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1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
SeaWorld Entertainment, Inc., through its wholly-owned subsidiary, SeaWorld Parks & Entertainment, Inc. (“SEA”) (collectively, the “Company”), owns and operates eleven theme parks within the United States. The Company is majority owned by ten limited partnerships (the “Partnerships”), ultimately controlled by affiliates of The Blackstone Group L.P. (“Blackstone”) and certain co-investors. On April 24, 2013, the Company completed an initial public offering in which it sold 10,000,000 shares of common stock and the selling shareholders of the Company sold 19,900,000 shares of common stock, including 3,900,000 shares pursuant to the exercise in full of the underwriters’ over-allotment option. The offering generated net proceeds of approximately $245,400 to the Company after deducting underwriting discounts, expenses and transaction costs. The Company did not receive any proceeds from shares sold by the selling shareholders. See further discussion in Note 12-Stockholders Equity.
The Company operates SeaWorld theme parks in Orlando, Florida; San Antonio, Texas; and San Diego, California, and Busch Gardens theme parks in Tampa, Florida, and Williamsburg, Virginia. The Company operates water park attractions in Orlando, Florida (Aquatica); San Diego, California (Aquatica), Tampa, Florida (Adventure Island), and Williamsburg, Virginia (Water Country USA). The Company also operates a reservations-only attraction offering interaction with marine animals (Discovery Cove) and a seasonal park in Langhorne, Pennsylvania (Sesame Place).
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2012 included in the Company’s prospectus as filed with the SEC on April 18, 2013, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”). The unaudited condensed consolidated balance sheet as of December 31, 2012 has been derived from the audited consolidated financial statements at that date.
In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2013 or any future period due to the seasonal nature of the Company’s operations. Based upon historical results, the Company typically generates its highest revenues in the second and third quarters of each year and incurs a net loss in the first and fourth quarters, in part because six of its theme parks are only open for a portion of the year.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including SEA. All intercompany accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance, deferred tax assets, deferred revenue, equity compensation and the valuation of goodwill and other indefinite-lived intangible assets. Actual results could differ from those estimates.
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2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which amends Accounting Standards Codification (“ASC”) 220, Comprehensive Income. The amended guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. Additionally, entities are required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amended guidance does not change the current requirements for reporting net income or other comprehensive income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a significant impact on the Company’s condensed consolidated financial statements.
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4. INCOME TAXES
Income tax expense is recognized based on the Company’s estimated annual effective tax rate which is based upon the tax rate expected for the full calendar year applied to the pre-tax income or loss of the interim period. The Company’s consolidated effective tax rate for the three and six months ended June 30, 2013 was 34.7% and 36.6%, respectively, and differs from the statutory federal income tax rate primarily due to state income taxes. The Company’s consolidated effective tax rate for the three and six months ended June 30, 2012 was 39.7% and 40.1%, respectively, and differs from the statutory federal income tax rate primarily due to state income taxes.
The Company has determined that there are no positions currently taken that would rise to a level requiring an amount to be recorded or disclosed as an uncertain tax position. If such positions do arise, it is the Company’s intent that any interest or penalty amount related to such positions will be recorded as a component of tax expense to the applicable period.
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5. OTHER ACCRUED EXPENSES
Other accrued expenses at June 30, 2013 and December 31, 2012, consisted of the following:
June 30, 2013 |
December 31, 2012 |
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Accrued property taxes |
$ | 7,065 | $ | 1,974 | ||||
Accrued interest |
2,894 | 3,877 | ||||||
Note payable |
3,000 | 3,000 | ||||||
Self-insurance reserve |
7,800 | 7,800 | ||||||
Other |
2,552 | 2,699 | ||||||
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Total other accrued expenses |
$ | 23,311 | $ | 19,350 | ||||
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6. LONG-TERM DEBT
Long-term debt as of June 30, 2013 and December 31, 2012 consisted of the following:
June 30, 2013 |
December 31, 2012 |
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Term Loan A |
$ | — | $ | 152,000 | ||||
Term Loan B |
— | 1,293,774 | ||||||
Term B-2 Loans |
1,405,000 | — | ||||||
Revolving credit agreement |
— | — | ||||||
Senior Notes |
260,000 | 400,000 | ||||||
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Total long-term debt |
1,665,000 | 1,845,774 | ||||||
Less discounts |
(19,121 | ) | (21,800 | ) | ||||
Less current maturities |
(14,050 | ) | (21,330 | ) | ||||
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Total long-term debt, net of current maturities |
$ | 1,631,829 | $ | 1,802,644 | ||||
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In conjunction with the Company’s initial public offering completed on April 24, 2013, the Company used $37,000 of the net proceeds received from the offering to repay a portion of the outstanding indebtedness under the then existing Term Loan B and $140,000 to redeem a portion of its Senior Notes at a redemption price of 111.0%, plus accrued and unpaid interest thereon. The redemption premium of $15,400 along with a write-off approximately $5,500 in related discounts and deferred financing costs is included in loss on early extinguishment of debt and write-off of discounts and deferred financing costs on the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2013. See further discussion in Note 12-Stockholders’ Equity.
Senior Secured Credit Facilities
On March 30, 2012, April 5, 2013 and May 14, 2013, SEA entered into Amendments No. 3, 4 and 5, respectively, of the senior secured credit facilities (the “Senior Secured Credit Facilities”).
Amendment No. 3 increased the amount of Term B Loans (“Additional Term B Loans”) by $500,000 for the purposes of financing a dividend payment to the stockholders in the same amount during the three months ended March 31, 2012. The Additional Term B Loans were issued at a discount which was being amortized to interest expense using the weighted average interest method.
