UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended ~~June~~September 30, 2019 or

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission file number: 1-13703

Six Flags Entertainment Corporation

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		13-3995059 (I.R.S. Employer Identification No.)

924 Avenue J East, Grand Prairie, TX 75050 (Address of Principal Executive Offices, Including Zip Code)		(972) 595-5000 (Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.025 par value per share	SIX	New York Stock Exchange

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 ⌧ No ◻

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 ⌧ No ◻

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


Large Accelerated Filer¹ ⌧		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 Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At ~~July 19,~~October 18, 2019, Six Flags Entertainment Corporation had ~~84,356,477~~84,524,441 outstanding shares of common stock, par value $0.025 per share.

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SIX FLAGS ENTERTAINMENT CORPORATION

FORM 10-Q

INDEX


Cautionary Note Regarding Forward-Looking Statements		1

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2019 (unaudited) and December 31, 2018	3

	Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended ~~June~~September 30, 2019 and 2018	4

	Condensed Consolidated Statements of Operations (unaudited) for the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018	5

	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended ~~June~~September 30, 2019 and 2018	6

	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018	7

	Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Three Months Ended ~~June~~September 30, 2019 and 2018	8

	Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018	9

	Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 and 2018	10

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3130

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3837

Item 4.	Controls and Procedures	3938

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3938

Item 1A.	Risk Factors	3938

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3938

Item 6.	Exhibits	40

Signatures		41

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Quarterly 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. 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) the adequacy of cash flows from operations, available cash and available amounts under our credit facilities to meet our future liquidity needs, (ii) our plans and 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, (vi) our ability to realize future growth and execute and deliver on our strategic initiatives, (vii) our expectations regarding uncertain tax positions, (viii) our expectations regarding our deferred revenue growth, and (ix) 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, events, disturbances and terrorist activities;

●recall of food, toys and other retail products sold at our parks;

●accidents occurring at our parks or other parks in the industry and adverse publicity concerning our parks or other parks in the industry;

●inability to achieve desired improvements and our aspirational financial performance goals;

●adverse weather conditions such as excess heat or cold, rain and storms;

●general financial and credit market conditions;

●economic conditions (including customer spending patterns);

●changes in public and consumer tastes;

●construction delays in capital improvements and 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;

●pending, threatened or future legal proceedings and the significant expenses associated with litigation;

●cybersecurity risks; and

●other factors described in "Item 1A. Risk Factors" set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Annual Report").

A more complete discussion of these factors and other risks applicable to our business is contained in "Part I, Item 1A. Risk Factors" of the 2018 Annual Report. All forward-looking statements in this Quarterly 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 Quarterly 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 give 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

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law, to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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 Quarterly 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 Quarterly 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, TX 75050, Attn: Investor Relations.

* * * * *

As used herein, unless the context requires otherwise, the terms "we," "our," "Company" and "Six Flags" 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.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


	As of				As of
	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
(Amounts in thousands, except share data)	(unaudited)				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	113,798	$	44,608	$	211,797	$	44,608
Accounts receivable, net		180,986		116,043		199,127		116,043
Inventories		42,866		28,779		36,953		28,779
Prepaid expenses and other current assets		72,403		52,499		60,508		52,499
Total current assets		410,053		241,929		508,385		241,929
Property and equipment, net:
Property and equipment, at cost		2,306,096		2,204,678		2,322,291		2,204,678
Accumulated depreciation		(1,005,764)		(950,996)		(1,032,914)		(950,996)
Total property and equipment, net		1,300,332		1,253,682		1,289,377		1,253,682
Other assets:
Right-of-use operating leases, net		206,980		—		202,935		—
Debt issuance costs		4,045		1,793		3,836		1,793
Deposits and other assets		10,625		11,277		10,740		11,277
Goodwill		659,618		659,618		659,618		659,618
Intangible assets, net of accumulated amortization of $22,023 and $21,133 as of June 30, 2019 and December 31, 2018, respectively		346,413		349,029
Intangible assets, net of accumulated amortization of $22,623 and $21,133 as of September 30, 2019 and December 31, 2018, respectively						345,812		349,029
Total other assets		1,227,681		1,021,717		1,222,941		1,021,717
Total assets	$	2,938,066	$	2,517,328	$	3,020,703	$	2,517,328

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	73,786	$	32,905	$	51,428	$	32,905
Accrued compensation, payroll taxes and benefits		28,065		30,468		23,994		30,468
Accrued insurance reserves		35,542		39,183		37,108		39,183
Accrued interest payable		26,349		30,697		20,819		30,697
Other accrued liabilities		59,250		45,880		61,038		45,880
Deferred revenue		235,109		146,227		197,674		146,227
Short-term borrowings		—		43,000		—		43,000
Current portion of long-term debt		8,000		—		8,000		—
Short-term operating lease liabilities		10,538		—		10,585		—
Total current liabilities		476,639		368,360		410,646		368,360
Noncurrent liabilities:
Long-term debt		2,269,761		2,063,512		2,268,704		2,063,512
Long-term operating lease liabilities		197,335		—		185,365		—
Other long-term liabilities		23,081		29,280		22,133		29,280
Deferred income taxes		175,671		173,998		223,656		173,998
Total noncurrent liabilities		2,665,848		2,266,790		2,699,858		2,266,790
Total liabilities		3,142,487		2,635,150		3,110,504		2,635,150

Redeemable noncontrolling interests		545,386		525,271		545,386		525,271

Stockholders' deficit:
Preferred stock, $1.00 par value		—		—		—		—
Common stock, $0.025 par value, 140,000,000 shares authorized; 84,334,531 and 83,962,182 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		2,108		2,099
Common stock, $0.025 par value, 140,000,000 shares authorized; 84,516,567 and 83,962,182 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively						2,113		2,099
Capital in excess of par value		1,058,675		1,037,640		1,066,312		1,037,640
Accumulated deficit		(1,738,955)		(1,611,334)		(1,628,394)		(1,611,334)
Accumulated other comprehensive loss, net of tax		(71,635)		(71,498)		(75,218)		(71,498)
Total stockholders' deficit		(749,807)		(643,093)		(635,187)		(643,093)
Total liabilities and stockholders' deficit	$	2,938,066	$	2,517,328	$	3,020,703	$	2,517,328

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended				Three Months Ended
(Amounts in thousands, except per share data)	June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018
Park admissions	$	252,508	$	240,471	$	352,664	$	350,977
Park food, merchandise and other		191,655		176,055		242,059		232,952
Sponsorship, international agreements and accommodations		33,047		28,894		26,457		35,891
Total revenues		477,210		445,420		621,180		619,820
Operating expenses (excluding depreciation and amortization shown separately below)		178,348		163,964		189,820		188,704
Selling, general and administrative expenses (including stock-based compensation of $3,553 and $16,036 in 2019 and 2018, respectively, and excluding depreciation and amortization shown separately below)		59,723		68,786
Selling, general and administrative expenses (including stock-based compensation of $3,903 and $10,183 in 2019 and 2018, respectively, and excluding depreciation and amortization shown separately below)						55,144		65,783
Costs of products sold		43,513		39,520		53,508		50,081
Other net periodic pension benefit		(1,055)		(1,277)		(1,038)		(1,290)
Depreciation		28,674		27,309		30,084		29,008
Amortization		601		612		601		612
(Gain) loss on disposal of assets		(690)		254
Loss on disposal of assets						2,659		386
Interest expense		29,649		27,556		28,686		27,142
Interest income		(77)		(76)		(350)		(157)
Loss on debt extinguishment		6,231		—
Other (income) expense, net		(1,278)		354
Other expense (income), net						231		(130)
Income before income taxes		133,571		118,418		261,835		259,681
Income tax expense		33,675		23,913		61,626		55,260
Net income		99,896		94,505		200,209		204,421
Less: Net income attributable to noncontrolling interests		(20,377)		(20,003)		(20,376)		(20,004)
Net income attributable to Six Flags Entertainment Corporation	$	79,519	$	74,502	$	179,833	$	184,417

Weighted-average common shares outstanding
Weighted-average common shares outstanding:
Basic:		84,288		83,666		84,413		84,143
Diluted:		84,868		85,072		85,045		85,516

Net income per average common share outstanding
Net income per average common share outstanding:
Basic:	$	0.94	$	0.89	$	2.13	$	2.19
Diluted:	$	0.94	$	0.88	$	2.11	$	2.16

Cash dividends declared per common share	$	0.82	$	0.78	$	0.82	$	0.78

See accompanying notes to the unaudited condensed consolidated financial statements

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)


		Six Months Ended				Nine Months Ended
(Amounts in thousands, except per share data)		June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018
Park admissions		$	318,588	$	306,792	$	671,252	$	657,769
Park food, merchandise and other			230,633		218,301		472,692		451,253
Sponsorship, international agreements and accommodations			56,182		49,291		82,639		85,182
Total revenues			605,403		574,384		1,226,583		1,194,204
Operating expenses (excluding depreciation and amortization shown separately below)			292,870		266,464		482,690		455,168
Selling, general and administrative expenses (including stock-based compensation of $7,444 and $20,589 in 2019 and 2018, respectively, and excluding depreciation and amortization shown separately below)			99,833		109,724
Selling, general and administrative expenses (including stock-based compensation of $11,347 and $30,772 in 2019 and 2018, respectively, and excluding depreciation and amortization shown separately below)							154,977		175,507
Costs of products sold			53,788		49,983		107,296		100,064
Other net periodic pension benefit			(2,110)		(2,554)		(3,148)		(3,844)
Depreciation			57,144		55,327		87,228		84,335
Amortization			1,204		1,223		1,805		1,835
Loss on disposal of assets			446		2,165		3,105		2,551
Interest expense			58,279		53,678		86,965		80,820
Interest income			(359)		(313)		(709)		(470)
Loss on debt extinguishment			6,231		—		6,231		—
Other (income) expense, net			(1,705)		2,289		(1,474)		2,159
Income before income taxes			39,782		36,398		301,617		296,079
Income tax expense			9,018		4,238		70,644		59,498
Net income			30,764		32,160		230,973		236,581
Less: Net income attributable to noncontrolling interests			(20,377)		(20,003)		(40,753)		(40,007)
Net income attributable to Six Flags Entertainment Corporation		$	10,387	$	12,157	$	190,220	$	196,574

Weighted-average common shares outstanding:
Basic:			84,207		84,059		84,276		84,087
Diluted:			84,882		85,489		84,938		85,504

Net income per average common share outstanding:
Basic:		$	0.12	$	0.14	$	2.26	$	2.34
Diluted:		$	0.12	$	0.14	$	2.24	$	2.30
	��
Cash dividends declared per common share		$	1.64	$	1.56	$	2.46	$	2.34

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended				Three Months Ended
(Amounts in thousands)	June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018
Net income	$	99,896	$	94,505	$	200,209	$	204,421
Other comprehensive loss, net of tax:
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment ⁽¹⁾		626		(3,898)		(1,466)		3,338
Defined benefit retirement plan ⁽²⁾		146		133		151		135
Change in cash flow hedging ⁽³⁾		(2,141)		—		(2,268)		—
Other comprehensive loss, net of tax		(1,369)		(3,765)
Other comprehensive (loss) income, net of tax						(3,583)		3,473
Comprehensive income		98,527		90,740		196,626		207,894
Less: comprehensive income attributable to noncontrolling interests		(20,377)		(20,003)
Less: Comprehensive income attributable to noncontrolling interests						(20,376)		(20,004)
Comprehensive income attributable to Six Flags Entertainment Corporation	$	78,150	$	70,737	$	176,250	$	187,890

(1) Foreign currency translation adjustment is presented net of tax ~~expense of $0.2 million and net of tax~~ benefit of ~~$1.0~~$0.4 million for the three months ended ~~June~~September 30, 2019 and ~~June~~tax expense of $0.9 million for the three months ended September 30, 2018, respectively.

(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the three months ended September 30, 2019 and net of nominal tax expense for the three months ended ~~June 30, 2019 and June~~September 30, 2018, respectively.

