What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-05 · 152 added, 177 removed, 248 unchanged (57% of the section changed)

13 unchanged sentences

Impact of Global COVID-19 Pandemic

Our results of operations for the three and six months ended June 30, 2022 continue to be impacted by the global COVID-19 pandemic due in part to a decline in both international and group-related attendance from historical levels.

Additionally, results of operations for the three and six months ended June 30, 2021 were also significantly impacted by the following factors:

(i) capacity limitations, modified/limited operations and/or temporary park closures;

Our results of operations for the three and nine months ended September 30, 2022 continued to be impacted by the global COVID-19 pandemic due in part to a decline in both international and group-related attendance from historical levels.

Additionally, results of operations for the nine months ended September 30, 2021 were also impacted by the following factors:

(i) capacity limitations, modified/limited operations and/or temporary park closures through the first half of 2021;

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

and (iii) restrictions on international travel.

and (iii) severe restrictions on international travel, some of which were in effect through the fourth quarter of 2021.

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

5 unchanged sentences

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

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

These staffing challenges have also led to wage pressures and less than optimal staffing levels.

Less than optimal staffing levels, particularly in the first quarter of 2022, has impacted our ability to open some of our food and beverage outlets, caused us to temporarily close some rides or attractions and/or caused longer wait times in certain areas of our parks, particularly food, beverage and/or retail outlets.

We have also been impacted by significant inflationary pressures (particularly relating to the costs for labor, goods, freight, services and capital projects), supply chain disruptions and higher interest rates.

We continue our efforts to recruit and retain talent and identify cost reduction and efficiency opportunities as well as incremental pricing and revenue opportunities to help offset cost pressures.

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

These staffing challenges have also led to wage pressures and less than optimal staffing levels, which have impacted and could continue to impact our ability to open some of our food and beverage outlets, caused us to temporarily close some rides or attractions, caused longer wait times in certain areas of our parks, which has and could continue to impact the guest experience.

To address these items, we continue our efforts to recruit and retain talent, optimize staffing levels and focus on park operations from the guest perspective, among other initiatives.

We continue our focus on cost reduction and efficiency opportunities as well as incremental pricing and revenue opportunities to help offset cost pressures.

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

21 unchanged sentences

In-park per capita spending is primarily driven by pricing, product offerings, the mix of guests (as domestic and international guests typically generate higher in-park per capita spending than local guests or pass holders), guest penetration levels (percentage of guests purchasing) and the mix of in-park spending, among other factors.

Total revenue per capita, admissions per capita and in-park per capita spending are key performance metrics that we use to assess the operating performance of our parks on a per attendee basis and to make strategic operating decisions.

We believe the presentation of these performance metrics is useful and relevant for investors as it provides investors the ability to review operating performance in the same manner as our management and provides investors with a consistent methodology to analyze revenue between periods on a per attendee basis.

In addition, investors, lenders, financial analysts and rating agencies have historically used similar per-capita related performance metrics to evaluate companies in the industry.

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

2 unchanged sentences

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

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

reported cases of COVID-19, domestic and international travel restrictions, federal, state and local regulations related to public places, limits on social gatherings , the availability and/or effectiveness of vaccines , boosters and/or medications for adults and children, and overall public safety sentiment.

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

15 unchanged sentences

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

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

Additionally, on March 26, 2022, we opened our Sesame Place San Diego park which is expected to be open more operating days than the Aquatica San Diego park it replaced.

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

Additionally, on March 26, 2022, we opened our Sesame Place San Diego park which has been, and is expected to continue to be, open more operating days than the Aquatica San Diego park it replaced, particularly in the first and fourth quarters of the year.

Incremental operating days generally are expected to drive incremental attendance and revenue.

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

Results of Operations

Our results for the three and six months ended June 30, 2022 are not directly comparable to the three and six months ended June 30, 2021 primarily due to COVID-19 related impacts including a temporary park closure and capacity limitations at some of our parks in 2021.

See “ Impact of Global COVID-19 Pandemic ” and “Attendance” for further details.

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

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table presents key operating and financial information for the three months ended June 30, 2022 and 2021:

Comparison of the Three Months Ended September 30, 2022 and 2021

The following table presents key operating and financial information for the three months ended September 30, 2022 and 2021:

For the Three Months Ended

September 30,

Summary Financial Data:

7 unchanged sentences

Selling, general and administrative expenses

Severance and other separation costs

Depreciation and amortization

1 unchanged sentence

Operating income

Other (income) expense, net

Other income, net

Interest expense

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

Income before income taxes

5 unchanged sentences

Admissions revenue .

Admissions revenue for the three months ended June 30, 2022 increased $32.3 million to $275.5 million as compared to $243.2 million for the three months ended June 30, 2021.

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

Total attendance for the second quarter of 2022 increased approximately 0.5 million guests, or 7.8%, when compared to the prior year quarter.

Attendance benefitted primarily from an increase in demand resulting from a return to more normalized operations when compared to the three months ended June 30, 2021, which included COVID-19 related impacts including restrictions on international travel, modified/limited operations and capacity limitations at some of our parks.

Admission per capita increased by 5.0% to $43.98 for the three months ended June 30, 2022 compared to $41.87 in the three months ended June 30, 2021, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset the impact of the park mix when compared to the prior year quarter.

