Six Flags(SIX) - 2023 Q2 - Quarterly Report

General Information This section provides foundational details on forward-looking statements, public information access, and company definitions Cautionary Note Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, including those related to the COVID-19 pandemic, economic conditions, liquidity, and strategic plans, which could cause actual results to differ materially - Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions, and other factors, some beyond the company's control, which could cause actual results to differ materially[5] - Key risk factors include global COVID-19 pandemic disruptions, economic uncertainty (including inflation), liquidity needs, strategic plan execution, capital plan implementation, impact of diverse geographical locations, compliance with laws, ability to obtain financing, interest payments, accounting pronouncements, litigation outcomes, income tax liability, and uncertain tax positions[5] - Additional risks include factors impacting attendance (e.g., contagious diseases like COVID-19 and Monkeypox, events, disturbances, terrorist activities), government regulations, economic impact of political instability (e.g., war in Ukraine), product recalls, safety incidents, insurance availability, inability to achieve financial targets, adverse weather, credit market conditions, changes in consumer tastes, construction delays, competition, seasonal workforce dependence, unionization, labor laws, environmental laws, corporate taxation, and legal proceedings[6][7][13] Available Information The company provides access to its annual, quarterly, and current reports free of charge through its investor relations website and the SEC, or by written request - Copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments are available free of charge through the company's website (investors.sixflags.com) and the SEC[10] - Reports are made available on the website as soon as reasonably practicable after electronic filing with the SEC[10] Company Definitions This section clarifies the terminology used throughout the report, defining 'we,' 'our,' 'Company,' and 'Six Flags' as referring to Six Flags Entertainment Corporation and its consolidated subsidiaries, while 'Holdings' refers solely to Six Flags Entertainment Corporation - The terms 'we,' 'our,' 'Company,' and 'Six Flags' refer collectively to Six Flags Entertainment Corporation and its consolidated subsidiaries[11] - 'Holdings' refers only to Six Flags Entertainment Corporation, without regard to its consolidated subsidiaries[11] PART I. FINANCIAL INFORMATION This part presents unaudited condensed consolidated financial statements and management's analysis of financial condition and operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), stockholders' deficit, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items for the reported periods - Six Flags owns and operates 27 regional theme parks and waterparks, with 24 in the United States, two in Mexico, and one in Montreal, Canada[37] - The company's operations are highly seasonal, with approximately 75% of park attendance and revenues typically occurring in the second and third calendar quarters, primarily between Memorial Day and Labor Day[41] - The COVID-19 pandemic continues to present material uncertainty and risk, impacting financial results due to fluctuating infection rates, supply chain challenges, and wage rate increases[42] - The company consolidates the partnerships that own Six Flags Over Texas (SFOT) and Six Flags Over Georgia (SFOG) as subsidiaries, reflecting non-affiliated equity interests as redeemable noncontrolling interests[44] Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' deficit Condensed Consolidated Balance Sheets (Amounts in thousands) | Category | July 3, 2022 | January 2, 2022 | July 4, 2021 | | :-------------------------------- | :----------- | :-------------- | :----------- | | ASSETS | | | | | Total current assets | $262,796 | $516,035 | $479,865 | | Total property and equipment, net | $1,254,434 | $1,250,927 | $1,239,503 | | Total other assets | $1,196,563 | $1,201,628 | $1,209,031 | | Total assets | $2,713,793 | $2,968,590 | $2,928,399 | | LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | Total current liabilities | $639,881 | $463,239 | $595,231 | | Total noncurrent liabilities | $2,611,213 | $2,965,484 | $2,950,372 | | Total liabilities | $3,251,094 | $3,428,723 | $3,545,603 | | Redeemable noncontrolling interests | $543,719 | $522,067 | $542,950 | | Total stockholders' deficit | $(1,081,020) | $(982,200) | $(1,160,154) | | Total liabilities and stockholders' deficit | $2,713,793 | $2,968,590 | $2,928,399 | Condensed Consolidated Statements of Operations This section presents the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (Amounts in thousands, except per share data) | Metric | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Total revenues | $435,422 | $459,787 | $573,529 | $541,811 | | Operating expenses | $173,582 | $183,768 | $283,526 | $276,411 | | Selling, general and administrative expenses | $53,573 | $50,205 | $92,905 | $86,331 | | Costs of products sold | $35,710 | $39,194 | $45,825 | $46,409 | | Income (loss) before income taxes | $92,433 | $120,660 | $7,658 | $(7,049) | | Income tax expense (benefit) | $24,716 | $29,257 | $5,603 | $(2,613) | | Net income (loss) | $67,717 | $91,403 | $2,055 | $(4,436) | | Net income (loss) attributable to Six Flags Entertainment Corporation | $45,392 | $70,520 | $(20,270) | $(25,319) | | Basic EPS | $0.53 | $0.82 | $(0.24) | $(0.30) | | Diluted EPS | $0.53 | $0.81 | $(0.24) | $(0.30) | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's net income or loss alongside other comprehensive income or loss components Condensed Consolidated Statements of Comprehensive Income (Loss) (Amounts in thousands) | Metric | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $67,717 | $91,403 | $2,055 | $(4,436) | | Other comprehensive income, net of tax | $3,690 | $1,807 | $9,255 | $4,016 | | Comprehensive income (loss) | $71,407 | $93,210 | $11,310 | $(420) | | Comprehensive income (loss) attributable to Six Flags Entertainment Corporation | $49,082 | $72,327 | $(11,015) | $(21,303) | Condensed Consolidated Statements of Stockholders' Deficit This section details changes in the company's equity, including common stock, capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Deficit (Amounts in thousands, except share data) | Category | Balances at April 4, 2021 | Balances at July 4, 2021 | Balances at April 3, 2022 | Balances at July 3, 2022 | | :------------------------------------------ | :------------------------ | :----------------------- | :------------------------ | :----------------------- | | Common stock (shares issued) | 85,369,434 | 85,871,956 | 86,248,545 | 83,026,556 | | Common stock (amount) | $2,134 | $2,147 | $2,156 | $2,075 | | Capital in excess of par value | $1,104,904 | $1,108,680 | $1,124,603 | $1,103,534 | | Accumulated deficit | $(2,249,207) | $(2,178,493) | $(2,088,913) | $(2,114,697) | | Accumulated other comprehensive loss | $(94,295) | $(92,488) | $(75,622) | $(71,932) | | Total stockholders' deficit | $(1,236,464) | $(1,160,154) | $(1,037,776) | $(1,081,020) | Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Category | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------------ | :---------------------------- | :---------------------------- | | Net cash provided by operating activities | $63,237 | $129,333 | | Net cash used in investing activities | $(55,342) | $(42,209) | | Net cash (used in) provided by financing activities | $(269,018) | $7,930 | | Net change in cash and cash equivalents | $(260,783) | $95,127 | | Cash and cash equivalents at end of period | $74,802 | $252,887 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. General — Basis of Presentation This section outlines foundational principles and significant accounting policies for financial statement preparation b. Income Taxes This section details the company's income tax provisions, including valuation allowances for net operating loss carryforwards and expected utilization - A valuation allowance of $108.4 million was recorded as of July 3, 2022, due to uncertainties related to the ability to use certain state net operating loss and other tax carryforwards[45] - The company expects to use all federal net operating loss carryforwards before they expire[45] c. Goodwill and Intangibles This section describes the company's annual impairment testing for goodwill and indefinite-lived intangible assets, noting no impairment identified - Goodwill and indefinite-lived intangible assets are tested for impairment annually; the company is considered a single reporting unit[47] - As of July 3, 2022, the fair value of the single reporting unit exceeded its carrying amount, and no triggering events for a full quantitative analysis were identified[48] e. Earnings (loss) Per Common Share This section presents the calculation of basic and diluted earnings per common share for the reported periods Earnings (loss) Per Common Share (Amounts in thousands, except per share data) | Metric | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) attributable to Six Flags Entertainment Corporation | $45,392 | $70,520 | $(20,270) | $(25,319) | | Basic EPS | $0.53 | $0.82 | $(0.24) | $(0.30) | | Diluted EPS | $0.53 | $0.81 | $(0.24) | $(0.30) | f. Stock Benefit Plans This section outlines the company's stock benefit plans and the associated stock-based compensation expense - The Long-Term Incentive Plan allows for grants of stock options, restricted stock, performance stock units, and other equity awards to employees, officers, directors, and consultants[52] Stock-Based Compensation Expense (Amounts in thousands) | Plan | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Long-Term Incentive Plan | $3,229 | $2,785 | $7,379 | $9,347 | | Employee Stock Purchase Plan | $(6) | $216 | $69 | $291 | | Total Stock-Based Compensation | $3,223 | $3,001 | $7,448 | $9,638 | g. Accounts Receivable, Net This section details the composition of accounts receivable and the allowance for doubtful accounts, primarily for membership programs - Accounts receivable primarily consist of amounts due from guests for group outings and multi-use admission products (season passes, annual passes, memberships)[55] - The allowance for doubtful accounts was $6.7 million as of July 3, 2022, a decrease from $13.8 million at January 2, 2022, and $29.8 million at July 4, 2021, primarily for estimated payment defaults under membership and annual pass programs[55] h. Recent Accounting Pronouncements Not Yet Adopted This section discusses recent accounting pronouncements, specifically ASU 2020-04, and its expected immaterial impact on financial statements - FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), providing optional expedients for contracts affected by reference rate reform (e.g., LIBOR)[56] - The company does not expect Update 2020-04 to have a material effect on its condensed consolidated financial statements[56] 2. Revenue This section details the company's revenue recognition policies, disaggregated by contract duration, and unearned revenue balances - Revenues are recognized when control of promised goods or services is transferred to customers, disaggregated by contract duration (long-term and short-term)[57][58] Total Revenues by Contract Duration (Amounts in thousands) | Category | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Long-term contracts | $21,727 | $85,351 | $32,988 | $97,521 | | Short-term contracts and other | $413,695 | $374,436 | $540,541 | $444,290 | | Total revenues | $435,422 | $459,787 | $573,529 | $541,811 | - Long-term contracts include season passes (over 12 months), sponsorship contracts, and international agreements. Short-term contracts primarily consist of annual passes, season passes (under 12 months), memberships, and transactional sales[62][65] - As of July 3, 2022, $37.6 million of unearned revenue from long-term contracts remained, with approximately $50.9 million expected to be recognized in the remainder of 2022[63][64] 3. Long-Term Indebtedness This section provides details on the company's credit facilities, outstanding debt, interest rates, and recent debt repayment activities - The credit facility includes a $350.0 million revolving credit loan and a $479.0 million Tranche B Term Loan. The revolving loan capacity was reduced from $481.0 million to $350.0 million on May 18, 2022[68] - As of July 3, 2022, $200.0 million was outstanding under the revolving loan (5.17% interest rate) and $479.0 million under the Term Loan B (3.42% interest rate)[69][72] - On July 1, 2022, Holdings prepaid $360.0 million of the 2025 Notes at a premium of 103.5%, resulting in a $17.5 million loss on debt extinguishment[74] Principal Balance of Long-Term Debt (Amounts in thousands) | Debt Type | July 3, 2022 | January 2, 2022 | July 4, 2021 | | :---------------------------------- | :----------- | :-------------- | :----------- | | Second Amended and Restated Term Loan B | $479,000 | $479,000 | $479,000 | | Second Amended and Restated Revolving Loan | $200,000 | $— | $— | | 2024 Notes | $949,490 | $949,490 | $949,490 | | 2025 Notes | $365,000 | $725,000 | $725,000 | | 2027 Notes | $500,000 | $500,000 | $500,000 | | Total debt (before discounts/costs) | $2,493,490 | $2,653,490 | $2,653,490 | 4. Accumulated Other Comprehensive Loss This section presents the components and changes in accumulated other comprehensive loss, including translation adjustments and cash flow hedges Accumulated Other Comprehensive Loss (AOCL) Balances (Amounts in thousands) | Category | Balances at January 2, 2022 | Net current period change | Amounts reclassified from AOCI | Balances at July 3, 2022 | | :-------------------------------- | :-------------------------- | :------------------------ | :----------------------------- | :----------------------- | | Cumulative Translation Adjustment | $(31,970) | $(209) | $— | $(32,179) | | Cash Flow Hedges | $(4,985) | $11,778 | $343 | $7,136 | | Defined Benefit Plans | $(44,093) | $— | $458 | $(43,635) | | Income Taxes | $(139) | $(2,912) | $(203) | $(3,254) | | Total AOCL | $(81,187) | $8,657 | $598 | $(71,932) | 5. Derivative Financial Instruments This section describes the company's use of interest rate swap agreements for risk mitigation and details derivative assets and liabilities - The company uses interest rate swap agreements to mitigate the risk of increasing LIBOR rates on its Second Amended and Restated Term Loan B, entering into derivatives for risk management only[79] - On March 24, 2022, the August 2019 Swap Agreements were terminated for net cash proceeds of $7.4 million, with the settlement recorded in accumulated other comprehensive income to be amortized through September 2024[81] Derivative Assets and Liabilities (Amounts in thousands) | Category | July 3, 2022 | January 2, 2022 | July 4, 2021 | | :--------------------------------------- | :----------- | :-------------- | :----------- | | Derivative Assets | | | | | Derivatives Not Designated as Hedging Instruments | $6,517 | $— | $833 | | Derivative Liabilities | | | | | Derivatives Designated as Cash Flow Hedges | $— | $(5,032) | $(11,603) | | Derivatives Not Designated as Hedging Instruments | $(12,785) | $(8,593) | $(11,379) | | Total Derivative Liabilities | $(12,785) | $(13,625) | $(22,982) | - The company expects to reclassify net losses of $3.1 million, currently in AOCL, into 'Interest expense, net' within the next twelve months[85] 6. Commitments and Contingencies This section outlines the company's various commitments and contingencies, including partnership park guarantees, insurance, and litigation Partnership Parks This section details commitments and guarantees for partnership parks, including minimum distributions and capital expenditures - The company guarantees minimum annual distributions (approximately $80.5 million in 2022) and capital expenditures for the Partnership Parks (Six Flags Over Texas and Six Flags Over Georgia)[86] - In May 2022, the company purchased 0.2536 units from the Texas partnership for $0.6 million[87] - A minimum price floor for Partnership Park units was set due to the COVID-19 pandemic, valuing SFOG at $409.7 million and SFOT at $527.4 million as of July 3, 2022[88] - Redeemable noncontrolling interests for the SFOT and SFOG partnerships totaled $543.7 million as of July 3, 2022[90] Insurance This section describes the company's insurance coverage, annual renegotiations, and future premium and coverage uncertainties - The company maintains commercially reasonable insurance policies, with most expiring on December 31, 2022, and renegotiates them annually[92][93] - The company cannot predict future premium levels, self-insurance retention, aggregate coverage, or the availability of coverage for specific risks[93] Litigation This section details ongoing legal proceedings, including securities, derivative, wage and hour, and personal injury claims Securities Class Action Lawsuits This section details securities class action lawsuits alleging false statements on China park development and partner financial health - A consolidated securities class action lawsuit (Electrical Workers litigation) alleges materially false or misleading statements regarding the company's China park development and the financial health of its former partner[95] - The district court dismissed the complaint with prejudice in March 2021, and plaintiffs filed an appeal to the U.S. Court of Appeals for the Fifth Circuit in August 2021[95][96] - Management believes these lawsuits are without merit and intends to defend them vigorously[97] Stockholder Derivative Lawsuits This section details stockholder derivative lawsuits alleging breach of fiduciary duty and unjust enrichment related to China park development - Consolidated stockholder derivative lawsuits allege breach of fiduciary duty, insider selling, waste of corporate assets, and unjust enrichment related to alleged misstatements about China park development and partner financial health[99][101] - The federal district court dismissed the consolidated complaint with prejudice in April 2021, and a consolidated state derivative action remains stayed[100][101] - Management believes these complaints are without merit and intends to defend them vigorously[102] Wage and Hour Class Action Lawsuits This section details class action lawsuits alleging wage and hour law violations in California and Massachusetts - Multiple class action lawsuits have been filed in California and Massachusetts alleging violations of wage and hour laws, including