(3) Change in fair value of cash flow hedging is presented net of tax benefit of ~~$0.7~~$0.8 million for the three months ended ~~June~~September 30, 2019.

See accompanying notes to unaudited condensed consolidated financial statements

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

							��
	Six Months Ended				Nine Months Ended
(Amounts in thousands)	June 30, 2019		June 30, 2018		September 30, 2019			September 30, 2018
Net income	$	30,764	$	32,160	$	230,973		$	236,581
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment ⁽¹⁾		1,715		1,075		249			4,413
Defined benefit retirement plan ⁽²⁾		289		266		440			401
Change in cash flow hedging ⁽³⁾		(2,141)		—		(4,409)			—
Other comprehensive (loss) income, net of tax		(137)		1,341		(3,720)			4,814
Comprehensive income		30,627		33,501		227,253			241,395
Less: comprehensive income attributable to noncontrolling interests		(20,377)		(20,003)
Less: Comprehensive income attributable to noncontrolling interests						(40,753)			(40,007)
Comprehensive income attributable to Six Flags Entertainment Corporation	$	10,250	$	13,498	$	186,500		$	201,388

(1) Foreign currency translation adjustment is presented net of tax expense of ~~$0.5~~$0.1 million and ~~$0.3~~$1.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018, respectively.

(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018.

(3) Change in fair value of cash flow hedging is presented net of tax benefit of ~~$0.7~~$1.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019.

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Consolidated Statements of Stockholders’ Deficit

(Unaudited)


								Accumulated											Accumulated
				Capital in				other		Total					Capital in				other		Total
	Common stock			excess of		Accumulated		comprehensive		stockholders'		Common stock			excess of		Accumulated		comprehensive		stockholders'
(Amounts in thousands, except share data)	Shares issued	Amount		par value		deficit		loss		deficit		Shares issued	Amount		par value		deficit		loss		deficit
Balances at March 31, 2018	83,536,352	$	2,088	$	1,091,755	$	(1,723,804)	$	(68,214)	$	(698,175)
Balances at June 30, 2018												83,910,255	$	2,098	$	1,118,411	$	(1,714,524)	$	(71,979)	$	(665,994)
Issuance of common stock	355,925		9		9,540		—		—		9,549	484,657		12		18,437		—		—		18,449
Stock-based compensation	—		—		16,036		—		—		16,036	—		—		10,183		—		—		10,183
Dividends declared to common shareholders	—		—		—		(65,302)		—		(65,302)	—		—		—		(65,699)		—		(65,699)
Repurchase of common stock	(69)		—		(5)		—		—		(5)	(684)		—		(45)		(1)		—		(46)
Employee stock purchase plan	18,047		1		1,085		—		—		1,086	64		—		4		—		—		4
Fresh start valuation adjustment for SFOT units purchased	—		—		—		80		—		80
Net income attributable to Six Flags Entertainment Corporation	—		—		—		74,502		—		74,502	—		—		—		184,417		—		184,417
Net other comprehensive loss, net of tax	—		—		—		—		(3,765)		(3,765)
Balances at June 30, 2018	83,910,255	$	2,098	$	1,118,411	$	(1,714,524)	$	(71,979)	$	(665,994)
Net other comprehensive income, net of tax												—		—		—		—		3,473		3,473
Balances at September 30, 2018												84,394,292	$	2,110	$	1,146,990	$	(1,595,807)	$	(68,506)	$	(515,213)


								Accumulated											Accumulated
				Capital in				other		Total					Capital in				other		Total
	Common stock			excess of		Accumulated		comprehensive		stockholders'		Common stock			excess of		Accumulated		comprehensive		stockholders'
(Amounts in thousands, except share data)	Shares issued	Amount		par value		deficit		loss		deficit		Shares issued	Amount		par value		deficit		loss		deficit
Balances at March 31, 2019	84,245,940	$	2,106	$	1,052,378	$	(1,749,400)	$	(70,266)	$	(765,182)
Balances at June 30, 2019												84,334,531	$	2,108	$	1,058,675	$	(1,738,955)	$	(71,635)	$	(749,807)
Issuance of common stock	61,654		1		1,540		—		—		1,541	182,851		5		3,782		—		—		3,787
Stock-based compensation	—		—		3,553		—		—		3,553	—		—		3,903		—		—		3,903
Dividends declared to common shareholders	—		—		—		(69,119)		—		(69,119)	—		—		—		(69,272)		—		(69,272)
Employee stock purchase plan	26,937		1		1,204		—		—		1,205
Fresh start valuation adjustment for SFOT units purchased	—		—		—		45		—		45
Repurchase of common stock												(815)		—		(48)		—		—		(48)
Net income attributable to Six Flags Entertainment Corporation	—		—		—		79,519		—		79,519	—		—		—		179,833		—		179,833
Net other comprehensive loss, net of tax	—		—		—		—		(1,369)		(1,369)	—		—		—		—		(3,583)		(3,583)
Balances at June 30, 2019	84,334,531	$	2,108	$	1,058,675	$	(1,738,955)	$	(71,635)	$	(749,807)
Balances at September 30, 2019												84,516,567	$	2,113	$	1,066,312	$	(1,628,394)	$	(75,218)	$	(635,187)

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Consolidated Statements of Stockholders’ Deficit

(Unaudited)


								Accumulated											Accumulated
				Capital in				other		Total					Capital in				other		Total
	Common stock			excess of		Accumulated		comprehensive		stockholders'		Common stock			excess of		Accumulated		comprehensive		stockholders'
(Amounts in thousands, except share data)	Shares issued	Amount		par value		deficit		loss		deficit		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)	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)	—		—		—		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)	84,488,433	$	2,112	$	1,086,265	$	(1,525,051)	$	(73,320)	$	(509,994)
Issuance of common stock	706,213		18		20,920		—		—		20,938	1,190,870		30		39,357		—		—		39,387
Stock-based compensation	—		—		20,589		—		—		20,589	—		—		30,772		—		—		30,772
Dividends declared to common shareholders	—		—		—		(131,245)		—		(131,245)	—		—		—		(196,944)		—		(196,944)
Repurchase of common stock	(1,302,438)		(33)		(10,448)		(70,465)		—		(80,946)	(1,303,122)		(33)		(10,493)		(70,466)		—		(80,992)
Employee stock purchase plan	18,047		1		1,085		—		—		1,086	18,111		1		1,089		—		—		1,090
Fresh start valuation adjustment for SFOT units purchased	—		—		—		80		—		80	—		—		—		80		—		80
Net income attributable to Six Flags Entertainment Corporation	—		—		—		12,157		—		12,157	—		—		—		196,574		—		196,574
Net other comprehensive income, net of tax	—		—		—		—		1,341		1,341	—		—		—		—		4,814		4,814
Balances at June 30, 2018	83,910,255	$	2,098	$	1,118,411	$	(1,714,524)	$	(71,979)	$	(665,994)
Balances at September 30, 2018												84,394,292	$	2,110	$	1,146,990	$	(1,595,807)	$	(68,506)	$	(515,213)


								Accumulated											Accumulated
				Capital in				other		Total					Capital in				other		Total
	Common stock			excess of		Accumulated		comprehensive		stockholders'		Common stock			excess of		Accumulated		comprehensive		stockholders'
(Amounts in thousands, except share data)	Shares issued	Amount		par value		deficit		loss		deficit		Shares issued	Amount		par value		deficit		loss		deficit
Balances at December 31, 2018	83,962,182	$	2,099	$	1,037,640	$	(1,611,334)	$	(71,498)	$	(643,093)	83,962,182	$	2,099	$	1,037,640	$	(1,611,334)	$	(71,498)	$	(643,093)
Issuance of common stock	345,479		8		12,391		—		—		12,399	528,330		13		16,173		—		—		16,186
Stock-based compensation	—		—		7,444		—		—		7,444	—		—		11,347		—		—		11,347
Dividends declared to common shareholders	—		—		—		(138,053)		—		(138,053)	—		—		—		(207,325)		—		(207,325)
Repurchase of common stock	(67)		—		(4)		—		—		(4)	(882)		—		(52)		—		—		(52)
Employee stock purchase plan	26,937		1		1,204		—		—		1,205	26,937		1		1,204		—		—		1,205
Fresh start valuation adjustment for SFOT units purchased	—		—		—		45		—		45	—		—		—		45		—		45
Net income attributable to Six Flags Entertainment Corporation	—		—		—		10,387		—		10,387	—		—		—		190,220		—		190,220
Net other comprehensive loss, net of tax	—		—		—		—		(137)		(137)	—		—		—		—		(3,720)		(3,720)
Balances at June 30, 2019	84,334,531	$	2,108	$	1,058,675	$	(1,738,955)	$	(71,635)	$	(749,807)
Balances at September 30, 2019												84,516,567	$	2,113	$	1,066,312	$	(1,628,394)	$	(75,218)	$	(635,187)

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended
(Amounts in thousands)

June 30, 2019

June 30, 2018
Cash flows from operating activities:

Net income

$
30,764

$
32,160
Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

58,348

56,550
Stock-based compensation

7,444

20,589
Interest accretion on notes payable

664

670
Loss on debt extinguishment

6,231

—
Amortization of debt issuance costs

1,872

1,966
Other, including loss on disposal of assets

(151)

5,673
Gain on sale of investee

(724)

—
Increase in accounts receivable

(63,700)

(62,568)
Increase in inventories, prepaid expenses and other current assets

(36,758)

(27,117)
Decrease in deposits and other assets

361

1,293
Decrease in ROU operating leases

2,003

—
Increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities

121,411

113,361
Increase in operating lease liabilities

1,100

—
(Decrease) increase in accrued interest payable

(4,348)

75
Deferred income taxes

1,680

(7,961)
Net cash provided by operating activities

126,197

134,691

Cash flows from investing activities:




Additions to property and equipment

(96,762)

(90,533)
Property insurance recoveries

1,637

—
Acquisition of park assets, net of cash acquired

—

(19,059)
Proceeds from sale of assets

4

32
Net cash used in investing activities

(95,121)

(109,560)

Cash flows from financing activities:




Repayment of borrowings

(798,750)

(123,000)
Proceeds from borrowings

970,000

281,000
Payment of debt issuance costs

(8,927)

(793)
Payment of cash dividends

(138,259)

(131,346)
Proceeds from issuance of common stock

13,604

22,024
Stock repurchases

(4)

(80,946)
Purchase of redeemable noncontrolling interest

(217)

(353)
Net cash provided by (used in) financing activities

37,447

(33,414)

��
Effect of exchange rate on cash

667

(588)

Net increase (decrease) in cash and cash equivalents

69,190

(8,871)
Cash and cash equivalents at beginning of period

44,608

77,496
Cash and cash equivalents at end of period

$
113,798

$
68,625

Supplemental cash flow information




Cash paid for interest

$
60,092

$
50,967
Cash paid for income taxes

$
17,407

$
14,832


	Nine Months Ended
(Amounts in thousands)	September 30, 2019		September 30, 2018
Cash flows from operating activities:
Net income	$	230,973	$	236,581
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		89,033		86,170
Stock-based compensation		11,347		30,772
Interest accretion on notes payable		988		1,007
Loss on debt extinguishment		6,231		—
Amortization of debt issuance costs		2,703		2,972
Other, including loss on disposal of assets		3,773		5,755
Gain on sale of investee		(724)		—
Increase in accounts receivable		(83,061)		(94,567)
Increase in inventories, prepaid expenses and other current assets		(19,188)		(24,614)
Decrease in deposits and other assets		242		515
Decrease in ROU operating leases		6,030		—
Increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities		62,266		68,786
Decrease in operating lease liabilities		(10,823)		—
Decrease in accrued interest payable		(9,878)		(5,020)
Deferred income taxes		50,953		33,654
Net cash provided by operating activities		340,865		342,011

Cash flows from investing activities:
Additions to property and equipment		(123,662)		(112,242)
Property insurance recoveries		1,637		—
Acquisition of park assets, net of cash acquired		—		(19,059)
Proceeds from sale of assets		24		55
Net cash used in investing activities		(122,001)		(131,246)

Cash flows from financing activities:
Repayment of borrowings		(800,750)		(257,000)
Proceeds from borrowings		970,000		296,000
Payment of debt issuance costs		(8,927)		(793)
Payment of cash dividends		(208,740)		(198,245)
Proceeds from issuance of common stock		17,391		40,477
Stock repurchases		(52)		(80,992)
Purchase of redeemable noncontrolling interest		(217)		(353)
Distributions to noncontrolling interests		(20,376)		(20,003)
Net cash used in financing activities		(51,671)		(220,909)

Effect of exchange rate on cash		(4)		1,205

Net increase (decrease) in cash and cash equivalents		167,189		(8,939)
Cash and cash equivalents at beginning of period		44,608		77,496
Cash and cash equivalents at end of period	$	211,797	$	68,557

Supplemental cash flow information
Cash paid for interest	$	93,153	$	81,861
Cash paid for income taxes	$	24,953	$	24,659

See accompanying notes to unaudited condensed consolidated financial statements.

