<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1998
REGISTRATION NO. 333-45859
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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)
PInES(sm)(7)(8).................................. (6) (6) (6)
Total............................................ -- -- $1,082,868,750 $319,447(9)
</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 upon
conversion of the Convertible Preferred Stock or PInES 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 upon conversion of the Convertible Preferred Stock
or PInES 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 PInES issued pursuant to a Deposit Agreement.
(8) Includes shares of PInES which may be issued upon exercise of the
Underwriters' over-allotment options. See "Underwriting."
(9) $206,500 of which has been previously paid.
<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 PInES, representing interests in the Company's
Mandatorily Convertible Preferred Stock (the "PInES 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 Considerations to Non-United States Holders." The U.S.
Prospectus and the PInES Prospectus are identical except that they contain
different front and back cover pages, a different "Legal Matters" section 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 PInES Prospectus are separately designated.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Subject to Completion, dated March 5, 1998
PROSPECTUS
[LOGO]
13,000,000 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 13,000,000 shares of Common Stock offered, 10,400,000 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 2,600,000 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 2006, and 5,000,000 Premium
Income Equity Securities (the "PInES(SM)") representing interests in the
Company's mandatorily convertible preferred stock (the "Mandatorily Convertible
Preferred Stock") with estimated gross proceeds of $228.2 million (assuming the
underwriters' over-allotment option for 750,000 PInES is not exercised). SFEC is
concurrently offering $170.0 million aggregate principal amount of senior notes
due 2006 (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 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 Company may
reduce (but not below $100 million) or may eliminate the Seller Depositary
Shares by increasing the cash portion of the consideration for the Six Flags
Acquisition and may, if issued, redeem the Seller Depositary Shares for cash
within 90 days of the closing at the higher of the issuance price and market
value. 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 March 3, 1998, the last sales price of the Common Stock, as
reported by the NYSE, was $52 1/2 per share. The Company has applied to list the
PInES 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 PInES.
------------------------
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
PRICE TO DISCOUNTS AND PROCEEDS 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
1,950,000 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
were exercised in full, the total Price to Public, Underwriting Discounts
and Commissions and Proceeds to Company would 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
FURMAN SELZ NATIONSBANC MONTGOMERY
SECURITIES LLC
, 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
PInES 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 Company's Current Report on Form 8-K, dated February 9, 1998.
9. 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.
10. 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.
11. The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
Company's Registration Statement on Form S-3 (File No. 333-46897).
2
<PAGE>
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 PInES OR THE
COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF PInES OR COMMON
STOCK FOLLOWING THE PRICING OF THE OFFERINGS TO COVER A SYNDICATE SHORT POSITION
IN THE PInES OR COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE
PInES OR THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES RELATING TO THE OFFERING, SEE "UNDERWRITING."
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of 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. POPEYE and all related indicia
are copyrights and trademarks of King Features Syndicate, Inc., a unit of The
Hearst Corporation.
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.
ALL INFORMATION IN THIS PROSPECTUS RELATING TO THE ASSUMED PROCEEDS OF THE
OFFERINGS AND RELATED SIX FLAGS FINANCINGS, THE AMOUNTS AND NUMBERS OF
SECURITIES TO BE SOLD THEREIN AND THE INTEREST AND DIVIDEND RATES ON THOSE
SECURITIES IS BASED ON THE ASSUMPTIONS DESCRIBED IN "UNAUDITED PRO FORMA
FINANCIAL STATEMENTS" CONTAINED ELSEWHERE HEREIN.
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 North America based on 1997 attendance. The
Company's theme parks serve nine of the ten largest metropolitan areas in the
country. The Company estimates that approximately two-thirds of the population
of the continental U.S. live within a 150-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 $815.3 million and $263.5 million,
respectively. See "Unaudited Pro Forma Financial Statements."
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 Parks drew, in the aggregate,
approximately 68% of their patrons from within a
4
<PAGE>
100-mile radius. During that year, Six Flags' attendance, revenue and EBITDA
totaled approximately 22.2 million, $708.7 million and $164.1 million,
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 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. and DC Comics 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 long-term license 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. The Company believes that use of the Warner Bros. and DC
Comics characters promotes attendance, supports higher ticket prices, increases
lengths-of-stay and enhances in-park spending. 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. The 11 parks owned by the
Company for the 1997 operating season achieved same park growth during 1997 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 18.1%, 20.4% and 59.6%,
respectively, as compared to 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
800 rides, including over 90 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 ten general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 210
years experience in the industry, including approximately 85 years at the
Premier Parks. A number of Premier's executives and operating personnel have
experience at Six Flags.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million. Total attendance for the 50
largest parks in North America was 167.2 million in 1997, compared to 145.0
million in 1994, representing a compound annual growth rate of 4.9%. The Company
believes that this growth reflects two trends: (i) demographic growth in the
5-24 year old age
5
<PAGE>
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 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, because 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
year ended December 31, 1997, the three parks acquired in the Company's 1995
acquisition of Funtime Parks, Inc. (the "Funtime Acquisition") achieved compound
annual growth in attendance, revenue and park-level operating cash flow of 9.7%,
13.7% and 24.3%, respectively, compared to 1995. Similarly, during the year
ended December 31, 1997, the five parks acquired in the 1996 Acquisitions
realized growth in attendance, revenue and park-level operating cash flow of
36.0%, 37.0% and 199.6%, respectively, compared to 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 year ended December 31, 1997,
attendance and revenue at Elitch Gardens grew 61.2% and 52.1%, respectively, and
park-level operating cash flow increased from $(1.0) million to $8.6 million, as
compared to 1996. Similarly, during the year ended December 31, 1997, attendance
and revenue at Riverside Park increased 67.1% and 54.4%, respectively, and
park-level operating cash flow increased from $1.5 million to $8.2 million, as
compared to 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. 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 and 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 $38 million in the Walibi Parks (as defined herein) over
the three years commencing with the 1999 season. See "-- Other Recent
Developments" and "Business--Pursuing Growth Opportunities at Existing Parks."
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, Geauga Lake, Kentucky
Kingdom, Marine World and Riverside Park, all of which are located in or near
major metropolitan areas, can significantly accelerate their market penetration
and the expansion of their geographic market through the use of the Six Flags
brand name, aggressive marketing campaigns
6
<PAGE>
featuring the animated characters licensed from Warner Bros. and DC Comics, as
well as targeted capital investment in new rides and attractions. Management
also believes that this expanded penetration, as well as the incorporation of
the animated characters in the parks and in merchandise sales, can result in
increased per capita spending at the existing Premier Parks. 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.
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 increased operating
efficiencies. 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 improvement in
park-level operating margins. 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. In addition, the Company recently purchased campgrounds
adjacent to Geauga Lake and 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 campgrounds, lodging facilities, new
water parks 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. See
"Business--Environmental and Other Regulation."
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. While the Company will continue to pursue
acquisitions of 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).
The Company believes it has a number of competitive advantages in acquiring
theme parks. Operators of destination or large regional park chains, other than
Cedar Fair L.P., have not generally been actively seeking to acquire parks in
recent years. 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. and DC Comics; (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 NYSE-listed 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 $965 million
(plus an approximate $11 million adjustment based on year-end balance sheet
adjustments and option cancellation costs). The purchase price is payable all in
cash or, at the Company's option, in cash and Seller Depositary Shares
representing interests in up to $200.0 million (but not less than $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 ($161.1
million accreted value at December 28, 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 28,
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. See
"Description of Indebtedness." In addition, the Company will refinance all
outstanding Six Flags bank indebtedness (approximately $348.5 million at
December 28, 1997) and certain other indebtedness of SFEC (approximately $30.5
million at December 28, 1997). See "Description of Six Flags Agreement."
THE FINANCINGS
In the Offerings:
1. The Company will issue (the "Common Stock Offering") 13,000,000 shares of
Common Stock with estimated gross proceeds of $593.2 million (based upon the
average closing price of the Company's Common Stock for the twenty trading days
ended February 27, 1998).
2. The Company will issue (the "PInES Offering") 5,000,000 PInES
representing interests in the Company's % Mandatorily Convertible Preferred
Stock (the "Mandatorily Convertible Preferred Stock" and, together with the
Seller Preferred Stock, the "Convertible Preferred Stock"), with estimated gross
proceeds of $228.2 million (based upon the average closing price of the
Company's Common Stock for the twenty trading days ended February 27, 1998). See
"Description of PInES."
3. The Company will issue (the "Discount Notes Offering") $ million
aggregate principal amount at maturity of its % Senior Discount Notes due
2008 (the "Company Senior Discount Notes") with estimated gross proceeds of
$250.0 million. See "Description of Indebtedness-- Company Senior Discount
Notes."
8
<PAGE>
4. The Company will issue (the "Senior Notes Offering") $280.0 million
principal amount of its % Senior Notes due 2006 (the "Company Senior Notes"
and, together with the Company Senior Discount Notes, the "Company Notes"). See
"Description of Indebtedness--Company Senior Notes."
5. SFEC will issue (the "SFEC Notes Offering") $170.0 million principal
amount of its % Senior Notes due 2006 (the "New SFEC Notes") guaranteed on a
fully subordinated basis by the Company. 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 is using approximately $225.0 million of borrowings
under the Premier Credit Facility (as defined below) to pay the cash portion of
the Walibi purchase price and refinance certain Walibi net indebtedness (which
together are estimated to be $117.8 million) and to prefund capital expenditures
and provide working capital (which together are estimated to be approximately
$107.2 million). The Company will also borrow approximately $420.0 million 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") primarily to repay bank indebtedness of SFTP. See "Description of
Indebtedness-- Premier Credit Facility" 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)....................................................... $ 593,190
PInES Offering(1).............................................................. 228,150
Issuance of Seller Depositary Shares........................................... 200,000
Company Senior Discount Notes Offering(1)...................................... 250,000
Company Senior Notes Offering(1)............................................... 280,000
SFEC Notes Offering(1)......................................................... 170,000
Borrowings under the Premier Credit Facility(2)................................ 107,210
Borrowings under the Six Flags Credit Facility................................. 420,000
-----------
Total...................................................................... $2,248,550
-----------
-----------
USES
Acquisition of SFEC capital stock.............................................. $ 965,000
Adjustment to purchase price of SFEC capital stock............................. 11,000
Deposit for repayment of SFEC Zero Coupon Senior Notes......................... 175,030
Repayment of Six Flags indebtedness............................................ 382,430
Interest escrow for Company Senior Notes(3).................................... 76,260
Restricted Cash Account(4)..................................................... 75,000
Financing of tender offer for partnership interests in Six Flags Over
Texas(5)..................................................................... 93,700
Prefunding of capital expenditures and working capital(6)...................... 378,710
Transaction offering fees, expenses, discounts and escrows..................... 91,420
-----------
Total...................................................................... $2,248,550
-----------
-----------
</TABLE>
- ------------------------
(1) Reflects assumed gross proceeds.
(2) Does not include an estimated $117.8 million (assuming a 100% Walibi Tender
Offer (as defined herein)) of borrowings to be used to fund the Walibi
acquisition.
(3) Represents escrow to prefund the first six semi-annual interest payments
thereon.
(4) Represents restricted cash to satisfy obligations under the arrangements
relating to the Co-Venture Parks (as defined herein) and to fund dividends
on the Convertible Preferred Stock, as required under the indentures that
will govern the Company Notes. See "Description of Securities--Preferred
Stock--Seller Preferred Stock" and "Description of PInES--Dividends."
(5) Assumes tender of 25% of the units representing limited partnership
interests. See "Business-- Description of Parks--Six Flags Over Texas and
Six Flags Hurricane Harbor."
(6) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Liquidity, Capital Commitments and Resources."
9
<PAGE>
Following the Six Flags Transactions, the Company's structure will be:
Chart demonstrating Parent-Subsidiary relationships and the respective
debt/credit obligations of each such entity following the Offerings.
10
<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 $4.8 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 an 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
approximately 50% 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. It owns six theme parks (the "Walibi Parks"), two
located in Belgium, one in The Netherlands and three in France, as well as two
smaller attractions in Belgium. Walibi's operations had combined 1997 attendance
of approximately 3.5 million.
The transaction values Walibi at approximately $136.7 million (at the
exchange rate of Belgian Francs ("BEF") 37.065 to US$1 on December 31, 1997),
based on a multiple of seven times Walibi's 1997 EBITDA. This amount includes
the assumption or refinancing of Walibi net indebtedness (total debt less cash
and cash equivalents) which aggregated approximately $53.0 million at December
31, 1997. As a result, the aggregate consideration to be paid by the Company for
the outstanding stock of Walibi (assuming the Company acquires 100% of the
outstanding Walibi capital stock pursuant to the Walibi Tender Offer) will be
$83.7 million (based on the year-end exchange rate). The purchase price in the
Private Acquisition will be paid 80% in cash in BEF and 20% in Premier Common
Stock (approximately 219,000 shares). 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
11
<PAGE>
Offer will be payable at the election of the holders of Walibi capital stock (i)
in cash only or (ii) in cash and shares of Premier Common Stock in the same
ratio as the Private Acquisition. 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 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." 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 Walibi Parks.
Under the terms of the Walibi Agreement, the Company has agreed to invest at
least BEF 1.4 billion (approximately $38 million based on the year-end exchange
rate) in the Walibi Parks over the three years commencing with the 1999 season.
12
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered(1):
U.S. Offering................... 10,400,000 shares
International Offering.......... 2,600,000 shares
Total......................... 13,000,000 shares
Common Stock outstanding:
prior to the Offering(2)........ 18,873,111 shares
after the Offering(3)........... 32,311,111 shares
The Offerings..................... The Company is concurrently offering (i) 13,000,000
shares of Common Stock, (ii) 5,000,000 PInES
representing interests in Mandatorily Convertible
Preferred Stock with estimated gross proceeds of $228.2
million, (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 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," "Description of
Securities--Preferred Stock--Seller Preferred Stock" and
"Description of PInES." 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 fund improvements and expansion of the Company's
parks, including the parks acquired in the Six Flags
Acquisition and the 1997 Acquisitions; to acquire and
make improvements at additional theme parks; and for
general corporate purposes, including working capital
requirements. See "Use of Proceeds."
NYSE symbols:
Common Stock.................... "PKS"
PInES...........................
</TABLE>
- ------------------------
(1) Excludes 1,950,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment options.
(2) Includes an aggregate of 375,000 unvested restricted shares issued to the
Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, which vest proportionately on January 1 of the five years
commencing 1999. Excludes (i) an aggregate of 45,038 shares of Common Stock
issuable upon exercise of warrants; (ii) 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; and (iii) an aggregate of 450,000
additional restricted shares issuable at the option of the Company to the
Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, under employment agreements with such officers.
(3) Assumes the issuance of 219,000 shares in the Private Acquisition and
219,000 shares in the Walibi Tender Offer. Excludes (i) any shares issuable
to the sellers in the Kentucky Kingdom and Walibi acquisitions depending
upon the future revenues of the acquired parks; (ii) shares issuable upon
conversion of the Convertible Preferred Stock or as dividends on the
Mandatorily Convertible Preferred Stock; and (iii) 1,950,000 shares of
Common Stock issuable upon exercise of the Underwriters' over-allotment
options.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA DATA
The tables below contain certain summary historical and pro forma financial
and operating data for the Company and certain summary historical financial and
operating data for Six Flags. The historical financial data of the Company for
1996 includes the 1996 Acquisitions (other than Riverside Park) from the dates
of the respective acquisitions. The pro forma financial and operating data of
the Company for the year ended December 31, 1997 give effect to (i) the
acquisitions of Walibi (assuming a 100% Walibi Tender Offer on the basis of 80%
payable in cash and 20% payable in shares of Common Stock) and Kentucky Kingdom
as if they had occurred on January 1, 1997; and (ii) the acquisition of Six
Flags as if it had occurred on December 30, 1996 (the first day of Six Flags'
1997 fiscal year). The following summary historical financial and operating
data, except for attendance and revenue per visitor data, for each of the years
in the three-year period ended December 31, 1997 (or December 28, 1997 in the
case of Six Flags) have been derived from the financial statements of the
Company and Six Flags appearing elsewhere in this Prospectus and should be read
in conjunction with those financial statements (including the notes thereto),
"Unaudited Pro Forma Financial Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Other historical
financial and operating data (except attendance and revenue per share data) have
been derived from audited consolidated financial statements which are not
included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1996(2) 1997
--------- --------- ----------- ----------- ------------------------
<CAPTION>
PRO
ACTUAL(3) FORMA(4)
----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Total revenue.............................. $ 21,860 $ 24,899 $ 41,496 $ 93,447 $ 193,904 $ 815,333
Gross profit(5)............................ 7,787 7,991 13,220 31,388 69,731 267,878
Income from operations(5).................. 3,019 2,543 3,948 14,461 33,184 136,298
Interest expense, net...................... (1,438) (2,299) (5,578) (11,121) (17,775) (180,273)
Income (loss) before extraordinary loss.... 1,354 102 (1,045)(6) 1,765 14,099 (41,292)
Income (loss) before extraordinary loss per
common share--Basic...................... $ .51 $ .04 $ (.40)(6) $ .14 $ .79 $ (2.14)
--Diluted.................... $ .51 $ .04 $ (.40)(6) $ .13 $ .76 $ (2.14)
OTHER DATA:
EBITDA(7).................................. $ 4,562 $ 4,549 $ 7,706 $ 22,994 $ 61,340(8) $ 263,455
Adjusted EBITDA(9)......................... -- -- -- -- -- $ 306,037
Net cash provided by operating
activities(10)........................... $ 2,699 $ 1,060 $ 10,646 $ 11,331 $ 47,150 $ 150,482
Depreciation and amortization.............. $ 1,537 $ 1,997 $ 3,866 $ 8,533 $ 19,792 $ 107,138
Capital expenditures....................... $ 7,674 $ 10,108 $ 10,732 $ 39,423 $ 135,852 $ 212,229(11)
Total attendance........................... 1,322 1,408 2,302 (12 4,518 (12 8,667 (12 36,730(13)
Revenue per visitor(14).................... $ 16.54 $ 17.68 $ 18.03 $ 20.66 $ 22.11 $ 27.19
SELECTED RATIOS:
Net debt/EBITDA(15)........................ -- -- -- -- -- 4.8x
Total debt/EBITDA(15)...................... -- -- -- -- -- 7.0x
EBITDA/cash interest expense(15)........... -- -- -- -- -- 2.2x
EBITDA/total interest expense(15).......... -- -- -- -- -- 1.4x
Ratio of earnings to fixed charges(16)..... 2.1x 1.1x (16) 1.3 x 2.3 x (16)
Ratio of earnings to combined fixed charges
and preferred stock dividends(16)........ 2.1x 1.1x (16) 1.2 x 2.3 x (16)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------
ACTUAL(17) PRO FORMA(18)
----------- --------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 84,288 $ 479,804(19)
Total assets......................................................................... $ 611,321 $3,553,662
Total long-term debt and capitalized lease obligations (excluding current
maturities)........................................................................ $ 216,231 $2,032,831
Total debt........................................................................... $ 217,026 $2,035,626
Mandatorily redeemable preferred stock............................................... -- $ 200,000
Stockholders' equity................................................................. $ 323,749 $1,130,180
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
- ------------------------
(1) 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.
(2) 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 acquisitions).
(3) The historical Statement of Operations Data for 1997 reflect the results of
Riverside Park from February 5, 1997 and Kentucky Kingdom from November 7,
1997 (the dates of their respective acquisitions).
(4) The pro forma financial and operating data for the year ended December 31,
1997 give effect to (i) the acquisitions of Walibi (assuming a 100% Walibi
Tender Offer on the basis of 80% payable in cash and 20% payable in shares
of Common Stock) and Kentucky Kingdom as if they had occurred on January 1,
1997; and (ii) the acquisition of Six Flags as if it had occured on
December 30, 1996 (the first day of Six Flags' 1997 fiscal year). The pro
forma income per share for 1997 gives effect to the January 1997 public
offering, the Common Stock Offering and the PInES Offering (assuming no
exercise of the Underwriters' over-allotment options) as if they had
occurred on January 1, 1997. See "Unaudited Pro Forma Financial
Statements-- Unaudited Pro Forma Statement of Operations" generally and
with respect to certain assumptions used in respect of the related
financings.
(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) before extraordinary loss and income (loss) before extraordinary
loss per common share for 1995.
(7) EBITDA is defined as earnings before extraordinary loss, 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 Company's financial statements included elsewhere herein. Equity in
loss of real estate partnership was $142,000, $83,000, $69,000, $78,000 and
$59,000 during each of the five years ended December 31, 1997,
respectively. Pro Forma EBITDA includes equity in operations of theme parks
and the depreciation and amortization ($6,830,000) of the investment in the
Co-Venture Parks included therein.
(8) Includes an $8.3 million termination fee paid to the Company upon
termination of its prior agreement to become managing general partner of
the Texas Co-Venture Partnership (as defined herein). Such termination fee
is not included in the pro forma amounts.
(9) Adjusted EBITDA reflects the Company's pro forma EBITDA plus the portion of
the pro forma EBITDA of Six Flags Over Georgia and Six Flags Over Texas
(the "Co-Venture Parks") ($34,672,000) distributed on a pro forma basis to
the other limited partners and therefore not included in the Company's pro
forma EBITDA. See Note (1) to the Six Flags Selected Historical Financial
and Operating Data. The Co-Venture Partnership (as defined herein)
agreements restrict the amount of cash distributable to the Company. See
"Business--Description of Parks--Six Flags Parks--Six Flags Over Georgia"
and "--Six Flags Over Texas and Six Flags Hurricane Harbor." Adjusted
EBITDA also includes $7,910,000 of pro forma EBITDA of Marine World for
1997 which is not already reflected in the Company's pro forma EBITDA. The
Company manages the operations of Marine World and has an option to
purchase the entire park beginning in February 2002. Adjusted EBITDA is not
indicative of the Company's ability to service or incur indebtedness and is
not a measure of the Company's profitability or liquidity. Adjusted EBITDA
is not meant to be predictive of future operating results.
(10) During each of the five years ended December 31, 1997, the Company's net
cash used in investing activities was $7,698,000, $10,177,000, $74,139,000,
$155,149,000 and $217,070,000, respectively. During those periods, net cash
provided by financing activities was $2,106,000, $7,457,000, $90,914,000,
$119,074,000 and $250,165,000, respectively.
(11) Does not include pro forma amount expended ($93,700,000) by the Company to
purchase interests of the limited partners in the Co-Venture Partnerships.
(12) 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 year
ended December 31, 1997 does not include attendance at Marine World or
attendance at Kentucky Kingdom since that park was acquired following the
1997 season.
(13) Pro forma attendance information includes attendance at Marine World for
1997.
(14) 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). Pro forma revenue per visitor also excludes revenue and attendance
of Marine World and the Co-Venture Parks.
(15) Total Debt/EBITDA and Net Debt/EBITDA include total outstanding pro forma
indebtedness of the Company (excluding the SFEC Zero Coupon Senior Notes)
in the accreted principal amount of $1,831,951,000. Net debt deducts from
total outstanding pro forma indebtedness $556,064,000 (representing
$479,804,000 of pro forma cash and cash equivalents and $76,260,000 of pro
forma restricted-use investments placed in escrow to fund the first six
semi-annual interest payments on the Company Senior Notes). See
"Capitalization." EBITDA/cash interest expense is calculated using pro
forma cash interest expense of $119,492,000. EBITDA/total interest expense
is calculated using pro forma total interest expense $185,712,000
(excluding interest on the SFEC Zero Coupon Senior Notes).
(16) 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) before extraordinary loss and
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 year ended December 31, 1995, the Company's earnings
were insufficient to cover fixed charges by $1,738,000, and were
insufficient to cover combined fixed charges and preferred stock dividends
by $2,620,000. 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 $31,818,000 and
$77,720,000, respectively.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
15
<PAGE>
(17) Actual balance sheet data as of December 31, 1997 include the Company's
purchase of Kentucky Kingdom and investment in Marine World as of that
date.
(18) The pro forma balance sheet data give effect to the acquisitions of Walibi
(assuming a 100% Walibi Tender Offer on the basis of 80% payable in cash
and 20% payable in shares of Common Stock) and Six Flags, the Offerings
(assuming no exercise of the underwriters' over-allotment options) and the
related financings as if they had occurred on December 31, 1997. Includes
SFEC Zero Coupon Senior Notes as well as cash held in escrow to repay the
SFEC Zero Coupon Senior Notes. Pro Forma total long term debt and total
debt include SFEC Zero Coupon Senior Notes and SFTP Senior Subordinated
Notes at fair value rather than accreted amount. See "Capitalization." See
also "Unaudited Pro Forma Financial Statements--Unaudited Pro Forma Balance
Sheet" generally and with respect to certain assumptions used in respect of
the related financings.
(19) Excludes $326,300,000 of restricted use investments. See "Capitalization."
---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DECEMBER 26, JANUARY 1, DECEMBER 31, DECEMBER 29, DECEMBER 28,
<CAPTION>
1993 1995 1995 1996 1997
------------- ----------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C>
SIX FLAGS
STATEMENT OF OPERATIONS DATA:(1)
Total revenue............................... $ 532,455 $ 556,791 $ 629,457 $ 680,876 $ 708,666
Income from operations(2)................... 53,236 54,561 66,738 67,715 79,575
Interest expense, net....................... (54,963) (48,753) (63,282) (76,530) (84,430)
Net (loss).................................. (12,944) (695) (3,287) (15,249) (3,708)
OTHER DATA:
EBITDA(3)................................... 122,371 134,642 150,182 155,132 164,068
Net cash provided by operating
activities(4)............................. 111,934 100,895 124,587 128,602 110,303
Depreciation and amortization............... 69,135 80,081 83,444 87,417 84,493
Capital expenditures........................ 34,057 42,039 45,578 75,627 67,675(5)
Total attendance............................ 19,144 19,855 21,830 22,796 22,229
Revenue per visitor......................... $ 27.81 $ 28.04 $ 28.83 $ 29.87 $ 31.88
</TABLE>
- ------------------------
(1) Prior to the Six Flags Acquisition, Six Flags, through two subsidiaries,
was the general partner in theme park limited partnerships (the "Co-Venture
Partnerships") related to the Co-Venture Parks. For the fiscal years
presented, Six Flags accounted for the parks as co-ventures, i.e., their
revenues and expenses (excluding partnership depreciation) were included in
the Six Flags consolidated statements of operations and the net amounts
distributed to the limited partners were deducted as expenses. Except for
the limited partnership units owned in the Georgia park at December 28,
1997, Six Flags had no rights or title to the Co-Venture Parks' assets or
to the proceeds from any sale of the Co-Venture Parks' assets or
liabilities during the periods presented. The Co-Venture Parks contributed
revenues of $160.6 million, $152.0 million and $176.8 million to Six Flags
in the fiscal years 1995, 1996 and 1997, respectively. During these three
fiscal years, the Co-Venture Parks contributed EBITDA of $36.8 million,
$24.3 million and $34.7 million (after payments of $11.6 million, $ 8.1
million and $21.3 million to the limited partners). In 1995, 1996 and 1997,
the Co-Venture Parks produced $48.4 million, $32.4 million and $56.0
million of EBITDA, respectively. In connection with the Six Flags
Acquisition, Six Flags is transferring its interests in the Co-Venture
Parks to Premier. Premier intends to account for its interests in the
Co-Venture Parks under the equity method of accounting.
(2) Income from operations is revenue less operating, general and
administrative expenses, costs of products sold and depreciation and
amortization.
(3) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of a 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 Six Flags operating performance. This
information should be read in conjunction with the Statements of Cash Flows
contained in the financial statements of Six Flags included elsewhere
herein.
(4) During each of the fiscal years ended December 26, 1993, January 1, 1995,
December 31, 1995, December 29, 1996 and December 28, 1997, Six Flags' net
cash used in investing activities was approximately $41.6 million, $43.8
million, $93.9 million, $81.2 million, and $149.7 million, respectively.
During these periods, net cash provided (used) in financing activities was
approximately $(73.2) million, $(55.6) million, $10.6 million, $(52.2)
million, and $10.6 million, respectively.
(5) Does not include amount expended ($62.7 million) by Six Flags to purchase
interests of the limited partners in the Co-Venture Partnerships.
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 AND OTHER OBLIGATIONS
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 (excluding the SFEC Zero Coupon Senior Notes) in the accreted
principal amount of approximately $1,832.0 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) $225.0
million in outstanding borrowings under the Premier Credit Facility; (viii)
$420.0 million in outstanding borrowings under the Six Flags Credit Facility and
(ix) $2.0 million of capitalized lease obligations. Pro forma indebtedness at
that date also included $161.1 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 $1,130.2 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 Company
is required to offer to purchase the Seller Preferred Stock 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 $77.7
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," "Unaudited Pro Forma Combined Financial
Statements" 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
March 3, 1998, the last reported sales price of these notes was substantially in
excess 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 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 outstanding as of the date of
the co-venture agreements that govern the 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 (as defined
therein) by a specified multiple (8.0 in the case of the Georgia park and 8.5 in
the case of the Texas park)
17
<PAGE>
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 2027 and 2028,
respectively. Six Flags has commenced a tender offer for all limited partner
units in the Texas park which is currently scheduled to close prior to the
consummation of the Six Flags Acquisition. Premier anticipates that Six Flags
will fund the tender from borrowings which must be refinanced by the Company in
connection with the Six Flags Acquisition. The Company has assumed a 25% tender
for purposes of preparing the pro forma financial information contained herein.
In the event that a larger number of units are tendered, the Company will be
required to refinance the additional indebtedness of Six Flags incurred by
virtue thereof and, accordingly, will have less cash to prefund capital
expenditures and working capital requirements.
As the Company purchases units relating to either Co-Venture Park, it will
be entitled to the minimum distribution and other distributions attributable to
such units, unless it is then in default under the applicable agreements with
its partners at such Co-Venture Park. Time Warner Inc. and certain of its
affiliates (collectively, "Time Warner") have guaranteed the obligations of Six
Flags under these agreements. Premier will indemnify Time Warner in respect of
its guarantee pursuant to a Subordinated Indemnity Agreement (the "Subordinated
Indemnity Agreement"). 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 $31 million for 1999, when purchases for both partnerships are
required) and its minimum capital expenditures for 1998 at these parks will
total approximately $11 million. See "Business--Description of Parks--Six Flags
Parks--Six Flags Over Georgia" and "--Six Flags Over Texas and Six Flags
Hurricane Harbor." In addition, the Company has agreed to invest approximately
$38 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, to pay dividends on its preferred stock, 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, based on
current and anticipated operating results, cash flow from operations, 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 dividends 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, that currently anticipated cost savings will be realized
or that future borrowings will be available under the Credit Facilities in an
amount sufficient to enable the Company to service its indebtedness or 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 and dividends
on its preferred stock, 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
18
<PAGE>
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, would 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
PInES. 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 PInES.
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 Preferred Stock
and obligations under the Subordinated 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, as well as
to pay any dividends or distributions to the Company, 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 restrictive covenants that will
significantly restrict or prohibit their ability to pay dividends or make other
distributions to the Company. See "Description of Indebtedness" for summary of
the terms of the dividend restrictions. In addition, 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 limit or
prohibit the payment of dividends or the making of other distributions by such
subsidiaries. The Premier Credit Facility will prohibit the payment of dividends
by Premier Operations to the Company for any purpose other than a one time
distribution, not to exceed $20.0 million, on the date of the Six Flags
transaction. The Six Flags Credit Facility will prohibit the payment of
dividends by SFTP to SFEC or the Company, except to pay dividends on the Seller
Preferred Stock and to pay interest on the New SFEC Notes (but in each case,
only if no default has occurred and is continuing under the Six Flags Credit
Facility and subject to the satisfaction of certain financial ratios). As a
result, there can be no assurance that dividends, distributions or loans to the
Company from its subsidiaries will be sufficient to fund its obligations. See
"Description of Indebtedness."
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.
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 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
19
<PAGE>
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 Subordinated Indemnity Agreement (which
lasts until 2028), without the consent of Time Warner, the Company cannot incur
indebtedness (other than the New SFEC Notes) at SFEC or any of its subsidiaries
that is secured by any assets of (or guaranteed by) 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
(or guarantees by) SFEC or any of its subsidiaries. These covenants could
inhibit the ability of the Company to borrow in the future.
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. Shares of Common
Stock (or securities convertible into Common Stock) were or will be used as a
portion of the aggregate consideration in the acquisitions of The Great Escape,
Riverside Park, 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 and the
PInES.
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
20
<PAGE>
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.
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 the Company's 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
21
<PAGE>
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 Messrs. Burke and Story and the failure to replace them
within a specified time period would constitute a default under the Credit
Facilities.
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
Credit Facilities. 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 and Other
Obligations."
As part of the Six Flags Acquisition, the Company will obtain from Warner
Bros. and DC Comics 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. Warner Bros. can terminate this license
under certain circumstances, including if persons engaged in the movie or
television industries 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. The Company's ability to pay cash dividends
on the Common Stock will be restricted under the Indentures relating to the
Company Notes and will be affected by, among other factors, the Company's
substantial
22
<PAGE>
indebtedness and holding company structure. See "--Risks Associated with
Substantial Indebtedness and Other Obligations" and "--Holding Company
Structure; Limitations on Access to Cash Flow of Subsidiaries."
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offerings, the Company will have 32.3 million
shares of Common Stock outstanding and 5.0 million PInES (initially convertible
into 5.0 million shares of Common Stock) outstanding. Future sales of Common
Stock (or Seller Depositary Shares) 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 Common Stock Offering,
the Convertible Preferred Stock and 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 acquisition), 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 6.0 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 Company may also pay quarterly dividend
payments on the PInES (which aggregate $ million over three years) by
issuing additional shares of Common Stock. The sale, or the availability for
sale, of substantial amounts of Common Stock or securities convertible into
Common 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 and the PInES. See "Description of Securities--Registration Rights."
LESS EQUITY APPRECIATION FOR PINES THAN COMMON STOCK
The opportunity for equity appreciation afforded by an investment in the
PInES is less than the opportunity for equity appreciation afforded by an
investment in Common Stock. Holders of PInES 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 PInES 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 PInES--Mandatory
Conversion of PInES."
23
<PAGE>
DILUTION OF COMMON STOCK
The Conversion Rate and the Optional Conversion Rate (as defined herein) on
the PInES are subject to adjustment for certain events, such as stock splits and
combinations, stock dividends, certain other actions by the Company that modify
its capital structure and certain other transactions involving the Company. See
"Description of PInES--Conversion Adjustments" and "--Adjustment for Certain
Consolidations or Mergers." 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 PInES. 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 PINES
The Mandatorily Convertible Preferred Stock represented by the PInES 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 payment of dividends
or liquidation preference to the Mandatorily Convertible Preferred Stock, as
well as in certain circumstances involving protracted dividend arrearages. See
"Description of PInES--Voting Rights." As a result, unless holders of PInES
voluntarily convert their PInES 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
(including investments in PInES representing interests in 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 or the PInES and no assurance can be given that the
Service will agree with the conclusions expressed under "Description of
PInES--Federal Income Tax Consequences."
