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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended April 4, 2021 or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission file number: 1-13703

GRAPHIC

Six Flags Entertainment Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

    

13-3995059
(I.R.S. Employer Identification No.)

1000 Ballpark Way Suite 400, Arlington, TX  76011
(Address of Principal Executive Offices, Including Zip Code)

(972) 595-5000
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.025 par value per share

SIX

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer1

  

Accelerated Filer

  

Non-accelerated Filer

  

Smaller Reporting Company

  

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  At April 23, 2021, Six Flags Entertainment Corporation had 85,391,767 outstanding shares of common stock, par value $0.025 per share.

SIX FLAGS ENTERTAINMENT CORPORATION

FORM 10-Q

INDEX

Cautionary Note Regarding Forward-Looking Statements

1

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of April 4, 2021 (unaudited), December 31, 2020 and March 31, 2020 (unaudited)

3

Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended April 4, 2021 and March 31, 2020

4

Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the Three Months Ended April 4, 2021 and March 31, 2020

5

Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Three Months Ended April 4, 2021 and March 31, 2020

6

Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended April 4, 2021 and March 31, 2020

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

Signatures

43

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Quarterly Report") and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding (i) the timing and conditions under which we may reopen our closed parks and our expectations regarding the continued operations of our reopened parks, (ii) the operation of our parks in light of the global coronavirus pandemic (“COVID-19”) following their anticipated reopening including, among other things, the effectiveness of cost-saving and health and safety measures implemented in response to COVID-19, (iii) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, including in the event of a prolonged closure of one or more of our parks, (iv) our ability to improve operating results, profitability and resilience by adopting and implementing a new strategic plan, (v) our plans and ability to roll out our capital enhancements and planned initiatives in a timely and cost effective manner, and our expectations regarding the anticipated costs, benefits and results of such enhancements and initiatives, (vi) the extent to which having parks in many geographical locations protects our consolidated results against the effects of adverse weather and other events, (vii) our ongoing compliance with laws and regulations, and the effect of and cost and timing of compliance with newly enacted laws, regulations and accounting policies, (viii) our ability to obtain additional financing, (ix) our expectations regarding future interest payments, (x) our expectations regarding the effect of certain accounting pronouncements, (xi) our expectations regarding the cost or outcome of any litigation or other disputes, (xii) our annual income tax liability and the availability and effect of net operating loss carryforwards and other tax benefits, (xiii) our expectations regarding uncertain tax positions, (xiv) our expectations regarding our deferred revenue growth, (xv) our expectations regarding incremental benefits, including increased Adjusted EBITDA, from our transformation plan, and (xvi) our expectations regarding reclassification of net losses. Forward-looking statements include all statements that are not historical facts and can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "may," "should," "could" and variations of such words or similar expressions.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are by their nature, subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, among others, the following:

factors impacting attendance, such as local conditions, contagious diseases, including COVID-19, or the perceived threat of contagious diseases, events, disturbances and terrorist activities;
regulations and guidance of federal, state and local governments and health officials regarding the response to COVID-19, including with respect to business operations, safety protocols and public gatherings (such as voluntary and in some cases, mandatory, quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities);
political or military events;
recall of food, toys and other retail products sold at our parks;
accidents, injuries involving the safety of guests and employees, or contagious disease outbreaks at our parks or other parks in our industry, and negative publicity about us or our industry;
availability of commercially reasonable insurance policies at reasonable rates;
inability to achieve desired improvements and financial performance targets;
adverse weather conditions such as excess heat or cold, rain and storms;
general financial and credit market conditions, including our ability to access credit or raise capital;
economic conditions (including customer spending patterns);
changes in public and consumer tastes;
construction delays in capital improvements or ride downtime;
competition with other theme parks and entertainment alternatives;
dependence on a seasonal workforce;
unionization activities and labor disputes;

1

laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, and healthcare reform;
environmental laws and regulations;
laws and regulations affecting corporate taxation;
pending, threatened or future legal proceedings and the significant expenses associated with litigation;
cyber security risks; and
other factors or uncertainties described in "Item 1A. Risk Factors" set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report") and in this Quarterly Report.

A more complete discussion of these factors and other risks applicable to our business is contained in "Part I, Item 1A. Risk Factors" of the 2020 Annual Report and in this Quarterly Report. All forward-looking statements in this Quarterly Report, or that are made on our behalf by our directors, officers or employees related to the information contained herein, apply only as of the date of this Quarterly Report or as of the date they were made. While we believe that the expectations reflected in such forward-looking statements are reasonable, we make no assurance that such expectations will be realized and actual results could vary materially. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation, except as required by applicable law, to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Additionally, the continued impact of COVID-19 could heighten many of the risk factors described herein.

Available Information

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge through our website at investors.sixflags.com. References to our website in this Quarterly Report are provided as a convenience and do not constitute an incorporation by reference of the information contained on, or accessible through, the website. Therefore, such information should not be considered part of this Quarterly Report. These reports, and any amendments to these reports, are made available on our website as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the United States Securities and Exchange Commission (the "SEC"). Copies are also available, without charge, by sending a written request to Six Flags Entertainment Corporation, 1000 Ballpark Way Suite 400, Arlington, TX 76011, Attn: Investor Relations.

*             *             *             *             *

As used herein, unless the context requires otherwise, the terms "we," "our," "Company" and "Six Flags" refer collectively to Six Flags Entertainment Corporation and its consolidated subsidiaries, and "Holdings" refers only to Six Flags Entertainment Corporation, without regard to its consolidated subsidiaries.

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

 

As of

    

April 4, 2021

    

December 31, 2020

    

March 31, 2020

(Amounts in thousands, except share data)

(unaudited)

(unaudited)

ASSETS

 

  

 

  

 

  

Current assets:

 

  

 

  

 

  

Cash and cash equivalents

$

62,905

$

157,760

$

22,811

Accounts receivable, net

 

46,420

 

36,610

 

71,558

Inventories

 

39,057

 

39,191

 

42,397

Prepaid expenses and other current assets

 

69,166

 

73,179

 

79,496

Total current assets

 

217,548

 

306,740

 

216,262

Property and equipment, net:

 

  

 

  

 

  

Property and equipment, at cost

 

2,427,318

 

2,408,690

 

2,364,872

Accumulated depreciation

 

(1,182,641)

 

(1,157,403)

 

(1,073,198)

Total property and equipment, net

 

1,244,677

 

1,251,287

 

1,291,674

Other assets:

 

  

 

  

 

  

Right-of-use operating leases, net

194,768

196,711

194,519

Debt issuance costs

 

6,501

 

7,034

 

3,413

Deposits and other assets

 

6,661

 

7,103

 

10,452

Goodwill

 

659,618

 

659,618

 

659,618

Intangible assets, net of accumulated amortization of $244, $238 and $23,824 as of April 4, 2021, December 31, 2020 and March 31, 2020, respectively

 

344,192

 

344,198

 

344,611

Total other assets

 

1,211,740

 

1,214,664

 

1,212,613

Total assets

$

2,673,965

$

2,772,691

$

2,720,549

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

  

 

  

 

  

Current liabilities:

 

  

 

  

 

  

Accounts payable

$

31,771

$

26,582

$

48,994

Accrued compensation, payroll taxes and benefits

 

25,674

 

22,031

 

11,660

Accrued insurance reserves

 

27,568

 

31,060

 

33,223

Accrued interest payable

 

33,290

 

60,184

 

20,413

Other accrued liabilities

 

91,848

 

93,369

 

63,114

Deferred revenue

 

245,310

 

205,125

 

149,111

Short-term borrowings

 

 

 

40,000

Current portion of long-term debt

8,000

Short-term lease liabilities

10,547

14,054

10,490

Total current liabilities

 

466,008

 

452,405

 

385,005

Noncurrent liabilities:

 

  

 

  

 

  

Long-term debt

 

2,624,361

 

2,622,641

 

2,215,794

Long-term lease liabilities

190,362

187,432

186,062

Other long-term liabilities

 

35,337

 

43,553

 

43,238

Deferred income taxes

 

70,985

 

101,831

 

214,038

Total noncurrent liabilities

 

2,921,045

 

2,955,457

 

2,659,132

Total liabilities

 

3,387,053

 

3,407,862

 

3,044,137

Redeemable noncontrolling interests

 

523,376

 

523,376

 

529,276

Stockholders' deficit:

 

  

 

  

 

  

Preferred stock, $1.00 par value

 

 

 

Common stock, $0.025 par value, 280,000,000 shares authorized; 85,369,434, 85,075,901 and 84,666,505 shares issued and outstanding at April 4, 2021, December 31, 2020 and March 31, 2020, respectively

 

2,134

 

2,126

 

2,116

Capital in excess of par value

 

1,104,904

 

1,089,199

 

1,070,900

Accumulated deficit

 

(2,249,207)

 

(2,153,368)

 

(1,815,457)

Accumulated other comprehensive loss, net of tax

 

(94,295)

 

(96,504)

 

(110,423)

Total stockholders' deficit

 

(1,236,464)

 

(1,158,547)

 

(852,864)

Total liabilities and stockholders' deficit

$

2,673,965

$

2,772,691

$

2,720,549

See accompanying notes to unaudited condensed consolidated financial statements.