Amendment No. 4 amended the terms of the existing Senior Secured Credit Facilities to, among other things, permit SEA to pay certain distributions following an initial public offering and replaced the then existing $172,500 senior secured revolving credit facility with a new $192,500 senior secured revolving credit facility. The new senior secured revolving credit facility will mature on the earlier of (a) April 24, 2018 or (b) the 91st day prior to the earlier of (1) the maturity date with respect to Term A Loans with an aggregate principal amount greater than $50,000 outstanding, (2) the maturity date with respect to the Term B Loans with an aggregate principal amount greater than $150,000 outstanding, (3) the maturity date of Senior Notes (also referred to as “Mezzanine Debt”) with an aggregate principal amount greater than $50,000 outstanding and (4) the maturity date of any indebtedness incurred to refinance any of the Term A or Term B Loans or the Mezzanine Debt.
Amendment No. 5 amended the terms of the existing Senior Secured Credit Facilities to, among other things, refinance Term Loan A and Term Loan B into new Term B-2 Loans, extend the final maturity date of the term loan facilities, reduce future principal and interest payments, and provide for additional future borrowings.
The Term B-2 Loans were borrowed in an aggregate principal amount of $1,405,000. Borrowings under the Term B-2 Loans bear interest, at SEA’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the higher of (1) the Bank of America’s prime lending rate and (2) the federal funds effective rate plus 1/2 of 1% or (b) a LIBOR rate determined by reference to the British Bankers Association (“BBA”) LIBOR rate for the interest period relevant to such borrowing. The margin for the Term B-2 Loans is 1.25%, in the case of base rate loans, and 2.25%, in the case of LIBOR rate loans, subject to a base rate floor of 1.75% and a LIBOR floor of 0.75%. The applicable margin for the Term B-2 Loans (under either a base rate or LIBOR rate) is subject to one 25 basis point step-down upon achievement by SEA of a certain leverage ratio. At June 30, 2013, the Company selected the LIBOR rate (interest rate of 3.00% at June 30, 2013).
Term B-2 Loans will amortize in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount of the Term B-2 Loans on the Amendment No. 5 effective date, with the first payment being due on September 30, 2013 and the balance due on the final maturity date. The Term B-2 Loans have a final maturity date of May 14, 2020. Amendment No. 5 also permits SEA to add one or more incremental term loan facilities to the Senior Secured Credit Facilities and/or increase commitments under the Revolving Credit Facility in an aggregate principal amount of up to $350,000. SEA may also incur additional incremental term loans provided that, among other things, on a pro forma basis after giving effect to the incurrence of such incremental term loans, the first lien secured net leverage ratio, as defined in the Senior Secured Credit Facility, is no greater than 3.50 to 1.00.
As a result of Amendment No. 5, approximately $11,500 of debt issuance costs were written off and included as loss on early extinguishment of debt and write-off of discounts and deferred financing costs on the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2013. As a result of Amendments No. 4 and 5, the Company capitalized fees totaling approximately $14,000. Deferred financing costs, net of accumulated amortization, were $36,272 and $44,103 as of June 30, 2013 and December 31, 2012, respectively, are being amortized to interest expense using the weighted average interest method and are included in other assets in the accompanying unaudited condensed consolidated balance sheets.
SEA had no amounts outstanding at June 30, 2013 and December 31, 2012, relating to the Revolving Credit Facility. As of June 30, 2013, the Company had approximately $18,500 of outstanding letters of credit.
On August 9, 2013, SEA entered into Amendment No. 6 of the Senior Secured Credit Facilities. Amendment No. 6 amends the calculation of the Company’s covenant EBITDA to allow the add back of the $46,300 termination fee paid in connection with the termination of the advisory agreement between the Company and affiliates of Blackstone. See Note 9-Related-Party Transactions for further discussion.
Senior Notes
In conjunction with the execution of Amendment No. 3 to the Senior Secured Credit Facilities, SEA also entered into the Second Supplemental Indenture (the “Second Supplemental Indenture”) dated March 30, 2012 relating to the Senior Notes. Among other matters, the Second Supplemental Indenture granted waivers to allow SEA to issue the additional $500,000 of Term B Loans to fund the dividend payment discussed above and decreased the interest rate on the Senior Notes from 13.5% per annum to 11% per annum. SEA can redeem the Senior Notes at any time and the Senior Notes are unsecured. Interest is paid semi-annually in arrears. Until December 1, 2014, and in the case of an Equity Offering (as defined in the indenture), SEA may redeem up to 35% of the Senior Notes at a price of 111% of the principal amount of the Senior Notes redeemed plus accrued interest using the net cash proceeds from an Equity Offering. Prior to December 1, 2014, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount of the Senior Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date, subject to the right of the holders of record on the relevant record date to receive interest due on the relevant interest payment date. The “Applicable Premium” is defined as the greater of (1) 1.0% of the principal amount of the Senior Notes and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of the Senior Notes at December 1, 2014 plus (ii) all required interest payments due on the Senior Notes through December 1, 2014 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate plus 50 basis points over (b) the principal amount of the Senior Notes. On or after December 1, 2014, the Senior Notes may be redeemed at 105.5% and 102.75% of the principal balance beginning on December 1, 2014 and 2015, respectively. The Second Supplemental Indenture also increased the minimum covenant leverage ratio from 2.75 to 1.00 to 3.00 to 1.00.
