UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
for the quarterly period ended
for the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
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).
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.
| 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At May 9, 2022, Six Flags Entertainment Corporation had
SIX FLAGS ENTERTAINMENT CORPORATION
FORM 10-Q
INDEX
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Quarterly Report") and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that are not historical facts and can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "may," "should," "could" and variations of such words or similar expressions. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include (i) global coronavirus (“COVID-19”) pandemic-related business disruptions and economic uncertainty, (ii) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, (iii) our expectations regardig the timing, costs, benefits and results of our strategic plan, (iv) our ability to implement our capital plans in a timely and cost effective manner, and our expectations regarding the anticipated costs, benefits and results of such capital plans, (v) the extent to which having parks in diverse geographical locations protects our consolidated results against the effects of adverse weather and other events, (vi) our ongoing compliance with laws and regulations, and the effect of, and cost and timing of compliance with, newly enacted laws and regulations, (vii) our ability to obtain additional financing, (viii) our expectations regarding future interest payments, (ix) our expectations regarding the effect of certain accounting pronouncements, (x) our expectations regarding the cost or outcome of any litigation or other disputes, (xi) our annual income tax liability and the availability and effect of net operating loss carryforwards and other tax benefits, and (xii) our expectations regarding uncertain tax positions.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are, by their nature, subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Additional risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements include, among others, the following:
• | factors impacting attendance, such as local conditions, contagious diseases, including COVID-19, 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 the COVID-19 pandemic, 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); |
• | global economic and political instability and conflicts, such as the conflict between Russia and Ukraine; |
• | recall of food, toys and other retail products sold at our parks; |
• | accidents or incidents involving the safety of guests and employees, or contagious disease outbreaks at our parks or other parks in our industry, and negative publicity about us or our industry; |
• | availability of commercially reasonable insurance policies at reasonable rates; |
• | inability to achieve desired improvements and financial performance targets; |
• | adverse weather conditions, such as excess heat or cold, rain and storms; |
• | general financial and credit market conditions, including our ability to access credit or raise capital; |
• | economic conditions (including customer spending patterns); |
• | changes in public and consumer tastes; |
• | competition with other theme parks and entertainment alternatives; |
• | dependence on a seasonal workforce; |
• | unionization activities and labor disputes; |
• | laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, 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 |
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• | other factors or uncertainties described in "Item 1A. Risk Factors" set forth in our Annual Report on Form 10-K for the year ended January 2, 2022 (the "2021 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 can provide no assurance that such expectations will be realized, and actual results could vary materially. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation, except as required by applicable law, to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Additionally, the continued impact of COVID-19, virus variants, and the rate of vaccinations could heighten many of the risk factors described herein.
Available Information
Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge through our website at investors.sixflags.com. References to our website in this Quarterly Report are provided as a convenience and do not constitute an incorporation by reference of the information contained on, or accessible through, the website. Therefore, such information should not be considered part of this Quarterly Report. These reports, and any amendments to these reports, are made available on our website as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the United States Securities and Exchange Commission (the "SEC"). Copies are also available, without charge, by sending a written request to Six Flags Entertainment Corporation, 1000 Ballpark Way Suite 400, Arlington, TX 76011, Attn: Investor Relations.