Admissions revenue for the three months ended September 30, 2022 increased $16.9 million, or 5.7%, to $313.6 million as compared to $296.7 million for the three months ended September 30, 2021.

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

Total attendance for the third quarter of 2022 increased approximately 0.1 million guests, or 1.5%, when compared to the prior year quarter.

Attendance benefitted largely from an increase in demand primarily from international guests when compared to the prior year quarter, which was impacted by more severe COVID-19 related restrictions on international travel.

Attendance during the third quarter was also unfavorably impacted by adverse weather, including the impacts of Hurricane Ian in September 2022, which led to closures at our parks in Florida and Virginia for a combined 15 operating days.

We estimate that adverse weather, including the impact of Hurricane Ian, contributed to a decline of approximately 90,000 guests during the quarter.

Admission per capita increased by 4.1% to $42.75 for the three months ended September 30, 2022 compared to $41.06 in the three months ended September 30, 2021, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts when compared to the prior year quarter.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the three months ended June 30, 2022 increased $32.8 million to $229.3 million as compared to $196.6 million for the three months ended June 30, 2021.

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

In-park per capita spending increased by 8.2% to $36.61 in the three months ended June 30, 2022 compared to $33.84 in the three months ended June 30, 2021.

Food, merchandise and other revenue for the three months ended September 30, 2022 increased $27.1 million, or 12.1%, to $251.6 million as compared to $224.5 million for the three months ended September 30, 2021.

The increase results from an increase in in-park per capita spending and the increase in attendance.

In-park per capita spending increased by 10.4% to $34.30 in the three months ended September 30, 2022 compared to $31.07 in the three months ended September 30, 2021.

In-park per capita spending improved due to a combination of factors including pricing initiatives, improved product quality and mix and the impact of new or enhanced and expanded venues and/or other in-park offerings.

These factors were partially offset by the impact of a higher mix of pass attendance when compared to the prior year quarter.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the three months ended June 30, 2022 increased by $7.3 million to $41.5 million as compared to $34.2 million for the three months ended June 30, 2021.

These costs represent 18.1% and 17.4% of the related revenue earned for the three months ended June 30, 2022 and 2021, respectively.

The increase as a percent of related revenue partly relates to the impact of inflationary pressures which were partially offset by higher realized prices on some of our in-park products and the impact of sourcing cost savings initiatives.

Costs of food, merchandise and other revenues for the three months ended September 30, 2022 increased by $3.4 million, or 9.0%, to $41.4 million as compared to $38.0 million for the three months ended September 30, 2021.

These costs represent 16.4% and 16.9% of the related revenue earned for the three months ended September 30, 2022 and 2021, respectively.

The decrease as a percent of related revenue partly relates to higher realized prices on some of our in-park products and the impact of sourcing cost savings initiatives which were partially offset by the impact of inflationary pressures.

Operating expenses.

Operating expenses for the three months ended June 30, 2022 increased by $33.2 million, or 21.1% , to $190.5 million as compared to $157.3 million for the three months ended June 30, 2021 .

Operating expenses in the second quarter of 2021 were impacted by limited operating days and capacity limitations due to the COVID-19 pandemic.

As a result, the increase in operating expenses in the second quarter of 202 2 primarily results from an increase in labor-related costs and other operating costs due to a return to more normalized operations and an increase in attendance .

Operating expenses were also unfavorably impacted by unusually high inflationary pressures.

These factors were partially offset by structural cost savings initiatives when compared to the second quarter of 2021 .

O perating expenses as a percent of revenue were 37.7% and 35.8% for the three months ended June 30, 2022 and 2021, respectively.

Operating expenses for the three months ended September 30, 2022 increased by $20.8 million, or 10.7% , to $215.9 million as compared to $195.1 million for the three months ended September 30, 2021 .

The increase in o perating expenses is primarily due to costs associated with new and/or expanded attractions and events, along with high inflationary pressures and an increase in legal accruals as compared to the prior year quarter .

These factors were partially offset by a decrease in non-cash equity compensation expense along with structural cost savings initiatives when compared to the third quarter of 2021 .

Operating expenses for the third quarter of 2021 were also impacted by approximately $9.2 million of nonrecurring contractual liabilities and legal costs resulting from the temporary COVID-19 park closures .

O perating expenses as a percent of revenue were 38.2% and 37.4% for the three months ended September 30, 2022 and 2021, respectively.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the three months ended June 30, 2022 increased $13.0 million, or 30.0%, to $56.2 million as compared to $43.2 million for the three months ended June 30, 2021.

The increase in selling, general and administrative expenses is primarily due to increased marketing-related costs, increased third-party vendor costs, and a legal settlement charge, partially offset by a decrease in non-cash equity compensation expense and the impact of cost savings and efficiency initiatives.

Selling, general and administrative expenses as a percent of revenue were 11.1% and 9.8% for the three months ended June 30, 2022 and 2021, respectively.

Selling, general and administrative expenses for the three months ended September 30, 2022 decreased $0.5 million, or 1.0%, to $53.1 million as compared to $53.6 million for the three months ended September 30, 2021.

The decrease in selling, general and administrative expenses is primarily due to a decrease in non-cash equity compensation expense and the impact of cost savings and efficiency initiatives.

These factors were partially offset by increased marketing and third-party consulting costs when compared to the prior year quarter.

