SEAWORLD ENTERTAINMENT, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)


References to our "theme parks" or "parks" in the discussion that follows
includes all of our separately gated parks. The following 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 our Annual Report on Form 10-K, as
such risk factors may be updated from time to time in our periodic filings with
the SEC. Actual results may differ materially from those contained in any
forward-looking statements. You should carefully read "Special Note Regarding
Forward-Looking Statements" included elsewhere in this Quarterly Report on Form
10-Q.

Introduction

The following discussion and analysis is intended to facilitate an understanding
of our business and results of operations and should be read in conjunction with
our unaudited condensed consolidated financial statements and the related notes
thereto included elsewhere in this Quarterly Report on Form 10-Q. This
discussion should also be read in conjunction with our consolidated financial
statements and related notes thereto, and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of our Annual
Report on Form 10-K for the year ended December 31, 2021.

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, Aquatica, Discovery Cove and Sesame Place. Over our more than
60-year history, we have developed a diversified portfolio of 12 differentiated
theme parks that are grouped in key markets across the United States. Many of
our theme parks showcase our one-of-a-kind zoological collection and feature a
diverse array of both thrill and family-friendly rides, educational
presentations, shows and/or other attractions with broad demographic appeal
which deliver memorable experiences and a strong value proposition for our
guests.

RECENT DEVELOPMENTS

Impact of the global COVID-19 pandemic

Our results of operations for the three months ended March 31, 2022 and 2021
continue to be impacted by the global COVID-19 pandemic due in part to a decline
in both international and group-related attendance in both
periods. Additionally, results of operations for the three months ended March
31, 2021 were also significantly impacted by the following factors: (i) capacity
limitations, modified/limited operations and/or temporary park closures; (ii)
decreased demand due to public concerns associated with the pandemic; and (iii)
restrictions on international travel. See further discussion in Note
1-Description of the Business and Basis of Presentation to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q.

As approved vaccines continue to be distributed, the operating environment has
improved and COVID-19 related capacity limitations have been eliminated;
however, there can be no certainty of the extent and effectiveness of the
vaccines or how they will impact these factors and others, including domestic or
international travel, group events and group-related attendance, public opinion
concerning social gatherings, consumer behavior or federal, state and local
regulations related to health protocols, capacity limitations and social
gatherings. See the "Risk Factors" section of our Annual Report on Form 10-K, as
such risk factors may be updated from time to time in our periodic filings with
the SEC.

Current operating environment

Our Board has formed a number of committees designed to provide additional assistance to Board members with expertise in certain areas by providing increased oversight of the Company’s operations. Accordingly, in the current operating environment, certain members of our Board, including our Chairman of the Board, are actively involved in overseeing certain key operating activities.

The current condition of the overall labor market, the challenging current
operating environment and COVID-19 related factors has led to increased turnover
and challenges in meeting our staffing goals. These staffing challenges have
also led to wage pressures and less than optimal staffing levels. Recently and
in 2021, we have also experienced inflationary pressures relating to the costs
for labor, goods, services and capital projects. Less than optimal staffing
levels have impacted our ability to open some of our food and beverage outlets,
caused us to temporarily close some rides or attractions and/or caused longer
wait times in certain areas of our parks, particularly food, beverage and/or
retail outlets. We continue our efforts to recruit and retain talent and
identify cost reduction and efficiency opportunities as well as incremental
pricing and revenue opportunities to help offset these cost pressures.

For further discussion relating to strategic measures we have taken to operate
in the current environment, see the "Results of Operations" section which
follows. For other factors concerning the global COVID-19 pandemic, see the
"Risk Factors" section of our Annual Report on Form 10-K, as such risk factors
may be updated from time to time in our periodic filings with the SEC.

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Key Factors and Trends Affecting Our Results of Operations

Revenue

Our revenues are driven primarily by attendance in our theme parks and the level
of per capita spending for admission and per capita spending for food and
beverage, merchandise and other in-park products. We define attendance as the
number of guest visits. Attendance drives admissions revenue as well as total
in-park spending. Admissions revenue primarily consists of single-day tickets,
annual passes (which generally expire after a 12-month term), season passes
(including our fun card products and, collectively with annual passes, referred
to as "passes" or "season passes") or other multi-day or multi-park admission
products. Revenue from these admissions products are generally recognized based
on attendance. Certain pass products are purchased through monthly installment
arrangements which allow guests to pay over the product's initial commitment
period. Once the initial commitment period is reached, these products transition
to a month-to-month basis providing these guests access to specific parks on a
monthly basis with related revenue recognized monthly.