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As used herein, unless the context requires otherwise, the terms "we," "our," "Company" and "Six Flags" refer collectively to Six Flags Entertainment Corporation and its consolidated subsidiaries, and "Holdings" refers only to Six Flags Entertainment Corporation, without regard to its consolidated subsidiaries.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| As of | ||||||||
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| January 2, 2022 |
| April 4, 2021 | ||||
(Amounts in thousands, except share data) | (unaudited) | (unaudited) | |||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | $ | | |||
Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net: |
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Property and equipment, at cost |
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Accumulated depreciation |
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Total property and equipment, net |
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Other assets: |
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Right-of-use operating leases, net | | | | ||||||
Debt issuance costs |
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Deposits and other assets |
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Goodwill |
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Intangible assets, net of accumulated amortization of $ |
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Total other assets |
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Total assets | $ | | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
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Accounts payable | $ | | $ | | $ | | |||
Accrued compensation, payroll taxes and benefits |
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Accrued insurance reserves |
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Accrued interest payable |
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Other accrued liabilities |
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Deferred revenue |
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Short-term lease liabilities | | | | ||||||
Total current liabilities |
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Noncurrent liabilities: |
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Long-term debt |
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Other long-term liabilities |
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Deferred income taxes |
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Total noncurrent liabilities |
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Total liabilities |
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Redeemable noncontrolling interests |
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Stockholders' deficit: |
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Preferred stock, $ |
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Common stock, $ |
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Capital in excess of par value |
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Accumulated deficit |
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Accumulated other comprehensive loss, net of tax |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit | $ | | $ | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
3
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | |||||
(Amounts in thousands, except per share data) |
| April 3, 2022 |
| April 4, 2021 | ||
Park admissions | $ | | $ | | ||
Park food, merchandise and other |
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Sponsorship, international agreements and accommodations |
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Total revenues |
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Operating expenses (excluding depreciation and amortization shown separately below) |
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Selling, general and administrative expenses (including stock-based compensation of $ |
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Costs of products sold |
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Other net periodic pension benefit |
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Depreciation |
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Amortization |
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(Gain) loss on disposal of assets |
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Interest expense |
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Interest income |
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Other expense, net |
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Loss before income taxes |
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Income tax benefit |
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Net loss | $ | ( | $ | ( | ||
Weighted-average common shares outstanding - basic and diluted: |
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Net loss per average common share outstanding - basic and diluted: | ( | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
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SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| Three Months Ended | |||||
(Amounts in thousands) |
| April 3, 2022 |
| April 4, 2021 | ||
Net loss | $ | ( | $ | ( | ||
Other comprehensive (loss) income, net of tax: |
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Foreign currency translation adjustment (1) |
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Defined benefit retirement plan (2) |
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Change in cash flow hedging (3) |
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Other comprehensive income, net of tax |
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Comprehensive loss | $ | ( | $ | ( |
(1)
(2)
(3)
See accompanying notes to unaudited condensed consolidated financial statements.
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SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
Accumulated | |||||||||||||||||
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| other |
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Common stock | excess of | Accumulated | comprehensive | stockholders' | |||||||||||||
(Amounts in thousands, except share data) |
| Shares issued |
| Amount |
| par value |
| deficit |
| loss |
| deficit | |||||
Balances at December 31, 2020 |
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Issuance of common stock |
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Stock-based compensation |
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Employee stock purchase plan | ( | — | ( | — | — | ( | |||||||||||
Net loss attributable to Six Flags Entertainment Corporation |
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Net other comprehensive loss, net of tax |
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Balances at April 4, 2021 |
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Accumulated | |||||||||||||||||
Capital in | other | Total | |||||||||||||||
Common stock | excess of | Accumulated | comprehensive | stockholders' | |||||||||||||
(Amounts in thousands, except share data) |
| Shares issued |
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| par value |
| deficit |
| loss |
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Balances at January 2, 2022 | | $ | | $ | | $ | ( | $ | ( | $ | ( | ||||||
Issuance of common stock | | | | — | — | | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Payment of tax withholdings on equity-based compensation through shares withheld | ( | — | ( | — | — | ( | |||||||||||
Net loss attributable to Six Flags Entertainment Corporation | — | — | — | ( | — | ( | |||||||||||
Net other comprehensive income, net of tax | — | — | — | — | | | |||||||||||
Balances at April 3, 2022 | | $ | | $ | | $ | ( | $ | ( | $ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
6
SIX FLAGS ENTERTAINMENT CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended | |||||
(Amounts in thousands) |
| April 3, 2022 |
| April 4, 2021 | ||
Cash flows from operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Interest accretion on notes payable |
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Loss on debt extinguishment |
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Amortization of debt issuance costs |
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Other, including loss (gain) on disposal of assets |
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Change in accounts receivable |
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Change in inventories, prepaid expenses and other current assets |
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Change in deposits and other assets |
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Change in ROU operating leases | | | ||||
Change in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities |
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Change in operating lease liabilities | | ( | ||||
Change in accrued interest payable |
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Deferred income taxes |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Additions to property and equipment |
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Property insurance recoveries |
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Proceeds from sale of assets |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Repayment of borrowings |
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Proceeds from borrowings |
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Payment of cash dividends |
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Proceeds from issuance of common stock | | | ||||
Reduction in finance lease liability | ( | ( | ||||
Stock repurchases | ( | ( | ||||
Net cash provided by financing activities |
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Effect of exchange rate on cash |
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Net change in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | | ||
Supplemental cash flow information |
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Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes | $ | | $ | |
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. We are the largest regional theme park operator in the world, and we are the largest operator of waterparks in North America based on the number of parks we operate. Of the
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the SEC.
