General - Basis of Presentation | 9 Months Ended |
Sep. 30, 2014 |
Accounting Policies [Abstract] | ' |
General - Basis of Presentation | ' |
General — Basis of Presentation |
We own and operate regional theme, water and zoological parks and are the largest regional theme park operator in the world. Of the 18 parks we currently own or operate, 16 parks are located in the United States, one is located in Mexico City, Mexico and one is located in Montreal, Canada. We are also involved in the development of Six Flags-branded theme parks outside of North America. |
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. |
On May 5, 2011 and May 8, 2013, Holdings' Board of Directors approved two-for-one stock splits of Holdings' common stock effective in the form of a stock dividend of one share of common stock for each outstanding share of common stock (the "2011 Stock Split" and "2013 Stock Split", respectively). The record dates for the 2011 Stock Split and 2013 Stock Split were June 15, 2011 and June 12, 2013, respectively. The additional shares of common stock in connection with the 2011 Stock Split and the 2013 Stock Split were distributed on June 27, 2011 and June 26, 2013, respectively. In accordance with the provisions of our stock benefit plans and as determined by Holdings' Board of Directors, the number of shares available for issuance, the number of shares subject to outstanding equity awards and the exercise prices of outstanding stock option awards were adjusted to equitably reflect the effect of the 2011 Stock Split and the 2013 Stock Split. All share and per share amounts presented in the unaudited condensed consolidated financial statements and notes have been retroactively adjusted to reflect the 2011 Stock Split and the 2013 Stock Split. |
"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" contains a discussion of our results of operations and our financial position and should be read in conjunction with the unaudited condensed consolidated financial statements and notes. The 2013 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 nine months ended September 30, 2014 are not indicative of the results expected for the full year. In particular, our park operations contribute a substantial majority of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year round. |
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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 those entities that most significantly impact the entities' economic performance and we have the obligation to absorb losses and receive benefits from the entities that can be potentially significant to these entities. The equity interests owned by non-affiliated parties in the Partnership Parks are reflected in the accompanying condensed consolidated balance sheets as redeemable noncontrolling interests. On September 30, 2013, we acquired the noncontrolling equity interests held by non-affiliated parties in HWP Development, LLC ("HWP"), with the exception of a nominal amount retained by a non-affiliated party that we subsequently acquired on December 31, 2013. Prior to the acquisition, we owned an approximate 49% interest in this joint venture and consolidated HWP as a subsidiary as we had the power to direct the activities that most significantly impacted HWP's economic performance and we had the obligation to absorb losses and receive benefits from HWP that could have been significant to HWP. The portion of earnings or loss attributable to non-affiliated parties in the Partnership Parks and HWP is reflected as net income attributable to noncontrolling interests in the accompanying unaudited condensed consolidated statements of operations. See Note 7 for further discussion. |
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b. | Income Taxes | | | | | | | | | | | | | | |
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases including net operating loss and other tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We recorded a valuation allowance of $194.3 million and $190.3 million as of September 30, 2014 and December 31, 2013, respectively, due to uncertainties related to our ability to utilize 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 gives us comfort that we will be able to utilize all of our federal net operating loss carryforwards before they expire. |
In determining the effective tax rate for interim periods, we consider the expected changes in our valuation allowance from current year originating or reversing timing differences between financial accounting and tax purposes and the taxable income or loss expected for the current year. For interim periods, we also account for the tax effect of significant non-recurring items in the period in which they occur as well as changes in the valuation allowance relating to a change in the assessment of the probability of utilization of the deferred income tax assets. |
Our liability for income taxes is finalized as auditable tax years pass their respective statutes of limitations in the various jurisdictions in which we are subject to tax. However, these jurisdictions may audit prior years for which the statute of limitations is closed for the purpose of making an adjustment to our taxable income in a year for which the statute of limitations has not closed. Accordingly, taxing authorities of these jurisdictions may audit prior years of the group and its predecessors for the purpose of adjusting net operating loss carryforwards to years for which the statute of limitations has not closed. |
We classify interest and penalties attributable to income taxes as part of income tax expense. As of September 30, 2014 and December 31, 2013, we had no accrued interest and penalties liability. |
We do not reinvest foreign earnings, therefore United States deferred income taxes have been provided on unremitted foreign earnings. |
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c. | Long-Lived Assets | | | | | | | | | | | | | | |
We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. |