Distributions on the Mandatorily Convertible Preferred Stock (including
distributions that are paid in the form of shares of Common Stock and
constructive distributions) will be taxable for U.S. federal income tax purposes
as ordinary dividend income and, subject to limitations described in
"Description of PInES-- Federal Income Tax Consequences--Dividends," will be
eligible for the dividends-received deduction that is available to certain U.S.
corporate holders only to the extent paid out of current or accumulated earnings
and profits of the Company as determined for U.S. federal income tax purposes.
Such distributions otherwise will be treated in the manner described under
"Federal Income Tax Consequences-- Dividends." It is uncertain whether the
Company will have any current or accumulated earnings and profits. To the extent
that the Company does not have current or accumulated earnings and profits, or
the amount of such distributions exceeds the Company's current or accumulated
earnings and profits, distributions on the Mandatorily Convertible Preferred
Stock (whether actual or constructive) will constitute tax-free returns of
capital to the extent of the holder's tax basis in the Mandatorily Convertible
Preferred Stock and thereafter will constitute capital gain, and will not be
eligible for the dividends-received deduction.
In the case of a distribution on the Mandatorily Convertible Preferred Stock
that is paid in the form of shares of Common Stock, the fair market value of
such Common Stock on the distribution date will be taxable for U.S. federal
income tax purposes in the same manner as a cash distribution would be treated.
24
<PAGE>
ABSENCE OF A PREVIOUS MARKET FOR THE PINES
The PInES are a new issue of securities with no established trading market.
Application has been made to list the PInES on the NYSE, but no assurance can be
given as to the development or liquidity of any trading market in the PInES. If
an active market does not develop, the market price and liquidity of the PInES
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."
25
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offerings, 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 Company intends to use the net proceeds from the
Offerings to fund the $765 million cash portion of the purchase price (plus any
adjustment thereto) 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
fund improvements and expansion of the Company's parks, including the Walibi
Parks and the Six Flags Parks; to acquire and make improvements at additional
theme 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 has been reached. There can be no assurance that any
such additional acquisitions will be made. See "Prospectus Summary--The Six
Flags Transactions--The Financings," "Risk Factors-- Uncertainty of Future
Acquisitions; Potential Effects of Acquisitions" and "Business--Acquisition
Strategy."
The Company presently intends to use the net proceeds of any exercise of the
Underwriters' over-allotment options to reduce the amount of (or eliminate) the
Seller Preferred Stock to be issued in the Six Flags Acquisition (or to redeem
the Seller Preferred Stock within 90 days of its issuance).
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.
26
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1997, (i) the actual
capitalization of the Company; and (ii) the pro forma capitalization of the
Company after giving effect to the acquisitions of Walibi (assuming a 100%
Walibi Tender Offer with 80% paid in cash and 20% paid in shares of Common
Stock) and Six Flags, and after giving effect to the Offerings (assuming that
the Underwriters' over-allotment options are not exercised) and other related
financings. This table should be read in conjunction with the consolidated
financial statements of the Company and Six Flags (including the notes thereto)
included elsewhere in this Prospectus, and "Unaudited Pro Forma Financial
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
<S> <C> <C>
ACTUAL PRO FORMA
---------- -----------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................................................ $ 84,288 $ 479,804(1)
---------- -----------
---------- -----------
Restricted-use investments....................................................................... $ -- $ 326,290(2)(3)
---------- -----------
---------- -----------
Short-term debt(4)............................................................................... $ 795 $ 2,795
---------- -----------
---------- -----------
Long-term debt (excluding current maturities):
Premier Credit Facility...................................................................... $ -- $ 224,000
Six Flags Credit Facility.................................................................... -- 419,000
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(3)
New SFEC Notes............................................................................... -- 170,000
SFEC Zero Coupon Senior Notes................................................................ -- 170,100(2)(5)
SFTP Senior Subordinated Notes............................................................... -- 303,500(5)
Other........................................................................................ 1,231 1,231
---------- -----------
Total long-term debt..................................................................... 216,231 2,032,831(2)
---------- -----------
Mandatorily redeemable preferred stock (none outstanding (actual) and outstanding (with a
liquidation value of $200.0 million) (pro forma)).............................................. -- 200,000
---------- -----------
Stockholders' equity: Common Stock (90,000,000 authorized; 18,873,111 outstanding (actual)(6) and
32,311,111 outstanding (pro forma)(7)) and Mandatorily Convertible Preferred Stock (none
outstanding (actual) and 10,000 outstanding (pro forma)(8)).................................... 323,749 1,130,180
---------- -----------
Total capitalization..................................................................... $ 539,980 $ 3,363,011
---------- -----------
---------- -----------
</TABLE>
- ------------------------------
(1) Cash balances include prefunding of capital expenditures and working
capital.
(2) The pro forma amount for the SFEC Zero Coupon Senior Notes and total
long-term debt do not give effect to the repayment thereof from the net
proceeds of the SFEC Notes Offering. Similarly, pro forma restricted-use
investments include $175.0 million which will be held in escrow to repay the
SFEC Zero Coupon Senior Notes.
(3) Restricted use investments include (i) $76.3 million which will be deposited
in escrow to fund the first six semi-annual interest payments on the Company
Senior Notes, (ii) a $75.0 million restricted cash account to fund certain
obligations in respect of the Co-Venture Parks and dividend payments on the
Convertible Preferred Stock and (iii) $175.0 million which will be held in
escrow to repay the SFEC Zero Coupon Notes.
(4) Represents current portion of long-term debt, including $1.0 million in
respect of the Premier Credit Facility and $1.0 million in respect of the
Six Flags Credit Facility. At December 31, 1997, the Company did not have
any amounts outstanding under its then-existing revolving credit facility,
which was terminated in February 1998.
(5) Represents fair market value of such indebtedness at December 31, 1997.
Actual accreted amounts outstanding at December 31, 1997 were $161.1 million
for the SFEC Zero Coupon Senior Notes and $269.9 million for the SFTP Senior
Subordinated Notes.
(6) Includes an aggregate of 375,000 unvested restricted shares issued to the
Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer which vest proportionately on January 1 of the five years
commencing 1999. Excludes (i) an aggregate of 45,038 shares of Common Stock
issuable upon exercise of warrants; (ii) 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 and (iii) an aggregate of 450,000
additional restricted shares issuable at the Company's option to the
Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, under employment agreements with such officers.
(7) Assumes the issuance of 219,000 shares in the Private Acquisition and
219,000 shares in the Walibi Tender Offer. Excludes (i) any shares issuable
to the sellers in the Kentucky Kingdom and Walibi acquisitions depending
upon the future revenues of the acquired parks; (ii) shares issuable upon
conversion of the Convertible Preferred Stock or as dividends on the
Mandatorily Convertible Preferred Stock; and (iii) 1,950,000 shares of
Common Stock issuable upon exercise of the Underwriters' over-allotment
options.
(8) Excludes effect of 750,000 PInES issuable upon exercise of the underwriters'
over-allotment option.
27
<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 (i) the Company as of and for each
of the years in the three-year period ended December 31, 1997, and (ii) Six
Flags as of December 29, 1996 and December 28, 1997 and for each of the three
years in the period ended December 28, 1997, are derived from the audited
financial statements of each entity appearing elsewhere in this Prospectus. The
selected historical financial data of the Company and Six Flags for fiscal years
1993 and 1994 have been derived from audited financial statements which are not
included herein. The historical financial data of the Company for the year ended
December 31, 1995 include the results of the Funtime parks from August 15, 1995,
the date of the Funtime Acquisition. The historical financial data of the
Company 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
acquisitions). The historical financial data of the Company for the year ended
December 31, 1997 include the operations of Riverside Park from February 5, 1997
and Kentucky Kingdom from November 7, 1997 (the dates of their respective
acquisitions).
The following selected pro forma financial and operating data of the Company
for the year ended December 31, 1997 are derived from the Unaudited Pro Forma
Financial Statements appearing elsewhere in this Prospectus. The pro forma
financial and operating data of the Company 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.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1993 1994 1995(1) 1996(2) 1997
--------- --------- --------- --------- ----------------------
PRO
ACTUAL(3) FORMA(4)
--------- -----------
(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.......... $ 12,874 $ 13,936 $ 21,863 $ 41,162 $ 94,611 $ 424,108
Theme park food, merchandise
and other.................... 8,986 10,963 19,633 52,285 99,293 391,225
--------- --------- --------- --------- --------- -----------
Total revenue................ 21,860 24,899 41,496 93,447 193,904 815,333
--------- --------- --------- --------- --------- -----------
Operating costs and expenses:
Operating expenses............. 10,401 12,358 19,775 42,425 81,356 330,942
Selling, general and
administrative............... 4,768 5,448 9,272 16,927 36,547 131,580
Cost of products sold.......... 2,135 2,553 4,635 11,101 23,025 109,375
Depreciation and
amortization................. 1,537 1,997 3,866 8,533 19,792 107,138
--------- --------- --------- --------- --------- -----------
Total operating costs and
expenses................... 18,841 22,356 37,548 78,986 160,720 679,035
--------- --------- --------- --------- --------- -----------
Income from operations....... 3,019 2,543 3,948 14,461 33,184 136,298
Other income (expense):
Interest expense, net.......... (1,438) (2,299) (5,578) (11,121) (17,775) (180,273)
Equity in operations of theme
parks........................ -- -- -- -- -- 13,538
Termination fee, net of
expenses..................... -- -- -- -- 8,364 --
Minority interest.............. -- -- -- -- -- (516)
Other income (expense)......... (136) (74) (177) (78) (59) (408)
--------- --------- --------- --------- --------- -----------
Total other income
(expense).................. (1,574) (2,373) (5,755) (11,199) (9,470) (167,659)
--------- --------- --------- --------- --------- -----------
Income (loss) before income
taxes...................... 1,445 170 (1,807) 3,262 23,714 (31,361)
Income tax expense (benefit)..... 91 68 (762) 1,497 9,615 9,931
--------- --------- --------- --------- --------- -----------
Income (loss) before
extraordinary loss......... $ 1,354 $ 102 $ (1,045 (5) $ 1,765 $ 14,099 $ (41,292)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Income (loss) before
extraordinary loss per
common share--basic........ $ .51 $ .04 $ (.40 (5) $ .14 $ .79 $ (2.14)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Income (loss) before
extraordinary loss per
common share--diluted...... $ .51 $ .04 $ (.40 (5) $ .13 $ .76 $ (2.14)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
OTHER DATA:
EBITDA(6)........................ $ 4,562 $ 4,549 $ 7,706 $ 22,994 $ 61,340(7) $ 263,455
Adjusted EBITDA(8)............... -- -- -- -- -- $ 306,037
Net cash provided by operating
activities(9).................. $ 2,699 $ 1,060 $ 10,646 $ 11,331 $ 47,150 $ 150,482
Capital expenditures............. $ 7,674 $ 10,108 $ 10,732 $ 39,423 $ 135,852 $ 212,229(10)
Total attendance................. 1,322 1,408 2,302 (11 4,518 (11 8,667 (11 36,730(12)
Revenue per visitor(13).......... $ 16.54 $ 17.68 $ 18.03 $ 20.66 $ 22.11 $ 27.19
SELECTED RATIOS:
Net debt/EBITDA(14).............. -- -- -- -- -- 4.8x
Total debt/EBITDA(14)............ -- -- -- -- -- 7.0x
EBITDA/cash interest
expense(14).................... -- -- -- -- -- 2.2x
EBITDA/total interest
expense(14).................... -- -- -- -- -- 1.4x
Ratio of earnings to fixed
charges(15).................... 2.1x 1.1x (15) 1.3x 2.3x (15)
Ratio of earnings to combined
fixed charges and preferred
stock dividends(15)............ 2.1x 1.1x (15) 1.2x 2.3x (15)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -------------------------
PRO
ACTUAL(16) FORMA(17)
----------- ------------
(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 $ 84,288 $ 479,804(18)
Total assets..................... $ 30,615 $ 36,708 $ 45,539 $ 173,318 $ 304,803 $ 611,321 $3,553,662
Total long-term debt and
capitalized lease obligations
(excluding current
maturities).................. $ 7,619 $ 18,649 $ 22,216 $ 93,213 $ 149,342 $ 216,231 $2,032,831
Total debt....................... $ 15,627 $ 20,821 $ 24,108 $ 94,278 $ 150,834 $ 217,026 $2,035,626
Mandatorily redeemable preferred
stock........................ -- -- -- -- -- -- $ 200,000
Stockholders' equity............. $ 11,838 $ 13,192 $ 18,134 $ 45,911 $ 113,182 $ 323,749 $1,130,180
</TABLE>
- ------------------------
(1) 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.
(2) 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 acquisitions).
(3) The historical Statement of Operations Data for 1997 reflect the results of
Riverside Park from February 5, 1997 and Kentucky Kingdom from November 7,
1997 (the dates of their respective acquisitions).
(4) The pro forma financial and operating data for the year ended December 31,
1997 give effect to (i) the acquisitions of Walibi (assuming a 100% Walibi
Tender Offer on the basis of 80% payable in cash and 20% payable in shares
of Common Stock) and Kentucky Kingdom as if they had occurred on January 1,
1997; and (ii) the acquisition of Six Flags as if it had occurred on
December 30, 1996 (the first day of Six Flags' 1997 fiscal year). The pro
forma income per share for 1997 gives effect to the January 1997 public
offering, the Common Stock Offering and the PInES Offering (assuming no
exercise of the Underwriters' over-allotment options) as if they had
occurred on January 1, 1997. See "Unaudited Pro Forma Financial
Statements--Unaudited Pro Forma Statement of Operations" generally and with
respect to certain assumptions used in respect of the related financings.
(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) before
extraordinary loss and income (loss) before extraordinary loss per common
share for 1995.
(6) EBITDA is defined as earnings before extraordinary loss, 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 Company's financial statements
included elsewhere herein. Equity in loss of real estate partnership was
$142,000, $83,000, $69,000, $78,000, and $59,000 during each of the five
years ended December 31, 1997, respectively. Pro Forma EBITDA includes
equity in operations of theme parks and the depreciation and amortization
($6,830,000) of the investment in the Co-Venture Parks included therein.
(7) Includes an $8.3 million termination fee paid to the Company upon
termination of its prior agreement to become managing general partner of the
Texas Co-Venture Partnership. Such termination fee is not included in the
pro forma amounts.
(8) Adjusted EBITDA reflects the Company's pro forma EBITDA plus the portion of
the pro forma EBITDA of the Co-Venture Parks ($34,672,000) distributed on a
pro forma basis to the other limited partners and therefore not included in
the Company's pro forma EBITDA. See Note (1) to the Six Flags Selected
Historical
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
30
<PAGE>
Financial and Operating Data. The Co-Venture Partnership agreements restrict
the amount of cash distributable to the Company. See "Business--Six Flags
Parks--Six Flags Over Georgia" and "--Six Flags Over Texas and Six Flags
Hurricane Harbor." Adjusted EBITDA also includes $7,910,000 of pro forma
EBITDA of Marine World for 1997 which is not already reflected in the
Company's pro forma EBITDA. The Company manages the operations of Marine
World and has an option to purchase the entire park beginning in February
2002. Adjusted EBITDA is not indicative of the Company's ability to service
or incur indebtedness and is not a measure of the Company's profitability or
liquidity. Adjusted EBITDA is not meant to be predictive of future operating
results.
(9) During each of the five years ended December 31, 1997, the Company's net
cash used in investing activities was $7,698,000, $10,177,000, $74,139,000,
$155,149,000 and $217,070,000, respectively. During those periods, net cash
provided by financing activities was $2,106,000, $7,457,000, $90,914,000,
$119,074,000 and $250,165,000, respectively.
(10) Does not include pro forma amount expended ($93,700,000) by the Company to
purchase interests of the limited partners in the Co-Venture Partnerships.
(11) 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 year
ended December 31, 1997 does not include attendance at Marine World or
attendance at Kentucky Kingdom since that park was acquired following the
1997 season.
(12) Pro forma attendance information includes attendance at Marine World for
1997.
(13) Pro forma and historical revenue per visitor for all applicable periods do
not include revenue of Paradise Island (a fee-per-attraction entertainment
center that does not track attendance, acquired in November 1996). Pro forma
revenue per visitor also excludes revenue and attendance of Marine World and
the Co-Venture Parks.
(14) Total Debt/EBITDA and Net Debt/EBITDA include total outstanding pro forma
indebtedness of the Company (excluding the SFEC Zero Coupon Senior Notes) in
the accreted principal amount of $1,831,951,000. Net debt deducts from total
outstanding pro forma indebtedness $556,064,000 (representing $479,804,000
of pro forma cash and cash equivalents and $76,260,000 of pro forma
restricted-use investments placed in escrow to fund the first six
semi-annual interest payments on the Company Senior Notes). See
"Capitalization." EBITDA/cash interest expense is calculated using pro forma
cash interest expense of $119,492,000. EBITDA/total interest expense is
calculated using pro forma total interest expense of $185,712,000 (excluding
interest on the SFEC Zero Coupon Senior Notes).
(15) 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) before extraordinary loss and
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 year
ended December 31, 1995, the Company's earnings were insufficient to cover
fixed charges by $1,738,000 and were insufficient to cover combined fixed
charges and preferred stock dividends by $2,620,000. 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 $31,818,000 and $77,720,000, respectively.
(16) Actual balance sheet data as of December 31, 1997 include the Company's
purchase of Kentucky Kingdom and investment in Marine World as of that date.
(17) The pro forma balance sheet data give effect to the acquisitions of Walibi
(assuming a 100% Walibi Tender Offer on the basis of 80% payable in cash and
20% payable in Common Stock) and Six Flags, the Offerings (assuming no
exercise of the underwriters' over-allotment options) and the related
financings as if they had occurred on December 31, 1997. Includes SFEC Zero
Coupon Senior Notes as well as cash held in escrow to repay the SFEC Zero
Coupon Senior Notes. Pro forma total long-term debt and total debt include
SFEC Zero Coupon Senior Notes and SFTP Senior Subordinated Notes at fair
value rather than accreted amount. See "Capitalization." See also "Unaudited
Pro Forma Financial Statements--Unaudited Pro Forma Balance Sheet" generally
and with respect to certain assumptions used in respect of the related
financings.
(18) Excludes $326,300,000 of restricted use investments. See "Capitalization."
31
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 31, DECEMBER 29, DECEMBER 28,
1995 1996 1997
------------ ------------ ------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER VISITOR
AMOUNTS)
<S> <C> <C> <C>
SIX FLAGS
STATEMENT OF OPERATIONS DATA(1):
Revenue:
Operating services.................................................. $ 366,665 $ 405,558 $ 427,569
Sales of products and other......................................... 262,792 275,318 281,097
------------ ------------ ------------
Total revenue(1).................................................. 629,457 680,876 708,666
------------ ------------ ------------
Costs and expenses:
Operating, general and administrative............................... 388,137 419,756 443,359
Cost of products sold............................................... 91,138 105,988 101,239
Depreciation and amortization....................................... 83,444 87,417 84,493
------------ ------------ ------------
Total costs and expenses.......................................... 562,719 613,161 629,091
------------ ------------ ------------
Income from operations(2)............................................. 66,738 67,715 79,575
Other income (expense):
Interest expense, net............................................... (63,282) (76,530) (84,430)
Minority interest................................................... -- (1,297) 1,147
------------ ------------ ------------
Total other income (expense)...................................... (63,282) (77,827) (83,283)
------------ ------------ ------------
Income (loss) before income taxes................................. 3,456 (10,112) (3,708)
Income tax expense.................................................... 6,743 5,137 --
------------ ------------ ------------
Net (loss)........................................................ $ (3,287) $ (15,249) $ (3,708)
------------ ------------ ------------
------------ ------------ ------------
OTHER DATA:
EBITDA(3)............................................................. $ 150,182 $ 155,132 $ 164,068
Net cash provided by operating activities(4).......................... $ 124,587 $ 128,602 $ 110,303
Capital expenditures.................................................. $ 45,578 $ 75,627 $ 67,675(5)
Total attendance...................................................... 21,830 22,796 22,229
Revenue per visitor................................................... $ 28.83 $ 29.87 $ 31.88
</TABLE>
- ------------------------
(1) Prior to the Six Flags Acquisition, Six Flags, through two subsidiaries, was
the general partner in the Co-Venture Partnerships. For the fiscal years
presented, Six Flags accounted for the parks as co-ventures, i.e., their
revenues and expenses (excluding partnership depreciation) were included in
Six Flags consolidated statements of operations and the net amounts
distributed to the limited partners were deducted as expenses. Except for
the limited partnership units owned in the Georgia park at December 28,
1997, Six Flags had no rights or title to the Co-Venture Parks' assets or to
the proceeds from any sale of the Co-Venture Parks' assets or liabilities
during the periods presented. The Co-Venture Parks contributed revenues of
$160.6 million, $152.0 million and $176.8 million to Six Flags in the fiscal
years 1995, 1996 and 1997, respectively. During these three fiscal years,
the Co-Venture Parks contributed EBITDA of $36.8 million, $24.3 million and
$34.7 million (after payment of $11.6 million, $8.1 million and $21.3
million to the limited partners). In 1995, 1996 and 1997, the Co-Venture
Parks produced $48.4 million, $32.4 million and $56.0 million of EBITDA,
respectively. In connection with the Six Flags Transactions, SFEC is
transferring its interest in the Co-Venture Parks to Premier. Premier
intends to account for its interests in the Co-Venture Parks under the
equity method of accounting.
(2) Income from operations is revenue less operating, general and administrative
expenses, costs of products sold and depreciation and amortization.
(3) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of a 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 Six Flags
operating
32
<PAGE>
performance. This information should be read in conjunction with the
Statements of Cash Flows contained in the Six Flags financial statements
included elsewhere herein.
(4) During each of the fiscal years ended December 31, 1995, December 29, 1996
and December 28, 1997, Six Flags' net cash used in investing activities was
approximately $93.9 million, $81.2 million and $149.7 million, respectively.
During these periods, net cash provided (used) in financing activities was
approximately $10.6 million, $(52.2) million and $10.6 million,
respectively.
(5) Does not include amount expended ($62.7 million) by Six Flags to purchase
interests of the limited partners in the Co-Venture Partnerships.
33
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") of the Company are based upon and should be read in
conjunction with the historical financial statements of Premier, Kentucky
Kingdom, Six Flags and Walibi, which are included elsewhere in this Prospectus,
except in the case of Kentucky Kingdom and Walibi which are incorporated herein
by reference.
The unaudited pro forma statement of operations for the year ended December
31, 1997 gives effect to the acquisitions of Kentucky Kingdom, Six Flags, and
Walibi, the financings associated with the transactions, and the issuance of
Convertible Preferred Stock and Common Stock as if they had occurred on January
1, 1997 (except in the case of Six Flags, which was treated as if it occurred
December 30, 1996, the first day of the 1997 fiscal year of Six Flags). The Pro
Forma Financial Statements also give pro forma effect to the new arrangements
with respect to the Co-Venture Parks entered into by Six Flags in 1997.
The unaudited pro forma balance sheet is presented as if the acquisitions of
Six Flags and Walibi, the financings associated with the transactions, and the
issuance of preferred and common stock occurred on December 31, 1997 (except in
the case of Six Flags, which was treated as if it were acquired December 28,
1997, the last day of the 1997 fiscal year of Six Flags). The acquisitions will
be accounted for using the purchase method of accounting. Allocations of the
purchase price have been determined based upon estimates of fair value. The
final allocation of the purchase price may differ from these preliminary
estimates due to the final allocation being based on the completion of
valuations of certain acquired assets and assumed liabilities and management's
evaluation of such items.
The Pro Forma Financial Statements are for informational purposes only, have
been prepared based upon 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
acquisitions had occurred as presented in such statements or which could be
achieved in the future.
34
<PAGE>
PREMIER PARKS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT FOR RATIO, SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
HISTORICAL ---------------
HISTORICAL KENTUCKY HISTORICAL HISTORICAL COMBINED CO-VENTURE
PREMIER KINGDOM (1) SIX FLAGS WALIBI (2) COMPANY ADJUSTMENTS(3)
---------- ------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Theme park admissions.................. $ 94,611 $ 11,562 $ 368,139 $ 43,742 $ 518,054 $ (93,946)
Theme park food, merchandise, and
other................................ 99,293 10,152 340,527 24,101 474,073 (82,848)
---------- ------------- ----------- ------------- ----------- ---------------
Total revenue...................... 193,904 21,714 708,666 67,843 992,127 (176,794)
---------- ------------- ----------- ------------- ----------- ---------------
OPERATING COSTS AND EXPENSES:
Operating expenses..................... 81,356 5,705 330,033 31,629 448,723 (105,123)
Selling, general and administrative.... 36,547 5,194 113,326 10,567 165,634 (17,474)
Costs of products sold................. 23,025 2,684 101,239 6,097 133,045 (24,137)
Depreciation and amortization.......... 19,792 2,344 84,493 13,998 120,627 (12,107)
---------- ------------- ----------- ------------- ----------- ---------------
Total operating costs and
expenses......................... 160,720 15,927 629,091 62,291 868,029 (158,841)
---------- ------------- ----------- ------------- ----------- ---------------
Income (loss) from operations.......... 33,184 5,787 79,575 5,552 124,098 (17,953)
OTHER INCOME (EXPENSE):
Interest expense, net.................. (17,775) (3,974) (84,430) (3,409) (109,588) --
Equity in operations of theme parks.... -- -- -- -- -- 17,953
Termination fee, net of expenses....... 8,364 -- -- -- 8,364 --
Minority interest...................... -- -- 1,147 -- 1,147 --
Other income (expense)................. (59) 293 -- (289) (55) --
---------- ------------- ----------- ------------- ----------- ---------------
Total other income (expense)....... (9,470) (3,681) (83,283) (3,698) (100,132) 17,953
Income (loss) before income taxes...... 23,714 2,106 (3,708) 1,854 23,966 --
Income tax expense (benefit)........... 9,615 -- -- 2,373 11,988 --
---------- ------------- ----------- ------------- ----------- ---------------
Net income (loss)...................... $ 14,099 $ 2,106 $ (3,708) $ (519) $ 11,978 $ --
---------- ------------- ----------- ------------- ----------- ---------------
---------- ------------- ----------- ------------- ----------- ---------------
Net income (loss) applicable to common
stock................................ $ 14,099 $ 2,106 $ (3,708) $ (519) $ 11,978 $ --
---------- ------------- ----------- ------------- ----------- ---------------
---------- ------------- ----------- ------------- ----------- ---------------
Net income (loss) per common share..... $ 0.79 (15) (15) (15) (15)
----------
----------
Weighted average shares................ 17,938,000 (15) (15) (15) (15)
----------
----------
EBITDA (16)............................ $ 61,340 $ 8,424 $ 164,068 $ 19,261 $ 253,093 $ --
---------- ------------- ----------- ------------- ----------- ---------------
---------- ------------- ----------- ------------- ----------- ---------------
Net cash provided by operating
activities........................... $ 47,150 $ 1,227 $ 110,303 $ 12,476 17) $ 171,156 $ --
---------- ------------- ----------- ------------- ----------- ---------------
---------- ------------- ----------- ------------- ----------- ---------------
Ratio of earnings to fixed charges..... 2.3x
Ratio of earnings to combined fixed
charges and preferred stock
dividends............................ 2.3x
<CAPTION>
PREMIER COMPANY
OPERATIONS (4) SIX FLAGS PRO FORMA
--------------- ----------- ----------
<S> <C> <C> <C>
REVENUE:
Theme park admissions.................. $ -- $ -- $ 424,108
Theme park food, merchandise, and
other................................ -- -- 391,225
--------------- ----------- ----------
Total revenue...................... -- -- 815,333
--------------- ----------- ----------
OPERATING COSTS AND EXPENSES:
Operating expenses..................... (62)(5) (12,596) 330,942
Selling, general and administrative.... (2,903)(6) (13,677) 131,580
Costs of products sold................. (261)(7) 728(7) 109,375
Depreciation and amortization.......... (6,587)(8) 5,205(8) 107,138
--------------- ----------- ----------
Total operating costs and
expenses......................... (9,813) (20,340) 679,035
--------------- ----------- ----------
Income (loss) from operations.......... 9,813 20,340 136,298
OTHER INCOME (EXPENSE):
Interest expense, net.................. (13,156)(9) (57,529) (180,273)
Equity in operations of theme parks.... -- (4,415) 0 ) 13,538
Termination fee, net of expenses....... (8,364)(11) -- --
Minority interest...................... -- (1,663) (516)
Other income (expense)................. (353)(13) -- (408)
--------------- ----------- ----------
Total other income (expense)....... (21,873) (63,607) (167,659)
Income (loss) before income taxes...... (12,060) (43,267) (31,361)
Income tax expense (benefit)........... (3,882)(14) 1,825 14 9,931
--------------- ----------- ----------
Net income (loss)...................... $ (8,178) $ (45,092) $ (41,292)
--------------- ----------- ----------
--------------- ----------- ----------
Net income (loss) applicable to common
stock................................ $ (8,178) $ (73,092) ) $ (69,292)
--------------- ----------- ----------
--------------- ----------- ----------
Net income (loss) per common share..... $ (2.14)(15)
----------
----------
Weighted average shares................ 32,311,000(15)
----------
----------
EBITDA (16)............................ $ (5,491 ) $ 15,853 $ 263,455
--------------- ----------- ----------
--------------- ----------- ----------
Net cash provided by operating
activities........................... $ (17,376 ) $ (3,298 ) $ 150,482
--------------- ----------- ----------
--------------- ----------- ----------
Ratio of earnings to fixed charges..... (18)
Ratio of earnings to combined fixed
charges and preferred stock
dividends............................ (18)
</TABLE>
See accompanying notes to unaudited pro forma statement of operations.
35
<PAGE>
Premier Parks Inc.
Notes to Unaudited Pro Forma Statement of Operation
Year Ended December 31, 1997
(All amounts in thousands, except share data)
BASIS OF PRESENTATION
The accompanying unaudited pro forma statement of operations for the year
ended December 31, 1997, has been prepared based upon certain pro forma
adjustments to historical financial information of the Company, Kentucky
Kingdom, Six Flags and Walibi. The Company's acquisition of the operating assets
of Kentucky Kingdom occurred on November 7, 1997. The Company's acquisition of
the capital stock of SFEC and Walibi are scheduled to be completed in the second
quarter of 1998.
The unaudited pro forma statement of operations for the year ended December
31, 1997, has been prepared assuming the acquisitions, the related financings,
the issuance of the Convertible Preferred Stock and Common Stock and the new
Co-Venture Park arrangements occurred January 1, 1997 (except in the case of Six
Flags, which was treated as if it were acquired on December 30, 1996, the first
day of the 1997 fiscal year of Six Flags). The unaudited pro forma statement of
operations should be read in conjunction with the financial statements of the
Company, Kentucky Kingdom, Six Flags and Walibi and notes thereto included
elsewhere herein or, in the case of Kentucky Kingdom and Walibi, which are
incorporated herein by reference.
PRO FORMA ADJUSTMENTS
(1) The results of Kentucky Kingdom included herein represent the ten months
during 1997 prior to the acquisition of Kentucky Kingdom by the Company.
Revenues, operating expenses and other expenses for the first two months
(November and December 1996) of Kentucky Kingdom's fiscal year ended
November 2, 1997 were $2, $1,199 and $849, respectively, and are not
included in the accompanying unaudited pro forma statement of operations.
(2) The results of Walibi are converted from Belgian Francs ("BEF") and are
accounted for using generally accepted accounting principles of Belgium.
The following table reflects the adjustment of the Walibi statement of
operations to conform to U.S. generally accepted accounting principles and
U.S. dollars (using the December 31, 1997 exchange rate of 37.065 BEF to
US$1):
<TABLE>
<CAPTION>
AMOUNT ACCOUNTING ADJUSTED AMOUNT
(IN BEF) ADJUSTMENTS AMOUNT (IN U.S.$)
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Theme park admissions........................................ 1,621,309 -- 1,621,309 $ 43,742
Theme park food, merchandise, and other...................... 893,291 -- 893,291 24,101
----------- ------------ ---------- ----------
Total revenue................................................ 2,514,600 -- 2,514,600 67,843
----------- ------------ ---------- ----------
Operating expenses........................................... 1,175,031 (2,700) 1,172,331 31,629
Selling, general and administrative.......................... 391,677 -- 391,677 10,567
Costs of products sold....................................... 225,974 -- 225,974 6,097
Depreciation and amortization................................ 524,988 (6,144) 518,844 13,998
----------- ------------ ---------- ----------
Total operating costs and expenses........................... 2,317,670 (8,844) 2,308,826 62,291
----------- ------------ ---------- ----------
Income (loss) from operations................................ 196,930 8,844 205,774 5,552
Interest expense, net........................................ (126,383) -- (126,383) (3,409)
Other income (expense)....................................... (10,700) -- (10,700) (289)
----------- ------------ ---------- ----------
Total other income (expense)................................. (137,083) -- (137,083) (3,698)
----------- ------------ ---------- ----------
Income (loss) before income taxes............................ 59,847 8,844 68,691 1,854
Income tax expense........................................... 59,287 28,656 87,943 2,373
----------- ------------ ---------- ----------
Net income (loss)............................................ 560 (19,812) (19,252) $ (519)
----------- ------------ ---------- ----------
----------- ------------ ---------- ----------
</TABLE>
36
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The unaudited pro forma statement of operations data assume all Walibi
stockholders accept the Walibi Tender Offer. If no such holders tender their
shares, the pro forma adjustment for minority interest would have been
increased by $1,969.
(3) Represents results of the Six Flags Over Texas and Six Flags Over Georgia
theme parks. Prior to the Six Flags Acquisition, Six Flags included the
results of the Co-Venture Partnerships in Six Flags' consolidated statements
of operations and the net amounts paid to the limited partners thereof were
reflected as an operating expense. After the date of the Six Flags
Acquisition, the Company will account for the results of the Co-Venture
Partnerships using the equity method of accounting. Under this method of
accounting, the Company's interest in the Co-Venture Partnerships will be
reflected in equity in operations of theme parks.
(4) Represents adjustments arising from Premier's acquisitions of Kentucky
Kingdom and Walibi, including interest expense associated with borrowings
under the Premier Credit Facility, and from the elimination of Premier's
termination fee referred to in note (11) below.
(5) Adjustments reflect reductions in park-level operating expenses of $62 in
the case of Kentucky Kingdom and $12,596, in the case of Six Flags.
(6) Adjustments reflect reductions in selling, general and administrative
expenses of $897 in the case of Kentucky Kingdom (including insurance,
franchise tax and other expenses); $2,006 in the case of Walibi (including
costs relating to its annual report, other shareholder-related expenses,
salaries and other expenses) and $13,677 in the case of Six Flags (including
national advertising and promotion expenses, insurance, and other expenses,
net of reduction of accrued restructuring costs and other non-recurring
items).
(7) Adjustments reflect $261 of cost reductions related to termination of
concessionaire arrangements at Kentucky Kingdom, and elimination of $728 of
non-recurring benefits from reversing previously accrued expenses at Six
Flags during 1997.
