What changed in this filing

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Item 1A. Risk Factors

2020-08-10 compared with 2020-05-08 · 42 added, 44 removed, 36 unchanged (70% of the section changed)

1 unchanged sentence

The global COVID-19 pandemic has disrupted our business and will adversely affect our results of operations and various other factors beyond our control could materially adversely affect our financial condition and results of operations.

In response to the global COVID-19 pandemic, significant travel warnings and restrictions, social distancing rules, curfews and shelter-in-place have been implemented pursuant to federal, state and local orders and mandates and a significant portion of the global population is under a state of self-quarantine.

During this period, we are generating no revenue from our parks.

The extent and duration of such impacts over the longer term remain largely uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the COVID-19, the extent and effectiveness of containment actions taken, including mobility restrictions, and the impact of these and other factors on travel and consumer behavior.

It is possible that the spread of the COVID-19 and the resulting economic and societal impact will reduce our guests’ interest or ability to visit our theme parks.

In response to the global COVID-19 pandemic, quarantines, significant travel warnings and restrictions, social distancing rules, curfews and shelter-in-place have been implemented and may be re-implemented pursuant to federal, state and local orders and mandates.

Effective March 16, 2020, we temporarily closed all of our theme parks and therefore, did not generate revenue from our parks during the closure period.

Although some of our parks have been permitted to re-open with limited capacity, the extent and duration of any negative impacts over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time.

It is also impossible to predict the severity and transmission rate of COVID-19, the extent and effectiveness of containment actions taken, including mobility restrictions, and the impact of these and other factors on travel and consumer behavior.

It is possible that the spread of the COVID-19, the resulting economic and societal impact, social distancing or other safety requirements existing today or that may be implemented will reduce our guests’ interest or ability to visit our theme parks.

The COVID-19 pandemic and the actions taken in response, pose the risk that we or our employees, contractors, suppliers, and other business partners may be prevented from conducting business activities for an unknown period of time.

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Any such impacts could have a material adverse effect on our business.

Effective March 16, 2020, we temporarily closed all of our theme parks and are therefore not generating any revenues from our parks during the closure period.

We estimate our net cash outflow to be up to approximately $25 million per month, on average, during the time our theme parks remain closed, which reflects our current estimate of ongoing park and operating costs, average debt amortization and interest and capital expenditures.

This estimate takes into account the efforts we have put forth to preserve cash and provide sufficient liquidity during the temporary park closures.

Some of these measures include (i) deferring all capital projects other than a minimal amount of essential projects and maintenance;

(ii) eliminating or deferring non-essential operating expenses;

(iii) eliminating substantially all advertising and marketing spend;

(iv) temporarily reducing Executive Officer base pay by 20% and (v) working with our vendors and other business partners to manage, defer, and/or abate certain costs during the closure period.

Additionally, we have furloughed approximately 95% of our current employees.

A prolonged closure of our parks could materially impact our results, operations and financial condition.

As a result, we cannot estimate the impact on our business, financial condition or near- or longer-term financial or operational results with certainty.

Additionally, our accounts payable and accrued expenses balance as of March 31, 2020 is expected to increase given the rate of payments we are making during the closure period as we work with vendors and other business partners to defer or manage these costs.

Our net cash outflows estimate could be impacted should our vendors or business partners request accelerated payments of amounts owed or do not agree to deferrals during the closure period.

In March 2020, we increased borrowings under our revolving credit facility as a precautionary measure to increase our cash position, to provide liquidity for a sustained period and to preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.

Including the proceeds from the incremental borrowings, total unrestricted cash and cash equivalents as of March 31, 2020 was approximately $192.8 million.

Additionally on April 19, 2020, we entered into an amendment to the credit agreement governing the Senior Secured Credit Facilities to amend certain provisions therein (the “Amendment No.

In response to our park closures, we took steps to minimize our cash outflows.

Some of these measures included, but are not limited to (i) deferring all capital projects other than a minimal amount of essential projects and maintenance;

(ii) eliminating or deferring non-essential operating expenses while the parks were closed;

(iii) eliminating substantially all advertising and marketing spend for closed parks;

(iv) temporarily reducing Executive Officer base pay by 20%;

(v) working with certain vendors and other business partners to manage, defer, and/or abate certain costs during the closure period;

and (vi) initially furloughing approximately 95% of our employees upon closing all of our parks.

It is unclear if any of these actions could have a lasting negative impact on our relationships with vendors, current and/or future business partners or ambassadors or if the parks are forced to close again whether we will be able to achieve similar cost savings.

