What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-06 · 220 added, 187 removed, 239 unchanged (63% of the section changed)

14 unchanged sentences

In response to the global COVID-19 pandemic and in compliance with government restrictions, we temporarily closed all of our theme parks effective March 16, 2020.

Beginning in June 2020, we began the phased reopening of some of our parks with capacity limitations and/or modified/limited operations and by the end of June 2020, we had reopened seven of our 12 parks on a limited basis.

Beginning in June 2020, we began the phased reopening of some of our parks with capacity limitations and/or modified/limited operations, which extended through 2020 and into 2021.

By the end of the second quarter of 2021, all of our parks were operating without COVID-19 related capacity limitations.

See further discussion in Note 1–Description of the Business and Basis of Presentation to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

1 unchanged sentence

During the second quarter of 2021, based on revisions to federal, state and local guidelines, we modified some of these protocols.

In particular, we are no longer requiring face coverings for guests who are fully vaccinated and fully vaccinated employees working in outdoor areas.

In particular, we are no longer requiring face coverings outdoors for guests and employees who are fully vaccinated.

We have also discontinued temperature screenings at all of our parks.

Additionally, in July 2021, excluding our reservations-only Discovery Cove park, we suspended the requirement for our guests to use our reservation system, providing guests more flexibility in planning their visit.

At the start of 2021, seven of our 12 parks were open, compared to eight of our 12 parks at the start of 2020.

At the start of the second quarter of 2021, 10 of our 12 parks were open but operating with capacity limitations or modified/limited operations.

By the end of the second quarter 2021, all of our parks were open and operating without COVID-19 related capacity limitations.

We continue our focus on reducing costs, improving operating margins and streamlining our labor structure to better align with our strategic business objectives.

2 unchanged sentences

however, there can be no certainty of the extent and effectiveness of the vaccines or how they will impact these factors and others, including domestic or international travel, group events, public opinion concerning social gatherings, consumer behavior or federal, state and local regulations related to health protocols, capacity limitations and social gatherings .

Due in part to the current overall labor market and COVID-19 related factors, we have experienced and may continue to experience challenges in meeting our seasonal staffing goals, which could impact operations.

These staffing challenges have led to wage pressures in select markets for select roles during the quarter.

These wage pressures were more than offset by cost savings initiatives.

Current Operating Environment

Our Board has formed a number of committees designed to provide further assistance by exercising enhanced oversight over the operations of the Company.

Examples of these committees include the Revenue Committee, Cost Committee and CRM Committee.

As a result, in the current operating environment, certain members of our Board, including our Chairman of the Board, are actively involved in overseeing certain key operating activities.

The current condition of the overall labor market, the challenging current operating environment and COVID-19 related factors has led to increased turnover and challenges in meeting our staffing goals.

These staffing challenges have also led to wage pressures for select roles during the second and third quarters of 2021.

Staffing challenges and inflationary pressures in general could continue in this environment;

however, we continue our efforts to recruit and retain talent as well as identify cost reduction and efficiency opportunities.

For further discussion relating to strategic measures we have taken to operate in the current environment, see the “Results of Operations” section which follows.

1 unchanged sentence

Principal Factors and Trends Affecting Our Results of Operations

Our revenues are driven primarily by attendance in our theme parks and the level of per capita spending for admission and per capita spending for culinary, merchandise and other in-park products.

Our revenues are driven primarily by attendance in our theme parks and the level of per capita spending for admission and per capita spending for food and beverage, merchandise and other in-park products.

We define attendance as the number of guest visits.

12 unchanged sentences

We calculate in-park per capita spending as total food, merchandise and other revenue divided by total attendance.

Food, merchandise and other revenue primarily consists of culinary, merchandise, parking and other in-park products and also includes other miscellaneous revenue, including online transaction fees, not necessarily generated in our parks, which is not significant in the periods presented.

Food, merchandise and other revenue primarily consists of food and beverage, merchandise, parking and other in-park products and also includes other miscellaneous revenue, including online transaction fees, not necessarily generated in our parks, which is not significant in the periods presented.

In-park per capita spending is primarily driven by pricing changes, new product offerings, the mix of guests (such as local, domestic or international guests), penetration levels (percentage of guests purchasing) and the mix of in-park spending, among other factors.

3 unchanged sentences

The external perceptions of our brands and reputation have at times impacted relationships with some of our business partners, including certain ticket resellers that have terminated relationships with us and other zoological-themed attractions.

As a result of the COVID-19 pandemic, we believe the level of attendance in our theme parks, including the mix of attendance from certain markets and certain guests has been and will continue to be impacted by public concerns over the COVID-19 pandemic, the number of reported local cases of COVID-19, domestic and international travel restrictions, federal, state and local regulations related to public places, limits on social gatherings, the availability and/or effectiveness of vaccines for adults and children, and overall public safety sentiment.

As a result of the COVID-19 pandemic, we believe the level of attendance in our theme parks, including the mix of attendance from certain markets and certain guests has been and will continue to be impacted by concerns over the COVID-19 pandemic, the number of reported local cases of COVID-19, domestic and international travel restrictions, federal, state and local regulations related to public places, limits on social gatherings, the availability and/or effectiveness of vaccines for adults and children, and overall public safety sentiment.

We continuously monitor factors impacting our attendance, making strategic operations, marketing and sales adjustments as necessary.

2 unchanged sentences

Factors that affect our costs and expenses include fixed operating costs, competitive wage pressures including minimum wage legislation, commodity prices, costs for construction, repairs and maintenance, other inflationary pressures and attendance levels, among other factors.

The mix of products sold compared to the prior year period can also impact our costs as generally retail products have a higher cost of sales component than our culinary or other in-park offerings.

A s a result of the impact of the COVID-19 pandemic on our business , costs and expenses as a percent of revenue for the three and six months ended June 30 , 202 1 and 2020 , are not necessarily indicative of costs and expenses as a percent of revenue for any future period , due in part to the impact of fixed operating costs and certain other costs which are not dependent on attendance levels , as well as certain costs associated with the COVID-19 pandemic.

The mix of products sold compared to the prior year period can also impact our costs as generally retail products have a higher cost of sales component than our food and beverage or other in-park offerings.

As a result of the impact of the COVID-19 pandemic on our business, costs and expenses as a percent of revenue for the three and nine months ended September 30, 2021 and 2020, are not necessarily indicative of costs and expenses as a percent of revenue for any future period, due in part to the impact of fixed operating costs and certain other costs which are not dependent on attendance levels, as well as certain costs associated with the COVID-19 pandemic.

For other factors affecting our costs and expenses, see the “ Impact of Global COVID-19 Pandemic ” section and the “ Risk Factors ” section of our Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with the SEC.

9 unchanged sentences

Furthermore, any changes to the operating schedule of a park such as increasing operating days for our seasonal parks, could impact seasonality in the future.

During the first six months of 2021, we began year-round operations at our SeaWorld park in Texas and began to operate on select days at both our Busch Gardens park in Virginia and our Sesame Place park in Pennsylvania.

During the first nine months of 2021, we began year-round operations at our SeaWorld park in Texas and began to operate on select days on a year round basis at both our Busch Gardens park in Virginia and our Sesame Place park in Pennsylvania.

See “ Risk Factors ” section of our Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with the SEC.

Results of Operations

Our results for the three and six months ended June 30, 2021 are not directly comparable to the three and six months ended June 30, 2020 primarily due to temporary park closures, effective on March 16, 2020, capacity limitations, and modified/limited operations associated with the COVID-19 pandemic.

Our results for the three and nine months ended September 30, 2021 are not directly comparable to the three and nine months ended September 30, 2020 primarily due to temporary park closures, effective on March 16, 2020, capacity limitations, and modified/limited operations associated with the COVID-19 pandemic.

Our business continues to be impacted by the COVID-19 pandemic;

however, we have seen improvement in operating results during the three and six months ended June 30, 2021 due in part to an improving operating environment along with the impact of strategic measures we have taken both before and during the COVID-19 pandemic.

however, we have seen improvement in operating results during the three and nine months ended September 30, 2021 due in part to an improving operating environment along with the impact of strategic measures we have taken both before and during the COVID-19 pandemic.