(8) Adjustments in the Premier Operations column reflect the elimination of
historical depreciation and amortization of $16,342 for Kentucky Kingdom and
Walibi and the inclusion of estimated pro forma depreciation of $7,909 and
amortization of $1,846. Adjustments in the Six Flags column reflect the
elimination of historical depreciation of $58,902 and the inclusion of
estimated pro forma depreciation of $25,937 and the elimination of
historical amortization of $13,484 (after reduction of $12,107 of
amortization related to the Co-Venture Partnerships) and the inclusion of
estimated pro forma amortization of $51,654. Depreciation by the Company is
based on useful lives of 20 years and intangible assets are amortized over
25 years. In the case of Walibi, the pro forma value of property and
equipment was increased from historical recorded value. In the case of Six
Flags, the pro forma value of property and equipment is estimated to be
consistent with the historical recorded value. Thus, the net pro forma
reduction of Six Flags depreciation is a result of longer average lives used
by the Company. The increase in Six Flags net pro forma amortization results
from the increase in the pro forma amount of intangible assets and the
amortization of such costs over 25 years. The allocation of the Six Flags
purchase price to property and equipment, based on book value, and to
intangible assets based on the excess of the purchase price over the
estimated value of the acquired net assets is subject to adjustment. The
final allocation of the purchase price may differ from these preliminary
estimates due to the final allocation being based on the completion of
valuations of certain acquired assets and assumed liabilities and
management's evaluation of such items.
(9) Adjustments reflect the interest expense associated with the Company Notes,
the New SFEC Notes, the Premier Credit Facility, and the Six Flags Credit
Facility net of the elimination of the interest expense associated with the
Company and Six Flags credit facilities previously outstanding, the long-
term debt of Kentucky Kingdom, the long-term debt of Walibi, and the
elimination of the interest
37
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
income earned by the Company on the cash used in the purchase of Kentucky
Kingdom as if the Company had made the above acquisitions as of January 1,
1997 (except in the case of Six Flags, which was treated as if it occurred
on December 30, 1996, the first day of the 1997 fiscal year of Six Flags).
Issuance costs associated with the new borrowings are being amortized over
the respective terms. The components of the adjustments are as follows:
<TABLE>
<S> <C> <C>
In the case of the Premier Operations adjustments:
Interest expense on Premier Credit Facility (assuming a 7 7/8%
interest rate)................................................... $ (17,719)
Interest expense from amortization of issuance costs............... (600)
Interest expense from commitment fees on the Premier Credit
Facility......................................................... (375)
Elimination of historical interest expense - Premier............... 655
Elimination of historical interest expense - Walibi................ 3,409
Elimination of historical interest expense - Kentucky Kingdom...... 3,974
Elimination of historical interest income on cash
used to acquire Kentucky Kingdom................................. (2,500)
---------
$ (13,156)
---------
---------
In the case of the Six Flags adjustments:
Interest expense on Company Senior Notes (assuming a 10% interest
rate)............................................................ $ (28,000)
Interest expense on Company Senior Discount Notes (assuming an 11%
interest rate)................................................... (27,500)
Interest expense on New SFEC Notes (assuming a 9 1/2% interest
rate)............................................................ (16,150)
Interest expense on Six Flags Credit Facility (assuming a 8.198%
interest rate)................................................... (34,432)
Interest expense from amortization of issuance costs............... (4,614)
Interest expense from commitment fee on the Six Flags Credit
Facility......................................................... (260)
Elimination of historical interest expense - Six Flags............. 53,427
---------
$ (57,529)
---------
---------
</TABLE>
A 0.125% change in the interest rates on the Company Notes, New SFEC Notes
and Credit Facilities would increase interest expense, net, in the case of
Premier Operations, by $281, in the case of Six Flags by $1,400 and, in the
case of Company Pro Forma, by $1,681.
(10) Adjustment reflects the equity in the operations of the Six Flags Over
Texas and Six Flags Over Georgia theme parks, based upon the Company's 25%
ownership of the limited partnership that owns the Georgia park and the
estimated 25% ownership of the limited partnership that owns the Texas park,
as if the Georgia and Texas partnership agreements had been in effect as of
January 1, 1997. Adjustments were also made to reflect (i) the elimination
of the historical amortization expense related to the investment in the
Texas limited partnership of $8,402, (ii) the estimated amortization of
$3,125 of the 25% investment in the Texas limited partnership, (iii)
recognition of the increased minimum level of required limited partnership
distributions of $20,261 as a result of the change in agreement, (iv)
receipt of $6,925 of limited partnership distributions associated with the
25% ownership of the limited partnership, and (v) cost savings associated
with allocation of national advertising costs and insurance costs of $3,644.
The pro forma statement of operations assumes a 25% tender acceptance rate
for units in the Texas limited partnership. If 50% of such units are
tendered, equity in operations of theme parks would be $17,338 as compared
to the $13,538 reflected in the pro forma statement of operations.
(11) Adjustment reflects the elimination of $8,364 termination fee paid to the
Company in connection with the termination of the Company's prior agreement
to become managing general partner of the Texas Co-Venture Partnership.
38
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(12) Adjustment reflects the increase of $1,663 relating to the minority
interest owner's share of operations related to net cost reductions at
Fiesta Texas reflected above.
(13) Adjustment reflects the reduction of $353 of other income of Kentucky
Kingdom related to a lease obligation not assumed by the Company.
(14) Adjustments reflects the application of income taxes to the pro forma
adjustments and to the acquired operations that were not previously directly
subject to income taxation, after consideration of permanent differences, at
a rate of 39%.
(15) Net income (loss) applicable to common stock is adjusted to reflect $28,000
of dividends payable to holders of Seller Preferred Stock and PInES at
assumed dividend rates of 6 1/2% and 7 1/2%, respectively.
Net income (loss) per common share and weighted average share data are not
presented for Kentucky Kingdom, Six Flags and Walibi as the information is
not meaningful. In the event of an all cash Walibi Tender Offer, net income
(loss) per common share would be $(2.16) and pro forma weighted average
number of common shares would be 32,092,000.
The calculation of pro forma weighted average shares outstanding for the
year ended December 31, 1997 is as follows:
<TABLE>
<S> <C>
Pro forma weighted average number of common shares outstanding
before the Common Stock Offering and the Walibi acquisition... 18,873,000
Common shares to be issued in the Common Stock Offering, the
proceeds of which will be used in part to fund the Six Flags
Acquisition, as if issued on January 1, 1997.................. 13,000,000
Common shares to be issued as partial consideration for the
Private Acquisition, as if issued on January 1, 1997.......... 219,000
Common shares to be issued as partial consideration for the
Walibi Tender Offer, as if issued on January 1, 1997.......... 219,000
---------
Pro forma weighted average number of common shares
outstanding................................................... 32,311,000
---------
---------
</TABLE>
(16) EBITDA is defined as earnings 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 $59,000 during the year ended December
31, 1997. Pro forma EBITDA includes equity in operations of theme parks and
the depreciation and amortization ($6,830,000) of the investment in the
Co-Venture Parks included therein.
(17) The operating cash flow for Walibi during 1997 was 462,430 BEF. At an
exchange rate of 37.065 BEF to US$1, the operating cash flow would have been
$12,476.
(18) 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 $31,818 and $77,720, respectively.
39
<PAGE>
PREMIER PARKS INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL
PREMIER SIX FLAGS WALIBI (1)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents................................................................ $ 84,288 $ 16,805 $ 16,423
Accounts receivable...................................................................... 6,537 7,258 5,693
Inventories.............................................................................. 5,547 14,338 1,748
Income tax receivable.................................................................... 995 -- --
Prepaid expenses and other current assets................................................ 3,690 11,899 1,595
----------- ----------- -----------
Total current assets................................................................. 101,057 50,300 25,459
Deferred charges......................................................................... 10,123 20,171
Restricted-use investments............................................................... -- -- --
Deposits and other....................................................................... 3,949 26,784 281
----------- ----------- -----------
Total other assets................................................................... 14,072 46,955 281
Investment in theme parks, net........................................................... -- 78,370 --
Property and equipment, net.............................................................. 450,256 492,137 91,174
Intangible assets, net................................................................... 45,936 196,928 2,431
----------- ----------- -----------
Total assets......................................................................... $ 611,321 $ 864,690 $ 119,345
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses.................................................... $ 23,199 $ 61,014 $ 11,387
Accrued interest payable................................................................. 9,785 3,431 --
Current maturities of long-term debt and capitalized lease obligations................... 795 56,633 18,843
----------- ----------- -----------
Total current liabilities............................................................ 33,779 121,078 30,230
Long-term debt and capitalized lease obligations......................................... 216,231 753,369 50,545
Other long-term liabilities.............................................................. 4,025 12,570 1,970
Deferred income taxes.................................................................... 33,537 -- 4,706
Mandatorily redeemable preferred stock................................................... -- -- --
Stockholders' equity..................................................................... 323,749 (22,327) 31,894
----------- ----------- -----------
Total liabilities and stockholders' equity........................................... $ 611,321 $ 864,690 $ 119,345
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
COMPANY PROFORMA COMPANY
COMBINED ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents................................................................ $ 117,516 $(135,210) 2) $ 479,804
(1,262,134)(3)
1,759,632(4)
Accounts receivable...................................................................... 19,488 19,488
Inventories.............................................................................. 21,633 21,633
Income tax receivable.................................................................... 995 995
Prepaid expenses and other current assets................................................ 17,184 17,184
----------- ----------- -----------
Total current assets................................................................. 176,816 362,288 539,104
Deferred charges......................................................................... 30,294 39,166(4) 49,289
(20,171)(3)
Restricted-use investments............................................................... -- 251,290(4) 326,290
75,000(4)
Deposits and other....................................................................... 31,014 (10,984)(3) 52,530
25,000(3)
7,500(4)
----------- ----------- -----------
Total other assets................................................................... 61,308 366,801 428,109
Investment in theme parks, net........................................................... 78,370 (18,274)(3) 153,796
93,700(3)
Property and equipment, net.............................................................. 1,033,567 17,326(2) 1,050,893
Intangible assets, net................................................................... 245,295 1,094,436(3) 1,381,760
42,029(2)
----------- ----------- -----------
Total assets......................................................................... $1,595,356 $1,958,306 $3,553,662
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses.................................................... $ 95,600 $ 95,600
Accrued interest payable................................................................. 13,216 (3,431)(3) 9,785
Current maturities of long-term debt and capitalized lease obligations................... 76,271 (18,843)(2) 2,795
(56,633)(3)
2,000(4)
----------- ----------- -----------
Total current liabilities............................................................ 185,087 (76,907) 108,180
Long-term debt and capitalized lease obligations......................................... 1,020,145 (50,545)(2) 2,032,831
(279,769)(3)
1,343,000(4)
Other long-term liabilities.............................................................. 18,565 35,000(3) 53,565
Deferred income taxes.................................................................... 38,243 6,584(2) 28,906
(15,921)(3)
Mandatorily redeemable preferred stock................................................... -- 200,000(3) 200,000
Stockholders' equity..................................................................... 333,316 (31,894)(2) 1,130,180
22,327(3)
18,843(2)
(1,421)(4)
789,009(4)
----------- ----------- -----------
Total liabilities and stockholders' equity........................................... $1,595,356 $1,958,306 $3,553,662
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma balance sheet.
40
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
BASIS OF PRESENTATION
The accompanying unaudited pro forma balance sheet as of December 31, 1997,
has been prepared based on certain pro forma adjustments to historical financial
information of the Company, Six Flags and Walibi. The Company's acquisition of
the capital stock of SFEC and Walibi are scheduled to be completed in the second
quarter of 1998.
The unaudited pro forma balance sheet as of December 31, 1997, has been
prepared assuming the acquisition of Six Flags and Walibi occurred on December
31, 1997. The unaudited pro forma balance sheet should be read in conjunction
with the financial statements of the Company, Six Flags and Walibi and notes
thereto included elsewhere herein or, in the case of Walibi, incorporated herein
by reference.
PRO FORMA ADJUSTMENTS
(1) The amounts for Walibi are converted from Belgian Francs ("BEF") and are
accounted for using generally accepted accounting principles of Belgium. The
following table reflects the adjustment of the Walibi balance sheet to
conform to U.S. generally accepted accounting principles and the conversion
to U.S. dollars (using the December 31, 1997 exchange rate of 37.065 BEF to
US$1) :
<TABLE>
<CAPTION>
AMOUNT ACCOUNTING ADJUSTED AMOUNT
(IN BEF) ADJUSTMENTS AMOUNT (IN U.S.$)
---------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents.................................. 608,724 -- 608,724 $ 16,423
Accounts receivable........................................ 210,997 -- 210,997 5,693
Inventories................................................ 64,780 -- 64,780 1,748
Prepaid expenses and other current assets.................. 69,909 (10,800) 59,109 1,595
Deposits and other......................................... 10,407 -- 10,407 281
Property and equipment, net................................ 3,393,688 (14,344) 3,379,344 91,174
Intangible assets, net..................................... 45,694 44,429 90,123 2,431
Total assets............................................... 4,404,199 19,285 4,423,484 119,345
Accounts payable and accrued expenses...................... 404,365 17,636 422,001 11,387
Current maturities of long-term debt and capitalized lease 698,411 -- 698,411 18,843
obligations..............................................
Long-term debt and capitalized lease obligations........... 1,873,467 -- 1,873,467 50,545
Other long-term liabilities................................ 58,015 15,000 73,015 1,970
Deferred income taxes...................................... 281,475 (107,029) 174,446 4,706
Stockholders' equity....................................... 1,088,466 93,678 1,182,144 31,894
Total liabilities and stockholders' equity................. 4,404,199 19,285 4,423,484 119,345
</TABLE>
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(2) Adjustment reflects the purchase of the outstanding capital stock of Walibi
for $64,822 of cash and in Common Stock of the Company valued at $18,843, as
well as $1,000 of estimated transaction costs. As of December 31, 1997,
Walibi had $69,388 of debt outstanding. As part of the acquisition, the debt
will be paid in full. The purchase price, including the debt payment, will
be funded from the Premier Credit Facility. The acquisition of Walibi will
be accounted for using the purchase price method of accounting. Allocation
of the purchase price for purposes of the pro forma balance sheet was based
upon estimated fair values of assets and liabilities. Estimated fair value
of property and equipment exceeds the historical carrying value by $17,326.
Other than intangible assets and deferred tax liabilities, fair value is not
anticipated to differ significantly from the current recorded value of other
assets and liabilities. Deferred tax liabilities have been increased by
$6,584 as a result of the differences between the fair value and tax basis
of the assets and liabilities. Purchase price in excess of the estimated
fair value of the acquired net assets has been reflected as an increase in
intangible assets.
The unaudited pro forma balance sheet data assumes a 100% acceptance of the
Walibi Tender Offer with 80% of the tender offer consideration payable in
cash and 20% in shares of Common Stock. If a 100% acceptance of an all cash
Walibi Tender Offer occurs, pro forma cash and cash equivalents and
stockholders' equity would decrease by $9,422:
If no shares of Walibi Capital Stock are tendered, the Company Pro Forma
amounts would be as follows:
<TABLE>
<CAPTION>
COMPANY
PRO FORMA
----------
<S> <C>
Cash and cash equivalents................................................................... $ 573,686
Intangible assets, net...................................................................... 1,363,791
Total assets................................................................................ 3,629,575
Current maturities of long-term debt and capitalized lease obligations...................... 21,638
Long-term debt and capitalized lease obligations............................................ 2,083,376
Other long-term liabilities................................................................. 69,512
Stockholders' equity........................................................................ 1,120,758
</TABLE>
(3) Adjustment reflects the purchase of the outstanding capital stock of Six
Flags for $776,000 of cash and Seller Preferred Stock of $200,000,
transaction costs of $10,000 and the purchase of 25% of the outstanding
limited partnership units of the Texas Co-Venture Park for $93,700. Six
Flags has commenced the tender offer on the terms described under
"Business--Description of Parks--Six Flags over Texas and Six Flags
Hurricane Harbor". The Company has assumed a 25% tender acceptance rate
based on comparable results of the prior tender relating to the Georgia
park. A $25,000 indemnity escrow will be established from the purchase price
to fund indemnification claims of Premier under the Six Flags Agreement. The
indemnity escrow is reflected as a deposit and as an other long-term
liability. As of December 31, 1997, Six Flags had $810,002 of debt
outstanding. The Company will refinance outstanding indebtedness of $379,003
and $3,431 of accrued interest and assume $430,999 of long-term debt. The
purchase price and debt repayment will be funded from proceeds of the
Offerings. The acquisition will be accounted for using the purchase method
of
42
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
accounting. Allocation of the purchase price for purposes of the pro forma
balance sheet was based upon estimated fair values of assets and
liabilities. Fair value of assets and liabilities approximate recorded
historical amounts, except for the fair value of the assumed debt and
certain other assets, investments and deferred charges. The fair value of
the assumed debt was $42,601 higher than the recorded value and certain
other assets were reduced by $49,429. Additionally, $10,000 of liabilities
related to changes in contractual agreements and other obligations are
reflected as other long-term liabilities. Purchase price in excess of the
estimated fair value of the acquired net assets has been reflected as an
increase in intangible assets.
The unaudited pro forma combined balance sheet data assumes a 25% tender
acceptance rate in the tender offer for units in the Texas Co-Venture Park.
In the event of a 50% tender acceptance rate, the applicable Company Pro
Forma amounts would be as follows:
<TABLE>
<CAPTION>
COMPANY PRO
FORMA
-----------
<S> <C>
Cash and cash equivalents.............................................................. $ 386,104
Investment in theme parks, net......................................................... $ 247,496
</TABLE>
(4) Adjustment reflects the following proceeds and costs:
<TABLE>
<CAPTION>
Equity:
<S> <C>
Common Stock (assuming 13,000,000 shares issued at $45.63 per share
based upon the average closing price of the Company's common stock for
the twenty trading days ended February 27, 1998)........................ $ 593,190
PInES (assuming 5,000,000 shares issued at $45.63 per share)............ 228,150
Less discounts and costs................................................ (32,331)
-----------
$ 789,009
-----------
-----------
<CAPTION>
Debt:
<S> <C>
Company Senior Notes.................................................... $ 280,000
Company Senior Discount Notes........................................... 250,000
New SFEC Notes.......................................................... 170,000
Premier Credit Facility................................................. 225,000
Six Flags Credit Facility............................................... 420,000
-----------
1,345,000
Less debt issuance costs.................................................... (40,587)
-----------
$1,304,413
-----------
-----------
</TABLE>
Deferred charges of $1,421 associated with the Company's prior credit
facility are reflected as a reduction in stockholders' equity.
As part of the Six Flags agreements, the Company will establish a $75,000
restricted-use investment securing the Company's obligations related to the
Co-Venture Parks' requirements and certain obligations related to the
Convertible Preferred Stock. The Company will also establish a deposit of
$7,500 related to securing the Company's obligation with respect to minimum
annual distributions and mandatory capital expenditures at the Co-Venture
Parks. Additionally, the Company will be establishing restricted-use
investments of $175,030 related to the repayment of the SFEC Zero Coupon
Senior Notes and of $76,260 for payment of the first six semi-annual
interest payments on the Company's Senior Notes.
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived from the sale of tickets for entrance to
its parks (approximately 52.7%, 44.0% and 48.8% in 1995, 1996 and 1997,
respectively) and the sale of food, merchandise, games and attractions inside
its parks and other income (approximately 47.3%, 56.0% and 51.2% in 1995, 1996
and 1997, respectively). The Company's principal costs of operations include
salaries and wages, employee 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 acquired three parks in 1995 in the Funtime Acquisition, and
acquired four parks during the last quarter of 1996. The Company acquired
Riverside Park in February 1997, and Kentucky Kingdom in November 1997. In
addition, the Company assumed management of Marine World in April 1997,
exercised a lease option with respect to a portion of that park in November
1997, and executed a purchase option for the entire park in September 1997. The
following discussion as it relates to 1996 includes two presentations. The first
includes the historical results of the Company (including the results of the
parks acquired in the 1996 Acquisitions (other than Riverside Park) only from
their dates of acquisition forward (October 31, 1996 for Elitch Gardens;
November 19, 1996 for the Waterworld parks; and December 4, 1996 for The Great
Escape). The second includes both the historical results for the Company and the
results of the parks acquired in the 1996 Acquisitions for periods prior to the
dates of their respective acquisition.
The following discussion as it relates to 1997 includes the results of the
parks acquired in the 1996 Acquisitions (other than Riverside Park) for the full
year, as well as Kentucky Kingdom and Riverside Park from their dates of
acquisition forward, and includes Marine World only to the extent of the
management fee received.
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
and Walibi acquisitions. In addition, the Company intends to continue its
on-going expansion of the rides and attractions and overall improvement of its
parks to maintain and enhance their appeal. Management believes this strategy
has contributed to increased attendance, lengths of stay and in-park spending
and therefore, profitability. A consummated acquisition, including, the Six
Flags and Walibi acquisitions, when consummated, may adversely affect the
Company's operating results, at least in the short term, depending on many
factors including capital requirements and the accounting treatment of any such
acquisition. See "Unaudited Pro Forma Financial Statements."
44
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 AND 1996
The table below sets forth certain financial information with respect to the
Company (including the 1996 Acquisitions and Riverside Park) for the year ended
December 31, 1996 and with respect to the Company and Kentucky Kingdom and
Marine World for the year ended December 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL HISTORICAL
HISTORICAL 1996 PREMIER
NINE MONTHS ACQUISITIONS (EXCLUDING
ENDED SEPTEMBER FOR PERIODS MARINE KENTUCKY
30, 1996 FOR SUBSEQUENT TO WORLD AND KINGDOM
HISTORICAL 1996 SEPTEMBER 30, HISTORICAL KENTUCKY AND MARINE HISTORICAL
PREMIER(1) ACQUISITIONS(2) 1996(3) COMBINED KINGDOM)(4) WORLD(5) PREMIER
----------- --------------- -------------- ----------- ----------- ----------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Theme park admissions...... $ 41,162 $ 34,062 $ 724 $ 75,948 $ 94,611 $ -- $ 94,611
Theme park food,
merchandise and other.... 52,285 30,453 1,020 83,758 99,103 190 99,293
----------- ------- -------------- ----------- ----------- ----------- -----------
Total revenue............ 93,447 64,515 1,744 159,706 193,714 190 193,904
----------- ------- -------------- ----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Operating expenses......... 42,425 23,204 3,116 68,745 80,307 1,049 81,356
Selling, general and
administrative........... 16,927 17,035 2,289 36,251 36,461 86 36,547
Costs of products sold..... 11,101 9,448 347 20,896 23,025 -- 23,025
Depreciation and
amortization............. 8,533 13,028 703 22,264 19,159 633 19,792
----------- ------- -------------- ----------- ----------- ----------- -----------
Total operating costs and
expenses............... 78,986 62,715 6,455 148,156 158,952 1,768 160,720
----------- ------- -------------- ----------- ----------- ----------- -----------
Income (loss) from
operations................. 14,461 1,800 (4,711) 11,550 34,762 (1,578) 33,184
OTHER INCOME (EXPENSE):
Interest expense, net...... (11,121) (4,624) (517) (16,262) (17,763) (12) (17,775)
Termination fee, net of
expenses................. -- -- -- -- 8,364 -- 8,364
Other income (expense)..... (78) (284) -- (362) (59) -- (59)
----------- ------- -------------- ----------- ----------- ----------- -----------
Total other income
(expense).............. (11,199) (4,908) (517) (16,624) (9,458) (12) (9,470)
----------- ------- -------------- ----------- ----------- ----------- -----------
Income before income
taxes.................... 3,262 (3,108) (5,228) (5,074) 25,304 (1,590) 23,714
Income tax expense
(benefit)................ 1,497 1,131 -- 2,628 9,615 -- 9,615
----------- ------- -------------- ----------- ----------- ----------- -----------
Net income (loss).......... $ 1,765 $ (4,239) $ (5,228) $ (7,702) $ 15,689 $ (1,590) $ 14,099
----------- ------- -------------- ----------- ----------- ----------- -----------
----------- ------- -------------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(1) Includes results of the 1996 Acquisitions from and after the acquisition
dates.
(2) Includes results of the 1996 Acquisitions for the nine months ended
September 30, 1996.
(3) Includes results of the 1996 Acquisitions for the respective periods
commencing October 1, 1996 and ending on the respective acquisition dates
(or in the case of Riverside Park, December 31, 1996).
(4) Excludes management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom for the period subsequent to the acquisition
date, November 7, 1997.
(5) Represents management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom from the acquisition date through December
31, 1997.
45
<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUE. Revenue aggregated $193.9 million in 1997 ($193.7 million at the
eleven parks owned during the 1997 season), compared to $93.4 million in 1996,
and to combined revenue of $159.7 million in 1996. This 21.3% increase in
revenue at the same eleven parks is primarily attributable to increased
attendance (8.9%) at these eleven parks, which resulted in part from increased
season pass and group sales at several parks.
OPERATING EXPENSES. Operating expenses increased during 1997 to $81.4
million ($80.3 million at the eleven parks owned during the 1997 season) from
$42.4 million reported in 1996, and from $68.7 million combined operating
expenses for 1996. This 16.9% increase in operating expenses at the same eleven
parks is mainly due to additional staffing related to the increased attendance
levels and increased pay rates. As a percentage of revenue, operating expenses
at these parks constituted 41.5% for 1997 and 43.0% on a combined basis for
1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses at the eleven owned parks were $36.5 million in 1997, compared to $16.9
million reported, and $36.3 million combined, selling, general and
administrative expenses for 1996. As a percentage of revenues, these expenses at
the same eleven parks constituted 18.8% for 1997 and 22.7% for 1996 combined.
This increase over 1996 combined expenses relates primarily to increased
advertising and marketing expenses to promote the newly acquired 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, offset by significant reductions in personnel and insurance expenses.
COSTS OF PRODUCTS SOLD. Costs of products sold were $23.0 million at the
eleven parks for 1997 compared to $11.1 million reported and $20.9 million
combined for 1996. Cost of products sold (as a percentage of in-park revenue) at
these parks constituted approximately 23.2% for 1997 and 25.0% for 1996
combined. This $2.1 million or 10.1% increase over combined 1996 results is
directly related to the 18.3% increase in food, merchandise and other revenues.
DEPRECIATION AND INTEREST EXPENSE. Depreciation expense increased $11.3
million over the reported 1996 results. The increase is a result of the full
year's effect of the 1996 Acquisitions (other than Riverside Park), the purchase
price paid for the Riverside Park and Kentucky Kingdom acquisitions and the
on-going capital program at the Company's parks. Interest expense, net,
increased $6.7 million from 1996 as a result of interest on the 1997 Premier
Notes.
TERMINATION FEE, NET OF EXPENSES. During October 1997, the Company entered
into an agreement with the limited partner of the partnership that owns Six
Flags Over Texas to become the managing general partner of the partnership, to
manage the operations of the park, to receive a portion of the income from such
operations, and to purchase limited partnership units over the term of the
agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the park reached an agreement with the limited partnership, and the
Company's agreement was terminated. The Company received the termination fee in
December 1997 and included the termination fee, net of $2,386,000 of expenses
associated with the transaction, as income in 1997.
46
<PAGE>
INCOME TAXES. The Company incurred income tax expense of $9.6 million
during 1997, compared to $1.5 million during 1996. The effective tax rate for
1997 was approximately 40.5% as compared to 45.9% in 1996. This decrease is the
result of the decline in the size of the non-deductible goodwill from the
Funtime Acquisition and the acquisition of Riverside Park relative to the
Company's income.
At December 31, 1997, the Company estimates that it had approximately $37
million of net operating losses ("NOLs") carryforwards for Federal income tax
purposes. The NOLs 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 is subject to
limitations on the amount of taxable income that can be offset with such NOLs.
Some of such NOLs also 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 to the Company and its subsidiaries. See Note 7 to Premier's Consolidated
Financial Statements.
47
<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 which was acquired in February 1997) from their
respective acquisition dates through December 31, 1996.
48
<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 7 to Notes to Premier's Consolidated
Financial Statements.
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
49
<PAGE>
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 1996, the Company generated net cash of $11.3 million from operating
activities. Net cash used in investing activities in 1996 totaled $155.1
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.
During 1997, the Company generated net cash of $47.2 million from operating
activities. Net cash used in investing activities in 1997 totaled $217.1
million, $81.4 million of which was employed in connection with the acquisitions
of Riverside Park and Kentucky Kingdom and $135.9 million represented amounts
spent for capital expenditures at the Company's parks. Net cash provided by
financing activities for 1997 totaled $250.2 million, reflecting the net
proceeds from the January 1997 offerings of Common Stock and $125.0 million
principal amount of 1997 Premier Notes described below, offset in part by
repayment of borrowings under the Company's senior credit facility.
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 $189.5 million, and issuing $125 million principal amount of the
1997 Premier Notes, resulting in net proceeds of approximately $120.7 million.
On October 31, 1996, the Company acquired substantially all of the assets
used in the operation of Elitch Gardens for $62.5 million in cash. On November
19, 1996, the Company acquired substantially all of the assets used in the
operation of the Waterworld Parks for an aggregate cash consideration of $17.25
million. On December 4, 1996, the Company acquired substantially all of the
assets of The Great Escape for $33.0 million in cash. On February 5, 1997, the
Company acquired all of the capital stock of the owner of Riverside Park for
approximately $22.2 million, of which $1.0 million was paid in Common Stock with
the balance paid in cash. On April 1, 1997, the Company assumed management of
Marine World, and subsequently exercised a long-term lease option for a portion
of the park and obtained a purchase option with respect to the entire property.
In November 1997, the Company purchased substantially all of the assets used in
the operation of Kentucky Kingdom for a purchase price of $64.0 million, of
which approximately $4.8 million was paid by delivery of 121,671 shares of
Common Stock, with the balance paid in cash and by assumption of certain
liabilities. Depending on the level of revenues at Kentucky Kingdom during each
of the 1998 through 2000 seasons, the Company may be required to issue
additional shares of Common Stock to the seller.
At December 31, 1997, substantially all of Premier's indebtedness was
represented by the Premier Notes in an aggregate principal amount of $215.0
million, 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
50
<PAGE>
thereof, August 15, 2003 in the case of the 1995 Premier Notes and January 15,
2007, in the case of the 1997 Premier Notes. In February 1998, Premier
terminated its $115.0 million senior secured credit facility and obtained a
commitment with respect to the Premier Credit Facility. The Company will expense
its remaining deferred charges related to the terminated facility in the first
quarter of 1998. The Company expects to enter into the Premier Credit Facility
on or about March 6, 1998.
PRO FORMA
In March 1998, the Company intends to enter into the Premier Credit
Facility, pursuant to which it will borrow $125.0 million at that time,
substantially all of which 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 13,000,000 shares of Common Stock, (ii) up to 5,000,000 PInES (depositary
shares representing up to $200.0 million of Mandatorily Convertible Preferred
Stock), (iii) Seller Depositary Shares representing 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 aggregate principal amount of New SFEC Notes. The PInES will
accrue cumulative dividends (payable, at the Company's option, in cash or shares
of Common Stock) at % per annum, and will be mandatorily convertible into
Common Stock in 2001. The Seller Preferred Stock will accrue cumulative cash
dividends at % per annum and the Company is required to offer to purchase the
Seller Preferred Stock in 2010. The Company Senior Discount Notes will not
require any interest payments prior to , 2003, 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 Company Senior 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 2006. 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 in 2006. The net
proceeds of the SFEC Notes Offering, together with other funds, will be
deposited in escrow to repay in full 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
28, 1997, (ii) refinance all outstanding SFTP bank indebtedness with the
proceeds of $420.0 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 through 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 Credit Facility. 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
and $25.0 million and $94.0 million in the seventh and eighth years,
respectively). 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
(other than real estate). See "Description of Indebtedness."
51
<PAGE>
On a pro forma basis as of December 31, 1997, the Company would have had
total outstanding indebtedness in the accreted principal amount of $1,832.0
million (excluding $161.1 million accreted value of the SFEC Zero Coupon Senior
Notes which will be repaid from proceeds of the SFEC Notes Offering, together
with other funds). Based on actual interest rates for debt outstanding at
December 31, 1997 and assumed interest rates for pro forma debt, annual interest
payments for 1998 on this indebtedness would have aggregated $136.9 million. In
addition, annual dividend payments on the Convertible Preferred Stock at assumed
dividend rates would have aggregated $28.0 million.
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 March
3, 1998, the last reported sales price of these notes was substantially in
excess 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 outstanding as of the date of the co-venture agreements that
govern the 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 (as defined therein) 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 entitled to the minimum
distribution and other distributions attributable to such units unless it is
then in default under its obligations to its partners at the Co-Venture Parks.
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 $31 million for 1999 when purchases for both
partnerships are required) and its minimum capital expenditures at these parks
for 1998 will total $11 million.
The degree to which the Company will be leveraged following the Six Flags
Transactions could have important consequences to the Company. See "Risk
Factors--Risks Associated with Substantial Indebtedness and Other Obligations"
and "Description of Indebtedness."
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
52
<PAGE>
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 believes that, based on current and anticipated operating
results, cash flow from operations, 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 dividends 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. See "Risk Factors-- Risks Associated with Substantial Indebtedness
and Other Obligations."
NEWLY ISSUED ACCOUNTING STANDARDS
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 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. See "Risk Factors -- Impact of Year 2000 Issue."
53
<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 North America, based on 1997 attendance. The Company's
theme parks serve 9 of the 10 largest metropolitan areas in the country. The
Company estimates that approximately two-thirds of the population of the
continental U.S. live within a 150-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 $815.3 million and $263.5 million,
respectively.
The following table sets forth certain information for the Company's parks:
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET 1997 ATTENDANCE(1) ACRES(2)
- ------------------------------- --------------- --------------------------------- --------------------- -------------
<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 1,440 60
Frontier City.................. Theme Oklahoma City 530 60
Geauga Lake.................... Theme/Water Cleveland 1,240 116
The Great Escape............... Theme/Water Lake George/Albany, New York 680 100
Kentucky Kingdom............... Theme/Water Louisville 1,150 58
Marine World................... Theme/Wildlife San Francisco 1,100 105
Riverside Park................. Theme New England/Boston 1,240 160
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 390 18
SIX FLAGS PARKS:
Six Flags AstroWorld........... 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(3) 576(3)
Six Flags Wild Safari Animal
Park........................... Wildlife New York City/Philadelphia (3) (3)
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) Excludes approximately 0.4 million in attendance at Walibi's two smaller
attractions.
(2) Includes acreage currently dedicated to park usage. Additional acreage
suitable for development exists at many of the facilities.
(3) 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 Parks drew, in the aggregate, approximately 68% of their patrons from
within a 100-mile radius. During that year, Six Flags' attendance, revenue and
EBITDA totaled approximately 22.2 million, $708.7 million and $164.1 million,
respectively.