Selling, general and administrative expenses as a percent of revenue were 9.4% and 10.3% for the three months ended September 30, 2022 and 2021, respectively.

Depreciation and amortization.

Depreciation and amortization expense for the three months ended June 30, 2022 increased by $2.3 million, or 6.4%, to $38.6 million as compared to $36.2 million for the three months ended June 30, 2021.

Depreciation and amortization expense for the three months ended September 30, 2022 increased by $0.9 million, or 2.5%, to $37.2 million as compared to $36.3 million for the three months ended September 30, 2021.

The increase primarily relates to new asset additions partially offset by the impact of asset retirements and fully depreciated assets.

Interest expense.

Interest expense for the three months ended June 30, 2022 decreased approximately $4.3 million, or 13.9%, to $26.8 million as compared to $31.1 million for the three months ended June 30, 2021.

The decrease primarily relates to the net impact of lower interest as a result of the Refinancing Transactions.

Interest expense for the three months ended September 30, 2022 increased approximately $2.2 million, or 7.7%, to $30.6 million as compared to $28.4 million for the three months ended September 30, 2021.

The increase primarily relates to increased interest rates on variable debt, partially offset by the net impact of lower interest on fixed debt as a result of the Refinancing Transactions.

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

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

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

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

Provision for income taxes.

Provision for income taxes for the three months ended June 30, 2022 was $34.6 million compared to $8.5 million for the three months ended June 30, 2021.

Our consolidated effective tax rate was 22.9% for the three months ended June 30, 2022 compared to 6.2% for the three months ended June 30, 2021.

The effective tax rate in the three months ended June 30, 2022 was primarily impacted by state income taxes and other compensation items, partially offset by a tax benefit related to equity-based compensation which vested during the quarter.

The effective tax rate in the three months ended June 30, 2021 was primarily impacted by non-cash valuation allowance adjustments on federal and state net operating loss, a valuation allowance adjustment on federal tax credits, changes in state tax rates and tax impacts of equity-based compensation.

Provision for income taxes for the three months ended September 30, 2022 was $52.6 million compared to $8.9 million for the three months ended September 30, 2021.

Our consolidated effective tax rate was 28.1% for the three months ended September 30, 2022 compared to 8.0% for the three months ended September 30, 2021.

The effective tax rate in the three months ended September 30, 2022 was primarily impacted by state income taxes, including the effect of tax rate changes enacted during the quarter.

The effective tax rate in the three months ended September 30, 2021 was primarily impacted by non-cash valuation allowance adjustments on federal and state net operating loss carryforwards, a valuation allowance adjustment on federal tax credits, changes in state tax rates and tax impacts of equity-based compensation.

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

Supplemental comparison of the three months ended June 30, 2022 to the three months ended June 30, 2019

We believe a comparison of selected financial results for the three months ended June 30, 2022 to the three months ended June 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the three months ended June 30, 2022 compared to the three months ended June 30, 2019.

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

For the Three Months Ended

Summary Financial Data:

(In thousands, except per capita data)

Net revenues:

Food, merchandise and other

Total revenues

Selected costs and expenses:

Cost of food, merchandise and other revenues

Operating expenses (exclusive of depreciation and amortization)

Selling, general and administrative expenses

Total revenue per capita

Admission per capita

In-park per capita spending

Admissions revenue .

Admissions revenue for the three months ended June 30, 2022 increased $47.7 million, or 20.9%, to $275.5 million as compared to $227.8 million for the three months ended June 30, 2019.

The increase in admissions revenue was primarily a result of an increase in admissions per capita, partially offset by a decrease in attendance of approximately 0.2 million guests, or 3.1%.

Admission per capita increased by 24.8% to $43.98 in 2022 compared to $35.25 in 2019.

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

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

Excluding international guest visitation and group-related attendance, attendance increased by approximately 3.3% when compared to the second quarter of 2019.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the three months ended June 30, 2022 increased $51.1 million, or 28.7%, to $229.3 million as compared to $178.2 million for the three months ended June 30, 2019, primarily as a result of an increase in in-park per capita spending, partially offset by a decrease in attendance.

In-park per capita spending increased by 32.8% to $36.61 in the second quarter of 2022 compared to $27.57 in the second quarter of 2019.

In-park per capita spending improved primarily due to pricing initiatives, improved product quality and mix and the impact of new or enhanced and expanded venues and/or events or other in-park offerings, partially offset by a higher mix of pass attendance during the quarter when compared to the second quarter of 2019.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the three months ended June 30, 2022 increased $9.5 million, or 29.7%, to $41.5 million as compared to $32.0 million for the three months ended June 30, 2019.

These costs represent 18.1% and 18.0% of the related revenue earned for the three months ended June 30, 2022 and 2019, respectively.

The increase as a percent of related revenue partly relates to the impact of unusually high inflationary pressures which were largely offset by higher realized prices on some of our in-park products and the impact of sourcing cost savings initiatives.

Operating expenses.

Operating expenses for the three months ended June 30, 2022 increased $20.1 million, or 11.8%, to $190.5 million as compared to $170.4 million for the three months ended June 30, 2019.

The increase primarily results from operating costs associated with incremental operating days, venues, events and attractions when compared to 2019, an increase in non-cash fixed asset write-offs, and inflationary pressures, partially offset by a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives.

