<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
________________
COMMISSION FILE NUMBER: 0-9789
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SIX FLAGS, INC.
(formerly Premier Parks Inc.)
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3995059
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11501 NORTHEAST EXPRESSWAY, OKLAHOMA CITY,
OKLAHOMA 73131 (Address of principal
executive offices, including zip code)
(405) 475-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date:
At August 1, 2000, Six Flags, Inc. had outstanding 78,700,603
shares of Common Stock, par value $.025 per share.
================================================================================
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
SIX FLAGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $88,620,000 $138,131,000
Accounts receivable.......................... 74,220,000 29,208,000
Inventories.................................. 44,582,000 23,590,000
Prepaid expenses and other current assets.... 31,503,000 32,793,000
Restricted-use investment securities......... 25,197,000 24,430,000
--------------------- --------------------
Total current assets...................... 264,122,000 248,152,000
Other assets:
Debt issuance costs.......................... 51,148,000 55,540,000
Restricted-use investment securities......... 70,215,000 84,464,000
Deposits and other assets.................... 60,398,000 64,472,000
--------------------- --------------------
Total other assets........................ 181,761,000 204,476,000
Property and equipment, at cost................. 2,508,003,000 2,272,419,000
Less accumulated depreciation................ 263,184,000 207,680,000
--------------------- --------------------
Total property and equipment.............. 2,244,819,000 2,064,739,000
Investment in theme park partnerships........... 388,721,000 384,637,000
Intangible assets, principally goodwill......... 1,351,440,000 1,352,732,000
Less accumulated amortization................ 120,489,000 93,164,000
--------------------- --------------------
1,230,951,000 1,259,568,000
--------------------- --------------------
Total assets.............................. $4,310,374,000 $4,161,572,000
===================== ====================
</TABLE>
See accompanying notes to consolidated financial statements
-2-
<PAGE>
ITEM 1 -- FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $107,575,000 $37,918,000
Accrued liabilities............................... 71,702,000 89,726,000
Accrued interest payable.......................... 26,411,000 23,566,000
Deferred income................................... 51,653,000 6,037,000
Current maturities of long-term debt.............. 211,958,000 2,055,000
---------------------- ----------------------
Total current liabilities...................... 469,299,000 159,302,000
Long-term debt ...................................... 2,216,480,000 2,202,933,000
Other long-term liabilities and minority interest.... 35,832,000 41,761,000
Deferred income taxes................................ 89,804,000 141,960,000
---------------------- ----------------------
Total liabilities.............................. 2,811,415,000 2,545,956,000
Stockholders' equity:
Preferred stock of $1.00 par value ............... 12,000 12,000
Common stock of $0.025 par value ................. 1,967,000 1,958,000
Capital in excess of par value.................... 1,705,158,000 1,700,305,000
Accumulated deficit .............................. (163,463,000) (53,681,000)
Deferred compensation............................. (10,327,000) (15,255,000)
Accumulated other comprehensive income (loss)
-foreign currency translation adjustments...... (34,388,000) (17,723,000)
---------------------- ----------------------
Total stockholders' equity..................... 1,498,959,000 1,615,616,000
---------------------- ----------------------
Total liabilities and stockholders' equity..... $4,310,374,000 $4,161,572,000
====================== ======================
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
ITEM 1 -- FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenue:
Theme park admissions......................................... $188,526,000 $173,910,000
Theme park food, merchandise and other........................ 152,553,000 140,232,000
---------------------- --------------------
Total revenue............................................ 341,079,000 314,142,000
---------------------- --------------------
Operating costs and expenses:
Operating expenses............................................ 117,875,000 104,743,000
Selling, general and administrative........................... 61,986,000 54,651,000
Noncash compensation.......................................... 3,145,000 4,201,000
Costs of products sold........................................ 32,355,000 31,078,000
Depreciation and amortization................................. 44,627,000 38,257,000
---------------------- --------------------
Total operating costs and expenses....................... 259,988,000 232,930,000
---------------------- --------------------
Income from operations................................... 81,091,000 81,212,000
---------------------- --------------------
Other income (expense):
Interest expense.............................................. (60,791,000) (47,253,000)
Interest income............................................... 1,804,000 6,100,000
Equity in operations of theme park partnerships............... 9,075,000 6,261,000
Other income (expense), including minority interest........... (122,000) 41,000
---------------------- --------------------
Total other income (expense)............................. (50,034,000) (34,851,000)
---------------------- --------------------
Income before income taxes............................... 31,057,000 46,361,000
Income tax expense............................................... 15,303,000 22,109,000
---------------------- --------------------
Income before extraordinary loss......................... 15,754,000 24,252,000
Extraordinary loss on extinguishment of debt, net of income tax
benefit of $4,104,000 in 1999................................. -- (6,157,000)
---------------------- --------------------
Net income............................................... $15,754,000 $18,095,000
====================== ====================
Net income applicable to common stock.................... $9,932,000 $12,273,000
====================== ====================
Per share amounts:
Net income per average common share-- basic:.................. $0.13 $0.16
Net income per average common share--diluted:................. $0.12 $0.15
====================== ====================
Weighted average number of common shares outstanding -- basic.... 78,677,000 77,372,000
====================== ====================
Weighted average number of common shares outstanding -- diluted.. 79,849,000 80,160,000
====================== ====================
</TABLE>
See accompanying notes to consolidated financial statements
-4-
<PAGE>
ITEM 1 -- FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenue:
Theme park admissions.................................................. $ 200,875,000 $ 188,228,000
Theme park food, merchandise and other................................. 171,097,000 164,494,000
---------------------- --------------------
Total revenue..................................................... 371,972,000 352,722,000
---------------------- --------------------
Operating costs and expenses:
Operating expenses..................................................... 177,068,000 157,523,000
Selling, general and administrative.................................... 95,994,000 89,703,000
Noncash compensation................................................... 6,292,000 9,236,000
Costs of products sold................................................. 34,823,000 34,271,000
Depreciation and amortization.......................................... 86,759,000 73,986,000
---------------------- --------------------
Total operating costs and expenses................................ 400,936,000 364,719,000
---------------------- --------------------
Loss from operations.............................................. (28,964,000) (11,997,000)
---------------------- --------------------
Other income (expense):
Interest expense....................................................... (116,151,000) (93,560,000)
Interest income........................................................ 4,109,000 13,534,000
Equity (loss) in operations of theme park partnerships................. (5,080,000) (3,651,000)
Other income (expense), including minority interest.................... 135,000 (198,000)
---------------------- --------------------
Total other income (expense)...................................... (116,987,000) (83,875,000)
---------------------- --------------------
Loss before income taxes.......................................... (145,951,000) (95,872,000)
Income tax benefit ....................................................... 47,813,000 26,724,000
---------------------- --------------------
Loss before extraordinary loss ................................... (98,138,000) (69,148,000)
Extraordinary loss on extinguishment of debt, net of income tax
benefit of $4,104,000 in 1999.......................................... -- (6,157,000)
---------------------- --------------------
Net loss ......................................................... $(98,138,000) $(75,305,000)
====================== ====================
Net loss applicable to common stock............................... $(109,782,000) $(86,949,000)
====================== ====================
Per share amounts:
Net loss per average common share--basic and diluted:.................. $(1.40) $(1.13)
====================== ====================
Weighted average number of common shares outstanding - basic and diluted.. 78,583,000 77,052,000
====================== ====================
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
ITEM 1 -- FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- -------------------------------------
2000 1999 2000 1999
------------------ ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net income (loss)................................ $15,754,000 $18,095,000 $(98,138,000) $(75,305,000)
Other comprehensive income (loss)--
Foreign currency translation adjustment....... (6,194,000) (7,265,000) (16,665,000) (18,797,000)
------------------ ----------------- ------------------ ----------------
Comprehensive income (loss)...................... $9,560,000 $10,830,000 $(114,803,000) $(94,102,000)
================== ================= ================== ================
</TABLE>
See accompanying notes to consolidated financial statements
-6-
<PAGE>
ITEM 1 -- FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................. $ (98,138,000) $ (75,305,000)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization.......................................... 86,759,000 73,986,000
Equity (loss) in operations of theme park partnerships................. 5,080,000 3,651,000
Minority interest...................................................... 132,000 198,000
Noncash compensation................................................... 6,292,000 9,236,000
Interest accretion on notes payable.................................... 14,992,000 16,646,000
Interest accretion on restricted-use investments....................... (1,656,000) (3,481,000)
Extraordinary loss on early extinguishment of debt .................... -- 10,261,000
Amortization of debt issuance costs.................................... 4,392,000 3,542,000
Deferred income taxes.................................................. (48,156,000) (37,772,000)
Increase in accounts receivable........................................ (45,012,000) (36,680,000)
Increase in inventories and prepaid expenses........................... (19,702,000) (10,192,000)
Decrease in deposits and other assets.................................. 4,074,000 17,916,000
Increase in accounts payable, accrued expenses, and other liabilities.. 83,482,000 81,933,000
Increase (decrease) in accrued interest payable........................ 2,845,000 (9,910,000)
--------------------- ---------------------
Total adjustments...................................................... 93,522,000 119,334,000
--------------------- ---------------------
Net cash (used in) provided by operating activities.................... (4,616,000) 44,029,000
--------------------- ---------------------
Cash flows from investing activities:
Additions to property and equipment....................................... (250,121,000) (251,315,000)
Investment in theme park partnerships..................................... (9,164,000) (27,975,000)
Acquisition of theme park companies, net of cash acquired................. -- (82,432,000)
Maturities of restricted-use investments ................................. 15,138,000 11,170,000
---------------------- --------------------
Net cash used in investing activities.................................. (244,147,000) (350,552,000)
---------------------- --------------------
Cash flows from financing activities:
Repayment of long-term debt............................................... (92,542,000) (427,621,000)
Proceeds from borrowings.................................................. 301,000,000 499,024,000
Net cash proceeds from issuance of common stock........................... 3,498,000 1,510,000
Payment of cash dividends................................................. (11,644,000) (11,644,000)
Payment of debt issuance costs............................................ -- (9,964,000)
---------------------- --------------------
Net cash provided by financing activities.............................. 200,312,000 51,305,000
---------------------- --------------------
Effect of exchange rate changes on cash ............................... (1,060,000) (3,326,000)
---------------------- --------------------
Decrease in cash and cash equivalents.................................. (49,511,000) (258,544,000)
Cash and cash equivalents at beginning of period............................. 138,131,000 400,578,000
====================== ====================
Cash and cash equivalents at end of period................................... $ 88,620,000 $ 142,034,000
====================== ====================
Supplementary cash flow information:
Cash paid for interest.................................................... $ 93,922,000 $ 83,282,000
====================== ====================
</TABLE>
See accompanying notes to consolidated financial statements
-7-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL -- BASIS OF PRESENTATIOn
Six Flags, Inc. ("Six Flags" or the "Company") owns and operates
regional theme amusement and water parks. As of June 30, 2000, the Company and
its subsidiaries own or operate 36 parks, including 28 domestic parks, one park
in Mexico and seven parks in Europe. The Company is also managing the
construction and development of a theme park in Europe. On June 30, 2000, the
Company changed its name from Premier Parks Inc. to Six Flags, Inc. As used
herein, Holdings refers only to Six Flags, Inc., without regard to its
subsidiaries.
During May 1999, in separate transactions, the Company purchased 100%
of the capital stock of the companies that own Reino Aventura, a theme park
located in Mexico City, and purchased the assets used in the operation of
Splashtown, a water park near Houston. In addition, during May 1999, the limited
partnership that owns Six Flags Over Georgia purchased the assets used in the
operation of White Water Atlanta, a water park and related entertainment
facility. The Company is the managing general partner of the limited partnership
and owns approximately 25% of the limited partnership units. On November 15,
1999, the Company purchased Warner Bros. Movie World Germany, near Dusseldorf,
Germany, and entered into a joint venture with Warner Bros. to develop and
manage a new Warner Bros. Movie World theme park scheduled to open in Madrid,
Spain in 2002. (See Note 2.)
