Six Flags Entertainment 10-Q 2020 Q3 Quarterly report

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 September 30, 2020 or

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

for the transition period from to

Commission file number: 1-13703

Six Flags Entertainment Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	13-3995059 (I.R.S. Employer Identification No.)
1000 Ballpark Way Suite 400, Arlington, TX 76011 (Address of Principal Executive Offices, Including Zip Code)	(972) 595-5000 (Registrant’s Telephone Number, Including Area Code)

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧  No ◻

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

Large Accelerated 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 October 23, 2020, Six Flags Entertainment Corporation had 84,977,079 outstanding shares of common stock, par value $0.025 per share.

SIX FLAGS ENTERTAINMENT CORPORATION

FORM 10-Q

INDEX

Cautionary Note Regarding Forward-Looking Statements		1
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited), December 31, 2019 and September 30, 2019 (unaudited)	3
	Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Operations (unaudited) for the Nine Months Ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Three Months Ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Nine Months Ended September 30, 2020 and 2019	7
	Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Three Months Ended September 30, 2020 and 2019	8
	Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Nine Months Ended September 30, 2020 and 2019	9
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2020 and 2019	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6.	Exhibits	52
Signatures		53

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, including statements regarding (i) the timing and conditions under which we may reopen our closed parks and our expectations regarding the continued operations of our reopened parks, (ii) the operation of our parks in light of the global coronavirus pandemic (“COVID-19”) following their anticipated reopening including, among other things, the effectiveness of cost-saving and health and safety measures implemented in response to COVID-19, (iii) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, including in the event of a prolonged closure of one or more of our parks, (iv) our ability to improve operating results, profitability and resilience by adopting and implementing a new strategic plan, including strategic cost reductions and organizational and personnel changes, without adversely affecting our business, (v) our plans and ability to roll out our capital enhancements and planned initiatives in a timely and cost effective manner, and our expectations regarding the anticipated costs, benefits and results of such enhancements and initiatives, (vi) the extent to which having parks in many 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, regulations and accounting policies, (viii) our ability to obtain additional financing, (ix) our expectations regarding future interest payments, (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 of net operating loss carryforwards and other tax benefits, (xiii) our expectations regarding uncertain tax positions, and (xiv) our expectations regarding our deferred revenue growth. Forward-looking statements include all statements that are not historical facts and can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "may," "should," "could" and variations of such words or similar expressions.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are by their nature, subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, among others, the following:

• factors impacting attendance, such as local conditions, contagious diseases, including COVID-19, or the perceived threat of contagious diseases, events, disturbances and terrorist activities;

• regulations and guidance of federal, state and local governments and health officials regarding the response to COVID-19, including with respect to business operations, safety protocols and public gatherings (such as voluntary and in some cases, mandatory, quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities);

• political or military events;

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

• accidents or contagious disease outbreaks occurring at our parks or other parks in the industry and adverse publicity concerning our parks or other parks in the industry;

• availability of commercially reasonable insurance policies at reasonable rates;

• inability to achieve desired improvements and financial performance targets set forth in our aspirational goals;

• 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;

• economic conditions (including customer spending patterns);

• changes in public and consumer tastes;

• construction delays in capital improvements or ride downtime;

• competition with other theme parks and entertainment alternatives;

• dependence on a seasonal workforce;

• unionization activities and labor disputes;

1

• laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, and healthcare reform;

• environmental laws and regulations;

• laws and regulations affecting corporate taxation;

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

• 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 December 31, 2019 (the "2019 Annual Report") and in this Quarterly Report.

A more complete discussion of these factors and other risks applicable to our business is contained in "Part I, Item 1A. Risk Factors" of the 2019 Annual Report and in this Quarterly Report. All forward-looking statements in this Quarterly Report, or that are made on our behalf by our directors, officers or employees related to the information contained herein, apply only as of the date of this Quarterly Report or as of the date they were made. While we believe that the expectations reflected in such forward-looking statements are reasonable, we make 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 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.

*             *             *             *             *

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
	September 30, 2020		December 31, 2019		September 30, 2019
(Amounts in thousands, except share data)	(unaudited)				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	213,907	$	174,179	$	211,797
Accounts receivable, net		48,500		108,679		199,127
Inventories		43,892		32,951		36,953
Prepaid expenses and other current assets		75,266		60,431		60,508
Total current assets		381,565		376,240		508,385
Property and equipment, net:
Property and equipment, at cost		2,386,409		2,345,283		2,322,291
Accumulated depreciation		(1,120,776)		(1,061,287)		(1,032,914)
Total property and equipment, net		1,265,633		1,283,996		1,289,377
Other assets:
Right-of-use operating leases, net		198,061		201,128		202,935
Debt issuance costs		7,568		3,624		3,836
Deposits and other assets		8,324		12,722		10,740
Goodwill		659,618		659,618		659,618
Intangible assets, net of accumulated amortization of $24,232, $23,224 and $22,623 as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively		344,203		345,212		345,812
Total other assets		1,217,774		1,222,304		1,222,941
Total assets	$	2,864,972	$	2,882,540	$	3,020,703
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	36,716	$	32,904	$	51,428
Accrued compensation, payroll taxes and benefits		20,348		19,556		23,994
Accrued insurance reserves		31,592		35,376		37,108
Accrued interest payable		44,085		26,128		20,819
Other accrued liabilities		78,249		63,019		61,038
Deferred revenue		198,563		144,040		197,674
Current portion of long-term debt		—		8,000		8,000
Short-term lease liabilities		18,803		10,709		10,585
Total current liabilities		428,356		339,732		410,646
Noncurrent liabilities:
Long-term debt		2,620,920		2,266,884		2,268,704
Long-term lease liabilities		183,065		188,149		185,365
Other long-term liabilities		39,688		27,514		22,133
Deferred income taxes		125,628		247,121		223,656
Total noncurrent liabilities		2,969,301		2,729,668		2,699,858
Total liabilities		3,397,657		3,069,400		3,110,504
Redeemable noncontrolling interests		544,020		529,258		545,386
Stockholders' deficit:
Preferred stock, $1.00 par value		—		—		—
Common stock, $0.025 par value, 280,000,000 shares authorized; 84,950,618, 84,633,845 and 84,516,567 shares issued and outstanding at September 30, 2020, December 31, 2019 and September 30, 2019, respectively		2,124		2,116		2,113
Capital in excess of par value		1,086,221		1,066,223		1,066,312
Accumulated deficit		(2,067,600)		(1,709,747)		(1,628,394)
Accumulated other comprehensive loss, net of tax		(97,450)		(74,710)		(75,218)
Total stockholders' deficit		(1,076,705)		(716,118)		(635,187)
Total liabilities and stockholders' deficit	$	2,864,972	$	2,882,540	$	3,020,703

3

See accompanying notes to unaudited condensed consolidated financial statements.

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
(Amounts in thousands, except per share data)	September 30, 2020		September 30, 2019
Park admissions	$	72,920	$	352,664
Park food, merchandise and other		49,342		242,059
Sponsorship, international agreements and accommodations		4,065		26,457
Total revenues		126,327		621,180
Operating expenses (excluding depreciation and amortization shown separately below)		113,833		189,820
Selling, general and administrative expenses (including stock-based compensation of $7,907 and $3,903 in 2020 and 2019, respectively, and excluding depreciation and amortization shown separately below)		41,568		55,144
Costs of products sold		12,980		53,508
Other net periodic pension benefit		(995)		(1,038)
Depreciation		28,780		30,084
Amortization		5		601
Loss on disposal of assets		10,065		2,659
Interest expense		38,500		28,686
Interest income		(108)		(350)
Other expense, net		13,470		231
(Loss) income before income taxes		(131,771)		261,835
Income tax (benefit) expense		(36,243)		61,626
Net (loss) income		(95,528)		200,209
Less: Net income attributable to noncontrolling interests		(20,644)		(20,376)
Net (loss) income attributable to Six Flags Entertainment Corporation	$	(116,172)	$	179,833
Weighted-average common shares outstanding:
Basic:		84,829		84,413
Diluted:		84,829		85,045
Net (loss) income per average common share outstanding:
Basic:	$	(1.37)	$	2.13
Diluted:	$	(1.37)	$	2.11
Cash dividends declared per common share	$	—	$	0.82

See accompanying notes to the unaudited condensed consolidated financial statements

4

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

	Nine Months Ended
(Amounts in thousands, except per share data)	September 30, 2020		September 30, 2019
Park admissions	$	143,688	$	671,252
Park food, merchandise and other		83,671		472,692
Sponsorship, international agreements and accommodations		20,614		82,639
Total revenues		247,973		1,226,583
Operating expenses (excluding depreciation and amortization shown separately below)		282,378		482,690
Selling, general and administrative expenses (including stock-based compensation of $18,207 and $11,347 in 2020 and 2019, respectively, and excluding depreciation and amortization shown separately below)		114,578		154,977
Costs of products sold		22,954		107,296
Other net periodic pension benefit		(2,985)		(3,148)
Depreciation		87,875		87,228
Amortization		1,008		1,805
Loss on disposal of assets		10,458		3,105
Interest expense		117,234		86,965
Interest income		(638)		(709)
Loss on debt extinguishment		6,106		6,231
Other expense (income), net		19,282		(1,474)
(Loss) income before income taxes		(410,277)		301,617
Income tax (benefit) expense		(113,953)		70,644
Net (loss) income		(296,324)		230,973
Less: Net income attributable to noncontrolling interests		(41,288)		(40,753)
Net (loss) income attributable to Six Flags Entertainment Corporation	$	(337,612)	$	190,220
Weighted-average common shares outstanding:
Basic:		84,730		84,276
Diluted:		84,730		84,938
Net (loss) earnings per average common share outstanding:
Basic:	$	(3.98)	$	2.26
Diluted:	$	(3.98)	$	2.24
Cash dividends declared per common share	$	0.25	$	2.46

See accompanying notes to unaudited condensed consolidated financial statements.

5

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

	Three Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019
Net (loss) income	$	(95,528)	$	200,209
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment (1)		1,831		(1,466)
Defined benefit retirement plan (2)		177		151
Change in cash flow hedging (3)		(37)		(2,268)
Other comprehensive income (loss), net of tax		1,971		(3,583)
Comprehensive (loss) income		(93,557)		196,626
Less: Comprehensive income attributable to noncontrolling interests		(20,644)		(20,376)
Comprehensive (loss) income attributable to Six Flags Entertainment Corporation	$	(114,201)	$	176,250

(1) Foreign currency translation adjustment is presented net of tax expense of $0.5 million for the three months ended September 30, 2020 and a tax benefit of $0.4 million for the three months ended September 30, 2019.

(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the three months ended September 30, 2020 and net of nominal tax expense for the three months ended September 30, 2019, respectively.

(3) Change in fair value of cash flow hedging is presented net of nominal tax benefit for the three months ended September 30, 2020 and net of tax benefit $0.8 million for the three months ended September 30, 2019, respectively.

See accompanying notes to unaudited condensed consolidated financial statements

6

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

	Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019
Net (loss) income	$	(296,324)	$	230,973
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (1)		(10,706)		249
Defined benefit retirement plan (2)		563		440
Change in cash flow hedging (3)		(12,597)		(4,409)
Other comprehensive loss, net of tax		(22,740)		(3,720)
Comprehensive (loss) income		(319,064)		227,253
Less: Comprehensive income attributable to noncontrolling interests		(41,288)		(40,753)
Comprehensive (loss) income attributable to Six Flags Entertainment Corporation	$	(360,352)	$	186,500

(1)  Foreign currency translation adjustment is presented net of tax benefit of $2.8 million for the nine months ended September 30, 2020 and tax expense of $0.1 million for the nine months ended September 30, 2019, respectively.

(2)  Defined benefit retirement plan is presented net of tax expense of $0.2 million and $0.1 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

(3)  Change in fair value of cash flow hedging is presented net of tax benefit of $4.1 million and $1.5 million for the nine months ended September 30, 2020 and September 30, 2019, 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 June 30, 2019	84,334,531	$	2,108	$	1,058,675	$	(1,738,955)	$	(71,635)	$	(749,807)
Issuance of common stock	182,851		5		3,782		—		—		3,787
Stock-based compensation	—		—		3,903		—		—		3,903
Dividends declared to common shareholders	—		—		—		(69,272)		—		(69,272)
Repurchase of common stock	(815)		—		(48)		—		—		(48)
Net income attributable to Six Flags Entertainment Corporation	—		—		—		179,833		—		179,833
Net other comprehensive loss, net of tax	—		—		—		—		(3,583)		(3,583)
Balances at September 30, 2019	84,516,567	$	2,113	$	1,066,312	$	(1,628,394)	$	(75,218)	$	(635,187)

								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 June 30, 2020	84,757,286	$	2,119	$	1,077,948	$	(1,951,428)	$	(99,421)	$	(970,782)
Issuance of common stock	195,468		5		414		—		—		419
Stock-based compensation	—		—		7,907		—		—		7,907
Repurchase of common stock	(2,136)		—		(48)		—		—		(48)
Net loss attributable to Six Flags Entertainment Corporation	—		—		—		(116,172)		—		(116,172)
Net other comprehensive income, net of tax	—		—		—		—		1,971		1,971
Balances at September 30, 2020	84,950,618	$	2,124	$	1,086,221	$	(2,067,600)	$	(97,450)	$	(1,076,705)

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, 2018	83,962,182	$	2,099	$	1,037,640	$	(1,611,334)	$	(71,498)	$	(643,093)
Issuance of common stock	528,330		13		16,173		—		—		16,186
Stock-based compensation	—		—		11,347		—		—		11,347
Dividends declared to common shareholders	—		—		—		(207,325)		—		(207,325)
Repurchase of common stock	(882)		—		(52)		—		—		(52)
Employee stock purchase plan	26,937		1		1,204		—		—		1,205
Fresh start valuation adjustment for partnership park units purchased	—		—		—		45		—		45
Net income attributable to Six Flags Entertainment Corporation	—		—		—		190,220		—		190,220
Net other comprehensive loss, net of tax	—		—		—		—		(3,720)		(3,720)
Balances at September 30, 2019	84,516,567	$	2,113	$	1,066,312	$	(1,628,394)	$	(75,218)	$	(635,187)

								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, 2019	84,633,845	$	2,116	$	1,066,223	$	(1,709,747)	$	(74,710)	$	(716,118)
Issuance of common stock	277,532		7		1,146		—		—		1,153
Stock-based compensation	—		—		18,207		—		—		18,207
Dividends declared to common shareholders	—		—		—		(21,165)		—		(21,165)
Repurchase of common stock	(2,291)		—		(54)		—		—		(54)
Employee stock purchase plan	41,532		1		717		—		—		718
Fresh start valuation adjustment for partnership park units purchased	—		—		—		924		—		924
Change in redemption value of partnership units	—		—		(18)		—		—		(18)
Net loss attributable to Six Flags Entertainment Corporation	—		—		—		(337,612)		—		(337,612)
Net other comprehensive loss, net of tax	—		—		—		—		(22,740)		(22,740)
Balances at September 30, 2020	84,950,618	$	2,124	$	1,086,221	$	(2,067,600)	$	(97,450)	$	(1,076,705)

See accompanying notes to unaudited condensed consolidated financial statements.