In conjunction with the execution of Amendment No. 4 to the Senior Secured Credit Facilities, SEA also entered into the Fourth Supplemental Indenture, dated April 5, 2013 (the “Fourth Supplemental Indenture”). The Fourth Supplemental Indenture increased by $20,000 the amount of debt that the Company can incur and have outstanding at one time under the Senior Secured Credit Facilities and amended the transactions with affiliates covenant to allow for the payment of a termination fee, not to exceed $50,000, in connection with the termination of the advisory agreement between the Company and affiliates of Blackstone (see Note 9-Related-Party Transactions).
Interest Rate Swap Agreements
On August 23, 2012, SEA executed two interest rate swap agreements (the “Interest Rate Swap Agreements”) to effectively fix the interest rate on $550,000 of the Term B Loans. Each interest rate swap had a notional amount of $275,000; was scheduled to mature on September 30, 2016; required the Company to pay a fixed rate of interest of 1.247% per annum; paid swap counterparties a variable rate of interest based upon three month BBA LIBOR; and had interest settlement dates occurring on the last day of December, March, June and September through maturity. SEA had designated such interest rate swap agreements as qualifying cash flow hedge accounting relationships. As a result of Amendment No. 5, in May 2013, the Interest Rate Swap Agreements were restructured into two interest rate swaps totaling $550,000 to match the refinanced debt. Each restructured interest rate swap has a notional amount of $275,000; matures on September 30, 2016; requires the Company to pay a fixed rate of interest between 1.049% and 1.051% per annum; pays swap counterparties a variable rate of interest based upon the greater of three month BBA LIBOR; and has interest settlement dates occurring on the last day of December, March, June and September through maturity. SEA designated such interest rate swap agreements as qualifying cash flow hedge accounting relationships as further discussed in Note 7-Derivative Instruments and Hedging Activities which follows.
Cash paid for interest relating to the Senior Secured Credit Facilities, the Senior Notes, and the Interest Rate Swap Agreements was $47,881 and $51,175 for the six month period ending June 30, 2013 and 2012, respectively.
Long-term debt at June 30, 2013, is repayable as follows, not including any possible prepayments:
Years Ending December 31, |
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2013 |
$ | 7,025 | ||
2014 |
14,050 | |||
2015 |
14,050 | |||
2016 |
274,050 | |||
2017 |
14,050 | |||
Thereafter |
1,341,775 | |||
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Total |
$ | 1,665,000 | ||
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7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.
As of June 30, 2013 and December 31, 2012, the Company did not have any derivatives outstanding that were not designated in hedge accounting relationships.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. During the three and six months ended June 30, 2013, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. As of June 30, 2013, the Company had two outstanding interest rate swaps with a combined notional of $550,000 that were designated as cash flow hedges of interest rate risk. In connection with Amendment No. 5 to the Senior Secured Credit Facility on May 14, 2013, the Company restructured the interest rate swaps to match the refinanced debt. The restructuring of the interest rate swap required a re-designation of the hedge accounting relationship. The re-designation is expected to result in the recognition of a minimal amount of ineffectiveness throughout the remaining term of the interest rate swaps.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2013, there was no ineffective portion recognized in earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $1,567 will be reclassified as an increase to interest expense.
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheet as of June 30, 2013:
Asset
Derivatives As of June 30, 2013 |
Liability
Derivatives As of June 30, 2013 |
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Balance Sheet Location |
Fair Value | Balance Sheet Location |
Fair Value | |||||||||
Derivatives designated as hedging instruments: |
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Interest rate swaps |
Other assets | $ | 2,096 | Other liabilities | $ | — | ||||||
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Total derivatives designated as hedging instruments |
$ | 2,096 | $ | — | ||||||||
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The unrealized gain on derivatives is recorded net of $1,378 and $1,416 in taxes for the three and six months ended June 30, 2013, respectively, and is included within the unaudited condensed consolidated statements of operations and comprehensive income (loss).
Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Income (Loss)
The table below presents the pre-tax effect of the Company’s derivative financial instruments on the unaudited condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2013:
Three Months Ended June 30, 2013 |
Six Months Ended June 30, 2013 |
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Derivatives in Cash Flow Hedging Relationships: |
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Gain related to effective portion of derivatives recognized in accumulated other comprehensive income |
$ | 4,046 | $ | 4,718 | ||||
Loss related to effective portion of derivatives reclassified from accumulated other comprehensive income to interest expense |
$ | (382 | ) | $ | (722 | ) | ||
Gain (loss) related to ineffective portion of derivatives recognized in other income (expense) |
$ | — | $ | — |
Credit Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
As of June 30, 2013, the termination value of derivatives in a net asset position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $2,191. As of June 30, 2013, the Company has posted no collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2013, it could have been required to settle its obligations under the agreements at their termination value of $2,191.
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8. FAIR VALUE MEASUREMENTS
Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement is required to be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The Company has determined that the majority of the inputs used to value its derivative financial instruments using the income approach fall within Level 2 of the fair value hierarchy. The Company uses readily available market data to value its derivatives, such as interest rate curves and discount factors. ASC 820, Fair Value Measurements and Disclosures, also requires consideration of credit risk in the valuation. The Company uses a potential future exposure model to estimate this credit valuation adjustment (“CVA”). The inputs to the CVA are largely based on observable market data, with the exception of certain assumptions regarding credit worthiness which make the CVA a Level 3 input. Based on the magnitude of the CVA, it is not considered a significant input and the derivatives are classified as Level 2. Of the Company’s long-term obligations, the Term B-2 Loans are classified in Level 2 of the fair value hierarchy. The fair value of the term loans as of June 30, 2013 approximates their carrying value due to the variable nature of the underlying interest rates and the frequent intervals at which such interest rates are reset. The Senior Notes are classified in Level 3 of the fair value hierarchy and have been valued using significant inputs that are not observable in the market including a discount rate of 11.05% and projected cash flows of the underlying Senior Notes.