Operating expenses were 37.7% of total revenues for the three months ended June 30, 2022 compared to 42.0% for the three months ended June 30, 2019.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the three months ended June 30, 2022 decreased $11.0 million, or 16.4%, to $56.2 million as compared to $67.2 million for the three months ended June 30, 2019.

The decrease primarily relates to a reduction in marketing related costs and the impact of cost savings and efficiency initiatives, partially offset by a legal settlement charge.

As a percentage of total revenue, selling, general and administrative expenses were 11.1% for the three months ended June 30, 2022 compared to 16.6% for the three months ended June 30, 2019.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table presents key operating and financial information for the six months ended June 30, 2022 and 2021:

For the Six Months Ended

Comparison of the Nine Months Ended September 30, 2022 and 2021

Our results for the nine months ended September 30, 2022 are not directly comparable to the nine months ended September 30, 2021 primarily due to COVID-19 related impacts including a temporary park closure and capacity limitations at some of our parks in 2021.

See “ Impact of Global COVID-19 Pandemic ” and “Attendance” for further details.

The following table presents key operating and financial information for the nine months ended September 30, 2022 and 2021:

For the Nine Months Ended

September 30,

Summary Financial Data:

13 unchanged sentences

Interest expense

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

Income before income taxes

5 unchanged sentences

Admissions revenue .

Admissions revenue for the six months ended June 30, 2022 increased $87.4 million to $426.4 million as compared to $339.0 million for the six months ended June 30, 2021.

The improvement was largely a result of an increase in attendance along with an increase in admissions per capita.

Total attendance for the first six months of 2022 increased by approximately 1.6 million guests when compared to the first six months of 2021.

Attendance benefitted primarily from an increase in demand resulting from a return to more normalized operations when compared to the first six months of 2021, which included COVID-19 related impacts including limited operating days, a temporary park closure, capacity limitations at some of our parks and restrictions on international travel.

Admission per capita increased by 4.4% to $44.11 for the six months ended June 30, 2022 compared to $42.25 for the six months ended June 30, 2021, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset by the impact of the park mix when compared to the prior year period.

Admissions revenue for the nine months ended September 30, 2022 increased $104.2 million, or 16.4%, to $739.9 million as compared to $635.7 million for the nine months ended September 30, 2021.

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

Total attendance for the first nine months of 2022 increased by approximately 1.8 million guests, or 11.5%, when compared to the first nine months of 2021.

Attendance benefitted primarily from an increase in demand resulting from a return to more normalized operations when compared to the first nine months of 2021, which included COVID-19 related impacts including limited operating days, a temporary park closure, capacity limitations at some of our parks and more severe restrictions on international travel.

Admission per capita increased by 4.4% to $43.52 for the nine months ended September 30, 2022 compared to $41.69 for the nine months ended September 30, 2021, primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset by the net impact of the admissions product mix when compared to the prior year period.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the six months ended June 30, 2022 increased $76.4 million to $349.1 million as compared to $272.7 million for the six months ended June 30, 2021.

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

In-park per capita spending increased by 6.3% to $36.12 for the six months ended June 30, 2022 compared to $33.99 for the six months ended June 30, 2021.

In park per capita spending improved due to a combination of factors including, pricing initiatives, improved product quality and mix and the impact of new or enhanced and/or expanded venues and/or events or other in-park offerings, partially offset by a higher mix of pass attendance and the impact of park mix when compared to the prior year period.

In-park per capita spending was also unfavorably impacted by less than optimal staffing, particularly during the first quarter of 2022, that impacted our ability to fully operate and/or open some of our food and beverage and retail outlets.

Food, merchandise and other revenue for the nine months ended September 30, 2022 increased $103.6 million, or 20.8%, to $600.8 million as compared to $497.2 million for the nine months ended September 30, 2021.

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

In-park per capita spending increased by 8.4% to $35.34 for the nine months ended September 30, 2022 compared to $32.61 for the nine months ended September 30, 2021.

In-park per capita spending was also unfavorably impacted by less than optimal staffing, particularly during the first quarter of 2022, which impacted our ability to fully operate and/or open some of our food and beverage and retail outlets.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the six months ended June 30, 2022 increased $15.4 million to $64.6 million as compared to $49.1 million for the six months ended June 30, 2021.

These costs represent 18.6% and 18.0% of the related revenue earned for the six months ended June 30, 2022 and 2021, respectively.

The increase as a percent of related revenue partly relates to the impact of unusually high inflationary pressures which were partially offset by higher realized prices on some of our in-park products and the impact of sourcing cost savings initiatives.

Costs of food, merchandise and other revenues for the nine months ended September 30, 2022 increased $18.9 million , or 21.6% , to $105.9 million as compared to $87.1 million for the nine months ended September 30, 2021 .

These costs represent 17.7% and 17.5% of the related revenue earned for the nine months ended September 30, 2022 and 2021 , respectively.

The in crease as a percent of related revenue partly relates to the impact of inflationary pressures which were partially offset by higher realized prices on some of our in-park products and the impact of sourcing cost savings initiatives .

Operating expenses.

Operating expenses for the six months ended June 30, 2022 increased by $78.3 million, or 29.6% , to $343.4 million as compared to $265.1 million for the six months ended June 30, 2021 .

