<PAGE>
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-48307
PREMIER PARKS INC.
PROSPECTUS/OFFER TO PURCHASE
------------------
THE EXCHANGE OFFER WILL START ON MAY 27, 1998 AND EXPIRE AT THE CLOSE OF
BUSINESS, ON JUNE 24, 1998. SUBJECT TO CERTAIN LIMITED EXCEPTIONS, ONCE WALIBI
STOCK IS TENDERED IN THE EXCHANGE OFFER IT MAY NOT BE WITHDRAWN.
Premier Parks Inc. ("Premier" or the "Company") hereby offers, on the terms
and subject to the conditions set forth herein (the "Exchange Offer"), to
exchange for the issued and outstanding shares of capital stock (the "Walibi
Stock") of Walibi S.A. ("Walibi"), on the basis of, and at the election of, the
holder (i) BEF 2,385 in cash for each share of Walibi Stock (the "Cash
Election") or (ii) BEF 1,908 in cash plus 0.337 of a share of common stock of
the Company, par value U.S. $0.05 per share ("Company Common Stock"), for each
share of Walibi Stock together with the right to receive (subject to certain
conditions) additional shares (the "Contingent Shares") of Company Common Stock
(the "Cash and Stock Election").
On May 19, 1998, the closing price on the New York Stock Exchange (the
"NYSE") of the Company Common Stock was U.S. $54.375 per share, or U.S. $18.324
for 0.337 of a share. On May 19, 1998, the closing price on the Official Market
of the Bourse de Bruxelles ("BSE") for the Walibi Stock was BEF 2,450 per share,
or U.S. $66.55 per share based on the Noon Buying Rate (as defined herein) for
such date of $1.00 = BEF 36.8130. The current market value of Company Common
Stock offered hereby will fluctuate with changes in the market price of the
Company Common Stock and the currency exchange rate.
THE OUTGOING BOARD OF DIRECTORS OF WALIBI HAS DETERMINED THAT THE EXCHANGE
OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, WALIBI AND ITS STOCKHOLDERS (THE
"WALIBI STOCKHOLDERS"), AND RECOMMENDS THAT WALIBI STOCKHOLDERS ACCEPT THE
EXCHANGE OFFER.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 HEREIN FOR CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY WALIBI STOCKHOLDERS IN CONNECTION WITH THEIR
CONSIDERATION OF THE EXCHANGE OFFER.
---------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS/OFFER TO PURCHASE 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/ OFFER TO
PURCHASE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus/Offer to Purchase is May 27, 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"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Regional Offices of the
Commission located 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 also be obtained from the Public Reference Section 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 Web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The Company Common Stock is listed on the NYSE. Such
reports, proxy and information 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. Walibi Stock is listed on the BSE.
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). In accordance
with the rules and regulations of the Commission, this Prospectus/Offer to
Purchase 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/Offer to Purchase 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, the Company Common Stock and the right to receive Contingent
Shares, 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.
The information concerning Walibi contained herein has been furnished by
Walibi and obtained from publicly available information. The Company has not to
date had complete access to the books and records of Walibi and is not in a
position to verify such information or statements.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by the Company with the Commission
are incorporated by reference into this Prospectus/Offer to Purchase 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,
1997, as amended.
2. The audited financial statements of Kentucky Kingdom, Inc. as of
November 2, 1997, and for the year then ended included in the Company's
Current Report on Form 8-K, dated November 7, 1997, as amended.
3. The description of the shares of Company 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.
4. The description of the rights relating to the shares of Company Common
Stock contained in the Company's Registration Statement on Form 8-A
dated January 12, 1998, as amended and filed under the Exchange Act,
including any amendment or report filed for the purpose of updating such
description.
5. The Company's Current Report on Form 8-K, dated March 25, 1998.
6. The Company's Current Reports on Form 8-K, dated April 9, 1998.
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<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/Offer to Purchase and prior to the termination of the Exchange Offer
shall also be deemed to be incorporated by reference into this Prospectus/Offer
to Purchase and to be a part hereof from the dates of filing of such documents.
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/Offer to Purchase to the extent that a statement contained
herein, or in any other subsequently filed document that also is incorporated or
deemed to be incorporated by reference herein, modifies or supersedes the
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus/Offer to Purchase.
This Prospectus/Offer to Purchase incorporates documents by reference that
are not presented herein or delivered herewith. Copies of such documents (other
than exhibits thereto that are not specifically incorporated by reference
herein) are available, without charge, to any person, including any beneficial
owner of Walibi Stock to whom a Prospectus/Offer to Purchase is delivered, upon
written or oral request, 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). In order to ensure
timely delivery of documents, any request should be made no later than five
business days prior to the Expiration Date (as defined herein).
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros. ("Warner Bros."), a division of Time
Warner Entertainment Company, L.P. ("TWE"). BATMAN, BATMOBILE, GOTHAM CITY AND
SUPERMAN are trademarks and service marks of DC Comics ("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 copyrights and related indicia are trademarks of King Features
Syndicate, Inc., a unit of The Hearst Corporation.
This Prospectus/Offer to Purchase includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act that are subject to risks and uncertainties. All statements other
than statements of historical fact included in this Prospectus/Offer to
Purchase, including, without limitation, statements under "Summary," "The
Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of the Company" and located elsewhere
herein ("Cautionary Statements") regarding industry prospects, financial
position, business strategy, and plans and objectives of management of the
Company 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 be correct. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in this Prospectus/Offer to Purchase, including,
without limitation, in conjunction with the forward-looking statements included
herein. All subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE SET FORTH OR INCORPORATED BY REFERENCE HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY PREMIER. THIS PROSPECTUS/OFFER TO PURCHASE
DOES NOT CONSTITUTE AN OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE EXCHANGE OFFER
IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS
OF WALIBI STOCK IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE THEREOF
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, THE
COMPANY MAY, IN ITS SOLE DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY
TO MAKE THE EXCHANGE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE
ii
<PAGE>
EXCHANGE OFFER TO HOLDERS OF WALIBI STOCK IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS/OFFER TO PURCHASE NOR ANY EXCHANGE OR SALE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF PREMIER OR WALIBI SINCE THE DATE AS OF WHICH
INFORMATION IS FURNISHED OR THE DATE HEREOF.
This Prospectus/Offer to Purchase may not be issued or passed on in the
United Kingdom except to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom such document may otherwise lawfully be issued or
passed on.
EXCHANGE RATES
The Company publishes its financial statements in U.S. dollars. In this
Prospectus/Offer to Purchase currency amounts are expressed in U.S. dollars,
unless otherwise indicated. References in this Prospectus/ Offer to Purchase to
"$" or "U.S. dollars" are to United States dollars, references to "BEF" are to
Belgian francs and references to "FF" are to French francs. For convenience
purposes only, unless otherwise indicated, translations of Belgian francs into
U.S. dollars have been calculated at the rate of $1.00 to BEF 36.8130, which
represents the noon buying rate in The City of New York for cable transfers
payable in Belgium francs as certified for customs purposes by the Federal
Reserve Bank of New York (the "Noon Buying Rate") as of May 19, 1998. Such
translations should not be construed as representations that the Belgian franc
amounts actually represent such U.S. dollar amounts or could be converted into
U.S. dollars at the rate indicated or at any other rate. The high, low, average
and period end Noon Buying Rates for Belgian francs for the five years ended
December 31, 1997 and the three months ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
CALENDAR PERIOD HIGH LOW AVERAGE(1) PERIOD END
- --------------------------------------------------------- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
December 31, 1993........................................ 37.18 32.25 34.51 36.24
December 31, 1994........................................ 36.53 30.73 33.43 31.85
December 31, 1995........................................ 32.14 27.94 29.47 29.43
December 31, 1996........................................ 32.27 27.76 30.96 31.71
December 31, 1997........................................ 38.82 31.76 35.80 37.08
March 31, 1998........................................... 38.50 36.76 37.80 38.14
</TABLE>
- ------------------------
(1) The average of the Noon Buying Rates on the last business day of each month,
or portion of the month, during the relevant period.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION...................................................................................... i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... i
EXCHANGE RATES............................................................................................. iii
SUMMARY.................................................................................................... 1
RISK FACTORS............................................................................................... 11
Risks Associated with Substantial Indebtedness and Other Obligations..................................... 11
SFTP Senior Subordinated Notes Repurchase Obligation..................................................... 13
Recent Losses of Six Flags............................................................................... 13
Holding Company Structure; Limitations on Access to Cash Flow of Subsidiaries............................ 13
Restrictive Debt Covenants............................................................................... 14
Ability to Manage Rapid Growth........................................................................... 14
Uncertainty of Future Acquisitions; Potential Effects of Acquisitions.................................... 14
Risks of Accidents and Disturbances at Parks; Effects of Local Conditions and Events..................... 15
Risks Associated with International Operations........................................................... 15
Effects of Inclement Weather; Seasonal Fluctuations of Operating Results................................. 15
Highly Competitive Business.............................................................................. 16
Dependence on Key Personnel.............................................................................. 16
Certain Anti-Takeover Considerations; Change of Control.................................................. 16
Cash Dividends Unlikely.................................................................................. 17
Shares of Company Common Stock Eligible for Future Sale.................................................. 17
Impact of Year 2000 Issue................................................................................ 18
THE EXCHANGE OFFER......................................................................................... 19
Terms of the Offer....................................................................................... 19
Contingent Shares........................................................................................ 19
Mandatory Bid............................................................................................ 20
The Offer Period......................................................................................... 20
Procedures for Tendering Walibi Stock.................................................................... 20
Withdrawal Rights........................................................................................ 21
Acceptance for Exchange; Delivery of Company Common Stock................................................ 21
Dividends and Distributions.............................................................................. 22
Fractional Shares........................................................................................ 22
Financing Arrangements................................................................................... 22
Fees and Expenses........................................................................................ 22
Structure of the Offer................................................................................... 22
Miscellaneous............................................................................................ 22
THE PROPOSED ACQUISITION................................................................................... 23
The Initial Acquisition.................................................................................. 23
Recommendation of the Walibi Board....................................................................... 23
No Dissenters' or Appraisal Rights....................................................................... 23
Accounting Treatment..................................................................................... 23
Stock Exchange Listings.................................................................................. 24
UNITED STATES TAX CONSEQUENCES OF THE EXCHANGE OFFER....................................................... 25
Introduction............................................................................................. 25
The Exchange Offer....................................................................................... 25
Taxation of Holders of Company Common Stock.............................................................. 26
BELGIAN TAX CONSEQUENCES OF THE EXCHANGE OFFER............................................................. 30
Belgian Income Tax Considerations Relating to the Exchange Offer......................................... 30
Belgian Income Tax Considerations Relating to the Contingent Shares...................................... 30
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Belgian Income Tax Considerations Relating to Dividend Payments by the Company........................... 30
Belgian Income Tax Considerations Relating to the Sale, Exchange, Redemption or Other Transfer of Company
Common Stock........................................................................................... 31
Belgian Tax on Stock Market Transactions................................................................. 31
Belgian Tax on the Physical Delivery of Bearer Securities................................................ 32
REGULATORY MATTERS......................................................................................... 33
U.S. Anti-Trust Laws..................................................................................... 33
Belgian Law; Other European Laws......................................................................... 33
Other Laws............................................................................................... 33
MARKET PRICE AND DIVIDEND DATA............................................................................. 34
Market Price............................................................................................. 34
Dividends................................................................................................ 35
SELECTED HISTORICAL AND PRO FORMA FINANCIAL
AND OPERATING DATA OF THE COMPANY........................................................................ 36
UNAUDITED PRO FORMA FINANCIAL STATEMENTS................................................................... 41
THE COMPANY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 51
SFEC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 60
DESCRIPTION OF THE COMPANY................................................................................. 63
General.................................................................................................. 63
Pursuing Growth Opportunities at Existing Parks.......................................................... 65
The Premier Parks........................................................................................ 66
The Six Flags Parks...................................................................................... 68
Expanding the Company's Parks............................................................................ 68
Acquisition Strategy..................................................................................... 68
The Theme Park Industry.................................................................................. 69
History.................................................................................................. 71
Description of Premier Parks............................................................................. 71
Description of Walibi Parks.............................................................................. 76
Description of Six Flags Parks........................................................................... 76
Marketing and Promotion.................................................................................. 81
Licenses................................................................................................. 82
Park Operations.......................................................................................... 82
Capital Improvements..................................................................................... 83
Maintenance and Inspection............................................................................... 83
Employees................................................................................................ 83
Insurance................................................................................................ 84
Environmental and Other Regulation....................................................................... 84
Legal Proceedings........................................................................................ 85
MANAGEMENT................................................................................................. 86
PRINCIPAL STOCKHOLDERS..................................................................................... 90
THE SIX FLAGS ACQUISITION.................................................................................. 93
The Acquisition.......................................................................................... 93
The Financings........................................................................................... 93
The Premier Merger....................................................................................... 93
Indemnification.......................................................................................... 93
Agreements Related to the Six Flags Agreement............................................................ 94
DESCRIPTION OF WALIBI...................................................................................... 97
Operating Strategy....................................................................................... 97
Description of the Walibi Parks.......................................................................... 97
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Legal Proceedings........................................................................................ 99
Exchange Controls and Other Limitations Affecting Securities Holders..................................... 99
Industry Conditions and Competition...................................................................... 99
Regulation............................................................................................... 99
Employees................................................................................................ 99
Directors of Walibi...................................................................................... 100
Executive Officers of Walibi............................................................................. 100
Related Party Transactions............................................................................... 101
Beneficial Ownership of Certain Walibi Stockholders and Management....................................... 101
Compensation of Officers and Directors................................................................... 101
SELECTED FINANCIAL DATA OF WALIBI.......................................................................... 102
WALIBI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................................................... 103
Overview................................................................................................. 103
Operating Results........................................................................................ 103
Liquidity and Capital Resources.......................................................................... 104
Inflation................................................................................................ 105
Foreign Currency and Interest Rate Risk Management....................................................... 105
DESCRIPTION OF INDEBTEDNESS OF THE COMPANY................................................................. 106
Premier Credit Facility.................................................................................. 106
Six Flags Credit Facility................................................................................ 106
Company Senior Discount Notes............................................................................ 107
Company Senior Notes..................................................................................... 108
Premier Notes............................................................................................ 109
SFTP Senior Subordinated Notes........................................................................... 109
SFEC Zero Coupon Senior Notes............................................................................ 110
New SFEC Notes........................................................................................... 110
DESCRIPTION OF CAPITAL STOCK AND CHARTER DOCUMENTS
OF THE COMPANY........................................................................................... 112
Company Common Stock..................................................................................... 112
Preferred Stock.......................................................................................... 112
Registration Rights...................................................................................... 114
Shares of Company Common Stock Eligible for Future Sale.................................................. 114
Rights Plan.............................................................................................. 115
Delaware Law and Certain Charter and By-Law Provisions................................................... 117
CERTAIN CHANGES IN RIGHTS OF WALIBI STOCKHOLDERS
RESULTING FROM THE ACQUISITION........................................................................... 118
Size of Board of Directors............................................................................... 118
Classification of Directors.............................................................................. 118
Removal of Directors..................................................................................... 119
Filling Vacancies on the Board of Directors.............................................................. 119
Director Liability and Indemnification................................................................... 119
Meetings of Stockholders................................................................................. 120
Business Combinations with Interested Stockholders....................................................... 120
Dissenters' Rights of Appraisal.......................................................................... 121
Dividends................................................................................................ 122
Preemptive Rights........................................................................................ 122
Amendment of Charter..................................................................................... 123
LEGAL MATTERS.............................................................................................. 124
EXPERTS.................................................................................................... 124
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>
vi
<PAGE>
SUMMARY
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/OFFER TO PURCHASE. AS USED, HEREIN, THE TERMS THE "COMPANY" AND
"PREMIER" MEAN FOR ANY PERIOD PRIOR TO THE PREMIER MERGER (AS DEFINED HEREIN),
PREMIER PARKS INC. AND ITS CONSOLIDATED SUBSIDIARIES AND FOR ANY PERIOD
SUBSEQUENT THERETO, PREMIER PARKS HOLDING CORPORATION AND ITS CONSOLIDATED
SUBSIDIARIES. AS USED IN THIS PROSPECTUS/OFFER TO PURCHASE, 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 ACQUISITION OF
APPROXIMATELY 49.9% OF THE OUTSTANDING CAPITAL STOCK OF WALIBI S.A. ("WALIBI"),
AS WELL AS THE COMPANY'S MANAGEMENT CONTRACT, LEASE AND PURCHASE OPTION WITH
RESPECT TO MARINE WORLD AFRICA USA IN THE 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 OCCURRED ON
APRIL 1, 1998, (IV) THE "ACQUISITIONS" REFERS TO THE 1996 ACQUISITIONS AND THE
1997 ACQUISITIONS 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). THE
PRO FORMA FINANCIAL INFORMATION PRESENTED HEREIN GIVES PRO FORMA EFFECT TO EACH
OF THE ACQUISITIONS (OTHER THAN MARINE WORLD) AND, WHERE NOTED, THE SIX FLAGS
ACQUISITION. ALL PARK ATTENDANCE INFORMATION INCLUDED IN THIS PROSPECTUS/OFFER
TO PURCHASE (OTHER THAN ATTENDANCE DATA FOR THE PREMIER PARKS AND THE SIX FLAGS
PARKS) ARE BASED ON ATTENDANCE INFORMATION PUBLISHED BY AMUSEMENT BUSINESS, A
RECOGNIZED INDUSTRY PUBLICATION, WHICH, ACCORDING TO SUCH SOURCE, INCLUDES
ESTIMATES BASED ON SOURCES IT BELIEVES TO BE RELIABLE. RANKINGS OF METROPOLITAN
AND DESIGNATED MARKET AREAS ("DMA") ARE BASED ON A COPYRIGHTED 1996-97 SURVEY OF
TELEVISION HOUSEHOLDS PUBLISHED BY A.C. NIELSEN MEDIA RESEARCH. THE EXCHANGE
OFFER IS BEING MADE ON BEHALF OF THE COMPANY BY PREMIER INTERNATIONAL HOLDINGS
INC. ("INTERNATIONAL"), AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF THE COMPANY. SEE
"THE EXCHANGE OFFER--STRUCTURE OF OFFER."
THE COMPANIES
PREMIER
Premier is a Delaware corporation and 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 U.S. The Company estimates that approximately two-thirds of the
population in the continental U.S. live within a 150-mile radius of the
Company's theme parks. On 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 $232.9
million, respectively. See "Unaudited Pro Forma Financial Statements." The
principal executive offices of Premier are located at 11501 Northeast
Expressway, Oklahoma City, Oklahoma 73131, and its main telephone number is
(405) 475-7500.
WALIBI
Walibi is a corporation (SOCIETE ANONYME) organized under the laws of
Belgium. Walibi operates 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 Brussels. Walibi's operations had combined 1997 attendance of
approximately 3.5 million. Prior to the Exchange Offer, Premier acquired
approximately 49.9% of the issued and outstanding capital stock of Walibi (the
"Walibi Stock"). The principal executive offices of Walibi are located at
Chaussee des Collines 54, B-1300 Wavre, Belgium and its main telephone number is
3210 23 58 00.
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<PAGE>
RECENT DEVELOPMENTS
THE SIX FLAGS ACQUISITION
Pursuant to an Agreement and Plan of Merger dated February 9, 1998 (the "Six
Flags Agreement"), on April 1, 1998 Premier acquired 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 was paid in cash. At the date
of the acquisition, Six Flags' liabilities included approximately $477.3 million
principal amount at maturity of notes issued by SFEC or Six Flags Theme Parks
Inc. (together with its subsidiaries, "SFTP"), an indirect wholly-owned
subsidiary of SFEC. In connection with the Six Flags Acquisition, the Company
raised approximately $2.1 billion (including replacement of existing notes
issued by SFEC) of new capital through the issuance of both debt and equity. The
Company also borrowed 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.
Prior to the Six Flags Acquisition the company formerly named Premier Parks
Inc. (together with its consolidated subsidiaries, "Premier Operations") merged
(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 became, on a share-for-share basis, holders of
common stock of Premier Parks
Holdings Corporation, and Premier Operations became a wholly-owned subsidiary of
Premier Parks Holdings Corporation. On the effective date of the Premier Merger,
Premier Operations changed its name to Premier Parks Operations Inc., and
Premier Parks Holdings Corporation changed its name to Premier Parks Inc.
For a discussion of the Six Flags Acquisition, the Offerings (as defined)
and related matters (the "Six Flags Transactions") see "Risk Factors--Risks
Associated with Substantial Indebtedness and Other Obligations," and "The Six
Flags Acquisition."
THE PREMIER CREDIT FACILITY
On March 13, 1998, the Company entered into a $300.0 million senior secured
credit facility (the "Premier Credit Facility"). The Premier Credit Facility
provides for (i) a five-year $75.0 million revolving credit facility for working
capital and general corporate purposes (the "Revolving Credit Facility"), (ii) a
five-year $100.0 million term loan facility ("Facility B") and (iii) an
eight-year $125.0 million term loan facility ("Facility C" and, together with
Facility B, the "Term Loan Facilities"), in each case to fund acquisitions and
make capital improvements. As of April 21, 1998, the Company had outstanding
borrowings of $200.0 million under the Premier Credit Facility which funds were
borrowed, in part, to fund the cash portion of the purchase price for the Walibi
acquisition. See "Description of Indebtedness of the Company--Premier Credit
Facility."
2
<PAGE>
The chart below sets forth the Company's capital structure following the Six
Flags Transactions.
Chart demonstrating Parent-Subsidiary relationship and our respective
debt/credit obligations of each such entity following the Offerings.
(a) Prior to the Exchange Offer, the Company had approximately 37.5 million
shares of Company Common Stock outstanding.
(b) Company Senior Discount Notes (as defined herein) due 2008 in the aggregate
principal amount at maturity of $410.0 million (gross proceeds of $251.7
million) with principal accreting until April 1, 2003. Cash interest will be
payable semi-annually after April 1, 2003.
(c) Company Senior Notes (as defined herein) due 2006 in the aggregate principal
amount of $280.0 million. Approximately $70.7 million of the proceeds will
be placed in escrow to fund the first six semi-annual interest payments.
(d) Management has drawn $200.0 million.
(e) Premium Income Equity Securities ("PIES-SM-") representing interests in the
Company's Mandatorily Convertible Preferred Stock (as defined herein) which
is mandatorily convertible into Company Common Stock on April 1, 2001.
(f) Upon the consummation of the Exchange Offer, Walibi will be a subsidiary of
Premier Operations. Premier Operations and SFTP own the Premier Parks and
Six Flags Parks (excluding the Co-Venture Parks (as defined herein)),
respectively, both directly or through their respective subsidiaries.
(g) The proceeds, together with other funds, will be used to establish an escrow
to provide for the full repayment of the SFEC Zero Coupon Senior Notes (as
defined herein), at or prior to maturity in December 1999.
(h) Management has drawn $410.0 million.
* Shading denotes the Offerings.
3
<PAGE>
THE PROPOSED ACQUISITION
THE INITIAL ACQUISITION
Prior to the Exchange Offer, the Company acquired approximately 49.9% of the
outstanding shares of capital stock of Walibi (the "Initial Acquisition"). See
"The Proposed Acquisition--The Initial Acquisition."
RECOMMENDATION OF THE WALIBI BOARD
In connection with the Exchange Offer, Walibi's Outgoing Board of Directors
(as defined herein) determined that the terms of the Exchange Offer are fair to,
and in the best interests of, Walibi and the Walibi stockholders (the "Walibi
Stockholders"). Accordingly, the Outgoing Board of Directors recommends that the
Walibi Stockholders ACCEPT the Exchange Offer.
In reaching this determination, the Outgoing Board of Directors considered a
number of factors including the following: (i) the premium over the then current
market price of the Walibi Stock offered by the Company in the Exchange Offer
(BEF 270 or 13% for the Cash Election) which the Board believed to be in excess
of any anticipated growth in the price of the Walibi Stock in the foreseeable
future; (ii) current industry, economic and market conditions, including the
limited ability of Walibi to raise additional capital required for expansion of
its operations, (iii) the potential future performance of the Company and the
Company Common Stock both after the Exchange Offer and following the Six Flags
Acquisition based primarily upon the Company's access to capital and management
resources required to expand the Company's operations and (iv) the Outgoing
Board of Directors' perception of the more favorable overall business prospects
of the Company and Walibi on a combined basis as compared to the prospects for
Walibi as a separate entity, primarily for the reasons set forth above. See "The
Proposed Acquisition-- Recommendation of the Walibi Board."
Additionally, the Outgoing Board of Directors believes that the Cash and
Stock Election of the Exchange Offer allows Walibi Stockholders an opportunity
to participate in an entity that will have greater financial flexibility and
better opportunities for growth than Walibi would have if it were to continue on
a stand-alone basis. There can be no assurance, however, that the expected
benefits of accepting the Cash and Stock Election of the Exchange Offer will be
realized. See "Risk Factors."
THE EXCHANGE OFFER
TERMS OF THE OFFER
The Company hereby offers, on the terms and subject to the conditions set
forth herein (the "Exchange Offer"), to exchange for the issued and outstanding
shares of Walibi Stock, on the basis of, and at the election of, the holder (i)
BEF 2,385 in cash for each share of Walibi Stock (the "Cash Election") or (ii)
BEF 1,908 in cash plus 0.337 of a share of common stock of the Company, par
value $0.05 per share (the "Company Common Stock") for each share of Walibi
Stock together with the right to receive (subject to certain conditions)
additional shares (the "Contingent Shares") of Company Common Stock (the "Cash
and Stock Election") (the aggregate consideration proposed to be paid in the
Exchange Offer for all of the outstanding shares of Walibi Stock not otherwise
held by the Company or its affiliates shall be referred to herein as the
"Consideration"). See "The Exchange Offer--Contingent Shares" for a description
of the right to receive Contingent Shares.
4
<PAGE>
MANDATORY BID
If as a result of the Exchange Offer, the Company acquires 90% or more of
the outstanding Walibi Stock, the Exchange Offer will be reopened for at least
15 days (as required by Belgian law) within one month of the publication of the
results of the Exchange Offer. The Exchange Offer shall be reopened on the same
conditions, should the Company apply for delisting of the Walibi Stock from the
BSE.
PROCEDURES FOR TENDERING WALIBI STOCK
In order for a holder of Walibi Stock to validly tender Walibi Stock
pursuant to the Exchange Offer, the acceptance form (the "Acceptance Form")
accompanying this Prospectus/Offer to Purchase, properly completed and duly
executed in two copies, together with either (i) the bearer share certificates
representing the Walibi Stock to be tendered together with the last dividend
coupon (coupon number ten) attached thereto or (ii) the certificates for
registered shares representing the Walibi Stock to be tendered, along with any
proxy relating to the tender of the shares, as well as any other required
documents, shall be delivered to any of the offices of the Depositary (as
defined herein) prior to the Expiration Date (as defined herein). Additional
copies of the Prospectus/Offer to Purchase and the Acceptance Form are available
at the offices of the Depositary. See "The Exchange Offer--Procedures for
Tendering Walibi Stock."
WITHDRAWAL RIGHTS
Once Walibi Stock is tendered in the Exchange Offer such tender is
irrevocable and unconditional and may not be withdrawn except in the event of a
regular counter offer organized pursuant to Belgian law (a "Counter Offer"), in
which case the Walibi Stockholders who have tendered shares in the Exchange
Offer are released from their acceptance in accordance with Article 19 of the
Belgian Royal Decree of 8 November 1989 relating to take-over bids and changes
in control over companies. See "The Exchange Offer--Withdrawal Rights."
ACCEPTANCE FOR EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for acquisition, and will acquire, all shares of Walibi
Stock validly tendered during the Offer Period in accordance with the procedures
set forth in this Prospectus/Offer to Purchase. The "Offer Period" shall mean
the period from and including May 27, 1998 to and including the Expiration Date.
The term "Expiration Date" shall mean the close of business, on June 24, 1998.
FRACTIONAL SHARES
No fractional shares of Company Common Stock will be issued to holders of
Walibi Stock in connection with the Exchange Offer. In lieu thereof, the Company
shall pay to such holders otherwise entitled to a fractional share cash in an
amount equal to the product of such fraction and BEF 2,070 (the BEF equivalent
of the price of Company Common Stock on the date the Company acquired control of
Walibi).
NO DISSENTERS' OR APPRAISAL RIGHTS
There are no dissenters or appraisal rights available to Walibi Stockholders
as a result of the Exchange Offer.
DEPOSITARY
The Company has retained Bank Brussels Lambert S.A. to act as the depositary
("Depositary") in connection with the Exchange Offer. See "The Exchange
Offer--Fees and Expenses."
TAX CONSEQUENCES OF THE EXCHANGE OFFER
Disposition of Walibi Stock by U.S. holders thereof generally will be a
taxable transaction for United States federal income tax purposes. For a further
discussion of tax consequences of the Exchange Offer, see "United States Tax
Consequences of the Exchange Offer" and "Belgian Tax Consequences of the
Exchange Offer."
5
<PAGE>
ACCOUNTING TREATMENT
The acquisition of Walibi by the Company will be accounted for under the
purchase method of accounting, in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP").
STOCK EXCHANGE LISTING
The Company Common Stock is listed on the New York Stock Exchange (the
"NYSE"). The additional listing on the NYSE of the shares of Company Common
Stock to be issued in the Exchange Offer is anticipated to be approved subject
to official notice of issuance. The Company Common Stock will not be listed on
the BSE.
RISK FACTORS
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY THE WALIBI STOCKHOLDERS IN CONNECTION WITH AN
INVESTMENT IN THE COMPANY UPON CONSUMMATION OF THE EXCHANGE OFFER.
MARKET PRICE DATA
The last sale price of Company Common Stock as reported on the NYSE
Composite Reporting System on May 19, 1998, was $54.375 per share. The last sale
price of the Walibi Stock on May 19, 1998, on the Bourse de Bruxelles ("BSE")
was BEF 2,450 per share.
HOLDERS OF SHARES OF WALIBI STOCK ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE COMPANY COMMON STOCK AND THE WALIBI STOCK.
COMPARATIVE PER SHARE DATA
The following table sets forth (i) the historical income (loss) per common
share, the historical book value per share data and cash dividends per common
share of the Company Common Stock; (ii) the historical income (loss) per share
of capital stock, the historical book value per share data and cash dividends
per share of the Walibi Stock (applying U.S. GAAP); (iii) the unaudited pro
forma income per common share and the unaudited pro forma book value per share
data of the Company Common Stock after giving effect to the Acquisitions, the
Six Flags Acquisition and the Exchange Offer accounted for as a purchase, as if
they had occurred at the beginning of the period; and (iv) the Walibi unaudited
equivalent pro forma income per share of capital stock and the unaudited
equivalent pro forma book value per share attributable to 0.337 shares of the
Company Common Stock. The information presented in the table has been prepared
applying U.S. GAAP and should be read in conjunction with the Selected
Historical and Pro Forma Financial and Operating Data of the Company and the
separate historical consolidated financial statements of the Company, Six Flags
and Walibi and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL --------------------------
------------------------ WALIBI
PREMIER WALIBI(1) COMBINED EQUIVALENT(2)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INCOME (LOSS) PER COMMON SHARE:
Year ended December 31, 1997--Basic.................... $ 0.79 $ 0.00 $ (2.10) $ (0.71)
Year ended December 31, 1997--Diluted.................. $ 0.76 $ 0.00 $ (2.10) $ (0.71)
BOOK VALUE PER COMMON SHARE
December 31, 1997...................................... $ 17.15 $ 23.90 $ 37.54 $ 12.65
CASH DIVIDENDS PER COMMON SHARE
Year ended December 31, 1997........................... -- -- -- --
</TABLE>
- ------------------------
(1) Amounts translated into U.S. dollars for purposes of this presentation at a
rate of $1.00 = BEF 37.08, the Noon Buying Rate as of December 31, 1997.
(2) Walibi's pro forma equivalent per share information assumes each of
1,333,000 shares of Walibi Stock are exchanged for 0.337 of a share of
Company Common Stock. The calculation excludes the effect of the cash
consideration to be received by Walibi Stockholders.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA OF THE COMPANY
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% Exchange Offer on the basis of 80%
payable in cash and 20% payable in shares of Company 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/Offer to Purchase
and should be read in conjunction with those financial statements (including the
notes thereto), "Unaudited Pro Forma Financial Statements" and "The Company's
Management's Discussion and Analysis of Financial Condition and Results of
Operations." Other historical financial and operating data (except attendance
and revenue per visitor data) have been derived from audited consolidated
financial statements which are not included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1996(2) 1997
------- ------- ----------- -------- -----------------------
<CAPTION>
PRO
ACTUAL(3) FORMA(4)
--------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Total revenue..................................... $21,860 $24,899 $41,496 $ 93,447 $193,904 $ 815,333
Gross profit(5)................................... 7,787 7,991 13,220 31,388 69,731 250,482
Income from operations(5)......................... 3,019 2,543 3,948 14,461 33,184 102,322
Interest expense, net............................. (1,438) (2,299) (5,578) (11,121) (17,775) (174,788)
Income (loss) before extraordinary loss........... 1,354 102 (1,045)(6) 1,765 14,099 (56,081)
Income (loss) before extraordinary loss per common
share--Basic.................................... $ .51 $ .04 $ (.40)(6) $ .14 $ .79 $ (2.10)
--Diluted................................... $ .51 $ .04 $ (.40)(6) $ .13 $ .76 $ (2.10)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------
ACTUAL(7) PRO FORMA(8)
----------- --------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................................. $ 84,288 $ 726,166(9)
Total assets.......................................................................................... $ 611,321 $ 3,820,609
Total long-term debt and capitalized lease obligations (excluding current maturities)................. $ 216,231 $ 2,034,531
Total debt............................................................................................ $ 217,026 $ 2,037,326
Stockholders' equity.................................................................................. $ 323,749 $ 1,595,427
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1996(2) 1997
------ ------- ----------- ------------ ----------------------------
<CAPTION>
ACTUAL(3) PRO FORMA(4)
------------ -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(10)........................................ $4,562 $ 4,549 $ 7,706 $ 22,994 $ 61,340(11) $ 232,906
Adjusted EBITDA(12)............................... -- -- -- -- -- $ 273,155
Net cash provided by operating activities(13)..... $2,699 $ 1,060 $10,646 $ 11,331 $ 47,150 $ 120,832
Depreciation and amortization..................... $1,537 $ 1,997 $ 3,866 $ 8,533 $ 19,792 $ 107,198
Capital expenditures.............................. $7,674 $10,108 $10,732 $ 39,423 $135,852 $ 212,229(14)
Total attendance.................................. 1,322 1,408 2,302(15) 4,518(15) 8,631(15) 36,530(16)
Revenue per visitor(17)........................... $16.54 $ 17.68 $ 18.03 $ 20.66 $ 22.18 $ 27.37
SELECTED RATIOS:
Ratio of earnings to fixed charges(18)............ 2.1x 1.1x (18) 1.3x 2.3x (18)
Ratio of earnings to combined fixed charges and
preferred stock dividends(18)................... 2.1x 1.1x (18) 1.2x 2.3x (18)
</TABLE>
- ------------------------
(1) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Company's acquisition of Darien Lake and Camping
Resort, Geauga Lake and Wyandot Lake (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%
Exchange Offer on the basis of 80% payable in cash and 20% payable in
shares of Company 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 (as defined herein) and the
PIES Offering (as defined herein) (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) 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.
(8) The pro forma balance sheet data give effect to the acquisitions of Walibi
(assuming a 100% Exchange Offer on the basis of 80% payable in cash and 20%
payable in shares of Company Common Stock) and Six Flags, the Offerings 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 (as defined herein) at fair value rather than accreted
amount. 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.
(9) Excludes $321,750,000 of restricted-use investments.
(10) 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 U.S. 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 U.S. 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 ($7,613,000) of the investment in the Co-Venture Parks
included therein. Also, the EBITDA definition used herein may not be
comparable to similarly titled measures reported by other companies.
(11) Includes an $8,364,000 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.
(12) 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") ($32,337,000) 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.
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.
(SEE FOOTNOTES ON FOLLOWING PAGE)
8
<PAGE>
(13) 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.
(14) Does not include pro forma amount expended ($117,250,000) by the Company to
purchase interests of the limited partners in the Co-Venture Partnerships
(as defined herein).
(15) 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.
(16) Pro forma attendance information includes attendance at Marine World for
1997.
(17) Pro forma and historical revenue per visitor for all applicable periods
does not include revenue of Paradise Island (a fee-per-attraction
entertainment center that does not track attendance, acquired in November
1996). Pro forma revenue per visitor also excludes revenue and attendance
of Marine World and the Co-Venture Parks.
(18) 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 $54,399,000 and
$92,576,000, respectively.
---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 26, JANUARY 1, DECEMBER 31, DECEMBER 29,
<CAPTION>
1993 1995 1995 1996
-------------- ----------- -------------- --------------
(IN THOUSANDS, EXCEPT PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C>
SIX FLAGS
STATEMENT OF OPERATIONS DATA:(1)
Total revenue........................................... $ 532,455 $ 556,791 $ 629,457 $ 680,876
Income from operations(2)............................... 53,236 54,561 66,738 67,715
Interest expense, net................................... (54,963) (48,753) (63,282) (76,530)
Net (loss).............................................. (12,944) (695) (3,287) (15,249)
OTHER DATA:
EBITDA(3)............................................... 122,371 134,642 150,182 155,132
Net cash provided by operating activities(4)............ 111,934 100,895 124,587 128,602
Depreciation and amortization........................... 69,135 80,081 83,444 87,417
Capital expenditures.................................... 34,057 42,039 45,578 75,627
Total attendance........................................ 19,144 19,855 21,830 22,796
Revenue per visitor..................................... $ 27.81 $ 28.04 $ 28.83 $ 29.87
<CAPTION>
<S> <C>
DECEMBER 28,
1997
--------------
<S> <C>
SIX FLAGS
STATEMENT OF OPERATIONS DATA:(1)
Total revenue........................................... $ 708,666
Income from operations(2)............................... 79,575
Interest expense, net................................... (84,430)
Net (loss).............................................. (3,708)
OTHER DATA:
EBITDA(3)............................................... 164,068
Net cash provided by operating activities(4)............ 110,303
Depreciation and amortization........................... 84,493
Capital expenditures.................................... 67,675(5)
Total attendance........................................ 22,229
Revenue per visitor..................................... $ 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 U.S. 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 U.S. 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.
