SEAWORLD ENTERTAINMENT, INC., 10-Q filed on 8/6/2021
Quarterly Report
v3.21.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2021
Aug. 02, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2021  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
Trading Symbol SEAS  
Entity Registrant Name SeaWorld Entertainment, Inc.  
Entity Central Index Key 0001564902  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   79,178,901
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Security Exchange Name NYSE  
Entity File Number 001-35883  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 27-1220297  
Entity Address, Address Line One 6240 Sea Harbor Drive  
Entity Address, City or Town Orlando  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 32821  
City Area Code 407  
Local Phone Number 226-5011  
Document Quarterly Report true  
Document Transition Report false  
v3.21.2
Unaudited Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 615,791 $ 433,909
Accounts receivable, net 90,419 30,410
Inventories 25,111 30,700
Prepaid expenses and other current assets 20,241 12,418
Total current assets 751,562 507,437
Property and equipment, at cost 3,314,860 3,272,705
Accumulated depreciation (1,676,366) (1,611,745)
Property and equipment, net 1,638,494 1,660,960
Goodwill 66,278 66,278
Trade names/trademarks, net 157,000 157,000
Right of use assets-operating leases 133,909 136,572
Deferred tax assets, net 24,179 22,847
Other assets, net 15,298 15,264
Total assets 2,786,720 2,566,358
Current liabilities:    
Accounts payable and accrued expenses 129,983 105,369
Current maturities of long-term debt 65,505 15,505
Operating lease liabilities 3,210 3,757
Accrued salaries, wages and benefits 19,245 10,781
Deferred revenue 238,694 130,759
Other accrued liabilities 51,243 50,950
Total current liabilities 507,880 317,121
Long-term debt, net 2,122,708 2,177,137
Long-term operating lease liabilities 118,251 120,144
Deferred tax liabilities, net 17,786 15,772
Other liabilities 41,409 41,987
Total liabilities 2,808,034 2,672,161
Commitments and contingencies (Note 9)
Stockholders’ Deficit:    
Preferred stock, $0.01 par value—authorized, 100,000,000 shares, no shares issued or outstanding at June 30, 2021 and December 31, 2020
Common stock, $0.01 par value—authorized, 1,000,000,000 shares; 95,380,481 and 94,652,248 shares issued at June 30, 2021 and December 31, 2020, respectively 953 946
Additional paid-in capital 681,964 680,360
Accumulated deficit (288,922) (371,800)
Treasury stock, at cost (16,260,248 shares at June 30, 2021 and December 31, 2020) (415,309) (415,309)
Total stockholders’ deficit (21,314) (105,803)
Total liabilities and stockholders’ deficit $ 2,786,720 $ 2,566,358
v3.21.2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2021
Dec. 31, 2020
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 95,380,481 94,652,248
Treasury stock, shares 16,260,248 16,260,248
v3.21.2
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Net revenues:        
Total revenues $ 439,784 $ 18,026 $ 611,704 $ 171,587
Costs and expenses:        
Cost of food, merchandise and other revenues 34,173 1,153 49,115 14,257
Operating expenses (exclusive of depreciation and amortization shown separately below) 157,307 59,049 265,079 192,048
Selling, general and administrative expenses 43,190 21,104 74,654 48,058
Severance and other separation costs 1,496 9 1,582 74
Depreciation and amortization 36,247 37,941 72,805 75,954
Total costs and expenses 272,413 119,256 463,235 330,391
Operating income (loss) 167,371 (101,230) 148,469 (158,804)
Other expense (income), net 21 (1) 195 (13)
Interest expense 31,127 21,908 62,083 41,061
Income (loss) before income taxes 136,223 (123,137) 86,191 (199,852)
Provision for (benefit from) income taxes 8,461 7,892 3,313 (12,304)
Net income (loss) 127,762 (131,029) 82,878 (187,548)
Other comprehensive income:        
Unrealized gain on derivatives, net of tax   855   1,559
Comprehensive income (loss) $ 127,762 $ (130,174) $ 82,878 $ (185,989)
Earnings (loss) per share:        
Earnings (loss) per share, basic $ 1.62 $ (1.68) $ 1.05 $ (2.40)
Earnings (loss) per share, diluted $ 1.59 $ (1.68) $ 1.03 $ (2.40)
Weighted average common shares outstanding:        
Basic 78,986 78,093 78,724 78,153
Diluted 80,177 78,093 80,123 78,153
Admissions [Member]        
Net revenues:        
Total revenues $ 243,225 $ 9,775 $ 339,005 $ 100,281
Food, Merchandise and Other [Member]        
Net revenues:        
Total revenues $ 196,559 $ 8,251 $ 272,699 $ 71,306
v3.21.2
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) - 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, 2019 $ 210,892 $ 940 $ 673,893 $ (59,479) $ (1,559) $ (402,903)
Beginning Balance, shares at Dec. 31, 2019   94,044,203        
Equity-based compensation (3,601)   (3,601)      
Unrealized gain on derivatives, net of tax 704       704  
Vesting of restricted shares   $ 4 (4)      
Vesting of restricted shares, shares   410,807        
Shares withheld for tax withholdings (3,160) $ (1) (3,159)      
Shares withheld for tax withholdings, shares   (121,089)        
Exercise of stock options 203   203      
Exercise of stock options, shares   11,096        
Adjustments to previous dividend declarations 1   1      
Repurchase of treasury shares (12,406)         (12,406)
Net income (Loss) (56,519)     (56,519)    
Ending Balance at Mar. 31, 2020 136,114 $ 943 667,333 (115,998) (855) (415,309)
Ending Balance, shares at Mar. 31, 2020   94,345,017        
Beginning Balance at Dec. 31, 2019 210,892 $ 940 673,893 (59,479) (1,559) (402,903)
Beginning Balance, shares at Dec. 31, 2019   94,044,203        
Unrealized gain on derivatives, net of tax 1,559          
Net income (Loss) (187,548)          
Ending Balance at Jun. 30, 2020 9,121 $ 944 670,513 (247,027)   (415,309)
Ending Balance, shares at Jun. 30, 2020   94,408,378        
Beginning Balance at Mar. 31, 2020 136,114 $ 943 667,333 (115,998) (855) (415,309)
Beginning Balance, shares at Mar. 31, 2020   94,345,017        
Equity-based compensation 3,320   3,320      
Unrealized gain on derivatives, net of tax 855       $ 855  
Vesting of restricted shares   $ 1 (1)      
Vesting of restricted shares, shares   71,530        
Shares withheld for tax withholdings (154)   (154)      
Shares withheld for tax withholdings, shares   (8,987)        
Exercise of stock options 15   15      
Exercise of stock options, shares   818        
Net income (Loss) (131,029)     (131,029)    
Ending Balance at Jun. 30, 2020 9,121 $ 944 670,513 (247,027)   (415,309)
Ending Balance, shares at Jun. 30, 2020   94,408,378        
Beginning Balance at Dec. 31, 2020 $ (105,803) $ 946 680,360 (371,800)   (415,309)
Beginning Balance, shares at Dec. 31, 2020 94,652,248 94,652,248        
Equity-based compensation $ 4,473   4,473      
Vesting of restricted shares   $ 1 (1)      
Vesting of restricted shares, shares   130,834        
Shares withheld for tax withholdings (1,971)   (1,971)      
Shares withheld for tax withholdings, shares   (41,271)        
Exercise of stock options 2,393 $ 1 2,392      
Exercise of stock options, shares   116,634        
Net income (Loss) (44,884)     (44,884)    
Ending Balance at Mar. 31, 2021 (145,792) $ 948 685,253 (416,684)   (415,309)
Ending Balance, shares at Mar. 31, 2021   94,858,445        
Beginning Balance at Dec. 31, 2020 $ (105,803) $ 946 680,360 (371,800)   (415,309)
Beginning Balance, shares at Dec. 31, 2020 94,652,248 94,652,248        
Net income (Loss) $ 82,878          
Ending Balance at Jun. 30, 2021 $ (21,314) $ 953 681,964 (288,922)   (415,309)
Ending Balance, shares at Jun. 30, 2021 95,380,481 95,380,481        
Beginning Balance at Mar. 31, 2021 $ (145,792) $ 948 685,253 (416,684)   (415,309)
Beginning Balance, shares at Mar. 31, 2021   94,858,445        
Equity-based compensation 5,634   5,634      
Vesting of restricted shares   $ 7 (7)      
Vesting of restricted shares, shares   653,146        
Shares withheld for tax withholdings (10,557) $ (3) (10,554)      
Shares withheld for tax withholdings, shares   (213,601)        
Exercise of stock options 1,639 $ 1 1,638      
Exercise of stock options, shares   82,491        
Net income (Loss) 127,762     127,762    
Ending Balance at Jun. 30, 2021 $ (21,314) $ 953 $ 681,964 $ (288,922)   $ (415,309)
Ending Balance, shares at Jun. 30, 2021 95,380,481 95,380,481        
v3.21.2
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Repurchase of treasury shares, shares   469,785
Accumulated Other Comprehensive (Loss) Income [Member]    
Unrealized gain on derivatives, net of tax expense $ 318 $ 254
v3.21.2
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Cash Flows From Operating Activities:    
Net income (loss) $ 82,878 $ (187,548)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization 72,805 75,954
Amortization of debt issuance costs and discounts 3,323 1,876
Deferred income tax provision (benefit) 682 (12,913)
Equity-based compensation 10,107 (281)
Other, including loss on sale or disposal of assets, net 2,112 322
Changes in assets and liabilities:    
Accounts receivable (75,345) 26,349
Inventories 5,647 (2,655)
Prepaid expenses and other current assets (3,896) (5,294)
Accounts payable and accrued expenses 20,361 24,624
Accrued salaries, wages and benefits 8,464 (7,929)
Deferred revenue 121,815 36,234
Other accrued liabilities 845 (17,616)
Right-of-use assets and operating lease liabilities 224 253
Other assets and liabilities (1,944) 298
Net cash provided by (used in) operating activities 248,078 (68,326)
Cash Flows From Investing Activities:    
Capital expenditures (44,981) (53,699)
Net cash used in investing activities (44,981) (53,699)
Cash Flows From Financing Activities:    
Proceeds from issuance of senior secured notes, net   222,335
Repayments of long-term debt (7,752) (7,752)
Proceeds from draws on revolving credit facility   272,500
Repayments of revolving credit facility   (11,500)
Purchase of treasury stock   (12,406)
Payment of tax withholdings on equity-based compensation through shares withheld (12,528) (3,314)
Exercise of stock options 4,032 218
Debt issuance costs   (1,089)
Other financing activities (4,357) (719)
Net cash (used in) provided by financing activities (20,605) 458,273
Change in Cash and Cash Equivalents, including Restricted Cash 182,492 336,248
Cash and Cash Equivalents, including Restricted Cash—Beginning of period 435,225 40,925
Cash and Cash Equivalents, including Restricted Cash—End of period 617,717 377,173
Supplemental Disclosure of Noncash Investing and Financing Activities:    
Capital expenditures in accounts payable 18,737 48,550
Other financing arrangements $ 4,239 $ 2,837
v3.21.2
Description of the Business and Basis of Presentation
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Description of the Business and Basis of Presentation