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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 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. and DC Comics 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 long-term license 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. The Company believes that use of the Warner Bros. and DC
Comics characters promotes attendance, supports higher ticket prices, increases
lengths-of-stay and enhances in-park spending. 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. The 11 parks owned by the
Company for 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 18.1%, 20.4% and 59.6%, respectively,
as compared to 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
800 rides, including over 90 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 ten general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 210
years experience in the industry, including approximately 85 years at the
Premier Parks. A number of Premier's executives and operating personnel have
experience at Six Flags.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million. Total attendance for the 50
largest parks in North America was 167.2 million in 1997, compared to 145.0
million in 1994, representing a compound annual growth rate of 4.9%. The Company
believes that this growth reflects two trends: (i) demographic growth in the
5-24 year old age
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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 also 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, because 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. and DC Comics. 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 parks
owned by the Company 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-
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recognized 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 $6.1 million and $0.1 million, respectively,
for 1992 to $20.2 million and $4.9 million, respectively, for 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 1997, the Funtime parks
achieved compound annual growth in attendance, revenue and park-level operating
cash flow of 9.7%, 13.7% and 24.3%, respectively, as compared to 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 1997 , Darien
Lake achieved compound annual growth of 14.3% in attendance, 18.8% in revenue
and 37.9% in park-level operating cash flow over the results for 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 1997, these five parks
achieved growth in attendance, revenue and park-level operating cash flow of
36.0%, 37.0% and 199.6%, respectively, as compared to 1996.
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
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main street (including a theatre) and numerous revenue outlets, as well as
substantial theming and landscaping. As a result, during 1997, attendance and
revenue at Elitch Gardens grew 61.2% and 52.1%, respectively, and park-level
operating cash flow increased from ($1.0) million to $8.6 million, as compared
to 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 1997, attendance and revenue at Riverside Park
increased 67.1% and 54.4%, respectively, and park-level operating cash flow
increased from $1.5 million to $8.2 million, as compared to 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 wildlife 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 and 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 $38 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, Geauga Lake,
Kentucky Kingdom, Marine World and Riverside Park, all of which are located in
or near major metropolitan areas, can significantly accelerate their market
penetration and the expansion of their geographic market. Management believes
this can be achieved through the use of the Six Flags brand name, aggressive
marketing campaigns featuring the animated characters licensed from Warner Bros.
and DC Comics, as well as targeted capital investment in new rides and
attractions. Management also believes that this expanded penetration, as well as
the incorporation of the animated characters in the parks and in merchandise
sales can result in increased per capita spending at the existing Premier Parks.
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.
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<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 increases in
operating efficiencies. 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 improvement in
park-level operating margins. 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.
In addition, the Company recently purchased campgrounds adjacent to Geauga Lake,
and 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 campgrounds, lodging facilities, new
water parks 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. See
"--Environmental and Other Regulation."
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 while the Company will continue to pursue
acquisitions of 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).
The Company believes it has a number of competitive advantages in acquiring
theme parks. Operators of destination or large regional park chains, other than
Cedar Fair L.P., have not generally been actively seeking to acquire parks in
recent years. 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
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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 DC 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 and Walibi
and may be used in the Six Flags Acquisition. 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
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.
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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) 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 the theme of the particular area in which they
are located. This enhances the promotional effect of the
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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 an approximate 50% interest in
Walibi, and expects to acquire the remaining interest in the second quarter of
1998. On February 9, 1998, the Company entered into an agreement to acquire all
of the outstanding capital stock of SFEC.
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.
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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.
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.
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
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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. Elitch Gardens has no significant direct competitors.
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.
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.
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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.
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. 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.
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.
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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 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
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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
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% 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
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Netherlands, southwestern France, eastern France and northern France. These
markets provide the Walibi Parks with a permanent resident population of 23.0
million people within 50 miles and 54.5 million people within 100 miles.
The Walibi Parks' most significant competitors are Disneyland Paris, located
in France, Meli Park and Bobbeejaanland, each located in Belgium, de Efteling,
located in the Netherlands, and Parc Asterix, located in France.
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 ASTROWORLD AND SIX FLAGS WATERWORLD
Six Flags AstroWorld, 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 4.3 million people within 50 miles and 5.2 million people
within 100 miles. The Houston market is the number 11 DMA in the United States.
Based upon in-park surveys, approximately 68% of the visitors to the parks in
1997 resided within a 50-mile radius of the park, and 73% 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 AstroWorld
indirectly competes with Sea World of Texas and the 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 "Fiesta Park"), the 33rd largest theme park in
the United States with 1997 attendance of 1.6 million, is located on
approximately 206 acres of land in San Antonio, Texas. The San Antonio, Texas
market provides the park with a permanent resident population of 1.7 million
people within 50 miles and 5.6 million people within 100 miles. The San Antonio
market is the number 38 DMA in the United States. Based upon in-park surveys,
approximately 43% of the visitors to the parks in 1997 resided within a 50-mile
radius of the park, and 55% 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. Six Flags took over management of the park in 1996.
The park is operated by San Antonio Theme Park, L.P., a limited partnership (the
"Fiesta Partnership"). Partners in the Fiesta Partnership include (i) Six Flags
San Antonio, L.P. (a limited partnership between two wholly-owned subsidiaries
of SFTP) as a 59% general partner (the "Six Flags GP"), (ii) San Antonio Park
GP, LLC (a Delaware limited liability company managed and partially owned by the
Sellers in which SFTP holds a 99% equity interest) as a 1% general partner (the
"Sellers GP") and (iii) Fiesta Texas Theme Park, Ltd (a Texas limited
partnership indirectly wholly-owned by La Cantera Development Company) as a 40%
limited partner (the "La Cantera LP"). Pursuant to the Six Flags Acquisition the
Sellers will transfer to the Company their 1% interest in the Sellers GP.
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The land and most of the assets of the Fiesta Park are owned by the La
Cantera LP. The La Cantera LP leases the park to the Fiesta Partnership (the
"Fiesta Lease"). In exchange, the Fiesta Partnership pays the La Cantera LP a
nominal annual rent and is required to make certain capital improvements to and
cover all operating expenses of the park.
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. If extended, the Fiesta Lease can be terminated at the end of
fiscal year 2010 at the option of either the Fiesta Partnership or the lessor.
The Fiesta Partnership has the right to terminate the Fiesta Lease effective at
the end of fiscal year 2001 if it has incurred in excess of a specified
cumulative operating loss during the 1998 to 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 and to buy-out 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 "Fiesta
Agreement") under which it will manage and operate Fiesta Park on the Fiesta
Partnership's behalf. Under the terms of the Fiesta 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 4% of the Fiesta Partnership's Gross Revenues
(as defined in the Fiesta Agreement) for such year. Commencing with the 1998
fiscal year, the management fee is 25% of EBITDA (as defined in the Fiesta
Agreement). The intellectual property fee payable to the Six Flags GP throughout
the term of the Fiesta Agreement will be based on the Fiesta Partnership's Gross
Revenues.
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 11.5 million
people within 50 miles and 25.9 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 50% of the
visitors to the parks in 1997 resided within a 50-mile radius of the park, and
80% 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 7.6 million people
within 50 miles and 12.5 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 64% of the visitors to
the park in 1997 resided within a 50-mile radius of the park, and 80% resided
within a 100-mile radius.
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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 9.4 million people within 50 miles
and 15.8 million people within 100 miles. The Los Angeles market is the number 2
DMA in the United States. Based upon in-park surveys, approximately 45% of the
visitors to the parks in 1997 resided within a 50-mile radius of the parks, and
64% 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.
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 3.8 million people
within 50 miles and 6.3 million people within 100 miles. The Atlanta market is
the number 10 DMA in the United States. Based upon in-park surveys,
approximately 42% of the visitors to the park in 1997 resided within a 50-mile
radius of the park, and 58% 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 Limited Partner (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, L.P. (the "Georgia
Co-Venture Partnership").
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 (excluding real property) by the Georgia Co-Venture
Partnership 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 the Georgia
Co-Venture Partnership (the "Georgia Limited Partner"), that values the Georgia
park at the greater of $250 million or eight times 1997 EBITDA of the Georgia
park (the "Georgia Tender Offer Price"). Six Flags purchased approximately 25%
of the LP Units in the 1997 tender offer at an aggregate price of $62.7 million.
The key elements of the new arrangements are as follows: (i) the Georgia
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
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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 Georgia 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 (as
defined therein) of the park by 8.0; (iv) in 2027, Six Flags will have the
option to acquire all remaining interests in the Georgia park at a price based
on the Georgia 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 the 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 Subordinated Indemnity Agreement, the Company is
transferring to Time Warner (who has guaranteed the Six Flags obligations under
these arrangements) record title to the corporations which own 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 retransfer to the Company such record
title for a nominal consideration. In addition, the Company will issue preferred
stock of the managing partner of the Georgia Limited Partner 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 Co-Venture 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.
The Company intends to account for its interest in the Georgia park under
the equity method of accounting.
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 4.5 million people within 50 miles
and 5.6 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 60%
of the visitors to the parks in 1997 resided within a 50-mile radius of the
park, and 68% resided within a 100-mile radius.
The Texas Limited Partner (as 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 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 285 miles from
the park. Six Flags Hurricane Harbor has no direct competitors in the area.
PARTNERSHIP STRUCTURE. Six Flags Over Texas is owned (excluding real
property) by Texas Flags, Ltd. (the "Texas Co-Venture 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 Fund II, Ltd., a Texas
limited partnership (the "Texas Limited Partner") which is unaffiliated with Six
Flags.
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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 (as defined herein) of the
park (the "Texas 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 2028 Six Flags and its affiliates will have the option to acquire all
remaining interests in the park at a price based on the Texas 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 these requirements first, before any funds
are required from the Company. Six Flags has commenced the 1998 tender offer for
the LP Units. The tender offer is scheduled to close on March 12, 1998. In
connection with the Subordinated Indemnity Agreement, the Company is
transferring to Time Warner (who has guaranteed the Six Flags obligations under
these arrangements) record title to the corporations which own 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 retransfer to the Company such record
title for a nominal consideration. In addition, the Company will issue preferred
stock of the managing partner of the Texas Co-Venture 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 Co-Venture 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.
The Company intends to account for its interest in the Texas park under the
equity method of accounting.
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 2.6 million people within 50 miles and 3.7
million people within 100 miles. The St. Louis market is the number 21 DMA in
the United States. Based upon in-park surveys, approximately 55% of the visitors
to the park in 1997 resided within a 50-mile radius of the park, and 65% 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.
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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 36.1% 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, because such expenses are relatively fixed
during the operating season. In 1997, approximately 77% of patrons at the 11
parks then owned by the Company were admitted at a discount rate and, for the
year ended December 31, 1997, approximately 44.8% 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 among Warner Bros., DC Comics, the Company
and SFTP, 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
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date hereof, BATMAN, SUPERMAN, BUGS BUNNY, DAFFY DUCK, 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 to terminate the License Agreement under certain
circumstances, including if any persons involved in the movie or television
industries obtain control of the Company and upon a default under the
Subordinated Indemnity Agreement. Premier also licenses on a non-exclusive basis
certain other characters, including POPEYE, for use at certain Premier Parks.
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
regional executives (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.
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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 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 230 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.
Operations at the parks are subject to certain local, state and federal
government regulations, including, without limitation labor, health, safety,
minimum wage and environmental regulations applicable to theme park operations,
and local and state regulations applicable to restaurant operations at each
park. The Company believes that it is in substantial compliance with applicable
regulatory standards and, although no assurance can be given, it does not
foresee the need for any significant expenditures in these areas in the near
future.
EMPLOYEES
The Company employs approximately 2,800 full-time employees and
approximately 35,000 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 14.8% of the Company's full-time and approximately 15.3% of
its seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in January 2000 (Six Flags Over
Texas), December 2000 (Six Flags Over Georgia), December 1999 (Six Flags Great
Adventure), January 2000 (Six Flags St. Louis) and January 2000 (Marine World).
The Company has never experienced any work stoppages, and believes that it has a
strong relationship with its employees and unions.
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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 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.
Premier may alter the insurance coverage of Six Flags following the Six Flags
Acquisition. Premier's combined cost for liability insurance and for
self-insured claims for 1997 was $0.9 million compared to $0.8 million in 1996
and $0.6 million in 1995. For the same three years Six Flags liability costs and
claims were $13.8 million, $15.9 million and $15.8 million, respectively. 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.
ENVIRONMENTAL AND OTHER REGULATION
The Company's operations are subject to increasingly stringent federal,
state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use and minimum wage regulations
applicable to theme park operations, and local and state regulations applicable
to restaurant operations at the park. The Company believes that it is in
substantial compliance with applicable environmental and other laws and
regulations and, although no assurance can be given, it does not foresee the
need for any significant expenditures in this area in the near future.
Remediation of certain hazardous substances or petroleum products are
underway at the Company's Six Flags Great Adventure Park. The Company does not
anticipate that any environmental remediation matters, either individually or in
the aggregate, will have a material adverse effect on its financial condition or
results of operation.
In addition, portions of the undeveloped areas at its parks may be
classified as wetlands. Accordingly, the Company may need to obtain governmental
permits and other approvals prior to conducting development activities that
affect these areas, and future development may be prohibited in some or all of
these areas.
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 "Georgia Litigation"). The
Six Flags Parties sought, among other things, a declaration and determination of
the rights and obligations of the partners
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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 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 out of the Georgia Litigation. See "Description of Six Flags
Agreement--Indemnification."
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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
Dan Aylward...................... 45 Vice President, General Manager, Marine World
Jack D. Bateman.................. 40 Vice President, General Manager, Kentucky Kingdom
Timothy D. Black................. 32 Vice President, General Manager, Wyandot Lake
James C. Bouy.................... 56 Vice President, General Manager, Elitch Gardens
John S. Collins.................. 38 Vice President, General Manager, The Great Escape
Jeffrey A. Lococo................ 41 Vice President, General Manager, Geauga Lake
Richard A. McCurley.............. 38 Vice President, General Manager, Waterworld
Bill Muirhead.................... 42 Vice President, General Manager, Riverside Park
Bradley Y. Paul.................. 50 Vice President, General Manager, Darien Lake
Manuel Gonzalez-Perez............ 36 Vice President, General Manager, Frontier City
Traci E. Blanks.................. 37 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.
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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).
DAN AYLWARD has served as Vice President and General Manager of Marine
World since February 1997. From January 1995 to February 1997, Mr. Aylward was
President and General Manager of Silverwood Theme Park, a small theme park
operation in Idaho. From June 1989 to January 1995 he served as General Manager
of Old Tucson Studios in Tucson, Arizona. Prior thereto, Mr. Aylward was
employed at Kings Island.
JACK D. BATEMAN has served as Vice President and General Manager of
Kentucky Kingdom since its acquisition by the Company in November 1997. Prior to
that time, he served as Director of Marketing at Elitch Gardens since 1996.
Prior to joining Premier, Mr. Bateman worked in various capacities at Six Flags
for over fifteen years, most recently as Director of Destination Marketing at
Six Flags Over Texas.
TIMOTHY D. BLACK has served as Vice President and General Manager of
Wyandot Lake since 1997. From 1995 through 1997, he was Manager of Park
Operations at Six Flags Fiesta Texas. From 1992 to 1995, he was Director of
Operations and Maintenance at Frontier City.
JAMES C. BOUY served as Vice President and General Manager of Geauga Lake
since 1994 and became General Manager of Elitch Gardens following its
acquisition by the Company. 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.
JOHN S. COLLINS has served as a Vice President since 1998 and as General
Manager of The Great Escape since November 1996. Prior to that time, he served
in various capacities at Geauga Lake for over ten years, most recently as
Director of Marketing.
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
its acquisition by the Company. 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 its acquisition by the Company. 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.
BILL MUIRHEAD has served as Vice President and General Manager of Riverside
Park since January 1997. Prior to that, beginning in 1992, he served as Vice
President and General Manager of Expo/Tiered Retail Services Inc., a company
headquartered in Hong Kong and specialized in developing themed retail and
gaming operations in the South Pacific rim. Prior thereto, Mr. Muirhead was
employed at Dorney Park and Six Flags Great Adventure.
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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.
MANUEL GONZALEZ-PEREZ has served as Vice President and General Manager of
Frontier City since 1996. From 1995 to 1996 he served as Director of Park
Revenue and Operation at Frontier City. From 1991 to 1995, Mr. Gonzalez-Perez
was President and CEO for Park Street (Family Entertainment Center) in Mexico
and from 1991 to 1994 he served as Revenue Director for Reine Arthon in Mexico
City.
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.
JOHN P. GANNON has served as Vice President of Finance for the Company
since August of 1995 when Premier purchased Funtime Parks, Inc. Mr. Gannon had
previously served as Vice President and Treasurer for Funtime Parks, Inc. from
1990 to 1995. From 1987 to 1990, he served as a controller for Geauga Lake Park
in Aurora, Ohio. Prior thereto, Mr. Gannon, a certified public accountant, was
employed with Ernst & Young, beginning in 1979, and was assigned to the Funtime
audit. Mr. Gannon is a past president of the Akron Chapter of the Institute of
Management Accounts.
RUSSELL W. KUTEMAN has served as Vice President of Finance of the Company
since 1996. From 1986 through 1996, Mr. Kuteman served as the Vice President of
Finance for Wet 'n Wild and later Six Flags. Prior to 1986, Mr. Kuteman served
as Vice President of Finance for several independent petroleum companies. Mr.
Kuteman is a CPA, and began his professional career with Peat, Marwick, Mitchell
& Co. in 1976.
PAUL A. BIDDELMAN has served as a Director of the Company since December
1992. Since December 1997, Mr. Biddelman has been president of Hanseatic
Corporation ("Hanseatic"), a private investment company. Prior to that date, he
was treasurer of Hanseatic for more than five years. 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.).
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
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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 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 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.
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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 senior 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.
<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 14.1 8.2
James F. Dannhauser(3).................................................... 76,665 * *
Michael E. Gellert(4)..................................................... 1,368,861 7.3 4.2
Gary Story(5)............................................................. 143,000 * *
Jack Tyrrell(6)........................................................... 695,253 3.7 2.2
Sandy Gurtler............................................................. -- -- --
Charles R. Wood........................................................... 9,091(7) * *
Robert J. Gellert(8)...................................................... 1,254,553 6.6 3.9
122 East 42nd Street
New York, New York 10168
Windcrest Partners(9)..................................................... 1,136,025 6.0 3.5
122 East 42nd Street
New York, New York 10168
Hanseatic Corporation(10)................................................. 2,657,071 14.1 8.2
Wolfgang Traber
450 Park Avenue
New York, New York 10152
FMR Corp.(11)............................................................. 1,296,500 6.9 4.0
82 Devonshire Street
Boston, Massachusetts 02109
Baron Capital Group(12)................................................... 1,184,700 6.3 3.7
767 Fifth Avenue
New York, NY 10153
Warburg Pincus Asset Management(13)....................................... 968,145 5.1 3.0
466 Lexington Avenue
New York, NY 10017
All directors and officers as a group(14) (14 persons).................... 5,306,419 27.5 16.2
</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 President. 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
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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.
(6) Includes 9,794 shares of Common Stock for his own account; 4,396 shares of
Common Stock held in a trust for the benefit of his son; 311,940 shares of
Common Stock beneficially owned by Lawrence, Tyrrell, Ortale & Smith II,
L.P. ("LTOS II"); and an aggregate of 369,123 shares of Common Stock
beneficially owned by Richland Ventures, L.P. ("Richland") and 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, 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 December 5, 1997.
(11) Includes 1,213,200 shares of Common Stock beneficially owned by Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR
Corp. and a registered investment adviser (including 3,400 shares of Common
Stock owned by Fidelity American Special Situations Trust ("FASST"), an
English unit trust as to which Fidelity acts as a sub-adviser); 81,400
shares of Common Stock beneficially owned by Fidelity Management Trust
Company ("FMT"), a wholly-owned subsidiary of FMR Corp. and a bank; and
5,300 shares beneficially owned by Fidelity International Limited ("FIL"), a
Bermudan investment adviser and former majority-owned subsidiary of Fidelity
(including 3,400 shares of Common Stock owned by FASST, as to which a
subsidiary of FIL acts as an investment adviser). Edward C. Johnson 3d,
Chairman of FMR Corp. and FIL, Abigail P. Johnson, a director of FMR Corp.,
and members of the Johnson family may be deemed to form a controlling group
with respect to FMR Corp. Information has been derived from Schedule 13G,
dated December 30, 1997.
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(12) Includes 1,136,700 shares of Common Stock beneficially owned by BAMCO,
Inc., a registered investment adviser as to which Baron Capital Group
("BCG") and Ronald Baron ("Baron"), President of BCG, may be deemed parent
holding companies; and 48,000 shares of Common Stock beneficially owned by
Baron Capital Management, Inc., a registered investment adviser as to which
BCG and Baron may be deemed parent holding companies. Information has been
derived from Schedule 13G, dated February 17, 1998.
(13) Represents shares beneficially owned by Warburg Pincus Asset Management,
Inc., a registered investment adviser. Information has been derived from
Amendment No. 1 to Schedule 13G, dated January 12, 1998.
(14) 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.
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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 $965 million (the "Capital Stock
Consideration") (plus an approximate $11 million adjustment based on year-end
balance sheet adjustments and option cancellation costs). The Capital Stock
Consideration will be payable in cash or 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 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 outstanding immediately prior to the
Premier Merger 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") of all amounts
necessary to fund such payments being loaned or contributed by the Company.
CONDITIONS
The Six Flags Agreement contains customary closing conditions of the
parties. In addition, the Company's obligation to consummate the Six Flags
Acquisition is subject to the condition that the Company 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.
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INDEMNIFICATION
The Six Flags Agreement contains customary representations, warranties,
covenants and other agreements of the parties. Each Seller has 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 such 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. The Company has agreed to indemnify and hold harmless the Sellers
against certain damages, claims and liabilities (and the cost and expenses
related thereto) suffered by the Sellers in respect to (i) any breach of or
inaccuracy in any representation or warranty made by or on behalf of the
Company, and (ii) any breach or violation of any covenant made by or on behalf
of the Company 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 Company and its consolidated
subsidiaries for the 1998 fiscal year are first made available to the Company
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. The Sellers' ability to make
indemnification claims for breaches of any of the Company's representations and
warranties is subject to a corresponding Basket Amount and $25 million maximum
amount.
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
who are 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. Any payment as a result of breaches of or inaccuracies in an
individual Seller's representations and warranties may be limited to such
individual Seller's contribution to the escrow fund.
In addition, the Sellers have agreed to indemnify the Company from any and
all liabilities arising out of 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, at the
closing of the Six Flags Transactions, the Company will enter into the
Subordinated Indemnity Agreement with Time Warner, pursuant to which the Company
will indemnify Time Warner in respect of its effective guarantee of the SFEC
Zero Coupon Senior Notes, and the Company and Six Flags will indemnify Time
Warner in respect of its guarantee of the obligations of Six
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Flags under the agreements relating to the Co-Venture Parks. Pursuant to the
Subordinated Indemnity Agreement, the Company will transfer to Time Warner
record title to the corporations which own certain entities that have purchased
and will purchase units of the limited partners of such partnerships, and the
Company will receive an assignment from Time Warner of all cash flow received on
such units and will otherwise control such entities, except in the event of a
default by the Company of its obligations under the Subordinated Indemnity
Agreement. After all such obligations have been satisfied, Time Warner is
required to retransfer to the Company such record title for a nominal
consideration. In the event of a default, the Subordinated Indemnity Agreement
allows Time Warner to acquire the stock of the entities that purchase units of
the limited partners of the Co-Venture Parks and the assets of the Company
subsidiary which holds the general partner interest in the Co-Venture Parks. In
addition, the Company will issue preferred stock of the managing partners of the
Co-Venture Parks to Time Warner which, in the event of such a default, would
permit Time Warner to obtain control of such entities. The Subordinated
Indemnity Agreement also limits the Company's ability to sell the Six Flags
Parks. Except in the case of the New SFEC Notes, under the terms of the
Subordinated Indemnity Agreement, without the consent of Time Warner, the
Company cannot incur indebtedness at SFEC or any of its subsidiaries that is
secured by any assets of (or guaranteed by) 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 (or guarantees
by) SFEC or any of its subsidiaries.
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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 (other than real estate), and
guaranteed by such subsidiaries. The Premier Credit Facility will have an
aggregate availability of $300.0 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.
The Company expects to borrow $125.0 million in March 1998, in part, to fund the
cash portion of the purchase price for the Walibi acquisition. 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 (as defined therein) 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 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 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 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
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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, and $303.0
million at maturity.
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, 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 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 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 accrete in value until , 2003 at
which time the accreted value will equal 100% of their principal amount. The
Company Senior Discount Notes bear cash interest at the rate of % per annum,
commencing , 2003, and are not guaranteed by the Company's subsidiaries.
Approximately $75.0 million of net proceeds from the sale of the Senior
Discount Notes will be deposited with the trustee to provide a fund until
, 2003 (the "Restricted Cash Account") to satisfy obligations under the
Co-Venture Parks agreements and to pay dividends on the Convertible Preferred
Stock. The Company's obligations will be secured pending disbursement by a
pledge of the Restricted Cash Account.
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, 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 or an Asset Sale
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(as defined in the applicable Indenture) or with certain covenants or provisions
governing the Restricted Cash Account and failure to comply for 60 days after
notice with the other agreements contained in the applicable Indenture, the
Company Senior Discount Notes or the Restricted Cash Account; (iv) the default
by the Company or any of its Restricted Subsidiaries (as defined in the
applicable Indenture) in respect of any indebtedness above specified levels; (v)
certain events of bankruptcy or insolvency; (vi) a material breach or default
of, or repudiation by the Company of its obligations under the escrow agreement
governing the Restricted Cash Account or the unenforceability of the escrow
agreement governing the Restricted Cash Account against the Company; and (vii)
certain judgements against the Company or any of its Restricted Subsidiaries
above specified levels.
COMPANY SENIOR NOTES
The Company Senior Notes are senior obligations of the Company, in the
aggregate principal amount of $280.0 million of which up to $76.3 million will
be used to capitalize a three-year overfund account (the "Interest Escrow
Account") with respect to the Company Senior Notes. The Company Senior Notes
will mature on , 2006. 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 , 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 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 (two days in the case of
interest payments due on or prior to , 2001) 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 or an Asset Sale (as
defined in the applicable Indenture) or with certain covenants or the provisions
governing the Interest Escrow Account and failure to comply for 60 days after
notice with the other agreements contained in the applicable Indenture, the
Company Senior Notes or the Interest Escrow Account; (iv) the default by the
Company or any of its Restricted Subsidiaries (as defined in the applicable
Indenture) in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy or insolvency; (vi) a material breach or default of, or
repudiation by the Company of its obligations under, the escrow agreement
governing the Interest Escrow Account or the unenforceability of the escrow
agreement governing the Interest Escrow Account against the Company; and (vii)
certain judgments against the Company or any of its Restricted Subsidiaries
above specified levels.
PREMIER NOTES
The Premier Notes are senior, unsecured obligations of Premier Operations,
in the aggregate principal amount of $215.0 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
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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.
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 in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against Premier Operations or any
principal subsidiaries; (vii) any principal subsidiaries (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 principal
subsidiary of its obligations under the applicable Indentures, 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
guaranteed on a senior, unsecured basis by the principal operating subsidiaries
of SFTP.
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 accreted value thereof
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;
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(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
(as defined in the applicable indenture) of its obligations under the applicable
Indenture or any note guarantee, which continues for 10 days.
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, Time Warner, has effectively guaranteed the SFEC Zero Coupon
Senior Notes, and the Company has indemnified Time Warner in respect of its
guarantee. The Company will use the proceeds of the SFEC Notes Offering,
together with other funds, to repay SFEC Zero Coupon Senior Notes. Until so
used, such proceeds and other funds (or U.S. government obligations purchased
therefrom) will be deposited in escrow.
The SFEC Zero Coupon Senior Notes may not be redeemed prior to maturity.
Defaults under the indenture relating to the SFEC Zero Coupon Senior Notes
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 will be senior, unsecured obligations of SFEC, in the
aggregate principal amount of $170.0 million. The New SFEC Notes will mature on
, 2006. The New SFEC Notes will bear interest at the rate of % per
annum and will be guaranteed by the Company on a fully subordinated basis (the
"Guarantee") but will not be guaranteed by SFEC's subsidiaries. All of the net
proceeds from the sale of the New SFEC Notes will be placed in escrow (the "SFEC
Escrow Account") for repayment of the SFEC Zero Coupon Senior Notes. The
indenture relating to the New SFEC Notes will provide that SFEC will defease the
SFEC Zero Coupon Senior Notes no later than 360 days from the date of the
Offerings.
The New SFEC Notes will be redeemable, at SFEC's option, in whole or in
part, at any time on or after , 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 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
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Notes; (iii) failure to comply for 30 days after notice with SFEC's repurchase
obligations upon the occurrence of a Change of Control or an Asset Sale (as
defined in the applicable Indenture) or with certain covenants or the provisions
governing the SFEC Escrow Account and failure by either the Company or SFEC to
comply for 60 days after notice with the other agreements contained in the
applicable Indenture, the Guarantee, the SFEC Escrow Account or the New SFEC
Notes; (iv) the default by SFEC or any of its Restricted Subsidiaries (as
defined in the applicable Indenture), in respect of any indebtedness above
specified levels; (v) certain events of bankruptcy or insolvency; (vi) if the
Guarantee shall be held invalid, unenforceable or shall cease for any reason to
be in full force and effect or any person acting on behalf of the Company shall
deny or disaffirm the Company's obligations under the Guarantee; (vii) a
material breach or default of, or repudiation by the Company of its obligations
under the escrow agreement governing the SFEC Escrow Account or the
unenforceability of the escrow agreement governing the SFEC Escrow Account
against the Company; and (viii) certain judgements against SFEC or any of its
Restricted Subsidiaries above specified levels.
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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-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, as described under "--Rights Plan" below. After
the Offerings, 32,311,111 shares of Common Stock will be outstanding and
shares will be reserved for future issuance (1,315,038 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 the 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 PInES Offering, the Company will issue PInES in respect of
its Mandatorily Convertible Preferred Stock. The terms of the PInES and the
Manditorily Convertible Preferred Stock are described under "Description of
PInES."
SELLER PREFERRED STOCK
In connection with the Six Flags Acquisition, the Company will issue to the
Sellers 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, Seller Depositary Shares representing not less than $100 million of
Seller Preferred Stock will 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 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
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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 will
not be entitled to any voting rights, except as required by Delaware law and
except in certain circumstances involving a default by the Company in the
payment of dividends, the authorization of capital stock having a preference as
to dividends or upon liquidation over the Seller Preferred Stock, charter
amendments materially affecting the rights of the holders or mergers or
consolidations of the Company.
CONVERSION RIGHTS. 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 Seller 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. The Company may redeem all (but not less
than all) of the Seller Preferred Stock at any time during the 90 days following
the date of issuance at a redemption price equal to the greater of Liquidation
Value or the fair market value of the Seller Preferred Stock, in each case plus
accrued and unpaid dividends. Except as provided in the preceding sentence,
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 notice by mail, at
the redemption prices equal to the Liquidation Value plus a premium based on 70%
of the dividend rate (declining ratably on an annual basis until 2010) plus, in
each case, accrued and unpaid dividends to the redemption date.
MANDATORY REDEMPTION BY COMPANY. On the twelfth anniversary of the date of
issuance of the Seller Preferred Stock, the Company must offer to purchase all
outstanding shares at the Liquidation Value, plus accrued and unpaid dividends
thereon to the date of purchase.
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
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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 will have the right
to require the Company to file a shelf registration statement within 90 days of
the closing with respect to the Seller Depositary Shares, as well as the shares
of Common Stock issuable upon conversion of the underlying Seller Preferred
Stock (the "Conversion Shares") received by them. In addition, Sellers will have
the right to require the Company on no more than four occasions to register such
shares of Seller Depositary Shares and Conversion Shares for sale under the
Securities Act. Sellers may not demand the registration of any of such shares
during such time as the shelf registration statement is effective or within six
months after the effective date of a registration statement filed in response to
a previous demand. Further, Sellers will have the right to have such Seller
Depositary Shares included in a future registration statement relating to the
Seller Depositary Shares 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. If 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 Offerings, the Company will have 32.3 million
shares of Common Stock outstanding and 5.0 million PInES (initially convertible
into 5.0 million shares of Common Stock) outstanding. Future sales of Common
Stock (or Seller Depositary Shares) 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 Common Stock Offering,
the Convertible Preferred Stock and 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 acquisition), 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 6.0 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
Company may also pay quarterly dividend payments on the PInES (which aggregate
$ million over three years) by issuing additional shares of Common Stock.
The sale, or the availability for sale, of substantial amounts of Common Stock
or securities convertible into Common 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 and the PInES. See "-- Registration Rights."
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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 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
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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, 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
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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 Credit
Facilities require the Company to make an offer to purchase the Company Senior
Discount Notes and the Company Senior Notes and repay all indebtedness under the
Credit Facilities upon a Change of Control (as defined therein) of the Company.
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.
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DESCRIPTION OF PINES
EACH OF THE PINES REPRESENTS BENEFICIAL OWNERSHIP OF ONE-FIVE HUNDREDTH OF A
SHARE OF MANDATORILY CONVERTIBLE PREFERRED STOCK AND ENTITLES THE HOLDER (AS
EVIDENCED BY ITS RECORD HOLDING OF THE DEPOSITARY RECEIPT (COLLECTIVELY, THE
"DEPOSITARY RECEIPTS") EVIDENCING THE PINES) TO THAT PROPORTION OF ALL THE
RIGHTS, PREFERENCES AND PRIVILEGES OF THE PROPORTIONATE SHARE OF MANDATORILY
CONVERTIBLE PREFERRED STOCK REPRESENTED THEREBY. SEE "DESCRIPTION OF DEPOSITARY
ARRANGEMENTS". THE SUMMARY OF THOSE RIGHTS, PREFERENCES AND PRIVILEGES AND
OTHERWISE OF THE TERMS OF THE PINES CONTAINED HEREIN DOES NOT PURPORT TO BE
COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ALL OF
THE PROVISIONS OF THE FORM OF CERTIFICATE OF DESIGNATION RELATING TO THE SHARES
OF MANDATORILY CONVERTIBLE PREFERRED STOCK (THE "CERTIFICATE OF DESIGNATION"), A
COPY OF WHICH EITHER HAS BEEN OR WILL BE FILED WITH THE COMMISSION AS AN EXHIBIT
TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
DIVIDENDS
Holders of the PInES will be entitled to receive, through the Depositary,
when, as and if declared on the Mandatorily Convertible Preferred Stock
represented thereby by the Board of Directors, dividends from the date of
initial issuance of the PInES (which issuance will be evidenced by the initial
issuance of the Depositary Receipts) (the "Issue Date") 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 (each such date, a "Regular
Dividend Payment Date"). The first dividend will be for the period from the
Issue Date to, but excluding, July 1, 1998, and will be payable on such date.
