common stock.
On April 13, 2017, weHoldings issued an additional $700.0 million of 4.875% Senior Notes due July 31, 2024 (the "2024 Notes Add-on"). We capitalized $3.9 million of debt issuance costs directly associated with the issuance of the 2024 Notes Add-on. Interest payments of $24.4 million for the 2024 Notes and the 2024 Notes Add-on are due semi-annually on January 31 and July 31 of each year, with the exception of the first payment for the 2024 Notes on January 31, 2017, which was $9.1 million.
On April 13, 2017, weHoldings issued $500.0 million of 5.500%5.50% Senior Notes due April 15, 2027 (the "2027 Notes"). We capitalized $2.6 million of debt issuance costs directly associated with the issuance of the 2027 Notes.
During March of 2020, we prepaid $50.5 million of the outstanding 2024 Notes principal, reducing the outstanding amount to $949.5 million. We recognized a loss on debt extinguishment of $1.0 million. Interest payments of $13.8$23.1 million for the 2024 Notes and the 2024 Notes Add-on are due semi-annually on January 31 and July 31 of each year.
On April 22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025 (the “2025 Notes”). The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B and for general corporate and working capital purposes, including expenses relating to the offering. In conjunction with the $315.0 million repayment of the Second Amended and Restated Term Loan B, certain of our hedging instruments that were entered into to mitigate the risk of an increase in the LIBOR interest rate and which are discussed in Note 7, Derivative Financial Instruments, were de-designated. Consistent with policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into counter-agreements designed to economically offset the impact of the de-designated swap agreements. Interest payments of $25.4 million are due semi-annually on April 15January 1 and October 15July 1 of each year, with the exception of January 1, 2021, which included the first payment on October 15, 2017, which was $13.9interest from April 22, 2020 through July 1, 2020 and totaled $35.1 million.
The 2024 Notes, the 2024 Notes Add-on, 2025 Notes and the 2027 Notes are guaranteed by the Loan Parties. The 2024 Notes, the 2024 Notes Add-on, 2025 Notes and the 2027 Notes contain restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the ability of the Loan Parties to incur additional indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments, engage in transactions with affiliates, pay dividends and repurchase capital stock. The 2024 Notes, the 2024 Notes Add-on, 2025 Notes and the 2027 Notes contain certain events of default, including payment defaults, breaches of covenants and representations, cross defaults to other material indebtedness, judgment, and changes of control and bankruptcy events of default.
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As of December 31, 20182020 and 2017,2019, total debt consisted of the following:
December 31, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
Amended and Restated Term Loan B | $ | 583,750 | $ | 544,750 | |||
2027 Notes | 500,000 | 500,000 | |||||
2024 Notes | 1,000,000 | 1,000,000 | |||||
Amended and Restated Revolving Loan | 43,000 | — | |||||
Net discount | (6,792 | ) | (8,137 | ) | |||
Deferred financing costs | (13,446 | ) | (15,435 | ) | |||
Total debt | 2,106,512 | 2,021,178 | |||||
Less current portion | 43,000 | — | |||||
Total long-term debt | $ | 2,063,512 | $ | 2,021,178 |
| | | | | | |
|
| As of | ||||
(Amounts in thousands) |
| December 31, 2020 |
| December 31, 2019 | ||
Second Amended and Restated Term Loan B |
| $ | 479,000 |
| $ | 796,000 |
2024 Notes | |
| 949,490 | |
| 1,000,000 |
2025 Notes | | | 725,000 | | | — |
2027 Notes | |
| 500,000 | |
| 500,000 |
Net discount | |
| (4,357) | |
| (6,535) |
Deferred financing costs | |
| (26,492) | |
| (14,581) |
Total debt | | $ | 2,622,641 | | $ | 2,274,884 |
Less current portion of long-term debt | |
| — | |
| (8,000) |
Total long-term debt | | $ | 2,622,641 | | $ | 2,266,884 |
As of December 31, 2018,2020, annual maturities of long-term debt, assuming no acceleration of maturities, were as follows:
(Amounts in thousands) | |||
For the year ending December 31: | |||
2019 | $ | — | |
2020 | 43,000 | ||
2021 | — | ||
2022 | 583,750 | ||
2023 | — | ||
2024 and thereafter | 1,500,000 | ||
$ | 2,126,750 |
| | | |
(Amounts in thousands) |
|
| |
For the year ending December 31: | |
| |
2021 | | | — |
2022 | | | — |
2023 | | | — |
2024 | | | 949,490 |
2025 | | | 725,000 |
2026 and thereafter | | | 979,000 |
| | $ | 2,653,490 |
Fair-Value of Long-Term Indebtedness
As of December 31, 20182020 and December 31, 2017,2019, the fair value of our long-term debt was $2,012.4$2,693.3 million and $2,057.1$2,348.9 million, respectively. The measurement of the fair value of long-term debt is based on market prices that are generally observable for similar liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement.
9. | |
Selling, General and Administrative Expenses |
Selling, general and administrative expenses comprised the following for the years ended December 31, 2018, 20172020, 2019 and 2016:
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Park | $ | 129,335 | $ | 129,090 | $ | 124,019 | |||||
Corporate | 2,833 | 29,980 | 168,986 | ||||||||
Total selling, general and administrative expenses | $ | 132,168 | $ | 159,070 | $ | 293,005 |
| | | | | | | | | |
|
| Year Ended December 31, | |||||||
(Amounts in thousands) |
| 2020 |
| 2019 |
| 2018 | |||
Park | | $ | 80,027 | | $ | 131,619 | | $ | 129,335 |
Corporate | |
| 67,268 | |
| 67,575 | |
| 2,833 |
Total selling, general and administrative expenses | | $ | 147,295 | | $ | 199,194 | | $ | 132,168 |
Corporate, selling, general and administrative expense includes stock-based compensation of $19.5 million and $13.3 million for the years ended December 31, 2020 and 2019, respectively, and a reversal of stock-based compensation expense of $46.7 million and $22.7 million for the years ended December 31, 2018 and 2017, respectively, and stock-based compensation expense of $116.3 million for the year ended December 31, 2016.2018.
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10. | |
Stock Benefit Plans |
Pursuant to the Long-Term Incentive Plan, Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance and cash-settled awards and dividend equivalents to select employees, officers, directors and consultants of Holdings and its affiliates. In May 2017, our stockholders approved amendments to the Long-Term Incentive Plan that increased the number of shares available for issuance under the Long-Term Incentive Plan by 4,000,000 shares.
During the years ended December 31, 2018, 2017,2020, 2019 and 20162018 we recognized stock-based compensation expense related to the Long-Term Incentive Plan, excluding of amounts related to our 2017 Performance Award (as defined below), of $19.1 million, $13.0 million and $15.5 million, $16.9 million and
As of December 31, 2018,2020, options to purchase approximately 5,380,0004,797,000 shares of common stock of Holdings and approximately 16,0001,581,000 shares of restricted stock or restricted stock units were outstanding under the Long-Term Incentive Plan and approximately
Stock Options
Options granted under the Long-Term Incentive Plan are designated as either incentive stock options or non-qualified stock options. Options are generally granted with an exercise price equal to the fair market value of the common stock of Holdings on the date of grant. While certain stock options are subject to acceleration in connection with a change in control, options are generally cumulatively exercisable in four equal annual installments commencing one year after the date of grant with a ten-year term. Generally, the unvested portion of stock option awards is forfeited upon termination of employment. Stock option compensation is recognized over the vesting period using the graded vesting terms of the respective grant.
The estimated fair value of the majority of our options granted was calculated using the Black-Scholes option pricing valuation model. This model takes into account several factors and assumptions. The risk-free interest rate is based on the yield
The following weighted-average assumptions were utilized in the Black-Scholes model to value the stock options granted during the years ended December 31, 2018, 20172020, 2019 and 2016:2018:
| | | | | | | | | | | | | |
|
| December 31, 2020 |
| December 31, 2019 |
| December 31, 2018 | | ||||||
|
| CEO |
| Employees |
| CEO |
| Employees |
| CEO |
| Employees | |
Risk-free interest rate |
| — | | 1.60 | % | 1.59 | % | 1.42 | % | 2.52 | % | 2.67 | % |
Expected life (in years) |
| — |
| 3.67 |
| 3.67 |
| 3.67 |
| 3.85 |
| 3.68 | |
Expected volatility |
| — | | 28.38 | % | 28.62 | % | 26.96 | % | 23.20 | % | 22.51 | % |
Expected dividend yield |
| — | | 7.18 | % | 6.47 | % | 6.12 | % | 4.67 | % | 4.54 | % |
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December 31, 2018 | December 31, 2017 | December 31, 2016 | |||||||||||||||
CEO | Employees | CEO | Employees | CEO | Employees | ||||||||||||
Risk-free interest rate | 2.52 | % | 2.67 | % | 1.64 | % | 1.56 | % | 1.05 | % | 1.00 | % | |||||
Expected life (in years) | 3.85 | 3.68 | 3.85 | 3.85 | 3.85 | 3.85 | |||||||||||
Expected volatility | 23.20 | % | 22.51 | % | 21.89 | % | 22.70 | % | 24.30 | % | 23.17 | % | |||||
Expected dividend yield | 4.67 | % | 4.54 | % | 4.22 | % | 4.42 | % | 4.47 | % | 4.15 | % |
(Amounts in thousands, expect per share data) | Shares | Weighted Avg. Exercise Price ($) | Weighted Avg. Remaining Contractual Term | Aggregate Intrinsic Value ($) | ||||||||
Balance at December 31, 2017 | 5,185 | $ | 43.78 | |||||||||
Granted | 1,451 | $ | 65.71 | |||||||||
Exercised | (1,094 | ) | $ | 38.08 | ||||||||
Canceled or exchanged | (4 | ) | $ | 44.39 | ||||||||
Forfeited | (158 | ) | $ | 52.46 | ||||||||
Expired | — | $ | — | |||||||||
Balance at December 31, 2018 | 5,380 | $ | 50.60 | 7.47 | $ | 43,141 | ||||||
Vested and expected to vest at December 31, 2018 | 5,140 | $ | 50.16 | 7.40 | $ | 42,780 | ||||||
Options exercisable at December 31, 2018 | 2,035 | $ | 37.88 | 5.51 | $ | 36,413 |
| | | | | | | | | | |
|
| |
| Weighted Avg. | | Weighted Avg. |
| | | |
| | | | Exercise Price | | Remaining | | Aggregate | ||
| | | | Per Share | | Contractual | | Intrinsic Value | ||
(Amounts in thousands, expect per share and term data) | | Shares | | ($) | | Term | | ($) | ||
Balance at December 31, 2019 | | 6,408 | | $ | 52.42 | |
| | |
|
Granted | | 9 | | $ | 44.73 | |
| | |
|
Exercised | | (127) | | $ | 17.64 | |
| | |
|
Canceled or exchanged | | (1,061) | | $ | 53.50 | |
| | |
|
Forfeited | | (432) | | $ | 59.85 | |
| | |
|
Expired | | 0 | | $ | 0 | |
| | |
|
Balance at December 31, 2020 | | 4,797 | | $ | 52.42 | | 6.27 | | $ | 2,569 |
Vested and expected to vest at December 31, 2020 | | 4,679 | | $ | 52.23 | | 6.22 | | $ | 2,569 |
Options exercisable at December 31, 2020 | | 2,993 | | $ | 49.30 | | 5.08 | | $ | 2,569 |
The following table presents the weighted average grant date fair value per share of the options granted, the total intrinsic value of options exercised, the total fair value of options that have vested, and the total cash received from the exercise of stock options during the years ended December 31, 2018, 20172020, 2019 and 2016:
Year Ended December 31, | |||||||||||
(Amounts in thousands, expect per share data) | 2018 | 2017 | 2016 | ||||||||
Weighted average grant date fair value of options granted | $ | 8.01 | $ | 6.26 | $ | 5.84 | |||||
Total intrinsic value of options exercised | $ | 31,822 | $ | 52,955 | $ | 37,847 | |||||
Total fair value of options that have vested | $ | 8,446 | $ | 8,436 | $ | 10,701 | |||||
Total cash received from the exercise of stock options | $ | 41,658 | $ | 60,583 | $ | 34,680 |
| | | | | | | | | |
|
| Year Ended December 31, | |||||||
(Amounts in thousands, expect per share data) |
| 2020 |
| 2019 |
| 2018 | |||
Weighted average grant date fair value per share of options granted | | $ | 4.85 | | $ | 6.38 | | $ | 8.01 |
Total intrinsic value of options exercised | | $ | 1,275 | | $ | 7,130 | | $ | 31,822 |
Total fair value of vested options | | $ | 7,369 | | $ | 10,253 | | $ | 8,446 |
Total cash received from the exercise of stock options | | $ | 2,235 | | $ | 17,495 | | $ | 41,658 |
As of December 31, 2018,2020, there was
Stock, Restricted Stock and Restricted Stock Units
Stock, restricted stock and restricted stock units granted under the Long-Term Incentive Plan may be subject to transfer and other restrictions as determined by the compensation committee of Holdings'Holdings’ Board of Directors. Generally, the unvested portion of restricted stock and restricted stock unit awards is forfeited upon termination of employment. The fair value of stock, restricted stock and restricted stock unit awards on the date of grant is expensed on a straight linestraight-line basis over the requisite service period of the graded vesting term as if the award was, in substance, multiple awards.