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

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. 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 park attractions in Orlando, Florida (Aquatica); San Antonio, Texas (Aquatica); San Diego, 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 park in Langhorne, Pennsylvania (Sesame Place).  

Impact of Global COVID-19 Pandemic

In response to the global 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 cleaning measures, capacity limitations and/or modified/limited operations, which at times included reduced hours and/or reduced operating days.  By the end of June 2020, the Company had reopened seven of its 12 parks on a limited basis and by August 2020, the Company had reopened 10 of its 12 parks on a limited basis. The Company was unable to reopen its Aquatica water park in California and its Water Country USA water park in Virginia for the 2020 operating season but has opened both parks for their 2021 operating season.  As of June 30, 2021, all of the Company’s theme parks are now open and operating without COVID-19 related capacity limitations.    

 

The Company’s SeaWorld park in California initially reopened in August 2020 on a limited basis, following the State of California’s guidance for reopening zoos.  In compliance with revised guidelines issued in the fourth quarter of 2020, the Company once again had to close this park effective December 7, 2020.  On January 15, 2021, the Company introduced a limited time drive-through only experience for guests at this park. The Company then reopened this park on February 6, 2021 on a limited basis, once again following California guidance for reopening zoos. In accordance with subsequently issued State of California revised guidelines, on April 12, 2021 this park resumed operations as a theme park with restricted capacity and on June 15, 2021, capacity restrictions for this park were removed. 

 

Attendance for the Company’s Busch Gardens park in Virginia was also significantly impacted by state restrictions. Initially the State of Virginia had a state mandated capacity restriction of 1,000 guests at a time. On October 29, 2020, the state revised its theme park guidance and modified the methodology for calculating capacity at theme parks.  As a result, capacity at this park increased to approximately 4,000 guests at a time. On February 1, 2021, in consultation with the State of Virginia, the Company further increased capacity to approximately 6,000 guests at a time and on April 1, 2021 to approximately 13,000 guests.  On May 28, 2021, theme park capacity restrictions in the State of Virginia were removed. 

