What changed in this filing

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Item 9A. Controls and Procedures

2022-02-28 compared with 2021-02-26 · 410 added, 554 removed, 1052 unchanged (48% of the section changed)

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The design of any controls and procedures also is based on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.

Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

Regulations under the Exchange Act require public companies, including our Company, to evaluate any change in our “internal control over financial reporting” as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that certain employees worked remotely due to the COVID-19 related park closures and some continue to work on a remote basis.

We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

There have been no changes in our internal control over financial reporting during the fiscal year covered by this Annual Report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Our management, with the participation of our principal executive officer and principal financial officer, have reviewed the effectiveness of our disclosure controls and procedures as of December 31, 2021 and, based on their evaluation, have concluded that the disclosure controls and procedures were not effective as of such date due to a material weakness in internal control over financial reporting initially disclosed as of September 30, 2021 and described below.

Notwithstanding the above, the control deficiency did not result in a material misstatement of any of the Company’s annual or interim consolidated financial statements.

Further, management believes and has concluded that the consolidated financial statements for the prior periods and included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Management’s Report on Internal Control over Financial Reporting

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In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013) .

Based on our assessments and those criteria, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2020.

Based on our assessments and those criteria, management including our principal executive officer and principal financial officer, identified a material weakness within the Company’s control environment.

Specifically, the Company does not have sufficient policies and procedures related to Board oversight of certain Board engagement within the Company’s control environment.

Accordingly, our principal executive officer and principal financial officer concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2021.

Changes in Internal Control over Financial Reporting

We have not experienced any material impact to our internal controls over financial reporting despite the fact that certain employees worked remotely due to the COVID-19 pandemic.

We are continually monitoring and assessing the COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.

There have been no changes in our internal control over financial reporting during the most recent quarter covered by this Annual Report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting, except for remediation efforts in connection with the material weakness as described above.

Status Update

Management and our Board of Directors are committed to remediating this deficiency.

Based upon a recommendation of the Audit Committee, the Board formed a committee (the “Committee”) to develop and execute on a remediation plan.

The Committee and management are in the process of developing the remediation plan and have implemented the following:

Engaged independent consultants to advise the Board’s Committee as it relates to the deficiency.

Enhanced our evaluation of the control environment.

Management and our Board are committed to taking appropriate steps to remediate the deficiency.

Our remediation of the identified material weakness is ongoing and will require additional time to fully remediate.

The material weakness cannot be considered remediated until remediation efforts have operated for a sufficient period of time and management has concluded, that the material weakness has been resolved.

Additional remediation measures continue to be considered and will be implemented as appropriate.

We will continue to assess the effectiveness of our remediation efforts in connection with our evaluations of internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

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Rule 10b5-1 Plans

Our policy governing transactions in our securities by our directors, officers and employees permits such persons to adopt stock trading plans pursuant to Rule 10b5-1 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Our directors, officers and employees have in the past and may from time to time establish such stock trading plans.

We do not undertake any obligation to disclose, or to update or revise any disclosure regarding, any such plans and specifically do not undertake to disclose the adoption, amendment, termination or expiration of any such plans.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

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Consolidated Balance Sheets

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

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Third Amended and Restated Bylaws of SeaWorld Entertainment, Inc., effective June 14, 2017 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 16, 2017 (File No.

Description of the Registrant’s Securities

Description of the Registrant’s Securities (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 (File No.

Indenture, dated as of April 30, 2020, among SeaWorld Parks & Entertainment, Inc., SeaWorld Entertainment, Inc., the other guarantors from time to time party thereto and Wilmington Trust, National Association, as trustee and collateral agent.

(incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 30, 2020 (File No.

Indenture, dated as of August 5, 2020, among SeaWorld Parks & Entertainment, Inc., SeaWorld Entertainment, Inc., the other guarantors from time to time party thereto and Wilmington Trust, National Association, as trustee and collateral agent.

First Supplemental Indenture, dated as of April 26, 2021, among SeaWorld Parks & Entertainment, Inc., SeaWorld Entertainment, Inc., the other guarantors from time to time party thereto and Wilmington Trust, National Association, as trustee for the 8.750% First-Priority Senior Secured Notes Due 2025 (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 7, 2021 (File No.

Indenture, dated as of August 25, 2021, by and among SeaWorld Parks & Entertainment, Inc., the guarantors party thereto, and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on August 26, 2021 (File No.

Restatement Agreement, dated as of August 25, 2021, by and among SeaWorld Parks & Entertainment, Inc., SeaWorld Entertainment, Inc., the subsidiary guarantors party thereto, the financial institutions list on the signature pages thereto, J.P.

Morgan Chase Bank, N.A., as Administrative Agent, as Collateral Agent, as Issuing Bank and as Swingline Lender.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 26, 2021 (File No.

Amendment No.

9, dated as of October 31, 2018, to the Credit Agreement, among SeaWorld Parks & Entertainment, Inc., the guarantors party thereto from time to time, JPMorgan Chase Bank, N.A., as administrative agent, collateral agent, L/C issuer and swing line lender and the other agents and lenders from time to time party thereto (the Amended credit Agreement is included as Exhibit A thereto) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 1, 2018 (File No.

Joinder Agreement, dated as of December 17, 2012, under the Credit Agreement, among SeaWorld of Texas Holdings, LLC, SeaWorld of Texas Management, LLC, SeaWorld of Texas Beverage, LLC and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Joinder Agreement, dated as of May 6, 2015, among SWBG Orlando Corporate Operations Group, LLC, SEA Holdings I, LLC and Bank of America, N.A., as administrative agent and collateral agent, to the Credit Agreement, dated as of December 1, 2009 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (File No.

Security Agreement, dated as of December 1, 2009, among SW Acquisitions Co., Inc., the other grantors named therein and Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Supplement No.

1, dated as of December 17, 2012, to the Security Agreement among the grantors identified therein and Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Supplement No.

2, dated as of May 6, 2015, among SWBG Orlando Corporate Operations Group, LLC, SEA Holdings I, LLC and Bank of America, N.A., as collateral agent, to the Security Agreement, dated as of December 1, 2009 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (File No.

Pledge Agreement, dated as of December 1, 2009, between SeaWorld Entertainment, Inc.

(f/k/a/SW Holdco, Inc.) and Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Patent Security Agreement, dated as of December 1, 2009, by SeaWorld Parks & Entertainment (f/k/a Busch Entertainment LLC) in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Trademark Security Agreement, dated as of December 1, 2009, by SeaWorld Parks & Entertainment (f/k/a Busch Entertainment LLC) in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Trademark Security Agreement, dated as of December 1, 2009, by Sea World LLC in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Copyright Security Agreement, dated as of December 1, 2009, by SeaWorld Parks & Entertainment (f/k/a Busch Entertainment LLC) in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Copyright Security Agreement, dated as of December 1, 2009, by Sea World LLC in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 filed on December 27, 2012 (File No.

Lease Amendment, dated January 9, 1978, by and between the City of San Diego and Sea World Inc.

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Form of Option Grant Notice and Option Agreement (Employees—Time-Based Options) (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (File No.

Third Amended & Restated Stock Ownership Guidelines, adopted February 19, 2020

Third Amended & Restated Stock Ownership Guidelines, adopted February 19, 2021 (incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 (File No.

Amended and Restated Key Employee Severance Plan, effective March 1, 2017 (incorporated by reference to Exhibit 10.57 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 (File No.

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Form of Amendment #1 to Restricted Stock Grant and Acknowledgment and Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 14, 2017 (File No.

Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement (Employees – Annual Incentive Award) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (File No.

Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (Employees – Time-Based Restricted Stock Units) (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (File No.

Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement (Employees – Performance-Based Restricted Stock Units) (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (File No.

Form of Deferred Stock Unit Grant Notice and Deferred Stock Unit Agreement (Non-Employee Directors) (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (File No.

Form of Restricted Stock Grant Notice and Restricted Stock Agreement (Employees―Annual Incentive Plan Award) (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No.

Form of Restricted Stock Grant Notice and Restricted Stock Agreement (Senior Leadership Team―Time-Based Shares) (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No.

Form of Restricted Stock Grant Notice and Restricted Stock Agreement (Senior Leadership Team―Performance-Based Shares) (incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No.

Cooperation Agreement, dated November 5, 2017, between Hill Path Capital LP and SeaWorld Entertainment, Inc.

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and Hill Path Capital LP (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 7, 2017 (File No.

Park Exclusivity and Concept Design Agreement, dated as of March 24, 2017, between Sea Holdings I, LLC and Zhonghong Holding Co., Ltd.

(Portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed on March 24, 2017 (File No.

Center Concept and Preliminary Design Support Agreement, dated as of March 24, 2017 between Sea Holdings I, LLC and Zhonghong Holding Co., Ltd.

(incorporated by reference to Exhibit 99.4 to the Registrant’s Current Report on Form 8-K filed on March 24, 2017 (File No.

Offer Letter of Employment, Agreed and Accepted the 2nd day of June, 2018, between SeaWorld Entertainment, Inc.

and Walter Bogumil (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 10-Q filed on May 8, 2019 (File No.

Offer Letter of Employment, Agreed and Accepted the 24th day of June, 2021, between SeaWorld Entertainment, Inc.

and Tom Iven (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 10-Q filed on August 6, 2021 (File No.

Form of Performance Stock Unit Grant Notice and Restricted Stock Unit Agreement (Employees – Annual Incentive Plan Award) (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 10-Q filed on May 8, 2019 (File No.

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Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (2019 Time-Based Restricted Stock Units) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q-K filed on November 7, 2019 (File No.

Employment Agreement, dated November 6, 2019, between SeaWorld Entertainment, Inc.

and Sergio Rivera (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 7, 2019 (File No.

Amendment No.

10, dated as of March 10, 2020, to the Credit Agreement, dated as of December 1, 2009, among SeaWorld Parks & Entertainment, Inc., the several banks and other financial institutions or entities from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as L/C issuer and swing line lender and the other parties thereto.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2020 (File No.

Amendment No.

11, dated as of April 19, 2020, to the Credit Agreement, dated as of December 1, 2009, among SeaWorld Parks & Entertainment, Inc., the several banks and other financial institutions or entities from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as L/C issuer and swing line lender and the other parties thereto.

(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on May 8, 2020 (File No.

First-Lien Intercreditor Agreement, dated as of April 30, 2020, among SeaWorld Parks & Entertainment, Inc., the other grantors from time to time party thereto, JPMorgan Chase Bank, N.A., as collateral agent for the Credit Agreement Secured Parties (as defined therein), JPMorgan Chase Bank, N.A.

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(incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q filed on May 8, 2020 (File No.

Amendment No.

12, dated as of July 29, 2020, to the Credit Agreement, dated as of December 1, 2009, among SeaWorld Parks & Entertainment, Inc., the several banks and other financial institutions or entities from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as L/C issuer and swing line lender and the other parties thereto.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Intercreditor Agreement, dated as of August 5, 2020, among JPMORGAN CHASE BANK, N.A., as Credit Agreement Agent, WILMINGTON TRUST, NATIONAL ASSOCIATION, as First Priority Notes Collateral Agent, each Other First Priority Lien Obligations Agent from time to time party hereto, each in its capacity as First Lien Agent, WILMINGTON TRUST, NATIONAL ASSOCIATION, solely in its capacity as Trustee and Second Priority Collateral Agent and each collateral agent for any Future Second Lien Indebtedness from time to time party hereto, each in its capacity as Second Priority Agent.

incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Second Lien Security Agreement, dated as of August 5, 2020, among the Grantors and Wilmington Trust, National Association, as Collateral Agent for the Secured Parties.

incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Second Lien Pledge Agreement, dated as of August 5, 2020, among SeaWorld Entertainment, Inc.

and Wilmington Trust, National Association, as collateral agent.

incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Copyright Security Agreement, dated as of August 5, 2020, by SeaWorld Parks & Entertainment, Inc., Sea World LLC and SeaWorld Parks & Entertainment LLC, in favor of Wilmington Trust, National Association, as collateral agent.

incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Patent Security Agreement, dated as of August 5, 2020, by SeaWorld Parks & Entertainment, Inc., in favor of Wilmington Trust, National Association, as collateral agent.

incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Trademark Security Agreement, dated as of August 5, 2020, by SeaWorld Entertainment, Inc., Sea World LLC and SeaWorld Parks & Entertainment LLC, and in favor of Wilmington Trust, National Association, as collateral agent.

incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2020 (File No.

Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (Non-Employee Directors)

Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (Non-Employee Directors) (incorporated by reference to Exhibit 10.65 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 (File No.

Form of Option Grant Notice and Option Agreement (Employees—Time-Based Options) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 7, 2021 (File No.

Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (Employees—Time-Based Restricted Stock Units) (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on May 7, 2021 (File No.

Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement (Employees—Performance-Based Restricted Stock Units) (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on May 7, 2021 (File No.

Eighth Amended and Restated Outside Director Compensation Policy, effective January 21, 2021

Nineth Amended and Restated Outside Director Compensation Policy, effective December 31, 2021

Amendment 1 to License Agreement, dated May 16, 2017, by and between Sesame Workshop and SeaWorld Parks & Entertainment, Inc.

(Portions of this exhibit have been omitted)

Amended and Restated Security Agreement dated as of August 25, 2021 among the Grantors identified herein and JPMorgan Chase Bank, N.A., as Collateral Agent

Amended & Restated Pledge Agreement dated as of August 25, 2021 between SeaWorld Entertainment, Inc.

and JPMorgan Chase Bank, N.A.

as Collateral Agent

Trademark Security Agreement, dated as of October 29, 2021, by Sea World LLC, a Delaware limited liability company (the “Grantor”), in favor of Wilmington Trust, National Association, in its capacity as collateral agent pursuant to the Indenture

Trademark Security Agreement, dated as of October 29, 2021, by Sea World LLC, a Delaware limited liability company, and SeaWorld Parks & Entertainment LLC, a Delaware limited liability company (each, a “Grantor” and collectively, the “Grantors”), in favor of JPMorgan Chase Bank, N.A., in its capacity as collateral agent pursuant to the Credit Agreement

List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed on February 26, 2016 (File No.

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February 28, 2022

Interim Chief Executive Officer

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

February 28, 2022

Interim Chief Executive Officer (Principal Executive Officer)

Chief Executive Officer (Principal Executive Officer)

/S/ ELIZABETH C.

February 28, 2022

Interim Chief Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer)

Chief Financial Officer (Principal Financial Officer)

/S/ CHRISTOPHER C.

February 28, 2022

Chief Accounting Officer (Principal Accounting Officer)

Christopher C.

/S/ RONALD BENSION

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Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income (for the Years Ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the Years Ended December 31, 2021, 2020 and 2019

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We have audited the accompanying consolidated balance sheets of SeaWorld Entertainment, Inc.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive (loss) income, changes in stockholders’ (deficit) equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income (loss), changes in stockholders’ (deficit) equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

Effective January 1, 2019, the Company adopted Financial Accounting Standards Board Topic Accounting Standards Codification 842 —Leases , using the modified retrospective approach.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2022, expressed an adverse opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition—Deferred Revenue Related to Annual and Season Admission Pass Products—Refer to Note 2 and Note 4 to the consolidated financial statements

Critical Audit Matter Description

The Company’s annual and season passes allow guests access to specific parks over a specified time period.

Such revenue is deferred and recognized over the terms of the admission product based on estimated redemption rates for similar products and is adjusted periodically.

The Company estimates a redemption rate using historical and forecasted growth rates and attendance trends by park for similar products.

The Company’s annual and seasonal admission pass products allow guests access to specific parks over a specified time period.

Such revenue is deferred and recognized over the terms of the admission pass product based on estimated redemption rates for similar products and is adjusted periodically.

The Company estimates redemption rates using historical and forecasted attendance trends by park.

Attendance trends factor in seasonality and are adjusted based on actual trends periodically.

As a result of the temporary park closures due to the COVID-19 pandemic, the Company upgraded some of their pass products and extended pass expiration dates for at least the equivalent period the related parks were closed which were considered in the estimated redemption and recognition patterns.

Revenue is recognized on a pro rata basis based on the estimated allocated selling price of the admission product.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the attendance projections by park and the recognition of revenue from the deferred revenue related to annual and season admission pass products included the following, among others:

We tested the effectiveness of management’s controls over revenue recognition related to annual and season admission pass products, including controls over actual and forecasted attendance used in the models.

We evaluated management’s ability to accurately forecast expected attendance by comparing actual results to management’s historical forecasts on a quarterly basis.

Our audit procedures related to the attendance projections by park and the recognition of revenue from the deferred revenue related to annual and seasonal admission pass products included the following, among others:

We tested the effectiveness of management’s controls over revenue recognition related to annual and season admission pass products, including controls over actual and estimated attendance and the timing of deferred revenue relief .

We performed a retrospective review on the prior year forecasted attendance by comparing actual attendance results to management’s historical forecasts in order to evaluate management’s ability to forecast attendance and identify any past bias.

