<PAGE>
Information contained in this Prospectus Supplement is not complete and may be
changed. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer to sell these securities or a solicitation of an offer to
buy these securities in any state where the offer or sale is not permitted.
<PAGE>
FILED PURSUANT TO RULE 424b5
REGISTRATION NO. 333-76595
Subject to Completion, dated January 10, 2001
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated June 18, 1999)
7,000,000 PREFERRED INCOME EQUITY REDEEMABLE SHARES(SM) ("PIERS(SM)")
SIX FLAGS, INC.
[LOGO]
CONSISTING OF DEPOSITARY SHARES, EACH REPRESENTING ONE ONE-HUNDREDTH
OF A SHARE OF % CONVERTIBLE PREFERRED STOCK
--------------------------------------------------------------------------------
We are offering 7,000,000 Preferred Income Equity Redeemable Shares
("PIERS"). Each of the PIERS represents one one-hundredth of a share of our %
Convertible Preferred Stock deposited with the Depositary for the PIERS. Each
PIERS, through the Depositary, entitles you to all proportional rights and
preferences of the underlying shares of Convertible Preferred Stock. The
liquidation preference of each PIERS is $25.00, plus accrued and unpaid
dividends.
Dividends on the PIERS will be cumulative from , 2001 and will
be payable quarterly on February 15, May 15, August 15 and November 15 of each
year, commencing May 15, 2001. The dividend rate is % per annum, which is
equivalent to $ per annum for each PIERS. We may at our option pay dividends
in cash, shares of our common stock or a combination of both.
You may convert the PIERS into shares of our common stock at any time prior
to their redemption by us. The conversion rate is shares of common stock
for each PIERS, subject to adjustment. This is equivalent to a conversion price
of $ per share.
On or after , 2004, if the closing price of our common stock
exceeds 120% of the conversion price, we may at our option, cause the PIERS to
be automatically converted, in whole or in part, into that number of shares of
our common stock that are issuable upon conversion of the PIERS.
On , 2009, we must redeem all of the PIERS for cash equal to the
liquidation preference (initially $25.00 per PIERS) plus any accrued and unpaid
dividends on the PIERS.
Our common stock is listed on the New York Stock Exchange under the symbol
"PKS." The last reported sales price of our common stock on January 9, 2001 was
$18.5625 per share.
We intend to list the PIERS on the NYSE under the symbol "PKSPrB." The
common stock issuable upon conversion of the Convertible Preferred Stock
represented by the PIERS has been approved for listing on the NYSE. The
Convertible Preferred Stock will not be listed and we do not expect that there
will be any trading market for the Convertible Preferred Stock except as
represented by the PIERS.
INVESTING IN THE PIERS INVOLVES RISKS. RISK FACTORS BEGIN ON PAGE S-11 OF
THIS PROSPECTUS SUPPLEMENT AND PAGE 8 OF THE ACCOMPANYING PROSPECTUS.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount.......................................
Proceeds to Us (before expenses)............................ $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 1,050,000
additional PIERS on the same terms and conditions set forth above solely to
cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the PIERS or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Lehman Brothers expects to deliver the Depositary Receipts evidencing the
PIERS on or about , 2001.
--------------------------------------------------------------------------------
LEHMAN BROTHERS
ALLEN & COMPANY INCORPORATED
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
, 2001
------------------------
"Preferred Income Equity Redeemable Shares(SM)" and "PIERS(SM)" are service
marks owned by Lehman Brothers Inc.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Special Note on Forward-Looking Statements.................. S-3
Note on Copyrights and Trademarks........................... S-3
Prospectus Supplement Summary............................... S-4
Risk Factors................................................ S-11
Use of Proceeds............................................. S-14
Capitalization.............................................. S-15
Historical and Pro Forma Financial and Operating Data....... S-16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-19
Business.................................................... S-25
Management.................................................. S-34
Description of PIERS........................................ S-36
Description of Depositary Arrangements...................... S-48
Description of Indebtedness................................. S-52
Certain United States Federal Income Tax Considerations..... S-53
Underwriting................................................ S-59
Legal Matters............................................... S-61
PROSPECTUS
About This Prospectus....................................... 3
Where You Can Find More Information......................... 3
Special Note on Forward-Looking Statements.................. 4
Six Flags, Inc. (formerly Premier Parks Inc.)............... 5
Risk Factors................................................ 8
Consolidated Ratio of Earnings to Fixed Charges and
Consolidated Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends............................. 14
Use of Proceeds............................................. 14
Unaudited Pro Forma Statement of Operations and Other
Data...................................................... 15
Description of Debt Securities.............................. 20
Description of Common Stock................................. 26
Description of Preferred Stock.............................. 28
Description of Warrants..................................... 33
Description of Units........................................ 34
Plan of Distribution........................................ 35
Legal Matters............................................... 36
Experts..................................................... 36
</TABLE>
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in or
incorporated by reference in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the dates of this prospectus
supplement or the accompanying prospectus or that any information we have
incorporated by reference is accurate as of any date other than the date of the
document incorporated by reference.
S-2
<PAGE>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in this
prospectus supplement or the accompanying prospectus discuss our plans and
strategies for our business or make other forward-looking statements, as this
term is defined in the Private Securities Litigation Reform Act. The words
"anticipates," "believes," "estimates," "expects," "plans," "intends" and
similar expressions are intended to identify these forward-looking statements,
but are not the exclusive means of identifying them. These forward-looking
statements reflect the current views of our management; however, various risks,
uncertainties and contingencies could cause our actual results, performance or
achievements to differ materially from those expressed in, or implied by, these
statements, including the following:
- the success or failure of our efforts to implement our business strategy,
and
- the other factors discussed under the heading "Risk Factors" and elsewhere
in this prospectus supplement and the accompanying prospectus
We do not have any obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
For a discussion of important risks of an investment in our securities,
including factors that could cause actual results to differ materially from
results referred to in the forward-looking statements, see "Risk Factors" in
this prospectus supplement and the accompanying prospectus. You should carefully
consider the information set forth under the caption "Risk Factors" in this
prospectus supplement and the accompanying prospectus. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in or
incorporated by reference in this prospectus supplement or the accompanying
prospectus might not occur.
NOTE ON COPYRIGHTS AND TRADEMARKS
BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are copyrights and
trademarks of Warner Bros.-C- 2001, a division of Time Warner Entertainment
Company, L.P. ("TWE"). BATMAN and SUPERMAN are copyrights and trademarks of
DC Comics-C- 2001, a partnership between TWE and a subsidiary of Time Warner
Inc. YOGI BEAR, SCOOBY-DOO, and THE FLINTSTONES are trademarks of
Hanna-Barbera-C- 2001.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, AS WELL AS THE INFORMATION INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, BEFORE MAKING AN
INVESTMENT DECISION. IN THIS PROSPECTUS SUPPLEMENT, WE REFER TO SIX FLAGS, INC.
AND ITS SUBSIDIARIES AS "WE" OR "SIX FLAGS," UNLESS THE CONTEXT CLEARLY
INDICATES OTHERWISE.
THE COMPANY
GENERAL
We are the largest regional theme park operator in the world, based on our
2000 attendance of approximately 45 million. We operate 37 regional parks,
including 15 of the 50 largest theme parks in North America, based on 2000
attendance, the largest paid admission theme park in Mexico and seven theme
parks in Europe. We also are managing the development and construction of a new
theme park in Spain. Our theme parks serve the 10 largest metropolitan areas in
the United States. We estimate that approximately two-thirds of the population
of the continental United States live within a 150-mile radius of one of our
theme parks.
In 1998, we acquired the former Six Flags, which had operated regional theme
parks under the Six Flags name for nearly forty years and established a
nationally recognized brand name. We have worldwide ownership of the "Six Flags"
brand name. To capitalize on this name recognition, since the commencement of
the 1998 season, we have rebranded nine of our parks as "Six Flags" parks,
including two of our international parks.
We hold exclusive long-term licenses for theme park usage throughout the
United States (except the Las Vegas metropolitan area), Canada, Europe and Latin
and South America (including Mexico) of certain Warner Bros. and DC Comics
characters. These characters include BUGS BUNNY, DAFFY DUCK, TWEETY BIRD,
YOSEMITE SAM, BATMAN, SUPERMAN and others. In addition, our European and Latin
and South American licenses with Warner Bros. include the Hanna-Barbera and
Cartoon Network characters, including YOGI BEAR, SCOOBY-DOO, THE FLINTSTONES and
others. We use these characters to market our parks and to provide an enhanced
family entertainment experience. Our licenses include the right to sell
merchandise featuring the characters at our parks, and to use the characters in
advertising, as walk-around characters, in theming for rides and attractions and
in retail outlets. We believe using these characters promotes increased
attendance, supports higher ticket prices, increases lengths-of-stay and
enhances in-park spending.
Our 37 parks are located in geographically diverse markets across North
America and Europe. Our parks are individually themed and provide a complete
family-oriented entertainment experience. Our 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, our theme parks offer more than 800
rides, including over 100 roller coasters, making us the leading operator of
thrill rides in the industry.
Since 1989, under our current management we have assumed control of 36 parks
and have achieved significant internal growth. Most recently, we achieved
operating cash flow growth of 35.6% from 1998 to 1999 and 8.3% from the first
nine months of 1999 to the first nine months of 2000, despite particularly
difficult weather conditions at many of our major markets in the core 2000
operating season (summer). In addition, in 2000 we rebranded four additional
parks with the Six Flags brand. These four parks, which included our first two
international Six Flags parks, achieved aggregate increases in the first nine
months of 2000 of 39.3% in attendance, 62.7% in revenue, 16.8% in per capita
spending and 91.4% in park-level operating cash flow (representing all park
operating revenues
S-4
<PAGE>
and expenses without depreciation and amortization or allocation of corporate
overhead or interest expense) compared to the comparable period of 1999.
We believe that our parks benefit from limited direct competition, since the
combination of a limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of our parks with a significant degree of
protection from competitive new theme park openings. Based on our knowledge of
the development of other theme parks in the United States, we estimate that it
would cost at least $200 million and would take a minimum of two years to
construct a new regional theme park comparable to one of our Six Flags theme
parks.