 

The Company’s 2021 financial results continue to be impacted by the COVID-19 pandemic.  While 10 of the Company’s 12 parks were open at the beginning of the second quarter of 2021, all parks were operating with capacity limitations or modified/limited operations.  As mentioned above, by the end of the second quarter of 2021, all of the Company’s 12 parks were open, and all operating without COVID-19 related capacity limitations.  

 

The Company continuously monitors guidance from federal, state and local authorities and engages with governmental authorities as well as medical/scientific consultants. The Company may adjust its plans accordingly as laws change and new information and guidance becomes available.  The COVID-19 pandemic has had, and may continue to have, a material impact on the Company’s financial results.     

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC.  The unaudited condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2021 or any future period due in part to the seasonal nature of the Company’s operations.  Based upon historical results, the Company typically generates its highest revenues in the second and third quarters of each year and incurs a net loss in the first and fourth quarters, in part because seven of its theme parks were historically only open for a portion of the year.  However, during 2021, the Company added additional operating days for three of these parks.  In particular, the Company began year-round operations at its SeaWorld park in Texas and began to operate on select days at its Busch Gardens park in Virginia and its Sesame Place park in Pennsylvania.   

The Company’s results of operations for the three and six months ended June 30, 2020 were materially impacted by the COVID-19 pandemic which ultimately led to temporary park closures effective on March 16, 2020. The timing of these park closures fell during historically high-volume spring break and summer weeks for most of the Company’s parks. The Company’s results of operations for the three and six months ended June 30, 2021 continue to be impacted by the COVID-19 pandemic due in part to capacity limitations and/or modified/limited operations which were in place for most of the respective periods as well as decreased demand due to public concerns associated with the pandemic.  

The unaudited condensed consolidated financial statements 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 unaudited condensed 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, and the valuation of goodwill and other indefinite-lived intangible assets. Estimates are based on various factors including current and historical trends, as well as other pertinent 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 impact or timing of government restrictions, capacity limitations due to social distancing guidelines, public sentiment on social gatherings, travel and attendance patterns, travel restrictions, effectiveness and adoption of vaccines, 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.

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 Company’s 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.

Restricted Cash

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

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

615,791

 

 

$

433,909

 

Restricted cash, included in prepaid expenses and other current assets

 

 

1,926

 

 

 

1,316

 

Total cash, cash equivalents and restricted cash

 

$

617,717

 

 

$

435,225

 

 

 

Revenue Recognition

Admissions revenue primarily consists of single-day tickets, annual or season passes or other multi-day or multi-park admission products.  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. For pass products purchased on an installment plan that have met their initial commitment period and have transitioned to a month to month basis, monthly charges are recognized as revenue as payments are received each month, with the exception of payments received during the temporary park closures (see further discussion which follows).

The Company estimates 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.  As a result of the temporary park closures due to the global COVID-19 pandemic, in 2020, the Company upgraded some of its pass products and extended pass expiration dates for at least the equivalent period the related parks were closed.  As a result, the Company adjusted its estimated redemption and recognition patterns on these products to reflect the fact that there was no attendance during the park closures and accordingly the Company did not recognize revenue from these admission products while the parks were closed. For passes under installment plans that had transitioned to a month-to-month basis, the Company temporarily paused monthly charges when the related parks reopened for the equivalent period the respective parks were closed.  Accordingly, payments received during the closure period were recorded as deferred revenue and recognized as revenue once the respective parks reopened, which may not necessarily reflect attendance patterns for these guests.  

Food, merchandise and other revenue primarily consists of culinary, merchandise and other in-park products and also includes other miscellaneous revenue which is not significant in the periods presented.  The Company recognizes revenue for food, merchandise and other in-park products when the related products or services are received by guests.     

At June 30, 2021 and December 31, 2020, the long-term portion of deferred revenue included in other liabilities in the accompanying unaudited condensed consolidated balance sheets primarily relates to the Company’s international agreement, as discussed in the following section.

The following table reflects the Company’s deferred revenue balance as of June 30, 2021 and December 31, 2020:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Deferred revenue, including long-term portion

 

$

252,779

 

 

$

144,187

 

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

 

 

14,085

 

 

 

13,428

 

Deferred revenue, short-term portion

 

$

238,694

 

 

$

130,759

 

 

The increase in deferred revenue as of June 30, 2021 compared to December 31, 2020 primarily relates to admission product sales, particularly for the Company’s passes and single-day ticket products which have not been fully redeemed.  

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 to provide certain services pertaining to the planning and design of SeaWorld Abu Dhabi, a marine life theme park on Yas Island (the “Middle East Project”), with funding received expected to offset internal expenses. The Company receives additional funds from its partner related to agreed-upon services and reimbursements of costs incurred by the Company on behalf of the Middle East Project including approximately $2.3 million and $1.9 million of deferred revenue recorded in other liabilities in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively. Approximately $7.3 million and $5.9 million of costs incurred related to the Middle East Project are recorded in other assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, 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. 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.   

v3.21.2
Recent Accounting Pronouncements
6 Months Ended
Jun. 30, 2021
Accounting Changes And Error Corrections [Abstract]  
Recent Accounting Pronouncements

2. 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

On January 1, 2021, the Company adopted the following Accounting Standards Updates (“ASUs”) which had no material impact on its unaudited condensed consolidated financial statements or disclosures:  

 

 

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

 

 

ASU 2019-12, Simplifying the Accounting for Income Taxes, simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 was effective for the Company beginning January 1, 2021. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of this ASU did not have a material impact on the Company’s unaudited condensed consolidated financial statements or disclosures.

v3.21.2
Earnings (Loss) Per Share
6 Months Ended
Jun. 30, 2021
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share

3. EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed as follows:

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

Net

Income

 

 

Shares

 

 

Per

Share

Amount

 

 

Net

Loss

 

 

Shares

 

 

Per

Share

Amount

 

 

 

(In thousands, except per share amounts)

 

Basic earnings (loss) per share

 

$

127,762

 

 

 

78,986

 

 

$

1.62

 

 

$

(131,029

)

 

 

78,093

 

 

$

(1.68

)

Effect of dilutive incentive-based awards

 

 

 

 

 

 

1,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

127,762

 

 

 

80,177

 

 

$

1.59

 

 

$

(131,029

)

 

 

78,093

 

 

$

(1.68

)

 

 

 

For the Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

Net

Income

 

 

Shares

 

 

Per

Share

Amount

 

 

Net

Loss

 

 

Shares

 

 

Per

Share

Amount

 

 

 

(In thousands, except per share amounts)

 

Basic earnings (loss) per share

 

$

82,878

 

 

 

78,724

 

 

$

1.05

 

 

$

(187,548

)

 

 

78,153

 

 

$

(2.40

)

Effect of dilutive incentive-based awards

 

 

 

 

 

 

1,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

82,878

 

 

 

80,123

 

 

$

1.03

 

 

$

(187,548

)

 

 

78,153

 

 

$

(2.40

)

In accordance with the Earnings Per Share Topic of the ASC, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period (excluding treasury stock and unvested restricted stock awards). Unvested restricted stock awards are eligible to receive dividends, if any; however, dividend rights will be forfeited if the award does not vest.  Accordingly, only vested shares of formerly restricted stock are included in the calculation of basic earnings (loss) per share. The weighted average number of repurchased shares during the period, if any, which are held as treasury stock, are excluded from shares of common stock outstanding.