overtime, meal/rest breaks, wage statements, and background checks[103][105][106][107][108][109] - Several California lawsuits have reached settlement agreements for immaterial amounts, with preliminary or final court approvals pending[103][106][107][108] - The outcome of the Massachusetts lawsuit and one California lawsuit is currently not determinable, and a reasonable estimate of loss or range of loss cannot be made[105][109] Personal Injury Lawsuit This section details multidistrict litigation arising from an alleged chemical vapor release at Six Flags Splashtown - Multidistrict litigation consolidated lawsuits against Six Flags Splashtown arising from an alleged chemical vapor release on July 17, 2021[110] - Plaintiffs are seeking compensatory and punitive damages; the outcome is currently not determinable, and any loss in excess of the recorded amount is not material to consolidated financial statements[110] 7. Business Segments This section describes the company's single parks segment and provides geographical asset and revenue breakdowns - The company operates as a single reportable segment: parks, with owned or managed parks primarily in the United States, Mexico, and Canada[112] Goodwill and Long-Lived Assets by Geography (Amounts in thousands) | Category | July 3, 2022 | January 2, 2022 | July 4, 2021 | | :------- | :----------- | :-------------- | :----------- | | Domestic | $2,322,514 | $2,324,420 | $2,304,446 | | Foreign | $116,550 | $117,066 | $132,116 | | Total | $2,439,064 | $2,441,486 | $2,436,562 | Revenues and (Loss) Income Before Income Taxes by Geography (Six Months Ended) (Amounts in thousands) | Category | Domestic (2022) | Foreign (2022) | Total (2022) | Domestic (2021) | Foreign (2021) | Total (2021) | | :-------------------------- | :-------------- | :------------- | :----------- | :-------------- | :------------- | :----------- | | Revenues | $531,041 | $42,488 | $573,529 | $521,346 | $20,465 | $541,811 | | (Loss) income before income taxes | $(1,063) | $8,721 | $7,658 | $(1,753) | $(5,296) | $(7,049) | 8. Pension Benefits This section details the company's frozen pension plan, net periodic pension benefit, and employer contribution status - The company's pension plan was frozen effective March 31, 2006, and participants no longer earned future benefits after February 16, 2009[114] Total Net Periodic Pension Benefit (Amounts in thousands) | Period | July 3, 2022 | July 4, 2021 | | :------------------------ | :----------- | :----------- | | Three Months Ended | $(1,147) | $(1,179) | | Six Months Ended | $(2,293) | $(2,358) | - No employer pension contributions were made during the six-month periods ended July 3, 2022, and July 4, 2021[116] 9. Stock Repurchase Plans and Shareholder Rights Plan This section outlines the company's stock repurchase activities and remaining authorization under its March 2017 plan - As of July 3, 2022, Holdings had repurchased 8,071,000 shares at a cumulative cost of approximately $365.1 million under the March 2017 Stock Repurchase Plan, with $134.9 million remaining available[117] - The amount of share repurchases is limited by covenants in the Second Amended and Restated Credit Facility, the 2024 Notes, the 2025 Notes, and the 2027 Notes[118] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting key drivers of revenue and expenses, operational strategies, and liquidity management for the reported periods Overview This section provides an overview of Six Flags' operations, primary revenue sources, EBITDA performance, and recent management changes - Six Flags is the largest regional theme park and waterpark operator in the world, with 27 parks across North America[122] - Revenue is primarily derived from ticket sales (approximately 55% of total revenue for the six months ended July 3, 2022), in-park sales, and sponsorship/international agreements[124] - Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased $15.0 million for the six months ended July 3, 2022, driven by increased guest spending per capita and cost savings[124] - Justin Hunt, Vice President, Controller, and Principal Accounting Officer, resigned effective July 15, 2022, with CFO Gary Mick assuming these roles on an interim basis[128] Results of Operations This section analyzes the company's financial performance, comparing revenues, expenses, and key metrics for the current and prior periods Three Months Ended July 3, 2022 Compared to Three Months Ended July 4, 2021 This section compares the company's financial results for the three months ended July 3, 2022, against the same period in the prior year Revenue and Attendance (Three Months Ended) | Metric | July 3, 2022 | July 4, 2021 