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

1. General — Basis of Presentation

We own and operate regional theme parks and waterparks and 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 the 26 parks we owned or operated as of ~~June~~September 30, 2019, 23 parks are located in the United States, ~~two~~2 are located in Mexico and ~~one~~1 is located in Montreal, Canada.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the SEC.

"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" contains a discussion of our results of operations and our financial position and should be read in conjunction with the unaudited condensed consolidated financial statements and notes. The 2018 Annual Report includes additional information about us, our operations and our financial position, and should be referred to in conjunction with this Quarterly Report. The information furnished in this Quarterly Report reflects all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the periods presented.

Results of operations for the ~~six~~nine months ended ~~June~~September 30, 2019 are not indicative of the results expected for the full year. In particular, our park operations contribute more than half of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year-round. Additionally, we had increased costs in the current year related to the operations of the ~~five~~5 new parks that we began operating on June 1, 2018, and Magic Waters, a waterpark in Rockford, Illinois that we began operating on April 1, 2019.

a. Consolidated U.S. GAAP Presentation

Our accounting policies reflect industry practices and conform to U.S. GAAP.

The unaudited condensed 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 unaudited condensed consolidated financial statements, as we have determined that we have the power to direct the activities of the Partnership Parks that most significantly impact their economic performance and we have the obligation to absorb losses and receive benefits from the Partnership Parks 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 unaudited condensed consolidated balance sheets as redeemable noncontrolling interests. See Note 6 for a description of the partnership agreements applicable to the Partnership Parks and Note 8 for further discussion on the non-affiliated parties’ share of the earnings of the Partnership Parks.

b. 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 recorded a valuation allowance of ~~$116.8~~$116.4 million and $115.2 million as of ~~June~~September 30, 2019 and December 31, 2018, respectively, due to uncertainties related to our ability to use some of our deferred tax assets, primarily consisting of certain state net

~~Table of Contents~~

~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

operating loss 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. Our projected taxable income over the foreseeable future gives us comfort that we will be able to use all of our federal net operating loss carryforwards before they expire.

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In determining the effective tax rate for interim periods, we consider the expected changes in our valuation allowance from current year originating or reversing timing differences between financial accounting and tax purposes and the taxable income or loss expected for the current year. For interim periods, we also account for the tax effect of significant non-recurring items in the period in which they occur as well as changes in the valuation allowance relating to a change in the assessment of the probability of utilization of the deferred income tax assets.

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, taxing authorities of 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 Company 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 ~~June~~September 30, 2019 and December 31, 2018, we had no0 recorded amounts for accrued interest or penalties.

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.

c. 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 comparing the carrying amount of the 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.

d. Earnings Per Common Share

Basic earnings per common share is computed by dividing net income attributable to 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’ 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.

The computation of diluted earnings per common share included the effect of 580,000 and 1,406,000 dilutive stock options and restricted stock units and excluded the effect of 2,989,000 and 346,000 antidilutive stock options and restricted stock units for the three months ended June 30, 2019 and June 30, 2018, respectively. The computation of diluted earnings per share included the effect of 675,000 and 1,430,000 dilutive stock options and restricted stock units and excluded the effect of 2,872,000 and 193,000 antidilutive stock options and restricted stock units for the six months ended June 30, 2019 and June 30, 2018, respectively.

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Earnings per common share for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018 was calculated as follows:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
(Amounts in thousands, except per share data)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Net income attributable to Six Flags Entertainment Corporation	$	79,519	$	74,502	$	10,387	$	12,157	$	179,833	$	184,417	$	190,220	$	196,574

Weighted-average common shares outstanding - basic:		84,288		83,666		84,207		84,059		84,413		84,143		84,276		84,087
Effect of dilutive stock options and restricted shares		580		1,406		675		1,430
Effect of dilutive stock options and restricted stock units										632		1,373		662		1,417
Weighted-average common shares outstanding - diluted:		84,868		85,072		84,882		85,489		85,045		85,516		84,938		85,504

Earnings per share - basic:	$	0.94	$	0.89	$	0.12	$	0.14	$	2.13	$	2.19	$	2.26	$	2.34
Earnings per share - diluted:	$	0.94	$	0.88	$	0.12	$	0.14	$	2.11	$	2.16	$	2.24	$	2.30

The computation of diluted earnings per share excluded the effect of 3,554,000 and 881,000 antidilutive stock options for the three months ended September 30, 2019 and September 30, 2018, respectively. The computation of diluted earnings per share excluded the effect of 3,595,000 and 729,000 antidilutive stock options and restricted stock units for the nine months ended September 30, 2019 and September 30, 2018, respectively.

e. Derivative Instruments and Hedging Activities

We account for derivatives and hedging activities in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. This accounting guidance establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the ~~Condensed Consolidated Balance Sheet~~condensed consolidated balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge for accounting purposes. The accounting for changes in the fair value of a derivative (e.g., gains and losses) depends on the intended use of the derivative and the resulting designation.

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’s inception and on an ongoing basis throughout the contract term, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Changes in the fair value of interest rate derivatives that are effective and that are designated and qualify as cash flow hedges are recorded in “Other comprehensive ~~(income) loss”~~(loss) income” until operations are affected by the variability in cash flows of the designated hedged item, at which point they are reclassified to “interest expense”. Changes in the fair value of derivatives that do not qualify for hedge accounting or that are de-designated are recorded in ~~other~~“Other expense (income) ~~expense, net~~, net” in the unaudited condensed consolidated statements of operations.

f. Fair Value of Financial Instruments

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 ASC Topic 820, Fair Value Measurement.

We use the following methods and assumptions 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.

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

●

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. See Note 3 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 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 5 for additional information on our derivative instruments and related Company policies.

g. Stock Benefit Plans

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 equivalent rights ("DERs") 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 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’ common stock on the date of grant.

During the three ~~months~~ and ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018, stock-based compensation expense consisted of the following:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
(Amounts in thousands)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Long-Term Incentive Plan
Options and other	$	3,494	$	3,803	$	7,310	$	7,269	$	3,828	$	4,067	$	11,138	$	11,336
Performance awards ⁽¹⁾		—		12,129		—		13,141		—		6,041		—		19,182
Employee Stock Purchase Plan		59		104		134		179		75		75		209		254
Total Stock-Based Compensation	$	3,553	$	16,036	$	7,444	$	20,589	$	3,903	$	10,183	$	11,347	$	30,772

⁽¹⁾ Relates to a prior year performance award

h. Revenue Recognition

FASB ASC 606, Revenue from Contracts with Customers ("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. Revenues are presented in the accompanying condensed 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 guests visit our parks. In contrast to our season pass and other multi-use offerings (such as our all season dining pass program, which enables season passholders and members to eat meals and snacks any day they visit the park for ~~one~~1 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

~~Table of Contents~~

~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

of the membership program. Guests enrolled in the membership program can visit our parks an unlimited number of times whenever 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. Amounts owed or received for multi-use admissions in excess of redemptions are recognized in deferred revenue. For active

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memberships after the initial twelve-month term, we recognize revenue monthly as payments are received. As of ~~June~~September 30, 2019, deferred revenue was primarily comprised of (i) unredeemed season pass and all season dining pass revenue, (ii) pre-sold single-day admissions revenue for the current operating season, (iii) unredeemed portions of the membership program and member dining program that will ~~primarily~~ be recognized in 2019 and 2020, and (iv) payments received from our international development partners in excess of revenue recognized.

We have entered into international agreements to assist third parties in the planning, design, development and operation of Six Flags-branded 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~~1 contract because they were negotiated with a single commercial objective. We have identified ~~three~~3 distinct promises within 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 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.

Our contracts with customers may include 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 prices charged to customers. 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 "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 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.

i. Leases

We or certain of our subsidiaries are a lessee in various ~~noncancellable~~noncancelable operating 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 7 for additional information. 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.

For our operating 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 ~~uses~~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 ~~noncancellable~~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

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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

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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 condensed 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 condensed 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 condensed 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 in ASC Subtopic 360-10, Property, Plant and Equipment - Overall, 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 ~~its~~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 condensed consolidated statements of operations.

j. 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, such as 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 record an allowance for doubtful accounts. As of ~~June~~September 30, 2019 and December 31, 2018, we have recorded an allowance for doubtful accounts of ~~$25.4~~$20.5 million and $7.4 million, respectively, which is primarily comprised of estimated payment defaults under our membership program. To the extent that ~~payment~~payments under our membership program have not been recognized in revenue, the allowance for doubtful accounts recorded against our membership program is offset with a corresponding reduction in deferred revenue.

k. Recently Adopted Accounting Pronouncements

On January 1, 2019, we adopted Topic 842 using the modified retrospective transition method applied to leases with terms extending past January 1, ~~2019~~2019. Topic 842 requires recognition on the balance sheet of lease ROU assets and lease

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

liabilities by lessees for those leases classified as operating leases in order to give more transparency on commitments and future cash flow. The new guidance is effective for annual periods beginning after December 15, 2018, including interim periods within the fiscal year. The new standard supersedes the previous lease accounting standard under FASB ASC 840, Leases (“Topic 840”). 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. See to Note 7 for additional information.

l. Recent Accounting Pronouncements

In June 2016, FASB issued ~~ASU~~Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments, ("Topic 326"). The standard requires the immediate recognition of estimated credit losses expected to occur

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over the life of financial assets rather than the current incurred loss impairment model that recognizes losses when a probable threshold is met. Topic 326 is effective for annual periods beginning after December 15, 2019 and interim periods within those fiscal years. We are evaluating the provisions of this accounting standards update and assessing the impact, if any, it may have on our condensed consolidated financial statements.

2. Revenue

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.

The following tables present our revenues disaggregated by contract duration for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 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.


	Three Months Ended June 30, 2019								Three Months Ended September 30, 2019
					Sponsorship,								Sponsorship,
			Park Food,		International						Park Food,		International
			Merchandise		Agreements and						Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated		Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	23,700	$	5,901	$	27,461	$	57,062	$	38,684	$	7,897	$	16,029	$	62,610
Short-term contracts and other^(a)		228,808		185,754		5,586		420,148		313,980		234,162		10,428		558,570
Total revenues	$	252,508	$	191,655	$	33,047	$	477,210	$	352,664	$	242,059	$	26,457	$	621,180


	Three Months Ended June 30, 2018								Three Months Ended September 30, 2018
					Sponsorship,								Sponsorship,
		��	Park Food,		International						Park Food,		International
			Merchandise		Agreements and						Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated		Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	22,897	$	6,461	$	20,208	$	49,566	$	43,976	$	10,032	$	25,703	$	79,711
Short-term contracts and other ^(a)		217,574		169,594		8,686		395,854		307,001		222,920		10,188		540,109
Total revenues	$	240,471	$	176,055	$	28,894	$	445,420	$	350,977	$	232,952	$	35,891	$	619,820

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~


	Six Months Ended June 30, 2019								Nine Months Ended September 30, 2019
					Sponsorship,								Sponsorship,
			Park Food,		International						Park Food,		International
			Merchandise		Agreements and						Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated		Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	31,543	$	7,614	$	45,433	$	84,590	$	70,227	$	15,511	$	61,462	$	147,200
Short-term contracts and other^(a)		287,045		223,019		10,749		520,813		601,025		457,181		21,177		1,079,383
Total revenues	$	318,588	$	230,633	$	56,182	$	605,403	$	671,252	$	472,692	$	82,639	$	1,226,583


	Six Months Ended June 30, 2018								Nine Months Ended September 30, 2018
					Sponsorship,								Sponsorship,
			Park Food,		International						Park Food,		International
			Merchandise		Agreements and						Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated		Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	34,227	$	8,387	$	35,235	$	77,849	$	78,203	$	18,419	$	60,938	$	157,560
Short-term contracts and other ^(a)		272,565		209,914		14,056		496,535		579,566		432,834		24,244		1,036,644
Total revenues	$	306,792	$	218,301	$	49,291	$	574,384	$	657,769	$	451,253	$	85,182	$	1,194,204

(a)	Other revenues primarily include sales of single-use tickets and short-term transactional sales for which we have the right to invoice.

