2019 Annual Report

2019 ANNUAL REPORT April 23, 2020 To Our Shareholders, As I write this letter, the world is experiencing an unprecedented global health crisis that has impacted nearly everyone on the planet. We hope that you and your loved ones are safe. We also want to recognize the heroic efforts of healthcare workers and first responders worldwide who care for those affected and protect those who are vulnerable to this virus. As a result of this pandemic, we have been forced to close all of our parks and dramatically reduce our workforce. As of this writing, it is unclear when we will be able to resume normal operations. In the meantime, our dedicated, professional animal care teams along with other essential employees continue to provide comprehensively for the welfare of our animals and maintain our parks so that when the Federal, State and Local authorities deem it practical to resume normal operations, we can welcome back our guests as soon as possible. Until that time, we are doing everything possible to preserve the Company’s financial position so that we can weather the storm and return to the path of delivering significantly improved operating and financial performance. 2019 FINANCIAL PERFORMANCE In February 2020, we reported strong fiscal 2019 financial results, with full year revenue increasing 1.9%, net income increasing 99.8% and Adjusted EBITDA increasing 13.9% from the prior year. Both net income and Adjusted EBITDA were record-setting results. Throughout 2019, we continued to focus on improving our execution with more effective pricing strategies, enhanced marketing and communications initiatives and the introduction of more compelling new rides, attractions and events. Additionally, we continued with our efforts to identify and execute on cost savings initiatives and efficiencies that have contributed to improved margins and increased profitability. Our efforts in 2019 on revenue, capital spending and costs led to strong financial results. We have an exciting lineup of new rides, attractions and events across our parks planned for when we re-open. We believe this is our best lineup ever with a new ride, attraction or event in almost every one of our 12 parks. A few of our new rides were opened prior to the shutdown, while others were close to completion. We are confident we can restart construction and testing on the yet to be completed rides, and we are excited to share them with our guests after we resume normal operations. While 2019 was a strong year for our Company, we continue to believe there remains significant additional opportunity for improvement. When we resume normal operations, we will continue our focus on improving our execution and continuing our efforts to enhance our marketing and communications initiatives as well as our pricing strategies. We will also continue our strategy of introducing new compelling rides, attractions or events in every park, every year. And, we will continue to identify and execute on cost and capital efficiency initiatives that we expect will contribute to meaningfully improved margins and profitability. Our outstanding team of ambassadors and leaders are committed to SeaWorld Entertainment’s success. Our priority as always is to make sure we exceed expectations every time a guest enters our parks. We have an exciting future ahead as we work to realize the potential of our unique portfolio of assets and meaningful opportunities for growth and maximize long-term value for all our stakeholders. Thank you for your investment in SeaWorld Entertainment. Sincerely, Marc G. Swanson Interim Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or ☐ 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 27-1220297 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6240 Sea Harbor Drive Orlando, Florida 32821 (Address of principal executive offices) (Zip Code) (407) 226-5011 (Registrants telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share SEAS 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 ☐ No 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 ☐ No 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 No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer,accelerated filer,smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act. Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2019, the last business day of the registrants most recently completed second fiscal quarter, was $1,579,259,660 based upon the closing price of the registrants 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 registrants 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 since such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for other purposes. The registrant had outstanding 78,726,029 shares of Common Stock, par value $0.01 per share as of February 20, 2020. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrants definitive proxy statement to be filed with the Securities and Exchange Commission relating to the 2020 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, 2019 TABLE OF CONTENTS Page No. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ............................................................................. 1 PART I. Item 1. Business............................................................................................................................................................................ 3 Item 1A. Risk Factors...................................................................................................................................................................... 18 Item 1B. Unresolved Staff Comments............................................................................................................................................. 35 Item 2. Properties.......................................................................................................................................................................... 35 Item 3. Legal Proceedings ............................................................................................................................................................ 36 Item 4. Mine Safety Disclosures................................................................................................................................................... 38 PART II. Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...... 39 Item 6. Selected Financial Data .................................................................................................................................................... 40 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations .......................................... 42 Item 7A.

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