<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998
REGISTRATION NO. 333-46167
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. KIRK A. DAVENPORT, ESQ.
Baer Marks & Upham LLP Latham & Watkins
805 Third Avenue 885 Third Avenue
New York, New York 10022 New York, New York 10022-4802
Tel: (212) 702-5819 Tel: (212) 906-1200
</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. / /
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. / /
------------------------
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>
Subject to Completion, dated March 9, 1998
PROSPECTUS
$
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>
[LOGO]
PREMIER PARKS INC.
$ % SENIOR DISCOUNT NOTES DUE 2008
$280,000,000 % SENIOR NOTES DUE 2006
-----------------
Premier Parks Inc. (collectively with its predecessor, the "Company" or
"Premier") is offering $ in aggregate principal amount at maturity of its
% Senior Discount Notes (the "Company Senior Discount Notes") due 2008 (the
"Discount Notes Offering") and $280,000,000 in aggregate principal amount of its
% Senior Notes (the "Company Senior Notes" and, together with the Company
Senior Discount Notes, the "Company Notes") due 2006 (the "Senior Notes
Offering" and, together with the Discount Notes Offering, the "Notes Offering").
The Company Senior Discount Notes will be issued at a substantial discount
to their principal amount at maturity, and will be sold at a price to investors
that will yield gross proceeds to the Company of approximately $250.0 million.
The issue price of the Company Senior Discount Notes will be $ per
$1,000 principal amount at maturity plus accreted original issue discount, if
any, from the date of issuance. The Company Senior Discount Notes will accrete
in value until , 2003. Thereafter, cash interest will accrue on the
Company Senior Discount Notes and will be payable semiannually in arrears on
and , commencing , 2003, at a rate of % per annum. A
portion of the net proceeds of the Offerings will be used to purchase a
portfolio of Government Securities (as defined) that will be pledged to secure
the Company's obligations under the Company Senior Discount Notes. The Company
will only be permitted to withdraw funds from this account to make Permitted
Distributions (as defined) or in the event of a Change of Control (as defined),
to make a Change of Control Payment (as defined). See "Description of
Notes--Security--Restricted Cash Account." The Company Senior Discount Notes
will be redeemable at the option of the Company, in whole or in part, at any
time on or after , 2003, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon to the date of redemption. In addition,
prior to , 2001, the Company may redeem up to 35% of the original
aggregate principal amount at maturity of the Company Senior Discount Notes at
% of the Accreted Value (as defined) thereof to the redemption date with the
net cash proceeds of one or more Public Equity Offerings (as defined) and/or
Strategic Equity Investments (as defined); provided that at least 65% of the
aggregate principal amount at maturity of the Company Senior Discount Notes
originally issued remains outstanding immediately after the occurrence of each
such redemption. See "Description of Notes."
Interest on the Company Senior Notes will be payable semi-annually in
arrears on and of each year, commencing on ,
1998. A portion of the net proceeds of the Senior Notes Offering will be used to
purchase a portfolio of Government Securities, that will be pledged as security
for payment of interest on the Company Senior Notes through , 2001, and,
under certain circumstances, as security for repayment of principal of the
Company Senior Notes. See "Description of Notes--Security--Interest Escrow." The
Company Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest thereon to the date of
redemption. In addition, prior to , 2001, the Company may redeem up to 35%
of the original aggregate principal amount of the Company Senior Notes at %
of the principal amount thereof to the redemption date with the net cash
proceeds of one or more Public Equity Offerings
and/or Strategic Equity Investments; provided that at least 65% of the aggregate
principal amount of the Company Senior Notes originally issued remains
outstanding immediately after the occurrence of each such redemption.
Upon the occurrence of a Change of Control, each holder of the Company Notes
will have the right to require the Company to purchase all or any part of such
holder's Company Notes at a purchase price equal to (i) in the case of the
Company Senior Discount Notes, 101% of the Accreted Value thereof to the date of
purchase prior to , 2003 or 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest to the date of purchase, on or after
, 2003 or (ii) in the case of the Company Senior Notes, 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the date
of purchase. See "Description of Notes."
The Company Notes will be general obligations of the Company and will rank
PARI PASSU in right of payment with all current and future senior indebtedness
of the Company. All of the operations of the Company are conducted through its
subsidiaries, and none of the Company's subsidiaries will guarantee the
Company's obligations under the Company Notes. Accordingly, the Company Notes
will be effectively subordinated to all indebtedness and other liabilities of
such subsidiaries, including borrowings under the Six Flags Credit Facility and
the Premier Credit Facility (each as defined) and indebtedness outstanding under
the Premier Notes, the SFTP Senior Subordinated Notes and the New SFEC Notes
(each as defined). As of December 31, 1997, after giving pro forma effect to the
Premier Merger, the Acquisitions and the Offerings (each as defined), the
Company on a consolidated basis would have had total outstanding indebtedness in
the accreted principal amount of $1,993.0 million (including the SFEC Zero
Coupon Senior Notes) (all of which indebtedness other than the Company Notes
would have been indebtedness of the Company's subsidiaries) and the Company's
subsidiaries would have had approximately $158.9 million of other outstanding
liabilities. See "Capitalization."
The Notes 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 publicly
offering in the U.S. and internationally 13,000,000 shares of the Company's
Common Stock, par value $0.05 per share (the "Common Stock") with estimated
gross proceeds of $593.2 million, 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 proceeds of $228.2 million (assuming the underwriters' over-allotment
option for 750,000 PInES is not exercised). SFEC is concurrently offering (the
"SFEC Notes Offering") $170.0 million aggregate principal amount of senior notes
due 2006 (the "New SFEC Notes"). The closing of the Notes Offerings is
conditioned upon the closing of the offerings of Common Stock (the "Common Stock
Offering") and PInES (the "PInES Offering," and together with, the SFEC Notes
Offering and the Common Stock Offering, the "Concurrent Offerings" and, together
with the Notes Offering, the "Offerings") and the closing of each of the Six
Flags Transactions (as defined).
---------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMPANY NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE
20.
--------------------
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(1) Commissions(2) Company(1)(3)
<S> <C> <C> <C>
Per Company Senior Discount Note............................... % % %
Total.......................................................... $ $ $
Per Company Senior Note........................................ % % %
Total.......................................................... $ $ $
</TABLE>
(1) Plus accreted original issue discount on the Company Senior Discount Notes,
if any, and accrued interest on the Company Senior Notes, if any, in both
instances from the date of issuance to the date of delivery.
(2) The Company and its operating subsidiaries have agreed to indemnify the
Underwriters (as defined) against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
---------------------------
The Company Notes are being offered subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to certain conditions.
It is expected that delivery of the Company Notes will be made in book entry
form through the facilities of The Depository Trust Company, on or about
, 1998, against payment therefor in immediately available funds.
---------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
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 THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMPANY NOTES
OFFERED HEREBY AT LEVELS WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros., 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>
(This page has been left blank intentionally.)
4
<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 IN THE COMMON STOCK OFFERING AND THE PINES
OFFERING 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.
5
<PAGE>
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.
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
6
<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 featuring the animated characters
licensed from Warner Bros. and DC Comics, as well as targeted capital
7
<PAGE>
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."
8
<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 Notes Offering is one of a series of related transactions (the "Six
Flags Transactions") all of which will be consummated immediately prior to or
concurrently with the Notes 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 depositary shares (the "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 Other 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 in 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). See "Description of Capital Stock-Common Stock."
2. The Company will issue in 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 Capital Stock--Mandatorily Convertible Preferred Stock."
3. The Company will issue in the Discount Notes Offering $ million
aggregate principal amount at maturity of the Company Senior Discount Notes with
estimated gross proceeds of $250.0 million. See "Description of Notes."
9
<PAGE>
4. The Company will issue in the Senior Notes Offering $280.0 million
principal amount of the Company Senior Notes. See "Description of Notes."
5. SFEC will issue in the SFEC Notes Offering $170.0 million principal
amount of 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 Other 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 approximately $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 Other Indebtedness--Premier Credit Facility" and "--Six
Flags Credit Facility."
The closing of the Notes 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 Capital Stock--Preferred
Stock."
(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."
10
<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.
11
<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
12
<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 Other
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.
13
<PAGE>
THE NOTES OFFERING
<TABLE>
<S> <C>
Securities Offered.................... $ in aggregate principal amount at maturity of %
Senior Discount Notes due 2008 (the "Company Senior Discount
Notes") and $280,000,000 in aggregate principal amount of %
Senior Notes due 2006 (the "Company Senior Notes").
The Offerings......................... In addition to the Notes Offering, the Company is concurrently
offering (i) 13,000,000 shares of Common Stock with estimated
gross proceeds of $593.2 million and (ii) 5,000,000 PInES
representing interests in Mandatorily Convertible Preferred
Stock with estimated gross proceeds of $228.2 million. 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 Other Indebtedness," "Description of Capital Stock" and
"Description of Notes." 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."
Ranking............................... The Company Notes will be general obligations of the Company,
ranking PARI PASSU in right of payment with all current and
future senior indebtedness of the Company, and senior in right
of payment to all future subordinated indebtedness of the
Company. The Company is a holding company whose only
significant asset is the capital stock of its subsidiaries.
The Company Notes will not be guaranteed by such subsidiaries.
Accordingly, the Company Notes will be effectively
subordinated to all indebtedness and other liabilities
(including trade payables) of the Company's subsidiaries,
including all borrowings under the Six Flags Credit Facility
and the Premier Credit Facility and all indebtedness
outstanding under the Subsidiary Indentures (as defined). As
of December 31, 1997, after giving pro forma effect to the
Premier Merger, the Acquisitions and the Offerings, the
Company on a consolidated basis would have had total
outstanding indebtedness in the accreted principal amount of
$1,993.0 million (including the SFEC Zero Coupon Senior Notes)
(all of which indebtedness other than the Company Notes would
have been indebtedness of the Company's subsidiaries) and the
Company's subsidiaries would have had approximately $158.9
million of other outstanding liabilities.
Certain Covenants..................... The indentures pursuant to which the Company Notes will be
issued (the "Company Indentures") will contain certain
covenants that, among other things, limit the ability of the
Company and its subsidiaries to (i) incur additional
indebtedness and issue preferred stock, (ii) pay dividends or
make certain other restricted payments, (iii) enter into
transactions with affiliates, (iv) make certain asset dispo-
sitions, (v) merge or consolidate with, or transfer
substantially all its assets to, another Person (as defined),
(vi) create Liens (as defined), (vii) issue or sell Equity
Interests (as defined) of the Company's subsidiaries, (viii)
engage in sale and leaseback transactions or (ix)
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
engage in certain business activities. See "Description of
Notes-- Certain Covenants."
COMPANY SENIOR DISCOUNT NOTES
Maturity Date......................... , 2008.
Yield and Interest.................... The Company Senior Discount Notes will accrete in value at a
rate of % per annum, compounded semiannually, to an
aggregate principal amount of $ million by , 2003.
Cash interest will not accrue on the Company Senior Discount
Notes prior to , 2003. Thereafter, cash interest on
the Company Senior Discount Notes will accrue and be payable
semiannually in arrears on each and ,
commencing , 2003, at a rate of % per annum.
Security.............................. A portion of the net proceeds of the Discount Notes Offering
will be used to purchase a portfolio of Government Securities
that will be pledged to secure the Company's obligations under
the Company Senior Discount Notes. The Company will only be
permitted to withdraw funds from this account to make
Permitted Distributions (as defined) or in the event of a
Change of Control, to make a Change of Control Payment. See
"Description of Notes--Security--Restricted Cash Account."
Original Issue Discount............... The Company Senior Discount Notes will be issued at a
substantial discount to their principal amount at maturity,
and will be sold to investors at a price that will yield gross
proceeds to the Company of approximately $250.0 million. The
Company Senior Discount Notes are being offered at an original
issue discount ("OID") for U.S. federal income tax purposes.
Thus, although cash interest will not be payable on the
Company Senior Discount Notes prior to , 2003,
original issue discount will accrue from the issue date of the
Company Senior Discount Notes and will be included as interest
income periodically (including for periods ending prior to
, 2003) in a holder's gross income for U.S. federal
income tax purposes in advance of receipt of the cash payments
to which the income is attributable. See "Certain United
States Federal Income Tax Considerations."
Optional Redemption................... Except as described below, the Company Senior Discount Notes
will not be redeemable at the Company's option prior to
, 2003. Thereafter, the Company Senior Discount Notes
will be subject to redemption at any time at the option of the
Company, in whole or in part, at the redemption prices set
forth herein plus accrued and unpaid interest to the
applicable redemption date. In addition, at any time prior to
, 2001, the Company may on any one or more occasions
redeem up to 35% of the original aggregate principal amount at
maturity of the Company Senior Discount Notes at a redemption
price of % of the Accreted Value thereof to the redemption
date, with the net cash proceeds from one or more Public
Equity Offerings and/or Strategic Equity Investments; PROVIDED
that at least 65% of the aggregate principal amount at
maturity of the Company Senior Discount Notes originally
issued remains outstanding immediately after the occurrence of
each such redemption (excluding Company Senior Discount Notes
held by the Company or any of its subsidiaries). See
"Description of Notes--Optional Redemption."
Change of Control..................... Upon the occurrence of a Change of Control, the holders of the
Company Senior Discount Notes will have the right to require
the
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Company to repurchase such holders' Company Senior Discount
Notes, in whole or in part, at a price equal to 101% of the
Accreted Value thereof to the date of purchase prior to
, 2003 or 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase on or
after , 2003. There can be no assurance that the
Company will be able to raise sufficient funds to meet this
obligation should it arise. See "Risk Factors--Risks
Associated with a Change of Control" and "Description of
Notes--Repurchase at the Option of Holders--Change of Con-
trol."
COMPANY SENIOR NOTES
Maturity Date......................... , 2006.
Yield and Interest.................... Interest accrues from the date of issuance and will be payable
in cash semiannually in arrears on each and ,
commencing , 1998, at a rate of % per annum.