9
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SUMMARY HISTORICAL FINANCIAL DATA OF WALIBI
The following table sets forth a summary of the financial information for
Walibi as of the dates and for the periods indicated. The selected Operating
Data for each of the five years ended 1997 and the balance sheet data as of
December 31, of 1993 through 1997 have been derived from the audited
consolidated financial statements of Walibi. The following data should be read
in conjunction with "Walibi Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Walibi's Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus/Offer to
Purchase. The following table reflects a translation for convenience of the BEF
amounts included in Walibi's consolidated financial statements into U.S. dollars
using the closing exchange rate at December 31, 1997 of U.S. $1.00 = BEF 37.065.
Walibi prepares its consolidated financial statements in accordance with Belgian
generally accepted accounting principles ("Belgian GAAP") (and for the years
1994-1997 in accordance with the norms of the International Accounting Standards
Committee ("IASC") provided that this is not in conflict with Belgian GAAP),
which are substantially the same as U.S. GAAP. See Note 27 to the Consolidated
Financial Statements of Walibi included elsewhere in this Prospectus/Offer to
Purchase for a description of the significant differences between Belgian GAAP
and U.S. GAAP affecting Walibi's consolidated profit (loss) on ordinary
activities and shareholders' equity.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- ---------
(IN MILLIONS OF BEF, OR IN THE INDICATED U.S. $
COLUMN, MILLIONS OF U.S. $, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
PROFIT AND LOSS ACCOUNT:
Amounts in accordance with Belgian GAAP:
Sales and services........................................... 2,172 2,447 2,668 2,524 2,515 67.8
Operating profit............................................. 71 125 201 22 197 5.3
Profit (loss)................................................ (97) (87) (10) (179) 1 0
Profit (loss) per share...................................... (75) (65) (8) (134) 0 0
Amounts in accordance with U.S. GAAP(1):
Profit (loss)................................................ -- -- -- (151) (19) (0.5)
BALANCE SHEET DATA:
Amount in accordance with Belgian GAAP:
Total assets................................................. 4,973 5,184 5,131 4,461 4,404 118.8
Amounts payable after one year............................... 2,451 2,719 2,456 2,179 1,873 50.5
Shareholders' equity......................................... 1,710 1,306 1,244 1,076 1,088 29.4
Cash dividends declared per share(2)......................... 37.71 37.71 40.00 -- -- --
Amount in accordance with U.S. GAAP(1):
Shareholders' equity......................................... -- -- -- 1,188 1,182 31.90
</TABLE>
- ------------------------
(1) Not available for years prior to 1996.
(2) Gross cash dividends per share.
10
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RISK FACTORS
IN CONSIDERING THE MATTERS SET FORTH IN THIS PROSPECTUS/OFFER TO PURCHASE,
WALIBI STOCKHOLDERS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
SIGNIFICANT RISKS AND SPECULATIVE FACTORS DESCRIBED BELOW, THAT ARE ASSOCIATED
WITH AN EXCHANGE OF WALIBI STOCK FOR COMPANY COMMON STOCK IN THE EXCHANGE OFFER:
RISKS ASSOCIATED WITH SUBSTANTIAL INDEBTEDNESS AND OTHER OBLIGATIONS
The Company is highly leveraged. On a pro forma basis, as of December 31,
1997, the Company had total outstanding indebtedness (excluding approximately
$192.3 million principal amount at maturity ($161.1 million accreted value at
December 28, 1997) of SFEC Zero Coupon Senior Notes due 1999 (the "SFEC Zero
Coupon Senior Notes")) in the accreted principal amount of approximately
$1,833.7 million, including (i) approximately $251.7 million in accreted value
at that date of the Company's 10% Senior Discount Notes due 2008 (the "Company
Senior Discount Notes") ($410.0 million in aggregate principal amount at
maturity in 2008); (ii) $280.0 million in aggregate principal amount of the
Company's 9 1/4% Senior Notes due 2006 (the "Company Senior Notes" and together
with the Company Senior Discount Notes, the "Company 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's 12 1/4% Senior
Subordinated Discount Notes due 2005 (the "SFTP Senior Subordinated Notes")
($285.0 million principal amount at maturity in 2005); (vi) $170.0 million in
aggregate principal amount of SFEC's 8 7/8% Senior Notes due 2006 (the "New SFEC
Notes" and 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 $1,595.4 million. In addition, the annual
dividends on the Mandatorily Convertible Preferred Stock (as defined herein)
which are payable in cash, or by issuance of shares of Company Common Stock, at
the option of the Company, aggregate $23.3 million. 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 $92.6 million. In addition, the indentures relating to the
Senior Notes (the "Indentures") permit the Company to incur additional
indebtedness under certain circumstances. See "Selected Historical and Pro Forma
Financial and Operating Data of the Company," "Unaudited Pro Forma Financial
Statements" and "Description of Indebtedness of the Company."
In addition to its obligations under its outstanding indebtedness and
preferred stock, 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 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 EBIDTA 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
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<PAGE>
continue until 2027 and 2028, respectively. In March 1998, Six Flags completed a
tender offer pursuant to which it purchased approximately 33% of the outstanding
limited partner units in the Texas park for an aggregate price of $117.3
million. Six Flags funded the tender offer from borrowings which were refinanced
by the Company in connection with the Six Flags Acquisition.
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 has agreed to indemnify Time Warner in
respect of its guarantee pursuant to a Subordinated Indemnity Agreement (the
"Subordinated Indemnity 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. 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 "The Company's 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 could have important
consequences to the Company, including, but not limited to: (i) making it more
difficult for the Company to satisfy its obligations, (ii) increasing the
Company's vulnerability to general adverse economic and industry conditions,
(iii) limiting the Company's ability to obtain additional financing to fund
future working capital, capital expenditures 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, 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.
The Company's inability to service its obligations would have a material
adverse effect on the market value and marketability of the Company Common
Stock. In the event of bankruptcy proceedings involving
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<PAGE>
the Company, the Company's creditors and preferred stockholders will have a
claim upon the Company's assets prior in right to the holders of Company Common
Stock.
SFTP SENIOR SUBORDINATED NOTES REPURCHASE OBLIGATION
By reason of the Six Flags Acquisition, the Company is 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 26,
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 will be able to obtain such financing in the event that it
should become necessary.
RECENT LOSSES OF SIX FLAGS
Prior to the consummation of the Six Flags Acquisition, Six Flags had
incurred net losses of approximately $3.7 million, $15.2 million, $3.3 million,
$1.0 million and $12.9 million during each of the years 1997, 1996, 1995, 1994
and 1993, respectively. Although Six Flags has experienced growth in revenues
throughout such period, such growth may not be sustainable and may not be
indicative of future operating results. Additionally, given the Company's recent
acquisition of Six Flags, it may be particularly difficult to foresee and plan
for future costs of operations. There can be no assurance therefore that the Six
Flags will not continue to incur losses and that such losses would not have a
material adverse effect on the Company.
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 and 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), as well as to pay
any dividends or distributions to the Company, when due is similarly dependent.
Under the terms of the indentures governing the Premier Notes, the SFTP
Senior Subordinated Notes and the New SFEC Notes, the Premier Credit Facility
and the Six Flags Credit Facility, the payment of dividends by Premier
Operations, SFEC and SFTP are subject to restrictive covenants that will
significantly restrict or prohibit their ability to pay dividends or make other
distributions to the Company. In addition, the terms of the Company Notes and
the Mandatorily Convertible Preferred Stock 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 prohibits the payment of dividends by Premier
Operations to the Company for any purpose. The Six Flags Credit Facility
prohibits the payment of dividends to SFTP to SFEC or the Company, except for a
one time distribution not to exceed $10.0 million, and dividends to provide
funds 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). As
a result, there can be no assurance that dividends, distributions or loans to
the Company from its subsidiaries will be sufficient to fund its obligations.
See "Description of Indebtedness of the Company."
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.
13
<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, debt service and total debt coverage ratios. The
Indentures also contain a series of restrictive covenants.
The Company is currently in compliance with the covenants and restrictions
contained in the Credit Facilities and the applicable 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 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 (or guaranteed by) of the Company, Premier
Operations or any of its subsidiaries, with any of the assets (or guaranteed by)
of 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 and the Six Flags Acquisition, 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 ability to incur or assume indebtedness under the Credit
Facilities and the Indentures. There can be no assurance that any future
acquisition will be permissible under these loan agreements or that waivers of
any such covenants could be obtained. See "-- Restrictive Debt Covenants."
In certain instances, a consummated acquisition may adversely affect the
Company's financial condition and reported results, at least in the short-term,
depending on many factors, including capital requirements and the accounting
treatment of such acquisition. There can be no assurance that the 1997
Acquisitions, the Six Flags Acquisition, or any future acquisition, if completed
successfully, will perform as
14
<PAGE>
expected, will not result in significant unexpected liabilities or will ever
contribute significant revenues or profits to the Company. Shares of Company
Common Stock were used as a portion of the aggregate consideration in the
acquisitions of The Great Escape, Riverside Park, Kentucky Kingdom and Walibi.
The Company may issue a substantial number of shares of Company Common Stock (or
convertible securities) to fund future acquisitions. By virtue of the foregoing,
the Company's acquisitions could have an adverse effect on the market price of
the Company Common Stock.
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 Flag's 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 Six Flags Magic Mountain park which will be acquired in
the Six Flags Acquisition 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 which will be
acquired in the Six Flags Acquisition 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
are being conducted in Europe, and the Company has become subject to risks that
are inherent in operating outside the U.S. 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
15
<PAGE>
than are theme parks. Unfavorable weekend weather and unusual weather of any
kind can adversely affect park attendance.
The operations of the Company are highly seasonal, with more than 80% of
park attendance occurring in the second and third calendar quarters of each
year. The great majority of the Company's revenue is collected in those quarters
while most expenditures for capital improvements and significant maintenance are
incurred when the parks are closed in the first and fourth quarters.
Accordingly, the Company believes that quarter-to-quarter comparisons of its
results of operations should not be relied upon as an indication of future
performance. Nevertheless, the market price of the Company Common Stock may
fluctuate significantly in response to variations in the Company's quarterly and
annual results of operations.
HIGHLY COMPETITIVE BUSINESS
The Company's parks compete directly with other theme, water and amusement
parks and indirectly with all other types of recreational facilities and forms
of entertainment within their market areas, including movies, sports attractions
and vacation travel. Accordingly, the Company's business is and will continue to
be subject to factors affecting the recreation and leisure time industries
generally, such as general economic conditions and changes in discretionary
consumer spending habits. Within each park's regional market area, the principal
factors affecting competition include location, price, the uniqueness and
perceived quality of the rides and attractions in a particular park, the
atmosphere and cleanliness of a park and the quality of its food and
entertainment.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers and key operating personnel, particularly Kieran E. Burke,
Chairman and Chief Executive Officer, and Gary Story, President and Chief
Operating Officer. The loss of services of, or a material reduction in the
amount of time devoted to the Company by, either of such individuals or certain
other key personnel could adversely affect the business of the Company. Although
the Company recently entered into three-year employment agreements with each of
Mr. Burke and Mr. Story, there is no assurance that the Company will be able to
retain their services during that period. Under certain circumstances, the loss
of the services of both Messrs. Burke and Story and the failure to replace them
within a specified time period would constitute a default under the Credit
Facilities.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS; CHANGE OF CONTROL
Certain provisions of the Company's Certificate of Incorporation and By-Laws
may have the effect of discouraging or delaying attempts to gain control of the
Company, including provisions which could result in the Company's stockholders
receiving less for their shares of Company Common Stock than otherwise might be
available in the event of a takeover attempt. These provisions include: (i)
authorizing the Board of Directors to fix the size of the Board of Directors
between three and 15 directors; (ii) authorizing directors to fill vacancies on
the Board of Directors that occur between annual meetings; and (iii) restricting
the persons who may call a special meeting of stockholders. Additionally, the
Company's authorized but unissued preferred stock can be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. In that connection, the Company has a plan that grants
to common stockholders rights to purchase shares of preferred stock (with
characteristics of Company Common Stock) upon the occurrence of certain events,
including events that could lead to a change in control. The existence of this
rights plan could discourage or hinder attempts by third parties to obtain
control of the Company. Furthermore, certain provisions of Delaware law may also
discourage or hinder attempts by third parties to obtain control of the Company.
See "Description of Capital Stock and Charter Documents of the Company--Rights
Plan" and "--Delaware Law and Certain Charter and By-Law Provisions." In
addition, certain events that could lead to a change of control of the
16
<PAGE>
Company will constitute a Change of Control under the Indentures relating to the
Senior Notes (other than the Indenture relating to the SFTP Senior Subordinated
Notes), and require the Company to make an offer to purchase these Senior Notes.
A Change of Control is also a default under the Credit Facilities. The proposed
Six Flags Transactions will not constitute a Change of Control under the
Indentures (other than the Indenture relating to the SFTP Senior Subordinated
Notes). By virtue of the Six Flags Transactions, the Company will be required to
make an offer to purchase the SFTP Senior Subordinated Notes. See "--Risks
Associated with Substantial Indebtedness and Other Obligations."
As part of the Six Flags Acquisition, the Company obtained from Warner Bros.
and DC Comics the exclusive right for theme-park usage of certain Warner Bros.
and DC Comics characters throughout the United States (except the Las Vegas
metropolitan area) and Canada. Warner Bros. can terminate this license under
certain circumstances, including if persons engaged in the movie or television
industries obtain control of the Company.
CASH DIVIDENDS UNLIKELY
The Company has not paid dividends on the Company Common Stock during the
three years ended December 31, 1997 and does not anticipate paying any cash
dividends thereon in the foreseeable future. The Company's ability to pay cash
dividends on the Company Common Stock will be restricted under the Indentures
relating to the Company Notes and will be affected by, among other factors, the
Company's substantial indebtedness and holding company structure. See "--Risks
Associated with Substantial Indebtedness and Other Obligations" and "--Holding
Company Structure; Limitations on Access to Cash Flow of Subsidiaries."
SHARES OF COMPANY COMMON STOCK ELIGIBLE FOR FUTURE SALE
As of May 19, 1998, the Company had 37,524,177 shares of Company Common
Stock outstanding and 5.8 million Premium Income Equity Securities ("PIES-SM-")
representing interests in the Company's Mandatorily Convertible Preferred Stock
(initially convertible into 4.8 million shares of Company Common Stock)
outstanding. Future sales of Company Common Stock by existing stockholders
pursuant to Rule 144 under the Securities Act, or through the exercise of
outstanding registration rights or otherwise, could have an adverse effect on
the prevailing market price of the Company Common Stock and the Company's
ability to raise additional capital. Except for the Company Common Stock to be
sold in the proposed Common Stock Offering (as defined herein), the PIES, the
Mandatorily Convertible Preferred Stock and shares of Company Common Stock
issued upon conversion of the PIES and the Mandatorily Convertible Preferred
Stock, the Company has agreed not to offer, sell, contract to sell or otherwise
issue any shares of Company Common Stock (except pursuant to outstanding options
and warrants) or other capital stock or securities convertible into or
exchangeable for, or any rights to acquire, Company Common Stock or other
capital stock, with certain exceptions (including certain exceptions for Company
Common Stock or other capital stock issued or sold in connection with future
acquisitions by the Company, including any Company Common Stock to be issued in
connection with the Walibi acquisition), prior to the expiration of 90 days from
March 26, 1998 without the prior written consent of Lehman Brothers Inc.
("Lehman Brothers"). The Company's officers, directors and principal
stockholders, who hold in the aggregate approximately 6.0 million shares of
Company Common Stock (including shares issuable upon exercise of outstanding
options and warrants and shares of outstanding restricted stock), will agree not
to sell any such shares for 90 days following the date of the Prospectus
relating to the Common Stock Offering without the consent of Lehman Brothers.
Thereafter, all such shares held by the Company's officers, directors and
principal stockholders will be eligible for sale in the public market (subject,
in most cases, to applicable volume limitations and other resale conditions
imposed by Rule 144). In addition, subject to the "lock-up" arrangements
described above and a 90 day "lock-up" from March 26, 1998 agreed by the sellers
in the Initial Acquisition, holders of approximately 4.9 million shares of
Company Common Stock have the right to require the Company to register such
shares for sale under the Securities
17
<PAGE>
Act. Depending upon the level of future revenues at Kentucky Kingdom and Walibi,
the Company may be required to issue additional shares of Company Common Stock
(assuming the maximum number of shares of Company Common Stock are issued in the
Exchange Offer) with an aggregate market value of up to $15.0 million to the
sellers thereof. The Company may also pay quarterly dividend payments on the
PIES (which aggregate of $69.9 million over three years) by issuing additional
shares of Company Common Stock. The sale, or the availability for sale, of
substantial amounts of Company Common Stock or securities convertible into
Company Common Stock in the public market at any time subsequent to the date of
this Prospectus/Offer to Purchase could adversely affect the prevailing market
price of the Company Common Stock. See "Description of Securities--Registration
Rights."
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 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.
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THE EXCHANGE OFFER
TERMS OF THE OFFER
The Company hereby offers, on the terms and subject to the conditions set
forth herein, to exchange for the issued and outstanding shares of Walibi Stock,
on the basis of, and at the election of, the holder (i) BEF 2,385 in cash for
each share of Walibi Stock (the "Cash Election") or (ii) BEF 1,908 in cash plus
0.337 of a share of Company Common Stock for each share of Walibi Stock together
with the right to receive (subject to certain conditions) Contingent Shares (the
"Cash and Stock Election").
CONTINGENT SHARES
Each holder of Walibi Stock who makes the Cash and Stock Election shall also
receive the contingent right to receive (subject to certain conditions)
Contingent Shares. The rights of holders of the right to receive Contingent
Shares will be governed by an agreement and plan (the "Contingent Share Plan")
between the Company and International. Pursuant to the Contingent Share Plan the
Company has agreed to issue the Contingent Shares to International if the
revenue targets described below are achieved. Upon the consummation of the
Exchange Offer, International will assign its rights under the Contingent Share
Plan to the holders of Walibi Stock seeking the Cash and Stock Election as
described herein. The number of Contingent Shares (if any) issuable shall be
determined as follows:
(i) If the gross revenues (excluding VAT) of the Parks (as defined herein)
is equal to or exceeds BEF 3,325,000,000 ($87.0 million) for any one of
the three full fiscal years 1999, 2000, or 2001, the Company shall
issue, pursuant to the terms of the Contingent Share Plan to each holder
of the right to receive Contingent Shares, that number of shares of
Company Common Stock equal to such holders Amount (as defined herein)
divided by the Relevant Price (as defined herein); and
(ii) In addition to the foregoing, if the gross revenues (excluding VAT) of
the Parks is equal to or exceeds BEF 3,675,000,000 ($96.2 million) for
any one of the three full fiscal years 1999, 2000 or 2001, the Company
shall issue, pursuant to the terms the Contingent Share Plan to each
holder of the right to receive Contingent Shares, that number of shares
of Company Common Stock equal to such holder's Amount divided by the
Relevant Price.
The "Amount", if any, for any holder of the right to receive Contingent
Shares shall equal BEF 262,500,000 MULTIPLIED by a fraction, the numerator of
which equals such holder's Individual Stock Consideration (as defined herein)
and the denominator of which equals BEF 3,179,205,000. The "Relevant Price" for
any period shall equal the closing prices of the Company Common Stock on the
NYSE Composite Reporting System as reported in THE WALL STREET JOURNAL, for the
10 trading days immediately following the second trading date prior to the
corresponding date of issuance of shares by the Company pursuant to the terms of
the Contingent Share Plan, translated into BEF using the Noon Buying Rate of the
second business day prior to the corresponding date of issuance of such shares.
"Individual Stock Consideration" for any holder shall mean the BEF value,
translated to BEF at an exchange rate of $1.00 = BEF 36.645, of all shares of
Company Common Stock received by such holder in the Exchange Offer (other than
pursuant to the terms of the right to receive Contingent Shares). "Parks" shall
mean the following Walibi's parks: Bellewaede, Walibi Aquitaine, Walibi Flevo,
Walibi Rhone-Alpes, Walibi Schtroumpf, Walibi Wavre and Aqualibi, Mini-Europe
and Oceade.
Shares of Company Common Stock shall be issued pursuant to the Contingent
Share Plan only for the first fiscal year when the respective targets are met
under subsections (i) and (ii) above and not in the event such targets are met
again in any subsequent fiscal year. In the event that any Park is closed
(either permanently or for more than 30 consecutive days during the operating
calendar under which such Park currently operates) or sold (whether by selling
the Park or by selling the stock of an entity which owns the Park) prior to the
completion of such Park's 2001 operating season, the gross revenue (exclusive of
VAT) for that Park during such fiscal year shall be deemed to equal the full
amount of gross revenue (exclusive of VAT) for that Park for the most recent
full fiscal year of operation. Shares of Company Common Stock issued pursuant to
the Contingent Share Plan will be registered under the Securities Act.
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The right to receive Contingent Shares will not be evidenced by certificates
and such right will be evidenced only in the register of the Company. The right
to receive Contingent Shares may not be sold, transferred, hypothecated,
pledged, assigned or otherwise disposed of by the holder except by operation of
law. No holder, as such, of any right to receive Contingent Shares shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
Company Common Stock or any other securities which may at any time be issuable,
nor shall anything contained herein be construed to confer upon the holder of
any right to receive Contingent Shares, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders or to receive dividends or subscription
rights, or otherwise. The foregoing is only a summary of the Contingent Share
Plan and does not purport to be complete and is subject to and qualified in its
entirety by reference to the Contingent Share Plan, the full text of which is
incorporated by reference herein.
MANDATORY BID
If as a result of the Exchange Offer, the Company acquires 90% or more of
the outstanding Walibi Stock, the Exchange Offer will be reopened for at least
15 days (as required by Belgian law) within one month of the publication of the
results of the Exchange Offer. The Exchange Offer shall be reopened on the same
conditions, should the Company apply for delisting of the Walibi Stock from the
BSE.
THE OFFER PERIOD
The term "Offer Period" shall mean the period from and including May 27,
1998 to and including the Expiration Date. The term "Expiration Date" shall mean
the close of business, on June 24, 1998.
Without limiting the manner in which the Company may choose to make any
public announcement, whether in connection with a reopening, delay, termination
or amendment of any of the terms of the Exchange Offer, and except as provided
by applicable law, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a press
release to the Dow Jones News Service and to the BSE. If such press release
relates to a reopening of the Exchange Offer, the Company shall issue such press
release no later than 9:00 a.m., on the next business day after the scheduled
termination of the Exchange Offer. For purposes of the Exchange Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.
This Prospectus/Offer to Purchase and related materials will be mailed by
the Company to holders who request copies of such materials and to brokers,
dealers, commercial banks, trust companies and similar persons who request
copies of such materials for subsequent transmittal to beneficial owners of
Walibi Stock, or who otherwise indicate to the Company that they are holding
Walibi Stock.
PROCEDURES FOR TENDERING WALIBI STOCK
GENERAL. In order for a holder of Walibi Stock to validly tender Walibi
Stock pursuant to the Exchange Offer, the Acceptance Form accompanying this
Prospectus/Offer to Purchase, properly completed and duly executed in two
copies, together with either (i) the bearer share certificates representing the
Walibi Stock to be tendered together with the last dividend coupon (coupon
number ten) attached thereto or (ii) the certificates for registered shares
representing the Walibi Stock to be tendered, along with any proxy relating to
the tender of the shares, as well as any other required documents, shall be
delivered to any of the offices of the Depositary prior to the Expiration Date.
Additional copies of the Prospectus/ Offer to Purchase and the Acceptance Form
are available at the offices of the Depositary.
In case shares of Walibi Stock are jointly owned by two or more persons,
each such person must execute the Acceptance Form. In case shares are subject to
an USUFRUCT under Belgian law each of the owner and bare USUFRUCTOR must execute
the Acceptance Form. In case shares are pledged, each of the owner and pledgee
must execute the Acceptance Form, and the pledgee must waive its pledge. Any
Walibi Stockholder whose Walibi Stock is registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such person
if such Walibi Stockholder desires to tender such
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Walibi Stock. In order for a holder of Walibi Stock to validly tender Walibi
Stock pursuant to the Exchange Offer, the Acceptance Form must be signed by the
stockholder or his authorized attorney.
The valid tender of Walibi Stock pursuant to the procedure described above
will constitute a binding agreement between the tendering Walibi Stockholder and
the Company upon the terms and subject to the conditions of the Exchange Offer.
In the event the Consideration offered in the Exchange Offer is increased, all
holders of Walibi Stock validly tendering in the Exchange Offer, even if
tendered prior to the date of such increase, will receive the highest
Consideration paid.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt and acceptance of any tender of Walibi
Stock) will be determined by the Company with respect to the Exchange Offer, in
its sole discretion, which determination shall be final and binding on all
parties. The Company reserves the absolute right to reject any or all tenders
determined by it not to be in proper form, or the acceptance for exchange of
which may, in the opinion of its counsel, be unlawful. The Company also reserves
the absolute right to waive any defect or irregularity in the tender of any
Walibi Stock. No tender of Walibi Stock will be deemed to have been validly made
until all defects or irregularities relating thereto have been cured or waived.
None of the Company, the Depositary, or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The interpretation by the
Company of the terms and conditions of the Exchange Offer (which includes the
Acceptance Form and the instructions thereto) will be final and binding.
If the Acceptance Form is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Depositary, proper evidence satisfactory to
the Depositary of their authority to so act must be submitted. The acceptance of
Walibi Stock by the Company pursuant to any of the procedures described above
will constitute a binding agreement between the tendering Walibi Stockholder and
the Company upon the terms and subject to the conditions applicable to the
Exchange Offer.
WITHDRAWAL RIGHTS
Once Walibi Stock is tendered in the Exchange Offer such tender is
irrevocable and unconditional and may not be withdrawn except in the event of a
regular Counter Offer, in which case the Walibi Stockholders who have tendered
shares in the Exchange Offer are released from their acceptance in accordance
with Article 19 of the Belgian Royal Decree of 8 November 1989 relating to
take-over bids and changes in control over companies.
ACCEPTANCE FOR EXCHANGE; DELIVERY OF COMPANY COMMON STOCK
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is reopened, the terms and conditions of any
such reopening), the Company will accept for acquisition, and will acquire, as
promptly as practicable after the Expiration Date, all Walibi Stock validly
tendered into the Exchange Offer and not withdrawn prior to the Expiration Date.
The issuance of Company Common Stock pursuant to the Exchange Offer will be
subject to all applicable requirements of law, including, without limitation,
the requirement that the Registration Statement of which this Prospectus/Offer
to Purchase is a part, shall have been declared effective by the Commission.
In all cases, Walibi Stock accepted for exchange pursuant to the Exchange
Offer will be acquired only after timely receipt by the Depositary of an
Acceptance Form (or facsimile copy thereof) properly completed and duly executed
in two copies and any other documents required by the Acceptance Form. For
purposes of the Exchange Offer, the Company will be deemed to have accepted for
exchange, and thereby acquired, Walibi Stock validly tendered to it pursuant to
the Exchange Offer as, if and when the Company gives oral or written notice to
the Depositary of its acceptance for exchange for such Walibi Stock tendered
pursuant to the Exchange Offer. In accordance with Article 27 of the Belgian
Royal Decree of 8 November 1989, the results of the Exchange Offer will be
published in the Belgian financial press within five days following the closing
of the Offer Period.
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If the Company is delayed in its acceptance for exchange of, or issuance of
the Company Common Stock in exchange for, Walibi Stock or is unable to accept
for exchange, or issue the Company Common Stock in exchange for, Walibi Stock
pursuant to the Exchange Offer for any reason, then, without prejudice to the
rights of the Company with respect to the Exchange Offer under this
Prospectus/Offer to Purchase (but subject to compliance with applicable rules of
the Commission including Rule 14e-1(c) of the Exchange Act which requires the
Company to pay the Consideration or return shares of Walibi Stock tendered
promptly after termination or withdrawal of the Exchange Offer), the Depositary
may nevertheless, on behalf of the Company, retain tendered Walibi Stock. Under
no circumstances will interest be paid, nor will any additional Company Common
Stock be issued, by the Company, regardless of any delay in making such
exchange. If any tendered shares of Walibi Stock are not accepted for exchange
or exchanged for any reason, any such stock will be returned, without expense to
the tendering Walibi Stockholder, as promptly as practicable after the
Expiration Date or closing of the Exchange Offer.
DIVIDENDS AND DISTRIBUTIONS
If, on or after the date hereof, Walibi should make a dividend or
distribution of Walibi Stock or split, combine or otherwise change any Walibi
Stock or its capitalization, or disclose that it has taken any such action, then
the Company may make such adjustments to the Consideration and other terms of
the Exchange Offer as it deems appropriate to reflect such split, combination or
other change.
FRACTIONAL SHARES
No fractional shares of Company Common Stock will be issued to holders of
Walibi Stock in connection with the Exchange Offer. In lieu thereof, the Company
shall pay to such holders otherwise entitled to a fractional share cash in an
amount equal to the product of such fraction and BEF 2,070 (the BEF equivalent
of the price of the Company's Common Stock on the date the Company acquired
control of Walibi).
FINANCING ARRANGEMENTS
The Company will fund the cash requirements of the Initial Acquisition, the
Exchange Offer, and refinancing certain Walibi indebtedness, which are expected
to aggregate approximately $119.8 million, with borrowings under the Premier
Credit Facility.
FEES AND EXPENSES
Tendering Walibi Stockholders will not be obligated to pay brokerage fees or
commissions in connection with the Exchange Offer. The Company has retained Bank
Brussels Lambert S.A. to act as the Depositary in connection with the Exchange
Offer. The Depositary will receive reasonable and customary compensation for its
services and will be reimbursed for certain reasonable out-of-pocket expenses in
connection therewith. The Company will not pay any fees or commissions to any
broker or dealer or other person for soliciting tenders of Walibi Stock pursuant
to the Exchange Offer. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Company for customary mailing and handling expenses
incurred by them in forwarding offering material of the Company to their
clients.
STRUCTURE OF THE OFFER
The Exchange Offer is being made on behalf of the Company by International,
an indirect wholly-owned subsidiary of the Company. International is a Delaware
corporation established for the purpose of acting as an intermediate holding
company for the Company's international operations.
MISCELLANEOUS
The Exchange Offer is not being made (nor will tenders of Walibi Stock be
accepted from or on behalf of) holders of Walibi Stock in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
the Company by Bank Brussels Lambert or one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.
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THE PROPOSED ACQUISITION
THE INITIAL ACQUISITION
In December 1997, the Company entered into an agreement (the "Walibi
Agreement") with three of the principal stockholders of Walibi pursuant to which
the Company, on March 26, 1998, acquired approximately 49.9%% of the outstanding
shares of Walibi Stock (the "Initial Acquisition"). Following the closing of the
Initial Acquisition, the Company agreed to commence a "public takeover bid" (as
defined and regulated under Belgian law) for the remainder of the outstanding
shares of capital stock of Walibi. Under the terms of the Walibi Agreement, the
Company has agreed to invest at least BEF 1.4 billion (approximately $38.0
million at the year end exchange rate) in the Walibi Parks over the three years
commencing the 1999 season.
RECOMMENDATION OF THE WALIBI BOARD
In connection with the Exchange Offer, Walibi's Outgoing Board of Directors
(as defined herein) determined that the terms of the Exchange Offer are fair to,
and in the best interests of, Walibi and the Walibi Stockholders. Accordingly,
the Outgoing Board of Directors recommends that the Walibi Stockholders ACCEPT
the Exchange Offer.
In reaching this determination, the Outgoing Board of Directors considered a
number of factors including the following: (i) the premium over the then current
market price of the Walibi Stock offered by the Company in the Exchange Offer
(BEF 270 or 13% for the Cash Election) which the Board believed to be in excess
of any anticipated growth of the price of the Walibi Stock in the foreseeable
future; (ii) current industry, economic and market conditions, including the
limited ability of Walibi to raise additional capital required for expansion of
its operations, (iii) the potential future performance of the Company and the
Company Common Stock both after the Exchange Offer and following the Six Flags
Acquisition based primarily upon the Company's access to capital and management
resources required to expand the Company's operations, and (iv) the Outgoing
Board of Directors' perception of the more favorable overall business prospects
of the Company and Walibi on a combined basis as compared to the prospects for
Walibi as a separate entity primarily for the reasons set forth above.
Additionally, the Outgoing Board of Directors believes that the Cash and
Stock Election of the Exchange Offer allows Walibi Stockholders an opportunity
to participate in an entity that will have greater financial flexibility and
better opportunities for growth than Walibi would have if it were to continue on
a stand-alone basis. There can be no assurance, however, that the expected
benefits of accepting the Cash and Stock Election of the Exchange Offer will be
realized. See "Risk Factors." The Outgoing Board of Directors did not consider
that there were any material factors which did not support the Exchange Offer.
The foregoing is a discussion of all material factors and information
considered by the Outgoing Board of Directors. In view of the variety of factors
considered in connection with its evaluation of the Exchange Offer, the Outgoing
Board of Directors did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination, and individual directors may have given differing weights to
different factors.
NO DISSENTERS' OR APPRAISAL RIGHTS
There are no dissenters or appraisal rights available to Walibi Stockholders
as a result of the Exchange Offer.
ACCOUNTING TREATMENT
The acquisition of Walibi by the Company will be accounted for under the
purchase method of accounting in accordance with U.S. GAAP. Under the purchase
method of accounting, the purchase price of Walibi, including the direct costs
of the acquisition, will be allocated to the assets acquired and the liabilities
assumed based upon their estimated fair values, with the purchase consideration
in excess of fair
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value recorded as goodwill. The results of the Company's operations will include
the results of Walibi commencing at the date of purchase.
STOCK EXCHANGE LISTINGS
The Company Common Stock is listed on the NYSE. The additional listing on
the NYSE of the shares of Company Common Stock to be issued in the Exchange
Offer, is anticipated to be approved, subject to official notice of issuance.
The Company Common Stock will not be listed on the BSE.
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UNITED STATES TAX CONSEQUENCES OF THE EXCHANGE OFFER
INTRODUCTION
Weil, Gotshal & Manges LLP, counsel to the Company, is of the opinion that,
except as noted otherwise and to the extent relating to legal conclusions and
matters of law, the following are the material United States federal income tax
consequences of the Exchange Offer to shareholders of Walibi.
The following discussion is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated and proposed thereunder, judicial authority and current
administrative rulings and practice, all of which are subject to change,
possibly with retroactive effect. Except as specifically provided below, the
following discussion is limited to the U.S. federal income tax consequences
relevant to a holder of Company Common Stock that is (i) an individual who is a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized under the laws of the United States, or any political
subdivision thereof, (iii) an estate otherwise subject to U.S. federal income
taxation on its worldwide income, or (iv) a trust if a court within the United
States is able to exercise primary supervision of the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust (each a "U.S. Holder"). A Non-U.S. Holder is
any stockholder other than U.S. Holder.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular holders in light of their
personal investment circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of holders subject to special
treatment under the U.S. federal income tax laws. Such holders include, but are
not limited to, (i) financial institutions, insurance companies, dealers in
securities and tax-exempt organizations, (ii) taxpayers holding the Walibi Stock
or Company Common Stock as part of a "straddle," "hedge" or "conversion
transaction," or taxpayers whose functional currency is not the United States
dollar or (iii) stockholders owning directly, indirectly or by attribution,
currently or during the past five years, 10% or more of the voting Walibi Stock,
(iv) stockholders who acquired shares pursuant to the exercise of an employee
stock option or otherwise as compensation, or (v) certain expatriates or former
long-term residents of the United States. Moreover, the effect of applicable
state, local or foreign tax laws is not discussed.
Except as otherwise indicated below, this discussion addresses the tax
consequences only to holders of the Walibi Stock exchanged in the Exchange Offer
and the Company Common Stock acquired in the Exchange Offer that hold such stock
as a capital asset (as defined in Section 1221 of the Code).
Holders are urged to consult their own tax advisor regarding the federal,
state, local, foreign and other tax considerations relating to the acquisition,
ownership and disposition of Walibi Stock and Company Common Stock.
THE EXCHANGE OFFER
RECEIPT OF COMPANY COMMON STOCK AND CASH
U.S. HOLDERS
A U.S. Holder that makes the Cash Election will recognize gain or loss in
the year of the Exchange Offer in an amount equal to the difference between the
amount of cash received and the U.S. Holder's tax basis in the shares of Walibi
Stock surrendered. Such gain or loss will be capital gain or loss that will be
short-term if the Holder held the Walibi Stock for not more than one year,
medium-term if the Walibi Stock was held for more than one year but not more
than 18 months and long-term if the U.S. Holder held the Walibi Stock for longer
than 18 months. Mid-term and long-term capital gain of non-corporate U.S.
Holders generally is taxed at preferential rates.
A U.S. Holder that makes the Cash and Stock Election, will recognize gain in
the year of the Exchange Offer equal to the difference between the share price
at which the Walibi Stock is being publicly traded at the time of the Exchange
Offer (the "Walibi Trading Price") and the Holder's basis in the Walibi Stock.
Because of the uncertainty as to the value that the Contingent Shares will have
when they are received, it is unclear whether a Holder can recognize a loss in
the year of the Exchange Offer to the extent that the Holder's basis in the
Walibi Stock exceeds the Walibi Trading Price. If no loss is allowed in the year
of the Exchange Offer, a loss may be claimed in the final year to which the
Contingent Share Plan applies
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to the extent that the Holder's basis in the Walibi Stock exceeds the sum of the
amount of cash, the value of the Company Common Stock and the aggregate
Discounted Value, defined below, of all of the Contingent Shares received by the
Holder. Any gain or loss that is recognized will be capital gain or loss that
will be taxed as described above. Holders should consult their own tax advisor
to determine when any loss on their Walibi Stock may be claimed.
A portion of the value of any Contingent Shares received by a U.S. Holder
will be treated as imputed interest income when the Contingent Shares are
received. The amount treated as interest is determined by discounting the value
of the Contingent Shares received from the date of receipt back to the date of
the Exchange Offer, using a discount rate equal to the applicable federal rate
determined under Section 1274 of the Code. The discount is treated as interest
income to the Holder for federal income tax purposes (the value of the
Contingent Shares, less the discount is referred to in this discussion as the
"Discounted Value").
