<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PREMIER PARKS INC.
(Exact name of Registrant as specified in its charter)
------------------------
<TABLE>
<S> <C>
DELAWARE 73-6137714
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
------------------------
<TABLE>
<S> <C>
11501 NORTHEAST EXPRESSWAY KIERAN E. BURKE
OKLAHOMA CITY, OKLAHOMA 73131 11501 NORTHEAST EXPRESSWAY
TEL: (405) 475-2500 OKLAHOMA CITY, OKLAHOMA 73131
(Address, including zip code, and telephone number, including TEL: (405) 475-2500
area code, of Registrant's principal executive offices) (Name, address, including zip code, and telephone
number, including area code, of agent for service)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. COUGHLIN, ESQ. KIRK A. DAVENPORT, ESQ.
Baer Marks & Upham LLP Latham & Watkins
805 Third Avenue 885 Third Avenue
New York, New York 10022 New York, New York 10022-4802
Tel: (212) 702-5819 Tel: (212) 906-1200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
(SEE FOLLOWING PAGE.)
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Company Senior Discount Notes................... $250,000,000(2) $73,750
Company Senior Notes............................ $280,000,000 $82,600
Total........................................... -- -- $530,000,000 $156,350
</TABLE>
(1) Estimated in accordance with Rule 457(o) solely for the purposes of
computing the registration fee.
(2) The Company Senior Discount Notes will be issued at a substantial discount
to their principal amount, and will be sold to investors at a price that
yields gross proceeds to the Company of approximately $250.0 million.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1998
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
$
PREMIER PARKS INC.
$ % SENIOR DISCOUNT NOTES DUE 2008
$280,000,000 % SENIOR NOTES DUE 2008
-----------------
Premier Parks Inc. (collectively with its predecessor, the "Company" or
"Premier") is offering $ in aggregate principal amount at maturity of its
% Senior Discount Notes (the "Company Senior Discount Notes") due 2008 (the
"Discount Notes Offering") and $280,000,000 in aggregate principal amount of its
% Senior Notes (the "Company Senior Notes" and, together with the Company
Senior Discount Notes, the "Company Notes") due 2008 (the "Senior Notes
Offering" and, together with the Discount Notes Offering, the "Notes Offering").
The Company Notes will mature on , 2008.
The Company Senior Discount Notes will be issued at a substantial discount
to their principal amount at maturity, and will be sold at a price to investors
that will yield gross proceeds to the Company of approximately $250.0 million.
The issue price of the Company Senior Discount Notes will be $ per
$1,000 principal amount at maturity plus accreted original issue discount, if
any, from the date of issuance. The Company Senior Discount Notes will accrete
in value until , 2003. Thereafter, cash interest will accrue on the
Company Senior Discount Notes and will be payable semiannually in arrears on
and , commencing , 2003, at a rate of % per annum. The
Company Senior Discount Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after , 2003, at the redemption
prices set forth herein, plus accrued and unpaid interest thereon to the date of
redemption. In addition, prior to , 2001, the Company may redeem up to 35%
of the original aggregate principal amount at maturity of the Company Senior
Discount Notes at % of the Accreted Value (as defined) thereof to the
redemption date with the net cash proceeds of one or more Public Equity
Offerings (as defined); provided that at least 65% of the aggregate principal
amount at maturity of the Company Senior Discount Notes originally issued
remains outstanding immediately after the occurrence of each such redemption.
See "Description of Notes."
Interest on the Company Senior Notes will be payable semi-annually in
arrears on and of each year, commencing on ,
1998. A portion of the net proceeds of the Senior Notes Offering will be used to
purchase a portfolio of Government Securities (as defined), that will be pledged
as security for payment of interest on the Company Senior Notes through ,
2001, and, under certain circumstances, as security for repayment of principal
of the Company Senior Notes. See "Description of Notes--Escrow of Proceeds." The
Company Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest thereon to the date of
redemption. In addition, prior to , 2001, the Company may redeem up to 35%
of the original aggregate principal amount of the Company Senior Notes at %
of the principal amount thereof to the redemption date with the net cash
proceeds of one or more Public Equity Offerings (as defined); provided that at
least 65% of the aggregate principal amount of the Company Senior Notes
originally issued remains outstanding immediately after the occurrence of each
such redemption.
Upon the occurrence of a Change of Control (as defined), each holder of the
Company Notes will have the right to require the Company to purchase all or any
part of such holder's Company Notes at a purchase price equal to (i) in the case
of the Company Senior Discount Notes, 101% of the Accreted Value thereof to the
date of purchase prior to , 2003 or 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest to the date of purchase, on or after
, 2003 or (ii) in the case of the Company Senior Notes, 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the date
of purchase. See "Description of Notes."
The Company Notes will be general unsecured obligations of the Company and
will rank PARI PASSU in right of payment with all current and future senior
indebtedness of the Company. All of the operations of the Company are conducted
through its subsidiaries, and none of the Company's subsidiaries will guarantee
the Company's obligations under the Company Notes. Accordingly, the Company
Notes will be effectively subordinated to all indebtedness and other liabilities
of such subsidiaries, including borrowings under the Six Flags Credit Facility
and the Premier Credit Facility (each as defined) and indebtedness outstanding
under the Premier Notes, the SFTP Senior Subordinated Notes and the New SFEC
Notes (each as defined). As of December 31, 1997, after giving pro forma effect
to the Premier Merger, the Acquisitions and the Offerings (each as defined), the
Company would have had approximately $ million of indebtedness outstanding
and the Company's subsidiaries would have had approximately $ million of
indebtedness outstanding and approximately $ million of other
outstanding liabilities. See "Capitalization."
Concurrently with the Notes Offering, the Company is publicly offering in
the U.S. and internationally $500.0 million of the Company's Common Stock, par
value $0.05 per share (the "Common Stock"), and depository receipts representing
$200.0 million of the Company's % Convertible Exchangeable Preferred Stock
(the "Mandatorily Convertible Preferred Stock"). SFEC (as defined) is
concurrently offering (the "SFEC Offering") $170.0 million aggregate principal
amount of senior notes (the "New SFEC Notes"). The closing of the Notes
Offerings is conditioned upon the closing of the offerings of Common Stock (the
"Common Stock Offering") and Mandatorily Convertible Preferred Stock (the
"Convertible Preferred Stock Offering," and together with the Notes Offering,
the SFEC Notes Offering and the Common Stock Offering, the "Offerings") and the
closing of each of the Six Flags Transactions (as defined).
---------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMPANY NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE
20.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Investors(1) Commissions(2) Company(1)(3)
<S> <C> <C> <C>
Per Company Senior Discount Note............................... % % %
Per Company Senior Note........................................ % % %
Total.......................................................... $ $ $
</TABLE>
(1) Plus accreted original issue discount on the Company Senior Discount Notes,
if any, and accrued interest on the Company Senior Notes, if any, in both
instances from the date of issuance to the date of delivery.
(2) The Company and its operating subsidiaries have agreed to indemnify the
Underwriters (as defined) against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
---------------------------
The Company Notes are being offered subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to certain conditions.
It is expected that delivery of the Company Notes will be made in book entry
form through the facilities of The Depository Trust Company, on or about
, 1998, against payment therefor in immediately available funds.
---------------------------
LEHMAN BROTHERS SALOMON SMITH BARNEY
, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, periodic reports and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission's principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the regional
offices of the Commission at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661.
Copies of such material can be obtained from the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Website (http://www.sec.gov) that also contains such reports, proxy
statements and other information filed by the Company. The Common Stock of the
Company is listed on the NYSE. In addition, application will be made to list the
depositary shares representing interests in the Mandatarily Convertible
Preferred Stock and the Common Stock issuable on conversion of the Mandatorily
Convertible Preferred Stock on the NYSE. Such reports, proxy statements and
other information concerning the Company can also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the securities offered hereby. For
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. In accordance with
the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the schedules
and exhibits thereto. Each statement made in this Prospectus concerning a
document filed as an exhibit to the Registration Statement is qualified in its
entirety by reference to such exhibit for a complete statement of its
provisions. For further information pertaining to the Company and the securities
offered hereby, reference is made to such Registration Statement, including the
exhibits and schedules thereto, which may be inspected or obtained as provided
in the foregoing paragraph.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference into this Prospectus and made a part hereof as of
their respective dates:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
5. The Company's Current Report on Form 8-K, dated February 6, 1997.
6. The Company's Current Report on Form 8-K, dated November 7, 1997, as
amended.
7. The Company's Current Report on Form 8-K, dated December 15, 1997.
8. The description of the shares of Common Stock contained in the Company's
Registration Statement on Form 8-A dated December 11, 1997 and filed under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
9. The description of the rights relating to the shares of Common Stock
contained in the Company's Registration Statement on Form 8-A dated January 12,
1998 and filed under the Exchange Act, including any amendment or report filed
for the purpose of updating such description.
10. The information contained in the Company's Registration Statement on
Form S-2 (Registration No. 333-16573) specified below:
(i) the Financial Statements of Elitch Gardens Company as of December
31, 1995 and 1994, for the year ended December 31, 1995 and for the period
from May 31, 1994 (date of inception) through
2
<PAGE>
December 31, 1994 and the report of the independent auditors thereon (pages
F-38 to F-51, inclusive, of such Registration Statement);
(ii) the Financial Statements of The Great Escape as of October 31, 1994
and 1995, and for the years then ended and the independent auditors' report
thereon (pages F-52 to F-60, inclusive, of such Registration Statement); and
(iii) the Financial Statements of Stuart Amusement Company as of
September 30, 1996 and 1995 and for each of the years in the three-year
period ended September 30, 1996 and the independent auditors' report thereon
(pages F-81 to F-93, inclusive, of such Registration Statement).
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering shall also be deemed to
be incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to: Premier Parks
Inc., 11501 Northeast Expressway, Oklahoma City, Oklahoma 73131, Attention:
Richard A. Kipf, Corporate Secretary (telephone number: (405) 475-2500, Ext.
219).
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMPANY NOTES
OFFERED HEREBY AT LEVELS WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros. ("Warner Bros."), a division of Time
Warner Entertainment Company, L.P. ("TWE"). BATMAN, BATMOBILE, GOTHAM CITY AND
SUPERMAN are copyrights and trademarks of DC Comics, a partnership between TWE
and a subsidiary of Time Warner Inc. SPORTS ILLUSTRATED is a trademark of Time,
Inc., a subsidiary of Time Warner Inc. HBO is a trademark of TWE. SIX FLAGS
GREAT ADVENTURE, SIX FLAGS GREAT AMERICA and SIX FLAGS are federally registered
trademarks of Six Flags Theme Parks Inc. FIESTA TEXAS and all related indicia
are trademarks of Fiesta Texas Theme Park, Ltd.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and located elsewhere herein regarding
industry prospects and the Company's financial position are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in this Prospectus, both together with such forward-looking statements
and under "Risk Factors."
3
<PAGE>
PROSPECTUS SUMMARY
PRIOR TO THE DATE OF THIS PROSPECTUS, THE EXISTING COMPANY CALLED "PREMIER
PARKS INC." WILL BECOME A WHOLLY-OWNED SUBSIDIARY OF THE REGISTRANT AND THE
OUTSTANDING SHARES OF CAPITAL STOCK OF THE EXISTING PREMIER PARKS INC. WILL
BECOME, ON A SHARE-FOR-SHARE BASIS, SHARES OF CAPITAL STOCK OF THE REGISTRANT
WHICH WILL THEN BE RENAMED "PREMIER PARKS INC." (THE "PREMIER MERGER"). AS USED
HEREIN, THE TERMS THE "COMPANY" AND "PREMIER" MEAN FOR ANY PERIOD PRIOR TO THE
PREMIER MERGER, THE EXISTING PREMIER PARKS INC. AND ITS CONSOLIDATED
SUBSIDIARIES AND FOR ANY PERIOD SUBSEQUENT THERETO, THE REGISTRANT AND ITS
CONSOLIDATED SUBSIDIARIES.
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD
BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES, ALL
INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO GIVE EFFECT TO THE PREMIER
MERGER AND THE ACQUISITIONS (AS DEFINED HEREIN) AND ASSUMES THAT THE
UNDERWRITERS' OVERALLOTMENT OPTIONS IN THE COMMON STOCK OFFERING ARE NOT
EXERCISED. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT REQUIRES OTHERWISE,
THE TERMS (I) THE "1996 ACQUISITIONS" REFERS TO THE ACQUISITIONS OF ELITCH
GARDENS, THE GREAT ESCAPE, WATERWORLD SACRAMENTO AND WATERWORLD CONCORD
(TOGETHER, THE "WATERWORLD PARKS") AND RIVERSIDE PARK, (II) THE "1997
ACQUISITIONS" REFERS TO THE ACQUISITION OF KENTUCKY KINGDOM--THE THRILL PARK IN
LOUISVILLE, KENTUCKY ("KENTUCKY KINGDOM"), THE PROPOSED ACQUISITION OF ALL OF
THE OUTSTANDING CAPITAL STOCK OF WALIBI S.A. ("WALIBI") ASSUMING SUCCESSFUL
COMPLETION OF THE WALIBI TENDER OFFER (AS DEFINED HEREIN), AS WELL AS THE
COMPANY'S MANAGEMENT CONTRACT, LEASE AND PURCHASE OPTION WITH RESPECT TO MARINE
WORLD AFRICA USA IN VALLEJO, CALIFORNIA ("MARINE WORLD"), (III) THE "SIX FLAGS
ACQUISITION" REFERS TO THE ACQUISITION, BY MERGER, OF ALL OF THE CAPITAL STOCK
OF SIX FLAGS ENTERTAINMENT CORPORATION ("SFEC" AND, TOGETHER WITH ITS
CONSOLIDATED SUBSIDIARIES, "SIX FLAGS") WHICH WILL OCCUR CONTEMPORANEOUSLY WITH
THE CLOSING OF THE OFFERING, (IV) THE "ACQUISITIONS" REFERS TO THE 1996
ACQUISITIONS, THE 1997 ACQUISITIONS AND THE SIX FLAGS ACQUISITION AND (V) THE
"SIX FLAGS PARKS" REFERS TO THE PARKS OPERATED BY SIX FLAGS ON THE DATE OF THE
SIX FLAGS ACQUISITION, AND THE "PREMIER PARKS" REFERS TO ALL OF THE PARKS
OPERATED BY THE COMPANY (INCLUDING PARKS ACQUIRED AND TO BE ACQUIRED IN THE 1997
ACQUISITIONS, BUT EXCLUDING THE SIX FLAGS PARKS). ALL PRO FORMA FINANCIAL
INFORMATION PRESENTED HEREIN GIVES PRO FORMA EFFECT TO EACH OF THE ACQUISITIONS
(OTHER THAN MARINE WORLD). ALL PARK ATTENDANCE INFORMATION AND RANKINGS BASED ON
SUCH DATA INCLUDED IN THIS PROSPECTUS (OTHER THAN ATTENDANCE DATA FOR THE
PREMIER PARKS AND THE SIX FLAGS PARKS) ARE BASED ON INFORMATION PUBLISHED BY
AMUSEMENT BUSINESS, A RECOGNIZED INDUSTRY PUBLICATION, WHICH, ACCORDING TO SUCH
PUBLICATION, INCLUDES ESTIMATES BASED ON SOURCES IT BELIEVES TO BE RELIABLE.
RANKINGS OF METROPOLITAN AND DESIGNATED MARKET AREAS ("DMA") ARE BASED ON A
COPYRIGHTED 1996-97 SURVEY OF TELEVISION HOUSEHOLDS PUBLISHED BY A.C. NIELSEN
MEDIA RESEARCH.
THE COMPANY
The Company is the largest regional theme park operator, and the second
largest theme park company, in the world, based on 1997 attendance of
approximately 37 million at its parks. It operates 31 regional parks, including
15 of the 50 largest theme parks in the U.S., based on 1997 attendance. The
Company's theme parks are located in nine of the ten largest metropolitan areas
in the country. The Company estimates that % of the U.S. population lives
within a 100-mile radius of the Company's theme parks. On a pro forma basis, the
Company's total revenue and earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the year ended December 31, 1997 was approximately
$ million and $ million, respectively.
A substantial portion of the proceeds of the Offerings will be used to fund
the Six Flags Acquisition. See "--The Six Flags Transactions." Six Flags
operates eight regional theme parks, as well as three separately gated water
parks and a wildlife safari park (each of which is located near one of the theme
parks). None of the Six Flags Parks is located within the primary market of any
of the Premier Parks. During 1997, the Six Flags theme parks drew, in the
aggregate, approximately % of their patrons from within a 100-mile radius.
During that year, Six Flags' attendance, revenue and EBITDA totaled ,
$ and $ , respectively.
4
<PAGE>
Six Flags has operated regional theme parks under the Six Flags name for
over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier will obtain exclusive worldwide
ownership of the Six Flags brand name and expects to use the Six Flags brand
name, generally beginning in the 1999 season, at most of the Premier Parks.
In addition, as part of the Six Flags Acquisition, the Company will obtain
from Warner Bros. the exclusive right for theme-park usage of certain Warner
Bros. and DC Comics characters throughout the United States (except the Las
Vegas metropolitan area) and Canada. These characters include BUGS BUNNY, DAFFY
DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. Since 1991, Six
Flags has used these characters to market its parks and to provide an enhanced
family entertainment experience. The license will have a term of 55 years, will
include the right to sell merchandise featuring the characters at the parks and
will apply to all of the Company's current theme parks, as well as future parks
that meet certain criteria. Premier intends to make extensive use of these
characters at the Six Flags Parks and, commencing in 1999, at most of the
existing Premier Parks. See "Business--Licenses."
The Premier Parks consist of nine regional theme parks (six of which include
a water park component) and four water parks located across the United States,
as well as six regional theme parks and two smaller attractions located in
Europe and scheduled to be acquired in March 1998 in the acquisition of Walibi.
During the 1997 operating season, the 11 parks then owned by Premier drew, on
average, approximately 82% of their patrons from within a 100-mile radius, with
approximately 36.1% of visitors utilizing group and other pre-sold tickets and
approximately 20.6% utilizing season passes.
Under current management, since 1989 Premier has assumed control of 30
parks, and has achieved significant internal growth. During the nine months
ended September 30, 1997, the 11 parks owned by the Company during the 1997
operating season achieved same park growth in attendance, revenue and park-level
operating cash flow (representing all park operating revenues and expenses
without depreciation and amortization or allocation of corporate overhead or
interest expense) of 17.4%, 21.0% and 44.4%, respectively, as compared to the
comparable period of 1996. See "--Summary Historical and Pro Forma Data."
The Company's parks are individually themed and provide a complete
family-oriented entertainment experience. The Company's theme parks generally
offer a broad selection of state-of-the-art and traditional thrill rides, water
attractions, themed areas, concerts and shows, restaurants, game venues and
merchandise outlets. In the aggregate, the Company's theme parks offer more than
rides, including roller coasters, making the Company the leading
provider of "thrill rides" in the industry.
The Company believes that its parks benefit from limited direct competition.
The combination of limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of the parks with a significant degree of
protection from competitive new theme park openings. Based on its knowledge of
the development of other theme parks in the United States, the Company's
management estimates that it would cost at least $200 million and would take a
minimum of two years to construct a new regional theme park comparable to the
Company's largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's six senior executive officers have over
150 years aggregate experience in the industry and its nine general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 200
years experience in the industry, including approximately 80 years at the
Premier Parks and approximately years experience at the Six Flags Parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million, compared to million in
1994 (the first year in which such information is available from that
publication), representing a compound annual growth rate of %. Total
attendance for the 40 largest parks in North America was 154.7 million in 1997,
compared to million in 1992, representing a compound annual growth rate of
%. The Company believes that this growth reflects two trends: (i) demographic
growth in the 5-24 year old age group, which is expected to continue through
2010; and (ii) an increasing emphasis on family-oriented leisure and recreation
activities.
5
<PAGE>
The Company's strategy for achieving growth includes the following key
elements: (i) pursuing growth opportunities at existing parks; (ii) expanding
the Company's parks; and (iii) making selective acquisitions.
PURSUING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for continued
internal growth at its parks. The Company seeks to increase revenue by
increasing attendance and per capita spending, while also maintaining strict
control of operating expenses. The primary elements used to achieve this
objective are: (i) adding rides and attractions and improving overall park
quality; (ii) enhancing marketing and sponsorship programs; (iii) increasing
group sales, season passes and other pre-sold tickets; (iv) implementing ticket
pricing strategies to maximize ticket revenues and park utilization; (v) adding
and enhancing restaurants and merchandise and other revenue outlets; and (vi)
adding special events. This approach is designed to exploit the operating
leverage inherent in the theme park business. Once parks achieve certain
critical attendance levels, operating cash flow margins increase because revenue
growth through incremental attendance gains and increased in-park spending is
not offset by a comparable increase in operating expenses, since a large portion
of such expenses is relatively fixed during any given year.
THE PREMIER PARKS
Management believes it has demonstrated the effectiveness of its strategy at
the Premier Parks owned prior to the 1997 Acquisitions. For example, during the
nine months ended September 30, 1997, the three parks acquired in the Company's
1995 Funtime acquisition achieved compound annual growth in attendance, revenue
and park-level operating cash flow of 9.0%, 13.8% and 20.5%, respectively,
compared to the comparable period of 1995. Similarly, during the nine months
ended September 30, 1997, the five parks acquired in the 1996 Acquisitions
realized growth in attendance, revenue and park-level operating cash flow of
32.6%, 34.4% and 161.3%, respectively, compared to the comparable period of
1996. In particular, two of the parks acquired in the 1996 Acquisitions, Elitch
Gardens in Denver and Riverside Park in Springfield, Massachusetts, realized
dramatic growth during their first year under the Company's ownership. As a
result of capital investment and improved marketing, during the nine months
ended September 30, 1997, attendance and revenue at Elitch Gardens grew 64.7%
and 52.2%, respectively, and park-level operating cash flow increased from $1.1
million to $10.2 million, as compared to the comparable period of 1996.
Similarly, during the nine months ended September 30, 1997, attendance and
revenue at Riverside Park increased 51.2% and 49.6%, respectively, and
park-level operating cash flow increased from $1.6 million to $10.1 million, as
compared to the comparable period of 1996.
Management believes that the parks acquired by Premier in the 1997
Acquisitions offer similar opportunities to implement the Company's growth
strategy. For example, at Marine World, a well-known wildlife park located in
the San Francisco market, management is expanding the park's entertainment
component with theme park rides and attractions, investing approximately $35-$40
million for the 1998 season to add fourteen new rides in the first phase of this
expansion. The Walibi acquisition provides the Company with a significant
presence in the expanding theme park industry in Europe. Although the Walibi
parks have historically produced solid operating results, management believes
that the Company's strategy of targeted capital investment and sophisticated
marketing can improve performance at these parks. The Company has agreed to
invest approximately $37.7 million in the Walibi Parks over the three years
commencing with the 1999 season. See "--Other Recent Developments" and
"Business--Operating Strategy."
The Company believes that, by virtue of the Six Flags Acquisition, a number
of the existing Premier Parks have the potential over the next several seasons
to accelerate their rate of growth. Recent attendance levels at the Six Flags
theme parks (between 1.7 millon and 3.6 million in 1997) have been substantially
higher than the annual attendance at the largest Premier Parks (between 1.0
million and 1.5 million during that year). Management believes that a number of
the existing Premier Parks, particularly Adventure World, Elitch Gardens, Geauga
Lake, Kentucky Kingdom, Marine World and Riverside Park, all of which are
located in or near major metropolitan areas, can accelerate their market
penetration and the expansion of their geographic market by their use of the Six
Flags brand name, aggressive marketing campaigns
6
<PAGE>
featuring the animated characters licensed from Warner Bros. and D.C. Comics, as
well as continued capital investment in new rides and attractions. The Company
expects to commence general use of the Six Flags brand name and the licensed
characters at the Premier Parks for the 1999 season.
THE SIX FLAGS PARKS
The Six Flags Parks generally enjoy significant market penetration. Thus,
although the Company plans to make targeted capital expenditures at these parks
to increase attendance and per capita spending levels, it expects to increase
significantly the EBITDA of these parks primarily through reduction in operating
expenses. First, and most importantly, the Company believes that it can
substantially reduce Six Flags' corporate overhead and other corporate-level
expenses. Second, the Company expects to achieve significant reduction in
park-level operating expenses. Third, by virtue of economies of scale, the
Company believes that operating efficiencies in areas such as marketing,
insurance, promotion, purchasing and other expenses can be realized. Finally,
the Company believes that its increased size following the Six Flags Acquisition
will enable it to achieve savings in capital expenditures.
EXPANDING THE COMPANY'S PARKS
The Company is expanding several of the Premier Parks in order to increase
attendance and per capita spending. For example, the Company is constructing an
economy motel at its Darien Lake park for the 1998 season to supplement the
existing campgrounds and continues to expand the park by purchasing additional
recreational vehicles (RV's). In addition, the Company recently purchased
campgrounds adjacent to Geauga Lake, and may add campgrounds or an amphitheater
at Frontier City. The Company expects to add prior to the 1999 season a more
complete complement of "dry" rides to Wyandot Lake, which is currently primarily
a water park. In addition, the Company owns 400 acres adjacent to Adventure
World which are zoned for entertainment, recreational and residential uses and
are available for complementary uses. Additional acreage owned by the Company
and suitable for development exists at several of the other Premier Parks.
The Company may expand in the future certain of the Six Flags Parks by
adding complementary attractions, such as lodging facilities and concert venues.
For example, Six Flags owns over 1,500 undeveloped acres adjacent to Six Flags
Great Adventure (located between New York City and Philadelphia) suitable for
such purposes. Additional acreage suitable for development exists at several
other Six Flags Parks.
MAKING SELECTIVE ACQUISITIONS
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that, in addition to the
Acquisitions, there are numerous acquisition opportunities, both in the U.S. and
abroad, that can expand its business. The Company's primary target for
acquisitions continues to be regional parks with attendance between 300,000 and
1.5 million annually. The Company will also consider acquisitions of larger
parks or park chains (such as Six Flags).
As the only owner of multiple parks that has been actively making
acquisitions of parks in its primary range over the last several years, the
Company believes it has a number of competitive advantages in acquiring parks of
this size. Historically, operators of destination or large regional park chains
have not generally sought to acquire parks in the Company's primary target range
and do not have the experience or management structure to readily operate parks
of that size profitably. Additionally, as a multi-park operator with a track
record of successfully acquiring, improving and repositioning parks, the Company
has numerous competitive advantages over single-park operators in pursuing
acquisitions and improving the operating results at acquired parks. These
advantages include the ability to (i) exercise group purchasing power (for both
operating and capital assets); (ii) achieve administrative economies of scale;
(iii) attract greater sponsorship revenue, support from sponsors with
nationally-recognized brands and marketing partners; (iv) use the Six Flags
brand name and the characters licensed from Warner Bros.; (v) recruit and retain
superior management; (vi) optimize the use of capital assets by rotating rides
among its parks to provide fresh attractions; (vii) access capital markets; and
(viii) use its publicly-traded Common Stock as a
7
<PAGE>
portion of the acquisition consideration. See "Risk Factors--Uncertainty of
Future Acquisitions; Potential Effects of Acquisitions" and
"Business--Acquisition Strategy."
The Company's principal executive offices are located at 11501 Northeast
Expressway, Oklahoma City, Oklahoma 73131, (405) 475-2500 and at 122 East 42nd
Street, New York, New York 10168, (212) 599-4690.
THE SIX FLAGS TRANSACTIONS
The Notes Offering is one of a series of related transactions (the "Six
Flags Transactions") all of which will be consummated immediately prior to or
concurrently with the Notes Offering. The elements of the Six Flags Transactions
are:
THE PREMIER MERGER
The company presently named Premier Parks Inc. (together with its
consolidated subsidiaries, "Premier Operations") will merge in the Premier
Merger with a wholly-owned subsidiary of Premier Parks Holdings Corporation in
accordance with Section 251(g) of the Delaware General Corporation Law. As a
result of the Premier Merger, holders of shares of Common Stock of Premier
Operations will become, on a share-for-share basis, holders of Common Stock of
Premier Parks Holdings Corporation, and Premier Operations will become a
wholly-owned subsidiary of Premier Parks Holdings Corporation. On the effective
date of the Premier Merger, Premier Operations will change its name to Premier
Parks Operations Inc., and Premier Parks Holdings Corporation will change its
name to Premier Parks Inc.
THE SIX FLAGS ACQUISITION
Pursuant to an Agreement and Plan of Merger dated as of February 9, 1998
(the "Six Flags Agreement"), Premier will acquire by merger all of the capital
stock of SFEC from its current stockholders (the "Sellers") for approximately
$965 million (subject to adjustment), less an amount equal to the excess of the
aggregate payment in such merger to the current holders of (i) options
exercisable for capital stock of SFEC OVER (ii) $5.0 million. The purchase price
is payable in all cash or, at the Company's option, cash and depositary shares
representing interests in up to $200.0 million (but not less then $100.0
million) of the Company's % Convertible Redeemable Preferred Stock (the
"Seller Preferred Stock"). At the date of acquisition, Six Flags' liabilities
will include approximately $192.3 million principal amount at maturity ($160.1
million accreted value at December 31, 1997) of SFEC's Zero Coupon Senior Notes
due 1999 (the "SFEC Zero Coupon Senior Notes") and approximately $285.0 million
principal amount at maturity ($269.9 million accreted value at December 31,
1997) of 12 1/4% Senior Subordinated Discount Notes due 2005 (the "SFTP Senior
Subordinated Notes") of Six Flags Theme Parks Inc. (together with its
subsidiaries, "SFTP"), an indirect wholly-owned subsidiary of SFEC. In addition,
the Company will refinance all outstanding Six Flags bank indebtedness
(approximately $ million at December 31, 1997). See "Description of Six
Flags Agreement."
THE FINANCINGS
In the Offerings:
1. The Company will issue in the Common Stock Offering, shares of Common
Stock with estimated gross proceeds of $500.0 million.
2. The Company will issue in the Preferred Stock Offering, depositary shares
representing interests in the Company's % Convertible Exchangeable Preferred
Stock (the "Mandatorily Convertible Preferred Stock" and, together with the
Seller Preferred Stock, the "Convertible Preferred Stock") with estimated gross
proceeds of $200.0 million. See "Description of Capital Stock--Mandatorily
Convertible Preferred Stock."
3. The Company will issue its Senior Discount Notes due 2008 (the "Company
Senior Discount Notes") with estimated gross proceeds of $250.0 million. See
"Description of Notes."
8
<PAGE>
4. The Company will issue $280.0 million principal amount of its % Senior
Notes due 2008 (the "Company Senior Notes" and, together with the Company Senior
Discount Notes, the "Company Notes"). See "Description of Notes."
5. SFEC will issue (the "SFEC Notes Offering" and, together with the Common
Stock Offering and the Preferred Stock Offering, the "Concurrent Offerings")
$170.0 million principal amount of its % Senior Notes (the "New SFEC Notes").
The proceeds of the New SFEC Notes, together with additional funds, will be
deposited in escrow to repay in full at or prior to maturity the SFEC Zero
Coupon Senior Notes. See "Description of Other Indebtedness--New SFEC Notes."
In addition, the Company will use approximately $ of borrowings
under the Premier Credit Facility (as defined below) to prefund capital
expenditures and provide working capital. The Company will also draw
approximately $ million of borrowings under a new $472.0 million Six Flags
senior secured credit facility (the "Six Flags Credit Facility" and, together
with the Premier Credit Facility, the "Credit Facilities") to repay bank
indebtedness of SFTP. See "Description of Other Indebtedness--Premier Credit
Facilities" and "--Six Flags Credit Facility."
The closing of the Notes Offering is conditioned upon the closing of all
other elements of the Six Flags Transactions. Although the size of one or more
of the Offerings may be changed, the aggregate gross proceeds of all the
Offerings is not expected to change materially.
The following table sets forth a summary of the expected sources and uses of
funds associated with the Six Flags Transactions:
<TABLE>
<CAPTION>
AMOUNT
(IN
SOURCES THOUSANDS)
-----------
<S> <C>
Common Stock Offering(1)....................................................... $ 500,000
Preferred Stock Offering(1).................................................... 200,000
Issuance of depositary shares for Seller Preferred Stock....................... 200,000
Senior Discount Notes Offering(1).............................................. 250,000
Senior Notes Offering(1)....................................................... 280,000
New SFEC Notes Offering(1)..................................................... 170,000
Borrowings under the Premier Credit Facility(2)................................
Borrowings under the Six Flags Credit Facility.................................
-----------
Total...................................................................... $
-----------
-----------
USES
Acquisition of SFEC capital stock.............................................. $ 965,000
Deposit for repayment of SFEC Zero Coupon Senior Notes.........................
Repayment of Six Flags bank indebtedness.......................................
Escrow Account for Company Senior Notes(3).....................................
Prefunding of capital expenditures(4)..........................................
Other cash.....................................................................
Transaction expenses...........................................................
-----------
Total...................................................................... $
-----------
-----------
</TABLE>
- ------------------------
(1) Reflects assumed gross proceeds.
(2) Does not include an estimated $ million (assuming an all cash Walibi
Tender Offer) of borrowings to be used to fund, in part, the Walibi
acquisition.
(3) Represents escrow to fund the first six semi-annual interest payments
thereon.
(4) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Liquidity, Capital Commitments and Resources."
Following the Six Flags Transactions, the Company's structure will be:
[Chart showing corporate structure and Offerings and Bank Facilities]
9
<PAGE>
OTHER RECENT DEVELOPMENTS
KENTUCKY KINGDOM. In November 1997, the Company acquired all of the
membership interests of the limited liability company that owns substantially
all of the assets used in the operation of Kentucky Kingdom, a combination theme
and water park located in Louisville, Kentucky, for an aggregate purchase price
of $64.0 million, of which approximately $4.9 million was paid by delivery of
121,671 shares of Common Stock, with the balance paid in cash and by the
assumption of liabilities. Depending upon the level of revenues at Kentucky
Kingdom during each of the 1998-2000 seasons, the Company may be required to
issue additional shares of Common Stock to the seller.
MARINE WORLD. In April 1997, the Company became manager of Marine World, a
marine and exotic wildlife park located in Vallejo, California, pursuant to a
contract with an agency of the City of Vallejo under which the Company is
entitled to receive an annual base management fee of $250,000 and up to $250,000
annually in additional fees based on park performance. In November 1997, the
Company exercised its option to lease approximately 40 acres of land within the
site for nominal rent and an initial term of 55 years (plus four ten-year and
one four-year renewal options). The Company intends to expand the park's
entertainment component by adding theme park rides and attractions on the leased
land, which is located within the existing park, in order to create one
fully-integrated regional theme park at the site. Premier is entitled to
receive, in addition to the management fee, 80% of the cash flow generated by
the combined operations at the park, after combined operating expenses and debt
service on outstanding debt obligations relating to the park. The Company is
currently implementing the first phase of the expansion of the entertainment
component at Marine World. The Company also has an option to purchase the entire
site commencing in February 2002 at a purchase price equal to the greater of the
then principal amount of certain debt obligations of the seller (expected to
aggregate $52.0 million at February 2002) or the then fair market value of the
seller's interest in the park (based on a formula relating to the seller's 20%
share of Marine World's cash flow). The Company currently expects to exercise
this purchase option when it becomes exercisable.
WALIBI. In December 1997, the Company entered into an agreement (the
"Walibi Agreement") with three of the principal stockholders of Walibi, S.A.
("Walibi"), pursuant to which the Company expects to purchase in March 1998 a
majority of the outstanding capital stock of Walibi (the "Private Acquisition").
Following the closing of the Private Acquisition, the Company will commence a
"public takeover bid," as defined and regulated under Belgian law (the "Walibi
Tender Offer"), for the remainder of the outstanding capital stock of Walibi.
Walibi is a corporation (SOCIETE ANONYME) organized under the laws of
Belgium. Walibi's stock is currently traded on the Official Market of the
Brussels Stock Exchange and it owns six theme parks, two located in Belgium, one
in The Netherlands and three in France, as well as two smaller attractions in
Belgium (the "Walibi Parks"). Walibi's operations had combined 1997 attendance
of approximately 3.5 million.
The transaction values the equity of Walibi based on a multiple of seven
times Walibi's 1997 EBITDA, less Walibi's net debt at December 31, 1997. The
Company estimates that the aggregate consideration to be paid by the Company for
Walibi (assuming the Company acquires 100% of the outstanding Walibi capital
stock pursuant to the Walibi Tender Offer) will be between Belgian Francs
("BEF") 2.8 billion and BEF 3.1 billion ($75.4 million to $83.4 million based on
the exchange rate of $1.00 to BEF 37.16 on February 4, 1998). The purchase price
in the Private Acquisition will be paid 80% in cash in BEF and 20% in Premier
Common Stock (approximately 220,000 shares based on an assumed purchase price of
BEF 1.55 billion in the Private Acquisition). Shares of Premier Common Stock
issued in the Private Acquisition will not be registered under the Securities
Act and will be subject to a "lock-up" agreement until the later of June 6, 1998
or 41 days after the consummation of the Private Acquisition. The consideration
offered in the Walibi Tender Offer will be payable at the election of the
holders of Walibi capital stock (i) in cash only
10
<PAGE>
or (ii) in cash and shares of Premier Common Stock in the same ratio as the
Private Acquisition. In addition, the Company will be obligated to issue
additional shares of Premier Common Stock in the event certain gross revenue
targets are met for the theme parks owned by Walibi at the time of the closing
of the Private Acquisition. The Company will also assume or refinance certain
indebtedness of Walibi which aggregated $ million at December 31, 1997. The
Company will fund the cash portion of the purchase price of the Walibi
acquisition (as well as the refinancing of certain indebtedness of Walibi) from
the proceeds of borrowings under a $300.0 million senior secured credit facility
(the "Premier Credit Facility") to be entered into by Premier Operations prior
to the Private Acquisition. See "Description of Other Indebtedness--Premier
Credit Facility."
Under the terms of the Walibi Agreement, the Company has agreed to invest at
least BEF 1.4 billion (approximately $37.7 million based on the exchange rate of
$1.00 to BEF 37.16 on February 4, 1998) in the Walibi Parks over the three years
commencing with the 1999 season.
11
<PAGE>
THE NOTES OFFERING
<TABLE>
<S> <C>
Securities Offered................ $ in aggregate principal amount at
maturity of % Senior Discount Notes due 2008 (the
"Company Senior Discount Notes") and $280,000,000 in
aggregate principal amount of % Senior Notes due 2008
(the "Company Senior Notes").
The Offerings..................... In addition to the Notes Offering, the Company is
concurrently offering (i) shares of Common Stock with
estimated gross proceeds of $500.0 million and (ii)
depositary shares representing interests in $200.0
million of Mandatorily Convertible Preferred Stock. In
addition, SFEC is offering $170.0 million of New SFEC
Notes. The Company also expects to issue depositary
shares representing interests in up to $200.0 million of
Seller Preferred Stock as part of the consideration for
the Six Flags Acquisition. See "--The Six Flags
Transactions," "Description of Other Indebtedness,"
"Description of Capital Stock" and "Description of
Notes." The Offerings are conditioned upon the closing
of all other elements of the Six Flags Transactions.
Use of Proceeds................... The Company intends to apply the net proceeds from the
Offerings to fund a portion of the cash portion of the
purchase price for the Six Flags Acquisition; to provide
for the repayment in full of the SFEC Zero Coupon Senior
Notes; to acquire and make improvements at additional
theme parks; to fund improvements and expansion of the
Company's parks, including the parks acquired in the Six
Flags Acquisition and the 1997 Acquisitions; and for
general corporate purposes, including working capital
requirements. See "Use of Proceeds."
Ranking........................... The Company Notes will be general unsecured obligations
of the Company, ranking PARI PASSU in right of payment
with all future senior indebtedness of the Company, and
senior in right of payment to all future subordinated
indebtedness of the Company. The Company is a holding
company whose only significant asset is the capital
stock of its subsidiaries. The Company Notes will not be
guaranteed by such subsidiaries. Accordingly, the
Company Notes will be structurally subordinated to all
indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries, including all
borrowings under the Six Flags Credit Facility and the
Premier Credit Facility and all indebtedness outstanding
under the Subsidiary Indentures. As of December 31,
1997, after giving pro forma effect to the Premier
Merger, the Acquisitions and the Offerings, the Company
would have had approximately $ million of
outstanding indebtedness and the Company's subsidiaries
would have had approximately $ million of
indebtedness outstanding and approximately $
million of other outstanding liabilities.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Certain Covenants................. The indentures pursuant to which the Company Notes will
be issued (the "Company Indentures") will contain
certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to (i) incur
additional indebtedness and issue preferred stock, (ii)
pay dividends or make certain other restricted payments,
(iii) enter into transactions with affiliates, (iv) make
certain asset dispositions, (v) merge or consolidate
with, or transfer substantially all its assets to,
another Person (as defined), (vi) create Liens (as
defined), (vii) issue or sell Equity Interests (as
defined) of the Company's subsidiaries, (viii) engage in
sale and leaseback transactions or (ix) engage in
certain business activities. See "Description of
Notes--Certain Covenants."
COMPANY SENIOR DISCOUNT NOTES
Maturity Date..................... , 2008.
Yield and Interest................ The Company Senior Discount Notes will accrete daily at
a rate of % per annum, compounded semiannually, to
an aggregate principal amount of $ million by
, 2003. Cash interest will not accrue on
the Company Senior Discount Notes prior to
, 2003. Thereafter, cash interest on the
Company Senior Discount Notes will accrue and be payable
semiannually in arrears on each and
, commencing , 2003, at
a rate of % per annum.
Original Issue Discount........... The Company Senior Discount Notes will be issued at a
substantial discount to their principal amount at
maturity, and will be sold to investors at a price that
will yield gross proceeds to the Company of
approximately $250.0 million. The Company Senior
Discount Notes are being offered at an original issue
discount ("OID") for U.S. federal income tax purposes.
Thus, although cash interest will not be payable on the
Company Senior Discount Notes prior to ,
2003, original issue discount will accrue from the issue
date of the Company Senior Discount Notes and will be
included as interest income periodically (including for
periods ending prior to , 2003) in a
holder's gross income for U.S. federal income tax
purposes in advance of receipt of the cash payments to
which the income is attributable. See "Certain United
States Federal Income Tax Considerations."
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Optional Redemption............... Except as described below, the Company Senior Discount
Notes will not be redeemable at the Company's option
prior to , 2003. Thereafter, the Company
Senior Discount Notes will be subject to redemption at
any time at the option of the Company, in whole or in
part, at the redemption prices set forth herein plus
accrued and unpaid interest to the applicable redemption
date. In addition, at any time prior to
, 2001, the Company may on any one or
more occasions redeem up to 35% of the original
aggregate principal amount at maturity of the Company
Senior Discount Notes at a redemption price of % of
the Accreted Value thereof to the redemption date, with
the net cash proceeds from one or more Public Equity
Offerings; PROVIDED that at least 65% of the aggregate
principal amount of the Company Senior Discount Notes
originally issued remains outstanding immediately after
the occurrence of each such redemption (excluding
Company Senior Discount Notes held by the Company or any
of its subsidiaries). See "Description of
Notes--Optional Redemption."
Change of Control................. Upon the occurrence of a Change of Control, the holders
of the Company Senior Discount Notes will have the right
to require the Company to repurchase such holders'
Company Senior Discount Notes, in whole or in part, at a
price equal to 101% of the Accreted Value thereof to the
date of purchase prior to , 2003 or 101%
of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase on or after
, 2003. There can be no assurance that
the Company will be able to raise sufficient funds to
meet this obligation should it arise. See "Risk
Factors--Risks Associated with a Change of Control" and
"Description of Notes-- Repurchase at the Option of
Holders--Change of Control."
COMPANY SENIOR NOTES
Maturity Date..................... , 2008.
Yield and Interest................ Interest accrues from the date of issuance and will be
payable in cash semiannually in arrears on each
and , commencing
, 1998, at a rate of % per annum.
Security.......................... A portion of the net proceeds of the Senior Notes
Offering will be used to purchase a portfolio of
Government Securities that will be pledged as security
for the payment of interest on the Company Senior Notes
for the first six semi-annual interest payments and
under certain circumstances as security for repayment of
principal of the Senior Company Notes. See "Description
of Notes--Escrow of Proceeds."
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Optional Redemption............... Except as described below, the Company Senior Notes will
not be redeemable at the Company's option prior to
, 2003. Thereafter, the Company Senior
Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, at the
redemption prices set forth herein plus accrued and
unpaid interest to the applicable redemption date. In
addition, at any time prior to , 2001,
the Company may on any one or more occasions redeem up
to 35% of the aggregate principal amount of the Company
Senior Notes at a redemption price of % of the
aggregate principal amount thereof to the redemption
date, with the net cash proceeds from one or more Public
Equity Offerings; PROVIDED that at least 65% of the
aggregate principal amount of the Company Senior Notes
originally issued remains outstanding immediately after
the occurrence of each such redemption (excluding
Company Senior Notes held by the Company or any of its
subsidiaries). See "Description of Notes-- Optional
Redemption."
Change of Control................. Upon the occurrence of a Change of Control, the holders
of the Company Senior Notes will have the right to
require the Company to repurchase such holders' Company
Senior Notes, in whole or in part, at a price equal to
101% of the aggregate principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
There can be no assurance that the Company will be able
to raise sufficient funds to meet this obligation should
it arise. See "Risk Factors--Risks Associated with a
Change of Control" and "Description of Notes--Repurchase
at the Option of Holders--Change of Control."