During the year ended December 31, 2014, a performance award was established based on our goal to achieve Modified EBITDA of $600 million by 2017 (the "2017 Performance Award"). "Modified EBITDA” is defined as the Company’sour consolidated income from continuing operations: excluding the cumulative effect of changes in accounting principles; discontinued operations gains or losses; income tax expense or benefit; restructure costs or recoveries; reorganization items
During the year ended December 31, 2016, an additionala performance award was established based on our aspirational goal to achieve Modified EBITDA of $750 million by 2020 (the "2020 Performance Award"). The aggregate payout under the performance award to key employees if the target iswas achieved in 2020 would behave been 1,025,000 shares plus associated DERs but could be more or less depending on the level of achievement and the timing thereof. There has been no stock-based compensation expense recorded for this performance award because it is not deemed probable that we will achieve the specified performance targets as of December 31, 2018. Based on the closing market price of Holdings' common stock on the last trading day of the quarter ended December 31, 2018, the total unrecognized compensation expense related to this award at target achievement in 2020 is $63.2 million that will be expensed over the service period if it becomes probable of achieving the performance condition.Dividend Equivalent Rights (“DERs”). The required growth rate, combined with the uncertainty of the timing of our international agreements revenue over the next few years has led us to revisit our medium-term outlook and conclude that on time achievement of the 2020 Performance Award is highly unlikely. We are now strivingwas not achieved in 2020 and we believe that achievement in 2021, which provides for late achievementissuance of one-half of the target in 2021, with modest growth likely in 2019award, is highly unlikely and accelerating thereafter. We will continuethus 0 expense has been recognized.
83
SIX FLAGS ENTERTAINMENT CORPORATION
Notes to evaluate the probability of achieving the performance condition going forward and record the appropriate expense if necessaryConsolidated Financial Statements
The following table summarizes stock, restricted stock and restricted stock unit activity for the year ended December 31, 2018:
(Amounts in thousands, except per share amounts) | Shares | Weighted Average Grant Date Fair Value Per Share ($) | ||||
Non-vested balance at December 31, 2017 | 12 | $ | 61.74 | |||
Granted | 65 | $ | 63.80 | |||
Vested | (61 | ) | $ | 63.42 | ||
Forfeited | — | $ | — | |||
Canceled | — | $ | — | |||
Non-vested balance at December 31, 2018 | 16 | $ | 63.69 |
| | | | | |
|
| |
| | Weighted |
| | | | | Average Grant |
| | | | | Date Fair Value |
| | | | | Per Share |
(Amounts in thousands, except per share amounts) | | Shares | | | ($) |
Non-vested balance at December 31, 2019 | | 62 | | $ | 48.29 |
Granted | | 1,569 | | $ | 18.86 |
Vested | | (50) | | $ | 40.19 |
Forfeited | | (121) | | $ | 19.01 |
Canceled | | 0 | | $ | 0 |
Non-vested balance at December 31, 2020 | | 1,460 | | $ | 19.37 |
The following table presents the weighted average grant date fair value per share of stock awards granted, the total grant date fair value of stock awards granted, and the total fair value of stock awards that have vested during the years ended December 31, 2018, 20172020, 2019 and 2016:
Year Ended December 31, | |||||||||||
(Amounts in thousands, expect per share data) | 2018 | 2017 | 2016 | ||||||||
Weighted average grant date fair value of stock awards granted | $ | 63.80 | $ | 61.74 | $ | 51.46 | |||||
Total grant date fair value of stock awards granted | $ | 4,185 | $ | 750 | $ | 68,207 | |||||
Total fair value of stock awards that have vested | $ | 3,888 | $ | 560 | $ | 68,341 |
| | | | | | | | | |
|
| Year Ended December 31, | |||||||
(Amounts in thousands, expect per share data) |
| 2020 |
| 2019 |
| 2018 | |||
Weighted average grant date fair value per share of stock awards granted | | $ | 18.86 | | $ | 48.29 | | $ | 63.80 |
Total grant date fair value of stock awards granted | | $ | 29,597 | | $ | 3,007 | | $ | 4,185 |
Total fair value of vested stock awards | | $ | 2,011 | | $ | 1,027 | | $ | 3,888 |
There was
Deferred Share Units
Non-employee directors can elect to receive the value of their annual cash retainer as a deferred share unit award ("DSU") under the Long-Term Incentive Plan whereby the non-employee director is granted DSUs in an amount equal to such director'sdirector’s annual cash retainer divided by the closing price of Holdings'Holdings’ common stock on the date of the annual stockholders meeting. Each DSU represents Holdings'Holdings’ obligation to issue one1 share of common stock. The shares are delivered approximately thirty days following the cessation of the non-employee director'sdirector’s service as a director of Holdings'Holdings’.
DSUs generally vest consistent with the manner in which non-employee directors'directors’ cash retainers are paid. The fair value of the DSUs on the date of grant is expensed on a straight line basis over the requisite service period.
During each of the years ended December 31, 2020, 2019 and 2018, 2017approximately 7,000 DSUs, 4,000 DSUs and 2016, approximately
As of December 31, 2018,2020, there was no0 unrecognized compensation expense related to the outstanding DSUs.
84
On February 8, 2012, Holdings'Holdings’ Board of Directors granted DERs to holders of unvested stock options, at which time, approximately 10.0 million unvested stock options were outstanding. The DERs accrue dividends as of the record date of each of Holdings'Holdings’ dividends that will be distributed to stock option holders upon the vesting of their stock option award. Holdings will distribute the accumulated accrued dividends pursuant to the DERs in either cash or shares of common stock. Generally, holders of stock options for fewer than 1,000 shares of stock will receive their accumulated accrued dividends in cash and holders of stock options for 1,000 shares of stock or greater will receive their accumulated accrued dividends in shares of common stock. In addition, Holdings'Holdings’ Board of Directors granted similar DERs payable in shares of common stock if and when any shares are granted under the 2020 Performance Award.
Holdings’ Board of Directors granted approximately 1.5 million, 1.92.0 million and 1.31.5 million additional options to the majority of our full-time employees as well as DERs in connection with such options during the years ended December 31, 2018, 20172019 and 2016,2018, respectively. Exclusive of stock-based compensation recognized for the DER grants associated with the 2017 Performance Award discussed above, we recorded stock-based compensation for DER grants of
Employee Stock Purchase Plan
The Six Flags Entertainment Corporation Employee Stock Purchase Plan (the "ESPP") allows eligible employees to purchase Holdings'Holdings’ common stock at 90% of the lower of the market value of the common stock at the beginning or end of each successive six-month offering period. Amounts accumulated through participants'participants’ payroll deductions ("purchase rights") are used to purchase shares of common stock at the end of each purchase period. Pursuant to the ESPP, noNo more than 2,000,000 shares of common stock of Holdings may be issued. Holdings'issued pursuant to the ESPP. Holdings’ common stock may be issued by eitherfrom authorized and unissued shares, treasury shares or shares purchased on the open market. As of December 31, 2018,2020, we had
Stock-based compensation related to purchase rights is recognized based on the intrinsic value of each respective six-month ESPP offering period. As of December 31, 20182020 and 2017,2019, no purchase rights were outstanding under the ESPP.
Stock-based compensation consisted of the following amounts for the years ended December 31, 2018, 20172020, 2019 and 2016.2018. We present separately the reversal of previously recorded stock-based compensation related to the 2017 Performance Award from our Long-Term Incentive Plan and Employee Stock Purchase Plan.
| | | | | | | | |
| Year Ended December 31, | |||||||
(Amounts in thousands) | 2020 | | 2019 | | 2018 | |||
Long-Term Incentive Plan | |
| | | |
| |
|
Options and other | $ | 19,078 | | $ | 13,037 | | $ | 15,543 |
Performance awards |
| — | |
| — | |
| (62,512) |
Employee Stock Purchase Plan |
| 452 | |
| 237 | |
| 285 |
Total Stock-Based Compensation | $ | 19,530 | | $ | 13,274 | | $ | (46,684) |
85
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Long-Term Incentive Plan | |||||||||||
Options and Other | $ | 15,543 | $ | 16,910 | $ | 13,581 | |||||
2017 Performance Award | (62,512 | ) | (39,935 | ) | 102,447 | ||||||
Employee Stock Purchase Plan | 285 | 328 | 311 | ||||||||
Total stock-based compensation | $ | (46,684 | ) | $ | (22,697 | ) | $ | 116,339 |
11. | |
Income Taxes |
The following table summarizes the domestic and foreign components of our income (loss) before income taxes for the years ended December 31, 2018, 20172020, 2019 and 2016:
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Domestic | $ | 383,875 | $ | 301,322 | $ | 216,205 | |||||
Foreign | 27,983 | 27,730 | 17,061 | ||||||||
Income before income taxes | $ | 411,858 | $ | 329,052 | $ | 233,266 |
| | | | | | | | | |
| | Year Ended December 31, | |||||||
(Amounts in thousands) |
| 2020 |
| 2019 |
| 2018 | |||
Domestic | | $ | (487,594) | | $ | 297,752 | | $ | 383,875 |
Foreign | |
| (35,464) | |
| 14,008 | |
| 27,983 |
(Loss) income before income taxes | | $ | (523,059) | | $ | 311,760 | | $ | 411,858 |
The following table summarizes the components of income tax (benefit) expense (benefit) for the years ended December 31, 2018, 20172020, 2019 and 2016:
(Amounts in thousands) | Current | Deferred | Total | ||||||||
2018: | |||||||||||
U.S. federal | $ | (58 | ) | $ | 65,976 | $ | 65,918 | ||||
Foreign | 11,752 | 626 | 12,378 | ||||||||
State and local | 11,268 | 6,291 | 17,559 | ||||||||
Income tax expense | $ | 22,962 | $ | 72,893 | $ | 95,855 | |||||
2017: | |||||||||||
U.S. federal | $ | (72 | ) | $ | (6,774 | ) | $ | (6,846 | ) | ||
Foreign | 11,840 | (2,231 | ) | 9,609 | |||||||
State and local | 5,829 | 7,434 | 13,263 | ||||||||
Income tax expense (benefit) | $ | 17,597 | $ | (1,571 | ) | $ | 16,026 | ||||
2016: | |||||||||||
U.S. federal | $ | (41 | ) | $ | 57,950 | $ | 57,909 | ||||
Foreign | 6,206 | (427 | ) | 5,779 | |||||||
State and local | 7,088 | 5,763 | 12,851 | ||||||||
Income tax expense | $ | 13,253 | $ | 63,286 | $ | 76,539 |
| | | | | | | | | |
(Amounts in thousands) |
| Current |
| Deferred |
| Total | |||
2020: | |
| | |
| | |
| |
U.S. federal | | $ | (3,530) | | $ | (99,976) | | $ | (103,506) |
Foreign | |
| — | |
| (7,642) | |
| (7,642) |
State and local | |
| (3,239) | |
| (26,580) | |
| (29,819) |
Income tax (benefit) expense | | $ | (6,769) | | $ | (134,199) | | $ | (140,967) |
2019: | |
|
| |
|
| |
|
|
U.S. federal | | $ | (2,960) | | $ | 67,975 | | $ | 65,015 |
Foreign | |
| 5,812 | |
| 1,169 | |
| 6,981 |
State and local | |
| 10,704 | |
| 9,242 | |
| 19,946 |
Income tax expense | | $ | 13,556 | | $ | 78,386 | | $ | 91,942 |
2018: | |
|
| |
|
| |
|
|
U.S. federal | | $ | (58) | | $ | 65,976 | | $ | 65,918 |
Foreign | |
| 11,752 | |
| 626 | |
| 12,378 |
State and local | |
| 11,268 | |
| 6,291 | |
| 17,559 |
Income tax expense | | $ | 22,962 | | $ | 72,893 | | $ | 95,855 |
Recorded income tax (benefit) expense differed from amounts computed by applying the U.S. federal income tax rate of 21% for the year ended December 31, 2018 and 35% for the years ended December 31, 20172020, 2019 and 20162018 to (loss) income before income taxes as a result of the following:
| | | | | | | | | |
| | Year Ended December 31, | |||||||
(Amounts in thousands) |
| 2020 |
| 2019 | | 2018 | |||
Computed "expected" federal income tax (benefit) expense | | $ | (109,842) | | $ | 65,470 | | $ | 86,490 |
Effect of noncontrolling interest income distribution | |
| (8,671) | |
| (8,558) | |
| (8,401) |
Change in valuation allowance | |
| (2,482) | |
| 15,469 | |
| 1,663 |
Effect of state and local income taxes, net of federal tax benefit | |
| (14,356) | |
| 18,622 | |
| 12,980 |
Deductible compensation in excess of book | |
| 773 | |
| (2,029) | |
| (5,392) |
Nondeductible compensation | |
| 951 | |
| 635 | |
| 1,167 |
Effect of foreign income taxes | |
