UNITED PARKS & RESORTS INC. References to our "theme parks" or "parks" in the discussion that follows includes all of our separately gated parks. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of our Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with theSEC . Actual results may differ materially from those contained in any forward-looking statements. You should carefully read "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q.
Introduction
The following discussion and analysis is intended to facilitate an understanding of our business and results of operations and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion should also be read in conjunction with our consolidated financial statements and related notes thereto, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Business Overview
We are a leading theme park and entertainment company providing experiences that matter and inspiring guests to protect animals and the wild wonders of our world. We own or license a portfolio of recognized brands, includingSeaWorld ,Busch Gardens , Aquatica, Discovery Cove andSesame Place . Over our more than 60-year history, we have developed a diversified portfolio of 12 differentiated theme parks that are grouped in key markets acrossthe United States . Many of our theme parks showcase our one-of-a-kind zoological collection and feature a diverse array of both thrill and family-friendly rides, educational presentations, shows and/or other attractions with broad demographic appeal which deliver memorable experiences and a strong value proposition for our guests.
Recent Developments
Impact of Global COVID-19 Pandemic
In response to the global COVID-19 pandemic and in compliance with government restrictions, we temporarily closed all of our theme parks effectiveMarch 16, 2020 . Beginning inJune 2020 , we began the phased reopening of some of our parks with capacity limitations and/or modified/limited operations, which extended through 2020 and into 2021. By the end of the second quarter of 2021, all of our parks were operating without COVID-19 related capacity limitations. See further discussion in Note 1-Description of the Business and Basis of Presentation to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Due to the COVID-19 pandemic, we implemented enhanced health and safety protocols for our parks including capacity limitations, increased cleaning measures, physical distancing practices, face covering requirements and temperature screening of both guests and employees. During the second quarter of 2021, based on revisions to federal, state and local guidelines, we modified some of these protocols. In particular, we are no longer requiring face coverings outdoors for guests and employees who are fully vaccinated. We have also discontinued temperature screenings at all of our parks. Additionally, inJuly 2021 , excluding our reservations-only Discovery Cove park, we suspended the requirement for our guests to use our reservation system, providing guests more flexibility in planning their visit. We continue our focus on reducing costs, improving operating margins and streamlining our labor structure to better align with our strategic business objectives. Since the start of the COVID-19 pandemic, we have spent significant time reviewing our operations and have identified meaningful cost savings opportunities which we believe will further strengthen our business. As approved vaccines continue to be distributed, public health conditions, the operating environment and capacity limitations have improved; however, there can be no certainty of the extent and effectiveness of the vaccines or how they will impact these factors and others, including domestic or international travel, group events, public opinion concerning social gatherings, consumer behavior or federal, state and local regulations related to health protocols, capacity limitations and social gatherings.
Current Operating Environment
Our Board has formed a number of committees designed to provide further assistance by exercising enhanced oversight over the operations of the Company. Examples of these committees include theRevenue Committee , Cost Committee and CRM Committee. As a result, in the current operating environment, certain members of our Board, including our Chairman of the Board, are actively involved in overseeing certain key operating activities. 24 -------------------------------------------------------------------------------- The current condition of the overall labor market, the challenging current operating environment and COVID-19 related factors has led to increased turnover and challenges in meeting our staffing goals. These staffing challenges have also led to wage pressures for select roles during the second and third quarters of 2021. Staffing challenges and inflationary pressures in general could continue in this environment; however, we continue our efforts to recruit and retain talent as well as identify cost reduction and efficiency opportunities. For further discussion relating to strategic measures we have taken to operate in the current environment, see the "Results of Operations" section which follows. For other factors concerning the global COVID-19 pandemic, see the "Risk Factors" section of our Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with theSEC .
Principal Factors and Trends Affecting Our Results of Operations
Revenues
Our revenues are driven primarily by attendance in our theme parks and the level of per capita spending for admission and per capita spending for food and beverage, merchandise and other in-park products. We define attendance as the number of guest visits. Attendance drives admissions revenue as well as total in-park spending. Admissions revenue primarily consists of single-day tickets, annual passes (which generally expire after a 12-month term), season passes (including our fun card products and, collectively with annual passes, referred to as "passes" or "season passes") or other multi-day or multi-park admission products.
Total revenue per capita, defined as total revenue divided by total attendance, consists of admission per capita and in-park per capita spending:
• Admission Per Capita. We calculate admission per capita as total admissions
revenue divided by total attendance. Admission per capita is primarily driven
by ticket pricing, the admissions product mix (including the impact of pass
visitation rates), and the park attendance mix, among other factors. The
admissions product mix, also referred to as the attendance or visitation mix,
is defined as the mix of attendance by ticket category such as single day,
multi-day, annual/season passes or complimentary tickets and can be impacted
by the mix of guests as domestic and international guests generally purchase
higher admission per capita ticket products than our local guests. A higher
mix of complimentary tickets will lower our admissions per capita. Pass
visitation rates are the number of visits per pass. A higher number of visits
per pass would yield a lower admissions per capita as the revenue is
recognized over more visits. The park attendance mix is defined as the mix of
theme parks visited and can impact admission per capita based on the theme
park's respective pricing which, on average, is lower for our water parks
compared to our other theme parks.
• In-Park Per Capita Spending. We calculate in-park per capita spending as total
food, merchandise and other revenue divided by total attendance. Food,
merchandise and other revenue primarily consists of food and beverage,
merchandise, parking and other in-park products and also includes other
miscellaneous revenue, including online transaction fees, not necessarily
generated in our parks, which is not significant in the periods
presented. In-park per capita spending is primarily driven by pricing changes,
new product offerings, the mix of guests (such as local, domestic or
international guests), penetration levels (percentage of guests purchasing)
and the mix of in-park spending, among other factors.
See further discussion in the "Results of Operations" section which follows and in Note 1-Description of the Business and Basis of Presentation to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. For other factors affecting our revenues, see the "Risk Factors" section of our Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with theSEC .
Attendance
The level of attendance in our theme parks is generally a function of many
factors, including affordability, the opening of new attractions and shows,
competitive offerings, weather, marketing and sales efforts, awareness and type
of ticket and park offerings, travel patterns of both our domestic and
international guests, fluctuations in foreign exchange rates and global and
regional economic conditions, consumer confidence, the external perceptions of
our brands and reputation, industry best practices and perceptions as to safety.
The external perceptions of our brands and reputation have at times impacted
relationships with some of our business partners, including certain ticket
resellers that have terminated relationships with us and other zoological-themed
attractions.