Diluted earnings (loss) per share is determined using the treasury stock method based on the dilutive effect of unvested restricted stock and certain shares of common stock that are issuable upon exercise of stock options. During the three and six months ended June 30, 2021, there were approximately 184,000 and 126,000 anti-dilutive shares excluded from the computation of diluted earnings per share, respectively. During the three and six months ended June 30, 2020, there were approximately 2,345,000 and 2,023,000 potentially dilutive shares excluded from the computation of diluted loss per share, respectively, as their effect would have been anti-dilutive due to the Company’s net loss in those periods. The Company’s outstanding performance-vesting restricted awards of approximately 1,141,000 and 1,487,000 as of June 30, 2021 and 2020, respectively, are considered contingently issuable shares and are excluded from the calculation of diluted earnings (loss) per share until the performance measure criteria is met as of the end of the reporting period.  

v3.21.2
Income Taxes
6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

4. INCOME TAXES

Income tax expense or benefit is recognized based on the Company’s estimated annual effective tax rate which is based upon the tax rate expected for the full calendar year applied to the pretax income or loss of the interim period. The Company’s consolidated effective tax rate for the three and six months ended June 30, 2021 was 6.2% and 3.8%, respectively, and differs from the effective statutory federal income tax rate of 21.0% primarily due to state income taxes, valuation allowance adjustments on federal and state carryforwards as described below, and deductible equity-based compensation.   

Due to the uncertainty of realizing the benefit from deferred tax assets, tax positions are reviewed at least quarterly by assessing future expected taxable income from all sources.  Realization of deferred tax assets, primarily arising from net operating loss carryforwards and charitable contribution carryforwards, is dependent upon generating sufficient taxable income prior to expiration of the carryforwards, which may include the reversal of deferred tax liability components.  Based on its analysis, the Company believes that some of its deferred tax assets may not be realized. Therefore, as of June 30, 2021 and December 31, 2020, respectively, the Company had recorded valuation allowances of approximately $1.2 million and $39.5 million for federal net operating loss carryforwards, approximately $12.8 million and $15.0 million, net of federal tax benefit, for certain state net operating loss carryforwards, approximately $2.9 million and $7.1 million for federal tax credits, and approximately $4.6 million and $4.0 million for charitable contributions.     

The Company has determined that there are no positions currently taken that would rise to a level requiring an amount to be recorded or disclosed as an unrecognized tax benefit. If such positions do arise, it is the Company’s intent that any interest or penalty amount related to such positions will be recorded as a component of the income tax provision (benefit) in the applicable period.

The computation of the estimated annual effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the forecasted pre-tax income or loss for the year, projections of the proportion of income and/or loss earned and taxed in respective jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. The volatile global economic conditions resulting from the COVID-19 pandemic, the impacts of which are difficult to predict, may cause fluctuations in the Company’s forecasted pre-tax income or loss for the year, which could create volatility in its estimated annual effective tax rate. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as the Company’s tax environment changes. To the extent that the estimated annual effective tax rate changes, the effect of the change on prior interim periods is included in the income tax provision in the period in which the change in estimate occurs.

The Company’s valuation allowances, in part, also rely on estimates and assumptions related to future financial performance. Given the macroeconomic environment related to the COVID-19 pandemic and the uncertainties regarding the related impact on financial performance, the Company’s valuation allowances may need to be further adjusted in the future.  Due to recent improvements in operating results management believes it is reasonably possible that a portion or all of the remaining valuation allowances may no longer be needed by year end.  Release of any valuation allowances would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period any release is recorded.  The exact timing and amount of any release is subject to change based on the level of profitability the Company is able to achieve.

v3.21.2
Other Accrued Liabilities
6 Months Ended
Jun. 30, 2021
Payables And Accruals [Abstract]  
Other Accrued Liabilities

5. OTHER ACCRUED LIABILITIES

Other accrued liabilities at June 30, 2021 and December 31, 2020, consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Accrued interest

 

$

23,807

 

 

$

23,422

 

Accrued taxes

 

 

9,272

 

 

 

10,518

 

Self-insurance reserve

 

 

7,458

 

 

 

7,540

 

Other

 

 

10,706

 

 

 

9,470

 

Total other accrued liabilities

 

$

51,243

 

 

$

50,950

 

 

v3.21.2
Long-Term Debt
6 Months Ended
Jun. 30, 2021
Debt Disclosure [Abstract]  
Long-Term Debt

6. LONG-TERM DEBT

Long-term debt, net, as of June 30, 2021 and December 31, 2020 consisted of the following:

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

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

   June 30, 2021 and December 31, 2020)

 

$

1,484,626

 

 

$

1,492,378

 

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

 

 

500,000

 

 

 

500,000

 

Senior Notes (interest rate of 8.75%)

 

 

227,500

 

 

 

227,500

 

Total long-term debt

 

 

2,212,126

 

 

 

2,219,878

 

Less: unamortized discounts and debt issuance costs

 

 

(23,913

)

 

 

(27,236

)

Less: current maturities

 

 

(65,505

)

 

 

(15,505

)

Total long-term debt, net

 

$

2,122,708

 

 

$

2,177,137

 

 

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. See further discussion in the Restrictive Covenants section which follows.

As of June 30, 2021, the Senior Secured Credit Facilities consisted of $1.485 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 June 30, 2021, and will mature on October 31, 2023.

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.

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

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 108.750%, 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.

In connection with the issuance of the Senior Notes and as a result of Amendment No. 10 and Amendment No. 11, SEA recorded discounts and fees of approximately $7.5 million and $7.8 million during the three and six months ended June 30, 2020, respectively.

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 to the Amended Credit Agreement, 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 paid 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.

Subsequent Events

Pursuant to (i) above, on July 14, 2021, the Company redeemed $50.0 million in aggregate principal amount of its Second-Priority Senior Notes at a price equal to 103% of the principal amount to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. As a result of this redemption, as June 30, 2021, $50.0 million of the outstanding balance related to the Company’s Second-Priority Senior Notes has been included in current maturities of long-term debt in the unaudited condensed consolidated balance sheet.

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.