Operating expenses in the first six months of 2021 were significantly impacted by limited operating days, a temporary park closure and capacity limitations due to the COVID-19 pandemic.

As a result, the increase in operating expenses in the first six months of 202 2 primarily results from an increase in labor-related costs and other operating costs due to a return to more normalized operations and an increase in attendance .

Operating expenses were also impacted by a non-cash increase in self-insurance reserve adjustments and inflationary pressures , partially offset by structural cost savings initiatives when compared to the first six months of 2021 .

Operating expenses as a percent of revenue were 44.3% for the six months ended June 30, 2022 and 43.3% for the six months ended June 30, 2021 .

Operating expenses for the nine months ended September 30, 2022 increased by $99.1 million, or 21.5%, to $559.3 million as compared to $460.2 million for the nine months ended September 30, 2021.

Operating expenses in the first nine months of 2021 were impacted by limited operating days, a temporary park closure and capacity limitations due to the COVID-19 pandemic.

As a result, the increase in operating expenses in the first nine months of 2022 primarily results from an increase in labor-related costs and other operating costs due to a return to more normalized operations and an increase in attendance.

Operating expenses were also impacted by inflationary pressures, partially offset by the impact of structural cost savings initiatives when compared to the first nine months of 2021.

Operating expenses as a percent of revenue were 41.7% for the nine months ended September 30, 2022 and 40.6% for the nine months ended September 30, 2021.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the six months ended June 30, 2022 increased $27.6 million, or 36.9%, to $102.2 million as compared to $74.7 million for the six months ended June 30, 2021.

The increase is primarily due to increased marketing-related costs, increased third-party vendor costs and a legal settlement charge, partially offset by the impact of cost savings and efficiency initiatives.

Selling, general and administrative expenses as a percent of revenue were 13.2% for the six months ended June 30, 2022 and 12.2% for the six months ended June 30, 2021.

Selling, general and administrative expenses for the nine months ended September 30, 2022 increased $27.0 million, or 21.1%, to $155.3 million as compared to $128.3 million for the nine months ended September 30, 2021.

The increase is primarily due to increased marketing-related costs and increased third-party consulting costs, partially offset by a decrease in non-cash equity compensation expense and the impact of cost savings and efficiency initiatives.

Selling, general and administrative expenses as a percent of revenue were 11.6% for the nine months ended September 30, 2022 and 11.3% for the nine months ended September 30, 2021.

Depreciation and amortization.

Depreciation and amortization expense for the six months ended June 30, 2022 increased $4.4 million, or 6.0%, to $77.2 million as compared to $72.8 million for the six months ended June 30, 2021.

Depreciation and amortization expense for the nine months ended September 30, 2022 increased $5.3 million, or 4.8%, to $114.4 million as compared to $109.1 million for the nine months ended September 30, 2021.

The increase primarily relates to new asset additions partially offset by the impact of asset retirements and fully depreciated assets.

Interest expense.

Interest expense for the six months ended June 30, 2022 decreased $9.9 million, or 16.0%, to $52.2 million as compared to $62.1 million for the six months ended June 30, 2021.

The decrease primarily relates to the net impact of lower interest as a result of the Refinancing Transactions.

Interest expense for the nine months ended September 30, 2022 decreased $7.7 million, or 8.5%, to $82.7 million as compared to $90.5 million for the nine months ended September 30, 2021.

The decrease primarily relates to the net impact of a lower average outstanding balance on our variable debt and lower interest on fixed debt as a result of the Refinancing Transactions, partially offset by increased interest rates on variable rate debt.

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

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

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

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

Provision for income taxes.

Provision for income taxes for the six months ended June 30, 2022 was $28.3 million compared to $3.3 million for the six months ended June 30, 2021.

Our consolidated effective tax rate was 20.8% for the six months ended June 30, 2022 compared to 3.8% for the six months ended June 30, 2021.

The effective tax rate in the six months ended June 30, 2022 was primarily impacted by a tax benefit related to equity-based compensation which vested during the period, partially offset by state income taxes and other compensation related items.

The effective tax rate in the six months ended June 30, 2021 was primarily impacted by non-cash valuation allowance adjustments on federal and state net operating loss carryforwards, a valuation allowance adjustment on federal tax credits, changes in state tax rates and tax impacts of equity-based compensation.

Provision for income taxes for the nine months ended September 30, 2022 was $80.9 million compared to $12.2 million for the nine months ended September 30, 2021.

Our consolidated effective tax rate was 25.0% for the nine months ended September 30, 2022 compared to 6.2% for the nine months ended September 30, 2021.

The effective tax rate in the nine months ended September 30, 2022 was primarily impacted by state income taxes, including the effect of tax rate changes enacted during the period, and other compensation related items, partially offset by tax benefits related to equity-based compensation which vested during the period.

The effective tax rate in the nine months ended September 30, 2021 was primarily impacted by non-cash valuation allowance adjustments on federal and state net operating loss carryforwards, state tax income taxes and deductible equity-based compensation.

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

Supplemental comparison of the six months ended June 30, 2022 to the six months ended June 30, 2019

We believe a comparison of selected financial results for the six months ended June 30, 2022 to the six months ended June 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the six months ended June 30, 2022 compared to the six months ended June 30, 2019.

