2015
ANNUAL REPORT
April 29, 2016
To Our Shareholders,
Over the past year, your Board of Directors and management have driven important changes at SeaWorld
Entertainment. Our fundamental mission remains the same – to provide experiences that matter and inspire
guests to protect animals and the wild wonders of the world. We recognized, however, that we must evolve how
we pursue that mission along with the expectations of our guests, current and future.
After I became CEO last April, we conducted a careful and thorough analysis of our business which was used as
a starting point to develop the plan we shared with you in November. With the foundational work complete, we are
now in a position to execute on the strategy we shared. Our primary objective is to improve operational excellence
and deliver the consistent and sustainable financial performance you expect from our company.
We are evolving the SeaWorld brand to deliver experiences that matter. Research tells us this is a priority for
young families, particularly millennials. We are making a range of changes over time so that guests who visit us
find opportunities to enjoy family time and pure fun, while also learning how to make the world a better place for
animals and their habitats.
In March of this year, we took a bold and decisive step in this direction. We committed to stop breeding orcas in
our care and to transition our orca theatrical shows toward more natural and educational encounters. We also
announced a partnership with the Humane Society of the United States to launch a series of initiatives to protect
and preserve marine wildlife and their habitats.
We expect these initiatives will help us grow attendance and revenue over time as consumers begin to recognize
that we are moving in their direction. To drive awareness and attract customers, we will implement an integrated
marketing campaign showcasing the “new” SeaWorld with its unique blend of compelling animal experiences and
new rides and attractions.
We are also committed to investing in our parks, including new rides, themed events, shows and restaurants– all
consistent with our evolved brand. Examples are Mako, the longest, tallest, and fastest roller coaster in Orlando,
opening in June, Cobra’s Curse, a unique spinning coaster in Tampa, opening in May, and our newest dolphin
experience, Discovery Point in San Antonio, also opening in June.
At the same time, we remain focused on costs and capital allocation that will enable us to make essential capital
investments to attract new guests while also continuing to return cash to our shareholders. We expect to continue
to deliver strong cash flow and returns as part of our core commitment to increase the value of your investment
over time.
Finally, our most recent action was the addition of a new independent director and the nomination of another, both
theme park industry veterans, to our experienced Board, together with enhancements to our governance
practices. We believe these important changes will help us advance our ongoing evolution.
In summary, we are changing, but we remain passionate about connecting people to nature and animals to
provide experiences that matter and inspire our guests to protect animals and the wild wonders of our world. This
purpose will never change, and it is the foundation upon which we will achieve sustainable growth over the long
term.
Thank you for your support.
Sincerely,
Joel K. Manby,
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
(cid:134) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-35883
SeaWorld Entertainment, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
27-1220297
(I.R.S. Employer
Identification No.)
9205 South Park Center Loop, Suite 400
Orlando, Florida 32819
(Address of principal executive offices)(Zip Code)
(407) 226-5011
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:59) No (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134) No (cid:59)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (cid:59) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes (cid:59) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
(cid:59)
(cid:134)
(cid:134) (Do not check if a smaller reporting company)
Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No (cid:59)
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2015, the last business
day of the registrant’s most recently completed second fiscal quarter, was $1,262,276,031 based upon the closing price of the registrant’s common
stock, par value $0.01 per share, reported for such date on the New York Stock Exchange. For purposes of this computation, shares of the
registrant’s common stock held by each executive officer and director and each person known to the registrant to own 10% or more of the
outstanding voting power of the registrant have been excluded in that such persons are affiliates. This determination of affiliate status is not a
determination for other purposes.
The registrant had outstanding 88,016,096 shares of Common Stock, par value $0.01 per share as of February 19, 2016.
Smaller reporting company (cid:134)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relating to the 2016 Annual Meeting
of Stockholders, which statement will be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this
Annual Report on Form 10-K, are incorporated by reference into Part III of this report.
[THIS PAGE INTENTIONALLY LEFT BLANK]
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2015
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS .........................................................................
PART I.
Item 1. Business ........................................................................................................................................................................
Item 1A. Risk Factors ..................................................................................................................................................................
Item 1B. Unresolved Staff Comments .........................................................................................................................................
Item 2.
Properties ......................................................................................................................................................................
Item 3.
Legal Proceedings ........................................................................................................................................................
Item 4. Mine Safety Disclosures ......................................................................................................................
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...
Item 6.
Selected Financial Data ................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ......................................................................................
Item 8.
Financial Statements and Supplementary Data ............................................................................................................
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ......................................
Item 9A. Controls and Procedures ...............................................................................................................................................
Item 9B. Other Information .........................................................................................................................................................
PART III.
Item 10. Directors, Executive Officers and Corporate Governance ...........................................................................................
Item 11. Executive Compensation ..............................................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .....................
Item 13. Certain Relationships and Related Transactions and Director Independence ..............................................................
Item 14. Principal Accounting Fees and Services.......................................................................................................................
PART IV.
Item 15. Exhibits, Financial Statement Schedules ......................................................................................................................
Signatures
Page No.
1
3
18
30
30
31
33
34
36
38
56
57
57
57
58
59
59
59
59
59
60
[THIS PAGE INTENTIONALLY LEFT BLANK]
Unless otherwise noted or the context otherwise requires, (i) references to the “Company,” “SeaWorld,” “we,” “our” or “us”
in this Annual Report on Form 10-K refer to SeaWorld Entertainment, Inc. and its consolidated subsidiaries, (ii) references to
“Blackstone” refer to certain investment funds affiliated with The Blackstone Group L.P., (iii) references to the “Partnerships” refer,
collectively, as applicable, to ten limited partnerships owned by affiliates of Blackstone and certain co-investors: SW Delaware L.P.,
SW Delaware A L.P., SW Delaware B L.P., SW Delaware C L.P., SW Delaware D L.P., SW Delaware E L.P., SW Delaware F L.P.
(f/k/a SW Cayman F L.P.), SW Delaware Co-Invest L.P. (f/k/a SW Cayman Co-Invest L.P.), SW Delaware (GS) L.P. and SW Delaware
(GSO) L.P. provided that, as of August 25, 2014, SW Delaware (GS) L.P. no longer owned shares of the Company’s common stock,
(iv) references to “ABI” refer to Anheuser-Busch, Incorporated, (v) references to “guests” refer to our theme park visitors, (vi)
references to “customers” refer to any consumer of our products and services, including guests of our theme parks, (vii) references to
the “TEA/AECOM Report” refer to the 2014 Theme Index: The Global Attractions Attendance Report, TEA/AECOM, 2015, (viii)
references to the “2015 Amusement Today Annual Survey” or the “Amusement Today 2015 Golden Ticket Awards” refer to the
Amusement Today 2015 Golden Ticket Awards, Vol. 19, issue 6.2 dated September 2015 and (ix) references to the “IBISWorld
Report” refer to the IBISWorld Industry Report 71311: Amusement Parks in the US dated December 2015. Unless otherwise noted,
attendance rankings included in this Annual Report on Form 10-K are based on the TEA/AECOM Report and theme park industry
statistics are based on the IBISWorld Report.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K may contain “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other
than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future
events, business conditions, our results of operations, financial position and our business outlook, business trends and other
information, may be forward-looking statements. Words such as “might,” “will,” “may,” “should,” “estimates,” “expects,”
“continues,” “contemplates,” “anticipates,” “projects,” “plans,” “potential,” “predicts,” “intends,” “believes,” “forecasts,” “future” and
variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements
are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many
of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are
expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s
expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is
expressed in or indicated by the forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause
our actual results to differ materially from the forward-looking statements contained in this Annual Report on Form 10-K. Such risks,
uncertainties and other important factors that could cause actual results to differ materially include, among others, the risks,
uncertainties and factors set forth under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, including the
following:
(cid:120) changes in federal and state regulations governing the treatment of animals and claims and lawsuits by activist groups;
(cid:120) various factors beyond our control adversely affecting attendance and guest spending at our theme parks;
(cid:120) incidents or adverse publicity concerning our theme parks;
(cid:120) a decline in discretionary consumer spending or consumer confidence;
(cid:120) significant portion of revenues generated in the States of Florida, California and Virginia and the Orlando market;
(cid:120) seasonal fluctuations;
(cid:120) inability to compete effectively;
(cid:120) interactions between animals and our employees and our guests at attractions at our theme parks;
(cid:120) animal exposure to infectious disease;
(cid:120) high fixed cost structure of theme park operations;
(cid:120) changing consumer tastes and preferences;
(cid:120) cyber security risks and failure to maintain the integrity of internal or guest data;
(cid:120) increased labor costs;
1
(cid:120) inability to grow our business or fund theme park capital expenditures;
(cid:120) adverse litigation judgments or settlements;
(cid:120) inability to protect our intellectual property or the infringement on intellectual property rights of others;
(cid:120) the loss of licenses and permits required to exhibit animals;
(cid:120) loss of key personnel;
(cid:120) unionization activities or labor disputes;
(cid:120) inability to meet workforce needs;
(cid:120) inability to maintain certain commercial licenses;
(cid:120) restrictions in our debt agreements limiting flexibility in operating our business;
(cid:120) our substantial leverage;
(cid:120) inability to realize the benefits of acquisitions or other strategic initiatives;
(cid:120) inadequate insurance coverage;
(cid:120) inability to purchase or contract with third party manufacturers for rides and attractions;
(cid:120) environmental regulations, expenditures and liabilities;
(cid:120) suspension or termination of any of our business licenses; and
(cid:120) the ability of affiliates of The Blackstone Group L.P to significantly influence our decisions.
We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and
other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that
we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the
way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or
the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is
complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All
forward-looking statements in this Annual Report on Form 10-K apply only as of the date of this Annual Report on Form 10-K or as
the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future developments or otherwise.
Trademarks, Service Marks and Trade names
We own or have rights to use a number of registered and common law trademarks, service marks and trade names in connection
with our business in the United States and in certain foreign jurisdictions, including SeaWorld Entertainment, SeaWorld Parks &
Entertainment, SeaWorld®, Shamu®, Busch Gardens®, Aquatica®, Discovery Cove®, Sea Rescue® and other names and marks that
identify our theme parks, characters, rides, attractions and other businesses. In addition, we have certain rights to use Sesame Street®
marks, characters and related indicia through certain license agreements with Sesame Workshop (f/k/a Children’s Television
Workshop).
Solely for convenience, the trademarks, service marks, and trade names referred to hereafter in this Annual Report on Form 10-
K are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest
extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names.
This Annual Report on Form 10-K may contain additional trademarks, service marks and trade names of others, which are the
property of their respective owners. All trademarks, service marks and trade names appearing in this Annual Report on Form 10-K
are, to our knowledge, the property of their respective owners.
2
PART I.
Item 1. Business
Company Overview
We are a leading theme park and entertainment company providing experiences that matter and inspiring guests to protect
animals and the wild wonders of our world. We own or license a portfolio of recognized brands including SeaWorld, Busch Gardens
and Sea Rescue. Over our more than 50 year history, we have built a diversified portfolio of 11 destination and regional theme parks
that are grouped in key markets across the United States, many of which showcase our one-of-a-kind zoological collection
representing more than 800 species of animals. Our theme parks feature a diverse array of rides, shows and other attractions with
broad demographic appeal which deliver memorable experiences and a strong value proposition for our guests.
During the year ended December 31, 2015, we hosted approximately 22.5 million guests in our theme parks, including
approximately 3.3 million international guests. In the year ended December 31, 2015, we had total revenues of $1.37 billion and net
income of $49.1 million.
We generate revenue primarily from selling admission to our theme parks and from purchases of food, merchandise and other
spending. For the year ended December 31, 2015, theme park admissions accounted for approximately 62% of our total revenue, and
food, merchandise and other revenue accounted for approximately 38% of our total revenue. Over the same period of time, we
reported $37.69 in admission per capita (calculated as admissions revenue divided by total attendance) and $23.32 in-park per capita
spending (calculated as food, merchandise and other revenue divided by total attendance).
In November 2015, we communicated our roadmap to stabilize our business to drive sustainable growth. This plan
encompasses five key points which include (i) providing experiences that matter; (ii) delivering distinct guest experiences that are fun
and meaningful; (iii) pursuing organic and strategic revenue growth; (iv) addressing the challenges we face; and (v) financial
discipline. The plan is intended to build on our strong business fundamentals by evolving the guest experience to align with consumer
preferences for experiences that matter. Through family entertainment and distinct experiences and attractions, we provide our guests
an opportunity to explore and learn more about the natural world and the plight of animals in the wild, to be inspired and to act to
make a better world. The plan includes a new approach to in-park activities as well as “turning parks inside out” by taking our guests
behind the scenes to provide a better understanding of our veterinary care and animal rescue operations. Other elements of the plan
include implementing a simplified pricing model, targeted capital investments in new attractions across our parks, and an ongoing
focus on cost control as part of a larger commitment to overall financial discipline. Additionally, we announced a new resort strategy
that will include evaluating opportunities which could include purchasing or developing resort properties in or near some of our parks.
As one of the world’s foremost zoological organizations and a global leader in animal welfare, training, husbandry and
veterinary care, we are committed to helping protect and preserve the environment and the natural world. For more information, see
the “—Our Animals” and “—Philanthropy and Community Relations” sections.
Recent Developments
Regulatory Developments
On July 16, 2015, Senator Dianne Feinstein (D-CA) offered an amendment to the Fiscal Year 2016 Agriculture, Rural
Development, Food and Drug Administration, and Related Agencies spending bill during consideration of the bill by the full
Committee on Appropriations. The amendment directed the U.S. Department of Agriculture’s Animal and Plant Health Inspection
Service (APHIS) to issue updated regulations for the display of marine mammals in domestic zoos and aquaria within six months of
enactment. While that amendment was not included in the final Fiscal Year 2016 Omnibus Appropriations Bill, APHIS released a
proposed rule on February 3, 2016 to amend the Animal Welfare Act regulations concerning the humane handling, care and treatment
of marine mammals in captivity (the “Proposed APHIS Regulations”).
On October 8, 2015, the California Coastal Commission approved our plan to build a new killer whale habitat (the “Blue World
Project”) in San Diego, but attached certain conditions to its approval. Those conditions included, among other things, a prohibition
against breeding killer whales or transporting killer whales to or from the habitat. On December 29, 2015, we filed a lawsuit against
the California Coastal Commission on the grounds that the California Coastal Commission decision was outside the scope of its
authority in imposing such conditions because it does not have jurisdiction over killer whales, which are regulated under federal law.
3
On November 16, 2015, Representative Adam Schiff (D-CA) introduced the Orca Responsibility and Care Advancement Act
(the “ORCA Act”). The bill has been referred to the Natural Resources and Agriculture Committees. It is unclear whether this bill
will be enacted into law, but if enacted, this bill would amend the Marine Mammal Protection Act of 1972 and the Animal Welfare
Act to prohibit the breeding, the taking (wild capture), and the import or export of killer whales for the purposes of public display.
For a discussion of certain risks associated with the Proposed APHIS Regulations, the California Coastal Commission’s
decision, and the ORCA Act, see “Risk Factors—Risks Related to Our Business and Our Industry—We are subject to complex federal
and state regulations governing the treatment of animals, which can change, and to claims and lawsuits by activist groups before
government regulators and in the courts.”
On February 8, 2016, the San Diego City Council decided to put a proposal on the June 7, 2016 primary ballot for voters to
decide whether the city of San Diego should have a higher minimum wage than the $10 per hour required by the State of
California. If approved by a simple majority of San Diego voters, the proposal would make the city’s minimum wage $10.50 as soon
as the election results are certified, and then increase it to $11.50 on January 1, 2017. Two years later in January 2019, annual
increases to the San Diego minimum wage based on the consumer price index would start to be implemented. For a discussion of
certain risks associated with the foregoing proposal, see “Risk Factors—Risks Related to Our Business and Our Industry—Increased
labor costs and employee health and welfare benefits may negatively impact our operations.”
Share Repurchase Program and Share Repurchases
In 2014, our Board of Directors (the “Board”) authorized the repurchase of up to $250.0 million of our common stock (the
“Share Repurchase Program”). During 2015, we repurchased a total of 2,413,803 shares of common stock at an average price of
$18.62 per share and a total cost of approximately $45.0 million. All of the repurchased common stock was held as treasury shares at
December 31, 2015. We have approximately $190.0 million available for future repurchases under the Share Repurchase Program as
of December 31, 2015.
The amount available for future dividend declarations, share repurchases and certain other restricted payments under the
covenant restrictions in the debt agreements is currently limited to $120.0 million for fiscal year 2016 based on the current calculation
and adjusts at the beginning of each quarter as set forth in Note 11–Long-Term Debt to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K.
International Development Strategy
We believe that in addition to the growth potential that exists domestically, our brands can also have significant appeal in certain
international markets. We are currently assessing these opportunities while maintaining a conservative and disciplined approach
towards the execution of our international development strategy. Thus far, we have identified our international market priorities as
well as our international partners within select markets. The market priorities were developed based on a specific set of criteria to
ensure we expand our brands into the most attractive markets. On February 17, 2016, we moved to the next phase of our international
development strategy with our partner in the Middle East (the “Middle East Project”) by (i) extending the exclusive negotiating period
under our previously announced Memorandum of Understanding and (ii) executing an Interim Advisory Services Agreement.
Pursuant to the Interim Advisory Services Agreement, we will commence certain advisory services pertaining to the planning and
design of the Middle East Project, with funding from our partner in the Middle East offsetting our internal expenses. The Middle East
Project is subject to, among other things, the parties completing the design development phase of such project and the mutual
agreement of definitive documents. For a discussion of certain risks associated with our international development strategy, including
the Middle East Project, see “Risk Factors—Risks Related to Our Business and Our Industry—We may not realize the benefits of
acquisitions or other strategic initiatives.”
Leadership Changes
On February 18, 2016, Daniel B. Brown announced his decision to retire as Chief Parks Operations Officer of the Company
effective as of April 1, 2016. Mr. Brown will remain as an employee of the Company through May 31, 2016, to assist in the transition
of his responsibilities. In connection with Mr. Brown’s retirement, on February 18, 2016, our Board of Directors appointed John
Reilly, SeaWorld San Diego Park President, to the position of Chief Parks Operations Officer of the Company effective as of April 1,
2016.
4
Mr. Reilly, age 47, began his career at Busch Gardens Williamsburg in 1985. Most recently, Mr. Reilly has served as SeaWorld
San Diego Park President since October 2010 and, prior to that, as the Busch Gardens Williamsburg Park President. Mr. Reilly is the
chairman of the board of directors of the San Diego Regional Chamber of Commerce and vice chairman of the board of directors of
the San Diego Regional Economic Development Corporation. Mr. Reilly also serves on the board of trustees of the Hubbs-SeaWorld
Research Institute and holds a Bachelor of Arts degree from The College of William & Mary.
On February 19, 2016, we announced additional changes to our operational management team. As part of the organization
changes, Dr. Christopher Dold, the Vice President of Veterinary Services will be promoted to the position of Chief Zoological Officer,
effective April 1, 2016. Mr. Dold will succeed Brad Andrews who will continue to serve as the Company’s Zoological Director
Emeritus. We also announced the formation of our Resort Development Group and the appointment of Steve Iandolo to the position
of Vice President of Resort Development, effective February 1, 2016.
Director Not Standing for Re-Election
On February 24, 2016, Joseph P. Baratta, notified the Company’s Board of Directors (the “Board”) that he would not stand for
re-election to the Board at the 2016 Annual Meeting of Stockholders. Mr. Baratta has served as a director of the Company since
2009. Mr. Baratta advised the Board that his decision not to stand for re-election was not due to a disagreement with the Company on
any matters involving the Company’s operations, policies or practices. Mr. Baratta is expected to continue to serve as a director until
the earlier of (i) the Board’s appointment of Mr. Baratta’s successor or (ii) the expiration of his current three-year term, which will end
effective upon the election of directors at the Company’s 2016 Annual Meeting of Stockholders.
Other Matters
In January 2016, we made a decision to remove deep-water lifting floors from the killer whale habitats at each of our three
SeaWorld theme parks. The deep-water lifting floors were intended as another safety tool for conducting in-water training in the
deeper pools. The lifting floors located in the medical pools, where our killer whale in-water training currently takes place, will not be
affected. That training will continue as an essential part of our overall safety program. Having safely and successfully conducted in-
water training in the medical pools for almost 4 years, our safety and zoological professionals determined that the deep-water lifting
floors in the deeper pools are no longer needed. This change will provide more space for the animals, and increase the time that the
deep-water pool is available by eliminating downtime for maintenance and cleaning. As a result, in the first half of 2016, we expect to
record approximately $33.0 million of accelerated depreciation related to the disposal of these lifting floors.
On February 22, 2016, the Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close
of business on March 14, 2016, which will be paid on April 1, 2016. Based on this dividend declaration, certain performance-vesting
restricted shares (the “2.25x Performance Restricted shares”) held by some of our equity plan participants will vest on April 1, 2016.
We expect to recognize approximately $28.0 million of equity compensation expense and record approximately $3.4 million of
accumulated dividends related to these 2.25x Performance Restricted shares during the first quarter of 2016. See Note 18–Equity-
Based Compensation to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our Competitive Strengths
(cid:120) Brands That Consumers Know and Love. We believe our brands attract and appeal to guests from around the world. We use
our brands and intellectual property and the work we do to care for animals to increase awareness of our theme parks, drive
attendance to our theme parks and create “out-of-park” experiences for our guests as a way to connect with them before they
visit our theme parks and to stay connected with them after their visit. Such experiences include various media and consumer
product offerings, including websites, advertisements and media programming, toys, books, apparel and technology accessories.
For example, we have developed iPhone and Android smartphone applications for our SeaWorld, Busch Gardens and Sesame
Place theme parks, which offer GPS navigation through the theme parks and interactive theme park maps that show the nearest
dining locations, gift shops and ATMs and provide real-time updates on wait times for rides.
We have also leveraged our brands into media, entertainment and consumer products. We produce two educational and
entertaining television shows that highlight our rescue and rehabilitation and animal care efforts, Sea Rescue and The Wildlife
Docs. Sea Rescue is a Saturday morning television show airing on the ABC Network featuring our ongoing work to rescue
injured animals in coordination with various government agencies and other rescue organizations. Since its debut in 2012
through December 2015, on a cumulative basis, Sea Rescue has attracted over 281 million viewers and has been rated as the
number one show in its timeslot in a number of major U.S. markets. In 2014, Sea Rescue was nominated for a Daytime Emmy®
Award in the category of Outstanding Children’s Series by the National Academy of Television Arts & Sciences. The Wildlife
Docs, which also airs on the ABC Network on Saturday mornings, centers on the day-to-day activities at our Animal Care
Center at Busch Gardens Tampa. Since its debut in October 2013 through December 2015, on a cumulative basis, The Wildlife
Docs has attracted over 168 million viewers and in 2015, The Wildlife Docs was nominated for a Daytime Emmy Award in the
category of Outstanding Children’s Series by the National Academy of Television Arts & Sciences. In 2015, both Sea Rescue
and The Wildlife Docs were each presented with a silver honor from the Parents' Choice Award®, a nonprofit program created
to recognize quality children’s media.
5
(cid:120) Differentiated Theme Parks. We own and operate 11 theme parks, including four of the top 20 theme parks and three of the
top 10 water parks in North America as measured by attendance, according to the TEA/AECOM Report. Our theme parks are
beautifully themed and deliver high-quality entertainment, aesthetic appeal, shopping and dining and have won numerous
awards, including the Amusement Today Golden Ticket Award for Best Landscaping. Our theme parks feature eight of the 50
highest rated steel roller coasters in the world, led by Apollo’s Chariot, the #6 rated steel roller coaster in the world according to
the 2015 Amusement Today Annual Survey, and have won the top three spots in the Amusement Today annual Golden Ticket
Award for Best Marine Life Park since the award’s inception in 2006 through 2014 and the top four spots in 2015. We have
over 600 attractions that appeal to guests of all ages, including 97 animal habitats, 117 shows and 194 rides. In addition, we
have over 300 restaurants and specialty shops. Our theme parks appeal to the entire family and offer a broad range of
experiences, ranging from emotional and educational animal encounters to thrilling rides and exciting shows. As a result of
these distinctive offerings, our guest surveys routinely report very high “Overall Satisfaction” scores, with 96% of respondents
in 2015 ranking their experience good or excellent.
(cid:120) Diversified Business Portfolio. Our portfolio of theme parks is diversified in a number of important respects. Our theme parks
are located in geographic clusters across the United States, which helps protect us from the impact of localized events. Each
theme park showcases a different mix of zoological, thrill-oriented and family friendly attractions. This varied portfolio of
entertainment offerings attracts guests from a broad range of demographics and geographies. Our theme parks appeal to both
regional and destination guests, which provide us with a diversified attendance base while allowing us to benefit from
improvements in macroeconomic conditions, including increased consumer spending and international travel.
(cid:120) One of the World’s Largest Zoological Collections. We believe we are attractively positioned in the industry due to our
ability to present our animals in a differentiated and interactive manner. We believe we have one of the world’s largest
zoological collections, representing more than 800 species of animals. We have the largest group of killer whales, also known as
orcas, in human care. We have not collected a killer whale from the wild in almost 40 years. More than 80% of our marine
mammals were born in human care.
(cid:120) Strong Competitive Position. Our competitive position is enhanced by the combination of our powerful brands, extensive
zoological collection and expertise and attractive in-park assets located on valuable real estate. Our zoological collection and
expertise, which have evolved over our more than five decades of caring for animals, would be very difficult and expensive to
replicate. We have made extensive investments in new attractions and infrastructure and we believe that our theme parks are
well capitalized. The limited supply of real estate suitable for theme park development coupled with high initial capital
investment, long development lead-times and zoning and other land use restrictions constrain the number of large theme parks
that can be constructed.
(cid:120) Proven and Experienced Management Team and Employees with Specialized Animal Expertise. Our senior management
team, led by Joel Manby, our President and Chief Executive Officer, includes some of the most experienced theme park
executives in the world, with an average tenure of approximately 28 years in the industry, as of December 31, 2015. The
management team is comprised of highly skilled and dedicated professionals with wide ranging experience in theme park
operations, zoological operations, product development, business development, marketing and finance. In addition, we are one
of the world’s foremost zoological organizations with approximately 1,500 employees dedicated to animal welfare, training,
husbandry and veterinary care.
(cid:120) Proximity of Complementary Theme Parks. Our theme parks are grouped in key locations near large population centers
across the United States, which allows us to realize revenue and operating expense efficiencies. Having complementary theme
parks located within close proximity to each other also enables us to cross market and offer bundled ticket and travel packages.
In addition, closely located theme parks provide operating efficiencies including sales, marketing, procurement and
administrative synergies as overhead expenses are shared among the theme parks within each region.
(cid:120) Strong Cash Flow Generation. Our disciplined approach to capital expenditures and working capital management enables us
to generate strong and recurring cash flow. Five of our 11 theme parks are open year-round, reducing our seasonal cash flow
volatility. In addition, we have substantial tax assets, which we expect to be available to defer a portion of our cash tax burden
going forward.
6
(cid:120) Care for Our Community and the Natural World. We are committed to the communities in which our theme parks are
located and focus our philanthropic efforts in three areas: animal preservation and stewardship; youth development and
education; and sustainable community projects and programs that help create solutions for environmental sustainability concerns
and address local socio-economic issues. Our theme parks inspire and educate children and guests of all ages through
experiences that are fun and meaningful. We also partner with charities across the country whose values and missions are
aligned with our own by providing financial support, in-kind resources, strategic guidance, and/or hands-on volunteer work.
For example, we are the primary supporter and corporate member of the SeaWorld & Busch Gardens Conservation Fund, a non-
profit conservation foundation, which makes grants to wildlife research and conservation projects that protect wildlife and wild
places worldwide. In addition, we operate one of the world’s most respected rescue programs for ill and injured marine animals,
in collaboration with federal, state and local governments, and other members of accredited stranding networks, among others,
with the goal of rehabilitating and returning them to the wild. For more than five decades, our animal experts have helped more
than 27,000 ill, injured, orphaned and abandoned animals. We are committed to rescue, research and education and invest
millions annually in these efforts. In 2014, the SeaWorld Animal Rescue Teams based in San Diego, Orlando and San Antonio
were presented the Amusement Today 2014 Persons of the Year Award for their tireless dedication to animal welfare.
Our Theme Parks
Our legacy started in 1959 with the opening of our first Busch Gardens theme park in Tampa, Florida. Since then, we have built
our portfolio of strong brands and have strategically expanded our portfolio of theme parks across five states on approximately 2,000
acres of owned land and 190 acres of leased land in San Diego.
Our theme parks offer guests a variety of exhilarating experiences, from animal encounters that invite exploration and
appreciation of the natural world, to thrilling rides and spectacular shows. Our theme parks are beautifully themed venues that are
consistently recognized among the top theme parks in the world and rank among the most highly attended in the industry. In 2014,
SeaWorld Orlando ranked among the top 25 theme parks worldwide based on attendance, and Aquatica Orlando ranked among the top
20 water parks worldwide based on attendance, according to the TEA/AECOM Report. In the 2015 Trip Advisor Travelers’ ChoiceTM
Awards, 7 of our 11 theme parks were ranked among the top 25 amusement parks or water parks in the United States. In addition,
Discovery Cove was ranked the #1 amusement park in the world in the 2013 and 2014 Trip Advisor Travelers’ Choice Awards and
was ranked the #2 amusement park in the world in the 2015 Trip Advisor Travelers’ Choice Awards. We generally locate our theme
parks in geographic clusters, which improve our ability to serve guests by providing them with a varied, comprehensive vacation
experience and valuable multi-park pricing packages, as well as improving our operating efficiency through shared overhead costs.
Our portfolio of branded theme parks includes the following names:
(cid:120) SeaWorld. SeaWorld is widely recognized as the leading marine-life theme park brand in the world. Our SeaWorld theme parks
rank among the most highly attended theme parks in the industry and offer up-close interactive experiences, special dining
experiences, thrilling attractions and a variety of live performances that immerse guests in the marine-life theme. We also offer our
guests numerous animal encounters, including the opportunity to work with trainers and feed marine animals, as well as themed
thrill rides and theatrical shows that creatively incorporate our one-of-kind zoological collection. Collectively, our SeaWorld
theme parks have won the top three spots in the Amusement Today annual Golden Ticket Award for Best Marine Life Park since
the award’s inception in 2006 through 2014, and among the top four spots in 2015, with our Discovery Cove park ranking #3. We
currently own and operate the following SeaWorld branded theme parks:
(cid:120) SeaWorld San Diego is the original SeaWorld theme park spanning 190 acres of waterfront property on Mission Bay in San
Diego, California. SeaWorld San Diego is open year-round and is one of the most visited paid attractions in San Diego.
Through its attraction, Explorer’s Reef, guests enter the park under a massive wave sculpture and encounter an underwater-
themed realm of animal attractions, buildings and shade structures. SeaWorld San Diego is also home to Manta, modeled on
the successful Manta ride in SeaWorld Orlando, which includes animal habitats featuring bat rays and other marine-life as
well as a launch roller coaster shaped like a giant manta ray.
(cid:120) SeaWorld Orlando is a 279 acre theme park in Orlando, Florida and is open year-round. It is our largest theme park as
measured by attendance and revenue. SeaWorld Orlando is home to the Journey to Atlantis water coaster ride, Kraken, a
floorless roller coaster, and Manta, a flying roller coaster, which integrates animals and a beautiful aquarium into its theme.
SeaWorld Orlando is also home to Antarctica: Empire of the Penguin, a realm within the park that immerses guests into a
penguin habitat and TurtleTrek, one of the first attractions with two extensive naturalistic habitats, home to manatees and sea
turtles, and a 3-D, 360-degree dome theater.
(cid:120) SeaWorld San Antonio is one of the world’s largest marine-life theme parks, encompassing approximately 415 acres in San
Antonio, Texas. SeaWorld San Antonio features thrilling roller coasters, including the Steel Eel and The Great White, along
with a collection of marine-themed shows and experiences. Guests can upgrade their experience for an additional fee to also
enjoy our Aquatica water park located within SeaWorld San Antonio. In 2016, Aquatica will be converted into a stand-
alone, separate admission park that guests can access through a separate gate.
7
(cid:120) Busch Gardens. Our Busch Gardens theme parks are family oriented destinations designed to immerse guests in foreign
geographic settings. They are renowned for their beauty and cleanliness with award-winning landscaping and gardens. Our Busch
Gardens theme parks allow our guests to discover the natural side of fun by offering a family experience featuring a variety of
attractions and roller coasters, exotic animals and high-energy theatrical productions that appeal to all ages. We currently own and
operate the following Busch Gardens theme parks:
(cid:120) Busch Gardens Tampa is open year-round and features exotic animals, thrill rides and shows on 306 acres of lush natural
landscape. The zoological collection is a popular attraction for families, and the portfolio of rides, including four of the
world’s top 50 steel rollercoasters according to the 2015 Amusement Today Annual Survey, broaden the theme park’s appeal
to teens and thrill seekers of all ages. Busch Gardens Tampa is also home to Falcon’s Fury, the tallest freestanding drop
tower in North America, standing at 335 feet. The attraction rises more than 300 feet in the air then pivots guests 90 degrees
to a face-down dive position before dropping to the ground.
(cid:120) Busch Gardens Williamsburg is regularly recognized as one of the highest quality theme parks in the world, capturing dozens
of awards over its history for attraction and show quality, design, landscaping, culinary operations and theming. This 422
acre theme park has been named the Most Beautiful Park in the World by the National Amusement Park Historical
Association for 25 consecutive years and has earned the Amusement Today Golden Ticket for Best Landscaping each year
since the category’s inception in 1998. It features some of the industry’s top thrill rides with three steel roller coasters,
Apollo’s Chariot, Alpengeist and Griffon, ranked in the top 35 in the 2015 Amusement Today Annual Survey. Its newest steel
roller coaster, which opened in 2015, Tempesto, features three launch experiences and races riders into tight turns at 63 miles
per hour and a complete inversion 154 feet in the air.
(cid:120) Aquatica. Our Aquatica branded water parks are premium, family oriented destinations in a South Seas-themed tropical setting.
Aquatica water parks build on the aquatic theme of our SeaWorld brand and feature high-energy rides, water attractions, white-
sand beaches and an innovative and entertaining presentation of marine and terrestrial animals. We position our Aquatica water
parks as companions to our SeaWorld theme parks and currently own and operate the following Aquatica branded theme parks:
(cid:120) Aquatica Orlando is an 81 acre South Seas-themed water park adjacent to SeaWorld Orlando that is open year-round. In
2014, it was the 3rd most attended water park in North America and the 6th most attended water park worldwide, according to
the TEA/AECOM Report. The water park features state-of-the-art attractions for guests of all ages and swimming abilities,
including some that pass by or through animal habitats, such as the signature Dolphin Plunge that carries guests through a
Commerson’s dolphin habitat. Aquatica Orlando is also home to Ihu’s Breakaway Falls, a multi-drop tower slide, which
provides guests a dramatic vertical plunge followed by a maze of curving tubes before final splashdown.
(cid:120) Aquatica San Antonio is a water park located within SeaWorld San Antonio that, through 2015, was only accessible to
SeaWorld San Antonio guests for an additional fee. In 2016, Aquatica San Antonio will be converted into a stand-alone,
separate admission park that guests can access through an independent gate without the need to purchase admission to
SeaWorld San Antonio. The water park features a variety of waterslides, rivers, lagoons, a large beach area and private
cabanas. The water park’s signature attraction, Stingray Falls, takes four-seat rafts down twists and turns to an underwater
grotto, where guests view stingrays and tropical fish. In addition, Walhalla Wave, a family raft ride, sends guests to the top of
a zero-gravity wall, giving riders the sense of weightlessness. Its newest attraction, Roa’s Aviary, features a 13,500 square
foot aviary giving guests the chance to float, wade or walk among hundreds of tropical birds. The aviary also contains a
guest pool and waterfalls.
(cid:120) Aquatica San Diego, a 66 acre water park, is located near our SeaWorld San Diego theme park and is the latest water park
added to our portfolio. The water park features Taumata Racer, a high-speed racing water ride that sends riders down a 375-
foot slide, around a 180-degree swooping turn, and in and out of tunnels before racing them across the finish line.
(cid:120) Discovery Cove. Located next to SeaWorld Orlando, Discovery Cove is a 58 acre, reservations only, all-inclusive marine life
theme park that is open year-round to guests and features premium culinary offerings. The theme park restricts its attendance to
approximately 1,300 guests per day in order to assure a more intimate experience. Discovery Cove provides guests with a full day
of activities, including a 30-minute dolphin swim session and the opportunity to snorkel with thousands of tropical fish, wade in a
lush lagoon with stingrays and hand-feed birds in a free flight aviary. In 2015, Discovery Cove was rated the #3 Best Marine Life
Park in the Amusement Today annual Golden Ticket Award. Discovery Cove was also ranked the #1 amusement park in the world
in the 2013 and 2014 Trip Advisor Travelers’ Choice Awards and the #2 amusement park in the world in the 2015 Trip Advisor
Travelers’ Choice Awards. Discovery Cove’s attractions include Freshwater Oasis, which offers wading adventures and face-to-
face encounters with otters and marmosets and The Grand Reef, which, for an additional fee, includes SeaVenture, an underwater
walking tour where guests can get up close to exotic fish and sharks.
8
(cid:120) Sesame Place. Located on 55 acres between Philadelphia and New York City, Sesame Place is the only theme park in America
entirely dedicated to the award-winning television show, Sesame Street, and its spirit of imagination. The theme park shares
SeaWorld’s “education and learning through entertainment” philosophy and allows parents and children to experience Sesame
Street together through whirling rides, water slides, colorful shows and furry friends. Sesame Place’s newest realm, Cookie’s
Monster Land, features five new family-friendly rides, a 3-story net climb, and a soft play area for the park’s youngest visitors. In
addition, we have introduced Sesame Street brands in our other theme parks through Sesame Street-themed rides, shows, children’s
play areas and merchandise. Our rights to the Sesame Street brand in the United States extend through 2021.
(cid:120) Water Country USA. Located on 222 acres, Virginia’s largest family water park, Water Country USA, features state-of-the-art
water rides and attractions, all set to a 1950s and 1960s surf theme. Water Country USA is the sixth most attended water park in
North America according to the TEA/AECOM Report and features a 23,000 square-foot wave pool, a science fiction themed
interactive children’s play area, kid-sized water slides, live shows and several other attractions. One of its newest attractions is
Colossal Curl, an action packed family thrill ride that sends riders down a nearly 550 foot water slide.
(cid:120) Adventure Island. Located adjacent to Busch Gardens Tampa, Adventure Island is a 56 acre water park that is filled with water
rides, dining and other attractions that incorporate a Key West theme. The theme park is the seventh most attended water park in
North America according to the TEA/AECOM Report and features a family-friendly wave pool and children’s water playground
that appeal to its core constituency, local families with young children. Its newest water slide, Colossal Curl, opened in 2015 and is
modeled after the Colossal Curl ride at Water Country USA.
The following table summarizes our theme park portfolio for 2015:
Location
Theme Park
Orlando, FL
Tampa, FL
San Diego, CA
San Antonio,
TX
Williamsburg,
VA
Langhorne, PA
Total(f)
Year
Opened
1973
2000
2008
1959
1980
1964
1996(a)
1988
1975
1984
1980
Animal
Habitats(b)
Rides(c)
Shows(d)
Other(e)
17
5
6
16
0
30
2
15
6
0
0
14
3
14
29
12
10
9
22
39
16
26
15
0
0
20
0
23
0
30
16
0
13
26
5
4
43
7
20
4
48
36
9
23
97
194
117
225
9
(a)
In 2012, we acquired the Knott’s Soak City Chula Vista water park in California from a subsidiary of Cedar Fair, L.P. This
water park was renovated, rebranded and relaunched as Aquatica San Diego in June 2013.
(b) Represents animal habitats without a ride or show element, often adjacent to a similarly themed attraction.
(c) Represents mechanical dry rides, water rides and water slides (including wave pools and lazy rivers).
(d) Represents annual and seasonal shows with live entertainment, animals, characters and/or 3-D or 4-D experiences.
(e) Represents our 2015 portfolio for events, distinctive experiences and play areas, which collectively may include special limited
time events; distinctive experiences often limited to small groups and individuals and/or requiring a supplemental fee (such as
educational tours, immersive dining experiences and swimming with animals); and pure play areas, typically designed for
children or seasonal special events, often without a queue (such as water splash areas or Halloween mazes).
(f) The total number of animal habitats, rides, shows, events, distinctive experiences and play areas in our theme park portfolio
varies seasonally.
Capital Improvements
We make annual targeted investments to support our existing theme park facilities and attractions, as well as enable the
development of new theme park attractions and infrastructure. Maintaining and improving our theme parks, as well as opening new
attractions, is critical to remain competitive, grow revenue and increase our guests’ length of stay. Our theme parks feature a variety
of attractions for our guests. Some of the new attractions in 2015 included:
(cid:120) Tempesto (Busch Gardens Williamsburg): A new thrill roller coaster that features three launch experiences and races riders into
tight turns at 63 miles per hour and a complete inversion 154 feet in the air.
(cid:120) Pacific Point Preserve (SeaWorld San Antonio): A new sea lion habitat which includes dining and merchandise venues.
(cid:120) Colossal Curl (Adventure Island): An action packed family thrill water slide that combines funnel and wave elements to give
riders a sense of weightlessness.
(cid:120) Sea Lion High (SeaWorld Orlando and SeaWorld San Antonio): A new sea lion comedy show featuring sea lions, walruses and
otters which takes place in an aquatic-themed high school.
During 2016, we will open a new roller coaster, Mako, at our SeaWorld Orlando theme park and a family roller coaster, Cobra’s
Curse, at our Busch Gardens Tampa theme park. In San Antonio, we will open Discovery Point at our SeaWorld San Antonio theme
park, which will include a new dolphin habitat and an underwater viewing area. Discovery Point will also offer guests an opportunity
to interact and swim with the dolphins. In addition, in 2016, Aquatica San Antonio will be converted into a stand-alone, separate
admission park that guests can access through an independent gate without the need to purchase admission to SeaWorld San Antonio.
In 2014 we announced a plan to build new killer whale habitats at all three of our SeaWorld locations (the “Blue World
Project”). The San Diego environment was expected to open to the public in 2018 with a new killer whale habitat to possibly follow at
SeaWorld Orlando and SeaWorld San Antonio based on our experience in San Diego. The total investment was expected to be
approximately $100.0 million per park by the project’s completion. On October 8, 2015, the California Coastal Commission approved
our plan to build the Blue World Project in San Diego, but attached certain conditions to its approval. Those conditions included,
among other things, a prohibition against breeding killer whales or transporting killer whales to or from the habitat. On December 29,
2015, we filed a lawsuit against the California Coastal Commission on the grounds that the California Coastal Commission decision
was outside the scope of its authority in imposing such conditions because it does not have jurisdiction over killer whales, which are
regulated under federal law. Due to the pending lawsuit and the uncertain legislative and regulatory environment in California, we are
currently reevaluating our plans with respect to the scope of the Blue World Project and we may ultimately decide not to pursue the
Blue World Project.
Maintenance and Inspection
Safety is of utmost importance to us. Maintenance at our theme parks is a key component of safety and guest service and
includes two areas of focus: (i) facilities and infrastructure and (ii) rides and attractions. Facilities and infrastructure maintenance
consists of all functions associated with upkeep, repair, preventative maintenance, code compliance and improvement of theme park
infrastructure. This area is staffed with a combination of external contractors/suppliers and our employees.
10
Rides and attractions maintenance represents all functions dedicated to the inspection, upkeep, repair and testing of guest
experiences, particularly rides. Rides and attractions maintenance is also staffed with a combination of external suppliers, inspectors
and our employees, who work to assure that ride experiences are operating within the manufacturer’s criteria and that maintenance is
conducted according to internal standards, industry best practice and standards (such as ASTM International), state or jurisdictional
requirements, as well as the ride designer or manufacturer’s specifications. All ride maintenance personnel are trained to perform their
duties according to internal training processes, in addition to recognized industry certification programs for maintenance leadership.
Every ride at our theme parks is inspected regularly, according to daily, weekly, monthly and annual schedules, by both park
maintenance experts and external consultants. Additionally, all rides are inspected daily by maintenance personnel before use by
guests to ensure proper and safe operation.
A networked enterprise software system is used to plan and track various maintenance activities, in order to schedule and
request work, track completion progress and manage costs of parts and materials.
