UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended OctoberJuly 2, 20222023 or
☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to
Commission file number: 1-13703
Six Flags Entertainment Corporation
(Exact Name of Registrant as Specified in Its Charter)
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Delaware | 13-3995059 | |
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1000 Ballpark Way Suite 400, Arlington, TX 76011 | | (972) 595-5000 |
Securities registered pursuant to Section 12(b) of the Act:
| | |||
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, $0.025 par value per share | | SIX | | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer ⌧ | Accelerated Filer ◻ | Non-accelerated Filer ◻ | Smaller Reporting Company ☐ | Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At November 5, 2022,August 7, 2023, Six Flags Entertainment Corporation had 83,156,50483,519,692 outstanding shares of common stock, par value $0.025 per share.
SIX FLAGS ENTERTAINMENT CORPORATION
FORM 10-Q
INDEX
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Quarterly Report") and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that are not historical facts and can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "may," "should," "could" and variations of such words or similar expressions. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include (i) global coronavirus (“COVID-19”) pandemic-related business disruptions and economic uncertainty, (ii) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, (iii) our expectations regarding the timing, costs, benefits and results of our strategic plan, (iv) impact of macro-economic conditions, including inflation on consumer spending, (v)(iv) our ability to implement our capital plans in a timely and cost effective manner, and our expectations regarding the anticipated costs, benefits and results of such capital plans, (vi) the extent to which having parks in diverse geographical locations protects our consolidated results against the effects of adverse weather and other events, (vii) our ongoing compliance with laws and regulations, and the effect of, and cost and timing of compliance with, newly enacted laws and regulations, (viii) our ability to obtain additional financing (ix) our expectations regarding futureand the increased cost of capital due to rising interest payments,rates, (x) our expectations regarding the effect of certain accounting pronouncements, (xi) our expectations regarding the cost or outcome of any litigation or other disputes, (xii) our annual income tax liability and the availability and effect of net operating loss carryforwards and other tax benefits, and (xiii)(xii) our expectations regarding uncertain tax positions.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are, by their nature, subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Additional risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements include, among others, the following:
• | factors impacting attendance, such as local conditions, contagious diseases, including COVID-19 and |
• | regulations and guidance of federal, state and local governments and health officials regarding the response to |
• | economic impact of political instability and conflicts globally, such as the war in Ukraine; |
• | recall of food, toys and other retail products sold at our parks; |
• | accidents or incidents involving the safety of guests and employees, or contagious disease outbreaks at our parks or other parks in our industry, and negative publicity about us or our industry; |
• | availability of commercially reasonable insurance policies at reasonable rates; |
• | inability to achieve desired improvements and financial performance targets; |
• | adverse weather conditions, such as excess heat or cold, rain and storms; |
• | general financial and credit market conditions, including our ability to access credit or raise capital; |
• | macro-economic conditions (including supply chain issues and the impact of inflation on customer spending patterns); |
• | our ability to successfully implement our strategy; |
• | changes in public and consumer tastes; |
• | construction delays in capital improvements or ride downtime; |
• | competition with other theme parks, water parks and entertainment alternatives; |
• | dependence on a seasonal workforce; |
• | unionization activities and labor disputes; |
• | laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, healthcare reform and |
• | availability of labor; |
• | environmental laws and regulations; |
• | laws and regulations affecting corporate taxation; |
• | pending, threatened or future legal proceedings and the significant expenses associated with litigation; |
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• | cyber security risks; and |
• | other factors or uncertainties described in "Item 1A. Risk Factors" set forth in our Annual Report on Form 10-K for the year ended January |
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All forward-looking statements in this Quarterly Report,report, or that are made on our behalf by our directors, officers or employees related to the information contained herein, apply only as of the date of this Quarterly Reportreport or as of the date they were made. While we believe that the expectations reflected in such forward-looking statements are reasonable, we can providemake no assurance that such expectations will be realized and actual results could vary materially. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation, except as required by applicable law, to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Additionally, the continued impact of COVID-19, virus variants and the rate of vaccinations could heighten many of the risk factors described herein.
Available Information
Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge through our website at investors.sixflags.com. References to our website in this Quarterly Report are provided as a convenience and do not constitute an incorporation by reference of the information contained on, or accessible through, the website. Therefore, such information should not be considered part of this Quarterly Report. These reports, and any amendments to these reports, are made available on our website as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the United States Securities and Exchange Commission (the "SEC"). Copies are also available, without charge, by sending a written request to Six Flags Entertainment Corporation, 1000 Ballpark Way Suite 400, Arlington, TX 76011, Attn: Investor Relations.
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As used herein, unless the context requires otherwise, the terms "we," "our," "Company" and "Six Flags" refer collectively to Six Flags Entertainment Corporation and its consolidated subsidiaries, and "Holdings" refers only to Six Flags Entertainment Corporation, without regard to its consolidated subsidiaries.
2
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | | | | | | | | |
|
| As of |
| As of | ||||||||||||||
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| October 2, 2022 |
| January 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| January 1, 2023 |
| July 3, 2022 | ||||||
(Amounts in thousands, except share data) | | (unaudited) | | | | | (unaudited) | | (unaudited) | | | | | (unaudited) | ||||
ASSETS |
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Current assets: |
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Cash and cash equivalents | | $ | 73,314 | | $ | 335,585 | | $ | 389,857 | | $ | 51,580 | | $ | 80,122 | | $ | 74,802 |
Accounts receivable, net | |
| 72,299 | |
| 97,722 | |
| 137,575 | |
| 93,077 | |
| 49,405 | |
| 70,473 |
Inventories | |
| 48,493 | |
| 27,273 | |
| 28,996 | |
| 43,172 | |
| 44,811 | |
| 47,531 |
Prepaid expenses and other current assets | |
| 77,329 | |
| 55,455 | |
| 65,715 | |
| 84,808 | |
| 66,452 | |
| 69,990 |
Total current assets | |
| 271,435 | |
| 516,035 | |
| 622,143 | |
| 272,637 | |
| 240,790 | |
| 262,796 |
Property and equipment, net: | |
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Property and equipment, at cost | |
| 2,559,635 | |
| 2,501,829 | |
| 2,454,929 | |
| 2,666,636 | |
| 2,592,485 | |
| 2,552,144 |
Accumulated depreciation | |
| (1,320,141) | |
| (1,250,902) | |
| (1,226,947) | |
| (1,410,480) | |
| (1,350,739) | |
| (1,297,710) |
Total property and equipment, net | |
| 1,239,494 | |
| 1,250,927 | |
| 1,227,982 | |
| 1,256,156 | |
| 1,241,746 | |
| 1,254,434 |
Other assets: | |
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Goodwill | | | 659,618 | |
| 659,618 | |
| 659,618 | |||||||||
Intangible assets, net of accumulated amortization of $295, $284 and $272 as of July 2, 2023, January 1, 2023 and July 3, 2022, respectively | | | 344,153 | |
| 344,164 | |
| 344,176 | |||||||||
Right-of-use operating leases, net | | | 176,178 | | | 186,754 | | | 189,616 | | | 154,182 | | | 158,838 | | | 180,836 |
Debt issuance costs | |
| 3,298 | |
| 4,899 | |
| 5,433 | |
| 6,110 | |
| 2,764 | |
| 3,832 |
Deposits and other assets | |
| 9,873 | |
| 6,170 | |
| 5,949 | |
| 20,737 | |
| 17,905 | |
| 8,101 |
Goodwill | |
| 659,618 | |
| 659,618 | |
| 659,618 | |||||||||
Intangible assets, net of accumulated amortization of $278, $261 and $255 as of October 2, 2022, January 2, 2022 and October 3, 2021, respectively | |
| 344,170 | |
| 344,187 | |
| 344,193 | |||||||||
Total other assets | |
| 1,193,137 | |
| 1,201,628 | |
| 1,204,809 | |||||||||
Total assets | | $ | 2,704,066 | | $ | 2,968,590 | | $ | 3,054,934 | | $ | 2,713,593 | | $ | 2,665,825 | | $ | 2,713,793 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT | |
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Current liabilities: | |
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Accounts payable | | $ | 47,808 | | $ | 38,251 | | $ | 60,659 | | $ | 54,174 | | $ | 38,887 | | $ | 67,925 |
Accrued compensation, payroll taxes and benefits | |
| 14,838 | |
| 51,473 | |
| 48,543 | |
| 21,571 | |
| 15,224 | |
| 24,968 |
Accrued insurance reserves | |
| 44,563 | |
| 32,182 | |
| 29,259 | |||||||||
Self-insurance reserves | |
| 68,633 | |
| 34,053 | |
| 37,017 | |||||||||
Accrued interest payable | |
| 26,616 | |
| 50,554 | |
| 33,220 | |
| 33,216 | |
| 38,484 | |
| 24,713 |
Other accrued liabilities | |
| 102,382 | |
| 101,790 | |
| 115,552 | |
| 79,959 | |
| 67,346 | |
| 102,626 |
Deferred revenue | |
| 126,578 | |
| 177,831 | |
| 224,083 | |
| 176,811 | |
| 128,627 | |
| 171,238 |
Short-term borrowings | |
| 110,000 | |
| — | |
| — | |
| 169,000 | |
| 100,000 | |
| 200,000 |
Short-term lease liabilities | | | 11,451 | | | 11,158 | | | 11,004 | | | 11,730 | | | 11,688 | | | 11,394 |
Total current liabilities | |
| 484,236 | |
| 463,239 | |
| 522,320 | |
| 615,094 | |
| 434,309 | |
| 639,881 |
Noncurrent liabilities: | |
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Long-term debt | |
| 2,279,220 | |
| 2,629,524 | |
| 2,627,803 | |
| 2,183,325 | |
| 2,280,531 | |
| 2,277,910 |
Long-term lease liabilities | | | 162,569 | | | 178,200 | | | 176,670 | | | 163,950 | | | 164,804 | | | 175,786 |
Other long-term liabilities | |
| 5,519 | |
| 9,469 | |
| 29,705 | |
| 29,077 | |
| 30,714 | |
| 5,476 |
Deferred income taxes | |
| 194,358 | |
| 148,291 | |
| 150,531 | |
| 172,849 | |
| 184,637 | |
| 152,041 |
Total noncurrent liabilities | |
| 2,641,666 | |
| 2,965,484 | |
| 2,984,709 | |||||||||
Total liabilities | |
| 3,125,902 | |
| 3,428,723 | |
| 3,507,029 | |
| 3,164,295 | |
| 3,094,995 | |
| 3,251,094 |
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Redeemable noncontrolling interests | |
| 543,719 | |
| 522,067 | |
| 542,950 | |
| 544,764 | |
| 521,395 | |
| 543,719 |
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Stockholders' deficit: | |
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Preferred stock, $1.00 par value | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Common stock, $0.025 par value, 280,000,000 shares authorized; 83,152,582, 86,162,879 and 85,981,788 shares issued and outstanding at October 2, 2022, January 2, 2022 and October 3, 2021, respectively | |
| 2,079 | |
| 2,154 | |
| 2,149 | |||||||||
Common stock, $0.025 par value, 280,000,000 shares authorized; 83,464,774, 83,178,294 and 83,026,556 shares issued and outstanding at July 2, 2023, January 1, 2023 and July 3, 2022, respectively | |
| 2,086 | |
| 2,079 | |
| 2,075 | |||||||||
Capital in excess of par value | |
| 1,105,053 | |
| 1,120,084 | |
| 1,118,353 | |
| 1,109,779 | |
| 1,104,051 | |
| 1,103,534 |
Accumulated deficit | |
| (1,998,868) | |
| (2,023,251) | |
| (2,021,252) | |
| (2,034,736) | |
| (1,985,500) | |
| (2,114,697) |
Accumulated other comprehensive loss, net of tax | |
| (73,819) | |
| (81,187) | |
| (94,295) | |
| (72,595) | |
| (71,195) | |
| (71,932) |
Total stockholders' deficit | |
| (965,555) | |
| (982,200) | |
| (995,045) | |
| (995,466) | |
| (950,565) | |
| (1,081,020) |
Total liabilities and stockholders' deficit | | $ | 2,704,066 | | $ | 2,968,590 | | $ | 3,054,934 | | $ | 2,713,593 | | $ | 2,665,825 | | $ | 2,713,793 |
See accompanying notes to unaudited condensed consolidated financial statements.
3
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | |
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| Three Months Ended |
| Three Months Ended | ||||||||
(Amounts in thousands, except per share data) | | October 2, 2022 |
| October 3, 2021 | | July 2, 2023 |
| July 3, 2022 | ||||
Park admissions | | $ | 280,502 | | $ | 345,217 | | $ | 238,963 | | $ | 241,777 |
Park food, merchandise and other | |
| 209,099 | |
| 280,499 | |
| 190,792 | |
| 183,081 |
Sponsorship, international agreements and accommodations | |
| 15,230 | |
| 12,568 | |
| 13,952 | |
| 10,564 |
Total revenues | |
| 504,831 | |
| 638,284 | |
| 443,707 | |
| 435,422 |
Operating expenses (excluding depreciation and amortization shown separately below) | |
| 181,162 | |
| 228,119 | |
| 173,669 | |
| 173,357 |
Selling, general and administrative expenses (including stock-based compensation of $1,676 and $7,876 in 2022 and 2021, respectively, and excluding depreciation and amortization shown separately below) | |
| 38,234 | |
| 64,356 | ||||||
Selling, general and administrative expenses (including stock-based compensation of $2,179 and $3,223 in 2023 and 2022, respectively, and excluding depreciation and amortization shown separately below) | |
| 90,448 | |
| 53,498 | ||||||
Costs of products sold | |
| 40,164 | |
| 54,100 | |
| 34,787 | |
| 35,710 |
Other net periodic pension benefit | |
| (1,480) | |
| (76) | ||||||
Depreciation | |
| 30,181 | |
| 28,047 | ||||||
Amortization | |
| 5 | |
| 6 | ||||||
Depreciation and amortization | |
| 28,910 | |
| 27,537 | ||||||
Loss on disposal of assets | |
| 5,038 | |
| 624 | |
| 2,550 | |
| 98 |
Interest expense | |
| 34,580 | |
| 38,224 | ||||||
Interest income | |
| (383) | |
| (129) | ||||||
Other expense, net | |
| 521 | |
| 346 | ||||||
Operating income | | | 113,343 | | | 145,222 | ||||||
Interest expense, net | |
| 43,495 | |
| 35,978 | ||||||
Loss on debt extinguishment | |
| 13,982 | |
| 17,533 | ||||||
Other income, net | |
| (2,261) | |
| (722) | ||||||
Income before income taxes | |
| 176,809 | |
| 224,667 | |
| 58,127 | |
| 92,433 |
Income tax expense | |
| 38,654 | |
| 46,543 | |
| 13,807 | |
| 24,716 |
Net income | |
| 138,155 | |
| 178,124 | |
| 44,320 | |
| 67,717 |
Less: Net income attributable to noncontrolling interests | |
| (22,326) | |
| (20,883) | |
| (23,766) | |
| (22,325) |
Net income attributable to Six Flags Entertainment Corporation | | $ | 115,829 | | $ | 157,241 | | $ | 20,554 | | $ | 45,392 |
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Weighted-average common shares outstanding: | |
| | |
| | |
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Basic: | |
| 83,094 | |
| 85,919 | |
| 83,379 | |
| 84,992 |
Diluted: | |
| 83,107 | |
| 87,259 | |
| 83,796 | |
| 85,242 |
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Earnings per average common share outstanding: | | | | | | | | | | | | |
Basic: | | $ | 1.39 | | $ | 1.83 | | $ | 0.25 | | $ | 0.53 |
Diluted: | | $ | 1.39 | | $ | 1.80 | | $ | 0.25 | | $ | 0.53 |
See accompanying notes to the unaudited condensed consolidated financial statements
4
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | |
|
| Nine Months Ended |
| Six Months Ended | ||||||||
(Amounts in thousands, except per share data) |
| October 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| July 3, 2022 | ||||
Park admissions | | $ | 595,266 | | $ | 634,716 | | $ | 315,266 | | $ | 314,764 |
Park food, merchandise and other | |
| 446,449 | |
| 510,620 | |
| 243,578 | |
| 237,350 |
Sponsorship, international agreements and accommodations | |
| 36,645 | |
| 34,759 | |
| 27,053 | |
| 21,415 |
Total revenues | |
| 1,078,360 | |
| 1,180,095 | |
| 585,897 | |
| 573,529 |
Operating expenses (excluding depreciation and amortization shown separately below) | |
| 464,688 | |
| 504,530 | |
| 282,539 | |
| 283,076 |
Selling, general and administrative expenses (including stock-based compensation of $9,124 and $17,514 in 2022 and 2021, respectively, and excluding depreciation and amortization shown separately below) | |
| 131,139 | |
| 150,687 | ||||||
Selling, general and administrative expenses (including stock-based compensation of $5,493 and $7,448 in 2023 and 2022, respectively, and excluding depreciation and amortization shown separately below) | |
| 134,695 | |
| 92,755 | ||||||
Costs of products sold | |
| 85,989 | |
| 100,509 | |
| 44,552 | |
| 45,825 |
Other net periodic pension benefit | |
| (4,851) | |
| (3,409) | ||||||
Depreciation | |
| 86,756 | |
| 84,921 | ||||||
Amortization | |
| 16 | |
| 17 | ||||||
Loss on disposal of assets | |
| 3,036 | |
| 1,863 | ||||||
Interest expense | |
| 108,687 | |
| 114,797 | ||||||
Interest income | |
| (982) | |
| (234) | ||||||
Depreciation and amortization | |
| 58,024 | |
| 56,586 | ||||||
Loss (gain) on disposal of assets | |
| 4,985 | |
| (2,002) | ||||||
Operating income | | | 61,102 | | | 97,289 | ||||||
Interest expense, net | |
| 79,797 | |
| 73,508 | ||||||
Loss on debt extinguishment | |
| 17,533 | |
| — | |
| 13,982 | |
| 17,533 |
Other expense, net | |
| 1,882 | |
| 8,796 | ||||||
Income before income taxes | |
| 184,467 | |
| 217,618 | ||||||
Income tax expense | |
| 44,257 | |
| 43,930 | ||||||
Net income | | $ | 140,210 | | $ | 173,688 | ||||||
Other income, net | |
| (3,093) | |
| (1,410) | ||||||
(Loss) income before income taxes | |
| (29,584) | |
| 7,658 | ||||||
Income tax (benefit) expense | |
| (4,045) | |
| 5,603 | ||||||
Net (loss) income | | $ | (25,539) | | $ | 2,055 | ||||||
Less: Net income attributable to noncontrolling interests | | | (44,651) | | | (41,766) | | | (23,766) | | | (22,325) |
Net income attributable to Six Flags Entertainment Corporation | | $ | 95,559 | | $ | 131,922 | ||||||
Net loss attributable to Six Flags Entertainment Corporation | | $ | (49,305) | | $ | (20,270) | ||||||
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Weighted-average common shares outstanding: | |
| | | | | |
| | | | |
Basic: | | | 84,760 | |
| 85,596 | | | 83,293 | |
| 85,594 |
Diluted: | | | 84,919 | | | 87,078 | | | 83,293 | | | 85,594 |
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Earnings per average common share outstanding: | | | | | | | | | | | | |
Basic: | | $ | 1.13 | | $ | 1.54 | | $ | (0.59) | | $ | (0.24) |
Diluted: | | $ | 1.13 | | $ | 1.51 | | $ | (0.59) | | $ | (0.24) |
See accompanying notes to unaudited condensed consolidated financial statements.
5
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| | | | | | |
|
| Three Months Ended | ||||
(Amounts in thousands) |
| July 2, 2023 |
| July 3, 2022 | ||
|
| | |
| | |
Net income | | $ | 44,320 | | $ | 67,717 |
Other comprehensive income, net of tax: | |
|
| |
|
|
Foreign currency translation adjustment (1) | |
| (1,481) | |
| 3,920 |
Defined benefit retirement plan (2) | |
| 175 | |
| 172 |
Change in cash flow hedging (3) | |
| (595) | |
| (402) |
Other comprehensive income (loss), net of tax | |
| (1,901) | |
| 3,690 |
Comprehensive income | | $ | 42,419 | | $ | 71,407 |
Less: Comprehensive income attributable to noncontrolling interests | |
| (23,766) | |
| (22,325) |
Comprehensive income attributable to Six Flags Entertainment Corporation | | $ | 18,653 | | $ | 49,082 |
(1) Foreign currency translation adjustment is presented net of tax benefit of $0.2 million for the three months ended July 2, 2023 and net of tax expense of $1.0 million for the three months ended July 3, 2022.
(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the three months ended July 2, 2023 and July 3, 2022, respectively.
(3) Change in fair value of cash flow hedging is presented net of tax benefit of $0.2 million and $0.1 million for the three months ended July 2, 2023 and July 3, 2022, respectively.