Total income per capita, defined as total income divided by total attendance, includes per capita entry and per capita expenditure in the park:

• Admission per capita. We calculate the admission per capita as the total number of admissions

revenue divided by total attendance. Admission per capita is mainly driven

by ticket prices, the mix produces admissions (including the impact of the pass

attendance rate) and the composition of park attendance, among other factors. the

Admissions Product Mix, also known as Attendance or Attendance Mix,

is defined as the breakdown of attendance by ticket category, such as single day,

multi-day, annual/seasonal passes or free tickets and may be impacted

by the diversity of customers, because domestic and international customers usually buy

higher ticketing revenue per capita than our local customers. A higher

combination of free tickets will reduce our per capita admissions. Pass

attendance rates are the number of visits per pass. A higher number of visits

per pass would lead to a drop in the number of admissions per capita because the associated revenues are

recognized on more visits. The park attendance mix is ​​defined as the mix of

theme parks visited and may impact per capita admission depending on theme

the respective park pricing which, on average, is lower for our water parks

compared to our other theme parks.

• Expenditure per capita in the park. We calculate per capita spending in the park as the total

food, merchandise and other income divided by total attendance. Food,

merchandise and other income consists mainly of food and beverages,

merchandise, parking and other products in the park and also includes other

miscellaneous income, including online transaction fees, not necessarily

generated in our parks, which are not significant over the periods

present. Per capita spending in the park is driven primarily by price changes,

new product offerings, the mix of customers (as domestic and international customers

generally generate higher per capita spending in the park than local customers or

pass holders)), customer penetration levels (percentage of customers buying) and

the mix of expenses in the park, among other factors.


See further discussion in the "Results of Operations" section which follows and
in Note 1-Description of the Business and Basis of Presentation to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q. For other factors affecting our revenues, see the "Risk
Factors" section of our Annual Report on Form 10-K, as such risk factors may be
updated from time to time in our periodic filings with the SEC.

Presence

The level of attendance in our theme parks is generally a function of many
factors, including affordability, the opening of new attractions and shows,
competitive offerings, weather, marketing and sales efforts, awareness and type
of ticket and park offerings, travel patterns of both our domestic and
international guests, fluctuations in foreign exchange rates and global and
regional economic conditions, consumer confidence, the external perceptions of
our brands and reputation, industry best practices and perceptions as to safety.
The external perceptions of our brands and reputation have at times impacted
relationships with some of our business partners, including certain ticket
resellers that have terminated relationships with us and other zoological-themed
attractions.

As a result of the COVID-19 pandemic, we believe the level of attendance in our
theme parks, including the mix of attendance from certain markets and certain
guests, has been and will continue to be impacted by public concerns over the
COVID-19 pandemic, the number of reported local cases of COVID-19, domestic and
international travel restrictions, federal, state and local regulations related
to public places, limits on social gatherings, the availability and/or
effectiveness of vaccines for adults and children, and overall public safety
sentiment. We continuously monitor factors impacting our attendance, making
strategic operations, marketing and sales adjustments as necessary.

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Costs and expenses

Historically, the principal costs of our operations are employee wages and
benefits, driven partly by staffing levels, advertising, maintenance, animal
care, utilities and insurance. Factors that affect our costs and expenses
include fixed operating costs, competitive wage pressures including minimum wage
legislation, commodity prices, costs for construction, repairs and maintenance,
other inflationary pressures and attendance levels, among other factors. The mix
of products sold compared to the prior year period can also impact our costs as
generally retail products have a higher cost of sales component than our food
and beverage or other in-park offerings.

We continue our focus on reducing costs, improving operating margins and
streamlining our labor structure to better align with our strategic business
objectives. Since the start of the COVID-19 pandemic, we have spent significant
time reviewing our operations and have identified meaningful cost savings
opportunities, including technology initiatives, which we believe will further
strengthen our business and, in some instances, improve our guest experiences.

See the "Impact of Global COVID-19 Pandemic" and the "Current Operating
Environment" section for further details. For other factors affecting our costs
and expenses, see the "Risk Factors" section of our Annual Report on Form 10-K,
as such risk factors may be updated from time to time in our periodic filings
with the SEC.

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
seven of our theme parks were historically only open for a portion of the year.
As a result, approximately two-thirds of our attendance and revenues were
historically generated in the second and third quarters of the year and we
generally incurred a net loss in the first and fourth quarters. 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
holiday breaks around Christmas and New Year. Even for our five theme parks
which have historically been open year-round, attendance patterns have
significant seasonality, driven by holidays, school vacations and weather
conditions. Changes in school calendars that impact traditional school vacation
breaks could also impact attendance patterns.

