☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ☒

The registrant had outstanding ~~63,886,889~~63,944,033 shares of Common Stock, par value $0.01 per share as of ~~May 4,~~November 3, 2023.

In addition to historical information, this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position and our business outlook, business trends and other information, may be forward-looking statements. Words such as “might,” “will,” “may,” “should,” “estimates,” “expects,” “continues,” “contemplates,” “anticipates,” “projects,” “plans,” “potential,” “predicts,” “intends,” “believes,” “forecasts,” “future,” “targeted,” “goal” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ materially include, among others, the risks, uncertainties and factors set forth under “Part I, Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report on Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”), and under “Part II, Item 1A., Risk Factors” in this Quarterly Report on Form 10-Q, as such risk factors may be updated from time to time in our periodic filings with the SEC, including this report, and are accessible on the SEC’s website at www.sec.gov, including the following:

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this Quarterly Report on Form 10-Q apply only as of the date of this Quarterly Report on Form 10-Q or as of the date they were made or as otherwise specified herein and, except as required by applicable law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise.

All references to “we,” “us,” “our,” “Company” or “SeaWorld” in this Quarterly Report on Form 10-Q mean SeaWorld Entertainment, Inc., its subsidiaries and affiliates.

We use our websites (www.seaworldentertainment.com and www.seaworldinvestors.com) and our corporate Twitter account (@SeaWorld) as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about SeaWorld when you enroll your e-mail address by visiting the “E-mail Alerts” section of our website at www.seaworldinvestors.com. The contents of our website and social media channels are not, however, a part of this Quarterly Report on Form 10-Q.

We own or have rights to use a number of registered and common law trademarks, service marks and trade names in connection with our business in the United States and in certain foreign jurisdictions, including SeaWorld Entertainment, SeaWorld Parks & Entertainment, SeaWorld®, Shamu®, Busch Gardens®, Aquatica®, Discovery Cove®, Sea Rescue® and other names and marks that identify our theme parks, characters, rides, attractions and other businesses. In addition, we have certain rights to use Sesame Street® marks, characters and related indicia through a license agreement with Sesame Workshop.

Solely for convenience, the trademarks, service marks, and trade names referred to hereafter in this Quarterly Report on Form 10-Q are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names. This Quarterly Report on Form 10-Q may contain additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this Quarterly Report on Form 10-Q are, to our knowledge, the property of their respective owners.


	March 31,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
Assets
Current assets:
Cash and cash equivalents	$	54,761		$	79,196		$	215,226		$	79,196
Accounts receivable, net		72,504			71,050			80,098			71,050
Inventories		59,060			55,190			54,623			55,190
Prepaid expenses and other current assets		35,492			28,260			25,888			28,260
Total current assets		221,817			233,696			375,835			233,696
Property and equipment, at cost		3,640,041			3,576,092			3,766,620			3,576,092
Accumulated depreciation		(1,899,152	)		(1,869,413	)		(1,958,429	)		(1,869,413	)
Property and equipment, net		1,740,889			1,706,679			1,808,191			1,706,679
Goodwill		66,278			66,278			66,278			66,278
Trade names/trademarks, net		157,000			157,000			157,000			157,000
Right of use assets-operating leases		129,415			130,479			127,814			130,479
Deferred tax assets, net		13,084			12,332			11,274			12,332
Other assets, net		25,397			19,323			29,150			19,323
Total assets	$	2,353,880		$	2,325,787		$	2,575,542		$	2,325,787
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses	$	164,327		$	159,947		$	146,719		$	159,947
Current maturities of long-term debt		12,000			12,000			12,000			12,000
Operating lease liabilities		3,261			3,387			3,371			3,387
Accrued salaries, wages and benefits		22,800			17,423			24,412			17,423
Deferred revenue		212,799			169,535			161,082			169,535
Other accrued liabilities		45,835			46,914			58,892			46,914
Total current liabilities		461,022			409,206			406,476			409,206
Long-term debt, net		2,097,601			2,099,059			2,094,667			2,099,059
Long-term operating lease liabilities		114,563			115,396			113,057			115,396
Deferred tax liabilities, net		88,962			96,627			157,708			96,627
Other liabilities		46,385			43,163			56,030			43,163
Total liabilities		2,808,533			2,763,451			2,827,938			2,763,451
Commitments and contingencies (Note 8)
Stockholders’ Deficit:
Preferred stock, $0.01 par value—authorized, 100,000,000 shares, no shares issued or outstanding at March 31, 2023 and December 31, 2022		—			—
Common stock, $0.01 par value—authorized, 1,000,000,000 shares; 96,496,784 and 96,287,771 shares issued at March 31, 2023 and December 31, 2022, respectively		965			963
Preferred stock, $0.01 par value—authorized, 100,000,000 shares, no shares issued or outstanding at September 30, 2023 and December 31, 2022								—			—
Common stock, $0.01 par value—authorized, 1,000,000,000 shares; 96,634,322 and 96,287,771 shares issued at September 30, 2023 and December 31, 2022, respectively								966			963
Additional paid-in capital		709,627			710,151			719,134			710,151
Retained earnings		159,436			175,903			370,046			175,903
Treasury stock, at cost (32,376,539 shares at March 31, 2023 and December 31, 2022)		(1,324,681	)		(1,324,681	)
Treasury stock, at cost (32,690,289 and 32,376,539 shares at September 30, 2023 and December 31, 2022, respectively)								(1,342,542	)		(1,324,681	)
Total stockholders’ deficit		(454,653	)		(437,664	)		(252,396	)		(437,664	)
Total liabilities and stockholders’ deficit	$	2,353,880		$	2,325,787		$	2,575,542		$	2,325,787

See accompanying notes to unaudited condensed consolidated financial statements.


							For the Three Months Ended						For the Nine Months Ended
	For the Three Months Ended March 31,						September 30,						September 30,
	2023			2022			2023			2022			2023		2022
Net revenues:
Admissions	$	163,863		$	150,862		$	299,785		$	313,574		$	733,542	$	739,941
Food, merchandise and other		129,483			119,831			248,462			251,633			604,080		600,776
Total revenues		293,346			270,693			548,247			565,207			1,337,622		1,340,717
Costs and expenses:
Cost of food, merchandise and other revenues		23,221			23,040			40,431			41,385			101,862		105,943
Operating expenses (exclusive of depreciation and amortization shown separately below)		172,674			152,925			205,808			215,899			574,210		559,320
Selling, general and administrative expenses		48,281			46,059			59,705			53,082			176,152		155,299
Severance and other separation costs		4			30			(139	)		—			521		113
Depreciation and amortization		37,394			38,612			39,171			37,216			114,396		114,379
Total costs and expenses		281,574			260,666			344,976			347,582			967,141		935,054
Operating income		11,772			10,027			203,271			217,625			370,481		405,663
Other expense (income), net		46			(12	)
Other (income) expense, net								(21	)		(66	)		20		(110	)
Interest expense		36,401			25,370			37,052			30,556			110,407		82,736
Loss before income taxes		(24,675	)		(15,331	)
Benefit from income taxes		(8,208	)		(6,344	)
Net loss	$	(16,467	)	$	(8,987	)
Loss per share:
Net loss per share, basic	$	(0.26	)	$	(0.12	)
Net loss per share, diluted	$	(0.26	)	$	(0.12	)
Income before income taxes								166,240			187,135			260,054		323,037
Provision for income taxes								42,685			52,578			65,911		80,857
Net income							$	123,555		$	134,557		$	194,143	$	242,180
Earnings per share:
Earnings per share, basic							$	1.93		$	2.00		$	3.04	$	3.39
Earnings per share, diluted							$	1.92		$	1.99		$	3.01	$	3.36
Weighted average common shares outstanding:
Basic		63,978			75,624			63,954			67,176			63,955		71,450
Diluted		63,978			75,624			64,319			67,569			64,425		72,130

See accompanying notes to unaudited condensed consolidated financial statements.

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

See accompanying notes to unaudited condensed consolidated financial statements.

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

SeaWorld Entertainment, Inc., through its wholly-owned subsidiary, SeaWorld Parks & Entertainment, Inc. (“SEA”) (collectively, the “Company”), owns and operates twelve theme parks within the United States. The Company operates SeaWorld theme parks in Orlando, Florida; San Antonio, Texas; and San Diego, California; and Busch Gardens theme parks in Tampa, Florida and Williamsburg, Virginia. The Company operates water park attractions in Orlando, Florida (Aquatica); San Antonio, Texas (Aquatica); Tampa, Florida (Adventure Island); and Williamsburg, Virginia (Water Country USA). The Company also operates a reservations-only theme park in Orlando, Florida (Discovery Cove) and Sesame Place theme parks in Langhorne, Pennsylvania and Chula Vista, California.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with ~~accounting principles~~U.S. generally accepted ~~in the United States of America~~accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2023 or any future period due in part to the seasonal nature of the Company’s operations. Based upon historical results, the Company typically generates its highest revenues in the second and third quarters of each year and incurs a net loss in the first quarter, in part because four of its theme parks were historically only open for a portion of the year. In the year ended December 31, 2022, we opened our Sesame Place San Diego park which has been, and is expected to continue to be, open more operating days than the Aquatica San Diego park it replaced, particularly in the first and fourth quarters of the year.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including SEA. All intercompany accounts have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance ~~deferred tax assets and liabilities, deferred~~reserves, income taxes, revenue ~~equity compensation, the valuation of goodwill and other indefinite-lived intangible assets~~recognition and reviews for potential impairment of long-lived assets. Estimates are based on various factors including current and historical trends, as well as other pertinent company and industry data. The Company regularly evaluates this information to determine if it is necessary to update the basis for its estimates and to adjust for known changes. Actual results could differ from those estimates.

Segment Reporting

The Company maintains discrete financial information for each of its twelve theme parks, which is used by the Chief Operating Decision Maker (“CODM”), as a basis for allocating resources and assessing performance. Each theme park has been identified as an operating segment and meets the criteria for aggregation due to similar economic characteristics. In addition, all of the Company’s theme parks provide similar products and services and share similar processes for delivering services. The theme parks have a high degree of similarity in the workforces and target similar consumer groups. Accordingly, based on these economic and operational similarities and the way the CODM monitors and makes decisions affecting the operations, the Company has concluded that its operating segments may be aggregated and that it has one reportable segment.

Restricted Cash

Restricted cash is recorded in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheets. Restricted cash as of December 31, 2022 consists primarily of advanced funds for which costs ~~have~~had yet to be incurred related to the Company’s international services agreements, as discussed in the “International Agreements” section which follows.

910

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


	March 31,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Cash and cash equivalents	$	54,761	$	79,196	$	215,226	$	79,196
Restricted cash, included in prepaid expenses and other current assets		—		3,124		—		3,124
Total cash, cash equivalents and restricted cash	$	54,761	$	82,320	$	215,226	$	82,320

Share Repurchase Programs and Treasury Stock

From time to time, the Company’s Board of Directors (the “Board”) may authorize share repurchases of common stock. Shares repurchased under Board authorizations are currently held in treasury for general corporate purposes. The Company accounts for treasury stock on the trade date under the cost method. Treasury stock at ~~March 31,~~September 30, 2023 and December 31, 2022 is reflected within stockholders’ deficit. See further discussion of the Company’s share repurchase programs in Note 10–Stockholders’ Deficit.