See “ Impact of Global COVID-19 Pandemic ” and “Attendance” for further discussion of the adverse impacts of the COVID-19 pandemic on our business.

The following data should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Three Months Ended June 30, 2021 and 2020

The following table presents key operating and financial information for the three months ended June 30, 2021 and 2020:

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table presents key operating and financial information for the three months ended September 30, 2021 and 2020:

For the Three Months Ended

September 30,

Summary Financial Data:

11 unchanged sentences

Operating income (loss)

Other expense (income), net

Other income, net

Interest expense

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs

Income (loss) before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Net income (loss)

4 unchanged sentences

Admissions revenue .

Admissions revenue for the three months ended June 30, 2021 increased $233.5 million to $243.2 million as compared to $9.8 million for the three months ended June 30, 2020.

Admissions revenue for the three months ended September 30, 2021 increased $233.6 million to $296.7 million as compared to $63.1 million for the three months ended September 30, 2020.

The increase in admissions revenue was primarily a result of an increase in attendance of approximately 5.7 million guests, along with an increase in admission per capita.

Attendance during the three months ended June 30, 2021 benefitted from an increase in demand and operating days resulting from a return to more normalized operations when compared to the second quarter of 2020, which was significantly impacted by the temporary park closures.

Admission per capita increased by 16.5% to $41.87 for the three months ended June 30, 2021 compared to $35.94 in the three months ended June 30, 2020.

Admission per capita increased primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset by the net impact of the park and admissions product mix when compared to the prior year quarter due in part to limited operating days and temporary park closures.

Attendance during the three months ended September 30, 2021 benefitted from an increase in demand and operating days resulting from a return to more normalized operations when compared to the third quarter of 2020, which was significantly impacted by the temporary park closures.

Attendance during the third quarter of 2021 was also unfavorably impacted by weather.

Admission per capita increased by 1.7% to $41.06 for the three months ended September 30, 2021 compared to $40.39 in the three months ended September 30, 2020.

Admission per capita increased primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset by the net impact of the admissions product and park mix when compared to the prior year quarter due in part to limited operating days and temporary park closures.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the three months ended June 30, 2021 increased $188.3 million to $196.6 million as compared to $8.3 million for the three months ended June 30, 2020.

Food, merchandise and other revenue for the three months ended September 30, 2021 increased $181.5 million to $224.5 million as compared to $43.0 million for the three months ended September 30, 2020.

The increase results primarily from the increase in attendance discussed above, along with an increase in in-park per capita spending.

In-park per capita spending increased by 11.6% to $33.84 in the three months ended June 30, 2021 compared to $30.33 in the three months ended June 30, 2020.

In-park per capita spending improved primarily due to increased guest spending, new or enhanced and expanded in-park offerings, an improved product mix, higher realized prices and a strong consumer demand environment during the quarter.

In-park per capita spending increased by 12.8% to $31.07 in the three months ended September 30, 2021 compared to $27.55 in the three months ended September 30, 2020.

In-park per capita spending improved primarily due to increased guest spending, an improved product mix, higher realized prices, new or enhanced and expanded in-park offerings, and a strong consumer demand environment during the quarter.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the three months ended June 30, 2021 increased by $33.0 million to $34.2 million as compared to $1.2 million for the three months ended June 30, 2020, primarily due to the increase in related revenue.

These costs represent 17.4% and 14.0% of the related revenue earned for the three months ended June 30, 2021 and 2020, respectively.

The increase as a percent of related revenue primarily reflects a return to more normalized operations and a higher mix of retail products sold, which generally have a higher cost of sales component than our culinary or other in park products.

Compared to previous years, these costs as a percent of related revenue for the three months ended June 30, 2019 and 2018, were 18.0% and 19.2%, respectively.

Costs of food, merchandise and other revenues for the three months ended September 30, 2021 increased by $28.7 million to $38.0 million as compared to $9.3 million for the three months ended September 30, 2020, primarily due to the increase in related revenue.

These costs represent 16.9% and 21.6% of the related revenue earned for the three months ended September 30, 2021 and 2020, respectively.

The decrease as a percent of related revenue primarily reflects a return to more normalized operations and the impact of higher realized pricing and product mix, which more than offset inflationary pressures.

Operating expenses.

Operating expenses for the three months ended June 30, 2021 increased by $98.3 million, or 166.4% , to $157.3 million as compared to $59.0 million for the three months ended June 30, 2020 .

Operating expenses in the prior year period were significantly impacted by the temporary park closures, which resulted in furloughing approximately 95% of our employees and eliminating or deferring all non-essential operating expenses while the parks were closed.

As a result, t he in crease in operating expenses during the second quarter of 2021 primarily results from a return to more normalized operations with all 12 parks open compared to only 7 parks which reopened in June 2020 with limited/modified operations.

In particular, operating expenses increased largely due to labor-related costs to staff all 12 open parks , partially offset by structural cost savings initiatives when compared to the prior year quarter .

O perating expenses as a percent of revenue were 35.8% for the three months ended June 30, 2021 and are not comparable to the prior year period primarily due to the impact of certain operating costs in 2020 which are not dependent on attendance levels .

Compared to previous years, operating expenses as a percent of revenue for the three months ended June 30, 2019 and 2018, were 42.0% and 48.5%, respectively.

Operating expenses for the three months ended September 30, 2021 increased by $103.8 million, or 113.6% , to $195.1 million as compared to $91.3 million for the three months ended September 30, 2020 .

Operating expenses in the prior year period were significantly impacted by limited operating days and hours, furloughs and workforce reductions resulting from limited reopenings and temporary park closures due to the COVID-19 pandemic .

As a result, t he in crease in operating expenses during the third quarter of 2021 primarily results from a return to more normalized operations.

In particular, operating expenses increased largely due to labor-related and other operating costs to staff and operate open parks in a more normalized environment , partially offset by structural cost savings initiatives when compared to the prior year quarter .

Operating expenses for the third quarter of 2021 were also impacted by approximately $9.

2 million of nonrecurring contractual liabilities and legal costs resulting from the temporary COVID-19 park closures , operating costs associated with incremental events added in 2021 , an increase of approximately $2.6 million in non-cash equity compensation expenses and the timing of certain maintenance projects .

O perating expenses as a percent of revenue were 37.4% for the three months ended September 30, 2021 and are not comparable to the prior year period primarily due to the impact of certain operating costs in 2020 which are not dependent on attendance levels .

Selling, general and administrative expenses .

Selling, general and administrative expenses for the three months ended June 30, 2021 increased $22.1 million, or 104.7%, to $43.2 million as compared to $21.1 million for the three months ended June 30, 2020.

The increase primarily relates to increased marketing related costs resulting from a return to more normalized operations in the second quarter of 2021 as we substantially eliminated all marketing related costs while the parks were closed in 2020.

Selling, general and administrative expenses were also impacted by an increase in labor-related costs when compared to the prior year quarter which included the impact of furloughs due to the temporary park closures, partially offset by the impact of cost savings and efficiency initiatives.

Selling, general and administrative expenses as a percent of revenue were 9.8% for the three months ended June 30, 2021 and is not comparable to the prior year period primarily due to the impact of the temporary park closures.

Compared to previous years, selling, general and administrative expenses as a percent of revenue for the three months ended June 30, 2019 and 2018, were 16.6% and 18.1%, respectively.

Selling, general and administrative expenses for the three months ended September 30, 2021 increased $29.3 million, or 120.3%, to $53.6 million as compared to $24.3 million for the three months ended September 30, 2020.

The increase primarily relates to increased marketing related costs resulting from a return to more normalized operations in the third quarter of 2021 as we substantially reduced marketing related costs due to limited reopenings and temporary park closures in 2020.

Selling, general and administrative expenses were also impacted by an increase of approximately $7.0 million in non-cash equity compensation and an increase in labor-related costs when compared to the prior year quarter, partially offset by the impact of cost savings and efficiency initiatives.