We have been sued and may face additional lawsuits or damage to our reputation related to actions taken or not taken as a result of COVID-19 from current and/or future vendors, customers and/or ambassadors.

The lawsuits could negatively impact our cash flows and results of operations.

Also, another prolonged closure of our parks could materially impact our results, operations and financial condition.

Additionally, due to the uncertainties created by the COVID-19 pandemic and the related impact on our business, we have made or may make future employment or restructuring decisions which may subject us to increased risks related to employment matters, including increased litigation and/or claims for severance or other benefits.

In March 2020, we increased borrowings under our revolving credit facility as a precautionary measure to increase our cash position and in April 2020 we issued $227.5 million aggregate principal amount of 8.750% first-priority senior secured notes due 2025 to raise capital and provide additional liquidity for a sustained period and to preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic.

Additionally on April 19, 2020, we entered into an amendment to our Amended Credit Agreement to amend certain provisions therein (“Amendment No.

As of June 30, 2020, total unrestricted cash and cash equivalents was approximately $375.7 million.

On July 29, 2020, we entered into another amendment to our Amended Credit Agreement to further amend certain provisions therein (“Amendment No.

Pursuant to Amendment No.

11, we will be required to comply with a quarterly minimum liquidity coverage test (defined as unrestricted cash and cash equivalents and available commitments under the Revolving Credit Facility) of not less than $75.0 million.

On April 30, 2020, we closed on our senior notes offering of $227.5 million 8.750% first-priority senior secured notes due 2025 which provided us with net proceeds of approximately $220.1 million.

We cannot be certain that we will continue to have access to sufficient liquidity to meet our obligations for the time required to allow our cash generating operations to resume or normalize.

12, we will be exempt from complying with our first lien secured leverage ratio covenant through the end of 2021 and will be required to comply with a quarterly minimum liquidity coverage test (defined as unrestricted cash and cash equivalents and available commitments under the

Revolving Credit Facility) of not less than $75.0 million until the earlier of September 30, 2022 or the date we elect to use actual Adjusted EBITDA for purposes of calculating our financial maintenance covenant .

There is no certainty we will be able to meet this test and failure to meet this test could result in events of default under our debt agreements, acceleration of our outstanding debt and materially affect our financial condition and results of operations.

On August 5 , 2020, we closed on a second -priority senior secured notes offering of $500.0 million 9.5 0 0% second -priority senior secured notes due 2025 which provided us with net proceeds of approximately $ 489.7 million.

We cannot be certain that we will continue to have access to sufficient liquidity to meet our obligations for the time required to allow our cash generating operations to normalize.

The effect of COVID-19 on the capital markets could significantly impact our cost of borrowing and the availability of capital to us.

COVID-19 also makes it more challenging for management to estimate the future performance of our business or our liquidity needs, particularly over the near to medium term.

We may not be able to obtain additional liquidity and any relief provided by lenders, governmental agencies, and business partners may not be adequate and may include onerous terms.

If we are unable to generate revenues from our parks due to a prolonged period of closure or experience significant declines in business volumes upon reopening, our results, operations and financial condition may be negatively impacted.

When we are able to reopen our theme parks, we may face additional costs and obstacles in complying with any new federal, state or local regulations or industry best practices established in response to the COVID-19 pandemic, re-integrating our furloughed employees and attracting guests who may not wish to travel or visit our theme parks for a prolonged period, which could impact the mix of guests in our theme parks.

Changes in school calendars could also impact traditional summer vacation months and impact our attendance.

In addition, we may take voluntary measures to require social distancing in our theme parks, limit the number of guests allowed to participate in events and rides or close our theme parks again if the COVID-19 pandemic worsens.

We had never previously experienced a complete cessation of our operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our operations and future prospects is uncertain.

In addition, the magnitude, duration and speed of the global pandemic is uncertain.

As a consequence, we cannot estimate the impact on our business, financial condition or near or longer-term financial or operational results with certainty.

As we continue to make progress in the reopening of our theme parks, we may face additional costs and obstacles in complying with any new federal, state or local regulations or industry best practices established in response to the COVID-19 pandemic, re-integrating our furloughed employees and attracting guests who may not wish to travel or visit our theme parks for a prolonged period.

In addition, any measures we take or may be required to take such as limiting capacity in our theme parks, enforcing social distancing requirements and / or requiring masks, may negatively impact attendance at our theme parks.

It is not possible to predict what steps, if any, we may be required to take if the COVID-19 pandemic worsens.

It is possible we could be forced to close some or all of our parks again.

Any of these factors could have a material adverse effect on our revenue and results of operations.

