10-Q 1 six-20211003x10q.htm 10-Q
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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 October 3, 2021 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

Graphic

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 22, 2021, Six Flags Entertainment Corporation had 85,983,101 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 October 3, 2021 (unaudited), December 31, 2020 and September 30, 2020 (unaudited)

3

Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended October 3, 2021 and September 30, 2020

4

Condensed Consolidated Statements of Operations (unaudited) for the Nine Months Ended October 3, 2021 and September 30, 2020

5

Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Three Months Ended October 3, 2021 and September 30, 2020

6

Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Nine Months Ended October 3, 2021 and September 30, 2020

7

Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Three Months Ended October 3, 2021 and September 30, 2020

8

Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Nine Months Ended October 3, 2021 and September 30, 2020

9

Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended October 3, 2021 and September 30, 2020

10

Notes to Condensed Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

38

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 6.

Exhibits

39

Signatures

40

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) the operation of our parks in light of the global coronavirus pandemic (“COVID-19”) including actions that may be taken by us, other businesses and governments to address or otherwise mitigate the impact of COVID-19, (ii) the duration and severity of COVID-19, the impact of virus variants, and the rate of vaccinations, (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, (v) our ability to implement our capital plans in a timely and cost effective manner, and our expectations regarding the anticipated costs, benefits and results of such capital plans, (vi) our expectations regarding the timing, costs, benefits and results of our transformation plan, (vii) the extent to which having parks in many geographical locations protects our consolidated results against the effects of adverse weather and other events, (viii) our ongoing compliance with laws and regulations, and the effect of, and cost and timing of compliance with, newly enacted laws and regulations, (ix) our ability to obtain additional financing, (x) our expectations regarding future interest payments, (xi) our expectations regarding the effect of certain accounting pronouncements, (xii) our expectations regarding the cost or outcome of any litigation or other disputes, (xiii) our annual income tax liability and the availability and effect of net operating loss carryforwards and other tax benefits, (xiv) our expectations regarding uncertain tax positions, and (xv) our expectations regarding our deferred revenue growth.

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

1

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, 2020 (the "2020 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.

*             *             *             *             *

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

    

October 3, 2021

    

December 31, 2020

    

September 30, 2020

(Amounts in thousands, except share data)

(unaudited)

(unaudited)

ASSETS

 

  

 

  

 

  

Current assets:

 

  

 

  

 

  

Cash and cash equivalents

$

389,857

$

157,760

$

213,907

Accounts receivable, net

 

137,575

 

36,610

 

48,500

Inventories

 

28,996

 

39,191

 

43,892

Prepaid expenses and other current assets

 

65,715

 

73,179

 

75,266

Total current assets

 

622,143

 

306,740

 

381,565

Property and equipment, net:

 

  

 

  

 

  

Property and equipment, at cost

 

2,454,929

 

2,408,690

 

2,386,409

Accumulated depreciation

 

(1,226,947)

 

(1,157,403)

 

(1,120,776)

Total property and equipment, net

 

1,227,982

 

1,251,287

 

1,265,633

Other assets:

 

  

 

  

 

  

Right-of-use operating leases, net

189,616

196,711

198,061

Debt issuance costs

 

5,433

 

7,034

 

7,568

Deposits and other assets

 

5,949

 

7,103

 

8,324

Goodwill

 

659,618

 

659,618

 

659,618

Intangible assets, net of accumulated amortization of $255, $238 and $24,232 as of October 3, 2021, December 31, 2020 and September 30, 2020, respectively

 

344,193

 

344,198

 

344,203

Total other assets

 

1,204,809

 

1,214,664

 

1,217,774

Total assets

$

3,054,934

$

2,772,691

$

2,864,972

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

  

 

  

 

  

Current liabilities:

 

  

 

  

 

  

Accounts payable

$

60,659

$

26,582

$

36,716

Accrued compensation, payroll taxes and benefits

 

48,543

 

22,031

 

20,348

Accrued insurance reserves

 

29,259

 

31,060

 

31,592

Accrued interest payable

 

33,220

 

60,184

 

44,085

Other accrued liabilities

 

