SeaWorld Entertainment, Inc., through its wholly-owned subsidiary, SeaWorld Parks & Entertainment, Inc. (“SEA”) (collectively, the “Company”), owns and operates twelve theme parks within the United States. 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 Antonio, Texas (Aquatica); San Diego, California (Aquatica); Tampa, Florida (Adventure Island); and Williamsburg, Virginia (Water Country USA). The Company also operates a reservations-only theme park in Orlando, Florida (Discovery Cove) and a seasonal park in Langhorne, Pennsylvania (Sesame Place).

In response to the global COVID-19 pandemic, and in compliance with government restrictions, the Company temporarily closed all of its theme parks, effective March 16, 2020. Beginning in June 2020, the Company began the phased reopening of some of its parks with capacity limitations, reduced hours and/or reduced operating days. In particular, on June 6, the Company’s Aquatica park in Texas reopened; on June 11, all five of the Company’s Florida parks reopened; on June 19, its SeaWorld park in Texas reopened; on July 24, its Sesame Place park in Pennsylvania reopened and on August 6, its Busch Gardens park in Virginia reopened. The Company continues to monitor guidance from federal, state and local authorities to determine when it can reopen in California. The Company does not currently plan to open its Aquatica water park in San Diego or its Water Country USA water park in Williamsburg for the 2020 operating season.

Since the global COVID-19 pandemic has begun, the Company has taken proactive measures for the safety of its guests, employees and animals, to appropriately manage costs and expenditures, and to maximize liquidity in response to the temporary park closures and limited reopenings related to COVID-19. Some of these measures included, but are not limited to, (i) increased its revolving credit commitments on March 10th and subsequently borrowed the remaining available amount; (ii) issued first-priority senior secured notes and second-priority senior secured notes to raise additional capital and further enhance available liquidity; (iii) entered into amendments to its existing senior secured credit facilities to amend its financial covenants (see Note 6–Long-Term Debt for details); (iv) furloughed approximately 95% of its employees upon closing all of its parks; (v) obtained payroll tax credit and deferred social security payroll taxes under the CARES act; (vi) reduced executive officers’ base salary by 20% until the theme parks substantially resume normal operations; (vii) eliminated and/or deferred all non-essential operating expenses at all of the parks and the corporate headquarters; (viii) eliminated substantially all advertising and marketing spend; (ix) substantially reduced or deferred all capital expenditures starting in March 2020 (other than minimal essential capital expenditures) and postponed to 2021 the opening of rides that were still under construction and scheduled to open in 2020; (x) worked with certain of its vendors and other business partners to manage, defer, and/or abate certain costs and; (xi) implemented a formal review and approval process for payments and cash disbursements. Concurrent with the reopening of some of its parks, the Company has begun to bring some employees back from furlough. The Company will continue to monitor the impact of the COVID-19 pandemic and may adjust its plans accordingly.

The COVID-19 pandemic, resulting park closures and limited park reopenings have had, and are likely to continue to have, a material impact on the Company’s financial statements. Federal, state and local governments have taken unprecedented measures to prevent the spread of COVID-19 in the population, including placing severe restrictions on social gatherings, which remain in place in all of the Company’s park locations.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2020 or any future period due to the seasonal nature of the Company’s operations. Prior to the COVID-19 pandemic, the Company historically generated its highest revenues in the second and third quarters of each year and typically incurred a net loss in the first and fourth quarters, in part because seven of its theme parks are typically only open for a portion of the year. The results of operations for the three and six months ended June 30, 2020 were materially impacted by the global COVID-19 pandemic which ultimately led to temporary park closures effective on March 16, 2020. The timing of these park closures fell during historically high volume spring break and summer weeks. For the vast majority of the quarter, all of the Company’s parks were closed with phased, reduced capacity reopenings beginning in June for seven of its parks. Attendance since the parks reopened in June has been impacted by capacity limitations, fewer operating days per week versus the prior year, limited marketing spend and a limited events line-up.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including SEA. All intercompany accounts have been eliminated in consolidation.