</TABLE>
15
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA DATA
The tables below contain certain summary historical and pro forma financial
and operating data for the Company. The historical financial data for 1996
includes the 1996 Acquisitions (other than Riverside Park) from the dates of the
respective acquisitions. The pro forma financial and operating data for the year
ended December 31, 1996 give effect to (i) the acquisitions of Elitch Gardens,
the Waterworld Parks, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags as if they had occurred on January 1, 1996; (ii) the acquisition of The
Great Escape as if it had occurred on November 1, 1995 (the first day of The
Great Escape's 1996 fiscal year); (iii) the acquisition of Riverside Park as if
it had occurred on October 1, 1995 (the first day of Riverside Park's 1996
fiscal year) and (iv) the acquisition of Kentucky Kingdom as if it had occurred
on October 30, 1995 (the first day of Kentucky Kingdom's 1996 fiscal year). The
pro forma financial and operating data for the nine months ended September 30,
1997 give effect to the acquisitions of Riverside Park, Kentucky Kingdom, Walibi
(assuming an all cash Walibi Tender Offer) and Six Flags as if they had occurred
on January 1, 1997. The following summary historical financial and operating
data, except for attendance and revenue per visitor data, as of September 30,
1997, for each of the years in the three-year period ended December 31, 1996 and
the nine months ended September 30, 1996 and 1997, have been derived from the
financial statements of the Company appearing elsewhere in this Prospectus
(which in the case of the unaudited consolidated financial statements, in the
opinion of management, include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation) and should be read in
conjunction with those financial statements (including the notes thereto) and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Other historical financial and operating data have been derived
from audited consolidated financial statements of Premier which are not included
herein.
The Company's business is highly seasonal. Results for the nine-month period
ended September 30, 1997 are not necessarily indicative of results to be
expected for the year ended December 31, 1997. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
PRO FORMA(4)
1992(1) 1993 1994 1995(2) 1996(3) 1996
----------- --------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND
PER VISITOR AMOUNTS) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Total revenue................................. $ 17,392 $ 21,860 $ 24,899 $ 41,496 $ 93,447 $
Gross profit(5)............................... 4,921 7,787 7,991 13,220 31,388
Income from operations(5)..................... 487 3,019 2,543 3,948 14,461
Interest expense, net......................... (1,413) (1,438) (2,299) (5,578) (11,121)
Income (loss) from continuing operations...... (1,735) 1,354 102 (1,045)(6) 1,765
Income (loss) from continuing operations per
common share (primary and fully diluted).... $ (2.10) $ .51 $ .04 $ (.40)(6) $ .13 $
OTHER DATA:
EBITDA(7)..................................... $ 1,938 $ 4,562 $ 4,549 $ 7,706 $ 22,994 $
Net cash provided by operating
activities(8)............................... $ 1,980 $ 2,699 $ 1,060 $ 10,646 $ 11,331 $
Depreciation and amortization................. $ 1,442 $ 1,537 $ 1,997 $ 3,866 $ 8,533 $
Capital expenditures.......................... $ 3,956 $ 7,674 $ 10,108 $ 10,732 $ 39,423 $
Total attendance.............................. 1,116 1,322 1,408 2,302(9) 4,518(9) (10)
Revenue per visitor(11)....................... $ 15.58 $ 16.54 $ 17.68 $ 18.03 $ 20.66 $
Ratio of earnings to fixed charges(12)........ (12) 2.1x 1.1x (12) 1.3 x
Ratio of earnings to combined fixed charges
and preferred stock dividends(12)........... (12) 2.1x 1.1x (12) 1.2 x
EBITDA/total interest expense.................
EBITDA/cash interest expense..................
Total debt/EBITDA.............................
Net debt/EBITDA...............................
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
HISTORICAL
HISTORICAL COMBINED HISTORICAL PRO FORMA
1996 1996(13) 1997 1997(4)
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR PER SHARE, RATIO AND
PER VISITOR AMOUNTS)
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Total revenue..................................... $ 89,792 $ 154,307 $ 186,746
Gross profit(5)................................... 40,611 59,446 81,256
Income from operations(5)......................... 25,248 27,048 51,568
Interest expense, net............................. (7,657) (12,281) (12,869)
Net income........................................ $ 10,512 $ 6,273 $ 23,193
Net income per common share
Primary......................................... $ 1.24 (13) $ 1.32
Fully diluted................................... $ 1.11 (13) $ 1.29
OTHER DATA:
EBITDA(7)......................................... $ 30,848 $ 45,392 $ 65,542
Net cash provided by operating activities(8)...... $ 10,222 $ 21,814 $ 43,921
Depreciation and amortization..................... $ 5,599 $ 18,627 $ 13,974
Capital expenditures.............................. $ 29,290 $ 33,273 $ 108,166
Total attendance.................................. 4,302 (9) 7,049 8,276(9) (10)
Revenue per visitor(11)........................... $ 20.87 $ 21.66 $ 22.33
Ratio of earnings to fixed charges(12)............ 3.2 x (13) 3.9x
Ratio of earnings to combined fixed charges and
preferred stock dividends(12)................... 2.9 x (13) 3.9x
EBITDA/total interest expense.....................
EBITDA/cash interest expense......................
Total debt/EBITDA.................................
Net debt/EBITDA...................................
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
ACTUAL(14) PRO FORMA(15)
----------- --------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 169,151
Total assets......................................................................... $ 621,267
Total long-term debt and capitalized lease obligations (excluding current
maturities)........................................................................ $ 216,263
Total debt........................................................................... $ 217,253
Seller Preferred Stock............................................................... --
Stockholders' equity................................................................. $ 326,802
</TABLE>
- --------------------------
(1) During 1992, the Company purchased Adventure World, as well as the
remaining minority interest in Frontier City. During 1992, the Company also
discontinued substantially all of its non-theme park operations through a
disposition transaction which significantly reduced the Company's assets
and indebtedness, as well as resulted in an extraordinary gain of $18.4
million, which gain is not reflected in income (loss) from continuing
operations. During 1992, the Company also adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
("Statement 109"), resulting in a decrease in net income of $2.3 million
which decrease is not reflected in income (loss) from continuing
operations.
(2) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Funtime acquisition from the date of acquisition,
August 15, 1995.
(3) The historical Statement of Operations Data for 1996 reflect the results of
Elitch Gardens from October 31, 1996, the Waterworld Parks from November
19, 1996 and The Great Escape from December 4, 1996 (the dates of their
respective acquisition).
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
17
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(4) The pro forma financial and operating data for the year ended December 31,
1996 give effect to the Acquisitions and the related financings as if they
had occurred on January 1, 1996 (in the case of Elitch Gardens, the
Waterworld Parks, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags), on November 1, 1995 (in the case of The Great Escape), on October
1, 1995 (in the case of Riverside Park) and October 30, 1995 (in the case
of Kentucky Kingdom). The pro forma financial and operating data for the
nine months ended September 30, 1997 give effect to the acquisitions of
Riverside Park, Kentucky Kingdom, Walibi (assuming an all cash Walibi
Tender Offer) and Six Flags as if they had occurred on January 1, 1997. The
pro forma income per share for 1996 also gives effect to the June 1996
public offering, the conversion of the Company's outstanding preferred
stock at that time, the January 1997 public offering, the Common Stock
Offering and the Preferred Stock Offering as if they had occurred on
January 1 of such year. The pro forma income per share for the 1997 period
also gives effect to the January 1997 public offering, the Common Stock
Offering and the Preferred Stock Offering as if they had occurred on
January 1, 1997.
(5) Gross profit is revenue less operating expenses, costs of products sold and
depreciation and amortization. Income from operations is gross profit less
selling, general and administrative expenses.
(6) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the
Funtime acquisition. This extraordinary loss is not included in income
(loss) from continuing operations and income (loss) from continuing
operations per common share for 1995.
(7) EBITDA is defined as earnings from continuing operations before interest
expense, net, income tax expense (benefit), depreciation and amortization,
minority interest and equity in loss of real estate partnership. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of the Company's ability to service and/or
incur debt. EBITDA is not required by generally accepted accounting
principles ("GAAP") and should not be considered in isolation or as an
alternative to net income, net cash provided by operating, investing and
financing activities or other financial data prepared in accordance with
GAAP or as an indicator of the Company's operating performance. This
information should be read in conjunction with the Statements of Cash Flows
contained in the financial statements included elsewhere herein. Equity in
loss of real estate partnership was $122,000, $142,000, $83,000, $69,000,
$78,000, $60,000 and $44,000 during each of the five years ended December
31, 1996 and the nine months ended September 30, 1996 and 1997,
respectively.
(8) During each of the five years ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997, the Company's net cash used in investing
activities was $5,649,000, $7,698,000, $10,177,000, $74,139,000,
$155,149,000, $29,328,000 and $129,542,000, respectively. During those
periods, net cash provided by financing activities was $8,736,000,
$2,106,000, $7,457,000, $90,914,000, $119,074,000, $64,085,000 and
$250,729,000, respectively.
(9) Represents in the case of 1995 attendance at the three parks owned by the
Company prior to the Funtime acquisition for the entire 1995 season and
attendance at the Funtime parks from and after August 15, 1995. In the case
of 1996, historical attendance does not include attendance at any of the
parks acquired in the 1996 Acquisitions since those acquisitions were
completed following the 1996 season. Historical attendance for the nine
months ended September 30, 1997 does not include attendance at Marine
World.
(10) Pro forma attendance information includes attendance at Marine World for
the applicable period.
(11) Pro forma and historical revenue per visitor for all applicable periods
does not include revenue of Paradise Island (a fee-per-attraction
entertainment center that does not track attendance, acquired in November
1996) or Marine World.
(12) For the purpose of determining the ratio of earnings to fixed charges, and
the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) from continuing operations
before income taxes and fixed charges. Fixed charges consist of interest
expense net of interest income, amortization of deferred financing costs
and discount or premium relating to indebtedness, and the portion
(approximately one-third) of rental expense that management believes
represents the interest component of rent expense. Preferred stock dividend
requirements have been increased to an amount representing the before tax
earnings which would have been required to cover such dividend
requirements. For the years ended December 31, 1992 and 1995, the Company's
earnings were insufficient to cover fixed charges by $917,000 and
$1,738,000, respectively, and were insufficient to cover combined fixed
charges and preferred stock dividends by $917,000 and $2,620,000,
respectively. On a pro forma basis, for the year ended December 31, 1997,
the Company's earnings were insufficient to cover fixed charges and
combined fixed charges and preferred stock dividends by $ and $ ,
respectively.
(13) Represents results of operations of Premier and the results of operations
for the parks acquired in the 1996 Acquisitions on a combined basis. No pro
forma adjustments for additional depreciation, interest expense or income
taxes have been made in combining the Company and 1996 Acquisitions
amounts. Income per share, ratio of earnings to fixed charges and ratio of
earnings to combined fixed charges and preferred stock dividends are not
presented on this basis as amounts are not meaningful.
(14) Actual balance sheet data as of September 30, 1997 include the Company's
investment in Marine World as of that date.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
18
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(15) The pro forma balance sheet data give effect to the acquisitions of
Kentucky Kingdom, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags, the Offerings (assuming no exercise of the underwriters'
over-allotment options in the Common Stock Offering) and the related
financings as if they had occurred on September 30, 1997.
19
<PAGE>
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS:
RISKS ASSOCIATED WITH SUBSTANTIAL INDEBTEDNESS
Following the Six Flags Transactions, the Company will be highly leveraged.
On a pro forma basis, as of December 31, 1997, the Company had total outstanding
indebtedness of approximately $ million, including (i) $250.0 million in
accreted value at that date of the Company Senior Discount Notes ($
million principal amount at maturity in 2008); (ii) $280.0 million in aggregate
principal amount of Company Senior Notes; (iii) $125.0 million in aggregate
principal amount of Premier Operations' 9 3/4% Senior Notes due 2007 (the "1997
Premier Notes"); (iv) $90.0 million in aggregate principal amount of Premier
Operations' 12% Senior Notes due 2003 (the "1995 Premier Notes" and, together
with the 1997 Premier Notes, the "Premier Notes"); (v) $269.9 million in
accreted value at that date of SFTP Senior Subordinated Notes ($285.0 million
principal amount at maturity in 2005); (vi) $170.0 million in aggregate
principal amount of New SFEC Notes (together with the Company Notes, the Premier
Notes and the SFTP Senior Subordinated Notes, the "Senior Notes"); (vii)
$ million in outstanding borrowings under the Premier Credit Facility;
and (viii) $ million in outstanding borrowings under the Six Flags Credit
Facility. Pro forma indebtedness at that date also included $160.1 million
accreted value of SFEC Zero Coupon Senior Notes, which will be repaid from the
proceeds of the New SFEC Notes together with other funds. On a pro forma basis,
as of December 31, 1997, the Company would have had stockholders' equity of
approximately $ million. In addition, the annual dividends (which are
payable in cash, in the case of the Seller Preferred Stock, or in cash, or by
issuance of shares of Common Stock, at the option of the Company, in the case of
the Mandatorily Convertible Preferred Stock) on the Convertible Preferred Stock
aggregate $ , and the Seller Preferred Stock is mandatorily redeemable
in 2010 (if not earlier redeemed or converted). On a pro forma basis, for the
year ended December 31, 1997, the Company's earnings would have been
insufficient to cover its combined fixed charges and preferred stock dividends
by approximately $ million. In addition, the indentures relating to the
Senior Notes (the "Indentures") permit the Company to incur additional
indebtedness under certain circumstances. See "Capitalization," "Selected
Historical and Pro Forma Financial and Operating Data," "Description of Other
Indebtedness" and "Description of Notes--Certain Covenants."
By reason of the Six Flags Acquisition, the Company will be required to
offer to repurchase the SFTP Senior Subordinated Notes at a price equal to 101%
of their accreted amount (approximately $287.9 million at June 15, 1998). On
February , 1998, the last reported sales price of these Notes was equivalent
to % of their accreted amount. The Company has not entered into any standby
arrangement to finance the purchase of such notes and there can be no assurance
that the Company would be able to obtain such financing in the event that it
were to become necessary.
In addition to its obligations under its outstanding indebtedness and
preferred stock, the Company is also required to (i) make minimum annual
distributions of approximately $46.2 million (subject to cost of living
adjustments) to its partners in two Six Flags Parks, Six Flags Over Georgia and
Six Flags Over Texas (the "Co-Venture Parks") and (ii) make minimum capital
expenditures at each of the Co-Venture Parks during rolling five-year periods,
based generally on 6% of such park's revenues. Cash flow from operations at the
Co-Venture Parks will be used to satisfy these requirements first, before any
funds are required from the Company. The Company has also agreed to purchase a
maximum number of 5% per year (accumulating to the extent not purchased in any
given year) of the total limited partnership units of these partnerships (to the
extent tendered by the unit holders). The agreed price for these purchases is
based on a valuation for each respective Co-Venture Park equal to the greater of
(i) a value derived by multiplying its weighted-average four year EBITDA by a
specified multiple (8.0 in the case of the Georgia park and 8.5 in the case of
the Texas park) or (ii) $250.0 million in the case of the Georgia park and
$374.8 million in the case of the Texas park. The Company's obligations with
respect to Six Flags Over Georgia and Six Flags
20
<PAGE>
Over Texas will continue until 2026 and 2027, respectively. As the Company
purchases units, it will be entitled to the minimum distribution and other
distributions attributable to such units, unless it is then in default under its
indemnity obligations to Time Warner. See "Description of Six Flags Agreement."
The Company estimates that its maximum unit purchase obligation for 1998, when
purchases are required only for the Georgia Park, will aggregate approximately
$13 million (approximately $32 million for 1999, when purchases for both
partnerships are required) and its minimum capital expenditures for 1998 at
these parks will total approximately $18 million. See "Business--Description of
Parks--Six Flags Parks--Six Flags Over Georgia" and "--Six Flags Over Texas; Six
Flags Hurricane Harbor." In addition, the Company has agreed to invest
approximately $37.7 million to expand the six Walibi Parks over three years,
commencing 1999.
The Company's ability to make scheduled payments on, or to refinance, its
indebtedness (including the Company Notes), or to fund planned capital
expenditures and its obligations under the arrangements relating to the
Co-Venture Parks will depend on its future performance, which, to a certain
extent, is subject to general economic, financial, weather, competitive and
other factors that are beyond its control. The Company believes that cash flow
from operations and available cash, available borrowings under the Credit
Facilities and the net proceeds of the Offerings (to the extent not used in
connection with the Six Flags Acquisition) will be adequate to meet the
Company's future liquidity needs, including anticipated requirements for working
capital, capital expenditures, scheduled debt and preferred stock payments and
its obligations under arrangements relating to the Co-Venture Parks, for at
least the next several years. The Company may, however, need to refinance all or
a portion of its existing debt on or prior to maturity or to obtain additional
financing. There can be no assurance that the Company's business will generate
sufficient cash flow from operations or that future borrowings will be available
under the Credit Facilities in an amount sufficient to enable the Company to
service its indebtedness or enable it to fund its other liquidity needs. In
addition, there can be no assurance that the Company will be able to effect any
such refinancing on commercially reasonable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity, Capital Commitments and Resources."
The degree to which the Company will be leveraged following the Six Flags
Transactions could have important consequences to the holders of the Company
Notes, including, but not limited to: (i) making it more difficult for the
Company to satisfy its obligations, (ii) increasing the Company's vulnerability
to general adverse economic and industry conditions, (iii) limiting the
Company's ability to obtain additional financing to fund future working capital,
capital expenditures, acquisitions and other general corporate requirements,
(iv) requiring the dedication of a substantial portion of the Company's cash
flow from operations to the payment of principal of, and interest on, its
indebtedness, thereby reducing the availability of such cash flow to fund
working capital, capital expenditures, acquisitions or other general corporate
purposes, (v) limiting the Company's flexibility in planning for, or reacting
to, changes in its business and the industry, and (vi) placing the Company at a
competitive disadvantage vis-a-vis less leveraged competitors. In addition, the
Indentures and the Credit Facilities will contain financial and other
restrictive covenants that will limit the ability of the Company to, among other
things, borrow additional funds. Failure by the Company to comply with such
covenants could result in an event of default which, if not cured or waived,
could have a material adverse effect on the Company. In addition, the degree to
which the Company is leveraged could prevent it from repurchasing all of the
Company Notes tendered to it upon the occurrence of a Change of Control. See
"Description of Notes--Repurchase at Option of Holders--Change of Control" and
"Description of Other Indebtedness."
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES
The Company has no operations of its own and derives all of its revenue from
its subsidiaries. Therefore, the Company's ability to pay its obligations
(including debt service on the Company Senior Discount Notes, the Company Senior
Notes and dividend and redemption obligations on the Convertible Preferred Stock
and obligations under the indemnity agreement with Time Warner) when due is
entirely
21
<PAGE>
dependent upon the receipt of sufficient funds from its direct and indirect
subsidiaries. SFEC is also a holding company and its ability to pay its
obligations (including debt service on the New SFEC Notes) when due is similarly
dependent.
Under the terms of the indentures governing the Premier Notes, the SFTP
Senior Subordinated Notes and the New SFEC Notes (the "Subsidiary Indentures"
and, together with the Company Indentures, the "Indentures"), the Premier Credit
Facility and the Six Flags Credit Facility, the payment of dividends by Premier
Operations, SFEC and SFTP are subject to certain specified financial tests which
will significantly restrict their ability to pay dividends or make other
distributions, see "Description of Other Indebtedness" for summary of the terms
of the dividend restrictions. The terms of the Company Notes and the Mandatorily
Convertible Preferred Stock will permit the Company's subsidiaries to incur
additional indebtedness, the terms of which could further limit the payment of
dividends or the making of other distributions by such subsidiaries. On a pro
forma basis, as of December 31, 1997, Premier Operations and SFEC would have had
the ability to pay dividends or make other restricted payments to the Company in
an aggregate amount of approximately $ million. On that basis, as of
that date, SFTP would have had the ability to pay dividends, or make such
payments to SFEC, in an aggregate amount of approximately $ million. There
can be no assurance that dividends, distributions or loans to the Company from
its subsidiaries will be sufficient to fund its obligations.
The Company Notes will be effectively subordinated to all indebtedness and
other obligations of the Company's subsidiaries. On a pro forma basis, as of
December 31, 1997, the aggregate amount of indebtedness and other obligations of
the Company's subsidiaries (including trade payables) that would effectively
rank senior in right of payment to the obligations of the Company under the
Company Notes would have been approximately $ million (in addition,
approximately $ million would have been available for additional borrowings
under the Credit Facilities). If any indebtedness of any of the Company's
subsidiaries were to be accelerated, there would be no assurance that the assets
of any such subsidiary would be sufficient to repay such indebtedness. The
Company's rights to participate in the distribution of the assets of its
operating subsidiaries upon a liquidation or reorganization of such companies
will be subject to the prior claims of their respective creditors.
ABILITY TO MANAGE RAPID GROWTH
The Six Flags Acquisition is significantly larger than any of Premier's
previous acquisitions, and the combination and integration of the respective
operations of Six Flags and Premier will be of a substantially greater scale
than previously undertaken by Premier and will be ongoing concurrently with the
integration of Walibi, its first foreign acquisition. The increased size of
Premier's operations and the process of combining and integrating Six Flags with
Premier, particularly during the same period as the integration of Walibi, will
place substantial additional demands upon existing management resources and
require Premier to effectively redeploy such resources, including hiring new
personnel. There can be no assurance that Premier's management will be able to
successfully integrate the operations of Six Flags or Walibi or that the
anticipated benefits of the Six Flags Acquisition or the Walibi acquisition to
Premier will be realized or, if realized, as to the timing thereof. The
inability to successfully manage the integration of Six Flags or Walibi with
Premier would have a material adverse effect on Premier's results of operations
and financial condition.
UNCERTAINTY OF FUTURE ACQUISITIONS; POTENTIAL EFFECTS OF ACQUISITIONS
In addition to the Acquisitions, the Company intends to continue to make
selective acquisitions that would expand its business. There can be no assurance
that the Company will be able to locate and acquire additional businesses. To
the extent any such acquisition would result in the incurrence or assumption of
indebtedness by the Company (or its operating subsidiaries), such incurrence or
assumption must comply with the limitations on the Company's (or such
subsidiary's) ability to incur or assume indebtedness under the Credit
Facilities and the Indentures. There can be no assurance that any future
acquisition will be
22
<PAGE>
permissible under these loan agreements or that waivers of any such covenants
could be obtained. See "-- Restrictive Debt Covenants."
In certain instances, a consummated acquisition may adversely affect the
Company's financial condition and reported results, at least in the short-term,
depending on many factors, including capital requirements and the accounting
treatment of such acquisition. There can be no assurance that the 1997
Acquisitions, the Six Flags Acquisition or any future acquisition will perform
as expected, will not result in significant unexpected liabilities or will ever
contribute significant revenues or profits to the Company. Shares of Common
Stock (or securities convertible into Common Stock) were used as a portion of
the aggregate consideration in the acquisitions of Kentucky Kingdom, Walibi and
Six Flags. The Company may issue a substantial number of shares of Common Stock
(or convertible securities) to fund future acquisitions. By virtue of the
foregoing, the Company's acquisitions could have an adverse effect on the market
price of the Common Stock.
RESTRICTIVE DEBT COVENANTS
The Credit Facilities contain a number of significant covenants that, among
other things, restrict the ability of the Company's operating subsidiaries to
dispose of assets, incur additional indebtedness, pay cash dividends, create
liens on assets, make investments or acquisitions, engage in mergers or
consolidations, make capital expenditures, engage in certain transactions with
affiliates or redeem or repurchase the indebtedness of such subsidiaries. In
addition, under the Credit Facilities, Premier Operations and SFTP are each
required to comply with specified financial ratios and tests, including interest
expense, fixed charges, debt service and total debt coverage ratios. The
Indentures also contain a series of restrictive covenants.
The Company is currently in compliance with the covenants and restrictions
contained in the Credit Facilities and the Indentures. However, its ability to
continue to comply with financial tests and ratios in the Credit Facilities may
be affected by events beyond its control, including prevailing economic,
financial, weather and industry conditions. The breach of any such financial
covenant could result in the termination of the Credit Facilities (and the
acceleration of the maturity of all amounts outstanding thereunder) and, by
virtue of cross default provisions, the acceleration of the maturity of other
indebtedness of the Company, including the Senior Notes.
In addition, under the terms of the Indemnity Agreement to be entered into
in connection with the Six Flags Transactions (the "Indemnity Agreement") (which
lasts until 2028), without the consent of Time Warner Inc. (collectively with
its affiliates, "Time Warner"), the Company cannot incur indebtedness at SFEC or
any of its subsidiaries that is secured by any assets of the Company, Premier
Operations or any of its subsidiaries, or secure any indebtedness of the
Company, Premier Operations or any of its subsidiaries, with any of the assets
of SFEC or any of its subsidiaries. These covenants could inhibit the ability of
the Company to borrow in the future.
RISKS OF ACCIDENTS AND DISTURBANCES AT PARKS; EFFECTS OF LOCAL CONDITIONS AND
EVENTS
Because substantially all of the Company's parks feature "thrill rides,"
attendance at the parks and, consequently, revenues may be adversely affected by
any serious accident or similar occurrence with respect to a ride. In that
connection, in June 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. The collapse had a material adverse effect on that park's 1997 operating
performance, as well as a lesser impact on the Company's Sacramento water park
(which is also named "Waterworld"), located approximately seventy miles from the
Concord park, but did not have a material effect on the balance of the Company's
1997 operations. The Company has recovered all of the Concord park's operating
shortfall under its business interruption insurance. Premier Operations'
liability insurance policies provide coverage of up to $25.0 million per loss
occurrence and require Premier Operations to pay the first $50,000 of loss per
occurrence.
23
<PAGE>
Six Flags' liability insurance policies provide coverage of up to $175.0 million
per loss occurrence and require Six Flags to pay the first $2.0 million per loss
occurrence.
Other local conditions and events can also adversely affect attendance. For
example, in 1994, the Company's Six Flags Magic Mountain park experienced
significant attendance declines and interruptions of business as a result of the
Los Angeles County earthquake centered in Northridge, California. Six Flags Over
Georgia experienced attendance declines in 1996 as a result of the 1996 Summer
Olympics. Management believes that the geographic diversity of the Company's
theme parks reduces the effects of such occurrences on the Company's
consolidated results.
In addition, in view of the proximity of certain of the Company's parks to
major urban areas and the appeal of the parks to teenagers and young adults, the
Company's parks could experience disturbances that could adversely affect the
image of and attendance levels at its parks. Working together with local police
authorities, the Company has taken certain security-related precautions designed
to prevent disturbances in its parks, but there can be no assurance that it will
be able to prevent any such disturbances.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
As a result of the Walibi acquisition, a portion of the Company's operations
will be conducted in Europe, and the Company will become subject to risks that
are inherent in operating abroad. These risks can include difficulties in
staffing and managing foreign operations, longer payment cycles, problems in
collecting accounts receivable, political risks, unexpected changes in
regulatory requirements, fluctuations in currency exchange rates, import
restrictions or prohibitions, delays from customs brokers or government agencies
and potentially adverse tax consequences resulting from operating in multiple
jurisdictions with different tax laws. There can be no assurance that these and
other comparable risks, individually or in the aggregate, will not adversely
impact its financial and operating results in Europe.
EFFECTS OF INCLEMENT WEATHER; SEASONAL FLUCTUATIONS OF OPERATING RESULTS
Because the great majority of theme parks' attractions are outdoor
activities, attendance at parks and, accordingly, the Company's revenues are
significantly affected by the weather. Additionally, seven of the Company's
parks are primarily water parks which, by their nature, are more sensitive to
adverse weather than are theme parks. Unfavorable weekend weather and unusual
weather of any kind can adversely affect park attendance.
The operations of the Company are highly seasonal, with more than 80% of
park attendance occurring in the second and third calendar quarters of each
year. The great majority of the Company's revenue is collected in those quarters
while most expenditures for capital improvements and significant maintenance are
incurred when the parks are closed in the first and fourth quarters.
Accordingly, the Company believes that quarter-to-quarter comparisons of its
results of operations should not be relied upon as an indication of future
performance.
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.
24
<PAGE>
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 Premier
Credit Facility.
ORIGINAL ISSUE DISCOUNT OF COMPANY SENIOR DISCOUNT NOTES
The Company Senior Discount Notes will be issued at a substantial discount
from their principal amount. Consequently, the purchasers of the Company Senior
Discount Notes generally will be required to include amounts in gross income for
federal income tax purposes in advance of receipt of any cash payment on the
Company Senior Discount Notes to which the income is attributable. See "Certain
United States Federal Income Tax Considerations" for a more detailed discussion
of the federal income tax consequences to the holders of the Company Senior
Discount Notes of the purchase, ownership and disposition of the Company Senior
Discount Notes.
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the Company
Senior Discount Notes, the claim of a holder of Company Senior Discount Notes
with respect to the principal amount thereof will likely be limited to an amount
equal to the sum of (i) the Accreted Value of the Company Senior Discount Notes
as of the date of issuance of the Company Senior Discount Notes and (ii) the
original issue discount that is not deemed to constitute "unmatured interest"
for the purposes of the Bankruptcy Code. Any original issue discount that was
not amortized as of any such bankruptcy filing would most likely constitute
"unmatured interest."
RISKS ASSOCIATED WITH A CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Company Senior Discount Notes at 101% of the Accreted
Value thereof to the date of purchase prior to , 2003 or 101% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase, on or after , 2003 and all outstanding Company Senior Notes
at 101% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of purchase. However, there can be no assurance that
sufficient funds will be available at the time of any Change of Control to make
any required repurchases of the Company Notes tendered or that restrictions in
the Credit Facilities and the Indentures will allow the Company to make such
required repurchases. In addition, a Change of Control would constitute an Event
of Default under the Credit Facilities and would require Premier Operations and
SFEC, respectively, to offer to repurchase the Premier Notes and the New SFEC
Notes. Notwithstanding these provisions, the Company could enter into certain
transactions, including certain recapitalizations, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of Notes--Repurchase at Option of Holders."
By virtue of the Six Flags Transactions, the Company will be required to
make an offer to purchase the SFTP Senior Subordinated Notes. See "--Risks
Associated with Substantial Indebtedness." Warner Bros. can terminate the
license agreement if persons engaged in the movie or television industries or
party to a material judicial proceeding pending against Time Warner obtain
control of the Company.
25
<PAGE>
ABSENCE OF PUBLIC MARKET
There is no existing trading market for the Company Notes. The Company does
not intend to apply for listing of the Company Notes on any securities exchange.
The Underwriters have advised the Company that they currently intend to make a
market in the Company Notes. However, they are not obligated to do so and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the prices or liquidity of, or trading markets
for, the Company Notes. The liquidity of any market for the Company Notes will
depend upon the number of holders of Company Notes, the interest of securities
dealers in making a market in the Company Notes, and other factors. The absence
of an active market for the Company Notes could adversely affect the liquidity
of the Company Notes. Even if such a market were to develop, the Company Notes
could trade at prices that may be lower than their initial offering price as a
result of many factors, including prevailing interest rates and the Company's
operating results and financial condition at the time. The liquidity of, and
trading markets for, the Company Notes may also be adversely affected by general
declines in the market for non-investment grade debt.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company anticipates that it will be able to test its entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material. However, if such modifications are not completed in a timely
manner, the Year 2000 problem may have a material adverse impact on the
operations of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Impact of Year 2000 Issue."
26
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Notes Offering,
after deducting estimated underwriting discounts and commissions and estimated
expenses payable by the Company, will be approximately $ million. The
net proceeds from the Concurrent Offerings (after deducting estimated
underwriting discounts and commissions and offering expenses) will be
approximately $ million (or approximately $ million if the
underwriters' over-allotment options in the Common Stock Offering are exercised
in full). The Company intends to use the net proceeds from the Offerings to fund
the $765 million cash portion of the purchase price payable to the Sellers in
the Six Flags Acquisition; to provide funds for the repayment in full of the
SFEC Zero Coupon Senior Notes; to acquire and make improvements at additional
theme parks; to fund improvements and expansion of the Company's parks,
including the Walibi Parks and the Six Flags Parks; and for general corporate
purposes, including working capital requirements. Although the Company has had
discussions with respect to several additional acquisition opportunities, no
agreement or understanding with respect to any future acquisition (other than
the Six Flags Acquisition) has been reached. There can be no assurance that any
such additional acquisitions will be made. See "Risk Factors--Uncertainty of
Future Acquisitions; Potential Effects of Acquisitions" and
"Business--Acquisition Strategy."
Pending their ultimate use, the portion of net proceeds from the Offerings
not used in connection with the Six Flags Acquisition may be invested in
short-term, investment grade, interest bearing securities, certificates of
deposit or direct or guaranteed obligations of the United States.
27
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1997, (i) the actual
capitalization of the Company; and (ii) the pro forma capitalization of the
Company after giving effect to the acquisitions of Kentucky Kingdom, Walibi
(assuming an all cash Walibi Tender Offer) and Six Flags, and after giving
effect to the Notes Offering and the Concurrent Offerings (assuming that the
underwriters' over-allotment options in the Common Stock Offering are not
exercised) and other related financings. This table should be read in
conjunction with the consolidated financial statements of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
<S> <C> <C>
ACTUAL PRO FORMA
---------- -----------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................ $ 169,151 $ (1)(2)
---------- -----------
---------- -----------
Short-term debt(3)................................................................... $ 990 $
---------- -----------
---------- -----------
Long-term debt (excluding current maturities):
Premier Credit Facility.......................................................... $ --
Six Flags Credit Facility........................................................ --
1995 Premier Notes............................................................... 90,000 90,000
1997 Premier Notes............................................................... 125,000 125,000
Company Senior Discount Notes.................................................... -- 250,000
Company Senior Notes............................................................. -- 280,000(2)
New SFEC Notes................................................................... -- 170,000
SFEC Zero Coupon Senior Notes.................................................... -- (1)
SFTP Senior Subordinated Notes................................................... --
Other............................................................................ 1,263
---------- -----------
Total long-term debt......................................................... 216,263
---------- -----------
Seller Preferred Stock (none outstanding (actual) and outstanding
(pro forma))....................................................................... --
---------- -----------
Stockholders' equity: Common Stock (90,000,000 authorized; outstanding (actual)
and outstanding (pro forma))(4) and Mandatorily Convertible Preferred Stock
(none outstanding (actual)
and outstanding
(pro forma))....................................................................... 326,802
---------- -----------
Total capitalization......................................................... $ 543,065 $
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) The pro forma amount for the SFEC Zero Coupon Senior Notes does not give
effect to the repayment thereof from the net proceeds of the New SFEC Notes
Offering. Similarly, pro forma cash and cash equivalents includes the amount
of such net proceeds.
(2) Includes escrow to fund the first six semi-annual interest payments in
connection with the Company Senior Notes.
(3) Represents current portion of long-term debt. At September 30, 1997 and
, 1998, the Company did not have any amounts outstanding under its
short-term revolving credit facility.
(4) Excludes (i) approximately 220,000 shares issuable in the Private
Acquisition (based on an assumed purchase price of BEF 1.55 billion in the
Private Acquisition) and any shares issued in the Walibi Tender Offer; (ii)
an aggregate of 45,038 shares of Common Stock issuable upon exercise of
warrants; (iii) an aggregate of 1,270,000 shares of Common Stock reserved
for issuance under the Company's Stock Incentive Plans, of which options for
764,700 shares have been granted and options for 455,800 shares are
presently exercisable; (iv) an aggregate of 375,000 restricted shares issued
to the Company's Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, which vest proportionately on January 1 of each of the
five years commencing 1999; (v) any shares issuable to the sellers in the
Kentucky Kingdom and Walibi acquisitions depending upon the future revenues
of these parks; (vi) shares issuable upon conversion of the Convertible
Preferred Stock or as dividends on the Mandatorily Convertible Preferred
Stock; and (vii) shares of Common Stock issuable upon exercise of the
underwriters' over-allotment options in the Common Stock Offering.
28
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following selected historical financial and operating data, except for
attendance and revenue per visitor data, of the Company as of and for each of
the years in the three-year period ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997 are derived from the financial statements
(audited in the case of all annual periods) of the Company appearing elsewhere
in this Prospectus. The selected historical financial data of the Company for
fiscal years 1992 and 1993 have been derived from audited financial statements
which are not included herein. The historical financial data for the year ended
December 31, 1995 for the Company include the results of the Funtime parks from
August 15, 1995, the date of the Funtime acquisition. The historical financial
data for the year ended December 31, 1996 include the operations of Elitch
Gardens from October 31, 1996, the Waterworld Parks from November 19, 1996 and
The Great Escape from December 4, 1996 (the dates of their respective
acquisition). The historical financial data for all interim periods have been
derived from unaudited financial statements of the Company included elsewhere
herein which, in the opinion of management, include all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation.
The following selected pro forma financial and operating data of the Company
for the year ended December 31, 1996 and as of and for the nine months ended
September 30, 1997 are derived from the Unaudited Pro Forma Combined Financial
Statements incorporated by reference in this Prospectus. The pro forma financial
and operating data are presented for informational purposes only, have been
prepared based on estimates and assumptions deemed by the Company to be
appropriate and do not purport to be indicative of the financial position or
results of operations which would actually have been attained if the relevant
acquisitions had occurred on the assumed dates or which may be achieved in the
future.
The Company's business is highly seasonal. Results for the nine-month
periods ended September 30, 1997 are not necessarily indicative of results to be
expected for the year ended December 31, 1997. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1997.
29
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
1992(1) 1993 1994 1995(2) 1996(3) PRO FORMA(4)
--------- --------- --------- --------- ---------- -------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER VISITOR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions.......... $ 10,186 $ 12,874 $ 13,936 $ 21,863 $ 41,162
Theme park food, merchandise,
and other.................... 7,206 8,986 10,963 19,633 52,285
--------- --------- --------- --------- ---------- -------------
Total........................ 17,392 21,860 24,899 41,496 93,447
--------- --------- --------- --------- ---------- -------------
Operating costs and expenses:
Operating expenses............. 9,293 10,401 12,358 19,775 42,425
Selling, general and
administrative............... 4,434 4,768 5,448 9,272 16,927
Cost of products sold.......... 1,736 2,135 2,553 4,635 11,101
Depreciation and
amortization................. 1,442 1,537 1,997 3,866 8,533
--------- --------- --------- --------- ---------- -------------
Total........................ 16,905 18,841 22,356 37,548 78,986
--------- --------- --------- --------- ---------- -------------
Income from operations........... 487 3,019 2,543 3,948 14,461
Other income (expense):
Interest expense, net.......... (1,413) (1,438) (2,299) (5,578) (11,121)
Minority interest in
earnings..................... (270) -- -- -- --
Other income (expense)......... (113) (136) (74) (177) (78)
--------- --------- --------- --------- ---------- -------------
Total........................ (1,796) (1,574) (2,373) (5,755) (11,199)
--------- --------- --------- --------- ---------- -------------
Income (loss) from continuing
operations before income
taxes.......................... (1,309) 1,445 170 (1,807) 3,262
Income tax expense (benefit)..... 426 91 68 (762) 1,497
--------- --------- --------- --------- ---------- -------------
--------- --------- --------- --------- ---------- -------------
Income (loss) from continuing
operations..................... $ (1,735) $ 1,354 $ 102 $ (1,045 (5) $ 1,765
Income (loss) from continuing
operations per common share
(primary and fully diluted).... $ (2.10) $ .51 $ .04 $ (.40 (5) $ .13
--------- --------- --------- --------- ---------- -------------
--------- --------- --------- --------- ---------- -------------
OTHER DATA:
EBITDA(6)........................ $ 1,938 $ 4,562 $ 4,549 $ 7,706 $ 22,994
Net cash provided by operating
activities(7).................. $ 1,980 $ 2,699 $ 1,060 $ 10,646 $ 11,331
Capital expenditures............. $ 3,956 $ 7,674 $ 10,108 $ 10,732 $ 39,423
Total attendance................. 1,116 1,322 1,408 2,302(8) 4,518(8) (9)
Revenue per visitor(10).......... $ 15.58 $ 16.54 $ 17.68 $ 18.03 $ 20.66
Ratio of earnings to fixed
charges(11).................... (11) 2.1x 1.1x (11) 1.3x
Ratio of earnings to combined
fixed charges and preferred
stock dividends(11)............ (11) 2.1x 1.1x (11) 1.2x
EBITDA/total interest expense....
EBITDA/cash interest expense.....
Total debt/EBITDA................
Net debt/EBITDA..................
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
HISTORICAL
HISTORICAL COMBINED HISTORICAL PRO FORMA
1996 1996(12) 1997 1997(4)
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND PER
VISITOR AMOUNTS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
THE COMPANY
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions............................ $ 38,970 $ 73,032 $ 91,080
Theme park food, merchandise, and other.......... 50,822 81,275 95,666
----------- ---------- ---------- -----------
Total........................................ 89,792 154,307 186,746
Operating costs and expenses:
Operating expenses............................... 32,897 56,101 69,444
Selling, general and administrative.............. 15,363 32,398 29,688
Cost of products sold............................ 10,685 20,133 22,072
Depreciation and amortization.................... 5,599 18,627 13,974
----------- ---------- ---------- -----------
Total........................................ 64,544 127,259 135,178
----------- ---------- ---------- -----------
Income from operations............................... 25,248 27,048 51,568
Other income (expense):
Interest expense, net................................ (7,657) (12,281) (12,869)
Other income (expense)............................... (59) (343) (44)
----------- ---------- ---------- -----------
Total........................................ (7,716) (12,624) (12,913)
----------- ---------- ---------- -----------
Income before income taxes(4)........................ 17,532 14,624 38,655
Income tax expense................................... 7,020 8,151 15,462
----------- ---------- ---------- -----------
Net income(5)........................................ $ 10,512 $ 6,273 $ 23,193
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
Net income per common share(5).......................
Primary.......................................... $ 1.24 (12) $ 1.32
Fully-diluted.................................... $ 1.11 (12) $ 1.29
OTHER DATA:
EBITDA(6)............................................ $ 30,848 $ 45,392 $ 65,542
Net cash provided by operating activities(7)......... $ 10,222 $ 21,814 $ 43,921
Capital expenditures................................. $ 29,290 $ 33,273 $ 108,166
Total attendance..................................... 4,302 (8) 7,049 8,276(8) (9)
Revenue per visitor(10).............................. $ 20.87 $ 21.66 $ 22.33
Ratio of earnings to fixed charges................... 3.2x (12) 3.9x
Ratio of earnings to combined fixed charges and
preferred stock dividends(11).................... 2.9x (12) 3.9x
EBITDA/total interest expense........................
EBITDA/cash interest expense.........................
Total debt/EBITDA....................................
Net debt/EBITDA......................................
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1997
------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 ACTUAL(13) PRO FORMA(14)
--------- --------- --------- ---------- ---------- ----------- -----------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
THE COMPANY
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 5,919 $ 3,026 $ 1,366 $ 28,787 $ 4,043 $ 169,151
Total assets......................... $ 30,615 $ 36,708 $ 45,539 $ 173,318 $ 304,803 $ 612,267
Total long-term debt and capitalized
lease obligations (excluding
current maturities).............. $ 7,619 $ 18,649 $ 22,216 $ 93,213 $ 149,342 $ 216,263
Total debt........................... $ 15,627 $ 20,821 $ 24,108 $ 94,278 $ 150,834 $ 217,253
Seller Preferred Stock............... -- -- -- -- -- --
Stockholders' equity................. $ 11,838 $ 13,192 $ 18,134 $ 45,911 $ 113,182 $ 326,802
</TABLE>
- ------------------------
(1) During 1992, the Company purchased Adventure World, as well as the remaining
minority interest in Frontier City. During 1992, the Company also
discontinued substantially all of its non-theme park operations through a
disposition transaction which significantly reduced the Company's assets and
indebtedness, as well as resulted in an extraordinary gain of $18.4 million,
which gain is not reflected in income (loss) from continuing operations.
During 1992, the Company also adopted Statement 109, resulting in a decrease
in net income of $2.3 million which decrease is not reflected in income
(loss) from continuing operations.
(2) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Funtime acquisition from the date of acquisition,
August 15, 1995.
(3) The historical Statement of Operations Data for 1996 reflect the results of
Elitch Gardens from October 31, 1996, the Waterworld Parks from November 19,
1996 and The Great Escape from December 4, 1996 (the dates of their
respective acquisition).
(4) The pro forma financial and operating data for the year ended December 31,
1996 give effect to the Acquisitions and the related financings as if they
had occurred on January 1, 1996 (in the case of Elitch Gardens, the
Waterworld Parks, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags), on November 1, 1995 (in the case of The Great Escape), on October 1,
1995 (in the case of Riverside Park) and October 30, 1995 (in the case of
Kentucky Kingdom). The pro forma financial and operating data for the nine
months ended September 30, 1997 give effect to the acquisitions of Riverside
Park, Kentucky Kingdom, Walibi (assuming an all cash Walibi Tender Offer)
and Six Flags as if they had occurred on January 1, 1997. The pro forma
income per share for 1996 also gives effect to the June 1996 public
offering, the conversion of the Company's outstanding preferred stock at
that time, the January 1997 public offering, the Common Stock Offering and
the Preferred Stock Offering as if they had occurred on January 1 of such
year. The pro forma income per share for the 1997 period also gives effect
to the January 1997 public offering, the Common Stock Offering and the
Preferred Stock Offering as if they had occurred on January 1, 1997.