Selling, general and administrative expenses as a percent of revenue were 10.3% for the three months ended September 30, 2021 and is not comparable to the prior year period primarily due to the impact of the limited operations and temporary park closures.

Depreciation and amortization.

Depreciation and amortization expense for the three months ended June 30, 2021 declined by $1.7 million, or 4.5%, to $36.2 million as compared to $37.9 million for the three months ended June 30, 2020.

Depreciation and amortization expense for the three months ended September 30, 2021 declined by $1.7 million, or 4.6%, to $36.3 million as compared to $38.1 million for the three months ended September 30, 2020.

The decrease primarily relates to a decline in new asset additions along with the impact of asset retirements and fully depreciated assets.

Interest expense.

Interest expense for the three months ended June 30, 2021 increased $9.2 million, or 42.1%, to $31.1 million as compared to $21.9 million for the three months ended June 30, 2020.

The increase primarily relates to interest on the Senior Notes issued in April 2020 and the Second-Priority Senior Secured Notes issued in August 2020, partially offset by reduced interest related to the Revolving Credit Facility, which was undrawn in 2021, and the impact of interest rate swap agreements which expired in the second quarter of 2020.

Interest expense for the three months ended September 30, 2021 increased approximately $0.2 million, or 0.8%, to $28.4 million as compared to $28.1 million for the three months ended September 30, 2020.

The increase primarily relates to interest on the Second-Priority Senior Secured Notes issued in August 2020 and the Senior Notes issued in August 2021, partially offset by the impact of a lower average outstanding balance on our Term Loans and Revolving Credit Facility, which was undrawn in 2021, and the impact of decreased LIBOR rates.

See Note 6–Long-Term Debt in our notes to the unaudited condensed consolidated financial statements and the “Our Indebtedness” section which follows for further details.

Provision for income taxes.

Income taxes in the three months ended June 30, 2021 was a provision of $8.5 million compared to $7.9 million for the three months ended June 30, 2020.

Our consolidated effective tax rate was 6.2% for the three months ended June 30, 2021 compared to -6.4% for the three months ended June 30, 2020.

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs.

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs for the three months ended September 30, 2021 primarily relate to a write-off of discounts and debt issuance costs resulting from the Refinancing Transactions during the three months ended September 30, 2021.

See Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q and the “ Our Indebtedness” section which follows for further details.

Provision for (benefit from) income taxes.

Income taxes in the three months ended September 30, 2021 was a provision of $8.9 million compared to a benefit of $8.4 million for the three months ended September 30, 2020.

Our consolidated effective tax rate was 8.0% for the three months ended September 30, 2021 compared to 9.6% for the three months ended September 30, 2020.

The effective tax rate was primarily impacted by non-cash valuation allowance adjustments on federal and state net operating loss carryforwards, a valuation allowance adjustment on federal tax credits, changes in state tax rates and tax impacts of equity-based compensation.

Supplemental comparison of the three months ended June 30, 2021 to the three months ended June 30, 2019

We believe a comparison of selected financial results for the three months ended June 30, 2021 to the three months ended June 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the three months ended June 30, 2021 compared to the three months ended June 30, 2019.

The selected summary financial data for the three months ended June 30, 2019 was derived from the Company’s Quarterly Report on Form 10-Q for quarter ended June 30, 2019.

See Note 4–Income Taxes in our notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Supplemental comparison of the three months ended September 30, 2021 to the three months ended September 30, 2019

We believe a comparison of selected financial results for the three months ended September 30, 2021 to the three months ended September 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2019.

The selected summary financial data for the three months ended September 30, 2019 was derived from the Company’s Quarterly Report on Form 10-Q for quarter ended September 30, 2019.

For the Three Months Ended

September 30,

Summary Financial Data:

11 unchanged sentences

Admissions revenue .

Admissions revenue for the three months ended June 30, 2021 increased $15.4 million, or 6.8%, to $243.2 million as compared to $227.8 million for the three months ended June 30, 2019.

Admissions revenue for the three months ended September 30, 2021 increased $28.6 million, or 10.7%, to $296.7 million as compared to $268.0 million for the three months ended September 30, 2019.

The increase in admissions revenue was primarily a result of an increase in admissions per capita, partially offset by a decrease in attendance of approximately 0.9 million guests, or 11.0%.

Attendance declined when compared to 2019 primarily due to COVID-19 related impacts including capacity limitations and/or modified/limited operations at our parks for some of the quarter.

Attendance declined when compared to 2019 primarily due to a decline from international guest visitation and group-related attendance.

Attendance was also impacted by an unfavorable calendar shift and weather during the quarter.

Admission per capita increased by 24.4% to $41.06 in 2021 compared to $33.00 in 2019.

Admission per capita increased primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, along with the net impact of the admissions product mix when compared to the second quarter of 2019.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the three months ended June 30, 2021 increased $18.4 million, or 10.3%, to $196.6 million as compared to $178.2 million for the three months ended June 30, 2019, primarily as a result of an increase in in-park per capita spending, partially offset by a decrease in attendance as discussed above.

In-park per capita spending increased by 22.7% to $33.84 in the second quarter of 2021 compared to $27.57 in the second quarter of 2019.

In-park per capita spending improved primarily due to increased guest spending, higher realized prices and fees, an improved product mix, new or enhanced and expanded in-park offerings, and a strong consumer demand environment during the quarter.

Food, merchandise and other revenue for the three months ended September 30, 2021 increased $18.9 million, or 9.2%, to $224.5 million as compared to $205.6 million for the three months ended September 30, 2019, primarily as a result of an increase in in-park per capita spending, partially offset by a decrease in attendance as discussed above.

In-park per capita spending increased by 22.8% to $31.07 in the third quarter of 2021 compared to $25.31 in the third quarter of 2019.

In-park per capita spending improved primarily due to increased guest spending, an improved product mix, higher realized prices and fees, new or enhanced and expanded in-park offerings and a strong consumer demand environment during the quarter.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the three months ended June 30, 2021 increased $2.2 million, or 6.8%, to $34.2 million as compared to $32.0 million for the three months ended June 30, 2019, primarily due to an increase in volume.

These costs represent 17.4% and 18.0% of the related revenue earned for the three months ended June 30, 2021 and 2019, respectively.

The decrease as a percent of related revenue partly relates to the impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products.

Costs of food, merchandise and other revenues for the three months ended September 30, 2021 increased $0.1 million, or 0.4%, to $38.0 million as compared to $37.8 million for the three months ended September 30, 2019.

These costs represent 16.9% and 18.4% of the related revenue earned for the three months ended September 30, 2021 and 2019, respectively.

The decrease as a percent of related revenue partly relates to the net impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products, which more than offset inflationary pressures.

Operating expenses.

Operating expenses for the three months ended June 30, 2021 decreased $13.1 million, or 7.7%, to $157.3 million as compared to $170.4 million for the three months ended June 30, 2019.

Operating expenses were 35.8% of total revenues for the three months ended June 30, 2021 compared to 42.0% for the three months ended June 30, 2019.

Operating expenses for the three months ended September 30, 2021 increased $19.5 million, or 11.1%, to $195.1 million as compared to $175.6 million for the three months ended September 30, 2019.

Operating expenses for the third quarter of 2021 increased primarily due to approximately $9.2 million of nonrecurring contractual liabilities and legal costs resulting from the temporary COVID-19 park closures.

Operating expenses also increased due to incremental operating days and events added in 2021, an increase of $2.6 million in non-cash equity compensation expenses, and the timing of certain maintenance projects.

These increases were partially offset by a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives.

Operating expenses were 37.4% of total revenues for the three months ended September 30, 2021 compared to 37.1% for the three months ended September 30, 2019.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the three months ended June 30, 2021 decreased $24.0 million, or 35.7%, to $43.2 million as compared to $67.2 million for the three months ended June 30, 2019.

The decrease primarily relates to a reduction in marketing related costs and the impact of cost savings and efficiency initiatives.

As a percentage of total revenue, selling, general and administrative expenses were 9.8% for the three months ended June 30, 2021 compared to 16.6% for the three months ended June 30, 2019.