Our senior and operating management team has extensive experience in the
theme park industry. Our senior executive officers have more than 175 years
aggregate experience in the industry and our general managers have an aggregate
of in excess of 500 years experience in the industry, including in excess of 300
years at our parks.
According to AMUSEMENT BUSINESS, total attendance for the 50 largest parks
in North America was 175.1 million in 2000, compared to 145.0 million in 1994,
representing a compound annual growth rate of 3.1%. We believe that this growth
reflects two trends:
- demographic growth in the 5-24 year old age group, which is expected to
continue through 2010, and
- an increasing emphasis on family-oriented leisure and recreation
activities.
STRATEGY
Our strategy for achieving continued growth includes pursuing growth at our
existing parks, expanding our parks, and making selective acquisitions.
PURSUING GROWTH AT OUR EXISTING PARKS
We believe there are substantial opportunities for continued growth at our
parks. We seek to increase revenue by increasing attendance and per capita
spending, while also maintaining strict control of operating expenses. The
primary elements we use to achieve these objectives are:
- adding rides and attractions and improving overall park quality;
- adding the Six Flags brand name and the characters licensed from Warner
Bros. and DC Comics at selected parks;
- enhancing marketing and sponsorship programs;
- increasing group sales, season passes and other pre-sold tickets;
- using ticket pricing strategies to maximize ticket revenues and park
utilization;
- adding and enhancing restaurants and merchandise and other revenue
outlets; and
- adding special events.
Our approach is designed to exploit the operating leverage inherent in the
theme park business. Once parks achieve certain critical attendance levels,
operating cash flow margins increase because revenue growth through incremental
attendance gains and increased in-park spending is not offset by a comparable
increase in operating expenses, because a large portion of these expenses is
relatively fixed during any given year.
S-5
<PAGE>
EXPANDING OUR PARKS
We have expanded several of our parks by adding complementary attractions,
such as campgrounds, lodging facilities and water parks, in order to increase
attendance and per capita spending. For example, since 1998, we have added by
construction and purchase hotels or other lodging facilities to Six Flags Darien
Lake (located near Buffalo, New York), Six Flags Ohio and Six Flags Holland.
Further, we added a water park to Six Flags St. Louis for the 1999 season and to
Six Flags Great Adventure (located between New York City and Philadelphia) for
the 2000 season. In addition, we own approximately 400 acres adjacent to Six
Flags America (located between Washington, D.C. and Baltimore) which are
available for complementary uses. We also own over 1,500 undeveloped acres
adjacent to Six Flags Great Adventure and additional acreage at several of our
other parks, which are suitable for development.
MAKING SELECTIVE ACQUISITIONS
The regional theme park industry is highly fragmented. We believe that there
remain numerous acquisition opportunities, both in the U.S. and abroad, through
which we can further expand our business. While we will continue to pursue
acquisitions of regional parks with annual attendance between 300,000 and 1.5
million, we will also consider acquisitions of larger parks or park chains.
We believe we have a number of competitive advantages in acquiring theme
parks. Operators of destination or large regional park chains, other than Cedar
Fair L.P., have generally not been actively seeking to acquire parks in recent
years. Additionally, as a multi-park operator with a track record of
successfully acquiring, improving and repositioning parks, we believe we have
numerous competitive advantages over single-park operators in pursuing
acquisitions and improving the operating results at acquired parks. These
advantages include our ability to:
- exercise group purchasing power (for both operating expenses and capital
assets);
- use the Six Flags brand name and the characters licensed from Warner Bros.
and DC Comics;
- attract greater sponsorship revenue and support from sponsors with
nationally-recognized brands and marketing partners;
- achieve administrative economies of scale;
- recruit and retain superior management; and
- use our access to capital markets as well as our capital stock to finance
all or a portion of future acquisition consideration.
RECENT AND PROPOSED ACQUISITIONS
We continue to implement our strategy of expanding our operations through
strategic park acquisitions.
SEA WORLD OF OHIO. On January 8, 2001, we entered into a definitive
purchase agreement to acquire the assets of Sea World of Ohio for
$110.0 million in cash. Sea World of Ohio is a 230 acre marine wildlife park
located adjacent to our Six Flags Ohio theme park. We believe that we can
increase attendance and revenue at both the newly acquired park and Six Flags
Ohio through joint season pass and other joint ticketing and marketing programs
and can increase operating efficiencies at both facilities through shared
expenses. Consummation of this transaction is subject to the satisfaction of
customary closing conditions, including expiration of the Hart-Scott-Rodino
waiting period. There is no assurance that such conditions will be met or
waived. If this transaction is completed, we plan to use a substantial portion
of the net proceeds from the sale of the PIERS offered hereby to fund the
purchase price.
S-6
<PAGE>
ENCHANTED VILLAGE. On December 6, 2000, we acquired Enchanted Village, a
children's ride and water park near Seattle, Washington, for approximately $19.3
million in shares of our common stock. We lease the land on which the park is
located on a long-term basis. The park, which is located on approximately 65
acres, is the only park located within the Seattle-Tacoma metropolitan area,
which is the 14th largest metropolitan area in the country. The park is
primarily a water park and lacks a full complement of rides and revenue outlets.
The park also has not benefited from significant marketing programs. As a
result, we believe that there is an opportunity over the next several years to
increase this park's revenue, attendance and cash flow, with limited capital
expenditures.
LA RONDE. On November 20, 2000, we entered into a letter of intent to
acquire the assets of La Ronde, a theme park located in the City of Montreal for
Can. $30.0 million (approximately US $20.0 million at the December 31, 2000
exchange rate). Under this letter, we have agreed to invest in the park Can.
$90.0 million (approximately US $60.0 million at that exchange rate) over three
to four seasons, commencing in 2002. The park is located on the 146 acre site of
the 1967 Montreal World's Fair. We will lease the land on which the park is
located on a long-term basis. Montreal has a metropolitan population of
approximately 3.3 million and is a major tourist destination. Since its
inception, the park has been operated by a municipal authority which contracted
with third parties to operate a substantial majority of the park's revenue
outlets. Those third parties retained a significant portion of the revenues
generated by these outlets. Most of the contracts covering these revenue outlets
expire by the end of 2002. In addition, the park has lacked sophisticated
marketing programs. As a result, we believe that, if we acquire this park, we
will be able to substantially increase the park's revenue, attendance and cash
flow over the next several years. There is no assurance that we will be able to
complete this acquisition.
ADDRESS
Our executive offices are located at 11501 Northeast Expressway, Oklahoma
City, Oklahoma 73131, (405) 475-2500, and at 122 East 42nd Street, New York, New
York 10168, (212) 599-4690.
S-7
<PAGE>
THE PIERS OFFERING
<TABLE>
<S> <C>
Securities Offered........................ 7,000,000 PIERS, consisting of depositary shares, each
representing one one-hundredth of a share of %
Convertible Preferred Stock, are offered hereby
(8,050,000 PIERS if the underwriters' over-allotment is
exercised in full). Each PIERS entitles the holder to
that proportion of all the rights, preferences and
privileges (including dividend, conversion, voting and
liquidation rights and preferences) of a share of our
% Convertible Preferred Stock, par value $1.00 per
share (the "Convertible Preferred Stock") represented
thereby.
Liquidation Preference.................... The PIERS will have a liquidation preference of $25.00
per share, plus an amount equal to accrued and unpaid
dividends.
Optional Conversion....................... The PIERS are convertible at any time prior to ,
2009, at the option of the holder, into shares of our
common stock at an initial conversion price of $ per
share of common stock (equivalent to a conversion rate
of shares of common stock for each PIERS), subject to
adjustment in certain circumstances (the "Conversion
Price").
Mandatory Redemption...................... We shall redeem outstanding PIERS on , 2009 at 100%
of the liquidation preference, plus accrued and unpaid
dividends.
Dividends................................. - Dividend rate: % of the liquidation preference per
annum on a cumulative basis from the date of issuance
(equivalent to $ per annum per PIERS).
- Dividend payment dates: quarterly, on February 15, May
15, August 15, and November 15 of each year, beginning
on May 15, 2001.
- We may, at our option, make dividend payments in cash,
shares of common stock or a combination of both. For
purposes of dividend payments, each share of common
stock will be valued at 95% of the average
volume-weighted daily trading price for our common
stock over a 10-day trading period preceding the
related record date for the dividend payment.
Mandatory Conversion...................... At any time on or after , 2004, we may at our
option cause the PIERS, in whole or in part or from time
to time, to be automatically converted into that number
of shares of our common stock that are issuable at the
Conversion Price. We may exercise our conversion right
only if for 20 trading days within any period of 30
consecutive trading days, including the last day of such
period, the closing price of our common stock on the New
York Stock Exchange exceeds 120% of the then prevailing
Conversion Price.
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
Designated Event Put Right................ If we become subject to a Change in Control or there is
a Termination of Trading of our common stock (each a
"Designated Event"), each holder of the PIERS will have
the right to require us to purchase any or all of the
PIERS of that holder at a purchase price equal to 100%
of the liquidation preference, plus accrued and unpaid
dividends to the date of purchase. This right will be
subject to our obligation to (i) repay our debt
obligations in full under our corporate credit facility,
(ii) repay all of our own and our subsidiaries'
indebtedness that is tendered for redemption or required
to be repaid and (iii) redeem any capital stock ranking
senior to the PIERS tendered for purchase, in each case,
in connection with the Change in Control or upon
Termination of Trading of our common stock. When we have
satisfied these obligations, and subject to the legal
availability of funds for this purpose, we shall
purchase all PIERS tendered by a holder upon a Change in
Control or upon Termination of Trading of our common
stock. In connection with a Change in Control, we will
have the option to pay for PIERS that have been tendered
in shares of our common stock valued at 95% of the
volume-weighted daily trading price for our common stock
over a 10-day trading period preceding the date of
purchase; otherwise we will pay for tendered PIERS in
cash.
Voting Rights............................. The holders of PIERS will be entitled to direct the
voting of the shares of Convertible Preferred Stock
represented thereby. The Convertible Preferred Stock has
no voting rights, except:
- as required by law;
- to approve amendments to the certificate of
designations of the Convertible Preferred Stock which
would adversely affect, alter or change the powers,
preferences or special rights of the Convertible
Preferred Stock; and
- if six quarterly dividends on the shares of the
Convertible Preferred Stock are accrued and unpaid,
the Convertible Preferred Stock, voting as a single
class with holders of other series of convertible
preferred stock that rank equally or senior to the
Convertible Preferred Stock with respect to dividend
rights and have similar voting rights, will be
entitled to elect at the next annual shareholder
meeting two directors to serve on our board until all
accumulated and unpaid dividends have been paid or
declared and funds have been set aside for their
payment.