115,552

 

93,369

 

78,249

Deferred revenue

 

224,083

 

205,125

 

198,563

Short-term lease liabilities

11,004

14,054

18,803

Total current liabilities

 

522,320

 

452,405

 

428,356

Noncurrent liabilities:

 

  

 

  

 

  

Long-term debt

 

2,627,803

 

2,622,641

 

2,620,920

Long-term lease liabilities

176,670

187,432

183,065

Other long-term liabilities

 

29,705

 

43,553

 

39,688

Deferred income taxes

 

150,531

 

101,831

 

125,628

Total noncurrent liabilities

 

2,984,709

 

2,955,457

 

2,969,301

Total liabilities

 

3,507,029

 

3,407,862

 

3,397,657

Redeemable noncontrolling interests

 

542,950

 

523,376

 

544,020

Stockholders' deficit:

 

  

 

  

 

  

Preferred stock, $1.00 par value

 

 

 

Common stock, $0.025 par value, 280,000,000 shares authorized; 85,981,788, 85,075,901 and 84,950,618 shares issued and outstanding at October 3, 2021, December 31, 2020 and September 30, 2020, respectively

 

2,149

 

2,126

 

2,124

Capital in excess of par value

 

1,118,353

 

1,089,199

 

1,086,221

Accumulated deficit

 

(2,021,252)

 

(2,153,368)

 

(2,067,600)

Accumulated other comprehensive loss, net of tax

 

(94,295)

 

(96,504)

 

(97,450)

Total stockholders' deficit

 

(995,045)

 

(1,158,547)

 

(1,076,705)

Total liabilities and stockholders' deficit

$

3,054,934

$

2,772,691

$

2,864,972

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)

October 3, 2021

    

September 30, 2020

Park admissions

$

345,217

$

72,920

Park food, merchandise and other

 

280,499

 

49,342

Sponsorship, international agreements and accommodations

 

12,568

 

4,065

Total revenues

 

638,284

 

126,327

Operating expenses (excluding depreciation and amortization shown separately below)

 

228,119

 

113,833

Selling, general and administrative expenses (including stock-based compensation of $7,876 and $7,907 in 2021 and 2020, respectively, and excluding depreciation and amortization shown separately below)

 

64,356

 

41,568

Costs of products sold

 

54,100

 

12,980

Other net periodic pension benefit

 

(76)

 

(995)

Depreciation

 

28,047

 

28,780

Amortization

 

6

 

5

Loss on disposal of assets

 

624

 

10,065

Interest expense

 

38,224

 

38,500

Interest income

 

(129)

 

(108)

Other expense, net

 

346

 

13,470

Income (loss) before income taxes

 

224,667

 

(131,771)

Income tax expense (benefit)

 

46,543

 

(36,243)

Net income (loss)

 

178,124

 

(95,528)

Less: Net income attributable to noncontrolling interests

 

(20,883)

 

(20,644)

Net income (loss) attributable to Six Flags Entertainment Corporation

$

157,241

$

(116,172)

Weighted-average common shares outstanding:

 

 

Basic:

 

85,919

 

84,829

Diluted:

 

87,259

 

84,829

Earnings (loss) per average common share outstanding:

Basic:

$

1.83

$

(1.37)

Diluted:

$

1.80

$

(1.37)

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)

    

October 3, 2021

    

September 30, 2020

Park admissions

$

634,716

$

143,688

Park food, merchandise and other

 

510,620

 

83,671

Sponsorship, international agreements and accommodations

 

34,759

 

20,614

Total revenues

 

1,180,095

 

247,973

Operating expenses (excluding depreciation and amortization shown separately below)

 

504,530

 

282,378

Selling, general and administrative expenses (including stock-based compensation of $17,514 and $18,207 in 2021 and 2020, respectively, and excluding depreciation and amortization shown separately below)

 

150,687

 

114,578

Costs of products sold

 

100,509

 

22,954

Other net periodic pension benefit

 

(3,409)

 

(2,985)

Depreciation

 

84,921

 

87,875

Amortization

 

17

 

1,008

Loss on disposal of assets

 