| (4,072) | |
| 2,084 | |
| 4,544 |
Effect of foreign earnings earned and remitted in the same year | |
| — | |
| (302) | |
| 2,317 |
Effect of foreign tax credits | |
| (528) | |
| (407) | |
| (996) |
Other, net | |
| (2,740) | |
| 958 | |
| 1,483 |
Income tax (benefit) expense | | $ | (140,967) | | $ | 91,942 | | $ | 95,855 |
86
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Computed "expected" federal income tax expense | $ | 86,490 | $ | 115,168 | $ | 81,643 | |||||
Effect of noncontrolling interest income distribution | (8,401 | ) | (13,724 | ) | (13,449 | ) | |||||
Change in valuation allowance | 1,663 | 413 | 648 | ||||||||
Effect of state and local income taxes, net of federal tax benefit | 12,980 | 10,767 | 8,353 | ||||||||
Deductible compensation in excess of book | (5,392 | ) | (13,757 | ) | — | ||||||
Nondeductible compensation | 1,167 | 2,201 | 2,127 | ||||||||
Effect of foreign income taxes | 4,544 | 2,367 | 380 | ||||||||
Effect of foreign earnings earned and remitted in the same year | 2,317 | 4,402 | 6,000 | ||||||||
Effect of foreign tax credits | (996 | ) | (5,357 | ) | (9,405 | ) | |||||
Effect of Tax Reform, including change in valuation allowance of $20,824 | — | (84,599 | ) | — | |||||||
Other, net | 1,483 | (1,855 | ) | 242 | |||||||
Income tax expense | $ | 95,855 | $ | 16,026 | $ | 76,539 |
In connection with emergence from Chapter 11, the Company'sCompany’s prepetition debt securities, primarily the prepetition notes issued by Six Flags, Inc. (which changed its corporate name to Six Flags Entertainment Corporation (Holdings) upon emergence from bankruptcy in 2010) and SFO, were extinguished. Absent an exception, a debtor recognizes cancellation of debt income ("CODI") upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code ("IRC") provides that a debtor in a bankruptcy case may exclude CODI from income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. As a result of the market value of our equity upon emergence from Chapter 11 bankruptcy proceedings, we were able to retain a significant portion of our federal NOLsnet operating losses (“NOLs”) and state NOLs (collectively, the "Tax
Sections 382 and 383 of the IRC impose an annual limitation on the utilization of NOLs and other favorable Tax Attribute carryforwards that a corporation has at the time of a so-called "ownership change" within the meaning of IRC Section 382. The Company'sCompany’s issuance of stock pursuant to its reorganization under Chapter 11 in 2010 resulted in such an ownership change. The limitation amount is the product of the value of the Company, computed under special rules that apply to a bankruptcy reorganization, and a published rate that applied for the month the Company emerged from Chapter 11. The Company'sCompany’s limitation amount is approximately $32.5 million for each year to which NOLs and other Tax Attribute carryforwards that existed at emergence are carried, increased by the portion of the net built-in income and gain that existed at emergence and that IRS pronouncements permit a taxpayer to treat as recognized during the five-year period following the ownership change. This has allowed the Company to increase its annual limitation by approximately $696.0 million through the end of 2015. Annual limitation amounts accumulate for future use to the extent they are not utilized in a given year.carried. As a result of the Section 382 limitation, the Company may have a cash tax liability in future years even though its deferred tax assets have not been exhausted. A subsequent ownership change could further limit the Company'sCompany’s utilization of NOLs and other Tax Attributes if a smaller limitation resulted from the subsequent ownership change or applied to NOLs and other Tax Attributes accumulated after emergence from Chapter 11.
87
Substantially all of our future taxable temporary differences (deferred tax liabilities) relate to the different financial accounting and tax depreciation methods and periods for property and equipment (20(20 to 25 years for financial reporting purposes and 7 to 12 yearsas few as 1 year for tax reporting purposes)purposes when 100% bonus depreciation is elected) and intangibles. Our net operating loss carryforwards, foreign tax credits, alternative minimum tax credits, accrued insurance expenses and deferred compensation amounts represent future income tax benefits (deferred tax assets). The following table summarizes the components of deferred income tax assets and deferred tax liabilities as of December 31, 20182020 and 2017:
December 31, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
Deferred tax assets | $ | 233,980 | $ | 296,132 | |||
Less: Valuation allowance | 115,172 | 113,509 | |||||
Net deferred tax assets | 118,808 | 182,623 | |||||
Deferred tax liabilities | 292,806 | 289,474 | |||||
Net deferred tax liability | $ | 173,998 | $ | 106,851 |
December 31, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
Deferred tax assets: | |||||||
Federal net operating loss carryforwards | $ | 19,334 | $ | 49,543 | |||
State net operating loss carryforwards | 117,236 | 119,837 | |||||
Deferred compensation | 6,873 | 21,464 | |||||
Foreign tax credits | 39,300 | 52,152 | |||||
Alternative minimum tax credits | 6,591 | 6,591 | |||||
Accrued insurance, pension liability and other | 44,646 | 46,545 | |||||
Total deferred tax assets | $ | 233,980 | $ | 296,132 | |||
Deferred tax liabilities: | |||||||
Property and equipment | $ | 209,070 | $ | 200,008 | |||
Intangible assets and other | 83,736 | 89,466 | |||||
Total deferred tax liabilities | $ | 292,806 | $ | 289,474 |
| | | | | | |
| | December 31, | ||||
(Amounts in thousands) |
| 2020 |
| 2019 | ||
Deferred tax assets | | $ | 326,023 | | $ | 191,349 |
Less: Valuation allowance | |
| 128,159 | |
| 130,641 |
Net deferred tax assets | |
| 197,864 | |
| 60,708 |
Deferred tax liabilities | |
| 299,695 | |
| 307,829 |
Net deferred tax liability | | $ | 101,831 | | $ | 247,121 |
| | | | | | |
| | | | | | |
| | December 31, | ||||
(Amounts in thousands) |
| 2020 |
| 2019 | ||
Deferred tax assets: |
| |
|
| |
|
Federal net operating loss carryforwards | | $ | 115,168 | | $ | 12,615 |
State net operating loss carryforwards | |
| 118,063 | |
| 107,303 |
Deferred compensation | |
| 9,307 | |
| 8,240 |
Foreign tax credits | |
| 21,367 | |
| 20,469 |
Alternative minimum tax credits | |
| — | |
| 3,296 |
Accrued insurance, pension liability and other | |
| 62,118 | |
| 39,426 |
Total deferred tax assets | | $ | 326,023 | | $ | 191,349 |
| | | | | | |
Deferred tax liabilities: | |
|
| |
|
|
Property and equipment | | $ | 220,927 | | $ | 226,872 |
Intangible assets and other | |
| 78,768 | |
| 80,957 |
Total deferred tax liabilities | | $ | 299,695 | | $ | 307,829 |
As of December 31, 2018,2020, we had approximately $0.2$0.6 billion and $5.5$6.3 billion of net operating loss carryforwards available for U.S. federal income tax and state income tax purposes, respectively, that expire through 2030 and 2038, respectively. Foreign tax credits of $39.3$21.4 million expire between 20202021 and 2027. We have a valuation allowance of $115.2$128.2 million and $113.5$130.6 million as of December 31, 20182020 and 2017,2019, respectively, due to uncertainties related to our ability to utilize some of our deferred tax assets before they expire. We analyze our ability to use our foreign tax credits based on our most probable outcome for future foreign sourced income. Based on that analysis, we have determined it is not more likely than not that some of our foreign tax credits will not be fully utilized and have established a valuation allowance of approximately $18.0 million at December 31, 2020. The remainder of our valuation allowance at December 31, 20182020 and December 31, 20172019 was based on our inability to use state deferred tax assets related to NOLs that were generated in states where we no longer do business or where we have consistently not generated taxable income. The change in valuation allowance is all attributable to income from operations.
Our unrecognized tax benefit as of each of December 31,
88
SIX FLAGS ENTERTAINMENT CORPORATION
Notes to corporate taxation, including a reduction of the corporate tax rate from 35% to 21%, creating a territorial tax system, allowing for immediate expensing of certain qualified property, modifying or repealing many business deductions and credits, and providing other incentives. In response to the Tax Act, on December 22, 2017 the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment. The SEC Staff noted in SAB 118 that in these cases a company should continue to apply Topic 740, Income Taxes based on the provisions of the tax laws that were in effect immediately prior to the enactment of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the enactment date of the Tax Act for companies to complete the accounting under Topic 740. For the year ended December 31, 2018, the Company has not identified any material changes to the net one-time charge related to its accounting for the enactment of the Act. Accordingly, the Company has finalized its accounting treatment for the Act. For global intangible low taxed income ("GILTI") under the Act, the Company has elected to account for GILTI as a component of tax expense in the period in which the Company is subject to the rules (the "period cost method").Consolidated Financial Statements
12. | |
Preferred Stock, Common Stock and Other |
Common Stock
As of December 31, 2018,2020, the number of authorized shares of common stock was 140,000,000,280,000,000, of which 83,962,18285,075,901 shares were outstanding,
On March 30, 2017, Holdings announced that its Board of Directors approved a new stock repurchase plan that permits Holdings to repurchase an incremental $500.0$500 million in shares of Holdings'Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of February 14, 2019,19, 2021, Holdings had repurchased 4,603,0004,607,000 shares at a cumulative cost of approximately $268.2$268.3 million and an average price per share of $58.27$58.25 under the March 2017 Stock Repurchase Plan, leaving approximately $231.8$231.7 million available for permitted repurchases.
During the years ended December 31, 2020, 2019 and 2018, 2017 and 2016, Holdings'Holdings’ Board of Directors declared and paid quarterly cash dividends per share of common stock as follows:
Dividends Paid Per Share | |||
2018: | |||
Fourth Quarter | $ | 0.82 | |
Third Quarter | $ | 0.78 | |
Second Quarter | $ | 0.78 | |
First Quarter | $ | 0.78 | |
2017: | |||
Fourth Quarter | $ | 0.70 | |
Third Quarter | $ | 0.64 | |
Second Quarter | $ | 0.64 | |
First Quarter | $ | 0.64 | |
2016: | |||
Fourth Quarter | $ | 0.64 | |
Third Quarter | $ | 0.58 | |
Second Quarter | $ | 0.58 | |
First Quarter | $ | 0.58 |
| | | |
| | Dividends | |
| | Paid | |
|
| Per Share | |
2020: | |
| |
First Quarter | | $ | 0.25 |
2019: | |
|
|
Fourth Quarter | | $ | 0.83 |
Third Quarter | | $ | 0.82 |
Second Quarter | | $ | 0.82 |
First Quarter | | $ | 0.82 |
2018: | |
|
|
Fourth Quarter | | $ | 0.82 |
Third Quarter | | $ | 0.78 |
Second Quarter | | $ | 0.78 |
First Quarter | | $ | 0.78 |
Preferred Stock
As of December 31, 2018,2020, the number of authorized shares of preferred stock was
Shareholder Rights Plan
On March 31, 2020, Holdings announced that its Board of Directors declared a dividend of 1 preferred share purchase right (a “Right”) payable on April 10, 2020, for each share of common stock to the shareholders of record on that date. In connection with the Rights, Holdings and Computershare Trust Company, N.A., as rights agent, entered into a Rights Agreement, dated as of March 31, 2020 (the “Rights Agreement”). Each Right entitles the registered holder to purchase from Holdings one one-thousandth of a Series B Junior Preferred Stock, par value $1.00 per share (the “Preferred Shares”), of Holdings at a price of $75.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. Subject to certain exceptions, if a person or group acquires more than 10% of Holdings’ outstanding common stock, the Rights will become exercisable for common stock having a value equal to 2 times the exercise price of the Right. The Rights are in all respects subject to and governed by the provisions of the Rights
89
Agreement. The Rights Plan has a one-year term, expiring on March 30, 2021. The Rights Plan may also be terminated, or the rights may be redeemed, prior to the scheduled expiration of the Rights Plan under certain other circumstances.