3

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

Three Months Ended

(Amounts in thousands, except per share data)

    

April 4, 2021

    

March 31, 2020

Park admissions

$

44,334

$

59,806

Park food, merchandise and other

 

31,224

 

29,806

Sponsorship, international agreements and accommodations

 

6,466

 

12,891

Total revenues

 

82,024

 

102,503

Operating expenses (excluding depreciation and amortization shown separately below)

 

92,643

 

105,864

Selling, general and administrative expenses (including stock-based compensation of $6,637 and $4,280 in 2021 and 2020, respectively, and excluding depreciation and amortization shown separately below)

 

36,126

 

36,190

Costs of products sold

 

7,215

 

7,760

Other net periodic pension benefit

 

(1,643)

 

(996)

Depreciation

 

28,827

 

30,063

Amortization

 

6

 

601

Loss (gain) on disposal of assets

 

520

 

(120)

Interest expense

 

38,460

 

27,486

Interest income

 

(40)

 

(329)

Loss on debt extinguishment

 

 

1,019

Other expense, net

 

7,619

 

1,560

Loss before income taxes

 

(127,709)

 

(106,595)

Income tax benefit

 

(31,870)

 

(22,049)

Net loss

$

(95,839)

$

(84,546)

Weighted-average common shares outstanding - basic and diluted:

 

85,209

 

84,656

Net loss per average common share outstanding - basic and diluted:

$

(1.12)

$

(1.00)

Cash dividends declared per common share

$

$

0.25

See accompanying notes to unaudited condensed consolidated financial statements.

4

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

 

Three Months Ended

(Amounts in thousands)

    

April 4, 2021

    

March 31, 2020

Net loss

$

(95,839)

$

(84,546)

Other comprehensive (loss) income, net of tax:

 

  

 

Foreign currency translation adjustment (1)

 

(1,973)

 

(14,198)

Defined benefit retirement plan (2)

 

255

 

193

Change in cash flow hedging (3)

 

3,927

 

(21,708)

Other comprehensive income (loss), net of tax

 

2,209

 

(35,713)

Comprehensive loss

$

(93,630)

$

(120,259)

(1)  Foreign currency translation adjustment is presented net of tax benefit of $0.4 million for the three months ended April 4, 2021, and tax benefit of $3.8 million for the three months ended March 31, 2020.

(2)  Defined benefit retirement plan is presented net of tax expense of $0.1 million for the three months ended April 4, 2021 and March 31, 2020.

(3)  Change in cash flow hedging is presented net of tax expense of $1.3 million for the three months ended April 4, 2021 and tax benefit of $7.2 million for the three months ended March 31, 2020, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

5

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Stockholders’ Deficit

(Unaudited)

Accumulated

 

Capital in

 

other

 

Total

Common stock

excess of 

Accumulated

comprehensive

stockholders'

(Amounts in thousands, except share data)

    

Shares issued

    

Amount

    

par value

    

deficit

    

loss

    

deficit

Balances at December 31, 2019

 

84,633,845

$

2,116

$

1,066,223

$

(1,709,747)

$

(74,710)

$

(716,118)

Issuance of common stock

 

32,788

 

1

 

421

 

 

 

422

Stock-based compensation

 

 

 

4,280

 

 

 

4,280

Dividends declared to common shareholders

 

 

 

 

(21,164)

 

 

(21,164)

Repurchase of common stock

 

(155)

 

 

(6)

 

 

 

(6)

Employee stock purchase plan

27

(1)

(1)

Change in redemption value of partnership units

(18)

(18)

Net loss attributable to Six Flags Entertainment Corporation

 

 

 

 

(84,546)

 

 

(84,546)

Net other comprehensive loss, net of tax

 

 

 

 

 

(35,713)

 

(35,713)

Balances at March 31, 2020

 

84,666,505

$

2,116

$

1,070,900

$

(1,815,457)

$

(110,423)

$

(852,864)

Accumulated 

Capital in

other

Total

Common stock

excess of 

Accumulated 

comprehensive

stockholders'

(Amounts in thousands, except share data)

    

Shares issued

    

Amount

    

par value

    

deficit

    

loss

    

deficit

Balances at December 31, 2020

85,075,901

$

2,126

$

1,089,199

$

(2,153,368)

$

(96,504)

$

(1,158,547)

Issuance of common stock

293,597

8

9,071

9,079

Stock-based compensation

6,637

6,637

Employee stock purchase plan

(64)

(3)

(3)

Net loss attributable to Six Flags Entertainment Corporation

(95,839)

(95,839)

Net other comprehensive income, net of tax

2,209

2,209

Balances at April 4, 2021

85,369,434

$

2,134

$

1,104,904

$

(2,249,207)

$

(94,295)

$

(1,236,464)

See accompanying notes to unaudited condensed consolidated financial statements.

6

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

Three Months Ended

(Amounts in thousands)

    

April 4, 2021

    

March 31, 2020

Cash flows from operating activities:

Net loss

$

(95,839)

$

(84,546)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Depreciation and amortization

 

28,833

 

30,664

Stock-based compensation

 

6,637

 

4,280

Interest accretion on notes payable

 

277

 

320

Loss on debt extinguishment

 

 

1,019

Amortization of debt issuance costs

 

1,978

 

856

Other, including loss (gain) on disposal of assets

 

(931)

 

1,546

Change in accounts receivable

 

(9,897)

 

35,159

Change in inventories, prepaid expenses and other current assets

 

3,907

 

(30,794)

Change in deposits and other assets

 

436

 

2,208

Change in ROU operating leases

2,113

2,437

Change in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities

 

42,146

 

1,223

Change in operating lease liabilities

(1,182)

2,204

Change in accrued interest payable

 

(26,894)

 

(5,715)

Deferred income taxes

 

(31,982)

 

(21,248)

Net cash used in operating activities

 

(80,398)

 

(60,387)

Cash flows from investing activities:

 

  

 

  

Additions to property and equipment

 

(23,133)

 

(53,458)

Property insurance recoveries

 

 

2,042

Proceeds from sale of assets

 

33

 

Net cash used in investing activities

 

(23,100)

 

(51,416)

Cash flows from financing activities:

 

  

 

  

Repayment of borrowings

 

(2,000)

 

(117,510)

Proceeds from borrowings

 

2,000

 

105,000

Payment of cash dividends

 

(201)

 

(21,367)

Proceeds from issuance of common stock

9,078

421

Stock repurchases

(3)

(6)

Reduction in finance lease liability

(76)

Net cash provided by (used in) financing activities

 

8,798

 

(33,462)

Effect of exchange rate on cash

 

(155)

 

(6,103)

Net change in cash and cash equivalents

 

(94,855)

 

(151,368)

Cash and cash equivalents at beginning of period

 

157,760

 

174,179

Cash and cash equivalents at end of period

$

62,905

$

22,811

Supplemental cash flow information

 

  

 

  

Cash paid for interest

$

63,937

$

31,987

Cash paid for income taxes

$

268

$

1,959

See accompanying notes to unaudited condensed consolidated financial statements.

7

1.  General — Basis of Presentation

We own and operate regional theme parks and waterparks. We are the largest regional theme park operator in the world, and the largest operator of waterparks in North America based on the number of parks we operate. Of the 27 parks we owned or operated as of April 4, 2021, 24 parks are located in the United States, two are located in Mexico and one is located in Montreal, Canada. Our waterpark at Six Flags Great America will open as a separate gate in 2021 as Hurricane Harbor Chicago, creating our 27th park.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the SEC.

Holdings’ Board of Directors determined that it is in our best interest to change the method of determining our fiscal quarters and fiscal years, such that each fiscal quarter will consist of thirteen weeks ending on a Sunday and each fiscal year will consist of 52 or 53 weeks, as applicable, and will end on the Sunday closest to December 31, effective as of the commencement of our fiscal year on January 1, 2021. This change was made to align our reporting calendar with how we operate our business and improve comparability across periods. Our current fiscal year will end on January 2, 2022. This Quarterly Report covers the period January 1, 2021 – April 4, 2021 (“the three months ended April 4, 2021”). The comparison period in the prior year covers the dates January 1, 2020 – March 31, 2020 (“the three months ended March 31, 2020”). The additional four days in the three months ended April 4, 2021 did not make a material impact on the first quarter 2021 results.

"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" contains a discussion of our results of operations and our financial position and should be read in conjunction with the unaudited condensed consolidated financial statements and notes. The 2020 Annual Report includes additional information about us, our operations and our financial position, and should be referred to in conjunction with this Quarterly Report. The information furnished in this Quarterly Report reflects all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the periods presented.

Results for the three months ended April 4, 2021, are not indicative of the results expected for the full year. In particular, our park operations contribute more than half of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year-round.