Our Animals
We are one of the world’s foremost zoological organizations with approximately 1,500 employees dedicated to animal welfare,
training, husbandry and veterinary care. Our mission is to provide experiences that matter, inspire guests through education and
entertainment and to care for and protect animals and the wild wonders of our world. We believe we have one of the largest zoological
collections in the world, representing more than 800 species of animals. Animals in our care include certain endangered or threatened
species such as the cheetah, Bengal tiger, West Indian manatee, black rhinoceros and polar bear.
The well-being of the animals in our care is a top priority. Our veterinarians and zoological staff have been caring for animals
for more than five decades, and our expertise is a resource for zoos, aquariums and conservation organizations worldwide. Our
expertise and innovation in animal husbandry have led to many advances in the care of species in zoological facilities and in the
conservation of wild populations. More than 80% of the marine mammals living in our zoological theme parks were born in human
care.
We have made many pioneering contributions to the zoological community. Until the birth of our first orca calf in 1985, no
zoological institution had successfully bred orcas. We have not collected a killer whale from the wild in almost 40 years. We care for
the largest orca population in zoological facilities worldwide and today have the most genetically diverse orca and dolphin population
in our history. Six of our orcas are presently on loan to a third party pursuant to an agreement entered into in February 2004. Pursuant
to this agreement, we receive an annual fee, which is not material to our results of operations. In addition to generating incremental
revenue for our business, the agreement provides for additional housing capacity for our orcas. The agreement expires in 2031 and is
renewable at the option of the parties.
Our commitment to animals also extends beyond our theme parks and throughout the world. We actively participate in species
conservation and rescue efforts as discussed in “—Conservation Efforts” and “—Philanthropy and Community Relations” below.
Our Products and Services
Admission Tickets
We generate most of our revenue from selling admission to our theme parks. For the year ended December 31, 2015, theme park
admissions accounted for approximately 62% of our revenue. We engage with travel agents, ticket resellers and travel agencies, and
directly with our guests through our websites and social media, to promote advanced sales and provide guest convenience and ease of
entry. Approximately 41% of our admission ticket purchases are made online.
Guests who visit our theme parks have the option of purchasing multiple types of admission tickets, from single and multi-day
tickets to season and annual passes. We also offer a Fun Card at select theme parks that allows multiple visits throughout a calendar
year. In addition, visitors can purchase vacation packages with preferred hotels, behind-the-scenes tours, specialty dining packages
and front of the line “Quick Queue” access to enhance their experience.
We also participate in joint programs that are designed to provide visitors to Florida and Southern California with flexibility and
value in creating their vacation itineraries. We have partnered with several theme parks and attractions to create joint ticket products
which allow guests to purchase a ticket providing access to our theme parks as well as other local area attractions. We also partner
with independent third parties who sell tickets and/or packages to our theme parks.
11
We actively run promotions and campaigns to maximize revenue and manage capacity. Recently, we introduced a simplified
pricing framework to reduce complexity in the number of ticket offerings, encourage advanced purchases and provide products that
are more flexible for our guests to use. We have also launched a new website portal to give guests a balanced look at our park
offerings with the ability to choose their experience, such as upgrades to include multiple parks, additional days, dining experiences,
tours or animal interactions.
Theme Park Operations
Our theme park operations strive to deliver a high level of safety, security, guest service and cleanliness at our theme parks. The
theme park operations team manages the planning and execution of the overall theme park experience on a daily basis, which is
comprised of rides, shows and attractions operations, safety, security, environmental, water park and guest arrival services (including
parking, tolls, admissions, guest relations, entry and exit). Our theme park operations team identifies and leverages internal best
practices across all of our theme parks in order to create a seamless and enjoyable guest experience throughout the entire visit.
Culinary Offerings
We strive to deliver a variety of high quality, creative and memorable culinary experiences to our guests. Our culinary
operations are strategically organized into five key guest-oriented disciplines designed to drive in-park per capita spending:
restaurants, catering, carts and kiosks, specialty snacks and vending. Our culinary team focuses on providing creative menu offerings
and ways to deliver those offerings that appeal to our diverse guest base.
We offer a variety of dining programs that provide quality food and great value to our guests and drive incremental revenues.
While our menu offerings have broad appeal, they also cater to guests who desire healthy options and those with special allergy-
related needs. Our successful all-day-dining program delivers convenience and value to our guests with numerous restaurant choices
for one price. We also offer creative immersive dining experiences that allow guests to dine up-close with our animals and characters.
Our commitment to care for the natural world extends to the food that we serve. Some of our menus feature sustainable, organic,
seasonal and locally grown ingredients that aim to minimize environmental impacts to animals and their habitats. In addition, through
culinary supply chain management initiatives, we are well-positioned to take advantage of changing economic and market conditions.
Merchandise
We offer guests the opportunity to capture memories through our products and services, including through traditional retail
shops, game venues and customized photos and videos. We make a focused effort to leverage the emotional connection of the theme
park experiences, capitalize on trends and optimize brand alignment with our merchandise product offerings.
We operate nearly 300 specialty retail shops at our theme parks, and our retail business encompasses the entire value chain,
from product design to production and sourcing, importing and logistics and visual presentation up to the point of sale. Our products
encompass more than 60,000 unique SKUs. Whether a plush toy, a stylish apparel item showcasing an attraction, a commemorative
memento or a tote to carry it all, we carry items both big and small so that every guest has a chance to find that perfect item that is a
reminder of the memories made in our theme parks.
Guests can purchase visual memories to commemorate their experience with us through real time photo and video technologies.
Whether on a traditional ride or during one of our numerous animal experiences, we capture the moment through the use of state-of-
the-art processes and technologies. We continue to explore and develop our photo and retail business with advanced offerings to
extend beyond the visit with online opportunities to further create customized products. An example is PhotoKey through which
guests can instantly view and share all of their photos using the PhotoKey app available on their smartphone devices.
In-park games span from traditional theme park operations to arcade experiences, all with the goal of creating positive family
experiences for guests of every age. Our merchandise teams also focus on making a visit to our theme parks easy, convenient and
comfortable. This includes offering lockers or service vehicle rentals such as strollers, electric personal carts and wheelchairs.
Licensing, Consumer Products and Media Enterprises
To capitalize on our popular brands, we leverage content through media and licensing arrangements. Our original television
series, Sea Rescue and The Wildlife Docs, showcase our rescue and rehabilitation efforts. These Emmy-nominated programs are
broadcast nationally through the ABC network, and have been renewed for an additional two seasons, through the summer of 2018.
We also developed licensed consumer products to drive consumer sales through retail channels beyond our theme parks. Our licensed
consumer product offerings currently include toys, games, books, apparel, DVD’s and technology accessories, among other product
types.
12
In addition, we expanded our brand appeal through strategic alliances with well-known external brands, including Sesame Street
and The Polar Express. In 2015, we acquired the license to incorporate Rudolph the Red-Nosed Reindeer into our park holiday
programs under a new agreement with Character Arts Creations, LLC. We also released original songs and soundtracks from our
theme parks and media enterprises for sale on digital music channels.
While currently these products do not represent a material percentage of our revenue, we believe by leveraging our brands and
our intellectual property through media and consumer products, we will create new revenue streams and enhance the value of our
brands through greater brand visibility, consumer awareness and increased consumer loyalty.
Group Events and Conventions
We host a variety of different group events, meetings and conventions at our theme parks both during the day and at night. Our
venues offer indoor and outdoor space for meetings, special events, entertainment shows, picnics, teambuilding events, group tours
and special group ticket packages. Park buy-outs allow groups to enjoy exclusive itineraries, including meetings and shows, up-close
encounters with animals and behind the scenes tours. Each of our theme parks offers attractive venues, such as SeaWorld Orlando’s
Ports of Call, a 70,000 square foot dedicated special events complex and banquet facility at the theme park, which is themed as a
nautical wharf-side warehouse district, complete with two miniature submarines. The facility offers more than 30,000 square feet of
dining space, with a ballroom that provides seating for more than 750 guests and a larger outdoor garden reception area that can
accommodate additional guests. For the year ended December 31, 2015, we hosted over 1,600 group events at our theme parks across
the country.
Corporate Sponsorships and Strategic Alliances
We seek to secure long-term corporate sponsorships and strategic alliances with leading companies and brands that share our
core values, deliver significant brand value and influence and drive mutual business gains. We identify prospective corporate sponsors
based on their industry and industry-leading position, and we select them based on their ability to deliver impactful value to our theme
parks and our brands, as well as to consumer products and various entertainment platforms. Our corporate sponsors contribute to us in
a multitude of ways, such as through direct marketing, advertising, media exposure and licensing opportunities, as well as through
contributions to the non-profit SeaWorld & Busch Gardens Conservation Fund.
Our Corporate Culture
Our corporate culture is built on our mission to provide experiences that matter and inspire guests to protect animals and the
wild wonders of our world. Our management team and our employees, referred to as ambassadors, are passionate about connecting
people to nature and animals and are committed to working in a socially responsible and environmentally sustainable manner. We
teach our ambassadors to be welcoming, friendly and attentive and to create an environment that allows our guests to build lasting
memories with their family and friends. Our consumer-oriented corporate culture is integral to our organization and the cornerstone of
our success.
Conservation Efforts
We contribute to species conservation, wildlife rescue, education and environmental stewardship programs around the world.
Through the SeaWorld & Busch Gardens Conservation Fund, a non-profit organization, we support wildlife research, habitat
protection, animal rescue and conservation education. We also work with and support conservation-related organizations,
including the National Fish and Wildlife Foundation and American Humane Association and contribute funds in support of efforts to
ensure the sustainability of animal species in the wild. Some of our animals also serve as animal ambassadors in helping raise
awareness for species in danger through numerous national media and public appearances. Through our theme parks’ up-close animal
encounters, educational exhibits and innovative entertainment, we strive to inspire each guest who visits one of our parks to care for
and conserve the natural world.
In addition, we operate one of the world’s most respected rescue programs for ill and injured marine animals, in collaboration
with federal, state and local governments, and other members of accredited stranding networks, among others, with the goal of
rehabilitating and returning them to the wild. For more than five decades, our animal experts have helped more than 27,000 ill,
injured, orphaned and abandoned animals. We are committed to rescue, rehabilitation, research and education and invest significant
amounts annually in these efforts.
13
Our commitment to research and conservation also has led to advances in the care of animals in zoological facilities and in
conserving wild populations. We have pioneered new ways to rehabilitate animals in need. For example, we helped to create
nutritional formulas and custom nursing bottles to hand-feed orphaned animals and developed techniques to help save sea turtles with
cracked shells, created prosthetic beaks for injured birds and outfitted injured manatees with an “animal wetsuit” allowing them to stay
afloat and warm.
Philanthropy and Community Relations
We are committed to the communities in which our theme parks are located and focus our philanthropic efforts on three areas:
animal preservation and stewardship; youth development and education; and sustainable community projects and programs that help
create solutions for environmental sustainability concerns and address local socio-economic issues. We also partner with charities
across the country whose values and missions are aligned with our own by providing financial support, in-kind resources, strategic
guidance, and/or hands-on volunteer work.
Our theme parks inspire and educate children and guests of all ages by providing experiences that matter. Our philanthropic
efforts reflect this commitment through educational outreach visits to inner-city schools and hosting “special wish” children to enjoy
theme parks. Plus, through our SeaWorld Cares and Busch Gardens Cares initiatives, our employees are actively involved in volunteer
activities such as beach and river cleanup efforts.
Finally, a key component of our community outreach is our long-term commitment to honoring the service of members of the
U.S. military and acknowledging the sacrifices that their families have made. Currently, we offer a free admission program to the
majority of our theme parks, which provided approximately 500,000 free single day passes to active military personnel and their
families for the year ended December 31, 2015.
Our Guests and Customers
Our theme parks are located near a number of large metropolitan areas, with a total population of over 61 million people located
within 150 miles of our parks. Additionally, because our theme parks are divided between regional and destination theme parks, our
guests include local visitors, non-local domestic visitors and international tourists. Our theme parks are entertainment venues and have
broad demographic appeal. For the year ended December 31, 2015, families comprised 51% of our attendance with an average party
size of 3.8 people.
Seasonality
The theme park industry is seasonal in nature. Historically, we generate the highest revenues in the second and third quarters of
each year, in part because six of our theme parks are only open for a portion of the year. Approximately two-thirds of the Company’s
attendance and revenues are generated in the second and third quarters of the year. The percent mix of revenues by quarter is relatively
constant each year, but revenues can shift between the first and second quarters due to the timing of Easter and spring break holidays
and between the first and fourth quarters due to the timing of Christmas and New Year. Even for our five theme parks open year-
round, attendance patterns have significant seasonality, driven by holidays, school vacations and weather conditions. One of our goals
is to continue to generate cash flow throughout the year to maximize profitability and minimize the effects of seasonality, in particular
at our theme parks that are open year-round. In recent years, we have begun to encourage attendance during non-peak times by
offering a variety of seasonal programs and events, such as shows for kids, special concert series, and Halloween and Christmas
events. In addition, during seasonally slow times, operating costs are controlled by reducing operating hours and show schedules.
Employment levels required for peak operations are met largely through part-time and seasonal hiring.
Marketing
Our marketing and sales efforts are focused on generating profitable attendance, in-park per capita spending and building the
value of our brands. Through advertising, including park specific messages, promotions, retail and corporate partners, digital
platforms, public relations and sales initiatives, we drive awareness of and intent to visit our theme parks, attendance and higher in-
park per capita spending on an international, national and regional level. Our attractive destination locations and strategy of grouping
parks together creates high appeal for multi-day visits. Our strategic priorities include: (i) emphasizing brand distinction,
(ii) improving guest engagement and loyalty, (iii) driving maximum revenue and (iv) broadening appeal (among multi-cultural
consumers, kids and domestic markets).
14
Intellectual Property
Our business is affected by our ability to protect against infringement of our intellectual property, including our trademarks,
service marks, domain names, copyrights and other proprietary rights. Important intellectual property includes rights in names, logos,
character likenesses, theme park attractions, content of television programs and systems related to the study and care of certain of our
animals. In addition, we are party to key license agreements as licensee, including our agreements with Sesame Workshop and ABI as
discussed below. To protect our intellectual property rights, we rely upon a combination of trademark, copyright, trade secret and
unfair competition laws of the United States and other countries, as well as contract provisions and third-party policies and procedures
governing internet/domain name registrations.
Busch Gardens License Agreement
Our subsidiary, SeaWorld Parks & Entertainment LLC, is a party to a trademark license agreement with ABI, which governs our
use of the Busch Gardens name and logo. Under the license agreement, ABI granted to us a perpetual, exclusive, worldwide, royalty-
free license to use the Busch Gardens trademark and certain related domain names in connection with the operation, marketing,
promotion and advertising of our theme parks, as well as in connection with the production, use, distribution and sale of merchandise
sold in connection with such theme parks.
The license extends to our Busch Gardens theme parks located in Williamsburg, Virginia and Tampa, Florida, and may also
include any amusement or theme park anywhere in the world that we acquire, build or rebrand with the Busch Gardens name in the
future, subject to certain conditions. ABI may not assign, transfer or sell the Busch Gardens mark without first granting us a
reasonable right of first refusal to purchase such mark.
We have agreed to indemnify ABI from and against third party claims and losses arising out of or in connection with the
operation of the theme parks and the related marketing or promotion thereof, any merchandise branded with the licensed marks and
the infringement of a third party’s intellectual property. We are required to carry certain insurance coverage throughout the term of the
license.
The license agreement can be terminated by ABI under certain limited circumstances, including in connection with certain types
of change of control of SeaWorld Parks & Entertainment LLC.
Sesame Licenses
Sesame Place Theme Park License Agreements
Our subsidiary, SeaWorld Parks & Entertainment LLC (f/k/a SPI, Inc.), is a party to a license agreement with Sesame Workshop
(f/k/a Children’s Television Workshop). Under the license agreement, we were granted the right to use titles, marks, names, and
characters from the Sesame Street and The Electric Company television series, as well as certain characters and elements created by
Muppets Inc. for the Sesame Street series, related marketing materials, and the Sesame Place design trademark in connection with the
children’s play parks in Langhorne, Pennsylvania. We pay specified royalties based on receipts from business conducted on the
premises of the theme park to Sesame Workshop. We are required to include Sesame Workshop and Muppets Inc. as insured parties
under any relevant insurance policies, and have agreed to indemnify Sesame Workshop from and against certain claims and expenses
arising out of any personal or property injury at our Sesame Place park or breach of the license agreement. The license agreement can
be terminated by Sesame Workshop under certain circumstances, including in connection with a specified change of control of
SeaWorld Parks & Entertainment LLC, specified uncured breaches of the license agreement or specified bankruptcy events.
Under a separate agreement, Sesame Workshop granted SeaWorld Parks & Entertainment LLC a license to develop,
manufacture, and produce in the United States (and, in some circumstances, elsewhere in the world) and to distribute and sell at
Sesame Place branded play parks, certain products bearing Sesame Place, Sesame Street, and Sesame Street Muppet characters,
likenesses, logos, marks and materials, including apparel, flags, bags, mugs, buttons, pens, wristbands and other miscellaneous
products. The parties have agreed to indemnify each other from and against claims and expenses in connection with our respective
performance under the license agreement and any breach thereof. Sesame Workshop may terminate the license under certain
circumstances, including our uncured breach or bankruptcy.
Both agreements are scheduled to remain in effect until December 31, 2021.
15
Multi-Park License
Under a separate agreement, Sesame Workshop granted SeaWorld Parks & Entertainment LLC rights to use the Sesame Place
and Sesame Workshop names and logos, certain Sesame Street characters (including Elmo, Big Bird and Cookie Monster), and
granted a limited term right of first negotiation to utilize characters from other Sesame Workshop television series at SeaWorld San
Diego, SeaWorld San Antonio, SeaWorld Orlando, and our two Busch Gardens theme parks. Within these theme parks we have rights
to use the marks and characters in connection with Sesame Street themed attractions, Sesame Street shows and character appearances,
and the marketing, advertising and promotion of the theme parks.
Sesame Workshop has also granted us the right to develop, manufacture, distribute and sell products within our SeaWorld and
Busch Gardens theme parks, at other parks in the United States that are owned or operated by SeaWorld Parks & Entertainment LLC,
its subsidiaries or affiliated entities, and through online stores on websites for our parks.
Pursuant to this agreement we pay a specified annual license fee, as well as a specified royalty based on revenues earned in
connection with sales of licensed products, all food and beverage items utilizing the licensed elements and any events utilizing such
elements if a separate fee is paid for such event.
The parties have agreed to indemnify each other from and against third party claims and expenses arising from their respective
performance under the agreement or any breach thereof. Sesame Workshop has the right to terminate the agreement under certain
limited circumstances, including a change of control of SeaWorld Parks & Entertainment LLC, SeaWorld Parks & Entertainment
LLC’s bankruptcy or uncured breach of the agreement, or the termination of the license agreement regarding our Sesame Place theme
park.
The agreement is scheduled to remain in effect until December 31, 2021 unless earlier terminated or extended.
Our Industry
We believe that the theme park industry is an attractive sector characterized by a proven business model that generates
significant cash flow and has avenues for growth. Theme parks offer a strong consumer value proposition, particularly when compared
to other forms of out-of-home entertainment such as concerts, sporting events, cruises and movies. As a result, theme parks attract a
broad range of guests and generally exhibit strong operating margin across regions, operators, park types and macroeconomic
conditions.
According to the IBISWorld Report, the U.S. amusement park industry is comprised of a large number of venues ranging from a
small group of high attendance, heavily themed destination theme parks to a large group of lower attendance local theme parks and
family entertainment centers. According to the TEA/AECOM Report, the United States is the largest theme park market in the world
with five of the ten largest theme park operators and 9 of the 25 most-visited theme parks in the world. In 2015, the U.S. amusement
park industry was expected to generate approximately $14.8 billion in revenues, according to the IBISWorld Report.
Competition
Our theme parks and other product and entertainment offerings compete directly for discretionary spending with other
destination and regional theme parks and water and amusement parks and indirectly with other types of recreational facilities and
forms of entertainment, including movies, home entertainment options, sports attractions, restaurants and vacation travel. Principal
direct competitors of our theme parks include theme parks operated by The Walt Disney Company, Universal Studios, Six Flags,
Cedar Fair, Merlin Entertainments and Hershey Entertainment and Resorts Company. Our highly differentiated products provide a
value proposition and a complementary experience to those offered by fantasy-themed Disney and Universal parks. In addition, we
benefit from the significant capital investments made in developing the tourism industry in the Orlando area. The Orlando theme park
market is extremely competitive, with a high concentration of theme parks operated by several companies.
Competition is based on multiple factors including location, price, the originality and perceived quality of the rides and
attractions, the atmosphere and cleanliness of the theme park, the quality of food and entertainment, weather conditions, ease of travel
to the theme park (including direct flights by major airlines), and availability and cost of transportation to a theme park. We believe
we can compete effectively, due to our strong brand recognition, unique and extensive zoological collection, targeted capital
investments and valuable real estate. Additionally, we believe that our theme parks feature a sufficient quality and variety of rides and
attractions, educational and interactive experiences, merchandise locations, restaurants and family orientation to make them highly
competitive with other destination and regional theme parks, as well as other forms of entertainment.
16
Employees
As of December 31, 2015, we employed approximately 5,000 full-time employees and approximately 6,300 part-time
employees. During our peak operating season in 2015, we employed approximately 14,200 seasonal employees, many of whom are
high school and college students. None of our employees are covered by a collective bargaining agreement, and we consider our
employee relations to be good.
Regulatory
Our operations are subject to a variety of federal, state and local laws, regulations and ordinances including, but not limited to,
those regulating the environment, display, possession and care of our animals, amusement park rides, building and construction, health
and safety, labor and employment, workplace safety, zoning and land use and alcoholic beverage and food service. Key statutes and
treaties relating to the display, possession and care of our zoological collection include the Endangered Species Act, Marine Mammal
Protection Act, Animal Welfare Act, Convention on International Trade in Endangered Species and Fauna Protection Act and the
Lacey Act. We must also comply with the Migratory Bird Treaty Act, Bald and Golden Eagle Protection Act, Wild Bird Conservation
Act and National Environmental Policy Act, among other laws and regulations. We believe that we are in substantial compliance with
applicable laws, regulations and ordinances; however, such requirements may change over time, and there can be no assurance that
new requirements, changes in enforcement policies or newly discovered conditions relating to our properties or operations will not
require significant expenditures in the future. For information on recent regulatory developments, see the “—Recent Developments—
Regulatory Developments” section above.
Insurance
We maintain insurance of the type and in the amounts that we believe to be commercially reasonable for businesses in our
industry. We maintain primary and excess casualty coverage of up to $100 million. As part of this coverage, we retain deductible/self-
insured retention exposures of $1 million per occurrence for general liability claims, $250,000 per accident for automobile liability
claims, and $750,000 per occurrence for workers compensation claims. We maintain employers’ liability and all coverage required by
law in the states in which we operate. Defense costs are included in the insurance coverage we obtain against losses in these areas.
Based upon our historical experience of reported claims and an estimate for incurred-but-not-reported claims, we accrue a liability for
our deductible/self-insured retention contingencies regarding general liability, automobile liability and workers compensation
exposures. We maintain additional forms of special casualty coverage appropriate for businesses in our industry. We also maintain
commercial property coverage against fire, natural perils, so-called “extended coverage” perils such as civil commotion, business
interruption and terrorism exposures for protection of our real and personal properties (other than land). We generally renegotiate our
insurance policies on an annual basis. We cannot predict the amounts of premium cost that we may be required to pay for future
insurance coverage, the level of any deductibles/self-insured retentions we may retain applicable thereto, the level of aggregate excess
coverage available or the availability of coverage for special or specific risks.
Corporate History
On December 1, 2009, investment funds affiliated with The Blackstone Group L.P. and certain co-investors, through SeaWorld
Entertainment, Inc. and its wholly owned subsidiary, SeaWorld Parks & Entertainment, Inc. (“SEA”), acquired 100% of the equity
interests of Sea World LLC (f/k/a Sea World, Inc.) and SeaWorld Parks & Entertainment LLC (f/k/a Busch Entertainment
Corporation) from certain subsidiaries of Anheuser-Busch Companies, Inc. We refer to this acquisition and related financing
transactions as the “2009 Transactions.”
SeaWorld Entertainment, Inc. was incorporated in Delaware on October 2, 2009 in connection with the 2009 Transactions and
changed its name from SW Holdco, Inc. to SeaWorld Entertainment, Inc. in December 2012. We completed our initial public offering
(the “IPO”) in April 2013 and our common stock is listed on the New York Stock Exchange under the symbol “SEAS”. As of
December 31, 2015, Blackstone and the other co-investors owned, through the Partnerships, approximately 22.2% of our total
outstanding common stock.
17
Available Information
Our website is http://www.seaworldentertainment.com. Information contained on our website is not incorporated by reference
herein and is not a part of this Annual Report on Form 10-K. We make available free of charge, on or through the “Investor Relations”
section of our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports, if any, or other filings filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon
as reasonably practicable after electronically filing or furnishing these reports with the Securities and Exchange Commission (“SEC”).
We have adopted a Code of Business Conduct and Ethics applicable to our employees including our principal executive, financial and
accounting officers, and it is available free of charge, on or through the “Investor Relations” section of our website along with our
Corporate Governance Guidelines, and the charters of our Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee.
The SEC maintains a website at http://www.sec.gov that contains our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and amendments to those reports, if any, or other filings filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act, and our proxy and information statements. All reports that we file with the SEC may be read and
copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC, 20549. Information about the operation of the
Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
Website and Social Media Disclosure
We use our websites (www.seaworldentertainment.com and www.seaworldinvestors.com) and our corporate Twitter account
(@Seaworld) as channels of distribution of company information. The information we post through these channels may be deemed
material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public
conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about SeaWorld when
you enroll your e-mail address by visiting the “E-mail Alerts” section of our website at www.seaworldinvestors.com. The contents of
our website and social media channels are not, however, a part of this Annual Report on Form 10-K.
Item 1A. Risk Factors
The following risk factors should be read carefully in connection with evaluating us and this Annual Report on Form 10-K.
Certain statements in “Risk Factors” are forward-looking statements. See “Special Note Regarding Forward-Looking Statements”
elsewhere in this report:
Risks Related to Our Business and Our Industry
We are subject to complex federal and state regulations governing the treatment of animals, which can change, and to claims and
lawsuits by activist groups before government regulators and in the courts.
We operate in a complex and evolving regulatory environment and are subject to various federal and state statutes and
regulations and international treaties implemented by federal law. The states in which we operate also regulate zoological activity
involving the import and export of exotic and native wildlife, endangered and/or otherwise protected species, zoological display and
anti-cruelty statutes. We incur significant compliance costs in connection with these regulations and violation of such regulations
could subject us to fines and penalties and result in the loss of our licenses and permits, which, if occurred, could impact our ability to
display certain animals. Future amendments to existing statutes, regulations and treaties or new statutes, regulations and treaties may
potentially restrict our ability to maintain our animals, or to acquire new ones to supplement or sustain our breeding programs or
otherwise adversely affect our business. For instance, in March of 2014 a bill was proposed by a California lawmaker which sought to
restrict our ability to display certain animals in that state. Also, on July 16, 2015, Senator Dianne Feinstein (D-CA) offered an
amendment to the Fiscal Year 2016 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies spending
bill during consideration of the bill by the full Committee on Appropriations. The amendment directed the U.S. Department of
Agriculture’s Animal and Plant Health Inspection Service (APHIS) to issue updated regulations for the display of marine mammals in
domestic zoos and aquaria within six months of enactment. While that amendment was not included in the final Fiscal Year 2016
Omnibus Appropriations Bill, APHIS released a proposed rule on February 3, 2016 to amend the Animal Welfare Act regulations
concerning the humane handling, care and treatment of marine mammals in captivity (the “Proposed APHIS Regulations”). This
proposed rule would affect sections in the regulations for the protection of all marine mammals in the United States relating to human
marine mammal interactive programs, space requirements, water quality, indoor facilities, outdoor facilities, implementation dates,
and variances. The Proposed APHIS Regulations are available for public comment by all stakeholders, including the Company, until
April 4, 2016, and the Proposed APHIS Regulations may be modified as a result of such comments. The full impact of the Proposed
APHIS Regulations on our business will not be known until the Proposed APHIS Regulations are finalized. Once effective, the
Proposed APHIS Regulations may increase our regulatory compliance burdens and costs, impact the way and manner the Company’s
marine mammals are displayed and require additional management attention and investments to come into compliance.
18
On October 8, 2015, the California Coastal Commission approved our plan to build a new killer whale habitat (the “Blue World
Project”) in San Diego, but attached certain conditions to its approval. Those conditions included, among other things, a prohibition
against breeding killer whales or transporting killer whales to or from the habitat. On December 29, 2015, we filed a lawsuit against
the California Coastal Commission on the grounds that the California Coastal Commission decision was outside the scope of its
authority in imposing such conditions because it does not have jurisdiction over killer whales, which are regulated under federal law.
Due to the pending lawsuit and the uncertain legislative and regulatory environment in California, we are currently reevaluating our
plans with respect to the scope of the Blue World Project and we may ultimately decide not to pursue the Blue World Project.
On November 16, 2015, Representative Adam Schiff (D-CA) introduced the Orca Responsibility and Care Advancement Act
(the “ORCA Act”). The bill has been referred to the Natural Resources and Agriculture Committees. It is unclear whether this bill
will be enacted into law, but if enacted, this bill would amend the Marine Mammal Protection Act of 1972 and the Animal Welfare
Act to prohibit the breeding, the taking (wild capture), and the import or export of killer whales for the purposes of public display.
In light of the uncertain legal, legislative and regulatory environment and evolving public sentiment, we continue to evaluate a
broad spectrum of enhancements, modifications and alternatives with respect to the display, husbandry and breeding practices,
handling and care, and study and research of our killer whales and other marine animals. Any decisions regarding such matters are
subject to consideration and assessment of various factors including, but not limited to, the health and welfare of the animals, guest
sentiment, market conditions, anticipated impact on our business, regulatory environment, legal proceedings, input from our
shareholders and conservation partners, and other factors. If we were to pursue or be required to pursue any alternative approaches
with respect to the display, husbandry and breeding practices, handling and care, or study and research of our killer whales or other
animals in our zoological collection, the full impact of such alternatives on our business will not be known until such alternatives are
finalized. In the meantime, we continue to invest significant management attention and resources to evaluate the impact of and ensure
compliance with the applicable regulatory and other developments.
From time to time, animal activist and other third-party groups may make claims before government agencies, bring lawsuits
against us, and/or attempt to generate negative publicity associated with our business. Such activities sometimes are based on
allegations that we do not properly care for some of our featured animals. On other occasions, such activities are specifically designed
to change existing law or enact new law in order to impede our ability to retain, exhibit, acquire or breed animals. While we seek to
structure our operations to comply with all applicable federal and state laws and vigorously defend ourselves when sued, there are no
assurances as to the outcome of future claims and lawsuits that could be brought against us. In addition, negative publicity associated
with such activities could adversely affect our reputation and results of operations. At times, activists and other third-party groups
have also attempted to generate negative publicity related to our relationships with our business partners, such as corporate sponsors,
promotional partners, vendors, ticket resellers and others. For example, since 2014, we have experienced demand pressures,
particularly in California, which we believe were partly due to media attention relating to the legislation proposed in that state. In
addition, we have experienced increased media attention since 2014 extending to our relationships with some of our business partners.
Various factors beyond our control could adversely affect attendance and guest spending patterns at our theme parks.
Various factors beyond our control could adversely affect attendance and guest spending patterns at our theme parks. These
factors could also affect our suppliers, vendors, insurance carriers and other contractual counterparties. Such factors include:
(cid:120) war, terrorist activities or threats and heightened travel security measures instituted in response to these events;
(cid:120) outbreaks of pandemic or contagious diseases or consumers’ concerns relating to potential exposure to contagious diseases;
(cid:120) natural disasters, such as hurricanes, fires, earthquakes, tsunamis, tornados, floods and volcanic eruptions and man-made
disasters such as the oil spill in the Gulf of Mexico, which may deter travelers from scheduling vacations or cause them to
cancel travel or vacation plans;
(cid:120) bad weather and even forecasts of bad weather, including abnormally hot, cold and/or wet weather, particularly during
weekends, holidays or other peak periods;
(cid:120) changes in the desirability of particular locations or travel patterns of both our domestic and international guests;
(cid:120) fluctuations in foreign exchange rates;
(cid:120) low consumer confidence;
(cid:120) oil prices and travel costs and the financial condition of the airline, automotive and other transportation-related industries, any
travel-related disruptions or incidents and their impact on travel;
(cid:120) actions or statements by U.S. and foreign governmental officials related to travel and corporate travel-related activities
(including changes to the U.S. visa rules) and the resulting public perception of such travel and activities; and
(cid:120) interruption of public or private utility services to our theme parks.
19
Any one or more of these factors could adversely affect attendance and total per capita spending at our theme parks, which
could materially adversely affect our business, financial condition and results of operations.
Incidents or adverse publicity concerning our theme parks or the theme park industry generally could harm our brands or
reputation as well as negatively impact our revenues and profitability.
Our brands and our reputation are among our most important assets. Our ability to attract and retain guests depends, in part,
upon the external perceptions of the Company, the quality of our theme parks and services and our corporate and management
integrity. The operation of theme parks involves the risk of accidents, illnesses, environmental incidents and other incidents which
may negatively affect the perception of guest and employee safety, health, security and guest satisfaction and which could negatively
impact our brands or reputation and our business and results of operations. An accident or an injury at any of our theme parks or at
theme parks operated by competitors, particularly an accident or an injury involving the safety of guests and employees, that receives
media attention, is the topic of a book, film, documentary or is otherwise the subject of public discussions, may harm our brands or
reputation, cause a loss of consumer confidence in the Company, reduce attendance at our theme parks and negatively impact our
results of operations. Such incidents have occurred in the past and may occur in the future. In addition, other types of adverse publicity
concerning our business or the theme park industry generally could harm our brands, reputation and results of operations. The
considerable expansion in the use of social media over recent years has compounded the impact of negative publicity.
We could be adversely affected by a decline in discretionary consumer spending or consumer confidence.
Our success depends to a significant extent on discretionary consumer spending, which is heavily influenced by general
economic conditions and the availability of discretionary income. In the past, severe economic downturns, coupled with high volatility
and uncertainty as to the future global economic landscape, have had an adverse effect on consumers’ discretionary income and
consumer confidence.
Difficult economic conditions and recessionary periods may adversely impact attendance figures, the frequency with which
guests choose to visit our theme parks and guest spending patterns at our theme parks. The actual or perceived weakness in the
economy could also lead to decreased spending by our guests. For example, in 2009 and 2010, we experienced a decline in attendance
as a result of the global economic crisis, which in turn adversely affected our revenue and profitability. Both attendance and total per
capita spending at our theme parks are key drivers of our revenue and profitability, and reductions in either can materially adversely
affect our business, financial condition and results of operations.
A significant portion of our revenues are generated in the States of Florida, California and Virginia and in the Orlando market.
Any risks affecting such markets, such as natural disasters and travel-related disruptions or incidents, may materially adversely
affect our business, financial condition and results of operations.
Approximately 57%, 18% and 13% of our revenues in 2015 were generated in the States of Florida, California and Virginia,
respectively. In addition, our revenues and results of operations depend significantly on the results of our Orlando theme parks. The
Orlando theme park market is extremely competitive, with a high concentration of theme parks operated by several companies.
Any risks described in this Annual Report on Form 10-K, such as the occurrence of natural disasters and travel-related
disruptions or incidents, affecting the States of Florida, California and Virginia generally or our Orlando theme parks in particular may
materially adversely affect our business, financial condition or results of operations, especially if they have the effect of decreasing
attendance at our theme parks or, in extreme cases, cause us to close any of our theme parks for any period of time. For example, in
2004, the State of Florida was impacted by Hurricanes Charley, Frances and Jeanne, which caused extensive physical damage and
power outages in various parts of the State of Florida. Although we attempted to manage our exposure to such events by implementing
our hurricane preparedness plan, our theme parks located in Orlando and Tampa, Florida experienced closures of several days as a
result of these storms.
Our operating results are subject to seasonal fluctuations.
We have historically experienced and expect to continue to experience seasonal fluctuations in our annual theme park
attendance and revenue, which are typically higher in our second and third quarters, partly because six of our theme parks are only
open for a portion of the year. Approximately two-thirds of our attendance and revenues are generated in the second and third quarters
of the year and we typically incur a net loss in the first and fourth quarters. In addition, school vacations and school start dates also
cause fluctuations in our quarterly theme park attendance and revenue.
Furthermore, the operating season at some of our theme parks, including Adventure Island, Aquatica San Diego, Busch Gardens
Williamsburg, Water Country USA and Sesame Place, is of limited duration. In addition, most of our expenses for maintenance and
costs of adding new attractions at our seasonal theme parks are incurred when the operating season is over, which may increase the
need for borrowing to fund such expenses during such periods.
20
When conditions or events described in this section occur during the operating season, particularly during the second and third
quarters, there is only a limited period of time during which the impact of those conditions or events can be mitigated. Accordingly,
such conditions or events may have a disproportionately adverse effect on our revenues and cash flow.
Because we operate in a highly competitive industry, our revenues, profits or market share could be harmed if we are unable to
compete effectively.
The entertainment industry, and the theme park industry in particular, is highly competitive. Our theme parks compete with
other theme, water and amusement parks and with other types of recreational facilities and forms of entertainment, including movies,
home entertainment options, sports attractions, restaurants and vacation travel.
Principal direct competitors of our theme parks include theme parks operated by The Walt Disney Company, Universal Studios,
Six Flags, Cedar Fair, Merlin Entertainments and Hershey Entertainment and Resorts Company. The principal competitive factors of a
theme park include location, price, originality and perceived quality of the rides and attractions, the atmosphere and cleanliness of the
theme park, the quality of its food and entertainment, weather conditions, ease of travel to the theme park (including direct flights by
major airlines), and availability and cost of transportation to a theme park. Certain of our direct competitors have substantially greater
financial resources than we do, and they may be able to adapt more quickly to changes in guest preferences or devote greater resources
to promotion of their offerings and attractions than us. Our competitors may be able to attract guests to their theme parks in lieu of our
own through the development or acquisition of new rides, attractions or shows that are perceived by guests to be of a higher quality
and entertainment value. As a result, we may not be able to compete successfully against such competitors. For example, in 2014, we
experienced negative attendance trends, primarily at our destination parks in Florida, which we believe was due in part to significant
new attraction offerings at competitor destination parks, along with a delay in the scheduled opening of one of our new rides at our
Busch Gardens Tampa park.
Featuring animals at our theme parks involves risks.
Our theme parks feature numerous displays and interactions that include animals. All animal enterprises involve some degree of
risk. All animal interaction by our employees and our guests in attractions in our theme parks, where offered, involves risk. While we
maintain strict safety procedures for the protection of our employees and guests, injuries or death, while rare, have occurred in the
past. For example, in February 2010, a trainer was killed while engaged in an interaction with a killer whale. Following this incident,
we were subject to an inspection by the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”), which
resulted in three citations concerning alleged violations of the Occupational Safety and Health Act and certain regulations thereunder.
In 2012, we initiated an appeal of certain of these citations with the U.S. Court of Appeals for the District of Columbia Circuit. On
April 11, 2014, the Court of Appeals denied our appeal and we elected to not pursue further appeal. In connection with this incident,
we reviewed and revised our safety protocols and made certain safety-related facility enhancements such as revising training protocols
used in show performances. This incident has also been and continues to be the subject of significant media attention, including
extensive television and newspaper coverage, a documentary and a book, as well as discussions in social media. This incident and
similar events that may occur in the future may harm our reputation, reduce attendance and negatively impact our business, financial
condition and results of operations.
In addition, six killer whales are presently on loan to a third party. Although the occurrence of any accident or injury involving
these killer whales would be outside of our control, any such occurrence could negatively affect our business and reputation.
We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to animal
enterprise related businesses in the theme park industry. We cannot predict the level of the premiums that we may be required to pay
for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage
available, or the availability of coverage for specific risks.
Animals in our care are important to our theme parks, and they could be exposed to infectious diseases.
Many of our theme parks are distinguished from those of our competitors in that we offer guest interactions with animals.
Individual animals, specific species of animals or groups of animals in our zoological collection could be exposed to infectious
diseases. While we have never had any such experiences, an outbreak of an infectious disease among any animals in our theme parks
or the public’s perception that a certain disease could be harmful to human health may materially adversely affect our zoological
collection, our business, financial condition and results of operations.
21
The high fixed cost structure of theme park operations can result in significantly lower margins if revenues decline.
A large portion of our expenses is relatively fixed because the costs for full-time employees, maintenance, animal care, utilities,
advertising and insurance do not vary significantly with attendance. These fixed costs may increase at a greater rate than our revenues
and may not be able to be reduced at the same rate as declining revenues. If cost-cutting efforts are insufficient to offset declines in
revenues or are impracticable, we could experience a material decline in margins, revenues, profitability and reduced or negative cash
flows. Such effects can be especially pronounced during periods of economic contraction or slow economic growth.
Changes in consumer tastes and preferences for entertainment and consumer products could reduce demand for our
entertainment offerings and products and adversely affect the profitability of our business.
The success of our business depends on our ability to consistently provide, maintain and expand theme park attractions as well
as create and distribute media programming, online material and consumer products that meet changing consumer preferences. In
addition, consumers from outside the United States constitute an increasingly important portion of our theme park attendance, and our
success depends in part on our ability to successfully predict and adapt to tastes and preferences of this consumer group. If our
entertainment offerings and products do not achieve sufficient consumer acceptance or if consumer preferences change, our business,
financial condition or results of operations could be materially adversely affected.
Cyber security risks and the failure to maintain the integrity of internal or guest data could result in damages to our reputation
and/or subject us to costs, fines or lawsuits.
We collect and retain large volumes of internal and guest data, including credit card numbers and other personally identifiable
information, for business purposes, including for transactional or target marketing and promotional purposes, and our various
information technology systems enter, process, summarize and report such data. We also maintain personally identifiable information
about our employees. The integrity and protection of our guest, employee and Company data is critical to our business and our guests
and employees have a high expectation that we will adequately protect their personal information. The regulatory environment, as well
as the requirements imposed on us by the credit card industry, governing information, security and privacy laws is increasingly
demanding and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our
operating costs and/or adversely impact our ability to market our theme parks, products and services to our guests. We face various
security threats, including cyber security attacks on our data (including our vendors’ and guests’ data) and/or information technology
infrastructure. Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance
that these procedures and controls will be sufficient to prevent penetrations or disruptions to our systems. Furthermore, a penetrated or
compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss, fraudulent
or unlawful use of guest, employee or Company data which could harm our reputation or result in remedial and other costs, fines or
lawsuits and require significant management attention and resources to be spent. In addition, our insurance coverage and
indemnification arrangements that we enter into, if any, may not be adequate to cover all the costs related to cyber security attacks or
disruptions resulting from such events. To date, cyber security attacks directed at us have not had a material impact on our financial
results. Due to the evolving nature of security threats, however, the impact of any future incident cannot be predicted.
Increased labor costs and employee health and welfare benefits may negatively impact our operations.
Labor is a primary component in the cost of operating our business. We devote significant resources to recruiting and training
our managers and employees. Increased labor costs due to competition, increased minimum wage or employee benefit costs or
otherwise, would adversely impact our operating expenses. The Patient Protection and Affordable Care Act of 2010 and the
amendments thereto contain provisions that have impacted our healthcare costs. It is possible that any future amendments could
significantly increase our compensation costs, which would reduce our net income and adversely affect our cash flows. More
recently, on February 8, 2016, the San Diego City Council decided to put a proposal on the June 7, 2016 primary ballot for voters to
decide whether the city of San Diego should have a higher minimum wage than the $10 per hour required by the State of California.
If approved by a simple majority of San Diego voters, the proposal would make the city’s minimum wage $10.50 as soon as the
election results are certified, and then increase it to $11.50 on January 1, 2017. Two years later in January 2019, annual increases to
the San Diego minimum wage based on the consumer price index would start to be implemented. If enacted, the proposal will impact
our operating expenses, particularly at the Company’s SeaWorld San Diego and Aquatica San Diego parks.
22
Our growth strategy may not achieve the anticipated results.