Even once our theme parks resume operations, a single case of COVID-19 in a theme park or impacting our animal population could result in additional costs and further closures.

A single case of COVID-19 in a theme park could result in additional costs and further closures.

If we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate, we could suffer damage to our reputation, which could significantly adversely affect our business.

Furthermore, the effects of the pandemic on our business could be long-lasting and could continue to have adverse effects on our business, results of operations, liquidity, cash flows and financial condition, some of which may be significant, and may adversely impact our ability to operate our business after our temporary suspension ends on the same terms as we conducted business prior to the pandemic.

We believe, but cannot guarantee, that our business will ultimately rebound and benefit from pent-up social demand for out-of-home entertainment, as government restrictions are lifted and home sheltering subsides.

However, the ultimate significance of the pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration and the effect on the overall economy and of responsive governmental regulations, including shelter-in-place orders of the pandemic and mandated business closures.

Our business also could be significantly affected should the disruptions caused by COVID-19 lead to changes in consumer behavior (such as social distancing), which we believe will be temporary.

The effect of COVID-19 on the capital markets could significantly impact our cost of borrowing and the availability of capital to us.

There are limitations on our ability to mitigate the adverse financial impact of these items.

COVID-19 also makes it more challenging for management to estimate the future performance of our business or our liquidity needs, particularly over the near to medium term.

Furthermore, the effects of the pandemic on our business could be long-lasting and could continue to have adverse effects, some of which may be significant, and which may indefinitely impact our ability to operate our business in the traditional, pre-pandemic manner.

Our business also could be significantly affected should the disruptions caused by COVID-19 lead to systemic changes in consumer behavior.

The outbreak of COVID-19 has significantly increased economic uncertainty.

It is possible that the current outbreak or continued spread of COVID-19 could cause a global recession, which could further adversely affect our business, and such adverse effects may be material.

Our properties are subject to the risk that operations could be halted for a temporary or extended period of time.

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Additionally, if a prolonged downturn of general economic or other conditions in the areas in which our properties are located or from which we draw our guests or prevents guests from easily coming to our properties, our business, financial condition, results of operations and prospects will be materially adversely affected.

The outbreak of COVID-19 has also significantly increased economic uncertainty.

It is likely that the current outbreak or continued spread of COVID-19 could cause a global recession, which could further adversely affect our business, and such adverse effects may be material.

We have never previously experienced a complete cessation of our operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our operations and future prospects is uncertain.

In addition, the magnitude, duration and speed of the global pandemic is uncertain.

As a consequence, we cannot estimate the impact on our business, financial condition or near or longer-term financial or operational results with certainty.

Various other factors beyond our control could adversely affect attendance and guest spending patterns at our theme parks.

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low consumer confidence;

outbreaks of pandemic or contagious diseases or consumers’ concerns relating to potential exposure to travel-related health concerns such as pandemics and epidemics such as COVID-19, Ebola, Zika, Influenza H1N1, avian bird flu, SARS and MERS;

outbreaks of pandemic or contagious diseases or consumers’ concerns relating to potential exposure to travel-related health concerns such as pandemics and epidemics such as Ebola, Zika, Influenza H1N1, avian bird flu, SARS and MERS;

changes in the desirability of particular locations or travel patterns of both our domestic and international guests;

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A strong dollar increases the cost for international tourists and could impact their spending.

In addition, demand for our parks is highly dependent on the general environment for travel and tourism, which can be significantly adversely affected by extreme weather events.

In addition, demand for our parks is highly dependent on the general environment for travel and tourism, which can be significantly adversely affected by quarantine requirements, availability of flights, closures of borders and/or extreme weather events.

Any of these such events could have a material adverse effect on our business, financial condition, or results of operations.

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Separately, in 2017 we also experienced negative impacts from weather events, particularly hurricanes, which caused park closures in Tampa and Orlando and park closures and other weather impacts in Texas and Virginia.

Additionally, although we are reviewing and intend to seek any applicable available benefits under the CARES Act, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all.

Certain of the benefits we seek to access under the CARES Act have not previously been administered on the present scale or at all.

Government or third party program administrators may be unable to cope with the volume of applications in the near term and any benefits we receive may not be as extensive as we currently estimate, may impose additional conditions and restrictions on our operations or may otherwise provide less relief than we contemplate.

Accessing these benefits and our response to the COVID-19 pandemic have required our management team to devote extensive resources and are likely to continue to do so in the near future, which negatively affects our ability to implement our business plan and respond to opportunities.

The COVID-19 pandemic (including governmental responses, broad economic impacts and market disruptions) has heightened the risks related to the other risk factors described in our 2019 Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors