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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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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PREMIER PARKS INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3995059
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
</TABLE>
11501 NORTHEAST EXPRESSWAY, OKLAHOMA CITY, OKLAHOMA 73131
(Address of principal executive offices)
Registrant's telephone number, including area code: (405) 475-2500
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Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Shares of common stock, par value $.025 per share, New York Stock Exchange
with Rights to Purchase Series A Junior
Preferred Stock
Premium Income Equity Securities, consisting of
Depositary Shares representing 1/500 of a share of New York Stock Exchange
7 1/2% Mandatorily Convertible Preferred Stock
</TABLE>
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Securities registered pursuant to Section 12(b) of the Act: NONE
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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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
State the aggregate market value of the voting stock held by non-affiliates
(assuming, solely for the purposes of this Form, that all the directors of the
Registrant are affiliates) of the Registrant.
Approximately $1,580.6 million as of March 1, 2000 (based on the last sales
price on such date as reported on the New York Stock Exchange). See "Item
5.--Market for the Registrant's Common Equity and Related Stockholder Matters."
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest most practicable date.
The number of shares of Common Stock of the Registrant outstanding as of
March 1, 2000 was 78,581,003 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The information required in Part III by Item 10, as to directors, and by
Items 11, 12 and 13 is incorporated by reference to the Registrant's proxy
statement in connection with the annual meeting of stockholders to be held in
June 2000, which will be filed by the Registrant within 120 days after the close
of its 1999 fiscal year.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Company(1) is the largest regional theme park operator in the world. The
34 parks it operated during the 1999 season had attendance of approximately
43.2 million. It now operates 35 regional parks, including 15 of the 50 highest
attendance theme parks in North America, the largest paid admission theme park
in Mexico and seven theme parks in Europe. The Company's theme parks serve each
of the 10 largest metropolitan areas in the United States. The Company estimates
that approximately two-thirds of the population of the continental United States
live within a 150-mile radius of the Company's parks.
For the year ended December 31, 1999, the Company's reported total revenue
was approximately $927.0 million and its consolidated earnings before interest,
taxes, depreciation and amortization and non-cash compensation ("EBITDA") was
approximately $319.0 million. Adjusted EBITDA for the year was $363.2 million.
Adjusted EBITDA includes the Company's proportionate share of the EBITDA of the
parks that are less than wholly-owned by the Company and accounted for by the
equity method, I.E., Six Flags Over Georgia (including White Water Atlanta), Six
Flags Over Texas and Six Flags Marine World (the "Partnership Parks"). Aggregate
combined revenues and EBITDA of the Company and the Partnership Parks for 1999
were $1,152.8 million and $404.6 million, respectively.
In May 1999, the Company acquired Reino Aventura, a theme park located in
Mexico City. Also in May 1999, the Company acquired two water parks, White Water
Atlanta (with an adjacent entertainment park) in Atlanta and Splashtown in
Houston.
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
theme park located near Dusseldorf, Germany. At the same time, the Company
entered into (i) a long-term license agreements with Warner Bros. for exclusive
theme park usage in Europe and Latin and South America (including Mexico) of the
Looney Tunes, Hanna-Barbera, Cartoon Network and DC Comics characters,(2) which
complement the Company's domestic license described below and (ii) 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. See Note 2 to Notes
to Consolidated Financial Statements.
In April 1998, the Company acquired the twelve parks (including its
interests in two of the Partnership Parks) that then constituted the Six Flags
chain. Six Flags has operated regional theme parks under the Six Flags name for
nearly forty years. As a result, Six Flags is a nationally-recognized brand
name. Premier obtained worldwide ownership of the Six Flags brand name, and in
the 1998 and 1999 seasons commenced the use of the Six Flags brand name at five
parks and is adding the brand to four additional parks for the 2000 season.
As part of the Six Flags acquisition, the Company obtained the exclusive
right for theme-park usage of certain Warner Bros. and DC Comics animated
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.
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(1) As used in this Report, unless the context requires otherwise, "Company"
or "Premier" refers to Premier Parks Inc. and its consolidated
subsidiaries.
(2) LOONEY TUNES, characters, names and all related indicia are trademarks of
Warner Bros. -C- 2000, a division of Time Warner Entertainment Company,
L.P. ("TWE"), BATMAN and SUPERMAN and all related characters, names and
indicia are copyrights and tradermarks of DC Comics -C- 2000, CARTOON
NETWORK and logo are trademarks of Cartoon Network -C- 2000, SIX FLAGS and
all related indicia are federally registered trademarks of Six Flags Theme
Parks Inc. -C- 2000, a subsidiary of the Company. FIESTA TEXAS and all
related indicia are trademarks of Fiesta Texas, Inc. -C- 2000, a subsidiary
of the Company.
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The Company's 35 parks at December 31, 1999, are located in geographically
diverse markets across North America and Europe. Each of the Company's theme
parks is individually themed and provides a complete family-oriented
entertainment experience. The Company's theme parks generally offer a broad
selection of state-of-the-art and traditional thrill rides, water attractions,
themed areas, concerts and shows, restaurants, game venues and merchandise
outlets. In the aggregate, the Company's theme parks offer more than 800 rides,
including over 100 roller coasters, making the Company the leading provider of
"thrill rides" in the industry.
Since current management assumed control in 1989, the Company has acquired
34 parks (including its interests in the Partnership Parks), and has achieved
significant internal growth.
DESCRIPTION OF DOMESTIC PARKS
SIX FLAGS AMERICA
Six Flags America, 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) is the 37(th) largest theme park in North America.(3)
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 11.0 million people within 100 miles. Based on a copyrighted 1999
survey of television households within designated market areas ("DMAs")
published by A.C. Nielsen Media Research, the Washington, D.C. and Baltimore
markets are the number 7 and number 23 DMAs in the United States, respectively.
The Company owns a site of 515 acres, with 131 acres currently used for park
operations. The remaining 384 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.
Six Flags America'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 Six Flags
America.
SIX FLAGS ASTROWORLD, SIX FLAGS WATERWORLD AND SPLASHTOWN
Six Flags AstroWorld, the 34(th) largest theme park in North America, and
the separately gated adjacent Six Flags WaterWorld, the 13(th) largest water
park in the United States, are located in Houston, Texas. The Houston, Texas
market provides the parks with a permanent resident population of 4.3 million
people within 50 miles and 5.2 million people within 100 miles. The Houston
market is the number 11 DMA in the United States.
In May 1999, the Company acquired Splashtown, a water park located
approximately 30 miles from Six Flags AstroWorld. The Company believes it can
increase attendance and revenues at all three Houston facilities through joint
season pass and other joint ticketing and marketing programs and can increase
operating efficiencies at the facilities through shared expenses.
The Company owns a site of approximately 90 acres used for the theme park,
approximately 14 acres used for Six Flags WaterWorld and approximately 60 acres
for Splashtown. Six Flags WaterWorld and Splashtown compete with each other and
with Water Works, a nearby water park. Six Flags AstroWorld competes with Sea
World of Texas and the Company's Six Flags Fiesta Texas, both located in San
Antonio, Texas, approximately 200 miles from the park. In addition, the park
competes with Six Flags Over Texas, the Company's park located in Arlington,
Texas, approximately 250 miles from the park.
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(3) Park rankings are based on 1999 attendance as published in Amusement
Business, an industry trade publication.
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SIX FLAGS DARIEN LAKE & CAMPING RESORT
Six Flags Darien Lake, a combination theme and water park, is the largest
theme park in the State of New York and the 36(th) largest theme park in North
America. Six Flags 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 3.2 million
within 100 miles. The Buffalo, Rochester and Syracuse markets are the number 39,
number 77 and number 76 DMAs in the United States, respectively.
The Six Flags Darien Lake property consists of approximately 988 acres,
including 144 acres for the theme park, 242 acres of campgrounds and 602 acres
of agricultural, undeveloped and water areas. Six Flags Darien Lake also has a
20,000 seat amphitheater. The Company has a long-term arrangement with a
national concert promoter to lease and operate the amphitheater.
Adjacent to the Six Flags Darien Lake theme park are a 164 room hotel and a
camping resort, each owned and operated by the Company. The campgrounds include
1,180 developed campsites, including 430 recreational vehicles (RVs') available
for daily and weekly rental. The campground is the fifth largest in the United
States. In 1999, approximately 330,000 people used the Six Flags Darien Lake
hotel and campgrounds. Substantially all of the hotel and camping visitors visit
the theme park.
Six Flags Darien Lake's principal competitor is Wonderland Park located in
Toronto, Canada, approximately 125 miles from Six Flags Darien Lake. In
addition, Six Flags Darien Lake competes to a lesser degree with three smaller
amusement parks located within 50 miles of the park. Six Flags Darien Lake is
significantly larger with a more diverse complement of entertainment than any of
these three smaller facilities.
SIX FLAGS ELITCH GARDENS
Six Flags Elitch Gardens is a combination theme and water park located on
approximately 67 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and the Pepsi Center Arena, and close to Coors Field. Six Flags
Elitch Gardens is the 40(th) largest theme park in North America. 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. Six Flags Elitch Gardens has no significant direct
competitors.
SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas, the 25(th) largest theme park in North America, is a
combination theme and water park located on approximately 206 acres in San
Antonio, Texas. The San Antonio, Texas market provides the park with a permanent
resident population of approximately 1.7 million people within 50 miles and
approximately 3.0 million people within 100 miles. The San Antonio market is the
number 38 DMA in the United States.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas, also
located in San Antonio. In addition, the park competes to a lesser degree with
two Company parks: Six Flags AstroWorld, located in Houston, Texas, and Six
Flags Over Texas located in Dallas.
SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK
Six Flags Great Adventure, the 10(th) largest theme park in North America,
and the separately gated adjacent Six Flags Wild Safari Animal Park, are located
in Jackson, New Jersey, approximately 70 miles south of New York City and 50
miles east of Philadelphia. The Company is adding a separately gated water
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park to the site for the 2000 season. The New York and Philadelphia markets
provide the parks with a permanent resident population of approximately
12.2 million people within 50 miles and approximately 26.4 million people within
100 miles. The New York and Philadelphia markets are the number 1 and number 4
DMAs in the United States, respectively.
The Company owns a site of approximately 2,200 acres, of which approximately
125 acres are currently used for the theme park operations, and approximately
350 adjacent acres are used for the wildlife safari park, home to over 1,200
exotic animals representing more than 58 species, which can be seen over a four
and one-half mile drive. The new water park will be located on approximately 23
acres. Over 1700 acres remain undeveloped. 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 18(th) largest theme park in North America, 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 approximately 7.8 million people within 50 miles and approximately
12.0 million people within 100 miles. The Chicago and Milwaukee markets are the
number 3 and number 31 DMAs in the United States, respectively.
The Company owns a site of approximately 440 acres of which 92 are used for
the theme park operations, and approximately 106 usable acres are located in a
separate parcel available for expansion and complementary uses. Six Flags Great
America currently has no direct theme park competitors in the region, but does
compete to some extent with 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 outside St. Louis, Missouri, approximately 320 miles from the park.
SIX FLAGS KENTUCKY KINGDOM
Six Flags 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 between 2021 and 2049,
with the balance owned by the Company. Six Flags Kentucky Kingdom is the 46th
largest theme park in North America. 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 approximately
4.6 million people within 100 miles. The Louisville and Lexington markets are
the number 50 and number 66 DMAs in the United States.
Six Flags Kentucky Kingdom's only significant direct competitor is Kings
Island, located near Cincinnati, Ohio, approximately 100 miles from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 17(th) largest theme park in North America,
and the separately gated adjacent Six Flags Hurricane Harbor, 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 approximately 9.8 million people within 50 miles and approximately
15.8 million people within 100 miles. The Los Angeles market is the number 2 DMA
in the United States.
The Company owns a site of approximately 260 acres with 160 acres used for
the theme park, and approximately 12 acres used for the pirate-themed water
park. Six Flags Magic Mountain's principal
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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. In early 1999, a new park, Legoland, opened approximately 120 miles from
Magic Mountain. Six Flags Hurricane Harbor's only direct competitor in the area
is Raging Waters, approximately 50 miles from the water park.
SIX FLAGS MARINE WORLD
Six Flags Marine World, a theme park which also features marine mammals and
exotic land animals, is the 30(th) largest theme park in North America. Six
Flags Marine World is located in Vallejo, California, approximately 30 miles
from San Francisco, 20 miles from Oakland and 60 miles from Sacramento. This
market provides the park with a permanent resident population base of
approximately 5.2 million people within 50 miles and approximately 9.7 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.
The Company manages the operations of Six Flags Marine World under 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 55 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 combined operations of 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.
Six Flags Marine World is located on approximately 136 acres and offers
various rides and other traditional theme park attractions, as well as
presentation stadiums, animal habitats and picnic areas, bordering a 55-acre
man-made lake. The park provides for the shelter and care for marine mammals,
land animals, sharks and rays, birds and reptiles, tropical and cold water fish
and marine invertebrates, and butterflies, all featured in a variety of exhibits
and participatory attractions.
Six Flags 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 Six
Flags Marine World, respectively.
The Company accounts for its interest in Six Flags Marine World under the
equity method of accounting. See Notes 4 and 13 to Notes to Consolidated
Financial Statements.
SIX FLAGS NEW ENGLAND
Six Flags New England (formerly Riverside Park) is a combination theme and
water park, located off Interstate 91 near Springfield, Massachusetts,
approximately 95 miles west of Boston. Six Flags New England is the 40(th)
largest theme park in North America with a primary market that includes
Springfield and western Massachusetts, Hartford and western Connecticut, as well
as portions of eastern Massachusetts (including Boston) and eastern New York.
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. Springfield, Hartford/New Haven and Boston are the number 105, number
27 and number 6 DMAs in the United States. Six Flags New England is comprised of
approximately 230 acres, with 90 acres currently used for park operations, 12
acres for a picnic grove and approximately 128 undeveloped acres.
Six Flags New England's only significant competitor is Lake Compounce
located in Bristol, Connecticut, approximately 50 miles from Six Flags New
England. To a lesser extent, Six Flags New England competes with The Great
Escape, the Company's park located in Lake George, New York, approximately 150
miles from Six Flags New England.
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SIX FLAGS OHIO
Six Flags Ohio (formerly Geauga Lake), a combination theme and water park,
is the 49(th) largest theme park in North America. Six Flags Ohio 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
approximately 7.2 million within 100 miles. The Cleveland/Akron, Youngstown and
Pittsburgh markets are the number 13, number 99 and number 19 DMAs in the United
States, respectively.
Adjacent to Six Flags Ohio are a 145 room hotel and a camping resort, each
owned and operated by the Company. The campgrounds include 300 developed
campsites, including 12 recreational vehicles (RV's) available for daily and
weekly rental. In 1999, approximately 62,000 people used the Six Flags Ohio
hotel and campgrounds.
The 263-acre property on which Six Flags Ohio is situated includes a 50-acre
spring-fed lake. The theme park itself presently occupies approximately 45
acres. There are approximately 121 acres of undeveloped land (of which
approximately 40 acres have the potential for further development).
Six Flags Ohio'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 the park. There are also three small
water parks within a 50-mile radius of Six Flags Ohio, and Sea World of Ohio, a
marine park, is located on the other side of the on-site lake. While Sea World
does, to some extent, compete with Six Flags Ohio, 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.
SIX FLAGS OVER GEORGIA AND WHITE WATER ATLANTA
Six Flags Over Georgia, the 24(th) largest theme park in North America is
located on approximately 280 acres, 10 miles outside of Atlanta, Georgia. The
Atlanta, Georgia market provides the park with a permanent resident population
of approximately 3.8 million people within 50 miles and approximately
6.3 million people within 100 miles. The Atlanta market is the number 10 DMA in
the United States.
In May 1999, the partnership that owns Six Flags Over Georgia purchased
White Water Atlanta, a water park and related entertainment park located
approximately 20 miles from the theme park. White Water Atlanta, which is the
11(th) largest water park in the United States, is located on approximately 69
acres. Approximately 12 acres remain undeveloped. The Company believes that it
can increase attendance and revenues at both White Water Atlanta and Six Flags
Over Georgia through joint season passes and other joint ticketing and marketing
programs, and can increase operating efficiencies at both facilities through
shared expenses.
Six Flags Over Georgia's primary competitors include Carowinds in Charlotte,
North Carolina, located approximately 250 miles from the park, Visionland in
Birmingham, Alabama, located approximately 160 miles from the park, and
Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles from the
park. White Water's primary competitors include Sun Valley Beach, Atlanta Beach
and Lake Lanier Islands. These competitors are located approximately 15, 40 and
45 miles away from the water park, respectively. The Georgia Limited Partner (as
defined below) owns the theme park site of approximately 280 acres, including
approximately 85 acres of undeveloped land, all of which is leased to Six Flags
Over Georgia II, L.P. (the "Georgia Partnership").
PARTNERSHIP STRUCTURE. On March 18, 1997, Six Flags completed arrangements
pursuant to which the Company will manage the Georgia park through 2026. Under
the agreements governing the new arrangements, the Georgia park is owned
(excluding real property) by the Georgia Partnership of which a Premier
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subsidiary is the managing general partner. In the second quarter of 1997, two
subsidiaries of Six Flags made a tender offer for partnership interests ("LP
Units") in the 99% limited partner of the Georgia Partnership (the "Georgia
Limited Partner"), that valued the Georgia park at $250 million (the "Georgia
Tender Offer Price"). Six Flags purchased approximately 25% of the LP Units in
the 1997 tender offer at an aggregate price of $62.7 million.
The key elements of the arrangements are as follows: (i) the Georgia Limited
Partner (which is not affiliated with the Company except for the Company's
ownership of certain LP Units) received minimum annual distributions of
$18.8 million in 1998 and $19.1 million in 1999, with the minimum distribution
increasing each subsequent year in proportion to increases in the cost of
living; (ii) thereafter, the Company 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 the Company and 5% to the Georgia Limited
Partner; (iii) on an annual basis, the Company will offer to purchase additional
LP Units at a price based on a valuation for the park equal to the greater of
$250.0 million or a value derived by multiplying the weighted average four year
EBITDA (as defined therein) of the park and, to the extent positive, White Water
Atlanta, by 8.0; (iv) in 2027, the Company will have the option to acquire all
remaining interests in the Georgia park at a price based on the Georgia Tender
Offer Price, increased in proportion to the increase in the cost of living
between December 1996 and December 2026, and (v) the Company is required to make
minimum capital expenditures at the Georgia park during rolling five-year
periods, based generally on 6% of the park's revenues. The Company was not
required to purchase a material number of LP Units in the 1998 and 1999 offers
to purchase. Cash flow from operations at the Georgia park is used to satisfy
these requirements first, before any funds are required from the Company. In
addition, the Company is entitled to retain its proportionate share (based on
its holdings of LP Units) of distributions made to the Georgia Limited Partner
(approximately $4.7 million in 1999). In connection with its acquisition of Six
Flags, the Company entered into a Subordinated Indemnity Agreement (the
"Subordinated Indemnity Agreement") with certain Six Flags entities, Time
Warner Inc. ("Time Warner") and an affiliate of Time Warner, pursuant to which
the Company transferred to Time Warner (who has guaranteed the Six Flags
obligations under these arrangements) record title to the corporations which own
the entities that have purchased and will purchase LP Units, and the Company
received an assignment from Time Warner of all cash flow received on such LP
Units and will otherwise control such entities, except in the event of a default
by the Company of its obligations under these arrangements. After all such
obligations have been satisfied, Time Warner is required to retransfer to the
Company such record title for a nominal consideration. In addition, the Company
issued 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.
The Company accounts for its interests in the Georgia parks under the equity
method of accounting. See Notes 2, 4, and 14 to Notes to Consolidated Financial
Statements.
SIX FLAGS OVER TEXAS AND SIX FLAGS HURRICANE HARBOR
Six Flags Over Texas, the 22(nd) largest theme park in North America, and
the separately gated Six Flags Hurricane Harbor, the 6(th) largest water park in
the United States, 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 approximately
4.5 million people within 50 miles and approximately 5.6 million people within
100 miles. The Dallas/Fort Worth market is the number 8 DMA in the United
States.
The Texas Limited Partner (as defined below) owns a site of approximately
200 acres used for the theme park. Six Flags Over Texas' principal competitors
include Sea World of Texas and the Company's Six Flags Fiesta Texas, both
located in San Antonio, Texas, approximately 285 miles from the park and Six
Flags AstroWorld, approximately 250 miles from the park. The Company owns
directly approximately 47
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acres, of which approximately 18 acres are currently used for Hurricane Harbor
and 31 acres remain undeveloped. Six Flags Hurricane Harbor has no direct
competitors in the area other than a municipal water park.
PARTNERSHIP STRUCTURE. Six Flags Over Texas is owned (excluding real
property) by Texas Flags, Ltd. (the "Texas Partnership"), a Texas limited
partnership of which the 1% general partner is a wholly-owned subsidiary of
Premier, and the 99% limited partner is Six Flags Fund II, Ltd., a Texas limited
partnership (the "Texas Limited Partner") which is unaffiliated with the Company
except that the Company owns certain limited partnership units in the Texas
Limited Partner as described below. Six Flags Hurricane Harbor is 100% owned by
the Company and is not included in these partnership arrangements.
In December 1997, Six Flags completed arrangements pursuant to which the
Company will manage Six Flags Over Texas through 2027. The key elements of the
arrangements are as follows: (i) the Texas Limited Partner received minimum
annual distribution of $28.2 million in 1999, increasing each year thereafter in
proportion to increases in the cost of living; (ii) thereafter, the Company 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 the Company and 7.5% to the Texas Limited Partner; (iii) in the first
quarter of 1998, the Company made a tender offer for partnership units ("LP
Units") in the Texas Limited Partner that valued the park at approximately
$374.8 million (the "Texas Tender Offer Price"); (iv) commencing in 1999, and on
an annual basis thereafter, Six Flags will offer to purchase LP Units at a price
based on a valuation for the park equal to the greater of $374.8 million or a
value derived by multiplying the weighted-average four year EBITDA of the park
by 8.5; (v) in 2028 the Company will have the option to acquire all remaining
interests in the park at a price based on the Texas Tender Offer Price,
increased in proportion to the increase in the cost of living between
December 1997 and December 2027; and (vi) the Company is required to make
minimum capital expenditures at the Texas park during rolling five-year periods,
based generally on 6% of such park's revenues. Cash flow from operations at the
Texas park is used to satisfy these requirements first, before any funds are
required from the Company. In addition, the Company is entitled to retain its
proportionate share (based on its holdings of LP Units) of distributions made to
the Texas Limited Partner (approximately $9.6 million in 1999). Pursuant to the
tender offer and the 1999 offer to purchase, the Company has purchased
approximately 34% of the LP Units at an aggregate price of $129.5 million. In
connection with the Subordinated Indemnity Agreement, the Company transferred to
Time Warner (who has guaranteed the Six Flags obligations under these
arrangements) record title to the corporations which own the entities that have
purchased and will purchase LP Units and the Company received an assignment from
Time Warner of all cash flow received on such LP Units and will otherwise
control such entities, except in the event of a default by the Company of its
obligations under these arrangements. After all such obligations have been
satisfied, Time Warner is required to retransfer to the Company such record
title for a nominal consideration. In addition, the Company issued preferred
stock of the managing general 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.