Our future success will depend on our ability to grow our business, including through capital investments to improve existing
and develop new theme parks, rides, attractions and shows, as well as in-park product offerings and product offerings outside of our
theme parks. Our growth and innovation strategies require significant commitments of management resources and capital investments
and may not grow our revenues at the rate we expect or at all. As a result, we may not be able to recover the costs incurred in
developing our new projects and initiatives or to realize their intended or projected benefits, which could materially adversely affect
our business, financial condition or results of operations. In 2014, we announced an initiative called the Blue World Project that
involves building first-of-its-kind killer whale habitats at all three SeaWorld parks. The total investment was expected to be
approximately $100.0 million per park by the project’s completion. On October 8, 2015, the California Coastal Commission approved
our plan to build a Blue World Project habitat in San Diego, but attached certain conditions to its approval. Those conditions
included, among other things, a prohibition against breeding killer whales or transporting killer whales to or from the habitat. On
December 29, 2015, we filed a lawsuit against the California Coastal Commission on the grounds that the California Coastal
Commission decision was outside the scope of its authority in imposing such conditions because it does not have jurisdiction over
killer whales, which are regulated under federal law. Due to the pending lawsuit and the uncertain legislative and regulatory
environment, we are currently reevaluating our plans with respect to the scope of the Blue World Project and we may ultimately
decide not to pursue the Blue World Project.
We may not be able to fund theme park capital expenditures and investment in future attractions and projects.
A principal competitive factor for a theme park is the originality and perceived quality of its rides and attractions. We need to
make continued capital investments through maintenance and the regular addition of new rides and attractions. Our ability to fund
capital expenditures will depend on our ability to generate sufficient cash flow from operations and to raise capital from third parties.
We cannot assure you that our operations will be able to generate sufficient cash flow to fund such costs, or that we will be able to
obtain sufficient financing on adequate terms, or at all, which could cause us to delay or abandon certain projects or plans.
Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of
our business could reduce our profits or limit our ability to operate our business.
We are subject to allegations, claims and legal actions arising in the ordinary course of our business, which may include claims
by third parties, including guests who visit our theme parks, our employees or regulators. We are currently subject to securities
litigation. We discuss this case and other litigation to which we are subject to in greater detail below under the caption “Item 3. Legal
Proceedings” and Note 14–Commitments and Contingencies to our consolidated financial statements included elsewhere in this
Annual Report on Form 10-K. The outcome of many of these proceedings cannot be predicted. If any of these proceedings were to be
determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or
injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely
affected. Even the successful defense of legal proceedings may cause us to incur substantial legal costs and may divert management’s
attention and resources.
Our intellectual property rights are valuable, and any inability to protect them could adversely affect our business.
Our intellectual property, including our trademarks, service marks, domain names, copyrights, patent and other proprietary
rights, constitutes a significant part of the value of the Company. To protect our intellectual property rights, we rely upon a
combination of trademark, copyright, patent, trade secret and unfair competition laws of the United States and other countries, as well
as contract provisions and third-party policies and procedures governing internet/domain name registrations. However, there can be no
assurance that these measures will be successful in any given case, particularly in those countries where the laws do not protect our
proprietary rights as fully as in the United States. We may be unable to prevent the misappropriation, infringement or violation of our
intellectual property rights, breaching any contractual obligations to us, or independently developing intellectual property that is
similar to ours, any of which could reduce or eliminate any competitive advantage we have developed, adversely affect our revenues
or otherwise harm our business.
We have obtained and applied for numerous U.S. and foreign trademark and service mark registrations and will continue to
evaluate the registration of additional trademarks and service marks or other intellectual property, as appropriate. We cannot guarantee
that any of our pending applications will be approved by the applicable governmental authorities. Moreover, even if the applications
are approved, third parties may seek to oppose or otherwise challenge these registrations. A failure to obtain registrations for our
intellectual property in the United States and other countries could limit our ability to protect our intellectual property rights and
impede our marketing efforts in those jurisdictions.
23
We are actively engaged in enforcement and other activities to protect our intellectual property rights. If it became necessary for
us to resort to litigation to protect these rights, any proceedings could be burdensome, costly and divert the attention of our personnel,
and we may not prevail. In addition, any repeal or weakening of laws or enforcement in the United States or internationally intended
to protect intellectual property rights could make it more difficult for us to adequately protect our intellectual property rights,
negatively impacting their value and increasing the cost of enforcing our rights.
We may be subject to claims for infringing the intellectual property rights of others, which could be costly and result in the loss of
significant intellectual property rights.
We cannot be certain that we do not and will not infringe the intellectual property rights of others. We have been in the past, and
may be in the future, subject to litigation and other claims in the ordinary course of our business based on allegations of infringement
or other violations of the intellectual property rights of others. Regardless of their merits, intellectual property claims can divert the
efforts of our personnel and are often time-consuming and expensive to litigate or settle. In addition, to the extent claims against us are
successful, we may have to pay substantial money damages or discontinue, modify or rename certain products or services that are
found to be in violation of another party’s rights. We may have to seek a license (if available on acceptable terms, or at all) to continue
offering products and services, which may significantly increase our operating expenses.
If we lose licenses and permits required to exhibit animals and/or violate laws and regulations, our business will be adversely
affected.
We are required to hold government licenses and permits, some of which are subject to yearly or periodic renewal, for purposes
of possessing, exhibiting and maintaining animals. Although our theme parks’ licenses and permits have always been renewed in the
past, in the event that any of our licenses or permits are not renewed or any of our licenses or permits are revoked, portions of the
affected theme park might not be able to remain open for purpose of displaying or retaining the animals covered by such license or
permit. Such an outcome could materially adversely affect our business, financial condition and results of operations.
In addition, we are subject to periodic inspections by federal and state agencies and the subsequent issuance of inspection
reports. While we believe that we comply with, or exceed, requisite care and maintenance standards that apply to our animals,
government inspectors can cite us for alleged statutory or regulatory violations. In unusual instances when we are cited for an alleged
deficiency, we are most often given the opportunity to correct any purported deficiencies without penalty. It is possible, however, that
in some cases a federal or state regulator could seek to impose monetary fines on us. In the past, when we have been subjected to
governmental claims for fines, the amounts involved were not material to our business, financial condition or results of operations.
However, while highly unlikely, we cannot predict whether any future fines that regulators might seek to impose would materially
adversely affect our business, financial condition or results of operations.
Moreover, many of the statutes under which we operate allow for the imposition of criminal sanctions. While neither of the
foregoing situations are likely to occur, either could negatively affect the business, financial condition or results of operations at our
theme parks.
If we lose key personnel, our business may be adversely affected.
Our success depends in part upon a number of key employees, including members of our senior management team who have
extensive experience in the industry. We may be unable to retain them or to attract other highly qualified employees, particularly if we
do not offer employment terms that are competitive with the rest of the market. Failure to attract, motivate and retain highly qualified
employees, or failure to develop and implement a viable succession plan, could adversely affect our business and our future success.
We have employment agreements with certain members of our senior management, but these employment agreements do not ensure
that they will not voluntarily terminate their employment with us.
Unionization activities or labor disputes may disrupt our operations and affect our profitability.
Although none of our employees are currently covered under collective bargaining agreements, we cannot guarantee that our
employees will not elect to be represented by labor unions in the future. If some or all of our employees were to become unionized and
collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely
affect our business, financial condition or results of operations. In addition, a labor dispute involving some or all of our employees
may disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs.
24
Although we maintain binding policies that require employees to submit to a mandatory alternative dispute resolution procedure
in lieu of other remedies, as employers, we may be subject to various employment-related claims, such as individual or class actions or
government enforcement actions relating to alleged employment discrimination, employee classification and related withholding,
wage-hour, labor standards or healthcare and benefit issues. Such actions, if brought against us and successful in whole or in part, may
affect our ability to compete or materially adversely affect our business, financial condition or results of operations.
Our business depends on our ability to meet our workforce needs.
Our success depends on our ability to attract, train, motivate and retain qualified employees to keep pace with our needs,
including employees with certain specialized skills in the field of animal training and care. If we are unable to do so, our results of
operations and cash flows may be adversely affected.
In addition, we employ a significant seasonal workforce. We recruit year-round to fill thousands of seasonal staffing positions
each season and work to manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place.
There is no assurance that we will be able to recruit and hire adequate seasonal personnel as the business requires or that we will not
experience material increases in the cost of securing our seasonal workforce in the future. Increased seasonal wages or an inadequate
workforce could materially adversely affect our business, financial condition or results of operations.
If we are unable to maintain certain commercial licenses, our business, reputation and brand could be adversely affected.
We rely on licenses from Sesame Workshop to use the Sesame Place trade name and trademark and certain other intellectual
property rights, including titles, marks, characters, logos and designs from the Sesame Street television series within our Sesame Place
theme park and with respect to Sesame Street themed areas within certain areas of some of our other theme parks, as well as in
connection with the sales of certain Sesame Street themed products. Our use of these intellectual property rights is subject to the
approval of Sesame Workshop and the licenses may be terminated in certain limited circumstances or in the event of our bankruptcy.
Furthermore, the current term of both the Sesame Place theme park license and the multi-park license expire on December 31, 2021,
and there is no assurance that we will be able to renegotiate the use of such intellectual property on commercially acceptable terms or
at all. The new terms of the licenses may significantly increase our operating expenses, or otherwise adversely affect our business.
ABI is the owner of the Busch Gardens trademarks and domain names. ABI has granted us a perpetual, exclusive, worldwide,
royalty-free license to use the Busch Gardens trademark and certain related domain names in connection with the operation,
marketing, promotion and advertising of certain of our theme parks, as well as in connection with the production, use, distribution and
sale of merchandise sold in connection with such theme parks. Under the license, we are required to indemnify ABI against losses
related to our use of the marks. If we were to lose or have to renegotiate this license, our business may be adversely affected.
Our existing debt agreements contain, and future debt agreements may contain, restrictions that may limit our flexibility in
operating our business.
Our existing debt agreements contain, and documents governing our future indebtedness may contain, numerous financial and
operating covenants that limit the discretion of management with respect to certain business matters. These covenants place
restrictions on, among other things, our ability to incur additional indebtedness, pay dividends and other distributions, make capital
expenditures, make certain loans, investments and other restricted payments, enter into agreements restricting our subsidiaries’ ability
to pay dividends, engage in certain transactions with stockholders or affiliates, sell certain assets or engage in mergers, acquisitions
and other business combinations, amend or otherwise alter the terms of our indebtedness, alter the business that we conduct, guarantee
indebtedness or incur other contingent obligations and create liens. Our existing debt agreements also require, and documents
governing our future indebtedness may require, us to meet certain financial ratios and tests. Our ability to comply with these and other
provisions of the existing debt agreements is dependent on our future performance, which will be subject to many factors, some of
which are beyond our control. The breach of any of these covenants or non-compliance with any of these financial ratios and tests
could result in an event of default under the existing debt agreements, which, if not cured or waived, could result in acceleration of the
related debt and the acceleration of debt under other instruments evidencing indebtedness that may contain cross-acceleration or cross-
default provisions. Variable rate indebtedness subjects us to the risk of higher interest rates, which could cause our future debt service
obligations to increase significantly.
25
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to
react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent
us from meeting our obligations under our indebtedness.
We are highly leveraged. As of December 31, 2015, our total indebtedness was approximately $1,601.3 million. Our high
degree of leverage could have important consequences, including the following: (i) a substantial portion of our cash flow from
operations is dedicated to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations,
future business opportunities, share repurchases pursuant to the Share Repurchase Program and capital expenditures; (ii) our ability to
obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate
purposes in the future may be limited; (iii) certain of the borrowings are at variable rates of interest, which will increase our
vulnerability to increases in interest rates; (iv) we are at a competitive disadvantage to less leveraged competitors; (v) we may be
unable to adjust rapidly to changing market conditions; (vi) the debt service requirements of our other indebtedness could make it
more difficult for us to satisfy our financial obligations; and (vii) we may be vulnerable in a downturn in general economic conditions
or in our business and we may be unable to carry out activities that are important to our growth.
Our ability to make scheduled payments of the principal of, or to pay interest on, or to refinance indebtedness depends on and is
subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive,
business and other factors beyond our control, including the availability of financing in the international banking and capital markets.
If unable to generate sufficient cash flow to service our debt or to fund our other liquidity needs, we will need to restructure or
refinance all or a portion of our debt, which could cause us to default on our obligations and impair our liquidity. There can be no
assurance that any refinancing of our indebtedness will be possible and any such refinancing could be at higher interest rates and may
require us to comply with more onerous covenants that could further restrict our business operations. We from time to time may
increase the amount of our indebtedness, modify the terms of our financing arrangements, issue dividends, make capital expenditures
and take other actions that may substantially increase our leverage.
Despite our significant leverage, we may incur significant additional amounts of debt, which could further exacerbate the risks
associated with our significant leverage.
We may not realize the benefits of acquisitions or other strategic initiatives.
Our business strategy may include selective expansion, both domestically and internationally, through acquisitions of assets or
other strategic initiatives, such as joint ventures, that allow us to profitably expand our business and leverage our brands. The success
of our acquisitions depends on effective integration of acquired businesses and assets into our operations, which is subject to risks and
uncertainties, including realization of anticipated synergies and cost savings, the ability to retain and attract personnel, the diversion of
management’s attention from other business concerns, and undisclosed or potential legal liabilities of an acquired businesses or assets.
Additionally, any international transactions are subject to additional risks, including foreign and U.S. regulations on the import and
export of animals, the impact of economic fluctuations in economies outside of the United States, difficulties and costs of staffing and
managing foreign operations due to distance, language and cultural differences, as well as political instability and lesser degree of
legal protection in certain jurisdictions, currency exchange fluctuations and potentially adverse tax consequences of overseas
operations.
Our insurance coverage may not be adequate to cover all possible losses that we could suffer and our insurance costs may
increase.
We seek to maintain comprehensive insurance coverage at commercially reasonable rates. Although we maintain various safety
and loss prevention programs and carry property and casualty insurance to cover certain risks, our insurance policies do not cover all
types of losses and liabilities. There can be no assurance that our insurance will be sufficient to cover the full extent of all losses or
liabilities for which we are insured, and we cannot guarantee that we will be able to renew our current insurance policies on favorable
terms, or at all. In addition, if we or other theme park operators sustain significant losses or make significant insurance claims, then
our ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected.
We may be unable to purchase or contract with third-party manufacturers for our theme park rides and attractions.
We may be unable to purchase or contract with third parties to build high quality rides and attractions and to continue to service
and maintain those rides and attractions at competitive or beneficial prices, or to provide the replacement parts needed to maintain the
operation of such rides. In addition, if our third-party suppliers’ financial condition deteriorates or they go out of business, we may not
be able to obtain the full benefit of manufacturer warranties or indemnities typically contained in our contracts or may need to incur
greater costs for the maintenance, repair, replacement or insurance of these assets.
26
Our operations and our ownership of property subject us to environmental requirements, and to environmental expenditures and
liabilities.
We incur costs to comply with environmental requirements, such as those relating to water use, wastewater and storm water
management and disposal, air emissions control, hazardous materials management, solid and hazardous waste disposal, and the clean-
up of properties affected by regulated materials.
We have been required and continue to investigate and clean-up hazardous or toxic substances or chemical releases, and other
releases, from current or formerly owned or operated facilities. In addition, in the ordinary course of our business, we generate, use
and dispose of large volumes of water, including saltwater, which requires us to comply with a number of federal, state and local
regulations and to incur significant expenses. Failure to comply with such regulations could subject us to fines and penalties and/or
require us to incur additional expenses. Although we are not now classified as a large quantity generator of hazardous waste, we do
store and handle hazardous materials to operate and maintain our equipment and facilities and have done so historically.
We cannot assure you that we will not incur substantial costs to comply with new or expanded environmental requirements in
the future or to investigate or clean-up new or newly identified environmental conditions, which could also impair our ability to use or
transfer the affected properties and to obtain financing.
The suspension or termination of any of our business licenses may have a negative impact on our business.
We maintain a variety of business licenses issued by federal, state and local authorities that are renewable on a periodic basis.
We cannot guarantee that we will be successful in renewing all of our licenses on a periodic basis. The suspension, termination or
expiration of one or more of these licenses could materially adversely affect our revenues and profits. In addition, any changes to the
licensing requirements for any of our licenses could affect our ability to maintain the licenses.
Affiliates of Blackstone will continue to be able to significantly influence our decisions and their interests may conflict with ours
or yours in the future.
Affiliates of Blackstone beneficially own approximately 22.2% of our common stock. As a result, investment funds associated
with or designated by affiliates of Blackstone will have the ability to elect members of our Board of Directors and thereby continue to
influence our policies and operations, including the appointment of management, future issuances of our common stock or other
securities, the payment of dividends, if any, on our common stock, the incurrence or modification of debt by us, amendments to our
amended and restated certificate of incorporation and amended and restated bylaws and the entering into of extraordinary transactions,
and their interests may not in all cases be aligned with your interests. In addition, Blackstone may have an interest in pursuing
acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions
might involve risks to you. For example, Blackstone may be interested in making acquisitions that increase our indebtedness or in
selling revenue-generating assets. Additionally, in certain circumstances, acquisitions of debt at a discount by purchasers that are
related to a debtor can give rise to cancellation of indebtedness income to such debtor for U.S. federal income tax purposes.
Blackstone is in the business of making investments in companies and may from time to time acquire and hold interests in
businesses that compete directly or indirectly with us. For example, Blackstone has several investments in the leisure and hospitality
industries.
Our amended and restated certificate of incorporation provides that none of Blackstone, any of its affiliates or any director who
is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer
capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or
similar business activities or lines of business in which we operate. Blackstone also may pursue acquisition opportunities that may be
complementary to our business, and, as a result, those acquisition opportunities may not be available to us. So long as affiliates of
Blackstone continue to own a significant amount of our combined voting power, even if such amount is less than 50%, Blackstone
will continue to be able to influence our decisions and, so long as Blackstone and its affiliates collectively own at least 5% of all
outstanding shares of our stock entitled to vote generally in the election of directors, it will be able to appoint individuals to our Board
of Directors under the stockholders agreement. In addition, Blackstone will be able to influence the outcome of all matters requiring
stockholder approval and prevent a change of control of the Company or a change in the composition of our Board of Directors and
could preclude any unsolicited acquisition of the Company. The concentration of ownership could deprive you of an opportunity to
receive a premium for your shares of common stock as part of a sale of the Company and ultimately might affect the market price of
our common stock.
27
Risks Related to Ownership of Our Common Stock
Our stock price may change significantly, and you may not be able to resell shares of our common stock at or above the price you
paid or at all, and you could lose all or part of your investment as a result.
The trading price of our common stock has been, and is likely to continue to be, volatile. Since shares of our common stock
were sold in our IPO in April 2013 through December 31, 2015, our common stock price has ranged from $15.43 to $38.92. In
addition to the risk factors discussed in this Annual Report on Form 10-K, the trading price of our common stock may be adversely
affected due to a number of factors, many of which are beyond or control, including:
(cid:120) results of operations that vary from the expectations of securities analysts and investors;
(cid:120) results of operations that vary from those of our competitors;
(cid:120) changes in expectations as to our future financial performance, including financial estimates and investment recommendations
by securities analysts and investors;
(cid:120) declines in the market prices of stocks generally, or those of amusement and theme parks companies;
(cid:120) strategic actions by us or our competitors;
(cid:120) announcements by us or our competitors of significant contracts, new products, acquisitions, joint marketing relationships, joint
ventures, other strategic relationships or capital commitments;
(cid:120) changes in general economic or market conditions or trends in our industry or markets;
(cid:120) changes in business or regulatory conditions;
(cid:120) future sales of our common stock or other securities;
(cid:120) repurchases of our common stock pursuant to the Share Repurchase Program;
(cid:120) investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives;
(cid:120) the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
(cid:120) announcements relating to litigation;
(cid:120) guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
(cid:120) the development and sustainability of an active trading market for our stock;
(cid:120) actions by institutional or activist stockholders;
(cid:120) changes in accounting principles; and
(cid:120) other events or factors, including those resulting from natural disasters, war, acts of terrorism or responses to these events.
We cannot assure you that we will continue to pay dividends on our common stock, and our indebtedness could limit our ability to
continue to pay dividends on our common stock.
We intend to continue to pay cash dividends on our common stock, subject to our compliance with applicable law, and
depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements,
contractual restrictions, restrictions in our debt agreements and in any preferred stock, business prospects and other factors that our
Board of Directors may deem relevant. However, the payment of any future dividends will be at the discretion of our Board of
Directors and there can be no assurance that we will continue to pay dividends in the future.
28
We cannot guarantee that our allocation of capital to various alternatives will enhance long-term stockholder value, and in some
cases, our Share Repurchase Program could increase the volatility of the price of our common stock.
Our goal is to invest capital to maximize our overall long-term returns. This includes spending on capital projects and expenses,
managing debt levels, and periodically returning capital to our shareholders through share repurchases and dividends. There can be no
assurance that our capital allocation decisions will enhance shareholder value. During 2015, we repurchased a total of 2,413,803
shares of common stock at an average price of $18.62 per share and a total cost of approximately $45.0 million leaving $190.0 million
available for future repurchases under the Share Repurchase Program as of December 31, 2015. Repurchases of our common stock
pursuant to the Share Repurchase Program could affect our stock price and increase its volatility. The existence of the Share
Repurchase Program could cause our stock price to be higher than it would be in the absence of such a program and could potentially
reduce the market liquidity for our stock. There can be no assurance that any share repurchases will enhance stockholder value
because the market price of our common stock may decline below the levels at which we repurchased shares of stock. Although the
Share Repurchase Program is intended to enhance long-term stockholder value, there is no assurance that it will do so and short-term
stock price fluctuations could reduce such program’s effectiveness.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock
price and trading volume could decline.
The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish
about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrade
our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the
price of our stock could decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on us
regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price
for our common stock to decline.
The sale of a substantial number of shares of our common stock in the public market, or the perception that such sales could
occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may
occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Shares held by the Partnerships and certain of our directors, officers and employees are eligible for resale, subject to volume,
manner of sale and other limitations under Rule 144. In addition, pursuant to a registration rights agreement entered into in connection
with the 2009 Transactions, we granted the Partnerships the right, subject to certain conditions, to require us to register the sale of
their shares of our common stock under the Securities Act.
As restrictions on resale end or if the Partnerships exercise their registration rights, the market price of our shares of common
stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These
factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or
other securities.
In addition, the shares of our common stock reserved for future issuance under the Omnibus Incentive Plan will become eligible
for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up
agreements and Rule 144, as applicable. A total of 15,000,000 shares of common stock were reserved for issuance under the Omnibus
Incentive Plan, of which 10,776,041 shares of common stock remain available for future issuance as of December 31, 2015. In the
future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock
issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our
common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution
to you.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-
takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control
transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the
market price for the shares held by our stockholders.
29
These provisions provide for, among other things:
(cid:120) a classified Board of Directors with staggered three-year terms;
(cid:120) the ability of our Board of Directors to issue one or more series of preferred stock;
(cid:120) advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our
annual meetings;
(cid:120) certain limitations on convening special stockholder meetings;
(cid:120) the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2 / 3 % in voting power of
all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class; and
(cid:120) that certain provisions may be amended only by the affirmative vote of the holders of at least 66 2 / 3 % in voting power of all
the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class.
These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third-party’s offer may be
considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium
for their shares.
Non-U.S. holders who own or owned more than a certain ownership threshold may be subject to United States federal income tax
on gains realized on the disposition of our common stock.
We believe that we are currently a U.S. real property holding corporation for U.S. federal income tax purposes. So long as our
common stock continues to be regularly traded on an established securities market, a non-U.S. stockholder who holds or held (at any
time during the shorter of the five year period preceding the date of disposition or the holder’s holding period) more than 5% of our
common stock will be subject to United States federal income tax on the disposition of our common stock. Non-U.S. holders should
consult their own tax advisors concerning the consequences of disposing of shares of our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following table summarizes our principal properties, which includes approximately 400 acres of land available for future
development.
Size
Location
Orlando, FL ....................... 76,360 sq ft
Orlando, FL ....................... 9,636 sq ft
San Diego, CA .................. 190 acres(a)
Chula Vista, CA ................ 66 acres
Orlando, FL ....................... 279 acres
Orlando, FL ....................... 58 acres
Orlando, FL ....................... 81 acres
Tampa, FL ......................... 56 acres
Tampa, FL ......................... 306 acres
Dade City, FL ................... 109 acres
Langhorne, PA .................. 55 acres
San Antonio, TX ............... 415 acres(b)
Williamsburg, VA ............. 222 acres
Williamsburg, VA ............. 422 acres
Williamsburg, VA ............. 5 acres
Williamsburg, VA ............. 5 acres
Use
Leased Office Space (corporate headquarters)
Leased Office Space (call center)
Leased Land
Owned Water Park
Owned Theme Park
Owned All-inclusive Interactive Park
Owned Water Park
Owned Water Park
Owned Theme Park
Owned Breeding and Holding Facility
Owned Theme Park
Owned Theme Park
Owned Water Park
Owned Theme Park
Owned Warehouse Space
Owned Seasonal Worker Lodging
(a) Includes approximately 17 acres of water in Mission Bay Park, California.
(b) Includes both a theme park and water park which is accessible to guests for an additional fee. In 2016, the water park will be
converted into a stand-alone, separate admission park that guests can access through an independent gate without the need to
purchase admission to the theme park.
We believe that our properties are in good operating condition and adequately serve our current business operations.
30
Lease Agreement with City of San Diego
Our subsidiary, Sea World LLC (f/k/a Sea World Inc.), leases approximately 190 acres from the City of San Diego, including
approximately 17 acres of water in Mission Bay Park, California (the “Premises”). The current lease term commenced on July 1, 1998
and extends for 50 years or the maximum period allowed by law. Under the lease, the Premises must be used as a marine park facility
and related uses. In addition, we may not operate another marine park facility within a radius of 560 miles from the City of San Diego.
The annual rent under the lease is calculated on the basis of a specified percentage of Sea World LLC’s gross income from the
Premises, or the minimum yearly rent, whichever is greater. The minimum yearly rent is adjusted every three years to an amount equal
to 80% of the average accounting year rent actually paid for the three previous years. The current minimum yearly rent is
approximately $10.4 million, which is subject to adjustment on January 1, 2017.
Item 3. Legal Proceedings
We are subject to various allegations, claims and legal actions arising in the ordinary course of business. While it is impossible
to determine with certainty the ultimate outcome of any of these proceedings, lawsuits and claims, management believes that adequate
provisions have been made and insurance secured for all currently pending proceedings so that the ultimate outcomes will not have a
material adverse effect on our financial position.
Securities Class Action Lawsuit
On September 9, 2014, a purported stockholder class action lawsuit consisting of purchasers of the Company’s common stock
during the periods between April 18, 2013 to August 13, 2014, captioned Baker v. SeaWorld Entertainment, Inc., et al., Case No. 14-
CV-02129-MMA (KSC), was filed in the U.S. District Court for the Southern District of California against the Company, the
Chairman of the Company’s Board of Directors, certain of its executive officers and Blackstone. On February 27, 2015, Court-
appointed Lead Plaintiffs, Pensionskassen For Børne- Og Ungdomspædagoger and Arkansas Public Employees Retirement System,
together with additional plaintiffs, Oklahoma City Employee Retirement System and Pembroke Pines Firefighters and Police Officers
Pension Fund (collectively, “Plaintiffs”), filed an amended complaint against the Company, the Chairman of the Company’s Board of
Directors, certain of its executive officers, Blackstone, and underwriters of the initial public offering and secondary public offerings.
The amended complaint alleges, among other things, that the prospectus and registration statements filed contained materially false
and misleading information in violation of the federal securities laws and seeks unspecified compensatory damages and other relief.
Plaintiffs contend that defendants knew or were reckless in not knowing that Blackfish was impacting SeaWorld’s business at the time
of each public statement. On May 29, 2015, the Company and the other defendants filed a motion to dismiss the amended complaint.
The Plaintiffs filed an opposition to the motion to dismiss on July 31, 2015. The Company and the other defendants filed a reply in
further support of their motion to dismiss on September 18, 2015. The Company believes that the class action lawsuit is without merit
and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this lawsuit.
Shareholder Derivative Lawsuit
On December 8, 2014, a putative derivative lawsuit captioned Kistenmacher v. Atchison, et al., Civil Action No. 10437, was
filed in the Court of Chancery of the State of Delaware against, among others, the Chairman of the Board of Directors, certain of the
Company’s executive officers, directors and shareholders, and Blackstone. The Company is a “Nominal Defendant” in the lawsuit.
On March 30, 2015, the plaintiff filed an amended complaint against the same set of defendants. The amended complaint alleges,
among other things, that the defendants breached their fiduciary duties, aided and abetted breaches of fiduciary duties, violated Florida
Blue Sky laws and were unjustly enriched by (i) including materially false and misleading information in the prospectus and
registration statements; and (ii) causing the Company to repurchase certain shares of its common stock from certain shareholders at an
alleged artificially inflated price. The Company does not maintain any direct exposure to loss in connection with this shareholder
derivative lawsuit as the lawsuit does not assert any claims against the Company. The Company’s status as a “Nominal Defendant” in
the action reflects the fact that the lawsuit is maintained by the named plaintiff on behalf of the Company and that the plaintiff seeks
damages on the Company’s behalf. On May 21, 2015, the defendants filed a motion to stay the lawsuit pending resolution of the
Company’s securities class action lawsuit. On September 21, 2015, the Court granted the motion and ordered that the derivative action
to be stayed in favor of the securities class action captioned Baker v. SeaWorld Entertainment, Inc., et al., Case No. 14-CV-02129-
MMA (KSC).
31
Consumer Class Action Lawsuits
On March 25, 2015, a purported class action was filed in the United States District Court for the Southern District of California
against the Company, captioned Holly Hall v. SeaWorld Entertainment, Inc., Case No. 3:15-cv-00600-CAB-RBB (the “Hall Matter”).
The complaint identifies three putative classes consisting of all consumers nationwide who at any time during the four-year period
preceding the filing of the original complaint, purchased an admission ticket, a membership or a SeaWorld “experience” that includes
an “orca experience” from the SeaWorld amusement park in San Diego, California, Orlando, Florida or San Antonio, Texas
respectively. The complaint alleges causes of action under California Unfair Competition Law, California Consumers Legal
Remedies Act (“CLRA”), California False Advertising Law, California Deceit statute, Florida Unfair and Deceptive Trade Practices
Act, Texas Deceptive Trade Practices Act, as well as claims for Unjust Enrichment. Plaintiffs’ claims are based on their allegations
that the Company misrepresented the physical living conditions and care and treatment of its killer whales, resulting in confusion or
misunderstanding among ticket purchasers, and omitted material facts regarding its killer whales with intent to deceive and mislead
the plaintiff and purported class members. The complaint further alleges that the specific misrepresentations heard and relied upon by
Holly Hall in purchasing her SeaWorld tickets concerned the circumstances surrounding the death of a SeaWorld trainer. The
complaint seeks actual damages, equitable relief, attorney’s fees and costs. Plaintiffs claim that the amount in controversy exceeds
$5.0 million, but the liability exposure is speculative until the size of the class is determined (if certification is granted at all).
In addition, four other purported class actions were filed against the Company and its affiliates. The first three actions were
filed on April 9, 2015, April 16, 2015 and April 17, 2015, respectively, in the following federal courts: (i) the United States District
Court for the Middle District of Florida, captioned Joyce Kuhl v. SeaWorld LLC et al., 6:15-cv-00574-ACC-GJK (the “Kuhl Matter”),
(ii) the United States District Court for the Southern District of California, captioned Jessica Gaab, et. al. v. SeaWorld Entertainment,
Inc., Case No. 15:cv-842-CAB-RBB (the “Gaab Matter”), and (iii) the United States District Court for the Western District of Texas,
captioned Elaine Salazar Browne v. SeaWorld of Texas LLC et al., 5:15-cv-00301-XR (the “Browne Matter”). On May 1, 2015, the
Kuhl Matter and Browne Matter were voluntarily dismissed without prejudice by the respective plaintiffs. On May 7, 2015, plaintiffs
Kuhl and Browne re-filed their claims, along with a new plaintiff, Valerie Simo, in the United States District Court for the Southern
District of California in an action captioned Valerie Simo et al. v. SeaWorld Entertainment, Inc., Case No. 15:cv-1022-CAB-RBB (the
“Simo Matter”). All four of these cases, in essence, reiterate the claims made and relief sought in the Hall Matter.
On August 7, 2015, the Gaab Matter and Simo Matter were consolidated with the Hall Matter, and the plaintiffs filed a First
Consolidated Amended Complaint (“FAC”) on August 21, 2015. The FAC pursues the same seven causes of action as the original
Hall complaint, and adds a request for punitive damages pursuant to the California CLRA.
The Company moved to dismiss the FAC in its entirety, and its motion was granted on December 24, 2015. The United States
District Court for the Southern District of California granted dismissal with prejudice as to the California CLRA claim, the portion of
California Unfair Competition Law claim premised on the CLRA claim, all claims for injunctive relief, and on all California claims
premised solely on alleged omissions by the Company. The United States District Court for the Southern District of California
granted leave to amend as to the remainder of the complaint. On January 25, 2016, plaintiffs filed their Second Consolidated
Amended Complaint (“SAC”). The SAC pursues the same causes of action as the FAC, except for the California CLRA, which, as
noted above, was dismissed with prejudice. The Company intends to file a motion to dismiss the SAC.
On April 13, 2015, a purported class action was filed in the Superior Court of the State of California for the City and County of
San Francisco against SeaWorld Parks & Entertainment, Inc., captioned Marc Anderson, et. al., v. SeaWorld Parks & Entertainment,
Inc., Case No. CGC-15-545292 (the “Anderson Matter”). The putative class consists of all consumers within California who, within
the past four years, purchased tickets to SeaWorld San Diego. On May 11, 2015, the plaintiffs filed a First Amended Class Action
Complaint (the “Amended Complaint”). The Amended Complaint alleges causes of action under the California False Advertising
Law, California Unfair Competition Law and California CLRA. Plaintiffs’ claims are based on their allegations that the Company
misrepresented the physical living conditions and care and treatment of its killer whales, resulting in confusion or misunderstanding
among ticket purchasers, and omitted material facts regarding its killer whales with intent to deceive and mislead the plaintiff and
purported class members. The Amended Complaint seeks actual damages, equitable relief, attorneys’ fees and costs. Based on
plaintiffs’ definition of the class, the amount in controversy exceeds $5.0 million, but the liability exposure is speculative until the size
of the class is determined (if certification is granted at all). On May 14, 2015, the Company removed the case to the United States
District Court for the Northern District of California, Case No. 15:cv-2172-SC.
32
On May 19, 2015, the plaintiffs filed a motion to remand. On September 18, 2015, the Company filed a motion to dismiss the
Amended Complaint in its entirety. The motion is fully briefed. On September 24, 2015, the United States District Court for the
Northern District of California denied plaintiffs’ motion to remand. On October 5, 2015, plaintiffs filed a motion for leave to file a
motion for reconsideration of this order, and contemporaneously filed a petition for permission to appeal to the Ninth Circuit, which
the Company opposed. On October 14, 2015, the United States District Court for the Northern District of California granted
plaintiffs’ motion for leave. Plaintiffs’ motion for reconsideration was fully briefed. On January 12, 2016, the United States District
Court for the Northern District of California granted in part and denied in part the motion for reconsideration, and refused to remand
the case. In that order, the United States District Court for the Northern District of California noted that it will defer ruling on the
Company’s motion to dismiss until the Ninth Circuit rules on plaintiffs’ petition for permission to appeal. On January 22, 2016,
plaintiffs filed a petition for permission to appeal the January 12, 2016 order to the Ninth Circuit, which the Company intends to
oppose. Both of plaintiffs’ petitions for permission to appeal remain pending.
California Coastal Commission Lawsuit
On October 8, 2015, the California Coastal Commission approved our plan to build a new killer whale habitat (the “Blue World
Project”) in San Diego, but attached certain conditions to its approval. Those conditions included, among other things, a prohibition
against breeding killer whales or transporting killer whales to or from the habitat. On December 29, 2015, we filed a lawsuit against
the California Coastal Commission in the Superior Court of the State of California for the County of San Diego, captioned SeaWorld
LLC v. California Coastal Commission, Case No. 37-2015-00043163-CU-WM-CTL. The lawsuit challenges those conditions on the
grounds that the California Coastal Commission decision was outside the scope of its authority in imposing such conditions because it
does not have jurisdiction over killer whales, which are regulated under federal law.
Item 4. Mine Safety Disclosures
Not applicable.
33
PART II.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “SEAS.” As of
February 19, 2016, there were approximately 932 holders of record of our outstanding common stock. This does not include persons
who hold our common stock in nominee or “street name” accounts through brokers or banks. The following table sets forth the high
and low closing sales prices per share of our common stock during the periods indicated and the amount of cash dividends declared
per share:
Calendar Period
2015
Quarter ended March 31, 2015 ................................................. $
Quarter ended June 30, 2015 .................................................... $
Quarter ended September 30, 2015........................................... $
Quarter ended December 31, 2015 ........................................... $
2014
Quarter ended March 31, 2014 ................................................. $
Quarter ended June 30, 2014 .................................................... $
Quarter ended September 30, 2014........................................... $
Quarter ended December 31, 2014 ........................................... $
High
Low
Cash Dividend
Declared
Per Share
20.77 $
21.82 $
19.47 $
20.18 $
35.11 $
31.75 $
29.59 $
19.25 $
16.45 $
18.44 $
17.10 $
16.96
27.79 $
28.00 $
18.00 $
15.43
0.42
0.21
0.21
(a)
0.20
0.21
0.21
(b)
(a) Cash dividend of $0.21 per share was declared on January 5, 2016 to all common stockholders of record at the close of business
on January 15, 2016, which was paid on January 22, 2016.
(b) Cash dividend of $0.21 per share was declared on January 5, 2015 to all common stockholders of record at the close of business
on January 13, 2015, which was paid on January 22, 2015.
Dividends
Our Board adopted a policy to pay, subject to legally available funds, a regular quarterly dividend. We declared cash dividends
of $0.84 in 2015 and $0.62 per share in 2014. Our ability to declare dividends and make other restricted payments is limited by
covenants in our senior secured credit facilities pursuant to a credit agreement dated as of December 1, 2009, as amended (the “Senior
Secured Credit Facilities”).
The fiscal amount available for dividend declarations, share repurchases and other restricted payments under the covenant
restrictions in the debt agreements adjusts at the beginning of each quarter. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for a description of the restrictions on our ability to pay dividends and Note 11–Long-Term
Debt in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We intend to continue to pay cash dividends on our common stock, subject to our compliance with applicable law, and
depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements,
contractual restrictions, restrictions in our debt agreements and in any preferred stock, business prospects and other factors that our
Board may deem relevant. However, the payment of any future dividends will be at the discretion of our Board and our Board may, at
any time, modify or revoke our dividend policy on our common stock. For tax purposes, a portion of the dividends paid in 2014 and
2015 were treated as a return of capital to stockholders and we expect a portion of the dividends paid in 2016 will also be treated as a
return of capital to stockholders.
Our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict
our ability to pay dividends as a result of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants
under any existing and future outstanding indebtedness we or our subsidiaries incur. In particular, the ability of our subsidiaries to
distribute cash to SeaWorld Entertainment, Inc. to pay dividends is limited by covenants in the Senior Secured Credit Facilities.
34
Securities Authorized for Issuance Under Equity Compensation Plans
The information called for by this item is incorporated by reference from our definitive proxy statement relating to our 2016
Annual Meeting of Stockholders, which we will file with the SEC within 120 days after our December 31, 2015 fiscal year end.
Stock Price Performance
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by
reference into any filing of SeaWorld under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific
reference in such filing.
The following graph shows a comparison from April 19, 2013 (the date our common stock commenced trading on the New
York Stock Exchange) through December 31, 2015 of the cumulative total return for our common stock, the Standard & Poor’s
(“S&P”) 500 Index, the S&P Midcap 400 Index and the S&P 400 Movies & Entertainment Index. The graph assumes that $100 was
invested in the Company’s common stock and in each index at the market close on April 19, 2013 and assumes that all dividends were
reinvested. The stock price performance of the following graph is not necessarily indicative of future stock price performance.
SeaWorld Entertainment, Inc.
S&P 500 Index - Total Returns
S&P Midcap 400 Index
S&P 400 Movies & Entertainment Index
Comparison of Cumulative Total Return
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
4/19/2013
6/30/2013
9/30/2013
12/31/2013
3/31/2014
6/30/2014
9/30/2014
12/31/2014
3/31/2015
6/30/2015
9/30/2015
12/31/2015
3/31/2015
76.27
SeaWorld Entertainment, Inc. .............................. $ 100.00 $ 108.53 $
S&P 500 Index - Total Returns ............................ $ 100.00 $ 120.66 $ 137.17 $ 138.48
S&P Midcap 400 Index ........................................ $ 100.00 $ 121.01 $ 132.84 $ 139.89
S&P 400 Movies & Entertainment Index ............ $ 100.00 $ 137.70 $ 127.70 $ 142.07
69.15 $
12/31/2014
12/31/2013
4/19/2013
12/31/2015
6/30/2015 9/30/2015
79.63
$ 73.71 $ 72.02 $
$ 138.86 $ 129.92 $ 139.07
$ 138.41 $ 126.65 $ 129.95
$ 142.08 $ 114.98 $ 126.13
Note: Comparison of 33 months cumulative total return. Data complete through last fiscal year. Prepared by Zacks Investment
Research, Inc. Used with permission. All rights reserved. Copyright 1980-2016.
Index Data: Copyright Standard and Poor’s Inc. Used with permission. All rights reserved.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the year ended December 31, 2015.
35
Purchases of Equity Securities by the Issuer
The following table sets forth information with respect to shares of our common stock purchased by the Company during the
periods indicated:
Period Ending
Period Beginning
October 1, 2015 ............. October 31, 2015
November 1, 2015 ......... November 30, 2015
December 1, 2015 ......... December 31, 2015
Total Number(cid:3)
of Shares
Purchased(1) (2)
Average
Price Paid
per Share
152 $
124 $
— $
276
18.50
17.99
18.99
Total Number of(cid:3)
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
(cid:3)(cid:3)
— $
—
1,577,835
1,577,835 $
Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
220,000,016
220,000,016
190,000,035
190,000,035
(1) Pursuant to the Share Repurchase Program, in December 2015, we repurchased a total of 1,577,835 shares of common stock at
an average price of $18.99 per share and a total cost of approximately $30.0 million. All of the common stock is held as
treasury shares at December 31, 2015. See Note 19–Stockholders’ Equity in our notes to the consolidated financial statements
included elsewhere in this Annual Report on Form 10-K for further information on the Share Repurchase Program.
(2) Except for the shares of our common stock repurchased as described in footnote (1) above, all other purchases were made
pursuant to the Company’s Omnibus Incentive Plan, under which participants may satisfy tax withholding obligations incurred
upon the vesting of restricted stock by requesting the Company to withhold shares with a value equal to the amount of the
withholding obligation.
Item 6. Selected Financial Data
The following tables set forth our selected historical consolidated financial and operating data as of the dates and for each of the
fiscal years ended December 31, 2015, 2014, 2013 and 2012 and selected historical consolidated financial and operating data as of and
for the fiscal year ended December 31, 2011.
The selected financial data as of December 31, 2015 and 2014 and for each of the fiscal years ended December 31, 2015, 2014
and 2013 has been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-
K. The selected financial data as of December 31, 2013, 2012 and 2011 for the fiscal years ended December 31, 2012 and 2011 have
been derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K.
The following tables should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and the consolidated financial statements and the notes thereto included in “Financial Statements and
Supplementary Data.”
36
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Statement of Comprehensive Income Data:
Net revenues:
2015
Year Ended December 31,
2013
(In thousands, except per share and per capita amounts)
2014
2012
2011
Admissions ...................................................................... $
Food, merchandise and other ...........................................
824,937
846,922 $
505,837
524,082
Total revenues ............................................................ 1,371,004 1,377,812 1,460,250 1,423,752 1,330,774
921,016 $ 884,407 $
539,345
539,234
859,426 $
518,386
Costs and expenses:
103,980
109,024
114,192
118,559
112,498
Cost of food, merchandise and other revenues ................
Operating expenses (exclusive of depreciation and
amortization shown separately below) .........................
Selling, general and administrative ..................................
Restructuring and other related costs ...............................
Separation costs ...............................................................
Secondary offering costs .................................................
Termination of advisory agreement .................................
Depreciation and amortization .........................................