The following table presents the Company’s estimated fair value measurements and related classifications as of June 30, 2013:
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Balance at June 30, 2013 |
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Assets: |
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Derivative financial instruments (a) |
$ | — | $ | 2,096 | $ | — | $ | 2,096 | ||||||||
Liabilities: |
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Long-term obligations (b) |
$ | — | $ | 1,405,000 | $ | 265,751 | $ | 1,670,751 |
(a) | Reflected at fair value in the unaudited condensed consolidated balance sheet as other assets of $2,096. There were no transfers between Levels 1, 2 or 3 during the three or six months ended June 30, 2013. |
(b) | Reflected at carrying value in the unaudited condensed consolidated balance sheet as current maturities on long-term debt of $14,050 and long-term debt of $1,631, 829 as of June 30, 2013. |
The Company did not have any assets measured at fair value at December 31, 2012. The following table presents the Company’s estimated fair value measurements and related classifications as of December 31, 2012:
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Balance at December 31, 2012 |
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Liabilities: |
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Letters of Credit |
$ | — | $ | 11,569 | $ | — | $ | 11,569 | ||||||||
Long-term obligations (a) |
$ | — | $ | 1,445,774 | $ | 416,317 | $ | 1,862,091 | ||||||||
Derivative financial instruments (b) |
$ | — | $ | 1,880 | $ | — | $ | 1,880 |
(a) | Reflected at carrying value in the unaudited condensed consolidated balance sheet as current maturities on long-term debt of $21,330 and long-term debt of $1,802,644 as of December 31, 2012. |
(b) | Reflected at fair value in the unaudited condensed consolidated balance sheet as other liabilities of $1,880 at December 31, 2012. |
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9. RELATED-PARTY TRANSACTIONS
Certain affiliates of Blackstone provided monitoring, advisory, and consulting services to the Company under an advisory fee agreement (the “2009 Advisory Agreement”), which was terminated on April 24, 2013 in connection with the completion of the initial public offering (see Note 12 – Stockholders’ Equity). Fees related to these services, which were based upon a multiple of EBITDA as defined in the 2009 Advisory Agreement, amounted to $1,874 and $2,799 for the three and six months ended June 30, 2013, respectively, and $1,999 and $2,811 for the three and six months ended June 30, 2012, respectively. These amounts are included in selling, general, and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss).
In connection with the completion of the initial public offering on April 24, 2013 (see Note 12 – Stockholders’ Equity), the 2009 Advisory Agreement between the Company and affiliates of Blackstone was terminated (except for provisions relating to indemnification and certain other provisions, which survived termination). In connection with such termination, the Company paid a termination fee of $46,300 to Blackstone with a portion of the net proceeds from the offering and wrote-off $3,772 of the 2013 prepaid advisory fee. The combined expense of $50,072 is recorded as termination of advisory agreement in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss).
On March 30, 2012, the Company declared and paid a $500,000 cash dividend to its stockholders. In June 2013, the Company’s Board of Directors declared a cash dividend of $0.20 per share payable on July 1, 2013 to all common stockholders of record at the close of business on June 20, 2013. In connection with the dividend declarations, certain affiliates of Blackstone were paid dividends in the amount of $500,000 and $11,749 on March 30, 2012 and July 1, 2013, respectively.
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10. COMMITMENTS AND CONTINGENCIES
The Company is a party to various claims and legal proceedings arising in the normal course of business. Matters where an unfavorable outcome to the Company is probable and which can be reasonably estimated are accrued. Such accruals, which are not material for any period presented, are based on information known about the matters, the Company’s estimate of the outcomes of such matters, and the Company’s experience in contesting, litigating, and settling similar matters. Matters that are considered reasonably possible to result in a material loss are not accrued for, but an estimate of the possible loss or range of loss is disclosed, if such amount or range can be determined. Management does not expect any known claims or legal proceedings to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.
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11. EQUITY-BASED COMPENSATION
In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services rendered in exchange for share-based compensation based upon the grant date fair market value. The cost is recognized over the requisite service period, which is generally the vesting period.
Employee Units Surrendered for Common Stock
Prior to April 18, 2013, the Company had an Employee Unit Incentive Plan (“Employee Unit Plan”). Under the Employee Unit Plan, the Partnerships granted Employee Units to certain key employees of SEA (“Employee Units”). The Employee Units which were granted were accounted for as equity awards and were divided into three tranches, Time-Vesting Units (“TVUs”), 2.25x Performance Vesting Units (“PVUs”) and 2.75x PVUs. Upon vesting of the Employee Units, the Company issued the corresponding number of shares of common stock of the Company to the Partnerships. There was no related cost to the employee upon vesting of the units. As of April 18, 2013, 669,293 Employee Units had been granted under the Employee Unit Plan, net of forfeitures. Separately, certain members of management in 2011 also purchased an aggregate of 29,240 Class D Units of the Partnerships (“Class D Units”).