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table presents key operating and financial information for the six months ended June 30, 2021 and 2020:

For the Six Months Ended

Selling, general and administrative expenses for the three months ended September 30, 2021 decreased $11.0 million, or 17.0% , to $53.6 million as compared to $64.6 million for the three months ended September 30, 2019.

The decrease primarily relates to a targeted reduction in marketing related costs and the impact of cost savings and efficiency initiatives partially offset by a $9.2 million increase in non-cash equity compensation .

As a percentage of total revenue, selling, general and administrative expenses were 10.3% for the three months ended September 30, 2021 compared to 13.6% for the three months ended September 30, 201 9 .

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table presents key operating and financial information for the nine months ended September 30, 2021 and 2020:

For the Nine Months Ended

September 30,

Summary Financial Data:

13 unchanged sentences

Interest expense

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs

Income (loss) before income taxes

6 unchanged sentences

Admissions revenue .

Admissions revenue for the six months ended June 30, 2021 increased $238.7 million to $339.0 million as compared to $100.3 million for the six months ended June 30, 2020.

Admissions revenue for the nine months ended September 30, 2021 increased $472.3 million to $635.7 million as compared to $163.4 million for the nine months ended September 30, 2020.

The improvement was a result of an increase in attendance and in admissions per capita.

Total attendance for the first six months of 2021 increased by approximately 5.4 million guests when compared to the first six months of 2020.

Attendance improved primarily due to an increase in demand and operating days resulting from a return to more normalized operations in the first six months of 2021 compared to the first six months of 2020, which was significantly impacted by the temporary park closures.

The increase in operating days more than offset unfavorable impacts on attendance from COVID-19 related impacts including capacity limitations and modified/limited operations for most of the first half of 2021.

Admission per capita increased by 9.2% to $42.25 for the six months ended June 30, 2021 compared to $38.70 for the six months ended June 30, 2020, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, partially offset by the net impact of the park and admissions product mix when compared to the prior year period.

Total attendance for the first nine months of 2021 increased by approximately 11.1 million guests when compared to the first nine months of 2020.

Attendance improved primarily due to an increase in demand and operating days resulting from a return to more normalized operations in the first nine months of 2021 compared to the first nine months of 2020, which was significantly impacted by the temporary park closures.

Attendance during the first nine months of 2021 was also unfavorably impacted by weather.

The increase in operating days more than offset unfavorable impacts on attendance from COVID-19 related impacts including capacity limitations and/or modified/limited operations for some of the first nine months of 2021.

Admission per capita increased by 6.0% to $41.69 for the nine months ended September 30, 2021 compared to $39.34 for the nine months ended September 30, 2020, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, partially offset by the net impact of the park and admissions product mix when compared to the prior year period.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the six months ended June 30, 2021 increased $201.4 million to $272.7 million as compared to $71.3 million for the six months ended June 30, 2020.

The increase largely results from the increase in attendance discussed above.

In-park per capita spending increased by 23.5% to $33.99 for the six months ended June 30, 2021 compared to $27.52 for the six months ended June 30, 2020.

In park per capita increased due to the impact of new or enhanced and expanded in-park offerings, increased guest spending, an improved product mix, higher realized prices and a strong consumer demand environment when compared to the prior year period.

Food, merchandise and other revenue for the nine months ended September 30, 2021 increased $382.9 million to $497.2 million as compared to $114.3 million for the nine months ended September 30, 2020 .

The in crease largely results from the increase in attendance discussed above .

In-park per capita spending increased by 18.5% to $32.61 for the nine months ended September 30, 2021 compared to $27.53 for the nine months ended September 30, 2020 .

In park per capita increased due to increased guest spending, an improved product mix , higher realized prices , the impact of new or enhanced and expanded in-park offerings , and a strong consumer demand environment when compared to the prior year period .

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the six months ended June 30, 2021 increased $34.9 million to $49.1 million as compared to $14.3 million for the six months ended June 30, 2020.

Costs of food, merchandise and other revenues for the nine months ended September 30, 2021 increased $63.5 million to $87.1 million as compared to $23.6 million for the nine months ended September 30, 2020.

The increase primarily relates to the increase in attendance as discussed above.

These costs represent 18.0% and 20.0% of the related revenue earned for the six months ended June 30, 2021 and 2020, respectively.

The decrease as a percent of related revenue primarily relates to the impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products.

Compared to previous years, these costs as a percent of related revenue for the six months ended June 30, 2019 and 2018, were 18.2% and 19.3%, respectively.

These costs represent 17.5% and 20.6% of the related revenue earned for the nine months ended September 30, 2021 and 2020, respectively.

The decrease as a percent of related revenue primarily reflects a return to more normalized operations and the impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products, which more than offset inflationary pressures.

Operating expenses.

Operating expenses for the six months ended June 30, 2021 increased by $73.0 million, or 38.0% , to $265.1 million as compared to $192.0 million for the six months ended June 30, 2020 .

The prior year period was significantly impacted by labor-related reductions due to furloughs and other nonessential operating cost reductions resulting from the temporary park closures .

Operating expenses as a percent of revenue were 43.3% for the six months ended June 30, 2021 and are not comparable to the prior year period primarily due to the impact of certain operating costs in 2020 which are not dependent on attendance levels.

Compared to previous years, operating expenses as a percent of revenue for the six months ended June 30, 2019 and 2018, were 51.1% and 56.7%, respectively.

Operating expenses for the nine months ended September 30, 2021 increased by $176.8 million, or 62.4%, to $460.2 million as compared to $283.4 million for the nine months ended September 30, 2020.

The increase primarily relates to a net increase in labor-related and other operating costs resulting from the impact of additional operating days due to a return to more normalized operations in 2021, approximately $9.2 million of certain nonrecurring contractual liabilities and legal costs resulting from the temporary COVID-19 park closures and an increase of approximately $6.2 million in non-cash equity compensation expenses, partially offset by structural cost savings initiatives.

Operating expenses as a percent of revenue were 40.6% for the nine months ended September 30, 2021 and are not comparable to the prior year period primarily due to the impact of certain operating costs in 2020 which are not dependent on attendance levels.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the six months ended June 30, 2021 increased $26.6 million, or 55.3%, to $74.7 million as compared to $48.1 million for the six months ended June 30, 2020.

Excluding the impact of certain legal settlement proceeds in the prior year period, selling, general and administrative expenses increased by approximately $14.1 million primarily due to increased non-cash equity compensation expense, increased labor-related costs resulting from the impact of furloughs in the prior year period and increased marketing-related costs, partially offset by the impact of cost savings and efficiency initiatives.

The legal settlement proceeds in the prior year period related to approximately $12.5 million received related to a legal matter.

Selling, general and administrative expenses for the nine months ended September 30, 2021 increased $55.9 million, or 77.2%, to $128.3 million as compared to $72.4 million for the nine months ended September 30, 2020.

Excluding the impact of certain legal settlement proceeds in the prior year period, selling, general and administrative expenses increased by approximately $43.4 million primarily due to increased marketing-related costs, an increase of $13.8 million in non-cash equity compensation expense, and increased labor-related costs resulting from the impact of furloughs in the prior year period, partially offset by the impact of cost savings and efficiency initiatives.

The legal settlement proceeds in the prior year period related to approximately $12.5 million received associated with a legal matter.

See Note 9–Commitments and Contingencies to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Selling, general and administrative expenses as a percent of revenue were 12.2% for the six months ended June 30, 2021 and is not comparable to the prior year period primarily due to the impact of the temporary park closures.

Compared to previous years, selling, general and administrative expenses as a percent of revenue for the six months ended June 30, 2019 and 2018, were 17.6% and 22.1%, respectively.

Selling, general and administrative expenses as a percent of revenue were 11.3% for the nine months ended September 30, 2021 and is not comparable to the prior year period primarily due to the impact of the temporary park closures.

Depreciation and amortization.

Depreciation and amortization expense for the six months ended June 30, 2021 decreased $3.1 million, or 4.1%, to $72.8 million as compared to $76.0 million for the six months ended June 30, 2020.

