SEAWORLD ENTERTAINMENT, INC., 10-K filed on 2/26/2021
Annual Report
v3.20.4
Document and Entity Information - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Feb. 19, 2021
Jun. 30, 2020
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2020    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Registrant Name SeaWorld Entertainment, Inc.    
Entity Central Index Key 0001564902    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Interactive Data Current Yes    
Current Fiscal Year End Date --12-31    
Entity Filer Category Large Accelerated Filer    
Entity Well-known Seasoned Issuer No    
Entity Public Float     $ 749,219,595
Entity Common Stock, Shares Outstanding   78,508,888  
Entity Shell Company false    
Entity Small Business false    
Entity Emerging Growth Company false    
Title of 12(b) Security Common Stock, par value $0.01 per share    
Trading Symbol SEAS    
Security Exchange Name NYSE    
Entity File Number 001-35883    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 27-1220297    
Entity Address, Address Line One 6240 Sea Harbor Drive    
Entity Address, City or Town Orlando    
Entity Address, State or Province FL    
Entity Address, Postal Zip Code 32821    
City Area Code (407)    
Local Phone Number 226-5011    
Documents Incorporated by Reference Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relating to the 2021 Annual Meeting of Stockholders, which statement will be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, are incorporated by reference into Part III of this report.    
Document Annual Report true    
ICFR Auditor Attestation Flag false    
Document Transition Report false    
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 433,909 $ 39,946
Accounts receivable, net 30,410 49,728
Inventories 30,700 33,163
Prepaid expenses and other current assets 12,418 46,312
Total current assets 507,437 169,149
Property and equipment, at cost 3,272,705 3,209,521
Accumulated depreciation (1,611,745) (1,476,059)
Property and equipment, net 1,660,960 1,733,462
Goodwill 66,278 66,278
Trade names/trademarks, net 157,000 157,000
Right of use assets-operating leases 136,572 141,438
Deferred tax assets, net 22,847 19,013
Other assets, net 15,264 14,178
Total assets 2,566,358 2,300,518
Current liabilities:    
Accounts payable and accrued expenses 105,369 131,503
Current maturities of long-term debt 15,505 65,505
Operating lease liabilities 3,757 3,896
Accrued salaries, wages and benefits 10,781 15,499
Deferred revenue 130,759 104,416
Other accrued liabilities 50,950 81,841
Total current liabilities 317,121 402,660
Long-term debt, net 2,177,137 1,482,619
Long-term operating lease liabilities 120,144 124,339
Deferred tax liabilities, net 15,772 42,773
Other liabilities 41,987 37,235
Total liabilities 2,672,161 2,089,626
Commitments and contingencies (Note 15)
Stockholders’ (Deficit) Equity:    
Preferred stock, $0.01 par value—authorized, 100,000,000 shares, no shares issued or outstanding at December 31, 2020 and 2019
Common stock, $0.01 par value—authorized, 1,000,000,000 shares; 94,652,248 and 94,044,203 shares issued at December 31, 2020 and 2019, respectively 946 940
Additional paid-in capital 680,360 673,893
Accumulated other comprehensive loss   (1,559)
Accumulated deficit (371,800) (59,479)
Treasury stock, at cost (16,260,248 and 15,790,463 shares at December 31, 2020 and 2019, respectively) (415,309) (402,903)
Total stockholders’ (deficit) equity (105,803) 210,892
Total liabilities and stockholders’ (deficit) equity $ 2,566,358 $ 2,300,518
v3.20.4
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 100,000,000 100,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 1,000,000,000 1,000,000,000
Common stock, shares issued 94,652,248 94,044,203
Treasury stock, shares 16,260,248 15,790,463
v3.20.4
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Net revenues:      
Total revenues $ 431,779 $ 1,398,244 $ 1,372,290
Costs and expenses:      
Cost of food, merchandise and other revenues 36,712 108,953 106,604
Operating expenses (exclusive of depreciation and amortization shown separately below) 388,473 649,657 705,954
Selling, general and administrative expenses 94,885 261,701 229,724
Severance and other separation costs 2,826 4,176 17,386
Depreciation and amortization 150,546 160,557 160,955
Total costs and expenses 673,442 1,185,044 1,220,623
Operating (loss) income (241,663) 213,200 151,667
Other expense (income), net 276 18 (100)
Interest expense 100,907 84,178 80,914
Loss on early extinguishment of debt and write-off of discounts and debt issuance costs     8,150
(Loss) income before income taxes (342,846) 129,004 62,703
(Benefit from) provision for income taxes (30,525) 39,528 17,915
Net (loss) income (312,321) 89,476 44,788
Other comprehensive income (loss):      
Unrealized gain (loss) on derivatives, net of tax 1,559 (3,843) 8,454
Comprehensive (loss) income $ (310,762) $ 85,633 $ 53,242
(Loss) earnings per share:      
(Loss) earnings per share, basic $ (3.99) $ 1.11 $ 0.52
(Loss) earnings per share, diluted $ (3.99) $ 1.10 $ 0.52
Weighted average common shares outstanding:      
Basic 78,194 80,309 86,170
Diluted 78,194 81,044 86,910
Admissions [Member]      
Net revenues:      
Total revenues $ 255,376 $ 802,834 $ 798,793
Food, Merchandise and Other [Member]      
Net revenues:      
Total revenues $ 176,403 $ 595,410 $ 573,497
v3.20.4
Consolidated Statements of Changes in Stockholders' (Deficit) Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive (Loss) Income [Member]
