General - Basis of Presentation (Policies)

6 Months Ended

Jul. 02, 2023

General - Basis of Presentation

Consolidated U.S. GAAP Presentation

a.  Consolidated U.S. GAAP Presentation

Our accounting policies reflect industry practices and conform to U.S. GAAP.

The unaudited condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. We also consolidate the partnerships that own Six Flags Over Texas ("SFOT") and Six Flags Over Georgia (including Six Flags White Water Atlanta) ("SFOG", and together with SFOT, the "Partnership Parks") in our unaudited condensed consolidated financial statements, as we have determined that we have the power to direct the activities of the Partnership Parks that most significantly impact their economic performance and we have the obligation to absorb losses and receive benefits from the Partnership Parks that can be potentially significant to these entities. The equity interests owned by non-affiliated parties in the Partnership Parks are reflected in the accompanying unaudited condensed consolidated balance sheets as redeemable noncontrolling interests.

Income Taxes

b.  Income Taxes

We recorded a valuation allowance of $98.1 million, $96.0 million and $108.4 million as of July 2, 2023, January 1, 2023, and July 3, 2022, respectively, due to uncertainties related to our ability to use some of our deferred tax assets, primarily consisting of certain state net operating loss and other tax carryforwards, before they expire. The valuation allowance was based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets were recoverable. Our projected taxable income over the foreseeable future indicates we will be able to use all of our federal net operating loss carryforwards before they expire.

We classify interest and penalties attributable to income taxes as part of income tax expense. As of July 2, 2023, January 1, 2023, and July 3, 2022, we had no recorded amounts for accrued interest or penalties.

Goodwill and Intangibles

c. Goodwill and Intangibles

As of July 2, 2023, the fair value of our single reporting unit exceeded our carrying amount. We have one reporting unit at the same level for which Holdings common stock is traded and we believe our market capitalization is the best indicator of our reporting unit’s fair value. As of July 2, 2023, we did not identify any triggering events that would require a full quantitative analysis to be performed.

Long-Lived Assets

d.  Long-Lived Assets

We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable, “triggering event(s)”. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset or group of assets to the projected future net cash flows expected to be generated by the asset or group of assets. If such assets are not determined to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective estimated fair value. Assets held-for-sale are reported at the lower of the carrying amount or fair value less costs to sell. As of July 2, 2023, we did not identify any triggering events that would require a quantitative analysis.

Earnings (Loss) Per Common Share

e.  Earnings (Loss) Per Common Share

Earnings (loss) per common share for the three and six months ended July 2, 2023 and July 3, 2022, was calculated as follows:

	Three Months Ended				Six Months Ended
(Amounts in thousands, except per share data)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net income (loss) attributable to Six Flags Entertainment Corporation	$	20,554	$	45,392	$	(49,305)	$	(20,270)
Weighted-average common shares outstanding - basic:		83,379		84,992		83,293		85,594
Effect of dilutive stock options and restricted stock units		417		250		—		—
Weighted-average common shares outstanding - diluted:		83,796		85,242		83,293		85,594
Earnings (loss) per share - basic:	$	0.25	$	0.53	$	(0.59)	$	(0.24)
Earnings (loss) per share - diluted:	$	0.25	$	0.53	$	(0.59)	$	(0.24)

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The computation of diluted earnings per share excluded the effect of 1,578,000 and 2,462,000 antidilutive stock options and restricted stock units for the three months ended July 2, 2023, and July 3, 2022, respectively, and excluded the effect of 1,550,000 and 2,415,000 antidilutive stock options and restricted stock units for the six months ended July 2, 2023, and July 3, 2022, respectively.

Stock Benefit Plans

f.  Stock Benefit Plans

Pursuant to the Six Flags Entertainment Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"), we may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance stock units, performance and cash-settled awards and dividend equivalent rights ("DERs") to select employees, officers, directors and consultants.

Periodically, we grant performance stock units to key employees. These awards vest based on attainment of specific performance targets most often related to Adjusted EBITDA or revenue over a defined period. As of July 2, 2023, we have not determined that it is probable that we will achieve any of the performance targets associated with our outstanding performance units, and we have therefore not recognized any expense for these awards.

During the three and six months ended July 2, 2023 and July 3, 2022, stock-based compensation expense consisted of the following:

	Three Months Ended				Six Months Ended
(Amounts in thousands)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Long-term incentive plan	$	2,123	$	3,229	$	5,407	$	7,379
Employee stock purchase plan		56		(6)		86		69
Total stock-based compensation	$	2,179	$	3,223	$	5,493	$	7,448

Accounts Receivable, Net

g.  Accounts Receivable, Net

Accounts receivable are reported at net realizable value and consist primarily of amounts due from guests for the sale of group outings and multi-use admission products that allow for payment plans, such as season passes, annual passes, memberships and our Six Flags Plus pass, a new twelve-month, subscription style pass. We are not exposed to a significant concentration of credit risk; however, based on the age of receivables, our historical experience and other factors and assumptions we believe to be customary and reasonable, we record an allowance for doubtful accounts. As of July 2, 2023, January 1, 2023, and July 3, 2022, we have recorded an allowance for doubtful accounts of $9.3 million, $4.1 million, and $6.7 million, respectively, which is primarily comprised of estimated payment defaults under our Six Flags Plus pass and multi-use admission products that allow for payment plans. To the extent that payments for products for which an allowance for doubtful accounts is established have not been recognized in revenue, the allowance  recorded is offset with a corresponding reduction in deferred revenue.

Recently Adopted Accounting Pronouncements

h.  Recently Adopted Accounting Pronouncements

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. As of July 2, 2023, we no longer have any debt instruments that contain LIBOR as a reference rate. Our adoption of Update 2020-04 did not have any effect on our condensed consolidated financial statements.