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Long-term Contracts

Our long-term contracts consist of season passes purchased by customers in the year preceding the operating season to which they relate, sponsorship contracts and international agreements with third parties. 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’ 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’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 theme parks and waterparks outside of North America. Within our international agreements, we have identified ~~three~~3 distinct performance obligations as brand licensing, project services and management services. We do not consider revenue recognized for the performance obligations related to our international agreements to be significant, neither individually nor in the aggregate, to any period presented. See Note 1 for additional information on our accounting for performance obligations under 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. We do not believe there will be significant changes to our estimates of variable consideration. Our brand licensing and management services performance agreements include royalty payments and management fees, respectively, based on gross sales from Six Flags-branded 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-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

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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."

At January 1, 2019, $100.8 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which ~~$41.2~~$46.9 million and ~~$62.8~~$109.7 million was recognized as revenue for long-term contracts during the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively. As of ~~June~~September 30, 2019, the total unearned amount of revenue for remaining long-term contract performance obligations was ~~$75.5~~$38.4 million. At January 1, 2018, $111.6 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which ~~$32.4~~$39.0 million and ~~$50.6~~$89.6 million was recognized as revenue for long-term contracts during the three and ~~six~~nine months ended ~~June~~September 30, 2018, respectively. As of ~~June~~September 30, 2018, the total unearned amount of revenue for remaining long-term contract performance obligations was ~~$72.2~~$102.9 million.

As of ~~June~~September 30, 2019, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately ~~$82.5~~$30.9 million ~~remaining~~ in the remainder of 2019, ~~$64.4~~$119.4 million in 2020, ~~$49.6~~$49.4 million in 2021, ~~$30.0~~$29.9 million in 2022, and ~~$0.9~~$1.0 million in 2023 and thereafter.

Short-term Contracts and Other

Our short-term contracts consist primarily of season passes and memberships purchased by customers in the year of the operating season to which they relate, certain sponsorship contracts and international agreements with third parties. We earn revenue from guests’ purchases of our season pass and membership products, which entitles the customer to

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visit our parks, including certain waterparks, throughout the duration of the parks’ operating season for a fixed fee. Current year season passes classified as short-term contracts are sold during the operating season to which they relate. We earn sponsorship and international agreements revenue from contracts with third parties, pursuant to which we sell and advertise the third party’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. Payments made by our members that have been enrolled in the membership program for longer than 12 months are recognized in revenue monthly as the payments are made. Amounts received for multi-use admissions in excess of redemptions are recognized in "Deferred revenue."

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~~goods and ~~goods~~services for which we have the right to invoice.

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

3. Long-Term Indebtedness

Credit Facility

As part of our ongoing operations, we periodically refinance our existing credit facility. As of ~~June~~September 30, 2019, our credit facility consisted of a $350.0 million revolving credit loan facility (the “Second Amended and Restated Revolving Loan”) and an $800.0 million Tranche B Term Loan facility (the “Second Amended and Restated Term Loan B”) pursuant to the amended and restated credit facility that we entered into in 2019 (the “Second Amended and Restated Credit Facility”). Our prior credit facility (as previously amended as described below, the “2015 Credit Facility”) consisted of a $250.0 million revolving credit loan facility (the “2015 Revolving Loan”) and a $700.0 million Tranche B Term Loan (the “2015 Term Loan B”) and was amended and restated in conjunction with the Second Amended and Restated Credit Facility. Additionally, we have amounts outstanding under the 2024 Notes and the 2027 Notes as described below.

On March 26, 2018, we entered into an amendment to the 2015 Credit Facility ~~(the “March 2018 Credit Facility Amendment”)~~ that reduced the overall borrowing rate on the 2015 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 2015 Credit Facility ~~(the “April 2018 Credit Facility Amendment”)~~ that increased ~~our~~the 2015 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 share repurchases.

On April 17, 2019, we amended and restated the 2015 Credit Facility (as ~~amended by the March 2018 Credit Facility Amendment and the April 2018 Credit Facility Amendment)~~previously amended). The Second Amended and Restated Credit Facility is comprised of a $350.0 million revolving credit loan facility and an $800.0 million Tranche B ~~Term Loan Facility.~~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 will be 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 ~~this amendment.~~the Second Amended and Restated Credit Facility.

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As of ~~June~~September 30, 2019, no0 advances under the Second Amended and Restated Revolving Loan were outstanding (excluding amounts reserved for letters of credit in the amount of $20.8 million). As of December 31, 2018, $43.0 million under the 2015 Revolving Loan was outstanding (excluding amounts reserved for letters of credit in the amount of $18.1 million). 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 ~~June~~September 30, 2019, the Second Amended and Restated Revolving Loan unused commitment fee was 0.30%. The principal amount of the Second Amended and Restated Revolving Loan is due and payable on April 17, 2024.

As of ~~June~~September 30, 2019, ~~$800.0~~$798.0 million was outstanding under the Second Amended and Restated Term Loan B. As of December 31, 2018, $583.8 million was outstanding under the 2015 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.~~2.00%. In June 2019, we entered into ~~three~~3 separate interest rate swap agreements with a notional amount of $300.0 million (collectively, the ~~“Interest Rate~~“June 2019 Swap Agreements”) to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. In August 2019, we entered into 2 additional separate interest rate swap agreements with a notional value of $400.0 million (collectively, the “August 2019 Swap Agreements”) to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. See Note 5 for a further discussion. As of ~~June~~September 30, 2019, the applicable interest rate on the Second Amended and Restated Term Loan B was ~~4.22%~~3.71%. Beginning on September 30, 2019, the Second Amended and Restated Term Loan B ~~will become~~became payable in equal quarterly principal

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

installments of $2.0 million. All remaining outstanding principal of the Second Amended and Restated Term Loan B is due and payable on April 17, 2026.

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 Six Flags Theme Parks Inc. ("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 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, and certain ~~and~~ hedging agreements, subject, in each case, to certain carve-outs.

2024 Notes and 2027 Notes

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 2015 Term Loan B, and we used the remaining net proceeds of the sale of the 2024 Notes for general corporate and working capital purposes, which primarily consisted of share repurchases.

On April 13, 2017, Holdings issued an additional $700.0 million of 4.875% Senior Notes due 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, Holdings issued $500.0 million of 5.50% Senior Notes due 2027 (the "2027 Notes"). We capitalized $2.6 million of debt issuance costs directly associated with the issuance of the 2027 Notes. Interest payments of $13.8 million are due semi-annually on April 15 and October 15 of each year, with the exception of the first payment on October 15, 2017, which was $13.9 million.

The 2024 Notes, the 2024 Notes Add-on and the 2027 Notes are guaranteed by the Loan Parties. The 2024 Notes, the 2024 Notes Add-on 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

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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 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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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Long-Term Indebtedness Summary

As of ~~June~~September 30, 2019 and December 31, 2018, long-term debt consisted of the following:


	As of				As of
(Amounts in thousands)	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Second Amended and Restated Credit Facility
Second Amended and Restated Term Loan B	$	800,000	$	—	$	798,000	$	—
2015 Credit Facility
2015 Term Loan B		—		583,750		—		583,750
2015 Revolving Loan		—		43,000		—		43,000
2024 Notes		1,000,000		1,000,000		1,000,000		1,000,000
2027 Notes		500,000		500,000		500,000		500,000
Net discount		(7,228)		(6,792)		(6,904)		(6,792)
Deferred financing costs		(15,011)		(13,446)		(14,392)		(13,446)
Total debt	$	2,277,761	$	2,106,512	$	2,276,704	$	2,106,512
Less current portion of long-term debt		(8,000)		—		(8,000)		—
Less short-term borrowings		—		(43,000)		—		(43,000)
Total long-term debt	$	2,269,761	$	2,063,512	$	2,268,704	$	2,063,512

Fair-Value of Long-Term Indebtedness

As of ~~June~~September 30, 2019 and December 31, 2018, the fair value of our long-term debt was ~~$2,315.0~~$2,347.4 million and $2,012.4 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.

4. Accumulated Other Comprehensive Loss

Changes in the composition of Accumulated Other Comprehensive Loss ("AOCI") during the nine months ended September 30, 2019 were as follows:


									Accumulated
	Cumulative								Other
	Translation		Cash Flow		Defined Benefit		Income		Comprehensive
(Amounts in thousands)	Adjustment		Hedges		Plans		Taxes		Loss
Balances at December 31, 2018	$	(27,352)	$	—	$	(41,071)	$	(3,075)	$	(71,498)
Net current period change		316		(5,901)		—		1,425		(4,160)
Amounts reclassified from AOCI		—		—		589		(149)		440
Balances at September 30, 2019	$	(27,036)	$	(5,901)	$	(40,482)	$	(1,799)	$	(75,218)

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~~4. Accumulated Other Comprehensive Loss~~

~~Changes in the composition of Accumulated Other Comprehensive Loss ("AOCI") during the six months ended June 30, 2019 were as follows:~~

Accumulated

Cumulative

Other

Translation

Cash Flow

Defined Benefit

Income

Comprehensive
(Amounts in thousands)

Adjustment

Hedges

Plans

Taxes

Loss
Balances at December 31, 2018

$
(27,352)

$
—

$
(41,071)

$
(3,075)

$
(71,498)
Net current period change

2,172

(2,866)

—

268

(426)
Amounts reclassified from AOCI

—

—

384

(95)

289
Balances at June 30, 2019

$
(25,180)

$
(2,866)

$
(40,687)

$
(2,902)

$
(71,635)

The Company had the following reclassifications out of AOCI during the three and ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018:


		Amount of Reclassification from AOCI									Amount of Reclassification from AOCI
		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
Component of AOCI	Location of Reclassification into Income	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		Location of Reclassification into Income	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018

Amortization of deferred actuarial loss and prior service cost	Operating expenses	$	192	$	179	$	384	$	358	Operating expenses	$	205	$	182	$	589	$	540
	Income tax expense		(46)		(46)		(95)		(92)	Income tax expense		(54)		(47)		(149)		(139)
	Net of tax	$	146	$	133	$	289	$	266	Net of tax	$	151	$	135	$	440	$	401

Total reclassifications		$	146	$	133	$	289	$	266		$	151	$	135	$	440	$	401

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

5. Derivative Financial Instruments

In June 2019, we entered the ~~Interest Rate~~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 in effect on the Second Amended and Restated Term Loan B. The term of the ~~Interest Rate~~June 2019 Swap Agreements began in June 2019 and expires in June 2023. Upon execution, we designated and documented the ~~Interest Rate~~June 2019 Swap Agreements as cash flow hedges. The ~~Interest Rate~~June 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.

In August 2019, we entered 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.