See accompanying notes to unaudited condensed consolidated financial statements
6
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | |
|
| Three Months Ended |
| Six Months Ended | ||||||||
(Amounts in thousands) |
| October 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| July 3, 2022 | ||||
|
| | |
| | | ||||||
Net income | | $ | 138,155 | | $ | 178,124 | ||||||
Net (loss) income | | $ | (25,539) | | $ | 2,055 | ||||||
Other comprehensive income, net of tax: | |
|
| |
|
| |
|
| |
| |
Foreign currency translation adjustment (1) | |
| (1,287) | |
| (2,646) | |
| (565) | |
| (165) |
Defined benefit retirement plan (2) | |
| 161 | |
| 271 | |
| 351 | |
| 343 |
Change in cash flow hedging (3) | |
| (761) | |
| 568 | |
| (1,186) | |
| 9,077 |
Other comprehensive loss, net of tax | |
| (1,887) | |
| (1,807) | ||||||
Comprehensive income | | $ | 136,268 | | $ | 176,317 | ||||||
Other comprehensive (loss) income, net of tax | |
| (1,400) | |
| 9,255 | ||||||
Comprehensive (loss) income | | $ | (26,939) | | $ | 11,310 | ||||||
Less: Comprehensive income attributable to noncontrolling interests | |
| (22,326) | |
| (20,883) | | | (23,766) | | | (22,325) |
Comprehensive income attributable to Six Flags Entertainment Corporation | | $ | 113,942 | | $ | 155,434 | ||||||
Comprehensive loss attributable to Six Flags Entertainment Corporation | | $ | (50,705) | | $ | (11,015) |
(1) Foreign currency translation adjustment is presented net of tax benefit of $0.2$0.1 million and $0.7 millionnet of tax benefit of a nominal amount for the threesix months ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021,2022, respectively.
(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the threesix months ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021,2022, respectively.
(3) Change in fair value of cash flow hedging is presented net of tax benefit of $0.3$0.4 million for the threesix months ended OctoberJuly 2, 20222023 and net of tax expense of $0.2$3.0 million for the threesix months ended OctoberJuly 3, 2021.
See accompanying notes to unaudited condensed consolidated financial statements
6
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | |
|
| Nine Months Ended | ||||
(Amounts in thousands) |
| October 2, 2022 |
| October 3, 2021 | ||
Net income | | $ | 140,210 | | $ | 173,688 |
Other comprehensive income, net of tax: | |
|
| |
| |
Foreign currency translation adjustment (1) | |
| (1,452) | |
| (3,087) |
Defined benefit retirement plan (2) | |
| 504 | |
| 780 |
Change in cash flow hedging (3) | |
| 8,316 | |
| 4,516 |
Other comprehensive income, net of tax | |
| 7,368 | |
| 2,209 |
Comprehensive income | | $ | 147,578 | | $ | 175,897 |
Less: Comprehensive income attributable to noncontrolling interests | | | (44,651) | | | (41,766) |
Comprehensive loss attributable to Six Flags Entertainment Corporation | | $ | 102,927 | | $ | 134,131 |
(1) Foreign currency translation adjustment is presented net of tax benefit of $0.2 million and $0.8 million for the nine months ended October 2, 2022 and October 3, 2021, respectively.2023.
(2) Defined benefit retirement plan is presented net of tax expense of $0.2 million and $0.3 million for the nine months ended October 2, 2022 and October 3, 2021, respectively.
(3) Change in fair value of cash flow hedging is presented net of tax expense of $2.8 million and $2.8 million for the nine months ended October 2, 2022 and October 3, 2021, respectively.
See accompanying notes to unaudited condensed consolidated financial statements.
7
SIX FLAGS ENTERTAINMENT CORPORATION
Consolidated Statements of Stockholders’ Deficit
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | | | | | | Accumulated | | | |||||||
| | |
| Capital in | | |
| other |
| Total | |||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | |||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | |||||
Balances at July 4, 2021 |
| 85,871,956 | | $ | 2,147 | | $ | 1,108,680 | | $ | (2,178,493) | | $ | (92,488) | | $ | (1,160,154) |
Issuance of common stock |
| 110,370 | |
| 2 | |
| 1,819 | |
| — | |
| — | |
| 1,821 |
Stock-based compensation |
| — | |
| — | |
| 7,876 | |
| — | |
| — | |
| 7,876 |
Payment of tax withholdings on equity-based compensation through shares withheld |
| (508) | |
| — | |
| (22) | |
| — | |
| — | |
| (22) |
Employee stock purchase plan |
| (30) | |
| — | |
| — | |
| — | |
| — | |
| — |
Net income attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| 157,241 | |
| — | |
| 157,241 |
Net other comprehensive loss, net of tax |
| — | |
| — | |
| — | |
| — | |
| (1,807) | |
| (1,807) |
Balances at October 3, 2021 |
| 85,981,788 | | $ | 2,149 | | $ | 1,118,353 | | $ | (2,021,252) | | $ | (94,295) | | $ | (995,045) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | Accumulated | | | |||||||
| | |
| Capital in | | |
| other |
| Total | |||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | |||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | |||||
Balances at April 3, 2022 |
| 86,248,545 | | $ | 2,156 | | $ | 1,124,603 | | $ | (2,088,913) | | $ | (75,622) | | $ | (1,037,776) |
Issuance of common stock |
| 215,707 | |
| 5 | |
| 735 | |
| — | |
| — | |
| 740 |
Stock-based compensation |
| — | |
| — | |
| 3,223 | |
| — | |
| — | |
| 3,223 |
Repurchase of common stock | | (3,464,385) | | | (87) | | | (25,394) | | | (71,293) | | | — | | | (96,774) |
Payment of tax withholdings on equity-based compensation through shares withheld |
| (5,304) | |
| — | |
| (257) | |
| — | |
| — | |
| (257) |
Employee stock purchase plan |
| 31,993 | |
| 1 | |
| 624 | |
| — | |
| — | |
| 625 |
Fresh start valuation adjustment for partnership park units purchased |
| — | |
| — | |
| — | |
| 117 | |
| — | |
| 117 |
Net loss attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| 45,392 | |
| — | |
| 45,392 |
Net other comprehensive income, net of tax |
| — | |
| — | |
| — | |
| — | |
| 3,690 | |
| 3,690 |
Balances at July 3, 2022 |
| 83,026,556 | | $ | 2,075 | | $ | 1,103,534 | | $ | (2,114,697) | | $ | (71,932) | | $ | (1,081,020) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Accumulated | | | | | | | | | | Accumulated | | | ||||||||||||||
| | |
| Capital in | | |
| other |
| Total | | |
| Capital in | | |
| other |
| Total | ||||||||||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | ||||||||||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | ||||||||||
Balances at July 3, 2022 |
| 83,026,556 | | $ | 2,075 | | $ | 1,103,534 | | $ | (2,114,697) | | $ | (71,932) | | $ | (1,081,020) | |||||||||||||||||
Balances at April 2, 2023 |
| 83,279,300 | | $ | 2,082 | | $ | 1,107,258 | | $ | (2,055,359) | | $ | (70,694) | | $ | (1,016,713) | |||||||||||||||||
Issuance of common stock |
| 128,590 | |
| 4 | |
| (4) | |
| — | |
| — | |
| — |
| 168,809 | | | 3 | | | (4) | | | — | | | — | | | (1) |
Stock-based compensation |
| — | |
| — | |
| 1,676 | |
| — | |
| — | |
| 1,676 |
| — | | | — | | | 2,179 | | | — | | | — | | | 2,179 |
Repurchase of common stock |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |||||||||||||||||
Payment of tax withholdings on equity-based compensation through shares withheld |
| (2,564) | |
| — | |
| (154) | |
| — | |
| — | |
| (154) |
| (5,507) | | | — | | | (137) | | | — | | | — | | | (137) |
Employee stock purchase plan |
| — | |
| — | |
| 1 | |
| — | |
| — | |
| 1 |
| 22,172 | |
| 1 | | | 483 | | | — | | | — | |
| 484 |
Fresh start valuation adjustment for partnership park units purchased |
| — | |
| — | | | — | | | 69 | | | — | |
| 69 | |||||||||||||||||
Net income attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| 115,829 | |
| — | |
| 115,829 |
| — | | | — | | | — | | | 20,554 | | | — | | | 20,554 |
Net other comprehensive loss, net of tax |
| — | |
| — | |
| — | |
| — | |
| (1,887) | |
| (1,887) |
| — | | | — | | | — | | | — | | | (1,901) | | | (1,901) |
Balances at October 2, 2022 |
| 83,152,582 | | $ | 2,079 | | $ | 1,105,053 | | $ | (1,998,868) | | $ | (73,819) | | $ | (965,555) | |||||||||||||||||
Balances at July 2, 2023 |
| 83,464,774 | | $ | 2,086 | | $ | 1,109,779 | | $ | (2,034,736) | | $ | (72,595) | | $ | (995,466) |
See accompanying notes to unaudited condensed consolidated financial statements.
8
SIX FLAGS ENTERTAINMENT CORPORATION
Consolidated Statements of Stockholders’ Deficit
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | | | | | | Accumulated | | | |||||||
| | |
| Capital in | | |
| other |
| Total | |||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | |||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | |||||
Balances at December 31, 2020 |
| 85,075,901 | | $ | 2,126 | | $ | 1,089,199 | | $ | (2,153,368) | | $ | (96,504) | | $ | (1,158,547) |
Issuance of common stock |
| 934,206 | |
| 23 | |
| 13,193 | |
| — | |
| — | |
| 13,216 |
Stock-based compensation |
| — | |
| — | |
| 17,514 | |
| — | |
| — | |
| 17,514 |
Payment of tax withholdings on equity-based compensation through shares withheld |
| (49,962) | |
| (1) | |
| (2,200) | |
| — | |
| — | |
| (2,201) |
Employee stock purchase plan | | 21,643 | | | 1 | | | 647 | | | — | | | — | | | 648 |
Fresh start valuation adjustment for partnership park units purchased | | — | | | — | | | — | | | 194 | | | — | | | 194 |
Net income attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| 131,922 | |
| — | |
| 131,922 |
Net other comprehensive income, net of tax |
| — | |
| — | |
| — | |
| — | |
| 2,209 | |
| 2,209 |
Balances at October 3, 2021 |
| 85,981,788 | | $ | 2,149 | | $ | 1,118,353 | | $ | (2,021,252) | | $ | (94,295) | | $ | (995,045) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | Accumulated | | | |||||||
| | |
| Capital in | | |
| other |
| Total | |||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | |||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | |||||
Balances at January 2, 2022 |
| 86,162,879 | | $ | 2,154 | | $ | 1,120,084 | | $ | (2,023,251) | | $ | (81,187) | | $ | (982,200) |
Issuance of common stock |
| 303,409 | |
| 7 | |
| 1,032 | |
| — | |
| — | |
| 1,039 |
Stock-based compensation |
| — | |
| — | |
| 7,448 | |
| — | |
| — | |
| 7,448 |
Repurchase of common stock |
| (3,464,385) | |
| (87) | |
| (25,394) | |
| (71,293) | |
| — | |
| (96,774) |
Payment of tax withholdings on equity-based compensation through shares withheld |
| (7,340) | |
| — | |
| (260) | |
| — | |
| — | |
| (260) |
Employee stock purchase plan | | 31,993 | | | 1 | | | 624 | | | — | | | — | | | 625 |
Fresh start valuation adjustment for partnership park units purchased | | — | | | — | | | — | | | 117 | | | — | | | 117 |
Net loss attributable to Six Flags Entertainment Corporation |
| — | |
| — | |
| — | |
| (20,270) | |
| — | |
| (20,270) |
Net other comprehensive income, net of tax |
| — | |
| — | |
| — | |
| — | |
| 9,255 | |
| 9,255 |
Balances at July 3, 2022 |
| 83,026,556 | | $ | 2,075 | | $ | 1,103,534 | | $ | (2,114,697) | | $ | (71,932) | | $ | (1,081,020) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | | | | | | Accumulated | | | ||||||||||
| | | | Capital in | | | | other | | Total | | | | Capital in | | | | other | | Total | ||||||||||||||
| | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | | Common stock | | excess of | | Accumulated | | comprehensive | | stockholders' | ||||||||||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | ||||||||||
Balances at January 2, 2022 | | 86,162,879 | | $ | 2,154 | | $ | 1,120,084 | | $ | (2,023,251) | | $ | (81,187) | | $ | (982,200) | |||||||||||||||||
Balances at January 1, 2023 | | 83,178,294 | | $ | 2,079 | | $ | 1,104,051 | | $ | (1,985,500) | | $ | (71,195) | | $ | (950,565) | |||||||||||||||||
Issuance of common stock | | 431,999 | | | 11 | | | 1,028 | | | — | | | — | | | 1,039 | | 273,469 | | | 6 | | | (7) | | | — | | | — | | | (1) |
Stock-based compensation | | — | | | — | | | 9,124 | | | — | | | — | | | 9,124 | | — | | | — | | | 5,493 | | | — | | | — | | | 5,493 |
Repurchase of common stock | | (3,464,385) | | | (87) | | | (25,394) | | | (71,293) | | | — | | | (96,774) | |||||||||||||||||
Payment of tax withholdings on equity-based compensation through shares withheld | | (9,904) | | | — | | | (414) | | | — | | | — | | | (414) | | (9,161) | | | — | | | (241) | | | — | | | — | | | (241) |
Employee stock purchase plan | | 31,993 | | | 1 | | | 625 | | | — | | | — | | | 626 | | 22,172 | | | 1 | | | 483 | | | — | | | — | | | 484 |
Fresh start valuation adjustment for partnership park units purchased | | — | | | — | | | — | | | 117 | | | — | | | 117 | | — | | | — | | | — | | | 69 | | | — | | | 69 |
Net income attributable to Six Flags Entertainment Corporation | | — | | | — | | | — | | | 95,559 | | | — | | | 95,559 | |||||||||||||||||
Net other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | 7,368 | | | 7,368 | |||||||||||||||||
Balances at October 2, 2022 | | 83,152,582 | | $ | 2,079 | | $ | 1,105,053 | | $ | (1,998,868) | | $ | (73,819) | | $ | (965,555) | |||||||||||||||||
Net loss attributable to Six Flags Entertainment Corporation | | — | | | — | | | — | | | (49,305) | | | — | | | (49,305) | |||||||||||||||||
Net other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (1,400) | | | (1,400) | |||||||||||||||||
Balances at July 2, 2023 | | 83,464,774 | | $ | 2,086 | | $ | 1,109,779 | | $ | (2,034,736) | | $ | (72,595) | | $ | (995,466) |
See accompanying notes to unaudited condensed consolidated financial statements.
9
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | |
|
| Nine Months Ended |
| Six Months Ended | ||||||||
(Amounts in thousands) |
| October 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| July 3, 2022 | ||||
Cash flows from operating activities: | | | | | | | | | | | | |
Net income | | $ | 140,210 | | $ | 173,688 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |
|
| |
|
| ||||||
Net (loss) income | | $ | (25,539) | | $ | 2,055 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |
|
| |
|
| ||||||
Depreciation and amortization | |
| 86,772 | |
| 84,938 | |
| 58,024 | |
| 56,586 |
Stock-based compensation | |
| 9,124 | |
| 17,514 | |
| 5,493 | |
| 7,448 |
Interest accretion on notes payable | |
| 833 | |
| 831 | |
| 511 | |
| 555 |
Loss on debt extinguishment | |
| 17,533 | |
| — | |
| 13,982 | |
| 17,533 |
Amortization of debt issuance costs | |
| 5,531 | |
| 5,933 | |
| 2,889 | |
| 3,965 |
Other, including (gain) loss on disposal of assets | |
| 2,760 | |
| (610) | ||||||
Change in accounts receivable | |
| 25,519 | |
| (101,080) | ||||||
Change in inventories, prepaid expenses and other current assets | |
| (43,543) | |
| 17,333 | ||||||
Change in deposits and other assets | |
| (3,697) | |
| 1,147 | ||||||
Change in ROU operating leases | | | 10,176 | | | 7,072 | ||||||
Change in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities | |
| (62,274) | |
| 93,742 | ||||||
Change in operating lease liabilities | | | (14,628) | | | (15,050) | ||||||
Change in accrued interest payable | |
| (23,938) | |
| (26,964) | ||||||
Deferred income taxes | |
| 43,434 | |
| 47,445 | ||||||
Loss (gain) on disposal of assets | |
| 4,985 | |
| (2,002) | ||||||
Deferred income tax (benefit) expense | |
| (7,467) | |
| 726 | ||||||
Other | | | (5,573) | | | (3,403) | ||||||
Changes in operating assets and liabilities: | | | | | | | ||||||
(Increase) decrease in accounts receivable | |
| (42,233) | |
| 27,327 | ||||||
Increase in inventories, prepaid expenses and other current assets | |
| (25,480) | |
| (34,698) | ||||||
(Increase) decrease in deposits and other assets | |
| 1,315 | |
| (1,928) | ||||||
Decrease in ROU operating leases | | | 5,614 | | | 5,517 | ||||||
Increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities | |
| 104,717 | |
| 11,012 | ||||||
Decrease in operating lease liabilities | | | (1,340) | | | (1,615) | ||||||
Decrease in accrued interest payable | |
| (5,269) | |
| (25,841) | ||||||
Net cash provided by operating activities | |
| 193,812 | |
| 305,939 | |
| 84,629 | |
| 63,237 |
| | | | | | | | | | | | |
Cash flows from investing activities: | |
|
| |
|
| |
|
| |
|
|
Additions to property and equipment | |
| (78,038) | |
| (61,815) | |
| (68,130) | |
| (59,006) |
Property insurance recoveries | |
| 4,655 | |
| — | |
| 1,089 | |
| 3,664 |
Purchase of identifiable intangible assets | |
| — | |
| (12) | ||||||
Proceeds from sale of assets | |
| — | |
| 46 | ||||||
Net cash used in investing activities | |
| (73,383) | |
| (61,781) | |
| (67,041) | |
| (55,342) |
| | | | | | | | | | | | |
Cash flows from financing activities: | |
|
| |
|
| |
|
| |
|
|
Repayment of borrowings | |
| (450,000) | |
| (2,000) | |
| (1,028,623) | |
| (360,000) |
Proceeds from borrowings | |
| 200,000 | |
| 2,000 | |
| 998,984 | |
| 200,000 |
Payment of debt issuance costs | |
| (19,294) | |
| (12,600) | ||||||
Stock repurchases | |
| (96,774) | |
| — | |
| — | |
| (96,774) |
Redemption premium payments on debt extinguishment | | | (12,600) | | | — | ||||||
Payment of cash dividends | |
| (199) | |
| (779) | |
| — | |
| (3) |
Proceeds from issuance of common stock | | | 1,665 | | | 13,605 | | | — | | | 1,665 |
Payment of tax withholdings on equity-based compensation through shares withheld | | | (414) | | | (2,201) | | | (241) | | | (260) |
Reduction in finance lease liability | | | (2,025) | | | (484) | | | (498) | | | (490) |
Purchase of redeemable noncontrolling interest | |
| (556) | |
| (1,115) | |
| (328) | |
| (556) |
Distributions to noncontrolling interests | | | (22,326) | | | (20,883) | ||||||
Net cash used in financing activities | |
| (383,229) | |
| (11,857) | |
| (50,000) | |
| (269,018) |
| | | | | | | | | | | | |
Effect of exchange rate on cash | |
| 529 | |
| (204) | |
| 3,870 | |
| 340 |
| | | | | | | | | | | | |
Net change in cash and cash equivalents | |
| (262,271) | |
| 232,097 | |
| (28,542) | |
| (260,783) |
Cash and cash equivalents at beginning of period | |
| 335,585 | |
| 157,760 | |
| 80,122 | |
| 335,585 |
Cash and cash equivalents at end of period | | $ | 73,314 | | $ | 389,857 | | $ | 51,580 | | $ | 74,802 |
| | | | | | | | | | | | |
Supplemental cash flow information | |
|
| |
|
| |
|
| |
|
|
Cash paid for interest | | $ | 125,919 | | $ | 134,921 | | $ | 83,031 | | $ | 95,141 |
Cash paid for income taxes | | $ | 3,582 | | $ | 783 | | $ | 6,892 | | $ | 1,661 |
See accompanying notes to unaudited condensed consolidated financial statements.
10
1. General — Basis of Presentation
We own and operate regional theme parks and waterparks.water parks. We are the largest regional theme park operator in the world, and we are the largest operator of waterparkswater parks in North America based on the number of parks we operate. Of the 27 parks we ownedown or operated as of October 2, 2022,operate, 24 parks are located in the United States, two are located in Mexico, and one is located in Montreal, Canada.
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the SEC.
Our current fiscal year will end on January 1,December 31, 2023. This Quarterly Report covers the period January 3, 20222, 2023 – OctoberJuly 2, 20222023 (“the ninesix months ended OctoberJuly 2, 2022”2023”) and the period April 3, 2023 – July 4, 2022 – October 2, 20222023 (“the three months ended OctoberJuly 2, 2022”2023”). The comparison period in the prior year covers the dates January 1, 20213, 2022 – OctoberJuly 3, 20212022 (“the ninesix months ended OctoberJuly 3, 2021”2022”) and the period April 4, 2022 – July 5, 2021 – October 3, 20212022 (“the three months ended OctoberJuly 3, 2021”2022”).
