Business context and reporting period
SeaWorld Entertainment, Inc. (the filer in this September 30, 2020 Form 10-Q; identified in the request as United Parks & Resorts) operated 12 U.S. theme parks. The filing covers the third quarter and nine months ended September 30, 2020, compared with the same 2019 periods. Results were heavily affected by COVID-19 closures and restricted reopenings.
Key financial metrics
Amounts below are in millions of dollars, except per-share, attendance and per-capita data.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $106.1 | $473.7 | $277.7 | $1,100.2 |
| Operating income (loss) | $(59.5) | $153.5 | $(218.3) | $218.5 |
| Net income (loss) | $(79.2) | $98.0 | $(266.8) | $113.7 |
| Diluted EPS | $(1.01) | $1.24 | $(3.41) | $1.39 |
| Operating cash flow | Not provided separately | Not provided separately | $(107.6) | $313.7 |
- Q3 attendance was 1.562 million, down 80.8%; nine-month attendance was 4.153 million, down 76.8%. Revenue per capita rose 16.5% in Q3 to $67.94 and 8.9% for the nine months to $66.87.
- At September 30, cash and cash equivalents were $488.4 million; current assets were $562.8 million and current liabilities $351.3 million (working-capital ratio 1.6). The company reported $2.224 billion of debt principal before discounts and current maturities, and $311.3 million available on its revolving facility.
- Capital expenditures were $75.7 million for the nine months, down from $152.9 million. Adjusted EBITDA, a non-GAAP measure, was $(11.2) million for Q3 and $(95.9) million for the nine months; last-twelve-month Adjusted EBITDA was $(12.0) million.
Material changes versus prior comparable periods
- Q3 revenue fell 77.6% year over year and nine-month revenue fell 74.8%. Attendance and fewer operating days were the main drivers; all parks closed March 16, with phased reopenings beginning in June.
- Despite lower attendance, Q3 admission per capita increased 22.4% to $40.39 and in-park spending per capita rose 8.9% to $27.55, primarily reflecting higher realized prices and changes in product mix.
- Operating expenses and SG&A declined, but by less than revenue, reflecting fixed costs alongside furloughs, workforce reductions, lower marketing and other cost controls. Interest expense increased to $28.1 million in Q3 and $69.2 million for the nine months, partly due to new notes.
- Cash declined from operating activities, while financing raised cash: the company issued $227.5 million of 8.75% first-priority notes and $500 million of 9.50% second-priority notes, using part of the latter proceeds to repay revolving-credit borrowings. Cash and equivalents rose from $39.9 million at year-end 2019 to $488.4 million.
Outlook, commentary, risks and unusual items
- Management said available cash and revolver capacity were expected to cover capital expenditure and working-capital needs for at least 12 months, while emphasizing that the pandemic’s duration and financial effects were uncertain. No numerical revenue or earnings guidance was provided.
- Parks operated with capacity limits, modified attractions, reduced hours or days, and enhanced safety protocols. California’s SeaWorld reopened on a limited basis; Aquatica California and Water Country USA in Virginia did not open for the 2020 season. Virginia’s theme-park capacity restriction was revised after quarter-end, with the company estimating capacity could rise from 1,000 to about 4,000 guests.
- The company recorded a $12.5 million insurance-proceeds gain related to a derivative lawsuit settlement during the nine months. It also recorded approximately $2.5 million of Q3 restructuring charges, primarily severance, and reported a $65 million securities-class-action settlement funded during the nine months.
- Debt amendments suspended the first-lien leverage covenant through 2021; covenant testing is scheduled to resume in Q1 2022, subject to specified terms. A minimum-liquidity test of $75 million applies until the earlier of September 30, 2022 or the stated covenant election. Restricted payments, including share repurchases, are limited through Q3 2022 unless conditions are met.
- Risks include renewed closures or restrictions, weak attendance and guest spending, high fixed operating costs, substantial leverage and interest-rate exposure. Interest-rate swaps expired in May 2020; management estimated a 100-basis-point LIBOR increase would add approximately $6.0 million of annual interest expense with no revolver borrowings, or $9.1 million assuming $311 million of revolver borrowings.
- The planned second Sesame Place park in California, originally expected in 2021, was then expected to open in 2022; construction had been paused temporarily. Management reported no impairment charge but cautioned future impairment could result if assumptions or recovery expectations were not met.
Most important facts for investors to verify
- Current park operating status, capacity restrictions, attendance recovery and any renewed closures; Q3 monthly attendance remained down 89% in July, 80% in August and 61% in September year over year.
- Liquidity, cash burn, refinancing needs and compliance with amended debt covenants, including the $75 million minimum-liquidity test and the return of leverage testing.
- Whether per-capita spending gains persist as attendance, park mix, operating schedules and marketing normalize.
- Timing and cost of the California Sesame Place project, potential future asset impairments, and the resolution of ongoing litigation and regulatory matters.