The accompanying consolidated financial statements for the three months
and six months ended June 30, 1999 include the results of the parks acquired in
May 1999 only from the respective dates of their acquisition and do not include
the results of Movie World Germany, which was acquired in November 1999. (See
Note 2.)
Management's Discussion and Analysis of Financial Condition and Results
of Operations which follows these notes contains additional information on the
results of operations and the financial position of the Company. Those comments
should be read in conjunction with these notes. The Company's annual report on
Form 10-K for the year ended December 31, 1999 includes additional information
about the Company, its operations and its financial position, and should be
referred to in conjunction with this quarterly report on Form 10-Q. The
information furnished in this report reflects all adjustments (all of which are
normal and recurring) which are, in the opinion of management, necessary to
present a fair statement of the results for the periods presented.
Results of operations for the three-month and six-month periods ended
June 30, 2000 are not indicative of the results expected for the full year. In
particular, the Company's theme park operations contribute most of their annual
revenue during the period from Memorial Day to Labor Day each year.
START-UP COSTS
As of January 1, 1999, the Company adopted the provisions of AICPA
Statement of Position No. 98-5, "Accounting for Start-Up Activities." Generally,
the statement required the write-off of previously capitalized start-up costs
and precludes the future capitalization of these types of costs. Start-up costs
include pre-opening costs and professional fees and other costs associated with
incorporating or otherwise starting a business. The effect of the adoption of
the provisions of the statement was not material to the financial position,
operations or cash flow of the Company and is included in depreciation and
amortization.
INCOME (LOSS) PER SHARE
The following table reconciles the weighted average number of common
shares outstanding used in
-8-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the calculations of basic and diluted income (loss) per share for the three and
six-month periods ended June 30, 2000 and 1999, respectively. The effect of
potential common shares issuable upon the exercise of employee stock options on
the weighted average number of shares on a diluted basis was antidilutive to the
diluted loss per share calculation for each six-month period. Additionally, the
weighted average number of shares of Common Stock for each period does not
include the effect of the potential conversion of the Company's mandatorily
convertible preferred stock into a maximum of 11,500,000 shares of common stock
and a minimum of 9,554,000 shares of common stock as the effects of such
conversion and the resulting decrease in preferred stock dividends is
antidilutive.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ ----------------------------------
2000 1999 2000 1999
----------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding - basic................................ 78,677,000 77,372,000 78,583,000 77,052,000
Effect of potential common shares issuable upon the
exercise of employee stock options ................ 1,172,000 2,788,000 -- --
----------------- ----------------- ----------------- ---------------
Weighted average number of common shares
outstanding - diluted.............................. 79,849,000 80,160,000 78,583,000 77,052,000
================= ================= ================= ===============
</TABLE>
REVENUE RECOGNITION
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 was
amended in March 2000 to delay the effective date until periods beginning after
April 1, 2000. The Company has elected to adopt the provisions of SAB 101 as of
January 1, 2000. The provisions of SAB No. 101 do not have an impact on the
accounting policies that the Company utilizes to prepare its annual financial
statements and therefore, the adoption did not have an impact on the Company's
annual financial statements. However, the provisions of SAB No. 101 did change
the accounting policies that the Company uses to recognize revenue from
multi-admission tickets and season passes during the year. The Company's
accounting policy as of January 1, 2000 recognizes the revenue for
multi-admission tickets and season passes over the operating season on a usage
basis rather than upon receipt.
-9-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provisions of SAB No. 101 allow companies to either restate results
or account for the change as a cumulative effect. The Company has elected to
restate its 1999 interim results of operations. The following sets forth the
results for the three months and six months ended June 30, 1999 as originally
reported and as restated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999 SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------- --------------------------------------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
AS ORIGINALLY AS ORIGINALLY
REPORTED: AS RESTATED: REPORTED: AS RESTATED:
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues......................................... $333,515 $314,142 $387,164 $352,722
Net income (loss) applicable to common stock..... 24,464 12,273 (64,172) (86,949)
Net income (loss) per average common share ......
outstanding - basic.......................... 0.32 0.16 (0.83) (1.13)
Net income (loss) per average common share ......
outstanding - diluted........................ 0.31 0.15 (0.83) (1.13)
</TABLE>
2. ACQUISITION OF THEME PARKS
On May 4, 1999, the Company acquired all of the capital stock of the
companies that own and operate Reino Aventura (subsequently renamed Six Flags
Mexico), a theme park located in Mexico City, for a cash purchase price of
approximately $59,600,000. The Company funded the acquisition from existing
cash. Approximately $14,575,000 of costs in excess of the fair value of the net
assets acquired were recorded as goodwill. The transaction was accounted for as
a purchase.
On May 13, 1999, the Company acquired the assets of Splashtown water
park located in Houston, Texas for a cash purchase price of approximately
$20,400,000. The Company funded the acquisition from existing cash.
Approximately $10,530,000 of costs in excess of the fair value of the net assets
acquired were recorded as goodwill. The transaction was accounted for as a
purchase.
On May 25, 1999, the limited partnership that owns Six Flags Over
Georgia acquired the assets of White Water Atlanta water park and the adjacent
American Adventures entertainment facility located near Atlanta, Georgia. In
connection with the acquisition, the Company issued a $40,700,000 note that was
converted into 1,080,000 shares of the Company's common stock. The transaction
was accounted for by the limited partnership as a purchase. The Company has
reflected the additional investment in the limited partnership as investment in
theme park partnerships.
On November 15, 1999, the Company purchased the partnership that owns
Warner Bros. Movie World Germany, near Dusseldorf, Germany, and entered into a
joint venture with Warner Bros. to design, develop and manage a new Warner Bros.