Due in part to the temporary park closures, along with capacity limitations
and/or modified/limited operations and other COVID-19 related impacts on our
attendance, the COVID-19 pandemic has impacted the seasonality of our business
and it is difficult to estimate how the COVID-19 pandemic will impact
seasonality in the future. Furthermore, any changes to the operating schedule of
a park such as increasing operating days for our historically seasonal parks,
could change the impact of seasonality in the future. During the first quarter
of 2021, we began year-round operations at our SeaWorld park in Texas and began
to operate on select days on a year round basis at both our Busch Gardens park
in Virginia and our Sesame Place park in Pennsylvania. Additionally, on March
26, 2022, we opened our Sesame Place San Diego park which is expected to be open
more operating days than the Aquatica San Diego park it replaces.

See the “Risk Factors” section of our Annual Report on Form 10-K, as these risk factors may be updated from time to time in our periodic filings with the SECOND.

Operating results

Our results for the three months ended March 31, 2022 are not directly
comparable to the three months ended March 31, 2021 primarily due to COVID-19
related impacts including a temporary park closure and capacity limitations at
some of our parks in 2021. See "Impact of Global COVID-19 Pandemic" and
"Attendance" for further details. The following data should be read in
conjunction with our unaudited condensed consolidated financial statements and
the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

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Comparison of the three months ended March 31, 2022 at the end of three months
March 31, 2021

The following table presents the main operational and financial information for the three months ended March 31, 2022 and 2021:


                                              For the Three Months Ended
                                                      March 31,                        Variance
                                                2022                2021            $             %
Summary Financial Data:                            (In thousands, except per capita data and %)
Net revenues:
Admissions                                 $       150,862       $   95,780     $  55,082          57.5 %
Food, merchandise and other                        119,831           76,140        43,691          57.4 %
Total revenues                                     270,693          171,920        98,773          57.5 %
Costs and expenses:
Cost of food, merchandise and other
revenues                                            23,040           14,942         8,098          54.2 %
Operating expenses (exclusive of
depreciation and amortization shown
separately below)                                  152,925          107,772        45,153          41.9 %
Selling, general and administrative
expenses                                            46,059           31,464        14,595          46.4 %
Severance and other separation costs                    30               86           (56 )       (65.1 %)
Depreciation and amortization                       38,612           36,558         2,054           5.6 %
Total costs and expenses                           260,666          190,822        69,844          36.6 %
Operating income (loss)                             10,027          (18,902 )      28,929            NM
Other (income) expense, net                            (12 )            174          (186 )          NM
Interest expense                                    25,370           30,956        (5,586 )       (18.0 %)
Loss before income taxes                           (15,331 )        (50,032 )      34,701          69.4 %
Benefit from income taxes                           (6,344 )         (5,148 )      (1,196 )       (23.2 %)
Net Loss                                   $        (8,987 )     $  (44,884 )   $  35,897          80.0 %
Other data:
Attendance                                           3,403            2,214         1,189          53.7 %
Total revenue per capita                   $         79.54       $    77.63     $    1.91           2.5 %
Admission per capita                       $         44.33       $    43.25     $    1.08           2.5 %
In-park per capita spending                $         35.21       $    34.38     $    0.83           2.4 %



NM-Not Meaningful.

Admissions revenue. Admissions revenue for the three months ended March 31, 2022
increased $55.1 million, or 57.5%, to $150.9 million as compared to $95.8
million for the three months ended March 31, 2021. The improvement was a result
of an increase in attendance and an increase in admissions per capita. Total
attendance for the first quarter of 2022 increased by approximately 1.2 million
guests, or 53.7%, when compared to the prior year quarter. Attendance benefitted
from an increase in demand and operating days resulting from a return to more
normalized operations when compared to the first quarter of 2021, which included
COVID-19 related impacts including limited operating days, a temporary park
closure and capacity limitations at some of our parks. Admission per capita
increased by 2.5% to $44.33 for the first quarter of 2022 compared to $43.25 in
the prior year quarter, primarily due to the realization of higher prices in our
admission products resulting from our strategic pricing efforts, which was
largely offset by the impact of the admissions product mix, due in part to an
increase in pass visitation, and the impact of park mix when compared to the
prior year quarter.