Upon receipt of the Contingent Shares, no gain is recognized until the
aggregate Discounted Value of all of the Contingent Shares received by the
Holder exceeds the difference between the Walibi Trading Price and the amount of
cash and the fair market value of the Company Common Stock that the Holder
received in the Exchange Offer. Any such excess will be capital gain that will
be short-term, mid-term or long-term depending on the period of time that
elapsed since the Exchange Offer. In the final year to which the Contingent
Share Plan applies, if the difference between the Walibi Trading Price and the
amount of cash and the fair market value of the Company Common Stock that a
Holder received in the Exchange exceeds the aggregate Discounted Value of all of
the Contingent Shares received by the Holder, the excess will be a capital loss
in that year. Such loss will be short-term, mid-term or long-term depending on
the period of time that has elapsed since the Exchange Offer.
A U.S. Holder's basis in the Company Common Stock received in the Exchange
Offer will be equal to its fair market value on the date of the Exchange Offer
(or with respect to Contingent Shares, on the date the Contingent Shares are
issued). A U.S. Holder's holding period of Company Common Stock received in the
Exchange Offer will commence on the day after the date of the Exchange Offer
(or, with respect to Contingent Shares, on the day after the date the Contingent
Shares are issued).
NON-U.S. HOLDERS
Subject to certain exceptions, Non-U.S. Holders will be subject to U.S.
federal income tax on gain realized, if any, on the exchange of Walibi Stock
pursuant to the Cash Election, or the Cash and Stock Election only if such gain
is effectively connected with the conduct of a trade or business or, in the case
of a resident of a country which has a tax treaty with the United States, the
gain is attributable to a permanent establishment (or in the case of an
individual, a fixed place of business) in the United States or, in the case of a
Non-U.S. Holder that is an individual who holds Walibi Stock as a capital asset,
such holder is present in the United States for 183 or more days during the
taxable year and certain other conditions are present.
Non-U.S. Holders who make the Cash and Stock Election will be treated as
realizing interest income when Contingent Shares are received (as discussed
above under "U.S. Holders"). Any amount treated as interest with respect to the
receipt of Contingent Shares will be subject to U.S. withholding tax at 30%, or
such lesser rate as provided by a tax treaty if the non-U.S. Holder is entitled
to benefits under such treaty. A non-U.S. Holder must provide certain
documentation to the Company or its agent in order to secure the benefits of a
tax treaty. Any amount treated as interest with respect to the receipt of
Contingent Shares will not qualify for the portfolio interest exemption from
U.S. withholding tax. The Company may sell a portion of a Non-U.S. Holder's
Contingent Shares in order to raise cash to satisfy its withholding obligation.
TAXATION OF HOLDERS OF COMPANY COMMON STOCK
U.S. HOLDERS
DIVIDENDS ON COMPANY COMMON STOCK
Dividends paid on Company Common Stock will be taxable to a U.S. Holder as
ordinary dividend income to the extent of the Company's undistributed current
and accumulated earnings and profits (as determined for United States federal
income tax purposes). To the extent that the amount of any distribution on
Company Common Stock exceeds the Company's undistributed current and accumulated
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earnings and profits (as determined for United States federal income tax
purposes), such distribution will be treated as a return of capital that will
reduce the U.S. Holder's adjusted tax basis in the Company Common Stock in
respect of which such distribution is made. Any such excess distribution that is
greater than the holder's adjusted tax basis in such Company Common Stock will
be taxed as a capital gain. For purposes of the remainder of the discussion, the
term "dividend" refers to a distribution paid out of undistributed earnings and
profits, unless the context indicates otherwise. However, it is uncertain
whether the Company has or will in the future have current or accumulated
earnings and profits.
Dividends received by corporate holders out of undistributed current or
accumulated earnings and profits, generally will be eligible for the 70%
dividends-received deduction under Section 243 of the Code. There are, however,
a number of exceptions and restrictions relating to the availability of such
dividends-received deduction, such as restrictions relating to (i) the holding
period of the stock with respect to which the dividends are paid, (ii)
debt-financed portfolio stock, (iii) dividends treated as "extraordinary
dividends" for purposes of Section 1059 of the Code, and (iv) taxpayers who pay
alternative minimum tax. Corporate stockholders should consult their own tax
advisors regarding the extent, if any, to which such exceptions and restrictions
may apply to their particular factual situations. Recent legislation amended the
rules applicable to the dividends-received deduction and modified the treatment
of certain extraordinary dividends. The legislation (i) requires corporate
holders to satisfy a separate 46 day holding period requirement for each
dividend in order to be eligible for such dividends-received deduction, and (ii)
requires immediate gain recognition whenever the basis of stock with respect to
which any extraordinary dividend was receive is reduced below zero.
SALE, EXCHANGE, REDEMPTION OR OTHER DISPOSITION
Unless a nonrecognition provision applies, the sale, exchange, redemption or
other disposition of Company Common Stock will be a taxable event for U.S.
federal income tax purposes. In such event, a U.S. Holder will recognize gain or
loss equal to the difference between (i) the amount of cash plus the fair market
value of any property received on the sale, exchange, redemption or other
taxable disposition, and (ii) the Holder's basis in the Company Common Stock.
Upon a redemption by the Company of Company Common Stock, in certain
circumstances a U.S. Holder may be required to treat the redemption price as a
dividend to the extent of the Company's undistributed current and accumulated
earnings and profits, rather than as an amount realized from the sale or
exchange of Company Common Stock, with the consequence that the U.S. Holder's
adjusted basis in the Company Common Stock will not offset the redemption price,
and no loss will be recognized with respect to the redeemed Company Common
Stock. However, dividend income would not result if (i) there is a complete
termination of the U.S. Holder's actual and constructive ownership interest in
the Company, (ii) the U.S. Holder's voting power in the Company is reduced to
less than 50% and the holder's actual and constructive percentage ownership of
Company Common Stock is reduced to less than 80% of the Holder's actual and
constructive percentage ownership of Company Common Stock prior to the
redemption, or (iii) there is a "meaningful reduction" (for U.S. federal income
tax purposes) of the U.S. Holder's actual and constructive ownership of Company
Common Stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under the Code, U.S. Holders of Company Common Stock may be subject, under
certain circumstances, to information reporting and "backup withholding" at a
31% rate with respect to cash payments in respect of dividends and the gross
proceeds from dispositions thereof. Backup withholding applies only if the U.S.
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
U.S. Holder under the backup withholding rules is allowable as a credit (and may
entitle such holder to a refund) against such U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the
Service. Certain persons are exempt from backup withholding, including
corporations and financial institutions. U.S.
27
<PAGE>
Holders of Company Common Stock 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 Service and to record holders of
Company Common Stock (to whom it is required to furnish such information)
information relating to the amount of dividends.
THE FOREGOING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE,
REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE
SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER
THAT COULD ADVERSELY AFFECT U.S. HOLDERS OF COMPANY COMMON STOCK. EACH PURCHASER
OF SHARES OF COMPANY COMMON STOCK SHOULD CONSULT ITS OWN TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF COMPANY COMMON STOCK.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of Company Common Stock that is not a U.S.
Holder (a "Non-U.S. Holder").
For purposes of the following discussion, dividends and gain on the sale,
exchange or other disposition of Company Common Stock will be considered to be
"U.S. trade or business income" if such income or gain is (i) effectively
connected with the conduct of a U.S. trade or business or (ii) in the case of a
treaty resident, attributable to a permanent establishment (or, in the case of
an individual, a fixed base) in the United States.
DIVIDENDS ON COMPANY COMMON STOCK
In general, dividends paid to a Non-U.S. Holder of Company Common Stock will
be subject to withholding of U.S. federal income tax at a 30% rate unless such
rate is reduced by an applicable income tax treaty. Dividends that are U.S.
trade or business income, are generally subject to U.S. federal income tax on a
net basis at regular income tax rates, and are not generally subject to the 30%
withholding tax if the Non-U.S. Holder provides the appropriate form to the
payor. Any U.S. trade or business income received by a Non-U.S. Holder that is a
corporation may also, under certain circumstances, but subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be applicable under
a tax treaty. Dividends paid to an address in a foreign country generally are
presumed (absent actual knowledge to the contrary) to be paid to a resident of
such country for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. Under U.S. Treasury
Regulations generally effective January 1, 1999, not currently in effect,
however, a Non-U.S. Holder of Company Common Stock who wishes to claim the
benefit of an applicable treaty rate would be required to satisfy certain
certification and other requirements, which would include the requirement that
the Non-U.S. Holder file a form containing the holder's name and address or
provide certain documentary evidence issued by foreign governmental authorities
as proof of residence in the foreign country.
A Non-U.S. Holder of Company Common Stock that is eligible for a reduced
rate of U.S. withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for a refund
with the Service.
SALE, EXCHANGE, REDEMPTION OR OTHER DISPOSITION
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange,
redemption or other disposition of Company Common Stock generally will not be
subject to U.S. federal income tax, unless (i) such gain is U.S. trade or
business income, (ii) subject to certain exceptions, the Non-U.S. Holder is an
individual who holds the Company Common Stock as a capital asset, is present in
the United States for 183 days or more during the taxable year of the
disposition, and certain other conditions are present, (iii) the Non-U.S. Holder
is subject to tax under U.S. tax law provisions applicable to certain U.S.
expatriates (including certain former
28
<PAGE>
citizens or residents of the United States) and (iv) the Company is or has been
a "United States real property holding corporation" (a "USRPHC") for federal
income tax purposes and such Non-U.S. Holder has held, directly or
constructively, more than 5% of the outstanding Company Common Stock within the
five-year period ending on the date of the sale or exchange. It is uncertain
whether the Company is or has been a USRPHC within the meaning of the Code.
Non-U.S. Holders owning, directly or constructively, more than 5% of the
Company Common Stock should consult their own tax advisor concerning the
consequences of the Company being a USRPHC.
FEDERAL ESTATE TAX
Company Common Stock owned or treated as owned by an individual who is not a
citizen or resident of the United States for U.S. federal estate tax purposes
will be included in such individual's gross estate for U.S. federal estate tax
purposes unless an applicable estate tax treaty otherwise provides.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Company must report annually to the Service and to each Non-U.S. Holder
any dividend income that is subject to withholding, or that is exempt from U.S.
withholding tax pursuant to a tax treaty. Copies of these information returns
may also be made available to the tax authorities of the country in which the
Non-U.S. Holder resides under the provisions of a specific treaty or agreement.
The payment of proceeds from the disposition of Company Common Stock to or
through the United States office of any broker, U.S. or foreign, will be subject
to information reporting and possible backup withholding unless the owner
certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes its entitlement to an exemption from information reporting and
backup withholding, provided the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of an exemption are not, in fact,
satisfied. The payment of proceeds from the disposition of Company Common Stock
to or through a non-U.S. office, of a non-U.S. broker that is not a U.S. related
person will not be subject to information reporting or backup withholding. A
U.S. related person is a foreign person with one or more of certain enumerated
relationships with the United States.
In the case of the payment of proceeds from the disposition of Company
Common Stock to or through a non-U.S. office of a broker that is either a U.S.
person or a U.S. related person, the regulations require information reporting
on the payment unless the broker has documentary evidence in its files that the
owner is a Non-U.S. Holder and the broker has no knowledge to the contrary.
Backup withholding will not apply to payments made through the foreign office of
a broker that is not a U.S. person or a U.S. related person (absent actual
knowledge that the payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
THE FOREGOING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE,
REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE
SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER
THAT COULD ADVERSELY AFFECT NON-U.S. HOLDERS OF COMPANY COMMON STOCK. EACH
PURCHASER OF SHARES OF COMPANY COMMON STOCK SHOULD CONSULT ITS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF COMPANY COMMON STOCK.
29
<PAGE>
BELGIAN TAX CONSEQUENCES OF THE EXCHANGE OFFER
The following summary is based on the Belgian tax laws as in effect on the
date of this Prospectus and is subject to changes in Belgian law, including
changes that could have retroactive effect. Prospective investors are urged to
consult their own tax advisers as to the Belgian and other tax consequences of
the disposition of Walibi Stock and of the purchase, ownership or disposition of
Company Common Stock. It does not describe Belgian estate and gift tax
considerations. Furthermore, this summary does not address Belgian tax
considerations relevant to potential investors, subject to taxing jurisdictions
other than, or in addition to, Belgium, and does not address all possible
categories of investors, some of whom may be subject to special rules.
BELGIAN INCOME TAX CONSIDERATIONS RELATING TO THE EXCHANGE OFFER
Belgian resident individuals (subject to the Belgian personal income tax)
are generally not liable for Belgian income tax on capital gains realized upon
tendering of Walibi Stock for cash or for cash and Company Common Stock, unless
the Belgian Tax Administration demonstrates that the capital gain is the result
of speculation.
Belgian non-profit organizations (subject to the Belgian income tax on legal
entities), Belgian resident companies (subject to the Belgian corporate income)
and companies with fiscal residence outside Belgium who hold Walibi Stock
through a permanent establishment or a fixed base in Belgium (subject to the
Belgian income tax on non-residents/companies), are generally not liable for
Belgian income tax on capital gains realized upon tendering of Walibi Stock for
cash or for cash and Company Common Stock.
Capitalized losses realized upon sale are generally not tax deductible.
No Belgian income tax is due by companies with fiscal residence outside
Belgium who do not hold the Walibi Stock through a permanent establishment or
fixed base in Belgium.
BELGIAN INCOME TAX CONSIDERATIONS RELATING TO THE CONTINGENT SHARES
For Belgian resident companies and for companies with fiscal residence
outside Belgium who hold their Company Common Stock and right to receive
Contingent Shares through a permanent establishment or a fixed base in Belgium,
the Belgian Tax Authorities may hold that, upon receipt of Contingent Shares,
Belgian corporate income tax is due on the positive difference between the fair
market value of the Contingent Shares of Company Common Stock received by the
Holder and the fair market value that the right to receive Contingent Shares had
at the time of the Exchange of Walibi Stock.
BELGIAN INCOME TAX CONSIDERATIONS RELATING TO DIVIDEND PAYMENTS BY THE COMPANY
For Belgian resident shareholders (individuals, non-profit organizations and
companies), the US withholding tax on dividend payments by the Company generally
is reduced to 15% pursuant to Article 10 of the Belgian-US income tax treaty.
For Belgian resident individuals and for Belgian non-profit organizations,
Belgian withholding tax at the rate of (presently) 25% will be due on the net
dividend (I.E. after deduction of US withholding tax) in case the dividend is
paid through a paying agent established in Belgium. This withholding tax
constitutes the final Belgian income tax.
In case no such paying agent intervenes, no withholding tax is due in
Belgium for Belgian resident individuals, but the dividend is to be declared in
the annual tax return and the net dividend (I.E. after deduction of US
withholding tax) will be taxed at a rate of (presently) 25% plus local taxes.
Belgian non-profit organizations have the obligation to pay the Belgian
withholding tax themselves to the Belgian Treasury. This withholding tax
constitutes the final Belgian income tax.
For Belgian resident companies and for companies with fiscal residence
outside Belgium who hold Company Common Stock through a permanent establishment
or a fixed base in Belgium, the net dividend (I.E. after deduction of US
withholding tax) will be taxed at the normal income tax rate in Belgium for
companies (generally 40.17% or less in certain circumstances). The US
withholding tax is not creditable against the Belgian income tax.
30
<PAGE>
In case the corporate shareholder holds a participation of at least 5% or
with an acquisition value of at least 50 million BEF, 95% of the dividend
received will be deductible ("participation exemption"), provided that the
Company falls outside the scope of Article 203, Section 1 of the Belgian Income
Tax Code 1992 (hereinafter referred to as "BITC/92"). As a general rule,
companies which are subject to a normal corporate income tax in their country of
residence fall outside the scope of Article 203, Section 1 of the BITC/92.
This participation exemption also applies, even if the quantitative criteria
are not fulfilled, if the corporate investor is identified as:
- a financial institution mentioned in Article 56, Section 1 of the BITC/92;
- an insurance company mentioned in Article 56, Section 2, 2 DEG., H of the
BITC/92;
- a broker company mentioned in Article 47 of the Law of 6 April 1995; or
- an investment company.
BELGIAN INCOME TAX CONSIDERATIONS RELATING TO THE SALE, EXCHANGE, REDEMPTION OR
OTHER TRANSFER OF COMPANY COMMON STOCK
Belgian resident individuals generally are not liable for Belgian income tax
on capital gains realized upon the sale, exchange, redemption or other transfer
of Company Common Stock, unless the Belgian Tax Administration demonstrates that
the capital gain is the result of speculation.
Belgian non-profit organizations generally are not liable for Belgian income
tax on capital gains realized upon the sale, exchange, redemption or other
transfer of Company Common Stock.
Belgian resident companies (subject to the Belgian corporate income) and
companies with fiscal residence outside Belgium who hold Company Common Stock
through a permanent establishment or a fixed base in Belgium (subject to the
Belgian income tax on non-residents/companies), generally are not liable for
Belgian income tax on capital gains realized upon the sale, exchange, redemption
or other transfer of Company Common Stock, provided that the Company falls
outside the scope of Article 203, Section 1 of the BITC/92.
Capital losses realized upon the sale, exchange, redemption or other
transfer of Company Common Stock generally are not tax deductible.
BELGIAN TAX ON STOCK MARKET TRANSACTIONS
The exchange of Walibi Stock for cash or for cash and Company Common Stock
through a professional intermediary established in Belgium generally is subject
to the Tax on Stock Market Transactions in the amount of 0.17% to each of the
Company and the Walibi Stockholder (but limited to BEF 10,000 each per
transaction). This tax will be borne by the Company.
The subsequent sale, exchange, redemption or other transfer of Company
Common Stock through a professional intermediary established in Belgium
generally is subject to the Tax on Stock Market Transactions at the rate of
0.17% to each of the buyer and seller (but limited to BEF 10,000 each per
transaction).
The Tax on Stock Market Transaction is not owed by:
- professional intermediaries mentioned in Article 2 of the Law of 6 April
1995 acting for their own account;
- insurance companies mentioned in Article 2, Section 1 of the Law of 9 July
1975 acting for their own account;
- pension funds mentioned in Article 2, Section 3, 6 DEG. of the Law of 9
July 1975 acting for their own account;
- collective investment institutions mentioned in the Law of 4 December 1990
acting for their own account;
- non-residents.
31
<PAGE>
BELGIAN TAX ON THE PHYSICAL DELIVERY OF BEARER SECURITIES
A tax in the amount of 0.2% is due in Belgium on the physical delivery of
bearer securities through an intermediary established in Belgium. A tax
exemption applies for the delivery to certain professional intermediaries (such
as credit institutions) acting for their own account.
32
<PAGE>
REGULATORY MATTERS
U.S. ANTI-TRUST LAWS
Under the U.S. Hart-Scott-Rodino Act and the rules and regulations
promulgated thereunder (the "HSR Act"), an acquisition of voting securities of a
foreign issuer (such as Walibi) by a U.S. person (such as the Company) is exempt
from the requirements of the HSR Act unless the issuer (including all entities
controlled by the issuer) either: (i) holds assets located in the United States
having an aggregate book value of $15 million or more; or (ii) made aggregate
sales in or into the United States of $25 million or more in its most recent
fiscal year. Based upon information received from Walibi, the Company believes
that the Exchange Offer is exempt from the requirements of the HSR Act.
BELGIAN LAW; OTHER EUROPEAN LAWS
The Exchange Offer is expected to be authorized by the Belgian Ministry of
Finance in accordance with Article 4 of the Act of 4 December 1990 on financial
transactions and financial markets.
Under relevant competition laws of the European Union, Belgium, France and
The Netherlands, there are no notification requirement applicable to the
acquisition of Walibi by the Company. Under the Belgian Law of August 5, 1991,
the Belgian Division Prix et Concurrence has, by letter dated February 6, 1998
concurred with this conclusion for Belgian law, however this conclusion is not
binding on the Belgian Council for Competition.
OTHER LAWS
The Company conducts operations in a number of countries where regulatory
filings or approvals may be required or advisable in connection with the
consummation of the Exchange Offer. The Company is currently in the process of
reviewing whether other filings or approvals may be required or desirable in
other countries which may be material to the Company, Walibi and their
respective subsidiaries. It is recognized that certain of such filings may not
be completed and certain of such approvals (which are not as a matter of
practice required to be obtained prior to effectiveness of an acquisition) may
not be obtained prior to the Expiration Date.
33
<PAGE>
MARKET PRICE AND DIVIDEND DATA
As of May 19, 1998, there were approximately 745 holders of record of
Company Common Stock. Since the shares of Walibi are predominantly bearer
shares, the Company cannot estimate the number of Walibi stockholders with any
reliability. The market prices for, and dividends paid on, the Company Common
Stock and the Walibi Stock shown below are the market prices and dividends paid
for each security without adjustments to give effect to the acquisition of
Walibi by the Company.
MARKET PRICE
THE COMPANY
The Company Common Stock began trading on Nasdaq in June 1996. In December
1997, the Company Common Stock began trading on the NYSE under the symbol "PKS."
The Company Common Stock is not currently traded on the BSE and there is no
established trading market for Company Common Stock in Belgium. The table below
sets forth, for the calendar quarters indicated, the high and low sales prices
of the Company Common Stock as quoted on Nasdaq and as reported on the NYSE
Composite Reporting System, as applicable. Except as otherwise provided, amounts
have been translated into Belgian francs, using the Noon Buying Rate on the
specific dates the Company Common Stock traded at a high or low price.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
------------------------------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN U.S. DOLLARS) (IN BEF)
1997
First Quarter............................................................ 32.125 25.875 1,088 891
Second Quarter........................................................... 36.875 26.000 1,326 896
Third Quarter............................................................ 37.750 32.000 1,377 1,212
Fourth Quarter........................................................... 43.375 37.000 1,542 1,320
1998
First Quarter............................................................ 59.187 37.125 2,257 1,394
Second Quarter (through May 19, 1998).................................... 60.250 53.500 2,305 1,959
</TABLE>
The high and low sales prices of Company Common Stock on the NYSE Composite
Reporting System on December 12, 1997, the last full trading prior to the date
of the announcement of the proposal for the Walibi acquisition was $38.00 (BEF
1,390) and $37.50 (BEF 1,372) per share, respectively. The last sales price of
Company Common Stock as reported on the NYSE Composite Reporting System on May
19, 1998, was $54.375 (BEF 2,002) per share. WALIBI STOCKHOLDERS ARE URGED TO
OBTAIN A CURRENT MARKET QUOTATION FOR THE COMPANY COMMON STOCK.
WALIBI
The Walibi Stock is traded on the BSE. There is no established trading
market for the Walibi Stock in the United States. The table below sets forth,
for the calendar quarters indicated, the high and low sales prices of the Walibi
Stock based upon published financial sources. Except as otherwise provided,
amounts
34
<PAGE>
have been translated into U.S. dollars, using the Noon Buying Rate on the
specific dates the Walibi Stock traded at a high or low price.
<TABLE>
<CAPTION>
WALIBI STOCK
------------------------------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN U.S. DOLLARS) (IN BEF)
1997
First Quarter................................................................. 41.02 37.35 1,420 1,200
Second Quarter................................................................ 38.43 33.74 1,372 1,184
Third Quarter................................................................. 36.67 29.95 1,320 1,088
Fourth Quarter................................................................ 56.28 32.87 2,060 1,190
1998
First Quarter................................................................. 61.62 53.62 2,350 2,045
Second Quarter (through May 19, 1998)......................................... 68.19 61.22 2,535 2,260
</TABLE>
The high and low sales prices of Walibi Stock on the BSE on December 12,
1997, the last full trading day prior to the date of the announcement of the
proposal for the Walibi Acquisition was BEF 1,801 (U.S. $48.00) and BEF 1,850
(U.S. $49.30) per share, respectively. The last sales price of Walibi Stock on
May 19, 1998 was BEF 2,450 (U.S. $66.55) per share. WALIBI STOCKHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE WALIBI STOCK.
DIVIDENDS
THE COMPANY
The Company has not paid dividends on Company Common Stock during the three
years ended December 31, 1997 and does not anticipate paying any cash dividends
in the foreseeable future. Furthermore, the indentures relating to the Premier
Notes restricts (and the indenture relating to the Company Notes will restrict)
the payment of cash dividends by the Company. Earnings, if any, are expected to
be retained to finance the Company's growth strategy.
WALIBI
Walibi did not pay any dividends on the Walibi Stock for the year ended
December 31, 1996 and does not anticipate paying any cash dividends for the year
ended December 31, 1997. For the years ended December 31, 1995 and 1994 Walibi
paid dividends of BEF 40.00 and BEF 37.71 per share of Walibi Stock,
respectively.
35
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL
AND OPERATING DATA OF THE COMPANY
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/Offer
to Purchase. 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
Combined Financial Statements appearing elsewhere in this Prospectus/Offer to
Purchase. The pro forma financial and operating data of the Company are
presented for information 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.
36
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1993 1994 1995(1) 1996(2) 1997
------- ------- ----------- ------------ ----------------------------
ACTUAL(3) PRO FORMA(4)
------------ -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
Statement of Operations Data:
Revenue:
Theme park admissions........................... $12,874 $13,936 $21,863 $ 41,162 $ 94,611 $ 424,108
Theme park food, merchandise and other.......... 8,986 10,963 19,633 52,285 99,293 391,225
------- ------- ----------- ------------ ------------ -------------
Total revenue................................. 21,860 24,899 41,496 93,447 193,904 815,333
------- ------- ----------- ------------ ------------ -------------
Operating costs and expenses:
Operating expenses.............................. 10,401 12,358 19,775 42,425 81,356 348,278
Selling, general and administrative............. 4,768 5,448 9,272 16,927 36,547 148,160
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 19,792 107,198
------- ------- ----------- ------------ ------------ -------------
Total operating costs and expenses............ 18,841 22,356 37,548 78,986 160,720 713,011
------- ------- ----------- ------------ ------------ -------------
Income from operations........................ 3,019 2,543 3,948 14,461 33,184 102,322
Other income (expense):
Interest expense, net........................... (1,438) (2,299) (5,578) (11,121) (17,775) (174,788)
Equity in operations of theme parks............. -- -- -- -- -- 16,122
Termination fee, net of expenses................ -- -- -- -- 8,364 --
Minority interest............................... -- -- -- -- -- 1,147
Other income (expense).......................... (136) (74) (177) (78) (59) (408)
------- ------- ----------- ------------ ------------ -------------
Total other income (expense).................. (1,574) (2,373) (5,755) (11,199) (9,470) (157,927)
------- ------- ----------- ------------ ------------ -------------
Income (loss) before income taxes............. 1,445 170 (1,807) 3,262 23,714 (55,605)
Income tax expense (benefit)...................... 91 68 (762) 1,497 9,615 476
------- ------- ----------- ------------ ------------ -------------
Income (loss) before extraordinary loss....... $ 1,354 $ 102 $(1,045)(5) $ 1,765 $ 14,099 $ (56,081)
------- ------- ----------- ------------ ------------ -------------
------- ------- ----------- ------------ ------------ -------------
Income (loss) before extraordinary loss per
common share--basic......................... $ .51 $ .04 $ (.40)(5) $ .14 $ .79 $ (2.10)
------- ------- ----------- ------------ ------------ -------------
------- ------- ----------- ------------ ------------ -------------
Income (loss) before extraordinary loss per
common share--diluted....................... $ .51 $ .04 $ (.40)(5) $ .13 $ .76 $ (2.10)
------- ------- ----------- ------------ ------------ -------------
------- ------- ----------- ------------ ------------ -------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ----------- ------------ ----------------------------
ACTUAL(6) PRO FORMA(7)
------------ -------------
(UNAUDITED)
(IN THOUSANDS EXCEPT RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
Balance Sheet Data:
Cash and cash equivalents......................... $ 3,026 $ 1,366 $28,787 $ 4,043 $ 84,288 $ 726,166(8)
Total assets...................................... $36,708 $45,539 $173,318 $304,803 $611,321 $3,820,609
Total long-term debt and capitalized lease
obligations (excluding current maturities)...... $18,649 $22,216 $93,213 $149,342 $216,231 $2,034,531
Total debt........................................ $20,821 $24,108 $94,278 $150,834 $217,026 $2,037,326
Stockholders' equity.............................. $13,192 $18,134 $45,911 $113,182 $323,749 $1,595,427
OTHER DATA:
EBITDA(9)......................................... $ 4,562 $ 4,549 $ 7,706 $ 22,994 $ 61,340(10) $ 232,906
Adjusted EBITDA(11)............................... -- -- -- -- -- $ 273,155
Net cash provided by operating activities(12)..... $ 2,699 $ 1,060 $10,646 $ 11,331 $ 47,150 $ 120,832
Capital expenditures.............................. $ 7,674 $10,108 $10,732 $ 39,423 $135,852 $ 212,229(13)
Total attendance.................................. 1,322 1,408 2,302(14) 4,518(14) 8,631(14) 36,530(15)
Revenue per visitor(16)........................... $ 16.54 $ 17.68 $ 18.03 $ 20.66 $ 22.18 $ 27.37
SELECTED RATIOS:
Ratio of earnings to fixed charges(17)............ 2.1x 1.1x (17) 1.3x 2.3x (17)
Ratio of earnings to combined fixed charges and
preferred stock dividends(17)................... 2.1x 1.1x (17) 1.2x 2.3x (17)
</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% Exchange
Offer on the basis of 80% payable in cash and 20% payable in shares of
Company 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 PIES 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 and
pro forma financial data for the Acquisitions without giving effect to the
Six Flags Acquisition.
(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) 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.
(7) The pro forma balance sheet data give effect to the acquisitions of Walibi
(assuming a 100% Exchange Offer on the basis of 80% payable in cash and 20%
payable in Company Common Stock) and Six Flags, the Offerings 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 "Unaudited Pro Forma
Financial Statements--Unaudited Pro Forma Balance
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
38
<PAGE>
Sheet" generally and with respect to certain assumptions used in respect of
the related financings.
(8) Excludes $321,750,000 of restricted-use investments.
(9) 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 U.S. 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 U.S. 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
($7,613,000) of the investment in the Co-Venture Parks included therein.
Also, the EBITDA definition used herein may not be comparable to similarly
titled measures reported by other companies.
(10) Includes an $8,364,000 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.
(11) Adjusted EBITDA reflects the Company's pro forma EBITDA plus the portion of
the pro forma EBITDA of the Co-Venture Parks ($32,339,000) 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.
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.
(12) 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.
(13) Does not include pro forma amount expended ($117,250,000) by the Company to
purchase interests of the limited partners in the Co-Venture Partnerships.
(14) 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.
(15) Pro forma attendance information includes attendance at Marine World for
1997.
(16) 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.
(17) 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 $54,399,000 and $92,576,000, respectively.
39
<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 U.S. 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 U.S. 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 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 in the Co-Venture Partnerships.
40
<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 which is 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
Mandatorily Convertible Preferred Stock and Company 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 Mandatorily Convertible Preferred Stock and Company 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
Company does not expect the final allocation of the purchase price to be
materially different than the preliminary allocation included herein.
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.
41
<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 (100,445)
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 (154,163)
---------- ------------ ---------- ---------- ---------- --------------
Income (loss) from operations........... 33,184 5,787 79,575 5,552 124,098 (22,631)
OTHER INCOME (EXPENSE):
Interest expense, net................... (17,775) (3,974) (84,430) (3,409) (109,588 ) --
Equity in operations of theme parks..... -- -- -- -- -- 22,631
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 ) 22,631
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 (12) (12) (12) (12)
---------- ----------
---------- ----------
Weighted average shares................. 17,938,000 (12) (12) (12) (12)
---------- ----------
---------- ----------
EBITDA (13)............................. $ 61,340 $ 8,424 $164,068 $ 19,261 $ 253,093 $--
---------- ------------ ---------- ---------- ---------- --------------
---------- ------------ ---------- ---------- ---------- --------------
Net cash provided by operating
activities............................ $ 47,150 $ 4,042 $110,303 $ 12,206(14) $ 173,701 $--
---------- ------------ ---------- ---------- ---------- --------------
---------- ------------ ---------- ---------- ---------- --------------
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 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...................... -- -- 348,278
Selling, general and administrative..... -- -- 148,160
Costs of products sold.................. (261)(5) 728(5) 109,375
Depreciation and amortization........... (6,527)(6) 5,205(6) 107,198
-------------- ------------- ----------
Total operating costs and
expenses.......................... (6,788) 5,933 713,011
-------------- ------------- ----------
Income (loss) from operations........... 6,788 (5,933) 102,322
OTHER INCOME (EXPENSE):
Interest expense, net................... (13,156)(7) (52,044)(7) (174,788 )
Equity in operations of theme parks..... -- (6,509)(8) 16,122
Termination fee, net of expenses........ (8,364)(9) -- --
Minority interest....................... -- (1,147 )
Other income (expense).................. (353)(10) -- (408 )
-------------- ------------- ----------
Total other income (expense)........ (21,873) (58,553) (137,927 )
Income (loss) before income taxes....... (15,085) (64,486) (33,605 )
Income tax expense (benefit)............ (5,062)(11) (6,450)(11) 476
-------------- ------------- ----------
Net income (loss)....................... $ (10,023) $(58,036) $ (56,081 )
-------------- ------------- ----------
-------------- ------------- ----------
Net income (loss) applicable to common
stock................................. $ (10,023) $(81,323)(12) $ (79,368 )
-------------- ------------- ----------
-------------- ------------- ----------
Net income (loss) per common share...... $ (2.10 )(12)
----------
----------
Weighted average shares................. 37,722,000(12)
----------
----------
EBITDA (13)............................. $ (8,456) $(11,731) $ 232,906
-------------- ------------- ----------
-------------- ------------- ----------
Net cash provided by operating
activities............................ $ (20,341) $(32,528) $ 120,832
-------------- ------------- ----------
-------------- ------------- ----------
Ratio of earnings to fixed charges...... (15)
Ratio of earnings to combined fixed
charges and preferred stock
dividends............................. (15)
</TABLE>
See accompanying notes to unaudited pro forma statement of operations.
42
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATION
YEAR ENDED DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
BASIS OF PRESENTATION
The accompanying unaudited pro forma statement of operations for the year
ended December 31, 1997, has been prepared based upon certain pro forma
adjustments to historical financial information of the Company, Kentucky
Kingdom, Six Flags and Walibi. The Company's acquisition of the operating assets
of Kentucky Kingdom occurred on November 7, 1997. The Company's acquisition of
the capital stock of SFEC and Walibi are scheduled to be completed in the second
quarter of 1998.
The unaudited pro forma statement of operations for the year ended December
31, 1997, has been prepared assuming the acquisitions, the related financings,
the issuance of the Convertible Preferred Stock and Common Stock and the new
Co-Venture Park arrangements occurred January 1, 1997 (except in the case of Six
Flags, which was treated as if it were acquired on December 30, 1996, the first
day of the 1997 fiscal year of Six Flags). The unaudited pro forma statement of
operations should be read in conjunction with the financial statements of the
Company, Kentucky Kingdom, Six Flags and Walibi and notes thereto included
elsewhere herein or, in the case of Kentucky Kingdom, which is 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$1). See "Walibi Group Notes to the Consolidated Financial Statements":
<TABLE>
<CAPTION>
AMOUNT ACCOUNTING ADJUSTED AMOUNT
(IN BEF) ADJUSTMENTS AMOUNT (IN U.S.$)
----------- ------------- ----------- -----------
<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)(a) 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)(b) 518,844 13,998
----------- ------------- ----------- -----------
Total operating costs and expenses.................. 2,317,670 (8,844) 2,308,826 62,291
----------- ------------- ----------- -----------
Income 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 before income taxes.......................... 59,847 8,844 68,691 1,854
Income tax expense.................................. 59,287 28,656(c) 87,943 2,373
----------- ------------- ----------- -----------
Net income (loss)................................... 560 (19,812) (19,252) $ (519)
----------- ------------- ----------- -----------
----------- ------------- ----------- -----------
</TABLE>
- ------------------------
(a) Adjustment results from the difference between Belgian generally
accepted accounting principles and US generally accepted accounting
principles relating to the recognition of maintenance costs as incurred
rather than capitalized and deferred until the following season.
43
<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)
(b) Adjustment results from the difference between Belgian generally
accepted accounting principles and U.S. generally accepted accounting
principles relating to the difference in the calculation of depreciation
and amortization expense resulting from different recorded value for
property and equipment and different estimated useful lives of the
property and equipment.
(c) Adjustment results from the difference between Belgian generally
accepted accounting principles and U.S. generally accepted accounting
principles relating to the recognition of deferred income taxes.
The unaudited pro forma statement of operations data assume all Walibi
stockholders accept the Exchange 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 $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.
(6) 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 $1,906. 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.
(7) 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 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
44
<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)
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 (at a 9 1/4% interest rate)...... $ (25,900)
Interest expense on Company Senior Discount Notes (at a 10% interest
rate)................................................................... (25,170)
Interest expense on New SFEC Notes (assuming an 8 7/8% interest rate)..... (15,088)
Interest expense on Six Flags Credit Facility (at a 8.198% interest
rate)................................................................... (34,432)
Interest expense from amortization of issuance costs...................... (4,621)
Interest expense from commitment fee on the Six Flags Credit Facility..... (260)
Interest expense from SFTP Senior Subordinated Notes...................... (31,003)
Elimination of historical interest expense - Six Flags.................... 84,430
---------
$ (52,044)
---------
---------
</TABLE>
(8) 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 33%
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 $3,908 of
the 33% 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, and (iv) receipt of $9,258
of limited partnership distributions associated with the 33% ownership of
the limited partnership.
(9) 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.
(10) Adjustment reflects the reduction of $353 of other income of Kentucky
Kingdom related to a lease obligation not assumed by the Company.
(11) 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%.
(12) Net income (loss) applicable to common stock is adjusted to reflect $23,288
of dividends payable to holders of PIES at assumed dividend rates of 7 1/2%.
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 $(2.11) and pro forma weighted average
number of common shares would be 37,498,000.
45
<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 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................................ 18,400,000
Common shares to be issued as partial consideration for the Private Acquisition, as if issued on
January 1, 1997................................................................................... 224,500
Common shares to be issued as partial consideration for the Walibi Tender Offer, as if issued on
January 1, 1997................................................................................... 224,500
----------
Pro forma weighted average number of common shares outstanding...................................... 37,722,000
----------
----------
</TABLE>
(13) 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 U.S. 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
U.S. 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 during the year ended December 31,
1997. Pro forma EBITDA includes equity in operations of theme parks and the
depreciation and amortization ($7,613) of the investment in the Co-Venture
Parks included therein.