We evaluated the reasonableness of the current-year attendance forecasts compared to historical results, considering recent trends in the Company’s attendance.

We tested the mathematical accuracy and appropriateness of management’s deferred revenue models and timing of recognition, including changes to the model to account for pass extensions as a result of park closures.

We detail tested the deferred revenue balances, related to annual and season admission pass products.

Further, we evaluated the reasonableness of the expected future relief of the deferred balances, in particularly with respect to the impact of COVID-19 and pass product upgrades and extensions.

We tested assumptions and inputs used in the deferred revenue pass models that are used to determine the deferred revenue balances related to and the revenue recognized from annual and seasonal admission pass products.

We tested the mathematical accuracy and appropriateness of management’s deferred revenue models and timing of revenue recognition.

/s/ Deloitte & Touche LLP

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and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020 of the Company and our report dated February 26, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of the Company and our report dated February 28, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management's assessment:

The Company does not have sufficient policies and procedures related to Board oversight of certain Board engagement within the Company’s control environment.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2021, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

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Other assets, net

Liabilities and Stockholders’ (Deficit) Equity

Liabilities and Stockholders’ Deficit

Current liabilities:

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Commitments and contingencies (Note 15)

Stockholders’ (Deficit) Equity:

Stockholders’ Deficit:

Preferred stock, $ 0.01 par value—authorized, 100,000,000 shares, no shares

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Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Treasury stock, at cost ( 19,953,042 and 16,260,248 shares at December 31, 2021 and 2020, respectively)

Total stockholders’ (deficit) equity

Total liabilities and stockholders’ (deficit) equity

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

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Total costs and expenses

Operating (loss) income

Other expense (income), net

Operating income (loss)

Other expense, net

Interest expense

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of discounts and debt issuance costs

(Loss) income before income taxes

Income (loss) before income taxes

(Benefit from) provision for income taxes

Net (loss) income

Net income (loss)

Other comprehensive income (loss):

Unrealized gain (loss) on derivatives, net of tax

Comprehensive (loss) income

(Loss) earnings per share:

(Loss) earnings per share, basic

(Loss) earnings per share, diluted

Comprehensive income (loss)

Earnings (loss) per share:

Earnings (loss) per share, basic

Earnings (loss) per share, diluted

Weighted average common shares outstanding:

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Comprehensive

(Loss) Income

Income (Loss)

Stockholders'

(Deficit) Equity

Balance at December 31, 2017

Impact of adoption of ASU 2018-02

Equity (Deficit)

Balance at January 1, 2019

Equity-based compensation

Unrealized gain on derivatives, net of

tax expense of $ 3,111

Unrealized loss on derivatives, net of

tax benefit of $ 1,421

Vesting of restricted shares

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Equity-based compensation

Unrealized loss on derivatives, net of

tax benefit of $ 1,421

Unrealized gain on derivatives, net of

tax expense of $ 572

Vesting of restricted shares

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Equity-based compensation

Unrealized gain on derivatives, net of

tax expense of $ 572

Vesting of restricted shares

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Exercise of stock options

Adjustments to previous dividend declarations

Repurchase of 3,692,794 shares of treasury stock, at cost

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Cash Flows From Operating Activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

operating activities:

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Other assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash Flows From Investing Activities:

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Other financing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Change in Cash and Cash Equivalents, including Restricted Cash

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and Anheuser-Busch InBev SA/NV (“ABI”).

At that time, the Company was owned by ten limited partnerships, ultimately controlled by affiliates of The Blackstone Group L.P.

(“Blackstone”) and certain co-investors.

The Company completed an initial public offering in April 2013.

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and San Diego, California, and Busch Gardens theme parks in Tampa, Florida, and Williamsburg, Virginia.

The Company operates water attraction theme parks in Orlando, Florida (Aquatica);

The Company operates water park attractions in Orlando, Florida (Aquatica);

San Antonio, Texas (Aquatica);

Chula Vista, California, (Aquatica);

San Diego, California, (Aquatica, which will be converted to a Sesame Place park in 2022);

Tampa, Florida (Adventure Island);

and Williamsburg, Virginia (Water Country USA).

The Company also operates a reservations-only theme park in Orlando, Florida (Discovery Cove) and a seasonal theme park in Langhorne, Pennsylvania (Sesame Place).

Historically more than 50 % of the Company’s revenues were generated in the State of Florida which exposes the Company to risks affecting the Florida market, such as natural disasters, severe weather or other incidents.

The Company also operates a reservations-only theme park in Orlando, Florida (Discovery Cove) and a theme park in Langhorne, Pennsylvania (Sesame Place).

During the years ended December 31, 2021 and 2019, respectively, approximately 58 % and 57 % of the Company’s revenues were generated in the State of Florida which exposes the Company to risks affecting the Florida market, such as natural disasters, severe weather or other incidents.

During the year ended December 31, 2020, more than 70 % of the Company’s revenues were generated in the State of Florida, due in part to the temporary park closures and limited operations as a result of the COVID-19 pandemic.

See Impact of Global COVID-19 Pandemic section which follows for further discussion on factors impacting 2020 revenues.

See Impact of Global COVID-19 Pandemic section which follows for further discussion.

Impact of Global COVID-19 Pandemic

The Company’s results of operations for the years ended December 31, 2021 and 2020 were impacted by the global COVID-19 pandemic due in part to the following factors:

(i) capacity limitations, modified/limited operations and/or temporary park closures which were in place for portions of the respective periods;

(ii) decreased demand due to public concerns associated with the pandemic;

(iii) restrictions on international travel and;

(iv) a decline in both international and group-related attendance.

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

Beginning in June 2020, the Company began the phased reopening of some of its parks with enhanced health, safety and sanitizing measures, capacity limitations, modified/limited operations, reduced hours and/or reduced operating days.

In particular, on June 6, its Aquatica water park in Texas reopened;

on June 11, all five of its Florida parks reopened;

on June 19, its SeaWorld park in Texas reopened;

on July 24, its Sesame Place park in Pennsylvania reopened;

on August 5, its Busch Gardens park in Virginia reopened and on August 28, its SeaWorld park in California reopened on a limited basis, following the State of California’s guidance for reopening zoos.

In compliance with revised state governmental restrictions issued late in the fourth quarter in California, the Company once again closed its SeaWorld park in California effective December 7, 2020.

The Company was unable to open its Aquatica water park in California and its Water Country USA water park in Virginia for the 2020 operating season.

Additionally, during the third quarter, the State of Virginia had a state mandated capacity restriction of 1,000 guests at a time which significantly restricted attendance for the Company’s Busch Gardens park in that state.

On October 29, 2020, the State of Virginia revised its theme park guidance and modified the methodology for calculating capacity at theme parks.

As a result, capacity at this park increased from 1,000 guests to approximately 4,000 guests at a time.

On January 15, 2021, while the Company’s SeaWorld park in California park remained closed, the Company introduced a limited time drive-through only experience for guests at this park.

Subsequently, based on updated state government guidance issued in January 2021, the Company has since reopened its SeaWorld park in California on February 6, 2021 on a limited basis, once again following California guidance for reopening zoos.

The Company continues to monitor guidance from, and engage with, federal, state and local authorities and may adjust its plans accordingly.

Since the COVID-19 pandemic began, the Company has taken proactive measures for the safety of its guests, employees and animals, to manage costs and expenditures, and to maximize liquidity in response to the temporary park closures and limited reopenings related to the COVID-19 pandemic.

Some of these measures included, but are not limited to:

(i) increased its revolving credit commitments on March 10th;

(ii) issued $ 227.5 million in first-priority senior secured notes and $ 500.0 million in second-priority senior secured notes to raise additional capital and further enhance available liquidity;

(iii) entered into amendments to its existing senior secured credit facilities to amend financial covenants;

(iv) furloughed approximately 95% of its employees upon closing all of its parks;

Beginning in June 2020, the Company began the phased reopening of some of its parks with enhanced health, safety and cleaning measures, capacity limitations and/or modified/limited operations, which at times included reduced hours and/or reduced operating days.

By the end of August 2020, the Company had reopened 10 of its 12 parks on a limited basis.

The Company was unable to reopen its Aquatica water park in California and its Water Country USA water park in Virginia for the 2020 operating season but opened both parks for their 2021 operating season.

At the start of 2021, seven of the Company’s 12 parks were open but were operating with capacity limitations or modified/limited operations.

By the end of the second quarter of 2021, all of the Company’s 12 parks were open, and operating without COVID-19 related capacity limitations.

Due to the COVID-19 pandemic, the Company has taken a number of proactive measures for the safety of its guests, employees and animals, to manage costs and expenditures, and to maximize liquidity in response to the temporary park closures and limited reopenings related to the COVID-19 pandemic.

Some of the measures taken in 2020 included, but were not limited to:

(i) increased its revolving credit commitments on March 10, 2020 prior to the temporary park closures;

(ii) issued first-priority senior secured notes and second-priority senior secured notes in 2020 to raise additional capital and further enhance available liquidity at the time;

(iii) entered into amendments to its existing senior secured credit facilities to amend financial covenants at the time;

(iv) furloughed approximately 95% of its employees in 2020 upon closing all of its parks;

(v) obtained payroll tax credits and deferred certain social security payroll taxes under the CARES act;

(vi) temporarily reduced executive officers’ base salary by 20% through November 2020;

(vii) eliminated and/or deferred all non-essential operating expenses at all of its parks and corporate headquarters while the parks were closed and actively managing operating expenses;

(viii) eliminated substantially all advertising and marketing spend while the parks were closed and strategically managing marketing spend as parks reopened;

(vii) eliminated and/or deferred all non-essential operating expenses at all of its parks and corporate headquarters while the parks were closed and actively managed operating expenses as parks reopened;

(viii) eliminated substantially all advertising and marketing spend while the parks were closed and strategically managed marketing spend as parks reopened;

(ix) substantially reduced or deferred all capital expenditures starting in March 2020 (other than minimal essential capital expenditures) when the parks were closed and postponed the opening of rides that were still under construction and scheduled to open in 2020;

(x) worked with certain of its vendors and other business partners to manage, defer, and/or abate certain costs and payments and;

(xi) added additional levels of review and approval for payments and cash disbursements which remains in place.

Concurrent with the reopening of some of its parks, the Company began to prudently bring some employees back from furlough.

employees remain on furlough while others have been transitioned from a furloughed status to a permanent layoff.

See Note 21–Severance and Other Separation Costs for additional disclosure.

The COVID-19 pandemic, resulting park closures and limited park reopenings have had, and are likely to continue to have, a material impact on the Company’s financial results.

(xi) added additional levels of review and approval for payments and cash disbursements which remained in place through 2021.

The Company continuously monitors guidance from federal, state and local authorities and engages with governmental authorities as well as medical/scientific consultants.

The Company may adjust its plans accordingly as laws change and new information and guidance becomes available.

The COVID-19 pandemic has had, and may continue to have, a material impact on the Company’s financial results.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance, deferred tax assets and liabilities, deferred revenue, equity compensation, the valuation of goodwill and other indefinite-lived intangible assets as well as reviews for potential impairment of long-lived assets.

Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance, deferred tax assets and liabilities, deferred revenue, equity compensation, the valuation of goodwill and other indefinite-lived intangible assets and reviews for potential impairment of long-lived assets.

Estimates are based on various factors including current and historical trends, as well as other pertinent company and industry data.

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Actual results could differ from those estimates.

Based on the uncertainty relating to the COVID-19 pandemic, including but not limited to the extent, duration and impact of park closures, limited park reopenings, capacity limitations due to social distancing guidelines, public sentiment on social gatherings, travel and attendance patterns, potential supply chain disruptions and additional actions which could be taken by government authorities to manage the pandemic, the Company is not certain of the ultimate impact the COVID-19 pandemic could have on its estimates, business or results of operations.

Based on the uncertainty relating to the COVID-19 pandemic, including but not limited to the impact or timing of government restrictions, any future capacity limitations due to social distancing guidelines, public sentiment on social gatherings, travel and attendance patterns, travel restrictions, effectiveness and adoption of vaccines, the impact of new variants, potential supply chain disruptions and additional actions which could be taken by government authorities to manage the pandemic, the Company is not certain of the ultimate impact the COVID-19 pandemic could have on its estimates, business or results of operations.

Cash and Cash Equivalents

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The Company records an allowance on trade accounts receivable with an offset to the provision for bad debt for estimated credit losses expected based on its history of uncollectable accounts.

For all periods presented,

the provision for bad debt was immaterial.

The Company also records an allowance for estimated credit losses on amounts due from monthly installment arrangements based on historical defaul t rates.

As of December 31, 2020 and 201 9 , the Company recorded $ 6.7 million and $ 12.1 million, respectively, as an allowance on its installment arrangements , which is included in accounts rec ei vable, net, in the accompanying consolidated balance sheets, with a corresponding reduction to deferred revenue.

For all periods presented, the provision for bad debt was immaterial.

The Company also records an allowance for estimated credit losses on amounts due from monthly installment arrangements based on historical default rates.

As of December 31, 2021 and 2020, the Company recorded $ 17.7 million and $ 6.7 million, respectively, as an allowance on its installment arrangements, which is included in accounts receivable, net, in the accompanying consolidated balance sheets, with a corresponding reduction to deferred revenue.

Inventories are accounted for using the weighted average cost method and are stated at the lower of cost or net realizable value.

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Accumulated amortization was $ 12.4 million and $ 11.2 million as of December 31, 2021 and 2020, respectively.

Amortization expense of capitalized computer system development costs during the years ended December 31, 2020, 2019 and 2018 was $ 1.7 million, $ 2.2 million and $ 3.7 million, respectively, and is recorded in depreciation and amortization in the accompanying consolidated statements of comprehensive (loss) income.

Amortization expense of capitalized computer system development costs during the years ended December 31, 2021, 2020 and 2019 was $ 1.4 million, $ 1.7 million and $ 2.2 million, respectively, and is recorded in depreciation and amortization in the accompanying consolidated statements of comprehensive income (loss).

Systems reengineering costs do not meet the proper criteria for capitalization and are expensed as incurred.

Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill and other indefinite-lived intangible assets are not amortized, but instead reviewed for impairment at least annually on December 1, and as of an interim date should factors or indicators become apparent that would require an interim test, with ongoing recoverability based on applicable reporting unit overall financial performance and consideration of significant events or changes in the overall business environment or macroeconomic conditions.

Goodwill and other indefinite-lived intangible assets are not amortized, but instead reviewed for impairment at least annually during the fourth quarter, and as of an interim date should factors or indicators become apparent that would require an interim test, with ongoing recoverability based on applicable reporting unit overall financial performance and consideration of significant events or changes in the overall business environment or macroeconomic conditions.

Such events or changes in the overall business environment could include, but are not limited to, significant negative trends or unanticipated changes in the competitive or macroeconomic environment.

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Trade names/trademarks are combined by brand as a unit of accounting when testing for impairment as the brand represents the highest and best use of the asset and drives the Company’s marketing strategy and international license agreements.

Estimates required in this valuation method include estimated future revenues impacted by the trade names/trademarks, royalty rates, and appropriate discount rates.

E stimates required in this valuation method include estimated future revenues impacted by the trade names/trademarks, royalty rates, and appropriate discount rates.

Projections are based on management’s best estimates given recent financial performance, market trends, strategic plans, brand awareness, operating characteristics by park, and other available information.

See Note 9–Goodwill, Trade Names/Trademarks and Other Intangible Assets, Net, for further details.

During the year ended December 31, 2020, due to the temporary park closures effective March 16, 2020 and the limited park reopenings resulting from the COVID-19 pandemic discussed previously, the Company identified triggering events and qualitatively evaluated its goodwill and other indefinite-lived intangible assets for further impairment analysis.

These qualitative evaluations included certain judgements and assumptions related to the impact of the temporary park closures, the extent and duration of capacity limitations, the expected attendance levels and number of operating days/hours and the significant excess of historical fair values over carrying values and determined that, no further impairment analysis was warranted.

As such, the Company did no t record an impairment of goodwill and other indefinite-lived intangible assets during the year ended December 31, 2020.

If the Company’s assumptions, including those around the impact of the COVID-19 pandemic and its projections of future cash flows and financial performance, as well as the economic outlook are not achieved, the Company may be required to record impairment charges in future periods, whether in connection with the Company’s next annual impairment testing, or on an interim basis, if any such change constitutes a triggering event outside of the quarter when the Company regularly performs its annual impairment test.

It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

See Note 9–Goodwill and Trade Names/Trademarks, Net, for further details.

Impairment of Long-Lived Assets

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The measurement of the impairment loss to be recognized is based upon the difference between the estimated fair value and the carrying amounts of the assets.

As discussed above, during the year ended December 31, 2020, due to the impact from the COVID-19 pandemic, the Company identified triggering events and qualitatively evaluated certain long-lived assets, including its right of use assets, for further impairment analysis.

Using similar assumptions as discussed above, the Company determined that, based on the significant excess estimated undiscounted cash flows over carrying values, there was no impairment of other long-lived assets.

Fair value is generally determined based upon a discounted cash flow analysis.