Food, merchandise and other revenue. Food, merchandise and other revenue for the
three months ended March 31, 2022 increased $43.7 million, or 57.4%, to $119.8
million as compared to $76.1 million for the three months ended March 31, 2021,
primarily as a result of an increase in attendance, as discussed above, along
with an increase in in-park per capita spending. In-park per capita spending
increased by 2.4% to $35.21 in the first quarter of 2022 compared to $34.38 in
the first quarter of 2021. In park per capita spending improved due to a
combination of factors including, pricing initiatives, improved product quality
and mix and the impact of new or enhanced and expanded in-park offerings,
partially offset by a higher mix of pass attendance and the impact of park mix
when compared to the first quarter of 2021. In-park per capita spending was also
impacted by less than optimal staffing during the first quarter of 2022, that
impacted our ability to fully operate and/or open some of our food and beverage
and retail outlets.

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Costs of food, merchandise and other revenues. Costs of food, merchandise and
other revenues for the three months ended March 31, 2022 increased $8.1 million,
or 54.2%, to $23.0 million as compared to $14.9 million for the three months
ended March 31, 2021, primarily due to the increase in related revenue. These
costs represent 19.2% and 19.6% of the related revenue earned for the three
months ended March 31, 2022 and 2021, respectively. The decrease as a percent of
related revenue partly relates to higher realized prices on some of our in-park
products and the impact of sourcing cost savings initiatives, partially offset
by inflationary pressures.

Operating expenses. Operating expenses for the three months ended March 31, 2022
increased $45.2 million, or 41.9%, to $152.9 million as compared to $107.8
million for the three months ended March 31, 2021. Operating expenses in the
first quarter of 2021 were significantly impacted by limited operating days, a
temporary park closure and capacity limitations due to the COVID-19 pandemic. As
a result, the increase in operating expenses in the first quarter of 2022
primarily results from an increase in labor-related costs and other operating
costs due to a return to more normalized operations and an increase in operating
days. Operating expenses were also impacted by a non-cash increase in
self-insurance reserve adjustments, partially offset by structural cost savings
initiatives when compared to the first quarter of 2021. Operating expenses as a
percent of revenue were 56.5% and 62.7% for the three months ended March 31,
2022 and 2021, respectively.

Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended March 31, 2022 increased
$14.6 million, or 46.4%, to $46.1 million as compared to $31.5 million for the
three months ended March 31, 2021. The increase in selling, general and
administrative expenses is primarily due to increased marketing-related costs,
partially offset by the impact of cost savings and efficiency initiatives. The
increased marketing-related costs result from a return to more normalized
operations as we substantially reduced marketing-related costs in the prior year
quarter. Selling, general and administrative expenses as a percent of revenue
were 17.0% and 18.3% for the three months ended March 31, 2022 and 2021,
respectively.

Depreciation and amortization. Depreciation and amortization expense for the
three months ended March 31, 2022 increased $2.1 million, or 5.6%, to $38.6
million as compared to $36.6 million for the three months ended March 31, 2021.
The increase primarily relates to new asset additions partially offset by the
impact of asset retirements and fully depreciated assets.

Interest expense. Interest expense for the three months ended March 31, 2022
decreased $5.6 million, or 18.0%, to $25.4 million as compared to $31.0 million
for the three months ended March 31, 2021. The decrease primarily relates to the
net impact of lower interest as a result of the Refinancing Transactions. See
Note 6-Long-Term Debt in our notes to the unaudited condensed consolidated
financial statements and the "Our Indebtedness" section which follows for
further details.

Benefit from income taxes. Benefit from income taxes in the three months ended
March 31, 2022 was $6.3 million compared to $5.1 million for the three months
ended March 31, 2021. Our consolidated effective tax rate was 41.4% for the
three months ended March 31, 2022 compared to 10.3% for the three months ended
March 31, 2021. The effective tax rate in the three months ended March 31, 2022
was primarily impacted by a tax benefit related to equity-based compensation
which vested during the quarter. The effective tax rate in the three months
ended March 31, 2021 was primarily impacted by non-cash valuation allowance
adjustments on federal and state net operating loss carryforwards.

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Additional comparison of the three months ended March 31, 2022 at the end of three months March 31, 2019

We believe a comparison of selected financial results for the three months ended
March 31, 2022 to the three months ended March 31, 2019 may provide additional
insight due to the impact of the COVID-19 pandemic on our business in 2021. As
such, the following supplemental discussion provides an analysis of selected
operating and financial results for the three months ended March 31, 2022
compared to the three months ended March 31, 2019. The selected summary
financial data for the first quarter of 2019 was derived from the Company's
Quarterly Report on Form 10-Q for three months ended March 31, 2019.