Revenue Recognition

Admissions revenue primarily consists of single-day tickets, annual or season passes or other multi-day or multi-park admission products. For single-day tickets, the Company recognizes revenue at a point in time, upon admission to the park. Annual passes, season passes, or other multi-day or multi-park passes allow guests access to specific parks over a specified time period. For these pass and multi-use products, revenue is deferred and recognized over the terms of the admission product based on estimated redemption rates for similar products and is adjusted periodically. The Company estimates redemption rates using historical and forecasted attendance trends by park for similar products. Attendance trends factor in seasonality and are adjusted based on actual trends periodically. These estimated redemption rates impact the timing of when revenue is recognized on these products. Actual results could materially differ from these estimates based on actual attendance patterns. Revenue is recognized on a pro-rata basis based on the estimated allocated selling price of the admission product. For pass products purchased on an installment plan that have met their initial commitment period and have transitioned to a month-to-month basis, monthly charges are recognized as revenue as payments are received each month. For certain multi-day admission products, revenue is allocated based on the number of visits included in the pass and recognized ratably based on each admission into the theme park.

Food, merchandise and other revenue primarily consists of food and beverage, retail, merchandise, parking, other in-park products and service fees, and other miscellaneous revenue, including online transaction fees and revenue from the Company’s international agreements, not necessarily generated in our parks, which is not significant in the periods presented. The Company recognizes revenue for food and beverage, merchandise and other in-park products when the related products or services are received by the guests.

Deferred revenue primarily includes revenue associated with pass products, admission or in-park products or services with a future intended use date and contract liability balances related to licensing and international agreements collected in advance of the Company satisfying its performance obligations and is expected to be recognized in future periods. At ~~March 31,~~September 30, 2023 and December 31, 2022, the long-term portion of deferred revenue included in other liabilities in the accompanying unaudited condensed consolidated balance sheets primarily relates to the Company’s international agreements, as discussed in the following section.

The following table reflects the Company’s deferred revenue balance as of ~~March 31,~~September 30, 2023 and December 31, 2022:


	March 31,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Deferred revenue, including long-term portion	$	227,605	$	183,772	$	177,025	$	183,772
Less: Deferred revenue, long-term portion, included in other liabilities		14,806		14,237		15,943		14,237
Deferred revenue, short-term portion	$	212,799	$	169,535	$	161,082	$	169,535

The Company estimates approximately $~~75.4~~164.2 million of the deferred revenue, short term portion, balance outstanding as of December 31, 2022 was recognized as revenue during the ~~three~~nine months ended ~~March 31,~~September 30, 2023. For certain admission products, the Company estimated timing of redemption using average historical redemption rates.

1011

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

International Agreements

The Company has previously received $10.0 million in deferred revenue which is recorded in other liabilities related to a nonrefundable payment received from a partner in connection with a project in the Middle East to provide certain services pertaining to the planning and design of SeaWorld Abu Dhabi, a marine life theme park on Yas Island which opened in May 2023 (the “Middle East Project”), with funding received expected to offset internal expenses. The ~~Middle East Project is on track with the park scheduled to open in May 2023. The~~ Company also ~~receives~~received additional funds, some of which were advanced, from its partner related to agreed-upon services and reimbursements of costs incurred by the Company on behalf of the Middle East Project (the “Middle East Services Agreements”).

Revenue and expenses associated with the Middle East Project ~~will begin~~began to be recognized when substantially all the services ~~have been performed~~were complete which ~~is anticipated to occur in 2023,~~occurred when SeaWorld Abu Dhabi ~~is expected to open.~~opened. Revenue and expenses associated with the Middle East Services Agreements will be recognized upon completion of the respective performance obligations.

As a result of the Middle East Project, approximately $0.6 million and $0.5 million of costs incurred by the Company are recorded in prepaid expenses and other current assets as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, and approximately $~~11.7~~12.1 million and $11.2 million of other related costs incurred are recorded in other assets in the accompanying unaudited condensed consolidated balance sheets as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. Separately, deferred revenue of approximately $~~0.7~~0.8 million and $0.6 million is recorded in deferred revenue as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, and approximately $~~14.5~~14.4 million and $14.2 million of long-term deferred revenue is recorded in other liabilities in the accompanying unaudited condensed consolidated balance sheets as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, related to the Middle East Project, which includes the $10.0 million nonrefundable payment previously discussed for each period.

As a result of the Middle East Services Agreements, approximately $2.0 million of costs incurred by the Company are recorded in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheets as of December 31, 2022. Separately, deferred revenue of approximately $~~0.9~~ ~~million and~~ $5.1 million is recorded in deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of ~~March 31, 2023 and~~ December 31, ~~2022, respectively.~~2022.

3. ~~LOSS~~EARNINGS PER SHARE

~~Loss~~Earnings per share is computed as follows:

For the Three Months Ended March 31,

2023

2022

Net Loss

Shares

Per
Share
Amount

Net Loss

Shares

Per
Share
Amount

(In thousands, except per share amounts)

Basic loss per share

$
(16,467
)

63,978

$
(0.26
)

$
(8,987
)

75,624

$
(0.12
)

Effect of dilutive incentive-based awards

—

—

Diluted loss per share

$
(16,467
)

63,978

$
(0.26
)

$
(8,987
)

75,624

$
(0.12
)


	For the Three Months Ended September 30,
	2023						2022
	Net Income		Shares		Per Share Amount		Net Income		Shares		Per Share Amount
	(In thousands, except per share amounts)
Basic earnings per share	$	123,555		63,954	$	1.93	$	134,557		67,176	$	2.00
Effect of dilutive incentive-based awards				365						393
Diluted earnings per share	$	123,555		64,319	$	1.92	$	134,557		67,569	$	1.99


	For the Nine Months Ended September 30,
	2023						2022
	Net Income		Shares		Per Share Amount		Net Income		Shares		Per Share Amount
	(In thousands, except per share amounts)
Basic earnings per share	$	194,143		63,955	$	3.04	$	242,180		71,450	$	3.39
Effect of dilutive incentive-based awards				470						680
Diluted earnings per share	$	194,143		64,425	$	3.01	$	242,180		72,130	$	3.36

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Earnings Per Share Topic of the Accounting Standards Codification (“ASC"), basic ~~loss~~earnings per share is computed by dividing net ~~loss~~income by the weighted average number of shares of common stock outstanding during the period (excluding treasury stock and unvested restricted stock awards). Unvested restricted stock awards are eligible to receive dividends, if any; however, dividend rights will be forfeited if the award does not vest. Accordingly, only vested shares of formerly restricted stock are included in the calculation of basic ~~loss~~earnings per share. The weighted average number of repurchased shares during the period, if any, which are held as treasury stock, are excluded from shares of common stock outstanding.

Diluted ~~loss~~earnings per share is determined using the treasury stock method based on the dilutive effect of ~~certain~~ unvested restricted stock awards and certain shares of common stock that are issuable upon exercise of stock options. ~~There~~During the three and nine months ended September 30, 2023, there were approximately ~~1,225,000~~491,000 and ~~1,555,000~~424,000 ~~potentially dilutive~~anti-dilutive shares excluded from the computation of diluted ~~loss~~earnings per share, ~~during~~respectively. During the three and nine months ended ~~March 31, 2023 and~~September 30, 2022, ~~respectively, as their effect would have been anti-dilutive due to the Company’s net loss in those periods. Approximately~~there were approximately ~~610,000~~328,000 and ~~1,057,000~~246,000 anti-dilutive shares excluded from the computation of ~~the~~diluted earnings per share, respectively. The Company’s outstanding performance-vesting restricted ~~stock~~ awards of approximately 912,000 and 1,015,000 as of ~~March 31,~~September 30, 2023 and 2022, respectively, are considered contingently issuable shares and are excluded from the calculation of diluted ~~loss~~earnings per share until the performance measure criteria is met as of the end of the reporting period.

5. OTHER ACCRUED LIABILITIES

Other accrued liabilities at ~~March 31,~~September 30, 2023 and December 31, 2022, consisted of the following:


	March 31,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Accrued interest	$	13,347	$	18,483	$	13,663	$	18,483
Accrued taxes		7,134		3,284		12,893		3,284
Self-insurance reserve		8,623		8,608		10,537		8,608
Other		16,731		16,539		21,799		16,539
Total other accrued liabilities	$	45,835	$	46,914	$	58,892	$	46,914

As of ~~March 31,~~September 30, 2023 and December 31, 2022, other accrued liabilities above includes approximately $15.1 million and $10.9 million, respectively, related to certain legal matters, contractual liabilities and respective assessments arising from the previously disclosed temporary COVID-19 park closures.

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of ~~March 31,~~September 30, 2023 and December 31, 2022, accrued interest above primarily relates to interest associated with the Company’s first-priority senior secured notes issued in April 2020, for which interest is paid bi-annually in November and May and the senior notes issued in August 2021, for which interest is paid bi-annually in February and August. See further discussion in Note 6–Long-Term Debt.

6. LONG-TERM DEBT

Long-term debt, net, as of ~~March 31,~~September 30, 2023 and December 31, 2022 consisted of the following:


	March 31,			December 31,			September 30,			December 31,
	2023			2022			2023			2022
	(In thousands)						(In thousands)
Term B Loans (effective interest rate of 7.88% and 7.44% at March 31, 2023 and December 31, 2022 respectively)	$	1,182,000		$	1,185,000
Term B Loans (effective interest rate of 8.43% and 7.44% at September 30, 2023 and December 31, 2022, respectively)							$	1,176,000		$	1,185,000
Senior Notes due 2029 (interest rate of 5.25%)		725,000			725,000			725,000			725,000
First-Priority Senior Secured Notes due 2025 (interest rate of 8.75%)		227,500			227,500			227,500			227,500
Total long-term debt		2,134,500			2,137,500			2,128,500			2,137,500
Less: unamortized discounts and debt issuance costs		(24,899	)		(26,441	)		(21,833	)		(26,441	)
Less: current maturities		(12,000	)		(12,000	)		(12,000	)		(12,000	)
Total long-term debt, net	$	2,097,601		$	2,099,059		$	2,094,667		$	2,099,059

On August 25, 2021, SEA entered into a Restatement Agreement (the “Restatement Agreement”) pursuant to which SEA amended and restated its existing senior secured credit agreement dated as of December 1, 2009 (as amended, restated, supplemented or otherwise modified from time to time, and the senior secured credit facilities thereunder (the “Existing Secured Credit Facilities”), and, as amended and restated by the Restatement Agreement (the “Amended and Restated Credit Agreement”).