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d. | Derivative Instruments and Hedging Activities | | | | | | | | | | | | | | |
We account for derivatives and hedging activities in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging. This accounting guidance establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge for accounting purposes. The accounting for changes in the fair value of a derivative (e.g., gains and losses) depends on the intended use of the derivative and the resulting designation. |
We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and our strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. We also assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. |
Changes in the fair value of a derivative that is effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income (loss) until operations are affected by the variability in cash flows of the designated hedged item, at which point they are reclassified to interest expense. Changes in fair value of a derivative that is not designated as a hedge are recorded in other income (expense), net in the unaudited condensed consolidated statements of operations on a current basis. |
In March 2012, we entered into a floating-to-fixed interest rate agreement (the "Interest Rate Cap Agreement") that we designated and documented as a cash flow hedge. The term of the Interest Rate Cap Agreement expired in March 2014 and no unrealized losses remain to be reclassified from accumulated other comprehensive income ("AOCI") to operations. |
In April 2014, we entered into three separate interest rate swap agreements (collectively, the "Interest Rate Swap Agreements") that we designated and documented as cash flow hedges. The Interest Rate Swap Agreements expire in December 2017. See Note 2 for further discussion. |
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e. | Earnings Per Common Share | | | | | | | | | | | | | | |
Basic earnings per common share is computed by dividing net income attributable to Holdings' common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income attributable to Holdings' common stockholders by the weighted average number of common shares outstanding during the period and the effect of all dilutive common stock equivalents. In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive. |
The computation of diluted earnings per share included the effect of 2,752,000 and 3,367,000 dilutive stock options and restricted shares and excluded the effect of 1,858,000 and 1,193,000 antidilutive stock options for the three months ended September 30, 2014 and September 30, 2013, respectively. The computation of diluted earnings per share included the effect of 2,985,000 and 3,250,000 dilutive stock options and restricted shares and excluded the effect of 1,784,000 and 1,205,000 antidilutive stock options for the nine months ended September 30, 2014 and September 30, 2013, respectively. Earnings per common share for the three and nine months ended September 30, 2014 and September 30, 2013 was calculated as follows: |
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| Three Months Ended | | Nine Months Ended |
(Amounts in thousands, except per share data) | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 |
Net income attributable to Six Flags Entertainment Corporation | $ | 105,034 | | | $ | 120,403 | | | $ | 110,139 | | | $ | 105,237 | |
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Weighted-average common shares outstanding — basic: | 94,522 | | | 95,105 | | | 94,900 | | | 97,569 | |
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Effect of dilutive stock options and restricted shares | 2,752 | | | 3,367 | | | 2,985 | | | 3,250 | |
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Weighted-average common shares outstanding — diluted: | 97,274 | | | 98,472 | | | 97,885 | | | 100,819 | |
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Earnings per share — basic: | $ | 1.11 | | | $ | 1.27 | | | $ | 1.16 | | | $ | 1.08 | |
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Earnings per share — diluted: | $ | 1.08 | | | $ | 1.22 | | | $ | 1.13 | | | $ | 1.04 | |
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f. | Stock Benefit Plans | | | | | | | | | | | | | | |
Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance and cash-settled awards and dividend equivalents (collectively, the "awards") to select employees, officers, directors and consultants of Holdings and its affiliates. The Long-Term Incentive Plan originally provided for the issuance of no more than 19,333,332 shares of common stock of Holdings, as adjusted to reflect the 2011 Stock Split and the 2013 Stock Split. In May 2012, our stockholders approved an amended and restated Long-Term Incentive Plan that, among other things, increased the number of shares available for issuance under the Long-Term Incentive Plan to 28,133,332, as adjusted to reflect the 2013 Stock Split. |
During the three months ended September 30, 2014 and September 30, 2013, stock-based compensation expense related to the Long-Term Incentive Plan was $78.1 million and $7.0 million, respectively. During the nine months ended September 30, 2014 and September 30, 2013, stock-based compensation expense related to the Long-Term Incentive Plan was $89.0 million and $21.3 million, respectively. |
As of September 30, 2014, options to purchase approximately 7,136,000 shares of common stock of Holdings and approximately 37,000 shares of restricted stock or restricted stock units were outstanding under the Long-Term Incentive Plan and approximately 3,181,000 shares were available for future grant. |
Stock Options |
Options granted under the Long-Term Incentive Plan are designated as either incentive stock options or non-qualified stock options. Options are generally granted with an exercise price equal to the fair market value of the common stock of Holdings on the date of grant. While certain stock options are subject to acceleration in connection with a change in control, options are generally cumulatively exercisable in four equal annual installments commencing one year after the date of grant with a ten-year term. Generally, the unvested portion of stock option awards is forfeited upon termination of employment. Stock option compensation is recognized over the vesting period using the graded vesting terms of the respective grant. |