                                               For the Three Months Ended
                                                       March 31,                      Variance
                                                2022                2019            $           %
                                              (In thousands, except per capita
Selected Summary Financial Data:                        data and %)
Net revenues:
Admissions                                   $   150,862         $  128,913     $  21,949       17.0 %
Food, merchandise and other                  $   119,831         $   91,662     $  28,169       30.7 %
Total revenues                               $   270,693         $  220,575     $  50,118       22.7 %
Selected costs and expenses:
Cost of food, merchandise and other
revenues                                     $    23,040         $   17,213     $   5,827       33.9 %
Operating expenses (exclusive of
depreciation and amortization)               $   152,925         $  149,885     $   3,040        2.0 %
Selling, general and administrative
expenses                                     $    46,059         $   42,764     $   3,295        7.7 %
Other data:
Attendance                                         3,403              3,340            63        1.9 %
Total revenue per capita                     $     79.54         $    66.04     $   13.50       20.4 %
Admission per capita                         $     44.33         $    38.60     $    5.73       14.8 %
In-park per capita spending                  $     35.21         $    27.44     $    7.77       28.3 %


Admissions revenue. Admissions revenue for the three months ended March 31, 2022
increased $21.9 million, or 17.0%, to $150.9 million as compared to $128.9
million for the three months ended March 31, 2019. The increase in admissions
revenue was primarily a result of an increase in admissions per cap along with
an increase in attendance. Admission per capita increased by 14.8% to $44.33 in
the first quarter of 2022 compared to $38.60 in the first quarter of 2019.
Admission per capita increased primarily due to the realization of higher prices
in our admission products resulting from our strategic pricing efforts, which
was partially offset by the impact of the admissions product mix when compared
to the first quarter of 2019. Attendance increased when compared to the first
quarter of 2019 due to increased demand and more operating days at some of our
parks. Attendance in 2022 was also impacted by a decline from international
guest visitation and group-related attendance when compared to 2019. Excluding
international guest visitation and group-related attendance, attendance
increased by approximately 16.4% when compared to the first quarter of 2019.

Food, merchandise and other revenue. Food, merchandise and other revenue for the
three months ended March 31, 2022 increased $28.2 million, or 30.7%, to $119.8
million as compared to $91.7 million for the three months ended March 31, 2019,
primarily as a result of an increase in in-park per capita spending along with
an increase in attendance as discussed above. In-park per capita spending
increased by 28.3% to $35.21 in the first quarter of 2022 compared to $27.44 in
the first quarter of 2019. In-park per capita spending improved primarily due to
pricing initiatives, improved product quality and mix and the impact of new or
enhanced and expanded in-park offerings, partially offset by a higher mix of
pass attendance during the quarter when compared to the first quarter of 2019.
In-park per capita spending was also impacted by less than optimal staffing
during the first quarter of 2022, that impacted our ability to fully operate
and/or open some of our food and beverage and retail outlets.

Costs of food, merchandise and other revenues. Costs of food, merchandise and
other revenues for the three months ended March 31, 2022 increased $5.8 million,
or 33.9%, to $23.0 million as compared to $17.2 million for the three months
ended March 31, 2019, primarily due to the increase in related revenue. These
costs represent 19.2% and 18.8% of the related revenue earned for the three
months ended March 31, 2022 and 2019, respectively. The increase as a percent of
related revenue partly relates to inflationary pressures, partially offset by
higher realized prices on some of our in-park products and the impact of
sourcing cost savings initiatives.

Operating expenses. Operating expenses for the three months ended March 31, 2022
increased $3.0 million, or 2.0%, to $152.9 million as compared to $149.9 million
for the three months ended March 31, 2019. The increase primarily results from
operating costs associated with incremental operating days and attractions added
in 2022 and an increase in self-insurance reserve adjustments, partially offset
by a net reduction in labor-related costs and other operating costs primarily
resulting from structural cost savings initiatives. Operating expenses as a
percent of revenue were 56.5% and 68.0% for the three months ended March 31,
2022 and 2019, respectively.

Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended March 31, 2022 increased $3.3
million, or 7.7%, to $46.1 million as compared to $42.8 million for the three
months ended March 31, 2019. Selling, general and administrative expenses
increased primarily due to an increase in non-cash equity compensation expense
along with other

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labor-related costs due in part to centralization efforts, partially offset by
the impact of cost savings and efficiency initiatives. Selling, general and
administrative expenses as a percent of revenue were 17.0% and 19.4% for the
three months ended March 31, 2022 and 2019, respectively.