The additional three days in the nine months ended October 3, 2021 accounted for 89 thousand additional guests.
The 20212022 Annual Report includes additional information about us, our operations and our financial position, and should be referred to in conjunction with this Quarterly Report. The information furnished in this Quarterly Report reflects all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the periods presented.
Results of operations for the three and ninesix months ended OctoberJuly 2, 2022,2023, are not indicative of the results expected for the full year. Our operations are highly seasonal, with approximately 70% - 75% of park attendance and revenues in a typical year occurring in the second and third calendar quarters of each year, with the most significant period falling between Memorial Day and Labor Day.
COVID-19 Pandemic
The COVID-19 pandemic continues to present material uncertainty and risk with respect to our performance and financial results. Significant government and private sector actionsCertain previously reported amounts have been taken since 2020 and likely will continuereclassified to be taken intendedconform to control the spread and mitigatecurrent year presentation. During 2023, we reclassified the economic effectsnet pension-related expense (benefit) to other (income) expense, net, in our consolidated statements of operations. We have separated “(Gain) loss on disposal of assets” from “Other” on the pandemic. Since early 2021, the availability and administrationcondensed consolidated statement of vaccines against COVID-19 has increased, and there has been an easing of restrictions on social, business, travel and government activities and functions. On the other hand, infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, and wage rates. The duration and severity of the impact of the COVID-19 pandemic are currently unknown. The pandemic has impacted the Company and could materially impact our financial results in the future.cash flows.
a. Consolidated U.S. GAAP Presentation
Our accounting policies reflect industry practices and conform to U.S. GAAP.
The unaudited condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. We also consolidate the partnerships that own Six Flags Over Texas ("SFOT") and Six Flags Over Georgia (including Six Flags White Water Atlanta) ("SFOG", and together with SFOT, the "Partnership Parks") as subsidiaries in our unaudited condensed consolidated financial statements, as we have determined that we have the power to direct the activities of the Partnership Parks that most significantly impact their economic performance and we have the obligation to absorb losses and receive benefits from the Partnership Parks that can be potentially significant to these entities. The equity interests owned by non-affiliated parties in the Partnership Parks are reflected in the accompanying unaudited condensed consolidated balance sheets as redeemable noncontrolling interests.
11
b. Income Taxes
We recorded a valuation allowance of $109.0$98.1 million, $107.4$96.0 million and $129.3$108.4 million as of OctoberJuly 2, 2022,2023, January 2,1, 2023, and July 3, 2022, and October 3, 2021, respectively, due to uncertainties related to our ability to use some of our deferred tax assets, primarily consisting of certain state net operating loss and other tax carryforwards, before they expire. The valuation allowance was based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets were recoverable. Our projected taxable income over the foreseeable future indicates we will be able to use all of our federal net operating loss carryforwards before they expire.
We classify interest and penalties attributable to income taxes as part of income tax expense. As of OctoberJuly 2, 2022,2023, January 2,1, 2023, and July 3, 2022, and October 3, 2021, we had no recorded amounts for accrued interest or penalties.
11
c. Goodwill and Intangibles
Goodwill and intangible assets with indefinite lives are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to the reporting unit. All of our parks are operated in a similar manner and have comparable characteristics in that they produce and distribute similar services and products using similar processes, have similar types of customers, are subject to similar regulations and exhibit similar economic characteristics. As such, we are a single reporting unit.
As of OctoberJuly 2, 2022,2023, the fair value of theour single reporting unit exceeded our carrying amount. We have one reporting unit at the same level for which Holdings common stock is traded and we believe our market capitalization is the best indicator of our reporting unit’s fair value. At OctoberAs of July 2, 2022,2023, we did not identify any triggering events that would require a full quantitative analysis to be performed.
d. Long-Lived Assets
We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable.recoverable, “triggering event(s)”. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset or group of assets to the projected future net cash flows expected to be generated by the asset or group of assets. If such assets are not considereddetermined to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective estimated fair value. Assets to be disposed ofheld-for-sale are reported at the lower of the carrying amount or fair value less costs to sell. At OctoberAs of July 2, 2022,2023, we did not identify any triggering events.events that would require a quantitative analysis.
12
e. Earnings (Loss) Per Common Share
Earnings (loss) per common share for the three and ninesix months ended OctoberJuly 2, 2022,2023 and OctoberJuly 3, 2021,2022, was calculated as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| Six Months Ended | ||||||||||||||||
(Amounts in thousands, except per share data) |
| October 2, 2022 |
| October 3, 2021 |
| October 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| July 3, 2022 |
| July 2, 2023 |
| July 3, 2022 | ||||||||
Net income attributable to Six Flags Entertainment Corporation |
| $ | 115,829 | | $ | 157,241 |
| $ | 95,559 | | $ | 131,922 | ||||||||||||
Net income (loss) attributable to Six Flags Entertainment Corporation |
| $ | 20,554 | | $ | 45,392 |
| $ | (49,305) | | $ | (20,270) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding - basic: | | | 83,094 | | | 85,919 | | | 84,760 | | | 85,596 | | | 83,379 | | | 84,992 | | | 83,293 | | | 85,594 |
Effect of dilutive stock options and restricted stock units | | | 13 | | | 1,340 | | | 159 | | | 1,482 | | | 417 | | | 250 | | | — | | | — |
Weighted-average common shares outstanding - diluted: | | | 83,107 | | | 87,259 | | | 84,919 | | | 87,078 | | | 83,796 | | | 85,242 | | | 83,293 | | | 85,594 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share - basic: | | $ | 1.39 | | $ | 1.83 | | $ | 1.13 | | $ | 1.54 | ||||||||||||
Earnings per share - diluted: | | $ | 1.39 | | $ | 1.80 | | $ | 1.13 | | $ | 1.51 | ||||||||||||
Earnings (loss) per share - basic: | | $ | 0.25 | | $ | 0.53 | | $ | (0.59) | | $ | (0.24) | ||||||||||||
Earnings (loss) per share - diluted: | | $ | 0.25 | | $ | 0.53 | | $ | (0.59) | | $ | (0.24) |
The computation of diluted earnings per share excluded the effect of 2,509,0001,578,000 and 3,580,0002,462,000 antidilutive stock options and restricted stock units for the three months ended OctoberJuly 2, 2022,2023, and OctoberJuly 3, 2021,2022, respectively, and excluded the effect of 2,979,0001,550,000 and 3,528,0002,415,000 antidilutive stock options and restricted stock units for the ninesix months ended OctoberJuly 2, 2023, and July 3, 2022, and October 3, 2021, respectively.
f. Stock Benefit Plans
Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), Holdingswe may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance stock units, performance and cash-settled awards and dividend equivalent rights ("DERs") to select employees, officers, directors and consultants of Holdings and its affiliates.consultants.
Periodically, we grant performance stock units to key employees. These awards vest based on attainment of specific objectivesperformance targets most often related to Adjusted EBITDA or recognized revenue over a defined period. CompensationAs of July 2, 2023, we have not determined that it is probable that we will achieve any of the performance targets associated with our outstanding performance units, and we have therefore not recognized any expense recognized underfor these performance stock units was not material to these condensed consolidated financial statements for any period presented.awards.
12
During the three and ninesix months ended OctoberJuly 2, 2022,2023 and OctoberJuly 3, 2021,2022, stock-based compensation expense consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
(Amounts in thousands) |
| October 2, 2022 |
| October 3, 2021 |
| October 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| July 3, 2022 |
| July 2, 2023 |
| July 3, 2022 | | ||||||||
Long-Term Incentive Plan | | $ | 1,682 | | $ | 7,801 | | $ | 9,061 | | $ | 17,148 | |||||||||||||
Employee Stock Purchase Plan | |
| (6) | |
| 75 | |
| 63 | |
| 366 | |||||||||||||
Total Stock-Based Compensation | | $ | 1,676 | | $ | 7,876 | | $ | 9,124 | | $ | 17,514 | |||||||||||||
Long-term incentive plan | | $ | 2,123 | | $ | 3,229 | | $ | 5,407 | | $ | 7,379 | | ||||||||||||
Employee stock purchase plan | |
| 56 | |
| (6) | |
| 86 | |
| 69 | | ||||||||||||
Total stock-based compensation | | $ | 2,179 | | $ | 3,223 | | $ | 5,493 | | $ | 7,448 | |
g. Accounts Receivable, Net
Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products that allow for payment plans, such as season passes, annual passes, summer passesmemberships and memberships.our Six Flags Plus pass, a new twelve-month, subscription style pass. We are not exposed to a significant concentration of credit risk; however, based on the age of the receivables, our historical experience and other factors and assumptions we believe to be customary and reasonable, we record an allowance for doubtful accounts. As of OctoberJuly 2, 2022,2023, January 2,1, 2023, and July 3, 2022, and October 3, 2021, we have recorded an allowance for doubtful accounts of $7.6$9.3 million, $13.8$4.1 million, and $22.0$6.7 million, respectively, which is primarily comprised of estimated payment defaults under our membershipSix Flags Plus pass and annual pass programs. As both our membership and annual pass programs are no longer accepting new customers, we expect the allowancemulti-use admission products that allow for doubtful accounts to decline over the next twelve months.payment plans. To the extent that payments under our membership and annual pass programsfor products for which an allowance for doubtful accounts is established have not been recognized in revenue, the allowance for doubtful accounts recorded against our membership and annual pass programs is offset with a corresponding reduction in deferred revenue.
13
h. RecentRecently Adopted Accounting Pronouncements Not Yet Adopted
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. Interest on the Second Amended and Restated Credit Facility accrues at an annual rate based on LIBOR. We do not expectAs of July 2, 2023, we no longer have any debt instruments that contain LIBOR as a reference rate. Our adoption of Update 2020-04 todid not have a materialany effect on our condensed consolidated financial statements.
2. Revenue
Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.
The following tables present our revenues disaggregated by contract duration for the three and nine month periods ended October 2, 2022, and October 3, 2021, respectively. Long-term and short-term contracts consist of our contracts with customers with terms greater than one year and less than or equal to one year, respectively.
| | | | | | | | | | | | |
| | Three Months Ended October 2, 2022 | ||||||||||
|
| |
| | | |
| Sponsorship, | | | | |
| | | | | Park Food, | | International | | | | ||
| | | | | Merchandise | | Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 20,481 | | $ | 1,915 | | $ | 6,301 | | $ | 28,697 |
Short-term contracts and other (a) | |
| 260,021 | |
| 207,184 | |
| 8,929 | |
| 476,134 |
Total revenues | | $ | 280,502 | | $ | 209,099 | | $ | 15,230 | | $ | 504,831 |
| | | | | | | | | | | | |
| | Three Months Ended October 3, 2021 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 105,393 | | $ | 7,494 | | $ | 5,157 | | $ | 118,044 |
Short-term contracts and other (a) | |
| 239,824 | |
| 273,005 | |
| 7,411 | |
| 520,240 |
Total revenues | | $ | 345,217 | | $ | 280,499 | | $ | 12,568 | | $ | 638,284 |
14
| | | | | | | | | | | | |
| | Nine Months Ended October 2, 2022 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 40,433 | | $ | 4,923 | | $ | 16,329 | | $ | 61,685 |
Short-term contracts and other (a) | |
| 554,833 | |
| 441,526 | |
| 20,316 | |
| 1,016,675 |
Total revenues | | $ | 595,266 | | $ | 446,449 | | $ | 36,645 | | $ | 1,078,360 |
| | | | | | | | | | | | |
| | Nine Months Ended October 3, 2021 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Consolidated | ||||
Long-term contracts | | $ | 182,187 | | $ | 15,317 | | $ | 18,061 | | $ | 215,565 |
Short-term contracts and other (a) | |
| 452,529 | |
| 495,303 | |
| 16,698 | |
| 964,530 |
Total revenues | | $ | 634,716 | | $ | 510,620 | | $ | 34,759 | | $ | 1,180,095 |
Long-term Contracts
Our long-term contracts consist of season passes that have a duration more than twelve months, consisting of season passes purchased by customers in the year preceding the operating season to which they relate, sponsorship contracts, and international agreements with third parties. We recently shifted our product offering from season passes to annual passes, which expire on the first anniversary of purchase. Annual passes are categorized as short-term contracts as described below under “Short-Term Contracts and Other”. We earn season pass revenue pursuant to our customers purchasing a season pass for a fixed fee, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks’ operating season. Our pass products are noncancelable and nonrefundable. We earn sponsorship revenue from separately-priced contracts with third parties pursuant to which we sell and advertise the third party’s products within the parks in exchange for consideration. Advertisements may include, but are not limited to, banners, signs, radio ads, association with certain events, sponsorship of rides within our parks and retail promotions. We earn international agreements revenue pursuant to arrangements in which we assist in the development and management of Six Flags-branded parks outside of North America. Within our international agreements, we have identified three distinct performance obligations as brand licensing, project services and management services. We do not consider revenue recognized for the performance obligations related to our international agreements to be significant, neither individually nor in the aggregate, to any period presented.
At January 2, 2022, $58.7 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $24.6 million and $49.4 million was recognized as revenue for long-term contracts during the three and nine months ended October 2, 2022, respectively. As of October 2, 2022, the total unearned amount of revenue for remaining long-term contract performance obligations was $21.4 million. At January 1, 2021, $77.6 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $37.7 million and $72.6 million was recognized as revenue for long-term contracts during the three and nine months ended October 3, 2021, respectively. As of October 3, 2021, the total unearned amount of revenue for remaining long-term contract performance obligations was $72.8 million.
As of October 2, 2022, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately $19.7 million in the remainder of 2022, $9.3 million in 2023, $6.9 million in 2024, $0.9 million in 2025, and $1.1 million in 2026 and thereafter.
15
Short-term Contracts and Other
Our short-term contracts consist primarily of annual passes, season passes that have a duration of less than twelve months, consisting of season passes purchased by customers during the operating season to which they relate and memberships with customers, certain sponsorship contracts and international agreements with third parties. We earn revenue from a customer’s purchase of our annual pass, season pass and membership products, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks’ operating season for a fixed fee. We earn sponsorship and international agreements revenue from contracts with third parties, pursuant to which we sell and advertise the third party’s products within our parks on a short-term basis that generally coincides with our annual operating season, and pursuant to certain activities in connection with our international agreements. The transaction price for our short-term contracts is explicitly stated within the contracts.
We generally recognize revenue from short-term contracts over the passage of time, with the exception of season pass and membership revenues. We recognize season pass and membership revenues in "Park admissions" over the estimated redemption rate, as we believe this appropriately depicts the transfer of service to our customers. We estimate the redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable. We review the estimated redemption rate regularly and on an ongoing basis and revise it as necessary throughout the year. Amounts received for multi-use admissions in excess of redemptions are recognized in "Deferred revenue".
Other revenues consist primarily of revenues from single-use tickets for entrance to our parks, in-park services (such as the sale of food and beverages, merchandise, games and attractions, standalone parking sales and other services inside our parks), accommodations revenue, and other miscellaneous products and services. Due to the short-term transactional nature of such purchases, we apply the practical expedient to recognize revenue for single-use ticket sales, in-park services, accommodations, and other miscellaneous services and goods for which we have the right to invoice.
3. Long-Term Indebtedness
Credit Facility
As of October 2, 2022, our credit facility consisted of a $350.0 million revolving credit loan facility (the “Second Amended and Restated Revolving Loan”) and a $479.0 million Tranche B Term Loan facility (the “Second Amended and Restated Term Loan B”) pursuant to the amended and restated credit facility that we entered into in 2019 (the “Second Amended and Restated Credit Facility”) and further amended in both April 2020 and August 2020. On May 18, 2022, we reduced and terminated the Series B replacement Revolving Commitments by $131.0 million, which reduced the Second Amended and Restated Revolving Loan capacity to $350.0 million from $481.0 million.
As of October 2, 2022, our available borrowing capacity under our Second Amended and Restated Revolving Loan was $219.0 million after reducing the facility by $110.0 million borrowings outstanding and $21.0 million of outstanding letters of credit. As of January 2, 2022 and October 3, 2021, no advances under the Second Amended and Restated Revolving Loan were outstanding (excluding amounts reserved for letters of credit in the amount of $20.2 million). Interest on the Second Amended and Restated Revolving Loan accrues at an annual rate of LIBOR plus an applicable margin with an unused commitment fee based on our senior secured leverage ratio. As of October 2, 2022, the Second Amended and Restated Revolving loan had an interest rate of 5.78%. As of October 2, 2022, the Second Amended and Restated Revolving Loan unused commitment fee was 0.625%. The Second Amended and Restated Revolving Loan matures on April 17, 2024.
As of October 2, 2022, January 2, 2022 and October 3, 2021, $479.0 million was outstanding under the Second Amended and Restated Term Loan B. Interest on the Second Amended and Restated Term Loan B accrues at an annual rate of LIBOR plus 1.75%. In June 2019, we entered into three separate interest rate swap agreements with a notional amount of $300.0 million (the “June 2019 Swap Agreements”) and, in August 2019, we entered into two separate interest rate swap agreements with a notional amount of $400.0 million (the “August 2019 Swap Agreements”). These swaps were entered into to mitigate the risk of an increase in the LIBOR interest rate on the Second Amended and
16
Restated Term Loan B by exchanging the floating LIBOR rate for a negotiated fixed rate. On March 24, 2022, we terminated the August 2019 Swap Agreements. The June 2019 Swap Agreements expire in June 2023. The Second Amended and Restated Term Loan B now consists of only floating rate debt. As of October 2, 2022, the applicable interest rate on the Second Amended and Restated Term Loan B was 3.23%. The Second Amended and Restated Term Loan B matures on April 17, 2026.
2024 Notes, 2025 Notes and 2027 Notes
In June 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due 2024 and, in April 2017, issued an additional $700.0 million of senior unsecured notes due 2024 (together, the “2024 Notes”). In April 2017, Holdings issued $500.0 million of 5.50% senior notes due 2027 (the "2027 Notes"). In April 2020, SFTP issued $725.0 million of 7.00% senior secured notes due 2025 (the “2025 Notes”).
On July 1, 2022, Holdings prepaid $360.0 million of the 2025 Notes at a premium of 103.5%. The transaction reduced the outstanding amount of the 2025 Notes to $365.0 million. We incurred a $17.5 million loss on debt extinguishment containing $12.6 million for the premium paid above par and $5.0 million related to the write-off of deferred financing costs related to the transaction.
As of October 2, 2022, $949.5 million of the 2024 Notes, $365.0 million of the 2025 Notes, and $500.0 million of the 2027 Notes, were issued and outstanding. Interest payments of $23.1 million for the 2024 Notes are due semi-annually on January 31 and July 31 of each year. Following the repayment of $360 million of the 2025 Notes, interest payments of $12.7 million for the 2025 Notes are due semi-annually on January 1 and July 1 each year. Interest payments of $13.8 million for the 2027 Notes are due semi-annually on April 15 and October 15 of each year.
Long-Term Indebtedness Summary
As of October 2, 2022, January 2, 2022, and October 3, 2021, the principal balance of our long-term debt consisted of the following:
| | | | | | | | | |
|
| As of | |||||||
(Amounts in thousands) |
| October 2, 2022 |
| January 2, 2022 |
| October 3, 2021 | |||
Second Amended and Restated Credit Facility | | | | | | | | | |
Second Amended and Restated Term Loan B |
| $ | 479,000 |
| $ | 479,000 |
| $ | 479,000 |
Second Amended and Restated Revolving Loan | | | 110,000 | | | — | | | — |
2024 Notes | |
| 949,490 | |
| 949,490 | |
| 949,490 |
2025 Notes | | | 365,000 | | | 725,000 | | | 725,000 |
2027 Notes | |
| 500,000 | |
| 500,000 | |
| 500,000 |
Net discount | |
| (2,416) | |
| (3,249) | |
| (3,526) |
Deferred financing costs | |
| (11,854) | |
| (20,717) | |
| (22,161) |
Total debt | | $ | 2,389,220 | | $ | 2,629,524 | | $ | 2,627,803 |
Less short-term borrowings | | | (110,000) | | | — | | | — |
Total long-term debt | | $ | 2,279,220 | | $ | 2,629,524 | | $ | 2,627,803 |
Fair-Value of Long-Term Indebtedness
As of October 2, 2022, January 2, 2022, and October 3, 2021, the fair value of our long-term debt, excluding discounts and deferred financing costs, was $2,259.2 million, $2,703.5 million and $2,692.4 million, respectively.