Depreciation and amortization expense for the nine months ended September 30, 2021 decreased $4.9 million, or 4.3%, to $109.1 million as compared to $114.0 million for the nine months ended September 30, 2020.

The decrease primarily relates to a decline in new asset additions along with the impact of asset retirements and fully depreciated assets.

Interest expense.

Interest expense for the six months ended June 30, 2021 increased $21.0 million, or 51.2%, to $62.1 million as compared to $41.1 million for the six months ended June 30, 2020.

Interest expense for the nine months ended September 30, 2021 increased $21.2 million, or 30.7%, to $90.5 million as compared to $69.2 million for the nine months ended September 30, 2020.

The increase primarily relates to interest on the Second-Priority Senior Secured Notes issued in August 2020, the First-Priority Senior Secured Notes issued in April 2020, and the Senior Notes issued in August 2021, partially offset by the impact of a lower average outstanding balance on our Revolving Credit Facility, which was undrawn in 2021 and the impact of decreased LIBOR rates.

See Note 6–Long-Term Debt in our notes to the unaudited condensed consolidated financial statements and the “ Our Indebtedness ” section which follows for further details.

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs.

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs for the nine months ended September 30, 2021 primarily relate to a write-off of discounts and debt issuance costs resulting from the Refinancing Transactions during the nine months ended September 30, 2021.

Provision for (benefit from) income taxes.

Income taxes for the six months ended June 30, 2021 was a provision of $3.3 million compared to a benefit of $12.3 million for the six months ended June 30, 2020.

Our consolidated effective tax rate was 3.8% for the six months ended June 30, 2021 compared to 6.2% for the six months ended June 30, 2020.

Income taxes for the nine months ended September 30, 2021 was a provision of $12.2 million compared to a benefit of $20.7 million for the nine months ended September 30, 2020.

Our consolidated effective tax rate was 6.2% for the nine months ended September 30, 2021 compared to 7.2% for the nine months ended September 30, 2020.

The effective tax rate decreased primarily due to non-cash valuation allowance adjustments on federal and state net operating loss carryforwards, a valuation allowance adjustment on federal tax credits, changes in state tax rates and tax impacts on equity-based compensation.

See Note 4–Income Taxes in our notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Supplemental comparison of the six months ended June 30, 2021 to the six months ended June 30, 2019

We believe a comparison of selected financial results for the six months ended June 30, 2021 to the six months ended June 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the six months ended June 30, 2021 compared to the six months ended June 30, 2019.

The selected summary financial data for the first six months of 2019 was derived from the Company’s Quarterly Report on Form 10-Q for quarter ended June 30, 2019.

For the Six Months Ended

Supplemental comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2019

We believe a comparison of selected financial results for the nine months ended September 30, 2021 to the nine months ended September 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2019.

The selected summary financial data for the first nine months of 2019 was derived from the Company’s Quarterly Report on Form 10-Q for quarter ended September 30, 2019.

For the Nine Months Ended

September 30,

Selected Summary Financial Data:

11 unchanged sentences

Admissions revenue .

Admissions revenue for the six months ended June 30, 2021 decreased $17.7 million, or 5.0%, to $339.0 million as compared to $356.7 million for the six months ended June 30, 2019.

The decline in admissions revenue was primarily a result of a decrease in attendance of approximately 1.8 million guests, or 18.1%, partially offset by an increase in admission per capita.

Attendance declined when compared to 2019 primarily due to COVID-19 related impacts including capacity limitations and modified/limited operations at our parks for most of the first six months of 2021.

Admissions revenue for the nine months ended September 30, 2021 increased $10.9 million, or 1.7%, to $635.7 million as compared to $624.8 million for the nine months ended September 30, 2019.

The increase in admissions revenue was primarily a result of an increase in admissions per capita which more than offset a decrease in attendance of approximately 2.7 million guests, or 14.9%.

Admission per capita increased by 19.6% to $41.69 in 2021 compared to $34.86 in 2019.

Attendance declined when compared to 2019 primarily due to COVID-19 related impacts including capacity limitations and/or modified/limited operations at our parks for most of the first nine months of 2021.

Attendance was also impacted by a decline from international guest visitation and group-related attendance when compared to 2019.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the six months ended June 30, 2021 increased $2.9 million, or 1.1%, to $272.7 million as compared to $269.8 million for the six months ended June 30, 2019, primarily as a result of an increase in in-park per capita spending, offset by a decrease in attendance as discussed above.

In-park per capita spending increased by 23.5% to $33.99 in the first six months of 2021 compared to $27.53 in the first six months of 2019.

In-park per capita spending improved primarily due to increased guest spending, higher realized prices and fees, an improved product mix, new, enhanced or expanded in-park offerings, and a strong consumer demand environment when compared to the first six months of 2019.

Food, merchandise and other revenue for the nine months ended September 30, 2021 increased $21.8 million, or 4.6%, to $497.2 million as compared to $475.4 million for the nine months ended September 30, 2019, primarily as a result of an increase in in-park per capita spending, offset by a decrease in attendance as discussed above.

In-park per capita spending increased by 23.0% to $32.61 in the first nine months of 2021 compared to $26.52 in the first nine months of 2019.

In-park per capita spending improved primarily due to increased guest spending, an improved product mix, higher realized prices and fees, new, enhanced or expanded in-park offerings and a strong consumer demand environment when compared to the first nine months of 2019.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the six months ended June 30, 2021 decreased $0.1 million, or 0.2%, to $49.1 million as compared to $49.2 million for the six months ended June 30, 2019, primarily due to the decrease in volume.

These costs represent 18.0% and 18.2% of the related revenue earned for the six months ended June 30, 2021 and 2019, respectively.

Costs of food, merchandise and other revenues for the nine months ended September 30, 2021 remained relatively flat at $87.1 million as compared to the nine months ended September 30, 2019.

These costs represent 17.5% and 18.3% of the related revenue earned for the nine months ended September 30, 2021 and 2019, respectively.

The decrease as a percent of related revenue relates to the impact of sourcing cost savings initiatives combined with higher realized prices on some of our in-park products, which more than offset inflationary pressures.

Operating expenses.

Operating expenses for the six months ended June 30, 2021 decreased $55.2 million, or 17.2%, to $265.1 million as compared to $320.3 million for the six months ended June 30, 2019.

Operating expenses were 43.3% of total revenues for the six months ended June 30, 2021 compared to 51.1% for the six months ended June 30, 2019.

Operating expenses for the nine months ended September 30, 2021 decreased $35.7 million, or 7.2%, to $460.2 million as compared to $495.9 million for the nine months ended September 30, 2019.

The decrease is primarily due to a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives and the impact of modified/limited operations due to COVID-19, partially offset by approximately $9.2 million of certain nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures, operating costs associated with incremental operating days and events added in 2021 and an increase of approximately $3.1 million in non-cash equity compensation expense.

Operating expenses were 40.6% of total revenues for the nine months ended September 30, 2021 compared to 45.1% for the nine months ended September 30, 2019.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the six months ended June 30, 2021 decreased $35.3 million, or 32.1%, to $74.7 million as compared to $110.0 million for the six months ended June 30, 2019.

The decrease primarily relates to a reduction in marketing related costs and the impact of cost savings and efficiency initiatives.

As a percentage of total revenue, selling, general and administrative expenses were 12.2% for the six months ended June 30, 2021 compared to 17.6% for the six months ended June 30, 2019.

Selling, general and administrative expenses for the nine months ended September 30, 2021 decreased $46.3 million, or 26.5% , to $128.3 million as compared to $174.6 million for the nine months ended September 30, 2019.

The decrease primarily relates to a targeted reduction in marketing related costs and the impact of cost savings and efficiency initiatives , partially offset by an increase of $11.6 million in non-cash equity compensation expense .

As a percentage of total revenue, selling, general and administrative expenses were 11.3% for the nine months ended September 30, 20 21 compared to 15.9% for the nine months ended September 30, 201 9 .

Liquidity and Capital Resources

Generally, our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand.

Our principal uses of cash include the funding of working capital obligations, debt service, investments in theme parks (including capital projects), and could include share repurchases or other return of capital to stockholders, when permitted.