(5) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the Funtime
acquisition. This extraordinary loss is not included in income (loss) from
continuing operations and income (loss) from continuing operations per
common share for 1995.
(6) EBITDA is defined as earnings from continuing operations before interest
expense, net, income tax expense (benefit), depreciation and amortization,
minority interest and equity in loss of real estate partnership. The Company
has included information concerning EBITDA because it is used by certain
investors as a measure of the Company's ability to service and/or incur
debt. EBITDA is not required by GAAP and should not be considered in
isolation or as an alternative to net income, net cash provided by
operating, investing and financing activities or other financial data
prepared in accordance with GAAP or as an indicator of the Company's
operating performance. This information should be read in conjunction with
the Statements of Cash Flows contained in the financial statements included
elsewhere herein. Equity in loss of real estate partnership was $122,000,
$142,000, $83,000, $69,000, $78,000, $60,000 and $44,000 during each of the
five years ended December 31, 1996 and the nine months ended September 30,
1996 and 1997, respectively.
(7) During each of the five years ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997, the Company's net cash used in investing
activities was $5,649,000, $7,698,000, $10,177,000, $74,139,000,
$155,149,000, $29,328,000 and $129,542,000, respectively. During those
periods, net cash provided by financing
32
<PAGE>
activities was $8,736,000, $2,106,000, $7,457,000, $90,914,000,
$119,074,000, $64,085,000 and $250,729,000, respectively.
(8) Represents in the case of 1995 attendance at the three parks owned by the
Company prior to the Funtime acquisition for the entire 1995 season and
attendance at the Funtime parks from and after August 15, 1995. In the case
of 1996, historical attendance does not include attendance at any of the
parks acquired in the 1996 Acquisitions since those acquisitions were
completed following the 1996 season. Historical attendance for the nine
months ended September 30, 1997 does not include attendance at Marine World.
(9) Pro forma attendance information includes attendance at Marine World for the
applicable period.
(10) Pro forma and historical revenue per visitor for all applicable periods
does not include revenue of Paradise Island (a fee-per-attraction
entertainment center that does not track attendance, acquired in November
1996) or Marine World.
(11) For the purpose of determining the ratio of earnings to fixed charges, and
the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) from continuing operations
before income taxes and fixed charges. Fixed charges consist of interest
expense net of interest income, amortization of deferred financing costs and
discount or premium relating to indebtedness and the portion (approximately
one-third) of rental expense that management believes represents the
interest component of rent expense. Preferred stock dividend requirements
have been increased to an amount representing the before tax earnings which
would have been required to cover such dividend requirements. For the years
ended December 31, 1992 and 1995, the Company's earnings were insufficient
to cover fixed charges by $917,000 and $1,738,000, respectively and were
insufficient to cover combined fixed charges and preferred stock dividends
by $917,000 and $2,620,000, respectively. On a pro forma basis, for the year
ended December 31, 1997, the Company's earnings were insufficient to cover
fixed charges and combined fixed charges and preferred stock dividends by
$ and $ , respectively.
(12) Represents results of operations of Premier and the results of operations
for the parks acquired in the 1996 Acquisitions on a combined basis. No pro
forma adjustments for additional depreciation, interest expense or income
taxes have been made in combining the Company and 1996 Acquisitions amounts.
Income per share, ratio of earnings to fixed charges and ratio of earnings
to combined fixed charges and preferred stock dividends are not presented on
this basis as amounts are not meaningful.
(13) Actual balance sheet data as of September 30, 1997 include the Company's
investment in Marine World as of that date.
(14) The pro forma balance sheet data give effect to the acquisitions of
Kentucky Kingdom, Walibi (assuming an all cash Walibi Tender Offer) and Six
Flags, the Offerings (assuming no exercise of the underwriters'
over-allotment options in the Common Stock Offering) and the related
financings as if they had occurred on September 30, 1997.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived principally from the sale of tickets for
entrance to its parks (approximately 48.8%, 44.0%, 52.7% and 56.0% in the nine
months ended September 30, 1997 and in the years ended December 31, 1996, 1995
and 1994, respectively) and the sale of food, merchandise, games and attractions
inside its parks and other income (approximately 51.2%, 56.0%, 47.3% and 44.0%
in the nine months ended September 30, 1997 and in the years ended December 31,
1996, 1995 and 1994, respectively). The Company's principal costs of operations
include salaries and wages, fringe benefits, advertising, outside services,
maintenance, utilities and insurance. The Company's expenses are relatively
fixed. Costs for full-time employees, maintenance, utilities, advertising and
insurance do not vary significantly with attendance, thereby providing the
Company with a significant degree of operating leverage as attendance increases
and fixed costs per visitor decrease.
The Company believes that significant opportunities exist to acquire
additional theme parks. Although the Company has had discussions with respect to
several additional business acquisitions, no agreement or understanding has been
reached with respect to any specific future acquisition (other than the Six
Flags Acquisition). See "Business -- Acquisition Strategy." In addition, the
Company intends to continue its on-going expansion of its rides and attractions
and overall improvement of its existing parks (particularly the Premier Parks)
to maintain and enhance their appeal. Management believes this strategy has
contributed to increased attendance, lengths of stay, in-park spending and,
therefore, profitability. See "Business -- Operating Strategy."
The Company's business is highly seasonal. Results for the nine-month period
ended September 30, 1997 are not necessarily indicative of results to be
expected for the year ended December 31, 1997. Specifically, the parks do not
generate meaningful revenue during the fourth quarter of the year, but do incur
expenses during that quarter. Accordingly, the Company historically incurs a net
loss for the fourth calendar quarter and expects to incur such a loss in the
fourth quarter of 1997.
The following discussion does not include the results of Six Flags or the
parks acquired in the 1997 Acquisitions.
34
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The following table sets forth certain financial information with respect to
the Company and the 1996 Acquisitions for the nine months ended September 30,
1996 and with respect to the Company for the nine months ended September 30,
1997:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NINE MONTHS
HISTORICAL ENDED
HISTORICAL 1996 COMBINED PRO FORMA COMPANY SEPTEMBER 30,
PREMIER(1) ACQUISITIONS(2) COMPANY ADJUSTMENTS PRO FORMA 1997
----------- -------------- ----------- ----------- ----------- -------------
<CAPTION>
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions......... $ 38,970 $ 34,062 $ 73,032 $ -- $ 73,032 $ 91,080
Theme park food, merchandise
and other................... 50,822 30,453 81,275 300 81,575 95,666
----------- ------- ----------- ----------- ----------- -------------
Total revenue................... 89,792 64,515 154,307 300 154,607 186,746
Operating costs and expenses:
Operating expenses............ 32,897 23,204 56,101 (350) 54,376 69,444
(1,375)
Selling, general and
administrative.............. 15,363 17,035 32,398 (4,513) 27,885 29,688
Costs of products sold........ 10,685 9,448 20,133 -- 20,133 22,072
Depreciation and
amortization................ 5,599 13,028 18,627 (7,832) 10,795 13,974
----------- ------- ----------- ----------- ----------- -------------
Total costs and expenses........ 64,544 62,715 127,259 (14,070) 113,189 135,178
----------- ------- ----------- ----------- ----------- -------------
Income from operations.......... 25,248 1,800 27,048 14,370 41,418 51,568
Other income (expense):
Interest expense, net......... (7,657) (4,624) (12,281) 1,160 (11,121) (12,869)
Other income (expense)........ (59) (284) (343) 125 (218) (44)
----------- ------- ----------- ----------- ----------- -------------
Total other income (expense).... (7,716) (4,908) (12,624) 1,285 (11,339) (12,913)
----------- ------- ----------- ----------- ----------- -------------
Income (loss) before income
taxes......................... 17,532 (3,108) 14,424 15,655 30,079 38,655
Income tax expense (benefit).... 7,020 1,131 8,151 4,149 12,300 15,462
----------- ------- ----------- ----------- ----------- -------------
Net income (loss)............... $ 10,512 $ (4,239) $ 6,273 $ 11,506 $ 17,779 $ 23,193
----------- ------- ----------- ----------- ----------- -------------
----------- ------- ----------- ----------- ----------- -------------
</TABLE>
- ------------------------
(1) Includes the results of Elitch Gardens from October 31, 1996, the Waterworld
Parks from November 19, 1996 and The Great Escape from December 4, 1996 (the
dates of their respective acquisition) but does not include the results of
Riverside Park, as the Company acquired Riverside Park in February 1997.
(2) Represents the results of the parks acquired in the 1996 Acquisitions prior
to the date of their respective acquisition.
REVENUE. Revenue was $186.7 million in the nine months ended September 30,
1997 compared to $89.8 million actual revenue and $154.3 million actual combined
revenue (including the revenue of the parks acquired in the 1996 Acquisitions),
in the first nine months of 1996. The aggregate $32.4 million (21.0%) increase
in the 1997 period in revenue over actual combined results for the 1996 period
includes an $18.0 million (24.7%) increase in admissions revenue and a $14.4
million (17.7%) increase in food, merchandise and other revenue. This revenue
increase is primarily attributable to a 17.4% increase (1.2
35
<PAGE>
million) in combined attendance at the Company's eleven parks in the 1997
period, and a 3.1% increase in per capita spending over the prior year period,
as well as an increase in sponsorship revenue.
OPERATING EXPENSES. Operating expenses increased during the first nine
months of 1997 to $69.4 million from $32.9 million actual operating expenses and
$56.1 million actual combined operating expenses (including the expenses of the
parks acquired in the 1996 Acquisitions) in the first nine months of 1996. This
$13.3 million (23.8%) increase from actual combined operating expenses for the
1996 period consists of a $5.1 million increase (15.5%) at the six parks owned
by the Company during its 1996 season and an $8.2 million increase (35.4%) at
the parks acquired in the 1996 Acquisitions. These increases primarily reflect
increased staffing levels to accommodate increased attendance levels, increased
wage rates, increased repairs and maintenance, increased utility expenses for
new attractions and other miscellaneous increases.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $29.7 million for the nine months ended September 30, 1997, an
increase from $15.4 million actual for the nine months ended September 30, 1996,
but a decrease from $32.4 million actual combined (including the parks acquired
in the 1996 Acquisitions) for the nine months ended September 30, 1996. Selling,
general and administrative expenses at the six parks owned by the Company for
the 1996 period (including corporate) increased by $1.6 million in the 1997
period, primarily reflecting increased personnel and advertising costs, offset
by a decrease in insurance expense. Selling, general and administrative expenses
at the acquired parks decreased by $4.3 million, notwithstanding increases in
marketing expenses, as a result of significant savings in personnel, insurance,
professional services and other areas.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $10.7 million
actual and $20.1 million actual combined (including the parks acquired in the
1996 Acquisitions) for the first nine months of 1996 to $22.1 million for the
first nine months of 1997. These increases primarily relate to increased sales
of merchandise, food and related items.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
increased from $5.6 million actual in 1996 to $14.0 million actual in 1997,
primarily as a result of the recognition of depreciation and amortization
expense from the 1996 Acquisitions and the on-going capital program at the
Company's theme parks. Interest expense, net increased from $7.7 million to
$12.9 million as a result of interest on the 1997 Premier Notes and amortization
of costs incurred in connection with the 1997 Premier Notes and the Company's
senior credit facility.
36
<PAGE>
YEARS ENDED DECEMBER 31, 1996 AND 1995
The table below sets forth certain financial information with respect to the
Company and the Funtime parks for the year ended December 31, 1995 and with
respect to the Company and the 1996 Acquisitions (other than Riverside Park) for
the year ended December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL FUNTIME(2)
----------------------------
<CAPTION>
SIX MONTHS HISTORICAL
ENDED FORTY-THREE PREMIER
HISTORICAL JULY 2, DAYS ENDED HISTORICAL (EXCLUDING 1996 1996 HISTORICAL
PREMIER(1) 1995 AUGUST 14, 1995 COMBINED ACQUISITIONS)(3) ACQUISITIONS(4) PREMIER
----------- ----------- --------------- ----------- --------------- -------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Theme park
admissions......... $ 21,863 $ 6,195 $ 9,680 $ 37,738 $ 41,157 $ 5 $ 41,162
Theme park food,
merchandise and
other.............. 19,633 8,958 13,450 42,041 52,148 137 52,285
----------- ----------- ------- ----------- ------- ------- -----------
Total revenue.......... 41,496 15,153 23,130 79,779 93,305 142 93,447
----------- ----------- ------- ----------- ------- ------- -----------
Expenses:
Operating expenses... 19,775 10,537 6,039 36,351 40,568 1,857 42,425
Selling, general and
administrative..... 9,272 3,459 2,533 15,264 16,353 574 16,927
Costs of products
sold............... 4,635 2,083 2,953 9,671 11,071 30 11,101
Depreciation and
amortization....... 3,866 3,316 829 8,011 7,785 748 8,533
----------- ----------- ------- ----------- ------- ------- -----------
Total costs and
expenses............. 37,548 19,395 12,354 69,297 75,777 3,209 78,986
----------- ----------- ------- ----------- ------- ------- -----------
Income (loss) from
operations........... 3,948 (4,242) 10,776 10,482 17,528 (3,067) 14,461
Interest expense,
net.................. (5,578) (2,741) (321) (8,640) (11,121) -- (11,121)
Other income
(expense)............ (177) 4 (4) (177) (78) -- (78)
----------- ----------- ------- ----------- ------- ------- -----------
Total other income
(expense)............ (5,755) (2,737) (325) (8,817) (11,199) -- (11,199)
----------- ----------- ------- ----------- ------- ------- -----------
Income before income
taxes and
extraordinary loss... (1,807) (6,979) 10,451 1,665 6,329 (3,067) 3,262
Income tax expense
(benefit)............ (762) (2,722) 4,076 592 2,905 (1,408) 1,497
----------- ----------- ------- ----------- ------- ------- -----------
Income (loss) before
extraordinary loss... $ (1,045) $ (4,257) $ 6,375 $ 1,073 $ 3,424 $ (1,659) $ 1,765
----------- ----------- ------- ----------- ------- ------- -----------
----------- ----------- ------- ----------- ------- ------- -----------
</TABLE>
- ------------------------
(1) Includes results of the Funtime acquisition from and after August 15, 1995,
the acquisition date.
(2) Represents results of the parks acquired in the Funtime acquisition from
January 1, 1995 to August 14, 1995.
(3) Excludes operating results of parks acquired in the 1996 Acquisitions, but
includes interest expense incurred by virtue of associated financings as of
the date incurred.
(4) Represents results of the parks acquired in the 1996 Acquisitions (other
than Riverside Park) from their respective acquisition dates through
December 31, 1996.
37
<PAGE>
REVENUE. Revenue aggregated $93.4 million in 1996 ($93.3 million without
the 1996 Acquisitions), compared to $41.5 million actual in 1995, and to
combined revenue of $79.8 million in 1995. This 16.9% increase in revenue
(excluding the 1996 Acquisitions) over combined 1995 revenue at the same six
parks is attributable to increased attendance (10.5%) and per capita revenue
(5.9%) at the six parks and increased sponsorship revenue, as well as increased
season pass sales at several parks, and increased campground revenue at Darien
Lake and income from the new contractual arrangements for 1996 at the Darien
Lake Performance Arts Center.
OPERATING EXPENSES. Operating expenses increased during 1996 to $42.4
million ($40.6 million excluding the 1996 Acquisitions) from $19.8 million
reported in 1995 and from $36.4 million combined operating expenses for 1995.
This 11.5% increase in operating expenses (excluding the 1996 Acquisitions) over
combined 1995 operating expenses is mainly due to additional staffing related to
increased attendance levels and increased pay rates, offset to some extent by a
decrease in equipment rental expense in 1996 due to the purchase of equipment
that had been leased during 1995. As a percentage of revenue, operating expenses
(excluding the 1996 Acquisitions) constituted 43.5% for 1996 and 45.6% on a
combined basis for 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $16.4 million in 1996 (excluding the 1996 Acquisitions), compared
to $9.3 million reported, and $15.3 million combined, selling, general and
administrative expenses for 1995. As a percentage of revenue, these expenses
constituted 17.6% for 1996 and 19.1% for 1995 combined. This increase over 1995
combined expenses relates primarily to increased advertising and marketing
expenses to promote the Funtime parks and the new rides and attractions at all
of the parks, increased sales taxes arising from increased volume generally and
increased property taxes and professional services.
COSTS OF PRODUCTS SOLD. Costs of products sold were $11.1 million for 1996
compared to $4.6 million reported and $9.7 million combined for 1995. Cost of
products sold (as a percentage of in-park revenue) constituted approximately
21.2% for 1996 and 23.0% for 1995 combined. This $1.4 million or 14.5% increase
over combined 1995 results is directly related to the 24.0% increase in 1996 in
food, merchandise and other revenue.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
was $8.5 million for 1996 as compared to $3.9 million in 1995. The increase was
a result of the full year's effect of the Funtime acquisition, the $116.2
million spent during the fourth quarter of 1996 for the 1996 Acquisitions and
the on-going capital program at the Company's parks. Interest expense, net,
increased $5.5 million in 1996, as compared to 1995, as a result of interest on
the 1995 Premier Notes for twelve months in 1996 as compared to four and
one-half months in 1995 and the Company's borrowings under its then-existing
senior credit facility made in connection with the 1996 Acquisitions.
INCOME TAXES. The Company incurred income tax expense of $1.5 million
during 1996, compared to a tax benefit of $762,000 during 1995. The effective
tax rate for 1996 was approximately 45.9% as compared to 42.2% in 1995. The
increase is the result of twelve months of goodwill amortization in 1996 versus
four and one-half months in 1995. The goodwill recognized for financial
reporting of the Funtime acquisition and the 1996 Acquisitions is not deductible
for Federal income tax purposes. See Note 6 to Notes to Consolidated Financial
Statements.
On its December 31, 1996 Federal income tax return, the Company reported
carryovers of approximately $19.3 million of net operating losses ("NOLs"), $4.4
million of alternative minimum tax ("AMT") NOLs and $1.9 million of AMT credits
for Federal income tax purposes. The regular tax and AMT NOLs and AMT credits
are subject to review and potential disallowance by the Internal Revenue Service
upon audit of the Federal income tax returns of the Company and its
subsidiaries. In addition, the use of such NOLs and AMT credits is subject to
limitations on the amount of taxable income, or in the case of the AMT credits,
regular tax, that can be offset with such NOLs and AMT credits. Some of such
NOLs also
38
<PAGE>
are subject to a limitation as to which of the subsidiaries' income such NOLs
are permitted to offset. Accordingly, no assurance can be given as to the timing
or amount of the availability of such NOLs and AMT credits to the Company and
its subsidiaries.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE. Revenue aggregated $41.5 million in 1995, a 66.7% increase over
1994 revenue of $24.9 million. A large portion of the increase ($13.5 million)
resulted from the Funtime acquisition on August 15, 1995. The Company's 1995
results include the results of the Funtime parks from and after that date. The
1995 results of the Company without consideration of the Funtime acquisition
provided a revenue increase of 12.5% from $24.9 million in 1994 to $28.0 million
in 1995. This increase is primarily attributable to the increased attendance of
14.3% from 1.4 million in 1994 to 1.6 million in 1995 at the three theme parks
owned by the Company prior to the Funtime acquisition.
OPERATING EXPENSES. Operating expenses increased approximately $7.4
million, or 60.0%, in 1995 over 1994 levels. A large portion of the increase
($6.9 million) is a result of the Funtime acquisition. The 1995 results of the
Company without consideration of the Funtime acquisition provided an increase of
3.2% in operating expenses from $12.4 million in 1994 to $12.8 million in 1995.
As a percentage of revenue, operating expenses constituted approximately 47.7%
in 1995 and approximately 49.6% in 1994. Without consideration of the Funtime
acquisition, operating expenses constituted approximately 45.7% of revenue in
1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased from approximately $5.5 million in 1994 to approximately $9.3
million in 1995. These expenses (as a percentage of revenue) constituted
approximately 22.3% and 21.9% during 1995 and 1994, respectively. A large
portion of the increase ($2.6 million) is a result of the Funtime acquisition.
The Company's selling, general and administrative expenses without consideration
of the Funtime acquisition increased 21.8% from $5.5 million in 1994 to $6.7
million in 1995 primarily due to a 20.3% increase in marketing and advertising
expenses. Most of the increase was incurred at Adventure World as part of the
advertising campaign designed to promote public awareness of the new suspended,
looping roller coaster, and a lesser portion of this increase was incurred in
connection with the promotion of the new combined season pass program at
Frontier City and White Water Bay.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $2.6 million
in 1994 to $4.6 million in 1995. A large portion of the increase ($1.7 million)
is a result of the Funtime acquisition. Cost of products sold (as a percentage
of in-park revenue) constituted approximately 23.6% and 23.3%, during 1995 and
1994, respectively. The Company's costs of products sold without consideration
of the Funtime acquisition increased 11.5% from $2.6 million in 1994 to $2.9
million in 1995. This increase is a direct result of increased in-park sales at
the parks.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
aggregated approximately $3.9 million in 1995 and approximately $2.0 million in
1994. This 93.6% increase resulted primarily from the Funtime acquisition. The
Company's depreciation and amortization without consideration of the Funtime
acquisition increased 25.0% from $2.0 million in 1994 to $2.5 million in 1995,
reflecting the effects of the Company's additional capital improvements.
Interest expense increased from $2.3 million in 1994 to $5.6 million in 1995,
primarily as a result of the issuance of the 1995 Notes in August 1995.
INCOME TAXES. The Company had an income tax benefit in 1995 of $852,000,
compared to an income tax expense of $68,000 in 1994. The Company's income tax
benefit in 1995 was allocated to loss before income taxes ($762,000) and an
extraordinary loss ($90,000) on extinguishment of debt. The effective income tax
rate for 1995 was 42.2% as compared to approximately 40% in 1994. The increase
was a result of the non-deductibility of the amortization of the goodwill that
resulted from the Funtime acquisition. See Note 6 to Notes to Consolidated
Financial Statements.
39
<PAGE>
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
The operations of the Company are highly seasonal, with the majority of the
operating season occurring between Memorial Day and Labor Day. Most of the
Company's revenue is collected in the second and third quarters of each year
while most expenditures for capital improvements and major maintenance are
incurred when the parks are closed. See "Risk Factors -- Effects of Inclement
Weather; Seasonal Fluctuations of Operating Results." The Company employs a
substantial number of seasonal employees who are compensated on an hourly basis.
The Company is not subject to Federal or certain applicable state minimum wage
rates in respect of its seasonal employees. However, the 1996 increase of $.90
an hour over two years in the Federal minimum wage rate, and any increase in
these state minimum wage rates, may result over time in increased compensation
expense for the Company as it relates to these employees as a result of
competitive factors.
HISTORICAL
During 1995, the Company generated approximately $10.6 million in net cash
from operating activities. Additionally, financing activities provided
approximately $90.9 million in net cash during that year, consisting of the net
proceeds of the $90.0 million 1995 Premier Notes offering and the $20.0 million
convertible preferred stock offering, both of which were consummated in
connection with the Funtime acquisition, offset in part by the Company's
repayment during 1995 of approximately $17.5 million of indebtedness. During
1995, the Company used $74.1 million in net cash in connection with investing
activities, $63.3 million of which was employed in connection with the Funtime
acquisition and $10.7 million represented additions to buildings, rides and
attractions at the Company's parks made in connection with its capital
improvement program. The Company acquired the Funtime parks for approximately
$60 million, excluding the post-closing adjustment of approximately $5.4 million
paid in December 1995, which represented a substantial portion of the operating
cash flow of the Funtime parks for the portion of the 1995 season after the date
of acquisition.
During 1996, the Company generated net cash of $11.3 million from operating
activities. Net cash used in investing activities in 1996 totaled $155.2
million, $116.2 million of which was employed in connection with the 1996
Acquisitions (other than Riverside Park) and $39.4 million represented amounts
spent for capital expenditures, offset slightly by proceeds received from
equipment sales. Net cash provided by financing activities for 1996 totaled
$119.1 million, reflecting the net proceeds from the June 1996 public offering
described below and borrowings under the Company's senior credit facility,
offset, in part, by scheduled repayments of capitalized lease obligations.
In June 1996, the Company completed a public offering of approximately 3.9
million shares of Common Stock at a price to the public of $18.00 per share,
resulting in aggregate net proceeds to the Company of approximately $65.3
million. In connection with the June 1996 public offering, all of the Company's
then outstanding shares of preferred stock, together with all accrued dividends
thereon, were converted into approximately 2.6 million shares of Common Stock.
In January 1997, the Company completed two concurrent public offerings, issuing
an additional 6.9 million shares of Common Stock at a price to the public of
$29.00 per share, resulting in aggregate net proceeds to the Company of
approximately $189.8 million, and issuing $125 million principal amount of the
1997 Premier Notes, resulting in net proceeds of approximately $120.7 million.
During the first nine months of 1997, the Company generated $43.9 million in
net cash provided by operating activities. Net cash used in investing activities
aggregated approximately $129.6 million, $21.4 million of which was employed in
connection with the acquisition of Riverside Park and $108.2 million represented
amounts spent for capital expenditures. Net cash provided by financing
activities for the nine-month period aggregated $250.7 million reflecting the
net proceeds from the January 1997 public offerings of Common Stock and the 1997
Premier Notes described above, offset, in part, by the repayment at that time of
all amounts outstanding under the Company's senior credit facility.
40
<PAGE>
At September 30, 1997, substantially all of the Company's indebtedness was
represented by the Premier Notes, which require aggregate annual interest
payments of approximately $23.0 million. Except in the event of a change of
control of the Company and certain other circumstances, no principal payment on
the Premier Notes is due until the maturity dates thereof, August 15, 2003 in
the case of the 1995 Premier Notes and January 15, 2007, in the case of the 1997
Premier Notes.
PRO FORMA
In March 1998, the Company intends to enter into the Premier Credit
Facility, pursuant to which it will borrow $ million at that time, of which
up to $ million will be expended in connection with the Walibi
acquisition. See "Description of Other Indebtedness."
Upon consummation of the Six Flags Transactions, the Company will issue (i)
shares of Common Stock with estimated gross proceeds of $500.0 million, (ii)
depositary shares for up to $200.0 million of Mandatorily Convertible Preferred
Stock, (iii) depositary shares for up to $200.0 million of Seller Preferred
Stock, (iv) $ million principal amount at maturity of Company Senior
Discount Notes (with estimated gross proceeds of $250.0 million), (v) $280.0
million aggregate principal amount of Company Senior Notes, and (vi) $170.0
million of aggregate principal amount of New SFEC Notes. The Mandatorily
Convertible Preferred Stock will accrue cumulative dividends (payable, at the
Company's option, in cash or shares of Common Stock) at % per annum, and will
be mandatorily exchangeable into Common Stock in 2001. The Seller Preferred
Stock will accrue cumulative cash dividends at % per annum and will be
mandatorily redeemable in 2010. The Company Senior Discount Notes will not
require any interest payments prior to , or, except in the event of a
change of control of the Company and certain other circumstances, any principal
payments prior to their maturity in 2008. The Senior Company Notes will require
annual interest payments of $ and, except in the event of a change of
control of the Company or certain other circumstances, will not require any
principal payments prior to their maturity in 2008. The New SFEC Notes will
require annual interest payments of $ and, except in the event of a
change of control of the Company or certain other circumstances, will not
require any principal payments prior to their maturity. The net proceeds of the
New SFEC Notes Offering, together with other funds, will be deposited in escrow
to repay in full at or prior to maturity the SFEC Zero Coupon Senior Notes. In
addition, in connection with the Six Flags Transactions, the Company will (i)
assume $285.0 million principal amount at maturity of the SFTP Senior
Subordinated Notes, which had an accreted value of $269.9 million at December
31, 1997, (ii) refinance all outstanding SFTP bank indebtedness with the
proceeds of $ million of borrowings under the Six Flags Credit Facility, and
(iii) refinance all outstanding bank debt of SFEC with a portion of the proceeds
of the Offerings. The SFTP Senior Subordinated Notes require interest payments
of approximately $34.9 million per annum, payable semi-annually commencing
December 15, 1998, and, except in certain circumstances, no principal payments
are due thereon until their maturity date, June 15, 2005. Term loan borrowings
under the Six Flags Credit Facility will mature on November 30, 2004 (with
principal payments of $1.0 million in each of 1998--2001, $25.0 million in 2002,
$40.0 million in 2003 and $303.0 million at maturity), Revolving credit
borrowings under this facility ($100.0 million) mature on the fifth anniversary
of the Six Flags Acquisition. Borrowings under the Six Flags Credit Facility
will be guaranteed by SFTP's subsidiaries and will be secured by substantially
all of the assets of SFTP and its subsidiaries. The Premier Credit Facility
includes a five-year $75.0 million revolving credit facility, a five-year $100.0
million term loan facility (with principal payments of $10.0 million, $25.0
million, $30.0 million and $35.0 million in the second, third, fourth and fifth
years) and an eight-year $125.0 million term loan facility (with principal
payments of $1.0 million in each of the first six years, $25.0 million and $94.0
million in the seventh and eight years). Borrowings under the Premier Credit
Facility will be guaranteed by Premier Operations' domestic subsidiaries and
will be secured by substantially all of the assets of Premier Operations and
such subsidiaries. See "Description of Other Indebtedness" and "Description of
Notes."
41
<PAGE>
On a pro forma basis as of December 31, 1997, the Company would have had
outstanding $ million of indebtedness. Based on interest rates in effect
on that date, annual interest payments for 1998 on this indebtedness would have
aggregated $ . In addition, annual dividend payments on the Convertible
Preferred Stock will aggregate $ .
By reason of the Six Flags Acquisition, the Company will be required to
offer to purchase the SFTP Senior Subordinated Notes at a price equal to 101% of
their accreted amount (approximately $287.9 million at June 15, 1998). On
February , 1998, the last reported sales price of these notes was
equivalent to % of their accreted amount. The Company does not expect to be
required to purchase any material amount of these Notes by reason of this offer.
Although the Company has entered into discussions with lenders to provide a
standby arrangement to finance the purchase of such Notes, there can be no
assurance that such discussions will be successful or that the Company will be
able to obtain any other financing in the event that it should become necessary.
The Company will be required to (i) make minimum annual distributions of
approximately $46.2 million (subject to cost of living adjustments) to its
partners in the Co-Venture Parks and (ii) make minimum capital expenditures at
each of the Co-Venture Parks during rolling five-year periods, generally based
on 6% of such park's revenue. Cash flow from operations at the Co-Venture Parks
will be used to satisfy these requirements, before any funds are required from
the Company. The Company has also agreed to purchase a maximum number of 5% per
year (accumulating to the extent not purchased in any given year) of limited
partnership units of these partners (to the extent tendered by the unit
holders). The agreed price for these purchases is based on a valuation for each
respective Co-Venture Park equal to the greater of (i) a value derived by
multiplying its weighted-average four year EBITDA by a specified multiple (8.0
in the case of Georgia park and 8.5 in the case of the Texas park) or (ii)
$250.0 million in the case of the Georgia park and $374.8 million in the case of
the Texas park. The Company's obligations with respect to Six Flags Over Georgia
and Six Flags Over Texas will continue until 2026 and 2027, respectively. As the
Company purchases units, it will be entitled to the minimum distribution and
other distributions attributable to such units unless it is then in default
under its indemnity obligations to Time Warner. The Company estimates that its
maximum unit purchase obligation for 1998, when purchases are required only for
the Georgia park, will aggregate approximately $13 million (approximately $32
million for 1999 when purchases for both partnerships are required) and its
minimum capital expenditures at these parks for 1998 will total $18 million.
The Company's liquidity could be adversely affected by unfavorable weather,
accidents or the occurrence of an event or condition, including negative
publicity or significant local competitive events (such as the 1996 Summer
Olympics in the case of Six Flags Over Georgia) that significantly reduces paid
attendance and, therefore, revenue at any of its theme parks. On June 2, 1997, a
slide collapsed at the Company's Waterworld park in Concord, California,
resulting in one fatality and the park's closure for twelve days. The park
re-opened with the approval of the City of Concord on June 14, 1997. Although
the collapse and the resulting closure had a material adverse impact on that
park's operating performance for 1997, as well as a lesser impact on the
Company's Sacramento water park (which is also named "Waterworld"), located
approximately seventy miles from the Concord park, the Company's other parks
were not adversely affected. The Company has recovered all of the Concord park's
operating shortfall under its business interruption insurance. In addition, the
Company believes that its liability insurance coverage should be more than
adequate to provide for any personal injury liability which may ultimately be
found to exist in connection with the collapse.
The Company believes that cash flow from operations and available cash,
available borrowings under the Credit Facilities and the net proceeds of the
Offerings (to the extent not used in connection with the Six Flags Acquisition)
will be adequate to meet the Company's future liquidity needs, including
anticipated requirements for working capital, capital expenditures, scheduled
debt and preferred stock payments and its obligations under arrangements
relating to the Co-Venture Parks, for at least the next several years. See "Risk
Factors--Risks Associated with Substantial Indebtedness."
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NEWLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, and restatement of prior-period earnings per share data is required. The
new standard will not apply to Premier's financial statements until the fourth
quarter of 1997. SFAS No. 128 revises the current calculation methods and
presentation of primary and fully diluted earnings per share. Premier has
reviewed the requirements of SFAS No. 128 and has concluded that the application
of the new standard will not have a material effect on the calculation of
Premier's historical earnings (loss) per share data.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of "comprehensive
income" and its components in a set of financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
currently does not have any components of comprehensive income that are not
included in net income. After the acquisition of Walibi, the only item not
currently included in the Company's consolidated statement of operations would
be the currency translation adjustment that will be reported as part of
stockholders' equity after the acquisition. The Company will adopt SFAS No. 130
in the year 1998.
Also in June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 is effective for periods beginning after December 15, 1997.
SFAS No. 131 requires that a public entity report financial and descriptive
information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company will adopt SFAS No.
131 in 1998. However, such adoption is not expected to impact the Company's
financial disclosures because the Company's current operations are limited to
one reportable operating segment under SFAS No. 131's definitions. After the
acquisition of Walibi, the Company will be required to disclose certain
financial information related to its foreign operations.
In January 1997, the Commission issued Release No. 33-7386, which requires
enhanced descriptions of accounting policies for derivative financial
instruments and derivative commodity instruments in the footnotes to financial
statements. The release also requires certain quantitative and qualitative
disclosure outside financial statements about market risks inherent in market
risk sensitive instruments and other financial instruments. The requirements
regarding accounting policy descriptions were effective for any fiscal period
ending after June 15, 1997. However, because derivative financial and commodity
instruments have not materially affected the Company's consolidated financial
position, cash flows or results of operations, this part of the release does not
affect the Company's 1997 financial statement disclosures. The quantitative and
qualitative disclosures required by the release will be initially provided in
the Company's annual report on Form 10-K for the year ending December 31, 1998.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of past practices in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company anticipates that it will be able to test it entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material. See "Risk Factors -- Impact of Year 2000 Issue."
43
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BUSINESS
GENERAL
The Company is the largest regional theme park operator, and the second
largest theme park company, in the world, based on 1997 attendance of
approximately 37 million. It operates 31 regional parks, including 15 of the 50
largest theme parks in the U.S., based on 1997 attendance. The Company's theme
parks are located in 9 of the 10 largest metropolitan areas in the country. The
Company estimates that % of the U.S. population lives within a 100-mile
radius of the Company's theme parks. On a pro forma basis, the Company's total
revenue and EBITDA for the year ended December 31, 1997 was approximately $
million and $ million, respectively.
The following table sets forth certain information for the Company's parks:
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET 1997 ATTENDANCE ACRES(1)
- ---------------------------------- --------------- --------------------------------- ----------------- -------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PREMIER PARKS:
Adventure World................... Theme/Water Baltimore/Washington, D.C. 970 115
Bellewaerde....................... Theme Belgium 670 133
Darien Lake....................... Theme/Water Buffalo/Rochester 1,400 142
Elitch Gardens.................... Theme/Water Denver 1,500 60
Frontier City..................... Theme Oklahoma City 520 60
Geauga Lake....................... Theme/Water Cleveland 1,300 116
The Great Escape.................. Theme/Water Lake George/Albany, New York 680 100
Kentucky Kingdom.................. Theme/Water Louisville 1,100 58
Marine World...................... Theme/Wildlife San Francisco 1,100 105
Riverside Park.................... Theme New England/Boston 1,200 160
Walibi Aquitaine.................. Theme France 240 74
Walibi Flevo...................... Theme The Netherlands 450 250
Walibi Rhone-Alpes................ Theme/Water France 350 35
Walibi Schtroumpf................. Theme France 350 375
Walibi Wavre and Aqualibi......... Theme/Water Belgium 960 120
Waterworld USA/Concord............ Water San Francisco 180 24
Waterworld USA/Sacramento......... Water Sacramento 290 20
White Water Bay................... Water Oklahoma City 320 22
Wyandot Lake...................... Water Columbus, Ohio 380 18
SIX FLAGS PARKS:
Six Flags Astro-World............. Theme Houston 1,990 90
Six Flags Water World............. Water Houston 280 14
Six Flags Fiesta Texas............ Theme San Antonio 1,640 200
Six Flags Great Adventure......... Theme New York City/Philadelphia 3,690(2) 576
Six Flags Wild Safari Animal
Park.............................. Wildlife New York City/Philadelphia (2)
Six Flags Great America........... Theme Chicago/Milwaukee 3,040 86
Six Flags Magic Mountain.......... Theme Los Angeles 3,270 110
Six Flags Hurricane Harbor........ Water Los Angeles 350 11
Six Flags St. Louis............... Theme St. Louis 1,690 499
Six Flags Over Georgia............ Theme Atlanta 2,780 196
Six Flags Over Texas.............. Theme Dallas/Fort Worth 2,950 197
Six Flags Hurricane Harbor........ Water Dallas/Fort Worth 560 49
</TABLE>
- ------------------------
(1) Includes acreage currently dedicated to park usage. Additional acreage
suitable for development exists at many of the facilities.
(2) Attendance and acreage information for Six Flags Great Adventure also
includes data for the adjacent Six Flags Wild Safari Animal Park.
The Six Flags Parks consist of eight regional theme parks, as well as three
separately gated water parks and a wildlife safari park (each of which is
located near one of the theme parks). None of the Six Flags Parks are located
within the primary market of any of the Premier Parks. During 1997, the Six
Flags theme parks drew, in the aggregate, approximately % of their patrons
from within a 100-mile radius. During that year, Six Flags' attendance, revenue
and EBITDA totaled , $ and $ , respectively.
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Six Flags has operated regional theme parks under the Six Flags name for
over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier will obtain exclusive worldwide
ownership of the Six Flags brand name and expects to use the Six Flags brand
name, generally beginning in the 1999 season, at most of the Premier Parks.
In addition, as part of the Six Flags Acquisition, the Company will obtain
from Warner Bros. the
exclusive right for theme-park usage of certain Warner Bros. and DC Comics
characters throughout the United States (except the Las Vegas metropolitan area)
and Canada. These characters include BUGS BUNNY, DAFFY DUCK, TWEETY BIRD,
YOSEMITE SAM, BATMAN, SUPERMAN and others. Since 1991, Six Flags has used these
characters to market its parks and to provide an enhanced family entertainment
experience. The license will have a term of 55 years, will include the right to
sell merchandise featuring the characters at the parks and will apply to all of
the Company's current theme parks, as well as future parks that meet certain
criteria. Premier intends to make extensive use of these characters at the Six
Flags Parks and, commencing in 1999, at most of the existing Premier Parks. See
"--Licenses."
The Premier Parks consist of nine regional theme parks (six of which include
a water park component) and four water parks located across the United States,
as well as six regional theme parks and two smaller attractions located in
Europe and scheduled to be acquired in March 1998 in the acquisition of Walibi.
During the 1997 operating season, the eleven parks then owned by Premier drew,
on average, approximately 82% of their patrons from within a 100-mile radius,
with approximately 36.1% of visitors utilizing group and other pre-sold tickets
and approximately 20.6% utilizing season passes.
Under current management, since 1989 Premier has assumed control of 30
parks, and has achieved significant internal growth. During the nine months
ended September 30, 1997, the 11 parks owned by the Company during the 1997
operating season achieved same park growth in attendance, revenue and park-level
operating cash flow (representing all park operating revenues and expenses
without depreciation and amortization or allocation of corporate overhead or
interest expense) of 17.4%, 21.0% and 44.4%, respectively, as compared to the
comparable period of 1996.
The Company's parks are individually themed and provide a complete
family-oriented entertainment experience. The Company's theme parks generally
offer a broad selection of state-of-the-art and traditional thrill rides, water
attractions, themed areas, concerts and shows, restaurants, game venues and
merchandise outlets. In the aggregate, the Company's theme parks offer more than
rides, including roller coasters, making the Company the leading
provider of "thrill rides" in the industry.
The Company believes that its parks benefit from limited direct competition.
The combination of limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of the parks with a significant degree of
protection from competitive new theme park openings. Based on its knowledge of
the development of other theme parks in the United States, the Company's
management estimates that it would cost at least $200 million and would take a
minimum of two years to construct a new regional theme park comparable to the
Company's largest parks.
The Company's senior and operating management team has extensive experience
in the theme park industry. Premier's six senior executive officers have over
150 years aggregate experience in the industry and its nine general managers
(prior to the Six Flags Acquisition) have an aggregate of approximately 200
years experience in the industry, including approximately 80 years at the
Premier Parks and approximately years at the Six Flags Parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million, compared to million in
1994 (the first year in which such information is available from that
publication), representing a compound annual growth rate of %. Total
attendance for the 40 largest parks in North America was 154.7 million in 1997,
compared to million in 1992, representing a compound annual growth rate of
%. The Company believes that this
45
<PAGE>
growth reflects two trends: (i) demographic growth in the 5-24 year old age
group, which is expected to continue through 2010; and (ii) an increasing
emphasis on family-oriented leisure and recreation activities.
The Company's strategy for achieving growth includes the following key
elements: (i) pursuing growth opportunities at existing parks; (ii) expanding
the Company's parks; and (iii) making selective acquisitions.
PURSUING GROWTH OPPORTUNITIES AT EXISTING PARKS
The Company believes there are substantial opportunities for continued
internal growth at its parks. The Company's operating strategy is to increase
revenue by increasing attendance and per capita spending, while maintaining
strict control of operating expenses. This approach is designed to exploit the
operating leverage inherent in the theme park business. Once parks achieve
certain critical attendance levels, operating cash flow margins increase because
revenue growth through incremental attendance gains and increased in-park
spending is not offset by a comparable increase in operating expenses, since a
large portion of such expenses is relatively fixed during any given year. The
primary elements of this strategy include:
--ADDING RIDES AND ATTRACTIONS AND IMPROVING OVERALL PARK QUALITY. The
Company regularly makes investments in the development and implementation of new
rides and attractions at its parks. The Company believes that the introduction
of marketable rides is an important factor in promoting each of the parks in
order to increase market penetration and encourage longer visits, which lead to
increased attendance and sales of food and merchandise. Once a park reaches an
appropriate level of attractions for its market size, the Company will add new
marketable attractions at that park only every three to four years.
--ENHANCING MARKETING AND SPONSORSHIP PROGRAMS. Premier's parks have
benefitted from professional, creative marketing programs which emphasize the
marketable rides and attractions, breadth of available entertainment and value
provided by each park. Following the Six Flags Acquisition, the Company intends
to implement marketing programs that also emphasize the Six Flags brand name, as
well as the animated characters licensed from Warner Bros. The Company has also
successfully attracted well known sponsorship and promotional partners, such as
Pepsi, McDonald's, Coca-Cola, Taco Bell, Blockbuster, 7-Eleven, Wendy's, First
USA Bank, Best Western and various supermarket chains. The Company believes that
its increased number of parks and annual attendance has enabled it to expand and
enhance its sponsorship and promotional programs.
--INCREASING GROUP SALES, SEASON PASSES AND OTHER PRE-SOLD TICKETS. Group
sales and pre-sold tickets provide the Company with a consistent and stable base
of attendance, representing over 36.0% of aggregate attendance at the 11 owned
parks in the 1997 season, with approximately 20.6% of patrons utilizing season
passes.
--IMPLEMENTING TICKET PRICING STRATEGIES TO MAXIMIZE TICKET REVENUES AND
PARK UTILIZATION. Management regularly reviews its ticket price levels and
ticket category mix in order to capitalize on opportunities to implement
selective price increases, both through main gate price increases and the
reduction in the number and types of discounts. Management believes that
opportunities exist to implement marginal ticket price increases without
significant reductions in attendance levels. Such increases have successfully
been implemented on a park-by-park basis in connection with the introduction of
major new attractions or rides. In addition, the Company offers discounts on
season, multi-visit and group tickets and also offers discounts on tickets for
specific periods, in order to increase attendance at less popular times such as
weekdays and evenings.
--INCREASING AND ENHANCING RESTAURANTS AND MERCHANDISE AND OTHER REVENUE
OUTLETS TO INCREASE LENGTH OF STAY AND IN-PARK SPENDING. The Company also seeks
to increase in-park spending by adding well-themed restaurants, remodeling and
updating existing restaurants and adding new merchandise outlets. The Company
has successfully increased spending on food and beverages by introducing
well-recognized
46
<PAGE>
local and national brands, such as Domino's, Friendly's, KFC and TCBY.