Prior to the consummation of the Company’s initial public offering, on April 18, 2013, the Employee Units and Class D Units held by certain of the Company’s directors, officers, employees, and consultants were surrendered to the Partnerships and such individuals received an aggregate of 4,165,861 shares of the Company’s issued and outstanding common stock from the Partnerships. The number of shares of the Company’s common stock received by such individuals from the Partnerships was determined in a manner intended to replicate the economic value to each equity holder immediately prior to the transaction. The Class D Units and vested Employee Units were surrendered for an aggregate of 949,142 shares of common stock. The unvested Employee Units were surrendered for an aggregate of 3,216,719 unvested restricted shares of the Company’s common stock, which are subject to vesting terms substantially similar to those applicable to the unvested Employee Units immediately prior to the transaction. These unvested restricted shares consist of Time Restricted shares, and 2.25x and 2.75x Performance Restricted shares, which, for accounting purposes, such shares were removed from issued and outstanding shares until their restrictions are met, as shown on the accompanying unaudited condensed consolidated statement of changes in stockholders’ equity. The following table sets forth the number of Class D Units and Employee Units surrendered for shares of common stock prior to the consummation of the Company’s initial public offering:
Units | Shares of Common Stock |
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(not in thousands) | ||||||||
Vested TVUs surrendered for shares of stock |
121,206 | 727,852 | ||||||
Class D Units surrendered for shares of stock |
29,240 | 221,290 | ||||||
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Total Class D Units and vested TVUs surrendered for shares of stock |
150,446 | 949,142 | ||||||
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Unvested TVUs surrendered for unvested Time Restricted shares of stock |
103,913 | 599,215 | ||||||
2.25x PVUs surrendered for 2.25x Performance Restricted shares of stock |
222,087 | 1,308,752 | ||||||
2.75x PVUs surrendered for 2.75x Performance Restricted shares of stock |
222,087 | 1,308,752 | ||||||
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Total unvested TVUs and PVUs surrendered for shares of unvested restricted stock |
548,087 | 3,216,719 | ||||||
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Total units surrendered for shares of stock and unvested restricted stock |
698,533 | 4,165,861 | ||||||
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Time-Vesting Units (TVUs) and Time Restricted Shares
One-third of the Employee Units originally granted vested over five years (20% per year). Generally, the vesting began on the earlier of December 1, 2009, or the grant date. Vesting was contingent upon continued employment. In the event of a change of control (defined as a sale or disposition of the assets of the limited partnership to other than a Blackstone affiliated group or, if any group other than a Blackstone-affiliated entity, becomes the general partner or the beneficial owner of more than 50% interest), the TVUs immediately 100% vested. The TVUs were originally recorded at the fair market value at the date of grant and were being amortized to compensation expense over the vesting period.
The shares of stock received upon surrender of the Employee Units contain substantially identical terms, conditions and vesting schedules as the previously outstanding Employee Units. In accordance with the guidance in ASC 718-20, Compensation-Stock Compensation, the surrender of the Employee Units for shares of common stock and Time Restricted shares qualifies as a modification of an equity compensation plan. As such, the Company calculated the incremental fair value of the TVU awards immediately prior to and after their modification and determined that $282 of incremental equity compensation cost would be recorded upon surrender of the vested TVUs for vested shares of stock in the three months ended June 30, 2013. The remaining incremental compensation cost of $220 which represents the incremental cost on the unvested TVUs which were surrendered for unvested Time Restricted shares of restricted stock, will be added to the original grant date fair value of the TVU awards and amortized to compensation expense over the remaining vesting period.
Total combined compensation expense related to these TVU and Time Restricted share awards was $611 and $931 for the three and six months ended June 30, 2013 and $300 and $567 for the three and six months ended June 30, 2012 and is included in selling, general, and administrative expenses in the accompanying unaudited condensed consolidated statement of operations and comprehensive income (loss) and as contributed capital in the accompanying unaudited condensed consolidated statements of stockholders’ equity. Total unrecognized compensation cost related to the unvested Time Restricted shares, expected to be recognized over the remaining vesting term which approximates two years, was approximately $2,295 as of June 30, 2013. The activity related to the TVU and Time Restricted share awards for the six months ended June 30, 2013, is as follows:
Employee Units |
Shares | Weighted Average Fair Value (per Unit/Share) |
Weighted Average Remaining Contractual Term |
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(not in thousands) | ||||||||||||||
Outstanding unvested TVUs at December 31, 2012 |
112,701 | $ | 21.70 | |||||||||||
Vested units |
(8,788 | ) | $ | 22.71 | ||||||||||
TVUs surrendered for unvested Time Restricted shares of stock |
(103,913 | ) | 599,215 | $ | 4.38 | |||||||||
Vested shares |
— | (8,909 | ) | $ | 4.38 | |||||||||
Forfeited |
— | — | — | |||||||||||
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Outstanding unvested Time Restricted shares of stock at June 30, 2013 |
— | 590,306 | $ | 4.38 | 25 months | |||||||||
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2.25x and 2.75x Performance Vesting Units (PVUs) and Performance Restricted Shares
Two tranches of the Employee Units vested only if certain events occur. The 2.25x PVUs under the Employee Unit Plan vested if the employee is employed by the Company when and if Blackstone receives cash proceeds (not subject to any clawback, indemnity or similar contractual obligation) in respect of its Partnerships units equal to (x) a 20% annualized effective compounded return rate on Blackstone’s investment and (y) a 2.25x on Blackstone’s investment. The 2.75x PVUs under the Employee Unit Plan vested if the employee is employed by the Company when and if Blackstone received cash proceeds (not subject to any clawback, indemnity or similar contractual obligation) in respect of its Partnerships units equal to (x) a 15% annualized effective compounded return rate on Blackstone’s investment and (y) a 2.75x multiple on Blackstone’s investment. The PVUs had no termination date other than termination of employment from the Company and there were no service or period vesting conditions associated with the PVUs other than employment at the time the benchmark was reached; no compensation was recorded related to these PVUs prior to the modification since their exercise was not considered probable. The unvested Performance Restricted shares received upon surrender of the Employee Unit PVUs contain substantially the same terms and conditions as the previously outstanding PVUs. No compensation expense will be recorded related to the Performance Restricted shares until their vesting is probable, accordingly, no compensation expense has been recorded during the six months ended June 30, 2013 or 2012 related to these PVU or Performance Restricted share awards.
