<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PREMIER PARKS INC.
(Exact name of Registrant as specified in its charter)
------------------------
<TABLE>
<S> <C>
DELAWARE 73-6137714
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
------------------------
<TABLE>
<S> <C>
11501 NORTHEAST EXPRESSWAY KIERAN E. BURKE
OKLAHOMA CITY, OKLAHOMA 73131 11501 NORTHEAST EXPRESSWAY
TEL: (405) 475-2500 OKLAHOMA CITY, OKLAHOMA 73131
(Address, including zip code, and telephone number, including TEL: (405) 475-2500
area code, of Registrant's principal executive offices) (Name, address, including zip code, and telephone
number, including area code, of agent for service)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. COUGHLIN, ESQ. THOMAS R. BROME, ESQ.
Baer Marks & Upham LLP Cravath, Swaine & Moore
805 Third Avenue Worldwide Plaza
New York, New York 10022 825 Eighth Avenue
Tel: (212) 702-5819 New York, New York 10019
Tel: (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
(SEE FOLLOWING PAGE.)
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1)(2)(3) BE REGISTERED PRICE PER SHARE OFFERING PRICE(4) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.05(5)................. (6) (6) (6)
Convertible Preferred Stock...................... (6) (6) (6)
Depositary Shares(7)............................. (6) (6) (6)
Total............................................ -- -- $700,000,000 $206,500
</TABLE>
(1) This Registration Statement also pertains to certain rights (the "Rights")
attached to each share of Common Stock. Each Right entitles its registered
holder to purchase one one-hundredth of a share of a junior participating
series of Preferred Stock of the Registrant upon the occurrence of certain
prescribed events. Until the occurrence of such events, the Rights are not
exercisable, will be evidenced by the certificates for the Common Stock and
will be transferred along with and only with the Common Stock.
(2) Securities registered hereunder may be sold separately, together or as units
with other securities, registered hereunder. This Registration Statement
also covers such indeterminate amount of securities as may be issued in
exchange for, or upon conversion of, as the case may be, the Convertible
Preferred Stock or Depositary Shares registered hereunder or as dividends on
the Convertible Preferred Stock.
(3) No separate consideration will be received for any securities registered
hereunder that are issued in exchange for, or upon conversion of, as the
case may be, the Convertible Preferred Stock or Depositary Shares registered
hereunder.
(4) Estimated in accordance with Rule 457(o) solely for the purposes of
computing the registration fee.
(5) Includes shares of Common Stock which may be issued upon exercise of the
Underwriters' over-allotment options. See "Underwriting."
(6) Pursuant to Rule 457(o), the Amount to be Registered, Proposed Maximum
Offering Price Per Share and Proposed Maximum Aggregate Offering Price have
been omitted for each class of these securities.
(7) Such indeterminate number of Depositary Shares to be evidenced by Depositary
Receipts issued pursuant to a Deposit Agreement. In the event that the
Registrant elects to offer to the public fractional interests in shares of
the Convertible Preferred Stock registered hereunder, the Depositary
Receipts will be distributed to those persons purchasing such fractional
interests and such shares will be issued to the Depositary under the Deposit
Agreement.
<PAGE>
EXPLANATORY NOTE
The Prospectus relating to the Common Stock being registered hereby to be
used in connection with a United States offering (the "U.S. Prospectus") is set
forth following this page. The Prospectus to be used in connection with a
concurrent international offering of the Common Stock (the "International
Prospectus") will consist of alternate pages set forth following the U.S.
Prospectus and the balance of the pages included in the U.S. Prospectus for
which no alternate is provided. The Prospectus to be used in connection with a
concurrent offering of Mandatorily Convertible Preferred Stock (the "Preferred
Stock Prospectus") will consist of alternate pages set forth following the
International Prospectus and the balance of the pages included in the U.S.
Prospectus for which no alternate is provided. The U.S. Prospectus and the
International Prospectus are identical except that they contain different front
and back cover pages and the International Prospectus contains an additional
section under the caption "Certain United States Federal Tax Consequences to
Non-United States Holders." The U.S. Prospectus and the Preferred Stock
Prospectus are identical except that they contain different front and back cover
pages, different "Use of Proceeds" and "Legal Matters" sections and to the
extent, in each case, of references to the different securities or the related
offering, different "Prospectus Summary -- The Offering" sections and different
"Underwriting" sections. Alternate pages for the International Prospectus and
the Preferred Stock Prospectus are separately designated.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1998
SHARES
PREMIER PARKS INC.
COMMON STOCK
------------------
All of the shares of Common Stock offered hereby will be sold by Premier
Parks Inc. (collectively with its predecessor, the "Company" or "Premier"). Of
the shares of Common Stock offered, shares are being offered
initially in the United States and Canada in a United States offering (the "U.S.
Offering") by the U.S. Underwriters and shares are being offered outside
the United States and Canada in a concurrent offering (the "International
Offering") by the International Managers (together with the U.S. Underwriters,
the "Underwriters"). These offerings are collectively referred to herein as the
"Offering." See "Underwriting."
The Offering is being made in connection with the acquisition (the "Six
Flags Acquisition") by the Company of all of the capital stock of Six Flags
Entertainment Corporation ("SFEC"). The Company is concurrently offering
$ million aggregate principal amount at maturity of its senior discount
notes due 2008, with estimated gross proceeds of $250.0 million, $280.0 million
aggregate principal amount of its senior notes due 2008, and depositary
shares (the "Public Depositary Shares") representing interests in $200.0 million
of the Company's mandatorily convertible preferred stock (the "Mandatorily
Convertible Preferred Stock"). SFEC is concurrently offering $170.0 million
aggregate principal amount of senior notes (collectively the "Concurrent
Offerings" and, together with the Offering, the "Offerings"). The Offerings will
finance, in part, the Six Flags Acquisition. The Company also expects to issue
up to depositary shares (the "Seller Depositary Shares") representing
interests in up to $200.0 million of the Company's convertible redeemable
preferred stock to the current stockholders of SFEC as part of the consideration
for the Six Flags Acquisition. The closing of the Offering is conditioned upon
the closing of the Concurrent Offerings and the Six Flags Acquisition.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "PKS." On February 6, 1998, the last sales price of the Common Stock,
as reported by the NYSE, was $38 3/8 per share. The Company has applied to list
the Public Depositary Shares on the NYSE. The Mandatorily Convertible Preferred
Stock will not be so listed and the Company does not expect that there will be
any trading market for the Mandatorily Convertible Preferred Stock except as
represented by the Public Depositary Shares.
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN FOR CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
</TABLE>
(1) The Company and its operating subsidiaries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted options to the Underwriters to purchase up to
additional shares of Common Stock on the same terms and conditions as set
forth herein solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
--------------------------
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1998.
LEHMAN BROTHERS SALOMON SMITH BARNEY
, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, periodic reports and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission's principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the regional
offices of the Commission at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661.
Copies of such material can be obtained from the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Website (http://www.sec.gov) that also contains such reports, proxy
statements and other information filed by the Company. The Common Stock of the
Company is listed on the NYSE. In addition, application will be made to list the
Public Depositary Shares and the Common Stock issuable on conversion of the
Mandatorily Convertible Preferred Stock on the NYSE. Such reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the securities offered hereby. For
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. In accordance with
the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the schedules
and exhibits thereto. Each statement made in this Prospectus concerning a
document filed as an exhibit to the Registration Statement is qualified in its
entirety by reference to such exhibit for a complete statement of its
provisions. For further information pertaining to the Company and the securities
offered hereby, reference is made to such Registration Statement, including the
exhibits and schedules thereto, which may be inspected or obtained as provided
in the foregoing paragraph.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference into this Prospectus and made a part hereof as of
their respective dates:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
5. The Company's Current Report on Form 8-K, dated February 6, 1997.
6. The Company's Current Report on Form 8-K, dated November 7, 1997, as
amended.
7. The Company's Current Report on Form 8-K, dated December 15, 1997.
8. The description of the shares of Common Stock contained in the Company's
Registration Statement on Form 8-A dated December 11, 1997 and filed under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
9. The description of the rights relating to the shares of Common Stock
contained in the Company's Registration Statement on Form 8-A dated January 12,
1998 and filed under the Exchange Act, including any amendment or report filed
for the purpose of updating such description.
10. The information contained in the Company's Registration Statement on
Form S-2 (Registration No. 333-16573) specified below:
(i) the Financial Statements of Elitch Gardens Company as of December
31, 1995 and 1994, for the year ended December 31, 1995 and for the period
from May 31, 1994 (date of inception) through
2
<PAGE>
December 31, 1994 and the report of the independent auditors thereon (pages
F-38 to F-51, inclusive, of such Registration Statement);
(ii) the Financial Statements of The Great Escape as of October 31, 1994
and 1995, and for the years then ended and the independent auditors' report
thereon (pages F-52 to F-60, inclusive, of such Registration Statement); and
(iii) the Financial Statements of Stuart Amusement Company as of
September 30, 1996 and 1995 and for each of the years in the three-year
period ended September 30, 1996 and the independent auditors' report thereon
(pages F-81 to F-93, inclusive, of such Registration Statement).
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering shall also be deemed to
be incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to: Premier Parks
Inc., 11501 Northeast Expressway, Oklahoma City, Oklahoma 73131, Attention:
Richard A. Kipf, Corporate Secretary (telephone number: (405) 475-2500, Ext.
219).
CERTAIN PERSONS PARTICIPATING IN THESE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PUBLIC DEPOSITARY
SHARES OR THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF PUBLIC
DEPOSITARY SHARES OR COMMON STOCK FOLLOWING THE PRICING OF THE OFFERING TO COVER
A SYNDICATE SHORT POSITION IN THE PUBLIC DEPOSITARY SHARES OR COMMON STOCK OR
FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE PUBLIC DEPOSITARY SHARES OR THE
COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros. ("Warner Bros."), a division of Time
Warner Entertainment Company, L.P. ("TWE"). BATMAN, BATMOBILE, GOTHAM CITY AND
SUPERMAN are copyrights and trademarks of DC Comics, a partnership between TWE
and a subsidiary of Time Warner Inc. SPORTS ILLUSTRATED is a trademark of Time,
Inc., a subsidiary of Time Warner Inc. HBO is a trademark of TWE. SIX FLAGS
GREAT ADVENTURE, SIX FLAGS GREAT AMERICA and SIX FLAGS are federally registered
trademarks of Six Flags Theme Parks Inc. FIESTA TEXAS and all related indicia
are trademarks of Fiesta Texas Theme Park, Ltd.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and located elsewhere herein regarding
industry prospects and the Company's financial position are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in this Prospectus, both together with such forward-looking statements
and under "Risk Factors."
3
<PAGE>
PROSPECTUS SUMMARY
PRIOR TO THE DATE OF THIS PROSPECTUS, THE EXISTING COMPANY CALLED "PREMIER
PARKS INC." WILL BECOME A WHOLLY-OWNED SUBSIDIARY OF THE REGISTRANT AND THE
OUTSTANDING SHARES OF CAPITAL STOCK OF THE EXISTING PREMIER PARKS INC. WILL
BECOME, ON A SHARE-FOR-SHARE BASIS, SHARES OF CAPITAL STOCK OF THE REGISTRANT
WHICH WILL THEN BE RENAMED "PREMIER PARKS INC." (THE "PREMIER MERGER"). AS USED
HEREIN, THE TERMS THE "COMPANY" AND "PREMIER" MEAN FOR ANY PERIOD PRIOR TO THE
PREMIER MERGER, THE EXISTING PREMIER PARKS INC. AND ITS CONSOLIDATED
SUBSIDIARIES AND FOR ANY PERIOD SUBSEQUENT THERETO, THE REGISTRANT AND ITS
CONSOLIDATED SUBSIDIARIES.
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD
BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES, ALL
INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO GIVE EFFECT TO THE PREMIER
MERGER AND THE ACQUISITIONS (AS DEFINED HEREIN) AND ASSUMES THAT THE
UNDERWRITERS' OVERALLOTMENT OPTIONS ARE NOT EXERCISED. AS USED IN THIS
PROSPECTUS, UNLESS THE CONTEXT REQUIRES OTHERWISE, THE TERMS (I) THE "1996
ACQUISITIONS" REFERS TO THE ACQUISITIONS OF ELITCH GARDENS, THE GREAT ESCAPE,
WATERWORLD SACRAMENTO AND WATERWORLD CONCORD (TOGETHER, THE "WATERWORLD PARKS")
AND RIVERSIDE PARK, (II) THE "1997 ACQUISITIONS" REFERS TO THE ACQUISITION OF
KENTUCKY KINGDOM--THE THRILL PARK IN LOUISVILLE, KENTUCKY ("KENTUCKY KINGDOM"),
THE PROPOSED ACQUISITION OF ALL OF THE OUTSTANDING CAPITAL STOCK OF WALIBI S.A.
("WALIBI") ASSUMING SUCCESSFUL COMPLETION OF THE WALIBI TENDER OFFER (AS DEFINED
HEREIN), AS WELL AS THE COMPANY'S MANAGEMENT CONTRACT, LEASE AND PURCHASE OPTION
WITH RESPECT TO MARINE WORLD AFRICA USA IN VALLEJO, CALIFORNIA ("MARINE WORLD"),
(III) THE "SIX FLAGS ACQUISITION" REFERS TO THE ACQUISITION, BY MERGER, OF ALL
OF THE CAPITAL STOCK OF SIX FLAGS ENTERTAINMENT CORPORATION ("SFEC" AND,
TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES, "SIX FLAGS") WHICH WILL OCCUR
CONTEMPORANEOUSLY WITH THE CLOSING OF THE OFFERING, (IV) THE "ACQUISITIONS"
REFERS TO THE 1996 ACQUISITIONS, THE 1997 ACQUISITIONS AND THE SIX FLAGS
ACQUISITION AND (V) THE "SIX FLAGS PARKS" REFERS TO THE PARKS OPERATED BY SIX
FLAGS ON THE DATE OF THE SIX FLAGS ACQUISITION, AND THE "PREMIER PARKS" REFERS
TO ALL OF THE PARKS OPERATED BY THE COMPANY (INCLUDING PARKS ACQUIRED AND TO BE
ACQUIRED IN THE 1997 ACQUISITIONS, BUT EXCLUDING THE SIX FLAGS PARKS). ALL PRO
FORMA FINANCIAL INFORMATION PRESENTED HEREIN GIVES PRO FORMA EFFECT TO EACH OF
THE ACQUISITIONS (OTHER THAN MARINE WORLD). ALL PARK ATTENDANCE INFORMATION AND
RANKINGS BASED ON SUCH DATA INCLUDED IN THIS PROSPECTUS (OTHER THAN ATTENDANCE
DATA FOR THE PREMIER PARKS AND THE SIX FLAGS PARKS) ARE BASED ON INFORMATION
PUBLISHED BY AMUSEMENT BUSINESS, A RECOGNIZED INDUSTRY PUBLICATION, WHICH,
ACCORDING TO SUCH PUBLICATION, INCLUDES ESTIMATES BASED ON SOURCES IT BELIEVES
TO BE RELIABLE. RANKINGS OF METROPOLITAN AND DESIGNATED MARKET AREAS ("DMA") ARE
BASED ON A COPYRIGHTED 1996-97 SURVEY OF TELEVISION HOUSEHOLDS PUBLISHED BY A.C.
NIELSEN MEDIA RESEARCH.
THE COMPANY
The Company is the largest regional theme park operator, and the second
largest theme park company, in the world, based on 1997 attendance of
approximately 37 million at its parks. It operates 31 regional parks, including
15 of the 50 largest theme parks in the U.S., based on 1997 attendance. The
Company's theme parks are located in nine of the ten largest metropolitan areas
in the country. The Company estimates that % of the U.S. population lives
within a 100-mile radius of the Company's theme parks. On a pro forma basis, the
Company's total revenue and earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the year ended December 31, 1997 was approximately
$ million and $ million, respectively.
A substantial portion of the proceeds of the Offerings will be used to fund
the Six Flags Acquisition. See "--The Six Flags Transactions." Six Flags
operates eight regional theme parks, as well as three separately gated water
parks and a wildlife safari park (each of which is located near one of the theme
parks). None of the Six Flags Parks is located within the primary market of any
of the Premier Parks. During 1997, the Six Flags theme parks drew, in the
aggregate, approximately % of their patrons from within a 100-mile radius.
During that year, Six Flags' attendance, revenue and EBITDA totaled ,
$ and $ , respectively.
Six Flags has operated regional theme parks under the Six Flags name for
over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier will obtain exclusive
4
<PAGE>
worldwide ownership of the Six Flags brand name and expects to use the Six Flags
brand name, generally beginning in the 1999 season, at most of the Premier
Parks.
In addition, as part of the Six Flags Acquisition, the Company will obtain
from Warner Bros. the exclusive right for theme-park usage of certain Warner
Bros. and DC Comics characters throughout the United States (except the Las
Vegas metropolitan area) and Canada. These characters include BUGS BUNNY, DAFFY
DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. Since 1991, Six
Flags has used these characters to market its parks and to provide an enhanced
family entertainment experience. The license will have a term of 55 years, will
include the right to sell merchandise featuring the characters at the parks and
will apply to all of the Company's current theme parks, as well as future parks
that meet certain criteria. Premier intends to make extensive use of these
characters at the Six Flags Parks and, commencing in 1999, at most of the
existing Premier Parks. See "Business--Licenses."
The Premier Parks consist of nine regional theme parks (six of which include
a water park component) and four water parks located across the United States,
as well as six regional theme parks and two smaller attractions located in
Europe and scheduled to be acquired in March 1998 in the acquisition of Walibi.
During the 1997 operating season, the 11 parks then owned by Premier drew, on
average, approximately 82% of their patrons from within a 100-mile radius, with
approximately 36.1% of visitors utilizing group and other pre-sold tickets and
approximately 20.6% utilizing season passes.
Under current management, since 1989 Premier has assumed control of 30
parks, and has achieved significant internal growth. During the nine months
ended September 30, 1997, the 11 parks owned by the Company during the 1997
operating season achieved same park growth in attendance, revenue and park-level
operating cash flow (representing all park operating revenues and expenses
without depreciation and amortization or allocation of corporate overhead or
interest expense) of 17.4%, 21.0% and 44.4%, respectively, as compared to the
comparable period of 1996. See "--Summary Historical and Pro Forma Data."
The Company's parks are individually themed and provide a complete
family-oriented entertainment experience. The Company's theme parks generally
offer a broad selection of state-of-the-art and traditional thrill rides, water
attractions, themed areas, concerts and shows, restaurants, game venues and
merchandise outlets. In the aggregate, the Company's theme parks offer more than
rides, including roller coasters, making the Company the leading
provider of "thrill rides" in the industry.
The Company believes that its parks benefit from limited direct competition.
The combination of limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of the parks with a significant degree of
protection from competitive new theme park openings. Based on its knowledge of
the development of other theme parks in the United States, the Company's
management estimates that it would cost at least $200 million and would take a
minimum of two years to construct a new regional theme park comparable to the
Company's largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's six senior executive officers have over
150 years aggregate experience in the industry and its nine general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 200
years experience in the industry, including approximately 80 years at the
Premier Parks and approximately years experience at the Six Flags Parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million, compared to million in
1994 (the first year in which such information is available from that
publication), representing a compound annual growth rate of %. Total
attendance for the 40 largest parks in North America was 154.7 million in 1997,
compared to million in 1992, representing a compound annual growth rate of
%. The Company believes that this growth reflects two trends: (i) demographic
growth in the 5-24 year old age group, which is expected to continue through
2010; and (ii) an increasing emphasis on family-oriented leisure and recreation
activities.
The Company's strategy for achieving growth includes the following key
elements: (i) pursuing growth opportunities at existing parks; (ii) expanding
the Company's parks; and (iii) making selective acquisitions.
5
<PAGE>
PURSUING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for continued
internal growth at its parks. The Company seeks to increase revenue by
increasing attendance and per capita spending, while also maintaining strict
control of operating expenses. The primary elements used to achieve this
objective are: (i) adding rides and attractions and improving overall park
quality; (ii) enhancing marketing and sponsorship programs; (iii) increasing
group sales, season passes and other pre-sold tickets; (iv) implementing ticket
pricing strategies to maximize ticket revenues and park utilization; (v) adding
and enhancing restaurants and merchandise and other revenue outlets; and (vi)
adding special events. This approach is designed to exploit the operating
leverage inherent in the theme park business. Once parks achieve certain
critical attendance levels, operating cash flow margins increase because revenue
growth through incremental attendance gains and increased in-park spending is
not offset by a comparable increase in operating expenses, since a large portion
of such expenses is relatively fixed during any given year.
THE PREMIER PARKS
Management believes it has demonstrated the effectiveness of its strategy at
the Premier Parks owned prior to the 1997 Acquisitions. For example, during the
nine months ended September 30, 1997, the three parks acquired in the Company's
1995 Funtime acquisition achieved compound annual growth in attendance, revenue
and park-level operating cash flow of 9.0%, 13.8% and 20.5%, respectively,
compared to the comparable period of 1995. Similarly, during the nine months
ended September 30, 1997, the five parks acquired in the 1996 Acquisitions
realized growth in attendance, revenue and park-level operating cash flow of
32.6%, 34.4% and 161.3%, respectively, compared to the comparable period of
1996. In particular, two of the parks acquired in the 1996 Acquisitions, Elitch
Gardens in Denver and Riverside Park in Springfield, Massachusetts, realized
dramatic growth during their first year under the Company's ownership. As a
result of capital investment and improved marketing, during the nine months
ended September 30, 1997, attendance and revenue at Elitch Gardens grew 64.7%
and 52.2%, respectively, and park-level operating cash flow increased from $1.1
million to $10.2 million, as compared to the comparable period of 1996.
Similarly, during the nine months ended September 30, 1997, attendance and
revenue at Riverside Park increased 51.2% and 49.6%, respectively, and
park-level operating cash flow increased from $1.6 million to $10.1 million, as
compared to the comparable period of 1996.
Management believes that the parks acquired by Premier in the 1997
Acquisitions offer similar opportunities to implement the Company's growth
strategy. For example, at Marine World, a well-known wildlife park located in
the San Francisco market, management is expanding the park's entertainment
component with theme park rides and attractions, investing approximately $35-$40
million for the 1998 season to add fourteen new rides in the first phase of this
expansion. The Walibi acquisition provides the Company with a significant
presence in the expanding theme park industry in Europe. Although the Walibi
parks have historically produced solid operating results, management believes
that the Company's strategy of targeted capital investment and sophisticated
marketing can improve performance at these parks. The Company has agreed to
invest approximately $37.7 million in the Walibi Parks over the three years
commencing with the 1999 season. See "--Other Recent Developments" and
"Business--Operating Strategy."
The Company believes that, by virtue of the Six Flags Acquisition, a number
of the existing Premier Parks have the potential over the next several seasons
to accelerate their rate of growth. Recent attendance levels at the Six Flags
theme parks (between 1.7 millon and 3.6 million in 1997) have been substantially
higher than the annual attendance at the largest Premier Parks (between 1.0
million and 1.5 million during that year). Management believes that a number of
the existing Premier Parks, particularly Adventure World, Elitch Gardens, Geauga
Lake, Kentucky Kingdom, Marine World and Riverside Park, all of which are
located in or near major metropolitan areas, can accelerate their market
penetration and the expansion of their geographic market by their use of the Six
Flags brand name, aggressive marketing campaigns featuring the animated
characters licensed from Warner Bros. and D.C. Comics, as well as continued
capital investment in new rides and attractions. The Company expects to commence
general use of the Six Flags brand name and the licensed characters at the
Premier Parks for the 1999 season.
6
<PAGE>
THE SIX FLAGS PARKS
The Six Flags Parks generally enjoy significant market penetration. Thus,
although the Company plans to make targeted capital expenditures at these parks
to increase attendance and per capita spending levels, it expects to increase
significantly the EBITDA of these parks primarily through reduction in operating
expenses. First, and most importantly, the Company believes that it can
substantially reduce Six Flags' corporate overhead and other corporate-level
expenses. Second, the Company expects to achieve significant reduction in
park-level operating expenses. Third, by virtue of economies of scale, the
Company believes that operating efficiencies in areas such as marketing,
insurance, promotion, purchasing and other expenses can be realized. Finally,
the Company believes that its increased size following the Six Flags Acquisition
will enable it to achieve savings in capital expenditures.
EXPANDING THE COMPANY'S PARKS
The Company is expanding several of the Premier Parks in order to increase
attendance and per capita spending. For example, the Company is constructing an
economy motel at its Darien Lake park for the 1998 season to supplement the
existing campgrounds and continues to expand the park by purchasing additional
recreational vehicles (RV's). In addition, the Company recently purchased
campgrounds adjacent to Geauga Lake, and may add campgrounds or an amphitheater
at Frontier City. The Company expects to add prior to the 1999 season a more
complete complement of "dry" rides to Wyandot Lake, which is currently primarily
a water park. In addition, the Company owns 400 acres adjacent to Adventure
World which are zoned for entertainment, recreational and residential uses and
are available for complementary uses. Additional acreage owned by the Company
and suitable for development exists at several of the other Premier Parks.
The Company may expand in the future certain of the Six Flags Parks by
adding complementary attractions, such as lodging facilities and concert venues.
For example, Six Flags owns over 1,500 undeveloped acres adjacent to Six Flags
Great Adventure (located between New York City and Philadelphia) suitable for
such purposes. Additional acreage suitable for development exists at several
other Six Flags Parks.
MAKING SELECTIVE ACQUISITIONS
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that, in addition to the
Acquisitions, there are numerous acquisition opportunities, both in the U.S. and
abroad, that can expand its business. The Company's primary target for
acquisitions continues to be regional parks with attendance between 300,000 and
1.5 million annually. The Company will also consider acquisitions of larger
parks or park chains (such as Six Flags).
As the only owner of multiple parks that has been actively making
acquisitions of parks in its primary range over the last several years, the
Company believes it has a number of competitive advantages in acquiring parks of
this size. Historically, operators of destination or large regional park chains
have not generally sought to acquire parks in the Company's primary target range
and do not have the experience or management structure to readily operate parks
of that size profitably. Additionally, as a multi-park operator with a track
record of successfully acquiring, improving and repositioning parks, the Company
has numerous competitive advantages over single-park operators in pursuing
acquisitions and improving the operating results at acquired parks. These
advantages include the ability to (i) exercise group purchasing power (for both
operating and capital assets); (ii) achieve administrative economies of scale;
(iii) attract greater sponsorship revenue, support from sponsors with
nationally-recognized brands and marketing partners; (iv) use the Six Flags
brand name and the characters licensed from Warner Bros.; (v) recruit and retain
superior management; (vi) optimize the use of capital assets by rotating rides
among its parks to provide fresh attractions; (vii) access capital markets; and
(viii) use its publicly-traded Common Stock as a portion of the acquisition
consideration. See "Risk Factors--Uncertainty of Future Acquisitions; Potential
Effects of Acquisitions" and "Business--Acquisition Strategy."
7
<PAGE>
The Company's principal executive offices are located at 11501 Northeast
Expressway, Oklahoma City, Oklahoma 73131, (405) 475-2500 and at 122 East 42nd
Street, New York, New York 10168, (212) 599-4690.
THE SIX FLAGS TRANSACTIONS
The Offering is one of a series of related transactions (the "Six Flags
Transactions") which will be consummated immediately prior to or concurrently
with the Offering. The elements of the Six Flags Transactions are:
THE PREMIER MERGER
The company presently named Premier Parks Inc. (together with its
consolidated subsidiaries, "Premier Operations") will merge in the Premier
Merger with a wholly-owned subsidiary of Premier Parks Holdings Corporation in
accordance with Section 251(g) of the Delaware General Corporation Law. As a
result of the Premier Merger, holders of shares of Common Stock of Premier
Operations will become, on a share-for-share basis, holders of Common Stock of
Premier Parks Holdings Corporation, and Premier Operations will become a
wholly-owned subsidiary of Premier Parks Holdings Corporation. On the effective
date of the Premier Merger, Premier Operations will change its name to Premier
Parks Operations Inc., and Premier Parks Holdings Corporation will change its
name to Premier Parks Inc.
THE SIX FLAGS ACQUISITION
Pursuant to an Agreement and Plan of Merger dated as of February 9, 1998
(the "Six Flags Agreement"), Premier will acquire by merger all of the capital
stock of SFEC from its current stockholders (the "Sellers") for approximately
$965 million (subject to adjustment), less an amount equal to the excess of the
aggregate payment in such merger to the current holders of (i) options
exercisable for capital stock of SFEC OVER (ii) $5.0 million. The purchase price
is payable in all cash or, at the Company's option, cash and Seller Depositary
Shares representing interests in up to $200.0 million (but not less then $100.0
million) of the Company's % Convertible Redeemable Preferred Stock (the
"Seller Preferred Stock"). At the date of acquisition, Six Flags' liabilities
will include approximately $192.3 million principal amount at maturity ($160.1
million accreted value at December 31, 1997) of SFEC's Zero Coupon Senior Notes
due 1999 (the "SFEC Zero Coupon Senior Notes") and approximately $285.0 million
principal amount at maturity ($269.9 million accreted value at December 31,
1997) of 12 1/4% Senior Subordinated Discount Notes due 2005 (the "SFTP Senior
Subordinated Notes") of Six Flags Theme Parks Inc. (together with its
subsidiaries, "SFTP"), an indirect wholly-owned subsidiary of SFEC. In addition,
the Company will refinance all outstanding Six Flags bank indebtedness
(approximately $ million at December 31, 1997). See "Description of Six
Flags Agreement."
THE FINANCINGS
In the Offerings:
1. The Company will issue Common Stock with estimated gross proceeds of
$500.0 million.
2. The Company will issue (the "Preferred Stock Offering") Public
Depositary Shares representing interests in the Company's % Convertible
Exchangeable Preferred Stock (the "Mandatorily Convertible Preferred Stock" and,
together with the Seller Preferred Stock, the "Convertible Preferred Stock")
with estimated gross proceeds of $200.0 million. See "Description of Mandatorily
Convertible Preferred Stock."
3. The Company will issue its Senior Discount Notes due 2008 (the "Company
Senior Discount Notes") with estimated gross proceeds of $250.0 million (the
"Discount Notes Offering"). See "Description of Indebtedness--Company Senior
Discount Notes."
4. The Company will issue (the "Senior Notes Offering") $280.0 million
principal amount of its % Senior Notes due 2008 (the "Company Senior Notes"
and, together with the Company Senior Discount Notes, the "Company Notes"). See
"Description of Indebtedness--Company Senior Notes."
8
<PAGE>
5. SFEC will issue (the "SFEC Notes Offering") $170.0 million principal
amount of its % Senior Notes (the "New SFEC Notes"). The proceeds of the New
SFEC Notes, together with additional funds, will be deposited in escrow to repay
in full at or prior to maturity the SFEC Zero Coupon Senior Notes. See
"Description of Indebtedness--New SFEC Notes."
In addition, the Company will use approximately $ of borrowings
under the Premier Credit Facility (as defined below) to prefund capital
expenditures and provide working capital. The Company will also draw
approximately $ million of borrowings under a new $472.0 million Six Flags
senior secured credit facility (the "Six Flags Credit Facility" and, together
with the Premier Credit Facility, the "Credit Facilities") to repay bank
indebtedness of SFTP. See "Description of Indebtedness--Premier Credit
Facilities" and "--Six Flags Credit Facility."
The closing of the Offering is conditioned upon the closing of all other
elements of the Six Flags Transactions. Although the size of one or more of the
Offerings may be changed, the aggregate gross proceeds of all the Offerings is
not expected to change materially.
The following table sets forth a summary of the expected sources and uses of
funds associated with the Six Flags Transactions:
<TABLE>
<CAPTION>
AMOUNT
(IN
SOURCES THOUSANDS)
-----------
<S> <C>
Common Stock Offering(1)....................................................... $ 500,000
Preferred Stock Offering(1).................................................... 200,000
Issuance of Seller Depositary Shares........................................... 200,000
Company Senior Discount Notes Offering(1)...................................... 250,000
Company Senior Notes Offering(1)............................................... 280,000
New SFEC Notes Offering(1)..................................................... 170,000
Borrowings under the Premier Credit Facility(2)................................
Borrowings under the Six Flags Credit Facility.................................
-----------
Total...................................................................... $
-----------
-----------
USES
Acquisition of SFEC capital stock.............................................. $ 965,000
Deposit for repayment of SFEC Zero Coupon Senior Notes.........................
Repayment of Six Flags bank indebtedness.......................................
Interest escrow for Company Senior Notes(3)....................................
Prefunding of capital expenditures(4)..........................................
Other cash.....................................................................
Transaction expenses...........................................................
-----------
Total...................................................................... $
-----------
-----------
</TABLE>
- ------------------------
(1) Reflects assumed gross proceeds.
(2) Does not include an estimated $ million (assuming an all cash Walibi
Tender Offer) of borrowings to be used to fund, in part, the Walibi
acquisition.
(3) Represents escrow to fund the first six semi-annual interest payments
thereon.
(4) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Liquidity, Capital Commitments and Resources."
Following the Six Flags Transactions, the Company's structure will be:
[Chart showing corporate structure and Offerings and Bank Facilities]
9
<PAGE>
OTHER RECENT DEVELOPMENTS
KENTUCKY KINGDOM. In November 1997, the Company acquired all of the
membership interests of the limited liability company that owns substantially
all of the assets used in the operation of Kentucky Kingdom, a combination theme
and water park located in Louisville, Kentucky, for an aggregate purchase price
of $64.0 million, of which approximately $4.9 million was paid by delivery of
121,671 shares of Common Stock, with the balance paid in cash and by the
assumption of liabilities. Depending upon the level of revenues at Kentucky
Kingdom during each of the 1998-2000 seasons, the Company may be required to
issue additional shares of Common Stock to the seller.
MARINE WORLD. In April 1997, the Company became manager of Marine World, a
marine and exotic wildlife park located in Vallejo, California, pursuant to a
contract with an agency of the City of Vallejo under which the Company is
entitled to receive an annual base management fee of $250,000 and up to $250,000
annually in additional fees based on park performance. In November 1997, the
Company exercised its option to lease approximately 40 acres of land within the
site for nominal rent and an initial term of 55 years (plus four ten-year and
one four-year renewal options). The Company intends to expand the park's
entertainment component by adding theme park rides and attractions on the leased
land, which is located within the existing park, in order to create one
fully-integrated regional theme park at the site. Premier is entitled to
receive, in addition to the management fee, 80% of the cash flow generated by
the combined operations at the park, after combined operating expenses and debt
service on outstanding debt obligations relating to the park. The Company is
currently implementing the first phase of the expansion of the entertainment
component at Marine World. The Company also has an option to purchase the entire
site commencing in February 2002 at a purchase price equal to the greater of the
then principal amount of certain debt obligations of the seller (expected to
aggregate $52.0 million at February 2002) or the then fair market value of the
seller's interest in the park (based on a formula relating to the seller's 20%
share of Marine World's cash flow). The Company currently expects to exercise
this purchase option when it becomes exercisable.
WALIBI. In December 1997, the Company entered into an agreement (the
"Walibi Agreement") with three of the principal stockholders of Walibi, S.A.
("Walibi"), pursuant to which the Company expects to purchase in March 1998 a
majority of the outstanding capital stock of Walibi (the "Private Acquisition").
Following the closing of the Private Acquisition, the Company will commence a
"public takeover bid," as defined and regulated under Belgian law (the "Walibi
Tender Offer"), for the remainder of the outstanding capital stock of Walibi.
Walibi is a corporation (SOCIETE ANONYME) organized under the laws of
Belgium. Walibi's stock is currently traded on the Official Market of the
Brussels Stock Exchange and it owns six theme parks, two located in Belgium, one
in The Netherlands and three in France, as well as two smaller attractions in
Belgium (the "Walibi Parks"). Walibi's operations had combined 1997 attendance
of approximately 3.5 million.
The transaction values the equity of Walibi based on a multiple of seven
times Walibi's 1997 EBITDA, less Walibi's net debt at December 31, 1997. The
Company estimates that the aggregate consideration to be paid by the Company for
Walibi (assuming the Company acquires 100% of the outstanding Walibi capital
stock pursuant to the Walibi Tender Offer) will be between Belgian Francs
("BEF") 2.8 billion and BEF 3.1 billion ($75.4 million to $83.4 million based on
the exchange rate of $1.00 to BEF 37.16 on February 4, 1998). The purchase price
in the Private Acquisition will be paid 80% in cash in BEF and 20% in Premier
Common Stock (approximately 220,000 shares based on an assumed purchase price of
BEF 1.55 billion in the Private Acquisition). Shares of Premier Common Stock
issued in the Private Acquisition will not be registered under the Securities
Act and will be subject to a "lock-up" agreement until the later of June 6, 1998
or 41 days after the consummation of the Private Acquisition. The consideration
offered in the Walibi Tender Offer will be payable at the election of the
holders of Walibi capital stock (i) in cash only
10
<PAGE>
or (ii) in cash and shares of Premier Common Stock in the same ratio as the
Private Acquisition. In addition, the Company will be obligated to issue
additional shares of Premier Common Stock in the event certain gross revenue
targets are met for the theme parks owned by Walibi at the time of the closing
of the Private Acquisition. The Company will also assume or refinance certain
indebtedness of Walibi which aggregated $ million at December 31, 1997. The
Company will fund the cash portion of the purchase price of the Walibi
acquisition (as well as the refinancing of certain indebtedness of Walibi) from
the proceeds of borrowings under a $300.0 million senior secured credit facility
(the "Premier Credit Facility") to be entered into by Premier Operations prior
to the Private Acquisition. See "Description of Indebtedness--Premier Credit
Facility."
Under the terms of the Walibi Agreement, the Company has agreed to invest at
least BEF 1.4 billion (approximately $37.7 million based on the exchange rate of
$1.00 to BEF 37.16 on February 4, 1998) in the Walibi Parks over the three years
commencing with the 1999 season.
11
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered(1):
U.S. Offering................... shares
International Offering.......... shares
Total......................... shares
Common Stock outstanding(2):
prior to the Offering........... 18,948,107 shares
after the Offering.............. shares
The Offerings..................... The Company is concurrently offering (i) shares of
Common Stock, (ii) Public Depositary Shares
representing interests in $200.0 million of Mandatorily
Convertible Preferred Stock (iii) $ million
aggregate principal amount at maturity of Company Senior
Discount Notes, with estimated gross proceeds of $250.0
million, and (iv) $280.0 million principal amount of
Company Senior Notes. In addition, SFEC is offering
$170.0 million of New SFEC Notes. The Company also
expects to issue up to Seller Depositary Shares
representing interests in up to $200.0 million of Seller
Preferred Stock as part of the consideration for the Six
Flags Acquisition. See "--The Six Flags Transactions,"
"Description of Indebtedness--Company Senior Discount
Notes," "--Company Senior Notes," "--New SFEC Notes" and
"Description of Securities--Preferred Stock." The
Offerings are conditioned upon the closing of all other
elements of the Six Flags Transactions.
Use of Proceeds................... The Company intends to apply the net proceeds from the
Offerings to fund the cash portion of the purchase price
for the Six Flags Acquisition; to provide for the
repayment in full of the SFEC Zero Coupon Senior Notes;
to acquire and make improvements at additional theme
parks; to fund improvements and expansion of the
Company's parks, including the parks acquired in the Six
Flags Acquisition and the 1997 Acquisitions; and for
general corporate purposes, including working capital
requirements. See "Use of Proceeds."
NYSE symbols:
Common Stock.................... "PKS"
Public Depositary Shares........
</TABLE>
- ------------------------
(1) Excludes shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment options.
(2) Excludes (i) approximately 220,000 shares issuable in the Walibi Private
Acquisition (based on an assumed purchase price of BEF 1.55 billion in the
Private Acquisition) and any shares issued in the Walibi Tender Offer; (ii)
an aggregate of 45,038 shares of Common Stock issuable upon exercise of
warrants; (iii) an aggregate of 1,270,000 shares of Common Stock reserved
for issuance under the Company's Stock Incentive Plans, of which options for
764,700 shares have been granted and options for 455,800 shares are
presently exercisable; (iv) an aggregate of 375,000 restricted shares issued
to the Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, which vest proportionately on January 1 of each of the
five years commencing 1999; (v) any shares issuable to the sellers in the
Kentucky Kingdom and Walibi acquisitions depending upon the future revenues
of these parks; (vi) shares issuable upon conversion of the Convertible
Preferred Stock or as dividends on the Mandatorily Convertible Preferred
Stock; and (vii) shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment options.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA DATA
The tables below contain certain summary historical and pro forma financial
and operating data for the Company. The historical financial data for 1996
includes the 1996 Acquisitions (other than Riverside Park) from the dates of the
respective acquisitions. The pro forma financial and operating data for the year
ended December 31, 1996 give effect to (i) the acquisitions of Elitch Gardens,
the Waterworld Parks, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags as if they had occurred on January 1, 1996; (ii) the acquisition of The
Great Escape as if it had occurred on November 1, 1995 (the first day of The
Great Escape's 1996 fiscal year); (iii) the acquisition of Riverside Park as if
it had occurred on October 1, 1995 (the first day of Riverside Park's 1996
fiscal year) and (iv) the acquisition of Kentucky Kingdom as if it had occurred
on October 30, 1995 (the first day of Kentucky Kingdom's 1996 fiscal year). The
pro forma financial and operating data for the nine months ended September 30,
1997 give effect to the acquisitions of Riverside Park, Kentucky Kingdom, Walibi
(assuming an all cash Walibi Tender Offer) and Six Flags as if they had occurred
on January 1, 1997. The following summary historical financial and operating
data, except for attendance and revenue per visitor data, as of September 30,
1997, for each of the years in the three-year period ended December 31, 1996 and
the nine months ended September 30, 1996 and 1997, have been derived from the
financial statements of the Company appearing elsewhere in this Prospectus
(which in the case of the unaudited consolidated financial statements, in the
opinion of management, include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation) and should be read in
conjunction with those financial statements (including the notes thereto) and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Other historical financial and operating data have been derived
from audited consolidated financial statements of Premier which are not included
herein.
The Company's business is highly seasonal. Results for the nine-month period
ended September 30, 1997 are not necessarily indicative of results to be
expected for the year ended December 31, 1997. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
PRO FORMA(4)
1992(1) 1993 1994 1995(2) 1996(3) 1996
----------- --------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND
PER VISITOR AMOUNTS) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Total revenue................................. $ 17,392 $ 21,860 $ 24,899 $ 41,496 $ 93,447 $
Gross profit(5)............................... 4,921 7,787 7,991 13,220 31,388
Income from operations(5)..................... 487 3,019 2,543 3,948 14,461
Interest expense, net......................... (1,413) (1,438) (2,299) (5,578) (11,121)
Income (loss) from continuing operations...... (1,735) 1,354 102 (1,045)(6) 1,765
Income (loss) from continuing operations per
common share (primary and fully diluted).... $ (2.10) $ .51 $ .04 $ (.40)(6) $ .13 $
OTHER DATA:
EBITDA(7)..................................... $ 1,938 $ 4,562 $ 4,549 $ 7,706 $ 22,994 $
Net cash provided by operating
activities(8)............................... $ 1,980 $ 2,699 $ 1,060 $ 10,646 $ 11,331 $
Depreciation and amortization................. $ 1,442 $ 1,537 $ 1,997 $ 3,866 $ 8,533 $
Capital expenditures.......................... $ 3,956 $ 7,674 $ 10,108 $ 10,732 $ 39,423 $
Total attendance.............................. 1,116 1,322 1,408 2,302(9) 4,518(9) (10)
Revenue per visitor(11)....................... $ 15.58 $ 16.54 $ 17.68 $ 18.03 $ 20.66 $
Ratio of earnings to fixed charges(12)........ (12) 2.1x 1.1x (12) 1.3 x
Ratio of earnings to combined fixed charges
and preferred stock dividends(12)........... (12) 2.1x 1.1x (12) 1.2 x
EBITDA/total interest expense................. 1.3 x 3.1x 1.9x 1.2 x 1.8 x
EBITDA/cash interest expense.................. 1.4 x 3.2x 2.0x 1.4 x 2.1 x
Total debt/EBITDA.............................
Net debt/EBITDA...............................
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
HISTORICAL
HISTORICAL COMBINED HISTORICAL PRO FORMA
1996 1996(13) 1997 1997(4)
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR PER SHARE, RATIO AND
PER VISITOR AMOUNTS)
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Total revenue..................................... $ 89,792 $ 154,307 $ 186,746
Gross profit(5)................................... 40,611 59,446 81,256
Income from operations(5)......................... 25,248 27,048 51,568
Interest expense, net............................. (7,657) (12,281) (12,869)
Net income........................................ $ 10,512 $ 6,273 $ 23,193
Net income per common share
Primary......................................... $ 1.24 (13) $ 1.32
Fully diluted................................... $ 1.11 (13) $ 1.29
OTHER DATA:
EBITDA(7)......................................... $ 30,848 $ 45,392 $ 65,542
Net cash provided by operating activities(8)...... $ 10,222 $ 21,814 $ 43,921
Depreciation and amortization..................... $ 5,599 $ 18,627 $ 13,974
Capital expenditures.............................. $ 29,290 $ 33,273 $ 108,166
Total attendance.................................. 4,302 (9) 7,049 8,276(9) (10)
Revenue per visitor(11)........................... $ 20.87 $ 21.66 $ 22.33
Ratio of earnings to fixed charges(12)............ 3.2 x (13) 3.9x
Ratio of earnings to combined fixed charges and
preferred stock dividends(12)................... 2.9 x (13) 3.9x
EBITDA/total interest expense..................... 3.4 x (13) 3.4x
EBITDA/cash interest expense...................... 4.0 x (13) 5.1x
Total debt/EBITDA.................................
Net debt/EBITDA...................................
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
ACTUAL(14) PRO FORMA(15)
----------- --------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 169,151
Total assets......................................................................... $ 621,267
Total long-term debt and capitalized lease obligations (excluding current
maturities)........................................................................ $ 216,263
Total debt........................................................................... $ 217,253
Seller Preferred Stock............................................................... --
Stockholders' equity................................................................. $ 326,802
</TABLE>
- --------------------------
(1) During 1992, the Company purchased Adventure World, as well as the
remaining minority interest in Frontier City. During 1992, the Company also
discontinued substantially all of its non-theme park operations through a
disposition transaction which significantly reduced the Company's assets
and indebtedness, as well as resulted in an extraordinary gain of $18.4
million, which gain is not reflected in income (loss) from continuing
operations. During 1992, the Company also adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
("Statement 109"), resulting in a decrease in net income of $2.3 million
which decrease is not reflected in income (loss) from continuing
operations.
(2) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Funtime acquisition from the date of acquisition,
August 15, 1995.
(3) The historical Statement of Operations Data for 1996 reflect the results of
Elitch Gardens from October 31, 1996, the Waterworld Parks from November
19, 1996 and The Great Escape from December 4, 1996 (the dates of their
respective acquisition).
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
14
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(4) The pro forma financial and operating data for the year ended December 31,
1996 give effect to the Acquisitions and the related financings as if they
had occurred on January 1, 1996 (in the case of Elitch Gardens, the
Waterworld Parks, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags), on November 1, 1995 (in the case of The Great Escape), on October
1, 1995 (in the case of Riverside Park) and October 30, 1995 (in the case
of Kentucky Kingdom). The pro forma financial and operating data for the
nine months ended September 30, 1997 give effect to the acquisitions of
Riverside Park, Kentucky Kingdom, Walibi (assuming an all cash Walibi
Tender Offer) and Six Flags as if they had occurred on January 1, 1997. The
pro forma income per share for 1996 also gives effect to the June 1996
public offering, the conversion of the Company's outstanding preferred
stock at that time, the January 1997 public offering, the Offering and the
Preferred Stock Offering as if they had occurred on January 1 of such year.
The pro forma income per share for the 1997 period also gives effect to the
January 1997 public offering, the Offering and the Preferred Stock Offering
as if they had occurred on January 1, 1997.
(5) Gross profit is revenue less operating expenses, costs of products sold and
depreciation and amortization. Income from operations is gross profit less
selling, general and administrative expenses.
(6) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the
Funtime acquisition. This extraordinary loss is not included in income
(loss) from continuing operations and income (loss) from continuing
operations per common share for 1995.
(7) EBITDA is defined as earnings from continuing operations before interest
expense, net, income tax expense (benefit), depreciation and amortization,
minority interest and equity in loss of real estate partnership. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of the Company's ability to service and/or
incur debt. EBITDA is not required by generally accepted accounting
principles ("GAAP") and should not be considered in isolation or as an
alternative to net income, net cash provided by operating, investing and
financing activities or other financial data prepared in accordance with
GAAP or as an indicator of the Company's operating performance. This
information should be read in conjunction with the Statements of Cash Flows
contained in the financial statements included elsewhere herein. Equity in
loss of real estate partnership was $122,000, $142,000, $83,000, $69,000,
$78,000, $60,000 and $44,000 during each of the five years ended December
31, 1996 and the nine months ended September 30, 1996 and 1997,
respectively.
(8) During each of the five years ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997, the Company's net cash used in investing
activities was $5,649,000, $7,698,000, $10,177,000, $74,139,000,
$155,149,000, $29,328,000 and $129,542,000, respectively. During those
periods, net cash provided by financing activities was $8,736,000,
$2,106,000, $7,457,000, $90,914,000, $119,074,000, $64,085,000 and
$250,729,000, respectively.
(9) Represents in the case of 1995 attendance at the three parks owned by the
Company prior to the Funtime acquisition for the entire 1995 season and
attendance at the Funtime parks from and after August 15, 1995. In the case
of 1996, historical attendance does not include attendance at any of the
parks acquired in the 1996 Acquisitions since those acquisitions were
completed following the 1996 season. Historical attendance for the nine
months ended September 30, 1997 does not include attendance at Marine
World.
(10) Pro forma attendance information includes attendance at Marine World for
the applicable period.
(11) Pro forma and historical revenue per visitor for all applicable periods
does not include revenue of Paradise Island (a fee-per-attraction
entertainment center that does not track attendance, acquired in November
1996) or Marine World.
(12) For the purpose of determining the ratio of earnings to fixed charges, and
the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) from continuing operations
before income taxes and fixed charges. Fixed charges consist of interest
expense net of interest income, amortization of deferred financing costs
and discount or premium relating to indebtedness, and the portion
(approximately one-third) of rental expense that management believes
represents the interest component of rent expense. Preferred stock dividend
requirements have been increased to an amount representing the before tax
earnings which would have been required to cover such dividend
requirements. For the years ended December 31, 1992 and 1995, the Company's
earnings were insufficient to cover fixed charges by $917,000 and
$1,738,000, respectively, and were insufficient to cover combined fixed
charges and preferred stock dividends by $917,000 and $2,620,000,
respectively. On a pro forma basis, for the year ended December 31, 1997,
the Company's earnings were insufficient to cover fixed charges and
combined fixed charges and preferred stock dividends by $ and $ ,
respectively.
