Business Context and Reporting Period
This Form 8-K Current Report, dated May 16, 2017, is filed by SeaWorld Entertainment, Inc. (the "Company"). The report details a material definitive agreement entered into on May 16, 2017, between SeaWorld Parks and Entertainment, Inc. ("SEA"), a wholly-owned subsidiary of the Company, and Sesame Workshop ("Sesame").
Key Financial Metrics
This filing does not contain specific financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on the terms of a new licensing agreement and the termination of prior agreements.
Material Changes and Agreements
New License Agreement
- Parties: SEA and Sesame Workshop.
- Scope: Extends SEA's status as Sesame Workshop's exclusive theme park partner in the United States, Puerto Rico, and the U.S. Virgin Islands.
- Assets Covered:
- Existing and future "Standalone Parks" (e.g., Sesame Place in Langhorne, PA; a second park scheduled for mid-2021).
- Existing and future "Sesame Lands" within SeaWorld and Busch Gardens properties (including a new Sesame Land at SeaWorld Orlando scheduled for fall 2022).
- Licensed Products (merchandise, food, and beverage items).
- Marketing, promotional activities, and sponsorship agreements.
- Term: Initial term through December 31, 2031, with an automatic 15-year extension plus a 5-year option added for each new Standalone Park opening.
- Financial Terms: SEA pays a specified annual license fee and a specified royalty based on revenues from Licensed Products, food/beverage, and events utilizing licensed elements.
- Exclusions: The license expressly excludes "Kermit the Frog."
Termination of Prior Agreements
Upon execution of the new agreement, the following historical agreements were terminated:
- Amended and Restated Agreement dated April 1, 1983.
- Amendment dated August 24, 2006, to the 1983 Agreement.
- Change in Control Notification and Consent dated October 6, 2009 (1983 License).
- License Agreement dated August 24, 2006.
- Change in Control Notification and Consent dated October 6, 2009 (2006 License).
Outlook, Risks, and Contingencies
Forward-Looking Statements
The filing contains forward-looking statements regarding the opening of the second Sesame Place theme park (no later than mid-2021) and the Sesame Land at SeaWorld Orlando (fall 2022). Actual results may differ due to risks outlined in the Company's Form 10-K.
Termination and Change of Control Risks
- Termination Rights: Sesame Workshop retains the right to terminate the agreement in whole or part under limited circumstances, including a change of control of SEA or the Company, bankruptcy, or uncured breach.
- Transfer Fees: If Sesame consents to a change of control or the sale of the Langhorne Sesame Place and at least one other SEA theme park, SEA must pay a transfer consent fee.
- Dispute Resolution: The agreement includes a three-tier dispute resolution mechanism with arbitration and provisions for liquidated damages.
Investor Verification Checklist
- Verify the specific amounts of the annual license fee and royalty rates, as the filing states these are "specified" but does not disclose the exact figures.
- Confirm the construction timelines for the second Sesame Place (mid-2021) and SeaWorld Orlando Sesame Land (fall 2022) against future project updates.
- Review the "Risk Factors" section of the most recent Form 10-K for detailed risks regarding intellectual property and licensing dependencies.
- Monitor for any announcements regarding a change of control, which could trigger termination rights or transfer consent fees.