1,863

 

10,458

Interest expense

 

114,797

 

117,234

Interest income

 

(234)

 

(638)

Loss on debt extinguishment

 

 

6,106

Other expense, net

 

8,796

 

19,282

Income (loss) before income taxes

 

217,618

 

(410,277)

Income tax expense (benefit)

 

43,930

 

(113,953)

Net income (loss)

$

173,688

$

(296,324)

Less: Net income attributable to noncontrolling interests

(41,766)

(41,288)

Net income (loss) attributable to Six Flags Entertainment Corporation

$

131,922

$

(337,612)

Weighted-average common shares outstanding:

 

Basic:

85,596

 

84,730

Diluted:

87,078

84,730

Earnings (loss) per average common share outstanding:

Basic:

$

1.54

$

(3.98)

Diluted:

$

1.51

$

(3.98)

Cash dividends declared per common share

$

$

0.25

See accompanying notes to unaudited condensed consolidated financial statements.

5

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

Three Months Ended

(Amounts in thousands)

    

October 3, 2021

    

September 30, 2020

    

    

Net income (loss)

$

178,124

$

(95,528)

Other comprehensive (loss) income, net of tax:

 

  

 

  

Foreign currency translation adjustment (1)

 

(2,646)

 

1,831

Defined benefit retirement plan (2)

 

271

 

177

Change in cash flow hedging (3)

 

568

 

(37)

Other comprehensive (loss) income, net of tax

 

(1,807)

 

1,971

Comprehensive income (loss)

$

176,317

$

(93,557)

Less: Comprehensive income attributable to noncontrolling interests

 

(20,883)

 

(20,644)

Comprehensive income (loss) attributable to Six Flags Entertainment Corporation

$

155,434

$

(114,201)

(1) Foreign currency translation adjustment is presented net of tax benefit of $0.7 million for the three months ended October 3, 2021 and net of tax expense of $0.5 million for the three months ended September 30, 2020.

(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the three months ended October 3, 2021 and September 30, 2020, respectively.

(3) Change in fair value of cash flow hedging is presented net of tax expense of $0.2 million for the three months ended October 3, 2021, and net of nominal tax benefit for the three months ended September 30, 2020.

See accompanying notes to unaudited condensed consolidated financial statements

6

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

Nine Months Ended

(Amounts in thousands)

    

October 3, 2021

    

September 30, 2020

Net income (loss)

$

173,688

$

(296,324)

Other comprehensive income (loss), net of tax:

 

  

 

Foreign currency translation adjustment (1)

 

(3,087)

 

(10,706)

Defined benefit retirement plan (2)

 

780

 

563

Change in cash flow hedging (3)

 

4,516

 

(12,597)

Other comprehensive income (loss), net of tax

 

2,209

 

(22,740)

Comprehensive income (loss)

$

175,897

$

(319,064)

Less: Comprehensive income attributable to noncontrolling interests

(41,766)

(41,288)

Comprehensive income (loss) attributable to Six Flags Entertainment Corporation

$

134,131

$

(360,352)

(1)  Foreign currency translation adjustment is presented net of tax benefit of $0.8 million and $2.8 million for the nine months ended October 3, 2021 and September 30, 2020, respectively.

(2)  Defined benefit retirement plan is presented net of tax expense of $0.3 million and $0.2 million for the nine months ended October 3, 2021 and September 30, 2020, respectively.

(3)  Change in fair value of cash flow hedging is presented net of tax expense of $1.5 million for the nine months ended October 3, 2021 and net of tax benefit of $4.1 million for the nine months ended September 30, 2020, 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, 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

Payment of tax withholdings on equity-based compensation through shares withheld

 

(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)

Accumulated

 

Capital in

 

other

 

Total

Common stock

excess of 

Accumulated

comprehensive

stockholders'

(Amounts in thousands, except share data)

    

Shares issued

    

Amount

    

par value

    

deficit

    

loss

    

deficit

Balances at July 4, 2021

 

85,871,956

$

2,147

$

1,108,680

$

(2,178,493)

$

(92,488)

$

(1,160,154)