COVID-19 Considerations

In response to the COVID-19 pandemic, federal, state and local governments implemented significant restrictions on travel, social conduct and business operations, including mass quarantine and social distancing mandates and orders. In March 2020, we temporarily suspended operations at all of our domestic theme parks and waterparks due to the COVID-19 pandemic. We have reopened or announced reopening dates for each of our parks with the exception of our park in Canada. Most parks that are currently operating have capacity and other operating limitations.

In March 2020, we quickly implemented plans to mitigate the impact of the COVID-19 pandemic on our business to ensure the health and safety of our employees and guests. In response to the challenging environment, we focused on the following actions:

Implemented immediate cost controls by right-sizing marketing and temporarily reducing salaries of all full-time employees by 25%;
Strengthened liquidity through expansion of our revolving credit facility, suspension of testing of certain maintenance covenants in our credit facility, issuance of senior secured notes, and suspension of dividend payments and stock repurchases;
Enhanced financial flexibility by delaying and reducing capital expenses related to new rides and attractions;
Developed measures to preserve our season pass holder and member bases;

8

Opened parks as quickly as possible, while following governmental and public health guidelines; and
Created new sources of revenue by introducing animal and holiday drive-thru experiences at many parks.

We resumed partial operations at many of our parks on a staggered basis near the end of the second quarter of 2020 using a cautious and phased approach, including limiting attendance, in accordance with local conditions and government guidelines. Attendance trends continued to improve throughout 2020 and the first quarter of 2021 for the parks that were open.

We have taken measures to ensure sufficient liquidity to meet our cash flow needs and covenant compliance obligations for at least the next twelve months from the issuance of these financial statements. Additionally, we believe we have sufficient liquidity to meet our cash obligations through the end of 2021, even if our open parks are required to close. In addition to reducing expenses and capital expenditures, in April 2020, we increased the revolving credit commitments under the Second Amended and Restated Revolving Loan by $131.0 million, increasing the facility from $350.0 million to $481.0 million. Also, in April 2020, Six Flags Theme Parks Inc. (“SFTP”), Holdings’ indirect, wholly owned subsidiary, completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025. In August 2020, we extended the increased revolving credit commitments under the Second Amended and Restated Revolving Loan through December 31, 2022, and extended the suspension of our senior secured leverage ratio financial maintenance covenant through the end of 2021. See Note 3, Long-Term Indebtedness, for more information on these transactions. In connection with the Second Amended and Restated Credit Agreement, we suspended dividend payments and stock repurchases until the earlier of December 31, 2022, or such time as SFTP reduces the incremental revolving credit commitments by $131 million and begins using actual results to test the senior secured leverage ratio financial maintenance covenant compliance.

The COVID-19 pandemic continues to present material uncertainty and risk with respect to our performance and financial results, including around our ability to keep all of our parks open to our guests. We will continue to consider near-term exigencies and the long-term financial health of the business as we take steps to mitigate the consequences of the COVID-19 pandemic. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including any additional actions we take to contain COVID-19 or treat its impact, among others. Our business and financial results could be materially and adversely impacted.

Transformation Plan

During the three months ended April 4, 2021, we incurred the below expenses related to our transformation plan.

Transformation Costs Breakout by Quarter

Three Months Ended

April 4, 2021

Amounts included in "Other expense, net"

Consultant costs

$

6,787

Technology modernization costs

2,094

Employee termination costs

815

Total transformation costs

$

9,696


There were no transformation plan related expenses incurred during the three months ended March 31, 2020.

a.  Consolidated U.S. GAAP Presentation

Our accounting policies reflect industry practices and conform to U.S. GAAP.

The unaudited condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. We also consolidate the partnerships that own Six Flags Over Texas ("SFOT") and Six Flags Over Georgia (including Six Flags White Water Atlanta) ("SFOG", and together with SFOT, the "Partnership Parks") as subsidiaries in our unaudited condensed consolidated financial statements, as we have determined that we have the

9

power to direct the activities of the Partnership Parks that most significantly impact their economic performance and we have the obligation to absorb losses and receive benefits from the Partnership Parks that can be potentially significant to these entities. The equity interests owned by non-affiliated parties in the Partnership Parks are reflected in the accompanying unaudited condensed consolidated balance sheets as redeemable noncontrolling interests. See Note 6 for a description of the partnership agreements applicable to the Partnership Parks and Note 8 for further discussion on the non-affiliated parties’ share of the earnings of the Partnership Parks.

b.  Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, including net operating loss and other tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We recorded a valuation allowance of $129.4 million, $128.2 million and $132.2 million as of April 4, 2021, December 31, 2020 and March 31, 2020, respectively, due to uncertainties related to our ability to use some of our deferred tax assets, primarily consisting of certain state net operating loss and other tax carryforwards, before they expire. The valuation allowance was based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets were recoverable. Our projected taxable income over the foreseeable future indicates we will be able to use all of our federal net operating loss carryforwards before they expire.

In determining the effective tax rate for interim periods, we consider the expected changes in our valuation allowance from current year originating or reversing timing differences between financial accounting and tax purposes and the taxable income or loss expected for the current year. For interim periods, we also account for the tax effect of significant non-recurring items in the period in which they occur as well as changes in the valuation allowance relating to a change in the assessment of the probability of utilization of the deferred income tax assets.

Our liability for income taxes is finalized as auditable tax years pass their respective statutes of limitations in the various jurisdictions in which we are subject to tax. However, taxing authorities of these jurisdictions may audit prior years for which the statute of limitations is closed for the purpose of making an adjustment to our taxable income in a year for which the statute of limitations has not closed. Accordingly, taxing authorities of these jurisdictions may audit prior years of the Company and its predecessors for the purpose of adjusting net operating loss carryforwards to years for which the statute of limitations has not closed.

We classify interest and penalties attributable to income taxes as part of income tax expense. As of April 4, 2021, December 31, 2020 and March 31, 2020, we had no recorded amounts for accrued interest or penalties.

Because we do not permanently reinvest foreign earnings, United States deferred income taxes have been provided on unremitted foreign earnings to the extent that such foreign earnings are expected to be taxable upon repatriation.

c. Goodwill and Intangibles

Goodwill and intangible assets with indefinite lives are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to the reporting unit. We then determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit. All of our parks are operated in a similar manner and have comparable characteristics in that they produce and distribute similar services and products using similar processes, have similar types of customers, are subject to similar regulations and exhibit similar economic characteristics. As such, we are a single reporting unit.

As of April 4, 2021, the fair value of the single reporting unit exceeded our carrying amount. We have one reporting unit at the same level for which Holdings common stock is traded and we believe our market capitalization is the best

10

indicator of our reporting unit’s fair value. At April 4, 2021, we determined that it is not more likely than not that the fair value of our intangible assets were less than their carrying amounts and there were no triggering events.

d.  Long-Lived Assets

We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. We determined that our long-lived assets were recoverable as of April 4, 2021.

e.  Earnings Per Common Share

Basic earnings per common share is computed by dividing net income attributable to Holdings’ common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income attributable to Holdings’ common stockholders by the weighted average number of common shares outstanding during the period, including the effect of all dilutive common stock equivalents using the treasury stock method. In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.

We incurred a net loss for the three months ended April 4, 2021 and March 31, 2020, therefore, diluted shares outstanding equaled basic shares outstanding for the purposes of determining loss per common share. The computation of diluted earnings per share excluded the effect of 6,199,000 and 5,907,000 antidilutive stock options for the three months ended April 4, 2021 and March 31, 2020, respectively.

f. Derivative Instruments and Hedging Activities

We recognize all derivatives as either assets or liabilities on the condensed consolidated balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge for accounting purposes. The accounting for changes in the fair value of a derivative (e.g., gains and losses) depends on the intended use of the derivative and the resulting designation.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and our strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. We also assess, both at the hedge’s inception and on an ongoing basis throughout the contract term, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Changes in the fair value of interest rate derivatives that are effective and that are designated and qualify as cash flow hedges are recorded in “Other comprehensive loss” until operations are affected by the variability in cash flows of the designated hedged item, at which point they are reclassified to “interest expense”. Changes in the fair value of derivatives that do not qualify for hedge accounting or that are de-designated are recorded in “Other expense, net” in the unaudited condensed consolidated statements of operations.

g.  Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. We use a market approach for our recurring fair value measurements, and we endeavor to use the best information available. Accordingly, valuation techniques that maximize the use of observable impacts are favored. We present the estimated fair values and classifications of our financial instruments in accordance with U.S. GAAP.

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We use the following methods and assumptions to estimate the fair value of each class of financial instruments:

The carrying values of cash and cash equivalents, accounts receivable, notes receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments.
The measurement of the fair value of long-term debt is based on market prices that generally are observable for similar liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement.
The measurement of the fair value of derivative assets and liabilities is based on market prices that generally are observable for similar assets and liabilities at commonly quoted intervals and is considered a Level 2 fair value measurement. Derivative assets and liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid and other current assets and other accrued liabilities, respectively. Derivative assets and liabilities that have maturity dates greater than twelve months from the balance sheet date are included in deposits and other assets and other long-term liabilities, respectively.

h.  Stock Benefit Plans

Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance and cash-settled awards and dividend equivalent rights ("DERs") to select employees, officers, directors and consultants of Holdings and its affiliates.