Treasury Stock, at Cost [Member]
Beginning Balance at Dec. 31, 2017 $ 287,466 $ 926 $ 641,324 $ (194,837) $ (5,076) $ (154,871)
Beginning Balance, shares at Dec. 31, 2017   92,637,403        
Impact of adoption of ASU 2018-02       1,094 (1,094)  
Equity-based compensation 22,152   22,152      
Unrealized gain (loss) on derivatives, net of tax 8,454       8,454  
Vesting of restricted shares   $ 7 (7)      
Vesting of restricted shares, shares   725,646        
Shares withheld for tax withholdings (3,977) $ (1) (3,976)      
Shares withheld for tax withholdings, shares   (197,097)        
Exercise of stock options 4,282 $ 2 4,280      
Exercise of stock options, shares   234,977        
Adjustments to previous dividend declarations 61   61      
Repurchase of shares of treasury stock, at cost (98,032)         (98,032)
Net income (loss) 44,788     44,788    
Ending Balance at Dec. 31, 2018 265,194 $ 934 663,834 (148,955) 2,284 (252,903)
Ending Balance, shares at Dec. 31, 2018   93,400,929        
Equity-based compensation 11,106   11,106      
Unrealized gain (loss) on derivatives, net of tax (3,843)       (3,843)  
Vesting of restricted shares   $ 6 (6)      
Vesting of restricted shares, shares   608,851        
Shares withheld for tax withholdings (4,841) $ (2) (4,839)      
Shares withheld for tax withholdings, shares   (176,673)        
Exercise of stock options 3,795 $ 2 3,793      
Exercise of stock options, shares   211,096        
Adjustments to previous dividend declarations 5   5      
Repurchase of shares of treasury stock, at cost (150,000)         (150,000)
Net income (loss) 89,476     89,476    
Ending Balance at Dec. 31, 2019 $ 210,892 $ 940 673,893 (59,479) (1,559) (402,903)
Ending Balance, shares at Dec. 31, 2019 94,044,203 94,044,203        
Equity-based compensation $ 7,467   7,467      
Unrealized gain (loss) on derivatives, net of tax 1,559       $ 1,559  
Vesting of restricted shares   $ 6 (6)      
Vesting of restricted shares, shares   609,286        
Shares withheld for tax withholdings (3,915) $ (2) (3,913)      
Shares withheld for tax withholdings, shares   (158,865)        
Exercise of stock options $ 2,920 $ 2 2,918      
Exercise of stock options, shares 157,624 157,624        
Adjustments to previous dividend declarations $ 1   1      
Repurchase of shares of treasury stock, at cost (12,406)         (12,406)
Net income (loss) (312,321)     (312,321)    
Ending Balance at Dec. 31, 2020 $ (105,803) $ 946 $ 680,360 $ (371,800)   $ (415,309)
Ending Balance, shares at Dec. 31, 2020 94,652,248 94,652,248        
v3.20.4
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Unrealized gain (loss) on derivatives, tax (benefit) expense $ 500 $ (1,400)  
Repurchase of treasury shares, shares 469,785 5,615,874 3,654,816
Accumulated Other Comprehensive (Loss) Income [Member]      
Unrealized gain (loss) on derivatives, tax (benefit) expense $ 572 $ (1,421) $ 3,111
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Cash Flows From Operating Activities:      
Net (loss) income $ (312,321) $ 89,476 $ 44,788
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:      
Depreciation and amortization 150,546 160,557 160,955
Amortization of debt issuance costs and discounts 5,025 3,446 4,461
Loss on early extinguishment of debt and write-off of discounts and debt issuance costs     8,150
Deferred income tax (benefit) provision (31,414) 37,998 16,894
Equity-based compensation 7,467 11,106 22,152
Other including loss on impairment or disposal of assets, net 6,046 4,616 19,681
Changes in assets and liabilities:      
Accounts receivable 24,761 10,865 (24,347)
Inventories 2,267 721 (4,620)
Prepaid expenses and other current assets 5,210 (27,359) (2,275)
Accounts payable and accrued expenses 1,640 2,733 13,317
Accrued salaries, wages and benefits (4,718) (5,467) 6,051
Deferred revenue 25,065 665 25,611
Other accrued liabilities (422) 57,684 3,417
Right-of-use assets and operating lease liabilities 561 501  
Other assets and liabilities (442) 874 (300)
Net cash (used in) provided by operating activities (120,729) 348,416 293,935
Cash Flows From Investing Activities:      
Capital expenditures (109,175) (195,217) (179,770)
Other investing activities, net   24 (259)
Net cash used in investing activities (109,175) (195,193) (180,029)
Cash Flows From Financing Activities:      
Proceeds from the issuance of debt, net 713,658   543,935
Repayments of long-term debt (15,505) (15,506) (565,592)
Proceeds from draw on revolving credit facility 272,500 294,000 95,000
Repayments of revolving credit facility (322,500) (274,000) (80,000)
Purchase of treasury stock (12,406) (150,000) (98,032)
Payment of tax withholdings on equity-based compensation through shares withheld (3,915) (4,841) (3,977)
Exercise of stock options 2,920 3,795 4,282
Debt issuance costs (7,530)   (8,086)
Other financing activities (3,018) (753) (426)
Net cash provided by (used in) financing activities 624,204 (147,305) (112,896)
Change in Cash and Cash Equivalents, including Restricted Cash 394,300 5,918 1,010
Cash and Cash Equivalents, including Restricted Cash—Beginning of year 40,925 35,007 33,997
Cash and Cash Equivalents, including Restricted Cash—End of year 435,225 40,925 35,007
Supplemental Disclosures of Noncash Financing Activities      
Capital expenditures in accounts payable and accrued expenses 12,544 $ 39,538 $ 30,760
Other financing arrangements $ 3,890    
v3.20.4
Description of the Business
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Description of the Business