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :----- | :------- | | Total revenue (in thousands) | $435,422 | $459,787 | $(24,365) | (5)% | | Attendance (in thousands) | 6,652 | 8,550 | (1,898) | (22)% | - Total guest spending per capita increased by $11.93 to $63.87, driven by a 27% increase in admissions revenue per capita and an 18% increase in in-park spending per capita[132] - Operating expenses decreased $10.2 million (6%) due to lower labor expenditures from reduced operating hours and efficient scheduling, partially offset by higher wage rates[133] - Selling, general and administrative expenses increased $3.4 million (7%) primarily due to shifting back-office functions to a shared-services center, moving costs from operating expenses, offset by lower advertising[134][135] - Loss on debt extinguishment was $17.5 million, resulting from the $360.0 million repayment of 2025 Notes, including a $12.6 million premium and $5.0 million write-off of deferred financing costs[140] - Income tax expense was $24.7 million (27% effective tax rate), primarily due to state/foreign income taxes and a $4.0 million discrete tax assessment in Mexico[141] Six Months Ended July 3, 2022 Compared to Six Months Ended July 4, 2021 This section compares the company's financial results for the six months ended July 3, 2022, against the same period in the prior year Revenue and Attendance (Six Months Ended) | Metric | July 3, 2022 | July 4, 2021 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :----- | :------- | | Total revenue (in thousands) | $573,529 | $541,811 | $31,718 | 6% | | Attendance (in thousands) | 8,339 | 9,895 | (1,556) | (16)% | - Total guest spending per capita increased by $13.70 to $66.21, driven by a 29% increase in admissions revenue per capita and a 22% increase in in-park spending per capita[144] - Operating expenses increased $7.1 million (3%) due to increased operating days at California and Mexico parks (closed in Q1 2021) and inflation, partially offset by decreased operating days/hours in Q2 from park optimization[145] - Selling, general and administrative expenses increased $6.6 million (8%) due to shifting back-office functions to a shared-services center, moving costs from operating expenses, offset by lower advertising[146][147] - A $2.0 million gain on disposal of assets was recognized, compared to a $1.2 million loss in the prior year, driven by insurance proceeds for prior year losses[150] - Loss on debt extinguishment was $17.5 million, resulting from the $360.0 million repayment of 2025 Notes, including a $12.6 million premium and $5.0 million write-off of deferred financing costs[152] - Income tax expense was $5.6 million, driven by a $4.0 million discrete tax assessment in Mexico, state/foreign income taxes, and nondeductible expenses[153] Calculation of EBITDA for the three and six months ended July 3, 2022 and July 4, 2021 This section reconciles net income to non-GAAP measures like Modified EBITDA and Adjusted EBITDA, explaining key drivers of change - Management uses non-GAAP measures: Modified EBITDA, Adjusted EBITDA, and Adjusted EBITDA minus capex for budgeting, performance measurement, and incentive compensation[155][156][157] Reconciliation of Net Income (Loss) to Adjusted EBITDA (Amounts in thousands) | Metric | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $67,717 | $91,403 | $2,055 | $(4,436) | | Modified EBITDA | $177,700 | $191,311 | $162,092 | $145,631 | | Adjusted EBITDA | $155,375 | $170,428 | $139,767 | $124,748 | | Capital expenditures, net of property insurance recovery | $(26,352) | $(19,117) | $(55,342) | $(42,250) | | Adjusted EBITDA minus capex | $129,023 | $151,311 | $84,425 | $82,498 | - Adjusted EBITDA decreased by $15.1 million for the three months ended July 3, 2022, primarily due to a $24.3 million revenue decrease, partially offset by cost savings[160] - Adjusted EBITDA increased by $15.0 million for the six months ended July 3, 2022, driven by a $31.7 million revenue increase from resumed operations, partially offset by higher operating costs[161] Liquidity, Capital Commitments and Resources This section discusses the company's liquidity sources, uses of cash, and adequacy of resources for future operational and financial needs - Principal liquidity sources are cash from operations, borrowings, and existing cash; uses include working capital, debt service, park investments, partner payments, and common stock repurchases[163] - The company expects cash flow from operations, available cash, and amounts under the Second Amended and Restated Credit Facility to be adequate for liquidity needs for at least the next twelve months[166] - As of July 3, 2022, the