Dividends will be payable on the Mandatorily Convertible Preferred Stock 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. The Depositary will be the holder of record of shares of
Mandatorily Convertible Preferred Stock represented by the PInES, and dividends
paid by the Company in respect of such shares of Mandatorily Convertible
Preferred Stock will, accordingly, be paid to the Depositary. The Depositary
will distribute dividends on the Mandatorily Convertible Preferred Stock paid to
it by the Company to holders of the PInES in accordance with the procedures
described in "Description of Depositary Arrangements--Dividends and Other
Distributions." Dividends will cease to become payable by the Company to the
Depositary for distribution to the holders of the PInES when dividends cease to
accrue on the Mandatorily Convertible Preferred Stock represented thereby on the
Mandatory Conversion Date or on the date of the earlier conversion of the PInES
at the option of the holder. Dividends distributed through the Depositary to the
holders of the PInES for any period less than a full quarterly dividend period
will be paid by the Company to the Depositary on the Mandatorily Convertible
Preferred Stock represented thereby 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 the 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 the
Mandatorily Convertible Preferred Stock will cumulate as of the dividend payment
date on which they first become payable, but no interest will accrue on any
accumulated but unpaid dividends.
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, provided that a dividend may
be paid in whole or in part by delivery of shares of Common Stock only if paid
on the Regular Dividend Payment Date for such dividend. If the Company elects to
pay any dividend, in whole or in part, by delivery of shares of Common Stock,
the amount of such dividend payment to be distributed per PInES in shares of
Common Stock (the "Stock Dividend Amount") will be distributed by the Depositary
to the holders of PInES which are holders on the record date for such dividend
payment. The Depositary will deliver to each such holder of PInES, for each
PInES held, a number of shares of
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Common Stock determined by dividing the dollar amount of the Stock Dividend
Amount by an amount (the "Cash Equivalent Amount") equal to 95% 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, 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 Depositary will deliver a cash adjustment as described under
"--Fractional Shares" in lieu of delivering a fractional share in distributing a
dividend payable in Common Stock to a holder of PInES if delivering shares of
Common Stock on the basis of that holder's aggregate holdings of PInES on the
related record date would otherwise result in delivery of a fractional share.
Any portion of a dividend on the Mandatorily Convertible Preferred Stock that is
declared and not paid by the Company through delivery of shares of Common Stock
on the related Regular Dividend Payment Date 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, by the
Depositary to the holders of PInES entitled thereto. 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 5% lower than the Dividend Stock Price as of the
related record date and the holder of the PInES who receives the dividend 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 PInES. 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 by publication, on the related record date for such dividend
payment, in a daily newspaper of national circulation.
The PInES, as representative of beneficial ownership interests in the
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 Mandatorily Convertible
Preferred Stock.
Whether or not the Mandatory Conversion Date has occurred,
(A) 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 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) may be paid or declared in
cash or otherwise, nor may 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;
(B) 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 purchase, redemption or other acquisition of
any Junior Stock (i) with any Junior Stock (and cash in lieu of
fractional shares in connection therewith) or (ii) in connection with
purchases in an aggregate amount up to $5.0 million from employees of the
Company on termination of their employment for whatever reason) nor may
any funds be set
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aside or made available for any sinking funds for the purchase,
redemption or acquisition of any Junior Stock; and
(C) no dividends or other distributions may be declared or paid on any
Preferred Stock (including the Mandatorily Convertible Preferred Stock)
that does not constitute Junior Stock ("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 the
requirement set out following clause (iv) of this paragraph and any
similar requirement of any other Preferred Stock, to receive accrued and
unpaid dividends)
unless, in the case of either (A) or (B) or (C):
(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 dividend, distribution, purchase, redemption,
acquisition, setting aside or making available, as applicable, 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, in the case of (C) only, with respect to the declaration and payment of
dividends on Parity Preferred Stock, 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 PINES
Unless voluntarily converted into Common Stock prior thereto, on ,
2001 (the "Mandatory Conversion Date"), each PInES will automatically convert
into a number of shares of Common Stock at the Conversion Rate (as defined
below) and the holder thereof will have the right to receive cash in an amount
equal to the accrued and unpaid dividends on the Mandatorily Convertible
Preferred Stock represented by such PInES to the Mandatory Conversion Date
(other than previously declared dividends deliverable to a holder of record of
the Depositary Receipt evidencing such PInES as of a prior date), whether or not
declared (the "Accrued Amount"), out of funds legally available for the payment
of dividends, subject to the requirement set forth following clause (iv) of the
immediately preceding paragraph and any other similar requirement of any other
Preferred Stock.
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 PInES, (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 one share of Common Stock per PInES and (c) if the
Conversion Price is less than or equal to the Initial Price, one share of Common
Stock per PInES. The Conversion Rate is subject to adjustment as provided in "--
Conversion Adjustments" and "--Adjustment for Certain Consolidations or
Mergers." THE VALUE OF THE COMMON STOCK TO BE RECEIVED BY HOLDERS OF THE PInES
UPON MANDATORY
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CONVERSION WILL NOT NECESSARILY EQUAL THE LIQUIDATION VALUE OF THE PInES. Any
shares of Common Stock received by holders of PInES that are not affiliated with
the Company will be free of any transfer restrictions and the holders of the
PInES 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
delivered by the Depositary to the holders of PInES upon mandatory conversion on
the Mandatory Conversion Date (see "--Fractional Shares" below).
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 PInES
upon mandatory conversion at the Mandatory Conversion Date will be shares of
Common Stock, other securities and/or cash. See "--Conversion Adjustments" and
"--Adjustment for Certain Consolidations or Mergers" 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, the "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 "--Conversion Adjustments" and "--Adjustment for
Certain Consolidations or Mergers." 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 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 that a holder of PInES would receive for each PInES at
various Conversion Prices. The table assumes that there will be no adjustments
to the Conversion Rate described under "--Conversion Adjustments" and
"--Adjustment for Certain Consolidations or Mergers" below. There can be no
assurance that the Conversion Price will be within the range set forth below.
Given the Initial Price of $ per PInES and the Threshold Appreciation
Price of $ per PInES, a holder of PInES would receive, through
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the Depositary, upon mandatory conversion at the Mandatory Conversion Date the
following number of shares of Common Stock:
<TABLE>
<CAPTION>
CONVERSION PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK (1)
- --------------------------- ---------------------------------
<S> <C>
$
</TABLE>
- ------------------------
(1) In lieu of any fractional share otherwise deliverable in respect of the
aggregate number of PInES of any holder that are converted upon mandatory
conversion, such holder will be entitled to receive an amount in cash equal
to the same fraction of the Closing Price of the Common Stock as of the
fifth Trading Day immediately preceding the Mandatory Conversion Date.
As the foregoing chart illustrates, if upon mandatory conversion at the
Mandatory Conversion Date the Conversion Price is greater than or equal to
$ , the Company will be obligated to deliver, through the Depositary,
shares of Common Stock per PInES, resulting in the holders of the PInES
receiving only % of the appreciation in market value of the Common Stock above
$ . If upon mandatory conversion at the Mandatory Conversion Date, the
Conversion Price is greater than $ and less than $ , the Company
will be obligated to deliver, through the Depositary, only a fraction of a share
of Common Stock having a market value equal to $ per PInES, resulting in
the holders of the PInES receiving none of the appreciation in the market value
of the Common Stock from $ to $ . If upon mandatory conversion
at the Mandatory Conversion Date, the Conversion Price is less than or equal to
$ , the Company will be obligated to deliver, through the Depositary,
one share of Common Stock per PInES, regardless of the market price of such
shares, resulting in the holders of the PInES realizing the entire loss on the
decline in market value of the Common Stock.
CONVERSION AT THE OPTION OF THE HOLDER
The PInES are convertible, in whole but not 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 PInES (the
"Optional Conversion Rate"), equivalent, for each PInES, to a conversion price
of $ per share of Common Stock (the "Optional Conversion Price"),
subject to adjustment as described under "--Conversion Adjustments" and
"--Adjustment for Certain Consolidations or Mergers" below. No fractional shares
of Common Stock will be delivered by the Depositary to the holders of PInES upon
their optional conversion (see "--Fractional Shares" below).
Conversions of PInES at the option of the holders may be effected in
accordance with the procedures described in "Description of Depositary
Arrangements--Conversion Provisions--Conversion at the Option of the Holder."
Holders of PInES at the close of business on a record date for any payment
of declared dividends on the Mandatorily Convertible Preferred Stock will be
entitled to receive the dividends so declared on the corresponding dividend
payment date notwithstanding the optional conversion of the PInES following such
record date and prior to such dividend payment date. However, PInES (as
evidenced by Depositary Receipts) 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 payable on
such date. Except as provided above, upon any optional conversion of PInES, the
Company will make no payment of or allowance for unpaid dividends, whether or
not in arrears, through the Depositary on such PInES or previously declared
dividends or distributions on the shares of Common Stock issued upon such
conversion.
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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 Mandatorily
Convertible Preferred Stock (including, with respect to Mandatorily Convertible
Preferred Stock represented by the PInES, the Depositary) 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 multiplied by 500, or (f) pay a
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 Mandatorily
Convertible Preferred Stock (including, with respect to Mandatorily Convertible
Preferred Stock represented by the PInES, the Depositary) 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 multiplied by 500. In
addition, the Company will be entitled (but will not be required) to make upward
adjustments in the Conversion Rate and the Optional Conversion Rate as the
Company, in its sole discretion, shall determine to be advisable, in order that
any stock dividend, subdivision or split of shares, distribution of 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 1% therein;
PROVIDED, HOWEVER, that any adjustments which, by reason of the foregoing, are
not required to be made will 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
Depositary and 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 PInES.
No adjustment will be made to the Conversion Rate or the Optional Conversion
Rate in the event that the Company issues Common Stock for cash, including at
prices below its then-existing market price, the Conversion Price or the
Optional Conversion Price. The Conversion Rate and the Optional Conversion Rate
will also not be adjusted for other events, such as issuances of Common Stock in
connection with acquisitions, that may adversely affect the market price of the
Common Stock. See "Risk Factors-- Dilution of Common Stock."
ADJUSTMENT FOR CERTAIN CONSOLIDATIONS OR MERGERS
In case of any consolidation or merger to which the Company is a party
(other than a merger or consolidation in which the Company is the surviving or
continuing corporation and in which each share of
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Common Stock outstanding immediately prior to the merger or consolidation
remains unchanged in all material respects), or in case of any sale or transfer
to another corporation of the property of the Company as an entirety or
substantially as an entirety, or in case of any statutory exchange of securities
with another corporation (other than in connection with a merger or
acquisition), each PInES will, after consummation of such transaction, be
subject to (i) conversion at the option of the holder into the kind and amount
of securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock (including
fractional shares for this purpose) into which such PInES might have been
converted immediately prior to consummation of such transaction and (ii)
conversion on the Mandatory Conversion Date into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock (including
fractional shares for this purpose) into which such PInES would have been
converted if the conversion on the Mandatory Conversion Date had occurred
immediately prior to the date of consummation of such transaction, plus the
right, subject to the rights of other Preferred Stock, to receive, through the
Depositary, cash in an amount equal to all accrued and unpaid dividends on the
Mandatorily Convertible Preferred Stock represented by such PInES (other than
previously declared dividends deliverable to a holder of record of the
Depositary Receipt evidencing such PInES as of a prior record date); and
assuming in each case that such holder of shares of Common Stock failed to
exercise rights of election, if any, as to the kind or amount of securities,
cash or other property receivable upon consummation of such transaction
(provided that, if the kind or amount of securities, cash or other property
receivable upon consummation of such transaction is not the same for each
non-electing share, then the kind and amount of securities, cash or other
property receivable upon consummation of such transaction for each non-electing
share will be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). The kind and amount of securities into or
for which the PInES will be convertible after consummation of such transaction
will be subject to adjustment as described above under the caption "--Conversion
Adjustments" following the date of consummation of such transaction. The Company
may not become a party to any such transaction unless the terms thereof are
consistent with the foregoing.
FRACTIONAL SHARES
No fractional shares of Common Stock will be delivered by the Depositary
upon conversion of the PInES. In lieu of any fractional share otherwise
deliverable in respect of the aggregate number of PInES of any holder that are
converted upon mandatory conversion or any voluntary conversion, such holder
will be entitled to receive an amount in cash equal to the same fraction of the
Closing Price of the Common Stock (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. If more than one
PInES is surrendered for conversion at one time by or for the same holder, the
number of shares of Common Stock issuable upon conversion thereof will be
computed on the basis of the aggregate number of PInES so converted.
In addition, no fractional shares of Common Stock will be delivered by the
Depositary to holders of the PInES in connection with the Depositary's
distribution of dividends on the Mandatorily Convertible Preferred Stock paid by
the Company to it in shares of Common Stock. In lieu of any fractional share
otherwise so deliverable, such holders will 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 fifth Trading Day immediately preceding the dividend
payment date. On the Mandatory Conversion Date, the fractional share of Common
Stock that any holder of PInES would otherwise be entitled to receive shall be
determined by adding all the fractional shares such holder would otherwise be
entitled to receive on the mandatory conversion of all PInES held by such holder
and on the payment of the regular quarterly dividend on all PInES held by such
holder. On that date, the Company may, at its option, deliver any resulting
whole number of shares in shares of Common Stock and the resulting fraction in
cash.
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In the event that (i) mandatory conversion of the PInES, (ii) voluntary
conversions of PInES, (iii) the Depositary's delivery of shares of Common Stock
as dividends to the holders of PInES or (iv) the combination of (i) and (iii)
pursuant to the preceding sentence result in more than one holder of PInES being
entitled to cash in lieu of a fractional share on the related date of conversion
or dividend payment, as applicable, the Company will deliver to the Depositary
for distribution to the holders of the PInES cash in an amount equal to the
total amount of cash to which all holders of PInES are entitled in lieu of
fractional shares on such date.
If payment in cash in lieu of fractional shares of Common Stock in
accordance with the preceding three paragraphs would result in the Company's
failure to be in compliance with any debt instrument to which it is a party, the
Company will be entitled to deliver a whole share of Common Stock in lieu of
cash to holders of PInES entitled to fractional shares of Common Stock
(beginning with the holders entitled to the largest fractional shares) until
delivery of cash in lieu of fractional shares of Common Stock to the remaining
holders of PInES would no longer result in the Company's failure to be in
compliance with such debt instrument.
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 PInES will be entitled to receive an
amount equal to the per share price to public of the PInES shown on the cover
page of this Prospectus plus accrued and unpaid dividends on the Mandatorily
Convertible Preferred Stock represented thereby, 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 (including
shares of Mandatorily Convertible Preferred Stock represented by PInES) will 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 Mandatorily Convertible Preferred Stock
(including shares of Mandatorily Convertible Preferred Stock represented by
PInES) or any other series of Preferred Stock are 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 which does not have a separate class vote and upon which like
voting rights have been conferred and are exercisable), with each share of
Mandatorily Convertible Preferred Stock entitled to 500 votes (equivalent to one
vote for each PInES) 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
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number of Directors constituting the Board of Directors immediately prior to the
accrual of such right. Such right, when vested, will continue until all
dividends in arrears on the Mandatorily Convertible Preferred Stock and such
series of Preferred Stock will 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 will terminate or have terminated,
and, when so paid and such termination occurs or has occurred, such voting right
will cease. Upon any termination of the aforesaid voting right, subject to the
requirements of the Delaware corporation law and the Restated Certificate of
Incorporation of the Company, such Preferred Stock Directors will cease to be
Directors of the Company and will 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 Restated
Certificate of Incorporation or the By-laws of the Company so as to affect
adversely the powers, 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 Restated 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 will 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, the PInES and shares of Mandatorily Convertible
Preferred Stock.
LISTING
Application will be made to list the PInES 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 PInES.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion regarding the material United States
Federal income tax consequences expected to apply to a holder with respect to
the purchase, ownership and disposition of the shares of PInES representing
interests in Mandatorily Convertible Preferred Stock. This discussion is based
on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
the Treasury regulations promulgated thereunder and the administrative and
judicial interpretations thereof, all as in effect on the date of this
Prospectus. 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 terms closely resembling those of the shares of
Mandatorily Convertible Preferred Stock has not been the subject of any
regulation, ruling or judicial decision currently in effect, and there can be no
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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.
PINES
Holders of the PInES will be treated for United States federal income tax
purposes as owners of the shares of Mandatorily Convertible Preferred Stock
represented by the PInES. Accordingly, the tax treatment of the owners of the
PInES will be the same as the tax treatment of the owners of the Mandatorily
Convertible Preferred Stock as described below.
Thus, upon the withdrawal of shares of Mandatorily Convertible Preferred
Stock in exchange for Depositary Receipts evidencing the ownership of PInES as
provided in the Depositary Agreement, (i) no gain or loss will be recognized by
an exchanging holder, (ii) the tax basis of each share of Mandatorily
Convertible Preferred Stock to an exchanging holder will be the same as the
aggregate tax basis of the PInES exchanged therefor, and (iii) the holding
period for shares of Mandatorily Convertible Preferred Stock in the hands of an
exchanging holder will include the period during which such holder held the
PInES exchanged therefor.
References in this section "Federal Income Tax Consequences," to holders of
the Mandatorily Convertible Preferred Stock will mean both holders of shares of
Mandatorily Convertible Preferred Stock and holders of PInES representing shares
of Mandatorily Convertible Preferred Stock. References to shares of Mandatorily
Convertible Preferred Stock will mean both shares of Mandatorily Convertible
Preferred Stock and PInES.
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 will qualify for the 70
percent intercorporate dividends-received deduction provided that the minimum
holding period (generally at least 46 days) and that other applicable
requirements are satisfied, and subject further to the discussion of Code
Section 1059(f), below. Under certain circumstances, a corporate holder may be
subject to the alternative minimum tax with respect to a portion of the amount
of its dividends-received deduction. To the extent the Company does not have
sufficient current or accumulated earnings and profits in the years that the
Mandatorily Convertible Preferred Stock is 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 distributions exceed such tax basis they will
be treated as capital gain. Such distributions will not be eligible for the
dividends-received deduction. It is uncertain whether the Company currently has,
and whether it will have prior to the Mandatory Conversion Date, any current or
accumulated earnings and profits.
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 that are not in arrears and that are paid to an original holder of the
shares of Mandatorily Convertible Preferred Stock will not constitute
extraordinary dividends under Section
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1059(c). However, under Section 1059(f), any dividend with respect to
"disqualified preferred stock" is treated as an "extraordinary dividend." For
this purpose, "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. However, although the issue is not free from doubt, it is
believed that the Manditorily Convertible Preferred Stock is not "disqualified
preferred stock."
DISTRIBUTION OF COMMON STOCK IN LIEU OF CASH DIVIDEND. If the Company pays
a distribution on the Mandatorily Convertible Preferred Stock in the form of
Common Stock, such distribution will be taxable in the same manner as
distributions described above under "Dividends." The amount of such distribution
will equal the fair market value on the distribution date of the Common Stock
distributed to a holder on that date. A holder's tax basis in Common Stock so
received will equal the fair market value of such Common Stock on the
distribution date, and such holder's holding period for such Common Stock will
commence on the day following the distribution date.
REDEMPTION PREMIUM. Under certain circumstances, Section 305(c) of the Code
requires that any excess of the redemption price of redeemable preferred stock
over its issue price be includable in income, prior to receipt, as a
constructive dividend. However, although the issue is not free from doubt 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 upon
the conversion of shares of Mandatorily Convertible Preferred Stock into shares
of Common Stock in either case 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 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. In addition, a holder who receives cash in lieu of a
fractional share will be treated as having received the fractional share and
exchanged it for cash in a transaction subject to Section 302 of the Code and
related provisions. This exchange generally should 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.
Generally, a holder's tax 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 (or failure to make
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 the holder's right to convert the shares of Mandatorily Convertible
Preferred Stock into shares of Common Stock after a dividend record date but
before payment of the dividend, then, upon conversion the 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, which amount would
increase the tax basis of the Common Stock received. The holder would
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recognize the dividend payment as income in accordance with the rules described
under "Dividends" above.
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 that was received either upon the conversion of
such preferred stock or as the dividend distribution generally will realize gain
(or loss) to the extent that the proceeds of such disposition (not including any
proceeds attributable to any declared accrued but unpaid dividends which will be
taxable as such to holders of record who have not previously included such
dividends in income), net of any reasonable costs of disposition, exceed (or are
exceeded by) the adjusted tax basis of the Mandatory Convertible Preferred Stock
or Common Stock that is disposed of by 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. Generally, backup
withholding applies only if a taxpayer fails to furnish or certify a proper
taxpayer identification number or if 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.
MISCELLANEOUS
Upon issuance, the shares of Mandatorily Convertible Preferred Stock will be
fully paid and nonassessable. Holders of PInES and Mandatorily Convertible
Preferred Stock will 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 will 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 will resume the status of authorized and unissued shares of preferred
stock, undesignated as to series, and will be available for subsequent issuance.
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DESCRIPTION OF DEPOSITARY ARRANGEMENTS
THE FOLLOWING SUMMARY OF THE TERMS AND PROVISIONS OF THE DEPOSITARY
ARRANGEMENTS FOR THE PINES 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 PInES 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 (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 PInES 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 Designation and summarized under
"Description of PInES." The principal executive office of is located
at .
The PInES are evidenced by Depositary Receipts. Copies of the Deposit
Agreement, the form of which has been or will be filed 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
The Company will deposit the shares of Mandatorily Convertible Preferred
Stock represented by the PInES being offered hereby with the Depositary, in
exchange for Depositary Receipts, which the Company will deliver to the
Representatives (as defined herein) upon consummation of the PInES Offering.
WITHDRAWAL OF MANDATORILY CONVERTIBLE PREFERRED STOCK
Upon surrender of Depositary Receipts at the corporate office of the
Depositary, the owner of the PInES evidenced thereby is entitled to delivery at
such office of certificates evidencing the number of shares of Mandatorily
Convertible Preferred Stock (but only in whole shares of Mandatorily Convertible
Preferred Stock) represented by such PInES. If the Depositary Receipts delivered
by the holder evidence a number of PInES in excess of the number of PInES
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 PInES. 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
PInES. See "Risk Factors--Absence of a Previous Market for the PInES."
CONVERSION PROVISIONS
MANDATORY CONVERSION. As described under "Description of PInES--Mandatory
Conversion of PInES," the PInES are subject to mandatory conversion into shares
of Common Stock on the Mandatory Conversion Date.
CONVERSION AT THE OPTION OF THE HOLDER. As described under "Description of
PInES-- Conversion at the Option of the Holder," the PInES may be converted, in
whole but not in part, into shares of Common Stock at the option of the holder
at any time prior to the Mandatory Conversion Date. To effect such an optional
conversion, a holder of PInES must deliver Depositary Receipts evidencing the
PInES 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 such
conversion is to occur 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, payment in cash of an amount equal to the
dividend payable on such
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date), to the Depositary or its agent. Each optional conversion of PInES 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.
If only a portion of the PInES evidenced by a Depositary Receipt is to be
converted, a new Depositary Receipt or Receipts will be issued for any PInES not
converted. No fractional shares of Common Stock will be issued to any holder
upon mandatory or optional conversion of its PInES. See "--Dividends and Other
Distributions" below.
After the date fixed for conversion, the PInES so converted will no longer
be deemed to be outstanding and all rights of the holders of such PInES 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 PInES
are entitled upon such conversion, upon surrender to the Depositary of the
Depositary Receipt or Receipts evidencing such PInES.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions (other than cash dividends or cash distributions paid by the
Company to the Depositary in lieu of fractional shares) and all dividends or
other distributions paid by the Company in shares of Common Stock (other than
payments of whole shares of Common Stock in lieu of fractional shares pursuant
to the final paragraph under "Description of PInES--Fractional Shares") in
respect of the Mandatorily Convertible Preferred Stock to the record holders of
Depositary Receipts in proportion, insofar as practicable, to the number of
PInES owned by such holders. The Depositary will distribute whole shares of
Common Stock paid by the Company to it in lieu of cash payments for fractional
shares otherwise payable by the Company on the Mandatorily Convertible Preferred
Stock to holders of PInES entitled to such fractional shares, beginning with the
holders entitled to the largest fractional shares.
The Depositary will distribute cash dividends or other cash distributions
received by it from the Company in lieu of fractional shares to a record holder
of Depositary Receipts on the basis of such holder's aggregate record holdings
of Depositary Receipts (i) on the related record date for a dividend payment or
(ii) which are to be converted into Common Stock on a conversion date, as
applicable, if delivering shares of Common Stock on that basis in payment of the
dividend or upon conversion would otherwise result in delivery of a fractional
share. The Depositary will, in any such event, deliver an amount in cash to such
record holder as set forth in "Description of PInES--Fractional Shares." On the
Mandatory Conversion Date, the fractional share of Common Stock that any holder
of PInES would otherwise be entitled to receive shall be determined by adding
all the fractional shares such holder would otherwise be entitled to receive on
the mandatory conversion of all PInES held by such holder and on the payment of
the regular quarterly dividend on all PInES held by such holder. If the Company
elects to deliver resulting whole number of shares in shares of Common Stock and
the resulting fraction in cash, the Depositary will distribute shares and cash
received by it to the applicable holders of PInES. In the event that (i)
mandatory conversion of the PInES, (ii) voluntary conversions of PInES, (iii)
the Depositary's delivery of shares of Common Stock as dividends to the holders
of PInES or (iv) the combination of (i) and (iii) pursuant to the preceding
sentence result in more than one holder of PInES being entitled to cash in lieu
of a fractional share on the related date of conversion or dividend payment, as
applicable, the Company will deliver to the Depositary for distribution to such
holders cash in an amount equal to the total amount of cash to which all such
holders are entitled in lieu of fractional shares on such date.
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 PInES owned by such
holders, unless the Depositary determines that it is not feasible to make such
distribution, in which
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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.
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
PInES. The Depositary will endeavor, insofar as practicable, to vote the number
of shares of Mandatorily Convertible Preferred Stock represented by such PInES
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.
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 PInES, subject to the conditions specified in
the Deposit Agreement, upon surrender of the Depositary Receipts evidencing such
PInES to receive shares of Mandatorily Convertible Preferred Stock or, upon
conversion of the shares of Mandatorily Convertible Preferred Stock represented
by PInES, 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.
114
<PAGE>
The Depositary may resign or be removed by the Company. Such resignation or
removal will only become effective upon the appointment of a qualified successor
depositary which expressly assumes the obligations of the Depositary under the
Deposit Agreement.
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.
115
<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., Smith Barney Inc., Furman Selz LLC and NationsBanc
Montgomery Securities LLC 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.................................................................................
Furman Selz LLC..................................................................................
NationsBanc Montgomery Securities LLC............................................................
---------------
Total........................................................................................ 10,400,000
---------------
---------------
</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), Smith Barney Inc.,
Furman Selz LLC and NationsBanc Montgomery Securities LLC 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.................................................................................
Furman Selz LLC..................................................................................
NationsBanc Montgomery Securities LLC............................................................
---------------
Total........................................................................................ 2,600,000
---------------
---------------
</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,
116
<PAGE>
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. 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
117
<PAGE>
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.
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 6.0 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 Seller 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 1,560,000 and 390,000 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.
118
<PAGE>
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 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 PInES and the Common Stock into
which shares of 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 PInES.
Each of Lehman Brothers, Smith Barney Inc. and Furman Selz LLC 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 financing commitments provided to the
Company in connection with the Six Flags Transactions and has received customary
fees in connection therewith. In addition, Lehman Brothers, Smith Barney Inc.
and Furman Selz LLC acted as underwriters of the Company's 1996 and 1997 public
offerings and are acting (along with NationsBanc Montgomery Securities LLC) 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.
119
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and 1997, and for each of the years in the three-year period ended December 31,
1997, 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 Six Flags Entertainment Corporation as of
December 28, 1997 and December 29, 1996 and for the three years ended December
28, 1997, December 29, 1996 and December 31, 1995 appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The audited financial statements of Kentucky Kingdom, Inc. as of November 2,
1997 and for the year then ended incorporated in this Prospectus by reference
from the Company's amended report on Form 8-K/A have been audited by Carpenter,
Mountjoy & Bressler, PSC, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of Walibi, S.A. at December 31, 1997 and for the
year then ended, appearing in the Form 8-K to be filed by the Company, which
will be incorporated by reference thereupon are incorporated herein in reliance
upon the report of Coopers & Lybrand LLP, independent auditors included in the
Form 8-K and upon the authority of such firm as experts in accounting and
auditing.
120
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF PREMIER PARKS INC.:
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets.............................................................................. 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:
Report of Independent Auditors........................................................................... F-26
Consolidated Statements of Operations.................................................................... F-27
Consolidated Balance Sheets.............................................................................. F-28
Consolidated Statements of Stockholders' Equity (Deficit)................................................ F-29
Consolidated Statements of Cash Flows.................................................................... F-30
Notes to Consolidated Financial Statements............................................................... F-31
</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, 1996 and 1997, 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, 1997. 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, 1996 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Oklahoma City, Oklahoma
February 23, 1998
F-2
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
ASSETS 1996 1997
- -------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 4,043,000 $84,288,000
Accounts receivable................................................................. 1,180,000 6,537,000
Inventories......................................................................... 4,200,000 5,547,000
Income tax receivable............................................................... -- 995,000
Prepaid expenses and other current assets........................................... 3,416,000 3,690,000
----------- -----------
Total current assets............................................................ 12,839,000 101,057,000
----------- -----------
Other assets:
Deferred charges.................................................................... 6,752,000 10,123,000
Deposits and other.................................................................. 9,087,000 3,949,000
----------- -----------
Total other assets.............................................................. 15,839,000 14,072,000
----------- -----------
Property and equipment, at cost....................................................... 263,175,000 485,866,000
Less accumulated depreciation....................................................... 17,845,000 35,610,000
----------- -----------
245,330,000 450,256,000
Intangible assets..................................................................... 31,669,000 48,876,000
Less accumulated amortization....................................................... 874,000 2,940,000
----------- -----------
30,795,000 45,936,000
----------- -----------
Total assets.................................................................... $304,803,000 $611,321,000
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities
Accounts payable and accrued expenses............................................... $11,059,000 $23,199,000
Accrued interest payable............................................................ 4,304,000 9,785,000
Current portion of capitalized lease obligations.................................... 1,492,000 795,000
----------- -----------
Total current liabilities....................................................... 16,855,000 33,779,000
----------- -----------
Long-term debt and capitalized lease obligations:
Long-term debt:
Senior notes...................................................................... 90,000,000 215,000,000
Credit facility................................................................... 57,574,000 --
Capitalized lease obligations....................................................... 1,768,000 1,231,000
----------- -----------
Total long-term debt and capitalized lease obligations.......................... 149,342,000 216,231,000
Other long-term liabilities........................................................... 4,846,000 4,025,000
Deferred income taxes................................................................. 20,578,000 33,537,000
----------- -----------
Total liabilities............................................................... 191,621,000 287,572,000
----------- -----------
Stockholders' equity:
Preferred stock, 500,000 shares authorized at December 31, 1996 and 1997; no shares
issued and outstanding at December 31, 1996 and 1997.............................. -- --
Common stock, $.05 par value, 30,000,000 and 90,000,000 shares authorized at
December 31, 1996 and 1997, respectively; 11,392,669 and 18,899,457 shares issued
and 11,366,323 and 18,873,111 shares outstanding at December 31, 1996 and 1997,
respectively...................................................................... 569,000 944,000
Capital in excess of par value...................................................... 144,642,000 354,235,000
Accumulated deficit................................................................. (31,340,000) (17,241,000)
Deferred compensation............................................................... -- (13,500,000)
----------- -----------
113,871,000 324,438,000
Less 26,346 common shares of treasury stock, at cost................................ (689,000) (689,000)
----------- -----------
Total stockholders' equity...................................................... 113,182,000 323,749,000
----------- -----------
Total liabilities and stockholders' equity...................................... $304,803,000 $611,321,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue:
Theme park admissions.......................................... $ 21,863,000 $ 41,162,000 $ 94,611,000
Theme park food, merchandise, and other........................ 19,633,000 52,285,000 99,293,000
-------------- -------------- --------------
Total revenue.............................................. 41,496,000 93,447,000 193,904,000
-------------- -------------- --------------
Operating costs and expenses:
Operating expenses............................................. 19,775,000 42,425,000 81,356,000
Selling, general and administrative............................ 9,272,000 16,927,000 36,547,000
Costs of products sold......................................... 4,635,000 11,101,000 23,025,000
Depreciation and amortization.................................. 3,866,000 8,533,000 19,792,000
-------------- -------------- --------------
Total operating costs and expenses......................... 37,548,000 78,986,000 160,720,000
-------------- -------------- --------------
Income from operations..................................... 3,948,000 14,461,000 33,184,000
Other income (expense):
Interest expense, net.......................................... (5,578,000) (11,121,000) (17,775,000)
Termination fee, net of expenses............................... -- -- 8,364,000
Other income (expense)......................................... (177,000) (78,000) (59,000)
-------------- -------------- --------------
Total other income (expense)............................... (5,755,000) (11,199,000) (9,470,000)
-------------- -------------- --------------
Income (loss) before income taxes.......................... (1,807,000) 3,262,000 23,714,000
Income tax expense (benefit)..................................... (762,000) 1,497,000 9,615,000
-------------- -------------- --------------
Income (loss) before extraordinary loss.................... (1,045,000) 1,765,000 14,099,000
Extraordinary loss on extinguishment of debt, net of income tax
benefit of $90,000 in 1995..................................... (140,000) -- --
-------------- -------------- --------------
Net income (loss).......................................... $ (1,185,000) $ 1,765,000 $ 14,099,000
-------------- -------------- --------------
-------------- -------------- --------------
Net income (loss) applicable to common stock............... $ (1,714,000) $ 1,162,000 $ 14,099,000
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average number of common shares outstanding--basic...... 3,938,000 8,603,000 17,938,000
-------------- -------------- --------------
-------------- -------------- --------------
Income (loss) per average common share outstanding-- basic:......