(14) The operating cash flow for Walibi during 1997 was BEF 452,430. At an
exchange rate of BEF 37.065 to US$1, the operating cash flow would have been
$12,206.
(15) 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 $54,399 and $92,576, respectively.
46
<PAGE>
PREMIER PARKS INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL COMPANY PRO FORMA COMPANY
PREMIER SIX FLAGS WALIBI (1) COMBINED ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents......................... $ 84,288 $ 16,805 $ 16,423 $ 117,516 $ (136,237)(2) $ 726,166
(1,485,684)(3)
2,230,571(4)
Accounts receivable............................... 6,537 7,258 5,693 19,488 19,488
Inventories....................................... 5,547 14,338 1,748 21,633 21,633
Income tax receivable............................. 995 -- -- 995 995
Prepaid expenses and other current assets......... 3,690 11,899 1,595 17,184 17,184
---------- ---------- ---------- ---------- -------------- ----------
Total current assets.......................... 101,057 50,300 25,459 176,816 608,650 785,466
Deferred charges.................................. 10,123 20,171 30,294 39,241(4) 49,364
(20,171)(3)
Restricted-use investments........................ -- -- -- -- 246,750 321,750
75,000(4)
Deposits and other................................ 3,949 26,784 281 31,014 (10,984)(3) 52,530
25,000(3)
7,500(4)
---------- ---------- ---------- ---------- -------------- ----------
Total other assets............................ 14,072 46,955 281 61,308 362,336 423,644
Investment in theme parks, net.................... -- 78,370 -- 78,370 (18,274)(3) 177,346
117,250(3)
Property and equipment, net....................... 450,256 492,137 91,174 1,033,567 17,326(2) 1,050,893
Intangible assets, net............................ 45,936 196,928 2,431 245,295 1,094,436(3) 1,383,260
43,529(2)
---------- ---------- ---------- ---------- -------------- ----------
Total assets.................................. $611,321 $864,690 $119,345 $1,595,356 $ 2,225,253 $3,820,609
---------- ---------- ---------- ---------- -------------- ----------
---------- ---------- ---------- ---------- -------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses............. $ 23,199 $ 61,014 $ 11,387 $ 95,600 $ 95,600
Accrued interest payable.......................... 9,785 3,431 -- 13,216 (3,431)(3) 9,785
Current maturities of long-term debt and
capitalized lease obligations................... 795 56,633 (18,843) 76,271 (18,843)(2) 2,795
(56,633)(3)
2,000(4)
---------- ---------- ---------- ---------- -------------- ----------
Total current liabilities..................... 33,779 121,078 30,230 185,087 (76,907) 108,180
Long-term debt and capitalized lease
obligations..................................... 216,231 753,369 (50,545) 1,020,145 (50,545)(2) 2,034,531
(279,769)(3)
1,344,700(4)
Other long-term liabilities....................... 4,025 12,570 1,970 18,565 35,000(3) 53,565
Deferred income taxes............................. 33,537 -- 4,706 38,243 6,584(2) 28,906
(15,921)(3)
Stockholders' equity.............................. 323,749 (22,327) 31,894 333,316 (31,894)(2) 1,595,427
22,327(3)
19,316(2)
(1,421)(4)
1,253,783(4)
---------- ---------- ---------- ---------- -------------- ----------
Total liabilities and stockholders' equity.... $611,321 $864,690 $119,345 $1,595,356 $ 2,225,253 $3,820,689
---------- ---------- ---------- ---------- -------------- ----------
---------- ---------- ---------- ---------- -------------- ----------
</TABLE>
See accompanying notes to unaudited pro forma balance sheet.
47
<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.
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)(a) 59,109 1,595
Deposits and other.............................. 10,407 -- 10,407 281
Property and equipment, net..................... 3,393,688 (14,344)(b) 3,379,344 91,174
Intangible assets, net.......................... 45,694 44,429(b) 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(b) 422,001 11,387
Current maturities of long-term debt and 698,411 -- 698,411 18,843
capitalized lease obligations.................
Long-term debt and capitalized lease 1,873,467 -- 1,873,467 50,545
obligations...................................
Other long-term liabilities..................... 58,015 15,000(c) 73,015 1,970
Deferred income taxes........................... 281,475 (107,029)(d) 174,446 4,706
Stockholders' equity............................ 1,088,466 93,678(e) 1,182,144 31,894
Total liabilities and stockholders' equity...... 4,404,199 19,285 4,423,484 119,345
</TABLE>
- ------------------------
(a) Adjustment results from the difference between Belgian generally
accepted accounting principles and U.S. generally accepted accounting
principles relating to the recognition of maintenance costs as incurred
rather than deferred until the following season.
(b) Adjustment results from the difference between Belgian generally
accepted accounting principles for the accounting for capital grants and
negative goodwill at acquisition as reductions in recorded amount of the
asset for U.S. accounting purposes rather than as liabilities and the
calculation of depreciation and
48
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
amortization expense resulting from different recorded value for property
and equipment and different estimated useful lives of the property and
equipment.
(c) Adjustment results from the difference between Belgian generally
accepted accounting principles and U.S. generally accepted accounting
principles relating to the recognition of postretirement benefit costs.
(d) Adjustment results from the difference between Belgian generally
accepted accounting principles and U.S. generally accepted accounting
principles relating to the recognition of deferred income taxes.
(e) Adjustment results from the difference between Belgian generally
accepted accounting principles and U.S. generally accepted accounting
principles relating to the cumulative effect of the items described
above.
(2) Adjustment reflects the purchase of the outstanding capital stock of Walibi
for $65,849 of cash and in Common Stock of the Company valued at $19,316, 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
Exchange Offer with 80% of the tender offer consideration payable in cash
and 20% in shares of Company Common Stock. If a 100% acceptance of an all
cash Exchange Offer occurs, pro forma cash and cash equivalents and
stockholders' equity would decrease by $9,658:
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.................................................................. $ 825,979
Intangible assets, net..................................................................... 1,363,124
Total assets............................................................................... 3,900,286
Current maturities of long-term debt and capitalized lease obligations..................... 21,638
Long-term debt and capitalized lease obligations........................................... 2,085,076
Other long-term liabilities................................................................ 73,512
Stockholders' equity....................................................................... 1,585,769
</TABLE>
(3) Adjustment reflects the purchase of the outstanding capital stock of Six
Flags for $976,000 of cash, transaction costs of $10,000 and the purchase of
33% of the outstanding limited partnership units of the Texas Co-Venture
Park for $117,250. Six Flags completed the tender offer on the terms
described under "Risk Factors Associated with Substantial Indebtedness and
Other Obligations." A $25,000 indemnity escrow was established from the
purchase price to fund indemnification claims of Premier
49
<PAGE>
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
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 refinanced 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 were funded from
proceeds of the Offerings. The acquisition was accounted for using the
purchase 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. 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 (deferred charges, deposits and other, and investments in theme
parks, net) 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.
(4) Adjustment reflects the following proceeds and costs:
<TABLE>
<CAPTION>
Equity:
<S> <C>
Common Stock (18,400,000 shares issued at $54.00 per share)............. $ 993,600
PIES (5,750,000 shares issued at $54.00 per share)...................... 310,500
Less discounts and costs................................................ (50,317)
-----------
$1,253,783
-----------
-----------
<CAPTION>
Company debt:
<S> <C>
Company Senior Notes.................................................... $ 280,000
Company Senior Discount Notes........................................... 251,700
New SFEC Notes.......................................................... 170,000
Premier Credit Facility ($1,000 principal due within one year).......... 225,000
Six Flags Credit Facility ($1,000 principal due within one year)........ 420,000
-----------
1,346,700
Less debt issuance costs.................................................... (40,662)
-----------
$1,306,038
-----------
-----------
</TABLE>
Deferred charges of $1,421 associated with Premier Operation'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. 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 $176,035 related to the repayment of the SFEC Zero Coupon
Senior Notes and of $70,715 for payment of the first six semi-annual
interest payments on the Company Senior Notes.
50
<PAGE>
THE COMPANY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived principally from the sale of tickets for
entrance to its parks (approximately 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 1977. 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 and depreciation expense related to that park.
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 Walibi
acquisition. 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."
51
<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,
YEAR ENDED DECEMBER 31, 1996 1997
----------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL
HISTORICAL 1996 HISTORICAL
NINE MONTHS ACQUISITIONS PREMIER
ENDED SEPTEMBER FOR PERIODS (EXCLUDING KENTUCKY
30, 1996 FOR SUBSEQUENT TO MARINE WORLD KINGDOM
HISTORICAL 1996 SEPTEMBER 30, HISTORICAL AND KENTUCKY AND MARINE
PREMIER(1) ACQUISITIONS(2) 1996(3) COMBINED KINGDOM)(4) WORLD(5)
----------- --------------- --------------- ------------ ------------ -------------
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Theme park admissions............. $ 41,162 $ 34,062 $ 724 $ 75,948 $ 94,611 $ --
Theme park food, merchandise and
other........................... 52,285 30,453 1,020 83,758 99,103 190
----------- ------- ------- ------------ ------------ -------------
Total revenue................... 93,447 64,515 1,744 159,706 193,714 190
----------- ------- ------- ------------ ------------ -------------
OPERATING COSTS AND EXPENSES:
Operating expenses................ 42,425 23,204 3,116 68,745 80,307 1,049
Selling, general and
administrative.................. 16,927 17,035 2,289 36,251 36,461 86
Costs of products sold............ 11,101 9,448 347 20,896 23,025 --
Depreciation and amortization..... 8,533 13,028 703 22,264 19,159 633
----------- ------- ------- ------------ ------------ -------------
Total operating costs and
expenses...................... 78,986 62,715 6,455 148,156 158,952 1,768
----------- ------- ------- ------------ ------------ -------------
Income (loss) from operations....... 14,461 1,800 (4,711) 11,550 34,762 (1,578)
OTHER INCOME (EXPENSE):
Interest expense, net............. (11,121) (4,624) (517) (16,262) (17,763) (12)
Termination fee, net of expenses.. -- -- -- -- 8,364 --
Other income (expense)............ (78) (284) -- (362) (59) --
----------- ------- ------- ------------ ------------ -------------
Total other income (expense).... (11,199) (4,908) (517) (16,624) (9,458) (12)
----------- ------- ------- ------------ ------------ -------------
Income (loss) before income
taxes........................... 3,262 (3,108) (5,228) (5,074) 25,304 (1,590)
Income tax expense................ 1,497 1,131 -- 2,628 9,615 --
----------- ------- ------- ------------ ------------ -------------
Net income (loss)................. $ 1,765 $ (4,239) $ (5,228) $ (7,702) $ 15,689 $ (1,590)
----------- ------- ------- ------------ ------------ -------------
----------- ------- ------- ------------ ------------ -------------
<CAPTION>
<S> <C>
HISTORICAL
PREMIER
------------
<S> <C>
REVENUE:
Theme park admissions............. $ 94,611
Theme park food, merchandise and
other........................... 99,293
------------
Total revenue................... 193,904
------------
OPERATING COSTS AND EXPENSES:
Operating expenses................ 81,356
Selling, general and
administrative.................. 36,547
Costs of products sold............ 23,025
Depreciation and amortization..... 19,792
------------
Total operating costs and
expenses...................... 160,720
------------
Income (loss) from operations....... 33,184
OTHER INCOME (EXPENSE):
Interest expense, net............. (17,775)
Termination fee, net of expenses.. 8,364
Other income (expense)............ (59)
------------
Total other income (expense).... (9,470)
------------
Income (loss) before income
taxes........................... 23,714
Income tax expense................ 9,615
------------
Net income (loss)................. $ 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.
52
<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUE. Revenue aggregated $193.9 million in 1997 ($193.7 million at the
11 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 11 parks is primarily attributable to increased attendance (17.3%) at
these 11 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 11 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 11 parks is mainly
due to increased salary expenses arising from 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 11 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 11 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 (approximately $2.5 million), increased sales
taxes arising from increased volume generally and increased property taxes and
professional services (approximately $1.0 million), offset by significant
reductions in personnel and insurance expenses (approximately $3.3 million).
COSTS OF PRODUCTS SOLD. Costs of products sold were $23.0 million at the 11
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 10.2% 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 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.
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NET INCOME. Net Income increased during 1997 to $14.1 million ($15.7
million at the 11 parks owned during 1997) from $1.8 million during 1996. This
increase was primarily attributable to the increase in revenues set forth above
partially offset by the increase in operating expenses and other expense items
set forth above.
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
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.
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
HISTORICAL FUNTIME(2) --------------------------------
----------------------------- HISTORICAL
SIX MONTHS FORTY-THREE PREMIER
HISTORICAL ENDED DAYS ENDED HISTORICAL (EXCLUDING 1996 1996
PREMIER(1) JULY 2, 1995 AUGUST 14, 1995 COMBINED ACQUISITIONS)(3) ACQUISITIONS(4)
----------- ------------ --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions........... $ 21,863 $ 6,195 $ 9,680 $ 37,738 $ 41,157 $ 5
Theme park food, merchandise and
other......................... 19,633 8,958 13,450 42,041 52,148 137
----------- ------------ ------- ------------ ------- -------
Total revenue..................... 41,496 15,153 23,130 79,779 93,305 142
----------- ------------ ------- ------------ ------- -------
Expenses:
Operating expenses.............. 19,775 10,537 6,039 36,351 40,568 1,857
Selling, general and
administrative................ 9,272 3,459 2,533 15,264 16,534 393
Costs of products sold.......... 4,635 2,083 2,953 9,671 11,071 30
Depreciation and amortization... 3,866 3,316 829 8,011 7,785 748
----------- ------------ ------- ------------ ------- -------
Total costs and expenses.......... 37,548 19,395 12,354 69,297 75,958 3,028
----------- ------------ ------- ------------ ------- -------
Income (loss) from operations..... 3,948 (4,242) 10,776 10,482 17,347 (2,886)
Interest expense, net............. (5,578) (2,741) (321) (8,640) (11,121) --
Other income (expense)............ (177) 4 (4) (177) (78) --
----------- ------------ ------- ------------ ------- -------
Total other income (expense)...... (5,755) (2,737) (325) (8,817) (11,199) --
----------- ------------ ------- ------------ ------- -------
Income before income taxes and
extraordinary loss.............. (1,807) (6,979) 10,451 1,665 6,148 (2,886)
Income tax expense (benefit)...... (762) (2,722) 4,076 592 2,905 (1,408)
----------- ------------ ------- ------------ ------- -------
Income (loss) before extraordinary
loss............................ $ (1,045) $ (4,257) $ 6,375 $ 1,073 $ 3,243 $ (1,478)
----------- ------------ ------- ------------ ------- -------
----------- ------------ ------- ------------ ------- -------
<CAPTION>
HISTORICAL
PREMIER
-----------
<S> <C>
<S> <C>
Revenue:
Theme park admissions........... $ 41,162
Theme park food, merchandise and
other......................... 52,285
-----------
Total revenue..................... 93,447
-----------
Expenses:
Operating expenses.............. 42,425
Selling, general and
administrative................ 16,927
Costs of products sold.......... 11,101
Depreciation and amortization... 8,533
-----------
Total costs and expenses.......... 78,986
-----------
Income (loss) from operations..... 14,461
Interest expense, net............. (11,121)
Other income (expense)............ (78)
-----------
Total other income (expense)...... (11,199)
-----------
Income before income taxes and
extraordinary loss.............. 3,262
Income tax expense (benefit)...... 1,497
-----------
Income (loss) before extraordinary
loss............................ $ 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.
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 17.0%
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increase in revenue (excluding the 1996 Acquisitions) over combined 1995 revenue
at the same six parks is attributable to increased attendance (10.3%) and per
capita revenue (6.3%) 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 11.6% increase in operating expenses (excluding the 1996 Acquisitions) over
combined 1995 operating expenses is mainly due to increased salary expenses
arising from additional staffing related to increased attendance levels and
increased pay rates, offset to some extent by a decrease in equipment rental
expense in 1996 (approximately $0.7 million) 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 $16.5 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 17.7% 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 (approximately $1.0 million), increased sales taxes arising from
increased volume generally and increased property taxes and professional
services (approximately $0.2 million).
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 12 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 12 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.
NET INCOME. Net Income increased during 1996 to $1.8 million ($3.2 million
without the 1996 Acquisitions) from a net loss of $1.0 million in 1995. This
increase was primarily attributable to the increase in revenues set forth above
partially offset by the increase in operating expenses and other expenses set
forth above.
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
55
<PAGE>
maintenance are incurred when the parks are closed. See "Risk Factors -- Effects
of Inclement Weather; Seasonal Fluctuations of Operating Results." The Company
employs a substantial number of seasonal employees who are compensated on an
hourly basis. The Company is not subject to federal or certain applicable state
minimum wage rates in respect of its seasonal employees. However, the 1996
increase of $.90 an hour over two years in the federal minimum wage rate, and
any increase in these state minimum wage rates, may result over time in
increased compensation expense for the Company as it relates to these employees
as a result of competitive factors.
HISTORICAL
During 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 Company 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 Company 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 Company Common
Stock. In January 1997, the Company completed two concurrent public offerings,
issuing an additional 6.9 million shares of Company 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 Company 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 Company 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
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<PAGE>
1997 Premier Notes. In February 1998, Premier terminated its $115.0 million
senior secured credit facility and obtained a commitment with respect to the
Premier Credit Facility. The Company will expense its remaining deferred charges
related to the terminated facility in the first quarter of 1998. The Company
entered into the Premier Credit Facility on March 13, 1998.
PRO FORMA
In March 1998, the Company entered into the Premier Credit Facility,
pursuant to which it borrowed $125.0 million in connection with the Walibi
acquisition. See "Description of Indebtedness of the Company."
Upon consummation of the Six Flags Transactions, the Company issued (i)
18,400,000 shares of Company Common Stock, (ii) 5,750,000 PIES (depositary
shares representing interests in Mandatorily Convertible Preferred Stock), (iii)
$410.0 million aggregate principal amount at maturity of Company Senior Discount
Notes (with gross proceeds of $251.7 million), (iv) $280.0 million aggregate
principal amount of Company Senior Notes and (v) $170.0 million aggregate
principal amount of New SFEC Notes. The PIES will accrue cumulative dividends
(payable, at the Company's option, in cash or shares of Company Common Stock) at
7 1/2% per annum and will be mandatorily convertible into Company Common Stock
in 2001. The Company Senior Discount Notes will not require any interest
payments prior to October 1, 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 approximately $25.9 million 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 approximately $15.1 million 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 (i)
assumed $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) refinanced all outstanding SFTP bank indebtedness with the
proceeds of $420.0 million of borrowings under the Six Flags Credit Facility,
and (iii) refinanced 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 SFEC, SF Holdings, Inc. ("SF
Holdings") and SFTP's subsidiaries and will be secured by substantially all of
the assets of SFTP and its subsidiaries and a pledge by SF Holdings of the stock
of SFTP. 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 are secured by
substantially all of the assets of Premier Operations and such subsidiaries
(other than real estate). See "Description of Indebtedness of the Company."
On a pro forma basis as of December 31, 1997, the Company would have had
total outstanding indebtedness in the accreted principal amount of $1,994.7
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
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have aggregated $133.8 million. In addition, annual dividend payments on the
Mandatorily Convertible Preferred Stock at assumed dividend rates would have
aggregated $23.3 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
26, 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. In March 1998, Six Flags completed a tender
offer pursuant to which it purchased approximately 33% of the outstanding
limited partnership units in Six Flags Over Texas, for an aggregate price of
$117.3 million, which was financed by borrowings.
The degree to which the Company is leveraged following the Six Flags
Transactions could have important consequences to the Company. See "Risk
Factors--Risks Associated with Substantial Indebtedness and Other Obligations"
and "Description of Indebtedness of the Company."
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 12 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 70 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, 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
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Company's future liquidity needs, including anticipated requirements for working
capital, capital expenditures, scheduled debt and preferred stock dividends and
its obligations under arrangements relating to the Co-Venture Parks, for at
least the next several years. The Company may, however, need to refinance all or
a portion of its existing debt on or prior to maturity or to obtain additional
financing. See "Risk Factors-- Risks Associated with Substantial Indebtedness
and Other Obligations." The Company estimates tht it will expend approximately
$95 million on capital expenditures during the first six month of 1998
(including amounts expended by Six Flags prior to the Six Flags Acquisition).
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.
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SFEC MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE DISCUSSION SET FORTH BELOW INCORPORATES BY REFERENCE AND SHOULD BE READ
IN CONJUNCTION WITH "THE COMPANY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONTAINED HERE, INCLUDING,
WITHOUT LIMITATION, "--LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES," "--NEWLY
ISSUED ACCOUNTING STANDARDS" AND "--IMPACT OF YEAR 2000 ISSUE."
GENERAL
SFEC's revenues are derived principally from the sale of tickets for
entrance to its parks, parking and corporate sponsorships (approximately 58.3%,
59.6% and 60.3% in the years ended December 31, 1995, December 29, 1996 and
December 28, 1997 respectively) and the sale of food, merchandise, gasoline,
games and attractions inside its parks and other income (approximately 41.7%,
40.4% and 39.7% in the years ended December 31, 1995, December 29, 1996 and
December 28, 1997, respectively). SFEC's principal costs of operations include
salaries and wages, fringe benefits, advertising, outside services, maintenance,
utilities and insurance. SFEC's expenses are relatively fixed. Costs for
full-time employees, maintenance, utilities, advertising and insurance do not
vary significantly with attendance, thereby providing SFEC with a significant
degree of operating leverage as attendance increases and fixed costs per visitor
decrease.
Prior to the Six Flags Acquisition, SFEC, through two subsidiaries, was the
general partner in the Co-Venture Partnerships. For the historical periods
presented, SFEC accounted for the Co-Venture Parks as co-ventures, i.e., their
revenues and expenses (excluding partnership depreciation) were included in
SFEC's consolidated statements of operations and the net amounts distributed to
the limited partners were deducted as expenses. Except for the limited
partnership units in the Georgia park owned by SFEC at December 28, 1997, SFEC
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. Accordingly, SFEC's historical consolidated balance sheets did not
include any of the Co-Venture Parks' assets. The investment in the Co-Venture
Parks included in SFEC's historical consolidated balance sheets represented (i)
SFEC's interest in the estimated future cash flows from the operations of the
Co-Venture Parks, which was amortized over the life of the partnership
agreements, and (ii) the value of Limited Partnership units purchased pursuant
to the tender offer relating to the Georgia park. The Co-Venture Parks
contributed revenues of $160.6 million, $152.0 million and $176.8 million to
SFEC in the fiscal years 1995, 1996 and 1997, respectively.
In connection with the Six Flags Transaction, SFEC transferred its interests
in the Co-Venture Parks to Premier. Accordingly, cash flows from these parks
will not be available to service the debt of SFEC (including the SFEC Senior
Notes) and SFEC will have no interest in the revenues or cash flows of the Co-
Venture Parks following consummation of the New SFEC Notes. The discussion below
includes the results of the Co-Venture Parks which are being transferred to
Premier as part of the Six Flags Transactions.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 28, 1997 AND DECEMBER 29, 1996
REVENUES. Revenues aggregated $708.7 million in 1997, compared to $680.9
million in 1996. The 4.1% increase in revenues is attributable to higher
spending per guest, partially offset by decreased attendance. The average ticket
spending per guest increased 8.1% as a result of selected price increases and
reductions in ticket discounts. Average in-park spending per guest increased
4.4% primarily from gains in food service, stemming from improved processes,
quality and service and increases in games, attractions and parking spending.
Attendance declined by 2.5% primarily due to the postponement of the linear
induction motor ("LIM") coasters at three of SFEC's parks, poor early-season
weather and increased competition in the San Antonio market. The declines were
offset, in part, by a substantial increase in attendance in 1997 at the Georgia
park after a low attendance level at that park in 1996 due largely to the
effects of the Atlanta Olympics during that summer. SFEC expects all three LIM's
to be operational for the 1998 season.
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OPERATING, GENERAL AND ADMINISTRATIVE. Operating, general and
administrative expenses were $443.4 million in 1997, compared to $419.8 million
for 1996. As a percentage of revenues, these expenses constituted 62.6% for 1997
and 61.6% for 1996. The increase over 1996 expenses related primarily to
increased distributions to the limited partners of the Georgia park along with
higher compensation and maintenance expenses, which were partially offset by
reduced advertising costs and the reversal of expense accruals of approximately
$7.3 million during 1997 that were no longer deemed necessary. Limited partner
distributions increased as a result of the new arrangements entered into in
March 1997 with respect to the Georgia Co-Venture Partnership. The higher
compensation costs resulted from higher average seasonal wage rates, additional
operating hours in 1997, and a return to full staffing at the Georgia park after
reduced requirements in 1996. Higher maintenance costs were incurred to repair
major rides and facilities to enhance park operations. Advertising costs were
down due to lower spending by the Georgia park, which incurred much higher
advertising expense levels in 1996 as a result of the Olympics. Additionally,
the postponed opening of the LIM coasters resulted in reduced advertising costs
at three of SFEC's parks.
COSTS OF PRODUCTS SOLD. Costs of products sold were $101.2 million for 1997
compared to $106.0 million for 1996. Costs of products sold as a percentage of
theme park food, merchandise and other decreased from 38.4% in 1996 to 36.0% in
1997. The $4.7 million or 4.5% decrease from 1996 resulted primarily from
centralized procurement of key food items and a shift in sales to higher margin
food products sold.
DEPRECIATION, AMORTIZATION AND INTEREST EXPENSE. Depreciation and
amortization expense was $84.5 million for 1997 as compared to $87.4 million in
1996. The decrease resulted from lower amortization of the investment in the
Co-Venture Parks related to the Georgia Co-Venture Park as a result of the
amendments in 1997 to the structure of the Georgia Co-Venture Partnership.
Interest expense, net, increased $7.9 million in 1997, as compared to 1996,
primarily due to the increased average borrowings in 1997 and higher interest
expense incurred by the Co-Venture Parks, partially offset by a decrease in
average borrowing rates.
INCOME TAXES. The relationship between income (loss) before taxes and
income tax expense is principally affected by the amortization of the excess of
costs over net assets acquired, which is non-deductible for income tax purposes.
The income tax expense recorded for 1996 principally represented a valuation
allowance on SFEC's deferred tax assets.
At May 25, 1997, SFEC reported that it had carryforwards of approximately
$123.0 million of NOLs for regular Federal income tax purposes and $35.0 million
for Federal alternative minimum 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 SFEC and its subsidiaries. In addition, the use of such
NOLs is, and, as a result of the Six Flags Acquisition, the use of all of such
NOLs will become, subject to limitations on the amount of taxable income that
can be offset with such NOLs. Accordingly, no assurance can be given as to the
timing or amount of the availability of such NOLs to SFEC and its subsidiaries.
NET INCOME (LOSS). Net loss was $3.7 million in 1997, compared to a net
loss of $15.2 million in 1996. This decrease was primarily attributable to the
increase in revenues set forth above partially offset by the increases in
Operating, General and Administrative expenses and Cost of Products Sold
expenses set forth above.
YEARS ENDED DECEMBER 29, 1996 AND DECEMBER 31, 1995
REVENUES. Revenues aggregated $680.9 million in 1996, an 8.2% increase over
1995 revenue of $629.5 million. This increase was primarily attributable to the
consolidation of Fiesta Park's operations in 1996 which accounted for
approximately $52.7 million of the total increase in revenues. The resulting
decrease in comparable revenues (exclusive of Fiesta Park's revenues) was due to
lower attendance, offset in part by higher average spending per guest.
Comparable in-park attendance declined by approximately 5.3%, while average
ticket spending per guest increased approximately 6.8% and average in-park
spending per guest increased approximately 3.9%. The decline in comparable
in-park attendance resulted primarily from unfavorable weather experienced by
several of SFEC's theme parks, the adverse impact of the 1996
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Summer Olympics (which were held in Atlanta) on the Georgia park and the delayed
introduction of the SUPERMAN THE ESCAPE ride at Six Flags Magic Mountain (the
"Superman Ride"). The delayed introduction of the Superman Ride resulted from
propulsion issues with the new state-of-the-art technology incorporated into
this first 100-mile per hour thrill ride. The Superman Ride opened on March 15,
1997. The increases in average ticket spending per guest and average in-park
spending per guest were due to selected price increases, improvements to
retail/food outlets and product offerings, and new pay-per-ride Skycoasters at
Six Flags Over Texas, Six Flags Over Georgia, Six Flags AstroWorld, Six Flags
St. Louis and Six Flags Magic Mountain.
OPERATING, GENERAL AND ADMINISTRATIVE. Operating, general and
administrative expenses increased from approximately $388.1 million in 1995 to
approximately $419.8 million in 1996. These expenses (as a percentage of
revenue) constituted approximately 61.6% and 61.7% during 1996 and 1995,
respectively. The acquisition of Wet'n Wild in April 1995 (which was renamed Six
Flags Hurricane Harbor (Dallas)) and the consolidation of Fiesta Park's
operations accounted for approximately $39.3 million of the total increase in
operating, general and administrative expenses. The resulting $7.6 million
decrease in comparable expenses was primarily due to lower incentive
compensation in 1996, costs accrued in 1995 in connection with the
reorganization of SFEC's headquarters and the absence of costs allocated from
Time Warner (relating to employees of Time Warner who served as senior
management of SFEC during 1995) subsequent to June 1995.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $91.1 million
in 1995 to $106.0 million in 1996. A large portion of the increase
(approximately 59%) was a result of the consolidation of the Fiesta Park's
operations. Cost of products sold (as a percentage of in-park product revenue)
constituted approximately 39.5% and 35.7%, during 1996 and 1995, respectively.
Excluding Fiesta Park, costs of products sold increased by 3.8% due to increased
cost for higher quality products and the mark-down/ write-off of slow moving
inventory.
DEPRECIATION, AMORTIZATION AND INTEREST EXPENSE. Depreciation and
amortization expense aggregated approximately $87.4 million in 1996 and
approximately $83.4 million in 1995. Interest expense, net, increased from $63.3
million in 1995 to $76.5 million in 1996, due to an increase in the average
outstanding debt level combined with an increase in the average cost of debt,
both of which resulted from the full year effect of the issuance of the SFEC
Senior Subordinated Notes and borrowings under Six Flags' then existing credit
facility, in each case, in June 1995.
INCOME TAXES. The relationship between income (loss) before taxes and
income tax expense is principally affected by the amortization of the excess of
costs over net assets acquired, which is non-deductible for income tax purposes.
The tax expense recorded for 1996 principally represents a valuation allowance
on SFEC's deferred tax assets.
NET INCOME (LOSS). Net loss was $15.2 million in 1996 compared to a net
loss of $3.3 million in 1995. This increase was primarily attributable to the
increase in Operating, General and Administrative expenses and Costs of Products
Sold expenses set forth above, partially offset by the increase in revenues set
forth above.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
During 1997, SFEC generated $110.3 million in net cash provided by operating
activities. Net cash used in investing activities aggregated approximately
$149.7 million, $67.7 million of which represented amounts spent for capital
expenditures of SFEC's wholly-owned theme parks and Fiesta Texas and $62.7
million of which represented the amount expended to purchase interests in the
limited partners of the Co-Venture Partnerships. Net cash provided by financing
activities for 1997 aggregated $10.6 million reflecting the net borrowings under
revolving lines of credit, and proceeds from other interim loans, partially
offset by payments on term loans.
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DESCRIPTION OF THE COMPANY
GENERAL
Premier is a Delaware corporation and 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 U.S.
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 $232.9 million,
respectively.
The following table sets forth certain information for the Company's parks
including the parks, owned by Walibi.
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET ACRES(2)
- ----------------------------------------- -------------- ----------------------------- 1997 -------------
ATTENDANCE(1)
-----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
PREMIER PARKS:
Adventure World.......................... Theme/Water Baltimore/Washington, D.C. 960 115
Bellewaerde.............................. Theme Belgium 670 133
Darien Lake.............................. Theme/Water Buffalo/Rochester 1,400 142
Elitch Gardens........................... Theme/Water Denver 1,450 60
Frontier City............................ Theme Oklahoma City 530 60
Geauga Lake.............................. Theme/Water Cleveland 1,250 116
The Great Escape......................... Theme/Water Lake George/Albany, New York 680 100
Kentucky Kingdom......................... Theme/Water Louisville 1,100 58
Marine World............................. Theme/Wildlife San Francisco 1,100 105
Riverside Park........................... Theme New England/Boston 1,200 160
Walibi Aquitaine......................... Theme France 240 74
Walibi Flevo............................. Theme The Netherlands 450 250
Walibi Rhone-Alpes....................... Theme/Water France 350 35
Walibi Schtroumpf........................ Theme France 350 375
Walibi Wavre and Aqualibi................ Theme/Water Belgium 960 120
Waterworld USA/Concord................... Water San Francisco 180 24
Waterworld USA/Sacramento................ Water Sacramento 290 20
White Water Bay.......................... Water Oklahoma City 320 22
Wyandot Lake............................. Water Columbus, Ohio 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.
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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.
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 has obtained 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 obtained 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. During the 1997 operating season, the 11 parks owned by the Company
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 35.7% 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 17.3%, 21.3% and 59.5%, 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
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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 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. 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, become a
large portion of such expenses is relatively fixed during any given year. The
primary elements in 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 35.7% 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
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on tickets for specific periods, in order to increase attendance at less popular
times such as weekdays and evenings.
INCREASING AND ENHANCING RESTAURANTS AND MERCHANDISE AND OTHER REVENUE
OUTLETS TO INCREASE LENGTH-OF-STAY AND IN-PARK SPENDING. The Company also seeks
to increase in-park spending by adding well-themed restaurants, remodeling and
updating existing restaurants and adding new merchandise outlets. The Company
has successfully increased spending on food and beverages by introducing
well-recognized 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 this 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. The percentage increase in attendance,
revenue and operating cash flow for Frontier City for 1997 as compared to 1996
was 0.2%, 3.6% and 25.9%, respectively.
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 21.5%. Additionally, revenue and park-level operating cash flow
at Adventure World increased from $6.1 million and $0.1 million, respectively,
for 1992 to $20.1 million and $4.9 million, respectively, for 1997. The
percentage increase in attendance, revenue and operating cash flow for Adventure
World for 1997 as compared to 1996 was 23.4%, 22.0% and 33.0%, respectively.
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 $43.0 million at these parks to add marketable rides and
attractions and make other improvements and implemented creative marketing and
sales programs. As a result of this strategy, during the year ended December 31,
1997, the Funtime parks achieved compound annual growth in attendance, revenue
and park-level operating cash flow of 10.2%, 14.9% and 27.2%, respectively,
compared to 1995.
DARIEN LAKE--For the 1996 season, Premier invested approximately $8.6
million, adding an indoor roller coaster, a five-story interactive water
attraction, and a new children's area, theme around the POPEYE characters.
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 20
nationally-recognized performers per season. For the 1997 season, Premier
invested approximately $13 million, adding a "state-of-the-art" steel suspended
looping
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roller coaster, a wave pool and 50 recreational vehicles. As a result of these
investments and creative marketing and sales initiatives, during 1997, Darien
Lake achieved compound annual growth of 15.2% in attendance, 20.5% in revenue
and 45.2% in park-level operating cash flow for 1995. The percentage increase in
attendance, revenue and operating cash flow for Darien Lake for 1997 as compared
to 1996 was 8.4%, 11.6% and 19.8%, respectively.
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
33.8%, 37.9% and 228.9%, respectively, 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 main street (including a theater) and numerous revenue outlets, as
well as substantial theming and landscaping. As a result, during 1997,
attendance and revenue at Elitch Gardens grew 62.1% and 52.1%, respectively, and
park-level operating cash flow increased from $(1.8) 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 57.7% and 56.7%, respectively, and park-level operating cash flow
increased from $1.5 million to $8.2 million (or 447%), as compared to 1996.
Management believes that each of the parks acquired in the 1997 Acquisitions
offers 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/Napa Valley 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 $30
million for the 1998 season to add 14 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.
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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.
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 reduce Six Flags' corporate overhead and other corporate-level expenses by
$15-20 million. Second, the Company expects to improve park-level operating
margins by as much as 5-7%. 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 Offerings to fund expansions at its 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
"--Environmental and Other Regulation."
ACQUISITION STRATEGY
The Company expects to achieve further growth beyond that generated from
internal growth at its existing parks through continued selective acquisitions
of additional regional theme parks. Given its decentralized management approach,
the Company has experience in managing assets in diverse locations, and
therefore does not seek acquisitions with any specific geographic focus. In that
connection, in the first quarter of 1998 the Company anticipates acquiring a
controlling interest in Walibi, which owns six theme
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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 and the Six Flags Acquisition, there are numerous acquisition
opportunities, both in the United States and abroad, that would 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 larger parks or chains (such as Six Flags).
The Company believes it has a number of competitive advantages in acquiring
theme parks. Operators of destination or large regional park chains, other than
Cedar Fair L.P., have not generally been actively seeking to acquire parks in
recent years. Additionally, as a multi-park operator with a track record of
successfully acquiring, improving and repositioning parks, the Company has
numerous competitive advantages over single-park operators in pursuing
acquisitions and improving the operating results at acquired parks. These
advantages include the ability to (i) exercise group purchasing power (for both
operating and 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 Company 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 Company Common Stock (or securities convertible into Company Common
Stock) were used as a portion of the aggregate consideration in the acquisition
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
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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.
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>
NUMBER OF
NAME OF OPERATOR TYPE OF PARK PARKS
- ------------------------------------------------------------ ----------------------- ------------- 1997
ATTENDANCE
--------------
(IN THOUSANDS)
<S> <C> <C> <C>
Disney...................................................... Destination 8 86,000
PREMIER PARKS(1)............................................ REGIONAL 31 36,500
Anheuser-Busch.............................................. Regional/Destination 9 20,700
Universal Studios........................................... Destination 2 14,300
Cedar Fair.................................................. Regional 7 13,400
Paramount Parks............................................. Regional 6 12,800
Blackpool Pleasure Beach Co.(2)............................. Destination 3 8,800
The Tussauds Group(2)....................................... Regional 3 7,400
Silver Dollar City.......................................... Regional/Destination 5 4,900
</TABLE>
- ------------------------
(1) Attendance figures for Premier Parks reflect the 1997 Acquisitions and the
Six Flags Acquisition as if such acquisitions had all occurred at the
commencement of the 1997 season.
(2) Does not operate parks in North America.