The estimated fair value of the majority of our options granted was calculated using the Black-Scholes option pricing valuation model. This model takes into account several factors and assumptions. The risk-free interest rate is based on the yield on United States Treasury zero-coupon issues with a remaining term equal to the expected term assumption at the time of grant. The simplified method was used to calculate the expected term (estimated period of time outstanding) because our historical data from our pre-confirmation equity grants is not representative or sufficient to be used to develop an expected term assumption. Expected volatility of options granted prior to 2013 was based on the historical volatility of similar companies' common stock for a period equal to the stock option's expected term, calculated on a daily basis. Expected volatility of options granted in 2013 and 2014 was based two-thirds on the historical volatility of similar companies' common stock and one-third on our historical volatility for a period equal to the stock option's expected term, calculated on a daily basis. The expected dividend yield is based on expected dividends for the expected term of the stock options. The fair value of stock options on the date of grant is expensed on a straight line basis over the requisite service period of the graded vesting term as if the award was, in substance, multiple awards. |
The following weighted-average assumptions were utilized in the Black-Scholes model to value the stock options granted during the nine months ended September 30, 2014 and September 30, 2013: |
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| Nine Months Ended | | | | | | | | | | |
| September 30, 2014 | | September 30, 2013 | | | | | | | | | | |
Risk-free interest rate | 1.96 | % | | 1.87 | % | | | | | | | | | | |
Expected term (in years) | 6.25 | | | 6.25 | | | | | | | | | | | |
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Expected volatility | 38.78 | % | | 39.03 | % | | | | | | | | | | |
Expected dividend yield | 4.84 | % | | 5.12 | % | | | | | | | | | | |
The following table summarizes stock option activity for the nine months ended September 30, 2014: |
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(Share and Aggregate Intrinsic Value amounts in thousands) | Shares | | Weighted | | Weighted | | Aggregate | | | |
Avg. | Avg. | Intrinsic Value | | | |
Exercise | Remaining | ($) | | | |
Price ($) | Contractual | | | | |
| Term | | | | |
Balance at December 31, 2013 | 7,910 | | | $ | 18.9 | | | | | | | | | |
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Granted | 1,673 | | | $ | 37.98 | | | | | | | | | |
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Exercised | (2,371 | ) | | $ | 12.87 | | | | | | | | | |
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Canceled or exchanged | — | | | $ | — | | | | | | | | | |
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Forfeited | (76 | ) | | $ | 25.77 | | | | | | | | | |
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Expired | — | | | $ | — | | | | | | | | | |
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Balance at September 30, 2014 | 7,136 | | | $ | 25.3 | | | 7.87 | | $ | 71,054 | | | | |
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Vested and expected to vest at September 30, 2014 | 6,952 | | | $ | 25.09 | | | 7.84 | | $ | 70,541 | | | | |
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Options exercisable at September 30, 2014 | 2,890 | | | $ | 16.81 | | | 6.74 | | $ | 50,847 | | | | |
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The weighted average grant date fair value of the options granted during the nine months ended September 30, 2014 and September 30, 2013 was $8.90 and $7.78, respectively. |
The total intrinsic value of options exercised during the nine months ended September 30, 2014 and September 30, 2013 was $59.6 million and $49.2 million, respectively. The total fair value of options that vested during the nine months ended September 30, 2014 and September 30, 2013 was $19.3 million and $17.5 million, respectively. |
As of September 30, 2014, there was $21.7 million of unrecognized compensation expense related to option awards. The weighted average period over which that cost is expected to be recognized is 3.25 years. |
Cash received from the exercise of stock options during the nine months ended September 30, 2014 and September 30, 2013 was $30.5 million and $25.0 million, respectively. |
Stock, Restricted Stock and Restricted Stock Units |
Stock, restricted stock and restricted stock units granted under the Long-Term Incentive Plan may be subject to transfer and other restrictions as determined by the compensation committee of Holdings' Board of Directors. Generally, the unvested portion of restricted stock and restricted stock unit awards is forfeited upon termination of employment. The fair value of stock, restricted stock and restricted stock unit awards on the date of grant is expensed on a straight line basis over the requisite service period of the graded vesting term as if the award was, in substance, multiple awards. |