On June 12, 2023, the Company amended the Amended and Restated Credit Agreement to replace the LIBOR-based benchmark rates with Term SOFR-based benchmark rates plus credit spread adjustments of 0.11448%, 0.26161% and 0.42826% for interest periods of one, three and six months, respectively, due to reference rate reform (“Adjusted Term SOFR”). The Term SOFR-based benchmark rate became effective as of July 1, 2023. There were no changes to any material terms of the Amended and Restated Credit Agreement that were unrelated to the replacement of the LIBOR-based benchmark rates.

The Amended and Restated Credit Agreement provides for senior secured financing of up to $1,585.0 million, consisting of:

(i)

a first lien term loan facility (the “Term Loan Facility” and the loans thereunder, the “Term B Loans”), in an aggregate principal amount of $1,200.0 million which was fully drawn on August 25, 2021. The Term Loan Facility will mature on August 25, 2028; and

(ii)

a first lien revolving credit facility (the “Revolving Credit Facility” (and the loans thereunder, the “Revolving Loans”) and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”), in an aggregate committed principal amount of $385.0 million, including both a letter of credit sub-facility and a swingline loan sub-facility. The Revolving Credit Facility will mature on August 25, 2026. On June 9, 2022, SEA entered into an incremental amendment to the Amended and Restated Credit Agreement to increase the revolving facility commitments under the Revolving Credit Facility by $5.0 million bringing the aggregate committed principal amount to $390.0 million as of such date.

On August 1, 2023, the Company launched an opportunistic repricing amendment for the Term Loan Facility under that certain Amended and Restated Credit Agreement, dated as of August 25, 2021 (and as amended on June 9, 2022 and June 12, 2023), among the Company, SEA, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, to, among other things, reprice the existing Term Loan Facility thereunder. The Company subsequently canceled the opportunistic repricing due to unfavorable market conditions unrelated to the Company.

Senior Secured Credit Facilities

Borrowings under the Term B Loans bear interest at a fluctuating rate per annum equal to, at the Company’s option, (i) a base rate equal to the higher of (a) the federal funds rate plus 1/2 of 1%, (b) the rate of interest quoted in the print edition of the Wall Street Journal Money Rates Section as the prime rate as in effect from time to time and (c) one-month Adjusted ~~LIBOR~~Term SOFR plus 1% per annum (provided that in no event shall such ABR rate with respect to the Term B Loans be less than 1.50% per annum) (“ABR”), in each case, plus an applicable margin of 2.00% or (ii) ~~a LIBOR~~an Adjusted Term SOFR rate for the applicable interest period (provided that in no event shall such ~~LIBOR~~Adjusted Term SOFR rate with respect to the Term B Loans be less than 0.50% per annum) (“~~LIBOR~~”) plus an applicable margin of 3.00%.

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Borrowings under the Revolving Loans bear interest at a fluctuating rate per annum equal to, at the Company’s option, (i) ABR (provided that in no event shall such ABR rate with respect to the Revolving Loans be less than 1.00% per annum) plus an applicable margin equal to 1.75% or (ii) ~~LIBOR~~Adjusted Term SOFR (provided that in no event shall such ~~LIBOR~~Adjusted Term SOFR rate with respect to the Revolving Loans be less than 0.00%) plus an applicable margin of 2.75%. The applicable margin for borrowings of Revolving Loans are subject to one 25 basis point step-down upon achievement by the Company of certain corporate credit ratings.

In addition to paying interest on the outstanding principal under the Senior Secured Credit Facilities, the Company is required to pay a commitment fee equal to 0.50% per annum to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The Company will also be required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for ~~LIBOR~~Adjusted Term SOFR rate borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee computed at a rate equal to 0.125% per annum on the daily stated amount of each letter of credit.

The Senior Secured Credit Facilities require scheduled amortization payments on the term loans in quarterly amounts equal to 0.25% of the original principal amount of the Term B Loans, payable quarterly, with the balance to be paid at maturity.

~~SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

In addition, the Senior Secured Credit Facilities require the Company to prepay outstanding term loan borrowings, subject to certain exceptions, with:

50% (which percentage will be reduced to 25% and 0% if the Company satisfies certain net first lien ~~senior secured~~ leverage ratios) of annual excess cash flow, as defined under the Senior Secured Credit Facilities;

100% (which percentage will be reduced to 50% and 0% if the Company satisfies certain net first lien leverage ratios) of the net cash proceeds of all non-ordinary course asset sales or other non-ordinary course dispositions of property, in each case subject to certain exceptions and reinvestment rights;

100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the Senior Secured Credit Facilities.

The Company may voluntarily repay outstanding loans under the Senior Secured Credit Facilities at any time, without prepayment premium or penalty, ~~except in connection with a repricing event in respect of the term loans as described below,~~ subject to customary “breakage” costs with respect to ~~LIBOR~~Adjusted Term SOFR rate loans.

All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default or event of default and the accuracy of representations and warranties in all material respects.

All obligations under the Senior Secured Credit Facilities are unconditionally guaranteed by the Company on a limited-recourse basis and each of SEA’s existing and future direct and indirect wholly owned material domestic subsidiaries, subject to certain exceptions. The obligations are secured by a pledge of SEA’s capital stock directly held by the Company and substantially all of SEA’s assets and those of each guarantor (other than the Company), including a pledge of the capital stock of all entities directly held by SEA or the guarantors, in each case subject to exceptions. Such security interests consist of a first-priority lien with respect to the collateral.

As of ~~March 31,~~September 30, 2023, SEA had approximately $18.4 million of outstanding letters of credit, leaving approximately $371.6 million available under the Revolving Credit Facility, which was not drawn upon as of ~~March 31,~~September 30, 2023.

Senior Notes

On August 25, 2021, SEA completed a private offering of $725.0 million aggregate principal amount of 5.250% senior notes which mature on August 15, 2029 (the “Senior Notes”). Interest on the Senior Notes accrues at 5.250% per annum and is paid semi-annually, in arrears on February 15 and August 15 of each year.

On or after August 15, 2024, SEA may redeem the Senior Notes, in whole at any time or in part from time to time, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the 12-month period commencing on August 15 of the years as follows: (i) in 2024 at 102.625%; (ii) in 2025 at 101.313%; and (iii) in 2026 and thereafter at 100%. In addition, prior to August 15, 2024, SEA may redeem the Senior Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus the “Applicable Premium” and accrued and unpaid interest, if any, to, but excluding, the redemption date. Notwithstanding the foregoing, subject to the provisions set forth in the Indenture, at any time and from time to time on or prior to August 15, 2024, SEA may redeem in the aggregate up to 40% of the original aggregate principal amount of the Senior Notes (calculated after giving effect to any issuance of additional Senior Notes) in an aggregate amount equal to the net cash proceeds of one or more equity offerings at a redemption price equal to 105.250%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Additionally, upon the occurrence of specified change of control events, each holder will have the right to require SEA to repurchase all or any part of such holder’s notes at a purchase price in cash equal to 101%.

SEA’s obligations under the Senior Notes and related indenture are guaranteed, jointly and severally, on a senior secured basis, by the Guarantors, as defined, in accordance with the provisions of the indenture.

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

First-Priority Senior Secured Notes

The 8.750% first-priority senior secured notes (the “First-Priority Senior Secured Notes”) mature on May 1, 2025 and have interest payment dates of May 1 and November 1. SEA may redeem the First-Priority Senior Secured Notes at its option, in whole at any time or in part from time to time, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the 12-month period commencing on May 1 of the years as follows: (i) in 2022 at 104.375%; (ii) in 2023 at 102.188%; and (iii) in 2024 and thereafter at 100%. SEA may also redeem in the aggregate (at a redemption price expressed as a percentage of principal amount thereof): (i) 100% of the First-Priority Senior Secured Notes after certain events constituting a change of control at a redemption price of 101%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date and (ii) up to 40% of the original aggregate principal amount of the First-Priority Senior Secured Notes with amounts equal to the net cash proceeds of certain equity offerings at a redemption price of 108.750%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The First-Priority Senior Secured Notes are fully and unconditionally guaranteed by the Company, any subsidiary of the Company that directly or indirectly owns 100% of the issued and outstanding equity interests of SEA, and subject to certain exceptions, each of SEA’s subsidiaries that guarantees SEA’s existing senior secured credit facilities.

14On August 1, 2023, SEA issued a conditional notice of redemption (the “Redemption Notice”) for all of the $

~~SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES~~227.5

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

million aggregate principal amount of the First-Priority Senior Secured Notes. Due to unfavorable market conditions unrelated to SEA, the Redemption Notice was subsequently withdrawn.

Restrictive Covenants

The Amended and Restated Credit Agreement governing the Senior Secured Credit Facilities and the indentures governing the Senior Notes and First-Priority Senior Secured Notes (collectively, the “Debt Agreements”), contain covenants that limit the ability of the Company, SEA and its restricted subsidiaries to, among other things: (i) incur additional indebtedness or issue certain preferred shares; (ii) make dividend payments on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting their restricted subsidiaries; (vi) create liens on assets; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; and (viii) enter into certain transactions with their affiliates. These covenants are subject to a number of important limitations and exceptions and are based, in part on the Company’s ability to satisfy certain tests and engage in certain transactions based on Covenant Adjusted EBITDA. Covenant Adjusted EBITDA differs from Adjusted EBITDA due to certain adjustments permitted under the relevant agreements, including but not limited to estimated cost savings, recruiting and retention costs, public company compliance costs, litigation and arbitration costs and other costs and adjustments as permitted under the Debt Agreements.

The Debt Agreements contain certain customary events of default, including relating to a change of control. If an event of default occurs, the lenders under the Debt Agreements will be entitled to take various actions, including the acceleration of amounts due under the Debt Agreements and all actions permitted to be taken by a secured creditor in respect of the collateral securing the Debt Agreements.

The Revolving Credit Facility requires that the Company, subject to a testing threshold, comply on a quarterly basis with a maximum net first lien ~~senior secured~~ leverage ratio of 6.25 to 1.00. The testing threshold will be satisfied (and therefore the covenant must be complied with at the end of such quarter) if the aggregate amount of funded loans and issued letters of credit (excluding up to $30.0 million of undrawn letters of credit under the Revolving Credit Facility and letters of credit that are cash collateralized) under the Revolving Credit Facility on such date exceeds an amount equal to 35% of the then-outstanding commitments under the Revolving Credit Facility.

The Debt Agreements permit an unlimited capacity for restricted payments if the net total leverage ratio on a pro forma basis does not exceed 4.25 to 1.00 after giving effect to the payment of any such restricted payment. As of ~~March 31,~~September 30, 2023, the net total leverage ratio as calculated under the Debt Agreements was ~~2.71~~2.56 to 1.00.