Ranking................................... The PIERS, as representative of beneficial ownership
interests in the Convertible Preferred Stock, will rank,
with respect to dividend rights and upon liquidation,
winding up or dissolution:
- junior to all our existing and future debt
obligations;
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
- junior to each other class or series of our capital
stock other than our common stock and any other class or
series of our capital stock the terms of which provide
that that class or series will rank junior to the
PIERS;
- on a parity with our 7 1/2% Mandatorily Convertible
Preferred Stock and each other class or series of our
capital stock the terms of which provide that that
class or series will rank on a parity with the PIERS;
and
- senior to our common stock and each class or series of
our capital stock the terms of which provide that that
class or series will rank junior to the PIERS.
Use of Proceeds........................... We expect to use a substantial portion of the net
proceeds of this offering to fund the acquisition of Sea
World of Ohio, assuming that the acquisition is
completed, and all of the remaining net proceeds will be
used for general corporate purposes. The closing of this
offering is not conditioned upon the closing of the Sea
World of Ohio acquisition. If that acquisition is not
completed, the net proceeds will be used for one or more
of the following purposes:
- funding future park acquisitions (including La
Ronde, if completed);
- funding improvements and enhancements to existing
and acquired parks;
- repaying amounts outstanding under our revolving
credit facilities; and
- working capital and other general corporate
purposes.
Trading................................... Our common stock currently trades on the New York Stock
Exchange under the symbol "PKS." We intend to list the
PIERS on the NYSE under the symbol "PKSPrB."
</TABLE>
S-10
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER EACH OF THE FOLLOWING RISKS, AS WELL AS THE
RISKS SET FORTH IN THE ACCOMPANYING PROSPECTUS, AND ALL OTHER INFORMATION SET
FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE
DECIDING TO INVEST IN THE PIERS.
SUBSTANTIAL LEVERAGE--OUR HIGH LEVEL OF INDEBTEDNESS AND OTHER MONETARY
OBLIGATIONS REQUIRE THAT A SIGNIFICANT PART OF OUR CASH FLOW BE USED TO PAY
INTEREST AND FUND THESE OTHER OBLIGATIONS
We have a high level of debt. As of September 30, 2000, Six Flags and its
subsidiaries owed a combined total of approximately $2,224.2 million. The total
cash interest on our debt in 2000 was approximately $188.0 million ($25.9
million of which we paid with funds already deposited in escrow). The annual
dividend requirements on the PIERS offered hereby (assuming no exercise of the
underwriters' over-allotment option) will total $ , which we can, at our
option, pay either in cash or shares of our common stock. On April 1, 2001, we
also are required to pay the final quarterly dividend of approximately
$5.8 million on our 7 1/2% Mandatorily Convertible Preferred Stock, which we
can, at our option, pay either in cash or shares of our common stock. At
September 30, 2000, we had approximately $65.7 million of unrestricted cash and
cash equivalents, $89.6 million of restricted cash and all $300.0 million
available under our working capital revolving credit facility which are
available to pay our obligations.
In addition to making interest payments on debt and dividend payments on our
preferred stock, we must satisfy the following obligations with respect to Six
Flags Over Georgia and Six Flags Over Texas (the "Partnership Parks"):
- We must make annual distributions to our partners in such parks, which
amounted to approximately $48.6 million in 2000 (of which we received
$14.8 million in 2000 as a result of our ownership interest in such parks)
with similar amounts (adjusted for changes in cost of living) payable in
future years.
- We must spend a minimum of approximately 6% of each park's annual revenues
over specified periods for capital expenditures.
- Each year we must offer to purchase a specified maximum number of
partnership units from our partners in such parks, which in 2000 resulted
in an aggregate payment by us of approximately $3.3 million.
We expect to use cash flow from the operations at these parks to satisfy our
annual distribution and capital expenditure obligations with respect to the
Partnership Parks before we use any of our other funds. In addition, we have
deposited in escrow until April 2003 approximately $75.0 million which can be
used to satisfy these obligations. The obligations relating to Six Flags Over
Georgia continue until 2027 and those relating to Six Flags Over Texas continue
until 2028.
Our high level of debt and other obligations could have important negative
consequences to us and investors in our securities. These include:
- We may not be able to satisfy all of our obligations, including those
relating to the PIERS.
- We could have difficulties obtaining necessary financing in the future for
working capital, capital expenditures, debt service requirements,
refinancings or other purposes.
- We will have to use a significant part of our cash flow to make payments
on our debt, to pay the dividends on preferred stock (if we choose to pay
them in cash), and to satisfy the other obligations set forth above, which
may reduce the capital available for operations and expansion.
- Adverse economic or industry conditions may have more of a negative impact
on us.
S-11
<PAGE>
We expect to be able to meet all of our obligations with existing cash, cash
generated from our parks, and our current committed lines of credit. We believe
that funds from these sources will be sufficient to meet our obligations and
operating needs for at least the next several years. However, our business is
subject to factors beyond our control, such as economic conditions, weather and
competition. We cannot be sure that income from our parks will be as high as we
expect. We may have to refinance all or some of our debt or secure new
financing. We cannot be sure that we will be able to obtain such refinancing or
new loans on reasonable terms or at all. We have agreed in our credit agreement
and the indentures covering certain of our outstanding notes to limit the amount
of additional debt we will incur.
If we cannot meet all of our obligations, the market value and marketability
of the PIERS offered hereby, as well as our common stock, will likely be
adversely affected. In addition, if we become the subject of bankruptcy
proceedings, our creditors will be entitled to our assets before any
distributions are made to stockholders, including holders of the PIERS.
HOLDING COMPANY STRUCTURE--LIMITATION ON ACCESS TO CASH FLOW OF CERTAIN
SUBSIDIARIES
We are a holding company with limited assets, and we conduct substantially
all of our current operations through our subsidiaries. Almost all of our income
is derived from our subsidiaries. The PIERS offered hereby will be solely the
obligations of our company and no other entity will have any obligation,
contingent or otherwise, to make any payments in respect of the PIERS.
Accordingly, we will be dependent on dividends and other distributions from our
subsidiaries to generate the funds necessary to meet our obligations, including
the payment of principal and interest on our debt securities as well as cash
dividends on the PIERS.
Other than our holdings in the Partnership Parks and Enchanted Village, all
of our current operations are conducted by subsidiaries of Six Flags Operations,
our principal direct wholly owned subsidiary. In addition, in the future, we may
transfer our holdings in all or some of these parks to Six Flags Operations or
other entities owned by us. The Six Flags Credit Facility (as defined herein)
and the indentures governing the 9 3/4% Senior Notes due 2007 and the 8 7/8%
Senior Notes due 2006, issued by Six Flags Operations limit the ability of Six
Flags Operations to pay dividends or make other distributions to us. Under the
Six Flags Credit Agreement, cash distributions by Six Flags Operations are
generally limited to an amount equal to the sum of:
- cash interest payments on the notes issued under the Six Flags indentures;
- payments we are required to make under our agreements with our partners at
the Partnership Parks; and
- until April 1, 2001, cash dividends on our 7 1/2% Mandatorily Convertible
Preferred Stock.
Under the more restrictive Six Flags Operations indenture, at September 30,
2000, Six Flags Operations had the ability to make up to $319.2 million of cash
distributions to us. An inability by Six Flags Operations to make dividend
payments to us could result in our inability to meet our cash obligations,
including cash dividends on the PIERS offered hereby.
We currently intend to seek consent from the lenders under the Six Flags
Credit Facility to permit Six Flags Operations to make additional cash
distributions which we may use to pay cash dividends on the PIERS. We cannot
assure you that we will obtain such consent or what the terms of any such
consent will be.
S-12
<PAGE>
MANDATORY REDEMPTION AND OFFER TO PURCHASE IN CASH--OUR ABILITY TO REDEEM THE
PIERS IN CASH ON , 2009 AND TO REPURCHASE TENDERED PIERS UPON A CHANGE
IN CONTROL OR TERMINATION OF TRADING MAY BE LIMITED
The PIERS are entitled to mandatory redemption in cash on , 2009 at
100% of the liquidation preference, plus accumulated and unpaid dividends to the
redemption date. In addition, upon a Change in Control we have the option to pay
for PIERS that have been tendered in cash or in shares of our common stock. Upon
a Termination of Trading of our common stock, we are required to offer to
purchase the tendered PIERS for payment in cash. We cannot assure you that we
will have sufficient financial resources to meet these obligations or that we
will be able to arrange adequate financing. Our ability to pay cash on the
redemption date or the purchase date, as the case may be, may also be limited by
law and by the terms of our then outstanding indebtedness. All of our existing
indebtedness matures prior to the date on which we must redeem the PIERS.
U.S. CORPORATE HOLDERS WOULD NOT BE ENTITLED TO A DIVIDENDS-RECEIVED-DEDUCTION
FOR DISTRIBUTIONS MADE ON PIERS
We do not have any current or accumulated earnings and profits, as
calculated for U.S. Federal income tax purposes. If we do not have any current
earnings and profits in future years, a U.S. corporate holder of PIERS (or the
common stock into which such PIERS are convertible) will not be entitled to
claim a dividends-received-deduction with respect to distributions made thereon.
Rather, any distributions will reduce a U.S. corporate (or other) holder's tax
basis (on a dollar-for-dollar basis) in the PIERS or common stock, as
applicable, and thereby increase the amount of capital gain (or reduce the
amount of capital loss) that such holder generally would realize in connection
with a sale, exchange or other disposition thereof. No assurance can be given
that we will have any current earnings and profits in future years.
ABSENCE OF A PREVIOUS MARKET FOR THE PIERS
The PIERS are a new issue of securities with no established trading market.
We intend to list the PIERS on the NYSE but we cannot assure that this listing
will be approved or, if approved, that an active trading market will develop. If
an active market does not develop, the market price and liquidity of the PIERS
will be adversely affected.
