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Table of Contents

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

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

Table of Contents

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

Table of Contents

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;

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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.

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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

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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

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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.

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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

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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.

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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.

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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.

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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.

10

Table of Contents

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, two are located in Mexico and one is located in Montreal, Canada.

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

"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.