We recognize the fair value of each grant as compensation expense on a straight-line basis over the vesting period using the graded vesting terms of the respective grant. The fair value of stock option grants is estimated using the Black-Scholes option pricing valuation model. The fair value of stock, restricted stock units and restricted stock awards is the quoted market price of Holdings’ common stock on the date of grant.

During the three months ended April 4, 2021, performance stock units were granted to key employees that will vest upon the achievement of Adjusted EBITDA and Revenue performance targets by 2023. The aggregate payout under these awards if the targets are achieved in 2023 would be 186,000, but could be more or less depending on the level of achievement and timing thereof. There has been no stock-based compensation expense recorded for the performance stock units because, as of April 4, 2021, it is not deemed probable that we will achieve the specified performance targets in 2023. Based on the grant date fair value of these performance stock units as determined by the closing market price of Holdings' common stock on the date of grant, the total unrecognized compensation cost related to these performance stock units at target achievement in 2023 is $9.3 million that will be expensed over the service period if achievement of the performance conditions becomes probable. We will continue to evaluate the probability of achieving the performance conditions going forward and will record the appropriate expense as necessary.

During the three months ended April 4, 2021 and March 31, 2020, stock-based compensation expense consisted of the following:

 

Three Months Ended

(Amounts in thousands)

    

April 4, 2021

    

March 31, 2020

Long-Term Incentive Plan

$

6,562

$

4,205

Employee Stock Purchase Plan

 

75

 

75

Total Stock-Based Compensation

$

6,637

$

4,280

During the three months ended April 4, 2021, we paid $0.2 million to employees with dividend equivalent rights for previously declared dividends due upon the vesting of the related shares. These dividends were declared prior to the suspension of dividend payments in connection with the increase in the Second Amended and Restated Revolving Loan in April 2020.

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i.  Revenue Recognition

We account for revenue from contracts with customers based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We recognize revenue upon admission into our parks, provision of our services, or when products are delivered to our guests. Revenues are presented in the accompanying condensed consolidated statements of operations net of sales taxes collected from our guests that are remitted or payable to government taxing authorities. For season passes, memberships in the initial twelve-month term and other multi-use admissions, we estimate a redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable and recognize a pro-rata portion of the revenue as the guests visit our parks. Amounts owed or received for multi-use admissions in excess of redemptions are recognized in deferred revenue. In contrast to our season pass and other multi-use offerings (such as our all season dining pass program, which enables season passholders and members to eat meals and snacks any day they visit the park for one upfront payment) that expire at the end of each operating season, the membership program continues on a month-to-month basis after the initial twelve-month membership term and can be canceled any time after the initial term pursuant to the terms of the membership program. Guests enrolled in the membership program can visit our parks an unlimited number of times whenever the parks are open as long as the guest remains enrolled in the membership program. We review the estimated redemption rate on an ongoing basis and revise it as necessary throughout the year, including the impact of changes to our season pass and memberships described above. For any bundled products with multiple performance obligations, revenue is allocated using the retail price of each distinct performance obligation and products that are not sold on a stand-alone basis are treated as residual.

For active memberships after the initial twelve-month term, we recognize revenue monthly as payments are received, with the exception of those payments related to the parks that remain temporarily closed due to COVID-19. In connection with the temporary closure of our parks due to COVID-19, we added one additional month of membership privileges for every month a member paid but could not visit their home park. Any membership payments received while parks were temporarily closed due to the pandemic were deferred and will be recognized as revenue when these additional months are utilized at the end of the respective membership periods or when they exchange their additional months for a Six Flags gift card pursuant to our gift card exchange program, whichever is sooner. Season pass holders were granted an additional year of admission to the parks due to the COVID-19 pandemic. All 2020 passes now expire at the end of the 2021 season.

As of April 4, 2021, deferred revenue was primarily comprised of (i) unredeemed season pass and all-season dining pass revenue, (ii) unredeemed portions of the membership program, member dining program and member flash pass program that will primarily be recognized in 2021, (iii) pre-sold single day admissions revenue for the 2021 operating season and (iv) pre-sold single-day admissions revenue for the 2020 operating season which now expire at the end of the 2021 season.

Certain contracts with customers, primarily memberships, may include bundled products with multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the observable retail prices charged to customers and use residual for any products not sold on a stand-alone basis. We generally expense (i) sales commissions when incurred, and (ii) certain costs to obtain a contract where the amortization period would have been one year or less. These costs are recognized in "Selling, general and administrative expenses." We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less or (ii) contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed. For certain of our contracts that have an original expected length of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money.

We have entered into international agreements to assist a third party in the planning, design, development and operation of a Six Flags-branded park outside of North America. These agreements consist of a brand licensing agreement, project services agreement, and management services agreement. We treat these agreements as one contract because they were negotiated with a single commercial objective. We have identified three distinct promises within the agreement with the third-party partner as brand licensing, project services and management services. Each of these

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promises is its own performance obligation and distinct, as the third party could benefit from each service on its own with other readily available resources, and each service is separately identifiable from other services in the context of the contract. We recognize revenue under our international agreements over the relevant service period of each performance obligation based on its relative stand-alone selling price, as determined by our best estimate of selling price. We review the service period of each performance obligation on an ongoing basis and revise it as necessary throughout the year. Revisions to the relevant service periods of the performance obligations may result in revisions to revenue in future periods and are recognized in the period in which the change is identified.

j.  Leases

We or certain of our subsidiaries are a lessee in various noncancelable operating and finance (formerly “capital”) leases, primarily for operating rights to amusement parks, land, office space, warehouses, office equipment and machinery. We account for leases in accordance with the Financial Accounting Standards Board (“FASB”) ASC 842, Leases (“Topic 842”); see below for additional information on recently adopted accounting pronouncements and Note 7 for additional information regarding our leases. We determine if an arrangement is or contains a lease at contract inception and recognize a right-of-use ("ROU") asset and lease liability at the lease commencement date.

For both our operating and finance leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments include how we determine (i) the discount rate used to discount the unpaid lease payments to present value, (ii) the lease term and (iii) the lease payments. Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate ("IBR"). Generally, we cannot determine the interest rate implicit in the lease and therefore we use the IBR as a discount rate for our leases. The IBR reflects the rate of interest we would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The lease term for all of our leases includes the noncancelable period of the lease plus any additional periods covered by an option to extend the lease that are reasonably certain to be executed by us. Lease payments included in the measurement of the lease liability comprise fixed payments owed over the lease term, variable lease payments that depend on an index or rate, and the exercise price of an option to purchase the underlying asset if it is reasonably certain that we will exercise the option.

The ROU asset is initially measured at cost, which comprises the initial amount of lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives received. For our operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, and adjusted for any prepaid or accrued lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the term of the operating lease.

Variable lease payments associated with our leases are recognized upon the occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Variable lease payments for operating leases are presented as operating expense in our condensed consolidated statements of operations in the same line item as expense arising from fixed lease payments. Property taxes and insurance paid on behalf of our lessors is included within variable lease payments.

Operating lease ROU assets net of accumulated amortization are presented as "Right-of-use operating leases, net" on the condensed consolidated balance sheets. The current portion of operating lease liabilities is presented as "Short-term lease liabilities" and the long-term portion is presented separately as "Long-term lease liabilities" on the condensed consolidated balance sheets.

Finance lease ROU assets are presented within “Property and equipment, at cost” and the related lease amortization within “Accumulated depreciation” on our condensed consolidated balance sheets. The current portion of the finance lease liabilities is presented as “Short-term lease liabilities” and the long-term portion is presented separately as “Long-term lease liabilities” on our condensed consolidated balance sheets.

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We have elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. We recognize the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with short-term leases are recognized and presented in the same manner as for all other leases.

The ROU assets for operating leases may be periodically reduced by impairment losses. We use the long-lived assets impairment guidance to determine whether an ROU asset is impaired and if so, the amount of the impairment loss to recognize. We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the remeasurement of a lease liability, an adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in our condensed consolidated statements of operations.

k.  Accounts Receivable, Net

Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products, such as season passes and the membership program. We are not exposed to a significant concentration of credit risk; however, based on the age of the receivables, our historical experience and other factors and assumptions we believe to be customary and reasonable, we record an allowance for doubtful accounts. As of April 4, 2021, December 31, 2020 and March 31, 2020, we have recorded an allowance for doubtful accounts of $8.5 million, $3.1 million and $7.6 million, respectively, which is primarily comprised of estimated payment defaults under our membership program. To the extent that payments under our membership program have not been recognized in revenue, the allowance for doubtful accounts recorded against our membership program is offset with a corresponding reduction in deferred revenue.

l.  Recently Adopted Accounting Pronouncements

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“Update 2019-12”), which removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. Update 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. Our adoption of Update 2019-12 did not have a material impact on our condensed consolidated financial statements and related disclosures.

m. Recent Accounting Pronouncements Not Yet Adopted

In August 2018, FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans: (“Update 2018-14”), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. Update 2018-14 is effective for annual periods beginning after January 1, 2021, with early adoption permitted. Adoption is required to be applied on a retrospective basis to all periods presented. We are in the process of evaluating the impact of this amendment on our condensed consolidated financial statements; however, we do not expect a material impact.