DESTINATION PARKS VERSUS REGIONAL PARKS. Destination parks are those
designed primarily to attract visitors willing generally to travel long
distances and incur significant expense to visit the parks' attractions as part
of an extended stay. To accommodate vacationers, many destination parks also
include on-site lodging. Walt Disney World and Universal Studios are well-known
examples of this type of park. Management believes that destination parks are
typically more affected by the national economy than are regional parks. With
the exception of Six Flags Magic Mountain which will be acquired in the Six
Flags Acquisition and is 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 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.
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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 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 shares of Company 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 Company Common Stock at a
price to the public of $29.00 per share, which raised approximately $189.5
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 acquired approximately a 49.9% interest in
Walibi. On April 1, 1998, the Company acquired all of the outstanding capital
stock of SFEC.
DESCRIPTION OF THE 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. According to a copyrighted 1996-97 study published by A.C.
Nielsen Media Research (the "Nielsen Report"), which measures the number of
persons in television households within a given geographic area or DMA, 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. According to the Nielsen
Report, the Buffalo, Rochester and Syracuse markets are the number 40, number 75
and number 72 DMAs in the United States, respectively. Based upon in-park
surveys, approximately 62% of the visitors to Darien Lake in 1997 resided within
a 50-mile radius of the park, and 79% resided within a 100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds and 593 acres of
agricultural, undeveloped and water areas. Darien Lake also has a 20,000 seat
amphitheater. Following the 1995 season, the Company entered into a long-term
arrangement with a national concert promoter to realize the cash flow potential
of the amphitheater. As a result, since it acquired the park, the Company has
realized substantial increases in revenues earned from concerts held at the
facility.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States.
In 1997, approximately 310,000 people used the Darien Lake campgrounds. The
Company believes that substantially all of the camping visitors use the theme
park. The Company is constructing an economy motel at the site for the 1998
season to supplement the campgrounds.
Darien Lake's principal competitor is Wonderland Park located in Toronto,
Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake
competes to a lesser degree with three smaller amusement parks located within 50
miles of the park. Darien Lake is significantly larger with a more diverse
complement of entertainment than any of these three smaller facilities.
ELITCH GARDENS. Elitch Gardens is a combination theme and water park
located on approximately 60 acres in the downtown area of Denver, Colorado, next
to Mile High Stadium and McNichols Arena, and close to Coors Field. Based on
1997 attendance of 1.5 million, Elitch Gardens is the 37th largest theme park in
the United States. The park's primary market includes the greater Denver area as
well as most of central Colorado. This market provides the park with a permanent
resident population base of approximately 2.4 million people within 50 miles of
the park and approximately 3.3 million people within 100 miles. The Denver area
is the number 18 DMA in the United States. Based upon in-park surveys,
approximately 54% of the visitors to Elitch Gardens in 1997 resided within a
50-mile radius of the park, and 78% resided within a 100-mile radius.
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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 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 on the other side of Geauga Lake. While Sea World does, to some extent,
compete with Geauga Lake, it is a complementary attraction due to the proximity
of the parks, and many patrons visit both facilities. In that regard, the
Company and Sea World conduct joint marketing programs in outer market areas,
involving joint television advertising of combination passes. In addition,
combination tickets are sold at each park.
THE GREAT ESCAPE. The Great Escape, which opened in 1954, is a combination
theme and water park located off Interstate 87 in the Lake George resort area,
180 miles north of New York City and 40 miles north of Albany. The park's
primary market includes the Lake George tourist population and the upstate New
York and western New England resident population. Official statistics indicate
that the area had a visitor population of over 7.5 million people in 1995, of
which over 3.5 million were overnight visitors, with an average length of stay
of 4.3 days. This market provides the park with a permanent resident population
base of approximately 800,000 people within 50 miles of the park and 3.3 million
people within 100 miles.
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The Albany market is the number 52 DMA in the United States. Based upon in-park
surveys, approximately 41% of the visitors to the Great Escape in 1997 resided
within a 50-mile radius of the park, and 69% resided within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Riverside Park, the Company's park located in Springfield,
Massachusetts, approximately 150 miles from The Great Escape. In addition, there
is a smaller water park located in Lake George.
KENTUCKY KINGDOM. Kentucky Kingdom is a combination theme and water park,
located on approximately 58 acres on and adjacent to the grounds of the Kentucky
State Fair in Louisville, Kentucky, of which approximately 38 acres are leased
under ground leases with terms (including renewal options) expiring in 2049,
with the balance owned by the Company. Based on 1997 attendance of 1.1 million,
Kentucky Kingdom was the 47th largest theme park in the United States. The
park's primary market includes Louisville and Lexington, Kentucky, Evansville
and Indianapolis, Indiana and Nashville, Tennessee. This market provides the
park with a permanent resident population of approximately 1.4 million people
within 50 miles and 4.6 million people within 100 miles. The Louisville and
Lexington markets are the number 50 and number 67 DMAs in the United States.
The Company believes that, although Kentucky Kingdom is outfitted with a
large number of rides and has a solid attendance base, the park has suffered
from limited available funds for investment and a lack of revenue outlets.
Premier intends to spend approximately $10 million prior to the 1998 season to
add two major new attractions and to upgrade the quality and quantity of the
merchandise outlets and restaurants. The Company also intends to implement more
professional and creative marketing, sales and promotional programs. Kentucky
Kingdom's only significant direct competitor is Paramount's Kings Island and The
Beach, located in Cincinnati, Ohio, approximately 100 miles from the park.
MARINE WORLD. Marine World, a theme park which has historically featured
primarily marine mammals and exotic land animals, is the 47th largest theme park
in the United States, based on 1997 attendance of 1.1 million. Marine World is
located in Vallejo, California, approximately 32 miles from San Francisco, 22
miles from Oakland and 57 miles from Sacramento. This market provides the park
with a permanent resident population base of approximately 5.4 million people
within 50 miles and 10.0 million people within 100 miles. The San
Francisco/Oakland and Sacramento areas are the number 5 and number 20 DMAs in
the United States, respectively. Based upon in-park surveys, approximately 50%
of the visitors to Marine World in 1997 resided within a 50-mile radius of the
park, and 78% resided within a 100-mile radius.
The Company manages the operations of Marine World pursuant to a management
agreement entered into in February 1997, pursuant to which the Company is
entitled to receive an annual base management fee of $250,000 and up to $250,000
annually in additional fees based on park performance. In addition, in November
1997 the Company exercised at no additional cost an option to lease
approximately 40 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the park after operating expenses and debt
service. Finally, the Company has the option to purchase the entire park
beginning in February 2002, which it currently expects to exercise at that time.
Marine World currently consists of 105 acres comprised of various
presentation stadiums, animal habitats, visitor walkways, parking, concession
and picnic areas, bordering a 55-acre man-made lake. The park provides for the
shelter and care of over 50 marine mammals, 600 land animals, over 70 sharks and
rays, birds and reptiles, over 2,600 tropical and cold water fish and marine
invertebrates, and 500 butterflies, all featured in a variety of exhibits and
participatory attractions.
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Marine World's principal competitors are Underwater World at Pier 39 in San
Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium.
These parks are located approximately, 30, 60 and 130 miles from Marine World,
respectively. In addition, plans for Hecker Pass, a new theme park in Gilroy,
California (approximately 100 miles from Marine World) are under development. If
developed, the Company believes that the park would not be operational for at
least two years.
Since taking over the management of Marine World in April 1997, the Company
has stabilized the park's performance by reducing operating expenses, shortening
the operating season, and beginning to expand the park's entertainment component
by adding a themed children's area with children's rides called "Popeye's
Seaport" and the DinoSphere TurboRide, a ride simulation theatre. The Company
expects to invest approximately $30-$40 million at Marine World for the 1998
season to add 14 new rides, including a boomerang steel roller coaster, a river
rapids ride and a shoot-the-chute giant splash ride.
RIVERSIDE PARK. Riverside Park is a combination theme park and motor
speedway, located off Interstate 91 near Springfield, Massachusetts,
approximately 95 miles west of Boston. Riverside Park's primary market includes
Springfield and western Massachusetts, and Hartford and western Connecticut, as
well as portions of eastern Massachusetts (including Boston) and eastern New
York. Based on 1997 attendance of over 1.2 million, Riverside Park is the 43rd
largest theme park in the United States. This market provides the park with a
permanent resident population base of approximately 3.1 million people within 50
miles and 14.7 million people within 100 miles. Based upon in-park surveys,
approximately 63% of the visitors to Riverside Park in 1997 resided within a
50-mile radius of the park, and 95% resided within a 100-mile radius.
Springfield, Hartford/New Haven and Boston are the number 103, number 27 and
number 6 DMAs in the United States.
Riverside Park is comprised of approximately 160 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 30 undeveloped acres. Riverside Park's Speedway is a multi-use
stadium which includes a one-quarter mile NASCAR-sanctioned short track for
automobile racing which can seat 6,200 for speedway events and 15,000 festival
style for concerts.
Riverside Park's most significant competitor is Lake Compounce located in
Bristol, Connecticut, approximately 50 miles from Riverside Park. Lake Compounce
had not been in regular full-service operation for several years. However, the
prior owner of the park entered into a joint venture relationship in 1996 with
an established park operator, and the park has received a substantial investment
of private and public funds and did operate in the 1997 season. To a lesser
extent, Riverside Park competes with The Great Escape, the Company's park
located in Lake George, New York, approximately 150 miles from Riverside Park.
WATERWORLD PARKS. The Waterworld Parks consist of two water parks
(Waterworld USA/Concord and Waterworld USA/Sacramento) and one family
entertainment center (Paradise Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.8 million people within 50 miles of the park
and 10.0 million people within 100 miles. According to the Nielsen Report, 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.
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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 44 DMA in
the United States. This market provides the park with a permanent resident
population base of approximately 1.2 million people within 50 miles of the park
and 2.1 million people within 100 miles. Based upon in-park surveys,
approximately 80% of the visitors to White Water Bay in 1997 resided within a
50-mile radius of the park, and 87% resided within a 100-mile radius. White
Water Bay has no direct competitors.
WYANDOT LAKE. Wyandot Lake, a water park that also offers "dry" rides, is
located just outside of Columbus, Ohio, adjacent to the Columbus Zoo on property
sub-leased from the Columbus Zoo. The park's primary market includes the
Columbus metropolitan area and other central Ohio towns. This market provides
the park with a permanent resident population base of approximately 2.0 million
people within 50 miles of the park and approximately 6.4 million people within
100 miles. The Columbus market is the number 34 DMA in the United States. Based
on in-park surveys, approximately 85% of the visitors to Wyandot Lake in 1997
resided within a 50-mile radius of the park, and 93% resided within a 100-mile
radius.
The Company leases from the Columbus Zoo the land, the buildings and several
rides which existed on the property at the time the lease was entered into in
1983. The current lease expires in 1998, but the Company expects to exercise the
first of its two five-year renewal options. The land leased by Wyandot Lake
consists of approximately 18 acres. The park shares parking facilities with the
Columbus Zoo.
Wyandot Lake's direct competitors are Paramount 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.
DESCRIPTION OF THE WALIBI PARKS.
Prior to the Exchange Offer, Premier acquired approximately 49.9% of the
Walibi Stock in the Initial Acquisition and as a result controls the operation
of the parks owned by Walibi. See "Description of Walibi--Description of Parks"
for a description of the parks operated by Walibi.
DESCRIPTION OF THE SIX FLAGS PARKS
On April 1, 1998, Premier acquired all of the capital stock of SFEC from the
Sellers. See "The Six Flags Acquisition." 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).
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
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upon in-park surveys, approximately 68% of the visitors to the parks in 1997
resided within a 50-mile radius of the park, and 73% resided within a 100-mile
radius.
The Company owns a site of approximately 90 acres used for the theme park,
and approximately 14 acres used for the water park. Six Flags AstroWorld
indirectly competes with Sea World of Texas and the Company's Six Flags Fiesta
Texas, both located in San Antonio, Texas, approximately 200 miles from the
park. Six Flags WaterWorld competes with Splashtown and Water Works, two nearby
water parks.
SIX FLAGS FIESTA TEXAS. Six Flags Fiesta Texas (the "Fiesta Park"), the
33rd largest theme park in the United States with 1997 attendance of 1.6
million, is located on approximately 206 acres of land in San Antonio, Texas.
The San Antonio, Texas market provides the park with a permanent resident
population of 1.7 million people within 50 miles and 3.0 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
AstroWorld, the Company's park located in Houston, Texas, approximately 200
miles from the park.
Partnership Structure. Six Flags took over management of the park in 1996.
The park is operated by San Antonio Theme Park, L.P., a limited partnership (the
"Fiesta Partnership"). Partners in the Fiesta Partnership include (i) Six Flags
San Antonio, L.P. (a limited partnership between two wholly-owned subsidiaries
of SFTP) as a 59% general partner (the "Six Flags GP"), (ii) San Antonio Park
GP, LLC (a Delaware limited liability company managed and partially owned by the
Sellers in which SFTP holds a 99% equity interest) as a 1% general partner (the
"Sellers GP") and (iii) Fiesta Texas Theme Park, Ltd (a Texas limited
partnership indirectly wholly-owned by La Cantera Development Company) as a 40%
limited partner (the "La Cantera LP"). Pursuant to the Six Flags Acquisition the
Sellers will transfer to the Company their 1% interest in the Sellers GP.
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.
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SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK. Six Flags
Great Adventure, the 10th largest theme park in the United States, and the
separately gated adjacent Six Flags Wild Safari Animal Park, the 23rd largest
theme park in the United States with 1997 combined attendance of 3.7 million,
are located in Jackson, New Jersey, approximately 70 miles south of New York
City and 50 miles east of Philadelphia. The New York and Philadelphia markets
provide the parks with a permanent resident population of 11.5 million people
within 50 miles and 25.9 million people within 100 miles. The New York and
Philadelphia markets are the number 1 and number 4 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 50% of the visitors to
the parks in 1997 resided within a 50-mile radius of the park, and 80% resided
within a 100-mile radius.
The Company owns a site of approximately 1,862 acres, of which approximately
221 acres are currently used for the thrill-ride based theme park operations,
and 1,641 acres remain undeveloped. Additionally, the Company owns approximately
355 adjacent acres that are used for the wildlife safari park, home to 55
species of 1,200 exotic animals which can be seen over a four and a half mile
drive. Six Flags Great Adventure's principal competitors are Hershey Park,
located in Hershey, Pennsylvania, approximately 150 miles from the park; and
Dorney Park, located in Allentown, Pennsylvania, approximately 75 miles from the
park.
SIX FLAGS GREAT AMERICA. Six Flags Great America, the 16th largest theme
park in the United States with 1997 attendance of 3.0 million, is located in
Gurnee, Illinois, between Chicago, Illinois and Milwaukee, Wisconsin. The
Chicago and Milwaukee markets provide the park with a permanent resident
population of 7.6 million people within 50 miles and 12.5 million people within
100 miles. The Chicago and Milwaukee markets are the number 3 and number 31 DMAs
in the United States, respectively. Based upon in-park surveys, approximately
64% of the visitors to the park in 1997 resided within a 50-mile radius of the
park, and 80% resided within a 100-mile radius.
The Company owns a site of approximately 86 acres used for the theme park
operations. Six Flags Great America currently has no direct theme park
competitors in the region, but does compete with Paramount's Kings Island,
located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar
Point, located in Sandusky, Ohio, approximately 340 miles from the park; and Six
Flags St. Louis, the Company's park located near St. Louis, Missouri,
approximately 320 miles from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR. Six Flags Magic
Mountain, the 12th largest theme park in the United States with 1997 attendance
of 3.3 million, and the separately gated adjacent Six Flags Hurricane Harbor,
the 11th largest water park in the United States with 1997 attendance of
351,000, are located in Valencia, California, in the northwest section of Los
Angeles County. The Los Angeles, California market provides the parks with a
permanent resident population of 9.4 million people within 50 miles and 15.8
million people within 100 miles. The Los Angeles market is the number 2 DMA in
the United States. Based upon in-park surveys, approximately 45% of the visitors
to the parks in 1997 resided within a 50-mile radius of the parks, and 64%
resided within a 100-mile radius.
The Company owns a site of approximately 110 acres used for the theme park,
and approximately 11 acres used for the pirate-themed water park. Six Flags
Magic Mountain's principal competitors include Disneyland in Anaheim,
California, located approximately 60 miles from the park, Universal Studios
Hollywood in Universal City, California, located approximately 20 miles from the
park, Knott's Berry Farm in Buena Park, California, located approximately 50
miles from the park, and Sea World of California in San Diego, California,
located approximately 150 miles from the park. Six Flags Hurricane Harbor has no
direct competitors in the area.
SIX FLAGS OVER GEORGIA. Six Flags Over Georgia, the 20th largest theme park
in the United States with 1997 attendance of 2.8 million, is located in
Mableton, Georgia, approximately 10 miles outside of Atlanta, Georgia. The
Atlanta, Georgia market provides the park with a permanent resident population
of 3.8 million people within 50 miles and 6.3 million people within 100 miles.
The Atlanta market is the number
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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 these arrangements (the "Georgia Agreements"), the Georgia
park is 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 valued 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 these 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 "The Six Flags Acquisition."
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
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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 valued 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. In March 1998, Six Flags completed a tender offer
pursuant to which Six Flags purchased approximately 33% of the outstanding LP
Units for an aggregate purchase price of $117.3 million. In connection with the
Subordinated Indemnity Agreement, the Company is transferring to Time Warner
(who has guaranteed the Six Flags obligations under these arrangements) record
title to the corporations which own certain entities that have purchased and
will purchase LP Units and the Company will receive an assignment from Time
Warner of all cash flow received on such LP Units and will otherwise control
such entities, except in the event of a default by the Company of its
obligations under these arrangements. After all such obligations have been
satisfied, Time Warner is required to retransfer to the Company such record
title for a nominal consideration. In addition, the Company will issue preferred
stock of the managing partner of the Texas Co-Venture Partnership to Time Warner
which, in the event of such a default, would permit Time Warner to obtain
control of such entity. See "The Six Flags Acquisition."
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
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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 local oriented multi-media marketing
and promotional programs for each of its parks. These 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 generally initiated at the
park level and 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 35.7% of aggregate
attendance in 1997 at the 11 parks owned during that season. Each park has a
group sales and pre-sold ticket manager and a well-trained sales staff dedicated
to selling multiple group sales and pre-sold ticket programs through a variety
of methods, including direct mail, telemarketing and personal sales calls.
Historically, Premier has been successful in increasing group sales and pre-sold
tickets at its existing and acquired parks.
The Company has also developed effective programs for marketing season pass
tickets. Season pass sales establish a solid attendance base in advance of the
season, thus reducing exposure to inclement weather. Additionally, season pass
holders often bring paying guests and generate "word-of-mouth" advertising for
the parks. The increased in-park spending which results from season passes is
not offset by incremental operating expenses, since such expenses are relatively
fixed during the operating season. During 1997, 20.6% of visitors to the 11
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 72% of patrons at the 11
parks then owned by the Company were admitted at a discount rate and, for the
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year ended December 31, 1997, approximately 44.7% 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 manufactured by
or for the Company and 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 (who report to its Chief Operating Officer) and is
responsible for all operations and management of the individual park. Local
advertising, ticket sales, community relations and hiring and training of
personnel are the responsibility of individual park management in coordination
with corporate support teams.
Each of the Company's parks is managed by a full-time, on-site management
team under the direction of the general manager. Each such management team
includes senior personnel responsible for operations and maintenance, marketing
and promotion, human resources and merchandising. Park management compensation
structures are designed to provide incentives (including stock options and cash
bonuses) for individual park managers to execute the Company's strategy and to
maximize revenues and operating cash flow at each park. The Company's 10 general
managers (before the Six Flags Acquisition) have an aggregate of approximately
210 years experience in the industry, including approximately 85 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
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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 center is open year-round and does 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 900 full-time
employees who devote substantially all of their time to maintaining the parks
and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs an annual inspection of each park
and all attractions and related maintenance procedures. The result of insurance
inspections are written evaluation and inspection reports, as well as written
suggestions on various aspects of park operations. State inspectors also conduct
annual ride inspections before the beginning of each season. Other portions of
each park are also subject to inspections by local fire marshals and health and
building department officials. Furthermore, the Company uses Ellis & Associates
as water safety consultants at its parks in order to train life guards and audit
safety procedures.
EMPLOYEES
The Company employs approximately 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
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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 $2.1 million compared to $1.5 million in 1996
and $0.9 million in 1995. For the same three years Six Flags liability costs and
claims were $13.8 million, $15.9 million and $15.8 million, respectively. The
Company also maintains fire and extended coverage, workers' compensation,
business interruption and other forms of insurance typical to businesses in its
industry. The fire and extended coverage policies insure the Company's real and
personal properties (other than land) against physical damage resulting from a
variety of hazards.
ENVIRONMENTAL AND OTHER REGULATION
The Company's operations are subject to increasingly stringent federal,
state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use and minimum wage regulations
applicable to theme park operations, and local and state regulations applicable
environmental and other laws and regulations and, although no assurance can be
given, it does not foresee the need for any significant expenditures in this
area in the near future.
Remediation of certain hazardous substances or petroleum products are
underway at the Company's Six Flags Great Adventure Park. The Company does not
anticipate that any environmental remediation matters, either individually or in
the aggregate, will have a material adverse effect on its financial condition or
results of operation.
In addition, portions of the undeveloped areas at its parks may be
classified as wetlands. Accordingly, the Company may need to obtain governmental
permits and other approvals prior to conducting development activities that
affect these areas, and future development may be prohibited in some or all of
these areas.
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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 "The Six Flags
Acquisition--Indemnification."
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MANAGEMENT
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................... 42 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..................... 36 Vice President of Marketing
David Thomas........................ 40 Vice President of Entertainment
Richard A. Kipf..................... 63 Vice President of Administration, Corporate Secretary
John Gannon......................... 40 Vice President of Finance
Russell Kuteman..................... 45 Vice President of Finance
Paul A. Biddelman................... 52 Director
Michael E. Gellert.................. 66 Director
Jack Tyrrell........................ 51 Director
Sandy Gurtler....................... 48 Director
Charles R. Wood..................... 83 Director
</TABLE>
KIERAN E. BURKE has served as Chief Executive Officer and a Director of the
Company since October 1989 and Chairman of the Board since June 1994. From 1989
through June 1994, he was President of Premier. Mr. Burke also serves as a
director of Blue Ridge Real Estate Company and Big Boulder Corporation. Mr.
Burke was an investment banker prior to becoming President of Premier. Mr. Burke
is a member of the board of directors of the International Association of
Amusement Parks & Attractions ("IAAPA").
GARY STORY has served as President and a Director of the Company since June
1994 and as Chief Operating Officer since January 1992. From January 1992
through June 1994, he also served as Premier's Executive Vice President. Prior
to that time, he had been General Manager of Frontier City for more than five
years. From 1983 through 1984, Mr. Story served as General Manager of Luna Park,
an amusement park in Sydney, Australia, during its redevelopment as a theme park
and from 1981 through 1983 he served as General Manager of Diversiones del
Reino, an amusement park in Mexico City. From 1972 through 1981, Mr. Story
served in various capacities with Six Flags. Mr. Story is a former member of the
board of directors of IAAPA.
JAMES F. DANNHAUSER became Chief Financial Officer of the Company in October
1995 and has served as a Director of Premier since December 1992. From 1990
through June 1996, Mr. Dannhauser was a managing director of Lepercq de Neuflize
& Co. Incorporated, an investment banking firm ("Lepercq"). Mr. Dannhauser is a
member of the board of directors of Lepercq.
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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
15 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 10 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.
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.
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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 40 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. From January 1991 through
March 1992, Mr. Biddelman was managing director of Clements Taee Biddelman
Incorporated, a financial advisory firm. Mr. Biddelman also serves as a director
of Electronic Retailing Systems International, Inc., Insituform Technologies,
Inc., Celadon Group, Inc., Petroleum Heat and Power Co., Inc. and Star Gas
Corporation (general partner of Star Gas Partners, L.P.).
MICHAEL E. GELLERT has served as a Director of the Company since March 1989.
He previously served as a Director of Premier and as a Trustee of Tierco from
1979 until 1986. From June 1989 through June 1994, he also served as the
Chairman of the Board of Premier. Mr. Gellert is a general partner of Windcrest
Partners ("Windcrest"), a New York limited partnership. Windcrest, the principal
business of which is private investing, is an affiliate of Premier. Mr. Gellert
also serves as a director of Devon Energy Corp., Humana Inc., Seacor Holdings,
Inc., Regal Cinemas, Inc. and The Putnam Trust Company of Greenwich Advisory
Board of The Bank of New York.
JACK TYRRELL has served as a Director of Premier since December 1992. For
more than five years, Mr. Tyrrell has been a general partner of Lawrence Venture
Partners, a general partnership, the principal business of which is that of
acting as general partner of Lawrence, Tyrrell, Ortale & Smith ("LTOS"), a
private investment limited partnership. Mr. Tyrrell is also a general partner of
LTOS II Partners, a general partnership, the principal business of which is that
of acting as general partner of Lawrence, Tyrrell, Ortale & Smith II, L.P.
("LTOS II"), a private investment limited partnership. Mr. Tyrrell is also a
general
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partner of Richland Partners, L.P., a limited partnership, the principal
business of which is that of acting as general partner of Richland Ventures,
L.P. ("Richland"), a private investment limited partnership. In addition, Mr.
Tyrrell is a general partner of Richland Partners II, L.P., a limited
partnership, the principal business of which is that of acting as general
partner of Richland Ventures II, L.P. ("Richland II"), a private investment
limited partnership. Mr. Tyrrell also serves as a director of National Health
Investors, Inc. and Regal Cinemas, Inc.
SANDY GURTLER has served as a Director of the Company since 1997. Mr.
Gurtler is the chief executive officer, a director and a shareholder of Chilcott
Entertainment Corp., which was the general partner of the owner of Elitch
Gardens Amusement Park in Denver, Colorado prior to the acquisition of the park
by the Company in October 1996. Mr. Gurtler also serves as a consultant to the
Company.
CHARLES R. WOOD has served as a Director of the Company since 1997. Mr. Wood
is the President and sole shareholder of Storytown USA, Inc. and Fantasy Rides
Corporation, which collectively owned The Great Escape 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 March 1, 1998
(except as noted below) as to Company Common Stock owned by (a) each of the
Company's current directors and named executive officers; (b) all current
directors and officers of the Company as a group; and (c) each person who, to
the best of the Company's knowledge, beneficially owned on that date more than
5% of the outstanding Company Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
- ------------------------------------------------------------------------ ----------------- -------------
<S> <C> <C>
Kieran E. Burke(1)...................................................... 314,877 *
Paul A. Biddelman(2).................................................... 2,657,071 7.1
James F. Dannhauser(3).................................................. 76,665 *
Michael E. Gellert(4)................................................... 1,368,961 3.7
Gary Story(5)........................................................... 143,000 *
Jack Tyrrell(6)......................................................... 695,253 1.9
Sandy Gurtler........................................................... -- --
Charles R. Wood......................................................... 9,091(7) *
Robert J. Gellert(8) 3.3
122 East 42nd Street
New York, New York 10168.............................................. 1,254,553
Windcrest Partners(9) 3.0
122 East 42nd Street
New York, New York 10168.............................................. 1,136,025
Hanseatic Corporation(10) 7.1
Wolfgang Traber
450 Park Avenue
New York, New York 10152.............................................. 2,657,071
FMR Corp.(11) 5.1
82 Devonshire Street
Boston, Massachusetts 02109........................................... 1,897,900
Baron Capital Group(12) 3.2
767 Fifth Avenue
New York, New York 10153.............................................. 1,184,700
Warburg Pincus Asset Management(13) 2.6
466 Lexington Avenue
New York, New York 10017.............................................. 968,145
All directors and officers as a group(14)(15 persons)................... 5,310,419 14.2
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes 75,637 shares of Company Common Stock and warrants and options to
purchase 239,238 shares of Company 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 Company Common Stock beneficially owned by Hanseatic
Corporation ("Hanseatic"), of which Mr. Biddelman is President. See footnote
(10) below.
(3) Includes 32,665 shares of Company Common Stock and options to purchase
44,000 shares of Company Common Stock. Does not include 154,325 shares under
the unvested portion of options and restricted shares granted.
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(4) Includes 232,936 shares of Company Common Stock, as to which Mr. Gellert has
sole voting and investment power. Also includes 1,136,025 shares of Company
Common Stock beneficially owned by Windcrest Partners ("Windcrest") which
shares voting and investment power with its general partners, Michael E.
Gellert and Robert J. Gellert.
(5) Includes 25,000 shares of Company Common Stock and options to purchase
118,000 shares of Company Common Stock. Does not include 197,000 shares
under the unvested portion of options and restricted shares granted.
(6) Includes 9,794 shares of Company Common Stock for his own account; 4,396
shares of Company Common Stock held in a trust for the benefit of his son;
311,940 shares of Company Common Stock beneficially owned by Lawrence,
Tyrrell, Ortale & Smith II, L.R ("LTOS II"); and an aggregate of 369,123
shares of Company 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 Company Common Stock for his own account, as to
which he has sole voting and investment power; 40,351 shares of Company
Common Stock as agent for 26 other persons and entities with whom he shares
voting and investment power; 2,168 shares of Company 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 Company 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 Company 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 Company 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 Company 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
Company 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 Company 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 Company 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 Company Common Stock. Of such
shares, 2,588,695 shares of Company 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 Company
Common Stock are held by Hanseatic for discretionary customer accounts.
Information has been derived from Amendment No. 7 to Schedule 13D, dated
November 10, 1997.
(11) Includes 1,665,000 shares of Company Common Stock beneficially owned by
Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. and a registered investment adviser (including 7,500
shares of Company Common Stock owned by Fidelity American Special Situations
Trust ("FASST"), an English unit trust as to which Fidelity acts as a
sub-adviser); 222,800 shares of Company Common Stock beneficially owned by
Fidelity Management Trust Company ("FMT"), a wholly-owned subsidiary of FMR
Corp. and a bank; and 17,100 shares of Company
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Common Stock beneficially owned by Fidelity International Limited ("FIL"), a
Bermudan investment adviser and former majority-owned subsidiary of Fidelity
(including 7,500 shares of Company 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 Amendment No. 1
to Schedule 13G, dated March 10, 1998.
(12) Includes 1,136,700 shares of Company 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 Company 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 Company Common Stock that the
following persons have the right to acquire within 60 days from March 1,
1998 (Kieran E. Burke, 239,238 shares (see footnote (1)); James R.
Dannhauser, 44,000 shares (see footnote (3)); Gary Story, 118,000 shares
(see footnote (5)); and all directors and officers as a group, 446,839
shares.
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THE SIX FLAGS ACQUISITION
THE ACQUISITION
GENERAL. On February 9, 1998, the Company, certain of its wholly-owned
subsidiaries, 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 acquired, by merger, on April 1, 1998, 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 was
paid in cash. At the date of acquisition, Six Flags' liabilities included
approximately $192.3 million principal amount at maturity ($161.1 million
accreted value at December 28, 1997) of SFEC Zero Coupon Senior Notes and
approximately $285.0 million principal amount at maturity ($269.9 million
accreted value at December 28, 1997) of SFTP Senior Subordinated Notes. In
addition, the Company refinanced 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). The net
proceeds of the Offerings (as defined herein) were used, in part, to fund the
payment of the Capital Stock Consideration.
THE FINANCINGS
In connection with the Six Flags Acquisition, the Company (i) issued
18,400,000 shares of Company Common Stock with gross proceeds of $993.6 million
(the "Common Stock Offering"), (ii) issued 5,750,000 Premium Income Equity
Securities ("PIES-SM-") representing interests in the Company's 7 1/2%
Mandatorily Convertible Preferred Stock (the "Mandatorily Convertible Preferred
Stock"), with gross proceeds of $310.5 million (the "PIES Offering"), (iii)
issued Company Senior Discount Notes with gross proceeds of $251.7 million (the
"Discount Notes Offering") and (iv) issued $280.0 million principal amount of
Company Senior Notes (the "Senior Notes Offering"). In addition, SFEC issued
$170.0 million principal amount of the New SFEC Notes guaranteed on a fully
subordinated basis by the Company (the "SFEC Notes Offering" and together with
the Common Stock Offering, the PIES Offering, the Discount Notes Offering and
the Senior Notes Offering, the "Offerings"). 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.
THE PREMIER MERGER
Prior to the Six Flags Acquisition, the Company (together with its
consolidated subsidiaries, "Premier Operations") merged (the "Premier Merger")
with a wholly-owned subsidiary of Premier Park 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 the common stock of Premier
Operations became, on a share-for-share basis, holders of common stock of
Premier Parks Holdings Corporation, and the Company became a wholly-owned
subsidiary of Premier Parks Holdings Corporation. On the effective date of the
Premier Merger, the Premier Operations changed its name to Premier Parks
Operations Inc., and Premier Parks Holdings Corporation changed its name to
Premier Parks Inc.
In addition to the share-for-share exchange, each option or similar right
exercisable for capital stock of Premier Operations outstanding immediately
prior to the Premier Merger (including the right to receive Contingent Shares)
automatically converted into an option or similar right exercisable for a number
of shares of common stock equal to the number of shares of capital stock of the
Company for which such option or similar right was exercisable immediately prior
to the Premier Merger.
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
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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 deposited $25
million in cash into an escrow fund under a General Indemnity Escrow Agreement
entered into by the Company with the Sellers and certain holders of options
exercisable for capital stock of SFEC. A portion of such deposit came from the
Capital Stock Consideration payable to the Sellers, with the balance coming 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 "Description of the
Company--Legal Proceedings."
AGREEMENTS RELATED TO THE SIX FLAGS AGREEMENT
Certain ancillary agreements have been entered into pursuant to the Six
Flags Agreement in connection with the Six Flags Acquisition. See "Description
of the Company--Licenses" and "Description of Capital Stock and Charter
Documents of the Company--Registration Rights."
In addition to the ancillary agreements entered into in connection with the
Six Flags Acquisition that are described elsewhere herein, at the closing of the
Six Flags Transactions, the Company entered 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 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
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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.
In connection with the Premier Merger, Premier, SFEC, SFTP and Premier
Operations entered into a Shared Services Agreement pursuant to which Premier
will provide certain corporate, administrative and other general services to
SFEC, SFTP and Premier Operations for their operations and the operations of
their subsidiaries. Generally, Premier will provide legal, financial,
accounting, human resources, information systems, payroll, marketing and
promotion, and other services to its subsidiaries. In addition, the purchasing,
design and implementation of capital improvements, the production of live
entertainment at the parks, as well as the purchasing of operating supplies,
will generally be done by Premier on behalf of its subsidiaries. The cost of
services provided generally to the parks, including third party costs and
appropriate corporate overhead, will generally be allocated based on each park's
percentage of Premier's revenues. Costs of services provided to particular
parks, such as costs relating to capital improvements, will be allocated to such
park and will normally include, in addition to direct costs, an allocation of
time spent and expenses incurred by corporate personnel in providing such
services. In addition, Premier will be entitled to a specified fixed annual fee
for providing certain specified general administrative services to these
entities. SFEC, SFTP and Premier Operations will be obligated to purchase such
services only so long as they may deem such services to be necessary or
desirable for their operations and the operations of their subsidiaries.
A tax sharing agreement was entered into between Premier and SFEC for the
purpose of allocating to SFEC its share of any actual federal income tax
liability of Premier's consolidated federal income tax group that will include
SFEC and its eligible subsidiaries. Under the tax sharing agreement, SFEC will
be required to make payments to Premier shortly before Premier is required to
make tax payments, including estimated tax payments, to the Internal Revenue
Service on behalf of the consolidated group. Premier will act as agent for SFEC
and its subsidiaries with respect to federal income tax matters and will pay to
the Internal Revenue Service the federal income tax liability of the
consolidated group. Under the tax sharing agreement, the amount that SFEC and
its subsidiaries will owe to Premier may not exceed the tax liability that they
would have owed if they were not members of Premier's consolidated group and
instead were a separate consolidated group, but without taking into account any
of their tax attribute carrybacks or carryforwards. The tax sharing agreement
will provide for the application of similar principles to any unitary,
consolidated or combined state or local income tax filing group that includes
SFEC or any of its subsidiaries in the same group with Premier or any of its
subsidiaries other than SFEC and its subsidiaries.
A tax sharing agreement was also entered into between Premier and Premier
Operations for the purpose of charging to Premier Operations and its tax
consolidated subsidiaries an amount in lieu of their federal income tax which
will be paid by Premier on their behalf. Under the tax sharing agreement,
Premier Operations is required to make payments to Premier shortly before
Premier is required to make estimated and final tax payments to the Internal
Revenue Service on behalf of the consolidated group. The amount to be paid by
Premier Operations and each of its subsidiaries is the amount that each would
owe as
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federal income tax if it were not a member of Premier's federal income tax
consolidated group. Under the tax sharing agreement, each of Premier Operations
and each of its subsidiaries can carry back and carry forward its net operating
and net capital losses and other tax attributes to the extent it would be
permitted to do so if it were a separate company filing its own federal income
tax return, but without taking into account any loss or other tax attribute
carryovers that existed prior to the effective date of the tax sharing
agreement. Under the tax sharing agreement, Premier will act as agent for
Premier Operations and its subsidiaries with respect to Federal income tax
matters and will pay to the Internal Revenue Service the Federal income tax
liability of the consolidated group. The tax sharing agreement also provides for
the application of similar principles to any unitary, consolidated or combined
state or local income, franchise or net worth tax filing group that includes
Premier Operations or any of its subsidiaries in the same group with Premier or
any of its other subsidiaries.
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DESCRIPTION OF WALIBI
Walibi is a corporation (SOCIETE ANONYME) organized under the laws of
Belgium. Walibi operates 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 include Bellewaerde, 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 approximately 23.0 million people within 50
miles and approximately 54.4 million people within 100 miles.
The Walibi Parks' most significant competitors are Disneyland Paris, located
in France, Meli Park and Bobbejaanland, each located in Belgium, de Efteling,
located in The Netherlands, and Parc Asterix, located in France.
The following table sets forth certain information for the parks operated by
Walibi.
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET ACRES(1)
- ------------------------------------------------ --------------- ------------------- 1997 ATTENDANCE -----------
-------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Bellewaerde..................................... Theme Belgium 670 133
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
</TABLE>
- ------------------------
(1) Includes acreage currently dedicated to park usage.