Typically, the Company operates these revenue outlets and often is the
franchisee. Finally, the Company has taken steps to decrease the waiting time
for its most popular restaurants and merchandise outlets.
--ADDING SPECIAL EVENTS. The Company has also developed a variety of
off-season special events designed to increase attendance and revenue prior to
Memorial Day and after Labor Day. Examples include Hallowscream and Fright
Fest-Registered Trademark-, Halloween events in which parks are transformed with
supernatural theming, scary rides and haunting shows, Oktoberfest, in which
traditional German food, theming, music and entertainment are presented at the
parks and Holiday in the Park-Registered Trademark-, a winter holiday event, in
which several parks are transformed with winter and holiday theming.
THE PREMIER PARKS
Management believes it has demonstrated the effectiveness of its strategy at
the Premier Parks owned prior to the 1997 Acquisitions. The Company first
implemented its strategy at the parks it owned prior to the Funtime acquisition.
FRONTIER CITY--In 1990 and 1991, an aggregate of approximately $7.0 million
was invested in Frontier City to add several major rides, expand and improve the
children's area, significantly increase the size of and theme the group picnic
facilities and construct a 12,000 square foot air-conditioned mall and main
events center. These additions, combined with an aggressive marketing strategy,
resulted in Frontier City's attendance and revenue increasing approximately 54%
and 83%, respectively, from 1989 to 1991.
ADVENTURE WORLD--Since acquiring Adventure World in January 1992, the
Company has invested approximately $42.1 million in the park to add numerous
rides and attractions and to improve theming. As a result of these improvements,
as well as aggressive and creative marketing and sales strategies, Adventure
World's attendance increased during the five seasons ended 1997 at a compound
annual rate of 19.7%. Additionally, revenue and park-level operating cash flow
at Adventure World increased from $6.0 million and $0.3 million, respectively,
for the first nine months of 1992 to $19.1 million and $5.6 million,
respectively, during the comparable period of 1997.
The Company is continuing to apply its growth strategy to the three Funtime
parks, acquired in August 1995. Since that time, the Company has invested
approximately $44.0 million at these parks to add marketable rides and
attractions and make other improvements and implemented creative marketing and
sales programs. As a result of this strategy, during the nine months ended
September 30, 1997, the Funtime parks achieved compound annual growth in
attendance, revenue and park-level operating cash flow of 9.0%, 13.8% and 20.5%,
respectively, as compared to the comparable period of 1995.
DARIEN LAKE--For the 1996 and 1997 seasons, Premier invested approximately
$21.6 million, adding numerous rides and attractions and 50 recreational
vehicles. Further, the Company entered into a long-term contract with a national
concert promoter under which the promoter invested $2.5 million to make
improvements at Darien Lake's 20,000 seat amphitheater and agreed to book at
least twenty nationally-recognized performers per season. As a result of these
investments and creative marketing and sales initiatives, during the nine-month
period ended September 30, 1997, Darien Lake achieved compound annual growth of
14.3% in attendance, 18.9% in revenue and 31.4% in park-level operating cash
flow over the results of the comparable period of 1995.
During the 1997 season, the Company began to apply its operating strategy to
the five parks acquired in the 1996 Acquisitions. The Company invested
approximately $65 million in the parks for that season to add marketable rides
and attractions and make other improvements and implemented creative marketing
and sales programs. As a result of this strategy, during the first nine months
of 1997, these five parks achieved growth in attendance, revenue and park-level
operating cash flow of 32.6%, 34.4% and 161.3%, respectively, as compared to the
comparable period of 1996.
47
<PAGE>
ELITCH GARDENS--Subsequent to its October 1996 acquisition of Elitch
Gardens, the Company invested approximately $30 million at that park for the
1997 season, adding three major marketable rides including a "state-of-the-art"
steel suspended looping roller coaster, an entire water park, a new main
entrance and main street (including a theatre) and numerous revenue outlets, as
well as substantial theming and landscaping. As a result, during the nine months
ended September 30, 1997, attendance and revenue at Elitch Gardens grew 64.7%
and 52.2%, respectively, and park-level operating cash flow increased from $1.1
million to $10.2 million, as compared to the comparable period of 1996.
RIVERSIDE PARK--The Company invested approximately $25 million for the 1997
season at Riverside Park, which it acquired in February 1997, to add three major
marketable rides, including a "state-of-the-art" steel suspended looping roller
coaster, a group picnic area, a new main entrance and improved theming and
landscaping. As a result, during the nine months ended September 30, 1997,
attendance and revenue at Riverside Park increased 51.2% and 49.6%,
respectively, and park-level operating cash flow increased from $1.0 million to
$10.1 million, as compared to the comparable period of 1996.
Management believes that each of the parks acquired by Premier in the 1997
Acquisitions offer similar opportunities to implement the Company's growth
strategy. Specifically, the Company believes it can increase attendance and per
capita revenue at Kentucky Kingdom. The Company intends to invest approximately
$10 million at Kentucky Kingdom for the 1998 season to add dueling wooden roller
coasters, a five-story interactive family water attraction and restaurants and
other revenue outlets. Marine World represents an opportunity to operate and
eventually own an established, well-known park in the San Francisco market, with
excellent access to major area highways. Premier has exercised its option to
lease approximately 40 acres at Marine World for a term of up to 99 years at a
nominal rent. Upon exercise of the lease option, Premier became entitled to
receive, in addition to its management fee, 80% of the cash flow generated by
the park after operating expenses and debt service. Management intends to expand
the park's entertainment component with theme park rides and attractions. The
Company is currently implementing the first phase of this expansion of Marine
World by investing approximately $35-$40 million for the 1998 season to add
fourteen new rides, including a boomerang steel roller coaster, a river rapids
ride and a shoot-the-chute giant splash ride. In September 1997, the Company was
granted an option to purchase the entire site commencing in February 2002, which
it currently expects to exercise at that time.
The Walibi acquisition provides the Company with a significant presence in
the expanding theme park industry in Europe. Although the Walibi Parks have
historically produced solid operating results, management believes that the
Company's strategy of targeted capital investment and sophisticated marketing
can improve performance at these parks. The Company has agreed to invest
approximately $37.7 million in the Walibi Parks over the three years commencing
with the 1999 season. The Company believes that the Walibi Parks have suffered
from limited available funds for investment and a lack of creative marketing.
Additionally, the Company believes that the presence of Disney Land Paris
outside of Paris has resulted in greater awareness of local parks in Europe. For
example, in 1997, European park attendance grew 6%, as compared to 4% in North
America.
Further, the Company believes that, by virtue of the Six Flags Acquisition,
a number of the existing Premier Parks have the potential over the next several
seasons to accelerate their rate of growth. Recent attendance levels at the Six
Flags theme parks (between 1.7 million and 3.6 million in 1997) have been
substantially higher than the annual attendance at the largest Premier Parks
(between 1.0 million and 1.5 million during that year). Management believes that
a number of existing Premier Parks, particularly Adventure World, Elitch
Gardens, Geauga Lake, Kentucky Kingdom, Marine World and Riverside Park, all of
which are located in or near major metropolitan areas, can accelerate their
market penetration and the expansion of their geographic market by their use of
the Six Flags brand name, aggressive marketing campaigns featuring the animated
characters licensed from Warner Bros., as well as continuing capital investment
in new rides and attractions. The Company expects to commence general use of the
Six Flags brand name and the licensed characters at the Premier Parks for the
1999 season.
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<PAGE>
THE SIX FLAGS PARKS
The Six Flags Parks generally enjoy significant market penetration. Thus,
although the Company plans to make targeted capital expenditures at these parks
to increase their attendance and per capita spending levels, it expects to
increase significantly the EBITDA of these parks primarily through reduction in
operating expenses. First and most importantly, the Company believes that it can
substantially reduce Six Flags' corporate overhead and other corporate-level
expenses. Second, the Company expects to achieve significant reduction in
park-level operating expenses. Third, by virtue of economies of scale, the
Company believes that operating efficiencies in areas such as marketing,
insurance, promotion, purchasing and other expenses can be realized. Finally,
the Company believes that its increased size following the Six Flags Acquisition
will enable it to achieve savings in capital expenditures, including by the
Company's ability to rotate rides among its parks.
EXPANDING THE COMPANY'S PARKS
The Company is expanding several of the Premier Parks in order to increase
attendance and per capita spending. For example, the Company is constructing an
economy motel at Darien Lake for the 1998 season to supplement the campgrounds
and continues to expand the park by purchasing additional recreational vehicles
(RV's). In addition, the Company recently purchased campgrounds adjacent to
Geauga Lake, and may add campgrounds or an amphitheater at Frontier City. The
Company expects to add prior to the 1999 season a more complete complement of
"dry" rides to Wyandot Lake, which is currently primarily a water park. In
addition, the Company owns 400 acres adjacent to Adventure World which are zoned
for entertainment, recreational and residential uses and are available for
complementary uses. Additional acreage owned by the Company and suitable for
development exists at several of the Company's other parks. The Company may use
a portion of the proceeds of the Offering and the Concurrent Offerings to fund
expansions at its parks. See "Use of Proceeds."
The Company may expand in the future certain of the Six Flags Parks by
adding complementary attractions, such as lodging facilities and concert venues.
For example, Six Flags owns over 1,500 undeveloped acres adjacent to Six Flags
Great Adventure (located between New York City and Philadelphia) suitable for
such purposes. Additional acreage suitable for development exists at several
other Six Flags Parks.
ACQUISITION STRATEGY
The Company expects to achieve further growth beyond that generated from
internal growth at its existing parks through continued selective acquisitions
of additional regional theme parks. Given its decentralized management approach,
the Company has experience in managing assets in diverse locations, and
therefore does not seek acquisitions with any specific geographic focus. In that
connection, in the first quarter of 1998 the Company expects to acquire a
controlling interest in Walibi (and expects to acquire the remaining interest in
the second quarter of 1998), which owns six theme parks and two smaller
attractions in Europe, and may continue to pursue acquisitions of parks located
outside of the United States.
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Management believes that, in addition to the
Acquisitions, there are numerous acquisition opportunities, both in the U.S. and
abroad, that can expand its business. The Company's primary target for
acquisitions continues to be regional parks with attendance between 300,000 and
1.5 million annually. The Company will consider acquisitions of larger parks or
chains (such as Six Flags).
As the only owner of multiple parks that has been actively making
acquisitions of parks in its primary range over the last several years, the
Company believes it has a number of competitive advantages in acquiring parks of
this size. Historically, operators of destination or large regional park chains
have not generally sought to acquire parks in the Company's primary target range
and do not have the experience or management structure to readily operate parks
of that size profitably. Additionally, as a multi-park
49
<PAGE>
operator with a track record of successfully acquiring, improving and
repositioning parks, the Company has numerous competitive advantages over
single-park operators in pursuing acquisitions and improving the operating
results at acquired parks. These advantages include the ability to (i) exercise
group purchasing power (for both operating and capital assets); (ii) achieve
administrative economies of scale; (iii) attract greater sponsorship revenue,
support from sponsors with nationally-recognized brands and marketing partners;
(iv) use the Six Flags brand name and the characters licensed from Warner Bros.
and D.C. Comics; (v) recruit and retain superior management; (vi) optimize the
use of capital assets by rotating rides among its parks to provide fresh
attractions; and (vii) access capital markets. See "Risk Factors-- Uncertainty
of Future Acquisitions; Potential Effects of Acquisitions."
Furthermore, the Company is able to make acquisitions where its capital
stock forms all or part of the purchase price. This is particularly important
where the seller has a low tax basis in its assets, which the Company believes
is often the case with its acquisition targets. While the Company expects that
many acquisitions will be made for cash, its ability to use Common Stock for all
or part of the purchase price will provide it with an additional advantage over
single-park operators in making such acquisitions. For example, shares of Common
Stock (or securities convertible into Common Stock) were used as a portion of
the aggregate consideration in the acquisitions of Kentucky Kingdom, Walibi and
Six Flags. In most cases, the Company will seek to acquire outright ownership of
parks, as it did with the 1996 Acquisitions. However, transactions may be
undertaken in other forms, including acquisition of less than full ownership,
such as participation in park management, leases or joint venture arrangements.
For example, the Company manages Marine World and leases a portion of that
facility, with an option to acquire the entire park, commencing in 2002.
The Company expects to continue to acquire parks which have been
undermanaged and have not benefitted from sustained capital expenditures, and to
reposition such parks through the implementation of its operating strategies.
The Company may also acquire better performing parks which require less
additional investment but where cash flow can be improved through economies of
scale in operating and capital expenditures and other enhancements.
The Company intends to locate acquisition targets primarily through its own
direct efforts. Management has extensive contacts throughout the industry and is
an active participant in industry associations. Particular attention is given to
cultivating relationships over time with park owners who appear likely to be or
become potential sellers due to factors such as age or family or economic
circumstances. In addition, the Company has developed a reputation as an active
acquiror of regional parks. Through this reputation and general industry
contacts, the Company believes that it becomes aware of most acquisition
opportunities that develop in its area of focus.
THE THEME PARK INDUSTRY
HISTORY
Although there is a long history of traditional amusement parks, primarily
family-owned and consisting of thrill rides and midways, the opening of
Disneyland in 1955 introduced the first modern theme park. Several features of
modern theme parks distinguish them from the traditional amusement park whose
carnival atmosphere and thrill rides offer less to families and adults. Theme
parks are designed around one central or several different themes which are
consistently applied to all areas, including the rides, attractions,
entertainment, food, restaurants and landscape. Modern parks also typically
present a variety of free entertainment not found at old-style amusement parks.
Theme parks also offer the visitor numerous and diverse dining establishments in
order to expand length of stay and position the parks as an all-day
entertainment center. Generally, theme parks also plan nighttime entertainment
(such as fireworks) and special events, and keep certain rides open into the
night to further extend the hours of operation. As a result of these
differences, theme parks draw attendance from a wider geographic area and
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attract a larger number of people from within a given market. Theme parks also
attract more families and group outings, and the average length of stay and per
capita outlay is greater.
The following table identifies the nine largest operators of theme park
chains worldwide ranked by total attendance, showing the number and type of such
parks operated by each and the aggregate attendance in 1997.
<TABLE>
<CAPTION>
TYPE NUMBER 1997
NAME OF OPERATOR OF PARK OF PARKS ATTENDANCE
- --------------------------------------------------------------- ----------------------- ------------- -------------
<S> <C> <C> <C>
(IN
THOUSANDS)
Disney......................................................... Destination 8 86,000
Premier Parks(1)............................................... Regional 31 36,700
Anheuser-Busch................................................. Regional/Destination 9 20,700
Universal Studios.............................................. Destination 2 14,300
Cedar Fair..................................................... Regional 7 13,400
Paramount Parks................................................ Regional 6 12,800
Blackpool Pleasure Beach Co.(2)................................ Destination 3 8,800
The Tussauds Group(2).......................................... Regional 3 7,400
Silver Dollar City............................................. Regional/Destination 5 4,900
</TABLE>
- ------------------------
(1) Attendance figures for Premier Parks reflect the 1997 Acquisitions and the
Six Flags Acquisition as if such acquisitions had all occurred at the
commencement of the 1997 season.
(2) Does not operate parks in North America.
DESTINATION PARKS VERSUS REGIONAL PARKS
Destination parks are those designed primarily to attract visitors willing
generally to travel long distances and incur significant expense to visit the
parks' attractions as part of an extended stay. To accommodate vacationers, many
destination parks also include on-site lodging. Walt Disney World and Universal
Studios are well-known examples of this type of park. Management believes that
destination parks are typically more affected by the national economy than are
regional parks. With the exception of Six Flags Magic Mountain, located in the
same market as Disneyland and Universal Studios Hollywood, the Company does not
believe that its parks compete directly with destination parks.
Regional theme parks, such as those historically operated by the Company,
are designed to attract visitors for a full day or a significant number of
hours. Management views regional theme parks as those that draw the majority of
their patrons from within a 50-mile radius of the park and the great majority of
their visitors from within a 100-mile radius of the park. Visiting a regional
theme park may be significantly less expensive than visiting a destination park
because of lower transportation expenses, lower ticket prices and the lack of
extended lodging expenses. The U.S. regional theme park industry is highly
fragmented with over 150 parks owned by over 100 operators.
ATTRACTIONS
Regional theme parks attract patrons of all ages. Families and young people
are attracted by the variety of major rides and attractions, children's rides
and various entertainment areas including thematic shows and concerts. Most park
admission policies are "pay-one-price," which entitles a guest to virtually
unlimited free access to all rides, shows and attractions.
Depending on the size of the property, regional theme parks typically have
between 30 and 40 attractions. These rides include roller coasters and water
rides, as well as other attractions such as bumper cars, aerial rides and
children's rides. A park may also have distinct entertainment and show areas
with specific themes such as a wild west or pirate stunt show. Games, food and
merchandise stands often reflect
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the theme of the particular area in which they are located. This enhances the
promotional effect of the thematic area. By offering a variety of rides and
themed areas, a park is able to target a wider age spectrum from the surrounding
population.
In addition to thrill rides, many parks offer indoor attractions and outdoor
concerts, ranging from musical skits and bands to full-scale evening concerts by
prominent entertainers. Selected concerts may require an add-on to the
admissions price, but often are part of the regular ticket price, providing
added value to visitors.
Food service offered ranges from full-service restaurants to fast food.
Young people may only be interested in a quick meal between rides while the
family may choose to relax for a picnic. Refreshment stands serve snack foods,
such as hot dogs, cotton candy and soda. In addition, game booths and
merchandise souvenir stands are dispersed throughout a park.
HISTORY
The Company was incorporated in 1981 as The Tierco Group, Inc., and through
1989 was primarily engaged in the ownership and management of real estate and
mortgage loans. In October 1989, the Company's current senior management assumed
control, and during 1989, management determined to focus Premier's business on
its theme park operations, which at that point consisted of a 50% interest in
Frontier City. In 1991, the Company acquired White Water Bay and increased its
ownership in Frontier City to in excess of 50%. In 1992, the Company acquired
Adventure World and the remaining minority interest in Frontier City and
disposed of substantially all of its non-theme park operations. In 1994, the
Company changed its name to Premier Parks Inc. On August 15, 1995, the Company
completed the Funtime acquisition. On June 4, 1996, the Company completed a
public offering of approximately 3.9 million shares of Common Stock, at a price
to the public of $18.00 per share, which raised $65.2 million of net proceeds.
In the fourth quarter of 1996, the Company acquired Elitch Gardens, the
Waterworld Parks and The Great Escape, and, in February 1997, acquired Riverside
Park. In January 1997, the Company completed the issuance, through a public
offering, of an additional 6.9 million shares of its Common Stock at a price to
the public of $29.00 per share, which raised approximately $189.8 million of
aggregate net proceeds. In the fourth quarter of 1997, the Company acquired
Kentucky Kingdom and its leasehold interest at Marine World. In the first
quarter of 1998, the Company expects to acquire a majority interest in Walibi,
and expects to acquire the remaining interest in the second quarter of 1998.
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DESCRIPTION OF PARKS
PREMIER PARKS
ADVENTURE WORLD
Adventure World is a combination theme and water park located in Largo,
Maryland, approximately 15 miles east of Washington, D.C. and 30 miles southwest
of Baltimore, Maryland. The park's primary market includes Maryland, northern
Virginia, Washington, D.C. and parts of Pennsylvania and Delaware. This market
provides the park with a permanent resident population base of approximately 6.6
million people within 50 miles and 10.9 million people within 100 miles. The
Washington, D.C. and Baltimore markets are the number 7 and number 23 DMAs in
the United States, respectively. Based upon in-park surveys, approximately 87%
of the visitors to Adventure World in 1997 resided within a 50-mile radius of
the park, and 92% resided within a 100-mile radius.
The Company owns a site of 515 acres, with 115 acres currently used for park
operations. The remaining 400 acres, which are fully zoned for entertainment and
recreational uses, provide the Company with ample expansion opportunity, as well
as the potential to develop complementary operations, such as an amphitheater.
Adventure World's principal competitors are King's Dominion Park, located in
Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Adventure
World.
DARIEN LAKE & CAMPING RESORT
Darien Lake, a combination theme and water park, is the largest theme park
in the State of New York and the 38th largest theme park in the United States
based on 1997 attendance of 1.4 million. Darien Lake is located off Interstate
90 in Darien Center, New York, approximately 30, 40 and 120 miles from Buffalo,
Rochester and Syracuse, New York, respectively. The park's primary market
includes upstate New York, western and northern Pennsylvania and southern
Ontario, Canada. This market provides the park with a permanent resident
population base of approximately 2.1 million people within 50 miles of the park
and 3.1 million with 100 miles. The Buffalo, Rochester and Syracuse markets are
the number 40, number 75 and number 72 DMAs in the United States, respectively.
Based upon in-park surveys, approximately 62% of the visitors to Darien Lake in
1997 resided within a 50-mile radius of the park, and 79% resided within a
100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds, and 593 acres of
agricultural, undeveloped and water areas. Darien Lake also has a 20,000 seat
amphitheater. Following the 1995 season, the Company entered into a long-term
arrangement with a national concert promoter to realize the cash flow potential
of the amphitheater. As a result, since it acquired the park, the Company has
realized substantial increases in revenues earned from concerts held at the
facility.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States.
In 1997, approximately 310,000 people used the Darien Lake campgrounds. The
Company believes that substantially all of the camping visitors use the theme
park. The Company is constructing an economy motel at the site for the 1998
season to supplement the campgrounds.
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Darien Lake's principal competitor is Wonderland Park located in Toronto,
Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake
competes to a lesser degree with three smaller amusement parks located within 50
miles of the park. Darien Lake is significantly larger with a more diverse
complement of entertainment than any of these three smaller facilities.
ELITCH GARDENS
Elitch Gardens is a combination theme and water park located on
approximately 60 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and McNichols Arena, and close to Coors Field. Based on 1997
attendance of 1.5 million, Elitch Gardens is the 37th largest theme park in the
United States. The park's primary market includes the greater Denver area, as
well as most of central Colorado. This market provides the park with a permanent
resident population base of approximately 2.4 million people within 50 miles of
the park and approximately 3.3 million people within 100 miles. The Denver area
is the number 18 DMA in the United States. Based upon in-park surveys,
approximately 54% of the visitors to Elitch Gardens in 1997 resided within a
50-mile radius of the park, and 78% resided within a 100-mile radius. Elitch
Gardens has no significant direct competitors.
A park in Denver under the name of "Elitch Gardens" has been in continuous
operation for over 100 years. During 1994 and 1995, the park was relocated from
its smaller location on the north side of Denver to its current location in
downtown Denver. The park was constructed at a cost of $100.0 million (including
land and equipment, as well as extensive infrastructure). The park was reopened
in 1995. Management believes that the park, as constructed, did not have
sufficient marketable rides and attractions to achieve its attendance potential.
In addition, prior to its acquisition in 1996, the park lacked theming and
landscaping, as well as creative marketing.
FRONTIER CITY
Frontier City is a western theme park located along Interstate 35 in
northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.2 million
people within 50 miles of the park and 2.1 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 43 and number 58 DMAs in the
United States, respectively. Based upon in-park surveys, approximately 63% of
the visitors to Frontier City in 1997 resided within a 50-mile radius of the
park, and 69% resided within a 100-mile radius.
The Company owns a site of approximately 90 acres, with 60 acres currently
used for park operations. The remaining 30 acres provide the Company with the
potential to develop complementary operations, such as campgrounds or an
amphitheater. Frontier City's only significant competitor is Six Flags Over
Texas, the Company's park located in Arlington, Texas, approximately 225 miles
from Frontier City.
GEAUGA LAKE
Geauga Lake is a combination theme and water park, and is the 40th largest
theme park in the United States based on 1997 attendance of 1.3 million. Geauga
Lake is located in Aurora, Ohio, 20 miles southeast of Cleveland and
approximately 30, 60 and 120 miles, respectively, from Akron and Youngstown,
Ohio and Pittsburgh, Pennsylvania. This market provides the park with a
permanent resident population base of approximately 4.0 million people within 50
miles of the park and 7.4 million within 100 miles. The Cleveland/Akron,
Youngstown and Pittsburgh markets are the number 13, number 97 and number 19
DMAs in the United States, respectively. Based upon in-park surveys,
approximately 44% of the visitors to Geauga Lake in 1997 resided within a
50-mile radius of the park, and 76% resided within a 100-mile radius.
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The 257-acre property on which Geauga Lake is situated includes a 55-acre
spring-fed lake. The theme park itself presently occupies approximately 116
acres. There are approximately 87 acres of undeveloped land (of which
approximately 30 acres have the potential for further development).
Geauga Lake's principal competitors are Cedar Point in Sandusky, Ohio and
Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately 90
miles and 120 miles, respectively, from Geauga Lake. There are also three small
water parks within a 50-mile radius of Geauga Lake, and Sea World, a marine
park, is located on the other side of Geauga Lake. While Sea World does, to some
extent, compete with Geauga Lake, it is a complementary attraction, and many
patrons visit both facilities. In that regard, the Company and Sea World conduct
joint marketing programs in outer market areas, involving joint television
advertising of combination passes. In addition, combination tickets are sold at
each park.
THE GREAT ESCAPE
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George resort area, 180 miles north
of New York City and 40 miles north of Albany. The park's primary market
includes the Lake George tourist population and the upstate New York and western
New England resident population. Official statistics indicate that the area had
a visitor population of over 7.5 million people in 1995, of which over 3.5
million were overnight visitors, with an average length of stay of 4.3 days.
This market provides the park with a permanent resident population base of
approximately 800,000 people within 50 miles of the park and 3.3 million people
within 100 miles. The Albany market is the number 52 DMA in the United States.
Based upon in-park surveys, approximately 41% of the visitors to the Great
Escape in 1997 resided within a 50-mile radius of the park, and 69% resided
within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Riverside Park, the Company's park located in Springfield,
Massachusetts, approximately 150 miles from The Great Escape. In addition, there
is a smaller water park located in Lake George.
KENTUCKY KINGDOM
Kentucky Kingdom is a combination theme and water park, located on
approximately 58 acres on and adjacent to the grounds of the Kentucky State Fair
in Louisville, Kentucky, of which approximately 38 acres are leased under ground
leases with terms (including renewal options) expiring in 2049, with the balance
owned by the Company. Based on 1997 attendance of 1.1 million, Kentucky Kingdom
was the 47th largest theme park in the United States. The park's primary market
includes Louisville and Lexington, Kentucky, Evansville and Indianapolis,
Indiana and Nashville, Tennessee. This market provides the park with a permanent
resident population of approximately 1.4 million people within 50 miles and 4.6
million people within 100 miles. The Louisville and Lexington markets are the
number 50 and number 67 DMAs in the United States. Kentucky Kingdom's only
significant direct competitor is Paramount's Kings Island and The Beach, located
in Cincinnati, Ohio, approximately 100 miles from the park.
The Company believes that, although Kentucky Kingdom is outfitted with a
large number of rides and has a solid attendance base, the park has suffered
from limited available funds for investment and a lack of revenue outlets.
Premier intends to spend approximately $10 million prior to the 1998 season to
add two major new attractions and to upgrade the quality and quantity of the
merchandise outlets and restaurants. The Company also intends to implement more
professional and creative marketing, sales and promotional programs.
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MARINE WORLD
Marine World, a theme park which has historically featured primarily marine
mammals and exotic land animals, is the 47th largest theme park in the United
States, based on 1997 attendance of 1.1 million. Marine World is located in
Vallejo, California, approximately 32 miles from San Francisco, 22 miles from
Oakland and 57 miles from Sacramento. This market provides the park with a
permanent resident population base of approximately 5.4 million people within 50
miles and 10.0 million people within 100 miles. The San Francisco/Oakland and
Sacramento areas are the number 5 and number 20 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 50% of the visitors to
Marine World in 1997 resided within a 50-mile radius of the park, and 78%
resided within a 100-mile radius.
The Company manages the operations of Marine World pursuant to a management
agreement entered into in February 1997, pursuant to which the Company is
entitled to receive an annual base management fee of $250,000 and up to $250,000
annually in additional fees based on park performance. In addition, in November
1997 the Company exercised at no additional cost an option to lease
approximately 40 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the park after operating expenses and debt
service. Finally, the Company has the option to purchase the entire park
beginning in February 2002, which it currently expects to exercise at that time.
Marine World currently consists of 105 acres comprised of various
presentation stadiums, animal habitats, visitor walkways, parking, concession
and picnic areas, bordering a 55-acre man-made lake. The park provides for the
shelter and care of over 50 marine mammals, 600 land animals, over 70 sharks and
rays, birds and reptiles, over 2,600 tropical and cold water fish and marine
invertebrates, and 500 butterflies, all featured in a variety of exhibits and
participatory attractions.
Marine World's principal competitors are Underwater World at Pier 39 in San
Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium.
These parks are located approximately, 30, 60 and 130 miles from Marine World,
respectively. In addition, plans for Hecker Pass, a new theme park in Gilroy,
California (approximately 100 miles from Marine World) are under development. If
developed, the Company believes that the park would not be operational for at
least two years.
Since taking over the management of Marine World in April 1997, the Company
has stabilized the park's performance by reducing operating expenses, shortening
the operating season, and beginning to expand the park's entertainment component
by adding a themed children's area with children's rides called "Popeye's
Seaport" and the DinoSphere TurboRide, a ride simulation theatre. The Company
expects to invest between $35-$40 million at Marine World for the 1998 season to
add fourteen new rides, including a boomerang steel roller coaster, a river
rapids ride and a shoot-the-chute giant splash ride.
RIVERSIDE PARK
Riverside Park is a combination theme park and motor speedway, located off
Interstate 91 near Springfield, Massachusetts, approximately 95 miles west of
Boston. Riverside Park's primary market includes Springfield and western
Massachusetts, and Hartford and western Connecticut, as well as portions of
eastern Massachusetts (including Boston) and eastern New York. Based on 1997
attendance of over 1.2 million, Riverside Park is the 43rd largest theme park in
the United States. This market provides the park with a permanent resident
population base of approximately 3.1 million people within 50 miles and 14.7
million people within 100 miles. Based upon in-park surveys, approximately 63%
of the visitors to Riverside Park in 1997 resided within a 50-mile radius of the
park, and 95% resided within a 100-mile radius. Springfield, Hartford/New Haven
and Boston are the number 103, number 27 and number 6 DMAs in the United States.
Riverside Park is comprised of approximately 160 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 30 undeveloped acres. Riverside Park's
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Speedway is a multi-use stadium which includes a one-quarter mile
NASCAR-sanctioned short track for automobile racing which can seat 6,200 for
speedway events and 15,000 festival style for concerts.
Riverside Park's most significant competitor is Lake Compounce located in
Bristol, Connecticut, approximately 50 miles from Riverside Park. Lake Compounce
had not been in regular full-service operation for several years. However, the
prior owner of the park entered into a joint venture relationship in 1996 with
an established park operator, and the park has received a substantial investment
of private and public funds and did operate in the 1997 season. To a lesser
extent, Riverside Park competes with The Great Escape, the Company's park
located in Lake George, New York, approximately 150 miles from Riverside Park.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld USA/Concord and
Waterworld USA/ Sacramento) and one family entertainment center (Paradise
Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.8 million people within 50 miles of the park
and 10.0 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States. Based upon in-park surveys, approximately 94%
of the visitors in 1997 resided within a 50-mile radius of the park, and 97%
resided within a 100-mile radius.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. Also located on the fair grounds is Paradise
Island, the Company's family entertainment center. The facilities' primary
market includes Sacramento and the immediate surrounding area. This market
provides the park with a permanent resident population base of approximately 2.7
million people within 50 miles of the park and 9.7 million people within 100
miles. The Sacramento market is the number 20 DMA in the United States. Based
upon in-park surveys, approximately 80% of the visitors in 1997 resided within a
50-mile radius of the park, and 96% resided within a 100-mile radius.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 29 acres, with 24 acres currently used for park
operations. The Sacramento facility is located on approximately 20 acres, all of
which is used for the park and the family entertainment center. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 100 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 40 miles
from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on 22 acres located
along Interstate 40 in southwest Oklahoma City, Oklahoma. The park is the 15th
largest water park in the United States based on 1997 attendance of
approximately 316,000. The park's primary market includes the greater Oklahoma
City metropolitan area. Oklahoma City is the number 43 DMA in the United States.
This market provides the park with a permanent resident population base of
approximately 1.2 million people within 50 miles of the park and 2.1 million
people within 100 miles. Based upon in-park surveys, approximately 80% of the
visitors to White Water Bay in 1997 resided within a 50-mile radius of the park,
and 87% resided within a 100-mile radius. White Water Bay has no direct
competitors.
WYANDOT LAKE
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property sub-leased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
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with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in the United States. Based on
in-park surveys, approximately 85% of the visitors to Wyandot Lake in 1997
resided within a 50-mile radius of the park, and 93% resided within a 100-mile
radius.
The Company leases from the Columbus Zoo the land, the buildings and several
rides which existed on the property at the time the lease was entered into in
1983. The current lease expires in 1998, but the Company expects to exercise the
first of its two five-year renewal options. The land leased by Wyandot Lake
consists of approximately 18 acres. The park shares parking facilities with the
Columbus Zoo.
Wyandot Lake's direct competitors are Paramount's Kings Island and The
Beach, each located in Cincinnati, Ohio, and Cedar Point, located in Sandusky,
Ohio. Each of these parks is located approximately 100 miles from Wyandot Lake.
Although the Columbus Zoo is located adjacent to the park, it is a complementary
attraction, with many patrons visiting both facilities.
WALIBI PARKS
In March 1998, Premier is scheduled to acquire approximately 50.1% of the
shares of capital stock of Walibi (on a fully diluted basis) in the Private
Acquisition. Thereafter, the Company will commence the Walibi Tender Offer for
the balance of the Walibi shares, pursuant to which the Company expects to
acquire all or substantially all of such shares. Walibi, a Belgian corporation
whose capital stock is traded on the Official Market of the Brussels Stock
Exchange, owns six theme parks, two located in Belgium, one in the Netherlands
and three in France, as well as two smaller attractions in Brussels. Walibi's
operations had combined 1997 attendance of approximately 3.5 million.
The Walibi Parks consist of six theme parks and two small attractions
throughout Europe, including: Bellewaerde, Mini-Europe and Oceade, Walibi
Aquitaine, Walibi Flevo, Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre
and Aqualibi. The Walibi Parks' primary markets include Belgium, The
Netherlands, southwestern France, eastern France and northern France. These
markets provide the Walibi Parks with a permanent resident population of
million people within 50 miles and million people within 100 miles.
The Walibi Parks' most significant competitors are , located in
.
SIX FLAGS PARKS
In February 1998, Premier entered into the Six Flags Agreement to acquire
all of the capital stock of SFEC from the Sellers. See "Description of Six Flags
Agreement." Six Flags operates 12 "Six Flags" branded theme parks in eight
locations in the United States, consisting of eight major regional theme parks,
as well as three separately gated water parks and one wildlife safari park (each
located near one of the theme parks). The closing of the Six Flags Acquisition
will occur concurrently with the closing of the Offerings.
SIX FLAGS ASTRO-WORLD AND SIX FLAGS WATERWORLD
Six Flags Astro-World, the 28th largest theme park in the United States with
1997 attendance of 2.0 million, and the separately gated adjacent Six Flags
WaterWorld, with 1997 attendance of 283,000, are located in Houston, Texas on
the grounds of an entertainment and sports complex that includes the Houston
Astrodome. The Houston, Texas market provides the parks with a permanent
resident population of million people within 50 miles and million
people within 100 miles. The Houston market is the number 11 DMA in the United
States. Based upon in-park surveys, approximately % of the visitors to the
parks in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 90 acres used for the theme park,
and approximately 14 acres used for the water park. Six Flags Astro-World
indirectly competes with Sea World of Texas and the
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Company's Six Flags Fiesta Texas, both located in San Antonio, Texas,
approximately 200 miles from the park. Six Flags WaterWorld competes with
Splashtown and Water Works, two nearby water parks.
SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas, the 33rd largest theme park in the United States
with 1997 attendance of 1.6 million, is located in San Antonio, Texas. The San
Antonio, Texas market provides the park with a permanent resident population of
million people within 50 miles and million people within 100 miles. The
San Antonio market is the number 38 DMA in the United States. Based upon in-park
surveys, approximately % of the visitors to the parks in 1997 resided within a
50-mile radius of the park, and % resided within a 100-mile radius.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas located
in San Antonio. In addition, the park competes to a lesser degree with Six Flags
Astro-World, the Company's park located in Houston, Texas, approximately 200
miles from the park.
PARTNERSHIP STRUCTURE. In March 1996, Six Flags completed arrangements
under which it took over management of the then named Fiesta Texas park ("Fiesta
Park"). Fiesta Park is located on 200 acres and is owned by La Cantera
Development Company ("La Cantera"), an affiliate of United Service Automobile
Associates and is leased to a then formed new limited partnership (the "Fiesta
Partnership"). Pursuant to the terms of the lease (the "Fiesta Lease"), the
Fiesta Partnership pays La Cantera a nominal annual rental and is required to
make certain capital improvements to and cover all operating expenses of the
park.
The Fiesta Partnership is a limited partnership formed by Six Flags San
Antonio, L.P., a Delaware limited partnership between two wholly-owned
subsidiaries of the Company (the "Six Flags GP"), as general partner, San
Antonio Park GP, LLC, a Delaware limited liability company which is managed by
managers elected by TWE, on the one hand, and an investor group, on the other
hand and in which SFEC holds a non-voting 99% equity interest (the "LLC GP"), as
general partner, and Fiesta Texas Theme Park, Ltd., a Texas limited partnership
wholly-owned by La Cantera (the "La Cantera LP"), as limited partner. The Fiesta
Partnership is controlled by the general partners and is owned 59% by the Six
Flags GP, 1% by the LLC GP and 40% by the La Cantera LP, which interests reflect
the partners' respective original contributions to the Fiesta Partnership.
The Fiesta Lease has an initial term which extends through the end of fiscal
year 2005, but under certain circumstances may be extended until the end of
fiscal year 2015. The extended Fiesta Lease can be terminated at the end of
fiscal year 2010 at the option of either the Fiesta Partnership or the lessor,
La Cantera LP. The Fiesta Partnership will also have the right to terminate the
Fiesta Lease effective at the end of fiscal year 2001 based on a specified
cumulative operating loss for the 1998 through 2001 fiscal years. As long as the
Fiesta Lease continues in effect, the Fiesta Partnership has the option to
purchase the tangible and intangible assets of Fiesta Park, as well as the La
Cantera LP's interest in the Fiesta Partnership, during the initial term of the
Fiesta Lease, at the end of fiscal year 2010 should the lessor terminate the
Fiesta Lease and at the end of fiscal year 2015.
In connection with Six Flags' management of Fiesta Park, the Six Flags GP
entered into a management agreement with the Fiesta Partnership (the "Management
Agreement") under which it will manage and operate Fiesta Park on the Fiesta
Partnership's behalf. Under the terms of the Management Agreement, the Fiesta
Partnership will pay the Six Flags GP an annual management fee and intellectual
property fee. For the 1996 and 1997 fiscal years, the annual management fee
payable to the Six Flags GP was 6% of the Fiesta Partnership's Gross Revenues
(as defined in the Management Agreement) for such year. Commencing with the 1998
fiscal year, the management fee is 25% of EBITDA (as defined in the Management
Agreement). The intellectual property fee payable to the Six Flags GP throughout
the term of the Management Agreement will be based on the Fiesta Partnership's
Gross Revenues.
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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 million
people within 50 miles and million people within 100 miles. The New York and
Philadelphia markets are the number 1 and number 4 DMAs in the United States,
respectively. Based upon in-park surveys, approximately % of the visitors to
the parks in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 1,862 acres, of which approximately
221 acres are currently used for the thrill-ride based theme park operations,
and 1,641 acres remain undeveloped. Additionally, the Company owns approximately
355 adjacent acres that are used for the wildlife safari park, home to 55
species of 1,200 exotic animals which can be seen over a four and a half mile
drive. Six Flags Great Adventure's principal competitors are Hershey Park,
located in Hershey, Pennsylvania, approximately 150 miles from the park; and
Dorney Park, located in Allentown, Pennsylvania, approximately 75 miles from the
park.
SIX FLAGS GREAT AMERICA
Six Flags Great America, the 16th largest theme park in the United States
with 1997 attendance of 3.0 million, is located in Gurnee, Illinois, between
Chicago, Illinois and Milwaukee, Wisconsin. The Chicago and Milwaukee markets
provide the park with a permanent resident population of million people
within 50 miles and million people within 100 miles. The Chicago and
Milwaukee markets are the number 3 and number 31 DMAs in the United States,
respectively. Based upon in-park surveys, approximately % of the visitors to
the park in 1997 resided within a 50-mile radius of the park, and % resided
within a 100-mile radius.
The Company owns a site of approximately 86 acres used for the theme park
operations. Six Flags Great America currently has no direct theme park
competitors in the region, but does compete with Paramount's Kings Island,
located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar
Point, located in Sandusky, Ohio, approximately 340 miles from the park; and Six
Flags St. Louis, the Company's park located near St. Louis, Missouri,
approximately 320 miles from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 12th largest theme park in the United States
with 1997 attendance of 3.3 million, and the separately gated adjacent Six Flags
Hurricane Harbor, the 11th largest water park in the United States with 1997
attendance of 351,000, are located in Valencia, California, in the northwest
section of Los Angeles County. The Los Angeles, California market provides the
parks with a permanent resident population of million people within 50
miles and million people within 100 miles. The Los Angeles market is the
number 2 DMA in the United States. Based upon in-park surveys, approximately
% of the visitors to the parks in 1997 resided within a 50-mile radius of the
parks, and % resided within a 100-mile radius.
The Company owns a site of approximately 110 acres used for the theme park,
and approximately 11 acres used for the pirate-themed water park. Six Flags
Magic Mountain's principal competitors include Disneyland in Anaheim,
California, located approximately 60 miles from the park, Universal Studios
Hollywood in Universal City, California, located approximately 20 miles from the
park, Knott's Berry Farm in Buena Park, California, located approximately 50
miles from the park, and Sea World of California in San Diego, California,
located approximately 150 miles from the park. Six Flags Hurricane Harbor has no
direct competitors in the area.
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SIX FLAGS OVER GEORGIA
Six Flags Over Georgia, the 20th largest theme park in the United States
with 1997 attendance of 2.8 million, is located in Mableton, Georgia,
approximately 10 miles outside of Atlanta, Georgia. The Atlanta, Georgia market
provides the park with a permanent resident population of million people
within 50 miles and million people within 100 miles. The Atlanta market is
the number 10 DMA in the United States. Based upon in-park surveys,
approximately % of the visitors to the park in 1997 resided within a 50-mile
radius of the park, and % resided within a 100-mile radius.
Six Flags Over Georgia's primary competitors include Paramount's Carowinds
in Charlotte, North Carolina, located approximately 250 miles from the park, and
Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles from the
park. The Georgia Partnership (as defined below) owns the site of approximately
283 acres, including approximately 87 acres of undeveloped land, all of which is
leased to Six Flags Over Georgia II.
PARTNERSHIP STRUCTURE. On March 18, 1997, Six Flags completed arrangements
pursuant to which Six Flags will manage the Georgia park through 2026. Under the
agreements governing the new arrangements (the "Georgia Agreements"), the
Georgia park is to be owned by Six Flags Over Georgia II of which a Six Flags
subsidiary is the managing general partner. In the second quarter of 1997, two
subsidiaries of Six Flags made a tender offer for partnership interests ("LP
Units") in the 99% limited partner of Six Flags Over Georgia II (the "Georgia
Partnership"), that values the Georgia park at the greater of $250 million or
eight times 1997 EBITDA of the Georgia park (the "Tender Offer Price"). Six
Flags purchased approximately 25% of the LP Units in the 1997 tender offer at an
aggregate price of $60.1 million.
The key elements of the new arrangements are as follows: (i) the limited
partner (which is not affiliated with Six Flags) received minimum annual
distributions of $18.5 million in 1997, which will increase each year thereafter
in proportion to increases in the cost of living; (ii) thereafter, Six Flags
will be entitled to receive from available cash (after provision for reasonable
reserves and after capital expenditures per annum of approximately 6% of prior
year's revenues) a management fee equal to 3% of the prior year's gross
revenues, and, thereafter, any additional available cash will be distributed 95%
to Six Flags and 5% to the limited partner; (iii) commencing in 1998, and on an
annual basis thereafter, Six Flags will offer to purchase additional LP Units at
a price based on a valuation for the park equal to the greater of $250.0 million
or a value derived by multiplying the weighted average four year EBITDA by 8.0;
(iv) in 2026, Six Flags will have the option to acquire all remaining interests
in the Georgia park at a price based on the Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1996 and
December 2026, and (v) the Company is required to make minimum capital
expenditures at the Georgia park during rolling five-year periods, based
generally on 6% of such park's revenues. Cash flow from operations at the
Georgia park will be used to satisfy these requirements first, before any funds
are required from the Company. In connection with the Indemnity Agreement, the
Company is transferring to Time Warner (who has guaranteed the Six Flags
obligations under these arrangements) record title to certain entities that have
purchased and will purchase LP Units, and the Company will receive an assignment
from Time Warner of all cash flow received on such LP Units and will otherwise
control such entities, except in the event of a default by the Company of its
obligations under these arrangements. After all such obligations have been
satisfied, Time Warner is required to transfer to the Company such stock for a
nominal consideration. In addition, the Company will issue preferred stock of
the managing partner of the Georgia Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity. See "Description of Six Flags Agreement."