708,745
692,325
214,072
172,368
2,268
—
—
—
—
—
—
—
213,592
182,503
Total costs and expenses ............................................ 1,211,568 1,217,215 1,262,377 1,201,036 1,190,783
139,991
159,436
1,679
129
97,741
65,571
743,322
187,298
—
—
1,407
50,072
166,086
727,659
189,369
11,567
2,574
747
—
176,275
730,582
184,920
—
—
—
—
166,975
197,873
(241 )
90,622
160,597
(198)
81,543
222,716
(1,563)
110,565
Operating income ............................................................
Other expense (income), net ............................................
Interest expense ...............................................................
Loss on early extinguishment of debt and write-off
of discounts and debt issuance costs .............................
Income before income taxes..................................................
Provision for income taxes ..............................................
Net income ........................................................................... $
Per share data (a):(cid:3)
20,905
72,831
23,698
49,133 $
461
78,791
28,872
49,919 $
29,858
77,634
25,714
51,920 $
2,053
111,661
37,440
74,221 $
15,129
25,442
10,653
14,789
Net income per share, basic ............................................. $
Net income per share, diluted .......................................... $
Cash dividends declared per share ................................... $
0.57 $
0.57 $
0.84 $
0.57 $
0.57 $
0.62 $
0.59 $
0.59 $
0.60 $
0.90 $
0.89 $
6.07 $
0.18
0.18
1.34
Weighted average commons shares outstanding:
Basic ................................................................................
Diluted .............................................................................
85,860
85,981
87,183
87,480
87,537
88,152
82,480
83,552
81,392
82,024
Other financial and operating data:
Cash capital expenditures ................................................ $
Attendance .......................................................................
Total revenue per capita(b) ............................................... $
157,302 $
22,471
61.01 $
154,641 $
22,399
61.51 $
166,258 $ 191,745 $
24,391
58.37 $
23,391
62.43 $
225,316
23,631
56.31
Consolidated balance sheet data:
2015
2014
As of December 31,
2013
(In thousands)
2012
2011
Cash and cash equivalents ............................................... $
66,663
Total assets(c) ................................................................... $ 2,391,134 $ 2,422,471 $ 2,549,957 $ 2,481,766 $ 2,510,638
Total long-term debt, net(c) .............................................. $ 1,580,743 $ 1,583,450 $ 1,619,128 $ 1,792,234 $ 1,385,754
868,143
Total equity ...................................................................... $
648,027 $ 442,302 $
116,841 $
579,535 $
504,120 $
45,675 $
43,906 $
18,971 $
(a) All share and per share amounts reflect an eight-for-one stock split of our common stock effected on April 8, 2013.
(b) Calculated as total revenue divided by total attendance.
37
(c)
In 2015, the Company elected to early adopt Accounting Standards Update (“ASU”) 2015-03, Interest –Imputation of Interest
(Topic 835): Simplifying the Presentation of Debt Issuance Costs which simplifies the accounting for debt issuance costs by
requiring such costs to be presented as a direct deduction from the related debt liability rather than as an asset. This ASU has
been applied retrospectively as a change in accounting principle for all periods presented. As a result, the Company reclassified
$20.0 million, $27.5 million, $35.1 million and $36.2 million of unamortized debt issuance costs at December 31, 2014, 2013,
2012 and 2011, respectively, from other assets to long-term debt in the selected historical consolidated financial data table
above. The adoption of this ASU did not impact the Company’s consolidated results of operations, stockholders’ equity or cash
flows. See Note 3–Recently Issued Accounting Pronouncements and Note 11–Long-Term Debt to our consolidated financial
statements included elsewhere in this Annual Report on Form 10-K for further details.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains management’s discussion and analysis of our financial condition and results of operations
and should be read together with “Selected Financial Data” and the historical consolidated financial statements and the notes thereto
included in “Financial Statements and Supplementary Data”. This discussion contains forward-looking statements that reflect our
plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk
Factors” section of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-
looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”
Business Overview
We are a leading theme park and entertainment company providing experiences that matter and inspiring guests to protect
animals and the wild wonders of our world. We own or license a portfolio of recognized brands, including SeaWorld, Busch Gardens
and Sea Rescue. Over our more than 50 year history, we have built a diversified portfolio of 11 destination and regional theme parks
that are grouped in key markets across the United States, many of which showcase our one-of-a-kind zoological collection
representing more than 800 species of animals. Our theme parks feature a diverse array of rides, shows and other attractions with
broad demographic appeal which deliver memorable experiences and a strong value proposition for our guests. During the year ended
December 31, 2015, we hosted approximately 22.5 million guests, including approximately 3.3 million international guests. In the
year ended December 31, 2015, we had total revenues of $1.37 billion and net income of $49.1 million.
In November 2015, we communicated our roadmap to stabilize our business to drive sustainable growth. This plan
encompasses five key points which include (i) providing experiences that matter; (ii) delivering distinct guest experiences that are fun
and meaningful; (iii) pursuing organic and strategic revenue growth; (iv) addressing the challenges we face; and (v) financial
discipline. The plan is intended to build on our strong business fundamentals by evolving the guest experience to align with consumer
preferences for experiences that matter. Through family entertainment and distinct experiences and attractions, we provide our guests
an opportunity to explore and to learn more about the natural world and the plight of animals in the wild, to be inspired and to act to
make a better world. The plan includes a new approach to in-park activities as well as “turning parks inside out” by taking our guests
behind the scenes to provide a better understanding of our veterinary care and animal rescue operations. Other elements of the plan
include implementing a simplified pricing model, targeted capital investments in new attractions across our parks, and an ongoing
focus on cost control as part of a larger commitment to overall financial discipline. Additionally, we announced a new resort strategy
that will include evaluating opportunities which could include purchasing or developing resort properties in or near some of our parks.
Key Business Metrics Evaluated by Management
Attendance
We define attendance as the number of guest visits to our theme parks. Attendance drives admissions revenue as well as total in-
park spending. The level of attendance at our theme parks is a function of many factors, including the opening of new attractions and
shows, competitive offerings, weather, global and regional economic conditions, and overall consumer confidence in the economy.
38
Total Revenue Per Capita
Total revenue per capita, defined as total revenue divided by total attendance, consists of admission per capita and in-park per
capita spending:
(cid:120) Admission Per Capita. We calculate admission per capita for any period as total admissions revenue divided by total
attendance. Theme park admissions accounted for approximately 62% of our total revenue for the year ended December 31,
2015. Over the same time period, we reported $37.69 in admission per capita, representing a decrease of 1.8% from $38.37 for
the year ended December 31, 2014. Admission per capita is driven by ticket pricing, the admissions product mix and the park
attendance mix. The admissions product mix is defined as the mix of tickets purchased such as single day, multi-day or annual
passes and the park attendance mix is defined as the mix of theme parks visited. The mix of theme parks visited can impact
admission per capita based on the theme park’s respective pricing.
(cid:120) In-Park Per Capita Spending. We calculate in-park per capita spending for any period as total food, merchandise and other
revenue divided by total attendance. For the year ended December 31, 2015, food, merchandise and other revenue accounted
for approximately 38% of our total revenue. Over the same time period, we reported $23.32 of in-park per capita spending,
representing an increase of 0.8% from $23.14 for the year ended December 31, 2014. In-park per capita spending is driven by
pricing changes, penetration levels (percentage of guests purchasing), new product offerings, the mix of guests (such as local,
passholders, domestic or international guests) and the mix of in-park spending.
Trends Affecting Our Results of Operations
Beginning in the second quarter of 2014, we experienced negative attendance trends, which we believe resulted from a
combination of factors affecting our destination parks, including negative media attention in California and a challenging competitive
environment in Florida. To address these challenges, we adjusted our attraction and marketing plans, launched a new reputation
campaign and executed a cost savings plan which delivered approximately $50.0 million of cost savings by the end of 2015 (the “Cost
Savings Plan”). The impact of these cost reductions were more than offset by normal inflationary increases in labor and other
expenses, along with an increase in marketing and legal costs.
In 2015, overall attendance improved by 0.3% when compared to 2014, reflecting increased attendance at all but two of our park
locations, Texas and California. Excluding these park locations, attendance in 2015 primarily benefitted from increased promotional
offerings, strong passholder visitation and additional consumer event programs, along with a favorable operating schedule due to the
later timing of Labor Day in 2015.
The decline in California primarily relates to continued SeaWorld brand challenges as discussed above; however, in 2015, we
have seen a meaningful reduction in the rate of decline. Looking ahead, we remain cautious as we recognize that fully resolving our
brand challenges in California requires sustained focus and we expect our marketing and reputation campaigns will be on-going in
nature as we continue to evolve our brand to generate a more positive connection with the changing expectations of our guests.
The decline in Texas primarily relates to a reduction in passholder visitation due to changes made to pass products for this
location, reduced promotional offerings, a lack of significant competitive offerings at this location and the impact of record levels of
rainfall during the second quarter. To address some of these challenges, we have changed the structure of our pass products for Texas
and will open a new attraction in 2016, Discovery Point, which will include a new dolphin habitat and underwater viewing area and
will offer guests an opportunity to interact and swim with the dolphins.
Our ability to attract and retain customers depends, in part, upon the external perceptions of our brands and reputation. Adverse
publicity concerning our business generally could harm our brands, reputation and results of operations. The considerable expansion
in the use of social media over recent years has amplified the impact of negative publicity. Recently, our SeaWorld-branded parks
have been the target of negative media attention, particularly in the state of California, and we believe we have experienced demand
pressures in California, due to such media attention. We have introduced a number of initiatives, including new marketing and
reputation campaigns to address public perceptions, share facts and correct misinformation. We also introduced a number of
promotions in an effort to increase demand. For a discussion of certain risks associated with adverse publicity, see “Risk Factors—
Risks Related to Our Business and Our Industry.”
39
Our success depends on our ability to grow our business, in part through targeted capital investments to improve our existing
theme parks, rides, attractions and shows. Our growth and innovation strategies require significant commitments of management
resources and capital investments designed to improve guest satisfaction and generate returns. As a result, we make annual
investments to support and improve our existing theme park facilities and attractions. Maintaining and improving our theme parks, as
well as opening new attractions, is critical to remain competitive, grow revenue, and increase our guests’ length of stay. In addition to
the new attraction for our Texas location mentioned above, we will introduce new roller coasters, Mako and Cobra’s Curse, at two of
our Florida theme parks in 2016.
In 2014 we announced a plan to build new killer whale habitats at all three of our SeaWorld locations (the “Blue World
Project”). The San Diego habitat was expected to open to the public in 2018 with new killer whale habitat to possibly follow at
SeaWorld Orlando and SeaWorld San Antonio based on our experience in San Diego. The total investment was expected to be
approximately $100.0 million per park by the project’s completion. For an update on the status of the Blue World Project, see the
“Regulatory Developments” below.
Our success also depends to some extent on discretionary consumer spending, which is heavily influenced by general economic
conditions and the availability of discretionary income. Severe economic downturns, coupled with high volatility and uncertainty as to
the future global economic landscape, have had and continue to have an adverse effect on consumers’ discretionary income and
consumer confidence. Difficult economic conditions and recessionary periods may adversely impact attendance figures, the frequency
with which guests choose to visit our theme parks and guest spending patterns at our theme parks. Generally, our revenue and
attendance growth have been correlated with domestic economic growth, as reflected in the gross domestic product (“GDP”) and the
overall level of growth in domestic consumer spending.
Fluctuations in foreign currency exchange rates also impact our business due to the effect a strong dollar has on international
tourist spending. International attendance has declined in 2015 which we believe results from the strengthening of the U.S. dollar
against a variety of foreign currencies. To manage this going forward, we have modified our international marketing to reflect more
appropriate ticket offers in light of the foreign currency exchange rate pressures and are working with our wholesalers in key
international markets to increase our competitive positioning.
Both attendance and total revenue per capita at our theme parks are key drivers of our revenue and profitability, and reductions
in either can materially adversely affect our business, financial condition, results of operations and cash flows.
Regulatory Developments
On July 16, 2015, Senator Dianne Feinstein (D-CA) offered an amendment to the Fiscal Year 2016 Agriculture, Rural
Development, Food and Drug Administration, and Related Agencies spending bill during consideration of the bill by the full
Committee on Appropriations. The amendment directed the U.S. Department of Agriculture’s Animal and Plant Health Inspection
Service (APHIS) to issue updated regulations for the display of marine mammals in domestic zoos and aquaria within six months of
enactment. While that amendment was not included in the final Fiscal Year 2016 Omnibus Appropriations Bill, APHIS released a
proposed rule on February 3, 2016 to amend the Animal Welfare Act regulations concerning the humane handling, care and treatment
of marine mammals in captivity (the “Proposed APHIS Regulations”).
On October 8, 2015, the California Coastal Commission approved our plan to build a new killer whale habitat (the “Blue World
Project”) in San Diego, but attached certain conditions to its approval. Those conditions included, among other things, a prohibition
against breeding killer whales or transporting killer whales to or from the habitat. On December 29, 2015, we filed a lawsuit against
the California Coastal Commission on the grounds that the California Coastal Commission decision was outside the scope of its
authority in imposing such conditions because it does not have jurisdiction over killer whales, which are regulated under federal law.
On November 16, 2015, Representative Adam Schiff (D-CA) introduced the Orca Responsibility and Care Advancement Act
(the “ORCA Act”). The bill has been referred to the Natural Resources and Agriculture Committees. It is unclear whether this bill
will be enacted into law, but if enacted, this bill would amend the Marine Mammal Protection Act of 1972 and the Animal Welfare
Act to prohibit the breeding, the taking (wild capture), and the import or export of killer whales for the purposes of public display.
For a discussion of certain risks associated with the Proposed APHIS Regulations, the California Coastal Commission’s
decision, and the ORCA Act, see “Risk Factors—Risks Related to Our Business and Our Industry—We are subject to complex federal
and state regulations governing the treatment of animals, which can change, and to claims and lawsuits by activist groups before
government regulators and in the courts.”
40
On February 8, 2016, the San Diego City Council decided to put a proposal on the June 7, 2016 primary ballot for voters to
decide whether the city of San Diego should have a higher minimum wage than the $10 per hour required by the State of
California. If approved by a simple majority of San Diego voters, the proposal would make the city’s minimum wage $10.50 as soon
as the election results are certified, and then increase it to $11.50 on January 1, 2017. Two years later in January 2019, annual
increases to the San Diego minimum wage based on the consumer price index would start to be implemented. For a discussion of
certain risks associated with the foregoing proposal, see “Risk Factors—Risks Related to Our Business and Our Industry— Increased
labor costs and employee health and welfare benefits may negatively impact our operations.”
International Development Strategy
We believe that in addition to the growth potential that exists domestically, our brands can also have significant appeal in certain
international markets. We are currently assessing these opportunities while maintaining a conservative and disciplined approach
towards the execution of our international development strategy. Thus far, we have identified our international market priorities as
well as our international partners within select markets. The market priorities were developed based on a specific set of criteria to
ensure we expand our brands into the most attractive markets. On February 17, 2016, we moved to the next phase of our international
development strategy with our partner in the Middle East (the “Middle East Project”) by (i) extending the exclusive negotiating period
under our previously announced Memorandum of Understanding and (ii) executing an Interim Advisory Services Agreement.
Pursuant to the Interim Advisory Services Agreement, we will commence certain advisory services pertaining to the planning and
design of the Middle East Project, with funding from our partner in the Middle East offsetting our internal expenses. The Middle East
Project is subject to, among other things, the parties completing the design development phase of such project and the mutual
agreement of definitive documents. For a discussion of certain risks associated with our international development strategy, including
the Middle East Project, see “Risk Factors—Risks Related to Our Business and Our Industry— We may not realize the benefits of
acquisitions or other strategic initiatives.”
Seasonality
The theme park industry is seasonal in nature. Historically, we generate the highest revenues in the second and third quarters of
each year, in part because six of our theme parks are open for a portion of the year. Approximately two-thirds of our attendance and
revenues are generated in the second and third quarters of the year and we typically incur a net loss in the first and fourth quarters. The
mix of revenues by quarter is relatively constant, but revenues can shift between the first and second quarters due to the timing of
Easter and spring break holidays or between the first and fourth quarters due to the timing of Christmas and New Year. Even for our
five theme parks open year-round, attendance patterns have significant seasonality, driven by holidays, school vacations and weather
conditions. One of our goals is to continue to generate cash flow throughout the year to maximize profitability and minimize the
effects of seasonality, in particular at our theme parks that are open year-round. In recent years, we have begun to drive attendance
during non-peak times by offering a variety of seasonal programs and events, such as shows for kids, special concert series, and
Halloween and Christmas events. In addition, during seasonally slow times, operating costs are controlled by reducing operating hours
and show schedules. Employment levels required for peak operations are met largely through part-time and seasonal hiring.
Principal Factors Affecting Our Results of Operations
Revenues
Our revenues are driven primarily by attendance in our theme parks and the level of per capita spending for admission to the
theme parks and per capita spending inside the theme parks for culinary, merchandise and other in-park experiences. The level of
attendance in our theme parks is a function of many factors, including the opening of new attractions and shows, competitive
offerings, weather, fluctuations in foreign exchange rates and global and regional economic conditions, travel patterns of both our
domestic and international guests and consumer confidence. Admission per capita is driven by ticket pricing, the admissions product
mix and the park attendance mix. In-park per capita spending is driven by pricing changes, penetration levels (percentage of guests
purchasing), new product offerings, the mix of guests (such as local, domestic or international guests) and the mix of in-park spending.
For other factors affecting our revenues, see “Risk Factors—Risks Related to Our Business and Our Industry.”
In addition to the theme parks, we are also involved in entertainment, media and consumer product businesses that leverage our
intellectual property. While these businesses currently do not represent a material percentage of our revenue, they are important
strategic drivers in terms of consumer awareness and brand building.
41
Costs and Expenses
The principal costs of our operations are employee salaries and benefits, advertising, maintenance, animal care, utilities and
insurance. Factors that affect our costs and expenses include commodity prices, costs for construction, repairs and maintenance, other
inflationary pressures and attendance levels. A large portion of our expenses is relatively fixed because the costs for full-time
employees, maintenance, animal care, utilities, advertising and insurance do not vary significantly with attendance. For factors
affecting our costs and expenses, see “Risk Factors—Risks Related to Our Business and Our Industry.”
As part of the Cost Savings Plan, in December 2014, we implemented a restructuring program (“the Restructuring Program”)
which involved the elimination of approximately 300 positions in an effort to centralize certain functions and reduce duplication to
increase efficiencies. In the fourth quarter of 2015, as part of a cost savings initiative and ongoing review of departmental structures,
certain additional positions were eliminated. For further details, refer to Note 4–Restructuring Program and Separation Costs in our
consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
In January 2016, we made a decision to remove deep-water lifting floors from the killer whale habitats at each of our three
SeaWorld theme parks. The deep-water lifting floors were intended as another safety tool for conducting in-water training in the
deeper pools. The lifting floors located in the medical pools, where our killer whale in-water training currently takes place, will not be
affected. That training will continue as an essential part of our overall safety program. Having safely and successfully conducted in-
water training in the medical pools for almost 4 years, our safety and zoological professionals determined that the deep-water lifting
floors in the deeper pools are no longer needed. This change will provide more space for the animals, and increase the time that the
deep-water pool is available by eliminating downtime for maintenance and cleaning. As a result, in the first half of 2016, we expect to
record approximately $33.0 million of accelerated depreciation related to the disposal of these lifting floors.
On February 22, 2016, the Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close
of business on March 14, 2016, which will be paid on April 1, 2016. Based on this dividend declaration, certain performance-vesting
restricted shares (the “2.25x Performance Restricted shares”) held by some of our equity plan participants will vest on April 1, 2016.
We expect to recognize approximately $28.0 million of equity compensation expense and record approximately $3.4 million of
accumulated dividends related to these 2.25x Performance Restricted shares during the first quarter of 2016. See Note 18–Equity-
Based Compensation to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We barter theme park admission products for advertising and various other products and services. The fair value of the
admission products is recognized into admissions revenue and related expenses at the time of the exchange and approximates the
estimated fair value of the goods or services received or provided, whichever is more readily determinable.
Results of Operations
The following discussion provides an analysis of our consolidated financial data for the years ended December 31, 2015, 2014
and 2013. This data should be read in conjunction with our consolidated financial statements and the notes thereto included in
“Financial Statements and Supplementary Data.”
42
Comparison of the Years Ended December 31, 2015 and 2014
The following table presents key operating and financial information for the years ended December 31, 2015 and 2014:
Statement of Comprehensive Income Data:
Net revenues:
For the Year Ended
December 31,
2015
2014
Variance
$
%
(In thousands, except per capita data and %)
Admissions ....................................................................... $
Food, merchandise and other ............................................
859,426 $
518,386
Total revenues ............................................................. 1,371,004 1,377,812
846,922 $
524,082
(12,504 )
5,696
(6,808 )
(1.5%)
1.1%
(0.5%)
Costs and expenses:
103,980
109,024
(5,044 )
(4.6%)
Cost of food, merchandise and other revenues .................
Operating expenses (exclusive of depreciation
and amortization shown separately below) ....................
Selling, general and administrative ...................................
Restructuring and other related costs ................................
Separation costs ................................................................
Secondary offering costs ...................................................
Depreciation and amortization ..........................................
727,659
189,369
11,567
2,574
747
176,275
Total costs and expenses ............................................. 1,211,568 1,217,215
160,597
708,745
214,072
2,268
—
—
182,503
Operating income ...................................................
Other expense (income), net .............................................
Interest expense .................................................................
Loss on early extinguishment of debt and write-
off of discounts and debt issuance costs ........................
Income before income taxes ........................................
Provision for income taxes ................................................
Net income ............................................................................. $
Other data:
159,436
129
65,571
(198)
81,543
20,905
72,831
23,698
49,133 $
461
78,791
28,872
49,919
(18,914 )
24,703
(9,299 )
(2,574 )
(747 )
6,228
(5,647 )
(1,161 )
327
(15,972 )
20,444
(5,960 )
(5,174 )
(786 )
(2.6%)
13.0%
(80.4%)
(100.0%)
(100.0%)
3.5%
(0.5%)
(0.7%)
(165.2%)
(19.6%)
NM
(7.6%)
(17.9%)
(1.6%)
Attendance ........................................................................
Total revenue per capita .................................................... $
22,471
61.01 $
22,399
61.51
72
(0.50 )
0.3%
(0.8%)
NM-Not Meaningful
Admissions revenue. Admissions revenue for the year ended December 31, 2015 decreased $12.5 million, or 1.5% to $846.9
million as compared to $859.4 million for the year ended December 31, 2014. The decrease in admissions revenue was a result of a
decrease of 1.8% in admission per capita to $37.69 in 2015 from $38.37 in 2014, offset slightly by an increase of 0.3% in attendance.
The change in admission per capita primarily relates to an increase in promotional offerings and passholder visitation along with an
unfavorable shift in the park attendance mix compared to the prior year period. Attendance for 2015 primarily benefited from an
improvement at all but two of our park locations, due to increased promotional offerings, strong passholder visitation, additional
consumer event programs and a favorable operating schedule due to the later timing of Labor Day in 2015. The positive impact of
these factors was largely offset by reduced attendance in Texas and California. The decline in Texas primarily relates to a reduction in
passholder visitation and promotional offerings, a lack of significant competitive offerings at this location and the impact of record
levels of rainfall during the second quarter. The decline in California primarily relates to continued SeaWorld brand challenges.
Food, merchandise and other revenue. Food, merchandise and other revenue for the year ended December 31, 2015 increased
$5.7 million, or 1.1% to $524.1 million as compared to $518.4 million for the year ended December 31, 2014. This increase was
primarily a result of a 0.8% increase in in-park per capita spending to $23.32 in 2015 from $23.14 in 2014, along with an increase in
attendance.
Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the year ended December
31, 2015 decreased $5.0 million, or 4.6%, to $104.0 million as compared to $109.0 million for the year ended December 31, 2014.
These costs represent 19.8% and 21.0% of related revenue earned for the years ended December 31, 2015 and 2014, respectively. The
decrease as a percent of related revenue primarily resulted from the impact of cost reduction initiatives including improved leveraged
buying efforts.
43
Operating expenses. Operating expenses for the year ended December 31, 2015 decreased by $18.9 million, or 2.6% to
$708.7 million as compared to $727.7 million for the year ended December 31, 2014. The decrease was primarily a result of cost
savings initiatives including a reduction in headcount resulting from the Restructuring Program implemented in December 2014 and a
decrease in entertainment-related costs due primarily to reduced show offerings in 2015 resulting from cost savings initiatives.
Operating expenses were 51.7% of total revenues in 2015 compared to 52.8% in 2014.
Selling, general and administrative. Selling, general and administrative expenses for the year ended December 31, 2015
increased by $24.7 million, or 13.0% to $214.1 million as compared to $189.4 million for the year ended December 31, 2014. The
increase was largely related to: (i) additional third party consulting costs, (ii) an increase in labor related costs primarily associated
with new equity grants awarded in 2015, (iii) an increase in marketing costs associated with our reputation campaign and (iv) an
increase in legal fees when compared to the prior year period. As a percentage of total revenue, selling, general and administrative
expenses were 15.6% in 2015 compared to 13.7% in 2014.
Restructuring and other related costs. Restructuring and other related costs for 2015 include $2.0 million in severance
associated with certain positions eliminated in the fourth quarter of 2015, and $0.3 million related to severance for individuals with
continuing service obligations through the second quarter of 2015, which were impacted by the Restructuring Program announced in
December 2014. Restructuring and other related costs of $11.6 million for the year ended December 31, 2014 represent severance and
other related expenses incurred in connection with the Restructuring Program. The Restructuring Program involved the elimination of
approximately 300 positions across our eleven theme parks and corporate headquarters in an effort to centralize certain operations and
reduce duplication of functions to increase efficiencies.
Separation costs. Separation costs for the year ended December 31, 2014 represent costs incurred pursuant to the previously
announced separation of our former Chief Executive Officer and President.
Secondary offering costs. On April 9, 2014, the selling stockholders completed an underwritten secondary offering of our
common stock. Pursuant to the Registration Rights Agreement, we paid all expenses related to the offering, other than underwriting
discounts and commissions. No shares were sold by us in the secondary offering and the selling stockholders received all of the net
proceeds from the offering. In connection with this secondary offering, we incurred fees and expenses of $0.7 million for the year
ended December 31, 2014.
Depreciation and amortization. Depreciation and amortization expense for the year ended December 31, 2015 increased by
$6.2 million, or 3.5% to $182.5 million as compared to $176.3 million for the year ended December 31, 2014 due primarily to
approximately $5.0 million of accelerated depreciation related to the closure of the Gwazi wooden rollercoaster at our Busch Gardens
Tampa park along with additional depreciation due to the impact of new asset additions, offset by fully depreciated assets and asset
retirements.
Interest expense. Interest expense for the year ended December 31, 2015 decreased $16.0 million, or 19.6% to $65.6 million
as compared to $81.5 million for the year ended December 31, 2014, due to the $260.0 million redemption of the 11.0% unsecured
senior notes in April 2015 which were refinanced with additional term loans under our senior secured credit facilities at a lower
interest rate (effective rate of 4.33% as of December 31, 2015). See Note 11–Long-Term Debt to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K and the “Our Indebtedness” section which follows for further details.
Loss on early extinguishment of debt and write-off of discounts and debt issuance costs. Loss on early extinguishment of debt
and write-off of discounts and debt issuance costs of $20.9 million for the year ended December 31, 2015 relates to a $14.3 million
premium paid for the early redemption of $260.0 million of our Senior Notes, along with a write-off of approximately $6.0 million in
related discounts and debt issuance costs and a $0.6 million write-off in discounts and debt issuance costs related to the voluntary
prepayment of $30.0 million on our Senior Secured Credit Facilities during the fourth quarter of 2015. See Note 11–Long-Term Debt
to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K and the “Our Indebtedness” section
which follows for further details. Loss on early extinguishment of debt and write-off of discounts and debt issuance costs of $0.5
million for the year ended December 31, 2014 relates to a write-off in discounts and debt issuance costs related to the voluntary
prepayment of $31.5 million on our Senior Secured Credit Facilities during the third quarter of 2014.
Provision for income taxes. The provision for income taxes for the year ended December 31, 2015 was $23.7 million compared
to $28.9 million in the year ended December 31, 2014. The change primarily results from the impact of a decline in the effective tax
rate (from 36.6% to 32.5%) along with a decrease in pretax income in 2015 compared to 2014. Our effective income tax rate
decreased primarily due to the benefit of prior year adjustments, federal tax credits, and an adjustment to certain state net operating
loss carryforwards as a result of restructuring. These benefits were offset in part by a valuation allowance recorded on charitable
contribution carryforwards expiring in 2016, a valuation allowance recorded on certain state net operating losses not expected to be
entirely utilized prior to expiration, as well as the impact of non-deductible costs, including certain equity compensation awards.
44
Comparison of the Years Ended December 31, 2014 and 2013
The following table presents key operating and financial information for the years ended December 31, 2014 and 2013:
Statement of Comprehensive Income Data:
Net revenues:
For the Year Ended
December 31,
2014
2013
Variance
$
%
(In thousands, except per capita data and %)
Admissions ....................................................................... $
Food, merchandise and other ............................................
921,016 $
539,234
Total revenues ............................................................. 1,377,812 1,460,250
859,426 $
518,386
(61,590 )
(20,848 )
(82,438 )
(6.7%)
(3.9%)
(5.6%)
Costs and expenses:
109,024
114,192
(5,168 )
(4.5%)
Cost of food, merchandise and other revenues .................
Operating expenses (exclusive of depreciation
and amortization shown separately below) ....................
Selling, general and administrative ...................................
Restructuring and other related costs ................................
Separation costs ................................................................
Termination of advisory agreement ..................................
Secondary offering costs ...................................................
Depreciation and amortization ..........................................
743,322
187,298
—
—
50,072
1,407
166,086
Total costs and expenses ............................................. 1,217,215 1,262,377
197,873
727,659
189,369
11,567
2,574
—
747
176,275
Operating income ...................................................
Other income, net ..............................................................
Interest expense .................................................................
Loss on early extinguishment of debt and write-
off of discounts and debt issuance costs ........................
Income before income taxes ........................................
Provision for income taxes ................................................
Net income ............................................................................. $
Other data:
160,597
(198)
81,543
(241)
90,622
461
78,791
28,872
49,919 $
29,858
77,634
25,714
51,920
(15,663 )
2,071
11,567
2,574
(50,072 )
(660 )
10,189
(45,162 )
(37,276 )
43
(9,079 )
(29,397 )
1,157
3,158
(2,001 )
(2.1%)
1.1%
ND
ND
(100.0%)
(46.9%)
6.1%
(3.6%)
(18.8%)
(17.8%)
(10.0%)
(98.5%)
1.5%
12.3%
(3.9%)
Attendance ........................................................................
Total revenue per capita .................................................... $
22,399
61.51 $
23,391
62.43
(992 )
(0.92 )
(4.2%)
(1.5%)
ND-Not Determinable
Admissions revenue. Admissions revenue for the year ended December 31, 2014 decreased $61.6 million, or 6.7%, to $859.4
million as compared to $921.0 million for the year ended December 31, 2013. The decrease in revenue was a result of a 4.2% decline
in attendance combined with a decrease of 2.6% in admission per capita from $39.37 in 2013 to $38.37 in 2014. Attendance for 2014
declined as the negative trends we experienced in the second quarter of 2014 primarily at our destination parks in California and
Florida extended into our third quarter, with attendance for the third quarter of 2014 down 5.2% compared to the third quarter of 2013.
These trends showed some improvement in the fourth quarter of 2014 with attendance down 2.2% compared to the fourth quarter of
2013, due in part to the success of our seasonal events. We believe the overall decline in attendance for 2014 results from a
combination of factors, including negative media attention in California, along with a challenging competitive environment,
particularly in Florida. Part of the challenges in Florida relate to significant new attraction offerings at competitor destination parks
and a delay in the opening of one of our new rides at our Busch Gardens Tampa park. The prior year also included the impact from
the opening of Antarctica: Empire of the Penguin at our SeaWorld Orlando park which helped drive record revenue for 2013.
Attendance for 2014 was also impacted, to a lesser extent, by adverse weather during the first quarter in the Florida and Texas
markets. The decrease in admission per capita was primarily a result of an unfavorable change in the park attendance mix along with
an increase in promotional offerings.
Food, merchandise and other revenue. Food, merchandise and other revenue for the year ended December 31, 2014
decreased by $20.8 million, or 3.9%, to $518.4 million as compared to $539.2 million for the year ended December 31, 2013. This
decrease was primarily a result of the decrease in attendance offset slightly by a 0.4% increase in in-park per capita spending from
$23.05 in 2013 to $23.14 in 2014.
45
Costs of food, merchandise and other revenues. Costs of food, merchandise and other revenues for the year ended December
31, 2014 decreased $5.2 million, or 4.5%, to $109.0 million as compared to $114.2 million for the year ended December 31, 2013.
These costs represent 21.0% of related revenue earned for the year ended December 31, 2014 and 21.2% of related revenue earned for
the year ended December 31, 2013.
Operating expenses. Operating expenses for the year ended December 31, 2014 decreased by $15.7 million, or 2.1%, to
$727.7 million as compared to $743.3 million for the year ended December 31, 2013. The decrease was primarily a result of a
reduction in variable labor costs and other cost mitigation efforts employed by our park operators. Operating expenses were 52.8% of
total revenues in 2014 compared to 50.9% in 2013.
Selling, general and administrative. Selling, general and administrative expenses for the year ended December 31, 2014
increased by $2.1 million, or 1.1%, to $189.4 million as compared to $187.3 million for the year ended December 31, 2013. The
increase was primarily related to marketing costs driven by reputation initiatives along with the launch of our SeaWorld brand 50th
anniversary celebration. These increased costs were partially offset by the elimination of the 2009 Advisory Agreement fees due to
the termination of this agreement in April 2013 and a decrease in equity compensation when compared to the prior year period. As a
percentage of total revenue, selling, general and administrative expenses were 13.7% in 2014 compared to 12.8% in 2013.
Restructuring and other related costs. Restructuring and other related costs for the year ended December 31, 2014 represent
severance and other related expenses incurred in connection with the Restructuring Program which we implemented in December
2014. The Restructuring Program involved the elimination of approximately 300 positions across our eleven theme parks and
corporate headquarters in an effort to centralize certain operations and reduce duplication of functions to increase efficiencies. The
Restructuring Program was part of our previously announced company-wide cost initiative to deliver approximately $50.0 million of
annual cost savings by the end of 2015, as compared to our cost structure in fiscal 2014. These cost savings have been largely offset
by annual inflationary pressures and increased spending on marketing and advertising initiatives.
Separation costs. Separation costs for the year ended December 31, 2014 represent costs incurred pursuant to the previously
announced separation of our former Chief Executive Officer and President.
Secondary offering costs. On April 9, 2014 and December 17, 2013, the selling stockholders completed underwritten
secondary offerings of our common stock. Pursuant to the Registration Rights Agreement, we paid all expenses related to the
offerings, other than underwriting discounts and commissions. No shares were sold by us in the secondary offerings and the selling
stockholders received all of the net proceeds from the offerings. In connection with these secondary offerings, we incurred fees and
expenses of $0.7 million for the year ended December 31, 2014 and $1.4 million for the year ended December 31, 2013.
Termination of advisory agreement. In connection with the completion of our initial public offering on April 24, 2013, the
2009 Advisory Agreement was terminated. In connection with such termination, we paid a termination fee of $46.3 million to an
affiliate of Blackstone and recorded a write-off of $3.8 million in 2013 prepaid advisory fees.
Depreciation and amortization. Depreciation and amortization expense for the year ended December 31, 2014 increased by
$10.2 million, or 6.1%, to $176.3 million as compared to $166.1 million for the year ended December 31, 2013 due to the impact of
new asset additions along with accelerated depreciation on certain assets impacted by our cost reduction initiatives offset by fully
depreciated assets.
Interest expense. Interest expense for the year ended December 31, 2014 decreased $9.1 million, or 10.0%, to $81.5 million as
compared to $90.6 million for the year ended December 31, 2013, primarily reflecting the effects of the redemption of $140.0 million
of our Senior Notes and the repayment of $37.0 million in term loan under our Senior Secured Credit Facilities in April 2013 with a
portion of the net proceeds from our initial public offering as well as the impact of Amendment No. 5 to our Senior Secured Credit
Facilities, which reduced the interest rate applicable to borrowings under our Senior Secured Credit Facilities.
Loss on early extinguishment of debt and write-off of discounts and debt issuance costs. Loss on early extinguishment of debt
and write-off of discounts and debt issuance costs of $0.5 million for the year ended December 31, 2014 relates to a write-off in
discounts and debt issuance costs connected to the voluntary prepayment of $31.5 million on our Senior Secured Credit Facilities
during the third quarter of 2014. Loss on early extinguishment of debt and write-off of discounts and debt issuance costs of $29.9
million for the year ended December 31, 2013 primarily relates to a $15.4 million premium paid for the early redemption of $140.0
million of our Senior Notes with a portion of the net proceeds from our initial public offering in April 2013, along with a write-off of
approximately $5.5 million in related discounts and debt issuance costs and the write-off of approximately $8.1 million of certain debt
issuance costs in connection with Amendment No. 5 to our Senior Secured Credit Facilities.
46
Provision for income taxes. The provision for income taxes for the year ended December 31, 2014 was $28.9 million compared
to $25.7 million in the year ended December 31, 2013. The change primarily results from an increase in pretax income in 2014
compared to 2013, along with an increase in our effective income tax rate (from 33.1% to 36.6%). Our effective income tax rate
increased primarily due to a valuation allowance recorded on charitable contribution carryforwards expiring in 2015, a change in the
income mix of the affiliated entities, and the impact of non-deductible costs, including certain officer compensation and certain equity
compensation awards, which was offset in part by the benefit of prior year adjustments and tax credits.
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our
principal uses of cash include the funding of working capital obligations, debt service, investments in theme parks (including capital
projects), common stock dividends and share repurchases. As of December 31, 2015, we had a working capital deficit of
approximately $120.3 million. We typically operate with a working capital deficit and we expect that we will continue to have
working capital deficits in the future. The working capital deficits are due in part to a significant deferred revenue balance from
revenues paid in advance for our theme park admissions products and high turnover of in-park products that results in a limited
inventory balance. Our cash flow from operations, along with our revolving credit facilities, have allowed us to meet our liquidity
needs while maintaining a working capital deficit.
As market conditions warrant and subject to our contractual restrictions and liquidity position, we, our affiliates and/or our
major stockholders, including Blackstone and its affiliates, may from time to time repurchase our outstanding equity and/or debt
securities, including our outstanding bank loans in privately negotiated or open market transactions, by tender offer or otherwise. Any
such repurchases may be funded by incurring new debt, including additional borrowings under the Senior Secured Credit Facilities.
Any new debt may also be secured debt. We may also use available cash on our balance sheet. The amounts involved in any such
transactions, individually or in the aggregate, may be material. Further, since some of our debt may trade at a discount to the face
amount among current or future syndicate members, any such purchases may result in our acquiring and retiring a substantial amount
of any particular series, with the attendant reduction in the trading liquidity of any such series. Depending on conditions in the credit
and capital markets and other factors, we will, from time to time, consider other financing transactions, the proceeds of which could be
used to refinance our indebtedness or for other purposes.
Dividends
The Company’s Board of Directors (the “Board”) has adopted a policy to pay, subject to legally available funds, a regular
quarterly dividend. Dividends paid to stockholders were $72.3 million, $72.1 million and $36.2 million in the years ended December
31, 2015, 2014 and 2013, respectively. Subsequent to December 31, 2015, on January 5, 2016, the Board declared a cash dividend of
$0.21 per share to all common stockholders of record at the close of business on January 15, 2016, which was paid on January 22,
2016. On February 22, 2016, the Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close
of business on March 14, 2016, which will be paid on April 1, 2016. The amount and timing of any future dividends payable on our
common stock is within the sole discretion of the Board. For tax purposes, a portion of the dividends paid in 2014 and 2015 were
treated as a return of capital to stockholders. The Company also expects that for tax purposes, a portion of the dividends paid in 2016
will be treated as a return of capital to stockholders. See “Market for the Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities-Dividends.”
Approximately $0.4 million of dividends declared through December 31, 2015 relate to unvested time restricted shares and
unvested performance restricted shares with a performance condition considered probable of being achieved and will be paid if the
awards vest in accordance with their terms. Dividends on certain performance-vesting restricted share awards that are not considered
probable of vesting as of December 31, 2015, were approximately $5.6 million and will accumulate and be paid only if and to the
extent the shares vest in accordance with their terms. Due to the dividend declaration on February 22, 2016, certain performance-
vesting restricted shares (the “2.25x Performance Restricted shares”) held by some of our equity plan participants will vest on April 1,
2016. We will recognize approximately $28.0 million of equity compensation expense and record approximately $3.4 million of
accumulated dividends related to these 2.25x Performance Restricted shares during the first quarter of 2016. See Note 18–Equity-
Based Compensation and Note 19–Stockholders’ Equity to our consolidated financial statements included elsewhere in this Annual
Report on Form 10-K for further details on our dividend activity and the “Covenant Compliance” section which follows for further
details on covenants that could restrict our ability to make certain restricted payments, including dividend payments and share
repurchases.
47
Share Repurchases
In 2014, our Board authorized a share repurchase program of up to $250.0 million of our common stock (the “Share Repurchase
Program”). Under the Share Repurchase Program, we are authorized to repurchase shares through open market purchases, privately-
negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading
plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program has no time limit and may be suspended or
discontinued completely at any time. The number of shares to be purchased and the timing of purchases will be based on the level of
our cash balances, general business and market conditions, and other factors, including legal requirements, debt covenant restrictions
and alternative investment opportunities.
Pursuant to the Share Repurchase Program, during 2015, we repurchased a total of 2,413,803 shares of common stock at an
average price of $18.62 per share and a total cost of approximately $45.0 million, leaving $190.0 million available for future
repurchases as of December 31, 2015. See Note 19–Stockholders’ Equity to our consolidated financial statements included elsewhere
in this Annual Report on Form 10-K for further details.
Other
In June 2015, we entered into five forward interest rate swap agreements (“the Forward Swaps”) to effectively fix the interest
rate on the three month LIBOR-indexed interest payments associated with $1.0 billion of our outstanding long-term debt. The Forward
Swaps have an effective date of September 30, 2016, have a total notional amount of $1.0 billion and mature on May 14, 2020.
In April 2015, we executed a new interest rate swap agreement to effectively fix the interest rate on $250.0 million of the Term
B-3 Loans under the Senior Secured Credit Facilities, as defined below. The interest rate swap became effective on June 30, 2015, has
a notional amount of $250.0 million and is scheduled to mature on September 30, 2016. See Note 11–Long-Term Debt and Note 12–
Derivative Instruments and Hedging Activities to our consolidated financial statements included elsewhere in this Annual Report on
Form 10-K for further details.
We believe that existing cash and cash equivalents, cash flow from operations, and available borrowings under the Senior
Secured Credit Facilities will be adequate to meet the capital expenditures, dividends and working capital requirements of our
operations for at least the next 12 months.
The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for
the periods indicated:
2015
For the Year Ended December 31,
2014
(In thousands)
2013
Net cash provided by operating activities ................................. $
Net cash used in investing activities .........................................
Net cash used in financing activities.........................................
Net (decrease) increase in cash and cash equivalents ............... $
286,274 $
(157,377)
(153,832)
(24,935) $
261,532 $
(156,546 )
(177,921 )
(72,935 ) $
286,461
(166,376)
(48,919)
71,166
Cash Flows from Operating Activities
Net cash provided by operating activities was $286.3 million during the year ended December 31, 2015 as compared to $261.5
million during the year ended December 31, 2014. The change in net cash provided by operating activities was primarily impacted by
a reduction in costs along with slightly favorable changes in working capital accounts, offset by a decrease in revenue in 2015
primarily due to a decline in admissions per capita when compared to the prior year.
Net cash provided by operating activities was $261.5 million during the year ended December 31, 2014 as compared to $286.5
million during the year ended December 31, 2013, which included a cash payment of $46.3 million for the 2009 Advisory Agreement
termination fee paid in conjunction with our initial public offering in April 2013. The change in net cash provided by operating
activities was also impacted by a decrease in total revenue in 2014 primarily related to a decline in attendance offset by favorable
changes in our working capital accounts when compared to 2013.
48
Cash Flows from Investing Activities
Investing activities consist principally of capital investments we make in our theme parks for future attractions and
infrastructure. Net cash used in investing activities during the year ended December 31, 2015 consisted primarily of capital
expenditures of $157.3 million largely related to future attractions.