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From time to time, the Company’s Board of Directors (the “Board”) may authorize share repurchases of common stock.

Shares repurchased under Board authorizations are held in treasury for general corporate purposes.

Shares repurchased under Board authorizations are currently held in treasury for general corporate purposes.

The Company accounts for treasury stock on the trade date under the cost method.

Treasury stock at December 31, 2020 and 2019 is recorded as a reduction to stockholders’ (deficit) equity as the Company does not currently intend to retire the treasury stock held.

Treasury stock at December 31, 2021 and 2020 is recorded as a reduction to stockholders’ (deficit) equity.

See further discussion of the Company’s share repurchase program in Note 20–Stockholders’ (Deficit) Equity.

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For these pass and multi-use products, revenue is deferred and recognized over the terms of the admission product based on estimated redemption rates for similar products and is adjusted periodically.

The Company estimates a redemption rate using historical and forecasted growth rates and attendance trends by park for similar products.

Due to the temporary park closures, capacity limitations and product extensions in 2020, the Company evaluated the estimates and assumptions used in its future estimated redemption rates for these products based on forecasted and actual attendance patterns.

Attendance trends factor in seasonality and are adjusted based on actual trends periodically, including to reflect recent trends.

The Company estimates redemption rates using historical and forecasted attendance trends by park for similar products.

Attendance trends factor in seasonality and are adjusted based on actual trends periodically.

These estimated redemption rates impact the timing of when revenue is recognized on these products.

Actual results could materially differ from these estimates based on actual attendance patterns.

Revenue is recognized on a pro-rata basis based on the estimated allocated selling price of the admission product.

For active pass products purchased under monthly installment arrangements that have extended beyond their initial commitment term and have transitioned to a month to month basis, revenue is recognized monthly as payments are received, with the exception of payments received during the temporary park closures (see further discussion which follows).

For pass products purchased on an installment plan that have met their initial commitment period and have transitioned to a month to month basis, monthly charges are recognized as revenue as payments are received each month, with the exception of payments received during the temporary park closures in 2020 (see further discussion which follows).

For multi-day admission products, revenue is allocated based on the number of visits included in the pass and recognized ratably based on each admission into the theme park.

As a result of the temporary park closures due to the COVID-19 pandemic, the Company upgraded some of its pass products and extended pass expiration dates for at least the equivalent period the related parks were closed.

As a result, the Company adjusted its estimated redemption and recognition patterns related to its admission products to reflect the fact that there was no attendance during the park closures and accordingly the Company did not recognize revenue from these admission products while the parks were closed.

For passes under installment plans that have transitioned to a month to month basis, payments received during the closure period are recorded as deferred revenue and are recognized as revenue once the respective park reopens, which may not necessarily reflect attendance patterns for these guests.

Accordingly, for these passes, the Company temporarily paused monthly charges when the related parks reopened for the equivalent period the respective parks were closed.

The Company has estimated future redemption and recognition patterns for admission pass products , which impacts the timing of when revenue is recognized on these products .

Actual results could materially differ from these estimates depending on the ultimate extent of the effects of the COVID-19 pandemic.

In 2020, as a result of the temporary park closures due to the COVID-19 pandemic, the Company upgraded some of its pass products and extended pass expiration dates for at least the equivalent period the related parks were closed.

As a result, the Company adjusted its estimated redemption and recognition patterns on these products to reflect the fact that there was no attendance during the park closures and accordingly the Company did not recognize revenue from these admission products while the parks were temporarily closed in 2020.

For passes under installment plans that had transitioned to a month to month basis, the Company temporarily paused monthly charges when the related parks reopened for the equivalent period the respective parks were closed.

Accordingly, payments received during the closure period were recorded as deferred revenue and recognized as revenue once the respective parks reopened in 2020, which may not have necessarily reflected attendance patterns for these guests.

The Company has also entered into agreements with certain external theme park, zoo and other attraction operators to jointly market and sell single and multi-use admission products.

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The fair value of the products or services is recognized into admissions revenue and related expenses at the time of the exchange and approximates the estimated fair value of the goods or services provided or received, whichever is more readily determinable.

For the years ended December 31, 2020, 2019 and 2018, amounts included within admissions revenue with an offset to either selling, general and administrative expenses or operating expenses in the accompanying consolidated statements of comprehensive (loss) income related to bartered ticket transactions were $ 4.7 million, $ 16.2 million and $ 16.6 million, respectively.

For the years ended December 31, 2021, 2020 and 2019, amounts included within admissions revenue with an offset to either selling, general and administrative expenses or operating expenses in the accompanying consolidated statements of comprehensive income (loss) related to bartered ticket transactions were $ 13.6 million, $ 4.7 million and $ 16.2 million, respectively.

Food, Merchandise and Other Revenue

Food, merchandise and other revenue primarily consists of culinary, merchandise, parking and other in-park products and also includes other miscellaneous revenue which is not significant in the periods presented, including revenue related to the Company’s international agreements as discussed in Note 4–Revenues.

The Company recognizes revenue for food, merchandise and other in-park products when the related products or services are received by the guests.

Certain admission products may also include bundled products at the time of purchase, such as culinary or merchandise items.

Food, merchandise and other revenue primarily consists of food and beverage, merchandise, parking and other in-park products and also includes other miscellaneous revenue which is not significant in the periods presented.

The Company recognizes revenue for food and beverage, merchandise and other in-park products when the related products or services are received by the guests.

Certain admission products may also include bundled products at the time of purchase, such as food and beverage or merchandise items.

The Company conducts an analysis of bundled products to identify separate distinct performance obligations that are material in the context of the contract.

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Advertising production costs are deferred and expensed the first time the advertisement is shown.

Other advertising and media costs are expensed as incurred and for the years ended December 31, 2020, 2019 and 2018, totaled approximately $ 48.1 million, $ 138.3 million and $ 127.5 million, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income.

Other advertising and media costs are expensed as incurred and, for the years ended December 31, 2021, 2020 and 2019, totaled approximately $ 81.4 million, $ 48.1 million and $ 138.3 million, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss).

Equity-Based Compensation

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(i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn.

If the one-time benefit arrangements are part of an ongoing benefit arrangement or an individual deferred compensation contract, a liability is recognized and measured at its fair value for one-time termination benefits when the following conditions are met:

(i) the obligation is attributable to services already rendered;

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The Company leases land, warehouse and office space, and equipment, which are classified as either operating or finance leases.

Under the provisions of ASC 842, lease liabilities and right of use assets are recognized at the lease commencement date on the basis of the present value of the future lease payments, with the right of use being adjusted by any prepaid or accrued rent, lease incentives, and initial direct costs.

Under the provisions of ASC 842, Leases, lease liabilities and right of use assets are recognized at the lease commencement date on the basis of the present value of the future lease payments, with the right of use being adjusted by any prepaid or accrued rent, lease incentives, and initial direct costs.

The lease term for each lease includes the noncancelable period plus any periods subject to an option for renewal when it is reasonably certain that the Company will exercise that option.

The subsequent measurement of a lease is dependent on whether the lease is classified as an operating or finance lease.

Operating leases have a straight-line expense pattern that is recognized as either operating expenses or selling, general, and administrative expenses in the consolidated statements of comprehensive (loss) income.

Finance leases have a front-loaded expense recognition pattern that is comprised of amortization expense and interest expense that is included in depreciation and amortization and interest expense in the consolidated statements of comprehensive (loss) income.

The Company initially evaluates the classification of its leases as of the lease commencement date and reevaluates the classification of its leases upon the occurrence of certain lease remeasurement events and when there is a lease modification that is not accounted for as a separate contract.

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The Company applies the incremental borrowing rates at a portfolio level based on lease terms.

The Company has elected the short-term lease recognition exemption by which it is not required to recognize on the balance sheet leases with an initial lease term of 12 months or less, with the lease expense for these short-term leases recognized on a straight-line basis over the lease term.

For lease agreements entered into or reassessed upon adoption of ASC 842, the Company has elected the available practical expedient to not separate the non-lease components from the related lease component, accounting for the combined components as a single lease component.

The short-term lease recognition exemption and the practical expedient to not separate the lease and non-lease components was elected for each class of underlying asset as permitted under ASC 842.

In accordance with the short-term lease recognition exemption of ASC 842, the Company does not recognize on its balance sheet leases with an initial lease term of 12 months or less.

Lease expense for these short-term leases is recognized on a straight-line basis over the lease term.

Some of the Company’s leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years or more.

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Certain of the Company’s lease agreements include rental payments based on a percentage of sales over contractual levels and others include rental payments adjusted periodically for inflation.

These variable lease payments are typically recognized when the underlying event occurs and are included in operating expenses in the Company’s consolidated statements of comprehensive (loss) income in the same line item as the expense arising from fixed lease payments.

These variable lease payments are typically recognized when the underlying event occurs and are included in operating expenses in the Company’s consolidated statements of comprehensive income (loss) in the same line item as the expense arising from fixed lease payments.

The Company’s lease agreements do not contain any material residual value guarantees, material restrictive covenants or material variable lease costs other than those described in Note 14–Leases related to the Company’s land lease.

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Realization is dependent on generating sufficient future taxable income or the reversal of deferred tax liabilities during the periods in which those temporary differences become deductible.

Forecasted financial performance is not used as evidence until such time as the Company has cumulative pretax income for a rolling 36-month period.

The Company evaluates its tax positions by determining if it is more likely than not a tax position is sustainable upon examination, based upon the technical merits of the position, before any of the benefit is recorded for financial statement purposes.

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Previously recorded benefits that no longer meet the more likely than not threshold are charged to earnings in the period that the determination is made.

Interest and penalties accrued related to unrecognized tax benefits are charged to the (benefit from) provision for income taxes in the accompanying consolidated statements of comprehensive (loss) income.

See further discussion in Note 13–Income Taxes.

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Segment Reporting

The Company maintains discrete financial information for each of its twelve theme parks, which is used by the Chief Operating Decision Maker (“CODM”), identified as the Chief Executive Officer, or equivalent role, as a basis for allocating resources and assessing performance.

The Company maintains discrete financial information for each of its twelve theme parks, which is used by the Chief Operating Decision Maker (“CODM”), as a basis for allocating resources and assessing performance.

Each theme park has been identified as an operating segment and meets the criteria for aggregation due to similar economic characteristics.

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Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by ASC 815, the Company records all derivatives on the balance sheet at fair value as either assets or liabilities.

As required by ASC 815, the Company records all derivatives, if any, on the balance sheet at fair value as either assets or liabilities.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

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During the year ended December 31, 2021, the Company adopted the following Accounting Standards Updates (“ASUs”) which had no material impact on its consolidated financial statements or disclosures:

FASB Staff Q&A :

On April 10, 2020, the FASB staff issued FASB Staff Q&A-Topic 842 and Topic 840:

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic which stated that entities may elect to account for lease concessions related to the effects of the COVID-19 pandemic as though the rights and obligations for those concessions existed as of the commencement of the contract rather than as a lease modification.

Lessees may make the election for any lessor-provided lease concession related to the impact of the COVID-19 pandemic as long as the concession does not result in a substantial increase in the rights of the lessor or in the obligations of the lessee.

The Company has made such election.

The Company has received immaterial rent concessions and has not entered into any lease modifications for the year ended

December 31, 2020 .

As such, this election did not have a material impact on the Company’s consolidated financial statements nor the related disclosures.

ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) , This ASU requires the immediate recognition of estimated credit losses expected to occur over the life of financial assets rather than the current incurred loss impairment model that recognizes losses when a probability threshold is met.

ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those fiscal years.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or disclosures.

Recently Issued Accounting Standards

The Company is currently evaluating the impact of the following recently issued ASUs:

ASU 2020-04, Reference Rate Reform (Topic 848) , provides optional transition guidance to ease the potential accounting burden associated with transitioning away from the London Interbank Offered Rate (“LIBOR”), with optional expedients related to the application of GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

The provisions of this ASU are effective upon issuance and can be applied prospectively through December 31, 2022.

Companies can apply this ASU immediately, but application is through December 31, 2020.

The Company is evaluating the impact of LIBOR on its existing contracts but does not expect that this ASU will have a material impact on its consolidated financial statements or related disclosures.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or disclosure.

ASU 2019-12, Simplifying the Accounting for Income Taxes , simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for the Company beginning January 1, 2021.

Early adoption requires adoption of all amendments in the same period.

ASU 2019-12 was effective for the Company beginning January 1, 2021.

Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company is currently evaluating ASU 2019-12 but does not expect that this ASU will have a material impact on its consolidated financial statements or related disclosures.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or disclosures.

Deferred revenue primarily includes revenue associated with pass products, admission or in-park products or services with a future intended use date and contract liability balances related to licensing and international agreements collected in advance of the Company satisfying its performance obligations and is expected to be recognized in future periods.

At December 31, 2021 and 2020, $ 14.5 million and $ 13.4 million, respectively, is included in other liabilities in the accompanying consolidated balance sheets related to the long-term portion of deferred revenue, which primarily relates to the Company’s international agreement, as discussed in the following section.

The Company expects to recognize this revenue over the term of the respective license agreement beginning when substantially all of the services have been performed, which is expected to be upon opening.

The following table reflects the Company’s deferred revenue balance as of December 31, 2021 and 2020:

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Deferred revenue, short-term portion

The majority of the deferred revenue, short term portion, balance outstanding as of January 1, 2020 was recognized as revenue during the year ended December 31, 2020, with approximately 5 % remaining as deferred revenue as of December 31, 2020 due to product extensions.

The increase in deferred revenue as of December 31, 2020 compared to December 31, 2019 primarily relates to extensions provided on some of the Company’s admission products due to the COVID-19 temporary park closures.

The majority of the deferred revenue, short term portion, balance outstanding as of January 1, 2021 was recognized as revenue during the year ended December 31, 2021.

International Agreements

The Company has received $ 10.0 million in deferred revenue recorded in other liabilities related to a nonrefundable payment received from a partner in connection with a project in the Middle East (the “Middle East Project”) to provide certain services pertaining to the planning and design of the Middle East Project, with funding received expected to offset internal expenses.

The Company expects to receive additional funds from its partner related to agreed upon services and reimbursements of costs incurred by the Company on behalf of the Middle East Project.

Approximately $ 5.9 million and $ 5.0 million of costs incurred related to the Middle East Project are recorded in other assets in the accompanying consolidated balance sheet as of December 31, 2020 and 2019, respectively.

The Company has recognized an asset for the costs incurred to fulfill the contract as the costs are specifically identifiable, enhance resources that will be used to satisfy performance obligations in the future and are expected to be recovered.

The related deferred revenue and expense will begin to be recognized when substantially all of the services have been performed, which is expected to be upon opening of the park.

The Company previously received $ 10.0 million in deferred revenue recorded in other liabilities related to a nonrefundable payment received from a partner in connection with a project in the Middle East to provide certain services pertaining to the planning and design of SeaWorld Abu Dhabi, a marine life theme park on Yas Island (the “Middle East Project”), with funding received expected to offset internal expenses.

The Company also receives additional funds from its partner related to agreed upon services and reimbursements of costs incurred by the Company on behalf of the Middle East Project, including approximately $ 4.5 million and $ 1.9 million of additional deferred revenue recorded in other liabilities in the accompanying consolidated balance sheets at December 31, 2021 and 2020, respectively.

Separately, the Company recognizes an asset for the costs incurred to fulfill the contract if the costs are specifically identifiable, enhance resources that will be used to satisfy performance obligations in the future and are expected to be recovered.

As a result, approximately $ 9.6 million and $ 5.9 million of costs incurred related to the Middle East Project are recorded in other assets in the accompanying consolidated balance sheet as of December 31, 2021 and 2020, respectively.

The related deferred revenue and expense will begin to be recognized when substantially all of the services have been performed.

The Company continually monitors performance on the contract and will make adjustments, if necessary.

Construction for the Middle East Project is on track and scheduled to be completed by the end of 2022 .

There is no assurance that the Middle East Project will be completed or open to the public.

In March 2017, the Company entered into a Park Exclusivity and Concept Design Agreement and a Center Concept and Preliminary Design Support Agreement (collectively, the “ZHG Agreements”) with an affiliate of Zhonghong Zhuoye Group Co., Ltd.

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In April 2019, the Company terminated the ZHG Agreements for non-payment of undisputed amounts owed.

For the years ended December 31, 2019 and 2018 , the Company recorded revenue related to the ZHG Agreements of approximately $ 1.7 million and $ 5.1 million, respectively, which is included in food, merchandise and other revenue in the accompanying consolidated statements of comprehensive (loss) income.

There were no amounts recorded as revenue related to the ZHG Agreements in the year ended December 31, 2020 See Note 17–Related-Party Transactions for further details.

(LOSS) EARNINGS PER SHARE

(Loss) earnings per share is computed as follows:

For the year ended December 31, 2019 , the Company recorded revenue related to the ZHG Agreements of approximately $ 1.7 million, which is included in food, merchandise and other revenue in the accompanying consolidated statements of comprehensive income (loss).