OPERATING STRATEGY
Walibi's operating strategy is to continue to increase attendance at its
existing parks. It intends to accomplish this by improving the attractiveness of
its parks primarily through capital investments in a number of its parks. In
this regard, the Company has agreed to invest approximately $38 million to
expand the six Walibi Parks over three years, commencing 1999. These investments
include three space shots and one giant drop in 1998.
DESCRIPTION OF THE WALIBI PARKS
BELLEWAERDE. Bellewaerde is a theme park located on approximately 133 acres
in Ieper, Belgium, approximately 75 miles from Brussels and approximately 30
miles from Lille, France. The park's primary market includes northwestern
Belgium as well as northern France. This market provides the park with a
permanent resident population of approximately 5.0 million people within 50
miles and approximately 11.0 million people within 100 miles.
Bellewaerde's most significant competitor is Meli Park, located in
Adinkerke, approximately 75 miles from the park. Bellewaerde has been in
operation since the 1950s.
WALIBI AQUITAINE. Walibi Aquitaine is a theme park located on approximately
74 acres in Agen, France, between Bordeaux and Toulouse, France. The park's
primary market includes Southwestern France. This market provides the park with
a permanent resident population of approximately 2.5 million people within 50
miles and approximately 3.5 million people within 100 miles.
Walibi Aquitaine's most significant competitors are as follows:
- Futuroscope located in Poitiers, approximately 250 miles from the park;
- Aqualand located in Arcachon, approximately 100 miles from the park;
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- Zoo de La Palmyre located in Royan, approximately 180 miles from the park;
and
- La Cite de l'Espace in Toulouse, approximately 70 miles from the park.
Walibi Aquitaine has been in operation since 1992.
WALIBI FLEVO. Walibi Flevo is a theme park located on approximately 250
acres in Biddinghuizen, The Netherlands, approximately 55 miles from Amsterdam.
The park's primary market includes all of The Netherlands. This market provides
the park with a permanent resident population of approximately 6.4 million
people within 50 miles and approximately 15.5 million people within 100 miles.
Walibi Flevo's most significant competitors are the Efteling, located in
Kaatsheuval, approximately 70 miles from the park, and Bellewaerde, the
Company's theme parks in Ieper, Belgium, approximately 125 miles from the park.
Walibi Flevo, which was previously known as Flevoho, was originally
developed in 1971 and offered visitors exhibitions on the theme of the farm and
nature. When Walibi acquired the park in 1992, it was closed and underwent
extensive renovations until its reopening in 1994.
WALIBI RHONE-ALPES. Walibi Rhone-Alpes is a combination theme and water
park located on approximately 35 acres in the Rhone-Alpes region of France at
the heart of the Lyon-Geneva-Grenoble triangle, approximately 37 miles from
Lyon, France. The park's primary market includes Rhone-Alpes region. This market
provides the park with a permanent resident population of approximately 3.3
million people within 50 miles and approximately 5.4 million people within 100
miles.
Walibi Rhone-Alpes' most significant competitors are as follows:
- Paugre located in the Ardeche subdivision, approximately 100 miles from
the park; and
- Le Pal located in the Allier subdivision, approximately 180 miles from the
park.
Walibi Rhone-Alpes has been in operation since 1979.
WALIBI SCHTROUMPF. Walibi Schtroumpf is a Smurf-TM- and space-themed park
located on approximately 375 acres in Metz, France, approximately 200 miles from
Paris, France. The park's primary market includes Northern France, Luxembourg,
Southern Belgium and Southern Germany. This market provides the park with a
permanent resident population of approximately 2.3 million people within 50
miles and approximately 5.0 million people within 100 miles.
Walibi Schtroumpf's most significant competitors are Europa Park, Walibi
Wavre, Disneyland Paris, Nigloland and Asterix, located in German, Belgium and
France, respectively, approximately 125, 150, 210 and 240 miles respectively
from the park, and located approximately 645 miles from Walibi Aquitaine, the
Company's theme park located in Agen, France and approximately 326 miles from
Walibi Rhone-Alpes, the Company's theme park located near Lyon, France. Walibi
Schtroumpf has been in operation since 1989.
WALIBI WAVRE AND AQUALIBI. Walibi Wavre and Aqualibi are a theme park and
an adjacent water park, respectively, located in the aggregate on approximately
120 acres in Wavre, Belgium, approximately 12.5 miles from Brussels. The parks'
primary market includes all of Belgium, northern France and The Netherlands.
This market provides the park with a permanent resident population of
approximately 8.0 million people within 50 miles and approximately 15.0 million
people within 100 miles.
Walibi Wavre and Aqualibi's most significant competitors are as follows:
- Disneyland Paris located East of Paris, approximately 281 miles from the
park;
- Efteling, located in the South of The Netherlands, approximately 106 miles
from the park; and
- Asterix, located North of Paris, approximately 250 miles from the park.
Walibi Wavre and Aqualibi have been in operation since 1975 and 1987,
respectively.
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LEGAL PROCEEDINGS
Walibi and its subsidiaries are party to various legal proceedings and
governmental investigations which arise in the regular course of its business.
Of particular note, on February 5, 1991, several individual plaintiffs and
Caisse Primaire d'Assurance Maladie de Lyon filed suit against Walibi
Rhone-Alpes (a subsidiary of Walibi) regarding an accident that occurred in the
Walibi Rhone-Alpes theme park in 1988. The individual plaintiffs have asserted
damages in the amount of approximately FF 13 million and Caisse Primaire
d'Assurance Maladie de Lyon has asserted damages in the amount of FF 7 million.
Walibi Rhone-Alpes has answered the suit and is defending it. The case is
pending before the Court of Grand Instance of Bourgoin-Jallieu located in the
Department de "l'Isere," France. Walibi has established a reserve for this case
of FF 6.5 million. The claims made by the plaintiffs are not covered by
insurance.
EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITIES HOLDERS
There are no limitations either under the laws of Belgium or under the
charter documents of Walibi restricting the rights of non-residents to buy, sell
or hold Walibi Stock. There are no restrictions on the remittance of dividends
to non-resident holders.
INDUSTRY CONDITIONS AND COMPETITION
Each of the Walibi Parks faces a significant level of competition. There are
a number of large competitors including destination theme parks which have
substantially greater resources than Walibi to allocate to advertising campaigns
and capital expenditures. In addition, Walibi's parks face competition from a
number of smaller family-owned parks which, although they generally have fewer
financial resources than Walibi, have historically focused their marketing
strategy on low priced admissions. In addition to direct competition, Walibi's
operating results can be adversely affected by unfavorable weather conditions,
accidents or occurrences of an event or condition, including negative publicity
or significant local competitive events, that significantly reduce paid
attendance, and therefore, revenue at any of its theme parks.
REGULATION
Walibi and its operations are subject to Belgian laws and regulations, as
well as the laws and regulations of other jurisdictions including the European
Union. Such laws and regulations regulate to a greater or lesser degree nearly
all aspects of Walibi's domestic and foreign operations including but not
limited to regulations governing Walibi relations with its employees, the
environment, health and safety and taxation. For example, each attraction at
Walibi theme parks requires a construction permit and in certain jurisdictions,
design safety certificates. In addition, Walibi is required to maintain
exploitation permits (which also operate as environmental permits) and is
subject to noise level regulation which could impact its parks operating hours.
The failure to maintain proper permits and adverse changes in regulations that
limit Walibi's ability to operate its park during prime hours could have a
material adverse effect on the operation of its parks.
EMPLOYEES
As of January 7, 1998 Walibi had approximately 300 employees. However, as
Walibi employs seasonal employees during the parks' operating season, this
number will increase significantly during such periods. Walibi's relationship
with its employees is governed by both the national and regional law of the
countries in which it operates and European Union regulations. Walibi's
collective bargaining agreements ("CBA") are concluded by committees (the
"Committees") where both employers and employees are represented. In the
Netherlands, the Committee for hotel and catering services represents Walibi
employees and in France, the Committee for attraction parks represents Walibi
employees. In Belgium, there is no Committee for parks, therefore most of
Walibi's Belgian employees are represented by various Committees including one
for its white-collar employees, and two for its blue-collar employees. Most
CBA's are entered
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into on national level, however, Bellewaerde has entered into six separate CBA's
for its employees. Walibi's relations with its employees in general, are
believed to be good.
Depending on the number of employees at each park, certain counties where
Walibi operates require workers advisory bodies generally known as Works
Councils. A number of Walibi Parks are required to have Works Councils. The main
functions of the Works Councils are (i) to advise on all matters relating to the
organization of work, the working conditions and the productivity of the
company, (ii) to receive from the employee information regarding the company and
(iii) to establish or modify the work rules. In addition, Walibi parks located
in Belgium are required to establish health and safety committees.
DIRECTORS OF WALIBI
Prior to the Initial Acquisition the Walibi Board of Directors consisted of
eight members, none of whom were affiliated with the Company (the "Outgoing
Board of Directors"). On March 26, 1998, in connection with the Initial
Acquisition six of the eight members of the Outgoing Board of Directors resigned
and Kieran E. Burke, Gary Story and James F. Dannhauser were appointed to the
Walibi Board. As a result, the Walibi Board currently consists of five members.
The terms of Thierry Meeus and Yves Meeus expire on January 1, 1999. The
appointments of Messrs. Burke, Story and Dannhauser must be approved by the
stockholders of Walibi at the next annual general meeting.
THIERRY MEEUS age 42, has been a director since 1988, and has served as
Chairman of the Direction Committee of Walibi since October 1996. From 1989 to
1996 Mr. Meeus served as Chairman of the Board of Mini Europe S.A. and of
Oceade. Mr. Meeus is a director of the 'Office de Promotion du Tourisme', a
Belgian organization created to promote the tourism industry in Belgium.
YVES MEEUS age 44, has been a director since 1988. During the past five
years, Mr. Meeus has served as technical manager of Walibi after being appointed
general manager of the Walibi Wavre Park. Since 1991, Mr. Meeus has been
responsible for development and operations for Walibi.
See "Management" for biographical information regarding Messrs. Burke, Story
and Dannhauser.
EXECUTIVE OFFICERS OF WALIBI
The following officers are the executive officers of Walibi:
<TABLE>
<CAPTION>
AGE AS OF MARCH 1,
OFFICERS OFFICE 1998
- -------------------------------- ---------------------------------------------------------------- -------------------
<S> <C> <C>
Gerard Constant General Manager 41
Edduard Bon General Manager--Schtrounpf 36
Chriotophe De Moffarts General Manager--Aquitaine 36
Herve Louis-Rhodes General Manager--Rhone-Alpes 34
Rudi Rasschaert General Manager--Mini Europe and Oceade 36
Jean-Marcel Thomas General Manager--Wavre 36
Hans van Driem General Manager--Flevo 51
Paul van Havere General Manager--Bellewaerde 45
</TABLE>
GERARD CONSTANT has served as General Manager of the Walibi since June 1995
and is a member of the group direction committee. From October 1993 to June
1995, Mr. Constant was responsible for Walibi finance and administrative
matters. Prior thereto he was group controller of Hoist.
EDDUARD BON has served as General Manager of Walibi Schtroumpf since March
1996. From 1985 to 1996, Mr. Bon served as a manager for Accor, a hotel group,
where he worked in several European countries before becoming general manager of
an hotel located in Reims (France).
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CHRISTOPHE DE MOFFARTS has served as General Manager of Walibi Aquitaine
since the creation of the park by Walibi, in 1992. During the past five years,
prior to assuming his current position, Mr. de Moffarts served as Human
Resources Manager of Walibi Wavre.
HERVE LOUIS-RHODES has served as General Manager of Walibi Rhone Alps since
June 1994. From 1991 to 1994 Mr. Louis Rhodes was a operation manager in
Eurodisney (Paris) in the Fantasyland area before becoming sales manager.
RUDI RASSCHAERT has served as General Manager of Mini Europe and Oceade
since October 1996. During the past five years, prior to assuming his current
position, Mr. Rasschaert was a manager with Trammell Crow Int. B.I.T.M., a real
estate company, where he managed the building of a major professional buying
sales center in Barcelona (Spain).
JEAN-MARCEL THOMAS has served as General Manager of Walibi Wavre since March
1996. During the past five years, prior to assuming his current position, Mr.
Thomas managed the Aqualibi Water Park before serving as general manager of
Walibi Schtroumpf.
HANS VAN DRIEM has served as General Manager of Walibi Flevo since the
acquisition of that park by the Walibi in 1992. Between 1992 and 1994, he was
responsible for the development of Walibi Flevo in preparation for its opening
in 1994.
PAUL VAN HAVERE has served as General Manager of Bellewaerde Park since
1994. During the past five years, prior to assuming his current position, Mr.
Van Havere was Manager for City 7, a company organizing major events in Belgium.
RELATED PARTY TRANSACTIONS
Karaba N.V. (a company controlled by Luc Florizoone, a former member of
Walibi's board of directors) and Walibi have entered into a management agreement
whereby Karaba N.V. provides one representative to participate in the management
committee of Walibi and the general management of the corporation. Karaba N.V.
receives a fee of BEF 2.4 million per six month period this agreement is in
effect.
Walibi intends to enter into consulting agreements with Thierry Meeus and Yves
Meeus, directors of Walibi, or companies directly controlled by them. The
agreements generally will provide for each individual to render consulting
services with an executive nature to Walibi for a three year term. Thierry Meeus
and Yves Meeus will receive fees of BEF 7.5 million and BEF 7.5 million,
respectively, per annum for such services.
BENEFICIAL OWNERSHIP OF CERTAIN WALIBI STOCKHOLDERS AND MANAGEMENT
International currently holds 665,167 shares of Walibi Stock representing
approximately 49.9% of the issued and outstanding Walibi Stock. As of April 15,
1998 the officers and directors of Walibi (other than with respect to beneficial
ownership attributable to Kieran E. Burke, Gary Story and James F. Dannhauser
(directors of both the Company and Walibi), as a result of the shares held by
International disclosed in the proceeding sentence) owned approximately 3,000
shares of Walibi Stock, as a group.
COMPENSATION OF OFFICERS AND DIRECTORS
For the year ended December 31, 1997 the aggregate amount of compensation
paid by Walibi to all directors and officers as a group was BEF 63 million
(approximately $1.6 million). In addition, Walibi has a bonus plan for the
managers of the six major parks that for the year ended December 31, 1997
resulted in payments of approximately BEF 4 million (approximately $105,000). In
addition, Walibi's executive officers benefit from a defined contribution group
insurance plan. For the year ended December 31, 1997, Walibi did not aggregate,
set aside or accrue any amounts for its officers and directors as pension,
retirement or similar benefits.
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SELECTED FINANCIAL DATA OF WALIBI
The following table sets forth a summary of the financial information for
Walibi as of the dates and for the periods indicated. The selected Profit and
Loss Account for each of the five years ended 1997 and the balance sheet data as
of December 31, 1993 through 1997 have been derived from the audited
consolidated financial statements of Walibi. The following data should be read
in conjunction with "Walibi's Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Walibi's Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus Offer to
Purchase. The following table reflects a translation for convenience of the BEF
amounts included in Walibi's consolidated financial statements into U.S. dollars
using the closing exchange rate at December 31, 1997 of U.S. $1.00 = BEF 37.065.
Walibi prepares its consolidated financial statements in accordance with Belgian
GAAP (and for the years 1994-1997 in accordance with the norms of the IASC
provided this is not in conflict with Belgian GAAP), which are substantially the
same as U.S. GAAP. See Note 27 to the Consolidated Financial Statements of
Walibi included elsewhere in this Prospectus/Offer to Purchase for a description
of the significant differences between Belgian GAAP and U.S. GAAP affecting
Walibi's consolidated profit (loss) on ordinary activities and shareholders'
equity.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- ---------
(IN MILLIONS OF BEF, OR IN THE INDICATED U.S. $
COLUMN, MILLIONS OF U.S. $, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
PROFIT AND LOSS ACCOUNT:
Amounts in accordance with Belgian GAAP:
Sales and services........................................... 2,172 2,447 2,668 2,524 2,515 67.8
Operating profit............................................. 71 125 201 22 197 5.3
Profit (loss)................................................ (97) (87) (10) (179) 1 0
Profit (loss) per share...................................... (75) (65) (8) (134) 0 0
Amounts in accordance with U.S. GAAP(1):
Profit (loss)................................................ -- -- -- (151) (19) (0.5)
BALANCE SHEET DATA:
Amount in accordance with Belgian GAAP:
Total assets................................................. 4,973 5,184 5,131 4,461 4,404 118.8
Amounts payable after one year............................... 2,451 2,719 2,456 2,179 1,873 50.5
Shareholders' equity......................................... 1,710 1,306 1,244 1,076 1,088 29.4
Cash dividends declared per share(2)......................... 37.71 37.71 40.00 -- -- --
Amount in accordance with U.S. GAAP(1):
Shareholders' equity......................................... -- -- -- 1,188 1,182 31.90
</TABLE>
- ------------------------
(1) Not available for years prior to 1996.
(2) Gross cash dividends per share.
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WALIBI MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of Walibi's financial condition and results of
operations is based on Walibi's Consolidated Financial Statements and the
related notes thereto. These financial statements are prepared in accordance
with Belgian generally accepted accounting principles ("Belgian GAAP"), which
differs in certain respects from U.S. GAAP. For a summary of the principle
differences between Belgian GAAP and U.S. GAAP as they relate to Walibi's
Consolidated Financial Statements, see Note 27 to Walibi's Consolidated
Financial Statements included elsewhere in this Prospectus/Offer to Purchase.
OVERVIEW
Walibi is a corporation (SOCIETE ANONYME) organized under the laws of
Belgium. Walibi operates 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 include Bellewaerde, 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.
Walibi's primary sources of turnover are sales of admission tickets, food
and drinks, merchandise and games and other services. During the year ended
December 31, 1997 these sources of turnover accounted for approximately 65%,
24%, 7% and 4% of Walibi's total turnover, respectively. Walibi's turnover
during the year ended December 31, 1997 was derived from three countries,
Belgium (55%), France (32%) and The Netherlands (13%). Walibi's principal costs
of operations consist of salaries, wages and social security contributions, as
well as utilities and cost of goods sold.
OPERATING RESULTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
TURNOVER. Walibi's total turnover for the year ended December 31, 1997 was
approximately BEF 2.49 billion compared to approximately BEF 2.50 billion for
the year ended December 31, 1996, a decrease of approximately BEF 12 million or
0.5%. This decrease resulted primarily from a decrease in Walibi's attendance at
its parks located in The Netherlands, partially offset by an increase in
attendance at its parks located in France, as well as a decrease in the average
spending per visitor of approximately 1%.
SALES AND SERVICES COSTS. Walibi's sales and services costs for the year
ended December 31, 1997 were approximately BEF 2.32 billion compared to
approximately BEF 2.50 billion for the year ended December 31, 1996, a decrease
of approximately BEF 184 million or 7%. This decrease resulted primarily from a
decrease of approximately BEF 50.4 million (7%) in the cost of salary and other
personnel costs resulting from a reduction in the number of employees and a
decrease of approximately BEF 124.0 million (14%) in services and other goods
costs resulting primarily from a decrease in advertising spending.
INTEREST EXPENSE. Walibi's interest and other debt charges expenses for the
year ended December 31, 1997 were approximately BEF 154.7 million compared to
approximately BEF 181.2 million for the year ended December 31, 1996, a decrease
of approximately BEF 26 million or 15%. This decrease resulted primarily from a
decrease in long term debt, which was refinanced in part by short term debt at
more favorable interest rates.
EXTRAORDINARY ITEMS. Walibi's loss from extraordinary items for the year
ended December 31, 1997 was approximately BEF 10.7 million compared to
approximately BEF 57.1 million for the year ended December 31, 1996, a decrease
of approximately 46 million. This decrease resulted primarily from the sale of
certain fixed assets not used in the principal operating activity of Walibi,
partially offset by an increase in the provision for extraordinary liabilities
and charges.
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PROFIT (LOSS). Walibi profit for the year ended December 31, 1997 was
approximately BEF 560,000 compared to a loss of approximately BEF 178.9 million
in the year ended December 31, 1996, a change of approximately BEF 179.4
million. This change was primarily attributable to the decrease in sales and
service costs and interest expense as well as a lower level of loss from
extraordinary items set forth above.
YEARS ENDED DECEMBER 31, 1996 AND 1995
TURNOVER. Walibi's total turnover for the year ended December 31, 1996 was
approximately BEF 2.50 billion compared to approximately BEF 2.67 billion for
the year ended December 31, 1995, a decrease of approximately BEF 144 million or
5%. This decrease resulted primarily from a decrease in attendance at the Walibi
Parks to approximately 3.5 million for the year ended December 31, 1996 compared
to approximately 3.8 million for the year ended December 31, 1995, partially
offset by an increase in average receipts per visitor of 3%.
SALES AND SERVICES COSTS. Walibi's sales and services costs for the year
ended December 31, 1996 were approximately BEF 2.50 billion compared to
approximately BEF 2.47 billion for the year ended December 31, 1995, an increase
of approximately BEF 35 million or 1%. This increase resulted primarily from an
increase of approximately BEF 18.6 million (2%) in the cost of salary and other
personnel costs and an increase of approximately BEF 31.4 million (4%) in
services and other goods costs resulting primarily from increased maintenance
costs and production costs related to shows.
INTEREST EXPENSE. Walibi's interest and other debt charges expenses for the
year ended December 31, 1996 were approximately BEF 181.2 million compared to
approximately BEF 223.8 million for the year ended December 31, 1995, a decrease
of approximately BEF 43 million or 19%. This decrease resulted primarily from a
decrease in interest rates.
EXTRAORDINARY ITEMS. Walibi's loss from extraordinary items for the year
ended December 31, 1996 was approximately BEF 57.1 million compared to
approximately BEF 6.3 million for the year ended December 31, 1995, an increase
of approximately 50.8 million. This increase resulted primarily from the write
off of fixed financial assets related to a reduction in the value of Wailibi's
holdings in Babyland Amiland S.A.R.L.
PROFIT (LOSS). Walibi loss for the year ended December 31, 1996 was
approximately BEF 178.9 million compared to a loss of approximately BEF 10.3
million for the year ended December 31, 1995, a increased loss of approximately
BEF 168.6 million. This increased loss was primarily attributable to the
decrease in turnover set forth above, as well as an increase in loss from
extraordinary items set forth above, partially offset by a decrease in interest
expense as set forth above.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flow for the year ended December 31, 1997 was approximately
BEF 452.4 million compared to approximately BEF 321.8 million for the year ended
December 31, 1996, an increase of approximately BEF 130 million. This increase
was primarily the result of Walibi realizing an after tax profit of
approximately BEF 560,000 in the year ended December 31, 1997 compared to an
after tax loss of approximately BEF 178.8 million in the year ended December 31,
1996.
Net cash used in investment funding activities for the year ended December
31, 1997 was approximately BEF 87. 8 million compared to approximately BEF 252.6
million for the year ended December 31, 1996, a decrease of approximately BEF
165 million. This decrease was primarily the result of increased sales of
various classes of assets by Walibi aggregating approximately BEF 116.3 million
during the year ended December 31, 1997.
Net cash used in financing activities for the year ended December 31, 1997
was approximately BEF 279.4 million compared to approximately BEF 249.2 million
for the year ended December 31, 1996, an
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increase of approximately BEF 30 million. This increase resulted primarily from
the repayment by Walibi of existing debt in aggregate amount of approximately
BEF 793.4 million.
Planned capital expenditures for 1998 is approximately BEF 490 million. BEF
125 million of such amount relates to the installation of a Giant Drop at Walibi
Wavre. BEF 197 million of the remaining planned capital expenditures relates to
the installation of three Space Shots at each of Walibi Flevo, Walibi Rhone-Alps
and Walibi Schtroumpf.
At December 31, 1997 Walibi and its subsidiaries had outstanding
indebtedness for borrowed money of approximately BEF 2.1 billion of which BEF
628.8 million consisted of fixed rate subordinated loans having a weighted
average interest rate of 6.75% per annum and BEF 1.5 billion consisted of both
fixed rate and variable rate bank loans having a weighted average interest rate
of 5.41% per annum.
During 1997, Walibi repurchased certain of its subordinated loans issued in
1992 and due June 1999 for approximately BEF 402 million. This repurchase
reduced to approximately BEF 625 million the outstanding principal amount of
such bonds that Walibi is obligated to repurchase at maturity on June 30, 1999.
INFLATION
The rate of inflation in Belgium has been moderate over the past several
years and has not had a material impact on Walibi's results of operations.
FOREIGN CURRENCY AND INTEREST RATE RISK MANAGEMENT
The possibility of currency exchange losses is a risk inherent to Walibi's
operations. In addition, at December 31, 1997, approximately 20% of Walibi's
outstanding debt (approximately BEF 335.3 million) was denominated in currencies
other than the Belgian franc.
Derivative, financial and commodity instruments have not materially effected
Walibi's consolidated financial position, cash flows or results of operations.
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DESCRIPTION OF INDEBTEDNESS OF THE COMPANY
PREMIER CREDIT FACILITY
Borrowings under the Premier Credit Facility, which was entered into in
March 13, 1998, are secured by substantially all of the assets of Premier
Operations and its U.S. subsidiaries (other than real estate), and guaranteed by
such subsidiaries. The Premier Credit Facility has 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 under Facility C 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 herein) or (b) the London
Interbank Offered Rate plus the Applicable Margin. The Revolving Credit Facility
will terminate March 31, 2003. Borrowings under Facility B will mature March 31,
2003 and under Facility C will mature March 31, 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 will
be 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 contains 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 requires that Premier Operations comply with certain specified
financial ratios and tests, including ratios of total debt to EBITDA, interest
expense to EBITDA, debt service to EBITDA and fixed charges to EBITDA.
Defaults under the Premier Credit Facility include (i) failure to repay
principal when due; (ii) failure to pay interest or any fees owing under the
Premier Credit Facility within three days after due; (iii) default in the
performance of certain obligations of Premier Operation's principal subsidiaries
under the Security Agreement (as defined thereunder); (iv) failure to comply
with certain covenants, conditions or agreements under the credit agreement
which, in certain cases, continues for 30 days; (v) default by Premier
Operations or any of its principal subsidiaries in respect of any indebtedness
above specified levels; (vi) certain events of bankruptcy; (vii) certain
judgments against Premier Operations or any of its principal subsidiaries;
(viii) the occurrence of a Change in Control (as defined thereunder); (ix) the
assertion of certain Environmental Claims (as defined thereunder); and (x) under
certain circumstances, the failure by Messrs. Burke and Story to serve Premier
Operations in their present positions and the failure to replace them within a
specified time period.
SIX FLAGS CREDIT FACILITY
Borrowings under the Six Flags Credit Facility, which was entered into in
connection with the closing of the Six Flags Acquisition, is secured by
substantially all of the assets of SFTP and its subsidiaries and a pledge by SF
Holdings of the stock of SFTP, and is guaranteed by such subsidiaries, SFEC and
SF Holdings. The Six Flags Credit Facility has an aggregate availability of $472
million consisting of (i) up to $100.0 million under a Revolving Credit Facility
to be used to refinance existing outstanding Six Flags bank indebtedness and for
working capital and other general corporate purposes; and (ii) up to $372.0
million under Facility B to be used to refinance previously existing outstanding
Six Flags bank indebtedness and fund acquisitions and make capital improvements.
Facility B was fully funded in connection with the Six Flags Acquisition.
Interest rates per annum under the Six Flags Credit Facility are equal to either
(a) a base rate equal to the higher of the Federal Funds Rate plus 1/2% or the
prime rate of Citibank, N.A., in
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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 Facility B will mature on November 30, 2004. However, for
Facility B, aggregate principal payments and reductions of $1.0 million will be
required during each of the first, second, third and fourth years and aggregate
principal payments of $25.0 million and $40.0 million are required in years five
and six, respectively, and $303.0 million at maturity.
The Six Flags Credit Facility contains restrictive covenants that, among
other things, limit the ability of SFTP and its subsidiaries to dispose of
assets; engage in mergers and consolidations; engage in certain transactions
with Subsidiaries and affiliates; incur, guarantee or grant liens with respect
to additional indebtedness; pay dividends except that (subject to covenant
compliance) dividends will be permitted to allow SFEC to meet cash pay interest
obligations with respect to the SFEC Senior Notes; repurchase stock; make
investments (including loans and advances) or capital expenditures and engage in
sale-leaseback transactions. The Six Flags Credit Facility also limits the
ability of SFEC to grant liens. In addition, the Six Flags Credit Facility
requires SFTP to comply with certain specified financial ratios and tests,
including ratios (as defined in the Six Flags Credit Facility) generally
requiring (i) total debt to EBITDA not to exceed 5.5 times and senior secured
debt to EBITDA not to exceed 3.75 times, (ii) EBITDA to interest expense of not
less than 2.0 times and (iii) EBITDA to total fixed charges of not less than 1.0
times.
Defaults under the Six Flags Credit Facility include (i) failure to repay
principal when due; (ii) failure to pay interest within three days after due;
(iii) default in the performance of certain obligations of SFTP's principal
subsidiaries under the Security Agreement (as defined thereunder); (iv) failure
to comply with certain covenants, conditions or agreements under the credit
agreement which, in certain cases, continues for 30 days; (v) default by SFTP or
any of its principal subsidiaries in respect of any indebtedness above specified
levels; (vi) certain events of bankruptcy; (vii) certain judgments against SFTP
or any of its principal subsidiaries; (viii) the occurrence of a Change in
Control (as defined thereunder); (ix) the assertion of certain Environmental
Claims (as defined thereunder); and (x) under certain circumstances, the failure
by Messrs. Burke and Story to serve as Chief Executive Officer and Chief
Operating Officer of SFTP and the failure to replace them within a specified
time period.
COMPANY SENIOR DISCOUNT NOTES
The Company Senior Discount Notes are senior obligations of the Company, in
an aggregate principal amount at maturity of $410.0 million. The Company Senior
Discount Notes will mature on April 1, 2008. The Company Senior Discount Notes
accrete in value until April 1, 2003 at which time the accreted value will equal
100% of their principal amount. The Company Senior Discount Notes bear cash
interest at the rate of 10% per annum, commencing April 1, 2003, and are not
guaranteed by the Company's subsidiaries.
Approximately $75.0 million of net proceeds from the sale of the Company
Senior Discount Notes were deposited with the trustee to provide a fund until
April 1, 2003 (the "Restricted Cash Account") to satisfy obligations under the
Co-Venture Parks agreements and to pay dividends on the Mandatorily Convertible
Preferred Stock. The Company's obligations will be secured pending disbursement
by a pledge of the Restricted Cash Account.
The Company Senior Discount Notes are redeemable, at the Company's option,
in whole or in part, at any time on or after April 1, 2003, at specified
redemption prices, together with accrued and unpaid interest, if any, to the
date of redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture), the Company will be required to make an offer to repurchase the
Company Senior Discount Notes at a price equal to 101% of the accreted value
thereof, prior to April 1, 2003 or 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase, on or after April
1, 2003. Neither the Premier
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Merger nor the Six Flags Acquisition constitutes a Change of Control under the
Indenture relating to the Company Senior Discount Notes.
The Indenture relating to the Company Senior Discount Notes contains
restrictive covenants that, among other things, limit the ability of the Company
to dispose of assets; incur additional indebtedness or liens; pay dividends;
engage in mergers or consolidations; and engage in certain transactions with
subsidiaries and affiliates. Defaults under the applicable Indenture include (i)
failure to pay interest on the Company Senior Discount Notes within 30 days
after such payments are due; (ii) failure to pay principal or premium, if any,
on the Company Senior Discount Notes; (iii) failure to comply for 30 days after
notice with the Company's repurchase obligations upon the occurrence of a Change
of Control or an Asset Sale (as defined in the applicable Indenture) or with
certain covenants or provisions governing the Restricted Cash Account and
failure to comply for 60 days after notice with the other agreements contained
in the applicable Indenture, the Company Senior Discount Notes or the escrow
agreement governing the Restricted Cash Account; (iv) the default by the Company
or any of its Restricted Subsidiaries (as defined in the applicable Indenture)
in respect of any indebtedness above specified levels; (v) certain events of
bankruptcy or insolvency; (vi) a material breach or default of, or repudiation
by the Company of its obligations under the escrow agreement governing the
Restricted Cash Account or the unenforceability of the escrow agreement
governing the Restricted Cash Account against the Company; and (vii) certain
judgements against the Company or any of its Restricted Subsidiaries above
specified levels.
COMPANY SENIOR NOTES
The Company Senior Notes are senior obligations of the Company, in the
aggregate principal amount of $280.0 million of which up to $70.7 million was
used to capitalize a three-year overfund account (the "Interest Escrow Account")
with respect to the Company Senior Notes. The Company Senior Notes will mature
on April 1, 2006. The Company Senior Notes bear interest at the rate of 9 1/4%
per annum and are not guaranteed by the Company's subsidiaries.
The Company Senior Notes are redeemable, at the Company's option, in whole
or in part, at any time on or after April 1, 2002, at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture) the Company will be required to make an offer to repurchase the
Company Senior Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indenture relating to the Company Senior Notes.
The Indenture relating to the Company Senior Notes contains restrictive
covenants that, among other things, limit the ability of the Company to dispose
of assets; incur additional indebtedness or liens; pay dividends; engage in
mergers or consolidations; and engage in certain transactions with subsidiaries
and affiliates. Defaults under the applicable Indenture include (i) failure to
pay interest on the Company Senior Notes within 30 days (two days in the case of
interest payments due on or prior to April 1, 2001) after such payments are due;
(ii) failure to pay principal or premium, if any on the Company Senior Notes;
(iii) failure to comply for 30 days after notice with the Company's repurchase
obligations upon the occurrence of a Change of Control or an Asset Sale (as
defined in the applicable Indenture) or with certain covenants or the provisions
governing the Interest Escrow Account and failure to comply for 60 days after
notice with the other agreements contained in the applicable Indenture, the
Company Senior Notes or the escrow agreement governing the Interest Escrow
Account; (iv) the default by the Company or any of its Restricted Subsidiaries
(as defined in the applicable Indenture) in respect of any indebtedness above
specified levels; (v) certain events of bankruptcy or insolvency; (vi) a
material breach or default of, or repudiation by the Company of its obligations
under, the escrow agreement governing the Interest Escrow Account or the
unenforceability of the escrow agreement governing the Interest Escrow Account
against
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the Company; and (vii) certain judgments against the Company or any of its
Restricted Subsidiaries above specified levels.
PREMIER NOTES
The Premier Notes are senior, unsecured obligations of Premier Operations,
in the aggregate principal amount of $215.0 million of which $90.0 million will
mature on August 15, 2003 (the "1995 Premier Notes") and $125.0 million will
mature on January 15, 2007 (the "1997 Premier Notes"). The 1995 Premier Notes
bear interest at the rate of 12% per annum and the 1997 Premier Notes bear
interest at the rate of 9 3/4% per annum. The Premier Notes are guaranteed on a
senior, unsecured basis by the principal operating subsidiaries of Premier
Operations.
The 1995 Premier Notes are redeemable, at Premier Operations' option, in
whole or in part, at any time on or after August 15, 1999, at specified
redemption prices, together with accrued and unpaid 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 Senior Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
Neither the Premier Merger nor the Six Flags Acquisition constitute 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 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'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 Premier
Operations or any of its principal subsidiaries in respect of any indebtedness
above specified levels; (v) certain events of bankruptcy; (vi) certain judgments
against Premier Operations or any principle subsidiaries; (vii) any principle
subsidiaries (as defined in the indentures) ceasing to be in full force and
effect (except as contemplated by the terms thereof); and (viii) the denial or
disaffirmation by any principle subsidiaries 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 subordinated
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
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the Company will be required to make an offer to purchase the SFTP Senior
Subordinated Notes within 30 days of the closing of the Six Flags Transactions.
The Company does not expect that it will be required to purchase any material
amount of such Notes pursuant to such offer. See "Risk Factors--Risks Associated
with Substantial Indebtedness."
The Indenture pursuant to which the SFTP Senior Subordinated Notes were
issued contains restrictive covenants that, among other things, limit the
ability of SFTP and its subsidiaries to dispose of assets; incur additional
indebtedness or liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates.
Defaults under this Indenture include (i) failure to pay interest on the
SFTP Senior Subordinated Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with SFTP's repurchase obligations
upon the occurrence of a Change of Control and failure to comply for 60 days
after notice with the other covenants contained in the Indenture; (iv) the
default by SFTP or any Significant Subsidiary (as defined in the applicable
indenture) in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against SFTP or any Significant
Subsidiary; (vii) any note guarantee (as defined in the applicable Indenture)
ceasing to be in full force and effect (except as contemplated by the terms
thereof); and (viii) the denial or disaffirmation by any note guarantor (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 from the New SFEC Notes, together
with other funds, to repay SFEC Zero Coupon Senior Notes. Until so used, such
proceeds and other funds (or U.S. government obligations purchased therefrom)
will be deposited in escrow.
The SFEC Zero Coupon Senior Notes may not be redeemed prior to maturity.
Defaults under the indenture relating to the SFEC Zero Coupon Senior Notes
include (i) the failure by SFEC or Time Warner to comply for 30 days after
written notice with any covenant in the applicable indenture; (ii) failure to
pay, when due, upon final maturity or upon acceleration, the principal amount of
any indebtedness of SFEC or any of its subsidiaries in excess of $5.0 million,
or any indebtedness of Time Warner or any of its Material Subsidiaries (as
defined in the applicable indenture) in excess of $50 million, if such
indebtedness is not discharged within 60 days after written notice; (iii)
certain events of bankruptcy of SFEC or Seller; and (iv) failure to pay the
principal amount of any SFEC Zero Coupon Senior Note at its maturity date.
Accordingly, after the Six Flags Acquisition, such a default by Time Warner
could result in the acceleration of the maturity of the SFEC Zero Coupon Senior
Notes.
