Six Flags Entertainment 10Q 2023 Q1 Quarterly report

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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 2, 2023 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

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 May 3, 2023, Six Flags Entertainment Corporation had 83,284,345 outstanding shares of common stock, par value $0.025 per share.

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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 2, 2023 (unaudited), January 1, 2023 and April 3, 2022 (unaudited)	3

	Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended April 2, 2023 and April 3, 2022	4

	Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the Three Months Ended April 2, 2023 and April 3, 2022	5

	Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the Three Months Ended April 2, 2023 and April 3, 2022	6

	Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended April 2, 2023 and April 3, 2022	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6.	Exhibits	30

Signatures		31

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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. 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. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors¹ include (i) global coronavirus (“COVID-19”) pandemic-related business disruptions and economic uncertainty (ii) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, (iii) our expectations regarding the timing, costs, benefits and results of our strategic plan, (iv) impact of macro-economic conditions, including inflation on consumer spending, (iv) our ability to implement our capital plans in a timely and cost effective manner, and our expectations regarding the anticipated costs, benefits and results of such capital plans, (vi) the extent to which having parks in diverse 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 and regulations, (viii) our ability to obtain additional financing and the increased cost of capital due to rising interest rates, (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, and (xii) our expectations regarding uncertain tax positions.

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. Additional risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements include, among others, the following:

•

factors impacting attendance, such as local conditions, contagious diseases, including COVID-19 and Monkey Pox, 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 and Monkey Pox, 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);

•

economic impact of political instability and conflicts globally, such as the war in Ukraine;

•

recall of food, toys and other retail products sold at our parks;

•

accidents or incidents 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;

•

macro-economic conditions (including supply chain issues and the impact of inflation on customer spending patterns);

•

our ability to successfully implement our strategy;

•

changes in public and consumer tastes;

•

construction delays in capital improvements or ride downtime;

•

competition with other theme parks, water parks and entertainment alternatives;

•

dependence on a seasonal workforce;

•

unionization activities and labor disputes;

•

laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, healthcare reform and potential wage and hour claims;

•

availability of labor;

•

environmental laws and regulations;

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•

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 January 1, 2023 (the "2022 Annual Report"), and in this Quarterly Report.

All forward-looking statements in this 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 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, virus variants and the rate of vaccinations 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.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


	As of
	April 2, 2023		January 1, 2023		April 3, 2022
(Amounts in thousands, except share data)	(unaudited)				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	64,749	$	80,122	$	252,203
Accounts receivable, net		45,462		49,405		86,461
Inventories		41,016		44,811		39,161
Prepaid expenses and other current assets		83,639		66,452		55,454
Total current assets		234,866		240,790		433,279
Property and equipment, net:
Property and equipment, at cost		2,621,518		2,592,485		2,528,135
Accumulated depreciation		(1,380,846)		(1,350,739)		(1,280,969)
Total property and equipment, net		1,240,672		1,241,746		1,247,166
Other assets:
Right-of-use operating leases, net		156,376		158,838		184,643
Debt issuance costs		2,230		2,764		4,365
Deposits and other assets		20,272		17,905		10,779
Goodwill		659,618		659,618		659,618
Intangible assets, net of accumulated amortization of $290, $284 and $266 as of April 2, 2023, January 1, 2023 and April 3, 2022, respectively		344,158		344,164		344,182
Total other assets		1,182,654		1,183,289		1,203,587
Total assets	$	2,658,192	$	2,665,825	$	2,884,032

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	43,513	$	38,887	$	65,652
Accrued compensation, payroll taxes and benefits		14,417		15,224		22,444
Accrued insurance reserves		34,032		34,053		32,423
Accrued interest payable		27,527		38,484		33,217
Other accrued liabilities		60,032		67,346		94,052
Deferred revenue		152,096		128,627		185,094
Short-term borrowings		170,000		100,000		—
Short-term lease liabilities		12,040		11,688		11,383
Total current liabilities		513,657		434,309		444,265
Noncurrent liabilities:
Long-term debt		2,281,841		2,280,531		2,631,246
Long-term lease liabilities		166,562		164,804		180,464
Other long-term liabilities		28,477		30,714		10,502
Deferred income taxes		162,973		184,637		133,264
Total noncurrent liabilities		2,639,853		2,660,686		2,955,476
Total liabilities		3,153,510		3,094,995		3,399,741

Redeemable noncontrolling interests		521,395		521,395		522,067

Stockholders' deficit:
Preferred stock, $1.00 par value		—		—		—
Common stock, $0.025 par value, 280,000,000 shares authorized; 83,279,300, 83,178,294 and 86,248,545 shares issued and outstanding at April 2, 2023, January 1, 2023 and April 3, 2022, respectively		2,082		2,079		2,156
Capital in excess of par value		1,107,258		1,104,051		1,124,603
Accumulated deficit		(2,055,359)		(1,985,500)		(2,088,913)
Accumulated other comprehensive loss, net of tax		(70,694)		(71,195)		(75,622)
Total stockholders' deficit		(1,016,713)		(950,565)		(1,037,776)
Total liabilities and stockholders' deficit	$	2,658,192	$	2,665,825	$	2,884,032

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended
(Amounts in thousands, except per share data)	April 2, 2023		April 3, 2022
Park admissions	$	76,303	$	72,987
Park food, merchandise and other		52,786		54,269
Sponsorship, international agreements and accommodations		13,101		10,851
Total revenues		142,190		138,107
Operating expenses (excluding depreciation and amortization shown separately below)		108,870		109,719
Selling, general and administrative expenses (including stock-based compensation of $3,314 and $4,225 in 2023 and 2022, respectively, and excluding depreciation and amortization shown separately below)		44,247		39,257
Costs of products sold		9,765		10,115
Depreciation and amortization		29,114		29,049
Loss (gain) on disposal of assets		2,435		(2,100)
Operating loss		(52,241)		(47,933)
Interest expense, net		36,302		37,530
Other income, net		(832)		(688)
Loss before income taxes		(87,711)		(84,775)
Income tax benefit		(17,852)		(19,113)
Net loss attributable to Six Flags Entertainment Corporation	$	(69,859)	$	(65,662)

Weighted-average common shares outstanding:
Basic:		83,207		86,197
Diluted:		83,207		86,197

Earnings per average common share outstanding:
Basic:	$	(0.84)	$	(0.76)
Diluted:	$	(0.84)	$	(0.76)

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended
(Amounts in thousands)	April 2, 2023		April 3, 2022
Net loss	$	(69,859)	$	(65,662)
Other comprehensive income, net of tax:
Foreign currency translation adjustment ⁽¹⁾		916		(4,085)
Defined benefit retirement plan ⁽²⁾		176		171
Change in cash flow hedging ⁽³⁾		(591)		9,479
Other comprehensive income, net of tax		501		5,565
Comprehensive loss attributable to Six Flags Entertainment Corporation	$	(69,358)	$	(60,097)

(1) Foreign currency translation adjustment is presented net of tax expense of $0.1 million for the three months ended April 2, 2023, and net of tax benefit of $1.1 million for the three months ended April 3, 2022.

(2) Defined benefit retirement plan is presented net of tax expense of $0.1 million for the three months ended April 2, 2023 and April 3, 2022.

(3) Change in cash flow hedging is presented net of tax benefit of $0.2 million for the three months ended April 2, 2023 and net of tax expense of $3.1 million for the three months ended April 3, 2022.

See accompanying notes to unaudited condensed consolidated financial statements.