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

For the Six Months Ended

Supplemental comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2019

We believe a comparison of selected financial results for the nine months ended September 30, 2022 to the nine months ended September 30, 2019 may provide additional insight regarding the current impact of the COVID-19 pandemic on our business.

As such, the following supplemental discussion provides an analysis of selected operating results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2019.

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

For the Nine Months Ended

September 30,

Selected Summary Financial Data:

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Admissions revenue .

Admissions revenue for the six months ended June 30, 2022 increased $69.6 million, or 19.5%, to $426.4 million as compared to $356.7 million for the six months ended June 30, 2019.

The increase in admissions revenue was primarily a result of an increase in admissions per capita which offset a decrease in attendance of approximately 0.1 million guests, or 1.4%.

Admissions revenue for the nine months ended September 30, 2022 increased $115.2 million, or 18.4%, to $739.9 million as compared to $624.8 million for the nine months ended September 30, 30, 2019.

The increase in admissions revenue was primarily a result of an increase in admission per capita which offset a decrease in attendance of approximately 0.9 million guests, or 5.1%.

Admission per capita increased by 24.8% to $43.52 in the 2022 period compared to $34.86 in the 2019 period.

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

Excluding international guest visitation and group-related attendance, attendance increased by approximately 7.7% when compared to the first six months of 2019.

Attendance declined primarily due to a decline from international guest visitation and group-related attendance, partially offset by the impact of increased incremental operating days when compared to 2019.

Excluding international guest visitation and group-related attendance, attendance increased by approximately 2.2% when compared to the first nine months of 2019.

Food, merchandise and other revenue.

Food, merchandise and other revenue for the six months ended June 30, 2022 increased $79.3 million, or 29.4%, to $349.1 million as compared to $269.8 million for the six months ended June 30, 2019, primarily as a result of an increase in in-park per capita spending, offset by a decrease in attendance.

In-park per capita spending increased by 31.2% to $36.12 in the first six months of 2022 compared to $27.53 in the first six months of 2019.

In-park per capita spending improved primarily due to pricing initiatives, improved product quality and mix and the impact of new or enhanced and/or expanded venues and/or events or other in-park offerings, partially offset by a higher mix of pass attendance during the first six months of 2022 when compared to the first six months of 2019.

In-park per capita spending was unfavorably impacted by less than optimal staffing, particularly during the first quarter of 2022, that impacted our ability to fully operate and/or open some of our food and beverage and retail outlets.

Food, merchandise and other revenue for the nine months ended September 30, 2022 increased $125.3 million, or 26.4%, to $600.8 million as compared to $475.4 million for the nine months ended September 30, 2019, primarily as a result of an increase in in-park per capita spending, partially offset by a decrease in attendance.

In-park per capita spending increased by 33.3% to $35.34 in the first nine months of 2022 compared to $26.52 in the first nine months of 2019.

In-park per capita spending improved primarily due to pricing initiatives, improved product quality and mix and the impact of new or enhanced and/or expanded venues and/or events or other in-park offerings during the first nine months of 2022 when compared to the first nine months of 2019.

In-park per capita spending was unfavorably impacted by less than optimal staffing, particularly during the first quarter of 2022, which impacted our ability to fully operate and/or open some of our food and beverage and retail outlets.

Costs of food, merchandise and other revenues.

Costs of food, merchandise and other revenues for the six months ended June 30, 2022 increased $15.3 million, or 31.2%, to $64.6 million as compared to $49.2 for the six months ended June 30, 2019.

These costs represent 18.6% and 18.2% of the related revenue earned for the six months ended June 30, 2022 and 2019, respectively.

The increase as a percent of related revenue partly relates to unusually high inflationary pressures, partially offset by higher realized prices on some of our in-park products and the impact of sourcing cost savings initiatives.

Costs of food, merchandise and other revenues for the nine months ended September 30, 2022 increased $18.9 million, or 21.7%, to $105.9 million as compared to $87.1 million for the nine months ended September 30, 2019.

These costs represent 17.7% and 18.3% of the related revenue earned for the nine months ended September 30, 2022 and 2019, respectively.

Operating expenses.

Operating expenses for the six months ended June 30, 2022 increased $23.1 million, or 7.2%, to $343.4 million as compared to $320.3 million for the six months ended June 30, 2019.

The increase primarily results from operating costs associated with incremental operating days, venues, events and attractions added in 2022, an increase in self-insurance reserve adjustments, an increase in non-cash fixed asset write-offs, and inflationary pressures, partially offset by a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives.

Operating expenses were 44.3% of total revenues for the six months ended June 30, 2022 compared to 51.1% for the six months ended June 30, 2019.

Operating expenses for the nine months ended September 30, 2022 increased $63.4 million, or 12.8%, to $559.3 million as compared to $495.9 million for the nine months ended September 30, 2019.

The increase primarily results from operating costs associated with incremental operating days, new, enhanced and/or expanded venues, events and attractions, along with inflationary pressures, partially offset by a net reduction in labor-related costs and other operating costs primarily resulting from structural cost savings initiatives.

Operating expenses were 41.7% of total revenues for the nine months ended September 30, 2022 compared to 45.1% for the nine months ended September 30, 2019.

Selling, general and administrative expenses .