2.  Revenue

Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.

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The following tables present our revenues disaggregated by contract duration for the three months ended April 4, 2021 and March 31, 2020, respectively. Long-term and short-term contracts consist of our contracts with customers with terms greater than one year and less than or equal to one year, respectively. Sales and usage-based taxes are excluded from revenues.

Three Months Ended April 4, 2021

    

    

    

Sponsorship, 

Park Food, 

International 

Merchandise 

Agreements and 

(Amounts in thousands)

    

Park Admissions

    

and Other

    

Accommodations

    

Consolidated

Long-term contracts

$

7,010

$

997

$

4,163

$

12,170

Short-term contracts and other (a)

 

37,324

 

30,227

 

2,303

 

69,854

Total revenues

$

44,334

$

31,224

$

6,466

$

82,024

Three Months Ended March 31, 2020

    

    

    

Sponsorship,

    

 

Park Food, 

 

 International 

 

Merchandise

 

Agreements and 

(Amounts in thousands)

    

Park Admissions

    

and Other

    

Accommodations

    

Consolidated

Long-term contracts

$

5,762

$

820

$

9,270

$

15,852

Short-term contracts and other (a)

 

54,044

 

28,986

 

3,621

 

86,651

Total revenues

$

59,806

$

29,806

$

12,891

$

102,503

(a) Other revenues primarily include sales of single-use tickets and short-term transactional sales for which we have the right to invoice.

Long-term Contracts

Our long-term contracts consist of season passes purchased by customers in the year preceding the operating season to which they relate, sponsorship contracts and international agreements with third parties. Due to the COVID-19 pandemic, we have extended all 2020 season passes through the 2021 season. Due to the extension of term on the 2020 season passes, all 2020 season passes have a length greater than one year and are thus considered long-term contracts. We earn season pass revenue when our customers purchase a season pass for a fixed fee, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks’ operating season. We earn sponsorship revenue from separately-priced contracts with third parties pursuant to which we sell and advertise the third party’s products within the parks in exchange for consideration. Advertisements may include, but are not limited to, banners, signs, radio ads, association with certain events, sponsorship of rides within our parks and retail promotions. We earn international agreements revenue pursuant to arrangements in which we assist in the development and management of Six Flags-branded parks outside of North America. Within our international agreements, we have identified three distinct performance obligations as brand licensing, project services and management services. We do not consider revenue recognized for the performance obligations related to our international agreements to be significant, neither individually nor in the aggregate, to any period presented.

The transaction price for our long-term contracts is explicitly stated within the contracts. Our sponsorship contracts and international agreements may include estimated variable consideration such as penalties for delay in performance of contract terms, and certain volume-based discounts and rebates. We do not believe there will be significant changes to our estimates of variable consideration. Our brand licensing and management services performance agreements include royalty payments and management fees, respectively, based on gross sales from Six Flags-branded parks once opened. We have elected to apply the sales-based royalty exemption to the brand licensing performance obligation, and accordingly, do not estimate revenue attributable to the gross sales-based royalty. We have also elected to apply the direct allocation exemption to the management services performance obligation, and accordingly, do not estimate revenue attributable to the gross sales-based management fee.

We recognize season pass revenue in "Park admissions" over the estimated redemption rate, as we believe this appropriately depicts the transfer of service to our customers. We estimate the redemption rate based on historical experience and other factors and assumptions that we believe to be customary and reasonable. We review the estimated redemption rate regularly, on an ongoing basis, and revise it as necessary throughout the year. Amounts received for

16

multi-use admissions in excess of redemptions are recognized in "Deferred revenue." We recognize sponsorship and international agreements revenue over the term of the agreements using the passage of time as a measure of complete satisfaction of the performance obligations in "Sponsorship, international agreements and accommodations." Amounts received for unsatisfied sponsorship and international agreements performance obligations are recognized in "Deferred revenue."

At January 1, 2021, $77.6 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $8.4 million was recognized as revenue for long-term contracts during the three months ended April 4, 2021. As of April 4, 2021, the total unearned amount of revenue for remaining long-term contract performance obligations was $86.7 million. At January 1, 2020, $85.1 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $10.2 million was recognized as revenue for long-term contracts during the three months ended March 31, 2020. As of March 31, 2020, the total unearned amount of revenue for remaining long-term contract performance obligations was $70.6 million.

As of April 4, 2021, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately $100.8 million in the remainder of 2021, $18.5 million in 2022, $8.9 million in 2023, $2.3 million in 2024, and $0.8 million in 2025 and thereafter.

Short-term Contracts and Other

Our short-term contracts consist primarily of season passes and memberships with customers, certain sponsorship contracts and international agreements with third parties. We earn revenue from a customer’s purchase of our season pass and membership products, which entitles the customer to visit our parks, including certain waterparks, throughout the duration of the parks’ operating season for a fixed fee. Some membership products include other benefits and discounts for our guests during their visits. We earn sponsorship and international agreements revenue from contracts with third parties, pursuant to which we sell and advertise the third party’s products within our parks on a short-term basis that generally coincides with our annual operating season, and pursuant to certain activities in connection with our international agreements. The transaction price for our short-term contracts is explicitly stated within the contracts.

We generally recognize revenue from short-term contracts over the passage of time, with the exception of season pass and membership revenues. We estimate the redemption rate based on historical experience and other factors and assumptions we believe to be customary and reasonable. We review the estimated redemption rate regularly and on an ongoing basis and revise it as necessary throughout the year. Amounts received for multi-use admissions in excess of redemptions are recognized in "Deferred revenue."

Other revenues consist primarily of revenues from single-use tickets for entrance to our parks, in-park services (such as the sale of food and beverages, merchandise, games and attractions, standalone parking sales and other services inside our parks), accommodations revenue, and other miscellaneous products and services. Due to the short-term transactional nature of such purchases, we apply the practical expedient to recognize revenue for single-use ticket sales, in-park services, accommodations, and other miscellaneous services and goods for which we have the right to invoice.

Arrangements with Multiple Performance Obligations

Certain contracts with customers, primarily memberships, may include bundled products with multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the observable retail prices charged to customers and use residual for any products not sold on a stand-alone basis. We generally expense (i) sales commissions when incurred, and (ii) certain costs to obtain a contract where the amortization period would have been one year or less. These costs are recognized in "Selling, general and administrative expenses." We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less or (ii) contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed. For certain of our contracts that have an original expected length of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money.

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3. Long-Term Indebtedness

Credit Facility

As of April 4, 2021, our credit facility consisted of a $481.0 million revolving credit loan facility (the “Second Amended and Restated Revolving Loan”) and a $479.0 million Tranche B Term Loan facility (the “Second Amended and Restated Term Loan B”) pursuant to the amended and restated credit facility that we entered into in 2019 (the “Second Amended and Restated Credit Facility”) and further amended in both April 2020 and August 2020 as discussed below.

On October 18, 2019, we entered into an amendment to the Second Amended and Restated Credit Facility which reduced the overall borrowing rate on the Second Amended and Restated Term Loan B by 25 basis points by reducing the applicable margin from LIBOR plus 2.00% to LIBOR plus 1.75%. We recognized a loss on debt extinguishment of $0.3 million related to the transaction.

On April 8, 2020, certain of our revolving credit lenders agreed to provide an incremental $131.0 million of revolving credit commitments to the Second Amended and Restated Revolving Loan, increasing the facility from $350.0 million to $481.0 million.

On April 15, 2020, we received sufficient consents from the continuing lenders under the Second Amended and Restated Credit Facility (the “Credit Agreement Amendment”) substantially concurrently with the closing of the $725 million 2025 Notes discussed below which, among other things, (i) permitted the issuance of the 2025 Notes, including specifically, permitted the 2025 Notes to mature inside the Second Amended and Restated Term Loan B, (ii) suspended the testing of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2020, (iii) re-established the financial maintenance covenant thereafter (provided that for the first, second, and third quarters of 2021 that such covenant is tested, we will be permitted to use the quarterly Borrower Consolidated Adjusted EBITDA (as defined in the Second Amended and Restated Credit Facility) from the second, third and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2020) and (iv) added a minimum liquidity covenant that will apply from the date of the Credit Agreement Amendment through December 31, 2021. The Credit Agreement Amendment became effective on April 22, 2020, after giving effect to the repayment of a portion of the Second Amended and Restated Term Loan B with a portion of the proceeds from the 2025 Notes.

On April 22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025. The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B, and for general corporate and working capital purposes, including expenses relating to the offering. We recognized a loss on debt extinguishment of $5.1 million related to the transaction.