The Company accounts for its interests in Six Flags Over Texas under the
equity method of accounting. See Notes 2, 4, and 14 to Notes to Consolidated
Financial Statements.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 32(nd) largest theme park in North America, is a
combination theme and water park 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 approximately 2.6 million people within 50
miles and approximately 3.7 million people within 100 miles. The St. Louis
market is the number 21 DMA in the United States.
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The Company owns a site of approximately 497 acres of which approximately
132 are used for park operations. Six Flags St. Louis competes with Kings
Island, located near Cincinnati, Ohio, approximately 350 miles from the park;
Worlds of Fun in Kansas City, Missouri, located approximately 250 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.
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 1.1 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.
The Company owns a site of approximately 95 acres, with 60 acres currently
used for park operations. Frontier City's only significant competitor is the
Company's Six Flags Over Texas, located in Arlington, Texas, approximately 225
miles from Frontier City.
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, New York 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. This market provides the park with a
permanent resident population base of approximately 870,000 people within 50
miles of the park and 2.9 million people within 100 miles. According to
information released by local governmental agencies, approximately 8.8 million
tourists visited the Lake George area in 1998. The Albany market is the number
55 DMA in the United States.
The Great Escape is located on a site of approximately 368 acres, with 143
acres currently used for park operations. Approximately 43 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Six Flags New England, 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.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld USA/Concord and
Waterworld USA/ Sacramento).
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 6.4 million people within 50 miles of the park
and 9.8 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. The facility's 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 9.8 million people within 100 miles. The
Sacramento market is the number 20 DMA in the United States.
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Both facilities are leased under long-term ground leases. The Concord site
includes approximately 21 acres. The Sacramento facility is located on
approximately 14 acres, all of which is used for the park. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 50 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 20 miles
from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on approximately 22
acres located along Interstate 40 in southwest Oklahoma City, Oklahoma. 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 1.1 million
people within 50 miles of the park and 2.1 million people within 100 miles.
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 subleased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in the United States. The park
is the 14(th) largest water park in the United States.
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 2000, 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 Kings Island, located near Cincinnati,
Ohio, and Cedar Point, located in Sandusky, Ohio. Each of these parks is located
approximately 100 miles from Wyandot Lake. Although the Columbus Zoo is located
adjacent to the park, it is a complementary attraction, with many patrons
visiting both facilities.
DESCRIPTION OF INTERNATIONAL PARKS
SIX FLAGS MEXICO
In May 1999, the Company acquired Reino Aventura, the largest paid admission
theme park in Mexico. The park is being rebranded as Six Flags Mexico for the
2000 season in connection with the introduction of the Looney Tunes and other
Warner Bros. licensed characters and a substantial capital expansion. The park
first opened in 1982 and is located on approximately 107 acres in Mexico City,
which are leased on a long-term basis from the Federal District of Mexico. More
than 22 million people live within 50 miles of Six Flags Mexico. Six Flags
Mexico's principal competitors are Chapultepec and Divertido, both amusement
parks located in Mexico City.
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WARNER BROS. MOVIE WORLD
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
"Hollywood" themed park located near Dusseldorf Germany. The park offers over
thirty rides, shows and attractions and also contains four studios for film and
television productions. The park is located on approximately 148 acres of land,
most of which is leased on a long-term basis with the balance owned. The Company
estimates that approximately 26 million people live within a 150 mile radius of
the park. The park's principal competitor is Phantasialand Park, located
approximately 50 miles from the park.
The Company has also entered into a joint venture with Warner Bros. to
design, develop and manage a new Warner Bros. Movie World park scheduled to open
in Madrid, Spain in 2002.
WALIBI PARKS
Premier owns approximately 98.6% of the shares of capital stock of Walibi,
S.A., and expects to acquire in 2000 all remaining shares not currently owned.
Walibi's six parks had combined 1999 attendance of approximately 3.8 million.
The Walibi parks consist of Bellewaerde, Walibi Aquitaine, Walibi Flevo,
Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre. Walibi Flevo, located
outside Amsterdam, is being rebranded as Six Flags Holland and the Warner
Bros./Looney Tunes characters are being introduced at that park for the 2000
season. The Walibi parks' primary markets include Belgium, The Netherlands,
southwestern France, eastern France and northern France. These markets provide
the Walibi parks with a permanent resident population of 23.0 million people
within 50 miles and 54.5 million people within 100 miles.
The Walibi parks' most significant competitors are Disneyland Paris, located
in France, Meli Park and Bobbeejaanland, each located in Belgium, de Efteling,
located in The Netherlands, and Parc Asterix, located in France.
For additional financial and other information concerning the Company's
international operations, see Note 15 to Notes to Consolidated Financial
Statements.
MARKETING AND PROMOTION
The Company attracts visitors through locally oriented multi-media marketing
and promotional programs for each of its parks. These programs are tailored to
address the different characteristics of their respective markets and to
maximize the impact of specific park attractions and product introductions. All
marketing and promotional programs are updated or completely revamped each year
to address new developments. Marketing programs are supervised by the Company's
Senior Vice President for Marketing, with the assistance of the Company's senior
management and in-house marketing staff, as well as 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. 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.
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.
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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.
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
Premier has the exclusive right on a long-term basis to theme park usage of
the Warner Bros. and DC comics animated characters throughout the world except
for Asia, Australia, Africa and the Las Vegas metropolitan area. In addition,
the Cartoon Network and Hanna-Barbera characters are available for use by the
Company at theme parks throughout Europe and Latin and South America. The
Company believes that the use of the Warner Bros. characters adds a new
dimension of family entertainment, helps drive attendance, lengthens visitors'
stay in the parks and increases in-park spending. The Company believes the
licensed characters are well known in Premier's non-U.S. markets.
PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States, Europe and Mexico. 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 reports to the 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 theme 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 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 and Oktoberfest). Certain of the parks have longer
operating 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.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the 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
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important factor in promoting each of the parks in order to achieve market
penetration and encourage longer visits, which lead to increased attendance and
in-park spending. In addition, the Company generally adds theming to acquired
parks and enhances the theming and landscaping of its existing parks in order to
provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every two to four
years in order to enhance the park's entertainment product.
The Company believes that there are ample sources for rides and other
attractions, and the Company is not dependent on any single source. Certain of
these manufacturers are located outside the United States.
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. At March 1, 2000, the Company had approximately
1,250 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 a periodic 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. Governmental
inspectors in certain jurisdictions 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.
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. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $100.0 million per occurrence.
With respect to liability claims arising out of occurrences on and after
July 1, 1998, there is no self-insured retention by the Company. In addition,
with respect to claims arising out of occurrences prior to July 1, 1998 at the
parks purchased in the Six Flags acquisition, there is no self-insured
retention. The self-insurance portion of claims arising out of occurrences prior
to that date at the Company's other U.S. parks is $50,000. 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
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extended coverage policies insure the Company's real and personal properties
(other than land) against physical damage resulting from a variety of hazards.
COMPETITION
The Company's parks compete directly with other theme parks, 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. The Company believes its parks feature a sufficient variety of
rides and attractions, restaurants, merchandise outlets and family orientation
to enable it to compete effectively.
SEASONALITY
The operations of the Company are highly seasonal, with more than 90% of
park attendance in 1999 occurring in the second and third calendar quarters and
the most active period falling between Memorial Day and Labor Day. The great
majority of the Company's revenues are collected in the second and third
quarters of each year.
ENVIRONMENTAL AND OTHER REGULATION
The Company's operations are subject to increasingly stringent federal,
state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use and minimum wage regulations
applicable to theme park operations, and local and state regulations applicable
to restaurant operations at the park. The Company believes that it is in
substantial compliance with applicable environmental and other laws and
regulations and, although no assurance can be given, it does not foresee the
need for any significant expenditures in this area in the near future.
In addition, portions of the undeveloped areas at some parks are classified
as wetlands. Accordingly, the Company may need to obtain governmental permits
and other approvals prior to conducting development activities that affect these
areas, and future development may be limited in some or all of these areas.
EMPLOYEES
At March 1, 2000, the Company employed approximately 4,000 full-time
employees, and the Company employed over 40,000 seasonal employees during the
1999 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.
Approximately 6.5% of the Company's full-time and approximately 7.1% of its
seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in January 2003 (Six Flags Over
Texas), December 2000 (Six Flags Over Georgia), December 2002 (Six Flags Great
Adventure), and January 2003 (Six Flags St. Louis). The Company has not
experienced any strikes or work stoppages by its employees, and the Company
considers its employee relations to be good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AS OF
NAME MARCH 1, 2000 POSITION
- ---- ------------- ---------------------------------------------------
<S> <C> <C>
Kieran E. Burke (42) Director, Chairman of the Board and Chief Executive
Officer since June 1994; Director, President and
Chief Executive Officer from October 1989 through
June 1994.
Gary Story (44) Director, President and Chief Operating Officer
since June 1994; Executive Vice President and Chief
Operating Officer from February 1992 through June
1994; prior to such period, general manager of
Frontier City theme park for more than five years.
James F. Dannhauser (47) Chief Financial Officer since October 1, 1995;
Director since October 1992; prior to June 1996,
Managing Director of Lepercq de Neuflize & Co.
Incorporated for more than five years.
Hue W. Eichelberger (41) Executive Vice President since February 1, 1997;
General Manager of Six Flags America from May 1992
to 1998; Park Manager of White Water Bay from
February 1991 to May 1992.
John E. Bement (47) Executive Vice President since May 1998; General
Manager of Six Flags Over Georgia from January 1993
to May 1998.
Daniel P. Aylward (47) Executive Vice President since June 1998; General
Manager of Six Flags Marine World from February
1997 to June 1998; President and General Manager of
Silverwood Theme Park from January 1995 to February
1997; General Manager of Old Tucson Studios for six
years prior thereto.
Sherrie Bang (44) Senior Vice President of Marketing since January
2000; Regional Vice President of Marketing from May
1998 to January 2000; Vice President of Marketing
of Six Flags Magic Mountain and Hurricane Harbor
from July 1989 to May 1998.
Richard A. Kipf (65) Secretary/Treasurer since 1975; Vice President
since June 1994.
James M. Coughlin (48) General Counsel since May 1998; partner, Baer Marks
& Upham LLP for five years prior thereto.
</TABLE>
Each of the above executive officers has been elected to serve in the
position indicated until the next annual meeting of directors which will follow
the annual meeting of stockholders to be held in June 2000.
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ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's material real estate
at March 1, 2000:
Six Flags America, Largo, Maryland--515 acres (fee ownership)
Six Flags AstroWorld, Houston, Texas--90 acres (fee ownership)
Six Flags Darien Lake, Darien Center, New York--988 acres (fee ownership)
Six Flags Elitch Gardens, Denver, Colorado--67 acres (fee ownership)
Six Flags Fiesta Texas, San Antonio, Texas--206 acres (fee ownership)
Six Flags Great Adventure & Wild Safari, Jackson, New Jersey--2,200 acres (fee
ownership)
Six Flags Great America, Gurnee, Illinois--440 acres (fee ownership)
Six Flags Holland, Biddinghuizen, The Netherlands--395 acres (fee ownership and
leasehold interest)(1)
Six Flags Hurricane Harbor, Arlington, Texas--47 acres (fee ownership)
Six Flags Hurricane Harbor, Valencia, California--12 acres (fee ownership)
Six Flags Kentucky Kingdom, Louisville, Kentucky--58 acres (fee ownership and
leasehold interest)(2)
Six Flags Magic Mountain, Valencia, California--248 acres (fee ownership)
Six Flags Marine World, Vallejo, California--136 acres (long-term leasehold
interest at nominal rent)
Six Flags Mexico, Mexico City, Mexico--107 acres (leasehold interest)(3)
Six Flags New England, Agawam, Massachusetts--230 acres (fee ownership)
Six Flags Ohio, Aurora, Ohio--263 acres (fee ownership)
Six Flags Over Georgia, Atlanta, Georgia--280 acres (leasehold interest)(4)
Six Flags Over Texas, Arlington, Texas--200 acres (leasehold interest)(4)
Six Flags St. Louis, Eureka, Missouri--497 acres (fee ownership)
Six Flags WaterWorld, Houston, Texas--14 acres (fee ownership)
Bellewaerde, Ieper, Belgium--133 acres (fee ownership)
Frontier City, Oklahoma City, Oklahoma--95 acres (fee ownership)
The Great Escape, Lake George, New York--368 acres (fee ownership)
Splashtown, Spring, Texas--60 acres (fee ownership)
Walibi Aquitaine, Roquefort, France--74 acres (fee ownership)
Walibi Rhone-Alpes, Les Avenieres, France--86 acres (fee ownership)
Walibi Schtroumpf, Metz, France--375 acres (fee ownership)
Walibi Wavre and Aqualibi, Brussels, Belgium--120 acres (fee ownership)
Warner Bros. Movie World Germany, Bottrop, Germany--148 acres (fee ownership and
leasehold interest)(5)
Waterworld/Concord, Concord, California--21 acres (leasehold interest)(6)
Waterworld/Sacramento, Sacramento, California--14 acres (leasehold interest)(7)
White Water Atlanta, Marietta, Georgia--69 acres (fee ownership)
White Water Bay, Oklahoma City, Oklahoma--22 acres (fee ownership)
Wyandot Lake, Columbus, Ohio--18 acres (leasehold interest)(8)
- ------------------------
(1) A substantial portion of the land is leased from a governmental agency with
a term expiring in 2018. An undeveloped portion of the land is also leased
on a year-to-year basis. The balance is owned.
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(2) Approximately 38 acres are leased under ground leases with terms (including
renewal options) expiring between 2021 and 2049, with the balance owned by
the Company.
(3) The site is leased from the Federal District of Mexico City. The lease
expires in 2017.
(4) Lessor is the limited partner of the partnership that owns the park. The
leases expire in 2027 and 2028, respectively, at which time the Company has
the option to acquire all of the interests in the respective lessor not
previously acquired.
(5) Approximately 7% of the site is owned. The balance is leased from multiple
landlords with lease terms in most cases ranging between 60 and 99 years.
(6) The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five-year renewal options.
(7) The site is leased from the California Exposition and State Fair. The lease
expires in 2015 and, subject to the satisfaction of certain conditions, may
be renewed by the Company for an additional ten-year term.
(8) The site is subleased from the Columbus Zoo. The lease expires in 2000 and
the Company has two five-year renewal options, the first of which will be
exercised in 2000. Acreage for this site does not include approximately 30
acres of parking which is shared with the Columbus Zoo.
The Company has granted to its lenders under its $1.2 billion credit
agreement a mortgage on substantially all of its United States properties.
In addition to the foregoing, at March 1, 2000, the Company owned certain
undeveloped land in Indiana and indirectly owned real estate interests through
its non-controlling general partnership interest in 229 East 79th Street
Associates L.P., a limited partnership that converted to cooperative ownership a
New York City apartment building. In addition, the Company leases office space
and a limited number of rides and attractions at its parks. See Note 14 to Notes
to Consolidated Financial Statements.
The Company considers its properties to be well-maintained, in good
condition and adequate for their present uses and business requirements.
ITEM 3. 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 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.
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. A
series of lawsuits arising out of the incident have been consolidated in
California Superior Court under the name GHILOTTI ET AL. V. WATERWORLD USA ET
AL. The Company has funded its $50,000 self-insurance retention limit in respect
of the incident under its then liability insurance policy and, although there
can be no assurances, does not expect to pay any additional amounts in
connection with this litigation.
In December 1998, a final judgment of $197.3 million in compensatory damages
was entered against Six Flags Entertainment Corporation, Six Flags Theme
Parks Inc., Six Flags Over Georgia, Inc. and TWE, and a final judgment of
$245.0 million in punitive damages was entered against TWE and of $12.0 million
in punitive damages was entered against the referenced Six Flags entities. The
judgments are now the subject of appeal, which has been briefed and argued
before the Georgia Court of Appeals. The judgments arose out of a case entitled
SIX FLAGS OVER GEORGIA, LLC ET AL. V. TIME WARNER ENTERTAINMENT COMPANY, L.P. ET
AL. based on, among other things, certain disputed partnership affairs prior to
the Company's acquisition of Six Flags at Six Flags Over Georgia, including
alleged breaches of fiduciary duty.
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The sellers in the Six Flags acquisition, including Time Warner, have agreed
to indemnify the Company from any and all liabilities arising out of this
litigation.
On March 21, 1999, a raft capsized in the river rapids ride at Six Flags
Over Texas, 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 in Tarrant County, Texas seeking unspecified
damages. The Park is covered by Premier's multi-layered general liability policy
that provides excess liability coverage of up to $100.0 million per occurrence,
with no self-insured retention. The Company does not believe that this incident
or the resulting lawsuit will have a material adverse effect on the Company's
consolidated financial position, operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has been listed on the New York Stock Exchange
(the "NYSE") since December 22, 1997 under the symbol "PKS." Between May 30,
1996 and December 19, 1997, the Company's Common Stock was traded on the Nasdaq
National Market and quoted under the symbol "PARK." Set forth below are the high
and low sales prices for the Common Stock as reported by the NYSE since
January 1, 1998. Prices shown for periods prior to July 1998 have been adjusted
to reflect the Company's two-for-one stock split at that time.
<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
- ---- ---------------------- --------------- ---------------
<S> <C> <C> <C>
2000 First (through)
March 8, 2000 28 5/16 19 13/16
1999 Fourth 30 7/16 24 1/2
Third 40 28 7/16
Second 40 1/4 33 3/4
First 37 1/4 28 1/2
1998 Fourth 30 1/4 15 7/16
Third 33 9/32 15 5/16
Second 33 5/16 26 15/32
First 29 19/32 18 9/16
</TABLE>
As of March 1, 2000, there were 765 holders of record of the Company's
Common Stock. The Company paid no cash dividends on its Common Stock during the
three years ended December 31, 1999. The Company does not anticipate paying any
cash dividends on its Common Stock during the foreseeable future. The indentures
relating to Premier Parks Inc.'s 9 1/4% Senior Notes Due 2006, 10% Senior
Discount Notes Due 2008 and 9 3/4% Senior Notes due 2007 (the "Senior Notes")
limit the payment of cash dividends to common stockholders. See Note 6 to Notes
to Consolidated Financial Statements.
19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
In August 1995, the Company acquired three parks in its acquisition of
Funtime Parks. In the fourth quarter of 1996, the Company acquired four parks.
In February and November 1997, respectively, the Company acquired Six Flags New
England (formerly Riverside Park) and Six Flags Kentucky Kingdom (formerly
Kentucky Kingdom). In 1998, the Company acquired Six Flags and substantially all
of the capital stock of Walibi. In May 1999, the Company acquired Six Flags
Mexico (formerly Reino Aventura) and two water parks. In November 1999, the
Company acquired Warner Bros. Movie World Germany, the operating season of which
ended prior to the acquisition. In each case the operations of acquired parks
are reflected only for the periods subsequent to their respective acquisition
dates. See Note 2 to Notes Consolidated Financial Statements.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue............................ $ 926,984 $ 792,703 $ 193,904 $ 93,447 $ 41,496
Depreciation and amortization...... 154,264 109,841 19,792 8,533 3,866
Equity in operations of theme park
partnerships..................... 26,180 24,054 -- -- --
Interest expense, net.............. 169,441 115,849 17,775 11,121 5,578
Provision for income tax expense
(benefit)........................ 24,460 40,716 9,615 1,497 (762)
Income (loss) before extraordinary
loss............................. (19,230) 35,628 14,099(1) 1,765 (1,045)
Extraordinary loss, net of tax
effect........................... (11,296) (788) -- -- (140)
Net income (loss).................. (30,526) 34,840 14,099(1) 1,765 (1,185)
Net income (loss) applicable to
common stock..................... (53,814) 17,374 14,099(1) 1,162 (1,714)
Per Share:
Income (loss) before
extraordinary loss:
Basic.......................... (.55) .27 .39 .07 (.20)
Diluted........................ (.55) .26 .38 .06 (.20)
Pro forma(2)................... N/A (.98) N/A N/A N/A
Extraordinary loss, net of tax
effect:
Basic.......................... (.14) (.01) -- -- (.02)
Diluted........................ (.14) (.01) -- -- (.02)
Pro forma(2)................... N/A (.01) N/A N/A N/A
Income (loss):
Basic.......................... (.69) .26 .39 .07 (.22)
Diluted........................ (.69) .25 .38 .06 (.22)
Pro forma(2)................... N/A (.99) N/A N/A N/A
Cash Dividends--common stock..... -- -- -- -- --
Net cash provided by operating
activities....................... 197,349 119,010 47,150 11,331 10,646
Net cash used in investing
activities....................... (506,178) (1,664,883) (217,070) (155,149) (74,139)
Net cash provided by financing
activities....................... 49,488 1,861,098 250,165 119,074 90,914
Total assets....................... 4,161,572 4,052,465 611,321 304,803 173,318
Long-term debt(3).................. 2,204,988 2,064,189 217,026 150,834 94,278
EBITDA(4).......................... 319,031 286,325 54,101 22,994 7,706
Adjusted EBITDA(5)................. 363,219 258,943 N/A N/A N/A
</TABLE>
- ------------------------
(1) Included in determining net income for 1997 is an $8.4 million
($5.1 million after tax effect) termination fee, net of expenses.
(2) Includes results of operations of Six Flags and Walibi as if the
acquisitions and associated financings had occurred on January 1, 1998.
20
<PAGE>
(3) Includes current portion. Also includes at December 31, 1998
$182.9 million of certain zero coupon notes due December 1999 which had
been defeased for covenant purposes and which have since been retired.
Excluding defeased notes, long-term debt was $1,881.3 million at
December 31, 1998.
(4) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), noncash compensation, depreciation and amortization and
other expenses, including minority interest. The Company has included
information concerning EBITDA because it is a component of the Company's
debt covenant ratios and is also used by certain investors as a measure of a
company's ability to service and/or incur debt. EBITDA is not required by
generally accepted accounting principles ("GAAP") and should not be
considered in isolation or as an alternative to net income, net cash
provided by operating, investing and financing activities or other financial
data prepared in accordance with GAAP or as an indicator of the Company's
operating performance. This information should be read in conjunction with
the Statements of Cash Flows contained in the Consolidated Financial
Statements.