Our current fiscal year will end on January 1, 2023. This Quarterly Report covers the period January 3, 2022 – April 3, 2022 (“the three months ended April 3, 2022”). The comparison period in the prior year covers the dates January 1, 2021 – April 4, 2021 (“the three months ended April 4, 2021”). The additional
The 2021 Annual Report includes additional information about us, our operations and our financial position, and should be referred to in conjunction with this Quarterly Report. The information furnished in this Quarterly Report reflects all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the periods presented.
Results of operations for the three months ended April 3, 2022, are not indicative of the results expected for the full year. Our operations are highly seasonal, with approximately
COVID-19 Pandemic
The COVID-19 pandemic continues to present material uncertainty and risk with respect to our performance and financial results. Significant government and private sector actions have been taken since 2020 and likely will continue to be taken intended to control the spread and mitigate the economic effects of the pandemic. Since early 2021, the availability and administration of vaccines against COVID-19 has increased, and there has been an easing of restrictions on social, business, travel and government activities and functions. On the other hand, infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, and wage rates. The duration and severity of the impact of the COVID-19 pandemic are currently unknown. The pandemic has impacted the Company and could materially impact our financial results in the future.
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.
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b. Income Taxes
We recorded a valuation allowance of $
We classify interest and penalties attributable to income taxes as part of income tax expense. As of April 3, 2022, January 2, 2022 and April 4, 2021, we had
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 April 3, 2022, the fair value of the single reporting unit exceeded our carrying amount. We have
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. As of April 3, 2022, we did not identify any triggering events that would require a full quantitative analysis.
e. Earnings Per Common Share
We incurred a net loss for the three months ended April 3, 2022 and April 4, 2021, therefore, diluted shares outstanding equaled basic shares outstanding for the purposes of determining loss per common share. The computation of diluted earnings per share excluded the effect of
f. Stock Benefit Plans
Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance stock units, performance and cash-settled awards and dividend equivalent rights ("DERs") to select employees, officers, directors and consultants of Holdings and its affiliates.
Periodically, we will grant performance stock units to key employees. These awards vest on attainment of specific objectives most often related to Adjusted EBITDA or recognized revenue over a defined period. During the three months
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ended April 3, 2022, it was determined that our March 8, 2021 grant was probable of achievement at the threshold level and stock compensation expense was recognized totaling $
During the three months ended April 3, 2022 and April 4, 2021, stock-based compensation expense consisted of the following:
| Three Months Ended | |||||
(Amounts in thousands) |
| April 3, 2022 |
| April 4, 2021 | ||
Long-Term Incentive Plan | $ | | $ | | ||
Employee Stock Purchase Plan |
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Total Stock-Based Compensation | $ | | $ | |
During the three months ended April 3, 2022 and April 4, 2021, we paid a nominal amount and $
g. Accounts Receivable, Net
Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products, such as season passes and memberships. 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 April 3, 2022, January 2, 2022 and April 4, 2021, we have recorded an allowance for doubtful accounts of $
h. Recently Adopted Accounting Pronouncements
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. Our adoption of ASU 2018-14 did not have a material impact on our condensed consolidated financial statements and related disclosures.
i. Recent Accounting Pronouncements Not Yet Adopted
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. Interest on the Second Amended and Restated Credit Facility accrues at an annual rate based on LIBOR. We do not expect Update 2020-04 to have a material effect on our condensed consolidated financial statements.
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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 months ended April 3, 2022 and April 4, 2021, respectively. Long-term and short-term contracts consist of our contracts with customers with terms greater than one year and less than or equal to one year, respectively. Sales and usage-based taxes are excluded from revenues.