9

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019
Cash flows from operating activities:
Net (loss) income	$	(296,324)	$	230,973
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		88,883		89,033
Stock-based compensation		18,207		11,347
Interest accretion on notes payable		881		988
Loss on debt extinguishment		6,106		6,231
Amortization of debt issuance costs		4,558		2,703
Other, including loss on disposal of assets		10,308		3,773
Gain on sale of investee		—		(724)
Decrease (increase) in accounts receivable		58,789		(83,061)
Increase in inventories, prepaid expenses and other current assets		(27,379)		(19,188)
Decrease in deposits and other assets		4,353		242
Decrease in ROU operating leases		886		6,030
Increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities		69,014		62,266
Increase (decrease) in operating lease liabilities		3,776		(10,823)
Increase (decrease) in accrued interest payable		17,957		(9,878)
Deferred income taxes		(113,979)		50,953
Net cash (used in) provided by operating activities		(153,964)		340,865
Cash flows from investing activities:
Additions to property and equipment		(92,960)		(123,662)
Property insurance recoveries		2,514		1,637
Proceeds from sale of assets		—		24
Net cash used in investing activities		(90,446)		(122,001)
Cash flows from financing activities:
Repayment of borrowings		(526,510)		(800,750)
Proceeds from borrowings		884,000		970,000
Payment of debt issuance costs		(22,271)		(8,927)
Payment of cash dividends		(22,497)		(208,740)
Proceeds from issuance of common stock		1,871		17,391
Stock repurchases		(54)		(52)
Reduction in finance lease liability		(396)		—
Purchase of redeemable noncontrolling interest		(4,976)		(217)
Distributions to noncontrolling interests		(20,644)		(20,376)
Net cash provided by (used in) financing activities		288,523		(51,671)
Effect of exchange rate on cash		(4,385)		(4)
Net increase in cash and cash equivalents		39,728		167,189
Cash and cash equivalents at beginning of period		174,179		44,608
Cash and cash equivalents at end of period	$	213,907	$	211,797
Supplemental cash flow information
Cash paid for interest	$	79,342	$	93,153
Cash paid for income taxes	$	4,596	$	24,953

See accompanying notes to unaudited condensed consolidated financial statements.

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1.  General — Basis of Presentation

We own and operate regional theme parks and waterparks and are the largest regional theme park operator in the world and the largest operator of waterparks in North America based on the number of parks we operate. Of the 26 parks we owned or operated as of September 30, 2020, 23 parks are located in the United States, 2 are located in Mexico and 1 is located in Montreal, Canada.

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

"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" contains a discussion of our results of operations and our financial position and should be read in conjunction with the unaudited condensed consolidated financial statements and notes. The 2019 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, 2020 are not indicative of the results expected for the full year. In particular, our park operations typically contribute more than half of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year-round. In addition, due to the COVID-19 pandemic, our operations have been limited during 2020, particularly during the second and third quarters.

Transformation Initiative

In March 2020, we launched a holistic transformation initiative to reinvigorate revenue growth, reduce operating expenses by optimizing our operating model, and improve our guests’ end-to end experience through technological advancements. Included in the plan are both revenue initiatives and productivity initiatives. Through this transformation initiative, we are targeting significant improvements to our financial performance and to the guest experience. We anticipate that a portion of the work will be completed by the fourth quarter of 2020, and the remaining portion will be completed over the next several quarters, with the full benefit of the transformation initiative to be realized when the parks are again operating at normal capacity.

We recognized non-recurring transformation charges in our Statement of Operations and present such charges as "Other expense (income), net." Executing the transformation initiative will result in a total of non-recurring charges of approximately $69 million, of which $60 million will be cash and $9 million will be non-cash write-off of assets. We have recognized $29.2 million of these charges during the nine months ended September 30, 2020. We anticipate that we will incur approximately $5 million in charges in the fourth quarter of 2020, with the remaining charges expected to be incurred by the end of 2021. Approximately two-thirds of the investments in 2021 will be on our technology platform, which will have the greatest impact on the overall guest experience.

Transformation Costs Breakout by Quarter
	Three Months Ended				Nine Months Ended
	June 30, 2020		September 30, 2020		September 30, 2020
Amounts included in "Other expense (income), net"
Consultant costs	$	6,155	$	12,145	$	18,300
Employee termination costs		—		1,555		1,555
Amounts included in "Loss on disposal of assets"
Ride / asset write-offs		—		9,351		9,351
Total transformation costs	$	6,155	$	23,051	$	29,206

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COVID-19 Considerations

In response to the global COVID-19 pandemic, federal, state and local governments have implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. The pandemic and these containment measures have had, and are expected to continue to have, a material negative impact on our business. With the unknown duration and intensity of the ongoing pandemic, it is not possible to accurately estimate the impact to our business in future quarters.

On March 13, 2020, we temporarily suspended operations of our theme parks and waterparks due to the COVID-19 pandemic. In response to the uncertainty caused by the pandemic, we took several actions after we suspended operations to increase our liquidity position and to prepare for multiple contingencies. We also adopted a remote-work policy and other physical distancing policies at our corporate office. We do not anticipate these policies to have an adverse impact on our ability to continue to operate our business. Transitioning to a remote-work environment has not had a material adverse impact on our financial reporting system, internal controls or disclosure controls and procedures.

NaN of our 26 parks were closed in the third quarter due to the COVID-19 pandemic. Since the temporary suspension of park operations in March 2020, in consultation with local health officials, we reopened parks in Oklahoma, Arizona, Georgia, Texas, Missouri, Maryland, New Jersey, Illinois, Montreal, Canada and Oaxtepec, Mexico with limited capacity and enhanced sanitization, social distancing and additional preventative measures to help minimize the spread of COVID-19. Due to local government orders related to the pandemic, our park in Arizona was required to close shortly after it reopened and our park in Montreal, Canada was required to close earlier than the end of its regular operating season. Additionally, we opened the drive-through Safari at Six Flags Great Adventure in Jackson, New Jersey, an animal only experience at our Six Flags Discovery Kingdom park in Vallejo, California, our campground at Six Flags Darien Lake in New York and our hotel in Lake George, New York. We opened our theme park in Mexico City, Mexico on October 23, 2020, and we announced plans to open Six Flags Great America in Gurnee, Illinois for a holiday walk-through experience during late November and December.

Effective April 6, 2020, we reduced the base salaries of executive officers and full-time salaried employees by 25% and reduced scheduled hours for full-time hourly employees by 25%, to 30 hours per week, subject to federal and state minimums. Salaries for full-time salaried employees at the parks are restored to 100% two weeks prior to the announced park opening date. Full-time hourly employees are paid for all hours worked to prepare parks for reopening and at operating parks.

We expect that a significant portion of our revenue decline will be offset by cost-saving measures that we implemented upon the suspension of park operations. In addition to the mitigation measures described above, we eliminated the majority of our seasonal labor at each of our parks until those parks reopened. We have also suspended all advertising and marketing costs at our parks that remain closed and have eliminated or intend to eliminate $30 - $40 million of non-labor operating costs in 2020, including the deferral of $20 million of increased investments we had planned to improve the guest experience. In addition, we have deferred or eliminated, or plan to defer or eliminate, $50 - $60 million in our discretionary capital projects planned for 2020.

We have taken measures to ensure sufficient liquidity to meet our cash flow needs and covenant compliance obligations for at least the next twelve months from the issuance of the financial statements. Additionally, we believe we have sufficient liquidity to meet our cash obligations through the end of 2021 even if our open parks are required to close. In addition to reducing expenses including capital expenditures, in April 2020, we increased the revolving credit commitments under the Second Amended and Restated Revolving Loan by $131.0 million, increasing the facility from $350.0 million to $481.0 million. Also in April, Six Flags Theme Parks Inc. (“SFTP”), Holdings’ indirect, wholly owned subsidiary, completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025. In August 2020, we extended the increased revolving credit commitments under the Second Amended and Restated Revolving Loan through December 31, 2022 and extended the suspension of our senior secured leverage ratio financial maintenance covenant through the end of 2021. See Note 3, Long-Term Indebtedness, for more information on these transactions.

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The COVID-19 pandemic caused the suspension of operations at 9 of our 26 parks, and limited attendance at the parks that were open, during the third quarter. However, attendance trends have improved from a range of 20% to 25% of prior year levels upon the initial reopening of certain parks in the second quarter to approximately 35% in the third quarter, for the parks that were open. Comparisons of open parks to prior year exclude attendance from Six Flags Discovery Kingdom and Six Flags Great America, as these parks had modified operations with minimal attendance in 2020.

The COVID-19 pandemic continues to present material uncertainty and risk with respect to our performance and financial results, including the ability to reopen all of our parks to guests. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including additional actions taken to contain COVID-19 or treat its impact, among others. Our business and financial results could be materially and adversely impacted.

a.  Consolidated U.S. GAAP Presentation

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

The unaudited condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. We also consolidate the partnerships that own Six Flags Over Texas ("SFOT") and Six Flags Over Georgia (including Six Flags White Water Atlanta) ("SFOG", and together with SFOT, the "Partnership Parks") as subsidiaries in our unaudited condensed consolidated financial statements, as we have determined that we have the power to direct the activities of the Partnership Parks that most significantly impact their economic performance and we have the obligation to absorb losses and receive benefits from the Partnership Parks that can be potentially significant to these entities. The equity interests owned by non-affiliated parties in the Partnership Parks are reflected in the accompanying unaudited condensed consolidated balance sheets as redeemable noncontrolling interests. See Note 6 for a description of the partnership agreements applicable to the Partnership Parks and Note 8 for further discussion on the non-affiliated parties’ share of the earnings of the Partnership Parks.

b.  Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, including net operating loss and other tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We recorded a valuation allowance of $134.7 million and $130.6 million as of September 30, 2020 and December 31, 2019, 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 gives us comfort that we will be able to use 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-routine items in the period in which they occur as well as changes in the valuation allowance relating to a change in the assessment of the probability of utilization of the deferred income tax assets.

Our liability for income taxes is finalized as auditable tax years pass their respective statutes of limitations in the various jurisdictions in which we are subject to tax. However, taxing authorities of these jurisdictions may audit prior years for which the statute of limitations is closed for the purpose of making an adjustment to our taxable income in a year for which the statute of limitations has not closed. Accordingly, taxing authorities of these jurisdictions may audit

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prior years of the Company and its predecessors for the purpose of adjusting net operating loss carryforwards to years for which the statute of limitations has not closed.

We classify interest and penalties attributable to income taxes as part of income tax expense. As of September 30, 2020 and December 31, 2019, we had 0 recorded amounts for accrued interest or penalties.

Because we do not permanently reinvest foreign earnings, United States deferred income taxes have been provided on unremitted foreign earnings to the extent that such foreign earnings are expected to be taxable upon repatriation.

c. 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. We then determine the fair value of the reporting unit and compare it to the carrying amount of 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 September 30, 2020, the fair value of the single reporting unit exceeded our carrying amount. We have 1 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 September 30, 2020, we determined that it is not more likely than not that the fair value of our intangible assets were less than their carrying amounts and there were no triggering events.

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. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. We determined that our long-lived assets were recoverable as of September 30, 2020.

We wrote-off assets with a net book value of $9.4 million during the three and nine month period ended September 30, 2020 related to our transformation initiative.

e.  (Loss) Earnings Per Common Share

Basic (loss) earnings per common share is computed by dividing net (loss) income attributable to Holdings’ common stockholders by the weighted average number of common shares outstanding for the period. Diluted (loss) earnings per common share is computed by dividing net income attributable to Holdings’ common stockholders by the weighted average number of common shares outstanding during the period, including the effect of all dilutive common stock equivalents using the treasury stock method. In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.

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(Loss) earnings per common share for the three and nine months ended September 30, 2020 and September 30, 2019 was calculated as follows:

	Three Months Ended				Nine Months Ended
(Amounts in thousands, except per share data)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net (loss) income attributable to Six Flags Entertainment Corporation	$	(116,172)	$	179,833	$	(337,612)	$	190,220
Weighted-average common shares outstanding - basic:		84,829		84,413		84,730		84,276
Effect of dilutive stock options and restricted stock units		—		632		—		662
Weighted-average common shares outstanding - diluted:		84,829		85,045		84,730		84,938
(Loss) earnings per share - basic:	$	(1.37)	$	2.13	$	(3.98)	$	2.26
(Loss) earnings per share - diluted:	$	(1.37)	$	2.11	$	(3.98)	$	2.24

​
The computation of diluted (loss) earnings per share excluded the effect of 5,811,000 and 3,554,000 antidilutive stock options for the three months ended September 30, 2020 and September 30, 2019, respectively, and excluded the effect of 5,811,000 and 3,595,000 antidilutive stock options and restricted stock units for the nine months ended September 30, 2020 and September 30, 2019, respectively.

f. Derivative Instruments and Hedging Activities

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

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and our strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. We also assess, both at the hedge’s inception and on an ongoing basis throughout the contract term, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

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

g.  Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. We use a market approach for our recurring fair value measurements, and we endeavor to use the best information available. Accordingly, valuation techniques that maximize the use of observable impacts are favored. We present the estimated fair values and classifications of our financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurement.

We use the following methods and assumptions to estimate the fair value of each class of financial instruments:

● The carrying values of cash and cash equivalents, accounts receivable, notes receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments.

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● The measurement of the fair value of long-term debt is based on market prices that generally are observable for similar liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement. See Note 3 for additional information.

● The measurement of the fair value of derivative assets and liabilities is based on market prices that generally are observable for similar assets and liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement. Derivative assets and liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid and other current assets and other accrued liabilities, respectively. Derivative assets and liabilities that have maturity dates greater than twelve months from the balance sheet date are included in deposits and other assets and other long-term liabilities, respectively. See Note 5 for additional information on our derivative instruments and related Company policies.

h.  Stock Benefit Plans

Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance and cash-settled awards and dividend equivalent rights ("DERs") to select employees, officers, directors and consultants of Holdings and its affiliates.

We recognize the fair value of each grant as compensation expense on a straight-line basis over the vesting period using the graded vesting terms of the respective grant. The fair value of stock option grants is estimated using the Black-Scholes option pricing valuation model. The fair value of stock, restricted stock units and restricted stock awards is the quoted market price of Holdings’ common stock on the date of grant.