Net cash used in investing activities during the year ended December 31, 2014 and 2013 consisted primarily of capital
expenditures of $154.6 million and $166.3 million, respectively, largely related to attractions which opened in 2014 and 2015.
The amount of our capital expenditures may be affected by general economic and financial conditions, among other things,
including restrictions imposed by our borrowing arrangements. We generally expect to fund our 2016 capital expenditures through our
operating cash flow.
Cash Flows from Financing Activities
Net cash used in financing activities during the year ended December 31, 2015 was primarily attributable to the following: (i)
$306.2 million in repayment of long-term debt, which included the early redemption of $260.0 million of our Senior Notes and a
voluntary prepayment of $30.0 million in Term B-3 Loans, (ii) $72.3 million in cash dividends paid to common stockholders, (iii)
$50.7 million used for treasury stock purchases, of which $5.7 million relates to treasury stock purchases in December 2014 which
settled in January 2015, (iv) $14.3 million paid as a redemption premium related to the Senior Notes, and (v) $4.6 million paid in debt
issuance costs related to the new Term B-3 Loans, offset by $280.0 million in proceeds from the issuance of the Term B-3 Loans
under the Senior Secured Credit Facilities, as defined below, and a net draw on the Revolving Credit Facility of $15.0 million.
Net cash used in financing activities during the year ended December 31, 2014 was primarily attributable to $72.1 million in
cash dividends paid to common stockholders, $60.1 million used to repurchase 2.6 million shares of our common stock and $45.5
million paid on our Term B-2 Loan under the Senior Secured Credit Facilities, as defined below, which included a voluntary
prepayment of $31.5 million.
Net cash used in financing activities during the year ended December 31, 2013 was primarily attributable to the receipt of
$253.8 million proceeds from our IPO, net of underwriter discounts and commissions, offset by the following: (i) repayments of
$189.3 million of debt which consisted primarily of a redemption of $140.0 million of our Senior Notes and a repayment of
$37.0 million of indebtedness under our then existing Term B Loan, (ii) $44.2 million used to repurchase 1.5 million shares of our
stock, (iii) payments of $36.2 million in cash dividends, (iv) $15.4 million paid in a redemption premium for the Senior Notes, (v)
$10.6 million paid in debt issuance costs, (vi) $4.7 million in costs incurred in connection with our initial public offering and (vii) $3.0
million related to a note payable which was due on September 1, 2013 for the November 2012 acquisition of Knott’s Soak City from
an affiliate of Cedar Fair L.P.
Our Indebtedness
The Company is a holding company and conducts its operations through its subsidiaries, which have incurred or guaranteed
indebtedness as described below.
Senior Secured Credit Facilities
SeaWorld Parks & Entertainment, Inc. (“SEA”) is the borrower under our senior secured credit facilities (the “Senior Secured
Credit Facilities”) pursuant to a credit agreement dated as of December 1, 2009, by and among SEA, as borrower, Bank of America,
N.A., as administrative agent, collateral agent, letter of credit issuer and swing line lender and the other agents and lenders party
thereto, as the same may be amended, restated, supplemented or modified from time to time.
On March 30, 2015, SEA entered into an incremental term loan amendment, Amendment No. 7 (the “Incremental Amendment”)
to its existing Senior Secured Credit Facilities. On April 7, 2015, SEA borrowed $280.0 million of additional term loans (the “Term
B-3 Loans”) pursuant to the Incremental Amendment. The proceeds, along with cash on hand, were used to redeem all of the $260.0
million outstanding principal of the Senior Notes at a redemption price of 105.5% plus accrued and unpaid interest and pay fees, costs
and other expenses in connection with the Term B-3 Loans. The redemption premium of $14.3 million along with a write-off of
approximately $6.0 million in related discounts and debt issuance costs is included in the loss on early extinguishment of debt and
write-off of discounts and debt issuance costs on the accompanying consolidated statements of comprehensive income for the year
ended December 31, 2015. See Note 11–Long-Term Debt to our consolidated financial statements included elsewhere in this Annual
Report on Form 10-K for further details.
49
As of December 31, 2015, our Senior Secured Credit Facilities consisted of a $1,338.4 million senior secured term loan facility
(the “Term B-2 Loans”), and $247.9 million in Term B-3 Loans which will mature on May 14, 2020 along with a $192.5 million
senior secured revolving credit facility (the “Revolving Credit Facility”), of which $15.0 million was outstanding as of December 31,
2015. The Revolving Credit Facility will mature on the earlier of (a) April 24, 2018 and (b) the 91st day prior to the maturity date of
any indebtedness incurred to refinance any of the term loans, and includes borrowing capacity available for letters of credit and for
short-term borrowings referred to as the swing line borrowings. As of December 31, 2015, SEA had approximately $14.3 million of
outstanding letters of credit, leaving approximately $163.2 million available for borrowing. The outstanding balance under the
Revolving Credit Facility is included in current maturities on long-term debt on the accompanying consolidated balance sheet as of
December 31, 2015 included elsewhere in this Annual Report on Form 10-K, due to the Company’s intent to repay the borrowings
within the next twelve months. Subsequent to December 31, 2015, SEA borrowed an additional $60.0 million under the Revolving
Credit Facility for general working capital purposes.
The obligations under our Senior Secured Credit Facilities are fully, unconditionally and irrevocably guaranteed by each of the
Company, any subsidiary of the Company that directly or indirectly owns 100% of the issued and outstanding equity interests of SEA,
and, subject to certain exceptions, each of SEA’s existing and future material domestic wholly-owned subsidiaries (collectively, the
“Guarantors”). Our Senior Secured Credit Facilities are collateralized by first priority or equivalent security interests, subject to
certain exceptions, in (i) all the capital stock of, or other equity interests in, substantially all of SEA’s direct or indirect material
wholly-owned domestic subsidiaries (subject to certain exceptions and qualifications) and 65% of the capital stock of, or other equity
interests in, any of SEA’s first tier foreign subsidiaries and (ii) certain tangible and intangible assets of SEA and those of the
Guarantors (subject to certain exceptions and qualifications).
Our Senior Secured Credit Facilities contain a number of customary negative covenants. Such covenants, among other things,
restrict, subject to certain exceptions, the ability of SEA and its restricted subsidiaries to incur additional indebtedness; make
guarantees; create liens on assets; enter into sale and leaseback transactions; engage in mergers or consolidations; sell assets; make
fundamental changes; pay dividends and distributions or repurchase SEA’s capital stock; make investments, loans and advances,
including acquisitions; engage in certain transactions with affiliates; make changes in the nature of the business; and make
prepayments of junior debt. Our Senior Secured Credit Facilities also contain covenants requiring SEA to maintain specified
maximum annual capital expenditures, a maximum total net leverage ratio and a minimum interest coverage ratio.
See Note 11–Long-Term Debt to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K
for further details.
Senior Notes
On December 1, 2009, SEA issued $400.0 million aggregate principal amount of unsecured senior notes which were due
December 1, 2016 (the “Senior Notes”). We used a portion of our net proceeds from our IPO to redeem $140.0 million aggregate
principal amount of the Senior Notes in April 2013 at a redemption price of 110%. The redemption premium of $15.4 million, along
with a write off of approximately $5.5 million in related discounts and debt issuance costs were recorded as a loss on early
extinguishment of debt and write-off of discounts and debt issuance costs on the accompanying consolidated statements of
comprehensive income for the year ended December 31, 2013. See Note 11–Long-Term Debt to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K for further details. We redeemed the remaining Senior Notes in April 2015
using the proceeds from the Term B-3 Loans.
Covenant Compliance
As of December 31, 2015, we were in compliance with all covenants in the credit agreement governing the Senior Secured
Credit Facilities.
The credit agreement governing the Senior Secured Credit Facilities provide for certain events of default which, if any of them
were to occur, would permit or require the principal of and accrued interest, if any, on the loans under the Senior Secured Credit
Facilities to become or be declared due and payable (subject, in some cases, to specified grace periods).
Under the credit agreement governing the Senior Secured Credit Facilities, our ability to engage in activities such as incurring
additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger
transactions is governed, in part, by our ability to satisfy tests based on covenant Adjusted EBITDA.
50
The Senior Secured Credit Facilities generally defines “Adjusted EBITDA” as net income (loss) before interest expense, income
tax expense (benefit), depreciation and amortization, as further adjusted to exclude certain unusual, non-cash, and other items
permitted in calculating covenant compliance under the Senior Secured Credit Facilities. Adjusted EBITDA as defined in the Senior
Secured Credit Facilities is consistent with our reported Adjusted EBITDA.
The Senior Secured Credit Facilities contain a number of covenants that, among other things, restrict our ability and the ability
of our restricted subsidiaries to, among other things, make certain restricted payments (as defined in the Senior Secured Credit
Facilities), including dividend payments and share repurchases. See Note 11–Long-Term Debt to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K for further details concerning the calculation of the Total Leverage Ratio (as
defined in the Senior Secured Credit Facilities). As of December 31, 2015, the Total Leverage Ratio as calculated under the Senior
Secured Credit Facilities was 4.38 to 1.00, which results in a $120.0 million capacity for restricted payments in the year ending
December 31, 2016. The amount available for dividend declarations, share repurchases and certain other restricted payments under the
covenant restrictions in the debt agreements adjusts at the beginning of each quarter as set forth in Note 11–Long-Term Debt to our
consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Adjusted EBITDA
We believe that the presentation of Adjusted EBITDA is appropriate as it eliminates the effect of certain non-cash and other
items not necessarily indicative of a company’s underlying operating performance. We use Adjusted EBITDA in connection with
certain components of our executive compensation program. In addition, investors, lenders, financial analysts and rating agencies have
historically used EBITDA related measures in our industry, along with other measures, to evaluate a company’s ability to meet its debt
service requirements, to estimate the value of a company and to make informed investment decisions. The presentation of Adjusted
EBITDA also provides additional information to investors about the calculation of, and compliance with, certain financial covenants
in the Senior Secured Credit Facilities.
Adjusted EBITDA is not a recognized term under accounting principles generally accepted in the United States of America
(“GAAP”), and should not be considered in isolation or as a substitute for a measure of our liquidity or performance prepared in
accordance with GAAP and is not indicative of income from operations as determined under GAAP. Adjusted EBITDA and other
non-GAAP financial measures have limitations which should be considered before using these measures to evaluate our liquidity or
financial performance. Adjusted EBITDA, as presented by us, may not be comparable to similarly titled measures of other companies
due to varying methods of calculation.
The following table reconciles Adjusted EBITDA to net income for the periods indicated:
2015
For the Year Ended December 31,
2014
(In thousands)
2013
Net income ................................................................................ $
Provision for income taxes .......................................................
Loss on early extinguishment of debt and write-off
of discounts and debt issuance costs (a) ..................................
Interest expense ........................................................................
Depreciation and amortization ..................................................
Equity-based compensation expense (b) ....................................
Other non-cash expenses (c) ......................................................
Other business optimization costs (d) ........................................
Other adjusting items (e) ............................................................
Other items, net of tax of $529 in 2015 (f).................................
Estimated cost savings (g) ..........................................................
Secondary offering costs (h) ......................................................
Termination of advisory agreement (i) .......................................
Advisory fees (j) .........................................................................
Debt refinancing costs (k) ...........................................................
Adjusted EBITDA(l) .................................................................. $
49,133 $
23,698
49,919 $
28,872
51,920
25,714
20,905
65,571
182,503
6,527
6,285
2,219
1,435
901
1,949
—
—
—
—
361,126 $
461
81,543
176,275
2,349
5,036
11,567
3,331
—
10,000
747
—
—
—
370,100 $
29,858
90,622
166,086
6,026
9,556
—
843
—
—
1,407
50,072
2,799
4,225
439,128
51
(a) Reflects a $14.3 million premium paid for the early redemption in April 2015 of $260.0 million of our Senior Notes, along with
a write-off of approximately $6.0 million in related discounts and debt issuance costs and a $0.6 million write-off of discounts
and debt issuance costs related to the voluntary prepayment of $30.0 million to our Senior Secured Credit Facilities in the year
ended December 31, 2015. For the year ended December 31, 2014, reflects the write-off of discounts and debt issuance costs
relating to the voluntary prepayment of $31.5 million on our Senior Secured Credit Facilities. For the year ended December 31,
2013, reflects a $15.4 million premium paid for the early redemption of $140.0 million of our then existing Senior Notes using
net proceeds from our initial public offering in April 2013, along with a write-off of approximately $5.5 million in related
discounts and debt issuance costs and a write-off of approximately $8.1 million of certain capitalized debt issuance costs in
connection with Amendment No. 5 to our Senior Secured Credit Facilities.
(b) Reflects non-cash compensation expenses associated with the grants of equity compensation.
(c) Reflects non-cash expenses related to miscellaneous asset write-offs and non-cash losses on derivatives.
(d) Reflects business optimization costs incurred in the fourth quarter ended December 31, 2015 primarily related to $2.0 million of
restructuring and related costs associated with severance and other employment expenses for certain positions eliminated in the
fourth quarter of 2015 as a result of cost saving initiatives. Business optimization costs for the year ended December 31, 2014
represent restructuring and other related costs and consist of $8.6 million related to severance and other employment expenses
and $3.0 million related to third party consulting costs associated with the development of the cost savings plan and
Restructuring Program. The Adjusted EBITDA calculations presented in the table above do not reflect certain 2015 other
business optimization costs incurred prior to the fourth quarter of 2015 due to limitations as described in footnote (l) below.
(e) Reflects non-recurring product and intellectual property development costs incurred for the three months ended December 31,
2015 and for the year ended December 31, 2014. The product and intellectual property development costs were not material in
2013. For the year ended December 31, 2015, also includes state franchise taxes paid of $0.2 million. State franchise taxes
were not included in the prior years and were not material. For the year ended December 31, 2013, other adjusting items
reflects costs related to our acquisition of the Knott’s Soak City Chula Vista water park and pre-opening costs related to
Aquatica San Diego. The Adjusted EBITDA calculations presented in the table above do not reflect certain 2015 other
adjusting items incurred prior to the fourth quarter of 2015 due to limitations as described in footnote (l) below.
(f) Reflects the impact of certain items during the year ended December 31, 2015 which we are permitted to exclude, net of tax,
under the credit agreement governing our senior secured credit facilities due to the unusual nature of the items.
(g) For the year ended December 31, 2015, reflects estimated 2015 cost savings related to certain actions on cost savings initiatives.
For the year ended December 31, 2014, reflects estimated 2014 cost savings related to the previously announced Restructuring
Program for the year. These estimated cost savings are a non-GAAP Adjusted EBITDA item only that does not impact the
Company’s reported GAAP net income. Pursuant to the credit agreement governing our Senior Secured Credit Facilities, we are
permitted to reflect in our calculation of Adjusted EBITDA, subject to certain limitations, estimated cost savings resulting from
certain specified actions, including restructurings and cost savings initiatives. The credit agreement governing our Senior
Secured Credit Facilities limits the amount of estimated cost savings that do not result from acquisitions or dispositions which
may be reflected in the calculation of Adjusted EBITDA to $10.0 million for any applicable consecutive four quarter period and
$30.0 million in the aggregate, of which we have utilized approximately $12.0 million through December 31, 2015.
(h) Reflects fees and expenses incurred in connection with the secondary offering of our common stock in April 2014 for the year
ended December 31, 2014 and fees and expenses incurred in connection with the secondary offering of our common stock in
December 2013 for the year ended December 31, 2013. Pursuant to the Registration Rights Agreement, we paid all expenses
related to the offerings, other than underwriting discounts and commissions. No shares were sold by us in the secondary
offerings and the selling stockholders received all of the net proceeds from the offerings.
(i) Reflects a one-time fee of $46.3 million paid to an affiliate of Blackstone in connection with the termination of the 2009
Advisory Agreement, and a related write-off of prepaid advisory fees of $3.8 million. In connection with our initial public
offering, the 2009 Advisory Agreement was terminated on April 24, 2013 in accordance with its terms.
(j) Reflects historical fees paid to an affiliate of Blackstone under the 2009 Advisory Agreement.
(k) Reflects costs which were expensed related to the amendments to our Senior Secured Credit Facilities.
(l)
For covenant calculation purposes under our credit agreement, the amount which we are able to add back to Adjusted EBITDA
for other business optimization costs and certain other adjusting items, including restructuring costs and product and intellectual
property development costs, is limited to $10.0 million for any four consecutive quarters (with certain unused amounts carried
over from the prior fiscal year). Due to these limitations, the Adjusted EBITDA calculations presented in the table above do not
reflect $0.3 million of restructuring and other related costs and $2.5 million of product and intellectual property development
costs incurred in the first three quarters of 2015.
52
Contractual Obligations
The following table summarizes our principal contractual obligations as of December 31, 2015:
Total
Less than
1 Year
1-3 Years 3-5 Years
(In thousands)
Long-term debt (including current portion)(a) .................................... $1,601,287 $ 31,850 $ 33,700 $ 1,535,737 $
Operating leases(b) ..............................................................................
Purchase obligations(c) ........................................................................
Total contractual obligations .............................................................. $2,045,526 $129,615 $ 65,584 $ 1,562,199 $
31,884
—
16,185
81,580
362,659
81,580
26,462
—
More than
5 Years
—
288,128
—
288,128
(a) Represents principal payments of long-term debt and does not include estimated interest obligations of $58,372; $133,932; and
$87,618 payable in less than one year, 1-3 year, and 3-5 year periods, respectively, calculated using interest rates at December
31, 2015. The outstanding balance under the Revolving Credit Facility at December 31, 2015 is included in the less than 1 year
classification due to our intent to repay the borrowings within the next twelve months.
(b) Represents commitments under long-term operating leases, primarily consisting of the lease for the land of our SeaWorld theme
park in San Diego, California, requiring annual minimum lease payments.
(c) We have minimum purchase commitments with various vendors through 2017. Outstanding minimum purchase commitments
consist primarily of capital expenditures related to future attractions, infrastructure enhancements for existing facilities and
information technology products and services.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2015.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of certain assets and liabilities, revenues and expenses, and disclosure of contingencies during the
reporting period. Significant estimates and assumptions include the valuation and useful lives of long-lived tangible and intangible
assets, the valuation of goodwill and other indefinite-lived intangible assets, the accounting for income taxes, the accounting for self-
insurance and revenue recognition. Actual results could differ from those estimates. We believe that the following discussion
addresses our critical accounting policies which require management’s most difficult, subjective and complex judgments, often as a
result of the need to make estimates about the effect of matters that are inherently uncertain.
Property and Equipment
Development costs associated with new attractions, rides and products are generally capitalized after necessary feasibility
studies have been completed and final concept or contracts have been approved. Interest is capitalized on all active construction
projects.
Property and equipment additions are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives.
It is possible that changes in circumstances such as technological advances, use of an asset, changes to our business model or changes
in capital strategy could result in the actual useful lives differing from the original estimate. In cases in which we determine that the
useful life of property and equipment should be shortened, we depreciate the remaining net book value in excess of the salvage value
over the revised remaining useful life, thereby increasing depreciation expense evenly through the remaining expected life.
Impairment of Long-Lived Assets
All long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment upon the
occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable.
Assets are grouped and tested at the lowest level for which identifiable, independent cash flows are available.
The impairment indicators considered important that may trigger an impairment review, if significant, include the following:
(cid:120)
(cid:120)
underperformance relative to historical or projected future operating results;
changes in the manner of use, sale or disposal of assets;
53
(cid:120)
(cid:120)
(cid:120)
decreases in the market value of assets;
adverse change in legal factors or business climate; and
other macroeconomic conditions.
An impairment loss may be recognized when estimated undiscounted future cash flows expected to result from the use of the
asset, including disposition, are less than the carrying value of the asset. The measurement of the impairment loss to be recognized is
based upon the difference between the fair value and the carrying amounts of the assets. Fair value is generally determined based upon
a discounted cash flow analysis. In order to determine if an asset has been impaired, the determination of both undiscounted and
discounted future cash flows requires management to make significant estimates and consider an anticipated course of action as of the
balance sheet date. Subsequent changes in estimated undiscounted and discounted future cash flows arising from changes in
anticipated actions could impact the determination of whether impairment exists. There was no impairment of any long-lived asset
groups in 2015, 2014 or 2013.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are reviewed for impairment annually, and as of an interim date should
factors or indicators become apparent that would require an interim test, for ongoing recoverability based on applicable reporting unit
performance and consideration of significant events or changes in the overall business environment.
In assessing goodwill for impairment, we may choose to initially evaluate qualitative factors to determine if it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. We consider several factors, including macroeconomic
conditions, industry and market conditions, overall financial performance of the reporting unit, changes in management, strategy or
customers, and relevant reporting unit specific events such as a change in the carrying amount of net assets, a more-likely-than-not
expectation of selling or disposing all, or a portion, of a reporting unit, and the testing of recoverability of a significant asset group
within a reporting unit. If the qualitative assessment is not conclusive, then the impairment analysis for goodwill is performed at the
reporting unit level using a two-step approach. We may also choose to perform this two-step impairment analysis instead of the
qualitative analysis. The first step is a comparison of the fair value of the reporting unit, determined using the income and market
approach, to its recorded amount. If the recorded amount exceeds the fair value, the second step quantifies any impairment write-down
by comparing the current implied value of goodwill to the recorded goodwill balance.
Significant judgments required in this testing process may include projecting future cash flows, determining appropriate
discount rates and other assumptions. Projections are based on management’s best estimates given recent financial performance,
market trends, strategic plans and other available information which in recent years have been materially accurate. Although not
currently anticipated, changes in these estimates and assumptions could materially affect the determination of fair value or
impairment. It is possible that our assumptions about future performance, as well as the economic outlook and related conclusions
regarding the valuation of our assets, could change adversely, which may result in impairment that would have a material effect on our
financial position and results of operations in future periods. At December 1, 2015, a qualitative assessment was performed on one of
our reporting units and a quantitative assessment was performed on the other. Based on the assessments, we determined that neither
reporting unit was considered impaired. For the quantitative assessment that was performed, we calculated that the estimated fair value
of the reporting unit exceeded its respective carrying value by 19%. A key assumption utilized in the goodwill analysis was a
weighted average cost of capital of 8.5%.
At December 1, 2014, a quantitative assessment was performed and we determined that we had no reporting units that were
considered impaired as a result of this goodwill impairment test. During this quantitative assessment, we calculated that the fair value
of the reporting units exceeded their respective carrying values by 12% and 106%. A key assumption utilized in the goodwill analysis
was a weighted average cost of capital of 9%.
At December 1, 2013, a qualitative assessment was performed and we determined, after assessing the totality of relevant events
and circumstances, that it was not more likely than not that the carrying value exceeded the fair value of the reporting units.
Accordingly, based upon the qualitative assessment tests that were performed in 2015 and 2013, and the quantitative assessments that
were performed as of December 1, 2015 and 2014, we had no reporting units that were considered at risk of failing step one of the
goodwill impairment tests.
54
Our other indefinite-lived intangible assets consist of certain trade names/trademarks and other intangible assets which, after
considering legal, regulatory, contractual, and other competitive and economic factors, are determined to have indefinite lives and are
valued annually using the relief from royalty method. Significant estimates required in this valuation method include estimated future
revenues impacted by the trade names/trademarks, royalty rate by park, and appropriate discount rates. Projections are based on
management’s best estimates given recent financial performance, market trends, strategic plans, brand awareness, operating
characteristics by park, and other available information which in recent years have been materially accurate. Changes in these
estimates and assumptions could materially affect the fair value determination used in the assessment of impairment. At December 1,
2015, we performed a qualitative assessment of certain trade names/trademarks and a quantitative assessment on the remaining trade
names/trademarks. At December 1, 2014, a quantitative assessment was performed and at December 1, 2013 a qualitative assessment
was performed. Based on these assessments, there was no impairment as the estimated fair value of trade names/trademarks were
substantially in excess of their carrying values. For the December 1, 2015 quantitative assessment, we calculated that the estimated
fair value of the trade names/trademarks exceeded their carrying values by 63% to 77%. Key assumptions utilized in the analysis
were a discount rate of 11.5% and an estimated royalty rate of 3%. For the December 1, 2014 quantitative assessment, we calculated
that the estimated fair value of the trade names/trademarks exceeded their carrying values by 68% to 85%. Key assumptions utilized
in the analysis were a discount rate of 12.0% and an estimated royalty rate ranging from 2% to 3%.
Accounting for Income Taxes
We are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating
actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as
depreciation periods for property and equipment and deferred revenue, for tax and financial accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the
likelihood that deferred tax assets (primarily net operating loss and charitable contribution carryforwards) will be recovered from
future taxable income. To the extent that we believe that recovery is not more likely than not, a valuation allowance against those
amounts is recorded. To the extent that we record a valuation allowance or a change in the valuation allowance during a period, we
recognize these amounts as income tax expense or benefit in the consolidated statements of comprehensive income. Section 382 of the
Internal Revenue Code of 1986, as amended (the “Code”) contains rules that limit the ability of a company that undergoes an
ownership change, which is generally any change in ownership of more than 50% of its stock over a rolling three-year period, to
utilize its net operating loss carryforwards in years after the ownership change. These rules generally operate by focusing on
ownership shifts among stockholders owning directly or indirectly 5% or more of the stock of a company and any change in
ownership arising from shares of stock sold by these same stockholders.
Significant management judgment is required in determining our provision or benefit for income taxes, deferred tax assets and
liabilities and any valuation allowance recorded against net deferred tax assets. Management has analyzed all available evidence,
both positive and negative, using a more likely than not standard in assessing the need for a valuation allowance against its deferred
income tax assets. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecast of
future profitability, the duration of the statutory carryback and carryforward periods and tax planning alternatives. The assumptions
about future taxable income require the use of significant judgment and are consistent with the plans and estimates we use to manage
the underlying business.
For the year ended December 31, 2014, a valuation allowance of approximately $1.5 million was recorded on charitable
contribution carryforward deferred tax assets which expired on December 31, 2015. This valuation allowance reversed at such time
due to the expiration of those unused charitable contributions. However, an additional valuation allowance of $0.9 million was
recorded for the year ended December 31, 2015 for the charitable contributions we expect will expire in 2016 and be unutilized.
Due to the uncertainty of realizing the benefit from the deferred tax asset recorded for certain state net operating loss
carryforwards, we have recorded a valuation allowance of $0.6 million, net of federal tax benefit, on the deferred tax assets related to
those state net operating losses. We believe it is more likely than not that the benefit from these state net operating loss carryforwards
will not be realized.
Although the secondary offerings that were completed in December 2013 and April 2014 gave rise to an ownership change
under Section 382, we believe that the resulting limitations imposed by Section 382 will not affect our ability to use our existing net
operating loss carryforwards. Any future ownership change may, however, result in further limitations imposed by Section 382. Any
such limitation may have the effect of reducing our after-tax cash flow in future years and may affect our need for a valuation
allowance on our deferred tax assets related to federal and state net operating loss carryforwards.
55
Self-Insurance Reserves
Reserves are recorded for the estimated amounts of guest and employee claims and expenses incurred each period that are not
covered by insurance. Reserves are established for both identified claims and incurred but not reported (“IBNR”) claims. Such
amounts are accrued for when claim amounts become probable and estimable. Reserves for identified claims are based upon our own
historical claims experience and third-party estimates of settlement costs. Reserves for IBNR claims are based upon our own claims
data history, as well as industry averages. All reserves are periodically reviewed for changes in facts and circumstances and
adjustments are made as necessary.
Revenue Recognition
We recognize revenue upon admission into a theme park for single day tickets and when products are received by customers for
merchandise, culinary or other in-park spending. For season passes and other multi-use admission products, revenue is deferred and
recognized based on the terms of the admission product and its estimated usage and is adjusted periodically.
We have entered into agreements with certain external theme park, zoo and other attraction operators, to jointly market and sell
single and multi-use admission products. These joint products allow admission to both a Company park and an external park, zoo or
other attraction. The agreements with the external partners specify the allocation of revenue to us from any jointly sold products.
Whether the Company or the external partner sells the product, our portion of revenue is deferred until the first time the product is
redeemed at one of our parks and recognized over its related use, in a manner consistent with the Company’s own admission products.
Recently Issued Financial Accounting Standards
Refer to Note 3–Recently Issued Accounting Pronouncements, in our notes to the consolidated financial statements included
elsewhere in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Inflation
The impact of inflation has affected, and will continue to affect, our operations significantly. Our costs of food, merchandise and
other revenues are influenced by inflation and fluctuations in global commodity prices. In addition, costs for construction, repairs and
maintenance are all subject to inflationary pressures.
Interest Rate Risk
We are exposed to market risks from fluctuations in interest rates, and to a lesser extent on currency exchange rates, from time
to time, on imported rides and equipment. The objective of our financial risk management is to reduce the potential negative impact of
interest rate and foreign currency exchange rate fluctuations to acceptable levels. We do not acquire market risk sensitive instruments
for trading purposes.
We manage interest rate risk through the use of a combination of fixed-rate long-term debt and interest rate swaps that fix a
portion of our variable-rate long-term debt.
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.
Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest
payments are made on our variable-rate debt. During the next 12 months, our estimate is that an additional $5.3 million will be
reclassified as an increase to interest expense.
After considering the impact of interest rate swap agreements, at December 31, 2015, approximately $1,250.0 million of our
outstanding long-term debt represents fixed-rate debt and approximately $336.3 million represents variable-rate debt. Assuming an
average balance on our revolving credit borrowings of approximately $40.0 million, a hypothetical 100 bps increase in 3 month
LIBOR on our variable-rate debt would lead to an increase of approximately $3.3 million in annual cash interest costs due to the
impact of our fixed-rate swap agreements.
56
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and the notes thereto are provided in Part IV, Item 15 of this Annual Report on Form 10-
K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), require public companies, including
us, to maintain “disclosure controls and procedures,” which are defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act to
mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms and that such information is accumulated and communicated to management, including our principal
executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions
regarding required or necessary disclosures. In designing and evaluating our disclosure controls and procedures, management
recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the disclosure controls and procedures are met. The design of any controls and procedures
also is based on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions. Additionally, in designing disclosure controls and procedures, our
management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls
and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has
evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered
by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer
concluded that, as of the end of the period covered by this report, the design and operation of our disclosure controls and procedures
were effective to accomplish their objectives at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
Regulations under the Exchange Act require public companies, including our Company, to evaluate any change in our “internal
control over financial reporting” as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. There have been
no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2015 that have materially
affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
As required by the SEC’s rules and regulations for the implementation of Section 404 of the Sarbanes-Oxley Act, our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of our consolidated financial statements for external reporting purposes in accordance with accounting principles generally accepted in
the United States of America. Our internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our
consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
57
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In
making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management
determined that the Company maintained effective internal control over financial reporting as of December 31, 2015.
Report of Independent Registered Public Accounting Firm
The Company’s independent registered public accounting firm has issued a report on the Company’s internal control over
financial reporting. This report appears on page F-2 in this Annual Report on Form 10-K.
Item 9B. Other Information
Rule 10b5-1 Plans
Our policy governing transactions in our securities by our directors, officers and employees permits such persons to adopt stock
trading plans pursuant to Rule 10b5-1 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended. Our directors, officers and employees have in the past and may from time to time establish such stock trading
plans. We do not undertake any obligation to disclose, or to update or revise any disclosure regarding, any such plans and specifically
do not undertake to disclose the adoption, amendment, termination or expiration of any such plans.
Iran Threat Reduction and Syria Human Rights Act of 2012
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the
Exchange Act, the Company hereby incorporates by reference herein Exhibit 99.1 of this report, which includes disclosures publicly
filed and/or provided to Blackstone, an affiliate of our major stockholders, by Travelport Worldwide Limited and Hilton Worldwide
Holdings, Inc., which may be considered the Company’s affiliates.
58
PART III.
Item 10. Director, Executive Officers and Corporate Governance
The information required by this item will be included in our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item will be included in our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this item will be included in our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
59
PART IV.
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm .........................................................................................
Consolidated Balance Sheets ........................................................................................................................................
Consolidated Statements of Comprehensive Income ....................................................................................................
Consolidated Statements of Changes in Stockholders’ Equity......................................................................................
Consolidated Statements of Cash Flows .......................................................................................................................
F-2
F-3
F-4
F-5
F-6
Notes to Consolidated Financial Statements ................................................................................................................. F-7 to F-39
2. Financial Statement Schedules
Schedule I—Registrant’s Condensed Financial Statements .......................................................................................... F-40 to F-46
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is
shown in the financial statements or notes herein.
3. Exhibits
See the Exhibit Index beginning on page 62.
60
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 26, 2016
SeaWorld Entertainment, Inc.
/s/ JOEL K. MANBY
Name: Joel K. Manby
Title: President and Chief Executive Officer, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated:
Signature
Date
Capacity
/S/ JOEL K. MANBY
Joel K. Manby
/S/ PETER J. CRAGE
Peter J. Crage
/S/ MARC G. SWANSON
Marc G. Swanson
/S/ DAVID F. D’ALESSANDRO
David F. D’Alessandro
/S/ JAMES ATCHISON
James Atchison
/S/ JOSEPH BARATTA
Joseph Baratta
/S/ WILLIAM GRAY
William Gray
/S/ JUDITH A. MCHALE
Judith A. McHale
/S/ THOMAS MOLONEY
Thomas Moloney
/S/ ELLEN TAUSCHER
Ellen Tauscher
/S/ DEBORAH M. THOMAS
Deborah M. Thomas
/S/ PETER WALLACE
Peter Wallace
February 26, 2016
President and Chief Executive Officer, Director
(Principal Executive Officer)
February 26, 2016
Chief Financial Officer (Principal Financial Officer)
February 26, 2016
Chief Accounting Officer (Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
61
Exhibit No. Description
Exhibit Index
3.1
Amended and Restated Certificate of Incorporation of SeaWorld Entertainment, Inc. (incorporated by reference to Exhibit
3.1 to the Registrant’s Current Report on Form 8-K filed on April 24, 2013) (No. 001-35883)
3.2
Amended and Restated Bylaws of SeaWorld Entertainment, Inc. (incorporated by reference to Exhibit 3.2 to the
Registrant’s Current Report on Form 8-K filed on December 12, 2014) (No. 001-35883)
4.1
Stockholders Agreement, dated as of April 24, 2013, among SeaWorld Entertainment, Inc. and the other parties thereto
(incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 24, 2013)
10.1
Amendment No. 4, dated as of April 5, 2013, to the Credit Agreement, among SeaWorld Parks & Entertainment, Inc.
(f/k/a SW Acquisitions Co., Inc.), the guarantors party thereto from time to time, Bank of America, N.A., as
administrative agent, collateral agent, letter of credit issuer and swing line lender, Bank of America, N.A., as lead
arranger and bookrunner, and the other agents and lenders from time to time party thereto (the amended and restated
Credit Agreement is included as Exhibit A hereto) (incorporated by reference to Exhibit 10.41 to the Registrant’s
Registration Statement on Form S-1 (No. 333-185697))
10.2
Amendment No. 5, dated as of May 14, 2013, to the Credit Agreement, among SeaWorld Parks & Entertainment, Inc.
(f/k/a SW Acquisitions Co., Inc.), the guarantors party thereto from time to time, Bank of America, N.A., as
administrative agent, collateral agent, Letter of Credit issuer and swing line lender, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Bank of America, N.A., as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Barclays Capital, Deutsche Bank Securities Inc., Goldman Sachs Lending Partners LLC, J.P. Morgan
Securities LLC, Macquarie Capital (USA) Inc. and Mizuho Corporate Banks, Ltd. as joint bookrunners, Deutsche Bank
Securities Inc. and Barclays Bank plc, as co-syndication agents, and the other agents and lenders from time to time party
thereto (the amended and restated Credit Agreement is included as Exhibit A hereto) (incorporated by reference to
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 23, 2013) (No. 001-35883)
10.3
Amendment No. 6, dated as of August 9, 2013, to the Credit Agreement, among SeaWorld Parks & Entertainment, Inc.
(f/k/a SW Acquisitions Co., Inc.), the guarantors party thereto from time to time, Bank of America, N.A., as
administrative agent, collateral agent, Letter of Credit issuer and swing line lender, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Bank of America, N.A., as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Barclays Capital, Deutsche Bank Securities Inc., Goldman Sachs Lending Partners LLC, J.P. Morgan
Securities LLC, Macquarie Capital (USA) Inc. and Mizuho Corporate Banks, Ltd. as joint bookrunners, Deutsche Bank
Securities Inc. and Barclays Bank plc, as co-syndication agents, and the other agents and lenders from time to time party
thereto (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14,
2013) (No. 001-35883)
10.4
Amendment No. 7, dated as of March 30, 2015, to the Credit Agreement, dated as of December 1, 2009, among
SeaWorld Parks & Entertainment, Inc. (f/k/a SW Acquisitions Co., Inc.), the guarantors party thereto from time to time,
Bank of America, N.A., as administrative agent, collateral agent, Letter of Credit issuer and swing line lender, Deutsche
Bank Securities Inc. and Barclays Bank plc, as co-syndication agents, Mizuho Corporate Banks, Ltd., as documentation
agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., as joint lead arrangers,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital and Deutsche Bank Securities Inc. as joint
bookrunners, and the other agents and lenders from time to time party thereto (incorporated by reference to Exhibit 10.1
to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) (No. 001-35883)
10.5
Joinder Agreement, dated as of December 17, 2012, under the Credit Agreement, among SeaWorld of Texas Holdings,
LLC, SeaWorld of Texas Management, LLC, SeaWorld of Texas Beverage, LLC and Bank of America, N.A., as
administrative agent and collateral agent (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration
Statement on Form S-1 (No. 333-185697))
10.6
Joinder Agreement, dated as of May 6, 2015, among SWBG Orlando Corporate Operations Group, LLC, SEA Holdings
I, LLC and Bank of America, N.A., as administrative agent and collateral agent, to the Credit Agreement, dated as of
December 1, 2009 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2015) (No. 001-35883)
10.7
Security Agreement, dated as of December 1, 2009, among SW Acquisitions Co., Inc., the other grantors named therein
and Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration
Statement on Form S-1 (No. 333-185697))
62
Exhibit No. Description
10.8
Supplement No. 1, dated as of December 17, 2012, to the Security Agreement among the grantors identified therein and
Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration
Statement on Form S-1 (No. 333-185697))
10.9
Supplement No. 2, dated as of May 6, 2015, among SWBG Orlando Corporate Operations Group, LLC, SEA Holdings I,
LLC and Bank of America, N.A., as collateral agent, to the Security Agreement, dated as of December 1, 2009
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2015) (No. 001-35883)
10.10
Pledge Agreement, dated as of December 1, 2009, between SeaWorld Entertainment, Inc. (f/k/a/SW Holdco, Inc.) and
Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration
Statement on Form S-1 (No. 333-185697))
10.11
Patent Security Agreement, dated as of December 1, 2009, by SeaWorld Parks & Entertainment (f/k/a Busch
Entertainment LLC) in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.10 to
the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.12
Trademark Security Agreement, dated as of December 1, 2009, by SeaWorld Parks & Entertainment (f/k/a Busch
Entertainment LLC) in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.11 to
the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.13
Trademark Security Agreement, dated as of December 1, 2009, by Sea World LLC in favor of Bank of America, N.A., as
collateral agent (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (No.
333-185697))
10.14
Copyright Security Agreement, dated as of December 1, 2009, by SeaWorld Parks & Entertainment (f/k/a Busch
Entertainment LLC) in favor of Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.13 to
the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.15
Copyright Security Agreement, dated as of December 1, 2009, by Sea World LLC in favor of Bank of America, N.A., as
collateral agent (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 (No.
333-185697))
10.16
Registration Rights Agreement, dated December 1, 2009, by and among SeaWorld Entertainment, Inc. (f/k/a SW Holdco,
Inc.), SW Cayman L.P. and the equityholders named therein (incorporated by reference to Exhibit 10.17 to the
Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.17
Lease Amendment, dated January 9, 1978, by and between the City of San Diego and Sea World Inc. (incorporated by
reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.18
Lease Amendment, dated March 6, 1979, by and between the City of San Diego and Sea World Inc. (incorporated by
reference to Exhibit 10.19 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.19
Lease Amendment, dated December 12, 1983, by and between the City of San Diego and Sea World Inc. (incorporated
by reference to Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.20
Lease Amendment, dated June 24, 1985, by and between the City of San Diego and Sea World Inc. (incorporated by
reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.21
Lease Amendment, dated September 22, 1986, by and between the City of San Diego and Sea World Inc. (incorporated
by reference to Exhibit 10.22 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.22
Lease Amendment, dated June 29, 1998, by and between the City of San Diego and Sea World Inc. (incorporated by
reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.23
Lease Amendment, dated July 9, 2002, by and between the City of San Diego and Sea World Inc. (incorporated by
reference to Exhibit 10.24 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.24
Trademark License Agreement, dated December 1, 2009, by and between Anheuser- Busch Incorporated and Busch
Entertainment LLC (incorporated by reference to Exhibit 10.25 to the Registrant’s Registration Statement on Form S-1
(No. 333-185697))
63
Exhibit No. Description
10.25
Amended and Restated Agreement, dated April 1, 1983, by and between SeaWorld Parks & Entertainment LLC (f/k/a
SPI, Inc.) and Sesame Workshop (f/k/a Children’s Television Workshop) (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.26 to the Registrant’s
Registration Statement on Form S-1 (No. 333-185697))
10.26
Amendment, dated August 24, 2006, to the Amended and Restated Agreement, dated April 1, 1983, by and between
SeaWorld Parks & Entertainment LLC (f/k/a SPI, Inc.) and Sesame Workshop (f/k/a Children’s Television Workshop)
(incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.27
10.28
License Agreement, dated August 24, 2006, by and between Sesame Workshop and SeaWorld Parks & Entertainment
LLC (f/k/a Busch Entertainment Corporation) (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment) (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration Statement on Form S-
1 (No. 333-185697))
Change in Control Notification and Consent, dated October 6, 2009, pursuant to the license agreement, dated April 1,
1983, as amended on August 24, 2006, between SeaWorld Parks & Entertainment LLC (f/k/a Busch Entertainment
Corporation) and Sesame Workshop (incorporated by reference to Exhibit 10.29 to the Registrant’s Registration
Statement on Form S-1 (No. 333-185697))
10.29
Change in Control Notification and Consent, dated October 6, 2009, pursuant to the license agreement, dated August 24,
2006, between SeaWorld Parks & Entertainment LLC (f/k/a Busch Entertainment Corporation) and Sesame Workshop
(incorporated by reference to Exhibit 10.30 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.30
Second Amended and Restated Equityholders Agreement, dated as of April 11, 2011 (incorporated by reference to
Exhibit 10.38 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.31†
2013 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.31 to the Registrant’s Registration Statement on
Form S-1 (No. 333-185697))
10.32†
Form of Restricted Stock Grant and Acknowledgment (incorporated by reference to Exhibit 10.15 to the Registrant’s
Registration Statement on Form S-1 (No. 333-185697))
10.33†
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.40 to the Registrant’s Registration
Statement on Form S-1 (No. 333-185697))
10.34†
SeaWorld Parks & Entertainment, Inc. Key Employee Severance Plan, effective August 1, 2010 (incorporated by
reference to Exhibit 10.37 to the Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.35†
Offer Letter to David D’Alessandro, dated September 1, 2010 (incorporated by reference to Exhibit 10.35 to the
Registrant’s Registration Statement on Form S-1 (No. 333-185697))
10.36
Form of Share Repurchase Agreement between SeaWorld Entertainment, Inc. and the Partnerships (incorporated by
reference to Exhibit 10.45 to the Registrant’s Registration Statement on Form S-1 (No. 333-192420))
10.37†
Second Amended and Restated Outside Director Compensation Policy (incorporated by reference to Exhibit 10.4 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) (No. 001-35883)
10.38†
Separation and Consulting Agreement, dated December 10, 2014, by and between SeaWorld Entertainment, Inc. and
James Atchison
10.39†
Restricted Stock Award Agreement, dated January 15, 2015, by and between SeaWorld Entertainment, Inc. and David
D’Alessandro
10.40†
Form of Restricted Stock Grant Notice and Restricted Stock Agreement (Employees—Annual Incentive Plan Award)
(incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2015) (No. 001-35883)
10.41†
Form of Restricted Stock Grant Notice and Restricted Stock Agreement (Employees—Time-Based Shares) (incorporated
by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015)
(No. 001-35883)
10.42†
Form of Option Grant Notice and Option Agreement (Employees—Time-Based Options) (incorporated by reference to
Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) (No. 001-35883)
64
Exhibit No. Description
10.43†
Form of Restricted Stock Grant Notice and Restricted Stock Agreement (Employees—Performance-Based Shares)
(incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2015) (No. 001-35883)
10.44†
Employment Agreement, dated March 16, 2015, between SeaWorld Entertainment, Inc. and Joel Manby (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 19, 2015) (No. 001-35883)
10.45†
Restricted Stock Grant Notice and Restricted Stock Agreement (Employees—Time-Based Shares), dated April 7, 2015,
between SeaWorld Entertainment, Inc. and Joel Manby (incorporated by reference to Exhibit 10.12 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) (No. 001-35883)
10.46†
Option Grant Notice and Option Agreement (Employees—Time-Based Options), dated April 7, 2015, between SeaWorld
Entertainment, Inc. and Joel Manby (incorporated by reference to Exhibit 10.13 to the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2015) (No. 001-35883)
10.47†
Employment Agreement, dated August 17, 2015, between SeaWorld Entertainment, Inc. and Peter J. Crage (incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 17, 2015) (No. 001-35883)
10.48†
Employment Agreement, dated August 16, 2015, by and between SeaWorld Entertainment, Inc. and Anthony Esparza
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2015) (No. 001-35883)
10.49*† Form of Restricted Stock Agreement (Outside Director Award)
10.50†
Separation Agreement, dated February 18, 2016, between SeaWorld Entertainment, Inc. and Daniel B. Brown
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 19, 2016)
(No. 001-35883)
21.1*
List of Subsidiaries
23.1*
Consent of Deloitte & Touche LLP
31.1*
Certification of Annual Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Annual Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2*
Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.1*
Section 13(r) Disclosure
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
†
*
Identifies exhibits that consist of a management contract or compensatory plan or arrangement.