~~As of March 31, 2023, SEA was in compliance with all covenants contained in the documents governing the Debt Agreements.~~

Long-term debt at ~~March 31,~~September 30, 2023 is repayable as follows and does not include the impact of any future voluntary prepayments:

Years Ending December 31,

(In thousands)

Remainder of 2023

$
9,000

2024

12,000

2025

239,500

2026

12,000

2027

12,000

Thereafter

1,850,000

Total

$
2,134,500


Years Ending December 31:	(In thousands)
Remainder of 2023	$	3,000
2024		12,000
2025		239,500
2026		12,000
2027		12,000
Thereafter		1,850,000
Total	$	2,128,500

~~Cash paid for interest relating to the Senior Secured Credit Facilities and the Senior Notes, net of amounts capitalized, as applicable, was $40.0~~ ~~million and $27.6~~ ~~million in the three months ended March 31, 2023 and 2022, respectively.~~

Cash paid for interest relating to the Senior Secured Credit Facilities, the Senior Notes, and the First-Priority Senior Secured Notes, net of amounts capitalized, as applicable, was $113.7 million and $82.4 million in the nine months ended September 30, 2023 and 2022, respectively.

7. FAIR VALUE MEASUREMENTS

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement is required to be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Of the Company’s long-term obligations as of ~~March 31,~~September 30, 2023 and December 31, 2022, the Term B Loans are classified in Level 2 of the fair value hierarchy and the First-Priority Senior Secured Notes and the Senior Notes are classified in Level 1 of the fair value hierarchy. The fair value of the Term B Loans approximates their carrying value, excluding unamortized debt issuance costs and discounts, due to the variable nature of the underlying interest rates and the frequent intervals at which such interest rates are reset. The fair value of the First-Priority Senior Secured Notes and Senior Notes was determined using quoted prices in active markets for identical instruments. See Note 6–Long-Term Debt for further details.

The Company did not have any assets measured on a recurring basis at fair value at ~~March 31,~~September 30, 2023 and December 31, 2022. The Company maintains its long-term liabilities at carrying value, net of unamortized debt issuance costs and discounts in the unaudited condensed consolidated balance sheet.

The following table presents the Company’s estimated fair value measurements and related classifications for liabilities measured on a recurring basis as of ~~March 31,~~September 30, 2023.

Quoted Prices in

Active Markets

Significant

for Identical

Other

Significant

Assets and

Observable

Unobservable

Balance at

Liabilities

Inputs

Inputs

March 31,

(Level 1)

(Level 2)

(Level 3)

2023

Liabilities:
(In thousands)

Long-term obligations (a)
$
866,425

$
1,182,000

$
—

$
2,048,425

Quoted Prices in

Active Markets

Significant

for Identical

Other

Significant

Assets and

Observable

Unobservable

Balance at

Liabilities

Inputs

September 30,

(Level 1)

(Level 2)

(Level 3)

2023

(In thousands)

Long-term obligations (a)

867,184

1,176,000

—

2,043,184

(a) Reflected at carrying value, net of unamortized debt issuance costs and discounts, in the unaudited condensed consolidated balance sheet as current maturities of long-term debt of $12.0 million and long-term debt, net, of $~~2.098~~2.095 billion as of ~~March 31,~~September 30, 2023.

The following table presents the Company’s estimated fair value measurements and related classifications for liabilities measured on a recurring basis as of December 31, 2022:

Quoted Prices in

Active Markets

Significant

for Identical

Other

Significant

Assets and

Observable

Unobservable

Balance at

Liabilities

Inputs

Inputs

December 31,

(Level 1)

(Level 2)

(Level 3)

2022

Liabilities:
(In thousands)

Long-term obligations (a)
$
873,675

$
1,185,000

$
—

$
2,058,675

Quoted Prices in

Active Markets

Significant

for Identical

Other

Significant

Assets and

Observable

Unobservable

Balance at

Liabilities

Inputs

December 31,

(Level 1)

(Level 2)

(Level 3)

2022

(In thousands)

Long-term obligations (a)

873,675

1,185,000

—

2,058,675

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Sesame Workshop Arbitration

On February 4, 2022, Sesame Workshop delivered notice asserting that the Company failed to pay an additional royalty payment for 2021 under its licensing agreement with the Company (the “Licensing Agreement”). The Company had previously ~~recorded~~accrued for the additional amount claimed ~~but disputes~~in other accrued liabilities in the ~~application and~~accompanying unaudited condensed consolidated balance sheet as of December 31, 2022. On June 27, 2022, pursuant to the License Agreement, Sesame Workshop initiated arbitration seeking a finding that its calculation of the ~~additional payment.~~amount of the 2021 royalty payment was correct. Sesame Workshop did not seek any modification or termination of the Licensing Agreement in the arbitration. The ~~amount~~arbitration panel made an award on May 22, 2023 to Sesame Workshop for royalties, interest on the award, arbitration fees and expenses, which amounts are accrued for in other accrued liabilities in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2023, however, the Company is challenging the ~~Company’s best estimate~~decision of the arbitration panel. On August 7, 2023, Sesame Workshop filed a Petition to Confirm Arbitration Award, and atin response, the Company filed a Cross Motion to Vacate. At this time, the Company does not anticipate any exposure to loss in excess of amounts accrued to be material. On June 27, 2022, Sesame Workshop initiated arbitration pursuant to the License Agreement. Oral arguments for the parties’ positions were held before the arbitration panel during the week of March 6, 2023, and the parties are currently awaiting a decision from the panel. The Company intends to vigorously defend its position.

Other Lawsuits

In October 2018, the Company received a demand letter from attorneys representing certain former employees who claim that the terms of their respective separation agreements entitle them to certain favorable modifications made to certain performance-vesting restricted shares (the “Tranche 3 Shares”) issued under the Company’s 2013 Omnibus Incentive Plan (the “Plan”).

In November 2020, the Company filed in the Court of Chancery of the State of Delaware an action for declaratory judgment seeking a determination that the threatened claims of the former employees are time-barred and without merit. In response, the defendant former employees filed a motion to dismiss or in the alternative to stay and compel arbitration. ~~The parties~~After an arbitration process agreed to ~~arbitrate whether~~by the ~~former employees’~~parties determined that the claims ~~are~~were not subject to arbitration. On October 21, 2021, the arbitrator determined that disputes related to the former employees’ claims for the vesting of the Tranche 3 Shares are governed by the forum selection clauses of the equity award amendments rather than the Company’s dispute resolution process and notice of the arbitrator’s decision was filed with the Court of Chancery. On August 10, 2022, the defendant former employees filed answers, affirmative defenses and counterclaims. On October 10, 2022, the Company filed motions for judgment on the pleadings and to dismiss the counterclaims. The defendant former employees opposed the motions ~~on November 17, 2022,~~ and ~~the Company filed its reply brief on December 22, 2022. Oral~~oral arguments for the parties’ motions and counterclaims were held before the Court of Chancery, on March 29, 2023. On May 26, 2023, the Court of Chancery granted the Company’s motion for judgment on the pleadings and dismissed with prejudice the defendant former employees’ counterclaims. The defendant former employees filed a notice of appeal on June 21, 2023. In terms of potential exposure, the value of the total shares at issue for these certain former employees depends largely upon the Company’s current share price, which fluctuates daily. Approximately 300,000 shares are at issue. The Company believes that the former employees’ claims are without merit and intends to defend vigorously its positions. While there can be no assurance regarding the ultimate outcome of this matter, the Company believes that any potential loss would not be material.

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On July 27, 2022, a purported class action was filed in the United States District Court for the Eastern District of Pennsylvania against the Company captioned Quinton Burns individually and Next Friend of K.B., a minor v. SeaWorld Parks & Entertainment, Inc. and SeaWorld Parks & Entertainment LLC, Civil Case No. 2:22-cv-09941. The complaint states the putative class consists of Quinton Burns and K.B. Burns and similarly situated Black people. Plaintiffs then filed an amended complaint adding an additional seven adult and seven minor class representative plaintiffs in which they allege the class consists of themselves and similarly situated minority persons and also disclosed an additional 89 families and 125 children represented by Plaintiffs’ counsel who are allegedly members of the purported class (the "First Amended Complaint"). The First Amended Complaint alleges the Company engaged in disparate treatment of ~~Class~~class members based on their race and in so doing violated the Civil Rights Act of 1866 and Pennsylvania common law. The First Amended Complaint seeks compensatory and punitive damages and attorneys’ fees and costs as well declarative and injunctive relief. The ~~parties are engaged in discovery. The~~ Company ~~has~~ filed a motion to dismiss all ~~counts. The Company has also filed~~counts and a motion to strike certification of the class. The Court granted the motion to dismiss with prejudice as to the negligent training and hiring claims, without prejudice as to the negligent supervising claim, and denied the motion as to the 42 USC 1981 and negligence per se claims. Regarding the motion to strike class certification, the Court denied the motion on the grounds it is premature. The Company intends to refile the motion to strike class certification if and when the Plaintiffs file a motion to certify the class. The Company believes that the lawsuit is without merit and intends to defend ~~the lawsuit~~it vigorously. While there can be no assurance regarding the ultimate outcome of the litigation, the Company believes a potential loss, if any, would not be material.

~~SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Other Matters

The Company is a party to various other claims and legal proceedings arising in the normal course of business. In addition, from time to time the Company is subject to audits, inspections and investigations by, or receives requests for information from, various federal and state regulatory agencies, including, but not limited to, the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (“APHIS”), the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”), the California Occupational Safety and Health Administration (“Cal-OSHA”), the Florida Fish & Wildlife Commission (“FWC”), the Equal Employment Opportunity Commission (“EEOC”), the Internal Revenue Service (“IRS”) the U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”).

~~Other than those~~In addition to the matters discussed above, from time to time, various parties also bring other lawsuits against the Company. Matters where an unfavorable outcome to the Company is probable and which can be reasonably estimated are accrued. Such accruals, which are not material for any period presented, are based on information known about the matters, the Company’s estimate of the outcomes of such matters, and the Company’s experience in contesting, litigating and settling similar matters. Matters that are considered reasonably possible to result in a material loss are not accrued for, but an estimate of the possible loss or range of loss is disclosed, if such amount or range can be determined. At this time, management does not expect any such known claims, legal proceedings or regulatory matters to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

License Commitments

Pursuant to the License Agreement with Sesame Workshop, the Company pays a specified annual license fee, as well as a specified royalty based on revenues earned in connection with sales of licensed products, all food and beverage items utilizing the licensed elements and any events utilizing such elements if a separate fee is paid for such event. The Company’s principal commitments pursuant to the License Agreement include, among other items, the opening of a second standalone park (“Standalone Park”) (the Company opened the Standalone Park in San Diego on March 26, 2022) and minimum annual capital and marketing thresholds. After the opening of the second Standalone Park (counting the existing Sesame Place Standalone Park in Langhorne, Pennsylvania), SEA has the option to build additional Standalone Parks in the Sesame Territory within agreed upon timelines. The License Agreement has an initial term through December 31, 2031, with an automatic additional 15-year extension plus a five-year option added to the term of the License Agreement from December 31st of the year of each new Standalone Park opening. As of ~~March 31,~~September 30, 2023, the Company estimates the combined remaining liabilities and obligations for the License Agreement commitments could be up to approximately $25.0 million over the remaining term of the agreement. See further discussion concerning royalty payments for the year 2021 in the "Sesame Workshop Arbitration" section above.