SHARES ELIGIBLE FOR FUTURE SALE--THE PRICE OF OUR COMMON STOCK MAY DECLINE DUE
TO POSSIBLE SALES OF SHARES
As of December 31, 2000, there were approximately 80.0 million shares of our
common stock outstanding (91.5 million shares after giving effect to the April
1, 2001 conversion of our 7 1/2% Mandatorily Convertible Preferred Stock), all
of which are (or will be) transferable without restriction or further
registration under the Securities Act of 1933, except for any shares held by our
affiliates. In addition, we have registered under the Securities Act
approximately 7.8 million shares for currently outstanding management-held
options and 2.2 million shares for future option issuances.
In addition, other stockholders who own approximately 6.5 million shares of
common stock have the right to require us to register their shares for sale
under the Securities Act. Under the agreement relating to our acquisition of six
of our European parks, we will be required to issue on or about April 30, 2001
additional shares of common stock with an aggregate market value at that time of
up to approximately Belgian Francs 93.0 million (approximately US $2.2 million
at the December 31, 2000 exchange rate), and, if revenues in 2001 at these parks
reach certain levels, we will be required to issue additional shares of common
stock in 2002. We may also issue additional shares of common stock to pay
quarterly dividend payments on our 7 1/2% Mandatorily Convertible Preferred
Stock and on the PIERS offered hereby. The sale or expectation of sales of a
large number of shares of common stock
S-13
<PAGE>
or securities convertible into common stock in the public market at any time
after the date of this prospectus supplement might negatively affect the market
price of the PIERS offered hereby and our common stock.
USE OF PROCEEDS
We expect the net proceeds from this offering, after deducting underwriting
discounts and commissions and estimated expenses payable by us, to be
approximately $169.5 million ($195.0 million, if the underwriters elect to
exercise their over-allotment option in full). We intend to use approximately
$113.0 million of the net proceeds from this offering to fund the acquisition of
Sea World of Ohio, including related expenses. All of the remaining net proceeds
will be used for general corporate purposes. The closing of this offering is not
conditioned upon the closing of the Sea World transaction. If that acquisition
is not completed, we will use the net proceeds for one or more of the following:
- funding of future park acquisitions (including La Ronde if completed);
- funding of improvements and enhancements to existing and acquired parks;
- repayment of amounts outstanding under our revolving credit facilities
(which we can reborrow); and
- working capital and other general corporate purposes.
Pending their ultimate use, any net proceeds from this offering may be
invested in short-term, investment grade, interest-bearing securities,
certificates of deposit or direct or guaranteed obligations of the United
States.
S-14
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 2000:
- our actual capitalization; and
- our capitalization after giving effect to the consummation of this
offering (assuming the underwriters' over-allotment option is not
exercised).
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------------
ACTUAL AS ADJUSTED
------------ -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
<S> <C> <C>
Cash and cash equivalents................................... $ 65,744 $ 235,244
========== ==========
Restricted-use investments(1)............................... $ 89,594 $ 89,594
========== ==========
Current maturities of long-term debt........................ $ 969 $ 969
========== ==========
Long-term debt (excluding current maturities):
Six Flags Credit Facility(2).............................. $ 891,000 $ 891,000
Six Flags 10% senior discount notes....................... 321,244 321,244
Six Flags 9 1/4% senior notes............................. 280,000 280,000
Six Flags 9 3/4% senior notes............................. 430,000 430,000
Six Flags Operations 9 3/4% senior notes.................. 125,000 125,000
Six Flags Operations 8 7/8% senior notes.................. 170,000 170,000
Other..................................................... 5,974 5,974
---------- ----------
Total long-term debt.................................... 2,223,218 2,223,218
---------- ----------
% Convertible Preferred Stock, $1.00 par value per share
(represented by the PIERS) (80,500 authorized and 70,000
outstanding, as adjusted)................................. -- 169,500
---------- ----------
Stockholders' equity:
Preferred stock, $1.00 par value per share (4,919,500
authorized and 11,500 shares outstanding) (excludes the
Convertible Preferred Stock shown above)................ 12 12
Common stock, $0.025 par value per share (150,000,000
shares authorized; 78,700,603 shares outstanding)....... 1,967 1,967
Capital in excess of par value............................ 1,705,840 1,705,840
Accumulated deficit....................................... (34,635) (34,635)
Deferred compensation..................................... (7,863) (7,863)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments................ (52,038) (52,038)
---------- ----------
Total stockholders' equity................................ 1,613,283 1,613,283
---------- ----------
Total capitalization.................................... $3,836,501 $4,006,001
========== ==========
</TABLE>
------------------------------
(1) Represents cash which has been deposited in escrow to fund the April 2001
interest payment on the Six Flags 9 1/4% Senior Notes, the April 2001
dividend payment on our 7 1/2% Mandatorily Convertible Preferred Stock
(which will be converted into common stock on that date) and payments to our
partners at the Partnership Parks.
(2) At December 31, 2000 we had borrowed an additional $90.0 million under the
$300.0 million working capital revolving credit portion of this facility.
S-15
<PAGE>
HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The historical financial and operating data below as of and for each of the
years in the three-year period ended December 31, 1999 are derived from our
audited financial statements, which are incorporated herein by reference. The
data as of and for the nine-month periods ended September 30, 2000 and September
30, 1999 are derived from our unaudited financial statements, which are
incorporated herein by reference. The historical financial data for the year
ended December 31, 1997 include the operations of Riverside Park from February
5, 1997 and Six Flags Kentucky Kingdom from November 7, 1997 (the dates of their
respective acquisitions). The historical financial data for the year ended
December 31, 1998 include the operations of the six European parks we acquired
in our acquisition of Walibi, S.A. from March 26, 1998 and the operations of the
former Six Flags from April 1, 1998 (the dates of their respective
acquisitions). Historical results for the year ended December 31, 1999 include
the operations of Six Flags Mexico (formerly Reino Aventura), White Water
Atlanta and Splashtown from the dates of their respective acquisitions in May
1999 and include the operations of Warner Bros. Movie World Germany from its
acquisition in November 1999 (following its 1999 operating season).
The pro forma financial and operating data below for the year ended December
31, 1998 are derived from the Unaudited Pro Forma Statements of Operations and
Other Data appearing in the accompanying prospectus. The pro forma financial and
operating data are presented for informational purposes only, have been prepared
based on estimates and assumptions which we have deemed to be appropriate and do
not purport to be indicative of the financial position or results of operations
which would actually have been attained if the relevant acquisitions and
financings had occurred on the assumed dates or which may be achieved in the
future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ---------------------
1997 1998 1999 1999 2000
-------- ---------------------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PRO
FORMA(1)
ACTUAL
-------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenue:
Theme park admissions................................ $ 94,611 $423,461 $439,391 $ 500,417 $ 459,735 $ 497,286
Theme park food, merchandise and other............... 99,293 369,242 377,658 426,567 388,391 422,125
-------- -------- -------- --------- --------- ---------
Total revenue...................................... 193,904 792,703 817,049 926,984 848,126 919,411
-------- -------- -------- --------- --------- ---------
Operating costs and expenses:
Operating expenses................................... 81,356 297,266 347,571 353,728 290,431 314,222
Selling, general and administrative.................. 35,422 126,985 149,670 163,526 128,600 142,713
Noncash compensation................................. 1,125 6,362 6,362 12,725 10,503 9,439
Costs of products sold............................... 23,025 82,127 84,568 90,699 81,907 86,652
Depreciation and amortization........................ 19,792 109,841 137,124 154,264 114,135 133,079
-------- -------- -------- --------- --------- ---------
Total operating costs and expenses................. 160,720 622,581 725,295 774,942 625,576 686,105
-------- -------- -------- --------- --------- ---------
Income from operations............................. 33,184 170,122 91,754 152,042 222,550 233,306
-------- -------- -------- --------- --------- ---------
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ---------------------
1997 1998 1999 1999 2000
-------- ---------------------- --------- --------- ---------
(UNAUDITED)
PRO
ACTUAL FORMA(1)
-------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OTHER INCOME (EXPENSE):
Interest expense, net.................................. (17,775) (115,849) (155,901) (169,441) (122,113) (168,347)
Equity in operations of theme park partnerships........ -- 24,054 10,892 26,180 24,602 11,439
Termination fee, net of expenses....................... 8,364(2) -- -- -- -- --
Other income (expense)................................. (59) (1,983) (1,984) (3,551) 156 (494)
-------- -------- -------- --------- --------- ---------
Total other income (expense)......................... (9,470) (93,778) (146,993) (146,812) (97,355) (157,402)
-------- -------- -------- --------- --------- ---------
Income (loss) before income taxes...................... 23,714 76,344 (55,239) 5,230 125,195 75,904
Income tax expense (benefit)........................... 9,615 40,716 (4,079) 24,460 62,712 39,392
-------- -------- -------- --------- --------- ---------
Income (loss) before extraordinary loss.............. $ 14,099 $ 35,628 (51,160) $ (19,230) $ 62,483 $ 36,512
======== ======== ======== ========= ========= =========
Income (loss) before extraordinary loss per common
share--basic(3).................................... $ .39 $ .27 $ (0.98) $ (0.55) $ .58 $ .24
======== ======== ======== ========= ========= =========
Income (loss) before extraordinary loss per common
share--diluted(3).................................... $ .38 $ .26 $ (0.98) $ (0.55) $ .56 $ .24
======== ======== ======== ========= ========= =========
OTHER DATA:
EBITDA(4).............................................. $ 62,465 $286,325 $235,240 $ 319,031 $ 347,188 $ 375,824
Adjusted EBITDA(5)..................................... $ 62,465 $321,733 $258,943 $ 363,219 $ 384,308 $ 403,302
Net cash provided by operating activities.............. $ 47,150 $119,010 $ 95,046 $ 197,349 $ 237,078 $ 245,410
Capital expenditures................................... $129,049 $205,754 $231,089 $ 391,655 $ 334,250 $ 301,083
Ratio of earnings to fixed charges(6).................. 2.3x 1.5x 0.8x 1.0x 1.8x 1.5x
Ratio of earnings to combined fixed charges and
preferred stock dividends(6)......................... 2.3x 1.2x 0.6x 0.8x 1.5x 1.3x
RATIOS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30,
2000(7):
Net debt/Adjusted EBITDA............................... 5.41
Total debt/Adjusted EBITDA............................. 5.82
Adjusted EBITDA/cash interest expense, net............. 2.23
Adjusted EBITDA/total interest expense, net............ 1.77
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 2000
---------------------------------- ----------------------------
1997 1998 1999 ACTUAL AS ADJUSTED(8)
-------- ---------- ---------- ---------- ---------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 84,288 $ 400,578 $ 138,131 $ 65,744 $ 235,244
Total assets....................................... $611,321 $4,052,465 $4,161,572 $4,242,630 $4,412,130
Total long-term debt (excluding current
maturities)...................................... $216,231 $1,866,151 $2,202,933 $2,233,218 $2,233,218
Total debt......................................... $217,026 $2,064,189 $2,204,988 $2,224,187 $2,224,187
Convertible Preferred Stock (represented by the
PIERS)........................................... $ -- $ -- $ -- $ -- $ 169,500
Stockholders' equity............................... $323,749 $1,626,565 $1,615,616 $1,613,283 $1,613,283
</TABLE>
------------------------------
(1) The pro forma statement of operations and other data for the year ended
December 31, 1998 gives effect to the acquisitions of Walibi (six European
parks) and the former Six Flags and the related financings as if they had
occurred on January 1, 1998 (December 29, 1997 in the case of the Six Flags
acquisition). See "Unaudited Pro Forma Statement of Operations and Other
Data" appearing in the accompanying prospectus.
