Six Flags Entertainment Corporation/NEW 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is intended to facilitate an understanding of the Combined Company's business and results of operations and should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion should also be read in conjunction with the Combined Company's consolidated financial statements and related notes thereto, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of Cedar Fair's Annual Report on Form 10-K for the year ended December 31, 2023. Merger Agreement with Six Flags: On July 1, 2024, the previously announced merger of equals transaction contemplated by the Merger Agreement, by and among CopperSteel HoldCo, Inc., Cedar Fair, Former Six Flags and Copper Merger Sub, was completed. Upon the consummation of the Mergers, the separate legal existences of each of Copper Merger Sub, Cedar Fair and Former Six Flags ceased, and the Combined Company changed its name to “Six Flags Entertainment Corporation”. The Combined Company trades on the New York Stock Exchange under the ticker symbol "FUN". References to the "Partnership," "Cedar Fair," or "Former Cedar Fair" are to Cedar Fair prior to the Mergers, and references to the "Combined Company" are to Cedar Fair, Former Six Flags and Copper Merger Sub after giving effect to the Mergers. The Mergers were entered into to create a leading amusement park operator with an expanded and diversified property portfolio, improved guest experience utilizing the complementary operating capabilities of Cedar Fair and Former Six Flags, and the opportunity for accelerated investment in the Cedar Fair and Former Six Flags properties with the cash flows of the Combined Company. For additional information, see the Explanatory Note in this Quarterly Report on Form 10-Q and Note 2 . The Mergers are accounted for as a business combination using the acquisition method of accounting. Former Cedar Fair has been determined to be the accounting acquirer and the predecessor for financial statement purposes. Accordingly, unless indicated otherwise, financial results and disclosures within this Management's Discussion and Analysis referring to periods prior to the Closing Date include only Former Cedar Fair's results before giving effect to the Mergers, including the financial statements as of December 31, 2023 and September 24, 2023 and for the three and nine months ended September 24, 2023. The results for Former Six Flags are included in the Combined Company's results from the Closing Date forward. Accordingly, financial results and disclosures for the three months ended September 29, 2024 reflect the Combined Company's operations. Financial results for the nine months ended September 29, 2024 reflect combined operations for only July 1, 2024, through September 29, 2024, and include only Former Cedar Fair's results before giving effect to the Mergers for the first six months of 2024. Business Overview: The Combined Company generates revenues from sales of (1) admission to amusement parks and water parks, (2) food, merchandise and games both inside and outside the parks, and (3) accommodations, extra-charge products, and other revenue sources. The Combined Company's principal costs and expenses, which include salaries and wages, operating supplies, maintenance, insurance and advertising, are relatively fixed for a typical operating season and do not vary significantly with attendance. Each of the parks are overseen by a general manager and operate autonomously. Management reviews operating results, evaluates performance and makes operating decisions, including allocating resources, on a park-by-park basis. Discrete financial information and operating results are prepared at the individual park level for use by the CEO, who is the Chief Operating Decision Maker (CODM), as well as by the Chief Financial Officer, the Chief Operating Officer, Senior Vice Presidents and the general managers of the parks. The Combined Company operates within a single reportable segment of amusement/water parks with accompanying resort facilities. Critical Accounting Policies: Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the unaudited condensed consolidated financial statements of the Combined Company, which were prepared in accordance with accounting principles generally accepted in the United States of America. These principles require management to make judgments, estimates and assumptions during the normal course of business that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Management believes that judgment and estimates related to the following critical accounting policies could materially affect the unaudited condensed consolidated financial statements: • Accounting for Business Combinations • Impairment of Long-Lived Assets • Goodwill and Other Intangible Assets • Self-Insurance Reserves • Revenue Recognition 27 Table of Contents • Income Taxes During the third quarter of 2024, the Mergers were completed (see Note 2 ). Therefore, Accounting for Business Combinations has been identified as a Critical Accounting Policy and included below. There were no other changes to the above critical accounting policies from those previously disclosed in Cedar Fair's Annual Report on Form 10-K for the year ended December 31, 2023. Accounting for Business Combinations Business combinations are accounted for under the acquisition method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by management, taking into consideration information supplied by the management of the acquired entities, valuations supplied by independent appraisal experts and other relevant information. The determination of fair values requires significant judgment by management. During the measurement period, which may be a period of up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed may be recorded with the corresponding offset to goodwill. Upon the measurement period's conclusion or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the condensed consolidated statement of operations and comprehensive income. Acquisition-related expenses are recognized separately from the business combination and expensed as incurred. Results of Operations: The following operational measures are key performance metrics in the Combined Company's managerial and operational reporting. They are used as major factors in significant operational decisions as they are primary drivers of financial and operational performance, measuring demand, pricing and consumer behavior. In-park revenues, in-park per capita spending and out-of-park revenues are non-GAAP measures. Attendance is defined as the number of guest visits to amusement