Filed herewith.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure
other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that
purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within
the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were
made or at any other time.
65
[THIS PAGE INTENTIONALLY LEFT BLANK]
SEAWORLD ENTERTAINMENT, INC.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm ........................................................................................................
Consolidated Balance Sheets as of December 31, 2015 and 2014 ...............................................................................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013 ........................
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2015, 2014 and 2013 ..........
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013 ...........................................
Notes to Consolidated Financial Statements ................................................................................................................................
Schedule I—Registrant’s Condensed Financial Statements ........................................................................................................
Page
Number
F-2
F-3
F-4
F-5
F-6
F-7
F-40
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
SeaWorld Entertainment, Inc.
Orlando, Florida
We have audited the accompanying consolidated balance sheets of SeaWorld Entertainment, Inc. and subsidiaries (the "Company") as
of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in stockholders’ equity,
and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement
schedule listed in the Index at Item 15. We also have audited the Company’s internal control over financial reporting as of December
31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements and financial
statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on
the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SeaWorld Entertainment, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
Tampa, Florida
February 25, 2016
F-2
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents .......................................................................................... $
Accounts receivable, net ............................................................................................
Inventories ..................................................................................................................
Prepaid expenses and other current assets ..................................................................
Deferred tax assets, net...............................................................................................
Total current assets ...............................................................................................
Property and equipment, at cost .......................................................................................
Accumulated depreciation ...............................................................................................
Property and equipment, net .......................................................................................
Goodwill ..........................................................................................................................
Trade names/trademarks, net ...........................................................................................
Other intangible assets, net ..............................................................................................
Deferred tax assets, net ....................................................................................................
Other assets ......................................................................................................................
Total assets ..................................................................................................................... $
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable ....................................................................................................... $
Current maturities on long-term debt .........................................................................
Accrued salaries, wages and benefits .........................................................................
Deferred revenue ........................................................................................................
Dividends payable ......................................................................................................
Other accrued expenses ..............................................................................................
Total current liabilities ..........................................................................................
Long-term debt, net of debt issuance costs of $13,333 and $20,003
as of December 31, 2015 and 2014, respectively .........................................................
Deferred tax liabilities, net ..............................................................................................
Other liabilities ................................................................................................................
Total liabilities ......................................................................................................
Commitments and contingencies (Note 14)
Stockholders’ Equity:
Preferred stock, $0.01 par value—authorized, 100,000,000 shares, no shares
issued or outstanding at December 31, 2015 and 2014 ...........................................
Common stock, $0.01 par value—authorized, 1,000,000,000 shares; 90,320,374
and 90,191,100 shares issued at December 31, 2015 and 2014, respectively .........
Additional paid-in capital ...........................................................................................
Accumulated other comprehensive loss .....................................................................
Retained earnings .......................................................................................................
Treasury stock, at cost (6,519,773 and 4,105,970 shares at December 31, 2015
and 2014, respectively) ...........................................................................................
Total stockholders’ equity ....................................................................................
Total liabilities and stockholders’ equity ..................................................................... $
December 31,
2015
2014
18,971 $
39,538
31,213
16,360
2,975
109,057
2,748,161
(1,029,165 )
1,718,996
335,610
162,726
21,327
23,491
19,927
2,391,134 $
93,743 $
31,850
12,330
79,818
430
11,143
229,314
1,548,893
68,161
40,646
1,887,014
43,906
37,002
33,134
20,894
7,268
142,204
2,612,052
(867,421)
1,744,631
335,610
164,188
24,525
—
11,313
2,422,471
88,279
14,050
19,068
79,367
172
20,149
221,085
1,569,400
31,760
20,691
1,842,936
—
—
903
624,765
(13,137 )
46,460
(154,871 )
504,120
2,391,134 $
902
655,471
(483)
33,516
(109,871)
579,535
2,422,471
See accompanying notes to consolidated financial statements.
F-3
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(In thousands, except per share amounts)
Net revenues:
Admissions .................................................................................................. $
Food, merchandise and other .......................................................................
Total revenues ........................................................................................
846,922 $
524,082
1,371,004
859,426 $
518,386
1,377,812
921,016
539,234
1,460,250
2015
Year Ended December 31,
2014
2013
103,980
109,024
114,192
743,322
187,298
—
—
1,407
50,072
166,086
1,262,377
197,873
(241)
90,622
29,858
77,634
25,714
51,920
1,265
53,185
0.59
0.59
87,537
88,152
Costs and expenses:
Cost of food, merchandise and other revenues ............................................
Operating expenses (exclusive of depreciation and
amortization shown separately below) .....................................................
Selling, general and administrative ..............................................................
Restructuring and other related costs ...........................................................
Separation costs ...........................................................................................
Secondary offering costs .............................................................................
Termination of advisory agreement .............................................................
Depreciation and amortization .....................................................................
Total costs and expenses ........................................................................
Operating income ........................................................................................
Other expense (income), net ........................................................................
Interest expense ...........................................................................................
Loss on early extinguishment of debt and write-off
of discounts and debt issuance costs .........................................................
Income before income taxes..............................................................................
Provision for income taxes ..........................................................................
Net income ....................................................................................................... $
Other comprehensive income:
708,745
214,072
2,268
—
—
—
182,503
1,211,568
159,436
129
65,571
727,659
189,369
11,567
2,574
747
—
176,275
1,217,215
160,597
(198)
81,543
20,905
72,831
23,698
49,133 $
461
78,791
28,872
49,919 $
Unrealized (loss) gain on derivatives, net of tax ..........................................
Comprehensive income ................................................................................... $
(12,654)
36,479 $
(494)
49,425 $
Earnings per share:
Net income per share, basic ......................................................................... $
Net income per share, diluted ...................................................................... $
0.57 $
0.57 $
0.57 $
0.57 $
Weighted average common shares outstanding:
Basic ............................................................................................................
Diluted .........................................................................................................
85,860
85,981
87,183
87,480
See accompanying notes to consolidated financial statements.
F-4
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(In thousands, except per share and share amounts)
Shares of
Common
Stock
Issued
Common
Stock
Additional
Paid-In
Capital
(Accumulated
Deficit)
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Treasury
Stock,
at Cost
Total
Stockholders'
Equity
—
—
Balance at December 31, 2012 .......................... 82,737,008 $
Equity-based compensation ................................
74,561
Unrealized gain on derivatives, net of
tax expense of $632 ..........................................
Issuance of common stock in initial public
offering, net of underwriter commissions
and offering costs ............................................. 10,000,000
Conversion of common stock into unvested
restricted shares ................................................ (3,216,719)
334,066
Vesting of restricted shares .................................
Shares withheld for tax withholdings ..................
(28,463)
Cash dividends declared to stockholders
($0.60 per share), net of forfeitures ..................
Repurchase of 1,500,000 shares of treasury
—
stock, at cost .....................................................
—
Net income ..........................................................
Balance at December 31, 2013 .......................... 89,900,453
Equity-based compensation ................................
—
Unrealized loss on derivatives, net of
tax benefit of $286 ...........................................
Vesting of restricted shares .................................
Shares withheld for tax withholdings ..................
Cash dividends declared to stockholders
($0.62 per share), net of forfeitures ..................
Repurchase of 2,605,970 shares of treasury
—
stock, at cost .....................................................
Net income ..........................................................
—
Balance at December 31, 2014 .......................... 90,191,100
Equity-based compensation ................................
—
Unrealized loss on derivatives, net of
tax benefit of $6,115 ........................................
Vesting of restricted shares .................................
Shares withheld for tax withholdings ..................
Cash dividends declared to stockholders
($0.84 per share), net of forfeitures ..................
Repurchase of 2,413,803 shares of treasury
—
stock, at cost .....................................................
Net income ..........................................................
—
Balance at December 31, 2015 .......................... (cid:3)(cid:3) 90,320,374 $
—
299,583
(8,936)
—
171,495
(42,221)
—
—
827 $456,923 $ (14,195) $
(1,254 ) $
1
6,025
—
—
— $ 442,301
6,026
—
—
—
—
1,265
—
1,265
100 245,341
(32)
3
—
32
(3)
(852)
—
—
—
—
— (18,072)
(35,839)
—
—
—
—
899 689,394
2,349
—
—
51,920
1,886
—
—
—
—
—
—
—
—
11
—
— 245,441
—
—
—
—
—
(852)
—
(53,911)
(44,163)
—
(44,163)
51,920
(44,163) 648,027
2,349
—
—
3
—
—
(3)
(213)
—
—
—
(494 )
—
—
—
—
—
(494)
—
(213)
— (36,056)
(18,289)
—
—
(54,345)
—
—
—
—
902 655,471
6,527
—
—
49,919
33,516
—
—
—
(65,708)
—
(65,708)
49,919
(483 ) (109,871) 579,535
6,527
—
—
—
2
(1)
—
(2)
(843)
—
—
—
(12,654 )
—
—
—
—
—
(12,654)
—
(844)
— (36,388)
(36,189)
—
—
(72,577)
—
—
—
—
903 $624,765 $
—
49,133
46,460 $
—
—
(45,000)
49,133
(13,137 ) $ (154,871) $ 504,120
(45,000)
—
See accompanying notes to consolidated financial statements.
F-5
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(In thousands)
(cid:3)
2015
Year Ended December 31,
2014
2013
Cash Flows From Operating Activities:
Net income ...............................................................................................................
$
49,133
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .....................................................................
Amortization of debt issuance costs and discounts......................................
Loss on sale or disposal of assets .................................................................
Loss on early extinguishment of debt and write-off
of discounts and debt issuance costs .........................................................
Loss on derivatives ......................................................................................
Deferred income tax provision .....................................................................
Equity-based compensation .........................................................................
Changes in assets and liabilities:
Accounts receivable .........................................................................
Inventories .......................................................................................
Prepaid expenses and other current assets ........................................
Accounts payable ..............................................................................
Accrued salaries, wages and benefits ................................................
Deferred revenue ..............................................................................
Other accrued expenses ....................................................................
Other assets and liabilities ................................................................
Net cash provided by operating activities ...................................
Cash Flows From Investing Activities:
Capital expenditures ....................................................................................................
Acquisition of intangible assets ...................................................................................
Change in restricted cash .............................................................................................
Net cash used in investing activities ...........................................
Cash Flows From Financing Activities:
Repayment of long-term debt ...................................................................................
Purchase of treasury stock ........................................................................................
Proceeds from draw on revolving credit facility .......................................................
Repayment of revolving credit facility .....................................................................
Dividends paid to stockholders .................................................................................
Proceeds from the issuance of debt ...........................................................................
Debt issuance costs ...................................................................................................
Payment of tax withholdings on equity-based compensation
through shares withheld .........................................................................................
Proceeds from issuance of common stock in initial public offering, net of
underwriter commissions .......................................................................................
Repayment of note payable .......................................................................................
Redemption premium payment .................................................................................
Offering costs ...........................................................................................................
Net cash used in financing activities...........................................
Change in Cash and Cash Equivalents .......................................................................
Cash and Cash Equivalents—Beginning of period .........................................................
Cash and Cash Equivalents—End of period .............................................................. $
Supplemental Disclosures of Noncash Investing and
Financing Activities
Dividends declared, but unpaid ................................................................................. $
Capital expenditures in accounts payable ................................................................. $
Treasury stock purchases settled in January 2015..................................................... $
(cid:3)(cid:3)
$
(cid:3)(cid:3)
(cid:3)(cid:3)
(cid:3)(cid:3)
(cid:3)(cid:3)
182,503
6,409
6,685
20,905
287
23,246
6,527
(3,622)
1,234
835
2,523
(6,738)
943
(2,347)
(2,249)
286,274
(157,302)
(120)
45
(157,377)
(306,150)
(50,650)
60,000
(45,000)
(72,318)
280,000
(4,571)
(843)
—
—
(14,300)
—
(153,832)
(24,935)
43,906
18,971
$
430
28,743
(cid:3)(cid:3)
$
$
— $
49,919
$
51,920
176,275
9,399
5,792
461
—
28,000
2,349
6,256
2,709
(1,276)
(8,791)
(4,928)
(6,089)
(763)
2,219
261,532
(154,641)
(1,900)
(5)
(156,546)
(45,537)
(60,058)
40,000
(40,000)
(72,113)
—
—
(213)
—
—
—
—
(177,921)
(72,935)
116,841
43,906
172
25,730
5,650
$
$
$
$
166,086
10,869
10,100
29,858
—
24,728
6,025
(3,215)
(166)
(5,343)
4,293
(9,092)
94
(824)
1,128
286,461
(166,258)
—
(118)
(166,376)
(189,255)
(44,163)
35,000
(35,000)
(36,175)
1,455
(10,635)
(852)
253,800
(3,000)
(15,400)
(4,694)
(48,919)
71,166
45,675
116,841
17,939
27,160
—
See accompanying notes to consolidated financial statements.
F-6
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. 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. Prior to December 1, 2009, the Company did not have
any operations. On December 1, 2009, the Company acquired all of the outstanding equity interest of Busch Entertainment LLC and
affiliates from Anheuser Busch Companies, Inc. and Anheuser-Busch InBev SA/NV (“ABI”). At that time, the Company was owned
by ten limited partnerships (the “Partnerships” or the “selling stockholders”), ultimately owned by affiliates of The Blackstone
Group L.P. (“Blackstone”) and certain co-investors. The Company completed an initial public offering in April 2013, and the selling
stockholders sold shares of common stock in April 2013, December 2013 and April 2014. As of December 31, 2015, the Partnerships
own approximately 22.2% of the Company’s total outstanding common stock. See further discussion in Note 19-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). The Company also has an Aquatica water park located within its SeaWorld
theme park in San Antonio, which is only accessible to SeaWorld San Antonio guests for an additional fee. In 2016, Aquatica San
Antonio will be converted into a stand-alone, separate admission park that guests can access through an independent gate without the
need to purchase admission to SeaWorld San Antonio.
During the years ended December 31, 2015, 2014 and 2013 approximately 57%, 56% and 55% of the Company’s revenues were
generated in the State of Florida, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) and 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
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.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 2015 presentation, in particular debt issuance costs, which were
previously included in other assets in the accompanying consolidated balance sheets, have been reclassified to long-term debt as a
result of the adoption of a new Accounting Standards Update (“ASU”). See Note 3–Recently Issued Accounting Pronouncements for
further details.
F-7
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Cash and Cash Equivalents
Cash and cash equivalents include cash held at financial institutions as well as operating cash onsite at each theme park to fund daily
operations and amounts due from third-party credit card companies with settlement terms of less than four days. The amounts due
from third-party credit card companies totaled $9,597 and $8,381 at December 31, 2015 and 2014, respectively. The cash balances in
non-interest bearing accounts held at financial institutions are fully insured by the Federal Deposit Insurance Corporation (“FDIC”)
through December 31, 2015. Interest bearing accounts are insured up to $250. At times, cash balances may exceed federally insured
amounts and potentially subject the Company to a concentration of credit risk. Management believes that no significant concentration
of credit risk exists with respect to these cash balances because of its assessment of the creditworthiness and financial viability of the
respective financial institutions.
Accounts Receivable—Net
Accounts receivable are reported at net realizable value and consist primarily of amounts due from customers for the sale of admission
products. The Company is not exposed to a significant concentration of credit risk. The Company records an allowance for estimated
uncollectible receivables, based on the amount and status of past-due accounts, contractual terms of the receivables and the
Company’s history of uncollectible accounts. For all periods presented, the allowance for uncollectible accounts and the related
provision were insignificant.
Inventories
Effective December 31, 2015, inventories are stated at the lower of cost or net realizable value in accordance with the adoption of
ASU 2015-11 Simplifying the Measurement of Inventory. See Note 3–Recently Issued Accounting Pronouncements for further
discussion. Prior to 2015, inventories were stated at the lower of cost or market. Inventories consist primarily of products for resale,
including merchandise, culinary items and miscellaneous supplies. Obsolete or excess inventories are recorded at their estimated
realizable value.
Restricted Cash
Restricted cash is recorded in other current assets and consists of funds received from strategic partners for use in approved marketing
and promotional activities.
Property and Equipment—Net
Property and equipment are recorded at cost. The cost of ordinary or routine maintenance, repairs, spare parts and minor renewals is
expensed as incurred. Development costs associated with new attractions and products are generally capitalized after necessary
feasibility studies have been completed and final concept or contracts have been approved. The cost of assets is depreciated using the
straight-line method based on the following estimated useful lives:
Land improvements............................................................ 10-40 years
Buildings ............................................................................ 5-40 years
Rides, attractions and equipment ....................................... 3-20 years
Animals .............................................................................. 1-50 years
Material costs to purchase animals exhibited in the theme parks are capitalized and amortized over their estimated lives (1-50 years).
All costs to maintain animals are expensed as incurred, including in-house animal breeding costs, as they are insignificant to the
consolidated financial statements. Construction in process assets consist primarily of new rides, attractions and infrastructure
improvements that have not yet been placed in service. These assets are stated at cost and are not depreciated. Once construction of the
assets is completed and placed into service, assets are reclassified to the appropriate asset class based on their nature and depreciated
in accordance with the useful lives above. Debt interest is capitalized on all active construction projects. Total interest capitalized for
the years ended December 31, 2015, 2014 and 2013, was $2,299, $2,629 and $4,347, respectively.
F-8
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Computer System Development Costs
The Company capitalizes computer system development costs that meet established criteria and, once placed in service, amortizes
those costs to expense on a straight-line basis over five years. Total capitalized costs related to computer system development costs,
net of accumulated amortization, were $12,873 and $10,287, as of December 31, 2015 and 2014, respectively, and are recorded in
other assets in the accompanying consolidated balance sheets. Accumulated amortization was $9,250 and $8,841 as of December 31,
2015 and 2014, respectively. Amortization expense of capitalized computer system development costs during the years ended
December 31, 2015, 2014 and 2013 was $3,022, $2,703 and $1,949, respectively, and is recorded in depreciation and amortization in
the accompanying consolidated statements of comprehensive income. Systems reengineering costs do not meet the proper criteria for
capitalization and are expensed as incurred.
Impairment of Long-Lived Assets
All long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that
the carrying value of the assets may not be recoverable. An impairment loss may be recognized when estimated undiscounted future
cash flows expected to result from the use of the asset, including disposition, are less than the carrying value of the asset. The
measurement of the impairment loss to be recognized is based upon the difference between the fair value and the carrying amounts of
the assets. Fair value is generally determined based upon a discounted cash flow analysis. In order to determine if an asset has been
impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (generally a
theme park). No impairment losses were recognized during the years ended December 31, 2015, 2014 and 2013.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are not amortized, but instead reviewed for impairment at least annually on
December 1, and as of an interim date should factors or indicators become apparent that would require an interim test, with ongoing
recoverability based on applicable reporting unit performance and consideration of significant events or changes in the overall
business environment. In assessing goodwill for impairment, the Company may choose to initially evaluate qualitative factors to
determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company considers
several factors, including macroeconomic conditions, industry and market conditions, overall financial performance of the reporting
unit, changes in management, strategy or customers, and relevant reporting unit specific events such as a change in the carrying
amount of net assets, a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit, and the testing for
recoverability of a significant asset group within a reporting unit. If this qualitative assessment results in a conclusion that it is more
likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting
unit. If the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then the
impairment analysis for goodwill is performed at the reporting unit level using a two-step approach. The Company may also choose to
perform this two-step impairment analysis instead of the qualitative analysis. The first step is a comparison of the fair value of the
reporting unit, determined using the income and market approach, to its recorded amount. If the recorded amount exceeds the fair
value, the second step quantifies any impairment write-down by comparing the current implied value of goodwill to the recorded
goodwill balance. The Company’s other indefinite-lived intangible assets consist of certain trade names/trademarks and other
intangible assets which, after considering legal, regulatory, contractual, and other competitive and economic factors, are determined to
have indefinite lives and are tested for impairment using the relief from royalty method. The Company performed either a quantitative
or qualitative assessment of goodwill and other indefinite-lived intangible assets at December 1, 2015, a quantitative assessment at
December 1, 2014 and a qualitative assessment at December 1, 2013 and identified no impairments.
Other Definite-Lived Intangible Assets
The Company’s other intangible assets consist primarily of certain trade names/trademarks, relationships with ticket resellers, a
favorable lease asset and a non-compete agreement. These intangible assets are amortized on the straight-line basis over their
estimated remaining lives.
F-9
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Self-Insurance Reserves
Reserves are recorded for the estimated amounts of guest and employee claims and expenses incurred each period that are not covered
by insurance. Reserves are established for both identified claims and incurred but not reported (“IBNR”) claims. Such amounts are
accrued for when claim amounts become probable and estimable. Reserves for identified claims are based upon the Company’s
historical claims experience and third-party estimates of settlement costs. Reserves for IBNR claims are based upon the Company’s
claims data history, actuarially determined loss development factors and qualitative considerations such as claims management
activities. The Company maintains self-insurance reserves for healthcare, auto, general liability and workers compensation claims.
Total claims reserves were $27,819 at December 31, 2015, of which $2,769 is recorded in accrued salaries, wages and benefits, $6,973
is recorded in other accrued expenses and the remaining long-term portion is recorded in other liabilities in the accompanying
consolidated balance sheets. Total claims reserves were $27,127 at December 31, 2014, of which $2,977 is recorded in accrued
salaries, wages and benefits, $7,800 is recorded in other accrued expenses and the remaining long-term portion is recorded in other
liabilities in the accompanying consolidated balance sheets. All reserves are periodically reviewed for changes in facts and
circumstances and adjustments are made as necessary.
Debt Issuance Costs
Debt issuance costs are amortized to interest expense using the effective interest method over the term of the Senior Secured Credit
Facilities or the Senior Notes, prior to their redemption, and are included in long term debt, net, in the accompanying consolidated
balance sheets due to the adoption of ASU 2015-03, Interest-Imputation of Interest (Topic 835): Simplifying the Presentation of Debt
Issuance Costs, in 2015. See Note 3–Recently Issued Accounting Pronouncements for further discussion.
Share Repurchase Program and Treasury Stock
From time to time, the Company’s Board of Directors (the “Board”) may authorize share repurchases of common stock. Shares
repurchased under Board authorizations are held in treasury for general corporate purposes. The Company accounts for treasury stock
on the trade date under the cost method. Treasury stock at December 31, 2015 and 2014 is recorded as a reduction to stockholders’
equity as the Company does not currently intend to retire the treasury stock held. See further discussion of the Company’s Share
Repurchase Program in Note 19–Stockholders’ Equity.
Revenue Recognition
The Company recognizes revenue upon admission into a park for single day tickets and when products are received by customers for
merchandise, culinary or other in-park spending. For season passes and other multi-use admission products, deferred revenue is
recorded and the related revenue is recognized over the terms of the admission product and its estimated usage. Deferred revenue
includes a current and long-term portion. At December 31, 2015 and 2014, long-term deferred revenue of $1,820 and $2,414,
respectively, is included in other liabilities in the accompanying consolidated balance sheets. The Company has entered into
agreements with certain external theme park, zoo and other attraction operators to jointly market and sell single and multi-use
admission products. These joint products allow admission to both a Company park and an external park, zoo or other attraction. The
agreements with the external partners specify the allocation of revenue to the Company from any jointly sold products. Whether the
Company or the external partner sells the product, the Company’s portion of revenue is deferred until the first time the product is
redeemed at one of its parks and recognized over its related use in a manner consistent with the Company’s own admission products.
The Company barters theme park admission products and sponsorship opportunities for advertising, employee recognition awards, and
various other services. The fair value of the products or services is recognized into admissions revenue and related expenses at the
time of the exchange and approximates the estimated fair value of the goods or services received or provided, whichever is more
readily determinable. For the years ended December 31, 2015, 2014 and 2013, approximately $18,000, $17,700 and $20,000,
respectively, were included within admissions revenue with an offset in either selling, general and administrative expenses or
operating expenses in the accompanying consolidated statements of comprehensive income related to bartered ticket transactions.
Advertising and Promotional Costs
Advertising production costs are deferred and expensed the first time the advertisement is shown. Advertising and media costs are
expensed as incurred and for the years ended December 31, 2015, 2014 and 2013, totaled approximately $106,000, $110,500 and
$112,000, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements
of comprehensive income.
F-10
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Equity-Based 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, unless service or
performance conditions require otherwise. The Company uses the Black-Scholes Option Pricing Model to value its stock options and
the closing stock price on the date of grant to value both its time-vesting and performance-vesting restricted share awards granted in
2015. On occasion, the Company may modify the terms or conditions of an equity award for its employees. If an award is modified,
the Company evaluates the type of modification in accordance with ASC 718, Compensation-Stock Compensation, to determine the
appropriate accounting. See further discussion in Note 18–Equity-Based Compensation.
Restructuring Costs
The Company accounts for exit or disposal of activities in accordance with ASC 420, Exit or Disposal Cost Obligations. The
Company defines a business restructuring as an exit or disposal activity that includes but is not limited to a program which is planned
and controlled by management and materially changes either the scope of a business or the manner in which that business is
conducted. Business restructuring charges may include (i) one-time termination benefits related to employee separations, (ii) contract
termination costs and (iii) other related costs associated with exit or disposal activities.
A liability is recognized and measured at its fair value for one-time termination benefits once the plan of termination is communicated
to affected employees and it meets all of the following criteria: (i) management commits to a plan of termination, (ii) the plan
identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion
date, (iii) the plan establishes the terms of the benefit arrangement and (iv) it is unlikely that significant changes to the plan will be
made or the plan will be withdrawn. Contract termination costs include costs to terminate a contract or costs that will continue to be
incurred under the contract without benefit to the Company. A liability is recognized and measured at its fair value when the Company
either terminates the contract or ceases using the rights conveyed by the contract.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is established for deferred
tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization is
dependent on generating sufficient future taxable income or the reversal of deferred tax liabilities during the periods in which those
temporary differences become deductible. The Company evaluates its tax positions by determining if it is more likely than not a tax
position is sustainable upon examination, based upon the technical merits of the position, before any of the benefit is recorded for
financial statement purposes. The benefit is measured as the largest dollar amount of position that is more likely than not to be
sustained upon settlement. Previously recorded benefits that no longer meet the more-likely-than-not threshold are charged to earnings
in the period that the determination is made. Interest and penalties accrued related to unrecognized tax benefits are charged to the
provision/benefit for income taxes.
Fair Value Measurements
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants.
An entity is permitted to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in
earnings each period. The Company has not elected to use the fair value option for any of its financial assets and financial liabilities
that are not already recorded at fair value. Carrying values of financial instruments classified as current assets and current liabilities
approximate fair value, due to their short-term nature.
F-11
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
A description of the Company’s policies regarding fair value measurement is summarized below.
Fair Value Hierarchy—Fair value is determined for assets and liabilities, which are grouped according to a hierarchy, based upon
significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when
available. These two types of inputs have created the following fair value hierarchy:
Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that
are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active
markets.
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
Determination of Fair Value—The Company generally uses quoted market prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access to determine fair value, and classifies such items in Level 1. Fair values
determined by Level 2 inputs utilize inputs other than quoted market prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly. Level 2 inputs include quoted market prices in active markets for similar assets or liabilities, and
inputs other than quoted market prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset
or liability, and include situations where there is little, if any, market activity for the asset or liability. If quoted market prices are not
available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or
independently sourced market parameters, such as interest and currency rates, and the like. Assets or liabilities valued using such
internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the
valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.
Segment Reporting
The Company maintains discrete financial information for each of its eleven theme parks, which is used by the Chief Operating
Decision Maker (“CODM”), identified as the Chief Executive Officer, as a basis for allocating resources. Each theme park has been
identified as an operating segment and meets the criteria for aggregation due to similar economic characteristics. In addition, all of the
theme parks provide similar products and services and share similar processes for delivering services. The theme parks have a high
degree of similarity in the workforces and target similar consumer groups. Accordingly, based on these economic and operational
similarities and the way the CODM monitors and makes decisions affecting the operations, the Company has concluded that its
operating segments may be aggregated and that it has one reportable segment.
Derivative Instruments and Hedging Activities
ASC 815, Derivatives and Hedging, provides the disclosure requirements for derivatives and hedging activities with the intent to
provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b)
how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged
items affect an entity’s financial position, results of operations and cash flows. Further, qualitative disclosures are required that
explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of, and
gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.
As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair
value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a
hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply
hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability,
or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated
and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are
considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the
hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may
enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply
or the Company elects not to apply hedge accounting.
F-12
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company reviews new accounting pronouncements as they are issued or proposed by the Financial Accounting Standards Board
(“FASB”).
On February 25, 2016, the FASB issued ASU 2016-02, Leases. This ASU establishes a new lease accounting model that, for many
companies, eliminates the concept of operating leases and requires entities to record lease assets and lease liabilities on the balance
sheet for certain types of leases. The ASU will be effective for annual periods beginning after December 15, 2018, and interim
periods therein. Early adoption will be permitted for all entities. The Company is currently evaluating the impact of this ASU on its
consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. This ASU simplifies the
accounting for deferred taxes by requiring an entity to classify all deferred taxes as noncurrent assets or noncurrent liabilities. No other
changes were made to the current guidance on deferred taxes. The ASU is effective for annual periods beginning after December 15,
2016 with early adoption permitted and may be applied as a change in accounting principle either retrospectively or prospectively. The
Company expects to adopt this ASU prospectively in the first quarter of 2016. The adoption of this ASU is not expected to have an
impact on the Company’s consolidated results of operations, stockholders’ equity or cash flows.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. This ASU simplifies the accounting for
inventory by requiring inventory to be measured at the “lower of cost and net realizable value” and eliminates options that currently
exist for measuring inventory at “market value”. The ASU defines net realizable value as the “estimated selling prices in the ordinary
course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the
current guidance on inventory measurement. The ASU is effective for interim and annual periods beginning after December 15, 2016.
Early application is permitted and should be applied prospectively. The Company elected to early adopt this ASU as of December 31,
2015. The adoption of this ASU did not have a material impact to its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Topic 835): Simplifying the Presentation of Debt
Issuance Costs. This ASU simplifies the accounting for debt issuance costs by requiring such costs to be presented as a direct
deduction from the related debt liability rather than as an asset. Debt disclosures include the face amount of the debt liability and the
effective interest rate. This ASU requires retrospective adoption and is effective for annual periods beginning on or after December
15, 2015, with early adoption permitted. The Company elected to early adopt this ASU as of June 30, 2015. The ASU has been
applied retrospectively as a change in accounting principle for all periods presented in the accompanying consolidated balance sheets.
As a result of adopting this ASU, the Company reclassified $20,003 of unamortized debt issuance costs at December 31, 2014, from
other assets to long-term debt on the accompanying consolidated balance sheet. The adoption of this ASU did not impact the
Company’s consolidated results of operations, stockholders’ equity or cash flows. Furthermore, in August 2015, the FASB issued
ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated With Line-of-Credit Arrangements:
Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This ASU expands on the
guidance set forth in ASU 2015-03 and clarifies that an entity may elect to present debt issuance costs related to line-of-credit
arrangements as an asset which is subsequently amortized over the term of the line-of-credit arrangement, regardless of whether there
are any outstanding borrowings on the arrangement. The Company has elected to record debt issuance costs related to its senior
secured revolving credit facility as a deduction to long-term debt on the accompanying consolidated balance sheets and to amortize the
debt issuance costs over the term of the arrangement. See Note 11–Long-Term Debt for further details.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue
recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and
assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date to annual reporting periods
beginning after December 15, 2017 using one of two retrospective application methods with earlier adoption permitted for annual
periods beginning after December 15, 2016. The Company has not yet selected a transition method and is evaluating the accounting
and disclosure requirements on its consolidated financial statements but does not currently anticipate a material impact upon adoption;
however, the Company is in the process of evaluating the effect this ASU will have on the classification of revenue and related
disclosures.
F-13
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. RESTRUCTURING PROGRAM AND SEPARATION COSTS
Restructuring Program
In December 2014, the Company implemented a restructuring program in an effort to centralize certain functions and reduce
duplication to increase efficiencies (the “Restructuring Program”). The Restructuring Program involved the elimination of
approximately 300 positions across the Company’s eleven theme parks and corporate headquarters. As a result, the Company recorded
$11,834 in pre-tax restructuring and other related costs associated with this Restructuring Program, of which $11,567 was incurred in
2014 and $267 was incurred in 2015 on the accompanying consolidated statements of comprehensive income. The Company will not
incur any additional costs associated with the Restructuring Program as all continuing service obligations were completed as of June
30, 2015.
The Restructuring Program activity for the year ended December 31, 2015 was as follows:
Liability as of December 31, 2014 ................................................ $
Costs incurred ...............................................................................
Payments made .............................................................................
Liability as of December 31, 2015 ................................................ $
7,691
267
(7,958 )
—
Severance
and Other
Employment
Expenses
Costs incurred in 2015 and 2014 related to the Restructuring Program primarily consist of severance and other employment expenses.
Other related restructuring expenses incurred in 2014 include third party consulting costs associated with the development of the cost
savings plan and the Restructuring Program. The liability as of December 31, 2014 related to severance and other employment
expenses is included in accrued salaries, wages and benefits as of December 31, 2014 on the accompanying consolidated balance
sheet.
Separately, in the fourth quarter of 2015, as part of a cost savings initiative and ongoing review of departmental structures, certain
additional positions were eliminated. The severance costs related to these positions of $2,001 was included in restructuring and other
related costs for the year ended December 31, 2015 on the accompanying consolidated statement of comprehensive income.
Restructuring and other related costs do not include any costs associated with the separation of the Company’s Chief Executive
Officer and President effective January 15, 2015 (the “Former CEO”) as discussed below.
Separation Costs
On December 11, 2014, the Company announced that its Chief Executive Officer would resign from his role effective on January 15,
2015. Pursuant to a separation and consulting agreement entered into by the Company and the Former CEO on December 10, 2014,
the Former CEO will remain involved with the Company as a member of the Board and in a consulting capacity to the Company for a
three-year consulting term. The Company recorded $2,574 as separation costs on the accompanying consolidated statements of
comprehensive income for the year ended December 31, 2014 related to this separation. This amount is included in accrued salaries,
wages and benefits as of December 31, 2014 on the accompanying consolidated balance sheet and was paid in January 2015.
Additionally, in connection with the Restructuring Program and the separation of the Former CEO, conditions for eligibility on certain
unvested performance restricted shares of common stock were modified to allow those participants who are separating from the
Company, including the Former CEO, to vest in their respective awards if the performance conditions are achieved after their
employment ends with the Company. See Note 18–Equity-Based Compensation for further details.
F-14
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. EARNINGS PER SHARE
Earnings per share is computed as follows (in thousands, except per share data):
(cid:3)(cid:3)
2015
Year Ended December 31,
2014
(cid:3)(cid:3)
2013
Net
Income
Basic earnings per share ........................... $ 49,133 85,860 $ 0.57 $49,919
Effect of dilutive incentive-based
awards ................................................... (cid:3)(cid:3) (cid:3)(cid:3)
Diluted earnings per share ........................ $ 49,133 85,981 $ 0.57
(cid:3) (cid:3)(cid:3)
$49,919
Net
Income
Shares
121
(cid:3)(cid:3)(cid:3)
(cid:3) (cid:3)(cid:3)
(cid:3)
Per
Share
Amount
Per
Share
Net
Income
Amount (cid:3)(cid:3)
Shares
87,183 $ 0.57 (cid:3)(cid:3)$ 51,920
Per
Share
Amount
Shares
87,537 $ 0.59
(cid:3) (cid:3)
297
(cid:3) (cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)(cid:3)
(cid:3) (cid:3)
87,480 $ 0.57 (cid:3)(cid:3)$ 51,920
615
(cid:3)
88,152 $ 0.59
(cid:3) (cid:3)(cid:3)
In accordance with the Earnings Per Share Topic of the ASC, basic earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period (excluding treasury stock and unvested restricted
stock). The shares of unvested restricted stock are eligible to receive dividends; however, dividend rights will be forfeited if the award
does not vest. Accordingly, only vested shares of outstanding restricted stock are included in the calculation of basic earnings per
share. The weighted average number of repurchased shares during the period, if any, which are held as treasury stock are excluded
from common stock outstanding.
Diluted earnings per share is determined using the treasury stock method based on the dilutive effect of unvested restricted stock and
certain shares of common stock that are issuable upon exercise of stock options. During the year ended December 31, 2015, there
were approximately 1,879,000 antidilutive shares of common stock excluded from the computation of diluted earnings per share.
During the year ended December 31, 2014, there were approximately 21,000 antidilutive shares of common stock excluded from the
computation of diluted earnings per share. During the year ended December 31, 2013, there were no antidilutive shares of common
stock excluded from the computation of diluted earnings per share.
The Company’s outstanding performance-vesting restricted share awards are considered contingently issuable shares and are excluded
from the calculation of diluted earnings per share until the performance measure criteria is met as of the end of the reporting period.
For the year ended December 31, 2015, approximately 19,000 performance-vesting restricted share awards were included in the
calculation of diluted earnings per share as their respective performance criteria was met as of December 31, 2015. There were no
performance-vesting restricted share awards included in the calculation of diluted earnings per share during the years ended December
31, 2014 and 2013. See further discussion in Note 18–Equity-Based Compensation.
6. INVENTORIES
Inventories as of December 31, 2015 and 2014 consisted of the following:
Merchandise ............................................................................... $
Food and beverage .....................................................................
Other supplies ............................................................................
Total inventories ........................................................................ $
2015
(cid:3)(cid:3)
2014
26,183 $
4,740
290
31,213 $
28,356
4,778
—
33,134
Effective December 31, 2015, inventories are stated at lower of cost or net realizable value in accordance with the adoption of ASU
2015-11 Simplifying the Measurement of Inventory during the quarter. Prior to 2015, inventories were stated at lower of cost or
market. See Note 3–Recently Issued Accounting Pronouncements for further discussion.
F-15
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of December 31, 2015 and 2014 consisted of the following:
Prepaid insurance ....................................................................... $
Prepaid marketing and advertising costs ....................................
Other ..........................................................................................
Total prepaid expenses and other current assets ........................ $
2015
(cid:3)(cid:3)
2014
8,264 $
1,439
6,657
16,360 $
8,047
6,965
5,882
20,894
8. PROPERTY AND EQUIPMENT, NET
The components of property and equipment, net as of December 31, 2015 and 2014, consisted of the following:
2014
286,200
Land ........................................................................................... $
289,892
Land improvements ...................................................................
566,112
Buildings ....................................................................................
1,310,645 1,267,832
Rides, attractions and equipment ...............................................
158,362
Animals ......................................................................................
43,654
Construction in process ..............................................................
Less accumulated depreciation ..................................................
(867,421 )
Total property and equipment, net ............................................. $ 1,718,996 $ 1,744,631
2015
286,200 $
281,612
618,507
158,191
93,006
(1,029,165)
(cid:3)(cid:3)
Depreciation expense was approximately $174,700, $169,000 and $159,700 for the years ended December 31, 2015, 2014 and 2013,
respectively.
In January 2016, the Company made a decision to remove deep-water lifting floors from the killer whale habitats at each of its three
SeaWorld theme parks. As a result, in the first half of 2016, the Company expects to record approximately $33,000 of accelerated
depreciation related to the disposal of these lifting floors. These lifting floors are included in rides, attractions and equipment in the
table above.
9. TRADE NAMES/TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET
Trade names/trademarks, net at December 31, 2015, consisted of the following:
Trade names/trademarks - indefinite lives ..............................
Trade names/trademarks- definite lives ..................................
Total trade names/trademarks, net ..........................................
Weighted
Average
Amortization
Period
9.3 years
Gross
Carrying
Amount
Accumulated
Amortization
$
$
157,000 $
12,900
169,900 $
Net Carrying
Value
157,000
5,726
162,726
— $
7,174
7,174 $
Trade names/trademarks, net at December 31, 2014, consisted of the following:
Trade names/trademarks - indefinite lives .............................
Trade names/trademarks- definite lives .................................
Total trade names/trademarks, net .........................................
Weighted
Average
Amortization
Period
9.3 years
F-16
Gross
Carrying
Amount
Accumulated
Amortization
$
$
157,000 $
12,900
169,900 $
Net Carrying
Value
157,000
7,188
164,188
— $
5,712
5,712 $
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Other intangible assets, net at December 31, 2015, consisted of the following:
Favorable lease asset ..............................................................
Reseller agreements ................................................................
Non-compete agreement .........................................................
Other intangible assets - indefinite lives.................................
Total other intangible assets, net ............................................
Weighted
Average
Amortization
Period
39 years
8.1 years
5 years
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Value
$
$
18,200 $
22,300
500
120
41,120 $
2,800 $
16,735
258
—
19,793 $
15,400
5,565
242
120
21,327
Other intangible assets, net at December 31, 2014, consisted of the following:
Favorable lease asset .............................................................
Reseller agreements ...............................................................
Non-compete agreement ........................................................
Total other intangible assets, net ...........................................
Weighted
Average
Amortization
Period
39 years
8.1 years
5 years
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Value
$
$
18,200 $
22,300
500
41,000 $
2,333 $
13,984
158
16,475 $
15,867
8,316
342
24,525
Total amortization was approximately $4,800, $4,600 and $4,400 for the years ended December 31, 2015, 2014 and 2013,
respectively. The total weighted average amortization period of all finite-lived intangibles is 18.8 years.
Total expected amortization of the finite-lived intangible assets for the succeeding five years and thereafter is as follows:
Years Ending December 31
2016.............................................................................................. $
2017..............................................................................................
2018..............................................................................................
2019..............................................................................................
2020..............................................................................................
Thereafter .....................................................................................
$
4,780
4,574
2,235
1,849
467
13,028
26,933
10. OTHER ACCRUED EXPENSES
Other accrued expenses at December 31, 2015 and 2014, consisted of the following:
Accrued property taxes .............................................................. $
Accrued interest .........................................................................
Self-insurance reserve ................................................................
Other ..........................................................................................
Total other accrued expenses ..................................................... $
2015
2014
2,250 $
441
6,973
1,479
11,143 $
2,039
2,604
7,800
7,706
20,149
As of December 31, 2014, the Company accrued $5,650 related to the 2014 repurchase of certain shares of common stock, which
settled and was paid in January 2015. See Note 19–Stockholders’ Equity for further discussion on the Share Repurchase Program.
F-17
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. LONG-TERM DEBT
Long-term debt as of December 31, 2015 and 2014 consisted of the following:
2015
(cid:3)(cid:3)
2014
Term B-2 Loans (effective interest rate of 3.26% at
December 31, 2015 and 2014, respectively) ........................... $ 1,338,387 $ 1,352,438
Term B-3 Loans (effective interest rate of 4.33% at
December 31, 2015) ................................................................
Senior Notes (effective interest rate of 12.07% at
260,000
December 31, 2014) ................................................................
—
Revolving Credit Facility ...........................................................