Movie World theme park scheduled to open in Madrid, Spain in 2002. At the same
time, the Company entered into a long-term license agreement for exclusive theme
park usage in Europe, Mexico, South America and Central America of the Looney
Tunes, Hanna-Barbera, Cartoon Network and D.C. Comics characters. The aggregate
cost of the transactions was $180,269,000, which was funded by borrowings under
the Company's 1999 credit facility (the "Credit Facility"). See Note 3(d).
Approximately $42,800,000 of the aggregate costs were allocated to goodwill and
intangible assets. The transaction was accounted for as a purchase.
-10-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In June 2000, the Company acquired the remaining minority interest in Walibi
S.A. held by third parties for an aggregate cost of approximately $1,023,000.
The purchase price was allocated primarily to goodwill.
3. LONG-TERM INDEBTEDNESS
(a) On January 31, 1997, Six Flags Operations Inc. (formerly known as
Premier Operations Inc.), the predecessor to and currently a wholly-owned
subsidiary of Holdings ("SF Operations"), issued $125,000,000 of senior notes
due January 2007 (the "1997 Notes"). The 1997 Notes are senior unsecured
obligations of SF Operations. The 1997 Notes bear interest at 9 3/4% per annum
payable semiannually and, except in the event of a change of control of SF
Operations and certain other circumstances, do not require any principal
payments prior to their maturity in 2007. The 1997 Notes are redeemable, at SF
Operations' option, in whole or in part, at any time on or after January 15,
2002, at varying redemption prices. The 1997 Notes are guaranteed on a senior,
unsecured, joint and several basis by all of SF Operations' principal domestic
subsidiaries.
The indenture limits the ability of SF Operations 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
affiliates.
(b) On April 1, 1998, Holdings issued at a discount $410,000,000
principal amount at maturity ($313,595,000 and $298,664,000 carrying value as of
June 30, 2000 and December 31, 1999, respectively) of Senior Discount Notes and
$280,000,000 principal amount of 9 1/4% Senior Notes (the "1998 Senior Notes").
The notes are senior unsecured obligations of Holdings, and are not guaranteed
by Holdings' subsidiaries. The Senior Discount Notes do not require any interest
payments prior to October 1, 2003 and, 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 Discount Notes have an interest rate
of 10% per annum. The 1998 Senior Notes require annual interest payments of
approximately $25,900,000 (9 1/4% per annum) and, except in the event of a
change of control of the Company and certain other circumstances, do not require
any principal payments prior to their maturity in 2006. The notes are
redeemable, at the Company's option, in whole or in part, at any time on or
after April 1, 2002 (in the case of the 1998 Senior Notes) and April 1, 2003 (in
the case of the Senior Discount Notes), at varying redemption prices.
Approximately $70,700,000 of the net proceeds of the 1998 Senior Notes
were deposited in escrow to prefund the first six semi-annual interest payments
thereon, and $75,000,000 of the net proceeds of the Senior Discount Notes were
invested in restricted-use securities, until April 1, 2003, to provide funds to
pay certain of the Company's obligations to the limited partners of Six Flags
Over Georgia and Six Flags Over Texas (the "Partnership Parks") and to pay cash
dividends on the Company's mandatorily convertible preferred stock.
The indentures under which the Senior Discount Notes and the 1998 Senior
Notes were issued limit the ability of Holdings 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 affiliates.
(c) On April 1, 1998, Six Flags Entertainment Corporation ("SFEC"), which
was subsequently merged into SF Operations, issued $170,000,000 principal amount
of 8 7/8% Senior Notes (the "SFEC Notes"). The SFEC Notes are guaranteed on a
fully subordinated basis by Holdings. The SFEC Notes require annual interest
payments of approximately $15,100,000 (8 7/8% per annum) and, except in the
event of a change of control of SF Operations and certain other circumstances,
do not require any principal payments prior to their maturity in 2006. The SFEC
Notes are redeemable, at SF Operation's option, in whole or in part, at any time
on or after April 1, 2002, at varying redemption
-11-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
prices. The net proceeds of the SFEC Notes, together with other funds, were
invested in restricted-use securities, which were used to repay in full on
December 15, 1999 pre-existing notes of SFEC in a principal amount of
$192,250,000 at that date.
The indenture under which the SFEC Notes were issued limits the ability
of SF Operations 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 affiliates.
(d) On November 5, 1999, Six Flags Theme Parks Inc., an indirect
wholly-owned subsidiary of the Company ("SFTP"), entered into the Credit
Facility and, in connection therewith, SFEC merged into SF Operations and SFTP
became a subsidiary of SF Operations. The Credit Facility includes a
$300,000,000 five-year revolving credit facility ($210,000,000 of which was
outstanding at June 30, 2000), a $300,000,000 five-and-one-half-year
multicurrency reducing revolver facility (of which $291,000,000 was outstanding
at June 30, 2000) and a $600,000,000 six-year term loan (all of which was
outstanding at June 30, 2000). Borrowings under the five-year revolving credit
facility must be repaid in full for thirty consecutive days each year. The
interest rate on borrowings under the Credit Facility can be fixed for periods
ranging from one to six months. At the Company's option the interest rate is
based upon specified levels in excess of the applicable base rate or LIBOR. In
February 2000, the Company entered into interest rate swap agreements that
effectively convert the term loan component of the Credit Facility into a fixed
rate obligation through the term of the swap agreements, ranging from December
2001 to March 2002. Giving effect to such agreements, the effective rate on the
term loan borrowings at June 30, 2000 was 9.93%.
The multicurrency facility, which permits optional prepayments and
reborrowings, requires quarterly mandatory repayments of 2.5% of the outstanding
amount thereof commencing on December 31, 2001, 5.0% commencing on December 31,
2002, 7.5% commencing on December 31, 2003 and 20.0% commencing on December 31,
2004. The term loan facility requires quarterly repayments of 0.25% of the
outstanding amount thereof commencing on December 31, 2001 and 24.25% commencing
on December 31, 2004. A commitment fee of .50% of the unused credit of the
facility is due quarterly in arrears. The principal borrower under the facility
is SFTP, and borrowings under the Credit Facility are guaranteed by Holdings, SF
Operations and all of SF Operations' domestic subsidiaries and are secured by
substantially all of SF Operations' domestic assets.