On August 26, 2020, we entered into an amendment to the Second Amended and Restated Credit Facility which, among other things, (i) extended the previously effectuated suspension of the senior secured leverage ratio financial maintenance covenant in the Second Amended and Restated Credit Facility through the end of 2021, (ii) re-established the senior secured leverage ratio financial maintenance covenant thereafter (provided that for each quarter in 2022 (other than the fourth quarter) that the financial maintenance covenant is tested, SFTP will be permitted to use its quarterly Borrower Consolidated Adjusted EBITDA (as defined in the credit agreement governing the Second Amended and Restated Credit Facility) from the second, third, and fourth quarters of 2019 in lieu of the actual Borrower Consolidated Adjusted EBITDA for the corresponding quarters of 2021), (iii) reduced the commitment fee on the revolving credit facility, and (iv) extended the minimum liquidity covenant that will apply through December 31, 2022. The extension of the modifications to the financial covenant and other provisions in the Second Amended and Restated Credit Facility pursuant to this amendment will be in effect from the date of the amendment until the earlier of the delivery of the compliance certificate for the fourth quarter of 2022 and the date on which SFTP, in its sole discretion, elects to calculate its compliance with the financial maintenance covenant by using its actual Borrower Consolidated Adjusted EBITDA instead of the 2019 figures as outlined above. In addition, all of SFTP’s existing incremental revolving credit

18

lenders agreed to extend the incremental $131 million revolving credit commitments to the Second Amended and Restated Revolving Loan by one year to December 31, 2022.

As of April 4, 2021 and December 31, 2020, we had no amounts outstanding under the Second Amended and Restated Revolving Loan (excluding amounts reserved for letters of credit in the amount of $20.2 million and $21.0 million, respectively). As of March 31, 2020, we had $40.0 million outstanding under the Second Amended and Restated Revolving Loan (excluding amounts reserved for letters of credit in the amount of $21.3 million). Interest on the Second Amended and Restated Revolving Loan accrues at an annual rate of LIBOR plus an applicable margin with an unused commitment fee based on our senior secured leverage ratio. As of April 4, 2021, the Second Amended and Restated Revolving Loan unused commitment fee was 0.625%. The principal amount of the Second Amended and Restated Revolving Loan is due and payable on April 17, 2024.

As of April 4, 2021 and December 31, 2020, $479.0 million was outstanding under the Second Amended and Restated Term Loan B, respectively. As of March 31, 2020, $794.0 million was outstanding under the Second Amended and Restated Term Loan B. Interest on the Second Amended and Restated Term Loan B accrues at an annual rate of LIBOR plus 1.75%. In June 2019, we entered into the June 2019 Swap Agreements to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. In August 2019, we entered into the August 2019 Swap Agreements to further mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. As of April 4, 2021, the applicable interest rate on the Second Amended and Restated Term Loan B was 3.00%. All remaining outstanding principal of the Second Amended and Restated Term Loan B is due and payable on April 17, 2026.

Amounts outstanding under the Second Amended and Restated Credit Facility are guaranteed by Holdings, Six Flags Operations Inc. ("SFO") and certain of the domestic subsidiaries of SFTP (collectively, the "Loan Parties"). The Second Amended and Restated Credit Facility is secured by a first priority security interest in substantially all of the assets of the Loan Parties. The Second Amended and Restated Credit Facility agreement contains certain representations, warranties, affirmative covenants and a financial covenant (specifically, a maximum senior secured net leverage maintenance covenant). In addition, the Second Amended and Restated Credit Facility agreement contains restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the incurrence of indebtedness and liens, fundamental changes, restricted payments, investments, prepayments of certain indebtedness, transactions with affiliates, changes in fiscal periods, modifications of certain documents, and certain hedging agreements, subject, in each case, to certain carve-outs.

2024 Notes, 2025 Notes and 2027 Notes

On June 16, 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due July 31, 2024 (the "2024 Notes"). We capitalized $4.7 million of debt issuance costs directly associated with the issuance of the 2024 Notes. We used approximately $150.0 million of the proceeds from the issuance of the 2024 Notes to reduce our borrowings under the 2015 Term Loan B. We used the remaining net proceeds of the sale of the 2024 Notes for general corporate and working capital purposes, which primarily included repurchases of our common stock.

On April 13, 2017, Holdings issued an additional $700.0 million of 4.875% Senior Notes due July 31, 2024 (the "2024 Notes Add-on"). We capitalized $3.9 million of debt issuance costs directly associated with the issuance of the 2024 Notes Add-on. Interest payments of $24.4 million for the 2024 Notes and the 2024 Notes Add-on are due semi-annually on January 31 and July 31 of each year, with the exception of the first payment for the 2024 Notes on January 31, 2017, which was $9.1 million.

On April 13, 2017, Holdings issued $500.0 million of 5.50% Senior Notes due April 15, 2027 (the "2027 Notes"). We capitalized $2.6 million of debt issuance costs directly associated with the issuance of the 2027 Notes.

During March of 2020, we prepaid $50.5 million of the outstanding 2024 Notes principal reducing the outstanding amount to $949.5 million. We recognized a loss on debt extinguishment of $1.0 million. Interest payments of $23.1 million for the 2024 Notes and the 2024 Notes Add-on are due semi-annually on January 31 and July 31 of each year.

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On April 22, 2020, SFTP completed the private sale of $725.0 million in aggregate principal amount of 7.00% senior secured notes due 2025 (the “2025 Notes”). The net proceeds from this offering were used to repay the outstanding balance of the Second Amended and Restated Revolving Loan and $315.0 million of the Second Amended and Restated Term Loan B and for general corporate and working capital purposes, including expenses relating to the offering. In conjunction with the $315.0 million repayment of the Second Amended and Restated Term Loan B, certain of our hedging instruments that were entered into to mitigate the risk of an increase in the LIBOR interest rate and were de-designated. Consistent with policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into counter-agreements designed to economically offset the impact of the de-designated swap agreements. Interest payments of $25.4 million are due semi-annually on January 1 and July 1 of each year, with the exception of January 1, 2021, which included the interest from April 22, 2020 through July 1, 2020 and totaled $35.1 million.

The 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes are guaranteed by the Loan Parties. The 2024 Notes, the 2024 Notes Add-on, the 2025 Notes and the 2027 Notes contain restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the ability of the Loan Parties to incur additional indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments, engage in transactions with affiliates, pay dividends and repurchase capital stock. The 2024 Notes, the 2024 Notes Add-on, 2025 Notes and the 2027 Notes contain certain events of default, including payment defaults, breaches of covenants and representations, cross defaults to other material indebtedness, judgment, and changes of control and bankruptcy events of default.

Long-Term Indebtedness Summary

As of April 4, 2021, December 31, 2020 and March 31, 2020, long-term debt consisted of the following:

 

As of

(Amounts in thousands)

    

April 4, 2021

    

December 31, 2020

    

March 31, 2020

Second Amended and Restated Term Loan B

    

$

479,000

    

$

479,000

    

$

794,000

Second Amended and Restated Revolving Loan

40,000

2024 Notes

 

949,490

 

949,490

 

949,490

2025 Notes

725,000

725,000

2027 Notes

 

500,000

 

500,000

 

500,000

Net discount

 

(4,080)

 

(4,357)

 

(6,002)

Deferred financing costs

 

(25,049)

 

(26,492)

 

(13,694)

Total debt

$

2,624,361

$

2,622,641

$

2,263,794

Less current portion of long-term debt

 

 

 

(8,000)

Less short-term borrowings

(40,000)

Total long-term debt

$

2,624,361

$

2,622,641

$

2,215,794

Fair-Value of Long-Term Indebtedness

As of April 4, 2021, December 31, 2020 and March 31, 2020, the fair value of our long-term debt was $2,700.5 million, $2,693.3 million and $1,952.4 million, respectively.

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4.  Accumulated Other Comprehensive Loss

Changes in the composition of Accumulated Other Comprehensive Loss ("AOCI") during the three months ended April 4, 2021, were as follows:

Accumulated

Cumulative

Other

Translation

Cash Flow

Defined Benefit

Income

Comprehensive

(Amounts in thousands)

    

Adjustment

    

Hedges

    

Plans

    

Taxes

    

Loss

Balances at December 31, 2020

$

(27,412)

$

(16,819)

$

(57,642)

$

5,369

$

(96,504)

Net current period change

 

(2,402)

 

3,883

 

 

(546)

 

935

Amounts reclassified from AOCI

 

 

1,361

 

340

 

(427)

 

1,274

Balances at April 4,2021

$

(29,814)

$

(11,575)

$

(57,302)

$

4,396

$

(94,295)

The change in “Cumulative Translation Adjustment” was caused by the weakening of the United States Dollar against the Mexican Peso and the Canadian Dollar during the three months ended April 4, 2021. Our assets for our parks that we operate in Mexico and Canada are recorded in their local currencies and translated into United States Dollars on our condensed consolidated balance sheet.

The change in “Cash Flow Hedges” was caused by declining interest rates and continued projections of low interest rates in future interest rate forward curves.

