Six Flags(SIX) - 2022 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements and Associated Risks This section outlines forward-looking statements and associated risks that could cause actual results to differ from expectations. Key risk factors highlighted include the ongoing impact of the COVID-19 pandemic on park operations, attendance, and liquidity. Other significant risks involve the implementation of a new strategic plan, compliance with regulations, competition, and economic conditions affecting consumer spending - The company identifies the COVID-19 pandemic, including its duration, severity, virus variants, and vaccination rates, as a primary risk factor affecting park operations and financial results[6] - Successful implementation of a new strategic and transformation plan is cited as a key factor for improving operating results and profitability[6] - A comprehensive list of risks is provided, including factors impacting attendance (e.g., contagious diseases, accidents), regulatory changes, economic conditions, competition, and dependence on a seasonal workforce[7][14] PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for the period ended July 4, 2021, show a significant recovery from the prior year. Total assets increased to $2.93 billion, while total liabilities stood at $3.55 billion, resulting in a stockholders' deficit of $1.16 billion. The company returned to profitability in the second quarter of 2021, driven by the reopening of its parks Condensed Consolidated Balance Sheets As of July 4, 2021, the company reported total assets of $2.93 billion, an increase from $2.77 billion at year-end 2020. Cash and cash equivalents grew to $252.9 million. Total liabilities increased to $3.55 billion, primarily due to a rise in deferred revenue to $310.4 million as park operations resumed. The total stockholders' deficit remained relatively stable at $1.16 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 4, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $252,887 | $157,760 | | Total current assets | $479,865 | $306,740 | | Total assets | $2,928,399 | $2,772,691 | | Liabilities & Stockholders' Deficit | | | | Deferred revenue | $310,441 | $205,125 | | Total current liabilities | $595,231 | $452,405 | | Long-term debt | $2,626,082 | $2,622,641 | | Total liabilities | $3,545,603 | $3,407,862 | | Total stockholders' deficit | ($1,160,154) | ($1,158,547) | Condensed Consolidated Statements of Operations The company reported a significant turnaround in the second quarter of 2021 with total revenues of $459.8 million and net income attributable to the company of $70.5 million, compared to revenues of $19.1 million and a net loss of $136.9 million in the same quarter of 2020. For the six-month period, revenues reached $541.8 million, and the net loss narrowed to $25.3 million from $221.4 million year-over-year Three Months Ended Financial Performance (in thousands, except per share data) | Metric | Q2 2021 (ended July 4) | Q2 2020 (ended June 30) | | :--- | :--- | :--- | | Total revenues | $459,787 | $19,143 | | Net income (loss) attributable to Six Flags | $70,520 | ($136,894) | | Diluted EPS | $0.81 | ($1.62) | Six Months Ended Financial Performance (in thousands, except per share data) | Metric | H1 2021 (ended July 4) | H1 2020 (ended June 30) | | :--- | :--- | :--- | | Total revenues | $541,811 | $121,646 | | Net loss attributable to Six Flags | ($25,319) | ($221,440) | | Diluted EPS | ($0.30) | ($2.62) | Condensed Consolidated Statements of Cash Flows For the six months ended July 4, 2021, net cash provided by operating activities was $129.3 million, a substantial improvement from the $110.7 million used in the prior-year period, reflecting the resumption of park operations. Net cash used in investing activities decreased to $42.2 million due to reduced capital expenditures. Net cash provided by financing activities was $7.9 million Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended July 4, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $129,333 | ($110,703) | | Net cash used in investing activities | ($42,209) | ($73,109) | | Net cash provided by financing activities | $7,930 | $310,896 | | Net change in cash and cash equivalents | $95,127 | $121,777 | Notes to Condensed Consolidated Financial Statements The notes detail the basis of presentation, including a change in the fiscal calendar and the significant impact of COVID-19. They provide breakdowns of revenue, long-term debt, derivative instruments, and commitments. Key details include the reopening of all parks by May 2021, costs related to a transformation plan, the extension of 2020 season passes, and the status of various legal proceedings - The company changed its fiscal year to end on the Sunday closest to December 31, starting January 1, 2021, to better align reporting with business operations[39] - As of June 15, 2021, all parks were open and no longer subject to mandated capacity constraints, with the exception of parks in Montreal and Mexico[43] - The company incurred $11.0 million in transformation plan costs during the first six months of 2021, primarily for consultant fees and technology modernization[50] - Total long-term debt principal as of July 4, 2021, was approximately $2.65 billion, composed of the Term Loan B, and 2024, 2025, and 2027 Notes[82] - The company settled several class action lawsuits, including a privacy lawsuit related to BIPA and lawsuits related to COVID-19 park closures, for immaterial amounts[100][116] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant operational and financial recovery following the COVID-19 pandemic-related disruptions of 2020. With all parks reopened by May 2021, revenues and attendance saw a dramatic increase in the second quarter. The discussion highlights strong growth in guest spending per capita compared to pre-pandemic levels in 2019, driven by revenue management and transformation initiatives. The company believes its liquidity is sufficient for the