As of June 30, 2021, we had a working capital ratio (defined as current assets divided by current liabilities) of 1.5, due in part to our outstanding cash balance at June 30, 2021.

Our principal uses of cash include the funding of working capital obligations, debt service, investments in theme parks (including capital projects), share repurchases and/or other return of capital to stockholders, when permitted.

As of September 30, 2021, we had a working capital ratio (defined as current assets divided by current liabilities) of 1.7, due in part to our outstanding cash balance at September 30, 2021.

Historically, we typically operate with a working capital ratio less than 1 due to significant deferred revenue balance from revenues paid in advance for our theme park admissions products and high turnover of in-park products that result in limited inventory balances.

9 unchanged sentences

Share Repurchases

See Note 11–Stockholders’ Deficit in our notes to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information on the Share Repurchase Program.

See Note 11–Stockholders’ Equity (Deficit) in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information on the Share Repurchase Program.

We believe that existing cash and cash equivalents, cash flow from operations, and available borrowings under our revolving credit facility will be adequate to meet the capital expenditures and working capital requirements of our operations for at least the next 12 months.

The following table presents a summary of our cash flows provided by (used in) operating, investing, and financing activities for the periods indicated:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Unaudited, in thousands)

4 unchanged sentences

Cash Flows from Operating Activities

Net cash provided by operating activities was $248.1 million during the six months ended June 30, 2021 as compared to net cash used in operating activities of $68.3 million during the six months ended June 30, 2020.

The change in net cash provided by (used in) operating activities was primarily impacted by improved operating performance including increased sales of admission products, partially offset by the impact of increased interest payments in the six months ended June 30, 2021 when compared to the six months ended June 30, 2020, which was impacted by the temporary park closures.

Net cash provided by operating activities was $416.4 million during the nine months ended September 30, 2021 as compared to net cash used in operating activities of $107.6 million during the nine months ended September 30, 2020.

The change in net cash provided by (used in) operating activities was primarily impacted by improved operating performance, including increased sales of admission products, partially offset by the impact of increased interest payments in the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020, which was impacted by the temporary park closures.

Cash Flows from Investing Activities

Investing activities consist principally of capital investments we make in our theme parks for future attractions and infrastructure.

Net cash used in investing activities during the six months ended June 30, 2021 consisted primarily of capital expenditures of $45.0 million largely related to future attractions.

Net cash used in investing activities during the six months ended June 30, 2020 consisted primarily of $53.7 million of capital expenditures.

The following table presents detail of our capital expenditu res for the periods indicated:

For the Six Months Ended June 30,

Net cash used in investing activities during the nine months ended September 30, 2021 consisted primarily of capital expenditures of $73.6 million largely related to future attractions.

Net cash used in investing activities during the nine months ended September 30, 2020 consisted primarily of $75.7 million of capital expenditures.

The following table presents detail of our capital expenditures for the periods indicated:

For the Nine Months Ended September 30,

Capital Expenditures:

6 unchanged sentences

Historically, we generally expect to fund our capital expenditures through our operating cash flow.

Due to the COVID-19 pandemic, we have taken proactive measures starting in March 2020 relating to our capital expenditures including delaying the opening of certain new rides.

Due to the COVID-19 pandemic, we took proactive measures starting in March 2020 relating to our capital expenditures including delaying the opening of certain new rides.

Cash Flows from Financing Activities

Net cash used in financing activities during the six months ended June 30, 2021 results primarily from payment of tax withholdings on equity-based compensation through shares withheld of $12.5 million and repayments on long-term debt of $7.8 million.

Net cash provided by financing activities during the six months ended June 30, 2020 results primarily from net draws on our revolving credit facility of $261.0 million and net proceeds from our Senior Notes offering of $222.3 million, partially offset by $12.4 million used to repurchase shares and repayments of $7.8 million on our long-term debt.

Net cash used in financing activities during the nine months ended September 30, 2021 results primarily from net debt repayments of $130.6 million, which includes the Refinancing Transactions and payments on the Second-Priority Senior Secured Notes, $77.6 million used to repurchase shares and the payment of tax withholdings on equity-based compensation through shares withheld of $12.7 million.

The Refinancing Transactions primarily consisted of $1,934.6 million in repayments of our Term B-5 Loans and Second-Priority Senior Secured Notes, approximately $34.3 million related to a premium paid for redemption of our Second-Priority Senior Secured Notes, and approximately $23.1 million in debt issuance costs partially offset by net proceeds from our Term B Loans and the Senior Notes of $1,922.2 million.

Net cash provided by financing activities during the nine months ended September 30, 2020 results primarily from net proceeds from our First-Priority Senior Secured Notes and our Second-Priority Senior Secured Notes offering of $713.7 million, partially offset by net repayments on our revolving credit facility of $50.0 million, $12.4 million used to repurchase shares and repayments of $11.6 million on our long-term debt.

See Note 6–Long-term Debt in our notes to the unaudited condensed consolidated financial statements for further details.

1 unchanged sentence

We are a holding company and conduct our operations through our subsidiaries, which have incurred or guaranteed indebtedness as described below.

As of June 30, 2021, our indebtedness consisted of senior secured credit facilities, first-priority senior secured notes (“Senior Notes”) and second-priority senior secured notes (“Second-Priority Senior Notes”).

On August 5, 2021, we announced our intention to commence the marketing of a new seven-year $1.1 billion senior secured first lien term loan facility (the “New Term Loan Facility”) and a new five-year approximately $385.0 million senior secured first lien revolving credit facility (the “New Revolving Credit Facility”).

We intend to use the proceeds from the New Term Loan Facility, together with the proceeds from a financing, which may be notes, loans or other securities, or a combination thereof, on terms satisfactory to us and in an aggregate principal amount satisfactory to us to repay all borrowings outstanding under the existing senior facilities and to pay related fees and expenses.

The closing of the New Term Loan Facility and the New Revolving Credit Facility is subject to successful marketing and other conditions, and there can be no assurance that we will close the New Term Loan Facility or the New Revolving Credit Facility (or offer the aforementioned notes) as described or at all.

See discussion which follows and Note 6–Long-Term Debt in our notes to the unaudited condensed consolidated financial statements for further details concerning our long-term debt.

As of September 30, 2021, our indebtedness consisted of Senior Secured Credit Facilities, 8.75% first-priority senior secured notes (“First-Priority Senior Secured Notes”) and 5.25% senior notes due 2029 (the “Senior Notes”).

See discussion which follows and Note 6–Long-Term Debt in our notes to the unaudited condensed consolidated financial statements for further details concerning our long-term debt and related debt transactions which occurred during the three and nine months ended September 30, 2021.

Senior Secured Credit Facilities

SeaWorld Parks & Entertainment, Inc.

(“SEA”) is the borrower under the senior secured credit facilities, as amended pursuant to a credit agreement (the “Amended Credit Agreement”) dated as of December 1, 2009, as the same may be amended, restated, supplemented or modified from time to time (the “Senior Secured Credit Facilities”).

As of June 30, 2021, our Senior Secured Credit Facilities consisted of $1.485 billion in Term B-5 Loans which will mature on March 31, 2024, along with a $332.5 million Revolving Credit Facility, which was not drawn upon as of June 30, 2021.

As of June 30, 2021, SEA had approximately $20.5 million of outstanding letters of credit, leaving approximately $312.0 million available for borrowing under the Revolving Credit Facility.

See Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements for information regarding our required quarterly liquidity test which could impact amounts available for borrowing.

Senior Secured Notes

On April 30, 2020, SEA closed on a private offering of $227.5 million aggregate principal amount of 8.750% Senior Notes and on August 5, 2020, SEA closed on a private offering of $500.0 million aggregate principal amount of 9.500% Second-Priority Senior Notes.

On July 14, 2021, SEA redeemed $50.0 million in aggregate principal amount of the Second-Priority Senior Notes.

(“SEA”) is the borrower under the senior secured credit facilities, as amended and restated pursuant to a credit agreement (the “Amended and Restated Credit Agreement”) dated August 25, 2021 (the “Senior Secured Credit Facilities”).