Anheuser-Busch, Incorporated ("ABI") has granted the Company a perpetual, exclusive, worldwide, royalty-free license to use the Busch Gardens trademark and certain related domain names in connection with the operation, marketing, promotion and advertising of certain of the Company’s theme parks, as well as in connection with the production, use, distribution and sale of merchandise sold in connection with such theme parks. Under the license, the Company is required to indemnify ABI against losses related to the use of the marks.

9. EQUITY-BASED COMPENSATION

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services rendered in exchange for share-based compensation based upon the grant date fair market value. The cost is recognized over the requisite service period, which is generally the vesting period unless service or performance conditions require otherwise. The Company recognizes the impact of forfeitures as they occur.

Equity compensation expense is included in operating expenses and in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations as follows:

For the Three Months Ended March 31,

2023

2022

(In thousands)

Equity compensation expense included in operating expenses

$
534

$
1,965

Equity compensation expense included in selling, general and administrative expenses

3,948

5,017

Total equity compensation expense

$
4,482

$
6,982

~~SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
	(In thousands)
Equity compensation expense included in operating expenses	$	671	$	961	$	1,215	$	3,615
Equity compensation expense included in selling, general and administrative expenses		3,931		3,483		11,594		10,360
Total equity compensation expense	$	4,602	$	4,444	$	12,809	$	13,975

Omnibus Incentive Plan

The Company has reserved 15.0 million shares of common stock for issuance under its Omnibus Incentive Plan (the “Omnibus Incentive Plan”), of which approximately ~~7.3~~6.9 million shares are available for future issuance as of ~~March 31,~~September 30, 2023.

Bonus Performance Restricted Units

During the nine months ended September 30, 2023, the Company granted approximately 140,000 performance-vesting restricted units (the “Bonus Performance Restricted Units”) in accordance with its annual bonus plan for 2023 (the “2023 Bonus Plan”). The 2023 Bonus Plan provides for bonus awards payable 50% in cash and 50% in performance-vesting restricted units (the “Bonus Performance Restricted Units”) and is based upon the Company’s achievement of specified performance goals, as defined by the 2023 Bonus Plan, with respect to the year ended December 31, 2023 (“Fiscal 2023”). The total number of units eligible to vest into shares of stock is based on the level of achievement of the targets for Fiscal 2023 which ranges from 0% (if below threshold performance), to 100% (if at target performance) with opportunities to earn above 100% when achievement is above the target performance for certain metrics.

The Company had an annual bonus plan for the fiscal year ended December 31, 2022 (“Fiscal 2022”), under which certain employees were eligible to vest in Bonus Performance Restricted Units based upon the Company’s achievement of certain performance goals with respect to Fiscal 2022. Based on the Company’s actual Fiscal 2022 results, a portion of these Bonus Performance Restricted Units vested and were converted into approximately 20,000 shares in the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and the remaining unvested units forfeited in accordance with their terms.

Long-term Incentive Performance Restricted Awards

~~Subsequent to March 31,~~During the nine months ended September 30, 2023, the Company ~~approved~~granted long-term incentive plan awards for 2023 (the “2023 Long-Term Incentive Grant”) which ~~will be granted later in the second quarter and will be~~were comprised of approximately 65,000 nonqualified stock options (the “Long-Term Incentive Options”) and approximately 260,000 performance-vesting restricted units (the “Long-Term Incentive Performance Restricted Units”) (collectively, the “Long-Term Incentive Awards”).

Long-Term Incentive Options

The Long-Term Incentive Options ~~will~~ vest over three years, with one-third vesting on each anniversary of the date of grant, subject to continued employment through the applicable vesting date. Equity compensation expense for these options ~~will be~~is recognized for each tranche over the vesting period using the straight-line method. Upon stock option exercises, authorized but unissued shares will be issued by the Company.

SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Incentive Performance Restricted Units

The Long-Term Incentive Performance Restricted Units are eligible to vest during the three-year performance period beginning on January 1, 2023 and ending on December 31, 2025 (or, extended through December 31, 2026, as applicable) (the “Performance Period”) based upon the Company’s achievement of specified performance goals during the Performance Period. The total number of Long-Term Incentive Performance Restricted Units eligible to vest will be based on the level of achievement of the performance goals and ranges from 0% (if below threshold performance) up to 150% (for maximum performance). Upon achievement of at least the threshold performance goals, 50% of the award for a given level of performance will vest, with the remaining 50% subject to a one-year performance test period. Performance for the test period must meet or exceed the prior year’s performance before up to the remaining 50% of the units can be earned.

~~SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Other

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, a portion of the previously granted long-term incentive performance restricted units under the 2019 Long-Term Incentive Plan vested based on the Company’s actual Fiscal 2022 results. The remainder of the 2019 Long-Term Incentive Plan awards are eligible to vest in 2024.

The Company recognizes equity compensation expense for its performance-vesting restricted awards ratably over the related performance period, if the performance condition is probable of being achieved. If the probability of vesting changes for performance-vesting restricted awards in a subsequent period, all equity compensation expense related to those awards that would have been recorded, if any, over the requisite service period had the new percentage been applied from inception, will be recorded as a cumulative catch-up or reduction at such subsequent date.

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

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 the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q.

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 ended December 31, 2022.

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, including SeaWorld, Busch Gardens, Aquatica, Discovery Cove and Sesame 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 across the 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.

Our Board has formed a number of committees and held certain meetings and operational review sessions designed to provide further assistance from Board members with expertise in certain areas by providing enhanced oversight over the operations of the Company. 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 and decisions.

~~The current condition of the overall labor market, including wage inflationary pressures and the challenging current operating environment has led~~We are seeing a return to ~~increased turnover throughout the company and challenges in meeting our~~more normalized staffing ~~goals in certain parts of our operations. These staffing challenges have also led to~~levels, but wage pressures and ~~less than optimal staffing levels,~~labor availability challenges remain for some positions which ~~have impacted~~could impact operations and could continue to impact our ability to open some of our food and beverage and retail outlets, caused us to temporarily close some rides or attractions, and/or caused longer wait times in certain areas of our parks, which has and could continue to impact the guest experience. ~~To address these items, we continue~~We remain committed to our efforts to recruit and retain strong talent ~~optimize staffing levels and focus on park operations from the guest perspective, among other initiatives.~~as a key to our success. We have also been impacted by ~~significant inflationary pressures (particularly relating to the costs for labor, goods, freight, services~~higher interest rates and ~~capital projects),~~ supply chain disruptions (which has, at times, impacted ride and/or in-park facility availability) ~~and higher interest rates.~~. We have heightened our focus on cost reduction and efficiency opportunities, including optimized labor deployment, as well as incremental pricing and revenue ~~opportunities to help offset cost pressures.~~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.

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. Revenue from these admissions products are generally recognized based on attendance. Certain pass products are purchased through monthly installment arrangements which allow guests to pay over the product’s initial commitment period. Once the initial commitment period is reached, some of these products transition to a month-to-month basis providing these guests access to specific parks on a monthly basis with related revenue recognized monthly, while others can renew for a full commitment period.

Total revenue per capita, defined as total revenue divided by total attendance, consists of admission per capita and in-park per capita spending:

Total revenue per capita, admissions per capita and in-park per capita spending are key performance metrics that we use to assess the operating performance of our parks on a per attendee basis and to make strategic operating decisions. We believe the presentation of these performance metrics is useful and relevant for investors as it provides investors the ability to review operating performance in the same manner as our management and provides investors with a consistent methodology to analyze revenue between periods on a per attendee basis. In addition, investors, lenders, financial analysts and rating agencies have historically used similar per-capita related performance metrics to evaluate companies in the industry.

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 the SEC.

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.

Historically, the principal costs of our operations are employee wages and benefits, driven partly by staffing levels, advertising, maintenance, animal care, utilities, property taxes 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, park operating hours, new parks and/or incremental operating days, new and/or enhanced events, attendance levels, supply chain issues, and inflationary pressures, among other factors. The mix of products sold compared to the prior year period can also impact our costs as retail products generally have a higher cost of sales component than our food and beverage or other in-park offerings.

We have a dedicated team of employees and consultants focused on reducing costs and improving operating margins and streamlining our labor structure to better align with our strategic business objectives. We have spent significant time reviewing our operations and have identified meaningful cost savings opportunities, including technology initiatives, which we believe will further strengthen our business and, in some instances, improve guest experiences.

See the “Current Operating Environment” section for further details. For other factors affecting our costs and expenses, 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 the SEC.

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 four 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 a net loss in the first quarter. 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 eight 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.

Any changes to the operating schedule of a park such as increasing operating days for our historically seasonal parks, could change the impact of seasonality in the future. In the year ended December 31, 2022, we opened our Sesame Place San Diego park which has been, and is expected to continue to be, open more operating days than the Aquatica San Diego park it replaced, particularly in the first and fourth quarters of the year. Incremental operating days generally are expected to drive incremental attendance and revenue.

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 SEC.

The following discussion provides an analysis of our operating results for the three months ended ~~March 31,~~September 30, 2023 and 2022. 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.

Comparison of the Three Months Ended ~~March 31,~~September 30, 2023 to the Three Months Ended ~~March 31,~~September 30, 2022

The following table presents key operating and financial information for the three months ended ~~March 31,~~September 30, 2023 and 2022:


	For the Three Months Ended												For the Three Months Ended
	March 31,						Variance						September 30,						Variance
	2023			2022			$			%			2023			2022			#			%
Summary Financial Data:	(In thousands, except per capita data and %)												(In thousands, except per capita data)
Net revenues:
Admissions	$	163,863		$	150,862		$	13,001			8.6	%	$	299,785		$	313,574		$	(13,789	)		(4.4	%)
Food, merchandise and other		129,483			119,831			9,652			8.1	%		248,462			251,633			(3,171	)		(1.3	%)
Total revenues		293,346			270,693			22,653			8.4	%		548,247			565,207			(16,960	)		(3.0	%)
Costs and expenses:
Cost of food, merchandise and other revenues		23,221			23,040			181			0.8	%		40,431			41,385			(954	)		(2.3	%)
Operating expenses (exclusive of depreciation and amortization shown separately below)		172,674			152,925			19,749			12.9	%		205,808			215,899			(10,091	)		(4.7	%)
Selling, general and administrative expenses		48,281			46,059			2,222			4.8	%		59,705			53,082			6,623			12.5	%
Severance and other separation costs		4			30			(26	)		(86.7	%)		(139	)		—			(139	)	NM
Depreciation and amortization		37,394			38,612			(1,218	)		(3.2	%)		39,171			37,216			1,955			5.3	%
Total costs and expenses		281,574			260,666			20,908			8.0	%		344,976			347,582			(2,606	)		(0.7	%)
Operating income		11,772			10,027			1,745			17.4	%		203,271			217,625			(14,354	)		(6.6	%)
Other expense (income), net		46			(12	)		58		NM
Other income, net														(21	)		(66	)		45			68.2	%
Interest expense		36,401			25,370			11,031			43.5	%		37,052			30,556			6,496			21.3	%
Loss before income taxes		(24,675	)		(15,331	)		(9,344	)		(60.9	%)
Benefit from income taxes		(8,208	)		(6,344	)		(1,864	)		(29.4	%)
Net Loss	$	(16,467	)	$	(8,987	)	$	(7,480	)		(83.2	%)
Income before income taxes														166,240			187,135			(20,895	)		(11.2	%)
Provision for income taxes														42,685			52,578			(9,893	)		(18.8	%)
Net income													$	123,555		$	134,557		$	(11,002	)		(8.2	%)
Other data:
Attendance		3,378			3,403			(25	)		(0.7	%)		7,129			7,336			(207	)		(2.8	%)
Total revenue per capita	$	86.84		$	79.54		$	7.30			9.2	%	$	76.90		$	77.05		$	(0.15	)		(0.2	%)
Admission per capita	$	48.51		$	44.33		$	4.18			9.4	%	$	42.05		$	42.75		$	(0.70	)		(1.6	%)
In-park per capita spending	$	38.33		$	35.21		$	3.12			8.9	%	$	34.85		$	34.30		$	0.55			1.6	%