During the three and nine months ended September 30, 2020 and September 30, 2019, stock-based compensation expense consisted of the following:

	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Long-Term Incentive Plan	$	7,869	$	3,828	$	18,089	$	11,138
Employee Stock Purchase Plan		38		75		118		209
Total Stock-Based Compensation	$	7,907	$	3,903	$	18,207	$	11,347

i.  Revenue Recognition

We account for revenue from contracts with customers based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We recognize revenue upon admission into our parks, provision of our services, or when products are delivered to our guests. Revenues are presented in the accompanying condensed consolidated statements of operations net of sales taxes collected from our guests that are remitted or payable to government taxing authorities. For season passes, memberships in the initial twelve-month term and other multi-use admissions, we estimate a redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable and recognize a pro-rata portion of the revenue as the guests visit our parks. Amounts owed or received for multi-use admissions in excess of redemptions are recognized in deferred revenue. In contrast to our season pass and other multi-use offerings (such as our all season dining pass program, which enables season passholders and members to eat meals and snacks any day they visit the park for 1 upfront payment) that expire at the end of each operating season, the membership program continues on a month-to-month basis after the initial twelve-month membership term and can be canceled any time after the initial term pursuant to the terms of the membership program. Guests enrolled in the membership program can visit our parks an unlimited number of times whenever the parks are open as long as the guest remains enrolled in the membership program. We review the estimated redemption rate regularly and on an ongoing basis and revise it as necessary throughout the year. In connection with the temporary closure of our parks due to COVID-19, we added one additional month of membership privileges for every month a member paid but could not visit their home park. Season pass holders will be granted an additional year of admission to the parks due to the COVID-19 pandemic. All 2020 passes now expire at the end of the 2021 season. The membership payments received while parks were temporarily closed due to the pandemic were deferred and will be recognized as

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revenue when these additional months are utilized at the end of the respective membership periods. For active memberships after the initial twelve-month term, we recognize revenue monthly as payments are received with the exception of those payments related to the parks that remain temporarily closed due to COVID-19. As of September 30, 2020, deferred revenue was primarily comprised of (i) unredeemed season pass and all season dining pass revenue, (ii) unredeemed portions of the membership program and member dining program that will be recognized in the fourth quarter of 2020 and in 2021, and (iii) pre-sold single-day admissions revenue for the current operating season.

We have entered into international agreements to assist a third party in the planning, design, development and operation of a Six Flags-branded park outside of North America. These agreements consist of a brand licensing agreement, project services agreement, and management services agreement. We treat these agreements as 1 contract because they were negotiated with a single commercial objective. We have identified 3 distinct promises within the agreement with the third party partner as brand licensing, project services and management services. Each of these promises is its own performance obligation and distinct, as the third party could benefit from each service on its own with other readily available resources, and each service is separately identifiable from other services in the context of the contract. We recognize revenue under our international agreements over the relevant service period of each performance obligation based on its relative stand-alone selling price, as determined by our best estimate of selling price. We review the service period of each performance obligation on an ongoing basis and revise it as necessary throughout the year. Revisions to the relevant service periods of the performance obligations may result in revisions to revenue in future periods and are recognized in the period in which the change is identified.

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the observable prices charged to customers. We generally expense (i) sales commissions when incurred, and (ii) certain costs to obtain a contract where the amortization period would have been one year or less. These costs are recognized in "Selling, general and administrative expenses." We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less or (ii) contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed. For certain of our contracts that have an original expected length of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money.

j.  Leases

We or certain of our subsidiaries are a lessee in various noncancelable operating and finance (formerly “capital”) leases, primarily for operating rights to amusement parks, land, office space, warehouses, office equipment and machinery. We account for leases in accordance with FASB ASC 842, Leases (“Topic 842”); see below for additional information on recently adopted accounting pronouncements and Note 7 for additional information regarding our leases. We determine if an arrangement is or contains a lease at contract inception and recognize a right-of-use ("ROU") asset and lease liability at the lease commencement date.

For both our operating and finance leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments include how we determine (i) the discount rate used to discount the unpaid lease payments to present value, (ii) the lease term and (iii) the lease payments. Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate ("IBR"). Generally, we cannot determine the interest rate implicit in the lease and therefore we use the IBR as a discount rate for our leases. The IBR reflects the rate of interest we would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The lease term for all of our leases includes the noncancelable period of the lease plus any additional periods covered by an option to extend the lease that are reasonably certain to be executed by us. Lease payments included in the measurement of the lease liability comprise fixed payments owed over the lease term, variable lease payments that depend on an index or rate, and the exercise price of an option to purchase the underlying asset if it is reasonably certain that we will exercise the option.

The ROU asset is initially measured at cost, which comprises the initial amount of lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives

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received. For our leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, and adjusted for any prepaid or accrued lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the term of the operating lease. Lease expense is taken on a straight-line basis with an associated interest expense charge for finance leases.

Variable lease payments associated with our leases are recognized upon the occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Variable lease payments for operating leases are presented as operating expense in our condensed consolidated statements of operations in the same line item as expense arising from fixed lease payments. Property taxes and insurance paid on behalf of our lessors is included within variable lease payments. We are not currently making any variable payments related to finance leases.

Operating lease ROU assets net of accumulated amortization are presented as "Right-of-use operating leases, net" on the condensed consolidated balance sheets. The current portion of operating lease liabilities is presented as "Short-term lease liabilities" and the long-term portion is presented separately as "Long-term lease liabilities" on the condensed consolidated balance sheets.

Finance lease ROU assets are presented within “Property and equipment, at cost” and the related lease amortization within “Accumulated depreciation” on the condensed consolidated balance sheets. The current portion of the finance lease liabilities is presented as “Short-term lease liabilities” and the long-term portion is presented separately as “Long-term lease liabilities” on the condensed consolidated balance sheets.

We have elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. We recognize the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with short-term leases are recognized and presented in the same manner as for all other leases.

The ROU assets for operating and finance leases may be periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant and Equipment - Overall, to determine whether an ROU asset is impaired and if so, the amount of the impairment loss to recognize. We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the remeasurement of a lease liability, an adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in our condensed consolidated statements of operations.

k.  Accounts Receivable, Net

Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products, such as season passes and the membership program. We are not exposed to a significant concentration of credit risk; however, based on the age of the receivables, our historical experience and other factors and assumptions we believe to be customary and reasonable, we record an allowance for doubtful accounts. As of September 30, 2020 and December 31, 2019, we have recorded an allowance for doubtful accounts of $7.7 million and $8.3 million, respectively, which is primarily comprised of estimated payment defaults under our membership program. To the extent that payments under our membership program have not been recognized in revenue, the allowance for doubtful accounts recorded against our membership program is offset with a corresponding reduction in deferred revenue.

l.  Recently Adopted Accounting Pronouncements

On January 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments (“Topic 326”). The standard requires the immediate recognition of estimated credit losses expected to occur over the life of financial assets rather than the current incurred loss impairment model that recognizes losses when a probable threshold is met. Topic 326 is effective for annual periods beginning after December 15, 2019

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and interim periods within those fiscal years. Our adoption of Topic 326 did not have a material impact on our condensed consolidated financial statements and related disclosures.

m.  Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“Update 2019-12”), which removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. Update 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. We are in the process of evaluating the impact of this amendment on our condensed consolidated financial statements; however, we do not expect a material impact.

In August 2018, FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans: (“Update 2018-14”), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. Update 2018-14 is effective for annual periods beginning after January 1, 2021, with early adoption permitted. Adoption is required to be applied on a retrospective basis to all periods presented. We are in the process of evaluating the impact of this amendment on our condensed consolidated financial statements; however, we do not expect a material impact.

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. We are in the process of evaluating the impact this amendment will have on our condensed consolidated financial statements.

2.  Revenue

Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.

The following tables present our revenues disaggregated by contract duration for the three and nine month periods ended September 30, 2020 and September 30, 2019, respectively. Long-term and short-term contracts consist of our contracts with customers with terms greater than one year and less than or equal to one year, respectively. Sales and usage-based taxes are excluded from revenues.

	Three Months Ended September 30, 2020
					Sponsorship,
			Park Food,		International
			Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	16,131	$	1,086	$	2,144	$	19,361
Short-term contracts and other (a)		56,789		48,256		1,921		106,966
Total revenues	$	72,920	$	49,342	$	4,065	$	126,327

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	Three Months Ended September 30, 2019
					Sponsorship,
			Park Food,		International
			Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	38,684	$	7,897	$	16,029	$	62,610
Short-term contracts and other (a)		313,980		234,162		10,428		558,570
Total revenues	$	352,664	$	242,059	$	26,457	$	621,180

	Nine Months Ended September 30, 2020
					Sponsorship,
			Park Food,		International
			Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	18,832	$	1,743	$	14,994	$	35,569
Short-term contracts and other (a)		124,856		81,928		5,620		212,404
Total revenues	$	143,688	$	83,671	$	20,614	$	247,973

	Nine Months Ended September 30, 2019
					Sponsorship,
			Park Food,		International
			Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Consolidated
Long-term contracts	$	70,227	$	15,511	$	61,462	$	147,200
Short-term contracts and other (a)		601,025		457,181		21,177		1,079,383
Total revenues	$	671,252	$	472,692	$	82,639	$	1,226,583

(a) 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

Our long-term contracts consist of season passes purchased by customers in the year preceding the operating season to which they relate, sponsorship contracts and international agreements with third parties. Due to the COVID-19 pandemic, we have extended all 2020 season passes through the 2021 season. We earn season pass revenue when our customers purchase a season pass for a fixed fee, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks’ operating season. We earn sponsorship revenue from separately-priced contracts with third parties pursuant to which we sell and advertise the third party’s products within the parks in exchange for consideration. Advertisements may include, but are not limited to, banners, signs, radio ads, association with certain events, sponsorship of rides within our parks and retail promotions. We earn international agreements revenue pursuant to arrangements in which we assist in the development and management of Six Flags-branded theme parks and waterparks outside of North America. Within our international agreements, we have identified 3 distinct performance obligations as brand licensing, project services and management services. We do not consider revenue recognized for the performance obligations related to our international agreements to be significant, neither individually nor in the aggregate, to any period presented. See Note 1 for additional information on our accounting for performance obligations under these contracts.

The transaction price for our long-term contracts is explicitly stated within the contracts. Our sponsorship contracts and international agreements may include estimated variable consideration such as penalties for delay in performance of contract terms, and certain volume-based discounts and rebates. We do not believe there will be significant changes to our estimates of variable consideration. Our brand licensing and management services performance agreements include royalty payments and management fees, respectively, based on gross sales from Six Flags-branded parks once opened. We have elected to apply the sales-based royalty exemption to the brand licensing performance obligation, and accordingly, do not estimate revenue attributable to the gross sales-based royalty. We have also elected to apply the direct allocation exemption to the management services performance obligation, and accordingly, do not estimate revenue attributable to the gross sales-based management fee.

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We recognize season pass revenue in "Park admissions" over the estimated redemption rate, as we believe this appropriately depicts the transfer of service to our customers. We estimate the redemption rate based on historical experience and other factors and assumptions that we believe to be customary and reasonable. We review the estimated redemption rate regularly, on an ongoing basis, and revise it as necessary throughout the year. Amounts received for multi-use admissions in excess of redemptions are recognized in "Deferred revenue." We recognize sponsorship and international agreements revenue over the term of the agreements using the passage of time as a measure of complete satisfaction of the performance obligations in "Sponsorship, international agreements and accommodations." Amounts received for unsatisfied sponsorship and international agreements performance obligations are recognized in "Deferred revenue."

At January 1, 2020, $85.1 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $16.0 million and $35.6 million was recognized as revenue for long-term contracts during the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, the total unearned amount of revenue for remaining long-term contract performance obligations was $65.1 million. At January 1, 2019, $100.8 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $46.9 million and $109.7 million was recognized as revenue for long-term contracts during the three and nine months ended September 30, 2019, respectively. As of September 30, 2019, the total unearned amount of revenue for remaining long-term contract performance obligations was $75.5 million.

As of September 30, 2020, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately $64.2 million in the remainder of 2020, $20.6 million in 2021, $19.3 million in 2022, $9.3 million in 2023, and $1.2 million in 2024 and thereafter.

Short-term Contracts and Other

Our short-term contracts consist primarily of season passes and memberships with customers, certain sponsorship contracts and international agreements with third parties. We earn revenue from a customer’s purchase of our 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.

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3. Long-Term Indebtedness

Credit Facility

As part of our ongoing operations, we periodically refinance our existing credit facility. As of September 30, 2020, our credit facility consisted of a $481.0 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”). Our prior credit facility (as previously amended as described below, the “2015 Credit Facility”) consisted of a $250.0 million revolving credit loan facility (the “2015 Revolving Loan”) and a $700.0 million Tranche B Term Loan (the “2015 Term Loan B”) and was amended and restated in conjunction with the Second Amended and Restated Credit Facility.

In connection with entering into the Second Amended and Restated Credit Facility on April 17, 2019, comprised of a $350.0 million revolving credit loan facility and an $800.0 million Tranche B term loan facility, we repaid the amounts outstanding on the 2015 Revolving Loan and the outstanding 2015 Term Loan B and we recognized a loss on debt extinguishment of $6.2 million. The remaining proceeds from the Second Amended and Restated Credit Facility were used for general corporate purposes, including payment of refinancing fees. We capitalized $8.9 million of debt issuance costs directly associated with the issuance of the Second Amended and Restated Credit Facility.

On October 18, 2019, we entered into an amendment to the Second Amended and Restated Credit Facility, which reduced the overall borrowing rate on the Second Amended and Restated Term Loan B by 25 basis points by reducing the applicable margin from LIBOR plus 2.00% to LIBOR plus 1.75%. Excluding the cost to execute the transaction, the lower borrowing rate reduced interest expense by approximately $2.0 million annually. We recognized a loss on debt extinguishment of $0.3 million related to the transaction.

On April 8, 2020, certain of our revolving credit lenders agreed to provide an incremental $131.0 million of revolving credit commitments to the Second Amended and Restated Revolving Loan, increasing the facility from $350.0 million to $481.0 million.

On April 22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025 (discussed below). The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B and for general corporate and working capital purposes, including expenses relating to the transaction. We recognized a loss on debt extinguishment of $5.1 million related to the transaction.

As of September 30, 2020 and December 31, 2019, 0 advances under the Second Amended and Restated Revolving Loan were outstanding (excluding amounts reserved for letters of credit in the amount of $21.7 million and $20.8 million, respectively). 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 September 30, 2020, the Second Amended and Restated Revolving Loan unused commitment fee was 0.625%. The principal amount of the Second Amended and Restated Revolving Loan is due and payable on April 17, 2024.

As of September 30, 2020 and December 31, 2019, $479.0 million and $796.0 million were outstanding under the Second Amended and Restated Term Loan B, respectively. Interest on the Second Amended and Restated Term Loan B accrues at an annual rate of LIBOR plus 1.75%. In August 2019, we entered into 2 additional separate interest rate swap agreements with a notional value of $400.0 million (collectively, the “August 2019 Swap Agreements”) to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. See Note 5 for a further discussion. As of September 30, 2020, the applicable interest rate on the Second Amended and Restated Term Loan B was 3.01%. All remaining outstanding principal of the Second Amended and Restated Term Loan B is due and payable on April 17, 2026.

Amounts outstanding under the Second Amended and Restated Credit Facility are guaranteed by Holdings, Six Flags Operations Inc. and certain of the domestic subsidiaries of SFTP (collectively, the "Loan Parties"). The Second

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Amended and Restated Credit Facility is secured by a first priority security interest in substantially all of the assets of the Loan Parties. The Second Amended and Restated Credit Facility agreement contains certain representations, warranties, affirmative covenants and financial covenants (such as a maximum senior leverage maintenance covenant). In addition, the Second Amended and Restated Credit Facility agreement contains restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the incurrence of indebtedness and liens, fundamental changes, restricted payments, capital expenditures, investments, prepayments of certain indebtedness, transactions with affiliates, changes in fiscal periods, modifications of certain documents, and certain hedging agreements, subject, in each case, to certain carve-outs.

On April 15, 2020, we received sufficient consents from the continuing lenders under the Second Amended and Restated Credit Facility (the “Credit Agreement Amendment”) substantially concurrently with the closing of the $725 million 2025 Notes discussed below to, among other things, (i) permit the issuance of the 2025 Notes, including specifically, permitting the 2025 Notes to mature inside the Second Amended and Restated Term Loan B, (ii) suspend the testing of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2020, (iii) re-establish the financial maintenance covenant thereafter (provided that for the first, second, and third quarters in 2021 that such covenant is tested, we will be permitted to use the quarterly Borrower Consolidated Adjusted EBITDA (as defined in the Second Amended and Restated Credit Facility) from the second, third and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2020) and (iv) add a minimum liquidity covenant that will apply from the date of the Credit Agreement Amendment through December 31, 2021. The modifications to the financial maintenance covenant and other restrictions pursuant to the Credit Agreement Amendment will be in effect from the date of the Credit Agreement Amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2021 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the financial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the 2019 figures as outlined above. The Credit Agreement Amendment became effective on April 22, 2020, after giving effect to the repayment of a portion of the Second Amended and Restated Term Loan B with a portion of the proceeds from the 2025 Notes.

On August 26, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility which, among other things, (i) extended the previously effectuated suspension of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2021, (ii) re-established the senior secured leverage ratio financial maintenance covenant thereafter (provided that for each quarter in 2022 (other than the fourth quarter) that the financial maintenance covenant is tested, SFTP will be permitted to use its quarterly Borrower Consolidated Adjusted EBITDA (as defined in the credit agreement governing the Second Amended and Restated Credit Facility) from the second, third, and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2021), (iii) reduced the commitment fee on the revolving credit facility, and (iv) extended the minimum liquidity covenant that will apply through December 31, 2022. The extension of the modifications to the financial covenant and other provisions in the Second Amended and Restated Credit Facility pursuant to this amendment will be in effect from the date of the amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the financial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the 2019 figures as outlined above. In addition, all of SFTP’s existing incremental revolving credit lenders agreed to extend the incremental $131 million revolving credit commitments to the Second Amended and Restated Revolving Loan by one year to December 31, 2022.

2024 Notes, 2025 Notes and 2027 Notes

On June 16, 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due July 31, 2024 (the "2024 Notes"). We used approximately $150.0 million of the proceeds from the issuance of the 2024 Notes to reduce our borrowings under the 2015 Term Loan B, and we used the remaining net proceeds of the sale of the 2024 Notes for general corporate and working capital purposes, which primarily consisted of share repurchases.

On April 13, 2017, Holdings issued an additional $700.0 million of 4.875% Senior Notes due 2024 (the "2024 Notes Add-on").

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During March of 2020, we prepaid $50.5 million of the outstanding 2024 Notes principal, reducing the outstanding amount to $949.5 million. We recognized a loss on debt extinguishment of $1.0 million. Interest payments of $23.1 million for the 2024 Notes and the 2024 Notes Add-on are due semi-annually on January 31 and July 31 of each year.

On April 13, 2017, Holdings issued $500.0 million of 5.50% Senior Notes due 2027 (the "2027 Notes"). Interest payments of $13.8 million are due semi-annually on April 15 and October 15 of each year.

On April 22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025 (the “2025 Notes”). The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B and for general corporate and working capital purposes, including expenses relating to the transaction. In conjunction with the $315.0 million repayment of the Second Amended and Restated Term Loan B, certain of our hedging instruments that were entered into to mitigate the risk of an increase in the LIBOR interest rate and which are discussed in Note 5, Derivative Financial Instruments, were de-designated. Consistent with company policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into counter-agreements to economically offset the impact of the de-designated swap agreements. Interest payments of $25.4 million are due semi-annually on January 1 and July 1 of each year, with the exception of January 1, 2021, which will include the interest from April 22, 2020 through July 1, 2020 and will total $35.1 million.

The 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes are guaranteed by the Loan Parties. The 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes contain restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the ability of the Loan Parties to incur additional indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments, engage in transactions with affiliates, pay dividends and repurchase capital stock. The 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes contain certain events of default, including payment defaults, breaches of covenants and representations, cross defaults to other material indebtedness, judgment, and changes of control and bankruptcy events of default.

Long-Term Indebtedness Summary

As of September 30, 2020 and December 31, 2019, long-term debt consisted of the following:

	As of
(Amounts in thousands)	September 30, 2020		December 31, 2019
Second Amended and Restated Credit Facility
Second Amended and Restated Term Loan B	$	479,000	$	796,000
Second Amended and Restated Revolving Loan		—		—
2024 Notes		949,490		1,000,000
2025 Notes		725,000		—
2027 Notes		500,000		500,000
Net discount		(4,633)		(6,535)
Deferred financing costs		(27,937)		(14,581)
Total debt	$	2,620,920	$	2,274,884
Less current portion of long-term debt		—		(8,000)
Total long-term debt	$	2,620,920	$	2,266,884

Fair-Value of Long-Term Indebtedness

As of September 30, 2020 and December 31, 2019, the fair value of our long-term debt was $2,559.1 million and $2,348.9 million, respectively. The measurement of the fair value of long-term debt is based on market prices that are generally observable for similar liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement.

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4.  Accumulated Other Comprehensive Loss

Changes in the composition of Accumulated Other Comprehensive Loss ("AOCI") during the nine months ended September 30, 2020 were as follows:

									Accumulated
	Cumulative								Other
	Translation		Cash Flow		Defined Benefit		Income		Comprehensive
(Amounts in thousands)	Adjustment		Hedges		Plans		Taxes		Loss
Balances at December 31, 2019	$	(22,184)	$	(1,530)	$	(49,282)	$	(1,714)	$	(74,710)
Net current period change		(13,553)		(33,948)		—		11,305		(36,196)
Amounts reclassified from AOCI		—		2,244		750		(746)		2,248
Amounts reclassified due to de-designation		—		14,928		—		(3,720)		11,208
Balances at September 30, 2020	$	(35,737)	$	(18,306)	$	(48,532)	$	5,125	$	(97,450)

The Company had the following reclassifications out of AOCI during the three and nine months ended September 30, 2020 and September 30, 2019:

		Amount of Reclassification from AOCI				Amount of Reclassification from AOCI
		Three Months Ended				Nine Months Ended
Component of AOCI	Location of Reclassification into (Loss) Income	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Amortization of loss on interest rate hedge	Interest Expense	$	1,320	$	—	$	17,172	$	—
	Income tax benefit		(329)		—		(4,279)		—
	Net of tax	$	991	$	—	$	12,893	$	—
Amortization of deferred actuarial loss and prior service cost	Operating expenses	$	235	$	205	$	750	$	589
	Income tax expense		(59)		55		(187)		(40)
	Net of tax	$	176	$	151	$	563	$	440
Total reclassifications		$	1,167	$	151	$	13,456	$	440

5.  Derivative Financial Instruments

In June 2019, we entered into 3 separate interest rate swap agreements with a notional amount of $300.0 million (collectively, the “June 2019 Swap Agreements”) to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. The term of the June 2019 Swap Agreements began in June 2019 and expires in June 2023. Upon execution, we designated and documented the June 2019 Swap Agreements as cash flow hedges. The June 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.

In August 2019, we entered the August 2019 Swap Agreements with an aggregate notional amount of $400.0 million to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. The term of the August 2019 Swap Agreements began in August 2019 and expires in August 2024. Upon execution, we designated and documented the August 2019 Swap Agreements as cash flow hedges. The August 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.

In March 2020, we completed a blend and extend on $100.0 million of the June 2019 Swap Agreements (the “Modified June 2019 Swap Agreement”) that extended the length of one of the June 2019 Swap Agreements through April 2026 and mitigates the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. The remaining $200.0 million of the June 2019 Swap Agreements (the “Unmodified June 2019 Swap Agreements”) did not change. Upon execution, we designated and documented the Modified June 2019 Swap Agreement as a cash flow hedge. The Modified June 2019 Swap Agreement serves as an economic hedge and provides protection against rising interest rates.

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On April 22, 2020, we repaid $315.0 million of the Second Amended and Restated Term Loan B. In conjunction, the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement were de-designated as the hedged items were no longer probable to occur due to the repayment of the debt. As a result, $14.9 million was reclassified from accumulated other comprehensive income to interest expense in the unaudited condensed consolidated statement of operations. Consistent with company policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into $300.0 million of notional amount counter-agreements (the “April 2020 Counter-agreements”) to economically offset the impact of the de-designated swap agreements.

By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instrument is placed with counterparties that we believe pose minimal credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, commodity prices or currency exchange rates. We manage the market risk associated with derivative instruments by establishing and monitoring parameters that limit the types and degree of market risk that we may undertake. We hold and issue derivative instruments for risk management purposes only and do not utilize derivatives for trading or speculative purposes.

We record derivative instruments at fair value on our unaudited condensed consolidated balance sheets. When in qualifying relationships, the effective portion of all cash flow designated derivatives are deferred in AOCI and are reclassified to interest expense when the forecasted transaction takes place. Ineffective changes, if any, and changes in the fair value of derivatives that are not designated as hedging instruments are recorded directly to “interest expense” and “other expense (income), net”, respectively. Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid and other current assets and other accrued liabilities, respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in deposits and other assets and other long-term liabilities, respectively.

Our derivatives are measured on a recurring basis using Level 2 inputs. The fair value measurements of our derivatives are based on market prices that generally are observable for similar assets or liabilities at commonly quoted intervals.

Derivative assets recorded at fair value in our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively, consisted of the following:
	Derivative Assets
(Amounts in thousands)	September 30, 2020		December 31, 2019
Derivatives Designated as Cash Flow Hedges
Interest Rate Swap Agreements — Current	$	—	$	485
Interest Rate Swap Agreements — Noncurrent		—		1,440
Derivatives Not Designated as Hedging Instruments
Interest Rate Swap Agreements - Current		744		—
Interest Rate Swap Agreements - Noncurrent		1,160		—
	$	1,904	$	1,925

Derivative liabilities recorded at fair value in our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively, consisted of the following:

	Derivative Liabilities
(Amounts in thousands)	September 30, 2020		December 31, 2019
Derivatives Designated as Cash Flow Hedges
Interest Rate Swap Agreements — Current	$	4,813	$	788
Interest Rate Swap Agreements — Noncurrent		13,563		2,667
Derivatives Not Designated as Hedging Instruments
Interest Rate Swap Agreements - Current		4,479		—
Interest Rate Swap Agreements - Noncurrent		10,870		—
	$	33,725	$	3,455

Gains and losses before taxes on derivatives not designated as hedging instruments included in our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and September 30, 2019 were as follows:

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	Amount of Loss Recognized in Income on Derivative
	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Interest Rate Swap Agreements	$	(48)	$	—	$	(16,776)	$	—
Total	$	(48)	$	—	$	(16,776)	$	—

Gains and losses before taxes on derivatives designated as a cash flow hedge for the three and nine months ended September 30, 2020 and September 30, 2019 were as follows:

Three Months Ended September 30, 2020 and September 30, 2019

	Loss				Loss Reclassified from
	Recognized in AOCI				AOCI into Operations
	(Effective Portion)				(Effective Portion)
(Amounts in thousands)	2020		2019		2020		2019
Interest Rate Swap Agreements	$	(1,368)	$	(3,035)	$	(1,320)	$	—
Total	$	(1,368)	$	(3,035)	$	(1,320)	$	—

Nine Months Ended September 30, 2020 and September 30, 2019

	Loss				Loss Reclassified from
	Recognized in AOCI				AOCI into Operations
	(Effective Portion)				(Effective Portion)
(Amounts in thousands)	2020		2019		2020		2019
Interest Rate Swap Agreements	$	(33,948)	$	(5,901)	$	(2,244)	$	—
Total	$	(33,948)	$	(5,901)	$	(2,244)	$	—

During the nine months ended September 30, 2020, we recognized in AOCI a loss of $33.9 million related to our swap agreements. This loss was caused by a decrease in both current interest rates, the interest rate forward curve and the expectation of future payment by us to our hedging counterparties based on current assumptions of the market. Upon de-designation of the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement, we reclassified $14.9 million from accumulated other comprehensive loss to interest expense in the unaudited condensed consolidated statement of operations.

6.  Commitments and Contingencies

Partnership Parks

On April 1, 1998, we acquired all of the capital stock of the former Six Flags Entertainment Corporation (a corporation that has been merged out of existence and that has always been a separate corporation from Holdings, "Former SFEC") for $976.0 million, paid in cash. In addition to our obligations under outstanding indebtedness and other securities issued or assumed in the Former SFEC acquisition, we also guaranteed certain contractual obligations relating to the Partnership Parks. Specifically, we guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions (including rent) of approximately $74.2 million in 2020 (subject to cost of living adjustments) to the limited partners in the Partnership Parks (based on our ownership of units as of September 30, 2020, our share of the distribution will be approximately $32.9 million) and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6% of the Partnership Parks’ revenues. Cash flow from operations at the Partnership Parks is used to satisfy these requirements first, before any funds are required from us. We also guaranteed the obligation of our subsidiaries to annually purchase all outstanding limited partnership units to the extent tendered by the unit holders (the "Partnership Park Put"). The agreed price for units tendered in the Partnership Park Put is based on a valuation of each of the respective Partnership Parks (the "Specified Price") that is the greater of (a) a valuation for each of the respective Partnership Parks derived by multiplying such park’s weighted average four-year EBITDA (as defined in the agreements that govern the partnerships)

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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 Partnership Parks due to the COVID-19 pandemic in March 2020, which would cause the value of the limited partnership units of the Partnership Parks 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 valuation methodologies described in the preceding sentence, the Specified Price for the Partnership Parks, if determined as of September 30, 2020, is $409.7 million in the case of SFOG and $527.4 million in the case of SFOT. As of September 30, 2020, we owned approximately 31.4% and 53.9% of the Georgia limited partner interests and Texas limited partner interests, respectively. Our obligations with respect to SFOG and SFOT will continue until 2027 and 2028, respectively.

In 2027 and 2028, we will have the option to purchase all remaining units in the Georgia limited partner and the Texas limited partner, respectively, at a price based on the Specified Price, increased by a cost of living adjustment. Pursuant to the 2020 annual offer, we purchased 0.375 limited partnership units in the Georgia partnership for $1.5 million and we purchased 1.5675 units from the Texas partnership for $3.4 million in May 2020. 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 2020 at both parks is approximately $524.3 million, representing approximately 68.6% of the outstanding units of SFOG and 46.1% of the outstanding units of SFOT. An additional $350.0 million of incremental borrowing is available under the Second Amended and Restated Credit Facility for future "put" obligations, if necessary.

In connection with our acquisition of the Former SFEC, we entered into the Subordinated Indemnity Agreement with certain of the Company’s entities, Time Warner, and an affiliate of Time Warner (an indirect subsidiary of AT&T Inc. as a result of a merger in 2018), pursuant to which, among other things, we transferred to Time Warner (which has guaranteed all of our obligations under the Partnership Park arrangements) record title to the corporations that own the entities that have purchased and will purchase limited partnership units of the Partnership Parks, and we received an assignment from Time Warner of all cash flow received on such limited partnership units, and we otherwise control such entities. In addition, we issued preferred stock of the managing partner of the partnerships to Time Warner. In the event of a default by us under the Subordinated Indemnity Agreement or of our obligations to our partners in the Partnership Parks, these arrangements would permit Time Warner to take full control of both the entities that own the limited partnership units and the managing partner. If we satisfy all such obligations, Time Warner is required to transfer to us the entire equity interests of these entities. The 2018 merger of Time Warner and AT&T Inc. did not affect the Time Warner guarantee of our obligations under the Subordinated Indemnity Agreement.

We incurred $21.1 million of capital expenditures at the Partnership Parks during the 2019 season. We intend to incur approximately $16.0 million of capital expenditures at these parks for the 2020 season (the majority of which has been spent), 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 $79.9 million of cash in 2019 from operating activities, after deduction of capital expenditures and excluding the impact of short-term intercompany advances from or payments to Holdings. As of September 30, 2020 and December 31, 2019, we had total loans receivable outstanding of $267.3 million and $239.3 million, respectively, from the partnerships that own the Partnership Parks, primarily to fund the acquisition of Six Flags White Water Atlanta and to make capital improvements to the Partnership Parks and distributions to the limited partners in prior years. The increase in the loans receivable balance during the nine months ended September 30, 2020 is a result of COVID-19 impacted operations at the Partnership Parks.

Insurance

We maintain insurance of the types and in amounts that we believe are commercially reasonable and that are available to businesses in our industry. We maintain multi-layered general liability policies that provide for excess liability coverage of up to $100.0 million per occurrence. For incidents arising on or after December 31, 2008, our self-insured retention is $2.0 million, followed by a $0.5 million deductible per occurrence applicable to all claims in the policy year for our domestic parks and our park in Canada and a nominal amount per occurrence for our parks in Mexico. Defense costs are in addition to these retentions. Our general liability policies cover the cost of punitive

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damages only in certain jurisdictions. Based upon reported claims and an estimate for incurred, but not reported claims, we accrue a liability for our self-insured contingencies. For workers’ compensation claims arising after November 15, 2003, our deductible is $0.75 million ($0.5 million deductible for the period from November 15, 2001 to November 15, 2003). We also maintain fire and extended coverage, business interruption, terrorism and other forms of insurance typical to businesses in our industry. Our all peril property coverage policies insure our real and personal properties (other than land) against physical damage resulting from a variety of hazards. Additionally, we maintain information security and privacy liability insurance in the amount of $10.0 million with a $0.25 million self-insured retention per event.

The majority of our current insurance policies expire on December 31, 2020. We generally renegotiate our insurance policies on an annual basis. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.

Litigation

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

Privacy Class Action Lawsuits

On January 7, 2016, a putative class action complaint was filed against Holdings in the Circuit Court of Lake County, Illinois. On April 22, 2016, Great America, LLC was added as a defendant. The complaint asserts that we violated the Illinois Biometric Information Privacy Act ("BIPA") in connection with the admission of season pass holders and members through the finger scan program that commenced in the 2014 operating season at Six Flags Great America in Gurnee, Illinois, and seeks statutory damages, attorneys’ fees and an injunction. An aggrieved party under BIPA may recover (i) $1,000 if a company is found to have negligently violated BIPA or (ii) $5,000 if found to have intentionally or recklessly violated BIPA, plus reasonable attorneys’ fees in each case. The complaint does not allege that any information was misused or disseminated. On April 7, 2017, the trial court certified 2 questions for consideration by the Illinois Appellate Court of the Second District. On June 7, 2017, the Illinois Appellate Court granted our motion to appeal. Accordingly, 2 questions regarding the interpretation of BIPA were certified for consideration by the Illinois Appellate Court. On December 21, 2017, the Illinois Appellate Court found in our favor, holding that the plaintiff had to allege more than a technical violation of BIPA and had to be injured in some way in order to have a right of action. On March 1, 2018, the plaintiff filed a petition for leave to appeal to the Illinois Supreme Court. On May 30, 2018, the Illinois Supreme Court granted the plaintiff’s leave to appeal and oral arguments were heard on November 20, 2018. On January 25, 2019, the Illinois Supreme Court found in favor of the plaintiff, holding that the plaintiff does not need to allege an actual injury beyond the violation of his rights under BIPA in order to proceed with a complaint. We intend to continue to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable, and a reasonable estimate of loss or range of loss in excess of the immaterial amount that we have recorded for this litigation cannot be made.

During 2017, 4 putative class action complaints were filed against Holdings or one of its subsidiaries. Complaints were filed on August 11, 2017, in the Circuit Court of Lake County, Illinois; on September 1, 2017, in the United States District Court for the Northern District of Georgia; on September 11, 2017, in the Superior Court of Los Angeles County, California; and on November 30, 2017, in the Superior Court of Ocean County, New Jersey. The complaints allege that we, in violation of federal law, printed more than the last five digits of a credit or debit card number on customers’ receipts and/or the expiration dates of those cards. A willful violation may subject a company to liability for

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actual damages or statutory damages between $100 and $1,000 per person, punitive damages in an amount determined by a court and reasonable attorneys’ fees, all of which are sought by the plaintiffs. The complaints do not allege that any information was misused. The Circuit Court in Illinois granted our motion to dismiss on November 2, 2018, but the matter was reversed on appeal on January 22, 2020. The Illinois Supreme Court has granted review, but briefing was stayed so that the parties could engage in settlement discussions.  The District Court for the Northern District of Georgia denied our motion to dismiss on May 6, 2019, but on December 31, 2019, the matter was stayed and administratively closed on our motion based on the Eleventh Circuit’s review of an order denying dismissal in a case involving substantially similar factual allegations and statutory violations. Either side may move to reopen the Georgia case within 30 days of the issuance of the Eleventh Circuit’s opinion in the other matter.  Our demurrer in the California matter was overruled on February 26, 2019, but the order contained certain favorable rulings that enabled us to file a motion for summary judgment on December 12, 2019. That motion is stayed as the parties explore settlement. The Superior Court in the New Jersey matter granted our motion to dismiss on January 18, 2019, which ruling the plaintiff has appealed, and the matter is stayed pending the outcome of settlement discussions. On October 20, 2020, the parties entered into a settlement agreement to resolve the lawsuits, for an immaterial amount, which is subject to preliminary and final approval by the court.

Wage and Hour Class Action Lawsuits

On March 8, 2016, certain plaintiffs filed a complaint against one of our subsidiaries in the Superior Court of Massachusetts, Suffolk County, on behalf of a purported class of current and former employees of Six Flags New England. The complaint alleges violations of Massachusetts law governing employee overtime and rest breaks, and seeks damages in the form of unpaid wages for overtime and meal breaks and related penalties. On July 2, 2018, the plaintiffs filed a motion for class certification of two classes, an overtime class and a meal break class. On November 8, 2018, the court granted class certification for the overtime class and denied class certification for the meal break class. On June 20, 2019, in response to competing motions for summary judgment on the application of an overtime wage exemption applicable to amusement parks that operate no more than 150 days per year, the court agreed that the defendant park did not operate more than 150 days in 2013, 2014, and 2016, but found that it did operate more than 150 days in 2015, 2017 and 2018, for which the defendant park would owe overtime wages. On September 26, 2019, we filed a motion for reconsideration with respect to 2017 and 2018, because the defendant park relied on a separate overtime wage law exemption applicable to a separate and distinct operation of the business in those years. On December 6, 2019, the court denied our motion for reconsideration. We continue to vigorously defend ourselves against this litigation. However, there can be no assurance regarding the ultimate outcome of this litigation and we have accrued our best estimate of exposure, the amount of which is not material to our consolidated financial statements.

On April 20, 2018, a complaint was filed against Holdings and Six Flags Concord, LLC in the Superior Court of Solano County, California, on behalf of a purported class of current and former employees of Six Flags Discovery Kingdom. On June 15, 2018, 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. We intend to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable and we have accrued our best estimate of exposure, the amount of which is not material to our consolidated financial statements.

On September 18, 2019, 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 Discovery Kingdom. An amended complaint was filed on November 24, 2019. On May 27, 2020, a copycat complaint was filed by the same law firm on behalf of a different named plaintiff alleging identical causes of action. The complaints allege violations of California law governing payment of wages, wage statements, and background checks, and seeks statutory damages under California law as well as under the Private Attorneys General Act, and attorneys’ fees costs. We intend to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable and a reasonable estimate of loss or range of loss cannot be made.

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

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complaint alleges one cause of action for failure to furnish accurate, itemized wage statements in violation of California labor law, and seeks all applicable statutory penalties and attorneys’ fees and costs. We intend to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable and we have accrued our best estimate of exposure, the amount of which is not material to our consolidated financial statements.

On February 20, 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 California law and attorneys’ fees costs. We intend to vigorously defend ourselves against this litigation. Since this litigation is in an early stage, the outcome is currently not determinable and a reasonable estimate of loss or range of loss cannot be made.

Securities Class Action Lawsuits

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 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 partner, Riverside Investment Group Co. Ltd., in violation of the federal securities laws. The consolidated complaint seeks 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. We believe that these lawsuits are without merit and intend to defend this litigation vigorously. However, there can be no assurance regarding the ultimate outcome of the lawsuit.

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 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 court granted the plaintiffs’ motion to consolidate. The consolidated action is captioned In re Six Flags Entertainment Corporation 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 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 partner, Riverside Investment Group Co. Ltd. The consolidated derivative complaint also alleges that a former officer and director sold shares of the

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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. We believe that these complaints are without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of these lawsuits.

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, against certain of its 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 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 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 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 District on behalf of putative stockholder Mr. Cliff Bragdon in an action captioned Bragdon v. Reid-Anderson, et al., Case No. DC-20-08180 (298th Dist. Ct., Dallas Cty., Tex.) (the “Bragdon action”). On July 10, 2020, the 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 resolution of the motion to dismiss the Electrical Workers litigation. The consolidated state derivative action is 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. We believe that these complaints are without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of these lawsuits.

COVID-19 Park Closure Lawsuits

Since COVID-19 began affecting the operations of our parks in mid-March 2020, three similar purported class action complaints were filed against Holdings or one of its subsidiaries in the United States District Court for the Central District of California on April 10, 2020, April 13, 2020, and April 21, 2020. These complaints allege that we, in violation of California law, charged members and season passholders while the parks were closed and did not provide refunds for the amounts charged. The complaints seek compensatory damages, punitive damages, restitution, and unspecified injunctive relief. On September 9, 2020, the parties agreed to a settlement in principle to resolve the lawsuits, for an immaterial amount, which is subject to preliminary and final approval by the court.

7.  Leases

We have operating and finance leases for amusement parks, land, vehicles, machinery and certain equipment. Our leases have remaining lease terms of less than one year to 45 years, some of which include options to extend leases up to 20 years, and some of which include options to terminate the lease within one year. For our noncancelable operating leases with options to extend, because we may determine it is not reasonably certain we will exercise the option, the options are not considered in determining the lease term, and associated potential option payments are excluded from lease payments. Our leases generally do not include restrictive financial or other covenants. Payments due under the lease contracts include fixed payments and, for certain of our leases, variable payments. Additionally, as of September 30, 2020, we have signed non-cancelable lease agreements with total estimated future lease payments of approximately $2.2 million that had not yet commenced and, therefore, are not included in the measurement of the right-of-use asset and lease liability.

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The components of lease cost for the three and nine months ended September 30, 2020 and September 30, 2019 are as follows:

	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Finance lease expense
Amortization of ROU assets	$	98	$	—	$	107	$	—
Interest on lease liabilities		13		—		14		—
Operating lease cost		6,379		6,127		18,927		18,524
Short-term lease cost		974		1,754		3,597		5,289
Variable lease cost		1,192		1,224		3,773		4,301
Total lease cost	$	8,656	$	9,105	$	26,418	$	28,114

Other information related to leases for the three and nine months ended September 30, 2020 and September 30, 2019 is as follows:

	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	6,777	$	14,011	$	14,259	$	22,464
Operating cash flows from finance leases		396		—		580		—
Financing cash flows from finance leases		14		—		15		—
Operating Leases
ROU assets obtained in exchange for lease liabilities		287		253		7,759		4,610
Finance Leases
ROU assets obtained in exchange for lease liabilities		1,904		—		2,761		—

Additional information related to our operating leases for the period ended September 30, 2020 is as follows:

Weighted-average remaining lease term (in years)	18.90
Weighted-average discount rate	6.89	%

Additional information related to our finance leases for the period ended September 30, 2020 is as follows:

Weighted-average remaining lease term (in years)	3.77
Weighted-average discount rate	3.99	%

The following tables set forth supplemental balance sheet information related to operating and finance leases as of September 30, 2020 and December 31, 2019:

	As of
(Amounts in thousands)	September 30, 2020		December 31, 2019
Operating Leases
Right of Use Assets, net	$	198,061	$	201,128
Short-term lease liabilities		18,644		10,709
Long-term lease liabilities		181,716		188,149
Total operating lease obligation	$	200,360	$	198,858
Finance Leases
Property and equipment, at cost	$	1,904	$	—
Accumulated depreciation		(107)		—
Total property and equipment, net		1,797		—
Short-term lease liabilities	$	159	$	—
Long-term lease liabilities		1,349		—
Total finance lease obligation	$	1,508	$	—

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Maturities of noncancelable operating and finance lease liabilities under Topic 842 as of September 30, 2020 are summarized in the table below.

(Amounts in thousands)	As of September 30, 2020
	Finance Leases		Operating Leases
Remaining in 2020	$	—	$	5,830
2021		346		27,364
2022		513		22,200
2023		513		22,062
2024		269		20,238
Thereafter		—		278,059
Total	$	1,641	$	375,753
Less: present value discount		(133)		(175,393)
Lease liability	$	1,508	$	200,360

8.  Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent the non-affiliated parties’ share of the assets of the Partnership Parks that are less than wholly-owned: SFOT, SFOG and Six Flags White Water Atlanta, which is owned by the partnership that owns SFOG. As of September 30, 2020, redeemable noncontrolling interests of the SFOT and SFOG partnerships was $252.9 million and $291.1 million, respectively.

(Amounts in thousands)	SFOT		SFOG		Total
Balance at December 31, 2019	$	246,744	$	282,514	$	529,258
Purchase of redeemable units		(3,440)		(1,536)		(4,976)
Fresh start accounting fair market value adjustment for purchased units		(720)		(204)		(924)
Change in redemption value of partnership units		11		7		18
Net income attributable to noncontrolling interests		20,634		20,654		41,288
Distributions to noncontrolling interests		(10,317)		(10,327)		(20,644)
Balance at September 30, 2020	$	252,912	$	291,108	$	544,020

The redemption value of the noncontrolling partnership units in SFOT and SFOG as of September 30, 2020 was approximately $243.3 million and $281.0 million, respectively. See Note 6 for a description of the partnership arrangements applicable to the Partnership Parks, the accounts of which are included in the accompanying unaudited condensed consolidated financial statements.

9.  Business Segments

We manage our operations on an individual park location basis, including operations from parks owned, managed and branded. Discrete financial information is maintained for each park and provided to our corporate management for review and as a basis for decision making. The primary performance measure used to allocate resources is Park EBITDA (defined as park-related operating earnings, excluding the impact of interest, taxes, depreciation, amortization and any other non-cash income or expenditures). In general, all of our parks provide similar products and services through a similar process to the same class of customer through a consistent method. We also believe that the parks share common economic characteristics. Based on these factors, we have only 1 reportable segment—parks.

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

	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net (loss) income	$	(95,528)	$	200,209	$	(296,324)	$	230,973
Interest expense, net		38,392		28,336		116,596		86,256
Income tax (benefit) expense		(36,243)		61,626		(113,953)		70,644
Depreciation and amortization		28,785		30,685		88,883		89,033
Corporate expenses		9,576		10,060		34,971		39,984
Stock-based compensation		7,907		3,903		18,207		11,347
Non-operating park level expense, net:
Loss (gain) on disposal of assets		10,065		2,659		10,458		3,105
Loss on debt extinguishment, net		—		—		6,106		6,231
Other expense (income), net		13,470		231		19,282		(1,474)
Park EBITDA	$	(23,576)	$	337,709	$	(115,774)	$	536,099

All of our owned or managed parks are located in the United States with the exception of 2 parks in Mexico and 1 park in Montreal, Canada. We also have revenue and expenses related to the development of Six Flags-branded parks outside of North America. The following information reflects our long-lived assets (which consists of property and equipment, right-of-use operating leases and intangible assets) as of September 30, 2020 and December 31, 2019, and revenues and (loss) income before income taxes by domestic and foreign categories for the nine months ended September 30, 2020 and September 30, 2019:

	Domestic		Foreign		Total
2020	(Amounts in thousands)
Long-lived assets	$	2,341,345	$	126,170	$	2,467,515
Revenues		231,254		16,719		247,973
Loss before income taxes		(385,764)		(24,513)		(410,277)
2019
Long-lived assets	$	2,347,577	$	142,377	$	2,489,954
Revenues		1,138,640		87,943		1,226,583
Income before income taxes		284,868		16,749		301,617

10.  Pension Benefits

We froze our pension plan effective March 31, 2006, pursuant to which most participants no longer earned future pension benefits. Effective February 16, 2009, the remaining participants in the pension plan no longer earned future benefits. The following summarizes our pension costs during the three and nine months ended September 30, 2020 and September 30, 2019:

	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Service cost	$	325	$	313	$	975	$	988
Interest cost		1,593		1,995		4,838		5,999
Expected return on plan assets		(3,280)		(3,318)		(9,838)		(9,979)
Amortization of net actuarial loss		235		205		750		589
Total net periodic benefit	$	(1,127)	$	(805)	$	(3,275)	$	(2,403)

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

Weighted-Average Assumptions Used To Determine Net Cost

	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Discount rate	3.00	%	4.05	%	3.00	%	4.05	%
Rate of compensation increase	N/A		N/A		N/A		N/A
Expected return on plan assets	6.50	%	7.25	%	6.50	%	7.25	%

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Employer Contributions

During the nine months ended September 30, 2020 and 2019, we made pension contributions of $1.5 million and $6.0 million, respectively.

11. 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 October 23, 2020, Holdings repurchased 4,607,000 shares at a cumulative cost of approximately $268.3 million and an average price per share of $58.25 under the March 2017 Stock Repurchase Plan, leaving approximately $231.7 million available for permitted repurchases.

The amount of share repurchases is limited by the covenants in the Second Amended and Restated Credit Facility, the 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes. Additionally, in conjunction with the increase in the borrowing capacity of the Second Amended and Restated Revolving Loan, and the issuance of the 2025 Notes (see Note 3, Long-Term Indebtedness), pursuant to amendments to the Second Amended and Restated Credit Facility in April 2020 and August 2020, we agreed to temporarily suspend the repurchase of Holdings common stock until the earlier of December 31, 2022, or such time as the incremental revolving credit commitments are reduced by $131 million.

On March 31, 2020, Holdings announced that its Board of Directors declared a dividend of 1 preferred share purchase right (a “Right”) payable on April 10, 2020, for each share of common stock to the shareholders of record on that date. In connection with the Rights, Holdings and Computershare Trust Company, N.A., as rights agent, entered into a Rights Agreement, dated as of March 31, 2020 (the “Rights Agreement”). Each Right entitles the registered holder to purchase from Holdings one one-thousandth of a Series B Junior Preferred Stock, par value $1.00 per share (the “Preferred Shares”), of Holdings at a price of $75.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. Subject to certain exceptions, if a person or group acquires more than 10% of Holdings’ outstanding common stock, the Rights will become exercisable for common stock having a value equal to 2 times the exercise price of the Right. The Rights are in all respects subject to and governed by the provisions of the Rights Agreement.

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

The following discussion and analysis contains forward-looking statements 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 2019 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 presents 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 2019 Annual Report.

Overview

General

We are the largest regional theme park operator in the world and the largest operator of waterparks in North America based on the number of parks we operate. Of our 26 regional theme parks and waterparks, 23 are located in the United States, two are located in Mexico and one is located in Montreal, Canada. Our parks are located in geographically diverse markets across North America and 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 nine months ended September 30, 2020 and September 30, 2019 are not indicative of the results expected for the full year. Typically, our park operations generate more than half of their annual revenue during the period from Memorial Day to Labor Day each year while expenses are incurred year-round. Due to the COVID-19 pandemic, we temporarily suspended operations at our parks beginning March 13, 2020. Nine of our 26 parks were closed in the third quarter. We continue to monitor government guidelines and requirements in each geographic region in which we operate and are resuming operations on a park-by-park basis based on local conditions. Since the temporary suspension of park operations in March 2020, in consultation with local health officials, we reopened parks in Oklahoma, Arizona, Georgia, Texas, Missouri, Maryland, New Jersey, Illinois, Montreal, Canada, and Oaxtepec, Mexico with limited capacity and enhanced sanitization, social distancing and additional preventative measures to help minimize the spread of COVID-19. Due to local government orders related to the pandemic, our park in Arizona was required to close shortly after it reopened and our park in Montreal, Canada was required to close earlier than the end of its regular operating season. Additionally, we opened the drive-through Safari at Six Flags Great Adventure in Jackson, New Jersey, an animal only experience at our Six Flags Discovery Kingdom park in Vallejo, California, our campground at Six Flags Darien Lake in New York and our hotel in Lake George, New York. We opened our theme park in Mexico City, Mexico on October 23, 2020, and we announced plans to open Six Flags Great America in Gurnee, Illinois for a holiday walk-through experience during late November through December.

The COVID-19 pandemic caused the suspension of operations at nine of our 26 parks, and limited attendance at the parks that were open, during the third quarter. However, attendance trends have improved from a range of 20% to 25% of prior year levels upon initial reopening in the second quarter to approximately 35% in the third quarter, for the parks that were open.

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Our revenue is primarily derived from (i) the sale of tickets (including season passes and memberships) for entrance to our parks (which accounted for approximately 58% and 55% of total revenues during the nine months ended September 30, 2020 and September 30, 2019, 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, including revenue earned under international development contracts. Revenues from ticket sales and in-park sales are primarily impacted by park attendance. Revenues from sponsorship, international agreements and accommodations can be impacted by the term, timing and extent of services and fees under these arrangements, which can result in fluctuations from quarter to quarter and year to year. During the first nine months of 2020, our park earnings before interest, taxes, depreciation and amortization ("Park EBITDA") decreased relative to the comparable period in the prior year, as a result of the temporary suspension of park operations related to the COVID-19 pandemic outbreak and the resulting decrease in attendance related to the reduction in operating days.

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, advertising and insurance do not vary significantly with attendance. While our parks were temporarily closed due to the COVID-19 pandemic, we reduced a significant portion of these expenses, including eliminating the majority of our seasonal labor and advertising expense. These cost-saving measures remain in effect with respect to parks that continue to be temporarily closed. These cost-savings were partially offset by the increased costs related to enhanced sanitization and preventative measures initiated at the reopened parks to help minimize the spread of COVID-19. We may face additional costs in the future in complying with any new federal, state or local regulations or industry best practices established in response to the COVID-19 pandemic.

Transformation Initiative

In March 2020, we launched the transformation initiative to reinvigorate growth and enhance the guest experience at our parks. Included in the plan are both revenue initiatives and productivity initiatives. We will focus on modernizing the guest experience through investments in key technology.

We recognized non-recurring transformation charges in our Statement of Operations and present such charges as "Other expense (income), net." Executing the transformation initiative will result in a total of non-recurring charges of approximately $69 million, of which $60 million will be cash and $9 million related to asset write-offs. We have recognized $29.2 million of these charges during the nine months ended September 30, 2020. We anticipate that we will incur approximately $5 million in charges in the fourth quarter of 2020, with the remaining charges expected to be incurred by the end of 2021. Approximately two-thirds of the investments in 2021 will be on our technology platform, which will have the greatest impact on the overall guest experience.

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 2019 Annual Report.

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Recent Events

Effective August 5, 2020, Esi Eggleston Bracey and Enrique Ramirez Mena were appointed to Holdings’ board of directors.

On August 26, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility which, among other things, (i) extended the previously effectuated suspension of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2021, (ii) re-established the senior secured leverage ratio financial maintenance covenant thereafter (provided that for each quarter in 2022 (other than the fourth quarter) that the financial maintenance covenant is tested, SFTP will be permitted to use its quarterly Borrower Consolidated Adjusted EBITDA (as defined in the credit agreement governing the Second Amended and Restated Credit Facility) from the second, third, and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2021), (iii) reduced the commitment fee on the revolving credit facility, and (iv) extended the minimum liquidity covenant that will apply through December 31, 2022. The extension of the modifications to the financial covenant and other provisions in the Second Amended and Restated Credit Facility pursuant to this amendment will be in effect from the date of the amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the financial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the 2019 figures as outlined above. In addition, all of SFTP’s existing incremental revolving credit lenders agreed to extend the incremental $131 million revolving credit commitments to the Second Amended and Restated Revolving Loan by one year to December 31, 2022.

Effective October 2, 2020 Kathy Aslin, Senior Vice President, Human Resources, and Brett Petit, Senior Vice President, Marketing and Sales, resigned, and, effective October 1, 2020, Laura Doerre, Executive Vice President and General Counsel, assumed the additional duties of Chief Administrative Officer.

On October 13, 2020, we committed to reduce our full-time workforce by approximately 240 employees, or 10 percent, as part of the transformation initiative. As a result, we recorded employee severance costs of approximately $1.5 million in the third quarter of 2020.

On October 15, 2020, we announced plans to open Six Flags Great America in Gurnee, Illinois for a holiday walk-through experience during late November through December, and on October 23, 2020, we opened our theme park in Mexico City, Mexico.

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Results of Operations

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The following table sets forth summary financial information for the three months ended September 30, 2020 and 2019.

	Three Months Ended				Percentage
(Amounts in thousands, except percentage and per capita data)	September 30, 2020		September 30, 2019		Change (%)
Total revenue	$	126,327	$	621,180	(80)	%
Operating expenses		113,833		189,820	(40)	%
Selling, general and administrative expenses		41,568		55,144	(25)	%
Cost of products sold		12,980		53,508	(76)	%
Other net periodic pension benefit		(995)		(1,038)	(4)	%
Depreciation and amortization		28,785		30,685	(6)	%
Loss on disposal of assets		10,065		2,659	N/M
Interest expense, net		38,392		28,336	35	%
Other expense, net		13,470		231	N/M
(Loss) income before income taxes		(131,771)		261,835	N/M
Income tax (benefit) expense		(36,243)		61,626	N/M
Net (loss) income		(95,528)		200,209	N/M
Less: Net income attributable to noncontrolling interests		(20,644)		(20,376)	1	%
Net (loss) income attributable to Six Flags Entertainment Corporation	$	(116,172)	$	179,833	N/M
Other Data:
Attendance		2,611		14,012	(81)	%
Total revenue per capita	$	48.38	$	44.33	9	%

Revenue

Revenue for the three months ended September 30, 2020 totaled $126.3 million, a decrease of $494.9 million, or 80%, compared to $621.2 million for the three months ended September 30, 2019. The decrease was driven primarily by an 81% decrease in attendance resulting from the temporary suspension of operations of our theme parks and waterparks on March 13, 2020 due to the ongoing COVID-19 pandemic and the limited capacity at our parks that are operating. The decrease in revenue was also attributable to a decrease in sponsorship, international agreements and accommodations revenues, due primarily to the termination of our contracts in China which generated revenue in the comparable prior year period and reduced revenue from sponsorships and the suspension of nearly all of our accommodations operations.

Total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, for the three months ended September 30, 2020 increased by $4.38 to $46.82 compared to the prior year period due to a $2.76, or 11%, increase in admissions revenue per capita and an increase of $1.62, or 9%, increase in non-admissions revenue per capita. The improvement in admissions spending per capita for the third quarter of 2020 was primarily due to recurring monthly membership revenue from members who retained their memberships on a monthly basis following the initial 12-month commitment period. An increase in the mix of paid single-day guests also contributed to the improvement. The increase in non-admissions revenue was due to higher mix of single-day guests, who tend to spend more on a per visit basis. In addition, recurring monthly all season membership products, such as the all season dining pass, from members who retained their memberships on a monthly basis following the initial 12-month commitment period contributed to the increase.

Operating expenses

Operating expenses for the three months ended September 30, 2020 decreased $76.0 million, or 40%, compared to the same period in the prior year, primarily as a result of fewer operating days and the cost mitigation measures put in place in response to the COVID-19 pandemic, including a 25% reduction in full-time salaries and wages for the full-time employees and the elimination of nearly all seasonal labor costs at our parks that remained closed. Also, there were additional savings in utilities and other costs related to nine of our parks that remained closed and reduced operating hours at our reopened parks. These savings were partially offset by the increased costs related to enhanced sanitization and additional preventative measures to help minimize the spread of COVID-19.

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Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2020 decreased $13.6 million, or 25%, compared to the same period in the prior year, driven by a reduction in advertising expense and salary, wage and benefit expense, including the reduction in executive officer salaries and the salaries of certain other corporate employees driven by the cost reduction measures put in place in response to the COVID-19 pandemic.

Cost of products sold

Cost of products sold in the three months ended September 30, 2020 decreased $40.5 million, or 76%, compared to the same period in the prior year, primarily as a result of reduced sales of food and merchandise due to the continued temporary suspension of park operations at nine of our parks and reduced attendance at our parks that were operating due to the COVID-19 pandemic.