Six Flags has accounted for the Georgia park as a co-venture and included
the revenues and expenses of the Georgia partnership (excluding partnership
depreciation and interest expense associated with limited partnership debt) in
Six Flags' consolidated financial statements and deducted as expenses the net
amounts distributed to the limited partners. Under the previous partnership
agreement for the Georgia partnership, net cash flow (as defined in the
partnership agreement) was distributed in the following order:
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$2.1 million to the limited partner; then $2.1 million to the general partner;
then a management fee to the general partner equal to 3% of the preceding year's
gross revenues; and finally, of the remainder, 30% to the limited partner and
70% to the general partner. In 1997, the Georgia park contributed $ million
of Six Flags' EBITDA, representing % thereof.
SIX FLAGS OVER TEXAS AND SIX FLAGS HURRICANE HARBOR
Six Flags Over Texas, the 16th largest theme park in the United States with
1997 attendance of 2.9 million, and the separately gated Six Flags Hurricane
Harbor, the 7th largest water park in the United States with 1997 attendance of
558,000, are located across Interstate 30 from each other in Arlington, Texas,
between Dallas and Fort Worth, Texas. The Dallas/Fort Worth market provides the
parks with a permanent resident population of million people within 50 miles
and million people within 100 miles. The Dallas/Fort Worth market is the
number 8 DMA in the United States. Based upon in-park surveys, approximately
% of the visitors to the parks in 1997 resided within a 50-mile radius of
the park, and % resided within a 100-mile radius.
Six Flags Hurricane Harbor includes a year-round family entertainment center
named "Funsphere," which includes a laser tag facility, a games arcade, two
go-cart tracks, a miniature golf course, batting cages and other attractions.
Funsphere does not charge front gate admission; attractions are offered on a
pay-as-you-play basis.
PARTNERSHIP STRUCTURE. The Texas Partnership (defined below) owns the site
of approximately 197 acres used for the theme park, and the Company owns
approximately an additional 49 acres, of which approximately 18 acres are
currently used for Hurricane Harbor, seven acres are used for Funsphere (an
adjacent family entertainment center), and 22 acres remain undeveloped. Six
Flags Over Texas' principal competitors include Sea World of Texas and the
Company's Six Flags Fiesta Texas, both located in San Antonio, Texas,
approximately miles from the park. Six Flags Hurricane Harbor has no direct
competitors in the area.
Six Flags Over Texas is owned by Texas Flags, Ltd. (the "Texas
Partnership"), a Texas limited partnership of which the 1% general partner is a
wholly-owned subsidiary of Six Flags, and the 99% limited partner is Six Flags
Over Texas Fund, Ltd., a Texas limited partnership (the "Texas Limited Partner")
which is unaffiliated with Six Flags. Under the terms of the prior partnership
agreement, the Texas Partnership was scheduled to dissolve on December 31, 1997,
unless 66 2/3% of the Texas Investors voted in favor of continuing the
partnership.
In December 1997, Six Flags completed arrangements pursuant to which it will
manage Six Flags Over Texas through 2027. The key elements of the new
arrangements are as follows: (i) the Texas Limited Partner will receive minimum
annual distributions of $27.7 million in 1998, increasing each year thereafter
in proportion to increases in the cost of living; (ii) thereafter, Six Flags
will be entitled to receive from available cash (after provision for reasonable
reserves and after capital expenditures per annum of approximately 6.0% of prior
year's revenues) a management fee equal to 3% of the prior year's gross
revenues, and, thereafter, any additional available cash will be distributed
92.5% to Six Flags and 7.5% to the Texas Limited Partner; (iii) in the first
quarter of 1998, Six Flags made a tender offer for partnership units ("LP
Units") in the Texas Limited Partner that values the park at the greater of
approximately $374.8 million or 8.5 times 1997 EBITDA of the park (the "Tender
Offer Price"); (iv) commencing in 1999, and on an annual basis thereafter, Six
Flags will offer to purchase LP Units at a price based on a valuation for the
park equal to the greater of $374.8 million or a value derived by multiplying
the weighted-average four year EBITDA of the park by 8.5; (v) in 2027 Six Flags
and its affiliates will have the option to acquire all remaining interests in
the park at a price based on the Tender Offer Price, increased in proportion to
the increase in the cost of living between December 1997 and December 2027; and
(vi) the Company is required to make minimum capital expenditures at the Texas
park during rolling five-year periods, based generally on 6% of such park's
revenues. Cash flow from operations at the Texas park will be used to satisfy
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these requirements first, before any funds are required from the Company. Six
Flags purchased approximately % of the LP units in the 1998 tender offer at
an aggregate price of $ million. In connection with the Indemnity
Agreement, the Company is transferring to Time Warner (who has guaranteed the
Six Flags obligations under these arrangements) record title to certain entities
that have purchased and will purchase LP Units and the Company will receive an
assignment from Time Warner of all cash flow received on such LP Units and will
otherwise control such entities, except in the event of a default by the Company
of its obligations under these arrangements. After all such obligations have
been satisfied, Time Warner is required to transfer to the Company such stock
for a nominal consideration. In addition, the Company will issue preferred stock
of the managing partner of the Texas Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity. See "Description of Six Flags Agreement."
Six Flags has accounted for the park as a co-venture and included the
revenues and expenses of the Texas Partnership (excluding partnership
depreciation and interest expense associated with limited partnership debt) in
its consolidated financial statements and deducted as expenses the net amounts
distributed to the Texas Limited Partner. Under the previous partnership
agreement for the Texas Partnership, net cash flow (as defined in the
partnership agreement) is distributed 30% to the limited partner and 70% to the
general partner. The 70%--30% split became effective after the limited partner
received cumulative net cash flow distributions from the Texas Partnership
subsequent to its formation equal to an aggregate amount of $110 million. In
1997, the park contributed $ million of Six Flags' EBITDA, representing %
thereof.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 33rd largest theme park in the United States with
1997 attendance of 1.7 million, is located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of million people within 50 miles and
million people within 100 miles. The St. Louis market is the number 21 DMA in
the United States. Based upon in-park surveys, approximately % of the
visitors to the park in 1997 resided within a 50-mile radius of the park, and
% resided within a 100-mile radius.
The Company owns a site of approximately 499 acres used for the theme park
operations. Six Flags St. Louis competes with Paramount's Kings Island, located
near Cincinnati, Ohio, approximately 350 miles from the park; Cedar Point,
located in Sandusky, Ohio, approximately 515 miles from the park; Silver Dollar
City, located in Branson, Missouri, approximately 250 miles from the park, and
Six Flags Great America, the Company's park located near Chicago, Illinois,
approximately 320 miles from the park.
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MARKETING AND PROMOTION
The Company attracts visitors through national and local multi-media
marketing and promotional programs for each of its parks. The national programs
are designed to market and enhance the Six Flags brand name. Local programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Marketing programs are
supervised by the Company's Vice President for Marketing, with the assistance of
the Company's senior management and its national advertising agency.
The Company also develops partnership relationships with well-known national
and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing approximately 36% of aggregate
attendance in 1997 at the eleven parks owned by Premier during that season. Each
park has a group sales and pre-sold ticket manager and a well-trained sales
staff dedicated to selling multiple group sales and pre-sold ticket programs
through a variety of methods, including direct mail, telemarketing and personal
sales calls. Historically, Premier has been successful in increasing group sales
and pre-sold tickets at its existing and acquired parks.
The Company has also developed effective programs for marketing season pass
tickets. Season pass sales establish a solid attendance base in advance of the
season, thus reducing exposure to inclement weather. Additionally, season pass
holders often bring paying guests and generate "word-of-mouth" advertising for
the parks. The increased in-park spending which results from season passes is
not offset by incremental operating expenses, since such expenses are relatively
fixed during the operating season. During 1997, 20.6% of visitors to the eleven
parks then owned by the Company utilized season passes.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, since such expenses are relatively fixed
during the operating season. In 1997, approximately 77% of patrons at the eleven
parks then owned by the Company were admitted at a discount rate and, for the
year ended December 31, 1997, approximately % of the Company's revenue was
attributable to in-park spending.
The Company also implements promotional programs as a means of targeting
specific market segments and geographic locations not reached through its group
or retail sales efforts. The promotional programs utilize coupons, sweepstakes,
reward incentives and rebates to attract additional visitors. These programs are
implemented through direct mail, telemarketing, direct response media,
sponsorship marketing and targeted multi-media programs. The special promotional
offers are usually for a limited time and offer a reduced admission price or
provide some additional incentive to purchase a ticket, such as combination
tickets with a complementary location.
LICENSES
Pursuant to the License Agreement, the Company has the exclusive right for a
term through 2053 to use Warner Bros. and DC Comics characters in theme parks
throughout the United States and Canada (other than the Las Vegas metropolitan
area). In particular, the License Agreement entitles the Company to use, subject
to customary approval rights of Warner Bros., and in limited circumstances,
approval rights of certain third parties, all animated cartoon and comic book
characters that Warner Bros. and DC Comics have the right to license, including
as of the date hereof, BATMAN, SUPERMAN, BUGS BUNNY, DAFFY DUCK,
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TWEETY BIRD and YOSEMITE SAM, and will include the right to sell merchandise
using the characters. The license fee is fixed until 2005, and thereafter, the
license fee will be subject to periodic scheduled increases and will be payable
on a per-theme park basis. In addition, the Company will be required to pay a
royalty fee on merchandise sold that uses the licensed characters. Six Flags is
also a party to certain additional license agreements with Warner Bros. and Time
Warner concerning, among others, HBO BACKLOT COMMISSARY and SPORTS ILLUSTRATED
FESTIVAL. Warner Bros. has the right terminate the License Agreement if any
persons involved in the movie or television industries or party to a material
judicial proceeding pending against Time Warner obtain control of the Company.
PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States and Europe. Each of the Company's parks is operated to the extent
practicable as a separate operating division of the Company in order to maximize
local marketing opportunities and to provide flexibility in meeting local needs.
Each park is managed by a general manager who reports to one of the Company's
[three] Executive Vice Presidents (each of whom report to its Chief Operating
Officer) and is responsible for all operations and management of the individual
park. Local advertising, ticket sales, community relations and hiring and
training of personnel are the responsibility of individual park management in
coordination with corporate support teams.
Each of the Company's parks is managed by a full-time, on-site management
team under the direction of the general manager. Each such management team
includes senior personnel responsible for operations and maintenance, marketing
and promotion, human resources and merchandising. Park management compensation
structures are designed to provide incentives (including stock options and cash
bonuses) for individual park managers to execute the Company's strategy and to
maximize revenues and operating cash flow at each park. The Company's nine
general managers (before the Six Flags Acquisition) have an aggregate of
approximately 200 years experience in the industry, including approximately 80
years at parks owned or operated by Premier.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for theme events (such as
Hallowscream, Fright Fest-Registered Trademark-, Oktoberfest and Holiday in the
Park-Registered Trademark-). Due to their location, certain Six Flags Parks have
longer operation seasons. Typically, the parks charge a basic daily admission
price, which allows unlimited use of all rides and attractions, although in
certain cases special rides and attractions require the payment of an additional
fee. The Company's family entertainment centers are open year-round and do not
charge an admission price.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company purchases
both new and used rides. In addition, the Company rotates rides among its parks
to provide fresh attractions. The Company believes that the introduction of new
rides is an important factor in promoting each of the parks in order to achieve
market penetration and encourage longer visits, which lead to increased
attendance and in-park spending. In addition, the Company generally adds theming
to acquired parks and enhances the theming and landscaping of its existing parks
in order to provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to
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drive significant attendance growth at the parks and to provide an appropriate
complement of entertainment value, depending on the size of a particular market.
As an individual park begins to reach an appropriate attendance penetration for
its market, management generally plans a new ride or attraction every three to
four years in order to enhance the park's entertainment product.
MAINTENANCE AND INSPECTION
The Company's rides are inspected daily by maintenance personnel during the
operating season. These inspections include safety checks, as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of the Company and the individual parks evaluate
the risk aspects of each park's operation. Potential risks to employees and
staff as well as to the public are evaluated. Contingency plans for potential
emergency situations have been developed for each facility. During the
off-season, maintenance personnel examine the rides and repair, refurbish and
rebuild them where necessary. This process includes x-raying and magnafluxing (a
further examination for minute cracks and defects) steel portions of certain
rides at high-stress points. The Company has approximately full-time
employees who devote substantially all of their time to maintaining the parks
and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs an annual inspection of each park
and all attractions and related maintenance procedures. The result of insurance
inspections are written evaluation and inspection reports, as well as written
suggestions on various aspects of park operations. State inspectors also conduct
annual ride inspections before the beginning of each season. Other portions of
each park are also subject to inspections by local fire marshals and health and
building department officials. Furthermore, the Company uses Ellis & Associates
as water safety consultants at its parks in order to train life guards and audit
safety procedures.
EMPLOYEES
The Company employs approximately full-time employees and
approximately seasonal employees during the operating season. In this
regard, the Company competes with other local employers for qualified student
and other candidates on a season-by-season basis. As part of the seasonal
employment program, the Company employs a significant number of teenagers, which
subjects the Company to child labor laws. The Company is not subject to federal
or certain applicable state minimum wage rates in respect of its seasonal
employees. However, the recent increase in the federal or any applicable state
minimum wage rate could result over time in increased compensation expense for
the Company as it relates to these employees as a result of competitive factors.
Approximately % of the Company's full-time and approximately % of its
seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in (Six Flags Over
Georgia and Six Flags Over Texas), December 1999 (Six Flags Great Adventure),
January 2000 (Six Flags St. Louis) and (Marine World). The Company has
never experienced any work stoppages, and believes that it has a strong
relationship with its employees and unions.
INSURANCE
The Company maintains insurance of the type and in amounts that it believes
are commercially reasonable and that are available to businesses in its
industry. Premier Operations maintains multi-layered general liability policies
that provide for excess liability coverage of up to $25.0 million per
occurrence. By virtue of self-insured retention limits, Premier Operations is
required to pay the first $50,000 of loss per occurrence. Six Flags maintains
multi-layered general liability policies that provide for excess liability
coverage of up to $175.0 million per occurrence. By virtue of self-insured
retention limits ($500,000 per
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occurrence) and first dollar coverage by a captive insurance company, Six Flags
or its wholly-owned insurance company subsidiary is required to pay the first $2
million of loss per occurrence. The Company's combined cost for insurance and
for self-insured claims for 1997 was $ million compared to $
million in 1996 and $ million in 1995. The Company also maintains fire
and extended coverage, workers' compensation, business interruption and other
forms of insurance typical to businesses in its industry. The fire and extended
coverage policies insure the Company's real and personal properties (other than
land) against physical damage resulting from a variety of hazards.
LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose it
to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the number of such events resulting in liability significantly increased, or if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
On March 19, 1997, SFTP, and its wholly-owned subsidiary Six Flags Over
Georgia, Inc. (collectively, the "Six Flags Parties") commenced a declaratory
judgment action in the Superior Court of Gwinnett County, Georgia, entitled Six
Flags Over Georgia, Inc. and Six Flags Theme Parks, Inc. v. Six Flags Fund, Ltd.
and Avram Salkin, as Trustee of the Claims Trust. The Six Flags Parties sought,
among other things, a declaration and determination of the rights and
obligations of the partners of Six Flags Over Georgia, L.P., with respect to
certain disputed partnership affairs and an accounting of all partnership
affairs. On April 21, 1997, defendants Six Flags Fund, Ltd. and its affiliates
(collectively, the "SFOG Fund Parties") filed a motion to dismiss the
declaratory judgment action as well as an answer and counterclaim naming SFEC
and Time Warner Entertainment Company, L.P. as additional
counterclaim-defendants. The counterclaim seeks imposition of a constructive
trust and an accounting, compensatory damages of in excess of $250 million and
unspecified punitive damages for alleged breaches of fiduciary duty, conversion,
fraud and conspiracy allegedly committed by the counterclaim-defendants in
connection with the management of the Six Flags Over Georgia.
On June 9, 1997, the parties entered into a Consent Order in which they
agreed, among other things, to realign the parties. An Amended Complaint was
then filed by the SFOG Fund Parties as the newly-aligned plaintiffs against the
Six Flags Parties in which the same substantive claims were asserted. The Six
Flags Parties filed their answer denying liability and asserting several
affirmative defenses on July 24, 1997. The Six Flags Parties intend to
vigorously contest the allegations of the complaint.
The Sellers have agreed to indemnify the Company from any and all
liabilities arising from these proceedings.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to the
directors, executive officers and key employees of the Company or its
subsidiaries.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- --------------------------------- --------- ------------------------------------------------------------------------
<S> <C> <C>
Kieran E. Burke.................. 40 Chairman and Chief Executive Officer; Director
Gary Story....................... 42 President and Chief Operating Officer; Director
James F. Dannhauser.............. 45 Chief Financial Officer; Director
Hue W. Eichelberger.............. 39 Executive Vice President
James C. Bouy.................... 56 Vice President, General Manager, Elitch Gardens
Jeffrey A. Lococo................ 41 Vice President, General Manager, Geauga Lake
Richard A. McCurley.............. 38 Vice President, General Manager, Waterworld
Bradley Y. Paul.................. 50 Vice President, General Manager, Darien Lake
Traci E. Blanks.................. 36 Vice President of Marketing
David Thomas..................... 40 Vice President of Entertainment
Richard A. Kipf.................. 63 Vice President of Administration, Corporate Secretary
John Gannon...................... 40 Vice President of Finance
Russell Kuteman.................. 45 Vice President of Finance
Paul A. Biddelman................ 52 Director
Michael E. Gellert............... 66 Director
Jack Tyrrell..................... 51 Director
Sandy Gurtler.................... 48 Director
Charles R. Wood.................. 83 Director
</TABLE>
KIERAN E. BURKE has served as Chief Executive Officer and a Director of the
Company since October 1989 and Chairman of the Board since June 1994. From 1989
through June 1994, he was President of Premier. Mr. Burke also serves as a
director of Blue Ridge Real Estate Company and Big Boulder Corporation. Mr.
Burke was an investment banker prior to becoming President of Premier. Mr. Burke
is a member of the board of directors of the International Association of
Amusement Parks & Attractions ("IAAPA").
GARY STORY has served as President and a Director of the Company since June
1994 and as Chief Operating Officer since January 1992. From January 1992
through June 1994, he also served as Premier's Executive Vice President. Prior
to that time, he had been General Manager of Frontier City for more than five
years. From 1983 through 1984, Mr. Story served as General Manager of Luna Park,
an amusement park in Sydney, Australia, during its redevelopment as a theme park
and from 1981 through 1983 he served as General Manager of Diversiones del
Reino, an amusement park in Mexico City. From 1972 through 1981, Mr. Story
served in various capacities with Six Flags. Mr. Story is a former member of the
board of directors of IAAPA.
JAMES F. DANNHAUSER became Chief Financial Officer of the Company in
October 1995 and has served as a Director of Premier since December 1992. From
1990 through June 1996, Mr. Dannhauser was a managing director of Lepercq, de
Neuflize & Co. Incorporated, an investment banking firm ("Lepercq"). Mr.
Dannhauser is a member of the board of directors of Lepercq.
HUE W. EICHELBERGER has served as Executive Vice President since 1996;
prior thereto he served as Vice President and General Manager of Adventure World
since 1992. From 1991 through 1992, he served as Park Manager of White Water
Bay. From 1988 through 1991, he was Associate Director of Corporate Development
at Silver Dollar City, Inc. Prior thereto, Mr. Eichelberger served as General
Manager of White Water (a water park in Grand Prairie, Texas) and FantaSea (a
water park in Wichita, Kansas).
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JAMES C. BOUY served as Vice President and General Manager of Geauga Lake
since 1994 and became General Manager of Elitch Gardens following the Denver
Acquisition. Prior thereto, from 1992 through 1994, he served as Vice President
and General Manager of Kennywood Park in Pittsburgh, Pennsylvania. From 1985
through 1991, Mr. Bouy was employed by Funtime as Vice President and General
Manager of Darien Lake. Prior thereto, from 1975 through 1981, he was employed
by the Marriott Corporation, where his responsibilities included serving as
Chief Operating Officer for The Great American Theme Park in Gurnee, Illinois
and The Great American Theme Park in Santa Clara, California.
JEFFREY A. LOCOCO has served as Vice President and General Manager of
Wyandot Lake since 1989 and became the General Manager of Geauga Lake following
the Denver Acquisition. From 1982 through 1989, he served as Director of
Marketing and Sales of Geauga Lake. From 1980 through 1982, Mr. Lococo served as
Regional Sales Manager with Marriott's Great America Theme Park.
RICHARD A. MCCURLEY has served as Vice President and General Manager of
Frontier City and White Water Bay since 1994 and became General Manager of
Waterworld following the California Acquisition. He joined Premier in 1992 as
Director of Revenue for Frontier City and White Water Bay and, during that year,
transferred to become Director of Revenue for Adventure World. From 1985 through
1992, Mr. McCurley was Food Service Manager and later Food Service Director at
Knotts Berry Farms. Prior to that period, he spent six years with Worlds of Fun,
a major theme park in Kansas City, Missouri, ultimately serving as Director of
Food Services.
BRADLEY Y. PAUL has served as Vice President and General Manager of Darien
Lake since 1991. From 1984 through 1991 he served as Marketing Director of
Darien Lake.
TRACI E. BLANKS has served as Vice President of Marketing since 1995. From
1992 through 1994, she served as Vice President Marketing for Frontier City and
White Water Bay. From 1986 through 1992, she served as Director of Marketing for
Frontier City, and as such was responsible for all marketing and group sales
programs. From 1986 through 1987, she also served as Manager of Advertising and
Promotions for Frontier City.
DAVID THOMAS has served as Vice President of Entertainment since 1993. From
1987 through 1993, he was responsible for the Company's show productions
(including booking national touring acts to appear at the parks) as well as the
staging of numerous festivals including Oktoberfest and Hallowscream. Prior to
1987, he served as President of Silvertree Productions, producing over forty
stage shows, musicals, stunt spectaculars and magic illusion presentations.
RICHARD A. KIPF has served as Corporate Secretary of the Company (or its
predecessors) since 1975 and has served as Vice President of Administration
since 1994.
PAUL A. BIDDELMAN has served as a Director of the Company since December
1992. Since April 1992, Mr. Biddelman has been treasurer of Hanseatic
Corporation ("Hanseatic"), a private investment company. From January 1991
through March 1992, Mr. Biddelman was managing director of Clements Taee
Biddelman Incorporated, a financial advisory firm. Mr. Biddelman also serves as
a director of Electronic Retailing Systems International, Inc., Insituform
Technologies, Inc., Celadon Group, Inc., Petroleum Heat and Power Co., Inc. and
Star Gas Corporation (general partner of Star Gas Partners, L.P.).
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MICHAEL E. GELLERT has served as a Director of the Company since March
1989. He previously served as a Director of Premier and as a Trustee of Tierco
from 1979 until 1986. From June 1989 through June 1994, he also served as the
Chairman of the Board of Premier. Mr. Gellert is a general partner of Windcrest
Partners ("Windcrest"), a New York limited partnership. Windcrest, the principal
business of which is private investing, is an affiliate of Premier. Mr. Gellert
also serves as a director of Devon Energy Corp., Humana Inc., Seacor Holdings,
Inc., Regal Cinemas, Inc. and The Putnam Trust Company of Greenwich Advisory
Board of The Bank of New York.
JACK TYRRELL has served as a Director of Premier since December 1992. For
more than five years, Mr. Tyrrell has been a general partner of Lawrence Venture
Partners, a general partnership, the principal business of which is that of
acting as general partner of Lawrence, Tyrrell, Ortale & Smith ("LTOS"), a
private investment limited partnership. Mr. Tyrrell is also a general partner of
LTOS II Partners, a general partnership, the principal business of which is that
of acting as general partner of Lawrence, Tyrrell, Ortale & Smith II, L.P.
("LTOS II"), a private investment limited partnership. Mr. Tyrrell is also a
general partner of Richland Partners, L.P., a limited partnership, the principal
business of which is that of acting as general partner of Richland Ventures,
L.P. ("Richland"), a private investment limited partnership. In addition, Mr.
Tyrrell is a general partner of Richland Partners II, L.P., a limited
partnership, the principal business of which is that of acting as general
partner of Richland Ventures II, L.P. ("Richland II"), a private investment
limited partnership. Mr. Tyrrell also serves as a director of National Health
Investors, Inc. and Regal Cinemas, Inc.
SANDY GURTLER has served as a Director of the Company since 1997. Mr.
Gurtler is the chief executive officer, a director and a shareholder of Chilcott
Entertainment Corp., which was the general partner of the owner of Elitch
Gardens Amusement Park in Denver, Colorado prior to the acquisition of the park
by the Company in October 1996. Mr. Gurtler also serves as a consultant to the
Company.
CHARLES R. WOOD has served as a Director of the Company since 1997. Mr.
Wood is the President and sole shareholder of Storytown USA, Inc. and Fantasy
Rides Corporation, which collectively owned The Great Escape and Splashwater
Kingdom in Lake George, New York prior to the acquisition of the park by the
Company in December 1996. Mr. Wood also serves as a consultant to the Company
and owns, directly or through wholly-owned corporations, a variety of businesses
in the Lake George area, including real estate, motels, restaurants and an
action park.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of January 1, 1998
(except as noted below) as to Common Stock owned by (a) each of the Company's
current directors and named executive officers; (b) all current directors and
officers of the Company as a group; and (c) each person who, to the best of the
Company's knowledge, beneficially owned on that date more than 5% of the
outstanding Common Stock. The information presented does not reflect any
prospective purchase of Common Stock in the Common Stock Offering by the named
persons.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NUMBER OF SHARES ----------------------------------------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED COMMON STOCK OFFERING COMMON STOCK OFFERING
- ---------------------------------------------- ----------------- ------------------------- -------------------------
<S> <C> <C> <C>
Kieran E. Burke(1)............................ 314,877 1.6
Paul A. Biddelman(2).......................... 2,657,071 14.0
James F. Dannhauser(3)........................ 76,665 * *
Michael E. Gellert(4)......................... 1,368,861 7.2
Gary Story(5)................................. 143,000 * *
Jack Tyrrell(6)............................... 691,241 3.8
Sandy Gurtler................................. -- -- --
Charles R. Wood............................... 9,091(7) * *
Robert J. Gellert(8)..........................
122 East 42nd Street
New York, New York 10168 1,254,553 6.6
Windcrest Partners(9).........................
122 East 42nd Street
New York, New York 10168 1,136,025 5.9
Hanseatic Corporation(10).....................
Wolfgang Traber
450 Park Avenue
New York, New York 10152 2,657,071 14.0
All directors and officers as a group(11) (14
persons).................................... 6,302,405 32.5
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes 75,637 shares of Common Stock and warrants and options to purchase
239,238 shares of Common Stock for his own account as to which Mr. Burke has
sole voting and investment power. Does not include 258,675 shares under the
unvested portion of options and restricted shares granted.
(2) Represents shares of Common Stock beneficially owned by Hanseatic
Corporation ("Hanseatic"), of which Mr. Biddelman is treasurer. See footnote
(10) below.
(3) Includes 32,665 shares of Common Stock and options to purchase 44,000 shares
of Common Stock. Does not include 154,325 shares under the unvested portion
of options and restricted shares granted.
(4) Includes 232,836 shares of Common Stock, as to which Mr. Gellert has sole
voting and investment power. Also includes 1,136,025 shares of Common Stock
beneficially owned by Windcrest Partners ("Windcrest") which shares voting
and investment power with its general partners, Michael E. Gellert and
Robert J. Gellert. Also includes 28,717 shares of Common Stock beneficially
owned by Michael E. Gellert's daughter who resides in his household. Mr.
Gellert disclaims beneficial ownership of all shares beneficially owned by
his daughter.
(5) Includes 25,000 shares of common stock and options to purchase 118,000
shares of Common Stock. Does not include 197,000 shares under the unvested
portion of options and restricted shares granted.
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(6) Includes 9,794 shares of Common Stock for his own account; 311,940 shares of
Common Stock beneficially owned by Lawrence, Tyrrell, Ortale & Smith II,
L.P. ("LTOS II"); and 200,729 shares of Common Stock beneficially owned by
Richland Ventures, L.P. ("Richland") and 168,778 shares of Common Stock
beneficially owned by Richland Ventures II, L.P. ("Richland II"). Mr.
Tyrrell, who is a general partner of the respective general partners of LTOS
II, Richland and Richland II, disclaims beneficial ownership of all shares
held by such entities.
(7) Represents shares held by Double "H" Hole in the Woods Ranch, Inc., a
charitable organization of which Mr. Wood is Chairman of the Board.
(8) Includes 2,514 shares of Common Stock for his own account, as to which he
has sole voting and investment power; 40,351 shares of Common Stock as agent
for 26 other persons and entities with whom he shares voting and investment
power; 2,168 shares of Common Stock as trustee for Michael E. Gellert's
sister with respect to which he shares voting and investment power with
Peter J. Gellert (who holds these shares as agent); 5,558 shares of Common
Stock as trustee of irrevocable trusts for the benefit of Michael E.
Gellert's children as to which he has sole voting and investment power;
1,083 shares of Common Stock as trustee of an irrevocable trust for the
benefit of his brother as to which he has sole voting and investment power;
1,854 shares of Common Stock as trustee of a trust for the benefit of a
second cousin as to which he has sole voting and investment power; 1,136,025
shares of Common Stock owned by Windcrest Partners ("Windcrest"), which
shares voting and investment power with its general partners, Michael E.
Gellert and Robert J. Gellert; and 65,000 shares of Common Stock
beneficially owned by Lexfor Corporation of which he is President and a
director, as to which he shares voting and investment power with the other
officers and directors. Michael E. Gellert disclaims beneficial ownership of
the shares of Common Stock owned by the trusts for the benefit of his
children.
(9) Windcrest shares voting and investment power with its general partners,
Michael E. Gellert and Robert J. Gellert.
(10) Represents shares of Common Stock beneficially owned by Hanseatic. Mr.
Traber holds a majority of the shares of capital stock of Hanseatic and thus
may be deemed to beneficially own such Common Stock. Of such shares,
2,588,695 shares of Common Stock are held by Hanseatic Americas LDC, a
Bahamian limited duration company in which the sole managing member is
Hansabel Partners LLC, a Delaware limited liability company in which the
sole managing member is Hanseatic. The remaining shares of Common Stock are
held by Hanseatic for discretionary customer accounts. Information has been
derived from Amendment No. 7 to Schedule 13D, dated November 10, 1997.
(11) The share amounts listed include shares of Common Stock that the following
persons have the right to acquire within 60 days from December 1, 1997
(Kieran E. Burke, 239,238 shares (see footnote (1)); James F. Dannhauser,
44,000 shares (see footnote (3)); Gary Story, 118,000 shares (see footnote
(5)); and all directors and officers as a group, 442,839 shares.
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DESCRIPTION OF SIX FLAGS AGREEMENT
GENERAL
On February 9, 1998, the company presently named Premier Parks Inc., certain
wholly-owned subsidiaries of Premier, SFEC and each of the Sellers entered into
the Six Flags Agreement. The Six Flags Agreement provides for the Six Flags
Acquisition, pursuant to which Premier will acquire, by merger, all of the
capital stock of SFEC from the Sellers for an amount (such amount, the "Capital
Stock Consideration") equal to (i) $965 million, adjusted as described below
(the "Preliminary Base Amount"), MINUS (ii) the excess of the SFEC Option
Consideration (as defined below) over $5 million. The Capital Stock
Consideration will be payable in Seller Depositary Shares representing interests
in up to $200 million, but not less than $100 million, of the Seller Preferred
Stock, with the balance payable in cash. The net proceeds of the Offerings will
be used, in part, to fund the cash portion of the Capital Stock Consideration.
Consummation of the Six Flags Acquisition is a condition to the Offerings.
The Preliminary Base Amount will be adjusted as follows. If the actual
tangible net worth of SFEC as of the end of its 1997 fiscal year exceeds
$ (the estimated tangible net worth of SFEC as of the end of its 1997
fiscal year), the Preliminary Base Amount will be increased by an amount equal
to such excess. If, however, such actual tangible net worth is less than
$ , then the Preliminary Base Amount will be reduced accordingly.
THE MERGERS
Prior to the Six Flags Acquisition, and pursuant to the Premier Merger, the
company presently named Premier Parks Inc. will merge with a wholly-owned
subsidiary of Premier Parks Holdings Corporation in accordance with Section
251(g) of the Delaware General Corporation Law. As a result of the Premier
Merger, holders of shares of Common Stock of Premier will become, on a
share-for-share basis, holders of Common Stock of Premier Parks Holdings
Corporation, and Premier will become a wholly-owned subsidiary of Premier Parks
Holdings Corporation. On the effective date of the Premier Merger, Premier will
change its name to Premier Parks Operations Inc., and Premier Parks Holdings
Corporation will change its name to Premier Parks Inc.
In addition to the share-for-share exchange, each option or similar right
exercisable for capital stock of Premier Operations outstanding immediately
prior to the Reorganization automatically will be converted into an option or
similar right exercisable for a number of shares of the Common Stock equal to
the number of shares of capital stock of Premier for which such option or
similar right was exercisable immediately prior to the Premier Merger.
Immediately following the closing of the Offerings, SFEC and a wholly-owned
subsidiary of the Company will be merged pursuant to the Six Flags Acquisition,
with SFEC continuing as the surviving corporation and as a wholly-owned
subsidiary of the Company. Pursuant to the Six Flags Acquisition, (i) each share
of capital stock of SFEC outstanding immediately prior to the Six Flags
Acquisition, all of which are held by the Sellers, automatically will be
converted into the right to receive a pro rata share of the Capital Stock
Consideration based on the aggregate number of such shares (together with a cash
payment in lieu of any fractional shares of Seller Preferred Stock to which the
Sellers would have otherwise been entitled as part of the Capital Stock
Consideration) and (ii) each option or similar right exercisable for capital
stock of SFEC outstanding immediately prior to the Six Flags Acquisition
automatically will be cancelled in exchange for a cash payment by SFEC (all such
cash payments together, the "SFEC Option Consideration").
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<PAGE>
CONDITIONS
The Six Flags Agreement contains customary closing conditions of the
parties. In addition, the Six Flags Acquisition is subject to the condition that
the Company will raise equity capital in an amount at least equal to the
difference between $900.0 million and the value of the Seller Preferred Stock
issued to the Sellers pursuant to the Six Flags Acquisition.
INDEMNIFICATION
The Six Flags Agreement contains customary representations, warranties,
covenants and other agreements of the parties. The Sellers have agreed to
indemnify and hold harmless the Company against certain damages, claims and
liabilities (and the cost and expenses related thereto) suffered by the Company
in respect of (i) any breach of or inaccuracy in any representation or warranty
contained in the Six Flags Agreement made by any Seller individually, or by the
Sellers collectively, and (ii) any breach or violation of any covenant or
agreement made by any Seller for itself or on behalf of SFEC or its subsidiaries
contained in the Six Flags Agreement or any documents delivered at the closing
thereunder.
Generally, no party may make a claim for indemnification for breaches of
representations and warranties and of covenants and other agreements as
described in the immediately preceding paragraph after the date (the "Claims
Termination Date") which is the earlier of (i) the 45th day following the date
on which audited annual financial statements of the Registrant and its
consolidated subsidiaries for the 1998 fiscal year are first made available to
the Registrant and (ii) April 30, 1999.
The Company may not make any claims for indemnification for breaches of any
of the Sellers' representations and warranties until the aggregate amount of the
damages suffered exceeds $5 million (the "Basket Amount"), whereupon the Sellers
are obligated to pay in full all such amounts for indemnification, including the
Basket Amount. The total maximum amount that the Sellers are required to pay for
indemnification for breaches of the Sellers' representations and warranties
under the Six Flags Agreement is $25 million. Upon consummation of the Six Flags
Acquisition, the Company will deposit $25 million in cash into an escrow fund
under a General Indemnity Escrow Agreement to be entered into by the Company
with the Sellers and certain holders of options exercisable for capital stock of
SFEC. A portion of such deposit will come from the Capital Stock Consideration
payable to the Sellers, with the balance to come from the SFEC Option
Consideration payable to the optionholders party to the General Indemnity Escrow
Agreement. The escrow fund will be the sole source of payment for the Sellers'
indemnification obligations to the Company for breaches of or inaccuracies in
the Sellers' representations and warranties.
In addition, the Sellers have agreed to indemnify and hold harmless the
Company, pursuant to the Georgia Litigation Indemnity Agreement being entered
into at the closing under the Six Flags Agreement, from any damages, claims and
liabilities (and the costs and expenses related thereto) suffered in connection
with the Georgia Litigation. See "Business--Legal Proceedings."
AGREEMENTS RELATED TO THE SIX FLAGS AGREEMENT
Certain ancillary agreements will be entered into pursuant to the Six Flags
Agreement in connection with the Six Flags Acquisition. See
"Business--Licenses."
In addition to the ancillary agreements to be entered into in connection
with the Six Flags Acquisition that are described elsewhere herein, SFEC,
certain of SFEC's subsidiaries (together with SFEC, the "SFEC Parties"), Time
Warner, and the Company and a wholly-owned subsidiary of the Company (together,
the "Company Parties") will enter into the Indemnity Agreement. The purpose of
the Indemnity Agreement is to have the SFEC Parties and the Company Parties
provide support for certain payment and performance obligations of Time Warner
and SFEC Parties under the arrangements relating to the Co-Venture Partnerships,
the SFEC Zero Coupon Senior Notes and certain other obligations.
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DESCRIPTION OF OTHER INDEBTEDNESS
PREMIER CREDIT FACILITY
Borrowings under the Premier Credit Facility, which will be entered into in
March 1998, will be secured by substantially all of the assets of Premier
Operations and its domestic subsidiaries, and guaranteed by such subsidiaries.
The Premier Credit Facility will have an aggregate availability of $300 million
consisting of (i) a five-year $75.0 million revolving credit facility for
working capital and general corporate purposes (the "Revolving Credit
Facility"); (ii) a five-year $100.0 million term loan facility ("Facility B");
and (iii) an eight-year $125.0 million term loan facility ("Facility C" and,
together with Facility B, the "Term Loan Facilities"), in each case, to fund
acquisitions and make capital improvements. As of March , 1998, the
Company had borrowed $ million under Facility . Interest rates per
annum under the Premier Credit Facility are equal to either (a) a base rate
equal to the higher of the Federal Funds Rate plus 1/2% or the prime rate of
Citibank, N.A., in each case, plus the Applicable Margin or (b) the London
Interbank Offered Rate plus the Applicable Margin. The Revolving Credit Facility
will terminate on March , 2003. Borrowings under Facility B will mature on
March , 2003 and borrowings under Facility C will mature on March , 2006;
however, aggregate principal payments and reductions of $10.0 million, $25.0
million, $30.0 million and $35.0 million will be required during the second,
third, fourth and fifth years of Facility B and aggregate principal payments of
$1.0 million each are required in each of the first six years of Facility C in
addition to a $25.0 million payment in year seven and a $94.0 million payment in
year eight.
The Premier Credit Facility will contain restrictive covenants that, among
other things, limit the ability of Premier Operations and its subsidiaries to
dispose of assets; incur additional indebtedness or liens; pay dividends;
repurchase stock; make investments; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates. In addition,
the Premier Credit Facility will require that Premier Operations comply with
certain specified financial ratios and tests, including ratios of total debt to
EBITDA, interest expense to EBITDA, debt service to EBITDA and fixed charges to
EBITDA.
Defaults under the Premier Credit Facility will include (i) failure to repay
principal when due; (ii) failure to pay interest within three days after due;
(iii) default in the performance of certain obligations of Premier Operations'
principal subsidiaries under the Revolving Credit Security Agreement or any
Equipment Security Agreement (as defined thereunder); (iv) failure to comply
with certain covenants, conditions or agreements under the credit agreement
which, in certain cases, continues for 30 days; (v) default by Premier
Operations or any of its principal subsidiaries in respect of any indebtedness
above specified levels; (vi) certain events of bankruptcy; (vii) certain
judgments against Premier Operations or any of its principal subsidiaries;
(viii) the occurrence of a Change in Control (as defined thereunder); (ix) the
assertion of certain Environmental Claims (as defined thereunder); and (x) under
certain circumstances, the failure by Messrs. Burke and Story to serve Premier
Operations in their present positions and the failure to replace them within a
specified time period.
SIX FLAGS CREDIT FACILITY
Borrowings under the Six Flags Credit Facility, which will be entered into
on or prior to the closing of the Six Flags Acquisition, will be secured by
substantially all of the assets of SFTP and its subsidiaries, and guaranteed by
such subsidiaries. The Six Flags Credit Facility will have an aggregate
availability of $472 million consisting of (i) up to $100.0 million under a
Revolving Credit Facility to be used to refinance existing outstanding Six Flags
bank indebtedness and for working capital and other general corporate purposes;
and (ii) up to $372.0 million under Facility B to be used to refinance existing
outstanding Six Flags bank indebtedness and fund acquisitions and make capital
improvements. The Company anticipates that Facility B will be fully funded in
connection with the Six Flags Acquisition. Interest rates per annum under the
Six Flags Credit Facility are equal to either (a) a base rate equal to the
higher of the Federal Funds Rate plus 1/2% or the prime rate of Citibank, N.A.,
in each case, plus the Applicable Margin (as
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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; aggregate principal payments of $25.0 million and $40.0
million are required in years five and six and $303.0 million in aggregate
principal payments are required at maturity.
The Six Flags Credit Facility will contain restrictive covenants that, among
other things, limit the ability of SFTP and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends; repurchase stock;
make investments; engage in mergers or consolidations; and engage in certain
transactions with subsidiaries and affiliates. In addition, the Six Flags Credit
Facility will require SFTP to comply with certain specified financial ratios and
tests, including ratios of total debt to EBITDA, interest expense to EBITDA,
debt service to EBITDA and fixed charges to EBITDA.
Defaults under the Six Flags Credit Facility will include (i) failure to
repay principal when due; (ii) failure to pay interest within three days after
due; (iii) default in the performance of certain obligations of SFTP's principal
subsidiaries under the Revolving Credit Security Agreement or any Equipment
Security Agreement (as defined thereunder); (iv) failure to comply with certain
covenants, conditions or agreements under the credit agreement which, in certain
cases, continues for 30 days; (v) default by SFTP or any of its principal
subsidiaries in respect of any indebtedness above specified levels; (vi) certain
events of bankruptcy (vii) certain judgments against SFTP or any of its
principal subsidiaries; (viii) the occurrence of a Change in Control (as defined
thereunder); (ix) the assertion of certain Environmental Claims (as defined
thereunder); and (x) under certain circumstances, the failure by Messrs. Burke
and Story to serve as Chief Executive Officer and Chief Operating Officer of
SFTP and the failure to replace them within a specified time period.
PREMIER NOTES
The Premier Notes are senior, unsecured obligations of Premier Operations,
in the aggregate principal amount of $215 million, of which $90.0 million will
mature on August 15, 2003 (the 1995 Premier Notes) and $125.0 million will
mature on January 15, 2007 (the 1997 Premier Notes). The 1995 Premier Notes bear
interest at the rate of 12% per annum and the 1997 Premier Notes bear interest
at the rate of 9 3/4% per annum. The Premier Notes are guaranteed on a senior,
unsecured basis by the principal operating subsidiaries of Premier Operations.
The 1995 Premier Notes are redeemable, at Premier Operations' option, in
whole or in part, at any time on or after August 15, 1999, at specified
redemption prices, together with accrued and unpaid interest, if any, to the
date of redemption. The 1997 Premier Notes are redeemable, at Premier
Operations' option, in whole or in part, at any time on or after January 15,
2002, at specified redemption prices, together with accrued and unpaid interest,
if any, to the date of redemption.
Upon the occurrence of a Change of Control (as defined in the relevant
Indenture), Premier Operations will be required to make an offer to repurchase
the Premier Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
Neither the Premier Merger nor the Six Flags Acquisition constitutes a Change of
Control under the Indentures relating to the Premier Notes.
The Indentures relating to the Premier Notes contain restrictive covenants
that, among other things, limit the ability of Premier Operations to dispose of
assets; incur additional indebtedness or liens; pay dividends; engage in mergers
or consolidations; and engage in certain transactions with subsidiaries and
affiliates. Defaults under these Indentures include (i) failure to pay interest
on the applicable Premier Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with Premier Operations' repurchase
obligations upon the occurrence of a
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Change of Control and failure to comply for 60 days after notice with the other
covenants contained in the applicable Indenture; (iv) the default by Premier
Operations or any of its principal subsidiaries (the "Note Guarantors") in
respect of any indebtedness above specified levels; (v) certain events of
bankruptcy; (vi) certain judgments against Premier Operations or any Note
Guarantor; (vii) any Note Guarantee (as defined in the Indentures) ceasing to be
in full force and effect (except as contemplated by the terms thereof); and
(viii) the denial or disaffirmation by any Note Guarantor of its obligations
under the applicable Indentures or any Note Guarantee, which continues for 10
days.