As a result of the COVID-19 pandemic, we believe the level of attendance in our
theme parks, including the mix of attendance from certain markets and certain
guests has been and will continue to be impacted by concerns over the COVID-19
pandemic, the number of reported local cases of COVID-19, domestic and
international travel restrictions, federal, state and local regulations related
to public places, limits on social gatherings, the availability and/or
effectiveness of vaccines for adults and children, and overall public safety
sentiment. We continuously monitor factors impacting our attendance, making
strategic operations, marketing and sales adjustments as necessary.
25
--------------------------------------------------------------------------------Costs and Expenses
Historically, the principal costs of our operations are employee wages and benefits, driven partly by staffing levels, advertising, maintenance, animal care, utilities and insurance. Factors that affect our costs and expenses include fixed operating costs, competitive wage pressures including minimum wage legislation, commodity prices, costs for construction, repairs and maintenance, other inflationary pressures and attendance levels, among other factors. The mix of products sold compared to the prior year period can also impact our costs as generally retail products have a higher cost of sales component than our food and beverage or other in-park offerings. As a result of the impact of the COVID-19 pandemic on our business, costs and expenses as a percent of revenue for the three and nine months endedSeptember 30, 2021 and 2020, are not necessarily indicative of costs and expenses as a percent of revenue for any future period, due in part to the impact of fixed operating costs and certain other costs which are not dependent on attendance levels, as well as certain costs associated with the COVID-19 pandemic. For other factors affecting our costs and expenses, see the "Impact of Global COVID-19 Pandemic" section and the "Risk Factors" section of our Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with theSEC . Additionally, we maintain valuation allowances for certain deferred tax assets which rely on estimates and assumptions on future financial performance, which may need to be adjusted in the future. See Note 4-Income Taxes in our notes to the unaudited condensed consolidated financial statements for further details.
Seasonality
The theme park industry is seasonal in nature. Historically, we generate the highest revenues in the second and third quarters of each year, in part because seven of our theme parks were historically only open for a portion of the year. As a result, approximately two-thirds of our attendance and revenues were historically generated in the second and third quarters of the year and we generally incurred net losses in the first and fourth quarters. The percent mix of revenues by quarter is relatively constant each year, but revenues can shift between the first and second quarters due to the timing of Easter and spring break holidays and between the first and fourth quarters due to the timing of holiday breaks around Christmas and New Year. Even for our five theme parks which have historically been open year-round, attendance patterns have significant seasonality, driven by holidays, school vacations and weather conditions. Changes in school calendars that impact traditional school vacation breaks could also impact attendance patterns. Due in part to the temporary park closures, capacity limitations and/or modified/limited operations, the COVID-19 pandemic has impacted the seasonality of our business and it is difficult to estimate how the COVID-19 pandemic will impact seasonality in the future. Furthermore, any changes to the operating schedule of a park such as increasing operating days for our seasonal parks, could impact seasonality in the future. During the first nine months of 2021, we began year-round operations at ourSeaWorld park inTexas and began to operate on select days on a year round basis at both ourBusch Gardens park inVirginia and ourSesame Place park inPennsylvania .
See "Risk Factors" section of our Annual Report on Form 10-K, as such risk
factors may be updated from time to time in our periodic filings with the
Results of Operations
Our results for the three and nine months endedSeptember 30, 2021 are not directly comparable to the three and nine months endedSeptember 30, 2020 primarily due to temporary park closures, effective onMarch 16, 2020 , capacity limitations, and modified/limited operations associated with the COVID-19 pandemic. Our business continues to be impacted by the COVID-19 pandemic; however, we have seen improvement in operating results during the three and nine months endedSeptember 30, 2021 due in part to an improving operating environment along with the impact of strategic measures we have taken both before and during the COVID-19 pandemic. See "Impact of Global COVID-19 Pandemic" and "Attendance" for further discussion of the adverse impacts of the COVID-19 pandemic on our business. The following data should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. 26
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Comparison of the Three Months Ended
The following table presents key operating and financial information for the
three months ended
For the Three Months Ended
September 30, Variance
2021 2020 # %
Summary Financial Data: (In thousands, except per capita data)
Net revenues:
Admissions $ 296,694 $ 63,087 $ 233,607 NM
Food, merchandise and other 224,512 43,030 181,482 NM
Total revenues 521,206 106,117 415,089 NM
Costs and expenses:
Cost of food, merchandise and other
revenues 37,977 9,298 28,679 NM
Operating expenses (exclusive of
depreciation and amortization shown
separately below) 195,113 91,337 103,776 113.6 %
Selling, general and administrative
expenses 53,617 24,335 29,282 120.3 %
Severance and other separation costs - 2,581 (2,581 ) NM
Depreciation and amortization 36,306 38,052 (1,746 ) (4.6 %)
Total costs and expenses 323,013 165,603 157,410 95.1 %
Operating income (loss) 198,193 (59,486 ) 257,679 NM
Other income, net (39 ) (2 ) (37 ) NM
Interest expense 28,372 28,145 227 0.8 %
Loss on early extinguishment of debt and
write-off of discounts and debt issuance
costs 58,827 - 58,827 NM
Income (loss) before income taxes 111,033 (87,629 ) 198,662 NM
Provision for (benefit from) income taxes 8,936 (8,392 ) 17,328 NM
Net income (loss) $ 102,097 $ (79,237 ) $ 181,334 NM
Other data:
Attendance 7,226 1,562 5,664 NM
Total revenue per capita $ 72.13 $ 67.94 $ 4.19 6.2 %
Admission per capita $ 41.06 $ 40.39 $ 0.67 1.7 %
In-park per capita spending $ 31.07 $ 27.55 $ 3.52 12.8 %
NM - Not Meaningful.
Admissions revenue. Admissions revenue for the three months ended September 30,
2021 increased $233.6 million to $296.7 million as compared to $63.1 million for
the three months ended September 30, 2020 . The increase in admissions revenue
was primarily a result of an increase in attendance of approximately 5.7 million
guests, along with an increase in admission per capita. Attendance during the
three months ended September 30, 2021 benefitted from an increase in demand and
operating days resulting from a return to more normalized operations when
compared to the third quarter of 2020, which was significantly impacted by the
temporary park closures. Attendance during the third quarter of 2021 was also
unfavorably impacted by weather. Admission per capita increased by 1.7% to
$41.06 for the three months ended September 30, 2021 compared to $40.39 in the
three months ended September 30, 2020 . Admission per capita increased primarily
due to the realization of higher prices in our admission products resulting from
our strategic pricing efforts, which was partially offset by the net impact of
the admissions product and park mix when compared to the prior year quarter due
in part to limited operating days and temporary park closures.