parks and separately gated outdoor water parks. In-park per capita spending is calculated as revenues generated within the amusement parks and separately gated outdoor water parks, along with related parking revenues and online transaction fees charged to customers ( in-park revenues ), divided by total attendance. Out-of-park revenues are defined as revenues from resorts, out-of-park food and retail locations, sponsorships, international agreements and all other out-of-park operations. Net revenues consist of in-park revenues and out-of-park revenues less amounts remitted to outside third parties under concessionaire arrangements; see Note 3 for a reconciliation of in-park revenues and out-of-park revenues to net revenues. Certain prior period amounts have been reclassified from out-of-park revenues to in-park revenues following completion of the Mergers (see Note 1. Reclassifications ). Nine months ended September 29, 2024 vs. Nine months ended September 24, 2023 The results for the nine-month period ended September 29, 2024 are not directly comparable with the results for the nine-month period ended September 24, 2023. First, the nine-month period ended September 29, 2024 included the results of the acquired Former Six Flags operations from the Closing Date of the Mergers forward (see Note 2 ). Second, the current period consisted of a 39-week period compared with a 38-week period in the prior period for Former Cedar Fair. The current nine-month period included 3,491 operating days compared with 1,988 operating days for the nine-month period ended September 24, 2023, an increase of 1,503 operating days. There were 1,591 operating days in the third quarter of 2024 at Former Six Flags parks following the completion of the Mergers. There were also 31 additional operating days period over period at Former Cedar Fair parks due to the fiscal calendar shift. These increases were partially offset by 119 fewer operating days driven by fewer planned early season operating days at some of Former Cedar Fair's seasonal parks. In particular, Carowinds, Kings Dominion and California's Great America were open additional operating days in January and February in the prior period that were not planned in the current period. 28 Table of Contents The following table presents key financial information for the Combined Company for the nine months ended September 29, 2024 and September 24, 2023: Nine months ended Increase (Decrease) September 29, 2024 September 24, 2023 $ % (Amounts in thousands, except per capita and operating days) Net revenues $ 2,021,616 $ 1,427,545 $ 594,071 41.6 % Operating costs and expenses 1,496,436 1,009,706 486,730 48.2 % Depreciation and amortization 211,887 127,711 84,176 65.9 % Loss on impairment / retirement of fixed assets, net 11,406 12,779 (1,373) N/M Loss on impairment of goodwill 42,462 — 42,462 N/M Operating income $ 259,425 $ 277,349 $ (17,924) (6.5) % Other Data: Attendance 30,955 20,889 10,066 48.2 % In-park per capita spending $ 61.21 $ 62.94 $ (1.73) (2.7) % Out-of-park revenues $ 184,623 $ 155,366 $ 29,257 18.8 % Operating days 3,491 1,988 1,503 75.6 % Net income margin (1) 2.8 % 9.4 % (6.6) % N/M Not meaningful due to the nature of the expense line-item. (1) Net income margin is calculated as net income divided by net revenues. For the nine months ended September 29, 2024, net revenues increased $594.1 million compared with the nine months ended September 24, 2023. The increase in net revenues reflected $558.0 million in net revenues contributed by Former Six Flags operations during the three months ended September 29, 2024 and a $36.1 million increase in net revenues contributed by Former Cedar Fair operations during the nine months ended September 29, 2024 compared to the prior period. The increase in net revenues reflected the impact of a 10.1 million-visit increase in attendance and a $29.3 million increase in out-of-park revenues, partially offset by the impact of a $1.73, or 2.7%, decrease in in-park per capita spending. The 10.1 million-visit increase in attendance included a 9.2 million-visit increase resulting from attendance at Former Six Flags parks in the third quarter of 2024 following the Mergers and a 0.6 million-visit increase attributable to the fiscal calendar shift for Former Cedar Fair, with the remaining increase driven by higher season pass sales at Former Cedar Fair parks, improved weather in California, and increased demand at Former Cedar Fair's parks with significant marketable new rides and attractions. These factors were partially offset by the impact of fewer planned operating days. Of the $1.73 decrease in in-park per capita spending, $0.39 of the decrease related to the impact of in-park per capita spending at the Former Six Flags parks during the third quarter of 2024, with the remaining decrease attributable to a planned decrease in average season pass pricing and a higher mix of season pass visitation at the Former Cedar Fair parks, partially offset by improved in-park per capita spending for food and beverage and extra-charge products at the Former Cedar Fair parks, including Fast Lane. The $29.3 million increase in out-of-park revenues was due primarily to $20.9 million contributed by Former Six Flags operations in the third quarter of 2024, and $3.1 million in increased out-of-park revenues due to the fiscal calendar shift for Former Cedar Fair, with the remaining increase largely attributable to increased revenues from the Knott's Hotel following a recent renovation. The increase in net revenues included a $2.9 million unfavorable impact of foreign currency exchange rates. Operating costs and expenses for the nine months ended September 29, 2024 increased $486.7 million compared with the nine months ended September 24, 2023. The increase in operating costs and expenses was the result of a $259.9 million increase in operating expenses, a $181.1 million increase in selling, general and administrative ("SG&A") expenses and a $45.7 million increase in cost of goods sold. The $259.9 million increase in operating expenses included a $245.2 million increase related to Former Six Flags operations in the third quarter of 2024, a $15.9 million increase due to the fiscal calendar shift for Former Cedar Fair and a $22.5 million increase in self-insurance reserves at Former Cedar Fair (see Note 1 ). Excluding these factors, operating expenses decreased in relation to Former Cedar Fair operations largely as a result of a planned reduction in labor costs totaling $19.3 million, including declines in seasonal hours and full-time head count, including related benefits, and a planned reduction in operating supplies, particularly for live entertainment. The $181.1 million increase in SG&A expenses included $80.9 million of additional expenses related to Former Six Flags operations in the third quarter of 2024, $75.5 million of increased transaction and integration costs incurred as the accounting acquirer in the Mergers, and $2.4 million due to the fiscal calendar shift for Former Cedar Fair. Excluding these factors, SG&A expenses increased at Former Cedar Fair due to higher full-time wages of $15.1 million, including bonuses and equity compensation, and to a lesser extent, advertising and costs related to information technology. Cost of goods sold as a percentage of food, merchandise and games revenue decreased 0.7%, of which 0.1% was a result of the Mergers, and the remainder of which was driven by both planned reductions in costs and higher pricing at Former Cedar Fair. The increase in operating costs and expenses included a $1.3 million favorable impact of foreign currency exchange rates. 