The Company had the following reclassifications out of AOCI during the three months ended April 4, 2021 and March 31, 2020:

Amount of Reclassification from AOCI

Three Months Ended

Component of AOCI

    

Location of Reclassification into (Loss) Income

    

April 4, 2021

March 31, 2020

Amortization of loss on interest rate hedge

Interest Expense

$

1,361

$

(120)

Income tax benefit

 

(342)

 

30

Net of tax

$

1,019

$

(90)

Amortization of deferred actuarial loss and prior service cost

 

Operating expenses

$

340

$

257

 

Income tax expense

 

(85)

 

(64)

 

Net of tax

$

255

$

193

Total reclassifications

 

  

$

1,274

$

103

5.  Derivative Financial Instruments

In June 2019, we entered into the June 2019 Swap Agreements with an aggregate notional amount of $300.0 million to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. The term of the June 2019 Swap Agreements began in June 2019 and expires in June 2023. Upon execution, we designated and documented the June 2019 Swap Agreements as cash flow hedges. The June 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.

In August 2019, we entered into the August 2019 Swap Agreements with an aggregate notional amount of $400.0 million to mitigate the risk of an increase in the LIBOR interest rate in effect on the Second Amended and Restated Term Loan B. The term of the August 2019 Swap Agreements began in August 2019 and expires in August 2024. Upon execution, we designated and documented the August 2019 Swap Agreements as cash flow hedges. The August 2019 Swap Agreements serve as economic hedges and provide protection against rising interest rates.

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In March 2020, we executed a strategy common known as a “blend and extend” on $100.0 million of the June 2019 Swap Agreements that extended the length of one of the swap agreements through April 2026. We extended the existing pay-fixed swap rate over a longer period than its original term at a lower interest rate, while maintaining the same overall value of the swap. The remaining $200.0 million of the June 2019 Swap Agreements did not change.

On April 22, 2020, we repaid $315.0 million of the Second Amended and Restated Term Loan B. In conjunction, the June 2019 Swap Agreements and the Modified June 2019 Swap Agreement were de-designated, since the hedged interest was no longer likely to occur due to the repayment of the debt. As a result, $14.9 million was reclassified from accumulated other comprehensive loss to interest expense in the condensed consolidated statement of operations. Consistent with company policy, we hold and issue derivative instruments for risk management purposes only and do not utilize derivative instruments for trading or speculative purposes. Accordingly, in April 2020 we entered into $300.0 million of notional amount counter-agreements (the “April 2020 Counter-agreements”) designed to economically offset the impact of the de-designated swap agreements.

By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, hedging instruments are placed with counterparties that we believe pose minimal credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, commodity prices or currency exchange rates. We manage the market risk associated with derivative instruments by establishing and monitoring parameters that limit the types and degree of market risk that we may undertake. We hold and issue derivative instruments for risk management purposes only and do not utilize derivatives for trading or speculative purposes.

We record derivative instruments at fair value on our unaudited condensed consolidated balance sheets. When in qualifying relationships, the gains and losses on cash flow designated derivatives are deferred in AOCI and are reclassified to interest expense when the forecasted transaction takes place. The fair value of derivatives that are not designated as hedging instruments are recorded directly to “interest expense, net”. Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid expenses and other current assets and other accrued liabilities, respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in “Deposits and other assets” and “Other long-term liabilities”, respectively.

The table below presents the fair value of our derivative financial instruments in an asset position as well as their classification on the unaudited condensed consolidated balance sheets as of April 4, 2021, December 31, 2020 and March 31, 2020:

(Amounts in thousands)

Asset Derivatives

April 4, 2021

December 31, 2020

March 31, 2020

    

Balance Sheet Classifications

    

Fair Value

    

Fair Value

    

Fair Value

Derivatives not designated as hedging instruments under ASC 815

Interest rate contracts

Other current assets

403

877

Interest rate contracts

Other long-term liabilities

(157)

585

Total derivatives not designated as hedging instruments under ASC 815

$

246

$

1,462

$

Total asset derivatives

$

246

$

1,462

$

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The table below presents the fair value of our derivative financial instruments in a liability position as well as their classification on the unaudited condensed consolidated balance sheets as of April 4, 2021, December 31, 2020 and March 31, 2020:

(Amounts in thousands)

Liability Derivatives

April 4, 2021

December 31, 2020

March 31, 2020

    

Balance Sheet Classifications

    

Fair Value

    

Fair Value

    

Fair Value

Derivatives designated as hedging instruments under ASC 815

Interest rate contracts

Other accrued liabilities

(5,139)

(5,251)

(7,689)

Interest rate contracts

Other long-term liabilities

(6,495)

(11,633)

(22,795)

Total derivatives designated as hedging instruments under ASC 815

$

(11,634)

$

(16,884)

$

(30,484)

Derivatives not designated as hedging instruments under ASC 815

Interest rate contracts

Other current assets

$

398

$

$

Interest rate contracts

Other accrued liabilities

(4,797)

(4,875)

Interest rate contracts

Other long-term liabilities

(7,353)

(9,032)

Total derivatives not designated as hedging instruments under ASC 815

$

(11,752)

$

(13,907)

$

Total liability derivatives

$

(23,386)

$

(30,791)

$

(30,484)

Derivative assets recorded at fair value in our condensed consolidated balance sheets as of April 4, 2021, December 31, 2020 and March 31, 2020, respectively, consisted of the following:

Derivative Assets

(Amounts in thousands)

April 4, 2021

    

December 31, 2020

    

March 31, 2020

Derivatives Designated as Cash Flow Hedges

Interest Rate Swap Agreements — Current

$

 

$

 

$

Interest Rate Swap Agreements — Noncurrent

Derivatives Not Designated as Hedging Instruments

Interest Rate Swap Agreements — Current

 

801

 

877

 

Interest Rate Swap Agreements — Noncurrent

585

$

801

 

$

1,462

 

$

Derivative liabilities recorded at fair value in our condensed consolidated balance sheets as of April 4, 2021, December 31, 2020 and March 31, 2020, respectively, consisted of the following:

Derivative Liabilities

(Amounts in thousands)

April 4, 2021

    

December 31, 2020

    

March 31, 2020

Derivatives Designated as Cash Flow Hedges

Interest Rate Swap Agreements — Current

$

(5,139)

 

$

(5,251)

 

$

(7,689)

Interest Rate Swap Agreements — Noncurrent

(6,495)

(11,633)

(22,795)

Derivatives Not Designated as Hedging Instruments

Interest Rate Swap Agreements — Current

 

(4,797)

 

(4,875)

 

Interest Rate Swap Agreements — Noncurrent

(7,510)

(9,032)

$

(23,941)

 

$

(30,791)

 

$

(30,484)

Losses before taxes on derivatives not designated as a cash flow hedge of $0.1 million were presented in “Interest expense” in the condensed consolidated statement of operations for the three months ended April 4, 2021.

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Gains and losses before taxes on derivatives designated as hedging instruments were presented in “Interest expense” in the condensed consolidated statements of operations for the three months ended April 4, 2021 and March 31, 2020:

Gain (Loss)

(Loss) Gain Reclassified from

Recognized in AOCL

AOCL into Operations

(Amounts in thousands)

    

2021

    

2020

    

2021

2020

Interest Rate Swap Agreements

$

3,883

 

$

(28,794)

 

$

(1,361)

 

$

120

Total

 

$

3,883

 

$

(28,794)

 

$

(1,361)

 

$

120

As of April 4, 2021, we expect to reclassify net losses of $5.1 million, currently recorded in AOCL, into “Interest expense, net” within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

6.  Commitments and Contingencies

Partnership Parks

On April 1, 1998, we acquired all of the capital stock of the former Six Flags Entertainment Corporation (a corporation that has been merged out of existence and that has always been a separate corporation from Holdings, "Former SFEC") for $976.0 million, paid in cash. In addition to our obligations under outstanding indebtedness and other securities issued or assumed in the Former SFEC acquisition, we also guaranteed certain contractual obligations relating to the Partnership Parks. Specifically, we guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions (including rent) of approximately $75.2 million in 2021 (subject to cost of living adjustments) to the limited partners in the Partnership Parks (based on our ownership of units as of April 4, 2021, our share of the distribution will be approximately $33.3 million) and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6% of the Partnership Parks’ revenues. Cash flow from operations at the Partnership Parks is used to satisfy these requirements first, before any funds are required from us. We also guaranteed the obligation of our subsidiaries to annually purchase all outstanding limited partnership units to the extent tendered by the unit holders (the "Partnership Park Put"). The agreed price for units tendered in the Partnership Park Put is based on a valuation of each of the respective Partnership Parks (the "Specified Price") that is the greater of (a) a valuation for each of the respective Partnership Parks derived by multiplying such park’s weighted average four-year EBITDA (as defined in the agreements that govern the partnerships) by a specified multiple (8.0 in the case of SFOG and 8.5 in the case of SFOT) and (b) a valuation derived from the highest prices previously offered for the units of the Partnership Parks by certain entities. In light of the temporary suspension of operations of the parks due to the COVID-19 pandemic during March of 2020, which would cause the value of the partnership park units to decrease in 2021 and thereafter, we adjusted our annual offer to purchase these units to set a minimum price floor for all future purchases. Pursuant to the new minimum price floor, the Specified Price for the Partnership Parks, if determined as of April 4, 2021, is $409.7 million in the case of SFOG and $527.4 million in the case of SFOT. As of April 4, 2021, we owned approximately 31.4% and 53.9% of the Georgia limited partner interests and Texas limited partner interests, respectively. Our obligations with respect to SFOG and SFOT will continue until 2027 and 2028, respectively.