Food, merchandise and other revenue. Food, merchandise and other revenue for the
three months ended September 30, 2021 increased $181.5 million to $224.5 million
as compared to $43.0 million for the three months ended September 30, 2020 . The
increase results primarily from the increase in attendance discussed above,
along with an increase in in-park per capita spending. In-park per capita
spending increased by 12.8% to $31.07 in the three months ended September 30,
2021 compared to $27.55 in the three months ended September 30, 2020 . In-park
per capita spending improved primarily due to increased guest spending, an
improved product mix, higher realized prices, new or enhanced and expanded
in-park offerings, and a strong consumer demand environment during the quarter.
Costs of food, merchandise and other revenues. Costs of food, merchandise and
other revenues for the three months ended September 30, 2021 increased by $28.7
million to $38.0 million as compared to $9.3 million for the three months ended
September 30, 2020 , primarily due to the increase in related revenue. These
costs represent 16.9% and 21.6% of the related revenue earned for the three
months ended September 30, 2021 and 2020, respectively. The decrease as a
percent of related revenue primarily reflects a return to more normalized
operations and the impact of higher realized pricing and product mix, which more
than offset inflationary pressures.
27
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Operating expenses. Operating expenses for the three months ended September 30,
2021 increased by $103.8 million , or 113.6%, to $195.1 million as compared to
$91.3 million for the three months ended September 30, 2020 . Operating expenses
in the prior year period were significantly impacted by limited operating days
and hours, furloughs and workforce reductions resulting from limited reopenings
and temporary park closures due to the COVID-19 pandemic. As a result, the
increase in operating expenses during the third quarter of 2021 primarily
results from a return to more normalized operations. In particular, operating
expenses increased largely due to labor-related and other operating costs to
staff and operate open parks in a more normalized environment, partially offset
by structural cost savings initiatives when compared to the prior year
quarter. Operating expenses for the third quarter of 2021 were also impacted by
approximately $9.2 million of nonrecurring contractual liabilities and legal
costs resulting from the temporary COVID-19 park closures, operating costs
associated with incremental events added in 2021, an increase of approximately
$2.6 million in non-cash equity compensation expenses and the timing of certain
maintenance projects. Operating expenses as a percent of revenue were 37.4% for
the three months ended September 30, 2021 and are not comparable to the prior
year period primarily due to the impact of certain operating costs in 2020 which
are not dependent on attendance levels.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended September 30, 2021 increased
$29.3 million , or 120.3%, to $53.6 million as compared to $24.3 million for the
three months ended September 30, 2020 . The increase primarily relates to
increased marketing related costs resulting from a return to more normalized
operations in the third quarter of 2021 as we substantially reduced marketing
related costs due to limited reopenings and temporary park closures in
2020. Selling, general and administrative expenses were also impacted by an
increase of approximately $7.0 million in non-cash equity compensation and an
increase in labor-related costs when compared to the prior year quarter,
partially offset by the impact of cost savings and efficiency
initiatives. Selling, general and administrative expenses as a percent of
revenue were 10.3% for the three months ended September 30, 2021 and is not
comparable to the prior year period primarily due to the impact of the limited
operations and temporary park closures.
Depreciation and amortization. Depreciation and amortization expense for the
three months ended September 30, 2021 declined by $1.7 million , or 4.6%, to
$36.3 million as compared to $38.1 million for the three months ended
September 30, 2020 . The decrease primarily relates to a decline in new asset
additions along with the impact of asset retirements and fully depreciated
assets.
Interest expense. Interest expense for the three months ended September 30, 2021
increased approximately $0.2 million , or 0.8%, to $28.4 million as compared to
$28.1 million for the three months ended September 30, 2020 . The increase
primarily relates to interest on the Second-Priority Senior Secured Notes issued
in August 2020 and the Senior Notes issued in August 2021 , partially offset by
the impact of a lower average outstanding balance on our Term Loans and
Revolving Credit Facility, which was undrawn in 2021, and the impact of
decreased LIBOR rates. See Note 6-Long-Term Debt in our notes to the unaudited
condensed consolidated financial statements and the "Our Indebtedness" section
which follows for further details.
Loss on early extinguishment of debt and write-off of discounts and debt
issuance costs. Loss on early extinguishment of debt and write-off of discounts
and debt issuance costs for the three months ended September 30, 2021 primarily
relate to a write-off of discounts and debt issuance costs resulting from the
Refinancing Transactions during the three months ended September 30, 2021 . See
Note 6-Long-Term Debt to our unaudited condensed consolidated financial
statements included elsewhere in this Form 10-Q and the "Our Indebtedness"
section which follows for further details.
Provision for (benefit from) income taxes. Income taxes in the three months
ended September 30, 2021 was a provision of $8.9 million compared to a benefit
of $8.4 million for the three months ended September 30, 2020 . Our consolidated
effective tax rate was 8.0% for the three months ended September 30, 2021
compared to 9.6% for the three months ended September 30, 2020 . The effective
tax rate was primarily impacted by non-cash valuation allowance adjustments on
federal and state net operating loss carryforwards, a valuation allowance
adjustment on federal tax credits, changes in state tax rates and tax impacts of
equity-based compensation. See Note 4-Income Taxes in our notes to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q for further details.
