SeaWorld Entertainment, Inc. (now identified in the request as United Parks & Resorts Inc.) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. The filing’s registrant name is SeaWorld Entertainment, Inc.; it reports 12 U.S. theme parks and one reportable segment. Unless stated otherwise, amounts below are U.S. dollars.
Financial performance
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 |
|---|---|---|
| Revenue | $521.2 million | $1,132.9 million |
| Operating income | $198.2 million; 38.0% margin | $346.7 million; 30.6% margin |
| Net income | $102.1 million; diluted EPS $1.28 | $185.0 million; diluted EPS $2.31 |
| Adjusted EBITDA, non-GAAP | $265.3 million | $509.3 million |
| Attendance | 7.23 million | 15.25 million |
| Revenue per capita | $72.13 | $74.29 |
For the nine-month period, operating cash flow was $416.4 million, capital expenditures were $73.6 million, and cash increased by $119.9 million, ending at $553.6 million (excluding restricted cash). The company reported a 1.7 working-capital ratio. Debt principal was $2.153 billion, with $2.106 billion reported as long-term debt net of discounts and current maturities. Net of cash, principal debt was approximately $1.60 billion. A $385 million revolving facility was undrawn; after outstanding letters of credit, approximately $364.5 million remained available.
Changes versus comparable periods
- Compared with Q3 2020, revenue rose from $106.1 million and net results improved from a $79.2 million loss. The prior-year quarter was heavily affected by pandemic park closures and limited operations, so the comparison is unusually distorted.
- Compared with Q3 2019, revenue was up 10.0%, but attendance was down 11.0%; revenue per capita rose 23.7% to $72.13. Management attributed higher per-capita spending to pricing, product mix, and expanded offerings.
- For the first nine months versus 2019, revenue increased 3.0%, while attendance declined 14.9%. Revenue per capita increased 21.0%. Management cited pandemic-related operating limits, lower international and group visitation, and improved pricing and in-park spending.
- Versus the first nine months of 2020, revenue and operating results rebounded as parks reopened and operating days increased. Interest expense rose 30.7% to $90.5 million, and a $58.8 million debt-extinguishment and financing-cost write-off reduced reported income.
Outlook, management commentary, risks, and unusual items
- Management said all 12 parks were open without COVID-related capacity limits by the end of Q2 2021. It also said existing cash, operating cash flow, and available revolver borrowings should cover capital expenditures and working-capital needs for at least the next 12 months. No specific revenue or earnings guidance was provided.
- In August 2021, the company refinanced debt, including $1.2 billion of variable-rate term loans and $725 million of 5.25% senior notes due 2029. It redeemed its 9.5% second-priority notes. The refinancing generated the $58.8 million reported loss; the company stated it was covenant-compliant at quarter-end.
- COVID-19 remained a source of uncertainty, including possible effects on attendance, travel, operating restrictions, and estimates. The company also cited labor shortages, increased turnover and wage pressures, inflation, weather, seasonality, high fixed costs, and animal-care regulation and reputation risks.
- The company disclosed a material weakness in internal control over financial reporting relating to policies and procedures for Board oversight of certain Board engagement. Management concluded disclosure controls were not effective at September 30, 2021; it reported no resulting material misstatement and said a remediation plan was being developed.
- Share repurchases totaled $82.7 million for the first nine months. After quarter-end, the company repurchased a further $26.8 million of shares through November 9, 2021.
- The conversion of Aquatica San Diego into a second Sesame Place park was expected in 2022; remaining Sesame Workshop commitments were estimated at up to approximately $40 million. Management did not expect known legal or regulatory matters to materially adversely affect results, but outcomes remain uncertain.
Important facts for investors to verify
- Track attendance recovery, particularly international and group visitation, and whether higher per-capita revenue can persist.
- Review the refinancing’s ongoing interest-rate exposure: approximately $1.2 billion of debt was variable-rate; management estimated a 100-basis-point LIBOR rise would increase annual interest expense by about $7.0 million without revolver borrowing.
- Monitor execution and timing of the Board-oversight control remediation, given the disclosed material weakness and ineffective disclosure controls.
- Assess labor availability, wage and other inflationary pressures, and whether structural cost savings offset them as park operations normalize.
- Distinguish GAAP earnings and cash flow from management-defined Adjusted EBITDA, which includes specified add-backs and is not a GAAP measure.