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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 January 2, 2022	86,162,879	$	2,154	$	1,120,084	$	(2,023,251)	$	(81,187)	$	(982,200)
Issuance of common stock	87,702		2		297		—		—		299
Stock-based compensation	—		—		4,225		—		—		4,225
Payment of tax withholdings on equity-based compensation through shares withheld	(2,036)		—		(3)		—		—		(3)
Net loss attributable to Six Flags Entertainment Corporation	—		—		—		(65,662)		—		(65,662)
Net other comprehensive income, net of tax	—		—		—		—		5,565		5,565
Balances at April 3, 2022	86,248,545	$	2,156	$	1,124,603	$	(2,088,913)	$	(75,622)	$	(1,037,776)


								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 January 1, 2023	83,178,294	$	2,079	$	1,104,051	$	(1,985,500)	$	(71,195)	$	(950,565)
Issuance of common stock	104,660		3	$	(3)	$	—	$	—		—
Stock-based compensation	—		—	$	3,314	$	—	$	—		3,314
Payment of tax withholdings on equity-based compensation through shares withheld	(3,654)		—	$	(104)	$	—	$	—		(104)
Net loss attributable to Six Flags Entertainment Corporation	—		—	$	—	$	(69,859)	$	—		(69,859)
Net other comprehensive income, net of tax	—		—	$	—	$	—	$	501		501
Balances at April 2, 2023	83,279,300	$	2,082	$	1,107,258	$	(2,055,359)	$	(70,694)	$	(1,016,713)

See accompanying notes to unaudited condensed consolidated financial statements.

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SIX FLAGS ENTERTAINMENT CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended
(Amounts in thousands)	April 2, 2023		April 3, 2022
Cash flows from operating activities:
Net loss	$	(69,859)	$	(65,662)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		29,114		29,049
Stock-based compensation		3,314		4,225
Interest accretion on notes payable		278		278
Amortization of debt issuance costs		1,566		1,978
Loss (gain) on disposal of assets		2,435		(2,100)
Deferred income tax benefit		(20,672)		(18,347)
Other		30		5,220
Changes in operating assets and liabilities:
Decrease in accounts receivable		7,426		11,535
Increase in inventories, prepaid expenses and other current assets		(18,672)		(11,512)
Decrease (increase) in deposits and other assets		2,834		(4,600)
Decrease in ROU operating leases		2,847		2,585
Increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities		12,070		6,815
Increase in operating lease liabilities		1,977		2,161
Decrease in accrued interest payable		(10,957)		(17,337)
Net cash used in operating activities		(56,269)		(55,712)

Cash flows from investing activities:
Additions to property and equipment		(25,488)		(32,071)
Property insurance recoveries		481		3,081
Net cash used in investing activities		(25,007)		(28,990)

Cash flows from financing activities:
Repayment of borrowings		(10,000)		—
Proceeds from borrowings		80,000		—
Payment of debt issuance costs		(970)		—
Payment of cash dividends		—		(14)
Proceeds from issuance of common stock		—		299
Payment of tax withholdings on equity-based compensation through shares withheld		(104)		(3)
Reduction in finance lease liability		(247)		(201)
Net cash provided by financing activities		68,679		81

Effect of exchange rate on cash		(2,776)		1,239

Net change in cash and cash equivalents		(15,373)		(83,382)
Cash and cash equivalents at beginning of period		80,122		335,585
Cash and cash equivalents at end of period	$	64,749	$	252,203

Supplemental cash flow information
Cash paid for interest	$	46,209	$	52,157
Cash paid for income taxes	$	311	$	885

See accompanying notes to unaudited condensed consolidated financial statements.

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1. General — Basis of Presentation

We own and operate regional theme parks and water parks. We are the largest regional theme park operator in the world, and we are the largest operator of water parks in North America based on the number of parks we operate. Of the 27 parks we owned or operated as of April 2, 2023, 24 parks are located in the United States, two are located in Mexico and one is located in Montreal, Canada.

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.

Our current fiscal year will end on December 31, 2023. This Quarterly Report covers the period January 2, 2023 – April 2, 2023 (“the three months ended April 2, 2023). The comparison period in the prior year covers the dates January 3, 2022 – April 3, 2022 (“the three months ended April 3, 2022”).

The 2022 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 of operations for the three months ended April 2, 2023, are not indicative of the results expected for the full year. Our operations are highly seasonal, with approximately 70% - 75% of park attendance and revenues in a typical year occurring in the second and third calendar quarters of each year, with the most significant period falling between Memorial Day and Labor Day.

Certain previously reported amounts have been reclassified to conform to the current year presentation.

Inflation and Supply Chain

Our operations can be impacted by increases in prices, whether caused by inflation or other economic drivers. Our business relies on a large number of seasonal workers. Our labor costs continue to increase due to shortages of qualified workers and competition from other employers. We continually seek to optimize and deploy our existing employees to both maximize revenue generating opportunities and provide the best guest experience. Hiring and retaining our workers continues to be a priority to avoid further labor shortages.

Supply chain disruption has continued for many of the products and inputs that we use in our parks, including food, merchandise and replacement parts, causing costs to increase. We have continued to mitigate these impacts to the extent possible by passing these costs on to our customers when possible.

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 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.

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b. Income Taxes

We recorded a valuation allowance of $97.6 million, $96.0 million and $107.8 million as of April 2, 2023, January 1, 2023 and April 3, 2022, 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.

We classify interest and penalties attributable to income taxes as part of income tax expense. As of April 2, 2023, January 1, 2023 and April 3, 2022, we had no recorded amounts for accrued interest or penalties.

c. Goodwill and Intangibles

As of April 2, 2023, the fair value of our single reporting unit exceeded its 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 indicator of our reporting unit’s fair value. At April 2, 2023, we did not identify any triggering events that would require a full quantitative analysis to be performed.

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, “triggering event(s)”. 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. As of April 2, 2023, we did not identify any triggering events that would require a quantitative analysis.

e. Earnings Per Common Share

We incurred a net loss for the three months ended April 2, 2023, and April 3, 2022. Therefore, diluted shares outstanding equaled basic shares outstanding for the purposes of determining loss per common share because their inclusion would be antidilutive. The computation of diluted earnings per share excluded the effect of 1,607,000 and 2,744,000 antidilutive stock options, restricted stock units and performance stock units for the three months ended April 2, 2023, and April 3, 2022, respectively.

f. 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 stock units, performance and cash-settled awards and dividend equivalent rights ("DERs") to select employees, officers, directors and consultants of Holdings and its affiliates.

Periodically, we will grant performance stock units to key employees. These awards vest on attainment of specific objectives most often related to Adjusted EBITDA or recognized revenue over a defined period. As of April 2, 2023, we have not determined that it is probable that we achieve any of the specific objectives, and thus, we have not recognized any expense associated with any outstanding performance stock units.

During the three months ended April 2, 2023, and April 3, 2022, stock-based compensation expense consisted of the following:


	Three Months Ended
(Amounts in thousands)	April 2, 2023		April 3, 2022
Long-Term Incentive Plan	$	3,284	$	4,150
Employee Stock Purchase Plan		30		75
Total Stock-Based Compensation	$	3,314	$	4,225

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During the three months ended April 2, 2023, and April 3, 2022, we paid a nominal amount to employees with dividend equivalent rights for previously declared dividends due upon the vesting of the related shares of Holdings’ common stock. These dividends were declared prior to the suspension of dividend payments.

g. 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 that allow for payment plans, such as season passes and memberships. 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 2, 2023, January 1, 2023 and April 3, 2022, we have recorded an allowance for doubtful accounts of $2.7 million, $4.1 million and $5.7 million, respectively, which is primarily comprised of estimated payment defaults under our membership program and multi-use admission products that allow for payment plans. To the extent that payments under our membership program and multi-use admission products have not been recognized in revenue, the allowance for doubtful accounts recorded is offset with a corresponding reduction in deferred revenue.

h. Recently Adopted Accounting Pronouncements

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. Interest on the Second Amended and Restated Credit Facility accrues at an annual rate based on LIBOR.

2. Revenue

Revenues are recognized when control of the promised goods or services are 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.