The Credit Facility contains restrictive covenants that, among other
things, limit the ability of SF Operations and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; repurchase stock; make
investments; engage in mergers or consolidations; pay dividends, except that
(subject to covenant compliance) dividends will be permitted to allow Holdings
to meet cash interest obligations with respect to its 1998 Senior Notes, Senior
Discount Notes and 1999 Senior Notes, cash dividend payments on its Premium
Income Equity Securities ("PIES") and its obligations to the limited partners in
the Partnership Parks, and engage in certain transactions with subsidiaries and
affiliates. In addition, the Credit Facility requires that SF Operations comply
with certain specified financial ratios and tests.
On November 5, 1999, the Company borrowed $892,000,000 under the Credit
Facility principally to repay all amounts outstanding under the Company's then
existing credit facilities and to provide funds to consummate the November 1999
transactions with Warner Bros. described in Note 2.
(e) On June 30, 1999, Holdings issued $430,000,000 principal amount of 9
3/4% Senior Notes (the "1999 Senior Notes"). The 1999 Senior Notes are senior
unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank
equal to the 1998 Senior Notes and the Senior Discount Notes. The 1999 Senior
Notes require annual interest payments of approximately $41,900,000 and, except
in the event of a change of control of the Company and certain other
circumstances, do not require any principal payments prior to their maturity in
2007. The 1999 Senior Notes are redeemable, at Holding's
-12-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
option, in whole or in part, at any time on or after June 15, 2003, at varying
redemption prices. The indenture under which the 1999 Senior Notes were issued
contains covenants substantially similar to those relating to the 1998 Senior
Notes and the Senior Discount Notes. The net proceeds of the 1999 Senior Notes
were used to retire notes of SF Operations and SFTP.
4. COMMITMENTS AND CONTINGENCIES
On March 21, 1999, a raft capsized in the river rapids ride at Six Flags
Over Texas, one of the Company's Partnership Parks, resulting in one fatality
and injuries to ten others. As a result, a case entitled JERRY L. CARTWRIGHT, ET
AL VS. PREMIER PARKS, INC. D/B/A SIX FLAGS OVER TEXAS, INC. was commenced
seeking unspecified damages. The Partnership Park is covered by the Company's
multi-layered general liability insurance coverage of up to $100,000,000 per
occurrence, with no self-insured retention. The Company does not believe that
the impact of this incident or the resulting lawsuit will have a material
adverse effect on the Company's consolidated financial position, operations or
liquidity.
In December 1998, a final judgment of $197,300,000 in compensatory
damages was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and Time
Warner Entertainment Company, L.P. (TWE), and a final judgment of $245,000,000
in punitive damages was entered against TWE and $12,000,000 in punitive damages
was entered against the Six Flags entities. In July 2000 the judgments were
upheld by the Georgia Court of Appeals. TWE has indicated that it intends to
appeal the judgments to the Georgia Supreme Court. The judgments arose out of a
case entitled SIX FLAGS OVER GEORGIA, LLC ET AL V. TIME WARNER ENTERTAINMENT
COMPANY, LP ET AL based on certain disputed partnership affairs prior to the
Company's acquisition of Six Flags at Six Flags Over Georgia, including alleged
breaches of fiduciary duty. The sellers in the Six Flags acquisition, including
Time Warner, Inc., have agreed to indemnify the Company from any and all
liabilities arising out of this litigation.
The Company is party to various legal actions arising in the normal
course of business. Matters that are probable of unfavorable outcome to the
Company and which can be reasonably estimated are accrued. Such accruals are
based on information known about the matters, the Company's estimates of the
outcomes of such matters and its experience in contesting, litigating and
settling similar matters. None of the actions are believed by management to
involve amounts that would be material to consolidated financial position,
operations, or liquidity after consideration of recorded accruals.
5. INVESTMENT IN THEME PARK PARTNERSHIPS
The following reflects the summarized results of the four parks managed
by the Company during the three and six months ended June 30, 2000 and June 30,
1999. Results for White Water Atlanta and the related outdoor entertainment
complex, which were acquired by the limited partnership that owns Six Flags Over
Georgia on May 25, 1999, are included in the 1999 periods only from the
acquisition date.
-13-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------- ---------------------------------------
2000 1999 2000 1999
---------------- -------------- ----------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue.......................................... $83,105 $86,302 $94,855 $97,853
Expenses:
Operating expenses.............................. 23,576 30,210 43,053 45,444
Selling, general and administrative............. 12,930 14,548 21,489 21,111
Costs of products sold.......................... 6,766 8,738 8,198 9,858
Depreciation and amortization................... 3,082 4,306 7,462 7,522
Interest expense, net........................... 4,429 2,360 7,213 4,207
Other expense................................... 171 132 393 194
---------------- -------------- ----------------- -------------------
Total......................................... 50,954 60,294 87,808 88,336
---------------- -------------- ----------------- -------------------
Net income ...................................... $32,151 $26,008 $7,047 $9,517
================ ============== ================= ===================
</TABLE>
The Company's share of income from operations of the four theme parks
for the three and six months ended June 30, 2000 was $14,076,000 and $4,795,000,
respectively, prior to depreciation and amortization charges of $4,767,000 and
$9,534,000, respectively, and third-party interest and other non-operating
expenses of $234,000 and $341,000, respectively. The Company's share of income
from operations of the four theme parks for the three and six months ended June
30, 1999 was $8,788,000 and $2,988,000, respectively, prior to depreciation and
amortization charges of $2,527,000 and $6,639,000, respectively. There is a
substantial difference between the carrying value of the Company's investment in
the theme parks and the net book value of the theme parks. The difference is
being amortized over 20 years for the Partnership Parks and over the expected
useful life of the rides and equipment installed by the Company at Six Flags
Marine World.
6. BUSINESS SEGMENTS
The Company manages its operations on an individual park location
basis. Discrete financial information is maintained for each park and provided
to the Company's management for review and as a basis for decision making. The
primary performance measure used to allocate resources is earnings before
interest, tax expense, depreciation and amortization ("EBITDA"). All of the
Company's parks provide similar products and services through a similar process
to the same class of customer through a consistent method. As such, the Company
has only one reportable segment--operation of theme parks. The following tables
present segment financial information, a reconciliation of the primary segment
performance measure to income (loss) before income taxes and a reconciliation of
theme park revenues to consolidated total revenues. Park level expenses exclude
all noncash operating expenses, principally depreciation and amortization, and
all non-operating expenses.
-14-
<PAGE>
SIX FLAGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- -----------------------------------
2000 1999 2000 1999
----------------- ------------------ ------------------ ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Theme park revenue.................................. $424,184 $400,444 $466,827 $450,575
Theme park cash expenses............................ 252,636 238,537 370,420 347,207
----------------- ------------------ ------------------ ---------------
Aggregate park EBITDA............................... 171,548 161,907 96,407 103,368
Third-party share of EBITDA from parks
accounted for under the equity method............ (24,804) (19,452) (17,626) (15,096)
Amortization of investment in theme park
Partnerships................................... (4,767) (2,527) (9,534) (6,639)
Unallocated net expenses, including corporate and
other expenses................................. (7,306) (14,157) (16,397) (23,493)
Depreciation and amortization....................... (44,627) (38,257) (86,759) (73,986)
Interest expense.................................... (60,791) (47,253) (116,151) (93,560)
Interest income..................................... 1,804 6,100 4,109 13,534
----------------- ------------------ ------------------ ---------------
Income (loss) before income taxes................... $ 31,057 $ 46,361 $(145,951) $(95,872)
================= ================== ================== ===============
Theme park revenue.................................. $424,184 $400,444 $ 466,827 $450,575
Theme park revenue from parks accounted
for under the equity method...................... (83,105) (86,302) (94,855) (97,853)
================= ================== ================== ===============
Consolidated total revenue.......................... $341,079 $314,142 $371,972 $352,722
================= ================== ================== ===============
</TABLE>
Seven of the Company's parks are located in Europe and one is located in
Mexico. The Mexico park was acquired in May 1999 and one of the European parks
was acquired in November 1999. The following information reflects the Company's
long-lived assets and revenue by domestic and foreign categories as of and for
the six months ended June 30, 2000 and 1999, respectively:
<TABLE>
<CAPTION>
2000: (In thousands)
--------------------------------------------------------------
Domestic International Total
-------- ------------- -----
<S> <C> <C> <C>
Long-lived assets................................ $3,361,733 $502,758 3,864,491
Revenue.......................................... 313,466 58,506 371,972
<CAPTION>
1999: (In thousands)
--------------------------------------------------------------
Domestic International Total
-------- ------------- -----
<S> <C> <C> <C>
Long-lived assets................................ $3,201,293 $230,471 $3,431,764
Revenue.......................................... 323,721 29,001 352,722
</TABLE>
-15-
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
Results of operations for the three-month and six-month periods ended
June 30, 2000 are not indicative of the results expected for the full year. In
particular, the Company's theme park operations contribute most of their annual
revenue during the period from Memorial Day to Labor Day each year.
Results of operations for the three and six months ended June 30, 2000
include the results of the four parks acquired in 1999. Results for the three
and six months ended June 30, 1999 include the results of three of the acquired
parks from their respective dates of acquisition in May 1999 and do not include
the results of the Movie World Germany park acquired in November 1999.
THREE MONTHS ENDED JUNE 30, 2000 VS. THREE MONTHS ENDED JUNE 30, 1999
Revenue in the second quarter of 2000 totaled $341.1 million compared
to $314.1 million for the second quarter of 1999. Revenues in the second quarter
of 2000 increased 8.6% over the prior year period due in part to the inclusion
of the results of the parks acquired in 1999. The Company believes that
revenues in the 2000 quarter were adversely affected by unusually difficult
weather, particularly on weekends, in a large number of its major markets. In
addition, revenues at the Company's European parks were adversely impacted by
a decline in European currencies during the quarter. Revenue growth would
have been approximately $4.5 million higher had European currency exchange
rates remained at 1999 levels.
Operating expenses for the second quarter of 2000 increased $13.1
million compared to expenses for the second quarter of 1999. The 12.5% increase
resulted primarily from the inclusion in the 2000 period of two consolidated
parks acquired in May 1999 and one acquired in November 1999. Excluding the
acquired parks from both periods, operating expenses in the 2000 period
increased $4.7 million (4.6%) as compared to the prior-year period as a result
of increased compensation expense and increased show expenses.
Selling, general and administrative expenses for the second quarter of
2000 increased $7.3 million compared to comparable expenses for the second
quarter of 1999. Excluding the acquired parks from both periods, selling,
general and administrative expenses are constant as compared to the prior year
period. Noncash compensation expense was $1.1 million less than the prior-year
period, reflecting the lower value associated with prior year conditional option
grants which have now become unconditional.
Costs of products sold in the 2000 period increased $1.3 million
compared to costs for the second quarter of 1999. As a percentage of theme park
food, merchandise and other revenue, costs of good sold represented 21.2% in the
2000 period as compared to 22.2% in the 1999 quarter.
Depreciation and amortization expense for the second quarter of 2000
increased $6.4 million compared to the second quarter of 1999. The increase
compared to the 1999 level was attributable to the Company's on-going capital
program and from additional depreciation and amortization expense ($2.7 million)
associated with the consolidated parks acquired in 1999. Interest expense, net
increased $17.8 million compared to the second quarter of 1999. The increase
compared to interest expense, net for the 1999 quarter resulted from higher
average interest rates on a higher average debt and reduced interest income from
lower average cash and cash equivalents and restricted-use investment balances
during 2000.