17
4. Accumulated Other Comprehensive Loss
Changes in the composition of Accumulated Other Comprehensive Loss ("AOCL") during the nine months ended October 2, 2022, were as follows:
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | |
| | Cumulative | | | | | | | | | | | Other | ||
| | Translation | | Cash Flow | | Defined Benefit | | Income | | Comprehensive | |||||
(Amounts in thousands) |
| Adjustment |
| Hedges |
| Plans |
| Taxes |
| Loss | |||||
Balances at January 2, 2022 | | $ | (31,970) | | $ | (4,985) | | $ | (44,093) | | $ | (139) | | $ | (81,187) |
Net current period change | |
| (1,888) | |
| 11,778 | |
| — | |
| (2,482) | |
| 7,408 |
Amounts reclassified from AOCI | |
| — | |
| (435) | |
| 674 | |
| (279) | |
| (40) |
Balances at October 2, 2022 | | $ | (33,858) | | $ | 6,358 | | $ | (43,419) | | $ | (2,900) | | $ | (73,819) |
Reclassifications out of AOCI during the three and nine months ended October 2, 2022 and October 3, 2021:
| | | | | | | | | | | | | | |
| | | | Amount of Reclassification from AOCI | | Amount of Reclassification from AOCI | ||||||||
| | | | Three Months Ended | | Nine Months Ended | ||||||||
Component of AOCI |
| Location of Reclassification into Income (Loss) | | October 2, 2022 | | October 3, 2021 |
| October 2, 2022 | | October 3, 2021 | ||||
| | | | | | | | | | | | | | |
Amortization of loss on interest rate hedge | | Interest expense | | $ | (778) | | $ | 1,395 | | $ | (435) | | $ | 4,137 |
| | Income tax benefit | | | (21) | | | (350) | |
| (109) | |
| (1,039) |
| | Net of tax | | $ | (799) | | $ | 1,045 | | $ | (544) | | $ | 3,098 |
| | | | | | | | | | | | | | |
Amortization of deferred actuarial loss and prior service cost |
| Operating expenses | | $ | 216 | | $ | 361 | | $ | 674 | | $ | 1,041 |
|
| Income tax benefit | |
| (55) | |
| (90) | |
| (170) | |
| (261) |
|
| Net of tax | | $ | 161 | | $ | 271 | | $ | 504 | | $ | 780 |
| | | | | | | | | | | | | | |
Total reclassifications |
|
| | $ | (638) | | $ | 1,316 | | $ | (40) | | $ | 3,878 |
5. Derivative Financial Instruments
We hold interest rate swap agreements that mitigate the risk of an increase in the LIBOR rate in effect on the Second Amended and Restated Term Loan B. We enter into derivative contracts for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. As such, in conjunction with the repayment of a portion of the Second Amended and Restated Term Loan B in April 2020, certain of our interest rate swap agreements were de-designated because the hedged interest was no longer probable to occur.
Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in “Prepaid expenses and other current assets” and “Other accrued liabilities,” respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in “Deposits and other assets” and “Other long-term liabilities,” respectively.
On March 24, 2022, we terminated the August 2019 Swap Agreements for net cash proceeds of $7.4 million. The swap agreements were used as economic hedges against rising interest rates and had been designated as cash flow hedges prior to termination. We recorded the settlement in accumulated other comprehensive income in the amount of $7.7 million which will be amortized through September 2024 until the maturity of the Second Amended and Restated Term Loan B.
Derivative assets recorded at fair value in an asset position as well as their classification on our unaudited condensed consolidated balance sheets as of October 2, 2022, January 2, 2022, and October 3, 2021:
1813
The following tables present our revenues disaggregated by contract duration for the three and six month periods ended July 2, 2023 and July 3, 2022, respectively. Long-term and short-term contracts consist of our contracts with customers with terms greater than one year and less than or equal to one year, respectively.
| | | | | | | | | | | | | ||||||||
| | Three Months Ended July 2, 2023 | ||||||||||||||||||
|
| |
| | | |
| Sponsorship, | | | | |||||||||
| | | | | | | | | | | | | Park Food, | | International | | | | ||
| Derivative Assets | | | | | Merchandise | | Agreements and | | | | |||||||||
(Amounts in thousands) | October 2, 2022 |
| January 2, 2022 |
| October 3, 2021 |
| Park Admissions |
| and Other |
| Accommodations |
| Total | |||||||
Derivatives Not Designated as Hedging Instruments | | | | | | | | | ||||||||||||
Interest rate swap agreements — other current assets | $ | 6,082 | | $ | — | | $ | 851 | ||||||||||||
Interest rate swap agreements — other non-current assets | | 5,442 | | | — | | | — | ||||||||||||
| $ | 11,524 |
| $ | — |
| $ | 851 | ||||||||||||
Long-term contracts | | $ | 12,066 | | $ | 1,423 | | $ | 6,807 | | $ | 20,296 | ||||||||
Short-term contracts and other (1) | |
| 226,897 | |
| 189,369 | |
| 7,145 | |
| 423,411 | ||||||||
Total revenues | | $ | 238,963 | | $ | 190,792 | | $ | 13,952 | | $ | 443,707 |
| | | | | | | | | | | | |
| | Three Months Ended July 3, 2022 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Total | ||||
Long-term contracts | | $ | 16,001 | | $ | 2,226 | | $ | 3,500 | | $ | 21,727 |
Short-term contracts and other (1) | |
| 225,776 | |
| 180,855 | |
| 7,064 | |
| 413,695 |
Total revenues | | $ | 241,777 | | $ | 183,081 | | $ | 10,564 | | $ | 435,422 |
| | | | | | | | | | | | |
| | Six Months Ended July 2, 2023 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Total | ||||
Long-term contracts | | $ | 16,927 | | $ | 1,963 | | $ | 13,570 | | $ | 32,460 |
Short-term contracts and other (1) | |
| 298,339 | |
| 241,615 | |
| 13,483 | |
| 553,437 |
Total revenues | | $ | 315,266 | | $ | 243,578 | | $ | 27,053 | | $ | 585,897 |
| | | | | | | | | | | | |
| | Six Months Ended July 3, 2022 | ||||||||||
|
| | |
| | |
| Sponsorship, |
| | | |
| | | |
| Park Food, |
| International | | | | ||
| | | |
| Merchandise |
| Agreements and | | | | ||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
| Total | ||||
Long-term contracts | | $ | 19,952 | | $ | 3,008 | | $ | 10,028 | | $ | 32,988 |
Short-term contracts and other (1) | |
| 294,812 | |
| 234,342 | |
| 11,387 | |
| 540,541 |
Total revenues | | $ | 314,764 | | $ | 237,350 | | $ | 21,415 | | $ | 573,529 |
(1) | Other revenues primarily include sales of single-use tickets and short-term transactional sales for which we have the right to invoice. |
Long-term Contracts
As of January 1, 2023, $33.5 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $8.6 million and $20.8 million was recognized as revenue for long-term contracts during the three and six months ended July 2, 2023, respectively. As of July 2, 2023, the total unearned amount of revenue for remaining long-term contract performance obligations was $27.5 million. As of January 2, 2022, $58.7 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $20.8 million and $33.0 million was recognized as revenue for long-term contracts during the three and six months ended July 3, 2022, respectively. As of July 3, 2022, the total unearned amount of revenue for remaining long-term contract performance obligations was $37.6 million.
As of July 2, 2023, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately $35.0 million in the remainder of 2023, $17.6 million in 2024, $9.2 million in 2025, $7.1 million in 2026, and $12.8 million in 2027 and thereafter.
14
3. Long-Term Indebtedness
Credit Facility
As of July 2, 2023, our credit facility consisted of a $500.0 million revolving credit facility (the “Revolving Credit Facility”) and a $479.0 million Tranche B Term Loan facility (the “Term Loan B”) pursuant to the amended and restated credit facility that we entered into in May 2023 (the “Credit Facility”).
Concurrently with the closing of the $800 million in aggregate principal amount of 7.25% senior unsecured notes due 2031 (“2031 Notes”), the Company amended its existing senior secured credit facility to, among other things, (i) establish a $500 million replacement revolving credit facility maturing in May 2028, subject to springing maturity conditions, which was previously scheduled to expire in April 2024 (ii) maintain the same interest rate margins on borrowings under the replacement revolving credit facility as were previously in effect, while reducing the fee on unused revolving commitments to 0.5%, stepping down to 0.375% upon achieving a senior secured leverage ratio of less than 1.25:1.00, (iii) replace LIBOR as the interest rate benchmark for borrowings under the senior secured credit facility with Term SOFR, plus a 0.10% Term SOFR Adjustment, (iv) modify the maximum senior secured leverage ratio that the Company must maintain to 4.50:1.00 for the four fiscal-quarter periods ending on or about December 31, 2022, March 31, 2023, and June 30, 2023, 4.25:1.00 for the four fiscal-quarter period ending on or about September 30, 2023, and each four fiscal-quarter period thereafter through the four fiscal-quarter period ending on or about June 30, 2024, and 3.75:1.00 for the four fiscal-quarter period ending on or about September 30, 2024, and each four fiscal-quarter period thereafter, and (v) make certain other changes to the covenants and other terms of the senior secured credit facility. We incurred a $0.1 million loss on debt extinguishment related to the write-off of deferred financing costs related to the transaction which was recognized during the three months ended July 2, 2023.
As of July 2, 2023, our available borrowing capacity under our Revolving Credit Facility was $310.0 million after reducing the facility by $169.0 million borrowings outstanding and $21.0 million of outstanding letters of credit. As of January 1, 2023 and July 3, 2022, $100.0 million and $200.0 million, respectively, under the Revolving Credit Facility were outstanding (excluding amounts reserved for letters of credit in the amount of $21.0 million). Interest on the Revolving Credit Facility accrues at an annual rate of SOFR, plus a Term SOFR Adjustment of 0.10%, plus an applicable margin with an unused commitment fee based on our senior secured leverage ratio. As of July 2, 2023, the Revolving Credit Facility had an interest rate of 8.45%. As of July 2, 2023, the Revolving Credit Facility unused commitment fee was 0.500%. The Revolving Credit Facility matures in May 2028.
As of July 2, 2023, January 1, 2023 and July 3, 2022, $479.0 million was outstanding under the Term Loan B. Interest on the Term Loan B accrues at an annual rate of SOFR, plus a Term SOFR Adjustment of 0.10%, plus 1.75%. The Term Loan B consists of only floating rate debt. As of July 2, 2023, the applicable interest rate on the Term Loan B was 6.95%. The Term Loan B matures on April 17, 2026.
2024 Notes, 2025 Notes, 2027 Notes and 2031 Notes
In June 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due 2024 and, in April 2017, issued an additional $700.0 million of senior unsecured notes due 2024 (together, the “2024 Notes”). During March of 2020, we prepaid $50.5 million of the outstanding 2024 Notes principal, reducing the outstanding amount to $949.5 million. On April 26, 2023, we commenced a cash tender offer (the “Tender Offer”) for any and all outstanding 2024 Notes. The consideration offered for each $1,000 principal amount of the 2024 Notes was $1,000.50 (the “Purchase Price”), plus accrued and unpaid interest. On May 3, 2023, we repaid $892.6 million, or 94.0% of the aggregate principal amount of the 2024 Notes that were tendered to us. The remainder of the 2024 Notes is due in July 2024.
In April 2017, Holdings issued $500.0 million of 5.50% senior notes due 2027 (the "2027 Notes"). In April 2020, our subsidiary Six Flags Theme Parks (“SFTP”) issued $725.0 million of 7.00% senior secured notes due 2025 (the “2025 Notes”).
On July 1, 2022, Holdings prepaid $360.0 million of the 2025 Notes at a premium of 103.5%. The transaction reduced the outstanding amount of the 2025 Notes to $365.0 million. We incurred a $17.5 million loss on debt extinguishment containing $12.6 million for the premium paid above par and $4.9 million related to the write-off of deferred financing costs related to the transaction which was recognized during the three months ended July 3, 2022.
15
On May 3, 2023, the Company completed the private sale of the 2031 Notes at an offering price of 99.248% of the principal amount thereof. Net of the original issuance discount and debt issuance costs, the Company received net proceeds of $784.0 million. We incurred a $13.9 million loss on debt extinguishment containing $1.0 million for the premium paid above par and $12.9 million of costs charged to expense on debt modification which were recognized during the three months ended July 2, 2023.
Also, on May 3, 2023, the Company announced that $892.6 million, or 94.0% of the aggregate principal amount of the 2024 notes were validly tendered pursuant to the Tender Offer. Net cash proceeds from the 2031 Notes, together with other available cash, including borrowings under our revolving credit facility, were used to pay the Purchase Price, plus accrued and unpaid interest.
As of July 2, 2023, $56.9 million of the 2024 Notes, $365.0 million of the 2025 Notes, $500.0 million of the 2027 Notes and $800.0 million of the 2031 Notes, were issued and outstanding. Interest payments of $1.4 million for the 2024 Notes are due semi-annually on January 31 and July 31 of each year. Following the repayment of $360 million of the 2025 Notes, interest payments of $12.7 million for the 2025 Notes are due semi-annually on January 1 and July 1 each year. Interest payments of $13.8 million for the 2027 Notes are due semi-annually on April 15 and October 15 of each year. For the 2031 Notes, an interest payment of $30.9 million is due November 15, 2023, and then $29.0 million is due semi-annually on May 15 and November 15 of each year, thereafter.
Long-Term Indebtedness Summary
As of July 2, 2023, January 1, 2023, and July 3, 2022, the principal balance of our long-term debt consisted of the following:
| | | | | | | | | |
|
| As of | |||||||
(Amounts in thousands) |
| July 2, 2023 |
| January 1, 2023 |
| July 3, 2022 | |||
Term Loan B |
| $ | 479,000 |
| $ | 479,000 |
| $ | 479,000 |
Revolving Credit Facility | | | 169,000 | | | 100,000 | | | 200,000 |
2024 Notes | |
| 56,867 | |
| 949,490 | |
| 949,490 |
2025 Notes | | | 365,000 | | | 365,000 | | | 365,000 |
2027 Notes | |
| 500,000 | |
| 500,000 | |
| 500,000 |
2031 Notes | | | 800,000 | |
| — | |
| — |
Net discount | |
| (6,580) | |
| (2,138) | |
| (2,694) |
Deferred financing costs | |
| (10,961) | |
| (10,821) | |
| (12,886) |
Total debt | | $ | 2,352,325 | | $ | 2,380,531 | | $ | 2,477,910 |
Less short-term borrowings | | | (169,000) | | | (100,000) | | | (200,000) |
Total long-term debt | | $ | 2,183,325 | | $ | 2,280,531 | | $ | 2,277,910 |
Fair-Value of Long-Term Indebtedness
As of July 2, 2023, January 1, 2023, and July 3, 2022, the fair value of our long-term debt was $2,298.7 million, $2,284.3 million and $2,368.2 million, respectively.
16
4. Accumulated Other Comprehensive Loss
Changes in the composition of Accumulated Other Comprehensive Loss ("AOCL") during the six months ended July 2, 2023, were as follows:
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | |
| | Cumulative | | | | | | | | | | | Other | ||
| | Translation | | Cash Flow | | Defined Benefit | | Income | | Comprehensive | |||||
(Amounts in thousands) |
| Adjustment |
| Hedges |
| Plans |
| Taxes |
| Loss | |||||
Balances at January 1, 2023 | | $ | (33,145) | | $ | 5,337 | | $ | (39,385) | | $ | (4,002) | | $ | (71,195) |
Net current period change | |
| (663) | |
| — | |
| — | |
| 97 | |
| (566) |
Amounts reclassified from AOCI | |
| — | |
| (1,579) | |
| 468 | |
| 277 | |
| (834) |
Balances at July 2, 2023 | | $ | (33,808) | | $ | 3,758 | | $ | (38,917) | | $ | (3,628) | | $ | (72,595) |
Reclassifications out of AOCL during the three and six months ended July 2, 2023 and July 3, 2022:
| | | | | | | | | | | | | | | |
| | | | Reclassification of (Gain) Loss from AOCL into Earnings | | ||||||||||
| | | | Three Months Ended | | Six Months Ended | | ||||||||
Component of AOCI |
| Location of Reclassification into Income (Loss) | | July 2, 2023 | | July 3, 2022 |
| July 2, 2023 | | July 3, 2022 | | ||||
| | | | | | | | | | | | | | | |
Amortization of gain on interest rate hedge | | Interest expense, net | | $ | (792) | | $ | (774) | | $ | (1,579) | | $ | 343 | |
| | Income tax expense | | | 197 | | | 193 | |
| 393 | |
| (88) | |
| | Net of tax | | $ | (595) | | $ | (581) | | $ | (1,186) | | $ | 255 | |
| | | | | | | | | | | | | | | |
Amortization of deferred actuarial loss and prior service cost |
| Operating expenses | | $ | 234 | | $ | 229 | | $ | 468 | | $ | 458 | |
|
| Income tax benefit | |
| (58) | |
| (58) | |
| (116) | |
| (115) | |
|
| Net of tax | | $ | 176 | | $ | 171 | | $ | 352 | | $ | 343 | |
| | | | | | | | | | | | | | | |
Total reclassifications |
|
| | $ | (419) | | $ | (410) | | $ | (834) | | $ | 598 | |
5. Derivative Financial Instruments
We hold interest rate swap agreements that mitigate the risk of an increase in the effective interest rate on the Term Loan B. We enter into derivative contracts for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. As such, in conjunction with the repayment of a portion of the Term Loan B in April 2020, certain of our interest rate swap agreements were de-designated because the hedged interest was no longer probable to occur.
Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in “Prepaid expenses and other current assets” and “Other accrued liabilities,” respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in “Deposits and other assets” and “Other long-term liabilities,” respectively.
On March 24, 2022, we terminated the August 2019 Swap Agreements for net cash proceeds of $7.4 million. The swap agreements were used as economic hedges against rising interest rates and had been designated as cash flow hedges prior to termination. We recorded the settlement in accumulated other comprehensive income in the amount of $7.7 million which will be amortized through September 2024, the maturity date of the Term Loan B.
Derivative assets recorded at fair value in an asset position as well as their classification on our unaudited condensed consolidated balance sheets as of July 2, 2023, January 1, 2023, and July 3, 2022:
17
| | | | | | | | |
| Derivative Assets | |||||||
(Amounts in thousands) | July 2, 2023 |
| January 1, 2023 |
| July 3, 2022 | |||
Derivatives Not Designated as Hedging Instruments | | | | | | | | |
Interest rate swap agreements — other current assets | $ | 3,631 | | $ | 6,135 | | $ | 3,688 |
Interest rate swap agreements — other non-current assets | | 3,984 | | | 4,446 | | | 2,829 |
| $ | 7,615 |
| $ | 10,581 |
| $ | 6,517 |
Derivative liabilities recorded at fair value in our unaudited condensed consolidated balance sheets as of OctoberJuly 2, 2022,2023, January 2, 2022,1, 2023, and OctoberJuly 3, 2021:2022:
| | | | | | | | | | | | | | | | | | |
| | Derivative Liabilities | | Derivative Liabilities | ||||||||||||||
(Amounts in thousands) | | October 2, 2022 |
| January 2, 2022 |
| October 3, 2021 | | July 2, 2023 |
| January 1, 2023 |
| July 3, 2022 | ||||||
Derivatives Designated as Cash Flow Hedges | | | | | | | | | | |||||||||
Interest rate swap agreements — other accrued liabilities | | $ | — |
| $ | (3,986) |
| $ | (5,204) | |||||||||
Interest rate swap agreements — other long-term liabilities | | | — | | | (1,046) | | | (5,635) | |||||||||
Derivatives Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements — other accrued liabilities | | $ | (9,235) | | $ | (4,012) | | $ | (4,863) | | $ | 4,535 | | $ | 8,476 | | $ | 7,589 |
Interest rate swap agreements — other long-term liabilities | | | (7,542) | | | (4,581) | | | (5,589) | | | 5,382 | | | 6,224 | | | 5,196 |
| | $ | (16,777) |
| $ | (13,625) |
| $ | (21,291) | | $ | 9,917 |
| $ | 14,700 |
| $ | 12,785 |
Earnings before taxesGains and losses on derivatives not designated as a cash flow hedge of a nominal amount and $0.3 million were presentedhedging instruments are recognized in “Interest expense”expense, net” in theour condensed consolidated statementstatements of operations, and were not material for the three and nine months ended OctoberJuly 2, 2023 and July 3, 2022 respectively.or for the six months ended July 2, 2023 and July 3, 2022.