The activity related to the 2.25x Performance Restricted shares for the six months ended June 30, 2013, is as follows:
Employee Units |
Shares | |||||||
(not in thousands) | ||||||||
Outstanding 2.25x PVUs at December 31, 2012 |
225,051 | |||||||
Forfeited |
(2,964 | ) | ||||||
2.25x PVUs surrendered for unvested 2.25x Performance Restricted shares of stock |
(222,087 | ) | 1,308,752 | |||||
Vested |
— | |||||||
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Outstanding unvested 2.25x Performance Restricted shares of stock at June 30, 2013 |
— | 1,308,752 | ||||||
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The activity related to the 2.75x Performance Restricted shares for the six months ended June 30, 2013, is as follows:
Employee Units |
Shares | |||||||
(not in thousands) | ||||||||
Outstanding 2.75x PVUs at December 31, 2012 |
225,051 | |||||||
Forfeited |
(2,964 | ) | ||||||
2.75x PVUs surrendered for unvested 2.75x Performance Restricted shares of stock |
(222,087 | ) | 1,308,752 | |||||
Vested |
— | |||||||
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Outstanding unvested 2.75x Performance Restricted shares of stock at June 30, 2013 |
— | 1,308,752 | ||||||
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The fair value of each Employee Unit originally granted was estimated on the date of grant using a composite of the discounted cash flow model and the guideline public company approach to determine the underlying enterprise value. The discounted cash flow model was based upon significant inputs that are not observable in the market. Key assumptions included projected cash flows, a discount rate of 10.5%, and a terminal value. The guideline public company approach uses relevant public company valuation multiples to determine fair value. The value of the individual equity tranches was allocated based upon the Option-Pricing Method model. Significant assumptions included a holding period of 2.6 to 3.6 years, a risk free rate of 0.33% to 1.22%, volatility of approximately 49% to 57%, a discount for lack of marketability, depending upon the units, from 31% to 53% and a 0 dividend yield. Volatility for SEA’s stock at the date of grant was estimated using the average volatility calculated for a peer group, which is based upon daily price observations over the estimated term of units granted.
In order to calculate the incremental fair value at the modification date, the Option-Pricing Method model was used to estimate the fair value prior to the modification. For the fair value after the modification, the initial public offering price of $27.00 per share was used to calculate the fair value of the TVUs while the fair value of the PVUs was estimated using an asset-or-nothing call option approach. Significant assumptions used in both the Option-Pricing Method model and the asset-or-nothing call option approach included a holding period of approximately 2 years from the initial public offering date, a risk free rate of 0.24%, a volatility of approximately 37.6% based on re-levered historical and implied equity volatility of comparable companies and a 0 dividend yield.
2013 Omnibus Incentive Plan
The Company reserved 15,000,000 shares of common stock for future issuance under the Company’s new 2013 Omnibus Incentive Plan (“2013 Omnibus Plan”). The 2013 Omnibus Plan is administered by the compensation committee of the Board of Directors, and provides that the Company may grant equity incentive awards to eligible employees, directors, consultants or advisors in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and performance compensation awards. If an award under the 2013 Omnibus Plan terminates, lapses, or is settled without the payment of the full number of shares subject to the award, the undelivered shares may be granted again under the 2013 Omnibus Plan.
On April 19, 2013, 494,557 shares of restricted stock were granted to the Company’s directors, officers and employees under the 2013 Omnibus Incentive Plan (the “2013 Grant”). The shares granted were in the form of time vesting restricted shares (“Time Restricted 2013 shares”), 2.25x performance restricted shares (“2.25x Performance Restricted 2013 shares”) and 2.75x performance restricted shares (“2.75x Performance Restricted 2013 shares”). The activity related to the 2013 Grant for the six months ended June 30, 2013, is as follows:
Shares | Weighted Average Grant Date Fair Value (per Share) |
Weighted Average Remaining Contractual Term |
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(not in thousands | ) | |||||||||
2013 Grant |
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Granted: |
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Time Restricted 2013 shares vesting after lock up period |
85,647 | $ | 33.52 | 6 months | ||||||
Time Restricted 2013 shares vesting over remaining service period |
82,290 | $ | 33.52 | 25 months | ||||||
2.25x Performance Restricted 2013 shares |
163,310 | $ | 30.46 | |||||||
2.75x Performance Restricted 2013 shares |
163,310 | $ | 23.05 | |||||||
Vested |
— | — | ||||||||
Forfeited |
— | — | ||||||||
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Outstanding 2013 Grant unvested restricted shares at June 30, 2013 |
494,557 | $ | 29.05 | |||||||
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The vesting terms and conditions of the Time Restricted 2013 shares, the 2.25x Performance Restricted 2013 shares, and the 2.75x Performance Restricted 2013 shares included in the 2013 Grant are substantially the same as those of the previous Employee Unit Plan TVUs, 2.25x PVUs, and 2.75x PVUs, respectively, (see previous discussion concerning the TVU and PVU vesting conditions). For the Time Restricted 2013 shares, after an initial 180 day post initial public offering lock up period, the vesting schedule from the Employee Unit Plan carries over so that each recipient will vest in the 2013 Grant in the same proportion as they were vested in the previous Employee Unit Plan. The remaining unvested shares will vest over the remaining service period, subject to substantially the same vesting conditions which carried over from the previous Employee Unit Plan.