There were no amounts recorded as revenue related to the ZHG Agreements in the years ended December 31, 2021 and 2020.

See Note 17–Related-Party Transactions for further details.

EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed as follows:

Year Ended December 31,

(In thousands, except per share amounts)

Basic (loss) earnings per share

Basic earnings (loss) per share

Effect of dilutive

incentive-based awards

Diluted (loss) earnings per share

In accordance with the Earnings Per Share Topic of the ASC, basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period (excluding treasury stock and unvested restricted stock awards).

Diluted earnings (loss) per share

In accordance with ASC 260, Earnings Per Share , basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period (excluding treasury stock and unvested restricted stock awards).

Unvested restricted stock awards are eligible to receive dividends, if any;

however, dividend rights will be forfeited if the award does not vest.

Accordingly, only vested shares of formerly restricted stock are included in the calculation of basic (loss) earnings per share.

Accordingly, only vested shares of formerly restricted stock are included in the calculation of basic earnings (loss) per share.

The weighted average number of repurchased shares during the period, if any, which are held as treasury stock, are excluded from shares of common stock outstanding.

Diluted (loss) earnings per share is determined using the treasury stock method based on the dilutive effect of certain unvested restricted stock awards and certain shares of common stock that are issuable upon exercise of stock options.

During the year ended December 31, 2020, there were approximately 2,253,000 potentially dilutive shares of common stock excluded from the computation of diluted loss per share as their effect would have been anti-dilutive due to the Company’s net loss in the period.

Diluted earnings (loss) per share is determined using the treasury stock method based on the dilutive effect of certain unvested restricted stock awards and certain shares of common stock that are issuable upon exercise of stock options.

During the years ended December 31, 2021 and 2019, there were approximately 146,000 and 305,000 anti-dilutive shares of common stock excluded from the computation of diluted earnings per share, respectively.

The Company’s outstanding performance-vesting restricted stock awards are considered contingently issuable shares and are excluded from the calculation of diluted earnings per share until the performance measure criteria is met as of the end of the reporting period.

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Prepaid marketing and advertising costs

Insurance recoveries

Total prepaid expenses and other current assets

As of December 31, 2019, insurance recoveries above related to insurance proceeds expected to be received from the Company’s insurance carriers related to a legal settlement.

The Company’s insurance carriers paid the insurance proceeds during the first quarter of 2020.

See further details in Note 10–Other Accrued Liabilities and Note 15–Commitments and Contingencies.

PROPERTY AND EQUIPMENT, NET

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Construction in progress

Less accumulated depreciation

accumulated depreciation

Total property and equipment, net

Depreciation expense was approximately $ 146.5 million, $ 148.0 million, and $ 156.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

For the years ended December 31, 2020 and 2019, the Company recorded approximately $ 6.7 million and $ 2.7 million, respectively, in fixed asset write-offs, which is included in operating expenses in the accompanying consolidated statement of comprehensive (loss) income.

For the year ended December 31, 2018, the Company recorded approximately $ 10.9 million in fixed asset disposals associated with certain rides and equipment which were removed from service during 2018, which is included in operating expenses in the accompanying consolidated statement of comprehensive (loss) income.

For the years ended December 31, 2021, 2020 and 2019, the Company recorded approximately $ 6.6 million, $ 6.7 million and $ 2.7 million, respectively, in fixed asset write-offs, which is included in operating expenses in the accompanying consolidated statement of comprehensive income (loss).

See Note 1–Description of the Business, Impact of Global COVID-19 Pandemic , for further details regarding proactive measures the Company has taken starting in March 2020 relating to its capital expenditures including delaying the opening of certain new rides.

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Goodwill, net, at December 31, 2021 and 2020 relates to the Company’s Discovery Cove reporting unit.

The Company performed an annual qualitative assessment at December 1, 2020 and 2019 and concluded that further evaluation was unnecessary.

The Company performed an annual qualitative assessment in the fourth quarter of 2021 and 2020 and concluded that further evaluation was unnecessary.

Trade Names/Trademarks, Net

At December 1, 2020, the Company performed a quantitative assessment over certain trade names/trademarks with a combined balance of $ 111.9 million related to its SeaWorld brand.

During the fourth quarter of 2021, the Company performed a qualitative assessment for its indefinite-lived intangible assets and concluded that further evaluation was unnecessary.

During the fourth quarter of 2020, the Company performed a quantitative assessment over certain trade names/trademarks with a combined balance of $ 111.9 million related to its SeaWorld brand.

Based on its assessment, the Company determined the estimated fair value exceeded its carrying value and therefore no impairment had occurred.

The Company performed a qualitative assessment for its remaining other indefinite-lived intangible assets at December 1, 2020 and all of its other indefinite-lived intangible assets at December 1, 2019 and concluded that further evaluation was unnecessary.

The Company performed a qualitative assessment for its remaining other indefinite-lived intangible assets in the fourth quarter of 2020 and concluded that further evaluation was unnecessary.

Trade names/trademarks, net, at December 31, 2021 and 2020, consisted of the following:

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Self-insurance reserve

Accrued legal settlements

Total other accrued liabilities

As of December 31, 2020, accrued interest above primarily relates to interest associated with the Company’s second-priority senior secured notes issued in August 2020, for which interest is paid bi-annually in February and August and the first-priority senior secured notes issued in April 2020, for which interest is paid bi-annually in November and May.

As of December 31, 2021, other accrued liabilities above includes approximately $ 10.9 million related to certain contractual liabilities arising from the temporary COVID-19 park closures.

As of December 31, 2021, accrued interest above primarily relates to interest associated with the Company’s senior notes issued in August 2021, for which interest is paid bi-annually in February and August and the first-priority senior secured notes issued in April 2020, for which interest is paid bi-annually in November and May.

As of December 31, 2020, accrued interest above primarily relates to interest associated with the Company’s second-priority senior secured notes issued in August 2020, for which interest was paid bi-annually in February and August and the first-priority senior secured notes issued in April 2020.

See further discussion in Note 11–Long-Term Debt.

As of December 31, 2019, accrued legal settlements above is related to a previously disclosed legal settlement which was paid, net of insurance proceeds, during the year ended December 31, 2020.

As of December 31, 2019, the Company had recorded a receivable of $ 32.9 million in prepaid expenses and other current assets for insurance proceeds from its insurance carriers related to this case.

See further details in Note 7–Prepaid Expenses and Other Current Assets and Note 15–Commitments and Contingencies.

LONG-TERM DEBT

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(In thousands)

Term B-5 Loans (effective interest rate of 3.75 % and 4.80 %

at December 31, 2020 and 2019, respectively)

Revolving credit facility (effective interest rate of 4.35 %

at December 31, 2019)

Second-Priority Senior Notes (interest rate of 9.50 %)

Senior Notes (interest rate of 8.75 %)

Term B Loans (effective interest rate of 3.50 %)

Term B-5 Loans (effective interest rate of 3.75 %)

Senior Notes due 2029 (interest rate of 5.25 %)

First-Priority Senior Secured Notes due 2025 (interest rate of 8.75 %)

Second-Priority Senior Secured Notes due 2025 (interest rate of 9.50 %)

Total long-term debt

discounts and debt issuance costs

current maturities, including revolving credit facility at December 31, 2019

current maturities

Total long-term debt, net

Refinancing Transactions

On August 25, 2021 (the “Closing Date”), SEA entered into a Restatement Agreement (the “Restatement Agreement”) pursuant to which SEA amended and restated its existing senior secured credit agreement dated as of December 1, 2009 (as amended, restated, supplemented or otherwise modified from time to time, and the senior secured credit facilities thereunder (the “Existing Secured Credit Facilities”), and, as amended and restated by the Restatement Agreement (the “Amended and Restated Credit Agreement”).

The Amended and Restated Credit Agreement provides for senior secured financing of up to $ 1,585.0 million, consisting of:

a first lien term loan facility (the “Term Loan Facility” and the loans thereunder, the “Term B Loans”), in an aggregate principal amount of $ 1,200.0 million which was fully drawn on the Closing Date.

The Term Loan Facility will mature on August 25, 2028 ;

a first lien revolving credit facility (the “Revolving Credit Facility” (and the loans thereunder, the “Revolving Loans”) and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”), in an aggregate committed principal amount of $ 385.0 million, including both a letter of credit sub-facility and a swingline loan sub-facility.

The Revolving Credit Facility will mature on August 25, 2026 .

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

See Senior Notes section which follows for more details.

The Company used proceeds of the Term B Loans drawn on the Closing Date, together with the proceeds from the offering of the Senior Notes and cash on hand, to redeem SEA’s then outstanding 9.500 % second-priority senior secured notes due 2025 (the “Second-Priority Senior Secured Notes”), to refinance the SEA’s Existing Secured Credit Facilities, and to pay related expenses of the offering and refinancing (collectively, the “Refinancing Transactions”).

As a result of the Refinancing Transactions, on August 25, 2021, SEA terminated its Existing Secured Credit Facilities and associated Term B-5 Loans and repaid all of its related outstanding obligations in respect of principal, interest and fees.

Prior to the Refinancing Transactions, on July 14, 2021, SEA completed a redemption of $ 50.0 million of its Second-Priority Senior Secured Notes and separately on August 25, 2021, SEA completed another redemption of $ 50.0 million of its Second-Priority Senior Secured Notes (collectively, the “Partial Redemptions”).

Pursuant to the Partial Redemptions, the aggregate principal amount of the Second-Priority Senior Secured Notes were redeemed at a price equal to 103.000 % of the respective principal amounts thereof, plus accrued and unpaid interest thereon to, but excluding, the respective redemption dates.

In connection with the Refinancing Transactions, SEA also redeemed the remaining $ 400.0 million of its Second-Priority Senior Secured Notes (the “Full Redemption”).

Pursuant to the Full Redemption, all of the aggregate principal amount of the Second-Priority Senior Secured Notes were redeemed at a price equal to the sum of (a) 100.000 % of the outstanding principal amount of the Second-Priority Senior Secured Notes redeemed pursuant to the Full Redemption plus (b) approximately $ 34.3 million related to the Applicable Premium (as defined in the respective indenture), which is included in loss on early extinguishment of debt and write-off of discounts and debt issuance costs for the year ended December 31, 2021, plus (c) accrued and unpaid interest thereon to, but excluding, the redemption date.

Discounts and Debt Issuance Costs

In connection with the Refinancing Transactions, SEA recorded a discount of $ 12.0 million and debt issuance costs of $ 12.7 million, of which $ 2.8 million were paid directly to lenders, during the year ended December 31, 2021.

Additionally, SEA wrote-off debt issuance costs and discounts of $ 21.5 million which is included in loss on early extinguishment of debt and write-off of discounts and debt issuance costs in the accompanying consolidated statement of comprehensive income (loss) for the year ended December 31, 2021.

In connection with the issuance of the First-Priority Senior Secured Notes and Second-Priority Senior Secured Notes, and as a result of certain amendments in 2020 to SEA’s then existing senior secured credit agreement, as previously disclosed, SEA recorded discounts and fees of approximately $ 21.9 million, of which approximately $ 13.8 million were paid directly to lenders, during the year ended December 31, 2020.

Senior Secured Credit Facilities

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”).

On March 10, 2020, SEA entered into an amendment, Amendment No.

10 (the “Amendment No.

10”) to its Amended Credit Agreement.

Pursuant to Amendment No.

10, SEA increased the revolving credit commitments available under the Amended Credit Agreement from $ 210.0 million to an aggregate of $ 332.5 million.

On April 19, 2020 and on July 29, 2020, respectively, SEA entered into Amendment No.

11, (the “Amendment No.

11”) and Amendment No.

12, (the “Amendment No.

12”) to its Amended Credit Agreement to amend certain provisions therein.

On October 31, 2018, SEA entered into a refinancing amendment, Amendment No.

9 (the “Amendment No.

9”), to its Amended Credit Agreement.

In connection with Amendment No.

9, SEA borrowed $ 543.9 million of additional term loans (the “Term B-5 Loans”) of which the proceeds, along with cash on hand, were used to redeem all of the then outstanding principal of the Term B-2 loans, and pay other fees, costs and expenses in connection with Amendment No.

9 and related transactions.

Additionally, pursuant to Amendment No.

9, SEA terminated the then existing revolving credit commitments and replaced them with a new tranche of revolving credit commitments with an aggregate commitment amount of $ 210.0 million (the “Revolving Credit Facility”).

As of December 31, 2020, the Senior Secured Credit Facilities consisted of $ 1.492 billion in Term B-5 Loans which will mature on March 31, 2024 and a $ 332.5 million revolving credit facility (the “Revolving Credit Facility”), which was not drawn upon as of December 31, 2020.

The Revolving Credit Facility will mature on October 31, 2023 .

The outstanding balance on the Revolving Credit Facility as of December 31, 2019 was included in current maturities of long-term debt in the accompanying consolidated balance sheets due to the Company’s intent to repay the borrowings within the following twelve month period.

The Term B-5 Loans amortize in equal quarterly installments in aggregate annual amounts equal to 1.015 % of the original principal amount of the Term B-5 Loans outstanding on October 31, 2018, with the balance payable on the final maturity date.

SEA may voluntarily repay amounts outstanding under the Senior Secured Credit Facilities at any time without premium or penalty, other than customary “breakage” costs with respect to LIBOR loans.

SEA is also required to prepay the outstanding Term B-5 Loans, subject to certain exceptions, under certain circumstances, as defined in the Senior Secured Credit Facilities.

There were no mandatory prepayments made during the years ended December 31, 2020, 2019 and 2018.

The obligations under the Senior Secured Credit Facilities are fully, unconditionally and irrevocably guaranteed by the Company, any subsidiary of the Company that directly or indirectly owns 100 % of the issued and outstanding equity interests of SEA, and, subject to certain exceptions, each of SEA’s existing and future material domestic wholly-owned subsidiaries.

The Senior Secured Credit Facilities are collateralized by first priority or equivalent security interests, subject to certain exceptions, in (i) all the capital stock of, or other equity interests in, substantially all of SEA’s direct or indirect material domestic subsidiaries and 65 % of the capital stock of, or other equity interests in, any “first tier” foreign subsidiaries and (ii) certain tangible and intangible assets of SEA and the Company.

Certain financial, affirmative and negative covenants are included in the Senior Secured Credit Facilities.

If an event of default occurs, the lenders under the Senior Secured Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the Senior Secured Credit Facilities and all actions permitted to be taken by a secured creditor.

Term B-5 Loans

Borrowings of the Term B-5 Loans under the Amended Credit Agreement bear interest at a fluctuating rate per annum equal to, at SEA ’ s option, (i) a base rate equal to the higher of (a) the federal funds rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by JPMorgan Chase Bank, N.A.

as its “ prime rate ” (provided that in no event shall such base rate with respect to the Term B-5 Loans be less than 1.75 % per annum), in each case, plus an applicable margin of 2.00 % or (ii) a LIBOR rate based on the British Bankers Association LIBOR Rate (or any successor thereto) for the applicable interest period (provided that in no event shall such LIBOR rate with respect to the Term B-5 Loans be less than 0.75 % per annum) plus an applicable margin of 3.00 %.

Revolving Credit Facility

Borrowings of the Revolving Credit Facility under the Amended Credit Agreement bear interest at a fluctuating rate per annum equal to, at SEA ’ s option, (i) a base rate equal to the higher of (a) the federal funds rate plus 1⁄2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by JPMorgan Chase Bank, N.A.

as its “ prime rate ” , in each case, plus an applicable margin equal to 1.75 %;

or (ii) a LIBOR rate based on the British Bankers Association LIBOR Rate (or any successor thereto) for the applicable interest period (provided that in no event shall such LIBOR rate with respect to the Revolving Credit Facility be less than 0.0 % per annum) plus an applicable margin equal to 2.75 %.

The applicable margin for borrowings under the Revolving Credit Facility are subject to one 25 basis point step-down upon achievement by SEA of certain corporate credit ratings, which the Company did not achieve as of December 31, 2020.

In addition to paying interest on outstanding principal under the Senior Secured Credit Facilities, SEA is required to pay a commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder at a rate of 0.50 % per annum.

SEA is also required to pay customary letter of credit fees.

As of December 31, 2020, SEA had approximately $ 21.2 million of outstanding letters of credit, leaving approximately $ 311.3 million available for borrowing under the Revolving Credit Facility.

First-Priority Senior Secured 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 due 2025 (the “Senior Notes”).

The Senior Notes mature on May 1, 2025 and have interest payment dates of May 1 and November 1 with the first interest payment paid on November 2, 2020 .

On or after May 1, 2022, SEA may redeem the Senior Notes at its option, in whole at any time or in part from time to time, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the 12-month period commencing on May 1 of the years as follows:

Borrowings of the Term B Loans bear interest at a fluctuating rate per annum equal to, at the Company’s option, (i) a base rate equal to the higher of (a) the federal funds rate plus 1/2 of 1%, (b) the rate of interest quoted in the print edition of the Wall Street Journal, Money Rates Section as the prime rate as in effect from time to time and (c) one-month Adjusted LIBOR plus 1% per annum (provided that in no event shall such ABR rate with respect to the Term B Loans be less than 1.50% per annum) (“ ABR ”), in each case, plus an applicable margin of 2.00% or (ii) a LIBOR rate for the applicable interest period (provided that in no event shall such LIBOR rate with respect to the Term B Loans be less than 0.50% per annum) (“ LIBOR ”) plus an applicable margin of 3.00%.