During the year ended December 31, 2011, a performance award was established based on our goal to achieve Modified EBITDA of $500 million by 2015 (the "2015 Performance Award"). If the target is achieved in 2015, an aggregate of 2,575,000 shares would be issued to certain key employees, as adjusted for the 2013 Stock Split; however, this amount could be more or less depending on the level of achievement and the timing thereof. During the three months ended September 30, 2014, it was determined that achievement of the Modified EBITDA performance target is probable by 2015. As such, in accordance with FASB ASC Topic 718, Stock Compensation, we have accrued $60.8 million, plus an additional $11.8 million for the associated dividend equivalent rights ("DERs"), for stock-based compensation expense related to the 2015 Performance Award as of September 30, 2014. Based on the closing market price of Holdings' common stock on the last trading day of the quarter ended September 30, 2014, the total unrecognized compensation expense related to the 2015 Performance Award was $27.7 million, plus the remaining expense for the associated DERs, which will be approximately $8.0 million, that will be expensed over the remaining service period. |
The following table summarizes stock, restricted stock and restricted stock unit activity for the nine months ended September 30, 2014: |
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(Share amounts in thousands) | Shares | | Weighted Average | | | | | | | | | |
Grant Date | | | | | | | | | |
Fair Value ($) | | | | | | | | | |
Non-vested balance at December 31, 2013 | 351 | | | $ | 10.84 | | | | | | | | | | |
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Granted | 18 | | | $ | 41.14 | | | | | | | | | | |
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Vested | (332 | ) | | $ | 11.07 | | | | | | | | | | |
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Forfeited | — | | | $ | — | | | | | | | | | | |
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Canceled | — | | | $ | — | | | | | | | | | | |
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Non-vested balance at September 30, 2014 | 37 | | | $ | 23.68 | | | | | | | | | | |
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The weighted average grant date fair value per share of stock awards granted during the nine months ended September 30, 2014 and September 30, 2013 was $41.14 and $38.26, respectively. |
The total grant date fair value of the stock awards granted during the nine months ended September 30, 2014 and September 30, 2013 was $0.7 million for both periods. The total fair value of stock awards that vested during the nine months ended September 30, 2014 and September 30, 2013 was $10.0 million and $3.4 million, respectively. |
Excluding the unrecognized compensation expense related to the 2015 Performance Award discussed above, there was $0.4 million of total unrecognized compensation expense related to stock, restricted stock, and restricted stock units as of September 30, 2014 that is expected to be recognized over a weighted-average period of 0.60 years. |
Deferred Share Units |
Non-employee directors can elect to receive the value of their annual cash retainer as a deferred share unit award ("DSU") under the Long-Term Incentive Plan whereby the non-employee director is granted DSUs in an amount equal to such director's annual cash retainer divided by the closing price of Holdings' common stock on the date of the annual stockholders meeting. Each DSU represents Holdings' obligation to issue one share of common stock. The shares are delivered approximately thirty days following the cessation of the non-employee director's service as a director of Holdings. |
DSUs vest consistent with the manner in which non-employee directors' cash retainers are paid. The fair value of the DSUs on the date of grant is expensed on a straight line basis over the requisite service period. |
During the nine months ended September 30, 2014 and September 30, 2013, approximately 3,000 DSUs were granted at a weighted-average grant date fair value of $41.14 and $38.26 per DSU, respectively. The total grant date fair value of DSUs granted during the nine months ended September 30, 2014 and September 30, 2013 was $0.1 million. |
As of September 30, 2014, there was a nominal amount of unrecognized compensation expense related to the outstanding DSUs. |
Dividend Equivalent Rights |
On February 8, 2012, Holdings' Board of Directors granted DERs to holders of unvested stock options, at which time, approximately 10.0 million unvested stock options were outstanding. As stockholders are paid cash dividends, the DERs accrue dividends, which will be distributed to stock option holders upon the vesting of their stock option award. Holdings will distribute the accumulated accrued dividends pursuant to the DERs in either cash or shares of common stock. Generally, holders of stock options for fewer than 1,000 shares of stock will receive their accumulated accrued dividends in cash and holders of stock options for 1,000 shares of stock or greater will receive their accumulated accrued dividends in shares of common stock. In addition, Holdings' Board of Directors granted similar DERs payable in shares of common stock if and when any shares are granted under the 2015 Performance Award. In August 2012, Holdings' Board of Directors granted approximately 2.0 million additional options to the majority of the full-time employees of the Company as well as DERs in connection with such options. During the twelve months ended December 31, 2013, Holdings' Board of Directors granted approximately 1.2 million additional options to the majority of full-time employees of the Company as well as DERs in connection with such options. During the nine months ended September 30, 2014, Holdings' Board of Directors granted approximately 1.7 million additional options to the majority of the full-time employees of the Company as well as DERs in connection with such options. |
Exclusive of stock-based compensation recognized for the DER grants associated with the 2015 Performance Award discussed above, we recorded stock-based compensation for DER grants of $1.7 million and $4.8 million for the three and nine months ended September 30, 2014, respectively. We recorded $1.9 million and $6.0 million of stock-based compensation for DER grants during the three and nine months ended September 30, 2013, respectively. |
All of the foregoing share amounts have been adjusted to reflect the 2013 Stock Split. |
Employee Stock Purchase Plan |