Gains and losses before taxes on derivatives designated as hedging instruments that were presentedrecognized in “Interest expense” in the condensed consolidated statements of operations for the three and ninesix months ended OctoberJuly 2, 2022,2023, and OctoberJuly 3, 2021,2022, were as follows:
Three Months Ended OctoberJuly 2, 20222023 and OctoberJuly 3, 20212022
| | | | | | | | | | | | | | | | | | | | |||||
| | Gain (Loss) | | Gain (Loss) Reclassified from | | Gain (Loss) | | Gain (Loss) Reclassified from | ||||||||||||||||
| | Recognized in AOCL | | AOCL into Operations | | Recognized in AOCL | | AOCL into Interest Expense, Net | ||||||||||||||||
(Amounts in thousands) |
| 2022 |
| 2021 |
| 2022 | | 2021 |
| 2023 |
| 2022 |
| 2023 | | 2022 | ||||||||
Interest rate swap agreements | | $ | — |
| $ | (1,895) |
| $ | 778 |
| $ | (4,137) | | $ | — |
| $ | — |
| $ | 792 |
| $ | 774 |
Total |
| $ | — |
| $ | (1,895) |
| $ | 778 |
| $ | (4,137) |
| $ | — |
| $ | — |
| $ | 792 |
| $ | 774 |
NineSix Months Ended OctoberJuly 2, 20222023 and OctoberJuly 3, 20212022
| | | | | | | | | | | | | | | | | | | | | ||||
| | Gain (Loss) | | Gain (Loss) Reclassified from | | Gain (Loss) | | Gain (Loss) Reclassified from | ||||||||||||||||
| | Recognized in AOCL | | AOCL into Operations | | Recognized in AOCL | | AOCL into Interest Expense, Net | ||||||||||||||||
(Amounts in thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Interest rate swap agreements | | $ | 11,778 |
| $ | (634) |
| $ | 435 |
| $ | (1,395) | | $ | — |
| $ | 11,778 |
| $ | 1,579 |
| $ | (343) |
Total |
| $ | 11,778 |
| $ | (634) |
| $ | 435 |
| $ | (1,395) |
| $ | — |
| $ | 11,778 |
| $ | 1,579 |
| $ | (343) |
As of OctoberJuly 2, 2022,2023, we expect to reclassify net lossesgains of $3.2 million, currently recorded in AOCL, into “Interest expense, net” within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of derivatives.
6. Commitments and Contingencies
Partnership Parks
We have guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions (including rent) of approximately $80.5$85.6 million in 20222023 (subject to cost of living adjustments) to the limited partners in the Partnership Parks (based on our ownership of units as of OctoberJuly 2, 2022,2023, our share of the distribution will be approximately $35.8$38.1 million) and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6.0% of the Partnership Parks’ revenues. Pursuant to the 20222023 annual offer
19
to purchase limited partnership units tendered by the unit holders (the "Partnership Park Put") in May 2022,2023, we purchased 0.253580.149 limited partnership units from the Texas partnership for $0.6$0.3 million. As we purchase additional units, we are entitled to a proportionate increase in our share of the minimum annual distributions. The maximum unit purchase obligations for 2022 at both parks is approximately $521.5 million, representing approximately 68.5% of the outstanding units of SFOG and 45.9% of the outstanding units of SFOT.
The agreed price for units tendered in the Partnership Park Put is based on a valuation of each of the respective Partnership Parks (the "Specified Price") that is the greater of (a) a valuation for each of the respective Partnership Parks derived by multiplying such
18
park’s weighted average four-year EBITDA (as defined in the agreements that govern the partnerships) by a specified multiple (8.0 in the case of SFOG and 8.5 in the case of SFOT) and (b) a valuation derived from the highest prices previously offered for the units of the Partnership Parks by certain entities. In light of the temporary suspension of operations of the parks due to the COVID-19 pandemic in March 2020, which would have caused the value of the Partnership Park units to decrease in 2021 and thereafter, we adjusted our annual offer to purchase these units to set a minimum price floor for all future purchases. Pursuant to the new minimum price floor, the Specified Price for the Partnership Parks, if determined as of OctoberJuly 2, 2022,2023, is $409.7$409.8 million in the case of SFOG and $527.4 million in the case of SFOT. As of OctoberJuly 2, 2022,2023, we owned approximately 31.5% and 54.0%54.1% of the Georgia limited partner interests and Texas limited partner interests, respectively. Our obligations with respect to SFOG and SFOT will continue until 2027 and 2028, respectively.
We incurred $25.5$20.6 million of capital expenditures at the Partnership Parks during 2021the 2022 season and intendexpect to incur approximately $21.6$26.0 million to $30.0 million of capital expenditures at these parks during 2022,for the 2023 season, an amount in excess of the minimum required expenditure. Cash flows from operations at the Partnership Parks will be used to satisfy the annual distribution and capital expenditure requirements, before any funds are required from us. The Partnership Parks generated approximately $73.8$73.0 million of cash in 2021 in operating activities,2022, after deduction of capital expenditures and excluding the impact of short-term intercompany advances from or payments to Holdings. As of both OctoberJuly 2, 2022,2023, January 2,1, 2023 and July 3, 2022, and October 3, 2021, we had total loans receivable outstanding of $288.3 million from the partnerships that own the Partnership Parks. The loans were primarily used to fund the acquisition of Six Flags White Water Atlanta and to make capital improvements to the Partnership Parks and distributions to the limited partners in prior years.
Redeemable noncontrolling interests represent the non-affiliated parties’ share of the assets ofinterests in the Partnership Parks that are less than wholly-owned:Parks: SFOT, SFOG and Six Flags White Water Atlanta, which is owned by the partnership that owns SFOG. As of OctoberJuly 2, 2022,2023, redeemable noncontrolling interests of the SFOT and SFOG partnerships was $252.3were $252.7 million and $291.4$292.1 million, respectively.
| | | | | | | | | | | | | | | | | | |
(Amounts in thousands) |
| SFOT |
| SFOG |
| Total |
| SFOT |
| SFOG |
| Total | ||||||
Balance at January 2, 2022 | | $ | 241,866 | | $ | 280,201 | | $ | 522,067 | |||||||||
Balance at January 1, 2023 | | $ | 241,194 | | $ | 280,201 | | $ | 521,395 | |||||||||
Purchase of redeemable units | |
| (556) | |
| — | |
| (556) | |
| (328) | |
| — | |
| (328) |
Fresh start accounting fair market value adjustment for purchased units | | | (117) | | | — | | | (117) | | | (69) | | | — | | | (69) |
Net income attributable to noncontrolling interests | |
| 22,283 | |
| 22,368 | |
| 44,651 | |
| 11,860 | |
| 11,906 | |
| 23,766 |
Distributions to noncontrolling interests | | | (11,141) | | | (11,185) | | | (22,326) | |||||||||
Balance at October 2, 2022 | | $ | 252,335 | | $ | 291,384 | | $ | 543,719 | |||||||||
Balance at July 2, 2023 | | $ | 252,657 | | $ | 292,107 | | $ | 544,764 |
The redemption value of the noncontrolling partnership units in SFOT and SFOG as of OctoberJuly 2, 2022,2023, was approximately $241.3$240.8 million and $280.2 million, respectively.
Insurance
We maintain insurance of the types and in amounts that we believe are commercially reasonable and that are available to businesses in our industry.
The majority of our current insurance policies expire on January 1,December 31, 2023. We generally renegotiate our insurance policies on an annual basis. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.
Self-Insurance Reserves
Self-insurance reserves are recorded for the estimated amounts of guest and employee claims and expenses incurred each period that are not covered by insurance. Reserves are established for both identified claims and incurred but not reported (“IBNR”) claims. Such amounts are accrued for when claim amounts become probable and estimable. Reserves for identified claims are based upon the Company’s historical claims experience and third-party estimates of settlement costs. Reserves for IBNR claims are based upon our claims data history, actuarially determined loss development factors and certain other qualitative considerations. We maintain self-insurance reserves for healthcare, auto, general liability, and workers’ compensation claims.
Our self-insurance reserves are periodically reviewed for changes in facts and circumstances and adjustments are made as necessary. During the second quarter of 2023, an actuarial analysis of our general liability and worker’s compensation self-insurance reserves resulted in a change in estimate that increased our ultimate loss indications on both identified claims and IBNR claims. The determination to undertake such an actuarial analysis resulted from greater than previously estimated reserve adjustments on
2019
Litigationidentified claims during the quarter as well as an observed pattern of increasing litigation and settlement costs. As a result of this actuarial analysis, we revised certain key actuarial assumptions utilized in determining estimated ultimate losses, including loss development factors. The change in estimate resulted in an increase to “selling, general and administrative expense” on our condensed consolidated statements of operation of $37.6 million during the three and six months ended July 2, 2023.
In the normal course
Total accrued self-insurance reserves were $68.6 million, $34.1 million and $37.0 million as of our business,July 2, 2023, January 1, 2023 and July 3, 2022, respectively.
Legal Proceedings
While certain legal proceedings and related indemnification obligations to which we are involved froma party specify the amounts claimed, these claims may not represent reasonably possible losses. Except as noted below, given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, includingnor can the matters described below. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether anyamount of possible loss is probable or to estimate the size or range of the possible loss, and accrualsif any, be reasonably estimated, except in circumstances where an aggregate litigation accrual has been recorded for legal matters are when we believe a loss for a particular matter is considered probable and reasonably estimable. However,estimable loss contingencies. A determination of the outcomeamount of such legal mattersaccrual required, if any, for these contingencies is subject to inherent uncertainties and management’s viewmade after careful analysis of these matterseach matter. The required accrual may change in the future.future due to new information or developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters.
Putative Securities Class Action LawsuitsLawsuit
In February 2020, two putative securities class action complaints were filed against Holdings and certain of its former executive officers (collectively, the “defendants”) in the U.S. District Court for the Northern District of Texas. On March 2, 2020, the two cases were consolidated in an action captioned Electrical Workers Pension Fund Local 103 I.B.E.W. v. Six Flags Entertainment Corp., et al., Case No. 4:20-cv-00201-P (N.D. Tex.) (the “Electrical Workers litigation”), and an amended complaint was filed on March 20, 2020. On May 8, 2020, Oklahoma Firefighters Pension and Retirement System (“Oklahoma Firefighters”) and Electrical Workers Pension Fund Local 103 I.B.E.W. were appointed as lead plaintiffs, Bernstein Litowitz Berger & Grossman LLP was appointed as lead counsel, and McKool Smith PC was appointed as liaison counsel. On July 2, 2020, lead plaintiffs filed a consolidated complaint. The consolidated complaint alleges, among other things, that the defendants made materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the development of its Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd., in violation of the federal securities laws. The consolidated complaint seeks an unspecified amount of compensatory damages and other relief on behalf of a putative class of purchasers of Holdings’ publicly traded common stock during the period between April 24, 2018 and February 19, 2020. On August 3, 2020, defendants filed a motion to dismiss the consolidated complaint. On March 3, 2021, the district court granted defendants’ motion, dismissing the complaint in its entirety and with prejudice. Plaintiffs filed a motion to amend or set aside judgment and for leave to file an amended complaint on March 31, 2021, which the district court denied on July 26, 2021. Plaintiffs filed a motion for leave to file a supplemental brief on June 17, 2021, which the district court denied on June 18, 2021.
On August 25, 2021, plaintiffsCo-Lead Plaintiff Oklahoma Firefighters filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit (“the Fifth Circuit”) from the district court’s decisions granting defendants’ motion to dismiss, denying plaintiffs’ motion to amend or set aside judgment, and denying plaintiffs’ motion for leave to file a supplemental brief. Plaintiffs’ appeal is captioned Oklahoma Firefighters Pension & Ret. Sys. v. Six Flags Ent. Corp., et al., No. 21-10865 (5th Cir.). The appeal iswas fully briefed as of December 15, 2021, and oral argument was held on March 7, 2022. On January 18, 2023, the Fifth Circuit reversed the dismissal and remanded the case to the district court for further proceedings. On February 9, 2023, the Fifth Circuit mandate issued to the district court. On March 7, 2023, the district court entered a scheduling order governing pre-trial proceedings. On April 18, 2023, Oklahoma Firefighters filed a motion for leave to file an amended complaint that would add a new named plaintiff, remove former Co-Lead Plaintiff Electrical Workers Pension Fund Local 103 I.B.E.W., and modify the case caption. On May 2, 2023, defendants filed an opposition to that motion and a motion for judgment on the pleadings. On June 2, 2023, the district court granted defendants’ motion for judgment on the pleadings, dismissing the case with prejudice, and denied Oklahoma Firefighters’ motions. On June 30, 2023, plaintiffs filed a notice of appeal to the Fifth Circuit from the district court’s decisions. On July 25, 2023, the Fifth Circuit informed the parties’ that, among other things, the appeal has been docketed, the appellate record is complete, and the Appellant’s brief is due within 40 days.
We believe that these lawsuits arethis lawsuit is without merit and intend to defend this litigation vigorously. However,merit; however, there can be no assurance regarding the ultimate outcome. Regardless of the merit of plaintiff’s claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management. The outcome of the lawsuit.this litigation is inherently uncertain, and we cannot reasonably estimate any loss or range of loss that may arise from this matter.
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Stockholder Derivative Lawsuits
On March 20, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings by Mr. Mark Schwartz in the U.S. District Court for the Northern District of Texas against certain of its currentthen-current and former executive officers and directors (the “individual defendants”) in an action captioned Schwartz v. Reid-Anderson, et al., Case No. 4:20-cv-00262-P (N.D. Tex.). In April 2020, two additional stockholder derivative lawsuits, making substantially identical allegations as the Schwartz complaint, were filed on behalf of nominal defendant Holdings by Trustees of the St. Clair County Employees’ Retirement System and Mr. Mehmet Ali Albayrak in the U.S. District Court for the Northern District of Texas in actions captioned Martin, et al. v. Reid-Anderson, et al., Case No. 4:20-cv-00311-P (N.D. Tex.) and Albayrak v. Reid-Anderson, et al., Case No. 4:20-cv-00312-P (N.D. Tex.), respectively. On April 8, 2020, plaintiffs in all three of these putative derivative actions moved to consolidate the three actions and to appoint lead counsel. On May 8, 2020, the district court granted the plaintiffs’ motion to consolidate. The consolidated action is captioned In re Six Flags Entertainment Corp. Derivative Litigation, Case No. 4:20-cv-00262-P (N.D. Tex.). On August 10, 2020, plaintiffs filed a consolidated derivative complaint. The consolidated derivative complaint alleges breach of fiduciary duty, insider selling, waste of corporate assets, unjust enrichment, and contribution for violations of
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federal securities laws. The consolidated derivative complaint references, and makes many of the same allegations as are set forth in, the Electrical Workers litigation, alleging, among other things, that the individual defendants breached their fiduciary duties, committed waste, are liable for contribution for, or were unjustly enriched by making, failing to correct, or failing to implement adequate internal controls relating to alleged materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the prospects of the development of its Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. The consolidated derivative complaint also alleges that a former officer and director sold shares of the Company while allegedly in possession of material non-public information concerning the same. On September 9, 2020, Holdings and the individual defendants filed a motion to dismiss the consolidated complaint. On April 28, 2021, the district court granted defendants’ motion, dismissing the consolidated complaint in its entirety and with prejudice and denying leave to amend. Plaintiffs’ time to appeal the judgment dismissing this action in its entirety and with prejudice and denying leave to amend lapsed in May 2021.
On May 5, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Mr. Richard Francisco in the District Court for Dallas County, Texas 160th Judicial District,state court against certain of its currentthen-current and former executive officers and directors (the “individual defendants”) in an action captioned Francisco v. Reid-Anderson, et al., Case No. DC-20-06425 (160th(160th Dist. Ct., Dallas Cty., Tex.) (the “Francisco action”). The petition in the Francisco action alleges breach of fiduciary duty,unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The petition in the Francisco action references, and makes many of the same allegations, as are set forth in the Electrical Workers litigation, alleging, among other things, that the individual defendants breached their fiduciary duties, were unjustly enriched by, abused their control, committed gross mismanagement, and committed waste by making, failing to correct, or failing to implement adequate internal controls relating to alleged materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the prospects of the development of its Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. The petition also alleges that a former officer and director engaged in insider trading. On May 28, 2020, the parties in the Francisco action filed a joint motion to stay proceedings through the resolution of the forthcoming motion to dismiss the Electrical Workers litigation. On June 3, 2020, the district court granted the joint motion to stay proceedings. On June 12, 2020, an additional stockholder derivative lawsuit, making substantially identical allegations as the Francisco petition, was filed on behalf of nominal defendant Holdings in the District Court for Dallas County, Texas 298th Judicial Districtstate court by putative stockholder Mr. Cliff Bragdon in an action captioned Bragdon v. Reid-Anderson, et al., Case No. DC-20-08180 (298th(298th Dist. Ct., Dallas Cty., Tex.) (the “Bragdon action”). On July 10, 2020, the district court granted an agreed motion filed by the parties in the Francisco and Bragdon actions to consolidate cases, to accept service and an unopposed motion to appoint co-lead and liaison counsel, and to stay both the Francisco and Bragdon actions through final resolution of the motion to dismiss the Electrical Workers litigation. The consolidated state derivative action was captioned In re Six Flags Entertainment Corp. Derivative Litigation, Case No. DC-20-06425 (160th Dist. Ct., Dallas Cty., Tex.). On September 8, 2020, the parties to the consolidated state derivative action filed an agreed motion to transfer the case from Dallas County to Tarrant County, which motion was so ordered on September 27, 2020. The consolidated action is now captioned In re Six Flags Ent. Corp. Derivative Litigation, No. 096-320958-20 (Tex.(96th Dist. Ct., Tarrant Cty.), Tex.). On February 9, 2023, the stay was lifted in the consolidated action when the Fifth Circuit issued the mandate in the Electrical Workers litigation. On April 27, 2023 and remains stayed.
We believeMay 30, 2023, the parties informed the court that thesethey were conferring, that they would provide a further update within 30 days, and that, in the meantime, the defendants had no obligation to respond to the Francisco or Bragdon complaints areor the consolidated action. On June 29, 2023, plaintiffs filed a notice of non-suit without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of theseprejudice. lawsuits.
Wage and Hour Class Action Lawsuits
On April 20, 2018,February 16, 2023, a complaintputative stockholder derivative lawsuit was filed against Holdings and Six Flags Concord, LLC in the Superior Court of Solano County, California, on behalf of a purported classnominal defendant Holdings by John Hancock in Texas state court against certain of currentits former executive officers and former employees of Six Flags Discovery Kingdom. On June 15, 2018,directors (the “individual defendants”) in an amended complaint was filed adding Park Management Corp. as a defendant. The amended complaint alleges violations of California law governing, among other things, employee overtime, meal and rest breaks, wage statements, and seeks damages in the form of unpaid wages and related penalties, and attorneys’ fees and costs. In September 2021, the parties entered into a settlement agreement to resolve the lawsuit, for an immaterial amount, and the court granted preliminary approval on March 30, 2022. A final approval hearing occurred on July 13, 2022, and the granted final approval on August 16, 2022. The settlement administrator will disburse the paymentsaction
2221
accordingcaptioned Hancock v. Roedel, et al., Case No. 348-340304-23 (348th Dist. Ct., Tarrant Cty., Tex.). Plaintiff refers to and makes many of the same allegations as are set forth in the Electrical Workers litigation, claiming that, among other things, the individual defendants caused Six Flags to make false and misleading statements and omissions about the status of construction of Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. Plaintiff asserts breach of fiduciary duty and unjust enrichment claims. Plaintiff seeks an unspecified amount of monetary damages and equitable relief including, but not limited to, disgorgement. On May 5, 2023, the individual defendants and the Company agreed to accept service of the petition, and plaintiff agreed that the individual defendants and the Company had no obligation to respond to the terms of the settlement agreementpetition and will advise the court when administration of the settlement is completed.that defendant’s answer dates are tolled until plaintiff files an amended petition. Plaintiff stated Plaintiff would file an amended petition by June 30, 2023. Plaintiff has not yet filed an amended petition.
On September 18, 2019,February 22, 2023, a complaintputative stockholder derivative lawsuit was filed against Magic Mountain LLC in the Superior Court of Los Angeles County, California, on behalf of a purported classnominal defendant Holdings by Antonio Dela Cruz in in the U.S. District Court for the Northern District of Texas against certain of its current and former employeesexecutive officers and directors (the “individual defendants”) in an action captioned DelaCruz v. Reid-Anderson, et al., Case No. 3:23-CV-0396-D (N.D. Tex.). Plaintiff refers to and makes many of the same allegations as are set forth in the Electrical Workers litigation, claiming that, among other things, the individual defendants caused Six Flags to make false and misleading statements and omissions about the status of construction of Six Flags Magic Mountain. Anbranded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. Plaintiff asserts contribution, breach of fiduciary duty, and unjust enrichment claims. Plaintiff seeks an unspecified amount of monetary damages and equitable relief including, but not limited to, disgorgement. On June 10, 2023, the court ordered the following schedule: plaintiff’s amended complaint was filedis due on or before August 12, 2023; defendants’ answer or other response is due on or before September 12, 2023; plaintiff’s opposition to defendants’ motion to dismiss is due on or before October 17, 2023; and defendants’ reply to plaintiff’s opposition is due on or before November 24, 2019. The complaint alleges1, 2023. On July 20, 2023, the court scheduled completion of discovery to occur by April 4, 2025, and a four-day trial to begin on September 1, 2025.