(13) Represents results of operations of Premier and the results of operations
for the parks acquired in the 1996 Acquisitions on a combined basis. No pro
forma adjustments for additional depreciation, interest expense or income
taxes have been made in combining the Company and 1996 Acquisitions
amounts. Income per share, ratio of earnings to fixed charges and ratio of
earnings to combined fixed charges and preferred stock dividends are not
presented on this basis as amounts are not meaningful.
(14) Actual balance sheet data as of September 30, 1997 include the Company's
investment in Marine World as of that date.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
15
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(15) The pro forma balance sheet data give effect to the acquisitions of
Kentucky Kingdom, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags, the Offerings (assuming no exercise of the Underwriters'
over-allotment options) and the related financings as if they had occurred
on September 30, 1997.
16
<PAGE>
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS:
RISKS ASSOCIATED WITH SUBSTANTIAL INDEBTEDNESS
Following the Six Flags Transactions, the Company will be highly leveraged.
On a pro forma basis, as of December 31, 1997, the Company had total outstanding
indebtedness of approximately $ million, including (i) $250.0 million in
accreted value at that date of the Company Senior Discount Notes ($ million
principal amount at maturity in 2008); (ii) $280.0 million in aggregate
principal amount of Company Senior Notes; (iii) $125.0 million in aggregate
principal amount of Premier Operations' 9 3/4% Senior Notes due 2007 (the "1997
Premier Notes"); (iv) $90.0 million in aggregate principal amount of Premier
Operations' 12% Senior Notes due 2003 (the "1995 Premier Notes" and, together
with the 1997 Premier Notes, the "Premier Notes"); (v) $269.9 million in
accreted value at that date of SFTP Senior Subordinated Notes ($285.0 million
principal amount at maturity in 2005); (vi) $170.0 million in aggregate
principal amount of New SFEC Notes (together with the Company Notes, the Premier
Notes and the SFTP Senior Subordinated Notes, the "Senior Notes"); (vii)
$ million in outstanding borrowings under the Premier Credit Facility;
and (viii) $ million in outstanding borrowings under the Six Flags Credit
Facility. Pro forma indebtedness at that date also included $160.1 million
accreted value of SFEC Zero Coupon Senior Notes, which will be repaid from the
proceeds of the New SFEC Notes together with other funds. On a pro forma basis,
as of December 31, 1997, the Company would have had stockholders' equity of
approximately $ million. In addition, the annual dividends (which are
payable in cash, in the case of the Seller Preferred Stock, or in cash, or by
issuance of shares of Common Stock, at the option of the Company, in the case of
the Mandatorily Convertible Preferred Stock) on the Convertible Preferred Stock
aggregate $ , and the Seller Preferred Stock is mandatorily redeemable
in 2010 (if not earlier redeemed or converted). On a pro forma basis, for the
year ended December 31, 1997, the Company's earnings would have been
insufficient to cover its combined fixed charges and preferred stock dividends
by approximately $ million. In addition, the indentures relating to the
Senior Notes (the "Indentures") permit the Company to incur additional
indebtedness under certain circumstances. See "Capitalization," "Selected
Historical and Pro Forma Financial and Operating Data" and "Description of
Indebtedness."
By reason of the Six Flags Acquisition, the Company will be required to
offer to repurchase the SFTP Senior Subordinated Notes at a price equal to 101%
of their accreted amount (approximately $287.9 million at June 15, 1998). On
February , 1998, the last reported sales price of these Notes was equivalent
to % of their accreted amount. The Company has not entered into any standby
arrangement to finance the purchase of such notes and there can be no assurance
that the Company would be able to obtain such financing in the event that it
were to become necessary.
In addition to its obligations under its outstanding indebtedness and
preferred stock, the Company is also required to (i) make minimum annual
distributions of approximately $46.2 million (subject to cost of living
adjustments) to its partners in two Six Flags Parks, Six Flags Over Georgia and
Six Flags Over Texas (the "Co-Venture Parks") and (ii) make minimum capital
expenditures at each of the Co-Venture Parks during rolling five-year periods,
based generally on 6% of such park's revenues. Cash flow from operations at the
Co-Venture Parks will be used to satisfy these requirements first, before any
funds are required from the Company. The Company has also agreed to purchase a
maximum number of 5% per year (accumulating to the extent not purchased in any
given year) of the total limited partnership units of these partnerships (to the
extent tendered by the unit holders). The agreed price for these purchases is
based on a valuation for each respective Co-Venture Park equal to the greater of
(i) a value derived by multiplying its weighted-average four year EBITDA by a
specified multiple (8.0 in the case of the Georgia park and 8.5 in the case of
the Texas park) or (ii) $250.0 million in the case of the Georgia park and
$374.8 million in the case of the Texas park. The Company's obligations with
respect to Six Flags Over Georgia and Six Flags Over Texas will continue until
2026 and 2027, respectively. As the Company purchases units, it will be
17
<PAGE>
entitled to the minimum distribution and other distributions attributable to
such units, unless it is then in default under its indemnity obligations to Time
Warner. See "Description of Six Flags Agreement." The Company estimates that its
maximum unit purchase obligation for 1998, when purchases are required only for
the Georgia Park, will aggregate approximately $13 million (approximately $32
million for 1999, when purchases for both partnerships are required) and its
minimum capital expenditures for 1998 at these parks will total approximately
$18 million. See "Business--Description of Parks--Six Flags Parks--Six Flags
Over Georgia" and "--Six Flags Over Texas; Six Flags Hurricane Harbor." In
addition, the Company has agreed to invest approximately $37.7 million to expand
the six Walibi Parks over three years, commencing 1999.
The Company's ability to make scheduled payments on, or to refinance, its
indebtedness, or to fund planned capital expenditures and its obligations under
the arrangements relating to the Co-Venture Parks will depend on its future
performance, which, to a certain extent, is subject to general economic,
financial, weather, competitive and other factors that are beyond its control.
The Company believes that cash flow from operations and available cash,
available borrowings under the Credit Facilities and the net proceeds of the
Offerings (to the extent not used in connection with the Six Flags Acquisition)
will be adequate to meet the Company's future liquidity needs, including
anticipated requirements for working capital, capital expenditures, scheduled
debt and preferred stock payments and its obligations under arrangements
relating to the Co-Venture Parks, for at least the next several years. The
Company may, however, need to refinance all or a portion of its existing debt on
or prior to maturity or to obtain additional financing. There can be no
assurance that the Company's business will generate sufficient cash flow from
operations or that future borrowings will be available under the Credit
Facilities in an amount sufficient to enable the Company to service its
indebtedness or enable it to fund its other liquidity needs. In addition, there
can be no assurance that the Company will be able to effect any such refinancing
on commercially reasonable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity, Capital
Commitments and Resources."
The degree to which the Company will be leveraged following the Six Flags
Transactions could have important consequences to the Company, including, but
not limited to: (i) making it more difficult for the Company to satisfy its
obligations, (ii) increasing the Company's vulnerability to general adverse
economic and industry conditions, (iii) limiting the Company's ability to obtain
additional financing to fund future working capital, capital expenditures,
acquisitions and other general corporate requirements, (iv) requiring the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal of, and interest on, its indebtedness, thereby
reducing the availability of such cash flow to fund working capital, capital
expenditures, acquisitions or other general corporate purposes, (v) limiting the
Company's flexibility in planning for, or reacting to, changes in its business
and the industry, and (vi) placing the Company at a competitive disadvantage
vis-a-vis less leveraged competitors. In addition, the Indentures and the Credit
Facilities will contain financial and other restrictive covenants that will
limit the ability of the Company to, among other things, borrow additional
funds. Failure by the Company to comply with such covenants could result in an
event of default which, if not cured or waived, could have a material adverse
effect on the Company. See "Description of Indebtedness."
The Company's inability to service its obligations would have a material
adverse effect on the market value and marketability of the Common Stock and the
Mandatorily Convertible Preferred Stock. In the event of bankruptcy proceedings
involving the Company, the Company's creditors will have a claim upon the
Company's assets prior in right to the holders of Common Stock and Mandatorily
Convertible Preferred Stock.
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES
The Company has no operations of its own and derives all of its revenue from
its subsidiaries. Therefore, the Company's ability to pay its obligations
(including debt service on the Company Senior Discount Notes, the Company Senior
Notes and dividend and redemption obligations on the Convertible
18
<PAGE>
Preferred Stock and obligations under the indemnity agreement with Time Warner)
when due is dependent upon the receipt of sufficient funds from its direct and
indirect subsidiaries. SFEC is also a holding company and its ability to pay its
obligations (including debt service on the New SFEC Notes) when due is similarly
dependent.
Under the terms of the indentures governing the Premier Notes, the SFTP
Senior Subordinated Notes and the New SFEC Notes, the Premier Credit Facility
and the Six Flags Credit Facility, the payment of
dividends by Premier Operations, SFEC and SFTP are subject to certain specified
financial tests which will significantly restrict their ability to pay dividends
or make other distributions. The terms of the Company Notes and the Mandatorily
Convertible Preferred Stock will permit the Company's subsidiaries to incur
additional indebtedness, the terms of which could further limit the payment of
dividends or the making of other distributions by such subsidiaries. On a pro
forma basis, as of December 31, 1997, Premier Operations and SFEC would have had
the ability to pay dividends or make other restricted payments to the Company in
an aggregate amount of approximately $ million. On that basis, as of
that date, SFTP would have had the ability to pay dividends, or make such
payments to SFEC, in an aggregate amount of approximately $ million. There
can be no assurance that dividends, distributions or loans to the Company from
its subsidiaries will be sufficient to fund its obligations.
If any indebtedness of any of the Company's subsidiaries were to be
accelerated, there would be no assurance that the assets of any such subsidiary
would be sufficient to repay such indebtedness. The Company's rights to
participate in the distribution of the assets of its operating subsidiaries upon
a liquidation or reorganization of such companies will be subject to the prior
claims of their respective creditors.
ABILITY TO MANAGE RAPID GROWTH
The Six Flags Acquisition is significantly larger than any of Premier's
previous acquisitions, and the combination and integration of the respective
operations of Six Flags and Premier will be of a substantially greater scale
than previously undertaken by Premier and will be ongoing concurrently with the
integration of Walibi, its first foreign acquisition. The increased size of
Premier's operations and the process of combining and integrating Six Flags with
Premier, particularly during the same period as the integration of Walibi, will
place substantial additional demands upon existing management resources and
require Premier to effectively redeploy such resources, including hiring new
personnel. There can be no assurance that Premier's management will be able to
successfully integrate the operations of Six Flags or Walibi or that the
anticipated benefits of the Six Flags Acquisition or the Walibi acquisition to
Premier will be realized or, if realized, as to the timing thereof. The
inability to successfully manage the integration of Six Flags or Walibi with
Premier would have a material adverse effect on Premier's results of operations
and financial condition.
UNCERTAINTY OF FUTURE ACQUISITIONS; POTENTIAL EFFECTS OF ACQUISITIONS
In addition to the Acquisitions, the Company intends to continue to make
selective acquisitions that would expand its business. There can be no assurance
that the Company will be able to locate and acquire additional businesses. To
the extent any such acquisition would result in the incurrence or assumption of
indebtedness by the Company (or its operating subsidiaries), such incurrence or
assumption must comply with the limitations on the Company's (or such
subsidiary's) ability to incur or assume indebtedness under the Credit
Facilities and the Indentures. There can be no assurance that any future
acquisition will be permissible under these loan agreements or that waivers of
any such covenants could be obtained. See "-- Restrictive Debt Covenants."
In certain instances, a consummated acquisition may adversely affect the
Company's financial condition and reported results, at least in the short-term,
depending on many factors, including capital requirements and the accounting
treatment of such acquisition. There can be no assurance that the 1997
Acquisitions, the Six Flags Acquisition or any future acquisition will perform
as expected, will not result in significant unexpected liabilities or will ever
contribute significant revenues or profits to the Company.
19
<PAGE>
Shares of Common Stock (or securities convertible into Common Stock) were used
as a portion of the aggregate consideration in the acquisitions of Kentucky
Kingdom, Walibi and Six Flags. The Company may issue a substantial number of
shares of Common Stock (or convertible securities) to fund future acquisitions.
By virtue of the foregoing, the Company's acquisitions could have an adverse
effect on the market price of the Common Stock.
RESTRICTIVE DEBT COVENANTS
The Credit Facilities contain a number of significant covenants that, among
other things, restrict the ability of the Company's operating subsidiaries to
dispose of assets, incur additional indebtedness, pay cash dividends, create
liens on assets, make investments or acquisitions, engage in mergers or
consolidations, make capital expenditures, engage in certain transactions with
affiliates or redeem or repurchase the indebtedness of such subsidiaries. In
addition, under the Credit Facilities, Premier Operations and SFTP are each
required to comply with specified financial ratios and tests, including interest
expense, fixed charges, debt service and total debt coverage ratios. The
Indentures also contain a series of restrictive covenants.
The Company is currently in compliance with the covenants and restrictions
contained in the Credit Facilities and the Indentures. However, its ability to
continue to comply with financial tests and ratios in the Credit Facilities may
be affected by events beyond its control, including prevailing economic,
financial, weather and industry conditions. The breach of any such financial
covenant could result in the termination of the Credit Facilities (and the
acceleration of the maturity of all amounts outstanding thereunder) and, by
virtue of cross default provisions, the acceleration of the maturity of other
indebtedness of the Company, including the Senior Notes.
In addition, under the terms of the Indemnity Agreement to be entered into
in connection with the Six Flags Transactions (the "Indemnity Agreement") (which
lasts until 2028), without the consent of Time Warner Inc. (collectively with
its affiliates, "Time Warner"), the Company cannot incur indebtedness at SFEC or
any of its subsidiaries that is secured by any assets of the Company, Premier
Operations or any of its subsidiaries, or secure any indebtedness of the
Company, Premier Operations or any of its subsidiaries, with any of the assets
of SFEC or any of its subsidiaries. These covenants could inhibit the ability of
the Company to borrow in the future.
RISKS OF ACCIDENTS AND DISTURBANCES AT PARKS; EFFECTS OF LOCAL CONDITIONS AND
EVENTS
Because substantially all of the Company's parks feature "thrill rides,"
attendance at the parks and, consequently, revenues may be adversely affected by
any serious accident or similar occurrence with respect to a ride. In that
connection, in June 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. The collapse had a material adverse effect on that park's 1997 operating
performance, as well as a lesser impact on the Company's Sacramento water park
(which is also named "Waterworld"), located approximately seventy miles from the
Concord park, but did not have a material effect on the balance of the Company's
1997 operations. The Company has recovered all of the Concord park's operating
shortfall under its business interruption insurance. Premier Operations'
liability insurance policies provide coverage of up to $25.0 million per loss
occurrence and require Premier Operations to pay the first $50,000 of loss per
occurrence. Six Flags' liability insurance policies provide coverage of up to
$175.0 million per loss occurrence and require Six Flags to pay the first $2.0
million per loss occurrence.
Other local conditions and events can also adversely affect attendance. For
example, in 1994, the Company's Six Flags Magic Mountain park experienced
significant attendance declines and interruptions of business as a result of the
Los Angeles County earthquake centered in Northridge, California. Six Flags Over
Georgia experienced attendance declines in 1996 as a result of the 1996 Summer
Olympics. Management believes that the geographic diversity of the Company's
theme parks reduces the effects of such occurrences on the Company's
consolidated results.
20
<PAGE>
In addition, in view of the proximity of certain of the Company's parks to
major urban areas and the appeal of the parks to teenagers and young adults, the
Company's parks could experience disturbances that could adversely affect the
image of and attendance levels at its parks. Working together with local police
authorities, the Company has taken certain security-related precautions designed
to prevent disturbances in its parks, but there can be no assurance that it will
be able to prevent any such disturbances.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
As a result of the Walibi acquisition, a portion of the Company's operations
will be conducted in Europe, and the Company will become subject to risks that
are inherent in operating abroad. These risks can include difficulties in
staffing and managing foreign operations, longer payment cycles, problems in
collecting accounts receivable, political risks, unexpected changes in
regulatory requirements, fluctuations in currency exchange rates, import
restrictions or prohibitions, delays from customs brokers or government agencies
and potentially adverse tax consequences resulting from operating in multiple
jurisdictions with different tax laws. There can be no assurance that these and
other comparable risks, individually or in the aggregate, will not adversely
impact its financial and operating results in Europe.
EFFECTS OF INCLEMENT WEATHER; SEASONAL FLUCTUATIONS OF OPERATING RESULTS
Because the great majority of theme parks' attractions are outdoor
activities, attendance at parks and, accordingly, the Company's revenues are
significantly affected by the weather. Additionally, seven of the Company's
parks are primarily water parks which, by their nature, are more sensitive to
adverse weather than are theme parks. Unfavorable weekend weather and unusual
weather of any kind can adversely affect park attendance.
The operations of the Company are highly seasonal, with more than 80% of
park attendance occurring in the second and third calendar quarters of each
year. The great majority of the Company's revenue is collected in those quarters
while most expenditures for capital improvements and significant maintenance are
incurred when the parks are closed in the first and fourth quarters.
Accordingly, the Company believes that quarter-to-quarter comparisons of its
results of operations should not be relied upon as an indication of future
performance. Nevertheless, the market price of the Common Stock may fluctuate
significantly in response to variations in the Company's quarterly and annual
results of operations.
HIGHLY COMPETITIVE BUSINESS
The Company's parks compete directly with other theme, water and amusement
parks and indirectly with all other types of recreational facilities and forms
of entertainment within their market areas, including movies, sports attractions
and vacation travel. Accordingly, the Company's business is and will continue to
be subject to factors affecting the recreation and leisure time industries
generally, such as general economic conditions and changes in discretionary
consumer spending habits. Within each park's regional market area, the principal
factors affecting competition include location, price, the uniqueness and
perceived quality of the rides and attractions in a particular park, the
atmosphere and cleanliness of a park and the quality of its food and
entertainment.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers and key operating personnel, particularly Kieran E. Burke,
Chairman and Chief Executive Officer, and Gary Story, President and Chief
Operating Officer. The loss of services of, or a material reduction in the
amount of time devoted to the Company by, either of such individuals or certain
other key personnel could adversely affect the business of the Company. Although
the Company recently entered into three-year employment agreements with each of
Mr. Burke and Mr. Story, there is no assurance that the Company will be able to
retain their services during that period. Under certain circumstances, the loss
of the services of both
21
<PAGE>
Messrs. Burke and Story and the failure to replace them within a specified time
period would constitute a default under the Premier Credit Facility.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS; CHANGE OF CONTROL
Certain provisions of the Company's Certificate of Incorporation and By-laws
may have the effect of discouraging or delaying attempts to gain control of the
Company, including provisions which could result in the Company's stockholders
receiving less for their shares of Common Stock than otherwise might be
available in the event of a take-over attempt. These provisions include: (i)
authorizing the Board of Directors to fix the size of the Board of Directors
between three and 15 directors; (ii) authorizing directors to fill vacancies on
the Board of Directors that occur between annual meetings; and (iii) restricting
the persons who may call a special meeting of stockholders. Additionally, the
Company's authorized but unissued preferred stock can be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. In that connection, the Company has a plan that grants
to common stockholders rights to purchase shares of preferred stock (with
characteristics of Common Stock) upon the occurrence of certain events,
including events that could lead to a change in control. The existence of this
rights plan could discourage or hinder attempts by third parties to obtain
control of the Company. Furthermore, certain provisions of Delaware law may also
discourage or hinder attempts by third parties to obtain control of the Company.
See "Description of Securities--Rights Plan" and "-- Delaware Law and Certain
Charter and By-law Provisions." In addition, certain events that could lead to a
change of control of the Company will constitute a Change of Control under the
Indentures relating to the Senior Notes (other than the Indenture relating to
the SFTP Senior Subordinated Notes), and require the Company to make an offer to
purchase these Senior Notes. A Change of Control is also a default under the
Premier Credit Facility. The Six Flags Transactions do not constitute a Change
of Control under the Indentures (other than the Indenture relating to the SFTP
Senior Subordinated Notes). By virtue of the Six Flags Transactions, the Company
will be required to make an offer to purchase the SFTP Senior Subordinated
Notes. See "--Risks Associated with Substantial Indebtedness." Warner Bros. can
terminate the license agreement if persons engaged in the movie or television
industries or party to a material judicial proceeding pending against Time
Warner obtain control of the Company.
CASH DIVIDENDS UNLIKELY
The Company has not paid dividends on its Common Stock during the three
years ended December 31, 1997 and does not anticipate paying any cash dividends
thereon in the foreseeable future. Cash dividends on the Convertible Preferred
Stock (as well as the Common Stock) will be restricted under the Indentures
relating to the Company Notes.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have million
shares of Common Stock outstanding. Future sales of Common Stock (or Convertible
Preferred Stock) by existing stockholders pursuant to Rule 144 under the
Securities Act, or through the exercise of outstanding registration rights or
otherwise, could have an adverse effect on the prevailing market price of the
Common Stock and the Company's ability to raise additional capital. Except for
the Common Stock to be sold in the Offering, the Convertible Preferred Stock or
shares of Common Stock issued upon conversion of the Convertible Preferred
Stock, the Company has agreed not to offer, sell, contract to sell or otherwise
issue any shares of Common Stock (except pursuant to outstanding options and
warrants) or other capital stock or securities convertible into or exchangeable
for, or any rights to acquire, Common Stock or other capital stock, with certain
exceptions (including certain exceptions for Common Stock or other capital stock
issued or sold in connection with future acquisitions by the Company, including
any Common Stock to be issued in connection with the Walibi Tender Offer), prior
to the expiration of 90 days from the date of this Prospectus without the prior
written consent of Lehman Brothers Inc. ("Lehman Brothers"). The Company's
officers, directors and principal stockholders, who hold in the aggregate
approximately 5.9
22
<PAGE>
million shares of Common Stock (including shares issuable upon exercise of
outstanding options and warrants and outstanding shares of restricted stock),
have agreed not to sell any such shares for 90 days following the date of this
Prospectus without the consent of Lehman Brothers. In addition, the Sellers in
the Six Flags Acquisition have agreed not to sell any Seller Preferred Stock
during such 90-day period. Thereafter, all such shares held by the Company's
officers, directors and principal stockholders will be eligible for sale in the
public market (subject, in most cases, to applicable volume limitations and
other resale conditions imposed by Rule 144). In addition, subject to the
"lock-up" arrangements described above, holders of approximately 4.7 million
shares of Common Stock and the holders of Seller Preferred Stock have the right
to require the Company to register such shares (and, in the case of the Seller
Preferred Stock, the shares of Common Stock issuable upon conversion thereof)
for sale under the Securities Act. Depending upon the level of future revenues
at Kentucky Kingdom and Walibi, the Company may also be required in the future
to issue additional shares of Common Stock (assuming the maximum number of
shares of Common Stock are issued in the Walibi Tender Offer) with an aggregate
market value of up to $15.0 million to the sellers thereof. See "Prospectus
Summary--Other Recent Developments." The sale, or the availability for sale, of
substantial amounts of Common Stock or Convertible Preferred Stock in the public
market at any time subsequent to the date of this Prospectus could adversely
affect the prevailing market price of the Common Stock. See "Description of
Securities-- Registration Rights."
LESS EQUITY APPRECIATION FOR MANDATORILY CONVERTIBLE PREFERRED STOCK THAN COMMON
STOCK
The opportunity for equity appreciation afforded by an investment in the
Mandatorily Convertible Preferred Stock is less than the opportunity for equity
appreciation afforded by an investment in Common Stock. Holders of Public
Depositary Shares will realize no equity appreciation if at the Mandatory
Conversion Date (as defined herein) the Conversion Price (as defined herein) of
the Common Stock is below the Threshold Appreciation Price (as defined herein),
and less than all of the equity appreciation if at such time the Conversion
Price of the Common Stock is above the Threshold Appreciation Price. Holders of
Public Depositary Shares will realize the entire decline in equity value if at
such time the Conversion Price of the Common Stock is below the Initial Price
(as defined herein). See "Description of Mandatorily Convertible Preferred
Stock--Mandatory Conversion of Mandatorily Convertible Preferred Stock."
DILUTION OF COMMON STOCK
The Conversion Rate and the Optional Conversion Rate (as defined herein) on
the Mandatorily Convertible Preferred Stock are subject to adjustment for
certain events arising from stock splits and combinations, stock dividends,
certain other actions of the Company that modify its capital structure and
certain other transactions involving the Company. See "Description of the
Mandatorily Convertible Preferred Stock--Dilution Adjustments; Other Adjustment
Events." Such Conversion Rate and Optional Conversion Rate will not be adjusted
for other events, such as offerings of Common Stock for cash or in connection
with acquisitions that may adversely affect the market price of Common Stock.
Due to the relationship of the Conversion Rate and the Optional Conversion Rate
to the market price of Common Stock, such other events may also adversely affect
the trading price of the Mandatorily Convertible Preferred Stock. There can be
no assurance that the Company will not make such offerings of Common Stock or as
to the size of such offerings, if any.
LIMITED VOTING RIGHTS FOR MANDATORILY CONVERTIBLE PREFERRED STOCK
The Mandatorily Convertible Preferred Stock does not carry any right to vote
at the stockholders' meetings of the Company, except with respect to adverse
charter and by-law amendments or the authorization or creation of classes of
capital stock ranking senior as to liquidation preference to the Mandatorily
Convertible Preferred Stock, as well as in certain circumstances involving
protracted dividend arrearages. See "Description of Mandatorily Convertible
Preferred Stock--Voting Rights." As a result,
23
<PAGE>
unless holders of Mandatorily Convertible Preferred Stock voluntarily convert
their shares into Common Stock prior to the Mandatory Conversion Date, such
holders will not be entitled to any rights with respect to the Common Stock
(including, without limitation, voting rights and the right to receive any
dividends or other distributions on the Common Stock) until such time, and will
generally have no influence on virtually all matters submitted for general
stockholder approval.
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES FOR MANDATORILY CONVERTIBLE
PREFERRED STOCK
No statutory, judicial or administrative authority directly addresses the
characterization of the Mandatorily Convertible Preferred Stock or instruments
similar to the Mandatorily Convertible Preferred Stock for U.S. federal income
tax purposes. As a result, significant aspects of the U.S. federal income tax
consequences of an investment in the Mandatorily Convertible Preferred Stock are
not certain. No ruling is being requested from the Internal Revenue Service (the
"Service") with respect to the Mandatorily Convertible Preferred Stock and no
assurance can be given that the Service will agree with the conclusion expressed
under "Description of Public Depositary Shares--Federal Income Tax
Consequences."
ABSENCE OF A PREVIOUS MARKET FOR THE DEPOSITARY SHARES
The Public Depositary Shares are a new issue of securities with no
established trading market. Application has been made to list the Public
Depositary Shares on the NYSE, but no assurance can be given as to the
development or liquidity of any trading market in the Public Depositary Shares.
If an active market does not develop, the market price and liquidity of the
Public Depositary Shares will be adversely affected.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company anticipates that it will be able to test its entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material. However, if such modifications are not completed in a timely
manner, the Year 2000 problem may have a material adverse impact on the
operations of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Impact of Year 2000 Issue."
24
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after
deducting estimated underwriting discounts and commissions and estimated
expenses payable by the Company, will be approximately $ million (or
approximately $ million if the Underwriters' over-allotment options are
exercised in full). The net proceeds from the Concurrent Offerings (after
deducting estimated underwriting discounts and commissions and offering
expenses) will be approximately $ million. The Company intends to use
the net proceeds from the Offering and the Concurrent Offerings to fund the $765
million cash portion of the purchase price payable to the Sellers in the Six
Flags Acquisition; to provide funds for the repayment in full of the SFEC Zero
Coupon Senior Notes; to acquire and make improvements at additional theme parks;
to fund improvements and expansion of the Company's parks, including the Walibi
Parks and the Six Flags Parks; and for general corporate purposes, including
working capital requirements. Although the Company has had discussions with
respect to several additional acquisition opportunities, no agreement or
understanding with respect to any future acquisition (other than the Six Flags
Acquisition) has been reached. There can be no assurance that any such
additional acquisitions will be made. See "Risk Factors--Uncertainty of Future
Acquisitions; Potential Effects of Acquisitions" and "Business--Acquisition
Strategy."
Pending their ultimate use, the portion of net proceeds from the Offerings
not used in connection with the Six Flags Acquisition may be invested in
short-term, investment grade, interest bearing securities, certificates of
deposit or direct or guaranteed obligations of the United States.
25
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1997, (i) the actual
capitalization of the Company; and (ii) the pro forma capitalization of the
Company after giving effect to the acquisitions of Kentucky Kingdom, Walibi
(assuming an all cash Walibi Tender Offer) and Six Flags, and after giving
effect to the Offering (assuming that the Underwriters' over-allotment options
are not exercised) and the Concurrent Offerings and other related financings.
This table should be read in conjunction with the consolidated financial
statements of the Company and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
<S> <C> <C>
ACTUAL PRO FORMA
---------- -----------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................ $ 169,151 $ (1)(2)
---------- -----------
---------- -----------
Short-term debt(3)................................................................... $ 990 $
---------- -----------
---------- -----------
Long-term debt (excluding current maturities):
Premier Credit Facility.......................................................... $ --
Six Flags Credit Facility........................................................ --
1995 Premier Notes............................................................... 90,000 90,000
1997 Premier Notes............................................................... 125,000 125,000
Company Senior Discount Notes.................................................... -- 250,000
Company Senior Notes............................................................. -- 280,000(2)
New SFEC Notes................................................................... -- 170,000
SFEC Zero Coupon Senior Notes.................................................... -- (1)
SFTP Senior Subordinated Notes................................................... --
Other............................................................................ 1,263
---------- -----------
Total long-term debt......................................................... 216,263
---------- -----------
Seller Preferred Stock (none outstanding (actual) and outstanding
(pro forma))....................................................................... --
---------- -----------
Stockholders' equity: Common Stock (90,000,000 authorized; outstanding (actual)
and outstanding (pro forma))(4) and Mandatorily Convertible Preferred Stock
(none outstanding (actual)
and outstanding
(pro forma))....................................................................... 326,802
---------- -----------
Total capitalization......................................................... $ 543,065 $
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) The pro forma amount for the Six Flags Zero Coupon Senior Notes does not
give effect to the repayment thereof from the net proceeds of the New SFEC
Notes Offering. Similarly, pro forma cash and cash equivalents includes the
amount of such net proceeds.
(2) Includes escrow to fund the first six semi-annual interest payments in
connection with the Company Senior Notes.
(3) Represents current portion of long-term debt. At September 30, 1997 and
, 1998, the Company did not have any amounts outstanding under its
short-term revolving credit facility.
(4) Excludes (i) approximately 220,000 shares issuable in the Private
Acquisition (based on an assumed purchase price of BEF 1.55 billion in the
Private Acquisition) and any shares issued in the Walibi Tender Offer; (ii)
an aggregate of 45,038 shares of Common Stock issuable upon exercise of
warrants; (iii) an aggregate of 1,270,000 shares of Common Stock reserved
for issuance under the Company's Stock Incentive Plans, of which options for
764,700 shares have been granted and options for 455,800 shares are
presently exercisable; (iv) an aggregate of 375,000 restricted shares issued
to the Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, which vest proportionately on January 1 of each of the
five years commencing 1999; (v) any shares issuable to the sellers in the
Kentucky Kingdom and Walibi acquisitions depending upon the future revenues
of these parks; (vi) shares issuable upon conversion of the Convertible
Preferred Stock or as dividends on the Mandatorily Convertible Preferred
Stock; and (vii) shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment options.
26
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following selected historical financial and operating data, except for
attendance and revenue per visitor data, of the Company as of and for each of
the years in the three-year period ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997 are derived from the financial statements
(audited in the case of all annual periods) of the Company appearing elsewhere
in this Prospectus. The selected historical financial data of the Company for
fiscal years 1992 and 1993 have been derived from audited financial statements
which are not included herein. The historical financial data for the year ended
December 31, 1995 for the Company include the results of the Funtime parks from
August 15, 1995, the date of the Funtime acquisition. The historical financial
data for the year ended December 31, 1996 include the operations of Elitch
Gardens from October 31, 1996, the Waterworld Parks from November 19, 1996 and
The Great Escape from December 4, 1996 (the dates of their respective
acquisition). The historical financial data for all interim periods have been
derived from unaudited financial statements of the Company included elsewhere
herein which, in the opinion of management, include all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation.
The following selected pro forma financial and operating data of the Company
for the year ended December 31, 1996 and as of and for the nine months ended
September 30, 1997 are derived from the Unaudited Pro Forma Combined Financial
Statements incorporated by reference in this Prospectus. The pro forma financial
and operating data are presented for informational purposes only, have been
prepared based on estimates and assumptions deemed by the Company to be
appropriate and do not purport to be indicative of the financial position or
results of operations which would actually have been attained if the relevant
acquisitions had occurred on the assumed dates or which may be achieved in the
future.
The Company's business is highly seasonal. Results for the nine-month
periods ended September 30, 1997 are not necessarily indicative of results to be
expected for the year ended December 31, 1997. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1997.
27
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
1992(1) 1993 1994 1995(2) 1996(3) PRO FORMA(4)
--------- --------- --------- --------- ---------- -------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions.......... $ 10,186 $ 12,874 $ 13,936 $ 21,863 $ 41,162
Theme park food, merchandise,
and other.................... 7,206 8,986 10,963 19,633 52,285
--------- --------- --------- --------- ---------- -------------
Total........................ 17,392 21,860 24,899 41,496 93,447
--------- --------- --------- --------- ---------- -------------
Operating costs and expenses:
Operating expenses............. 9,293 10,401 12,358 19,775 42,425
Selling, general and
administrative............... 4,434 4,768 5,448 9,272 16,927
Cost of products sold.......... 1,736 2,135 2,553 4,635 11,101
Depreciation and
amortization................. 1,442 1,537 1,997 3,866 8,533
--------- --------- --------- --------- ---------- -------------
Total........................ 16,905 18,841 22,356 37,548 78,986
--------- --------- --------- --------- ---------- -------------
Income from operations........... 487 3,019 2,543 3,948 14,461
Other income (expense):
Interest expense, net.......... (1,413) (1,438) (2,299) (5,578) (11,121)
Minority interest in
earnings..................... (270) -- -- -- --
Other income (expense)......... (113) (136) (74) (177) (78)
--------- --------- --------- --------- ---------- -------------
Total........................ (1,796) (1,574) (2,373) (5,755) (11,199)
--------- --------- --------- --------- ---------- -------------
Income (loss) from continuing
operations before income
taxes.......................... (1,309) 1,445 170 (1,807) 3,262
Income tax expense (benefit)..... 426 91 68 (762) 1,497
--------- --------- --------- --------- ---------- -------------
--------- --------- --------- --------- ---------- -------------
Income (loss) from continuing
operations..................... $ (1,735) $ 1,354 $ 102 $ (1,045 (5) $ 1,765
Income (loss) from continuing
operations per common share
(primary and fully diluted).... $ (2.10) $ .51 $ .04 $ (.40 (5) $ .13
--------- --------- --------- --------- ---------- -------------
--------- --------- --------- --------- ---------- -------------
OTHER DATA:
EBITDA(6)........................ $ 1,938 $ 4,562 $ 4,549 $ 7,706 $ 22,994
Net cash provided by operating
activities(7).................. $ 1,980 $ 2,699 $ 1,060 $ 10,646 $ 11,331
Capital expenditures............. $ 3,956 $ 7,674 $ 10,108 $ 10,732 $ 39,423
Total attendance................. 1,116 1,322 1,408 2,302(8) 4,518(8) (9)
Revenue per visitor(10).......... $ 15.58 $ 16.54 $ 17.68 $ 18.03 $ 20.66
Ratio of earnings to fixed
charges(11).................... (11) 2.1x 1.1x (11) 1.3x
Ratio of earnings to combined
fixed charges and preferred
stock dividends(11)............ (11) 2.1x 1.1x (11) 1.2x
EBITDA/total interest expense.... 1.3x 3.1x 1.9x 1.2x 1.8x
EBITDA/cash interest expense..... 1.4x 3.2x 2.0x 1.4x 2.1x
Total debt/EBITDA................
Net debt/EBITDA..................
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
HISTORICAL
HISTORICAL COMBINED HISTORICAL PRO FORMA
1996 1996(12) 1997 1997(4)
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER
VISITOR AMOUNTS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions............................ $ 38,970 $ 73,032 $ 91,080
Theme park food, merchandise, and other.......... 50,822 81,275 95,666
----------- ---------- ---------- -----------
Total........................................ 89,792 154,307 186,746
Operating costs and expenses:
Operating expenses............................... 32,897 56,101 69,444
Selling, general and administrative.............. 15,363 32,398 29,688
Cost of products sold............................ 10,685 20,133 22,072
Depreciation and amortization.................... 5,599 18,627 13,974
----------- ---------- ---------- -----------
Total........................................ 64,544 127,259 135,178
----------- ---------- ---------- -----------
Income from operations............................... 25,248 27,048 51,568
Other income (expense):
Interest expense, net................................ (7,657) (12,281) (12,869)
Other income (expense)............................... (59) (343) (44)
----------- ---------- ---------- -----------
Total........................................ (7,716) (12,624) (12,913)
----------- ---------- ---------- -----------
Income before income taxes(4)........................ 17,532 14,624 38,655
Income tax expense................................... 7,020 8,151 15,462
----------- ---------- ---------- -----------
Net income(5)........................................ $ 10,512 $ 6,273 $ 23,193
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
Net income per common share(5).......................
Primary.......................................... $ 1.24 (12) $ 1.32
Fully-diluted.................................... $ 1.11 (12) $ 1.29
OTHER DATA:
EBITDA(6)............................................ $ 30,848 $ 45,392 $ 65,542
Net cash provided by operating activities(7)......... $ 10,222 $ 21,814 $ 43,921
Capital expenditures................................. $ 29,290 $ 33,273 $ 108,166
Total attendance..................................... 4,302 (8) 7,049 8,276(8) (9)
Revenue per visitor(10).............................. $ 20.87 $ 21.66 $ 22.33
Ratio of earnings to fixed charges................... 3.2x (12) 3.9x
Ratio of earnings to combined fixed charges and
preferred stock dividends(11).................... 2.9x (12) 3.9x
EBITDA/total interest expense........................ 3.4x (12) 3.4x
EBITDA/cash interest expense......................... 4.0x (12) 5.1x
Total debt/EBITDA....................................
Net debt/EBITDA......................................
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1997
------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 ACTUAL(13) PRO FORMA(14)
--------- --------- --------- ---------- ---------- ----------- -----------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
THE COMPANY
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 5,919 $ 3,026 $ 1,366 $ 28,787 $ 4,043 $ 169,151
Total assets......................... $ 30,615 $ 36,708 $ 45,539 $ 173,318 $ 304,803 $ 612,267
Total long-term debt and capitalized
lease obligations (excluding
current maturities).............. $ 7,619 $ 18,649 $ 22,216 $ 93,213 $ 149,342 $ 216,263
Total debt........................... $ 15,627 $ 20,821 $ 24,108 $ 94,278 $ 150,834 $ 217,253
Seller Preferred Stock............... -- -- -- -- -- --
Stockholders' equity................. $ 11,838 $ 13,192 $ 18,134 $ 45,911 $ 113,182 $ 326,802
</TABLE>
- ------------------------
(1) During 1992, the Company purchased Adventure World, as well as the remaining
minority interest in Frontier City. During 1992, the Company also
discontinued substantially all of its non-theme park operations through a
disposition transaction which significantly reduced the Company's assets and
indebtedness, as well as resulted in an extraordinary gain of $18.4 million,
which gain is not reflected in income (loss) from continuing operations.
During 1992, the Company also adopted Statement 109, resulting in a decrease
in net income of $2.3 million which decrease is not reflected in income
(loss) from continuing operations.
(2) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Funtime acquisition from the date of acquisition,
August 15, 1995.
(3) The historical Statement of Operations Data for 1996 reflect the results of
Elitch Gardens from October 31, 1996, the Waterworld Parks from November 19,
1996 and The Great Escape from December 4, 1996 (the dates of their
respective acquisition).
(4) The pro forma financial and operating data for the year ended December 31,
1996 give effect to the Acquisitions and the related financings as if they
had occurred on January 1, 1996 (in the case of Elitch Gardens, the
Waterworld Parks, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags), on November 1, 1995 (in the case of The Great Escape), on October 1,
1995 (in the case of Riverside Park) and October 30, 1995 (in the case of
Kentucky Kingdom). The pro forma financial and operating data for the nine
months ended September 30, 1997 give effect to the acquisitions of Riverside
Park, Kentucky Kingdom, Walibi (assuming an all cash Walibi Tender Offer)
and Six Flags as if they had occurred on January 1, 1997. The pro forma
income per share for 1996 also gives effect to the June 1996 public
offering, the conversion of the Company's outstanding preferred stock at
that time, the January 1997 public offering, the Offering and the Preferred
Stock Offering as if they had occurred on January 1 of such year. The pro
forma income per share for the 1997 period also gives effect to the January
1997 public offering, the Offering and the Preferred Stock Offering as if
they had occurred on January 1, 1997.
(5) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the Funtime
acquisition. This extraordinary loss is not included in income (loss) from
continuing operations and income (loss) from continuing operations per
common share for 1995.
(6) EBITDA is defined as earnings from continuing operations before interest
expense, net, income tax expense (benefit), depreciation and amortization,
minority interest and equity in loss of real estate partnership. The Company
has included information concerning EBITDA because it is used by certain
investors as a measure of the Company's ability to service and/or incur
debt. EBITDA is not required by GAAP and should not be considered in
isolation or as an alternative to net income, net cash provided by
operating, investing and financing activities or other financial data
prepared in accordance with GAAP or as an indicator of the Company's
operating performance. This information should be read in conjunction with
the Statements of Cash Flows contained in the financial statements included
elsewhere herein. Equity in loss of real estate partnership was $122,000,
$142,000, $83,000, $69,000, $78,000, $60,000 and $44,000 during each of the
five years ended December 31, 1996 and the nine months ended September 30,
1996 and 1997, respectively.
(7) During each of the five years ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997, the Company's net cash used in investing
activities was $5,649,000, $7,698,000, $10,177,000, $74,139,000,
$155,149,000, $29,328,000 and $129,542,000, respectively. During those
periods, net cash provided by financing
30
<PAGE>
activities was $8,736,000, $2,106,000, $7,457,000, $90,914,000,
$119,074,000, $64,085,000 and $250,729,000, respectively.
(8) Represents in the case of 1995 attendance at the three parks owned by the
Company prior to the Funtime acquisition for the entire 1995 season and
attendance at the Funtime parks from and after August 15, 1995. In the case
of 1996, historical attendance does not include attendance at any of the
parks acquired in the 1996 Acquisitions since those acquisitions were
completed following the 1996 season. Historical attendance for the nine
months ended September 30, 1997 does not include attendance at Marine World.
(9) Pro forma attendance information includes attendance at Marine World for the
applicable period.
(10) Pro forma and historical revenue per visitor for all applicable periods
does not include revenue of Paradise Island (a fee-per-attraction
entertainment center that does not track attendance, acquired in November
1996) or Marine World.
(11) For the purpose of determining the ratio of earnings to fixed charges, and
the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) from continuing operations
before income taxes and fixed charges. Fixed charges consist of interest
expense net of interest income, amortization of deferred financing costs and
discount or premium relating to indebtedness and the portion (approximately
one-third) of rental expense that management believes represents the
interest component of rent expense. Preferred stock dividend requirements
have been increased to an amount representing the before tax earnings which
would have been required to cover such dividend requirements. For the years
ended December 31, 1992 and 1995, the Company's earnings were insufficient
to cover fixed charges by $917,000 and $1,738,000, respectively and were
insufficient to cover combined fixed charges and preferred stock dividends
by $917,000 and $2,620,000, respectively. On a pro forma basis, for the year
ended December 31, 1997, the Company's earnings were insufficient to cover
fixed charges and combined fixed charges and preferred stock dividends by
$ and $ , respectively.
(12) Represents results of operations of Premier and the results of operations
for the parks acquired in the 1996 Acquisitions on a combined basis. No pro
forma adjustments for additional depreciation, interest expense or income
taxes have been made in combining the Company and 1996 Acquisitions amounts.
Income per share, ratio of earnings to fixed charges and ratio of earnings
to combined fixed charges and preferred stock dividends are not presented on
this basis as amounts are not meaningful.
(13) Actual balance sheet data as of September 30, 1997 include the Company's
investment in Marine World as of that date.
(14) The pro forma balance sheet data give effect to the acquisitions of
Kentucky Kingdom, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags, the Offerings (assuming no exercise of the Underwriters'
over-allotment options) and the related financings as if they had occurred
on September 30, 1997.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived principally from the sale of tickets for
entrance to its parks (approximately 48.8%, 44.0%, 52.7% and 56.0% in the nine
months ended September 30, 1997 and in the years ended December 31, 1996, 1995
and 1994, respectively) and the sale of food, merchandise, games and attractions
inside its parks and other income (approximately 51.2%, 56.0%, 47.3% and 44.0%
in the nine months ended September 30, 1997 and in the years ended December 31,
1996, 1995 and 1994, respectively). The Company's principal costs of operations
include salaries and wages, fringe benefits, advertising, outside services,
maintenance, utilities and insurance. The Company's expenses are relatively
fixed. Costs for full-time employees, maintenance, utilities, advertising and
insurance do not vary significantly with attendance, thereby providing the
Company with a significant degree of operating leverage as attendance increases
and fixed costs per visitor decrease.
The Company believes that significant opportunities exist to acquire
additional theme parks. Although the Company has had discussions with respect to
several additional business acquisitions, no agreement or understanding has been
reached with respect to any specific future acquisition (other than the Six
Flags Acquisition). See "Business -- Acquisition Strategy." In addition, the
Company intends to continue its on-going expansion of its rides and attractions
and overall improvement of its existing parks (particularly the Premier Parks)
to maintain and enhance their appeal. Management believes this strategy has
contributed to increased attendance, lengths of stay, in-park spending and,
therefore, profitability. See "Business -- Operating Strategy."
The Company's business is highly seasonal. Results for the nine-month period
ended September 30, 1997 are not necessarily indicative of results to be
expected for the year ended December 31, 1997. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a net
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1997.
The following discussion does not include the results of Six Flags or the
parks acquired in the 1997 Acquisitions.
32
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The following table sets forth certain financial information with respect to
the Company and the 1996 Acquisitions for the nine months ended September 30,
1996 and with respect to the Company for the nine months ended September 30,
1997:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NINE MONTHS
HISTORICAL ENDED
HISTORICAL 1996 COMBINED PRO FORMA COMPANY SEPTEMBER 30,
PREMIER(1) ACQUISITIONS(2) COMPANY ADJUSTMENTS PRO FORMA 1997
----------- -------------- ----------- ----------- ----------- -------------
<CAPTION>
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions......... $ 38,970 $ 34,062 $ 73,032 $ -- $ 73,032 $ 91,080
Theme park food, merchandise
and other................... 50,822 30,453 81,275 300 81,575 95,666
----------- ------- ----------- ----------- ----------- -------------
Total revenue................... 89,792 64,515 154,307 300 154,607 186,746
Operating costs and expenses:
Operating expenses............ 32,897 23,204 56,101 (350) 54,376 69,444
(1,375)
Selling, general and
administrative.............. 15,363 17,035 32,398 (4,513) 27,885 29,688
Costs of products sold........ 10,685 9,448 20,133 -- 20,133 22,072
Depreciation and
amortization................ 5,599 13,028 18,627 (7,832) 10,795 13,974
----------- ------- ----------- ----------- ----------- -------------
Total costs and expenses........ 64,544 62,715 127,259 (14,070) 113,189 135,178
----------- ------- ----------- ----------- ----------- -------------
Income from operations.......... 25,248 1,800 27,048 14,370 41,418 51,568
Other income (expense):
Interest expense, net......... (7,657) (4,624) (12,281) 1,160 (11,121) (12,869)
Other income (expense)........ (59) (284) (343) 125 (218) (44)
----------- ------- ----------- ----------- ----------- -------------
Total other income (expense).... (7,716) (4,908) (12,624) 1,285 (11,339) (12,913)
----------- ------- ----------- ----------- ----------- -------------
Income (loss) before income
taxes......................... 17,532 (3,108) 14,424 15,655 30,079 38,655
Income tax expense (benefit).... 7,020 1,131 8,151 4,149 12,300 15,462
----------- ------- ----------- ----------- ----------- -------------
Net income (loss)............... $ 10,512 $ (4,239) $ 6,273 $ 11,506 $ 17,779 $ 23,193
----------- ------- ----------- ----------- ----------- -------------
----------- ------- ----------- ----------- ----------- -------------
</TABLE>
- ------------------------
(1) Includes the results of Elitch Gardens from October 31, 1996, the Waterworld
Parks from November 19, 1996 and The Great Escape from December 4, 1996 (the
dates of their respective acquisition) but does not include the results of
Riverside Park, as the Company acquired Riverside Park in February 1997.
(2) Represents the results of the parks acquired in the 1996 Acquisitions prior
to the date of their respective acquisition.
REVENUE. Revenue was $186.7 million in the nine months ended September 30,
1997 compared to $89.8 million actual revenue and $154.3 million actual combined
revenue (including the revenue of the parks acquired in the 1996 Acquisitions),
in the first nine months of 1996. The aggregate $32.4 million (21.0%) increase
in the 1997 period in revenue over actual combined results for the 1996 period
includes an $18.0 million (24.7%) increase in admissions revenue and a $14.4
million (17.7%) increase in food, merchandise and other revenue. This revenue
increase is primarily attributable to a 17.4% increase (1.2
33
<PAGE>
million) in combined attendance at the Company's eleven parks in the 1997
period, and a 3.1% increase in per capita spending over the prior year period,
as well as an increase in sponsorship revenue.