Borrowings of the Revolving Loans bear interest at a fluctuating rate per annum equal to, at the Company’s option, (i) ABR (provided that in no event shall such ABR rate with respect to the Revolving Loans be less than 1.00% per annum) plus an applicable margin equal to 1.75% or (ii) LIBOR (provided that in no event shall such LIBOR rate with respect to the Revolving Loans be less than 0.00%) plus an applicable margin of 2.75%.

The applicable margin for borrowings of Revolving Loans are subject to one 25 basis point step-down upon achievement by the Company of certain corporate credit ratings.

In addition to paying interest on the outstanding principal under the Senior Secured Credit Facilities, the Company is required to pay a commitment fee equal to 0.50 % per annum to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder.

The Company will also be required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR rate borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee computed at a rate equal to 0.125 % per annum on the daily stated amount of each letter of credit.

The Senior Secured Credit Facilities require scheduled amortization payments on the term loans in quarterly amounts equal to 0.25 % of the original principal amount of the Term B Loans, payable quarterly, with the balance to be paid at maturity.

In addition, the Senior Secured Credit Facilities require the Company to prepay outstanding term loan borrowings, subject to certain exceptions, with:

beginning with the fiscal year ending on December 31, 2022, 50% (which percentage will be reduced to 25% and 0% if the Company satisfies certain net first lien senior secured leverage ratios) of annual excess cash flow, as defined under the Senior Secured Credit Facilities;

100% of the net cash proceeds of all non-ordinary course asset sales or other non-ordinary course dispositions of property, in each case subject to certain exceptions and reinvestment rights;

100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the Senior Secured Credit Facilities.

The Company may voluntarily repay outstanding loans under the Senior Secured Credit Facilities at any time, without prepayment premium or penalty, except in connection with a repricing event in respect of the term loans as described below, subject to customary “breakage” costs with respect to LIBOR rate loans.

All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default or event of default and the accuracy of representations and warranties in all material respects.

All obligations under the Senior Secured Credit Facilities are unconditionally guaranteed by the Company on a limited-recourse basis and each of SEA’s existing and future direct and indirect wholly owned material domestic subsidiaries, subject to certain exceptions.

The obligations are secured by a pledge of SEA’s capital stock directly held by the Company and substantially all of SEA’s assets and those of each guarantor (other than the Company), including a pledge of the capital stock of all entities directly held by SEA or the guarantors, in each case subject to exceptions.

Such security interests consist of a first-priority lien with respect to the collateral.

As of December 31, 2021, SEA had approximately $ 20.5 million of outstanding letters of credit, leaving approximately $ 364.5 million available under the Revolving Credit Facility, which was not drawn upon as of December 31, 2021.

The Senior Notes will mature on August 15, 2029 .

Interest on the Senior Notes will accrue at 5.250 % per annum and will be paid semi-annually, in arrears on February 15 and August 15 of each year, beginning February 15, 2022 .

On or after August 15, 2024, SEA may redeem the Senior Notes, in whole at any time or in part from time to time, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the 12-month period commencing on August 15 of the years as follows:

(i) in 2024 at 102.625 %;

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and (iii) in 2026 and thereafter at 100 %.

SEA may also redeem in the aggregate (at a redemption price expressed as a percentage of principal amount thereof):

(i) 100 % of the Senior Notes after certain events constituting a change of control at a redemption price of 101 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date and (ii) up to 40% of the original aggregate principal amount of the Senior Notes with amounts equal to the net cash proceeds of certain equity offerings at a redemption price of 108.375 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The Senior Notes are fully and unconditionally guaranteed by the Company, any subsidiary of the Company that directly or indirectly owns 100% of the issued and outstanding equity interests of SEA, and subject to certain exceptions, each of SEA’s subsidiaries that guarantees SEA’s existing senior secured credit facilities.

Second-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 due 2025 (the “Second-Priority Senior Notes”).

Net of expenses related to the offering of the Second-Priority Senior Notes and Amendment No.

12, the Company used a portion of the proceeds from the issuance of the Second-Priority Senior Notes to repay the then outstanding borrowings of $ 311.0 million under the Revolving Credit Facility.

The Second-Priority Senior Notes mature on August 1, 2025 and have interest payment dates of February 1 and August 1 with the first interest payment due on February 1, 2021 .

On or after February 1, 2022, SEA may redeem the Second-Priority Senior Notes at its option, in whole at any time or in part from time to time, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the 12-month period commencing on February 1 of the years as follows:

In addition, prior to August 15, 2024, SEA may redeem the Senior Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the Senior Notes redeemed, plus the “Applicable Premium” and accrued and unpaid interest, if any, to, but excluding, the redemption date.

Notwithstanding the foregoing, subject to the provisions set forth in the Indenture, at any time and from time to time on or prior to August 15, 2024, SEA may redeem in the aggregate up to 40 % of the original aggregate principal amount of the Senior Notes (calculated after giving effect to any issuance of additional Senior Notes) in an aggregate amount equal to the net cash proceeds of one or more equity offerings at a redemption price equal to 105.250 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Additionally, upon the occurrence of specified change of control events, each holder will have the right to require SEA to repurchase all or any part of such holder’s notes at a purchase price in cash equal to 101 %.

SEA’s obligations under the Senior Notes and related indenture are guaranteed, jointly and severally, on a senior secured basis, by the Guarantors, as defined, in accordance with the provisions of the indenture.

First-Priority Senior Secured 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 due 2025 (the “First-Priority Senior Secured Notes”).

The First-Priority Senior Secured Notes mature on May 1, 2025 and have interest payment dates of May 1 and November 1 with the first interest payment paid on November 2, 2020 .

On or after May 1, 2022, SEA may redeem the First-Priority Senior Secured Notes at its option, in whole at any time or in part from time to time, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the 12-month period commencing on May 1 of the years as follows:

(i) in 2022 at 104.375 %;

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SEA may also redeem in the aggregate (at a redemption price expressed as a percentage of principal amount thereof):

(i) 100 % of the Second-Priority Senior Notes after certain events constituting a change of control at a redemption price of 101 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date and (ii) up to 40 % of the original aggregate principal amount of the Second-Priority Senior Notes with amounts equal to the net cash proceeds of certain equity offerings at a redemption price of 109.50 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

At any time prior to February 1, 2022, SEA may, (i) during the twelve month period commencing on the issue date and (ii) during the period subsequent to such twelve month period and prior to February 1, 2022, redeem in each period up to 10.0 % of the initial aggregate principal amount of the Second-Priority Senior Notes at a redemption price equal to 103 % of the aggregate principal amount of the Second-Priority Senior Notes to be redeemed plus accrued and unpaid interest, if any, to but excluding the redemption date;

provided, that if SEA does not redeem 10.0% of the initial aggregate principal amount of Second-Priority Senior Notes during the twelve month period commencing on the issue date, SEA may, in the subsequent period prior to February 1, 2022, redeem the Second-Priority Senior Notes in an amount that does not exceed 10.0% of the initial aggregate principal amount plus the difference between (x) 10.0% of the initial aggregate principal amount and (y) the aggregate principal amount of Second-Priority Senior Notes that were redeemed in such twelve month period .

The Second-Priority Senior Notes are fully and unconditionally guaranteed by the Company, any subsidiary of the Company that directly or indirectly owns 100% of the issued and outstanding equity interests of SEA, and subject to certain exceptions, each of SEA’s subsidiaries that guarantees SEA’s existing senior secured credit facilities.

Discounts and Debt Issuance Costs

In connection with the issuance of the Senior Notes and Second-Priority Senior Notes, and as a result of Amendment No.

10, Amendment No.

11 and Amendment No.

12, SEA recorded discounts and fees of approximately $ 21.9 million, of which approximately $ 13.8 million were paid directly to lenders, during the year ended December 31, 2020.

In connection with the issuance of the Term B-5 Loans and as a result of the Amendment No.

9, SEA recorded a discount of $ 0.7 million during the year ended December 31, 2018.

Additionally, SEA wrote-off debt issuance costs of $ 8.2 million, which is included in loss on early extinguishment of debt and write-off of discounts and debt issuances costs in the accompanying consolidated statement of comprehensive (loss) income during the year ended December 31, 2018.

(i) 100 % of the First-Priority Senior Secured Notes after certain events constituting a change of control at a redemption price of 101 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date and (ii) up to 40% of the original aggregate principal amount of the First-Priority Senior Secured Notes with amounts equal to the net cash proceeds of certain equity offerings at a redemption price of 108.750 %, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The First-Priority Senior Secured Notes are fully and unconditionally guaranteed by the Company, any subsidiary of the Company that directly or indirectly owns 100% of the issued and outstanding equity interests of SEA, and subject to certain exceptions, each of SEA’s subsidiaries that guarantees SEA’s existing senior secured credit facilities.

Second-Priority Senior Secured Notes

On August 5, 2020, SEA closed on a private offering of $ 500.0 million aggregate principal amount of Second-Priority Senior Secured Notes.

Net of expenses related to the offering of the Second-Priority Senior Secured Notes and an amendment to its then existing senior secured credit agreement, the Company used a portion of the proceeds from the issuance of the Second-Priority Senior Secured Notes to repay the then outstanding borrowings of $ 311.0 million under the Revolving Credit Facility.

The Second-Priority Senior Secured Notes were scheduled to mature on August 1, 2025 and had interest payment dates of February 1 and August 1 with the first interest payment paid on February 1, 2021 .

See additional discussion in the preceding Refinancing Transactions section regarding the full redemption of the Second-Priority Senior Secured Notes in 2021.

Restrictive Covenants

The Senior Secured Credit Facilities contain a number of customary negative covenants.

Such covenants, among other things, restrict, subject to certain exceptions, the ability of SEA and its restricted subsidiaries to incur additional indebtedness;

make guarantees;

create liens on assets;

enter into sale and leaseback transactions;

engage in mergers or consolidations;

make fundamental changes;

pay dividends and distributions or repurchase SEA’s capital stock;

make investments, loans and advances, including acquisitions;

engage in certain transactions with affiliates;

make changes in the nature of the business;

and make prepayments of junior debt.

All of the net assets of SEA and its consolidated subsidiaries are restricted and there are no unconsolidated subsidiaries of SEA.

The Revolving Credit Facility requires that the Company comply with a springing maximum first lien secured leverage ratio of 6.25 x to be tested as of the last day of any fiscal quarter, solely to the extent that on such date the aggregate amount of funded loans and letters of credit (excluding undrawn letters of credit in an amount not to exceed $ 30.0 million and cash collateralized letters of credit) under the Revolving Credit Facility exceeds an amount equal to 35 % of the then outstanding commitments under the Revolving Credit Facility.

Pursuant to Amendment No.

12, among other terms, SEA will be exempt from complying with its first lien secured leverage ratio covenant through the end of 2021, after which SEA will be required to comply with such covenant starting in the first quarter of 2022.

For purposes of calculating compliance with such covenant, unless a Triggering Event occurs (as defined in Amendment No.

12), beginning with the first quarter of 2022, to the extent trailing Adjusted EBITDA (as defined in Amendment No.

12) for the second, third or fourth quarters of 2021 would have otherwise been included in the calculation of such covenant, in lieu of using actual Adjusted EBITDA for such periods, Adjusted EBITDA for such applicable periods will be deemed to be actual Adjusted EBITDA (as defined in Amendment No.

12) for the corresponding quarter of 2019.

In addition, SEA will be required to comply with a quarterly minimum liquidity 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 on which the Company elects to use the actual Adjusted EBITDA for purposes of calculating its financial maintenance covenant.

SEA will also be restricted from paying certain dividends or making other restricted payments through the third quarter of 2022 unless certain conditions are met.

As of December 31, 2020, SEA was in compliance with all covenants contained in the documents governing the Senior Secured Credit Facilities.

The Amended and Restated Credit Agreement governing the Senior Secured Credit Facilities and the indentures governing the Senior Notes and First-Priority Senior Secured Notes (collectively, the “Debt Agreements”), contain covenants that limit the ability of the Company, SEA and its restricted subsidiaries to, among other things:

(i) incur additional indebtedness or issue certain preferred shares;

(ii) make dividend payments on or make other distributions in respect of their capital stock or make other restricted payments;

(iii) make certain investments;

(iv) sell certain assets;

(v) create or permit to exist dividend and/or payment restrictions affecting their restricted subsidiaries;

(vi) create liens on assets;

(vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets;

and (viii) enter into certain transactions with their affiliates.

These covenants are subject to a number of important limitations and exceptions and are based, in part on the Company’s ability to satisfy certain tests and engage in certain transactions based on Covenant Adjusted EBITDA.

Covenant Adjusted EBITDA differs from Adjusted EBITDA due to certain adjustments permitted under the relevant agreements, including but not limited to estimated cost savings, recruiting and retention costs, public company compliance costs, litigation and arbitration costs and other costs and adjustments as permitted under the Debt Agreements.

The Debt Agreements contain certain customary events of default, including relating to a change of control.

If an event of default occurs, the lenders under the Debt Agreements will be entitled to take various actions, including the acceleration of amounts due under the Debt Agreements and all actions permitted to be taken by a secured creditor in respect of the collateral securing the Debt Agreements.

The Revolving Credit Facility requires that the Company, commencing as of the last day of the first full fiscal quarter after the Closing Date and subject to a testing threshold, comply on a quarterly basis with a maximum net first lien senior secured leverage ratio of 6.25 to 1.00 .

The testing threshold will be satisfied (and therefore the covenant must be complied with at the end of such quarter) if the aggregate amount of funded loans and issued letters of credit (excluding up to $ 30.0 million of undrawn letters of credit under the Revolving Credit Facility and letters of credit that are cash collateralized) under the Revolving Credit Facility on such date exceeds an amount equal to 35 % of the then-outstanding commitments under the Revolving Credit Facility.

The Debt Agreements permit an unlimited capacity for restricted payments if the net total leverage ratio on a pro forma basis does not exceed 4.25 to 1.00 after giving effect to the payment of any such restricted payment.

As of December 31, 2021, the net total leverage ratio as calculated under the Debt Agreements was 2.48 to 1.00.

As of December 31, 2021, SEA was in compliance with all covenants contained in the documents governing the Debt Agreements.

Long-term debt at December 31, 2021, is repayable as follows and does not include the impact of any future voluntary prepayments:

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SEA designated the Interest Rate Swap Agreements above as qualifying cash flow hedge accounting relationships as further discussed in Note 12–Derivative Instruments and Hedging Activities which follows.

Cash paid for interest relating to the Senior Secured Credit Facilities, Senior Notes and Interest Rate Swap Agreements, net of amounts capitalized, as applicable, was $ 73.7 million, $ 80.5 million and $ 82.5 million during the years ended December 31, 2020, 2019 and 2018, respectively.

Cash paid for interest relating to the Second-Priority Senior Secured Notes, the Senior Secured Credit Facilities, the First-Priority Senior Secured Notes, and the Interest Rate Swap Agreements, net of amounts capitalized, as applicable, was $ 116.1 million, $ 73.7 million and $ 80.5 million during the years ended December 31, 2021, 2020 and 2019, respectively.

See Note 10–Other Accrued Liabilities for accrued interest included in the accompanying consolidated balance sheets as of December 31, 2021 and 2020.

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Specifically, the Company has previously entered into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

The Company’s derivative financial instruments, if any, are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

The Company does not speculate using derivative instruments.

In May 2020, the Company’s Interest Rate Swap Agreements expired, as such, the Company did no t have any derivative instruments outstanding as of December 31, 2020.

As of December 31, 2019, the Company did no t have any derivatives outstanding that were not designated in hedge accounting relationships.

In May 2020, the Company’s Interest Rate Swap Agreements expired.

As such, the Company did no t have any derivative instruments outstanding as of December 31, 2021 and 2020.

Cash Flow Hedges of Interest Rate Risk

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Amounts reported in accumulated other comprehensive income (loss) related to derivatives were reclassified to interest expense as interest payments were made on the Company’s variable-rate debt.

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The Company did not have any derivative financial instruments outstanding as of December 31, 2020.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the accompanying consolidated balance sheet as of December 31, 2019:

Liability Derivatives

As of December 31, 2019

Balance Sheet

Derivatives designated as hedging instruments:

(In thousands)

Interest rate swap agreements

Other liabilities

Total derivatives designated as hedging instruments

Derivative instruments are valued according to the methodology outlined in Note 2–Summary of Significant Accounting Policies.

The Company determined that its derivatives fell within Level 2 of the fair value hierarchy as discussed in Note–16 Fair Value Measurements.