Admissions revenue. Admissions revenue for the three months ended ~~March 31,~~September 30, 2023 ~~increased $13.0~~decreased $13.8 million, or ~~8.6%~~4.4%, to ~~$163.9~~$299.8 million as compared to ~~$150.9~~$313.6 million for the three months ended ~~March 31,~~September 30, 2022. The ~~improvement~~decline was ~~primarily~~ a result of ~~an increase in admissions per capita, partially offset by~~ a decrease in ~~attendance.~~attendance and a decrease in admission per capita. Total attendance for the ~~first~~third quarter of 2023 decreased by approximately ~~twenty-five~~207 thousand guests, or ~~0.7%~~2.8%, when compared to the prior year quarter. The decrease in attendance was primarily due to significantly adverse weather, including some combination of unusual heat and/or rain, across ~~a number~~most of our markets, ~~particularly at our California parks,~~ including during peak visitation periods. ~~Attendance was also likely impacted unfavorably by the timing of new ride openings in 2023 compared with 2022.~~ Admission per capita ~~increased~~decreased by ~~9.4%~~$0.70 to ~~$48.51~~$42.05 for the ~~first~~third quarter of 2023 compared to ~~$44.33~~$42.75 in the prior year quarter, primarily due to the net impact of the admissions product mix, partially offset by 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 prior year quarter.

Food, merchandise and other revenue. Food, merchandise and other revenue for the three months ended ~~March 31,~~September 30, 2023 ~~increased $9.7~~decreased $3.2 million, or ~~8.1%~~1.3%, to ~~$129.5~~$248.5 million as compared to ~~$119.8~~$251.6 million for the three months ended ~~March 31,~~September 30, 2022, as a result of a decrease in attendance, as discussed above, partially offset by an increase in in-park per capita spending. In-park per capita spending increased by 1.6% to $34.85 in the third quarter of 2023 compared to $34.30 in the third quarter of 2022. In park per capita spending improved primarily due to pricing initiatives, partially offset by factors including weather, the admissions product mix, closures and disruption related to construction delays at certain in park locations when compared to the third quarter of 2022.

Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the three months ended September 30, 2023 decreased $1.0 million, or 2.3%, to $40.4 million as compared to $41.4 million for the three months ended September 30, 2022, primarily due to a decrease in related revenue along with the impact of implemented structural cost savings initiatives.

Operating expenses. Operating expenses for the three months ended September 30, 2023 decreased $10.1 million, or 4.7%, to $205.8 million as compared to $215.9 million for the three months ended September 30, 2022. The decrease in operating expenses is primarily due to decreased labor related costs and a decrease in nonrecurring legal costs and contractual liabilities resulting from the previously disclosed temporary COVID-19 park closures, along with the impact of implemented structural cost savings initiatives when compared to the third quarter of 2022.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended September 30, 2023 increased $6.6 million, or 12.5%, to $59.7 million as compared to $53.1 million for the three months ended September 30, 2022. The increase in selling, general and administrative expenses is primarily due to a $5.6 million increase in third-party consulting costs and legal fees, including approximately $2.7 million of nonrecurring costs primarily related to an opportunistic loan repricing and strategic initiatives, partially offset by the impact of implemented cost savings and efficiency initiatives when compared to the third quarter of 2022. See Note 6–Long-Term Debt 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 opportunistic loan repricing.

Depreciation and amortization. Depreciation and amortization expense for the three months ended September 30, 2023 increased $2.0 million, or 5.3%, to $39.2 million as compared to $37.2 million for the three months ended September 30, 2022. The increase primarily relates to new asset additions, partially offset by the impact of asset retirements and fully depreciated assets.

Interest expense. Interest expense for the three months ended September 30, 2023 increased $6.5 million, or 21.3%, to $37.1 million as compared to $30.6 million for the three months ended September 30, 2022. The increase primarily relates to increased interest rates on variable rate debt.

Provision for income taxes. Provision for income taxes in the three months ended September 30, 2023 was $42.7 million compared to $52.6 million for the three months ended September 30, 2022. Our consolidated effective tax rate was 25.7% for the three months ended September 30, 2023 compared to 28.1% for the three months ended September 30, 2022. The effective tax rate for the three months ended September 30, 2023 and 2022 was primarily impacted due to state income taxes and other compensation related items, partially offset by a tax benefit related to equity-based compensation which vested during the period.

The following table presents key operating and financial information for the nine months ended September 30, 2023 and 2022:

Admissions revenue. Admissions revenue for the nine months ended September 30, 2023 decreased $6.4 million, or 0.9%, to $733.5 million as compared to $739.9 million for the nine months ended September 30, 2022. The decline was a result of a decrease in attendance, partially offset by an increase in admissions per capita. Total attendance for the first nine months of 2023 decreased by approximately 356 thousand guests, or 2.1%, when compared to the first nine months of 2022. The decrease in attendance was primarily due to significantly adverse weather, including some combination of unusual heat, cold, rain and/or the fall-out from Canadian wildfires, across most of our markets, including during peak visitation periods. Admission per capita increased by 1.3% to $44.07 for the nine months ended September 30, 2023 compared to $43.52 for the nine months ended September 30, 2022, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset by the impact of the admissions product mix when compared to the prior year period.

Food, merchandise and other revenue. Food, merchandise and other revenue for the nine months ended September 30, 2023 increased $3.3 million, or 0.5%, to $604.1 million as compared to $600.8 million for the nine months ended September 30, 2022 as a result of an increase in revenue related to our international services agreements and 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 ~~8.9%~~2.7% to ~~$38.33 in~~$36.29 for the ~~first quarter of~~nine months ended September 30, 2023 compared to ~~$35.21 in~~$35.34 for the ~~first quarter of~~nine months ended September 30, 2022. In park per capita spending improved primarily due to pricing initiatives and an increase in revenue related to our international services agreements ~~and pricing initiatives~~ when compared to the first ~~quarter~~nine months of ~~2022.~~2022, partially offset by factors including weather, the admissions product mix, closures and disruption related to construction delays at certain in park locations. See Note 1–Description of the Business and Basis of Presentation in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information on our international ~~services~~ agreements.

Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 ~~increased $0.2~~decreased $4.1 million, or ~~0.8%~~3.9%, to ~~$23.2~~$101.9 million as compared to ~~$23.0~~$105.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, primarily due to ~~the increase~~a decrease in related ~~revenue.~~revenue along with decreased freight costs and the impact of implemented structural cost savings initiatives.

Operating expenses.Operating expenses for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 increased ~~$19.7~~by $14.9 million, or ~~12.9%~~2.7%, to ~~$172.7~~$574.2 million as compared to ~~$152.9~~$559.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The increase in operating expenses is primarily due to an increase in costs associated with our international services agreements, ~~increased labor-related costs due to more optimal staffing,~~an increase in non-cash self-insurance reserve adjustments, and an increase in ~~legal costs, including approximately $3.5 million related to the previously disclosed temporary COVID-19 park closures,~~non-cash asset write-offs, partially offset by the impact of implemented structural cost savings initiatives when compared to the first ~~quarter~~nine months of 2022.

Selling, general and administrative expenses. Selling, general and administrative expenses for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 increased ~~$2.2~~$20.9 million, or ~~4.8%~~13.4%, to ~~$48.3~~$176.2 million as compared to ~~$46.1~~$155.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The increase in selling, general and administrative expenses is primarily due to a ~~$3.6~~$15.7 million increase in third-party consulting costs and legal fees, including approximately ~~$1.7~~$11.2 million of ~~non-recurring~~nonrecurring costs primarily related to strategic initiatives, partially offset by ~~decreased marketing-related costs along with~~ the impact of implemented cost savings and efficiency ~~initiatives.~~initiatives when compared to the first nine months of 2022.

Depreciation and amortization. Depreciation and amortization expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 ~~decreased $1.2 million, or 3.2%, to $37.4~~was relatively flat at $114.4 million as compared to ~~$38.6~~$114.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. ~~The decrease primarily relates to the impact of asset retirements and fully depreciated assets, partially offset by new asset additions.~~

Interest expense. Interest expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 increased ~~$11.0~~$27.7 million, or ~~43.5%~~33.4%, to ~~$36.4~~$110.4 million as compared to ~~$25.4~~$82.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The increase primarily relates to increased interest rates on variable rate debt.

~~Benefit from~~Provision for income taxes. ~~Benefit from~~Provision for income taxes infor the ~~three~~nine months ended ~~March 31,~~September 30, 2023 was ~~$8.2~~$65.9 million compared to ~~$6.3~~$80.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Our consolidated effective tax rate was ~~33.3%~~25.3% for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to ~~41.4%~~25.0% for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The effective tax rate in the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022 was primarily impacted by state income taxes and other compensation related items, partially offset by a tax benefit related to equity-based compensation which vested during the ~~quarter. The effective tax rate~~period. See Note 4–Income Taxes in ~~the three months ended March 31, 2022 was primarily impacted by a tax benefit related~~our notes to ~~equity-based compensation which vested during the quarter.~~our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Generally, our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash typically 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 of ~~March 31,~~September 30, 2023, we had a working capital ratio (defined as current assets divided by current liabilities) of ~~0.5.~~0.9. We typically have operated with a working capital ratio of less than 1 due to a 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.

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 our 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.

See Note 10–Stockholders’ 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 our share repurchase programs.

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, debt service obligations 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 Three Months Ended March 31,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
	(In thousands)						(Unaudited, in thousands)
Net cash provided by operating activities	$	50,296		$	70,794		$	398,457		$	468,874
Net cash used in investing activities		(69,758	)		(35,110	)		(234,218	)		(150,729	)
Net cash used in financing activities		(8,097	)		(99,558	)		(31,333	)		(647,139	)
Net decrease in cash and cash equivalents, including restricted cash	$	(27,559	)	$	(63,874	)
Net increase (decrease) in cash and cash equivalents, including restricted cash							$	132,906		$	(328,994	)

Net cash provided by operating activities was ~~$50.3~~$398.5 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 as compared to ~~$70.8~~$468.9 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The change in net cash provided by operating activities was ~~primarily~~significantly impacted by ~~increased interest payments.~~a decline in operating performance.