28
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Supplemental comparison of the three months ended
We believe a comparison of selected financial results for the three months endedSeptember 30, 2021 to the three months endedSeptember 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business. As such, the following supplemental discussion provides an analysis of selected operating results for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2019 . The selected summary financial data for the three months endedSeptember 30, 2019 was derived from the Company's Quarterly Report on Form 10-Q for quarter endedSeptember 30, 2019 . For the Three Months Ended September 30, Variance 2021 2019 # % Summary Financial Data: (In thousands, except per capita data) Net revenues: Admissions$ 296,694 $ 268,048 $ 28,646 10.7 % Food, merchandise and other 224,512 205,618 18,894 9.2 % Total revenues 521,206 473,666 47,540 10.0 % Selected Costs and expenses: Cost of food, merchandise and other revenues 37,977 37,843 134 0.4 % Operating expenses (exclusive of depreciation and amortization) 195,113 175,634 19,479 11.1 % Selling, general and administrative expenses 53,617 64,632 (11,015 ) (17.0 %) Other data: Attendance 7,226 8,123 (897 ) (11.0 %) Total revenue per capita$ 72.13 $ 58.31 $ 13.82 23.7 % Admission per capita$ 41.06 $ 33.00 $ 8.06 24.4 % In-park per capita spending$ 31.07 $
25.31
Admissions revenue. Admissions revenue for the three months endedSeptember 30, 2021 increased$28.6 million , or 10.7%, to$296.7 million as compared to$268.0 million for the three months endedSeptember 30, 2019 . The increase in admissions revenue was primarily a result of an increase in admissions per capita, partially offset by a decrease in attendance of approximately 0.9 million guests, or 11.0%. Attendance declined when compared to 2019 primarily due to a decline from international guest visitation and group-related attendance. Attendance was also impacted by an unfavorable calendar shift and weather during the quarter. Admission per capita increased by 24.4% to$41.06 in 2021 compared to$33.00 in 2019. Admission per capita increased primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, along with the net impact of the admissions product mix when compared to the third quarter of 2019. Food, merchandise and other revenue. Food, merchandise and other revenue for the three months endedSeptember 30, 2021 increased$18.9 million , or 9.2%, to$224.5 million as compared to$205.6 million for the three months endedSeptember 30, 2019 , primarily as a result of an increase in in-park per capita spending, partially offset by a decrease in attendance as discussed above. In-park per capita spending increased by 22.8% to$31.07 in the third quarter of 2021 compared to$25.31 in the third quarter of 2019. In-park per capita spending improved primarily due to increased guest spending, an improved product mix, higher realized prices and fees, new or enhanced and expanded in-park offerings and a strong consumer demand environment during the quarter. Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the three months endedSeptember 30, 2021 increased$0.1 million , or 0.4%, to$38.0 million as compared to$37.8 million for the three months endedSeptember 30, 2019 . These costs represent 16.9% and 18.4% of the related revenue earned for the three months endedSeptember 30, 2021 and 2019, respectively. The decrease as a percent of related revenue partly relates to the net impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products, which more than offset inflationary pressures. Operating expenses. Operating expenses for the three months endedSeptember 30, 2021 increased$19.5 million , or 11.1%, to$195.1 million as compared to$175.6 million for the three months endedSeptember 30, 2019 . Operating expenses for the third quarter of 2021 increased primarily due to approximately$9.2 million of nonrecurring contractual liabilities and legal costs resulting from the temporary COVID-19 park closures. Operating expenses also increased due to incremental operating days and events added in 2021, an increase of$2.6 million in non-cash equity compensation expenses, and the timing of certain maintenance projects. These increases were partially offset by a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives. Operating expenses were 37.4% of total revenues for the three months endedSeptember 30, 2021 compared to 37.1% for the three months endedSeptember 30, 2019 . 29 -------------------------------------------------------------------------------- Selling, general and administrative expenses. Selling, general and administrative expenses for the three months endedSeptember 30, 2021 decreased$11.0 million , or 17.0%, to$53.6 million as compared to$64.6 million for the three months endedSeptember 30, 2019 . The decrease primarily relates to a targeted reduction in marketing related costs and the impact of cost savings and efficiency initiatives partially offset by a$9.2 million increase in non-cash equity compensation. As a percentage of total revenue, selling, general and administrative expenses were 10.3% for the three months endedSeptember 30, 2021 compared to 13.6% for the three months endedSeptember 30, 2019 .
Comparison of the Nine Months Ended
The following table presents key operating and financial information for the
nine months ended
For the Nine Months Ended
September 30, Variance
2021 2020 # %
Summary Financial Data: (In thousands, except per capita data)
Net revenues:
Admissions $ 635,699 $ 163,368 $ 472,331 NM
Food, merchandise and other 497,211 114,336 382,875 NM
Total revenues 1,132,910 277,704 855,206 NM
Costs and expenses:
Cost of food, merchandise and other
revenues 87,092 23,555 63,537 NM
Operating expenses (exclusive of
depreciation and amortization shown
separately below) 460,192 283,385 176,807 62.4 %
Selling, general and administrative
expenses 128,271 72,393 55,878 77.2 %
Severance and other separation costs 1,582 2,655 (1,073 ) NM
Depreciation and amortization 109,111 114,006 (4,895 ) (4.3 %)
Total costs and expenses 786,248 495,994 290,254 58.5 %
Operating income (loss) 346,662 (218,290 ) 564,952 NM
Other expense (income), net 156 (15 ) 171 NM
Interest expense 90,455 69,206 21,249 30.7 %
Loss on early extinguishment of debt and
write-off of discounts and debt issuance
costs 58,827 - 58,827 NM
Income (loss) before income taxes 197,224 (287,481 ) 484,705 NM
Provision for (benefit from) income taxes 12,249 (20,696 ) 32,945 NM
Net income (loss) $ 184,975 $ (266,785 ) $ 451,760 NM
Other data:
Attendance 15,250 4,153 11,097 NM
Total revenue per capita $ 74.29 $ 66.87 $ 7.42 11.1 %
Admission per capita $ 41.69 $ 39.34 $ 2.35 6.0 %
In-park per capita spending $ 32.61 $ 27.53 NM-Not Meaningful.