Issuance of common stock

 

110,370

 

2

 

1,819

 

 

 

1,821

Stock-based compensation

 

 

 

7,876

 

 

 

7,876

Payment of tax withholdings on equity-based compensation through shares withheld

 

(508)

 

 

(22)

 

 

 

(22)

Employee stock purchase plan

 

(30)

 

 

 

 

 

Net income attributable to Six Flags Entertainment Corporation

 

 

 

 

157,241

 

 

157,241

Net other comprehensive loss, net of tax

 

 

 

 

 

(1,807)

 

(1,807)

Balances at October 3, 2021

 

85,981,788

$

2,149

$

1,118,353

$

(2,021,252)

$

(94,295)

$

(995,045)

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, 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)

Payment of tax withholdings on equity-based compensation through shares withheld

 

(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)

Accumulated 

Capital in

other

Total

Common stock

excess of 

Accumulated 

comprehensive

stockholders'

(Amounts in thousands, except share data)

    

Shares issued

    

Amount

    

par value

    

deficit

    

loss

    

deficit

Balances at December 31, 2020

85,075,901

$

2,126

$

1,089,199

$

(2,153,368)

$

(96,504)

$

(1,158,547)

Issuance of common stock

934,206

23

13,193

13,216

Stock-based compensation

17,514

17,514

Payment of tax withholdings on equity-based compensation through shares withheld

(49,962)

(1)

(2,200)

(2,201)

Employee stock purchase plan

21,643

1

647

648

Fresh start valuation adjustment for partnership park units purchased

194

194

Net income attributable to Six Flags Entertainment Corporation

131,922

131,922

Net other comprehensive income, net of tax

2,209

2,209

Balances at October 3, 2021

85,981,788

$

2,149

$

1,118,353

$

(2,021,252)

$

(94,295)

$

(995,045)

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)

    

October 3, 2021

    

September 30, 2020

Cash flows from operating activities:

Net income (loss)

$

173,688

$

(296,324)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

  

 

  

Depreciation and amortization

 

84,938

 

88,883

Stock-based compensation

 

17,514

 

18,207

Interest accretion on notes payable

 

831

 

881

Loss on debt extinguishment

 

 

6,106

Amortization of debt issuance costs

 

5,933

 

4,558

Other, including (gain) loss on disposal of assets

 

(610)

 

10,308

Change in accounts receivable

 

(101,080)

 

58,789

Change in inventories, prepaid expenses and other current assets

 

17,333

 

(27,379)

Change in deposits and other assets

 

1,147

 

4,353

Change in ROU operating leases

7,072

886

Change in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities

 

93,742

 

69,014

Change in operating lease liabilities

(15,050)

3,776

Change in accrued interest payable

 

(26,964)

 

17,957

Deferred income taxes

 

47,445

 

(113,979)

Net cash provided by (used in) operating activities

 

305,939

 

(153,964)

Cash flows from investing activities:

 

  

 

  

Additions to property and equipment

 

(61,815)

 

(92,960)

Property insurance recoveries

 

 

2,514

Purchase of identifiable intangible assets

 

(12)

 

Proceeds from sale of assets

 

46

 

Net cash used in investing activities

 

(61,781)

 

(90,446)

Cash flows from financing activities:

 

  

 

  

Repayment of borrowings

 

(2,000)

 

(526,510)

Proceeds from borrowings

 

2,000

 

884,000

Payment of debt issuance costs

 

 

(22,271)

Payment of cash dividends

 

(779)

 

(22,497)

Proceeds from issuance of common stock

13,605

1,871

Payment of tax withholdings on equity-based compensation through shares withheld

(2,201)

(54)

Reduction in finance lease liability

(484)

(396)

Purchase of redeemable noncontrolling interest

 

(1,115)

 

(4,976)

Distributions to noncontrolling interests

(20,883)

(20,644)

Net cash (used in) provided by financing activities

 

(11,857)

 

288,523

Effect of exchange rate on cash

 

(204)

 

(4,385)

Net change in cash and cash equivalents

 

232,097

 

39,728

Cash and cash equivalents at beginning of period

 

157,760

 

174,179

Cash and cash equivalents at end of period

$

389,857

$

213,907

Supplemental cash flow information

 

  

 

  

Cash paid for interest

$

134,921

$

79,342

Cash paid for income taxes

$

783

$

4,596

See accompanying notes to unaudited condensed consolidated financial statements.