Cash and capital resources

Insight

Generally, 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), share repurchases
and/or other return of capital to stockholders, when permitted. As of March 31,
2022, we had a working capital ratio (defined as current assets divided by
current liabilities) of 1.1, due in part to our outstanding cash balance at
March 31, 2022. Historically, we typically have operated with a working capital
ratio of less than 1 due 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 result in limited inventory balances. Our cash flow from
operations, along with our revolving credit facilities, have historically
allowed us to meet our liquidity needs.

As market conditions warrant and subject to our contractual restrictions and
liquidity position, we or our affiliates, may from time to time purchase 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 purchases may be funded by incurring new debt, including
additional borrowings under our 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.

Share buybacks

See Note 10-Shareholder Deficit in our Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for more information on the share buyback program.

Other

We believe that existing cash and cash equivalents, cash flow from operations,
and available borrowings under our revolving credit facility will be adequate to
meet the capital expenditures, debt service obligations and working capital
requirements of our operations for at least the next 12 months.

The following table provides a summary of our cash flows generated by (used in) operating, investing and financing activities for the periods indicated:

                                                          For the Three Months Ended March 31,
                                                              2022                    2021
                                                                     (In thousands)
Net cash provided by operating activities               $          70,794       $          18,393
Net cash used in investing activities                             (35,110 )               (15,298 )
Net cash used in financing activities                             (99,558 )                (5,612 )

Net decrease in cash and cash equivalents, including restricted cash

                                         $         (63,874 ) 

($2,517)

Cash flow from operating activities

Net cash provided by operating activities was $70.8 million during the three
months ended March 31, 2022 as compared to $18.4 million during the three months
ended March 31, 2021. The change in net cash provided by operating activities
was primarily impacted by improved operating performance including increased
sales of admission products and the impact of decreased interest payments.

Cash flow 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 three months ended March 31, 2022 consisted of
capital expenditures of $35.1 million largely related to future attractions. Net
cash used in investing activities during the three months ended March 31, 2021
consisted of $15.3 million of capital expenditures.

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The following table presents detail of our capital expenditures for the periods
indicated:
                                  For the Three Months Ended March 31,
                                     2022                       2021
Capital Expenditures:                   (Unaudited, in thousands)
Core(a)                       $           23,020         $           10,883
Expansion/ROI projects(b)                 12,090                      4,415
Capital expenditures, total   $           35,110         $           15,298


(a) Reflects capital expenditures for rides, attractions and park maintenance

Activities.

(b) Reflects capital expenditures for fleet expansion, new properties and revenues

and/or projected return on investment (“ROI”).


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. Historically, we generally expect to fund our capital
expenditures through our operating cash flow.

Cash flow from financing activities

Net cash used in financing activities during the three months ended March 31,
2022 results primarily from share repurchases of $89.7 million and payment of
tax withholdings on equity-based compensation through shares withheld of $7.7
million. Net cash used in financing activities during the three months ended
March 31, 2021 results primarily from repayments on long-term debt of $3.9
million. See Note 6-Long-term Debt in our notes to the unaudited condensed
consolidated financial statements for further details.

Our debt

We are a holding company and conduct our operations through our subsidiaries,
which have incurred or guaranteed indebtedness as described below. As of March
31, 2022, our indebtedness consisted of senior secured credit facilities, 5.25%
senior notes (the "Senior Notes") and 8.75% first-priority senior secured notes
(the "First-Priority Senior Secured Notes").

See the following discussion and Note 6 – Long-term debt in our notes to the unaudited condensed consolidated financial statements for further details regarding our long-term debt.

Senior secured credit facilities

SeaWorld Parks & Entertainment, Inc. ("SEA") is the borrower under the senior
secured credit facilities, as amended and restated pursuant to a credit
agreement (the "Amended and Restated Credit Agreement") dated as of August 25,
2021 (the "Senior Secured Credit Facilities").

As of March 31, 2022, our Senior Secured Credit Facilities consisted of $1.194
billion in Term B Loans which will mature in August 2028, along with a $385.0
million Revolving Credit Facility, which had no amounts outstanding as of
March 31, 2022 and will mature in August 2026. As of March 31, 2022, SEA had
approximately $19.7 million of outstanding letters of credit, leaving
approximately $365.3 million available for borrowing under the Revolving Credit
Facility.