In 2027 and 2028, we will have the option to purchase all remaining units in the Georgia limited partner and the Texas limited partner, respectively, at a price based on the Specified Price, increased by a cost of living adjustment. As of the date of this quarterly report, we expect to purchase units from the Georgia and Texas partnerships for $1.0 million and $1.2 million, respectively, in May 2021 pursuant to the 2021 annual offer. As we purchase additional units, we are entitled to a proportionate increase in our share of the minimum annual distributions. The maximum unit purchase obligations for 2021 at both parks is approximately $523.4 million, representing approximately 68.6% of the outstanding units of SFOG and 46.1% of the outstanding units of SFOT. An additional $350.0 million of incremental borrowing is available under the Second Amended and Restated Credit Facility for future "put" obligations, if necessary.

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In connection with our acquisition of the Former SFEC, we entered into the Subordinated Indemnity Agreement with certain of the Company’s entities, Time Warner, and an affiliate of Time Warner (an indirect subsidiary of AT&T Inc. as a result of a merger in 2018), pursuant to which, among other things, we transferred to Time Warner (which has guaranteed all of our obligations under the Partnership Park arrangements) record title to the corporations that own the entities that have purchased and will purchase limited partnership units of the Partnership Parks, and we received an assignment from Time Warner of all cash flow received on such limited partnership units, and we otherwise control such entities. In addition, we issued preferred stock of the managing partner of the partnerships to Time Warner. In the event of a default by us under the Subordinated Indemnity Agreement or of our obligations to our partners in the Partnership Parks, these arrangements would permit Time Warner to take full control of both the entities that own the limited partnership units and the managing partner. If we satisfy all such obligations, Time Warner is required to transfer to us the entire equity interests of these entities. The 2018 merger of Time Warner and AT&T Inc. did not affect the Time Warner guarantee of our obligations under the Subordinated Indemnity Agreement.

We incurred $9.1 million of capital expenditures at the Partnership Parks during the 2020 season and intend to incur approximately $11.0 million of capital expenditures at these parks for the 2021 season, an amount in excess of the minimum required expenditure. Cash flows from operations at the Partnership Parks will be used to satisfy the annual distribution and capital expenditure requirements, before any funds are required from us. The Partnership Parks used approximately $5.0 million of cash in 2020 in operating activities, after deduction of capital expenditures and excluding the impact of short-term intercompany advances from or payments to Holdings. As of April 4, 2021, December 31, 2020 and March 31, 2020, we had total loans receivable outstanding of $288.3 million, $288.3 million and $239.3 million, respectively, from the partnerships that own the Partnership Parks, primarily to fund the acquisition of Six Flags White Water Atlanta and to make capital improvements to the Partnership Parks and distributions to the limited partners in prior years.

Insurance

We maintain insurance of the types and in amounts that we believe are commercially reasonable and that are available to businesses in our industry. We maintain multi-layered general liability policies that provide for excess liability coverage of up to $100.0 million per occurrence. For incidents arising on or after December 31, 2008, our self-insured retention is $2.0 million, followed by a $0.5 million deductible per occurrence applicable to all claims in the policy year for our domestic parks and our park in Canada and a nominal amount per occurrence for our parks in Mexico. Defense costs are in addition to these retentions. Our general liability policies cover the cost of punitive damages only in certain jurisdictions. Based upon reported claims and an estimate for incurred, but not reported claims, we accrue a liability for our self-insured contingencies. For workers’ compensation claims arising after November 15, 2003, our deductible is $0.75 million ($0.5 million deductible for the period from November 15, 2001 to November 15, 2003). We also maintain fire and extended coverage, business interruption, terrorism and other forms of insurance typical to businesses in our industry. Our all peril property coverage policies insure our real and personal properties (other than land) against physical damage resulting from a variety of hazards. Additionally, we maintain information security and privacy liability insurance in the amount of $10.0 million with a $0.25 million self-insured retention per event.

The majority of our current insurance policies expire on December 31, 2021. We generally renegotiate our insurance policies on an annual basis. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.

Litigation

Privacy Class Action Lawsuits

On January 7, 2016, a putative class action complaint was filed against Holdings in the Circuit Court of Lake County, Illinois. On April 22, 2016, Great America, LLC was added as a defendant. The complaint asserts that we violated the Illinois Biometric Information Privacy Act ("BIPA") in connection with the admission of season pass holders and members through the finger scan program that commenced in the 2014 operating season at Six Flags Great

25

America in Gurnee, Illinois, and seeks statutory damages, attorneys’ fees and an injunction. An aggrieved party under BIPA may recover (i) $1,000 if a company is found to have negligently violated BIPA or (ii) $5,000 if found to have intentionally or recklessly violated BIPA, plus reasonable attorneys’ fees in each case. The complaint does not allege that any information was misused or disseminated. On April 7, 2017, the trial court certified two questions for consideration by the Illinois Appellate Court of the Second District. On June 7, 2017, the Illinois Appellate Court granted our motion to appeal. Accordingly, two questions regarding the interpretation of BIPA were certified for consideration by the Illinois Appellate Court. On December 21, 2017, the Illinois Appellate Court found in our favor, holding that the plaintiff had to allege more than a technical violation of BIPA and had to be injured in some way in order to have a right of action. On March 1, 2018, the plaintiff filed a petition for leave to appeal to the Illinois Supreme Court. On May 30, 2018, the Illinois Supreme Court granted the plaintiff’s leave to appeal and oral arguments were heard on November 20, 2018. On January 25, 2019, the Illinois Supreme Court found in favor of the plaintiff, holding that the plaintiff does not need to allege an actual injury beyond the violation of his rights under BIPA in order to proceed with a complaint. We intend to continue to vigorously defend ourselves against this litigation. The amount we have recorded is based on our estimate of the probable outcome of this litigation.

During 2017, four putative class action complaints were filed against Holdings or one of its subsidiaries. Complaints were filed on August 11, 2017, in the Circuit Court of Lake County, Illinois; on September 1, 2017, in the United States District Court for the Northern District of Georgia; on September 11, 2017, in the Superior Court of Los Angeles County, California; and on November 30, 2017, in the Superior Court of Ocean County, New Jersey. The complaints allege that we, in violation of federal law, printed more than the last five digits of a credit or debit card number on customers’ receipts and/or the expiration dates of those cards. A willful violation may subject a company to liability for actual damages or statutory damages between $100 and $1,000 per person, punitive damages in an amount determined by a court and reasonable attorneys’ fees, all of which are sought by the plaintiffs. The complaints do not allege that any information was misused. On October 20, 2020, the parties entered into a settlement agreement to resolve the lawsuits, for an immaterial amount, and preliminary approval was granted by the court on December 3, 2020. All four lawsuits are stayed pending final approval of the settlement by the court.

Securities Class Action Lawsuits

In February 2020, two putative securities class action complaints were filed against Holdings and certain of its former executive officers (collectively, the “defendants”) in the U.S. District Court for the Northern District of Texas. On March 2, 2020, the two cases were consolidated in an action captioned Electrical Workers Pension Fund Local 103 I.B.E.W. v. Six Flags Entertainment Corp., et al., Case No. 4:20-cv-00201-P (N.D. Tex.) (the “Electrical Workers litigation”), and an amended complaint was filed on March 20, 2020. On May 8, 2020, Oklahoma Firefighters Pension and Retirement System and Electrical Workers Pension Fund Local 103 I.B.E.W. were appointed as lead plaintiffs, Bernstein Litowitz Berger & Grossman LLP was appointed as lead counsel, and McKool Smith PC was appointed as liaison counsel. On July 2, 2020, lead plaintiffs filed a consolidated complaint. The consolidated complaint alleges, among other things, that the defendants made materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the development of its Six Flags branded parks in China and the financial health of its partner, Riverside Investment Group Co. Ltd., in violation of the federal securities laws. The consolidated complaint seeks compensatory damages and other relief on behalf of a putative class of purchasers of Holdings’ publicly traded common stock during the period between April 24, 2018 and February 19, 2020. On August 3, 2020, defendants filed a motion to dismiss the consolidated complaint. On March 3, 2021, the court granted defendants’ motion, dismissing the complaint in its entirety and with prejudice. Plaintiffs filed a motion to amend or set aside judgment on March 31, 2021, and defendants filed an opposition to that motion on April 21, 2021. We believe that these lawsuits are without merit and intend to defend this litigation vigorously. However, there can be no assurance regarding the ultimate outcome of the lawsuit.

Stockholder Derivative Lawsuits

On March 20, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Mr. Mark Schwartz in the U.S. District Court for the Northern District of Texas against certain of its current and former executive officers and directors (the “individual defendants”) in an action captioned Schwartz v. Reid-Anderson, et al., Case No. 4:20-cv-00262-P (N.D. Tex.). In April 2020, two additional stockholder derivative lawsuits, making

26