Income (loss) before extraordinary loss.................... $ (.40) $ .14 $ .79
Extraordinary loss......................................... (.04) -- --
-------------- -------------- --------------
Net income (loss).......................................... $ (.44) $ .14 $ .79
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average number of common shares outstanding--diluted.... 3,938,000 8,972,000 18,438,000
-------------- -------------- --------------
-------------- -------------- --------------
Income (loss) per average common share outstanding-- diluted:
Income (loss) before extraordinary loss.................... $ (.40) $ .13 $ .76
Extraordinary loss......................................... (.04) -- --
-------------- -------------- --------------
Net income (loss).......................................... $ (.44) $ .13 $ .76
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
SERIES A, 7%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- CAPITAL IN
SHARES SHARES EXCESS OF ACCUMULATED DEFERRED TREASURY
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT COMPENSATION STOCK TOTAL
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 common
stock........... -- -- 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
to common
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........... -- -- 7,506,788 375,000 209,593,000 -- (14,625,000) -- 195,343,000
Amortization of
deferred
compensation.... -- -- -- -- -- -- 1,125,000 -- 1,125,000
Net income........ -- -- -- -- -- 14,099,000 -- -- 14,099,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1997............ -- $ -- 18,899,457 $ 944,000 354,235,000 (17,241,000) (13,500,000) (689,000) 323,749,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................... $ (1,185,000) $ 1,765,000 $ 14,099,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 3,866,000 8,533,000 19,792,000
Deferred compensation.................................. -- -- 1,125,000
Extraordinary loss on early extinguishment of debt..... 230,000 -- --
Amortization of debt issuance costs.................... 317,000 811,000 1,918,000
Gain on sale of assets................................. -- (51,000) (46,000)
(Increase) decrease in accounts receivable............. 5,794,000 (215,000) (5,272,000)
Deferred income taxes (benefit)........................ (808,000) 1,433,000 6,737,000
Increase in income tax receivable...................... -- -- (995,000)
Increase in inventories and prepaid expenses and other
current assets....................................... (455,000) (2,360,000) (1,150,000)
(Increase) decrease in deposits and other assets....... 1,197,000 (3,947,000) 6,237,000
Increase (decrease) in accounts payable and accrued
expenses............................................. (2,366,000) 5,216,000 (776,000)
Increase in accrued interest payable................... 4,056,000 146,000 5,481,000
--------------- --------------- ---------------
Total adjustments...................................... 11,831,000 9,566,000 33,051,000
--------------- --------------- ---------------
Net cash provided by operating activities.................... 10,646,000 11,331,000 47,150,000
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from the sale of equipment........................ -- 476,000 246,000
Other investments.......................................... (63,000) (48,000) (38,000)
Additions to property and equipment........................ (10,732,000) (39,423,000) (135,852,000)
Acquisition of theme park assets........................... -- (116,154,000) (60,050,000)
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........................ (74,139,000) (155,149,000) (217,070,000)
--------------- --------------- ---------------
Cash flows from financing activities:
Repayment of debt.......................................... (17,487,000) (1,082,000) (66,576,000)
Proceeds from borrowings................................... 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............ -- 65,306,000 189,530,000
Payment of debt issuance costs............................. (5,099,000) (2,724,000) (5,289,000)
--------------- --------------- ---------------
Net cash provided by financing activities.................... 90,914,000 119,074,000 250,165,000
--------------- --------------- ---------------
Increase (decrease) in cash and cash equivalents............. 27,421,000 (24,744,000) 80,245,000
Cash and cash equivalents at beginning of year............... 1,366,000 28,787,000 4,043,000
--------------- --------------- ---------------
Cash and cash equivalents at end of year..................... $ 28,787,000 $ 4,043,000 $ 84,288,000
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
F-6
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------- -------------
<S> <C> <C> <C>
Supplementary cash flow information:
Cash paid for interest............................................. $ 1,701,000 $ 11,640,000 $ 18,315,000
------------ ------------- -------------
------------ ------------- -------------
Cash paid (received) for income taxes (refund)..................... $ (22,000) $ 64,000 $ 3,697,000
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
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.
1996
- 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.
1997
- The Company issued $5,813,000 of common stock (153,800 shares) as
components of theme park acquisitions.
- The Company issued restricted common stock (450,000 shares) to certain
employees valued at $14,625,000.
- The Company assumed $268,000 of capital lease obligations 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
DECEMBER 31, 1995, 1996 AND 1997
(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, 1997, the Company and its
subsidiaries own and operate twelve 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; Kentucky
Kingdom--The Thrill Park, located in Louisville, Kentucky; Riverside Park, a
theme park located near Springfield, Massachusetts; 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. The
Company also manages Marine World Africa USA in Vallejo, California.
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 limited partnerships and limited liability
companies in which the Company beneficially owns 100% of the interests.
Intercompany transactions and balances have been eliminated in consolidation.
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 $2,753,000 and $73,694,000 at December 31, 1996 and
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 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.
F-8
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
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.
Advertising and promotions expense incurred was $5,700,000, $9,100,000, and
$21,600,000 during 1995, 1996, and 1997, respectively.
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 is 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) were 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. Impairment of goodwill is assessed
whenever events or changes in circumstances indicate that the carrying amount of
goodwill may not be recoverable.
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 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.
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
INTEREST EXPENSE RECOGNITION
Interest on notes payable is generally recognized as expense on the basis of
stated interest rates. 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 $6,074,000, $12,597,000, and $25,714,000 in 1995, 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
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." SFAS No. 128
revised the previous calculation methods and presentations of earnings per
share. The statement requires that all prior-period earnings per share data be
restated. The Company adopted SFAS No. 128 in the fourth quarter of 1997 as
required by the statement. The effect of applying SFAS No. 128 was not material
to the Company's prior period's earnings per share data. The previously reported
amounts for earnings per share were replaced by basic earnings per share and
diluted earnings per share. Basic earnings per share for the second quarter of
1997 and for the year 1996 are $.01 per share higher than the previously
reported primary earnings per share amounts.
The Company issued convertible preferred stock in 1995. Preferred stock
dividends of $529,000 and $603,000, which were paid through additional issuances
of common stock, were considered in determining net income (loss) applicable to
common stock in 1995 and 1996, respectively.
Under the provisions of SFAS No. 128, basic earnings per share is computed
by dividing net income (loss) applicable to common stock by the weighted average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if the Company's outstanding
stock options were exercised (calculated using the treasury stock method).
The following table reconciles the weighted average number of common shares
outstanding used in the calculations of basic and diluted income per average
common share outstanding for the years 1996 and 1997. The Company incurred a
loss in 1995 and the effect on diluted loss per average common share
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
outstanding of all contingently issuable common shares was antidilutive.
Therefore, there is no difference in the number of shares used in the basic and
diluted calculations for the year 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
<S> <C> <C>
1996 1997
---------- ------------
Weighted average number of common shares outstanding-- basic....... 8,603,000 17,938,000
Dilutive effect of potential common shares issuable upon the
exercise of employee stock options............................... 369,000 500,000
---------- ------------
Weighted average number of common shares outstanding-- diluted..... 8,972,000 18,438,000
---------- ------------
---------- ------------
</TABLE>
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 8.
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.
RECLASSIFICATIONS
Reclassifications have been made to certain amounts reported in 1995 and
1996 to conform with the 1997 presentation.
(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.
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(3) ACQUISITION OF THEME PARKS PRIOR TO JANUARY 1998
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 acquisition date. The acquisition was accounted for as a
purchase. 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.
The accompanying 1995, 1996 and 1997 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 of 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 then directly owned by the
Company. The transaction was accounted for as a purchase. In addition, the
Company 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 of two
partnerships which owned substantially all of the assets used in the operation
of the two Waterworld/USA water parks and a related family entertainment center
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 then 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 and 1997 consolidated statement of operations reflects
the results of the Elitch Gardens, Waterworld/USA, and The Great Escape and
Splash Water Kingdom acquisitions from their respective acquisition dates.
F-12
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(3) ACQUISITION OF THEME PARKS PRIOR TO JANUARY 1998 (CONTINUED)
On February 5, 1997, the Company acquired all of the outstanding common
stock of Stuart Amusement Company ("Stuart"), 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
transaction was accounted for as a purchase. As of the acquisition date and
after giving effect to the purchase, $6,623,000 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 Stuart's assets and
liabilities. Approximately $10,484,000 of cost in excess of the fair value of
the net assets acquired was recorded as intangible assets, primarily goodwill.
On November 7, 1997, the Company acquired all of the interests of a limited
liability company which owned substantially all of the theme park assets of
Kentucky Kingdom--The Thrill Park ("Kentucky Kingdom"), located in Louisville,
Kentucky, for a purchase price of $64,000,000 of which $4,831,000 was 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 1998, 1999, and 2000. The
acquisition was accounted for as a purchase. The purchase price was primarily
allocated to property and equipment with $4,592,000 of costs recorded as
intangible assets, primarily goodwill. The value of the additional shares, if
any, will be recognized as additional goodwill.
The accompanying 1997 consolidated statement of operations reflects the
results of Stuart and Kentucky Kingdom from their respective acquisition dates.
The following summarized pro forma results of operations assumes that for
the year ended December 31, 1997, the Stuart and Kentucky Kingdom acquisitions
and related transactions occurred as of the beginning of 1997 and for the year
ended December 31, 1996, assumes that these acquisitions, the Elitch Gardens,
The Great Escape and Splash Water Kingdom and Waterworld/USA acquisitions, and
the related transactions occurred as of the beginning of 1996.
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
(UNAUDITED)
(IN THOUSANDS)
Total revenues........................................................ $ 175,224 $ 215,620
Net income............................................................ 12,436 15,210
Income per weighted average common share outstanding-- basic.......... .66 .81
</TABLE>
F-13
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(4) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Land......................................................... $ 27,760,000 $ 40,099,000
Buildings and improvements................................... 106,302,000 159,661,000
Rides and attractions........................................ 112,379,000 254,969,000
Equipment.................................................... 16,734,000 31,137,000
-------------- --------------
Total...................................................... 263,175,000 485,866,000
Less accumulated depreciation................................ (17,845,000) (35,610,000)
-------------- --------------
$ 245,330,000 $ 450,256,000
-------------- --------------
-------------- --------------
</TABLE>
Included in property and equipment are costs and accumulated depreciation
associated with capitalized leases as follows:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Cost.............................................................. $ 6,069,000 $ 6,386,000
Accumulated depreciation.......................................... (577,000) (826,000)
------------ ------------
$ 5,492,000 $ 5,560,000
------------ ------------
------------ ------------
</TABLE>
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
At December 31, 1996 and 1997, long-term debt and capitalized lease
obligations consist of:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Long term debt:
Senior notes due 2003 (a).................................. $ 90,000,000 $ 90,000,000
Senior notes due 2007 (b).................................. -- 125,000,000
Credit facility (c)........................................ 57,574,000 --
-------------- --------------
Total long-term debt......................................... 147,574,000 215,000,000
Capitalized lease obligations:
Capitalized lease obligations maturing 1998 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
$5,560,000 as of December 31, 1997....................... 3,260,000 2,026,000
-------------- --------------
Total.................................................... $ 150,834,000 $ 217,026,000
-------------- --------------
-------------- --------------
</TABLE>
F-14
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
(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 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 the $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) 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 equal to the Company's 2003 notes in priority upon liquidation.
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.
(c) In connection with the 1996 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
F-15
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
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") was for working capital and general corporate purposes; (ii) up to
$25,000,000 ("Facility A") was to finance capital expenditures prior to April
30, 1998; and (iii) up to $60,000,000 ("Facility B") was 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. Commitment fees approximated $53,000
and $620,000 in 1996 and 1997, respectively. 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, including ratios of total
debt to earnings before interest, taxes and depreciation and amortization
(EBITDA), interest expense to EBITDA, and fixed charges to EBITDA.
On January 31, 1997, the Company and the syndicate of banks agreed to amend
the Credit Facility. The $30,000,000 Revolving Credit Facility has a maturity
date of December 31, 2001 (without reduction prior to that date). Additionally,
following repayment of amounts that were 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 Term Loan Facility, as amended, will be
available to fund acquisitions and make capital improvements. The amount
available under the Term Loan Facility reduces to $75,000,000 on December 31,
1999, to $45,000,000 on December 31, 2000, and matures 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.
On February 9, 1998, the Company terminated the Credit Facility. No amounts
were outstanding as of December 31, 1997 or as of the termination date.
F-16
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
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, 1997, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998.......................................................................... $ 795,000
1999.......................................................................... 412,000
2000.......................................................................... 723,000
2001.......................................................................... 67,000
2002 and thereafter........................................................... 215,029,000
--------------
$ 217,026,000
--------------
--------------
</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, 1996
and 1997, is approximately $160,000,000 and $236,000,000, respectively.
(6) TERMINATION FEE
During October 1997, the Company entered into an agreement with the limited
partner of the partnership that owns the Six Flags Over Texas theme park. The
general terms of the agreement were for the Company to become the managing
general partner of the partnership, to manage the operations of the park, to
receive a portion of the income from such operations, and to purchase limited
partnership units over the term of the agreement. The provisions of the
agreement also granted the Company an option to purchase all of the partnership
interests in the partnership at the end of the agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the theme park also reached an agreement with the limited
partnership. The Company received the termination fee in December 1997 and has
included the termination fee, net of $2,386,000 of expenses associated with the
transaction, as a component of other income (expense) in the accompanying 1997
consolidated statement of operations.
F-17
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(7) INCOME TAXES
Income tax expense (benefit) allocated to operations for 1995, 1996 and 1997
consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
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
------------ ------------ ------------
------------ ------------ ------------
1997:
U.S. Federal...................................... $ 2,505,000 $ 6,060,000 $ 8,565,000
State and local................................... 373,000 677,000 1,050,000
------------ ------------ ------------
$ 2,878,000 $ 6,737,000 $ 9,615,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Recorded income tax expense (benefit) allocated to operations differed from
amounts computed by applying the U.S. federal income tax rate of 34% in 1995 and
1996 and 35% in 1997 to pretax income (loss) approximately as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Computed "expected" federal income tax expense
(benefit)......................................... $ (614,000) $ 1,109,000 $ 8,300,000
Amortization of goodwill............................ 78,000 180,000 327,000
Other, net.......................................... (68,000) 87,000 200,000
Effect of state and local income taxes, net of
federal tax benefit............................... (158,000) 121,000 788,000
------------ ------------ ------------
$ (762,000) $ 1,497,000 $ 9,615,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
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, alternative minimum tax carryforwards, and
deferred compensation amounts represent future income tax deductions (deferred
tax assets). The tax effects of these temporary differences as of December 31,
1996 and 1997, are presented below:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Deferred tax assets before valuation allowance................. $ 11,496,000 $ 21,891,000
Less valuation allowance....................................... 1,196,000 1,196,000
------------- -------------
Net deferred tax assets........................................ 10,300,000 20,695,000
Deferred tax liabilities....................................... 30,878,000 54,232,000
------------- -------------
Net deferred tax liability..................................... $ 20,578,000 $ 33,537,000
------------- -------------
------------- -------------
</TABLE>
The Company's deferred tax liability results from the financial carrying
value for property and equipment being substantially in excess of the Company's
tax basis in the corresponding assets. The
F-18
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(7) INCOME TAXES (CONTINUED)
Company's property and equipment are 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 future years 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 has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. As a result of
the ownership changes, net operating loss carryforwards generated before the
ownership changes 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. A valuation allowance for the pre-October 1992 net operating loss
carryforwards has been established. The Company experienced an additional
ownership change on June 4, 1996 as a result of the issuance of shares of common
stock and the conversion of preferred stock into additional shares of common
stock. This ownership change may limit the use of the Company's November 1992
through June 1996 net operating loss carryforwards in a given year; however, it
is more likely than not that the post-October 1992 carryforwards will be fully
utilized by the Company before their expiration.
As of December 31, 1997, the Company has approximately $36,709,000 of net
operating loss carryforwards available for federal income tax purposes which
expire through 2012. Included in that total are pre-October 30, 1992, net
operating loss carryforwards of which $3,400,000 are not expected to be
utilized. Additionally, the Company has approximately $4,370,000 of alternative
minimum tax credits which have no expiration date.
(8) STOCKHOLDERS' EQUITY
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 shares.
The Company has agreed to provide the former 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 facility 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.
F-19
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(8) STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
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 $189,530,000.
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, 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). No stock options were issued during
1997. 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
without notice terminate upon the seventh anniversary of the issuance date or
upon termination of employment.
At December 31, 1997, 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
F-20
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(8) STOCKHOLDERS' EQUITY (CONTINUED)
under SFAS No. 123, the Company's net income (loss) would have been changed to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------ -------------
<S> <C> <C> <C> <C>
Net income (loss) applicable to common stock:
As reported $ (1,714,000) $ 1,162,000 $ 14,099,000
Pro forma (1,880,000) 390,000 13,325,000
Income (loss) per average common share
outstanding--basic:
As reported $ (.44) $ .14 $ .79
Pro forma (.48) .05 .74
</TABLE>
Pro forma net income (loss) applicable to common stock 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.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE 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
Granted....................................................... -- --
Exercised..................................................... -- --
Forfeited..................................................... (2,000) 5.00
Expired....................................................... -- --
----------- ------
Balance at December 31, 1997.................................... 764,700 $ 13.67
----------- ------
----------- ------
</TABLE>
F-21
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(8) STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1997, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.00 to $22.00 and 5.01
years, respectively.
At December 31, 1995, 1996, and 1997, the number of options exercisable was
151,120, 304,460 and 445,800, respectively, and weighted-average exercise price
of those options was $6.30, $10.01 and $11.25, 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.
SHARE RIGHTS PLAN
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 the
Company, each 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 2008. The rights may be
redeemed by the Company for $.01 per right until the right becomes exercisable.
RESTRICTED STOCK GRANT
The Company has issued 450,000 restricted common shares to members of the
Company's senior 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.
(9) 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% and 25% of the next 6% of salary contributions made by
employees. The accounts of all participating employees are fully vested. The
Company recognized
F-22
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(9) 401(K) PLAN (CONTINUED)
approximately $32,000, $150,000 and $377,000 of expense in the years ended
December 31, 1995, 1996 and 1997, respectively.
(10) 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). At December 31, 1997, the Company is in the process
of 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. The Company 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 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.
(11) 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.
An affiliate of the Company 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 the affiliate) for the years ended December 1995,
1996 and 1997, aggregated $68,000, $64,000, 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, 1996, and 1997, the Company recognized approximately
$100,000, $385,000 and $1,110,000, respectively, of rental expense under these
rent agreements.
Total rental expense, including office space and park sites, was
approximately $550,000, $1,227,000, and $2,229,000 for the years ended December
31, 1995, 1996, and 1997, respectively.
On June 2, 1997, a water slide collapsed at the Company's Waterworld/USA
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 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/USA"), 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
F-23
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
adequate to provide for any personal injury liability which may ultimately be
found to exist in connection with the collapse.
The Company is party to various legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the Company and
which can be reasonably estimated are accrued. Such accruals are based on
information known about the matters, the Company's estimates of the outcomes of
such matters and its experience in contesting, litigating and settling similar
matters. None of the actions are believed by management to involve amounts that
would be material to consolidated financial condition, operations, or liquidity
after consideration of recorded accruals.
(12) 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.
(13) PROPOSED ACQUISITIONS OF ADDITIONAL THEME PARKS
On December 15, 1997, the Company entered into an agreement with the
majority shareholders of Walibi, S.A. ("Walibi"), to purchase the outstanding
stock of Walibi held by the majority shareholders. The purchase agreement
commits the Company to tender for the remaining stock. The estimated aggregate
purchase price of the Walibi common stock plus the debt of Walibi to be assumed
by the Company will approximate $140,000,000. The acquisition will be accounted
for using the purchase method of accounting and is expected to be completed in
March 1998.
On February 9, 1998, the Company agreed to purchase 100% of the capital
stock of Six Flags Entertainment Corporation for $965,000,000 (subject to
adjustment) and the assumption of approximately $770,000,000 of indebtedness.
The purchase price is payable in cash or, at the Company's option, cash and up
to $200,000,000 of preferred stock. The Company has filed registration
statements to offer equity and debt securities to fund the cash portion of the
purchase price. The acquisition will be accounted for using the purchase method
of accounting and is expected to be completed in April 1998.
If the agreement to purchase Six Flags is terminated, except as a result of
legal or governmental restrictions or by mutual consent, the Company may be
required to pay a termination fee of $25,000,000.
F-24
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------ ------------- ------------- ------------- -------------
Revenue................................ $ 2,430,000 $ 26,953,000 $ 60,409,000 $ 3,655,000 $ 93,447,000
Net income (loss) applicable to common
stock................................ (5,584,000) (744,000) 16,238,000 (8,748,000) 1,162,000
Net income (loss) applicable to common
stock per share:
Basic.............................. $ (1.15) $ (.11) $ 1.43 $ (.77) $ .14
Diluted............................ $ (1.15) $ (.11) $ 1.39 $ (.77) $ .13
</TABLE>
<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------ ------------- -------------- ------------- --------------
Revenue............................. $ 4,264,000 $ 62,468,000 $ 120,014,000 $ 7,158,000 $ 193,904,000
Net income (loss) applicable to
common stock...................... (9,742,000) 5,698,000 27,237,000 (9,094,000) 14,099,000
Net income (loss) applicable to
common stock per share:
Basic........................... $ (.61) $ .31 $ 1.49 $ (.48) $ .79
Diluted......................... $ (.61) $ .30 $ 1.45 $ (.48) $ .76
</TABLE>
F-25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Six Flags Entertainment Corporation
We have audited the accompanying consolidated balance sheets of Six Flags
Entertainment Corporation as of December 28, 1997 and December 29, 1996 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 28,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 consolidated financial position of
Six Flags Entertainment Corporation at December 28, 1997 and December 29, 1996
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 28, 1997 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 14, 1998
F-26
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Operating services......................................................... $ 366,665 $ 405,558 $ 427,569
Sales of products.......................................................... 255,030 268,150 271,046
Other...................................................................... 7,762 7,168 10,051
---------- ---------- ----------
629,457 680,876 708,666
---------- ---------- ----------
Costs and expenses:
Operating, general and administrative expenses............................. 388,137 419,756 443,359
Cost of products sold...................................................... 91,138 105,988 101,239
Depreciation............................................................... 51,848 55,090 58,902
Amortization............................................................... 31,596 32,327 25,591
Interest, net.............................................................. 63,282 76,530 84,430
Minority interest.......................................................... -- 1,297 (1,147)
---------- ---------- ----------
626,001 690,988 712,374
---------- ---------- ----------
Income (loss) before income taxes............................................ 3,456 (10,112) (3,708)
Income tax expense........................................................... 6,743 5,137 --
---------- ---------- ----------
Net loss..................................................................... $ (3,287) $ (15,249) $ (3,708)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 45,587 $ 16,805
Receivables, net.......................................................................... 6,559 3,258
Receivable from affiliate................................................................. -- 4,000
Inventories, net.......................................................................... 13,526 14,338
Maintenance supplies...................................................................... 6,620 8,051
Prepaid expenses and other current assets................................................. 4,150 3,848
---------- ----------
Total current assets...................................................................... 76,442 50,300
Property and equipment, net............................................................... 489,068 492,137
Investment in co-venture parks, net....................................................... 19,135 78,370
Excess of cost over net assets acquired, net.............................................. 205,117 196,928
Deferred financing costs, net............................................................. 24,278 20,171
Other assets, net......................................................................... 12,727 26,784
---------- ----------
Total assets.............................................................................. $ 826,767 $ 864,690
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................................................... $ 29,518 $ 21,055
Accrued liabilities....................................................................... 49,885 43,390
Current portion of long-term debt......................................................... 38,332 26,130
Short-term borrowings..................................................................... 1,585 30,503
---------- ----------
Total current liabilities................................................................. 119,320 121,078
Long-term debt............................................................................ 714,993 753,369
Other long-term liabilities............................................................... 14,728 12,420
Minority interest......................................................................... 1,297 150
Commitments and contingencies
Stockholders' Deficit:
Class A Convertible Preferred Stock ($.01 par value per share: 6,100,000 shares
authorized; 5,100,000 shares issued and outstanding at December 29, 1996 and December
28, 1997; $243,572 and $273,499 aggregate liquidation preference at December 29, 1996
and December 28, 1997, respectively).................................................... 51 51
Class B Convertible Preferred Stock ($.01 par value per share; 4,900,000 shares
authorized, issued and outstanding at December 29, 1996 and December 28, 1997; $196,000
aggregate liquidation preference at December 29, 1996 and December 28, 1997)............ 49 49
Class A Common Stock ($.01 par value per share; 6,100,000 shares authorized; 51 shares
issued and outstanding at December 29, 1996 and December 28, 1997)...................... -- --
Class B Common Stock ($.01 par value per share: 20,000,000 shares authorized; 49 shares
issued and outstanding at December 29, 1996 and December 28, 1997)...................... -- --
Additional paid-in capital................................................................ 35,983 40,217
Accumulated deficit....................................................................... (56,159) (59,867)
Unearned compensation reserved stock awards............................................... (3,495) (2,777)
---------- ----------
Total stockholders' deficit............................................................... (23,571) (22,327)
---------- ----------
Total liabilities and stockholders' deficit............................................... $ 826,767 $ 864,690
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK A PREFERRED STOCK B COMMON STOCK ADDITIONAL
---------------------- ---------------------- ------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- ----------- --------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995... -- $ -- -- $ -- 300 $ -- $ 122,320 $ (37,623)
Net loss..................... -- -- -- -- -- -- -- (3,287)
1995 Refinancing............. -- -- -- -- -- -- (90,843) --
1995 Recapitalization........ 5,100,000 51 4,900,000 49 (200) -- (100) --
Reserved stock awards........ -- -- -- -- -- -- 4,372 --
Amortization of unearned
compensation............... -- -- -- -- -- -- -- --
--------- ----- --------- ----- --- ----- ----------- ------------
Balance at December 31,
1995....................... 5,100,000 51 4,900,000 49 100 -- 35,749 (40,910)
Net loss..................... -- -- -- -- -- -- -- (15,249)
Reserved stock awards........ -- -- -- -- -- -- 234 --
Amortization of unearned
compensation............... -- -- -- -- -- -- -- --
--------- ----- --------- ----- --- ----- ----------- ------------
Balance at December 29,
1996....................... 5,100,000 51 4,900,000 49 100 -- 35,983 (56,159)
Net loss..................... -- -- -- -- -- -- -- (3,708)
Reserved stock awards........ -- -- -- -- -- -- 234 --
Amortization of unearned
compensation............... -- -- -- -- -- -- -- --
Capital contribution......... -- -- -- -- -- -- 4,000 --
--------- ----- --------- ----- --- ----- ----------- ------------
Balance at December 28,
1997....................... 5,100,000 $ 51 4,900,000 $ 49 100 $ -- $ 40,217 $ (59,867)
--------- ----- --------- ----- --- ----- ----------- ------------
--------- ----- --------- ----- --- ----- ----------- ------------
<CAPTION>
STOCKHOLDERS'
UNEARNED EQUITY
COMPENSATION (DEFICIT)
--------------- -------------
<S> <C> <C>
Balance at January 1, 1995... $ -- $ 84,697
Net loss..................... -- (3,287)
1995 Refinancing............. -- (90,843)
1995 Recapitalization........ -- --
Reserved stock awards........ (4,372) --
Amortization of unearned
compensation............... 220 220
------- -------------
Balance at December 31,
1995....................... (4,152) (9,213)
Net loss..................... -- (15,249)
Reserved stock awards........ (234) --
Amortization of unearned
compensation............... 891 891
------- -------------
Balance at December 29,
1996....................... (3,495) (23,571)
Net loss..................... -- (3,708)
Reserved stock awards........ (234) --
Amortization of unearned
compensation............... 952 952
Capital contribution......... -- 4,000
------- -------------
Balance at December 28,
1997....................... $ (2,777) $ (22,327)
------- -------------
------- -------------
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss..................................................................... $ (3,287) $ (15,249) $ (3,708)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.............................................. 83,444 87,417 84,493
Noncash interest expense................................................... 26,998 43,688 48,552
Minority interest.......................................................... -- 1,297 (1,147)
Inventory reserve.......................................................... -- 1,077 --
Deferred income taxes...................................................... 806 5,137 --
Changes in current assets and liabilities:
Receivables................................................................ 3,068 401 3,301
Inventories................................................................ (1,518) (3,648) (812)
Maintenance supplies....................................................... (303) (914) (1,431)
Prepaid expenses and other current assets.................................. (1,308) 43 302
Accounts payable and accrued liabilities................................... 17,820 9,286 (14,958)
Other, net................................................................... (1,133) 67 (4,289)
----------- ---------- ----------
Net cash provided by operating activities.................................... 124,587 128,602 110,303
----------- ---------- ----------
INVESTING ACTIVITIES:
Investment in co-venture parks............................................... (8,729) (5,548) (10,654)
Cost of acquisitions, including real estate held for development............. (39,593) -- --
Purchase of co-venture limited partnership units............................. -- -- (62,678)
Prepayment of SFOT partnership obligation.................................... -- -- (10,725)
Purchase of property and equipment........................................... (45,578) (75,627) (67,675)
Proceeds from sale of land and property...................................... -- -- 2,000
----------- ---------- ----------
Net cash used in investing activities........................................ (93,900) (81,175) (149,732)
----------- ---------- ----------
FINANCING ACTIVITIES:
Net proceeds from related party debt......................................... 65,969 -- --
Proceeds from revolving lines of credit...................................... 2,205 41,673 97,936
Payments on revolving lines of credit........................................ (2,124) (40,881) (58,521)
Payments on term loans....................................................... (55,500) (53,000) (59,000)
Proceeds from other debt..................................................... -- -- 30,232
----------- ---------- ----------
Net cash provided by (used in) financing activities.......................... 10,550 (52,208) 10,647
----------- ---------- ----------
Increase (decrease) in cash and cash equivalents............................. 41,237 (4,781) (28,782)
Cash and cash equivalents at beginning of year............................... 9,131 50,368 45,587
----------- ---------- ----------
Cash and cash equivalents at end of year..................................... $ 50,368 $ 45,587 $ 16,805
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Six Flags Entertainment Corporation ("SFEC", and together with its
subsidiaries, "Six Flags"), a Delaware corporation, was formed in 1991 to effect
the acquisition of S.F. Holdings, Inc. ("Holdings") and its subsidiary Six Flags
Theme Parks Inc. ("SFTP"). SFEC owns 100% of the Common Stock of Holdings, which
owns 100% of the Common Stock of SFTP. Prior to June 23, 1995, SFEC was wholly
owned by Time Warner Entertainment Company, L.P., a Delaware limited partnership
("TWE"). On June 23, 1995, TWE caused SFEC to undergo a recapitalization and TWE
sold 51% of its interest in SFEC to an investor group (the "Investor Group") led
by Boston Ventures Management, Inc., a private investment management firm (the
"1995 Recapitalization"). In connection with the 1995 Recapitalization, SFEC
consummated a series of transactions (the "1995 Refinancing", together with the
1995 Recapitalization, the "1995 Refinancing and Recapitalization").
SFEC and Holdings are holding companies which have no significant operations
independent of their ownership of SFTP. Accordingly, the consolidated financial
statements of Six Flags consist principally of the assets, liabilities,
operations and cash flows of SFTP and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Certain amounts
have been reclassified to conform to the current year presentation.
Six Flags operates twelve "Six Flags" branded theme parks in eight locations
throughout the United States. Nine of the theme parks--Six Flags Great Adventure
and Wild Safari Animal Park (New York-Philadelphia), Six Flags Great America
(Chicago-Milwaukee), Six Flags Magic Mountain and Six Flags Hurricane Harbor
(Los Angeles) (collectively "Six Flags California"), Six Flags Astroworld and
Six Flags Waterworld (Houston) (collectively "Six Flags Houston"), Six Flags St.
Louis (St. Louis) and Six Flags Hurricane Harbor (Dallas-Ft. Worth)--are owned
directly by SFTP. Six Flags Fiesta Texas located in San Antonio, Texas is leased
by a limited partnership of which a subsidiary of SFTP is a general partner and
manages the park. Two parks--Six Flags Over Texas (Dallas-Ft. Worth) and Six
Flags Over Georgia (Atlanta)--are operated by SFTP pursuant to partnership
agreements (the "co-venture parks"). Six Flags Over Texas is owned by a limited
partnership ("Texas Flags") of which the managing general partner is a
wholly-owned subsidiary of SFTP. Six Flags Over Georgia is owned by a limited
partnership of which the managing general partner is SFOG II, Inc., a Delaware
corporation which is a wholly-owned subsidiary of SFEC ("SFOG II"). Six Flags
has entered into new partnership agreements for the management of Six Flags Over
Georgia and Six Flags Over Texas through 2026 and 2027, respectively. See the
Investment In Co-venture Parks footnote for a description of these new
agreements.
In March 1996, SFTP completed arrangements pursuant to which SFTP, through
wholly-owned subsidiaries, manages the Fiesta Texas theme park located in San
Antonio, Texas ("Fiesta Park"). The Fiesta Park, which is owned by a subsidiary
of La Cantera Development Company ("La Cantera"), an affiliate of United Service
Automobile Association ("USAA"), was leased to a newly formed limited
partnership (the "Fiesta Partnership") in which SFTP, acting through
wholly-owned subsidiaries (the "Six Flags GP"), is a general partner with an
approximate 60% equity interest. La Cantera is the limited partner with a 40%
equity interest. In connection with these arrangements, the Fiesta Partnership
obtained an option to purchase the tangible and intangible assets related to the
Fiesta Park as well as the limited partner's interest in the Fiesta Partnership.
In addition, Six Flags GP receives an annual management fee and intellectual
property fee in connection with the management of the Fiesta Park. The
management fee is based on revenues for 1996 and 1997 and will be based on
operating profit thereafter. The intellectual property fee is based on revenues.
F-31
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SFTP's consolidated results for 1996 include a full year of Fiesta Park's
operations. The following unaudited proforma financial information for the 1995
fiscal year gives effect to consolidation of Fiesta Park as if it had occurred
at the beginning of the 1995 fiscal year. These proforma results are not
necessarily indicative of what the results would have been had SFTP actually
managed the park during 1995. Proforma revenues and net loss would have been
$672 million and $8.6 million, respectively, if the consolidation of the Fiesta
Park occurred at the beginning of the 1995 fiscal year.
The 1995, 1996, and 1997 fiscal years each consisted of 52 weeks. The 1995
fiscal year ended on December 31, 1995, while the 1996 and 1997 fiscal years
ended on December 29, 1996 and December 28, 1997, respectively.
1995 REFINANCING AND RECAPITALIZATION
The 1995 Refinancing and Recapitalization was effected through the following
transactions consummated in June 1995:
1. SFEC effected a recapitalization (the "Recapitalization") pursuant to
which its Common Stock (all of which was owned by TWE) was recapitalized
into shares of Class A Convertible Preferred Stock (representing
approximately 51% of the equity), Class B Convertible Preferred Stock
(representing approximately 49% of the equity) and Common Stock (the
"SFEC Common Stock"), which has nominal value.
2. TWE sold to the Investor Group all of the outstanding shares of SFEC's
Class A Convertible Preferred Stock and 51% of the outstanding shares of
the SFEC Common Stock.
3. SFTP borrowed $475.0 million on a term basis pursuant to a credit
agreement dated as of June 23, 1995 (the "Credit Agreement") with a group
of banks.
4. SFTP issued $285.0 million aggregate principal amount of 12.25% Senior
Subordinated Discount Notes due 2005 (the "12.25% Notes") at an aggregate
issue price of $200.0 million.
5. SFTP paid TWE $640 million in connection with (i) the repurchase of all
assets previously sold to TWE as part of the sale and leaseback
transactions, (ii) the repayment of intercompany indebtedness and related
accrued interest, (iii) a payment as required under a license agreement
entered into with TWE and (iv) a payment in consideration of TWE entering
into a non-competition agreement for the benefit of Six Flags. The total
amount paid to TWE in excess of the outstanding indebtedness to TWE has
been accounted for as an equity transaction.