1. DESCRIPTION OF THE BUSINESS

SeaWorld Entertainment, Inc., through its wholly-owned subsidiary, SeaWorld Parks & Entertainment, Inc. (“SEA”) (collectively, the “Company”), owns and operates twelve theme parks within the United States.  Prior to December 1, 2009, the Company did not have any operations.  On December 1, 2009, the Company acquired all of the outstanding equity interest of Busch Entertainment LLC and affiliates from Anheuser Busch Companies, Inc. 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.  See further discussion relating to subsequent ownership changes in Note 17–Related-Party Transactions.

The Company operates SeaWorld theme parks in Orlando, Florida; San Antonio, Texas; 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); San Antonio, Texas (Aquatica); Chula Vista, California, (Aquatica); 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.  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.

Impact of Global COVID-19 Pandemic

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; (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; (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. Some of its

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.  

v3.20.4
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries, including SEA.  All intercompany accounts have been eliminated in consolidation.

Use of Estimates

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. Estimates are based on various factors including current and historical trends, as well as other pertinent company and industry data.  The Company regularly evaluates this information to determine if it is necessary to update the basis for its estimates and to adjust for known changes.  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.

Cash and Cash Equivalents

Cash and cash equivalents include cash held at financial institutions as well as operating cash onsite at each theme park to fund daily operations and amounts due from third-party credit card companies with settlement terms of less than four days. The amounts due from third-party credit card companies totaled $4.9 million and $9.7 million at December 31, 2020 and 2019, respectively. The cash balances in all accounts held at financial institutions are insured up to $250,000 by the Federal Deposit Insurance Corporation (“FDIC”) through December 31, 2020. At times, cash balances may exceed federally insured amounts and potentially subject the Company to a concentration of credit risk. Management believes that no significant concentration of credit risk exists with respect to these cash balances because of its assessment of the creditworthiness and financial viability of the respective financial institutions.

From time to time, the Company may invest in certain highly liquid instruments with original maturities of three months or less.  These instruments may include money market mutual funds, certificates of deposit or time deposits, among others, which may or may not qualify for FDIC insurance. The Company classifies any such instruments as cash and cash equivalents based on their short-term maturities.

Restricted Cash

Restricted cash is recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets. Restricted cash consists primarily of funds received from strategic partners for use in approved marketing and promotional activities.

 

 

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

433,909

 

 

$

39,946

 

Restricted cash, included in prepaid expenses and other current assets

 

 

1,316

 

 

 

979

 

Total cash, cash equivalents and restricted cash

 

$

435,225

 

 

$

40,925

 

Accounts Receivable—Net

Accounts receivable are reported at net realizable value and consist primarily of amounts due from customers for the sale of admission products, including amounts due for admissions products purchased on monthly installment arrangements. The Company is not exposed to a significant concentration of credit risk. 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 default rates.  As of December 31, 2020 and 2019, the Company recorded $6.7 million and $12.1 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

Inventories are accounted for using the weighted average cost method and are stated at the lower of cost or net realizable value. Inventories consist primarily of products for resale, including merchandise, culinary items and miscellaneous supplies. Obsolete or excess inventories are recorded at their estimated realizable value.