OPERATING EXPENSES. Operating expenses increased during the first nine
months of 1997 to $69.4 million from $32.9 million actual operating expenses and
$56.1 million actual combined operating expenses (including the expenses of the
parks acquired in the 1996 Acquisitions) in the first nine months of 1996. This
$13.3 million (23.8%) increase from actual combined operating expenses for the
1996 period consists of a $5.1 million increase (15.5%) at the six parks owned
by the Company during its 1996 season and an $8.2 million increase (35.4%) at
the parks acquired in the 1996 Acquisitions. These increases primarily reflect
increased staffing levels to accommodate increased attendance levels, increased
wage rates, increased repairs and maintenance, increased utility expenses for
new attractions and other miscellaneous increases.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $29.7 million for the nine months ended September 30, 1997, an
increase from $15.4 million actual for the nine months ended September 30, 1996,
but a decrease from $32.4 million actual combined (including the parks acquired
in the 1996 Acquisitions) for the nine months ended September 30, 1996. Selling,
general and administrative expenses at the six parks owned by the Company for
the 1996 period (including corporate) increased by $1.6 million in the 1997
period, primarily reflecting increased personnel and advertising costs, offset
by a decrease in insurance expense. Selling, general and administrative expenses
at the acquired parks decreased by $4.3 million, notwithstanding increases in
marketing expenses, as a result of significant savings in personnel, insurance,
professional services and other areas.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $10.7 million
actual and $20.1 million actual combined (including the parks acquired in the
1996 Acquisitions) for the first nine months of 1996 to $22.1 million for the
first nine months of 1997. These increases primarily relate to increased sales
of merchandise, food and related items.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
increased from $5.6 million actual in 1996 to $14.0 million actual in 1997,
primarily as a result of the recognition of depreciation and amortization
expense from the 1996 Acquisitions and the on-going capital program at the
Company's theme parks. Interest expense, net increased from $7.7 million to
$12.9 million as a result of interest on the 1997 Premier Notes and amortization
of costs incurred in connection with the 1997 Premier Notes and the Company's
senior credit facility.
34
<PAGE>
YEARS ENDED DECEMBER 31, 1996 AND 1995
The table below sets forth certain financial information with respect to the
Company and the Funtime parks for the year ended December 31, 1995 and with
respect to the Company and the 1996 Acquisitions (other than Riverside Park) for
the year ended December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL FUNTIME(2)
----------------------------
<CAPTION>
SIX MONTHS HISTORICAL
ENDED FORTY-THREE PREMIER
HISTORICAL JULY 2, DAYS ENDED HISTORICAL (EXCLUDING 1996 1996 HISTORICAL
PREMIER(1) 1995 AUGUST 14, 1995 COMBINED ACQUISITIONS)(3) ACQUISITIONS(4) PREMIER
----------- ----------- --------------- ----------- --------------- -------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Theme park
admissions......... $ 21,863 $ 6,195 $ 9,680 $ 37,738 $ 41,157 $ 5 $ 41,162
Theme park food,
merchandise and
other.............. 19,633 8,958 13,450 42,041 52,148 137 52,285
----------- ----------- ------- ----------- ------- ------- -----------
Total revenue.......... 41,496 15,153 23,130 79,779 93,305 142 93,447
----------- ----------- ------- ----------- ------- ------- -----------
Expenses:
Operating expenses... 19,775 10,537 6,039 36,351 40,568 1,857 42,425
Selling, general and
administrative..... 9,272 3,459 2,533 15,264 16,353 574 16,927
Costs of products
sold............... 4,635 2,083 2,953 9,671 11,071 30 11,101
Depreciation and
amortization....... 3,866 3,316 829 8,011 7,785 748 8,533
----------- ----------- ------- ----------- ------- ------- -----------
Total costs and
expenses............. 37,548 19,395 12,354 69,297 75,777 3,209 78,986
----------- ----------- ------- ----------- ------- ------- -----------
Income (loss) from
operations........... 3,948 (4,242) 10,776 10,482 17,528 (3,067) 14,461
Interest expense,
net.................. (5,578) (2,741) (321) (8,640) (11,121) -- (11,121)
Other income
(expense)............ (177) 4 (4) (177) (78) -- (78)
----------- ----------- ------- ----------- ------- ------- -----------
Total other income
(expense)............ (5,755) (2,737) (325) (8,817) (11,199) -- (11,199)
----------- ----------- ------- ----------- ------- ------- -----------
Income before income
taxes and
extraordinary loss... (1,807) (6,979) 10,451 1,665 6,329 (3,067) 3,262
Income tax expense
(benefit)............ (762) (2,722) 4,076 592 2,905 (1,408) 1,497
----------- ----------- ------- ----------- ------- ------- -----------
Income (loss) before
extraordinary loss... $ (1,045) $ (4,257) $ 6,375 $ 1,073 $ 3,424 $ (1,659) $ 1,765
----------- ----------- ------- ----------- ------- ------- -----------
----------- ----------- ------- ----------- ------- ------- -----------
</TABLE>
- ------------------------
(1) Includes results of the Funtime acquisition from and after August 15, 1995,
the acquisition date.
(2) Represents results of the parks acquired in the Funtime acquisition from
January 1, 1995 to August 14, 1995.
(3) Excludes operating results of parks acquired in the 1996 Acquisitions, but
includes interest expense incurred by virtue of associated financings as of
the date incurred.
(4) Represents results of the parks acquired in the 1996 Acquisitions (other
than Riverside Park) from their respective acquisition dates through
December 31, 1996.
35
<PAGE>
REVENUE. Revenue aggregated $93.4 million in 1996 ($93.3 million without
the 1996 Acquisitions), compared to $41.5 million actual in 1995, and to
combined revenue of $79.8 million in 1995. This 16.9% increase in revenue
(excluding the 1996 Acquisitions) over combined 1995 revenue at the same six
parks is attributable to increased attendance (10.5%) and per capita revenue
(5.9%) at the six parks and increased sponsorship revenue, as well as increased
season pass sales at several parks, and increased campground revenue at Darien
Lake and income from the new contractual arrangements for 1996 at the Darien
Lake Performance Arts Center.
OPERATING EXPENSES. Operating expenses increased during 1996 to $42.4
million ($40.6 million excluding the 1996 Acquisitions) from $19.8 million
reported in 1995 and from $36.4 million combined operating expenses for 1995.
This 11.5% increase in operating expenses (excluding the 1996 Acquisitions) over
combined 1995 operating expenses is mainly due to additional staffing related to
increased attendance levels and increased pay rates, offset to some extent by a
decrease in equipment rental expense in 1996 due to the purchase of equipment
that had been leased during 1995. As a percentage of revenue, operating expenses
(excluding the 1996 Acquisitions) constituted 43.5% for 1996 and 45.6% on a
combined basis for 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $16.4 million in 1996 (excluding the 1996 Acquisitions), compared
to $9.3 million reported, and $15.3 million combined, selling, general and
administrative expenses for 1995. As a percentage of revenue, these expenses
constituted 17.6% for 1996 and 19.1% for 1995 combined. This increase over 1995
combined expenses relates primarily to increased advertising and marketing
expenses to promote the Funtime parks and the new rides and attractions at all
of the parks, increased sales taxes arising from increased volume generally and
increased property taxes and professional services.
COSTS OF PRODUCTS SOLD. Costs of products sold were $11.1 million for 1996
compared to $4.6 million reported and $9.7 million combined for 1995. Cost of
products sold (as a percentage of in-park revenue) constituted approximately
21.2% for 1996 and 23.0% for 1995 combined. This $1.4 million or 14.5% increase
over combined 1995 results is directly related to the 24.0% increase in 1996 in
food, merchandise and other revenue.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
was $8.5 million for 1996 as compared to $3.9 million in 1995. The increase was
a result of the full year's effect of the Funtime acquisition, the $116.2
million spent during the fourth quarter of 1996 for the 1996 Acquisitions and
the on-going capital program at the Company's parks. Interest expense, net,
increased $5.5 million in 1996, as compared to 1995, as a result of interest on
the 1995 Premier Notes for twelve months in 1996 as compared to four and
one-half months in 1995 and the Company's borrowings under its then-existing
senior credit facility made in connection with the 1996 Acquisitions.
INCOME TAXES. The Company incurred income tax expense of $1.5 million
during 1996, compared to a tax benefit of $762,000 during 1995. The effective
tax rate for 1996 was approximately 45.9% as compared to 42.2% in 1995. The
increase is the result of twelve months of goodwill amortization in 1996 versus
four and one-half months in 1995. The goodwill recognized for financial
reporting of the Funtime acquisition and the 1996 Acquisitions is not deductible
for Federal income tax purposes. See Note 6 to Notes to Consolidated Financial
Statements.
On its December 31, 1996 Federal income tax return, the Company reported
carryovers of approximately $19.3 million of net operating losses ("NOLs"), $4.4
million of alternative minimum tax ("AMT") NOLs and $1.9 million of AMT credits
for Federal income tax purposes. The regular tax and AMT NOLs and AMT credits
are subject to review and potential disallowance by the Internal Revenue Service
upon audit of the Federal income tax returns of the Company and its
subsidiaries. In addition, the use of such NOLs and AMT credits is subject to
limitations on the amount of taxable income, or in the case of the AMT credits,
regular tax, that can be offset with such NOLs and AMT credits. Some of such
NOLs also
36
<PAGE>
are subject to a limitation as to which of the subsidiaries' income such NOLs
are permitted to offset. Accordingly, no assurance can be given as to the timing
or amount of the availability of such NOLs and AMT credits to the Company and
its subsidiaries.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE. Revenue aggregated $41.5 million in 1995, a 66.7% increase over
1994 revenue of $24.9 million. A large portion of the increase ($13.5 million)
resulted from the Funtime acquisition on August 15, 1995. The Company's 1995
results include the results of the Funtime parks from and after that date. The
1995 results of the Company without consideration of the Funtime acquisition
provided a revenue increase of 12.5% from $24.9 million in 1994 to $28.0 million
in 1995. This increase is primarily attributable to the increased attendance of
14.3% from 1.4 million in 1994 to 1.6 million in 1995 at the three theme parks
owned by the Company prior to the Funtime acquisition.
OPERATING EXPENSES. Operating expenses increased approximately $7.4
million, or 60.0%, in 1995 over 1994 levels. A large portion of the increase
($6.9 million) is a result of the Funtime acquisition. The 1995 results of the
Company without consideration of the Funtime acquisition provided an increase of
3.2% in operating expenses from $12.4 million in 1994 to $12.8 million in 1995.
As a percentage of revenue, operating expenses constituted approximately 47.7%
in 1995 and approximately 49.6% in 1994. Without consideration of the Funtime
acquisition, operating expenses constituted approximately 45.7% of revenue in
1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased from approximately $5.5 million in 1994 to approximately $9.3
million in 1995. These expenses (as a percentage of revenue) constituted
approximately 22.3% and 21.9% during 1995 and 1994, respectively. A large
portion of the increase ($2.6 million) is a result of the Funtime acquisition.
The Company's selling, general and administrative expenses without consideration
of the Funtime acquisition increased 21.8% from $5.5 million in 1994 to $6.7
million in 1995 primarily due to a 20.3% increase in marketing and advertising
expenses. Most of the increase was incurred at Adventure World as part of the
advertising campaign designed to promote public awareness of the new suspended,
looping roller coaster, and a lesser portion of this increase was incurred in
connection with the promotion of the new combined season pass program at
Frontier City and White Water Bay.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $2.6 million
in 1994 to $4.6 million in 1995. A large portion of the increase ($1.7 million)
is a result of the Funtime acquisition. Cost of products sold (as a percentage
of in-park revenue) constituted approximately 23.6% and 23.3%, during 1995 and
1994, respectively. The Company's costs of products sold without consideration
of the Funtime acquisition increased 11.5% from $2.6 million in 1994 to $2.9
million in 1995. This increase is a direct result of increased in-park sales at
the parks.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
aggregated approximately $3.9 million in 1995 and approximately $2.0 million in
1994. This 93.6% increase resulted primarily from the Funtime acquisition. The
Company's depreciation and amortization without consideration of the Funtime
acquisition increased 25.0% from $2.0 million in 1994 to $2.5 million in 1995,
reflecting the effects of the Company's additional capital improvements.
Interest expense increased from $2.3 million in 1994 to $5.6 million in 1995,
primarily as a result of the issuance of the 1995 Notes in August 1995.
INCOME TAXES. The Company had an income tax benefit in 1995 of $852,000,
compared to an income tax expense of $68,000 in 1994. The Company's income tax
benefit in 1995 was allocated to loss before income taxes ($762,000) and an
extraordinary loss ($90,000) on extinguishment of debt. The effective income tax
rate for 1995 was 42.2% as compared to approximately 40% in 1994. The increase
was a result of the non-deductibility of the amortization of the goodwill that
resulted from the Funtime acquisition. See Note 6 to Notes to Consolidated
Financial Statements.
37
<PAGE>
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
The operations of the Company are highly seasonal, with the majority of the
operating season occurring between Memorial Day and Labor Day. Most of the
Company's revenue is collected in the second and third quarters of each year
while most expenditures for capital improvements and major maintenance are
incurred when the parks are closed. See "Risk Factors -- Effects of Inclement
Weather; Seasonal Fluctuations of Operating Results." The Company employs a
substantial number of seasonal employees who are compensated on an hourly basis.
The Company is not subject to Federal or certain applicable state minimum wage
rates in respect of its seasonal employees. However, the 1996 increase of $.90
an hour over two years in the Federal minimum wage rate, and any increase in
these state minimum wage rates, may result over time in increased compensation
expense for the Company as it relates to these employees as a result of
competitive factors.
HISTORICAL
During 1995, the Company generated approximately $10.6 million in net cash
from operating activities. Additionally, financing activities provided
approximately $90.9 million in net cash during that year, consisting of the net
proceeds of the $90.0 million 1995 Premier Notes offering and the $20.0 million
convertible preferred stock offering, both of which were consummated in
connection with the Funtime acquisition, offset in part by the Company's
repayment during 1995 of approximately $17.5 million of indebtedness. During
1995, the Company used $74.1 million in net cash in connection with investing
activities, $63.3 million of which was employed in connection with the Funtime
acquisition and $10.7 million represented additions to buildings, rides and
attractions at the Company's parks made in connection with its capital
improvement program. The Company acquired the Funtime parks for approximately
$60 million, excluding the post-closing adjustment of approximately $5.4 million
paid in December 1995, which represented a substantial portion of the operating
cash flow of the Funtime parks for the portion of the 1995 season after the date
of acquisition.
During 1996, the Company generated net cash of $11.3 million from operating
activities. Net cash used in investing activities in 1996 totaled $155.2
million, $116.2 million of which was employed in connection with the 1996
Acquisitions (other than Riverside Park) and $39.4 million represented amounts
spent for capital expenditures, offset slightly by proceeds received from
equipment sales. Net cash provided by financing activities for 1996 totaled
$119.1 million, reflecting the net proceeds from the June 1996 public offering
described below and borrowings under the Company's senior credit facility,
offset, in part, by scheduled repayments of capitalized lease obligations.
In June 1996, the Company completed a public offering of approximately 3.9
million shares of Common Stock at a price to the public of $18.00 per share,
resulting in aggregate net proceeds to the Company of approximately $65.3
million. In connection with the June 1996 public offering, all of the Company's
then outstanding shares of preferred stock, together with all accrued dividends
thereon, were converted into approximately 2.6 million shares of Common Stock.
In January 1997, the Company completed two concurrent public offerings, issuing
an additional 6.9 million shares of Common Stock at a price to the public of
$29.00 per share, resulting in aggregate net proceeds to the Company of
approximately $189.8 million, and issuing $125 million principal amount of the
1997 Premier Notes, resulting in net proceeds of approximately $120.7 million.
During the first nine months of 1997, the Company generated $43.9 million in
net cash provided by operating activities. Net cash used in investing activities
aggregated approximately $129.6 million, $21.4 million of which was employed in
connection with the acquisition of Riverside Park and $108.2 million represented
amounts spent for capital expenditures. Net cash provided by financing
activities for the nine-month period aggregated $250.7 million reflecting the
net proceeds from the January 1997 public offerings of Common Stock and the 1997
Premier Notes described above, offset, in part, by the repayment at that time of
all amounts outstanding under the Company's senior credit facility.
38
<PAGE>
At September 30, 1997, substantially all of the Company's indebtedness was
represented by the Premier Notes, which require aggregate annual interest
payments of approximately $23.0 million. Except in the event of a change of
control of the Company and certain other circumstances, no principal payment on
the Premier Notes is due until the maturity dates thereof, August 15, 2003 in
the case of the 1995 Premier Notes and January 15, 2007, in the case of the 1997
Premier Notes.
PRO FORMA
In March 1998, the Company intends to enter into the Premier Credit
Facility, pursuant to which it will borrow $ million at that time, of which
up to $ million will be expended in connection with the Walibi
acquisition. See "Description of Indebtedness."
Upon consummation of the Six Flags Transactions, the Company will issue (i)
up to shares of Common Stock, (ii) up to Public Depositary Shares
for up to $200.0 million of Mandatorily Convertible Preferred Stock, (iii) up to
Seller Depositary Shares for up to $200.0 million of Seller Preferred Stock,
(iv) $ million principal amount at maturity of Company Senior Discount
Notes (with estimated gross proceeds of $250.0 million), (v) $280.0 million
aggregate principal amount of Company Senior Notes, and (vi) $170.0 million of
aggregate principal amount of New SFEC Notes. The Mandatorily Convertible
Preferred Stock will accrue cumulative dividends (payable, at the Company's
option, in cash or shares of Common Stock) at % per annum, and will be
mandatorily exchangeable into Common Stock in 2001. The Seller Preferred Stock
will accrue cumulative cash dividends at % per annum and will be mandatorily
redeemable in 2010. The Company Senior Discount Notes will not require any
interest payments prior to , or, except in the event of a change of
control of the Company and certain other circumstances, any principal payments
prior to their maturity in 2008. The Senior Company Notes will require annual
interest payments of $ and, except in the event of a change of control
of the Company or certain other circumstances, will not require any principal
payments prior to their maturity in 2008. The New SFEC Notes will require annual
interest payments of $ and, except in the event of a change of control
of the Company or certain other circumstances, will not require any principal
payments prior to their maturity. The net proceeds of the New SFEC Notes
Offering, together with other funds, will be deposited in escrow to repay in
full at or prior to maturity the SFEC Zero Coupon Senior Notes. In addition, in
connection with the Six Flags Transactions, the Company will (i) assume $285.0
million principal amount at maturity of the SFTP Senior Subordinated Notes,
which had an accreted value of $269.9 million at December 31, 1997, (ii)
refinance all outstanding SFTP bank indebtedness with the proceeds of $
million of borrowings under the Six Flags Credit Facility, and (iii) refinance
all outstanding bank debt of SFEC with a portion of the proceeds of the
Offerings. The SFTP Senior Subordinated Notes require interest payments of
approximately $34.9 million per annum, payable semi-annually commencing December
15, 1998, and, except in certain circumstances, no principal payments are due
thereon until their maturity date, June 15, 2005. Term loan borrowings under the
Six Flags Credit Facility will mature on November 30, 2004 (with principal
payments of $1.0 million in each of 1998--2001, $25.0 million in 2002, $40.0
million in 2003 and $303.0 million at maturity), Revolving credit borrowings
under this facility ($100.0 million) mature on the fifth anniversary of the Six
Flags Acquisition. Borrowings under the Six Flags Credit Facility will be
guaranteed by SFTP's subsidiaries and will be secured by substantially all of
the assets of SFTP and its subsidiaries. The Premier Credit Facility includes a
five-year $75.0 million revolving credit facility, a five-year $100.0 million
term loan facility (with principal payments of $10.0 million, $25.0 million,
$30.0 million and $35.0 million in the second, third, fourth and fifth years)
and an eight-year $125.0 million term loan facility (with principal payments of
$1.0 million in each of the first six years, $25.0 million and $94.0 million in
the seventh and eight years). Borrowings under the Premier Credit Facility will
be guaranteed by Premier Operations' domestic subsidiaries and will be secured
by substantially all of the assets of Premier Operations and such subsidiaries.
See "Description of Indebtedness."
39
<PAGE>
On a pro forma basis as of December 31, 1997, the Company would have had
outstanding $ million of indebtedness. Based on interest rates in effect
on that date, annual interest payments for 1998 on this indebtedness would have
aggregated $ . In addition, annual dividend payments on the Convertible
Preferred Stock will aggregate $ .
By reason of the Six Flags Acquisition, the Company will be required to
offer to purchase the SFTP Senior Subordinated Notes at a price equal to 101% of
their accreted amount (approximately $287.9 million at June 15, 1998). On
February , 1998, the last reported sales price of these notes was
equivalent to % of their accreted amount. The Company does not expect to be
required to purchase any material amount of these Notes by reason of this offer.
Although the Company has entered into discussions with lenders to provide a
standby arrangement to finance the purchase of such Notes, there can be no
assurance that such discussions will be successful or that the Company will be
able to obtain any other financing in the event that it should become necessary.
The Company will be required to (i) make minimum annual distributions of
approximately $46.2 million (subject to cost of living adjustments) to its
partners in the Co-Venture Parks and (ii) make minimum capital expenditures at
each of the Co-Venture Parks during rolling five-year periods, generally based
on 6% of such park's revenue. Cash flow from operations at the Co-Venture Parks
will be used to satisfy these requirements, before any funds are required from
the Company. The Company has also agreed to purchase a maximum number of 5% per
year (accumulating to the extent not purchased in any given year) of limited
partnership units of these partners (to the extent tendered by the unit
holders). The agreed price for these purchases is based on a valuation for each
respective Co-Venture Park equal to the greater of (i) a value derived by
multiplying its weighted-average four year EBITDA by a specified multiple (8.0
in the case of Georgia park and 8.5 in the case of the Texas park) or (ii)
$250.0 million in the case of the Georgia park and $374.8 million in the case of
the Texas park. The Company's obligations with respect to Six Flags Over Georgia
and Six Flags Over Texas will continue until 2026 and 2027, respectively. As the
Company purchases units, it will be entitled to the minimum distribution and
other distributions attributable to such units unless it is then in default
under its indemnity obligations to Time Warner. The Company estimates that its
maximum unit purchase obligation for 1998, when purchases are required only for
the Georgia park, will aggregate approximately $13 million (approximately $32
million for 1999 when purchases for both partnerships are required) and its
minimum capital expenditures at these parks for 1998 will total $18 million.
The Company's liquidity could be adversely affected by unfavorable weather,
accidents or the occurrence of an event or condition, including negative
publicity or significant local competitive events (such as the 1996 Summer
Olympics in the case of Six Flags Over Georgia) that significantly reduces paid
attendance and, therefore, revenue at any of its theme parks. On June 2, 1997, a
slide collapsed at the Company's Waterworld park in Concord, California,
resulting in one fatality and the park's closure for twelve days. The park
re-opened with the approval of the City of Concord on June 14, 1997. Although
the collapse and the resulting closure had a material adverse impact on that
park's operating performance for 1997, as well as a lesser impact on the
Company's Sacramento water park (which is also named "Waterworld"), located
approximately seventy miles from the Concord park, the Company's other parks
were not adversely affected. The Company has recovered all of the Concord park's
operating shortfall under its business interruption insurance. In addition, the
Company believes that its liability insurance coverage should be more than
adequate to provide for any personal injury liability which may ultimately be
found to exist in connection with the collapse.
The Company expects that cash from operations and available cash, funds
available under the Credit Facilities and the net proceeds of the Offerings (to
the extent not used in connection with the Six Flags Acquisition) will be
adequate to meet the Company's future liquidity needs, including anticipated
requirements for working capital, capital expenditures, scheduled debt and
preferred stock payments and its obligations under arrangements relating to the
Co-Venture Parks, for at least the next several years.
40
<PAGE>
NEWLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, and restatement of prior-period earnings per share data is required. The
new standard will not apply to Premier's financial statements until the fourth
quarter of 1997. SFAS No. 128 revises the current calculation methods and
presentation of primary and fully diluted earnings per share. Premier has
reviewed the requirements of SFAS No. 128 and has concluded that the application
of the new standard will not have a material effect on the calculation of
Premier's historical earnings (loss) per share data.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of "comprehensive
income" and its components in a set of financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
currently does not have any components of comprehensive income that are not
included in net income. After the acquisition of Walibi, the only item not
currently included in the Company's consolidated statement of operations would
be the currency translation adjustment that will be reported as part of
stockholders' equity after the acquisition. The Company will adopt SFAS No. 130
in the year 1998.
Also in June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 is effective for periods beginning after December 15, 1997.
SFAS No. 131 requires that a public entity report financial and descriptive
information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company will adopt SFAS No.
131 in 1998. However, such adoption is not expected to impact the Company's
financial disclosures because the Company's current operations are limited to
one reportable operating segment under SFAS No. 131's definitions. After the
acquisition of Walibi, the Company will be required to disclose certain
financial information related to its foreign operations.
In January 1997, the Commission issued Release No. 33-7386, which requires
enhanced descriptions of accounting policies for derivative financial
instruments and derivative commodity instruments in the footnotes to financial
statements. The release also requires certain quantitative and qualitative
disclosure outside financial statements about market risks inherent in market
risk sensitive instruments and other financial instruments. The requirements
regarding accounting policy descriptions were effective for any fiscal period
ending after June 15, 1997. However, because derivative financial and commodity
instruments have not materially affected the Company's consolidated financial
position, cash flows or results of operations, this part of the release does not
affect the Company's 1997 financial statement disclosures. The quantitative and
qualitative disclosures required by the release will be initially provided in
the Company's annual report on Form 10-K for the year ending December 31, 1998.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of past practices in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company anticipates that it will be able to test it entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material. See "Risk Factors -- Impact of Year 2000 Issue."
41
<PAGE>
BUSINESS
GENERAL
The Company is the largest regional theme park operator, and the second
largest theme park company, in the world, based on 1997 attendance of
approximately 37 million. It operates 31 regional parks, including 15 of the 50
largest theme parks in the U.S., based on 1997 attendance. The Company's theme
parks are located in 9 of the 10 largest metropolitan areas in the country. The
Company estimates that % of the U.S. population lives within a 100-mile
radius of the Company's theme parks. On a pro forma basis, the Company's total
revenue and EBITDA for the year ended December 31, 1997 was approximately $
million and $ million, respectively.
The following table sets forth certain information for the Company's parks:
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET 1997 ATTENDANCE ACRES(1)
- ---------------------------------- --------------- --------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PREMIER PARKS:
Adventure World................... Theme/Water Baltimore/Washington, D.C. 970 115
Bellewaerde....................... Theme Belgium 670 133
Darien Lake....................... Theme/Water Buffalo/Rochester 1,400 142
Elitch Gardens.................... Theme/Water Denver 1,500 60
Frontier City..................... Theme Oklahoma City 520 60
Geauga Lake....................... Theme/Water Cleveland 1,300 116
The Great Escape.................. Theme/Water Lake George/Albany, New York 680 100
Kentucky Kingdom.................. Theme/Water Louisville 1,100 58
Marine World...................... Theme/Wildlife San Francisco 1,100 105
Riverside Park.................... Theme New England/Boston 1,200 160
Walibi Aquitaine.................. Theme France 240 74
Walibi Flevo...................... Theme The Netherlands 450 250
Walibi Rhone-Alpes................ Theme/Water France 350 35
Walibi Schtroumpf................. Theme France 350 375
Walibi Wavre and Aqualibi......... Theme/Water Belgium 960 120
Waterworld USA/Concord............ Water San Francisco 180 24
Waterworld USA/Sacramento......... Water Sacramento 290 20
White Water Bay................... Water Oklahoma City 320 22
Wyandot Lake...................... Water Columbus, Ohio 380 18
SIX FLAGS PARKS:
Six Flags Astro-World............. Theme Houston 1,990 90
Six Flags Water World............. Water Houston 280 14
Six Flags Fiesta Texas............ Theme San Antonio 1,640 200
Six Flags Great Adventure......... Theme New York City/Philadelphia 3,690(2) 576
Six Flags Wild Safari Animal
Park.............................. Wildlife New York City/Philadelphia (2)
Six Flags Great America........... Theme Chicago/Milwaukee 3,040 86
Six Flags Magic Mountain.......... Theme Los Angeles 3,270 110
Six Flags Hurricane Harbor........ Water Los Angeles 350 11
Six Flags St. Louis............... Theme St. Louis 1,690 499
Six Flags Over Georgia............ Theme Atlanta 2,780 196
Six Flags Over Texas.............. Theme Dallas/Fort Worth 2,950 197
Six Flags Hurricane Harbor........ Water Dallas/Fort Worth 560 49
</TABLE>
- ------------------------
(1) Includes acreage currently dedicated to park usage. Additional acreage
suitable for development exists at many of the facilities.
(2) Attendance and acreage information for Six Flags Great Adventure also
includes data for the adjacent Six Flags Wild Safari Animal Park.
The Six Flags Parks consist of eight regional theme parks, as well as three
separately gated water parks and a wildlife safari park (each of which is
located near one of the theme parks). None of the Six Flags Parks are located
within the primary market of any of the Premier Parks. During 1997, the Six
Flags theme parks drew, in the aggregate, approximately % of their patrons
from within a 100-mile radius. During that year, Six Flags' attendance, revenue
and EBITDA totaled , $ and $ , respectively.
42
<PAGE>
Six Flags has operated regional theme parks under the Six Flags name for
over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier will obtain exclusive worldwide
ownership of the Six Flags brand name and expects to use the Six Flags brand
name, generally beginning in the 1999 season, at most of the Premier Parks.
In addition, as part of the Six Flags Acquisition, the Company will obtain
from Warner Bros. the exclusive right for theme-park usage of certain Warner
Bros. and DC Comics characters throughout the United States (except the Las
Vegas metropolitan area) and Canada. These characters include BUGS BUNNY, DAFFY
DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. Since 1991, Six
Flags has used these characters to market its parks and to provide an enhanced
family entertainment experience. The license will have a term of 55 years, will
include the right to sell merchandise featuring the characters at the parks and
will apply to all of the Company's current theme parks, as well as future parks
that meet certain criteria. Premier intends to make extensive use of these
characters at the Six Flags Parks and, commencing in 1999, at most of the
existing Premier Parks. See "--Licenses."
The Premier Parks consist of nine regional theme parks (six of which include
a water park component) and four water parks located across the United States,
as well as six regional theme parks and two smaller attractions located in
Europe and scheduled to be acquired in March 1998 in the acquisition of Walibi.
During the 1997 operating season, the eleven parks then owned by Premier drew,
on average, approximately 82% of their patrons from within a 100-mile radius,
with approximately 36.1% of visitors utilizing group and other pre-sold tickets
and approximately 20.6% utilizing season passes.
Under current management, since 1989 Premier has assumed control of 30
parks, and has achieved significant internal growth. During the nine months
ended September 30, 1997, the 11 parks owned by the Company during the 1997
operating season achieved same park growth in attendance, revenue and park-level
operating cash flow (representing all park operating revenues and expenses
without depreciation and amortization or allocation of corporate overhead or
interest expense) of 17.4%, 21.0% and 44.4%, respectively, as compared to the
comparable period of 1996.
The Company's parks are individually themed and provide a complete
family-oriented entertainment experience. The Company's theme parks generally
offer a broad selection of state-of-the-art and traditional thrill rides, water
attractions, themed areas, concerts and shows, restaurants, game venues and
merchandise outlets. In the aggregate, the Company's theme parks offer more than
rides, including roller coasters, making the Company the leading
provider of "thrill rides" in the industry.
The Company believes that its parks benefit from limited direct competition.
The combination of limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of the parks with a significant degree of
protection from competitive new theme park openings. Based on its knowledge of
the development of other theme parks in the United States, the Company's
management estimates that it would cost at least $200 million and would take a
minimum of two years to construct a new regional theme park comparable to the
Company's largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's six senior executive officers have over
150 years aggregate experience in the industry and its nine general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 200
years experience in the industry, including approximately 80 years at the
Premier Parks and approximately years at the Six Flags Parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million, compared to million in
1994 (the first year in which such information is available from that
publication), representing a compound annual growth rate of %. Total
attendance for the 40 largest parks in North America was 154.7 million in 1997,
compared to million in 1992, representing a compound annual growth rate of
%. The Company believes that this
43
<PAGE>
growth reflects two trends: (i) demographic growth in the 5-24 year old age
group, which is expected to continue through 2010; and (ii) an increasing
emphasis on family-oriented leisure and recreation activities.
The Company's strategy for achieving growth includes the following key
elements: (i) pursuing growth opportunities at existing parks; (ii) expanding
the Company's parks; and (iii) making selective acquisitions.
PURSUING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for continued
internal growth at its parks. The Company's operating strategy is to increase
revenue by increasing attendance and per capita spending, while maintaining
strict control of operating expenses. This approach is designed to exploit the
operating leverage inherent in the theme park business. Once parks achieve
certain critical attendance levels, operating cash flow margins increase because
revenue growth through incremental attendance gains and increased in-park
spending is not offset by a comparable increase in operating expenses, since a
large portion of such expenses is relatively fixed during any given year. The
primary elements of this strategy include:
--ADDING RIDES AND ATTRACTIONS AND IMPROVING OVERALL PARK QUALITY. The
Company regularly makes investments in the development and implementation of new
rides and attractions at its parks. The Company believes that the introduction
of marketable rides is an important factor in promoting each of the parks in
order to increase market penetration and encourage longer visits, which lead to
increased attendance and sales of food and merchandise. Once a park reaches an
appropriate level of attractions for its market size, the Company will add new
marketable attractions at that park only every three to four years.
--ENHANCING MARKETING AND SPONSORSHIP PROGRAMS. Premier's parks have
benefitted from professional, creative marketing programs which emphasize the
marketable rides and attractions, breadth of available entertainment and value
provided by each park. Following the Six Flags Acquisition, the Company intends
to implement marketing programs that also emphasize the Six Flags brand name, as
well as the animated characters licensed from Warner Bros. The Company has also
successfully attracted well known sponsorship and promotional partners, such as
Pepsi, McDonald's, Coca-Cola, Taco Bell, Blockbuster, 7-Eleven, Wendy's, First
USA Bank, Best Western and various supermarket chains. The Company believes that
its increased number of parks and annual attendance has enabled it to expand and
enhance its sponsorship and promotional programs.
--INCREASING GROUP SALES, SEASON PASSES AND OTHER PRE-SOLD TICKETS. Group
sales and pre-sold tickets provide the Company with a consistent and stable base
of attendance, representing over 36.0% of aggregate attendance at the 11 owned
parks in the 1997 season, with approximately 20.6% of patrons utilizing season
passes.
--IMPLEMENTING TICKET PRICING STRATEGIES TO MAXIMIZE TICKET REVENUES AND
PARK UTILIZATION. Management regularly reviews its ticket price levels and
ticket category mix in order to capitalize on opportunities to implement
selective price increases, both through main gate price increases and the
reduction in the number and types of discounts. Management believes that
opportunities exist to implement marginal ticket price increases without
significant reductions in attendance levels. Such increases have successfully
been implemented on a park-by-park basis in connection with the introduction of
major new attractions or rides. In addition, the Company offers discounts on
season, multi-visit and group tickets and also offers discounts on tickets for
specific periods, in order to increase attendance at less popular times such as
weekdays and evenings.
--INCREASING AND ENHANCING RESTAURANTS AND MERCHANDISE AND OTHER REVENUE
OUTLETS TO INCREASE LENGTH OF STAY AND IN-PARK SPENDING. The Company also seeks
to increase in-park spending by adding well-themed restaurants, remodeling and
updating existing restaurants and adding new merchandise outlets. The Company
has successfully increased spending on food and beverages by introducing
well-recognized
44
<PAGE>
local and national brands, such as Domino's, Friendly's, KFC and TCBY.
Typically, the Company operates these revenue outlets and often is the
franchisee. Finally, the Company has taken steps to decrease the waiting time
for its most popular restaurants and merchandise outlets.
--ADDING SPECIAL EVENTS. The Company has also developed a variety of
off-season special events designed to increase attendance and revenue prior to
Memorial Day and after Labor Day. Examples include Hallowscream and Fright
Fest-Registered Trademark-, Halloween events in which parks are transformed with
supernatural theming, scary rides and haunting shows, Oktoberfest, in which
traditional German food, theming, music and entertainment are presented at the
parks and Holiday in the Park-Registered Trademark-, a winter holiday event, in
which several parks are transformed with winter and holiday theming.
THE PREMIER PARKS
Management believes it has demonstrated the effectiveness of its strategy at
the Premier Parks owned prior to the 1997 Acquisitions. The Company first
implemented its strategy at the parks it owned prior to the Funtime acquisition.
FRONTIER CITY--In 1990 and 1991, an aggregate of approximately $7.0 million
was invested in Frontier City to add several major rides, expand and improve the
children's area, significantly increase the size of and theme the group picnic
facilities and construct a 12,000 square foot air-conditioned mall and main
events center. These additions, combined with an aggressive marketing strategy,
resulted in Frontier City's attendance and revenue increasing approximately 54%
and 83%, respectively, from 1989 to 1991.
ADVENTURE WORLD--Since acquiring Adventure World in January 1992, the
Company has invested approximately $42.1 million in the park to add numerous
rides and attractions and to improve theming. As a result of these improvements,
as well as aggressive and creative marketing and sales strategies, Adventure
World's attendance increased during the five seasons ended 1997 at a compound
annual rate of 19.7%. Additionally, revenue and park-level operating cash flow
at Adventure World increased from $6.0 million and $0.3 million, respectively,
for the first nine months of 1992 to $19.1 million and $5.6 million,
respectively, during the comparable period of 1997.
The Company is continuing to apply its growth strategy to the three Funtime
parks, acquired in August 1995. Since that time, the Company has invested
approximately $44.0 million at these parks to add marketable rides and
attractions and make other improvements and implemented creative marketing and
sales programs. As a result of this strategy, during the nine months ended
September 30, 1997, the Funtime parks achieved compound annual growth in
attendance, revenue and park-level operating cash flow of 9.0%, 13.8% and 20.5%,
respectively, as compared to the comparable period of 1995.
DARIEN LAKE--For the 1996 and 1997 seasons, Premier invested approximately
$21.6 million, adding numerous rides and attractions and 50 recreational
vehicles. Further, the Company entered into a long-term contract with a national
concert promoter under which the promoter invested $2.5 million to make
improvements at Darien Lake's 20,000 seat amphitheater and agreed to book at
least twenty nationally-recognized performers per season. As a result of these
investments and creative marketing and sales initiatives, during the nine-month
period ended September 30, 1997, Darien Lake achieved compound annual growth of
14.3% in attendance, 18.9% in revenue and 31.4% in park-level operating cash
flow over the results of the comparable period of 1995.
During the 1997 season, the Company began to apply its operating strategy to
the five parks acquired in the 1996 Acquisitions. The Company invested
approximately $65 million in the parks for that season to add marketable rides
and attractions and make other improvements and implemented creative marketing
and sales programs. As a result of this strategy, during the first nine months
of 1997, these five parks achieved growth in attendance, revenue and park-level
operating cash flow of 32.6%, 34.4% and 161.3%, respectively, as compared to the
comparable period of 1996.
45
<PAGE>
ELITCH GARDENS--Subsequent to its October 1996 acquisition of Elitch
Gardens, the Company invested approximately $30 million at that park for the
1997 season, adding three major marketable rides including a "state-of-the-art"
steel suspended looping roller coaster, an entire water park, a new main
entrance and main street (including a theatre) and numerous revenue outlets, as
well as substantial theming and landscaping. As a result, during the nine months
ended September 30, 1997, attendance and revenue at Elitch Gardens grew 64.7%
and 52.2%, respectively, and park-level operating cash flow increased from $1.1
million to $10.2 million, as compared to the comparable period of 1996.
RIVERSIDE PARK--The Company invested approximately $25 million for the 1997
season at Riverside Park, which it acquired in February 1997, to add three major
marketable rides, including a "state-of-the-art" steel suspended looping roller
coaster, a group picnic area, a new main entrance and improved theming and
landscaping. As a result, during the nine months ended September 30, 1997,
attendance and revenue at Riverside Park increased 51.2% and 49.6%,
respectively, and park-level operating cash flow increased from $1.0 million to
$10.1 million, as compared to the comparable period of 1996.
Management believes that each of the parks acquired by Premier in the 1997
Acquisitions offer similar opportunities to implement the Company's growth
strategy. Specifically, the Company believes it can increase attendance and per
capita revenue at Kentucky Kingdom. The Company intends to invest approximately
$10 million at Kentucky Kingdom for the 1998 season to add dueling wooden roller
coasters, a five-story interactive family water attraction and restaurants and
other revenue outlets. Marine World represents an opportunity to operate and
eventually own an established, well-known park in the San Francisco market, with
excellent access to major area highways. Premier has exercised its option to
lease approximately 40 acres at Marine World for a term of up to 99 years at a
nominal rent. Upon exercise of the lease option, Premier became entitled to
receive, in addition to its management fee, 80% of the cash flow generated by
the park after operating expenses and debt service. Management intends to expand
the park's entertainment component with theme park rides and attractions. The
Company is currently implementing the first phase of this expansion of Marine
World by investing approximately $35-$40 million for the 1998 season to add
fourteen new rides, including a boomerang steel roller coaster, a river rapids
ride and a shoot-the-chute giant splash ride. In September 1997, the Company was
granted an option to purchase the entire site commencing in February 2002, which
it currently expects to exercise at that time.
The Walibi acquisition provides the Company with a significant presence in
the expanding theme park industry in Europe. Although the Walibi Parks have
historically produced solid operating results, management believes that the
Company's strategy of targeted capital investment and sophisticated marketing
can improve performance at these parks. The Company has agreed to invest
approximately $37.7 million in the Walibi Parks over the three years commencing
with the 1999 season. The Company believes that the Walibi Parks have suffered
from limited available funds for investment and a lack of creative marketing.
Additionally, the Company believes that the presence of Disney Land Paris
outside of Paris has resulted in greater awareness of local parks in Europe. For
example, in 1997, European park attendance grew 6%, as compared to 4% in North
America.
Further, the Company believes that, by virtue of the Six Flags Acquisition,
a number of the existing Premier Parks have the potential over the next several
seasons to accelerate their rate of growth. Recent attendance levels at the Six
Flags theme parks (between 1.7 million and 3.6 million in 1997) have been
substantially higher than the annual attendance at the largest Premier Parks
(between 1.0 million and 1.5 million during that year). Management believes that
a number of existing Premier Parks, particularly Adventure World, Elitch
Gardens, Geauga Lake, Kentucky Kingdom, Marine World and Riverside Park, all of
which are located in or near major metropolitan areas, can accelerate their
market penetration and the expansion of their geographic market by their use of
the Six Flags brand name, aggressive marketing campaigns featuring the animated
characters licensed from Warner Bros., as well as continuing capital investment
in new rides and attractions. The Company expects to commence general use of the
Six Flags brand name and the licensed characters at the Premier Parks for the
1999 season.
46
<PAGE>
THE SIX FLAGS PARKS
The Six Flags Parks generally enjoy significant market penetration. Thus,
although the Company plans to make targeted capital expenditures at these parks
to increase their attendance and per capita spending levels, it expects to
increase significantly the EBITDA of these parks primarily through reduction in
operating expenses. First and most importantly, the Company believes that it can
substantially reduce Six Flags' corporate overhead and other corporate-level
expenses. Second, the Company expects to achieve significant reduction in
park-level operating expenses. Third, by virtue of economies of scale, the
Company believes that operating efficiencies in areas such as marketing,
insurance, promotion, purchasing and other expenses can be realized. Finally,
the Company believes that its increased size following the Six Flags Acquisition
will enable it to achieve savings in capital expenditures, including by the
Company's ability to rotate rides among its parks.
EXPANDING THE COMPANY'S PARKS
The Company is expanding several of the Premier Parks in order to increase
attendance and per capita spending. For example, the Company is constructing an
economy motel at Darien Lake for the 1998 season to supplement the campgrounds
and continues to expand the park by purchasing additional recreational vehicles
(RV's). In addition, the Company recently purchased campgrounds adjacent to
Geauga Lake, and may add campgrounds or an amphitheater at Frontier City. The
Company expects to add prior to the 1999 season a more complete complement of
"dry" rides to Wyandot Lake, which is currently primarily a water park. In
addition, the Company owns 400 acres adjacent to Adventure World which are zoned
for entertainment, recreational and residential uses and are available for
complementary uses. Additional acreage owned by the Company and suitable for
development exists at several of the Company's other parks. The Company may use
a portion of the proceeds of the Offering and the Concurrent Offerings to fund
expansions at its parks. See "Use of Proceeds."
The Company may expand in the future certain of the Six Flags Parks by
adding complementary attractions, such as lodging facilities and concert venues.
For example, Six Flags owns over 1,500 undeveloped acres adjacent to Six Flags
Great Adventure (located between New York City and Philadelphia) suitable for
such purposes. Additional acreage suitable for development exists at several
other Six Flags Parks.
ACQUISITION STRATEGY
The Company expects to achieve further growth beyond that generated from
internal growth at its existing parks through continued selective acquisitions
of additional regional theme parks. Given its decentralized management approach,
the Company has experience in managing assets in diverse locations, and
therefore does not seek acquisitions with any specific geographic focus. In that
connection, in the first quarter of 1998 the Company expects to acquire a
controlling interest in Walibi (and expects to acquire the remaining interest in
the second quarter of 1998), which owns six theme parks and two smaller
attractions in Europe, and may continue to pursue acquisitions of parks located
outside of the United States.
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that, in addition to the
Acquisitions, there are numerous acquisition opportunities, both in the U.S. and
abroad, that can expand its business. The Company's primary target for
acquisitions continues to be regional parks with attendance between 300,000 and
1.5 million annually. The Company will consider acquisitions of larger parks or
chains (such as Six Flags).
As the only owner of multiple parks that has been actively making
acquisitions of parks in its primary range over the last several years, the
Company believes it has a number of competitive advantages in acquiring parks of
this size. Historically, operators of destination or large regional park chains
have not generally sought to acquire parks in the Company's primary target range
and do not have the experience or management structure to readily operate parks
of that size profitably. Additionally, as a multi-park
47
<PAGE>
operator with a track record of successfully acquiring, improving and
repositioning parks, the Company has numerous competitive advantages over
single-park operators in pursuing acquisitions and improving the operating
results at acquired parks. These advantages include the ability to (i) exercise
group purchasing power (for both operating and capital assets); (ii) achieve
administrative economies of scale; (iii) attract greater sponsorship revenue,
support from sponsors with nationally-recognized brands and marketing partners;
(iv) use the Six Flags brand name and the characters licensed from Warner Bros.
and D.C. Comics; (v) recruit and retain superior management; (vi) optimize the
use of capital assets by rotating rides among its parks to provide fresh
attractions; and (vii) access capital markets. See "Risk Factors-- Uncertainty
of Future Acquisitions; Potential Effects of Acquisitions."
Furthermore, the Company is able to make acquisitions where its capital
stock forms all or part of the purchase price. This is particularly important
where the seller has a low tax basis in its assets, which the Company believes
is often the case with its acquisition targets. While the Company expects that
many acquisitions will be made for cash, its ability to use Common Stock for all
or part of the purchase price will provide it with an additional advantage over
single-park operators in making such acquisitions. For example, shares of Common
Stock (or securities convertible into Common Stock) were used as a portion of
the aggregate consideration in the acquisitions of Kentucky Kingdom, Walibi and
Six Flags. In most cases, the Company will seek to acquire outright ownership of
parks, as it did with the 1996 Acquisitions. However, transactions may be
undertaken in other forms, including acquisition of less than full ownership,
such as participation in park management, leases or joint venture arrangements.
For example, the Company manages Marine World and leases a portion of that
facility, with an option to acquire the entire park, commencing in 2002.
The Company expects to continue to acquire parks which have been
undermanaged and have not benefitted from sustained capital expenditures, and to
reposition such parks through the implementation of its operating strategies.
The Company may also acquire better performing parks which require less
additional investment but where cash flow can be improved through economies of
scale in operating and capital expenditures and other enhancements.
The Company intends to locate acquisition targets primarily through its own
direct efforts. Management has extensive contacts throughout the industry and is
an active participant in industry associations. Particular attention is given to
cultivating relationships over time with park owners who appear likely to be or
become potential sellers due to factors such as age or family or economic
circumstances. In addition, the Company has developed a reputation as an active
acquiror of regional parks. Through this reputation and general industry
contacts, the Company believes that it becomes aware of most acquisition
opportunities that develop in its area of focus.
THE THEME PARK INDUSTRY
HISTORY
Although there is a long history of traditional amusement parks, primarily
family-owned and consisting of thrill rides and midways, the opening of
Disneyland in 1955 introduced the first modern theme park. Several features of
modern theme parks distinguish them from the traditional amusement park whose
carnival atmosphere and thrill rides offer less to families and adults. Theme
parks are designed around one central or several different themes which are
consistently applied to all areas, including the rides, attractions,
entertainment, food, restaurants and landscape. Modern parks also typically
present a variety of free entertainment not found at old-style amusement parks.
Theme parks also offer the visitor numerous and diverse dining establishments in
order to expand length of stay and position the parks as an all-day
entertainment center. Generally, theme parks also plan nighttime entertainment
(such as fireworks) and special events, and keep certain rides open into the
night to further extend the hours of operation. As a result of these
differences, theme parks draw attendance from a wider geographic area and
48
<PAGE>
attract a larger number of people from within a given market. Theme parks also
attract more families and group outings, and the average length of stay and per
capita outlay is greater.
The following table identifies the nine largest operators of theme park
chains worldwide ranked by total attendance, showing the number and type of such
parks operated by each and the aggregate attendance in 1997.
<TABLE>
<CAPTION>
TYPE NUMBER 1997
NAME OF OPERATOR OF PARK OF PARKS ATTENDANCE
- --------------------------------------------------------------- ----------------------- ------------- -------------
<S> <C> <C> <C>
(IN
THOUSANDS)
Disney......................................................... Destination 8 86,000
Premier Parks(1)............................................... Regional 31 36,700
Anheuser-Busch................................................. Regional/Destination 9 20,700
Universal Studios.............................................. Destination 2 14,300
Cedar Fair..................................................... Regional 7 13,400
Paramount Parks................................................ Regional 6 12,800
Blackpool Pleasure Beach Co.(2)................................ Destination 3 8,800
The Tussauds Group(2).......................................... Regional 3 7,400
Silver Dollar City............................................. Regional/Destination 5 4,900
</TABLE>
- ------------------------
(1) Attendance figures for Premier Parks reflect the 1997 Acquisitions and the
Six Flags Acquisition as if such acquisitions had all occurred at the
commencement of the 1997 season.
(2) Does not operate parks in North America.
DESTINATION PARKS VERSUS REGIONAL PARKS
Destination parks are those designed primarily to attract visitors willing
generally to travel long distances and incur significant expense to visit the
parks' attractions as part of an extended stay. To accommodate vacationers, many
destination parks also include on-site lodging. Walt Disney World and Universal
Studios are well-known examples of this type of park. Management believes that
destination parks are typically more affected by the national economy than are
regional parks. With the exception of Six Flags Magic Mountain, located in the
same market as Disneyland and Universal Studios Hollywood, the Company does not
believe that its parks compete directly with destination parks.
Regional theme parks, such as those historically operated by the Company,
are designed to attract visitors for a full day or a significant number of
hours. Management views regional theme parks as those that draw the majority of
their patrons from within a 50-mile radius of the park and the great majority of
their visitors from within a 100-mile radius of the park. Visiting a regional
theme park may be significantly less expensive than visiting a destination park
because of lower transportation expenses, lower ticket prices and the lack of
extended lodging expenses. The U.S. regional theme park industry is highly
fragmented with over 150 parks owned by over 100 operators.