next twelve months, supported by cash from operations and available credit, despite the temporary suspension of dividends and stock buybacks Results of Operations Comparing Q2 2021 to Q2 2019 (a pre-pandemic baseline), total revenue decreased by 4% to $459.8 million, primarily due to lower sponsorship and international agreement revenue. However, total guest spending per capita increased by a strong 18% to $53.78 versus 2019, reflecting higher admissions and in-park spending. For the six-month period, revenue was down 11% versus 2019, but per capita spending was up 15%. The recovery was driven by the full reopening of parks and strong consumer spending trends, partially offset by lower attendance compared to 2019 Three Months Ended Performance vs. 2019 | Metric | Q2 2021 (ended July 4) | Q2 2019 (ended June 30) | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $459,787K | $477,210K | (4)% | | Attendance | 8,550K | 10,508K | (19)% | | Total revenue per capita | $53.78 | $45.41 | 18% | Six Months Ended Performance vs. 2019 | Metric | H1 2021 (ended July 4) | H1 2019 (ended June 30) | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $541,811K | $605,403K | (11)% | | Attendance | 9,895K | 12,675K | (22)% | | Total revenue per capita | $54.76 | $47.76 | 15% | - The increase in guest spending per capita versus 2019 was driven by a 28% rise in non-admissions revenue per capita and a 19% increase in admissions revenue per capita, attributed to revenue management initiatives and strong consumer spending[140] - Operating expenses in Q2 2021 increased by 3% compared to Q2 2019, mainly due to costs for sanitization and COVID-19 preventative measures, partially offset by savings from the transformation plan[144] Transformation Plan The company is executing a transformation plan focused on modernizing the guest experience with technology, improving operational efficiency, and driving financial excellence. Progress includes reducing full-time headcount costs by 10% in October 2020, centralizing vendor negotiations, optimizing labor usage, and improving pricing and merchandising strategies - The strategy has three main focus areas: modernizing the guest experience through technology, improving operational efficiency, and driving financial excellence[132] - Key actions taken include a 10% reduction in full-time headcount costs, closing satellite offices, centralizing procurement, and optimizing ticket pricing and media spending[133] Liquidity, Capital Commitments and Resources As of July 4, 2021, the company had $252.9 million in cash and $460.8 million available under its revolving credit facility. Management believes this liquidity is adequate for at least the next twelve months. Dividend payments and stock repurchases remain suspended until at least late 2022 as per credit facility amendments. Total indebtedness was approximately $2.63 billion, with anticipated annual cash interest payments around $150-$160 million for 2021-2022 - The company believes cash flow from operations, available cash, and its credit facility are adequate to meet liquidity needs for at least the next twelve months[181] - As of July 4, 2021, liquidity consisted of $252.9 million in cash and $460.8 million available under the revolving credit facility[185] - Dividend payments and stock repurchases are suspended until the earlier of December 31, 2022, or when certain credit facility conditions are met[180] Quantitative and Qualitative Disclosures About Market Risk The company states that as of July 4, 2021, there have been no material changes in its market risk exposure from the disclosures made in its 2020 Annual Report - There were no material changes in market risk exposure from the 2020 Annual Report[191] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of July 4, 2021. No material changes to internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that as of July 4, 2021, the company's disclosure controls and procedures are effective[192] - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[193] PART II. OTHER INFORMATION Legal Proceedings The company is party to various legal actions arising from the normal course of business, primarily guest injury claims. It believes it is adequately insured against these claims. For detailed information, the report refers to Note 6 of the financial statements - The company is exposed to legal claims, mainly for guest injuries, which is typical for the industry[195] - Detailed information on legal proceedings is located in Note 6, Commitments and Contingencies[196] Risk Factors There have been no material changes to the principal risk factors previously disclosed in the company's 2020 Annual Report - No material changes to the principal risks have occurred since the 2020 Annual Report[197] Unregistered Sales of Equity Securities and Use of Proceeds The company discusses its stock repurchase plan, which was approved in March 2017 for $500 million. As of July 23, 2021, approximately $231.7 million remained available for repurchases. However, stock repurchases are currently suspended due to amendments to its credit facility, and no repurchases were made in the three months ended July 4, 2021 - The stock repurchase program has approximately $231.7 million remaining available for repurchases as of July 23, 2021[198] - Stock repurchases were suspended as part of credit facility amendments and are not expected to resume until at least late 2022[199] - No stock repurchases occurred during the three months ended July 4, 2021[200] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act and financial statements formatted in Inline XBRL - Lists exhibits filed with the report, including Sarbanes-Oxley certifications and XBRL data[201] Signatures Signatures The report is duly signed and authorized by Michael Spanos, President and Chief Executive Officer, and Sandeep Reddy, Executive Vice President and Chief Financial Officer, on July 28, 2021 - The report was signed on July 28, 2021, by the CEO and CFO[204]