Accumulated Other Comprehensive (Loss) Income
The balances for each component of accumulated other comprehensive (loss) incomeloss are as follows:
Currency Translation Adjustment | Cash Flow Hedges | Defined Benefit Plans | Income Taxes | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||
Balance as of December 31, 2015 | $ | (24,800 | ) | $ | (1,598 | ) | $ | (49,772 | ) | $ | 9,612 | $ | (66,558 | ) | |||||
Net current period change | (7,142 | ) | (944 | ) | 4,881 | 965 | (2,240 | ) | |||||||||||
Amounts reclassified from AOCI | — | 1,716 | 931 | (1,033 | ) | 1,614 | |||||||||||||
Balance as of December 31, 2016 | $ | (31,942 | ) | $ | (826 | ) | $ | (43,960 | ) | $ | 9,544 | $ | (67,184 | ) | |||||
Net current period change | 3,120 | 57 | 1,136 | (2,106 | ) | 2,207 | |||||||||||||
Amounts reclassified from AOCI | — | 769 | 865 | (538 | ) | 1,096 | |||||||||||||
Balance as of December 31, 2017 | $ | (28,822 | ) | $ | — | $ | (41,959 | ) | $ | 6,900 | $ | (63,881 | ) | ||||||
Net current period change | 1,470 | — | 167 | (351 | ) | 1,286 | |||||||||||||
Amounts reclassified from AOCI | — | — | 721 | (185 | ) | 536 | |||||||||||||
Effects of adoption of ASU 2018-02 | — | — | — | (9,439 | ) | (9,439 | ) | ||||||||||||
Balance as of December 31, 2018 | $ | (27,352 | ) | $ | — | $ | (41,071 | ) | $ | (3,075 | ) | $ | (71,498 | ) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | |
| | Cumulative | | | | | | | | | | | Other | ||
| | Translation | | Cash Flow | | Defined Benefit | | Income | | Comprehensive | |||||
(Amounts in thousands) |
| Adjustment |
| Hedges |
| Plans |
| Taxes |
| Loss | |||||
Balance as of December 31, 2017 | | $ | (28,822) | | $ | — | | $ | (41,959) | | $ | 6,900 | | $ | (63,881) |
Net current period change | |
| 1,470 | |
| — | |
| 167 | |
| (351) | |
| 1,286 |
Amounts reclassified from AOCL | |
| — | |
| — | |
| 721 | |
| (185) | |
| 536 |
Effects of Adoption of ASU 2018-02 | | | — | | | — | | | — | | | (9,439) | | | (9,439) |
Balance as of December 31, 2018 | | $ | (27,352) | | $ | — | | $ | (41,071) | | $ | (3,075) | | $ | (71,498) |
Net current period change | |
| 5,168 | |
| (484) | |
| (9,006) | |
| 1,283 | |
| (3,039) |
Amounts reclassified from AOCL | | | — | | | (1,046) | | | 795 | | | 78 | | | (173) |
Balances at December 31, 2019 | | $ | (22,184) | | $ | (1,530) | | $ | (49,282) | | $ | (1,714) | | $ | (74,710) |
Net current period change | |
| (5,228) | |
| (33,902) | |
| (9,345) | |
| 11,968 | |
| (36,507) |
Amounts reclassified from AOCL | |
| — | |
| 3,685 | |
| 985 | |
| (1,165) | |
| 3,505 |
Amounts reclassified due to de-designation | | | — | | | 14,928 | | | — | | | (3,720) | | | 11,208 |
Balances at December 31, 2020 | | $ | (27,412) | | $ | (16,819) | | $ | (57,642) | | $ | 5,369 | | $ | (96,504) |
The Company had the following reclassifications out of accumulated other comprehensive income (loss)loss during the years ended December 31, 2018, 20172020, 2019 and 2016:
Location of | Amount of Reclassification from AOCI | |||||||||||||
Reclassification | Year Ended December 31, | |||||||||||||
Component of AOCI | into Income | 2018 | 2017 | 2016 | ||||||||||
(Amounts in thousands) | ||||||||||||||
Amortization of loss on interest rate hedge | Interest expense | $ | — | $ | 769 | $ | 1,716 | |||||||
Income tax benefit | — | (279 | ) | (669 | ) | |||||||||
Net of tax | $ | — | $ | 490 | $ | 1,047 | ||||||||
Amortization of deferred actuarial loss and prior service cost | Operating expenses | $ | 721 | $ | 865 | $ | 931 | |||||||
Income tax benefit | (185 | ) | (259 | ) | (364 | ) | ||||||||
Net of tax | $ | 536 | $ | 606 | $ | 567 | ||||||||
Total reclassifications | $ | 536 | $ | 1,096 | $ | 1,614 |
| | | | | | | | | | |
| | | Amount of Reclassification from AOCL | |||||||
| | | Year Ended December 31, | |||||||
Component of AOCL |
| Location of Reclassification into Income | 2020 | | 2019 | | 2018 | |||
Amortization of loss on interest rate hedge |
| Interest expense | $ | 3,685 | | $ | (1,046) | | $ | — |
|
| Income tax benefit |
| (917) | |
| 276 | |
| — |
|
| Net of tax | $ | 2,768 | | $ | (770) | | $ | — |
| | | | | | | | | | |
Amortization of deferred actuarial loss and prior service cost |
| Operating expenses | $ | 985 | | $ | 795 | | $ | 721 |
|
| Income tax expense |
| (248) | |
| (198) | |
| (185) |
|
| Net of tax | $ | 737 | | $ | 597 | | $ | 536 |
| | | | | | | | | | |
Total reclassifications |
|
| $ | 3,505 | | $ | (173) | | $ | 536 |
13. | |
Pension Benefits |
As part of the acquisition of Former SFEC, we assumed the obligations related to the SFTP Defined Benefit Plan (the "SFTP Benefit Plan"). The SFTP Benefit Plan covered substantially all of SFTP'sSFTP’s employees. During 1999, the SFTP Benefit Plan was amended to cover substantially all of our domestic full-time employees. During 2004, the SFTP Benefit Plan was further amended to cover certain seasonal workers, retroactive to January 1, 2003. The SFTP Benefit Plan permits normal retirement at age
90
We froze our pension plan effective March 31, 2006, pursuant to which most participants no longer earned future pension benefits. Effective February 16, 2009, the remaining participants in the pension plan no longer earned future benefits.
Obligations and Funded Status
The following table sets forth the change in our benefit plan obligation and fair value of plan assets:
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Change in benefit obligation: | |||||||||||
Beginning balance | $ | 218,746 | $ | 216,571 | $ | 223,389 | |||||
Interest cost | 7,386 | 8,283 | 8,901 | ||||||||
Actuarial loss (gain) | (16,324 | ) | 11,402 | (828 | ) | ||||||
Benefits paid | (8,056 | ) | (17,510 | ) | (14,891 | ) | |||||
Benefit obligation at end of period | $ | 201,752 | $ | 218,746 | $ | 216,571 | |||||
Change in fair value of plan assets: | |||||||||||
Beginning balance | $ | 190,534 | $ | 178,375 | $ | 173,123 | |||||
Actual return on assets | (2,497 | ) | 25,240 | 15,949 | |||||||
Employer contributions | 6,000 | 6,000 | 6,000 | ||||||||
Administrative fees | (1,223 | ) | (1,571 | ) | (1,806 | ) | |||||
Benefits paid | (8,056 | ) | (17,510 | ) | (14,891 | ) | |||||
Fair value of plan assets at end of period | $ | 184,758 | $ | 190,534 | $ | 178,375 |
| | | | | | | | | |
| | Year Ended December 31, | |||||||
(Amounts in thousands) |
| 2020 |
| 2019 |
| 2018 | |||
Change in benefit obligation: |
| |
|
| |
|
| |
|
Beginning balance | | $ | 221,458 | | $ | 201,752 | | $ | 218,746 |
Interest cost | |
| 6,431 | |
| 7,993 | |
| 7,386 |
Actuarial loss (gain) | |
| 18,243 | |
| 25,632 | |
| (16,324) |
Benefits paid | |
| (9,006) | |
| (13,919) | |
| (8,056) |
Benefit obligation at end of period | | $ | 237,126 | | $ | 221,458 | | $ | 201,752 |
| | | | | | | | | |
Change in fair value of plan assets: | |
|
| |
|
| |
|
|
Beginning balance | | $ | 205,463 | | $ | 184,758 | | $ | 190,534 |
Actual return on assets | |
| 21,987 | |
| 29,815 | |
| (2,497) |
Employer contributions | |
| 1,500 | |
| 6,000 | |
| 6,000 |
Administrative fees | |
| (9,006) | |
| (13,918) | |
| (1,223) |
Benefits paid | |
| (1,171) | |
| (1,192) | |
| (8,056) |
Fair value of plan assets at end of period | | $ | 218,773 | | $ | 205,463 | | $ | 184,758 |
Employer contributions and benefits paid in the above table include only those amounts contributed directly to, or paid directly from, plan assets. As of December 31, 20182020 and 2017,2019, the SFTP Benefit Plan'sPlan’s projected benefit obligation exceeded the fair value of SFTP Benefit Plan assets resulting in the SFTP Benefit Plan being underfunded by $17.0$18.4 million and $28.2$16.0 million, respectively. The underfunded amount is recognized in other long-term liabilities in our consolidated balance sheets.
We use December 31 as our measurement date. The weighted average assumptions used to determine benefit obligations are as follows:
| | | | | |
| | December 31, |
| ||
|
| 2020 |
| 2019 |
|
Discount rate |
| 2.20 | % | 3.00 | % |
Rate of compensation increase |
| N/A |
| N/A | |
91
December 31, | |||||
2018 | 2017 | ||||
Discount rate | 4.05 | % | 3.45 | % | |
Rate of compensation increase | N/A | N/A |
The following table sets forth the components of net periodic benefit cost and other comprehensive income (loss):
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Net periodic benefit cost: | |||||||||||
Service cost | $ | 1,300 | $ | 1,700 | $ | 2,400 | |||||
Interest cost | 7,386 | 8,283 | 8,901 | ||||||||
Expected return on plan assets | (13,737 | ) | (12,831 | ) | (12,490 | ) | |||||
Amortization of net actuarial loss | 721 | 865 | 931 | ||||||||
Total net periodic benefit | $ | (4,330 | ) | $ | (1,983 | ) | $ | (258 | ) | ||
Other comprehensive income: | |||||||||||
Current year actuarial gain | $ | 167 | $ | 1,136 | $ | 4,881 | |||||
Recognized net actuarial loss | 721 | 865 | 931 | ||||||||
Total other comprehensive gain | $ | 888 | $ | 2,001 | $ | 5,812 |
| | | | | | | | |
| Year Ended December 31, | |||||||
(Amounts in thousands) | 2020 |
| 2019 |
| 2018 | |||
Net periodic benefit cost: | |
|
| |
|
| |
|
Service cost | $ | 1,200 | | $ | 1,300 | | $ | 1,300 |
Interest cost |
| 6,431 | |
| 7,993 | |
| 7,386 |
Expected return on plan assets |
| (13,119) | |
| (13,296) | |
| (13,737) |
Amortization of net actuarial loss |
| 985 | |
| 795 | |
| 721 |
Total net periodic benefit | $ | (4,503) | | $ | (3,208) | | $ | (4,330) |
| | | | | | | | |
Other comprehensive income: |
|
| |
|
| |
|
|
Current year actuarial (gain) loss | $ | (9,345) | | $ | (9,006) | | $ | 167 |
Recognized net actuarial loss |
| 985 | |
| 795 | |
| 721 |
Total other comprehensive (gain) loss | $ | (8,360) | | $ | (8,211) | | $ | 888 |
As of December 31, 20182020 and 2017,2019, we have recorded $49.9$64.6 million (net of tax expense of $8.8$7.0 million) and $42.2$56.1 million (net of tax expense of $0.3$6.8 million), respectively, in accumulated other comprehensive loss in our consolidated balance sheets, respectively.
We anticipate that $0.8$1.4 million will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2019.
The weighted average assumptions used to determine net costs are as follows:
Year Ended December 31, | ||||||||
2018 | 2017 | 2016 | ||||||
Discount rate | 3.45 | % | 3.90 | % | 4.10 | % | ||
Rate of compensation increase | N/A | N/A | N/A | |||||
Expected return on plan assets | 7.25 | % | 7.25 | % | 7.25 | % | ||
Corridor | 10.00 | % | 10.00 | % | 10.00 | % | ||
Average future life expectancy (in years) | 27.77 | 26.33 | 27.79 |
| | | | | | | |
| | Year Ended December 31, |
| ||||
| | 2020 |
| 2019 |
| 2018 |
|
Discount rate | | 3.00 | % | 4.05 | % | 3.45 | % |
Rate of compensation increase | | N/A |
| N/A |
| N/A | |
Expected return on plan assets | | 6.50 | % | 7.25 | % | 7.25 | % |
Corridor | | 10.00 | % | 10.00 | % | 10.00 | % |
Average future life expectancy (in years) | | 25.70 |
| 26.87 |
| 27.77 | |
The discount rate assumption was developed based on high-quality corporate bond yields as of the measurement date. High quality corporate bond yield indices on over
500 AA high grade bonds are considered when selecting the discount rate.The return on plan assets assumption was developed based on consideration of historical market returns, current market conditions, and the SFTP Benefit Plan'sPlan’s past experience. Estimates of future market returns by asset category are reflective of actual long-term historical returns. Overall, it was projected that the SFTP Benefit Plan could achieve a 7.25%6.50% net return over time based on a consistent application of the existing asset allocation strategy and a continuation of the SFTP Benefit Plan'sPlan’s policy of monitoring manager performance.