On July 26, 2021, the Company issued (i) a conditional notice of partial redemption (the “Conditional Notice of Partial Redemption”) for the Second-Priority Senior Notes and (ii) a conditional notice of full redemption for the Second-Priority Senior Notes not purchased pursuant to the Conditional Notice of Partial Redemption (the “Conditional Notice of Full Redemption,” together with the Conditional Notice of Partial Redemption, the “Redemption Notices”).  

The Conditional Notice of Partial Redemption states that $50.0 million aggregate principal amount of the Second-Priority Senior Notes will be redeemed on August 25, 2021 at a price equal to the sum of (i) 103% of the principal amount to be redeemed, plus (ii) accrued and unpaid interest, if any, to, but excluding, the redemption date. The Conditional Notice of Full Redemption states that $400.0 million aggregate principal amount of the Second-Priority Senior Notes will be redeemed on August 25, 2021 at a price equal to the sum of (i) 100% of the principal amount to be redeemed, plus (ii) the Applicable Premium (as defined in the indenture governing the Second-Priority Senior Notes) as of the redemption date plus (iii) accrued and unpaid interest, if any, to, but excluding, the redemption date.

The redemptions pursuant to the Redemption Notices are conditioned on the completion of a financing, which may be notes, loans or other securities, or a combination thereof, on or prior to the redemption date, by the Company on terms satisfactory to the Company and in an aggregate principal amount satisfactory to the Company. 

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

The Company intends to use the proceeds from the New Term Loan Facility, together with the proceeds from a financing, which may be notes, loans or other securities, or a combination thereof, on terms satisfactory to the Company and in an aggregate principal amount satisfactory to the Company to repay all borrowings outstanding under the existing senior facilities and to pay related fees and expenses. The closing of the New Term Loan Facility and the New Revolving Credit Facility is subject to successful marketing and other conditions, and there can be no assurance that the Company will close the New Term Loan Facility or the New Revolving Credit Facility (or offer the aforementioned notes) as described or at all.

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 is 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 (as defined in Amendment No.12) for such applicable periods will be deemed to be actual Adjusted EBITDA 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 any dividends or making other restricted payments through the third quarter of 2022 unless certain conditions are met. 

Long-term debt at June 30, 2021 is repayable as follows and does not include the impact of any future voluntary prepayments. The $50.0 million partial redemption of the Second-Priority Senior Notes discussed above is reflected below based upon the repayment made in July 2021:

 

Years Ending December 31:

 

(In thousands)

 

Remainder of 2021

 

$

57,753

 

2022

 

 

15,505

 

2023

 

 

15,505

 

2024

 

 

1,445,863

 

2025

 

 

677,500

 

Total

 

$

2,212,126

 

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 7–Derivative Instruments and Hedging Activities which follows.

Cash paid for interest relating to the Senior Secured Credit Facilities, Senior Notes, Second-Priority Senior Notes and the Interest Rate Swap Agreements, net of amounts capitalized, as applicable, was $58.3 million and $36.5 million in the six months ended June 30, 2021 and 2020, respectively.

v3.21.2
Derivative Instruments and Hedging Activities
6 Months Ended
Jun. 30, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities

7. 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 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 were 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 June 30, 2021 and December 31, 2020. 

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 three and six months ended June 30, 2020, 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 (loss) income and were subsequently reclassified into earnings in the period that the hedged forecasted transaction affected earnings. Amounts reported in accumulated other comprehensive (loss) income related to derivatives were reclassified to interest expense as interest payments were made on the Company’s variable-rate debt.  

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

The table below presents the pretax effect of the Company’s derivative financial instruments on the unaudited condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2020:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2020

 

Derivatives in Cash Flow Hedging Relationships:

 

(In thousands)

 

Loss recognized in accumulated other comprehensive (loss) income

 

$

(26

)

 

$

(370

)

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

 

$

1,199

 

 

$

2,501

 

 

v3.21.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements

8. FAIR VALUE MEASUREMENTS

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement is required to be determined based on the assumptions that market participants would use in pricing the asset or liability. 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. The standard describes three levels of inputs that may be used to measure fair value:  

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.

 

Of the Company’s long-term obligations, the Term B-5 Loans are classified in Level 2 of the fair value hierarchy and the Senior Notes and Second-Priority Senior Notes are classified in Level 1 of the fair value hierarchy as of June 30, 2021 and December 31, 2020. The fair value of the Term B-5 Loans approximate their carrying value, excluding unamortized debt issuance costs and discounts, due in part to the variable nature of the underlying interest rates and the frequent intervals at which such interest rates are reset. The fair value of the Senior Notes and Second-Priority Senior Notes was determined using quoted prices in active markets for identical instruments. 

The Company did not have any assets measured on a recurring basis at fair value as of June 30, 2021 and December 31, 2020. The Company maintains its long-term liabilities at carrying value, net of unamortized debt issuance costs and discounts, in the unaudited condensed consolidated balance sheet.

The following table presents the Company’s estimated fair value measurements and related classifications for liabilities measured on a recurring basis as of June 30, 2021:

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active Markets

 

 

Significant

 

 

 

 

 

 

 

 

 

 

for Identical

 

 

Other

 

 

Significant

 

 

 

 

 

 

Assets and

 

 

Observable

 

 

Unobservable

 

 

Balance at

 

 

Liabilities

 

 

Inputs

 

 

Inputs

 

 

June 30,

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

2021

 

Liabilities:

(In thousands)

 

Long-term obligations (a)

$

784,338

 

 

$

1,484,626

 

 

$

 

 

$

2,268,964

 

 

(a)

Reflected at carrying value, net of unamortized debt issuance costs and discounts, in the unaudited condensed consolidated balance sheet as current maturities of long-term debt of $65.5 million and long-term debt of $2.123 billion as of June 30, 2021.

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

 

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active Markets

 

 

Significant

 

 

 

 

 

 

 

 

 

 

for Identical

 

 

Other

 

 

Significant

 

 

 

 

 

 

Assets and

 

 

Observable

 

 

Unobservable

 

 

Balance at

 

 

Liabilities

 

 

Inputs

 

 

Inputs

 

 

December 31,

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

2020

 

Liabilities:

(In thousands)

 

Long-term obligations (a)

$

787,975

 

 

$

1,492,378

 

 

$

 

 

$

2,280,353

 

 

 

(a)

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

v3.21.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2021
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

9. COMMITMENTS AND CONTINGENCIES

2020 Settled Matters

In 2020, the Company received final court approval of a settlement for a previously disclosed stockholder class action lawsuit, captioned Baker v. SeaWorld Entertainment, Inc., et al. The settlement required the Company to pay $65.0 million and did not include or constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant. During the year ended December 31, 2019, the Company recorded $32.1 million of legal settlement charges, net of insurance recoveries, related to this case. The full settlement amount was funded during the six months ended June 30, 2020.