29 Table of Contents Depreciation and amortization expense for the nine months ended September 29, 2024 increased $84.2 million compared with the nine months ended September 24, 2023. A $95.0 million increase in depreciation expense was attributable to the Mergers, which was partially offset by the impact of a change in interim depreciation method for Former Cedar Fair (see Note 1 ). The loss on impairment / retirement of fixed assets for both periods was due to retirement of assets in the normal course of business, which in the prior period included the retirement of two specific assets. During the third quarter of 2024, management tested the Schlitterbahn reporting unit's fair value due to a decline in estimated future cash flows as a result of shifting investment priorities at those locations following the Mergers. Management concluded the estimated fair value of goodwill at the Schlitterbahn reporting unit no longer exceeded its carrying value. Therefore, a $42.5 million impairment of the goodwill at the Schlitterbahn reporting unit was recorded during the third quarter of 2024. After the items above, operating income for the nine months ended September 29, 2024 totaled $259.4 million compared with $277.3 million for the nine months ended September 24, 2023. The amount for the nine months ended September 29, 2024 included $91.2 million of operating income activity relating to the Former Six Flags operations in the third quarter of 2024. Interest expense, net for the nine months ended September 29, 2024 increased $51.8 million as a result of $39.2 million of interest incurred on debt acquired in the Mergers, as well as refinancing events during the current period, including the full redemption of the 2025 senior notes which were refinanced with a $1.0 billion senior secured term loan facility, and additional revolver borrowings in the current period. The refinancing events also resulted in a loss on early debt extinguishment of $8.0 million during the current period. Other (income) expense, net primarily represented the remeasurement of U.S. dollar denominated notes to an entity's functional currency. During the nine months ended September 29, 2024, a provision for income taxes of $31.1 million was recorded compared with $40.2 million for the nine months ended September 24, 2023. The decrease in provision for income taxes was primarily attributable to lower pre-tax book income relative to the comparable period and certain discrete tax effects associated with the Mergers partially offset by non-deductible executive compensation and state and local income taxes. After the items above and income attributable to non-controlling interests (see Note 7 ), net income attributable to Six Flags Entertainment Corporation for the nine months ended September 29, 2024 totaled $33.1 million, or $0.49 per diluted common share, $3.0 million of which is from activity relating to the Former Six Flags operations in the third quarter of 2024, compared with $134.5 million, or $2.61 per diluted limited partner unit, for the nine months ended September 24, 2023. Net income margin decreased 6.6% largely due to the $75.5 million of increased transaction and integration costs and the $42.5 million impairment of goodwill related to the Schlitterbahn reporting unit incurred during the current period. Three months ended September 29, 2024 vs. Three months ended September 24, 2023 The results for the three-month period ended September 29, 2024 are not directly comparable with the results for the three-month period ended September 24, 2023. First, the three-month period ended September 29, 2024 included the results of the acquired Former Six Flags operations since the Closing Date of the Mergers (see Note 2 ). Second, the current period consisted of the thirteen-week period ended September 29, 2024 while the prior period consisted of the thirteen-week period ended September 24, 2023 for Former Cedar Fair. The current three-month period included 2,585 operating days compared with 1,091 operating days for the three-month period ended September 24, 2023. This 1,494 operating day increase was driven by 1,591 operating days in the third quarter of 2024 at Former Six Flags parks following completion of the Mergers. Those additional operating days were offset by 71 fewer days period over period at Former Cedar Fair parks due to the fiscal calendar shift and 26 fewer days attributable to planned closure of low volume operating days and unplanned closures due to inclement weather. 30 Table of Contents The following table presents key financial information for the Combined Company for the three months ended September 29, 2024 and September 24, 2023: Three months ended Increase (Decrease) September 29, 2024 September 24, 2023 $ % (Amounts in thousands, except per capita and operating days) Net revenues $ 1,348,385 $ 842,009 $ 506,376 60.1 % Operating costs and expenses 894,182 467,430 426,752 91.3 % Depreciation and amortization 144,560 65,936 78,624 119.2 % Loss on impairment / retirement of fixed assets, net 4,671 2,018 2,653 N/M Loss on impairment of goodwill 42,462 — 42,462 N/M Operating income $ 262,510 $ 306,625 $ (44,115) (14.4) % Other Data: Attendance 20,971 12,433 8,538 68.7 % In-park per capita spending $ 61.27 $ 62.70 $ (1.43) (2.3) % Out-of-park revenues $ 102,265 $ 85,995 $ 16,270 18.9 % Operating days 2,585 1,091 1,494 136.9 % Net income margin (1) 10.0 % 25.6 % (15.6) % N/M Not meaningful due to the nature of the expense line-item. (1) Net income margin is calculated as net income divided by net revenues. For the three months ended September 29, 2024, net revenues increased $506.4 million compared with the