-16-
<PAGE>
For the 2000 period, equity (loss) in operations of theme park
partnerships reflects the Company's share of the income or loss of Six Flags
Over Texas (34% effective Company ownership) and Six Flags Over Georgia,
including White Water Atlanta (25% effective Company ownership), the lease of
Six Flags Marine World and the management of all four parks. The partnership
that owns Six Flags Over Georgia acquired White Water Atlanta in May 1999.
The $2.8 million increase in the income from equity in operations of theme
park partnerships compared to the second quarter of 1999 was attributable in
part to inclusion of the results of White Water Atlanta for the full 2000
period.
Income tax expense was $15.3 million for the second quarter of 2000
compared to $22.1 million for the second quarter of 1999. The effective tax rate
for the second quarter of 2000 was 49.3% compared to a rate of 47.7% for the
second quarter of 1999. The Company's quarterly effective tax rate will vary
from period-to-period based upon the inherent seasonal nature of the theme park
business, as a result of permanent differences associated with goodwill
amortization for financial statement purposes and the deductible portion of the
amortization for tax purposes.
SIX MONTHS ENDED JUNE 30, 2000 VS. SIX MONTHS ENDED JUNE 30, 1999
Revenue in the first six months of 2000 totaled $372.0 million compared
to $352.7 million for the comparable period of 1999. Revenues in the 2000 period
increased 5.5% over the prior year period due to the inclusion of the results of
the parks acquired in 1999. The Company believes that revenues in the 2000
period were adversely affected by unusually difficult weather, particularly on
weekends, in a large number of its major markets. In addition, revenues at the
Company's European parks were adversely impacted by a decline in European
currencies during the period. Revenue growth would have been approximately $4.5
million higher had European currency exchange rates remained at 1999 levels.
Operating expenses for the six months ended June 30, 2000 increased
$19.5 million compared to expenses for the first half of 1999. The 12.4%
increase resulted primarily from the inclusion in the 2000 period of two
consolidated parks acquired in May 1999 and one acquired in November 1999.
Excluding the acquired parks from both periods, operating expenses in the 2000
period increased $5.5 million (3.6%) as compared to the prior-year period as a
result of increased compensation expense and increased show expenses.
Selling, general and administrative expenses for the first six months
of 2000 increased $6.3 million compared to similar expenses for the first six
months of 1999. Excluding the acquired parks from both periods, selling,
general and administrative expenses decreased $5.0 million as compared to the
prior year period due in large measure to lower corporate expenses. Noncash
compensation expense was $2.9 million less than the prior-year period,
reflecting the lower value associated with prior year conditional option
grants which have now become unconditional.
Costs of products sold in the 2000 period increased $0.6 million
compared to costs for the first six months of 1999. As a percentage of theme
park food, merchandise and other revenue, costs of good sold represented 20.4%
in the 2000 period as compared to 20.8% in the 1999 period.
Depreciation and amortization expense for the first six months of 2000
increased $12.8 million compared to the comparable period of 1999. The increase
compared to the 1999 level was attributable to the Company's on-going capital
program and from additional depreciation and amortization expense ($6.5 million)
associated with the consolidated parks acquired in 1999. Interest expense, net
increased $32.0 million compared to the first six months of 1999. The increase
compared to interest expense, net for the 1999 quarter resulted from higher
average interest rates on a higher average debt and reduced interest income from
lower average cash and cash equivalents and restricted-use investment balances
during 2000.
-17-
<PAGE>
For the 2000 period, equity (loss) in operations of theme park
partnerships reflects the Company's share of the income or loss of Six Flags
Over Texas (34% effective Company ownership) and Six Flags Over Georgia,
including White Water Atlanta (25% effective Company ownership), the lease of
Six Flags Marine World and the management of all four parks. The partnership
that owns Six Flags Over Georgia acquired White Water Atlanta in May 1999.
The loss from equity in operations of theme park partnerships compared to the
first six months of 1999 increased by $1.4 million, primarily as result of
the ownership of White Water Atlanta for the full period in 2000.
Income tax benefit was $47.8 million for the six months ended June 30,
2000 compared to $26.7 million for the first six months of 1999. The effective
tax rate for the 2000 period was 32.8% compared to a rate of 27.9% for the
comparable period of 1999. The Company's quarterly effective tax rate will vary
from period-to-period based upon the inherent seasonal nature of the theme park
business, as a result of permanent differences associated with goodwill
amortization for financial statement purposes and the deductible portion of the
amortization for tax purposes.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
At June 30, 2000, the Company's indebtedness aggregated $2,428.4
million, of which approximately $212.0 million matures prior to June 30, 2001.
Substantially all of the short-term debt represents borrowings under the
revolving credit component of the Credit Facility, which the Company expects to
pay down in full during the third quarter. See Note 3 to the Company's
Consolidated Financial Statements for additional information regarding the
Company's indebtedness.
During the six months ended June 30, 2000, net cash used in operating
activities was $4.6 million. Net cash used in investing activities in the first
six months of 2000 totaled $244.1 million, consisting primarily of capital
expenditures and investments in theme park partnerships. Net cash provided by
financing activities in the first six months of 2000 was $200.3 million,
representing net proceeds of borrowings under the Credit Facility described in
Note 3(d) to the Company's Consolidated Financial Statements, net of cash
dividends paid.
In addition to its obligations under its outstanding indebtedness, the
Company has guaranteed the obligations of certain of its subsidiaries to (i)
make minimum annual distributions of approximately $48.6 million (subject to
annual cost of living adjustments) to the limited partners in the Partnership
Parks, (ii) make minimum capital expenditures at each of the Partnership Parks
during rolling five-year periods, based generally on 6% of such park's revenues,
and (iii) purchase at specified prices a maximum number of 5% per year
(accumulating to the extent not purchased in any given year) of limited
partnership units outstanding (to the extent tendered by the unit holders). Cash
flows from operations at those two Partnership Parks will be used to satisfy the
obligations described in clauses (i) and (ii) above before any funds are
required from the Company. In addition, at June 30, 2000, the Company had $70.2
million in a dedicated escrow account available to fund these obligations.