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 unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance, deferred tax assets and liabilities, deferred revenue, equity compensation, the valuation of goodwill and other indefinite-lived intangible assets as well as reviews for potential impairment of assets, including other long-lived assets. Estimates are based on various factors including current and historical trends, as well as other pertinent industry data. The Company regularly evaluates this information to determine if it is necessary to update the basis for its estimates and to adjust for known changes. Actual results could differ from those estimates. Based on the uncertainty relating to the COVID-19 pandemic, including but not limited to the extent, duration and impact of park closures and limited park reopenings, public sentiment on social gatherings, travel and attendance patterns, potential supply chain disruptions and additional actions which could be taken by government authorities to manage the pandemic, the Company is not certain of the ultimate impact the COVID-19 pandemic could have on its estimates, business or results of operations for the year ending December 31, 2020.

The Company maintains discrete financial information for each of its twelve theme parks, which is used by the Chief Operating Decision Maker (“CODM”), identified as the Chief Executive Officer, or equivalent role, as a basis for allocating resources and assessing performance. 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.

Restricted cash is recorded in other current assets in the accompanying unaudited condensed consolidated balance sheets. Restricted cash consists primarily of funds received from strategic partners for use in approved marketing and promotional activities.

	June 30,		December 31,
	2020		2019
	(In thousands)
Cash and cash equivalents	$	375,683	$	39,946
Restricted cash, included in other current assets		1,490		979
Total cash, cash equivalents and restricted cash	$	377,173	$	40,925

Admissions revenue primarily consists of single-day tickets, annual or season passes or other multi-day or multi-park admission products. For single-day tickets, the Company recognizes revenue at a point in time, upon admission to the park. Annual passes, season passes, or other multi-day or multi-park passes allow guests access to specific parks over a specified time period. For these pass and multi-use products, revenue is deferred and recognized over the terms of the admission product based on estimated redemption rates for similar products and is adjusted periodically. For pass products purchased on an installment plan that have met their initial commitment period and have transitioned to a month to month basis, monthly charges are recognized as revenue as payments are received each month, with the exception of payments received during the temporary park closures (see further discussion which follows).

As a result of the temporary park closures due to the global COVID-19 pandemic, the Company upgraded some of its pass products and extended pass expiration dates for at least the equivalent period the related parks were closed. As a result, the Company adjusted its estimated redemption and recognition patterns to reflect the fact that there was no attendance during the park closures and accordingly the Company did not recognize revenue from these admission products while the parks were closed. For passes under installment plans that have transitioned to a month to month basis, payments received during the closure period were recorded as deferred revenue and will be recognized as revenue once the parks reopen, which may not necessarily reflect attendance patterns for these guests. Accordingly, for these passes, once the related parks reopen, the Company will temporarily pause monthly charges for the equivalent period the parks were closed.

The Company estimates a redemption rate using historical and forecasted growth rates and attendance trends by park for similar products. For the parks that remain closed, the Company is evaluating the estimates and assumptions used in its future estimated redemption rates for these products based on attendance patterns as parks reopen. Attendance trends factor in seasonality and are adjusted based on actual trends periodically, including to reflect recent trends. Revenue is recognized on a pro-rata basis based on the estimated allocated selling price of the admission product. For multi-day admission products, revenue is allocated based on the number of visits included in the pass and recognized ratably based on each admission into the theme park.

Food, merchandise and other revenue primarily consists of culinary, merchandise and other in-park products and also includes other miscellaneous revenue which is not significant in the periods presented, including revenue related to the Company’s international agreements in the prior year period as discussed below. The Company recognizes revenue for food, merchandise and other in-park products when the related products or services are received by the guests. Certain admission products may also include bundled products at the time of purchase, such as culinary or merchandise items. The Company conducts an analysis of bundled products to identify separate distinct performance obligations that are material in the context of the contract. For those products that are determined to be distinct performance obligations and material in the context of the contract, the Company allocates a portion of the transaction price to each distinct performance obligation using each performance obligation’s standalone price. If the bundled product is related to a pass product and offered over time, revenue will be recognized over time accordingly.