Security.............................. A portion of the net proceeds of the Senior Notes Offering
will be used to purchase a portfolio of Government Securities
that will be pledged as security for the payment of interest
on the Company Senior Notes for the first six semi-annual
interest payments and under certain circumstances as security
for repayment of principal of the Company Senior Notes. See
"Description of Notes--Security--Interest Escrow."
Optional Redemption................... Except as described below, the Company Senior Notes will not
be redeemable at the Company's option prior to , 2002.
Thereafter, the Company Senior Notes will be subject to
redemption at any time at the option of the Company, in whole
or in part, at the redemption prices set forth herein plus
accrued and unpaid interest to the applicable redemption date.
In addition, at any time prior to , 2001, the Company
may on any one or more occasions redeem up to 35% of the
aggregate principal amount of the Company Senior Notes at a
redemption price of % of the aggregate principal amount
thereof to the redemption date, with the net cash proceeds
from one or more Public Equity Offerings and/or Strategic
Equity Investments; PROVIDED that at least 65% of the
aggregate principal amount of the Company Senior Notes
originally issued remains outstanding immediately after the
occurrence of each such redemption (excluding Company Senior
Notes held by the Company or any of its subsidiaries). See
"Description of Notes--Optional Redemption."
Change of Control..................... Upon the occurrence of a Change of Control, the holders of the
Company Senior Notes will have the right to require the
Company to repurchase such holders' Company Senior Notes, in
whole or in part, at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest to
the date of purchase. There can be no assurance that the
Company will be able to raise sufficient funds to meet this
obligation should it arise. See "Risk Factors--Risks Associ-
ated with a Change of Control" and "Description of
Notes--Repurchase at the Option of Holders--Change of
Control."
</TABLE>
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<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,
------------------------------------------------------------------------
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:
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)
17
<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) or Marine World. 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 of $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
18
<PAGE>
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.
(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 with
respect to the Common Stock Offering and the PInES Offering) 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 also "Capitalization."
See "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
-----------------------------------------------------------------------
DECEMBER 26, JANUARY 1, DECEMBER 31, DECEMBER 29, DECEMBER 28,
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 by (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.
19
<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," "Description of Other Indebtedness" and "Description of
Notes--Certain Covenants."
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
20
<PAGE>
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 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 holders of the Company
Notes, 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,
21
<PAGE>
acquisitions or other general corporate purposes, (v) limiting the Company's
flexibility in planning for, or reacting to, changes in its business and the
industry, and (vi) placing the Company at a competitive disadvantage vis-a-vis
less leveraged competitors. In addition, the Indentures and the Credit
Facilities will contain financial and other restrictive covenants that will
limit the ability of the Company to, among other things, borrow additional
funds. Failure by the Company to comply with such covenants could result in an
event of default which, if not cured or waived, would have a material adverse
effect on the Company. In addition, the degree to which the Company is leveraged
could prevent it from repurchasing all of the Company Notes tendered to it upon
the occurrence of a Change of Control. See "Description of Notes-- Repurchase at
Option of Holders--Change of Control" and "Description of Other Indebtedness."
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 "Subsidiary Indentures"
and, together with the Company Indentures, the "Indentures"), 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 Other 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 Transactions. 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 Other Indebtedness."
The Company Notes will be effectively subordinated to all indebtedness and
other obligations of the Company's subsidiaries. On a pro forma basis, as of
December 31, 1997, the aggregate accreted amount of indebtedness and other
obligations of the Company's subsidiaries (including trade payables and the SFEC
Zero Coupon Senior Notes) that would effectively rank senior in right of payment
to the obligations of the Company under the Company Notes would have been
approximately $1,621.9 million (in addition, approximately $127.0 million would
have been available for additional borrowings under the Credit Facilities). 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.
22
<PAGE>
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 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
23
<PAGE>
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.
RISKS OF ACCIDENTS AND DISTURBANCES AT PARKS; EFFECTS OF LOCAL CONDITIONS AND
EVENTS
Because substantially all of the Company's parks feature "thrill rides,"
attendance at the parks and, consequently, revenues may be adversely affected by
any serious accident or similar occurrence with respect to a ride. In that
connection, in June 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. The collapse had a material adverse effect on that park's 1997 operating
performance, as well as a lesser impact on the Company's Sacramento water park
(which is also named "Waterworld"), located approximately seventy miles from the
Concord park, but did not have a material effect on the balance of the Company's
1997 operations. The Company has recovered all of the Concord park's operating
shortfall under its business interruption insurance. Premier Operations'
liability insurance policies provide coverage of up to $25.0 million per loss
occurrence and require Premier Operations to pay the first $50,000 of loss per
occurrence. Six Flags' liability insurance policies provide coverage of up to
$175.0 million per loss occurrence and require Six Flags to pay the first $2.0
million per loss occurrence.
Other local conditions and events can also adversely affect attendance. For
example, in 1994, the Company's Six Flags Magic Mountain park experienced
significant attendance declines and interruptions of business as a result of the
Los Angeles County earthquake centered in Northridge, California. Six Flags Over
Georgia experienced attendance declines in 1996 as a result of the 1996 Summer
Olympics. Management believes that the geographic diversity of the Company's
theme parks reduces the effects of such occurrences on the Company's
consolidated results.
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
24
<PAGE>
Company believes that quarter-to-quarter comparisons of its results of
operations should not be relied upon as an indication of future performance.
HIGHLY COMPETITIVE BUSINESS
The Company's parks compete directly with other theme, water and amusement
parks and indirectly with all other types of recreational facilities and forms
of entertainment within their market areas, including movies, sports attractions
and vacation travel. Accordingly, the Company's business is and will continue to
be subject to factors affecting the recreation and leisure time industries
generally, such as general economic conditions and changes in discretionary
consumer spending habits. Within each park's regional market area, the principal
factors affecting competition include location, price, the uniqueness and
perceived quality of the rides and attractions in a particular park, the
atmosphere and cleanliness of a park and the quality of its food and
entertainment.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers and key operating personnel, particularly Kieran E. Burke,
Chairman and Chief Executive Officer, and Gary Story, President and Chief
Operating Officer. The loss of services of, or a material reduction in the
amount of time devoted to the Company by, either of such individuals or certain
other key personnel could adversely affect the business of the Company. Although
the Company recently entered into three-year employment agreements with each of
Mr. Burke and Mr. Story, there is no assurance that the Company will be able to
retain their services during that period. Under certain circumstances, the loss
of the services of both Messrs. Burke and Story and the failure to replace them
within a specified time period would constitute a default under the Credit
Facilities.
ORIGINAL ISSUE DISCOUNT OF COMPANY SENIOR DISCOUNT NOTES
The Company Senior Discount Notes will be issued at a substantial discount
from their principal amount. Consequently, the purchasers of the Company Senior
Discount Notes generally will be required to include amounts in gross income for
federal income tax purposes in advance of receipt of any cash payment on the
Company Senior Discount Notes to which the income is attributable. See "Certain
United States Federal Income Tax Considerations" for a more detailed discussion
of the federal income tax consequences to the holders of the Company Senior
Discount Notes of the purchase, ownership and disposition of the Company Senior
Discount Notes.
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the Company
Senior Discount Notes, the claim of a holder of Company Senior Discount Notes
with respect to the principal amount thereof will likely be limited to an amount
equal to the sum of (i) the Accreted Value of the Company Senior Discount Notes
as of the date of issuance of the Company Senior Discount Notes and (ii) the
original issue discount that is not deemed to constitute "unmatured interest"
for the purposes of the Bankruptcy Code. Any original issue discount that was
not amortized as of any such bankruptcy filing would most likely constitute
"unmatured interest."
RISKS ASSOCIATED WITH A CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Company Senior Discount Notes at 101% of the Accreted
Value thereof to the date of purchase prior to , 2003 or 101% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase, on or after , 2003 and all outstanding Company Senior Notes
at 101% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of purchase. However, there can be no assurance that
sufficient funds will be available at the time of any Change of Control to
25
<PAGE>
make any required repurchases of the Company Notes tendered or that restrictions
in the Credit Facilities and the Indentures will allow the Company to make such
required repurchases. In addition, a Change of Control would constitute an Event
of Default under the Credit Facilities and would require Premier Operations and
SFEC, respectively, to offer to repurchase the Premier Notes and the New SFEC
Notes. Notwithstanding these provisions, the Company could enter into certain
transactions, including certain recapitalizations, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of Notes--Repurchase at Option of Holders."
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." Warner Bros.
can terminate the license agreement if persons engaged in the movie or
television industries or party to a material judicial proceeding pending against
Time Warner obtain control of the Company.
ABSENCE OF PUBLIC MARKET
There is no existing trading market for the Company Notes. The Company does
not intend to apply for listing of the Company Notes on any securities exchange.
The Underwriters have advised the Company that they currently intend to make a
market in the Company Notes. However, they are not obligated to do so and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the prices or liquidity of, or trading markets
for, the Company Notes. The liquidity of any market for the Company Notes will
depend upon the number of holders of Company Notes, the interest of securities
dealers in making a market in the Company Notes, and other factors. The absence
of an active market for the Company Notes could adversely affect the liquidity
of the Company Notes. Even if such a market were to develop, the Company Notes
could trade at prices that may be lower than their initial offering price as a
result of many factors, including prevailing interest rates and the Company's
operating results and financial condition at the time. The liquidity of, and
trading markets for, the Company Notes may also be adversely affected by general
declines in the market for non-investment grade debt.
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."
26
<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 with
respect to the Common Stock Offering and the PInES Offering 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 (with respect to the Common Stock Offering
or the PInES Offering) 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.
27
<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 with respect to the Common Stock
Offering and the PInES Offering 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 with respect to the Common Stock Offering and the PInES Offering.
(8) Excludes effect of 750,000 PInES issuable upon exercise of the underwriters'
over-allotment option with respect to the PInES Offering.
28
<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.
29
<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........................ 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>
30
<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.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
31
<PAGE>
(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 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 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 with respect to the
Common Stock Offering and the PInES Offering) 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."
32
<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
33
<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 by (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 of the Co-Venture Partnerships.
34
<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.
35
<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.
36
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
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>
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)
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
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)
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 an 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.
39
<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.
40
<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.
41
<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>
42
<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
43
<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.
44
<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."
45
<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.
46
<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.
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
47
<PAGE>
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.
48
<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.
49
<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
50
<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 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
51
<PAGE>
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 Other 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 Other Indebtedness."
On a pro forma basis as of December 31, 1997, the Company would have had
total outstanding indebtedness in the accreted principal amount of $1,993.0
million (including $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
52
<PAGE>
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 Other 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 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 and available cash, available borrowings
under the Credit Facilities and the net proceeds of the Offerings (to the extent
not used in connection with the Six Flags Acquisition) will be adequate to meet
the Company's future liquidity needs, including anticipated requirements for
working capital, capital expenditures, scheduled debt and preferred stock
dividends and its obligations under arrangements relating to the
53
<PAGE>
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."
54
<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.
55
<PAGE>
Six Flags has operated regional theme parks under the Six Flags name for
over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier will obtain 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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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 Regulations."
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
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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; 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.
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The Company owns a site of 515 acres, with 115 acres currently used for park
operations. The remaining 400 acres, which are fully zoned for entertainment and
recreational uses, provide the Company with ample expansion opportunity, as well
as the potential to develop complementary operations, such as an amphitheater.
Adventure World's principal competitors are King's Dominion Park, located in
Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Adventure
World.
DARIEN LAKE & CAMPING RESORT
Darien Lake, a combination theme and water park, is the largest theme park
in the State of New York and the 38th largest theme park in the United States
based on 1997 attendance of 1.4 million. Darien Lake is located off Interstate
90 in Darien Center, New York, approximately 30, 40 and 120 miles from Buffalo,
Rochester and Syracuse, New York, respectively. The park's primary market
includes upstate New York, western and northern Pennsylvania and southern
Ontario, Canada. This market provides the park with a permanent resident
population base of approximately 2.1 million people within 50 miles of the park
and 3.1 million with 100 miles. The Buffalo, Rochester and Syracuse markets are
the number 40, number 75 and number 72 DMAs in the United States, respectively.
Based upon in-park surveys, approximately 62% of the visitors to Darien Lake in
1997 resided within a 50-mile radius of the park, and 79% resided within a
100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds and 593 acres of
agricultural, undeveloped and water areas. Darien Lake also has a 20,000 seat
amphitheater. Following the 1995 season, the Company entered into a long-term
arrangement with a national concert promoter to realize the cash flow potential
of the amphitheater. As a result, since it acquired the park, the Company has
realized substantial increases in revenues earned from concerts held at the
facility.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States.
In 1997, approximately 310,000 people used the Darien Lake campgrounds. The
Company believes that substantially all of the camping visitors use the theme
park. The Company is constructing an economy motel at the site for the 1998
season to supplement the campgrounds.
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
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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 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.
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THE GREAT ESCAPE
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George resort area, 180 miles north
of New York City and 40 miles north of Albany. The park's primary market
includes the Lake George tourist population and the upstate New York and western
New England resident population. Official statistics indicate that the area had
a visitor population of over 7.5 million people in 1995, of which over 3.5
million were overnight visitors, with an average length of stay of 4.3 days.
This market provides the park with a permanent resident population base of
approximately 800,000 people within 50 miles of the park and 3.3 million people
within 100 miles. The Albany market is the number 52 DMA in the United States.
Based upon in-park surveys, approximately 41% of the visitors to The Great
Escape in 1997 resided within a 50-mile radius of the park, and 69% resided
within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Riverside Park, the Company's park located in Springfield,
Massachusetts, approximately 150 miles from The Great Escape. In addition, there
is a smaller water park located in Lake George.