ATTRACTIONS
Regional theme parks attract patrons of all ages. Families and young people
are attracted by the variety of major rides and attractions, children's rides
and various entertainment areas including thematic shows and concerts. Most park
admission policies are "pay-one-price," which entitles a guest to virtually
unlimited free access to all rides, shows and attractions.
Depending on the size of the property, regional theme parks typically have
between 30 and 40 attractions. These rides include roller coasters and water
rides, as well as other attractions such as bumper cars, aerial rides and
children's rides. A park may also have distinct entertainment and show areas
with specific themes such as a wild west or pirate stunt show. Games, food and
merchandise stands often reflect
49
<PAGE>
the theme of the particular area in which they are located. This enhances the
promotional effect of the thematic area. By offering a variety of rides and
themed areas, a park is able to target a wider age spectrum from the surrounding
population.
In addition to thrill rides, many parks offer indoor attractions and outdoor
concerts, ranging from musical skits and bands to full-scale evening concerts by
prominent entertainers. Selected concerts may require an add-on to the
admissions price, but often are part of the regular ticket price, providing
added value to visitors.
Food service offered ranges from full-service restaurants to fast food.
Young people may only be interested in a quick meal between rides while the
family may choose to relax for a picnic. Refreshment stands serve snack foods,
such as hot dogs, cotton candy and soda. In addition, game booths and
merchandise souvenir stands are dispersed throughout a park.
HISTORY
The Company was incorporated in 1981 as The Tierco Group, Inc., and through
1989 was primarily engaged in the ownership and management of real estate and
mortgage loans. In October 1989, the Company's current senior management assumed
control, and during 1989, management determined to focus Premier's business on
its theme park operations, which at that point consisted of a 50% interest in
Frontier City. In 1991, the Company acquired White Water Bay and increased its
ownership in Frontier City to in excess of 50%. In 1992, the Company acquired
Adventure World and the remaining minority interest in Frontier City and
disposed of substantially all of its non-theme park operations. In 1994, the
Company changed its name to Premier Parks Inc. On August 15, 1995, the Company
completed the Funtime acquisition. On June 4, 1996, the Company completed a
public offering of approximately 3.9 million shares of Common Stock, at a price
to the public of $18.00 per share, which raised $65.2 million of net proceeds.
In the fourth quarter of 1996, the Company acquired Elitch Gardens, the
Waterworld Parks and The Great Escape, and, in February 1997, acquired Riverside
Park. In January 1997, the Company completed the issuance, through a public
offering, of an additional 6.9 million shares of its Common Stock at a price to
the public of $29.00 per share, which raised approximately $189.8 million of
aggregate net proceeds. In the fourth quarter of 1997, the Company acquired
Kentucky Kingdom and its leasehold interest at Marine World. In the first
quarter of 1998, the Company expects to acquire a majority interest in Walibi,
and expects to acquire the remaining interest in the second quarter of 1998.
50
<PAGE>
DESCRIPTION OF PARKS
PREMIER PARKS
ADVENTURE WORLD
Adventure World is a combination theme and water park located in Largo,
Maryland, approximately 15 miles east of Washington, D.C. and 30 miles southwest
of Baltimore, Maryland. The park's primary market includes Maryland, northern
Virginia, Washington, D.C. and parts of Pennsylvania and Delaware. This market
provides the park with a permanent resident population base of approximately 6.6
million people within 50 miles and 10.9 million people within 100 miles. The
Washington, D.C. and Baltimore markets are the number 7 and number 23 DMAs in
the United States, respectively. Based upon in-park surveys, approximately 87%
of the visitors to Adventure World in 1997 resided within a 50-mile radius of
the park, and 92% resided within a 100-mile radius.
The Company owns a site of 515 acres, with 115 acres currently used for park
operations. The remaining 400 acres, which are fully zoned for entertainment and
recreational uses, provide the Company with ample expansion opportunity, as well
as the potential to develop complementary operations, such as an amphitheater.
Adventure World's principal competitors are King's Dominion Park, located in
Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Adventure
World.
DARIEN LAKE & CAMPING RESORT
Darien Lake, a combination theme and water park, is the largest theme park
in the State of New York and the 38th largest theme park in the United States
based on 1997 attendance of 1.4 million. Darien Lake is located off Interstate
90 in Darien Center, New York, approximately 30, 40 and 120 miles from Buffalo,
Rochester and Syracuse, New York, respectively. The park's primary market
includes upstate New York, western and northern Pennsylvania and southern
Ontario, Canada. This market provides the park with a permanent resident
population base of approximately 2.1 million people within 50 miles of the park
and 3.1 million with 100 miles. The Buffalo, Rochester and Syracuse markets are
the number 40, number 75 and number 72 DMAs in the United States, respectively.
Based upon in-park surveys, approximately 62% of the visitors to Darien Lake in
1997 resided within a 50-mile radius of the park, and 79% resided within a
100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds, and 593 acres of
agricultural, undeveloped and water areas. Darien Lake also has a 20,000 seat
amphitheater. Following the 1995 season, the Company entered into a long-term
arrangement with a national concert promoter to realize the cash flow potential
of the amphitheater. As a result, since it acquired the park, the Company has
realized substantial increases in revenues earned from concerts held at the
facility.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States.
In 1997, approximately 310,000 people used the Darien Lake campgrounds. The
Company believes that substantially all of the camping visitors use the theme
park. The Company is constructing an economy motel at the site for the 1998
season to supplement the campgrounds.
51
<PAGE>
Darien Lake's principal competitor is Wonderland Park located in Toronto,
Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake
competes to a lesser degree with three smaller amusement parks located within 50
miles of the park. Darien Lake is significantly larger with a more diverse
complement of entertainment than any of these three smaller facilities.
ELITCH GARDENS
Elitch Gardens is a combination theme and water park located on
approximately 60 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and McNichols Arena, and close to Coors Field. Based on 1997
attendance of 1.5 million, Elitch Gardens is the 37th largest theme park in the
United States. The park's primary market includes the greater Denver area, as
well as most of central Colorado. This market provides the park with a permanent
resident population base of approximately 2.4 million people within 50 miles of
the park and approximately 3.3 million people within 100 miles. The Denver area
is the number 18 DMA in the United States. Based upon in-park surveys,
approximately 54% of the visitors to Elitch Gardens in 1997 resided within a
50-mile radius of the park, and 78% resided within a 100-mile radius. Elitch
Gardens has no significant direct competitors.
A park in Denver under the name of "Elitch Gardens" has been in continuous
operation for over 100 years. During 1994 and 1995, the park was relocated from
its smaller location on the north side of Denver to its current location in
downtown Denver. The park was constructed at a cost of $100.0 million (including
land and equipment, as well as extensive infrastructure). The park was reopened
in 1995. Management believes that the park, as constructed, did not have
sufficient marketable rides and attractions to achieve its attendance potential.
In addition, prior to its acquisition in 1996, the park lacked theming and
landscaping, as well as creative marketing.
FRONTIER CITY
Frontier City is a western theme park located along Interstate 35 in
northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.2 million
people within 50 miles of the park and 2.1 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 43 and number 58 DMAs in the
United States, respectively. Based upon in-park surveys, approximately 63% of
the visitors to Frontier City in 1997 resided within a 50-mile radius of the
park, and 69% resided within a 100-mile radius.
The Company owns a site of approximately 90 acres, with 60 acres currently
used for park operations. The remaining 30 acres provide the Company with the
potential to develop complementary operations, such as campgrounds or an
amphitheater. Frontier City's only significant competitor is Six Flags Over
Texas, the Company's park located in Arlington, Texas, approximately 225 miles
from Frontier City.
GEAUGA LAKE
Geauga Lake is a combination theme and water park, and is the 40th largest
theme park in the United States based on 1997 attendance of 1.3 million. Geauga
Lake is located in Aurora, Ohio, 20 miles southeast of Cleveland and
approximately 30, 60 and 120 miles, respectively, from Akron and Youngstown,
Ohio and Pittsburgh, Pennsylvania. This market provides the park with a
permanent resident population base of approximately 4.0 million people within 50
miles of the park and 7.4 million within 100 miles. The Cleveland/Akron,
Youngstown and Pittsburgh markets are the number 13, number 97 and number 19
DMAs in the United States, respectively. Based upon in-park surveys,
approximately 44% of the visitors to Geauga Lake in 1997 resided within a
50-mile radius of the park, and 76% resided within a 100-mile radius.
52
<PAGE>
The 257-acre property on which Geauga Lake is situated includes a 55-acre
spring-fed lake. The theme park itself presently occupies approximately 116
acres. There are approximately 87 acres of undeveloped land (of which
approximately 30 acres have the potential for further development).
Geauga Lake's principal competitors are Cedar Point in Sandusky, Ohio and
Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately 90
miles and 120 miles, respectively, from Geauga Lake. There are also three small
water parks within a 50-mile radius of Geauga Lake, and Sea World, a marine
park, is located on the other side of Geauga Lake. While Sea World does, to some
extent, compete with Geauga Lake, it is a complementary attraction, and many
patrons visit both facilities. In that regard, the Company and Sea World conduct
joint marketing programs in outer market areas, involving joint television
advertising of combination passes. In addition, combination tickets are sold at
each park.
THE GREAT ESCAPE
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George resort area, 180 miles north
of New York City and 40 miles north of Albany. The park's primary market
includes the Lake George tourist population and the upstate New York and western
New England resident population. Official statistics indicate that the area had
a visitor population of over 7.5 million people in 1995, of which over 3.5
million were overnight visitors, with an average length of stay of 4.3 days.
This market provides the park with a permanent resident population base of
approximately 800,000 people within 50 miles of the park and 3.3 million people
within 100 miles. The Albany market is the number 52 DMA in the United States.
Based upon in-park surveys, approximately 41% of the visitors to the Great
Escape in 1997 resided within a 50-mile radius of the park, and 69% resided
within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Riverside Park, the Company's park located in Springfield,
Massachusetts, approximately 150 miles from The Great Escape. In addition, there
is a smaller water park located in Lake George.
KENTUCKY KINGDOM
Kentucky Kingdom is a combination theme and water park, located on
approximately 58 acres on and adjacent to the grounds of the Kentucky State Fair
in Louisville, Kentucky, of which approximately 38 acres are leased under ground
leases with terms (including renewal options) expiring in 2049, with the balance
owned by the Company. Based on 1997 attendance of 1.1 million, Kentucky Kingdom
was the 47th largest theme park in the United States. The park's primary market
includes Louisville and Lexington, Kentucky, Evansville and Indianapolis,
Indiana and Nashville, Tennessee. This market provides the park with a permanent
resident population of approximately 1.4 million people within 50 miles and 4.6
million people within 100 miles. The Louisville and Lexington markets are the
number 50 and number 67 DMAs in the United States. Kentucky Kingdom's only
significant direct competitor is Paramount's Kings Island and The Beach, located
in Cincinnati, Ohio, approximately 100 miles from the park.
The Company believes that, although Kentucky Kingdom is outfitted with a
large number of rides and has a solid attendance base, the park has suffered
from limited available funds for investment and a lack of revenue outlets.
Premier intends to spend approximately $10 million prior to the 1998 season to
add two major new attractions and to upgrade the quality and quantity of the
merchandise outlets and restaurants. The Company also intends to implement more
professional and creative marketing, sales and promotional programs.
53
<PAGE>
MARINE WORLD
Marine World, a theme park which has historically featured primarily marine
mammals and exotic land animals, is the 47th largest theme park in the United
States, based on 1997 attendance of 1.1 million. Marine World is located in
Vallejo, California, approximately 32 miles from San Francisco, 22 miles from
Oakland and 57 miles from Sacramento. This market provides the park with a
permanent resident population base of approximately 5.4 million people within 50
miles and 10.0 million people within 100 miles. The San Francisco/Oakland and
Sacramento areas are the number 5 and number 20 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 50% of the visitors to
Marine World in 1997 resided within a 50-mile radius of the park, and 78%
resided within a 100-mile radius.
The Company manages the operations of Marine World pursuant to a management
agreement entered into in February 1997, pursuant to which the Company is
entitled to receive an annual base management fee of $250,000 and up to $250,000
annually in additional fees based on park performance. In addition, in November
1997 the Company exercised at no additional cost an option to lease
approximately 40 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the park after operating expenses and debt
service. Finally, the Company has the option to purchase the entire park
beginning in February 2002, which it currently expects to exercise at that time.
Marine World currently consists of 105 acres comprised of various
presentation stadiums, animal habitats, visitor walkways, parking, concession
and picnic areas, bordering a 55-acre man-made lake. The park provides for the
shelter and care of over 50 marine mammals, 600 land animals, over 70 sharks and
rays, birds and reptiles, over 2,600 tropical and cold water fish and marine
invertebrates, and 500 butterflies, all featured in a variety of exhibits and
participatory attractions.
Marine World's principal competitors are Underwater World at Pier 39 in San
Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium.
These parks are located approximately, 30, 60 and 130 miles from Marine World,
respectively. In addition, plans for Hecker Pass, a new theme park in Gilroy,
California (approximately 100 miles from Marine World) are under development. If
developed, the Company believes that the park would not be operational for at
least two years.
Since taking over the management of Marine World in April 1997, the Company
has stabilized the park's performance by reducing operating expenses, shortening
the operating season, and beginning to expand the park's entertainment component
by adding a themed children's area with children's rides called "Popeye's
Seaport" and the DinoSphere TurboRide, a ride simulation theatre. The Company
expects to invest between $35-$40 million at Marine World for the 1998 season to
add fourteen new rides, including a boomerang steel roller coaster, a river
rapids ride and a shoot-the-chute giant splash ride.
RIVERSIDE PARK
Riverside Park is a combination theme park and motor speedway, located off
Interstate 91 near Springfield, Massachusetts, approximately 95 miles west of
Boston. Riverside Park's primary market includes Springfield and western
Massachusetts, and Hartford and western Connecticut, as well as portions of
eastern Massachusetts (including Boston) and eastern New York. Based on 1997
attendance of over 1.2 million, Riverside Park is the 43rd largest theme park in
the United States. This market provides the park with a permanent resident
population base of approximately 3.1 million people within 50 miles and 14.7
million people within 100 miles. Based upon in-park surveys, approximately 63%
of the visitors to Riverside Park in 1997 resided within a 50-mile radius of the
park, and 95% resided within a 100-mile radius. Springfield, Hartford/New Haven
and Boston are the number 103, number 27 and number 6 DMAs in the United States.
Riverside Park is comprised of approximately 160 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 30 undeveloped acres. Riverside Park's
54
<PAGE>
Speedway is a multi-use stadium which includes a one-quarter mile
NASCAR-sanctioned short track for automobile racing which can seat 6,200 for
speedway events and 15,000 festival style for concerts.
Riverside Park's most significant competitor is Lake Compounce located in
Bristol, Connecticut, approximately 50 miles from Riverside Park. Lake Compounce
had not been in regular full-service operation for several years. However, the
prior owner of the park entered into a joint venture relationship in 1996 with
an established park operator, and the park has received a substantial investment
of private and public funds and did operate in the 1997 season. To a lesser
extent, Riverside Park competes with The Great Escape, the Company's park
located in Lake George, New York, approximately 150 miles from Riverside Park.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld USA/Concord and
Waterworld USA/ Sacramento) and one family entertainment center (Paradise
Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.8 million people within 50 miles of the park
and 10.0 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States. Based upon in-park surveys, approximately 94%
of the visitors in 1997 resided within a 50-mile radius of the park, and 97%
resided within a 100-mile radius.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. Also located on the fair grounds is Paradise
Island, the Company's family entertainment center. The facilities' primary
market includes Sacramento and the immediate surrounding area. This market
provides the park with a permanent resident population base of approximately 2.7
million people within 50 miles of the park and 9.7 million people within 100
miles. The Sacramento market is the number 20 DMA in the United States. Based
upon in-park surveys, approximately 80% of the visitors in 1997 resided within a
50-mile radius of the park, and 96% resided within a 100-mile radius.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 29 acres, with 24 acres currently used for park
operations. The Sacramento facility is located on approximately 20 acres, all of
which is used for the park and the family entertainment center. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 100 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 40 miles
from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on 22 acres located
along Interstate 40 in southwest Oklahoma City, Oklahoma. The park is the 15th
largest water park in the United States based on 1997 attendance of
approximately 316,000. The park's primary market includes the greater Oklahoma
City metropolitan area. Oklahoma City is the number 43 DMA in the United States.
This market provides the park with a permanent resident population base of
approximately 1.2 million people within 50 miles of the park and 2.1 million
people within 100 miles. Based upon in-park surveys, approximately 80% of the
visitors to White Water Bay in 1997 resided within a 50-mile radius of the park,
and 87% resided within a 100-mile radius. White Water Bay has no direct
competitors.
WYANDOT LAKE
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property sub-leased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
55
<PAGE>
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in the United States. Based on
in-park surveys, approximately 85% of the visitors to Wyandot Lake in 1997
resided within a 50-mile radius of the park, and 93% resided within a 100-mile
radius.
The Company leases from the Columbus Zoo the land, the buildings and several
rides which existed on the property at the time the lease was entered into in
1983. The current lease expires in 1998, but the Company expects to exercise the
first of its two five-year renewal options. The land leased by Wyandot Lake
consists of approximately 18 acres. The park shares parking facilities with the
Columbus Zoo.
Wyandot Lake's direct competitors are Paramount's Kings Island and The
Beach, each located in Cincinnati, Ohio, and Cedar Point, located in Sandusky,
Ohio. Each of these parks is located approximately 100 miles from Wyandot Lake.
Although the Columbus Zoo is located adjacent to the park, it is a complementary
attraction, with many patrons visiting both facilities.
WALIBI PARKS
In March 1998, Premier is scheduled to acquire approximately 50.1% of the
shares of capital stock of Walibi (on a fully diluted basis) in the Private
Acquisition. Thereafter, the Company will commence the Walibi Tender Offer for
the balance of the Walibi shares, pursuant to which the Company expects to
acquire all or substantially all of such shares. Walibi, a Belgian corporation
whose capital stock is traded on the Official Market of the Brussels Stock
Exchange, owns six theme parks, two located in Belgium, one in the Netherlands
and three in France, as well as two smaller attractions in Brussels. Walibi's
operations had combined 1997 attendance of approximately 3.5 million.
The Walibi Parks consist of six theme parks and two small attractions
throughout Europe, including: Bellewaerde, Mini-Europe and Oceade, Walibi
Aquitaine, Walibi Flevo, Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre
and Aqualibi. The Walibi Parks' primary markets include Belgium, The
Netherlands, southwestern France, eastern France and northern France. These
markets provide the Walibi Parks with a permanent resident population of
million people within 50 miles and million people within 100 miles.
The Walibi Parks' most significant competitors are , located in
.
SIX FLAGS PARKS
In February 1998, Premier entered into the Six Flags Agreement to acquire
all of the capital stock of SFEC from the Sellers. See "Description of Six Flags
Agreement." Six Flags operates 12 "Six Flags" branded theme parks in eight
locations in the United States, consisting of eight major regional theme parks,
as well as three separately gated water parks and one wildlife safari park (each
located near one of the theme parks). The closing of the Six Flags Acquisition
will occur concurrently with the closing of the Offering.
SIX FLAGS ASTRO-WORLD AND SIX FLAGS WATERWORLD
Six Flags Astro-World, the 28th largest theme park in the United States with
1997 attendance of 2.0 million, and the separately gated adjacent Six Flags
WaterWorld, with 1997 attendance of 283,000, are located in Houston, Texas on
the grounds of an entertainment and sports complex that includes the Houston
Astrodome. The Houston, Texas market provides the parks with a permanent
resident population of million people within 50 miles and million
people within 100 miles. The Houston market is the number 11 DMA in the United
States. Based upon in-park surveys, approximately % of the visitors to the
parks in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 90 acres used for the theme park,
and approximately 14 acres used for the water park. Six Flags Astro-World
indirectly competes with Sea World of Texas and the
56
<PAGE>
Company's Six Flags Fiesta Texas, both located in San Antonio, Texas,
approximately 200 miles from the park. Six Flags WaterWorld competes with
Splashtown and Water Works, two nearby water parks.
SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas, the 33rd largest theme park in the United States
with 1997 attendance of 1.6 million, is located in San Antonio, Texas. The San
Antonio, Texas market provides the park with a permanent resident population of
million people within 50 miles and million people within 100 miles. The
San Antonio market is the number 38 DMA in the United States. Based upon in-park
surveys, approximately % of the visitors to the parks in 1997 resided within a
50-mile radius of the park, and % resided within a 100-mile radius.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas located
in San Antonio. In addition, the park competes to a lesser degree with Six Flags
Astro-World, the Company's park located in Houston, Texas, approximately 200
miles from the park.
PARTNERSHIP STRUCTURE. In March 1996, Six Flags completed arrangements
under which it took over management of the then named Fiesta Texas park ("Fiesta
Park"). Fiesta Park is located on 200 acres and is owned by La Cantera
Development Company ("La Cantera"), an affiliate of United Service Automobile
Associates and is leased to a then formed new limited partnership (the "Fiesta
Partnership"). Pursuant to the terms of the lease (the "Fiesta Lease"), the
Fiesta Partnership pays La Cantera a nominal annual rental and is required to
make certain capital improvements to and cover all operating expenses of the
park.
The Fiesta Partnership is a limited partnership formed by Six Flags San
Antonio, L.P., a Delaware limited partnership between two wholly-owned
subsidiaries of the Company (the "Six Flags GP"), as general partner, San
Antonio Park GP, LLC, a Delaware limited liability company which is managed by
managers elected by TWE, on the one hand, and an investor group, on the other
hand and in which SFEC holds a non-voting 99% equity interest (the "LLC GP"), as
general partner, and Fiesta Texas Theme Park, Ltd., a Texas limited partnership
wholly-owned by La Cantera (the "La Cantera LP"), as limited partner. The Fiesta
Partnership is controlled by the general partners and is owned 59% by the Six
Flags GP, 1% by the LLC GP and 40% by the La Cantera LP, which interests reflect
the partners' respective original contributions to the Fiesta Partnership.
The Fiesta Lease has an initial term which extends through the end of fiscal
year 2005, but under certain circumstances may be extended until the end of
fiscal year 2015. The extended Fiesta Lease can be terminated at the end of
fiscal year 2010 at the option of either the Fiesta Partnership or the lessor,
La Cantera LP. The Fiesta Partnership will also have the right to terminate the
Fiesta Lease effective at the end of fiscal year 2001 based on a specified
cumulative operating loss for the 1998 through 2001 fiscal years. As long as the
Fiesta Lease continues in effect, the Fiesta Partnership has the option to
purchase the tangible and intangible assets of Fiesta Park, as well as the La
Cantera LP's interest in the Fiesta Partnership, during the initial term of the
Fiesta Lease, at the end of fiscal year 2010 should the lessor terminate the
Fiesta Lease and at the end of fiscal year 2015.
In connection with Six Flags' management of Fiesta Park, the Six Flags GP
entered into a management agreement with the Fiesta Partnership (the "Management
Agreement") under which it will manage and operate Fiesta Park on the Fiesta
Partnership's behalf. Under the terms of the Management Agreement, the Fiesta
Partnership will pay the Six Flags GP an annual management fee and intellectual
property fee. For the 1996 and 1997 fiscal years, the annual management fee
payable to the Six Flags GP was 6% of the Fiesta Partnership's Gross Revenues
(as defined in the Management Agreement) for such year. Commencing with the 1998
fiscal year, the management fee is 25% of EBITDA (as defined in the Management
Agreement). The intellectual property fee payable to the Six Flags GP throughout
the term of the Management Agreement will be based on the Fiesta Partnership's
Gross Revenues.
57
<PAGE>
SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK
Six Flags Great Adventure, the 10th largest theme park in the United States,
and the separately gated adjacent Six Flags Wild Safari Animal Park, the 23rd
largest theme park in the United States with 1997 combined attendance of 3.7
million, are located in Jackson, New Jersey, approximately 70 miles south of New
York City and 50 miles east of Philadelphia. The New York and Philadelphia
markets provide the parks with a permanent resident population of million
people within 50 miles and million people within 100 miles. The New York and
Philadelphia markets are the number 1 and number 4 DMAs in the United States,
respectively. Based upon in-park surveys, approximately % of the visitors to
the parks in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 1,862 acres, of which approximately
221 acres are currently used for the thrill-ride based theme park operations,
and 1,641 acres remain undeveloped. Additionally, the Company owns approximately
355 adjacent acres that are used for the wildlife safari park, home to 55
species of 1,200 exotic animals which can be seen over a four and a half mile
drive. Six Flags Great Adventure's principal competitors are Hershey Park,
located in Hershey, Pennsylvania, approximately 150 miles from the park; and
Dorney Park, located in Allentown, Pennsylvania, approximately 75 miles from the
park.
SIX FLAGS GREAT AMERICA
Six Flags Great America, the 16th largest theme park in the United States
with 1997 attendance of 3.0 million, is located in Gurnee, Illinois, between
Chicago, Illinois and Milwaukee, Wisconsin. The Chicago and Milwaukee markets
provide the park with a permanent resident population of million people
within 50 miles and million people within 100 miles. The Chicago and
Milwaukee markets are the number 3 and number 31 DMAs in the United States,
respectively. Based upon in-park surveys, approximately % of the visitors to
the park in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 86 acres used for the theme park
operations. Six Flags Great America currently has no direct theme park
competitors in the region, but does compete with Paramount's Kings Island,
located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar
Point, located in Sandusky, Ohio, approximately 340 miles from the park; and Six
Flags St. Louis, the Company's park located near St. Louis, Missouri,
approximately 320 miles from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 12th largest theme park in the United States
with 1997 attendance of 3.3 million, and the separately gated adjacent Six Flags
Hurricane Harbor, the 11th largest water park in the United States with 1997
attendance of 351,000, are located in Valencia, California, in the northwest
section of Los Angeles County. The Los Angeles, California market provides the
parks with a permanent resident population of million people within 50
miles and million people within 100 miles. The Los Angeles market is the
number 2 DMA in the United States. Based upon in-park surveys, approximately
% of the visitors to the parks in 1997 resided within a 50-mile radius of the
parks, and % resided within a 100-mile radius.
The Company owns a site of approximately 110 acres used for the theme park,
and approximately 11 acres used for the pirate-themed water park. Six Flags
Magic Mountain's principal competitors include Disneyland in Anaheim,
California, located approximately 60 miles from the park, Universal Studios
Hollywood in Universal City, California, located approximately 20 miles from the
park, Knott's Berry Farm in Buena Park, California, located approximately 50
miles from the park, and Sea World of California in San Diego, California,
located approximately 150 miles from the park. Six Flags Hurricane Harbor has no
direct competitors in the area.
58
<PAGE>
SIX FLAGS OVER GEORGIA
Six Flags Over Georgia, the 20th largest theme park in the United States
with 1997 attendance of 2.8 million, is located in Mableton, Georgia,
approximately 10 miles outside of Atlanta, Georgia. The Atlanta, Georgia market
provides the park with a permanent resident population of million people
within 50 miles and million people within 100 miles. The Atlanta market is
the number 10 DMA in the United States. Based upon in-park surveys,
approximately % of the visitors to the park in 1997 resided within a 50-mile
radius of the park, and % resided within a 100-mile radius.
Six Flags Over Georgia's primary competitors include Paramount's Carowinds
in Charlotte, North Carolina, located approximately 250 miles from the park, and
Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles from the
park. The Georgia Partnership (as defined below) owns the site of approximately
283 acres, including approximately 87 acres of undeveloped land, all of which is
leased to Six Flags Over Georgia II.
PARTNERSHIP STRUCTURE. On March 18, 1997, Six Flags completed arrangements
pursuant to which Six Flags will manage the Georgia park through 2026. Under the
agreements governing the new arrangements (the "Georgia Agreements"), the
Georgia park is to be owned by Six Flags Over Georgia II of which a Six Flags
subsidiary is the managing general partner. In the second quarter of 1997, two
subsidiaries of Six Flags made a tender offer for partnership interests ("LP
Units") in the 99% limited partner of Six Flags Over Georgia II (the "Georgia
Partnership"), that values the Georgia park at the greater of $250 million or
eight times 1997 EBITDA of the Georgia park (the "Tender Offer Price"). Six
Flags purchased approximately 25% of the LP Units in the 1997 tender offer at an
aggregate price of $60.1 million.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) received minimum annual
distributions of $18.5 million in 1997, which will increase each year thereafter
in proportion to increases in the cost of living; (ii) thereafter, Six Flags
will be entitled to receive from available cash (after provision for reasonable
reserves and after capital expenditures per annum of approximately 6% of prior
year's revenues) a management fee equal to 3% of the prior year's gross
revenues, and, thereafter, any additional available cash will be distributed 95%
to Six Flags and 5% to the limited partner; (iii) commencing in 1998, and on an
annual basis thereafter, Six Flags will offer to purchase additional LP Units at
a price based on a valuation for the park equal to the greater of $250.0 million
or a value derived by multiplying the weighted average four year EBITDA by 8.0;
(iv) in 2026, Six Flags will have the option to acquire all remaining interests
in the Georgia park at a price based on the Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1996 and
December 2026, and (v) the Company is required to make minimum capital
expenditures at the Georgia park during rolling five-year periods, based
generally on 6% of such park's revenues. Cash flow from operations at the
Georgia park will be used to satisfy these requirements first, before any funds
are required from the Company. In connection with the Indemnity Agreement, the
Company is transferring to Time Warner (who has guaranteed the Six Flags
obligations under these arrangements) record title to certain entities that have
purchased and will purchase LP Units, and the Company will receive an assignment
from Time Warner of all cash flow received on such LP Units and will otherwise
control such entities, except in the event of a default by the Company of its
obligations under these arrangements. After all such obligations have been
satisfied, Time Warner is required to transfer to the Company such stock for a
nominal consideration. In addition, the Company will issue preferred stock of
the managing partner of the Georgia Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity. See "Description of Six Flags Agreement."
Six Flags has accounted for the Georgia park as a co-venture and included
the revenues and expenses of the Georgia partnership (excluding partnership
depreciation and interest expense associated with limited partnership debt) in
Six Flags' consolidated financial statements and deducted as expenses the net
amounts distributed to the limited partners. Under the previous partnership
agreement for the Georgia partnership, net cash flow (as defined in the
partnership agreement) was distributed in the following order:
59
<PAGE>
$2.1 million to the limited partner; then $2.1 million to the general partner;
then a management fee to the general partner equal to 3% of the preceding year's
gross revenues; and finally, of the remainder, 30% to the limited partner and
70% to the general partner. In 1997, the Georgia park contributed $ million
of Six Flags' EBITDA, representing % thereof.
SIX FLAGS OVER TEXAS AND SIX FLAGS HURRICANE HARBOR
Six Flags Over Texas, the 16th largest theme park in the United States with
1997 attendance of 2.9 million, and the separately gated Six Flags Hurricane
Harbor, the 7th largest water park in the United States with 1997 attendance of
558,000, are located across Interstate 30 from each other in Arlington, Texas,
between Dallas and Fort Worth, Texas. The Dallas/Fort Worth market provides the
parks with a permanent resident population of million people within 50 miles
and million people within 100 miles. The Dallas/Fort Worth market is the
number 8 DMA in the United States. Based upon in-park surveys, approximately
% of the visitors to the parks in 1997 resided within a 50-mile radius of
the park, and % resided within a 100-mile radius.
Six Flags Hurricane Harbor includes a year-round family entertainment center
named "Funsphere," which includes a laser tag facility, a games arcade, two
go-cart tracks, a miniature golf course, batting cages and other attractions.
Funsphere does not charge front gate admission; attractions are offered on a
pay-as-you-play basis.
The Texas Partnership (defined below) owns the site of approximately 197
acres used for the theme park, and the Company owns approximately an additional
49 acres, of which approximately 18 acres are currently used for Hurricane
Harbor, seven acres are used for Funsphere (an adjacent family entertainment
center), and 22 acres remain undeveloped. Six Flags Over Texas' principal
competitors include Sea World of Texas and the Company's Six Flags Fiesta Texas,
both located in San Antonio, Texas, approximately miles from the park. Six
Flags Hurricane Harbor has no direct competitors in the area.
Six Flags Over Texas is owned by Texas Flags, Ltd. (the "Texas
Partnership"), a Texas limited partnership of which the 1% general partner is a
wholly-owned subsidiary of Six Flags, and the 99% limited partner is Six Flags
Over Texas Fund, Ltd., a Texas limited partnership (the "Texas Limited Partner")
which is unaffiliated with Six Flags. Under the terms of the prior partnership
agreement, the Texas Partnership was scheduled to dissolve on December 31, 1997,
unless 66 2/3% of the Texas Investors voted in favor of continuing the
partnership.
In December 1997, Six Flags completed arrangements pursuant to which it will
manage Six Flags Over Texas through 2027. The key elements of the new
arrangements are as follows: (i) the Texas Limited Partner will receive minimum
annual distributions of $27.7 million in 1998, increasing each year thereafter
in proportion to increases in the cost of living; (ii) thereafter, Six Flags
will be entitled to receive from available cash (after provision for reasonable
reserves and after capital expenditures per annum of approximately 6.0% of prior
year's revenues) a management fee equal to 3% of the prior year's gross
revenues, and, thereafter, any additional available cash will be distributed
92.5% to Six Flags and 7.5% to the Texas Limited Partner; (iii) in the first
quarter of 1998, Six Flags made a tender offer for partnership units ("LP
Units") in the Texas Limited Partner that values the park at the greater of
approximately $374.8 million or 8.5 times 1997 EBITDA of the park (the "Tender
Offer Price"); (iv) commencing in 1999, and on an annual basis thereafter, Six
Flags will offer to purchase LP Units at a price based on a valuation for the
park equal to the greater of $374.8 million or a value derived by multiplying
the weighted-average four year EBITDA of the park by 8.5; (v) in 2027 Six Flags
and its affiliates will have the option to acquire all remaining interests in
the park at a price based on the Tender Offer Price, increased in proportion to
the increase in the cost of living between December 1997 and December 2027; and
(vi) the Company is required to make minimum capital expenditures at the Texas
park during rolling five-year periods, based generally on 6% of such park's
revenues. Cash flow from operations at the Texas park will be used to satisfy
60
<PAGE>
these requirements first, before any funds are required from the Company. Six
Flags purchased approximately % of the LP units in the 1998 tender offer at
an aggregate price of $ million. In connection with the Indemnity
Agreement, the Company is transferring to Time Warner (who has guaranteed the
Six Flags obligations under these arrangements) record title to certain entities
that have purchased and will purchase LP Units and the Company will receive an
assignment from Time Warner of all cash flow received on such LP Units and will
otherwise control such entities, except in the event of a default by the Company
of its obligations under these arrangements. After all such obligations have
been satisfied, Time Warner is required to transfer to the Company such stock
for a nominal consideration. In addition, the Company will issue preferred stock
of the managing partner of the Texas Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity. See "Description of Six Flags Agreement."
Six Flags has accounted for the park as a co-venture and included the
revenues and expenses of the Texas Partnership (excluding partnership
depreciation and interest expense associated with limited partnership debt) in
its consolidated financial statements and deducted as expenses the net amounts
distributed to the Texas Limited Partner. Under the previous partnership
agreement for the Texas Partnership, net cash flow (as defined in the
partnership agreement) is distributed 30% to the limited partner and 70% to the
general partner. The 70%--30% split became effective after the limited partner
received cumulative net cash flow distributions from the Texas Partnership
subsequent to its formation equal to an aggregate amount of $110 million. In
1997, the park contributed $ million of Six Flags' EBITDA, representing %
thereof.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 33rd largest theme park in the United States with
1997 attendance of 1.7 million, is located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of million people within 50 miles and
million people within 100 miles. The St. Louis market is the number 21 DMA in
the United States. Based upon in-park surveys, approximately % of the
visitors to the park in 1997 resided within a 50-mile radius of the park, and
% resided within a 100-mile radius.
The Company owns a site of approximately 499 acres used for the theme park
operations. Six Flags St. Louis competes with Paramount's Kings Island, located
near Cincinnati, Ohio, approximately 350 miles from the park; Cedar Point,
located in Sandusky, Ohio, approximately 515 miles from the park; Silver Dollar
City, located in Branson, Missouri, approximately 250 miles from the park, and
Six Flags Great America, the Company's park located near Chicago, Illinois,
approximately 320 miles from the park.
61
<PAGE>
MARKETING AND PROMOTION
The Company attracts visitors through national and local multi-media
marketing and promotional programs for each of its parks. The national programs
are designed to market and enhance the Six Flags brand name. Local programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Marketing programs are
supervised by the Company's Vice President for Marketing, with the assistance of
the Company's senior management and its national advertising agency.
The Company also develops partnership relationships with well-known national
and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing approximately 36% of aggregate
attendance in 1997 at the eleven parks owned by Premier during that season. Each
park has a group sales and pre-sold ticket manager and a well-trained sales
staff dedicated to selling multiple group sales and pre-sold ticket programs
through a variety of methods, including direct mail, telemarketing and personal
sales calls. Historically, Premier has been successful in increasing group sales
and pre-sold tickets at its existing and acquired parks.
The Company has also developed effective programs for marketing season pass
tickets. Season pass sales establish a solid attendance base in advance of the
season, thus reducing exposure to inclement weather. Additionally, season pass
holders often bring paying guests and generate "word-of-mouth" advertising for
the parks. The increased in-park spending which results from season passes is
not offset by incremental operating expenses, since such expenses are relatively
fixed during the operating season. During 1997, 20.6% of visitors to the eleven
parks then owned by the Company utilized season passes.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, since such expenses are relatively fixed
during the operating season. In 1997, approximately 77% of patrons at the eleven
parks then owned by the Company were admitted at a discount rate and, for the
year ended December 31, 1997, approximately % of the Company's revenue was
attributable to in-park spending.
The Company also implements promotional programs as a means of targeting
specific market segments and geographic locations not reached through its group
or retail sales efforts. The promotional programs utilize coupons, sweepstakes,
reward incentives and rebates to attract additional visitors. These programs are
implemented through direct mail, telemarketing, direct response media,
sponsorship marketing and targeted multi-media programs. The special promotional
offers are usually for a limited time and offer a reduced admission price or
provide some additional incentive to purchase a ticket, such as combination
tickets with a complementary location.
LICENSES
Pursuant to the License Agreement, the Company has the exclusive right for a
term through 2053 to use Warner Bros. and DC Comics characters in theme parks
throughout the United States and Canada (other than the Las Vegas metropolitan
area). In particular, the License Agreement entitles the Company to use, subject
to customary approval rights of Warner Bros., and in limited circumstances,
approval rights of certain third parties, all animated cartoon and comic book
characters that Warner Bros. and DC Comics have the right to license, including
as of the date hereof, BATMAN, SUPERMAN, BUGS BUNNY, DAFFY DUCK,
62
<PAGE>
TWEETY BIRD and YOSEMITE SAM, and will include the right to sell merchandise
using the characters. The license fee is fixed until 2005, and thereafter, the
license fee will be subject to periodic scheduled increases and will be payable
on a per-theme park basis. In addition, the Company will be required to pay a
royalty fee on merchandise sold that uses the licensed characters. Six Flags is
also a party to certain additional license agreements with Warner Bros. and Time
Warner concerning, among others, HBO BACKLOT COMMISSARY and SPORTS ILLUSTRATED
FESTIVAL. Warner Bros. has the right terminate the License Agreement if any
persons involved in the movie or television industries or party to a material
judicial proceeding pending against Time Warner obtain control of the Company.
PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States and Europe. Each of the Company's parks is operated to the extent
practicable as a separate operating division of the Company in order to maximize
local marketing opportunities and to provide flexibility in meeting local needs.
Each park is managed by a general manager who reports to one of the Company's
[three] Executive Vice Presidents (each of whom report to its Chief Operating
Officer) and is responsible for all operations and management of the individual
park. Local advertising, ticket sales, community relations and hiring and
training of personnel are the responsibility of individual park management in
coordination with corporate support teams.
Each of the Company's parks is managed by a full-time, on-site management
team under the direction of the general manager. Each such management team
includes senior personnel responsible for operations and maintenance, marketing
and promotion, human resources and merchandising. Park management compensation
structures are designed to provide incentives (including stock options and cash
bonuses) for individual park managers to execute the Company's strategy and to
maximize revenues and operating cash flow at each park. The Company's nine
general managers (before the Six Flags Acquisition) have an aggregate of
approximately 200 years experience in the industry, including approximately 80
years at parks owned or operated by Premier.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for theme events (such as
Hallowscream, Fright Fest-Registered Trademark-, Oktoberfest and Holiday in the
Park-Registered Trademark-). Due to their location, certain Six Flags Parks have
longer operation seasons. Typically, the parks charge a basic daily admission
price, which allows unlimited use of all rides and attractions, although in
certain cases special rides and attractions require the payment of an additional
fee. The Company's family entertainment centers are open year-round and do not
charge an admission price.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company purchases
both new and used rides. In addition, the Company rotates rides among its parks
to provide fresh attractions. The Company believes that the introduction of new
rides is an important factor in promoting each of the parks in order to achieve
market penetration and encourage longer visits, which lead to increased
attendance and in-park spending. In addition, the Company generally adds theming
to acquired parks and enhances the theming and landscaping of its existing parks
in order to provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to
63
<PAGE>
drive significant attendance growth at the parks and to provide an appropriate
complement of entertainment value, depending on the size of a particular market.
As an individual park begins to reach an appropriate attendance penetration for
its market, management generally plans a new ride or attraction every three to
four years in order to enhance the park's entertainment product.
MAINTENANCE AND INSPECTION
The Company's rides are inspected daily by maintenance personnel during the
operating season. These inspections include safety checks, as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of the Company and the individual parks evaluate
the risk aspects of each park's operation. Potential risks to employees and
staff as well as to the public are evaluated. Contingency plans for potential
emergency situations have been developed for each facility. During the
off-season, maintenance personnel examine the rides and repair, refurbish and
rebuild them where necessary. This process includes x-raying and magnafluxing (a
further examination for minute cracks and defects) steel portions of certain
rides at high-stress points. The Company has approximately full-time
employees who devote substantially all of their time to maintaining the parks
and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs an annual inspection of each park
and all attractions and related maintenance procedures. The result of insurance
inspections are written evaluation and inspection reports, as well as written
suggestions on various aspects of park operations. State inspectors also conduct
annual ride inspections before the beginning of each season. Other portions of
each park are also subject to inspections by local fire marshals and health and
building department officials. Furthermore, the Company uses [Ellis &
Associates] as water safety consultants at its parks in order to train life
guards and audit safety procedures.
EMPLOYEES
The Company employs approximately full-time employees and
approximately seasonal employees during the operating season. In this
regard, the Company competes with other local employers for qualified student
and other candidates on a season-by-season basis. As part of the seasonal
employment program, the Company employs a significant number of teenagers, which
subjects the Company to child labor laws. The Company is not subject to federal
or certain applicable state minimum wage rates in respect of its seasonal
employees. However, the recent increase in the federal or any applicable state
minimum wage rate could result over time in increased compensation expense for
the Company as it relates to these employees as a result of competitive factors.
Approximately % of the Company's full-time and approximately % of its
seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in (Six Flags Over
Georgia and Six Flags Over Texas), December 1999 (Six Flags Great Adventure),
January 2000 (Six Flags St. Louis) and (Marine World). The Company has
never experienced any work stoppages, and believes that it has a strong
relationship with its employees and unions.
INSURANCE
The Company maintains insurance of the type and in amounts that it believes
are commercially reasonable and that are available to businesses in its
industry. Premier Operations maintains multi-layered general liability policies
that provide for excess liability coverage of up to $25.0 million per
occurrence. By virtue of self-insured retention limits, Premier Operations is
required to pay the first $50,000 of loss per occurrence. Six Flags maintains
multi-layered general liability policies that provide for excess liability
coverage of up to $175.0 million per occurrence. By virtue of self-insured
retention limits ($500,000 per
64
<PAGE>
occurrence) and first dollar coverage by a captive insurance company, Six Flags
or its wholly-owned insurance company subsidiary is required to pay the first $2
million of loss per occurrence. The Company's combined cost for insurance and
for self-insured claims for 1997 was $ million compared to $
million in 1996 and $ million in 1995. The Company also maintains fire
and extended coverage, workers' compensation, business interruption and other
forms of insurance typical to businesses in its industry. The fire and extended
coverage policies insure the Company's real and personal properties (other than
land) against physical damage resulting from a variety of hazards.
LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose it
to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the number of such events resulting in liability significantly increased, or if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
On March 19, 1997, SFTP, and its wholly-owned subsidiary Six Flags Over
Georgia, Inc. (collectively, the "Six Flags Parties") commenced a declaratory
judgment action in the Superior Court of Gwinnett County, Georgia, entitled Six
Flags Over Georgia, Inc. and Six Flags Theme Parks, Inc. v. Six Flags Fund, Ltd.
and Avram Salkin, as Trustee of the Claims Trust. The Six Flags Parties sought,
among other things, a declaration and determination of the rights and
obligations of the partners of Six Flags Over Georgia, L.P., with respect to
certain disputed partnership affairs and an accounting of all partnership
affairs. On April 21, 1997, defendants Six Flags Fund, Ltd. and its affiliates
(collectively, the "SFOG Fund Parties") filed a motion to dismiss the
declaratory judgment action as well as an answer and counterclaim naming SFEC
and Time Warner Entertainment Company, L.P. as additional
counterclaim-defendants. The counterclaim seeks imposition of a constructive
trust and an accounting, compensatory damages of in excess of $250 million and
unspecified punitive damages for alleged breaches of fiduciary duty, conversion,
fraud and conspiracy allegedly committed by the counterclaim-defendants in
connection with the management of the Six Flags Over Georgia.
On June 9, 1997, the parties entered into a Consent Order in which they
agreed, among other things, to realign the parties. An Amended Complaint was
then filed by the SFOG Fund Parties as the newly-aligned plaintiffs against the
Six Flags Parties in which the same substantive claims were asserted. The Six
Flags Parties filed their answer denying liability and asserting several
affirmative defenses on July 24, 1997. The Six Flags Parties intend to
vigorously contest the allegations of the complaint.
The Sellers have agreed to indemnify the Company from any and all
liabilities arising from these proceedings.
65
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to the
directors, executive officers and key employees of the Company or its
subsidiaries.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- --------------------------------- --------- ------------------------------------------------------------------------
<S> <C> <C>
Kieran E. Burke.................. 40 Chairman and Chief Executive Officer; Director
Gary Story....................... 42 President and Chief Operating Officer; Director
James F. Dannhauser.............. 45 Chief Financial Officer; Director
Hue W. Eichelberger.............. 39 Executive Vice President
James C. Bouy.................... 56 Vice President, General Manager, Elitch Gardens
Jeffrey A. Lococo................ 41 Vice President, General Manager, Geauga Lake
Richard A. McCurley.............. 38 Vice President, General Manager, Waterworld
Bradley Y. Paul.................. 50 Vice President, General Manager, Darien Lake
Traci E. Blanks.................. 36 Vice President of Marketing
David Thomas..................... 40 Vice President of Entertainment
Richard A. Kipf.................. 63 Vice President of Administration, Corporate Secretary
John Gannon...................... 40 Vice President of Finance
Russell Kuteman.................. 45 Vice President of Finance
Paul A. Biddelman................ 52 Director
Michael E. Gellert............... 66 Director
Jack Tyrrell..................... 51 Director
Sandy Gurtler.................... 48 Director
Charles R. Wood.................. 83 Director
</TABLE>
KIERAN E. BURKE has served as Chief Executive Officer and a Director of the
Company since October 1989 and Chairman of the Board since June 1994. From 1989
through June 1994, he was President of Premier. Mr. Burke also serves as a
director of Blue Ridge Real Estate Company and Big Boulder Corporation. Mr.
Burke was an investment banker prior to becoming President of Premier. Mr. Burke
is a member of the board of directors of the International Association of
Amusement Parks & Attractions ("IAAPA").
GARY STORY has served as President and a Director of the Company since June
1994 and as Chief Operating Officer since January 1992. From January 1992
through June 1994, he also served as Premier's Executive Vice President. Prior
to that time, he had been General Manager of Frontier City for more than five
years. From 1983 through 1984, Mr. Story served as General Manager of Luna Park,
an amusement park in Sydney, Australia, during its redevelopment as a theme park
and from 1981 through 1983 he served as General Manager of Diversiones del
Reino, an amusement park in Mexico City. From 1972 through 1981, Mr. Story
served in various capacities with Six Flags. Mr. Story is a former member of the
board of directors of IAAPA.
JAMES F. DANNHAUSER became Chief Financial Officer of the Company in
October 1995 and has served as a Director of Premier since December 1992. From
1990 through June 1996, Mr. Dannhauser was a managing director of Lepercq, de
Neuflize & Co. Incorporated, an investment banking firm ("Lepercq"). Mr.
Dannhauser is a member of the board of directors of Lepercq.
HUE W. EICHELBERGER has served as Executive Vice President since 1996;
prior thereto he served as Vice President and General Manager of Adventure World
since 1992. From 1991 through 1992, he served as Park Manager of White Water
Bay. From 1988 through 1991, he was Associate Director of Corporate Development
at Silver Dollar City, Inc. Prior thereto, Mr. Eichelberger served as General
Manager of White Water (a water park in Grand Prairie, Texas) and FantaSea (a
water park in Wichita, Kansas).
66
<PAGE>
JAMES C. BOUY served as Vice President and General Manager of Geauga Lake
since 1994 and became General Manager of Elitch Gardens following the Denver
Acquisition. Prior thereto, from 1992 through 1994, he served as Vice President
and General Manager of Kennywood Park in Pittsburgh, Pennsylvania. From 1985
through 1991, Mr. Bouy was employed by Funtime as Vice President and General
Manager of Darien Lake. Prior thereto, from 1975 through 1981, he was employed
by the Marriott Corporation, where his responsibilities included serving as
Chief Operating Officer for The Great American Theme Park in Gurnee, Illinois
and The Great American Theme Park in Santa Clara, California.
JEFFREY A. LOCOCO has served as Vice President and General Manager of
Wyandot Lake since 1989 and became the General Manager of Geauga Lake following
the Denver Acquisition. From 1982 through 1989, he served as Director of
Marketing and Sales of Geauga Lake. From 1980 through 1982, Mr. Lococo served as
Regional Sales Manager with Marriott's Great America Theme Park.
RICHARD A. MCCURLEY has served as Vice President and General Manager of
Frontier City and White Water Bay since 1994 and became General Manager of
Waterworld following the California Acquisition. He joined Premier in 1992 as
Director of Revenue for Frontier City and White Water Bay and, during that year,
transferred to become Director of Revenue for Adventure World. From 1985 through
1992, Mr. McCurley was Food Service Manager and later Food Service Director at
Knotts Berry Farms. Prior to that period, he spent six years with Worlds of Fun,
a major theme park in Kansas City, Missouri, ultimately serving as Director of
Food Services.