In 2020, the Company received final court approval of a settlement for a previously disclosed putative derivative lawsuit captioned Kistenmacher v. Atchison, et al.  Pursuant to the settlement, the Company received $12.5 million of insurance proceeds from its insurers and adopted certain corporate governance modifications. During the six months ended June 30, 2020, the Company recorded a legal settlement gain of $12.5 million related to insurance proceeds received in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of comprehensive income (loss).

Legal Proceedings

Securities Class Action Lawsuit

On June 14, 2018, a lawsuit captioned Highfields Capital I LP et al v. SeaWorld Entertainment, Inc. et al, was filed in the United States District Court in the Southern District of California against the Company and certain of the Company’s former and present executive officers. The plaintiffs allege, among other things, that the defendants made false and misleading statements in violation of the federal securities laws and Florida common law, regarding the impact of the film Blackfish on SeaWorld’s business. The complaint further alleges that such statements were made to induce plaintiffs to purchase common stock of the Company at artificially-inflated prices and that plaintiffs suffered investment losses as a result.  The plaintiffs have indicated to the Company they believe the damages are in the range of $30 million to $35 million before considering interest.  In 2018, defendants moved for partial dismissal of the complaint.  In 2019, the Court granted defendants’ motion and dismissed plaintiffs’ Florida state law claims as well as federal securities law claims based on the Company’s second quarter 2013 earnings statements. The parties have completed discovery and will be filing summary judgment motions. The Company believes that the lawsuit is without merit and intends to defend the lawsuit vigorously. While there can be no assurance regarding the ultimate outcome of this lawsuit, the Company believes that any potential loss would not be material.

Other Lawsuits

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

In November 2020, the Company filed in the Court of Chancery of the State of Delaware an action for declaratory judgment seeking a declaration that the threatened claims of the former employees are time-barred and without merit. In response, the defendant former employees filed a motion to dismiss or in the alternative to stay and compel arbitration. The parties have agreed to arbitrate whether the former employees’ claims are subject to arbitration. In terms of potential exposure, the value of the total shares at issue for these certain former employees depends largely upon the Company’s current share price, which fluctuates daily. Approximately 300,000 shares are at issue. The Company believes that the former employees’ claims are without merit and intends to defend vigorously its positions. While there can be no assurance regarding the ultimate outcome of this matter, the Company believes that any potential loss would not be material.

Other Matters

The Company is a party to various other claims and legal proceedings arising in the normal course of business. In addition, from time to time the Company is subject to audits, inspections and investigations by, or receives requests for information from, various federal and state regulatory agencies, including, but not limited to, the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (“APHIS”), the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”), the California Occupational Safety and Health Administration (“Cal-OSHA”), the Florida Fish & Wildlife Commission (“FWC”), the Equal Employment Opportunity Commission (“EEOC”), the Internal Revenue Service (“IRS”) the U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”).

Other than those matters discussed above, from time to time, various parties also bring other lawsuits against the Company. Matters where an unfavorable outcome to the Company is probable and which can be reasonably estimated are accrued. Such accruals, which are not material for any period presented, are based on information known about the matters, the Company’s estimate of the outcomes of such matters, and the Company’s experience in contesting, litigating and settling similar matters. Matters that are considered reasonably possible to result in a material loss are not accrued for, but an estimate of the possible loss or range of loss is disclosed, if such amount or range can be determined. At this time, management does not expect any such known claims, legal proceedings or regulatory matters to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

License Commitments

Pursuant to a license agreement (“License Agreement”) with Sesame Workshop, the Company pays a specified annual license fee, as well as a specified royalty based on revenues earned in connection with sales of licensed products, all food and beverage items utilizing the licensed elements and any events utilizing such elements if a separate fee is paid for such event.  The Company’s principal commitments pursuant to the License Agreement include, among other items, the opening of a second standalone park (“Standalone Park”) no later than mid-2021 and minimum annual capital and marketing thresholds.  The Company is currently in discussion with Sesame Workshop regarding the License Agreement as a result of the impacts of the COVID-19 pandemic. After the opening of the second Standalone Park (counting the existing Sesame Place Standalone Park in Langhorne, Pennsylvania), SEA will have the option to build additional Standalone Parks in the Sesame Territory within agreed upon timelines.  The License Agreement has an initial term through December 31, 2031, with an automatic additional 15-year extension plus a five-year option added to the term of the License Agreement from December 31st of the year of each new Standalone Park opening. As of June 30, 2021, the Company estimates the combined remaining obligations for these commitments could be up to approximately $35.0 million over the remaining term of the agreement. In October 2019, the Company announced that it planned to convert Aquatica San Diego into its second Sesame Place Standalone Park in the spring of 2021. While construction began in the fall of 2019, it was temporarily paused due to the COVID-19 pandemic. The Company has opened its Aquatica San Diego park for the 2021 operating season and currently expects to open this park rebranded as its second Sesame Place Standalone Park in 2022. 

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

v3.21.2
Equity-Based Compensation
6 Months Ended
Jun. 30, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Equity-Based Compensation

10. EQUITY-BASED COMPENSATION

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services rendered in exchange for share-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 the impact of forfeitures as they occur.  

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

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Equity compensation expense included in operating expenses

 

$

1,564

 

 

$

674

 

 

$

2,502

 

 

$

(1,077

)

Equity compensation expense included in selling, general and administrative expenses

 

 

4,070

 

 

 

2,646

 

 

 

7,605

 

 

 

796

 

Total equity compensation expense

 

$

5,634

 

 

$

3,320

 

 

$

10,107

 

 

$

(281

)

 

The credit in equity compensation expense for the six months ended June 30, 2020, was primarily due to the reversal of expense related to certain performance vesting restricted units which were no longer considered probable of vesting and also included the reversal of expense related to outstanding unvested equity awards previously held by the Company’s former chief executive officer which were forfeited in connection with his departure.  See Long-term Incentive Performance Restricted Awards section which follows for further details.

Omnibus Incentive Plan

The Company has reserved 15.0 million shares of common stock for issuance under its Omnibus Incentive Plan (the “Omnibus Incentive Plan”), of which approximately 7.8 million shares are available for future issuance as of June 30, 2021. The Company has outstanding time restricted awards, performance restricted awards and incentive stock options.    

Bonus Performance Restricted Units  

During the six months ended June 30, 2021, the Company granted approximately 120,000 performance-vesting restricted units (the “Bonus Performance Restricted Units”) in accordance with its annual bonus plan for 2021 (the “2021 Bonus Plan”).  The 2021 Bonus Plan provides for bonus awards payable 50% in cash and 50% in performance-vesting restricted units (the “Bonus Performance Restricted Units”) and is based upon the Company’s achievement of specified performance goals, as defined by the 2021 Bonus Plan, with respect to the year ended December 31, 2021 (the “Fiscal 2021”).  The total number of units eligible to vest into shares of stock is based on the level of achievement of the targets for Fiscal 2021 which ranges from 0% (if below threshold performance), to 125% (if at maximum performance) with opportunities to earn above 125% when achievement is above the maximum performance for certain metrics.  