KENTUCKY KINGDOM
Kentucky Kingdom is a combination theme and water park, located on
approximately 58 acres on and adjacent to the grounds of the Kentucky State Fair
in Louisville, Kentucky, of which approximately 38 acres are leased under ground
leases with terms (including renewal options) expiring in 2049, with the balance
owned by the Company. Based on 1997 attendance of 1.1 million, Kentucky Kingdom
was the 47th largest theme park in the United States. The park's primary market
includes Louisville and Lexington, Kentucky, Evansville and Indianapolis,
Indiana and Nashville, Tennessee. This market provides the park with a permanent
resident population of approximately 1.4 million people within 50 miles and 4.6
million people within 100 miles. The Louisville and Lexington markets are the
number 50 and number 67 DMAs in the United States.
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
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management fee of $250,000 and up to $250,000 annually in additional fees based
on park performance. In addition, in November 1997 the Company exercised at no
additional cost an option to lease approximately 40 acres of land at the site on
a long-term basis and at nominal rent, entitling the Company to receive, in
addition to the management fee, 80% of the cash flow generated by the park after
operating expenses and debt service. Finally, the Company has the option to
purchase the entire park beginning in February 2002, which it currently expects
to exercise at that time.
Marine World currently consists of 105 acres comprised of various
presentation stadiums, animal habitats, visitor walkways, parking, concession
and picnic areas, bordering a 55-acre man-made lake. The park provides for the
shelter and care of over 50 marine mammals, 600 land animals, over 70 sharks and
rays, birds and reptiles, over 2,600 tropical and cold water fish and marine
invertebrates, and 500 butterflies, all featured in a variety of exhibits and
participatory attractions.
Marine World's principal competitors are Underwater World at Pier 39 in San
Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium.
These parks are located approximately, 30, 60 and 130 miles from Marine World,
respectively. In addition, plans for Hecker Pass, a new theme park in Gilroy,
California (approximately 100 miles from Marine World) are under development. If
developed, the Company believes that the park would not be operational for at
least two years.
Since taking over the management of Marine World in April 1997, the Company
has stabilized the park's performance by reducing operating expenses, shortening
the operating season, and beginning to expand the park's entertainment component
by adding a themed children's area with children's rides called "Popeye's
Seaport" and the DinoSphere TurboRide, a ride simulation theatre. The Company
expects to invest between $35-$40 million at Marine World for the 1998 season to
add fourteen new rides, including a boomerang steel roller coaster, a river
rapids ride and a shoot-the-chute giant splash ride.
RIVERSIDE PARK
Riverside Park is a combination theme park and motor speedway, located off
Interstate 91 near Springfield, Massachusetts, approximately 95 miles west of
Boston. Riverside Park's primary market includes Springfield and western
Massachusetts, and Hartford and western Connecticut, as well as portions of
eastern Massachusetts (including Boston) and eastern New York. Based on 1997
attendance of over 1.2 million, Riverside Park is the 43rd largest theme park in
the United States. This market provides the park with a permanent resident
population base of approximately 3.1 million people within 50 miles and 14.7
million people within 100 miles. Based upon in-park surveys, approximately 63%
of the visitors to Riverside Park in 1997 resided within a 50-mile radius of the
park, and 95% resided within a 100-mile radius. Springfield, Hartford/New Haven
and Boston are the number 103, number 27 and number 6 DMAs in the United States.
Riverside Park is comprised of approximately 160 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 30 undeveloped acres. Riverside Park's 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.
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WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld USA/Concord and
Waterworld USA/ Sacramento) and one family entertainment center (Paradise
Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.8 million people within 50 miles of the park
and 10.0 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States. Based upon in-park surveys, approximately 94%
of the visitors in 1997 resided within a 50-mile radius of the park, and 97%
resided within a 100-mile radius.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. Also located on the fair grounds is Paradise
Island, the Company's family entertainment center. The facilities' primary
market includes Sacramento and the immediate surrounding area. This market
provides the park with a permanent resident population base of approximately 2.7
million people within 50 miles of the park and 9.7 million people within 100
miles. The Sacramento market is the number 20 DMA in the United States. Based
upon in-park surveys, approximately 80% of the visitors in 1997 resided within a
50-mile radius of the park, and 96% resided within a 100-mile radius.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 29 acres, with 24 acres currently used for park
operations. The Sacramento facility is located on approximately 20 acres, all of
which is used for the park and the family entertainment center. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 100 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 40 miles
from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on 22 acres located
along Interstate 40 in southwest Oklahoma City, Oklahoma. The park is the 15th
largest water park in the United States based on 1997 attendance of
approximately 316,000. The park's primary market includes the greater Oklahoma
City metropolitan area. Oklahoma City is the number 43 DMA in the United States.
This market provides the park with a permanent resident population base of
approximately 1.2 million people within 50 miles of the park and 2.1 million
people within 100 miles. Based upon in-park surveys, approximately 80% of the
visitors to White Water Bay in 1997 resided within a 50-mile radius of the park,
and 87% resided within a 100-mile radius. White Water Bay has no direct
competitors.
WYANDOT LAKE
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property sub-leased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
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.
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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
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 Offerings.
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.
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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 Park, 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.
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
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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.
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.
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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 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."
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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.
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 in 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
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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.
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
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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 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.
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Each of the Company's parks is managed by a full-time, on-site management
team under the direction of the general manager. Each such management team
includes senior personnel responsible for operations and maintenance, marketing
and promotion, human resources and merchandising. Park management compensation
structures are designed to provide incentives (including stock options and cash
bonuses) for individual park managers to execute the Company's strategy and to
maximize revenues and operating cash flow at each park. The Company's nine
general managers (before the Six Flags Acquisition) have an aggregate of
approximately 200 years experience in the industry, including approximately 80
years at parks owned or operated by Premier.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for theme events (such as
Hallowscream, Fright Fest-Registered Trademark-, Oktoberfest and Holiday in the
Park-Registered Trademark-). Due to their location, certain Six Flags Parks have
longer operation seasons. Typically, the parks charge a basic daily admission
price, which allows unlimited use of all rides and attractions, although in
certain cases special rides and attractions require the payment of an additional
fee. The Company's family entertainment centers are open year-round and do not
charge an admission price.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company purchases
both new and used rides. In addition, the Company rotates rides among its parks
to provide fresh attractions. The Company believes that the introduction of new
rides is an important factor in promoting each of the parks in order to achieve
market penetration and encourage longer visits, which lead to increased
attendance and in-park spending. In addition, the Company generally adds theming
to acquired parks and enhances the theming and landscaping of its existing parks
in order to provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to 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
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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.
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
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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 each 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 is
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 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 OFFERINGS OFFERINGS
- ------------------------------------------------------------------------ ----------------- ----------- -----------
<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."
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 Flags under the
agreements relating to the Co-Venture Parks. Pursuant to the Subordinated
Indemnity
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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 OTHER 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
and its 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 subsidiaries in respect of any indebtedness
above specified levels; (vi) certain events of bankruptcy; (vii) certain
judgments against Premier Operations or any of its 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 a term loan facility (the "Term Loan
Facility") to be used to refinance existing outstanding Six Flags bank
indebtedness and fund acquisitions and make capital improvements. The Company
anticipates that the Term Loan Facility 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,
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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 the Term Loan Facility will mature on November 30,
2004. However, for the Term Loan Facility, aggregate principal payments and
reductions of $1.0 million will be required during each of the first, second,
third and fourth years; 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 and its
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 subsidiaries in respect of any indebtedness above specified levels;
(vi) certain events of bankruptcy (vii) certain judgments against SFTP or any of
its 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.
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 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
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applicable Indenture; (iv) the default by Premier Operations or any of its
subsidiaries in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against Premier Operations or any
subsidiaries; (vii) any principal subsidiaries (as defined in the applicable
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 and Other Obligations."
The Indenture pursuant to which the SFTP Senior Subordinated Notes were
issued contains restrictive covenants that, among other things, limit the
ability of SFTP and its subsidiaries to dispose of assets; incur additional
indebtedness or liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates.
Defaults under this Indenture include (i) failure to pay interest on the
SFTP Senior Subordinated Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with SFTP's repurchase obligations
upon the occurrence of a Change of Control and failure to comply for 60 days
after notice with the other covenants contained in the Indenture; (iv) the
default by SFTP or any Significant Subsidiary (as defined in the applicable
indenture) in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against SFTP or any Significant
Subsidiary; (vii) any Note Guarantee (as defined in the applicable Indenture)
ceasing to be in full force and effect (except as contemplated by the terms
thereof); and (viii) the denial or disaffirmation by any Note Guarantor (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
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the SFEC Notes Offering, together with other funds, to repay the 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 Notes; (iii) failure
to comply for 30 days with SFEC's repurchase obligations upon the occurrence of
a Change of Control or an Asset Sale (as defined in the applicable indenture) or
the provision governing the SFEC Escrow Account or for 30 days (after notice)
with certain covenants 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 NOTES
GENERAL
The Senior Notes will be issued pursuant to an Indenture (the "Senior Note
Indenture") between the Company and The Bank of New York, as trustee (the
"Senior Note Trustee"). The Senior Discount Notes will be issued by the Company
pursuant to an Indenture (the "Senior Discount Note Indenture" and, together
with the Senior Note Indenture (the "Indentures") between the Company and The
Bank of New York, as trustee (the "Senior Discount Note Trustee" and, together
with the Senior Note Trustee, the "Trustees"). The terms of the Senior Notes and
the Senior Discount Notes (collectively, the "Company Notes") include those
stated in the Indentures and those made part of the Indentures by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Company Notes are subject to all such terms and Holders of Company Notes are
referred to the Indentures and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indentures, the proposed
Pledge and Escrow Agreement with respect to the Senior Notes and the proposed
Restricted Cash Escrow Agreement with respect to the Senior Discount Notes does
not purport to be complete and is qualified in its entirety by reference to the
Indentures, the Pledge and Escrow Agreement and the Restricted Cash Escrow
Agreement, including the definitions therein of certain terms used below. The
proposed forms of the Indentures, the Pledge and Escrow Agreement and the
Restricted Cash Escrow Agreement have been or will be filed as exhibits to the
Registration Statement of which this Prospectus is a part and copies of the
proposed forms of the Indentures, the Pledge and Escrow Agreement and the
Restricted Cash Escrow Agreement are available as set forth below under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." For
purposes of this summary, (i) the term "Company" refers only to Premier Parks
Inc. and not to any of its Subsidiaries, (ii) the term "Senior Notes" refers to
the Company's % Senior Notes due 2006 offered hereby and (iii) the term
"Senior Discount Notes" refers to the Company's % Senior Discount Notes due
2008 offered hereby.
The Company Notes will be general obligations of the Company and will rank
PARI PASSU in right of payment with all current and future senior indebtedness
of the Company. However, the operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the
Company Notes. The Company's Subsidiaries will not be guarantors of the Company
Notes. As a result, the Company Notes will be effectively subordinated to all
Indebtedness and other liabilities and commitments (including trade payables) of
the Company's Subsidiaries. Any right of the Company to receive assets of any of
its Subsidiaries upon the latter's liquidation or reorganization (and the
consequent right of the Holders of the Company Notes to participate in those
assets) will be effectively subordinated to the claims of that Subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such Subsidiary and any
indebtedness of such Subsidiary senior to that held by the Company. On a pro
forma basis, as of December 31, 1997, the Company's Subsidiaries would have had
approximately $1,463.0 million of Indebtedness (including the SFEC Zero Coupon
Senior Notes) and $158.9 million of trade payables and other liabilities
outstanding. See "Risk Factors--Holding Company Structure; Limitations on Access
to Cash Flow of Subsidiaries."
As of the date of the Indentures, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indentures.
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SECURITY
INTEREST ESCROW
The Company's Obligations under the Senior Notes will be secured pending
disbursement pursuant to the Pledge and Escrow Agreement by a pledge of the
Escrow Account (as defined). Approximately $76.3 million will be deposited in
the Escrow Account and be used to purchase a portfolio of Government Securities
that will be pledged as security for payment of interest on the Senior Notes
through , 2001.
The Pledge and Escrow Agreement will provide for the grant by the Company to
the Senior Note Trustee of a security interest in the Escrow Account for the
benefit of the Holders of the Senior Notes. All such security interests will
secure the payment and performance when due of the Obligations of the Company
under the Senior Note Indenture with respect to the Senior Notes and under such
Senior Notes, as provided in the Pledge and Escrow Agreement. The ability of
holders to realize upon such funds or securities may be subject to certain
bankruptcy law limitations in the event of a bankruptcy of the Company.
The Escrow Account will initially contain an amount of Government Securities
that will be sufficient upon receipt of scheduled interest and principal
payments on such securities, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company (who may be the Company's
accountants), to pay the first six scheduled interest payments on the Senior
Notes. Funds will be disbursed from the Escrow Account only to pay interest on
the Senior Notes and upon certain repurchases or redemptions of the Senior
Notes, to pay principal of and premium, if any, thereon, or if so paid with
other proceeds, such funds may be released to the Company. Pending such
disbursements, all funds contained in the Escrow Account will be invested in
Government Securities. Upon the acceleration of the maturity of the Senior Notes
or the failure to pay principal at maturity or upon certain redemptions and
repurchases of the Senior Notes, the Pledge and Escrow Agreement will provide
for the foreclosure by the Senior Note Trustee upon the net proceeds of the
Escrow Account. Under the terms of the Senior Note Indenture, the proceeds of
the Escrow Account shall be applied, first, to amounts owing to the Senior Note
Trustee in respect of fees and expenses of the Senior Note Trustee and second,
to the Obligations under the Senior Notes and the Senior Note Indenture. The
failure by the Company to pay interest on the Senior Notes within two days of an
interest payment date through , 2001 will constitute an immediate Event of
Default.