BRADLEY Y. PAUL has served as Vice President and General Manager of Darien
Lake since 1991. From 1984 through 1991 he served as Marketing Director of
Darien Lake.
TRACI E. BLANKS has served as Vice President of Marketing since 1995. From
1992 through 1994, she served as Vice President Marketing for Frontier City and
White Water Bay. From 1986 through 1992, she served as Director of Marketing for
Frontier City, and as such was responsible for all marketing and group sales
programs. From 1986 through 1987, she also served as Manager of Advertising and
Promotions for Frontier City.
DAVID THOMAS has served as Vice President of Entertainment since 1993. From
1987 through 1993, he was responsible for the Company's show productions
(including booking national touring acts to appear at the parks) as well as the
staging of numerous festivals including Oktoberfest and Hallowscream. Prior to
1987, he served as President of Silvertree Productions, producing over forty
stage shows, musicals, stunt spectaculars and magic illusion presentations.
RICHARD A. KIPF has served as Corporate Secretary of the Company (or its
predecessors) since 1975 and has served as Vice President of Administration
since 1994.
PAUL A. BIDDELMAN has served as a Director of the Company since December
1992. Since April 1992, Mr. Biddelman has been treasurer of Hanseatic
Corporation ("Hanseatic"), a private investment company. From January 1991
through March 1992, Mr. Biddelman was managing director of Clements Taee
Biddelman Incorporated, a financial advisory firm. Mr. Biddelman also serves as
a director of Electronic Retailing Systems International, Inc., Insituform
Technologies, Inc., Celadon Group, Inc., Petroleum Heat and Power Co., Inc. and
Star Gas Corporation (general partner of Star Gas Partners, L.P.).
67
<PAGE>
MICHAEL E. GELLERT has served as a Director of the Company since March
1989. He previously served as a Director of Premier and as a Trustee of Tierco
from 1979 until 1986. From June 1989 through June 1994, he also served as the
Chairman of the Board of Premier. Mr. Gellert is a general partner of Windcrest
Partners ("Windcrest"), a New York limited partnership. Windcrest, the principal
business of which is private investing, is an affiliate of Premier. Mr. Gellert
also serves as a director of Devon Energy Corp., Humana Inc., Seacor Holdings,
Inc., Regal Cinemas, Inc. and The Putnam Trust Company of Greenwich Advisory
Board of The Bank of New York.
JACK TYRRELL has served as a Director of Premier since December 1992. For
more than five years, Mr. Tyrrell has been a general partner of Lawrence Venture
Partners, a general partnership, the principal business of which is that of
acting as general partner of Lawrence, Tyrrell, Ortale & Smith ("LTOS"), a
private investment limited partnership. Mr. Tyrrell is also a general partner of
LTOS II Partners, a general partnership, the principal business of which is that
of acting as general partner of Lawrence, Tyrrell, Ortale & Smith II, L.P.
("LTOS II"), a private investment limited partnership. Mr. Tyrrell is also a
general partner of Richland Partners, L.P., a limited partnership, the principal
business of which is that of acting as general partner of Richland Ventures,
L.P. ("Richland"), a private investment limited partnership. In addition, Mr.
Tyrrell is a general partner of Richland Partners II, L.P., a limited
partnership, the principal business of which is that of acting as general
partner of Richland Ventures II, L.P. ("Richland II"), a private investment
limited partnership. Mr. Tyrrell also serves as a director of National Health
Investors, Inc. and Regal Cinemas, Inc.
SANDY GURTLER has served as a Director of the Company since 1997. Mr.
Gurtler is the chief executive officer, a director and a shareholder of Chilcott
Entertainment Corp., which was the general partner of the owner of Elitch
Gardens Amusement Park in Denver, Colorado prior to the acquisition of the park
by the Company in October 1996. Mr. Gurtler also serves as a consultant to the
Company.
CHARLES R. WOOD has served as a Director of the Company since 1997. Mr.
Wood is the President and sole shareholder of Storytown USA, Inc. and Fantasy
Rides Corporation, which collectively owned The Great Escape and Splashwater
Kingdom in Lake George, New York prior to the acquisition of the park by the
Company in December 1996. Mr. Wood also serves as a consultant to the Company
and owns, directly or through wholly-owned corporations, a variety of businesses
in the Lake George area, including real estate, motels, restaurants and an
action park.
68
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of January 1, 1998
(except as noted below) as to Common Stock owned by (a) each of the Company's
current directors and named executive officers; (b) all current directors and
officers of the Company as a group; and (c) each person who, to the best of the
Company's knowledge, beneficially owned on that date more than 5% of the
outstanding Common Stock. The information presented does not reflect any
prospective purchase of Common Stock in the Offering by the named persons.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NUMBER OF SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- -------------------------------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Kieran E. Burke(1)........................................................ 314,877 1.6
Paul A. Biddelman(2)...................................................... 2,657,071 14.0
James F. Dannhauser(3).................................................... 76,665 * *
Michael E. Gellert(4)..................................................... 1,368,861 7.2
Gary Story(5)............................................................. 143,000 * *
Jack Tyrrell(6)........................................................... 691,241 3.8
Sandy Gurtler............................................................. -- -- --
Charles R. Wood........................................................... 9,091(7) * *
Robert J. Gellert(8)......................................................
122 East 42nd Street
New York, New York 10168 1,254,553 6.6
Windcrest Partners(9).....................................................
122 East 42nd Street
New York, New York 10168 1,136,025 5.9
Hanseatic Corporation(10).................................................
Wolfgang Traber
450 Park Avenue
New York, New York 10152 2,657,071 14.0
All directors and officers as a group(11) (14 persons).................... 6,302,405 32.5
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes 75,637 shares of Common Stock and warrants and options to purchase
239,238 shares of Common Stock for his own account as to which Mr. Burke has
sole voting and investment power. Does not include 258,675 shares under the
unvested portion of options and restricted shares granted.
(2) Represents shares of Common Stock beneficially owned by Hanseatic
Corporation ("Hanseatic"), of which Mr. Biddelman is treasurer. See footnote
(10) below.
(3) Includes 32,665 shares of Common Stock and options to purchase 44,000 shares
of Common Stock. Does not include 154,325 shares under the unvested portion
of options and restricted shares granted.
(4) Includes 232,836 shares of Common Stock, as to which Mr. Gellert has sole
voting and investment power. Also includes 1,136,025 shares of Common Stock
beneficially owned by Windcrest Partners ("Windcrest") which shares voting
and investment power with its general partners, Michael E. Gellert and
Robert J. Gellert. Also includes 28,717 shares of Common Stock beneficially
owned by Michael E. Gellert's daughter who resides in his household. Mr.
Gellert disclaims beneficial ownership of all shares beneficially owned by
his daughter.
(5) Includes 25,000 shares of common stock and options to purchase 118,000
shares of Common Stock. Does not include 197,000 shares under the unvested
portion of options and restricted shares granted.
69
<PAGE>
(6) Includes 9,794 shares of Common Stock for his own account; 311,940 shares of
Common Stock beneficially owned by Lawrence, Tyrrell, Ortale & Smith II,
L.P. ("LTOS II"); and 200,729 shares of Common Stock beneficially owned by
Richland Ventures, L.P. ("Richland") and 168,778 shares of Common Stock
beneficially owned by Richland Ventures II, L.P. ("Richland II"). Mr.
Tyrrell, who is a general partner of the respective general partners of LTOS
II, Richland and Richland II, disclaims beneficial ownership of all shares
held by such entities.
(7) Represents shares held by Double "H" Hole in the Woods Ranch, Inc., a
charitable organization of which Mr. Wood is Chairman of the Board.
(8) Includes 2,514 shares of Common Stock for his own account, as to which he
has sole voting and investment power; 40,351 shares of Common Stock as agent
for 26 other persons and entities with whom he shares voting and investment
power; 2,168 shares of Common Stock as trustee for Michael E. Gellert's
sister with respect to which he shares voting and investment power with
Peter J. Gellert (who holds these shares as agent); 5,558 shares of Common
Stock as trustee of irrevocable trusts for the benefit of Michael E.
Gellert's children as to which he has sole voting and investment power;
1,083 shares of Common Stock as trustee of an irrevocable trust for the
benefit of his brother as to which he has sole voting and investment power;
1,854 shares of Common Stock as trustee of a trust for the benefit of a
second cousin as to which he has sole voting and investment power; 1,136,025
shares of Common Stock owned by Windcrest Partners ("Windcrest"), which
shares voting and investment power with its general partners, Michael E.
Gellert and Robert J. Gellert; and 65,000 shares of Common Stock
beneficially owned by Lexfor Corporation of which he is President and a
director, as to which he shares voting and investment power with the other
officers and directors. Michael E. Gellert disclaims beneficial ownership of
the shares of Common Stock owned by the trusts for the benefit of his
children.
(9) Windcrest shares voting and investment power with its general partners,
Michael E. Gellert and Robert J. Gellert.
(10) Represents shares of Common Stock beneficially owned by Hanseatic. Mr.
Traber holds a majority of the shares of capital stock of Hanseatic and thus
may be deemed to beneficially own such Common Stock. Of such shares,
2,588,695 shares of Common Stock are held by Hanseatic Americas LDC, a
Bahamian limited duration company in which the sole managing member is
Hansabel Partners LLC, a Delaware limited liability company in which the
sole managing member is Hanseatic. The remaining shares of Common Stock are
held by Hanseatic for discretionary customer accounts. Information has been
derived from Amendment No. 7 to Schedule 13D, dated November 10, 1997.
(11) The share amounts listed include shares of Common Stock that the following
persons have the right to acquire within 60 days from December 1, 1997
(Kieran E. Burke, 239,238 shares (see footnote (1)); James F. Dannhauser,
44,000 shares (see footnote (3)); Gary Story, 118,000 shares (see footnote
(5)); and all directors and officers as a group, 442,839 shares.
70
<PAGE>
DESCRIPTION OF SIX FLAGS AGREEMENT
GENERAL
On February 9, 1998, the company presently named Premier Parks Inc., certain
wholly-owned subsidiaries of Premier, SFEC and each of the Sellers entered into
the Six Flags Agreement. The Six Flags Agreement provides for the Six Flags
Acquisition, pursuant to which Premier will acquire, by merger, all of the
capital stock of SFEC from the Sellers for an amount (such amount, the "Capital
Stock Consideration") equal to (i) $965 million, adjusted as described below
(the "Preliminary Base Amount"), MINUS (ii) the excess of the SFEC Option
Consideration (as defined below) over $5 million. The Capital Stock
Consideration will be payable in Seller Depositary Shares representing interests
in up to $200 million, but not less than $100 million, of the Seller Preferred
Stock, with the balance payable in cash. The net proceeds of the Offerings will
be used, in part, to fund the cash portion of the Capital Stock Consideration.
Consummation of the Six Flags Acquisition is a condition to the Offerings.
The Preliminary Base Amount will be adjusted as follows. If the actual
tangible net worth of SFEC as of the end of its 1997 fiscal year exceeds
$ (the estimated tangible net worth of SFEC as of the end of its 1997
fiscal year), the Preliminary Base Amount will be increased by an amount equal
to such excess. If, however, such actual tangible net worth is less than
$ , then the Preliminary Base Amount will be reduced accordingly.
THE MERGERS
Prior to the Six Flags Acquisition, and pursuant to the Premier Merger, the
company presently named Premier Parks Inc. will merge with a wholly-owned
subsidiary of Premier Parks Holdings Corporation in accordance with Section
251(g) of the Delaware General Corporation Law. As a result of the Premier
Merger, holders of shares of Common Stock of Premier will become, on a
share-for-share basis, holders of Common Stock of Premier Parks Holdings
Corporation, and Premier will become a wholly-owned subsidiary of Premier Parks
Holdings Corporation. On the effective date of the Premier Merger, Premier will
change its name to Premier Parks Operations Inc., and Premier Parks Holdings
Corporation will change its name to Premier Parks Inc.
In addition to the share-for-share exchange, each option or similar right
exercisable for capital stock of Premier Operations outstanding immediately
prior to the Reorganization automatically will be converted into an option or
similar right exercisable for a number of shares of the Common Stock equal to
the number of shares of capital stock of Premier for which such option or
similar right was exercisable immediately prior to the Premier Merger.
Immediately following the closing of the Offerings, SFEC and a wholly-owned
subsidiary of the Company will be merged pursuant to the Six Flags Acquisition,
with SFEC continuing as the surviving corporation and as a wholly-owned
subsidiary of the Company. Pursuant to the Six Flags Acquisition, (i) each share
of capital stock of SFEC outstanding immediately prior to the Six Flags
Acquisition, all of which are held by the Sellers, automatically will be
converted into the right to receive a pro rata share of the Capital Stock
Consideration based on the aggregate number of such shares (together with a cash
payment in lieu of any fractional shares of Seller Preferred Stock to which the
Sellers would have otherwise been entitled as part of the Capital Stock
Consideration) and (ii) each option or similar right exercisable for capital
stock of SFEC outstanding immediately prior to the Six Flags Acquisition
automatically will be cancelled in exchange for a cash payment by SFEC (all such
cash payments together, the "SFEC Option Consideration").
71
<PAGE>
CONDITIONS
The Six Flags Agreement contains customary closing conditions of the
parties. In addition, the Six Flags Acquisition is subject to the condition that
the Company will raise equity capital in an amount at least equal to the
difference between $900.0 million and the value of the Seller Preferred Stock
issued to the Sellers pursuant to the Six Flags Acquisition.
INDEMNIFICATION
The Six Flags Agreement contains customary representations, warranties,
covenants and other agreements of the parties. The Sellers have agreed to
indemnify and hold harmless the Company against certain damages, claims and
liabilities (and the cost and expenses related thereto) suffered by the Company
in respect of (i) any breach of or inaccuracy in any representation or warranty
contained in the Six Flags Agreement made by any Seller individually, or by the
Sellers collectively, and (ii) any breach or violation of any covenant or
agreement made by any Seller for itself or on behalf of SFEC or its subsidiaries
contained in the Six Flags Agreement or any documents delivered at the closing
thereunder.
Generally, no party may make a claim for indemnification for breaches of
representations and warranties and of covenants and other agreements as
described in the immediately preceding paragraph after the date (the "Claims
Termination Date") which is the earlier of (i) the 45th day following the date
on which audited annual financial statements of the Registrant and its
consolidated subsidiaries for the 1998 fiscal year are first made available to
the Registrant and (ii) April 30, 1999.
The Company may not make any claims for indemnification for breaches of any
of the Sellers' representations and warranties until the aggregate amount of the
damages suffered exceeds $5 million (the "Basket Amount"), whereupon the Sellers
are obligated to pay in full all such amounts for indemnification, including the
Basket Amount. The total maximum amount that the Sellers are required to pay for
indemnification for breaches of the Sellers' representations and warranties
under the Six Flags Agreement is $25 million. Upon consummation of the Six Flags
Acquisition, the Company will deposit $25 million in cash into an escrow fund
under a General Indemnity Escrow Agreement to be entered into by the Company
with the Sellers and certain holders of options exercisable for capital stock of
SFEC. A portion of such deposit will come from the Capital Stock Consideration
payable to the Sellers, with the balance to come from the SFEC Option
Consideration payable to the optionholders party to the General Indemnity Escrow
Agreement. The escrow fund will be the sole source of payment for the Sellers'
indemnification obligations to the Company for breaches of or inaccuracies in
the Sellers' representations and warranties.
In addition, the Sellers have agreed to indemnify and hold harmless the
Company, pursuant to the Georgia Litigation Indemnity Agreement being entered
into at the closing under the Six Flags Agreement, from any damages, claims and
liabilities (and the costs and expenses related thereto) suffered in connection
with the Georgia Litigation. See "Business--Legal Proceedings."
AGREEMENTS RELATED TO THE SIX FLAGS AGREEMENT
Certain ancillary agreements will be entered into pursuant to the Six Flags
Agreement in connection with the Six Flags Acquisition. See "Business--Licenses"
and "Description of Securities--Registration Rights."
In addition to the ancillary agreements to be entered into in connection
with the Six Flags Acquisition that are described elsewhere herein, SFEC,
certain of SFEC's subsidiaries (together with SFEC, the "SFEC Parties"), Time
Warner, and the Company and a wholly-owned subsidiary of the Company (together,
the "Company Parties") will enter into the Indemnity Agreement. The purpose of
the Indemnity Agreement is to have the SFEC Parties and the Company Parties
provide support for certain payment and performance obligations of Time Warner
and SFEC Parties under the arrangements relating to the Co-Venture Partnerships,
the SFEC Zero Coupon Senior Notes and certain other obligations.
72
<PAGE>
DESCRIPTION OF INDEBTEDNESS
PREMIER CREDIT FACILITY
Borrowings under the Premier Credit Facility, which will be entered into in
March 1998, will be secured by substantially all of the assets of Premier
Operations and its domestic subsidiaries, and guaranteed by such subsidiaries.
The Premier Credit Facility will have an aggregate availability of $300 million
consisting of (i) a five-year $75.0 million revolving credit facility for
working capital and general corporate purposes (the "Revolving Credit
Facility"); (ii) a five-year $100.0 million term loan facility ("Facility B");
and (iii) an eight-year $125.0 million term loan facility ("Facility C" and,
together with Facility B, the "Term Loan Facilities"), in each case, to fund
acquisitions and make capital improvements. As of March , 1998, the
Company had borrowed $ million under Facility . Interest rates per
annum under the Premier Credit Facility are equal to either (a) a base rate
equal to the higher of the Federal Funds Rate plus 1/2% or the prime rate of
Citibank, N.A., in each case, plus the Applicable Margin or (b) the London
Interbank Offered Rate plus the Applicable Margin. The Revolving Credit Facility
will terminate on March , 2003. Borrowings under Facility B will mature on
March , 2003 and borrowings under Facility C will mature on March , 2006;
however, aggregate principal payments and reductions of $10.0 million, $25.0
million, $30.0 million and $35.0 million will be required during the second,
third, fourth and fifth years of Facility B and aggregate principal payments of
$1.0 million each are required in each of the first six years of Facility C in
addition to a $25.0 million payment in year seven and a $94.0 million payment in
year eight.
The Premier Credit Facility will contain restrictive covenants that, among
other things, limit the ability of Premier Operations and its subsidiaries to
dispose of assets; incur additional indebtedness or liens; pay dividends;
repurchase stock; make investments; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates. In addition,
the Premier Credit Facility will require that Premier Operations comply with
certain specified financial ratios and tests, including ratios of total debt to
EBITDA, interest expense to EBITDA, debt service to EBITDA and fixed charges to
EBITDA.
Defaults under the Premier Credit Facility will include (i) failure to repay
principal when due; (ii) failure to pay interest within three days after due;
(iii) default in the performance of certain obligations of Premier Operations'
principal subsidiaries under the Revolving Credit Security Agreement or any
Equipment Security Agreement (as defined thereunder); (iv) failure to comply
with certain covenants, conditions or agreements under the credit agreement
which, in certain cases, continues for 30 days; (v) default by Premier
Operations or any of its principal subsidiaries in respect of any indebtedness
above specified levels; (vi) certain events of bankruptcy; (vii) certain
judgments against Premier Operations or any of its principal subsidiaries;
(viii) the occurrence of a Change in Control (as defined thereunder); (ix) the
assertion of certain Environmental Claims (as defined thereunder); and (x) under
certain circumstances, the failure by Messrs. Burke and Story to serve Premier
Operations in their present positions and the failure to replace them within a
specified time period.
SIX FLAGS CREDIT FACILITY
Borrowings under the Six Flags Credit Facility, which will be entered into
on or prior to the closing of the Six Flags Acquisition, will be secured by
substantially all of the assets of SFTP and its subsidiaries, and guaranteed by
such subsidiaries. The Six Flags Credit Facility will have an aggregate
availability of $472 million consisting of (i) up to $100.0 million under a
Revolving Credit Facility to be used to refinance existing outstanding Six Flags
bank indebtedness and for working capital and other general corporate purposes;
and (ii) up to $372.0 million under Facility B to be used to refinance existing
outstanding Six Flags bank indebtedness and fund acquisitions and make capital
improvements. The Company anticipates that Facility B will be fully funded in
connection with the Six Flags Acquisition. Interest rates per annum under the
Six Flags Credit Facility are equal to either (a) a base rate equal to the
higher of the Federal Funds Rate plus 1/2% or the prime rate of Citibank, N.A.,
in each case, plus the Applicable Margin (as
73
<PAGE>
defined therein) or (b) the London Interbank Offered Rate plus the Applicable
Margin. The Revolving Credit Facility will terminate five years from the closing
of the Six Flags Acquisition. Borrowings under Facility B will mature on
November 30, 2004. However, for Facility B, aggregate principal payments and
reductions of $1.0 million will be required during each of the first, second,
third and fourth years and aggregate principal payments of $25.0 million and
$40.0 million are required in years five and six.
The Six Flags Credit Facility will contain restrictive covenants that, among
other things, limit the ability of SFTP and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends; repurchase stock;
make investments; engage in mergers or consolidations; and engage in certain
transactions with subsidiaries and affiliates. In addition, the Six Flags Credit
Facility will require SFTP to comply with certain specified financial ratios and
tests, including ratios of total debt to EBITDA, interest expense to EBITDA,
debt service to EBITDA and fixed charges to EBITDA.
Defaults under the Six Flags Credit Facility will include (i) failure to
repay principal when due; (ii) failure to pay interest within three days after
due; (iii) default in the performance of certain obligations of SFTP's principal
subsidiaries under the Revolving Credit Security Agreement or any Equipment
Security Agreement (as defined thereunder); (iv) failure to comply with certain
covenants, conditions or agreements under the credit agreement which, in certain
cases, continues for 30 days; (v) default by SFTP or any of its principal
subsidiaries in respect of any indebtedness above specified levels; (vi) certain
events of bankruptcy (vii) certain judgments against SFTP or any of its
principal subsidiaries; (viii) the occurrence of a Change in Control (as defined
thereunder); (ix) the assertion of certain Environmental Claims (as defined
thereunder); and (x) under certain circumstances, the failure by Messrs. Burke
and Story to serve as Chief Executive Officer and Chief Operating Officer of
SFTP and the failure to replace them within a specified time period.
COMPANY SENIOR DISCOUNT NOTES
The Company Senior Discount Notes are senior, unsecured obligations of the
Company, in an aggregate principal amount at maturity sufficient to generate
gross proceeds of $250.0 million. The Company Senior Discount Notes will mature
on , 2008. The Company Senior Discount Notes bear interest at the rate
of % per annum and are not guaranteed by the Company's subsidiaries.
The Company Senior Discount Notes are redeemable, at the Company's option,
in whole or in part, at any time on or after , 2003, at specified
redemption prices, together with accrued and unpaid interest, if any, to the
date of redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture), the Company will be required to make an offer to repurchase the
Company Senior Discount Notes at a price equal to 101% of the accreted value
thereof, plus accrued and unpaid interest, if any, to the date of purchase prior
to , 2003 or 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase on or after , 2003.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indenture relating to the Company Senior Discount Notes.
The Indenture relating to the Company Senior Discount Notes contains
restrictive covenants that, among other things, limit the ability of the Company
to dispose of assets; incur additional indebtedness or liens; pay dividends;
engage in mergers or consolidations; and engage in certain transactions with
subsidiaries and affiliates. Defaults under the applicable Indenture include (i)
failure to pay interest on the Company Senior Discount Notes within 30 days
after such payments are due; (ii) failure to pay principal or premium, if any,
on the Company Senior Discount Notes; (iii) failure to comply for 30 days after
notice with the Company's repurchase obligations upon the occurrence of a Change
of Control, an Asset Sale (as defined in the applicable Indenture) or certain
covenants and failure to comply for 60 days after notice with the other
agreements contained in the applicable Indenture; (iv) the default by the
Company or any of
74
<PAGE>
its subsidiaries in respect of any indebtedness above specified levels; (v)
certain events of bankruptcy or insolvency; and (vi) certain judgements against
the Company or any of its subsidiaries above specified levels.
COMPANY SENIOR NOTES
The Company Senior Notes are senior, unsecured obligations of the Company,
in the aggregate principal amount of up to $280.0 million of which up to $80.0
million will be used to capitalize a three-year overfund account with respect to
the Company Senior Notes. The Company Senior Notes will mature on ,
2008. The Company Senior Notes bear interest at the rate of % per annum and
are not guaranteed by the Company's subsidiaries.
The Company Senior Notes are redeemable, at the Company's option, in whole
or in part, at any time on or after , 2003, at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture) the Company will be required to make an offer to repurchase the
Company Senior Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indenture relating to the Company Senior Notes.
The Indenture relating to the Company Senior Notes contains restrictive
covenants that, among other things, limit the ability of the Company to dispose
of assets; incur additional indebtedness or liens; pay dividends; engage in
mergers or consolidations; and engage in certain transactions with subsidiaries
and affiliates. Defaults under the applicable Indenture include (i) failure to
pay interest on the Company Senior Notes within 30 days after such payments are
due; (ii) failure to pay principal or premium, if any on the Company Senior
Notes; (iii) failure to comply for 30 days after notice with the Company's
repurchase obligations upon the occurrence of a Change of Control, an Asset Sale
(as defined in the applicable Indenture) or certain covenants and failure to
comply for 60 days after notice with the other agreements contained in the
applicable Indenture; (iv) the default by the Company or any of its subsidiaries
in respect of any indebtedness above specified levels; (v) certain events of
bankruptcy or insolvency; and (vi) certain judgments against the Company or any
of its subsidiaries above specified levels.
PREMIER NOTES
The Premier Notes are senior, unsecured obligations of Premier Operations,
in the aggregate principal amount of $215 million, of which $90.0 million will
mature on August 15, 2003 (the 1995 Premier Notes) and $125.0 million will
mature on January 15, 2007 (the 1997 Premier Notes). The 1995 Premier Notes bear
interest at the rate of 12% per annum and the 1997 Premier Notes bear interest
at the rate of 9 3/4% per annum. The Premier Notes are guaranteed on a senior,
unsecured basis by the principal operating subsidiaries of Premier Operations.
The 1995 Premier Notes are redeemable, at Premier Operations' option, in
whole or in part, at any time on or after August 15, 1999, at specified
redemption prices, together with accrued and unpaid interest, if any, to the
date of redemption. The 1997 Premier Notes are redeemable, at Premier
Operations' option, in whole or in part, at any time on or after January 15,
2002, at specified redemption prices, together with accrued and unpaid interest,
if any, to the date of redemption.
Upon the occurrence of a Change of Control (as defined in the relevant
Indenture), Premier Operations will be required to make an offer to repurchase
the Premier Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indentures relating to the Premier Notes.
75
<PAGE>
The Indentures relating to the Premier Notes contain restrictive covenants
that, among other things, limit the ability of Premier Operations to dispose of
assets; incur additional indebtedness or liens; pay dividends; engage in mergers
or consolidations; and engage in certain transactions with subsidiaries and
affiliates. Defaults under these Indentures include (i) failure to pay interest
on the applicable Premier Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with Premier Operations' repurchase
obligations upon the occurrence of a Change of Control and failure to comply for
60 days after notice with the other covenants contained in the applicable
Indenture; (iv) the default by Premier Operations or any of its principal
subsidiaries (the "Note Guarantors") in respect of any indebtedness above
specified levels; (v) certain events of bankruptcy; (vi) certain judgments
against Premier Operations or any Note Guarantor; (vii) any Note Guarantee (as
defined in the Indentures) ceasing to be in full force and effect (except as
contemplated by the terms thereof); and (viii) the denial or disaffirmation by
any Note Guarantor of its obligations under the Indentures or any Note
Guarantee, which continues for 10 days.
SFTP SENIOR SUBORDINATED NOTES
The SFTP Senior Subordinated Notes are unsecured senior subordinated
obligations of SFTP, in an aggregate principal amount of $285.0 million and will
mature on June 15, 2005. The SFTP Senior Subordinated Notes accrete in value
until June 15, 1998, at which time the accreted value will equal 100% of their
principal amount. The SFTP Senior Subordinated Notes bear interest at the rate
of 12 1/4% per annum, payable semiannually on June 15 and December 15 of each
year, commencing December 15, 1998.
The SFTP Senior Subordinated Notes are redeemable, at SFTP's option, in
whole or in part, at any time on or after June 15, 2000 at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption. Upon the occurrence of a Change of Control (as defined in the
applicable Indenture), SFTP is required to make an offer to repurchase the SFTP
Senior Subordinated Notes at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
repurchase. The Six Flags Transactions constitute a Change of Control under the
Indenture relating to the SFTP Senior Subordinated Notes, and the Company will
be required to make an offer to purchase the SFTP Senior Subordinated Notes
within 30 days of the closing of the Six Flags Transactions. The Company does
not expect that it will be required to purchase any material amount of such
Notes pursuant to such offer. See "Risk Factors--Risks Associated with
Substantial Indebtedness."
The Indenture pursuant to which the SFTP Senior Subordinated Notes were
issued contains restrictive covenants that, among other things, limit the
ability of SFTP and its subsidiaries to dispose of assets; incur additional
indebtedness or liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates.
Defaults under this Indenture include (i) failure to pay interest on the
SFTP Senior Subordinated Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with SFTP's repurchase obligations
upon the occurrence of a Change of Control and failure to comply for 60 days
after notice with the other covenants contained in the Indenture; (iv) the
default by SFTP or any Significant Subsidiary (as defined in the applicable
Indenture) in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against SFTP or any Significant
Subsidiary; (vii) any Note Guarantee (as defined in the applicable Indenture)
ceasing to be in full force and effect (except as contemplated by the terms
thereof); and (viii) the denial or disaffirmation by any Note Guarantor of its
obligations under the applicable Indenture or any Note Guarantee, which
continues for 10 days.
76
<PAGE>
SFEC ZERO COUPON SENIOR NOTES
The SFEC Zero Coupon Senior Notes are senior unsecured obligations of SFEC,
in an aggregate principal amount of $192.25 million and will mature on December
15, 1999. The SFEC Zero Coupon Senior Notes accrete in value until December 15,
1999, at which time the accreted value will equal 100% of their principal
amount. There are no periodic payments on the SFEC Zero Coupon Senior Notes. One
of the Sellers has effectively guaranteed the SFEC Zero Coupon Senior Notes, and
the Company has indemnified that Seller in respect of its guarantee. The Company
will use the proceeds of the New SFEC Notes Offering, together with other funds,
to provide for the payment, at or prior to maturity of the SFEC Zero Coupon
Senior Notes. Until so used, such proceeds (or U.S. government obligations
purchased from such proceeds) will be deposited in escrow.
The SFEC Zero Coupon Senior Notes may not be redeemed prior to maturity.
From and after the consummation of the Six Flags Transaction, the
restrictive covenants contained in the indenture pursuant to which the SFEC Zero
Coupon Senior Notes were issued will generally not be applicable to SFEC or its
subsidiaries.
Defaults under this indenture include (i) the failure by SFEC or Time Warner
to comply for 30 days after written notice with any covenant in the applicable
Indenture; (ii) failure to pay, when due, upon final maturity or upon
acceleration, the principal amount of any indebtedness of SFEC or any of its
subsidiaries in excess of $5.0 million, or any indebtedness of Time Warner or
any of its Material Subsidiaries (as defined in the applicable indenture) in
excess of $50 million, if such indebtedness is not discharged within 60 days
after written notice; (iii) certain events of bankruptcy of SFEC or Seller; and
(iv) failure to pay the principal amount of any SFEC Zero Coupon Senior Note at
its maturity date. Accordingly, after the Six Flags Acquisition, such a default
by Time Warner could result in the acceleration of the maturity of the SFEC Zero
Coupon Senior Notes.
NEW SFEC NOTES
The New SFEC Notes are senior, unsecured obligations of SFEC, in the
aggregate principal amount of $170.0 million. The New SFEC Notes will mature on
. The New SFEC Notes bear interest at the rate of % per annum
and are not guaranteed by SFEC's subsidiaries or the Company.
The New SFEC Notes are redeemable, at SFEC's option, in whole or in part, at
any time on or after , at specified redemption prices, together
with accrued and unpaid interest, if any, to the date of redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture), SFEC will be required to make an offer to repurchase the New SFEC
Notes at a price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase. Neither the
Premier Merger nor the Six Flags Acquisition constitutes a Change of Control
under the Indenture relating to the New SFEC Notes.
The Indenture relating to the New SFEC Notes contains restrictive covenants
that, among other things, limit the ability of SFEC to dispose of assets; incur
additional indebtedness or liens; pay dividends; engage in mergers or
consolidations; and engage in certain transactions with subsidiaries and
affiliates. Defaults under the applicable Indenture include (i) failure to pay
interest on the New SFEC Notes within 30 days after such payments are due; (ii)
failure to pay principal or premium, if any on the New SFEC Notes; (iii) failure
to comply for 30 days after notice with SFEC's repurchase obligations upon the
occurrence of a Change of Control, an Asset Sale (as defined in the applicable
Indenture) or certain covenants and failure to comply for 30 days after notice
with the other agreements contained in the applicable Indenture; (iv) the
default by SFEC or any of its subsidiaries, in respect of any indebtedness above
specified levels; (v) certain events of bankruptcy or insolvency; and (vi)
certain judgements against SFEC or any of its subsidiaries above specified
levels.
77
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's authorized capital stock includes 90,000,000 shares of Common
Stock, par value $0.05 per share. Each share of Common Stock entitles the holder
thereof to one vote. Holders of the Common Stock have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors and are entitled to share ratably, as a single class, in all
of the assets of the Company available for distribution to holders of Common
Stock upon the liquidation, dissolution or winding up of the affairs of the
Company. Holders of Common Stock do not have preemptive, subscription or
conversion rights. However, each outstanding share of Common Stock currently has
attached to it one right (a "Right") issued pursuant to a Rights Agreement (the
"Rights Agreement"). Each Right entitles its registered holder to purchase one
one-thousandth of a share of a junior participating series of Preferred Stock
designated to have economic and voting terms similar to those of one share of
Common Stock, as described under "--Rights Plan" below. After the Offerings,
shares of Common Stock will be outstanding and shares will be reserved
for future issuance ( for options and warrants and upon conversion of
the Convertible Preferred Stock).
Bank One Trust Company, N.A., Oklahoma City, Oklahoma, is the transfer agent
and registrar for the Common Stock.
PREFERRED STOCK
The Company's authorized capital stock includes 500,000 shares of Preferred
Stock, par value $1.00 per share. The Preferred Stock may be issued in series,
and shares of each series will have such rights and preferences as are fixed by
the Board of Directors in resolutions authorizing the issuance of that
particular series. In designating any series of Preferred Stock, the Board of
Directors may, without further action by the holders of Common Stock, fix the
number of shares constituting that series and fix the dividend rights, dividend
rate, conversion rights, voting rights (which may be greater or lesser than the
voting rights of the Common Stock), rights and terms of redemption (including
any sinking fund provisions), and the liquidation preferences of such series of
Preferred Stock. Holders of any series of Preferred Stock, when and if issued,
may have priority claims to dividends and to any distributions upon liquidation
of the Company, and other preferences over the holders of the Common Stock.
After giving effect to the Six Flags Transactions, shares of Preferred
Stock will be outstanding. In addition, approximately 206,000 shares (which will
be amended to 20,600 prior to the date of this Prospectus) of Preferred Stock
have been reserved for issuance under the Rights Plan.
MANDATORILY CONVERTIBLE PREFERRED STOCK
Pursuant to the Preferred Stock Offering, the Company will issue Public
Depositary Shares in respect of its Mandatorily Convertible Preferred Stock. The
terms of the Mandatorily Convertible Preferred Stock are described under
"Description of Mandatorily Convertible Preferred Stock."
SELLER PREFERRED STOCK
In connection with the Six Flags Acquisition, the Company will issue to the
Sellers up to Seller Depositary Shares for up to $200 million of Seller
Preferred Stock. The Company has the right to pay cash in lieu of all or a
portion of such shares, provided that if any Seller Depositary Shares are issued
to the Sellers not less than shares (representing not less than $100 million
of the Capital Stock Consideration must be issued). The following is a summary
of the terms of the Seller Preferred Stock.
DIVIDENDS. Subject to the terms of the Company Notes, holders of shares of
the Seller Preferred Stock will be entitled to receive annually, cash dividends
out of funds of the Company legally available for payment, at an annual rate of
% of the $ liquidation value (the "Liquidation Value") per
78
<PAGE>
share. Dividends will be cumulative from the date of original issuance of the
Seller Preferred Stock. The Seller Preferred Stock will rank PARI PASSU as to
dividends with the Mandatorily Convertible Preferred Stock and have priority as
to dividends over the Common Stock and any other series or class of the
Company's stock hereafter issued.
LIQUIDATION RIGHTS. In case of the voluntary or involuntary liquidation,
dissolution or winding up of the Company, holders of shares of Seller Preferred
Stock are entitled to receive the amount equal to the Liquidation Value thereof,
plus an amount equal to any accrued and unpaid dividends to the payment date,
before any payment or distribution is made to the holders of Common Stock or any
other series or class of the Company's stock hereafter issued which ranks junior
as to liquidations rights to the Seller Preferred Stock. The Seller Preferred
Stock will rank PARI PASSU as to liquidation with the Mandatorily Convertible
Preferred Stock.
VOTING RIGHTS. The holders of each share of the Seller Preferred Stock
shall not be entitled to any voting rights, except as required by Delaware law
and except in certain circumstances involving the default by the Company in the
payment of dividends, the authorization of securities having a preference over
the Seller Preferred Stock, charter amendments materially affecting the rights
of the holders or the merger or consolidation of the Company.
CONVERSION RIGHTS. Shares of the Seller Preferred Stock (and thereby the
Seller Depositary Shares) will be convertible, in whole or in part, at any time,
at the option of the holder into shares of Common Stock at a conversion price of
$ per share of Common Stock, subject to adjustment as described below.
The holders of Seller Preferred Stock will be entitled at any time after the
90th day following the date of issuance to convert their shares of Convertible
Preferred Stock into Common Stock at an initial conversion price equal to
[ % of the weighted average of the trading prices for all of the sales of
the Common Stock on the NYSE for the 20 consecutive trading days ending on the
third trading day prior to the issuance of the Seller Preferred Stock,] subject
to adjustment in certain circumstances, including the payment of a stock
dividend on shares of the Common Stock, combinations and subdivisions of the
Common Stock, certain reclassifications of the Common Stock, the issuance to the
Company's stockholders of rights or warrants to subscribe for or purchase shares
of Common Stock at a price per share less than the then-current market price
(determined as provided in the Certificate of Designation of the Seller
Preferred Stock) of the Common Stock and certain cash dividends and
distributions of evidences of indebtedness or assets to holders of certain of
the Company's capital stock.
The Seller Depositary Shares may be voluntarily converted by the holders
thereof upon the same terms and conditions as the Seller Preferred Stock
represented by such Seller Depositary Shares, adjusted to reflect the fact that
Seller Depositary Shares represent a one-five hundredth interest of a share of
Seller Preferred Stock.
OPTIONAL REDEMPTION BY COMPANY. Shares of Seller Preferred Stock will not
be redeemable prior to 2001. On or after such date, the shares of Seller
Preferred Stock will be redeemable at the option of the Company, in whole or in
part, at any time or from time to time on not less than 30 nor more than 60 days
79
<PAGE>
notice by mail, at the redemption prices set forth below, in each case, plus an
amount equal to the sum of all accrued and unpaid dividends to the redemption
date:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE TWELVE-MONTH REDEMPTION PRICE PER REDEMPTION PRICE PER
PERIOD BEGINNING ON PREFERRED SHARE DEPOSITARY SHARE
- -------------------------------------------------- -------------------- --------------------
<S> <C> <C>
2001..............................................
2002..............................................
2003..............................................
2004..............................................
2005..............................................
2006..............................................
200[ ] and thereafter.............................
</TABLE>
MANDATORY REDEMPTION BY COMPANY. On the twelfth anniversary of the date of
issuance of the Seller Preferred Stock, the Company must redeem all outstanding
shares at the Liquidation Value, plus accrued and unpaid dividends thereon to
the date of redemption.
The holders of the shares of the Seller Preferred Stock have no preemptive
rights with respect to any shares of capital stock of the Company or any other
securities of the Company convertible into or carrying rights or options to
purchase any such shares.
REGISTRATION RIGHTS
Holders of approximately 4.7 million shares of Common Stock have rights to
require the Company to register such shares for sale under the Securities Act.
In addition, such holders have the right to have such shares included in a
future registration statement relating to Common Stock and, in certain cases,
other equity securities, subject to customary provisions relating to the right
of the underwriters of any such offering to exclude such shares if their
inclusion would impair the success of such offering. In the event such holders
exercise their registration rights, the Company will be required to bear all
registration expenses other than underwriting discounts or other selling
expenses and fees and expenses of counsel to such holders.
Upon consummation of the Six Flags Acquisition, Sellers shall have the right
to require the Company to file a shelf registration statement within 90 days of
the closing with respect to the shares of Seller Preferred Stock received by
them. In addition, Sellers shall have the right to require the Company on no
more than four occasions to register such Seller Preferred Shares, as well as
the shares of Common Stock issuable upon conversion of such Seller Preferred
Shares (the "Conversion Shares") for sale under the Securities Act. Sellers may
not demand the registration of any of such shares within six months after the
effective date of a registration statement filed in response to a previous
demand. Further, Sellers shall have the right to have such Preferred Shares as
well as such Conversion Shares included in a future registration statement
relating to the Seller Preferred Stock or Common Stock, as the case may be,
subject to customary provisions relating to the right of the underwriters of any
such offering to exclude such shares if their inclusion would impair the success
of such offering. In the event Sellers exercise their registration rights, the
Company will be required to bear all registration expenses other than
underwriting discounts and commissions.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have million
shares of Common Stock outstanding. Future sales of Common Stock (or Preferred
Stock) by existing stockholders pursuant to Rule 144 under the Securities Act,
or through the exercise of outstanding registration rights or otherwise, could
have an adverse effect on the prevailing market price of the Common Stock and
the Company's ability to raise additional capital. Except for the Common Stock
to be sold in the Offering, the Convertible
80
<PAGE>
Preferred Stock or shares of Common Stock issued upon conversion of the
Convertible Preferred Stock, the Company has agreed not to offer, sell, contract
to sell or otherwise issue any shares of Common Stock (except pursuant to
outstanding options and warrants) or other capital stock or securities
convertible into or exchangeable for, or any rights to acquire, Common Stock or
other capital stock, with certain exceptions (including certain exceptions for
Common Stock or other capital stock issued or sold in connection with future
acquisitions by the Company, including any Common Stock to be issued in
connection with the Walibi Tender Offer), prior to the expiration of 90 days
from the date of this Prospectus without the prior written consent of Lehman
Brothers. The Company's officers, directors and principal stockholders, who hold
in the aggregate approximately 5.9 million shares of Common Stock (including
shares issuable upon exercise of outstanding options and warrants and
outstanding shares of restricted stock), have agreed not to sell any such shares
for 90 days following the date of this Prospectus without the consent of Lehman
Brothers. In addition, the Sellers in the Six Flags Acquisition have agreed not
to sell any Seller Preferred Stock during such 90-day period. Thereafter, all
such shares held by the Company's officers, directors and principal stockholders
will be eligible for sale in the public market (subject, in most cases, to
applicable volume limitations and other resale conditions imposed by Rule 144).
In addition, subject to the "lock-up" arrangements described above, holders of
approximately 4.7 million shares of Common Stock and the holders of Seller
Preferred Stock have the right to require the Company to register such shares
(and, in the case of the Seller Preferred Stock, the shares of Common Stock
issuable upon conversion thereof) for sale under the Securities Act. Depending
upon the level of revenues at Kentucky Kingdom and Walibi, the Company may also
be required in the future to issue additional shares of Common Stock (assuming
the maximum number of shares of Common Stock are issued in the Walibi Tender
Offer) with an aggregate market value of up to $15.0 million to the sellers
thereof. See "Prospectus Summary--Other Recent Developments." The sale, or the
availability for sale, of substantial amounts of Common Stock or Convertible
Preferred Stock in the public market at any time subsequent to the date of this
Prospectus could adversely affect the prevailing market price of the Common
Stock.
RIGHTS PLAN
Each outstanding share of Common Stock currently has attached to it one
Right issued pursuant to the Rights Agreement. Each Right entitles its
registered holder to purchase one one-hundredth of a share of a junior
participating series of Preferred Stock (which will be amended to one-one
thousandth of a share prior to the date of this Prospectus) designated to have
economic and voting terms similar to those of one share of Common Stock, for
$250.00 (which will be amended to $25.00 prior to the date of this Prospectus),
subject to adjustment (the "Rights Exercise Price"), but only after the earlier
to occur of (i) the tenth day following a public announcement that a person or
group of affiliated or associated persons has acquired beneficial ownership of
15% or more of the outstanding voting stock of the Company (an "Acquiring
Person") or (ii) the tenth business day (or such later date as may be determined
by the Board of Directors prior to such time as any person becomes an Acquiring
Person) after the date (the "Flip-in Date") of the commencement or announcement
of a person's or group's intention to commence a tender or exchange offer whose
consummation will result in the ownership of 15% or more of the Company's
outstanding voting stock (even if no shares are actually purchased pursuant to
such offer) (in either case, the "Separation Time"). The Rights will not trade
separately from the shares of Common Stock unless and until the Separation Time
occurs.
The Rights Agreement provides that an Acquiring Person does not include (A)
the Company, (B) any subsidiary of the Company, (C) any employee benefit plan or
employee stock plan of the Company, or any trust or other entity organized,
appointed, established or holding Common Stock for or pursuant to the terms of
any such plan or (D) any person whose ownership of 15% or more of the shares of
voting stock of the Company then outstanding results solely from (i) any action
or transaction approved by the Board of Directors before such person acquires
such 15% beneficial ownership or (ii) a reduction in the number of issued and
outstanding shares of voting stock of the Company pursuant to a transaction or
transactions approved by the Board of Directors (provided that any person that
does not become an Acquiring Person
81
<PAGE>
by reason of clause (i) or (ii) above shall become an Acquiring Person upon his
acquisition of any additional 1% of the Company's voting stock unless such
acquisition of additional voting stock will not result in such person becoming
an Acquiring Person by reason of such clause (i) or (ii)).
The Rights will not be exercisable until the business day following the
Separation Time. The Rights will expire on the earlier of (i) the close of
business on December 10, 2007 and (ii) the date on which the Rights are redeemed
or terminated as described below. The Rights Exercise Price and the number of
Rights outstanding, or in certain circumstances the securities purchasable upon
exercise of the Rights, are subject to adjustment upon the occurrence of certain
events.
Once any person becomes an Acquiring Person, unless the Rights are earlier
redeemed or exchanged as described below, if
(i) the Company were to be merged into or consolidated with another
entity (whether or not related to a 15% stockholder),
(ii) the Company were to merge with another entity (whether or not
related to a 15% stockholder) and be the surviving corporation, but any
shares of the Company's Common Stock were changed into or exchanged for
other securities or assets, or
(iii) more than 50% of the Company's assets or earning power were to be
sold in one or a series of related transactions,
each Right then outstanding would "flip-over" and would require that its holder
be entitled to buy, at the exercise price, that number of shares of common stock
of the acquiring company which at the time of the merger or sale would have a
market value of two times the exercise price of the Right (i.e., a discount of
50%). Any business combination not providing for the issuance of common stock of
the acquiring company in compliance with such provisions would be prohibited.
Unless the Rights are earlier redeemed or exchanged as described below, if a
person or group becomes the beneficial owner of 15% or more of the Company's
voting stock, each Right not owned by such stockholder would become exercisable,
at the Rights Exercise Price, for that number of shares of Preferred Stock which
at the time of such transaction would have a market value of two times the
Rights Exercise Price.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
voting stock of the Company and before the acquisition by a person or group of
50% or more of the outstanding voting stock of the Company, the Board of
Directors may elect to cause the Company to exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of the Company's Common Stock per Right,
subject to adjustment.
The Rights are redeemable by the Company by a vote of a majority of the
Board of Directors at a price of $.01 per Right at any time prior to the close
of business on the Flip-in Date (or at such later date as may be authorized by
the Board of Directors and a majority of the Continuing Directors (as defined in
the Rights Agreement)). The Rights may be redeemed after the time that any
person has become an Acquiring Person only if approved by a majority of the
Continuing Directors. The Rights have no voting rights, and they are not
entitled to dividends.
The Rights will not prevent a takeover of the Company. The Rights, however,
may cause substantial dilution to a person or group that acquires 15 percent or
more of the Common Stock unless the Rights are first redeemed or terminated by
the Board of Directors of the Company. Nevertheless, the Rights should not
interfere with a transaction that, in the judgment of the Board of Directors, is
in the best interests of the Company and its stockholders because the Rights can
be redeemed, as hereinabove described, before the consummation of such
transaction.
The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part,
82
<PAGE>
and the foregoing description is qualified in its entirety by reference thereto.
A copy of the Rights Agreement can be obtained upon written request to the
Rights Agent.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Delaware General Corporation Law may also be
considered to have an anti-takeover effect. Section 203 of the Delaware General
Corporation Law prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the time of the transaction in which the person became an interested stockholder
unless (i) prior to the time the person became an interested stockholder, either
the business combination or the transaction which resulted in the person
becoming an interested stockholder is approved by the board of directors of the
corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock, or (iii) on or after such time the
business combination is approved by the board of directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the stockholder. An "interested stockholder" is a person who owns 15% or more of
the corporation's outstanding voting stock or who is an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such person is
an interested stockholder, as well as the affiliates and associates of such
person. The restrictions of Section 203 do not apply if, among other things, a
corporation, by action of its stockholders, adopts an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed by
Section 203, PROVIDED THAT, in addition to any other vote required by law, such
amendment to the certificate of incorporation or by-laws must be approved by the
affirmative vote of a majority of the shares entitled to vote. Moreover, an
amendment so adopted is not effective until twelve months after its adoption and
does not apply to any business combination between the corporation and any
person who became an interested stockholder of such corporation on or prior to
such adoption. The Company's Restated Certificate of Incorporation and By-Laws
do not currently contain any provisions electing not to be governed by Section
203 of the Delaware General Corporation Law.
In addition, the Restated Certificate of Incorporation and By-laws of the
Company contain a number of provisions which may be deemed to have the effect of
discouraging or delaying attempts to gain control of the Company, including (i)
authorizing the Board of Directors to fix the size of the Board of Directors
between three and 15 directors; (ii) authorizing directors to fill vacancies on
the Board of Directors that occur between annual meetings; (iii) restricting the
persons who may call a special meeting of stockholders; and (iv) authorizing the
issuance of Preferred Stock. Further, the applicable Indentures and the Premier
Credit Facility require the Company to make an offer to purchase the Premier
Notes and the Company Senior Discount Notes and repay all indebtedness under the
Premier Credit Facility upon a Change of Control (as defined therein).