The unrealized gain or loss on derivatives was recorded net of tax expense of $ 0.5 million and a tax benefit of $ 1.4 million for the years ended December 31, 2020 and 2019, respectively, and is included in the accompanying consolidated statements of changes in stockholders’ (deficit) equity and the consolidated statements of comprehensive (loss) income.

Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive (Loss) Income

The table below presents the pre-tax effect of the Company’s derivative financial instruments in the accompanying consolidated statements of comprehensive (loss) income for the years ended December 31, 2020 and 2019:

Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Income (Loss)

The table below presents the pre-tax effect of the Company’s derivative financial instruments in the accompanying consolidated statements of comprehensive income (loss) for the year ended December 31, 2020:

Year Ended December 31,

(In thousands)

Derivatives in Cash Flow Hedging Relationships:

(Loss) gain recognized in accumulated other comprehensive loss

Loss recognized in accumulated other comprehensive income (loss)

Amounts reclassified from accumulated other comprehensive income (loss) to interest expense

Changes in Accumulated Other Comprehensive Income (Loss)

The following table reflects the changes in accumulated other comprehensive income (loss), net of tax for the years ended December 31, 2020 and 2019:

The following table reflects the changes in accumulated other comprehensive income (loss), net of tax, for the year ended December 31, 2020:

Accumulated other comprehensive income (loss) (In thousands):

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Cash Flow Hedges

Accumulated other comprehensive income at December 31, 2018

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive income (loss) to interest expense

Change in other comprehensive income (loss), net of tax

Accumulated other comprehensive loss at December 31, 2019

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Deferred revenue

Cash flow hedge

Restricted stock

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Interest limitation

Charitable contributions

Total deferred income tax assets

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Total deferred income tax liabilities

Net deferred income tax assets (liabilities)

Net deferred income tax assets

The Company files federal, state and provincial income tax returns in various jurisdictions with varying statute of limitation expiration dates.

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The Company has federal tax net operating loss carryforwards of approximately $ 0.7 billion as of December 31, 2021 and state net operating loss carryforwards spread across various jurisdictions with a combined total of approximately $ 1.0 billion as of December 31, 2021.

These net operating loss carryforwards, if not used to reduce taxable income in future periods, will begin to expire in 2029 , for both federal and state tax purposes.

These net operating loss carryforwards, if not used to reduce taxable income in future periods, will begin to expire in 2030 and 2029 , for federal and state tax purposes, respectively.

Realization of the deferred income tax assets, primarily arising from these net operating loss carryforwards and charitable contribution carryforwards, is dependent upon generating sufficient taxable income prior to expiration of the carryforwards, which may include the reversal of deferred tax liability components.

The Company believes it is more likely than not that some of its deferred tax assets will not be realized.

Therefore, the Company has recorded a valuation allowance of approximately $ 39.5 million for federal net operating loss carryforwards, approximately $ 7.1 million for federal tax credits and approximately $ 4.0 million for federal and state charitable contributions as of December 31, 2020.

Separately, the Company has recorded a valuation allowance of approximately $ 15.0 million and $ 5.2 million, net of federal tax benefit, on the deferred tax assets related to state net operating loss carryforwards as of December 31, 2020 and 2019, respectively.

Through December 31, 2020, approximately $ 65.6 million of valuation allowances were established for some of the Company’s deferred tax assets, which, based on its analysis at the time, the Company believed did not meet the “more likely than not” criteria and would expire before being realized in future periods.

These valuation allowance s consisted of the following as of December 31, 2020:

approximately $ 39.5 million for federal net operating loss carryforwards, approximately $ 7.1 million for federal tax credits, approximately $ 4.0 million for federal and state charitable contributions and approximately $ 15.0 million, net of federal tax benefit, for state net operating losses.

Based on the Company’s assessment of the realizability of its deferred tax assets during the year ended December 31, 2021, which included a review of current and forecasted financial performance, the Company believes that some of these deferred tax assets now meet the “more likely than not” criteria and will be realized in future periods before they expire.

As a result, the Company reversed its valuation allowances by approximately $ 60.8 million during the year ended December 31, 2021.

As of December 31, 2021, the Company has a remaining valuation allowance of approximately $ 4.8 million, net of federal tax benefit, on the deferred tax assets related to state net operating loss carryforwards.

The Company’s valuation allowances, in part, rely on estimates and assumptions related to future financial performance.

Given the macroeconomic environment related to the COVID-19 pandemic and the uncertainties regarding the related impact on financial performance, the Company’s valuation allowances may need to be adjusted in the future.

The reconciliation between the statutory income tax rate and the Company’s effective income tax provision (benefit) rate for the years ended December 31, 2020, 2019 and 2018, is as follows:

The reconciliation between the statutory income tax rate and the Company’s effective income tax (benefit) provision rate for the years ended December 31, 2021, 2020 and 2019, is as follows:

(In thousands)

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Impact of state rate changes

Nondeductible settlement

Officer's compensation limitation

Valuation allowance - state

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The annual rent payments may vary from the base rent due to a shift of seasonal performance results.

Rent payments related to the Premises for the years ended December 31, 2020, 2019 and 2018 were approximately $ 0.5 million, $ 10.5 million and $ 11.2 million, respectively.

Rent payments related to the Premises for the years ended December 31, 20 2 1 , 20 20 and 201 9 were approximately $ 11.1 million (including approximately $ 1.6 million remitted in 2021 related to 2020 Percentage Rent) , $ 0.5 million and $ 10.5 million, respectively.

The Company’s gross income from the Premises was significantly impacted during the year ended December 31, 2020 due to the temporary park closures, limited reopenings , modified operations and capacity restrictions resulting from the impact of the COVID-19 pandemic and related government restrictions in San Diego.

As a result, the Company deferred $ 1.6 million of the Percentage Rent related to the year ended December 31, 2020, and an additional $ 8.3 million related to the Minimum Rent for the year ended December 31, 2020.

As such, approximately $ 9.9 million is included in accounts payable and accrued expenses on the accompanying consolidated balance sheet as of December 31, 2020 related to this lease.

Operating lease liabilities and long-term operating lease liabilities on the accompanying consolidated balance sheet as of December 31, 2020 and the lease maturities as of December 31, 2020 are not adjusted for these deferred payments.

Subsequent to December 31, 2020, the Company remitted the amounts owed for Percentage Rent of approximately $ 1.6 million.

Due to these factors , the Company deferred a payment of $ 8.3 million related to the Minimum Rent for the year ended December 31, 2020 (the “2020 Minimum Rent Payment”) .

As such, approximately $ 10.8 million and $ 9.9 million is included in accounts payable and accrued expenses on the accompanying consolidated balance sheet s as of December 31, 2021 and 2020 , respectively, primarily related to the 2020 Minimum Rent Payment , in addition to certain accrued fees as of December 31, 2021 and the timing of a Percentage Rent payment as of December 31, 2020.

Operating lease liabilities and long-term operating lease liabilities on the accompanying consolidated balance sheet as of December 31, 202 1 and 2020 and the lease maturities as of December 31, 202 1 are not adjusted for these deferred payments.

The tables below present the lease balances and their classification in the accompanying consolidated balance sheets as of December 31, 2021 and 2020:

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Total lease liabilities

The table below presents the lease costs and their classification in the accompanying consolidated statements of comprehensive (loss) income for the years ended December 31, 2020 and 2019:

The table below presents the lease costs and their classification in the accompanying consolidated statements of comprehensive income (loss) for the years ended December 31, 2021, 2020 and 2019:

Classification

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Net lease cost

In addition to the operating lease costs above, short-term rent expense for the years ended December 31, 2020 and 2019 were approximately $ 2.1 million and $ 4.2 million, respectively, and variable rent expense for the years ended December 31, 2020 and 2019 were $ 4.9 million and $ 5.3 million, respectively.

The short-term and variable rent expense amounts are included in operating expenses and selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income.

In addition to the operating lease costs above, short-term rent expense for the years ended December 31, 2021, 2020 and 2019 were approximately $ 2.7 million, $ 2.1 million and $ 4.2 million, respectively, and variable rent expense for the years ended December 31, 2021, 2020 and 2019 were $ 3.8 million, $ 4.9 million and $ 5.3 million, respectively.

The table below presents the Company’s lease maturities as of December 31, 2021:

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The Company has commenced construction of certain new theme park attractions and other projects under contracts with various third parties.

At December 31, 2020, excluding certain amounts related to the License Agreement with Sesame Workshop as described below, additional capital payments of approximately $ 72.0 million are necessary to complete these projects.

As of December 31, 2021, excluding certain amounts related to the License Agreement with Sesame Workshop as described below, additional capital payments of approximately $ 181.6 million are necessary to complete these projects.

The majority of these projects are expected to be completed in 2022 or 2023.

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The License Agreement has an initial term through December 31, 2031, with an automatic additional 15-year extension plus a five year option added to the term of the License Agreement from December 31st of the year of each new Standalone Park opening.

As of December 31, 2020, the Company estimates the combined remaining obligations for the License Agreement commitments could be up to approximately $ 45.0 million over the remaining term of the agreement.

As of December 31, 2021, the Company estimates

the combined remaining liabilities and obligations for the License Agreement commitments could be up to approximately $ 30.0 million over the remaining term of the agreement.

In October 2019, the Company announced that it will convert Aquatica San Diego into its second Sesame Place Standalone Park in the spring of 2021.

While construction began in the fall of 2019, it was temporarily paused due to the COVID-19 pandemic.

The Company currently expects to open this park in 2022.

As a result, depending on governmental restrictions in the state of California, the Company expects to reopen its Aquatica San Diego park in 2021 for its operating season.

The Company opened its Aquatica San Diego park for the 2021 operating season and currently expects to open this park rebranded as its second Sesame Place Standalone Park in March 2022.

ABI has granted the Company a perpetual, exclusive, worldwide, royalty-free license to use the Busch Gardens trademark and certain related domain names in connection with the operation, marketing, promotion and advertising of certain of the Company’s theme parks, as well as in connection with the production, use, distribution and sale of merchandise sold in connection with such theme parks.

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Legal Proceedings

Securities Class Action Lawsuits

The Company received final court approval of settlement of a purported stockholder class action lawsuit consisting of purchasers of the Company’s common stock during the periods between April 18, 2013 and August 13, 2014, captioned Baker v.

SeaWorld Entertainment, Inc., et al., Case No.

14-CV-02129-MMA (KSC).

The settlement required the Company to pay $ 65.0 million for

claims alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as the costs of administration and legal fees and expenses.

The settlement does not include or constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant.

During the year ended December 31, 2019, the Company recorded $ 32.1 million of legal settlement charges, net of insurance recoveries, related to this case.

The full settlement amount was funded during the year ended December 31, 2020.

Securities Class Action Lawsuit

On June 14, 2018, a lawsuit captioned Highfields Capital I LP et al v.

SeaWorld Entertainment, Inc.

et al, Case No.

3:18-cv-01276-L-BLM, was filed in the United States District Court in the Southern District of California against the Company and certain of the Company’s former and present executive officers.

The plaintiffs, which are investment funds managed by a common adviser allege, among other things, that the Defendants made false and misleading statements in violation of the federal securities laws and Florida common law, regarding the impact of the film Blackfish on SeaWorld’s business.

et al, was filed in the United States District Court in the Southern District of California against the Company and certain of the Company’s former and present executive officers.

The plaintiffs allege, among other things, that the Defendants made false and misleading statements in violation of the federal securities laws and Florida common law, regarding the impact of the film Blackfish on SeaWorld’s business.

The complaint further alleges that such statements were made to induce Plaintiffs to purchase common stock of the Company at artificially-inflated prices and that Plaintiffs suffered investment losses as a result.

The Plaintiffs have indicated to the Company they believe the damages are in the range of $ 30 million to $ 35 million before considering interest.

On October 19, 2018, Defendants moved for partial dismissal of the complaint.

On February 7, 2019, the Court granted Defendants’ motion and dismissed Plaintiffs’ Florida state law claims as well as federal securities law claims based on the Company’s second quarter 2013 earnings statements.

On May 1, 2019, Defendants filed their answer to Plaintiffs’ complaint.

The parties are in the process of completing discovery and will then have the opportunity to file any summary judgment motions per a scheduling order the Court issued which contemplates briefing into the summer and the fall.

In 2018, Defendants moved for partial dismissal of the complaint.

In 2019, the Court granted Defendants’ motion and dismissed Plaintiffs’ Florida state law claims as well as federal securities law claims based on the Company’s second quarter 2013 earnings statements.

The Court conducted settlement conferences which ended in impasse.

The parties have completed discovery and each party has filed a summary judgment motion.

The summary judgment motions as well as the Daubert motion filed by the Company are scheduled to be argued to the Court March 16, 2022.

The Company believes that the lawsuit is without merit and intends to defend the lawsuit vigorously.

While there can be no assurance regarding the ultimate outcome of this lawsuit , the Company believes that any potential loss would not be material.

Shareholder Derivative Lawsuit

The Company received final court approval of a settlement of a putative derivative lawsuit captioned Kistenmacher v.

Atchison, et al., Civil Action No.

10437 that was filed in the Court of Chancery of the State of Delaware against, among others, the then Chairman of the Company’s Board, certain of the Company’s executive officers, directors and shareholders, and Blackstone.

The Company was a “Nominal Defendant” in the lawsuit.

Pursuant to the settlement, the Company received $ 12.5 million of insurance proceeds from its insurers and adopted certain corporate governance modifications.

During the year ended December 31, 2020, the Company recorded a legal settlement gain of $ 12.5 million related to insurance proceeds received in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income.

Consumer Lawsuit

On April 13, 2015, a purported class action was filed in the Superior Court of the State of California for the City and County of San Francisco against SeaWorld Parks & Entertainment, Inc., captioned Marc Anderson, et.

SeaWorld Parks & Entertainment, Inc.

Civil Case No.

15-cv-02172-JSW.

The putative class consisted of all consumers within California who, within the past four years, purchased tickets to SeaWorld San Diego.

The complaint (as amended) alleged causes of action under the California False Advertising Law, California Unfair Competition Law and California CLRA.

The complaint sought restitution, equitable relief, attorneys’ fees and costs.

The case was dismissed and refiled in the United States District Court for the Northern District of California.

The plaintiffs did not file a motion for class certification.

The case was prosecuted by certain plaintiffs for individual restitution in a nominal amount and injunctive relief.

The Court bifurcated the trial of the case into two phases:

the plaintiffs’ standing to sue and the merits of their claims.

Before the first phase of the trial, plaintiff Anderson dismissed all claims against the Company.

The standing trial with regard to the remaining plaintiffs took place in March of 2020.

On October 13, 2020, the Court ruled that the remaining plaintiffs have no standing to sue and judgment was entered in favor of the Company.

Plaintiffs have elected not to appeal this decision and the time to do so has passed.

Other lawsuits

On or about October 9, 2018, the Company received a demand letter from attorneys representing 19 former employees who claim that the terms of their respective separation agreements entitle them to certain favorable modifications made to certain performance-vesting restricted shares issued under the Company’s 2013 Omnibus Incentive Plan (the “Plan”).

The parties attended non-binding mediation on October 27, 2020.

The claims were not resolved.

On November 9, 2020, the Company filed in the Court of Chancery of the State of Delaware an action for declaratory judgment seeking a declaration that the threatened claims of the former employees are time-barred and without merit.

In October 2018, the Company received a demand letter from attorneys representing certain former employees who claim that the terms of their respective separation agreements entitle them to certain favorable modifications made to certain performance-vesting restricted shares (the “Tranche 3 Shares”) issued under the Company’s 2013 Omnibus Incentive Plan (the “Plan”).

In November 2020, the Company filed in the Court of Chancery of the State of Delaware an action for declaratory judgment seeking a determination that the threatened claims of the former employees are time-barred and without merit.

In response, the defendant former employees filed a motion to dismiss or in the alternative to stay and compel arbitration.

The parties are currently discussing participation in an arbitration.

In terms of potential exposure, the value of the total shares at issue for these 19 former employees depends largely upon the Company’s current share price, which fluctuates daily.

The parties agreed to arbitrate whether the former employees’ claims are subject to arbitration.

On October 21, 2021, the arbitrator determined that disputes related to the former employees’ claims for the vesting of the Tranche 3 Shares are governed by the forum selection clauses of the equity award amendments rather than the Company’s dispute resolution process.

In terms of potential exposure, the value of the total shares at issue for these certain former employees depends largely upon the Company’s current share price, which fluctuates daily.

Approximately 300,000 shares are at issue.

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Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”).

In September 2018, the Company reached a settlement with the SEC relating to a previously disclosed SEC investigation.

In connection with the settlement, without admitting or denying the substantive allegations in the SEC’s complaint, the Company agreed to the entry of a final judgment ordering the Company to pay a civil penalty of $ 4.0 million and enjoining the Company from violation of certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and certain rules thereunder.

The settlement is recorded in selling, general and administrative expenses for the year ended December 31, 2018 in the Company’s consolidated statements of comprehensive (loss) income.

Other than those matters discussed above, from time to time, various parties also bring other lawsuits against the Company.