Admissions revenue. Admissions revenue for the nine months endedSeptember 30, 2021 increased$472.3 million to$635.7 million as compared to$163.4 million for the nine months endedSeptember 30, 2020 . The improvement was a result of an increase in attendance and in admissions per capita. Total attendance for the first nine months of 2021 increased by approximately 11.1 million guests when compared to the first nine months of 2020. Attendance improved primarily due to an increase in demand and operating days resulting from a return to more normalized operations in the first nine months of 2021 compared to the first nine months of 2020, which was significantly impacted by the temporary park closures. Attendance during the first nine months of 2021 was also unfavorably impacted by weather. The increase in operating days more than offset unfavorable impacts on attendance from COVID-19 related impacts including capacity limitations and/or modified/limited operations for some of the first nine months of 2021. Admission per capita increased by 6.0% to$41.69 for the nine months endedSeptember 30, 2021 compared to$39.34 for the nine months endedSeptember 30, 2020 , primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, partially offset by the net impact of the park and admissions product mix when compared to the prior year period. 30
-------------------------------------------------------------------------------- Food, merchandise and other revenue. Food, merchandise and other revenue for the nine months endedSeptember 30, 2021 increased$382.9 million to$497.2 million as compared to$114.3 million for the nine months endedSeptember 30, 2020 . The increase largely results from the increase in attendance discussed above. In-park per capita spending increased by 18.5% to$32.61 for the nine months endedSeptember 30, 2021 compared to$27.53 for the nine months endedSeptember 30, 2020 . In park per capita increased due to increased guest spending, an improved product mix, higher realized prices, the impact of new or enhanced and expanded in-park offerings, and a strong consumer demand environment when compared to the prior year period. Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the nine months endedSeptember 30, 2021 increased$63.5 million to$87.1 million as compared to$23.6 million for the nine months endedSeptember 30, 2020 . The increase primarily relates to the increase in attendance as discussed above. These costs represent 17.5% and 20.6% of the related revenue earned for the nine months endedSeptember 30, 2021 and 2020, respectively. The decrease as a percent of related revenue primarily reflects a return to more normalized operations and the impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products, which more than offset inflationary pressures. Operating expenses. Operating expenses for the nine months endedSeptember 30, 2021 increased by$176.8 million , or 62.4%, to$460.2 million as compared to$283.4 million for the nine months endedSeptember 30, 2020 . The increase primarily relates to a net increase in labor-related and other operating costs resulting from the impact of additional operating days due to a return to more normalized operations in 2021, approximately$9.2 million of certain nonrecurring contractual liabilities and legal costs resulting from the temporary COVID-19 park closures and an increase of approximately$6.2 million in non-cash equity compensation expenses, partially offset by structural cost savings initiatives. Operating expenses as a percent of revenue were 40.6% for the nine months endedSeptember 30, 2021 and are not comparable to the prior year period primarily due to the impact of certain operating costs in 2020 which are not dependent on attendance levels. Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months endedSeptember 30, 2021 increased$55.9 million , or 77.2%, to$128.3 million as compared to$72.4 million for the nine months endedSeptember 30, 2020 . Excluding the impact of certain legal settlement proceeds in the prior year period, selling, general and administrative expenses increased by approximately$43.4 million primarily due to increased marketing-related costs, an increase of$13.8 million in non-cash equity compensation expense, and increased labor-related costs resulting from the impact of furloughs in the prior year period, partially offset by the impact of cost savings and efficiency initiatives. The legal settlement proceeds in the prior year period related to approximately$12.5 million received associated with a legal matter. See Note 9-Commitments and Contingencies to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details. Selling, general and administrative expenses as a percent of revenue were 11.3% for the nine months endedSeptember 30, 2021 and is not comparable to the prior year period primarily due to the impact of the temporary park closures. Depreciation and amortization. Depreciation and amortization expense for the nine months endedSeptember 30, 2021 decreased$4.9 million , or 4.3%, to$109.1 million as compared to$114.0 million for the nine months endedSeptember 30, 2020 . The decrease primarily relates to a decline in new asset additions along with the impact of asset retirements and fully depreciated assets. Interest expense. Interest expense for the nine months endedSeptember 30, 2021 increased$21.2 million , or 30.7%, to$90.5 million as compared to$69.2 million for the nine months endedSeptember 30, 2020 . The increase primarily relates to interest on the Second-Priority Senior Secured Notes issued inAugust 2020 , the First-Priority Senior Secured Notes issued inApril 2020 , and the Senior Notes issued inAugust 2021 , partially offset by the impact of a lower average outstanding balance on our Revolving Credit Facility, which was undrawn in 2021 and the impact of decreased LIBOR rates. See Note 6-Long-Term Debt in our notes to the unaudited condensed consolidated financial statements and the "Our Indebtedness" section which follows for further details. Loss on early extinguishment of debt and write-off of discounts and debt issuance costs. Loss on early extinguishment of debt and write-off of discounts and debt issuance costs for the nine months endedSeptember 30, 2021 primarily relate to a write-off of discounts and debt issuance costs resulting from the Refinancing Transactions during the nine months endedSeptember 30, 2021 . See Note 6-Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q and the "Our Indebtedness" section which follows for further details. Provision for (benefit from) income taxes. Income taxes for the nine months endedSeptember 30, 2021 was a provision of$12.2 million compared to a benefit of$20.7 million for the nine months endedSeptember 30, 2020 . Our consolidated effective tax rate was 6.2% for the nine months endedSeptember 30, 2021 compared to 7.2% for the nine months endedSeptember 30, 2020 . The effective tax rate decreased primarily due to non-cash valuation allowance adjustments on federal and state net operating loss carryforwards, a valuation allowance adjustment on federal tax credits, changes in state tax rates and tax impacts on equity-based compensation. See Note 4-Income Taxes in our notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details. 31 --------------------------------------------------------------------------------
Supplemental comparison of the nine months ended
We believe a comparison of selected financial results for the nine months endedSeptember 30, 2021 to the nine months endedSeptember 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business. As such, the following supplemental discussion provides an analysis of selected operating results for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2019 . The selected summary financial data for the first nine months of 2019 was derived from the Company's Quarterly Report on Form 10-Q for quarter endedSeptember 30, 2019 . For the Nine Months Ended September 30, Variance 2021 2019 # % Selected Summary Financial Data: (In thousands, except per capita data) Net revenues: Admissions$ 635,699 $ 624,789 $ 10,910 1.7 % Food, merchandise and other 497,211 475,444 21,767 4.6 % Total revenues 1,132,910 1,100,233 32,677 3.0 % Selected costs and expenses: Cost of food, merchandise and other revenues 87,092 87,062 30 0.0 % Operating expenses (exclusive of depreciation and amortization) 460,192 495,917 (35,725 ) (7.2 %) Selling, general and administrative expenses 128,271 174,601 (46,330 ) (26.5 %) Other data: Attendance 15,250 17,925 (2,675 ) (14.9 %) Total revenue per capita$ 74.29 $ 61.38 $ 12.91 21.0 % Admission per capita$ 41.69 $ 34.86 $ 6.83 19.6 % In-park per capita spending$ 32.61 $ 26.52 $ 6.09 23.0 % Admissions revenue. Admissions revenue for the nine months endedSeptember 30, 2021 increased$10.9 million , or 1.7%, to$635.7 million as compared to$624.8 million for the nine months endedSeptember 30, 2019 . The increase in admissions revenue was primarily a result of an increase in admissions per capita which more than offset a decrease in attendance of approximately 2.7 million guests, or 14.9%. Admission per capita increased by 19.6% to$41.69 in 2021 compared to$34.86 in 2019. Admission per capita increased primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, along with the net impact of the admissions product mix when compared to the first nine months of 2019. Attendance declined when compared to 2019 primarily due to COVID-19 related impacts including capacity limitations and/or modified/limited operations at our parks for most of the first nine months of 2021. Attendance was also impacted by a decline from international guest visitation and group-related attendance when compared to 2019. Food, merchandise and other revenue. Food, merchandise and other revenue for the nine months endedSeptember 30, 2021 increased$21.8 million , or 4.6%, to$497.2 million as compared to$475.4 million for the nine months endedSeptember 30, 2019 , primarily as a result of an increase in in-park per capita spending, offset by a decrease in attendance as discussed above. In-park per capita spending increased by 23.0% to$32.61 in the first nine months of 2021 compared to$26.52 in the first nine months of 2019. In-park per capita spending improved primarily due to increased guest spending, an improved product mix, higher realized prices and fees, new, enhanced or expanded in-park offerings and a strong consumer demand environment when compared to the first nine months of 2019. Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the nine months endedSeptember 30, 2021 remained relatively flat at$87.1 million as compared to the nine months endedSeptember 30, 2019 . These costs represent 17.5% and 18.3% of the related revenue earned for the nine months endedSeptember 30, 2021 and 2019, respectively. The decrease as a percent of related revenue relates to the impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products, which more than offset inflationary pressures. Operating expenses. Operating expenses for the nine months endedSeptember 30, 2021 decreased$35.7 million , or 7.2%, to$460.2 million as compared to$495.9 million for the nine months endedSeptember 30, 2019 . The decrease is primarily due to a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives and the impact of modified/limited operations due to COVID-19, partially offset by approximately$9.2 million of certain nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures, operating costs associated with incremental operating days and events added in 2021 and an increase of approximately$3.1 million in non-cash equity compensation expense. Operating expenses were 40.6% of total revenues for the nine months endedSeptember 30, 2021 compared to 45.1% for the nine months endedSeptember 30, 2019 . 32 -------------------------------------------------------------------------------- Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months endedSeptember 30, 2021 decreased$46.3 million , or 26.5%, to$128.3 million as compared to$174.6 million for the nine months endedSeptember 30, 2019 . The decrease primarily relates to a targeted reduction in marketing related costs and the impact of cost savings and efficiency initiatives, partially offset by an increase of$11.6 million in non-cash equity compensation expense. As a percentage of total revenue, selling, general and administrative expenses were 11.3% for the nine months endedSeptember 30, 2021 compared to 15.9% for the nine months endedSeptember 30, 2019 .