The degree to which the Company is leveraged could adversely affect its
liquidity. The Company's liquidity could also be adversely affected by
unfavorable weather, accidents or the occurrence of an event or condition,
including negative publicity or significant local competitive events, that
significantly reduce paid attendance and, therefore, revenue at any of its theme
parks.
The Company believes that, based on historical and anticipated
operating results, cash flows from operations, available cash and available
amounts under the Credit Facility will be adequate to meet the Company's future
liquidity needs, including anticipated requirements for working capital, capital
expenditures, scheduled debt and PIES requirements and obligations under
arrangements relating to the Partnership 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 seek additional financing.
-18-
<PAGE>
To minimize the Company's exposure to changing foreign currency rates
on ride purchases, in the past the Company has entered into foreign exchange
forward contracts. The Company has not entered into any new foreign exchange
forward contracts in 2000 related to ride purchase contracts from foreign
vendors. Additionally, the Company has not hedged its exposure to changes in
foreign currency rates related to its international parks.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and in June 2000 issued SFAS No. 138, which
amended certain provisions of SFAS 133. SFAS No. 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge for accounting purposes. The accounting for changes in the
fair value of a derivative (that is gains and losses) depends on the intended
use of the derivative and the resulting designation. It is expected that the
Company will adopt the provisions of SFAS No. 133 and SFAS No. 138 as of January
1, 2001.
The Company has had limited involvement with derivative financial
instruments. The Company is currently evaluating the provisions of SFAS No. 133,
as amended. Based upon the Company's limited use of derivative financial
instruments, the Company does not believe that the adoption of SFAS No. 133 will
have a material impact on its consolidated financial position or future results
of operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25." The Interpretation
clarifies the application of Opinion 25 for certain issues. The Company accounts
for stock based arrangements with employees based on Opinion 25. Among other
issues, the Interpretation clarifies (a) the definition of employee for purposes
of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. The Interpretation is effective July 1, 2000, but certain
conclusions cover specific events that occur either after December 15, 1998 or
January 12, 2000. The Company does not believe that the Interpretation will have
a material impact on its consolidated financial position or future results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information included in "Quantitative and Qualitative Disclosures
About Market Risk" in Item 7A of the Company's 1999 Annual Report on Form 10-K
is incorporated herein by reference. Such information includes a description of
the Company's potential exposure to market risks, including interest rate risk
and foreign currency risk.
During the period January 1, 2000 through June 30, 2000, the value of
the Euro has declined approximately 5.5% in relation to the dollar. This
decline to date is less than the hypothetical 10% decline described and
evaluated in the 1999 Form 10-K. Although the Company may in the future enter
into transactions to hedge currency exchange risks in respect of specific
purchase contracts with foreign vendors, the Company has no current plans to
enter into hedging transactions with respect to its foreign operations
generally.
During the first six months, interest rates (as measured by LIBOR)
have increased by approximately 12%. As previously disclosed, the Company has
entered into interest swap arrangements with respect to its $600.0 million
term loan. At June 30, 2000, the balance of the Company's other indebtedness
represented fixed rate debt, other than $501.0 million outstanding under the
Credit Facility, of which $210.0 million represented debt under the revolving
credit facility which the Company intends to repay in full during the third
quarter of 2000. Except as described above, there have been no material
changes in the Company's market risk exposure from that disclosed in the 1999
Form 10-K.
-19-
<PAGE>
PART II -- OTHER INFORMATION
ITEMS 1-3 AND 5
Not applicable.
ITEMS 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
On June 15, 2000, the Company held its Annual Meeting of Stockholders.
The number of shares of Common Stock represented at the Meeting either in person
or by proxy, was 68,122,279 shares (86.57% of the outstanding shares of common
stock). Five proposals were voted upon at the Meeting. The proposals and voting
results were as follows:
1. Proposal 1 - Election of Directors
The following persons were elected as directors as follows:
<TABLE>
<CAPTION>
NAME FOR AGAINST
---- --- -------
<S> <C> <C>
Paul A. Biddelman...................... 67,927,825 194,454
Kieran E. Burke........................ 67,927,043 195,236
James F. Dannhauser.................... 67,927,060 195,219
Michael E. Gellert..................... 67,927,935 194,344
Francois Letaconnoux................... 67,835,164 287,115
Stanley S. Shuman...................... 67,927,955 194,324
Gary Story............................. 67,925,960 196,319
</TABLE>
2. Proposal 2 - Approval of Amendment to the Company's
Certificate of Incorporation to Effect a name change from
Premier Parks Inc. to Six Flags, Inc.
FOR AGAINST WITHHELD
68,109,769 3,577 8,933
3. Proposal 3 - Approval of Amendment to Premier Parks Operations
Inc.'s Certificate of Incorporation to effect a name change
from Premier Parks Operations Inc. to Six Flags Operations
Inc.
FOR AGAINST WITHHELD
68,045,126 3,693 73,260
4. Proposal 4 - Transfer of Ownership of International Operations
to Six Flags Theme Parks, Inc.
FOR AGAINST WITHHELD
67,929,712 2,387 190,180
5. Proposal 5 - Ratification of selection by the Company's Board
of Directors of KPMG LLP as independent public accountants of
the Company for the year ending December 31, 2000
FOR AGAINST WITHHELD
68,108,207 3,665 10,407
-20-
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Amendment of the Company's Certificate of
Incorporation dated June 23, 2000.
3.2 Amended and Restated By-Laws of the Company
27.1 Financial Data Schedule - June 30, 2000
(b) Reports on Form 8-K
None.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIX FLAGS, INC.
(Registrant)
Kieran E. Burke
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
James F. Dannhauser
CHIEF FINANCIAL OFFICER
Date: August 11, 2000
-22-