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At this time, management does not expect any such known claims, legal proceedings or regulatory matters to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

2020 Settled Matters

In 2020, the Company received final court approval of a settlement for a previously disclosed stockholder class action lawsuit, captioned Baker v.

SeaWorld Entertainment, Inc., et al .

The settlement required the Company to pay $ 65.0 million for claims alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as the costs of administration and legal fees and expenses.

The settlement does not include or constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant.

During the year ended December 31, 2019, the Company recorded $ 32.1 million of legal settlement charges, net of insurance recoveries, related to this case, in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss).

The full settlement amount was funded during the year ended December 31, 2020.

In 2020, the Company received final court approval of a settlement for a previously disclosed putative derivative lawsuit captioned Kistenmacher v.

Atchison, et al.

The Company was a “Nominal Defendant” in the lawsuit.

Pursuant to the settlement, the Company received $ 12.5 million of insurance proceeds from its insurers and adopted certain corporate governance modifications.

FAIR VALUE MEASUREMENTS

The Company has determined that of its long-term obligations, the Term B-5 Loans are classified in Level 2 of the fair value hierarchy as of December 31, 2020 and 2019, and the Senior Notes and Second-Priority Senior Notes are classified in Level 1 of the fair value hierarchy as of December 31, 2020.

The fair value of the Term B-5 Loans approximate their carrying value, excluding unamortized debt issuance costs and discounts, due to the variable nature of the underlying interest rates and the frequent intervals at which such interest rates are reset.

The fair value of the Senior Notes and Second-Priority Senior Notes was determined using quoted prices in active markets for identical instruments.

See Note 11–Long-Term Debt.

The Company has determined that the majority of the inputs used to value its derivative financial instruments using the income approach fall within Level 2 of the fair value hierarchy.

The Company uses readily available market data to value its derivatives, such as interest rate curves and discount factors.

ASC 820, Fair Value Measurement also requires consideration of credit risk in the valuation.

The Company uses a potential future exposure model to estimate this credit valuation adjustment (“CVA”).

The inputs to the CVA are largely based on observable market data, with the exception of certain assumptions regarding credit worthiness which make the CVA a Level 3 input.

Based on the magnitude of the CVA, it was not considered a significant input and the derivatives were classified as Level 2 as of December 31, 2019.

The Company did no t have any derivative financial instruments outstanding as of December 31, 2020.

See Note 12 – Derivative Instruments and Hedging Activities.

The Company did no t have any assets measured on a recurring basis at fair value at December 31, 2020.

The following table presents the Company’s estimated fair value measurements and related classifications for liabilities measured on a recurring basis at fair or carrying value as of December 31, 2020:

Of the Company’s long-term obligations as of December 31, 2021, the Term B Loans are classified in Level 2 of the fair value hierarchy and the First-Priority Senior Secured Notes and the Senior Notes are classified in Level 1 of the fair value hierarchy.

Of the Company’s long-term obligations as of December 31, 2020, the Term B-5 Loans are classified in Level 2 of the fair value hierarchy and the First-Priority Senior Secured Notes and the Second-Priority Senior Secured Notes are classified in level 1 of the fair value hierarchy.

The fair value of the Term B Loans and the Term B-5 Loans approximates their carrying value, excluding unamortized debt issuance costs and discounts, due to the variable nature of the underlying interest rates and the frequent intervals at which such interest rates are reset.

The fair value of the First-Priority Senior Secured Notes, Senior Notes, and Second-Priority Senior Secured Notes was determined using quoted prices in active markets for identical instruments.

See Note 11–Long-Term Debt for further details.

The Company did no t have any assets measured on a recurring basis at fair value as of December 31, 2021 and 2020.

The Company maintains its long-term liabilities at carrying value, net of unamortized debt issuance costs and discounts, in the consolidated balance sheet.

The following table presents the Company’s estimated fair value measurements and related classifications for liabilities measured on a recurring basis as of December 31, 2021:

Quoted Prices in

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Reflected at carrying value, net of unamortized debt issuance costs and discounts, in the consolidated balance sheet as current maturities of long-term debt of $ 12.0 million and long-term debt of $ 2.105 billion as of December 31, 2021.

The Company did no t have any assets measured on a recurring basis at fair value at December 31, 2019.

The following table presents the Company’s estimated fair value measurements and related classifications for liabilities measured on a recurring basis as of December 31, 2020:

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(In thousands)

Derivative financial instruments (a)

Long-term obligations (b)

Reflected at fair value in the consolidated balance sheet as other liabilities of $ 2.2 million as of December 31, 2019.

Long-term obligations (a)

Reflected at carrying value, net of unamortized debt issuance costs and discounts, in the consolidated balance sheet as current maturities of long-term debt of $ 15.5 million and long-term debt of $ 2.177 billion as of December 31, 2020.

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The SEAS Repurchase closed on May 30, 2019 .

Also on May 27, 2019, the Security Agent also entered into a stock purchase agreement with Hill Path Capital LP (“Hill Path”) and certain of its affiliates pursuant to which the Security Agent agreed to sell and certain affiliates of Hill Path agreed to purchase, in the aggregate, 13,214,000 of the Pledged Shares held by the Security Agent at a price per share equal to $ 26.71 (the “HP Purchase”).

The purchase closed on May 30, 2019 , at which time, Hill Path’s ownership percentage increased to 34.6 %.

See Note 20 – Stockholders’ (Deficit) Equity for further details.

Also on May 27, 2019, the Security Agent entered into a stock purchase agreement with Hill Path Capital LP (“Hill Path”) and certain of its affiliates pursuant to which the Security Agent agreed to sell and certain affiliates of Hill Path agreed to purchase, in the aggregate, 13,214,000 of the Pledged Shares held by the Security Agent at a price per share equal to $ 26.71 (the “HP Purchase”).

The purchase closed on May 30, 2019 , at which time, Hill Path’s ownership percentage increased to 34.6 %.

ZHG Agreements

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The Company sponsors a defined contribution plan, under Section 401(k) of the Internal Revenue Code.

During 2019 and 2018, the plan was a qualified automatic contributions arrangement, which automatically enrolled employees, once eligible, unless they opted out.

During 2019, the plan was a qualified automatic contributions arrangement, which automatically enrolled employees, once eligible, unless they opted out.

Effective January 1, 2020, the plan removed the automatic contributions arrangement.

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Effective January 1, 2020, the plan amended the matching cash contributions structure going forward to be a 50 % match on the first 4 % of eligible pay contributed by the employee.

In April 2020, the Company matching contribution was temporarily suspended in response to the COVID-19 pandemic.

Employer matching contributions for the years ended December 31, 2020, 2019 and 2018, totaled $ 1.3 million, $ 7.5 million and $ 7.6 million, respectively, and is included in selling, general and administrative expenses and in operating expenses in the accompanying consolidated statements of comprehensive (loss) income.

In April 2020, the Company matching contribution was temporarily suspended in response to the COVID-19 pandemic and has remained suspended through 2021.

Employer matching contributions for the years ended December 31, 2020 and 2019, totaled $ 1.3 million and $ 7.5 million, respectively, and is included in selling, general and administrative expenses and in operating expenses in the accompanying consolidated statements of comprehensive income (loss).

EQUITY-BASED COMPENSATION

Equity compensation expense is included in operating expenses and in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income as follows:

For the Year Ended December 31,

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Total equity compensation expense

Equity compensation expense for the year ended December 31, 2020, includes the reversal of expense related to certain performance vesting restricted units which were no longer considered probable of vesting and also includes the reversal of expense related to outstanding unvested equity awards previously held by the Company’s former chief executive officer which were forfeited in connection with his departure.

Equity compensation expense for the year ended December 31, 2021, includes the impact of certain prior year performance vesting restricted awards which were previously not considered probable of vesting.

Equity compensation expense for the year ended December 31, 2020, includes the reversal of expense related to certain performance vesting restricted awards which at the time were no longer considered probable of vesting and also includes the reversal of expense related to outstanding unvested equity awards previously held by the Company’s former chief executive officer which were forfeited in connection with his departure.

See Previous Long-term Incentive Awards section which follows for further details.

Equity compensation expense for the year ended December 31, 2018, includes approximately $ 5.5 million related to equity awards which were accelerated to vest in connection with the departure of certain executives as required by their respective employment agreements (see Note 21–Severance and Other Separation Costs for further details).

Total unrecognized equity compensation expense for all equity compensation awards probable of vesting as of December 31, 2021 was approximately $ 29.0 million, which is expected to be recognized over a weighted-average period of 1.6 years.

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Bonus Performance Restricted Awards

Due to the impact of the COVID-19 pandemic and related temporary park closures, the Company did not adopt an annual bonus plan for the year ended December 31, 2020.

The Company had an annual bonus plan for the year ended December 31, 2019 (the “Fiscal 2019”), under which certain employees were eligible to vest in performance-vesting restricted units based upon the Company’s achievement of specified performance goals with respect to Fiscal 2019.

Based on the Company’s actual Fiscal 2019 results, a portion of these units vested in the year ended December 31, 2020 and the remainder forfeited in accordance with their terms.

Separately, on October 3, 2019, in connection with its regular review of compensation matters, the Compensation Committee of the Board, approved certain equity awards designed to recognize employees for their contribution and continued expected contribution to the Company and its goals.

A portion of these awards were in the form of performance-vesting restricted units which were eligible to vest based on achievement of specific performance goals with respect to Fiscal 2019.

Based on the Company’s actual Fiscal 2019 results, a portion of these units vested in the first quarter of 2020, another portion will vest in the first quarter of 2021 based on the employee’s continued employment on such vesting date and the remainder forfeited in accordance with their terms.

During the year ended December 31, 2021, the Company granted approximately 132,000 performance-vesting restricted units (the “Bonus Performance Restricted Awards”) in accordance with its annual bonus plan for 2021 (the “2021 Bonus Plan”).

The 2021 Bonus Plan provides for bonus awards payable 50 % in cash and 50 % in performance-vesting restricted units (the “Bonus Performance Restricted Units”) and is based upon the Company’s achievement of specified performance goals, as defined by the 2021 Bonus Plan, with respect to the year ended December 31, 2021 (the “Fiscal 2021”).

The total number of units eligible to vest into shares of stock is based on the level of achievement of the targets for Fiscal 2021 which ranges from 0 % (if below threshold performance), to 125 % (if at maximum performance) with opportunities to earn above 125% when achievement is above the maximum performance for certain metrics.

In accordance with ASC 718, Compensation-Stock Compensation , equity compensation expense is recorded on shares probable of vesting.

Based on the Company’s actual Fiscal 2021 results with respect to specific performance goals, a portion of the outstanding performance-vesting restricted awards related to the Fiscal 2021 performance goals were considered probable of vesting as of December 31, 2021;

therefore, equity compensation expense has been recorded related to these awards.

These awards are expected to vest in accordance with their terms, at which time any unearned units will forfeit.

Due to the impact of the COVID-19 pandemic, the Company did not have an annual bonus plan for the fiscal year ended December 31, 2020;

however, based on a discretionary review of performance in light of the negative impact of the COVID-19 pandemic on the Company’s business, the Compensation Committee determined to make discretionary equity awards to the Company’s bonus eligible employees during the year ended December 31, 2021.

These awards were paid entirely in restricted stock units that vest 50 % each on the first and second anniversaries of the date of grant.

The Company also had previously granted performance-vesting restricted units which were eligible to vest based on the Company’s actual results for the year ended December 31, 2019.

A portion of these units vested in 2020, and the remaining portion vested in 2021 based on the employee’s continued employment on such vesting date and the remainder forfeited in accordance with their terms.

2021 Long-Term Incentive Awards

During the year ended December 31, 2020, the Company granted long-term incentive plan awards to certain employees.

These grants were comprised of nonqualified stock options (the “Long-Term Incentive Options”) and performance-vesting restricted units (the “Long-Term Incentive Performance Restricted Units”).

The nonqualified stock options generally vest ratably over two or three years , subject to continued employment through the applicable vesting date.

During the year ended December 31, 2021, the Company granted long-term incentive plan awards for 2021 (the “2021 Long-Term Incentive Grant”) which were comprised of approximately 157,000 nonqualified stock options (the “Long-Term Incentive Options”) and approximately 168,000 performance-vesting restricted units (the “Long-Term Incentive Performance Restricted Units”) (collectively, the “Long-Term Incentive Awards”).

Long-Term Incentive Options

The Long-Term Incentive Options vest over three years , with 20 % vesting on each of the first two anniversaries of the grant date and 60 % vesting on the third anniversary of the grant date, subject to continued employment through the applicable vesting date.

Equity compensation expense for these options is recognized for each tranche over the vesting period using the straight-line method.

Upon stock option exercises, authorized but unissued shares are issued by the Company.

The performance-vesting restricted units granted in 2020 contain a performance period through calendar year 2022 (or, the end of the 2023 calendar year, as applicable), and are otherwise consistent with the terms of the modified 2019 LTIP Performance Awards as discussed further below.

Equity compensation expense has not yet been recorded related to these awards.

Long-Term Incentive Performance Restricted Units

The Long-Term Incentive Performance Restricted Units are expected to vest following the end of the three-year performance period beginning on January 1, 2021 and ending on December 31, 2023 (the “Performance Period”) based upon the Company’s achievement of specified performance goals during the Performance Period.

The total number of Long-Term Incentive Performance Restricted Units eligible to vest will be based on the level of achievement of the performance goals and ranges from 0 % (if below threshold performance) up to 100 % (for target or above performance).

Upon achievement of at least the threshold performance goals, only 25% to 50% of the award for a given level of performance will vest, with the remaining 50% subject to a one-year performance test period.

Performance for the test period must meet or exceed at least 95 % of the prior year’s performance before up to the remaining 50 % of the units can be earned.

The Company recognizes equity compensation expense for its performance-vesting restricted awards ratably over the related performance period, if the performance condition is likely to be achieved.

If the probability of vesting related to awards changes in a subsequent period, all equity compensation expense related to those awards that would have been recorded over the requisite service period had the current assumptions been used since the grant date is recorded as a cumulative catch-up at such subsequent date.

on the Company’s likely future achievement of respective performance goals as of December 31, 2021, equity compensation expense was recorded during the year ended December 31, 2021 related to the Long-Term Incentive Performance Restricted Units.

Other Long-Term Incentive Awards

During the year ended December 31, 2020, the Company also granted time-vesting restricted units to certain employees which generally vest over three years , with one-third vesting on each anniversary of the date of grant, subject to continued employment through the applicable vesting date.

Separately, during the year ended December 31, 2020, in connection with a review of compensation matters, the Compensation Committee of the Board of Directors approved grants of approximately 1.2 million restricted stock units designed to recognize certain employees for their contributions and continued expected contributions to the Company and its long term goals during the COVID-19 pandemic.

The restricted stock units will vest 50 % on each of the first two anniversaries of the grant date, subject to the recipient’s continued employment on each such vesting date.

During the year ended December 31, 2021, the Company also granted time-vesting restricted units to certain employees which generally vest over three years , with 20 % vesting on each of the first two anniversaries of the grant date and 60 % vesting on the third anniversary of the grant date , subject to continued employment through the applicable vesting date.

Previous Long-Term Incentive Awards

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The remaining outstanding Long-Term Incentive Performance Restricted Awards related to future performance periods are eligible to vest based upon the Company’s achievement of pre-established performance goals for the respective performance period, as defined.

Based on the Company’s actual results for 2020, the previously granted Long-Term Incentive Performance Restricted Awards related to the performance period which ended on December 31, 2020 are expected to forfeit in the first quarter of 2021.

The Company previously granted long-term incentive performance restricted units in 2019 (the “2019 LTIP Performance Awards”) which contained a three-year performance period consisting of the 2019-2021 calendar years (or, extended through the end of the 2022 calendar year, as applicable) and were eligible to vest based upon the Company’s achievement of specific performance goals for the performance period, as defined.

A portion of the outstanding Long-Term Incentive Performance Restricted Awards relate to performance restricted units (the “2019 LTIP Performance Awards”) which contain a four-year performance period consisting of the 2019-2022 calendar years (or, extended through the end of the 2023 calendar year, as applicable) and are eligible to vest based upon the Company’s achievement of specific performance goals for the performance period, as defined, with an opportunity to vest up to 50% of the award earlier if certain goals are achieved in any fiscal year during the performance period.

The total number of 2019 LTIP Performance Awards eligible to vest will be based on the level of achievement of the performance goals and ranges from 0 % (if below threshold performance) up to 100 % (for target or above performance).

Upon achievement of the performance goals, only 50% of the award for a given level of performance will vest, with the remaining 50% subject to a one-year performance test period.

The goal achieved must be met again or exceeded the next fiscal year before the remaining units are earned.

In November 2019, certain performance-vesting restricted stock units were granted to the Company’s previous Chief Executive Officer (the “CEO Performance Awards”).

The CEO Performance Awards had a three-year performance period consisting of the 2020-2022 calendar years (or, extended through the end of the 2023 calendar year, as applicable) which were eligible to vest based upon the Company’s achievement of specific performance goals for the performance period, as defined by the CEO Performance Awards.