Liquidity and Capital Resources
Overview
Generally, our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash include the funding of working capital obligations, debt service, investments in theme parks (including capital projects), share repurchases and/or other return of capital to stockholders, when permitted. As ofSeptember 30, 2021 , we had a working capital ratio (defined as current assets divided by current liabilities) of 1.7, due in part to our outstanding cash balance atSeptember 30, 2021 . Historically, we typically operate with a working capital ratio less than 1 due to significant deferred revenue balance from revenues paid in advance for our theme park admissions products and high turnover of in-park products that result in limited inventory balances. Our cash flow from operations, along with our revolving credit facilities, have historically allowed us to meet our liquidity needs. See the "Our Indebtedness" section for further details concerning the proactive measures we have taken to address liquidity in response to the COVID-19 pandemic. As market conditions warrant and subject to our contractual restrictions and liquidity position, we or our affiliates, may from time to time purchase our outstanding equity and/or debt securities, including our outstanding bank loans in privately negotiated or open market transactions, by tender offer or otherwise. Any such purchases may be funded by incurring new debt, including additional borrowings under the Senior Secured Credit Facilities. Any new debt may also be secured debt. We may also use available cash on our balance sheet. The amounts involved in any such transactions, individually or in the aggregate, may be material. Further, since some of our debt may trade at a discount to the face amount among current or future syndicate members, any such purchases may result in our acquiring and retiring a substantial amount of any particular series, with the attendant reduction in the trading liquidity of any such series. Depending on conditions in the credit and capital markets and other factors, we will, from time to time, consider other financing transactions, the proceeds of which could be used to refinance our indebtedness or for other purposes.
Share Repurchases
See Note 11-Stockholders' Equity (Deficit) in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information on the Share Repurchase Program.
Other
We believe that existing cash and cash equivalents, cash flow from operations, and available borrowings under our revolving credit facility will be adequate to meet the capital expenditures and working capital requirements of our operations for at least the next 12 months.
The following table presents a summary of our cash flows provided by (used in) operating, investing, and financing activities for the periods indicated:
For the Nine Months Ended
September 30,
2021 2020
(Unaudited, in thousands)
Net cash provided by (used in) operating activities
(73,591 ) (75,715 )
Net cash (used in) provided by financing activities (222,913 ) 632,310
Net increase in cash and cash equivalents, including restricted cash
$ 119,933
Cash Flows from Operating Activities
Net cash provided by operating activities was$416.4 million during the nine months endedSeptember 30, 2021 as compared to net cash used in operating activities of$107.6 million during the nine months endedSeptember 30, 2020 . The change in net cash provided by (used in) operating activities was primarily impacted by improved operating performance, including increased sales of admission products, partially offset by the impact of increased interest payments in the nine months endedSeptember 30, 2021 when compared to the nine months endedSeptember 30, 2020 , which was impacted by the temporary park closures. 33 --------------------------------------------------------------------------------
Cash Flows from Investing Activities
Investing activities consist principally of capital investments we make in our theme parks for future attractions and infrastructure. Net cash used in investing activities during the nine months endedSeptember 30, 2021 consisted primarily of capital expenditures of$73.6 million largely related to future attractions. Net cash used in investing activities during the nine months endedSeptember 30, 2020 consisted primarily of$75.7 million of capital expenditures. The following table presents detail of our capital expenditures for the periods indicated: For the Nine Months Ended September 30, 2021 2020 Capital Expenditures: (Unaudited, in thousands) Core(a) $ 44,046 $ 65,914 Expansion/ROI projects(b) 29,545 9,801 Capital expenditures, total $ 73,591 $
75,715
(a) Reflects capital expenditures for park rides, attractions and maintenance
activities.
(b) Reflects capital expenditures for park expansion, new properties, and revenue
and/or expense return on investment ("ROI") projects.
The amount of our capital expenditures may be affected by general economic and financial conditions, among other things, including restrictions imposed by our borrowing arrangements. Historically, we generally expect to fund our capital expenditures through our operating cash flow. Due to the COVID-19 pandemic, we took proactive measures starting inMarch 2020 relating to our capital expenditures including delaying the opening of certain new rides.
Cash Flows from Financing Activities
Net cash used in financing activities during the nine months endedSeptember 30, 2021 results primarily from net debt repayments of$130.6 million , which includes the Refinancing Transactions and payments on the Second-Priority Senior Secured Notes,$77.6 million used to repurchase shares and the payment of tax withholdings on equity-based compensation through shares withheld of$12.7 million . The Refinancing Transactions primarily consisted of$1,934.6 million in repayments of our Term B-5 Loans and Second-Priority Senior Secured Notes, approximately$34.3 million related to a premium paid for redemption of our Second-Priority Senior Secured Notes, and approximately$23.1 million in debt issuance costs partially offset by net proceeds from our Term B Loans and the Senior Notes of$1,922.2 million . Net cash provided by financing activities during the nine months endedSeptember 30, 2020 results primarily from net proceeds from our First-Priority Senior Secured Notes and our Second-Priority Senior Secured Notes offering of$713.7 million , partially offset by net repayments on our revolving credit facility of$50.0 million ,$12.4 million used to repurchase shares and repayments of$11.6 million on our long-term debt. See Note 6-Long-term Debt in our notes to the unaudited condensed consolidated financial statements for further details.