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 ~~three~~nine months ended ~~March 31,~~September 30, 2023 consisted of capital expenditures of ~~$69.8~~$234.2 million largely related to future attractions. Net cash used in investing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 consisted of ~~$35.1~~$150.7 million of capital expenditures.

The following table presents detail of our capital expenditures for the periods indicated:


	For the Three Months Ended March 31,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
Capital Expenditures:	(Unaudited, in thousands)				(Unaudited, in thousands)
Core(a)	$	56,268	$	23,020	$	156,060	$	100,197
Expansion/ROI projects(b)		13,490		12,090		78,158		50,532
Capital expenditures, total	$	69,758	$	35,110	$	234,218	$	150,729

(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.

Net cash used in financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 results primarily from share repurchases of $17.9 million, repayments of $9.0 million on our long-term debt, and payment of tax withholdings on equity-based compensation through shares withheld of ~~$5.6~~$6.6 million. Net cash used in financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 results primarily from share repurchases of ~~$89.7~~$617.8 million and payment of tax withholdings on equity-based compensation through shares withheld of ~~$7.7~~$22.2 million. See Note 10–Stockholders’ Deficit in our notes to the unaudited condensed consolidated financial statements for further details.

We are a holding company and conduct our operations through our subsidiaries, which have incurred or guaranteed indebtedness as described below. As of ~~March 31,~~September 30, 2023, our indebtedness consisted of senior secured credit facilities, 5.25% senior notes (the “Senior Notes”) and 8.75% first-priority senior secured notes (the “First-Priority Senior Secured ~~Notes”) and 5.25% senior notes (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 related to our long-term debt.

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”) dated August 25, 2021 (the “Senior Secured Credit Facilities”).

As of ~~March 31,~~September 30, 2023, our Senior Secured Credit Facilities consisted of ~~$1.182~~$1.176 billion in Term B Loans which will mature in August 2028, along with a $390.0 million Revolving Credit Facility, which had no amounts outstanding as of ~~March 31,~~September 30, 2023 and will mature in August 2026. As of ~~March 31,~~September 30, 2023, SEA had approximately $18.4 million of outstanding letters of credit, leaving approximately $371.6 million available for borrowing under the Revolving Credit Facility.

As of ~~March 31,~~September 30, 2023, SEA had outstanding $725.0 million in aggregate principal amount of Senior Notes due on August 15, 2029 and $227.5 million in aggregate principal amount of First-Priority Senior Secured Notes, due on May 1, 2025.

As of ~~March 31,~~September 30, 2023, 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.

We define Adjusted EBITDA as net ~~(loss)~~ income plus (i) income tax ~~(benefit)~~ provision, (ii) loss on extinguishment of debt, (iii) interest expense, consent fees and similar financing costs, (iv) depreciation and amortization, (v) equity-based compensation expense, (vi) certain non-cash charges/credits including those related to asset disposals and self-insurance reserve adjustments, (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 Covenant 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 Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements for further details relating to our restrictive covenants.

Adjusted EBITDA and Covenant Adjusted EBITDA are not recognized terms under ~~accounting principles~~U.S. generally accepted ~~in the United States of America~~accounting principles (“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.

The following table reconciles Adjusted EBITDA and Covenant Adjusted EBITDA to net ~~(loss)~~ income for the periods indicated:

(a) Reflects non-cash equity compensation expenses and related payroll taxes associated with the grants of equity-based compensation. See Note 9–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.

(b) ~~Includes approximately $2.3 million, $3.9 million and $4.9 million related to~~Reflects primarily non-cash self-insurance reserve adjustments of: (i) approximately $4.8 million for the three months ended ~~March 31, 2023 and 2022~~September 30, 2023; (ii) approximately $11.8 million for the nine and twelve months ended ~~March 31,~~September 30, 2023, ~~respectively. For~~respectively; and (iii) approximately $2.6 million and $6.5 million for the three and nine months ended ~~March 31, 2023 and~~September 30, 2022, ~~and for the twelve months ended March 31, 2023, also~~respectively. Also includes non-cash expenses related to miscellaneous fixed asset disposals including asset write-offs and costs, ~~related to~~including approximately $4.5 million for the three months ended September 30, 2023 and $6.5 million for the nine and twelve months ended September 30, 2023 in disposals associated with certain rides and equipment which were removed from service.

(c) For the three, nine, and twelve months ended ~~March 31,~~September 30, 2023, reflects business optimization, development and other strategic initiative costs primarily related to: (i) ~~$6.6~~$3.1 million, $17.1 million, and ~~$14.1~~$19.3 million, respectively of third-party consulting costs and (ii) $3.6 million, $9.7 million, and $12.9 million, respectively of other business optimization costs and strategic initiative ~~costs; and (ii) $2.8 million and $10.5 million, respectively of third-party consulting~~ costs.For the three and nine months ended ~~March 31,~~September 30, 2022, reflects business optimization, development and other strategic initiative costs primarily related ~~to $2.2~~to: (i) $2.5 million and $7.6 million, respectively, of third-party consulting costs and (ii) $1.8 million and $5.6 million, respectively, of other business optimization costs and strategic initiative costs.

(d) For the three, nine, and twelve months ended ~~March 31,~~September 30, 2023, primarily reflects costs associated with certain legal matters, nonrecurring contractual liabilities and respective assessments related to the previously disclosed temporary COVID-19 park closures. For the three and nine months ended ~~March 31,~~September 30, 2022, ~~primarily relates~~includes approximately $4.1 million of certain legal matters related to ~~incremental non-recurring costs associated with~~ the temporary COVID-19 ~~pandemic.~~park closures.

(e) Reflects the impact of expenses, net of insurance recoveries and adjustments, incurred primarily related to certain matters, which we are permitted to exclude under the credit agreement governing our Senior Secured Credit Facilities due to the unusual nature of the items. For the nine months ended September 30, 2022, includes $3.6 million related to a legal settlement.

(f) Adjusted EBITDA is defined as net income (loss) ~~income~~ before income tax expense, interest expense, depreciation and amortization, as further adjusted to exclude certain non-cash, and other items as described above.

(g) 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 benefits realized 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 ~~(loss)~~ income.

~~(g)~~(h) 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, if any.

~~(h)~~(i) 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 ~~(f)~~(g) and ~~(g)~~(h) above.

There have been no material changes to our contractual obligations as ~~March 31,~~September 30, 2023 from those previously disclosed in our Annual Report on Form 10-K.

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 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 on March 1, 2023.

We had no material off-balance sheet arrangements as of ~~March 31,~~September 30, 2023.

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.

The impact of inflation has affected, and will continue to affect, our operations significantly. The costs of food, merchandise and other revenues are influenced by inflation and fluctuations in global commodity prices. In addition, other costs, such as the costs of fuel, construction, repairs and maintenance, labor, freight, utilities and insurance are all subject to inflationary pressures. For further discussion, 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 the SEC.

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

Prior to 2021, we previously managed interest rate risk through the use of a combination of fixed-rate long-term debt and interest rate swaps that fixed a portion of our variable-rate long-term debt. We have no interest rate swap agreements outstanding as of ~~March 31,~~September 30, 2023. We presently manage interest rate risk primarily by managing the amount, sources and duration of our debt funding. At ~~March 31,~~September 30, 2023, approximately $1.2 billion of our outstanding long-term debt represents variable-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $390.0 million, a hypothetical 100 bps increase in ~~LIBOR~~Adjusted Term SOFR would increase our annual interest expense by approximately $15.7 million. Assuming no revolving credit borrowings, a hypothetical 100 bps increase in ~~LIBOR~~Adjusted Term SOFR would increase our annual interest expense by approximately $11.8 million.

Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), require public companies, including us, to maintain “disclosure controls and procedures,” which are defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required or necessary disclosures.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. The design of any controls and procedures also is based on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of ~~March 31,~~September 30, 2023. Based upon this evaluation, our management, including our principal executive officer and principal financial officer, have concluded that the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q due to a material weakness in our internal control over financial reporting which was initially disclosed as of September 30, 2021.

Notwithstanding the above, the control deficiency did not result in a material misstatement of any of the Company’s annual or interim consolidated financial statements. Further, management believes and has concluded that the consolidated financial statements for the prior periods and included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with ~~accounting principles~~U.S. generally accepted ~~in the United States of America.~~accounting principles.

Regulations under the Exchange Act require public companies, including our Company, to evaluate any change in our “internal control over financial reporting” as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. There have been no changes in our internal control over financial reporting that occurred during the most recent quarter ended ~~March 31,~~September 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than those disclosed in the status update section.

Management and our Board of Directors are committed to remediating the above noted material weakness to address the deficiency within the control environment which resulted from a lack of sufficient policies and procedures surrounding the frequency, manner and extent in which Board members engage with management, resulting, in part, from increased Board engagement with management, as disclosed in Part I, Item 2, “Current Operating Environment” included elsewhere in this Quarterly Report on Form 10-Q. As a result, management and the Board determined that it should establish and/or enhance additional policies and procedures relating to Board engagement and establish a process to evaluate adherence to these policies and procedures. Based upon a recommendation of the Audit Committee, the Board formed a committee (the “Committee”) and engaged independent consultants to advise the Committee and management as it relates to this deficiency to develop and execute on a remediation plan.

Management continues to perform ongoing risk assessments. As a result of these assessments, management and the Committee continue to identify actions to remediate the material weakness, including the following actions:

Management will continue to perform ongoing risk assessment procedures, including continued enhancement, design and implementation of relevant controls, and will assess and test the effectiveness of these remediation efforts. As we continue to evaluate the effectiveness of the above remediation efforts, management may determine to take additional measures or to modify the remediation plan described above, which may require additional implementation time. The material weakness cannot be considered remediated until remediation efforts have operated for a sufficient period of time and management has concluded, that the material weakness has been resolved. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluations of internal control over financial reporting.

See Note 9–8–Commitments and Contingencies under the caption “Legal Proceedings” in our notes to the unaudited condensed consolidated financial statements for further details concerning our other legal proceedings.

There have been no material changes to the risk factors set forth in Item 1A.to Part I of our Annual Report on Form 10-K, as filed on March 1, 2023, except to the extent factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors, which is incorporated herein by reference.

There were no unregistered sales of equity securities during the ~~first~~third quarter of 2023. The following table sets forth information with respect to shares of our common stock purchased by the Company during the periods indicated:

In August 2022, we announced that our Board ~~of Directors~~ approved a new $250.0 million share repurchase program (the “Share Repurchase Program”) ~~of which approximately $56.4 million remained available as of March~~. Under the Share Repurchase Program, during the year ended December 31, ~~2023. Subsequent to March 31, 2023, the Company~~2022, we repurchased ~~235,000~~3,774,659 shares for an aggregate total of approximately ~~$13.9~~$193.6 million. During the quarter ended September 30, 2023, we repurchased 78,750 shares for an aggregate total of approximately $3.9 million, leaving approximately ~~$42.4~~$38.5 million ~~remaining under the Share Repurchase Program~~available as of ~~May 4,~~September 30, 2023.