Wage and Hour Class Action Lawsuits
Holdings and/or certain of its consolidated subsidiaries are named defendants in various lawsuits generally alleging violations of California law governing payment of wages,federal and/or state laws regulating wage statements, and seekshour pay. Plaintiffs in these lawsuits seek monetary damages, including unpaid wages, and statutory damages under California law as well as under the Private Attorneys General Act, andpenalties, and/or attorneys’ fees and costs. We intendRegardless of the merits of particular suits, litigation may be expensive, time-consuming, disruptive to vigorously defend ourselves against this lawsuit.the Company’s operations and distract management from the operation of our business. In recognition of these impacts on the business, the Company may enter into settlement agreements or other arrangements to settle litigation and resolve such disputes. No assurance can be given that such agreements can be obtained on acceptable terms or at all, or that litigation will not occur. These agreements may also significantly increase the Company’s operating expenses. The outcome is currently not determinableoutcomes of these lawsuits are inherently uncertain, and a reasonablewe cannot reasonably estimate ofany loss or range of loss cannot be made.
On April 6, 2020, a complaint was filed against Magic Mountain LLCthat may arise from these matters in the Superior Court of Los Angeles County, California, on behalf of a purported class of current and former employees of Six Flags Magic Mountain. The complaint alleges violations of California law governing background checks, and seeks statutory damages under California law as well as under the Private Attorneys General Act, and attorneys’ fees and costs. In January 2022, the parties entered into a settlement agreement to resolve the lawsuit for an immaterial amount, and the court granted preliminary approval on July 12, 2022. The final approval hearing is scheduled for December 15, 2022.
On February 14, 2020, a complaint was filed against Magic Mountain, LLC in the Superior Court of Los Angeles County, California, on behalf of a purported class of current and former employees of Six Flags Magic Mountain. The complaint alleges one cause of action for failure to furnish accurate, itemized wage statements in violation of California labor law, and seeks statutory damages under California law as well as under the Private Attorneys General Act, and attorneys’ fees and costs. In October 2021, the parties entered into a settlement agreement to resolve the lawsuit, for an immaterial amount, and the court granted preliminary approval on April 5, 2022. A final approval hearing will be scheduled following the filingexcess of the motionamounts that we have recognized for final approval. It is anticipated that the final approval hearing will occur in the next 30 – 45 days.these lawsuits, which amounts are not material to our consolidated financial statements.
On February 21, 2020, a complaint was filed against Park Management Corp. in the Superior Court of Solano County, California, on behalf of a purported class of current and former employees of Six Flags Discovery Kingdom. The complaint alleges violations of California law governing payment of wages, wage statements, and background checks, and seeks statutory damages under federal and California law and attorneys’ fees and costs. The claims related to wages and wage statements will be resolved under the settlement of the April 2018 litigation above. In January 2022, the parties entered into a settlement agreement to resolve the lawsuit, for an immaterial amount, and the court granted preliminary approval on May 5, 2022. The final approval hearing is scheduled for December 13, 2022.
On October 22, 2021, a complaint was filed against Riverside Park Enterprises, Inc. in the Superior Court of Hampden County, Massachusetts, on behalf of a purported class of current and former employees of Six Flags New England. The complaint alleges violations of Massachusetts law governing payment of wages and seeks unpaid wages as well as attorneys’ fees and costs. We intend to vigorously defend ourselves against this lawsuit. The outcome is currently not determinable and a reasonable estimate of loss or range of loss cannot be made.
Personal Injury Lawsuit
On November 18, 2021, the Texas Judicial Panel on Multidistrict Litigation consolidated numerous lawsuits filed against Six Flags Splashtown, LLC d/b/a Six Flags Hurricane Harbor Splashtown asserting claims arising from an alleged chemical vapor release on July 17, 2021 at Six Flags Splashtown. A third party equipment installer isCertain plaintiffs have also named unaffiliated third parties as a defendant in the litigation.additional defendants. The consolidated multidistrict litigation is captioned In re Six Flags Splashtown Litigation (Master File No. 2021-77214), and is pending in the 295th Judicial District.District Court in Harris County, Texas. Plaintiffs are seeking compensatory and punitive damages. On April 14, 2023, Six Flags Splashtown settled with 421 plaintiffs, including all bellwether plaintiffs set for trial on April 17, 2023, for an immaterial amount. This settlement resolved all claims brought by these plaintiffs only. The parties are working to document this settlement and will seek to have the Court appoint a special master to determine the amounts each settling plaintiff will receive. This settlement does not resolve all claims arising from the alleged chemical vapor release. There are 122 remaining plaintiffs; 71 plaintiffs represented by 5 different firms and 51 pro se plaintiffs. The Court set a status conference for August 10, 2023, and ordered all remaining plaintiffs to appear. Any who fail to appear at the status conference will immediately be dismissed. The court also set the next bellweather trial for January 15, 2024. We intend to defendhave defended this litigation vigorously.vigorously and will continue to do so. Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management. In recognition of these considerations, the Company may enter into further settlement agreements or other arrangements to settle litigation and resolve such disputes. No assurance can be given that such agreements can be obtained on acceptable terms or that litigation will not occur. These agreements may also significantly increase the Company’s operating expenses. The outcome of this litigation is currently not determinableinherently
22
uncertain, and we cannot reasonably estimate any loss or range of loss that may arise from thesethe remaining matters in excess of the amount that we have recorded for this litigation, which amount is not material to our consolidated financial statements.
23Litigation Relating to Routine Proceedings
We are also engaged from time to time in other routine legal and tax proceedings incidental to our business. We do not believe that any of Contentsthese routine proceedings will have a material impact on the business or our financial condition.
Securities and Exchange Commission Investigation
The Securities and Exchange Commission is conducting an investigation into the Company’s disclosures and reporting made in 2018 through February 2020related to its business, operations and growth prospects of its Six Flags branded parks in China and the financial health of its former business partner, Riverside Investment Group Co. Ltd. The Company received a document subpoena in February 2020 and subsequently certain current and former executives received subpoenas in connection with this matter and they continue to provide responsive information. The Company is fully cooperating and is committed to continuing to cooperate fully with the SEC in this matter. We cannot predict the length, scope or results of the investigation, or the impact, of the investigation on our results of operations, business or financial condition.
7. Business Segments
Our chief operating decision maker “CODM” regularly receives consolidated information which is used to make strategy decisions. Each individual park location has a Park President or General Manager responsible for the operational results and executing the strategy set forth by the CODM. Substantially all of our parks provide similar products and services through a similar process to the same class of customer through a consistent method. We also believe that the parks share common economic characteristics. Based on these factors, we have only one reportable segment - parks.All of our owned or managed parks are located in the United States with the exception of two parks in Mexico and one park in Montreal, Canada. We also have revenue and expenses related to the development of a Six Flags-branded park outside of North America.
The following information reflects our goodwill and long-lived assets (which consists of property and equipment, right-of-use operating leases and intangible assets) as of OctoberJuly 2, 2022,2023, January 2, 2022,1, 2023, and OctoberJuly 3, 2021:2022:
| | | | | | | | | | | | | | | | | | |
| | As of | | As of | ||||||||||||||
(Amounts in thousands) |
| October 2, 2022 |
| January 2, 2022 |
| October 3, 2021 |
| July 2, 2023 |
| January 1, 2023 |
| July 3, 2022 | ||||||
Domestic | | $ | 2,308,557 | | $ | 2,324,420 | | $ | 2,295,840 | | $ | 2,292,265 | | $ | 2,290,318 | | $ | 2,322,514 |
Foreign | | | 110,903 | | | 117,066 | | | 125,569 | | | 121,844 | | | 114,048 | | | 116,550 |
Total | | $ | 2,419,460 | | $ | 2,441,486 | | $ | 2,421,409 | | $ | 2,414,109 | | $ | 2,404,366 | | $ | 2,439,064 |
The following information reflects our revenues and income before income taxes by domestic and foreign categoriesjurisdictions for the ninesix months ended OctoberJuly 2, 2022,2023, and OctoberJuly 3, 2021:2022:
| | | | | | | | | | | | | | | | | | |
|
| Domestic |
| Foreign |
| Total |
| Domestic |
| Foreign |
| Total | ||||||
2023 | | (Amounts in thousands) | ||||||||||||||||
Revenues | | $ | 529,735 | | $ | 56,162 | | $ | 585,897 | |||||||||
(Loss) income before income taxes | |
| (55,878) | |
| 26,294 | |
| (29,584) | |||||||||
2022 | | (Amounts in thousands) | | | | | | | | | | |||||||
Revenues | | $ | 994,463 | | $ | 83,897 | | $ | 1,078,360 | | $ | 531,041 | | $ | 42,488 | | $ | 573,529 |
Income before income taxes | |
| 158,489 | |
| 25,978 | |
| 184,467 | |||||||||
2021 | | | | | | | | | | |||||||||
Revenues | | $ | 1,125,917 | | $ | 54,178 | | $ | 1,180,095 | |||||||||
Income before income taxes | |
| 212,462 | |
| 5,156 | |
| 217,618 | |||||||||
(Loss) income before income taxes | |
| (1,063) | |
| 8,721 | |
| 7,658 |
23
8. Pension Benefits
We froze our pension plan effective March 31, 2006, and effective February 16, 2009, the remaining participants in the pension plan no longer earned future benefits. The following summarizes our pension costs during the three and ninesix months ended OctoberJuly 2, 2023, and July 3, 2022, and October 3, 2021:respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | | ||||||||||||||||
(Amounts in thousands) | | October 2, 2022 | | October 3, 2021 |
| October 2, 2022 | | October 3, 2021 | | July 2, 2023 | | July 3, 2022 |
| July 2, 2023 | | July 3, 2022 | | ||||||||
Service cost | | $ | 300 | | $ | 275 | | $ | 900 | | $ | 825 | | $ | — | | $ | — | | $ | — | | $ | — | |
Interest cost | |
| 1,375 | |
| 1,284 | |
| 4,143 | |
| 3,834 | | | 1,954 | | | 1,384 | | | 3,908 | | | 2,768 | |
Expected return on plan assets | |
| (3,060) | |
| (3,067) | |
| (9,179) | |
| (9,205) | |
| (2,402) | |
| (3,060) | |
| (4,804) | |
| (6,119) | |
Amortization of net actuarial loss | |
| 217 | |
| 361 | |
| 675 | |
| 1,041 | |
| 234 | |
| 229 | |
| 468 | |
| 458 | |
Total net periodic benefit | | $ | (1,168) | | $ | (1,147) | | $ | (3,461) | | $ | (3,505) | |||||||||||||
Administrative fees | | | 650 | | | 300 | | | 1,300 | | | 600 | | ||||||||||||
Total net periodic expense (benefit) | | $ | 436 | | $ | (1,147) | | $ | 872 | | $ | (2,293) | |
The components of net periodic pension benefit other than the service cost component(benefit) expense were included in "Other net periodic pension benefit"(income) expense" in the condensed consolidated statements of operations.
Weighted-Average Assumptions Used To Determine Net Cost
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | Six Months Ended | |
| |||||||||
| | October 2, 2022 | | October 3, 2021 | | | October 2, 2022 | | October 3, 2021 | | | July 2, 2023 | | July 3, 2022 | | July 2, 2023 | | July 3, 2022 | | | |
Discount rate |
| 2.60 | % | 2.20 | % | | 2.60 | % | 2.20 | % |
| 4.95 | % | 2.60 | % | | 4.95 | % | 2.60 | % | |
Rate of compensation increase |
| N/A |
| N/A |
|
| N/A |
| N/A |
|
| N/A |
| N/A |
| N/A |
| N/A |
| | |
Expected return on plan assets |
| 5.75 | % | 5.75 | % | | 5.75 | % | 5.75 | % |
| 5.75 | % | 5.75 | % | | 5.75 | % | 5.75 | % | |
Employer Contributions
We did not make any pension contributions during the three month or ninesix month periods ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021.
24
2022.
9. Stock Repurchase Plans and Shareholder Rights Plan
On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of OctoberJuly 2, 2022,2023, Holdings had repurchased 8,071,000 shares at a cumulative cost of approximately $365.1 million and an average price per share of $45.24 under the March 2017 Stock Repurchase Plan, leaving approximately $134.9 million available for permitted repurchases. We have not made any repurchases during the six months ended July 2, 2023.
The amount of share repurchases is limited by the covenants in the Second Amended and Restated Credit Facility, the 2024 Notes, the 2025 Notes and the 2027 Notes.
2524
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis containscontain forward-looking statements relating to future events or our future financial performance, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included under the caption "Cautionary Note Regarding Forward-Looking Statements" included elsewhere in this Quarterly Report and "Item 1A. Risk Factors" in the 20212022 Annual Report and in this Quarterly Report for further discussion of the uncertainties, risks and assumptions associated with these statements.
The following discussion and analysis presentspresent information that we believe is relevant to an assessment and understanding of our condensed consolidated balance sheets and results of operations. This information should be read in conjunction with the condensed consolidated financial statements, and the notes thereto, and other financial data included elsewhere in this Quarterly Report. The following information should also be read in conjunction with our audited consolidated financial statements, and the notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the 20212022 Annual Report.
Use of Certain Per Capita Metrics
We use certain per capita metrics that are non-GAAP measures of the performance of our business on a per guest basis and believe that these metrics provide relevant and useful information for investors because they assist in comparing our operating performance on a consistent basis, make it easier to compare our results with those of other companies andin our industry and allows investors to review performance in the same manner as our management.
● | Total guest spending per capita is the total revenue generated from our guests, on a per guest basis, through admissions and in-park spending. Total guest spending per capita is calculated by dividing the sum of park admissions revenue and park food merchandise and other revenue by total attendance. |
● | Admissions revenue per capita is the total revenue generated from our guests, on a per guest basis, to enter our parks. Admissions revenue per capita is calculated by dividing park admission revenue by total attendance. |
● |
Overview
General
We are the largest regional theme park operator in the world and the largest operator of waterparkswater parks in North America based on the number of parks we operate. Of our 27 regional theme parks and waterparks,water parks, 24 are located in the United States, two are located in Mexico and one is located in Montreal, Canada. Our parks are located in geographically diverse markets across North America and generally offer a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and retail outlets, providing a complete family-oriented entertainment experience. We work continuously to improve our parks and our guests’ experiences and to meet our guests’ evolving needs and preferences.
The results of operations for the three and ninesix months ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021,2022, are not indicative of the results expected for the full year. Typically, our park operations generate more than halfapproximately 70% - 75% of their annual revenue during the period from Memorial Day to Labor Daysecond and third quarter each year while certain expenses are incurred year-round. During the first quarter of 2021, many of our parks remained closed or had capacity limits or other restrictions affecting
26
attendance; however, starting in the second quarter of 2021, the amount of COVID-19 related impacts became less severe.
Our revenue is derived from (i) the sale of tickets (including season passes summer passes, annual passes and memberships)other multi-use products) for entrance to our parks, (which accounted for approximately 55% and 54% of total revenue during the nine months ended October 2, 2022 and October 3, 2021, respectively), (ii) the sale of food and beverages, merchandise, games and attractions, parking and other services inside our parks, and (iii) sponsorship, international agreements and accommodations. Revenue from ticket sales and in-park sales are primarily impacted by park attendance and guest spending.average pricing of our admission products and in-park offerings. Revenue from sponsorship, international
25
agreements and accommodations can be impacted by the term, timing and extent of services and fees under these arrangements, which can result in fluctuations from quarter to quarter and year to year.
Our principal costs of operations include salaries and wages, employee benefits, advertising, third party services, repairs and maintenance, utilities, rent and insurance. A large portion of our expenses is relatively fixed when our parks are operating, as our costs for full-time employees, maintenance, utilities, rent, and insurance do not vary significantly with attendance.
We anticipate that the tight labor market and recent increases to the minimum wage rates will increase our salary, wage and benefit expenses in 2023 and future years. Further legislative changes and competitive wage rate pressure could cause these expenses to continue to increase in the future.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective and complex estimates and judgments. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from the continuing changes in the economic environment will be reflected in the financial statements in future periods. With respect to our critical accounting policies and estimates, there have been no material developments or changes from the policies and estimates discussed in the 20212022 Annual Report.
2726
Results of Operations
Three Months Ended OctoberJuly 2, 20222023 Compared to Three Months Ended OctoberJuly 3, 20212022
The following table sets forth summary financial information for the three months ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021:2022:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Percentage Change (%) | | Three Months Ended | | Percentage Change (%) | ||||||||||
(Amounts in thousands, except percentage and per capita data) |
| October 2, 2022 |
| October 3, 2021 |
| 2022 to 2021 |
| July 2, 2023 |
| July 3, 2022 |
| 2023 to 2022 | ||||||
Total revenue |
| $ | 504,831 |
| $ | 638,284 | | (21) | % |
| $ | 443,707 |
| $ | 435,422 | | 2 | % |
Operating expenses | |
| 181,162 | |
| 228,119 | | (21) | % | |
| 173,669 | |
| 173,357 | | N/M | |
Selling, general and administrative expenses | |
| 38,234 | |
| 64,356 | | (41) | % | |
| 90,448 | |
| 53,498 | | 69 | % |
Cost of products sold | |
| 40,164 | |
| 54,100 | | (26) | % | |
| 34,787 | |
| 35,710 | | (3) | % |
Other net periodic pension benefit | |
| (1,480) | |
| (76) | | NM | | |||||||||
Depreciation and amortization | |
| 30,186 | |
| 28,053 | | 8 | % | |
| 28,910 | |
| 27,537 | | 5 | % |
Loss on disposal of assets | |
| 5,038 | |
| 624 | | NM | | |
| 2,550 | |
| 98 | | N/M | |
Operating income | | | 113,343 | | | 145,222 | | (22) | % | |||||||||
Interest expense, net | |
| 34,197 | |
| 38,095 | | (10) | % | |
| 43,495 | |
| 35,978 | | 21 | % |
Other expense, net | |
| 521 | |
| 346 | | N/M | | |||||||||
Loss on extinguishment of debt | | | 13,982 | | | 17,533 | | (20) | % | |||||||||
Other income, net | |
| (2,261) | |
| (722) | | N/M | | |||||||||
Income before income taxes | |
| 176,809 | |
| 224,667 | | (21) | % | |
| 58,127 | |
| 92,433 | | (37) | % |
Income tax expense | |
| 38,654 | |
| 46,543 | | (17) | % | |
| 13,807 | |
| 24,716 | | (44) | % |
Net income | | | 138,155 | | | 178,124 | | (22) | % | | | 44,320 | | | 67,717 | | (35) | % |
Less: Net income attributable to noncontrolling interests | |
| (22,326) | |
| (20,883) | | 7 | % | |
| (23,766) | |
| (22,325) | | 6 | % |
Net income attributable to Six Flags Entertainment Corporation | | $ | 115,829 | | $ | 157,241 | | (26) | % | | $ | 20,554 | | $ | 45,392 | | (55) | % |
| | | | | | | | | | | | | | | | | | |
Other Data: | |
|
| |
|
| |
| | |
|
| |
|
| |
| |
Attendance | |
| 8,032 | |
| 12,029 | | (33) | % | |
| 7,073 | |
| 6,652 | | 6 | % |
Admissions revenue per capita | | $ | 33.79 | | $ | 36.35 | | (7) | % | |||||||||
In-park spending per capita | | $ | 26.97 | | $ | 27.52 | | (2) | % | |||||||||
Total guest spending per capita | | $ | 60.76 | | $ | 63.87 | | (5) | % |
Revenue
Revenue recognized for the three months ended OctoberJuly 2, 2022,2023, totaled $504.8$443.7 million, a decreasean increase of $133.5$8.3 million, or 21%2%, compared to the $638.3$435.4 million recognized for the three months ended OctoberJuly 3, 2021.2022. The decreaseincrease was attributable to an attendance decreaseincrease of 33%,6% and an increase in sponsorship, international agreements and accommodations revenue of $3.4 million. The increase was partially offset by a $2.6 million increase in “Sponsorship, international agreements and accommodations” revenue. The decrease in attendance was driven by an increase in ticket prices and the elimination of free tickets and heavily-discounted product offerings.per capita spending.
Total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, for the three months ended OctoberJuly 2, 2022, increased2023, decreased by $8.94,$3.11, to $60.96,$60.76, compared to the three months ended OctoberJuly 3, 2021,2022, driven by a $6.23,$2.56, or 22%7%, increasedecrease in admissions revenue per capita and a $2.71,$0.55, or 12%2%, increasedecrease in In-parkin-park spending per capita. The higherlower admissions per capita reflects higher realized ticket pricingour increased focus on selling season pass and a higher mix of single day guests.other multi-use products which generate lower per capita revenue compared to our single-day tickets. The increasedecrease in In-parkin-park spending per capita reflects the Company’s in-park pricing initiatives.