The performance period and the performance goals for the CEO Performance Awards differed from those of the 2019 LTIP Performance Awards, as such, o n February 25, 2020, the Board approved a modification (the “Modification”) to the 2019 LTIP Performance Awards in order to better align its terms with those of the CEO Performance Awards.

The Compensation Committee of the Board determined that it was preferable to align the 2019 LTIP Performance Awards with the CEO Performance Awards to put everyone on the same performance cycle with the same performance goals.

Pursuant to the Modification, the threshold and target performance goals were revised to align with the CEO Performance Awards threshold and target performance goals and the performance period was extended through calendar year 2022 (or, the end of the 2023 calendar year, as applicable) consistent with the CEO Performance Awards.

Equity compensation expense has not yet been recorded related to these awards as the performance goals are not yet considered probable of achievement.

The Company will use the respective modification date fair value to record equity compensation expense related to the Modification awards when and if they become probable of vesting in a future period, in accordance with the guidance in ASC 718, Compensation-Stock Compensation .

Upon achievement of the performance goals, up to 50% of the award for a given level of performance will vest, with the remaining 50% subject to a one-year extended performance test period.

The goal achieved must be met again or exceeded for the extended performance period before the remaining units are earned.

Based on the Company’s results for fiscal year 2021, the Company expects to vest a portion of the 2019 LTIP Performance Awards in the first quarter of 2022.

During the year ended December 31, 2021, the Company granted equity awards to its non-employee members of its Board which will vest on the day before the Company’s next annual meeting.

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Upon vesting, each RSU will be converted into one share of the Company’s common stock.

Additionally, during the year ended December 31, 2020, the Company granted equity awards in the form of RSUs which vested immediately to each eligible Board member in lieu of quarterly cash payments related to the director’s annual retainers.

Additionally, during the year ended December 31, 2021, the Company granted equity awards in the form of RSUs or DSUs which vested immediately to each eligible Board member in lieu of quarterly cash payments related to the director’s annual retainers.

STOCKHOLDERS’ (DEFICIT) EQUITY

As of December 31, 2020, 94,652,248 shares of common stock were issued in the accompanying consolidated balance sheet, which includes 16,260,248 shares of treasury stock held by the Company (see Share Repurchase Program discussion below), but excludes 101,135 unvested shares of common stock and 3,082,378 unvested restricted stock units held by certain participants in the Company’s equity compensation plans (see Note 19–Equity-Based Compensation).

As of December 31, 2021, 95,541,992 shares of common stock were issued in the accompanying consolidated balance sheet, which includes 19,953,042 shares of treasury stock held by the Company (see Share Repurchase Program discussion which follows), but excludes 50,862 unvested shares of common stock and 1,988,416 unvested restricted stock units held by certain participants in the Company’s equity compensation plans (see Note 19–Equity-Based Compensation).

Share Repurchase Program

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Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act.

During the year ended December 31, 2020, prior to the COVID-19 temporary park closures, the Company completed a share repurchase of 469,785 shares for an aggregate total of approximately $ 12.4 million, leaving approximately $ 237.6 million available under the Share Repurchase Program as of December 31, 2020.

In connection with Amendment No.

12 to the Company’s Amended Credit Agreement, the Company is restricted from paying any dividends or making restricted payments, including share repurchases, through the third quarter of 2022 unless certain conditions are met ( see Note 11–Long-Term Debt).

During the year ended December 31, 2019, the Company completed a share repurchase of 5,615,874 shares (see discussion relating to the SEAS Repurchase in Note 17–Related Party Transactions for further details).

On August 2, 2019, the Company’s Board approved a replenishment to the Share Repurchase Program of $ 150.0 million, bringing the total amount authorized for future share repurchases back up to $ 250.0 million at that time.

During the year ended December 31, 2018, the Company repurchased a total of 3,654,816 shares of common stock at a total cost of approximately $ 98.0 million.

During the year ended December 31, 2021, the Company repurchased 3,692,794 shares for an aggregate total of approximately $ 215.7 million leaving approximately $ 21.8 million available under the Share Repurchase Program as of December 31, 2021.

During the year ended December 31, 2020, prior to the COVID-19 temporary park closures, the Company repurchased 469,785 shares for an aggregate total of approximately $ 12.4 million.

During the year ended December 31, 2019, the Company repurchased 5,615,874 shares (see discussion relating to the SEAS Repurchase in Note 17–Related Party Transactions for further details).

The Share Repurchase Program has no time limit and may be suspended or discontinued completely at any time.

The number of shares to be purchased and the timing of purchases will be based on the Company’s trading windows and available liquidity, general business and market conditions, and other factors, including legal requirements, debt covenant restrictions and alternative investment opportunities.

All shares repurchased pursuant to the Share Repurchase Program, along with shares repurchased directly from selling stockholders concurrently with previous secondary offerings, are recorded as treasury stock at a total cost of $ 415.3 million and $ 402.9 million as of December 31, 2020 and 2019, respectively, and are reflected as a reduction to stockholders’ (deficit) equity in the accompanying consolidated statements of changes in stockholders’ (deficit) equity.

The number of shares to be purchased and the timing of purchases will be based on the Company’s trading windows and available liquidity, general business

and market conditions, and other factors, including legal requirements, debt covenant restrictions and alternative investment opportunities.

All shares repurchased pursuant to the Share Repurchase Program, the SEAS Repurchase and shares repurchased directly from selling stockholders concurrently with previous secondary offerings, are recorded as treasury stock at a total cost of $ 631.1 million and $ 415.3 million as of December 31, 2021 and 2020, respectively, and are reflected as a reduction to stockholders’ (deficit) equity in the accompanying consolidated statements of changes in stockholders’ (deficit) equity.

SEVERANCE AND OTHER SEPARATION COSTS

The Company is committed to continuous improvement and regularly evaluates operations to ensure it is properly organized for performance and efficiency.

As a result, during the years ended December 31, 2021 and 2019, the Company recorded approximately $ 1.5 million and $ 4.2 million, respectively, in pre-tax charges primarily consisting of severance and other termination benefits, which is included in severance and other separation costs in the accompanying consolidated statements of comprehensive income (loss).

In September 2020, the Company committed to a plan of termination (the “2020 Restructuring Program”) primarily impacting some of the Company’s previously furloughed salaried, full-time and part-time employees.

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Due to the sudden and unforeseeable economic impacts of the pandemic on the Company’s business operations, that were not reasonably foreseeable at the time of the temporary furloughs, the Company transitioned certain park and corporate personnel from a furloughed status to a permanent layoff.

As a result, during the year ended December 31, 2020, the Company recorded approximately $ 2.7 million in pre-tax restructuring charges primarily related to severance and other termination benefits related to the 2020 Restructuring Program, which is included in severance and other separation costs in the accompanying consolidated statements of comprehensive (loss) income.

Currently, some of the Company’s employees at certain parks remain on furlough.

The Company continues to monitor the impact of the COVID-19 pandemic and may adjust its plans accordingly.

As of December 31, 2020, the remaining liability, which primarily relates to severance and other separation costs incurred as part of the 2020 Restructuring Program to be paid as contractually obligated by December 31, 2021, is included in accrued salaries, wages and benefits in the accompanying consolidated balance sheets.

The Company is committed to continuous improvement and regularly evaluates operations to ensure it is properly organized for performance and efficiency.

As a result, during the year ended December 31, 2019, the Company recorded approximately $ 4.2 million in pre-tax charges primarily consisting of severance and other termination benefits, which is included in severance and other separation costs in the accompanying consolidated statements of comprehensive (loss) income.

In August 2018, the Company announced a restructuring program (the “2018 Restructuring Program”) focused on reducing costs, improving operating margins and streamlining its management structure to create efficiencies and better align with its strategic business objectives.

The 2018 Restructuring Program involved the elimination of approximately 125 positions during the third quarter of 2018 across the Company’s theme parks and its corporate headquarters.

As a result, during the year ended December 31, 2018, the Company recorded approximately $ 5.5 million in pre-tax restructuring charges primarily related to severance and other termination benefits, which is included in severance and other separation costs in the accompanying consolidated statements of comprehensive (loss) income.

The Company will not incur any additional costs associated with the 2018 Restructuring Program as all continuing service obligations were completed as of December 31, 2018.

The 2020 and 2018 Restructuring Program activity for the years ended December 31, 2020 and 2019 was as follows:

2020 Restructuring Program

The 2020 Restructuring Program activity for the years ended December 31, 2021 and 2020 was as follows:

2020 Restructuring Program

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Liability as of December 31, 2021

Other Separation Costs

Severance and other separation costs for the year ended December 31, 2018 also includes severance and other employment expenses for other positions not part of a larger restructuring program and includes certain executives who stepped down from their respective positions during 2018.

In particular, on February 27, 2018, the Company announced that its President and Chief Executive Officer (the “Former CEO”) had stepped down from his position and resigned as a member of the Board.

In connection with his departure, the Former CEO received a lump sum cash payment of approximately $ 6.7 million in severance-related benefits, in accordance with his employment agreement.

Certain other executives who separated from the Company during the first half of 2018 also received severance-related benefits of approximately $ 3.8 million in accordance with the terms of their respective employment agreements or relevant company plan, as applicable.

These severance expenses are included in severance and other separation costs in the accompanying consolidated statements of comprehensive (loss) income for the year ended December 31, 2018.

Additionally, during the year ended December 31, 2018, certain equity awards were accelerated to vest in connection with the departure of specific executives as required by their respective employment agreements.

As a result, the Company recorded incremental non-cash equity compensation expense related to these awards, which is included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive (loss) income.

See Note 19–Equity-Based Compensation for further details.

Schedule I-Registrant’s Condensed Financial Statements

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Total current assets

Investment in wholly-owned subsidiary

Liabilities and Stockholders’ (Deficit) Equity

Liabilities and Stockholders’ Deficit

Current Liabilities:

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Commitments and contingencies

Stockholders’ (Deficit) Equity:

Stockholders’ Deficit:

Preferred stock, $ 0.01 par value—authorized, 100,000,000 shares, no shares

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Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Treasury stock, at cost ( 19,953,042 and 16,260,248 shares at December 31, 2021 and 2020, respectively)

Total stockholders’ (deficit) equity

Total Liabilities and Stockholders’ (Deficit) Equity

Total stockholders’ deficit

Total Liabilities and Stockholders’ Deficit

See accompanying notes to condensed financial statements.

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PARENT COMPANY ONLY

CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

For the Year Ended December 31,

Equity in net (loss) income of subsidiary

Net (loss) income

Equity in net income (loss) of subsidiary

Net income (loss)

Equity in other comprehensive income (loss) of subsidiary

Comprehensive (loss) income

Comprehensive income (loss)

See accompanying notes to condensed financial statements.

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Cash Flows From Operating Activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by (used

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used

in) operating activities:

Equity in net loss (income) of subsidiary

Equity in net (income) loss of subsidiary

Net cash provided by (used in) operating activities

Cash Flows From Investing Activities:

Dividends (forfeited) received from subsidiary- return of capital, net of forfeitures

Dividends forfeited from subsidiary- return of capital, net of forfeitures

Capital contributed to subsidiary from exercises of stock options

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(the “Parent”) was incorporated in Delaware on October 2, 2009.

At that time, the Parent was owned by ten limited partnerships, ultimately owned by affiliates of The Blackstone Group L.P.

(“Blackstone”) and certain co-investors.

Parent completed an initial public offering in April 2013.

In May 2017, an affiliate of Zhonghong Zhuoye Group Co., Ltd., Sun Wise (UK) Co., LTD.

(“Sun Wise”) acquired approximately 21 % of the then outstanding shares of common stock of the Company (the “ZHG Transaction”) from certain affiliates of Blackstone.

Subsequent to the ZHG Transaction, Blackstone did not own any remaining shares of the Company.

See further discussion relating to subsequent ownership changes in Note 17–Related-Party Transactions in the accompanying consolidated financial statements.

See further discussion in Note 1–Description of the Business and Note 17–Related-Party Transactions in the accompanying consolidated financial statements.

The Parent has no operations or significant assets or liabilities other than its investment in SeaWorld Parks & Entertainment, Inc.

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However, under the terms of SEA’s various debt agreements, SEA’s ability to pay dividends or lend to the Parent is restricted, except that SEA may pay specified amounts to the Parent to fund the payment of the Parent’s tax obligations.

The COVID-19 pandemic materially impacted operations for SEA for the year ended December 31, 2020.

The COVID-19 pandemic materially impacted operations for SEA for the years ended December 31, 2021 and 2020.

See further discussion relating to the impact of the COVID-19 pandemic in Note 1–Description of the Business in the accompanying consolidated financial statements.

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These parent company only financial statements should be read in conjunction with the consolidated financial statements.

SEA is the borrower under the senior secured credit facilities, (the “Senior Secured Credit Facilities”) under 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.

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 due 2025 (the “Senior 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 due 2025 (the “Second-Priority Senior Notes”).

SEA is the borrower under the senior secured credit facilities, (the “Senior Secured Credit Facilities”) under a credit agreement dated as of December 1, 2009 which was amended and restated on August 25, 2021 (the “Amended and Restated Credit Agreement”).

On August 25, 2021, SEA completed a private offering of $ 725.0 million aggregate principal amount of 5.250 % senior notes due 2029 (the “Senior 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 due 2025 (the “Second-Priority Senior Secured Notes”), which were fully redeemed during the year ended December 31, 2021.

Under the terms of the Senior Secured Credit Facilities, the obligations of SEA are fully, unconditionally and irrevocably guaranteed by Parent, any subsidiary of Parent that directly or indirectly owns 100 % of the issued and outstanding equity interest of SEA, and subject to certain exceptions, each of SEA’s existing and future material domestic wholly-owned subsidiaries (collectively, the “Guarantors”).

The Senior Notes and Second-Priority Senior Notes are fully and unconditionally guaranteed by Parent, any subsidiary of Parent that directly or indirectly owns 100 % of the issued and outstanding equity interests of SEA, and subject to certain exceptions, each of SEA’s subsidiaries that guarantees SEA’s existing senior secured credit facilities.

The First-Priority Senior Secured Notes are fully and unconditionally guaranteed by the Parent, any subsidiary of the Parent that directly or indirectly owns 100 % of the issued and outstanding equity interests of SEA, and subject to certain exceptions, each of SEA’s subsidiaries that guarantees SEA’s existing senior secured credit facilities.

See Note 11–Long-Term Debt of the accompanying consolidated financial statements for further details .

DIVIDENDS FROM SUBSIDIARY

During the years ended December 31, 2020, 2019 and 2018, SEA paid dividends to the Parent of approximately $ 12.4 million, $ 150.0 million and $ 98.0 million, respectively.

The dividends were in the form of payments that SEA made for share repurchases at the Parent level (see Note 5–Stockholders’ (Deficit) Equity which follows).

During the year ended December 31, 2021, SEA paid dividends to the Parent of approximately $ 215.7 million.

The dividends were in the form of 3,692,794 shares of common stock repurchased by SEA.

(see Note 5–Stockholders’ Deficit which follows).

During the years ended December 31, 2020 and 2019, SEA paid dividends to the Parent of approximately $ 12.4 million and $ 150.0 million, respectively.

The dividends were in the form of payments that SEA made for share repurchases at the Parent level (see Note 5–Stockholders’ Deficit which follows).

During the years ended December 31, 2020 and 2019, Parent paid accumulated dividends, net of forfeitures, related to shares that carried dividend rights from previous dividend declarations which vested during the respective year.

STOCKHOLDERS’ (DEFICIT) EQUITY

STOCKHOLDERS’ DEFICIT

Omnibus Incentive Plan

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The Share Repurchase Program has no time limit and may be suspended or discontinued completely at any time.

During the year ended December 31, 2020, prior to the COVID-19 temporary park closures, the Parent repurchased a total of 469,785 shares of common stock at a total cost of $ 12.4 million , leaving approximately $ 237.6 million available under the Share Repurchase Program as of December 31, 2020 .

In connection with Amendment No.

12 to the SEA’s Amended Credit Agreement, the Parent is restricted from paying any dividends or making restricted payments, including share repurchases, through the third quarter of 2022 unless certain conditions are met.

See further discussion in Note 11–Long-Term Debt of the accompanying consolidated financial statements.

During the year ended December 31, 2019, the Parent repurchased a total of 5,615,874 shares of common stock at a total cost of approximately $ 150.0 million.

During the year ended December 31, 2021, the Parent repurchased 3,692,794 shares for an aggregate total of approximately $ 215.7 million leaving approximately $ 21.8 million available under the Share Repurchase Program as of December 31, 2021.

During the year ended December 31, 2020, prior to the COVID-19 temporary park closures, the Parent repurchased 469,785 shares for an aggregate total of approximately $ 12.4 million.

During the year ended December 31, 2019, the Parent repurchased a total of 5,615,874 shares of common stock at a total cost of approximately $ 150.0 million.

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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-K

Item 9A. Controls and Procedures