Under the Share Repurchase Program, we are authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. All of the common stock is held as treasury shares as of ~~March 31,~~September 30, 2023. The number of shares to be purchased and the timing of purchases will be based on our trading windows and available liquidity, general business and market conditions and other factors, including legal requirements and alternative opportunities. See Note 10–Stockholders’ Deficit in the notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

The following is a list of all exhibits filed or furnished as part of this report:

† Identifies exhibits that consist of a management contract or compensatory plan or arrangement

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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.


Delaware		27-1220297
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
6240 Sea Harbor Drive Orlando, Florida		32821
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SEAS	New York Stock Exchange


		Page No.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION	5

Item 1.	Unaudited Condensed Consolidated Financial Statements	5

	Unaudited Condensed Consolidated Balance Sheets	5

	Unaudited Condensed Consolidated Statements of Operations	6

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit	7

	Unaudited Condensed Consolidated Statements of Cash Flows	89

	Notes to Unaudited Condensed Consolidated Financial Statements	910

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2122

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2931

Item 4.	Controls and Procedures	2932

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3134

Item 1A.	Risk Factors	3134

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3134

Item 3.	Defaults Upon Senior Securities	3134

Item 4.	Mine Safety Disclosures	3134

Item 5.	Other Information	3135

Item 6.	Exhibits	3235
	Signatures	3336


	Shares of Common Stock			Common Stock			Additional Paid-In Capital			Accumulated Deficit			Treasury Stock, at Cost			Total Stockholders' Deficit
Balance at December 31, 2021		95,541,992		$	955		$	711,474		$	(115,287	)	$	(631,058	)	$	(33,916	)
Equity-based compensation		—			—			6,982			—			—			6,982
Vesting of restricted shares		361,403			4			(4	)		—			—			—
Shares withheld for tax withholdings		(111,865	)		(1	)		(7,737	)		—			—			(7,738	)
Exercise of stock options		46,503			—			1,127			—			—			1,127
Repurchase of 1,535,427 shares of treasury stock, at cost		—			—			—			—			(109,905	)		(109,905	)
Net loss		—			—			—			(8,987	)		—			(8,987	)
Balance at March 31, 2022		95,838,033		$	958		$	711,842		$	(124,274	)	$	(740,963	)	$	(152,437	)


	For the Three Months Ended March 31,
	2023			2022
Cash Flows From Operating Activities:
Net loss	$	(16,467	)	$	(8,987	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		37,394			38,612
Amortization of debt issuance costs and discounts		1,542			1,532
Deferred income tax benefit		(8,417	)		(6,531	)
Equity-based compensation		4,482			6,982
Other, including loss on sale or disposal of assets, net		3,221			4,420
Changes in assets and liabilities:
Accounts receivable		(1,361	)		3,408
Inventories		(3,936	)		(15,601	)
Prepaid expenses and other current assets		(6,863	)		(7,653	)
Accounts payable and accrued expenses		(345	)		5,599
Accrued salaries, wages and benefits		5,377			(2,841	)
Deferred revenue		42,072			53,584
Other accrued liabilities		(1,276	)		(5,675	)
Right of use assets and operating lease liabilities		104			201
Other assets and liabilities		(5,231	)		3,744
Net cash provided by operating activities		50,296			70,794
Cash Flows From Investing Activities:
Capital expenditures		(69,758	)		(35,110	)
Net cash used in investing activities		(69,758	)		(35,110	)
Cash Flows From Financing Activities:
Repayments of long-term debt		(3,000	)		(3,000	)
Proceeds from draws on revolving credit facility		20,000			—
Repayments of revolving credit facility		(20,000	)		—
Purchase of treasury stock		—			(89,736	)
Payment of tax withholdings on equity-based compensation through shares withheld		(5,569	)		(7,738	)
Exercise of stock options		565			1,127
Other financing activities		(93	)		(211	)
Net cash used in financing activities		(8,097	)		(99,558	)
Change in Cash and Cash Equivalents, including Restricted Cash		(27,559	)		(63,874	)
Cash and Cash Equivalents, including Restricted Cash—Beginning of period		82,320			444,486
Cash and Cash Equivalents, including Restricted Cash—End of period	$	54,761		$	380,612
Supplemental Disclosure of Noncash Investing and Financing Activities
Capital expenditures in accounts payable	$	45,548		$	31,483
Treasury stock purchases not yet settled in other accrued liabilities	$	—		$	20,169


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	Shares of Common Stock Issued			Common Stock			Additional Paid-In Capital			Retained Earnings			Treasury Stock, at Cost			Total Stockholders' Deficit
Balance at December 31, 2022		96,287,771		$	963		$	710,151		$	175,903		$	(1,324,681	)	$	(437,664	)
Equity-based compensation		—			—			4,482			—			—			4,482
Vesting of restricted shares		273,134			3			(3	)		—			—			—
Shares withheld for tax withholdings		(86,914	)		(1	)		(5,568	)		—			—			(5,569	)
Exercise of stock options		22,793			—			565			—			—			565
Net loss		—			—			—			(16,467	)		—			(16,467	)
Balance at March 31, 2023		96,496,784			965			709,627			159,436			(1,324,681	)		(454,653	)
Equity-based compensation		—			—			3,725			—			—			3,725
Vesting of restricted shares		53,735			—			—			—			—			—
Shares withheld for tax withholdings		(13,118	)		—			(771	)		—			—			(771	)
Exercise of stock options		45,248			1			1,078			—			—			1,079
Repurchase of 235,000 shares of treasury stock, at cost		—			—			—			—			(13,947	)		(13,947	)
Net income		—			—			—			87,055			—			87,055
Balance at June 30, 2023		96,582,649			966			713,659			246,491			(1,338,628	)		(377,512	)
Equity-based compensation		—			—			4,602			—			—			4,602
Vesting of restricted shares		20,986			—			—			—			—			—
Shares withheld for tax withholdings		(4,289	)		—			(221	)		—			—			(221	)
Exercise of stock options		34,976			—			1,094			—			—			1,094
Repurchase of 78,750 shares of treasury stock, at cost		—			—			—			—			(3,914	)		(3,914	)
Net income		—			—			—			123,555			—			123,555
Balance at September 30, 2023		96,634,322		$	966		$	719,134		$	370,046		$	(1,342,542	)	$	(252,396	)


Years Ending December 31,	(In thousands)
Remainder of 2023	$	9,000
2024		12,000
2025		239,500
2026		12,000
2027		12,000
Thereafter		1,850,000
Total	$	2,134,500


SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

	For the Three Months Ended March 31,						Last Twelve Months Ended March 31,
	2023			2022			2023
	(Unaudited, in thousands)
Net (loss) income	$	(16,467	)	$	(8,987	)	$	283,710
(Benefit from) provision for income taxes		(8,208	)		(6,344	)		97,019
Interest expense		36,401			25,370			128,532
Depreciation and amortization		37,394			38,612			151,402
Equity-based compensation expense (a)		5,205			7,877			17,085
Loss on impairment or disposal of assets and certain non-cash expenses (b)		3,667			4,604			13,281
Business optimization, development and strategic initiative costs (c)		9,425			3,604			25,667
Certain investment costs and other taxes		48			401			775
COVID-19 related incremental costs(d)		3,583			350			9,922
Other adjusting items		1,364			453			7,324
Adjusted EBITDA(e)	$	72,412		$	65,940		$	734,717
Items added back to Covenant Adjusted EBITDA, as defined in the Debt Agreements:
Estimated cost savings (f)								23,300
Other adjustments as defined in the Debt Agreements (g)								9,342
Covenant Adjusted EBITDA (h)							$	767,359


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				Last Twelve Months Ended September 30,
	2023		2022		2023		2022		2023
	(Unaudited, in thousands)
Net income	$	123,555	$	134,557	$	194,143	$	242,180	$	243,153
Provision for income taxes		42,685		52,578		65,911		80,857		83,937
Interest expense		37,052		30,556		110,407		82,736		145,172
Depreciation and amortization		39,171		37,216		114,396		114,379		152,637
Equity-based compensation expense (a)		4,644		4,472		13,715		15,554		17,918
Loss on impairment or disposal of assets and certain non-cash expenses(b)		8,723		3,540		22,985		12,555		24,648
Business optimization, development and strategic initiative costs (c)		6,662		4,656		28,191		14,050		33,987
Certain investment costs and other taxes		1,147		53		1,309		1,053		1,384
COVID-19 related incremental costs (d)		1,092		4,957		8,760		5,930		9,519
Other adjusting items (e)		1,666		1,598		3,239		5,275		4,377
Adjusted EBITDA (f)	$	266,397	$	274,183	$	563,056	$	574,569	$	716,732
Items added back to Covenant Adjusted EBITDA as defined in the Debt Agreements:
Estimated cost savings (g)										25,200
Other adjustments as defined in the Debt Agreements (h)										6,522
Covenant Adjusted EBITDA (i)									$	748,454


Period Beginning	Period Ended	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(2)
January 1, 2023	January 31, 2023		—		—		—	$	56,372,461
February 1, 2023	February 28, 2023		—		—		—		56,372,461
March 1, 2023	March 31, 2023		86,914	$	64.08		—		56,372,461
			86,914				—	$	56,372,461


Period Beginning	Period Ended	Total Number of Shares Purchased(1)(2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(2)
July 1, 2023	July 31, 2023		—		—		—	$	42,424,727
August 1, 2023	August 31, 2023		83,039	$	49.80		78,750		38,510,748
September 1, 2023	September 30, 2023		—		—		—		38,510,748
			83,039				78,750	$	38,510,748


Exhibit No.		Description

10.1*†		~~Offer Letter~~Form of ~~Employment, Agreed~~Performance Stock Unit Grant Notice and ~~Accepted the 25th day of January 2023, between SeaWorld Entertainment, Inc. and Jim Forrester~~Restricted Stock Unit Agreement (Employees – Annual Incentive Plan Award)

10.2*†		~~Fourth~~ Amended &and Restated ~~Stock Ownership Guidelines, adopted February 22,~~Outside Director Compensation Policy, effective January 1, 2023

31.1*		Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101.INS*		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31, 2022,~~September 30, 2023, formatted in Inline XBRL


		SEAWORLD ENTERTAINMENT, INC.
		(Registrant)
Date: ~~May 10,~~November 9, 2023		By: /s/ James W. Forrester, Jr.
		James W. Forrester, Jr.
		Interim Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Date: ~~May 10,~~November 9, 2023		By: /s/ Shekufeh Shirazi Boyle
		Shekufeh Shirazi Boyle
		Chief Accounting Officer
		(Principal Accounting Officer)