Business context and reporting period
SeaWorld Entertainment, Inc. (ticker: SEAS; now identified in the request as United Parks & Resorts) filed this Form 10-K for the fiscal year ended December 31, 2022. The company operated 12 U.S. theme parks under SeaWorld, Busch Gardens, Aquatica, Discovery Cove and Sesame Place brands. This is an annual report; it does not provide standalone fourth-quarter results.
Key financial metrics
Amounts are in U.S. dollars; financial figures below are in millions unless noted.
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $1,731.2 | $1,503.7 | +15.1% |
| Operating income | $507.5 | $432.0 | +17.5% |
| Operating margin | 29.3% | 28.7% | +0.6 percentage points |
| Net income | $291.2 | $256.5 | +13.5% |
| Diluted EPS | $4.14 | $3.22 | +28.6% |
| Adjusted EBITDA (non-GAAP) | $728.2 | $662.0 | +10.0% |
| Operating cash flow | $564.6 | $503.0 | +12.2% |
| Capital expenditures | $200.7 | $128.9 | +55.8% |
Attendance was 21.939 million, up 8.6%. Total revenue per visitor rose 6.0% to $78.91; admission per capita increased 4.3% to $44.00 and in-park spending per capita rose 8.2% to $34.91. Net margin was 16.8%; Adjusted EBITDA margin was 42.1% (company-defined non-GAAP measure).
At year-end, cash and cash equivalents were $79.2 million, down from $443.7 million. Working capital was negative $175.5 million and the current ratio was 0.6; management attributes the sub-1 ratio partly to advance ticket receipts and low inventory. Total debt principal was $2.138 billion: $1.185 billion of Term B loans, $725 million of 5.25% notes due 2029 and $227.5 million of 8.75% secured notes due 2025. The $390 million revolver had no borrowings at year-end, with $371.6 million available after letters of credit; the company subsequently drew $20 million for working capital. Year-end net total leverage ratio under the debt agreements was 2.78x, and the company reported covenant compliance.
Material changes versus prior comparable period
- Revenue and attendance increased as operations normalized from 2021 COVID-related closures, limited operating days and capacity restrictions. The company estimated adverse weather, including Hurricanes Ian and Nicole, reduced 2022 attendance by about 655,000 guests.
- Revenue growth reflected both higher attendance and higher per-capita spending, supported by pricing, product mix and expanded in-park offerings.
- Operating expenses rose 18.2%, faster than revenue, reflecting labor and operating costs, increased attendance and inflation. Operating expenses increased to 42.5% of revenue from 41.4%.
- Net income growth was moderated by a $98.9 million income tax provision in 2022, versus a $0.2 million tax benefit in 2021. The prior year also included a $58.8 million loss on early debt extinguishment, which did not recur.
- Cash used in financing was $726.0 million, primarily due to $693.6 million of share repurchases. The company repurchased 12.4 million shares, compared with $215.7 million spent in 2021; shareholders’ deficit widened to $437.7 million.
Outlook, commentary, risks and unusual items
- No quantified 2023 financial guidance is provided. Management described a planned slate of new attractions and events across parks in 2023 and expected SeaWorld Abu Dhabi to open in 2023.
- Management cited persistent wage and labor availability pressures, inflation, supply-chain disruption, higher interest rates and staffing constraints that can limit outlet or ride availability and affect guest experience. The company is pursuing cost efficiencies, pricing and revenue initiatives.
- COVID-19 continued to affect international and group attendance relative to historical levels. Results remain exposed to discretionary consumer spending, weather and natural disasters, seasonality, travel conditions, labor costs, animal-care regulation and public sentiment, litigation, cybersecurity, and substantial fixed operating costs.
- Internal controls are a significant reporting concern: management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 because of an unresolved material weakness involving Board oversight, Board-management engagement and delegation-of-authority policies. Deloitte issued an adverse opinion on internal control, while giving an unqualified opinion on the financial statements. Management said remediation was underway and that the weakness had not caused a material misstatement in the periods presented.
- Notable contingencies include an active Sesame Workshop arbitration over an additional 2021 royalty payment (the company disputes the calculation and says any exposure beyond accrual is not expected to be material), and pending litigation alleging disparate treatment based on race. Management states it intends to defend the matters; outcomes remain uncertain.
- Other items to note: the 2022 tax provision included significant deferred-tax effects; the company had $627.5 million of federal and $634.5 million of state net operating loss carryforwards; and $8.3 million of deferred 2020 minimum rent for the San Diego lease remained unpaid at year-end. The company reported no off-balance-sheet arrangements.
Investor verification priorities
- Track remediation and independent testing of the material weakness, and assess the implications of the adverse internal-control opinion.
- Review cash generation, the sharp year-end cash decline, working-capital needs, the subsequent $20 million revolver draw and the timing and cost of debt maturities.
- Assess whether revenue-per-capita gains and attendance recovery can offset labor, inflation and operating-cost pressures, including weather-related disruption.
- Verify the outcomes and any additional accruals related to the Sesame royalty arbitration and pending discrimination litigation.
- Monitor execution, capital costs and returns from planned attractions and the SeaWorld Abu Dhabi project; no quantified 2023 guidance is stated in this filing.
- Evaluate the scale and timing of share repurchases relative to liquidity, leverage, debt restrictions and the company’s negative stockholders’ equity.