(5) Adjusted EBITDA is defined as EBITDA of the Company plus the Company's
share (based on its ownership interests) of the EBITDA of the Partnership
Parks, determined on a pro forma basis for 1998 only as if Six Flags, Walibi
and the Company's interests in the Partnership Parks had been acquired on
January 1, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's revenue is derived from the sale of tickets for entrance to
its parks (approximately 54.0%, 53.4% and 48.8%, in 1999, 1998 and 1997,
respectively) and the sale of food, merchandise, games and attractions inside
its parks, as well as sponsorship and other income (approximately 46.0%, 46.6%
and 51.2%, in 1999, 1998 and 1997, respectively). The Company's principal costs
of operations include salaries and wages, employee benefits, advertising,
outside services, maintenance, utilities and insurance. The Company's expenses
are relatively fixed. Costs for full-time employees, maintenance, utilities,
advertising and insurance do not vary significantly with attendance, thereby
providing the Company with a significant degree of operating leverage as
attendance increases and fixed costs per visitor decrease.
Historical results of operations for 1999 include the results of operations
of Six Flags Mexico, White Water Atlanta and Splashtown only from the dates of
their respective acquisitions in May 1999 and include the results of operations
of Warner Bros. Movie World Germany only from its acquisition in November 1999
(following its 1999 operating season). Results of Walibi and Six Flags are
included in 1998 results only from the dates of their respective acquisitions
(March 26, 1998, in the case of Walibi, and April 1, 1998, in the case of Six
Flags). Historical results for 1997 reflect the results of Six Flags New England
(formerly Riverside Park) only from its acquisition date (February 5, 1997), and
Six Flags Kentucky Kingdom (formerly Kentucky Kingdom) only from its acquisition
date (November 7, 1997) and do not include the results of Walibi or Six Flags
for that year. In addition, 1998 and 1999 historical results include in the
Company's equity in earnings the Company's share of the revenues of Six Flags
Marine World (formerly Marine World) under the applicable lease and related
documents. Those results are not included in the 1997 period.
The Company believes that significant opportunities exist to acquire
additional theme parks. In addition, the Company intends to continue its
on-going expansion of the rides and attractions and overall improvement of its
parks to maintain and enhance their appeal. Management believes this strategy
has contributed to increased attendance, lengths of stay and in-park spending
and, therefore, profitability.
21
<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
The table below sets forth certain historical financial information with
respect to the Company for the years ended December 31, 1999 and 1998 and with
respect to Six Flags and Walibi for the three months ended March 31, 1998
(representing the pre-acquisition portion of the 1998 year).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------
HISTORICAL SIX
FLAGS FOR PERIOD HISTORICAL WALIBI
YEAR ENDED HISTORICAL PRIOR TO APRIL 1, FOR PERIOD PRIOR TO PRO FORMA COMPANY
DECEMBER 31, 1999 PREMIER 1998(1) MARCH 26, 1998(2) ADJUSTMENTS PRO FORMA
----------------- ---------- ----------------- ------------------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Theme park
admissions......... $500,417 $423,461 $ 15,047 $ 883 $ -- $ 439,391
Theme park food,
Merchandise and
other.............. 426,567 369,242 7,792 624 -- 377,658
-------- -------- -------- -------- -------- ---------
Total revenue........ 926,984 792,703 22,839 1,507 -- 817,049
-------- -------- -------- -------- -------- ---------
Operating costs and
expenses:
Operating expenses... 353,728 297,266 45,679 4,626 -- 347,571
Selling, general and
administrative..... 163,526 126,985 19,278 3,407 -- 149,670
Noncash
compensation....... 12,725 6,362 -- -- -- 6,362
Costs of products
sold............... 90,699 82,127 2,193 248 -- 84,568
Depreciation and
amortization....... 154,264 109,841 17,629 3,214 6,440(3) 137,124
-------- -------- -------- -------- -------- ---------
Total operating costs
and expenses....... 774,942 622,581 84,779 11,495 6,440 725,295
-------- -------- -------- -------- -------- ---------
Income (loss) from
operations......... 152,042 170,122 (61,940) (9,988) (6,440) 91,754
Other income
(expense):
Interest expense,
net................ (169,441) (115,849) (22,508) (889) (16,655)(4) (155,901)
Equity in operations
of theme park
partnerships....... 26,180 24,054 -- -- (13,162)(5) 10,892
Other income
(expense),
including minority
interest........... (3,551) (1,983) -- (1) -- (1,984)
-------- -------- -------- -------- -------- ---------
Total other income
(expense).......... (146,812) (93,778) (22,508) (890) (29,817) (146,993)
-------- -------- -------- -------- -------- ---------
Income (loss) before
income taxes and
extraordinary
loss............... 5,230 76,344 (84,448) (10,878) (36,257) (55,239)
Income tax expense
(benefit).......... 24,460 40,716 -- -- (44,795)(6) (4,079)
-------- -------- -------- -------- -------- ---------
Income (loss) before
extraordinary
loss............... $(19,230) $ 35,628 $(84,448) $(10,878) $ 8,538 $ (51,160)
======== ======== ======== ======== ======== =========
EBITDA(7)............ $319,031 $286,325 $(44,311) $ (6,774) $ -- $ 235,240
======== ======== ======== ======== ======== =========
Adjusted EBITDA(8)... $363,219 $321,733 $(44,311) $ (6,774) $(11,705)(9) $ 258,943
======== ======== ======== ======== ======== =========
</TABLE>
- ------------------------------
(1) Includes results of Six Flags for the period prior to April 1, 1998, the
acquisition date, adjusted to eliminate (i) results of the Partnership Parks
and (ii) the expense associated with certain one-time option payments
resulting from the purchase.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date.
22
<PAGE>
(3) Includes adjustments to eliminate the historical depreciation and
amortization for Six Flags and Walibi and the inclusion of estimated pro
forma depreciation and amortization for the three months ended March 31,
1998.
(4) Includes adjustments to reflect additional interest expense associated with
the 1998 Senior Notes, the Senior Discount Notes, the SFEC Notes, the
Premier Credit Facility and the Six Flags Credit Facility net of (a) the
elimination of the historical interest expense associated with the Company
and Six Flags credit facilities outstanding prior to April 1, 1998 and the
long term debt of Walibi and (b) the amortization of the fair market value
adjustments on the SFTP Senior Subordinated Notes and the SFEC Zero Coupon
Notes recorded in connection with the acquisition of Six Flags. Issuance
costs associated with the borrowings are being amortized over their
respective periods.
(5) Includes adjustments to reflect the Company's share of the operations of the
Partnership Parks using the equity method of accounting.
(6) Includes adjustments to reflect the application of income taxes to the pro
forma adjustments and to the pre-acquisition operations of Six Flags and
Walibi, after consideration of permanent differences, at a rate of 38%.
(7) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), noncash compensation, depreciation and amortization and
other expenses, including minority interest. The Company has included
information concerning EBITDA because it is a component of the Company's
debt covenant ratios and is also used by certain investors as a measure of a
company's ability to service and/or incur debt. EBITDA is not required by
GAAP and should not be considered in isolation or as an alternative to net
income, net cash provided by operating, investing and financing activities
or other financial data prepared in accordance with GAAP or as an indicator
of the Company's operating performance. This information should be read in
conjunction with the Statements of Cash Flows contained in the Consolidated
Financial Statements.
(8) Adjusted EBITDA is defined as EBITDA of the Company plus the Company's share
(based on its ownership interests) of the EBITDA of the Partnership Parks.
(9) Reflects the adjustments to the Company's share of the EBITDA of the
Partnership Parks as if they were acquired on January 1, 1998.
- ------------------------------
REVENUE. Revenue in 1999 totaled $927.0 million ($903.2 million without
giving effect to the three consolidated parks acquired in that year (the
"Acquired Parks")), compared to $792.7 million (actual) and $817.0 million (pro
forma) for 1998. The $86.2 million (10.6%) increase in 1999 revenue (excluding
the Acquired Parks) compared to pro forma revenue for 1998 resulted primarily
from an aggregate same park attendance increase of 3.8 million (12.9%) resulting
in increased admission and in-park revenues and from increased in-park spending
per capita at a number of parks, especially the parks re-branded as Six Flags
parks for the year.
OPERATING EXPENSES. Operating expenses for 1999 increased $56.5 million
($46.4 million excluding the Acquired Parks) compared to actual expenses for
1998 and increased $6.2 million (but decreased $3.9 million excluding the
Acquired Parks) compared to pro forma expenses for 1998. The decrease (excluding
the Acquired Parks) compared to pro forma expenses for 1998 resulted primarily
from operating efficiencies realized at the Six Flags parks subsequent to their
acquisition on April 1, 1998. Comparing 1999 actual (excluding the Acquired
Parks) to 1998 pro forma as a percentage of revenues, these expenses were 38.0%
and 42.5%, respectively.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses (excluding noncash compensation) for 1999 increased $36.5 million and
$13.9 million, respectively, compared to the actual and pro forma expenses for
1998. Selling, general and administrative expenses for the Acquired Parks were
$4.1 million for 1999. Advertising expenditures for 1999 increased by
$23.3 million over the pro forma expense for 1998 reflecting a return to
historical advertising levels of expenditures at the Six Flags parks and
additional expenditures in support of the 1999 transition of four original
Premier parks to the Six Flags brand. Remaining selling, general and
administrative expenses in 1999 decreased by $13.5 million compared to 1998 pro
forma levels primarily as a result of reduced corporate level expenditures,
including staffing, related to the closing of the former Six Flags corporate
office subsequent to the April 1, 1998 acquisition, as well as certain other
savings, including insurance. Comparing 1999 actual (excluding the Acquired
Parks) to 1998 pro forma as a percentage of revenues, selling, general and
administrative expenses (excluding noncash compensation) were 17.7% and 18.3%
respectively. Noncash compensation increased by $6.4 million due to a full year
of expense recognition related to the issuance of restricted stock and
conditional employee stock options during 1998.
23
<PAGE>
COSTS OF PRODUCTS SOLD. Costs of products sold in 1999 increased
$8.6 million ($6.2 million excluding the Acquired Parks) and $6.1 million
($3.8 million excluding the Acquired Parks), respectively, compared to actual
and pro forma expenses for 1998. As a percentage of theme park food, merchandise
and other revenues, cost of products sold were 21.2% in 1999 (excluding the
Acquired Parks) compared to 22.4% pro forma in 1998.
DEPRECIATION AND AMORTIZATION AND INTEREST EXPENSES. Depreciation and
amortization expense for 1999 increased $44.4 million and $17.1 million,
respectively, compared to the actual and pro forma amounts for 1998. The
increase compared to the pro forma 1998 level was attributable to the Company's
on-going capital program at the previously owned parks and from the additional
depreciation and amortization expense associated with the Acquired Parks.
Interest expense, net increased $53.6 million compared to the actual interest
expense, net for 1998 and increased $13.5 million compared to the pro forma
interest expense, net for that year. The increase compared to pro forma interest
expense, net for 1998 resulted from higher average interest rates on a higher
average debt and reduced interest income from lower average cash and cash
equivalent balances during 1999.
EQUITY IN OPERATIONS OF THEME PARKS. Equity in operations of theme park
partnerships reflects the Company's share of the income or loss of Six Flags
Over Texas and Six Flags Over Georgia (including White Water Atlanta), the lease
of Six Flags Marine World and the management of all four parks. The Company's
ownership interests in Six Flags Over Texas (34% effective Company ownership)
and Six Flags Over Georgia (25% effective Company ownership) commenced on
April 1, 1998, the date of the Six Flags acquisition. The Company became
entitled to a share of the cash flows from the lease and management of Six Flags
Marine World in 1998. Its interests in White Water Atlanta commenced with its
acquisition by the partnership that owns Six Flags Over Georgia in May 1999. The
$15.3 million increase in the equity in operations of theme park partnerships
compared to the pro forma level for 1998 was attributable to improved
performance at the Partnership Parks and the inclusion of the results of White
Water Atlanta. See Notes 2, 4 and 13 to Notes to Consolidated Financial
Statements.
INCOME TAX EXPENSE. Income tax expense was $24.5 million for 1999 compared
to a $40.7 million expense and a $4.1 million benefit for the actual and pro
forma results, respectively, for 1998. The effective tax rate was affected by
permanent differences associated with goodwill amortization for financial
purposes being higher than the amount of amortization that is deductible for tax
purposes and from non-deductible compensation expense associated with
conditional stock options and restricted stock grants. The Company's quarterly
effective income tax rate will vary from period-to-period based upon the
inherent seasonal nature of the theme park business.
At December 31, 1999, the Company estimates that it had approximately
$539.0 million of usable net operating losses ("NOLs") carryforwards for Federal
income tax purposes. The NOLs are subject to review and potential disallowance
by the Internal Revenue Service upon audit of the Federal income tax returns of
the Company and its subsidiaries. In addition, the use of such NOLs is subject
to limitations on the amount of taxable income that can be offset with such
NOLs. Some of such NOLs also are subject to a limitation as to which of the
subsidiaries' income such NOLs are permitted to offset. Accordingly, no
assurance can be given as to the timing or amount of the availability of such
NOLs to the Company and its subsidiaries. See Note 9 to Notes to Consolidated
Financial Statements.
NET LOSS. Net loss applicable to common stock in 1999 reflects as an
increase to the loss the preferred stock dividends accrued during 1999 on the
Company's Premium Income Equity Securities ("PIES"). The PIES accrue cumulative
dividends at 7 1/2% per annum (1.875% per quarter), which approximates an annual
dividend requirement of $23.3 million (approximately $5.8 million per quarter).
The dividend is payable in cash or shares of Common Stock at the option of the
Company. To date, the Company has elected to pay the dividend in cash.
24
<PAGE>
YEARS ENDED DECEMBER 31, 1998 AND 1997
The table below sets forth certain financial information with respect to the
Company, Six Flags, Walibi and, for the period prior to its acquisition,
Kentucky Kingdom for the year ended December 31, 1997 and with respect to the
Company and, for periods prior to their respective acquisitions, Six Flags and
Walibi for the year ended December 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------
HISTORICAL SIX HISTORICAL WALIBI
FLAGS FOR PERIOD FOR PERIOD PRIOR
HISTORICAL PRIOR TO APRIL TO MARCH 26, HISTORICAL
PREMIER 1998(1) 1998(2) COMBINED
---------- ---------------- ----------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUE:
Theme park
admissions....... $423,461 $ 15,047 $ 883 $439,391
Theme park food,
merchandise and
other............ 369,242 7,792 624 377,658
-------- -------- -------- --------
Total revenue.... 792,703 22,839 1,507 817,049
-------- -------- -------- --------
OPERATING COSTS AND
EXPENSES:
Operating
expenses......... 297,266 45,679 4,626 347,571
Selling, general
and
administrative... 126,985 19,278 3,407 149,670
Noncash
compensation..... 6,362 -- -- 6,362
Costs of products
sold............. 82,127 2,193 248 84,568
Depreciation and
amortization..... 109,841 17,629 3,214 130,684
-------- -------- -------- --------
Total operating
costs and
expenses....... 622,581 84,779 11,495 718,855
-------- -------- -------- --------
Income (loss) from
operations......... 170,122 (61,940) (9,988) 98,194
Equity in operations
of theme park
partnerships....... 24,054 -- -- 24,054
OTHER INCOME
(EXPENSE):
Interest expense,
net.............. (115,849) (22,508) (889) (139,246)
Termination fee,
net of
expenses......... -- -- -- --
Minority
interest......... (960) -- -- --
Other income
(expense)........ (1,023) -- (1) (1,984)
-------- -------- -------- --------
Total other
income
(expense)...... (117,832) (22,508) (890) (141,230)
-------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary
loss............... 76,344 (84,448) (10,878) (18,982)
Income tax expense... 40,716 -- -- 40,716
-------- -------- -------- --------
Income (loss) before
Extraordinary
loss............... $ 35,628 $(84,448) $(10,878) $(59,698)
======== ======== ======== ========
EBITDA(6)............ $286,325 $(44,311) $ (6,774) $235,240
======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------
HISTORICAL
HISTORICAL HISTORICAL HISTORICAL KENTUCKY HISTORICAL
PREMIER(3) SIX FLAGS(4) WALIBI KINGDOM(5) COMBINED
---------- ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUE:
Theme park
admissions....... $ 94,611 $274,193 $ 43,742 $ 11,562 $424,108
Theme park food,
merchandise and
other............ 99,293 235,813 24,101 10,152 369,359
-------- -------- -------- -------- --------
Total revenue.... 193,904 510,006 67,843 21,714 793,467
-------- -------- -------- -------- --------
OPERATING COSTS AND
EXPENSES:
Operating
expenses......... 81,356 229,588 31,629 5,705 348,278
Selling, general
and
administrative... 35,422 95,852 10,567 5,194 147,035
Noncash
compensation..... 1,125 -- -- -- 1,125
Costs of products
sold............. 23,025 55,236 6,097 2,684 87,042
Depreciation and
amortization..... 19,792 72,386 13,998 2,344 108,520
-------- -------- -------- -------- --------
Total operating
costs and
expenses....... 160,720 453,062 62,291 15,927 692,000
-------- -------- -------- -------- --------
Income (loss) from
operations......... 33,184 56,944 5,552 5,787 101,467
Equity in operations
of theme park
partnerships....... -- -- -- -- --
OTHER INCOME
(EXPENSE):
Interest expense,
net.............. (17,775) (84,430) (3,409) (3,974) (109,588)
Termination fee,
net of
expenses......... 8,364 -- -- -- 8,364
Minority
interest......... -- 1,147 -- -- 1,147
Other income
(expense)........ (59) -- (289) 293 (55)
-------- -------- -------- -------- --------
Total other
income
(expense)...... (9,470) (83,283) (3,698) (3,681) (100,132)
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary
loss............... 23,714 (26,339) 1,854 2,106 1,335
Income tax expense... 9,615 -- 2,373 -- 11,988
-------- -------- -------- -------- --------
Income (loss) before
Extraordinary
loss............... $ 14,099 $(26,339) $ (519) $ 2,106 $(10,653)
======== ======== ======== ======== ========
EBITDA(6)............ $ 54,101 $129,330 $ 19,550 $ 8,131 $211,112
======== ======== ======== ======== ========
</TABLE>
- ------------------------------
(1) Includes results of Six Flags for the period prior to April 1, 1998, the
acquisition date, adjusted to eliminate (i) results of the Partnership Parks
and (ii) the expense associated with certain one-time option payments made
from the purchase price.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date.
25
<PAGE>
(3) Includes results of Riverside Park and Kentucky Kingdom from and after their
respective acquisition dates, February 5 and November 7, 1997.
(4) Includes results of Six Flags adjusted to eliminate results of Partnership
Parks.
(5) Includes results of Kentucky Kingdom for the ten months of 1997 prior to its
acquisition by the Company.
(6) Excludes termination fee in 1997.
REVENUE. Revenue aggregated $792.7 million in 1998 ($817.0 million
combined), compared to $193.9 million reported in 1997. Of reported 1998
revenue, $523.9 million represented revenues of Six Flags and Walibi (the "1998
Acquired Parks") which were acquired in 1998, and thus not included in reported
1997 results. Revenues generated by the Company's other twelve parks (excluding
Marine World) amounted to $249.1 million in 1998, as compared to $193.7 million
from the Company's eleven parks in 1997. Of this $55.4 million increase,
$28.4 million relates to Kentucky Kingdom which was purchased in November of the
prior year, and the balance ($27.0 million) results from improved performance at
the other eleven parks. During 1998, the Company's thirteen parks (including
Marine World) experienced a 14.3% increase in attendance and a 5.0% increase in
per capita spending over the performance of those thirteen parks in the prior
year.
OPERATING EXPENSES. Operating expenses increased during 1998 to
$297.3 million ($347.6 million combined) from $81.4 million reported in 1997. Of
reported 1998 operating expenses, $197.4 million related directly to the 1998
Acquired Parks. Operating expenses at the Company's other twelve parks
(excluding Marine World) increased $18.5 million, primarily reflecting an
incremental $10.3 million of operating expenses for Kentucky Kingdom which was
included for only two months in the prior year, and increased salary expense at
the parks. As a percentage of total reported revenue, reported operating
expenses were 36.5% of revenue (and combined operating expenses were 41.4% of
combined revenues) in 1998 as compared to 42.0% in 1997.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses (including noncash compensation) were $133.3 million in 1998
($156.0 million on a combined basis), compared to $36.5 million reported for
1997. Of reported expenses for 1998, $68.2 million related to the 1998 Acquired
Parks. Selling, general and administrative expenses at the remaining twelve
parks (excluding Marine World) increased $28.5 million over 1997 levels,
primarily reflecting an incremental $5.2 million of selling, general and
administrative expenses at Kentucky Kingdom, $5.3 million of noncash
compensation relating to restricted stock awards and conditional option grants
over amounts included in 1997, increased corporate expenses reflecting the
larger scope of the Company's operations and, to a lesser extent, increased
marketing and advertising costs and real estate taxes. As a percentage of total
reported revenue, consolidated selling, general and administrative expenses
(excluding noncash compensation) were 15.6% of revenue (and combined selling,
general and administrative expenses (excluding noncash compensation) were 17.8%
of combined revenues) in 1998 as compared to 18.3% for 1997. The decrease is a
result of the Company's continued ability to use operating leverage to increase
operations without having to increase administrative costs by a like percentage.
COSTS OF PRODUCTS SOLD. Costs of products sold were $82.2 million for 1998
($84.6 million on a combined basis) compared to $23.0 million reported for 1997.
Reported costs for 1998 include $54.3 million related to the 1998 Acquired
Parks. The balance of the increase ($4.9 million) over reported 1997 costs
primarily related to $2.7 million of costs of sales at Kentucky Kingdom and to
increased product sales at the parks owned in both years.
DEPRECIATION AND AMORTIZATION AND INTEREST EXPENSES. Depreciation and
amortization expense increased $90.0 million from $19.8 million in 1997 to
$109.8 million in 1998, of which $82.6 million was attributable to the
recognition of depreciation and amortization expense for the 1998 Acquired
Parks, an incremental $2.9 million was attributable to Kentucky Kingdom and the
balance was attributable to the
26
<PAGE>
Company's on-going capital program. Interest expense, net of interest income,
increased from $17.8 million to $115.9 million in 1998 principally as a result
of borrowings made in connection with the acquisition of Six Flags and Walibi.
See Notes 2 and 6 to Notes to Consolidated Financial Statements.
EQUITY IN OPERATIONS OF THEME PARKS. Equity in operations of theme park
partnerships results from the Company's shares of the operations of Six Flags
Over Texas (33% effective Company ownership) and Six Flags Over Georgia (25%
effective Company ownership), the lease of Six Flags Marine World and the
management of all three parks. The Company did not have the partial ownership or
lease arrangement with any of the parks prior to commencement of the 1998
operating season. See Notes 2, 4 and 13 to Notes to Consolidated Financial
Statements.