Three Months Ended April 3, 2022 | ||||||||||||
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Merchandise | Agreements and | |||||||||||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
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Long-term contracts | $ | | $ | | $ | | $ | | ||||
Short-term contracts and other (a) |
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Total revenues | $ | | $ | | $ | | $ | |
Three Months Ended April 4, 2021 | ||||||||||||
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| Agreements and | |||||||||
(Amounts in thousands) |
| Park Admissions |
| and Other |
| Accommodations |
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Long-term contracts | $ | | $ | | $ | | $ | | ||||
Short-term contracts and other (a) |
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Total revenues | $ | | $ | | $ | | $ | |
(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. 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 parks outside of North America. Within our international agreements, we have identified
At January 2, 2022, $
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As of April 3, 2022, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately $
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.
3. Long-Term Indebtedness
Credit Facility
As of April 3, 2022, our credit facility consisted of a $
As of April 3, 2022, January 2, 2022 and April 4, 2021, we had
As of April 3, 2022, January 2, 2022 and April 4, 2021, $
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Swap Agreements. The June 2019 Swap Agreements expire in June 2023. The Second Amended and Restated Term Loan B now consists of only floating rate debt. As of April 3, 2022, the applicable interest rate on the Second Amended and Restated Term Loan B was
2024 Notes, 2025 Notes and 2027 Notes
In June 2016, Holdings issued $
Long-Term Indebtedness Summary
As of April 3, 2022, January 2, 2022 and April 4, 2021, the principal balance of our long-term debt consisted of the following:
| As of | ||||||||
(Amounts in thousands) |
| April 3, 2022 |
| January 2, 2022 |
| April 4, 2021 | |||
Second Amended and Restated Term Loan B |
| $ | |
| $ | |
| $ | |
2024 Notes |
| |
| |
| | |||
2025 Notes | | | | ||||||
2027 Notes |
| |
| |
| | |||
Net discount |
| ( |
| ( |
| ( | |||
Deferred financing costs |
| ( |
| ( |
| ( | |||
Total long-term debt | $ | | $ | | $ | |
Fair-Value of Long-Term Indebtedness
As of April 3, 2022, January 2, 2022 and April 4, 2021, the fair value of our long-term debt was $
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4. Accumulated Other Comprehensive Loss
Changes in the composition of Accumulated Other Comprehensive Loss ("AOCI") during the three months ended April 3, 2022, were as follows:
Accumulated | |||||||||||||||
Cumulative | Other | ||||||||||||||
Translation | Cash Flow | Defined Benefit | Income | Comprehensive | |||||||||||
(Amounts in thousands) |
| Adjustment |
| Hedges |
| Plans |
| Taxes |
| Loss | |||||
Balances at January 2, 2022 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Net current period change |
| ( |
| |
| — |
| ( |
| | |||||
Amounts reclassified from AOCI |
| — |
| |
| |
| ( |
| | |||||
Balances at April 3, 2022 | $ | ( | $ | | $ | ( | $ | ( | $ | ( |
Reclassifications out of AOCI during the three months ended April 3, 2022 and April 4, 2021:
Amount of Reclassification from AOCI | ||||||||
Year Ended | ||||||||
Component of AOCI |
| Location of Reclassification into (Loss) Income |
| April 3, 2022 | April 4, 2021 | |||
Amortization of loss on interest rate hedge | Interest Expense | $ | | $ | | |||
Income tax benefit |
| ( |
| ( | ||||
Net of tax | $ | | $ | | ||||
Amortization of deferred actuarial loss and prior service cost |
| Operating expenses | $ | | $ | | ||
| Income tax expense |
| ( |
| ( | |||
| Net of tax | $ | | $ | | |||
Total reclassifications |
|
| $ | | $ | |
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5. Derivative Financial Instruments
We hold interest rate swap agreements that mitigate the risk of an increase in the LIBOR rate in effect on the Second Amended and Restated Term Loan B. We enter into derivative contracts for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. As such, in conjunction with the repayment of a portion of the Second Amended and Restated Term Loan B in April 2020, certain of our interest rate swap agreements were de-designated as the hedged interest was no longer probable to occur.
Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in “Prepaid expenses and other current assets” and “Other accrued liabilities,” respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in “Deposits and other assets” and “Other long-term liabilities,” respectively.