1,601,287 1,612,438
Total long-term debt ..................................................................
(8,985 )
Less discounts ............................................................................
(20,003 )
Less debt issuance costs .............................................................
Less current maturities ...............................................................
(14,050 )
Total long-term debt, net ............................................................ $ 1,548,893 $ 1,569,400
(7,211)
(13,333)
(31,850)
—
15,000
247,900
—
SEA is the borrower under the senior secured credit facilities, as amended pursuant to a credit agreement dated as of December 1,
2009 (the “Senior Secured Credit Facilities”). Also, on December 1, 2009, SEA issued $400,000 aggregate principal amount of
unsecured senior notes due December 1, 2016 (the “Senior Notes”).
On March 30, 2015, SEA entered into an incremental term loan amendment, Amendment No. 7 (the “Incremental Amendment”), to its
existing Senior Secured Credit Facilities. On April 7, 2015, SEA borrowed $280,000 of additional term loans (the “Term B-3 Loans”)
pursuant to the Incremental Amendment. The proceeds, along with cash on hand, were used to redeem all of the $260,000 outstanding
principal amount of the Senior Notes at a redemption price of 105.5% plus accrued and unpaid interest and pay fees, costs and other
expenses in connection with the Term B-3 Loans. The redemption premium of $14,300 along with a write-off of approximately
$6,048 in related discounts and debt issuance costs is included in the loss on early extinguishment of debt and write-off of discounts
and debt issuance costs on the accompanying consolidated statements of comprehensive income for the year ended December 31,
2015.
In connection with the issuance of the Term B-3 Loans, SEA recorded a discount of $1,400 and debt issuance costs of $3,171 during
the year ended December 31, 2015. Debt issuance costs and discounts are amortized to interest expense using the effective interest
method over the term of the related debt and are included in long-term debt, net, in the accompanying consolidated balance sheets.
Unamortized debt issuance costs and discounts for the Term B-2 Loans, Term B-3 Loans and senior secured revolving credit facility
(the “Revolving Credit Facility”) were $14,713, $3,448 and $2,383, respectively, at December 31, 2015. Unamortized debt issuance
costs and discounts for the Term B-2 Loans, Senior Notes and Revolving Credit Facility were $18,205, $6,921 and $3,862,
respectively at December 31, 2014. See Note 3–Recently Issued Accounting Pronouncements for more details on the Company’s
adoption of ASU 2015-03 in the second quarter of 2015.
As of December 31, 2015, SEA was in compliance with all covenants in the provisions contained in the documents governing the
Senior Secured Credit Facilities.
Senior Secured Credit Facilities
As of December 31, 2015, the Senior Secured Credit Facilities consisted of $1,338,387 in Term B-2 Loans and $247,900 in Term B-3
Loans, which will mature on May 14, 2020, along with a $192,500 Revolving Credit Facility, of which $15,000 was outstanding at
December 31, 2015 (at an interest rate of 2.89%). The Revolving Credit Facility will mature on the earlier of (a) April 24, 2018 and
(b) the 91st day prior to the maturity date of any indebtedness incurred to refinance any of the term loans. The outstanding balance
under the Revolving Credit Facility is included in current maturities on long-term debt on the accompanying consolidated balance
sheet as of December 31, 2015, due to the Company’s intent to repay the borrowings within the next twelve months. Subsequent to
December 31, 2015, SEA borrowed an additional $60,000 under the Revolving Credit Facility for general working capital purposes.
F-18
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Term B-2 Loans 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 May 14, 2013, with the balance due on the final maturity date, of May 14, 2020. The Term B-3
Loans amortize in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount of the
Term B-3 Loans on the date of effectiveness of the Incremental Amendment, with the balance due on the final maturity date of May
14, 2020. SEA may voluntarily repay amounts outstanding under the Senior Secured Credit Facilities at any time without premium or
penalty, other than customary “breakage” costs with respect to LIBOR loans and other than a prepayment premium on voluntary
prepayments of Term B-3 Loans in connection with certain repricing transactions on or prior to the date that is six months after the
effectiveness of the Incremental Amendment.
SEA is required to prepay the outstanding Term B-2 and Term B-3 loans, subject to certain exceptions, with
(i)
50% of SEA’s annual “excess cash flow” (with step-downs to 25% and 0%, as applicable, based upon achievement by SEA
of a certain total net leverage ratio), subject to certain exceptions;
(ii) 100% of the net cash proceeds of certain non-ordinary course asset sales or other dispositions subject to reinvestment rights
and certain exceptions; and
(iii) 100% of the net cash proceeds of any incurrence of debt by SEA or any of its restricted subsidiaries, other than debt
permitted to be incurred or issued under the Senior Secured Credit Facilities.
Notwithstanding any of the foregoing, each lender of term loans has the right to reject its pro rata share of mandatory prepayments
described above, in which case SEA may retain the amounts so rejected. The foregoing mandatory prepayments will be applied pro
rata to installments of term loans in direct order of maturity. There were no mandatory prepayments during the years ended December
31, 2015 or 2014 since none of the events indicated above occurred. On October 30, 2015, the Company made a voluntary principal
repayment of approximately $30,000 on the Term B-3 Loans with available cash on hand.
SEA may also increase and/or 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 Leverage Ratio, as defined in the Senior Secured Credit Facilities, is no greater than
3.50 to 1.00.
The obligations under the Senior Secured Credit Facilities are fully, unconditionally and irrevocably guaranteed by the Company, any
subsidiary of the Company that directly or indirectly owns 100% of the issued and outstanding equity interests of SEA, and, subject to
certain exceptions, each of SEA’s existing and future material domestic wholly-owned subsidiaries. The Senior Secured Credit
Facilities are collateralized by first priority or equivalent security interests, subject to certain exceptions, in (i) all the capital stock of,
or other equity interests in, substantially all of SEA’s direct or indirect material domestic subsidiaries and 65% of the capital stock of,
or other equity interests in, any “first tier” foreign subsidiaries and (ii) certain tangible and intangible assets of SEA and the Company.
Certain financial, affirmative and negative covenants, including a maximum total net leverage ratio, minimum interest coverage ratio
and maximum capital expenditures are included in the Senior Secured Credit Facilities. If an event of default occurs, the lenders under
the Senior Secured Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the Senior
Secured Credit Facilities and all actions permitted to be taken by a secured creditor.
Term B-2 Loans
The Term B-2 Loans were initially borrowed in an aggregate principal amount of $1,405,000. Borrowings under the Senior Secured
Credit Facilities 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 rate of interest in effect for such day as publicly announced from time to time by Bank of America, N.A. as its “prime
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, or the successor thereto if the BBA is no longer making a LIBOR rate available, for the interest
period relevant to such borrowing. The applicable 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
total net leverage ratio equal to or less than 3.25 to 1.00. At December 31, 2015, SEA selected the LIBOR rate (interest rate of 3.00%
at December 31, 2015).
F-19
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Term B-3 Loans
Borrowings of Term B-3 Loans bear interest at a fluctuating rate per annum equal to, at SEA’s option, (a) a base rate equal to the
higher of (1) the federal funds rate plus 1/2 of 1% and (2) the rate of interest in effect for such day as publicly announced from time to
time by Bank of America, N.A. as its “prime rate” or (b) a LIBOR rate determined by reference to the BBA LIBOR rate, or the
successor thereto if the BBA is no longer making a LIBOR rate available, for the interest period relevant to such borrowing. The
applicable margin for the Term B-3 Loans is 2.25%, in the case of base rate loans, and 3.25%, in the case of LIBOR rate loans, subject
to a base rate floor of 1.75% and a LIBOR floor of 0.75%. At December 31, 2015, SEA selected the LIBOR rate (interest rate of
4.00% at December 31, 2015).
Revolving Credit Facility
Borrowings of loans under the Revolving Credit Facility bear interest at a fluctuating rate per annum equal to, at SEA’s option, (a) a
base rate equal to the higher of (1) the federal funds rate plus 1/2 of 1%, and (2) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America, N.A. as its “prime rate” or (b) a LIBOR rate determined by reference to the BBA
LIBOR rate, or the successor thereto if the BBA is no longer making a LIBOR rate available, for the interest period relevant to such
borrowing. The applicable margin for borrowings under the Revolving Credit Facility is 1.75%, in the case of base rate loans, and
2.75%, in the case of LIBOR rate loans. The applicable margin (under either a base rate or LIBOR rate) is subject to one 25 basis
point step-down upon achievement by SEA of certain corporate credit ratings. At December 31, 2015, SEA selected the LIBOR rate
and achieved the corporate credit ratings for an applicable LIBOR margin of 2.50%.
In addition to paying interest on outstanding principal under the Senior Secured Credit Facilities, SEA is required to pay a
commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder at a rate of
0.50% per annum. SEA is also required to pay customary letter of credit fees.
As of December 31, 2015, SEA had approximately $14,300 of outstanding letters of credit and $15,000 outstanding under the
Revolving Credit Facility, leaving approximately $163,200 available for borrowing.
Restrictive Covenants
The Senior Secured Credit Facilities contain a number of customary negative covenants. Such covenants, among other things, restrict,
subject to certain exceptions, the ability of SEA and its restricted subsidiaries to incur additional indebtedness; make guarantees;
create liens on assets; enter into sale and leaseback transactions; engage in mergers or consolidations; sell assets; make fundamental
changes; pay dividends and distributions or repurchase SEA’s capital stock; make investments, loans and advances, including
acquisitions; engage in certain transactions with affiliates; make changes in the nature of the business; and make prepayments of
junior debt. The Senior Secured Credit Facilities also contain covenants requiring SEA to maintain specified maximum annual capital
expenditures, a maximum total net leverage ratio and a minimum interest coverage ratio. All of the net assets of SEA and its
consolidated subsidiaries are restricted and there are no unconsolidated subsidiaries of SEA.
The Senior Secured Credit Facilities permit restricted payments in an aggregate amount per annum not to exceed the greater of (1) 6%
of initial public offering net proceeds received by SEA or (2) (a) $90,000, so long as, on a Pro Forma Basis (as defined in the Senior
Secured Credit Facilities) after giving effect to the payment of any such restricted payment, the Total Leverage Ratio, (as defined in
the Senior Secured Credit Facilities), is no greater than 5.00 to 1.00 and greater than 4.50 to 1.00, (b) $120,000, so long as, on a Pro
Forma Basis after giving effect to the payment of any such restricted payment, the Total Leverage Ratio is no greater than 4.50 to 1.00
and greater than 4.00 to 1.00, (c) the greater of (A) $120,000 and (B) 7.5% of Market Capitalization (as defined in the Senior Secured
Credit Facilities), so long as, on a Pro Forma Basis after giving effect to the payment of any such restricted payment, the Total
Leverage Ratio is no greater than 4.00 to 1.00 and greater than 3.50 to 1.00 and (d) an unlimited amount, so long as, on a Pro Forma
Basis after giving effect to the payment of any such restricted payment, the Total Leverage Ratio is no greater than 3.50 to 1.00.
For the year ended December 31, 2015, the Company had a $120,000 capacity for restricted payments, calculated as set forth above.
Through the third quarter of 2015, the Company had used approximately $87,700 of its available restricted payments capacity leaving
an aggregate amount of approximately $32,300 available in the fourth quarter of 2015 to declare dividends or make other restricted
payments under the Senior Secured Credit Facilities. As a result, the Company repurchased $30,000 of its common stock in December
2015. See Note 19–Stockholders’ Equity for further discussion on the Share Repurchase Program.
F-20
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
As of December 31, 2015, the Total Leverage Ratio as calculated under the Senior Secured Credit Facilities was 4.38 to 1.00, which
results in the Company having a $120,000 capacity for restricted payments in the year ending December 31, 2016. The amount
available for dividend declarations, share repurchases and certain other restricted payments under the covenant restrictions in the debt
agreements adjusts at the beginning of each quarter as set forth above.
Long-term debt at December 31, 2015, is repayable as follows and does not include the impact of any future prepayments. The
outstanding balance under the Revolving Credit Facility is included in current maturities on long-term debt on the accompanying
consolidated balance sheet as of December 31, 2015, due to the Company’s intent to repay the borrowings within the next twelve
months.
Years Ending December 31,
2016.............................................................................................. $
2017..............................................................................................
2018..............................................................................................
2019..............................................................................................
2020..............................................................................................
Total ............................................................................................. $
(cid:3)(cid:3)
31,850
16,850
16,850
16,850
1,518,887
1,601,287
Interest Rate Swap Agreements
As of December 31, 2015, SEA had four traditional interest rate swap agreements (collectively, the “Interest Rate Swap
Agreements”). Three of the interest rate swap agreements have a combined notional amount of $1,000,000; mature on September 30,
2016; require the Company to pay a fixed rate of interest between 1.049% and 1.051% per annum; pay swap counterparties a variable
rate of interest based upon the greater of 0.75% or the three month BBA LIBOR; and have interest settlement dates occurring on the
last day of March, June, September and December through maturity.
In April 2015, the Company executed the fourth traditional interest rate swap agreement to effectively fix the interest rate on $250,000
of the Term B-3 Loans. The interest rate swap became effective on June 30, 2015; has a notional amount of $250,000; is scheduled to
mature on September 30, 2016; requires the Company to pay a fixed rate of interest of 0.901% per annum; pays swap counterparties a
variable rate of interest based upon the greater of 0.75% or the three month BBA LIBOR; and has interest settlement dates occurring
on the last day of September, December, March and June through maturity.
In June 2015, the Company entered into five forward interest rate swap agreements (“the Forward Swaps”) to effectively fix the
interest rate on the three month LIBOR-indexed interest payments associated with $1,000,000 of SEA’s outstanding long-term debt.
The Forward Swaps have an effective date of September 30, 2016; have a total notional amount of $1,000,000; mature on May 14,
2020; require the Company to pay a weighted-average fixed rate of 2.45% per annum; pay swap counterparties a variable rate of
interest based upon the greater of 0.75% or the three month BBA LIBOR; and have interest settlement dates occurring on the last day
of September, December, March and June through maturity.
SEA designated the Interest Rate Swap Agreements and the Forward Swaps above as qualifying cash flow hedge accounting
relationships as further discussed in Note 12–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
$63,726, $74,933 and $85,514 during the years ended December 31, 2015, 2014 and 2013, respectively.
F-21
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. 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. The Company does not speculate using derivative instruments.
As of December 31, 2015 and 2014, 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 years ended December 31, 2015 and 2014, such derivatives were used to hedge the variable cash
flows associated with existing variable-rate debt. As of December 31, 2015, the Company had four outstanding interest rate swaps
with a combined notional value of $1,250,000 and five forward interest rate swap agreements with a combined notional value of
$1,000,000 that were designated as cash flow hedges of interest rate risk. 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 year ended December 31, 2015, a loss of $287 related to the
ineffective portion was recognized in other expense (income), net on the accompanying consolidated statement of comprehensive
income. There was no ineffective portion during the year ended December 31, 2014. 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 $5,299 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
consolidated balance sheet as of December 31, 2015 and 2014:
Liability Derivatives
As of December 31, 2015
Liability Derivatives
As of December 31, 2014
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps ................................................................. Other liabilities $
Forward interest rate swaps ................................................... Other liabilities
Total derivatives designated as hedging instruments ............ (cid:3)
$
(cid:3)
(cid:3)
(cid:3)(cid:3)(cid:3)
(cid:3)
1,673 Other liabilities $
17,927
19,600 (cid:3)(cid:3)
$
628
—
628
The unrealized loss on derivatives is recorded net of a tax benefit of $6,115 and $286 for the years ended December 31, 2015 and
2014, respectively, and is included in the accompanying statements of changes in stockholders’ equity and the consolidated statements
of comprehensive income.
F-22
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Income
The table below presents the pre-tax effect of the Company’s derivative financial instruments on the accompanying consolidated
statements of comprehensive income for the years ended December 31, 2015 and 2014:
Derivatives in Cash Flow Hedging Relationships:
(Loss) gain related to effective portion of derivatives
recognized in accumulated other comprehensive loss ....... $
Gain (loss) related to effective portion of derivatives
reclassified from accumulated other comprehensive
loss to interest expense ...................................................... $
Loss related to ineffective portion of derivatives
recognized in other expense (income), net ........................ $
2015
2014
(cid:3)(cid:3)
(21,924) (cid:3)(cid:3)$
1,846
3,154 (cid:3)(cid:3)$
(2,626 )
(287) (cid:3)(cid:3)$
—
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 December 31, 2015, the termination value of derivatives in a net
liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements
was $21,529. As of December 31, 2015, the Company has posted no collateral related to these agreements. If the Company had
breached any of these provisions at December 31, 2015, it could have been required to settle its obligations under the agreements at
their termination value of $21,529.
Changes in Accumulated Other Comprehensive Income (Loss)
The following table reflects the changes in accumulated other comprehensive income (loss) for the years ended December 31, 2015
and 2014, net of tax:
Gains (Losses)
on
Cash Flow
Hedges
(cid:3)
Accumulated other comprehensive income (loss):
Accumulated other comprehensive income
at December 31, 2013 ............................................................... (cid:3) $
Other comprehensive income before reclassifications ............ (cid:3)
Amounts reclassified from accumulated other
comprehensive income to interest expense .......................... (cid:3)
Unrealized loss on derivatives, net of tax ..................................... (cid:3)
Accumulated other comprehensive loss
at December 31, 2014 ............................................................... (cid:3)
Other comprehensive loss before reclassifications ................. (cid:3)
Amounts reclassified from accumulated other
comprehensive loss to interest expense ............................... (cid:3)
Unrealized loss on derivatives, net of tax ..................................... (cid:3)
Accumulated other comprehensive loss
at December 31, 2015 ............................................................... (cid:3) $
11
1,169
(1,663 )
(494 )
(483 )
(14,781 )
2,127
(12,654 )
(13,137 )
F-23
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. INCOME TAXES
For the years ended December 31, 2015, 2014 and 2013, the provision for income taxes is comprised of the following:
2015
2014
2013
Current income tax (benefit) provision
Federal ................................................................................. $
State .....................................................................................
Foreign ................................................................................
Total current income tax provision ................................
(78) $
494
36
452
(70 ) $
937
5
872
Deferred income tax provision (benefit):
Federal .................................................................................
State .....................................................................................
Total deferred income tax provision ..............................
Total income tax provision ....................................................... $
25,210
(1,964)
23,246
23,698 $
30,414
(2,414 )
28,000
28,872 $
(113)
1,086
13
986
28,628
(3,900)
24,728
25,714
The deferred income tax provision represents the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Cash paid for income taxes totaled $1,062,
$858 and $923, for the years ended December 31, 2015, 2014 and 2013, respectively.
The components of deferred income tax assets and liabilities as of December 31, 2015 and 2014 are as follows:
2015
2014
Deferred income tax assets:
Acquisition and debt related costs ........................................ $
Net operating loss .................................................................
Self-insurance .......................................................................
Deferred revenue ..................................................................
Cash flow hedge ...................................................................
Tax credits ............................................................................
Other .....................................................................................
Total deferred income tax assets .....................................
Valuation allowance .............................................................
Net deferred tax assets ....................................................
18,281 $
283,947
10,039
942
6,401
4,546
9,652
333,808
(1,466)
332,342
20,319
269,002
9,666
1,021
286
2,920
7,483
310,697
(1,507 )
309,190
Deferred income tax liabilities:
Property and equipment ........................................................
Goodwill ...............................................................................
Amortization .........................................................................
Other .....................................................................................
Total deferred income tax liabilities................................
Net deferred income tax liabilities ............................................. $
(309,054)
(42,458)
(17,564)
(4,961)
(374,037)
(41,695) $
(278,851 )
(35,396 )
(15,226 )
(4,209 )
(333,682 )
(24,492 )
The Company files federal, state and provincial income tax returns in various jurisdictions with varying statute of limitation expiration
dates. Under the tax statute of limitations applicable to the Internal Revenue Code of 1986, as amended (the “Code”), the Company is
no longer subject to U.S. federal income tax examinations by the Internal Revenue Service for years before 2012. However, because
the Company is carrying forward income tax attributes, such as net operating losses and tax credits from 2009 and subsequent years,
these attributes can still be audited when utilized on returns filed in the future. 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 unrecognized tax benefit. 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 the income tax provision in the applicable period.
F-24
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Company has federal tax net operating loss carryforwards of approximately $677,000 as of December 31, 2015 and state net
operating loss carryforwards spread across various jurisdictions with a combined total of approximately $1,100,000 as of December
31, 2015. These net operating loss carryforwards, if not used to reduce taxable income in future periods, will begin to expire in 2029,
for both federal and state tax purposes.
Realization of the deferred income tax assets, primarily arising from these net operating loss carryforwards and charitable contribution
carryforwards, is dependent upon generating sufficient taxable income prior to expiration of the carryforwards, which may include the
reversal of deferred tax liability components. The Company believes it is more likely than not that the benefit from certain state net
operating loss carryforwards will not be realized. Due to the uncertainty of realizing the benefit from the deferred tax asset recorded
for state net operating loss carryforwards, the Company has recorded a valuation allowance of approximately $600, net of federal tax
benefit, on the deferred tax assets related to those state net operating losses.
For the year ended December 31, 2014, a valuation allowance of approximately $1,500 was recorded on charitable contribution
carryforward deferred tax assets which expired on December 31, 2015. This valuation allowance reversed at such time due to the
expiration of those unused charitable contributions. However, an additional valuation allowance of $900 was recorded for the year
ended December 31, 2015 for the charitable contributions the Company expects will expire in 2016 and be unutilized.
Due to the secondary offerings in December 2013 and April 2014, there were ownership shifts of more than 50%, as defined by
Section 382 of the Code. The Company determined that, while an ownership shift occurred and limits were determined under Section
382 and the regulations and guidance thereunder, the applicable limits would not impair the value or anticipated use of the Company’s
federal and state net operating losses. Although realization is not assured, management believes it is more likely than not that all of
the deferred income tax assets related to federal and state tax net operating loss carryforwards will be realized.
The provision for income taxes for the years ended December 31, 2015, 2014 and 2013 differs from the amount computed by applying
the U.S. federal statutory income tax rate to the Company’s income before income taxes primarily due to state income taxes, prior year
adjustments, and federal tax credits.
For the year ended December 31, 2015, the Company realized a net benefit of $1,817 related to the revaluation of certain state net
operating loss carryforwards as a result of a restructuring, which also impacted the state effective rate. In addition, for the year ended
December 31, 2015, certain equity compensation awards and a valuation allowance related to certain state net operating losses and
charitable contribution carryforwards also impacted the provision for income taxes.
The prior year adjustment for the year ended December 31, 2014 relates to the revaluation of certain state net operating loss
carryforwards resulting in a net benefit of $2,977. In addition, for the year ended December 31, 2014, non-deductible offering costs,
certain equity compensation awards and a valuation allowance related to certain charitable contribution carryforwards also impacted
the provision for income taxes.
The reconciliation between the U.S. federal statutory income tax rate and the Company’s effective income tax provision rate for the
years ended December 31, 2015, 2014 and 2013, is as follows:
Income tax rate at federal statutory rates ................................
State taxes, net of federal benefit ............................................
State net operating loss revaluation ........................................
Charitable contribution carryforward valuation allowance ....
Tax credits ..............................................................................
Other .......................................................................................
Income tax rate .......................................................................
2015
2014
2013
35.00 %
0.56
(2.51)
2.01
(1.73)
(0.79)
32.54 %
35.00 %
1.32
(3.78 )
1.91
(0.80 )
2.99
36.64 %
35.00 %
(0.77)
—
—
(1.16)
0.05
33.12 %
F-25
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. COMMITMENTS AND CONTINGENCIES
At December 31, 2015, the Company has commitments under long-term operating leases requiring annual minimum lease payments
as follows:
Years Ending December 31,
2016.............................................................................................. $
2017..............................................................................................
2018..............................................................................................
2019..............................................................................................
2020..............................................................................................
Thereafter .....................................................................................
Total ............................................................................................. $
16,185
16,132
15,752
14,643
11,819
288,128
362,659
Rental expense was $20,233, $21,643 and $24,338 for the years ended December 31, 2015, 2014 and 2013, respectively.
The SeaWorld theme park in San Diego, California, leases the land for the theme park from the City of San Diego. The lease term is
for 50 years ending on July 1, 2048. Lease payments are based upon gross revenue from the San Diego theme park subject to certain
minimums. On January 1, 2014, the minimum annual rent payment was recalculated in accordance with the lease agreement as
approximately $10,400 and is included in the table above for all periods presented. This annual rent will remain in effect until January
1, 2017, at which time the next recalculation will be completed in accordance with the lease agreement.
Pursuant to license agreements with Sesame Workshop, the Company pays a specified annual license fee, as well as a specified
royalty based on revenues earned in connection with sales of licensed products, all food and beverage items utilizing the licensed
elements and any events utilizing such elements if a separate fee is paid for such event.
ABI has granted the Company a perpetual, exclusive, worldwide, royalty-free license to use the Busch Gardens trademark and certain
related domain names in connection with the operation, marketing, promotion and advertising of certain of the Company’s theme
parks, as well as in connection with the production, use, distribution and sale of merchandise sold in connection with such theme
parks. Under the license, the Company is required to indemnify ABI against losses related to the use of the marks.
The Company has commenced construction of certain new theme park attractions and other projects under contracts with various third
parties. At December 31, 2015, additional capital payments of approximately $80,000 are necessary to complete these projects. The
majority of these projects are expected to be completed in 2016.
Securities Class Action Lawsuit
On September 9, 2014, a purported stockholder class action lawsuit consisting of purchasers of the Company’s common stock during
the periods between April 18, 2013 to August 13, 2014, captioned Baker v. SeaWorld Entertainment, Inc., et al., Case No. 14-CV-
02129-MMA (KSC), was filed in the U.S. District Court for the Southern District of California against the Company, the Chairman of
the Company’s Board of Directors, certain of its executive officers and Blackstone. On February 27, 2015, Court-appointed Lead
Plaintiffs, Pensionskassen For Børne- Og Ungdomspædagoger and Arkansas Public Employees Retirement System, together with
additional plaintiffs, Oklahoma City Employee Retirement System and Pembroke Pines Firefighters and Police Officers Pension Fund
(collectively, “Plaintiffs”), filed an amended complaint against the Company, the Chairman of the Company’s Board of Directors,
certain of its executive officers, Blackstone, and underwriters of the initial public offering and secondary public offerings. The
amended complaint alleges, among other things, that the prospectus and registration statements filed contained materially false and
misleading information in violation of the federal securities laws and seeks unspecified compensatory damages and other relief.
Plaintiffs contend that defendants knew or were reckless in not knowing that Blackfish was impacting SeaWorld’s business at the time
of each public statement. On May 29, 2015, the Company and the other defendants filed a motion to dismiss the amended complaint.
The Plaintiffs filed an opposition to the motion to dismiss on July 31, 2015. The Company and the other defendants filed a reply in
further support of their motion to dismiss on September 18, 2015. The Company believes that the class action lawsuit is without merit
and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this lawsuit.
F-26
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Shareholder Derivative Lawsuit
On December 8, 2014, a putative derivative lawsuit captioned Kistenmacher v. Atchison, et al., Civil Action No. 10437, was filed in
the Court of Chancery of the State of Delaware against, among others, the Chairman of the Board of Directors, certain of the
Company’s executive officers, directors and shareholders, and Blackstone. The Company is a “Nominal Defendant” in the lawsuit.
On March 30, 2015, the plaintiff filed an amended complaint against the same set of defendants. The amended complaint alleges,
among other things, that the defendants breached their fiduciary duties, aided and abetted breaches of fiduciary duties, violated Florida
Blue Sky laws and were unjustly enriched by (i) including materially false and misleading information in the prospectus and
registration statements; and (ii) causing the Company to repurchase certain shares of its common stock from certain shareholders at an
alleged artificially inflated price. The Company does not maintain any direct exposure to loss in connection with this shareholder
derivative lawsuit as the lawsuit does not assert any claims against the Company. The Company’s status as a “Nominal Defendant” in
the action reflects the fact that the lawsuit is maintained by the named plaintiff on behalf of the Company and that the plaintiff seeks
damages on the Company’s behalf. On May 21, 2015, the defendants filed a motion to stay the lawsuit pending resolution of the
Company’s securities class action lawsuit. On September 21, 2015, the Court granted the motion and ordered that the derivative action
to be stayed in favor of the securities class action captioned Baker v. SeaWorld Entertainment, Inc., et al., Case No. 14-CV-02129-
MMA (KSC).
Consumer Class Action Lawsuits
On March 25, 2015, a purported class action was filed in the United States District Court for the Southern District of California
against the Company, captioned Holly Hall v. SeaWorld Entertainment, Inc., Case No. 3:15-cv-00600-CAB-RBB (the “Hall Matter”).
The complaint identifies three putative classes consisting of all consumers nationwide who at any time during the four-year period
preceding the filing of the original complaint, purchased an admission ticket, a membership or a SeaWorld “experience” that includes
an “orca experience” from the SeaWorld amusement park in San Diego, California, Orlando, Florida or San Antonio, Texas
respectively. The complaint alleges causes of action under California Unfair Competition Law, California Consumers Legal
Remedies Act (“CLRA”), California False Advertising Law, California Deceit statute, Florida Unfair and Deceptive Trade Practices
Act, Texas Deceptive Trade Practices Act, as well as claims for Unjust Enrichment. Plaintiffs’ claims are based on their allegations
that the Company misrepresented the physical living conditions and care and treatment of its killer whales, resulting in confusion or
misunderstanding among ticket purchasers, and omitted material facts regarding its killer whales with intent to deceive and mislead
the plaintiff and purported class members. The complaint further alleges that the specific misrepresentations heard and relied upon by
Holly Hall in purchasing her SeaWorld tickets concerned the circumstances surrounding the death of a SeaWorld trainer. The
complaint seeks actual damages, equitable relief, attorney’s fees and costs. Plaintiffs claim that the amount in controversy exceeds
$5,000, but the liability exposure is speculative until the size of the class is determined (if certification is granted at all).
In addition, four other purported class actions were filed against the Company and its affiliates. The first three actions were filed on
April 9, 2015, April 16, 2015 and April 17, 2015, respectively, in the following federal courts: (i) the United States District Court for
the Middle District of Florida, captioned Joyce Kuhl v. SeaWorld LLC et al., 6:15-cv-00574-ACC-GJK (the “Kuhl Matter”), (ii) the
United States District Court for the Southern District of California, captioned Jessica Gaab, et. al. v. SeaWorld Entertainment, Inc.,
Case No. 15:cv-842-CAB-RBB (the “Gaab Matter”), and (iii) the United States District Court for the Western District of Texas,
captioned Elaine Salazar Browne v. SeaWorld of Texas LLC et al., 5:15-cv-00301-XR (the “Browne Matter”). On May 1, 2015, the
Kuhl Matter and Browne Matter were voluntarily dismissed without prejudice by the respective plaintiffs. On May 7, 2015, plaintiffs
Kuhl and Browne re-filed their claims, along with a new plaintiff, Valerie Simo, in the United States District Court for the Southern
District of California in an action captioned Valerie Simo et al. v. SeaWorld Entertainment, Inc., Case No. 15:cv-1022-CAB-RBB (the
“Simo Matter”). All four of these cases, in essence, reiterate the claims made and relief sought in the Hall Matter.
On August 7, 2015, the Gaab Matter and Simo Matter were consolidated with the Hall Matter, and the plaintiffs filed a First
Consolidated Amended Complaint (“FAC”) on August 21, 2015. The FAC pursues the same seven causes of action as the original
Hall complaint, and adds a request for punitive damages pursuant to the California CLRA.
The Company moved to dismiss the FAC in its entirety, and its motion was granted on December 24, 2015. The Court granted
dismissal with prejudice as to the California CLRA claim, the portion of California Unfair Competition Law claim premised on the
CLRA claim, all claims for injunctive relief, and on all California claims premised solely on alleged omissions by the Company. The
Court granted leave to amend as to the remainder of the complaint. On January 25, 2016, plaintiffs filed their Second Consolidated
Amended Complaint (“SAC”). The SAC pursues the same causes of action as the FAC, except for the California CLRA, which, as
noted above, was dismissed with prejudice. The Company intends to file a motion to dismiss the SAC.
F-27
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On April 13, 2015, a purported class action was filed in the Superior Court of the State of California for the City and County of San
Francisco against SeaWorld Parks & Entertainment, Inc., captioned Marc Anderson, et. al., v. SeaWorld Parks & Entertainment, Inc.,
Case No. CGC-15-545292 (the “Anderson Matter”). The putative class consists of all consumers within California who, within the
past four years, purchased tickets to SeaWorld San Diego. On May 11, 2015, the plaintiffs filed a First Amended Class Action
Complaint (the “Amended Complaint”). The Amended Complaint alleges causes of action under the California False Advertising
Law, California Unfair Competition Law and California CLRA. Plaintiffs’ claims are based on their allegations that the Company
misrepresented the physical living conditions and care and treatment of its killer whales, resulting in confusion or misunderstanding
among ticket purchasers, and omitted material facts regarding its killer whales with intent to deceive and mislead the plaintiff and
purported class members. The Amended Complaint seeks actual damages, equitable relief, attorneys’ fees and costs. Based on
plaintiffs’ definition of the class, the amount in controversy exceeds $5,000, but the liability exposure is speculative until the size of
the class is determined (if certification is granted at all). On May 14, 2015, the Company removed the case to the United States
District Court for the Northern District of California, Case No. 15:cv-2172-SC.
On May 19, 2015, the plaintiffs filed a motion to remand. On September 18, 2015, the Company filed a motion to dismiss the
Amended Complaint in its entirety. The motion is fully briefed. On September 24, 2015, the Court denied plaintiffs’ motion to
remand. On October 5, 2015, plaintiffs filed a motion for leave to file a motion for reconsideration of this order, and
contemporaneously filed a petition for permission to appeal to the Ninth Circuit, which the Company opposed. On October 14, 2015,
the district court granted plaintiffs’ motion for leave. Plaintiffs’ motion for reconsideration was fully briefed. On January 12, 2016
the court granted in part and denied in part the motion for reconsideration, and refused to remand the case. In that order, the district
court noted that it will defer ruling on the Company’s motion to dismiss until the Ninth Circuit rules on plaintiffs’ petition for
permission to appeal. On January 22, 2016, plaintiffs filed a petition for permission to appeal the January 12, 2016 order to the Ninth
Circuit, which the Company intends to oppose. Both of plaintiffs’ petitions for permission to appeal remain pending.
The Company believes that these consumer class action lawsuits are without merit and intends to defend these lawsuits vigorously;
however, there can be no assurance regarding the ultimate outcome of these lawsuits.
In addition, the Company is a party to other various claims and legal proceedings arising in the normal course of business. From time
to time, third-party groups may also bring lawsuits against the Company. 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. At this time,
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.
15. 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 Measurement 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 and Term B-3 Loans are classified in Level 2 of
the fair value hierarchy. The fair value of the term loans as of December 31, 2015 approximate their carrying value, excluding
unamortized debt issuance costs and discounts, due to the variable nature of the underlying interest rates and the frequent intervals at
which such interest rates are reset. The Senior Notes were classified in Level 3 of the fair value hierarchy as of December 31, 2014
and were valued using significant inputs that are not observable in the market including a discount rate of 11.37% and projected cash
flows of the underlying Senior Notes as of December 31, 2014. The Senior Notes were redeemed in full on April 7, 2015 as discussed
in Note 11–Long-Term Debt.
F-28
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
There were no transfers between Levels 1, 2 or 3 during the year ended December 31, 2015. The Company did not have any assets
measured at fair value at December 31, 2015. The following table presents the Company’s estimated fair value measurements and
related classifications as of December 31, 2015:
Liabilities:
(cid:3)
Derivative financial instruments (a) ................................. $
Long-term obligations (b) ................................................. $
(cid:3)
(cid:3)
(cid:3)
— $
19,600
— $ 1,601,287
(cid:3)(cid:3)
$
$
(cid:3) (cid:3)(cid:3) (cid:3)(cid:3)
(cid:3)(cid:3) (cid:3)(cid:3)
Significant
Observable Unobservable (cid:3)(cid:3) Balance at
Significant
Other
(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)(cid:3) (cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)
(cid:3)
Quoted Prices in (cid:3)(cid:3) (cid:3)(cid:3)
Active Markets
for Identical
Assets and
Liabilities
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
2015
(cid:3)(cid:3) December 31,
(cid:3)(cid:3)
(cid:3)
(cid:3)(cid:3)(cid:3)
(cid:3)
— $
19,600
— $ 1,601,287
(a)
(b)
Reflected at fair value in the consolidated balance sheet as other liabilities of $19,600.
Reflected at carrying value, net of unamortized debt issuance costs and discounts, in the consolidated balance sheet as current
maturities on long-term debt of $31,850 and long-term debt of $1,548,893 as of December 31, 2015.
There were no transfers between Levels 1, 2 or 3 during the year ended December 31, 2014. The Company did not have any assets
measured at fair value at December 31, 2014. The following table presents the Company’s estimated fair value measurements and
related classifications as of December 31, 2014:
Liabilities:
(cid:3)
Derivative financial instruments (a) ................................. $
Long-term obligations (b) ................................................. $
(cid:3)
(cid:3)
(cid:3)
628
— $
— $ 1,352,438
(cid:3)(cid:3) (cid:3)(cid:3)
(cid:3)(cid:3) (cid:3)(cid:3)
Significant
Observable Unobservable (cid:3)(cid:3) Balance at
Significant
Other
(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)
Quoted Prices in
Active Markets
for Identical
Assets and
Liabilities
(Level 1)
Inputs
(Level 2)
2014
Inputs
(Level 3)
(cid:3)(cid:3) December 31,
(cid:3)(cid:3)
(cid:3)(cid:3)
(cid:3)
(cid:3)(cid:3)(cid:3)
(cid:3)
628
— $
$
$ 263,197 $ 1,615,635
(a)
(b)
Reflected at fair value in the consolidated balance sheet as other liabilities of $628.
Reflected at carrying value, net of unamortized debt issuance costs and discounts, in the consolidated balance sheet as current
maturities on long-term debt of $14,050 and long-term debt of $1,569,400 as of December 31, 2014.
16. RELATED-PARTY TRANSACTIONS
As of December 31, 2015, approximately $77,000 aggregate principal amount of Term B-2 Loans and $9,000 aggregate principal
amount of Term B-3 Loans were owned by affiliates of Blackstone. As of December 31, 2014, approximately $65,000 aggregate
principal amount of the Senior Notes and approximately $87,000 aggregate principal amount of Term B-2 Loans were owned by
affiliates of Blackstone. The Company makes voluntary principal repayments as well as periodic principal and interest payments on
such debt in accordance with its terms. On April 7, 2015, the Senior Notes were redeemed as discussed in Note 11–Long-Term Debt.
Dividend Payments
On January 5, 2016, the Company’s Board of Directors (the “Board”) declared a cash dividend of $0.21 per share to all common
stockholders of record at the close of business on January 15, 2016, which was paid on January 22, 2016. In connection with this
dividend declaration, certain affiliates of Blackstone were paid dividends in the amount of $4,095. On February 22, 2016, the Board
declared a cash dividend of $0.21 per share to all common stockholders of record at the close of business on March 14, 2016, which
will be paid on April 1, 2016. In connection with this dividend declaration, certain affiliates of Blackstone are estimated to receive
dividends.
F-29
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On January 5, March 3, June 10, and September 16, 2015, the Board declared a cash dividend of $0.21 per share to all common
stockholders of record at the close of business on January 13, March 13, June 22, and September 29, 2015, respectively (see Note 19–
Stockholders’ Equity). In connection with these dividend declarations, certain affiliates of Blackstone were paid dividends in the
amount of $4,095 on January 22, April 1, July 1, and October 6, 2015.
In March 2014, the Board declared a cash dividend of $0.20 per share to all common stockholders of record at the close of business on
March 20, 2014. In May and September 2014, the Board declared a cash dividend of $0.21 per share to all common stockholders of
record at the close of business on June 20 and September 29, 2014, respectively (see Note 19–Stockholders’ Equity). In connection
with these dividend declarations, certain affiliates of Blackstone were paid dividends in the amount of $7,849, $4,252 and $4,095 on
April 1, July 1, and October 6, 2014, respectively.
In June, September and December 2013, the Board declared a cash dividend of $0.20 per share to all common stockholders of record
at the close of business on June 20, September 20 and December 20, 2013, respectively (see Note 19–Stockholders’ Equity). In
connection with these dividend declarations, certain affiliates of Blackstone were paid dividends in the amount of $11,749, $11,749
and $7,849, on July 1, 2013, October 1, 2013, and January 3, 2014, respectively.
Share Repurchases
The Company repurchased shares of its common stock from the selling stockholders concurrently with the closing of the respective
secondary offerings in December 2013 and April 2014. See further discussion in Note 19–Stockholders’ Equity.
Advisory Agreement
Prior to April 2013, 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 19–Stockholders’ Equity). Fees related to these services, which were based upon a multiple of
Adjusted EBITDA as defined in the 2009 Advisory Agreement, amounted to $2,799 for the year ended December 31, 2013. These
fees are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive
income. There were no fees related to these services in the years ended December 31, 2015 or 2014 due to the termination of the 2009
Advisory Agreement in April 2013.
In connection with the completion of the initial public offering in April 2013 (see Note 19–Stockholders’ Equity), the 2009 Advisory
Agreement between the Company and affiliates of Blackstone was terminated (except for certain 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 using 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 was recorded as termination of advisory agreement during the year ended
December 31, 2013 in the accompanying consolidated statements of comprehensive income.
17. RETIREMENT PLAN
The Company sponsors a defined contribution plan, under Section 401(k) of the Internal Revenue Code. The plan is a qualified
automatic contributions arrangement, which automatically enrolls employees, once eligible, unless they opt out. The Company makes
matching cash contributions subject to certain restrictions, structured as a 100% match on the first 1% contributed by the employee
and a 50% match on the next 5% contributed by the employee. Employer matching contributions for the years ended December 31,
2015, 2014 and 2013, totaled $7,696, $7,790 and $8,956, respectively.
18. 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, net of estimated forfeitures, is
recognized over the requisite service period, which is generally the vesting period unless service or performance conditions require
otherwise. The Company has granted stock options, time-vesting restricted share awards and performance-vesting restricted share
awards. The Company used the Black-Scholes Option Pricing Model to value its stock options granted in 2015 and the closing stock
price on the date of grant to value its time-vesting restricted share awards granted in 2015, 2014 and 2013 and its performance-vesting
restricted share awards granted in 2015. For valuation models used on other prior year grants, see the Other Fair Value Assumptions
section.
F-30
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Total equity compensation expense was $6,527, $2,349 and $6,026 for the years ended December 31, 2015, 2014 and 2013,
respectively, and is included in selling, general and administrative expenses and in operating expenses in the accompanying
consolidated statements of comprehensive income. Total unrecognized equity compensation expense for all equity compensation
awards probable of vesting as of December 31, 2015 was approximately $22,310 which is expected to be recognized over the
respective service periods.
The total fair value of shares which vested during the years ended December 31, 2015, 2014 and 2013 was approximately $2,450,
$2,410 and $4,820, respectively. The weighted average grant date fair value per share of time-vesting and performance-vesting
restricted share awards granted during the years ended December 31, 2015, 2014 and 2013 were $18.76, $24.59 and $29.06 per share,
respectively.
The activity related to the Company’s time-vesting and performance-vesting restricted share awards during the year ended December
31, 2015 is as follows:
(cid:3)
(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)
(cid:3)(cid:3) (cid:3)
Time-Vesting
Restricted shares
Bonus Performance
Restricted shares
Performance-Vesting Restricted shares
Long-Term
Incentive
Performance
Restricted shares
2.25x Performance
Restricted shares
2.75x Performance
Restricted shares
Weighted(cid:3)
Average
Grant Date
Fair Value
per Share (cid:3)(cid:3) (cid:3) Shares
Weighted
Average
Grant Date
Fair Value
per Share
Weighted
Average
Grant Date
Fair Value
per Share
Shares
Weighted
Average
Grant Date
Fair Value
per Share (cid:3) Shares
Weighted
Average
Grant Date
Fair Value
per Share
Shares
Shares
Outstanding at
December 31, 2014 .... 164,545 $
Granted .......................... 968,005 $
Vested ........................... (171,495 ) $
Forfeited ........................ (77,785 ) $
Outstanding at
December 31, 2015 .... 883,270 $
—
11.68 (cid:3)
18.64 (cid:3) 464,896 $
14.28 (cid:3)
13.77 (cid:3) (48,901) $
—
—
18.99
—
—
79,279 $
—
18.96 (16,914) $
— 1,451,453 $ 20.96 (cid:3) 1,451,453 $
18.90
—
18.96
—
—
—
—
(80,632 ) $ 22.90 (cid:3)
—
—
(80,632) $
12.61
—
—
15.76
18.66 (cid:3) 415,995 $
19.00
62,365 $
18.88 1,370,821 $ 20.35 (cid:3) 1,370,821 $
10.93
The activity related to the Company’s stock option awards during the year ended December 31, 2015 is as follows:
Weighted(cid:3)
Average
Exercise Price
Options
Weighted
Average
Remaining
Contractual
Life (in years) (cid:3)(cid:3)
Aggregate
Intrinsic Value
Outstanding at December 31, 2014 ........................................