INCOME TAXES. Income tax expense was $40.7 million for 1998 as compared to
$9.6 million for 1997. The increase in the effective tax rate to 53.3% from
40.5% is a function of the non-deductible intangible asset amortization
associated with the Six Flags acquisition. Approximately $10.0 million of
non-deductible amortization will be recognized each quarter. The Company's
quarterly effective income tax rate will vary from period-to-period based upon
the inherent seasonal nature of the theme park business.
NET INCOME. Net income applicable to common stock in 1998 reflects as a
charge to net income the preferred stock dividends accrued since the April 1,
1998 issuance of the Company's Premium Income Equity Securities ("PIES"). The
PIES accrue cumulative dividends at 7 1/2% per annum (1.875% per quarter), which
approximates an annual dividend requirement of $23.3 million (approximately
$5.8 million per quarter). The dividend is payable in cash or shares of Common
Stock at the option of the Company. To date, the Company has elected to pay the
dividend in cash.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
At December 31, 1999, the Company's indebtedness aggregated
$2,205.0 million, of which approximately $2.1 million matures prior to
December 31, 2000. Based on interest rates at December 31, 1999 for floating
rate debt and after giving effect to the interest rate swaps described below,
annual cash interest payments for 2000 on this indebtedness will total
approximately $161.7 million, excluding $24.4 million which has been deposited
in a dedicated escrow account and classified as a restricted-use investment. In
addition, annual dividend payments on the PIES are $23.3 million, payable at the
Company's option in cash or shares of Common Stock. See Notes 6 and 10 to Notes
to Consolidated Financial Statements for additional information regarding the
Company's indebtedness.
During the year ended December 31, 1999, net cash provided by operating
activities was $197.3 million. Net cash used in investing activities in 1999
totaled $506.2 million, consisting primarily of the Company's acquisition of the
four parks acquired in 1999 ($277.5 million, net of cash acquired) and capital
expenditures for the 1999 and 2000 seasons. Net cash provided by financing
activities in 1999 was $49.5 million, representing the refinancing by Premier of
its bank debt with a new $1.2 billion credit facility as well as the refinancing
of public debt of two of the Company's subsidiaries with the issuance of
$430.0 million principal amount of 9 3/4% Senior Notes due 2007 of Premier. See
Notes 2 and 6 to Notes to Consolidated Financial Statements.
As more fully described in "Business--Six Flags Over Georgia and White Water
Atlanta" and "--Six Flags Over Texas and Six Flags Hurricane Harbor" and in
Note 2 to Notes to Consolidated Financial Statements, in connection with the Six
Flags acquisition, the Company guaranteed certain obligations relating to Six
Flags Over Georgia and Six Flags Over Texas. Among such obligations are
(i) minimum distributions of approximately $48.6 million in 2000 to partners in
these two Partnership Parks (of which the Company will be entitled to receive
approximately $14.7 million based on its present ownership interests) and
(ii) up to approximately $71.2 million of limited partnership unit purchase
obligations for 2000 with respect to both parks. (There are no minimum capital
expenditures required for 2000 under the agreements relating to either park.)
Cash flows from operations at these two Partnership Parks will be used
27
<PAGE>
to satisfy these requirements, before any funds are required from the Company.
In addition, the Company had $71.6 million in a dedicated escrow account at
December 31, 1999 (classified as a restricted-use investment) 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 reduces 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 New 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.
MARKET RISKS AND SENSITIVITY ANALYSES
Like other global companies, Premier is exposed to market risks relating to
fluctuations in interest rates and currency exchange rates. The objective of
financial risk management at Premier is to minimize the negative impact of
interest rate and foreign currency exchange rate fluctuations on the Company's
earnings, cash flows and equity. Premier does not acquire market risk sensitive
instruments for trading purposes. The foreign currency and interest rate risks
that the Company is exposed to at December 31, 1999 are greater than those at
December 31, 1998 in that the Company has added operations in Germany and Mexico
and has increased its total debt balance. In 1999 and 1998 Premier purchased
foreign exchange forward contracts to minimize foreign currency risk related to
purchases of rides and equipment denominated in foreign currency. Prior to
February 2000, the Company had not entered into financial instruments to manage
interest rate risks.
To manage foreign currency exchange rate risks, on a limited basis Premier
has used derivative financial instruments, exclusively foreign exchange forward
contracts. These derivative financial instruments have been held to maturity and
Premier only uses non-leveraged instruments. These contracts are entered into
with major financial institutions, thereby minimizing the risk of credit loss.
Premier has used forward contracts to "lock-in" the U.S. dollar cost of
equipment to be purchased from foreign vendors or manufacturers where the
contracts related thereto are denominated in foreign currency. See Note 5 to
Notes to Consolidated Financial Statements for a more complete description of
Premier's accounting policies and use of such instruments.
In February 2000, the Company entered into three interest rate swap
transactions that for the term of the applicable agreements (ranging from
December 2001 to March 2002) effectively converted the Company's $600.0 million
term loan into a fixed rate obligation. The Company's term loan borrowings bear
interest at 3.25% above the LIBOR rate. The Company's interest rate swap
arrangements effectively "lock-in" the LIBOR component at rates ranging from
6.615% to 6.780% depending on the applicable agreement. The counterparties to
these transactions are major financial institutions, which minimizes the credit
risk. See Note 5 to Notes to Consolidated Financial Statements.
The following analyses present the sensitivity of the market value, earnings
and cash flows of Premier's financial instruments to hypothetical changes in
interest and exchange rates as if these changes occurred at December 31, 1999.
The range of changes chosen for these analyses reflect Premier's view of changes
which are reasonably possible over a one-year period. Market values are the
present values of projected future cash flows based on the interest rate and
exchange rate assumptions. These forward looking disclosures are selective in
nature and only address the potential impacts from financial instruments. They
do not include other potential effects which could impact Premier's business as
a result of these changes in interest and exchange rates.
28
<PAGE>
INTEREST RATE AND DEBT SENSITIVITY ANALYSIS
At December 31, 1999, Premier had debt totaling $2,205.0 million, of which
$1,309.5 million represents fixed-rate debt and the balance represents
floating-rate debt. For fixed-rate debt, interest rate changes affect the fair
value but do not impact the recorded fixed-rate debt amount, earnings or cash
flows. Conversely, for floating-rate debt, interest rate changes generally do
not affect the fair value of the floating-rate debt but do impact future
earnings and cash flows, assuming other factors remain constant.
Assuming other variables remain constant (such as foreign exchange rates and
debt levels), after giving effect to the Company's interest rate swaps and
assuming an average annual balance of $150.0 million on the Company's working
capital revolver, the pre-tax earnings and cash flows impact resulting from a
one percentage point increase in interest rates would be approximately
$4.5 million.
EXCHANGE RATE SENSITIVITY ANALYSIS
Premier's exchange rate exposures result from its investments and ongoing
operations in Belgium, France, The Netherlands, Germany and Mexico and certain
other business transactions such as the purchase of rides from foreign vendors
or manufacturers. Among other techniques, Premier utilizes foreign exchange
forward contracts to hedge these exposures. At present, Premier does not use
financial instruments to hedge against currency risks associated with its
international operations. At December 31, 1999, Premier had $63.3 million
notional amount of foreign exchange contracts to hedge the risks associated with
ride purchase and construction commitments. The dates of foreign exchange
forward contracts run through early 2000, with the last contract settling in
July 2000.
Maintaining other variables constant, if there were a ten percent adverse
change in foreign currency exchange rates (I.E., a weakening of the dollar
against the applicable foreign currencies), the fair value of foreign currency
contracts outstanding at December 31, 1999 would increase by approximately
$5.4 million. No amount of this decrease would impact earnings since the gain
(loss) on these contracts would be offset by an equal loss (gain) on the
underlying exposure being hedged.
Assuming the Company's international parks generate the same level of
earnings and cash flow in 2000 as they did in 1999, earnings and cash flows of
the Company in the event of such ten percent adverse change would decrease by
less than $1.0 million and $3.0 million, respectively.
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." SFAS No. 133 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. 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. A subsequent pronouncement, SFAS No. 137, was issued in July 1999
that delayed the effective date of SFAS 133 until fiscal years beginning after
June 15, 2000. The Company will adopt the provision of SFAS No. 133 as of
January 1, 2001.
The Company has entered into two types of derivative instruments. To the
extent that the fair value of the Company's foreign exchange forward contracts
varies prior to settlement, the amount of the change will be reflected as an
asset or liability, with a corresponding change in other comprehensive income.
At settlement date, the foreign currency will be used to meet property and
equipment purchase commitments and the gain or loss will be recognized as a
component of the Company's historical cost of the asset. Likewise the fair value
of the Company's interest swap agreements will be reflected as an asset or
liability, with a corresponding change in other comprehensive income. Since the
interest rate swap and the
29
<PAGE>
contractual interest rate have the same basis, then as the Company settles its
interest rate swap agreements, the proceeds or payment will be reflected as a
reduction or increase in interest expense. As such, if rates remain below the
maximum amounts in the interest swap agreements, the Company has fixed its
interest rate on the amount of long-term debt that has been hedged for the term
of the interest rate swap agreements. As such, the Company does not believe that
the adoption of SFAS No. 133 will have a material impact on its financial
position or future results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 is
effective for periods beginning 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, will not have an impact
on the Company's annual financial statements. However, the provisions of SAB
No. 101 will 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 will recognize the revenue for
multi-admission tickets and season passes over the operating season.
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 quarterly results. Had the Company used the newly adopted accounting
policy described above, the quarterly results would have been as follows:
As reported:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
-------------- ------------- ------------------ -----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues........................... $ 53,649 $333,515 $471,728 $ 68,092
Net income (loss) applicable to
common stock..................... (88,636) 24,464 111,008 (100,650)
Net income (loss) per average
common shares outstanding:
Basic............................ (1.16) 0.32 1.42 (1.29)
Diluted.......................... (1.16) 0.31 1.29 (1.29)
</TABLE>
As restated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
-------------- ------------- ------------------ -----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues........................... $ 38,580 $314,142 $495,404 $ 78,858
Net income (loss) applicable to
common stock..................... (99,222) 12,274 125,809 (92,675)
Net income (loss) per average
common share outstanding:
Basic............................ (1.29) .16 1.61 (1.18)
Diluted.......................... (1.29) .15 1.46 (1.18)
</TABLE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the information appearing under the subheading "Market
Risks and Sensitivity Analyses" under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 28-29 of
this Report.
30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in Item 14(a)(1) and (2) are
included in this Report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Incorporated by reference from the information captioned "Proposal 1:
Election of Directors" included in the Company's Proxy Statement in connection
with the annual meeting of stockholders to be held in June 2000.
(b) Identification of Executive Officers
Information regarding executive officers is included in Item 1 of Part I
herein.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information captioned "Executive
Compensation" included in the Company's Proxy Statement in connection with the
annual meeting of stockholders to be held in June 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a), (b) Incorporated by reference from the information captioned "Stock
Ownership of Management and Certain Beneficial Holders" included in the
Company's Proxy Statement in connection with the annual meeting of stockholders
to be held in June 2000.
(c) Changes in Control
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information captioned "Certain
Transactions" included in the Company's Proxy Statement in connection with the
annual meeting of stockholders to be held in June 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1)and (2) Financial Statements and Financial Statement Schedules
31
<PAGE>
The following consolidated financial statements of Premier Parks Inc. and
subsidiaries, the notes thereto and the related report thereon of independent
auditors are filed under Item 8 of this Report:
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets--December 31, 1999 and 1998..... F-3
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997.............. F-4
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999, 1998 and 1997.............. F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997.............. F-6
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted because they
either are not required under the related instructions, are inapplicable, or the
required information is shown in the financial statements or notes thereto.
(a)(3)See Exhibit Index.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Item 14(a)(3) above.
32
<PAGE>
PREMIER PARKS INC.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets--December 31, 1999 and 1998..... F-3
Consolidated Statements of Operations--Years ended December
31, 1999, 1998 and 1997................................... F-4
Consolidated Statements of Stockholders' Equity--Years ended
December 31, 1999, 1998 and 1997.......................... F-5
Consolidated Statements of Cash Flows--Years ended December
31, 1999, 1998 and 1997................................... F-6
Notes to Consolidated Financial Statements.................. F-8
</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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Oklahoma City, Oklahoma
March 14, 2000
F-2
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 138,131,000 400,578,000
Accounts receivable....................................... 29,208,000 31,484,000
Inventories............................................... 23,590,000 21,703,000
Prepaid expenses and other current assets................. 32,793,000 29,200,000
Restricted-use investment securities...................... 24,430,000 206,075,000
-------------- --------------
Total current assets.................................... 248,152,000 689,040,000
-------------- --------------
Other assets:
Debt issuance costs....................................... 55,540,000 45,099,000
Restricted-use investment securities...................... 84,464,000 111,577,000
Deposits and other assets................................. 64,472,000 73,887,000
-------------- --------------
Total other assets...................................... 204,476,000 230,563,000
-------------- --------------
Property and equipment, at cost............................. 2,272,419,000 1,675,959,000
Less accumulated depreciation............................. 207,680,000 104,806,000
-------------- --------------
2,064,739,000 1,571,153,000
-------------- --------------
Investment in theme park partnerships....................... 384,637,000 283,520,000
Intangible assets, principally goodwill..................... 1,352,732,000 1,321,616,000
Less accumulated amortization............................. 93,164,000 43,427,000
-------------- --------------
1,259,568,000 1,278,189,000
-------------- --------------
Total assets............................................ $4,161,572,000 4,052,465,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 37,918,000 25,285,000
Accrued interest payable.................................. 23,566,000 33,269,000
Accrued compensation, payroll taxes and benefits.......... 19,368,000 17,548,000
Accrued insurance......................................... 13,211,000 28,727,000
Other accrued liabilities................................. 63,184,000 54,331,000
Current portion of long-term debt......................... 2,055,000 198,038,000
-------------- --------------
Total current liabilities............................... 159,302,000 357,198,000
Long-term debt.............................................. 2,202,933,000 1,866,151,000
Other long-term liabilities................................. 41,761,000 50,573,000
Deferred income taxes....................................... 141,960,000 151,978,000
-------------- --------------
Total liabilities....................................... 2,545,956,000 2,425,900,000
-------------- --------------
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized at December
31, 1999 and 1998, 11,500 shares issued and outstanding
at December 31, 1999 and 1998........................... 12,000 12,000
Common stock, $.025 par value, 150,000,000 shares
authorized; 78,350,771 and 76,488,661 shares issued and
outstanding at December 31, 1999 and 1998,
respectively............................................ 1,958,000 1,912,000
Capital in excess of par value............................ 1,700,305,000 1,640,532,000
Retained earnings (accumulated deficit)................... (53,681,000) 133,000
Deferred compensation..................................... (15,255,000) (25,111,000)
Accumulated other comprehensive income (loss)............. (17,723,000) 9,087,000
-------------- --------------
Total stockholders' equity.............................. 1,615,616,000 1,626,565,000
-------------- --------------
Total liabilities and stockholders' equity.............. $4,161,572,000 4,052,465,000
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ -----------
<S> <C> <C> <C>
Theme park admissions............................... $ 500,417,000 423,461,000 94,611,000
Theme park food, merchandise and other.............. 426,567,000 369,242,000 99,293,000
------------- ------------ -----------
Total revenue................................. 926,984,000 792,703,000 193,904,000
------------- ------------ -----------
Operating costs and expenses:
Operating expenses................................ 353,728,000 297,266,000 81,356,000
Selling, general and administrative............... 163,526,000 126,985,000 35,422,000
Noncash compensation.............................. 12,725,000 6,362,000 1,125,000
Costs of products sold............................ 90,699,000 82,127,000 23,025,000
Depreciation and amortization..................... 154,264,000 109,841,000 19,792,000
------------- ------------ -----------
Total operating costs and expenses............ 774,942,000 622,581,000 160,720,000
------------- ------------ -----------
Income from operations........................ 152,042,000 170,122,000 33,184,000
------------- ------------ -----------
Other income (expense):
Interest expense.................................. (193,965,000) (149,820,000) (25,714,000)
Interest income................................... 24,524,000 33,971,000 7,939,000
Equity in operations of theme park partnerships... 26,180,000 24,054,000 --
Termination fee, net of expenses.................. -- -- 8,364,000
Other income (expense), including minority
interest........................................ (3,551,000) (1,983,000) (59,000)
------------- ------------ -----------
Total other income (expense).................. (146,812,000) (93,778,000) (9,470,000)
------------- ------------ -----------
Income before income taxes.................... 5,230,000 76,344,000 23,714,000
Income tax expense.................................. 24,460,000 40,716,000 9,615,000
------------- ------------ -----------
Income (loss) before extraordinary loss....... (19,230,000) 35,628,000 14,099,000
Extraordinary loss on extinguishment of debt, net of
income tax benefit of $7,530,000 in 1999 and
$526,000 in 1998.................................. (11,296,000) (788,000) --
------------- ------------ -----------
Net income (loss)............................. $ (30,526,000) 34,840,000 14,099,000
============= ============ ===========
Net income (loss) applicable to common
stock....................................... $ (53,814,000) 17,374,000 14,099,000
============= ============ ===========
Weighted average number of common shares
outstanding--basic................................ 77,656,000 66,430,000 35,876,000
============= ============ ===========
Net income (loss) per average common share
outstanding--basic:
Income (loss) before extraordinary loss........... $ (0.55) 0.27 0.39
Extraordinary loss................................ (0.14) (0.01) --
------------- ------------ -----------
Net income (loss)............................. $ (0.69) 0.26 0.39
============= ============ ===========
Weighted average number of common shares
outstanding--diluted.............................. 77,656,000 68,518,000 36,876,000
============= ============ ===========
Net income (loss) per average common share
outstanding--diluted:
Income (loss) before extraordinary loss........... $ (0.55) 0.26 0.38
Extraordinary loss................................ (0.14) (0.01) --
------------- ------------ -----------
Net income (loss)............................. $ (0.69) 0.25 0.38
============= ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK RETAINED
------------------- ----------------------- CAPITAL IN EARNINGS
SHARES SHARES EXCESS OF (ACCUMULATED
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT)
-------- -------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996........... -- $ -- 22,785,338 $ 569,000 144,642,000 (31,340,000)
Issuance of common stock................ -- -- 15,013,576 375,000 209,593,000 --
Amortization of deferred compensation... -- -- -- -- -- --
Net income.............................. -- -- -- -- -- 14,099,000
------ ------- ---------- ---------- ------------- -----------
Balances at December 31, 1997........... -- -- 37,798,914 944,000 354,235,000 (17,241,000)
Issuance of preferred stock............. 11,500 12,000 -- -- 301,173,000 --
Issuance of common stock................ -- -- 38,742,439 969,000 985,812,000 --
Amortization of deferred compensation... -- -- -- -- -- --
Retirement of treasury stock............ -- -- (52,692) (1,000) (688,000) --
Net income.............................. -- -- -- -- -- 34,840,000
Other comprehensive income--foreign
currency translation adjustment....... -- -- -- -- -- --
Comprehensive income....................
Preferred stock dividends............... -- -- -- -- -- (17,466,000)
------ ------- ---------- ---------- ------------- -----------
Balances at December 31, 1998........... 11,500 12,000 76,488,661 1,912,000 1,640,532,000 133,000
Issuance of common stock................ -- -- 1,862,110 46,000 53,853,000 --
Amortization of deferred compensation... -- -- -- -- -- --
Stock option compensation............... -- -- -- -- 4,742,000 --
Tax benefit from stock options and
warrants.............................. -- -- -- -- 1,178,000 --
Net loss................................ -- -- -- -- -- (30,526,000)
Other comprehensive loss--foreign
currency translation adjustment....... -- -- -- -- -- --
Comprehensive loss......................
Preferred stock dividends............... -- -- -- -- -- (23,288,000)
------ ------- ---------- ---------- ------------- -----------
Balances at December 31, 1999........... 11,500 $12,000 78,350,771 $1,958,000 1,700,305,000 (53,681,000)
====== ======= ========== ========== ============= ===========
<CAPTION>
ACCUMULATED
OTHER
DEFERRED COMPREHENSIVE TREASURY
COMPENSATION INCOME (LOSS) STOCK TOTAL
------------- -------------- -------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1996........... -- -- (689,000) 113,182,000
Issuance of common stock................ (14,625,000) -- -- 195,343,000
Amortization of deferred compensation... 1,125,000 -- -- 1,125,000
Net income.............................. -- -- -- 14,099,000
----------- ----------- -------- -------------
Balances at December 31, 1997........... (13,500,000) -- (689,000) 323,749,000
Issuance of preferred stock............. -- -- -- 301,185,000
Issuance of common stock................ (16,100,000) -- -- 970,681,000
Amortization of deferred compensation... 4,489,000 -- -- 4,489,000
Retirement of treasury stock............ -- -- 689,000 --
Net income.............................. -- -- -- 34,840,000
Other comprehensive income--foreign
currency translation adjustment....... -- 9,087,000 -- 9,087,000
-------------
Comprehensive income.................... 43,927,000
-------------
Preferred stock dividends............... -- -- -- (17,466,000)
----------- ----------- -------- -------------
Balances at December 31, 1998........... (25,111,000) 9,087,000 -- 1,626,565,000
Issuance of common stock................ -- -- -- 53,899,000
Amortization of deferred compensation... 9,856,000 -- -- 9,856,000
Stock option compensation............... -- -- -- 4,742,000
Tax benefit from stock options and
warrants.............................. -- -- -- 1,178,000
Net loss................................ -- -- -- (30,526,000)
Other comprehensive loss--foreign
currency translation adjustment....... -- (26,810,000) -- (26,810,000)
-------------
Comprehensive loss...................... (57,336,000)
-------------
Preferred stock dividends............... -- -- -- (23,288,000)
----------- ----------- -------- -------------
Balances at December 31, 1999........... (15,255,000) (17,723,000) -- 1,615,616,000
=========== =========== ======== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:.........