Operating expenses
Operating expenses for the three months ended OctoberJuly 2, 2022, decreased $46.92023, increased $0.3 million, or 21%, compared to the three months ended OctoberJuly 3, 2021,2022, which was primarily as a result of lowerattributable to wage increases for our seasonal labor, expenditures at the parks due to a reduction in operating hours and more efficient labor scheduling and lower incentive costs, as well as the moving of some back-office functions to a shared-services center, which shifted some operating costs to selling, general and administrative expenses. These decreases were partially offset by generally higher salaries, wages, utilities and maintenance resulting from inflationary pressures.a decline in full-time headcount.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended OctoberJuly 2, 2022, decreased $26.12023, increased $37.0 million, or 41%69%, compared to the three months ended OctoberJuly 3, 2021.2022. The decreaseincrease was primarily attributable to reduced advertising expensesan increase in self-insurance reserves of $37.6 million. See Note 6, Commitments and lower personnel costs.Contingencies, for additional information on the change in accounting estimate that resulted in this adjustment. The declineremaining decrease was attributable to a decrease in personnel costs was primarily driven by lower bonus accruals, stock-based compensation and headcount reductions. These reductions werefull-time head count, partially offset by higher costsan increase in advertising expenses.
2827
due to the movement of some back-office functions to a shared-services center, which shifted a portion of costs from operating expenses to selling, general and administrative expenses.
Cost of products sold
Cost of products sold in the three months ended OctoberJuly 2, 2022,2023, decreased $13.9$0.9 million, or 26%3%, compared to the three months ended OctoberJuly 3, 2021,2022, primarily as a result of a decrease in total sales. Costs of products sold as a percentage of in-park revenue for the three months ended October 2, 2022 decreased slightly relativeprocurement initiatives to the prior year period, primarily as a result of the mix of in-park revenue, an increase in retail prices, and a reduction in membership discounts,reduce costs, partially offset by higher unit costs for food and retail items.sales volume of our other in-park offerings due to higher attendance.
Depreciation and amortization
Depreciation and amortization expense for the three months ended OctoberJuly 2, 2022,2023, increased $2.1$1.4 million, or 8%5%, compared to the period ended July 2, 2022. The increase was primarily attributable to a higher proportion of our capital expenditures over the past several years that have been allocated to assets with shorter useful lives.
Loss on disposal of assets
We recognized a loss on disposal of assets of $2.5 million during the three months ended July 2, 2023, and a loss on disposal of assets of $0.1 million during the three months ended July 3, 2022. These losses were related to the disposition of older rides and other assets in the normal course of operations.
Interest expense, net
Interest expense, net increased $7.5 million, or 21%, compared to the three months ended OctoberJuly 3, 2021.2022. The increase in depreciation and amortization expense is primarily attributable to an increase in the resultcost of decreased capital expenditures during 2020 dueour floating rate debt and increased borrowings on our Revolving Credit Facility. The higher borrowings under our Revolving Credit Facility are primarily attributable to additional borrowings used to fund the COVID-19 pandemic, which reduced depreciation expense in 2021 as compared to 2022 asportion of the tender of our capital expenditures returned to more normalized levels.2024 Notes not covered by the net proceeds of the 2031 Notes.
Loss on disposal of assetsdebt extinguishment
We recognized a $5.0 million lossLoss on disposal of assets for the three months ended October 2, 2022, compared to a loss on disposal of assets of $0.6debt extinguishment was $14.0 million for the three months ended OctoberJuly 2, 2023 as compared to compared to a loss of debt extinguishment of $17.5 for three months ended July 3, 2021. These losses on disposal of assets were primarily driven by the write-off of assets in conjunction with our ongoing capital plan.
Interest expense, net
Interest expense, net decreased $3.9 million, or 10%, for2022. During the three months ended OctoberJuly 2, 2022. The decrease is primarily attributable2023, we recognized a loss on debt extinguishment of $14.0 million due to the write-off of unamortized deferred financing costs on the 2024 Notes, the premium paid above par on the early redemption of the 2024 Notes and the transaction costs charged to expense. During the three months ended July 3, 2022, we incurred a $17.5 million loss on debt extinguishment upon the early redemption of $360.0 million aggregate principalof the 2025 Notes comprised of $12.6 million for the premium paid above par and $5.0 million for the write-off of the pro rata amount of our senior secured 7.000%unamortized deferred financing costs associated with the 2025 Notes due 2025 during the quarter ended July 3, 2022. This decrease was partially offset by borrowings under our revolving credit facility and higher interest rates on our floating rate debt.that were redeemed early.
Income tax expense (benefit)
Income tax expense for the three months ended OctoberJuly 2, 20222023 was $38.7$13.8 million reflecting an effective tax rate of 21.9%23.7%. The difference between our effective tax rate and the federal statutory rate primarily results from state and foreign income taxes and certain nondeductible expenses, including nondeductible executive compensation. Income tax expense for the three months ended July 3, 2022 was $24.7 million reflecting an effective tax rate of 27%. The difference between our effective tax rate and the federal statutory rate primarily results from state and foreign income taxes and certain nondeductible expenses, including nondeductible executive compensation and a $4.0 million discrete tax assessment in Mexico.
2928
Results of Operations
NineSix Months Ended OctoberJuly 2, 20222023 Compared to NineSix Months Ended OctoberJuly 3, 20212022
The following table sets forth summary financial information for the ninesix months ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021:2022:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | Percentage Change (%) | | Six Months Ended | | Percentage Change (%) | ||||||||||
(Amounts in thousands, except per capita data) |
| October 2, 2022 |
| October 3, 2021 |
| 2022 to 2021 |
| July 2, 2023 |
| July 3, 2022 |
| 2023 to 2022 | ||||||
Total revenue |
| $ | 1,078,360 |
| $ | 1,180,095 | | (9) | % |
| $ | 585,897 |
| $ | 573,529 | | 2 | % |
Operating expenses | |
| 464,688 | |
| 504,530 | | (8) | % | |
| 282,539 | |
| 283,076 | | N/M | |
Selling, general and administrative expenses | |
| 131,139 | |
| 150,687 | | (13) | % | |
| 134,695 | |
| 92,755 | | 45 | % |
Costs of products sold | |
| 85,989 | |
| 100,509 | | (14) | % | |
| 44,552 | |
| 45,825 | | (3) | % |
Other net periodic pension benefit | |
| (4,851) | |
| (3,409) | | 42 | % | |||||||||
Depreciation and amortization | |
| 86,772 | |
| 84,938 | | 2 | % | |
| 58,024 | |
| 56,586 | | 3 | % |
Loss on disposal of assets | |
| 3,036 | |
| 1,863 | | (1) | % | |||||||||
Loss (gain) on disposal of assets | |
| 4,985 | |
| (2,002) | | N/M | | |||||||||
Operating income | | | 61,102 | | | 97,289 | | (37) | % | |||||||||
Interest expense, net | |
| 107,705 | |
| 114,563 | | (6) | % | |
| 79,797 | |
| 73,508 | | 9 | % |
Loss on debt extinguishment | |
| 17,533 | |
| — | | N/M | | |
| 13,982 | |
| 17,533 | | (20) | % |
Other expense, net | |
| 1,882 | |
| 8,796 | | (79) | % | |||||||||
Income before income taxes | |
| 184,467 | |
| 217,618 | | N/M | | |||||||||
Income tax expense | |
| 44,257 | |
| 43,930 | | 1 | | |||||||||
Net income | | | 140,210 | | | 173,688 | | N/M | | |||||||||
Other income, net | |
| (3,093) | |
| (1,410) | | N/M | | |||||||||
(Loss) income before income taxes | |
| (29,584) | |
| 7,658 | | N/M | | |||||||||
Income tax (benefit) expense | |
| (4,045) | |
| 5,603 | | N/M | | |||||||||
Net (loss) income attributable to Six Flags Entertainment Corporation | | | (25,539) | | | 2,055 | | N/M | | |||||||||
Less: Net income attributable to noncontrolling interests | | | (44,651) | | | (41,766) | | 7 | % | | | (23,766) | | | (22,325) | | 6 | % |
Net loss attributable to Six Flags Entertainment Corporation | | $ | 95,559 | | $ | 131,922 | | (28) | % | | $ | (49,305) | | $ | (20,270) | | N/M | |
| | | | | | | | | | | | | | | | | | |
Other Data: | |
|
| |
|
| |
| | |
|
| |
|
| |
| |
Attendance | |
| 16,371 | |
| 21,924 | | (25) | % | |
| 8,669 | |
| 8,339 | | 4 | % |
Admissions revenue per capita | | $ | 36.37 | | $ | 37.75 | | (4) | % | |||||||||
In-park spending per capita | | $ | 28.09 | | $ | 28.46 | | (1) | % | |||||||||
Total guest spending per capita | | $ | 64.46 | | $ | 66.21 | | (3) | % |
Revenue
Revenue recognized for the ninesix months ended OctoberJuly 2, 2022,2023, totaled $1,078.4$585.9 million, a decreasean increase of $101.7$12.4 million, or 9%2%, compared to the $1,180.1$573.5 million recognized for the ninesix months ended OctoberJuly 3, 2021.2022. The decreaseincrease was primarily attributable to an attendance decrease of 25%. The lower attendance was driven by an increase in ticket pricesattendance of 4% and elimination of free ticketsa $5.6 million increase in sponsorship, international agreement and heavily-discounted product offerings. In addition, due to the adoption ofaccommodations revenue. The increase was partially offset by reduced spending on a fiscal reporting calendar commencing January 1, 2021, there were three fewer days in the first nine months 2022 compared to the first nine months 2021, which accounted for 89 thousand additional guests in the first nine months 2021.per capita basis.
Total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, for the ninesix months ended OctoberJuly 2, 2022, increased by $11.39,2023, decreased $1.75, to $63.63,$64.46, compared to the ninesix months ended OctoberJuly 3, 2021,2022, driven by a $7.42, or 26%, increasedecrease in admissions revenue per capita of $1.38, or 4%, and a $3.98, or 17%, increasedecrease in In-parkin-park spending per capita.capita of $0.37, or 1%. The higherlower admissions per capita reflects higher realized ticket pricingour increased focus on selling season pass and a higher mix ofother multi-use products, which generate lower per capita revenue compared to single day guests. The increase in In-park spending per capita reflects the benefits of our revenue management initiatives related to our premiumization strategy and in-park initiatives.tickets.
Operating expenses
Operating expenses for the ninesix months ended OctoberJuly 2, 2022,2023, decreased $39.8$0.5 million, or 8%, compared to the ninesix months ended OctoberJuly 3, 2021,2022, primarily as a result of lower labor expenditures ata decline in full-time headcount. This decrease was partially offset by an increase in wages per hour paid to our seasonal workers and the parks due to a reduction in operating hoursaddition of multiple events during the first half of the year including Viva la Fiesta, Flavors of the World and more efficient labor scheduling as well as the moving of some back-office functions to a shared-services center, which shifted some operating costs to selling,Scream Break.
Selling, general and administrative expenses. These decreases wereexpenses
Selling, general and administrative expenses for the six months ended July 2, 2023, increased $41.9 million, or 45%, compared to the six months ended July 3, 2022. The increase was primarily attributable to an increase in our self-insurance reserves of $37.6 million. See Note 6, Commitments and Contingencies, for additional information on the change in accounting estimate that resulted in this adjustment. The remaining increase is attributable to an increase in advertising expenses during the first half of the year. The increase was partially offset by increased operating expenses at our California and Mexico parksa decline in the first quarter of 2022, as these parks were closed due to COVID-19 during the first quarter of 2021 and generally higher salaries, wages, utilities and maintenance resulting from inflationary pressures.
full-time headcount.
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Selling, general and administrative expenses
Selling, general and administrative expenses
Cost of products sold
Cost of products sold for the ninesix months ended OctoberJuly 2, 2022,2023 decreased $19.5$1.3 million, or 13%3%, compared to the nine monthssix month period ended OctoberJuly 3, 2021.The decrease was primarily attributable to reduced advertising expenses and lower personnel costs. The decline in personnel costs was primarily driven by lower bonus accruals, stock-based compensation and headcount reductions. These reductions were partially offset by higher costs due to the movement of some back-office functions to a shared-services center, which shifted a portion of costs from operating expenses to selling, general and administrative expenses.
Cost of products sold
Cost of products sold in the nine months ended October 2, 2022 decreased $14.5 million, or 14%, compared to the nine months ended October 3, 2021, primarily as a result of a decrease in total items sold. Costs of products sold as a percentage of in-park revenue for the nine months ended October 2, 2022 decreased slightly relativeprocurement initiatives to the prior year period, primarily as a result of the mix of in-park revenue, an increase in retail prices, and a reduction in membership discounts,reduce costs, partially offset by higher unit costssales volume of food and retail itemsour other in-park offerings due to higher attendance.
Depreciation and amortization
Depreciation and amortization expense for the ninesix months ended OctoberJuly 2, 2022,2023, increased $1.8$1.4 million, or 2%3%, compared to the ninesix months ended OctoberJuly 3, 2021.2022. The increase in depreciation and amortization expense is primarily the result of decreased capital expenditures during 2020 due to the COVID-19 pandemic, which reduced depreciation expense in 2021 as compared to 2022 asa higher proportion of our capital expenditures returnedover the past several years that have been allocated to more normalized levels.assets with shorter useful lives.
Loss on disposal of assets
We recognized a $3.0$5.0 million loss on disposal of assets for the ninesix months ended OctoberJuly 2, 2022,2023, compared to a gain on disposal of assets of $2.0 million for the six months ended July 3, 2022. The loss on disposal of assets of $1.9 million forduring the ninesix months ended October 3, 2021. These losses on disposal of assets were primarilyJuly 2, 2023, was driven by the write-offdisposition of older rides and other assets in conjunction withthe normal course of operations. The gain of $2.0 million during the six months ended July 3, 2022 was primarily attributable to insurance proceeds received under our ongoing capital plan.property insurance policy for losses incurred.
Interest expense, net
Interest expense, net decreased $6.9increased $6.3 million, or 6%9%, for the nine months ended October 2, 2022 compared to the ninesix months ended OctoberJuly 3, 2021.2022. The decreaseincrease is primarily attributable to an increase in the redemption of $360.0 million aggregate principal amountcost of our senior secured 7.000% Notes due 2025 during the quarter ended July 3, partially offset byfloating rate debt and increased borrowings on our Revolving Credit Facility. The higher borrowings under our revolving credit facility and higher interest rates onRevolving Credit Facility are primarily attributable to additional borrowings used to fund the portion of the tender of our floating rate debt.2024 Notes not covered by the net proceeds of the 2031 Notes.
Loss on debt extinguishment
Loss on debt extinguishment was $17.5$14.0 million for the ninesix months ended OctoberJuly 2, 2023 as compared to compared to a loss of debt extinguishment of $17.5 for six months ended July 3, 2022. WeDuring the six months ended July 2, 2023, we recognized a loss on debt extinguishment of $14.0 million due to the write-off of unamortized deferred financing costs on the 2024 Notes, the premium paid above par on the early redemption of the 2024 Notes and the transaction costs charged to expense. During the six months ended July 3, 2022, we incurred a $17.5 million chargeloss on debt extinguishment upon the repaymentearly redemption of $360.0 million of the 2025 Notes containingcomprised of $12.6 million for the premium paid above par and $5.0 million for the write-off of the pro rata amount of unamortized deferred financing costs related toassociated with the transaction.2025 Notes that were redeemed early.
Income tax (benefit) expense (benefit)
Income tax benefit for the six months ended July 2, 2023 was $4.0 million, an effective tax rate of 13.7%. The difference between our effective tax rate and the federal statutory rate primarily results from state and foreign income taxes and certain nondeductible expenses, including nondeductible executive compensation. Income tax expense for the ninesix months ended October 2,July 3, 2022, was $44.3$5.6 million. The difference between the federal statuatorystatutory rate and our effective tax rate was driven by a $4.0 million discrete tax assessmentadjustment in Mexico. Our income tax expense was also driven by state and foreign income taxes and nondeductible expenses, including certain nondeductible executive compensation.
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Calculation of EBITDA for the three and ninesix months ended OctoberJuly 2, 20222023 and OctoberJuly 3, 20212022
We manage our business primarily with three different metrics; Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex.
“Modified EBITDA,” a non-GAAP measure, is defined as our consolidated income (loss) from continuing operations:operations excluding the following: the cumulative effect of changes in accounting principles,principle, discontinued operations, gains or losses, income tax expense or benefit,(benefit), restructure costs or recoveries, reorganization items (net), other income or(income) expense, gain or(gain) loss on earlydebt extinguishment, of debt, equity in income or(income) loss of investees, interest expense (net), gain or(gain) loss on disposal of assets, gain or(gain) loss on the sale of investees, amortization, depreciation, stock-based compensation, and fresh start accounting valuation adjustments.adjustments and other significant non-recurring items. Modified EBITDA, as defined herein, may differ from similarly titled measures presented by other companies. Management uses non-GAAP measures for budgeting purposes, measuring actual results and allocating resources and in determining employee incentive compensation.resources. We believe that Modified EBITDA provides relevant and useful information for investors because it assists in comparing our operating performance on a consistent basis, makes it easier to compare our results with those of other companies in our industry as it most closely ties our performance to that of our competitors from a park-level perspective and allows investors to review performance in the same manner as our management.
"Adjusted EBITDA," a non-GAAP measure, is defined as Modified EBITDA minus the interests of third parties in the Modified EBITDA of properties that are less than wholly owned (consisting of Six Flags Over Georgia, Six Flags White Water Atlanta and Six Flags Over Texas). Adjusted EBITDA is approximately equal to “Parent Consolidated Adjusted EBITDA” as defined in our secured credit agreement, except that Parent Consolidated Adjusted EBITDA excludes Adjusted EBITDA from equity investees that is not distributed to us in cash on a net basis and has limitations on the amounts of certain expenses that are excluded from the calculation. Adjusted EBITDA as defined herein may differ from similarly titled measures presented by other companies. Our board of directors and management use Adjusted EBITDA to measure our performance and our current management incentive compensation plans are based largely on achieving specified Adjusted EBITDA.EBITDA targets. We believe that Adjusted EBITDA is frequently used by all our sell-side analysts and most investors as their primary measure of our performance in the evaluation of companies in our industry. In addition, the instruments governing our indebtedness use Adjusted EBITDA to measure our compliance with certain covenants and, in certain circumstances, our ability to make certain borrowings. During 2023, we reclassified the net pension-related expense (benefit) to other (income) expense, net, in our condensed consolidated statements of operations. This reclassification has been reflected in all periods presented. As a result of this reclassification, Adjusted EBITDA for the three-month and six-month periods ended July 3, 2022, declined by $1.6 million and $2.8 million, respectively, as computed by us, may not be comparablecompared to similar metrics used by other companies in our industry.the amounts previously reported.
“Adjusted EBITDA minus capex,” a non-GAAP measure, is defined as Adjusted EBITDA minus capital expenditures net of property insurance recoveries. Our board of directors and management use Adjusted EBITDA to measure our performance and our current management incentive compensation plans are based largely on Adjusted EBITDA minus capex. Adjusted EBITDA minus capex as defined herein may differ from similarly titled measures presented by other companies.
Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex are not recognized terms under US GAAP and should not be considered in isolation or as a substitute for a measure of our financial performance prepared in accordance with US GAAP. These metrics are not indicative of income or loss as determined under US GAAP. Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex as presented may not be comparable to similarly titled measures of other companies due to varying methods of calculation.