Property and Equipment—Net

Property and equipment are recorded at cost.  The cost of ordinary or routine maintenance, repairs, spare parts and minor renewals is expensed as incurred. Development costs associated with new attractions and products are generally capitalized after necessary feasibility studies have been completed and final concept or contracts have been approved. The cost of assets is depreciated using the straight-line method based on the following estimated useful lives:

 

Land improvements

 

10-40 years

 

Buildings

 

5-40 years

 

Rides, attractions and equipment

 

3-20 years

 

Animals

 

1-50 years

 

 

Certain costs related to animals exhibited in the theme parks are capitalized and amortized over their estimated lives (1-50 years).  All costs to care for animals are expensed as incurred. Construction in progress assets consist primarily of new rides, attractions and infrastructure improvements that have not yet been placed in service. These assets are stated at cost and are not depreciated. Once construction of the assets is completed and placed into service, assets are reclassified to the appropriate asset class based on their nature and depreciated in accordance with the useful lives above. Debt interest is capitalized on all active construction projects. Total interest capitalized for the years ended December 31, 2020, 2019 and 2018 was $6.3 million, $4.6 million and $4.2 million, respectively.

Computer System Development Costs

The Company capitalizes computer system development costs that meet established criteria and, once placed in service, amortizes those costs to expense on a straight-line basis over five years.  Total capitalized costs related to computer system development costs, net of accumulated amortization, were $2.4 million and $4.2 million as of December 31, 2020 and 2019, respectively, and are recorded in other assets in the accompanying consolidated balance sheets.  Accumulated amortization was $11.2 million and $9.5 million as of December 31, 2020 and 2019, 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.  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.  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.

In assessing goodwill for impairment, the Company may choose to initially evaluate qualitative factors to determine if it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. The Company considers several factors, including macroeconomic conditions, industry and market conditions, overall financial performance of the reporting unit, changes in management, strategy or customers, and relevant reporting unit specific events such as a change in the carrying amount of net assets, a more likely than not expectation of selling or disposing all, or a portion, of a reporting unit, and the testing of recoverability of a significant asset group within a reporting unit. If the qualitative assessment is not conclusive, then a quantitative impairment analysis for goodwill is performed at the reporting unit level. The Company may also choose to perform this quantitative impairment analysis instead of the qualitative analysis.  The quantitative impairment analysis compares the estimated fair value of the reporting unit, determined using the income and/or market approach, to its recorded amount. If the recorded amount exceeds the fair value, then a goodwill impairment charge is recorded for the difference up to the recorded amount of goodwill.

The determination of fair value in the Company’s goodwill impairment analysis is based on an estimate of fair value for the relevant reporting unit utilizing known and estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates and cost of invested capital.

The Company’s other indefinite-lived intangible assets consist of certain trade names/trademarks and other intangible assets which, after considering legal, regulatory, contractual, and other competitive and economic factors, are determined to have indefinite lives and are valued using the relief from royalty method. 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. 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 not 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.

Impairment of Long-Lived Assets

All long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. An impairment loss may be recognized when estimated undiscounted future cash flows expected to result from the use of the asset, including disposition, are less than the carrying value of the asset. 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. In order to determine if an asset has been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (generally a theme park).  See further discussion in Note 8–Property and Equipment, Net.

Self-Insurance Reserves

Reserves are recorded for the estimated amounts of guest and employee claims and expenses incurred each period that are not covered by insurance. Reserves are established for both identified claims and incurred but not reported (“IBNR”) claims. Such amounts are accrued for when claim amounts become probable and estimable. Reserves for identified claims are based upon the Company’s historical claims experience and third-party estimates of settlement costs. Reserves for IBNR claims are based upon the Company’s claims data history, actuarially determined loss development factors and qualitative considerations such as claims management activities.  The Company maintains self-insurance reserves for healthcare, auto, general liability and workers’ compensation claims.  Total claims reserves were $31.1 million at December 31, 2020, of which $1.8 million is recorded in accrued salaries, wages and benefits, $7.5 million is recorded in other accrued liabilities and the remaining long-term portion is recorded in other liabilities in the accompanying consolidated balance sheets.  Total claims reserves were $31.7 million at December 31, 2019, of which $2.8 million is recorded in accrued salaries, wages and benefits, $7.5 million is recorded in other accrued liabilities and the remaining long-term portion is recorded in other liabilities in the accompanying consolidated balance sheets.  All reserves are periodically reviewed for changes in facts and circumstances and adjustments are made as necessary.

Debt Issuance Costs

Debt issuance costs are amortized to interest expense using the effective interest method over the term of the related debt and are included in long-term debt, net, in the accompanying consolidated balance sheets. See further discussion in Note 11–Long-Term Debt.

Share Repurchase Program and Treasury Stock

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

Revenue Recognition

The Company records revenue in accordance with Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers, which is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identify the contracts with customers; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies the performance obligations. ASC 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. Revenue is recorded net of sales-related taxes collected from guests and remitted or payable to government taxing authorities. 