Net income (loss)........................... $ (30,526,000) $ 34,840,000 14,099,000
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities (net of effects of
acquisition):
Depreciation and amortization........... 154,264,000 109,841,000 19,792,000
Equity in operations of theme parks, net
of cash received...................... (8,524,000) (8,240,000) --
Minority interest in earnings........... (6,000) 960,000 --
Noncash compensation.................... 12,725,000 6,362,000 1,125,000
Interest accretion on notes payable..... 34,402,000 28,713,000 --
Interest accretion on restricted-use
investments........................... (6,182,000) (7,267,000) --
Extraordinary loss on early
extinguishment of debt................ 18,826,000 1,314,000 --
Amortization of debt issuance costs..... 6,755,000 5,351,000 1,918,000
(Gain) loss on sale of assets........... 3,557,000 920,000 (46,000)
Deferred income taxes................... 17,146,000 38,698,000 6,737,000
(Increase) decrease in accounts
receivable............................ 5,359,000 (17,816,000) (5,272,000)
(Increase) decrease in income tax
receivable............................ -- 995,000 (995,000)
Increase in inventories and prepaid
expenses and other current assets..... (2,191,000) (12,154,000) (1,150,000)
(Increase) decrease in deposits and
other assets.......................... 9,416,000 (25,185,000) 6,237,000
Decrease in accounts payable, accrued
expenses and other liabilities........ (7,966,000) (61,806,000) (776,000)
Increase (decrease) in accrued interest
payable............................... (9,706,000) 23,484,000 5,481,000
--------------- --------------- -------------
Total adjustments..................... 227,875,000 84,170,000 33,051,000
--------------- --------------- -------------
Net cash provided by operating
activities.......................... 197,349,000 119,010,000 47,150,000
--------------- --------------- -------------
Cash flows from investing activities:
Additions to property and equipment......... (391,655,000) (205,754,000) (129,049,000)
Investment in theme park partnerships....... (51,931,000) (60,739,000) (6,595,000)
Acquisition of theme park assets............ (34,578,000) (50,593,000) (60,050,000)
Acquisition of theme park companies, net of
cash acquired............................. (242,954,000) (1,037,412,000) (21,376,000)
Purchase of restricted-use investments...... -- (321,750,000) --
Maturities of restricted-use investments.... 214,940,000 11,365,000 --
--------------- --------------- -------------
Net cash used in investing
activities.......................... (506,178,000) (1,664,883,000) (217,070,000)
--------------- --------------- -------------
Cash flows from financing activities:
Repayment of long-term debt................. (1,291,910,000) (703,639,000) (66,576,000)
Proceeds from borrowings.................... 1,391,024,000 1,361,703,000 132,500,000
Net proceeds from issuance of preferred
stocks.................................... -- 301,185,000 --
Net proceeds from issuance of common
stocks.................................... 2,801,000 955,134,000 189,530,000
Payment of cash dividends................... (23,288,000) (11,644,000) --
Payment of debt issuance costs.............. (29,139,000) (41,641,000) (5,289,000)
--------------- --------------- -------------
Net cash provided by financing
activities.......................... 49,488,000 1,861,098,000 250,165,000
--------------- --------------- -------------
</TABLE>
F-6
<PAGE>
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ----------- ----------
<S> <C> <C> <C>
Effect of exchange rate changes on cash
and cash equivalents................................ $ (3,106,000) 1,065,000 --
------------- ----------- ----------
Increase (decrease) in cash and cash
equivalents......................................... (262,447,000) 316,290,000 80,245,000
Cash and cash equivalents at beginning of year........ 400,578,000 84,288,000 4,043,000
------------- ----------- ----------
Cash and cash equivalents at end of year.............. $ 138,131,000 400,578,000 84,288,000
============= =========== ==========
Supplementary cash flow information:
Cash paid for interest.............................. $ 162,511,000 92,272,000 18,315,000
============= =========== ==========
Cash paid for income taxes.......................... $ 220,000 497,000 3,697,000
============= =========== ==========
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
1999
- The Company issued a $40,700,000 note convertible into 1,080,000 common
shares as consideration for a theme park acquisition made by a limited
partnership for which the Company is the managing general partner.
- The Company issued $10,435,000 of common stock (337,467 shares) as
additional consideration for a theme park acquisition.
1998
- The Company issued $15,547,000 of common stock (805,954 shares) as
consideration for a theme park acquisition.
- The Company issued restricted common stock (920,000 shares) to certain
employees valued at $16,100,000.
1997
- The Company issued $5,831,000 of common stock (307,600 shares) as
components of theme park acquisitions.
- The Company issued restricted common stock (900,000 shares) to certain
employees valued at $14,625,000.
- The Company assumed $268,000 of capital lease obligations as a component
of a theme park acquisition.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES
(A) DESCRIPTION OF BUSINESS
Premier owns and operates regional theme amusement and water parks. As of
December 31, 1999, the Company and its subsidiaries own or operate 35
parks, including 27 domestic parks, one park in Mexico and seven parks in
Europe. Premier is also managing the construction and development of a
theme park in Europe.
On March 24, 1998, the company then known as Premier Parks Inc. ("Premier
Operations") merged (the "Merger") with an indirect wholly owned
subsidiary thereof, pursuant to which Premier Operations became a wholly
owned subsidiary of Premier Parks Holdings Corporation ("Holdings") and
the holders of shares of common stock of Premier Operations became, on a
share-for-share basis, holders of common stock of Holdings. On the Merger
date, Premier Operations' name was changed to Premier Parks
Operations Inc., and Holdings' name was changed to Premier Parks Inc.
References herein to the "Company" or "Premier" mean (i) for all periods
or dates prior to March 24, 1998, Premier Operations and its consolidated
subsidiaries and (ii) for all subsequent periods or dates, Holdings and
its consolidated subsidiaries (including Premier Operations). As used
herein, Holdings refers only to Premier Parks Inc., without regard to its
subsidiaries.
During May 1999, in separate transactions, the Company purchased 100% of
the capital stock of the companies that owned 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 consideration for this
purchase was advanced to the partnership by the Company through a
convertible promissory note. 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.
During 1998, the Company purchased approximately 97% of the outstanding
capital stock of Walibi, S.A. ("Walibi") and as of December 31, 1999 owns
approximately 99%. See Note 2. On April 1, 1998, the Company purchased
all of the outstanding capital stock of Six Flags Entertainment
Corporation ("SFEC" and, together with its subsidiaries, "Six Flags") and
consummated the related transactions described in Note 2.
During February 1997, the Company purchased 100% of the common stock of
the company that owned Riverside Park and in November 1997 purchased 100%
of the equity interests of the company that owned Kentucky Kingdom.
The accompanying consolidated financial statements for the year ended
December 31, 1999 reflect the results of Reino Aventura, Splashtown,
White Water Atlanta, and Movie World Germany only from their acquisition
dates, May 4, 1999, May 13, 1999, May 25, 1999, and November 15, 1999,
respectively. The accompanying consolidated financial statements for the
year ended December 31, 1998 reflect the results of Walibi only from
March 26, 1998, and of Six Flags only from April 1, 1998. The
accompanying consolidated financial statements for the year ended
December 31, 1997 reflect the results of Riverside Park only from its
acquisition date, February 5, 1997 and Kentucky Kingdom only from its
acquisition date, November 7, 1997. In
F-8
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
addition, 1999 and 1998 results include the Company's share of the
results of Six Flags Marine World under the applicable lease and related
documents. See Note 13. Those results are not included in the 1997
period.
(B) 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 majority and wholly owned subsidiaries, and limited
partnerships and limited liability companies in which the Company
beneficially owns 100% of the interests. Intercompany transactions and
balances have been eliminated in consolidation.
The Company's investment in partnerships and joint ventures in which it
does not own controlling interests are accounted for using the equity
method.
(C) CASH EQUIVALENTS
Cash equivalents of $93,083,000 and $357,984,000 at December 31, 1999 and
1998, respectively, consist of short-term highly liquid investments with
a remaining maturity as of purchase date of three months or less, which
are readily convertible into cash. For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments with remaining maturities as of their purchase date of three
months or less to be cash equivalents.
(D) 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.
(E) 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 when incurred. The amounts
capitalized at year-end are included in prepaid expenses.
Advertising and promotions expense was $100,175,000, $66,141,000, and
$21,600,000 during 1999, 1998, and 1997, respectively.
(F) DEBT ISSUANCE COSTS
The Company capitalizes costs related to the issuance of debt. The
amortization of such costs is recognized as interest expense under a
method approximating the interest method over the life of the respective
debt issue.
(G) DEPRECIATION AND AMORTIZATION
Rides and attractions are depreciated using the straight-line method over
5-25 years. 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.
Maintenance and repairs are charged directly to expense as incurred,
while betterments and renewals are generally capitalized as property and
equipment. 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.
F-9
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
(H) INVESTMENT IN THEME PARK PARTNERSHIPS
The Company manages five parks in which the Company does not currently
own a controlling interest. The Company accounts for its investment in
these five parks using the equity method of accounting. The equity method
of accounting recognizes the Company's share of the activity of Six Flags
Over Texas, Six Flags Over Georgia, White Water Atlanta, and Six Flags
Marine World in the accompanying consolidated statements of operations in
the caption "equity in operations of theme park partnerships." The Warner
Bros. Movie World theme park being constructed in Spain is not yet in
operation. The equity method of accounting differs from the consolidation
method of accounting used for the theme parks in which the Company owns a
controlling interest. In the consolidation method of accounting, the
activities of the controlled parks are reflected in each revenue and
expense caption rather than aggregated into one caption.
(I) 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 18 to 25 years. Other
intangible assets are amortized over the period to be benefited,
generally up to 25 years. The Company assesses the recoverability of
intangible assets by determining whether the amortization of the
intangible asset balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquisition. The amount
of goodwill impairment, if any, is measured based on projected discounted
future operating cash flows using a discount rate reflecting the
Company's average borrowing rate.
(J) LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset or group of assets to future net cash
flows expected to be generated by the asset or group of assets. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed
the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
(K) INTEREST EXPENSE
Interest on notes payable is generally recognized as expense on the basis
of stated interest rates. Notes payable assumed in an acquisition are
carried at amounts adjusted to impute a market rate of interest cost
(when the obligations were assumed).
(L) 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
F-10
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
enactment date. United States deferred income taxes have not been
provided on foreign earnings which are being permanently reinvested.
(M) INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per share is computed by dividing net income (loss)
applicable to common stock by the weighted average number of common
shares outstanding for the period. Diluted income (loss) per share
reflects the potential dilution that would occur if the Company's
outstanding stock options were exercised (calculated using the treasury
stock method). No dilutive stock options were included in the 1999
computation of diluted loss per share because the effect in 1999 would
have been antidilutive. Additionally, the weighted average number of
shares for the year ended December 31, 1999 and 1998 does not include the
impact of the 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 effect of the
conversion and resulting decrease in preferred stock dividends would be
antidilutive.
During 1999 and the last nine months of 1998, the Company's mandatorily
convertible preferred stock was outstanding. Preferred stock dividends of
$23,288,000 and $17,466,000 were considered in determining net income
(loss) applicable to common stock in 1999 and 1998, respectively.
On June 9, 1998, the Company's common shareholders approved a two-for-one
stock split effective July 24, 1998. The par value of the common stock
was decreased to $.025 per share from $.05 per share. Additionally, the
authorized common shares of the Company were increased to 150,000,000.
The accompanying consolidated financial statements and notes to the
consolidated financial statements reflect the stock split as if it had
occurred as of the beginning of the earliest year presented.
The following table reconciles the weighted average number of common
shares outstanding used in the calculations of basic and diluted income
(loss) per average common share outstanding for the years 1999, 1998 and
1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of common
shares outstanding--basic.............. 77,656,000 66,430,000 35,876,000
Dilutive effect of potential common
shares issuable upon the exercise of
employee stock options................. -- 2,088,000 1,000,000
---------- ---------- ----------
Weighted average number of common
shares outstanding--diluted............ 77,656,000 68,518,000 36,876,000
========== ========== ==========
</TABLE>
(N) STOCK OPTIONS
For unconditional employee stock options, the Company recognizes
compensation expense over the service period, only if the current market
price of the underlying stock exceeds the exercise price on the date of
the grant. For employee stock options that are conditioned upon the
achievement of performance goals, compensation expense, as determined by
the extent that the quoted market price of the underlying stock at the
time that the condition for exercise is achieved exceeds the stock option
exercise price, is recognized over the service period. For stock options
F-11
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
issued to nonemployees, the Company recognizes compensation expense at
the time of issuance based upon the fair value of the options issued.
Pro forma net income (loss) and net income (loss) per share for employee
stock option grants made in and subsequent to 1995 as if the
fair-value-based method had been applied are provided in Note 10.
(O) INVESTMENT SECURITIES
Restricted-use investment securities at December 31, 1999 and 1998
consist of U.S. Treasury securities. The securities are restricted to
provide for three years of interest payments on certain debt issued in
1998, to provide funds to satisfy the Company's obligations under certain
guarantees of partnership arrangements described in Note 2, and at
December 31, 1998, to provide funds for the repayment of indebtedness
which matured in 1999. The Company classifies its investment securities
in one of two categories: available-for-sale or held-to-maturity.
Held-to-maturity securities are those securities in which the Company has
the ability and intent to hold the security until maturity. All other
securities held by the Company are classified as available-for-sale. The
Company does not purchase investment securities principally for the
purpose of selling them in the near term and thus has no securities
classified as trading.
Available-for-sale securities are recorded at fair value. As of
December 31, 1999 and 1998, the fair value of the restricted-use
investments classified as available-for-sale was $71,600,000 and
$74,000,000 which approximated the amortized cost of the securities.
Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported
as a separate component of other comprehensive income until realized.
Realized gains and losses from the sale of available-for-sale securities
are determined on a specific identification basis. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization
or accretion of premiums or discounts.
As of December 31, 1999 and 1998, all of the Company's restricted-use
investment securities classified as available-for-sale had remaining
maturities of less than one year; however, these securities are reflected
as noncurrent assets as they are restricted for future use. As of
December 31, 1999 and 1998, $24,430,000 and $206,075,000 of
restricted-use investment securities classified as held-to-maturity had
maturities and restrictions of less than one year and are reflected as
current assets. The remaining restricted-use investment securities
classified as held-to-maturity have a remaining term of less than three
years.
Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security as an adjustment to yield using the
effective interest method. Dividend and interest income are recognized
when earned.
(P) COMPREHENSIVE INCOME (LOSS)
On January 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME. SFAS No. 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full set
of financial statements. Comprehensive income (loss) consists of net
income (loss) and changes in the foreign currency translation adjustment
and is presented in the 1999 and 1998 consolidated statements of
stockholders' equity as accumulated other comprehensive income (loss).
The Statement requires only additional disclosures in the consolidated
financial statements; it does not affect the Company's financial position
or results of operations.
F-12
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
The Company's 1997 and earlier financial statements do not reflect any
effect from the adoption of SFAS 130 as prior to 1998 the Company did not
have foreign operations or own significant investment securities.
(Q) 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.
(R) RECLASSIFICATIONS
Reclassifications have been made to certain amounts reported in 1998 and
1997 to conform with the 1999 presentation.
(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 adjacent
American Adventures entertainment facility located near Atlanta, Georgia.
In connection with the acquisition, Premier issued a $40,700,000 note
that was converted into 1,080,000 shares of Premier 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 "New Credit Facility"). See
Note 6(h). Approximately $42,800,000 of the aggregate costs were
allocated to goodwill and intangible assets. The transaction was
accounted for as a purchase.
On March 26, 1998, the Company purchased (the "Private Acquisition")
approximately 49.9% of the outstanding capital stock of Walibi for an
aggregate purchase price of $42,300,000, of which
F-13
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(2) ACQUISITION OF THEME PARKS (CONTINUED)
20% was paid through issuance of 448,910 shares of common stock and 80%
was paid in cash. In June 1998, the Company purchased an additional 44%
of the outstanding capital stock of Walibi for an aggregate purchase
price of $38,100,000, which was paid through issuance of 347,746 shares
of common stock and $31,400,000 in cash. During the remainder of the
year, Premier purchased an additional 3% of Walibi, which included the
issuance of an additional 9,298 shares of common stock. During 1999,
Premier purchased an additional 2% of Walibi. On the date of the Private
Acquisition, Walibi's indebtedness aggregated $71,181,000, which
indebtedness was assumed or refinanced by the Company. The Company funded
the cash portion of the purchase price (and the refinancing of such
indebtedness) from borrowings under its senior secured credit facility
(the "Premier Credit Facility") entered into in March 1998. See
Note 6(c). As of the acquisition dates and after giving effect to the
purchases, $11,519,000 of deferred tax liabilities were recognized for
the tax consequences attributable to the differences between the
financial carrying amounts and the tax basis of Walibi's assets and
liabilities. Approximately $60,118,000 of costs in excess of the fair
value of the net assets acquired were recorded as goodwill. The Company
was not required to issue any shares as a result of the 1999 revenues.
The Company may be required to issue additional shares of common stock
based on Walibi's revenues during 2000 or 2001. The value of the
additional shares, if any, will be recorded as additional goodwill.
On April 1, 1998 the Company acquired (the "Six Flags Acquisition") all
of the capital stock of SFEC for $976,000,000, paid in cash. In
connection with the Six Flags Acquisition, the Company issued through
public offerings (i) 36,800,000 shares of common stock (with gross
proceeds of $993,600,000), (ii) 5,750,000 Premium Income Equity
Securities ("PIES") (with gross proceeds of $310,500,000),
(iii) $410,000,000 aggregate principal amount at maturity of the
Company's 10% Senior Discount Notes due 2008 (the "Senior Discount
Notes") (with gross proceeds of $251,700,000) and (iv) $280,000,000
aggregate principal amount of the Company's 9 1/4% Senior Notes due 2006
(the "1998 Senior Notes"), and SFEC issued $170,000,000 aggregate
principal amount of its 8 7/8% Senior Notes due 2006 (the "SFEC Notes").
In addition, in connection with the Six Flags Acquisition, the Company
(i) assumed $285,000,000 principal amount at maturity of senior
subordinated notes (the "SFTP Senior Subordinated Notes") of Six Flags
Theme Parks Inc. ("SFTP"), an indirect wholly-owned subsidiary of SFEC,
which notes had an accreted value of $278,100,000 at April 1, 1998 (fair
value of $318,500,000 at that date) and (ii) refinanced all outstanding
SFTP bank indebtedness with the proceeds of $410,000,000 of borrowings
under a new $472,000,000 senior secured credit facility of SFTP (the "Six
Flags Credit Facility"). See Note 6(g). During 1999, the Company
completed the determination of the value of the assets acquired and
liabilities assumed. As a result of the final determination, the deferred
income tax liability resulting from the acquisition and goodwill were
each reduced by approximately $30,000,000. As of the acquisition date and
after giving effect to the final allocation of purchase price,
$35,619,000 of deferred tax liabilities were recognized for the tax
consequences attributable to the differences between the financial
carrying amounts and the tax basis of Six Flags' assets and liabilities.
Approximately $1,170,974,000 of costs in excess of the fair value of the
net assets acquired were recorded as goodwill.
In addition to its obligations under outstanding indebtedness and other
securities issued or assumed in the Six Flags Acquisition, the Company
also guaranteed in connection therewith certain contractual obligations
relating to the partnerships that own two Six Flags parks, Six Flags Over
Texas and Six Flags Over Georgia (the "Partnership Parks"). Specifically,
the Company
F-14
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(2) ACQUISITION OF THEME PARKS (CONTINUED)
guaranteed the obligations of the general partners of those partnerships
to (i) make minimum annual distributions of approximately $46,300,000
(subject to annual cost of living adjustments) to the limited partners in
the Partnership Parks and (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. Cash flow from operations at the
Partnership Parks will be used to satisfy these requirements first,
before any funds are required from the Company. The Company also
guaranteed the obligation of its subsidiaries to purchase a maximum
number of 5% per year (accumulating to the extent not purchased in any
given year) of the total limited partnership units outstanding as of the
date of the agreements (the "Partnership Agreements") that govern the
partnerships (to the extent tendered by the unit holders). The agreed
price for these purchases is based on a valuation for each respective
Partnership Park equal to the greater of (i) a value derived by
multiplying such park's weighted-average four-year EBITDA (as defined in
the Partnership Agreements) 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) $250,000,000 in the case of the Georgia park and $374,800,000 in the
case of the Texas park. The Company's obligations with respect to Six
Flags Over Georgia and Six Flags Over Texas will continue until 2027 and
2028, respectively.
As the Company purchases units relating to either Partnership Park, it
will be entitled to the minimum distribution and other distributions
attributable to such units, unless it is then in default under the
applicable agreements with its partners at such Partnership Park. On
December 31, 1999, the Company owned approximately 25% and 34%,
respectively, of the limited partnership units in the Georgia and Texas
partnerships. The maximum unit purchase obligations for 2000 at both
parks will aggregate approximately $71,200,000.
On February 5, 1997, the Company acquired all of the outstanding common
stock of Stuart Amusement Company ("Stuart"), the owner of Riverside
Park, for a purchase price of $22,200,000 ($1,000,000 of which was paid
through issuance of 64,278 of the Company's common shares). The
transaction was accounted for as a purchase. As of the acquisition date
and after giving effect to the purchase, $6,623,000 of deferred tax
liabilities were recognized for the tax consequences attributable to the
differences between the financial statement carrying amounts and the tax
basis of Stuart's assets and liabilities. Approximately $10,484,000 of
costs in excess of the fair value of the net assets acquired were
recorded as goodwill.
On November 7, 1997, the Company acquired Kentucky Kingdom--The Thrill
Park ("Kentucky Kingdom") for a preliminary purchase price of $64,000,000
of which $4,831,000 was paid through the issuance of 243,342 shares of
the Company's common stock. As a result of 1998 revenues exceeding levels
specified in the purchase agreement, Premier was required to issue the
former owners of Kentucky Kingdom an additional 337,000 shares of common
stock in April 1999, of which approximately 126,000 shares were placed in
an escrow account to offset potential pre-acquisition claims by the
Company. The Company would have been required to issue additional shares
of common stock based upon the level of revenues at Kentucky Kingdom
during 1999 and 2000. During 1999, the Company and the sellers of
Kentucky Kingdom reached a new agreement pursuant to which the Company
agreed to pay the sellers $4,300,000, of which $1,250,000 was placed in
escrow. A portion of this payment represented proceeds of the sale of the
126,000 shares of common stock previously placed in escrow. In
consideration of the foregoing, the sellers released the Company from any
further obligations under the acquisition
F-15
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(2) ACQUISITION OF THEME PARKS (CONTINUED)
agreement, including the obligation to issue additional shares based on
1999 and 2000 revenues of Kentucky Kingdom. The acquisition was accounted
for as a purchase. The purchase price, as adjusted, was primarily
allocated to property and equipment with $16,306,000 of costs recorded as
goodwill.
The following summarized unaudited pro forma results of operations for
the years ended December 31, 1999 and 1998, assume that the Six Flags,
Walibi, Reino Aventura, White Water Atlanta, Splashtown and Movie World
acquisitions, and the related transactions occurred as of January 1,
1998.
<TABLE>
<CAPTION>
1999 1998
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Total revenues.......................................... $975,859 898,670
Income (loss) before extraordinary loss................. (42,942) (66,299)
Income (loss) per common share - basic.................. (0.85) (1.17)
Income (loss) per common share - diluted................ (0.85) (1.17)
</TABLE>
The following summarized unaudited pro forma results of operations for
the years ended December 31, 1998 and 1997, assume that the Six Flags
Acquisition, the acquisition of Walibi, the acquisition of Kentucky
Kingdom, and the related financings occurred as of January 1, 1997.