company had approximately $74.8 million of unrestricted cash and $129.0 million available for borrowing under the Second Amended and Restated Revolving Loan[170] - Net cash provided by operating activities was $63.2 million for the six months ended July 3, 2022, compared to $129.3 million in the prior year period[172] - Net cash used in financing activities was $269.0 million for the six months ended July 3, 2022, primarily due to $360.0 million debt repayment and $96.8 million stock repurchases, partially offset by $200.0 million revolving loan borrowing[172] Contractual Obligations This section outlines the company's contractual obligations, including long-term debt payments and interest, noting recent material changes - No material changes to contractual obligations since January 2, 2022, outside the ordinary course of business, except for the early paydown of $360 million on the 2025 Notes[175] Long-Term Debt Payment Due by Period (Amounts in thousands) | Category | 2022 | 2023 - 2024 | 2025 - 2026 | 2027 and beyond | Total | | :---------------------------------------------------------------- | :--- | :---------- | :---------- | :-------------- | :---- | | Long-term debt including current portion (2025 Notes and Second Amended and Restated Revolving Loan) | $— | $200,000 | $365,000 | $— | $565,000 | | Interest on 2025 Notes | $11,803 | $46,583 | $6,951 | $— | $65,337 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes in its market risk exposure as of July 3, 2022, compared to the disclosures in its 2021 Annual Report - There have been no material changes in the company's market risk exposure from that disclosed in the 2021 Annual Report as of July 3, 2022[177] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of July 3, 2022[178] - No changes in internal control over financial reporting occurred during the fiscal quarter ended July 3, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[179] PART II. OTHER INFORMATION This part provides additional disclosures on legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is involved in various legal actions, primarily guest injury claims, with further details referenced in Note 6 - The company is involved in various legal actions, generally for guest injuries, arising in the normal course of business[181] - Although adequately insured against guest claims, damages that cannot be insured against (e.g., punitive damages) could have a material adverse effect on operations[181] - For detailed information regarding legal proceedings, refer to Note 6, Commitments and Contingencies, in the unaudited condensed consolidated financial statements[182] Item 1A. Risk Factors No material changes to the principal risk factors affecting the business, results of operations, and financial condition were reported since the 2021 Annual Report - There have been no material changes to the principal risks that are material to the company's business, results of operations, and financial condition from the risk factors disclosed in the 2021 Annual Report as of July 3, 2022[183] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Holdings continued its stock repurchase plan, having repurchased 8,071,000 shares for $365.1 million as of August 8, 2022, with $134.9 million remaining available - As of August 8, 2022, Holdings had repurchased 8,071,000 shares of common stock at a cumulative cost of approximately $365.1 million under the March 2017 Stock Repurchase Plan[184] - Approximately $134.9 million remained available for permitted repurchases under the plan[184] Stock Repurchase Activity (April 4 - July 3, 2022) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plans or programs | | :---------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | :-------------------------------------------------------------------- | | April 4 - May 1 | — | $— | — | $231,673,000 | | May 2 - May 29 | 2,174,781 | $27.76 | 2,174,781 | $171,299,000 | | May 30 - July 3 | 1,289,604 | $28.23 | 1,289,604 | $134,899,000 | | Total | 3,464,385 | $27.76 | 3,464,385 | $134,899,000 | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements, CEO/CFO certifications, and Inline XBRL financial statements - Exhibits include employment agreements, certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, and Inline XBRL formatted financial statements[186] Signatures The report was duly signed on behalf of Six Flags Entertainment Corporation by its President and Chief Executive Officer and Chief Financial Officer on August 11, 2022 - The report was signed by Selim Bassoul, President and Chief Executive Officer, and Gary Mick, Chief Financial Officer and Interim Principal Accounting Officer, on August 11, 2022[189]