As of September 30, 2021, our Senior Secured Credit Facilities consisted of $1.200 billion in Term B Loans which will mature in August 2028, along with a $385.0 million Revolving Credit Facility, which will mature in August 2026, which was not drawn upon as of September 30, 2021.

As of September 30, 2021, SEA had approximately $20.5 million of outstanding letters of credit, leaving approximately $364.5 million available for borrowing under the Revolving Credit Facility.

See Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements for information.

First-Priority Senior Secured Notes and Senior Notes

On April 30, 2020, SEA closed on a private offering of $227.5 million aggregate principal amount of 8.750% First-Priority Senior Secured Notes.

On August 5, 2020, SEA closed on a private offering of $500.0 million aggregate principal amount of 9.500% Second-Priority Senior Secured Notes, which were fully redeemed during the three months ended September 30, 2021.

On August 25, 2021 SEA closed on a private offering of $725.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “Senior Notes”).

Covenant Compliance

As of June 30, 2021, we were in compliance with all covenants in the credit agreement governing the Senior Secured Credit Facilities.

As of September 30, 2021, we were in compliance with all covenants in the credit agreement governing the Senior Secured Credit Facilities and the indentures governing our Senior Notes and First-Priority Senior Secured Notes.

See Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements for further details relating to our restrictive covenants.

Adjusted EBITDA

Under the credit agreement governing the Senior Secured Credit Facilities, our ability to engage in activities such as incurring additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger transactions is governed, in part, by our ability to satisfy tests based on “Adjusted EBITDA”.

The Senior Secured Credit Facilities defines “Adjusted EBITDA” as net income or loss before interest expense, income tax expense, depreciation and amortization, as further adjusted to exclude certain unusual, non-cash, and other items permitted in calculating covenant compliance under the Senior Secured Credit Facilities, subject to certain limitations.

Adjusted EBITDA as defined in the Senior Secured Credit Facilities is consistent with our reported Adjusted EBITDA.

We define Adjusted EBITDA as net income (loss) plus (i) income tax provision (benefit) (ii) interest expense, consent fees and similar financing costs (iii) depreciation and amortization (iv) equity-based compensation expense (v) loss on extinguishment of debt (vi) non-cash charges/credits related to asset disposals (vii) certain business optimization, development and strategic initiative costs (viii) merger, acquisition, integration and certain investment costs and (ix) other nonrecurring costs including incremental costs associated with the COVID-19 pandemic or similar unusual events.

Under the credit agreement governing the Senior Secured Credit Facilities and the indentures governing our Senior Notes and First-Priority Senior Secured Notes (collectively, the “Debt Agreements”), our ability to engage in activities such as incurring additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger transactions is governed, in part, by our ability to satisfy tests based on Adjusted EBITDA as defined in the Debt Agreements (“Covenant Adjusted EBITDA”).

Covenant Adjusted EBITDA is defined as Adjusted EBITDA plus certain other items as defined in the Debt Agreements, including estimated cost savings among other adjustments.

Cost savings represent annualized estimated savings expected to be realized over the following 24 month period related to certain specified actions including restructurings and cost savings initiatives, net of actual benefits realized during the last twelve months.

Other adjustments include (i) recruiting and retention costs (ii) public company compliance costs (iii) litigation and arbitration costs and (iv) other costs and adjustments as permitted by the Debt Agreements.

We believe that the presentation of Adjusted EBITDA is appropriate as it eliminates the effect of certain non-cash and other items not necessarily indicative of a company’s underlying operating performance.

1 unchanged sentence

In addition, investors, lenders, financial analysts and rating agencies have historically used EBITDA related measures in our industry, along with other measures, to estimate the value of a company, to make informed investment decisions and to evaluate companies in the industry.

In addition, the presentation of Adjusted EBITDA for the last twelve months provides additional information to investors about the calculation of, and compliance with, certain financial covenants in the Senior Secured Credit Facilities.

In addition, we believe the presentation of Covenant Adjusted EBITDA for the last twelve months is appropriate as it provides additional information to investors about the calculation of, and compliance with, certain financial covenants in the Debt Agreements.

See the “Our Indebtedness-Covenant Compliance” section for further details.

Adjusted EBITDA is not a recognized term under accounting principles generally accepted in the United States of America (“GAAP”), should not be considered in isolation or as a substitute for a measure of our financial performance prepared in accordance with GAAP and is not indicative of income or loss from operations as determined under GAAP.

Adjusted EBITDA and other non-GAAP financial measures have limitations which should be considered before using these measures to evaluate our financial performance.

Adjusted EBITDA, as presented by us, may not be comparable to similarly titled measures of other companies due to varying methods of calculation.

The following table reconciles Adjusted EBITDA, as defined in the Amended Credit Agreement, to net income (loss) for the periods indicated:

Adjusted EBITDA and Covenant Adjusted EBITDA are not recognized terms under accounting principles generally accepted in the United States of America (“GAAP”), should not be considered in isolation or as a substitute for a measure of our financial performance prepared in accordance with GAAP and are not indicative of income or loss from operations as determined under GAAP.

Adjusted EBITDA, Covenant Adjusted EBITDA and other non-GAAP financial measures have limitations which should be considered before using these measures to evaluate our financial performance.

Adjusted EBITDA and Covenant Adjusted EBITDA as presented by us, may not be comparable to similarly titled measures of other companies due to varying methods of calculation.

The following table reconciles Adjusted EBITDA and Covenant Adjusted EBITDA to net income (loss) for the periods indicated:

SEAWORLD ENTERTAINMENT, INC.

1 unchanged sentence

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Last Twelve Months Ended

September 30,

(Unaudited, in thousands)

1 unchanged sentence

Provision for (benefit from) income taxes

Loss on early extinguishment of debt and write-off of discounts and debt issuance costs (a)

Interest expense

Depreciation and amortization

Equity-based compensation expense (a)

Loss on impairment or disposal of assets and certain non-cash expenses (b)

Business optimization, development and strategic initiative costs (c)

Certain investment costs and other taxes (d)

Other adjusting items (e)

Adjusted EBITDA (f)

Items added back to Adjusted EBITDA, after cost savings, as defined in the Amended Credit Agreement:

Estimated cost savings (g)

Adjusted EBITDA, after cost savings (h)

Reflects non-cash equity compensation expenses and related cash payroll taxes incurred during the period.

For the six months ended June 30, 2020, includes a reversal of equity compensation for certain performance vesting restricted units which were no longer considered probable of vesting.

Equity-based compensation expense (b)

Loss on impairment or disposal of assets and certain non-cash expenses (c)

Business optimization, development and strategic initiative costs (d)

Certain investment costs and other taxes (e)

COVID-19 related incremental costs (f)

Other adjusting items (g)

Adjusted EBITDA (h)

Items added back to Covenant Adjusted EBITDA as defined in the Debt Agreements:

Estimated cost savings ( i )

Other adjustments as defined in the Debt Agreements ( j)

Covenant Adjusted EBITDA ( k)

Reflects a loss on early extinguishment of debt and write-off of discounts and debt issuance costs primarily associated with the Refinancing Transactions.

See Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Reflects non-cash equity compensation expenses and related payroll taxes incurred during the period.

For the three and nine months ended September 30, 2021, includes equity compensation expense related to certain performance vesting restricted awards which were previously not considered likely of vesting.

For the nine months ended September 30, 2020, includes a reversal of equity compensation for certain performance vesting restricted units which were no longer considered likely of vesting.

See Note 10–Equity-Based Compensation in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Reflects primarily non-cash expenses related to miscellaneous fixed asset disposals.

For the three, six and twelve months ended June 30, 2021, primarily reflects asset write-offs and certain costs related to certain rides and equipment which were removed from service.

For the three and six months ended June 30, 2021, reflects business optimization, development and other strategic initiative costs primarily related to:

(i) $1.5 million and $1.6 million, respectively, of severance and other separation costs associated with positions eliminated and (ii) $0.4 million and $0.5 million, respectively, of third-party consulting costs.

For the six months ended June 30, 2020, reflects business optimization, development and other strategic initiative costs primarily related to $1.9 million of third-party consulting costs.