<TABLE>
<CAPTION>
1998 1997
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Total revenues........................................... $817,409 793,467
Income (loss) before extraordinary loss.................. (51,160) (56,497)
Income (loss) per common share - basic................... (0.98) (1.06)
Income (loss) per common share - diluted................. (0.98) (1.06)
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Land........................................... $ 332,942,000 273,723,000
Buildings and improvements..................... 681,700,000 465,991,000
Rides and attractions.......................... 1,061,607,000 808,438,000
Equipment...................................... 196,170,000 127,807,000
-------------- -------------
Total.......................................... 2,272,419,000 1,675,959,000
Less accumulated depreciation.................. 207,680,000 104,806,000
-------------- -------------
$2,064,739,000 1,571,153,000
============== =============
</TABLE>
(4) INVESTMENT IN THEME PARK PARTNERSHIPS
The following reflects the summarized assets, liabilities, and equity as
of December 31, 1999 and 1998, and the results of the four parks managed
by the Company for the years ended December 31, 1999 and 1998, in the
case of Six Flags Marine World, and for the periods subsequent to
F-16
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(4) INVESTMENT IN THEME PARK PARTNERSHIPS (CONTINUED)
April 1, 1998 (the date of the Six Flags Acquisition), in the case of the
Partnership Parks and for the period subsequent to May 25, 1999, in the
case of White Water Atlanta, which was purchased on that date by the
limited partnership that owns Six Flags Over Georgia. Previous periods
are not presented as the general partner and limited partnership
interests in the Partnership Parks were purchased on April 1, 1998 and
the lease agreement with the owner of Six Flags Marine World, which
established a revenue sharing arrangement in which the Company
participates, became effective at the beginning of the 1998 operating
season. The following information does not include results of the Warner
Bros. Movie World theme park being constructed in Spain, as it is not yet
in operation.
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Assets:
Current assets.................................. $ 33,114,000 34,055,000
Property and equipment, net..................... 241,522,000 189,632,000
Other assets.................................... 39,179,000 24,289,000
------------ -----------
Total assets................................ $313,815,000 247,976,000
============ ===========
Liabilities and equity:
Current liabilities............................. $ 32,851,000 34,189,000
Affiliate loans................................. 89,607,000 29,907,000
Long-term debt.................................. 71,613,000 90,337,000
Equity.......................................... 119,744,000 93,543,000
------------ -----------
Total liabilities and equity................ $313,815,000 247,976,000
============ ===========
Revenue........................................... $225,774,000 202,183,000
------------ -----------
Expenses:
Operating expenses.............................. 88,901,000 75,680,000
Selling, general and administrative............. 28,457,000 24,933,000
Costs of products sold.......................... 21,241,000 26,689,000
Depreciation and amortization................... 13,148,000 13,325,000
Interest expense, net........................... 11,545,000 6,301,000
Other expense................................... 532,000 1,451,000
------------ -----------
Total....................................... 163,824,000 148,379,000
------------ -----------
Net income........................................ $ 61,950,000 53,804,000
============ ===========
</TABLE>
The Company's share of operations of the four theme parks for the years
ended December 31, 1999 and 1998 were $44,187,000 and $35,408,000, prior
to depreciation and amortization charges of $15,826,000 and $9,763,000
and third-party interest expense and other non-operating expenses of
$2,181,000 and $1,591,000, respectively. A substantial difference exists
between the carrying value of the Company's investment in the theme parks
and the Company's share of 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. Pursuant to the Partnership
Agreements, the Company, as managing general partner of the Partnership
Parks, can make affiliate loans to the Partnership Parks. These loans are
reflected in the Company's consolidated balance sheet as an investment in
theme park partnerships. As discussed in Note 2, the Company provided the
consideration for a Partnership
F-17
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(4) INVESTMENT IN THEME PARK PARTNERSHIPS (CONTINUED)
Park to acquire White Water Atlanta. The resulting note from the
Partnership Park to the Company is in the form of an affiliate loan.
Included in long-term debt above as of December 31, 1999 is $65,971,000
of long-term debt that is not guaranteed by the Company. The long-term
debt is an obligation of the other parties that have an interest in Six
Flags Marine World. The remaining long-term debt consists primarily of
term loan debt and capitalized lease obligations associated with rides
and equipment.
(5) DERIVATIVE FINANCIAL INSTRUMENTS
The Company historically has had only limited involvement with derivative
financial instruments, entering into contracts to manage the variability
of foreign-currency exchange rates.
Foreign currency forward purchase agreements are used to reduce the
potential impact of changes in foreign currency exchange rates on the
cost of rides and equipment purchased from European suppliers. At
December 31 1999, the Company was a party to forward purchase agreements
of European currencies with terms expiring in 2000. The agreements
require the Company to purchase European currencies from the
counterparties (three large financial institutions) at specified
intervals, for approximately $63,255,000. The specified transaction
intervals coincide with the dates that payments are expected to be made
related to the capital expenditures being paid through use of a foreign
currency. At December 31, 1998, the Company was a party to two forward
purchase agreements of European currencies with terms that expired in
1999. The agreements required the Company to purchase European currencies
from the counterparties (an investment bank and a large financial
institution), at specified intervals, for approximately $17,679,000. The
specified transaction intervals coincided with the dates that payments
were expected to be made related to the capital expenditures being paid
through use of a foreign currency.
The fair value of the forward purchase agreements was $58,000 and
$577,000 at December 31, 1999 and 1998, respectively. The fair value is
estimated using values provided by the counterparties based upon quoted
exchange rates for forward purchases.
In February 2000, the Company entered into three interest rate swap
agreements that effectively convert the Company's $600,000,000 term loan
component of the New Credit Facility (see note 6(h)) into a fixed rate
obligation. The terms of the agreements, each of which has a notional
amount of $200,000,000, begin March 2000 and expire from December 2001 to
March 2002. The Company's term loan borrowings bear interest based upon
the LIBOR rate. The Company's interest rate swap arrangements are
designed to "lock-in" the LIBOR component at rates ranging from 6.615% to
6.780% depending on the applicable agreement. Two of the agreements have
a feature that negates the interest rate swap for a ninety-day period if
LIBOR rates exceed 7.5%, while the remaining agreement limits the
interest rate swap at the 7.5% rate. The counterparties to these
transactions are major financial institutions, which minimizes the credit
risk.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its forward purchase and interest rate swap
agreements. The Company anticipates, however, that counterparties will
fully satisfy their obligations under the contracts. The Company does not
obtain collateral to support its financial instruments but monitors the
credit standing of the counterparties.
F-18
<PAGE>
(6) LONG-TERM DEBT
At December 31, 1999 and 1998, long-term debt consists of:
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Long-term debt:
1995 Notes due 2003 (a)...................... $ -- 90,000,000
1997 Notes due 2007 (b)...................... 125,000,000 125,000,000
Premier Credit Facility (c).................. -- 200,000,000
Senior Discount Notes due 2008 (d)........... 298,664,000 270,895,000
1998 Senior Notes due 2006(d) 280,000,000 280,000,000
SFEC Notes (e)............................... 170,000,000 170,000,000
SFEC Zero Coupon Notes (e)................... -- 182,877,000
SFTP Senior Subordinated Notes (f)........... -- 321,167,000
Six Flags Credit Facility (g)................ -- 409,750,000
New Credit Facility (h)...................... 892,000,000 --
Senior Notes due 2007 (i).................... 429,085,000 --
Other........................................ 10,239,000 14,500,000
-------------- -------------
2,204,988,000 2,064,189,000
Less current portion, in 1998 primarily the
SFEC Zero Coupon Notes (carrying value of
$182,877,000 as of December 31, 1998) which
had been prefunded with restricted-use
investments (which also matured in 1999)..... 2,055,000 198,038,000
-------------- -------------
$2,202,933,000 1,866,151,000
============== =============
</TABLE>
- ------------------------
(a) In August 1995, Premier Operations issued $90,000,000 principal amount
of senior notes (the "1995 Notes"). A portion of the proceeds from the
June 1999 issuance of Holdings' Senior Notes due 2007 (see Note 6(i))
were utilized to repurchase and redeem these notes. An extraordinary loss
of $5,778,000, net of tax benefit of $3,852,000, was recognized from
early extinguishment. The 1995 Notes were senior unsecured obligations of
Premier Operations, and were scheduled to mature on August 15, 2003. The
1995 Notes accrued interest at 12% per annum payable semiannually and
were guaranteed on a senior, unsecured, joint and several basis by all of
Premier Operations' principal domestic subsidiaries.
(b) On January 31, 1997, Premier Operations issued $125,000,000 of senior
notes due January 2007 (the "1997 Notes"). The 1997 Notes are senior
unsecured obligations of Premier Operations and were equal to the 1995
Notes in priority upon liquidation. The 1997 Notes bear interest at
9 3/4% per annum payable semiannually and are redeemable, at Premier
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
Premier Operations' principal domestic subsidiaries.
The indenture limits the ability of Premier 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. A portion of the proceeds were used
to pay in full all amounts outstanding under Premier Operations' then
outstanding credit facility.
All obligations under the 1997 Notes and the related indenture remained
as obligations of Premier Operations and were not assumed by Holdings
after the Merger.
F-19
<PAGE>
(6) LONG-TERM DEBT (CONTINUED)
(c) In March 1998, Premier Operations entered into the Premier Credit
Facility and terminated its then outstanding $115,000,000 credit
facility, resulting in a $788,000 extraordinary loss, net of tax benefit
of $526,000, in the first quarter of 1998 in respect of debt issuance
costs related to the terminated facility. The Premier Credit Facility was
terminated in November 1999 in connection with the New Credit Facility.
See Note 6(h). At December 31, 1998, Premier Operations had borrowed
$200,000,000 under the Premier Credit Facility, in part to fund the
acquisition of Walibi. The Premier Credit Facility included a five-year
$75,000,000 revolving credit facility (none of which was outstanding at
December 31, 1998), a five-year $100,000,000 term loan facility
(subsequently reduced to $75,000,000 and an eight-year $125,000,000 term
loan facility (which was fully drawn at December 31, 1998). Borrowings
under the Premier Credit Facility were guaranteed by Premier Operations'
domestic subsidiaries and secured by substantially all of the assets of
Premier Operations and such subsidiaries (other than real estate).
(d) On April 1, 1998, Holdings issued at a discount $410,000,000 principal
amount at maturity ($298,664,000 and $270,895,000 carrying value as of
December 31, 1999 and 1998, respectively) of Senior Discount Notes and
$280,000,000 principal amount of 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 Premier's obligations
to the limited partners of the Partnership Parks. See Note 2.
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.
(e) On April 1, 1998, SFEC issued $170,000,000 principal amount of SFEC
Notes, which are senior obligations of SFEC. 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 Premier
Operations and certain other circumstances, do not require any principal
payments prior to their maturity in 2006. The SFEC Notes are redeemable,
at the Company's option, in whole or in part, at any time on or after
April 1, 2002, at varying redemption prices. The net proceeds of the SFEC
Notes, together with other funds, were invested in restricted-use
securities to provide for the repayment in full on or before
December 15, 1999 of pre-existing notes of SFEC (with a carrying value of
$182,877,000 at December 31, 1998). The pre-existing notes of SFEC were
paid in full using the restricted-use securities on December 15, 1999.
The indenture under which the SFEC Notes were issued limits the ability
of Premier Operations and its subsidiaries to dispose of assets; incur
additional indebtedness or liens; pay dividends;
F-20
<PAGE>
(6) LONG-TERM DEBT (CONTINUED)
engage in mergers or consolidations; and engage in certain transactions
with affiliates. In November 1999, SFEC merged into Premier Operations,
which assumed the obligations of SFEC under the SFEC Notes and the
related indenture.
(f) The SFTP Senior Subordinated Notes were senior subordinated obligations
of SFTP in an aggregate principal amount of $285,000,000. A portion of
the proceeds from the June 1999 issuance of Holdings' Senior Notes due
2007 (see Note 6(i)) were used to repurchase and retire these notes. An
extraordinary loss of $304,000, net of tax benefit of $202,000, was
recognized from the early extinguishment. The SFTP Senior Subordinated
Notes were issued at a discount and effective in 1999 required annual
interest payments of approximately $34,900,000 per annum (12 1/4% per
annum). The first interest payment was paid in December 1998. As a result
of the application of purchase accounting, the carrying value of the SFTP
Senior Subordinated Notes was increased to $318,500,000, which was the
estimated fair value at the acquisition date of April 1, 1998. The
premium that resulted from the adjustment of the carrying value was
amortized as a reduction to interest expense and resulted in an effective
interest rate of approximately 9 3/4%.
(g) On April 1, 1998, SFTP entered into the Six Flags Credit Facility. The
facility was terminated in November 1999 in connection with the New
Credit Facility. See Note 6(h). The Six Flags Credit Facility included
(i) a $100,000,000 five-year revolving credit facility used to refinance
Six Flags bank indebtedness as of April 1, 1998 and for working capital
and other general corporate purposes and (ii) a $372,000,000 term loan
facility (the "Term Loan Facility"). Borrowings under the Six Flags
Credit Facility were secured by substantially all of the assets of SFTP
and its subsidiaries and a pledge of the stock of SFTP, and were
guaranteed by such subsidiaries and SFEC.
(h) On November 5, 1999, SFTP entered into the New Credit Facility and, in
connection therewith, SFEC merged into Premier Operations and SFTP became
a subsidiary of Premier Operations. The New Credit Facility includes a
$300,000,000 five-year revolving credit facility (none of which was
outstanding at December 31, 1999), a $300,000,000 five-and-one-half-year
multicurrency reducing revolver facility (of which $292,000,000 was
outstanding at December 31, 1999) and a $600,000,000 six-year term loan
(all of which was borrowed at December 31, 1999). 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 New
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. At December 31, 1999, the
interest rate on the borrowings was 8.88%. 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 New Credit
Facility are guaranteed by Holdings, Premier Operations and all of
Premier Operations' domestic subsidiaries and are secured by
substantially all of Premier Operations' domestic assets. See note 5
regarding interest rate hedging activities.
The New Credit Facility contains restrictive covenants that, among other
things, limit the ability of Premier Operations and its subsidiaries to
dispose of assets; incur additional indebtedness or liens; repurchase
stock; make investments; engage in mergers or consolidations; pay
dividends,
F-21
<PAGE>
(6) LONG-TERM DEBT (CONTINUED)
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 PIES and its obligations to the limited partners
in the Partnership Parks, and engage in certain transactions with
subsidiaries and affiliates. In addition, the New Credit Facility
requires that Premier Operations comply with certain specified financial
ratios and tests.
On November 5, 1999, the Company borrowed $892,000,000 under the New
Credit Facility principally to repay all amounts outstanding under the
Premier Credit Facility and the Six Flags Credit Facility and to provide
funds to consummate the November 1999 transactions with Warner Bros.
described in Note 2. The termination of the Premier and Six Flags Credit
Facilities resulted in an extraordinary loss in respect of the debt
issuance costs related thereto of $5,214,000, net of tax benefit of
$3,476,000.
(i) 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 in 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 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 1999 Senior New Notes were used to fund the purchase
in a tender offer of $87,500,000 of the 1995 Notes (see Note 6(a)) and
the entire $285,000,000 principal amount of the SFTP Senior Subordinated
Notes (see Note 6(f)). The remaining $2,500,000 balance of the 1995 Notes
was redeemed in August 1999.
Annual maturities of long-term debt during the five years subsequent to
December 31, 1999, are as follows:
<TABLE>
<S> <C>
2000.............................................. $ 2,055,000
2001.............................................. 9,834,000
2002.............................................. 43,464,000
2003.............................................. 72,518,000
2004 and thereafter............................... 2,077,117,000
--------------
$2,204,988,000
==============
</TABLE>
As discussed in (a) to (i), the long-term debt of the Company has been
issued by both Holdings and by several of its subsidiaries. The following
table provides information as of and for the year ended December 31, 1999
of the assets held by, and the results of operations and cash flows of,
each of the consolidating groups that have issued registered debt.
Holdings is the issuer of the notes described in (d) and (i) above. The
information presented below for Holdings contains the assets,
liabilities, results of operations and cash flows of Holdings. Premier
Operations is the issuer of the notes described in (b) above. The
domestic subsidiaries of Premier Operations guarantee the 1997 Notes on a
full, unconditional, and joint and several basis. The information for
Premier Operations contains the assets, liabilities, results of
operations and cash flows of Premier Operations and its domestic
subsidiaries as if the merger of SFEC into Premier Operations had
occurred on January 1, 1999. The non-guarantor group is
F-22
<PAGE>
(6) LONG-TERM DEBT (CONTINUED)
comprised of the assets, liabilities, results of operations and cash
flows of Premier Operations' foreign subsidiaries that are not guarantors
of any of the debt described in (a) through (i) above.
<TABLE>
<CAPTION>
PREMIER NON-
HOLDINGS OPERATIONS GUARANTORS ELIMINATIONS TOTAL
---------- ---------- ---------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents........... $ 20,120 97,724 20,287 -- 138,131
Restricted-use investment
securities........................ 24,430 -- -- -- 24,430
Other current assets................ 21,882 47,655 16,054 -- 85,591
---------- --------- -------- ---------- ---------
Total current assets.................. 66,432 145,379 36,341 -- 248,152
Intercompany receivables (payables)... 100,291 (59,519) (40,772) -- --
Deferred income taxes................. 16,690 -- -- (16,690) --
Other assets.......................... 112,672 299,677 796 (208,669) 204,476
Investment in subsidiaries............ 2,042,400 158,076 -- (2,200,476) --
Investment in theme park
partnerships........................ 292,305 92,332 -- -- 384,637
Property and equipment, net........... 12,584 1,694,710 357,445 -- 2,064,739
Intangible assets, net................ 6,463 1,159,161 93,944 -- 1,259,568
---------- --------- -------- ---------- ---------
Total assets.......................... $2,649,837 3,489,816 447,754 (2,425,835) 4,161,572
========== ========= ======== ========== =========
Liabilities and stockholders' equity:
Current portion of long-term debt..... $ -- 1,376 679 -- 2,055
Other current liabilities........... 25,901 83,159 48,187 -- 157,247
---------- --------- -------- ---------- ---------
Total current liabilities....... 25,901 84,535 48,866 -- 159,302
Long-term debt........................ 1,007,749 1,190,978 212,875 (208,669) 2,202,933
Other long-term liabilities........... 571 39,736 2,024 (570) 41,761
Deferred income taxes................. -- 132,737 25,913 (16,690) 141,960
Stockholders' equity.................. 1,615,616 2,041,830 158,076 (2,199,906) 1,615,616
---------- --------- -------- ---------- ---------
Total liabilities and stockholders'
equity.............................. $2,649,837 3,489,816 447,754 (2,425,835) 4,161,572
========== ========= ======== ========== =========
Revenue:
Theme park admissions............... $ -- 445,046 55,371 -- 500,417
Theme park food, merchandise and
other............................. -- 385,532 41,035 -- 426,567
---------- --------- -------- ---------- ---------
Total revenue................... -- 830,578 96,406 -- 926,984
---------- --------- -------- ---------- ---------
Operating costs and expenses:
Operating expenses.................. -- 311,903 41,825 -- 353,728
Selling, general and
administrative.................... 10,277 137,226 16,023 -- 163,526
Noncash compensation................ 12,725 -- -- -- 12,725
Costs of products sold.............. -- 81,887 8,812 -- 90,699
Depreciation and amortization....... 589 135,637 18,038 -- 154,264
---------- --------- -------- ---------- ---------
Total operating costs and
expenses...................... 23,591 666,653 84,698 -- 774,942
---------- --------- -------- ---------- ---------
Income (loss) from operations... (23,591) 163,925 11,708 -- 152,042
---------- --------- -------- ---------- ---------
</TABLE>
F-23
<PAGE>
(6) LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
PREMIER NON-
HOLDINGS OPERATIONS GUARANTORS ELIMINATIONS TOTAL
--------- ---------- ---------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Other income (expense):
Interest expense.................. $ (78,232) (114,512) (6,238) 5,017 (193,965)
Interest income................... 11,323 18,022 196 (5,017) 24,524
Equity in operations of theme park
partnerships.................... 19,105 7,075 -- -- 26,180
Other income (expense)............ -- (4,119) 568 -- (3,551)
--------- ---------- ---------- -------- ----------
Total other income
(expense)................... (47,804) (93,534) (5,474) -- (146,812)
--------- ---------- ---------- -------- ----------
Income (loss) before income
taxes....................... (71,395) 70,391 6,234 -- 5,230
Income tax expense (benefit)........ (19,803) 40,133 4,130 -- 24,460
--------- ---------- ---------- -------- ----------
Income (loss) before
extraordinary loss.......... (51,592) 30,258 2,104 -- (19,230)
Extraordinary loss on extinguishment
of debt, net of income tax
benefit........................... -- (11,296) -- -- (11,296)
--------- ---------- ---------- -------- ----------
Net income (loss)............. $ (51,592) 18,962 2,104 -- (30,526)
========= ========== ========== ======== ==========
Net income (loss) applicable
to common stock............. $ (74,880) 18,962 2,104 -- (53,814)
========= ========== ========== ======== ==========
Cash flow information:
Operating cash flows.............. $ (1,506) 167,492 31,363 -- 197,349
--------- ---------- ---------- -------- ----------
Cash flows from investing
activities:
Additions to property and
equipment....................... 10,746 (369,136) (33,265) -- (391,655)
Investment in theme park
partnerships.................... (23,006) (28,925) -- -- (51,931)
Acquisition of theme park
assets.......................... -- (26,701) (7,877) -- (34,578)
Acquisitions of theme park
companies....................... -- (63,090) (180,653) 789 (242,954)
Investment in subsidiaries........ (607,632) (158,743) -- 766,375 --
Maturities of restricted-use
investments..................... 22,690 192,250 -- -- 214,940
--------- ---------- ---------- -------- ----------
(597,202) (454,345) (221,795) 767,164 (506,178)
--------- ---------- ---------- -------- ----------
Cash flows from financing
activities:
Repayment of long-term debt....... -- (1,286,792) (19,801) 14,683 (1,291,910)
Proceeds from borrowings.......... 429,024 962,000 162,769 (162,769) 1,391,024
Net cash proceeds from issuance of
stock........................... 2,801 -- -- -- 2,801
Capital contributions............. -- 607,632 10,657 (618,289) --
Advances to subsidiaries.......... (100,291) 60,383 39,908 -- --
Payment of preferred dividends.... (23,288) -- -- -- (23,288)
Payment of debt issuance costs.... (9,829) (19,310) -- -- (29,139)
--------- ---------- ---------- -------- ----------
298,417 323,913 193,533 (766,375) 49,488
Effect of exchange rate changes on
cash............................ -- -- (3,106) -- (3,106)
--------- ---------- ---------- -------- ----------
Increase (decrease) in cash and
cash equivalents................ $(300,291) 37,060 (5) 789 (262,447)
========= ========== ========== ======== ==========
</TABLE>
F-24
<PAGE>
(6) LONG-TERM DEBT (CONTINUED)
The debt indentures and credit facility agreements generally restrict the
ability of the obligors to distribute assets to parent companies or in
the case of Holdings to shareholders. The following table discloses the
amounts available for distribution (other than permitted payments in
respect of shared administrative and other corporate expenses and tax
sharing payments) at December 31, 1999 by each debt group based upon the
most restrictive applicable limitation.