Description of Investment Committee and Strategy
The Investment Committee is responsible for managing the investment of SFTP Benefit Plan assets and ensuring that the SFTP Benefit Plan'sPlan’s investment program is in compliance with all provisions of ERISA, other relevant legislation, related SFTP Benefit Plan documents and the Statement of Investment Policy. The Investment Committee has retained several mutual funds, commingled funds and/or investment managers to manage SFTP Benefit Plan assets and implement the investment process. The investment managers, in implementing their investment processes, have the authority and responsibility to select appropriate
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The primary financial objective of the SFTP Benefit Plan is to secure participant retirement benefits. To achieve this, the key objective in the SFTP Benefit Plan'sPlan’s financial management is to promote stability and, to the extent appropriate, growth in funded status. Other related and supporting financial objectives are also considered in conjunction with a comprehensive review of current and projected SFTP Benefit Plan financial requirements.
The assets of the fund are invested to achieve the greatest reward for the SFTP Benefit Plan consistent with a prudent level of risk. The asset return objective is to achieve, as a minimum over time, the passively managed return earned by market index funds, weighted in the proportions outlined by the asset class exposures in the SFTP Benefit Plan'sPlan’s long-term target asset allocation.
The SFTP Benefit Plan'sPlan’s portfolio may be allocated across several hedge fund styles and strategies.
Plan Assets
The target allocations for plan assets are
| | | | | | | | | | | | |
| | Fair Value Measurements as of December 31, 2020 | ||||||||||
|
| | |
| Quoted Prices in |
| Significant |
| Significant | |||
| | | | | Active Markets for | | Observable | | Unobservable | |||
| | | | | Identical Assets | | Inputs | | Inputs | |||
(Amounts in thousands) | | Total | | (Level 1) | | (Level 2) | | (Level 3) | ||||
ASSET CATEGORY: |
| |
|
| |
|
| |
|
| |
|
Equity Securities: |
| |
|
| |
|
| |
|
| |
|
Large-Cap Disciplined Equity (a) | | $ | 8,065 | | $ | 8,065 | | $ | 0 | | $ | 0 |
International Equity (b) | |
| 42,178 | |
| 42,178 | |
| 0 | |
| 0 |
Fixed Income: | |
| | |
|
| |
|
| |
|
|
Long Duration Fixed Income (c) | |
| 138,399 | |
| 138,399 | |
| 0 | |
| 0 |
Alternatives: | |
|
| |
|
| |
|
| |
|
|
Other Investments (f) | |
| 30,131 | |
| 0 | |
| 0 | |
| 0 |
Fair Value of Plan Assets | | $ | 218,773 | | $ | 188,642 | | $ | 0 | | $ | 0 |
| | | | | | | | | | | | |
| | Fair Value Measurements as of December 31, 2019 | ||||||||||
|
| | |
| Quoted Prices in |
| Significant |
| Significant | |||
| | | | | Active Markets for | | Observable | | Unobservable | |||
| | | | | Identical Assets | | Inputs | | Inputs | |||
(Amounts in thousands) | | Total | | (Level 1) | | (Level 2) | | (Level 3) | ||||
ASSET CATEGORY: |
| |
|
| |
|
| |
|
| |
|
Equity Securities: |
| |
|
| |
|
| |
|
| |
|
Large-Cap Disciplined Equity (a) | | $ | 6,844 | | $ | 6,844 | | $ | 0 | | $ | 0 |
International Equity (b) | |
| 35,962 | |
| 35,962 | |
| 0 | |
| 0 |
Fixed Income: | |
|
| |
|
| |
|
| |
|
|
Long Duration Fixed Income (c) | |
| 133,592 | |
| 133,592 | |
| 0 | |
| 0 |
High Yield (d) | |
| — | |
| 0 | |
| 0 | |
| 0 |
Emerging Markets Debt (e) | |
| — | |
| 0 | |
| 0 | |
| 0 |
Alternatives: | |
|
| |
|
| |
|
| |
|
|
Other Investments (f) | |
| 29,065 | |
| 0 | |
| 0 | |
| 0 |
Fair Value of Plan Assets | | $ | 205,463 | | $ | 176,398 | | $ | 0 | | $ | 0 |
Fair Value Measurements as of December 31, 2018 | |||||||||||||||
(Amounts in thousands) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
ASSET CATEGORY: | |||||||||||||||
Equity Securities: | |||||||||||||||
Large-Cap Disciplined Equity (a) | $ | 22,022 | $ | 22,022 | $ | — | $ | — | |||||||
International Equity (b) | 15,894 | 15,894 | — | — | |||||||||||
Fixed Income: | |||||||||||||||
Long Duration Fixed Income (c) | 109,408 | 109,408 | — | — | |||||||||||
High Yield (d) | 4,965 | 4,965 | — | — | |||||||||||
Emerging Markets Debt (e) | 4,566 | 4,566 | — | — | |||||||||||
Alternatives: | |||||||||||||||
Other Investments (f) (g) | 27,903 | — | — | — | |||||||||||
Fair Value of Plan Assets | $ | 184,758 | $ | 156,855 | $ | — | $ | — |
Fair Value Measurements as of December 31, 2017 | |||||||||||||||
(Amounts in thousands) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
ASSET CATEGORY: | |||||||||||||||
Equity Securities: | |||||||||||||||
Large-Cap Disciplined Equity (a) | $ | 27,765 | $ | 27,765 | $ | — | $ | — | |||||||
Small/Mid-Cap Equity (a) | 3,433 | 3,433 | — | — | |||||||||||
International Equity (b) | 24,383 | 24,383 | — | — | |||||||||||
Fixed Income: | |||||||||||||||
Long Duration Fixed Income (c) | 95,650 | 95,650 | — | — | |||||||||||
High Yield (d) | 8,559 | 8,559 | — | — | |||||||||||
Emerging Markets Debt (e) | 5,001 | 5,001 | — | — | |||||||||||
Alternatives: | |||||||||||||||
Other Investments (f) (g) | 25,743 | — | — | — | |||||||||||
Fair Value of Plan Assets | $ | 190,534 | $ | 164,791 | $ | — | $ | — |
(a) | These categories are comprised of mutual funds actively traded on the registered exchanges or over the counter markets. The mutual funds are invested in equity securities of U.S. issuers. |
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(b) | This category consists of mutual funds invested primarily in equity securities (common stocks, securities that are convertible into common stocks, preferred stocks, warrants and rights to subscribe to common stocks) of non-U.S. issuers purchased in foreign markets. The mutual funds are actively traded on U.S. or foreign registered exchanges, or the over-the-counter markets. |
(c) | The assets are comprised of U.S. Treasury Separate Trading of Registered Interest and Principal of Securities ("U.S. Treasury STRIPS") and mutual funds which are actively traded on the registered exchanges. The mutual funds are invested primarily in high quality government and corporate fixed income securities, as well as synthetic instruments or derivatives having economic characteristics similar to fixed income securities. |
(d) | The high yield portion of the fixed income portfolio consists of mutual funds invested primarily in fixed income securities that are rated below investment grade. The mutual funds are actively traded on the registered exchanges. |
(e) | The emerging debt portion of the portfolio consists of mutual funds primarily invested in the debt securities of government, government-related and corporate issuers in emerging market countries and of entities organized to restructure outstanding debt of such issuers. The mutual funds are actively traded on the registered exchanges. |
(f) |
Common/collective trust investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets. The Company has participant redemptions restricted to the last business day of the quarter, with either a 65 or 90 day period redemption notice. |
(Amounts in thousands) | Hedge Fund of Funds | ||
Balance as of December 31, 2016 | $ | 9,967 | |
Actual return on plan assets: | |||
Relating to assets still held at the reporting date | — | ||
Relating to assets sold during the period | (9,967 | ) | |
Purchases, sales and settlements, net | — | ||
Balance as of December 31, 2017 | $ | — |
Expected Cash Flows
The following table summarizes expected employer contributions and future benefit payments:
(Amounts in thousands) | |||
Expected contributions to plan trusts | |||
2019 | $ | 6,000 | |
Total expected contributions | $ | 6,000 | |
Expected benefit payments: | |||
2019 | $ | 9,823 | |
2020 | 10,242 | ||
2021 | 10,649 | ||
2022 | 11,196 | ||
2023 | 11,547 | ||
2024 through 2028 | 61,609 | ||
Total expected benefit payments | $ | 115,066 |
| | | |
(Amounts in thousands) |
| | |
Expected contributions to plan trusts |
| |
|
2021 | | $ | — |
Total expected contributions | | $ | — |
| | | |
Expected benefit payments: | |
|
|
2021 | | $ | 10,578 |
2022 | |
| 11,072 |
2023 | |
| 11,407 |
2024 | |
| 11,709 |
2025 | |
| 11,958 |
2026 through 2030 | |
| 60,744 |
Total expected benefit payments | | $ | 117,468 |
14. | |
(Loss) Earnings Per Common Share |
Basic (loss) earnings per common share is computed by dividing net (loss) income attributable to Holdings'Holdings’ common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income attributable to Holdings'Holdings’ common stockholders by the weighted average number of common shares outstanding during the period and the effect of all dilutive common stock equivalents. In periods where there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.
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For the years ended December 31, 2018, 20172019 and 2016,2018, the computation of diluted earnings per common share included the effect of 1.3 million, 1.70.6 million and 2.01.3 million dilutive stock options and restricted stock units, respectively. For the years ended December 31, 2018, 20172020, 2019 and 2016,2018, the computation of diluted (loss) earnings per common share excluded the effect of 0.76.3 million,, 0.4 3.5 million and 0.40.7 million antidilutive stock options and restricted stock units, respectively. Earnings(Loss) earnings per common share for the years ended December 31, 2018, 20172020, 2019 and 20162018 was calculated as follows:
For the year ended December 31, | |||||||||||
(Amounts in thousands, except per share amounts) | 2018 | 2017 | 2016 | ||||||||
Net income attributable to Six Flags Entertainment Corporation common stockholders | $ | 275,996 | $ | 273,816 | $ | 118,302 | |||||
Weighted-average common shares outstanding—basic | 84,100 | 86,802 | 92,349 | ||||||||
Effect of dilutive stock options and restricted stock units | 1,345 | 1,692 | 2,049 | ||||||||
Weighted-average common shares outstanding—diluted | 85,445 | 88,494 | 94,398 | ||||||||
Earnings per share—basic | $ | 3.28 | $ | 3.15 | $ | 1.28 | |||||
Earnings per share—diluted | $ | 3.23 | $ | 3.09 | $ | 1.25 |
| | | | | | | | | |
| | For the year ended December 31, | |||||||
(Amounts in thousands, except per share amounts) |
| 2020 |
| 2019 |
| 2018 | |||
Net (loss) income attributable to Six Flags Entertainment Corporation common stockholders | | $ | (423,380) | | $ | 179,065 | | $ | 275,996 |
| | | | | | | | | |
Weighted-average common shares outstanding—basic | |
| 84,800 | |
| 84,348 | |
| 84,100 |
Effect of dilutive stock options and restricted stock units | |
| — | |
| 620 | |
| 1,345 |
Weighted-average common shares outstanding—diluted | |
| 84,800 | |
| 84,968 | |
| 85,445 |
| | | | | | | | | |
(Loss) earnings per share—basic | | $ | (4.99) | | $ | 2.12 | | $ | 3.28 |
(Loss) earnings per share—diluted | | $ | (4.99) | | $ | 2.11 | | $ | 3.23 |
15. | |
Commitments and Contingencies |
Partnership Parks
On April 1, 1998, we acquired all of the capital stock of Former SFEC for
95
In 2027 and 2028, we will have the option to purchase all remaining units in the Georgia limited partner and the Texas limited partner, respectively, at a price based on the Specified Price, increased by a cost of living adjustment. Pursuant to the 20182020 annual offer, we purchased 0.375 units from the Georgia partnership for approximately $1.5 million and 1.5675 units from the Texas partnership for approximately $3.4 million in May 2020. Pursuant to the 2019 annual offer, we did not purchase any units from the Georgia partnership and we purchased 0.17500.1 units from the Texas partnership for approximately $0.4$0.2 million in May 2018. Pursuant to the 2017 annual offer, we did not purchase any units from the Georgia partnership and we purchased 0.0708 units from the Texas partnership for approximately $0.1 million in May 2017.2019. As we purchase additional units, we are entitled to a proportionate increase in our share of the minimum annual distributions. The maximum unit purchase obligations for 20182021 at both parks aggregatedaggregates to approximately $525.3$523.4 million, representing approximately 69.0%68.6% of the outstanding units of SFOG and 46.8%46.1% of the outstanding units of SFOT. The $350.0$350.0 million accordion feature on the Second Amended and Restated Term Loan B under the Second Amended and Restated Credit Facility is available for borrowing for future "put" obligations if necessary.