(2) Represents an $8,364,000 termination fee (net of expenses) paid to us upon
termination of our prior agreement to become managing general partner of the
partnership that owns Six Flags Over Texas.
(3) All per share data has been retroactively adjusted to give effect to a
two-for-one stock split consummated in July 1998.
(4) EBITDA is defined as income before extraordinary loss, interest expense,
net, income tax expense (benefit), depreciation and amortization, equity in
operations of theme park partnerships, other income (expense) and noncash
compensation. We
S-17
<PAGE>
have included information concerning EBITDA because it is used by certain
investors as a measure of a company's ability to service and/or incur debt.
EBITDA is not required by generally accepted accounting principles ("GAAP")
and should not be considered in isolation or as an alternative to net
income, net cash provided by operating, investing and financing activities
or other financial data prepared in accordance with GAAP or as an indicator
of our operating performance. This information should be read in conjunction
with the Statements of Cash Flows contained in our Consolidated Financial
Statements, which are incorporated by reference herein.
(5) Adjusted EBITDA reflects EBITDA plus, for periods after April 1, 1998, our
share of the EBITDA of the Partnership Parks (including White Water Atlanta
for periods after its acquisition in May 1999), and of Six Flags Marine
World which, in each case, is not already reflected in EBITDA. We manage the
operations of Six Flags Marine World, are entitled to receive 80% of the
cash flow from its operations after payment of municipal bond debt service,
and have an option to purchase the entire park beginning in February 2002.
Adjusted EBITDA is not indicative of our ability to service and/or incur
debt and is not a measure of our profitability or liquidity.
(6) For the purpose of calculating the consolidated ratios of earnings to fixed
charges and of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) before extraordinary loss and
before income taxes, minority interest in earnings, equity in operations of
theme park partnerships not distributed to Six Flags and fixed charges.
Fixed charges consist of interest expense, amortization of deferred
financing costs and discount or premium relating to indebtedness and the
portion (approximately one-third) of rental expense that management believes
represents the interest component of rent expense. Preferred stock dividend
requirements have been increased to an amount representing the before-tax
earnings which would have been required to cover such dividend requirements.
For the years ended December 31, 1998 (pro forma) and 1999 (actual),
earnings were insufficient to cover fixed charges by $45.2 million and $3.2
million, respectively, and were insufficient to cover combined fixed charges
and preferred stock dividends by $82.8 million and $40.8 million,
respectively.
(7) Total debt/Adjusted EBITDA includes total outstanding indebtedness of
$2,224.2 million and Adjusted EBITDA of $382.2 million. Net debt deducts
from total outstanding indebtedness $155.3 million representing cash and
cash equivalents and restricted-use investments placed in escrow to fund
certain obligations. See "Capitalization." Adjusted EBITDA/cash interest
expense, net is calculated using the cash interest expense, net for the
period of $171.2 million. Adjusted EBITDA/total interest expense, net is
calculated using the interest expense, net for the period of $215.7 million.
(8) Adjusted to give effect to the issuance of the PIERS, assuming no exercise
of the underwriters' over-allotment option.
S-18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Our revenue is derived from the sale of tickets for entrance to our parks
(approximately 48.8%, 53.4% and 54.0% in 1997, 1998 and 1999, respectively) and
the sale of food, merchandise, games and attractions inside our parks and other
income (approximately 51.2%, 46.6% and 46.0% in 1997, 1998 and 1999,
respectively). Our principal costs of operations include salaries and wages,
employee benefits, advertising, outside services, maintenance, utilities and
insurance. Our expenses are relatively fixed. Costs for full-time employees,
maintenance, utilities, advertising and insurance do not vary significantly with
attendance, thereby providing us 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 from the dates of their
respective acquisitions in May 1999 and include the results of operations of
Warner Bros. Movie World Germany from the date of its acquisition in November
1999 (following its 1999 operating season). Results of Walibi and the former Six
Flags are included in 1998 historical 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).
Results of operations for the nine months ended September 30, 2000 include
the results of the four parks acquired in 1999. Results for the nine months
ended September 30, 1999 include the results of three of the acquired parks from
their respective dates of acquisition in May 1999 and do not include the results
of the Movie World Germany park acquired in November 1999.
Results of operations for the nine-month period ended September 30, 2000 are
not indicative of the results expected for the full year. In particular, our
theme park operations contribute most of their annual revenue during the period
from Memorial Day to Labor Day each year. The information for such period
reflects all adjustments (all of which are normal and recurring) which are, in
the opinion of management, necessary to present a fair statement of the results
for the period presented.
We believe that significant opportunities exist to acquire additional theme
parks. In addition, we intend to continue our on-going expansion of the rides
and attractions and overall improvement of our parks to maintain and enhance
their appeal. We believe this strategy has contributed to increased attendance,
lengths of stay and in-park spending and, therefore, profitability.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUE. Revenue in the first nine months of 2000 totaled $919.4 million
compared to $848.1 million for the comparable period of 1999. Revenues in the
2000 period increased 8.4% over the prior year period due to the inclusion in
the entire 2000 period of the results of the parks acquired in 1999 and to a
lesser extent to an increase in per capita spending at the Company's parks. We
believe that revenues in the 2000 period were adversely affected by unusually
difficult weather, particularly in June and July, in a large number of its major
markets. Reported revenues from our European parks as translated into U.S.
dollars were adversely impacted by a decline in European currencies during the
2000 period. Revenues in the first nine months of 2000 would have been
approximately $19.4 million higher had European currency exchange rates remained
at 1999 levels.
OPERATING EXPENSES. Operating expenses for the nine months ended September
30, 2000 increased $23.8 million compared to the comparable nine months of 1999.
The 8.2% increase resulted primarily from the inclusion in the 2000 period of
two consolidated parks acquired in May 1999 and one acquired in November 1999.
Excluding the acquired parks from both periods, operating expenses in the
S-19
<PAGE>
2000 period would have increased $3.8 million (1.3%) as compared to the prior
year period primarily as a result of increased compensation expense.
SELLING, GENERAL AND ADMINISTRATIVE; NONCASH COMPENSATION. Selling, general
and administrative expenses for the first nine months of 2000 increased $14.1
million compared to the comparable period of 1999. Excluding the parks acquired
in 1999 from both periods, selling, general and administrative expenses in 2000
would have increased $0.6 million as compared to the prior year period. Noncash
compensation expense in the 2000 period was $1.1 million less than the prior
year period, reflecting the difference between the fixed cost in the 2000 period
relating to certain conditional stock options and the estimated cost used in the
1999 period.
COSTS OF PRODUCTS SOLD. Costs of products sold in the 2000 period increased
$4.7 million compared to costs for the first nine months of 1999. As a
percentage of theme park food, merchandise and other revenue, costs of goods
sold represented 20.5% in the 2000 period as compared to 21.1% in the 1999
period.
DEPRECIATION AND AMORTIZATION; INTEREST EXPENSE, NET. Depreciation and
amortization expense for the first nine months of 2000 increased $18.9 million
compared to the comparable period of 1999. The increase compared to the 1999
level was attributable to our on-going capital program and from additional
depreciation and amortization expense ($9.7 million) associated with the
consolidated parks acquired in 1999. Interest expense, net increased $46.2
million compared to the comparable nine months of 1999. The increase in the 2000
period resulted from higher average interest rates on a higher average debt and
reduced interest income from lower average cash and cash equivalents and
restricted-use investment balances during 2000.
EQUITY IN OPERATIONS OF THEME PARK PARTNERSHIPS. For the 2000 period,
equity in operations of theme park partnerships reflects our share of the income
or loss of Six Flags Over Texas (we have a 34% effective ownership interest) and
Six Flags Over Georgia, including White Water Atlanta (we have a 25% effective
ownership interest), the lease of Six Flags Marine World and the management of
all four parks. The partnership that owns Six Flags Over Georgia acquired White
Water Atlanta in May 1999. The equity in operations of theme park partnerships
compared to the first nine months of 1999 decreased by $13.2 million, primarily
as result of reduced attendance in the 2000 period at certain of these parks.
INCOME TAX. Income tax expense was $39.4 million for the nine months ended
September 30, 2000 compared to $62.7 million for the first nine months of 1999.
The effective tax rate for the 2000 period was 51.9% compared to a rate of 50.1%
for the comparable period of 1999. Our quarterly effective tax rate will vary
from period-to-period based upon the inherent seasonal nature of the theme park
business, as a result of permanent differences associated with goodwill
amortization for financial statement purposes and the deductible portion of the
amortization for tax purposes.
S-20
<PAGE>
YEARS ENDED DECEMBER 31, 1999 AND 1998
The table below sets forth certain of our historical financial information
for the years ended December 31, 1999 and 1998 and with respect to the former
Six Flags and Walibi for the pre-acquisition portion of the 1998 year.