SFTP SENIOR SUBORDINATED NOTES
The SFTP Senior Subordinated Notes are unsecured senior subordinated
obligations of SFTP, in an aggregate principal amount of $285.0 million and will
mature on June 15, 2005. The SFTP Senior Subordinated Notes accrete in value
until June 15, 1998, at which time the accreted value will equal 100% of their
principal amount. The SFTP Senior Subordinated Notes bear interest at the rate
of 12 1/4% per annum, payable semiannually on June 15 and December 15 of each
year, commencing December 15, 1998.
The SFTP Senior Subordinated Notes are redeemable, at SFTP's option, in
whole or in part, at any time on or after June 15, 2000 at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption. Upon the occurrence of a Change of Control (as defined in the
applicable Indenture), SFTP is required to make an offer to repurchase the SFTP
Senior Subordinated Notes at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
repurchase. The Six Flags Transactions constitute a Change of Control under the
Indenture relating to the SFTP Senior Subordinated Notes, and the Company will
be required to make an offer to purchase the SFTP Senior Subordinated Notes
within 30 days of the closing of the Six Flags Transactions. The Company does
not expect that it will be required to purchase any material amount of such
Notes pursuant to such offer. See "Risk Factors--Risks Associated with
Substantial Indebtedness."
The Indenture pursuant to which the SFTP Senior Subordinated Notes were
issued contains restrictive covenants that, among other things, limit the
ability of SFTP and its subsidiaries to dispose of assets; incur additional
indebtedness or liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with subsidiaries and affiliates.
Defaults under this Indenture include (i) failure to pay interest on the
SFTP Senior Subordinated Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with SFTP's repurchase obligations
upon the occurrence of a Change of Control and failure to comply for 60 days
after notice with the other covenants contained in the Indenture; (iv) the
default by SFTP or any Significant Subsidiary (as defined in the applicable
Indenture) in respect of any indebtedness above specified levels; (v) certain
events of bankruptcy; (vi) certain judgments against SFTP or any Significant
Subsidiary; (vii) any Note Guarantee (as defined in the applicable Indenture)
ceasing to be in full force and effect (except as contemplated by the terms
thereof); and (viii) the denial or disaffirmation by any Note Guarantor of its
obligations under the applicable Indenture or any Note Guarantee, which
continues for 10 days.
SFEC ZERO COUPON SENIOR NOTES
The SFEC Zero Coupon Senior Notes are senior unsecured obligations of SFEC,
in an aggregate principal amount of $192.25 million and will mature on December
15, 1999. The SFEC Zero Coupon Senior Notes accrete in value until December 15,
1999, at which time the accreted value will equal 100% of their principal
amount. There are no periodic payments on the SFEC Zero Coupon Senior Notes. One
of the Sellers has effectively guaranteed the SFEC Zero Coupon Senior Notes, and
the Company has indemnified that Seller in respect of its guarantee. The Company
will use the proceeds of the New SFEC Notes Offering, together with other funds,
to provide for the payment, at or prior to maturity of the SFEC
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Zero Coupon Senior Notes. Until so used, such proceeds (or U.S. government
obligations purchased from such proceeds) will be deposited in escrow.
The SFEC Zero Coupon Senior Notes may not be redeemed prior to maturity.
From and after the consummation of the Six Flags Transaction, the
restrictive covenants contained in the indenture pursuant to which the SFEC Zero
Coupon Senior Notes were issued will generally not be applicable to SFEC or its
subsidiaries.
Defaults under this indenture include (i) the failure by SFEC or Time Warner
to comply for 30 days after written notice with any covenant in the applicable
Indenture; (ii) failure to pay, when due, upon final maturity or upon
acceleration, the principal amount of any indebtedness of SFEC or any of its
subsidiaries in excess of $5.0 million, or any indebtedness of Time Warner or
any of its Material Subsidiaries (as defined in the applicable indenture) in
excess of $50 million, if such indebtedness is not discharged within 60 days
after written notice; (iii) certain events of bankruptcy of SFEC or Seller; and
(iv) failure to pay the principal amount of any SFEC Zero Coupon Senior Note at
its maturity date. Accordingly, after the Six Flags Acquisition, such a default
by Time Warner could result in the acceleration of the maturity of the SFEC Zero
Coupon Senior Notes.
NEW SFEC NOTES
The New SFEC Notes are senior, unsecured obligations of SFEC, in the
aggregate principal amount of $170.0 million. The New SFEC Notes will mature on
. The New SFEC Notes bear interest at the rate of % per annum
and are not guaranteed by SFEC's subsidiaries.
The New SFEC Notes are redeemable, at SFEC's option, in whole or in part, at
any time on or after , at specified redemption prices, together
with accrued and unpaid interest, if any, to the date of redemption.
Upon the occurrence of a Change of Control (as defined in the applicable
Indenture), SFEC will be required to make an offer to repurchase the New SFEC
Notes at a price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase. Neither the
Premier Merger nor the Six Flags Acquisition constitutes a Change of Control
under the Indenture relating to the New SFEC Notes.
The Indenture relating to the New SFEC Notes contains restrictive covenants
that, among other things, limit the ability of SFEC to dispose of assets; incur
additional indebtedness or liens; pay dividends; engage in mergers or
consolidations; and engage in certain transactions with subsidiaries and
affiliates. Defaults under the applicable Indenture include (i) failure to pay
interest on the New SFEC Notes within 30 days after such payments are due; (ii)
failure to pay principal or premium, if any on the New SFEC Notes; (iii) failure
to comply for 30 days after notice with SFEC's repurchase obligations upon the
occurrence of a Change of Control, an Asset Sale (as defined in the applicable
Indenture) or certain covenants and failure to comply for 30 days after notice
with the other agreements contained in the applicable Indenture; (iv) the
default by SFEC or any of its subsidiaries, in respect of any indebtedness above
specified levels; (v) certain events of bankruptcy or insolvency; and (vi)
certain judgements against SFEC or any of its subsidiaries above specified
levels.
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DESCRIPTION OF NOTES
GENERAL
The Senior Notes will be issued pursuant to an Indenture (the "Senior Note
Indenture") between the Company and , as trustee (the "Senior Note
Trustee"). The Senior Discount Notes will be issued by the Company pursuant to
an Indenture (the "Senior Discount Note Indenture" and, together with the Senior
Note Indenture, the "Indentures") between the Company and as trustee (the
"Senior Discount Note Trustee" and, together with the Senior Note Trustee, the
"Trustees") The terms of the Senior Notes and the Senior Discount Notes
(collectively, the "Company Notes") include those stated in the Indentures and
those made part of the Indentures by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Company Notes are subject to
all such terms and Holders of Company Notes are referred to the Indentures and
the Trust Indenture Act for a statement thereof. The following summary of the
material provisions of the Indentures and the proposed Pledge and Escrow
Agreement with respect to the Senior Notes does not purport to be complete and
is qualified in its entirety by reference to the Indentures and the Pledge and
Escrow Agreement, including the definitions therein of certain terms used below.
The proposed forms of the Indentures and the Pledge and Escrow Agreement have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part and copies of the proposed forms of the Indentures and the Pledge and
Escrow Agreement are available as set forth below under "--Additional
Information." The definitions of certain terms used in the following summary are
set forth below under "--Certain Definitions." For purposes of this summary, (i)
the term "Company" refers only to Premier Parks Inc. and not to any of its
Subsidiaries, (ii) the term "Senior Notes" refers to the Company's % Senior
Notes due 2008 offered hereby, (iii) the term "Senior Discount Notes" refers to
the Company's % Senior Discount Notes due 2008 offered hereby and (iv) the
term "Indentures" refers to the Senior Discount Note Indenture and the Senior
Note Indenture.
The Company Notes will be general unsecured obligations of the Company and
will rank PARI PASSU in right of payment with all future unsecured senior
indebtedness of the Company. However, the operations of the Company are
conducted through its Subsidiaries and, therefore, the Company is dependent upon
the cash flow of its Subsidiaries to meet its obligations, including its
obligations under the Company Notes. The Company's Subsidiaries will not be
guarantors of the Company Notes. As a result, the Company Notes will be
effectively subordinated to all Indebtedness and other liabilities and
commitments (including trade payables) of the Company's Subsidiaries. Any right
of the Company to receive assets of any of its Subsidiaries upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Company Notes to participate in those assets) will be effectively subordinated
to the claims of that Subsidiary's creditors, except to the extent that the
Company is itself recognized as a creditor of such Subsidiary, in which case the
claims of the Company would still be subordinate to any security in the assets
of such Subsidiary and any indebtedness of such Subsidiary senior to that held
by the Company. On a pro forma basis, as of December 31, 1997, the Company's
Subsidiaries would have had approximately $ million of Indebtedness and
$ million of trade payables and other liabilities outstanding. See "Risk
Factors--Holding Company Structure; Limitations on Access to Cash Flow of
Subsidiaries."
As of the date of the Indentures, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indentures.
ESCROW OF PROCEEDS
Certain of the Company's obligations under the Senior Notes will be secured
pending disbursement pursuant to the Pledge and Escrow Agreement by a pledge of
the Escrow Account. Approximately $ million will remain in the Escrow
Account and be used to purchase a portfolio of Government
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Securities that will be pledged as security for payment of interest on the
Senior Notes through , 2001.
The Pledge and Escrow Agreement will provide for the grant by the Company to
the Senior Note Trustee of a security interest in the Escrow Account for the
benefit of the Holders of the Senior Notes. All such security interests will
secure the payment and performance when due of the Obligations of the Company
under the Senior Note Indenture with respect to the Senior Notes and under such
Senior Notes, as provided in the Pledge and Escrow Agreement. The ability of
holders to realize upon such funds or securities may be subject to certain
bankruptcy law limitations in the event of a bankruptcy of the Company.
The Escrow Account will initially contain an amount of Government Securities
that will be sufficient upon receipt of scheduled interest and principal
payments of such securities, in the opinion of a nationally recognized firm of
independent public accountants, to pay the first six scheduled interest payments
on the Senior Notes. Funds will be disbursed from the Escrow Account only to pay
interest on the Senior Notes and upon certain repurchases or redemptions of the
Senior Notes, to pay principal of and premium, if any, thereon, or if so paid
with other proceeds, such funds may be released to the Company. Pending such
disbursements, all funds contained in the Escrow Account will be invested in
Government Securities. Upon the acceleration of the maturity of the Senior Notes
or the failure to pay principal at maturity or upon certain redemptions and
repurchases of the Senior Notes, the Pledge and Escrow Agreement will provide
for the foreclosure by the Senior Note Trustee upon the net proceeds of the
Escrow Account. Under the terms of the Senior Note Indenture, the proceeds of
the Escrow Account shall be applied, first, to amounts owing to the Senior Note
Trustee in respect of fees and expenses of the Senior Note Trustee and second,
to the Obligations under the Senior Notes and the Senior Note Indenture. The
failure by the Company to pay interest on the Senior Notes within two days of an
interest payment date through , 2001 will constitute an immediate Event of
Default.
In the event of the Company's bankruptcy, the Company, as debtor in
possession under Chapter 11 of the Bankruptcy Code, would be entitled to
petition the United States Bankruptcy Court having jurisdiction over its case
for permission, under Section 363 of the Bankruptcy Code, to use the proceeds of
the Escrow Account to fund its operations during the pendency of the
reorganization proceedings. Permission for such use is likely to be granted so
long as the interests of the Senior Note Trustee, for the benefit of the Holders
of Senior Notes and itself as Senior Note Trustee, and the Senior Discount Note
Trustee, for the benefit of the Holders of Senior Discount Notes and itself as
Senior Discount Note Trustee, as applicable, are "adequately protected." A
secured creditor's interest in cash collateral to be used by a debtor in
possession may be "adequately protected" by, among other means, the granting of
liens on substitute collateral which may be substantially less liquid than
Government Securities.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE SENIOR NOTES
The Senior Notes will be limited in aggregate principal amount to $280.0
million and will mature on , 2008. Interest on the Senior Notes will
accrue at the rate of % per annum and will be payable semi-annually in
arrears on and of each year, to Holders of record on the immediately
preceding and . Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
and interest on the Senior Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest may be made by check mailed to
the Holders of the Senior Notes at their respective addresses set forth in the
register of Holders of Senior Notes; PROVIDED that all payments of principal,
premium and interest with respect to Senior Notes the Holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York
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will be the office of the Trustee maintained for such purpose. The Senior Notes
will be issued in denominations of $1,000 and integral multiples thereof.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE SENIOR DISCOUNT NOTES
The Senior Discount Notes will be limited in aggregate principal amount to
$ million and will mature on , 2008. The Senior Discount Notes
will be issued at a substantial discount from their principal amount at
maturity, to generate gross proceeds of $250.0 million. Until , 2003, no
interest will accrue on the Senior Discount Notes, but the Accreted Value will
increase (representing amortization of original issue discount) between the date
of original issuance and , 2003, on a semi-annual basis using a 360-day
year comprised of twelve 30-day months, such that the Accreted Value shall be
equal to the full principal amount at maturity of the Senior Discount Notes on
, 2003 (the "Full Accretion Date"). Beginning on the Full Accretion Date,
interest on the Senior Discount Notes will accrue at the rate of % per annum
and will be payable semi-annually in arrears on and of each year, to
Holders of record on the immediately preceding and . Interest on the
Senior Discount Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the Full Accretion Date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal, premium, if any, and interest on the Senior Discount
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest may be made by check mailed to the Holders of the Senior
Discount Notes at their respective addresses set forth in the register of
Holders of Senior Discount Notes; PROVIDED that all payments of principal,
premium and interest with respect to Senior Discount Notes the Holders of which
have given wire transfer instructions to the Company will be required to be made
by wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Senior Discount Notes will be issued in denominations of $1,000 and
integral multiples thereof.
OPTIONAL REDEMPTION
SENIOR NOTES
The Senior Notes will not be redeemable at the Company's option prior to
, 2003. Thereafter, the Senior Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
2003.................................................................................................. %
2004..................................................................................................
2005..................................................................................................
2006 and thereafter................................................................................... 100.00%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
original issuance of the Senior Notes, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount at maturity of
Senior Notes originally issued under the Senior Note Indenture at a redemption
price of % of the principal amount thereof on the redemption date with the
net cash proceeds of one or more Public Equity Offerings; PROVIDED that at least
65% of the aggregate principal amount of Senior Notes originally issued remains
outstanding immediately after the occurrence of each such redemption (excluding
Senior Notes held by the Company and its Subsidiaries); and PROVIDED, further,
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that any such redemption shall occur within 45 days of the date of the closing
of each such Public Equity Offering.
SENIOR DISCOUNT NOTES
The Senior Discount Notes will not be redeemable at the Company's option
prior to , 2003. Thereafter, the Senior Discount Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
2003.................................................................................................. %
2004..................................................................................................
2005..................................................................................................
2006 and thereafter................................................................................... 100.00%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
original issuance of the Senior Discount Notes, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount at maturity of
Senior Discount Notes originally issued under the Senior Discount Note Indenture
at a redemption price of % of the Accreted Value thereof on the redemption
date with the net cash proceeds of one or more Public Equity Offerings; PROVIDED
that at least 65% of the aggregate principal amount at maturity of Senior
Discount Notes originally issued remains outstanding immediately after the
occurrence of each such redemption (excluding Senior Discount Notes held by the
Company and its Subsidiaries); and PROVIDED, FURTHER, that any such redemption
shall occur within 45 days of the date of the closing of each such Public Equity
Offering.
SELECTION AND NOTICE
If less than all of the Senior Notes and/or Senior Discount Notes, as the
case may be, are to be redeemed at any time, selection of such Company Notes for
redemption will be made by the applicable Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Company Notes are listed, or, if the Company Notes are not so listed, on a pro
rata basis, by lot or by such method as the applicable Trustee shall deem fair
and appropriate; provided that, subject to the limitations described above, the
Company may, at its option, elect to redeem either Senior Notes, Senior Discount
Notes, or both Senior Notes and Senior Discount Notes; and PROVIDED FURTHER that
no Company Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Company Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Company Notes called for redemption become
due on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Company Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under the caption "--Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Company Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be obligated to
make an offer (the "Change of Control Offer") to each Holder of Company Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Company Notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon, if
any, to the date of purchase (or, in the case of repurchases of Senior Discount
Notes prior to , 2003, at a purchase price equal to 101% of the Accreted
Value thereof as of the date of repurchase). Within ten days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Company Notes pursuant to the procedures required by the
applicable Company Indenture and described in such notice. The Company will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Company Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Company Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Company
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Company Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount at maturity of Company Notes
or portions thereof being purchased by the Company. The Paying Agent will
promptly mail to each Holder of Company Notes so tendered the Change of Control
Payment for such Company Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Note equal
in principal amount to any unpurchased portion of the Company Notes surrendered,
if any; PROVIDED that each such new Note will be in a principal amount of $1,000
or an integral multiple thereof. The Company will publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Indentures will provide that the Company will fix the Change of Control
Payment Date no earlier than 30 days and no later than 60 days after the Change
of Control Offer is mailed as set forth above. Prior to complying with the
provisions of the preceding sentence, but in any event within 90 days following
a Change of Control, the Company will either repay all outstanding Indebtedness
of its Subsidiaries or obtain the requisite consents, if any, under all
agreements governing all such outstanding Indebtedness of its Subsidiaries to
permit the repurchase of Company Notes required by this covenant. Under the
terms of the indentures governing the Premier Notes, the SFTP Senior
Subordinated Notes and the New SFEC Notes, the Premier Credit Facility and the
Six Flags Credit Facility, the payment of dividends by Premier Operations, SFEC
and SFTP are subject to certain specified financial tests which will
significantly restrict their ability to pay dividends or make other
distributions. If the Company does not obtain the consent of the lenders under
agreements governing outstanding Indebtedness of its Subsidiaries, including
under the Credit Facilities and the indentures governing the Premier Notes, the
SFTP Senior Subordinated Notes and the New SFEC Notes, to permit the repurchase
of Company Notes or does not refinance such Indebtedness, the Company will
likely not have the financial resources to purchase Company Notes and the
Company's Subsidiaries will be restricted by the terms of such Indebtedness from
paying dividends to the Company or otherwise lending funds to the Company for
the purpose of such purchase. In any event, there can be no assurance that the
Company's Subsidiaries will have the resources available to pay any such
dividend or make any such distribution. The Company's failure to make a Change
of Control Offer when required or to purchase tendered Company Notes when
tendered would constitute an Event of Default under the Indentures. See "Risk
Factors--Holding Company Structure; Limitations on Access to Cash Flow of
Subsidiaries" and "--Risks Associated with a Change of Control."
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The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indentures are applicable. Except as
described above with respect to a Change of Control, the Indentures does not
contain provisions that permit the Holders of the Company Notes to require that
the Company repurchase or redeem the Company Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indentures applicable to a Change of Control Offer made by the Company
and purchases all Company Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Company Notes to require the
Company to repurchase such Company Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustees) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; PROVIDED that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Company Notes or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or such Restricted Subsidiary from
such transferee that are contemporaneously (subject to ordinary settlement
periods) converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net Proceeds
(a) to repay Indebtedness of a Restricted Subsidiary of the Company or (b) to
the acquisition of all or substantially all of the assets of, or a majority of
the Voting Stock of, another Permitted Business, (c) to the making of a capital
expenditure or (d) to the acquisition of other long-term assets that are used or
useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company or such Restricted Subsidiary may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indentures. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $ million, the Company will be required to make an
offer to all Holders of Company Notes and all holders of other PARI PASSU
Indebtedness containing provisions similar to those set forth in the Indentures
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of
Company Notes and such other PARI PASSU Indebtedness that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon, if any,
to
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the date of purchase (or, in the case of repurchases of Senior Discount Notes
prior to the Full Accretion Date, at a purchase price equal to 100% of the
Accreted Value thereof as of the date of repurchase), in accordance with the
procedures set forth in the Indentures and such other Indebtedness. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indentures. If the aggregate principal amount at maturity or
Accreted Value (as applicable) of Company Notes and such other Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Company Notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Company Notes pursuant to an Asset Sale Offer.
Under the terms of the indentures governing the Premier Notes, the SFTP
Senior Subordinated Notes and the New SFEC Notes, the Premier Credit Facility
and the Six Flags Credit Facility, the payment of dividends by Premier
Operations, SFEC and SFTP are subject to certain specified financial tests which
will significantly restrict their ability to pay dividends or make other
distributions. If the Company does not obtain the consent of the lenders under
agreements governing outstanding Indebtedness of its Subsidiaries, including
under the Credit Facilities and the indentures governing the Premier Notes, the
SFTP Senior Subordinated Notes and the New SFEC Notes, to permit the repurchase
of Company Notes or does not refinance such Indebtedness, the Company will
likely not have the financial resources to purchase Company Notes and the
Company's Subsidiaries will be restricted by the terms of such Indebtedness from
paying dividends to the Company or otherwise lending funds to the Company for
the purpose of such purchase. In any event, there can be no assurance that the
Company's Subsidiaries will have the resources available to pay any such
dividend or make any such distribution. The Company's failure to make an Asset
Sale Offer when required or to purchase tendered Company Notes when tendered
would constitute an Event of Default under the Indentures. See "Risk
Factors--Risks Associated with Substantial Indebtedness" and "--Holding Company
Structure; Limitations on Access to Cash Flow of Subsidiaries."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of any
Equity Interests of the Company (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of any Equity Interests of the Company in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company that is
subordinated to the Company Notes, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-
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quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt to Cash Flow test set forth in the first
paragraph of the covenant described below under caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of the Indentures
(excluding Restricted Payments permitted by clauses (ii), (iii) and (v) of
the next succeeding paragraph) shall not exceed, at the date of
determination, the sum, without duplication, of (i) an amount equal to the
Company's Consolidated Cash Flow for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after the
date of the Indentures to the end of the Company's most recently ended full
fiscal quarter for which internal financial statements are available (the
"Basket Period") LESS the product of times the Company's Consolidated
Interest Expense for the Basket Period, PLUS (ii) 100% of the aggregate net
cash proceeds received by the Company after the date of the Indentures as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale after the date of the Indentures of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Subsidiary of the Company and other than in, or
with the proceeds of, the Offerings), plus (iii) to the extent that any
Restricted Investment that was made after the date of the Indentures is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the Indentures,
the fair market value of the Issuer's Investment in such Subsidiary as of
the date of such redesignation.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indentures;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness or Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of, Equity Interests of the Company (other
than Disqualified Stock); PROVIDED that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(iv) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), the purchase, redemption, retirement or
other acquisition by the Company or any Restricted Subsidiary of the Company of
limited partnership interests held by the limited partners in the Co-Venture
Partnerships, or their successors, in accordance with and in the manner required
by the terms of the Partnership Park Agreements as the same are in effect on the
date of the Indentures;
(v) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), the payment of dividends on the Seller
Preferred Stock and the Mandatorily Convertible Preferred Stock in accordance
with the terms thereof as in effect on the date of the Indentures; and
(vi) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company from employees, former employees,
directors or former directors of the Company or any of its Restricted
Subsidiaries (or permitted transferees of such employees, former employees,
directors or
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former directors); PROVIDED, HOWEVER, that the aggregate amount of such
repurchases shall not exceed $ million in any twelve-month period.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; PROVIDED
that in no event shall the business currently operated by Premier Operations or
SFTP be transferred to or held by an Unrestricted Subsidiary. For purposes of
making such determination, all outstanding Investments held by the Company and
its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the fair market
value of such Investments at the time of such designation. Such designation will
only be permitted if such Restricted Payment would be permitted at such time and
if such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the Trustee,
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $ million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indentures.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indentures will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; PROVIDED, HOWEVER, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
the Company's Subsidiaries may incur Indebtedness or issue shares of preferred
stock if the Company's Debt to Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or such preferred stock,
as the case may be, after giving pro forma effect to such incurrence or issuance
as of such date and to the use of the proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period of the Company for which internal financial statements are available,
would have been no greater than (a) to 1, if such incurrence or issuance is
on or prior to , and (b) to 1, if such incurrence or issuance is
after .
The Indentures will also provide that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Company Notes on substantially identical
terms; PROVIDED, HOWEVER, that no Indebtedness of the Company shall be deemed to
be contractually subordinated in right of payment to any other Indebtedness of
the Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
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(i) the incurrence by the Company and its Restricted Subsidiaries of term
Indebtedness under Credit Facilities; PROVIDED that the aggregate principal
amount of all Indebtedness outstanding under all Credit Facilities after giving
effect to such incurrence does not exceed an amount equal to $ million LESS
the aggregate amount of all repayments, optional or mandatory, of the principal
of any term Indebtedness under a Credit Facility (other than repayments that are
immediately reborrowed) that have been made since the date of the Indentures;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
revolving credit Indebtedness and letters of credit pursuant to Credit
Facilities; PROVIDED that the aggregate principal amount of all revolving credit
Indebtedness (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) outstanding under all Credit Facilities of the Company
and its Restricted Subsidiaries after giving effect to such incurrence does not
exceed $ million less the aggregate amount of all commitment reductions with
respect to revolving credit borrowings that have been made since the date of the
Indentures as a result of the application of Net Proceeds of Asset Sales
pursuant to the covenant described above under the caption "-- Repurchase at the
Option of Holders Asset Sales" and, PROVIDED FURTHER, that the aggregate
principal amount of all Indebtedness incurred pursuant to this clause (ii) is
reduced to an outstanding balance of $ million or less for at least 30
consecutive days in each fiscal year;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Company Notes;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount not to exceed
$ million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness and Indebtedness incurred pursuant to clauses (i) and (ii) above)
that was permitted by the Indentures to be incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the Company Notes and (ii)(A)
any subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Restricted Subsidiary thereof
shall be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of (a) Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Indentures to be incurred and (b) Currency
Agreements that do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder;
(ix) Indebtedness in respect of performance bonds, letters of credits,
surety or appeal bonds, prior to any drawing thereunder, for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business;
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(x) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant (including,
without limiting the generality of the forgoing, the guarantee by any Restricted
Subsidiary of the Company of Existing Indebtedness);
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xi); and
(xii) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (xii), not to exceed $ million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
preferred stock in the form of additional shares of the same class of preferred
stock will not be deemed to be an incurrence of Indebtedness or an issuance of
preferred stock for purposes of this covenant; PROVIDED, in each such case, that
the amount thereof is included in Consolidated Indebtedness of the Company as
accrued.
SALE AND LEASEBACK TRANSACTIONS
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company or a Restricted Subsidiary of the Company
may enter into a sale and leaseback transaction if (i) the Company could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Debt to Cash Flow test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Additional Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described below under the caption "--Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
or such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Asset Sales."
LIENS
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing trade payables, Attributable Debt or
Indebtedness on any asset now owned or hereafter acquired, except Permitted
Liens.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indentures, (b) the Partnership Parks Agreements as
such are in effect as of the date of the Indentures, (c) the terms of any
Indebtedness permitted by the Indentures to be incurred by any Restricted
Subsidiary of the Company, (d) the Indentures and the Company Notes, (e)
applicable law, (f) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indentures to be incurred, (g)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (h) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (i) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (j)
secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the covenant described above under the caption "--Liens" that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business and (l) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indentures will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Company Notes, the Indentures and the Pledge and Escrow
Agreement pursuant to supplemental indentures in forms reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Restricted Subsidiary of the Company, the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, both at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt to Cash Flow
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test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indentures will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $ million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $ million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, or any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment or
indemnification arrangements, stock options and stock ownership plans approved
by the Board of Directors, or the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors, (ii) transactions between or among the Company and/or its
Restricted Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise employees of the Company or its Restricted Subsidiaries,
(iv) loans or advances to employees in the ordinary course of business, (v)
Restricted Payments that are permitted by the provisions of the Indentures
described above under the caption "--Restricted Payments" and (vi) transactions
pursuant to, and in accordance with, the terms of the Subordinate Indemnity
Agreement as the same is in effect as of the date of the Indentures.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indentures will provide that the Company (i) will not, and will not
permit any Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary
of the Company to any Person (other than the Company or a Restricted Subsidiary
of the Company), unless (a)(i) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Restricted Subsidiary or (ii)
after giving effect thereto, such Restricted Subsidiary will still constitute a
Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales," and (ii) will not permit any Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Restricted Subsidiary of the Company.
BUSINESS ACTIVITIES
The Indentures will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
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PAYMENTS FOR CONSENT
The Indentures will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Company Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indentures or the Company Notes unless
such consideration is offered to be paid or is paid to all Holders of the
Company Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
REPORTS
The Indentures will provide that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Company Notes are outstanding, the Company will furnish to the
Holders of Company Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries (showing in reasonable detail,
either on the face of the financial statements or in the footnotes thereto and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of the Company and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Company) and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indentures will provide that each of the following constitutes an Event
of Default with respect to the Senior Notes or the Senior Discount Notes, as the
case may be: (i) default for 30 days in the payment when due of interest on the
Company Notes; PROVIDED, HOWEVER, that on or prior to , 2001, the failure
by the Company to pay interest on the Senior Notes within days of an
interest payment date will constitute an immediate Event of Default; (ii)
default in payment when due of the principal of or premium, if any, on the
Company Notes; (iii) failure by the Company to comply for 30 days with the
provisions described under the captions and "--Escrow of Proceeds,"
"--Repurchase at the Option of Holders" and "--Certain Covenants" (in each case,
other than a failure to purchase Company Notes); (iv) failure by the Company for
60 days after notice to comply with any of the Company's other agreements in the
Indentures, or the Company Notes or the Pledge and Escrow Agreement; (v) the
failure by the Company or any Restricted Subsidiary to pay Indebtedness within
any applicable grace period after final maturity or the acceleration of any
Indebtedness by the holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $ million; (vi) failure by the
Company or any of its Restricted Subsidiaries to pay final judgments aggregating
in excess of $ million, which judgments are not paid, discharged or stayed for
a period of 60 days; and (vii) certain events of bankruptcy or insolvency with
respect to the Company, any Restricted Subsidiary that constitutes a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary.
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If any Event of Default occurs and is continuing, either Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
or Senior Discount Notes, as the case may be, may declare all the Senior Notes
or the Senior Discount Notes, as the case may be, to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, any Restricted Subsidiary of the Company that constitutes a Significant
Subsidiary or any group of Restricted Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary, all outstanding Company
Notes will become due and payable without further action or notice. Holders of
the Company Notes may not enforce the Indentures or the Company Notes except as
provided in the Indentures. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Company Notes may direct
the Trustee in its exercise of any trust or power. Either Trustee may withhold
from Holders of the Company Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Company Notes pursuant to
the optional redemption provisions of the applicable Indentures, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Company Notes. If an Event of
Default occurs prior to , 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Company Notes prior to ,
2003, then the premium specified in the applicable Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Company Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
or the Senior Discount Notes, as the case may be, then outstanding by notice to
the applicable Trustee may on behalf of the Holders of all of the notes of such
series waive any existing Default or Event of Default and its consequences under
the applicable Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Company Notes.
The Company is required to deliver to each Trustee annually a statement
regarding compliance with the applicable Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to each
Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Company Notes, the Indentures or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Company Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Company Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes and/or the
Senior Notes, as the case may be ("Legal Defeasance"), except for (i) the rights
of Holders of outstanding Company Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Company Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Company Notes concerning issuing temporary
Company Notes, registration of Company Notes, mutilated, destroyed, lost or
stolen Company Notes and the maintenance of an office or agency for payment and
money for security payments
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held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the applicable Company Indenture. In addition,
the Company may, at its option and at any time, elect to have the obligations of
the Company released with respect to certain covenants that are described in the
Senior Note Indenture or the Senior Discount Note Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Senior Notes or
the Senior Discount Notes, as the case may be. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Notes or the
Senior Discount Notes, as the case may be.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the appropriate Trustee, in trust, for the
benefit of the Holders of the Senior Notes or the Senior Discount Notes, as the
case may be, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Senior Notes or
Senior Discount Notes, as the case may be, on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Senior Notes or Senior Discount Notes, as the case may be, are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indentures, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Senior Notes or Senior Discount Notes, as the
case may be, will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the appropriate
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Senior Notes or Senior
Discount Notes, as the case may be, will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the appropriate Company Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the appropriate Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the appropriate Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Senior Notes or Senior Discount Notes,
as the case may be, over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (viii) the Company must deliver to the appropriate Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange Company Notes in accordance with the
Indentures. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indentures. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Company Notes
to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indentures,
the Pledge and Escrow Agreement or the Company Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Senior Notes or Senior Discount Notes, as the case may be, then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for such Senior Notes or Senior
Discount Notes, as the case may be), and any existing default or compliance with
any provision of the Indentures, the Pledge and Escrow Agreement or the Company
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Senior Notes or Senior Discount Notes, as the
case may be, (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Company Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Company Notes held by a non-consenting Holder): (i) reduce
the principal amount of Company Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Company Notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Company Notes (except a rescission of
acceleration of the Senior Notes or Senior Discount Notes, as the case may be,
by the Holders of at least a majority in aggregate principal amount thereof and
a waiver of the payment default that resulted from such acceleration), (v) make
any Note payable in money other than that stated in the Company Notes, (vi) make
any change in the provisions of the Indentures relating to waivers of past
Defaults or the rights of Holders of Company Notes to receive payments of
principal of or premium, if any, or interest on the Company Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Repurchase at the
Option of Holders"), or (viii) make any change in the foregoing amendment and
waiver provisions. In addition, any amendments to the Pledge and Escrow
Agreement or the provisions of the Senior Note Indenture governing the Pledge
and Escrow Agreement will require the consent of the Holders of at least % in
aggregate principal amount of Senior Notes then outstanding if such amendment
would adversely affect the rights of Holders of Senior Notes.
Notwithstanding the foregoing, without the consent of any Holder of Company
Notes, the Company and the appropriate Trustee may amend or supplement the
Indentures, the Pledge and Escrow Agreement or the Company Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Company Notes
in addition to or in place of certificated Company Notes, to provide for the
assumption of the Company's obligations to Holders of Company Notes in the case
of a merger or consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights or
benefits to the Holders of Company Notes or that does not adversely affect the
legal rights under the Indentures of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indentures under the Trust Indenture Act.
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CONCERNING THE TRUSTEE
The Indentures contain certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustees will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Senior
Notes or Senior Discount Notes, as the case may be, will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the applicable Trustee, subject to certain exceptions.
The Indentures provide that in case an Event of Default shall occur (which shall
not be cured), the applicable Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, neither Trustee will be under an obligation
to exercise any of its rights or powers under the Indentures at the request of
any Holder of Company Notes, unless such Holder shall have offered to the
applicable Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indentures
without charge by writing to Premier Parks, Inc. 11501 Northeast Expressway,
Oklahoma City, Oklahoma 73131, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Company Notes to be resold as
set forth herein will initially be issued in the form of one or more Global
Notes (the "Global Notes"). The Global Notes will be deposited on the date of
the closing of the sale of the Company Notes offered hereby (the "Closing Date")
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").
Company Notes that are issued as described below under "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless all Global Notes have previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Company Notes being
transferred, subject to the transfer restrictions set forth in the Indentures.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the
Underwriters), banks and trust companies, clearing corporations and certain
other organizations. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only thorough
the Depositary's Participants or the Depositary's Indirect Participants.
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The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Notes and (ii) ownership of the Company Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Company Notes evidenced by the
Global Note will be limited to such extent. For certain other restrictions on
the transferability of the Company Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Company
Notes, the Global Note Holder will be considered the sole Holder under the
Indentures of any Company Notes evidenced by the Global Notes. Beneficial owners
of Company Notes evidenced by the Global Notes will not be considered the owners
or Holders thereof under the applicable Indentures for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither the Company nor the Trustees will have any
responsibility or liability for any aspect of the records of the Depositary or
for maintaining, supervising or reviewing any records of the Depositary relating
to the Company Notes.
Payments in respect of the principal of, premium, if any, interest on any
Company Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the applicable Trustee to or at the direction of
the Global Note Holder in its capacity as the registered Holder under the
applicable Indenture. Under the terms of the Indentures, the Company and the
Trustees may treat the persons in whose names Company Notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments. Consequently, neither the Company nor any Trustee has or will
have any responsibility or liability for the payment of such amounts to
beneficial owners of Company Notes. The Company believes, however, that it is
currently the policy of the Depositary to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant security as shown on
the records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Company Notes
will be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the applicable Trustee, exchange such
beneficial interest for Company Notes in the form of Certificated Securities.
Upon any such issuance, the applicable Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such certificated
Company Notes would be subject to the legend requirements described herein under
"Notice to Investors." In addition, if (i) the Company notifies the applicable
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the applicable Trustee in
writing that it elects to cause the issuance of Company Notes in the form of
Certificated Securities under the applicable Company Indenture, then, upon
surrender by the Global Note Holder of its Global Note, Company Notes in such
form will be issued to each person that the Global Note Holder and the
Depositary identify as being the beneficial owner of the related Company Notes.
Neither the Company nor any Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Company Notes and the Company and the Trustees may conclusively rely on, and
will be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
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SAME DAY SETTLEMENT AND PAYMENT
The Indentures will require that payments in respect of the Company Notes
represented by the Global Note (including principal, premium, if any, interest ,
if any) be made by wire transfer of immediately available next day funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
interest , if any, by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Company expects
that secondary trading in the Certificated Securities will also be settled in
immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indentures. Reference
is made to the Indentures for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACCRETED VALUE" means, as of any date of determination prior to ,
2003, with respect to any Senior Discount Note, the sum of (a) the initial
offering price (which shall be calculated by discounting the aggregate principal
amount at maturity of such Senior Discount Note at a rate of % per annum,
compounded semi-annually on each and from , 2003 to the date
of issuance) of such Senior Discount Note and (b) the portion of the excess of
the principal amount of such Senior Discount Note over such initial offering
price that shall have been accreted thereon through such date, such amount to be
so accreted on a daily basis at % per annum of the initial offering price of
such Senior Discount Note, compounded semi-annually on each and from
the date of issuance of the Senior Discount Notes through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months;
provided that, on and after , 2003, the Accreted Value of each Senior
Discount Note shall be equal to the principal amount at maturity of such Senior
Discount Note.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(PROVIDED that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indentures described
above under the caption "--Certain Covenants--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $ million or (b) for net proceeds in excess of $ million.
Notwithstanding the foregoing, the following items shall not be deemed to be
Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly
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Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, and
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Certain Covenants--Restricted Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the Credit
Facilities or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition and (vi) money
market funds at least 95% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) through (v) of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act); (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35%
of the Voting Stock of the Company, or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not capitalized (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest
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component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iii) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus (iv) non-cash items increasing such Consolidated
Net Income for such period, in each case, on a consolidated basis and determined
in accordance with GAAP (other than accrual of income in the ordinary course of
business in respect of a future cash payment).
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of
Indebtedness and Attributable Debt of such Person and its Restricted
Subsidiaries, PLUS (ii) the total amount of Indebtedness and Attributable Debt
of any other Person, to the extent that the same has been guaranteed by the
referent Person or one or more of its Restricted Subsidiaries, PLUS (iii) the
aggregate liquidation value of all Disqualified Stock of such Person and all
preferred stock of Restricted Subsidiaries of such Person, in each case,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization or original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness or Attributable Debt of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (iv) the product of (a) all
dividend payments on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, and prior to any deduction in respect
of dividends on any series of preferred stock of such Person, determined in
accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a Wholly
Owned Restricted Subsidiary thereof, (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iii) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in
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respect of the year of such declaration and payment, but only to the extent of
any cash received by such Person upon issuance of such preferred stock, less (x)
all write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indentures in the book value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indentures or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CO-VENTURE PARTNERSHIPS" means (i) Six Flags Over Georgia, Ltd., a Georgia
Limited Partnership, (ii) Texas Flags, Ltd., a Texas Limited Partnership and
(iii) Fiesta Texas Theme Park, Ltd., a Texas Limited Partnership.
"CREDIT FACILITIES" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Bank Loan Agreements) or commercial paper facilities with banks
or other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"DEBT TO CASH FLOW RATIO" means, as of any date of determination, the ratio
of (a) the Consolidated Indebtedness of the Company as of such date to (b) the
Consolidated Cash Flow of the Company for the four most recent full fiscal
quarters ending immediately prior to such date for which internal financial
statements are available, determined on a pro forma basis after giving effect to
all acquisitions or dispositions of assets made by the Company and its
Restricted Subsidiaries from the beginning of such four-quarter period through
and including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of the
proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Company Notes mature; PROVIDED, HOWEVER, that any Capital
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Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital Stock
upon the occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described above
under the caption "--Certain Covenants-- Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ESCROW ACCOUNT" means the Escrow Account for the initial deposit of
approximately $ million dollars of the net proceeds from the sale of the
Senior Notes under the Pledge and Escrow Agreement.
"EXISTING INDEBTEDNESS" means up to $ million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Facilities) in existence on the date of the
Indentures, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to
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officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) and (ii) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARTNERSHIP PARKS AGREEMENTS" means (i) the Overall Agreement, dated as of
February 15, 1997, among Six Flags Fund, Ltd. (L.P.), Salkin Family Trust, SFG,
Inc., SFG-I, LLC, SFG-II, LLC, Six Flags Over Georgia, Ltd., SFOG II, Inc., SFOG
II Employee, Inc., SFOG Acquisition A, Inc., SFOG Acquisition B, L.L.C., Six
Flags Over Georgia, Inc., Six Flags Services of Georgia, Inc., Six Flags Theme
Parks Inc. and Six Flags Entertainment Corporation, (ii) Overall Agreement,
dated as of November 24, 1997, among Six Flags Over Texas Fund, Ltd., Flags'
Directors, L.L.C., FD-II, L.L.C., Texas Flags, Ltd., SFOT Employee,
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Inc., SFOT Acquisition I, Inc., SFOT Acquisition II, Inc., Six Flags Over Texas,
Inc., Six Flags Theme Parks Inc. and Six Flags Entertainment Corporation, (iii)
the Lease Agreement with Option to Purchase dated as of March 9, 1996, among
Fiesta Texas Theme Park, Ltd., San Antonio Theme Park, L.P. and Six Flags San
Antonio, L.P., and (iv) the Agreement of Limited Partnership, dated as of March
9, 1996, among San Antonio Park GP, L.L.C., Six Flags San Antonio, L.P. and
Fiesta Texas Theme Park, Ltd., in each case, as the same are in effect on the
date of the Indentures.
"PERMITTED BUSINESS" means any business related, ancillary or complementary
to the businesses of the Company and its Restricted Subsidiaries on the date of
the Indentures.
"PERMITTED INVESTMENTS" means an Investment by the Company or any Restricted
Subsidiary in (i) cash or Cash Equivalents, (ii) the Company, a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such
Restricted Subsidiary is a Permitted Business; (iii) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, the
Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's
primary business is a Permitted Business; (iv) another Person if the aggregate
amount of all Investments in all such other Persons does not exceed $ million
at any one time outstanding (with each Investment being valued as of the date
made and without giving effect to subsequent changes in value); PROVIDED,
HOWEVER, that such Person's primary business is a Permitted Business; (v)
promissory notes received as consideration for an Asset Sale which are secured
by a Lien on the asset subject to such Asset Sale; PROVIDED that the aggregate
amount of all such promissory notes at any one time outstanding does not exceed
$ million; (vi) non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" (vii) assets
acquired solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (viii) receivables owing to the Company or
any Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
PROVIDED, HOWEVER, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances; (ix) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (x) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary; (xi) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments; (xii) transactions
pursuant to, and in accordance with, the terms of the Subordinate Indemnity
Agreement as the same is in effect as of the date of the Indentures and (xiii)
transactions pursuant to, and in accordance with, the terms of the Partnership
Park Agreements as the same are in effect on the date of the Indentures.