The existence of the foregoing provisions could result in (i) the Company
being less attractive to a potential acquiror and (ii) the Company's
stockholders receiving less for their shares of Common Stock than otherwise
might be available in the event of a take-over attempt.
83
<PAGE>
DESCRIPTION OF MANDATORILY CONVERTIBLE PREFERRED STOCK
THE SUMMARY CONTAINED HEREIN OF THE TERMS OF SHARES OF MANDATORILY
CONVERTIBLE PREFERRED STOCK, INCLUDING THOSE TERMS APPLICABLE TO SHARES OF
SELLER PREFERRED STOCK, DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ALL OF THE PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND FORM OF CERTIFICATE OF DESIGNATION RELATING TO
THE SHARES OF MANDATORILY CONVERTIBLE PREFERRED STOCK (THE "CERTIFICATE OF
DESIGNATION"), A COPY OF EACH OF WHICH EITHER HAS BEEN OR WILL BE FILED WITH THE
COMMISSION AS AN EXHIBIT TO OR INCORPORATED BY REFERENCE INTO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
Each of the Depositary Shares represents beneficial ownership of a one-five
hundredth interest of a share of Mandatorily Convertible Preferred Stock and
entitles the owner to that proportion of all the rights, preferences and
privileges of the share of Mandatorily Convertible Preferred Stock represented
thereby. See "Description of Public Depositary Shares".
DIVIDENDS
Subject to the terms of the Company Notes, holders of the shares of
Mandatorily Convertible Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available
therefor, cash dividends from the date of initial issuance of the shares of
Mandatorily Convertible Preferred Stock at the rate of $ per annum or
$ per quarter payable quarterly in arrears on January 1, April 1, July 1
and October 1 or, if any such date is not a Business Day (as defined herein), on
the next succeeding Business Day. The first dividend will be for the period from
the date of initial issuance of the shares of Mandatorily Convertible Preferred
Stock to, but excluding, July 1, 1998, and will be payable on such date.
Dividends will cease to accrue on the shares of Mandatorily Convertible
Preferred Stock on the Mandatory Conversion Date or on the date of their earlier
conversion at the option of the holder. Dividends will be payable to holders of
record of shares of Mandatorily Convertible Preferred Stock as they appear on
the stock register of the Company on record dates not less than 15 nor more than
60 days preceding the payment date thereof, as will be fixed by the Board of
Directors. Dividends payable on shares of Mandatorily Convertible Preferred
Stock for any period less than a full quarterly dividend period will be computed
on the basis of a 360-day year of twelve 30-day months and the actual number of
days elapsed in any period less than one month.
Dividends on shares of Mandatorily Convertible Preferred Stock will accrue
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are declared. Accrued but unpaid
dividends on shares of Mandatorily Convertible Preferred Stock will cumulate as
of the dividend payment date on which they first become payable, but no interest
shall accrue on accumulated but unpaid dividends on shares of Mandatorily
Convertible Preferred Stock.
Dividends may be paid, at the election of the Company, (i) out of funds
legally available therefor, (ii) through the delivery of shares of Common Stock
or (iii) through any combination of the foregoing forms of consideration elected
by the Board of Directors in its sole discretion. If the Company elects to pay
any dividend payment, in whole or in part, by delivery of shares of Common
Stock, the amount of such dividend payment to be paid per share of Mandatorily
Convertible Preferred Stock in shares of Common Stock (the "Stock Dividend
Amount") will be paid through the delivery, to the holders of record of shares
of Mandatorily Convertible Preferred Stock on the record date for such dividend
payment fixed by the Board of Directors as described above, of a number of
shares of Common Stock determined by dividing the dollar amount of the Stock
Dividend Amount by an amount (the "Cash Equivalent Amount") equal to % of the
average Closing Price (as defined herein) per share of Common Stock on the ten
Trading Days (as defined herein) ending on the third Trading Day preceding the
related record date (the "Dividend Stock Price") (appropriately adjusted in such
manner as the Board of Directors in good faith deems appropriate to take into
account any stock dividend on the Common Stock, or any subdivision, split,
combination or reclassification of the Common Stock that occurs, or the
ex-dividend date for which occurs,
84
<PAGE>
during the period following the first Trading Day in such ten-Trading Day Period
and ending on the last full Trading Day immediately preceding the payment of the
dividend). The Dividend Stock Price for any dividend which will be paid, in
whole or in part, through the delivery of shares of Common Stock will be
determined on the related record date for such dividend payment. The Company
will pay a cash adjustment as described under "-- Fractional Shares" in lieu of
delivering a fractional share in paying a dividend when delivering shares of
Common Stock in payment of the dividend on a per Public Depositary Share basis
for the aggregate Public Depositary Shares representing a holder's shares of
Mandatorily Convertible Preferred Stock would result in delivery of a fractional
share. Any portion of a dividend that is declared and not paid through the
delivery of shares of Common Stock will be paid in cash.
The market price of the Common Stock may vary from the Dividend Stock Price
between the date of determination of such Dividend Stock Price and the
subsequent delivery of shares of Common Stock, in payment of a dividend, to
holders of shares of Mandatorily Convertible Preferred Stock. If the market
value on the related dividend payment date of the shares of Common Stock
delivered in payment of a dividend is more than % lower than the Dividend
Stock Price as of the related record date and the holder of shares of
Mandatorily Convertible Preferred Stock sells such shares of Common Stock at
such lower price, the holder's actual dividend yield for the dividend period in
respect of which such dividend was paid would be lower than the stated dividend
yield on the shares of Mandatorily Convertible Preferred Stock. In addition, in
connection with any such sale the holder is likely to incur commissions and
transaction costs.
If the Company elects to make a dividend payment, in whole or in part,
through the delivery of shares of Common Stock, it will give notice of such
determination (which shall include the number of shares of Common Stock and
cash, if any, to be delivered in respect of each share of Mandatorily
Convertible Preferred Stock and each Public Depositary Share) by publication, on
the related record date for such dividend payment, in a daily newspaper of
national circulation.
The shares of Mandatorily Convertible Preferred Stock will rank on a parity,
both as to payment of dividends and distribution of assets upon liquidation,
with the Seller Preferred Stock and any other preferred stock issued in the
future by the Company that by its terms ranks PARI PASSU with the shares of
Mandatorily Convertible Preferred Stock.
As long as any shares of Mandatorily Convertible Preferred Stock are
outstanding, no dividends (other than dividends payable in shares of, or
warrants, rights or options exercisable for or convertible into shares of, any
capital stock, including without limitation, the Common Stock, of the Company
ranking junior to the shares of Mandatorily Convertible Preferred Stock as to
the payment of dividends and the distribution of assets upon liquidation
(collectively "Junior Stock") and cash in lieu of fractional shares in
connection with any such dividend) will be paid or declared in cash or
otherwise, nor will any other distribution be made (other than a distribution
payable in Junior Stock and cash in lieu of fractional shares in connection with
any such distribution), on any Junior Stock unless: (i) full dividends on
Preferred Stock that does not constitute Junior Stock ("Parity Preferred Stock")
have been paid, or declared and set aside for payment, for all dividend periods
terminating on or prior to the date of such Junior Stock dividend or
distribution payment to the extent such dividends are cumulative; (ii) dividends
in full for the current quarterly dividend period have been paid, or declared
and set aside for payment, on all Parity Preferred Stock to the extent such
dividends are cumulative; (iii) the Company has paid or set aside all amounts,
if any, then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any Parity Preferred Stock; and (iv)
the Company is not in default on any of its obligations to redeem any Parity
Preferred Stock.
In addition, as long as any shares of Mandatorily Convertible Preferred
Stock are outstanding, no shares of any Junior Stock may be purchased, redeemed
or otherwise acquired by the Company or any of its subsidiaries (except in
connection with a reclassification or exchange of any Junior Stock through the
issuance of other Junior Stock (and cash in lieu of fractional shares in
connection therewith) or the
85
<PAGE>
purchase, redemption or other acquisition of any Junior Stock with any Junior
Stock (and cash in lieu of fractional shares in connection therewith)) nor may
any funds be set aside or made available for any sinking funds for the purchase,
redemption or acquisition of any Junior Stock unless: (i) full dividends on
Parity Preferred Stock have been paid, or declared and set aside for payment,
for all dividend periods terminating on or prior to the date of such purchase,
redemption, acquisition, setting aside or making available to the extent such
dividends are cumulative; (ii) dividends in full for the current quarterly
dividend period have been paid, or declared and set aside for payment, on all
Parity Preferred Stock to the extent such dividends are cumulative; (iii) the
Company has paid or set aside all amounts, if any, then or theretofore required
to be paid or set aside for all purchase, retirement, and sinking funds, if any,
for any Parity Preferred Stock; and (iv) the Company is not in default on any of
its obligations to redeem any Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on shares of any Junior Stock
from time to time and Junior Stock may be purchased, redeemed or otherwise
acquired by the Company or any of its subsidiaries, and funds may be set aside
or made available for that purpose, from time to time. In the event of the
declaration and payment of any such dividends or other distributions, the
holders of such Junior Stock will be entitled, to the exclusion of holders of
the Parity Preferred Stock, to share therein according to their respective
interests.
As long as any shares of Mandatorily Convertible Preferred Stock are
outstanding, dividends or other distributions may not be declared or paid on any
Parity Preferred Stock (other than dividends or other distributions payable in
Junior Stock and cash in lieu of fractional shares in connection therewith), and
the Company may not purchase, redeem or otherwise acquire any Parity Preferred
Stock (except with any Junior Stock and cash in lieu of fractional shares in
connection therewith and except with the right, subject to clause (b) of this
paragraph and any similar requirement of any other Preferred Stock, to receive
accrued and unpaid dividends), unless either: (a)(i) full dividends on Parity
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such Parity Preferred
Stock dividend, distribution, redemption, purchase or acquisition payment to the
extent such dividends are cumulative; (ii) dividends in full for the current
quarterly dividend period have been paid, or declared and set aside for payment,
on all Parity Preferred Stock to the extent such dividends are cumulative; (iii)
the Company has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any Parity Preferred Stock; and (iv) the Company is not in
default on any of its obligations to redeem any Parity Preferred Stock; or (b)
with respect to the declaration and payment of dividends only, any such
dividends are declared and paid pro rata so that the amounts of any dividends
declared and paid per share of Mandatorily Convertible Preferred Stock and each
other share of Parity Preferred Stock will in all cases bear to each other the
same ratio that accrued and unpaid dividends (including any accumulation with
respect to unpaid dividends for prior dividend periods, if such dividends are
cumulative) per share of Mandatorily Convertible Preferred Stock and such other
share of Parity Preferred Stock bear to each other.
MANDATORY CONVERSION OF MANDATORILY CONVERTIBLE PREFERRED STOCK
Unless voluntarily converted into Common Stock, as hereinafter described, on
, 2001 (the "Mandatory Conversion Date") each share of Mandatorily
Convertible Preferred Stock will automatically convert into a number of shares
of Common Stock (or the equivalent amount of cash) at the Conversion Rate (as
defined below). The "Conversion Rate" is equal to, (a) if the Conversion Price
(as defined below) is greater than or equal to $ (the "Threshold
Appreciation Price"), shares of Common Stock per Mandatorily Convertible
Preferred Stock (equivalent to shares of Common Stock for each Depositary
Share), (b) if the Conversion Price is less than the Threshold Appreciation
Price but is greater than $ (the "Initial Price"), a fraction, equal to
the Initial Price divided by the Conversion Price, of five hundred shares of
Common Stock per Mandatorily Convertible Preferred Stock (equivalent to
86
<PAGE>
1/500th of such number of shares for each Depositary Share) and (c) if the
Conversion Price is less than or equal to the Initial Price, 500 shares of
Common Stock per Mandatorily Convertible Preferred Stock (equivalent to one
share of Common Stock for each Public Depositary Share). The Conversion Rate is
subject to adjustment as provided in "--Dilution Adjustments; Other Adjustment
Events." THE VALUE OF THE COMMON STOCK TO BE RECEIVED BY HOLDERS OF THE
MANDATORILY CONVERTIBLE PREFERRED STOCK (OR, AS DISCUSSED BELOW, THE CASH
EQUIVALENT TO BE RECEIVED IN LIEU OF SUCH SHARES) UPON MANDATORY CONVERSION WILL
NOT NECESSARILY EQUAL THE LIQUIDATION VALUE OF SUCH MANDATORILY CONVERTIBLE
PREFERRED STOCK. The ratios of shares of Common Stock per Mandatorily
Convertible Preferred Stock and Public Depositary Share specified in clauses
(a), (b) and (c) above of the Conversion Rate definition are hereinafter
referred to as the "Share Components." Any shares of Common Stock received by
holders of Public Depositary Shares that are not affiliated with the Company
will be free of any transfer restrictions and the holders of the Public
Depositary Shares will be responsible for the payment of any and all brokerage
costs upon the subsequent sale of such shares. No fractional shares of Common
Stock will be issued on the Mandatory Conversion Date as provided under
"--Fractional Shares" below. Although it is the Company's current intention to
deliver shares of Common Stock at the Mandatory Conversion Date, the Company may
at its option deliver cash, in lieu of delivering such shares of Common Stock,
except where such delivery would violate applicable state law. The amount of
cash deliverable in respect of each Mandatorily Convertible Preferred Stock
shall be equal to the product of the number of shares of Common Stock otherwise
deliverable in respect of such Mandatorily Convertible Preferred Stock on the
Mandatory Conversion Date multiplied by the Conversion Price. In the event the
Company elects to deliver cash in lieu of shares of Common Stock at the
Mandatory Conversion Date, it will be obligated pursuant to the Certificate of
Designation to deliver cash to all holders of Mandatorily Convertible Preferred
Stock, except those holders with respect to whom it has determined delivery of
cash may violate applicable state law and as to whom it will deliver shares of
Common Stock. On or prior to the fourth Business Day prior to , 2001,
the Company will notify the Depositary and publish a notice in a daily newspaper
of national circulation stating whether the Mandatorily Convertible Preferred
Stock will be converted into shares of Common Stock or paid in cash (and/or such
other consideration as permitted or required by the terms of the Mandatorily
Convertible Preferred Stock); provided, however, that if the Company intends to
deliver cash, the Company shall have the right, as a condition to delivery of
such cash, to require certification as to the domicile and residency of each
beneficial holder of the Public Depositary Shares.
Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Conversion Rate will be subject to adjustment and (ii) in the case of
certain adjustment events, the consideration received by holders of the
Mandatorily Convertible Preferred Stock at the Mandatory Conversion Date will be
shares of Common Stock, other securities and/or cash. See "--Dilution
Adjustments; Other Adjustment Events" below.
The "Conversion Price" is the average Closing Price per share of Common
Stock for the 20 Trading Days immediately prior to (but not including) the
Mandatory Conversion Date; provided, however, that if there are not 20 Trading
Days for the Common Stock occurring later than the 60th calendar day immediately
prior to, but not including, the Mandatory Conversion Date, "Conversion Price"
will be the market value per share of Common Stock as of the Mandatory
Conversion Date as determined by a nationally recognized investment banking firm
retained for such purpose by the Company. The Conversion Price is subject to
adjustment as provided in "--Dilution Adjustments; Other Adjustment Events." The
"Closing Price" of any security on any date of determination means (i) the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security (regular way) on the NYSE on such date, (ii) if
such security is not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, (iii) if such security
is not so listed on a United States national or regional securities exchange, as
reported by the NASDAQ Stock Market, (iv) if such security is not so reported,
the last quoted bid price
87
<PAGE>
for such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or (v) if such security is not so
quoted, the average of the mid-point of the last bid and ask prices for such
security from each of at least three nationally recognized investment banking
firms selected by the Company for such purpose. A "Trading Day" is defined as a
Business Day on which the security, the Closing Price of which is being
determined, (A) is not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the close of
business and (B) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of such security. "Business Day" means any day that is not a
Saturday, a Sunday or a day on which the NYSE, banking institutions or trust
companies in The City of New York are authorized or obligated by law or
executive order to close.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock or the amount of cash that a holder of shares of
Mandatorily Convertible Preferred Stock would receive for each Mandatorily
Convertible Preferred Stock at various Conversion Prices. The table assumes that
there will be no adjustments to the Conversion Rate described under "-- Dilution
Adjustments; Other Adjustment Events" below. There can be no assurance that the
Conversion Price will be within the range set forth below. Given the Initial
Price of $ per Public Depositary Share (equivalent to $ per
Mandatorily Convertible Preferred Stock) and the Threshold Appreciation Price of
$ per Public Depositary Share (equivalent to $ per Mandatorily
Convertible Preferred Stock), a Mandatorily Convertible Preferred Stock holder
would receive at the Mandatory Conversion Date the following number of shares of
Common Stock or amount of cash (if the Company elects to pay the Mandatorily
Convertible Preferred Stock in cash):
<TABLE>
<CAPTION>
CONVERSION PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK AMOUNT OF CASH
- --------------------- --------------------- -------------------
<S> <C> <C>
$ $
</TABLE>
As the foregoing chart illustrates, if at the Mandatory Conversion Date, the
Conversion Price is greater than or equal to $ , the Company will be
obligated to deliver shares of Common Stock per Mandatorily Convertible
Preferred Stock (or shares of Common Stock per Public Depositary Share),
resulting in the Company receiving percent of the appreciation in market
value and the Mandatorily Convertible Preferred Stock holder receiving
percent of the appreciation in market value above $ . If at the
Mandatory Conversion Date, the Conversion Price is greater than $ and
less than $ , the Company will be obligated to deliver only a fraction
of 500 shares of Common Stock having a market value equal to $ per
Mandatorily Convertible Preferred Stock, resulting in the Company retaining all
appreciation in the market value of the Common Stock from $ to
$ . If at the Mandatory Conversion Date, the Conversion Price is less
than or equal to $ , the Company will be obligated to deliver 500 shares
of Common Stock per Mandatorily Convertible Preferred Stock, regardless of the
market price of such shares, resulting in the Mandatorily Convertible Preferred
Stock holder realizing the entire loss on the decline in market value of the
Common Stock.
As described herein, the Company will have the option, exercisable in its
sole discretion, to satisfy its obligations pursuant to the mandatory conversion
of the Mandatorily Convertible Preferred Stock at the Mandatory Conversion Date
by delivering to holders of the Mandatorily Convertible Preferred Stock either
the number of shares of Common Stock specified above or cash in an amount equal
to the product of such number of shares multiplied by the Conversion Price. As a
result, there can be no assurance that the Company will elect at the Mandatory
Conversion Date to deliver Common Stock.
88
<PAGE>
CONVERSION AT THE OPTION OF THE HOLDER
The shares of Mandatorily Convertible Preferred Stock (and thereby the
Public Depositary Shares) are convertible, in whole or in part, at the option of
the holders thereof, at any time prior to the Mandatory Conversion Date, into
shares of Common Stock at a rate of shares of Common Stock for each share of
Mandatorily Convertible Preferred Stock (the "Optional Conversion Rate") (or a
rate of shares of Common Stock for each Public Depositary Share) equivalent,
for each Depositary Share, to a conversion price of $ per share of
Common Stock (the "Optional Conversion Price"), subject to adjustment as
described under "--Dilution Adjustments; Other Adjustment Events" below.
Conversion of shares of Mandatorily Convertible Preferred Stock at the
option of the holder may be effected by delivering certificates evidencing such
shares, together with written notice of conversion and proper assignment of such
certificates to the Company or in blank (and, if applicable, cash payment of an
amount equal to the dividend attributable to the current quarterly dividend
period payable on such shares), to the office of any transfer agent for shares
of Mandatorily Convertible Preferred Stock or to any other office or agency
maintained by the Company for that purpose and otherwise in accordance with
conversion procedures established by the Company. Each optional conversion will
be deemed to have been effected immediately prior to the close of business on
the date on which the foregoing requirements will have been satisfied. The
conversion will be at the Optional Conversion Rate in effect at such time on
such date. If only a portion of a share of Mandatorily Convertible Preferred
Stock is to be converted, the Company will issue a new share of Mandatorily
Convertible Preferred Stock for any Mandatorily Convertible Preferred Stock not
converted.
Holders of shares of Mandatorily Convertible Preferred Stock at the close of
business on a record date for any payment of declared dividends will be entitled
to receive the dividend payable on such shares of Mandatorily Convertible
Preferred Stock on the corresponding dividend payment date notwithstanding the
optional conversion of such shares of Mandatorily Convertible Preferred Stock
following such record date and prior to such dividend payment date. However,
shares of Mandatorily Convertible Preferred Stock surrendered for optional
conversion after the close of business on a record date for any payment of
declared dividends and before the opening of business on the next succeeding
dividend payment date must be accompanied by payment in cash of an amount equal
to the dividend attributable to the current quarterly dividend period payable on
such date. Except as provided above, upon any optional conversion of shares of
Mandatorily Convertible Preferred Stock, the Company will make no payment of or
allowance for unpaid dividends, whether or not in arrears, on such shares of
Mandatorily Convertible Preferred Stock or previously declared dividends or
distributions on the shares of Common Stock issued upon such conversion.
The Depositary Shares may be voluntarily converted by the holders thereof
upon the same terms and conditions (including those as to notice) as the shares
of Mandatorily Convertible Preferred Stock represented by such Depositary
Shares, adjusted to reflect the fact that Depositary Shares represent a one-five
hundredth interest of a share of Mandatorily Convertible Preferred Stock. See
"Description of Depositary Shares--Conversion Provisions."
CONVERSION ADJUSTMENTS
The Conversion Rate and the Optional Conversion Rate are each subject to
adjustment as appropriate in certain circumstances, including if the Company
shall (a) pay a stock dividend or make a distribution with respect to its Common
Stock in shares of Common Stock, (b) subdivide or split its outstanding Common
Stock, (c) combine its outstanding Common Stock into a smaller number of shares,
(d) issue by reclassification of its shares of Common Stock any shares of Common
Stock, (e) issue certain rights or warrants to all holders of its Common Stock
unless such rights or warrants are issued to each holder of shares of
Mandatorily Convertible Preferred Stock on a pro rata basis with the shares of
Common Stock based on the Conversion Rate in effect on the date immediately
preceding such issuance, or (f) pay a
89
<PAGE>
dividend or distribute to all holders of its Common Stock evidences of its
indebtedness, cash or other assets (including capital stock of the Company but
excluding any cash dividends or distributions, other than Extraordinary Cash
Distributions (as defined below), and dividends referred to in clause (a) above)
unless such dividend or distribution is made to each holder of shares of
Mandatorily Convertible Preferred Stock on a pro rata basis with the shares of
Common Stock based on the Conversion Rate in effect on the date immediately
preceding such dividend or distribution. In addition, the Company will be
entitled (but will not be required) to make upward adjustments in the Conversion
Rate, the Optional Conversion Rate and the Optional Conversion Price as the
Company, in its sole discretion, shall determine to be advisable, in order that
any stock dividend, subdivision or split of shares, distribution or rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction which could be treated as any of the
foregoing transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended (the "Code")) hereafter made by the Company to its stockholders
will not be taxable in whole or in part. "Extraordinary Cash Distributions"
means, with respect to any cash dividend or distribution paid on any date, the
amount, if any, by which all cash dividends and cash distributions on the Common
Stock paid during the consecutive 12-month period ending on and including such
date (other than cash dividends and cash distributions for which an adjustment
to the Conversion Rate or the Optional Conversion Rate was previously made)
exceeds, on a per share of Common Stock basis, 10% of the average of the daily
Closing Price of the Common Stock over such consecutive 12-month period. All
adjustments to the Conversion Rate and the Optional Conversion Rate will be
calculated to the nearest 1/100th of a share of Common Stock. No adjustment in
the Conversion Rate or the Optional Conversion Rate will be required unless such
adjustment would require an increase or decrease of at least one percent in the
Conversion Rate; provided, however, that any adjustments which, by reason of the
foregoing, are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All adjustments will be made successively.
Whenever the Conversion Rate and the Optional Conversion Rate are adjusted
as provided in the preceding paragraph, the Company will file with the transfer
agent for the shares of Mandatorily Convertible Preferred Stock a certificate
with respect to such adjustment, make a prompt public announcement thereof and
mail a notice to holders of the shares of Mandatorily Convertible Preferred
Stock providing specified information with respect to such adjustment.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued upon conversion of
shares of Mandatorily Convertible Preferred Stock or upon conversion of Public
Depositary Shares representing shares of Mandatorily Convertible Preferred
Stock. In lieu of any fractional share otherwise issuable in respect of the
aggregate number of shares of Mandatorily Convertible Preferred Stock of any
holder that are converted upon mandatory conversion or any voluntary conversion,
such holder (A) as of the fifth Trading Day immediately preceding the Mandatory
Conversion Date, in the case of mandatory conversion, or (B) as of the second
Trading Day immediately preceding the effective date of conversion, in the case
of an optional conversion by a holder. In addition, no fractional shares of
Common Stock will be issued in connection with delivery of shares of Common
Stock by the Company in payment of a dividend, in whole or in part, on the
Mandatorily Convertible Preferred Stock. The Company will pay a cash adjustment
in lieu of delivering a fractional share in paying a dividend when delivering
shares of Common Stock in payment of the dividend on a per Public Depositary
Share basis for the aggregate Public Depositary Shares representing a holder's
shares of Mandatorily Convertible Preferred Stock would result in delivery of a
fractional share. In lieu of any fractional share otherwise so issuable, such
holder shall be entitled to receive an amount in cash equal to the same fraction
of the Closing Price of the Common Stock determined as of the Trading Day
immediately preceding the dividend payment date. If more than one share of
Mandatorily Convertible Preferred Stock or more than one Public Depositary Share
representing Mandatorily Convertible Preferred Stock shall be surrendered for
conversion at one time by or for the same holder, the number of shares of Common
Stock issuable upon conversion thereof shall be computed
90
<PAGE>
on the basis of the aggregate number of shares of Mandatorily Convertible
Preferred Stock or Public Depositary Shares, as the case may be, so converted.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, and subject to the rights of holders of any other
series of Preferred Stock, the holders of outstanding shares of Mandatorily
Convertible Preferred Stock are entitled to receive an amount equal to the per
share price to investors of the shares of Mandatorily Convertible Preferred
Stock (equivalent to an amount equal to 500 times the per share price to
investors of each Public Depositary Share shown on the cover page of this
Prospectus) plus accrued and unpaid dividends thereon, out of the assets of the
Company available for distribution to stockholders, before any distribution of
assets is made to holders of Junior Stock upon liquidation, dissolution or
winding up.
If upon any voluntary or involuntary liquidation, dissolution, or winding up
of the Company, the assets of the Company are insufficient to permit the payment
of the full preferential amounts payable with respect to shares of Mandatorily
Convertible Preferred Stock and all other series of Parity Preferred Stock, the
holders of shares of Mandatorily Convertible Preferred Stock and of all other
series of Parity Preferred Stock will share ratably in any distribution of
assets of the Company in proportion to the full respective preferential amounts
to which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of Mandatorily
Convertible Preferred Stock will not be entitled to any further participation in
any distribution of assets by the Company. A consolidation or merger of the
Company with one or more corporations or a sale or transfer of substantially all
of the assets of the Company shall not be deemed to be a liquidation,
dissolution or winding up of the Company.
VOTING RIGHTS
The holders of shares of Mandatorily Convertible Preferred Stock shall not
be entitled to any voting rights, except as required by applicable state law and
as described below.
In the event that dividends on the shares of Mandatorily Convertible
Preferred Stock or any other series of Preferred Stock shall be in arrears and
unpaid for six quarterly dividend periods, or if any other series of Preferred
Stock shall be entitled for any other reason to exercise voting rights, separate
from the Common Stock, to elect any Directors of the Company ("Preferred Stock
Directors"), the holders of the shares of Mandatorily Convertible Preferred
Stock (voting separately as a class with holders of all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable), with each share of Mandatorily Convertible Preferred Stock
entitled to one vote (equivalent to one-five hundredth of a vote for each
Depositary Share) on this and other matters in which Preferred Stock votes as a
group, will be entitled to vote for the election of two Preferred Stock
Directors, such Directors to be in addition to the number of Directors
constituting the Board of Directors immediately prior to the accrual of such
right. Such right, when vested, shall continue until all dividends in arrears on
the shares of Mandatorily Convertible Preferred Stock and such other series of
Preferred Stock shall have been paid in full and the right of any other series
of Preferred Stock to exercise voting rights, separate from the Common Stock, to
elect any Preferred Stock Directors shall terminate or have terminated, and,
when so paid and such termination occurs or has occurred, such right of the
holders of the shares of Mandatorily Convertible Preferred Stock shall cease.
Upon any termination of the aforesaid voting right, subject to the requirements
of the Delaware corporation law and the Certificate of Incorporation of the
Company, such Preferred Stock Directors shall cease to be Directors of the
Company and shall resign.
The Company will not, without the approval of the holders of at least 66 2/3
percent of all the shares of Mandatorily Convertible Preferred Stock then
outstanding: (i) amend, alter, or repeal any of the provisions of the
Certificate of Incorporation or the By-laws of the Company so as to affect
adversely the powers,
91
<PAGE>
preferences, or rights of the holders of the shares of Mandatorily Convertible
Preferred Stock then outstanding or reduce the minimum time required for any
notice to which only the holders of the shares of Mandatorily Convertible
Preferred Stock then outstanding may be entitled (an amendment of the
Certificate of Incorporation to authorize or create, or increase the authorized
amount of or to issue, Junior Stock, preferred stock ranking on parity with the
shares of Mandatorily Convertible Preferred Stock or any stock of any class
ranking on parity with the shares of Mandatorily Convertible Preferred Stock
shall be deemed not to affect adversely the powers, preferences, or rights of
the holders of the shares of Mandatorily Convertible Preferred Stock); (ii)
create any series of preferred stock ranking prior to the shares of Mandatorily
Convertible Preferred Stock as to payment of dividends or the distribution of
assets upon liquidation; or (iii) authorize or create, or increase the
authorized amount of, any capital stock, or any security convertible into
capital stock, of any class ranking prior to the shares of Mandatorily
Convertible Preferred Stock as to payment of dividends or the distribution of
assets upon liquidation.
TRANSFER AGENT AND REGISTRAR
will act as transfer agent and registrar for, and paying agent for the
payment of dividends on, shares of Mandatorily Convertible Preferred Stock and
the Public Depositary Shares.
LISTING
Application will be made to list the Public Depositary Shares and the Common
Stock issuable on conversion of the Mandatorily Convertible Preferred Stock on
the NYSE. The Mandatorily Convertible Preferred Stock will not be so listed and
the Company does not expect that there will be any trading market for the
Mandatorily Convertible Preferred Stock except as represented by the Public
Depositary Shares.
MISCELLANEOUS
Upon issuance, the shares of Mandatorily Convertible Preferred Stock will be
fully paid and nonassessable. Holders of shares of Mandatorily Convertible
Preferred Stock have no preemptive rights. The Company shall at all times
reserve and keep available out of its authorized and unissued Common Stock,
solely for issuance upon the conversion of shares of Mandatorily Convertible
Preferred Stock, such number of shares of Common Stock as shall from time to
time be issuable upon the conversion of all the shares of Mandatorily
Convertible Preferred Stock then outstanding. Shares of Mandatorily Convertible
Preferred Stock converted into Common Stock of the Company or otherwise acquired
by the Company shall resume the status of authorized and unissued shares of
preferred stock, undesignated as to series, and shall be available for
subsequent issuance.
92
<PAGE>
DESCRIPTION OF PUBLIC DEPOSITARY SHARES
THE FOLLOWING SUMMARY OF THE TERMS AND PROVISIONS OF THE PUBLIC DEPOSITARY
SHARES DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS
ENTIRETY BY, THE DEPOSIT AGREEMENT, AS DEFINED BELOW (WHICH CONTAINS THE FORM OF
THE DEPOSITARY RECEIPT, AS DEFINED BELOW).
Each Public Depositary Share represents one-five hundredth of a share of
Mandatorily Convertible Preferred Stock deposited under a Deposit Agreement
dated as of , 1998 (the "Deposit Agreement"), among the Company,
, as depositary (including any successor, the "Depositary"), and the
holders from time to time of depositary receipts executed and delivered
thereunder (the "Depositary Receipts"). Subject to the terms of the Deposit
Agreement, each owner of a Public Depositary Share is entitled, proportionately,
to all the rights, preferences and privileges of the shares of Mandatorily
Convertible Preferred Stock represented thereby (including dividend, conversion,
voting and liquidation rights), and subject to all of the limitations of the
shares of Mandatorily Convertible Preferred Stock represented thereby, contained
in the Certificate of Designations and summarized under "Description of
Mandatorily Convertible Preferred Stock". The principal executive office of
is located at .
The Public Depositary Shares are evidenced by Depositary Receipts. Copies of
the Deposit Agreement, the form of which has been or will be filed or
incorporated by reference with the Registration Statement of which this
Prospectus is a part, are available for inspection at the office of the
Depositary listed above.
EXECUTION AND DELIVERY OF DEPOSITARY RECEIPTS
Following the purchase of the shares of Mandatorily Convertible Preferred
Stock from the Company by the Representatives (as defined herein), the shares of
Mandatorily Convertible Preferred Stock will be deposited by the
Representatives, or on their behalf, with the Depositary, in exchange for the
Depositary Receipts.
WITHDRAWAL OF MANDATORILY CONVERTIBLE PREFERRED STOCK
Upon surrender of Depositary Receipts at the Corporate Office of the
Depositary, the owner of the Public Depositary Shares evidenced thereby is
entitled to delivery at such office of certificates evidencing the number of
shares of Mandatorily Convertible Preferred Stock represented by such Depositary
Receipts. If the Depositary Receipts delivered by the holder evidence a number
of Public Depositary Shares in excess of the number of Public Depositary Shares
representing the number of shares of Mandatorily Convertible Preferred Stock to
be withdrawn, the Depositary will at the same time deliver to such holder a new
Depositary Receipt or Receipts evidencing such excess number of Public
Depositary Shares. The Company does not expect that there will be any public
trading market for the shares of Mandatorily Convertible Preferred Stock except
as represented by the Public Depositary Shares. See "Risk Factors--Restrictions
on Transfer; Absence of Public Market."
CONVERSION PROVISIONS
MANDATORY CONVERSION. As described under "Description of Mandatorily
Convertible Preferred Stock--Mandatory Conversion of Mandatorily Convertible
Preferred Stock," the shares of Mandatorily Convertible Preferred Stock are
subject to mandatory conversion into shares of Common Stock on the Mandatory
Conversion Date. The Public Depositary Shares are subject to mandatory
conversion upon substantially the same terms and conditions as the shares of
Mandatorily Convertible Preferred Stock, except that the number of shares of
Common Stock received upon mandatory conversion of each Public Depositary Share
will be equal to the number of shares of Common Stock received upon mandatory
conversion of each share of Mandatorily Convertible Preferred Stock divided by
500.
93
<PAGE>
CONVERSION AT THE OPTION OF THE HOLDER. As described under "Description of
Mandatorily Convertible Preferred Stock--Conversion at the Option of the
Holder", the shares of Mandatorily Convertible Preferred Stock may be converted,
in whole or in part, into shares of Common Stock at the option of the holders of
shares of Mandatorily Convertible Preferred Stock at any time prior to the
Mandatory Conversion Date. The Public Depositary Shares may, at the option of
holders thereof, be converted into shares of Common Stock upon the same terms
and conditions as the shares of Mandatorily Convertible Preferred Stock, except
that the number of shares of Common Stock received upon conversion of each
Public Depositary Share will be equal to the number of shares of Common Stock
received upon conversion of each share of Mandatorily Convertible Preferred
Stock divided by 500. To effect such an optional conversion, a holder of Public
Depositary Shares must deliver Depositary Receipts evidencing the Public
Depositary Shares to be converted, together with a written notice of conversion
and a proper assignment of the Depositary Receipts to the Company or in blank
(and, if applicable, payment in cash of an amount equal to the dividend
attributable to the current quarterly dividend period payable on such Public
Depositary Shares), to the Depositary or its agent. Each optional conversion of
Public Depositary Shares shall be deemed to have been effected immediately prior
to the close of business on the date on which the foregoing requirements shall
have been satisfied. The conversion shall be at the Optional Conversion Rate in
effect at such time and on such date, adjusted to reflect the fact that 500
Public Depositary Shares are the equivalent of one share of Mandatorily
Convertible Preferred Stock.
If only a portion of the Public Depositary Shares evidenced by a Depositary
Receipt is to be converted, a new Depositary Receipt or Receipts will be issued
for any Public Depositary Shares not converted. No fractional shares of Common
Stock will be issued upon conversion of Public Depositary Shares, and, if such
conversion would otherwise result in a fractional share of Common Stock being
issued, an amount will be paid in cash as described in "Description of
Mandatorily Convertible Preferred Stock-- Fractional Shares" or as set forth in
the Deposit Agreement.
After the date fixed for conversion, the Public Depositary Shares so
converted will no longer be deemed to be outstanding and all rights of the
holders of such Public Depositary Shares will cease, except the right to receive
the Common Stock and amounts payable on such conversion and any money or other
property to which the holders of such Public Depositary Shares were entitled
upon such conversion, upon surrender to the Depositary of the Depositary Receipt
or Receipts evidencing such Public Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions and all dividends paid by the Company in shares of Common Stock in
respect of the shares of Mandatorily Convertible Preferred Stock to the record
holders of Depositary Receipts in proportion, insofar as practicable, to the
number of Public Depositary Shares owned by such holders.
In the event of a distribution other than cash or Common Stock in respect of
the shares of Mandatorily Convertible Preferred Stock, the Depositary will
distribute property received by it to the record holders of Depositary Receipts
in proportion, insofar as practicable, to the number of Public Depositary Shares
owned by such holders, unless the Depositary determines that it is not feasible
to make such distribution, in which case the Depositary may, with the approval
of the Company, adopt such method as it deems equitable and practicable for the
purpose of effecting such distribution, including sale (at public or private
sale) of such property and distribution of the net proceeds from such sale to
such holders.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by the Company or the Depositary on account of
taxes.
94
<PAGE>
RECORD DATE
Whenever (i) any cash dividend or other cash distribution or any dividend to
be paid by the Company in shares of Common Stock shall become payable, any
distribution other than cash shall be made, or any rights, preferences or
privileges shall be offered with respect to the shares of Mandatorily
Convertible Preferred Stock, or (ii) the Depositary shall receive notice of any
meeting at which holders of shares of Mandatorily Convertible Preferred Stock
are entitled to vote or of which holders of shares of Mandatorily Convertible
Preferred Stock are entitled to notice, the Depositary shall in each such
instance fix a record date (which shall be the same date as the record date for
the shares of Mandatorily Convertible Preferred Stock) for the determination of
the holders of Depositary Receipts (x) who shall be entitled to receive such
dividend, distribution, rights, preferences or privileges or the net proceeds of
the sale thereof or (y) who shall be entitled to give instructions for the
exercise of voting rights at any such meeting or to receive notice of such
meeting.
VOTING OF MANDATORILY CONVERTIBLE PREFERRED STOCK
Upon receipt of notice of any meeting at which holders of shares of
Mandatorily Convertible Preferred Stock are entitled to vote, the Depositary
will mail the information contained in such notice of meeting to the record
holders of Depositary Receipts. Each record holder of Depositary Receipts on the
record date (which will be the same date as the record date for the shares of
Mandatorily Convertible Preferred Stock) will be entitled to instruct the
Depositary as to the exercise of the voting rights pertaining to the number of
shares of Mandatorily Convertible Preferred Stock represented by such holder's
Public Depositary Shares. The Depositary will endeavor, insofar as practicable,
to vote the number of shares of Mandatorily Convertible Preferred Stock
represented by such Public Depositary Shares in accordance with such
instructions, and the Company has agreed to take all reasonable action which may
be deemed necessary by the Depositary in order to enable the Depositary to do
so. The Depositary will abstain from voting shares of Mandatorily Convertible
Preferred Stock to the extent it does not receive specific written voting
instructions from the holders of Depositary Receipts representing the shares of
Mandatorily Convertible Preferred Stock.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit Agreement
may at any time be amended by agreement between the Company and the Depositary.
However, any amendment that imposes any fees, taxes or other charges payable by
holders of Depositary Receipts (other than taxes and other governmental charges,
fees and other expenses payable by such holders as stated under "Charges of
Depositary"), or that otherwise prejudices any substantial existing right of
holders of Depositary Receipts, will not take effect as to outstanding
Depositary Receipts until the expiration of 90 days after notice of such
amendment has been mailed to the record holders of outstanding Depositary
Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of Depositary Shares, subject to the conditions
specified in the Deposit Agreement, upon surrender of the Depositary Receipts
evidencing such Depositary Shares to receive shares of Mandatorily Convertible
Preferred Stock or, upon conversion of the shares of Mandatorily Convertible
Preferred Stock represented by the Depositary Receipts, to receive shares of
Common Stock, and in each case any money or other property represented thereby,
except in order to comply with mandatory provisions of applicable law.
Whenever so directed by the Company, the Depositary will terminate the
Deposit Agreement after mailing notice of such termination to the record holders
of all Depositary Receipts then outstanding at least 30 days prior to the date
fixed in such notice for such termination. The Depositary may likewise terminate
the Deposit Agreement if at any time 45 days shall have expired after the
Depositary shall have delivered to the Company a written notice of its election
to resign and a successor depositary shall not have
95
<PAGE>
been appointed and accepted its appointment. If any Depositary Receipts remain
outstanding after the date cf termination, the Depositary thereafter will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders thereof, and will not give any further notices
(other than notice of such termination) or perform any further acts under the
Deposit Agreement except as provided below and except that the Depositary will
continue (i) to collect dividends on the shares of Mandatorily Convertible
Preferred Stock and any other distributions with respect thereto and (ii) to
deliver the shares of Mandatorily Convertible Preferred Stock together with such
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges or other property, without liability for interest
thereon, in exchange for Depositary Receipts surrendered. At any time after the
expiration of two years from the date of termination, the Depositary may sell
the shares of Mandatorily Convertible Preferred Stock then held by it at public
or private sale, at such place or places and upon such terms as it deems proper
and may thereafter hold the net proceeds of any such sale, together with any
money and other property then held by it, without liability for interest
thereon, for the pro rata benefit of the holders of Depositary Receipts which
have not been surrendered. The Company does not intend to terminate the Deposit
Agreement or to permit the resignation of the Depositary without appointing a
successor depositary. In the event the Deposit Agreement is terminated and a
sufficient number of shares of Mandatorily Convertible Preferred Stock remain
outstanding, the Company will use its best efforts to list the shares of
Mandatorily Convertible Preferred Stock on the NYSE (unless the holders of a
majority of the outstanding shares of Mandatorily Convertible Preferred Stock
shall consent to the Company not effecting such listing).
CHARGES OF DEPOSITARY
The Company will pay all charges of the Depositary including charges in
connection with the initial deposit of the shares of Mandatorily Convertible
Preferred Stock, the initial execution and delivery of the Depositary Receipts,
the distribution of information to the holders of Depositary Receipts with
respect to matters on which shares of Mandatorily Convertible Preferred Stock
are entitled to vote, withdrawals of the shares of Mandatorily Convertible
Preferred Stock by the holders of Depositary Receipts or conversion of the
shares of Mandatorily Convertible Preferred Stock, except for taxes (including
transfer taxes, if any) and other governmental charges and such other charges as
are provided in the Deposit Agreement to be at the expense of holders of
Depositary Receipts or persons depositing shares of Mandatorily Convertible
Preferred Stock.
GENERAL
The Depositary will make available for inspection by holders of Depositary
Receipts at its Corporate Office all reports and communications from the Company
that are delivered to the Depositary and made generally available to the holders
of the shares of Mandatorily Convertible Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control from or in performing its
obligations under the Deposit Agreement.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion regarding the material United States
Federal income tax consequences under existing law of the ownership and
disposition of the shares of Mandatorily Convertible Preferred Stock. This
discussion is intended for informational purposes only, and does not address
aspects of taxation, other than Federal income taxation, or all tax consequences
that may be relevant in the particular circumstances of each holder (some of
which, such as dealers in securities, banks, insurance companies, tax-exempt
organizations and foreign persons, may be subject to special rules). There can
be no assurance that future changes in applicable law or administrative and
judicial interpretations thereof, any of which could have a retroactive effect,
will not adversely affect the tax consequences discussed herein or that there
will not be differences of opinion as to the interpretation of applicable law.
Stock having
96
<PAGE>
terms closely resembling those of the shares of Mandatorily Convertible
Preferred Stock has not has not been the subject of any regulation, ruling or
judicial decision currently in effect, and there can be no assurance that the
Service will take the positions set forth below. The Company has not and will
not seek a ruling from the Service as to any tax matters relating to the shares
of Mandatorily Convertible Preferred Stock. Persons considering the purchase of
shares of Mandatorily Convertible Preferred Stock should consult their tax
advisors with respect to the application of the United States Federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction. The following
discussion relates only to shares of Mandatorily Convertible Preferred Stock or
shares of Common Stock received upon conversion thereof or in exchange therefor
that are held as capital assets within the meaning of Section 1221 of the Code).
This summary pertains only to a holder that is (i) a citizen or resident of the
U.S. for U.S. Federal income tax purposes, (ii) an estate subject to U.S.
Federal income taxation without regard to the source of its income, (iii) a
corporation created or organized in or under the laws of the U.S. or any
political subdivision thereof or (iv) a trust which is subject to the
supervision of a court within the U.S. and the control of a U.S. fiduciary.
DIVIDENDS. Dividends paid on the shares of Mandatorily Convertible
Preferred Stock out of the Company's current or accumulated earnings and profits
will be taxable as ordinary income and will generally qualify for the 70 percent
intercorporate dividends-received deduction subject to the minimum holding
period (generally at least 46 days) and other applicable requirements. Under
certain circumstances, a corporate holder may be subject to the alternative
minimum tax with respect to the amount of its dividends-received deduction.
There can be no assurance that the Company's operations during the years that
the Mandatorily Convertible Preferred Stock are outstanding will generate the
necessary amounts of income so that the distributions with respect to the
Mandatorily Convertible Preferred Stock will be treated as made from earnings
and profits and thereby qualify as dividends for Federal income tax purposes. To
the extent the Company does not have sufficient current or accumulated earnings
and profits in the years that the Mandatorily Convertible Preferred Stock are
outstanding, distributions made with respect to the Mandatorily Convertible
Preferred Stock for any such year will be treated as a return of capital rather
than a taxable dividend. Such distributions will reduce the holder's tax basis
in its Mandatorily Convertible Preferred Stock and, to the extent they exceed
such tax basis, will be treated as capital gain. In addition, such distributions
will not be eligible for the dividends-received deduction.
Under certain circumstances, a corporation that receives an "extraordinary
dividend", as defined in Section 1059(c) of the Code, is required to reduce its
stock basis by the non-taxed portion of such dividend. Generally, quarterly
dividends not in arrears paid to an original holder of the shares of Mandatorily
Convertible Preferred Stock will not constitute extraordinary dividends under
Section 1059(c). In addition, under Section 1059(c), any dividend with respect
to "disqualified preferred stock" is treated as an "extraordinary dividend". For
these purposes, "disqualified preferred stock" includes stock which is preferred
as to dividends if the issue price of such stock exceeds its liquidation rights
or redemption price. It is unclear whether the shares of the Mandatorily
Convertible Preferred Stock will be determined to constitute disqualified
preferred stock and, thus, whether dividends distributed with respect to the
Mandatorily Convertible Preferred Stock will constitute extraordinary dividends.
REDEMPTION PREMIUM. Under certain circumstances, Section 305(c) of the Code
requires that any excess of the redemption price of preferred stock over its
issue price be includable in income, prior to receipt, as a constructive
dividend. However, it is believed that Section 305(c) does not apply to stock
with terms such as those of the shares of Mandatorily Convertible Preferred
Stock.
REDEMPTION OR MANDATORY OR OPTIONAL CONVERSION INTO COMMON STOCK. Gain or
loss generally will not be recognized by a holder upon the redemption of shares
of Mandatorily Convertible Preferred Stock for shares of Common Stock or the
conversion of shares of Mandatorily Convertible Preferred Stock into shares of
Common Stock if no cash is received. Income may be recognized, however, to the
extent Common Stock or cash is received in payment of accrued and unpaid
dividends or as an Additional
97
<PAGE>
Dividend (as defined therein) upon a redemption or conversion. Such income would
probably be characterized as dividend income although some uncertainty exists as
to the appropriate characterization of payments in satisfaction of undeclared
accrued and unpaid dividends or as an Additional Dividend. In addition, a holder
who receives cash in lieu of a fractional share will be treated as having
received such fractional share and having exchanged it for cash in a transaction
subject to Section 302 of the Code and related provisions. Such exchange should
generally result in capital gain or loss measured by the difference between the
cash received for the fractional share interest and the holder's basis in the
fractional share interest.
Generally, a holder's basis in the Common Stock received upon the redemption
or conversion of the shares of Mandatorily Convertible Preferred Stock, other
than shares of Common Stock taxed upon receipt, will equal the adjusted tax
basis of the redeemed or converted shares of Mandatorily Convertible Preferred
Stock (exclusive of any basis allocable to a fractional share interest) and the
holding period of such Common Stock will include the holding period of the
redeemed or converted shares of Mandatorily Convertible Preferred Stock.
ADJUSTMENT OF CONVERSION RATE. Certain adjustments to the Conversion Rate
and the Optional Conversion Rate to reflect the Company's issuance of certain
rights, warrants, evidences of indebtedness, securities or other assets to
holders of Common Stock may result in constructive distributions taxable as
dividends to the holders of the shares of Mandatorily Convertible Preferred
Stock which may constitute (and cause other dividends to constitute)
"extraordinary dividends" to corporate holders as described above.
CONVERSION OF MANDATORILY CONVERTIBLE PREFERRED STOCK AFTER DIVIDEND RECORD
DATE. If a holder of shares of Mandatorily Convertible Preferred Stock
exercises such holder's right to convert shares of Mandatorily Convertible
Preferred Stock into shares of Common Stock after a dividend record date but
before payment of the dividend, then such holder generally will be required to
pay the Company an amount equal to the portion of such dividend attributable to
the current quarterly dividend period upon conversion, which amount would
increase the basis of the Common Stock received. The holder would recognize the
dividend payment as income.
DISPOSITION OF MANDATORY CONVERTIBLE PREFERRED STOCK AND COMMON STOCK. A
holder that disposes of or is deemed to dispose of Mandatory Convertible
Preferred Stock or Common Stock received upon the conversion of such preferred
stock generally will realize gain (or loss) to the extent that the proceeds of
such disposition (not including any accrued by unpaid dividends which will be
taxable as such to holders who have previously included such dividends in
income), net of any reasonable costs of disposition, exceed (or are exceeded by)
the adjusted tax base of the Mandatory Convertible Preferred Stock or Common
Stock of such holder. Such gain or loss will be capital gain or loss, and for
individual holders that held the Mandatory Convertible Preferred Stock and
Common Stock for more than 18 months may be subject to a preferential tax rate
of 20%.