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
----------------- -------------------------------------------------------------
HISTORICAL HISTORICAL
SIX FLAGS WALIBI FOR
FOR PERIOD PERIOD
PRIOR TO PRIOR TO PRO COMPANY
HISTORICAL APRIL 1, MARCH 26, FORMA PRO
SIX FLAGS 1998(1) 1998(2) ADJUSTMENTS FORMA
---------- ---------- ---------- ----------- --------
(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) (21,262) (889) (17,901)(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) (21,262) (890) (31,063) (146,993)
Income (loss) before income taxes
and extraordinary loss........... 5,230 76,344 (83,202) (10,878) (37,503) (55,239)
Income tax expense (benefit)....... 24,460 40,716 -- -- (44,795)(6) (4,079)
Income (loss) before extraordinary
loss............................. $(19,230) $ 35,628 $(83,202) $(10,878) $ 7,292 $(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) $258,943
======== ======== ======== ======== ======== ========
</TABLE>
------------------------------
(1) Includes results of the former 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.
(3) Includes adjustments to eliminate the historical depreciation and
amortization for the former 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 indebtedness incurred to finance the Six Flags acquisition net of (i)
the elimination of the historical interest expense associated with our
credit facilities and the former Six Flags credit facilities outstanding
prior to April 1, 1998 and the long term debt of Walibi and (ii) the
amortization of the fair
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market value adjustments on certain then outstanding Six Flags indebtedness
assumed 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 our 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 income before extraordinary loss, interest expense,
net, income tax expense (benefit), depreciation and amortization, equity in
operations of theme park partnerships, other income (expense) and noncash
compensation. We have included information concerning EBITDA because it is
used by certain investors as a measure of a company's ability to service
and/or incur debt. EBITDA is not required by GAAP and should not be
considered in isolation or as an alternative to net income, net cash
provided by operating, investing and financing activities or other financial
data prepared in accordance with GAAP or as an indicator of our operating
performance. This information should be read in conjunction with the
Statements of Cash Flows contained in our Consolidated Financial Statements,
which are incorporated by reference herein.
(8) Adjusted EBITDA is defined as our EBITDA plus our share (based on our
ownership interests) of the EBITDA of the Partnership Parks and Six Flags
Marine World.
REVENUE. Revenue in 1999 totaled $927.0 million ($903.2 million without
giving effect to the three consolidated parks acquired in that year (the "1999
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 1999 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.
OPERATING EXPENSES. Operating expenses for 1999 increased $56.5 million
($46.4 million excluding the 1999 Acquired Parks) compared to actual expenses
for 1998 and increased $6.2 million (but decreased $3.9 million excluding the
1999 Acquired Parks) compared to pro forma expenses for 1998. The decrease
(excluding the 1999 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 1999 Acquired Parks) to 1998 pro forma as a percentage of
revenues, these expenses were 38.1% and 42.5% respectively.
SELLING, GENERAL AND ADMINISTRATIVE; NONCASH COMPENSATION. Selling, general
and administrative expenses (excluding noncash compensation) for 1999 increased
$36.5 million and $13.7 million, respectively, compared to the actual and pro
forma expenses for 1998. Selling, general and administrative expenses for the
1999 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 parks to
the Six Flags brand. Remaining selling, general and administrative expenses in
1999 decreased by $9.6 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 1999 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 related to the issuance of restricted stock and
conditional employee stock options during 1998.
COSTS OF PRODUCTS SOLD. Costs of products sold in 1999 increased $8.6
million ($6.2 million excluding the 1999 Acquired Parks) and $6.1 million ($3.8
million excluding the 1999 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 21.3% in 1999 (21.2% excluding the
1999 Acquired Parks) compared to 22.4% pro forma in 1998.
DEPRECIATION AND AMORTIZATION; INTEREST EXPENSE, NET. 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 our on-going
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<PAGE>
capital program at the previously owned parks and from the additional
improvements associated with the 1999 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 PARK PARTNERSHIPS. Equity in operations of
theme park partnerships reflects our 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. Our ownership
interests in Six Flags Over Texas (we have a 34% effective ownership interest)
and Six Flags Over Georgia (we have a 25% effective ownership interest)
commenced on April 1, 1998, the date of the Six Flags acquisition. We became
entitled to a share of the cash flows from the lease and management of Six Flags
Marine World in 1998. Our interest in White Water Atlanta commenced with our
acquisition of it 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 our Consolidated Financial Statements, which are incorporated herein by
reference.
INCOME TAX. 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 adversely effected
from permanent differences associated with goodwill amortization for financial
purposes and the lesser amount of amortization that is deductible for tax
purposes and from non-deductible compensation expense associated with
conditional stock options and restricted stock grants.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
At September 30, 2000, our indebtedness aggregated $2,224.2 million, of
which approximately $1.0 million matures prior to September 30, 2001. The annual
total cash interest on our debt in 2000 was approximately $188.0 million ($25.9
million of which we paid with the funds already deposited in escrow). The annual
dividend requirements on the PIERS offered hereby (assuming no exercise of the
underwriters' over-allotment option) will total $ , which we can, at our
option, pay either in cash or shares of common stock. On April 1, 2001, we also
are required to pay the final quarterly dividend of approximately $5.8 million
upon the conversion on that date of our 7 1/2% Manditorily Convertible Preferred
Stock, which we can, at our option, pay either in cash or shares of common
stock. At September 30, 2000, we had approximately $65.7 million of unrestricted
cash and cash equivalents, $89.6 million of restricted cash and all $300.0
million available under our working capital revolving credit facility.
During the nine months ended September 30, 2000, net cash provided by
operating activities was $245.4 million. Net cash used in investing activities
in the first nine months of 2000 totaled $298.1 million, consisting primarily of
capital expenditures and investments in theme park partnerships. Net cash used
in financing activities in the first nine months of 2000 was $17.4 million,
primarily representing cash dividends paid.
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 our 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 our refinancing of our bank
debt with a new $1.2 billion credit facility as well as the refinancing of
public debt of two of our subsidiaries with the issuance of $430.0 million
principal amount of 9 3/4% Senior Notes due 2007 of the Company. See Notes 2 and
6 to Notes to the Company's Consolidated Financial Statements, which are
incorporated herein by reference.
S-23
<PAGE>
In addition to our obligations under outstanding indebtedness, we have
guaranteed the obligations of certain of our subsidiaries to (i) make minimum
annual distributions of approximately $48.6 million in 2000 (subject to annual
cost of living adjustments) to the limited partners in the Partnership Parks (of
which we received $14.8 million in 2000 as a result of our ownership interest in
such parks), (ii) make minimum capital expenditures at each of the Partnership
Parks during rolling five-year periods, based generally on 6% of such park's
revenues, and (iii) purchase at specified prices a maximum number of 5% per year
(accumulating to the extent not purchased in any given year) of limited
partnership units outstanding (to the extent tendered by the unit holders). We
expect to use cash flow from operations at the Partnership Parks to satisfy our
annual distribution and capital expenditure obligations with respect to the
Partnership Parks, before we use any of our other funds. In addition, at
December 31, 2000, the Company had a $75.0 million dedicated escrow account
available to fund these and other obligations.
Our high level of debt and other obligations could have important negative
consequences to us and investors in our securities. See "Risk
Factors--Substantial Leverage," "Description of Indebtedness" and Note 6 to the
Notes to our Consolidated Financial Statements, which are incorporated herein by
reference.
Our liquidity could be adversely affected by unfavorable weather, accidents
or the occurrence of an event or condition, including negative publicity or
significant local competitive events that significantly reduces paid attendance
and, therefore, revenue at any of our theme parks. 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. The park is covered by our existing
insurance, and we do not believe that this incident will have a material adverse
effect on our financial position, operations or liquidity.
We believe that, based on current and anticipated operating results, cash
flow from operations, existing cash and available borrowings under the existing
credit facilities will be adequate to meet our future liquidity needs, including
anticipated requirements for working capital, capital expenditures, scheduled
debt payments and preferred stock dividends and our obligations under
arrangements relating to the Partnership Parks, for at least the next several
years. We may, however, need to refinance all or a portion of our existing debt
on or prior to maturity or to obtain additional financing. See "Risk
Factors--Substantial Leverage."
To minimize our exposure to changing foreign currency rates on ride
purchases from foreign vendors, in the past we have entered into foreign
exchange forward contracts. However, we are not now party to any foreign
exchange forward contracts related to ride purchase contracts. Additionally, we
have not hedged our exposure to changes in foreign currency rates related to our
international parks.
We have entered into interest swap arrangements with terms ending between
December 2001 and March 2002 with respect to our $600.0 million term loan under
the Six Flags Credit Facility. At December 31, 2000, the balance of our other
indebtedness represented fixed-rate debt, other than an additional $381.0
million then outstanding under the Six Flags Credit Facility. Increases in LIBOR
in the future would result in higher interest expense with respect to this
floating-rate indebtedness.
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<PAGE>
BUSINESS
GENERAL
We are the largest regional theme park operator in the world, based on our
2000 attendance of approximately 45 million. We operate 37 regional parks,
including 15 of the 50 largest theme parks in North America based on 2000
attendance, the largest paid admission theme park in Mexico and seven theme
parks in Europe. We are also managing the development and construction of a new
theme park in Spain. Our theme parks serve the 10 largest metropolitan areas in
the United States. We estimate that approximately two-thirds of the population
of the continental United States live within a 150-mile radius of one of our
theme parks.
The following table sets forth certain information concerning our parks:
<TABLE>
<CAPTION>
NAME TYPE OF PARK PRIMARY MARKET
----------------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
EXISTING PARKS:
Bellewaerde.............................. Theme Belgium
Enchanted Village........................ Water/Children Seattle/Tacoma
Frontier City............................ Theme Oklahoma City
The Great Escape......................... Theme/Water Lake George/Albany, New York
Six Flags America........................ Theme/Water Baltimore/Washington, D.C.