Due to the impact of the COVID-19 pandemic, the Company did not have an annual bonus plan for the fiscal year ended December 31, 2020 (“Fiscal 2020”); however, based on a discretionary review of performance in light of the negative impact of the COVID-19 pandemic on the Company’s business, the Compensation Committee determined to make discretionary equity awards to the Company’s bonus eligible employees during the six months ended June 30, 2021.  These awards were paid entirely in restricted stock units that vest 50% each on the first and second anniversaries of the date of grant.

Long-term Incentive Performance Restricted Awards

During the six months ended June 30, 2021, the Company granted long-term incentive plan awards for 2021 (the “2021 Long-Term Incentive Grant”) which were comprised of approximately 120,000 nonqualified stock options (the “Long-Term Incentive Options”) and approximately 120,000 performance-vesting restricted units (the “Long-Term Incentive Performance Restricted Units”) (collectively, the “Long-Term Incentive Awards”).

Long-Term Incentive Options

The Long-Term Incentive Options vest over three years, with 20% vesting on each of the first two anniversaries of the grant date and 60% vesting on the third anniversary of the grant date, subject to continued employment through the applicable vesting date. Equity compensation expense for these options is recognized for each tranche over the vesting period using the straight-line method. Upon stock option exercises, authorized but unissued shares are issued by the Company.

Long-Term Incentive Performance Restricted Units

The Long-Term Incentive Performance Restricted Units are expected to vest following the end of the three-year performance period beginning on January 1, 2021 and ending on December 31, 2023 (the “Performance Period”) based upon the Company’s achievement of specified performance goals during the Performance Period.  The total number of Long-Term Incentive Performance Restricted Units eligible to vest will be based on the level of achievement of the performance goals and ranges from 0% (if below threshold performance) up to 100% (for target or above performance). Upon achievement of at least the threshold performance goals, only 25% to 50% of the award for a given level of performance will vest, with the remaining 50% subject to a one-year performance test period. Performance for the test period must meet or exceed at least 95% of the prior year’s performance before up to the remaining 50% of the units can be earned.

The Company recognizes equity compensation expense for its performance-vesting restricted awards ratably over the related performance period, if the performance condition is probable of being achieved.  Based on the Company’s progress towards its respective performance goals, a portion of its performance-vesting restricted awards are not considered probable of vesting as of June 30, 2021; therefore, equity compensation expense has not yet been recorded related to these awards.  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, will be recorded as a cumulative catch-up at such subsequent date.  

v3.21.2
Stockholders' Deficit
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Stockholders' Deficit

11. STOCKHOLDERS’ DEFICIT

As of June 30, 2021, 95,380,481 shares of common stock were issued in the accompanying unaudited condensed consolidated balance sheet, which includes 16,260,248 shares of treasury stock held by the Company and excludes 57,124 unvested shares of common stock and 2,114,222 unvested restricted stock units or deferred stock units held by certain participants in the Company’s equity compensation plans or members of the Company’s Board of Directors (the “Board”) (see Note 10–Equity-Based Compensation).  

Share Repurchase Program

The Board had previously authorized a share repurchase program of up to $250.0 million of the Company’s common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act.

During the six months ended June 30, 2020, prior to the COVID-19 temporary park closures, the Company completed a share repurchase of 469,785 shares for an aggregate total of approximately $12.4 million. As of June 30, 2021, the Company has approximately $237.6 million available under the Share Repurchase Program. In connection with Amendment No. 12 to the Company’s Amended Credit Agreement, the Company is restricted from paying any dividends or making restricted payments, including share repurchases, through the third quarter of 2022 unless certain conditions are met (see Note 6–Long-Term Debt).

The Share Repurchase Program has no time limit and may be suspended or discontinued completely at any time. The number of shares to be purchased and the timing of purchases will be based on the Company’s trading windows and available liquidity, general business and market conditions, and other factors, including legal requirements, debt covenant restrictions and alternative investment opportunities.

v3.21.2
Description of the Business and Basis of Presentation (Policies)
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Description of the Business

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. 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 park attractions in Orlando, Florida (Aquatica); San Antonio, Texas (Aquatica); San Diego, 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 park in Langhorne, Pennsylvania (Sesame Place).  

Impact of Global COVID -19 Pandemic

Impact of Global COVID-19 Pandemic

In response to the global 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 cleaning measures, capacity limitations and/or modified/limited operations, which at times included reduced hours and/or reduced operating days.  By the end of June 2020, the Company had reopened seven of its 12 parks on a limited basis and by August 2020, the Company had reopened 10 of its 12 parks on a limited basis. The Company was unable to reopen its Aquatica water park in California and its Water Country USA water park in Virginia for the 2020 operating season but has opened both parks for their 2021 operating season.  As of June 30, 2021, all of the Company’s theme parks are now open and operating without COVID-19 related capacity limitations.    

 

The Company’s SeaWorld park in California initially reopened in August 2020 on a limited basis, following the State of California’s guidance for reopening zoos.  In compliance with revised guidelines issued in the fourth quarter of 2020, the Company once again had to close this park effective December 7, 2020.  On January 15, 2021, the Company introduced a limited time drive-through only experience for guests at this park. The Company then reopened this park on February 6, 2021 on a limited basis, once again following California guidance for reopening zoos. In accordance with subsequently issued State of California revised guidelines, on April 12, 2021 this park resumed operations as a theme park with restricted capacity and on June 15, 2021, capacity restrictions for this park were removed. 

 

Attendance for the Company’s Busch Gardens park in Virginia was also significantly impacted by state restrictions. Initially the State of Virginia had a state mandated capacity restriction of 1,000 guests at a time. On October 29, 2020, the state revised its theme park guidance and modified the methodology for calculating capacity at theme parks.  As a result, capacity at this park increased to approximately 4,000 guests at a time. On February 1, 2021, in consultation with the State of Virginia, the Company further increased capacity to approximately 6,000 guests at a time and on April 1, 2021 to approximately 13,000 guests.  On May 28, 2021, theme park capacity restrictions in the State of Virginia were removed. 

 

The Company’s 2021 financial results continue to be impacted by the COVID-19 pandemic.  While 10 of the Company’s 12 parks were open at the beginning of the second quarter of 2021, all parks were operating with capacity limitations or modified/limited operations.  As mentioned above, by the end of the second quarter of 2021, all of the Company’s 12 parks were open, and all operating without COVID-19 related capacity limitations.  