Admissions Revenue

Admissions revenue primarily consists of single-day tickets, annual or season passes or other multi-day or multi-park admission products.  Admission products with similar characteristics are analyzed using a portfolio approach for each separate park as the Company expects that the effects on the consolidated financial statements of applying ASC 606 to the portfolio does not differ materially from applying the guidance to individual contracts within the portfolio. For single-day tickets, the Company recognizes revenue at a point in time, upon admission to the park.  Annual passes, season passes or other multi-day or multi-park passes allow guests access to specific parks over a specified time period. 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. 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 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.

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. These joint products allow admission to both a Company park(s) and an external park, zoo or other attraction. The agreements with the external partners specify the allocation of revenue to Company parks from any jointly sold products. Whether the Company or the external partner sells the product, the Company’s portion of revenue is deferred until the first time the product is redeemed at one of the Company’s parks and recognized over its related use in a manner consistent with the Company’s other admission products.

Additionally, the Company barters theme park admission products and sponsorship opportunities for advertising, employee recognition awards, and various other services. 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.

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.  The Company conducts an analysis of bundled products to identify separate distinct performance obligations that are material in the context of the contract. For those products that are determined to be distinct performance obligations and material in the context of the contract, the Company allocates a portion of the transaction price to each distinct performance obligation using each performance obligation’s standalone price.  If the bundled product is related to a pass product and offered over time, revenue will be recognized over time accordingly.  

See further discussion in Note 4–Revenues.

Advertising and Promotional Costs

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.

Equity-Based Compensation

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services rendered in exchange for equity-based compensation based upon the grant date fair market value.  The cost is recognized over the requisite service period, which is generally the vesting period unless service or performance conditions require otherwise. The Company recognizes equity compensation expense for its performance-vesting restricted awards ratably over the related performance period if the performance condition is probable of being achieved.  If the probability of vesting related to these 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 awards been considered probable at the new percentage from inception, is recorded as a cumulative catch-up at such subsequent date.  The Company recognizes the impact of forfeitures as they occur.  The Company grants time-vesting restricted shares and units, time-vesting deferred stock units, performance-vesting restricted shares and units, and stock options. The Company uses the closing stock price on the date of grant to value its time-vesting and performance-vesting restricted share awards.  The Company uses the Black-Scholes Option Pricing Model to value stock options at the date of grant.  

On occasion, the Company may modify the terms or conditions of an equity award for its employees.  If an award is modified, the Company evaluates the type of modification in accordance with ASC 718 to determine the appropriate accounting.  See further discussion in Note 19–Equity-Based Compensation.

Restructuring Costs

The Company accounts for exit or disposal of activities in accordance with ASC 420, Exit or Disposal Cost Obligations if the one-time benefit arrangements are not part of an ongoing benefit arrangement or an individual deferred compensation contract.  Nonretirement post-employment benefits that are part of an ongoing benefit arrangement or an individual deferred compensation contract are accounted for in accordance with ASC 712, Compensation-Nonretirement Postemployment Benefits.  The Company defines a business restructuring as an exit or disposal activity that includes but is not limited to a program which is planned and controlled by management and materially changes either the scope of a business or the manner in which that business is conducted.  Business restructuring charges may include (i) one-time termination benefits related to employee separations, (ii) contract termination costs and (iii) other related costs associated with exit or disposal activities.

If the one-time benefit arrangements are not 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 once the plan of termination is communicated to affected employees and it meets all of the following criteria: (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; (ii) rights to those benefits accumulate; (iii) payment of the benefits is probable; and (iv) amount can be reasonably estimated.  If these four conditions are not met, a liability is recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated in accordance with ASC 450, Contingencies.

Contract termination costs include costs to terminate a contract or costs that will continue to be incurred under the contract without benefit to the Company. A liability is recognized and measured at its fair value when the Company either terminates the contract or ceases using the rights conveyed by the contract.

See further discussion in Note 21–Severance and Other Separation Costs.

Leases

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.  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.

The present value of future lease payments is calculated using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate, which reflects the rate of interest it would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. As most of the Company’s leases do not provide an implicit rate, the Company uses incremental borrowing rates based on the information available at the lease commencement date, liability remeasurement date, or lease modification date in determining the present value of the lease payments. In calculating the incremental borrowing rates, the Company considered recent ratings from credit agencies, recent trading prices on the Company’s debt, and current lease demographic information. 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.

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. The exercise of lease renewal options is at the Company’s sole discretion and the inclusion of the renewal options in the lease term would only occur when the Company concludes it is reasonably certain of exercising the option(s). Certain leases also include options to purchase the leased property.

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. 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.

All long-lived assets, including right of use assets associated with leases, are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. The measurement of an impairment loss to be recognized is based upon the difference between the estimated fair value and the carrying amounts of the assets. Fair value is generally determined based upon a discounted cash flow analysis.