The grant date fair value for the Time Restricted 2013 shares awarded was determined based on the closing market price of the Company’s stock at the date of grant applied to the total number of shares that are anticipated to fully vest. The fair value of the restricted shares will be recognized as equity compensation on a straight-line basis over the requisite service period as if the award was, in substance, multiple awards consisting of the Time Restricted 2013 shares which vest at the end of the 180 day lock up period, and the remaining Time Restricted 2013 shares which vest over the requisite service period. As a result, approximately $1,291 of equity compensation expense was recognized in the three months ended June 30, 2013 related to the 2013 Grant, leaving unrecognized equity compensation expense related to the Time Restricted 2013 shares of $1,914 to be recognized by the end of the lock up period and $2,424 to be recognized over the remaining requisite service period.
The grant date fair value of the 2.25x and 2.75x Performance Restricted 2013 shares was measured using the asset-or-nothing option pricing model. Significant assumptions included a holding period of approximately 2 years from the initial public offering date, a risk free rate of 0.24%, a volatility of approximately 33.2% based on re-levered historical and implied equity volatility of comparable companies and a 0 dividend yield. There is no compensation expense recorded related to the Performance Restricted 2013 shares until their issuance is probable. Total unrecognized compensation expense as of June 30, 2013 for the 2013 Grant was approximately $4,974 and $3,764 for the 2.25x Performance Restricted 2013 shares and 2.75x Performance Restricted 2013 shares, respectively.
As of June 30, 2013, there were 14,505,443 shares of common stock available for future issuance under the Company’s 2013 Omnibus Plan.
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12. STOCKHOLDERS’ EQUITY
Stock Split
On April 7, 2013, the Company’s Board of Directors authorized an eight-for-one split of the Company’s common stock which was effective on April 8, 2013. The Company retained the current par value of $0.01 per share for all shares of common stock after the stock split, and accordingly, stockholders’ equity on the accompanying unaudited condensed consolidated balance sheets and the unaudited condensed consolidated statements of changes in stockholders’ equity reflects the stock split by reclassifying from “Additional paid-in capital” to “Common stock” an amount equal to the par value of the additional shares arising from the split. The Company’s historical share and per share information has been retroactively adjusted to give effect to this stock split.
Contemporaneously with the stock split, the Company’s Board of Directors approved an increase in the number of authorized shares of common stock to 1 billion shares. Additionally, upon the consummation of the initial public offering, the Board of Directors authorized 100,000,000 shares of preferred stock at a par value of $0.01 per share.
Initial Public Offering and Use of Proceeds
On April 24, 2013, the Company completed its initial public offering of its common stock in which it offered and sold 10,000,000 shares of common stock and the selling shareholders of the Company offered and sold 19,900,000 shares of common stock including, 3,900,000 shares of common stock pursuant to the exercise in full of the underwriters’ over-allotment option. The shares offered and sold in the offering were registered under the Securities Act pursuant to the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on April 18, 2013. The common stock is listed on the New York Stock Exchange under the symbol “SEAS”.
The Company’s shares of common stock were sold at an initial public offering price of $27.00 per share, which generated net proceeds of approximately $245,400 to the Company after deducting underwriting discounts, expenses and transaction costs. The Company did not receive any proceeds from shares sold by the selling shareholders. The Company used a portion of the net proceeds received in the offering to redeem $140,000 in aggregate principal amount of its Senior Notes at a redemption price of 111.0% plus accrued and unpaid interest thereon, pursuant to a provision in the indenture governing the Senior Notes that permits the Company to redeem up to 35% of the aggregate principal amount of the Senior Notes with the net cash proceeds of certain equity offerings. In addition, the Company used approximately $46,300 of the net proceeds received from the offering to make a one-time payment to an affiliate of Blackstone in connection with the termination of the 2009 Advisory Agreement (see Note 9 – Related-Party Transactions). Of the net proceeds received from the offering, $37,000 was used to repay a portion of the outstanding indebtedness under Term Loan B. The remainder of the proceeds was used for other general corporate purposes.
Dividends
In March 2012, the Company declared a $500,000 cash dividend to its common stockholders, which at that time consisted of entities controlled by certain affiliates of Blackstone. In June 2013, the Company’s Board of Directors adopted a policy to pay a regular quarterly dividend. As a result, an initial quarterly cash dividend of $0.20 per share payable on July 1, 2013 was declared to all common stockholders of record at the close of business on June 20, 2013. Unvested restricted shares carry dividend rights and therefore the dividends are payable as the shares vest in accordance with the underlying stock compensation grants. As of June 30, 2013, the Company had $18,072 of cash dividends payable included in other current liabilities in the accompanying unaudited condensed consolidated balance sheet. Dividends on the 2.25x and 2.75x Performance Restricted shares, including the 2.25x and 2.75x Performance Restricted 2013 shares (collectively the “Performance Restricted shares”), were approximately $294 for each tranche and will accumulate and be paid only if and to the extent the Performance Restricted shares vest in accordance with their terms. The Company has not recorded a payable related to these dividends as the vesting of the Performance Restricted Shares is not probable.
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13. SUBSEQUENT EVENTS
In connection with the preparation of the unaudited condensed consolidated financial statements, the Company evaluated subsequent events after the condensed consolidated balance sheet date through the date the unaudited condensed consolidated financial statements were issued, to determine whether any events occurred that required recognition or disclosure in the accompanying unaudited condensed consolidated financial statements. The Company believes there are no additional events which require disclosure.