 

The Company continuously monitors guidance from federal, state and local authorities and engages with governmental authorities as well as medical/scientific consultants. The Company may adjust its plans accordingly as laws change and new information and guidance becomes available.  The COVID-19 pandemic has had, and may continue to have, a material impact on the Company’s financial results.     

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC.  The unaudited condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2021 or any future period due in part to the seasonal nature of the Company’s operations.  Based upon historical results, the Company typically generates its highest revenues in the second and third quarters of each year and incurs a net loss in the first and fourth quarters, in part because seven of its theme parks were historically only open for a portion of the year.  However, during 2021, the Company added additional operating days for three of these parks.  In particular, the Company began year-round operations at its SeaWorld park in Texas and began to operate on select days at its Busch Gardens park in Virginia and its Sesame Place park in Pennsylvania.   

The Company’s results of operations for the three and six months ended June 30, 2020 were materially impacted by the COVID-19 pandemic which ultimately led to temporary park closures effective on March 16, 2020. The timing of these park closures fell during historically high-volume spring break and summer weeks for most of the Company’s parks. The Company’s results of operations for the three and six months ended June 30, 2021 continue to be impacted by the COVID-19 pandemic due in part to capacity limitations and/or modified/limited operations which were in place for most of the respective periods as well as decreased demand due to public concerns associated with the pandemic.  

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including SEA. All intercompany accounts have been eliminated in consolidation.

Use of Estimates

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 unaudited condensed 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, and the valuation of goodwill and other indefinite-lived intangible assets. Estimates are based on various factors including current and historical trends, as well as other pertinent 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 impact or timing of government restrictions, capacity limitations due to social distancing guidelines, public sentiment on social gatherings, travel and attendance patterns, travel restrictions, effectiveness and adoption of vaccines, 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.

Segment Reporting

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 Company’s 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.

Restricted Cash

Restricted Cash

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

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

615,791

 

 

$

433,909

 

Restricted cash, included in prepaid expenses and other current assets

 

 

1,926

 

 

 

1,316

 

Total cash, cash equivalents and restricted cash

 

$

617,717

 

 

$

435,225

 

Revenue Recognition

Revenue Recognition

Admissions revenue primarily consists of single-day tickets, annual or season passes or other multi-day or multi-park admission products.  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. For pass products purchased on an installment plan that have met their initial commitment period and have transitioned to a month to month basis, monthly charges are recognized as revenue as payments are received each month, with the exception of payments received during the temporary park closures (see further discussion which follows).

The Company estimates 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.  As a result of the temporary park closures due to the global COVID-19 pandemic, in 2020, the Company upgraded some of its pass products and extended pass expiration dates for at least the equivalent period the related parks were closed.  As a result, the Company adjusted its estimated redemption and recognition patterns on these products to reflect the fact that there was no attendance during the park closures and accordingly the Company did not recognize revenue from these admission products while the parks were closed. For passes under installment plans that had transitioned to a month-to-month basis, the Company temporarily paused monthly charges when the related parks reopened for the equivalent period the respective parks were closed.  Accordingly, payments received during the closure period were recorded as deferred revenue and recognized as revenue once the respective parks reopened, which may not necessarily reflect attendance patterns for these guests.  

Food, merchandise and other revenue primarily consists of culinary, merchandise and other in-park products and also includes other miscellaneous revenue which is not significant in the periods presented.  The Company recognizes revenue for food, merchandise and other in-park products when the related products or services are received by guests.     

At June 30, 2021 and December 31, 2020, the long-term portion of deferred revenue included in other liabilities in the accompanying unaudited condensed consolidated balance sheets primarily relates to the Company’s international agreement, as discussed in the following section.

The following table reflects the Company’s deferred revenue balance as of June 30, 2021 and December 31, 2020:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Deferred revenue, including long-term portion

 

$

252,779

 

 

$

144,187

 

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

 

 

14,085

 

 

 

13,428

 

Deferred revenue, short-term portion

 

$

238,694

 

 

$

130,759

 

 

The increase in deferred revenue as of June 30, 2021 compared to December 31, 2020 primarily relates to admission product sales, particularly for the Company’s passes and single-day ticket products which have not been fully redeemed.  

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 to provide certain services pertaining to the planning and design of SeaWorld Abu Dhabi, a marine life theme park on Yas Island (the “Middle East Project”), with funding received expected to offset internal expenses. The Company receives additional funds from its partner related to agreed-upon services and reimbursements of costs incurred by the Company on behalf of the Middle East Project including approximately $2.3 million and $1.9 million of deferred revenue recorded in other liabilities in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively. Approximately $7.3 million and $5.9 million of costs incurred related to the Middle East Project are recorded in other assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, 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. 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.   

Recently Issued 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

On January 1, 2021, the Company adopted the following Accounting Standards Updates (“ASUs”) which had no material impact on its unaudited condensed consolidated financial statements or disclosures:  

 

 

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

 

 

ASU 2019-12, Simplifying the Accounting for Income Taxes, simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 was effective for the Company beginning January 1, 2021. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of this ASU did not have a material impact on the Company’s unaudited condensed consolidated financial statements or disclosures.

Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement is required to be determined based on the assumptions that market participants would use in pricing the asset or liability. 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. The standard describes three levels of inputs that may be used to measure fair value:  

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.

 

Of the Company’s long-term obligations, the Term B-5 Loans are classified in Level 2 of the fair value hierarchy and the Senior Notes and Second-Priority Senior Notes are classified in Level 1 of the fair value hierarchy as of June 30, 2021 and December 31, 2020. The fair value of the Term B-5 Loans approximate their carrying value, excluding unamortized debt issuance costs and discounts, due in part to the variable nature of the underlying interest rates and the frequent intervals at which such interest rates are reset. The fair value of the Senior Notes and Second-Priority Senior Notes was determined using quoted prices in active markets for identical instruments. 

v3.21.2
Description of the Business and Basis of Presentation (Tables)
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Schedule Of Cash Cash Equivalents And Restricted Cash

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

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

615,791

 

 

$

433,909

 

Restricted cash, included in prepaid expenses and other current assets

 

 

1,926

 

 

 

1,316

 

Total cash, cash equivalents and restricted cash

 

$

617,717

 

 

$

435,225

 

Deferred Revenue Balances

The following table reflects the Company’s deferred revenue balance as of June 30, 2021 and December 31, 2020:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Deferred revenue, including long-term portion

 

$

252,779

 

 

$

144,187

 

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

 

 

14,085

 

 

 

13,428

 

Deferred revenue, short-term portion

 

$

238,694

 

 

$

130,759

 

v3.21.2
Earnings (Loss) Per Share (Tables)
6 Months Ended
Jun. 30, 2021
Earnings Per Share [Abstract]  
Schedule of Earnings (Loss) Per Share

Earnings (loss) per share is computed as follows:

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

Net

Income

 

 

Shares