By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instrument is placed with counterparties that we believe pose minimal credit risk. Market risk is the adverse effect on the value of a financial 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 unaudited condensed consolidated balance sheets. When in qualifying relationships, the effective portion of all cash flow designated derivatives are deferred in AOCI and are reclassified to interest expense when the forecasted transaction takes place. Ineffective changes, if any, and changes in the fair value of derivatives that are not designated as hedging instruments are recorded directly to “interest expense” and “other expense (income), net”, respectively. 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 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. The fair value measurements of our derivatives are based on market prices that generally are observable for similar assets or liabilities at commonly quoted intervals.

As of June 30, 2019 and December 30, 2018, we had no derivative assets recorded in our unaudited or audited condensed consolidated balance sheets. Derivative liabilities recorded at fair value in our unaudited and audited condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018, respectively, consisted of the following:

Derivative Liabilities
(Amounts in thousands)

June 30, 2019

December 31, 2018
Derivatives Designated as Cash Flow Hedges

Interest Rate Swap Agreements - Current

$
184

$
—
Interest Rate Swap Agreements - Noncurrent

2,682

—

$
2,866

$
—

2322

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Derivative assets recorded at fair value in our condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively, consisted of the following:


	Derivative Assets
(Amounts in thousands)	September 30, 2019		December 31, 2018
Derivatives Designated as Cash Flow Hedges
Interest Rate Swap Agreements — Current	$	718	$	—
Interest Rate Swap Agreements — Noncurrent		—		—
	$	718	$	—

Derivative liabilities recorded at fair value in our condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively, consisted of the following:


	Derivative Liabilities
(Amounts in thousands)	September 30, 2019		December 31, 2018
Derivatives Designated as Cash Flow Hedges
Interest Rate Swap Agreements — Current	$	(598)	$	—
Interest Rate Swap Agreements — Noncurrent		(6,021)		—
	$	(6,619)	$	—

As of ~~June~~September 30, 2019, we had no derivatives not designated as cash flow hedges.

Gains and losses before taxes on derivatives designated as a cash flow ~~hedges included in our unaudited condensed consolidated statements of operations~~hedge for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018 were as follows:

Three Months Ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018


									Loss Recognized in												Loss Recognized in
									Operations on Derivatives												Operations on Derivatives
	Loss				Loss Reclassified from				(Ineffective Portion and				Loss				Loss Reclassified from				(Ineffective Portion and
	Recognized in AOCI				AOCI into Operations				Amount Excluded from				Recognized in AOCI				AOCI into Operations				Amount Excluded from
	(Effective Portion)				(Effective Portion)				Effectiveness Testing)				(Effective Portion)				(Effective Portion)				Effectiveness Testing)
(Amounts in thousands)	2019		2018		2019		2018		2019		2018		2019		2018		2019		2018		2019		2018
Interest Rate Swap Agreements	$	(2,866)	$	—	$	—	$	—	$	—	$	—	$	(3,035)	$	—	$	—	$	—	$	—	$	—
Total	$	(2,866)	$	—	$	—	$	—	$	—	$	—	$	(3,035)	$	—	$	—	$	—	$	—	$	—

~~Six~~Nine Months Ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018


									Loss Recognized in												Loss Recognized in
									Operations on Derivatives												Operations on Derivatives
	Loss				Loss Reclassified from				(Ineffective Portion and				Loss				Loss Reclassified from				(Ineffective Portion and
	Recognized in AOCI				AOCI into Operations				Amount Excluded from				Recognized in AOCI				AOCI into Operations				Amount Excluded from
	(Effective Portion)				(Effective Portion)				Effectiveness Testing)				(Effective Portion)				(Effective Portion)				Effectiveness Testing)
(Amounts in thousands)	2019		2018		2019		2018		2019		2018		2019		2018		2019		2018		2019		2018
Interest Rate Swap Agreements	$	(2,866)	$	—	$	—	$	—	$	—	$	—	$	(5,901)	$	—	$	—	$	—	$	—	$	—
Total	$	(2,866)	$	—	$	—	$	—	$	—	$	—	$	(5,901)	$	—	$	—	$	—	$	—	$	—

6. Commitments and Contingencies

Partnership Parks

On April 1, 1998, we acquired all of the capital stock of the former Six Flags Entertainment Corporation (a corporation that has been merged out of existence and that has always been a separate corporation from Holdings, "Former SFEC") for $976.0 million, paid in cash. In addition to our obligations under outstanding indebtedness and other securities issued or assumed in the Former SFEC acquisition, we also guaranteed certain contractual obligations relating to the Partnership Parks. Specifically, we guaranteed the obligations of the general partners of those partnerships

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to (i) make minimum annual distributions (including rent) of approximately $72.5 million in 2019 (subject to cost of living adjustments) to the limited partners in the Partnership Parks (based on our ownership of units as of ~~June~~September 30, 2019, our share of the distribution will be approximately $31.7 million) and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6% of the Partnership Parks’ revenues. Cash flow from operations at the Partnership Parks is used to satisfy these requirements first, 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"). 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 (a) a valuation for each of the respective Partnership Parks derived by multiplying such park’s weighted average four-year EBITDA (as defined in the agreements that govern the partnerships) by a specified multiple (8.0 in the case of SFOG and 8.5 in the case of SFOT) and (b) a valuation derived from the highest prices previously offered for the units of the Partnership Parks by certain entities. Pursuant to the valuation methodologies described in the preceding sentence, the Specified Price for the Partnership Parks, if determined as of ~~June~~September 30, 2019, is $408.3 million in the case of

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

SFOG and ~~$520.5~~$520.6 million in the case of SFOT. As of ~~June~~September 30, 2019, we owned approximately 31.0% and 53.2% of the Georgia limited partner interests and Texas limited partner interests, respectively. Our obligations with respect to SFOG and SFOT will continue until 2027 and 2028, respectively.

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 2019 annual offer, no0 partnership units in the Georgia Partnership were tendered for purchase, and we purchased 0.1 units from the Texas partnership for $0.2 million in May 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 2019 at both parks is approximately $525.1 million, representing approximately 69.0% of the outstanding units of SFOG and 46.8% of the outstanding units of SFOT. An additional $350.0 million of incremental borrowing is available under the Second Amended and Restated Credit Facility 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’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 that 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.

We incurred $21.2 million of capital expenditures at the Partnership Parks during the 2018 season and intend to incur approximately $13.0 million of capital expenditures at these parks for the 2019 season, an amount in excess of the minimum required expenditure. 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 Partnership Parks generated approximately $73.5 million of cash in 2018 from operating activities, after deduction of capital expenditures and excluding the impact of short-term intercompany advances from or payments to Holdings. As of ~~June~~September 30, 2019 and December 31, 2018, we had total loans receivable outstanding of $239.3 million from the partnerships that own the Partnership Parks, primarily to fund the acquisition of Six Flags White Water Atlanta and to make capital improvements to the Partnership Parks and distributions to the limited partners in prior years.

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

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liability coverage of up to $100.0 million per occurrence. For incidents arising on or after December 31, 2008, our self-insured retention is $2.0 million, followed by a $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 contingencies. For workers’ compensation claims arising after November 15, 2003, our deductible is $0.75 million ($0.5 million deductible for the period from November 15, 2001 to November 15, 2003). We also maintain fire and extended coverage, business interruption, terrorism and other forms of insurance typical to businesses in our industry. Our 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

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

security and privacy liability insurance in the amount of $10.0 million with a $0.25 million self-insured retention per event.

The majority of our current insurance policies expire on December 31, 2019. We generally renegotiate our insurance policies on an annual basis. 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.

Litigation

We are party to various legal actions arising in the normal course of business, including the cases discussed below. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. We exercise significant judgment to evaluate both the likelihood and the estimated amount of a loss related to such matters. Based on our current knowledge, we believe that the amount of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is subject to inherent uncertainties and management’s view of these matters may change in the future.

On January 7, 2016, a potential class action complaint was filed against Six Flags Entertainment Corporation 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, attorneys’ 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 a company is found to have intentionally or recklessly violated BIPA, plus reasonable 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 ~~two~~2 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, ~~two~~2 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’s petition for 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 immaterial amount that we have recorded for this litigation cannot be made.

During 2017, ~~four~~4 potential class action complaints were filed against Six Flags Entertainment Corporation or one of its subsidiaries. Complaints were filed on August 11, 2017 in the Circuit Court of Lake County, Illinois, on September 1, 2017 in the United States District Court for the Northern District of Georgia, on September 11, 2017, in the Superior Court of Los Angeles County, California, and on November 30, 2017, in the Superior Court of Ocean County,

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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 sought by the plaintiffs. The complaints do not allege that any information was misused. We intend to vigorously defend ourselves against this

~~Table of Contents~~

~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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 in excess of the immaterial amount that we have recorded for this litigation cannot be made.

7. 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 ~~its~~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 1 (i. 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 ~~amusement~~theme park and waterpark properties and land. There was not a material impact to our condensed 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 46 years, some of which include options to extend leases up to 20 years, and some of which include options to terminate the lease within one year. For our ~~noncancellable~~noncancelable operating leases with options to extend, because we may determine it is not reasonably certain itwe 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 ~~the~~ our leases, variable payments.

The components of lease cost for the three and ~~six~~nine months ended ~~June~~September 30, 2019 are as follows:


	Three Months Ended		Six Months Ended		Three Months Ended		Nine Months Ended
(Amounts in thousands)	June 30, 2019		June 30, 2019		September 30, 2019		September 30, 2019
Operating lease cost	$	6,270	$	12,397	$	6,127	$	18,524
Short-term lease cost		2,298		3,535		1,754		5,289
Variable lease cost		384		867		1,224		2,091
Total lease cost	$	8,952	$	16,799	$	9,105	$	25,904

Lease costs for the three and ~~six~~nine months ended ~~June~~September 30, 2018 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 three and ~~six~~nine months ended ~~June~~September 30, 2018 was ~~$5.2~~$9.5 million and ~~$8.6~~$19.6 million, respectively.

Other information related to leases for the three and ~~six~~nine months ended ~~June~~September 30, 2019 is as follows:


	Three Months Ended			Six Months Ended			Three Months Ended			Nine Months Ended
(Amounts in thousands, except for lease term and discount rate)	June 30, 2019			June 30, 2019			September 30, 2019			September 30, 2019
Cash paid for amounts included in the measurement of lease liability operating cash flows	$	6,892		$	8,452		$	14,011		$	22,464
ROU assets obtained in exchange for lease liabilities		3,772			4,357			253			4,610
Weighted-average remaining lease term (in years)		19.69			20.0			19.62			19.62
Weighted-average discount rate		6.90	%		6.91	%		6.91	%		6.91	%

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Maturities of ~~noncancellable~~noncancelable operating lease liabilities under Topic 842 as of ~~June~~September 30, 2019 are summarized in the table below.


(Amounts in thousands)	As of June 30, 2019		As of September 30, 2019
Remaining in 2019	$	15,680	$	1,559
2020		23,675		23,741
2021		22,524		22,597
2022		21,542		21,588
2023		21,376		21,406
Thereafter		287,522		287,536
Total		392,319	$	378,427
Less: present value discount		(184,446)		(182,477)
Lease liability	$	207,873	$	195,950

Future minimum lease payments for long-term ~~noncancellable~~noncancelable operating leases under Topic 840 as of December 31, 2018 are summarized in the table below.


(Amounts in thousands)	As of December 31, 2018
2019	$	23,936
2020		23,266
2021		22,384
2022		21,626
2023		21,563
Thereafter		314,799
Total	$	427,574

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 carryforward 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 contract into its lease and non-lease components.

8.8. Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent the non-affiliated 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. As of ~~June~~September 30, 2019, redeemable noncontrolling interests of the SFOT and SFOG partnerships was $253.7 million and $291.7 million, respectively.