Selling, general and administrative expenses for the six months ended June 30, 2022 decreased $7.8 million, or 7.0%, to $102.2 million as compared to $110.0 million for the six months ended June 30, 2019.

The decrease primarily relates to a reduction in marketing related costs and the impact of cost savings and efficiency initiatives, partially offset by a legal settlement charge.

As a percentage of total revenue, selling, general and administrative expenses were 13.2% for the six months ended June 30, 2022 compared to 17.6% for the six months ended June 30, 2019.

Selling, general and administrative expenses for the nine months ended September 30, 2022 decreased $19.3 million, or 11.1% , to $155.3 million as compared to $174.6 million for the nine months ended September 30, 2019.

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

As a percentage of total revenue, selling, general and administrative expenses were 11.6% for the nine months ended September 30, 2022 compared to 15.9% for the nine months ended September 30, 201 9 .

Liquidity and Capital Resources

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

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

As of June 30, 2022, we had a working capital ratio (defined as current assets divided by current liabilities) of 0.7.

Historically, we typically have operated with a working capital ratio of less than 1.0 due to a significant deferred revenue balance from revenues paid in advance for our theme park admissions products and high turnover of in-park products that result in limited inventory balances.

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

As of September 30, 2022, we had a working capital ratio (defined as current assets divided by current liabilities) of 0.6.

We typically have operated with a working capital ratio of less than 1.0 due to a significant deferred revenue balance from revenues paid in advance for our theme park admissions products and high turnover of in-park products that result in limited inventory balances.

Our cash flow from operations, along with our revolving credit facilities, have historically allowed us to meet our liquidity needs.

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See Note 10–Stockholders’ Deficit in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information on the Company’s share repurchase programs.

On August 4, 2022, we announced that our Board approved a new $250.0 million share repurchase program (the “Share Repurchase Program”).

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.

The Share Repurchase Program has no time limits and could 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, share ownership thresholds, debt covenant restrictions and alternative investment opportunities.

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

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Unaudited, in thousands)

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Cash Flows from Operating Activities

Net cash provided by operating activities was $299.6 million during the six months ended June 30, 2022 as compared to $248.1 million during the six months ended June 30, 2021.

The change in net cash provided by operating activities was primarily impacted by improved operating performance, including increased sales of admission products and the impact of decreased interest payments in the six months ended June 30, 2022 when compared to the six months ended June 30, 2021.

Net cash provided by operating activities was $468.9 million during the nine months ended September 30, 2022 as compared to $416.4 million during the nine months ended September 30, 2021.

The change in net cash provided by operating activities was primarily impacted by improved operating performance, including increased sales of admission and other products and the impact of decreased interest payments in the nine months ended September 30, 2022 when compared to the nine months ended September 30, 2021.

Cash Flows from Investing Activities

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

Net cash used in investing activities during the six months ended June 30, 2022 consisted primarily of capital expenditures of $101.0 million largely related to future attractions.

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

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

For the Six Months Ended June 30,

Net cash used in investing activities during the nine months ended September 30, 2022 consisted primarily of capital expenditures of $150.7 million largely related to future attractions.

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

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

For the Nine Months Ended September 30,

Capital Expenditures:

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Cash Flows from Financing Activities

Net cash used in financing activities during the six months ended June 30, 2022 results primarily from share repurchases of $454.8 million and payment of tax withholdings on equity-based compensation through shares withheld of $22.1 million.

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

Net cash used in financing activities during the nine months ended September 30, 2022 results primarily from share repurchases of $617.8 million and payment of tax withholdings on equity-based compensation through shares withheld of $22.2 million.

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

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

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

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

As of June 30, 2022, our indebtedness consisted of senior secured credit facilities, 5.25% unsecured senior notes (the “Senior Notes”) and 8.75% first-priority senior secured notes (the “First-Priority Senior Secured Notes”).

As of September 30, 2022, our indebtedness consisted of senior secured credit facilities, 5.25% unsecured senior notes (the “Senior Notes”) and 8.75% first-priority senior secured notes (the “First-Priority Senior Secured Notes”).

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

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

As of June 30, 2022, our Senior Secured Credit Facilities consisted of $1.191 billion in Term B Loans which will mature in August 2028, along with a $390.0 million Revolving Credit Facility, which had no amounts outstanding as of June 30, 2022 and will mature in August 2026.

As of June 30, 2022, SEA had approximately $19.7 million of outstanding letters of credit, leaving approximately $370.3 million available for borrowing under the Revolving Credit Facility.

As of September 30, 2022, our Senior Secured Credit Facilities consisted of $1.188 billion in Term B Loans which will mature in August 2028, along with a $390.0 million Revolving Credit Facility, which had no amounts outstanding as of September 30, 2022 and will mature in August 2026.

As of September 30, 2022, SEA had approximately $19.7 million of outstanding letters of credit, leaving approximately $370.3 million available for borrowing under the Revolving Credit Facility.

Senior Notes and First-Priority Senior Secured Notes

As of June 30, 2022 , SEA had outstanding $725.0 million in aggregate principal amount of Senior Notes due on August 15, 2029 and $227.5 million in aggregate principal amount of First-Priority Senior Secured Notes, due on May 1, 2025.

As of September 30, 2022, SEA had outstanding $725.0 million in aggregate principal amount of Senior Notes due on August 15, 2029 and $227.5 million in aggregate principal amount of First-Priority Senior Secured Notes, due on May 1, 2025.