The following tables present our revenues disaggregated by contract duration for the three months ended April 2, 2023, and April 3, 2022, 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 2, 2023
					Sponsorship,
			Park Food,		International
			Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Total
Long-term contracts	$	4,861	$	540	$	6,763	$	12,164
Short-term contracts and other^(a)		71,442		52,246		6,338		130,026
Total revenues	$	76,303	$	52,786	$	13,101	$	142,190

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	Three Months Ended April 3, 2022
					Sponsorship,
			Park Food,		International
			Merchandise		Agreements and
(Amounts in thousands)	Park Admissions		and Other		Accommodations		Total
Long-term contracts	$	3,951	$	782	$	6,528	$	11,261
Short-term contracts and other ^(a)		69,036		53,487		4,323		126,846
Total revenues	$	72,987	$	54,269	$	10,851	$	138,107

(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

At January 1, 2023, $33.5 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $12.2 million was recognized as revenue for long-term contracts during the three months ended April 2, 2023. As of April 2, 2023, we had $152.1 million of deferred revenue of which the total unearned amount of revenue for remaining long-term contract performance obligations was $42.8 million. At January 2, 2022, $58.7 million of unearned revenue associated with outstanding long-term contracts was reported in "Deferred revenue," of which $12.2 million was recognized as revenue for long-term contracts during the three months ended April 3, 2022. As of April 3, 2022, we had $185.1 million in deferred revenue, of which the total unearned amount of revenue for remaining long-term contract performance obligations was $59.0 million.

As of April 2, 2023, we expect to recognize estimated revenue for partially or wholly unsatisfied performance obligations on long-term contracts of approximately $54.6 million in the remainder of 2023, $17.7 million in 2024, $9.3 million in 2025, $7.1 million in 2026, and $12.8 million in 2027 and thereafter.

3. Long-Term Indebtedness

Credit Facility

As of April 2, 2023, our credit facility consisted of a $350.0 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 of April 2, 2023 and January 1, 2023, we had $170.0 million and $100.0 million outstanding under the Second Amended and Restated Revolving Loan (excluding amounts reserved for letters of credit in the amount of $21.0 million as of each respective period end). As of April 3, 2022, we had no amounts outstanding under the Second Amended and Restated Revolving Loan (excluding amounts reserved for letters of credit in the amount of $21.0 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 3, 2022, the Second Amended and Restated Revolving Loan unused commitment fee was 0.625%. The Second Amended and Restated Revolving Loan will mature on April 17, 2024.

As of April 2, 2023, January 1, 2023 and April 3, 2022, $479.0 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 three separate interest rate swap agreements with a notional amount of $300.0 million (the “June 2019 Swap Agreements”) and, in August 2019, we entered into two separate interest rate swap agreements with a notional amount of $400.0 million (the “August 2019 Swap Agreements”). These swaps were entered into to mitigate the risk of an increase in the LIBOR interest rate on the Second Amended and Restated Term Loan B by exchanging the floating LIBOR rate for a negotiated fixed rate. On March 24, 2022, we terminated the August 2019 Swap Agreements. The June 2019 Swap Agreements expire in June 2023. The Second Amended and Restated Term Loan B now consists of only floating rate debt. As of April 2, 2023, the applicable interest rate on the Second Amended and Restated Term Loan B was 6.60 %. The Second Amended and Restated Term Loan B will mature on April 17, 2026.

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2024 Notes, 2025 Notes and 2027 Notes

In June 2016, Holdings issued $300.0 million of 4.875% senior unsecured notes due 2024 and, in April 2017, issued an additional $700.0 million of senior unsecured notes due 2024 (together, the “2024 Notes”). In April 2017, Holdings issued $500.0 million of 5.50% senior notes due 2027 (the "2027 Notes"). In April 2020, SFTP issued $725.0 million of 7.00% senior secured notes due 2025 (the “2025 Notes”). As of April 2, 2023, $949.5 million of the 2024 Notes, $365.0 million of the 2025 Notes, and $500.0 million of the 2027 Notes, were issued and outstanding. Interest payments of $23.1 million for the 2024 Notes are due semi-annually on January 31 and July 31 of each year. Interest payments of $12.8 million for the 2025 Notes are due semi-annually on January 1 and July 1 each year. Interest payments of $13.8 million for the 2027 Notes are due semi-annually on April 15 and October 15 of each year.

Long-Term Indebtedness Summary

As of April 2, 2023, January 1, 2023 and April 3, 2022, the principal balance of our long-term debt consisted of the following:


	As of
(Amounts in thousands)	April 2, 2023		January 1, 2023		April 3, 2022
Second Amended and Restated Term Loan B	$	479,000	$	479,000	$	479,000
Second Amended and Restated Revolving Loan		170,000		100,000		—
2024 Notes		949,490		949,490		949,490
2025 Notes		365,000		365,000		725,000
2027 Notes		500,000		500,000		500,000
Net discount		(1,859)		(2,138)		(2,972)
Deferred financing costs		(9,790)		(10,821)		(19,272)
Total debt	$	2,451,841	$	2,380,531	$	2,631,246
Less short-term borrowings		(170,000)		(100,000)		—
Total long-term debt	$	2,281,841	$	2,280,531	$	2,631,246

Fair-Value of Long-Term Indebtedness

As of April 2, 2023, January 1, 2023 and April 3, 2022, the fair value of our long-term debt was $2,423.8 million, $2,284.3 million and $2,660.5 million, respectively.

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Recent Events

On April 26, 2023, the Company launched a private offering of up to $800 million aggregate principal amount of senior notes. Concurrently, the Company commenced a cash tender offer (the “Tender Offer”) for any and all outstanding 2024 Notes. The consideration offered for each $1,000 principal amount of the 2024 Notes was $1,000.50 (the “Purchase Price”), plus accrued and unpaid interest, for any an all notes validly tendered by 5:00 p.m. New Your City time, on May 2, 2023.

On May 3, 2023, the Company completed the private sale of $800 million in aggregate principal amount of 7.25% senior unsecured notes due 2031 (“2031 Notes”) at an offering price of 99.248% of the principal amount thereof. Net of the original issuance discount and debt issuance costs, the Company received net proceeds of $784.0 million. Concurrently with the closing of the 2031 Notes, the Company amended its existing senior secured credit facility to, among other things, (i) establish a $500 million replacement revolving credit facility maturing in May 2028, which was previously scheduled to expire in April 2024 (ii) maintain the same interest rate margins on borrowings under the replacement revolving credit facility as are currently in effect, while reducing the fee on unused revolving commitments to 0.5%, stepping down to 0.375% upon achieving a senior secured leverage ratio of less than 1.25:1.00, (iii) replace LIBOR as the interest rate benchmark for borrowings under the senior secured credit facility with Term SOFR, (iv) modify the maximum senior secured leverage ratio that the Company must maintain to 4.50:1.00 for the four fiscal-quarter periods ending on or about December 31, 2022, March 31, 2023, and June 30, 2023, 4.25:1.00 for the four fiscal-quarter period ending on or about September 30, 2023, and each four fiscal-quarter period thereafter through the four fiscal-quarter period ending on or about June 30, 2024, and 3.75:1.00 for the four fiscal-quarter period ending on or about September 30, 2024, and each four fiscal-quarter period thereafter, and (v) make certain other changes to the covenants and other terms of the senior secured credit facility.

Also on May 3, 2023, the Company announced that $892.6 million, or 94.0% of the aggregate principal amount of the 2024 notes were validly tendered pursuant to the Tender Offer. Net cash proceeds from the 2031 Notes, together with other available cash, including borrowings under our revolving credit facility, were used to pay the Purchase Price, plus accrued and unpaid interest.