Granted ...................................................................................
Forfeited .................................................................................
Outstanding at December 31, 2015 ........................................
Exercisable at December 31, 2015 .........................................
—
$
2,411,415
(137,030) $
2,274,385
$
—
—
19.20
18.96
19.21
—
9.31 $
—
1,436
—
The weighted average grant date fair value of stock options granted during the year ended December 31, 2015 was $4.39 per stock
option. Key weighted-average assumptions utilized in the Black-Scholes Option Pricing Model for stock options granted during the
year ended December 31, 2015 were:
Risk- free interest rate ..................................................................
Expected volatility(a).....................................................................
Expected dividend yield ...............................................................
Expected life (in years)(b) .............................................................
1.66 %
36.71 %
4.37 %
6.25
(a)
Due to the Company’s limited history as a public company, the volatility for the Company’s stock at the date of each grant was
estimated using the average volatility calculated for a peer group, which is based upon daily price observations over the
estimated term of options granted.
F-31
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(b)
The expected life was estimated using the simplified method, as the Company does not have sufficient historical exercise data
due to the limited period of time its common stock has been publicly traded.
Omnibus Incentive Plan
The Company has reserved 15,000,000 shares of common stock for issuance under the Company’s 2013 Omnibus Incentive Plan (the
“Omnibus Incentive Plan”). The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors
(the “Board”), 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 Omnibus Incentive 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 Omnibus Incentive Plan.
For the year ended December 31, 2015, the Company withheld an aggregate of 42,221 shares of its common stock from employees to
satisfy minimum tax withholding obligations related to the vesting of restricted stock awards. As a result, these shares were added
back to the number of shares of common stock available for future issuance under the Company’s Omnibus Incentive Plan. As of
December 31, 2015, there were 10,776,041 shares of common stock available for future issuance under the Company’s Omnibus
Incentive Plan.
Bonus Performance Restricted Shares
On March 3, 2015, the Board approved an annual bonus plan (the “2015 Bonus Plan”) for the fiscal year ended December 31, 2015
(the “Fiscal 2015”) under which certain employees are eligible to receive a bonus with respect to Fiscal 2015, payable 50% in cash
and 50% in performance-vesting restricted shares (the “Bonus Performance Restricted shares”) based upon the Company’s
achievement of specified performance goals with respect to Adjusted EBITDA. The Bonus Performance Restricted shares were
granted pursuant to the Omnibus Incentive Plan. Subsequent grants were made in 2015, under the same terms, to newly hired bonus-
eligible employees based on their hire date and/or to certain newly promoted employees. As part of the Company’s annual
compensation-setting process and in accordance with the Company’s Equity Award Grant Policy (the “Equity Grant Policy”), on
February 22, 2016, the Company’s Compensation Committee (the “Compensation Committee”) approved an annual bonus plan (the
“2016 Bonus Plan”) for the fiscal year ending December 31, 2016 (the “Fiscal 2016”). The 2016 Bonus Plan contains similar terms as
the 2015 Bonus Plan with bonus awards payable 50% in cash and 50% in Bonus Performance Restricted shares and is based upon the
Company’s achievement of specified performance goals with respect to Fiscal 2016 Adjusted EBITDA. Pursuant to the Equity Grant
Policy, the Bonus Performance Restricted shares related to the 2016 Bonus Plan will be granted effective as of March 1, 2016, which
is the second business day following the filing of this Annual Report on Form 10-K.
In accordance with ASC 718, equity compensation expense is not recorded until the performance condition is probable of being
achieved. Based on the Company’s Fiscal 2015 Adjusted EBITDA results, the Bonus Performance Restricted shares are not
considered probable of vesting as of December 31, 2015; therefore, no equity compensation expense has been recorded related to
these shares and these shares will forfeit in the first quarter of 2016.
Long-Term Incentive Awards
On March 3, 2015, the Board also approved a long-term incentive plan grant (the “2015 Long-Term Incentive Grant”) for Fiscal 2015
comprised of nonqualified stock options (“Long-Term Incentive Options”), time-vesting restricted shares (“Long-Term Incentive
Time Restricted shares”) and performance-vesting restricted shares (“Long-Term Incentive Performance Restricted shares”)
(collectively, “Long-Term Incentive Awards”) to certain of the Company’s management and executive officers. These awards were
granted pursuant to the Omnibus Incentive Plan. Subsequent grants were made in 2015, under the same terms, to newly hired
employees based on their hire date and/or to certain promoted management and executive officers. As part of the Company’s annual
compensation-setting process and in accordance with the Equity Grant Policy, on February 22, 2016, the Compensation Committee
approved a long-term incentive plan grant (the “2016 Long-Term Incentive Grant”) for Fiscal 2016 also comprised of Long-Term
Incentive Options, Long-Term Incentive Time Restricted shares and Long-Term Incentive Performance Restricted shares with similar
terms as the 2015 Long-Term Incentive Grant. Pursuant to the Equity Grant Policy, the Long-Term Incentive Awards related to the
2016 Long-Term Incentive Grant will be granted effective March 1, 2016, which is the second business day following the filing of this
Annual Report on Form 10-K.
F-32
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Long-Term Incentive Options
The Long-Term Incentive Options vest ratably over four years from the date of grant (25% per year), subject to continued
employment through the applicable vesting date and will expire 10 years from the date of grant or earlier if the employee’s service
terminates. The options have an exercise price per share equal to the closing price of the Company’s common stock on the date of
grant. Equity compensation expense is recognized using the straight line method for each tranche over the four year vesting period.
Long-Term Incentive Time Restricted Shares
The Long-Term Incentive Time Restricted shares vest ratably over four years from the date of grant (25% per year), subject to
continued employment through the applicable vesting date. Equity compensation expense is recognized using the straight line method
over the four year vesting period.
Long-Term Incentive Performance Restricted Shares
The Long-Term Incentive Performance Restricted shares vest following the end of a three-year performance period beginning on
January 1, 2015 and ending on December 31, 2017 based upon the Company’s achievement of certain performance goals with respect
to Adjusted EBITDA for each fiscal year performance period. The total number of shares eligible to vest is based on the level of
achievement of the Adjusted EBITDA target for each fiscal year in the performance period which ranges from 0% (if below threshold
performance), to 50% (for threshold performance), to 100% (for target performance), and up to 200% (at or above maximum
performance). For actual performance between the specified threshold, target, and maximum levels, the resulting vesting percentage
will be adjusted on a linear basis. Total shares earned (approximately 33% are eligible to be earned per year) based on the actual
performance percentage for each performance year will vest on the date the Company’s Compensation Committee determines the
actual performance percentage for fiscal year 2017 if the employee has not terminated prior to the last day of fiscal year 2017 and all
unearned shares will forfeit immediately as of such date. The Adjusted EBITDA target for each fiscal year will be set in the first
quarter of each respective year, at which time the grant date and the grant date fair value for accounting purposes related to that
performance year will be established based on the closing price of the Company’s stock on such date. Equity compensation expense
will be recognized ratably for each fiscal year, if the performance condition is probable of being achieved, beginning on the date of
grant and through the end of the final performance period on December 31, 2017.
As of December 31, 2015, the Company had awarded 187,125 Long-Term Incentive Performance Restricted shares, net of forfeitures,
under the 2015 Long-Term Incentive Plan, which represents the total shares that could be earned under the maximum performance
level of achievement for all three performance periods combined, with approximately one-third related to each respective performance
period. The performance goal for the first performance period was established as of the award date on March 3, 2015, as such, for
accounting purposes, 62,365 of these shares have a grant date in 2015 and a grant date fair value per share determined using the
closing price of the Company’s common stock on the date of grant. The performance targets for the second and third performance
periods have not yet been set and will be determined by the Compensation Committee during the first quarter of each respective fiscal
year, at which time, for accounting purposes, the grant date and respective grant date fair value will be determined for those related
shares. As the Long-Term Incentive Performance Restricted shares have both a service and a performance condition, the requisite
service period over which equity compensation expense will be recognized once the performance condition is probable of
achievement begins on the date of grant and extends through December 31, 2017. Based on the Company’s Fiscal 2015 Adjusted
EBITDA results for the first performance period, a percentage of the target performance level for the first performance period is
considered probable; as such 18,709 Long-Term Incentive Performance Restricted shares related to the 2015 performance year are
considered probable of vesting as of December 31, 2015. Total unrecognized equity compensation expense related to the first
performance period expected to be recognized over the remaining vesting term was approximately $260 as of December 31, 2015.
Total unrecognized equity compensation expense related to the second and third performance periods has not been determined as the
grant date and grant date fair value for these awards have not yet occurred for accounting purposes, as such no expense has been
recorded related to the second and third performance periods.
Other 2015 Omnibus Incentive Plan Awards
On January 15, 2015, the Company granted 100,000 time-vesting restricted shares to its Interim Chief Executive Officer (the “Interim
CEO”) in accordance with his appointment to such role (see further discussion in Note 4–Restructuring Program and Separation
Costs). The shares had a grant date fair value per share of $16.50 and a vest date on the earlier of the start date of a new Chief
Executive Officer or June 30, 2015. As a new Chief Executive Officer was appointed with a start date of April 7, 2015, these shares
fully vested on such date accordingly.
Also during the year ended December 31, 2015, the Company granted 49,284 of time-vesting restricted shares to certain Board
members. These shares vest ratably over a three-year term.
F-33
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Other
2.25x and 2.75x Performance Restricted Shares
The Company has outstanding under both its Omnibus Incentive Plan and its previous incentive plan (the “Pre-IPO Incentive Plan”)
certain performance-vesting restricted shares (the “2.25x and 2.75x Performance Restricted shares”). The 2.25x Performance
Restricted shares will vest if the employee is employed by the Company when and if certain investment funds affiliated with
Blackstone receive cash proceeds (not subject to any clawback, indemnity or similar contractual obligation) in respect of their
Partnerships units equal to (x) a 20% annualized effective compounded return rate on such funds’ investment and (y) a 2.25x multiple
on such funds’ investment. The 2.75x Performance Restricted shares will vest if the employee is employed by the Company when and
if such funds receive cash proceeds (not subject to any clawback, indemnity or similar contractual obligation) in respect of their
Partnerships units equal to (x) a 15% annualized effective compounded return rate on such funds’ investment and (y) a 2.75x multiple
on such funds’ investment. Certain awards were modified to allow some employees separating from the Company to vest in their
respective shares if the performance conditions are achieved after their employment ends as detailed below in Equity Plan
Modifications.
No equity compensation expense will be recorded related to the 2.25x and 2.75x Performance Restricted shares until their vesting is
probable. Accordingly, no equity compensation expense has been recorded during the years ended December 31, 2015, 2014 or 2013,
respectively, related to these 2.25x and 2.75x Performance Restricted shares. Total unrecognized equity compensation expense as of
December 31, 2015, was approximately $28,000 and $15,000 for the 2.25x and 2.75x Performance Restricted shares, respectively.
Based on cash proceeds previously received by certain investment funds affiliated with Blackstone from the Company’s initial public
offering and subsequent secondary offerings of stock, the Company’s repurchase of shares and the cumulative dividends paid by the
Company through January 22, 2016, if such funds receive additional future cash proceeds of approximately $960 and other vesting
conditions are satisfied, the 2.25x Performance Restricted shares will vest. Similarly, if such funds receive additional future cash
proceeds of approximately $428,000 and other vesting conditions are satisfied, the 2.75x Performance Restricted shares will vest. As
receipt of these future cash proceeds will be primarily related to liquidity events, such as secondary offerings of stock or additional
dividends paid to such funds, the shares are not considered probable of vesting until such events are consummated. On February 22,
2016, the Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close of business on March
14, 2016, which will be paid on April 1, 2016. Based on this declaration, the 2.25x Performance Restricted shares will vest on April
1, 2016; therefore, the Company will recognize approximately $28,000 of equity compensation expense and record approximately
$3,400 of accumulated dividends related to these shares during the first quarter of 2016.
Pre-IPO Incentive Plan and 2013 Grant
Prior to April 18, 2013, the Partnerships granted Employee Units to certain key employees of SEA (“Employee Units”) under the Pre-
IPO Incentive Plan. 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. There was no related cost to
the employee upon vesting of the units. Separately, certain members of management in 2011 also purchased 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 were subject to vesting
terms substantially similar to those applicable to the unvested Employee Units immediately prior to the transaction. These unvested
restricted shares consisted of time-vesting restricted share awards and 2.25x and 2.75x Performance Restricted shares which, for
accounting purposes, have been removed from issued shares until their restrictions are met, as shown on the accompanying
consolidated statement of changes in stockholders’ equity.
The Pre-IPO Incentive Plan TVUs originally granted vested over five years (20% per year) and vesting was contingent upon continued
employment. The TVUs were originally valued at the fair market value at the date of grant and were being amortized to compensation
expense over the vesting period. The unvested time-vesting restricted shares received upon surrender of the TVUs contained
substantially the same terms, conditions and vesting schedules as the previously outstanding TVUs.
F-34
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On April 19, 2013, 494,557 shares of restricted stock were granted to the Company’s directors, officers and employees under the
Omnibus Incentive Plan (the “2013 Grant”). The shares granted were in the form of time-vesting restricted shares, 2.25x
Performance Restricted shares and 2.75x Performance Restricted shares. The vesting terms and conditions of the 2013 Grant were
substantially the same as those of the Pre-IPO Incentive Plan. After an initial 180 day post initial public offering lock up period, the
vesting schedule from the Pre-IPO Incentive Plan carried over so that each recipient vested in the 2013 Grant in the same proportion
as they were vested in the previous Pre-IPO Incentive Plan. The remaining unvested shares vest over the remaining service period,
subject to substantially the same vesting conditions which carried over from the previous Pre-IPO Incentive Plan.
Equity Plan Modifications
In accordance with the guidance in ASC 718, Compensation-Stock Compensation, the surrender of the TVUs for shares of common
stock and time-vesting restricted shares in 2013 qualified as a modification of an equity compensation plan. As such, the Company
calculated the incremental fair value of the TVUs 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 year
ended December 31, 2013. The remaining incremental compensation cost of $220 which represented the incremental cost on the
unvested TVUs surrendered for unvested time-vesting restricted shares, was added to the original grant date fair value of the
respective awards and is being amortized to compensation expense over the remaining vesting period.
The surrender of the unvested PVUs for unvested 2.25x and 2.75x Performance Restricted shares of stock in 2013 also qualified as a
modification of an equity compensation plan. In addition, through December 31, 2015, conditions for eligibility on approximately
940,000 2.25x and 2.75x Performance Restricted shares have been modified to allow those participants holding such shares who were
separating from the Company to vest in their respective shares if the performance conditions are achieved after their employment ends
with the Company, subject to their continued compliance with applicable post-termination restrictive covenants (see Note 4–
Restructuring Program and Separation Costs). As the 2.25x and 2.75x Performance Restricted shares were not considered probable of
vesting before or after either modification, the Company will use the respective modification date fair value to record compensation
expense related to these shares if the performance conditions become probable within a future reporting period.
Other Fair Value Assumptions
Pre-IPO Incentive Plan Fair Value Assumptions
The fair value of each Pre-IPO Incentive Plan Employee Unit originally granted prior to April 18, 2013 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.
In order to calculate the incremental fair value when the unvested Employee Units were surrendered for unvested restricted shares on
April 18, 2013, 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 time-vesting restricted
shares while the fair value of the performance-vesting restricted shares 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 Grant Fair Value Assumptions
The grant date fair value of the 2013 Grant 2.25x and 2.75x Performance Restricted 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.
Modification Fair Value Assumptions
In order to calculate the modification date fair value for certain Performance Restricted shares which were modified, the asset-or-
nothing call option approach was used. Significant assumptions included a holding period of 0.75 to 1.5 years from the date of
modification, a risk free rate of 0.33% to 0.38%, a volatility of 33.0% to 45.4% based on re-levered historical and implied equity
volatility of comparable companies and a 0% dividend yield.
F-35
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
19. STOCKHOLDERS’ EQUITY
As of December 31, 2015, 90,320,374 shares of common stock were issued on the accompanying consolidated balance sheet, which
excludes 4,228,032 unvested shares of common stock held by certain participants in the Company’s equity compensation plan (see
Note 18–Equity-Based Compensation) and includes 6,519,773 shares of treasury stock held by the Company (see Secondary Offerings
and Concurrent Share Repurchases and Share Repurchase Program discussions below).
Dividends
The Board has adopted a policy to pay, subject to legally available funds, regular quarterly dividends. The payment and timing of
cash dividends is within the discretion of the Board and depends on many factors, including, but not limited to, the Company’s results
of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in its debt
agreements and in any preferred stock, business prospects and other factors that the Board may deem relevant.
During the years ended December 31, 2015, 2014 and 2013, the Board declared or paid quarterly cash dividends to all common
stockholders of record as follows:
Payment Date
Record Date
2015:
January 13, 2015 ....................................... January 22, 2015
March 13, 2015(a) ...................................... April 1, 2015
June 22, 2015(a) ......................................... July 1, 2015
September 29, 2015 .................................. October 6, 2015
2014:
March 20, 2014(a) ...................................... April 1, 2014
June 20, 2014(a) ......................................... July 1, 2014
September 29, 2014 .................................. October 6, 2014
2013:
June 20, 2013(a) ......................................... July 1, 2013
September 20, 2013 .................................. October 1, 2013
December 20, 2013 ................................... January 3, 2014
Cash Dividend
per Common
Share
$
$
$
$
$
$
$
$
$
$
0.21
0.21
0.21
0.21
0.20
0.21
0.21
0.20
0.20
0.20
(a)
As the Company had an accumulated deficit at the time these dividends were declared, these dividends were accounted for as a
return of capital and recorded as a reduction to additional paid-in capital on the accompanying consolidated statements of
changes in stockholders’ equity.
On January 5, 2016, the Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close of
business on January 15, 2016, which was paid on January 22, 2016. On February 22, 2016, the Board declared a cash dividend of
$0.21 per share to all common stockholders of record at the close of business on March 14, 2016, which will be paid on April 1, 2016.
As of December 31 2015, the Company had $430 of cash dividends recorded as dividends payable in the accompanying consolidated
balance sheet, which relates to unvested time restricted shares and unvested performance restricted shares with a performance
condition considered probable of being achieved. These shares carry dividend rights and therefore the dividends will be paid as the
shares vest in accordance with the underlying stock compensation grants. These dividend rights will be forfeited if the shares do not
vest.
Dividends paid to common stockholders were $72,318, $72,113 and $36,175 in the years ended December 31, 2015, 2014 and 2013,
respectively. For tax purposes, a portion of the 2015 and 2014 dividends were treated as a return of capital to stockholders.
Distributions that qualify as a return of capital are not considered “dividends” for tax purposes only.
F-36
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Dividends on all performance-vesting restricted share awards accumulate and are paid only if the performance conditions are met and
the respective shares vest in accordance with their terms. Excluding the impact of the January and February 2016 dividend
declarations, dividends on the 2.25x and 2.75x Performance Restricted shares were approximately $2,820 for each tranche as of
December 31, 2015, and will accumulate and be paid only if and to the extent these 2.25x and 2.75x Performance Restricted shares
vest in accordance with their terms. The Company does not record a dividend payable when the performance conditions on the related
unvested shares are not considered probable of being achieved. Due to the dividend declaration on February 22, 2016, the 2.25x
Performance Restricted shares will vest on April 1, 2016. The Company expects to record approximately $3,400 of accumulated
dividends related to these 2.25x Performance Restricted shares during the first quarter of 2016. See Note 18–Equity-Based
Compensation for further details.
Stock Split
On April 7, 2013, the Board 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 consolidated balance sheets and the consolidated statements of changes in stockholders’
equity reflects the stock 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 Board approved an increase in the number of authorized shares of common stock to 1
billion shares. Additionally, in connection with the consummation of the initial public offering, the Board 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 an initial public offering of its common stock in which it offered and sold 10,000,000
shares of common stock and the selling stockholders 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 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 and commissions, expenses and
transaction costs. The Company did not receive any proceeds from shares sold by the selling stockholders. The Company used a
portion of the net proceeds received in the offering to redeem (1) $140,000 in aggregate principal amount of its Senior Notes at a
redemption price of 111.0% plus accrued and unpaid interest thereon and (2) to repay $37,000 of the outstanding indebtedness under
the then existing Term B Loan. 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 16–Related-Party Transactions).
Secondary Offerings and Concurrent Share Repurchases
On December 17, 2013, the selling stockholders completed an underwritten secondary offering of 18,000,000 shares of common
stock. The selling stockholders received all of the net proceeds from the offering and no shares were sold by the Company. The
Company incurred fees and expenses of $1,407 in connection with this secondary offering which is shown as secondary offering
expenses on the consolidated statement of comprehensive income for the year ended December 31, 2013.
On April 9, 2014, the selling stockholders completed an underwritten secondary offering of 17,250,000 shares of common stock,
including 2,250,000 shares pursuant to the exercise in full of the underwriters’ option to purchase additional shares. The selling
stockholders received all of the net proceeds from the offering and no shares were sold by the Company. In the year ended December
31, 2014, the Company incurred fees and expenses of $747 in connection with this secondary offering which is shown as secondary
offering expenses on the accompanying consolidated statement of comprehensive income.
Concurrently with the closing of the secondary offerings in December 2013 and April 2014, the Company repurchased 1,500,000 and
1,750,000 shares, respectively, of its common stock directly from the selling stockholders in private, non-underwritten transactions at
a price per share equal to the price per share paid to the selling stockholders by the underwriters in the respective secondary offerings.
F-37
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Share Repurchase Program
On August 12, 2014, the Board authorized the repurchase of up to $250,000 of the Company’s common stock (the “Share Repurchase
Program”). Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases,
privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1
trading plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program has no time limit and may be suspended or
discontinued completely at any time. The number of shares to be purchased and the timing of purchases will be based on the level of
the Company’s cash balances, general business and market conditions, and other factors, including legal requirements, debt covenant
restrictions and alternative investment opportunities.
Pursuant to the Share Repurchase Program, during the year ended December 31, 2014, the Company repurchased a total of 855,970
shares of common stock at an average price of $17.50 per share and a total cost of approximately $15,000. The Company paid $5,650
in January 2015 for settlement of shares repurchased in December 2014.
During the year ended December 31, 2015, the Company repurchased a total of 2,413,803 shares of common stock at an average price
of $18.62 per share and a total cost of approximately $45,000 leaving $190,000 available for future repurchases under the Share
Repurchase Program as of December 31, 2015.
All of the repurchased shares from the Share Repurchase Program and the shares repurchased directly from the selling stockholders
during the December 2013 and April 2014 secondary offerings were recorded as treasury stock at a total cost of $154,871 and
$109,871 as of December 31, 2015 and 2014, respectively, and are reflected as a reduction to stockholders’ equity on the
accompanying consolidated balance sheets.
20. SUMMARY QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited summary quarterly financial data for the years ended December 31, 2015 and 2014 was as follows:
2015
First
Quarter
Second
Quarter (a)
Third
Quarter
Fourth
Quarter(b)
Total revenues ........................................................................ $
Operating (loss) income ......................................................... $
Net (loss) income ................................................................... $
(Loss) earnings per share:
214,592 $
(50,199) $
(43,598) $
Net (loss) income per share, basic .................................... $
Net (loss) income per share, diluted .................................. $
(0.51) $
(0.51) $
(Unaudited)
391,616 (cid:3)$ 496,939 (cid:3)(cid:3)$
45,750 (cid:3)$ 170,860 (cid:3)(cid:3)$
97,950 (cid:3)(cid:3)$
5,809 (cid:3)$
(cid:3)(cid:3)
(cid:3)
1.14 (cid:3)(cid:3)$
0.07 (cid:3)$
1.14 (cid:3)(cid:3)$
0.07 (cid:3)$
267,857
(6,975)
(11,028)
(0.13)
(0.13)
2014
First
Quarter
Second
Third
Quarter
Quarter
Fourth
Quarter (c)
Total revenues ........................................................................ $
Operating (loss) income ......................................................... $
Net (loss) income ................................................................... $
(Loss) earnings per share:
212,290 $
(59,408) $
(49,217) $
Net (loss) income per share, basic .................................... $
Net (loss) income per share, diluted .................................. $
(0.56) $
(0.56) $
(Unaudited)
405,151 (cid:3)$ 495,834 (cid:3)(cid:3)$
80,587 (cid:3)$ 161,915 (cid:3)(cid:3)$
87,176 (cid:3)(cid:3)$
37,406 (cid:3)$
(cid:3)(cid:3)
(cid:3)
1.01 (cid:3)(cid:3)$
0.43 (cid:3)$
1.00 (cid:3)(cid:3)$
0.43 (cid:3)$
264,537
(22,497)
(25,446)
(0.29)
(0.29)
(a) During the second quarter of 2015, the Company recorded $20,348 in loss on early extinguishment of debt and write-off of
discounts and debt issuance costs related to the early redemption of $260,000 of its Senior Notes. See Note 11–Long-Term
Debt for further details.
F-38
SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(b) During the fourth quarter of 2015, the Company recorded $2,001 in restructuring and other related costs primarily related to
severance costs for certain positions which were eliminated as part of a cost savings initiative. See Note 4–Restructuring
Program and Separation Costs for further details.
(c) During the fourth quarter of 2014, the Company recorded $10,371 in restructuring and other related costs incurred in connection
with the restructuring program which the Company implemented in December 2014. Also during the fourth quarter of 2014, the
Company recorded $2,574 in separation costs representing costs incurred pursuant to the previously announced separation of the
Company’s Former Chief Executive Officer and President on January 15, 2015. See Note 4–Restructuring Program and
Separation Costs for further details.
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.
F-39
SEAWORLD ENTERTAINMENT, INC.
PARENT COMPANY ONLY
CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
2015
2014
Current Assets:
Assets
Cash ............................................................................................................................ $
Total current assets ................................................................................................
Investment in wholly owned subsidiary ......................................................................
Total assets ............................................................................................................................ $
430 $
430
517,257
517,687 $
Current Liabilities:
Liabilities and Stockholders' Equity
Dividends payable ....................................................................................................... $
Other accrued expenses ...............................................................................................
Total current liabilities ...........................................................................................
Total liabilities ............................................................................................................
430 $
—
430
430
5,858
5,858
580,018
585,876
172
5,686
5,858
5,858
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value—authorized, 100,000,000 shares, no shares
issued or outstanding at December 31, 2015 and 2014 ..................................................
Common stock, $0.01 par value—authorized, 1,000,000,000 shares; 90,320,374
and 90,191,100 shares issued at December 31, 2015 and 2014, respectively ...................
Additional paid-in capital .................................................................................................
Retained earnings .............................................................................................................
Treasury stock, at cost (6,519,773 and 4,105,970 shares at December 31, 2015
and 2014, respectively) ...................................................................................................
Total stockholders' equity ......................................................................................
Total liabilities and stockholders' equity ........................................................................... $
—
—
903
624,765
46,460
(154,871 )
517,257
517,687 $
902
655,471
33,516
(109,871)
580,018
585,876
See accompanying notes to condensed financial statements.
F-40
SEAWORLD ENTERTAINMENT, INC.
PARENT COMPANY ONLY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(In thousands)
Equity in net income of subsidiary .................................................................... $
Net income ........................................................................................................ $
Other comprehensive income ............................................................................
Comprehensive income ..................................................................................... $
49,133 $
49,133 $
—
49,133 $
49,919 $
49,919 $
—
49,919 $
51,920
51,920
—
51,920
2015
Year Ended December 31,
2014
2013
See accompanying notes to condensed financial statements.
F-41
SEAWORLD ENTERTAINMENT, INC.
PARENT COMPANY ONLY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(In thousands)
Cash Flows From Operating Activities:
Net income ................................................................................................... $
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in net income of subsidiary .........................................................
Dividend received from subsidiary-return on capital
(net of forfeitures) ...............................................................................
Net cash provided by operating activities .........................................
Cash Flows From Investing Activities:
Capital contributed to subsidiary .................................................................
Restricted payment from subsidiary ............................................................
Dividend received from subsidiary-return of capital
(net of forfeitures) .....................................................................................
Net cash provided by (used in) investing activities ..........................
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net of
underwriter commissions ..........................................................................
Purchase of treasury stock ...........................................................................
Dividend paid to common stockholders ......................................................
Offering costs ..............................................................................................
(Payment) receipt of cash for tax withholdings on
equity-based compensation .......................................................................
Net cash (used in) provided by financing activities ..........................
Change in Cash and Cash Equivalents .........................................................
Cash and Cash Equivalents - Beginning of year ..........................................
Cash and Cash Equivalents - End of year ..................................................... $
For the Year Ended December 31,
2014
2013
2015
49,133 $
49,919 $
51,920
(49,133)
(49,919)
(51,920)
36,196
36,196
—
45,000
36,056
36,056
—
65,708
36,381
81,381
36,056
101,764
—
(50,650)
(72,318)
—
(37)
(123,005)
(5,428)
5,858
430 $
—
(60,058)
(72,113)
—
37
(132,134)
5,686
172
5,858 $
18,072
18,072
(249,106)
44,163
18,072
(186,871)
253,800
(44,163)
(36,175)
(4,694)
—
168,768
(31)
203
172
Supplemental Disclosures of Noncash Financing Activities ........................
Dividends declared, but unpaid ................................................................... $
Treasury stock purchases settled in January 2015 ............................................. $
430 $
— $
172 $
5,650 $
17,939
—
See accompanying notes to condensed financial statements.
F-42
SEAWORLD ENTERTAINMENT, INC.
NOTES TO CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. DESCRIPTION OF SEAWORLD ENTERTAINMENT, INC.
SeaWorld Entertainment, Inc. (the “Parent”) was incorporated in Delaware on October 2, 2009. At that time, the Parent was owned
by ten limited partnerships (the “Partnerships” or the “selling stockholders”), ultimately owned by affiliates of The Blackstone
Group L.P. (“Blackstone”) and certain co-investors. The Parent has no operations or significant assets or liabilities other than its
investment in SeaWorld Parks & Entertainment, Inc. (“SEA”), which owns and operates eleven theme parks within the United States.
Accordingly, the Parent is dependent upon distributions from SEA to fund its obligations. However, under the terms of SEA’s various
debt agreements, SEA’s ability to pay dividends or lend to the Parent is restricted, except that SEA may pay specified amounts to the
Parent to fund the payment of the Parent’s tax obligations.
2. BASIS OF PRESENTATION
The accompanying condensed financial statements (the “parent company only financial statements”) include the accounts of the
Parent and its investment in SEA accounted for in accordance with the equity method, and do not present the financial statements of
the Parent and its subsidiary on a consolidated basis. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed
or omitted since this information is included with the SeaWorld Entertainment, Inc. consolidated financial statements included
elsewhere in this Annual Report on Form 10-K (the “consolidated financial statements”). These parent company only financial
statements should be read in conjunction with the consolidated financial statements.
3. GUARANTEES
On December 1, 2009, SEA entered into senior secured credit facilities (the “Senior Secured Credit Facilities”) and issued senior notes
(the “Senior Notes”). On March 30, 2015, SEA entered into an incremental term loan amendment (the “Incremental Amendment”) to
its existing Senior Secured Credit Facilities and on April 7, 2015, SEA borrowed additional term loans pursuant to the Incremental
Amendment. The proceeds, along with cash on hand, were used to redeem all of the outstanding Senior Notes. See further discussion
in Note 11–Long-Term Debt of the accompanying consolidated financial statements.
Under the terms of the Senior Secured Credit Facilities, the obligations of SEA are fully, unconditionally and irrevocably guaranteed
by Parent, any subsidiary of Parent that directly or indirectly owns 100% of the issued and outstanding equity interest of SEA, and
subject to certain exceptions, each of SEA’s existing and future material domestic wholly-owned subsidiaries (collectively, the
“Guarantors”).
F-43
SEAWORLD ENTERTAINMENT, INC.
NOTES TO CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. DIVIDENDS FROM SUBSIDIARIES
SEA’s Board of Directors (the “Board”) has adopted a policy to pay a regular quarterly cash dividend to the Parent (defined as a
restricted payment in the Senior Secured Credit Facilities). As a result, SEA paid a cash dividend to the Parent during the years ended
December 31, 2015, 2014 and 2013 related to dividend declarations as follows:
Cash Dividends
Paid
Payment Date
2015:
January 22, 2015 .......................................................................... $
April 1, 2015(a) ............................................................................. $
July 1, 2015(a) ............................................................................... $
October 6, 2015 ............................................................................ $
2014
January 3, 2014 ............................................................................ $
April 1, 2014(a) ............................................................................. $
July 1, 2014(a) ............................................................................... $
October 6, 2014 ............................................................................ $
2013:
July 1, 2013(a) ............................................................................... $
October 1, 2013 ............................................................................ $
18,112
18,204
18,238
18,117
17,767
17,766
18,290
18,290
18,072
18,072
(a)
As SEA had an accumulated deficit at the time these dividends were declared to the Parent, these dividends were accounted for
as a return of capital by the Parent. The remaining dividends from SEA have been reflected as a return on capital in the
accompanying parent company only financial statements.
The Parent’s Board has also adopted a policy to pay a regular quarterly dividend (defined as a restricted payment in the Senior
Secured Credit Facilities). The payment of cash dividends is within the discretion of the Parent’s Board and depends on many factors,
including, but not limited to, SEA’s results of operations, financial condition, level of indebtedness, capital requirements, contractual
restrictions, restrictions in its debt agreements and in any preferred stock, business prospects and other factors that the Board may
deem relevant.
During the years ended December 31, 2015, 2014 and 2013, the Parent’s Board declared or paid quarterly cash dividends to all
common stockholders of record as follows:
Cash Dividend
per Common
Share
Payment Date
Record Date
2015:
January 13, 2015 ..................................................................... January 22, 2015 $
$
March 13, 2015 ....................................................................... April 1, 2015
June 22, 2015 .......................................................................... July 1, 2015
$
September 29, 2015 ................................................................ October 6, 2015 $
2014:
$
March 20, 2014 ....................................................................... April 1, 2014
June 20, 2014 .......................................................................... July 1, 2014
$
September 29, 2014 ................................................................ October 6, 2014 $
2013:
June 20, 2013 .......................................................................... July 1, 2013
$
September 20, 2013 ................................................................ October 1, 2013 $
December 20, 2013 ................................................................. January 3, 2014 $
0.21
0.21
0.21
0.21
0.20
0.21
0.21
0.20
0.20
0.20
As of December 31, 2015, the Parent had $430 of cash dividends payable included in dividends payable in the accompanying
condensed balance sheet. See Note 19–Stockholders’ Equity of the accompanying consolidated financial statements for further
discussion.
F-44
SEAWORLD ENTERTAINMENT, INC.
NOTES TO CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On January 5, 2016, SEA’s Board declared a cash dividend of up to $17,787 to the Parent, which was paid on January 22, 2016.
Additionally, the Parent’s Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close of
business on January 15, 2016, which was paid on January 22, 2016. On February 22, 2016, SEA’s Board declared a cash dividend of
up to $18,600 to the Parent, which will be paid on April 1, 2016. Additionally, the Parent’s Board declared a cash dividend of $0.21
per share to all common stockholders of record at the close of business on March 14, 2016, which will be paid on April 1, 2016.
5. STOCKHOLDERS’ EQUITY
Stock Split and Authorized Shares
On April 7, 2013, the Parent’s Board authorized an eight-for-one split of the Parent’s common stock which was effective on April 8,
2013. The Parent 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 condensed balance sheet reflects the stock split. The Parent’s historical share information
has been retroactively adjusted to give effect to this stock split.
Contemporaneously with the stock split, the Parent’s Board 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 Parent’s Board authorized 100,000,000
shares of preferred stock at a par value of $0.01 per share.
Omnibus Incentive Plan
The Parent reserved 15,000,000 shares of common stock for future issuance under the 2013 Omnibus Incentive Plan (“Omnibus
Incentive Plan”). The Omnibus Incentive Plan is administered by the compensation committee of the Parent’s Board, and provides
that the Parent may grant equity incentive awards to eligible employees, directors, consultants or advisors of the Parent or its
subsidiary, SEA, 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 Omnibus Incentive 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 Omnibus Incentive
Plan. See further discussion in Note 18–Equity-Based Compensation of the accompanying consolidated financial statements.
Initial Public Offering and Use of Proceeds
On April 24, 2013, the Parent completed an initial public offering of its common stock in which it offered and sold 10,000,000 shares
of common stock and the selling stockholders of the Parent 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 Parent did not receive any
proceeds from shares sold by the selling stockholders. The shares offered and sold in the offering were registered under the Securities
Act pursuant to the Parent’s Registration Statement on Form S-1, which was declared effective by the Securities and Exchange
Commission on April 18, 2013. The common stock is listed on the New York Stock Exchange under the symbol “SEAS”.
The Parent’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 Parent after deducting underwriting discounts and commissions, expenses and transaction costs.
Subsequent to the initial public offering, the Parent transferred the net proceeds to SEA as a capital contribution and increased its
investment in SEA.
Secondary Offerings and Concurrent Share Repurchases
On December 17, 2013, the selling stockholders completed an underwritten secondary offering of 18,000,000 shares of common
stock. The selling stockholders received all of the net proceeds from the offering and no shares were sold by the Parent.
On April 9, 2014, the selling stockholders completed an underwritten secondary offering of 17,250,000 shares of common stock,
including 2,250,000 shares pursuant to the exercise in full of the underwriters’ option to purchase additional shares. The selling
stockholders received all of the net proceeds from the offering and no shares were sold by the Parent.
Concurrently with the closing of the secondary offering in December 2013 and April 2014, the Parent repurchased 1,500,000 and
1,750,000 shares, respectively, of its common stock directly from the selling stockholders in private, non-underwritten transactions at
a price per share equal to the price per share paid to the selling stockholders by the underwriters in the respective secondary offerings.
F-45
SEAWORLD ENTERTAINMENT, INC.
NOTES TO CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Share Repurchase Program
On August 12, 2014, the Parent’s Board authorized the repurchase of up to $250,000 of the Company’s common stock (the “Share
Repurchase Program”). Under the Share Repurchase Program, the Parent is authorized to repurchase shares through open market
purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule
10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program has no time limit and may be
suspended or discontinued completely at any time. The number of shares to be purchased and the timing of purchases will be based on
the level of the Company’s cash balances, general business and market conditions, and other factors, including legal requirements,
debt covenant restrictions and alternative investment opportunities.
Pursuant to the Share Repurchase Program, during the year ended December 31, 2014, the Parent repurchased a total of 855,970
shares of common stock at an average price of $17.50 per share and a total cost of approximately $15,000. The Company paid $5,650
in January 2015 for settlement of shares repurchased in December 2014.
During the year ended December 31, 2015, the Parent repurchased a total of 2,413,803 shares of common stock at an average price of
$18.62 per share and a total cost of approximately $45,000 leaving $190,000 available for future repurchases under the Share
Repurchase Program as of December 31, 2015.
All of the repurchased shares from the Share Repurchase Program and the shares repurchased directly from the selling stockholders
during the December 2013 and April 2014 secondary offerings were recorded as treasury stock at a total cost of $154,871 and
$109,871 as of December 31, 2015 and 2014, respectively, and are reflected as a reduction to stockholders’ equity on the
accompanying consolidated balance sheets. SEA transferred $45,000, $65,708 and $44,163 during the years ended December 31,
2015, 2014 and 2013, respectively, as restricted payments to the Parent for the payment of repurchased shares.
F-46
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Joel K. Manby, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2015 of SeaWorld Entertainment, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 26, 2016
Signature:
/s/ Joel K. Manby
Joel K. Manby
President and Chief Executive Officer, Director
(Principal Executive Officer)
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Peter J. Crage, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2015 of SeaWorld Entertainment, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 26, 2016
Signature:
/s/ Peter J. Crage
Peter J. Crage
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of SeaWorld Entertainment, Inc. (the “Company”) on Form 10-K for the year ended December
31, 2015 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joel K. Manby, President and Chief
Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(cid:120)
(cid:120)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company for the periods presented therein.
Date: February 26, 2016
By: /s/ Joel K. Manby
Joel K. Manby
President and Chief Executive Officer, Director
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of SeaWorld Entertainment, Inc. (the “Company”) on Form 10-K for the year ended December
31, 2015 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter J. Crage, Chief Financial
Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
(cid:120)
(cid:120)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company for the periods presented therein.
Date: February 26, 2016
By: /s/ Peter J. Crage
Peter J. Crage
Chief Financial Officer
(Principal Financial Officer)
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
Corporate Information
BOARD OF DIRECTORS:
COMPANY EXECUTIVES:
Joel K. Manby
President and Chief Executive Officer
Peter J. Crage
Chief Financial Officer
John T. Reilly
Chief Parks Operations Officer
Anthony Esparza
Chief Creative Officer
G. Anthony (Tony) Taylor
Chief Legal Officer, General Counsel
and Corporate Secretary
Dave Hammer
Chief Human Resources Officer
Marc G. Swanson
Chief Accounting Officer
Dr. Christopher (Chris) Dold
Chief Zoological Officer
David F. D’Alessandro, Chairman A,D
Former Chairman, President and Chief
Executive Officer,
John Hancock Financial Services
Joel K. Manby
President and Chief Executive Officer,
SeaWorld Entertainment, Inc.
Joseph P. Baratta
Global Head of Private Equity Group,
The Blackstone Group
Ronald Bension
President, House of Blues
Entertainment, LLC
William Gray A,C
Co-Founder and Director,
Hulls Highway, Inc.
Judith A. McHale B,C
President and Chief Executive Officer,
Cane Investments, LLC
Thomas E. Moloney B,D
Former Senior Executive Vice President
and Chief Financial Officer,
John Hancock Financial Services, Inc.
Ellen O. Tauscher A,C,D
Strategic Advisor, Baker, Donelson,
Bearman, Caldwell & Berkowitz, PC
Deborah M. Thomas B
Chief Financial Officer, Hasbro, Inc.
Peter F. Wallace
Senior Managing Director of Private Equity
Group, The Blackstone Group
A Member of the Compensation Committee
B Member of the Audit Committee
C Member of the Nominating and Corporate
Governance Committee
D Member of the Regulatory &
Governmental Affairs Committee
TRANSFER AGENT &
REGISTRAR:
For information or assistance regarding
individual stock records or dividends,
contact your broker or the Company’s
transfer agent, Computershare.
Computershare may be reached
at: 1-800-851-9677.
STOCK EXCHANGE LISTING:
The Company’s common stock is listed on
the New York Stock Exchange under the
ticker symbol “SEAS.”
FORWARD-LOOKING
STATEMENTS:
This Annual Report contains certain
forward-looking statements that are based
largely on the Company’s current
expectations. Forward-looking statements
are subject to certain risks and
uncertainties that could cause actual
performance or results to differ materially
from those expressed in the forward-
looking statements. For more information
about these forward-looking statements
and related risks, please refer to the
“Special Note Regarding Forward-Looking
Statements” beginning on page 1 of the
Company’s Annual Report on Form 10-K
included herewith.
CORPORATE GOVERNANCE:
Information concerning our Corporate
Governance practices, including our Code
of Ethics, Code of Conduct, Committee
Charters and Corporate Governance
Guidelines, is available on our Investor
Relations website at
www.seaworldinvestors.com.
INVESTOR RELATIONS:
Anyone seeking information about
SeaWorld Entertainment, Inc. is
encouraged to visit us online at
www.seaworldinvestors.com. The
Company provides a variety of information
about the business on its websites.
Prospective and current investors may also
contact the investor relations team at:
Phone: 855-797-8625
Email: investors@seaworld.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM:
Deloitte & Touche LLP
201 N. Franklin Street, Suite 3600,
Tampa, FL 33602-5827
SeaWorld Entertainment, Inc. Global Headquarters
9205 SouthPark Center Loop, Suite 400
Orlando, Florida 32819
Phone 407.226.5011
www.seaworldentertainment.com