10

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 27 parks we owned or operated as of October 3, 2021, 24 parks are located in the United States, two are located in Mexico, and one is located in Montreal, Canada. Our waterpark at Six Flags Great America, in Gurnee, Illinois, opened as a separate gate in 2021 as Hurricane Harbor Chicago, creating our 27th park.

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.

The Board of Directors of Six Flags Entertainment Corporation (“Holdings”) determined that it is in our best interest to change the method of determining our fiscal quarters and fiscal years, such that each fiscal quarter will consist of thirteen weeks ending on a Sunday and each fiscal year will consist of 52 or 53 weeks, as applicable, and will end on the Sunday closest to December 31, effective as of the commencement of our fiscal year on January 1, 2021. This change was made to align our fiscal reporting calendar with how we operate our business and improve comparability across periods. Our current fiscal year will end on January 2, 2022. This Quarterly Report covers the nine month period January 1, 2021 through October 3, 2021 (“the nine months ended October 3, 2021”) and the three month period July 5, 2021 through October 3, 2021 (“the three months ended October 3, 2021”). The comparison period in the prior year covers January 1, 2020 through September 30, 2020 (“the nine months ended September 30, 2020”) and July 1, 2020 through September 30, 2020 (“the three months ended September 30, 2020”).

The 2020 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 October 3, 2021, are not indicative of the results expected for the full year. In particular, our park operations 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.

COVID-19 Considerations

In response to the COVID-19 pandemic, federal, state and local governments implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. In March 2020, we quickly implemented plans to mitigate the impact of the COVID-19 pandemic on our business to ensure the health and safety of our employees and guests.

We resumed partial operations at many of our parks on a staggered basis near the end of the second quarter of 2020 using a cautious and phased approach, including limiting attendance, in accordance with local conditions and government guidelines. Attendance trends continued to improve throughout 2020 and the first nine months of 2021. As of May 29, 2021, we had opened all of our parks, and, as of June 15, 2021, none of our parks were subject to mandated capacity constraints, with the exception of our theme park in Montreal and our two parks in Mexico. As of October 18, 2021, all capacity constraints were lifted on the two Mexico parks. The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain parts of our business. The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, the impact of virus variants, the rate of vaccinations, and the COVID-19 pandemic’s impact on our guests and suppliers. 

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 these financial statements. Additionally, we believe we have sufficient liquidity to meet our cash obligations through the end of 2022, even if we are required to suspend

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operations due to the COVID-19 pandemic. In addition to reducing expenses and 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 2020, we 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 the senior secured leverage ratio financial maintenance covenant through the end of 2021. See Note 3, Long-Term Indebtedness, for more information on these transactions. In connection with the Second Amended and Restated Credit Agreement, we suspended dividend payments and stock repurchases until the earlier of December 31, 2022, or such time as Six Flags Theme Parks Inc. (“SFTP”), Holdings’ indirect, wholly owned subsidiary, reduces the incremental revolving credit commitments by $131 million and begins using actual results to test compliance with the senior secured leverage ratio financial maintenance covenant.

The COVID-19 pandemic continues to present material uncertainty and risk with respect to our performance and financial results, including our ability to keep all of our parks open to our guests. We will continue to consider near-term exigencies and the long-term financial health of the business as we take steps to mitigate the consequences of the COVID-19 pandemic on our business. The extent to which the COVID-19 pandemic adversely impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including any additional actions we have taken, or will take, to minimize the spread of COVID-19 or manage its impact.

Transformation Plan

We commenced a transformation plan in March 2020 to reinvigorate long-term profit growth. The transformation plan is focused on modernizing the guest experience through technology, continuously improving operational efficiency, and driving financial excellence.

During the three and nine months ended October 3, 2021, we incurred the below expenses related to our transformation plan.