RESTRICTED CASH ACCOUNT
The Company's Obligations under the Senior Discount Notes will be secured
pending disbursement pursuant to the Restricted Cash Escrow Agreement by a
pledge of the Restricted Cash Account. Upon consummation of the Offering, the
Company will deposit $75.0 million (the "Initial Amount") of the net proceeds of
the Offerings in an account (the "Restricted Cash Account") with the Senior
Discount Note Trustee. The Company will only be permitted to withdraw funds from
the Restricted Cash Account (a) to make Permitted Distributions or (b) in the
event of a Change of Control, to make the Change of Control Payment. Pending
such disbursements, all funds contained in the Restricted Cash Account will be
invested in Government Securities. On , 2003, provided that no Default or
Event of Default shall have then occurred and be continuing, any and all
Government Securities or cash remaining in the Restricted Cash Account shall be
immediately returned to the Company and any security interests in such amounts
held by the Senior Discount Note Trustee shall be terminated. In addition, the
Company will be required by the terms of the Senior Discount Note Indenture and
the Restricted Cash Escrow Agreement, until , 2003, to cause all cash
actually dividended or otherwise distributed to or received by the Company or
any of its Restricted Subsidiaries in respect of any general or limited
partnership interests held in the Co-Venture Partnerships to be deposited in the
Restricted Cash Account; PROVIDED that, in no event, shall the Company be
required to deposit in the Restricted Cash Account any funds if, after giving
effect thereto,
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the aggregate amount of cash and Government Securities (valued at their accreted
value or principal amount, as appropriate) then held in the Restricted Cash
Account would exceed the Initial Amount.
In the event of the Company's bankruptcy, the Company, as debtor in
possession under Chapter 11 of the Bankruptcy Code, would be entitled to
petition the United States Bankruptcy Court having jurisdiction over its case
for permission, under Section 363 of the Bankruptcy Code, to use the proceeds of
the Escrow Account and/or the Restricted Cash Account to fund its operations
during the pendency of the reorganization proceedings. Permission for such use
is likely to be granted so long as the interests of the Senior Note Trustee, for
the benefit of the Holders of Senior Notes and itself as Senior Note Trustee,
and the Senior Discount Note Trustee, for the benefit of the Holders of Senior
Discount Notes and itself as Senior Discount Note Trustee, as applicable, are
"adequately protected." A secured creditor's interest in cash collateral to be
used by a debtor in possession may be "adequately protected" by, among other
means, the granting of liens on substitute collateral which may be substantially
less liquid than Government Securities.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE SENIOR NOTES
The Senior Notes will be limited in aggregate principal amount to $280.0
million and will mature on , 2006. Interest on the Senior Notes will
accrue at the rate of % per annum and will be payable semi-annually in
arrears on and of each year, to Holders of record on the immediately
preceding and . Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
and interest on the Senior Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest may be made by check mailed to
the Holders of the Senior Notes at their respective addresses set forth in the
register of Holders of Senior Notes; PROVIDED that all payments of principal,
premium and interest with respect to Senior Notes the Holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Senior Notes will be issued in denominations of $1,000 and integral
multiples thereof.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE SENIOR DISCOUNT NOTES
The Senior Discount Notes will be limited in aggregate principal amount at
maturity to $ million and will mature on , 2008. The Senior
Discount Notes will be issued at a substantial discount from their principal
amount at maturity, to generate gross proceeds of approximately $250.0 million.
Until , 2003, no interest will accrue on the Senior Discount Notes, but
the Accreted Value will increase (representing amortization of original issue
discount) between the date of original issuance and , 2003, on a
semi-annual basis using a 360-day year comprised of twelve 30-day months, such
that the Accreted Value shall be equal to the full principal amount at maturity
of the Senior Discount Notes on , 2003 (the "Full Accretion Date").
Beginning on the Full Accretion Date, interest on the Senior Discount Notes will
accrue at the rate of % per annum and will be payable semi-annually in
arrears on and of each year, to Holders of record on the immediately
preceding and . Interest on the Senior Discount Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the Full Accretion Date. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
and interest on the Senior Discount Notes will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest may be made by
check mailed to the Holders of the Senior Discount Notes at their respective
addresses set forth in the register of Holders of Senior Discount Notes;
PROVIDED that all payments of principal, premium and interest with respect to
Senior Discount Notes the Holders of which have given wire transfer instructions
to the
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Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Senior Discount Notes
will be issued in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
SENIOR NOTES
The Senior Notes will not be redeemable at the Company's option prior to
, 2002. Thereafter, the Senior Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2002.................................................................................. %
2003..................................................................................
2004..................................................................................
2005 and thereafter................................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
original issuance of the Senior Notes, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount at maturity of
Senior Notes originally issued under the Senior Note Indenture at a redemption
price of % of the principal amount thereof on the redemption date with the
net cash proceeds of one or more Public Equity Offerings and/or the net cash
proceeds of a Strategic Equity Investment; provided that at least 65% of the
aggregate principal amount of Senior Notes originally issued remains outstanding
immediately after the occurrence of each such redemption (excluding Senior Notes
held by the Company and its Subsidiaries); and provided, further, that any such
redemption shall occur within 60 days of the date of the closing of each such
Public Equity Offering and/or Strategic Equity Investment.
SENIOR DISCOUNT NOTES
The Senior Discount Notes will not be redeemable at the Company's option
prior to , 2003. Thereafter, the Senior Discount Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2003.................................................................................. %
2004..................................................................................
2005..................................................................................
2006 and thereafter................................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
original issuance of the Senior Discount Notes, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount at maturity of
Senior Discount Notes originally issued under the Senior Discount Note Indenture
at a redemption price of % of the Accreted Value thereof on the redemption
date with the net cash proceeds of one or more Public Equity Offerings and/or
the net cash proceeds of a
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Strategic Equity Investment; PROVIDED that at least 65% of the aggregate
principal amount at maturity of Senior Discount Notes originally issued remains
outstanding immediately after the occurrence of each such redemption (excluding
Senior Discount Notes held by the Company and its Subsidiaries); and PROVIDED,
FURTHER, that any such redemption shall occur within 60 days of the date of the
closing of each such Public Equity Offering and/or Strategic Equity Investment.
SELECTION AND NOTICE
If less than all of the Senior Notes and/or Senior Discount Notes, as the
case may be, are to be redeemed at any time, selection of such Company Notes for
redemption will be made by the applicable Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Company Notes are listed, or, if the Company Notes are not so listed, on a pro
rata basis, by lot or by such method as the applicable Trustee shall deem fair
and appropriate; PROVIDED THAT, subject to the limitations described above, the
Company may, at its option, elect to redeem either Senior Notes, Senior Discount
Notes, or both Senior Notes and Senior Discount Notes; and PROVIDED FURTHER that
no Company Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Company Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Company Notes called for redemption become
due on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Company Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under the caption "--Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Company Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be obligated to
make an offer (the "Change of Control Offer") to each Holder of Company Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Company Notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon, if
any, to the date of purchase (or, in the case of repurchases of Senior Discount
Notes prior to , 2003, at a purchase price equal to 101% of the Accreted
Value thereof as of the date of repurchase). Within 30 days following any Change
of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Company Notes pursuant to the procedures required by the
applicable Company Indenture and described in such notice. The Company will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Company Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Company Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Company
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Company Notes so accepted together with an Officers'
Certificate stating the aggregate principal
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amount at maturity of Company Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Company Notes so
tendered the Change of Control Payment for such Company Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in principal amount to any unpurchased portion
of the Company Notes surrendered, if any; PROVIDED that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
The Indentures will provide that the Company will fix the Change of Control
Payment Date no earlier than 30 days and no later than 60 days after the Change
of Control Offer is mailed as set forth above. Prior to complying with the
provisions of the preceding sentence, but in any event within 90 days following
a Change of Control, the Company will either repay all outstanding Indebtedness
of its Subsidiaries or obtain the requisite consents, if any, under all
agreements governing all such outstanding Indebtedness of its Subsidiaries to
permit the repurchase of Company Notes required by this covenant. Under the
terms of the indentures governing the Premier Notes, the SFTP Senior
Subordinated Notes and the New SFEC Notes, the Premier Credit Facility and the
Six Flags Credit Facility, the payment of dividends by Premier Operations, SFEC
and SFTP are subject to certain specified tests which will significantly
restrict their ability to pay dividends or make other distributions. If the
Company does not obtain the consent of the lenders under agreements governing
outstanding Indebtedness of its Subsidiaries, including under the Credit
Facilities and the indentures governing the Premier Notes, the SFTP Senior
Subordinated Notes and the New SFEC Notes, to permit the repurchase of Company
Notes or does not refinance such Indebtedness, the Company will likely not have
the financial resources to purchase Company Notes and the Company's Subsidiaries
will be restricted by the terms of such Indebtedness from paying dividends to
the Company or otherwise lending funds to the Company for the purpose of such
purchase. In any event, there can be no assurance that the Company's
Subsidiaries will have the resources available to pay any such dividend or make
any such distribution. The Company's failure to make a Change of Control Offer
when required or to purchase tendered Company Notes when tendered would
constitute an Event of Default under the Indentures. See "Risk Factors--Holding
Company Structure; Limitations on Access to Cash Flow of Subsidiaries" and
"--Risks Associated with a Change of Control."
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indentures are applicable. Except as
described above with respect to a Change of Control, the Indentures do not
contain provisions that permit the Holders of the Company Notes to require that
the Company repurchase or redeem the Company Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indentures applicable to a Change of Control Offer made by the Company
and purchases all Company Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Company Notes to require the
Company to repurchase such Company Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
To the extent that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this paragraph by virtue thereof.
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ASSET SALES
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustees) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; PROVIDED that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinate to the Company Notes) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability or, in the case of the sale of Capital Stock, that are assumed by the
transferee by operation of law and (y) any securities, notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are promptly (subject to ordinary settlement periods) converted
by the Company or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net Proceeds
(a) to repay or repurchase Indebtedness of a Restricted Subsidiary of the
Company (and to correspondingly reduce commitments with respect thereto in the
case of revolving credit borrowings), (b) to the acquisition of all or
substantially all of the assets of, or a majority of the Voting Stock of,
another Person (or business unit or division of such Person); PROVIDED, that the
primary business of such Person (or unit or division) is a Permitted Business,
(c) to fund obligations of the Company or any Restricted Subsidiary under the
Partnership Parks Agreements or the Subordinated Indemnity Agreement, (d) to the
acquisition of Capital Stock of a Restricted Subsidiary of the Company held by
Persons other than the Company or any Restricted Subsidiary, (e) to the making
of a capital expenditure or (f) to the acquisition of other long-term assets
that are used or useful in a Permitted Business. Pending the final application
of any such Net Proceeds, the Company or such Restricted Subsidiary may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indentures. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $20.0 million, the Company
will be required to make an offer to all Holders of Company Notes and all
holders of other PARI PASSU Indebtedness of the Company containing provisions
similar to those set forth in the Indentures with respect to offers to purchase
or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to
purchase the maximum principal amount of Company Notes and such other PARI PASSU
Indebtedness of the Company that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
repurchase (or, in the case of repurchases of Senior Discount Notes prior to the
Full Accretion Date, at a purchase price equal to 100% of the Accreted Value
thereof as of the date of repurchase), in accordance with the procedures set
forth in the Indentures and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indentures. If the aggregate principal amount at maturity or Accreted Value (as
applicable) of Company Notes and such other Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select
the Company Notes and such other Indebtedness to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Company Notes pursuant to an Asset Sale Offer.
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To the extent that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this paragraph by virtue thereof.
Under the terms of the indentures governing the Premier Notes, the SFTP
Senior Subordinated Notes and the New SFEC Notes and the Premier Credit Facility
and the Six Flags Credit Facility, the payment of dividends by Premier
Operations, SFEC and SFTP are subject to certain specified financial tests which
will significantly restrict their ability to pay dividends or make other
distributions. See "Risk Factors--Risks Associated with Substantial
Indebtedness" and "--Holding Company Structure; Limitations on Access to Cash
Flow of Subsidiaries."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of any
Equity Interests of the Company (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of any Equity Interests of the Company in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company that is
subordinated to the Company Notes, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Debt to
Cash Flow test set forth in the first paragraph of the covenant described
below under caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of the Indentures
(excluding Restricted Payments permitted by clauses (ii) and (iii) of the
next succeeding paragraph) shall not exceed, at the date of determination,
the sum, without duplication, of (i) an amount equal to the Company's
Consolidated Cash Flow for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indentures to the end of the Company's most recently ended full fiscal
quarter for which financial statements have been filed with the Commission
(the "Basket Period") LESS the product of 1.4 times the Company's
Consolidated Interest Expense for the Basket Period, PLUS (ii) 100% of the
aggregate net cash proceeds received by the Company after the date of the
Indentures as a contribution to its common equity capital or from the issue
or sale of Equity Interests of the Company (other than Disqualified Stock)
or from the issue or sale after the date of the Indentures of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than (w) Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company, (x) Equity
Interests sold in the Offerings and (y) any sale of Equity Interests of the
Company the net cash proceeds of which are applied pursuant to clause (ii)
of the immediately succeeding paragraph), PLUS (iii) to the extent that any
Restricted Investment that was
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made after the date of the Indentures is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, PLUS (iv) to
the extent that any Unrestricted Subsidiary is redesignated as a Restricted
Subsidiary after the date of the Indentures, the fair market value of the
Company's or its Restricted Subsidiary's, as the case may be, Investment in
such Subsidiary as of the date of such redesignation.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indentures;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness or Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially concurrent sale
including in the Offerings (other than to a Subsidiary of the Company) of,
Equity Interests of the Company (other than Disqualified Stock); PROVIDED that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from (a) clause (c)(ii) of the preceding paragraph and (b) clause (xii)
of the definition of "Permitted Investments;"
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(iv) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), the purchase, redemption, retirement or
other acquisition by the Company or any Restricted Subsidiary of the Company of
partnership interests held by the partners in the limited partners of the Co-
Venture Partnerships, the co-general partner of the Co-Venture Partnerships or,
in each case, their successors, in accordance with and in the manner required or
permitted by the terms of the Partnership Parks Agreements;
(v) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), any transactions pursuant to or
contemplated by, and payments made in connection with, and in accordance with
the terms of, the Partnership Parks Agreements and the Marine World Agreements;
(vi) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), any transactions pursuant to or
contemplated by, and payments made in connection with, and in accordance with
the terms of, the Subordinated Indemnity Agreement;
(vii) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), the payment of dividends on the Seller
Preferred Stock and the Mandatorily Convertible Preferred Stock in accordance
with the terms thereof as in effect on the date of the Indentures;
(viii) in the event the Company issues common stock in exchange for or upon
conversion of Seller Preferred Stock or Mandatorily Convertible Preferred Stock,
cash payments made in lieu of the issuance of fractional shares of common stock,
not to exceed $250,000 in the aggregate in any fiscal year; and
(ix) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company from employees, former employees,
directors or former directors of the Company or any of its Restricted
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors); PROVIDED, HOWEVER, that the aggregate amount of
such repurchases shall not exceed $5.0 million in any twelve-month period.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; PROVIDED
that in no event shall the business currently operated by Premier Operations or
SFTP be transferred to or held by an Unrestricted Subsidiary. For purposes of
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making such determination, all outstanding Investments held by the Company and
its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the fair market
value of such Investments at the time of such designation. Such designation will
only be permitted if such Restricted Payment would be permitted at such time and
if such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the Trustee,
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indentures.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indentures will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; PROVIDED, HOWEVER, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
the Company's Subsidiaries may incur Indebtedness or issue shares of preferred
stock if the Company's Debt to Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or such preferred stock,
as the case may be, after giving pro forma effect to such incurrence or issuance
as of such date and to the use of the proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period of the Company for which financial statements have been filed with the
Commission, would have been no greater than (a) 6.0 to 1, if such incurrence or
issuance is on or prior to March 31, 1999, (b) 5.75 to 1, if such incurrence or
issuance is on or prior to March 31, 2000 and after March 31, 1999, and (c) 5.5
to 1, if such incurrence or issuance is after March 31, 2000.