Senior Notes and First Priority Secured Senior Notes

As of March 31, 2022, SEA had outstanding $725.0 million in aggregate principal
amount of Senior Notes due on August 15, 2029 and $227.5 million in aggregate
principal amount of First-Priority Senior Secured Notes, due on May 1, 2025.

Compliance with commitments

As of March 31, 2022, we were in compliance with all covenants in the credit
agreement governing the Senior Secured Credit Facilities and the indentures
governing our Senior Notes and First-Priority Senior Secured Notes. See Note
6-Long-Term Debt to our unaudited condensed consolidated financial statements
for further details relating to our restrictive covenants.

Adjusted EBITDA

We define Adjusted EBITDA as net (loss) income plus (i) income tax (benefit)
provision, (ii) interest expense, consent fees and similar financing costs,
(iii) depreciation and amortization, (iv) equity-based compensation expense, (v)
loss on extinguishment of debt, (vi) certain non-cash charges/credits including
those related to asset disposals, (vii) certain business optimization,
development and strategic initiative costs, (viii) merger, acquisition,
integration and certain investment costs, and (ix) other nonrecurring costs
including incremental costs associated with the COVID-19 pandemic or similar
unusual events.

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Under the credit agreement governing the Senior Secured Credit Facilities and
the indentures governing our Senior Notes and First-Priority Senior Secured
Notes (collectively, the "Debt Agreements"), 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 as defined in the Debt Agreements ("Covenant Adjusted
EBITDA").

Covenant Adjusted EBITDA, is defined as Adjusted EBITDA plus certain other items
as defined in the Debt Agreements, including estimated cost savings among other
adjustments. Cost savings represent annualized estimated savings expected to be
realized over the following 24 month period related to certain specified actions
including restructurings and cost savings initiatives, net of actual benefits
realized during the last twelve months. Other adjustments include (i) recruiting
and retention costs, (ii) public company compliance costs, (iii) litigation and
arbitration costs, and (iv) other costs and adjustments as permitted by the Debt
Agreements.

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 estimate the value of a company, to make informed investment
decisions and to evaluate companies in the industry. In addition, we believe the
presentation of Covenant Adjusted EBITDA for the last twelve months is
appropriate as it provides additional information to investors about the
calculation of, and compliance with, certain financial covenants in the Debt
Agreements. See Note 6-Long-Term Debt to our unaudited condensed consolidated
financial statements for further details relating to our restrictive covenants.

Adjusted EBITDA and Covenant Adjusted EBITDA are not recognized terms under
accounting principles generally accepted in the United States of America
("GAAP"), should not be considered in isolation or as a substitute for a measure
of our financial performance prepared in accordance with GAAP and are not
indicative of income or loss from operations as determined under GAAP. Adjusted
EBITDA, Covenant Adjusted EBITDA and other non-GAAP financial measures have
limitations which should be considered before using these measures to evaluate
our financial performance. Adjusted EBITDA and Covenant 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 and Commitment Adjusted EBITDA to net income (loss) for the periods indicated:

                              SEAWORLD ENTERTAINMENT, INC. AND SUBSIDIARIES
                         UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

                                                                                             Last Twelve
                                                                                             Months Ended
                                                  For the Three Months Ended March 31,        March 31,
                                                       2022                    2021              2022
                                                                 (Unaudited, in thousands)
Net (loss) income                                $          (8,987 )       $    (44,884 )   $      292,410
Benefit from income taxes                                   (6,344 )             (5,148 )           (1,360 )
Loss on early extinguishment of debt and
write-off of discounts and debt issuance costs
(a)                                                              -                    -             58,827
Interest expense                                            25,370               30,956            111,056
Depreciation and amortization                               38,612               36,558            150,714
Equity-based compensation expense (b)                        7,877                4,473             44,422
Loss on impairment or disposal of assets and
certain non-cash expenses (c)                                4,604                  608             11,095
Business optimization, development and
strategic initiative costs (d)                               3,604                  512             11,851
Certain investment costs and other taxes                       401                   87              1,144
COVID-19 related incremental costs(e)                          350                2,176             20,736
Other adjusting items                                          453                 (149 )            1,904
Adjusted EBITDA(f)                               $          65,940         $     25,189     $      702,799
Items added back to Covenant Adjusted EBITDA,
as defined in the Debt Agreements:
Estimated cost savings (g)                                                                           6,300
Other adjustments as defined in the Debt
Agreements (h)                                                                                      20,674
Covenant Adjusted EBITDA (i)                                                                $      729,773


                                       27
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(a) Reflects a loss on early extinguishment of debt and cancellation of discounts

and debt issuance costs associated with the Refinancing Transactions. To see

Note 6-Long-term debt in our notes to the unaudited condensed consolidated financial statements

financial statements included elsewhere in this quarterly report on Form 10-Q

for more details.