For the twelve months ended June 30, 2021, reflects business optimization, development and other strategic initiative costs primarily related to:

(i) $4.3 million of severance and other separation costs and (ii) $1.7 million of third-party consulting costs.

For the twelve months ended June 30, 2021, includes costs associated with a Registration Statement on Form S-3 filed in 2020.

Reflects the impact of expenses, net of insurance recoveries and adjustments, incurred primarily related to certain matters, which we are permitted to exclude under the credit agreement governing our Senior Secured Credit Facilities due to the unusual nature of the items.

For the three and six months ended June 30, 2021, primarily relates to incremental non-recurring costs associated with the COVID-19 pandemic, primarily associated with incremental labor-related costs to prepare, staff, and operate the parks with enhanced safety measures and legal costs related to COVID-19 related matters.

For the three and six months ended June 30, 2020, includes approximately $3.9 million in incremental non-recurring costs associated with the COVID-19 pandemic, primarily associated with incremental labor-related costs to prepare the parks for reopening with enhanced safety measures, incremental third-party consulting costs related to our COVID-19 response and safety communication strategies and initial purchases of personal protective equipment .

For the six months ended June 30, 2020, also includes $12.5 million of insurance proceeds related to a legal settlement gain as previously disclosed.

For the twelve months ended June 30, 2021, includes approximately $9.2 million or incremental non-recurring costs associated with the COVID-19 pandemic, partially offset by approximately $4.4 million related to the return of funds previously paid for a legal settlement.

See Note 9–Commitments and Contingencies in our notes to the unaudited condensed consolidated financial statements for further details.

The costs associated with the COVID-19 pandemic primarily relate to incremental labor-related costs to prepare, staff and operate the parks with enhanced safety measures, legal costs related to COVID-19 related matters, temporary or initial purchases of safety monitoring and personal protective equipment and contract termination or modification costs related to impacts from the temporary COVID-19 park closures.

Adjusted EBITDA is defined as net income (loss) before income tax expense, interest expense, depreciation and amortization, as further adjusted to exclude certain non-cash, and other items permitted in calculating covenant compliance under the credit agreement governing our Senior Secured Credit Facilities.

The Senior Secured Credit Facilities permits the calculation of certain covenants to be based on Adjusted EBITDA, as defined above, for the last twelve month period further adjusted for net annualized estimated savings we expect to realize over the following 18 month period related to certain specified actions, including restructurings and cost savings initiatives.

For the three, nine and twelve months ended September 30, 2021, primarily reflects asset write-offs and certain costs related to certain rides and equipment which were removed from service.

For the three and nine months ended September 30, 2021, reflects business optimization, development and other strategic initiative costs primarily related to:

(i) $1.7 million and $2.2 million, respectively of third-party consulting costs;

(ii) $1.6 million of severance and other separation costs in the nine months ended September 30, 2021 associated with positions eliminated and (iii) $1.0 million and $2.1 million, respectively of other business optimization costs and strategic initiative costs.

For the three and nine months ended September 30, 2020, reflects business optimization, development and other strategic initiative costs primarily related to:

(i) $2.6 million and $2.7 million, respectively, of severance and other separation costs primarily related to the 2020 Restructuring Program and (ii) $0.5 million and $2.4 million, respectively, of third party consulting costs.

For the twelve months ended September 30 , 202 1 , reflects business optimization, development and other strategic initiative costs primarily relate d to:

( i ) $ 2.9 million of third-party consultin g costs ( ii) $2.5 million of other business optimization costs and strategic initiative costs and (iii) $1.8 million of severance and other separation costs .

For the three and nine months ended September 30, 2020, includes costs associated with a Registration Statement on Form S-3 filed in 2020.

For the three and nine months ended September 30, 2021, includes approximately $9.2 million and $10.4 million, respectively, of nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures.

For the three and nine months ended September 30, 2021, also includes approximately $4.1 million and $6.9 million, respectively, of incremental temporary labor-related costs incurred to prepare and staff the parks and certain incremental, nonrecurring, temporary incentives paid to attract employees to return to or remain in the workforce during the COVID-19 related environment.

For the three and nine months ended September 30, 2020, primarily includes incremental labor-related costs to prepare and temporarily operate the parks with enhanced safety measures, nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures and initial purchases of safety monitoring and personal protective equipment.

For the nine months ended September 30, 2020, also includes incremental third-party consulting costs primarily related to our COVID-19 response and safety communication strategies.

For the twelve months ended September 30, 2021, includes approximately (i) $10.6 million of nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures (ii) approximately $9.3 million of incremental labor-related costs to prepare and temporarily operate the parks with enhanced safety measures and certain incremental, nonrecurring, temporary incentives paid to attract employees to return to or remain in the workforce during the COVID-19 related environment and (iii) initial purchases of safety monitoring and personal protective equipment.

For the nine months ended September 30, 2020, includes approximately $12.5 million of insurance proceeds related to a legal settlement gain as previously disclosed.

For the twelve months ended September 30, 2021, includes approximately $4.4 million related to the return of funds previously paid for a legal settlement.

See Note 9–Commitments and Contingencies in our notes to the unaudited condensed consolidated financial statements on Form 10-Q for further details.

Our Debt Agreements permit the calculation of certain covenants to be based on Covenant Adjusted EBITDA, as defined above, for the last twelve-month period further adjusted for net annualized estimated savings we expect to realize over the following 24 month period related to certain specified actions, including restructurings and cost savings initiatives.

These estimated savings are calculated net of the amount of actual benefits realized during such period.

These estimated savings are a non-GAAP Adjusted EBITDA add-back item only as defined in the Amended Credit Agreement and does not impact our reported GAAP net income (loss).

The Amended Credit Agreement limits the amount of such estimated savings which may be reflected to 25% of Adjusted EBITDA, calculated for the last twelve months before the impact of these estimated cost savings.

The estimated cost savings included in the table above do not reflect the net annualized estimated cost savings we would have realized versus 2019 because operations during the last twelve-month period ended June 30, 2021 were significantly impacted by the COVID-19 pandemic.

The Senior Secured Credit Facilities permits our calculation of certain covenants to be based on Adjusted EBITDA, as defined above, for the last twelve month period further adjusted for net annualized estimated savings as described in footnote (g) above.

These estimated savings are a non-GAAP Adjusted EBITDA add-back item only as defined in the Debt Agreements and does not impact our reported GAAP net income (loss).

The Debt Agreements permit our calculation of certain covenants to be based on Covenant Adjusted EBITDA as defined above, for the last twelve-month period further adjusted for certain costs as permitted by the Debt Agreements including recruiting and retention expenses, public company compliance costs and litigation and arbitration costs.

Covenant Adjusted EBITDA is defined in the Debt Agreements as Adjusted EBITDA for the last twelve-month period further adjusted for net annualized estimated savings among other adjustments as described in footnotes (i) and (j) above.

Contractual Obligations

There have been no material changes to our contractual obligations as of June 30, 2021 from those previously disclosed in our Annual Report on Form 10-K.

There have been no material changes to our contractual obligations as of September 30, 2021 from those previously disclosed in our Annual Report on Form 10-K other than the debt and interest obligations pursuant to the Refinancing Transactions (see Note 6–Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details).

As a result, our total long-term debt obligations as of September 30, 2021, not including any possible prepayments, are as follows for the remainder of 2021, 2022-2023, 2024-2025, and thereafter, respectively (in thousands):

and $1,874,000.

Our estimated future interest payments based on interest rates in effect at September 30, 2021 are as follows for the remainder of 2021, 2022-2023, 2024-2025, and thereafter, respectively (in thousands):

and $262,163.

Interest obligations also include letter of credit and commitment fees for the used and unused portions of our Revolving Credit Facility assuming payoff at maturity and excluding any possible principal prepayments.

Critical Accounting Policies and Estimates

4 unchanged sentences

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of June 30, 2021.

We had no material off-balance sheet arrangements as of September 30, 2021.

Recently Issued Financial Accounting Standards

1 unchanged sentence

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 2. Management’s Discussion and Analysis