See further discussion in Note 14–Leases.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is established for deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. 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. 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. The benefit is measured as the largest dollar amount of the position that is more likely than not to be sustained upon settlement. 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.

Contingencies

The Company accounts for contingencies in accordance with ASC 450, Contingencies. For loss contingencies, such as potential legal settlements, the Company records an estimated loss when payment is considered probable and the amount of loss is reasonably estimable. In assessing loss contingencies related to legal proceedings that are pending against the Company, the Company evaluates the perceived merits of the legal proceedings as well as the perceived merits of the amount of relief sought or expected to be sought therein.  If a loss is considered probable but the best estimate of the loss can only be identified within a range and no specific amount within that range is more likely, then the minimum of the range is accrued. Legal and related professional services costs to defend litigation are expensed as incurred. Insurance recoveries related to potential claims are recognized up to the amount of the recorded liability when coverage is confirmed and the estimated recoveries are probable of payment. These recoveries are not netted against the related liabilities for financial statement presentation. Additionally, for any potential gain contingencies, the Company does not recognize the gain until the period that all contingencies have been resolved and the amounts are realizable. See further discussion in Note 15–Commitments and Contingencies.

Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement and is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. An entity is permitted to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period. The Company has not elected to use the fair value option for any of its financial assets and financial liabilities that are not already recorded at fair value. Carrying values of financial instruments classified as current assets and current liabilities approximate fair value, due to their short-term nature.

Fair Value Hierarchy—As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity.  Fair value is determined for assets and liabilities, based upon significant levels of observable or unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable and include situations where there is little, if any, market activity for the asset or liability.

Determination of Fair Value—If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest and currency rates. Assets or liabilities valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.  See further discussion in Note 16–Fair Value Measurements.

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. Each theme park has been identified as an operating segment and meets the criteria for aggregation due to similar economic characteristics. In addition, all of the theme parks provide similar products and services and share similar processes for delivering services. The theme parks have a high degree of similarity in the workforces and target similar consumer groups. Accordingly, based on these economic and operational similarities and the way the CODM monitors and makes decisions affecting the operations, the Company has concluded that its operating segments may be aggregated and that it has one reportable segment.

Derivative Instruments and Hedging Activities

ASC 815, Derivatives and Hedging, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (i) how and why an entity uses derivative instruments, (ii) how the entity accounts for derivative instruments and related hedged items, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows. 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. 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. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the changes in fair value of the derivative contract are recorded in accumulated other comprehensive income (loss), net of taxes, and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. See further discussion in Note 12–Derivative Instruments and Hedging Activities.

v3.20.4
Recent Accounting Pronouncements
12 Months Ended
Dec. 31, 2020
Accounting Changes And Error Corrections [Abstract]  
Recent Accounting Pronouncements

3. RECENT ACCOUNTING PRONOUNCEMENTS

The Company reviews new accounting pronouncements as they are issued or proposed by the Financial Accounting Standards Board (“FASB”).

Recently Implemented Accounting Standards

During the year ended December 31, 2020, 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.

 

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. 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.

v3.20.4
Revenues
12 Months Ended
Dec. 31, 2020
Revenue From Contract With Customer [Abstract]  
Revenues

4. REVENUES

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, 2020 and 2019, $13.4 million and $10.0 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, 2020 and 2019:   

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Deferred revenue, including long-term portion

 

$

144,187

 

 

$

114,416

 

Less: Deferred revenue, long-term portion, included in other liabilities

 

 

13,428

 

 

 

10,000

 

Deferred revenue, short-term portion

 

$

130,759

 

 

$

104,416

 

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.

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 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. (“ZHG Group”), to provide design, support and advisory services for various potential projects and grant exclusive rights in China, Taiwan, Hong Kong and Macau. 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.

v3.20.4
(Loss) Earnings per Share
12 Months Ended
Dec. 31, 2020
Earnings Per Share [Abstract]  
(Loss) Earnings per Share

5. (LOSS) EARNINGS PER SHARE

(Loss) earnings per share is computed as follows:

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

Net

Loss

 

 

Shares

 

 

Per

Share

Amount

 

 

Net

Income

 

 

Shares

 

 

Per

Share

Amount

 

 

Net

Income

 

 

Shares

 

 

Per

Share

Amount

 

 

 

(In thousands, except per share amounts)

 

Basic (loss) earnings per share

 

$

(312,321

)

 

 

78,194

 

 

$

(3.99

)

 

$

89,476

 

 

 

80,309

 

 

$

1.11

 

 

$

44,788

 

 

 

86,170

 

 

$

0.52

 

Effect of dilutive

   incentive-based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

735

 

 

 

 

 

 

 

 

 

 

 

740

 

 

 

 

 

Diluted (loss) earnings per share

 

$

(312,321

)

 

 

78,194

 

 

$

(3.99

)

 