NEW SFEC NOTES
The New SFEC Notes are senior, unsecured obligations of SFEC, in the
aggregate principal amount of $170.0 million. The New SFEC Notes will mature on
April 1, 2006. The New SFEC Notes bear interest at the rate of 8 7/8% per annum
and are 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 were placed in escrow (the "SFEC
Escrow Account") for repayment of the SFEC
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Zero Coupon Senior Notes. The indenture relating to the New SFEC Notes 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 are redeemable, at SFEC's option, in whole or in part, at
any time on or after April 1, 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 after notice with SFEC's repurchase obligations upon the
occurrence of a Change of Control or an Asset Sale (as defined in the applicable
Indenture) or with certain covenants or the provisions governing the SFEC Escrow
Account and failure by either the Company or SFEC to comply for 60 days after
notice with the other agreements contained in the applicable Indenture, the
Guarantee, the SFEC Escrow Account or the New SFEC Notes; (iv) the default by
SFEC or any of its Restricted Subsidiaries (as defined in the applicable
Indenture), in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy or insolvency; (vi) if the Guarantee shall be held invalid,
unenforceable or shall cease for any reason to be in full force and effect or
any person acting on behalf of the Company shall deny or disaffirm the Company's
obligations under the Guarantee; (vii) a material breach or default of, or
repudiation by the Company of its obligations under the escrow agreement
governing the SFEC Escrow Account or the unenforceability of the escrow
agreement governing the SFEC Escrow Account against the Company; and (viii)
certain judgements against SFEC or any of its Restricted Subsidiaries above
specified levels.
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DESCRIPTION OF CAPITAL STOCK AND CHARTER DOCUMENTS OF THE COMPANY
COMPANY COMMON STOCK
The Company's authorized capital stock includes 90,000,000 shares of Company
Common Stock, par value $0.05 per share. Each share of Company Common Stock
entitles the holder thereof to one vote. Holders of the Company 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 Company Common Stock upon the liquidation,
dissolution or winding up of the affairs of the Company. Holders of Company
Common Stock do not have preemptive, subscription or conversion rights. However,
each outstanding share of Company 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-hundredth
of a share of a junior participating series of Preferred Stock (which will be
amended to one one-thousandth of a share prior to and in connection with the Six
Flags Acquisition) designated to have economic and voting terms similar to those
of one share of Company Common Stock, as described under "--Rights Plan" below.
As of May 19, 1998, 37,524,177 shares of Company Common Stock were outstanding
and 7,065,038 shares were reserved for future issuance (1,315,038 for options
and warrants and 5,750,000 upon conversion of the Mandatorily Convertible
Preferred Stock).
Bank One Trust Company, N.A., Oklahoma City, Oklahoma, is the transfer agent
and registrar for the Company Common Stock.
PREFERRED STOCK
The Company's authorized capital stock includes 500,000 shares of Preferred
Stock, par value $1.00 per share. The Preferred Stock may be issued in series,
and shares of each series will have such rights and preferences as are fixed by
the Board of Directors in resolutions authorizing the issuance of that
particular series. In designating any series of Preferred Stock, the Board of
Directors may, without further action by the holders of Company 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 Company 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 Company Common Stock. In addition, approximately 206,000
shares (to be reduced to 20,600 prior to the Six Flags Transactions) of
Preferred Stock have been reserved for issuance under the Rights Plan.
MANDATORILY CONVERTIBLE PREFERRED STOCK
Pursuant to the PIES Offering, the Company issued PIES, each representing
one-five hundredth of a share of Mandatorily Convertible Preferred Stock
deposited under a Deposit Agreement dated as of April 1, 1998 (the "Deposit
Agreement"), among the Company, The Bank of New York 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 PIES 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 PIES (which issuance will be evidenced by the initial
issuance of the Depositary Receipts) at the rate of 7 1/2 per annum or 1 7/8 per
quarter. Dividends will cease to become payable by the Company to the Depositary
for distribution to the holders of the PIES when dividends cease to accrue on
the Mandatorily Convertible Preferred Stock represented thereby on the Mandatory
Conversion Date or on the date of the earlier conversion of the PIES at the
option of the holder.
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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 PIES, 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 any
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 PIES. Unless voluntarily converted into Common
Stock prior thereto, on April 1, 2001 (the "Mandatory Conversion Date"), each
PIES 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 PIES to the
Mandatory Conversion Date (other than previously declared dividends deliverable
to a holder of record of the Depositary Receipt evidencing such PIES 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 $65.00 (the "Threshold Appreciation Price"),
.8308 shares of Common Stock per PIES, (b) if the Conversion Price is less than
the Threshold Appreciation Price but is greater than $54.00 (the "Initial
Price"), a fraction, equal to the Initial Price divided by the Conversion Price,
of one share of Common Stock per PIES and (c) if the Conversion Price is less
than or equal to the Initial Price, one share of Common Stock per PIES. The
Conversion Rate, the Threshold Appreciation Price and the Initial Price are each
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 rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in the Certificate of
Designation) of the Common Stock on the record date for the determination of
stockholders entitled to receive such rights or warrants, or (f) pay certain
dividends or distribute to all holders of its Common Stock evidences of its
indebtedness, cash or other assets or issue rights or warrants (other than those
referred to in clause (e) above) to all holders of its Common Stock entitling
them to subscribe for or purchase any of its securities.
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 PIES 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 .8308 shares
of Common Stock for each PIES (the "Optional Conversion Rate"), equivalent, for
each PIES, to a conversion price of $65.00 per share of Common Stock (the
"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 PIES will be
entitled to receive an amount equal to the per share price to the public of the
PIES plus
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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 PIES) 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
PIES) 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 PIES and Mandatorily Convertible Preferred Stock will have no
preemptive rights.
REGISTRATION RIGHTS
Holders of approximately 4.9 million shares of Company Common Stock have
right to require the Company to register such shares for sale under the
Securities Act. In addition, such holders have the right to have such shares
included in a future registration statement relating to Company Common Stock
and, in certain cases, other equity securities, subject to customary provisions
relating to the right of the underwriters of any such offering to exclude such
shares if their inclusion would impair the success of such offering. In the
event such holders exercise their registration rights, the Company will be
required to bear all registration expenses other than underwriting discounts or
other selling expenses and fees and expenses of counsel to such holders.
SHARES OF COMPANY COMMON STOCK ELIGIBLE FOR FUTURE SALE
As of May 19, 1998 the Company had 37,524,177 shares of Company Common Stock
outstanding 5.8 million PIES (initially convertible into 4.8 million shares of
Common Stock) outstanding. Future sales of Company Common Stock by existing
stockholders pursuant to Rule 144 under the Securities Act, or through the
exercise of outstanding registration rights or otherwise, could have an adverse
effect on the prevailing market price of the Company Common Stock and the
Company's ability to raise additional capital. Except for the Company Common
Stock to be sold in the proposed Common Stock Offering, the PIES, the
Mandatorily Convertible Preferred Stock and shares of Company Common Stock
issued upon conversion of the PIES and the Mandatorily Convertible Preferred
Stock, the Company has agreed not to
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offer, sell, contract to sell or otherwise issue any shares of Company Common
Stock (except pursuant to outstanding options and warrants) or other capital
stock or securities convertible into or exchangeable for, or any rights to
acquire, Company Common Stock or other capital stock, with certain exceptions
(including certain exceptions for Company Common Stock or other capital stock
issued or sold in connection with future acquisitions by the Company, including
any Common Stock to be issued in connection with the Walibi acquisition), prior
to the expiration of 90 days from March 26, 1998 without the prior written
consent of Lehman Brothers. The Company's officers, directors and principal
stockholders, who hold in the aggregate approximately 6.0 million shares of
Company Common Stock (including shares issuable upon exercise of outstanding
options and warrants and shares of outstanding restricted stock), will agree not
to sell any such shares for 90 days following the date of the Prospectus without
the consent of Lehman Brothers. Thereafter, all such shares held by the
Company's officers, directors and principal stockholders will be eligible for
sale in the public market (subject, in most cases, to applicable volume
limitations and other resale conditions imposed by Rule 144). In addition,
subject to the "lock-up" arrangements described above and a 90 day "lock-up"
from March 26, 1998 agreed by the sellers in the Initial Acquisition, holders of
approximately 4.9 million shares of Company Common Stock have the right to
require the Company to register such shares for sale under the Securities Act.
Depending upon the level of future revenues at Kentucky Kingdom and Walibi, the
Company may be required to issue additional shares of Company Common Stock
(assuming the maximum number of shares of Common Stock are issued in the Walibi
Tender Offer) with an aggregate market value of up to $15.0 million to the
sellers thereof. The Company may also pay quarterly dividend payments on the
PIES (which aggregate $69.9 million over three years) by issuing additional
shares of Common Stock. The sale, or the availability for sale, of substantial
amounts of Company Common Stock or securities convertible into Company Common
Stock in the public market at any time subsequent to the date of this
Prospectus/Offer to Purchase could adversely affect the prevailing market price
of the Company Common Stock.
RIGHTS PLAN
Each outstanding share of Company Common Stock currently has attached to it
one Right issued pursuant to the Rights Agreement. Each Right entitles its
registered holder to purchase one-thousandth of a share of a junior
participating series of Preferred Stock designated to have economic and voting
terms similar to those of one share of Company Common Stock, for $250.00 (which
will be amended to $25.00 prior to the date of the Six Flags Transactions),
subject to adjustment (the "Rights Exercise Price"), but only after the earlier
to occur of (i) the tenth day following a public announcement that a person or
group of affiliated or associated persons has acquired beneficial ownership of
15% or more of the outstanding voting stock of the Company (an "Acquiring
Person") or (ii) the tenth business day (or such later date as may be determined
by the Board of Directors prior to such time as any person becomes an Acquiring
Person) after the date (the "Flip-in Date") of the commencement or announcement
of a person's or group's intention to commence a tender or exchange offer whose
consummation will result in the ownership of 15% or more of the Company's
outstanding voting stock (even if no shares are actually purchased pursuant to
such offer) (in either case, the "Separation Time"). The Rights will not trade
separately from the shares of Company Common Stock unless and until the
Separation Time occurs.
The Rights Agreement provides that an Acquiring Person does not include (A)
the Company, (B) any subsidiary of the Company, (C) any employee benefit plan or
employee stock plan of the Company, or any trust or other entity organized,
appointed, established or holding Company Common Stock for or pursuant to the
terms of any such plan or (D) any person whose ownership of 15% or more of the
shares of voting stock of the Company then outstanding results solely from (i)
any action or transaction approved by the Board of Directors before such person
acquires such 15% beneficial ownership or (ii) a reduction in the number of
issued and outstanding shares of voting stock of the Company pursuant to a
transaction or transactions approved by the Board of Directors (provided that
any person that does not become an Acquiring Person by reason of clause (i) or
(ii) above shall become an Acquiring Person upon his
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acquisition of any additional 1% of the Company's voting stock unless such
acquisition of additional voting stock will not result in such person becoming
an Acquiring Person by reason of such clause (i) or (ii)).
The Rights will not be exercisable until the business day following the
Separation Time. The Rights will expire on the earlier of (i) the close of
business on December 10, 2007 and (ii) the date on which the Rights are redeemed
or terminated as described below. The Rights Exercise Price and the number of
Rights outstanding, or in certain circumstances the securities purchasable upon
exercise of the Rights, are subject to adjustment upon the occurrence of certain
events.
Once any person becomes an Acquiring Person, unless the Rights are earlier
redeemed or exchanged as described below, if
(i) the Company were to be merged into or consolidated with another entity
(whether or not related to a 15% stockholder),
(ii) the Company were to merge with another entity (whether or not related to a
15% stockholder) and be the surviving corporation, but any shares of the
Company's Company Common Stock were changed into or exchanged for other
securities or assets, or
(iii) more than 50% of the Company's assets or earning power were to be sold in
one or a series of related transactions,
each Right then outstanding would "flip-over" and would require that its holder
be entitled to buy, at the exercise price, that number of shares of common stock
of the acquiring company which at the time of the merger or sale would have a
market value of two times the exercise price of the Right (I.E., a discount of
50%). Any business combination not providing for the issuance of common stock of
the acquiring company in compliance with such provisions would be prohibited.
Unless the Rights are earlier redeemed or exchanged as described below, if a
person or group becomes the beneficial owner of 15% or more of the Company's
voting stock, each Right not owned by such stockholder would become exercisable,
at the Rights Exercise Price, for that number of shares of Preferred Stock which
at the time of such transaction would have a market value of two times the
Rights Exercise Price.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
voting stock of the Company and before the acquisition by a person or group of
50% or more of the outstanding voting stock of the Company, the Board of
Directors may elect to cause the Company to exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of the Company's Company Common Stock
per Right, subject to adjustment.
The Rights are redeemable by the Company by a vote of a majority of the
Board of Directors at a price of $.01 per Right at any time prior to the close
of business on the Flip-in Date (or at such later date as may be authorized by
the Board of Directors and a majority of the Continuing Directors (as defined in
the Rights Agreement)). The Rights may be redeemed after the time that any
person has become an Acquiring Person only if approved by a majority of the
Continuing Directors. The Rights have no voting rights, and they are not
entitled to dividends.
The Rights will not prevent a takeover of the Company. The Rights, however,
may cause substantial dilution to a person or group that acquires 15 percent or
more of the Company Common Stock unless the Rights are first redeemed or
terminated by the Board of Directors of the Company. Nevertheless, the Rights
should not interfere with a transaction that, in the judgment of the Board of
Directors, is in the best interests of the Company and its stockholders because
the Rights can be redeemed, as hereinabove described, before the consummation of
such transaction.
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The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference in this Prospectus/Offer to
Purchase and the foregoing description is qualified in its entirety by reference
thereto. A copy of the Rights Agreement can be obtained upon written request to
the Rights Agent.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Delaware General Corporation Law may also be
considered to have an anti-takeover effect. Section 203 of the Delaware General
Corporation Law prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the time of the transaction in which the person became an interested stockholder
unless (i) prior to the time the person became an interested stockholder, either
the business combination or the transaction which resulted in the person
becoming an interested stockholder is approved by the board of directors of the
corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock, or (iii) on or after such time the
business combination is approved by the board of directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the stockholder. An "interested stockholder" is a person who owns 15% or more of
the corporation's outstanding voting stock or who is an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such person is
an interested stockholder, as well as the affiliates and associates of such
person. The restrictions of Section 203 do not apply if, among other things, a
corporation, by action of its stockholders, adopts an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed by
Section 203, PROVIDED THAT, in addition to any other vote required by law, such
amendment to the certificate of incorporation or by-laws must be approved by the
affirmative vote of a majority of the shares entitled to vote. Moreover, an
amendment so adopted is not effective until twelve months after its adoption and
does not apply to any business combination between the corporation and any
person who became an interested stockholder of such corporation on or prior to
such adoption. The Company's Restated Certificate of Incorporation and By-Laws
do not currently contain any provisions electing not to be governed by Section
203 of the Delaware General Corporation Law.
In addition, the Restated Certificate of Incorporation and By-Laws of the
Company contain a number of provisions which may be deemed to have the effect of
discouraging or delaying attempts to gain control of the Company, including (i)
authorizing the Board of Directors to fix the size of the Board of Directors
between three and 15 directors; (ii) authorizing directors to fill vacancies on
the Board of Directors that occur between annual meetings; (iii) restricting the
persons who may call a special meeting of stockholders; and (iv) authorizing the
issuance of Preferred Stock. Facilities will require the Company to make an
offer to purchase the Company Senior Discount Notes and the Company Senior Notes
and repay all indebtedness under the Credit Facilities upon a Change of Control
(as defined therein) of the Company.
The existence of the foregoing provisions could result in (i) the Company
being less attractive to a potential acquiror and (ii) the Company's
stockholders receiving less for their shares of Company Common Stock than
otherwise might be available in the event of a take-over attempt.
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CERTAIN CHANGES IN RIGHTS OF WALIBI STOCKHOLDERS
RESULTING FROM THE ACQUISITION
Upon consummation of the Exchange Offer, holders of Walibi Stock who tender
such shares in the Exchange Offer and are not paid cash therefor will own shares
of Company Common Stock. Walibi is a corporation (SOCIETE ANONYME) organized
under the laws of Belgium and the Company is a corporation incorporated under
the laws of the State of Delaware. The Delaware General Corporation Laws
("DGCL") is the statute which governs Delaware corporations and the Belgian
Coordinated Laws on Commercial Companies ("CLCC") governs Belgium companies. The
following is a summary of certain significant differences between the rights of
holders of Walibi Stock and holders of Company Common Stock. These differences
arise from differences between the corporate laws of Belgium and the State of
Delaware, as well as from differences between Walibi's Charter and the Company
Charter and By-Laws, the governing instruments of the two companies. See
"Description of Capital Stock and Charter Documents of the Company."
SIZE OF THE BOARD OF DIRECTORS
THE COMPANY
The DGCL provides that the board of directors of a corporation shall consist
of one or more members. The DGCL further provides that the number of directors
shall be fixed by, or in the manner provided in, the bylaws, unless the
certificate of incorporation fixes the number of directors, in which case a
change in the number of directors shall be made only by amendment of the
certificate. The Company's By-Laws authorize the Board of Directors of the
Company to fix the size of the Board of Directors between three and 15
directors. The Company currently has eight Directors. Directors are elected at
each annual meeting of stockholders of the Company for the ensuing year and
until their respective successors are elected and qualified.
WALIBI
The CLCC provides that any "SOCIETE ANONYME" (such as Walibi) shall be
managed by a board of directors which is composed of at least three members.
Walibi currently has eight directors. Directors may be appointed at any annual
meeting of stockholders or at any extraordinary meeting of stockholders called
for such purpose. The CLCC provides that directors may be appointed for a fixed
term that may not exceed six years. However, such term may be renewed unless
otherwise provided in the charter. Under Walibi's Charter, directors may be
appointed for six year terms and such terms may be renewed.
CLASSIFICATION OF DIRECTORS
THE COMPANY
Although the DGCL permits a corporation to provide for a classified board of
directors, the Charter and By-Laws of the Company do not contain any such
provision, and all members of the Board of Directors of the Company stand for
election each year.
WALIBI
The terms of two members of Walibi's board of directors expire in 1999. The
remaining three directors appointments to the board must be ratified by the
Stockholders of Walibi at the next general meeting. Any general meeting of the
stockholders of Walibi may alter the duration of directors terms, provided that
any such term cannot exceed six years.
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REMOVAL OF DIRECTORS
THE COMPANY
The Company's By-Laws provide that any director may be removed with or
without cause by the holders of a majority of the shares then entitled to vote
at an election of directors, except as provided by the DGCL. The DGCL provides
for certain restrictions on the right of stockholders to remove directors where
cumulative voting is authorized or when the board of directors is classified.
Since the Company's board of directors is not classified and cumulative voting
is not authorized, such restrictions are inapplicable to the Company.
WALIBI
Walibi's Charter provides that the stockholders of Walibi can dismiss any or
all the directors at any annual meeting or an extraordinary meeting called for
such purpose.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
THE COMPANY
The By-Laws of the Company provide that vacancies on the Company's Board of
Directors caused by death, resignation, disqualification, removal or otherwise
may be filled by the remaining directors and the successor or successors shall
hold office for the unexpired term.
WALIBI
The CLCC provides that if a director is dismissed or resigns, the remaining
directors may appoint a temporary director, unless the charter provides that the
stockholders shall appoint a director at any annual meeting or an extraordinary
meeting called for such purpose. Any such temporary director shall serve the
remainder of the unexpired term, unless dismissed by the stockholders at any
annual meeting or at an extraordinary meeting called for such purpose.
DIRECTOR LIABILITY AND INDEMNIFICATION
THE COMPANY
The By-Laws of the Company provide that the Company shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director, officer, employee or agent of the Company or is or was serving
at the request of the Company as a director, officer, employee or agent of
another enterprise against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the Company
and with respect to any criminal proceeding had no reasonable cause to believe
his conduct was unlawful; provided that, in an action by or in the right of the
Company, no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudicated liable for negligence
or misconduct in performance of his duty to the Company unless and only to the
extent that the court in which such proceeding was brought shall determine that
despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses which the court deems proper. The
Company's By-Laws also provide that expenses incurred in defending a civil or
criminal proceeding may be paid by the company in advance as authorized by the
board of directors upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it is
ultimately determined that he is entitled to be indemnified by the Company under
the By-Laws. The Company's By-Laws further provide that to the extent that a
director, officer, employee or agent of the Company has been successful on the
merits or in
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defense of any proceeding, he shall be entitled to be indemnified against
expenses (including attorneys' fees), actually and reasonably incurred in
connection therewith.
In addition, the Company Charter contains a provision that eliminates
(subject to certain exceptions) the personal monetary liability of a director to
the Company and its stockholders for breach of his fiduciary duty as a director,
except that such provision does not eliminate or limit the liability of a
director (i) for any breach of his duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) the unlawful
payment of a dividend or unlawful stock purchase or redemption, or (iv) for any
transaction in which the director derived an improper personal benefit.
WALIBI
The Walibi Charter does not contain any provisions limiting the liability of
directors. However, the CLCC provides that after the stockholders' approval of
the annual accounts, they are required to determine the discharge of liability
to be given to the directors. Such discharge covers any potential liability of
the directors to Walibi but is not binding on third parties and upon
stockholders who have refused to vote in favor of such discharge.
MEETINGS OF STOCKHOLDERS
THE COMPANY
The Company By-Laws provide that the annual meeting of the stockholders is
required to be held on or before six months after the end of each fiscal year
(as established by the Board of Directors). Election of directors and any other
proper business may be transacted at the annual meeting. Special meetings of the
stockholders may be called by the Chairman or President or at the request in
writing of a majority of the Board of Directors or stockholders owing not less
than 20% of capital stock of the Company issued and outstanding, and entitled to
vote. Any such request shall state the purpose of the proposed meeting.
WALIBI
The Walibi Charter provides that the annual meeting of stockholders shall
take place at 11:00 a.m. on the first Tuesday of June or on the first business
day thereafter if such day is a holiday. If the annual meeting has not been
called on the date specified in the Charter, then any stockholder may bring suit
for the appointment of a person to call such meeting. Annual and extraordinary
meetings of the stockholders may be called by the board of directors, the
statutory auditor, or, if appointed a liquidator. Furthermore, the board of
directors is required to call an annual or extraordinary meeting of the
stockholders if requested by the stockholders representing 1/5 of the
outstanding shares. Stockholders may not vote on matters not specified in the
notice of the meeting, unless all stockholders are present at the meeting
whether in person or by proxy and affirmatively vote in favor of so doing.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
THE COMPANY
Section 203 of the DGCL prohibits a Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the time of the transaction in which the person became an interested
stockholder unless (i) prior to the time the person became an interested
stockholder, either the business combination or the transaction which resulted
in the person becoming an interested stockholder is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such time the business combination is approved by the board of directors
and by the affirmative vote of at least 66 2/3% of the
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<PAGE>
outstanding voting stock which is not owned by the interested stockholder. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who owns 15% or more of the corporation's outstanding voting stock
or who is an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation at any time within
the three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder, as well as the
affiliates and associates of such person. The restrictions of Section 203 do not
apply if, among other things, a corporation, by action of its stockholders,
adopts an amendment to its certificate of incorporation or by-laws expressly
electing not to be governed by Section 203, provided that, in addition to any
other vote required by law, such amendment to the certificate of incorporation
or by-laws must be approved by the affirmative vote of a majority of the shares
entitled to vote. Moreover, an amendment so adopted is not effective until 12
months after its adoption and does not apply to any business combination between
the corporation and any person who became an interested stockholder of such
corporation on or prior to such adoption. The Company's Charter and By-Laws do
not currently contain any provisions electing not to be governed by Section 203
of the DGCL.
WALIBI
Article 60bis of the CLCC provides, save exceptions, for the following
measures to be complied with, for companies whose securities are included on the
official list of a securities exchange established in a Member State of the
European Union, "in case of decisions within the authority of the board of
directors which could give rise to a direct or indirect financial advantage to a
shareholder with a decisive or significant influence on the appointment of the
directors of such company": (a) the board of directors must charge three board
members chosen because of their independence with regard to the decision and who
will be assisted by an independent expert, with drafting a report describing the
financial consequences for the company of the decision and a reasoned evaluation
thereof, (b) directors who have a direct or indirect personal and conflicting
interest of a financial nature in the decision must comply with the specific
rules provided by article 60 CLCC and may not participate in the deliberations
of the board nor in the voting, (c) the application of this procedure is stated
in the minutes of the meeting of the board and the statutory auditor is informed
thereof, (d) the conclusion of the above mentioned report and a description of
the decisions made must be included in the annual report of the company, and (e)
the annual report of the statutory auditor contain the same description and the
appropriate comments.
Article 60 provides for specific rules to be followed by a director who has
a direct or indirect personal and conflicting interest of a financial nature in
a decision or transaction within the authority of the board. A director could be
deemed to have such a conflicting interest in a decision of the board to approve
a transaction between the company and a company, stockholder or either of the
latter, in which the director has a material stockholding or a remunerated
position.
DISSENTERS' RIGHTS OF APPRAISAL
THE COMPANY
Under the DGCL, dissenters' rights of appraisal are limited. Rights of
appraisal are available to a stockholder of a corporation only in connection
with certain mergers or consolidations involving such corporation, amendments to
the certificate of incorporation of such corporation (if so provided in the
certificate of incorporation) or sales of all or substantially all of the assets
of such corporation. However, appraisal rights are not available under the DGCL
if the corporation's stock is (prior to the applicable transaction) listed on a
national securities exchange or designated on Nasdaq or held of record by more
than 2,000 stockholders; provided that appraisal rights will be available if the
merger or consolidation requires stockholders to exchange their stock for
anything other than shares of the surviving corporation, shares of another
corporation that will be listed on a national securities exchange, designated on
Nasdaq or
121
<PAGE>
held of record by more than 2,000 stockholders, cash in lieu of fractional
shares of any such corporation, or a combination of such shares and such cash.
WALIBI
The CLCC does not provide for rights of appraisal to stockholders of public
corporations.
DIVIDENDS
THE COMPANY
Under the DGCL, the directors of a corporation, subject to any restrictions
in its certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock, either (i) out of its surplus, or (ii) in case
there shall be no such surplus, out of its net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year. If capital of
the corporation shall have been diminished by depreciation in the value of its
property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets, the directors of
such corporation shall not declare and pay out of such net profits any dividends
upon any shares of any classes of its capital stock until the deficiency in the
amount of capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets shall have been repaired.
For information in respect of the Company's historical payment of dividends and
the Company's intentions with respect to the future payment of dividends in
respect of Company Common Stock, see "Market Price and Dividend
Data--Dividends."
WALIBI
Under the CLCC, the declaration of dividends shall be determined by the
stockholders at the annual meeting and shall be paid in accordance with the
charter. The payment of dividends on the capital stock of Walibi is limited by
the following provisions of the CCLC (of which the first one is also repeated in
the charter of Walibi): (a) on an annual basis, five percent of the profits are
required to be allocated to the legal reserve, provided that once the amount in
such reserve equals 10% of the share capital such requirement ceases, (b) no
distribution may be made if, on the date of the last financial year, the net
assets appearing from the annual accounts have fallen, or would fall as a result
of the distribution, below the sum of the contributed capital ("CAPITAL LIBERE")
and all reserves not distributable by law or the charter. Net assets shall mean
the aggregate amount of the assets appearing from the balance sheet less the
provision and liabilities, and may specifically not include (a) any pending
depreciation of the cost of incorporation and further development, (b) save in
exceptional instances to be mentioned and justified in the notes to the annual
accounts, any pending amortization of the cost of research and development.
PREEMPTIVE RIGHTS
THE COMPANY
The Board of Directors of the Company may approve the issuance of capital
stock of the Company to the extent authorized shares are available under the
Company Charter, subject to NYSE rules that require stockholders' approval under
certain circumstances. The Company Charter and By-laws do not provide for
preemptive rights. The DGCL does not provide for preemptive rights unless
specifically provided for in the certificate of incorporation of a corporation.
WALIBI
Each Walibi share confers a preemptive right to subscribe for additional
Walibi shares where an increase in Walibi's capital is effected. In the event
any Walibi share is held by a legal owner and a beneficial owner, the preemptive
right may be exercised by the legal owner. The stockholders may,
122
<PAGE>
however, determine to restrict or annul the preemptive rights under certain
conditions. In addition, the board of directors can reduce or eliminate the
preemptive right under certain conditions.
AMENDMENT OF CHARTER
THE COMPANY
The Company Charter may be amended if approved by the Board of Directors of
the Company and by the affirmative vote of a majority of the outstanding shares
of Company Common Stock.
WALIBI
The Walibi Charter may only be amended if stockholders representing at least
one half of the capital stock of Walibi are present and three quarters of the
votes cast vote in favor of the amendment.
123
<PAGE>
LEGAL MATTERS
The validity of the Company Common Stock offered hereby and certain legal
matters in connection with the Exchange Offer will be passed upon by Weil,
Gotshal & Manges LLP, Dallas, Texas and Baer Marks & Upham LLP, New York, New
York.
Certain tax matters in connection with the transaction as discussed under
"United States Tax Consequences of the Exchange Offer" have been passed upon by
Weil, Gotshal & Manges LLP, Houston, Texas.
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/Offer to Purchase 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 this Prospectus/Offer to Purchase and Registration
Statement have been audited by Coopers & Lybrand Reviseurs d' Entreprises,
independent auditors in reliance upon the report of such firm given upon the
authority of such firm as experts in accounting and auditing.
124
<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
CONSOLIDATED FINANCIAL STATEMENTS OF WALIBI S.A.
Report of Independent Auditors............................................................................. F-52
Consolidated Balance Sheet After Distribution of Profit.................................................... F-53
Consolidated Profit and Loss Account....................................................................... F-55
Cash Flow Statement........................................................................................ F-57
Comments on the Main Items in the Balance Sheet and the Profit and Loss Account............................ F-58
Notes to the Consolidated Financial Statements............................................................. F-59
</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.................................................................... $ 2,934,000 $10,051,000
Accrued interest payable............................................................ 4,304,000 9,785,000
Accrued compensation................................................................ 1,474,000 3,110,000
Accrued property taxes.............................................................. 1,551,000 2,067,000
Other accrued liabilities........................................................... 5,100,000 7,971,000
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 other than interest......................... (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)
REVENUE AND SEASONAL NATURE OF BUSINESS
Revenue consists primarily of theme park admissions and parking, the sale of
park food and merchandise, and corporate sponsorship.
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 earned in these quarters
while most expenditures for capital improvements and significant maintenance are
incurred when the parks are closed in the first and fourth quarters.
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.
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
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.
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).
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
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 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
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
these financial instruments. The fair value estimates, methods, and assumptions
relating to the Company's other financial instruments are discussed in note 5.
(3) ACQUISITION OF THEME PARKS 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.
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)
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.
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 adequate to provide for any personal injury liability which
may ultimately be found to exist in connection
F-23
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
with the collapse. The Company believes that this matter will not materially
adversely affect the Company's consolidated financial position or future results
of operations.
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>
REPORT OF THE INDEPENDENT AUDITORS
To the Board of Directors of Walibi S.A.
We have audited the consolidated balance sheets of Walibi S.A. as of
December 31, 1996 and 1997 and the related consolidated statements of income and
the related cash flow statements of Walibi S.A. for each of the two years in the
period ended December 31, 1997. These consolidated financial statements are the
responsibility of the Board of Directors. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
Our examination has been conducted in accordance with generally accepted
auditing standards in Belgium, which are substantially the same as those
followed in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement and are in compliance
with the Belgian legal and regulatory requirements with respect to consolidated
financial statements.
In accordance with these standards we have taken into account the
administrative and accounting oganisation of the company as well as the
procedures of internal control. We have obtained all information and
explanations required for our audit. We have examined, on a test basis, the
evidence supporting the amounts included in the consolidated financial
statements. We have assessed the accounting policies used, the significant
estimates made by the company and the overall presentation of the consolidated
financial statements. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, taking into account the legal and regulatory requirements
which are applicable to them, the consolidated financial statements referred to
above present fairly, in all material respect, the consolidated financial
position of Walibi S.A. as of December 31, 1996 and 1997 and the consolidated
results of operations and cash flows of Walibi for each of the two years in the
period ended December 31, 1997.
Application of accounting principles generally accepted in the United States
would have affected shareholders' equity as of December 31, 1996 and 1997 and
share of the group in the result for each of the two years in the period ended
December 31, 1997 to the extent summarized in Note 27 to the consolidated
financial statements.
COOPERS & LYBRAND
Reviseurs
d'Entreprises/Bedrijfsrevisoren
BCV/SCC
represented by
Philippe Barbier
Brussels, March 17, 1998
F-52
<PAGE>
CONSOLIDATED BALANCE SHEET AFTER DISTRIBUTION OF PROFIT
(IN THOUSANDS OF BEF)
ASSETS
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FIXED ASSETS.......................................................... 3,449,789 3,860,482 4,179,132
I Formation expenses......................................... NOTE 1 7,559 13,770 19,278
II Intangible assets.......................................... NOTE 2 3,350 10,348 17,334
III Consolidation differences.................................. NOTE 3 34,785 45,718 56,651
IV Tangible assets............................................ NOTE 4 3,393,688 3,726,836 3,980,262
A Land and buildings.............................. 1,895,410 2,028,292 2,006,352
B Plant, machinery and equipment.................. 1,368,427 1,570,830 1,849,194
C Furniture and vehicles.......................... 56,318 64,522 60,996
D Leasing and similar rights...................... 223 4,315 7,602
E Other tangible assets........................... 43,586 50,321 37,400
F Assets under construction and advance
payments...................................... 29,724 8,556 18,718
V Financial assets........................................... NOTE 5 10,407 63,810 105,607
B Other companies................................. 10,407 63,810 105,607
1. Participating interests...................... 24,427 57,483
2. Amounts receivable........................... 10,407 39,383 48,124
CURRENT ASSETS........................................................ 954,410 780,189 951,673
VII Stocks and contracts in progress........................... 64,780 54,380 38,213
A Stocks NOTE 6 64,780 54,380 38,213
4. Goods purchased for resale................... 64,780 54,380 38,213
VIII Amounts receivable within one year......................... NOTE 7 210,997 107,251 123,117
A Trade debtors................................... 45,119 45,677 35,546
B Other debtors................................... 165,878 61,574 87,571
IX Investments................................................ NOTE 8 513,294 367,591 627,425
B Other investments and deposits.................. 513,294 367,591 627,425
X Cash in hand and at bank................................... NOTE 8 95,430 157,469 78,957
XI Deferred charges and accrued income........................ NOTE 9 69,909 93,498 83,961
TOTAL ASSETS.......................................................... 4,404,199 4,640,671 5,130,805
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-53
<PAGE>
CONSOLIDATED BALANCE SHEET AFTER DISTRIBUTION OF PROFIT
(IN THOUSANDS OF BEF)
LIABILITIES
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY.................................................. 1,088,466 1,075,971 1,243,881
I Capital.................................................... 1,170,087 1,170,087 1,170,087
III Revaluation surpluses...................................... 14,344 15,447 16,550
IV Reserves................................................... NOTE 10 (122,312) (123,975) 53,795
V Consolidation differences.................................. 11,218 11,218 11,218
VI Translation differences.................................... NOTE 11 5,815 (7,953) (21,467)
VII Investment grants.......................................... NOTE 12 9,314 11,147 13,698
PROVISIONS AND DEFERRED TAXATION...................................... 370,207 289,657 298,009
IX A Provisions for liabilities and charges.......... 88,732 42,792 34,039
1. Pension and similar obligations.............. NOTE 13 7,680 5,780
2. Taxation..................................... 30,717
4. Other liabilities and charges................ 50,335 37,012 34,039
B Deferred taxation............................... NOTE 14 281,475 246,865 263,970
CREDITORS, AMOUNTS PAYABLE............................................ 2,945,526 3,275,043 3,588,915
X Amounts payable after one year............................. NOTE 15 1,873,467 2,179,169 2,455,691
A Financial debts................................. 1,873,467 2,179,169 2,455,691
1. Subordinated loans........................... 628,285 1,029,592 1,030,518
3. Leasing or similar obligations............... 238 328
4. Credit institutions.......................... 1,244,344 1,147,622 1,338,046
5. Other loans.................................. 600 1,627 87,127
XI Amounts payable within one year............................ 917,726 943,959 972,592
A Current portion of amounts payable after one
year.......................................... NOTE 15 302,718 275,340 261,245
B Financial debts................................. NOTE 16 395,693 397,156 348,884
1. Credit institutions.......................... 395,693 397,156 348,884
C Trade debts..................................... 88,094 102,519 129,636
1. Suppliers.................................... 88,094 102,519 129,636
E Taxes, remuneration and social security......... 126,474 160,913 170,842
1. Taxes........................................ 45,609 85,344 88,766
2. Remuneration and social security............. 80,865 75,569 82,076
F Other debts..................................... 4,747 8,031 61,985
XII Accrued charges and deferred income........................ NOTE 17 154,333 151,915 160,632
TOTAL LIABILITIES..................................................... 4,404,199 4,640,671 5,130,805
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-54
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT
(IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
I Sales and services..................................... 2,514,600 2,523,781 2,667,529
A Turnover............................................... NOTE 18 2,488,538 2,500,874 2,644,864
C Fixed assets--own construction......................... 445
D Other operating income................................. 25,617 22,907 22,665
II Cost of sales and services............................. 2,317,670 2,501,377 2,466,185
A Raw materials, consumables and goods for resale........ 225,974 217,748 219,628
1. Purchases........................................... 234,698 232,437 214,692
2. Increase (-), decrease (+) in stocks................ (8,724) (14,689) 4,936
B Services and other goods............................... 781,889 905,890 874,452
C Remuneration, social security costs and pensions....... NOTE 19 715,030 765,457 746,825
D Depreciation
1. Depreciation of and other amounts written off....... 514,055 536,436 526,040
2. Depreciation of consolidation differences........... 10,933 10,933 10,933
E Increase (+) or decrease (-) in amounts written off 1,439 332 3,754
stocks, contracts in progress and trade debtors......
F Increase (+) or decrease (-) in provisions for 3,161 39 336
liabilities and charges..............................
G Other operating charges................................ 65,189 64,542 84,217
III OPERATING PROFIT......................................................... 196,930 22,404 201,344
IV Financial income....................................... 37,049 43,985 68,769
A Income from financial fixed assets..................... 6 2,897 2,675
B Income from current assets............................. 17,341 19,819 40,609
C Other financial income................................. 19,702 21,269 25,485
V Financial charges...................................... 163,432 191,163 242,938
A Interest and other debt charges........................ NOTE 20 154,701 181,199 223,790
B Increase (+) or decrease (-) in amounts written off 155 120 264
current assets other than those under II.E...........