Deferred revenue primarily includes revenue associated with pass products, admission or in-park products or services with a future intended use date and contract liability balances related to licensing and international agreements collected in advance of the Company’s performance and expected to be recognized in future periods. As a result of the temporary park closures, the Company extended some product expiration dates and as a result, estimated a long-term portion of deferred revenue related to these products of approximately $4.2 million, which is reflected in the chart which follows. The Company’s estimate of the long-term portion of deferred revenue related to such products factors in certain judgements and assumptions by park and product type, including, but not limited to, the reopening schedules and expected timing of attendance by mix of guests.

At June 30, 2020 and December 31, 2019, $10.3 million and $10.0 million, respectively, related to the long-term portion of deferred revenue included in other liabilities in the accompanying unaudited condensed consolidated balance sheets relates to the Company’s international agreement, as discussed in the following section. The Company expects to recognize revenue related to its international agreement over the term of the respective license agreement beginning when substantially all of the services have been performed, which is expected to be upon opening.

The following table reflects the Company’s deferred revenue balance as of June 30, 2020 and December 31, 2019:

	June 30,		December 31,
	2020		2019
	(In thousands)
Deferred revenue, including long-term portion	$	148,343	$	114,416
Less: Deferred revenue, long-term portion, included in other liabilities		14,505		10,000
Deferred revenue, short-term portion	$	133,838	$	104,416

The Company has received $10.0 million in deferred revenue recorded in other liabilities related to a nonrefundable payment received from a partner in connection with a project in the Middle East (the “Middle East Project”) to provide certain services pertaining to the planning and design of the Middle East Project, with funding received expected to offset internal expenses. Approximately $5.5 million and $5.0 million of costs incurred related to the Middle East Project are recorded in other assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively. The Company has recognized an asset for the costs incurred to fulfill the contract as the costs are specifically identifiable, enhance resources that will be used to satisfy performance obligations in the future and are expected to be recovered. The related deferred revenue and expense will begin to be recognized when substantially all of the services have been performed. The Company continually monitors performance on the contract and will make adjustments, if necessary. The Middle East Project is currently in construction and is scheduled to be completed in 2022. There is no assurance that the Middle East Project will be completed or open to the public.

In March 2017, the Company entered into certain agreements with an affiliate of ZHG Group, to provide design, support and advisory services for various potential projects and grant certain exclusive rights (collectively, the “ZHG Agreements”). In April 2019, the Company terminated the ZHG Agreements for non-payment of undisputed amounts owed. For the six months ended June 30, 2019, the Company recorded approximately $1.7 million which is included in food, merchandise and other revenue in the accompanying unaudited condensed consolidated statements of comprehensive (loss) income related to the ZHG Agreements. There were no amounts recorded as revenue related to the ZHG Agreements in the three months ended June 30, 2019. See Note 9–Related-Party Transactions for additional disclosures.

As of June 30, 2020, the Company determined that due to the temporary park closures effective March 16, 2020 resulting from the global COVID-19 pandemic, a triggering event had occurred that required an interim impairment review for goodwill and other indefinite-lived intangible assets. The Company performed a qualitative impairment analysis which included certain judgements and assumptions related to the impact of the park closures, reopening time frames and expected attendance levels upon reopening and determined that, based on the significant excess fair values over carrying values that previously existed, there was no impairment of goodwill and other indefinite-lived intangible assets as of June 30, 2020. Additionally, using similar assumptions, the Company evaluated certain other long-lived assets, including its right of use assets for impairment and determined that, based on the significant excess estimated undiscounted cash flows over carrying values, there was no impairment of other long-lived assets as of June 30, 2020.

If the Company’s current assumptions, including those around the impact of the global COVID-19 pandemic and its projections of future cash flows and financial performance, as well as the economic outlook are not achieved, the Company may be required to record impairment charges in future periods, whether in connection with the Company’s next annual impairment testing, or on an interim basis, if any such change constitutes a triggering event outside of the quarter when the Company regularly performs its annual impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.