(Amounts in thousands)	SFOT		SFOG		Total		SFOT		SFOG		Total
Balance at December 31, 2018	$	243,756	$	281,515	$	525,271	$	243,756	$	281,515	$	525,271
Purchase of redeemable units of SFOT and SFOG		(217)		—		(217)
Purchase of redeemable units of SFOT								(217)		—		(217)
Fresh start accounting fair market value adjustment for purchased units		(45)		—		(45)		(45)		—		(45)
Net income attributable to noncontrolling interests		10,226		10,151		20,377		20,452		20,301		40,753
Balance at June 30, 2019	$	253,720	$	291,666	$	545,386
Distributions to noncontrolling interests								(10,226)		(10,150)		(20,376)
Balance at September 30, 2019							$	253,720	$	291,666	$	545,386

The redemption value of the noncontrolling partnership units in SFOT and SFOG as of ~~June~~September 30, 2019 was approximately $243.6 million and $281.5 million, respectively. See Note 6 for a description of the partnership arrangements applicable to the Partnership Parks, the accounts of which are included in the accompanying unaudited condensed consolidated financial statements.

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

9. 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 measure 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). In general, 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 ~~one~~1 reportable segment—parks.

The following table presents segment financial information and a reconciliation of net income to Park EBITDA. Park level expenses exclude all non-cash operating expenses, principally depreciation and amortization and all non-operating expenses.


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
(Amounts in thousands)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Net income	$	99,896	$	94,505	$	30,764	$	32,160	$	200,209	$	204,421	$	230,973	$	236,581
Interest expense, net		29,572		27,480		57,920		53,365		28,336		26,985		86,256		80,350
Income tax expense		33,675		23,913		9,018		4,238		61,626		55,260		70,644		59,498
Depreciation and amortization		29,275		27,921		58,348		56,550		30,685		29,620		89,033		86,170
Corporate expenses		13,020		14,119		29,924		29,133		10,060		12,523		39,984		41,656
Stock-based compensation		3,553		16,036		7,444		20,589		3,903		10,183		11,347		30,772
Non-operating park level expense, net:
(Gain) loss on disposal of assets		(690)		254		446		2,165
Loss on disposal of assets										2,659		386		3,105		2,551
Loss on debt extinguishment, net		6,231		—		6,231		—		—		—		6,231		—
Other (income) expense, net		(1,278)		354		(1,705)		2,289
Other expense (income), net										231		(130)		(1,474)		2,159
Park EBITDA	$	213,254	$	204,582	$	198,390	$	200,489	$	337,709	$	339,248	$	536,099	$	539,737

All of our owned or managed parks are located in the United States with the exception of ~~two~~2 parks in Mexico and ~~one~~1 park in Montreal, Canada. We also have revenue and expenses related to the development of Six Flags-branded parks outside of North America. The following information reflects our long-lived assets (which consists of property and equipment, right-of-use operating leases and intangible assets), revenues and income before income taxes by domestic and foreign categories as of or for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018:


	Domestic		Foreign		Total		Domestic		Foreign		Total
2019	(Amounts in thousands)						(Amounts in thousands)
Long-lived assets	$	2,372,797	$	140,546	$	2,513,343	$	2,361,622	$	136,120	$	2,497,742
Revenues		558,821		46,582		605,403		1,138,640		87,943		1,226,583
Income before income taxes		36,047		3,735		39,782		284,868		16,749		301,617
2018
Long-lived assets	$	2,183,842	$	99,583	$	2,283,425	$	2,171,503	$	104,029	$	2,275,532
Revenues		526,812		47,572		574,384		1,101,836		92,368		1,194,204
Income before income taxes		32,937		3,461		36,398		274,811		21,268		296,079

10. Pension Benefits

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. The following summarizes our pension costs during the three and nine months ended September 30, 2019 and September 30, 2018:


	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Service cost	$	313	$	250	$	988	$	1,050
Interest cost		1,995		1,844		5,999		5,542
Expected return on plan assets		(3,318)		(3,431)		(9,979)		(10,307)
Amortization of net actuarial loss		205		182		589		540
Total net periodic benefit	$	(805)	$	(1,155)	$	(2,403)	$	(3,175)

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~~Six Flags Entertainment Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~benefits. The following summarizes our pension costs during the three months and six months ended June 30, 2019 and June 30, 2018:~~

Three Months Ended

Six Months Ended
(Amounts in thousands)

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018
Service cost

$
337

$
400

$
675

$
800
Interest cost

2,002

1,849

4,004

3,698
Expected return on plan assets

(3,331)

(3,438)

(6,661)

(6,876)
Amortization of net actuarial loss

193

179

384

358
Total net periodic benefit

$
(799)

$
(1,010)

$
(1,598)

$
(2,020)

The components of net periodic pension benefit other than the service cost component were included in "Other net periodic pension benefit" in the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations.~~operations.

Weighted-Average Assumptions Used To Determine Net Cost


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Discount rate	4.05	%	3.45	%	4.05	%	3.45	%	4.05	%	3.45	%	4.05	%	3.45	%
Rate of compensation increase	N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Expected return on plan assets	7.25	%	7.25	%	7.25	%	7.25	%	7.25	%	7.25	%	7.25	%	7.25	%

Employer Contributions

During both of the ~~six-month periods~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018, we made pension contributions of ~~$3.0~~$6.0 million.

11. Stock Repurchase Plans

On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of ~~July 19,~~October 18, 2019, Holdings repurchased 4,604,000 shares at a cumulative cost of approximately ~~$268.2~~$268.3 million and an average price per share of $58.27 under the March 2017 Stock Repurchase Plan, leaving approximately ~~$231.8~~$231.7 million available for permitted repurchases.

The amount of share repurchases is limited by the covenants in the Second Amended and Restated Credit Facility, the 2024 Notes, the 2024 Notes Add-on and the 2027 Notes. We will continue to evaluate the share repurchase limits under the covenants on an ongoing basis to determine our ability to use the remaining amount authorized for share repurchases. See Note 3 for further discussion.

12. Subsequent Event

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 will reduce interest expense by approximately $2.0 million annually.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains forward-looking statements that 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 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" included elsewhere in this Quarterly Report and "Item 1A. Risk Factors" in our 2018 Annual Report for further discussion of the uncertainties, risks and assumptions associated with these statements.

The following discussion and analysis presents information that we believe is relevant to an assessment and understanding of our consolidated financial position and results of operations. This information should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto, and other financial data included elsewhere in this Quarterly Report. The following information should also be read in conjunction with our audited consolidated financial statements, and the notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Annual Report.

Overview

General

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 26 regional theme parks and waterparks, 23 are located in the United States, two are located in Mexico and one is located in Montreal, Canada. Our parks are located in geographically diverse markets across North America and they 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’ experiences and to meet our guests’ evolving needs and preferences.

The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018 are not indicative of the results expected for the full year. In particular, our park operations generate more than half of their annual revenue during the period from Memorial Day to Labor Day each year while expenses are incurred year-round. We have added operating days to several of our parks during the first, third and fourth quarters to help balance the seasonal nature of our business. In addition, we had additional costs in the current year related to the operations of the five new parks that we began operating on June 1, 2018 and Magic Waters, a waterpark in Rockford, Illinois that we began operating on April 1, 2019.

Our revenue is primarily derived from (i) the sale of tickets (including season passes and memberships) for entrance to our parks (which accounted for approximately ~~53%~~55% of total revenues during the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 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, including revenue earned under international development contracts. Revenues from ticket sales and in-park sales are primarily impacted by park attendance. 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 quarter to quarter and year to year. During the first ~~six~~nine months of 2019, our park earnings before interest, taxes, depreciation and amortization ("Park EBITDA") decreased relative to the comparable period in the prior year, primarily as a result of increases in cash operating costs, resulting from (i) expenses related to the addition of five new parks on June 1, 2018; (ii) expenses related to our newly added Magic Waters waterpark in Rockford, Illinois on April 1, 2019; and (iii) increased costs from mandated minimum wage increases and competitive labor markets. These decreases were partially offset by an increase in attendance of ~~0.5~~1.0 million guests primarily as a result of (i) our

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five new parks acquired on June 1, ~~2018,~~2018; (ii) our newly added Magic Waters waterpark; and (iii) a 2% year-over-year increase in our Active Pass Base, which represents the total number of guests who are enrolled in our membership program or who have a season ~~pass, and a 14% increase in sponsorship, international agreements~~

~~Table of Contents~~

~~and accommodations revenue.~~pass. During the three month period ended ~~June~~September 30, 2019, Park EBITDA increased over the prior year primarily as a result of ~~the Easter holiday falling on April 21~~^stan increase in ~~2019 as compared to April 1~~^stguest spending revenue driven by a 3% increase in ~~2018, which shifted a portion of the parks’ operating calendar from the first quarter to the second quarter in 2019 along~~attendance coupled with a ~~14%~~decrease in selling, general and administrative expenses. This increase was partially offset by an expected 26% decrease 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 and insurance. A large portion of our ~~expenses~~expense is relatively fixed, as our costs for full-time employees, maintenance, utilities, advertising and insurance do not vary significantly with attendance.

Critical Accounting Policies and Estimates

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. With respect to our critical accounting policies and estimates, there have been no material developments or changes from the policies and estimates discussed in our 2018 Annual Report.

Recent Events

~~As part of our normal succession planning process, on March 7,~~On October 18, 2019, we announced that we have commenced a search process, and retained an outside search firm, to locate a successor for James Reid-Anderson, our Chairman, President and Chief Executive Officer, who informed the Company of his intention to retire by the end of February 2020. Mr. Reid-Anderson will also be retiring from his current role as Chairman of the Board of Directors. In connection with the succession planning process we entered into ~~a retirement agreement with Mr. Reid-Anderson that becomes effective upon~~an amendment to the ~~earlier of: (i) notice from Mr. Reid-Anderson of a retirement date~~Second Amended and Restated Credit Facility which reduced the overall borrowing rate on ~~or after February 28, 2020~~the Second Amended and ~~(ii) notice from us of the commencement date of an individual to become the next Chief Executive Officer.~~

~~On April 17, 2019, we amended and restated the 2015 Credit Facility. The refinancing increased the 2015~~Restated Term Loan B by 25 basis points by reducing the applicable margin from LIBOR plus 2.00% to ~~$800.0~~LIBOR plus 1.75%. Excluding the cost to execute the transaction, the lower borrowing rate reduce interest expense by approximately $2.0 million ~~and extended its term through April 17, 2026, and increased the 2015 Revolving Loan to $350.0 million and extended its term through April 17, 2024.~~annually.

On June 30, 2019, we reached an agreement with our partner in Dubai to discontinue the previously announced project to develop a Six Flags-branded theme park. In July, we received $7.5 million in connection with the agreement and the settlement of all claims.

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Results of Operations

Three Months Ended ~~June~~September 30, 2019 Compared to Three Months Ended ~~June~~September 30, 2018

The following table sets forth summary financial information for the three months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018.