C Other financial charges................................ 8,576 9,844 18,884
VI PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE INCOME TAXES OF THE
CONSOLIDATED COMPANIES.................................................... 70,547 (124,774) 27,175
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-55
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT (CONTINUED)
(IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
VII Extraordinary income............................................. 74,447 12,808 20,509
A Adjustments to depreciation of and to other amounts
written off intangible and tangible fixed assets.... 491 1,652 2,043
B Adjustments to amounts written off financial fixed
assets.............................................. 551
C Adjustments to provisions for extraordinary
liabilities and charges............................. 6,767 574 1,178
D Gains on disposal of fixed assets..................... 39,122 1,451 4,994
E Other extraordinary income............................ NOTE 21 28,067 9,131 11,743
VIII Extraordinary charges............................................ 85,147 69,954 26,839
A Extraordinary depreciation and amounts written off
formation expenses, intangible and tangible fixed
assets.............................................. 4,077
B Amounts written off financial fixed assets............ 6,746 33,751
C Provisions for extraordinary liabilities and charges
(Increase +, Decrease -)............................ 45,694 8,790 (8,258)
D Capital loss on disposal of fixed assets.............. 6,870 1,537 7,887
E Other extraordinary charges........................... NOTE 21 21,760 25,876 27,210
VII EXTRAORDINARY RESULTS............................................ (10,700) (57,146) (6,330)
IX PROFIT (LOSS) FOR THE PERIOD BEFORE INCOME TAXES OF THE 59,847 (181,920) 20,845
CONSOLIDATED COMPANIES...........................................
IX A Transfer from the deferred taxes............................... NOTE 22 10,837 19,731 14,640
B Provision for deferred taxes.......................... NOTE 22 (45,447) (3,857) (13,292)
X Income taxes..................................................... NOTE 22 (24,677) (12,827) (32,452)
A Taxes................................................. (35,284) (15,057) (35,072)
B Tax adjustment and writing back of provisions for
tax................................................. 10,607 2,230 2,620
XI PROFIT (LOSS) OF THE CONSOLIDATED COMPANIES...................... 560 (178,873) (10,259)
XIII CONSOLIDATED PROFIT (CONSOLIDATED LOSS).......................... 560 (178,873) (10,259)
XV SHARE OF THE GROUP IN THE RESULT................................. 560 (178,873) (10,259)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-56
<PAGE>
CASH FLOW STATEMENT
(IN THOUSANDS BEF)
<TABLE>
<CAPTION>
NOTE 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS
Group result................................................................... 560 (178,873)
Depreciation on assets......................................................... 517,655 536,436
Depreciation on consolidation differences...................................... 10,933 10,933
Written off stocks and amounts receivable...................................... 3,220 8,447
Written off financial assets................................................... 26 - 1 6,746 39,490
Provisions for liabilities and charges......................................... 26 - 2 46,247 8,255
Transfer of investment grants as result........................................ (1,833) (2,550)
Gains and losses from sales and disposals...................................... (32,252) 86
Other non cash revenue......................................................... (16,717) (6,767)
Deferred taxes................................................................. 34,609 (17,105)
GROSS SELF-FINANCING MARGIN.................................................... 569,168 398,352
VARIATION OF REQUIREMENT FOR WORKING CAPITAL................................... 26 - 3 (126,785) (76,722)
Miscellaneous.................................................................. 10,047 164
OPERATING CASH FLOW............................................................ 452,430 321,794
INVESTMENTS
Acquisitions of intangible fixed assets........................................ (3,716) (173)
Acquisitions of tangible fixed assets.......................................... (190,879) (258,855)
New loans granted and guaranty payments........................................ (9,507) 0
TOTAL INVESTMENT............................................................... (204,102) (259,028)
Sales and disposals of intangible fixed assets................................. 0 19
Sales and disposals of tangible fixed assets................................... 59,925 3,514
Sales and disposals of financial assets........................................ 17,766 0
Repayment of cash guarantees................................................... 38,577 2,924
TOTAL DISINVESTMENT............................................................ 116,268 6,457
INVESTMENT FUNDING............................................................. 26 - 4 (87,834) (252,571)
FINANCING
New loans...................................................................... 26 - 5 514,000 135,300
Repayments of loans............................................................ 26 - 6 (793,395) (350,576)
Dividends paid out by parent company........................................... 0 19,367
Government grants.............................................................. 0 (53,320)
FINANCING...................................................................... (279,395) (249,229)
NET VARIATION IN CASH POSITION................................................. 85,201 (180,006)
Cash position at beginning of period........................................... 525,060 706,382
Cash position at end of period................................................. 608,724 525,060
Translation difference on cash position........................................ 1,537 1,316
Variation in cash position..................................................... 85,201 (180,006)
</TABLE>
F-57
<PAGE>
COMMENTS ON THE MAIN ITEMS IN THE BALANCE SHEET
AND THE PROFIT AND LOSS ACCOUNT
INTRODUCTION
The consolidated accounts of the Walibi Group have been prepared in
accordance with the provisions of the Royal Decree of 1 September 1986, relating
to the annual accounts and the consolidated accounts of holding companies. The
Walibi Group consolidated financial statements are also in compliance with the
norms of the International Accounting Standards Committee (IASC) accounts,
provided that this was not in conflict with the Belgian accounting legislation
in force.
It should be borne in mind that the accounts of the companies included
within the scope of the consolidation are adjusted in order to make them
homogeneous and consistent with the rules of the Group and to the provisions
mentioned above.
CRITERIA USED FOR THE DETERMINATION OF THE CONSOLIDATION METHOD
All the companies of which Walibi S.A. holds sole control are subject to
full consolidation. Companies of negligible importance are excluded.
COMPANIES SUBJECT TO FULL INTEGRATION
<TABLE>
<CAPTION>
PROPORTION
NAME ACTIVITY REGISTERED OFFICE VAT REG. NO. OF CAPITAL
- ---------------------- ------------------ ----------------------------------- ---------------- ------------
<S> <C> <C> <C> <C>
Mini-Europe S.A. Mini Europe Av. du Football 1 - 1020 Brussels BE 429.551.335 99.89%
Gespark S.A. Rue J. Deschamps 9 - 1300 Wavre BE 414.127.444 99.98%
S.P.A.H. S.A Oceade Av. du Football 3 - 1020 Brussels BE 434.211.293 99.99%
Immoflor N.V. D. Martensstraat 22 - 8000 Brugge BE 425.080.328 99.99%
Bellewaerde
Park N.V. Bellewaerde Meenseweg 497 - 8902 Ieper BE 439.050.308 100.00%
Cofilo S.A.R.L. Voie Romaine - 57210 Maizieres les 99.80%
Metz (France) FR
563.839.265.32
Avenir Land S.A. Walibi Rhone-Alpes Le Grand Marais, 38630 Les 99.78%
Avenieres (France) FR
353.112.850.68
Parc Lorrain S.A. Walibi Schtroumpf Voie Romaine - 57210 Maizieres les 99.68%
Metz (France) FR
603.810.784.84
Parc Agen S.A. Walibi Aquitaine 47310 Roquefort (France) FR 99.20%
903.824.445.45
Flevo Attractiepark Walibi Flevo Postbus 40 - AA 8250 Dronten 99.89%
B.V. (Nederland) NL 994.562.3B.01
</TABLE>
Immoflor and Cofilo are holding companies, the former holding N.V.
Bellewaerde Park and the latter S.A. Avenir Land, Parc Lorrain and Parc Agen.
Gespark is a dormant company.
ASSOCIATED COMPANIES NOT INCLUDED IN THE CONSOLIDATION
<TABLE>
<CAPTION>
EQUITY IN RESULT IN
THOUSANDS OF THOUSANDS OF PROPORTION OF
NAME AND REGISTERED OFFICE VAT REG. NO. BEF 31.12.96 BEF 31.12.96 CAPITAL
- ------------------------------------------- ----------------- ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
Historium S.A.
Av. F. Roosevelt 164 - 1050 Brussels BE 426.079.230 (9,198) (2,900) 50.5%
</TABLE>
Historium S.A. has no business activities, and is therefore not included in
the consolidation.
F-58
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
BALANCE SHEET ACCOUNT
(1) STATEMENT OF FORMATION EXPENSES (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
AMOUNTS 1997 1996
- ----------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Net book value at the end of the previous period............................................... 13,770 19,278
Changes during the period:
Additions (+)................................................................................ 3,622
Depreciation (-)............................................................................. (9,833) (5,508)
Net book value at the end of the period...................................................... 7,559 13,770
Of which expenses for incorporation and increasing the capital, loan issue expenses and other
formation costs.............................................................................. 7,559 13,770
</TABLE>
This item includes the charges relating to the issue of the debenture loan.
The formation expenses are depreciated over the period of the loan.
(2) STATEMENT OF INTANGIBLE ASSETS (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
CONCESSIONS,
PATENTS,
LICENCES,
ETC.... GOODWILL TOTAL
--------------- ----------- ---------
<S> <C> <C> <C>
a) ACQUISITION COST
At the end of the previous period:........................................ 56,439 6,586 63,025
Changes during the period:
Acquisitions, including own work capitalised............................ 92 92
Sales and disposals..................................................... (67) (67)
Translation difference.................................................. 124 (18) 106
At the end of the period.................................................. 56,588 6,568 63,156
c) DEPRECIATION AND AMOUNTS WRITTEN OFF
At the end of the previous period:........................................ (47,406) (5,271) (52,677)
Changes during the period:
Recorded................................................................ (5,807) (1,315) (7,122)
Reversals............................................................... 64 64
Translation differences................................................. (89) 18 (71)
At the end of the period.................................................. (53,238) (6,568) (59,806)
d) NET BOOK VALUE AT THE END OF THE YEAR................................... 3,350 0 3,350
</TABLE>
The intangible assets are mainly due to the purchase of the business capital
of independent operators previously working with the Walibi Flevo and
Bellewaerde parks. They are depreciated over a period not exceeding 5 years.
F-59
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(3) STATEMENT OF POSITIVE CONSOLIDATION DIFFERENCES (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
At the end of the previous period............................................................ 45,718 56,651
Depreciation................................................................................. (10,933) (10,933)
At the end of the period..................................................................... 34,785 45,718
</TABLE>
Positive consolidation differences arise from the inclusion in the
consolidation of participation in N.V. Bellewaerde Park and S.A. Mini Europe.
The changes during the financial year are due to depreciation of 10% per year of
the initial value.
(4) STATEMENT OF TANGIBLE FIXED ASSETS (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
PLANT, LEASING ASSETS UNDER
LAND MACHINERY FURNITURE AND OTHER OTHER CONSTRUCTION
AND AND AND SIMILAR FIXED AND ADVANCE
BUILDINGS EQUIPMENT VEHICLES RIGHTS ASSETS PAYMENTS
----------- ----------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
a) ACQUISITION COST
At the end of the previous period.. 3,019,168 3,803,311 423,721 151,269 110,813 8,556
Acquisitions, including own work 28,705 112,410 12,585 11,288 25,891
capitalised.......................
Sales and disposals................ (29,081) (28,431) (3,595) (268) (20)
Transfers from one heading to 260 3,229 1,270 (4,759)
another...........................
Translation differences............ 5,984 4,585 98 369 56
At the end of the period........... 3,025,036 3,895,104 434,079 151,269 122,202 29,724
b) REVALUATION SURPLUSES
At the end of the previous period.. 16,549
At the end of the period........... 0 16,549 0 0 0 0
c) DEPRECIATION AND AMOUNTS WRITTEN (990,876) (2,249,030) (359,199) (146,954) (60,492) 0
OFF ..............................
At the end of the previous period
Depreciation and amounts written (157,078) (299,660) (21,858) (4,092) (18,012)
off recorded......................
Depreciation and amounts written 20,823 9,353 3,427 119
off reversed......................
Depreciation and amounts written (2,495) (3,889) (131) (231)
off transferred ..................
Translation differences
At the end of the period........... (1,129,626) (2,543,226) (377,761) (151,046) (78,616) 0
d) NET BOOK VALUE AT THE END OF THE 1,895,410 1,368,427 56,318 223 43,586 29,724
PERIOD............................
</TABLE>
Acquisitions include investments for the 1997 season as also the investments
for the 1998 season included in the "assets under construction" account.
F-60
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(4) STATEMENT OF TANGIBLE FIXED ASSETS (IN THOUSANDS OF BEF) (CONTINUED)
Modifications to fixed assets for the 1997 and 1996 financial years can be
summarised as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Acquisitions.................................................................... 190,879 258,855
Net sales and disposals......................................................... (27,673) (3,600)
Depreciation during the financial year.......................................... (500,700) (523,772)
Translation difference.......................................................... 4,346 15,091
Net variation................................................................... (333,148) (253,426)
</TABLE>
The main acquisitions over 1997 were equally split between the biggest Parks
and are composed of improvement of the infrastructure and of purchase of leased
attractions.
(5) STATEMENT OF FINANCIAL ASSETS (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
OTHER OTHER
COMPANIES COMPANIES
1997 1996
----------- -----------
<S> <C> <C> <C>
1. PARTICIPATION AND OTHER INVESTMENTS
a) ACQUISITION COST
At the end of the previous period.................................................... 70,708 69,723
Sales and disposals.................................................................. (58,669)
Translation differences.............................................................. 201 985
At the end of the period............................................................. 12,240 70,708
c) AMOUNTS WRITTEN OFF
At the end of the previous period.................................................... (46,281) (12,240)
Recorded............................................................................. (6,746) (33,751)
Reversals due to sales and disposals................................................. 40,903
Translation differences.............................................................. (116) (290)
At the end of the period............................................................. (12,240) (46,281)
e) NET BOOK VALUE AT THE END OF THE PERIOD.............................................. 0 24,427
2. LOANS TO OTHER COMPANIES
Value at the end of the previous period.............................................. 39,383 48,124
Additions--Acquisitions.............................................................. 9,507 1,300
Repayments/disposals................................................................. (38,577) (4,224)
Translation differences.............................................................. 94 488
Other changes........................................................................ 0 (6,305)
Value at the end of the period....................................................... 10,407 39,383
</TABLE>
The disposal of financial asset is related to the disposal of the
participation held in S.A.R.L. Babyland Amiland. The amount receivable after
more than one year mainly consists of deposits paid to guarantee equipment held
on a leasing basis.
F-61
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(6) STOCKS
Stocks mainly consist of goods for the "souvenir" shops.
(7) AMOUNTS RECEIVABLE WITHIN ONE YEAR
Commercial debts arise from invoicing of admission tickets and various
rentals. Other amount receivable concern amounts of VAT or withholding tax to be
received, compensation for insurance claims and prepayments that will be
refunded within year. These amounts receivable increase as a consequence of some
prepayments made for 1998 capital expenditures.
(8) SHORT-TERM INVESTMENTS, CASH IN HAND AND AT BANK
Short-term investments cash in hand and at bank are quasi-liquid. They are
increasing over 1997 as a consequence of a higher cash flow achieved during the
year, combined with lower investment expenditures.
(9) DEFERRED CHARGES AND ACCRUED INCOME
These accounts mainly consist of the invoicing of charges in 1997 which
relate to the 1998 financial year.
(10) STATEMENT OF THE RESERVES (IN THOUSANDS OF BEF)
The variation in reserves is explained in the following table (see also
introduction):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
At the end of the previous period............................................... (123,975) 53,795
Changes:
Result for the period......................................................... 560 (178,873)
Transfers from revaluation surpluses.......................................... 1,103 1,103
At the end of the period........................................................ (122,312) (123,975)
</TABLE>
(11) TRANSLATION DIFFERENCES
The fluctuation in translation differences is explained hereafter:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
At the end of the previous period............................................... (7,953) (21,467)
Conversion differences
on net assets of the consolidated companies................................... 1,113 4,459
on long term intragroup monetary assets and liabilities....................... 12,335 9,315
on conversion of balance sheets and profit and loss accounts.................. 320 (260)
At the end of the period........................................................ 5,815 (7,953)
</TABLE>
F-62
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(12) INVESTMENT GRANTS
The reduction in capital grants results from posting them as revenues pro
rata with depreciation on the investments concerned.
(13) PROVISIONS FOR PENSION
The provision for pensions covers the future cost of staff early
retirements.
(14) PROVISIONS FOR DIFFERED TAXES
The provision for deferred taxes takes into account the future tax debt
associated with differences in the financial and tax accounting processing. The
main difference is due to the diverse depreciation policies employed for company
accounts and consolidated accounts.
(15) STATEMENT OF DEBTS (IN THOUSANDS OF BEF)
Our debts are shown in the table below:
<TABLE>
<CAPTION>
1 TO 5
WITHIN 1 YEAR YEARS MORE THAN 5 YEARS TOTAL
------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
A. Breakdown of debts originally due in more
than one year by their residual period
Financial debts
1. Subordinated loans................... 0 628,285 0 628,285
3. Leasing and other similar
obligations.......................... 90 238 0 328
4. Credit establishments................ 302,628 1,165,282 79,062 1,546,972
5. Other loans.......................... 600 0 600
Total as of 31.12.97.................. 302,718 1,794,405 79,062 2,176,185
Comparative figures as of 31.12.96.... 275,340 2,019,295 159,874 2,454,509
<CAPTION>
1997 1996
----------------- ----------
<S> <C> <C> <C> <C>
B. Debts for which a real guarantee has been
formed or irrevocably pledged against the
assets of the consolidated company
Financial debts
4. Credit institutions.................. 1,246,930 1,116,772
Total................................. 1,246,930 1,116,772
</TABLE>
The amount of BEF 628 million shown in the item for subordinated loans
represents the outstanding debenture loan issued in 1992 and which is due to be
repaid on 30 June 1999. A first BEF 402 million has been purchased in stock
exchange during 1997 financial year and was financed by bank loans in order to
extend the repayment period and benefit from interesting market rates.
F-63
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(15) STATEMENT OF DEBTS (IN THOUSANDS OF BEF) (CONTINUED)
Loans taken out with leading Belgian and foreign financial institutions are
repayable within an average period of 5 years. Changes during the financial year
stem from the reimbursement of amounts due, the reimbursement of a debt for an
amount of BEF 114 million and replacing it with a new loan for the same amount
and the financing of the debenture loan purchase mentioned here above.
A summary of debts (originally falling due in more than one year) are
presented by currency in the table below:
<TABLE>
<CAPTION>
FINANCIAL DEBTS (BEF THOUSANDS) ON
CURRENCY 31.12.97 COMPARATIVE FIGURES ON 31.12.96
- ------------------- ---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C>
BEF................ 1,904,502 88% 2,119,154 86%
FRF................ 31,263 1% 54,501 2%
NLG................ 240,420 11% 280,854 12%
---------- ---------- ---------- ----------
2,176,185 100% 2,454,509 100%
</TABLE>
The structure of interest rates on 31.12.97 is presented below:
<TABLE>
<CAPTION>
WEIGHTED
VARIABLE INTEREST
RATES FIXED RATES TOTAL RATES
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Subordinated loans.................................. 628,285 628,285 6.75%
Credit institutions................................. 613,430 933,542 1,546,972 5.41%
------------- ----------- ----------
Total........................................... 613,430 1,561,827 2,175,257
TOTAL (%)....................................... 28% 72% 100%
</TABLE>
(16) AMOUNTS PAYABLE WITHIN ONE YEAR
Because of the very favourable short-term interest rates, the Group
continued to use of this form of financing in 1997.
(17) DEFERRED INCOME AND ACCRUED CHARGES
The major part of the amount under this item is due to interest charges
noted in advance and in particular, relating to the debenture loan.
PROFIT AND LOSS ACCOUNT
(18) SALES AND SERVICES (IN THOUSANDS OF BEF)
Sales and services remained stable in 1997 compared with those of 1996.
F-64
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(18) SALES AND SERVICES (IN THOUSANDS OF BEF) (CONTINUED)
As the table below shows, a fall in turnover in The Netherlands was
compensated by an increase on the French market.
<TABLE>
<CAPTION>
FLUCTUATION 1997 1996
------------ ---------- ----------
<S> <C> <C> <C>
Breakdown of net turnover by geographical market
Belgium.................................................. -0.5% 1,378,556 1,385,705
France................................................... +5.2% 791,682 752,115
The Netherlands.......................................... -12.3% 318,300 363,054
------ ---------- ----------
Total.................................................. 0.5% 2,488,538 2,500,874
</TABLE>
Consolidated turnover comes from sales of entrance tickets to the parks
(65%), catering (24%), "souvenir" shops and games (7%) and other services
provided (4%).
(19) COSTS OF SALES AND SERVICES (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Wage costs are broken down as follows:
a. Salaries and direct social benefits................................................... 537,445 590,901
b. Employer's social security contributions.............................................. 150,141 150,738
c. Other staff costs..................................................................... 25,504 21,857
e. Pensions.............................................................................. 1,940 1,961
--------- ---------
Total....................................................................................... 715,030 765,457
Average number of staff
Manual workers............................................................................ 337 344
Clerical workers.......................................................................... 324 348
</TABLE>
(20) FINANCIAL RESULTS
The improvement in the financial results is due to the decrease in long-term
indebtedness partially refinanced by short-term debt for which rates are
currently more favourable.
F-65
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(21) EXTRAORDINARY RESULTS (IN THOUSANDS OF BEF)
Extraordinary items improved by BEF 46 million. This is mainly explained by
the increase of the extraordinary profits composed of gain on disposal of fixed
assets. These extraordinary profit compensate the allowance for provision for
risk and charges.
<TABLE>
<CAPTION>
EXTRAORDINARY INCOME 1997 1996
- ----------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1. Breakdown of other extraordinary income if they are large amounts
Various adjustments.......................................................................... 7,321 2,945
Compensation received........................................................................ 13,748 2,521
Other........................................................................................ 6,998 3,665
<CAPTION>
EXTRAORDINARY CHARGES 1997 1996
- ----------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
2. Breakdown of other extraordinary charges if they are large amounts
Extraordinary write off...................................................................... 0 12,044
VAT adjustment............................................................................... 2,741 4,409
Various adjustments.......................................................................... 8,224 4,313
Severance pay................................................................................ 1,380 5,110
Extraordinary exchange differences........................................................... 9,415 0
</TABLE>
(22) TAXATION (IN THOUSANDS OF BEF)
Tax costs for the financial year can be broken down as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Taxes on earnings
1. Taxes on earnings for the financial year
a) Taxes and deductions due or paid..................................................... (18,162) (3,760)
b) Excess payments of taxes and deductions posted as assets............................. 0 1,886
c) Estimated additional taxes........................................................... (2,360) 0
2. Taxes on earnings for previous financial years
a) Additional taxes due or paid......................................................... (14,762) (183)
b) Provisions........................................................................... 0 (13,000)
Tax adjustments.............................................................................. 10,607 2,230
Deferred taxes
1. Deductions on deferred taxes............................................................ 10,837 19,731
2. Provisions for deferred taxes........................................................... (45,447) (3,857)
Total taxes (+ earnings, - costs)............................................................ (59,287) 3,047
Including Current and deferred taxes on current earnings..................................... (55,132) 14,000
Taxes on extraordinary earnings and tax adjustments.................................. (4,155) (10,953)
</TABLE>
F-66
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(23) OFF BALANCE SHEET RIGHTS AND OBLIGATIONS (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
TO GUARANTEE THE DEBTS AND OBLIGATIONS 1997 1996
- ---------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
A2. Real guaranteed or irrevocable pledges against their assets by companies included in
the consolidation Mortgages:
Book value of properties mortgaged................................................ 659,397 760,469
Amount of mortgage................................................................ 1,174,630 1,486,504
Pledges against other assets........................................................ 172,776 170,000
Pledges against the business capital
Amount of the pledge................................................................ 868,490 834,422
</TABLE>
<TABLE>
<CAPTION>
OTHERS SIGNIFICANT RIGHTS AND COMMITMENTS 1997 1996
- -------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Disputed taxes (Fixed quota of foreign taxes and variable loans to subsidiaries)........ 106,824 100,228
Forward currency purchases.............................................................. 0 4,795
</TABLE>
(24) FINANCIAL RELATIONSHIPS WITH GROUP COMPANIES NOT INCLUDED IN THE
CONSOLIDATION (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
1. Amount of participating interest....................................................... 0 24,427
2. Amounts receivable: within one year.................................................... 1,750 0
</TABLE>
(25) FINANCIAL RELATIONSHIPS WITH DIRECTORS AND MANAGERS (IN THOUSANDS OF BEF)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
A. Direct and indirect remuneration and pensions paid during the period to directors and
managers................................................................................ 5,493 11,703
</TABLE>
(26) COMMENTS ON THE CONSOLIDATED CASH FLOW STATEMENT (IN THOUSANDS OF BEF)
1. Written off financial assets:
The reductions in value for 1997 concern an additional write off of the
participation in the company Babyland Amiland (BEF 34 million) before its
disposal at the end of the financial year.
2. Allowance for provisions for liabilities and charges are mainly related to
disputed taxes.
3. Variation of requirement for working capital:
The change in operating funds requirements in 1997 (BEF 127 million) is due
to the prepayments made in 1997 for 1998 capital expenditures.
4. Investments funding:
Total Group investment costs are in line with the budget approved for 1997.
5. New loans:
New loans contracted by the Group correspond to the refinancing of a portion
of the debenture loan (BEF 400 million) and of a bank loan (BEF 114
million).
6. Repayments of loans:
Debt repayments include the reimbursement of debts maturing during the year
and the reimbursement of the loans mentioned above.
F-67
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
VALUATION RULES
1. FORMATION EXPENSES
The expenses for formation and increasing the capital are depreciated 100 %
during the financial year in which they are incurred. The costs of issuing
subordinated debentures with subscription rights are being depreciated over the
7-year period of the loan.
2. INTANGIBLE ASSETS
Intangible assets are depreciated over a period not exceeding 5 years.
3. CONSOLIDATION DIFFERENCES
Consolidation differences are determined at the time of acquisition of the
participation. Positive consolidation differences, which remain after any
charging of assets and liabilities of subsidiaries, are subject to depreciation
in the consolidated profit and loss account, according to a plan decided on a
case by case basis by the Board of Directors:
<TABLE>
<CAPTION>
RATE
-----------
<S> <C>
Consolidation difference on Bellewaerde Park N.V.............................................. 10%
Consolidation difference on Gespark S.A....................................................... 20%
Consolidation difference on Mini-Europe S.A................................................... 10%
</TABLE>
The depreciation of the positive consolidation differences over a period
greater than 5 years is justified by strategic long-term effects for the Group.
4. FIXED ASSETS
Fixed assets are shown on the balance sheet at their acquisition cost. The
acquisition cost includes the accessory charges. Fixed assets are subject to
straight-line depreciation at the following annual rates (recalculation occurs
where the rules used by individual companies are different):
<TABLE>
<CAPTION>
RATE
-----------
<S> <C>
Buildings..................................................................................... 5%
New attractions:
prior to 31/12/93........................................................................... 10%
since 31/12/93.............................................................................. 6.67%
Second-hand attractions: depending on the residual life
Technical equipment........................................................................... 33.30%
Computer equipment............................................................................ 33.30%
Furniture..................................................................................... 20%
Office equipment.............................................................................. 33.0%
Vehicles...................................................................................... 25.0%
Works of art.................................................................................. 0.00%
Assets under construction..................................................................... 0.00%
</TABLE>
F-68
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
5. FINANCIAL ASSETS (OTHER COMPANIES)
These are valued at their acquisition or intake cost, after deduction of any
writing-down of their value as a result of their intrinsic value, viability or
future prospects in the company concerned. The amount receivable and cash
guarantees are recorded at their nominal value.
6. STOCKS
The goods are valued at their acquisition cost using the FIFO method.
7. AMOUNTS RECEIVABLE WITHIN ONE YEAR AND OVER ONE YEAR
These are recorded at their nominal value, and are written-down if it
becomes uncertain or doubtful that they can be recovered at the due date.
8. SHORT-TERM INVESTMENTS
Short-term deposits in Belgian francs are recorded at their nominal value.
As for investments in foreign currencies, they are valued at the exchange rate
of the last day of the financial year. Other short-term investments are recorded
at their nominal value. The value of shares is also written-down if their
inventory value is lower than their book value.
9. CASH IN HAND AND AT BANK
Cash in hand and at bank are recorded at their nominal value. If they are
expressed in foreign currency, they are then converted into Belgian francs at
the rate of the last day of the financial year.
10. DEFERRED CHARGES
Maintenance charges relating to the preparation of the next season are
carried forward to the next financial year.
11. GROUP RESERVES
The Group reserves include the legal and untaxed reserves, reserves
available and unavailable for distribution and the profit brought forward of the
various companies in the Group. They also include the consolidation results.
Translation differences on the capital and reserves of subsidiaries whose
accounts are kept in foreign currency are shown in a separate heading in the
capital and reserves.
12. INTERESTS HELD BY THIRD PARTIES
They are included in the consolidated reserves and in the Group result
because they are insignificant.
13. PROVISION FOR LIABILITIES AND CHARGES
These provisions cannot be used to correct items shown on the assets side of
the balance sheet. They cover a clearly defined, probable loss or charge.
F-69
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
14. DEFERRED TAXATION
Provision is made for latent taxation for all of the temporary differences
between the consolidated result and the fiscal result, using the liability
method that takes into account variations in future tax debts.
15. DEBTS
Debts are recorded at their nominal value on the last day of the period.
16. SPONSORSHIP CONTRACTS
Revenues from sponsorship contracts are shown in the profit and loss
accounts as linear over the duration of the contracts.
17. TRANSLATION RULES FOR ASSETS AND LIABILITIES IN FOREIGN CURRENCY
(1) Creditors, debtors, short-term investments and cash in hand and at bank in
foreign currencies are expressed on the balance sheet at the rate of the
last day of the period.
(2) The translation differences recorded on amount receivable within one year,
debts, cash in hand and at bank and short-term investments are shown in the
profit and loss account:
- in the item "Other financial income" if the differences are favourable
- in the item "Other financial charges" if the differences are unfavourable.
18. METHOD AND BASIS FOR TRANSLATION OF FINANCIAL STATEMENTS FROM FOREIGN
SUBSIDIARIES
All the assets and liabilities of subsidiaries located outside Belgium are
expressed in Belgian francs on the basis of the rate of exchange at the end of
the financial year.
The rates used in the consolidation of these accounts for 1997 and 1996 are
as follows
31.12.97: FRF 1 = BEF 6,1650 NLG 1 = BEF 18.3150
31.12.96: FRF 1 = BEF 6,1120 NLG 1 = BEF 18.3660
The profit and loss accounts of subsidiaries have been converted on the
basis of the average exchange rate for the period. The average rates used were
as follows:
31.12.97: FRF 1 = BEF 6,1330 NLG 1 = BEF 18.3310
31.12.96: FRF 1 = BEF 6,0600 NLG 1 = BEF 18.3650
The effect of exchange rate fluctuations on the net assets of the
subsidiaries and, starting from the 1994 financial year, on the long-term
intragroup monetary assets and liabilities which are in substance of the same
nature as the acquisition of a participation are shown directly in the
Translation differences(2) without affecting the consolidated result. The impact
of a discrepancy between the rate used for the translation of balance sheets and
profit and loss accounts of subsidiaries is also included in the Translation
differences(2) on the liability side of the balance sheet.
19. GOVERNMENT GRANTS
Capital grants are posted when they are granted and included in the results
at the same rhythm as the depreciation of the assets for which they were
obtained. In compliance with Belgian accounting law, they
F-70
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
are posted under a separate liability heading and must be considered as deferred
income under IAS accounting rules.
(27)SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN BELGIAN AND U.S. GENERALLY
ACCEPTED ACCOUNTING PRINICIPLES.
The consolidated financial statements of Walibi S.A. have been prepared in
accordance with generally accepted accounting principles in Belgium (Belgian
"GAAP") and are also in compliance with the norms of the International
Accounting Standards Committee (IASC) provided that this was not in conflict
with the Belgian GAAP.
The accounting priniciples differ in certain material respects from United
States generally accepted accounting principles in the United States (U.S.
GAAP).
Following is a summary of the principle differences between Belgian GAAP and
U.S. GAAP that are significant to the Company's consolidated financial
statements. The effects on the Company's net income and shareholders' equity of
applying the significant differences between Belgian GAAP and U.S. GAAP are
summarized in the tabular reconciliation set out below:
(I) DEFERRED TAXES
Belgian and International Accounting standards do not require a deferred tax
asset pertaining to temporary differences that give rise to deferred tax assets
unless there is a reasonable expectation of realization. FAS 109, Accounting for
income taxes, requires deferred taxes to be provided on a full liability basis.
A valuation allowance should be established for deferred tax assets when it is
more likely than not that some portion of all the deferred tax asset wil not be
realized.
(II) INTANGIBLE ASSETS
Belgian Accounting principles require intangible assets and cost of goodwill
at acquisition to be recognized as expense by amortizing it over a period not
exceeding 5 years. Under U.S. GAAP, separately identifiable intangible assets
are amortized over their estimated useful lives of 25 years.
(III) NEGATIVE GOODWILL AT ACQUISITION
Belgian Accounting principles require negative goodwill at acquisition to be
recorded in a separate line under Equity. Accounting Principles Board Opinion
No. 16, Business Combination, requires negative goodwill at acquisition to be
first amortized to non current assets and then to be recorded as deferred income
and amortized systematically to income over the period estimated to be
benefitted, but not in excess of 40 years.
(IV) CAPITAL GRANT
For both Belgian GAAP and U.S. GAAP, grants are recognized as income over
the periods necessary to match them with the assets to which they relate. For
Belgian GAAP, capital grants are credited directly to a separate line under
Equity whereas for U.S. GAAP, capital grants are deducted in determining the
carrying amount of the related assets.
F-71
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(27)SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN BELGIAN AND U.S. GENERALLY
ACCEPTED ACCOUNTING PRINICIPLES. (CONTINUED)
(V) REVALUATION SURPLUS
International Accounting Standards (IAS 16) and Belgian GAAP permit property
to be revalued periodically and carried at fair value subsequent to initial
recognition. Revaluation increases are credited directly to equity as
revaluation surpluses. Under U.S. GAAP, revaluation surpluses are not allowed
except in certain respects in business combinations.
(VI) RETIREMENT BENEFIT COSTS
Under Belgian GAAP, contributions to the relevant government agencies in
accordance with local requirements are expensed as incurred. Under U.S. GAAP,
pension expense is based upon a specified actuarial methodology with amounts
reflected in the income statement systematically over the working lives of the
employees covered by the plan. Other postretirement benefits are accrued over
the life of an employee's working career with the expense recognized consisting
of a number of components involving actuarial assumptions.
(VII) MAINTENANCE DEFERRALS
Preventive maintenance costs incurred after the end of the season and
related to following season are deferred. Under U.S. GAAP, the cost of
maintenance is recognized as expenses in the period incurred.
<TABLE>
<CAPTION>
RECONCILIATION OF CONSOLIDATED PROFIT AND LOSS ACCOUNTS 1996 1997
------------------------------------------------------------------------------ ------------- ------------
<C> <S> <C> <C>
SHARE OF THE GROUP IN THE RESULT AS REPORTED IN THE CONSOLIDATED STATEMENT OF
PROFIT AND LOSS IN ACCORDANCE WITH THE BELGIAN GAAP: (178,873) 560
Adjustments required for U.S. GAAP reporting purposes:
(i) Recognition of changes in deferred income tax assets on temporary differences
exisiting but not recognized under Belgian and IAS GAAP basis............... 22,538 (25,727)
(ii) Recognition of changes in amortization of intangible fixed assets............. 4,635 4,592
(iii) Recognition of negative goodwill at acquisition as deferred income............ 449 449
(v) Elimination of revaluation surplus............................................ 1,103 1,103
(vii) Maintenance costs to be expected as incurred.................................. 1,500 2,700
(viii) Recogniton of deferred tax income on (ii) and (vii) above..................... (2,464) (2,929)
Net income (loss) in accordance with U.S. GAAP................................ (151,113) (19,252)
</TABLE>
F-72
<PAGE>
WALIBI GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996 AND 1997
(ALL AMOUNTS IN THOUSANDS OF BELGIAN FRANCS, UNLESS OTHERWISE INDICATED)
(27)SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN BELGIAN AND U.S. GENERALLY
ACCEPTED ACCOUNTING PRINICIPLES. (CONTINUED)
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, DECEMBER 31,
RECONCILLIATION OF SHAREHOLDERS' EQUITY 1996 1997
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<C> <S> <C> <C>
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH BELGIAN GAAP.......................... 1,075,971 1,088,466
Adjustments required for U.S. GAAP reporting purposes:
(i) Recognition of changes in deferred income tax assets on temporary differences
existing but not recognized under Belgian IAS GAAP basis.................... 146,265 120,538
(ii) Recognition of changes in amortization of intangible fixed assets............. 39,837 44,429
(iii) Recognition of negative goodwill at acquisition as deferred income............ (8,771) (8,322)
(iv) Recognition of capital grant as a deferred income............................. (11,147) (9,314)
(v) Elimination of revaluation surplus............................................ (15,447) (14,344)
(vi) Retirement Benefit costs...................................................... (15,000) (15,000)
(vii) Maintenance costs to be expensed as incurred.................................. (13,500) (10,800)
(viii) Recognition of deferred tax income on (ii) and (x) above...................... (10,580) (13,509)
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP............................. 1,187,628 1,182,144
<CAPTION>
BELGIAN GAAP U.S. GAAP
STATEMENT OF CHANGES IN EQUITY BEF "000" BEF "000"
------------------------------------------------------------------------------ ------------- ------------
<C> <S> <C> <C>
SHAREHOLDERS' EQUITY AS OF DECEMBER 31, 1996.................................. 1,075,971 1,187,628
Net income for the year ending December 31, 1997.............................. 560 (19,252)
Translation difference........................................................ 13,768 13,768
Capital Grant disclosed as a separate component of equity under Belgian GAAP
and amortized to income over the assets useful life......................... (1,833) N/A
SHAREHOLDERS' EQUITY AS OF DECEMBER 31, 1997.................................. 1,088,466 1,182,144
</TABLE>
F-73
<PAGE>
The Depositary for the Exchange Offer is:
Bank Brussels Lambert SA (Capital Markets Support)
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or
Avenue Marnix 24 011-322-547-36-86 Overnight Courier:
1000 Brussels-Belgium Confirm by Telephone: Avenue Marnix 24
011-322-547-23-66 1000 Brussels-Belgium
By Telex:
24444 BBF Fin B
</TABLE>
------------------------
Questions or requests for assistance may be directed to the Depositary at
its addresses and telephone numbers listed above. Additional copies of this
Prospectus/Offer to Purchase or the Acceptance Form enclosed herewith may be
obtained from the Depositary. A stockholder may also contact brokers, dealers,
commercial banks or trust companies for assistance concerning the Exchange
Offer.