$

89,476

 

 

 

81,044

 

 

$

1.10

 

 

$

44,788

 

 

 

86,910

 

 

$

0.52

 

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). 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. 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. During the years ended December 31, 2019 and 2018, there were approximately 305,000 and 1,299,000 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.  For the years ended December 31, 2019 and 2018, approximately 247,000 and 364,000 performance-vesting restricted stock awards had met their performance criteria for their respective performance years as of the end of the reporting periods, respectively, and are therefore included in the calculation of diluted earnings per share. See further discussion in Note 19–Equity-Based Compensation.

v3.20.4
Inventories
12 Months Ended
Dec. 31, 2020
Inventory Disclosure [Abstract]  
INVENTORIES

6. INVENTORIES

Inventories as of December 31, 2020 and 2019 consisted of the following:

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Merchandise

 

$

26,044

 

 

$

28,515

 

Food and beverage

 

 

4,027

 

 

 

4,430

 

Other supplies

 

 

629

 

 

 

218

 

Total inventories

 

$

30,700

 

 

$

33,163

 

 

v3.20.4
Prepaid Expenses and Other Current Assets
12 Months Ended
Dec. 31, 2020
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]  
Prepaid Expenses and Other Current Assets

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of December 31, 2020 and 2019 consisted of the following:

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Prepaid insurance

 

$

2,757

 

 

$

2,397

 

Prepaid marketing and advertising costs

 

 

1,175

 

 

 

2,264

 

Insurance recoveries

 

 

 

 

 

32,911

 

Other

 

 

8,486

 

 

 

8,740

 

Total prepaid expenses and other current assets

 

$

12,418

 

 

$

46,312

 

 

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.

v3.20.4
Property and Equipment, Net
12 Months Ended
Dec. 31, 2020
Property Plant And Equipment [Abstract]  
Property and Equipment, Net

8. PROPERTY AND EQUIPMENT, NET

The components of property and equipment, net as of December 31, 2020 and 2019, consisted of the following:

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Land

 

$

286,200

 

 

$

286,200

 

Land improvements

 

 

405,652

 

 

 

403,409

 

Buildings

 

 

737,231

 

 

 

733,258

 

Rides, attractions and equipment

 

 

1,547,786

 

 

 

1,527,301

 

Animals

 

 

142,307

 

 

 

142,232

 

Construction in progress

 

 

153,529

 

 

 

117,121

 

Less accumulated depreciation

 

 

(1,611,745

)

 

 

(1,476,059

)

Total property and equipment, net

 

$

1,660,960

 

 

$

1,733,462

 

Depreciation expense was approximately $148.0 million, $156.2 million, and $155.0 million for the years ended December 31, 2020, 2019 and 2018, 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.   

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.

v3.20.4
Goodwill, Trade Names/Trademarks and Other Intangible Assets, Net
12 Months Ended
Dec. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill, Trade Names/Trademarks and Other Intangible Assets, Net

9. GOODWILL AND TRADE NAMES/TRADEMARKS, NET

Goodwill, Net

Goodwill, net, at December 31, 2020 and 2019 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.

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. 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.

Trade names/trademarks, net, at December 31, 2020 and 2019, consisted of the following:

 

  

 

Weighted

Average

Amortization

Period

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

 

 

(In thousands)

 

Trade names/trademarks - indefinite lives

 

 

 

$

157,000

 

 

$

 

 

$

157,000

 

Trade names/trademarks - finite lives

 

9.3 years

 

 

12,900

 

 

 

12,900

 

 

 

 

Total trade names/trademarks, net

 

 

 

$

169,900

 

 

$

12,900

 

 

$

157,000

 

 

v3.20.4
Other Accrued Liabilities
12 Months Ended
Dec. 31, 2020
Payables And Accruals [Abstract]  
Other Accrued Liabilities

 

10. OTHER ACCRUED LIABILITIES

Other accrued liabilities as of December 31, 2020 and 2019, consisted of the following:

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Accrued interest

 

$

23,422

 

 

$

573

 

Accrued taxes

 

 

10,518

 

 

 

2,718

 

Self-insurance reserve

 

 

7,540

 

 

 

7,488

 

Accrued legal settlements

 

 

 

 

 

65,000

 

Other

 

 

9,470

 

 

 

6,062

 

Total other accrued liabilities

 

$

50,950

 

 

$

81,841

 

 

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. 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.

v3.20.4
Long-Term Debt
12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Long-Term Debt

11. LONG-TERM DEBT

Long-term debt, net, as of December 31, 2020 and 2019 consisted of the following:

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

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

   at December 31, 2020 and 2019, respectively)

 

$

1,492,378

 

 

$

1,507,883

 

Revolving credit facility (effective interest rate of 4.35%

   at December 31, 2019)

 

 

 

 

 

50,000

 

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

 

 

500,000

 

 

 

 

Senior Notes (interest rate of 8.75%)

 

 

227,500

 

 

 

 

Total long-term debt

 

 

2,219,878

 

 

 

1,557,883

 

Less: discounts and debt issuance costs

 

 

(27,236

)

 

 

(9,759

)

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

 

 

(15,505

)

 

 

(65,505

)

Total long-term debt, net

 

$

2,177,137

 

 

$

1,482,619

 

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 SEAs 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 SEAs 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: (i) in 2022 at 104.375%; (ii) in 2023 at 102.188%; and (iii) in 2024 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: (i) in 2022 at 104.75%; (ii) in 2023 at 102.375%; and (iii) in 2024 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 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.  