	Three Months Ended				Percentage		Three Months Ended				Percentage
(Amounts in thousands, except percentage and per capita data)	June 30, 2019		June 30, 2018		Change (%)		September 30, 2019		September 30, 2018		Change (%)
Total revenue	$	477,210	$	445,420	7	%	$	621,180	$	619,820	0	%
Operating expenses		178,348		163,964	9	%		189,820		188,704	1	%
Selling, general and administrative expenses		59,723		68,786	(13)	%		55,144		65,783	(16)	%
Cost of products sold		43,513		39,520	10	%		53,508		50,081	7	%
Other net periodic pension benefit		(1,055)		(1,277)	(17)	%		(1,038)		(1,290)	(20)	%
Depreciation and amortization		29,275		27,921	5	%		30,685		29,620	4	%
(Gain) loss on disposal of assets		(690)		254	N/M
Loss on disposal of assets								2,659		386	N/M
Interest expense, net		29,572		27,480	8	%		28,336		26,985	5	%
Loss on extinguishment of debt		6,231		—	N/M
Other (income) expense, net		(1,278)		354	N/M
Other expense (income), net								231		(130)	N/M
Income before income taxes		133,571		118,418	13	%		261,835		259,681	1	%
Income tax expense		33,675		23,913	41	%		61,626		55,260	12	%
Net income		99,896		94,505	6	%		200,209		204,421	(2)	%
Less: Net income attributable to noncontrolling interests		(20,377)		(20,003)	2	%		(20,376)		(20,004)	2	%
Net income attributable to Six Flags Entertainment Corporation	$	79,519	$	74,502	7	%	$	179,833	$	184,417	(2)	%

Other Data:
Attendance		10,508		9,770	8	%		14,012		13,572	3	%
Total revenue per capita	$	45.41	$	45.59	(1)	%	$	44.33	$	45.67	(3)	%

Revenue

Revenue for the three months ended ~~June~~September 30, 2019 totaled ~~$477.2~~$621.2 million, an increase of ~~$31.8~~$1.4 million ~~or 7%,~~ compared to ~~$445.4~~$619.8 million for the three months ended ~~June~~September 30, 2018. The revenue increase was attributable to ~~an 8%~~a 3% increase in attendance primarily driven by (i) the operation of our ~~five new parks~~newly acquired Magic Waters waterpark in ~~2018 for~~Rockford, Illinois; and (ii) a ~~three months versus one month~~2% year-over-year increase in ~~2018, (ii) the Easter holiday falling on April 21st in 2019 as compared to April 1st in 2018, which shifted~~our Active Pass Base. These revenue increases were offset by a ~~portion of the Company's operating calendar from the first quarter to the second quarter in 2019; and (iii) a 14% increase~~26% reduction in sponsorship, international agreements and accommodations revenue. Total revenue per capita decreased ~~slightly due~~$1.34, or 3% compared to ~~(i) a higher mix of season pass and memberships; (ii) lower guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, at~~ the ~~five new domestic parks acquired on June 1, 2018, which had additional operating days and attendance~~same period in the second quarter of 2019 than the second quarter of 2018; and (iii) lower guest spending per capita at a sixth domestic park in Rockford, IL, newly added in April 2019. These decreases were partially offset by price increases, the benefit of premium priced membership sales and the increase in sponsorship, international agreements and accommodations revenue.prior year.

Admissions revenue per capita for the three months ended ~~June~~September 30, 2019 decreased ~~$0.58,~~$0.69, or 2%3%, ~~relative~~compared to the ~~comparable~~same period in the prior year. This decrease was primarily driven by (i) ~~a higher mix of season pass and membership attendance; (ii)~~ lower admissions revenue per capita ofat the five new domestic parks acquired on June 1, 2018 ~~which had additional operating days~~ and ~~attendance in the second quarter of 2019 than the second quarter of 2018; and (iii) lower admissions revenue per capita~~ at ~~a sixth domestic park~~our newly acquired Magic Waters waterpark in Rockford, Illinois, ~~newly added~~which we began operating in April ~~2019.~~2019; and (ii) a higher mix of attendance from our Active Pass Base, which represents the total number of guests who are enrolled in our membership program or who have a season pass. These decreases were partially offset by price increases and the benefit of premium priced membership sales. Non-admissions revenue per capita for the three months ended ~~June~~September 30, 2019 increased ~~$0.22,~~$0.11, or 1%, relative to the comparable period in the prior year. This increase was primarily driven by the continued success in selling our all season dining ~~products.~~passes.

Operating expenses

Operating expenses for the three months ended ~~June~~September 30, 2019 increased ~~$14.4~~$1.1 million, or 9%1%, ~~relative~~compared to the ~~comparable~~same period in the prior year, primarily as a result of ~~(i) incremental operating costs in the three months ended~~

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June 30, 2019, including lease expense, to operate and rebrand our five new domestic parks added on June 1, 2018, (ii) increased costs from statutory minimum wage rate increases and competitive market rate increases at many of our parks, and (iii) incremental costs to lease and operate Magic Waters, aour newly acquired waterpark in Rockford, Illinois that we began operating on April 1, 2019.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended ~~June~~September 30, 2019 decreased ~~$9.0~~$10.6 million, or ~~13%~~16%, compared to the ~~three months ended June 30, 2018~~same period in the prior year. The decrease was primarily as a result of (i) a decrease in stock-based compensation expense related to the Project 600 Performance Award, which we were accruing in 2018 but ~~was~~

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ultimately reversed when we did not ~~achieved. This~~achieve the applicable targets; (ii) a reduction ~~was partially offset by an increase~~ in advertising costs related to (i) the Easter holiday shift discussed above, (ii) incremental advertising costs related to our five new domestic parks added on June 1, 2018 that we operated for the full quarter versus one month in 2018,insurance expenses; and (iii) ~~our new waterpark, Magic Waters.~~reduced advertising costs.

Cost of products sold

Cost of products sold in the three months ended ~~June~~September 30, 2019 increased ~~$4.0~~$3.4 million, or ~~10%~~7%, compared to the ~~three months ended June 30, 2018,~~same period in the prior year, primarily due to the increased sales associated with our successful all season dining passes. Cost of products sold as a percentage of park food, merchandise and other revenue remained relatively flat.

Depreciation and amortization expense

Depreciation and amortization expense for the three months ended ~~June~~September 30, 2019 increased ~~$1.4~~$1.1 million, or 5%4%, compared to the ~~three months ended June 30, 2018.~~same period in the prior year. The increase in depreciation and amortization expense is primarily the result of asset additions made in conjunction with our ongoing capital program, partially offset by asset retirements.

~~(Gain) loss~~Loss on disposal of assets

~~We recognized a gain~~Loss on disposal of assets for the three months ended ~~June~~September 30, 2019 ~~of $0.7~~increased $2.3 million ~~versus a loss of disposal of assets of $0.3 million for~~compared to the ~~three months ended June 30, 2018.~~same period in the prior year. The ~~gain~~increase was primarily driven by ~~insurance proceeds from a flood we experienced at Six Flags over Texas in September 2018.~~the write-off of assets associated with our ongoing capital program.

Interest expense, net

Interest expense, net increased ~~$2.1~~$1.4 million, or 8%5%, for the three months ended ~~June~~September 30, 2019 ~~relative~~compared to the ~~comparable~~same period in the prior year, primarily as a result of the increased debt level related to the Second Amended and Restated Term Loan B which increased borrowings by $216.2 million. This increase was partially offset by lower interest rates and less borrowings outstanding under ~~our~~the Second Amended and Restated Revolving Loan ~~and~~compared to outstanding borrowings under the 2015 Revolving ~~Loan.~~Loan in the prior year.

Income tax expense

Income tax expense increased ~~$9.8~~$6.4 million, or ~~41%~~12%, for the three months ended ~~June~~September 30, 2019 ~~relative~~compared to the ~~comparable~~same period in the prior year, ~~period~~ primarily as a result of (i) an increase in income before income taxes year over year, (ii) a change in certain state income tax laws that generated a favorable discrete tax benefit in the same period in the prior year, and (iii) lower discrete tax benefits primarily related to the recognition of fewer excess tax benefits from stock-based compensation during the three months ended ~~June~~September 30, 2019.

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Results of Operations

~~Six~~Nine Months Ended ~~June~~September 30, 2019 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2018

The following table sets forth summary financial information for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018:


	Six Months Ended				Percentage		Nine Months Ended				Percentage
(Amounts in thousands, except per capita data)	June 30, 2019		June 30, 2018		Change (%)		September 30, 2019		September 30, 2018		Change (%)
Total revenue	$	605,403	$	574,384	5	%	$	1,226,583	$	1,194,204	3	%
Operating expenses		292,870		266,464	10	%		482,690		455,168	6	%
Selling, general and administrative expenses		99,833		109,724	(9)	%		154,977		175,507	(12)	%
Costs of products sold		53,788		49,983	8	%		107,296		100,064	7	%
Other net periodic pension benefit		(2,110)		(2,554)	(17)	%		(3,148)		(3,844)	(18)	%
Depreciation and amortization		58,348		56,550	3	%		89,033		86,170	3	%
Loss on disposal of assets		446		2,165	(79)	%		3,105		2,551	22	%
Interest expense, net		57,920		53,365	9	%		86,256		80,350	7	%
Loss on debt extinguishment		6,231		—	N/M			6,231		—	N/M
Other (income) expense, net		(1,705)		2,289	N/M			(1,474)		2,159	N/M
Income before income taxes		39,782		36,398	9	%		301,617		296,079	2	%
Income tax expense		9,018		4,238	N/M			70,644		59,498	19	%
Net income		30,764		32,160	(4)	%		230,973		236,581	(2)	%
Less: Net income attributable to noncontrolling interests		(20,377)		(20,003)	2	%		(40,753)		(40,007)	2	%
Net income attributable to Six Flags Entertainment Corporation	$	10,387	$	12,157	(15)	%	$	190,220	$	196,574	(3)	%

Other Data:
Attendance		12,675		12,126	5	%		26,688		25,699	4	%
Total revenue per capita	$	47.76	$	47.37	(1)	%	$	45.96	$	46.47	(1)	%

Revenue

Revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 totaled ~~605.4~~$1,226.6 million, an increase of ~~$31.0~~$32.4 million, or 5%3%, compared to ~~$574.4~~$1,194.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018. The increase was primarily driven by (i) an increase in attendance of ~~0.5~~1.0 million guests, or 5%4%, primarily related to the ~~operation of~~attendance gains at our five new parks acquired in ~~2018 for six months versus one month~~2018; (ii) the operation of our newly acquired Magic Waters waterpark in ~~2018, (ii)~~Rockford, Illinois; and (iii) a 2% year-over-year increase in our Active Pass ~~Base, and (iii)~~Base. These increases were partially offset by a ~~14% increase~~3% decrease in sponsorship, international agreements and accommodations revenue. Total revenue per capita ~~increased $0.39,~~decreased $0.51, or 1% ~~versus~~compared to the ~~comparable~~same period in 2018.

Admissions revenue per capita for the ~~six~~nine months ended ~~June~~September 30, 2019 decreased ~~$0.17,~~$0.44, or 1%2%, ~~relative~~compared to the ~~comparable~~same period in the prior year. This decrease was primarily driven by (i) ~~a higher mix of season pass and membership attendance; (ii)~~ lower admissions revenue per capita at the five new domestic parks acquired on June 1, 2018 ~~which had additional operating days~~ and ~~attendance in the first six months of 2019 than the one month we operated them in the first six months of 2018; and (iii) lower admissions revenue per capita~~ at ~~a sixth domestic park~~our newly acquired Magic Waters waterpark in Rockford, Illinois, ~~newly added on~~which we began operating in April ~~1, 2019.~~2019; (ii) strategically targeted promotions to drive membership penetration; and (iii) a higher mix of attendance from our Active Pass Base, which represents the total number of guests who are enrolled in our membership program or who have a season pass. These decreases were partially offset by price increases and the benefit of premium priced membership sales. Non-admissions revenue per capita for the ~~three~~nine months ended ~~June~~September 30, 2019 increased ~~$0.22,~~$0.15, or 1%, ~~relative~~compared to the ~~comparable~~same period in the prior year. This increase was primarily driven by the continued success in selling our all season dining products.

Operating expenses

Operating expenses for the ~~six~~nine months ended ~~June~~September 30, 2019 increased ~~$26.4~~$27.5 million, or ~~10%~~6%, ~~relative~~compared to the ~~comparable~~same period in the prior year, primarily as a result of (i) incremental operating costs in the first five months of 2019, including lease expense, to operate and rebrand our five new domestic parks we began operating on June 1, ~~2018,~~2018; (ii) increased costs from statutory minimum wage rate increases and competitive market rate increases at many of our ~~parks,~~parks; and (iii) incremental costs to lease and operate Magic Waters, a waterpark in Rockford, Illinois that we began operating on April 1, 2019.

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Selling, general and administrative expenses

Selling, general and administrative expenses for the ~~six~~nine months ended ~~June~~September 30, 2019 decreased ~~$9.9~~$20.5 million, or 9%12%, compared to the ~~six~~nine months ended ~~June~~September 30, 2018 primarily as a result of a decrease in stock-based compensation expense related to the Project 600 Performance Award which we were accruing in 2018, but ~~was~~ ultimately reversed when we did not achieved. This reduction was partially offset by an increase in advertising costs related to incremental advertising costs at our five new domestic parks which we operated for six months in 2019 versus one month in 2018 and our new waterpark, Magic Waters.achieve the applicable targets.