In connection with our acquisition of the Former SFEC, we entered into the Subordinated Indemnity Agreement with certain of the Company'sCompany’s entities, Time Warner and an affiliate of Time Warner (an indirect subsidiary of AT&T Inc. as a result of a merger in 2018), pursuant to which, among other things, we transferred to Time Warner (which has guaranteed all of our obligations under the Partnership Park arrangements) record title to the corporations which own the entities that have purchased and will purchase limited partnership units of the Partnership Parks, and we received an assignment from Time Warner of all cash flow received on such limited partnership units, and we otherwise control such entities. In addition, we issued preferred stock of the managing partner of the partnerships to Time Warner. In the event of a default by us under the Subordinated Indemnity Agreement or of our obligations to our partners in the Partnership Parks, these arrangements would permit Time Warner to take full control of both the entities that own limited partnership units and the managing partner. If we satisfy all such obligations, Time Warner is required to transfer to us the entire equity interests of these entities.
We incurred
(Amounts in thousands) | |||
For the year ending December 31: | |||
2019 | $ | 23,936 | |
2020 | 23,266 | ||
2021 | 22,384 | ||
2022 | 21,626 | ||
2023 | 21,563 | ||
2024 and thereafter | 314,799 | ||
$ | 427,574 |
License Agreements
We are party to a license agreement pursuant to which we have the exclusive right on a long-term basis to theme park use in the United States and Canada (excluding the Las Vegas, Nevada metropolitan area) of all animated, cartoon and comic book characters that Warner Bros. and DC Comics have the right to license for such use. The term of the agreement expires in 2053. The license fee is subject to periodic scheduled increases and is payable on a per-theme park basis.
In November 1999, we entered into license agreements pursuant to which we have the exclusive right on a long-term basis to parks use in Europe, Central and South America of all animated, cartoon and comic book characters that Warner Bros. and DC Comics have the right to license for such use. Under such agreements, the license fee is based on specified percentages of the gross revenues of the applicable parks.
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Insurance
We maintain insurance of the types and in amounts that we believe are commercially reasonable and that are available to businesses in our industry. We maintain multi-layered general liability policies that provide for excess liability coverage of up to $100.0$100.0 million per occurrence. For incidents arising on or after December 31, 2008, our self-insured retention is $2.0$2.0 million,, followed by a $0.5$0.5 million deductible per occurrence applicable to all claims in the policy year for our domestic parks and our park in Canada and a nominal amount per occurrence for our parks in Mexico. Defense costs are in addition to these retentions. Our general liability policies cover the cost of punitive damages only in certain jurisdictions. Based upon reported claims and an estimate for incurred, but not reported claims, we accrue a liability for our self-insured retention contingencies. For workers'workers’ compensation claims arising after November 15, 2003, our deductible is $0.75 million.$0.75 million. We also maintain fire and extended coverage, business interruption, terrorism and other forms of insurance typical to businesses in this industry. The all peril property coverage policies insure our real and personal properties (other than land) against physical damage resulting from a variety of hazards. Additionally, we maintain information security and privacy liability insurance in the amount of $10.0 million with a $0.25 million self-insured retention per event.
We generally renegotiate our insurance policies on an annual basis. The majority of our current insurance policies expire on December 31, 2019.2021. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance
Capital Expenditures
We plan to strategically reinvest in our properties to improve the guest experience.
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Table of annual revenues on capital expenditures during the 2019 calendar year.Contents
SIX FLAGS ENTERTAINMENT CORPORATION
Notes to Consolidated Financial Statements
Litigation
Privacy Class Action Lawsuits
On January 7, 2016, a potentialputative class action complaint was filed against Six Flags Entertainment CorporationHoldings in the Circuit Court of Lake County, Illinois. On April 22, 2016, Great America, LLC was added as a defendant. The complaint asserts that we violated the Illinois Biometric Information Privacy Act ("BIPA") in connection with the admission of season pass holders and members through the finger scan program that commenced in the 2014 operating season at Six Flags Great America in Gurnee, Illinois, and seeks statutory damages, attorney'sattorneys’ fees and an injunction. An aggrieved party under BIPA may recover (i) $1,000 if a company is found to have negligently violated BIPA or (ii) $5,000 if found to have intentionally or recklessly violated BIPA, plus reasonable attorneys'attorneys’ fees in each case. The complaint does not allege that any information was misused or disseminated. On April 7, 2017, the trial court certified two2 questions for consideration by the Illinois Appellate Court of the Second District. On June 7, 2017, the Illinois Appellate Court granted our motion to appeal. Accordingly, two2 questions regarding the interpretation of BIPA were certified for consideration by the Illinois Appellate Court. On December 21, 2017, the Illinois Appellate Court found in our favor, holding that the plaintiff had to allege more than a technical violation of BIPA and had to be injured in some way in order to have a right of action. On March 1, 2018, the plaintiff filed a petition for leave to appeal to the Illinois Supreme Court. On May 30, 2018, the Illinois Supreme Court granted the plaintiff'splaintiff’s leave to appeal and oral arguments were heard on November 20, 2018. On January 25, 2019, the Illinois Supreme Court found in favor of the plaintiff, holding that the plaintiff does not need to allege an actual injury beyond the violation of his rights under BIPA in order to proceed with a complaint. We intend to continue to vigorously defend ourselves against this litigation. Since this litigation is still in an early stage, the outcome is currently not determinable, and a reasonable estimate of loss or range of loss in excess of the immaterialThe amount that we have recorded foris based on our estimate of the probable outcome of this litigation cannot be made.
During 2017, four potential4 putative class action complaints were filed against Six Flags Entertainment CorporationHoldings or one of its subsidiaries. Complaints were filed on August 11, 2017, in the Circuit Court of Lake County, Illinois,Illinois; on September 1, 2017, in the United States District Court for the Northern District of Georgia,Georgia; on September 11, 2017, in the Superior Court of Los Angeles County, California,California; and on November 30, 2017, in the Superior Court of Ocean County, New Jersey. The complaints allege that we, in violation of federal law, printed more than the last five digits of a credit or debit card number on customers’ receipts and/or the expiration dates of those cards. A willful violation may subject a company to liability for actual damages or statutory damages between $100 and $1,000 per person, punitive damages in an amount determined by a court and reasonable attorneys’ fees, all of which are being sought by the plaintiffs. The complaints do not allege that any information was misused. On October 20, 2020, the parties entered into a settlement agreement to resolve the lawsuits, for an immaterial amount, and preliminary approval was granted by the court on December 3, 2020. All 4 lawsuits are stayed pending final approval of the settlement by the court.
Securities Class Action Lawsuits
In February 2020, 2 putative securities class action complaints were filed against Holdings and certain of its former executive officers (collectively, the “defendants”) in the U.S. District Court for the Northern District of Texas. On March 2, 2020, the 2 cases were consolidated in an action captioned Electrical Workers Pension Fund Local 103 I.B.E.W. v. Six Flags Entertainment Corp., et al., Case No. 4:20-cv-00201-P (N.D. Tex.) (the “Electrical Workers litigation”), and an amended complaint was filed on March 20, 2020. On May 8, 2020, Oklahoma Firefighters Pension and Retirement System and Electrical Workers Pension Fund Local 103 I.B.E.W. were appointed as lead plaintiffs, Bernstein Litowitz Berger & Grossman LLP was appointed as lead counsel, and McKool Smith PC was appointed as liaison counsel. On July 2, 2020, lead plaintiffs filed a consolidated complaint. The consolidated complaint alleges, among other things, that the defendants made materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the development of its Six Flags branded parks in China and the financial health of its partner, Riverside Investment Group Co. Ltd., in violation of the federal securities laws. The consolidated complaint seeks compensatory damages and other relief on behalf of a putative class of purchasers of Holdings’ publicly traded common stock during the period between April 24, 2018 and February 19, 2020. On August 3, 2020, defendants filed a motion to dismiss the consolidated complaint, which motion was fully briefed as of September 16, 2020 and remains pending. We believe that these lawsuits are without merit and intend to defend this litigation vigorously. However, there can be no assurance regarding the ultimate outcome of the lawsuit.
98
Stockholder Derivative Lawsuits
On March 20, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Mr. Mark Schwartz in the U.S. District Court for the Northern District of Texas against certain of its current and former executive officers and directors (the “individual defendants”) in an action captioned Schwartz v. Reid-Anderson, et al., Case No. 4:20-cv-00262-P (N.D. Tex.). In April 2020, 2 additional stockholder derivative lawsuits, making substantially identical allegations as the Schwartz complaint, were filed on behalf of nominal defendant Holdings by Trustees of the St. Clair County Employees’ Retirement System and Mr. Mehmet Ali Albayrak in the U.S. District Court for the Northern District of Texas in actions captioned Martin, et al. v. Reid-Anderson, et al., Case No. 4:20-cv-00311-P (N.D. Tex.) and Albayrak v. Reid-Anderson, et al., Case No. 4:20-cv-00312-P (N.D. Tex.), respectively. On April 8, 2020, plaintiffs in all 3 of these putative derivative actions moved to consolidate the 3 actions and to appoint lead counsel. On May 8, 2020, the court granted the plaintiffs’ motion to consolidate. The consolidated action is captioned In re Six Flags Entertainment Corporation Derivative Litigation, Case No. 4:20-cv-00262-P (N.D. Tex.). On August 10, 2020, plaintiffs filed a consolidated derivative complaint. The consolidated derivative complaint alleges breach of fiduciary duty, insider selling, waste of corporate assets, unjust enrichment, and contribution for violations of federal securities laws. The consolidated derivative complaint references, and makes many of the same allegations, as are set forth in the Electrical Workers litigation, alleging, among other things, that the individual defendants breached their fiduciary duties, committed waste, are liable for contribution for, or were unjustly enriched by making, failing to correct, or failing to implement adequate internal controls relating to alleged materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the prospects of the development of its Six Flags branded parks in China and the financial health of its partner, Riverside Investment Group Co. Ltd. The consolidated derivative complaint also alleges that a former officer and director sold shares of the Company while allegedly in possession of material non-public information concerning the same. On September 9, 2020, Holdings and the individual defendants filed a motion to dismiss the consolidated complaint, which motion was fully briefed as of October 23, 2020 and remains pending. We believe that these complaints are without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of these lawsuits.
On May 5, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Mr. Richard Francisco in the District Court for Dallas County, Texas, 160th Judicial District, against certain of its current and former executive officers and directors (the “individual defendants”) in an action captioned Francisco v. Reid-Anderson, et al., Case No. DC-20-06425 (160th Dist. Ct., Dallas Cty., Tex.) (the “Francisco action”). The petition in the Francisco action alleges breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The petition in the Francisco action references, and makes many of the same allegations, as are set forth in the Electrical Workers litigation, alleging, among other things, that the individual defendants breached their fiduciary duties, were unjustly enriched by, abused their control, committed gross mismanagement, and committed waste by making, failing to correct, or failing to implement adequate internal controls relating to alleged materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the prospects of the development of its Six Flags branded parks in China and the financial health of its partner, Riverside Investment Group Co, Ltd. The petition also alleges that a former officer and director engaged in insider trading. On May 28, 2020, the parties in the Francisco action filed a joint motion to stay proceedings through the resolution of the forthcoming motion to dismiss the Electrical Workers litigation. On June 3, 2020, the court granted the joint motion to stay proceedings. On June 12, 2020, an additional stockholder derivative lawsuit, making substantially identical allegations as the Francisco petition, was filed on behalf of nominal defendant Holdings in the District Court for Dallas County, Texas, 298th Judicial District on behalf of putative stockholder Mr. Cliff Bragdon in an action captioned Bragdon v. Reid-Anderson, et al., Case No. DC-20-08180 (298th Dist. Ct., Dallas Cty., Tex.) (the “Bragdon action”). On July 10, 2020, the court granted an agreed motion filed by the parties in the Francisco and Bragdon actions to consolidate cases, to accept service and an unopposed motion to appoint co-lead and liaison counsel, and to stay both the Francisco and Bragdon actions through resolution of the motion to dismiss the Electrical Workers litigation. The consolidated state derivative action is captioned In re Six Flags Entertainment Corp. Derivative Litigation, Case No. DC-20-06425 (160th Dist. Ct., Dallas Cty., Tex.). On September 8, 2020, the parties to the consolidated state derivative action filed an agreed motion to transfer the case from Dallas County to Tarrant County, which motion was so ordered on September 27, 2020. The consolidated action is now captioned In re Six Flags Ent. Corp. Deriv. Litig., No. 096-
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320958-20 (Tex. Dist. Ct., Tarrant Cty.). We believe that these complaints are without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of these lawsuits.