The following tables set forth a reconciliation of net income (loss) to Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex for the three and ninesix month periods ended OctoberJuly 2, 20222023 and OctoberJuly 3, 2021:2022:
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | ||||||||||||||||
(Amounts in thousands, except per share data) |
| October 2, 2022 |
| October 3, 2021 |
| October 2, 2022 |
| October 3, 2021 | | July 2, 2023 |
| July 3, 2022 | | July 2, 2023 |
| July 3, 2022 | ||||||||
Net income | | $ | 138,155 | | $ | 178,124 | | $ | 140,210 | | $ | 173,688 | ||||||||||||
Income tax expense | | | 38,654 | | | 46,543 | | | 44,257 | | | 43,930 | ||||||||||||
Other expense, net (2) | | | 521 | | | 346 | | | 1,882 | | | 8,796 | ||||||||||||
Net income (loss) | | $ | 44,320 | | $ | 67,717 | | $ | (25,539) | | $ | 2,055 | ||||||||||||
Income tax expense (benefit) | | | 13,807 | | | 24,716 | | | (4,045) | | | 5,603 | ||||||||||||
Other income, net | | | (2,261) | | | (722) | | | (3,093) | | | (1,410) | ||||||||||||
Loss on debt extinguishment | | | — | | | — | | | 17,533 | | | — | | | 13,982 | | | 17,533 | | | 13,982 | | | 17,533 |
Interest expense, net | | | 34,197 | | | 38,095 | | | 107,705 | | | 114,563 | | | 43,495 | | | 35,978 | | | 79,797 | | | 73,508 |
Loss (gain) on disposal of assets | | | 5,038 | | | 624 | | | 3,036 | | | 1,863 | | | 2,550 | | | 98 | | | 4,985 | | | (2,002) |
Amortization | | | 5 | | | 6 | | | 16 | | | 17 | ||||||||||||
Depreciation | | | 30,181 | | | 28,047 | | | 86,756 | | | 84,921 | ||||||||||||
Depreciation and amortization | | | 28,910 | | | 27,537 | | | 58,024 | | | 56,586 | ||||||||||||
Stock-based compensation | | | 1,676 | | | 7,876 | | | 9,124 | | | 17,514 | | | 2,179 | | | 3,223 | | | 5,493 | | | 7,448 |
Self-insurance reserve adjustment (1) | | | 37,558 | | | — | | | 37,558 | | | — | ||||||||||||
Modified EBITDA | | $ | 248,427 | | $ | 299,661 | | $ | 410,519 | | $ | 445,292 | | $ | 184,540 | | $ | 176,080 | | $ | 167,162 | | $ | 159,321 |
Third party interest in EBITDA of certain operations | | | (22,326) | | | (20,883) | | | (44,651) | | | (41,766) | | | (23,766) | | | (22,325) | | | (23,766) | | | (22,325) |
Adjusted EBITDA | | $ | 226,101 | | $ | 278,778 | | $ | 365,868 | | $ | 403,526 | | $ | 160,774 | | $ | 153,755 | | $ | 143,396 | | $ | 136,996 |
Capital expenditures, net of property insurance recovery | | | (18,041) | | | (19,565) | | | (73,383) | | | (61,815) | | | (42,034) | | | (26,352) | | | (67,041) | | | (55,342) |
Adjusted EBITDA minus capex (3) | | $ | 208,060 | | $ | 259,213 | | $ | 292,485 | | $ | 341,711 | ||||||||||||
Adjusted EBITDA minus CAPEX | | $ | 118,740 | | $ | 127,403 | | $ | 76,355 | | $ | 81,654 |
(1) | Amount relates to an adjustment to our self-insurance reserves resulting from a change in accounting estimate that increased our ultimate loss indications on both identified claims and incurred but not reported claims. See Note 6 – Commitment and Contingencies for additional information regarding this change in accounting estimate. We have excluded this adjustment from our reported Adjusted EBITDA because we believe (i) the change in actuarial assumptions and related change in accounting estimate that rise to adjustment is unusual and not expected to be recurring; (ii) excluding it provides more meaningful comparisons to our historical results; and (iii) excluding it provides more meaningful comparisons to other companies in our industry. |
Adjusted EBITDA for the three months ended October 2, 2022, decreased $52.7 million compared to the three months ended October 3, 2021. This was primarily driven by a $133.5 million decrease in revenue for the period, which was partially offset by a decrease in operating expenses, cost of products sold and sales, general and administrative expenses. Capital expenditures, net of property insurance recovery, decreased by $1.6 million.
Adjusted EBITDA for the nine months ended October 2, 2022, decreased $37.6 million compared to the nine months ended October 3, 2021. This was primarily driven by a $101.7 million decrease in revenue, which was partially offset by a decrease in operating expenses, cost of products sold and sales, general and administrative expenses. Capital expenditures, net of property insurance recovery, increased by $11.6 million due decreased spending in the prior year period when COVID-19 led to more uncertainty and decreased capital spending during the first and second quarters.
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Liquidity, Capital Commitments and Resources
On an annual basis, ourOur 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 workingour operations, including interest payments on our outstanding debt obligations, capital obligations, debt service, investments in parks (including capital projects), common stock dividends,expenditures and payments to our partners in the Partnership Parks, and common stock repurchases.Parks.
HoldingsWe did not pay any dividends during the ninesix months ended OctoberJuly 2, 20222023, and October 3, 2021. Duringwe paid a nominal amount in the ninesix months ended OctoberJuly 3, 2021, we paid $0.5 million2022 to employees with dividend equivalent rights for previously declared dividends due upon the vesting of the related shares. These dividends were declared prior to the suspension of dividend payments in connection with the increase in the Second Amended and Restated Revolving Loan in April 2020.
As of OctoberJuly 2, 2022, Holdings has2023, we have repurchased 8,071,000 shares of common stock at a cumulative cost of approximately $365.1 million and an average cost per share of $45.24 under itsour approved stock repurchase program, leaving approximately $134.9 million available for permitted repurchases. The stock price of Holdings’ common stock could be adversely affected if our cash dividend rate or common stock repurchase activity differs from investors’ expectations.
Based on historical and anticipated future operating results, we believe cash flow from operations, available cash and amounts available under the Second Amended and Restatedour Revolving Credit Facility will be adequate to meet our liquidity needs, for at least the next twelve months, including any anticipated requirements for working capital, capital expenditures, scheduled debt service and obligations under arrangements relating to the Partnership Parks. Additionally, we expect to be able to useutilize federal net operating loss carryforwards to reduce our federal incomecash tax liability for several years. For the years 2022obligations through 2024, we have significant federal net operating loss carryforwards subject to an annual limitation that will offset approximately $32.5 million of taxable income per year. We expect taxable income in excess of the annual limitation in those years will be offset by net operating losses generated during 2020. In accordance with the CARES Act, net operating loss carryforwards generated in 2020 are not subject to expiration and will carryforward indefinitely.fiscal year 2024.
Our current and future liquidity is greatly dependent upon our operating results, which are driven largely by overall economic conditions as well as the price and perceived quality of the entertainment experience at our parks. Our liquidity could also be adversely affected by a disruption in the availability of credit as well as unfavorable weather; natural disasters; contagious diseases, such as Ebola, Zika, swine flu, COVID-19, Monkeypox or other diseases; accidents or the occurrence of an unfavorable event at one or condition atmore of our parks, including terrorist acts or threats inside or outside of our parks; negative publicity; or significant local competitive events, which could materially reduce paid attendance and revenue related to that attendance at any of our parks. While we work with local police authorities on security-related precautions to prevent certain types of disturbances, we can make no assurance that these precautions will be able to prevent these types of occurrences. However, we believe our ownership of many parks in different geographic locations reduces the effects of adverse weather and these other types of occurrencesadverse events on our consolidated results. If such an adverse event were to occur, we may be unable to borrow under the Second Amended and Restated Revolving LoanCredit Facility or may be required to repay amounts outstanding under the Second Amended and RestatedRevolving Credit Facility and/or we may need to seek additional financing. In addition, we expect that we maywill be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. The degree to which we are leveraged could adversely affect our ability to obtain any additional financing. See "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" in the 20212022 Annual Report and in this Quarterly Report.
On July 1, 2022, we redeemed $360.0 million in aggregate principal amount of our senior secured 7.000% Notes due 2025 at a redemption price of 103.5%. We recorded a loss on debt extinguishment of $17.5 million in connection with the redemption. As of October 2, 2022, the total principal amount of our outstanding debt was approximately $2,403.5 million. As of October 2, 2022, based on (i) non-revolving credit debt outstanding on that date, (ii) estimated interest rates for floating-rate debt, and (iii) the 2024 Notes, the 2025 Notes and the 2027 Notes, we anticipate annual cash interest payments of approximately $150 million and $140 million during 2022 and 2023, respectively.
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As of OctoberJuly 2, 2022,2023, the principal amount of our total indebtedness, was $2,369.9 million. As of August 7, 2023, based on (i) non-revolving credit debt outstanding, (ii) anticipated levels of working capital revolving borrowings during 2023 and 2024, and (iii) required interest payments due to holders of the 2024 Notes, the 2025 Notes, the 2027 Notes and the 2031 Notes, we anticipate annual cash interest payments of approximately $165 million and $155 million during 2023 and 2024, respectively.
As of July 2, 2023, we had approximately $73.3$51.6 million of unrestricted cash and $219.0$310.0 million available for borrowing under the Second Amended and Restated Revolving Loan.Credit Facility. Our ability to borrow under the Second Amended and Restated Revolving Loan dependsCredit Facility is contingent on our compliance with certain conditions, including a maximum senior secured net leverage maintenance covenant, a minimum liquidity covenant and the absence of any material adverse change in our business or financial condition. If we were to become unable to borrow under the Second AmendedRevolving Credit Facility, and Restated Revolving Loan, andour operating results significantly underperform our expectations, we failed to meet our projected results from operations significantly, we mightmay be unable to pay in full our off-season obligations. A default under the Second Amended and Restated Revolving LoanCredit Facility could permit the lenders under the Second Amended and Restated Credit Facility to accelerate the obligations thereunder. The Second Amended and Restated Revolving LoanCredit Facility expires on April 17, 2024.in May 2028. The terms and availability of the Second Amended and Restated Credit Facility and other indebtedness are not affected by changes in the ratings issued by rating agencies in respect of our indebtedness. As of July 2, 2023, we are in compliance with all covenants. For a more detailed description of our indebtedness, see Note 3 to the unaudited condensed consolidated financial statements included in this Quarterly Report.
2031 Notes Issuance and Tender Offer
On April 26, 2023, the Company launched a private offering of up to $800 million aggregate principal amount of senior notes. Concurrently, the Company commenced a cash tender offer (the “Tender Offer”) for any and all outstanding 2024 Notes. On May 3, 2023, we repaid $892.6 million, or 94.0% of the aggregate principal amount of the 2024 Notes that were tendered to us. The remainder of the 2024 Notes is due in July 2024.
On May 3, 2023, the Company completed the private sale of the 2031 Notes at an offering price of 99.248% of the principal amount thereof. Net of the original issuance discount and debt issuance costs, the Company received net proceeds of $784.0 million. We incurred a $13.9 million loss on debt extinguishment containing $1.0 million for the premium paid above par and $12.9 million of costs charged to expense on debt modification which were recognized during the three months ended July 2, 2023.
Also, on May 3, 2023, the Company announced that $892.6 million, or 94.0% of the aggregate principal amount of the 2024 notes were validly tendered pursuant to the Tender Offer. Net cash proceeds from the 2031 Notes, together with other available cash, including borrowings under our Revolving Credit Facility, were used to pay the Purchase Price, plus accrued and unpaid interest.
Investments
We regularly make capital investments for new rides and attractions in our parks. In addition, each year we make capital investments in the food, retail games and other in-park areas to increase guest spending per capita.areas. We also make annual enhancements to theming and landscaping of our parks in order to provide a more complete, family-oriented entertainment experience; and invest in our information technology infrastructure to attain operational efficiencies. We regularly perform maintenance capital enhancements, with most expenditures made during the off-season. Repairs and maintenance costs for materialsrecurring and services associated with maintaining assets, such as painting and inspecting existing rides,routine maintenance are expensed as incurred and are not included in capital expenditures.
Cash Flows
| | | | | | |
| | Six Months Ended | ||||
(Amounts in thousands) | | July 2, 2023 | | July 3, 2022 | ||
Net cash provided by operating activities |
| $ | 84,629 |
| $ | 63,237 |
Net cash used in investing activities | | | (67,041) | | | (55,342) |
Net cash used in financing activities | | | (50,000) | | | (269,018) |
Effect of exchange rate on cash | | | 3,870 | | | 340 |
Net change in cash and cash equivalents | | $ | (28,542) | | $ | (260,783) |
During the ninesix months ended OctoberJuly 2, 2022,2023, net cash provided by operating activities was $193.8$84.6 million, compared to net cash provided by operating activities of $305.9$63.2 million during the six months ended July 3, 2022. The increase was primarily driven by an increase in deferred revenue from the prior year period.sale of season pass products which require up-front payment for visitation. Net cash used in investing activities duringwas $67.0 million for the ninesix months ended OctoberJuly 2, 2022, and October 3, 2021, was $73.4 million and $61.8 million, respectively, consisting primarily of capital expenditures,2023, compared to net of property insurance recoveries. The additional investment spending during the nine months ended October 2, 2022 reflects the reduction in the effects of COVID-19 on our capital budget. Net cash used in financinginvesting activities duringof $55.3 million in the ninesix months ended October 2, 2022, was $383.2 million andJuly 3, 2022. The increase was primarily dueattributable to the repayment of $360.0 million repayment on the 2025 Notes and $96.8 milliona planned increase in stock repurchases, which was partially offset by net borrowings of $110.0 million on the Second Amended and Restated Revolving Loan.capital spending. Net cash used in financing activities was $11.9 million during the nine months ended October 3, 2021, primarily due to distributions to noncontrolling interests partially offset by proceeds received from the exercise of stock options.
Since our business is both seasonal in nature and involves significant levels of cash transactions, our net operating cash flows are largely driven by attendance and guest spending per capita levels. Most of our cash-based expenses are relatively fixed and do not vary significantly with either attendance or spending per capita assuming that the parks are operating in the normal course.
As the war in Ukraine has continued and sanctions, export controls and other measures are imposed against Russia, Belarus and specific areas of Ukraine, the war is increasingly affecting the global economy and financial markets, as well as exacerbating ongoing economic challenges, including rising inflation and global supply-chain disruption. We will continue to monitor the impacts of the Russia-Ukraine war on macroeconomic conditions and continually assess the effect these matters may have on consumer demand, our suppliers’ ability to deliver products, cybersecurity risks and our liquidity and access to capital.
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used in financing activities was $50.0 million for the six months ended July 3, 2022, compared to $269.0 million for the six months ended July 3, 2022. During 2023, the amount is driven by the repayment of $892.0 million of the 2024 Notes offset by the $784.0 million in proceeds received from the issuance of the 2031 Notes, and additional borrowings under the Revolving Credit Facility. The $269.0 million in 2022 was driven by the repayment of $360.0 million of the 2025 Notes and share repurchases of $96.8 million, partially offset by increased borrowings under our Revolving Credit Facility.
Contractual Obligations
Since January 2, 2022,1, 2023, there have been no material changes to the contractual obligations of the Company outside the ordinary course of our business except for the Company’s business outsideearly redemption of $892.6 million of the early paydown2024 Notes, the issuance of $360.0 million on the 20252031 Notes and borrowing $110.0 million under the Second Amended and Restatedamendments made to our Revolving Loan.Credit Facility. See Note 3, Long-Term Indebtedness for additional information. The table below sets forth the material changes during 2023 to the corresponding table as presented in our 2022 Annual Report.
| | | | | | | | | | | | | | | |
|
| Payment Due by Period | |||||||||||||
(Amounts in thousands) |
| 2022 |
| 2023 - 2024 |
| 2025 - 2026 |
| 2027 and beyond |
| Total | |||||
Long-term debt including current portion (2025 Notes and Second Amended and Restated Revolving Loan) (1) | | $ | — |
| $ | 110,000 |
| $ | 365,000 | | $ | — | | $ | 475,000 |
Interest on 2025 Notes (1) | | | — | | | 51,100 | | | 25,550 | | | — | | | 76,650 |
| | | | | | | | | | | | | | | |
|
| Payment Due by Period | |||||||||||||
(Amounts in thousands) |
| 2023 |
| 2024 - 2025 |
| 2026 - 2027 |
| 2028 and beyond |
| Total | |||||
Long-term debt including current portion (2024 Notes, 2031 Notes and Revolving Credit Facility) | | $ | — |
| $ | 56,867 |
| $ | — | | $ | 969,000 | | $ | 1,025,867 |
Interest on 2024 Notes | | | 1,386 | | | 1,386 | | | — | | | — | | | 2,772 |
Interest on 2031 Notes | | | 31,145 | | | 116,000 | | | 116,000 | | | 203,000 | | | 466,145 |
(1) See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion on long-term debt.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of OctoberJuly 2, 2022,2023, there were no material changes in our market risk exposure from that disclosed in the 20212022 Annual Report.
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation, as of OctoberJuly 2, 2022,2023, of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. As required by Exchange Act Rule 13a-15(d), the Company's management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company's internal control over financial reporting to determine whether any change occurred during the last fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation there has been no change in the Company’s internal control over financial reporting during the last fiscal quarter of the period covered by this report other than certain internal control changes related to the implementation of new accounting and financial reporting system that has materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting.”
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the industry in which we operate tends to expose us to claims by guests, generally for injuries. Accordingly, we are party to various legal actions arising in the normal course of business. Historically, the great majority of these claims have been minor. Although we believe that we are adequately insured against guests’ claims, if we become subject to damages that cannot by law be insured against, such as punitive damages or certain intentional misconduct by employees, there may be a material adverse effect on our operations.
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For information regarding legal proceedings, see Note 15, Commitments and Contingencies, to the consolidated financial statements in the 20212022 Annual Report, and Note 6, Commitments and Contingencies, to the unaudited condensed consolidated financial statements in this Quarterly Report.
ITEM 1A. RISK FACTORS
There have been no material changes to the principal risks that we believe are material to our business, results of operations and financial condition, from the risk factors disclosed in the 20212022 Annual Report. For a discussion of these risk factors, please see “Item 1A. Risk Factors” contained in the 20212022 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 30, 2017, Holdingswe announced that itsour Board of Directors approved a stock repurchase plan that permits Holdingsus to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of August 8, 2022, Holdings has7, 2023, we have repurchased 8,071,000 shares of common stock at a cumulative cost of approximately $365.1 million and an average cost per share of $45.24 under itsour approved stock repurchase program, leaving approximately $134.9 million available for permitted repurchases.
| | | | | | | | | | | | |
|
| |
| |
| | |
| Total number of |
| Approximate dollar | |
| | |
| Total |
| Average |
| shares purchased |
| value of shares that | ||
| | |
| number of |
| price |
| as part of publicly |
| may yet be purchased | ||
| | |
| shares |
| paid per |
| announced plans |
| under the plans | ||
|
| Period |
| purchased |
| share |
| or programs |
| or programs | ||
Month 1 |
| April 4 - May 1 |
| — |
| $ | — |
| — | | $ | 231,673,000 |
Month 2 |
| May 2 - May 29 |
| 2,174,781 | | $ | 27.76 |
| 2,174,781 | | $ | 171,299,000 |
Month 3 |
| May 30 - July 3 |
| 1,289,604 | | $ | 28.23 |
| 1,289,604 | | $ | 134,899,000 |
| | |
| 3,464,385 | | $ | 27.76 |
| 3,464,385 | | $ | 134,899,000 |
ITEM 5.OTHER ITEMS
On June 7, 2023, Aimee Williams-Ramey, Chief Legal Officer and Corporate Secretary of the Company, entered into a 10b5-1 trading arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) promulgated under the Securities Exchange Act of 1934, as amended. The trading arrangements will expire on June 28, 2024, and may be terminated earlier in the limited circumstances defined in the trading arrangement. An aggregate of 2,307 shares may be sold pursuant to the trading arrangement.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
The Company announced on August 11, 2023 (“Effective Date”) that Aimee Williams-Ramey, the Company’s Chief Legal Officer and Corporate Secretary, has departed from the Company. Concurrently with her departure, Ms. Williams-Ramey entered into a consulting agreement, dated as of August 11, 2023 (the “Consulting Agreement”), pursuant to which she will provide consulting services to the Company for up to 10 months following the Effective Date in exchange for a monthly consulting fee of $38,333. Ms. Williams-Ramey’s employment was terminated without cause under the employment agreement between Ms. Williams-Ramey and the Company, dated as of June 13, 2022 (the “Employment Agreement”), with such termination effective as of the Effective Date. In connection with such termination, Ms. Williams-Ramey entered into a Separation Agreement and General Release with the Company on August 11, 2023 (the “Separation Agreement”), which provides, in addition to the terms below, that Ms. Williams-Ramey will receive the payments and benefits provided upon a termination without cause pursuant to the Employment Agreement. These payments and benefits consist of (i) an amount equal to the sum of Ms. Williams-Ramey’s base salary and target annual bonus, to be paid in a lump sum within 60 days following the Effective Date, (ii) payment of the annual bonus, if any, that would otherwise have been paid to Ms. Williams-Ramey if she had remained employed by the Company through December 31, 2023, calculated based on actual performance and paid at the time annual bonuses are normally paid to the Company’s executives (but no later than March 15, 2024), (iii) subject to Ms. Williams-Ramey’s timely election, continued health care coverage for a period of 12 months commencing on the Effective Date or until Ms. Williams-Ramey receives comparable coverage from a subsequent employer, (iv) immediate vesting of 10,030 unvested restricted stock units held by Ms. Williams-Ramey that are scheduled to vest in the 12-month period following the Effective Date, and (v) a cash payment equal to $10,000 for executive outplacement services.
Ms. Williams-Ramey has agreed to extend the duration of the non-competition and noninterference covenants under her Employment Agreement from 12 months to 18 months following the Effective Date. In consideration of this extension and her entry into the Consulting Agreement, the Separation Agreement provides for a lump sum cash payment equal to $355,000, to be paid within 60 days following the Effective Date.
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The foregoing descriptions of the Separation Agreement and the Consulting Agreement are not complete and are qualified by reference to the full text and terms of the Separation Agreement and Consulting Agreement, which are filed as Exhibit 10.3 and Exhibit 10.4, respectively, to this report and incorporated herein by reference.
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ITEM 6. EXHIBITS
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Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
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Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
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Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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Exhibit 101* | The following financial statements and footnotes from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
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Exhibit 104* | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
* | Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | SIX FLAGS ENTERTAINMENT CORPORATION |
| | (Registrant) |
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Date: |
| /s/ |
| | Selim Bassoul |
| | President and Chief Executive Officer |
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Date: |
| /s/ |
| | Gary Mick |
| | Chief Financial Officer |
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