Our Indebtedness
We are a holding company and conduct our operations through our subsidiaries, which have incurred or guaranteed indebtedness as described below. As ofSeptember 30, 2021 , our indebtedness consisted of Senior Secured Credit Facilities, 8.75% first-priority senior secured notes ("First-Priority Senior Secured Notes") and 5.25% senior notes due 2029 (the "Senior Notes").
See discussion which follows and Note 6-Long-Term Debt in our notes to the
unaudited condensed consolidated financial statements for further details
concerning our long-term debt and related debt transactions which occurred
during the three and nine months ended
Senior Secured Credit Facilities
SeaWorld Parks & Entertainment, Inc. ("SEA") is the borrower under the senior secured credit facilities, as amended and restated pursuant to a credit agreement (the "Amended and Restated Credit Agreement") datedAugust 25, 2021 (the "Senior Secured Credit Facilities"). As ofSeptember 30, 2021 , our Senior Secured Credit Facilities consisted of$1.200 billion in Term B Loans which will mature inAugust 2028 , along with a$385.0 million Revolving Credit Facility, which will mature inAugust 2026 , which was not drawn upon as ofSeptember 30, 2021 . As ofSeptember 30, 2021 , SEA had approximately$20.5 million of outstanding letters of credit, leaving approximately$364.5 million available for borrowing under the Revolving Credit Facility. See Note 6-Long-Term Debt to our unaudited condensed consolidated financial statements for information. 34 --------------------------------------------------------------------------------
First-Priority Senior Secured Notes and Senior Notes
OnApril 30, 2020 , SEA closed on a private offering of$227.5 million aggregate principal amount of 8.750% First-Priority Senior Secured Notes. OnAugust 5, 2020 , SEA closed on a private offering of$500.0 million aggregate principal amount of 9.500% Second-Priority Senior Secured Notes, which were fully redeemed during the three months endedSeptember 30, 2021 .
On
Covenant Compliance
As ofSeptember 30, 2021 , we were in compliance with all covenants in the credit agreement governing the Senior Secured Credit Facilities and the indentures governing our Senior Notes and First-Priority Senior Secured Notes. See Note 6-Long-Term Debt to our unaudited condensed consolidated financial statements for further details relating to our restrictive covenants.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) plus (i) income tax provision
(benefit) (ii) interest expense, consent fees and similar financing costs (iii)
depreciation and amortization (iv) equity-based compensation expense (v) loss on
extinguishment of debt (vi) non-cash charges/credits related to asset disposals
(vii) certain business optimization, development and strategic initiative costs
(viii) merger, acquisition, integration and certain investment costs and (ix)
other nonrecurring costs including incremental costs associated with the
COVID-19 pandemic or similar unusual events.
Under the credit agreement governing the Senior Secured Credit Facilities and
the indentures governing our Senior Notes and First-Priority Senior Secured
Notes (collectively, the "Debt Agreements"), our ability to engage in activities
such as incurring additional indebtedness, making investments, refinancing
certain indebtedness, paying dividends and entering into certain merger
transactions is governed, in part, by our ability to satisfy tests based on
Adjusted EBITDA as defined in the Debt Agreements ("Covenant Adjusted EBITDA").
Covenant Adjusted EBITDA is defined as Adjusted EBITDA plus certain other items
as defined in the Debt Agreements, including estimated cost savings among other
adjustments. Cost savings represent annualized estimated savings expected to be
realized over the following 24 month period related to certain specified actions
including restructurings and cost savings initiatives, net of actual benefits
realized during the last twelve months. Other adjustments include (i) recruiting
and retention costs (ii) public company compliance costs (iii) litigation and
arbitration costs and (iv) other costs and adjustments as permitted by the Debt
Agreements.
We believe that the presentation of Adjusted EBITDA is appropriate as it
eliminates the effect of certain non-cash and other items not necessarily
indicative of a company's underlying operating performance. We use Adjusted
EBITDA in connection with certain components of our executive compensation
program. In addition, investors, lenders, financial analysts and rating agencies
have historically used EBITDA related measures in our industry, along with other
measures, to estimate the value of a company, to make informed investment
decisions and to evaluate companies in the industry. In addition, we believe the
presentation of Covenant Adjusted EBITDA for the last twelve months is
appropriate as it provides additional information to investors about the
calculation of, and compliance with, certain financial covenants in the Debt
Agreements. See the "Our Indebtedness-Covenant Compliance" section for further
details.
Adjusted EBITDA and Covenant Adjusted EBITDA are not recognized terms under
accounting principles generally accepted in the United States of America
("GAAP"), should not be considered in isolation or as a substitute for a measure
of our financial performance prepared in accordance with GAAP and are not
indicative of income or loss from operations as determined under GAAP. Adjusted
EBITDA, Covenant Adjusted EBITDA and other non-GAAP financial measures have
limitations which should be considered before using these measures to evaluate
our financial performance. Adjusted EBITDA and Covenant Adjusted EBITDA as
presented by us, may not be comparable to similarly titled measures of other
companies due to varying methods of calculation.
35
--------------------------------------------------------------------------------The following table reconciles Adjusted EBITDA and Covenant Adjusted EBITDA to net income (loss) for the periods indicated:
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Last Twelve
Months
Ended
For the Three Months Ended For the Nine Months Ended September
September 30, September 30, 30,
2021 2020 2021 2020 2021
(Unaudited, in thousands)
Net income (loss) $ 102,097 $ (79,237 ) $ 184,975 $ (266,785 ) $ 139,439
Provision for (benefit from) income
taxes 8,936 (8,392 ) 12,249 (20,696 ) 2,420
Loss on early extinguishment of
debt and write-off of discounts and
debt issuance costs (a) 58,827 - 58,827 - 58,827
Interest expense 28,372 28,145 90,455 69,206 122,156
Depreciation and amortization 36,306 38,052 109,111 114,006 145,651
Equity-based compensation expense
(b) 13,076 3,484 24,331 3,203 28,595
Loss on impairment or disposal of
assets and certain non-cash
expenses(c) 1,291 131 4,978 1,551 10,614
Business optimization, development
and strategic initiative costs (d) 2,307 3,698 5,654 5,997 6,925
Certain investment costs and other
taxes (e) 56 433 472 1,095 421
COVID-19 related incremental costs
(f) 13,560 2,024 17,928 5,969 20,767
Other adjusting items (g) 451 438 304 (9,461 ) (3,802 )
Adjusted EBITDA (h) $ 265,279 $ (11,224 ) $ 509,284 $ (95,915 ) $ 532,013
Items added back to Covenant
Adjusted EBITDA as defined in the
Debt Agreements:
Estimated cost savings (i) 7,400
Other adjustments as defined in the
Debt Agreements (j) 15,873
Covenant Adjusted EBITDA (k) $ 555,286 (a) Reflects a loss on early extinguishment of debt and write-off of discounts
and debt issuance costs primarily associated with the Refinancing
Transactions. See Note 6-Long-Term Debt to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report
on Form 10-Q for further details.
