United Parks & Resorts Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk Inflation The impact of inflation has affected, and will continue to affect, our operations significantly. Our costs of food, merchandise and other revenues are influenced by inflation and fluctuations in global commodity prices. In addition, costs for construction, repairs and maintenance are all subject to inflationary pressures. Interest Rate Risk We are exposed to market risks from fluctuations in interest rates, and to a lesser extent on currency exchange rates, from time to time, on imported rides and equipment. The objective of our financial risk management is to reduce the potential negative impact of interest rate and foreign currency exchange rate fluctuations to acceptable levels. We do not acquire market risk sensitive instruments for trading purposes. We previously managed interest rate risk through the use of a combination of fixed-rate long-term debt and interest rate swaps that fixed a portion of our variable-rate long-term debt. In May 2020, our interest rate swap agreements expired, as such, we did not have any derivative instruments outstanding as of September 30, 2020. We presently manage interest rate risk primarily by managing the amount, sources and duration of our debt funding. At September 30, 2020, approximately $1.5 billion of our outstanding long-term debt represents variable-rate debt. Assuming an average balance on our revolving credit borrowings of approximately $311.0 million, a hypothetical 100 bps increase in LIBOR would increase our annual interest expense by approximately $9.1 million. Assuming no revolving credit borrowings, a hypothetical 100 bps increase in LIBOR would increase our annual interest expense by approximately $6.0 million. COVID-19 Risks and Uncertainties See “ Risk Factors” for further discussion of the adverse impacts of the COVID-19 pandemic on our business and financial performance. 37