Depreciation and amortization expense

Depreciation and amortization expense for the three months ended September 30, 2020, decreased $1.9 million, or 6%, compared to the same period in the prior year. The decrease in depreciation and amortization expense is primarily the result of asset retirements, partially offset asset additions made in conjunction with our ongoing capital program.

Loss on disposal of assets

Loss on disposal of assets for the three months ended September 30, 2020 increased $7.4 million compared to the same period in the prior year. The increase was primarily driven by the write-off of assets in conjunction with our transformation initiative.

Interest expense, net

Interest expense, net increased $10.1 million, or 35%, for the three months ended September 30, 2020, compared to the same period in the prior year, primarily as a result of increased interest expense related to the 2025 Notes issued in April 2020. This increase was partially offset by lower borrowings under the Second Amended and Restated Revolving Loan and the Second Amended and Restated Term Loan B and the interest savings related to the $50.5 million of the outstanding 2024 Notes principal prepaid in March 2020.

Other expense, net

Other expense, net for the three months ended September 30, 2020 increased $13.2 million compared to the same period in the prior year. The increase was primarily driven by costs associated with our transformation initiative.

Income tax (benefit) expense

Income tax benefit for the three months ended September 30, 2020 was $36.2 million. In the same period in the prior year, we recorded a tax expense of $61.6 million. The difference in income tax (benefit) expense is driven by our loss before income taxes for 2020 related to the COVID-19 pandemic.

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Results of Operations

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The following table sets forth summary financial information for the nine months ended September 30, 2020 and 2019:

	Nine Months Ended				Percentage
(Amounts in thousands, except per capita data)	September 30, 2020		September 30, 2019		Change (%)
Total revenue	$	247,973	$	1,226,583	(80)	%
Operating expenses		282,378		482,690	(41)	%
Selling, general and administrative expenses		114,578		154,977	(26)	%
Costs of products sold		22,954		107,296	(79)	%
Other net periodic pension benefit		(2,985)		(3,148)	(5)	%
Depreciation and amortization		88,883		89,033	0	%
Loss on disposal of assets		10,458		3,105	N/M
Interest expense, net		116,596		86,256	35	%
Loss on debt extinguishment		6,106		6,231	(2)	%
Other expense (income), net		19,282		(1,474)	N/M
(Loss) income before income taxes		(410,277)		301,617	N/M
Income tax (benefit) expense		(113,953)		70,644	N/M
Net (loss) income		(296,324)		230,973	N/M
Less: Net income attributable to noncontrolling interests		(41,288)		(40,753)	1	%
Net (loss) income attributable to Six Flags Entertainment Corporation	$	(337,612)	$	190,220	N/M
Other Data:
Attendance		4,628		26,688	(83)	%
Total revenue per capita	$	53.59	$	45.96	17	%

Revenue

Revenue for the nine months ended September 30, 2020 totaled $247.9 million, a decrease of $978.6 million, or 80%, compared to $1,226.6 million for the nine months ended September 30, 2019. The decrease was driven by an 83% decrease in attendance resulting from the temporary suspension of operations of many of our theme parks and waterparks on March 13, 2020 due to the ongoing COVID-19 pandemic and the limited capacity at our parks that reopened starting in June. The decrease in revenue was also attributable to a decrease in sponsorship, international agreements and accommodations revenues, due primarily to the termination of our contracts in China and Dubai, reduced revenue from sponsorships and the suspension of nearly all of our accommodations operations.

Total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, for the nine months ended September 30, 2020 increased $6.27 to $49.13 compared to the prior period due to a $5.90, or 23%, increase in admissions revenue per capita and a $0.37, or 2%, increase in non-admissions revenue per capita. The improvement in admissions spending per capita for the first nine months of 2020 was primarily due to recurring monthly membership revenue from members who retained their memberships on a monthly basis following the initial 12-month commitment period. Higher guest spending per capita by single-day guests also contributed to the improvement. The increase in non-admissions revenue per capita in the first nine months of 2020 due to recurring monthly all season membership products, such as the all season dining pass, from members who retained their memberships on a monthly basis following the initial 12-month commitment period and the increase in single-day attendance mix. These increases were offset by attendance at our drive-through Safari, which offers limited in-park spending opportunities.

Operating expenses

Operating expenses for the nine months ended September 30, 2020 decreased $200.3 million, or 42%, compared to the same period in the prior year, primarily as a result of fewer operating days and the cost mitigation measures put in place in response to the COVID-19 pandemic, including a 25% reduction in full-time salaries and wages for the full-time employees and the elimination of nearly all seasonal labor costs at our parks that remained closed. These reductions continue at our parks that remain closed. Also, there were additional savings in utilities and other costs related to nine of

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our parks that remained closed and reduced operating hours at our reopened parks. These savings were partially offset by the increased costs related to enhanced sanitization and additional preventative measures to help minimize the spread of COVID-19 and an increase in reserves associated with several legal claims.

Selling, general and administrative expenses

Selling, general and administrative expenses for the nine months ended September 30, 2020 decreased $40.4 million, or 26%, compared to the same period in the prior year, driven by a reduction in advertising expense and salary, wage and benefit expense, including the reduction in executive officer salaries and the salaries of certain other corporate employees driven by the cost reduction measures put in place in response to the COVID-19 pandemic.

Cost of products sold

Cost of products sold in the nine months ended September 30, 2020 decreased $84.3 million, or 79%, compared to the same period in the prior year, primarily as a result of reduced sales of food and merchandise due to the temporary suspension of park operations at many of our parks and reduced attendance at our parks that were operating in response to the COVID-19 pandemic.

Depreciation and amortization expense

Depreciation and amortization expense for the nine months ended September 30, 2020, decreased $0.2 million compared to the same period in the prior year. The decrease in depreciation and amortization expense is primarily the result of asset retirements, partially offset by asset additions made in conjunction with our ongoing capital program.

Loss on disposal of assets

Loss on disposal of assets for the nine months ended September 30, 2020 increased $7.4 million compared to the same period in the prior year. The increase was primarily driven by the write-off of assets in conjunction with our transformation initiative.

Interest expense, net

Interest expense, net increased $30.3 million, or 35%, for the nine months ended September 30, 2020, compared to the same period in the prior year, primarily as a result of increased interest expense related to the 2025 Notes issued in April 2020 and the de-designation of the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement, which resulted in a $14.9 million reclassification from accumulated other comprehensive income to interest expense in the unaudited condensed consolidated statement of operations for the period ended September 30, 2020. For a more detailed description of our interest rate swap agreements, see Note 5 to the unaudited condensed consolidated financial statements included in this Quarterly Report. These increases were partially offset by lower borrowings under the Second Amended and Restated Revolving Loan and the Second Amended and Restated Term Loan B and the interest savings related to the $50.5 million of the outstanding 2024 Notes principal prepaid in March 2020.

Other expense (income), net

Other expense (income), net for the nine months ended September 30, 2020 increased $20.8 million compared to the same period in the prior year. The increase was primarily driven by costs associated with our transformation initiative.

Income tax (benefit) expense

Income tax benefit for the nine months ended September 30, 2020 was $114.0 million. In the same period in the prior year, we recorded a tax expense of $70.6 million. The difference in income tax (benefit) expense is driven by our loss before income taxes for 2020 related to the COVID-19 pandemic.

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Liquidity, Capital Commitments and Resources

On an annual basis, our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash typically include working capital obligations, the funding of common stock dividends, investments in parks (including capital projects), debt service, payments to our partners in the Partnership Parks and common stock repurchases. Our principal uses of cash also include the cash operating expenses and selling, general and administrative expenses that are typically less than revenues. To enhance our liquidity in response to the temporary suspension of park operations due to the COVID-19 pandemic, we have taken proactive steps to decrease capital spending for calendar year 2020, including deferring or eliminating at least $50 to $60 million of discretionary capital projects planned for 2020.

Prior to the temporary suspension of park operations on March 13, 2020 due to the COVID-19 pandemic, Holdings announced a quarterly cash dividend of $0.25 per share of common stock, representing a 70% reduction from the dividend declared in February 2019. Holdings did not declare a dividend during the three months ended September 30, 2020 compared to an $0.82 dividend declared in the three months ended September 30, 2019. During the nine months ended September 30, 2020, and September 30, 2019, Holdings paid $22.5 million and $208.7 million, respectively, in cash dividends on its common stock.

As of October 23, 2020, Holdings has repurchased 4,607,000 shares of common stock at a cumulative cost of approximately $268.3 million and an average cost per share of $58.25 under its previously approved stock repurchase program, leaving approximately $231.7 million available for permitted repurchases. Pursuant to amendments to the Second Amended and Restated Credit Facility, we agreed to temporarily suspend the payment of dividends and the repurchase of common stock.

Based on historical and anticipated operating results, including the negative impact of the reduced capacity at our parks that are operating and the continued temporary suspension of operations in response to COVID-19 at nine of our parks, we believe available cash and amounts available under the Second Amended and Restated Credit Facility will be adequate to meet our liquidity needs through 2021 even if our open parks are required to close. Our cash needs would include any anticipated requirements for working capital, capital expenditures, scheduled debt service and obligations under arrangements relating to the Partnership Parks.

On April 8, 2020, we announced that we increased the Second Amended and Restated Revolving Loan by $131.0 million, increasing the facility from $350.0 million to $481.0 million. On April 22, 2020, we announced that SFTP issued $725.0 million in aggregate principal amount of 7.00% senior secured notes (the “2025 Notes”) in a private offering, a portion of which was used to repay $315.0 million of the Second Amended and Restated Term Loan B. Based on our current federal net operating loss carryforwards and reduced operations due to the COVID-19 pandemic, we anticipate paying minimal federal income taxes in 2020 and do not anticipate becoming a full cash taxpayer until 2024. During the years 2021 through 2024, we have significant federal operating loss carryforwards that will offset the majority of our taxable income.

On April 22, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility that suspended testing of the senior secured leverage ratio financial maintenance covenant through the end of 2020 and modified testing of the senior secured leverage ratio financial maintenance covenant through December 31, 2021. The amendment also added a minimum liquidity covenant.

On August 26, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility which, among other things, (i) extended the previously effectuated suspension of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2021, (ii) re-established the senior secured leverage ratio financial maintenance covenant thereafter (provided that for each quarter in 2022 (other than the fourth quarter) that the financial maintenance covenant is tested, SFTP will be permitted to use its quarterly Borrower Consolidated Adjusted EBITDA (as defined in the credit agreement governing the Second Amended and Restated Credit Facility) from the second, third, and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2021), (iii) reduced the commitment fee on the revolving credit facility, and (iv) extended the minimum liquidity covenant that will apply through December 31, 2022. The extension of the modifications to the financial covenant and other provisions in the Second Amended and Restated Credit Facility

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pursuant to this amendment will be in effect from the date of the amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the financial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the 2019 figures as outlined above. In addition, all of SFTP’s existing incremental revolving credit lenders agreed to extend the incremental $131 million revolving credit commitments to the Second Amended and Restated Revolving Loan by one year to December 31, 2022.

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. An extended suspension of operations of our closed parks or significant capacity restrictions on or additional closures of our reopened parks, due to the COVID-19 pandemic or otherwise, would materially and adversely impact our liquidity positions. 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 or COVID-19; accidents or the occurrence of an event or condition at our parks, including terrorist acts or threats inside or outside of our parks; negative publicity; or significant local competitive events, which could significantly reduce paid attendance and revenue related to that attendance at any of our parks. While we work with local police authorities on security-related precautions to prevent certain types of disturbances, we can make no assurance that these precautions will be able to prevent these types of occurrences. However, we believe our ownership of many parks in different geographic locations reduces the effects of adverse weather and these other types of occurrences on our consolidated results. If such an adverse event were to occur, we may be unable to borrow under the Second Amended and Restated Revolving Loan or may be required to repay amounts outstanding under the Second Amended and Restated Credit Facility and/or may need to seek additional financing. In addition, we expect we may be required to refinance all or a significant portion of our existing debt on or prior to maturity, requiring us to potentially seek additional financing. The degree to which we are leveraged could adversely affect our ability to obtain any additional financing. See "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" in the 2019 Annual Report and in this Quarterly Report.

As of September 30, 2020, our total indebtedness, net of discount and deferred financing costs, was approximately $2,620.9 million. Based on (i) non-revolving credit debt outstanding on that date, (ii) anticipated levels of working capital revolving borrowings during 2020 and 2021, (iii) estimated interest rates for floating-rate debt, and (iv) the 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes, we anticipate annual cash interest payments of approximately $105 million and $165 million during 2020 and 2021, respectively.

As of September 30, 2020, we had approximately $213.9 million of unrestricted cash and $459.3 million available for borrowing under the Second Amended and Restated Revolving Loan. Our ability to borrow under the Second Amended and Restated Revolving Loan depends on our compliance with certain conditions, including a minimum liquidity covenant, and the absence of any material adverse change in our business or financial condition. If we are unable to borrow under the Second Amended and Restated Revolving Loan, and we failed significantly to meet our projected results from operations, we might be unable to pay in full our off-season obligations. A default under the Second Amended and Restated Revolving Loan could permit the lenders under the Second Amended and Restated Credit Facility to accelerate the obligations thereunder. The terms and availability of the Second Amended and Restated Credit Facility and other indebtedness are not affected by changes in the ratings issued by rating agencies in respect of our indebtedness. For a more detailed description of our indebtedness, see Note 3 to the unaudited condensed consolidated financial statements included in this Quarterly Report.

We regularly make capital investments for new rides and attractions in our parks to (i) enhance our food, retail, games and other in-park areas, (ii) enhance the theming and landscaping of our parks in order to provide a more complete family-oriented entertainment experience and (iii) attain operational efficiencies through our information technology infrastructure. In addition, we perform maintenance capital projects on an annual basis with most expenditures made during the off-season, although we have recently taken steps to reduce capital expenditures for calendar year 2020 including deferring or eliminating at least $50 to $60 million of discretionary capital projects planned for 2020 in response to the COVID-19 pandemic. Repairs and maintenance costs for materials and services associated with maintaining assets, such as painting and inspecting existing rides, are expensed as incurred and are not included in capital expenditures.

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During the nine months ended September 30, 2020, net cash used in operating activities was $154.0 million, compared to net cash provided by operating activities of $340.9 million in the prior year period. The significant decrease in net cash provided by operating activities was due to the decrease in operations during 2020 attributable to COVID-19. Net cash used in investing activities during the nine months ended September 30, 2020 and September 30, 2019 was $90.4 million and $122.0 million, respectively, consisting primarily of capital expenditures, net of property insurance recoveries. The decrease is attributable to the reduction in spending on capital expenditures due to COVID-19. Net cash provided by financing activities during the nine months ended September 30, 2020 was $288.5 million and was primarily due to the issuance of the 2025 Notes, partially offset by the $315.0 repayment of the Second Amended and Restated Term Loan B, the $50.5 million of the outstanding 2024 Notes principal we prepaid in March 2020, and the payment of $22.5 million in cash dividends. Net cash used in financing activities during the nine months ended September 30, 2019 was $51.9 million and was mostly attributable to our repayment of the Amended and Restated Credit Facility, entering into the Second Amended and Restated Credit Facility, and the payment of $208.7 million in cash dividends.