Covenant Compliance

As of June 30, 2022, we were in compliance with all covenants in the credit agreement governing the Senior Secured Credit Facilities and the indentures governing our Senior Notes and First-Priority Senior Secured Notes.

As of September 30, 2022, we were in compliance with all covenants in the credit agreement governing the Senior Secured Credit Facilities and the indentures governing our Senior Notes and First-Priority Senior Secured Notes.

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

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UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Last Twelve Months Ended

September 30,

(Unaudited, in thousands)

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Reflects non-cash equity compensation expenses and related payroll taxes associated with grants of equity-based compensation.

For the twelve months ended June 30, 2022, includes equity compensation expense related to certain performance vesting restricted awards which were previously not considered probable of vesting .

For the three and nine months ended September 30, 2021 and the twelve months ended September 30, 2022, includes equity compensation expense related to certain performance vesting restricted awards which were previously not considered probable of vesting .

See Note 9–Equity-Based Compensation in our notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Reflects primarily non-cash expenses related to miscellaneous fixed asset disposals including asset write-offs and costs related to certain rides and equipment which were removed from service.

For the six and twelve months ended June 30, 2022, includes approximately $3.9 million related to non-cash self-insurance reserve adjustments.

For the three and six months ended June 30, 2022, reflects business optimization, development and other strategic initiative costs primarily related to:

Includes approximately $2.6 million for the three months ended September 30, 2022 and approximately $6.5 million for the nine and twelve months ended September 30, 2022 related to non-cash self-insurance reserve adjustments.

For the three and nine months ended September 30, 2022, reflects business optimization, development and other strategic initiative costs primarily related to:

(i) $2.5 million and $7.6 million, respectively of third-party consulting costs and (ii) $1.8 million and $5.6 million, respectively of other business optimization costs and strategic initiative costs.

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

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

For the twelve months ended June 30, 2022, reflects business optimization, development and other strategic initiative costs primarily related to:

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

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

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

For the twelve months ended September 30, 2022, reflects business optimization, development and other strategic initiative costs primarily related to :

( i ) $ 9.7 million of third-party consulting costs and (ii) $ 6.6 million of other business optimization costs and strategic initiative costs.

For the three and six months ended June 30, 2022 and 2021, primarily relates to incremental non-recurring costs associated with the COVID-19 pandemic, primarily associated with incremental labor-related costs to prepare, staff, and operate the parks with enhanced safety measures and costs associated with COVID-19 related legal matters.

For the twelve months ended June 30, 2022, includes approximately $11.1 million of nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures and approximately $6.8 million of incremental temporary labor-related costs incurred to prepare and staff the parks and certain incremental, nonrecurring, temporary incentives paid to attract employees to return to or remain in the workforce during the COVID-19 related environment.

For the three, nine and twelve months ended September 30, 2022, includes approximately $4.1 million of certain legal matters related to the temporary COVID-19 park closures.

For the twelve months ended September 30, 2022, also includes approximately $3.1 million of certain incremental, nonrecurring, temporary incentives paid to attract employees to return or remain in the workforce during the COVID-19 related environment and approximately $1.7 million of contract termination or modification costs related to impacts from the temporary COVID-19 park closures.

For the three and nine months ended September 30, 2021, includes approximately $9.2 million and $10.4 million, respectively, of nonrecurring contractual liabilities and legal costs impacted by the temporary COVID-19 park closures and approximately $4.1 million and $6.9 million, respectively, of incremental temporary labor related costs incurred to prepare and staff the parks and certain incremental, nonrecurring, temporary incentives paid to attract employees to return to or remain in the workforce during the COVID-19 related environment.

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

For the three, six and twelve months ended June 30, 2022, includes $3.6 million related to a legal settlement.

Includes approximately $3.6 million for the nine and twelve months ended September 30, 2022 related to a legal settlement.

Adjusted EBITDA is defined as net income before income tax expense, interest expense, depreciation and amortization, as further adjusted to exclude certain non-cash, and other items as described above.

Our Debt Agreements, which were effective for the twelve months ended June 30, 2022, permit the calculation of certain covenants to be based on Covenant Adjusted EBITDA, as defined above, for the last twelve-month period further adjusted for net annualized estimated savings we expect to realize over the following 24-month period related to certain specified actions, including restructurings and cost savings initiatives.

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

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

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

The Debt Agreements, which were effective for the twelve months ended June 30, 2022, permit our calculation of certain covenants to be based on Covenant Adjusted EBITDA as defined above, for the last twelve-month period further adjusted for certain costs as permitted by the Debt Agreements including recruiting and retention expenses, public company compliance costs and litigation and arbitration costs, if any.

Prior to the Debt Agreements, these costs were not permitted adjustments in the calculation, as such, these adjustments are not applicable to the prior years.

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

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

Contractual Obligations

There have been no material changes to our contractual obligations as June 30, 2022 from those previously disclosed in our Annual Report on Form 10-K.

There have been no material changes to our contractual obligations as September 30, 2022 from those previously disclosed in our Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

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Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of June 30, 2022.

We had no material off-balance sheet arrangements as of September 30, 2022.

Recently Issued Financial Accounting Standards

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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-Q

Item 2. Management’s Discussion and Analysis