three months ended September 24, 2023. The increase in net revenues reflected $558.0 million in net revenues contributed by Former Six Flags operations during the three months ended September 29, 2024 offset by $51.6 million in lower net revenues for Former Cedar Fair operations during the three months ended September 29, 2024 compared to the prior year period. The increase in net revenues reflected the impact of an 8.5 million-visit increase in attendance and a $16.3 million increase in out-of-park revenues, partially offset by the impact of a $1.43, or 2.3%, decrease in in-park per capita spending. The 8.5 million-visit increase in attendance included a 9.2 million-visit increase resulting from attendance at Former Six Flags parks following the Mergers offset by a 460,000-visit decrease at Former Cedar Fair parks driven by the calendar shift in the current period for Former Cedar Fair. The remaining 200,000-visit decrease was driven by inclement weather at multiple Former Cedar Fair parks, including the impact of hurricanes and flooding. Of the $1.43 decrease in in-park per capita spending, $0.77 of the decrease related to the impact of in-park per capita spending at the Former Six Flags parks, with the remaining decrease attributable to a planned decrease in average season pass pricing and a higher mix of season pass visitation at the Former Cedar Fair parks, partially offset by improved in-park per capita spending for food and beverage and extra-charge products at the Former Cedar Fair parks, including Fast Lane. The $16.3 million increase in out-of-park revenues was due to $20.9 million contributed by Former Six Flags operations offset by a $4.6 million decrease due to the fiscal calendar shift for Former Cedar Fair. The increase in net revenues included a $1.9 million unfavorable impact of foreign currency exchange rates. Operating costs and expenses for the three months ended September 29, 2024 increased $426.8 million compared with the three months ended September 24, 2023. The increase in operating costs and expenses was the result of a $242.5 million increase in operating expenses, a $144.5 million increase in SG&A expenses and a $39.8 million increase in cost of goods sold. The $242.5 million increase in operating expenses included a $245.2 million increase related to Former Six Flags operations and a $17.9 million increase in self-insurance reserves at Former Cedar Fair described above offset by a $9.7 million decrease due to the calendar shift in the current period for Former Cedar Fair. Excluding these factors, operating expenses decreased in relation to Former Cedar Fair operations largely as a result of a planned reduction in seasonal labor costs totaling $4.7 million and operating supply costs, particularly for live entertainment. The $144.5 million increase in SG&A expenses included $80.9 million of additional expenses related to Former Six Flags operations, $54.5 million of increased transaction and integration costs incurred as the accounting acquirer in the Mergers, and higher full-time wages of $6.2 million primarily driven by bonuses at Former Cedar Fair. Cost of goods sold as a percentage of food, merchandise and games revenue increased 0.3%, of which 0.1% was a result of the Mergers, and the remainder of which was driven by an increase in food and beverage costs at Former Cedar Fair. The increase in operating costs and expenses included a $0.8 million favorable impact of foreign currency exchange rates. Depreciation and amortization expense for the three months ended September 29, 2024 increased $78.6 million compared with the three months ended September 24, 2023. A $95.0 million increase in depreciation expense was attributable to the Mergers, which was somewhat offset by the impact of a change in interim depreciation method for Former Cedar Fair. The loss on impairment / retirement of fixed assets for both periods was due to retirement of assets in the normal course of business. During the third quarter of 2024, management tested the Schlitterbahn reporting unit's fair value due to a decline in estimated future cash flows as a result of shifting investment priorities at those locations following the Mergers. Management concluded the 31 Table of Contents estimated fair value of goodwill at the Schlitterbahn reporting unit no longer exceeded its carrying value. Therefore, a $42.5 million impairment of the goodwill at the Schlitterbahn reporting unit was recorded during the third quarter of 2024. After the items above, operating income for the three months ended September 29, 2024 totaled $262.5 million compared with $306.6 million for the three months ended September 24, 2023. The amount for the three months ended September 29, 2024 included $91.2 million of operating income from activity relating to the Former Six Flags operations. Interest expense, net for the three months ended September 29, 2024 increased $46.4 million as a result of $39.2 million of interest incurred on debt acquired in the Mergers, as well as refinancing events during the current period, including the full redemption of the 2025 senior notes in full which were refinanced with a $1.0 billion senior secured term loan facility, and additional revolver borrowings in the current period. The refinancing events also resulted in a loss on early debt extinguishment of $2.1 million during the current period representing consent payments on the 2025 senior notes (see Note 6 ). Other (income) expense, net primarily represented the remeasurement of U.S. dollar denominated notes to the Canadian entity's functional currency. During the three months ended September 29, 2024, a provision for income taxes of $43.3 million was recorded compared with $50.7 million for the three months ended September 24, 2023. The decrease in provision for income taxes was primarily attributable to lower pre-tax book income relative to the comparable period and certain discrete tax effects associated with the Mergers partially offset by non-deductible executive compensation and state and local income taxes. After the items above and income attributable to non-controlling interests (see Note 7 ), net income attributable to Six Flags Entertainment Corporation for the three months ended September 29, 2024 totaled $111.0 million, or $1.10 per diluted common share, $3.0 million of which is from activity relating to the Former Six Flags operations, compared with $215.5 million, or $4.21 per diluted limited partner unit, for the three months ended September 24, 2023. Net income margin decreased 15.6% primarily due to the $54.5 million of increased transaction and integration costs and the $42.5 million