The Indentures will also provide that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Company Notes on substantially identical
terms; PROVIDED, HOWEVER, that no Indebtedness of the Company shall be deemed to
be contractually subordinated in right of payment to any other Indebtedness of
the Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
additional term Indebtedness under Credit Facilities in an aggregate principal
amount at any one time outstanding not to exceed $275.0 million LESS the
aggregate amount of all mandatory or scheduled repayments of the principal of
any such additional term Indebtedness (other than repayments that are
immediately reborrowed) that have actually been made since the date of the
Indentures;
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(ii) the incurrence by the Company and its Restricted Subsidiaries of
additional revolving credit Indebtedness and letters of credit pursuant to
Credit Facilities in an aggregate principal amount (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability of
the Company and its Restricted Subsidiaries thereunder) at any one time
outstanding not to exceed the Specified Amount as of such date of incurrence;
PROVIDED THAT, that the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (ii) is reduced to an outstanding balance of $1.0
million or less for at least 30 consecutive days in each fiscal year;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company and SFEC of Indebtedness represented by
the Company Notes and the New SFEC Notes;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount not to exceed $25.0
million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness and Indebtedness incurred pursuant to clauses (i) and (ii) above)
that was permitted by the Indentures to be incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the obligor on any
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Company Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the case may
be, that was not permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of (a) Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Indentures to be incurred and (b) Currency
Agreements that do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder;
(ix) Indebtedness in respect of performance bonds, letters of credits,
surety or appeal bonds, prior to any drawing thereunder, for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business;
(x) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant (including,
without limiting the generality of the forgoing, the guarantee by any Restricted
Subsidiary of the Company of Existing Indebtedness and the guarantee by the
Company of the New SFEC Notes);
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xi); and
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(xii) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (xii), not to exceed $50.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to one or more of such clauses and/or pursuant to
the first paragraph hereof, as the Company shall specify. In connection with the
Six Flags Transactions occurring on the date of the Indentures, the Company
shall be permitted to incur a portion of the Indebtedness to be incurred on that
date pursuant to the Debt to Cash Flow Ratio set forth in the first paragraph of
this covenant to the extent permitted by such Debt to Cash Flow Ratio calculated
without regard to any Permitted Debt incurred on such date. Accrual of interest,
accretion or amortization of original issue discount, the payment of interest on
any Indebtedness in the form of additional Indebtedness with the same terms, and
the payment of dividends on preferred stock in the form of additional shares of
the same class of preferred stock will not be deemed to be an incurrence of
Indebtedness or an issuance of preferred stock for purposes of this covenant;
PROVIDED, in each such case, that the amount thereof is included in Consolidated
Indebtedness of the Company as accrued.
SALE AND LEASEBACK TRANSACTIONS
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; PROVIDED that the Company or a Restricted Subsidiary of the Company
may enter into a sale and leaseback transaction if (i) the Company could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Debt to Cash Flow test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Additional Indebtedness and Issuance of Preferred
Stock" or pursuant to clause (vi) of the second paragraph of such covenant and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described below under the caption "--Liens," (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market value
(as determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and the Company or such
Restricted Subsidiary applies the proceeds of such transaction in compliance
with, the covenant described above under the caption "--Asset Sales."
LIENS
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing trade payables, Attributable Debt or
Indebtedness on any asset now owned or hereafter acquired, except Permitted
Liens.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indentures, (b) the Partnership Parks Agreements, the
Marine World Agreements or the Subordinated Indemnity Agreement, (c) the terms
of any Indebtedness permitted by the Indentures to be incurred by any Restricted
Subsidiary of the Company, (d) the Indentures and the Company Notes, (e)
applicable law, (f) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indentures to be incurred, (g)
customary non-assignment provisions in leases, licenses or other contracts
entered into in the ordinary course of business, (h) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (i) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (j)
obligations otherwise permitted to be incurred pursuant to the provisions of the
covenant described above under the caption "--Liens" that limits the right of
the obligee to dispose of the assets securing such obligations, (k) provisions
with respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indentures will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Company Notes, the Indentures, the Pledge and Escrow Agreement
and the Restricted Cash Escrow Agreement pursuant to supplemental indentures in
forms reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, both at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant
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to the Debt to Cash Flow test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, or any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment or
indemnification arrangements, stock options and stock ownership plans approved
by the Board of Directors, or the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors, (ii) transactions between or among the Company and/or its
Restricted Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise employees of the Company or its Restricted Subsidiaries,
(iv) loans or advances to employees in the ordinary course of business, (v)
Restricted Payments that are permitted by the provisions of the Indentures
described above under the caption "--Restricted Payments," (vi) transactions
pursuant to or contemplated by, and in accordance with, the terms of the
Subordinated Indemnity Agreement, (vii) transactions pursuant to or contemplated
by and payments in connection with, and, in each case, in accordance with, the
terms of the Partnership Parks Agreements and (viii) transactions pursuant to or
contemplated by, and in accordance with, the Marine World Agreements.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED SUBSIDIARIES
The Indentures will provide that the Company (i) will not, and will not
permit any Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary
of the Company to any Person (other than the Company or a Restricted Subsidiary
of the Company and other than transactions contemplated by the Partnership Parks
Agreements and the Subordinated Indemnity Agreement), unless (a)(1) such
transfer, conveyance, sale, lease or other disposition is of all the Equity
Interests in such Restricted Subsidiary or (2) after giving effect thereto, such
Restricted Subsidiary will still constitute a Restricted Subsidiary and (b) the
cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "--Repurchase at the Option of Holders--Asset Sales," and (ii) will
not permit any Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or a
Wholly Owned Restricted Subsidiary of the Company if, after giving effect
thereto, such Restricted Subsidiary will not be a direct or indirect Subsidiary
of the Company.
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BUSINESS ACTIVITIES
The Indentures will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indentures will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Company Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indentures or the Company Notes unless
such consideration is offered to be paid or is paid to all Holders of the
Company Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
REPORTS
The Indentures will provide that, whether or not required by the rules and
regulations of the Commission, so long as any Company Notes are outstanding, the
Company will furnish to the Holders of Company Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition and
results of operations of the Company and its consolidated Subsidiaries (showing
in reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. In addition,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability within the time periods specified in the Commission's
rules and regulations (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indentures will provide that each of the following constitutes an Event
of Default with respect to the Senior Notes or the Senior Discount Notes, as the
case may be: (i) default for 30 days in the payment when due of interest on the
Company Notes; provided, however, that on or prior to , 2001, the failure
by the Company to pay interest on the Senior Notes within two days of an
interest payment date will constitute an immediate Event of Default; (ii)
default in payment when due of the principal of or premium, if any, on the
Company Notes; (iii) failure by the Company to comply for (a) 30 days with the
provisions described under the captions and "--Security" and "--Repurchase at
the Option of Holders" and (b) 30 days after notice with the provisions
described under the caption "--Certain Covenants" (in each case, other than a
failure to purchase Company Notes); (iv) failure by the Company for 60 days
after notice to comply with any of the Company's other agreements in the
Indentures, or the Company Notes, the Pledge and Escrow Agreement or the
Restricted Cash Escrow Agreement; (v) the failure by the Company or any
Restricted Subsidiary to pay Indebtedness within any applicable grace period
after final maturity or the acceleration of any Indebtedness by the holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated at any time exceeds $10.0 million; (vi) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating at any
time in excess of $10.0 million, which judgments are not paid, discharged or
stayed for a period of 60 days; (vii) in respect of the Senior Notes, material
breach by the Company of any representation or warranty set forth in the
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Pledge and Escrow Agreement, or a material default by the Company in the
performance of any covenant set forth in the Pledge and Escrow Agreement, or
repudiation by the Company of its obligations under the Pledge and Escrow
Agreement, or the unenforceability of the Pledge and Escrow Agreement against
the Company for any reason; (viii) with respect to the Senior Discount Notes,
material breach by the Company of any representation or warranty set forth in
the Restricted Cash Escrow Agreement, or a material default by the Company in
the performance of any covenant set forth in the Restricted Cash Escrow
Agreement, or repudiation by the Company of its obligations under the Restricted
Cash Escrow Agreement, or the unenforceability of the Restricted Cash Escrow
Agreement against the Company for any reason; and (ix) certain events of
bankruptcy or insolvency with respect to the Company, any Restricted Subsidiary
that constitutes a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, either Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
or Senior Discount Notes, as the case may be, may declare all the Senior Notes
or the Senior Discount Notes, as the case may be, to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, any Restricted Subsidiary of the Company that constitutes a Significant
Subsidiary or any group of Restricted Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary, all outstanding Company
Notes will become due and payable without further action or notice. Holders of
the Company Notes may not enforce the Indentures or the Company Notes except as
provided in the Indentures. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Company Notes may direct
the Trustee in its exercise of any trust or power. Either Trustee may withhold
from Holders of the Company Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default with respect to the Senior Notes
occurring by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding payment of the
premium that the Company would have had to pay if the Company then had elected
to redeem the Senior Notes pursuant to the optional redemption provisions of the
Senior Note Indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the Senior Notes. If an Event of Default occurs prior to , 2002 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Senior Notes prior to , 2002, then the premium specified for the
twelve months commencing on such date in the Senior Note Indenture shall also
become immediately due and payable to the extent permitted by law upon the
acceleration of the Senior Notes.
In the case of any Event of Default with respect to the Senior Discount
Notes occurring by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding payment of
the premium that the Company would have had to pay if the Company then had
elected to redeem the Senior Discount Notes pursuant to the optional redemption
provisions of the Senior Discount Note Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Discount Notes. If an Event of Default
occurs prior to , 2003 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Senior Discount Notes prior to , 2003,
then the premium specified for the twelve months commencing on such date in the
Senior Discount Note Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Senior Discount Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
or the Senior Discount Notes, as the case may be, then outstanding by notice to
the applicable Trustee may on behalf of the Holders of all of the Company Notes
of such series waive any existing Default or Event of Default and its
consequences under the applicable Company Indenture except a continuing Default
or Event of Default in the payment of interest on, or the principal of, the
Company Notes.
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The Company is required to deliver to each Trustee annually a statement
regarding compliance with the applicable Company Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
each Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Company Notes, the Indentures or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Company Notes by
accepting a Company Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Company Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes and/or the
Senior Discount Notes, as the case may be ("Legal Defeasance"), except for (i)
the rights of Holders of outstanding Company Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Company Notes
when such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Company Notes concerning issuing temporary
Company Notes, registration of Company Notes, mutilated, destroyed, lost or
stolen Company Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the applicable Trustee, and the Company's obligations
in connection therewith and (iv) the Legal Defeasance provisions of the
applicable Company Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Senior Note Indenture or the Senior
Discount Note Indenture ("Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Senior Notes or the Senior Discount Notes, as the case may
be. In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Senior Notes or the Senior Discount Notes, as the
case may be.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the appropriate Trustee, in trust, for the
benefit of the Holders of the Senior Notes or the Senior Discount Notes, as the
case may be, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Senior Notes or
Senior Discount Notes, as the case may be, on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Senior Notes or Senior Discount Notes, as the case may be, are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company shall have delivered to the applicable Trustee an
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indentures, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Senior Notes or Senior Discount
Notes, as the case may be, will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the
appropriate Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Senior
Notes or Senior Discount Notes, as the case may be, will not recognize income,
gain or loss for federal income tax purposes as a result of such
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Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the appropriate Company Indenture) to which
the Company or any of its Restricted Subsidiaries is a party or by which the
Company or any of its Restricted Subsidiaries is bound; (vi) the Company must
have delivered to the appropriate Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) the Company must
deliver to the appropriate Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Senior Notes or Senior Discount Notes, as the case may be, over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the appropriate Trustee an Officers' Certificate and an opinion of
counsel, each stating that all conditions precedent provided for relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Company Notes in accordance with the
Indentures. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indentures. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Company Notes
to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indentures,
the Pledge and Escrow Agreement, the Restricted Cash Escrow Agreement or the
Company Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Senior Notes or Senior Discount
Notes, as the case may be, then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for such Senior Notes or Senior Discount Notes, as the case may be), and
any existing default or compliance with any provision of the Indentures, the
Pledge and Escrow Agreement, the Restricted Cash Escrow Agreement or the Company
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Senior Notes or Senior Discount Notes, as the
case may be, (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Company Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Company Notes held by a non-consenting Holder): (i) reduce
the principal amount of Company Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Company Note or alter the provisions with respect to the
redemption of the Company Notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Company Notes (except a rescission of
acceleration of the Senior Notes or Senior Discount Notes, as the case may be,
by the Holders of at least a majority in aggregate principal amount thereof and
a waiver of the payment default that resulted from such acceleration), (v) make
any Note payable in money other than that stated in the Company Notes, (vi) make
any change in the provisions of the Indentures
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relating to waivers of past Defaults or the rights of Holders of Company Notes
to receive payments of principal of or premium, if any, or interest on the
Company Notes, (vii) waive a redemption payment with respect to any Company Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendments to
the Pledge and Escrow Agreement, the provisions of the Senior Note Indenture
governing the Pledge and Escrow Agreement, the Restricted Cash Escrow Agreement
or the provisions of the Senior Discount Note Indenture relating to the
Restricted Cash Escrow Agreement will require the consent of the Holders of at
least 75% in aggregate principal amount of Senior Notes or Senior Discount
Notes, as the case may be, then outstanding if such amendment would adversely
affect the rights of Holders of Senior Notes or Senior Discount Notes, as the
case may be.
