Description of the Business and Significant Accounting Policies

6 Months Ended

Jun. 27, 2021

Description of the Business and Significant Accounting Policies

Description of the Business and Significant Accounting Policies:

Impact of COVID-19 Pandemic

The novel coronavirus (COVID-19) pandemic had a material impact on our business in 2020, is expected to have a continuing negative impact in 2021 and may have a longer-term negative effect. On March 14, 2020, we closed our properties in response to the spread of COVID-19 and local government mandates. We ultimately resumed only partial operations at 10 of our 13 properties in 2020. Due to soft demand trends upon reopening in 2020, park operating calendars were adjusted, including reduced operating days per week and operating hours within each operating day. Following March 14, 2020, Knott's Berry Farm's partial operations in 2020 were limited to culinary festivals.

In May 2021, we opened all of our U.S. properties for the 2021 operating season on a staggered basis with capacity restrictions, guest reservations, and other operating protocols in place. Our 2021 operating calendars were designed to align with anticipated capacity restrictions, guest demand and labor availability. As vaccination distribution efforts continued during the second quarter of 2021 and we were able to secure additional labor, we removed most capacity restrictions, guest reservation requirements and other protocols at our U.S. properties beginning in July 2021. We have adjusted and may continue to adjust our 2021 operating calendars as we respond to changes in guest demand, labor availability and any state and local restrictions. We were able to open our Canadian property, Canada's Wonderland, in July 2021. Canada's Wonderland is operating with capacity restrictions, guest reservations, and other operating protocols in place. Our future operations are dependent on factors outside of our knowledge or control, including the duration and severity of the COVID-19 pandemic and actions taken to contain its spread and mitigate its public health effects. Furthermore, management has made significant estimates and assumptions to determine our liquidity requirements and estimate the impact of the COVID-19 pandemic on our business, including financial results in the near and long-term. Actual results could materially differ from these estimates depending on the ultimate extent of the effects of the COVID-19 pandemic.

In the prior year quarterly period ended June 28, 2020, we estimated that some of our parks would remain closed throughout 2020 and some of our parks that had been able to open would be compelled to close for the 2020 operating season earlier than the park's typical operating calendar due to the effects of the COVID-19 pandemic. Furthermore, during the second quarter of 2020, we paused collections of guest payments on installment purchase products and extended the usage privileges of 2020 season passes through the 2021 operating season. As a result, we estimated the following working capital amounts would be realized greater than 12 months from the balance sheet date, and these amounts were classified as non-current within the prior year quarterly period unaudited condensed consolidated balance sheet:


(In thousands)
Working Capital Account	Balance Sheet Location	June 28, 2020
Receivables	Other Assets	$	8,663
Inventories	Other Assets	9,159
Other current assets	Other Assets	763
		$	18,585

Deferred revenue	Non-Current Deferred Revenue	$	88,579

In the current year quarterly period ended June 27, 2021, all of our properties were open except for our Canadian property, Canada's Wonderland, which opened in July 2021. Therefore, we expect outstanding working capital amounts to be realized within 12 months from the balance sheet date, including accounts receivable related to outstanding installment purchase products and deferred revenue related to outstanding season passes, with the exception of $5.8 million of deferred revenue expected to be realized greater than 12 months from the balance sheet date due to the extension of validity for Canada's Wonderland season-long products (see Note 3).

Significant Accounting Policies

Except for the changes described below, our unaudited condensed consolidated financial statements included in this Form 10-Q report have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the year ended December 31, 2020, which were included in the Form 10-K filed on February 19, 2021. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange

Commission (the "Commission"). These financial statements should be read in conjunction with the financial statements and the notes included in the Form 10-K referred to above.

Adopted Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing specific exceptions and clarifying and amending existing guidance under Topic 740, Income Taxes. ASU 2019-12 is effective for fiscal years after December 15, 2020 and interim periods within those years. Early adoption is permitted, including adoption in any interim period, but all amendments must be adopted in the same period. The allowable adoption methods differ under the various amendments. We adopted ASU 2019-12 as of January 1, 2021. The standard did not have an effect on the condensed consolidated financial statements and related disclosures.

New Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. We are in the process of evaluating the effect this standard will have on the unaudited condensed consolidated financial statements and related disclosures.