impairment of goodwill related to the Schlitterbahn reporting unit incurred during the current period. October Update For the five week period ended November 3, 2024, preliminary attendance for the Combined Company totaled 6.5 million visits, which was up 20% compared with combined attendance for Former Cedar Fair and Former Six Flags over the five week period ended November 5, 2023. Modified EBITDA and Adjusted EBITDA Modified EBITDA represents earnings before interest, taxes, depreciation, amortization, other non-cash items, and adjustments as defined in the Combined Company's credit agreement. Adjusted EBITDA represents Modified EBITDA minus net income attributable to non-controlling interests. Both measures have been included to disclose the effect of non-controlling interests. Prior to the Mergers, Former Cedar Fair did not have net income attributable to non-controlling interests. Modified EBITDA and Adjusted EBITDA are not measurements of operating performance computed in accordance with generally accepted accounting principles ("GAAP") and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with GAAP. Management believes Modified EBITDA and Adjusted EBITDA are meaningful measures of park-level operating profitability, and use them for measuring returns on capital investments, evaluating potential acquisitions, determining awards under incentive compensation plans, and calculating compliance with certain loan covenants. Adjusted EBITDA is widely used by analysts, investors and comparable companies in the industry to evaluate operating performance on a consistent basis, as well as more easily compare results with those of other companies in the industry. These measures are provided as a supplemental measure of the Combined Company's operating results and may not be comparable to similarly titled measures of other companies. 32 Table of Contents The table below sets forth a reconciliation of Modified EBITDA and Adjusted EBITDA to net income for the three and nine-month periods ended September 29, 2024 and September 24, 2023. The results for the three and nine months ended September 29, 2024 include the results of the acquired Former Six Flags operations from the Closing Date of the Mergers forward (see Note 2 ). Three months ended Nine months ended (In thousands) September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 Net income $ 135,465 $ 215,494 $ 57,551 $ 134,512 Interest expense, net 81,742 35,296 155,903 104,099 Provision for taxes 43,341 50,673 31,135 40,246 Depreciation and amortization 144,560 65,936 211,887 127,711 EBITDA 405,108 367,399 456,476 406,568 Loss on early debt extinguishment 2,063 — 7,974 — Non-cash foreign currency (gain) loss (1,122) 5,460 5,880 (1,674) Non-cash equity compensation expense 39,131 8,221 53,550 15,841 Loss on retirement of fixed assets, net 4,671 2,018 11,406 12,779 Loss on impairment of goodwill 42,462 — 42,462 — Costs related to the Mergers (1) 73,335 5,012 94,610 5,012 Self-insurance adjustment (2) 14,865 — 14,865 — Other (3) 2,019 385 3,593 284 Modified EBITDA 582,532 388,495 690,816 438,810 Modified EBITDA attributable to non-controlling interests 24,499 — 24,499 — Adjusted EBITDA $ 558,033 $ 388,495 $ 666,317 $ 438,810 Modified EBITDA margin (4) 43.2 % 46.1 % 34.2 % 30.7 % (1) Consists of third-party legal and consulting transaction costs, as well as integration costs related to the Mergers. Integration costs include third-party consulting costs, travel costs and contract termination costs. See Note 2 for additional information related to the Mergers. These costs are added back to net income to calculate Modified EBITDA and Adjusted EBITDA as defined in the Combined Company's credit agreement and were recorded within "Selling, general and administrative" in the unaudited condensed consolidated statement of operations and comprehensive income. (2) During the third quarter of 2024, an actuarial analysis of Former Cedar Fair's self-insurance reserves resulted in a change in estimate that increased the incurred but not reported ("IBNR") reserves related to these self-insurance reserves by $14.9 million, which was recorded within "Operating expenses" in the unaudited condensed consolidated statements of operations and comprehensive income. The increase was driven by an observed pattern of increasing litigation and settlement costs. See Note 1 for additional information. (3) Consists of certain costs as defined in the Combined Company's credit agreement. These costs are added back to net income to calculate Modified EBITDA and Adjusted EBITDA and have included certain legal expenses, severance and related benefits, and contract termination costs. This balance also includes unrealized gains and losses on short-term investments. (4) Modified EBITDA margin (Modified EBITDA divided by net revenues) is not a measurement computed in accordance with GAAP and may not be comparable to similarly titled measures of other companies. Modified EBITDA margin is provided because management believes the measure provides a meaningful metric of operating profitability. Modified EBITDA margin has been disclosed as opposed to Adjusted EBITDA margin because management believes Modified EBITDA margin more accurately reflects the park-level operations of the Combined Company as it does not give effect to distributions to non-controlling interests. For the nine months ended September 29, 2024, Adjusted EBITDA increased $227.5 million compared with the nine months ended September 24, 2023. The increase in Adjusted EBITDA included $206.3 million as a result of the Mergers, $14.7 million due to the fiscal calendar shift, and $6.5 million due to Former Cedar Fair operations on a comparable calendar basis. For the nine months ended September 29, 2024, Modified EBITDA margin increased 3.5% compared with the nine months ended September 24, 2023. The increase in Modified EBITDA margin included a 2.7% increase as a result of the Mergers, 0.3% due to the fiscal calendar shift, and 0.5% due to Former Cedar Fair operations on a comparable calendar basis. The $6.5 million increase in Adjusted EBITDA and 0.5% increase in Modified EBITDA margin from Former Cedar Fair operations on a comparable calendar basis was primarily due to lower planned costs, particularly labor costs, in the current period. For the three months ended September 29, 2024, Adjusted EBITDA increased $169.5 million compared with the three months ended September 24, 2023. The increase in Adjusted EBITDA included $206.3 million as a result of the Mergers offset by a $20.9 million decrease due to the fiscal calendar shift and a $15.9 million decrease due to Former Cedar Fair operations