<TABLE>
<CAPTION>
AMOUNT
AVAILABLE
--------------
(IN THOUSANDS)
<S> <C>
Holdings............................................ $176,795
Premier Operations.................................. 864,937
</TABLE>
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1999 and
1998. The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties.
<TABLE>
<CAPTION>
1999 1998
------------------------------ -----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial assets
(liabilities):
Restricted-use
investment
securities.......... $ 108,894,000 108,782,000 317,652,000 320,059,000
Long-term debt........ 2,204,988,000 2,183,636,000 2,064,189,000 2,098,271,000
Foreign currency
forward purchase
agreements.......... -- 59,000 -- 577,000
</TABLE>
The carrying amounts shown in the table are included in the consolidated
balance sheets under the indicated captions, except for the foreign
currency forward purchase agreements (Note 5) which are not reflected in
the consolidated balance sheets.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
- The fair value of cash and cash equivalents, accounts receivable, accounts
payable, and accrued liabilities approximate fair value because of the
short maturity of these instruments.
- Restricted-use investment securities: The fair values of debt securities
(both available-for-sale and held-to-maturity investments) are based on
quoted market prices at the reporting date for those or similar
investments.
- Long-term debt: The fair value of the Company's long-term debt is
estimated by discounting the future cash flows of each instrument at rates
currently offered to the Company for similar debt instruments of
comparable maturities by the Company's investment bankers or based upon
quoted market prices.
F-25
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(8) TERMINATION FEE
During October 1997, the Company entered into an agreement with the
limited partner of the partnership that owned the Six Flags Over Texas
theme park. The general terms of the agreement were for the Company to
become the managing general partner of the partnership, to manage the
operations of the park, to receive a portion of the income from such
operations, and to purchase limited partnership units over the term of
the agreement. The provisions of the agreement also granted the Company
an option to purchase all of the partnership interests in the partnership
at the end of the agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was
terminated. Subsequent to the Company's agreement with the limited
partners, the prior operator of the theme park also reached an agreement
with the limited partners. The Company received the termination fee in
December 1997 and has included the termination fee, net of $2,386,000 of
expenses associated with the transaction, as a component of other income
(expense) in the accompanying 1997 consolidated statement of operations.
(9) INCOME TAXES
Income tax expense (benefit) allocated to operations for 1999, 1998 and
1997 consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
1999:
U.S. federal..................................... $ (683,000) 18,338,000 17,655,000
Foreign.......................................... 1,058,000 3,072,000 4,130,000
State and local.................................. (591,000) 3,266,000 2,675,000
---------- ---------- ----------
$ (216,000) 24,676,000 24,460,000
========== ========== ==========
1998:
U.S. federal..................................... $ (564,000) 32,318,000 31,754,000
Foreign.......................................... 1,049,000 5,146,000 6,195,000
State and local.................................. 1,007,000 1,760,000 2,767,000
---------- ---------- ----------
$1,492,000 39,224,000 40,716,000
========== ========== ==========
1997:
U.S. federal..................................... $2,505,000 6,060,000 8,565,000
State and local.................................. 373,000 677,000 1,050,000
---------- ---------- ----------
$2,878,000 6,737,000 9,615,000
========== ========== ==========
</TABLE>
F-26
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(9) INCOME TAXES (CONTINUED)
Recorded income tax expense allocated to operations differed from amounts
computed by applying the U.S. federal income tax rate of 35% in 1999,
1998 and 1997 to income before income taxes as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ---------
<S> <C> <C> <C>
Computed "expected" federal income tax
expense................................ $ 1,830,000 26,720,000 8,300,000
Amortization of goodwill................. 11,973,000 9,970,000 327,000
Nondeductible compensation............... 6,786,000 656,000 --
Other, net............................... 864,000 (129,000) 200,000
Effect of foreign income taxes........... 1,215,000 1,645,000 --
Effect of state and local income taxes,
net of federal tax benefit............. 1,792,000 1,854,000 788,000
----------- ---------- ---------
$24,460,000 40,716,000 9,615,000
=========== ========== =========
</TABLE>
An income tax benefit of $7,530,000 was allocated to extraordinary loss
for 1999. The U.S. federal benefit component was $6,539,000 and the state
and local benefit component was $991,000. There were no foreign
extraordinary losses in 1999. An income tax benefit of $526,000 was
allocated to extraordinary loss for 1998. The U.S. federal benefit
component was $457,000 and the state and local benefit component was
$69,000. There were no foreign extraordinary losses in 1998.
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting
and tax depreciation methods and periods for property and equipment. The
Company's net operating loss carryforwards, alternative minimum tax
credits, accrued insurance expenses, and deferred compensation amounts
represent future income tax deductions (deferred tax assets). The tax
effects of these temporary differences as of December 31, 1999 and 1998,
are presented below:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Deferred tax assets before valuation allowance.... $213,244,000 172,227,000
Less valuation allowance.......................... 1,196,000 1,196,000
------------ -----------
Net deferred tax assets........................... 212,048,000 171,031,000
Deferred tax liabilities.......................... 354,008,000 323,009,000
------------ -----------
Net deferred tax liability........................ $141,960,000 151,978,000
============ ===========
</TABLE>
The Company's deferred tax liability results from the financial carrying
amounts for property and equipment being substantially in excess of the
Company's tax basis in the corresponding assets. The majority of the
Company's property and equipment is depreciated over a 7-year period for
tax reporting purposes and a longer 20- to 25-year period for financial
purposes. The faster tax depreciation has resulted in tax losses which
can be carried forward to future years to offset future taxable income.
Because most of the Company's depreciable assets' financial carrying
amounts and tax basis difference will reverse before the expiration of
the Company's net
F-27
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(9) INCOME TAXES (CONTINUED)
operating loss carryforwards and taking into account the Company's
projections of future taxable income over the same period, management
believes that the Company will more likely than not realize the benefits
of these net future deductions.
As of December 31, 1999, the Company has approximately $542,375,000 of
net operating loss carryforwards available for federal income tax
purposes which expire through 2019. Included are net operating loss
carryforwards of $3,400,000 which are not expected to be utilized as a
result of an ownership change that occurred on October 30, 1992. A
valuation allowance for the pre-October 1992 net operating loss
carryforwards has been established. Additionally at December 31, 1999,
the Company had approximately $7,537,000 of alternative minimum tax
credits which have no expiration date.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. The
Company experienced an additional ownership change on June 4, 1996, as a
result of the issuance of shares of common stock and the conversion of
preferred stock into additional shares of common stock. This ownership
change limits the amount of the Company's post-October 1992 through
June 1996 net operating loss carryforwards that can be used in any year.
Included in the Company's tax net operating loss carryforward amounts are
approximately $249,353,000 of net operating loss carryforwards of Six
Flags generated prior to its acquisition by the Company. Six Flags
experienced an ownership change on April 1, 1998 as a result of the Six
Flags Acquisition. Due to this ownership change, no more than $49,200,000
of pre-acquisition net operating loss carryforwards may be used to offset
taxable income in any year; however, it is more likely than not that all
of the Company's carryforwards generated subsequent to October 1992 and
all of the Six Flags' carryfowards will be fully utilized by the Company
before their expiration.
During 1999, the Company reduced goodwill by approximately $1,700,000 for
the tax benefit from certain reimbursed costs arising from contingencies
related to the Six Flags Acquisition.
(10) STOCKHOLDERS' EQUITY
(A) PREFERRED STOCK
The Company has authorized 5,000,000 shares of preferred stock, $1.00 par
value per share.
In connection with the Company's acquisition of SFEC on April 1, 1998,
the Company issued 5,750,000 PIES for gross proceeds of $310,500,000,
each representing one five-hundredth of a share of mandatorily
convertible preferred stock (an aggregate of 11,500 shares of preferred
stock). See Note 2. The PIES accrue cumulative dividends (payable, at the
Company's option, in cash or shares of common stock) at 7 1/2% per annum
(approximately $23,288,000 per annum) and are mandatorily convertible
into shares of common stock on April 1, 2001. Holders can voluntarily
convert the PIES into shares of common stock at any time prior to
April 1, 2001.
Prior to April 1, 2001, each of the PIES is convertible at the option of
the holder into 1.6616 common shares. On April 1, 2001, the PIES will
mandatorily convert into common shares based upon the average of the
closing quoted market price of the common stock for the last twenty days
F-28
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(10) STOCKHOLDERS' EQUITY (CONTINUED)
prior to the conversion. If the average market price of the common stock
is equal to or less than $27 per common share, each PIES share will
convert into two shares of common stock. If the average market price of
the common stock is equal to or more than $32.50 per common share, each
PIES share will convert into 1.6616 common shares. If the average market
price of the common stock is between $27 and $32.50 per common share,
each PIES share will convert into a declining number of common shares
based upon the proportional excess of the average market price over $27
per common share until the 1.6616 conversion rate is achieved at the
average market price of $32.50. Any conversion is also adjusted for
dividends that have accumulated, but have not yet been paid in cash or
common stock.
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.
(B) COMMON STOCK
On June 9, 1998, the Company's common shareholders approved a two-for-one
stock split effective July 24, 1998. The par value of the common stock
was decreased to $.025 per share from $.05 per share. Additionally, the
authorized common shares of the Company were increased to 150,000,000.
The accompanying consolidated financial statements and notes to the
consolidated financial statements reflect the stock split as if it had
occurred as of the earliest year presented.
(C) STOCK OPTIONS AND WARRANTS
Certain members of the Company's management have been issued seven-year
options to purchase common shares under the Company's 1998, 1996, 1995
and 1993 Stock Option and Incentive Plans (collectively, the "Option
Plans"). Under the Option Plans, stock options are granted with an
exercise price equal to the underlying stock's fair value at the date of
grant. Except for 1,531,000 conditional options issued in 1998, options
may be exercised on a cumulative basis with 20% of the total exercisable
on the 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 terminate upon the seventh
anniversary of the issuance date or following termination of employment.
There were 1,531,000 conditional stock options issued in 1998. These
options have the same vesting schedule as the unconditional stock
options, except that no conditional option could be exercised until after
the conditions of the stock option were met. The conditions related to
these stock options were met during December 1999.
In 1999 and 1998, the Company also issued to certain consultants options
to purchase 40,000 and 70,000 common shares, respectively. The options
have substantially the same terms and conditions as the options granted
under the Option Plans. The Company has recognized the fair value of the
options issued to the consultants as an expense in the accompanying 1999
and 1998 consolidated statements of operations.
At December 31, 1999, there were 2,253,199 additional shares available
for grant under the Option Plans. The per share weighted-average fair
value of stock options granted during 1999 and 1998 was $17.43 and
$12.74, respectively, on the date of grant using the Black--Scholes
option-pricing model with the following weighted-average assumptions:
1999--expected dividend
F-29
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(10) STOCKHOLDERS' EQUITY (CONTINUED)
yield 0%, risk-free interest rate of 5.5%, expected volatility of 84%,
and an expected life of 5 years; 1998--expected dividend yield 0%,
risk-free interest rate of 4.5%, expected volatility of 92%, and an
expected life of 5 years.
No compensation cost has been recognized for the unconditional stock
options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the grant date
for all its unconditional stock options, the Company's net income (loss)
would have been as indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Net income (loss) applicable to common
stock:
As reported............................. $(53,814,000) 17,374,000 14,099,000
Pro forma............................... (74,617,000) 11,212,000 13,325,000
Net income (loss) per average common
share outstanding - basic:
As reported............................. (0.69) 0.26 0.39
Pro forma............................... (0.96) 0.17 0.37
</TABLE>
Stock option activity during the years indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Balance at December 31, 1996......................... 1,563,401 $ 6.91
Granted............................................ -- --
Exercised.......................................... -- --
Forfeited.......................................... (4,000) 2.50
Expired............................................ -- --
---------
Balance at December 31, 1997......................... 1,559,401 6.92
Granted............................................ 3,507,000 17.50
Exercised.......................................... (216,485) 3.52
Forfeited.......................................... -- --
Expired............................................ -- --
---------
Balance at December 31, 1998......................... 4,849,916 14.72
Granted............................................ 3,440,000 25.00
Exercised.......................................... (354,565) 7.30
Forfeited.......................................... (93,600) 17.50
Expired............................................ -- --
---------
Balance at December 31, 1999......................... 7,841,751 $19.55
========= ======
</TABLE>
At December 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.50 to $25.00 and
5.93 years, respectively.
F-30
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(10) STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1999, 1998, and 1997, options exercisable were 3,245,800,
1,366,700, and 891,600, respectively, and weighted-average exercise price
of those options was $15.23, $9.83, and $5.63, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant to
purchase 52,692 common shares at an exercise price of $.50 per share and
a ten-year warrant to purchase 37,386 common shares at an exercise price
of $.50 per share. The warrants were exercised during 1999 prior to their
expiration.
(D) SHARE RIGHTS PLAN
On December 10, 1997, the Company's board of directors authorized a share
rights plan. The plan was subsequently amended on February 4, 1998. 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 Company's 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 1/1000 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
stockholder who then owned 15% or more of the Company, each right will
entitle its holder to purchase securities of the merging or acquiring
party with a value equal to twice the exercise price of the right.
The rights, which have no voting power, expire in 2008. The rights may be
redeemed by the Company for $.01 per right until the rights become
exercisable.
(E) RESTRICTED STOCK GRANTS
The Company issued 900,000 restricted common shares with an estimated
aggregate value of $14,625,000 to members of the Company's senior
management in July 1997. The restrictions on the stock lapse ratably over
a six-year term commencing January 1, 1998, generally based upon the
continued employment of the recipient. The Company issued an additional
920,000 restricted common shares with an estimated aggregate value of
$16,100,000 to members of the Company's senior management in
October 1998. The restrictions on the stock lapse ratably over a
three-year term commencing January 1, 1999. The restrictions also lapse
upon termination of the executive without cause or if a change in control
of the Company occurs. Compensation expense equal to the aggregate value
of the shares is being recognized as an expense over the vesting period.
(11) PENSION BENEFITS
As part of the acquisition of Six Flags by the Company on April 1, 1998,
the Company assumed the obligations related to the Six Flags Defined
Benefit Plan (the "Benefit Plan"). The Benefit
F-31
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(11) PENSION BENEFITS (CONTINUED)
Plan covered substantially all of Six Flags' full-time employees. During
1999 the Benefit Plan was extended to cover substantially all of the
Company's domestic full-time employees. The Benefit Plan permits normal
retirement at age 65, with early retirement at ages 55 through 64 upon
attainment of ten years of credited service. The early retirement benefit
is reduced for benefits commencing before age 62. Benefit Plan benefits
are calculated according to a benefit formula based on age, average
compensation over the highest consecutive five-year period during the
employee's last ten years of employment and years of service. Benefit
Plan assets are invested primarily in common stock and mutual funds. The
Benefit Plan does not have significant liabilities other than benefit
obligations. Under the Company's funding policy, contributions to the
Benefit Plan are determined using the projected unit credit cost method.
This funding policy meets the requirements under the Employee Retirement
Income Security Act of 1974.
The following table sets forth the aggregate funded status of the Benefit
Plan and the related amounts recognized in the Company's consolidated
balance sheets:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation, January 1, 1999 and April 1,
1998............................................ $74,658,000 68,712,000
Service cost...................................... 3,644,000 2,444,000
Interest cost..................................... 5,459,000 3,808,000
Plan amendments................................... 2,723,000 --
Actuarial loss.................................... (12,587,000) 757,000
Benefits paid..................................... (1,708,000) (1,063,000)
----------- ----------
Benefit obligation at December 31................... 72,189,000 74,658,000
----------- ----------
Change in plan assets:
Fair value of assets, January 1, 1999 and April 1,
1998............................................ 87,270,000 85,236,000
Actual return on plan assets...................... 4,396,000 3,097,000
Benefits paid..................................... (1,708,000) (1,063,000)
----------- ----------
Fair value of assets at December 31................. 89,958,000 87,270,000
----------- ----------
Plan assets in excess of benefit obligations........ 17,769,000 12,612,000
Unrecognized net actuarial loss..................... 5,891,000 3,317,000
Unrecognized prior service cost..................... 2,463,000 --
----------- ----------
Prepaid benefit cost (included in deposits and other
assets)........................................... $14,341,000 15,929,000
=========== ==========
</TABLE>
F-32
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(11) PENSION BENEFITS (CONTINUED)
Net pension expense of the Benefit Plan for the year ended December 31,
1999 and the nine-month period ended December 31, 1998, included the
following components:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Service cost......................................... $3,643,000 2,444,000
Interest cost........................................ 5,459,000 3,808,000
Expected return on plan assets....................... (7,773,000) (5,657,000)
Amortization of prior service cost................... 260,000 --
---------- ----------
Net periodic benefit cost............................ $1,589,000 595,000
========== ==========
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation in 1999 and 1998 was
7.75% and 6.75%, respectively. The rate of increase in future
compensation levels was 4.75% and 4.5% in 1999 and 1998, respectively.
The expected long-term rate of return on assets was 9% each year.
(12) 401(K) PLAN
The Company has a qualified, contributory 401(k) plan (the "401(k)
Plan"). All regular employees are eligible to participate in the 401(k)
Plan if they have completed one full year of service and are at least
21 years old. The Company matches 100% of the first 2% and 25% of the
next 6% of salary contributions made by employees. The accounts of all
participating employees are fully vested upon completion of four years of
service. The Company recognized approximately $1,874,000, $417,000, and
$377,000 of expense in the years ended December 31, 1999, 1998 and 1997,
respectively.
As part of the acquisition of Six Flags by the Company, the Company
assumed the administration of the Six Flags' savings plan. Under the
provisions of the Six Flags' savings plan, all full-time and seasonal
employees of Six Flags completing one year of service (minimum
1,000 hours) and attaining age 21 were eligible to participate and could
contribute up to 6% of compensation as a tax deferred basic contribution.
Each participant could also elect to make additional contributions of up
to 10% of compensation (up to 4% tax deferred). Tax deferred
contributions to the savings plan could not exceed amounts defined by the
Internal Revenue Service ($10,000 for 1999). Both the basic and
additional contributions were at all times vested. Six Flags, at its
discretion, could make matching contributions of up to 100% of its
employees' basic contributions. Six Flags made $743,000 in contributions
for the 1998 plan year. During the first quarter of 1999, the Six Flags'
savings plan was merged into the Company's 401(k) Plan.
(13) SIX FLAGS MARINE WORLD
In April 1997, the Company became manager of Marine World (subsequently
renamed Six Flags Marine World), then 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 management fees based on park revenues. In November 1997, the
Company exercised its option to lease
F-33
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(13) SIX FLAGS MARINE WORLD (CONTINUED)
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). In 1999 and 1998, the Company added theme park rides and
attractions on the leased land, which is located within the existing
park, in order to create one fully-integrated regional theme park at the
site. The Company is entitled to receive, in addition to the management
fee, 80% of the cash flow generated by the combined operations at the
park, after combined operating expenses and debt service on outstanding
debt obligations relating to the park. The Company also has an option to
purchase the entire site commencing in February 2002 at a purchase price
equal to the greater of the then principal amount of certain debt
obligations of the seller (expected to aggregate $52,000,000 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).
(14) COMMITMENTS AND CONTINGENCIES
The Company leases the sites of Wyandot Lake, Six Flags Mexico, and each
of the two Waterworld/USA locations. The Company also leases portions of
the sites of Six Flags Kentucky Kingdom, Six Flags Holland, and Movie
World Germany. In certain cases rent is based upon percentage of the
revenues earned by the applicable park. During 1999, 1998, and 1997, the
Company recognized approximately $2,045,000, $1,002,000, and $1,110,000,
respectively, of rental expense under these rent agreements.
Total rental expense, including office space and park sites, was
approximately $7,352,000, $7,918,000, and $2,229,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
In connection with the acquisition of Six Flags by the Company in 1998,
the Company entered into a license agreement (the "License Agreement")
pursuant to which it obtained the exclusive right for a term of 55 years
to theme park use in the United States and Canada (excluding the Las
Vegas, Nevada metropolitan area) of all animated, cartoon and comic book
characters that Warner Bros. and DC Comics have the right to license for
such use during the term of the agreement.
Under the License Agreement, the Company pays an annual license fee of
$2,500,000 through 2005. Thereafter, the license fee will be subject to
periodic scheduled increases and will be payable on a per-theme park
basis.
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,
F-34
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(14) COMMITMENTS AND CONTINGENCIES (CONTINUED)
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. The judgements are now the subject of an
appeal, which has been briefed and argued before the Georgia Court of
Appeals. 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 Six Flags
Acquisition 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.
In June 1997, a water slide collapsed at the Company's Waterworld/USA
park in Concord, California, resulting in one fatality and the park's
closure for twelve days. A series of lawsuits arising out of the incident
have been consolidated in California Superior Court under the name
GHILOTTI, ET AL. V. WATERWORLD USA, ET AL. The Company has funded its
$50,000 self-retention limit in respect of the incident under its then
liability insurance policy and, although there can be no assurance, does
not expect to pay any additional amounts in connection with 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.
(15) 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 before income taxes and a
reconciliation of theme park revenues to consolidated total revenues.
Park level expenses
F-35
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(15) BUSINESS SEGMENTS (CONTINUED)
exclude all non-cash operating expenses, principally depreciation and
amortization and all non operating expenses.