BACKUP WITHHOLDING. Certain non-corporate holders may be subject to backup
withholding at a current rate of 31 percent on dividends and certain
consideration received upon the call or conversion of the shares of Mandatorily
Convertible Preferred Stock. Generally, backup withholding applies only when the
taxpayer fails to furnish or certify a proper taxpayer identification number or
when the taxpayer is notified by the Service that the taxpayer has failed to
report payments of interest and dividends properly. Holders should consult their
tax advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining any applicable exemption.
98
<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in an
underwriting agreement (the "U.S. Underwriting Agreement"), among the Company
and each of the underwriters named below (the "U.S. Underwriters"), for whom
Lehman Brothers Inc., and Smith Barney Inc. are acting as representatives (the
"Representatives"), each of the several U.S. Underwriters has agreed to purchase
from the Company, and the Company has agreed to sell to each U.S. Underwriter,
the aggregate number of shares of Common Stock set forth opposite the name of
such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS COMMON SHARES
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Lehman Brothers Inc..............................................................................
Smith Barney Inc.................................................................................
Total........................................................................................
-------
-------
</TABLE>
Under the terms of and subject to the conditions contained in an
underwriting agreement (the "International Underwriting Agreement"), among the
Company and each of the international managers named below (the "International
Managers"), for whom Lehman Brothers International (Europe), and Smith Barney
Inc. are acting as Lead Managers (the "Lead Managers"), each of the several
International Managers has agreed to purchase from the Company, and the Company
has agreed to sell to each International Manager, the aggregate number of shares
of Common Stock set forth opposite the name of such International Manager below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS COMMON SHARES
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Lehman Brothers International (Europe)...........................................................
Smith Barney Inc.................................................................................
Total........................................................................................
-------
-------
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the U.S. Underwriters and the International Managers, respectively, to purchase
shares of Common Stock, are subject to the approval of certain legal matters by
counsel and to certain other conditions and that if any of the shares of Common
Stock are purchased by the U.S. Underwriters pursuant to the U.S. Underwriting
Agreement or by the International Managers pursuant to the International
Underwriting Agreement, all the shares of Common Stock agreed to be purchased by
either the U.S. Underwriters or the International Managers, as the case may be,
pursuant to their respective Underwriting Agreements, must be so purchased. The
offering price and underwriting discounts and commissions for the U.S. Offering
and the International Offering are identical. The closing of each of the U.S.
Offering, the International Offering and the Concurrent Offerings is conditioned
upon the closing of the other and of the other Six Flags Transactions.
The Company has been advised by the Representatives and the Lead Managers
that the U.S. Underwriters and the International Managers propose to offer
shares of Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers (who may include the U.S. Underwriters and International Managers) at
such public offering price less a selling concession not to exceed $ per
share. The selected dealers may reallow a concession not to exceed $ per
share. After the initial offering of the Common Stock, the offering price, the
concession to selected dealers and the reallowance to other dealers may be
changed by the U.S. Underwriters and the International Managers.
The U.S. Underwriters and the International Managers have entered into an
Agreement Among U.S. Underwriters and International Managers (the "Agreement
Among") pursuant to which each U.S. Underwriter has agreed that, as part of the
distribution of the shares of Common Stock offered in the U.S.
99
<PAGE>
Offering, (a) it is not purchasing any of such shares for the account of anyone
other than a U.S. or Canadian Person (as defined below) and (b) it has not
offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to the U.S.
Offering outside the United States or Canada or to anyone other than a U.S. or
Canadian Person. In addition, pursuant to the Agreement Among, each
International Manager has agreed that, as part of the distribution of the shares
of Common Stock offered in the International Offering, (a) it is not purchasing
any of such shares for the account of any U.S. or Canadian Person and (b) it has
not offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to the
International Offering within the United States or Canada or to any U.S. or
Canadian Person. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Underwriting
Agreements and the Agreement Among, including: (i) certain purchases and sales
between the U.S. Underwriters and the International Managers; (ii) certain
offers, sales, resales, deliveries or distributions to or through investment
advisors or other persons exercising investment discretion; (iii) purchases,
offers or sales by a U.S. Underwriter that is also acting as an International
Manager or by an International Manager that is also acting as a U.S.
Underwriter; and (iv) other transactions specifically approved by the U.S.
Underwriters and International Managers. As used herein, "U.S. or Canadian
Person" means any resident or citizen of the United States or Canada, any
corporation, pension, profit sharing or other trust or other entity organized
under or governed by the laws of the United States or Canada or any political
subdivision thereof (other than the foreign branch of any United States or
Canadian Person), any estate or trust the income of which is subject to United
States or Canadian federal income taxation regardless of the source of its
income, and any United States or Canadian branch of a person other than a United
States or Canadian Person. The term "United States" means the United States of
America (including, the states thereof and the District of Columbia) and its
territories, its possessions and other areas subject to its jurisdiction. The
term "Canada" means the provinces of Canada, its territories, its possessions
and other areas subject to its jurisdiction.
Pursuant to the Agreement Among, sales may be made among the U.S.
Underwriters and the International Managers of such number of shares of Common
Stock as may be mutually agreed. The price of any shares so sold shall be the
public offering price as then in effect for Common Stock being sold by the U.S.
Underwriters and the International Managers, less an amount not greater than the
selling concession unless otherwise determined by mutual agreement. To the
extent that there are sales pursuant to the Agreement Among, the number of
shares initially available for sale by the U.S. Underwriters and the
International Managers may be more or less than the amount specified on the
cover page of this Prospectus.
Each International Manager has represented and agreed that: (i) it has not
offered or sold and, prior to the date six months after the date of issue of the
shares of Common Stock, will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on, and will only issue or pass on, to any person in the United Kingdom, any
document received by it in connection with the issue of the Common Stock if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995.
Purchasers of the shares of Common Stock offered pursuant to the Offering
may be required to pay stamp taxes and other charges in accordance with the laws
and practices of the country of purchase in addition to the offering price set
forth on the cover page hereof.
100
<PAGE>
Except for the Common Stock to be sold in the Offering and the Convertible
Preferred Stock or shares of Common Stock to be issued upon conversion of the
Convertible Preferred Stock, the Company has agreed not to offer, sell, contract
to sell or otherwise issue any shares of Common Stock or other capital stock or
securities convertible into or exchangeable for, or any rights to acquire,
Common Stock or other capital stock, with certain exceptions (including certain
exceptions for Common Stock or other capital stock issued or sold in connection
with future acquisitions by the Company, including its proposed acquisition of
Walibi), prior to the expiration of 90 days from the date of this Prospectus
without the prior written consent of Lehman Brothers on behalf of the
Representatives and the Lead Managers. The Company's officers, directors and
principal stockholders, who hold in the aggregate approximately 5.9 million
shares of Common Stock (including shares issuable upon exercise of outstanding
options, warrants and restricted stock), have agreed not to, directly or
indirectly, offer, sell or otherwise dispose of shares of Common Stock of the
Company or any securities convertible into or exchangeable for or any rights to
acquire, Common Stock or other capital stock of the Company for 90 days
following the date of this Prospectus without the prior written consent of
Lehman Brothers. In addition, the Sellers in the Six Flags Acquisition have
agreed not to sell any Convertible Preferred Stock (or shares of Common Stock
issuable upon conversion thereof) acquired by them in the Six Flags Acquisition
during such 90-day period.
The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an additional and shares of
Common Stock, respectively, at the initial public offering price to the public,
less the underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. The options may be
exercised at any time up to 30 days after the date of this Prospectus. To the
extent that the U.S. Underwriters and the International Managers exercise such
options, each of the U.S. Underwriters and the International Managers, as the
case may be, will be committed (subject to certain conditions) to purchase a
number of additional shares proportionate to such U.S. Underwriter's or
International Manager's initial commitment as indicated in the preceding tables.
The Company and its operating subsidiaries (including Six Flags) have agreed
to indemnify the U.S. Underwriters and the International Managers against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments which the U.S. Underwriters and the International
Managers may be required to make in respect thereof.
Until the distribution of the shares of Common Stock offered hereby is
completed, rules of the Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Representatives and the Lead Managers are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering (I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus), the Representatives
and the Lead Managers may reduce that short position by purchasing the Common
Stock in the open market after the distribution has been completed. The
Representatives and the Lead Managers may also elect to reduce any short
position by exercising all or part of the over-allotment options described
herein.
The Representatives and the Lead Managers also may impose a penalty bid on
certain Underwriters and selling group members. This means that if the
Representatives or the Lead Managers purchase Common Stock in the open market to
reduce the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares of Common Stock as
part of the Offering.
In general, purchases of a security for the purposes of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such
101
<PAGE>
purchases. The imposition of a penalty bid might have an effect on the price of
a security to the extent that it were to discourage resales of the security by
purchasers in the applicable offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives or the Lead Managers will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
An application will be made to list the Public Depositary Shares and the
Common Stock into which the Mandatorily Convertible Preferred Stock are
convertible on the NYSE. The Mandatorily Convertible Preferred Stock will not be
so listed and the Company does not expect that there will be any trading market
for the Mandatorily Convertible Preferred Stock except as represented by the
Public Depositary Shares.
Each of Lehman Brothers and Smith Barney Inc. has from time to time provided
certain investment banking services to the Company and its affiliates for which
they have received customary fees. LBI Group Inc., an affiliate of Lehman
Brothers is party to a financing commitment provided to the Company in
connection with the Six Flags Transactions and has received customary fees in
connection therewith. In addition, Lehman Brothers and Smith Barney Inc.
(predecessor to Salomon Smith Barney) acted as underwriters of the Company's
1996 and 1997 public offerings and are acting as underwriters in connection with
the Concurrent Offerings and will receive customary fees in connection
therewith. An affiliate of Lehman Brothers is a lender under each of the Credit
Facilities.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain legal matters in
connection with the Offering will be passed upon for the Company by Baer Marks &
Upham LLP, New York, New York. The Underwriters are being represented by
Cravath, Swaine & Moore, New York, New York.
102
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, have been included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of Elitch Gardens Company at December 31, 1995 and
1994, and for the year ended December 31, 1995 and the period from May 31, 1994
(date of inception) through December 31, 1994, appearing in the Company's
Registration Statement (Form S-2 No. 333-16573) have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph with respect to that company's ability to
continue as a going concern) and are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of The Great Escape as of October 31, 1995 and
1994, and for the years then ended, included in the Company's Registration
Statement (Form S-2 No. 333-16573) portions of which are incorporated by
reference herein are incorporated herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, included in the Form
S-2, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Stuart Amusement Company as of
September 30, 1996 and 1995, and for each of the years in the three-year period
ended September 30, 1996, included in the Company's Registration Statement (Form
S-2 No. 333-16573) portions of which are incorporated by reference herein are
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, included in the Form S-2, and upon the
authority of said firm as experts in accounting and auditing.
The financial statements of Kentucky Kingdom, Inc. at November 2, 1997 and
for the 52-week period then ended, appearing in the Company's Form 8-K dated
November 7, 1997, as amended, which is incorporated by reference herein are
incorporated herein in reliance upon the report of Carpenter Mountjoy &
Bressler, independent certified public accountants, included in the Form 8-K and
upon the authority of said firm as experts in accounting and auditing.
103
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements of Premier Parks Inc..................................................... F-1
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheet................................................................................. F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statements of Stockholders' Equity............................................................ F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-8
Consolidated Financial Statements of Six Flags Entertainment Corporation................................... F-
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Premier Parks Inc.:
We have audited the accompanying consolidated balance sheets of Premier
Parks Inc. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Parks Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 7, 1997
F-2
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
ASSETS 1995 1996 1997
- ----------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents............................................ $28,787,000 4,043,000 169,151,000
Accounts receivable.................................................. 965,000 1,180,000 15,960,000
Inventories.......................................................... 2,904,000 4,200,000 5,546,000
Prepaid expenses and other current assets............................ 2,352,000 3,416,000 3,652,000
----------- ----------- -------------
Total current assets........................................... 35,008,000 12,839,000 194,309,000
----------- ----------- -------------
Other assets:
Deferred charges..................................................... 4,839,000 6,752,000 10,594,000
Deposits and other................................................... 4,229,000 9,087,000 6,036,000
----------- ----------- -------------
Total other assets............................................. 9,068,000 15,839,000 16,630,000
----------- ----------- -------------
Property and equipment, at cost........................................ 125,906,000 263,175,000 390,359,000
Less accumulated depreciation........................................ 9,905,000 17,845,000 30,342,000
----------- ----------- -------------
116,001,000 245,330,000 360,017,000
----------- ----------- -------------
Intangible assets...................................................... 13,471,000 31,669,000 43,659,000
Less accumulated amortization........................................ 230,000 874,000 2,348,000
----------- ----------- -------------
13,241,000 30,795,000 41,311,000
----------- ----------- -------------
Total assets................................................... $173,318,000 304,803,000 612,267,000
----------- ----------- -------------
----------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses................................ $ 6,361,000 11,059,000 17,291,000
Accrued interest payable............................................. 4,158,000 4,304,000 4,054,000
Current portion of long-term debt.................................... 56,000 -- --
Current portion of capitalized lease obligations..................... 1,009,000 1,492,000 990,000
----------- ----------- -------------
Total current liabilities...................................... 11,584,000 16,855,000 22,335,000
----------- ----------- -------------
Long-term debt and capitalized lease obligations:
Long-term debt:
Senior notes....................................................... 90,000,000 90,000,000 215,000,000
Credit facility.................................................... -- 57,574,000 --
Capitalized lease obligations........................................ 3,213,000 1,768,000 1,263,000
----------- ----------- -------------
Total long-term debt and capitalized lease obligations......... 93,213,000 149,342,000 216,263,000
Other long-term liabilities............................................ 3,465,000 4,846,000 3,967,000
Deferred income taxes.................................................. 19,145,000 20,578,000 42,900,000
----------- ----------- -------------
Total liabilities.............................................. 127,407,000 191,621,000 285,465,000
----------- ----------- -------------
Stockholders' equity:
Preferred stock, 500,000 shares authorized at December 31, 1995, 1996
and September 30, 1997; 200,000 shares Series A, 7% cumulative
convertible, $1 par value ($100 redemption value) issued and
outstanding at December 31, 1995; no shares issued and outstanding
at December 31, 1996 and September 30, 1997........................ 200,000 -- --
Common stock, $.05 par value, 9,000,000, 30,000,000 and 90,000,000
shares authorized at December 31, 1995 and 1996, and September 30,
1997, respectively; 4,883,900, 11,392,669 and 18,327,018 shares
issued and 4,857,554, 11,366,323 and 18,300,672 shares outstanding
as of December 31, 1995, 1996 and September 30, 1997,
respectively....................................................... 244,000 569,000 917,000
Capital in excess of par value....................................... 79,261,000 144,642,000 334,721,000
Accumulated deficit.................................................. (33,105,000) (31,340,000) (8,147,000)
----------- ----------- -------------
46,600,000 113,871,000 327,491,000
Less 26,346 common shares of treasury stock, at cost................. (689,000) (689,000) (689,000)
----------- ----------- -------------
Total stockholders' equity..................................... 45,911,000 113,182,000 326,802,000
----------- ----------- -------------
Total liabilities and stockholders' equity..................... $173,318,000 304,803,000 612,267,000
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
------------ ----------- ----------- ----------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions.......................... $ 13,936,000 21,863,000 41,162,000 38,970,000 91,080,000
Theme park food, merchandise, and other........ 10,963,000 19,633,000 52,285,000 50,822,000 95,666,000
------------ ----------- ----------- ----------- ------------
Total revenue.............................. 24,899,000 41,496,000 93,447,000 89,792,000 186,746,000
------------ ----------- ----------- ----------- ------------
Operating costs and expenses:
Operating expenses............................. 12,358,000 19,775,000 42,425,000 32,897,000 69,444,000
Selling, general and administrative............ 5,448,000 9,272,000 16,927,000 15,363,000 29,688,000
Costs of products sold......................... 2,553,000 4,635,000 11,101,000 10,685,000 22,072,000
Depreciation and amortization.................. 1,997,000 3,866,000 8,533,000 5,599,000 13,974,000
------------ ----------- ----------- ----------- ------------
Total operating costs and expenses......... 22,356,000 37,548,000 78,986,000 64,544,000 135,178,000
------------ ----------- ----------- ----------- ------------
Income from operations..................... 2,543,000 3,948,000 14,461,000 25,248,000 51,568,000
Other income (expense):
Interest expense, net.......................... (2,299,000) (5,578,000) (11,121,000) (7,657,000) (12,869,000)
Other income (expense)......................... (74,000) (177,000) (78,000) (59,000) (44,000)
------------ ----------- ----------- ----------- ------------
(2,373,000) (5,755,000) (11,199,000) (7,716,000) (12,913,000)
------------ ----------- ----------- ----------- ------------
Income (loss) before income taxes.......... 170,000 (1,807,000) 3,262,000 17,532,000 38,655,000
Income tax expense (benefit)..................... 68,000 (762,000) 1,497,000 7,020,000 15,462,000
------------ ----------- ----------- ----------- ------------
Income (loss) before extraordinary loss.... 102,000 (1,045,000) 1,765,000 10,512,000 23,193,000
Extraordinary loss on extinguishment of debt, net
of income tax benefit of $90,000............... -- (140,000) -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss).......................... $ 102,000 (1,185,000) 1,765,000 10,512,000 23,193,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Net income (loss) applicable to common
stock.................................... $ 102,000 (1,714,000) 1,162,000 9,909,000 23,193,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Weighted average number of common shares
outstanding--primary........................... 2,810,000 3,938,000 8,972,000 7,979,000 17,513,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Income (loss) per common share--primary:
Income (loss) before extraordinary loss.... $ .04 (.40) .13 1.24 1.32
Extraordinary loss......................... -- (.04) -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss).......................... $ .04 (.44) .13 1.24 1.32
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Weighted average number of common shares
outstanding--fully diluted..................... 2,810,000 3,938,000 8,972,000 9,439,000 18,046,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Income (loss) per common share--fully diluted:
Income (loss) before extraordinary loss.... $ .04 (.40) .13 1.11 1.29
Extraordinary loss......................... -- (.04) -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss).......................... $ .04 (.44) .13 1.11 1.29
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SERIES A, 7%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- CAPITAL IN
SHARES SHARES EXCESS OF ACCUMULATED TREASURY
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT STOCK TOTAL
--------- --------- --------- --------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1993.......... -- $ -- 2,681,565 $ 134,000 45,769,000 (32,022,000) (689,000) 13,192,000
Issuance of common
stock:
Cash
proceeds-net.. -- -- 619,815 31,000 4,154,000 -- -- 4,185,000
Exchange of debt
for equity.... -- -- 97,087 5,000 650,000 -- -- 655,000
Net income.......... -- -- -- -- -- 102,000 -- 102,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at December
31, 1994.......... -- -- 3,398,467 170,000 50,573,000 (31,920,000) (689,000) 18,134,000
Issuance of
preferred stock... 200,000 200,000 -- -- 19,800,000 -- -- 20,000,000
Conversion of debt
to equity......... -- -- 1,485,433 74,000 8,888,000 -- -- 8,962,000
Net loss............ -- -- -- -- -- (1,185,000) -- (1,185,000)
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at December
31, 1995.......... 200,000 200,000 4,883,900 244,000 79,261,000 (33,105,000) (689,000) 45,911,000
Conversion of
preferred stock... (200,000) (200,000) 2,560,928 128,000 72,000 -- -- --
Issuance of common
stock............. -- -- 3,947,841 197,000 65,309,000 -- -- 65,506,000
Net income.......... -- -- -- -- -- 1,765,000 -- 1,765,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at December
31, 1996.......... -- -- 11,392,669 569,000 144,642,000 (31,340,000) (689,000) 113,182,000
Issuance of common
stock............. -- -- 6,934,349 348,000 190,079,000 -- -- 190,427,000
Net income.......... -- -- -- -- -- 23,193,000 -- 23,193,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at
September 30, 1997
(Unaudited)....... -- $ -- 18,327,018 $ 917,000 334,721,000 (8,147,000) (689,000) 326,802,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
--------- --------- --------- --------- ---------- ------------ ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
----------- ----------- ------------ ----------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 102,000 (1,185,000) 1,765,000 10,512,000 23,193,000
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization........... 1,997,000 3,866,000 8,533,000 5,599,000 13,974,000
Extraordinary loss on early
extinguishment of debt................ -- 230,000 -- -- --
Amortization of discount on debt and
debt issuance costs................... 94,000 317,000 811,000 523,000 1,443,000
Gain on sale of assets.................. (9,000) -- (51,000) -- --
(Increase) decrease in accounts
receivable............................ (496,000) 5,794,000 (215,000) (7,444,000) (14,696,000)
Deferred income taxes (benefit)......... 24,000 (808,000) 1,433,000 6,993,000 15,226,000
Increase in inventories and prepaid
expenses.............................. (422,000) (455,000) (2,360,000) (110,000) (1,420,000)
(Increase) decrease in deposits and
other assets.......................... (808,000) 1,197,000 (3,947,000) (2,858,000) 4,112,000
Increase (decrease) in accounts payable
and accrued expenses.................. 511,000 (2,366,000) 5,216,000 (221,000) 2,339,000
Increase (decrease) in accrued interest
payable............................... 67,000 4,056,000 146,000 (2,772,000) (250,000)
----------- ----------- ------------ ----------- ------------
Total adjustments..................... 958,000 11,831,000 9,566,000 (290,000) 20,728,000
----------- ----------- ------------ ----------- ------------
Net cash provided by operating
activities.......................... 1,060,000 10,646,000 11,331,000 10,222,000 43,921,000
----------- ----------- ------------ ----------- ------------
Cash flows from investing activities:
Proceeds from the sale of equipment....... 14,000 -- 476,000 -- --
Other investments......................... (83,000) (63,000) (48,000) (38,000) --
Additions to property and equipment....... (10,108,000) (10,732,000) (39,423,000) (29,290,000) (108,166,000)
Acquisition of theme park assets.......... -- -- (116,154,000) -- --
Acquisition of Funtime Parks, Inc. in 1995
and Stuart Amusement Company in 1997,
net of cash acquired.................... -- (63,344,000) -- -- (21,376,000)
----------- ----------- ------------ ----------- ------------
Net cash used in investing
activities.......................... (10,177,000) (74,139,000) (155,149,000) (29,328,000) (129,542,000)
----------- ----------- ------------ ----------- ------------
Cash flows from financing activities:
Repayment of debt......................... (5,079,000) (17,487,000) (1,082,000) (938,000) (66,081,000)
Proceeds from borrowings.................. 8,451,000 93,500,000 57,574,000 -- 132,500,000
Net cash proceeds from issuance of
preferred stock......................... -- 20,000,000 -- -- --
Net cash proceeds from issuance of common
stock................................... 4,185,000 -- 65,306,000 65,151,000 189,427,000
Payment of debt issuance costs............ (100,000) (5,099,000) (2,724,000) (128,000) (5,117,000)
----------- ----------- ------------ ----------- ------------
Net cash provided by financing
activities.......................... 7,457,000 90,914,000 119,074,000 64,085,000 250,729,000
----------- ----------- ------------ ----------- ------------
(Decrease) increase in cash and cash
equivalents............................... (1,660,000) 27,421,000 (24,744,000) 44,979,000 165,108,000
Cash and cash equivalents at beginning of
period.................................... 3,026,000 1,366,000 28,787,000 28,787,000 4,043,000
----------- ----------- ------------ ----------- ------------
Cash and cash equivalents at end of
period.................................... $ 1,366,000 28,787,000 4,043,000 73,766,000 169,151,000
----------- ----------- ------------ ----------- ------------
----------- ----------- ------------ ----------- ------------
Supplemental cash flow information:.........
Cash paid for interest.................... $ 2,178,000 2,018,000 11,640,000 11,405,000 17,929,000
----------- ----------- ------------ ----------- ------------
----------- ----------- ------------ ----------- ------------
Cash paid for income taxes (refund)....... $ 38,000 (22,000) 64,000 27,000 135,000
----------- ----------- ------------ ----------- ------------
----------- ----------- ------------ ----------- ------------
</TABLE>
F-6
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Supplemental disclosure of noncash investing and financing activities:
Year ended December 31, 1994
- Common stock (97,087 shares) was exchanged for $655,000 of debt.
- The Company entered into two separate note agreements, aggregating
$570,000 for the purchase of property and equipment.
Year ended December 31, 1995
- Common stock (1,485,433 shares) was exchanged for $9,095,000 of debt, net
of $133,000 of costs.
- The Company acquired certain rides and attractions through capital leases
with obligations totaling $3,259,000.
Year ended December 31, 1996 and Nine Months Ended September 30, 1996
(Unaudited)
- Preferred stock (200,000 shares) was converted into common stock
(2,560,928 shares).
- The Company issued $200,000 of common stock (9,091 shares) as a component
of a theme park acquisition.
- The Company acquired certain equipment through a capital lease with an
obligation of $64,000.
Nine Months Ended September 30, 1997 (Unaudited)
- The Company issued $1,000,000 of common stock (32,139 shares) as a
component of a theme park acquisition.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES
DESCRIPTION OF BUSINESS
Premier Parks Inc. (the Company) owns and operates regional theme amusement
and water parks. As of December 31, 1996, the Company and its subsidiaries own
and operate ten parks: Adventure World, a combination theme and water park
located in Largo, Maryland; Darien Lake & Camping Resort, a combination theme
and water park with an adjacent camping resort and performing arts center,
located between Buffalo and Rochester, New York; Elitch Gardens, a theme park
located in Denver, Colorado; Frontier City, a western theme park located in
Oklahoma City, Oklahoma; Geauga Lake, a combination theme and water park located
near Cleveland, Ohio; The Great Escape and Splash Water Kingdom, a combination
theme and water park located in Lake George, New York; two water parks operated
under the name Waterworld/USA, located in Northern California; White Water Bay,
a tropical water park located in Oklahoma City, Oklahoma; and Wyandot Lake, a
water park which also includes "dry rides" located in Columbus, Ohio. On
February 5, 1997, the Company acquired Riverside Park, a theme park located near
Springfield, Massachusetts (note 14).
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries, and a limited partnership and a limited liability
company in which the Company beneficially owns 100% of the interests.
Intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements as of September 30, 1997 and for the nine months ended
September 30, 1996 and 1997, reflect all adjustments (all of which were normal
and recurring) which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the interim
periods presented. The results of operations for the nine month period ended
September 30, 1997, are not indicative of the results to be expected for the
full year. The Company's business is highly seasonal. The great majority of the
Company's revenue is collected in the second and third quarters while operating
expenses are incurred throughout the year. Accordingly, the Company historically
incurs a net loss for the fourth calendar quarter.
The Company's investment in a partnership in which it does not own a
controlling interest is accounted for using the equity method and included in
other assets.
CASH EQUIVALENTS
Cash equivalents of $26,728,000, $2,753,000, and $158,169,000 at December
31, 1995, 1996 and September 30, 1997, respectively, consist of short-term
highly liquid investments with a remaining maturity as of purchase date of three
months or less, which are readily convertible into cash. For purposes of the
F-8
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
consolidated statements of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and primarily consist of products for resale including merchandise and food and
miscellaneous supplies including repair parts for rides and attractions.
ADVERTISING COSTS
Production costs of commercials and programming are charged to operations in
the year first aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the year incurred. The amounts capitalized
at year-end are included in prepaid expenses.
DEFERRED CHARGES
The Company capitalizes all costs related to the issuance of debt with such
costs included in deferred charges in the consolidated balance sheets. The
amortization of such costs are recognized as interest expense under a method
approximating the interest method over the life of the respective debt issue. As
of December 31, 1996, approximately $626,000 of costs associated with the
Company's January 1997 debt and equity offerings (notes 5 and 8) are also
included in deferred charges.
DEPRECIATION AND AMORTIZATION
Buildings and improvements are depreciated over their estimated useful lives
of approximately 30 years by use of the straight-line method. Furniture and
equipment are depreciated using the straight-line method over 5-10 years. Rides
and attractions are depreciated using the straight-line method over 5-25 years.
Amortization of property associated with capitalized lease obligations is
included in depreciation expense in the consolidated financial statements.
Maintenance and repairs are charged directly to expense as incurred, while
betterments and renewals are generally capitalized in the property accounts.
When an item is retired or otherwise disposed of, the cost and applicable
accumulated depreciation are removed and the resulting gain or loss is
recognized.
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited, generally 25 years.
LONG-LIVED ASSETS
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
January 1, 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The adoption of SFAS No. 121 did not have an impact on the
Company's consolidated financial position or results of operations in 1996.
INTEREST EXPENSE RECOGNITION
Interest on notes payable is generally recognized as expense on the basis of
stated interest rates. Notes payable and capitalized lease obligations that do
not have a stated interest rate or that have interest rates considered to be
lower than prevailing market rates (when the obligations were incurred) are
carried at amounts discounted to impute a market rate of interest cost. Total
interest expense incurred was $2,341,000, $6,074,000, $12,597,000, $9,156,000
and $19,122,000 in 1994, 1995 and 1996, and for the nine months ended September
30, 1996 and 1997, respectively. Interest expense in the accompanying
consolidated statements of operations is shown net of interest income.
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 and operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary 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 income in the period that includes the enactment date.
INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is computed based on income (loss) applicable
to common stock divided by the weighted average number of common shares
outstanding during the period. For the year ended December 31, 1995, no
warrants, options, or potentially issuable shares from convertible securities
were considered as the effect would be antidilutive. For the year ended December
31, 1994, warrants and options outstanding have been excluded from the per
common share calculations as no active trading market existed for the Company's
common stock during the year.
The Company's former senior subordinated notes were converted into common
shares in 1995. For 1994, the senior subordinated notes were considered to be
potentially dilutive securities. The weighted average number of common shares
attributable to the conversion feature of the notes was 1,120,000. The former
senior subordinated notes bore interest and if the notes had been converted, the
interest expense on the notes in 1994 would not have been incurred. After
consideration of the increase in income that would have occurred from the
reduction in interest expense, the effect of the convertible notes on income per
common share was antidilutive.
The Company issued convertible preferred stock in 1995 which was a
potentially dilutive security. Accumulated preferred stock dividends of
$529,000, $603,000 and $603,000, which were paid through additional issuances of
common stock, were considered in determining net income (loss) applicable to
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
common stock in 1995 and 1996, and the nine months ended September 30, 1996,
respectively. The common shares that would have resulted from conversion of the
preferred stock at December 31, 1995 are not considered in the 1995 calculation
of loss per common share, as the effect would be antidilutive. The convertible
preferred stock was converted into common stock during June 1996. The effect of
the additional common shares, as if they were converted on January 1, 1996, was
included in the determination of the weighted average number of common shares
outstanding-fully diluted for the nine months ended September 30, 1996. The
effect of the conversion of the preferred shares as of the beginning of the
period was antidilutive for the year ended 1996.
STOCK OPTIONS
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB No. 25, "Accounting for Stock Issued to Employees," whereby
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. Companies which
continue to apply the provisions of APB No. 25 are required by SFAS No. 123 to
disclose pro forma net earnings and net earnings per share for employee stock
option grants made in 1995, 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB No. 25, and has provided the pro forma
disclosures required by SFAS No. 123 in note 9.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses, and accrued interest payable approximate
fair value because of the short maturity of these financial instruments. The
fair value estimates, methods, and assumptions relating to the Company's other
financial instruments are discussed in note 5.
(3) ACQUISITION OF THEME PARKS
Pursuant to a merger agreement, on August 15, 1995, the Company acquired
Funtime Parks, Inc. (Funtime), a company owning three regional theme parks, for
an initial purchase price of approximately $60,000,000 in cash, with an
additional amount of approximately $5,400,000 paid to the former shareholders as
a postclosing adjustment related to the operating cash flows of the former
Funtime parks after the
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(3) ACQUISITION OF THEME PARKS (CONTINUED)
acquisition date. The acquisition was accounted for as a purchase. The
allocation of the purchase price was determined based upon estimates of fair
value as determined by independent appraisal. As of the acquisition date and
after giving effect to the purchase, $18,030,000 of deferred tax liabilities
were recognized for the tax consequences attributable to the differences between
the financial statement carrying amounts and the tax basis of Funtime's assets
and liabilities. Approximately $13,500,000 of cost in excess of the fair value
of the net assets acquired was recorded as goodwill. As part of the acquisition,
$2,500,000 of the purchase price was placed into escrow as an indemnification
fund. Except in limited circumstances, the indemnification fund represents the
sole source of funds for indemnification claims made by the Company against the
former shareholders of Funtime. The indemnification fund is classified in the
accompanying consolidated financial statements as a deposit and as a noncurrent
other liability.
The accompanying 1996 and 1995 consolidated statements of operations reflect
the results of Funtime from the date of acquisition (August 15, 1995).
On October 31, 1996, the Company acquired all of the interests in a
partnership which owned substantially all of the assets used in the operation of
Elitch Gardens for $62,500,000 in cash. Thereupon, the partnership dissolved by
operation of law. As a result, the assets were directly owned by the Company.
The transaction was accounted for as a purchase. In addition, the Company has
entered into a five-year non-competition agreement with the president of Elitch
Gardens Company's general partner. Based upon the purchase method of accounting,
the purchase price was primarily allocated to property and equipment with
$4,506,000 of costs recorded as intangible assets, primarily goodwill. The
general partner and a principal limited partner of Elitch Gardens Company have
agreed severally to indemnify the Company for claims in excess of $100,000 in an
amount up to $1,000,000 per partner.
On November 19, 1996, the Company acquired all of the interests in two
partnerships which owned substantially all of the assets used in the operation
of the two Waterworld/USA water parks for an aggregate cash purchase price of
approximately $17,250,000, of which $862,500 was placed in escrow to fund
potential indemnification claims by the Company. Thereupon, the partnerships
dissolved by operation of law. As a result, the assets were directly owned by
the Company. The transaction was accounted for as a purchase. Based upon the
purchase method of accounting, the purchase price was primarily allocated to
property and equipment with $5,110,000 of costs recorded as intangible assets,
primarily goodwill.
On December 4, 1996, the Company acquired all of the interests in a limited
liability company which owned substantially all of the assets used in the
operation of The Great Escape and Splash Water Kingdom for a cash purchase price
of $33,000,000. The transaction was accounted for as a purchase. In connection
with the acquisition, the Company entered into a non-competition agreement and a
related agreement with the former owner, providing for an aggregate
consideration of $1,250,000. In addition, as a component of the transaction, the
Company issued 9,091 shares of its common stock ($200,000) to an affiliate of
the former owner. Based upon the purchase method of accounting, the purchase
price was primarily allocated to property and equipment with $9,221,000 of costs
recorded as intangible assets, primarily goodwill.
The accompanying 1996 consolidated statement of operations reflects the
results of these 1996 acquisitions from their respective acquisition dates.
F-12
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(3) ACQUISITION OF THEME PARKS (CONTINUED)
The following summarized pro forma results of operations assumes that for
the year ended December 31, 1996, the Elitch Gardens, The Great Escape, and
Waterworld/USA acquisitions and related transactions occurred as of the
beginning of 1996 and for the year ended December 31, 1995, assumes that these
acquisitions, the Funtime acquisition, and the related transactions occurred as
of the beginning of 1995 and neither year includes the operations of the
Riverside Park, which was acquired in 1997.
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Total revenues...................................................... $ 140,126 125,941
Income before extraordinary loss.................................... 6,135 4,957
Income before extraordinary loss applicable to common stock......... 6,135 4,957
Income before extraordinary loss per common share................... .52 .44
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------
1995 1996 1997
-------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Land........................................... $ 12,230,000 27,760,000 33,467,000
Buildings and improvements..................... 54,935,000 106,302,000 135,766,000
Rides and attractions.......................... 51,653,000 112,379,000 195,655,000
Equipment...................................... 7,088,000 16,734,000 25,471,000
-------------- ------------- -------------
Total...................................... 125,906,000 263,175,000 390,359,000
Less accumulated depreciation.................. (9,905,000) (17,845,000) (30,342,000)
-------------- ------------- -------------
$ 116,001,000 245,330,000 360,017,000
-------------- ------------- -------------
</TABLE>
Included in property and equipment are costs and accumulated depreciation
associated with capital leases as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1995 1996 1997
------------ ---------- -------------
<S> <C> <C> <C>
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Cost................................................ $ 6,005,000 6,069,000 6,069,000
Accumulated depreciation............................ (334,000) (577,000) (760,000)
------------ ---------- -------------
$ 5,671,000 5,492,000 5,309,000
------------ ---------- -------------
------------ ---------- -------------
</TABLE>
F-13
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
At December 31, 1995 and 1996, and September 30, 1997, long-term debt and
capitalized lease obligations consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Long term debt:
Senior notes--due 2003(a)........................... $ 90,000,000 90,000,000 90,000,000
Senior notes--due 2007 (c).......................... -- -- 125,000,000
Credit facility (b)................................. -- 57,574,000 --
Other debt.......................................... 56,000 -- --
------------- ------------- -------------
Total long-term debt................................ 90,056,000 147,574,000 215,000,000
Capitalized lease obligations:
Capitalized lease obligations expiring 1997 through
2000, requiring aggregate annual lease payments
ranging from approximately $20,000 to $548,000
including implicit interest at rates ranging from
9.875% to 14% and secured by equipment with a net
book value of approximately $5,492,000 and
$5,309,000 as of December 31, 1996 and September
30, 1997, respectively............................ 4,222,000 3,260,000 2,253,000
------------- ------------- -------------
Total........................................... $ 94,278,000 150,834,000 217,253,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
(a) The notes are senior unsecured obligations of the Company, with a
$90,000,000 aggregate principal amount, and mature on August 15, 2003. The notes
bear interest at 12% per annum payable semiannually on August 15 and February 15
of each year, commencing February 15, 1996. The notes are redeemable, at the
Company's option, in whole or part, at any time on or after August 15, 1999, at
varying redemption prices. Additionally, at any time prior to August 15, 1998,
the Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. These notes are
guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The proceeds of the notes were used in the Funtime acquisition and in the
refinancing of previously existing indebtedness. The Company recognized a
$230,000 loss on early extinguishment of debt during 1995. The loss was
recorded, net of tax effect, as an extraordinary item.
The indenture under which the notes were issued was amended January 21,
1997, in contemplation of the Company's January 1997 senior debt and equity
offerings. The indenture places limitations on operations and sales of assets by
the Company or its subsidiaries, permits incurrence of additional debt
F-14
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
only in compliance with certain financial ratios, and limits the Company's
ability to pay cash dividends or make other distributions to the holders of its
capital stock or to redeem such stock.
The indenture, as amended, permits the Company, subject to certain
limitations, to incur additional indebtedness, including $125,000,000 of
indebtedness issued January 31, 1997 described below and secured senior
revolving credit facility indebtedness of up to $75,000,000.
All of the Company's subsidiaries, except for one indirect wholly owned
subsidiary, Funtime-Famous Recipe, Inc., are full, unconditional, and joint and
several guarantors of the notes. The assets and operations of Funtime-Famous
Recipe, Inc. are inconsequential to the Company and its consolidated financial
position and results of operations. Condensed financial statement information
for the guarantors is not included herein, as the Company does not believe such
information would be material to the understanding of the Company and its direct
and indirect subsidiaries.
(b) In connection with the acquisitions described in note 3, in October 1996
the Company entered into a senior secured credit facility (the "Credit
Facility") with a syndicate of banks. The Credit Facility had an aggregate
availability of $115,000,000 of which (i) up to $30,000,000 under the revolving
credit facility (the "Revolving Credit Facility") may have been used for working
capital and general corporate purposes; (ii) up to $25,000,000 ("Facility A")
may have been used to finance capital expenditures prior to April 30, 1998; and
(iii) up to $60,000,000 ("Facility B") may have been used to finance certain
acquisitions by the Company (including the acquisitions described in note 3),
provided that at least 50% of the consideration for any such acquisition or
improvements under Facility A or Facility B (collectively, the "Term Loan
Facility") was required to have been funded by the Company. Interest rates per
annum under the Credit Facility were equal to a base rate equal to the higher of
the Federal Funds Rate plus 1/2% or the prime rate of Citibank N.A., in each
case plus the Applicable Margin (as defined thereunder) or the London Interbank
Offered Rate plus the Applicable Margin. The Revolving Credit Facility was to
terminate October 31, 2002 (reducing to $15,000,000 on October 31, 2001) and
borrowings under the Term Loan Facility were to mature October 31, 2001;
however, aggregate principal payments of $7,500,000, $20,000,000 and $25,000,000
were to be required under the Term Loan Facility during 1998, 1999 and 2000,
respectively. Borrowings under the Revolving Credit Facility were required to be
fully paid for at least 30 days each year and were secured by substantially all
of the Company's assets (other than real estate) and guarantees of the Company's
principal subsidiaries. Borrowings under the Term Loan Facility were secured by
the assets acquired with the proceeds thereof, and limited guarantees of the
Company's principal subsidiaries. The Credit Facility contained restrictive
covenants that, among other things, limited the ability of the Company and its
subsidiaries to dispose of assets; incur additional indebtedness or liens; pay
dividends; repurchase stock; make investments; engage in mergers or
consolidations and engage in certain transactions with subsidiaries and
affiliates. In addition, the Credit Facility required that the Company comply
with certain specified financial ratios and tests.
On January 31, 1997, the Company and the syndicate of banks agreed to amend
the Credit Facility. The $30,000,000 Revolving Credit Facility will remain in
place through December 31, 2001 (without reduction prior to that date).
Additionally, following repayment of amounts then outstanding under the Term
Loan Facility through the use of proceeds from the Company's January 1997 debt
and equity offerings, the Term Loan Facility was converted into an $85,000,000
reducing revolving credit facility. The
F-15
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
Term Loan Facility, as amended, will be available to fund acquisitions and make
capital improvements. The amount available under the Term Loan Facility will
reduce to $75,000,000 on December 31, 1999, to $45,000,000 on December 31, 2000,
and will mature on December 31, 2001. Borrowings under the amended Credit
Facility are secured by substantially all the assets of the Company and its
subsidiaries (other than real estate) and are guaranteed by the Company's
operating subsidiaries. The restrictive covenants are essentially the same as
those of the original October 1996 credit facility.
(c) On January 31, 1997, the Company issued $125,000,000 of 9 3/4% senior
notes due January 2007. The notes are senior unsecured obligations of the
Company and, in priority upon liquidation, are equal to the Company's senior
notes due in 2003. Interest is payable on January 15 and July 15 of each year,
commencing July 15, 1997. The notes are redeemable, at the Company's option, in
whole or in part, at any time on or after January 15, 2002, at varying
redemption prices. Additionally, at any time prior to January 15, 2000, the
Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. The notes are
guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The indenture under which the notes were issued places limitations
substantially similar to those of the Company's senior notes due in 2003. A
portion of the proceeds were used to fully pay amounts outstanding under the
Company's Credit Facility.
Annual maturities of long-term debt and capitalized lease obligations,
adjusted to reflect the payment of the amounts outstanding under the Credit
Facility through use of proceeds of the January 1997 note issuance, during the
five years subsequent to December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997....................................................... $ 1,492,000
1998....................................................... 737,000
1999....................................................... 364,000
2000....................................................... 667,000
2001 and thereafter........................................ 147,574,000
-----------
$150,834,000
-----------
-----------
</TABLE>
The fair value of the Company's long-term debt is estimated by using quoted
prices or discounted cash flow analyses based on current borrowing rates for
debt with similar maturities. Under the above assumptions the estimated fair
value of long-term debt and capitalized lease obligations at December 31, 1995
and 1996, and at September 30, 1997, is approximately $103,000,000, $160,000,000
and $228,000,000, respectively.
F-16
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) INCOME TAXES
Income tax expense (benefit) allocated to operations for 1996, 1995 and 1994
consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
1994:
U.S. Federal.......................................... $ 44,000 15,000 59,000
State and local....................................... -- 9,000 9,000
---------- ---------- ----------
$ 44,000 24,000 68,000
---------- ---------- ----------
---------- ---------- ----------
1995:
U.S. Federal.......................................... $ (44,000) (508,000) (552,000)
State and local....................................... -- (210,000) (210,000)
---------- ---------- ----------
$ (44,000) (718,000) (762,000)
---------- ---------- ----------
---------- ---------- ----------
1996:
U.S. Federal.......................................... $ -- 1,335,000 1,335,000
State and local....................................... 64,000 98,000 162,000
---------- ---------- ----------
$ 64,000 1,433,000 1,497,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Recorded income tax expense (benefit) allocated to operations differed from
amounts computed by applying the U.S. federal income tax rate of 34% to pretax
income (loss) approximately as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" federal income tax expense
(benefit)............................................... $ 58,000 (614,000) 1,109,000
Amortization of goodwill.................................. -- 78,000 180,000
Other, net................................................ 1,000 (16,000) 46,000
Effect of state and local income taxes.................... 9,000 (210,000) 162,000
--------- ---------- ----------
$ 68,000 (762,000) 1,497,000
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
Income tax expense for the nine months ended September 30, 1996 and 1997 was
approximately 40% of each of the periods' income before income taxes.
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting and tax
depreciation methods and periods for property and equipment. The Company's net
operating loss carryforwards and alternative minimum tax carryforwards
F-17
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) INCOME TAXES (CONTINUED)
represent future income tax deductions (deferred tax assets). The tax effects of
these temporary differences as of December 31, 1995 and 1996, are presented
below:
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Deferred tax assets before valuation allowance................... $ 7,860,000 10,300,000
Less valuation allowance......................................... -- --
------------- ------------
Net deferred tax assets.......................................... 7,860,000 10,300,000
Deferred tax liabilities......................................... 27,005,000 30,878,000
------------- ------------
Net deferred tax liability....................................... $ 19,145,000 20,578,000
------------- ------------
------------- ------------
</TABLE>
The Company's deferred tax liability results from the financial carrying
value for assets acquired in the Funtime acquisition, which was based upon the
fair value at the acquisition date, being substantially in excess of Funtime's
tax basis in the assets and from the Company's other depreciable assets being
depreciated primarily over a 7-year period for tax reporting purposes and a
longer 20- to 25-year period for financial purposes. The faster tax depreciation
has resulted in tax losses which can be carried forward to offset future taxable
income. Because most of the Company's depreciable assets' financial carrying
value and tax basis difference will reverse before the expiration of the
Company's net operating loss carryforwards and taking into account the Company's
projections of future taxable income over the same period, management believes
that it will more likely than not realize the benefits of these net future
deductions.
The Company experienced an ownership change within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder on October 30,
1992, as a result of the issuance of 2,200,000 shares of common stock. As a
result of the ownership change, net operating loss carryforwards generated
before the ownership change can be deducted in subsequent periods only in
certain limited situations. Accordingly, it is probable that the Company will
not be able to use most of the net operating loss carryforwards generated prior
to October 30, 1992. Therefore, most of the pre-October 30, 1992, net operating
loss carryforwards were not considered in computing the Company's available net
operating loss carryforwards and deferred tax liability. The Company experienced
an additional ownership change on June 4, 1996, as a result of the issuance of
3,938,750 shares of common stock and conversion of preferred stock into an
additional 2,560,928 shares of common stock. The use of the Company's pre-June
1996 net operating loss carryforwards may be limited in the future; however, it
is probable that the carryforwards will be fully utilized by the Company before
their expiration.
As of December 31, 1996, the Company has approximately $19,400,000 of
unrestricted net operating loss and $7,000,000 of alternative minimum tax
carryforwards available for federal income tax purposes which expire in 2007
through 2011. Additionally, the Company has $1,864,000 of alternative minimum
tax credits which have no expiration date.
(7) PREFERRED STOCK
The Company has authorized 500,000 shares of preferred stock, $1 par value.
During 1995, the Company issued 200,000 shares of Series A, 7% cumulative
convertible preferred stock at $100 per share. During June 1996, the shares,
including all dividends thereon, were converted into 2,560,928 common
F-18
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(7) PREFERRED STOCK (CONTINUED)
shares. The Company has agreed to provide the preferred stockholders certain
registration rights relative to the common stock issued upon conversion of the
preferred stock.
Holders of Series A preferred stock were entitled to receive cumulative
dividends at an annual rate of $7 per share. At the Company's election,
dividends were payable in cash and/or in additional Series A preferred stock.
The terms of the Company's senior notes and credit facilities limit the
Company's ability to pay cash dividends. All dividends paid to the preferred
stockholders were made by additional issuances of common stock at the time of
the conversion into shares of common stock as described above.
All shares of preferred stock rank senior and prior in right to all of the
Company's now or hereafter issued common stock with respect to dividend payments
and distribution of assets upon liquidation or dissolution of the Company.
(8) COMMON STOCK
In October 1994, the Company issued 619,815 common shares in a private
placement with existing stockholders for cash. In connection with this
placement, Windcrest Partners, an affiliate of the Company, also exchanged
$655,000 of then existing debt for 97,087 shares of common stock. The Company
has agreed to provide the stockholders certain registration rights in the
future.
In August 1995, the Company issued 1,175,063 common shares in full exchange
for the Company's $7,000,000 senior subordinated convertible notes and 310,370
common shares in full exchange for the Company's $2,095,000 junior subordinated
term loan. The Company has agreed to provide the stockholders certain
registration rights in the future.
On April 4, 1996, a majority of the Company's common and preferred
shareholders and the Company's board of directors approved a one-for-five
reverse stock split effective May 6, 1996. The par value of common stock was
increased to $.05 per share from $.01 per share. Additionally, the authorized
common shares of the Company were changed to 30,000,000. The accompanying
consolidated financial statements and notes to the consolidated financial
statements reflect the reverse stock split as if it had occurred as of the
earliest date presented.
On June 4, 1996, and June 6, 1996, the Company issued 3,425,000 and 513,750,
respectively, of its common shares resulting in net proceeds to the Company of
$65,306,000. Additionally, on June 4, 1996, the Company exchanged 2,560,928 of
its common shares for all 200,000 shares of its previously outstanding preferred
stock.
On January 31, 1997, the Company issued 6,900,000 of its common shares
resulting in net proceeds to the Company of approximately $189,000,000.
(9) STOCK OPTIONS AND WARRANTS
In 1993, 1994, 1995, and 1996, certain members of the Company's management
were issued seven-year options to purchase 145,200, 36,000, 248,000 and 337,500,
and of its common shares, at an exercise price of $5.00, $7.50, $8.25, and
$22.00 per share, respectively, under the Company's 1993, 1995 and 1996 Stock
Option and Incentive Plans (the Plans). Stock options are granted with an
exercise price equal to the stock's fair market value at the date of grant.
These options may be exercised on a cumulative basis with 20% of the total
exercisable on date of issuance and with an additional 20% being available for
exercise on each of the succeeding anniversary dates. Any unexercised portion of
the options will automatically and
F-19
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(9) STOCK OPTIONS AND WARRANTS (CONTINUED)
without notice terminate upon the seventh anniversary of the issuance date or
upon termination of employment.