on a comparable calendar basis. For the three months ended September 29, 2024, Modified EBITDA margin decreased 2.9% 33 Table of Contents compared with the three months ended September 24, 2023. The decrease in Modified EBITDA margin included a 1.3% decrease as a result of the Mergers, 0.6% due to the fiscal calendar shift, and 1.0% due to Former Cedar Fair operations on a comparable calendar basis. The $15.9 million decrease in Adjusted EBITDA and 1.0% decrease in Modified EBITDA margin from Former Cedar Fair operations on a comparable calendar basis was primarily due to lower revenues driven by inclement weather somewhat offset by lower planned costs, particularly for seasonal labor and operating supplies, in the current period. Liquidity and Capital Resources: The Combined Company's principal sources of liquidity include cash from operating activities, funding from long-term debt obligations and existing cash on hand. Due to the seasonality of the business, pre-opening operations are funded with revolving credit borrowings, which are reduced with positive cash flow during the seasonal operating period. Primary uses of liquidity include operating expenses, capital expenditures, interest payments, and income tax obligations. With the Combined Company's revolving credit facility capacity and cash on hand, the Combined Company has sufficient liquidity to satisfy existing cash obligations through the fourth quarter of 2025. Capital expenditures for the Combined Company are expected to total between $100 million and $110 million during the fourth quarter of 2024 and $500 million and $525 million in 2025. Cash interest payments for the Combined Company are expected to range from $110 million to $115 million during the fourth quarter of 2024 and $305 million to $315 million in 2025. Cash payments for income taxes for the Combined Company are expected to range from $45 to $50 million during the fourth quarter of 2024 and $130 million to $140 million in 2025. Cash Flows The following table presents key cash flow information for the nine months ended September 29, 2024 and September 24, 2023: Nine months ended September 29, 2024 September 24, 2023 (Amounts in thousands) Net cash from operating activities $ 405,983 $ 330,018 Net cash for investing activities (378,705) (169,579) Net cash for financing activities (1,166) (126,575) Effect of exchange rate on cash and cash equivalents (1,895) (659) Net increase in cash and cash equivalents $ 24,217 $ 33,205 Net cash from operating activities for the first nine months of 2024 totaled $406.0 million, an increase of $76.0 million compared with the same period in the prior year. The increase was primarily due to the inclusion of operations of the acquired Former Six Flags operations since the Closing Date of the Mergers offset by an increase in interest payments on Former Cedar Fair debt. Net cash for investing activities for the first nine months of 2024 totaled $378.7 million, an increase of $209.1 million compared with the same period in the prior year. The increase was due to net cash consideration paid for the Mergers and the inclusion of capital expenditures of the acquired Former Six Flags operations since the Closing Date of the Mergers. Net cash for financing activities for the first nine months of 2024 totaled $1.2 million, a decrease of $125.4 million compared with the same period in the prior year. The decrease was primarily attributable to higher revolving credit facility borrowings in the current period, partially offset by repurchases of limited partnership units of Cedar Fair in the prior period. Contractual Obligations As of September 29, 2024, the Combined Company's primary contractual obligations consisted of outstanding long-term debt agreements and certain obligations pertaining to the Partnership Parks (see N ote 7 ). Before reduction for debt issuance costs, the Combined Company's long-term debt agreements at such date consisted of the following: • $1.0 billion of senior secured term debt, maturing in May 2031 under the 2024 Credit Agreement, as amended. Amortization payments of $10.0 million per year, paid in equal quarterly installments, are required to be made on the term debt. The term debt bears interest at a rate equal to SOFR plus a margin of 200 bps per annum or base rate plus a margin of 100 bps per annum. There was $10.0 million of current maturities outstanding and payable within the next twelve months as of September 29, 2024 related to the senior secured term debt facility. • $500 million of 5.375% senior unsecured notes, maturing in April 2027. Interest is payable under the 2027 senior notes semi-annually in April and October. • $300 million of 6.500% senior unsecured notes, maturing in October 2028. Interest is payable under the 2028 senior notes semi-annually in April and October. 34 Table of Contents • $500 million of 5.250% senior unsecured notes, maturing in July 2029. Interest is payable under the 2029 senior notes semi-annually in January and July. • $200 million of 7.000% senior secured notes, maturing in July 2025. Interest is payable under the 2025 Six Notes semi-annually in January and July. • $500 million of 5.500% senior unsecured notes, maturing in April 2027. Interest is payable under the 2027 Six Notes semi-annually in April and October. • $800 million of 7.250% senior unsecured notes, maturing in May 2031. Interest is payable under the 2031 Six Notes semi-annually in May and November. • $850 million of 6.625% senior secured notes, maturing in May 2032. Interest is payable under the 2032 Six Notes semi-annually in May and November. • $156 million of borrowings under the $850 million senior secured revolving credit facility under the 2024 Credit Agreement, as amended. The revolving credit facility bears interest at Term SOFR or Term Canadian Overnight Repo Rate Average plus a margin of 200 bps per annum, or base rate or Canadian prime rate plus a margin of 100 bps per annum; matures on July 1, 2029, following the amendment to the 2024 Credit Agreement and subject to a springing maturity date on the date that is 91 days prior to the final maturity of certain indebtedness in an aggregate outstanding principal amount greater than $200 million on such date; and requires a commitment fee of 50 bps per annum on the unused portion of the revolving credit facility, which is subject to decrease to 37.5 bps upon achievement of a 3.5x Net First Lien Leverage Ratio (as defined in the 2024 Credit Agreement, as amended). The 2024 Credit Agreement also provides for the issuance of documentary and standby letters of credit. After letters of credit of $40.9 million as of September 29, 