4. Accumulated Other Comprehensive Loss

Changes in the composition of Accumulated Other Comprehensive Loss ("AOCL") during the three months ended April 2, 2023, were as follows:


									Accumulated
	Cumulative								Other
	Translation		Cash Flow		Defined Benefit		Income		Comprehensive
(Amounts in thousands)	Adjustment		Hedges		Plans		Taxes		Loss
Balances at January 1, 2023	$	(33,145)	$	5,337	$	(39,385)	$	(4,002)	$	(71,195)
Net current period change		772		—		—		144		916
Amounts reclassified from AOCI		—		(787)		234		138		(415)
Balances at April 2, 2023	$	(32,373)	$	4,550	$	(39,151)	$	(3,720)	$	(70,694)

Reclassifications out of AOCI during the three months ended April 2, 2023 and April 3, 2022:


		Amount of Reclassification from AOCI
		Three Months Ended
Component of AOCI	Location of Reclassification into Income (Loss)	April 2, 2023		April 3, 2022

Amortization of (gain) loss on interest rate hedge	Interest (benefit) expense	$	(787)	$	1,117
	Income tax expense (benefit)		196		(281)
	Net of tax	$	(591)	$	836

Amortization of deferred actuarial loss and prior service cost	Operating expenses	$	234	$	229
	Income tax benefit		(58)		(57)
	Net of tax	$	176	$	172

Total reclassifications		$	(415)	$	1,008

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5. Derivative Financial Instruments

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.

On March 24, 2022, we terminated the August 2019 Swap Agreements for net cash proceeds of $7.4 million. The swap agreements were used as economic hedges against rising interest rates and had been designated as cash flow hedges prior to termination. We recorded the gain on settlement in accumulated other comprehensive loss in the amount of $7.7 million which will be amortized through September 2024 when the Second Amended and Restated Term Loan B matures.

Derivative assets recorded at fair value in our condensed consolidated balance sheets as of April 2, 2023, January 1, 2023 and April 3, 2022, respectively, consisted of the following:


	Derivative Assets
(Amounts in thousands)	April 2, 2023		January 1, 2023		April 3, 2022
Derivatives Not Designated as Hedging Instruments
Interest rate swap agreements — other current assets	$	4,610	$	6,135	$	—
Interest rate swap agreements — other non-current assets		3,225		4,446		3,996
	$	7,835	$	10,581	$	3,996

Derivative liabilities recorded at fair value in our condensed consolidated balance sheets as of April 2, 2023, January 1, 2023 and April 3, 2022, respectively, consisted of the following:


	Derivative Liabilities
(Amounts in thousands)	April 2, 2023		January 1, 2023		April 3, 2022
Derivatives Not Designated as Hedging Instruments
Interest rate swap agreements — other accrued liabilities	$	6,253	$	8,476	$	4,250
Interest rate swap agreements — other long-term liabilities		4,859		6,224		7,512
	$	11,112	$	14,700	$	11,762

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 2, 2023.

Gains and losses before taxes on derivatives designated as hedging instruments were presented in “Interest expense, net” in the condensed consolidated statements of operations for the three months ended April 2, 2023, and April 3, 2022:


	Gain (Loss)				Gain (Loss) Reclassified from
	Recognized in AOCL				AOCL into Interest Expense, Net
(Amounts in thousands)	2023		2022		2023		2022
Interest rate swap agreements	$	—	$	11,540	$	787	$	(1,117)
Total	$	—	$	11,540	$	787	$	(1,117)

As of April 2, 2023, we expect to reclassify net gains of $3.2 million, currently recorded in AOCL, into “Interest expense, net” within the next twelve months.

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6. Commitments and Contingencies

Partnership Parks

We have guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions (including rent) of approximately $85.6 million in 2023 (subject to cost of living adjustments) to the limited partners in the Partnership Parks (based on our ownership of units as of April 2, 2023, our share of the distribution will be approximately $38.1 million) and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6.0% of the Partnership Parks’ revenues. Pursuant to the 2023 annual offer to purchase limited partnership units tendered by the unit holders (the "Partnership Park Put") in May 2023, we purchased 0.149 limited partnership units from the Texas partnership for $0.3 million. 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 2023 at both parks is approximately $521.4 million, representing approximately 68.5% of the outstanding units of SFOG and 45.9% of the outstanding units of SFOT.

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 in March 2020, which would have caused 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 2, 2023, is $409.7 million in the case of SFOG and $527.4 million in the case of SFOT. As of April 2, 2023, we owned approximately 31.5% and 54.1% 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.

We incurred $20.6 million of capital expenditures at the Partnership Parks during the 2022 season and intend to incur approximately $18.3 million of capital expenditures at these parks for the 2023 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 generated approximately $73.0 million of cash in 2022 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 2, 2023, January 1, 2023 and April 3, 2022, we had total loans receivable outstanding of $288.3 million 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.

Redeemable noncontrolling interests represent the non-affiliated parties’ share of the assets of the Partnership Parks that are less than wholly-owned: SFOT, SFOG and Six Flags White Water Atlanta, which is owned by the partnership that owns SFOG. As of April 2, 2023, redeemable noncontrolling interests of the SFOG and SFOT partnerships was $280.2 million and $241.2 million, respectively, which approximates redemption value.

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.

The majority of our current insurance policies expire on December 31, 2023. 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.

Legal Proceedings

While certain legal proceedings and related indemnification obligations to which we are a party specify the amounts claimed, these claims may not represent reasonably possible losses. Except as noted below, given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably

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estimated, except in circumstances where an aggregate litigation accrual has been recorded for probable and reasonably estimable loss contingencies. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new information or developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters.

Putative Securities Class Action Lawsuit

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 former partner, Riverside Investment Group Co. Ltd., in violation of the federal securities laws. The consolidated complaint seeks an unspecified amount of 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 district court granted defendants’ motion, dismissing the complaint in its entirety and with prejudice.

On August 25, 2021, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit (“the Fifth Circuit”) from the district court’s decisions granting defendants’ motion to dismiss, denying plaintiffs’ motion to amend or set aside judgment, and denying plaintiffs’ motion for leave to file a supplemental brief. The appeal was fully briefed as of December 15, 2021, and oral argument was held on March 7, 2022. On January 18, 2023, the Fifth Circuit reversed the dismissal and remanded the case to the district court for further proceedings. On February 9, 2023, the Fifth Circuit mandate issued to the district court. On March 7, 2023, the district court entered a scheduling order governing pre-trial proceedings, among other things setting a completion of discovery date for February 16, 2024, and a date for trial beginning February 3, 2025. On April 18, 2023, Co-Lead Plaintiff Oklahoma Firefighters Pension & Retirement System filed a motion for leave to file an amended complaint that would add a new named plaintiff, remove former Co-Lead Plaintiff Electrical Workers Pension Fund Local 103 I.B.E.W., and modify the case caption. On May 2, 2023, defendants filed an opposition to that motion and a motion for judgment on the pleadings.

We believe this lawsuit is without merit; however, there can be no assurance regarding the ultimate outcome. Regardless of the merit of plaintiff’s claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management. The outcome of this litigation is inherently uncertain, and we cannot reasonably estimate any loss or range of loss that may arise from this matter.

Stockholder Derivative Lawsuits

On March 20, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings in the U.S. District Court for the Northern District of Texas against certain of its then-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 substantially identical allegations as the Schwartz complaint, were filed by Trustees of the St. Clair County Employees’ Retirement System and Mr. Mehmet Ali Albayrak in the U.S. District Court for the Northern District of Texas in actions captioned Martin, et al. v. Reid-Anderson, et al., Case No. 4:20-cv-00311-P (N.D. Tex.) and Albayrak v. Reid-Anderson, et al., Case No. 4:20-cv-00312-P (N.D. Tex.), respectively. On April 8, 2020, plaintiffs in all three of these putative derivative actions moved to consolidate the actions and appoint lead counsel. On May 8, 2020, the district court granted the plaintiffs’ motion to consolidate. The consolidated action is captioned In re Six Flags Entertainment Corp. Derivative Litigation, Case No. 4:20-cv-00262-P (N.D. Tex.). On August 10, 2020, plaintiffs filed a consolidated derivative complaint. The consolidated derivative complaint alleges breach of fiduciary duty, insider selling, waste of corporate assets, unjust enrichment, and contribution for violations of federal securities laws. The consolidated derivative complaint references, and makes many of the same allegations as are set forth in, the Electrical Workers litigation, alleging, among other things, that the individual defendants breached their fiduciary duties, committed waste, are liable for contribution for, or were unjustly enriched by making, failing to correct, or failing to implement adequate internal

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controls relating to alleged materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the prospects of the development of Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. The consolidated derivative complaint also alleges that a former officer and director sold shares of the Company while allegedly in possession of material non-public information concerning the same. On September 9, 2020, Holdings and the individual defendants filed a motion to dismiss the consolidated complaint. On April 28, 2021, the district court granted defendants’ motion, dismissing the consolidated complaint in its entirety and with prejudice and denying leave to amend. Plaintiffs’ time to appeal the judgment dismissing this action in its entirety and with prejudice and denying leave to amend lapsed in May 2021.