The Six Flags Entertainment Corporation Employee Stock Purchase Plan (the "ESPP") allows eligible employees to purchase Holdings' common stock at 90% of the lower of the market value of the common stock at the beginning or end of each successive six-month offering period. Amounts accumulated through participants' payroll deductions ("purchase rights") are used to purchase shares of common stock at the end of each purchase period. Pursuant to the ESPP, no more than 2,000,000 shares of common stock of Holdings may be issued. Holdings' common stock may be issued by either authorized and unissued shares, treasury shares or shares purchased on the open market. As of September 30, 2014, we had 1,864,000 shares available for purchase pursuant to the ESPP. In accordance with FASB ASC Topic 718, Stock Based Compensation, stock-based compensation related to purchase rights is recognized based on the intrinsic value of each respective six-month ESPP offering period. |
During the three and nine months ended September 30, 2014 and September 30, 2013, stock-based compensation expense consisted of the following: |
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| Three Months Ended | | Nine Months Ended |
(Amounts in thousands) | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 |
Long-Term Incentive Plan | $ | 78,118 | | | $ | 7,030 | | | $ | 89,038 | | | $ | 21,302 | |
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Employee Stock Purchase Plan | 50 | | | 47 | | | 229 | | | 194 | |
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Total Stock-Based Compensation | $ | 78,168 | | | $ | 7,077 | | | $ | 89,267 | | | $ | 21,496 | |
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g. | Revenue Recognition | | | | | | | | | | | | | | |
We recognize revenue upon admission into our parks, provision of our services, or when products are delivered to our guests. Revenues are presented in the accompanying unaudited condensed consolidated statements of operations net of sales taxes collected from our guests and remitted to government taxing authorities. During 2013, we launched a membership program. In contrast to our season pass and other multi-use offerings that expire at the end of each operating season, the membership program does not expire. It automatically renews on a month-to-month basis after the initial twelve-month membership term, and can be canceled any time thereafter pursuant to the terms of the membership program. Guests enrolled in the membership program can visit our parks an unlimited number of times anytime they are open as long as the guest remains enrolled in the membership program. For season pass, memberships in the initial twelve-month term and other multi-use admissions, we estimate a redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable and recognize a pro-rata portion of the revenue as the guest attends our parks. 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 income. For active memberships after the initial twelve-month term, we recognize revenue monthly as payments are received. As of September 30, 2014, deferred income was primarily comprised of (i) unredeemed 2014 season pass revenue, (ii) advance sales of season pass and other admissions for the 2015 operating season, (iii) pre-sold single-day admissions revenue for the current operating season, (iv) unredeemed portions of the membership program that will be recognized in 2014 and 2015 and (iv) sponsorship revenue that will be recognized in 2014. |
During 2014, we entered into two agreements to assist third parties in the planning, design, development and operation of Six Flags-branded theme parks outside of North America. Pursuant to these agreements, we agreed to provide exclusivity, brand licensing, and other services to assist in the design, development, and project management of Six Flags-branded theme parks, as well as initial and ongoing management services. Each significant deliverable qualifies as a separate unit of accounting. We recognize revenue under these agreements over the relevant service period of each unit of accounting based on its relative selling price, as determined by our best estimate of selling price. Our best estimate of selling price is established consistent with our overall pricing strategy and includes, but is not limited to, consideration of current market conditions, various risk factors and our required return and profit objectives. We review the service period of each unit of accounting regularly and on an ongoing basis and revise it as necessary throughout the year. Revisions to the relevant service periods of the units of accounting may result in revisions to revenue in future periods and are recognized in the period in which the change is identified. |
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h. | Accounts Receivable, Net | | | | | | | | | | | | | | |
Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products, including season passes and the membership program. We are not exposed to a significant concentration of credit risk, however, based on the age of the receivables, our historical experience and other factors and assumptions we believe to be customary and reasonable, we do record an allowance for doubtful accounts. As of September 30, 2014 and December 31, 2013, the allowance for doubtful accounts and the related bad debt expense were primarily comprised of estimated defaults under deferred season pass payment and membership plans. |
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i. | Recent Accounting Pronouncements | | | | | | | | | | | | | | |
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The amendments in ASU 2014-09 provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition guidance. ASU 2014-09 is effective for annual and interim periods beginning on or after December 15, 2016 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is not permitted. We have not yet selected a transition method and are in the process of evaluating the effect this standard will have on our consolidated financial statements and related disclosures. |