Notwithstanding the foregoing, without the consent of any Holder of Company
Notes, the Company and the appropriate Trustee may amend or supplement the
Indentures, the Pledge and Escrow Agreement, the Restricted Cash Escrow
Agreement or the Company Notes to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Company Notes in addition to or in place of
certificated Company Notes, to provide for the assumption of the Company's
obligations to Holders of Company Notes in the case of a merger or consolidation
or sale of all or substantially all of the Company's assets, to make any change
that would provide any additional rights or benefits to the Holders of Company
Notes or that does not adversely affect the legal rights under the Indentures of
any such Holder, or to comply with requirements of the Commission in order to
effect or maintain the qualification of the Indentures under the Trust Indenture
Act.
CONCERNING THE TRUSTEE
The Indentures contain certain limitations on the rights of the applicable
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustees will be permitted to engage in
other transactions; however, if either acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Senior
Notes or Senior Discount Notes, as the case may be, will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the applicable Trustee, subject to certain exceptions.
The Indentures provide that in case an Event of Default shall occur (which shall
not be cured), the applicable Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, neither Trustee will be under an obligation
to exercise any of its rights or powers under the Indentures at the request of
any Holder of Company Notes, unless such Holder shall have offered to the
applicable Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indentures
without charge by writing to Premier Parks Inc., 11501 Northeast Expressway,
Oklahoma City, Oklahoma 73131, Attention: Corporate Secretary.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Company Notes to be resold as
set forth herein will initially be issued in the form of one or more Global
Notes (the "Global Notes"). The Global Notes will be deposited on the date of
the closing of the sale of the Company Notes offered hereby (the "Closing Date")
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").
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Company Notes that are issued as described below under "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless all Global Notes have previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Company Notes being
transferred, subject to the transfer restrictions set forth in the Indentures.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the
Underwriters), banks and trust companies, clearing corporations and certain
other organizations. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only thorough
the Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Notes and (ii) ownership of the Company Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Company Notes evidenced by the
Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Company
Notes, the Global Note Holder will be considered the sole Holder under the
Indentures of any Company Notes evidenced by the Global Notes. Beneficial owners
of Company Notes evidenced by the Global Notes will not be considered the owners
or Holders thereof under the applicable Indentures for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither the Company nor the Trustees will have any
responsibility or liability for any aspect of the records of the Depositary or
for maintaining, supervising or reviewing any records of the Depositary relating
to the Company Notes.
Payments in respect of the principal of, premium, if any, interest on any
Company Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the applicable Trustee to or at the direction of
the Global Note Holder in its capacity as the registered Holder under the
applicable Company Indenture. Under the terms of the Indentures, the Company and
the Trustees may treat the persons in whose names Company Notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments. Consequently, neither the Company nor any Trustee has or will
have any responsibility or liability for the payment of such amounts to
beneficial owners of Company Notes. The Company believes, however, that it is
currently the policy of the Depositary to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant security as shown on
the records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Company Notes
will be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
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CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the applicable Trustee, exchange such
beneficial interest for Company Notes in the form of Certificated Securities.
Upon any such issuance, the applicable Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). In addition, if (i) the
Company notifies the applicable Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the applicable Trustee in writing that it elects to cause the issuance
of Company Notes in the form of Certificated Securities under the applicable
Company Indenture, then, upon surrender by the Global Note Holder of its Global
Note, Company Notes in such form will be issued to each person that the Global
Note Holder and the Depositary identify as being the beneficial owner of the
related Company Notes.
Neither the Company nor any Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Company Notes and the Company and the Trustees may conclusively rely on, and
will be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indentures will require that payments in respect of the Company Notes
represented by the Global Note (including principal, premium, if any, interest ,
if any) be made by wire transfer of immediately available next day funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
interest , if any, by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Company expects
that secondary trading, if any, in the Certificated Securities will also be
settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indentures. Reference
is made to the Indentures for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACCRETED VALUE" means, as of any date of determination prior to ,
2003, with respect to any Senior Discount Note, the sum of (a) the initial
offering price (which shall be calculated by discounting the aggregate principal
amount at maturity of such Senior Discount Note at a rate of % per annum,
compounded semi-annually on each and from , 2003 to the date
of issuance) of such Senior Discount Note and (b) the portion of the excess of
the principal amount of such Senior Discount Note over such initial offering
price that shall have been accreted thereon through such date, such amount to be
so accreted on a daily basis at % per annum of the initial offering price of
such Senior Discount Note, compounded semi-annually on each and from
the date of issuance of the Senior Discount Notes through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months;
PROVIDED that, on and after , 2003, the Accreted Value of each Senior
Discount Note shall be equal to the principal amount at maturity of such Senior
Discount Note.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
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"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or property (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(PROVIDED that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indentures described
above under the caption "--Certain Covenants--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $10.0 million or (b) for net proceeds in excess of $10.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Restricted
Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary, (iii) the transfer of Equity
Interests in any Restricted Subsidiary pursuant to the Subordinated Indemnity
Agreement or the Partnership Parks Agreements, (iv) the issuance of Equity
Interests by a Restricted Subsidiary to any employee thereof or as consideration
for the acquisition of all or substantially all of the assets of, or a majority
of the Voting Stock of, any Person (or a business unit or division of such
Person), PROVIDED that the primary business of such Person (or such unit or
division) is a Permitted Business, (v) the substitution of property in
accordance with the terms of the Parcel Lease, dated November 7, 1997, between
Marine World and Park Management Corp. as the same may be modified or amended
from time to time after the date of the Indentures, PROVIDED such modification
or amendment does not adversely affect the interests of the Holders in any
material respect, and (vi) a Restricted Payment that is permitted by the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"BENEFICIAL SHARE ASSIGNMENT AGREEMENT" means the Beneficial Share
Assignment Agreement, dated as of the date of the consummation of the Six Flags
Acquisition, between TW-SPV Co. and the Company.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
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"CASH EQUIVALENTS" means (i) United States dollars or foreign currency, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any lender
party to the Credit Facilities or with any commercial bank having capital and
surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than thirty days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within one year after the date of acquisition, (vi)
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory, the securities of which state, commonwealth,
territory, political subdivision or taxing authority (as the case may be) are
rated at least "A" by Standard & Poor's Corporation or "A" by Moody's Investors
Service, Inc. and (vii) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (vi)
of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" becomes the 'beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35%
of the Voting Stock of the Company, or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) Consolidated
Interest Expense of such Person and its Restricted Subsidiaries for such period,
to the extent that any such expense was deducted in computing such Consolidated
Net Income, plus (iii) depreciation, amortization (including any depreciation or
amortization arising out of purchases by the Company or any Restricted
Subsidiary of Equity Interests in the partners of the Co-Venture Partnerships
and amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (iv) non-cash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP (other than accrual of income in
the ordinary course of business in respect of a future cash payment).
Notwithstanding any other provision of the Indentures to the contrary,
"Consolidated Cash Flow" of the Company for any period will be deemed to include
100% of the cash distributions to the Company or any of its Restricted
Subsidiaries in respect of such period from the Co-Venture Partnerships,
directly or indirectly, out of the Consolidated Cash Flow of the Co-Venture
Partnerships in respect of such period.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of
Indebtedness and Attributable Debt of such Person
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and its Restricted Subsidiaries, PLUS (ii) the total amount of Indebtedness and
Attributable Debt of any other Person, to the extent that the same has been
guaranteed by the referent Person or one or more of its Restricted Subsidiaries,
PLUS (iii) the aggregate liquidation value of all Disqualified Stock of such
Person and all preferred stock of Restricted Subsidiaries of such Person, in
each case, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization or original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness or Attributable Debt of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon). The term "Consolidated Interest
Expense" shall not include the consolidated interest expense of any Person with
respect to (i) any obligations in respect of the SFEC Zero Coupon Senior Notes
so long as (x) the SFEC Pledge and Escrow Agreement is in full force and effect
and the trustee under the indenture governing the New SFEC Notes maintains a
valid and perfected security interest in cash or Government Securities in an
amount at least equal to the outstanding principal amount of such SFEC Zero
Coupon Senior Notes pursuant to the terms thereof or (y) the SFEC Zero Coupon
Senior Notes shall have been defeased in accordance with the indenture governing
the SFEC Zero Coupon Senior Notes or (ii) any obligations of the Company or any
Restricted Subsidiary under the Partnership Parks Agreements, the Marine World
Agreements or the Subordinated Indemnity Agreement.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, and prior to any deduction in respect
of dividends on any series of preferred stock of such Person, determined in
accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a Wholly
Owned Restricted Subsidiary thereof, (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iii) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity (including stated capital, additional
paid-in capital and retained earnings) of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indentures in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
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"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indentures or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CO-VENTURE PARTNERSHIPS" means (i) Six Flags Over Georgia, Ltd., a Georgia
Limited Partnership, (ii) Texas Flags, Ltd., a Texas Limited Partnership and
(iii) Fiesta Texas Theme Park, Ltd., a Texas Limited Partnership.
"CREDIT FACILITIES" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Premier Credit Facility and the Six Flags Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"DEBT TO CASH FLOW RATIO" means, as of any date of determination, the ratio
of (a) the Consolidated Indebtedness of the Company as of such date to (b) the
Consolidated Cash Flow of the Company for the four most recent full fiscal
quarters ending immediately prior to such date for which financial statements
have been filed with the Commission, determined on a pro forma basis after
giving effect to all acquisitions or Asset Sales made by the Company and its
Restricted Subsidiaries from the beginning of such four-quarter period through
and including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of the
proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock (other than the Seller
Preferred Stock) that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Company Notes mature; PROVIDED,
HOWEVER, that any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
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"ESCROW ACCOUNT" means the Escrow Account for the initial deposit of
approximately $76.3 million dollars of the net proceeds from the sale of the
Senior Notes under the Pledge and Escrow Agreement.
"EXISTING INDEBTEDNESS" means up to $ million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Premier Credit Facility and the Six Flags Credit
Facility) in existence on the date of the Indentures, until such amounts are
repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness. The term
"Indebtedness" shall not include (i) any obligations in respect of the SFEC Zero
Coupon Senior Notes so long as (x) the SFEC Pledge and Escrow Agreement is in
full force and effect and the trustee under the indenture governing the New SFEC
Notes maintains a valid and perfected security interest in cash or Government
Securities in an amount at least equal to the outstanding principal amount of
such SFEC Zero Coupon Senior Notes pursuant to the terms thereof or (y) the SFEC
Zero Coupon Senior Notes shall have been defeased in accordance with the
indenture governing the SFEC Zero Coupon Senior Notes or (ii) any obligations of
the Company or any Restricted Subsidiary under the Partnership Parks Agreements,
the Marine World Agreements or the Subordinated Indemnity Agreement.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees and any deposit or advance made pursuant to
any contract entered into in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a
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balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary
of the Company sells or otherwise disposes of any Equity Interests of any direct
or indirect Subsidiary of the Company (other than pursuant to the terms of the
Partnership Parks Agreements or the Subordinated Indemnity Agreement) such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Certain Covenants--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"MARINE WORLD" means the Marine World Joint Powers Authority or any
successor thereto.
"MARINE WORLD AGREEMENTS" mean (i) the Parcel Lease, dated November 7, 1997,
between Marine World and Park Management Corp. ("PMC"), (ii) the Reciprocal
Easement Agreement, dated November 7, 1997, between Marine World and PMC, (iii)
the Revenue Sharing Agreement, dated November 7, 1997, among Marine World, PMC
and the Redevelopment Agency of the City of Vallejo (the "Agency"), (iv) the
Purchase Option Agreement, dated as of August 29, 1997, among Marine World, the
Agency, the City of Vallejo and PMC and (v) the 1997 Management Agreement, dated
as of February 1, 1997, between Marine World and PMC, as amended, in each case,
as the same may be modified or amended from time to time after the date of the
Indentures, PROVIDED such modification or amendment does not adversely affect
the interests of the Holders in any material respects.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) and (ii) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NEW SFEC NOTES" means SFEC's % Senior Notes due 2006.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
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writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARTNERSHIP PARKS AGREEMENTS" means (i) the Overall Agreement, dated as of
February 15, 1997, among Six Flags Fund, Ltd. (L.P.), Salkin Family Trust, SFG,
Inc., SFG-I, LLC, SFG-II, LLC, Six Flags Over Georgia, Ltd., SFOG II, Inc., SFOG
II Employee, Inc., SFOG Acquisition A, Inc., SFOG Acquisition B, L.L.C., Six
Flags Over Georgia, Inc., Six Flags Services of Georgia, Inc., Six Flags Theme
Parks Inc. and Six Flags Entertainment Corporation and the Related Agreements
(as defined therein), (ii) Overall Agreement, dated as of November 24, 1997,
among Six Flags Over Texas Fund, Ltd., Flags' Directors, L.L.C., FD-II, L.L.C.,
Texas Flags, Ltd., SFOT Employee, Inc., SFOT Acquisition I, Inc., SFOT
Acquisition II, Inc., Six Flags Over Texas, Inc., Six Flags Theme Parks Inc. and
Six Flags Entertainment Corporation and the Related Agreements (as defined
therein), and (iii) the Lease Agreement with Option to Purchase, dated as of
March 9, 1996, among Fiesta Texas Theme Park, Ltd., a Texas Limited Partnership,
San Antonio Theme Park, L.P., and Six Flags San Antonio, L.P. and the
Transaction Documents (as defined therein), in each case, as the same may be
modified or amended from time to time after the date of the Indentures provided
such modification or amendment does not adversely affect the interests of the
Holders in any material respect.