On May 5, 2020, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings, by Richard Francisco in Texas state court against certain of its then-current and former executive officers and directors (the “individual defendants”) in an action captioned Francisco v. Reid-Anderson, et al., Case No. DC-20-06425 (160^th Dist. Ct., Dallas Cty., Tex.) (the “Francisco action”). The petition in the Francisco action alleges breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The petition in the Francisco action references, and makes many of the same allegations, as are set forth in the Electrical Workers litigation, alleging, among other things, that the individual defendants breached their fiduciary duties, were unjustly enriched by, abused their control, committed gross mismanagement, and committed waste by making, failing to correct, or failing to implement adequate internal controls relating to alleged materially false or misleading statements or omissions regarding the Company’s business, operations and growth prospects, specifically with respect to the prospects of the development of Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. The petition also alleges that a former officer and director engaged in insider trading. On May 28, 2020, the parties in the Francisco action filed a joint motion to stay proceedings through the resolution of the forthcoming motion to dismiss the Electrical Workers litigation. On June 3, 2020, the district court granted the joint motion to stay proceedings. On June 12, 2020, an additional stockholder derivative lawsuit, making substantially identical allegations as the Francisco petition, was filed on behalf of nominal defendant Holdings in Texas state court by putative stockholder Cliff Bragdon in an action captioned Bragdon v. Reid-Anderson, et al., Case No. DC-20-08180 (298^th Dist. Ct., Dallas Cty., Tex.) (the “Bragdon action”). On July 10, 2020, the district court granted an agreed motion filed by the parties in the Francisco and Bragdon actions to consolidate cases, to accept service and an unopposed motion to appoint co-lead and liaison counsel, and to stay both the Francisco and Bragdon actions through final resolution of the motion to dismiss the Electrical Workers litigation. The consolidated state derivative action was captioned In re Six Flags Entertainment Corp. Derivative Litigation, Case No. DC-20-06425 (160th Dist. Ct., Dallas Cty., Tex.). On September 8, 2020, the parties to the consolidated state derivative action filed an agreed motion to transfer the case from Dallas County to Tarrant County, which motion was so ordered on September 27, 2020. The consolidated action is now captioned In re Six Flags Ent. Corp. Derivative Litigation, No. 096-320958-20 (96^th Dist. Ct., Tarrant Cty., Tex.). On February 9, 2023, the stay was lifted in the consolidated action when the Fifth Circuit issued the mandate in the Electrical Workers litigation. In an April 27, 2023 joint report to the court, the parties informed the court that they were conferring, that they would provide a further update within 30 days, and that, in the meantime, the defendants had no obligation to respond to the Francisco or Bragdon complaints or the consolidated action.

On February 16, 2023, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings by John Hancock in Texas state court against certain of its former executive officers and directors (the “individual defendants”) in an action captioned Hancock v. Roedel, et al., Case No. 348-340304-23 (348^th Dist. Ct., Tarrant Cty., Tex.). Plaintiff refers to and makes many of the same allegations as are set forth in the Electrical Workers litigation, claiming that, among other things, the individual defendants caused Six Flags to make false and misleading statements and omissions about the status of construction of Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. Plaintiff asserts breach of fiduciary duty and unjust enrichment claims. Plaintiff seeks an unspecified amount of monetary damages and equitable relief including, but not limited to, disgorgement.

On February 22, 2023, a putative stockholder derivative lawsuit was filed on behalf of nominal defendant Holdings by Antonio Dela Cruz in 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 Cruz v. Reid-Anderson, et al., Case No. 3:23-CV-0396-D (N.D. Tex.). Plaintiff refers to and makes many of the same allegations as are set forth in the Electrical Workers litigation, claiming that, among other things, the individual defendants caused Six Flags to make false and misleading statements and omissions about the status of construction of Six Flags branded parks in China and the financial health of its former partner, Riverside Investment Group Co. Ltd. Plaintiff asserts contribution, breach of fiduciary duty, and unjust enrichment claims. Plaintiff seeks an unspecified amount of monetary damages and equitable relief including, but not limited to, disgorgement.

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Wage and Hour Class Action Lawsuits

Holdings and/or certain of its consolidated subsidiaries are named defendants in various lawsuits generally alleging violations of federal and/or state laws regulating wage and hour pay. Plaintiffs in these lawsuits seek monetary damages, including unpaid wages, statutory penalties, and/or attorneys’ fees and costs. Regardless of the merits of particular suits, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distract management from the operation of our business. In recognition of these impacts on the business, the Company may enter into settlement agreements or other arrangements to settle litigation and resolve such disputes. No assurance can be given that such agreements can be obtained on acceptable terms or at all, or that litigation will not occur. These agreements may also significantly increase the Company’s operating expenses. The outcomes of these lawsuits are inherently uncertain, and we cannot reasonably estimate any loss or range of loss that may arise from these matters in excess of the amounts that we have recognized for these lawsuits, which amounts are not material to our consolidated financial statements.

Personal Injury Lawsuit

On November 18, 2021, the Texas Judicial Panel on Multidistrict Litigation consolidated numerous lawsuits filed against Six Flags Splashtown, LLC d/b/a Six Flags Hurricane Harbor Splashtown asserting claims arising from an alleged chemical vapor release on July 17, 2021 at Six Flags Splashtown. Certain plaintiffs have also named unaffiliated third parties as additional defendants. The consolidated multidistrict litigation is captioned In re Six Flags Splashtown Litigation (Master File No. 2021-77214), and is pending in the 295th Judicial District Court in Harris County, Texas. Plaintiffs are seeking compensatory and punitive damages. On April 14, 2023, Six Flags Splashtown settled with 421 plaintiffs, including all bellwether plaintiffs set for trial on April 17, 2023, for an immaterial amount. This settlement resolved all claims brought by these plaintiffs only. The parties are working to document this settlement and will seek to have the Court appoint a special master to determine the amounts each settling plaintiff will receive. This settlement does not resolve all claims arising from the alleged chemical vapor release. There are 113 remaining plaintiffs -- 61 plaintiffs represented by two different firms (6 of whom are subject to a motion to reinstate that is currently pending before the Court) and 52 pro se plaintiffs. The Court set a status conference for June 13, 2023, and ordered all remaining plaintiffs to appear. Any who fail to appear at the status conference will immediately be dismissed. We have defended this litigation vigorously and will continue to do so. Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management. In recognition of these considerations, the Company may enter into further settlement agreements or other arrangements to settle litigation and resolve such disputes. No assurance can be given that such agreements can be obtained on acceptable terms or that litigation will not occur. These agreements may also significantly increase the Company’s operating expenses. The outcome of this litigation is inherently uncertain, and we cannot reasonably estimate any loss or range of loss that may arise from the remaining matters in excess of the amount that we have recorded for this litigation, which amount is not material to our consolidated financial statements.

Litigation Relating to Routine Proceedings

We are also engaged from time to time in other routine legal and tax proceedings incidental to our business. We do not believe that any of these routine proceedings will have a material impact on the business or our financial condition.