6. SFTP incurred approximately $27.5 million in deferred financing fees and
approximately $7.5 million in transaction fees related to the 1995
Refinancing and Recapitalization. The amount paid for transaction fees
has been accounted for as an equity transaction. In addition, the 2%
participation in a trust, which holds all TWE-owned aircraft, ceased upon
the consummation of the 1995 Refinancing and Recapitalization. The
elimination of the remaining net book value of this 2% interest
(approximately $1.8 million) has been accounted for as an equity
transaction.
ACCOUNTING AND FINANCIAL REPORTING POLICIES
REVENUES AND EXPENSES
Operating services revenue consists primarily of theme park admissions and
parking, corporate sponsorships and other in-park services. Sales of products
consist primarily of revenues from the in-park sales of food and beverages,
merchandise, gifts and souvenirs, games of skill and gasoline. Operating
F-32
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
expenses consist of theme park employee compensation and benefits (approximately
50%) and advertising media and production (approximately 10%-15%). Park
maintenance materials and services, utilities, operating supplies, insurance and
other operating service costs account for the remainder. Cost of products sold
consists of the cost of food and beverages, gifts and souvenirs, games of skill
prizes and gasoline sold. During 1997, Six Flags reversed approximately $7.3
million of expense accruals no longer deemed necessary. Such amounts have been
reflected as expense reductions of $0.7 million in cost of products sold, and
$6.6 million in operating, general and administrative expenses in the current
year statement of operations.
INCOME TAXES
Six Flags uses the liability method of accounting for income taxes required
by FASB Statement No. 109, "Accounting for Income Taxes".
CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments purchased
with a maturity date of three months or less.
INVENTORIES
Inventories, primarily products held for resale, are valued at the lower of
cost or market. Cost is determined principally using the first-in, first-out
method.
OFF-SEASON EXPENSES
Theme park operations are highly seasonal with substantially all revenues
being generated in the second and third quarters. Such revenues are recognized
when earned, while cost of products sold, general and administrative expenses,
interest on debt and income taxes are recognized when incurred. All other
interim period costs related to park operations are considered off-season
expenses and are charged to interim periods based upon estimated annual
revenues. No costs are deferred at the end of a fiscal year.
PROPERTY AND EQUIPMENT
Property and equipment, which includes land, rides and attractions,
buildings and improvements, and other (principally machinery and equipment) are
stated at cost (fair value at the date of acquisition). Depreciation is computed
for financial reporting purposes using the straight-line method over the
estimated useful lives of the assets. The estimated lives used in computing
depreciation are:
<TABLE>
<S> <C>
Rides and attractions........................................ 3 to 25 years
10 to 33
Buildings and improvements................................... years
Other........................................................ 3 to 15 years
</TABLE>
INVESTMENT IN CO-VENTURE PARKS
Six Flags, through two subsidiaries, is the general partner in two theme
park limited partnerships. Six Flags accounts for the parks as co-ventures,
i.e., the revenues and expenses (excluding partnership depreciation) are
included in Six Flags' consolidated statements of operations and the net amounts
distributed to the limited partners are deducted as expenses. Except for the
limited partnership units purchased pursuant to the tender offer, Six Flags has
no rights or title to the co-venture park assets or to
F-33
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the proceeds from any sale of the co-venture parks' assets. Accordingly, Six
Flags' consolidated balance sheets do not include any of the co-venture parks'
assets. The investment in co-venture parks included in the consolidated balance
sheets represents (i) Six Flags' interest in the estimated future cash flows
from the operations of the co-venture parks and is amortized over the life of
the partnership agreements, and (ii) the value of Limited Partnership units
purchased pursuant to the SFOG tender offer. The co-venture parks contributed
revenues of $160.6 million, $152.0 million and $176.8 million to Six Flags in
the fiscal years 1995, 1996 and 1997, respectively. See the Investment In
Co-venture Parks footnote below for a description of the new agreements
extending the management of Six Flags Over Georgia and Six Flags Over Texas,
each for another 30-year term.
DEFERRED FINANCING COSTS
Deferred financing costs consist of debt issuance costs incurred in
connection with the Credit Agreement, the issuance of the 12.25% Notes and the
issuance of the $192.3 million aggregate principal amount of Zero Coupon Senior
Notes due 1999 (the "Zero Coupon Notes") in December 1992. Deferred financing
costs are amortized over the life of the related debt. Accumulated amortization
of deferred financing costs at December 29, 1996 and December 28, 1997 amounted
to $8.3 million and $12.0 million, respectively.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired is amortized over periods not
exceeding forty years using the straight-line method. Accumulated amortization
at December 29, 1996 and December 28, 1997 amounted to $39.6 million and $47.7
million, respectively.
OTHER ASSETS
Other assets consist primarily of intangible assets, which are amortized
over periods of two to thirteen years using the straight-line method.
Additionally, in 1997, other assets include a $10.7 million prepayment in
accordance with the Texas Agreements. See the Investment In Co-venture Parks
footnote.
REVENUE RECOGNITION
In general, Six Flags recognizes operating revenue from ticket sales when
guests are admitted to the parks. Theme park operations are highly seasonal and
substantially all revenues are generated in the second and third quarters of the
fiscal year.
CONCENTRATIONS OF CREDIT RISKS
Financial instruments, which potentially subject Six Flags to concentrations
of credit risk, consist primarily of cash and cash equivalents and receivables.
Six Flags places its cash and cash equivalents with high credit, quality
institutions and minimizes its credit risk exposure relating to receivables
through formal credit policies and monitoring procedures.
FINANCIAL INSTRUMENTS
The fair value of financial instruments, such as long-term debt, is
disclosed when significantly different from the recorded values of such
instruments in the consolidated balance sheets pursuant to FASB Statement No.
107, "Disclosure about Fair Value of Financial Instruments." Six Flags generally
estimates
F-34
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the fair value of its long-term debt by using discounted cash flow analyses
based on Six Flags' current borrowing rates for debt with similar maturities, or
by quoted market prices for the same issues.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying value of long-lived assets, including intangibles, is reviewed
if the facts and circumstances, such as significant declines in revenues,
earnings or cash flows, or material adverse changes in the business climate,
suggest that it may be impaired. Six Flags performs its review by comparing the
book value relating to long-lived assets to the estimated future undiscounted
cash flows relating to such long-lived assets. If any impairment in the value of
the long- lived assets is indicated, the carrying value of the long-lived assets
is adjusted to reflect such impairment calculated based on the discounted cash
flows of the impaired assets or the assets fair value, as appropriate.
ADVERTISING
Advertising costs are expensed as incurred or the first time the advertising
takes place. Six Flags incurred advertising costs of approximately $53.4
million, $64.6 million and $61.1 million in the 1995, 1996 and 1997 fiscal
years, respectively
INVENTORIES
Inventories at December 29, 1996 and December 28, 1997 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Merchandise, gifts and souvenirs........................................ $ 10,892 $ 12,029
Food and beverages...................................................... 1,242 948
Games................................................................... 1,158 1,133
Other................................................................... 234 228
--------- ---------
$ 13,526 $ 14,338
--------- ---------
--------- ---------
</TABLE>
F-35
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment at December 29, 1996 and December 28, 1997 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Land................................................................ $ 55,218 $ 50,582
Buildings and improvements.......................................... 249,066 263,475
Rides and attractions............................................... 364,770 389,798
Other............................................................... 8,239 9,033
Construction in progress............................................ 36,950 55,368
----------- -----------
714,243 768,256
Less accumulated depreciation....................................... (225,175) (276,119)
----------- -----------
$ 489,068 $ 492,137
----------- -----------
----------- -----------
</TABLE>
INVESTMENT IN CO-VENTURE PARKS
Changes in the investment in co-venture parks at December 29, 1996 and
December 28, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Balance at beginning of period........................................ $ 34,404 $ 19,135
Capital additions made by the co-venture parks........................ 5,436 16,147
Operations, net of distributions to the limited partners.............. 18,603 18,633
Distributions to Six Flags............................................ (18,491) (24,126)
Amortization.......................................................... (20,817) (11,515)
---------- ----------
19,135 18,274
---------- ----------
Purchase of SFOG limited partnership units............................ -- 62,678
Amortization.......................................................... -- (2,582)
---------- ----------
-- 60,096
---------- ----------
$ 19,135 $ 78,370
---------- ----------
---------- ----------
</TABLE>
F-36
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS OVER GEORGIA
On March 18, 1997, Six Flags, Time Warner and TWE completed arrangements
pursuant to which SFOG II will manage the Six Flags Over Georgia Park through
2026. Under the agreements governing the new arrangements (the "Georgia
Agreements"), the Six Flags Over Georgia Park is owned by a newly formed limited
partnership ("Six Flags Over Georgia II") of which SFOG II is the managing
general partner.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) will receive minimum annual
distributions of $18.5 million in 1997, increasing each year thereafter in
proportion to increases in the cost of living; thereafter, SFOG II 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
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 SFOG II and
5% to the limited partner; (ii) in the second quarter of 1997, a subsidiary of
SFTP (the "SFTP-SFOG Subsidiary") and a subsidiary of SFEC (the "SFEC-SFOG
Subsidiary") made a tender offer for partnership interests ("SFOG LP Units") in
Six Flags Fund, Ltd. (L.P.), which owns 99% of the limited partner of Six Flags
Over Georgia II, that valued the Six Flags Over Georgia Park at the greater of
$250 million or 8.0 times 1997 EBITDA of the Six Flags Over Georgia Park (the
"SFOG Tender Offer Price"); (iii) commencing in 1998, and on an annual basis
thereafter, the SFTP-SFOG Subsidiary and the SFEC-SFOG Subsidiary will offer to
purchase additional SFOG LP Units at a price based on the greater of the SFOG
Tender Offer Price or the EBITDA of the Six Flags Over Georgia Park for the
prior four years (provided that no more than $50 million of such SFOG LP Units
will be acquired by the SFTP-SFOG Subsidiary); and (iv) in 2026, Six Flags and
its affiliates will have the option to acquire the Six Flags Over 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. SFEC,
SFTP, and TWE have guaranteed certain of the obligations (including the minimum
annual distributions noted in (i) above) of SFOG II and Six Flags Over Georgia
II under the Georgia Agreements, and in consideration therefor, SFOG II has
agreed to assign to SFTP at least 90% of the cash distributions it receives from
time to time from Six Flags Over Georgia II. Six Flags continues to account for
the Six Flags Over Georgia Park as a co-venture and includes the revenues and
expenses of Six Flags Over Georgia II partnership (excluding partnership
depreciation) in Six Flags' consolidated financial statements and deducts as
expenses the net amounts distributed to the limited partners. As a result of
entering into the Georgia Agreements, Six Flags expects a reduction in net
income and net cash flow allocation from Six Flags Over Georgia II.
On May 6, 1997, in connection with the closing of the tender offer described
above, the SFTP-SFOG Subsidiary and the SFEC-SFOG Subsidiary purchased
approximately 17% and 8%, respectively, of SFOG LP Units for approximately $42.4
million and $20.3 million, respectively. The purchase of SFOG LP Units entitles
each such purchaser the right to receive minimum annual distributions and any
residual distributions (5% of available cash after the minimum annual
distributions and management fee distributions) in proportion to the percentage
amounts purchased. The purchase of SFOG LP Units by the SFTP-SFOG Subsidiary was
financed through a drawdown on Six Flags' secured revolving line of credit
available for acquisitions under the Credit Agreement and the purchase of SFOG
LP Units by the SFEC-SFOG Subsidiary was financed through loans from TWE, which
were subsequently refinanced with demand loans from Chase Bank. See Long-Term
Debt footnote.
In connection with the purchase of the SFOG LP Units, approximately $49.8
million of the excess of cost over net assets acquired associated with this
investment is being amortized over 30 years. The net
F-37
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
investment in SFOG LP Units is presented as part of the investment in co-venture
parks. Accumulated amortization at December 28, 1997 amounted to $2.6 million.
SIX FLAGS OVER TEXAS
On November 24, 1997, Six Flags, Time Warner and TWE completed arrangements
pursuant to which Six Flags Over Texas, Inc., a wholly-owned subsidiary of SFTP
("SFOT"), will manage the Six Flags Over Texas Park through 2027. Under the
agreements governing the new arrangements (the "Texas Agreements"), the Six
Flags Over Texas Park will continue to be owned by Texas Flags Ltd., a limited
partnership ("Six Flags Over Texas") of which SFOT is the managing general
partner.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) will receive minimum annual
distributions of $27.7 million in 1998, increasing each year thereafter in
proportion to increases in the cost of living; thereafter, SFOT II 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
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 SFOT and
7.5% to the limited partner; (ii) in the first quarter of 1998, a subsidiary of
SFTP (the "SFTP-SFOT Subsidiary") and a subsidiary of SFEC (the "SFEC-SFOT
Subsidiary") have commenced a tender offer for partnership interests ("SFOT LP
Units") in Six Flags Over Texas, Ltd., which owns 99% of the limited partner of
Six Flags Over Texas, that values the Six Flags Over Texas Park at the greater
of $375 million or 8.5 times 1998 EBITDA of the Six Flags Over Texas Park (the
"SFOT Tender Offer Price"); (iii) commencing in 1999, and on an annual basis
thereafter, the SFTP-SFOT Subsidiary and the SFEC-SFOT Subsidiary will offer to
purchase additional SFOT LP Units at a price based on the EBITDA of the Six
Flags Over Texas Park for the prior four years; and (iv) in 2027, Six Flags and
its affiliates will have the option to acquire the Six Flags Over Texas Park at
a price based on the SFOT Tender Offer Price, increased in proportion to the
increase in the cost of living between December 1997 and December 2027. SFEC,
SFTP and TWE have guaranteed certain of the obligations (including the minimum
annual distributions noted in (i) above) of SFOT under the Texas Agreements. Six
Flags intends to continue to account for the Six Flags Over Texas Park as a co-
venture and to include the revenues and expenses of Texas Flags partnership
(excluding partnership depreciation) in Six Flags' consolidated financial
statements and deduct as expenses the net amounts distributed to the limited
partners. As a result of entering into the Texas Agreements, Six Flags expects a
reduction in net income and net cash flow allocation from Texas Flags.
In connection with the entering into the Texas Agreements, a subsidiary of
SFEC loaned $10.7 million to Texas Flags Ltd. during December 1997 as a
prepayment of its obligations under the Texas Agreements. This amount has been
included in other assets, net as of December 28, 1997.
The tender offer for SFOT LP Units commenced on January 23, 1998 and is
expected to close on March 12, 1998. Six Flags will purchase these units through
the SFEC-SFOT Subsidiary and will finance the purchase of such units through
loans from a syndicate of lenders.
F-38
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities at December 29, 1996 and December 28, 1997 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Insurance............................................................... $ 15,867 $ 15,608
Income taxes payable.................................................... 4,036 557
Real estate and property taxes.......................................... 2,983 3,352
Compensation and payroll taxes.......................................... 7,920 8,728
Interest................................................................ 2,741 3,431
Pension costs........................................................... 2,868 921
Deferred revenue........................................................ 4,422 4,352
Other................................................................... 9,048 6,441
--------- ---------
$ 49,885 $ 43,390
--------- ---------
--------- ---------
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings at December 29, 1996 and December 28, 1997 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
8.5% Note payable to Chase Bank, due March 31, 1998...................... $ -- $ 19,778
7.2% Note payable to TWE, due March 31, 1998............................. -- 10,725
Co-venture parks general partner line of credit.......................... 1,585 --
--------- ---------
$ 1,585 $ 30,503
--------- ---------
--------- ---------
</TABLE>
The proceeds from the note payable to Chase Bank were used to purchase
approximately 8% of SFOG LP Units pursuant to the tender offer for such units.
The proceeds from the TWE note payable were loaned to Texas Flags Ltd. in
connection with the Texas Agreements. See the Investment in Co-venture Parks
footnote. The weighted average interest rate of short-term borrowings
outstanding as of December 29, 1996 and December 28, 1997 was 7.5 % and 8.5%,
respectively.
F-39
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LONG-TERM DEBT
Long-term debt of Six Flags at December 29, 1996 and December 28, 1997
consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Credit Agreement, due through 2003, interest rates from 8.5% to
9.13%............................................................... $ 366,500 $ 348,500
12.25% Notes of SFTP, due 2005, less unamortized discount of $45,328
and $15,075 at December 29, 1996 and December 28, 1997,
respectively........................................................ 239,672 269,925
Zero Coupon Notes of SFEC, due 1999, less unamortized discount of
$45,097 and $31,176 at December 29, 1996 and December 28, 1997,
respectively........................................................ 147,153 161,074
---------- ----------
753,325 779,499
Less current portion.................................................. (38,332) (26,130)
---------- ----------
$ 714,993 $ 753,369
---------- ----------
---------- ----------
</TABLE>
The scheduled annual maturities of Six Flags' debt are as follows (in
thousands):
<TABLE>
<S> <C>
1998.............................................................. $ 26,130
1999.............................................................. 216,074
2000.............................................................. 65,000
2001.............................................................. 60,000
2002.............................................................. 39,870
Thereafter........................................................ 372,425
---------
$ 779,499
---------
---------
</TABLE>
CREDIT AGREEMENT
In 1995, SFTP entered into a $600 million Credit Agreement with a group of
lenders. The Credit Agreement consists of a $345 million Tranche A Senior
Secured Term Loan Facility (the "Tranche A Term Facility"), a $130 million
Tranche B Senior Secured Term Loan Facility (the "Tranche B Term
Facility")(together the "Term Facilities"), and a Senior Secured Revolving
Credit Facility (the "Revolving Facility"). The Revolving Facility provides for
revolving loans to SFTP and the issuance of letters of credit for the account of
SFTP in an aggregate principal amount of up to $125 million, of which not more
than $12 million may be represented by letters of credit. The interest rates per
annum applicable to the Tranche A Term Facility and Revolving Facility are LIBOR
plus 2.50%, as adjusted semi-annually. The interest rate per annum applicable to
the Tranche B Term Facility is LIBOR plus 3.00%, as adjusted semi-annually. The
amounts outstanding under the Term Facilities were $307.5 million at December
28, 1997. At December 29, 1996, there were no amounts borrowed against the
Revolving Facility. The amounts borrowed against the Revolving Facility as of
December 28, 1997 were $41 million. As of December 28, 1997, the Company had
$9.3 million in letters of credit outstanding.
Borrowings under the Tranche A Term Facility are payable as to principal in
July and September of each year through 2001. Borrowings under the Tranche B
Term Facility are payable in July and September of each year through 2002 and in
June 23, 2003. SFTP is required to make mandatory prepayments of
F-40
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
loans, and letters of credit will be mandatorily reduced based on certain
criteria, as defined in the Credit Agreement.
At least once during the period from June 30 to August 31 in each fiscal
year, SFTP must repay all loans outstanding under the Revolving Facility in
excess of an amount equal to the lesser of (a) $50.0 million and (b) the
principal amount of loans then outstanding under the Revolving Facility that
were used to finance related business acquisitions. SFTP may not make drawings
under the Revolving Facility for 30 consecutive days following the date of such
repayment. During such period, SFTP must also cause each co-venture park limited
partnership to repay all amounts outstanding under their unsecured credit lines
and not to make drawings thereunder for 30 consecutive days following the date
of such repayment.
The obligations of SFTP under the Credit Agreement are unconditionally and
irrevocably guaranteed by each of SFTP's direct or indirect subsidiaries, other
than the co-venture partnerships and certain special purpose subsidiaries. In
addition, the Credit Agreement is secured by first priority security interests
in all capital stock and other equity interests of SFEC and its subsidiaries.
SFTP is required to pay a per annum fee equal to 2.50%, plus a fronting fee
of 0.25%, of the aggregate face amount of outstanding letters of credit under
the Revolving Facility and a per annum fee equal to 0.50% on the undrawn portion
of the commitments in respect of the Revolving Facility. Commitment fees totaled
$0.3 million, $0.6 million and $0.4 million in 1995, 1996 and 1997,
respectively.
The Credit Agreement contains a number of significant covenants that, among
other things, restricts the ability of SFTP to dispose of assets, incur
additional indebtedness, repay other indebtedness, amend material agreements,
pay dividends, create liens on assets, enter into leases, make investments or
acquisitions, engage in mergers or consolidations, make capital expenditures, or
engage in certain transactions with subsidiaries and affiliates and will
otherwise restrict corporate activities. In addition, under the Credit Agreement
SFTP is required to comply with specified financial ratios and tests, including
cash interest expense coverage, debt service coverage and debt to earnings
ratios. The Credit Agreement also contains provisions that prohibit any
modification of the indenture governing the Notes in any manner adverse to the
lenders under the Credit Agreement and that limit SFTP's ability to refinance
the Notes without the consent of such lenders.
In December 1995, SFTP entered into no-cost interest rate collar
transactions with certain lenders (or their affiliates) under the Credit
Agreement. The interest rate collar transactions effectively protect against an
increase in the three month LIBOR above 7% but limits SFTP's ability to benefit
from a decline in the three month LIBOR below 4.55% with respect to $172
million, $150 million and $130 million notional amounts of debt during the 1996,
1997 and 1998 fiscal years, respectively. Interest payments/receipts on these
interest rate collar agreements will be made quarterly. No such
payments/receipts occurred through December 28, 1997.
The fair value of the Credit Agreement and related interest rate collar
transactions approximated their carrying value as of December 29, 1996 and
December 28, 1997.
SENIOR SUBORDINATED DISCOUNT NOTES
SFTP issued the 12.25% Notes on June 23, 1995 (the "Issue Date") pursuant to
an Indenture dated as of such date, among SFTP, the Note Guarantors and United
States Trust Company of New York, as trustee. In November 1995, SFTP offered to
exchange $285.0 million aggregate principal amount of its 12.25% Series A Senior
Subordinated Discount Notes due 2005 (the "Series A Notes" and, together with
the 12.25% Notes, the "Notes") for a like principal amount of its 12.25% Notes.
The exchange offer expired on December 18, 1995, and $283.5 million aggregate
principal amount of the Series A Notes were
F-41
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
exchanged for an equal principal amount of 12.25% Notes. The Series A Notes are
governed by the same indenture as, and are substantially identical to, the
12.25% Notes. However, unlike the 12.25% Notes, the Series A Notes were issued
in a transaction registered under the Securities Act of 1933, as amended.
The Notes are and will be unsecured senior subordinated obligations of SFTP,
limited to $285.0 million aggregate principal amount, maturing on June 15, 2005.
The Notes will accrete in value for purposes of the Indenture until June 15,
1998, at which time the accreted value of the Notes will equal 100% of their
principal amount ($285 million). Interest payable in cash will not accrue or be
payable prior to June 15, 1998; thereafter, the accreted value of the Notes will
no longer increase and cash interest will be payable semi-annually on June 15
and December 15 of each year, commencing December 15, 1998, at a rate of 12.25%
per annum.
The Notes will be redeemable, at SFTP's option, in whole or in part, at any
time on or after June 15, 2000 through maturity. If redeemed during the 12-month
period commencing on June 15 of the years set forth below, SFTP will be required
to pay the following redemption prices:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2000........................................................................ 106.0%
2001........................................................................ 104.0%
2002........................................................................ 102.0%
2003 and thereafter......................................................... 100.0%
</TABLE>
In addition, at any time prior to June 15, 1998, SFTP may, subject to
certain requirements, redeem Notes having a principal amount of up to 35% of the
original aggregate principal amount of the Notes with the net cash proceeds of
one or more public equity offering by SFTP at a redemption price equal to
112.25% of the accreted value of the Notes to be redeemed as of the redemption
date; provided, however, that at least 65% of the original aggregate principal
amount of the Notes must remain outstanding.
The fair value of the Notes, estimated based on the quoted market prices,
was $230.1 million and $303.5 million at December 29, 1996 and December 28,
1997, respectively.
The Notes are guaranteed on an unsecured, senior subordinated basis by Six
Flags Over Georgia, Inc., Six Flags Over Texas, Inc. and S.F. Partnership (the
"Note Guarantors"), each of which is a wholly-owned subsidiary of SFTP.
ZERO COUPON NOTES
The Zero Coupon Notes are unsecured obligations of SFEC issued under an
Indenture dated as of December 16, 1992, as amended, between SFEC, TWE and the
United States Trust Company of New York, as trustee (the "Indenture"). The Zero
Coupon Notes may not be redeemed prior to maturity and there will be no periodic
payments of interest over the life of the Zero Coupon Notes.
TWE has unconditionally and irrevocably agreed that upon a failure by SFEC
to pay the principal amount of the Zero Coupon Notes upon maturity, or to pay
the Accreted Value Amount (as defined in the Indenture) upon a declaration of
acceleration following a Secondary Event of Default (as defined in the
Indenture), TWE will offer to purchase the Zero Coupon Notes from the holders
thereof at a predetermined price. TWE's obligation to make the offer to purchase
will rank PARI PASSU with all other unsecured and unsubordinated obligations for
money borrowed of TWE.
The fair value of the Notes, estimated based on the quoted market prices,
was $154.3 million and $170.1 million at December 29, 1996 and December 28,
1997, respectively.
F-42
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCKHOLDERS' EQUITY
Pursuant to the 1995 Refinancing and Recapitalization, SFEC's outstanding
equity consists of 5,100,000 shares of Class A Convertible Preferred Stock, par
value $.01 per share, 4,900,000 shares of Class B Convertible Preferred Stock,
par value $.01 per share, 51 shares of Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), and 49 shares of Class B Common Stock, par value
$.01 per share ("Class B Common Stock"). The Class A Convertible Preferred Stock
has a liquidation preference per share of $40 plus accrued and unpaid dividends
to the liquidation date. Dividends accrue on the outstanding shares of Class A
Convertible Preferred Stock on a daily basis at the rate of 12% per annum,
compounded semi-annually on December 1 and June 1 of each year. Accrued and
unpaid dividends for the Class A Convertible Preferred Stock were $39.6 million
and $69.5 million at December 29, 1996 and December 28, 1997, respectively. The
Class B Convertible Preferred Stock has a liquidation preference per share of
$40. No dividends shall accrue on the Class B Convertible Preferred Stock.
Members of the Investor Group own 51% of the equity of SFEC, consisting of all
of the outstanding shares of Class A Convertible Preferred Stock and Class A
Common Stock, and TWE owns 49% of the equity of SFEC, consisting of all of the
outstanding shares of Class B Convertible Preferred Stock and Class B Common
Stock. SFEC's Class A Convertible Preferred Stock and Class A Common Stock are
further divided into shares of voting stock (known as Class A-1 Convertible
Preferred Stock and Class A-1 Common Stock, respectively) and non-voting stock
(known as Class A-2 Convertible Preferred Stock and Class A-2 Common Stock,
respectively). The non-voting shares of each such class were created for the
benefit of certain regulated entities (each a "Regulated Holder") whose ability
to own voting stock is restricted. Shares of Class A-1 Convertible Preferred
Stock and Class A-1 Common Stock may be exchanged by a Regulated Holder on a
share-for-share basis for non-voting shares of such class. Shares of Class A-2
Convertible Preferred Stock and Class A-2 Common Stock may be exchanged on a
share-for-share basis for voting shares of each such class if such shares are
held by a person other than by a Regulated Holder. Except for voting rights
specifically accorded to a particular class under Delaware law, the shares of
Class A-1 Common Stock and Class B Common Stock vote together as a single class
on matters requiring stockholder action.
Six Flags has entered into an Employment Agreement ("the Agreement") with an
Executive (the "Executive") whereby SFEC agrees to reserve for issuance a
certain number of shares of Class B Common Stock (the "Reserved Shares"), as
defined in the Agreement. The Reserved Shares will become vested on December 31,
2000, subject to the Executive's employment having continued through such date
or prior thereto if certain events occur as defined in the Agreement. Upon
vesting of the Reserved Shares, the Executive will be entitled to receive from
Six Flags, in addition to the issued shares, any dividends or distributions had
such shares been issued and outstanding at the time that such dividends or
distributions were declared and paid as defined in the Agreement. Six Flags has
recognized compensation expense related to the Reserved Shares during 1996 and
1997.
Under the Agreement, the Executive was also granted options to purchase
shares of SFEC's Class B Common Stock. The options include an option to purchase
an additional 163,936 shares of SFEC's Class B Common Stock (the "Tranche 1
Option"), and a second option to purchase an additional 327,872 shares of SFEC's
Class B Common Stock (the "Tranche 2 Option"). The exercise price of the Tranche
1 Option is based on a September 1995 exercise price of $40.64 per share,
increasing at a cumulative annual rate of 10%. The exercise price of the Tranche
2 Option is based on a September 1995 exercise price of $40.94, increasing at a
cumulative annual rate of 15%. On each September 15 while the Executive is
employed under Agreement, the number of shares of SFEC's Class B Common Stock
reserved for issuance under the terms of the Tranche 1 Option will decrease by
5,858.9 shares, at which time the Executive will be granted a like number of
additional Reserved Shares. In addition, SFEC granted additional options for the
purchase
F-43
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of 327,872 shares of SFEC's Class B Common Stock to members of management of Six
Flags and its subsidiaries. The terms of these options will be similar to the
Tranche 1 Option and Tranche 2 Option described above.
The options become exercisable only if there is a triggering event, as
defined in the stock option plan agreement. Accordingly, these stock options
have been treated as if they were unissued due to the uncertainty regarding the
Executive's and other management employees' ability to exercise such options.
In 1995, the Financial Accounting Standards Board issued SFAS. No. 123,
"Accounting for Stock-Based Compensation," which permits either recording the
estimated value of stock-based compensation over the applicable vesting period
or disclosing such cost in the notes to the financial statements. Six Flags has
adopted the disclosure-only provisions of SFAS 123. Had compensation cost for
the stock options been determined consistent with SFAS 123, the proforma effect
would not have been significant.
PENSION PLAN
Six Flags maintains a noncontributory, defined benefit pension plan (the
"Plan") covering substantially all of Six Flags' full-time employees. The Plan
permits normal retirement at age 65, with early retirement at ages 55 through 64
upon attainment of ten years of credited service. The early retirement benefit
is reduced for benefits commencing before age 62. Plan benefits are calculated
according to a benefit formula based on age, average compensation over the
highest consecutive five-year period during the employee's last ten years of
employment and years of service. Plan assets are invested primarily in common
stocks and mutual funds. The Plan does not have significant liabilities other
than benefit obligations. Under Six Flags' funding policy, contributions to the
Plan are determined using the projected unit credit cost method. This funding
policy meets the requirements under the Employee Retirement Income Security Act
of 1974.
F-44
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The reconciliation of the funded status of the Plan for the fiscal years
1996 and 1997 follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Actuarial present value of current accumulated pension obligations,
including vested benefits of $35,615 and $45,289 in 1996 and 1997,
respectively.......................................................... $ 41,243 $ 52,436
--------- ---------
--------- ---------
Actuarial present value of accumulated pension obligations, adjusted for
assumptions regarding future compensation levels (projected benefit
obligations).......................................................... $ 58,702 $ 68,912
Pension assets at market value.......................................... 60,560 77,024
--------- ---------
Projected benefit obligation less than pension assets................... (1,858) (8,112)
Unrecognized net gain................................................... 3,389 7,943
Unrecognized prior service costs........................................ 1,337 1,090
--------- ---------
Accrued pension liability............................................... $ 2,868 $ 921
--------- ---------
--------- ---------
</TABLE>
Net pension cost for the fiscal years 1995, 1996 and 1997 included the
following components (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---------- --------- ----------
<S> <C> <C> <C>
Pension costs for benefits earned........................... $ 2,035 $ 3,133 $ 3,025
Interest cost on projected benefit obligation............... 3,612 4,436 4,858
Actual return on pension assets............................. (3,510) (8,484) (13,584)
Net amortization and deferrals.............................. (176) 3,776 7,912
---------- --------- ----------
Net pension cost............................................ $ 1,961 $ 2,861 $ 2,211
---------- --------- ----------
---------- --------- ----------
</TABLE>
Measurement of the projected benefit obligation was based on the following
assumptions:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Discount rate.......................................................... 7.25% 7.75% 7.25%
Return on plan assets.................................................. 9.00% 9.00% 9.00%
Expected rate of salary progression.................................... 6.00% 6.00% 5.00%
</TABLE>
SAVINGS PLAN
Under the provisions of the Six Flags' savings plan, all full-time and
seasonal employees of Six Flags completing one year of service (minimum 1,000
hours) and attaining age 21 are eligible to participate and may contribute up to
6% of compensation as a tax deferred basic contribution. Each participant may
also elect to make additional contributions of up to 10% of compensation (up to
4% tax deferred). Tax deferred contributions to the savings plan may not exceed
amounts defined by the Internal Revenue Service ($9,500 for 1997). Both the
basic and additional contributions are at all times vested. Six Flags, at its
discretion, may make matching contributions of up to 100% of its employees'
basic contributions. Six Flags contributed $0.7 million for each of the 1996 and
1995 Plan years, representing up to 30% of the employees' basic contributions.
Six Flags plans to make $0.9 million in contributions for the 1997 plan year.
Six Flags matching contributions to the savings plan are made in the first
quarter of the succeeding year.
F-45
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
Significant components of income tax expense are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal........................................................ $ 3,668 $ -- $ --
State.......................................................... 2,269 -- --
--------- --------- ---------
Total current.................................................... 5,937 -- --
--------- --------- ---------
Deferred
Federal........................................................ 606 4,369 --
State.......................................................... 200 768 --
--------- --------- ---------
Total deferred................................................... 806 5,137 --
--------- --------- ---------
$ 6,743 $ 5,137 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income tax expense (benefit) varied from the U.S. federal statutory income
tax rate due to the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Tax provision (benefit) on income (loss) at U.S. federal
statutory rate of 35%....................................... $ 1,209 $ (3,539) $ (1,298)
Non-deductible amortization of goodwill....................... 2,762 2,287 2,866
State income taxes, net of federal benefit.................... 1,600 499 --
Carryover of net operating losses............................. -- 5,822 (1,241)
Other......................................................... 1,172 68 (327)
--------- --------- ---------
Income tax expense............................................ $ 6,743 $ 5,137 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-46
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant components of Six Flags' deferred tax assets and liabilities at
December 29, 1996 and December 28, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Deferred tax liabilities:
Depreciation......................................................... $ 18,800 $ 33,736
Deferral related to tax and fiscal year end difference............... 41,051 46,225
Other................................................................ 22,824 7,256
---------- ---------
Total deferred tax liabilities......................................... 82,675 87,217
---------- ---------
Deferred tax assets:
Tax basis in excess of book basis.................................... 58,964 55,467
Net operating loss carryforwards..................................... 24,698 43,071
Other................................................................ 4,835 4,600
---------- ---------
Total deferred tax assets.............................................. 88,497 103,138
Valuation allowance.................................................... (5,822) (15,921)
---------- ---------
Net deferred tax assets................................................ 82,675 87,217
---------- ---------
Net deferred income taxes.............................................. $ -- $ --
---------- ---------
---------- ---------
</TABLE>
Realization of deferred tax assets associated with the net operating loss
carryforwards is dependent upon generating sufficient taxable income prior to
their expiration. Management believes that there is a risk that certain of these
net operating loss carryforwards may expire unused and, accordingly, has
established a valuation allowance against them. Although realization is not
assured for the remaining deferred tax assets, management believes it is more
likely than not that they will be realized through future taxable earnings or
alternative tax strategies.