"PERMITTED LIENS" means (a) Liens to secure Indebtedness of a Restricted
Subsidiary of the Company that was permitted to be incurred under the
Indentures; (b) Liens existing on the Issue Date; (c) Liens on property or
shares of Capital Stock of another Person at the time such other Person becomes
a Restricted Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are
not created, incurred or assumed in connection with, or in contemplation of,
such other Person becoming such a Restricted Subsidiary; PROVIDED FURTHER,
HOWEVER, that such Lien may not extend to any other property owned by such
Person or any of its Restricted Subsidiaries; (d) Liens on property at the time
such Person or any of its Restricted Subsidiaries acquires the property,
including any acquisition by means of a merger or consolidation with or into
such Person or a Restricted Subsidiary of such Person; PROVIDED, HOWEVER, that
such Liens are not created, incurred or assumed in connection with, or in
contemplation of, such acquisition; PROVIDED FURTHER, HOWEVER, that the Liens
may not extend to any other property owned by such Person or any of its
Restricted Subsidiaries; (e) Liens securing Indebtedness or other obligations of
a Restricted Subsidiary of such Person owing to such Person or a Restricted
Subsidiary of such Person; (f) Liens securing Hedging Obligations so
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long as the related Indebtedness is, and is permitted to be under the
Indentures, secured by a Lien on the same type of property securing such Hedging
Obligations; (g) Liens to secure any Permitted Refinancing Indebtedness;
PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements on such
property) and (y) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (A) the outstanding principal
amount or, if greater, committed amount of the Indebtedness refinanced at the
time the original Lien became a Permitted Lien and (B) an amount necessary to
pay any fees and expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement; (h)(i) mortgages, liens, security
interests, restrictions or encumbrances that have been placed by any developer,
landlord or other third party on property over which the Company or any
Restricted Subsidiary of the Company has easement rights or on any real property
leased by the Company and subordination or similar agreements relating thereto
and (ii) any condemnation or eminent domain proceedings affecting any real
property; (i) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of cash or United
States government bonds to secure surety or appeal bonds to which such Person is
a party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case incurred in the ordinary course of business; (j)
Liens imposed by law, such as carriers', warehousemen's and mechanic's Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an appeal
or other proceedings for review; (k) Liens for property taxes not yet due or
payable or subject to penalties for non-payment or which are being contested in
good faith and by appropriate proceedings; (l) minor survey exceptions, minor
encumbrances, easements or reservations of, or rights of others for, licenses,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties which were not Incurred in connection with
the Indebtedness and which do not in the aggregate materially impair the use of
such properties in the operation of the business of such Person; (m) Liens
securing Purchase Money Indebtedness; PROVIDED, HOWEVER, that (i) the
Indebtedness secured by such Liens is otherwise permitted to be incurred under
the Indentures, (ii) the principal amount of any Indebtedness secured by any
such Lien does not exceed the cost of assets or property so acquired or
constructed and (iii) the amount of Indebtedness secured by any such Lien is not
subsequently increased and (n) Liens incurred in the ordinary course of business
of the Company or any Subsidiary of the Company with respect to obligations that
do not exceed $ million at any one time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses,
including premiums, incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Company Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the Senior Notes on terms
at least as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary
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who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"PLEDGE AND ESCROW AGREEMENT" means the Pledge, Escrow and Disbursement
Agreement, dated as of the date of the Indentures, by and between the Company
and the Senior Note Trustee governing the disbursement of funds from the Escrow
Account, as amended from time to time in accordance with the Senior Note
Indenture.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; PROVIDED, HOWEVER, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
PROVIDED FURTHER, that such Indebtedness is Incurred within 180 days after such
acquisition, addition or improvement by the Company or Restricted Subsidiary of
such asset.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATE INDEMNITY AGREEMENT" means the Subordinate Indemnity Agreement,
dated February 10, 1998, among the Company, SFEC and its subsidiaries, Time
Warner Inc., Time Warner Entertainment Company, L.P. and TW-SPV Co.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership or limited liability company (a) the sole
general partner or the managing general partner (or equivalent) of which is such
Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than Premier
Operations or SFTP or any successor to any of them) that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
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Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "--Certain
Covenants-- Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indentures and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "--Certain Covenants-- Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company's authorized capital stock includes 90,000,000 shares of Common
Stock, par value $0.05 per share. Each share of Common Stock entitles the holder
thereof to one vote. Holders of the Common Stock have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors and are entitled to share ratably, as a single class, in all
of the assets of the Company available for distribution to holders of Common
Stock upon the liquidation, dissolution or winding up of the affairs of the
Company. Holders of Common Stock do not have preemptive, subscription or
conversion rights. However, each outstanding share of Common Stock currently has
attached to it one right (a "Right") issued pursuant to a Rights Agreement (the
"Rights Agreement"). Each Right entitles its registered holder to purchase one
one-hundredth of a share of a junior participating series of Preferred Stock
designated to have economic and voting terms similar to those of one share of
Common Stock. After the Offerings, shares of Common Stock will be
outstanding and shares will be reserved for future issuance ( for
options and warrants and upon conversion of the Convertible Preferred
Stock).
Bank One Trust Company, N.A., Oklahoma City, Oklahoma, is the transfer agent
and registrar for the Common Stock.
PREFERRED STOCK
The Company's authorized capital stock includes 500,000 shares of Preferred
Stock, par value $1.00 per share. The Preferred Stock may be issued in series,
and shares of each series will have such rights and preferences as are fixed by
the Board of Directors in resolutions authorizing the issuance of that
particular series. In designating any series of Preferred Stock, the Board of
Directors may, without further action by the holders of Common Stock, fix the
number of shares constituting that series and fix the dividend rights, dividend
rate, conversion rights, voting rights (which may be greater or lesser than the
voting rights of the Common Stock), rights and terms of redemption (including
any sinking fund provisions), and the liquidation preferences of such series of
Preferred Stock. Holders of any series of Preferred Stock, when and if issued,
may have priority claims to dividends and to any distributions upon liquidation
of the Company, and other preferences over the holders of the Common Stock.
After giving effect to the Six Flags Transactions, shares of Preferred
Stock will be outstanding. In addition, approximately 206,000 shares (which will
be amended to 20,600 prior to the date of this Prospectus) of Preferred Stock
have been reserved for issuance under the Rights Plan.
MANDATORILY CONVERTIBLE PREFERRED STOCK
Pursuant to the Preferred Stock Offering, the Company will issue Public
Depositary Shares in respect of its Mandatorily Convertible Preferred Stock.
DIVIDENDS. Subject to the terms of the Company Notes, holders of the shares
of Mandatorily Convertible Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available
therefor, cash dividends from the date of initial issuance of the shares of
Mandatorily Convertible Preferred Stock at the rate of $ per annum or
$ per quarter. Dividends will cease to accrue on the shares of
Mandatorily Convertible Preferred Stock on the Mandatory Conversion Date or on
the date of their earlier conversion at the option of the holder.
Dividends may be paid, at the election of the Company, (i) out of funds
legally available therefor, (ii) through the delivery of shares of Common Stock
or (iii) through any combination of the foregoing forms of consideration elected
by the Board of Directors in its sole discretion.
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The shares of Mandatorily Convertible Preferred Stock will rank on a parity,
both as to payment of dividends and distribution of assets upon liquidation,
with the Seller Preferred Stock and any other preferred stock issued in the
future by the Company that by its terms ranks PARI PASSU with the shares of
Mandatorily Convertible Preferred Stock.
MANDATORY CONVERSION OF MANDATORILY CONVERTIBLE PREFERRED STOCK. Unless
voluntarily converted into Common Stock, as hereinafter described, on
, 2001 (the "Mandatory Conversion Date") each share of Mandatorily
Convertible Preferred Stock will automatically convert into a number of shares
of Common Stock (or the equivalent amount of cash) at the Conversion Rate (as
defined below). The "Conversion Rate" is equal to, (a) if the Conversion Price
(as defined below) is greater than or equal to $ (the "Threshold
Appreciation Price"), shares of Common Stock per Mandatorily Convertible
Preferred Stock (equivalent to shares of Common Stock for each Depositary
Share), (b) if the Conversion Price is less than the Threshold Appreciation
Price but is greater than $ (the "Initial Price"), a fraction, equal to
the Initial Price divided by the Conversion Price, of five hundred shares of
Common Stock per Mandatorily Convertible Preferred Stock (equivalent to 1/500th
of such number of shares for each Public Depositary Share) and (c) if the
Conversion Price is less than or equal to the Initial Price, 500 shares of
Common Stock per Mandatorily Convertible Preferred Stock (equivalent to one
share of Common Stock for each Public Depositary Share). The Conversion Rate is
subject to adjustment in certain circumstances, including if the Company shall
(a) pay a stock dividend or make a distribution with respect to its Common Stock
in shares of Common Stock, (b) subdivide or split its outstanding Common Stock,
(c) combine its outstanding Common Stock into a smaller number of shares, (d)
issue by reclassification of its shares of Common Stock any shares of Common
Stock, (e) issue certain rights or warrants to all holders of its Common Stock
unless such rights or warrants are issued to each holder of shares of
Mandatorily Convertible Preferred Stock on a pro rata basis with the shares of
Common Stock based on the Conversion Rate in effect on the date immediately
preceding such issuance, or (f) pay certain dividends or distribute to all
holders of its Common Stock evidences of its indebtedness, cash or other assets
unless such dividend or distribution is made to each holder of shares of
Mandatorily Convertible Preferred Stock on a pro rata basis with the shares of
Common Stock based on the Conversion Rate in effect on the date immediately
preceding such dividend or distribution.
The "Conversion Price" is the average closing price per share of Common
Stock for the 20 trading days immediately prior to (but not including) the
Mandatory Conversion Date; provided, however, that if there are not 20 trading
days for the Common Stock occurring later than the 60th calendar day immediately
prior to, but not including, the Mandatory Conversion Date, "Conversion Price"
will be the market value per share of Common Stock as of the Mandatory
Conversion Date as determined by a nationally recognized investment banking firm
retained for such purpose by the Company. The Conversion Price is subject to
adjustment in certain circumstances.
The Company will have the option, exercisable in its sole discretion, to
satisfy its obligations pursuant to the mandatory conversion of the Mandatorily
Convertible Preferred Stock at the Mandatory Conversion Date by delivering to
holders of the Mandatorily Convertible Preferred Stock either the number of
shares of Common Stock specified above or cash in an amount equal to the product
of such number of shares multiplied by the Conversion Price.
CONVERSION AT THE OPTION OF THE HOLDER. The shares of Mandatorily
Convertible Preferred Stock (and thereby the Public Depositary Shares) are
convertible, in whole or in part, at the option of the holders thereof, at any
time prior to the Mandatory Conversion Date, into shares of Common Stock at a
rate of shares of Common Stock for each share of Mandatorily Convertible
Preferred Stock (or a rate of shares of Common Stock for each Public
Depositary Share) equivalent, for each Depositary Share, to a conversion price
of $ per share of Common Stock, 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
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its shares of Common Stock any shares of Common Stock, (e) issue certain rights
or warrants to all holders of its Common Stock unless such rights or warrants
are issued to each holder of shares of Mandatorily Convertible Preferred Stock
on a pro rata basis with the shares of Common Stock based on the Conversion Rate
in effect on the date immediately preceding such issuance, or (f) pay certain
dividends or distribute to all holders of its Common Stock evidences of its
indebtedness, cash or other assets unless such dividend or distribution is made
to each holder of shares of Mandatorily Convertible Preferred Stock on a pro
rata basis with the shares of Common Stock based on the Conversion Rate in
effect on the date immediately preceding such dividend or distribution.
The depositary shares representing shares of Mandatorily Convertible
Preferred Stock may be voluntarily converted by the holders thereof upon the
same terms and conditions as the shares of Mandatorily Convertible Preferred
Stock represented by such depositary shares, adjusted to reflect the fact that
depositary shares represent a one-five hundredth interest of a share of
Mandatorily Convertible Preferred Stock.
LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Company, and subject to the
rights of holders of any other series of Preferred Stock, the holders of
outstanding shares of Mandatorily Convertible Preferred Stock are entitled to
receive an amount equal to the per share price to investors of the shares of
Mandatorily Convertible Preferred Stock plus accrued and unpaid dividends
thereon, out of the assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of junior
ranking stock upon liquidation, dissolution or winding up.
VOTING RIGHTS. The holders of shares of Mandatorily Convertible Preferred
Stock shall not be entitled to any voting rights, except as required by
applicable state law and as described below.
In the event that dividends on the shares of Mandatorily Convertible
Preferred Stock or any other series of Preferred Stock shall be in arrears and
unpaid for six quarterly dividend periods, or if any other series of Preferred
Stock shall be entitled for any other reason to exercise voting rights, separate
from the Common Stock, to elect any Directors of the Company ("Preferred Stock
Directors"), the holders of the shares of Mandatorily Convertible Preferred
Stock, 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
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 shares of Mandatorily Convertible Preferred Stock have no
preemptive rights.
SELLER PREFERRED STOCK
In connection with the Six Flags Acquisition, the Company will issue to the
Sellers up to Seller Depositary Shares for up to $200 million of Seller
Preferred Stock. The Company has the right to pay cash in lieu of all or a
portion of such shares, provided that if any Seller Depositary Shares are issued
to the
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Sellers not less than shares (representing not less than $100 million of the
Capital Stock Consideration must be issued). The following is a summary of the
terms of the Seller Preferred Stock.
DIVIDENDS. Subject to the terms of the Company Notes, holders of shares of
the Seller Preferred Stock will be entitled to receive annually, cash dividends
out of funds of the Company legally available for payment, at an annual rate of
% of the $ liquidation value (the "Liquidation Value") per share.
Dividends will be cumulative from the date of original issuance of the Seller
Preferred Stock. The Seller Preferred Stock will rank PARI PASSU as to dividends
with the Mandatorily Convertible Preferred Stock and have priority as to
dividends over the Common Stock and any other series or class of the Company's
stock hereafter issued.
LIQUIDATION RIGHTS. In case of the voluntary or involuntary liquidation,
dissolution or winding up of the Company, holders of shares of Seller Preferred
Stock are entitled to receive the amount equal to the Liquidation Value thereof,
plus an amount equal to any accrued and unpaid dividends to the payment date,
before any payment or distribution is made to the holders of Common Stock or any
other series or class of the Company's stock hereafter issued which ranks junior
as to liquidations rights to the Seller Preferred Stock. The Seller Preferred
Stock will rank PARI PASSU as to liquidation with the Mandatorily Convertible
Preferred Stock.
VOTING RIGHTS. The holders of each share of the Seller Preferred Stock
shall not be entitled to any voting rights, except as required by Delaware law
and except in certain circumstances involving the default by the Company in the
payment of dividends, the authorization of securities having a preference over
the Seller Preferred Stock, charter amendments materially affecting the rights
of the holders or the merger or consolidation of the Company.
CONVERSION RIGHTS. Shares of the Seller Preferred Stock (and thereby the
Seller Depositary Shares) will be convertible, in whole or in part, at any time,
at the option of the holder into shares of Common Stock at a conversion price of
$ per share of Common Stock, subject to adjustment as described below.
The holders of Seller Preferred Stock will be entitled at any time after the
90th day following the date of issuance to convert their shares of Convertible
Preferred Stock into Common Stock at an initial conversion price equal to
% of the weighted average of the trading prices for all of the sales of
the Common Stock on the NYSE for the 20 consecutive trading days ending on the
third trading day prior to the issuance of the Seller Preferred Stock, subject
to adjustment in certain circumstances, including the payment of a stock
dividend on shares of the Common Stock, combinations and subdivisions of the
Common Stock, certain reclassifications of the Common Stock, the issuance to the
Company's stockholders of rights or warrants to subscribe for or purchase shares
of Common Stock at a price per share less than the then-current market price
(determined as provided in the Certificate of Designation of the Seller
Preferred Stock) of the Common Stock and certain cash dividends and
distributions of evidences of indebtedness or assets to holders of certain of
the Company's capital stock.
The depositary shares representing shares of Seller Preferred Stock may be
voluntarily converted by the holders thereof upon the same terms and conditions
as the Seller Preferred Stock represented by such depositary shares, adjusted to
reflect the fact that the depositary shares represent a one-five hundredth
interest of a share of Seller Preferred Stock.
OPTIONAL REDEMPTION BY COMPANY. Shares of Seller Preferred Stock will not
be redeemable prior to 2001. On or after such date, the shares of Seller
Preferred Stock will be redeemable at the option of the Company, in whole or in
part, at any time or from time to time on not less than 30 nor more than 60 days
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notice by mail, at the redemption prices set forth below, in each case, plus an
amount equal to the sum of all accrued and unpaid dividends to the redemption
date:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE TWELVE-MONTH REDEMPTION PRICE PER REDEMPTION PRICE PER
PERIOD BEGINNING ON PREFERRED SHARE DEPOSITARY SHARE
- -------------------------------------------------- -------------------- --------------------
<S> <C> <C>
2001..............................................
2002..............................................
2003..............................................
2004..............................................
2005..............................................
2006..............................................
200[ ] and thereafter.............................
</TABLE>
MANDATORY REDEMPTION BY COMPANY. On the twelfth anniversary of the date of
issuance of the Seller Preferred Stock, the Company must redeem all outstanding
shares at the Liquidation Value, plus accrued and unpaid dividends thereon to
the date of redemption.
The holders of the shares of the Seller Preferred Stock have no preemptive
rights with respect to any shares of capital stock of the Company or any other
securities of the Company convertible into or carrying rights or options to
purchase any such shares.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the purchase, ownership and disposition of the
Company Senior Discount Notes. This discussion is a summary for general
information only and does not consider all aspects of U.S. federal income tax
that may be relevant to the purchase, ownership and disposition of the Company
Senior Discount Notes by a prospective investor in light of such investor's
personal circumstances. This discussion also does not address the U.S. federal
income tax consequences of ownership of Company Senior Discount Notes not held
as capital assets within the meaning of Section 1221 of the Code, or the U.S.
federal income tax consequences to investors subject to special treatment under
the U.S. federal income tax laws, such as dealers in securities or foreign
currency, tax-exempt entities, banks, thrifts, insurance companies, persons that
hold the Company Senior Discount Notes as part of a "straddle," a "hedge"
against currency risk or a "conversion transaction," or other integrated
investment, persons that have a "functional currency" other than the U.S.
dollar, holders who are not U.S. persons and investors in pass-through entities.
A U.S. person means a holder of a Company Senior Discount Note that is (i) a
citizen or resident of the United States, (ii) a corporation, a partnership or
other entity created or organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate or trust described in
Section 7701(a)(30) of the Code or (iv) a person whose worldwide income or gain
is otherwise subject to U.S. federal income taxation on a net income basis. In
addition, this discussion is limited to the U.S. federal income tax consequences
to initial holders that purchase the Company Senior Discount Notes for cash at
their issue price (as defined below) pursuant to the Offer. It does not describe
any tax consequences arising out of the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, existing and proposed regulations
thereunder, IRS rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change (possibly on a retroactive basis). The
Company has not and will not seek any rulings from the IRS with respect to the
matters discussed below. There can be no assurance that the IRS will not take
positions concerning the tax consequences of the purchase, ownership or
disposition of the Company Senior Discount Notes which are different from those
discussed herein.
PERSONS CONSIDERING THE PURCHASE OF COMPANY SENIOR DISCOUNT NOTES SHOULD
CONSULT THEIR OWN ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO
THEIR PARTICULAR SITUATIONS.
INTEREST AND ORIGINAL ISSUE DISCOUNT
The Company Senior Discount Notes will be considered to have been issued
with OID for U.S. federal income tax purposes. OID is the excess of (i) the
stated redemption price at maturity of a Company Senior Discount Note over (ii)
its issue price.
The "stated redemption price at maturity" of a Company Senior Discount Note
is the sum of all payments provided by the instrument. The "issue price" of a
Company Senior Discount Note is the first price at which a substantial amount of
the Company Senior Discount Notes are sold to the public (excluding sales to
bond houses, brokers or similar persons or organizations acting in the capacity
as underwriters, placement agents or wholesalers).
A holder is required to include OID in gross income as ordinary interest as
it accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of such holder's regular method
of accounting. A holder will not be required to report separately as taxable
income actual distributions of stated interest with respect to the Company
Senior Discount Notes; such stated interest will be included in income as OID
under the method described immediately below. In general, the amount of OID
included in income by the holder of a Company Senior Discount Note is the sum of
the daily portions of OID for each day during the taxable year (or portion of
the taxable year) on which such holder held such Company Senior Discount Note,
including the purchase date and excluding
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the disposition date. The "daily portion" is determined by allocating the OID
for an accrual period equally to each day in that accrual period. The "accrual
period" for a Company Senior Discount Note may be of any length and may vary in
length over the term of a Company Senior Discount Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the first or final day of an accrual
period.
The amount of OID for an accrual period is generally equal to the product of
the Company Senior Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity. The "adjusted issue price" of a
Company Senior Discount Note at the beginning of any accrual period is the sum
of the issue price of the Company Senior Discount Note plus the amount of OID
allocable to all prior accrual periods minus the amount of any prior payments on
the Company Senior Discount Note. Under those rules, a holder generally will
have to include in income increasingly greater amounts of OID in successive
accrual periods. The "yield to maturity" of a Company Senior Discount Note is
the discount rate that, when used in computing the present value of all payments
to be made on a Company Senior Discount Note, produces an amount equal to the
issue price of the Company Senior Discount Note.
In determining the yield and maturity of the Company Senior Discount Notes,
the Company will be deemed to exercise the unconditional call option in a manner
that minimizes the yield on the Company Senior Discount Notes. If the Company
Senior Discount Notes are not in fact called on a presumed exercise date, then,
for purposes of the accrual of OID, the yield and maturity of the Company Senior
Discount Notes are redetermined by treating the Company Senior Discount Notes as
retired and reissued on that date for an amount equal to their adjusted issue
price on that date.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATION
If the Company Senior Discount Notes constitute "applicable high yield
discount obligations," the OID on the Company Senior Discount Notes will not be
deductible by the Company until paid. An "applicable high yield discount
obligation" is any debt instrument that (i) has a maturity date which is more
than five years from the date of issue, (ii) has a yield to maturity which
equals or exceeds the AFR (as set forth in Section 1274(d) of the Code) for the
calendar month in which the obligation is issued plus five percentage points and
(iii) has "significant original issue discount." The AFR is an interest rate,
announced monthly by the IRS, that is based on the yield of debt obligations
issued by the U.S. Treasury. A debt instrument generally has "significant
original issue discount" if, as of the close of any accrual period ending more
than five years after the date of issue, the excess of the interest (including
OID) that has accrued on the obligation over the interest (including OID) that
is required to be paid thereunder exceeds the product of the issue price of the
instrument and its yield to maturity.
Moreover, if the Company Senior Discount Notes' yield to maturity exceeds
the AFR plus six percentage points, a ratable portion of the Company's deduction
for OID (the "Disqualified OID") (based on the portion of the yield to maturity
that exceeds the AFR plus six percentage points) will be characterized as a
non-deductible dividend with respect to the Company to the extent of the
Company's current and accumulated earnings and profits. For purposes of the
dividends-received deduction under Section 243 of the Code, the Disqualified OID
will be treated as a dividend to the extent it would have been so treated had
such amount been distributed by the Company with respect to its stock. To the
extent that the Company's earnings and profits are insufficient, any portion of
the Disqualified OID that otherwise would have been recharacterized as a
dividend for purposes of the dividends received deduction will continue to be
treated as ordinary OID income in accordance with the rules described above.
SALE, EXCHANGE OR REDEMPTION OF THE COMPANY SENIOR DISCOUNT NOTES
Upon the sale, exchange, retirement or other disposition of a Company Senior
Discount Note, a holder generally will recognize taxable gain or loss equal to
the difference between (i) the amount realized on the disposition and (ii) the
holder's adjusted tax basis in the Company Senior Discount Note. A holder's
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adjusted tax basis in a Company Senior Discount Note generally will equal the
cost of the Company Senior Discount Note to the holder increased by any OID
included in income through the date of disposition and decreased by any payments
received on the Company Senior Discount Notes. Such gain or loss will generally
constitute capital gain or loss. In the case of a holder who is an individual,
any capital gain will be subject to tax at a maximum rate of 28% if the Company
Senior Discount Note has been held for more than 12 months but not more than 18
months at the time of the sale, exchange, retirement or other disposition
thereof, and a maximum rate of 20% if the Company Senior Discount Note has been
held for more than 18 months.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Holders may be subject, under certain circumstances, to information
reporting and "backup withholding" at a 31% rate with respect to cash payments
in respect of principal (and premium, if any), interest (including OID) and the
gross proceeds from dispositions of Company Senior Discount Notes. Backup
withholding applies only if the holder (i) fails to furnish its social security
or other taxpayer identification number ("TIN") within a reasonable time after a
request therefor, (ii) furnishes an incorrect TIN, (iii) fails to report
properly interest or dividends, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that it is not subject to backup withholding.
Any amount withheld from a payment to a holder under the backup withholding
rules is allowable as a credit (and may entitle such holder to a refund) against
such holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS. Certain persons are exempt from backup
withholding, including corporations and financial institutions. Holders of
Company Senior Discount Notes should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
The Company will furnish annually to the IRS and to record holders of the
Company Senior Discount Notes (to whom it is required to furnish such
information) information relating to the amount of OID and interest, as
applicable.
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UNDERWRITING
The Company has entered into an Underwriting Agreement (the form of which
has been filed as an exhibit to Registration Statement of which this Prospectus
is a part) dated , 1998 (the "Underwriting Agreement"), with the
underwriters named below (the "Underwriters") pursuant to which, on the terms
and subject to the conditions thereof, the Company has agreed to sell to the
Underwriters and the Underwriters have agreed to purchase from the Company, the
aggregate principal amount of Company Notes set forth opposite their names
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY PRINCIPAL AMOUNT
OF COMPANY SENIOR OF COMPANY
UNDERWRITERS DISCOUNT NOTES SENIOR NOTES
- ---------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Lehman Brothers Inc................................................... $ $
Salomon Brothers Inc..................................................
------------------- ---------------------
Total............................................................... $ $ 280,000,000
------------------- ---------------------
------------------- ---------------------
</TABLE>
The Underwriting Agreement provides that the obligation of each Underwriter
to pay for and accept delivery of the Company Notes is subject to certain
conditions, including delivery of certain legal opinions by their counsel.
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Company Notes if any
are taken. The Closing of the Notes Offering is conditioned upon the closing of
each of the Offerings and each of the Six Flags Transactions.
The Company has been advised by the Underwriters that they propose to offer
the Company Notes offered hereby initially at the public offering price set
forth on the cover page of this Prospectus and to certain selected dealers (who
may include the Underwriters) at such public offering price less a concession
not to exceed % of the aggregate principal amount at maturity of the Company
Senior Discount Notes and % of the aggregate principal amount of the Company
Senior Notes. The Underwriters or such selected dealers may reallow a commission
to certain other dealers not to exceed % of the aggregate principal amount at
maturity of the Company Senior Discount Notes and % of the aggregate
principal amount of the Company Senior Notes. After the initial public offering
of the Company Notes, the public offering price, the concession to selected
dealers and the reallowance to the other dealers may be changed by the
Underwriters.
The Underwriting Agreement provides that the Company and its operating
subsidiaries (including Six Flags) will indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, and will
contribute to payments the Underwriters may be required to make in respect
hereof.
The Company does not intend to list the Company Notes on any national
securities exchange or to seek the admission thereof to trading on the NASDAQ
National Market System. The Company has been advised by the Underwriters that
following the completion of the Notes Offerings, the Underwriters currently
intend to make a market in the Company Notes. However, the Underwriters are not
obligated to do so. Any market making activities with respect to the Company
Notes may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act. See "Risk Factors--Absence of Public Market."
In connection with the Notes Offerings, the Underwriters may engage in
certain transactions that stabilize the price of the Company Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Company Notes. If the Underwriters create a
short position in the Company Notes in connection with the Notes Offerings
(i.e., if they sell more Company Notes than are set forth on the cover page of
this Prospectus) the Underwriters may reduce that short position by purchasing
Company Notes in open market.
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In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Company Notes. In addition, neither
the Company nor any of the Underwriters makes any representation that anyone
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
Each of Lehman Brothers and Smith Barney Inc. (predecessor to Salomon Smith
Barney) has from time to time provided certain investment banking services to
the Company and its affiliates for which they have received customary fees. LBI
Group Inc., an affiliate of Lehman Brothers is party to a financing commitment
provided to the Company in connection with the Six Flags Transactions and has
received customary fees in connection therewith. In addition, Lehman Brothers
and Smith Barney Inc. acted as underwriters of the Company's 1996 and 1997
public offerings and are acting as underwriters in connection with the
Concurrent Offerings and will receive customary fees in connection therewith. An
affiliate of Lehman Brothers is a lender under each of the Credit Facilities.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain legal matters in
connection with the Offering will be passed upon for the Company by Baer Marks &
Upham LLP, New York, New York. The Underwriters are being represented by Latham
& Watkins, New York, New York.
117
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, have been included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of Elitch Gardens Company at December 31, 1995 and
1994, and for the year ended December 31, 1995 and the period from May 31, 1994
(date of inception) through December 31, 1994, appearing in the Company's
Registration Statement (Form S-2 No. 333-16573) have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph with respect to that company's ability to
continue as a going concern) and are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of The Great Escape as of October 31, 1995 and
1994, and for the years then ended, included in the Company's Registration
Statement (Form S-2 No. 333-16573) portions of which are incorporated by
reference herein are incorporated herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, included in the Form
S-2, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Stuart Amusement Company as of
September 30, 1996 and 1995, and for each of the years in the three-year period
ended September 30, 1996, included in the Company's Registration Statement (Form
S-2 No. 333-16573) portions of which are incorporated by reference herein are
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, included in the Form S-2, and upon the
authority of said firm as experts in accounting and auditing.
The financial statements of Kentucky Kingdom, Inc. at November 2, 1997 and
for the 52-week period then ended, appearing in the Company's Form 8-K dated
November 7, 1997, as amended, which is incorporated by reference herein are
incorporated herein in reliance upon the report of Carpenter Mountjoy &
Bressler, independent certified public accountants, included in the Form 8-K and
upon the authority of said firm as experts in accounting and auditing.
118
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements of Premier Parks Inc..................................................... F-1
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheet................................................................................. F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statements of Stockholders' Equity............................................................ F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-8
Consolidated Financial Statements of Six Flags Entertainment Corporation................................... F-
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Premier Parks Inc.:
We have audited the accompanying consolidated balance sheets of Premier
Parks Inc. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Parks Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 7, 1997
F-2
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
ASSETS 1995 1996 1997
- ----------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents............................................ $28,787,000 4,043,000 169,151,000
Accounts receivable.................................................. 965,000 1,180,000 15,960,000
Inventories.......................................................... 2,904,000 4,200,000 5,546,000
Prepaid expenses and other current assets............................ 2,352,000 3,416,000 3,652,000
----------- ----------- -------------
Total current assets........................................... 35,008,000 12,839,000 194,309,000
----------- ----------- -------------
Other assets:
Deferred charges..................................................... 4,839,000 6,752,000 10,594,000
Deposits and other................................................... 4,229,000 9,087,000 6,036,000
----------- ----------- -------------
Total other assets............................................. 9,068,000 15,839,000 16,630,000
----------- ----------- -------------
Property and equipment, at cost........................................ 125,906,000 263,175,000 390,359,000
Less accumulated depreciation........................................ 9,905,000 17,845,000 30,342,000
----------- ----------- -------------
116,001,000 245,330,000 360,017,000
----------- ----------- -------------
Intangible assets...................................................... 13,471,000 31,669,000 43,659,000
Less accumulated amortization........................................ 230,000 874,000 2,348,000
----------- ----------- -------------
13,241,000 30,795,000 41,311,000
----------- ----------- -------------
Total assets................................................... $173,318,000 304,803,000 612,267,000
----------- ----------- -------------
----------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses................................ $ 6,361,000 11,059,000 17,291,000
Accrued interest payable............................................. 4,158,000 4,304,000 4,054,000
Current portion of long-term debt.................................... 56,000 -- --
Current portion of capitalized lease obligations..................... 1,009,000 1,492,000 990,000
----------- ----------- -------------
Total current liabilities...................................... 11,584,000 16,855,000 22,335,000
----------- ----------- -------------
Long-term debt and capitalized lease obligations:
Long-term debt:
Senior notes....................................................... 90,000,000 90,000,000 215,000,000
Credit facility.................................................... -- 57,574,000 --
Capitalized lease obligations........................................ 3,213,000 1,768,000 1,263,000
----------- ----------- -------------
Total long-term debt and capitalized lease obligations......... 93,213,000 149,342,000 216,263,000
Other long-term liabilities............................................ 3,465,000 4,846,000 3,967,000
Deferred income taxes.................................................. 19,145,000 20,578,000 42,900,000
----------- ----------- -------------
Total liabilities.............................................. 127,407,000 191,621,000 285,465,000
----------- ----------- -------------
Stockholders' equity:
Preferred stock, 500,000 shares authorized at December 31, 1995, 1996
and September 30, 1997; 200,000 shares Series A, 7% cumulative
convertible, $1 par value ($100 redemption value) issued and
outstanding at December 31, 1995; no shares issued and outstanding
at December 31, 1996 and September 30, 1997........................ 200,000 -- --
Common stock, $.05 par value, 9,000,000, 30,000,000 and 90,000,000
shares authorized at December 31, 1995 and 1996, and September 30,
1997, respectively; 4,883,900, 11,392,669 and 18,327,018 shares
issued and 4,857,554, 11,366,323 and 18,300,672 shares outstanding
as of December 31, 1995, 1996 and September 30, 1997,
respectively....................................................... 244,000 569,000 917,000
Capital in excess of par value....................................... 79,261,000 144,642,000 334,721,000
Accumulated deficit.................................................. (33,105,000) (31,340,000) (8,147,000)
----------- ----------- -------------
46,600,000 113,871,000 327,491,000
Less 26,346 common shares of treasury stock, at cost................. (689,000) (689,000) (689,000)
----------- ----------- -------------
Total stockholders' equity..................................... 45,911,000 113,182,000 326,802,000
----------- ----------- -------------
Total liabilities and stockholders' equity..................... $173,318,000 304,803,000 612,267,000
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
------------ ----------- ----------- ----------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions.......................... $ 13,936,000 21,863,000 41,162,000 38,970,000 91,080,000
Theme park food, merchandise, and other........ 10,963,000 19,633,000 52,285,000 50,822,000 95,666,000
------------ ----------- ----------- ----------- ------------
Total revenue.............................. 24,899,000 41,496,000 93,447,000 89,792,000 186,746,000
------------ ----------- ----------- ----------- ------------
Operating costs and expenses:
Operating expenses............................. 12,358,000 19,775,000 42,425,000 32,897,000 69,444,000
Selling, general and administrative............ 5,448,000 9,272,000 16,927,000 15,363,000 29,688,000
Costs of products sold......................... 2,553,000 4,635,000 11,101,000 10,685,000 22,072,000
Depreciation and amortization.................. 1,997,000 3,866,000 8,533,000 5,599,000 13,974,000
------------ ----------- ----------- ----------- ------------
Total operating costs and expenses......... 22,356,000 37,548,000 78,986,000 64,544,000 135,178,000
------------ ----------- ----------- ----------- ------------
Income from operations..................... 2,543,000 3,948,000 14,461,000 25,248,000 51,568,000
Other income (expense):
Interest expense, net.......................... (2,299,000) (5,578,000) (11,121,000) (7,657,000) (12,869,000)
Other income (expense)......................... (74,000) (177,000) (78,000) (59,000) (44,000)
------------ ----------- ----------- ----------- ------------
(2,373,000) (5,755,000) (11,199,000) (7,716,000) (12,913,000)
------------ ----------- ----------- ----------- ------------
Income (loss) before income taxes.......... 170,000 (1,807,000) 3,262,000 17,532,000 38,655,000
Income tax expense (benefit)..................... 68,000 (762,000) 1,497,000 7,020,000 15,462,000
------------ ----------- ----------- ----------- ------------
Income (loss) before extraordinary loss.... 102,000 (1,045,000) 1,765,000 10,512,000 23,193,000
Extraordinary loss on extinguishment of debt, net
of income tax benefit of $90,000............... -- (140,000) -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss).......................... $ 102,000 (1,185,000) 1,765,000 10,512,000 23,193,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Net income (loss) applicable to common
stock.................................... $ 102,000 (1,714,000) 1,162,000 9,909,000 23,193,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Weighted average number of common shares
outstanding--primary........................... 2,810,000 3,938,000 8,972,000 7,979,000 17,513,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Income (loss) per common share--primary:
Income (loss) before extraordinary loss.... $ .04 (.40) .13 1.24 1.32
Extraordinary loss......................... -- (.04) -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss).......................... $ .04 (.44) .13 1.24 1.32
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Weighted average number of common shares
outstanding--fully diluted..................... 2,810,000 3,938,000 8,972,000 9,439,000 18,046,000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Income (loss) per common share--fully diluted:
Income (loss) before extraordinary loss.... $ .04 (.40) .13 1.11 1.29
Extraordinary loss......................... -- (.04) -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss).......................... $ .04 (.44) .13 1.11 1.29
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SERIES A, 7%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- CAPITAL IN
SHARES SHARES EXCESS OF ACCUMULATED TREASURY
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT STOCK TOTAL
--------- --------- --------- --------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1993.......... -- $ -- 2,681,565 $ 134,000 45,769,000 (32,022,000) (689,000) 13,192,000
Issuance of common
stock:
Cash
proceeds-net.. -- -- 619,815 31,000 4,154,000 -- -- 4,185,000
Exchange of debt
for equity.... -- -- 97,087 5,000 650,000 -- -- 655,000
Net income.......... -- -- -- -- -- 102,000 -- 102,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at December
31, 1994.......... -- -- 3,398,467 170,000 50,573,000 (31,920,000) (689,000) 18,134,000
Issuance of
preferred stock... 200,000 200,000 -- -- 19,800,000 -- -- 20,000,000
Conversion of debt
to equity......... -- -- 1,485,433 74,000 8,888,000 -- -- 8,962,000
Net loss............ -- -- -- -- -- (1,185,000) -- (1,185,000)
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at December
31, 1995.......... 200,000 200,000 4,883,900 244,000 79,261,000 (33,105,000) (689,000) 45,911,000
Conversion of
preferred stock... (200,000) (200,000) 2,560,928 128,000 72,000 -- -- --
Issuance of common
stock............. -- -- 3,947,841 197,000 65,309,000 -- -- 65,506,000
Net income.......... -- -- -- -- -- 1,765,000 -- 1,765,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at December
31, 1996.......... -- -- 11,392,669 569,000 144,642,000 (31,340,000) (689,000) 113,182,000
Issuance of common
stock............. -- -- 6,934,349 348,000 190,079,000 -- -- 190,427,000
Net income.......... -- -- -- -- -- 23,193,000 -- 23,193,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
Balances at
September 30, 1997
(Unaudited)....... -- $ -- 18,327,018 $ 917,000 334,721,000 (8,147,000) (689,000) 326,802,000
--------- --------- --------- --------- ---------- ------------ ----------- ----------
--------- --------- --------- --------- ---------- ------------ ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
----------- ----------- ------------ ----------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 102,000 (1,185,000) 1,765,000 10,512,000 23,193,000
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization........... 1,997,000 3,866,000 8,533,000 5,599,000 13,974,000
Extraordinary loss on early
extinguishment of debt................ -- 230,000 -- -- --
Amortization of discount on debt and
debt issuance costs................... 94,000 317,000 811,000 523,000 1,443,000
Gain on sale of assets.................. (9,000) -- (51,000) -- --
(Increase) decrease in accounts
receivable............................ (496,000) 5,794,000 (215,000) (7,444,000) (14,696,000)
Deferred income taxes (benefit)......... 24,000 (808,000) 1,433,000 6,993,000 15,226,000
Increase in inventories and prepaid
expenses.............................. (422,000) (455,000) (2,360,000) (110,000) (1,420,000)
(Increase) decrease in deposits and
other assets.......................... (808,000) 1,197,000 (3,947,000) (2,858,000) 4,112,000
Increase (decrease) in accounts payable
and accrued expenses.................. 511,000 (2,366,000) 5,216,000 (221,000) 2,339,000
Increase (decrease) in accrued interest
payable............................... 67,000 4,056,000 146,000 (2,772,000) (250,000)
----------- ----------- ------------ ----------- ------------
Total adjustments..................... 958,000 11,831,000 9,566,000 (290,000) 20,728,000
----------- ----------- ------------ ----------- ------------
Net cash provided by operating
activities.......................... 1,060,000 10,646,000 11,331,000 10,222,000 43,921,000
----------- ----------- ------------ ----------- ------------
Cash flows from investing activities:
Proceeds from the sale of equipment....... 14,000 -- 476,000 -- --
Other investments......................... (83,000) (63,000) (48,000) (38,000) --
Additions to property and equipment....... (10,108,000) (10,732,000) (39,423,000) (29,290,000) (108,166,000)
Acquisition of theme park assets.......... -- -- (116,154,000) -- --
Acquisition of Funtime Parks, Inc. in 1995
and Stuart Amusement Company in 1997,
net of cash acquired.................... -- (63,344,000) -- -- (21,376,000)
----------- ----------- ------------ ----------- ------------
Net cash used in investing
activities.......................... (10,177,000) (74,139,000) (155,149,000) (29,328,000) (129,542,000)
----------- ----------- ------------ ----------- ------------
Cash flows from financing activities:
Repayment of debt......................... (5,079,000) (17,487,000) (1,082,000) (938,000) (66,081,000)
Proceeds from borrowings.................. 8,451,000 93,500,000 57,574,000 -- 132,500,000
Net cash proceeds from issuance of
preferred stock......................... -- 20,000,000 -- -- --
Net cash proceeds from issuance of common
stock................................... 4,185,000 -- 65,306,000 65,151,000 189,427,000
Payment of debt issuance costs............ (100,000) (5,099,000) (2,724,000) (128,000) (5,117,000)
----------- ----------- ------------ ----------- ------------
Net cash provided by financing
activities.......................... 7,457,000 90,914,000 119,074,000 64,085,000 250,729,000
----------- ----------- ------------ ----------- ------------
(Decrease) increase in cash and cash
equivalents............................... (1,660,000) 27,421,000 (24,744,000) 44,979,000 165,108,000
Cash and cash equivalents at beginning of
period.................................... 3,026,000 1,366,000 28,787,000 28,787,000 4,043,000
----------- ----------- ------------ ----------- ------------
Cash and cash equivalents at end of
period.................................... $ 1,366,000 28,787,000 4,043,000 73,766,000 169,151,000
----------- ----------- ------------ ----------- ------------
----------- ----------- ------------ ----------- ------------
Supplemental cash flow information:.........
Cash paid for interest.................... $ 2,178,000 2,018,000 11,640,000 11,405,000 17,929,000
----------- ----------- ------------ ----------- ------------
----------- ----------- ------------ ----------- ------------
Cash paid for income taxes (refund)....... $ 38,000 (22,000) 64,000 27,000 135,000
----------- ----------- ------------ ----------- ------------
----------- ----------- ------------ ----------- ------------
</TABLE>
F-6
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Supplemental disclosure of noncash investing and financing activities:
Year ended December 31, 1994
- Common stock (97,087 shares) was exchanged for $655,000 of debt.
- The Company entered into two separate note agreements, aggregating
$570,000 for the purchase of property and equipment.
Year ended December 31, 1995
- Common stock (1,485,433 shares) was exchanged for $9,095,000 of debt, net
of $133,000 of costs.
- The Company acquired certain rides and attractions through capital leases
with obligations totaling $3,259,000.
Year ended December 31, 1996 and Nine Months Ended September 30, 1996
(Unaudited)
- Preferred stock (200,000 shares) was converted into common stock
(2,560,928 shares).
- The Company issued $200,000 of common stock (9,091 shares) as a component
of a theme park acquisition.
- The Company acquired certain equipment through a capital lease with an
obligation of $64,000.
Nine Months Ended September 30, 1997 (Unaudited)
- The Company issued $1,000,000 of common stock (32,139 shares) as a
component of a theme park acquisition.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES
DESCRIPTION OF BUSINESS
Premier Parks Inc. (the Company) owns and operates regional theme amusement
and water parks. As of December 31, 1996, the Company and its subsidiaries own
and operate ten parks: Adventure World, a combination theme and water park
located in Largo, Maryland; Darien Lake & Camping Resort, a combination theme
and water park with an adjacent camping resort and performing arts center,
located between Buffalo and Rochester, New York; Elitch Gardens, a theme park
located in Denver, Colorado; Frontier City, a western theme park located in
Oklahoma City, Oklahoma; Geauga Lake, a combination theme and water park located
near Cleveland, Ohio; The Great Escape and Splash Water Kingdom, a combination
theme and water park located in Lake George, New York; two water parks operated
under the name Waterworld/USA, located in Northern California; White Water Bay,
a tropical water park located in Oklahoma City, Oklahoma; and Wyandot Lake, a
water park which also includes "dry rides" located in Columbus, Ohio. On
February 5, 1997, the Company acquired Riverside Park, a theme park located near
Springfield, Massachusetts (note 14).
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries, and a limited partnership and a limited liability
company in which the Company beneficially owns 100% of the interests.
Intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements as of September 30, 1997 and for the nine months ended
September 30, 1996 and 1997, reflect all adjustments (all of which were normal
and recurring) which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the interim
periods presented. The results of operations for the nine month period ended
September 30, 1997, are not indicative of the results to be expected for the
full year. The Company's business is highly seasonal. The great majority of the
Company's revenue is collected in the second and third quarters while operating
expenses are incurred throughout the year. Accordingly, the Company historically
incurs a net loss for the fourth calendar quarter.
The Company's investment in a partnership in which it does not own a
controlling interest is accounted for using the equity method and included in
other assets.
CASH EQUIVALENTS
Cash equivalents of $26,728,000, $2,753,000, and $158,169,000 at December
31, 1995, 1996 and September 30, 1997, respectively, consist of short-term
highly liquid investments with a remaining maturity as of purchase date of three
months or less, which are readily convertible into cash. For purposes of the
F-8
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
consolidated statements of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and primarily consist of products for resale including merchandise and food and
miscellaneous supplies including repair parts for rides and attractions.
ADVERTISING COSTS
Production costs of commercials and programming are charged to operations in
the year first aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the year incurred. The amounts capitalized
at year-end are included in prepaid expenses.
DEFERRED CHARGES
The Company capitalizes all costs related to the issuance of debt with such
costs included in deferred charges in the consolidated balance sheets. The
amortization of such costs are recognized as interest expense under a method
approximating the interest method over the life of the respective debt issue. As
of December 31, 1996, approximately $626,000 of costs associated with the
Company's January 1997 debt and equity offerings (notes 5 and 8) are also
included in deferred charges.
DEPRECIATION AND AMORTIZATION
Buildings and improvements are depreciated over their estimated useful lives
of approximately 30 years by use of the straight-line method. Furniture and
equipment are depreciated using the straight-line method over 5-10 years. Rides
and attractions are depreciated using the straight-line method over 5-25 years.
Amortization of property associated with capitalized lease obligations is
included in depreciation expense in the consolidated financial statements.
Maintenance and repairs are charged directly to expense as incurred, while
betterments and renewals are generally capitalized in the property accounts.
When an item is retired or otherwise disposed of, the cost and applicable
accumulated depreciation are removed and the resulting gain or loss is
recognized.