Securities and Exchange Commission Investigation

The Securities and Exchange Commission is conducting an investigation into the Company’s disclosures and reporting made in 2018 through February 2020 related to its business, operations and growth prospects of its Six Flags branded parks in China and the financial health of its former business partner, Riverside Investment Group Co. Ltd. The Company received a document subpoena in February 2020 and subsequently certain current and former executives received subpoenas in connection with this matter and they continue to provide responsive information. The Company is fully cooperating and is committed to continuing to cooperate fully with the SEC in this matter. We cannot predict the length, scope or results of the investigation, or the impact, of the investigation on our results of operations, business or financial condition.

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7. Business Segments

Our chief operating decision maker “CODM” regularly receives consolidated information which is used to make strategy decisions. Each individual park location, has a Park President or General Manager responsible for the operational results and executing the strategy set forth by the CODM. Substantially all of our parks provide similar products and services through a similar process to the same class of customer through a consistent method. We also believe that the parks share common economic characteristics. Based on these factors, we have only one reportable segment - parks.

The following information reflects our goodwill and long-lived assets (which consists of property and equipment, right-of-use operating leases and intangible assets) as of April 2, 2023, January 1, 2023 and April 3, 2022:


	As of
(Amounts in thousands)	April 2, 2023		January 1, 2023		April 3, 2022
Domestic	$	2,283,902	$	2,290,318	$	2,321,053
Foreign		116,922		114,048		114,556
Total	$	2,400,824	$	2,404,366	$	2,435,609

Revenues and (loss) income before income taxes by domestic and foreign jurisdictions for the three months ended April 2, 2023 and April 3, 2022:


	Domestic		Foreign		Total
2023	(Amounts in thousands)
Revenues	$	120,482	$	21,708	$	142,190
(Loss) income before income taxes		(95,356)		7,645		(87,711)
2022
Revenues	$	125,903	$	12,204	$	138,107
Loss before income taxes		(83,048)		(1,727)		(84,775)

8. Pension Benefits

We froze our pension plan effective March 31, 2006 and effective February 16, 2009, the remaining participants in the pension plan no longer earned future benefits. The following summarizes our pension costs during the three months ended April 2, 2023 and April 3, 2022, respectively:


	Three Months Ended
(Amounts in thousands)	April 2, 2023		April 3, 2022
Service cost	$	—	$	—
Interest cost		1,954		1,384
Expected return on plan assets		(2,402)		(3,059)
Amortization of net actuarial loss		234		229
Administrative fees		650		300
Total net periodic expense (benefit)	$	436	$	(1,146)

The components of net periodic pension benefit other than the service cost component were included in "Other income" in the condensed consolidated statements of operations.

Weighted-Average Assumptions Used To Determine Net Cost


	Three Months Ended
	April 2, 2023		April 3, 2022
Discount rate	4.95	%	2.60
Rate of compensation increase	N/A		N/A
Expected return on plan assets	5.75	%	5.75

Employer Contributions

We did not make any pension contributions during the three month periods ended April 2, 2023 or April 3, 2022.

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9. Stock Repurchase Plans

On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of April 2, 2023, Holdings had repurchased 8,071,000 shares at a cumulative cost of approximately $365.1 million and an average price per share of $45.24 under the March 2017 Stock Repurchase Plan, leaving approximately $134.9 million available for permitted repurchases.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains forward-looking statements relating to future events or our future financial performance, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included under the caption "Cautionary Note Regarding Forward-Looking Statements" included elsewhere in this Quarterly Report and "Item 1A. Risk Factors" in the 2022 Annual Report and in this Quarterly Report for further discussion of the uncertainties, risks and assumptions associated with these statements.

The following discussion and analysis presents information that we believe is relevant to an assessment and understanding of our condensed consolidated balance sheets and results of operations. This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto, and other financial data included elsewhere in this Quarterly Report. The following information should also be read in conjunction with our audited consolidated financial statements, and the notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the 2022 Annual Report.

Use of Certain Per Capita Metrics

We use certain per capita metrics that are non-GAAP measures of the performance of our business on a per guest basis and believe that these metrics provide relevant and useful information for investors because they assist in comparing our operating performance on a consistent basis, make it easier to compare our results with those of other companies in our industry and allows investors to review performance in the same manner as our management.

●

Total guest spending per capita is the total revenue generated from our guests, on a per guest basis, through admissions and in-park spending. Total guest spending per capita is calculated by dividing the sum of park admissions revenue and park food merchandise and other revenue by total attendance.

●

Admissions revenue per capita is the total revenue generated from our guests, on a per guest basis, to enter our parks. Admissions revenue per capita is calculated by dividing park admission revenue by total attendance.

●

Non-admissions revenue per capita is the total revenue generated from our guests, on a per guest basis, on items sold within our parks, such as food and beverages, games and merchandise. Non-admission revenue per capita is calculated by dividing non-admissions revenue by total attendance.

Overview

General

We are the largest regional theme park operator in the world and the largest operator of water parks in North America based on the number of parks we operate. Of our 27 regional theme parks and water parks, 24 are located in the United States, two are located in Mexico and one is located in Montreal, Canada. Our parks are located in geographically diverse markets across North America and generally offer a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and retail outlets, providing a complete family-oriented entertainment experience. We work continuously to improve our parks and our guests’ experiences and to meet our guests’ evolving needs and preferences.

The results of operations for the three months ended April 2, 2023, and April 3, 2022 are not indicative of the results expected for the full year. Typically, our park operations generate approximately 70% - 75% of their annual revenue during the second and third quarter each year while expenses are incurred year-round.

Our revenue is derived from (i) the sale of tickets (including season passes and memberships) for entrance to our parks (which accounted for approximately 54% and 53% of total revenue during the three months ended April 2, 2023, and April 3, 2022, respectively), (ii) the sale of food and beverages, merchandise, games and attractions, parking and other services inside our parks, and (iii) sponsorship, international agreements and accommodations. Revenue from ticket sales and in-park sales are primarily impacted

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by park attendance. Revenue from sponsorship, international agreements and accommodations can be impacted by the term, timing and extent of services and fees under these arrangements, which can result in fluctuations from quarter to quarter and year to year. During the three months ended April 2, 2023, our earnings before interest, taxes, depreciation and amortization were flat compared to the three months ended April 3, 2022.

Our principal costs of operations include salaries and wages, employee benefits, advertising, third party services, repairs and maintenance, utilities, rent and insurance. A large portion of our expenses is relatively fixed as our costs for full-time employees, maintenance, utilities, rent, advertising and insurance do not vary significantly with attendance. We anticipate that the tight labor market and recent increases to the minimum wage rates will increase our salary, wage and benefit expenses in 2023 and future years. Further legislative changes and competitive wage rate pressure could cause these expenses to continue to increase in the future.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective and complex estimates and judgments. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from the continuing changes in the economic environment will be reflected in the financial statements in future periods. With respect to our critical accounting policies and estimates, there have been no material developments or changes from the policies and estimates discussed in the 2022 Annual Report.

Recent Events

See Note 3, Long-term Indebtedness, for more information.

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Results of Operations

Three Months Ended April 2, 2023, Compared to Three Months Ended April 3, 2022

The following table sets forth financial information for the three months ended April 2, 2023, and April 3, 2022.


	Three Months Ended				Percentage Change (%)
(Amounts in thousands, except percentage and per capita data)	April 2, 2023		April 3, 2022		2023 to 2022
Total revenue	$	142,190	$	138,107	3	%
Operating expenses		108,870		109,719	(1)	%
Selling, general and administrative expenses		44,247		39,257	12	%
Cost of products sold		9,765		10,115	(3)	%
Depreciation and amortization		29,114		29,049	0	%
Loss on disposal of assets		2,435		(2,100)	N/M
Operating loss		(52,241)		(47,933)	9	%
Interest expense, net		36,302		37,530	(3)	%
Other income, net		(832)		(688)	21	%
Loss before income taxes		(87,711)		(84,775)	3	%
Income tax benefit		(17,852)		(19,113)	(7)	%
Net loss attributable to Six Flags Entertainment Corporation	$	(69,859)	$	(65,662)	6	%

Other Data:
Attendance		1,596		1,686	(5)	%
Admissions revenue per capita	$	47.81	$	43.28	10	%
Non-admissions revenue per capita	$	33.07	$	32.18	3	%
Total guest spending per capita	$	80.88	$	75.46	7	%

Revenue

Revenue for the three months ended April 2, 2023, totaled $142.2 million, an increase of $4.1 million, or 3%, compared to $138.1 million for the three months ended April 3, 2022 driven by higher guest spending per capita, partially offset by lower attendance. The decrease in attendance was driven primarily by a reduction of operating days caused by severe weather in California and Texas.