(b) Reflects non-cash stock-related compensation expense and related employee benefits

associated with equity compensation awards. For the twelve

months ended March 31, 2022includes stock-based compensation expense related to

certain restricted performance vesting awards that were previously not

considered probable of acquisition. See Note 9-Share-based compensation in our

the notes to the unaudited condensed consolidated financial statements included

elsewhere in this Quarterly Report on Form 10-Q for details.

(c) For the three and twelve month periods ended March 31, 2022includes approximately

$3.9 million related to adjustments to the non-cash self-insurance reserve. For the

three months completed March 31, 2022 and 2021 and for the twelve months ended

March 31, 2022also includes non-cash expenses related to asset write-offs

and costs related to certain rides and equipment that have been removed from

a service.

(d) For the three months ended March 31, 2022reflects business optimization,

development costs and other strategic initiatives primarily related to $2.2

million in third-party consulting fees. For the twelve months ended March

31, 2022, reflects business optimization, development and other strategies

initiative costs mainly related to; (I) $6.4 million from third parties

consulting fees; (ii) $4.0 million other business optimization costs and

the costs of strategic initiatives and (iii) $1.5 million severance pay and other

severance costs associated with eliminated positions.

(e) For the three months ended March 31, 2022mainly concerns

one-time costs associated with the COVID-19 pandemic.


For the three months ended March 31, 2021, primarily relates to incremental
non-recurring costs associated with the COVID-19 pandemic, including incremental
labor-related costs incurred to prepare and staff the parks and other
incremental, nonrecurring, temporary incentives paid to attract employees to
return to or remain in the workforce during the COVID-19 related environment.

For the twelve months ended March 31, 2022, includes approximately $12.0 million
of nonrecurring contractual liabilities and legal costs impacted by the
temporary COVID-19 park closures and approximately $7.3 million of incremental
temporary labor-related costs incurred to prepare and staff the parks and
certain incremental, nonrecurring, temporary incentives paid to attract
employees to return to or remain in the workforce during the COVID-19 related
environment.
(f) Adjusted EBITDA is defined as net (loss) income before income tax expense,

interest expense, depreciation and amortization, as adjusted

exclude certain non-cash and other items described above.

(g) Our debt agreements, which were in effect for the twelve months ended March

31, 2022, allow the calculation of certain covenants to be based on the covenant

Adjusted EBITDA, as defined above, for the latest twelve-month period

adjusted for the estimated annualized net savings we expect to achieve over the course of the

after a period of 24 months related to certain specified actions, including

restructuring and cost reduction initiatives. These estimated savings are

calculated net of the amount of actual benefits realized during this period.

These estimated savings are a non-GAAP Adjusted EBITDA add-back item only, as

defined in the debt agreements and does not impact our net GAAP report

(loss) of income.

(h) The debt agreements, which were in effect for the twelve months ended March

31, 2022, allow our calculation of certain covenants to be based on the covenant

Adjusted EBITDA as defined above, for the last twelve months period

adjusted for certain costs as permitted by debt agreements, including

recruitment and retention expenses, public company compliance costs and

litigation and arbitration costs, if any. Before the debt agreements, these

costs were not allowed in the calculation of adjustments, as such these

adjustments are not applicable to prior years.

(i) Commitment Adjusted EBITDA is defined in the Debt Agreements as Adjusted EBITDA

for the last twelve-month period, adjusted by the annualized net amount

estimated savings among other adjustments as described in footnotes (g) and

    (h) above.


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Contractual obligations

There have been no material changes to our contractual obligations March 31, 2022 from those previously disclosed in our Annual Report on Form 10-K.

Significant 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 assets, the accounting for
income taxes, the accounting for self-insurance and revenue recognition. Actual
results could differ from those estimates. The critical accounting estimates
associated with these policies are described in our Annual Report on Form 10-K
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations." There have been no material changes to our significant
accounting policies as compared to the significant accounting policies described
in our Annual Report on Form 10-K, filed on February 28, 2022.

Off-balance sheet arrangements

We had no significant off-balance sheet arrangements March 31, 2022.

Recently released financial accounting standards

Refer to Note 2-Recent Accounting Pronouncements in our notes to the unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q for further details.

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