(b) Reflects non-cash equity compensation expenses and related payroll taxes
incurred during the period. For the three and nine months ended
2021, includes equity compensation expense related to certain performance
vesting restricted awards which were previously not considered likely of
vesting. For the nine months ended
equity compensation for certain performance vesting restricted units which
were no longer considered likely of vesting. See Note 10-Equity-Based
Compensation in our notes to the unaudited condensed consolidated financial
statements included elsewhere in this Quarterly Report on Form 10-Q for
further details.
(c) Reflects primarily non-cash expenses related to miscellaneous fixed asset
disposals. For the three, nine and twelve months ended
primarily reflects asset write-offs and certain costs related to certain
rides and equipment which were removed from service.
(d) For the three and nine months ended
optimization, development and other strategic initiative costs primarily
related to: (i)
consulting costs; (ii)
in the nine months ended
eliminated and (iii)
business optimization costs and strategic initiative costs.
For the three and nine months endedSeptember 30, 2020 , reflects business optimization, development and other strategic initiative costs primarily related to: (i)$2.6 million and$2.7 million , respectively, of severance and other separation costs primarily related to the 2020 Restructuring Program and (ii)$0.5 million and$2.4 million , respectively, of third party consulting costs. 36 -------------------------------------------------------------------------------- For the twelve months endedSeptember 30, 2021 , reflects business optimization, development and other strategic initiative costs primarily related to: (i)$2.9 million of third-party consulting costs (ii)$2.5 million of other business optimization costs and strategic initiative costs and (iii)$1.8 million of severance and other separation costs.
(e) For the three and nine months ended
associated with a Registration Statement on Form S-3 filed in 2020.
(f) For the three and nine months ended
approximately
contractual liabilities and legal costs impacted by the temporary COVID-19
park closures. For the three and nine months ended
includes approximately
incremental temporary labor-related costs incurred to prepare and staff the
parks and certain incremental, nonrecurring, temporary incentives paid to
attract employees to return to or remain in the workforce during the COVID-19
related environment.
For the three and nine months endedSeptember 30, 2020 , primarily includes incremental labor-related costs to prepare and temporarily operate the parks with enhanced safety measures, nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures and initial purchases of safety monitoring and personal protective equipment. For the nine months endedSeptember 30, 2020 , also includes incremental third-party consulting costs primarily related to our COVID-19 response and safety communication strategies. For the twelve months endedSeptember 30, 2021 , includes approximately (i)$10.6 million of nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures (ii) approximately$9.3 million of incremental labor-related costs to prepare and temporarily operate the parks with enhanced safety measures and certain incremental, nonrecurring, temporary incentives paid to attract employees to return to or remain in the workforce during the COVID-19 related environment and (iii) initial purchases of safety monitoring and personal protective equipment.
(g) For the nine months ended
million of insurance proceeds related to a legal settlement gain as
previously disclosed. For the twelve months ended
includes approximately
paid for a legal settlement. See Note 9-Commitments and Contingencies in our
notes to the unaudited condensed consolidated financial statements on Form
10-Q for further details.
(h) Adjusted EBITDA is defined as net income (loss) before income tax expense,
interest expense, depreciation and amortization, as further adjusted to
exclude certain non-cash, and other items as described above.
(i) Our Debt Agreements permit the calculation of certain covenants to be based
on Covenant Adjusted EBITDA, as defined above, for the last twelve-month
period further adjusted for net annualized estimated savings we expect to
realize over the following 24 month period related to certain specified
actions, including restructurings and cost savings initiatives. These
estimated savings are calculated net of the amount of actual benefitsrealized during such period. These estimated savings are a non-GAAP Adjusted
EBITDA add-back item only as defined in the Debt Agreements and does not
impact our reported GAAP net income (loss).
(j) The Debt Agreements permit our calculation of certain covenants to be based
on Covenant Adjusted EBITDA as defined above, for the last twelve-month
period further adjusted for certain costs as permitted by the Debt Agreements
including recruiting and retention expenses, public company compliance costs
and litigation and arbitration costs.
(k) Covenant Adjusted EBITDA is defined in the Debt Agreements as Adjusted EBITDA
for the last twelve-month period further adjusted for net annualized
estimated savings among other adjustments as described in footnotes (i) and
(j) above.
37
--------------------------------------------------------------------------------
Contractual Obligations
There have been no material changes to our contractual obligations as ofSeptember 30, 2021 from those previously disclosed in our Annual Report on Form 10-K other than the debt and interest obligations pursuant to the Refinancing Transactions (see Note 6-Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details). As a result, our total long-term debt obligations as ofSeptember 30, 2021 , not including any possible prepayments, are as follows for the remainder of 2021, 2022-2023, 2024-2025, and thereafter, respectively (in thousands):$3,000 ;$24,000 ;$251,500 ; and$1,874,000 . Our estimated future interest payments based on interest rates in effect atSeptember 30, 2021 are as follows for the remainder of 2021, 2022-2023, 2024-2025, and thereafter, respectively (in thousands):$21,303 ;$205,275 ;$196,773 ; and$262,163 . Interest obligations also include letter of credit and commitment fees for the used and unused portions of our Revolving Credit Facility assuming payoff at maturity and excluding any possible principal prepayments.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, revenues and expenses, and disclosure of contingencies during the reporting period. Significant estimates and assumptions include the valuation and useful lives of long-lived tangible and intangible assets, the valuation of goodwill and other indefinite-lived intangible assets, the accounting for income taxes, the accounting for self-insurance and revenue recognition. Actual results could differ from those estimates. The critical accounting estimates associated with these policies are described in our Annual Report on Form 10-K under "Management's Discussion and Analysis of Financial Condition and Results of Operations." There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report on Form 10-K, filed onFebruary 26, 2021 .
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements as of
Recently Issued Financial Accounting Standards
Refer to Note 2-Recent Accounting Pronouncements in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.
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