At December 31, 1996, there were 503,300 additional shares available for
grant under the Plans. The per share weighted-average fair value of stock
options granted during 1995 and 1996 was $5.56 and $14.97 on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: 1995--expected dividend yield 0%, risk-free interest rate of 5.5%,
and an expected life of 5 years; 1996--expected dividend yield 0%, risk-free
interest rate of 6.25%, and an expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income (loss) would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------------- ----------
<S> <C> <C> <C>
Net income (loss) applicable to common stock:
As reported $ (1,714,000) 1,162,000
Pro forma (1,880,000) 390,000
Net income (loss) applicable to common stock per
share:
As reported $ (.44) .13
Pro forma (.48) .04
</TABLE>
Pro forma net income (loss) reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income (loss) amounts
presented above because compensation cost is reflected over the options' vesting
period of 4 years and compensation cost for options granted prior to January 1,
1995 is not considered.
F-20
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(9) STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGEEXERCISE
SHARES PRICE
----------- -----------------
<S> <C> <C>
Balance at December 31, 1994.................................... 181,200 $ 5.50
Granted....................................................... 248,000 8.25
Exercised..................................................... -- --
Forfeited..................................................... -- --
Expired....................................................... -- --
----------- ------
Balance at December 31, 1995.................................... 429,200 7.09
Granted....................................................... 337,500 22.00
Exercised..................................................... -- --
Forfeited..................................................... -- --
Expired....................................................... -- --
----------- ------
Balance at December 31, 1996.................................... 766,700 $ 13.65
----------- ------
----------- ------
</TABLE>
At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.00 to $22.00 and 6.01
years, respectively.
At December 31, 1995 and 1996, the number of options exercisable was 151,120
and 304,460, respectively, and weighted-average exercise price of those options
was $6.30 and $10.01, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant to
purchase 26,346 common shares (currently being held as treasury stock) at an
exercise price of $1.00 per share and a ten-year warrant to purchase 18,693
common shares at an exercise price of $1.00 per share.
(10) 401(K) PLAN
The Company has a qualified, contributory 401(k) plan (the Plan). All
regular employees are eligible to participate in the Plan if they have completed
one full year of service and are at least 21 years old. The Company matches 100%
of the first 2% of and 25% of the next 6% of salary contributions made by
employees. The accounts of all participating employees are fully vested. The
Company recognized approximately $32,000 and $150,000 of expense in the years
ended December 31, 1995 and 1996, respectively. Prior to 1995, the Company did
not match employee's salary contributions.
(11) CASUALTY LOSS
On July 27, 1994, high winds damaged the Company's Adventure World location.
The loss was covered by insurance and the total insurance benefits recognized
during 1994 were $748,000, including approximately $348,000 accrued as a
receivable, which was collected subsequent to December 31, 1994. The Company
spent approximately $393,000 in 1994 to replace and repair capital assets which
had been destroyed or damaged. Insurance proceeds in excess of the net book
value of destroyed assets and the repair costs of damaged assets were
approximately $417,000 and are reflected in the 1994 consolidated statement of
operations in theme parks revenue.
F-21
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(12) COMMITMENTS AND CONTINGENCIES
The Company leases office space under a lease agreement which expires April
30, 2001. The lease requires minimum monthly payments over its term and also
escalation charges for proportionate share of expenses as defined in the lease.
Windcrest Partners shares office space with the Company and has agreed to pay
50% of the rental payments. Rent expense recognized by the Company (after
deduction of amounts paid by Windcrest Partners) for the years ended December
1994, 1995, and 1996, aggregated $68,000, $68,000, and $64,000, respectively.
The Company leases the sites of Wyandot Lake and each of the two
Waterworld/USA locations with rent based upon percentages of revenues earned by
each park. During 1995 and 1996, the Company recognized approximately $100,000
and $385,000, respectively, of rental expense under these rent agreements.
On June 2, 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. Although the collapse and the resulting closure had a material adverse
impact on the park's operating performance for 1997, as well as a lesser impact
on the Company's Sacramento water park (which is also named "Waterworld"),
located approximately seventy miles from the Concord park, the Company's other
parks were not adversely affected. The Company has recovered all of the Concord
park's operating shortfall under its business interruption insurance. In
addition, the Company believes that its liability insurance coverage should be
more than adequate to provide for any personal injury liability which may
ultimately be found to exist in connection with the collapse.
The Company is a party to various legal actions arising in the normal course
of business. None of the actions are believed by management to involve amounts
that would be material to the Company's consolidated financial condition,
operations, or liquidity.
(13) CERTAIN TRANSACTIONS
During 1995, in connection with the acquisition of Funtime and the issuance
of the $90,000,000 senior notes, the Company paid investment banking and
financial advisory fees in the amount of $800,000 and $475,000 to Lepercq, de
Neuflize & Co. Incorporated (Lepercq) and Hanseatic Corporation (Hanseatic),
respectively. Two directors of the Company are director and treasurer,
respectively, of Lepercq and Hanseatic.
(14) ACQUISITION OF STUART AMUSEMENT COMPANY
On February 5, 1997, the Company purchased all of the outstanding common
stock of Stuart Amusement Company, the owner of Riverside Park and an adjacent
multi-use stadium, for a purchase price of $22,200,000 ($1,000,000 of which was
paid through issuance of 32,129 of the Company's common shares). The Company
funded the purchase through use of the proceeds from the Company's January 1997
debt and equity offerings (notes 5 and 8). The transaction was accounted for
using the purchase method of accounting.
(15) SIGNIFICANT TRANSACTIONS SUBSEQUENT TO THE 1997 OPERATING SEASON
(UNAUDITED)
On November 7, 1997 the Company acquired the theme park assets of Kentucky
Kingdom--The Thrill Park, located in Louisville, Kentucky, for a purchase price
of $64,000,000, of which $4,900,000 was
F-22
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(15) SIGNIFICANT TRANSACTIONS SUBSEQUENT TO THE 1997 OPERATING SEASON
(UNAUDITED) (CONTINUED)
paid through the issuance of 121,671 shares of the Company's common stock. The
Company may be required to issue additional shares of common stock based upon
the level of revenues at Kentucky Kingdom during each of the 1998-2000 seasons.
The Company has purchased thirteen rides and attractions from Opryland, in
Nashville, Tennessee, for $10,000,000 for use at its various theme parks. The
Company has also entered into management and lease agreements related to Marine
World Africa USA in Vallejo, California. As part of the lease agreement, the
Company has option to purchase the park in 2002 at a purchase price equal to the
greater of the then principal amount of certain debt obligations of the seller
(expected to aggregate $52,000,000) or the then fair market value of the
seller's interest in the park (based upon a formula relating to the seller's 20%
share of Marine World's cash flow. On December 15, 1997, the Company signed an
agreement with the majority shareholders of Walibi, S.A. "Walibi", to purchase
the outstanding stock of "Walibi" held by the majority shareholders commits the
Company to tender for the remaining stock for an estimated aggregate purchase
price including outstanding debt of Walibi, of approximately $140,000,000. The
acquisition is not expected to be completed until March of 1998.
(16) SHARE RIGHTS PLAN (UNAUDITED)
On December 10, 1997, the Company's board of directors authorized a share
rights plan. Under the plan, stockholders have one right for each share of
common stock held. The rights become exercisable ten business days after (a) an
announcement that a person or group of affiliated or associated persons has
acquired beneficial ownership of 15% or more of the voting shares outstanding,
or (b) the commencement or announcement of a person's or group's intention to
commence a tender or exchange offer that could result in a person or group
owning 15% or more of the voting shares outstanding.
Each right entitles its holder (except a holder who is the acquiring person)
to purchase 1/100 of a share of a junior participating series of preferred stock
designated to have economic and voting terms similar to those of one share of
common stock for $250.00, subject to adjustment. In the event of certain merger
or asset sale transactions with another party or transactions which would
increase the equity ownership of a shareholder who then owned 15% or more of
Premier, each Premier right will entitle its holder to purchase securities of
the merging or acquiring party with a value equal to twice the exercise price of
the right.
The rights, which have no voting power, expire in 2007. The rights may be
redeemed by Premier for $.01 per right until the rights becomes exercisable.
(17) RESTRICTED STOCK GRANT (UNAUDITED)
The Company has issued 450,000 restricted common shares to members of the
Company's management. The restrictions on the stock lapse ratably over a
six-year term commencing January 1, 1998, generally based upon the continued
employment of the members of management. The restrictions also lapse if any or
all members are terminated without cause or if a change in control of the
Company occurs. The fair value of the restricted shares, as determined at the
date of grant, approximated $14,625,000 and will be recognized as an expense
over the vesting term.
F-23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.....................................................
Incorporation of Certain Information by Reference.........................
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Historical and Pro Forma Financial and Operating Data............
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Description of Six Flags Agreement........................................
Description of Indebtedness...............................................
Description of Securities.................................................
Description of Mandatorily Convertible Preferred Stock....................
Description of Public Depositary Shares...................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Index to Financial Statements.............................................
</TABLE>
SHARES
PREMIER PARKS INC.
COMMON STOCK
------------------
PROSPECTUS
, 1998
---------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS [International Alternate Page]
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1998
SHARES
PREMIER PARKS INC.
COMMON STOCK
---------------------
All of the shares of Common Stock offered hereby are being sold by Premier
Parks Inc. (collectively, with its predecessor, the "Company" or "Premier"). Of
the shares of Common Stock offered, shares are being offered
initially outside the United States and Canada in an international offering (the
"International Offering") by the International Managers and shares are
being offered inside the United States and Canada in a concurrent offering (the
"U.S. Offering") by the U.S. Underwriters (together with the International
Managers, the "Underwriters"). These offerings are collectively referred to
herein as the "Offering." See "Underwriting."
The Offering is being made in connection with the acquisition (the "Six
Flags Acquisition") by the Company of all of the capital stock of Six Flags
Entertainment Corporation ("SFEC"). The Company is concurrently offering $
million aggregate principal amount at maturity of its mandatorily senior
discount notes due 2008, with estimated gross proceeds of $250.0 million, $280.0
million aggregate principal amount of its senior notes due 2008, and
depositary shares (the "Public Depositary Shares") representing interests in
$200.0 million of the Company's mandatorily convertible preferred stock (the
"Mandatorily Convertible Preferred Stock"). SFEC is concurrently offering $170.0
million aggregate principal amount of senior notes (collectively, the
"Concurrent Offerings and, together with the Offering, the Offerings"). The
Offerings will finance, in part, the Six Flags Acquisition. The Company also
expects to issue up to depositary shares (the "Seller Depositary Shares")
representing interests in up to $200.0 million of the Company's convertible
redeemable preferred stock to the current stockholders of SFEC as part of the
consideration for the Six Flags Acquisition. The closing of the Offering is
conditioned upon the closing of the Concurrent Offerings and the Six Flags
Acquisition.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "PKS." On February 6, 1998, the last sales price of the Common Stock,
as reported by the NYSE, was $38 1/2 per share. The Company has applied to list
the Public Depositary Shares on the NYSE. The Mandatorily Convertible Preferred
Stock will not be so listed and the Company does not expect that there will be
any trading market for the Mandatorily Convertible Preferred Stock except as
represented by the Public Depositary Shares.
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE HEREIN FOR CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total(3)................................................. $ $ $
</TABLE>
(1) The Company and its operating subsidiaries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted options to the Underwriters to purchase up to
additional shares of Common Stock on the same terms and conditions as
set forth herein solely to cover over-allotments, if any. If such options
are exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------------------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1998.
LEHMAN BROTHERS SALOMON SMITH BARNEY INTERNATIONAL
, 1998
<PAGE>
[International Alternate Page]
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
TO NON-UNITED STATES HOLDERS
The following is a general summary of the material United States federal
income and estate tax considerations to a Foreign Holder (as defined below)
relevant to the ownership and disposition of shares of Common Stock. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
final, temporary and proposed United States Treasury Regulations promulgated
thereunder, Service rulings, official pronouncements and judicial decisions, all
as in effect on the date hereof and all of which are subject to change, possibly
with retroactive effect, or different interpretations. This summary does not
discuss all the tax consequences that may be relevant to a particular Foreign
Holder in light of the holder's particular circumstances and it is not intended
to be able in all respects to all categories of Foreign Holders, some of whom
may be subject to special rules not discussed below. In addition, this summary
does not address any state, local or foreign tax considerations that may be
relevant to a Foreign Holder's decision to purchase shares of Common Stock.
As used herein, a "Foreign Holder" means any person who, for United States
federal income tax purposes, is neither (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any State or of any of its
territories or possessions or (iii) a domestic trust or estate.
ALL HOLDERS THAT ARE FOREIGN HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF SHARES OF COMMON STOCK IN LIGHT OF THEIR OWN
PARTICULAR CIRCUMSTANCES.
SALE OR EXCHANGE OF COMMON STOCK
Subject to the discussion of backup withholding below, any capital gain
realized upon a sale or exchange of Common Stock by a beneficial owner who is a
Foreign Holder ordinarily will not be subject to United States federal income
tax unless (i) such gain is effectively connected with a trade or business
conducted by such Foreign Holder within the United States (in which case the
branch profits tax may also apply if the holder is a foreign corporation), (ii)
in the case of a Foreign Holder that is an individual, such holder is present in
the United States for a period or periods aggregating 183 days or more in the
taxable year of the sale or exchange and certain other conditions are met or
(iii) the Company is or has been a "United States real property holding
corporation" for federal income tax purposes and such Foreign Holder has held,
directly or constructively, more than 5% of the outstanding Common Stock within
the five-year period ending on the date of the sale or exchange, and no treaty
exception is applicable.
DIVIDENDS ON COMMON STOCK
Generally, any dividends paid on Common Stock will be subject to United
States federal withholding tax at a rate of 30% of the amount of the dividend,
or at a lower applicable treaty rate. However, if the dividend is effectively
connected with a United States trade or business of a Foreign Holder, it will be
subject to United States federal income tax at ordinary federal income tax rates
on a net basis (in which case the branch profits tax may also apply if such
holder is a foreign corporation), rather than the 30% withholding tax.
Under current Treasury Regulations, a holder's status as a non-United States
person and eligibility for a tax treaty reduced rate of withholding will be
determined by reference to the holder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of
withholding, unless facts and circumstances indicate that reliance is not
warranted. However, the Service has recently issued Regulations that require a
non-United States person to provide certifications under penalties of perjury in
order to obtain treaty benefits for payments made after January 1, 1998.
<PAGE>
[International Alternate Page]
FEDERAL ESTATE TAXES
Common Stock that is beneficially owned by an individual who is neither a
citizen nor a resident of the United States at the time of death will be
included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, dividends on Common Stock paid to holders that are Foreign
Holders that are subject to the 30% or a reduced treaty rate of United States
federal withholding tax will be exempt from backup withholding tax. Otherwise,
backup withholding of United States federal income tax at a rate of 31% may
apply to dividends paid with respect to Common Stock to holders that are not
"exempt recipients" and that fail to provide certain information (including the
holder's taxpayer identification number) in the manner required by United States
law and applicable regulations.
Payments of the proceeds from the sale by a holder that is a Foreign Holder
of shares of Common Stock made to or through a foreign office of a broker will
not be subject to information reporting or backup withholding, except that if
the broker is a United States person, a controlled foreign corporation for
United States tax purposes or a foreign person 50% or more of whose gross income
is effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments of
the proceeds from the sale of shares of Common Stock to or through the United
States office of a broker will be subject to information reporting and backup
withholding unless the holder certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
<PAGE>
[International Alternate Page]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE INTERNATIONAL MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.....................................................
Incorporation of Certain Information by Reference.........................
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Historical and Pro Forma Financial and Operating Data............
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Description of Six Flags Agreement........................................
Description of Indebtedness...............................................
Description of Securities.................................................
Description of Mandatorily Convertible Preferred Stock....................
Description of Public Depositary Shares...................................
Certain United States Federal Tax Considerations to Non-United States
Holders.................................................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Index to Financial Statements.............................................
</TABLE>
SHARES
PREMIER PARKS INC.
COMMON STOCK
------------------
PROSPECTUS
FEBRUARY , 1998
---------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY INTERNATIONAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS [Alternate Page-Mandatorily Convertible Preferred Stock]
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1998
SHARES
PREMIER PARKS INC.
DEPOSITARY SHARES
EACH REPRESENTING A ONE-FIVE HUNDREDTH INTEREST IN
A SHARE OF % MANDATORILY CONVERTIBLE PREFERRED STOCK
------------------------
All of the depositary shares offered hereby (the "Public Depositary Shares")
will be sold by Premier Parks Inc. (collectively with its predecessor, the
"Company" or "Premier"). Each of the Public Depositary Shares represents a
one-five hundredth interest in a share of % Mandatorily Convertible Preferred
Stock ("Mandatorily Convertible Preferred Stock") of Premier Parks Inc.
deposited with the Depositary (as defined herein) and has an issue price (the
"Initial Price") of $38 3/8 (the last sale price of the Company's common stock,
par value $0.05 per share (the "Common Stock") on February 6, 1998, as reported
on the New York Stock Exchange Composite Tape). Each Public Depositary Share,
through the Depositary, entitles the holder to all proportional rights and
preferences of the share of Mandatorily Convertible Preferred Stock represented
thereby (including dividend, voting, conversion, redemption and liquidation
rights). The proportionate liquidation preference of each Public Depositary
Share is $ , plus accrued and unpaid dividends thereon. See "Description of
Public Depositary Shares."
Unless voluntarily converted into Common Stock, as hereinafter described, on
, 2001 (the "Mandatory Conversion Date") each share of Mandatorily
Convertible Preferred Stock will automatically convert into a number of shares
of Common Stock (or the equivalent amount of cash) at the Conversion Rate. The
"Conversion Rate" is equal to, (a) if the Conversion Price (as defined below) is
greater than or equal to $ (the "Threshold Appreciation Price"),
shares of Common Stock per Mandatorily Convertible Preferred Stock (equivalent
to shares of Common Stock for each Public Depositary Share), (b) if the
Conversion Price is less than the Threshold Appreciation Price but greater than
$ (the "Initial Price"), a fraction, equal to the Initial Price divided by
the Conversion Price, of five hundred shares of Common Stock per Mandatorily
Convertible Preferred Stock (equivalent to 1/500th of such number of shares for
each Public Depositary Share) and (c) if the Conversion Price is less than or
equal to the Initial Price, 500 shares of Common Stock per Mandatorily
Convertible Preferred Stock (equivalent to one share of Common Stock for each
Public Depositary Share). The "Conversion Price" is, with certain exceptions,
the average Closing Price (as defined herein) per share of Common Stock for the
20 Trading Days (as defined herein) immediately prior to (but not including) the
Mandatorily Conversion Date. See "Description of Mandatorily Convertible
Preferred Stock--Mandatorily Conversion of Mandatorily Convertible Preferred
Stock" and "Description of Public Depositary Shares-- Conversion Provisions".
The value of the Common Stock that may be received by holders of Depositary
Shares upon their mandatorily conversion may be more or less than the amount
paid for the Public Depositary Shares offered hereby due to market fluctuations
in the price of the Common Stock.
Annual cumulative dividends accrue at a rate of $ with respect to each
Public Depositary Share (equivalent to a rate of $ per annum for each share
of Mandatorily Convertible Preferred Stock), from the date of initial issuance,
payable quarterly in arrears on each January 1, April 1. July 1 and October 1,
commencing 1998. The Company may, at its option, pay dividends with cash, shares
of Common Stock or in some combination of both. For purposes of calculating
dividend payments, each share of Common Stock delivered to holders for payment
of dividends will be valued at % of the average Closing Price (as defined
herein) for the Common Stock over a ten-Trading Day (as defined herein) period
preceding the related record date for the dividend payment. See "Description of
Mandatorily Convertible Preferred Stock--Dividends.
The holders of shares of Mandatorily Convertible Preferred Stock are not
entitled to any voting rights, except as required by applicable state law and
with respect to adverse charter and by-law amendments or the authorization or
creation of classes of capital stock ranking senior as to liquidation preference
to the Mandatorily Convertible Preferred Stock, as well as in certain
circumstances involving protracted dividend arrearages. See "Description of
Mandatorily Convertible Preferred Stock--Voting Rights."
The Offering is being made in connection with the acquisition (the "Six
Flags Acquisition") by the Company of all of the capital stock of Six Flags
Entertainment Corporation ("SFEC"). The Company is concurrently offering
$ million aggregate principal amount at maturity of its senior discount
notes due 2008, with estimated gross proceeds of $250.0 million, $280.0 million
aggregate principal amount of its senior notes due 2008, and shares of
Common Stock. SFEC is concurrently offering $170.0 million aggregate principal
amount of senior notes (collectively, the "Concurrent Offerings" and, together
with the Offering, The "Offerings"). The Offerings will finance, in part, the
Six Flags Acquisition. The Company also expects to issue up to depositary
shares (the "Seller Depositary Shares") representing interests in up to $200.0
million of the Company's convertible redeemable preferred stock to the current
stockholders of SFEC as part of the consideration for the Six Flags Acquisition.
The closing of the Offering is conditioned upon the closing of the Concurrent
Offerings and the Six Flags Acquisition.
Application will be made to list the Public Depositary Shares and the Common
Stock issuable on conversion of the Mandatorily Convertible Preferred Stock on
the New York Stock Exchange (the "NYSE"). The Mandatorily Convertible Preferred
Stock will not be so listed and the Company does not expect that there will be
any trading market for the Mandatorily Convertible Preferred Stock except as
represented by the Public Depositary Shares.
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN FOR CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total(3)................................................. $ $ $
</TABLE>
(1) The Company and its operating subsidiaries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
------------------------------
The Public Depositary Shares offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the Public
Depositary Shares will be made at the offices of Lehman Brothers Inc., New York,
New York, on or about , 1998.
LEHMAN BROTHERS SALOMON SMITH BARNEY
<PAGE>
, 1998
<PAGE>
[Alternate Page-Mandatorily Convertible Preferred Stock]
THE OFFERING
<TABLE>
<S> <C>
Securities........................ Public Depositary Shares, each such share representing a
one- five hundredth interest in a share of Mandatorily
Convertible Preferred Stock and entitling the holder to
that proportion of all the rights, preferences, and
privileges of a share of Mandatorily Convertible
Preferred Stock (including dividend, conversion, voting
and liquidation rights and preferences) represented
thereby, are offered hereby. The Public Depositary
Shares mandatorily convert into shares of Common Stock
on , 2001 (the "mandatorily Conversion Date"). In
addition, the Public Depositary Shares are convertible
at the option of the holder at any time prior to the
mandatorily Conversion Date as set forth below.
Dividends......................... Annual cumulative dividends accrue at a rate of $
with respect to each Public Depositary Share (equivalent
to a rate of $ per annum for each share of
Mandatorily Convertible Preferred Stock), from the date
of initial issuance, payable quarterly in arrears on
each January 1, April 1, July 1 and October 1,
commencing , 1998. The Company may, at its option,
pay dividends with cash, shares of Common Stock or in
some combination of both. For purposes of calculating
dividend payments, each share of Common Stock delivered
to holders for payment of dividends will be valued at
% of the average Closing Price (as defined herein) for
the Common Stock over a ten-Trading Day (as defined
herein) period preceding the related record date for the
dividend payment. See "Description of Mandatorily
Convertible Preferred Stock--Dividends.
Mandatory Conversion.............. Unless voluntarily converted into Common Stock, as
hereinafter described, on , 2001 (the "Mandatory
Conversion Date") each share of Mandatorily Convertible
Preferred Stock will automatically convert into a number
of shares of Common Stock (or the equivalent amount of
cash) at the Conversion Rate. The "Conversion Rate" is
equal to, (a) if the Conversion Price (as defined below)
is greater than or equal to $ (the "Threshold
Appreciation Price"), shares of Common Stock per
Mandatorily Convertible Preferred Stock (equivalent to
shares of Common Stock for each Public Depositary
Share), (b) if the Conversion Price is less than the
Threshold Appreciation Price but is greater than $
(the "Initial Price"), a fraction, equal to the Initial
Price divided by the Conversion Price, of five hundred
shares of Common Stock per Mandatorily Convertible
Preferred Stock (equivalent to 1/500th of such number of
shares for each Public Depositary Share) and (c) if the
Conversion Price is less than or equal to the Initial
Price, 500 shares of Common Stock per Mandatorily
Convertible Preferred Stock (equivalent to one share of
Common Stock for each Public Depositary Share). The
"Conversion Price" is, with certain exceptions, the
average Closing Price (as defined herein) per share of
Common Stock for the 20 Trading Days (as defined herein)
immediately prior to (but not including) the mandatorily
Conversion Date. See "Description of Mandatorily
Convertible Preferred Stock--mandatorily Conversion of
Mandatorily Convertible Preferred Stock" and
"Description of Public
</TABLE>
12
<PAGE>
[Alternate Page-Mandatorily Convertible Preferred Stock]
<TABLE>
<S> <C>
Depositary Shares--Conversion Provisions". The value of
the Common Stock that may be received by holders of
Public Depositary Shares upon their mandatorily
conversion may be more or less than the amount paid for
the Public Depositary Shares offered hereby due to
market fluctuations in the price of the Common Stock.
Conversion at the Option of the
Holder.......................... At any time prior to the Mandatory Conversion Date, each
Mandatorily Convertible Preferred Stock is convertible
at the option of the holder thereof into shares of
Common Stock (the "Optional Conversion Rate"),
equivalent to a conversion price of $ per share of
Common Stock (the "Optional Conversion Price"), subject
to adjustment in certain events (such Optional
Conversion Rate being equivalent to shares of Common
Stock for each Public Depositary Share). The value of
the shares of Common Stock received by a holder upon
conversion will vary depending on the market price of
the Common Stock from time to time. See "Description of
Mandatorily Convertible Preferred Stock--Conversion at
the Option of the Holder" and "Description of Public
Depositary Shares--Conversion Provisions".
Voting Rights..................... The holders of shares of Mandatorily Convertible
Preferred Stock shall not be entitled to any voting
rights, except as required by applicable state law and
as described below. Whenever dividends on the shares of
Mandatorily Convertible Preferred Stock or any other
series of the Company's preferred stock (all series of
which, including the shares of Mandatorily Convertible
Preferred Stock, hereinafter are called the "Preferred
Stock") are in arrears and unpaid for six quarterly
dividend periods, and in certain other circumstances,
the holders of the shares of Mandatorily Convertible
Preferred Stock (voting separately as a class with
holders of all other series of outstanding Preferred
Stock upon which voting rights have been conferred and
are exercisable) will be entitled to vote, on the basis
for one vote for each share of Mandatorily Convertible
Preferred Stock (equivalent to one-five hundredth of a
vote for each Public Depositary Share), for the election
of two Preferred Stock Directors (as defined herein) of
the Company, these Directors to be in addition to the
number of Directors constituting the Board of Directors
immediately prior to the accrual of such right, and (ii)
the holders of the shares of Mandatorily Convertible
Preferred Stock will have voting rights with respect to
certain alterations of the Company's Certificate of
Incorporation and By-Laws and the creation or
authorization of preferred stock or other capital stock
(or securities convertible into capital stock) ranking
prior to the Mandatorily Convertible Preferred Stock as
to the payment of dividends or the distribution of
assets upon liquidation. The owners of Public Depositary
Shares will be entitled to direct the voting of the
shares of Mandatorily Convertible Preferred Stock
represented thereby. See "Description of Mandatorily
Convertible Preferred Stock--Voting Rights",
"Description of Public Depositary Shares--Voting of
Mandatorily Convertible Preferred Stock" and
"Description of Capital Stock--Common Stock".
</TABLE>
13
<PAGE>
[Alternate Page-Mandatorily Convertible Preferred Stock]
<TABLE>
<S> <C>
Liquidation Preference and
Ranking......................... The shares of Mandatorily Convertible Preferred Stock
will rank prior to the Common Stock as to payment of
dividends and distributions of assets upon liquidation.
The liquidation preference of each share of Mandatorily
Convertible Preferred Stockis an amount equal to the sum
of (i) $ which is 500 times the liquidation
preference per Public Depositary Share of $ and
(ii) all accrued and unpaid dividends thereon. See
"Description of Mandatorily Convertible Preferred
Stock-- Dividends" and "--Liquidation Rights" and
"Description of Public Depositary Shares".
Listing........................... Application will be made to list the Public Depositary
Shares and the Common Stock issuable on conversion of
the Mandatorily Convertible Preferred Stock on the NYSE.
The Mandatorily Convertible Preferred Stock will not be
so listed and the Company does not expect that there
will be any trading market for the Mandatorily
Convertible Preferred Stock except as represented by the
Public Depositary Shares.
Concurrent Offerings.............. The Company is concurrently offering (i) shares of
Common Stock, (ii) $ million aggregate principal
amount at maturity of Company Senior Discount Notes,
with estimated gross proceeds of $250.0 million, (iii)
Public Depositary Shares representing interests in
$200.0 million of Mandatorily Convertible Preferred
Stock, and (iv) $280.0 million principal amount of
Company Senior Notes. In addition, SFEC is issuing
$170.0 million of New SFEC Notes. The Company also
expects to issue up to Seller Depositary Shares
representing interests in up to $200.0 million of Seller
Preferred Stock as part of the consideration for the Six
Flags Acquisition. See "--The Six Flags Transactions,"
"Description of Indebtedness-- Company Senior Discount
Notes," "--Company Senior Notes," "--New SFEC Notes" and
"Description of Securities-- Preferred Stock." The
Offerings are conditioned upon the closing of all other
elements of the Six Flags Transactions.
Use of Proceeds................... The Company intends to apply the net proceeds from the
Offering and the Concurrent Offerings to fund the cash
portion of the purchase price for the Six Flags
Acquisition; to provide for the repayment in full of the
SFEC Zero Coupon Senior Notes; to acquire and make
improvements at additional theme parks; to fund
improvements and expansion of the Company's parks,
including the parks acquired in the Six Flags
Acquisition and the 1997 Acquisitions; and for general
corporate purposes, including working capital
requirements. See "Use of Proceeds."
NYSE symbols:
Common Stock.................... "PKS"
Public Depositary Shares........
</TABLE>
14
<PAGE>
[Alternate Page-Mandatorily Convertible Preferred Stock]
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after
deducting estimated underwriting discounts and commissions and estimated
expenses payable by the Company, will be approximately $ million. The
net proceeds from the Concurrent Offerings (after deducting estimated
underwriting discounts and commissions and offering expenses) will be
approximately $ million. The Company intends to use the net proceeds
from the Offering and the Concurrent Offerings to fund the $765 million cash
portion of the purchase price payable to the Sellers in the Six Flags
Acquisition; to provide funds for the repayment in full of the SFEC Zero Coupon
Senior Notes; to acquire and make improvements at additional theme parks; to
fund improvements and expansion of the Company's parks, including the Walibi
Parks and the Six Flags Parks; and for general corporate purposes, including
working capital requirements. Although the Company has had discussions with
respect to several additional acquisition opportunities, no agreement or
understanding with respect to any future acquisition (other than the Six Flags
Acquisition) has been reached. There can be no assurance that any such
additional acquisitions will be made. See "Risk Factors--Uncertainty of Future
Acquisitions; Potential Effects of Acquisitions" and "Business--Acquisition
Strategy."
Pending their ultimate use, the portion of net proceeds from the Offering
and the Concurrent Offerings not used in connection with the Six Flags
Acquisition may be invested in short-term, investment grade, interest bearing
securities, certificates of deposit or direct or guaranteed obligations of the
United States.
25
<PAGE>
[Alternate Page-Mandatorily Convertible Preferred Stock]
UNDERWRITING
Under the terms of and subject to the conditions contained in an
underwriting agreement (the "Underwriting Agreement"), among the Company and
each of the underwriters named below (the "Underwriters"), for whom Lehman
Brothers Inc., and Smith Barney Inc. are acting as representatives (the
"Representatives"), each of the several Underwriters has agreed to purchase from
the Company, and the Company has agreed to sell to each Underwriter, the
aggregate number of Public Depositary Shares set forth opposite the name of such
Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS COMMON SHARES
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Lehman Brothers Inc..............................................................................
Smith Barney Inc. ...............................................................................
Total........................................................................................
-------
-------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase Public Depositary Shares, are subject to the approval of certain
legal matters by counsel and to certain other conditions and that if any of the
Public Depositary Shares are purchased by the Underwriters pursuant to the
Underwriting Agreement, all the Public Depositary Shares agreed to be purchased
by the Underwriters, pursuant to the Underwriting Agreement, must be so
purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer Public Depositary Shares directly to the public initially at
the public offering price set forth on the cover page of this Prospectus and to
certain selected dealers (who may include the Underwriters) at such public
offering price less a selling concession not to exceed $ per share. The
selected dealers may reallow a concession not to exceed $ per share.
After the initial offering of the Public Depositary Shares, the offering price,
the concession to selected dealers and the reallowance to other dealers may be
changed by the Underwriters.
Except for the Public Depositary Shares to be sold in the Offering (and the
Mandatorily Convertible Preferred Stock represented thereby) and the securities
sold in the Concurrent Offerings, the Company has agreed not to offer, sell,
contract to sell or otherwise issue any Public Depositary Shares or other
capital stock or securities convertible into or exchangeable for, or any rights
to acquire Public Depositary Shares or other capital stock, with certain
exceptions (including certain exceptions for Common Stock or other capital stock
issued or sold in connection with future acquisitions by the Company, including
its proposed acquisition of Walibi), prior to the expiration of 90 days from the
date of this Prospectus without the prior written consent of Lehman Brothers on
behalf of the Representatives and the Lead Managers. The Company's officers,
directors and principal stockholders, who hold in the aggregate approximately
[5.9] million shares of Common Stock (including shares issuable upon exercise of
outstanding options, warrants and restricted stock), have agreed not to,
directly or indirectly, offer, sell or otherwise dispose of shares of Common
Stock of the Company or any securities convertible into or exchangeable for or
any rights to acquire, Common Stock or other capital stock of the Company for 90
days following the date of this Prospectus without the prior written consent of
Lehman Brothers. In addition, the Sellers in the Six Flags Acquisition have
agreed not to sell any Convertible Preferred Stock (or shares of Common Stock
issuable upon conversion thereof) acquired by them in the Six Flags Acquisition
during such 90-day period.
The Company and its operating subsidiaries (including Six Flags) have agreed
to indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, and to contribute to payments which the Underwriters
may be required to make in respect thereof.
Until the distribution of the Public Depositary Shares offered hereby is
completed, rules of the Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Public Depositary
Shares, Convertible Preferred and Common Stock. As an exception to these rules,
the Representatives are permitted to engage in certain transactions that
stabilize the price of
99
<PAGE>
[Alternate Page-Mandatorily Convertible Preferred Stock]
the Public Depositary Shares, Convertible Preferred and Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Public Depositary Shares, Convertible Preferred
and Common Stock.
If the Underwriters create a short position in the Public Depositary Shares
in connection with the Offering (I.E., if they sell more Public Depositary
Shares than are set forth on the cover page of this Prospectus), the
Representatives may reduce that short position by purchasing Public Depositary
Shares in the open market after the distribution has been completed. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment options described herein.
The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
Public Depositary Shares in the open market to reduce the Underwriters' short
position or to stabilize the price of the Public Depositary Shares, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those Public Depositary Shares as part of the Offering.
In general, purchases of a security for the purposes of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the applicable offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Public Depositary Shares. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
An application will be made to list the Public Depositary Shares and the
Common Stock into which the Mandatorily Convertible Preferred Stock are
convertible on the NYSE. The Mandatorily Convertible Preferred Stock will not be
so listed and the Company does not expect that there will be any trading market
for the Mandatorily Convertible Preferred Stock except as represented by the
Public Depositary Shares.
Each of Lehman Brothers and [Salomon] ("Salomon Smith Barney") has from time
to time provided certain investment banking services to the Company and its
affiliates for which they have received customary fees. LBI Group Inc., an
affiliate of Lehman Brothers is party to a financing commitment provided to the
Company in connection with the Six Flags Transactions and has received customary
fees in connection therewith. In addition, Lehman Brothers and Smith Barney Inc.
(predecessor to Salomon Smith Barney) acted as underwriters of the Company's
1996 and 1997 public offerings and are acting as underwriters in connection with
the Concurrent Offerings and will receive customary fees in connection
therewith. An affiliate of Lehman Brothers is a lender under each of the Credit
Facilities.
LEGAL MATTERS
The validity of the Public Depositary Shares and the Mandatorily Convertible
Preferred Stock offered hereby and certain legal matters in connection with the
Offering will be passed upon for the Company by Baer Marks & Upham LLP, New
York, New York. The Underwriters are being represented by Cravath, Swaine &
Moore, New York, New York.
100
<PAGE>
[Alternate Page--Mandatorily Convertible Preferred Stock]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.....................................................
Incorporation of Certain Information by Reference.........................
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Historical and Pro Forma Financial and Operating Data............
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Description of Six Flags Agreement........................................
Description of Indebtedness...............................................
Description of Securities.................................................
Description of Mandatorily Convertible Preferred Stock....................
Description of Public Depositary Shares...................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Index to Financial Statements.............................................
</TABLE>
SHARES
PREMIER PARKS INC.
DEPOSITARY SHARES
------------------
PROSPECTUS
, 1998
---------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be borne by the
Registrant in connection with the issuance and distribution of the Common Stock
being registered (other than underwriting discounts and commissions). All
amounts presented are estimates except the Securities and Exchange Commission
registration fee and the National Association of Securities Dealers, Inc. filing
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $
National Association of Securities Dealers, Inc. filing fee.......................
New York Stock Exchange listing fee...............................................
Accounting fees and expenses......................................................
Legal fees and expenses...........................................................
Printing and engraving expenses...................................................
Transfer agent and registrar fees.................................................
Miscellaneous.....................................................................
---------
Total fees and expenses........................................................... $
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law which covers the
indemnification of directors, officers, employees and agents of a corporation is
hereby incorporated herein by reference. Reference is made to Article XXV of the
Registrant's By-Laws which provides for indemnification by the Registrant in the
manner and to the full extent permitted by Delaware law.
Reference is also made to Section of the U.S. Underwriting Agreement
and the International Underwriting Agreement, to be filed by amendment as
Exhibits 1(a) and 1(b), respectively.
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference herein
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
(c) The undersigned Registrant hereby undertakes the following:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 9th day of
February, 1998.
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
------------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Kieran E. Burke, Gary Story,
James F. Dannhauser and James M. Coughlin, or any of them, as his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
re-substitution, for him and in his name, place and stead, to sign in any and
all capacities any and all amendments (including post-effective amendments) to
this registration statement on Form S-3, and any subsequent registration
statement filed by the Registrant pursuant to Rule 462(b) of the Securities Act
of 1933, and to file the same, with all exhibits thereto and all other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that all such attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board and
/s/ KIERAN E. BURKE Chief Executive Officer
- ------------------------------ (principal executive February 9, 1998
Kieran E. Burke officer)
/s/ GARY STORY Director, President and
- ------------------------------ Chief February 9, 1998
Gary Story Operating Officer
Chief Financial Officer
/s/ JAMES F. DANNHAUSER and
- ------------------------------ Director (principal February 9, 1998
James F. Dannhauser financial and accounting
officer)
/s/ PAUL A. BIDDELMAN
- ------------------------------ Director February 9, 1998
Paul A. Biddelman
/s/ MICHAEL E. GELLERT
- ------------------------------ Director February 9, 1998
Michael E. Gellert
/s/ JACK TYRRELL
- ------------------------------ Director February 9, 1998
Jack Tyrrell
/s/ SANDY GURTLER
- ------------------------------ Director February 9, 1998
Sandy Gurtler
/s/ CHARLES R. WOOD
- ------------------------------ Director February 9, 1998
Charles R. Wood
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
(1) Underwriting Agreements:
* (a) Form of U.S. Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney
Inc., as representatives of the several U.S. Underwriters.......................................
* (b) Form of International Underwriting Agreement among the Registrant, Lehman Brothers International
(Europe), Smith Barney Inc., as representatives of the several International Managers...........
* (c) Form of Agreement among U.S. Underwriters and International Managers............................
* (d) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney Inc., as
representative of the several Underwriters (Mandatorily Convertible Preferred Stock)............
* (e) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney Inc., as
representatives of the several Underwriters (Company Senior Discount Notes).....................
* (f) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney Inc., as
representatives of the several Underwriters (Company Senior Notes)..............................
* (g) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney Inc., as
representatives of the several Underwriters (New SFEC Notes)....................................
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among the Registrant, the subsidiaries of the Registrant
named therein and United States Trust Company of New York, as trustee (including the form of the
Existing Notes) -- incorporated by reference from Exhibit 4(2) to Registrant's Registration
Statement on Form S-1 (Reg. No. 33-62225) declared effective on November 9, 1995 (the
"Registration Statement").......................................................................
(b) Form of First Supplemental Indenture dated as of November 9, 1995 --incorporated by reference
from Exhibit 4(2.1) to the Registration Statement...............................................
(c) Purchase Agreement, dated August 10, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and Chemical Securities Inc. --incorporated by reference from Exhibit
4(3) to the Registration Statement..............................................................
(d) Exchange and Registration Rights Agreement, dated August 14, 1995, among the Registrant, the
subsidiaries of the Registrant named therein and Chemical Securities Inc. -- incorporated by
reference from Exhibit 4(4) to the Registration Statement.......................................
(e) Form of Subscription Agreement between the Registrant and each of the purchasers of shares of
Preferred Stock -- incorporated by reference from Exhibit 4(10) to the Registration Statement...
(f) Convertible Note Purchase Agreement, dated as of March 3, 1993, between the Registrant and the
purchasers named therein (including forms of Senior Subordinated Convertible Note and
Registration Rights Agreement) -- incorporated by reference from Exhibit 4(i) to Form 10-K of
the Registrant for the year ended December 31, 1993.............................................
(g) Form of Subscription Agreement, dated October 1992, between the Registrant and certain investors
-- incorporated by reference from Exhibit 4(a) to the Registrant's Current Report on Form 8-K
dated October 30, 1992..........................................................................
(h) Stock Purchase and Warrant Issuance Agreement, dated October 16, 1989, between the Registrant
and Kieran E. Burke -- incorporated by reference from Exhibit 4(i) to Form 10-K of the
Registrant for the year ended December 31, 1989.................................................
(i) Warrant, dated October 16, 1989, to purchase 131,728 shares of Common Stock issued by the
Registration to Kieran E. Burke -- incorporated by reference from Exhibit 4(k) to Form 10-K of
the Registrant for the year ended December 31, 1989.............................................
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
(j) Warrant, dated October 16, 1989, to purchase 93,466 shares of Common Stock issued by the
Registrant to Kieran E. Burke -- incorporated by reference from Exhibit 4(l) to Form 10-K of the
Registrant for the year ended December 31, 1989.................................................
(k) Form of Common Stock Certificate -- incorporated by reference from Exhibit 4(l) to the
Registrant's Registration Statement on Form S-2 (Reg. No. 333-08281) declared effective on May
28, 1996........................................................................................
* (l) Form of Registration Rights Agreement among the Registrant, Kentucky Kingdom, Inc. and certain
individuals.....................................................................................
(m) Form of Indenture dated as of February 1, 1997, among the Registrant and the Bank of New York,
as trustee (including the form of Notes) -- incorporated by reference from Exhibit 4(l) to the
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) filed with the Securities
and Exchange Commission on January 22, 1997.....................................................
(n) Form of Second Supplemental Indenture dated January 21, 1997 -- incorporated by reference from
Exhibit 4(n) to the Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) filed
with the Securities and Exchange Commission on January 22, 1997.................................
* (o) Form of Indenture, dated as of , 1998, between the Registrant and ..................
* (p) Form of Indenture, dated as of , 1998, between the Registrant and ..................
* (q) Form of Indenture, dated as of , 1998, between the Registrant and ..................
* (r) Form of Certificate of Designation, Rights and Preferences relating to Seller Preferred Stock...
* (s) Form of Certificate of Designation, Rights and Preferences relating to Mandatorily Convertible
Preferred Stock.................................................................................
* (t) Rights Agreement, dated January 12, 1998, between the Registrant and Bank One Trust Company,
N.A. (including certificate of designation of Series A Junior Participating Preferred Stock)
incorporated by reference from Exhibit to the Registrant's Current Report on Form 8-K, dated
December 15, 1997...............................................................................
*(5) Opinion of Baer Marks & Upham LLP, including consent.............................................................
(12) (a) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends........
(12) (b) Computation of Ratio of Earnings to Fixed Charges...............................................
(23) Consents:
* (a) Consent of Baer Marks & Upham LLP (included in Exhibit (5)).....................................
(b) Consent of KPMG Peat Marwick LLP................................................................
(c) Consent of Ernst & Young LLP....................................................................
(d) Consent of KPMG Peat Marwick LLP................................................................
(e) Consent of KPMG Peat Marwick LLP................................................................
* (f) Consent of Carpenter Mountjoy & Bressler........................................................
(24) Power of Attorney (included on Signature Page of Registration Statement).........................................
</TABLE>
- ------------------------
* To be filed by amendment
II-6
<PAGE>
EXHIBIT 12(A)
PREMIER PARKS INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
FOR EACH OF THE YEARS IN THE 5-YEAR PERIOD ENDED DECEMBER 31, 1996
AND FOR THE NINE NONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE NINE
YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED
----------------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing
operations......................... (1,735) 1,354 102 (1,045) 1,765 10,512 23,193
Income tax expense (benefit)......... 426 91 68 (762) 1,497 7,020 15,462
Interest expense, net................ 1,413 1,438 2,299 5,578 11,121 7,657 12,869
Equity in loss of affiliated
partnership........................ 122 142 83 69 78 60 44
Minority interest in earnings........ 270 -- -- -- -- -- --
1/3 of rental expense... 23 23 107 183 405 191 515
--------- --------- --------- --------- --------- ------ ------
Adjusted earnings (loss)............. 519 3,048 2,659 4,023 14,866 25,440 52,083
--------- --------- --------- --------- --------- ------ ------
--------- --------- --------- --------- --------- ------ ------
FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS:
Interest expense, net................ 1,413 1,438 2,299 5,578 11,121 7,657 12,869
Preferred stock dividends............ -- -- -- 529 603 603 --
Increase in preferred stock dividends
for pretax earnings required to
cover such dividends at 40%
estimate rate...................... -- -- -- 353 402 402 --
1/3 of rental expense................ 23 23 107 183 405 191 515
--------- --------- --------- --------- --------- ------ ------
Total fixed charges.................. 1,436 1,461 2,406 6,643 12,531 8,853 13,384
--------- --------- --------- --------- --------- ------ ------
--------- --------- --------- --------- --------- ------ ------
Ratio of earnings to combined fixed
charges and preferred stock
dividends.......................... 0.4 2.1 1.1 0.6 1.2 2.9 3.9
--------- --------- --------- --------- --------- ------ ------
Deficiency........................... 917 2,620
</TABLE>
<PAGE>
EXHIBIT 12(B)
PREMIER PARKS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR EACH OF THE YEARS IN THE 5-YEAR PERIOD ENDED DECEMBER 31, 1996
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE
YEAR ENDED DECEMBER 31, MONTHS ENDED
----------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing operations......... (1,735) 1,354 102 (1,045) 1,765 10,512
Income tax expense (benefit)..................... 426 91 68 (762) 1,497 7,020
Interest expense, net............................ 1,413 1,438 2,299 5,578 11,121 7,657
Equity in loss of affiliated partnership......... 122 142 83 69 78 60
Minority interest in earnings.................... 270 -- -- -- -- --
1/3 of rental expense... 23 23 107 183 -- 191
--------- --------- --------- --------- --------- ------
Adjusted earnings (loss)......................... 519 3,048 2,659 4,023 14,461 25,440
--------- --------- --------- --------- --------- ------
--------- --------- --------- --------- --------- ------
FIXED CHARGES:
Interest expense, net............................ 1,413 1,438 2,299 5,578 11,121 7,657
Preferred stock dividends of majority-owned
subsidiaries and fifty-percent owned persons... -- -- -- -- -- --
Increase in preferred stock dividends for pretax
earnings required to cover such dividends at
40% estimated rate............................. -- -- -- -- -- --
1/3 of rental expense............................ 23 23 107 183 405 191
--------- --------- --------- --------- --------- ------
Total fixed charges.............................. 1,436 1,461 2,406 5,761 11,526 7,848
--------- --------- --------- --------- --------- ------
--------- --------- --------- --------- --------- ------
Ratio of earnings to fixed charges............... 0.4 2.1 1.1 0.7 1.3 3.2
--------- --------- --------- --------- --------- ------
Deficiency....................................... 917 1,738
<CAPTION>
NINE
MONTHS ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
EARNINGS:
Income (loss) from continuing operations......... 23,193
Income tax expense (benefit)..................... 15,462
Interest expense, net............................ 12,869
Equity in loss of affiliated partnership......... 44
Minority interest in earnings.................... --
1/3 of rental expense... --
------
Adjusted earnings (loss)......................... 51,568
------
------
FIXED CHARGES:
Interest expense, net............................ 12,869
Preferred stock dividends of majority-owned
subsidiaries and fifty-percent owned persons... --
Increase in preferred stock dividends for pretax
earnings required to cover such dividends at
40% estimated rate............................. --
1/3 of rental expense............................ 515
------
Total fixed charges.............................. 13,384
------
------
Ratio of earnings to fixed charges............... 3.9
------
Deficiency.......................................
</TABLE>
<PAGE>
EXHIBIT 23(B)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 9, 1998
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333- ) and the related Prospectus of
Premier Parks Inc. and to the incorporation by reference therein of our report
dated February 16, 1996 with respect to the financial statements of Elitch
Gardens Company included in the Registration Statement (Form S-2 No. 333-16573)
and related Prospectus of Premier Parks Inc.
Ernst & Young LLP
Denver, Colorado
February 9, 1998
<PAGE>
EXHIBIT 23(D)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Storytown, U.S.A. Inc.
Fantasy Rides Corporation:
We consent to the incorporation by reference in the registration statement
on Form S-3 of Premier Parks Inc. of our report dated October 11, 1996, relating
to the balance sheets of The Great Escape (as defined in note 1 to the financial
statements) as of October 31, 1995 and 1994, and the related statements of
operations, stockholder's equity, and cash flows for the years then ended, which
report appears in the registration statement on Form S-2 (Registration No.
333-16573) of Premier Parks Inc. and to the reference to our firm under the
heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 9, 1998
<PAGE>
EXHIBIT 23(E)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stuart Amusement Company:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Premier Parks Inc. of our report dated December 10, 1996, except as
to the last sentence of the third paragraph of note 3, which is as of December
24, 1996, relating to the consolidated balance sheets of Stuart Amusement
Company and subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of operations, changes in common and other stockholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 1996, which report appears in the registration statement on Form
S-2 (Registration No. 333-16573) of Premier Parks Inc. and to the reference to
our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Springfield, Massachusetts
February 9, 1998