Total guest spending per capita, which excludes sponsorship, international agreements and accommodations revenue, for the three months ended April 2, 2023, increased by $5.42, to $80.88, compared to the three months ended April 2, 2022, driven by a $4.53, or 10%, increase in admissions revenue per capita and a $0.89, or 3% increase in In-park spending per capita. The increase in guest spending per capita was driven by higher revenue from memberships beyond the initial twelve month commitment period, which is recognized evenly each month and includes a portion of revenue that is allocated from Park admissions revenue to Park food, merchandise and other revenue. Higher membership revenue in the first quarter of 2023 increased Admissions revenue per capita and Non-admissions revenue per capita versus the prior year.

Operating expenses

Operating expenses for the three months ended April 2, 2023, decreased $0.8 million, or 1%, compared to the three months ended April 3, 2022. The decrease was due to lower personnel costs due to headcount reductions and continued scheduling optimization efforts, partially offset by higher wages, utilities, and other expenses primarily driven by inflationary pressures.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended April 2, 2023, increased $5.0 million, or 12%, compared to the three months ended April 3, 2022. The increase was primarily due to higher advertising and media spend.

Cost of products sold

Cost of products sold in the three months ended April 2, 2023, decreased $0.4 million, or 3%, compared to the three months ended April 3, 2022. The decrease was primarily due to a decrease in unit sales due to lower attendance.

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Depreciation and amortization expense

Depreciation and amortization expense for the three months ended April 2, 2023, increased $0.1 million, compared to the three months ended April 3, 2022.

Loss (gain) on disposal of assets

We recognized a $2.4 million loss on disposal of assets for the three months ended April 2, 2023, compared to a $2.1 million gain on disposal of assets for the three months ended April 3, 2022. The $2.4 million loss on disposal of resulted from normal-course asset retirements. The $2.1 million gain on disposal of assets for the three months ended April 3, 2022 was driven by insurance proceeds due to prior year losses at multiple parks.

Interest expense, net

Interest expense, net decreased $1.2 million, or 3%, for the three months ended April 2, 2023, compared to the three months ended April 3, 2022. The decrease is primarily attributable to interest savings resulting from the prepayment of $315.0 million of the 2025 Notes during the second quarter of 2022, partially offset by higher interest rates on the Second Amended and Restated Term Loan B and Revolving Loan.

Income tax benefit

Income tax benefit decreased $1.3 million for the three months ended April 2, 2023 compared to the three months ended April 3, 2022 primarily due to the effect of state and foreign income taxes and nondeductable executive compensation. The effective tax rates for the three months ended April 2, 2023 and April 3, 2022 were 20.4% and 23.0%, respectively. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from state and foreign income taxes and nondeductible expenses, including nondeductible executive compensation.

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Calculation of EBITDA for the three months ended April 2, 2023 compared to the three months ended April 3, 2022

We manage our business primarily with three different metrics; Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex.

“Modified EBITDA,” a non-GAAP measure, is defined as our consolidated income (loss) from continuing operations: excluding the following: the cumulative effect of changes in accounting principles, discontinued operations gains or losses, income tax expense or benefit, restructure costs or recoveries, reorganization items (net), other income or expense, gain or loss on early extinguishment of debt, equity in income or loss of investees, interest expense (net), gain or loss on disposal of assets, gain or loss on the sale of investees, amortization, depreciation, stock-based compensation, and fresh start accounting valuation adjustments. Modified EBITDA, as defined herein, may differ from similarly titled measures presented by other companies. Management uses non-GAAP measures for budgeting purposes, measuring actual results and allocating resources. We believe that Modified EBITDA provides relevant and useful information for investors because it assists in comparing our operating performance on a consistent basis, makes it easier to compare our results with those of other companies in our industry as it most closely ties our performance to that of our competitors from a park-level perspective and allows investors to review performance in the same manner as our management.

"Adjusted EBITDA," a non-GAAP measure, is defined as Modified EBITDA minus the interests of third parties in the Modified EBITDA of properties that are less than wholly owned (consisting of Six Flags Over Georgia, Six Flags White Water Atlanta and Six Flags Over Texas). Adjusted EBITDA is approximately equal to “Parent Consolidated Adjusted EBITDA” as defined in our secured credit agreement, except that Parent Consolidated Adjusted EBITDA excludes Adjusted EBITDA from equity investees that is not distributed to us in cash on a net basis and has limitations on the amounts of certain expenses that are excluded from the calculation. Adjusted EBITDA as defined herein may differ from similarly titled measures presented by other companies. Our board of directors and management use Adjusted EBITDA to measure our performance and our current management incentive compensation plans are based largely on Adjusted EBITDA. We believe that Adjusted EBITDA is frequently used by all our sell-side analysts and most investors as their primary measure of our performance in the evaluation of companies in our industry. In addition, the instruments governing our indebtedness use Adjusted EBITDA to measure our compliance with certain covenants and, in certain circumstances, our ability to make certain borrowings. Adjusted EBITDA, as computed by us, may not be comparable to similar metrics used by other companies in our industry. During 2023, we reclassified the net pension-related expense (benefit) to other (income) expense, net. in our consolidated statements of operations. This reclassification has been reflected in all periods presented. As a result of this reclassification, Adjusted EBITDA for the three-month period ended April 3, 2022, declined by $1.2 million as compared to the previously reported figure.

“Adjusted EBITDA minus capex,” a non-GAAP measure, is defined as Modified EBITDA minus capital expenditures net of property insurance recoveries. Our board of directors and management use Adjusted EBITDA to measure our performance and our current management incentive compensation plans are based largely on Adjusted EBITDA minus capex. Adjusted EBITDA minus capex as defined herein may differ from similarly titled measures presented by other companies.

Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex are not recognized terms under US GAAP and should not be considered in isolation or as a substitute for a measure of our financial performance prepared in accordance with US GAAP. These metrics are not indicative of income or loss as determined under US GAAP. Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex as presented may not be comparable to similarly titled measures of other companies due to varying methods of calculation.

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The following tables set forth a reconciliation of net income (loss) to Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex for the three month periods ended April 2, 2023 and April 3, 2022:


	Three Months Ended
(Amounts in thousands, except per share data)	April 2, 2023		April 3, 2022
Net loss	$	(69,859)	$	(65,662)
Income tax benefit		(17,852)		(19,113)
Other income, net		(832)		(688)
Interest expense, net		36,302		37,530
Loss (gain) on disposal of assets		2,435		(2,100)
Depreciation and amortization		29,114		29,049
Stock-based compensation		3,314		4,225
Modified EBITDA	$	(17,378)	$	(16,759)
Third party interest in EBITDA of certain operations		—		—
Adjusted EBITDA	$	(17,378)	$	(16,759)
Capital expenditures, net of property insurance recovery		(25,007)		(28,990)
Adjusted EBITDA minus CAPEX	$	(42,385)	$	(45,749)

Liquidity, Capital Commitments and Resources

On an annual basis, our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash typically include the funding of working capital obligations, debt service, investments in parks (including infrastructure and capital projects), payments to our partners in the Partnership Parks, and could include payment of stock dividends and stock repurchases, when permitted.