2024, the Combined Company had $653.1 million of availability under the former revolving credit facility. Letters of credit are primarily in place to backstop insurance arrangements. During the third quarter of 2024, $165 million of the outstanding balance of the 2025 Six Notes was paid on July 1, 2024 and the remaining $56.9 million outstanding balance of the 2024 Six Notes was paid on July 31, 2024. With respect to the revolving credit facility only, the 2024 Credit Agreement, as amended, includes a maximum Net First Lien Leverage Ratio (as defined in the 2024 Credit Agreement) financial maintenance covenant, which is required to be tested as of the last day of each quarter except for the quarter in which the consummation of the Mergers occurred. The maximum Net First Lien Leverage Ratio following the consummation of the Mergers is 5.25x beginning with the test period ending on or about December 31, 2024, with step-downs of 25 bps after every four consecutive quarters, culminating at 4.5x beginning with the test period ending on or about December 31, 2027. The 2024 Credit Agreement, as amended, and fixed rate note agreements include restricted payment provisions, which could limit the Combined Company's ability to pay dividends. Under the 2024 Credit Agreement, as amended, if the pro forma Net Secured Leverage Ratio (as defined in the 2024 Credit Agreement) is less than or equal to 3.00x, the Combined Company can make unlimited restricted payments so long as no event of default has occurred and is continuing. If the pro forma Net Total Leverage Ratio (as defined in the 2024 Credit Agreement) is less than or equal to 5.25x, the Combined Company can make restricted payments up to the then-available Cumulative Credit (as defined in the 2024 Credit Agreement), so long as no event of default has occurred and is continuing. Irrespective of any leverage calculations, the Combined Company can make restricted payments not to exceed the greater of 7.0% of Market Capitalization (as defined in the 2024 Credit Agreement) and $200 million annually. Pursuant to the terms of the indenture governing the 2027 senior notes, which includes the most restrictive of the restricted payments provisions under the terms of the Combined Company's outstanding notes, even if the pro forma Total Indebtedness to Consolidated Cash Flow Ratio (as defined in the indenture governing the 2027 senior notes) is greater than 5.25x, the Combined Company can still make restricted payments of $100 million annually so long as no default or event of default has occurred and is continuing. If the pro forma Total Indebtedness to Consolidated Cash Flow Ratio is less than or equal to 5.25x, the Combined Company can make restricted payments up to its restricted payment pool so long as no default or event of default has occurred and is continuing or would occur as a consequence thereof. The Combined Company's pro forma Total Indebtedness to Consolidated Cash Flow Ratio was less than 5.25x as of September 29, 2024. On November 9, 2023, Cedar Fair entered into supplemental indentures related to the 2025 senior notes, 2027 senior notes, 2028 senior notes and 2029 senior notes (the "Amendments") following receipt of requisite consents from the holders of the notes. The Amendments enabled Cedar Fair to select November 2, 2023, the date the Merger Agreement with Former Six Flags was entered into, as the testing date for purposes of calculating, with respect to the Mergers and related transactions, any and all ratio tests under those notes, each of which was satisfied when tested on November 2, 2023. To become operative, the Amendments required a payment, which was made upon the consummation of the Mergers. The payment related to the 2025 senior notes was still required despite the redemption of those notes in May 2024. 35 Table of Contents Financial and Non-Financial Disclosure About Issuers and Guarantors of Registered Senior Notes Three tranches of fixed rate senior notes outstanding as of September 29, 2024 were registered under the Securities Act of 1933: the 2027, 2028 and 2029 senior notes, or the "registered senior notes". The Combined Company, Canada's Wonderland Company ("Cedar Canada"), Magnum Management Corporation ("Magnum"), and Millennium Operations LLC (“Millennium”) are the co-issuers of the registered senior notes. Substantially concurrently with the closing and in connection with the Mergers, the Combined Company entered into supplemental indentures to assume all of Former Cedar Fair's obligations under the indentures governing the registered senior notes. Pursuant to the supplemental indentures, each of the Former Six Flags subsidiary guarantors under the 2024 Credit Agreement agreed to fully and unconditionally guarantee the registered senior notes. As a result, the registered senior notes are irrevocably and unconditionally guaranteed, on a joint and several basis, by each wholly owned subsidiary of the Combined Company (other than the co-issuers) that guarantee the credit facilities under the 2024 Credit Agreement, as amended. A full listing of the issuers and guarantors of the registered senior notes as of September 29, 2024 can be found within Exhibit 22. The registered senior notes each rank equally in right of payment with all of each issuer’s existing and future senior unsecured debt. However, the registered senior notes rank effectively junior to any secured debt to the extent of the value of the assets securing such debt, including under the 2024 Credit Agreement, the 2025 Six Notes and the 2032 Six Notes. In the event that the co-issuers (except for the Combined Company) or any subsidiary guarantor is released from its obligations under the 2024 Credit Agreement, such entity will also be released from its obligations under the 2027 and 2029 senior notes and from its guarantee under the 2028 senior notes. In addition, the co-issuers (except for the Combined Company) or any subsidiary guarantor can be released from its obligations under the registered senior notes under the following circumstances, assuming the associated transactions are in compliance with the applicable provisions of the indentures governing the registered senior notes: i) in the case of co-issuers (other than the Combined Company), any direct or indirect sale, conveyance or other disposition of the capital stock of such entity following which the entity ceases to be a direct or indirect subsidiary of the Combined Company or a sale or disposition of all or substantially all of the assets of such entity made in accordance with the applicable indenture; ii) if such entity is dissolved or liquidated; iii) if an entity is