<TABLE>
<CAPTION>
1999 1998 1997
---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Theme park revenues................................. $1,152,758 994,546 193,531
Theme park cash expenses............................ (712,611) (613,077) (133,302)
---------- -------- --------
Aggregate park EBITDA............................... 440,147 381,469 60,229
Third-party share of EBITDA from parks accounted for
under the equity method........................... (40,761) (41,064) --
Amortization of investment in theme park
partnerships...................................... (15,826) (9,763) --
Unallocated net expenses, including corporate and
expenses from parks acquired after completion of
the operating season.............................. (54,625) (28,608) (7,312)
Termination fee, net of expenses.................... -- -- 8,364
Depreciation and amortization....................... (154,264) (109,841) (19,792)
Interest expense.................................... (193,965) (149,820) (25,714)
Interest income..................................... 24,524 33,971 7,939
---------- -------- --------
Income before income taxes.......................... $ 5,230 76,344 23,714
========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Theme park revenues................................. $1,152,758 994,546 193,531
Theme park revenues from parks accounted for under
the equity method................................. (225,774) (202,183) --
Other revenues...................................... -- 340 373
---------- -------- -------
Consolidated total revenues......................... $ 926,984 792,703 193,904
========== ======== =======
</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 for 1999 and 1998 (the Company did not have foreign operations
prior to March 1998):
<TABLE>
<CAPTION>
DOMESTIC FOREIGN TOTAL
---------- -------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
1999:
Long-lived assets................................. $3,267,019 441,925 3,708,944
Revenues.......................................... 830,578 96,406 926,984
1998:
Long-lived assets................................. $2,944,036 188,826 3,132,862
Revenues.......................................... 725,946 66,757 792,703
</TABLE>
F-36
<PAGE>
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(16) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Total revenue............... $53,649,000 333,515,000 471,728,000 68,092,000 926,984,000
Net income (loss) applicable
to common stock........... (88,636,000) 24,464,000 111,008,000 (100,650,000) (53,814,000)
Net income (loss) per
average common shares
outstanding:
Basic................... (1.16) 0.32 1.42 (1.29) (0.69)
Diluted................. (1.16) 0.31 1.29 (1.29) (0.69)
</TABLE>
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenue................ $ 6,831,000 292,198,000 435,077,000 58,597,000 792,703,000
Net income (loss) applicable
to common stock............ (15,450,000) 14,741,000 94,934,000 (76,851,000) 17,374,000
Net income (loss) per average
common shares outstanding:
Basic.................... (0.82) 0.20 1.26 (1.00) 0.26
Diluted.................. (0.82) 0.19 1.17 (1.00) 0.25
</TABLE>
F-37
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- --------
<C> <S> <C>
(3) Articles of Incorporation and By-Laws:
(a) Certificate of Incorporation of Registrant dated March 24,
1981--incorporated by reference from Exhibit 3 to Form 10-Q
of Registrant for the quarter ended June 30, 1987...........
(b) Plan and Agreement of Merger of Registrant and Tierco, a
Massachusetts business trust, dated March 31,
1981--incorporated by reference from Exhibit 3 to Form 10-Q
of Registrant for the quarter ended June 30, 1987...........
(c) Certificate of Amendment of Certificate of Incorporation of
Registrant dated April 14, 1985--incorporated by reference
from Exhibit 3 to Form 10-Q of Registrant for the quarter
ended June 30, 1987.........................................
(d) Certificate of Amendment of Certificate of Incorporation of
Registrant dated May 8, 1987--incorporated by reference
from Exhibit 3 to Form 10-Q of Registrant for the quarter
ended June 30, 1987.........................................
(e) Certificate of Amendment of Certificate of Incorporation of
Registrant dated June 11, 1987--incorporated by reference
from Exhibit 3 to Form 10-Q of Registrant for the quarter
ended June 30, 1987.........................................
(f) Certificate of Amendment of Certificate of Incorporation of
Registrant dated April 30, 1991--incorporated by reference
from Exhibit 3(f) to Form 10-K of Registrant for the year
ended December 31, 1991.....................................
(g) Certificate of Amendment of Certificate of Incorporation of
Registrant dated June 30, 1992--incorporated by reference
from Exhibit 3(g) to Form 10-K of Registrant for the year
ended December 31, 1992.....................................
(h) Certificate of Amendment of Certificate of Incorporation of
Registrant dated June 23, 1993--incorporated by reference
from Exhibit 3(a) to Form 10-Q of Registrant for the quarter
ended June 30, 1993.........................................
(i) Certificate of Amendment to Certificate of Incorporation
dated October 7, 1994--incorporated by reference from
Exhibit 3(i) to Form 10-K of Registrant for the year ended
December 31, 1994...........................................
(j) Certificate of Designation of Series A 7% Cumulative
Convertible Preferred Stock (the "Preferred Stock") of
Registrant--incorporated by reference from Exhibit 3(10) to
Registrant's Registration Statement on Form S-1 (Reg. No.
33-62225) declared effective on November 9, 1995 (the
"Registration Statement")...................................
(k) By-laws of Registrant, as amended--incorporated by reference
from Exhibit 3(k) to Form 10-K of Registrant for the year
ended December 31, 1996.....................................
(l) Certificate of Amendment to Certificate of Incorporation
dated May 6, 1996--incorporated by reference from
Exhibit 3(l) to Form 10-K of Registrant for the year ended
December 31, 1996...........................................
(m) Certificate of Designation of Series A Junior Preferred
Stock of Registrant--incorporated by reference from
Exhibit 2(1.C) to Registrant's Form 8-A dated January 21,
1998........................................................
(n) Certificate of Amendment to Certificate of Incorporation
dated June 16, 1997--incorporated by reference from
Exhibit 3(n) to Form 10-K of Registrant for year ended
December 31, 1997...........................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- --------
<C> <S> <C>
(o) Certificate of Designation, Rights and Preferences for
7 1/2% Mandatorily Convertible Preferred Stock of
Registrant--incorporated by reference from Exhibit 4(s) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26, 1998........
(p) Certificate of Amendment of Certificate of Incorporation of
Registrant date July 24, 1998--incorporated by reference
from Exhibit 3(p) to Form 10-K of Registrant for the year
ended December 31, 1998.....................................
(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 Notes)--incorporated by reference from Exhibit 4(2)
to 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) 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......................................
(d) 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...................
(e) Form of Common Stock Certificate--incorporated by reference
from Exhibit 4(l) to Registrant's Registration Statement on
Form S-2 (Reg. No. 333-08281) declared effective on May 28,
1996........................................................
(f) 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 Registrant's Registration Statement on
Form S-2 (Reg. No. 333-16763) declared effective on
January 27, 1997............................................
(g) Form of Second Supplemental Indenture dated January 21,
1997--incorporated by reference form Exhibit 4(n) to
Registrant's Registration Statement on Form S-2
(Reg. No. 333-16763) declared effective on January 27,
1997........................................................
(h) Form of Depository Receipt evidencing ownership of
Registrant's Premium Income Equity Securities--incorporated
by reference from Exhibit 4(k) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared effective on
March 26, 1998..............................................
(i) Indenture dated as of April 1, 1998 between Premier
Parks Inc. and The Bank of New York, as Trustee with respect
to the Registrant's 10% Senior Discount Notes due
2008--incorporated by reference from Exhibit 4(o) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26, 1998........
(j) Indenture dated as of April 1, 1998 between Premier
Parks Inc. and The Bank of New York, as Trustee with respect
to the Registrant's 9 1/4% Senior Discount Notes due
2006--incorporated by reference from Exhibit 4(p) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26, 1998........
(k) Indenture dated as of April 1, 1998 between Premier
Parks Inc., Six Flags Entertainment Corporation and The Bank
of New York, as Trustee with respect to the Six Flags'
8 7/8% Senior Discount Notes due 2006--incorporated by
reference from Exhibit 4(q) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared effective on
March 26, 1998..............................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- --------
<C> <S> <C>
(l) Deposit Agreement dated as of April 1, 1998 among the
Registrant, The Bank of New York, and the holder from time
to time of depositary receipts executed and delivered
thereunder--incorporated by reference from Exhibit 4(u) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26, 1998........
(m) Indenture and First Supplemental Indenture, dated as of
June 30, 1999 between Registrant and The Bank of New York
with respect to the Registrant's 9 3/4% Senior Notes Due
2007--incorporated by reference from Exhibits 4.1 and 4.2 to
Registrant's Current Report on Form 8-K dated July 2,
1999........................................................
(10) Material Contracts:
(a) Agreement of Limited Partnership of 229 East 79(th) Street
Associates LP dated July 24, 1987, together with amendments
thereto dated, respectively, August 31, 1987, October 21,
1987, and December 21, 1987--incorporated by reference from
Exhibit 10(i) to Form 10-K of Registrant for year ended
December 31, 1987...........................................
(b) Agreement of Limited Partnership of Frontier City Partners
Limited Partnership, dated October 18, 1989, between
Frontier City Properties, Inc. as general partner, and the
Registrant and Frontier City Properties, Inc. as limited
partners--incorporated by reference from Exhibit 10(g) to
the Registrant's Current Report on Form 8-K dated
October 18, 1989............................................
(c) Registrant's 1993 Stock Option and Incentive
Plan--incorporated by reference from Exhibit 10(k) to
Form 10-K of Registrant for the year ended December 31,
1993........................................................
(d) Lease Agreement dated December 22, 1995 between Darien Lake
Theme Park and Camping Resort, Inc. and The Metropolitan
Entertainment Co., Inc.--incorporated by reference from
Exhibit 10(o) to Form 10-K of Registrant for the year ended
December 31, 1995...........................................
(e) Consulting and Non-Competition Agreement, dated October 30,
1996, between Registrant and Arnold S. Gurtler--incorporated
by reference from Exhibit 10(u) to Registrant's Registration
Statement on Form S-2 (Reg. No. 333-16573) declared
effective on January 27, 1997...............................
(f) Non-Competition Agreement, dated as of October 30, 1996
between the Registrant and Ascent Entertainment
Group, Inc.--incorporated by reference from Exhibit 10(s)
to Registrant's Registration Statement on Form S-2 (Reg.
No. 333-16573) declared effective on January 27, 1997.......
(g) Consulting Agreement, dated December 4, 1996, between the
Registrant and Charles R. Wood--incorporated by reference
from Exhibit 10(b) to the Registrant's Current Report on
Form 8-K, dated December 13, 1996...........................
(h) Non-Competition Agreement dated as of December 4, 1996
between the Registrant and Charles R. Wood--incorporated by
reference from Exhibit 10(c) of the Registrant's Current
Report on Form 8-K, dated December 13, 1996.................
(i) Stock Purchase Agreement dated as of December 4, 1996, among
the Registrant, Stuart Amusement Company, Edward J. Carroll,
Jr., and the Carroll Family Limited
Partnership--incorporated by reference from Exhibit 10(y) to
Registrant's Registration Statement on Form S-2 (Reg.
No. 333-16573) declared effective on January 27, 1997.......
(j) Registrant's 1996 Stock Option and Incentive
Plan--incorporated by reference from Exhibit 10(z) to
Form 10-K of Registrant for year ended December 31, 1997....
(k) 1997 Management Agreement Relating to Marine World, by and
between the Marine World Joint Powers Authority and Park
Management Corp, dated as of the 1st day of February,
1997--incorporated by reference from Exhibit 10(aa) to
Form 10-K of Registrant for year ended December 31, 1997....
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- --------
<C> <S> <C>
(l) Purchase Option Agreement Among City of Vallejo, Marine
World Joint Powers Authority and Redevelopment Agency of the
City of Vallejo, and Park Management Corp., dated as of
August 29, 1997--incorporated by reference from
Exhibit 10(ab) to Form 10-K of Registrant for year ended
December 31, 1997...........................................
(m) Letter Agreement, dated November 7, 1997, amending 1997
Management Agreement Relating to Marine World, by and
between the Marine World Joint Powers Authority and Park
Management Corp., dated as of the 1st day of February,
1997--incorporated by reference from Exhibit 10(ac) to
Form 10-K of Registrant for year ended December 31, 1997....
(n) Reciprocal Easement Agreement between Marine World Joint
Powers Authority and Park Management Corp., dated as of
November 7, 1997--incorporated by reference from
Exhibit 10(ad) to Form 10-K of Registrant for year ended
December 31, 1997...........................................
(o) Parcel Lease between Marine World Joint Powers Authority and
Park Management Corp., dated as of November 7,
1997--incorporated by reference from Exhibit 10(ae) to
Form 10-K of Registrant for year ended December 31, 1997....
(p) Employment Agreement, dated as of July 31, 1997, between
Premier Parks Inc. and Kieran E. Burke--incorporated by
reference from Exhibit 10(af) to Form 10-K of Registrant for
year ended December 31, 1997................................
(q) Employment Agreement, dated as of July 31, 1997, between
Premier Parks Inc. and Gary Story--incorporated by reference
from Exhibit 10(ag) to Form 10-K of Registrant for year
ended December 31, 1997.....................................
(r) Employment Agreement, dated as of July 31, 1997, between
Premier Parks Inc. and James F. Dannhauser--incorporated by
reference from Exhibit 10(ah) to Form 10-K of Registrant
for year ended December 31, 1997............................
(s) Stock Purchase Agreement dated as of September 26, 1997,
among Registrant, Kentucky Kingdom, Inc., Hart-Lunsford
Enterprises, LLC, and Edward J. Hart--incorporated by
reference from Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997........................................................
(t) Rights Agreement dated as of January 12, 1998 between
Premier Parks Inc. and Bank One Trust Company, N.A., as
Rights Agent--incorporated by reference from Exhibit 4.1 to
the Registrant's Current Report on Form 8-K dated
December 15, 1997...........................................
(u) Stock Purchase Agreement dated as of December 15, 1997,
between the Registrant and Centrag S.A., Karaba N.V. and
Westkoi N.V.--incorporated by reference from Exhibit 10.1 to
the Registrant's Current Report on Form 8-K dated
December 15, 1997...........................................
(v) Agreement and Plan of Merger dated as of February 9, 1998,
by and among the Registrant, Six Flags Entertainment
Corporation and others--incorporated by reference from
Exhibit 10(a) to the Registrant's Current Report on Form 8-K
dated February 9, 1998......................................
(w) Agreement and Plan of Merger dated as of February 9, 1998 by
and among Premier Parks Inc., Premier Parks Holdings
Corporation and Premier Parks Merger
Corporation--incorporated by reference from Exhibit 2.1 to
the Registrant's Current Report on Form 8-K dated March 25,
1998........................................................
(x) Amended and Restated Rights Agreement between Premier
Parks Inc. and Bank One Trust Company, as Rights
Agent--incorporated by reference from Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated December 15,
1997, as amended............................................
(y) Registrant's 1998 Stock Option and Incentive
Plan--incorporated by reference to Exhibit 10(ap) to
Registrant's Form 10-K for the year ended December 31,
1998........................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- --------
<C> <S> <C>
(z) Subordinated Indemnity Agreement dated February 9, 1998,
among the Registrant, the subsidiaries of the Registrant
named therein, Time Warner Inc., the subsidiaries of Time
Warner Inc. named therein, Six Flags Entertainment
Corporation and the subsidiaries of Six Flags Entertainment
Corporation named therein--incorporated by reference from
Exhibit 2(b) to Registrant's Registration Statement on
Form S-3 (No. 333-45859) declared effective on March 26,
1998........................................................
(aa) Sale and Purchase Agreement dated as of October , 1998 by
and between the Registrant and Fiesta Texas Theme
Park, Ltd.--incorporated by reference to Exhibit 10(at) to
Registrant's Form 10-K for the year ended December 31,
1998........................................................
(ab) Overall Agreement dated as of February 15, 1997 among Six
Flags Fund, Ltd. (L.P.), Salkin II Inc., SFOG II
Employee, Inc., SFOG Acquisition A, Inc., SFOG
Acquisition B, Inc., Six Flags Over Georgia, Inc. Six Flags
Series of Georgia, Inc., Six Flags Theme Parks Inc., and Six
Flags Entertainment Corporation--incorporated by reference
to Exhibit 10(au) to Registrant's Form 10-K for the year
ended December 31, 1998.....................................
(ac) Overall Agreement dated as of November 24, 1997 among Six
Flags Over Texas Fund, Ltd., Flags' Directors, LLC, FD-II,
LLC, Texas Flags, Ltd. SFOT Employee, Inc., SFOT Parks Inc.,
and Six Flags Entertainment Corporation--incorporated by
reference to Exhibit 10(av) to Registrant's Form 10-K for
the year ended December 31, 1998............................
(ad) Credit Agreement, dated as of November 5, 1999, among
Registrant, certain subsidiaries named therein, the Lenders
from time to time party thereto, The Bank of New York, as
Syndicate Agent, Bank of American, N.A. and The Bank of Nova
Scotia, as Documentation Agents, Lehman Brothers Inc. and
Lehman Brothers International (Europe) Inc., as Advisors,
Lead Arrangers and Bank Managers and Lehman Commercial
Paper Inc., as Administrative Agent--incorporated by
reference to Exhibit 10.1 to Registrant's Form 10-Q for the
quarter ended September 30, 1999............................
</TABLE>
*(21) Subsidiaries of the Registrant.
*(23.1) Consent of KPMG LLP.
*(27) Financial Data Schedule
- ------------------------
* File herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 27, 2000
<TABLE>
<S> <C> <C>
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the following capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Chairman of the Board, Chief
/s/ KIERAN E. BURKE Executive Officer (Principal
------------------------------------------- Executive Officer) and March 27, 2000
Kieran E. Burke Director
/s/ GARY STORY
------------------------------------------- President, Chief Operating March 27, 2000
Gary Story Officer and Director
Chief Financial Officer
/s/ JAMES F. DANNHAUSER (Principal Financial and
------------------------------------------- Accounting Officer) and March 27, 2000
James F. Dannhauser Director
/s/ PAUL A. BIDDELMAN
------------------------------------------- Director March 27, 2000
Paul A. Biddelman
/s/ MICHAEL E. GELLERT
------------------------------------------- Director March 27, 2000
Michael E. Gellert
/s/ SANDY GURTLER
------------------------------------------- Director March 27, 2000
Sandy Gurtler
/s/ CHARLES R. WOOD
------------------------------------------- Director March 27, 2000
Charles R. Wood
</TABLE>
II-1
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
ENTITY NAME JURISDICTION
- ----------- -------------
<S> <C>
Premier Parks Operations Inc. Delaware
Six Flags Theme Parks Inc. Delaware
Aurora Campground, Inc. Ohio
Indiana Parks, Inc. Indiana
Ohio Campgrounds Inc. Ohio
Park Management Corp. California
Premier Waterworld Concord Inc. California
Premier Waterworld Sacramento Inc. California
Tierco Maryland, Inc. Delaware
Tierco Water Park, Inc. Oklahoma
Funtime Parks, Inc. Delaware
Funtime Inc. Ohio
Premier Parks of Colorado Inc. Colorado
Wyandot Lake, Inc. Ohio
Darien Lake Theme Park and Camping Resort, Inc. New York
Elitch Gardens L.P. Colorado
Ohio Hotel LLC Delaware
Great Escape Holding Inc. New York
Great Escape Theme Park LLC New York
Great Escape LLC New York
Frontier City Properties, Inc. Oklahoma
Frontier City Partners Limited Partnership Oklahoma
Stuart Amusement Company Massachusetts
Riverside Park Enterprises, Inc. Massachusetts
Riverside Park Food Services, Inc. Massachusetts
KKI, LLC Delaware
Premier International Holdings Inc. Delaware
Walibi S.A. Belgium
Movie World GP GmbH Germany
Movie World GmbH & Co. KG Germany
Movie World Holding GmbH Germany
Premier Parks Holdings Inc. Delaware
Reino Aventura, S.A. de C.V. Mexico
Ventas y Servicios al Consumidor S.A. de C.V. Mexico
SFTP Inc. Delaware
SF Partnership Delaware
SFTP San Antonio GP, Inc. Delaware
Six Flags San Antonio, L.P. Delaware
SFTP San Antonio, Inc. Delaware
San Antonio Park GP, LLC Delaware
San Antonio Theme Park L.P. Delaware
SFTP San Antonio II, Inc. Delaware
Fiesta Texas, Inc. Delaware
Flags Beverages, Inc. Texas
Fiesta Texas Hospitality LLC Texas
SF Splashtown GP Inc. Texas
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTITY NAME JURISDICTION
- ----------- -------------
<S> <C>
Six Flags Spashtown L.P. Delaware
SF Splashtown Inc. Delaware
MWM Holdings Inc. Delaware
MWM Management LLC Delaware
MWM Ancillary Services S.L. Spain
Six Flags Events Holding Corp. Delaware
Six Flags Events L.P. Delaware
Six Flags Events Inc. Texas
Six Flags Services, Inc. Delaware
Six Flags Services of Illinois, Inc. Delaware
Six Flags Services of Missouri, Inc. Delaware
Six Flags Services of Texas, Inc. Delaware
PPZ Inc. Delaware
GP Holdings Inc. Delaware
PP Data Services Inc. Texas
Premier Parks Capital LLC Delaware
Six Flags Over Georgia, Inc. Delaware
SFOG II, Inc. Delaware
Six Flags Over Georgia II, L.P. Delaware
SFOG Acquisition Company LLC Delaware
SFOG II Employee, Inc. Delaware
SFOT II Holdings, LLC Delaware
SFT Holdings, Inc. Delaware
Six Flags Over Texas, Inc. Delaware
Texas Flags, Ltd. Delaware
SFG Holdings, Inc. Delaware
SFOT Employee, Inc. Delaware
SFOG Acquisition A Holdings, Inc. Delaware
SFOG Acquisition B Holdings, Inc. Delaware
SFOG Acquisition A, Inc. Delaware
SFOG Acquisition B, L.L.C. Delaware
SFOT Acquisition I Holdings, Inc. Delaware
SFOT Acquisition II Holdings, Inc. Delaware
SFOT Acquisition I, Inc. Delaware
SFOT Acquisition II, Inc. Delaware
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Premier Parks, Inc.:
We consent to the incorporation by reference in the registration
statement (No. 333-76595) on Form S-3 and in the registration statement
(No. 333-59249) on Form S-8 of Premier Parks Inc. of our report dated
March 14, 2000, relating to the consolidated balance sheets of Premier
Parks Inc. and subsidiaries as of December 31, 1999 and 1998, 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,
1999, which report appears in the December 31, 1999 annual report on
Form 10-K of Premier Parks Inc.
KPMG LLP
Oklahoma City, Oklahoma
March 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 138,131
<SECURITIES> 0
<RECEIVABLES> 29,208
<ALLOWANCES> 0
<INVENTORY> 23,590
<CURRENT-ASSETS> 248,152
<PP&E> 2,272,419
<DEPRECIATION> 207,680
<TOTAL-ASSETS> 4,161,572
<CURRENT-LIABILITIES> 159,302
<BONDS> 2,202,933
0
12
<COMMON> 1,958
<OTHER-SE> 1,613,646
<TOTAL-LIABILITY-AND-EQUITY> 4,161,572
<SALES> 926,984
<TOTAL-REVENUES> 926,984
<CGS> 90,699
<TOTAL-COSTS> 90,699
<OTHER-EXPENSES> 353,728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193,965
<INCOME-PRETAX> 5,230
<INCOME-TAX> 24,460
<INCOME-CONTINUING> (19,230)
<DISCONTINUED> 0
<EXTRAORDINARY> (11,296)
<CHANGES> 0
<NET-INCOME> (30,526)
<EPS-BASIC> (0.69)
<EPS-DILUTED> (0.69)
</TABLE>