Our business is both seasonal in nature and involves significant levels of cash transactions. Most of our cash-based expenses are relatively fixed when our parks are operating and do not vary significantly with either attendance or per capita spending. As a result, our net operating cash flows are largely driven by attendance and per capita spending levels. These cash-based operating expenses include salaries and wages, employee benefits, advertising, third party services, repairs and maintenance, utilities and insurance. While our parks were temporarily closed due to the COVID-19 pandemic, we reduced a significant portion of these expenses including eliminating the majority of our seasonal labor and advertising expense. These cost-saving measures remain in effect with respect to parks that continue to be temporarily closed.

Contractual Obligations

Since December 31, 2019, there have been no material changes to the contractual obligations of the Company outside of the ordinary course of the Company’s business except for a reduction in the principal of long-term debt and the interest related to the prepayment of $50.5 million on the 2024 Notes in March 2020, and the issuance and interest payments related to 2025 Notes in April 2020. Set forth below is certain updated information regarding our debt obligations as of September 30, 2020.

	Payment Due by Period
(Amounts in thousands)	2020		2021 - 2022		2023 - 2024		2025 and beyond		Total
Long-term debt including current portion (2024 Notes) (1)	$	—	$	—	$	949,490	$	—	$	949,490
Interest on 2024 Notes (1)		23,445		92,528		92,527		—		208,500
Long-term debt including current portion (2025 Notes) (1)		—		—		—		725,000		725,000
Interest on 2025 Notes (1)		—		111,227		101,500		50,750		263,477

⁽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 September 30, 2020, there were no material changes in our market risk exposure from that disclosed in the 2019 Annual Report, except as it relates to our derivative financial instruments. See Note 5 to the condensed consolidated financial statements included elsewhere in this report for further discussion. For a discussion of our market risk exposure, please see "Item 7A. Quantitative and Qualitative Disclosure About Market Risk" contained in the 2019 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 September 30, 2020, 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

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to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting, as such term is defined under Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, that occurred during our fiscal quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

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

Certain legal proceedings in which we are involved are discussed in Item 3 of the 2019 Annual Report, and in Note 6 to the unaudited condensed consolidated financial statements contained in this Quarterly Report. Except as set forth below, there were no material developments concerning our legal proceedings during the quarter ended September 30, 2020.

Privacy Class Action Lawsuits

During 2017, four putative class action complaints were filed against Holdings or one of its subsidiaries. Complaints were filed on August 11, 2017, in the Circuit Court of Lake County, Illinois; on September 1, 2017, in the United States District Court for the Northern District of Georgia; on September 11, 2017, in the Superior Court of Los Angeles County, California; and on November 30, 2017, in the Superior Court of Ocean County, New Jersey. The complaints allege that we, in violation of federal law, printed more than the last five digits of a credit or debit card number on customers’ receipts and/or the expiration dates of those cards. A willful violation may subject a company to liability for actual damages or statutory damages between $100 and $1,000 per person, punitive damages in an amount determined by a court and reasonable attorneys’ fees, all of which are sought by the plaintiffs. The complaints do not allege that any information was misused. The Circuit Court in Illinois granted our motion to dismiss on November 2, 2018, but the matter was reversed on appeal on January 22, 2020. The Illinois Supreme Court has granted review, but briefing was stayed so that the parties could engage in settlement discussions.  The District Court for the Northern District of Georgia denied our motion to dismiss on May 6, 2019, but on December 31, 2019, the matter was stayed and administratively closed on our motion based on the Eleventh Circuit’s review of an order denying dismissal in a case involving substantially similar factual allegations and statutory violations. Either side may move to reopen the Georgia case within 30 days of the issuance of the Eleventh Circuit’s opinion in the other matter.  Our demurrer in the California matter was overruled on February 26, 2019, but the order contained certain favorable rulings that enabled us to file a motion for summary judgment on December 12, 2019. That motion is stayed as the parties explore settlement. The Superior Court in the New Jersey matter granted our motion to dismiss on January 18, 2019, which ruling the plaintiff has appealed, and the matter is stayed pending the outcome of settlement discussions. On October 20, 2020, the parties entered into a settlement agreement to resolve the lawsuits, for an immaterial amount, which is subject to preliminary and final approval by the court.

Securities Class Action Lawsuits

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

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litigation”), and an amended complaint was filed on March 20, 2020. On May 8, 2020, Oklahoma Firefighters Pension and Retirement System 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 partner, Riverside Investment Group Co. Ltd., in violation of the federal securities laws. The consolidated complaint seeks 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. We believe that these lawsuits are without merit and intend to defend this litigation vigorously. However, there can be no assurance regarding the ultimate outcome of the lawsuit.

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 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 court granted the plaintiffs’ motion to consolidate. The consolidated action is captioned In re Six Flags Entertainment Corporation 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 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 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. We believe that these complaints are without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of these lawsuits.

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, against certain of its 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 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 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 court granted the

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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 District on behalf of putative stockholder Mr. Cliff Bragdon in an action captioned Bragdon v. Reid-Anderson, et al., Case No. DC-20-08180 (298th Dist. Ct., Dallas Cty., Tex.) (the “Bragdon action”). On July 10, 2020, the 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 resolution of the motion to dismiss the Electrical Workers litigation. The consolidated state derivative action is 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. We believe that these complaints are without merit and intend to defend these lawsuits vigorously. However, there can be no assurance regarding the ultimate outcome of these lawsuits.

COVID-19 Park Closure Lawsuits

Since COVID-19 began affecting the operations of our parks in mid-March 2020, three similar purported class action complaints were filed against Holdings or one of its subsidiaries in the United States District Court for the Central District of California on April 10, 2020, April 13, 2020, and April 21, 2020. These complaints allege that we, in violation of California law, charged members and season passholders while the parks were closed and did not provide refunds for the amounts charged. The complaints seek compensatory damages, punitive damages, restitution, and unspecified injunctive relief. On September 9, 2020, the parties agreed to a settlement in principle to resolve the lawsuits, for an immaterial amount, which is subject to preliminary and final approval by the court.

ITEM 1A. RISK FACTORS

In “Item 1A. Risk Factors” in Part I of the 2019 Annual Report, we described the principal risks that we believe are material to our business, results of operations and financial condition that could affect our business. Except as set forth below, as of the date of this Quarterly Report on Form 10-Q there have been no material changes to the risk factors described in the 2019 Annual Report. Any of the risks identified in the 2019 Annual Report, in this Quarterly Report on Form 10-Q or in other reports we file with the SEC, and other risks we have not anticipated or discussed, could have a material adverse effect on our business, financial condition or results of operations.

The COVID-19 pandemic has disrupted our business and will continue to adversely affect our results of operations, liquidity, cash flows and financial condition.

In response to the global COVID-19 pandemic, federal, state and local governments have implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. These actions, in addition to concerns relating to the public health impacts of the virus, have prevented us and our employees, contractors, suppliers, and other business partners from conducting business activities at full capacity, have led to the temporary cessation of certain business activities altogether, and may continue to have an adverse impact on our business for an unknown period of time. Ongoing concern regarding the virus and its evolving impact, as well as containment actions imposed in response to the pandemic, have had, and will likely continue to have a negative effect on economies and financial markets. Future developments relating to the virus, including severity, rate of transmission, mutations, treatment and availability of a vaccine, are uncertain and difficult to predict. As a result, the extent and duration of the impacts over the longer term on our business of the COVID-19 pandemic and the measures implemented in response to the COVID-19 pandemic remain largely uncertain and cannot be accurately predicted at this time.

In accordance with government guidelines concerning the COVID-19 pandemic, we temporarily suspended operations at all of our theme parks and waterparks in March 2020. During the period of suspended operations, we experienced a significant decrease in revenues. We also implemented a number of mitigation efforts, including eliminating seasonal labor costs, effecting salary and wage reductions for our executives and employees, increasing the available borrowings under our credit facilities, issuing senior secured notes to repay certain short-term borrowings and for working capital purposes, deferring or eliminating certain discretionary capital projects, and developing incentives to

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maintain monthly membership commitments. These efforts may not be sufficient, however, to counteract the adverse impact the COVID-19 pandemic has had and may continue to have on our revenues or prevent any further adverse impact, and some of our mitigating actions may have an adverse impact on our business. In addition, the effect of COVID-19 on capital markets could impact our cost of borrowing or result in reduced or delayed capital expenditures and the impairment of certain of our assets and could adversely affect our strategic plans. Even as we reopen our closed parks, the COVID-19 pandemic could continue to have a significant adverse impact on our business including future park closures and additional costs, such as the costs associated with reopening and restarting business activities, and costs to implement or enhance health and safety measures. We could also suffer damage to our reputation as a result of an outbreak of COVID-19 at one of our properties or if our response is inappropriate or is perceived by our guests or other stakeholders to be inappropriate, which could significantly and adversely affect our business, results of operations, liquidity, cash flows and financial condition.

While governmental authorities have begun to ease restrictions, increased COVID-19 case numbers or other developments relating to the COVID-19 pandemic may result in the implementation of additional government measures, orders and mandates in some or all of the states and regions in which we operate, such as orders requiring park closures or further restrictions on travel or public gatherings. Any of these measures could further disrupt, or exacerbate the current impact of the COVID-19 pandemic on, our business, results of operations, liquidity, cash flows and financial condition. In addition, in light of certain future developments, we may determine that a voluntary temporary closure of certain properties or portions thereof is in the best interest of our guests, employees and reputation. If any of the recent disruptions to our business are prolonged or extended, or if future developments require subsequent disruptive measures to be implemented, our business, financial condition, results of operations and reputation may be materially and adversely affected.

The COVID-19 pandemic has also significantly increased economic uncertainty. The demand for parks, entertainment, recreation activities and discretionary travel is highly sensitive to downturns in the economy and the corresponding impact on discretionary consumer spending. Any actual or perceived deterioration or weakness in general, regional or local economic conditions, unemployment levels, the job or housing markets, consumer debt levels or consumer confidence, as well as other adverse economic or market conditions due to COVID-19 or otherwise, may reduce our customers’ discretionary income to spend on parks, entertainment, recreation activities and travel. In addition, the COVID-19 pandemic could have longer-term impacts on consumer tastes and preferences and could shift consumer entertainment and recreation behaviors toward digital entertainment experiences and other off-premises experiences and technologies. As a result, attendance, revenue and per capita spending at our theme parks and waterparks could be adversely affected, which could materially adversely affect our business, results of operations, liquidity, cash flows, financial condition, and prospects.

There are no comparable recent events that provide guidance as to the general effects the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. In addition, the extent and duration of such impacts over the longer term depend on numerous factors and future developments that vary by market and cannot be accurately predicted at this time. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. The effects could, however, have a material impact on our results, operations, financial conditions and liquidity and heighten many of our known risks described in “Item 1A. Risk Factors” contained in the 2019 Annual Report and in this Quarterly Report.

We have agreed to temporarily suspend payment of dividends in connection with amendments to our revolving credit facility.

In connection with the amendment to the Second Amended and Restated Credit Facility in August 2020, we agreed to extend the suspension of the repurchase of Holdings’ common stock and payment of dividends until the earlier December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million. However, given the present uncertainty associated with the ultimate impact of COVID-19 on our business and operations, we may determine that it is prudent to continue suspending payment of dividends after the restrictions under the Second Amended and Restated Credit Facility are terminated depending on any then-existing limitations on our working capital.

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Our growth strategy and strategic plan may not achieve the anticipated results.

Our future success depends on our ability to grow, evolve and adapt our business, including through capital investments to improve existing parks, rides, attractions and other entertainment offerings, technological advancements and improvements to enhance the guest experience and to increase productivity, as well as through our culinary and retail offerings. Our business strategy for growth may also include selective expansion, both domestically and internationally, through acquisitions of assets or other strategic initiatives, such as international agreements, joint ventures and partnerships that allow us to profitably expand our business and leverage our brand.

Our growth and innovation strategies, including our transformation initiative, require significant commitments of management resources and capital investments and may not enhance guest experiences or increase productivity as planned, may not increase our revenues at the rate we expect or at all, and may require the expenditure of capital resources in excess of what we originally budgeted and allocated for such purposes. Our business strategy for growth also requires that the other parties to our international agreements, joint ventures and partnerships perform their obligations. In addition, the success of any acquisitions depends on the effective integration of acquired businesses and assets into our operations, which is subject to risks and uncertainties, including realization of anticipated synergies and cost savings, the ability to retain and attract personnel, the diversion of management’s attention from other business concerns, and undisclosed or potential legal liabilities of acquired businesses or assets. As a result, we may not be able to recover the costs incurred in developing our new projects and initiatives or to realize their intended or projected benefits, which could materially adversely affect our business, financial condition or results of operations. For example, we had previously established, but did not achieve, our long-term aspirational goal to achieve Modified EBITDA of $600 million by 2017 and we believe that on-time or late achievement of our 2020 Performance Award (Project 750) is not reasonably attainable.

Our strategy to grow our business by attracting guests through innovation and enhancement to the guest experience may not be successful. If we are unable to achieve our strategic objectives and grow our business, our financial condition and results of operations may be adversely affected.

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

On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of October 23, 2020, Holdings had repurchased 4,607,000 shares at a cumulative cost of approximately $268.3 million and an average cost per share of $58.25 under the March 2017 Stock Repurchase Plan, leaving approximately $231.7 million available for permitted repurchases.

In connection with the recent amendments to the Second Amended and Restated Credit Facility, we agreed to suspend the repurchase of Holdings’ common stock and payment of dividends until the earlier of December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million.

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ITEM 6.   EXHIBITS

Exhibit 3.1	Restated Certificate of Incorporation, as amended—incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q (File No. 001-13703) filed on April 30, 2020
Exhibit 3.2	Amended and Restated Bylaws of Six Flags Entertainment Corporation—incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K (File No. 001-13703) filed on February 7, 2018
Exhibit 10.1	Third Amendment to Second Amended and Restated Credit Agreement, dated as of August 26, 2020, among Six Flags Entertainment Corporation, Six Flags Operations Inc., Six Flags Theme Parks Inc., the other subsidiary guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent and the other lenders party thereto─incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 001-13703) filed on August 26, 2020
Exhibit 10.2	Amended and Restated Employment Agreement, dated as of July 23, 2020, by and between Laura Doerre and Six Flags Entertainment Corporation─incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 001-13703) filed on August 27, 2020
Exhibit 31.1*	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2*	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1*	Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2*	Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101*	The following financial statements and footnotes from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 formatted in Inline XBRL: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Deficit, (v) the Unaudited Condensed Statements of Cash Flow, and (vi) related Notes to the Condensed Consolidated Financial Statements
Exhibit 104*	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL

*     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.

		SIX FLAGS ENTERTAINMENT CORPORATION
		(Registrant)
Date:	October 28, 2020	/s/ Michael Spanos
		Michael Spanos
		President and Chief Executive Officer
Date:	October 28, 2020	/s/ Sandeep Reddy
		Sandeep Reddy
		Executive Vice President and Chief Financial Officer

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