At December 31, 1997, Six Flags has approximately $123.0 million of net
operating loss carryforwards, which expire through 2012.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
----------- --------- ----------
<S> <C> <C> <C>
Cash interest paid........................................ $ 35,282 $ 34,284 $ 36,089
----------- --------- ----------
----------- --------- ----------
Income taxes paid......................................... $ 5,401 $ -- $ 3,479
----------- --------- ----------
----------- --------- ----------
1995 Refinancing and Recapitalization:
Proceeds from term loans................................ $ 475,000 $ -- $ --
Proceeds from the 12.25% Notes.......................... 200,024 -- --
Repayment of TWE debt................................... (558,453) -- --
Return of capital....................................... (89,047) -- --
Payment of deferred financing fees...................... (27,524) -- --
----------- --------- ----------
$ -- $ -- $ --
----------- --------- ----------
----------- --------- ----------
</TABLE>
F-47
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH TIME WARNER ENTERTAINMENT COMPANY, L.P. AND AFFILIATES
On December 31, 1997, TWE contributed $4.0 million to Six Flags pursuant to
an agreement with the Investor Group. This capital contribution is reflected as
an affiliate receivable as of December 28, 1997.
On May 5, 1997, TWE loaned $19.5 million to a subsidiary of Six Flags. The
proceeds from this affiliate loan were used to purchase approximately 8% of SFOG
LP Units pursuant to the tender offer for such units. On December 23, 1997, this
affiliate loan, along with accrued interest, was refinanced with Chase Bank. On
November 24, 1997, TWE loaned $10.7 million to another Six Flags subsidiary. The
proceeds of this affiliate loan were loaned to Texas Flags Ltd. in connection
with the Texas Agreements. See the Investment In Co-venture Parks footnote.
In 1996 and 1997, Six Flags reimbursed TWE and its affiliates $4.4 million
and $2.6 million, respectively, for royalties on merchandise, advertising and
other expenses. Employees of a subsidiary of TWE served as senior management of
Six Flags during 1995. Costs associated with this management team, including
compensation and overhead, were charged to Six Flags by TWE. During 1995, Six
Flags was also allocated costs for additional services from TWE, including
accounting services, insurance coverage, transportation, and other services.
Costs allocated from TWE were at a level agreed upon by TWE and Six Flags. Six
Flags believes that this method of allocation was reasonable and that the
allocated costs approximated the costs which would have been incurred on a
stand-alone basis. In 1995, Six Flags recorded approximately $5.3 million for
merchandise royalties, advertising, and other expenses, as well as compensation,
overhead and other services allocated to Six Flags by TWE. Liabilities relating
to such amounts are included in other long-term liabilities in the accompanying
consolidated balance sheets. There were no costs allocated from TWE subsequent
to June 23, 1995.
As part of the 1995 Refinancing and Recapitalization, Six Flags entered into
a new license agreement (the "License Agreement") pursuant to which it obtained
the exclusive right for a term of 55 years to theme park use in the United
States and Canada (excluding the Las Vegas, Nevada metropolitan area) of all
animated, cartoon and comic book characters that Warner Bros. and DC Comics have
the right to license for such use during the term of the agreement, including
all characters which, prior to the effectiveness of the License Agreement,
already had been licensed by Warner Bros. and DC Comics to Six Flags for use in
connection with Six Flags' theme parks.
Under the License Agreement, Six Flags will pay an annual license fee of
$500,000 for each of the first ten years of the license term. Thereafter, the
license fee will be subject to periodic scheduled increases and will be payable
on a per-theme park basis. The annual license fees will also be increased by
amounts equal to any third-party payments which may be payable by Warner Bros.
or DC Comics as a result of the use of any licensed character by Six Flags.
Six Flags entered into an amendment to the License Agreement ("Amendment No.
1") which provides the exclusive right for a period of three years ending
December 31, 1998, to theme park use of elements contained in released versions
of certain theatrical motion pictures and television shows, along with usage of
the "Warner Bros. Backlot Logo" (the "Logo Usage"). Each separate motion
picture, television series and/or Logo Usage may be utilized only in connection
with live shows within Six Flags' parks. Six Flags was charged $400,000 in total
for the years 1996 and 1997 and will be charged $150,000 in 1998 for the rights
granted pursuant to Amendment No. 1.
F-48
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In addition to the annual license fees described above, Six Flags is also
required to pay royalties on sales of products incorporating the licensed
characters at standard royalty rates for such products, subject to increase from
time to time. Warner Bros. will be entitled to terminate the License Agreement
prior to the expiration of the stated term if Six Flags, at any time during the
term, is directly or indirectly controlled by a person that derives significant
revenues from the production or distribution of motion pictures or engages in
certain other businesses competitive with TWE.
Six Flags also entered into a license agreement with TWE pursuant to which
TWE granted Six Flags a 25-year license to use the trademarks and service marks
relating to the "Home Box Office" and "HBO" names and the "HBO" logo for use in
connection with the operation of restaurants in Six Flags' theme parks. The TWE
license is royalty-free for the first ten years of its term. Thereafter, annual
royalties will be established every five years. Six Flags also entered into an
agreement entitling Six Flags (i) to use the name "Time Warner" in connection
with operating a retail merchandise outlet with the name "Time Warner Studio
Store" at Six Flags' theme parks and for establishing a themed area in each of
Six Flags' theme parks to be called "Time Warner Studios" and (ii) to stage a
concert series in Six Flags' theme parks under the name "Warner Music Rock
Review." Six Flags also entered into a license agreement with the Sports
Illustrated division of Time Warner pursuant to which Time Warner granted Six
Flags a ten-year royalty-free license to use the "Sports Illustrated" and
"Sports Illustrated for Kids" trademarks and service marks in connection with
the operation of a sports festival at Six Flags' theme parks. The licensor under
each of these additional license agreements has the right to terminate the
license granted thereby if, during the stated term of any such license
agreement, the Warner Bros. License Agreement is terminated for any reason. The
licensor also has the right under certain circumstances to suspend the right of
any of Six Flags' theme parks to use the licenses granted thereby if the license
is not sufficiently utilized in such theme park.
At January 1, 1995, Six Flags had amounts outstanding to TWE aggregating
$488.0 million. Interest expense relating to the amounts due to TWE for fiscal
year 1995 amounted to $18.0 million. At January 1, 1995, accrued interest on the
TWE debt amounted to $7.2 million. As part of the 1995 Refinancing, all amounts
due to TWE were repaid.
COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS AND OTHER
Six Flags is a party to lawsuits incidental to its business and against
which Six Flags believes it is adequately insured or which will not result in
losses material to the consolidated financial position or results of operations
of Six Flags.
On March 19, 1997, SFTP, and its wholly-owned subsidiary Six Flags Over
Georgia, Inc. (collectively, the "Six Flags Parties") commenced a declaratory
judgement 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 Court. The Six Flags Parties sought,
among other things, a declaration and determination of rights and obligations of
the partners of Six Flags Over Georgia, LP 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 discuss the declaratory judgment action as well
as an answer and counterclaim naming SFEC and Time Warner Entertainment Company,
LP as additional counterclaim-defendants. The counterclaim seeks imposition of a
constructive trust, 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
F-49
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Georgia theme park (the "Georgia Park"). Six Flags and the other
counterclaim-defendants intend to vigorously contest these allegations.
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.
On February 2, 1995, Six Flags entered into an agreement with the Jackson
Township Municipal Utilities Authority of New Jersey (the "Authority") which
provides for the extension of the Authority's sanitary sewer collection
facilities to Six Flags Great Adventure ("SFGA"), Six Flags' theme park located
in Jackson, New Jersey, and connection of the SFGA property to such facilities.
SFGA will be entitled to utilize approximately 40% of the total capacity of the
extension and the Authority will waive SFGA's fees relating to connecting to the
extension. The Authority through the New Jersey Waste Water Treatment Trust
("NJWWTT") plans to issue approximately $6.5 million of tax-exempt bonds (the
"Bonds") to finance the costs of the extension. Six Flags has agreed to pay the
Authority amounts equal to principal and interest on the Bonds plus fees to the
NJWWTT. Such debt service payments are estimated at approximately $0.5 million
per annum over the 20-year life of the bonds. In addition, Six Flags has
permitted the Authority to retain, as security, $0.9 million that the Authority
currently owes to Six Flags. These amounts will be repaid to Six Flags on a pro
rata basis as the principal of the Bonds is amortized. Six Flags will be
entitled to credits against the debt service payments as new users connect to
the extension and pay for the 60% of capacity not used by SFGA. Six Flags made
the first principal and interest payment on the bonds, approximately $0.2
million, during the first quarter of 1998.
LEASES
Six Flags leases certain buildings, vehicles, equipment and rides under
operating leases. Vehicles are generally leased under a Fleet Lease Agreement,
which provides for early lease termination under certain conditions. All other
leases are generally noncancellable and may contain renewal options upon
expiration.
Total rent expense for the fiscal years ended 1995, 1996 and 1997 was $12.0
million, $8.5 million and $9.7 million, respectively. Minimum future rent
payments totaling $16.0 million under commitments for noncancellable operating
leases in effect at the end of 1997 are payable as follows: $5.7 million in
1998, $4.3 million in 1999, $3.0 million in 2000, $1.9 million in 2001, $1.0
million in 2002 and $0.1 million for years thereafter.
SUBSEQUENT EVENT
On February 9, 1998, TWE and Boston Ventures Management, Inc. entered into
an agreement with Premier Parks Inc. ("Premier") to sell SFEC for approximately
$1.9 billion. Under the terms of the agreement, Premier will acquire 100% of the
equity of SFEC for $965 million, subject to adjustment, including $765 million
in cash and $200 million in convertible preferred stock of Premier. Premier will
assume a total of approximately $890 million of debt. As part of the
transaction, the companies will enter into a long-term licensing agreement that
gives Premier the exclusive theme park rights in the U.S. and Canada (excluding
the Las Vegas, Nevada Metropolitan area) of all Warner Bros. and DC Comics
animated cartoon and comic book characters. The transaction is expected to close
in the second quarter of 1998. These financial statements do not reflect any
adjustments relating to the consummation of the transaction.
F-50
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Premier expects to finance the transaction with approximately $700 million
of public equity and equity equivalents as well as public debt and bank
financing.
The consummation of this transaction will cause the reserved shares and
options discussed in the Stockholders' Equity footnote to become vested and
exercisable, respectively.
F-51
<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..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 17
Use of Proceeds........................................................... 26
Capitalization............................................................ 27
Selected Historical and Pro Forma Financial and Operating Data............ 28
Unaudited Pro Forma Financial Statements.................................. 34
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 44
Business.................................................................. 54
Management................................................................ 78
Principal Stockholders.................................................... 82
Description of Six Flags Agreement........................................ 85
Description of Indebtedness............................................... 88
Description of Securities................................................. 94
Description of PInES...................................................... 100
Description of Depositary Arrangements.................................... 112
Underwriting.............................................................. 116
Legal Matters............................................................. 119
Experts................................................................... 120
Index to Financial Statements............................................. F-1
</TABLE>
13,000,000 SHARES
[LOGO]
PREMIER PARKS INC.
COMMON STOCK
------------------
PROSPECTUS
, 1998
---------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
FURMAN SELZ
NATIONSBANC MONTGOMERY
SECURITIES LLC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN ARE
SUBJECT TO COMPLETION OR AMENDMENT WITHOUT NOTICE. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY THEM BE ACCEPTED, PRIOR TO THE TIME THE OFFICIAL
STATEMENT IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS
PRELIMINARY OFFICIAL STATEMENT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF, THESE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION, QUALIFICATION OR FILING UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
Subject to Completion, dated March 5, 1998
PROSPECTUS [International Alternate Page]
[LOGO]
13,000,000 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 13,000,000 shares of Common Stock offered, 2,600,000 shares are being
offered initially outside the United States and Canada in an international
offering (the "International Offering") by the International Managers and
10,400,000 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 senior discount notes due
2008, with estimated gross proceeds of $250.0 million, $280.0 million aggregate
principal amount of its senior notes due 2006, and 5,000,000 Premium Income
Equity Securities (the "PInES-SM-") representing interests in the Company's
mandatorily convertible preferred stock (the "Mandatorily Convertible Preferred
Stock") with estimated gross proceeds of $228.2 million (assuming the
underwriters' over-allotment option for 750,000 PInES is not exercised). SFEC is
concurrently offering $170.0 million aggregate principal amount of senior notes
due 2006 (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 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 Company may
reduce (but not below $100 million) or may eliminate the Seller Depositary
Shares by increasing the cash portion of the consideration for the Six Flags
Acquisition and may, if issued, redeem the Seller Depositary Shares for cash
within 90 days of the closing at the higher of the issuance price and market
value. 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 March 3, 1998, the last sales price of the Common Stock, as
reported by the NYSE, was $52 1/2 per share. The Company has applied to list the
PInES 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 PInES.
------------------------
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
PRICE TO DISCOUNTS AND PROCEEDS 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
1,950,000 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
were exercised in full, the total Price to Public, Underwriting Discounts
and Commissions and Proceeds to Company would be 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
FURMAN SELZ NATIONSBANC MONTGOMERY SECURITIES LLC
, 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 applicable 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" (a "USRPHC") 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. It is uncertain whether the
Company is a USRPHC within the meaning of the Code. If the Company is or becomes
a USRPHC then a Foreign Holder described in (iii) of the preceding sentence
generally will be subject to United States federal income tax at regular
graduated rates on gain recognized on a sale or other disposition of Common
Stock. Accordingly, a Foreign Holder that intends to acquire more than 5% of the
outstanding Common Stock should consult its tax advisor regarding possible
adverse tax consequences to such holder.
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 on a net basis at ordinary federal
income tax rates (in which case the branch profits tax may also apply if such
holder is a foreign corporation), and will not be subject to 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 on such
address, certificates or statements is not warranted.
<PAGE>
[International Alternate Page]
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 December 31, 1998.
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..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 17
Use of Proceeds........................................................... 26
Capitalization............................................................ 27
Selected Historical and Pro Forma Financial and Operating Data............ 28
Unaudited Pro Forma Financial Statements.................................. 34
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 44
Business.................................................................. 54
Management................................................................ 78
Principal Stockholders.................................................... 82
Description of Six Flags Agreement........................................ 85
Description of Indebtedness............................................... 88
Description of Securities................................................. 94
Description of PInES...................................................... 100
Description of Depositary Arrangements.................................... 112
Certain United States Federal Tax Considerations to Non-United States
Holders................................................................. 115
Underwriting.............................................................. 117
Legal Matters............................................................. 120
Experts................................................................... 120
Index to Financial Statements............................................. F-1
</TABLE>
13,000,000 SHARES
[LOGO]
PREMIER PARKS INC.
COMMON STOCK
------------------
PROSPECTUS
, 1998
------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
INTERNATIONAL
FURMAN SELZ
NATIONSBANC MONTGOMERY
SECURITIES LLC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[Convertible Stock]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. UNDER NO CIRCUMSTANCES SHALL THIS REGISTRATION STATEMENT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY
SALE OF, THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
<PAGE>
Subject to Completion, dated March 5, 1998
[Alternate Page-PInES]
PROSPECTUS
5,000,000 PINES-SM-
PREMIER PARKS INC.
PREMIUM INCOME EQUITY SECURITIES ("PINES-SM-")
CONSISTING OF DEPOSITARY SHARES, EACH REPRESENTING ONE-FIVE HUNDREDTH OF A
SHARE OF % MANDATORILY CONVERTIBLE PREFERRED STOCK
---------------------
[LOGO]
All of the Premium Income Equity Securities ("PInES-SM-") offered hereby
(the "Offering") are being sold by Premier Parks Inc. (collectively with its
predecessor, the "Company" or "Premier"). Each of the PInES represents one
five-hundredth of a share of % Mandatorily Convertible Preferred Stock
("Mandatorily Convertible Preferred Stock") of the Company deposited with the
Depositary (as defined herein). Each PInES, through the Depositary, entitles the
holder to all proportional rights and preferences of the share of Mandatorily
Convertible Preferred Stock represented thereby. The liquidation preference of
each PInES is $ , plus accrued and unpaid dividends thereon. See
"Description of PInES".
Unless converted by the holder into the Company's common stock, par value
$0.05 per share (the "Common Stock") prior thereto, on , 2001 (the
"Mandatory Conversion Date") each PInES will automatically convert into a number
of shares of Common Stock at the Conversion Rate. The "Conversion Rate" is,
subject to adjustment in certain events, 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 PInES, (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 one share of Common Stock per PInES and (c) if the Conversion Price is less
than or equal to the Initial Price, one share of Common Stock per PInES. The
"Conversion Price" is 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 Mandatory Conversion Date, except as otherwise described
herein. See "Description of PInES--Mandatory Conversion of PInES". At any time
prior to the Mandatory Conversion Date, each PInES is convertible, in whole but
not in part, at the option of the holder thereof into shares of Common Stock,
subject to adjustment in certain events. See "Description of PInES--Conversion
at the Option of the Holder". The value of the Common Stock that will be
received by holders of PInES upon their conversion may be more or less than the
amount paid for the PInES offered hereby due to market fluctuations in the price
of the Common Stock.
Annual dividends on the PInES are cumulative at a rate of $ per PInES from
the date of initial issuance, payable quarterly in arrears on each January 1,
April 1, July 1 and October 1, commencing July 1, 1998. The Company may, at its
option, pay dividends with cash, shares of Common Stock or in some combination
of both, provided that dividends may be paid with Common Stock only if paid on
the Regular Dividend Payment Date (as defined herein) for such dividend. For
purposes of calculating dividend payments, each share of Common Stock delivered
to holders of PInES for payment of dividends will be valued at 95% of the
average Closing Price for the Common Stock over a ten-Trading Day period
preceding the related record date for the dividend payment. See "Description of
PInES--Dividends" and "--Mandatory Conversion of PInES".
The holders of Mandatorily Convertible Preferred Stock (including shares of
Mandatorily Convertible Preferred Stock represented by the PInES) 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 payment of dividends
or liquidation preference to the Mandatorily Convertible Preferred Stock, and in
certain circumstances involving protracted dividend arrearages. See "Description
of PInES--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 2006, and 13,000,000 shares of Common
Stock with estimated gross proceeds of $593.2 million (assuming the
underwriters' over-allotment options are not exercised). SFEC is concurrently
offering $170.0 million aggregate principal amount of senior notes due 2006
(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 Company may
reduce (but not below $100 million) or may eliminate the Seller Depositary
Shares by increasing the cash portion of the consideration for the Six Flags
Acquisition and may, if issued, redeem the Seller Depositary Shares for cash
within 90 days of the closing at the higher of the issuance price and market
value. 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 PInES 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
PInES.
The Common Stock is listed on the NYSE under the symbol "PKS". On
, 1998, the last sales price of the Common Stock, as reported by the
NYSE was $ per share.
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 18 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
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per PInES................................................ $ $ $
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 an option to the Underwriters to purchase up to an
additional 750,000 PInES on the same terms and conditions as set forth
herein solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
---------------------------
The PInES 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 Depositary Receipts evidencing
the PInES 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>
[Alternate Page-PInES]
THE OFFERING
<TABLE>
<S> <C>
Securities........................ 5,000,000 PInES, consisting of depositary shares, each
representing one five-hundredth of a share of
Mandatorily Convertible Preferred Stock, are offered
hereby. Each PInES entitles 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.
Dividends......................... $ per annum per PInES cumulative from the date
of initial issuance, payable quarterly in arrears on
each January 1, April 1, July 1 and October 1,
commencing July 1, 1998. The Company may, at its option,
pay dividends with cash, shares of Common Stock or in
some combination of both, provided that dividends may be
paid with Common Stock only if paid on the Regular
Dividend Payment Date (as defined herein) for such
dividend. For purposes of dividend payments, each share
of Common Stock will be valued at 95% 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 PInES--Dividends" and
"--Mandatory Conversion of PInES".
Mandatory Conversion.............. On , 2001 (the "Mandatory Conversion Date"),
each PInES will automatically convert into shares of
Common Stock at the Conversion Rate. The "Conversion
Rate" is, subject to adjustment in certain events, 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 PInES,
(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 one share of Common
Stock per PInES and (c) if the Conversion Price is less
than or equal to the Initial Price, one share of Common
Stock per PInES. 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, except as otherwise
described herein. See "Description of PInES-- Mandatory
Conversion of PInES".
Optional Conversion............... At any time prior to the Mandatory Conversion Date, each
PInES is convertible, in whole but not in part, at the
option of the holder thereof into shares of Common
Stock, subject to adjustment in certain events. See
"Description of PInES-- Conversion at the Option of the
Holder" and "Description of Depositary
Arrangements--Conversion Provisions".
Voting Rights..................... The holders of PInES will be entitled to direct the
voting of the shares of Mandatorily Convertible
Preferred Stock represented thereby. See "Description of
PInES--Voting Rights". The Mandatorily Convertible
Preferred Stock has no voting rights, except as required
by applicable state law and except that (i) if dividends
on the Mandatorily Convertible Preferred Stock or any
other series of the Company's Preferred Stock are in
arrears and unpaid for six quarterly dividend periods
the Mandatorily Convertible Preferred Stock (voting as a
class with certain other
</TABLE>
13
<PAGE>
[Alternate Page-PInES]
<TABLE>
<S> <C>
series of Preferred Stock) will be entitled to elect two
directors of the Company and (ii) the Mandatorily
Convertible Preferred Stock will have voting rights with
respect to certain alterations of the Company's Restated
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. See
"Description of Depositary Arrangements-- Voting of
Mandatorily Convertible Preferred Stock".
Liquidation Preference and
Ranking......................... The PInES, as representative of beneficial ownership
interests in the 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 PInES is
an amount equal to the sum of (i) $ and (ii) all
accrued and unpaid dividends thereon. See "Description
of PInES--Dividends" and "--Liquidation Rights".
Listing........................... Application will be made to list the PInES 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 PInES.
The Offerings..................... The Company is concurrently offering (i) 13,000,000
shares of Common Stock, with estimated gross proceeds of
$593.2 million, (ii) the 5,000,000 PInES offered hereby,
(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 issuing $170.0 million of New SFEC
Notes. The Company also expects to issue 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", "Description
of Securities--Preferred Stock--Seller Preferred Stock"
and "Description of PInES". 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 fund improvements and expansion of the Company's
parks, including the parks acquired in the Six Flags
Acquisition and the 1997 Acquisitions; to acquire and
make improvements at additional theme parks; and for
general corporate purposes, including working capital
requirements. See "Use of Proceeds".
NYSE symbols:
Common Stock.................... "PKS"
PInES...........................
</TABLE>
14
<PAGE>
[Alternate Page-PInES]
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 PInES set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS PINES
---------------
<S> <C>
Lehman Brothers Inc..............................................................................
Smith Barney Inc. ...............................................................................
-------
Total.........................................................................................
-------
-------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase PInES are subject to the approval of certain legal matters by
counsel and to certain other conditions and that if any of the PInES are
purchased by the Underwriters pursuant to the Underwriting Agreement, all the
PInES agreed to be purchased by the Underwriters pursuant to the Underwriting
Agreement must be so purchased. The closing of each of the 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 that the Underwriters
propose to offer PInES 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 PInES. The selected dealers may
reallow a concession not to exceed $ per PInES. After the initial
offering of the PInES, the offering price, the concession to selected dealers
and the reallowance to other dealers may be changed by the Underwriters.
Except for the PInES to be sold in the Offering (and the Mandatorily
Convertible Preferred Stock represented thereby), the Seller Preferred Stock and
the Common Stock to be sold in the Concurrent Offerings or 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. The Company's officers, directors and principal
stockholders, who hold in the aggregate approximately 6.0 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
Seller 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 Underwriters an option to purchase up to an
additional 750,000 PInES 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 option may be exercised
at any time up to 30 days after the date of this Prospectus. To the extent that
the Underwriters exercise such option, each of the Underwriters will be
committed (subject to certain conditions) to purchase a number of additional
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.
117
<PAGE>
[Alternate Page-PInES]
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 PInES 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 PInES and the Common Stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the PInES and the Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the PInES and the Common Stock.
If the Underwriters create a short position in the PInES in connection with
the Offering (I.E., if they sell more PInES than are set forth on the cover page
of this Prospectus), the Representatives may reduce that short position by
purchasing PInES in the open market after the distribution has been completed.
The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase PInES
in the open market to reduce the Underwriters' short position or to stabilize
the price of the PInES, they may reclaim the amount of the selling concession
from the Underwriters and selling group members who sold those PInES 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 PInES. 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 PInES 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 PInES. The
PInES are a new issue of securities with no established trading market. While
application has been made to list the PInES on the NYSE, no assurance can be
given as to the development or liquidity of any trading market in the PInES. If
an active market does not develop, the market price and liquidity of the PInES
will be adversely affected.
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 financing commitments 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. 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 PInES 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.
118
<PAGE>
[Alternate Page--PInES]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 18
Use of Proceeds........................................................... 27
Capitalization............................................................ 28
Selected Historical and Pro Forma Financial and Operating Data............ 29
Unaudited Pro Forma Financial Statements.................................. 35
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 45
Business.................................................................. 55
Management................................................................ 79
Principal Stockholders.................................................... 83
Description of Six Flags Agreement........................................ 86
Description of Indebtedness............................................... 89
Description of Securities................................................. 95
Description of PInES...................................................... 101
Description of Depositary Arrangements.................................... 113
Underwriting.............................................................. 117
Legal Matters............................................................. 118
Experts................................................................... 119
Index to Financial Statements............................................. F-1
</TABLE>
5,000,000 PINES-SM-
[LOGO]
PREMIER PARKS INC.
PREMIUM INCOME
EQUITY SECURITIES
EACH REPRESENTING ONE FIVE-HUNDREDTH OF A SHARE OF % MANDATORILY CONVERTIBLE
PREFERRED STOCK
------------------------
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 securities
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............................... $ 319,447
National Association of Securities Dealers, Inc. filing fee....................... 30,500
New York Stock Exchange listing fee...............................................
Accounting fees and expenses......................................................
Legal fees and expenses...........................................................
Printing and engraving expenses...................................................
Transfer agent and registrar fees.................................................
Depositary 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 8 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:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
II-1
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of
this section do not apply if the registration statement is on Form
S-3, Form S-8 or Form F-3, and the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(3) 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.
(4) 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.
(b) 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.
(c) 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-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 4th day of March,
1998.
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
------------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
II-3
<PAGE>
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
* Chief Executive Officer
- ------------------------------ (principal executive March 4, 1998
Kieran E. Burke officer)
* Director, President and
- ------------------------------ Chief March 4, 1998
Gary Story Operating Officer
Chief Financial Officer
* and
- ------------------------------ Director (principal March 4, 1998
James F. Dannhauser financial and accounting
officer)
*
- ------------------------------ Director March 4, 1998
Paul A. Biddelman
*
- ------------------------------ Director March 4, 1998
Michael E. Gellert
*
- ------------------------------ Director March 4, 1998
Jack Tyrrell
*
- ------------------------------ Director March 4, 1998
Sandy Gurtler
*
- ------------------------------ Director March 4, 1998
Charles R. Wood
*By: JAMES M. COUGHLIN
-------------------------
James M. Coughlin
Attorney-in-fact
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., Furman Selz LLC and NationsBanc Montgomery Securities LLC as representatives
of the several U.S. Underwriters...........................................................
* (b) Form of International Underwriting Agreement among the Registrant, Lehman Brothers
International (Europe), Smith Barney Inc., Furman Selz LLC and NationsBanc Montgomery
Securities LLC 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., and Smith Barney
Inc, as representative of the several Underwriters (Premium Income Equity Securities)......
* (e) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc. and Salomon
Brothers Inc, as representatives of the several Underwriters (Company Notes)...............
* (f) Form of Underwriting Agreement among Six Flags Entertainment Corporation, Lehman Brothers
Inc., Salomon Brothers Inc. and NationsBanc Montgomery Securities LLC as representatives of
the several Underwriters (New SFEC Notes)..................................................
(2) Plan of Acquisition:
(a) Agreement and Plan of Merger dated February 9, 1998, among the Registrant, the subsidiaries
of the Registrant named therein, the holders of capital stock of Six Flags Entertainment
Corporation and Six Flags Entertainment Corporation-- incorporated by reference from
Exhibit [ ] to the Registrant's Current Report on Form 8-K dated February 9, 1998.........
* (b) Subordinated Indemnity Agreement dated February 9, 1998, among the Registrant, the
subsidiary of the Registrant named therein, Time Warner Inc., the subsidiaries of Time
Warner Inc. named therein, Six Flags Entertainment Corporation and the subsidiaries of Six
Flags Entertainment Corporation named therein..............................................
(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 "1995 Registration Statement").......................................
(b) Form of First Supplemental Indenture dated as of November 9, 1995 --incorporated by
reference from Exhibit 4(2.1) to the 1995 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 1995 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 1995 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..................................................................................
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
(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.....................................
(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 March , 1998, between the Registrant and the Bank of New
York.......................................................................................
* (p) Form of Indenture, dated as of March , 1998, between the Registrant and ................
* (q) Form of Indenture, dated as of March , 1998, among the Registrant, Six Flags Entertainment
Corporation 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................................................
* (u) Form of Depositary Agreement dated as of , 1998, among the Registrant,
, and the holders from time to time of depositary receipts executed and
delivered thereunder.......................................................................
* (5) Opinion of Baer Marks & Upham LLP, including consent......................................................
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C> <C>
(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 Coopers & Lybrand LLP...........................................................
(e) Consent of Carpenter Mountjoy & Bressler, PSC..............................................
**(24) Power of Attorney.........................................................................................
(27) Financial Data Schedule...................................................................................
</TABLE>
- ------------------------
* To be filed by amendment
** Previously filed
II-7
<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, 1997
AND FOR THE PRO FORMA YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997 1997 PRO FORMA
--------- --------- --------- --------- --------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before extraordinary loss..... $ 1,354 $ 102 $ (1,045) $ 1,765 $ 14,099 $ (41,292)
Income tax expense (benefit)................ 91 68 (762) 1,497 9,615 9,931
Interest expense, net....................... 1,438 2,299 5,578 11,121 17,775 180,273
Equity in loss of affiliated partnership.... 142 83 69 78 59 59
Minority interest in earnings............... -- -- -- -- -- (516)
1/3 of rental expense... 23 107 183 405 743 3,976
--------- --------- --------- --------- --------- ---------------
Adjusted earnings (loss).................... $ 3,048 $ 2,659 $ 4,023 $ 14,866 $ 42,291 $ 152,431
--------- --------- --------- --------- --------- ---------------
--------- --------- --------- --------- --------- ---------------
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS:
Interest expense, net....................... $ 1,438 $ 2,299 $ 5,578 $ 11,121 $ 17,775 $ 180,273
Preferred stock dividends................... -- -- 529 603 -- 28,000
Increase in preferred stock dividends for
pretax exrnings required to cover such
dividends at 39% estimate rate............. -- -- 353 402 -- 17,902
1/3 of rental expense....................... 23 107 183 405 743 3,976
--------- --------- --------- --------- --------- ---------------
Total fixed charges......................... $ 1,461 $ 2,406 $ 6,643 $ 12,531 $ 18,518 $ 230,151
--------- --------- --------- --------- --------- ---------------
--------- --------- --------- --------- --------- ---------------
Ratio of earnings to combined fixed charges
and preferred stock dividends.............. 2.1 1.1 0.6 1.2 2.3 0.7
--------- --------- --------- --------- --------- ---------------
Deficiency.................................. $ 2,620 $ 77,720
</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, 1997
AND FOR THE PRO FORMA YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------- PRO FORMA
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before extraordinary loss.......... $ 1,354 $ 102 $ (1,045) $ 1,765 $ 14,099 $ (41,292)
Income tax expense (benefit)..................... 91 68 (762) 1,497 9,615 9,931
Interest expense, net............................ 1,438 2,299 5,578 11,121 17,775 180,273
Equity in loss of affiliated partnership......... 142 83 69 78 59 59
Minority interest in earnings.................... -- -- -- -- -- (516)
1/3 of rental expense... 23 107 183 743 3,976
--------- --------- --------- --------- --------- -----------
Adjusted earnings (loss)......................... $ 3,048 $ 2,659 $ 4,023 $ 14,461 $ 42,291 $ 152,431
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
FIXED CHANGES:
Interest expense, net............................ $ 1,438 $ 2,299 $ 5,578 $ 11,121 $ 17,775 $ 180,273
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 39%
estimate rate................................... -- -- -- -- -- --
1/3 of rental expense............................ 23 107 183 405 743 3,976
--------- --------- --------- --------- --------- -----------
Total fixed charges.............................. $ 1,461 $ 2,406 $ 5,761 $ 11,526 $ 18,518 $ 184,249
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Ratio of earnings to fixed charges............... 2.1 1.1 0.7 1.3 2.3 0.8
--------- --------- --------- --------- --------- -----------
Deficiency....................................... $ 1,738 $ 31,818
</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
March 4, 1998
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 14, 1998, with respect to the financial
statements of Six Flags Entertainment Corporation included in the Registration
Statement (Amendment No. 1 to Form S-3, No. 333-45859) and related Prospectus of
Premier Parks Inc.
Ernst & Young LLP
New York, New York
March 4, 1998
<PAGE>
EXHIBIT 23(E)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Kentucky Kingdom, Inc.
We consent to the incorporation by reference in the registration statement on
Form S-3 of Premier Parks, Inc. of our report dated December 12, 1997, except as
to Note K which is as of March 4, 1998, relating to the balance sheet of
Kentucky Kingdom as of November 2, 1997, and the related statements of income,
changes in stockholders equity and cash flows for the year then ended, which
report appears in the amended report on Form 8-K/A of Premier Parks, Inc. and to
the reference to our firm under the heading "Experts" in the Prospectus.
Carpenter, Mountjoy & Bressler, PSC
Louisville, Kentucky
March 4, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 84,288
<SECURITIES> 0
<RECEIVABLES> 6,537
<ALLOWANCES> 0
<INVENTORY> 5,547
<CURRENT-ASSETS> 101,057
<PP&E> 485,866
<DEPRECIATION> 35,610
<TOTAL-ASSETS> 611,321
<CURRENT-LIABILITIES> 33,779
<BONDS> 216,231
0
0
<COMMON> 944
<OTHER-SE> 322,805
<TOTAL-LIABILITY-AND-EQUITY> 611,321
<SALES> 193,904
<TOTAL-REVENUES> 193,904
<CGS> 23,025
<TOTAL-COSTS> 23,025
<OTHER-EXPENSES> 101,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,775
<INCOME-PRETAX> 23,714
<INCOME-TAX> 9,615
<INCOME-CONTINUING> 14,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,099
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0.76
</TABLE>