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited, generally 25 years.
LONG-LIVED ASSETS
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
January 1, 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The adoption of SFAS No. 121 did not have an impact on the
Company's consolidated financial position or results of operations in 1996.
INTEREST EXPENSE RECOGNITION
Interest on notes payable is generally recognized as expense on the basis of
stated interest rates. Notes payable and capitalized lease obligations that do
not have a stated interest rate or that have interest rates considered to be
lower than prevailing market rates (when the obligations were incurred) are
carried at amounts discounted to impute a market rate of interest cost. Total
interest expense incurred was $2,341,000, $6,074,000, $12,597,000, $9,156,000
and $19,122,000 in 1994, 1995 and 1996, and for the nine months ended September
30, 1996 and 1997, respectively. Interest expense in the accompanying
consolidated statements of operations is shown net of interest income.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is computed based on income (loss) applicable
to common stock divided by the weighted average number of common shares
outstanding during the period. For the year ended December 31, 1995, no
warrants, options, or potentially issuable shares from convertible securities
were considered as the effect would be antidilutive. For the year ended December
31, 1994, warrants and options outstanding have been excluded from the per
common share calculations as no active trading market existed for the Company's
common stock during the year.
The Company's former senior subordinated notes were converted into common
shares in 1995. For 1994, the senior subordinated notes were considered to be
potentially dilutive securities. The weighted average number of common shares
attributable to the conversion feature of the notes was 1,120,000. The former
senior subordinated notes bore interest and if the notes had been converted, the
interest expense on the notes in 1994 would not have been incurred. After
consideration of the increase in income that would have occurred from the
reduction in interest expense, the effect of the convertible notes on income per
common share was antidilutive.
The Company issued convertible preferred stock in 1995 which was a
potentially dilutive security. Accumulated preferred stock dividends of
$529,000, $603,000 and $603,000, which were paid through additional issuances of
common stock, were considered in determining net income (loss) applicable to
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
common stock in 1995 and 1996, and the nine months ended September 30, 1996,
respectively. The common shares that would have resulted from conversion of the
preferred stock at December 31, 1995 are not considered in the 1995 calculation
of loss per common share, as the effect would be antidilutive. The convertible
preferred stock was converted into common stock during June 1996. The effect of
the additional common shares, as if they were converted on January 1, 1996, was
included in the determination of the weighted average number of common shares
outstanding-fully diluted for the nine months ended September 30, 1996. The
effect of the conversion of the preferred shares as of the beginning of the
period was antidilutive for the year ended 1996.
STOCK OPTIONS
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB No. 25, "Accounting for Stock Issued to Employees," whereby
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. Companies which
continue to apply the provisions of APB No. 25 are required by SFAS No. 123 to
disclose pro forma net earnings and net earnings per share for employee stock
option grants made in 1995, 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB No. 25, and has provided the pro forma
disclosures required by SFAS No. 123 in note 9.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses, and accrued interest payable approximate
fair value because of the short maturity of these financial instruments. The
fair value estimates, methods, and assumptions relating to the Company's other
financial instruments are discussed in note 5.
(3) ACQUISITION OF THEME PARKS
Pursuant to a merger agreement, on August 15, 1995, the Company acquired
Funtime Parks, Inc. (Funtime), a company owning three regional theme parks, for
an initial purchase price of approximately $60,000,000 in cash, with an
additional amount of approximately $5,400,000 paid to the former shareholders as
a postclosing adjustment related to the operating cash flows of the former
Funtime parks after the
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(3) ACQUISITION OF THEME PARKS (CONTINUED)
acquisition date. The acquisition was accounted for as a purchase. The
allocation of the purchase price was determined based upon estimates of fair
value as determined by independent appraisal. As of the acquisition date and
after giving effect to the purchase, $18,030,000 of deferred tax liabilities
were recognized for the tax consequences attributable to the differences between
the financial statement carrying amounts and the tax basis of Funtime's assets
and liabilities. Approximately $13,500,000 of cost in excess of the fair value
of the net assets acquired was recorded as goodwill. As part of the acquisition,
$2,500,000 of the purchase price was placed into escrow as an indemnification
fund. Except in limited circumstances, the indemnification fund represents the
sole source of funds for indemnification claims made by the Company against the
former shareholders of Funtime. The indemnification fund is classified in the
accompanying consolidated financial statements as a deposit and as a noncurrent
other liability.
The accompanying 1996 and 1995 consolidated statements of operations reflect
the results of Funtime from the date of acquisition (August 15, 1995).
On October 31, 1996, the Company acquired all of the interests in a
partnership which owned substantially all of the assets used in the operation of
Elitch Gardens for $62,500,000 in cash. Thereupon, the partnership dissolved by
operation of law. As a result, the assets were directly owned by the Company.
The transaction was accounted for as a purchase. In addition, the Company has
entered into a five-year non-competition agreement with the president of Elitch
Gardens Company's general partner. Based upon the purchase method of accounting,
the purchase price was primarily allocated to property and equipment with
$4,506,000 of costs recorded as intangible assets, primarily goodwill. The
general partner and a principal limited partner of Elitch Gardens Company have
agreed severally to indemnify the Company for claims in excess of $100,000 in an
amount up to $1,000,000 per partner.
On November 19, 1996, the Company acquired all of the interests in two
partnerships which owned substantially all of the assets used in the operation
of the two Waterworld/USA water parks for an aggregate cash purchase price of
approximately $17,250,000, of which $862,500 was placed in escrow to fund
potential indemnification claims by the Company. Thereupon, the partnerships
dissolved by operation of law. As a result, the assets were directly owned by
the Company. The transaction was accounted for as a purchase. Based upon the
purchase method of accounting, the purchase price was primarily allocated to
property and equipment with $5,110,000 of costs recorded as intangible assets,
primarily goodwill.
On December 4, 1996, the Company acquired all of the interests in a limited
liability company which owned substantially all of the assets used in the
operation of The Great Escape and Splash Water Kingdom for a cash purchase price
of $33,000,000. The transaction was accounted for as a purchase. In connection
with the acquisition, the Company entered into a non-competition agreement and a
related agreement with the former owner, providing for an aggregate
consideration of $1,250,000. In addition, as a component of the transaction, the
Company issued 9,091 shares of its common stock ($200,000) to an affiliate of
the former owner. Based upon the purchase method of accounting, the purchase
price was primarily allocated to property and equipment with $9,221,000 of costs
recorded as intangible assets, primarily goodwill.
The accompanying 1996 consolidated statement of operations reflects the
results of these 1996 acquisitions from their respective acquisition dates.
F-12
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(3) ACQUISITION OF THEME PARKS (CONTINUED)
The following summarized pro forma results of operations assumes that for
the year ended December 31, 1996, the Elitch Gardens, The Great Escape, and
Waterworld/USA acquisitions and related transactions occurred as of the
beginning of 1996 and for the year ended December 31, 1995, assumes that these
acquisitions, the Funtime acquisition, and the related transactions occurred as
of the beginning of 1995 and neither year includes the operations of the
Riverside Park, which was acquired in 1997.
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Total revenues...................................................... $ 140,126 125,941
Income before extraordinary loss.................................... 6,135 4,957
Income before extraordinary loss applicable to common stock......... 6,135 4,957
Income before extraordinary loss per common share................... .52 .44
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------
1995 1996 1997
-------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Land........................................... $ 12,230,000 27,760,000 33,467,000
Buildings and improvements..................... 54,935,000 106,302,000 135,766,000
Rides and attractions.......................... 51,653,000 112,379,000 195,655,000
Equipment...................................... 7,088,000 16,734,000 25,471,000
-------------- ------------- -------------
Total...................................... 125,906,000 263,175,000 390,359,000
Less accumulated depreciation.................. (9,905,000) (17,845,000) (30,342,000)
-------------- ------------- -------------
$ 116,001,000 245,330,000 360,017,000
-------------- ------------- -------------
</TABLE>
Included in property and equipment are costs and accumulated depreciation
associated with capital leases as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1995 1996 1997
------------ ---------- -------------
<S> <C> <C> <C>
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Cost................................................ $ 6,005,000 6,069,000 6,069,000
Accumulated depreciation............................ (334,000) (577,000) (760,000)
------------ ---------- -------------
$ 5,671,000 5,492,000 5,309,000
------------ ---------- -------------
------------ ---------- -------------
</TABLE>
F-13
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
At December 31, 1995 and 1996, and September 30, 1997, long-term debt and
capitalized lease obligations consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Long term debt:
Senior notes--due 2003(a)........................... $ 90,000,000 90,000,000 90,000,000
Senior notes--due 2007 (c).......................... -- -- 125,000,000
Credit facility (b)................................. -- 57,574,000 --
Other debt.......................................... 56,000 -- --
------------- ------------- -------------
Total long-term debt................................ 90,056,000 147,574,000 215,000,000
Capitalized lease obligations:
Capitalized lease obligations expiring 1997 through
2000, requiring aggregate annual lease payments
ranging from approximately $20,000 to $548,000
including implicit interest at rates ranging from
9.875% to 14% and secured by equipment with a net
book value of approximately $5,492,000 and
$5,309,000 as of December 31, 1996 and September
30, 1997, respectively............................ 4,222,000 3,260,000 2,253,000
------------- ------------- -------------
Total........................................... $ 94,278,000 150,834,000 217,253,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
(a) The notes are senior unsecured obligations of the Company, with a
$90,000,000 aggregate principal amount, and mature on August 15, 2003. The notes
bear interest at 12% per annum payable semiannually on August 15 and February 15
of each year, commencing February 15, 1996. The notes are redeemable, at the
Company's option, in whole or part, at any time on or after August 15, 1999, at
varying redemption prices. Additionally, at any time prior to August 15, 1998,
the Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. These notes are
guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The proceeds of the notes were used in the Funtime acquisition and in the
refinancing of previously existing indebtedness. The Company recognized a
$230,000 loss on early extinguishment of debt during 1995. The loss was
recorded, net of tax effect, as an extraordinary item.
The indenture under which the notes were issued was amended January 21,
1997, in contemplation of the Company's January 1997 senior debt and equity
offerings. The indenture places limitations on operations and sales of assets by
the Company or its subsidiaries, permits incurrence of additional debt
F-14
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
only in compliance with certain financial ratios, and limits the Company's
ability to pay cash dividends or make other distributions to the holders of its
capital stock or to redeem such stock.
The indenture, as amended, permits the Company, subject to certain
limitations, to incur additional indebtedness, including $125,000,000 of
indebtedness issued January 31, 1997 described below and secured senior
revolving credit facility indebtedness of up to $75,000,000.
All of the Company's subsidiaries, except for one indirect wholly owned
subsidiary, Funtime-Famous Recipe, Inc., are full, unconditional, and joint and
several guarantors of the notes. The assets and operations of Funtime-Famous
Recipe, Inc. are inconsequential to the Company and its consolidated financial
position and results of operations. Condensed financial statement information
for the guarantors is not included herein, as the Company does not believe such
information would be material to the understanding of the Company and its direct
and indirect subsidiaries.
(b) In connection with the acquisitions described in note 3, in October 1996
the Company entered into a senior secured credit facility (the "Credit
Facility") with a syndicate of banks. The Credit Facility had an aggregate
availability of $115,000,000 of which (i) up to $30,000,000 under the revolving
credit facility (the "Revolving Credit Facility") may have been used for working
capital and general corporate purposes; (ii) up to $25,000,000 ("Facility A")
may have been used to finance capital expenditures prior to April 30, 1998; and
(iii) up to $60,000,000 ("Facility B") may have been used to finance certain
acquisitions by the Company (including the acquisitions described in note 3),
provided that at least 50% of the consideration for any such acquisition or
improvements under Facility A or Facility B (collectively, the "Term Loan
Facility") was required to have been funded by the Company. Interest rates per
annum under the Credit Facility were equal to a base rate equal to the higher of
the Federal Funds Rate plus 1/2% or the prime rate of Citibank N.A., in each
case plus the Applicable Margin (as defined thereunder) or the London Interbank
Offered Rate plus the Applicable Margin. The Revolving Credit Facility was to
terminate October 31, 2002 (reducing to $15,000,000 on October 31, 2001) and
borrowings under the Term Loan Facility were to mature October 31, 2001;
however, aggregate principal payments of $7,500,000, $20,000,000 and $25,000,000
were to be required under the Term Loan Facility during 1998, 1999 and 2000,
respectively. Borrowings under the Revolving Credit Facility were required to be
fully paid for at least 30 days each year and were secured by substantially all
of the Company's assets (other than real estate) and guarantees of the Company's
principal subsidiaries. Borrowings under the Term Loan Facility were secured by
the assets acquired with the proceeds thereof, and limited guarantees of the
Company's principal subsidiaries. The Credit Facility contained restrictive
covenants that, among other things, limited the ability of the Company and its
subsidiaries to dispose of assets; incur additional indebtedness or liens; pay
dividends; repurchase stock; make investments; engage in mergers or
consolidations and engage in certain transactions with subsidiaries and
affiliates. In addition, the Credit Facility required that the Company comply
with certain specified financial ratios and tests.
On January 31, 1997, the Company and the syndicate of banks agreed to amend
the Credit Facility. The $30,000,000 Revolving Credit Facility will remain in
place through December 31, 2001 (without reduction prior to that date).
Additionally, following repayment of amounts then outstanding under the Term
Loan Facility through the use of proceeds from the Company's January 1997 debt
and equity offerings, the Term Loan Facility was converted into an $85,000,000
reducing revolving credit facility. The
F-15
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
Term Loan Facility, as amended, will be available to fund acquisitions and make
capital improvements. The amount available under the Term Loan Facility will
reduce to $75,000,000 on December 31, 1999, to $45,000,000 on December 31, 2000,
and will mature on December 31, 2001. Borrowings under the amended Credit
Facility are secured by substantially all the assets of the Company and its
subsidiaries (other than real estate) and are guaranteed by the Company's
operating subsidiaries. The restrictive covenants are essentially the same as
those of the original October 1996 credit facility.
(c) On January 31, 1997, the Company issued $125,000,000 of 9 3/4% senior
notes due January 2007. The notes are senior unsecured obligations of the
Company and, in priority upon liquidation, are equal to the Company's senior
notes due in 2003. Interest is payable on January 15 and July 15 of each year,
commencing July 15, 1997. The notes are redeemable, at the Company's option, in
whole or in part, at any time on or after January 15, 2002, at varying
redemption prices. Additionally, at any time prior to January 15, 2000, the
Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. The notes are
guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The indenture under which the notes were issued places limitations
substantially similar to those of the Company's senior notes due in 2003. A
portion of the proceeds were used to fully pay amounts outstanding under the
Company's Credit Facility.
Annual maturities of long-term debt and capitalized lease obligations,
adjusted to reflect the payment of the amounts outstanding under the Credit
Facility through use of proceeds of the January 1997 note issuance, during the
five years subsequent to December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997....................................................... $ 1,492,000
1998....................................................... 737,000
1999....................................................... 364,000
2000....................................................... 667,000
2001 and thereafter........................................ 147,574,000
-----------
$150,834,000
-----------
-----------
</TABLE>
The fair value of the Company's long-term debt is estimated by using quoted
prices or discounted cash flow analyses based on current borrowing rates for
debt with similar maturities. Under the above assumptions the estimated fair
value of long-term debt and capitalized lease obligations at December 31, 1995
and 1996, and at September 30, 1997, is approximately $103,000,000, $160,000,000
and $228,000,000, respectively.
F-16
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) INCOME TAXES
Income tax expense (benefit) allocated to operations for 1996, 1995 and 1994
consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
1994:
U.S. Federal.......................................... $ 44,000 15,000 59,000
State and local....................................... -- 9,000 9,000
---------- ---------- ----------
$ 44,000 24,000 68,000
---------- ---------- ----------
---------- ---------- ----------
1995:
U.S. Federal.......................................... $ (44,000) (508,000) (552,000)
State and local....................................... -- (210,000) (210,000)
---------- ---------- ----------
$ (44,000) (718,000) (762,000)
---------- ---------- ----------
---------- ---------- ----------
1996:
U.S. Federal.......................................... $ -- 1,335,000 1,335,000
State and local....................................... 64,000 98,000 162,000
---------- ---------- ----------
$ 64,000 1,433,000 1,497,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Recorded income tax expense (benefit) allocated to operations differed from
amounts computed by applying the U.S. federal income tax rate of 34% to pretax
income (loss) approximately as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" federal income tax expense
(benefit)............................................... $ 58,000 (614,000) 1,109,000
Amortization of goodwill.................................. -- 78,000 180,000
Other, net................................................ 1,000 (16,000) 46,000
Effect of state and local income taxes.................... 9,000 (210,000) 162,000
--------- ---------- ----------
$ 68,000 (762,000) 1,497,000
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
Income tax expense for the nine months ended September 30, 1996 and 1997 was
approximately 40% of each of the periods' income before income taxes.
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting and tax
depreciation methods and periods for property and equipment. The Company's net
operating loss carryforwards and alternative minimum tax carryforwards
F-17
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) INCOME TAXES (CONTINUED)
represent future income tax deductions (deferred tax assets). The tax effects of
these temporary differences as of December 31, 1995 and 1996, are presented
below:
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Deferred tax assets before valuation allowance................... $ 7,860,000 10,300,000
Less valuation allowance......................................... -- --
------------- ------------
Net deferred tax assets.......................................... 7,860,000 10,300,000
Deferred tax liabilities......................................... 27,005,000 30,878,000
------------- ------------
Net deferred tax liability....................................... $ 19,145,000 20,578,000
------------- ------------
------------- ------------
</TABLE>
The Company's deferred tax liability results from the financial carrying
value for assets acquired in the Funtime acquisition, which was based upon the
fair value at the acquisition date, being substantially in excess of Funtime's
tax basis in the assets and from the Company's other depreciable assets being
depreciated primarily over a 7-year period for tax reporting purposes and a
longer 20- to 25-year period for financial purposes. The faster tax depreciation
has resulted in tax losses which can be carried forward to offset future taxable
income. Because most of the Company's depreciable assets' financial carrying
value and tax basis difference will reverse before the expiration of the
Company's net operating loss carryforwards and taking into account the Company's
projections of future taxable income over the same period, management believes
that it will more likely than not realize the benefits of these net future
deductions.
The Company experienced an ownership change within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder on October 30,
1992, as a result of the issuance of 2,200,000 shares of common stock. As a
result of the ownership change, net operating loss carryforwards generated
before the ownership change can be deducted in subsequent periods only in
certain limited situations. Accordingly, it is probable that the Company will
not be able to use most of the net operating loss carryforwards generated prior
to October 30, 1992. Therefore, most of the pre-October 30, 1992, net operating
loss carryforwards were not considered in computing the Company's available net
operating loss carryforwards and deferred tax liability. The Company experienced
an additional ownership change on June 4, 1996, as a result of the issuance of
3,938,750 shares of common stock and conversion of preferred stock into an
additional 2,560,928 shares of common stock. The use of the Company's pre-June
1996 net operating loss carryforwards may be limited in the future; however, it
is probable that the carryforwards will be fully utilized by the Company before
their expiration.
As of December 31, 1996, the Company has approximately $19,400,000 of
unrestricted net operating loss and $7,000,000 of alternative minimum tax
carryforwards available for federal income tax purposes which expire in 2007
through 2011. Additionally, the Company has $1,864,000 of alternative minimum
tax credits which have no expiration date.
(7) PREFERRED STOCK
The Company has authorized 500,000 shares of preferred stock, $1 par value.
During 1995, the Company issued 200,000 shares of Series A, 7% cumulative
convertible preferred stock at $100 per share. During June 1996, the shares,
including all dividends thereon, were converted into 2,560,928 common
F-18
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(7) PREFERRED STOCK (CONTINUED)
shares. The Company has agreed to provide the preferred stockholders certain
registration rights relative to the common stock issued upon conversion of the
preferred stock.
Holders of Series A preferred stock were entitled to receive cumulative
dividends at an annual rate of $7 per share. At the Company's election,
dividends were payable in cash and/or in additional Series A preferred stock.
The terms of the Company's senior notes and credit facilities limit the
Company's ability to pay cash dividends. All dividends paid to the preferred
stockholders were made by additional issuances of common stock at the time of
the conversion into shares of common stock as described above.
All shares of preferred stock rank senior and prior in right to all of the
Company's now or hereafter issued common stock with respect to dividend payments
and distribution of assets upon liquidation or dissolution of the Company.
(8) COMMON STOCK
In October 1994, the Company issued 619,815 common shares in a private
placement with existing stockholders for cash. In connection with this
placement, Windcrest Partners, an affiliate of the Company, also exchanged
$655,000 of then existing debt for 97,087 shares of common stock. The Company
has agreed to provide the stockholders certain registration rights in the
future.
In August 1995, the Company issued 1,175,063 common shares in full exchange
for the Company's $7,000,000 senior subordinated convertible notes and 310,370
common shares in full exchange for the Company's $2,095,000 junior subordinated
term loan. The Company has agreed to provide the stockholders certain
registration rights in the future.
On April 4, 1996, a majority of the Company's common and preferred
shareholders and the Company's board of directors approved a one-for-five
reverse stock split effective May 6, 1996. The par value of common stock was
increased to $.05 per share from $.01 per share. Additionally, the authorized
common shares of the Company were changed to 30,000,000. The accompanying
consolidated financial statements and notes to the consolidated financial
statements reflect the reverse stock split as if it had occurred as of the
earliest date presented.
On June 4, 1996, and June 6, 1996, the Company issued 3,425,000 and 513,750,
respectively, of its common shares resulting in net proceeds to the Company of
$65,306,000. Additionally, on June 4, 1996, the Company exchanged 2,560,928 of
its common shares for all 200,000 shares of its previously outstanding preferred
stock.
On January 31, 1997, the Company issued 6,900,000 of its common shares
resulting in net proceeds to the Company of approximately $189,000,000.
(9) STOCK OPTIONS AND WARRANTS
In 1993, 1994, 1995, and 1996, certain members of the Company's management
were issued seven-year options to purchase 145,200, 36,000, 248,000 and 337,500,
and of its common shares, at an exercise price of $5.00, $7.50, $8.25, and
$22.00 per share, respectively, under the Company's 1993, 1995 and 1996 Stock
Option and Incentive Plans (the Plans). Stock options are granted with an
exercise price equal to the stock's fair market value at the date of grant.
These options may be exercised on a cumulative basis with 20% of the total
exercisable on date of issuance and with an additional 20% being available for
exercise on each of the succeeding anniversary dates. Any unexercised portion of
the options will automatically and
F-19
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(9) STOCK OPTIONS AND WARRANTS (CONTINUED)
without notice terminate upon the seventh anniversary of the issuance date or
upon termination of employment.
At December 31, 1996, there were 503,300 additional shares available for
grant under the Plans. The per share weighted-average fair value of stock
options granted during 1995 and 1996 was $5.56 and $14.97 on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: 1995--expected dividend yield 0%, risk-free interest rate of 5.5%,
and an expected life of 5 years; 1996--expected dividend yield 0%, risk-free
interest rate of 6.25%, and an expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income (loss) would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------------- ----------
<S> <C> <C> <C>
Net income (loss) applicable to common stock:
As reported $ (1,714,000) 1,162,000
Pro forma (1,880,000) 390,000
Net income (loss) applicable to common stock per
share:
As reported $ (.44) .13
Pro forma (.48) .04
</TABLE>
Pro forma net income (loss) reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income (loss) amounts
presented above because compensation cost is reflected over the options' vesting
period of 4 years and compensation cost for options granted prior to January 1,
1995 is not considered.
F-20
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(9) STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGEEXERCISE
SHARES PRICE
----------- -----------------
<S> <C> <C>
Balance at December 31, 1994.................................... 181,200 $ 5.50
Granted....................................................... 248,000 8.25
Exercised..................................................... -- --
Forfeited..................................................... -- --
Expired....................................................... -- --
----------- ------
Balance at December 31, 1995.................................... 429,200 7.09
Granted....................................................... 337,500 22.00
Exercised..................................................... -- --
Forfeited..................................................... -- --
Expired....................................................... -- --
----------- ------
Balance at December 31, 1996.................................... 766,700 $ 13.65
----------- ------
----------- ------
</TABLE>
At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.00 to $22.00 and 6.01
years, respectively.
At December 31, 1995 and 1996, the number of options exercisable was 151,120
and 304,460, respectively, and weighted-average exercise price of those options
was $6.30 and $10.01, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant to
purchase 26,346 common shares (currently being held as treasury stock) at an
exercise price of $1.00 per share and a ten-year warrant to purchase 18,693
common shares at an exercise price of $1.00 per share.
(10) 401(K) PLAN
The Company has a qualified, contributory 401(k) plan (the Plan). All
regular employees are eligible to participate in the Plan if they have completed
one full year of service and are at least 21 years old. The Company matches 100%
of the first 2% of and 25% of the next 6% of salary contributions made by
employees. The accounts of all participating employees are fully vested. The
Company recognized approximately $32,000 and $150,000 of expense in the years
ended December 31, 1995 and 1996, respectively. Prior to 1995, the Company did
not match employee's salary contributions.
(11) CASUALTY LOSS
On July 27, 1994, high winds damaged the Company's Adventure World location.
The loss was covered by insurance and the total insurance benefits recognized
during 1994 were $748,000, including approximately $348,000 accrued as a
receivable, which was collected subsequent to December 31, 1994. The Company
spent approximately $393,000 in 1994 to replace and repair capital assets which
had been destroyed or damaged. Insurance proceeds in excess of the net book
value of destroyed assets and the repair costs of damaged assets were
approximately $417,000 and are reflected in the 1994 consolidated statement of
operations in theme parks revenue.
F-21
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(12) COMMITMENTS AND CONTINGENCIES
The Company leases office space under a lease agreement which expires April
30, 2001. The lease requires minimum monthly payments over its term and also
escalation charges for proportionate share of expenses as defined in the lease.
Windcrest Partners shares office space with the Company and has agreed to pay
50% of the rental payments. Rent expense recognized by the Company (after
deduction of amounts paid by Windcrest Partners) for the years ended December
1994, 1995, and 1996, aggregated $68,000, $68,000, and $64,000, respectively.
The Company leases the sites of Wyandot Lake and each of the two
Waterworld/USA locations with rent based upon percentages of revenues earned by
each park. During 1995 and 1996, the Company recognized approximately $100,000
and $385,000, respectively, of rental expense under these rent agreements.
On June 2, 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. Although the collapse and the resulting closure had a material adverse
impact on the park's operating performance for 1997, as well as a lesser impact
on the Company's Sacramento water park (which is also named "Waterworld"),
located approximately seventy miles from the Concord park, the Company's other
parks were not adversely affected. The Company has recovered all of the Concord
park's operating shortfall under its business interruption insurance. In
addition, the Company believes that its liability insurance coverage should be
more than adequate to provide for any personal injury liability which may
ultimately be found to exist in connection with the collapse.
The Company is a party to various legal actions arising in the normal course
of business. None of the actions are believed by management to involve amounts
that would be material to the Company's consolidated financial condition,
operations, or liquidity.
(13) CERTAIN TRANSACTIONS
During 1995, in connection with the acquisition of Funtime and the issuance
of the $90,000,000 senior notes, the Company paid investment banking and
financial advisory fees in the amount of $800,000 and $475,000 to Lepercq, de
Neuflize & Co. Incorporated (Lepercq) and Hanseatic Corporation (Hanseatic),
respectively. Two directors of the Company are director and treasurer,
respectively, of Lepercq and Hanseatic.
(14) ACQUISITION OF STUART AMUSEMENT COMPANY
On February 5, 1997, the Company purchased all of the outstanding common
stock of Stuart Amusement Company, the owner of Riverside Park and an adjacent
multi-use stadium, for a purchase price of $22,200,000 ($1,000,000 of which was
paid through issuance of 32,129 of the Company's common shares). The Company
funded the purchase through use of the proceeds from the Company's January 1997
debt and equity offerings (notes 5 and 8). The transaction was accounted for
using the purchase method of accounting.
(15) SIGNIFICANT TRANSACTIONS SUBSEQUENT TO THE 1997 OPERATING SEASON
(UNAUDITED)
On November 7, 1997 the Company acquired the theme park assets of Kentucky
Kingdom--The Thrill Park, located in Louisville, Kentucky, for a purchase price
of $64,000,000, of which $4,900,000 was
F-22
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997 (INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(15) SIGNIFICANT TRANSACTIONS SUBSEQUENT TO THE 1997 OPERATING SEASON
(UNAUDITED) (CONTINUED)
paid through the issuance of 121,671 shares of the Company's common stock. The
Company may be required to issue additional shares of common stock based upon
the level of revenues at Kentucky Kingdom during each of the 1998-2000 seasons.
The Company has purchased thirteen rides and attractions from Opryland, in
Nashville, Tennessee, for $10,000,000 for use at its various theme parks. The
Company has also entered into management and lease agreements related to Marine
World Africa USA in Vallejo, California. As part of the lease agreement, the
Company has option to purchase the park in 2002 at a purchase price equal to the
greater of the then principal amount of certain debt obligations of the seller
(expected to aggregate $52,000,000) or the then fair market value of the
seller's interest in the park (based upon a formula relating to the seller's 20%
share of Marine World's cash flow. On December 15, 1997, the Company signed an
agreement with the majority shareholders of Walibi, S.A. "Walibi", to purchase
the outstanding stock of "Walibi" held by the majority shareholders commits the
Company to tender for the remaining stock for an estimated aggregate purchase
price including outstanding debt of Walibi, of approximately $140,000,000. The
acquisition is not expected to be completed until March of 1998.
(16) SHARE RIGHTS PLAN (UNAUDITED)
On December 10, 1997, the Company's board of directors authorized a share
rights plan. Under the plan, stockholders have one right for each share of
common stock held. The rights become exercisable ten business days after (a) an
announcement that a person or group of affiliated or associated persons has
acquired beneficial ownership of 15% or more of the voting shares outstanding,
or (b) the commencement or announcement of a person's or group's intention to
commence a tender or exchange offer that could result in a person or group
owning 15% or more of the voting shares outstanding.
Each right entitles its holder (except a holder who is the acquiring person)
to purchase 1/100 of a share of a junior participating series of preferred stock
designated to have economic and voting terms similar to those of one share of
common stock for $250.00, subject to adjustment. In the event of certain merger
or asset sale transactions with another party or transactions which would
increase the equity ownership of a shareholder who then owned 15% or more of
Premier, each Premier right will entitle its holder to purchase securities of
the merging or acquiring party with a value equal to twice the exercise price of
the right.
The rights, which have no voting power, expire in 2007. The rights may be
redeemed by Premier for $.01 per right until the rights becomes exercisable.
(17) RESTRICTED STOCK GRANT (UNAUDITED)
The Company has issued 450,000 restricted common shares to members of the
Company's management. The restrictions on the stock lapse ratably over a
six-year term commencing January 1, 1998, generally based upon the continued
employment of the members of management. The restrictions also lapse if any or
all members are terminated without cause or if a change in control of the
Company occurs. The fair value of the restricted shares, as determined at the
date of grant, approximated $14,625,000 and will be recognized as an expense
over the vesting term.
F-23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.....................................................
Incorporation of Certain Information by Reference.........................
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Historical and Pro Forma Financial and Operating Data............
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Description of Six Flags Agreement........................................
Description of Other Indebtedness.........................................
Description of Notes......................................................
Description of Capital Stock..............................................
Certain United States Federal Income Tax Considerations...................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Index to Financial Statements.............................................
</TABLE>
$
PREMIER PARKS INC.
$ % SENIOR DISCOUNT NOTES DUE 2008
$280,000,000 % SENIOR NOTES DUE 2008
---------------------
PROSPECTUS
, 1998
------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be borne by the
Registrant in connection with the issuance and distribution of the securities
being registered (other than underwriting discounts and commissions). All
amounts presented are estimates except the Securities and Exchange Commission
registration fee and the National Association of Securities Dealers, Inc. filing
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 156,350
National Association of Securities Dealers, Inc. filing fee....................... 30,500
Accounting fees and expenses......................................................
Legal fees and expenses...........................................................
Printing and engraving expenses...................................................
Transfer agent and registrar fees.................................................
Miscellaneous.....................................................................
---------
Total fees and expenses........................................................... $
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law which covers the
indemnification of directors, officers, employees and agents of a corporation is
hereby incorporated herein by reference. Reference is made to Article XXV of the
Registrant's By-Laws which provides for indemnification by the Registrant in the
manner and to the full extent permitted by Delaware law.
Reference is also made to Section of the Underwriting Agreement, to be
filed by amendment as Exhibit 1(a).
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference herein
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
(c) The undersigned Registrant hereby undertakes the following:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 12th day of
February, 1998.
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
------------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Kieran E. Burke, Gary Story,
James F. Dannhauser and James M. Coughlin, or any of them, as his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
re-substitution, for him and in his name, place and stead, to sign in any and
all capacities any and all amendments (including post-effective amendments) to
this registration statement on Form S-3, and any subsequent registration
statement filed by the Registrant pursuant to Rule 462(b) of the Securities Act
of 1933, and to file the same, with all exhibits thereto and all other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that all such attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board and
/s/ KIERAN E. BURKE Chief Executive Officer
- ------------------------------ (principal executive February 12, 1998
Kieran E. Burke officer)
/s/ GARY STORY Director, President and
- ------------------------------ Chief February 12, 1998
Gary Story Operating Officer
Chief Financial Officer
/s/ JAMES F. DANNHAUSER and
- ------------------------------ Director (principal February 12, 1998
James F. Dannhauser financial and accounting
officer)
/s/ PAUL A. BIDDELMAN
- ------------------------------ Director February 12, 1998
Paul A. Biddelman
/s/ MICHAEL E. GELLERT
- ------------------------------ Director February 12, 1998
Michael E. Gellert
/s/ JACK TYRRELL
- ------------------------------ Director February 12, 1998
Jack Tyrrell
/s/ SANDY GURTLER
- ------------------------------ Director February 12, 1998
Sandy Gurtler
/s/ CHARLES R. WOOD
- ------------------------------ Director February 12, 1998
Charles R. Wood
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
(1) Underwriting Agreements:
* (a) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., and Salomon Brothers
Inc as representatives of the several Underwriters (Company Senior Discount Notes and Company
Senior Notes)..................................................................................
* (b) Form of U.S. Underwriting Agreement among the Registrant, Lehman Brothers Inc., and Smith
Barney Inc., as representatives of the several U.S. Underwriters...............................
* (c) Form of International Underwriting Agreement among the Registrant, Lehman Brothers
International (Europe), Smith Barney Inc., as representatives of the several International
Managers.......................................................................................
* (d) Form of Agreement among U.S. Underwriters and International Managers...........................
* (e) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., Smith Barney Inc.,
as representative of the several Underwriters (Mandatorily Convertible Preferred Stock)........
* (f) Form of Underwriting Agreement among the Registrant, Lehman Brothers Inc., as
representatives of the several Underwriters (New SFEC Notes)...................................
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among the Registrant, the subsidiaries of the Registrant
named therein and United States Trust Company of New York, as trustee (including the form of
the Existing Notes) -- incorporated by reference from Exhibit 4(2) to Registrant's Registration
Statement on Form S-1 (Reg. No. 33-62225) declared effective on November 9, 1995 (the
"Registration Statement")......................................................................
(b) Form of First Supplemental Indenture dated as of November 9, 1995 --incorporated by reference
from Exhibit 4(2.1) to the Registration Statement..............................................
(c) Purchase Agreement, dated August 10, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and Chemical Securities Inc. --incorporated by reference from Exhibit
4(3) to the Registration Statement.............................................................
(d) Exchange and Registration Rights Agreement, dated August 14, 1995, among the Registrant, the
subsidiaries of the Registrant named therein and Chemical Securities Inc. -- incorporated by
reference from Exhibit 4(4) to the Registration Statement......................................
(e) Form of Subscription Agreement between the Registrant and each of the purchasers of shares of
Preferred Stock -- incorporated by reference from Exhibit 4(10) to the Registration
Statement......................................................................................
(f) Convertible Note Purchase Agreement, dated as of March 3, 1993, between the Registrant and the
purchasers named therein (including forms of Senior Subordinated Convertible Note and
Registration Rights Agreement) -- incorporated by reference from Exhibit 4(i) to Form 10-K of
the Registrant for the year ended December 31, 1993............................................
(g) Form of Subscription Agreement, dated October 1992, between the Registrant and certain
investors -- incorporated by reference from Exhibit 4(a) to the Registrant's Current Report on
Form 8-K dated October 30, 1992................................................................
(h) Stock Purchase and Warrant Issuance Agreement, dated October 16, 1989, between the Registrant
and Kieran E. Burke -- incorporated by reference from Exhibit 4(i) to Form 10-K of the
Registrant for the year ended December 31, 1989................................................
(i) Warrant, dated October 16, 1989, to purchase 131,728 shares of Common Stock issued by the
Registration to Kieran E. Burke -- incorporated by reference from Exhibit 4(k) to Form 10-K of
the Registrant for the year ended December 31, 1989............................................
(j) Warrant, dated October 16, 1989, to purchase 93,466 shares of Common Stock issued by the
Registrant to Kieran E. Burke -- incorporated by reference from Exhibit 4(l) to Form 10-K of
the Registrant for the year ended December 31, 1989............................................
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
(k) Form of Common Stock Certificate -- incorporated by reference from Exhibit 4(l) to the
Registrant's Registration Statement on Form S-2 (Reg. No. 333-08281) declared effective on May
28, 1996.......................................................................................
* (l) Form of Registration Rights Agreement among the Registrant, Kentucky Kingdom, Inc. and certain
individuals....................................................................................
(m) Form of Indenture dated as of February 1, 1997, among the Registrant and the Bank of New York,
as trustee (including the form of Notes) -- incorporated by reference from Exhibit 4(l) to the
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) filed with the Securities
and Exchange Commission on January 22, 1997....................................................
(n) Form of Second Supplemental Indenture dated January 21, 1997 -- incorporated by reference from
Exhibit 4(n) to the Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) filed
with the Securities and Exchange Commission on January 22, 1997................................
* (o) Form of Indenture, dated as of , 1998, between the Registrant and .................
* (p) Form of Indenture, dated as of , 1998, between the Registrant and .................
* (q) Form of Indenture, dated as of , 1998, between Six Flags Entertainment Corporation and
.........................................................................................
* (r) Form of Certificate of Designation, Rights and Preferences relating to Seller Preferred
Stock..........................................................................................
* (s) Form of Certificate of Designation, Rights and Preferences relating to Mandatorily Convertible
Preferred Stock................................................................................
* (t) Rights Agreement, dated January 12, 1998, between the Registrant and Bank One Trust Company,
N.A. (including certificate of designation of Series A Junior Participating Preferred Stock)
incorporated by reference from Exhibit to the Registrant's Current Report on Form 8-K, dated
December 15, 1997..............................................................................
*(5) Opinion of Baer Marks & Upham LLP, including consent............................................................
(12) (a) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.......
(12) (b) Computation of Ratio of Earnings to Fixed Charges..............................................
(23) Consents:
* (a) Consent of Baer Marks & Upham LLP (included in Exhibit (5))....................................
(b) Consent of KPMG Peat Marwick LLP...............................................................
(c) Consent of Ernst & Young LLP...................................................................
(d) Consent of KPMG Peat Marwick LLP...............................................................
(e) Consent of KPMG Peat Marwick LLP...............................................................
* (f) Consent of Carpenter Mountjoy & Bressler.......................................................
(24) Power of Attorney (included on Signature Page of Registration Statement)........................................
</TABLE>
- ------------------------
* To be filed by amendment
II-6
<PAGE>
EXHIBIT 12(A)
PREMIER PARKS INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
FOR EACH OF THE YEARS IN THE 5-YEAR PERIOD ENDED DECEMBER 31, 1996
AND FOR THE NINE NONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE NINE
YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED
----------------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing
operations......................... (1,735) 1,354 102 (1,045) 1,765 10,512 23,193
Income tax expense (benefit)......... 426 91 68 (762) 1,497 7,020 15,462
Interest expense, net................ 1,413 1,438 2,299 5,578 11,121 7,657 12,869
Equity in loss of affiliated
partnership........................ 122 142 83 69 78 60 44
Minority interest in earnings........ 270 -- -- -- -- -- --
1/3 of rental expense... 23 23 107 183 405 191 515
--------- --------- --------- --------- --------- ------ ------
Adjusted earnings (loss)............. 519 3,048 2,659 4,023 14,866 25,440 52,083
--------- --------- --------- --------- --------- ------ ------
--------- --------- --------- --------- --------- ------ ------
FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS:
Interest expense, net................ 1,413 1,438 2,299 5,578 11,121 7,657 12,869
Preferred stock dividends............ -- -- -- 529 603 603 --
Increase in preferred stock dividends
for pretax earnings required to
cover such dividends at 40%
estimate rate...................... -- -- -- 353 402 402 --
1/3 of rental expense................ 23 23 107 183 405 191 515
--------- --------- --------- --------- --------- ------ ------
Total fixed charges.................. 1,436 1,461 2,406 6,643 12,531 8,853 13,384
--------- --------- --------- --------- --------- ------ ------
--------- --------- --------- --------- --------- ------ ------
Ratio of earnings to combined fixed
charges and preferred stock
dividends.......................... 0.4 2.1 1.1 0.6 1.2 2.9 3.9
--------- --------- --------- --------- --------- ------ ------
Deficiency........................... 917 2,620
</TABLE>
<PAGE>
EXHIBIT 12(B)
PREMIER PARKS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR EACH OF THE YEARS IN THE 5-YEAR PERIOD ENDED DECEMBER 31, 1996
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE
YEAR ENDED DECEMBER 31, MONTHS ENDED
----------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing operations......... (1,735) 1,354 102 (1,045) 1,765 10,512
Income tax expense (benefit)..................... 426 91 68 (762) 1,497 7,020
Interest expense, net............................ 1,413 1,438 2,299 5,578 11,121 7,657
Equity in loss of affiliated partnership......... 122 142 83 69 78 60
Minority interest in earnings.................... 270 -- -- -- -- --
1/3 of rental expense... 23 23 107 183 -- 191
--------- --------- --------- --------- --------- ------
Adjusted earnings (loss)......................... 519 3,048 2,659 4,023 14,461 25,440
--------- --------- --------- --------- --------- ------
--------- --------- --------- --------- --------- ------
FIXED CHARGES:
Interest expense, net............................ 1,413 1,438 2,299 5,578 11,121 7,657
Preferred stock dividends of majority-owned
subsidiaries and fifty-percent owned persons... -- -- -- -- -- --
Increase in preferred stock dividends for pretax
earnings required to cover such dividends at
40% estimated rate............................. -- -- -- -- -- --
1/3 of rental expense............................ 23 23 107 183 405 191
--------- --------- --------- --------- --------- ------
Total fixed charges.............................. 1,436 1,461 2,406 5,761 11,526 7,848
--------- --------- --------- --------- --------- ------
--------- --------- --------- --------- --------- ------
Ratio of earnings to fixed charges............... 0.4 2.1 1.1 0.7 1.3 3.2
--------- --------- --------- --------- --------- ------
Deficiency....................................... 917 1,738
<CAPTION>
NINE
MONTHS ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
EARNINGS:
Income (loss) from continuing operations......... 23,193
Income tax expense (benefit)..................... 15,462
Interest expense, net............................ 12,869
Equity in loss of affiliated partnership......... 44
Minority interest in earnings.................... --
1/3 of rental expense... --
------
Adjusted earnings (loss)......................... 51,568
------
------
FIXED CHARGES:
Interest expense, net............................ 12,869
Preferred stock dividends of majority-owned
subsidiaries and fifty-percent owned persons... --
Increase in preferred stock dividends for pretax
earnings required to cover such dividends at
40% estimated rate............................. --
1/3 of rental expense............................ 515
------
Total fixed charges.............................. 13,384
------
------
Ratio of earnings to fixed charges............... 3.9
------
Deficiency.......................................
</TABLE>
<PAGE>
EXHIBIT 23(B)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 9, 1998
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333- ) and the related Prospectus of
Premier Parks Inc. and to the incorporation by reference therein of our report
dated February 16, 1996 with respect to the financial statements of Elitch
Gardens Company included in the Registration Statement (Form S-2 No. 333-16573)
and related Prospectus of Premier Parks Inc.
Ernst & Young LLP
Denver, Colorado
February 11, 1998
<PAGE>
EXHIBIT 23(D)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Storytown, U.S.A. Inc.
Fantasy Rides Corporation:
We consent to the incorporation by reference in the registration statement
on Form S-3 of Premier Parks Inc. of our report dated October 11, 1996, relating
to the balance sheets of The Great Escape (as defined in note 1 to the financial
statements) as of October 31, 1995 and 1994, and the related statements of
operations, stockholder's equity, and cash flows for the years then ended, which
report appears in the registration statement on Form S-2 (Registration No.
333-16573) of Premier Parks Inc. and to the reference to our firm under the
heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 9, 1998
<PAGE>
EXHIBIT 23(E)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stuart Amusement Company:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Premier Parks Inc. of our report dated December 10, 1996, except as
to the last sentence of the third paragraph of note 3, which is as of December
24, 1996, relating to the consolidated balance sheets of Stuart Amusement
Company and subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of operations, changes in common and other stockholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 1996, which report appears in the registration statement on Form
S-2 (Registration No. 333-16573) of Premier Parks Inc. and to the reference to
our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Springfield, Massachusetts
February 9, 1998