"PERMITTED BUSINESS" means any business related, ancillary or complementary
to the businesses of the Company and its Restricted Subsidiaries on the date of
the Indentures.
"PERMITTED DISTRIBUTIONS" means (i) the purchase, redemption, retirement or
other acquisition by the Company or any Restricted Subsidiary of the Company of
partnership interests in the Co-Venture Partnerships or the limited partners
thereof, or their successors, in accordance with and in the manner required or
permitted by the terms of the Partnership Parks Agreements (ii) the payment of
any other obligation under the terms of the Partnership Parks Agreements or the
Subordinated Indemnity Agreement and (iii) the payment of dividends on the
Seller Preferred Stock and the Mandatorily Convertible Preferred Stock in
accordance with the terms thereof as in effect on the date of the Indentures.
"PERMITTED INVESTMENTS" means an Investment by the Company or any Restricted
Subsidiary in (i) cash or Cash Equivalents, (ii) the Company, a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such
Restricted Subsidiary is a Permitted Business; (iii) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets (or the assets
of any business unit or division of such Person) to, the Company or a Restricted
Subsidiary; PROVIDED, HOWEVER, that such Person's (or such unit's or division's)
primary business is a Permitted Business; (iv) another Person if the aggregate
amount of all Investments in all such other Persons does not exceed $25.0
million at any one time outstanding (with each Investment being valued as of the
date made and without giving effect to subsequent changes in value); PROVIDED,
HOWEVER, that such Person's primary business is a Permitted Business; (v)
promissory notes received as consideration for an Asset Sale which are secured
by a Lien on the asset subject to such Asset Sale; PROVIDED that the aggregate
amount of all such promissory notes at any one time outstanding does not exceed
$5.0 million; (vi) non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" (vii) assets
acquired solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (viii) receivables owing to the Company or
any Restricted Subsidiary, if created or acquired in the ordinary course of
business; (ix) payroll, travel and similar advances that are made in the
ordinary course of business; (x) loans or advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (xi) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; and (xii)
other Investments in any Person at any time
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outstanding (each such Investment being measured on the date each such
Investment was made and without giving effect to subsequent changes in value)
not to exceed 50% of the aggregate amount of net cash proceeds received by the
Company from the Common Stock Offering in excess of $700.0 million; PROVIDED,
HOWEVER, that any proceeds that are used as a basis for a Restricted Payment
under clause (ii) of the second paragraph of the covenant described above under
the caption "--Certain Covenants-- Restricted Payments" or otherwise will be
disregarded for purposes of this clause (xii).
"PERMITTED LIENS" means (a) Liens to secure Indebtedness of a Restricted
Subsidiary of the Company that was permitted to be incurred under the
Indentures; (b) Liens existing on the Issue Date; (c) Liens on property or
shares of Capital Stock of another Person at the time such other Person becomes
a Restricted Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are
not created, incurred or assumed in connection with, or in contemplation of,
such other Person becoming such a Restricted Subsidiary; PROVIDED FURTHER,
HOWEVER, that such Lien may not extend to any other property owned by such
Person or any of its Restricted Subsidiaries; (d) Liens on property at the time
such Person or any of its Restricted Subsidiaries acquires the property,
including any acquisition by means of a merger or consolidation with or into
such Person or a Restricted Subsidiary of such Person; PROVIDED, HOWEVER, that
such Liens are not created, incurred or assumed in connection with, or in
contemplation of, such acquisition; PROVIDED FURTHER, HOWEVER, that the Liens
may not extend to any other property owned by such Person or any of its
Restricted Subsidiaries; (e) Liens securing Indebtedness or other obligations of
a Restricted Subsidiary of such Person owing to such Person or a Restricted
Subsidiary of such Person; (f) Liens securing Hedging Obligations so long as the
related Indebtedness is, and is permitted to be under the Indenture, secured by
a Lien on the same type of property securing such Hedging Obligations; (g) Liens
to secure any Permitted Refinancing Indebtedness; PROVIDED, HOWEVER, that (x)
such new Lien shall be limited to all or part of the same property that secured
the original Lien (plus improvements on such property) and (y) the Indebtedness
secured by such Lien at such time is not increased to any amount greater than
the sum of (A) the outstanding principal amount or, if greater, committed amount
of the Indebtedness refinanced at the time the original Lien became a Permitted
Lien and (B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement; (h)(i) mortgages, liens, security interests, restrictions or
encumbrances that have been placed by any developer, landlord or other third
party on property over which the Company or any Restricted Subsidiary of the
Company has easement rights or on any real property leased by the Company or any
Restricted Subsidiary of the Company and subordination or similar agreements
relating thereto and (ii) any condemnation or eminent domain proceedings
affecting any real property; (i) pledges or deposits by such Person under
workmen's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or deposits of
cash or United States government bonds to secure surety or appeal bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case incurred in the ordinary course
of business; (j) Liens imposed by law, such as carriers', warehousemen's and
mechanic's Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (k) Liens for
property taxes not yet due or payable or subject to penalties for non-payment or
which are being contested in good faith and by appropriate proceedings; (l)
minor survey exceptions, minor encumbrances, easements or reservations of, or
rights of others for, licenses, rights of way, sewers, electric lines, telegraph
and telephone lines and other similar purposes, or zoning or other restrictions
as to the use of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were not
incurred in connection with Indebtedness and which do not in the aggregate
materially impair the use of such properties in the operation of the business of
such Person; (m) Liens securing Purchase Money Indebtedness; PROVIDED, HOWEVER,
that (i) the Indebtedness secured by such Liens is otherwise permitted to be
incurred under the Indentures, (ii) the principal amount of any Indebtedness
secured by any such Lien does not exceed the cost of assets or property so
acquired or constructed and
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(iii) the amount of Indebtedness secured by any such Lien is not subsequently
increased; (n) Liens arising out of the transactions contemplated by the
Partnership Parks Agreements, the Marine World Agreements, the Subordinated
Indemnity Agreement or the Six Flags Agreement; and (o) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $20.0 million at any one time
outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses,
including premiums, incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Company Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the Senior Notes on terms
at least as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PLEDGE AND ESCROW AGREEMENT" means the Pledge, Escrow and Disbursement
Agreement, dated as of the date of the Indentures, by and between the Company
and the Senior Note Trustee governing the disbursement of funds from the Escrow
Account, as amended from time to time in accordance with the Senior Note
Indenture.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of the Company
of such asset, including additions and improvements; PROVIDED, HOWEVER, that any
Lien arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached; and PROVIDED FURTHER, that such Indebtedness is Incurred within 180
days after such acquisition, addition or improvement by the Company or
Restricted Subsidiary of such asset.
"RESTRICTED CASH ESCROW AGREEMENT" means the Pledge, Escrow and Disbursement
Agreement, dated as of the date of the Indentures, by and between the Company
and the Senior Discount Note Trustee governing the disbursement of funds from
the Restricted Cash Account, as amended from time to time in accordance with the
Senior Discount Note Indenture.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SFEC PLEDGE AND ESCROW AGREEMENT" means the Pledge, Escrow and Disbursement
Agreement dated as of the date of the indenture governing the New SFEC Notes, by
and between SFEC and the trustee
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thereunder, as amended from time to time in accordance with the indenture
governing the New SFEC Notes.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indentures.
"SPECIFIED AMOUNT" means, as of any date, (i) the product of (a) the
Consolidated Cash Flow of the Company for the most recently ended four-quarter
period for which financial statements have been filed with the Commission
determined on a pro forma basis after giving effect to all acquisitions or Asset
Sales made by the Company and its Restricted Subsidiaries from the beginning of
such four-quarter period through and including such date of determination
(including any related financing transactions) as if such acquisitions and
dispositions had occurred at the beginning of such four-quarter period, TIMES(b)
0.75.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"STRATEGIC EQUITY INVESTMENT" means a cash contribution to the common equity
capital of the Company or a purchase from the Company of common Equity Interests
(other than Disqualified Stock), in either case by or from a Strategic Equity
Investor and for aggregate cash consideration of at least $25.0 million.
"STRATEGIC EQUITY INVESTOR" means, as of any date, any Person (other than an
Affiliate of the Company) engaged in a Permitted Business which, as of the day
immediately before such date, had a Total Equity Market Capitalization of at
least $1.0 billion.
"SUBORDINATED INDEMNITY AGREEMENT" means the Subordinated Indemnity
Agreement, dated as of the date of the consummation of the Six Flags
Acquisition, among the Company, SFEC and its subsidiaries, Time Warner Inc.,
Time Warner Entertainment Company, L.P. and TW-SPV Co. , as the same may be
modified or amended from time to time after the date of the Indentures, provided
such modification or amendment does not adversely affect the interests of the
Holders in any material fashion.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% (49% in the case of
Walibi, S.A.) of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof); PROVIDED that, notwithstanding the
foregoing, each of SFOG A Holdings, SFOG B Holdings, SFOT I Holdings and SFOT II
Holdings shall be deemed to be a Subsidiary of the Company for all purposes
under the Indentures so long as (x) the Subordinated Indemnity Agreement and the
Beneficial Share Assignment Agreement shall each be in full force and effect and
no default or event of default shall have occurred thereunder, and (ii) any
partnership or limited liability company (a) the sole general partner or the
managing general partner (or equivalent) of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or one
or more Subsidiaries of such Person (or any combination thereof).
"TOTAL EQUITY MARKET CAPITALIZATION" of any Person means, as of any day of
determination, the sum of (i) the product of (A) the aggregate number of
outstanding primary shares of common stock of such Person on such day (which
shall not include any options or warrants on, or securities convertible or
exchangeable into, shares of common stock of such Person) multiplied by (B) the
average closing price of such common stock listed on a national securities
exchange or the Nasdaq National Market System over the 20 consecutive business
days immediately preceding such day, plus (ii) the liquidation value of any
outstanding shares of preferred stock of such Person on such day.
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"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than Premier
Operations or SFTP or any successor to either of them) that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustees by filing with the Trustees a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "--Certain
Covenants-- Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indentures and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "--Certain Covenants-- Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote by the holder thereof in the
election of the Board of Directors (or comparable body) of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
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DESCRIPTION OF CAPITAL STOCK
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-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. After the Offerings, 32,311,111 shares of Common Stock
will be outstanding (assuming the issuance of 219,000 shares of Common Stock in
the Walibi Private Acquisition and 219,000 of Common Stock in the Walibi Tender
Offer) 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"). 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.
PINES
Pursuant to the PInES Offering, the Company will issue PInES, each
representing 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").
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) at the rate of $ per annum or $ per
quarter. 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
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the Mandatory Conversion Date or on the date of the earlier conversion of the
PInES at the option of the holder.
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.
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.
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, out of funds legally available for the
payment of dividends, subject to any applicable requirements of 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 in certain circumstances, including if the Company
shall (a) pay a stock dividend or make a distribution with respect to its Common
Stock in shares of Common Stock, (b) subdivide or split its outstanding Common
Stock, (c) combine its outstanding Common Stock into a smaller number of shares,
(d) issue by reclassification of its shares of Common Stock any shares of Common
Stock, (e) issue certain rights or warrants to all holders of its Common Stock
unless such rights or warrants are issued to each holder of shares of
Mandatorily Convertible Preferred Stock (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 certain dividends or distribute to all holders of its Common Stock evidences
of its indebtedness, cash or other assets unless such dividend or distribution
is made to each holder of shares 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.
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 in certain circumstances.
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
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"Optional Conversion Price"), subject to adjustment in the circumstances
described above with respect to the Conversion Rate.
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 the public of the
PInES 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 ranking stock upon liquidation, dissolution or winding up.
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), will be entitled to vote
for the election of two Preferred Stock Directors, such Directors to be in
addition to the number of Directors constituting the Board of Directors
immediately prior to the accrual of such right.
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; (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.
Holders of PInES and Mandatorily Convertible Preferred Stock will have no
preemptive rights.
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 Stock and have priority as to
dividends over the Common Stock and any other series or class of the Company's
stock hereafter issued.
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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 depositary shares representing shares of Seller Preferred Stock may be
voluntarily converted by the holders thereof upon the same terms and conditions
as the Seller Preferred Stock represented by such depositary shares, adjusted to
reflect the fact that the 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.
128
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the purchase, ownership and disposition of the
Company Senior Discount Notes. This discussion is a summary for general
information only and does not consider all aspects of U.S. federal income tax
that may be relevant to the purchase, ownership and disposition of the Company
Senior Discount Notes by a prospective investor in light of such investor's
personal circumstances. This discussion also does not address the U.S. federal
income tax consequences of ownership of Company Senior Discount Notes not held
as capital assets within the meaning of Section 1221 of the Code, or the U.S.
federal income tax consequences to investors subject to special treatment under
the U.S. federal income tax laws, such as dealers in securities or foreign
currency, tax-exempt entities, banks, thrifts, insurance companies, persons that
hold the Company Senior Discount Notes as part of a "straddle," a "hedge"
against currency risk or a "conversion transaction," or other integrated
investment, persons that have a "functional currency" other than the U.S.
dollar, holders who are not U.S. persons and investors in pass-through entities.