On March 24, 2022, we terminated the August 2019 Swap Agreements for net cash proceeds of $
Derivative assets recorded at fair value in our condensed consolidated balance sheets as of April 3, 2022, January 2, 2022 and April 4, 2021, respectively, consisted of the following:
Derivative Assets | ||||||||
(Amounts in thousands) | April 3, 2022 |
| January 2, 2022 |
| April 4, 2021 | |||
Derivatives Not Designated as Hedging Instruments | ||||||||
Interest Rate Swap Agreements — other current assets |
| — |
| — |
| | ||
Interest Rate Swap Agreements — other non-current assets | | — | — | |||||
$ | |
| $ | — |
| $ | |
Derivative liabilities recorded at fair value in our condensed consolidated balance sheets as of April 3, 2022, January 2, 2022 and April 4, 2021, respectively, consisted of the following:
Derivative Liabilities | |||||||||
(Amounts in thousands) | April 3, 2022 |
| January 2, 2022 |
| April 4, 2021 | ||||
Derivatives Designated as Cash Flow Hedges | |||||||||
Interest rate swap agreements — other accrued liabilities | $ | — |
| $ | ( |
| $ | ( | |
Interest rate swap agreements — other long-term liabilities | — | ( | ( | ||||||
Derivatives Not Designated as Hedging Instruments | |||||||||
Interest rate swap agreements — other accrued liabilities |
| ( |
| ( |
| ( | |||
Interest rate swap agreements — other long-term liabilities | ( | ( | ( | ||||||
$ | ( |
| $ | ( |
| $ | ( |
Losses before taxes on derivatives not designated as a cash flow hedge of $
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Gains and losses before taxes on derivatives designated as hedging instruments were presented in “Interest expense” in the condensed consolidated statements of operations for the three months ended April 3, 2022 and April 4, 2021:
Gain (Loss) | (Loss) Gain Reclassified from | |||||||||||
Recognized in AOCL | AOCL into Operations | |||||||||||
(Amounts in thousands) |
| 2022 |
| 2021 |
| 2022 | 2021 | |||||
Interest Rate Swap Agreements | $ | |
| $ | |
| $ | ( |
| $ | ( | |
Total |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
As of April 3, 2022, we expect to reclassify net losses of $
6. Commitments and Contingencies
Partnership Parks
We have guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions (including rent) of approximately $
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
We incurred $
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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 April 3, 2022, redeemable noncontrolling interests of the SFOG and SFOT partnerships was $
Insurance
We maintain insurance of the types and in amounts that we believe are commercially reasonable and that are available to businesses in our industry.
The majority of our current insurance policies expire on December 31, 2022. 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
In the normal course of our business, we are involved from time to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, including the matters described below. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether any loss is probable or to estimate the size or range of the possible loss, and accruals for legal matters are when we believe a loss for a particular matter is considered probable and reasonably estimable. However, the outcome of such legal matters is subject to inherent uncertainties and management’s view of these matters may change in the future.
Securities Class Action Lawsuits
In February 2020,
On August 25, 2021, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit from the district court’s decisions granting defendants’ motion to dismiss, denying plaintiffs’ motion to amend or set aside judgment, and denying plaintiffs’ motion for leave to file a supplemental brief. Plaintiffs’ appeal is captioned Oklahoma Firefighters Pension & Ret. Sys. v. Six Flags Ent. Corp., et al., No. 21-10865 (5th Cir.). The appeal is fully briefed and oral argument was held on March 7, 2022.
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.
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Stockholder Derivative Lawsuits
On March 20, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Mr. Mark Schwartz in the U.S. District Court for the Northern District of Texas against certain of its 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,
The consolidated derivative complaint also alleges that a former officer and director sold shares of the Company while allegedly in possession of material non-public information concerning the same. On September 9, 2020, Holdings and the individual defendants filed a motion to dismiss the consolidated complaint. On April 28, 2021, the district court granted defendants’ motion, dismissing the consolidated complaint in its entirety and with prejudice and denying leave to amend. Plaintiffs’ time to appeal the judgment dismissing this action in its entirety and with prejudice and denying leave to amend lapsed in May 2021.
On May 5, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Mr. Richard Francisco in the District Court for Dallas County, Texas, 160th Judicial District, against certain of i