FUN

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2025 for Six Flags Entertainment Corporation (NYSE: FUN). The Company is North America's largest regional amusement park operator, managing 26 amusement parks, 15 water parks, and nine resorts across the U.S., Canada, and Mexico. The reporting period reflects the first full year of operations following the July 1, 2024, merger of equals between Cedar Fair and Former Six Flags. The Company operates within a single reportable segment and is highly seasonal, with approximately 70% of annual revenue generated in the second and third quarters.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net revenues increased 14.4% to $3.1 billion, driven by the inclusion of Former Six Flags operations for the full year (contributing $499.7 million in the first six months) and a 13.8% increase in attendance to 47.4 million visits.
• Significant Impairment: The Company recorded a $1.52 billion non-cash impairment charge in Q3 2025 related to goodwill and trade names (including Six Flags and Schlitterbahn reporting units). This was triggered by revenue/earnings missing expectations and a sustained decline in share price.
• Operating Loss: Operating income turned to a loss of $1.38 billion, primarily due to the impairment charge, increased depreciation ($486.4 million vs. $318.1 million), and higher interest expense ($360.0 million vs. $234.8 million).
• Cost Management: Despite revenue growth, operating costs rose 20.3%. However, the Company reduced full-time headcount by approximately 15% and planned fewer seasonal labor hours to offset some inflationary pressures.
• Portfolio Optimization: The Company closed its Bowie, Maryland park following the 2025 season to market the property for redevelopment.

Guidance, Outlook, and Risks

• Strategic Priorities: Management focuses on accelerating profitability through cost management, pricing optimization, and portfolio optimization to strengthen the balance sheet.
• 2026 Outlook:
  • Capital expenditures expected to range between $400 million and $425 million.
  • Cash interest payments expected to range from $320 million to $330 million.
  • Cash tax payments expected to range from $25 million to $30 million.
• Debt Refinancing: In a subsequent event (January 2026), the Company issued $1.0 billion of 8.625% senior notes due 2032 to redeem $1.0 billion of maturing 2027 notes.
• Key Risks:
  • Integration: Risks associated with realizing anticipated synergies and cost savings from the merger.
  • Weather: Extreme weather in Q2 2025 negatively impacted attendance; future climate events remain a risk.
  • Legal: Ongoing litigation includes a Canadian Competition Tribunal case regarding "drip pricing" and securities class actions alleging misrepresentation regarding park investment levels.
  • Liquidity: High leverage limits flexibility; restricted payment covenants currently prevent dividends or share repurchases unless specific leverage ratios are met.

Investor Verification Checklist

• Impairment Assumptions: Verify the discounted cash flow models and terminal growth rates used to justify the $1.52 billion impairment charge.
• Debt Covenants: Confirm compliance with the Net First Lien Leverage Ratio (max 5.0x) and Net Total Leverage Ratio covenants given the high debt load.
• Attendance Trends: Monitor Q2 and Q3 2026 attendance figures to assess if the 2025 decline was weather-related or indicative of broader demand issues.
• Partnership Park Obligations: Review the status of the Six Flags Over Georgia (SFOG) and Six Flags Over Texas (SFOT) partnership obligations, specifically the 2027/2028 call options and minimum distribution requirements.
• Legal Reserves: Track the resolution of the Canadian Competition Tribunal case and the securities class actions filed in late 2025.