Wage and Hour Class Action Lawsuits
On March 8, 2016, certain plaintiffs filed a complaint against one of our subsidiaries in the Superior Court of Massachusetts, Suffolk County, on behalf of a purported class of current and former employees of Six Flags New England. The complaint alleges violations of Massachusetts law governing employee overtime and rest breaks, and seeks damages in the form of unpaid wages for overtime and meal breaks and related penalties. On November 12, 2020, the parties entered into a settlement agreement to resolve the lawsuit, for an immaterial amount, and preliminary approval was granted by the court on December 3, 2020.
On April 20, 2018, a complaint was filed against Holdings and Six Flags Concord, LLC in the Superior Court of Solano County, California, on behalf of a purported class of current and former employees of Six Flags Discovery Kingdom. On June 15, 2018, an amended complaint was filed adding Park Management Corp. as a defendant. The amended complaint alleges violations of California law governing, among other things, employee overtime, meal and rest breaks, wage statements, and seeks damages in the form of unpaid wages, and related penalties, and attorneys’ fees and costs. Following mediation on November 30, 2020, the parties agreed to a settlement in principle to resolve the lawsuit, for an immaterial amount. The settlement is subject to preliminary and final approval by the court.
On September 18, 2019, a complaint was filed against Magic Mountain LLC in the Superior Court of Los Angeles County, California, on behalf of a purported class of current and former employees of Six Flags Discovery Kingdom. An amended complaint was filed on November 24, 2019. On May 27, 2020, a copycat complaint was filed by the same law firm on behalf of a different named plaintiff alleging identical causes of action. The complaints allege violations of California law governing payment of wages, wage statements, and background checks, and seeks statutory damages under California law as well as under the Private Attorneys General Act, and attorneys’ fees costs. We intend to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable and a reasonable estimate of loss or range of loss cannot be made.
On February 14, 2020, a complaint was filed against Magic Mountain, LLC in excessthe Superior Court of Los Angeles County, California, on behalf of a purported class of current and former employees of Six Flags Magic Mountain. The complaint alleges one cause of action for failure to furnish accurate, itemized wage statements in violation of California labor law, and seeks all applicable statutory penalties and attorneys’ fees and costs. Following mediation on January 13, 2021, the parties agreed to a settlement in principle to resolve the lawsuit, for an immaterial amount. The settlement is subject to preliminary and final approval by the court.
On February 20, 2020, a complaint was filed against Park Management Corp. in the Superior Court of Solano County, California, on behalf of a purported class of current and former employees of Six Flags Discovery Kingdom. The complaint alleges violations of California law governing payment of wages, wage statements, and background checks, and seeks statutory damages under California law and attorneys’ fees costs. We intend to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable and a reasonable estimate of loss or range of loss cannot be made.
COVID-19 Park Closure Lawsuits
Since COVID-19 began affecting the operations of our parks in mid-March 2020, 3 similar purported class action complaints were filed against Holdings or one of its subsidiaries in the United States District Court for the Central District of California on April 10, 2020, April 13, 2020, and April 21, 2020. These complaints allege that we, in violation of California law, charged members and season passholders while the parks were closed and did not provide refunds for the amounts charged. The complaints seek compensatory damages, punitive damages, restitution, and unspecified injunctive relief. On September 9, 2020, the parties agreed to a settlement in principle to resolve the lawsuits, for an immaterial amount, that we have recorded for this litigation cannot be made.which is subject to preliminary and final approval by the court.
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Tax and other contingencies
As of December 31, 20182020 and 2017,2019, we had a nominal amount of accrued liabilities for tax and other indemnification contingencies related to certain parks sold in previous years that could be recognized as recovery losses from discontinued operations in the future if such liabilities are not requested to be paid.
16. Leases
On January 1, 2019, we adopted Topic 842 using the modified retrospective approach on leases with terms extending past January 1, 2019. Results for reporting periods beginning after January 1, 2019, are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. As a result, we were not required to adjust our comparative period financial information for the effects of Topic 842 or make new lease disclosures for comparative prior periods before the date of adoption. See Note 2 (u. Leases) for additional information concerning our accounting policies and the election of certain practical expedients under Topic 842.
Upon adoption of Topic 842 on January 1, 2019, we recorded right-of-use assets and corresponding liabilities of $207.4 million and $204.3 million, respectively, with the impact primarily related to our leases of operating rights for theme park and waterpark properties and land. There was not a material impact to our consolidated statements of operations or statements of cash flows as a result of adoption of Topic 842.
We have operating leases for amusement parks, land, vehicles, machinery and certain equipment. Our leases have remaining lease terms of less than one year to 45 years, some of which include an option to extend the underlying leases for up to 20 years, and some of which include an option to terminate the underlying lease within one year. For our noncancelable operating leases with such options to extend, because we may determine it is not reasonably certain we will exercise the option, the options are not considered in determining the lease term, and associated potential option payments are excluded from lease payments. Our leases generally do not include restrictive financial or other covenants. Payments due under the lease contracts include fixed payments and, for certain of our leases, variable payments.
The components of lease cost for the year ended December 31, 2020 are as follows:
| | | | | | |
| | Year Ended | ||||
(Amounts in thousands) | | December 31, 2020 |
| December 31, 2019 | ||
Finance Lease Expense | | | | | | |
Amortization of ROU assets | | $ | 248 | | $ | — |
Interest on lease liabilities | | | 31 | | | — |
Operating lease cost | | | 24,166 |
| | 24,890 |
Short-term lease cost | | | 5,804 | | | 6,925 |
Variable lease cost | | | 4,816 | | | 5,979 |
Total lease cost | | $ | 35,065 | | $ | 37,794 |
Lease costs for the year ended December 31, 2020 and 2019 included minimum rental payments under operating leases recognized on a straight-line basis over the term of the lease. Rental expense for operating leases during the year ended December 31, 2018 was $29.3 million.
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Other information related to leases for the year ended December 31, 2020 and 2019 is as follows:
| | | | | | | | |
| | Year Ended |
| |||||
(Amounts in thousands, except for lease term and discount rate) | | December 31, 2020 | |
| December 31, 2019 |
| ||
Cash paid for amounts included in the measurement of lease liabilities | | | | | | | | |
Operating cash flows for operating leases | | $ | 18,870 | | | $ | 24,140 | |
Financing cash flows for finance leases | | | 490 | | | | — | |
Operating cash flows from finance leases | | | 31 | | | | — | |
Operating Leases | | | | | | | | |
ROU assets obtained in exchange for lease liabilities | | | 7,774 | | |
| 4,808 | |
Finance Leases | | | | | | | | |
ROU assets obtained in exchange for lease liabilities | | | 2,428 | | | | — | |
Additional information related to our operating leases for the year ended December 31, 2020 is as follows:
| | | | |
Weighted average remaining lease term (in years) | | | 18.83 | |
Weighted average discount rate | | | 6.95 | % |
Additional information related to our finance leases for the year ended December 31, 2020 is as follows:
| | | | |
Weighted average remaining lease term (in years) | | | 3.59 | |
Weighted average discount rate | | | 3.81 | % |
The following tables set forth supplemental balance sheet information related to operating and finance leases as of December 31, 2020 and December 31, 2019:
| | | | | | |
| | Year Ended | ||||
(Amounts in thousands) | | December 31, 2020 | | December 31, 2019 | ||
Operating Leases | | | | | | |
Right of use assets, net | | $ | 196,711 | | $ | 201,128 |
| | | | | | |
Short-term lease liabilities | | | 13,727 | | | 10,709 |
Long-term lease liabilities | | | 185,823 | | | 188,149 |
Total operating lease obligation | | $ | 199,550 | | $ | 198,858 |
| | | | | | |
Finance Leases | | | | | | |
Property and equipment, at cost | | $ | 2,428 | | $ | — |
Accumulated depreciation | | | (248) | | | — |
Total property and equipment, net | | $ | 2,180 | | $ | — |
| | | | | | |
Short-term lease liabilities | | $ | 327 | | $ | — |
Long-term lease liabilities | | | 1,609 | | | — |
Total finance lease obligation | | $ | 1,936 | | $ | — |
Maturities of noncancelable operating and finance lease liabilities under Topic 842 as of December 31, 2020 are summarized in the table below.
| | | | | | |
(Amounts in thousands) | | As of December 31, 2020 | ||||
| | Finance Leases | | Operating Leases | ||
2021 | | $ | 397 | | $ | 26,859 |
2022 | | | 651 | |
| 22,326 |
2023 | | | 651 | |
| 22,225 |
2024 | | | 384 | |
| 20,473 |
2025 | | | — | |
| 18,388 |
Thereafter | | | — | |
| 261,746 |
Total | | $ | 2,083 | | $ | 372,017 |
Less: present value discount | | | (147) | |
| (172,467) |
Lease liability | | $ | 1,936 | | $ | 199,550 |
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Practical Expedients
We have elected the package of practical expedients for adoption of Topic 842 permitted under the transition guidance within the standard, which among other things allows us to carry forward historical lease classification, indirect costs and the original determination of whether or not a contract contained a lease.
We have elected the practical expedient to not separate a qualifying lease into its lease and non-lease components.
17. | Business Segments |
We manage our operations on an individual park location basis, including operations from parks owned, managed and branded. Discrete financial information is maintained for each park and provided to our corporate management for review and as a basis for decision making. The primary performance measures used to allocate resources is Park EBITDA (defined as park-related operating earnings, excluding the impact of interest, taxes, depreciation, amortization and any other non-cash income or expenditures). PrimarilySubstantially all of our parks provide similar products and services through a similar process to the same class of customer through a consistent method. We also believe that the parks share common economic characteristics. Based on these factors, we have only
The following table presents segment financial information and a reconciliation of net (loss) income to Park EBITDA. Park level expenses exclude all non-cash operating expenses, principally depreciation and amortization and all non-operating expenses.