Based on historical and anticipated operating results, we believe cash flow from operations, available cash and amounts available under the Second Amended and Restated Credit Facility will be adequate to meet our liquidity needs for at least the next twelve months, including any anticipated requirements for working capital, capital expenditures, scheduled debt service and obligations under arrangements relating to the Partnership Parks. Additionally, we expect to be able to use federal net operating loss carryforwards to reduce our federal income tax liability for several years. During 2023 and 2024, we have significant federal net operating loss carryforwards subject to an annual limitation that will offset approximately $32.5 million and $30.0 million of taxable income per year. We expect taxable income in excess of the annual limitation in those years will be offset by net operating losses generated during 2020. In accordance with the CARES Act, any net operating loss carryforwards generated in 2020 are not subject to expiration and will carryforward indefinitely.

Our current and future liquidity is greatly dependent upon our operating results, which are driven largely by overall economic conditions as well as the price and perceived quality of the entertainment experience at our parks. Our liquidity could also be adversely affected by a disruption in the availability of credit as well as unfavorable weather; natural disasters; contagious diseases, such as Ebola, Zika, swine flu, COVID-19 or other diseases; accidents or the occurrence of an event or condition at our parks, including terrorist acts or threats inside or outside of our parks; negative publicity; or significant local competitive events, which could materially reduce paid attendance and revenue related to that attendance at any of our parks. While we work with local police authorities on security-related precautions to prevent certain types of disturbances, we can make no assurance that these precautions will be able to prevent these types of occurrences. However, we believe our ownership of many parks in different geographic locations reduces the effects of adverse weather and these other types of occurrences on our consolidated results. If such an adverse event were to occur, we may be unable to borrow under the Second Amended and Restated Revolving Loan or may be required to repay amounts outstanding under the Second Amended and Restated Credit Facility and/or may need to seek additional financing. In addition, we expect we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. Our degree of indebtedness could adversely affect our ability to obtain any additional financing. See "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" in the 2022 Annual Report and in this Quarterly Report.

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As of April 2, 2023, our total indebtedness, net of discount and deferred financing costs, was approximately $2,481.8 million. As of May 5, 2023, based on (i) non-revolving credit debt outstanding on that date, (ii) anticipated levels of working capital revolving borrowings during 2023 and 2024, (iii) estimated interest rates for floating-rate debt and (iv) the 2024 Notes, the 2025 Notes and the 2027 Notes, we anticipate annual cash interest payments of approximately $165 million and $140 million during 2023 and 2024, respectively.

As of April 3, 2022, we had approximately $64.7 million of unrestricted cash and $159.0 million available for borrowing under the Second Amended and Restated Revolving Loan. Our ability to borrow under the Second Amended and Restated Revolving Loan depends on compliance with certain conditions, including a maximum senior secured net leverage maintenance covenant, a minimum liquidity covenant and the absence of any material adverse change in our business or financial condition. If we were to become unable to borrow under the Second Amended and Restated Revolving Loan, and we failed to meet our projected results from operations significantly, we might be unable to pay in full our off-season obligations. A default under the Second Amended and Restated Revolving Loan could permit the lenders under the Second Amended and Restated Credit Facility to accelerate the obligations thereunder. The Second Amended and Restated Revolving Loan expires on April 17, 2024. The terms and availability of the Second Amended and Restated Credit Facility and other indebtedness are not affected by changes in the ratings issued by rating agencies in respect of our indebtedness. As of April 2, 2023, we are in compliance with all covenants. For a more detailed description of our indebtedness, see Note 3 to the unaudited condensed consolidated financial statements included in this Quarterly Report.

See Note 3, Long-term Indebtedness, for more information.

We regularly make capital investments for new rides and attractions in our parks. In addition, each year we make capital investments in the food, retail, games and other in-park areas to increase guest spending per capita. We also make annual enhancements to theming and landscaping of our parks in order to provide a more complete, family-oriented entertainment experience; and invest in our information technology infrastructure to attain operational efficiencies. We regularly perform maintenance capital enhancements, with most expenditures made during the off-season. Repairs and maintenance costs for materials and services associated with maintaining assets, such as painting and inspecting existing rides, are expensed as incurred and are not included in capital expenditures.


	Three Months Ended
(Amounts in thousands)	April 2, 2023		April 3, 2022
Net cash used in operating activities	$	(56,269)	$	(55,712)
Net cash used in investing activities		(25,007)		(28,990)
Net cash provided by financing activities		68,679		81
Effect of exchange rate on cash		(2,776)		1,239
Net change in cash and cash equivalents	$	(15,373)	$	(83,382)

Net cash used in operating activities was $56.3 million and $55.7 million during the three months ended April 2, 2023 and April 3, 2022, respectively. The difference in net cash used in operating activities was primarily due to an increase in the net loss during the three months ended April 2, 2023. Net cash used in investing activities during the three months ended April 2, 2023 and April 3, 2022, was $25.0 million and $29.0 million, respectively, consisting primarily of capital expenditures, net of property insurance recoveries. The

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decrease was a result of decreased spending on rides, which shifts some of our capital spending to later quarters of the year. Net cash provided by financing activities during the three months ended April 2, 2023, and April 3, 2022 was $69.7 million and $0.1 million, respectively, primarily due to net borrowings of $70.0 million during the first quarter of 2023 on the Second Amended and Restated Revolving Loan.

Since our business is both seasonal in nature and involves significant levels of cash transactions, our net operating cash flows are largely driven by attendance and guest spending per capita levels. Approximately half of our cash-based expenses are fixed and do not vary significantly with either attendance or spending per capita assuming that the parks are operating in the normal course.

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Contractual Obligations

Since January 1, 2023, there have been no material changes to our contractual obligations outside the ordinary course of our business outside of the issuance of the 2031 Notes and the repayment of the 2024 Notes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of April 2, 2023, there were no material changes in our market risk exposure from that disclosed in the 2022 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation, as of April 3, 2022, of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our Chief Executive Officer and our Interim Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting, as such term is defined under Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, that occurred during our fiscal quarter ended April 2, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The nature of the industry in which we operate tends to expose us to claims by guests, generally for injuries. Accordingly, we are party to various legal actions arising in the normal course of business. Historically, the great majority of these claims have been minor. Although we believe that we are adequately insured against guests’ claims, if we become subject to damages that cannot by law be insured against, such as punitive damages or certain intentional misconduct by employees, there may be a material adverse effect on our operations.

For information regarding legal proceedings, see Note 15, Commitments and Contingencies, to the consolidated financial statements in the 2022 Annual Report, and Note 6, Commitments and Contingencies, to the unaudited condensed consolidated financial statements in this Quarterly Report.

ITEM 1A. RISK FACTORS

There have been no material changes to the principal risks that we believe are material to our business, results of operations and financial condition, from the risk factors disclosed in the 2022 Annual Report. For a discussion of these risk factors, please see “Item 1A. Risk Factors” contained in the 2022 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No stock repurchases were made during the three months ended April 2, 2023. On March 30, 2017, Holdings announced that its Board of Directors approved a stock repurchase plan that permits Holdings to repurchase an incremental $500.0 million in shares of Holdings’ common stock (the "March 2017 Stock Repurchase Plan"). As of April 3, 2022, Holdings had repurchased 8,071,000 shares at a cumulative cost of approximately $365.1 million and an average price per share of $45.24 under the March 2017 Stock Repurchase Plan, leaving approximately $134.9 million available for permitted repurchases.

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ITEM 6. EXHIBITS


Exhibit 31.1*	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2*	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1*	Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2*	Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101*	The following financial statements and footnotes from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2023 formatted in Inline XBRL: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Deficit, (v) the Unaudited Condensed Consolidated Statements of Cash Flow, and (vi) related Notes to the Condensed Consolidated Financial Statements.

Exhibit 104*	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2023, formatted in Inline XBRL.

* Filed herewith


†	Management contract or compensatory plan

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SIX FLAGS ENTERTAINMENT CORPORATION
		(Registrant)

Date:	May 8, 2023	/s/ SELIM BASSOUL
		Selim Bassoul
		President and Chief Executive Officer

Date:	May 8, 2023	/s/ GARY MICK
		Gary Mick
		Chief Financial Officer

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Six Flags Entertainment 10-Q2023 Q1 Quarterly report

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