designated as an Unrestricted Subsidiary (as defined in each indenture); iv) in the case of the 2027 and 2029 senior notes, upon transfer of such entity in a qualifying transaction if following such transfer the entity ceases to be a direct or indirect Restricted Subsidiary (as defined in each indenture) of the Combined Company or is a Restricted Subsidiary that is not a guarantor under any credit facility; or v) in the case of the subsidiary guarantors, upon a discharge of the indenture or upon any legal defeasance or covenant defeasance of the indenture. The obligations of each guarantor are limited to the extent necessary to prevent such guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law. This provision may not, however, protect a guarantee from being voided under fraudulent transfer law, or may reduce the applicable guarantor’s obligation to an amount that effectively makes its guarantee worthless. If a guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness of the guarantor, and depending on the amount of such indebtedness, could reduce the guarantee to zero. Each guarantor that makes a payment or distribution under a guarantee is entitled to a pro rata contribution from each other guarantor based on the respective net assets of the guarantors. The following tables provide summarized financial information for each of the co-issuers and guarantors of the registered senior notes (the "Obligor Group") as of September 29, 2024 and December 31, 2023. Each entity that was a co-issuer of the registered senior notes is presented separately. The subsidiaries that guaranteed the registered senior notes were presented on a combined basis with intercompany balances and transactions between entities in such guarantor subsidiary group eliminated. Intercompany balances and transactions between the co-issuers and guarantor subsidiaries were not eliminated. Certain subsidiaries did not guarantee the credit facilities or senior notes (the "non-guarantor" subsidiaries). The summarized financial information excludes results of the non-guarantor subsidiaries and does not reflect investments of the Obligor Group in the non-guarantor subsidiaries. The Obligor Group's amounts due from, amounts due to, and transactions with the non-guarantor subsidiaries have not been eliminated and included intercompany receivables from non-guarantors of $111.2 million and $14.3 million as of September 29, 2024 and December 31, 2023, respectively. 36 Table of Contents Summarized Financial Information (In thousands) Six Flags Entertainment Corporation (2024) Cedar Fair, L.P. (2023) (Parent) Magnum (Co-Issuer Subsidiary) Cedar Canada (Co-Issuer Subsidiary) Millennium (Co-Issuer Subsidiary) Guarantor Subsidiaries Balance as of September 29, 2024 Current Assets $ 580 $ 91,498 $ 95,382 $ 158,270 $ 2,001,013 Non-Current Assets 3,173,053 2,105,802 669,645 2,469,603 8,049,271 Current Liabilities 206,483 1,701,622 25,798 273,523 783,012 Non-Current Liabilities 369,982 1,880 362,931 1,711,429 3,079,917 Balance as of December 31, 2023 Current Assets $ 445 $ 13,876 $ 46,641 $ 346,820 $ 1,618,550 Non-Current Assets (269,050) 1,916,183 627,130 2,387,798 1,955,628 Current Liabilities 160,560 1,525,756 188,975 223,098 107,007 Non-Current Liabilities 148,854 2,019 16,985 2,141,096 141,402 Nine Months Ended September 29, 2024 Net revenues $ 84,769 $ 384,452 $ 135,990 $ 1,599,444 $ 801,494 Operating (loss) income (10,000) (124,671) 52,795 98,170 227,895 Net income 47,400 66,760 51,080 — 166,060 Twelve Months Ended December 31, 2023 Net revenues $ 87,790 $ 478,478 $ 173,321 $ 1,935,516 $ 447,639 Operating income (loss) 84,005 (153,697) 67,459 126,165 182,687 Net income 125,284 72,213 98,108 — 263,071 37 Table of Contents Forward Looking Statements Some of the statements contained in this report (including the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section) that are not historical in nature are forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements as to management's expectations, beliefs, goals and strategies regarding the future. Words such as "anticipate," "believe," "create," "expect," "future," "guidance," "intend," "plan," "potential," "seek," "synergies," "target," "will," "would," similar expressions, and variations or negatives of these words identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These forward-looking statements may involve current plans, estimates, expectations and ambitions that are subject to risks, uncertainties and assumptions that are difficult to predict, may be beyond the Combined Company's control and could cause actual results to differ materially from those described in such statements. Although management believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct, that the Combined Company's growth and operational strategies will achieve the target results. Important risks and uncertainties that may cause such a difference and could adversely affect attendance at the Combined Company's parks, future financial performance, and/or the Combined Company's growth strategies, and could cause actual results to differ materially from expectations or otherwise to fluctuate or decrease, include, but are not limited to: general economic, political and market conditions; the impacts of pandemics or other public health crises, including the effects of government responses on people and economies; adverse weather conditions; competition for consumer leisure time and spending; unanticipated construction delays; changes in capital investment plans and projects; anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the Combined Company’s operations; failure to realize the anticipated benefits of the Mergers, including difficulty in integrating the businesses of Former Six Flags and Cedar Fair; failure to realize the expected amount and timing of cost savings and operating synergies related to the Mergers; legislative, regulatory and economic developments and changes in laws, regulations, and policies affecting the Combined Company; acts of terrorism or outbreak of war, hostilities, civil unrest, and other political or security disturbances; and other risks and uncertainties discussed under the heading "Risk Factors" within Part II, Item 1A of the Quarterly Report on Form 10-Q filed on August 8, 2024, in Cedar Fair's Annual Report on Form 10-K, in Former Six Flags' Annual Report on Form 10-K and in the other filings made from time to time with the SEC. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q and are based on information currently and reasonably known to management. The Combined Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this report.