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Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2012 included in the Company’s prospectus as filed with the SEC on April 18, 2013, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”). The unaudited condensed consolidated balance sheet as of December 31, 2012 has been derived from the audited consolidated financial statements at that date.
In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2013 or any future period due to the seasonal nature of the Company’s operations. Based upon historical results, the Company typically generates its highest revenues in the second and third quarters of each year and incurs a net loss in the first and fourth quarters, in part because six of its theme parks are only open for a portion of the year.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including SEA. All intercompany accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance, deferred tax assets, deferred revenue, equity compensation and the valuation of goodwill and other indefinite-lived intangible assets. Actual results could differ from those estimates.
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which amends Accounting Standards Codification (“ASC”) 220, Comprehensive Income. The amended guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. Additionally, entities are required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amended guidance does not change the current requirements for reporting net income or other comprehensive income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a significant impact on the Company’s condensed consolidated financial statements.
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Other accrued expenses at June 30, 2013 and December 31, 2012, consisted of the following:
June 30, 2013 |
December 31, 2012 |
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Accrued property taxes |
$ | 7,065 | $ | 1,974 | ||||
Accrued interest |
2,894 | 3,877 | ||||||
Note payable |
3,000 | 3,000 | ||||||
Self-insurance reserve |
7,800 | 7,800 | ||||||
Other |
2,552 | 2,699 | ||||||
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Total other accrued expenses |
$ | 23,311 | $ | 19,350 | ||||
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Long-term debt as of June 30, 2013 and December 31, 2012 consisted of the following:
June 30, 2013 |
December 31, 2012 |
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Term Loan A |
$ | — | $ | 152,000 | ||||
Term Loan B |
— | 1,293,774 | ||||||
Term B-2 Loans |
1,405,000 | — | ||||||
Revolving credit agreement |
— | — | ||||||
Senior Notes |
260,000 | 400,000 | ||||||
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Total long-term debt |
1,665,000 | 1,845,774 | ||||||
Less discounts |
(19,121 | ) | (21,800 | ) | ||||
Less current maturities |
(14,050 | ) | (21,330 | ) | ||||
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Total long-term debt, net of current maturities |
$ | 1,631,829 | $ | 1,802,644 | ||||
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Long-term debt at June 30, 2013, is repayable as follows, not including any possible prepayments:
Years Ending December 31, |
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2013 |
$ | 7,025 | ||
2014 |
14,050 | |||
2015 |
14,050 | |||
2016 |
274,050 | |||
2017 |
14,050 | |||
Thereafter |
1,341,775 | |||
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Total |
$ | 1,665,000 | ||
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The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheet as of June 30, 2013:
Asset
Derivatives As of June 30, 2013 |
Liability
Derivatives As of June 30, 2013 |
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Balance Sheet Location |
Fair Value | Balance Sheet Location |
Fair Value | |||||||||
Derivatives designated as hedging instruments: |
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Interest rate swaps |
Other assets | $ | 2,096 | Other liabilities | $ | — | ||||||
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Total derivatives designated as hedging instruments |
$ | 2,096 | $ | — | ||||||||
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The table below presents the pre-tax effect of the Company’s derivative financial instruments on the unaudited condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2013:
Three Months Ended June 30, 2013 |
Six Months Ended June 30, 2013 |
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Derivatives in Cash Flow Hedging Relationships: |
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Gain related to effective portion of derivatives recognized in accumulated other comprehensive income |
$ | 4,046 | $ | 4,718 | ||||
Loss related to effective portion of derivatives reclassified from accumulated other comprehensive income to interest expense |
$ | (382 | ) | $ | (722 | ) | ||
Gain (loss) related to ineffective portion of derivatives recognized in other income (expense) |
$ | — | $ | — |
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The following table presents the Company’s estimated fair value measurements and related classifications as of June 30, 2013:
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Balance at June 30, 2013 |
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Assets: |
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Derivative financial instruments (a) |
$ | — | $ | 2,096 | $ | — | $ | 2,096 | ||||||||
Liabilities: |
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Long-term obligations (b) |
$ | — | $ | 1,405,000 | $ | 265,751 | $ | 1,670,751 |
(a) | Reflected at fair value in the unaudited condensed consolidated balance sheet as other assets of $2,096. There were no transfers between Levels 1, 2 or 3 during the three or six months ended June 30, 2013. |
(b) | Reflected at carrying value in the unaudited condensed consolidated balance sheet as current maturities on long-term debt of $14,050 and long-term debt of $1,631, 829 as of June 30, 2013. |
The Company did not have any assets measured at fair value at December 31, 2012. The following table presents the Company’s estimated fair value measurements and related classifications as of December 31, 2012:
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Balance at December 31, 2012 |
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Liabilities: |
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Letters of Credit |
$ | — | $ | 11,569 | $ | — | $ | 11,569 | ||||||||
Long-term obligations (a) |
$ | — | $ | 1,445,774 | $ | 416,317 | $ | 1,862,091 | ||||||||
Derivative financial instruments (b) |
$ | — | $ | 1,880 | $ | — | $ | 1,880 |
(a) | Reflected at carrying value in the unaudited condensed consolidated balance sheet as current maturities on long-term debt of $21,330 and long-term debt of $1,802,644 as of December 31, 2012. |
(b) | Reflected at fair value in the unaudited condensed consolidated balance sheet as other liabilities of $1,880 at December 31, 2012. |
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