Six Flags AstroWorld..................... Theme Houston
Six Flags Water World.................... Water Houston
Six Flags Darien Lake.................... Theme/Water Buffalo/Rochester
Six Flags Elitch Gardens................. Theme/Water Denver
Six Flags Fiesta Texas................... Theme/Water San Antonio
Six Flags Great Adventure................ Theme New York City/Philadelphia
Six Flags Hurricane Harbor............... Water New York City/Philadelphia
Six Flags Wild Safari Animal Park........ Wildlife New York City/Philadelphia
Six Flags Great America.................. Theme Chicago/Milwaukee
Six Flags Holland........................ Theme The Netherlands
Six Flags Kentucky Kingdom............... Theme/Water Louisville
Six Flags Magic Mountain................. Theme Los Angeles
Six Flags Hurricane Harbor............... Water Los Angeles
Six Flags Marine World................... Theme/Wildlife San Francisco
Six Flags Mexico......................... Theme Mexico City
Six Flags New England.................... Theme/Water New England/Boston
Six Flags Ohio........................... Theme/Water Cleveland
Six Flags St. Louis...................... Theme/Water St. Louis
Six Flags Over Georgia................... Theme Atlanta
Six Flags Over Texas..................... Theme Dallas/Fort Worth
Six Flags Hurricane Harbor............... Water Dallas/Fort Worth
Six Flags White Water Atlanta............ Water Atlanta
Splashtown............................... Water Houston
Walibi Aquitaine......................... Theme France
Walibi Rhone-Alpes....................... Theme/Water France
Walibi Schtroumpf........................ Theme France
Walibi Wavre and Aqualibi................ Theme/Water Belgium
Warner Bros. Movie World................. Movie/Entertainment Germany
Warner Bros. Movie World(1).............. Movie/Entertainment Spain
Waterworld USA/Concord................... Water San Francisco
Waterworld USA/Sacramento................ Water Sacramento
White Water Bay.......................... Water Oklahoma City
Wyandot Lake............................. Water Columbus, Ohio
PENDING ACQUISTIONS:
La Ronde................................. Theme Montreal
Sea World of Ohio........................ Wildlife Cleveland
</TABLE>
------------------------------
(1) Under construction and scheduled to open in 2002. We are developing and will
manage this park.
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<PAGE>
In 1998, we acquired the former Six Flags, which had operated regional theme
parks under the Six Flags name for nearly forty years and established a
nationally recognized brand name. We have worldwide ownership of the "Six Flags"
brand name. To capitalize on this name recognition, since the commencement of
the 1998 season we have rebranded nine of our parks as "Six Flags" parks,
including two of our international parks.
We hold exclusive long-term licenses for theme park usage throughout the
United States (except the Las Vegas metropolitan area), Canada, Europe and Latin
and South America (including Mexico) of certain Warner Bros. and DC Comics
characters. These characters include BUGS BUNNY, DAFFY DUCK, TWEETY BIRD,
YOSEMITE SAM, BATMAN, SUPERMAN and others. In addition, our European and Latin
and South American licenses with Warner Bros. include the Hanna-Barbera and
Cartoon Network characters, including YOGI BEAR, SCOOBY-DOO, THE FLINTSTONES and
others. We use these characters to market our parks and to provide an enhanced
family entertainment experience. Our license includes the right to sell
merchandise featuring the characters at our parks, and to use the characters in
advertising, as walk-around characters, in theming for rides and attractions and
in retail outlets. We believe using these characters promotes increased
attendance, supports higher ticket prices, increases lengths-of-stay and
enhances in-park spending.
Our 37 parks are located in geographically diverse markets across North
America and Europe. Our parks are individually themed and provide a complete
family-oriented entertainment experience. Our 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, our theme parks offer more than 800
rides, including over 100 roller coasters, making us the leading operator of
thrill rides in the industry.
Since 1989, under our current management we have assumed control of 36 parks
and have achieved significant internal growth. Most recently, we achieved park
operating cash flow growth of 35.6% from 1998 to 1999 and 8.3% from the first
nine months of 1999 to the first nine months of 2000, despite particularly
difficult weather conditions at many of our major markets in the core 2000
operating season (summer). In addition, in 2000 we rebranded four additional
parks with the Six Flags brand. These four parks, which included our first two
international Six Flags parks, achieved aggregate increases in the first nine
months of 2000 of 39.3% in attendance, 62.7% in revenue, 16.8% in per capita
spending and 91.4% in park-level operating cash flow compared to the comparable
period of 1999.
We believe that our parks benefit from limited direct competition, since the
combination of a limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of our parks with a significant degree of
protection from competitive new theme park openings. Based on our knowledge of
the development of other theme parks in the United States, we estimate that it
would cost at least $200 million and would take a minimum of two years to
construct a new regional theme park comparable to one of our Six Flags theme
parks.
Our senior and operating management team has extensive experience in the
theme park industry. Our senior executive officers have more than 175 years
aggregate experience in the industry and our general managers have an aggregate
of in excess of 500 years experience in the industry, including in excess of 300
years at our parks.
According to AMUSEMENT BUSINESS, total attendance for the 50 largest parks
in North America was 175.1 million in 2000, compared to 145.0 million in 1994,
representing a compound annual growth rate of 3.1%. We believe that this growth
reflects two trends:
- demographic growth in the 5-24 year old age group, which is expected to
continue through 2010, and
- an increasing emphasis on family-oriented leisure and recreation
activities.
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<PAGE>
STRATEGY
Our strategy for achieving growth includes the following key elements: (i)
pursuing growth at our existing parks; (ii) expanding our parks; and (iii)
making selective acquisitions.
PURSUING GROWTH AT OUR EXISTING PARKS
We believe there are substantial opportunities for continued growth at our
parks. Our operating strategy is to increase revenue by increasing attendance
and per capita spending, while also maintaining strict control of operating
expenses. This approach is designed to exploit the operating leverage inherent
in the theme park business. Once parks achieve certain critical attendance
levels, operating cash flow margins increase because revenue growth through
incremental attendance gains and increased in-park spending is not offset by a
comparable increase in operating expenses, because a large portion of such
expenses is relatively fixed during any given year. The primary elements of this
strategy include:
- ADDING RIDES AND ATTRACTIONS AND IMPROVING OVERALL PARK QUALITY. We
regularly make investments in the introduction of new rides and
attractions at our parks. We believe that the introduction of marketable
rides is an important factor in promoting our parks in order to increase
market penetration and encourage longer visits, which lead to increased
attendance and sales of food and merchandise. Once a park reaches an
appropriate level of attractions for its market size, we generally will
add new marketable attractions at that park only every two to four years.
- ADDING THE SIX FLAGS BRAND NAME AND THE CHARACTERS LICENSED FROM WARNER
BROS. AND DC COMICS AT SELECTED PARKS. Since our Six Flags acquisition in
1998, we have added the "Six Flags" brand to nine of our parks, including
two of our international parks. The four parks rebranded in 1999 achieved
attendance, revenue and per capita spending growth in that year of 21.2%,
30.7% and 7.8%, respectively, over 1998 levels. The four parks rebranded
in 2000 achieved attendance, revenue and per capita spending growth during
the first nine months of 2000, of 39.3%, 62.7% and 16.8%, respectively,
over the same period of 1999. We believe that this growth reflects
significant gains in market penetration and geographic market expansion,
as well as increased per capita spending, following rebranding. We have
coupled the introduction of the "Six Flags" brand with aggressive
marketing campaigns featuring the animated characters licensed from Warner
Bros. and DC Comics and targeted capital investment in new rides and
attractions. We intend to rebrand one additional park for the 2001 season.
Further, a component of our acquisition strategy is to identify parks
which we believe can also gain market penetration and geographic market
expansion following our acquisition.
- ENHANCING MARKETING AND SPONSORSHIP PROGRAMS. Our parks have benefitted
from professional, creative marketing programs which emphasize our rides
and attractions, breadth of available entertainment and value provided by
each park. We have also implemented marketing programs that emphasize the
Six Flags brand name, as well as the characters licensed from Warner Bros.
and DC Comics and have successfully attracted well known sponsorship and
promotional partners, such as Pepsi, McDonald's, Coca-Cola, Kodak, AOL,
Procter & Gamble, Perrier and various supermarket chains. We believe that
our increased number of parks and annual attendance will enable us to
expand and enhance our sponsorship and promotional programs.
- INCREASING GROUP SALES, SEASON PASSES AND OTHER PRE-SOLD TICKETS. Group
sales and pre-sold tickets provide us with a consistent and stable base of
attendance, representing over 35.0% of aggregate attendance at the parks
owned or operated by us in the 2000 season. In addition, approximately
26.5% of our patrons at those parks utilized season passes. We intend to
continue emphasizing group sales and pre-sold ticket programs in our sales
efforts and will establish aggressive new programs at any parks we acquire
in the future where appropriate.
S-27
<PAGE>
- USING TICKET PRICING STRATEGIES TO MAXIMIZE TICKET REVENUES AND PARK
UTILIZATION. We regularly review our ticket price levels and ticket
category mix in order to capitalize on opportunities to implement
selective price increases. We believe that opportunities exist to
implement marginal ticket price increases without significant reductions
in attendance levels. Such increases have been implemented successfully on
a park-by-park basis in connection with the introduction of major new
attractions or rides. In addition, we offer discounts on season,
multi-visit and group tickets, as well as discounts on tickets for
specific periods, in order to increase attendance at less popular times,
such as weekdays and evenings.
- ADDING AND ENHANCING RESTAURANTS AND MERCHANDISE AND OTHER REVENUE
OUTLETS. We also seek to increase in-park spending by adding well-themed
restaurants, remodeling and updating existing restaurants and adding and
upgrading merchandise outlets. We have successfully increased spending on
food and beverages by introducing well-recognized local and national
brands, such as Domino's, Friendly's, KFC and TCBY. Typically, we operate
these revenue outlets and we are often the franchisee.
- ADDING SPECIAL EVENTS. We have also developed a variety of off-season
special events designed to increase attendance and revenue prior to
Memorial Day and after Labor Day. Examples include Hallowscream and Fright
Fest-Registered Trademark-, Halloween events in which parks are
transformed with supernatural theming, scary rides and haunting shows;
Oktoberfest, in which traditional German food, theming, music and
entertainment are presented at the parks; and Holiday in the
Park-Registered Trademark-, a winter holiday event, in which two parks are
transformed with winter and holiday theming.