Cost of products sold

Cost of products sold in the ~~six~~nine months ended ~~June~~September 30, 2019, increased ~~$3.8~~$7.2 million, or 8%7%, compared to the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2018. This increase was primarily due to a higher volume of sales driven by ~~the~~(i) increased revenue associated with the continued success of selling our ~~successful~~ all season dining ~~passes.~~passes; (ii) the operation of our five new parks acquired on June 1, 2018 for additional operating days compared to 2018; and (iii) the operation of our newly acquired Magic Waters waterpark in Rockford, Illinois. Cost of products sold as a percentage of park food, merchandise and other revenue remained relatively flat.

Depreciation and amortization expense

Depreciation and amortization expense for the ~~six~~nine months ended ~~June~~September 30, 2019 increased ~~$1.8~~$2.9 million, or 3%, compared to the ~~six~~nine months ended ~~June~~September 30, 2018. The increase in depreciation and amortization expense is primarily the result of asset additions made in conjunction with our ongoing capital program, partially offset by asset retirements.

Loss on disposal of assets

Loss on disposal of assets for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~decreased $1.7~~increased $0.6 million, or 22%, compared to the same period in the prior year, primarily as a result of ~~insurance recoveries related to flooding at Six Flags Over Texas that occurred in September 2018 and fewer~~increased asset disposals in conjunction with the execution of our ongoing capital program during the current year relative to the prior year.

Interest expense, net

Interest expense, net increased ~~$4.6~~$5.9 million, or 9%7%, for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~relative~~compared to the ~~comparable~~same period in the prior year, primarily as a result ~~of the increased debt level related to~~our entry into the Second Amended and Restated Term Loan B which increased borrowings by $216.2 million and higher borrowings outstanding on ~~our~~the 2015 Revolving Loan prior to the refinancing ~~completed~~ in April 2019. ~~This~~The increase in borrowings was partially offset by decreasing interest rates.

Income tax expense

Income tax expense increased ~~$4.8~~$11.1 million, or 19%, for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~relative~~compared to the ~~comparable~~same period in the prior year as a result of (i) an increase in income before income taxes, (ii) a change in certain state income tax laws that generated a favorable discrete tax benefit in the same period in the prior year, and (iii) lower discrete tax benefits primarily related to the recognition of fewer excess tax benefits from stock-based compensation during the ~~six~~nine months ~~eneded June~~ended September 30, 2019.

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Liquidity, Capital Commitments and Resources

On an annual basis, our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash include working capital obligations, the funding of common stock dividends, investments in parks (including capital projects), debt service, payments to our partners in the Partnership Parks and common stock repurchases.

In November 2018, Holdings announced a quarterly cash dividend of $0.82 per share of common stock. During the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018, Holdings paid ~~$138.3~~$208.7 million and ~~$131.3~~$198.2 million, respectively, in cash dividends on its 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) the dividends per share authorized by Holdings’ Board of Directors, and (ii) the current number of shares of Holdings’ common stock outstanding, and ~~(iii) estimates of share repurchases, restricted stock vesting and option exercises,~~ we currently anticipate paying approximately $280.0 million in total cash dividends on our common stock in the 2019 calendar year.

On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of ~~July 19,~~October 18, 2019, Holdings has repurchased 4,604,000 shares at a cumulative cost of approximately ~~$268.2~~$268.3 million and an average cost per share of $58.27 under the March 2017 Stock Repurchase Plan, leaving approximately ~~$231.8~~$231.7 million available for permitted repurchases.

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, including any anticipated requirements for working capital, capital expenditures, common stock dividends, scheduled debt service, obligations under arrangements relating to the Partnership Parks and discretionary common stock repurchases. Additionally, based on our current federal net operating loss carryforwards, we anticipate paying minimal federal income taxes in 2019 and 2020 and do not anticipate becoming a full cash taxpayer until 2024. During the years 2021 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.

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, or swine or avian flu; 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 that 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 that we may be required to refinance all or a significant portion of our existing debt on or prior to maturity, requiring us to potentially seek additional financing. 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" in the 2018 Annual Report.

As of ~~June~~September 30, 2019, our total indebtedness, net of discount and deferred financing costs, was approximately ~~$2,277.8~~$2,276.7 million. Based on (i) non-revolving credit debt outstanding on that date, (ii) anticipated levels of working capital revolving borrowings during 2019 and 2020, (iii) estimated interest rates for floating-rate debt and (iv) the 2024 Notes, the 2024 Notes Add-on and the 2027 Notes, we anticipate annual cash interest payments of approximately ~~$116.0 million and $113.0~~$115 million during both 2019 and ~~2020, respectively.~~2020.

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As of ~~June~~September 30, 2019, we had approximately ~~$113.8~~$211.8 million of unrestricted cash and $329.2 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 leverage maintenance ~~covenant, a minimum interest coverage~~ 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 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 3 to the unaudited condensed consolidated financial statements included in this Quarterly Report.

We currently plan on spending approximately 9% of annual revenues on capital expenditures during the 2019 calendar year.

During the ~~six~~nine months ended ~~June~~September 30, 2019, net cash provided by operating activities was ~~$126.2~~$340.9 million. Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$95.1~~$122.0 million, consisting primarily of capital expenditures, net of property insurance recoveries. Net cash ~~provided by~~used in financing activities during the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$37.4~~$51.7 million, primarily attributable to net proceeds from borrowings under the Second Amended and Restated Credit Facility and proceeds from the issuance of common stock, partially offset by the payment of ~~$138.3~~$208.7 million in cash dividends and $8.9 million of debt issuance costs.

Since our business is both seasonal in nature and involves significant levels of cash transactions and most of our cash-based expenses are relatively fixed and do not vary significantly with either attendance or per capita spending, our net operating cash flows are largely driven by attendance and per capita spending levels. These cash-based operating expenses include salaries and wages, employee benefits, advertising, third party services, repairs and maintenance, utilities and insurance.

Contractual Obligations

Since December 31, 2018, there have been no material changes to the contractual obligations of the Company outside the ordinary course of the Company’s business except with respect to the Second Amended and Restated Credit Facility entered into in April 2019. Set forth below is certain updated information regarding our debt obligations as of ~~June~~September 30, 2019.


	Payment Due by Period										Payment Due by Period
(Amounts in thousands)	2019		2020 - 2021		2022 - 2023		2024 and beyond		Total		2019		2020 - 2021		2022 - 2023		2024 and beyond		Total
Long-term debt including current portion ⁽¹⁾	$	4,000	$	16,000	$	16,000	$	764,000	$	800,000	$	2,000	$	16,000	$	16,000	$	764,000	$	798,000
Interest on long-term debt ⁽²⁾		17,212		67,484		66,758		77,587		229,041		7,565		59,356		58,279		70,406		195,606

⁽¹⁾ Payments are shown at principal amount for the Second Amended and Restated Term Loan B. See Note 3 to the condensed consolidated financial statements included elsewhere in Quarterly Report for further discussion on long-term debt.

⁽²⁾ See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion on long-term debt. Amounts shown reflect variable interest rates in effect at ~~June~~September 30, 2019 for the Second Amended and Restated Term Loan B.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of ~~June~~September 30, 2019, there have been no material changes in our market risk exposure from that disclosed in the 2018 Annual Report, except as it relates to our derivative financial instruments. See Note 5 to the ~~unaudited~~ condensed consolidated financial statements included elsewhere in this report for further discussion. For a discussion of our market risk exposure, please see "Item 7A. Quantitative and Qualitative Disclosure About Market Risk" contained in the 2018 Annual Report.

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ITEM 4. 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 ~~June~~September 30, 2019, of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting, as such term is defined under Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, that occurred during our fiscal quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The nature of the industry in which we operate tends to expose us to claims by guests, generally for injuries. Accordingly, we are party to various legal actions arising in the normal course of business. Historically, the great majority of these claims have been minor. Although we believe that we are adequately insured against guests’ claims, if we become subject to damages that cannot by law be insured against, such as punitive damages or certain intentional misconduct by employees, there may be a material adverse effect on our operations.

Certain legal proceedings in which we are involved are discussed in Item 3 of the 2018 Annual Report, and in Note 6 to the unaudited condensed consolidated financial statements contained in this Quarterly Report. Other than as previously disclosed in Item 3 of the 2018 Annual Report, there were no material developments concerning our legal proceedings during the quarter ended ~~June~~September 30, 2019.

ITEM 1A. RISK FACTORS

There have been no material changes to the principal risks that we believe are material to our business, results of operations and financial condition, from the risk factors previously disclosed in the 2018 Annual Report. For a discussion on these risk factors, please see "Item 1A. Risk Factors" contained in the 2018 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of ~~July 19,~~October 18, 2019, Holdings has repurchased 4,604,000 shares at a cumulative cost of approximately ~~$268.2~~$268.3 million and an average cost per share of $58.27 under the March 2017 Stock Repurchase Plan, leaving approximately ~~$231.8~~$231.7 million available for permitted repurchases.

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The following table sets forth information regarding purchases of Holdings’ common stock during the three months ended September 30, 2019 under the March 2017 Stock Repurchase Plan:


					Total number of	Approximate dollar
		Total	Average		shares purchased	value of shares that
		number of	price		as part of publicly	may yet be purchased
		shares	paid per		announced plans	under the plans
	Period	purchased	share		or programs	or programs
Month 1	July 1 - July 31	—	$	—	—	$	231,775,000
Month 2	August 1 - August 31	815	$	58.42	815	$	231,727,000
Month 3	September 1 - September 30	—	$	—	—	$	231,727,000
		815	$	58.42	815	$	231,727,000

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ITEM 6. EXHIBITS


~~Exhibit 10.1~~	$1,150,000,000 Second Amended and Restated Credit Agreement, dated as of April 17, 2019, among Holdings, SFO and SFTP and several lenders, Wells Fargo Bank, National Association, as administrative agent, an issuing lender and a swingline lender, Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers, Barclays Bank PLC, JPMorgan Chase Bank, N.A., Compass, HSBC Bank USA, National Association and PNC Bank, National Association, as co-documentation agents, Bank of America, N.A. and Goldman Sachs Bank USA, as co-syndication agents, and Wells Fargo Securities, LLC, Barclays Bank PLC, Goldman Sachs Bank USA, JPMorgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and HSBC Bank USA, National Association, as joint bookrunners—incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8K (File No. 00113703) filed on April 17, 2019

~~Exhibit 10.2~~	Second Amended and Restated Guarantee and Collateral Agreement, dated as of April 17, 2019, among Holdings, SFO and SFTP, the other grantors party thereto, and Wells Fargo Bank, National Association, as administrative agent—incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8K (File No. 00113703) filed on April 17, 2019

Exhibit 31.1*	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2*	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1*	Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2*	Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS*101	~~XBRL Instance Document~~The following financial statements and footnotes from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 fomatted in Inline XBRL: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Deficit, (v) the Unaudited Condensed Statements of Cash Flow, and (vi) related Notes to the Condensed Consolidated Financial Statements.

Exhibit 101.SCH*104	~~XBRL Taxonomy Extension Schema Document~~

Exhibit 101.CAL**	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

Exhibit 101.DEF**	~~XBRL Taxonomy Extension Definition Linkbase Document~~

Exhibit 101.LAB**	~~XBRL Taxonomy Extension Labels Linkbase Document~~

Exhibit 101.PRE**	~~XBRL Taxonomy Extension Presentation Linkbase Document~~The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL.

~~† Management contract or compensatory plan~~

* Filed ~~herewith~~

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SIX FLAGS ENTERTAINMENT CORPORATION
		(Registrant)

Date:	~~July 24,~~October 23, 2019	/s/ James Reid-Anderson
		James Reid-Anderson
		Chairman, President and Chief Executive Officer

Date:	~~July 24,~~October 23, 2019	/s/ Marshall Barber
		Marshall Barber
		Executive Vice President and Chief Financial Officer