 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; sell assets; 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 6.25x 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.

Long-term debt at December 31, 2020, is repayable as follows and does not include the impact of any future voluntary prepayments:

 

Years Ending December 31,

 

(In thousands)

 

2021

 

$

15,505

 

2022

 

 

15,505

 

2023

 

 

15,505

 

2024

 

 

1,445,863

 

2025

 

 

727,500

 

Total

 

$

2,219,878

 

 

Interest Rate Swap Agreements

The Company previously had five interest rate swap agreements (the “Interest Rate Swap Agreements”) which effectively fixed the interest rate on the LIBOR-indexed interest payments associated with $1.0 billion of SEA’s outstanding long-term debt. The Interest Rate Swap Agreements expired on May 14, 2020.

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.  See Note 10–Other Accrued Liabilities for accrued interest included in the accompanying consolidated balance sheets as of December 31, 2020 and 2019.

v3.20.4
Derivative Instruments and Hedging Activities
12 Months Ended
Dec. 31, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities

12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and at times through the use of derivative financial instruments. 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 does not speculate using derivative instruments.

In May 2020, the Company’s Interest Rate Swap Agreements expired, as such, the Company did not have any derivative instruments outstanding as of December 31, 2020. As of December 31, 2019, the Company did not have any derivatives outstanding that were not designated in hedge accounting relationships.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives were to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily used interest rate swaps at times as part of its interest rate risk management strategy. During the years ended December 31, 2020, 2019 and 2018, such derivatives were used to hedge a portion of the variable cash flows associated with existing variable-rate debt.   

The Interest Rate Swap Agreements were designated as cash flow hedges of interest rate risk. The changes in the fair value of derivatives designated and that qualify as cash flow hedges were recorded in accumulated other comprehensive income (loss) and were subsequently reclassified into earnings in the period that the hedged forecasted transaction affected earnings. 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

Location

 

Fair Value

 

Derivatives designated as hedging instruments:

 

(In thousands)

 

Interest rate swap agreements

 

Other liabilities

 

 

2,156

 

Total derivatives designated as hedging instruments

 

 

 

$

2,156

 

 

 

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:

 

 

 

 

 

2020

 

 

2019

 

 

 

 

 

(In thousands)

 

Derivatives in Cash Flow Hedging Relationships:

 

 

 

 

 

 

 

 

 

 

(Loss) gain recognized in accumulated other comprehensive loss

 

 

 

$

(370

)

 

$

(5,247

)

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

 

 

 

$

2,501

 

 

$

(17

)

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:

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

 

 

 

 

 

(Losses) Gains on

Cash Flow Hedges

 

Accumulated other comprehensive income at December 31, 2018

 

 

 

 

 

 

2,284

 

Other comprehensive loss before reclassifications

 

 

(3,831

)

 

 

 

 

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

 

 

(12

)

 

 

 

 

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

 

 

 

 

 

 

(3,843

)

Accumulated other comprehensive loss at December 31, 2019

 

 

 

 

 

 

(1,559

)

Other comprehensive loss before reclassifications

 

 

(271

)

 

 

 

 

Amounts reclassified from accumulated other comprehensive loss to interest expense

 

 

1,830

 

 

 

 

 

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

 

 

 

 

 

 

1,559

 

Accumulated other comprehensive income (loss) at December 31, 2020

 

 

 

 

 

$

 

 

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

13. INCOME TAXES

For the years ended December 31, 2020, 2019 and 2018, the (benefit from) provision for income taxes is comprised of the following:

 

 

2020

 

 

2019

 

 

2018

 

Current income tax provision

 

(In thousands)

 

Federal

 

$

(136

)

 

$

(77

)

 

$

(99

)

State

 

 

1,020

 

 

 

1,580

 

 

 

1,113

 

Foreign

 

 

5

 

 

 

27

 

 

 

7

 

Total current income tax provision

 

 

889

 

 

 

1,530

 

 

 

1,021

 

Deferred income tax (benefit) provision:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(19,718

)

 

 

21,825

 

 

 

13,019

 

State

 

 

(11,696

)

 

 

16,173

 

 

 

3,875

 

Total deferred income tax (benefit) provision

 

 

(31,414

)

 

 

37,998

 

 

 

16,894

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