Year Ended December 31, | |||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | ||||||||
Net income | $ | 316,003 | $ | 313,026 | $ | 156,727 | |||||
Interest expense, net | 107,243 | 99,010 | 81,872 | ||||||||
Income tax expense | 95,855 | 16,026 | 76,539 | ||||||||
Depreciation and amortization | 115,693 | 111,671 | 106,893 | ||||||||
Corporate expenses | 48,679 | 52,105 | 51,435 | ||||||||
Stock-based compensation | (46,684 | ) | (22,697 | ) | 116,339 | ||||||
Non-operating park level expense, net: | |||||||||||
Loss on disposal of assets | 1,879 | 3,959 | 1,968 | ||||||||
Loss on debt extinguishment, net | — | 37,116 | 2,935 | ||||||||
Other expense, net | 3,508 | 271 | 1,684 | ||||||||
Park EBITDA | $ | 642,176 | $ | 610,487 | $ | 596,392 |
| | | | | | | | | |
| | Year Ended December 31, | |||||||
(Amounts in thousands) | | 2020 | | 2019 | | 2018 | |||
Net (loss) income |
| $ | (382,092) |
| $ | 219,818 |
| $ | 316,003 |
Interest expense, net | |
| 154,723 | |
| 113,302 | |
| 107,243 |
Income tax (benefit) expense | |
| (140,967) | |
| 91,942 | |
| 95,855 |
Depreciation and amortization | |
| 120,173 | |
| 118,230 | |
| 115,693 |
Corporate expenses (excluding stock-based compensation) | |
| 47,732 | |
| 54,301 | |
| 48,679 |
Stock-based compensation | |
| 19,530 | |
| 13,274 | |
| (46,684) |
Non-operating park level expense, net: | | | | | | | | | |
Loss on disposal of assets | |
| 7,689 | |
| 2,162 | |
| 1,879 |
Loss on debt extinguishment, net | |
| 6,106 | |
| 6,484 | |
| 0 |
Other expense, net | |
| 24,993 | |
| 2,542 | |
| 3,508 |
Park EBITDA |
| $ | (142,113) |
| $ | 622,055 |
| $ | 642,176 |
All of our owned or managed parks are located in the United States with the exception of
| | | | | | | | | |
|
| Domestic |
| Foreign |
| Total | |||
As of or for the year ended December 31, 2020 | | | | | | | | | |
Long-lived assets |
| $ | 2,317,009 |
| $ | 134,805 |
| $ | 2,451,814 |
Revenues | |
| 334,713 | |
| 21,862 | |
| 356,575 |
Loss before income taxes | |
| (487,594) | |
| (35,464) | |
| (523,059) |
As of or for the year ended December 31, 2019 | | | | | | | | | |
Long-lived assets |
| $ | 2,347,578 |
| $ | 142,376 |
| $ | 2,489,954 |
Revenues | |
| 1,370,367 | |
| 117,216 | |
| 1,487,583 |
Income before income taxes | |
| 297,752 | |
| 14,008 | |
| 311,760 |
As of or for the year ended December 31, 2018 | | | | | | | | | |
Long-lived assets |
| $ | 2,160,970 |
| $ | 101,359 |
| $ | 2,262,329 |
Revenues | |
| 1,335,787 | |
| 127,920 | |
| 1,463,707 |
Income before income taxes | |
| 383,875 | |
| 27,983 | |
| 411,858 |
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(Amounts in thousands) | Domestic | Foreign | Total | ||||||||
As of or for the year ended December 31, 2018 | |||||||||||
Long-lived assets | $ | 2,160,970 | $ | 101,359 | $ | 2,262,329 | |||||
Revenues | 1,335,787 | 127,920 | 1,463,707 | ||||||||
Income before income taxes | 383,875 | 27,983 | 411,858 | ||||||||
As of or for the year ended December 31, 2017 | |||||||||||
Long-lived assets | $ | 2,121,157 | $ | 98,635 | $ | 2,219,792 | |||||
Revenues | 1,240,018 | 119,056 | 1,359,074 | ||||||||
Income before income taxes | 301,322 | 27,730 | 329,052 | ||||||||
As of or for the year ended December 31, 2016 | |||||||||||
Long-lived assets | $ | 2,111,839 | $ | 83,636 | $ | 2,195,475 | |||||
Revenues | 1,205,235 | 114,163 | 1,319,398 | ||||||||
Income before income taxes | 216,205 | 17,061 | 233,266 |
18. | |
Quarterly Financial Information (Unaudited) |
Following is a summary of the unaudited interim results of operations for the years ended December 31, 2018, 20172020 and 2016:
Year Ended December 31, 2018 | |||||||||||||||
(Amounts in thousands) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||
Total revenue | $ | 128,964 | $ | 445,420 | $ | 619,820 | $ | 269,503 | |||||||
Net (loss) income attributable to Six Flags Entertainment Corporation common stockholders | (62,345 | ) | 74,502 | 184,417 | 79,422 | ||||||||||
Net (loss) income per weighted average common share outstanding: | |||||||||||||||
Basic | $ | (0.74 | ) | $ | 0.89 | $ | 2.19 | $ | 0.94 | ||||||
Diluted | (0.74 | ) | 0.88 | 2.16 | 0.93 |
Year Ended December 31, 2017 | |||||||||||||||
(Amounts in thousands) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||
Total revenue | $ | 99,528 | $ | 422,372 | $ | 580,418 | $ | 256,756 | |||||||
Net (loss) income attributable to Six Flags Entertainment Corporation common stockholders | (57,548 | ) | 52,026 | 181,325 | 98,013 | ||||||||||
Net (loss) income per weighted average common share outstanding: | |||||||||||||||
Basic | $ | (0.63 | ) | $ | 0.60 | $ | 2.15 | $ | 1.16 | ||||||
Diluted | (0.63 | ) | 0.59 | 2.11 | 1.14 |
Year Ended December 31, 2016 | |||||||||||||||
(Amounts in thousands) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||
Total revenue | $ | 115,419 | $ | 407,066 | $ | 557,599 | $ | 239,314 | |||||||
Net (loss) income attributable to Six Flags Entertainment Corporation common stockholders | (46,935 | ) | 60,887 | 102,482 | 1,868 | ||||||||||
Net (loss) income per weighted average common share outstanding: | |||||||||||||||
Basic | $ | (0.51 | ) | $ | 0.65 | $ | 1.11 | $ | 0.02 | ||||||
Diluted | (0.51 | ) | 0.64 | 1.09 | 0.02 |
| | | | | | | | | | | | |
| | Year Ended December 31, 2020 | ||||||||||
| | First | | Second | | Third | | Fourth | ||||
(Amounts in thousands) |
| Quarter |
| Quarter |
| Quarter |
| Quarter | ||||
Total revenue |
| $ | 102,503 |
| $ | 19,143 |
| $ | 126,327 |
| $ | 108,602 |
(Loss) before income taxes | | | (106,595) | | | (171,911) | | | (131,771) | | | (112,782) |
Net (loss) income attributable to Six Flags Entertainment Corporation common stockholders | |
| (84,546) | |
| (136,894) | |
| (116,172) | |
| (85,768) |
Net (loss) income per weighted average common share outstanding: | | | | | | | | | | | | |
Basic |
| $ | (1.00) |
| $ | (1.62) |
| $ | (1.37) |
| $ | (1.00) |
Diluted | |
| (1.00) | |
| (1.62) | |
| (1.37) | |
| (1.00) |
| | | | | | | | | | | | |
| | Year Ended December 31, 2019 | ||||||||||
| | First | | Second | | Third | | Fourth | ||||
(Amounts in thousands) |
| Quarter |
| Quarter |
| Quarter |
| Quarter | ||||
Total revenue |
| $ | 128,193 |
| $ | 477,210 |
| $ | 621,180 |
| $ | 261,000 |
(Loss) income before income taxes | | | (93,789) | | | 133,571 | | | 261,835 | | | 10,143 |
Net (loss) income attributable to Six Flags Entertainment Corporation common stockholders | |
| (69,132) | |
| 79,519 | |
| 179,833 | |
| (11,155) |
Net (loss) income per weighted average common share outstanding: | | | | | | | | | | | | |
Basic |
| $ | (0.82) |
| $ | 0.94 |
| $ | 2.13 |
| $ | (0.13) |
Diluted | |
| (0.82) | |
| 0.94 | |
| 2.11 | |
| (0.13) |
We operate a seasonal business. In particular, our theme park and waterpark operations contribute most of their annual revenue during the period from Memorial Day to Labor Day each year.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
We have had no disagreements with our independent registered public accounting firm on any matter of accounting principles or practices or financial statement disclosure.
ITEM 9A. | CONTROLS AND PROCEDURES |
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation, as of
December 31,Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting included in Item 8 of this Annual Report is incorporated by reference herein.
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Attestation Report of Registered Public Accounting Firm
KPMG LLP’s Attestation Report included in Item 8 of this Annual Report is incorporated by reference herein.
Changes in Internal Control Over Financial Reporting During the Quarter Ended December 31, 2018
There were no changes in our internal control over financial reporting, as such term is defined under Rule 13a-15(f) or 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, as amended, that occurred during our fiscal quarter ended December 31, 20182020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.OTHER INFORMATION
The Six Flags Entertainment Corporation Supplemental 401(k) Plan was amended and restated effective January 1, 2021 including to eliminate a fixed employer contribution rate. The Six Flags Entertainment Corporation Amended and Restated Supplemental 401(k) Plan is attached as an exhibit to this Annual Report.
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PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item regarding our executive officers is provided in "Item 1. Business — Executive Officers and Certain Significant Employees" of this Annual Report. The information required by this item concerning our directors, compliance with Section 16 of the Exchange Act, our codecodes of ethics and other corporate governance information is incorporated by reference to the information set forth in the sections entitled "Proposal 1: Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance"Directors" and "Corporate Governance" in our Proxy Statement for our 20192021 annual meeting of stockholders to be filed with the SEC not later than 120 days after the fiscal year ended December 31, 20182020 (the "2019"2021 Proxy Statement").
ITEM 11.EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the information set forth in the sections entitled "2018"2020 Non-Employee Director Compensation," "Executive Compensation," "Corporate Governance"Governance," “Compensation Committee Interlocks and Insider Participation,” and "Compensation Committee Report" in the 20192021 Proxy Statement.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information required by this item concerning security ownership of certain beneficial owners and management is incorporated by reference to the information set forth in the section entitled "Security Ownership of Certain Beneficial Owners and Management" in the 20192021 Proxy Statement.
Equity Compensation Plan Information
The following table contains information as of December 31, 20182020 regarding shares of common stock that may be issued under equity compensation plans approved by our stockholders (Employee Stock Purchase Plan and Long-Term Incentive Plan).
| | | | | | | | |
| | (a) | | (b) | | (c) |
| |
| | Number of securities | | Weighted-average | | Number of securities |
| |
| | to be | | exercise price of | | remaining available |
| |
| | issued upon exercise | | outstanding | | for future issuance |
| |
| | of outstanding options, | | options, warrants | | under equity |
| |
Plan Category |
| warrants and rights |
| and rights |
| compensation plans |
| |
Equity compensation plans approved by security holders |
| 4,797,000 | (1) | $ | 52.42 | (2) | 5,954,000 | (3) |
Equity compensation plans not approved by security holders |
| N/A |
|
| N/A |
| N/A | |
Total |
| 4,797,000 | | $ | 52.42 |
| 5,954,000 | |
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted-average exercise price of outstanding options, warrants and rights | (c) Number of securities remaining available for future issuance under equity compensation plans | |||||||
Equity compensation plans approved by security holders | 5,380,000 | (1) | $ | 50.60 | (2) | 6,788,000 | (3) | |||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||
Total | 5,380,000 | $ | 50.60 | 6,788,000 |
(1) | Excludes restricted stock units outstanding under the |
(2) | The determination of the weighted-average exercise price excludes outstanding rights under the |
(3) | Consists of |
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ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
The information required by this item is incorporated by reference to the information set forth in the sections entitled "Transactions with Related Persons" and "Corporate Governance
—Independence" in theITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The information required by this item is incorporated by reference to the information set forth in the section entitled "Audit, Audit-Related, and Tax Fees" in the 20192021 Proxy Statement.
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PART IV
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Six Flags Entertainment Corporation and its subsidiaries, the notes thereto, the related report thereon of the independent registered public accounting firm, and financial statement schedules are filed under Item 8 of this Annual Report:
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Certain schedules for which provision is made in the applicable accounting regulations of the SEC have been omitted because they either are not required under the related instructions, are inapplicable, or the required information is shown in the financial statements or notes thereto.
(a)(3) Exhibits
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10.10 | †* | |
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| Consent to Second Amended and Restated Credit Agreement, dated as of December 28, 2020, among Six Flags Entertainment Corporation, Six Flags Operations Inc., Six Flags Theme Parks Inc., the other subsidiary guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent and the other lenders party thereto─incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 001-13703) filed on December 28, 2020. | |
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101 | * | The following financial statements and footnotes from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 formatted in Inline XBRL: (i) the Audited Consolidated Balance Sheets, (ii) the Audited Consolidated Statements of Operations, (iii) the Audited Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholders’ Deficit, (v) the Audited Statements of Cash Flow, and (vi) related Notes to the Consolidated Financial Statements. |
104 | * | The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL. |
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Filed herewith |
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Management contract or compensatory plan |
(b) | Exhibits |
See Item 15(a)(3) above.
Neither Six Flags Entertainment Corporation, nor any of its consolidated subsidiaries, has outstanding any instrument with respect to its long-term debt, other than those filed as an exhibit to this Annual Report, under which the total amount of securities authorized exceeds 10% of the total assets of Six Flags Entertainment Corporation and its subsidiaries on a consolidated basis. Six Flags Entertainment Corporation hereby agrees to furnish to the SEC, upon request, a copy of each instrument that defines the rights of holders of such long-term debt that is not filed or incorporated by reference as an exhibit to this Annual Report.
Six Flags Entertainment Corporation will furnish any exhibit upon the payment of a reasonable fee, which fee will be limited to Six Flags Entertainment Corporation'sCorporation’s reasonable expenses in furnishing such exhibit.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 19, 2019
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SIX FLAGS ENTERTAINMENT CORPORATION | ||||
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| By: | /s/ MICHAEL SPANOS | ||
| | Michael Spanos |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the following capacities on the dates indicated.
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Signature | Title | Date | ||
/s/ | | President and Chief Executive Officer | | February |
Michael Spanos | | | | |
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/s/ | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | February |
Sandeep Reddy | | | | |
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/s/ TAYLOR BROOKS | | Vice President and Chief Accounting Officer (Principal Accounting Officer) | | February |
Taylor Brooks | | | | |
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/s/ SELIM BASSOUL | | Non-Executive Chairman | | February 25, 2021 |
Selim Bassoul | | | | |
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/s/ BEN BALDANZA | | Director | | February 25, 2021 |
Ben Baldanza | | | | |
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/s/ ESI EGGLESTON BRACEY | | Director | | February 25, 2021 |
Esi Eggleston Bracey | | | | |
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/s/ KURT CELLAR | | Director | | February |
Kurt Cellar | | | | |
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/s/ NANCY A. KREJSA | | Director | | February |
Nancy A. Krejsa | | | | |
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/s/ ENRIQUE RAMIREZ MENA | | Director | | February 25, 2021 |
Enrique Ramirez Mena | | | | |
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/s/ RICHARD W. ROEDEL | | Director | | February |
Richard W. Roedel | | | | |
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/s/ ARIK RUCHIM | | Director | | February 25, 2021 |
Arik Ruchim | | | | |
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