A U.S. person means a holder of a Company Senior Discount Note that is (i) a
citizen or resident of the United States, (ii) a corporation, a partnership or
other entity created or organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate or trust described in
Section 7701(a)(30) of the Code or (iv) a person whose worldwide income or gain
is otherwise subject to U.S. federal income taxation on a net income basis. In
addition, this discussion is limited to the U.S. federal income tax consequences
to initial holders that purchase the Company Senior Discount Notes for cash at
their issue price (as defined below) pursuant to the Offer. It does not describe
any tax consequences arising out of the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, existing and proposed regulations
thereunder, IRS rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change (possibly on a retroactive basis). The
Company has not and will not seek any rulings from the IRS with respect to the
matters discussed below. There can be no assurance that the IRS will not take
positions concerning the tax consequences of the purchase, ownership or
disposition of the Company Senior Discount Notes which are different from those
discussed herein.
PERSONS CONSIDERING THE PURCHASE OF COMPANY SENIOR DISCOUNT NOTES SHOULD
CONSULT THEIR OWN ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO
THEIR PARTICULAR SITUATIONS.
INTEREST AND ORIGINAL ISSUE DISCOUNT
The Company Senior Discount Notes will be considered to have been issued
with OID for U.S. federal income tax purposes. OID is the excess of (i) the
stated redemption price at maturity of a Company Senior Discount Note over (ii)
its issue price.
The "stated redemption price at maturity" of a Company Senior Discount Note
is the sum of all payments provided by the instrument. The "issue price" of a
Company Senior Discount Note is the first price at which a substantial amount of
the Company Senior Discount Notes are sold to the public (excluding sales to
bond houses, brokers or similar persons or organizations acting in the capacity
as underwriters, placement agents or wholesalers).
A holder is required to include OID in gross income as ordinary interest as
it accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of such holder's regular method
of accounting. A holder will not be required to report separately as taxable
income actual distributions of stated interest with respect to the Company
Senior Discount Notes; such stated interest will be included in income as OID
under the method described immediately below. In general, the amount of OID
included in income by the holder of a Company Senior Discount Note is the sum of
the daily portions of OID for each day during the taxable year (or portion of
the taxable year) on which such holder held such Company Senior Discount Note,
including the purchase date and excluding
129
<PAGE>
the disposition date. The "daily portion" is determined by allocating the OID
for an accrual period equally to each day in that accrual period. The "accrual
period" for a Company Senior Discount Note may be of any length and may vary in
length over the term of a Company Senior Discount Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the first or final day of an accrual
period.
The amount of OID for an accrual period is generally equal to the product of
the Company Senior Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity. The "adjusted issue price" of a
Company Senior Discount Note at the beginning of any accrual period is the sum
of the issue price of the Company Senior Discount Note plus the amount of OID
allocable to all prior accrual periods minus the amount of any prior payments on
the Company Senior Discount Note. Under those rules, a holder generally will
have to include in income increasingly greater amounts of OID in successive
accrual periods. The "yield to maturity" of a Company Senior Discount Note is
the discount rate that, when used in computing the present value of all payments
to be made on a Company Senior Discount Note, produces an amount equal to the
issue price of the Company Senior Discount Note.
In determining the yield and maturity of the Company Senior Discount Notes,
the Company will be deemed to exercise the unconditional call option in a manner
that minimizes the yield on the Company Senior Discount Notes. If the Company
Senior Discount Notes are not in fact called on a presumed exercise date, then,
for purposes of the accrual of OID, the yield and maturity of the Company Senior
Discount Notes are redetermined by treating the Company Senior Discount Notes as
retired and reissued on that date for an amount equal to their adjusted issue
price on that date.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATION
If the Company Senior Discount Notes constitute "applicable high yield
discount obligations," the OID on the Company Senior Discount Notes will not be
deductible by the Company until paid. An "applicable high yield discount
obligation" is any debt instrument that (i) has a maturity date which is more
than five years from the date of issue, (ii) has a yield to maturity which
equals or exceeds the AFR (as set forth in Section 1274(d) of the Code) for the
calendar month in which the obligation is issued plus five percentage points and
(iii) has "significant original issue discount." The AFR is an interest rate,
announced monthly by the IRS, that is based on the yield of debt obligations
issued by the U.S. Treasury. A debt instrument generally has "significant
original issue discount" if, as of the close of any accrual period ending more
than five years after the date of issue, the excess of the interest (including
OID) that has accrued on the obligation over the interest (including OID) that
is required to be paid thereunder exceeds the product of the issue price of the
instrument and its yield to maturity.
Moreover, if the Company Senior Discount Notes' yield to maturity exceeds
the AFR plus six percentage points, a ratable portion of the Company's deduction
for OID (the "Disqualified OID") (based on the portion of the yield to maturity
that exceeds the AFR plus six percentage points) will be characterized as a
non-deductible dividend with respect to the Company to the extent of the
Company's current and accumulated earnings and profits. For purposes of the
dividends-received deduction under Section 243 of the Code, the Disqualified OID
will be treated as a dividend to the extent it would have been so treated had
such amount been distributed by the Company with respect to its stock. To the
extent that the Company's earnings and profits are insufficient, any portion of
the Disqualified OID that otherwise would have been recharacterized as a
dividend for purposes of the dividends received deduction will continue to be
treated as ordinary OID income in accordance with the rules described above.
SALE, EXCHANGE OR REDEMPTION OF THE COMPANY SENIOR DISCOUNT NOTES
Upon the sale, exchange, retirement or other disposition of a Company Senior
Discount Note, a holder generally will recognize taxable gain or loss equal to
the difference between (i) the amount realized on the disposition and (ii) the
holder's adjusted tax basis in the Company Senior Discount Note. A holder's
130
<PAGE>
adjusted tax basis in a Company Senior Discount Note generally will equal the
cost of the Company Senior Discount Note to the holder increased by any OID
included in income through the date of disposition and decreased by any payments
received on the Company Senior Discount Notes. Such gain or loss will generally
constitute capital gain or loss. In the case of a holder who is an individual,
any capital gain will be subject to tax at a maximum rate of 28% if the Company
Senior Discount Note has been held for more than 12 months but not more than 18
months at the time of the sale, exchange, retirement or other disposition
thereof, and a maximum rate of 20% if the Company Senior Discount Note has been
held for more than 18 months.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Holders may be subject, under certain circumstances, to information
reporting and "backup withholding" at a 31% rate with respect to cash payments
in respect of principal (and premium, if any), interest (including OID) and the
gross proceeds from dispositions of Company Senior Discount Notes. Backup
withholding applies only if the holder (i) fails to furnish its social security
or other taxpayer identification number ("TIN") within a reasonable time after a
request therefor, (ii) furnishes an incorrect TIN, (iii) fails to report
properly interest or dividends, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that it is not subject to backup withholding.
Any amount withheld from a payment to a holder under the backup withholding
rules is allowable as a credit (and may entitle such holder to a refund) against
such holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS. Certain persons are exempt from backup
withholding, including corporations and financial institutions. Holders of
Company Senior Discount Notes should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
The Company will furnish annually to the IRS and to record holders of the
Company Senior Discount Notes (to whom it is required to furnish such
information) information relating to the amount of OID and interest, as
applicable.
131
<PAGE>
UNDERWRITING
The Company has entered into an Underwriting Agreement (the form of which
has been filed as an exhibit to Registration Statement of which this Prospectus
is a part) dated , 1998 (the "Underwriting Agreement"), with the
underwriters named below (the "Underwriters") pursuant to which, on the terms
and subject to the conditions thereof, the Company has agreed to sell to the
Underwriters and the Underwriters have agreed to purchase from the Company, the
aggregate principal amount of Company Notes set forth opposite their names
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY PRINCIPAL AMOUNT
OF COMPANY SENIOR OF COMPANY
UNDERWRITERS DISCOUNT NOTES SENIOR NOTES
- ---------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Lehman Brothers Inc................................................... $ $
Salomon Brothers Inc..................................................
NationsBanc Montgomery Securities LLC.................................
------------------- ---------------------
Total............................................................... $ $ 280,000,000
------------------- ---------------------
------------------- ---------------------
</TABLE>
The Underwriting Agreement provides that the obligation of each Underwriter
to pay for and accept delivery of the Company Notes is subject to certain
conditions, including delivery of certain legal opinions by their counsel.
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Company Notes if any
are taken. The Closing of the Notes Offering is conditioned upon the closing of
each of the Offerings and each of the Six Flags Transactions.
The Company has been advised by the Underwriters that they propose to offer
the Company Notes offered hereby 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 concession
not to exceed % of the aggregate principal amount at maturity of the Company
Senior Discount Notes and % of the aggregate principal amount of the Company
Senior Notes. The Underwriters or such selected dealers may reallow a commission
to certain other dealers not to exceed % of the aggregate principal amount at
maturity of the Company Senior Discount Notes and % of the aggregate
principal amount of the Company Senior Notes. After the initial public offering
of the Company Notes, the public offering price, the concession to selected
dealers and the reallowance to the other dealers may be changed by the
Underwriters.
The Underwriting Agreement provides that the Company and its operating
subsidiaries (including Six Flags) will indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, and will
contribute to payments the Underwriters may be required to make in respect
hereof.
The Company does not intend to list the Company Notes on any national
securities exchange or to seek the admission thereof to trading on the NASDAQ
National Market System. The Company has been advised by the Underwriters that
following the completion of the Notes Offerings, the Underwriters currently
intend to make a market in the Company Notes. However, the Underwriters are not
obligated to do so. Any market making activities with respect to the Company
Notes may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act. See "Risk Factors--Absence of Public Market."
In connection with the Notes Offerings, the Underwriters may engage in
certain transactions that stabilize the price of the Company Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Company Notes. If the Underwriters create a
short position in the Company Notes in connection with the Notes Offerings
(i.e., if they sell more Company Notes than are set forth on the cover page of
this Prospectus) the Underwriters may reduce that short position by purchasing
Company Notes in open market.
132
<PAGE>
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases.
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 Company Notes. In addition, neither
the Company nor any of the Underwriters makes any representation that anyone
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
Each of Lehman Brothers and Smith Barney Inc. (a separately registered
broker dealer affiliated with Salomon Brothers 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
(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 Company Notes offered hereby and certain legal matters
in connection with the Notes Offering will be passed upon for the Company by
Baer Marks & Upham LLP, New York, New York. The Underwriters are being
represented by Latham & Watkins, New York, New York.
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.
133
<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 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 ANY
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........................................................ 5
Risk Factors.............................................................. 20
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 Other Indebtedness......................................... 89
Description of Notes...................................................... 93
Description of Capital Stock.............................................. 125
Certain United States Federal Income Tax Considerations................... 129
Underwriting.............................................................. 132
Legal Matters............................................................. 133
Experts................................................................... 133
Index to Financial Statements............................................. F-1
</TABLE>
$
[LOGO]
PREMIER PARKS INC.
$
% SENIOR DISCOUNT
NOTES DUE 2008
$280,000,000
% SENIOR NOTES
DUE 2006
------------------
PROSPECTUS
, 1998
------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
NATIONSBANC MONTGOMERY
SECURITIES LLC
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
<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............................... $ 156,350
National Association of Securities Dealers, Inc. filing fee....................... 30,500
Accounting fees and expenses......................................................
Legal fees and expenses...........................................................
Printing and engraving expenses...................................................
Transfer agent and registrar fees.................................................
Miscellaneous.....................................................................
---------
Total fees and expenses........................................................... $
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law which covers the
indemnification of directors, officers, employees and agents of a corporation is
hereby incorporated herein by reference. Reference is made to Article XXV of the
Registrant's By-Laws which provides for indemnification by the Registrant in the
manner and to the full extent permitted by Delaware law.
Reference is also made to the Underwriting Agreement, to be filed by
amendment as Exhibit 1(a).
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference herein
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
(c) The undersigned Registrant hereby undertakes the following:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 6th 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 6, 1998
Kieran E. Burke officer)
* Director, President and
- ------------------------------ Chief March 6, 1998
Gary Story Operating Officer
Chief Financial Officer
* and
- ------------------------------ Director (principal March 6, 1998
James F. Dannhauser financial and accounting
officer)
*
- ------------------------------ Director March 6, 1998
Paul A. Biddelman
*
- ------------------------------ Director March 6, 1998
Michael E. Gellert
*
- ------------------------------ Director March 6, 1998
Jack Tyrrell
*
- ------------------------------ Director March 6, 1998
Sandy Gurtler
*
- ------------------------------ Director March 6, 1998
Charles R. Wood
*By: /s/ 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 Underwriting Agreement among the Registrant, Lehman Brothers Inc., Salomon Brothers Inc
and NationsBanc Montgomery Securities LLC, as representatives of the several Underwriters
(Company Senior Discount Notes and Company Senior Notes).......................................
* (b) Form of U.S. Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney
Inc. and Furman Selz LLC and NationsBanc Montgomery Securities LLC, as representatives of the
several U.S. Underwriters......................................................................
* (c) 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.......................
* (d) Form of Agreement among U.S. Underwriters and International Managers...........................
* (e) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc. and Smith Barney
Inc., as representative of the several Underwriters (Premium Income Equity Securities).........
* (f) Form of Underwriting Agreement among the Registrant, 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
10(a) 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 Registration Statement......................................
(e) Form of Subscription Agreement between the Registrant and each of the purchasers of shares of
Preferred Stock -- incorporated by reference from Exhibit 4(10) to the Registration
Statement......................................................................................
(f) Convertible Note Purchase Agreement, dated as of March 3, 1993, between the Registrant and the
purchasers named therein (including forms of Senior Subordinated Convertible Note and
Registration Rights Agreement) -- incorporated by reference from Exhibit 4(i) to Form 10-K of
the Registrant for the year ended December 31, 1993............................................
(g) Form of Subscription Agreement, dated October 1992, between the Registrant and certain
investors -- incorporated by reference from Exhibit 4(a) to the Registrant's Current Report on
Form 8-K dated October 30, 1992................................................................
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
---
<S> <C> <C> <C>
(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............................................................
(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 (included on Signature Page of Registration Statement)......................................
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
II-6
<PAGE>
EXHIBIT 12(A)
PREMIER PARKS INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
FOR EACH OF THE YEARS IN THE 5-YEAR PERIOD ENDED DECEMBER 31, 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. 333-46167) 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