We believe that our base of seven parks in Europe provides us with a
significant presence in the expanding theme park industry there. We have
improved performance at these parks since we acquired them and believe that
there remains a substantial opportunity to achieve further internal growth at
these parks. Some of that growth potential was realized in 2000 at the newly
rebranded Six Flags Holland which, during the first nine months of 2000,
increased attendance, revenue and park-level operating cash flow by 106.1%,
143.9% and 132.9% respectively, over the comparable period of 1999 (without
giving effect to changes in currency exchange rates).
EXPANDING OUR PARKS
We have expanded several of our parks by adding complementary attractions,
such as campgrounds, lodging facilities and water parks, in order to increase
attendance and per capita spending. For example, since 1998, we have added by
construction and purchase hotels or other lodging facilities to Six Flags Darien
Lake, Six Flags Ohio and Six Flags Holland. Further, we added a water park to
Six Flags St. Louis for the 1999 season and to Six Flags Great Adventure for the
2000 season. In addition, we own approximately 400 acres adjacent to Six Flags
America which are zoned for entertainment, recreational and residential uses and
are available for complementary uses. We also own over 1,500 undeveloped acres
adjacent to Six Flags Great Adventure and additional acreage at several of our
other parks which are suitable for development.
MAKING SELECTIVE ACQUISITIONS
We expect to achieve further growth beyond that generated from internal
growth at our existing parks through continued selective acquisitions of
additional regional theme parks. Given our decentralized management approach, we
have significant experience in managing park assets in diverse locations, and we
seek acquisitions where we believe there are significant growth opportunities.
In that connection, in December 2000 we acquired Enchanted Village, a children's
ride and water park located near Seattle. We also have pending the acquisitions
of Sea World of Ohio, located adjacent to our Six Flags Ohio park, and La Ronde,
a theme park in Montreal. See "Business -- Recent and Proposed Acquisitions."
S-28
<PAGE>
The regional theme park industry is highly fragmented. We believe that there
remain numerous acquisition opportunities, both in the U.S. and abroad, for us
to expand our business. While we will continue to pursue acquisitions of
regional parks with annual attendance between 300,000 and 1.5 million, we will
also consider acquisitions of larger parks or park chains.
We believe we have a number of competitive advantages in acquiring theme
parks. Operators of destination or large regional park chains, other than Cedar
Fair L.P., have generally not been actively seeking to acquire parks in recent
years. Additionally, as a multi-park operator with a track record of
successfully acquiring, improving and repositioning parks, we believe we have
numerous competitive advantages over single-park operators in pursuing
acquisitions and improving the operating results at acquired parks. These
advantages include the ability to:
- exercise group purchasing power (for both operating expenses and capital
assets);
- use the Six Flags brand name and the characters licensed from Warner Bros.
and DC Comics;
- attract greater sponsorship revenue and support from sponsors with
nationally-recognized brands and other marketing partners;
- achieve administrative economies of scale;
- recruit and retain superior management; and
- use our access to capital markets as well as our capital stock to finance
all or a portion of future acquisition consideration.
We expect to continue to acquire parks which have been undermanaged and have
not benefitted from sustained capital expenditures, and to reposition such parks
through the implementation of our operating strategies. We may also acquire
better performing parks which require less additional investment but where cash
flow can be improved through economies of scale in operating expenses and
capital assets and other enhancements.
We intend to locate acquisition targets primarily through our own direct
efforts. Our management has extensive contacts throughout the industry and is an
active participant in industry associations. Particular attention is given to
cultivating relationships over time with park owners who appear likely to be or
become potential sellers due to factors such as age or family or economic
circumstances. In addition, we have developed a reputation as an active acquiror
of regional parks. Through this reputation and general industry contacts, we
believe that we become aware of most acquisition opportunities that develop in
our area of focus.
RECENT AND PROPOSED ACQUISITIONS
We continue to implement our strategy of expanding our operations through
strategic park acquisitions.
SEA WORLD OF OHIO. On January 8, 2001, we entered into a definitive
purchase agreement to acquire the assets of Sea World of Ohio for $110.0 million
in cash. Sea World of Ohio is a 230 acre, marine wildlife park located adjacent
to our Six Flags Ohio theme park. We believe that we can increase attendance and
revenue at both the newly acquired park and Six Flags Ohio through joint season
pass and other joint ticketing and marketing programs and can increase operating
efficiencies at both facilities through shared expenses. Consummation of this
transaction is subject to the satisfaction of customary closing conditions,
including expiration of the Hart-Scott-Rodino waiting period. There is no
assurance that such conditions will be met or waived. If this transaction is
completed, we plan to use a substantial portion of the net proceeds from the
sale of the PIERS offered hereby to fund the purchase price.
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ENCHANTED VILLAGE. On December 6, 2000, we acquired Enchanted Village, a
children's ride and water park near Seattle, Washington, for approximately $19.3
million in shares of our common stock. We lease the land on which the park is
located on a long-term basis. The park, which is located on approximately 65
acres, is the only park located within the Seattle-Tacoma metropolitan area,
which is the 14th largest metropolitan area in the country. The park is
primarily a water park and lacks a full complement of rides and revenue outlets.
The park also has not benefited from significant marketing programs. As a
result, we believe that there is an opportunity over the next several years to
increase this park's revenue, attendance and cash flow, with limited capital
expenditures.
LA RONDE. On November 20, 2000, we entered into a letter of intent to
acquire the assets of La Ronde, a theme park located in the City of Montreal for
Can. $30.0 million (approximately US $20.0 million at the December 31, 2000
exchange rate). Under this letter, we have agreed to invest in the park Can.
$90.0 million (approximately US $60.0 million at that exchange rate) over three
to four seasons, commencing in 2002. The park is located on the 146 acre site of
the 1967 Montreal World's Fair. We will lease the land on which the park is
located on a long-term basis. Montreal has a metropolitan population of
approximately 3.3 million and is a major tourist destination. Since its
inception, the park has been operated by a municipal authority which contracted
with third parties to operate a substantial majority of the park's revenue
outlets. Those third parties retained a significant portion of the revenues
generated by these outlets. Most of the contracts covering these revenue outlets
expire by the end of 2002. In addition, the park has lacked sophisticated
marketing programs. As a result, we believe that, if we acquire this park, we
will be able to substantially increase the park's revenue, attendance and cash
flow over the next several years. There is no assurance that we will be able to
complete this acquisition.
MARKETING AND PROMOTION
We attract visitors through national and local multi-media marketing and
promotional programs for each of our parks. The national programs are designed
to market and enhance the Six Flags brand name. Local programs are tailored to
address the different characteristics of their respective markets and to
maximize the impact of specific park attractions and product introductions. All
marketing and promotional programs are updated or completely changed each year
to address new developments. Marketing programs are supervised by our Senior
Vice President for Marketing, with the assistance of our senior management and a
national advertising agency.
We also develop partnership relationships with well-known national and
regional consumer goods companies and retailers to supplement our advertising
efforts and to provide attendance incentives in the form of discounts and/or
premiums. We also arrange for popular local radio and television programs to be
filmed or broadcast live from our parks.
Group sales and pre-sold tickets provide us with a consistent and stable
base of attendance, representing approximately 35.0% of aggregate attendance in
2000 at the parks which we owned or operated during that season. Each park has a
group sales and pre-sold ticket manager and a well-trained sales staff dedicated
to selling multiple group sales and pre-sold ticket programs through a variety
of methods, including direct mail, telemarketing and personal sales calls.
Historically, we have been successful in increasing group sales and pre-sold
tickets at our existing and acquired parks.
We have 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. During 2000, 26.5% of visitors to the parks we owned or operated during
that season utilized season passes.
A significant portion of our attendance is attributable to the sale of
discount admission tickets. We offer discounts on season and multi-visit
tickets, tickets for specific dates and tickets to affiliated groups
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such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, because such expenses are relatively fixed
during the operating season.
We also implement promotional programs as a means of targeting specific
market segments and geographic locations not generally reached through 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
We have 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 particular, our
license agreements entitle us to use, subject to customary approval rights of
Warner Bros., and in limited circumstances, approval rights of certain third
parties, all animated cartoon and comic book characters that Warner Bros. and DC
Comics have the right to license, including BATMAN, SUPERMAN, BUGS BUNNY, DAFFY
DUCK, TWEETY BIRD and YOSEMITE SAM, and include the right to sell merchandise
using the characters. In addition, the Cartoon Network and Hanna-Barbera
characters including YOGI BEAR, SCOOBY-DOO and THE FLINTSTONES are available for
our use at theme parks throughout Europe and Latin and South America. In
addition to basic license fees, we are required to pay a royalty fee on
merchandise manufactured by or for us and sold that uses the licensed
characters. Warner Bros. has the right to terminate the license agreements under
certain circumstances including if any persons involved in the movie or
television industries obtain control of the Company and upon a default under the
subordinated indemnity agreement between the Company and Time Warner Inc.
entered into in connection with the Six Flags acquisition.
PARK OPERATIONS
We currently operate in geographically diverse markets in the United States,
Mexico and Europe. Each of our 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 our regional Executive Vice
Presidents (each of whom reports to our Chief Operating Officer) and is
responsible for all operations and management of the individual park. We also
have an Executive Vice President responsible for retail and in-park spending at
all of our parks. 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 our 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 our strategy and to maximize revenues and
operating cash flow at each park. Our general managers have an aggregate of more
than 500 years experience in the industry, including more than 300 years at
parks we operate.
Our parks are generally open daily from Memorial Day through Labor Day. In
addition, most of our parks are open during weekends prior to and following
their daily seasons, often in conjunction with themed events (such as
Hallowscream, Fright Fest-Registered Trademark-, Oktoberfest and Holiday in the
Park-Registered Trademark-). Due to their location, certain parks have longer
operating seasons. Typically, the parks charge a basic daily
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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
We regularly make capital investments in the introduction of new rides and
attractions at our parks. We purchase both new and used rides and attractions.
In addition, we rotate rides among parks to provide fresh attractions. We
believe that the introduction of new rides and attractions is an important
factor in promoting each of the parks in order to achieve market penetration and
encourage longer visits, which lead to increased attendance and in-park
spending. In addition, we generally add theming to acquired parks and enhance
the theming and landscaping of our 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.
Our level of capital expenditures is 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.
MAINTENANCE AND INSPECTION
Our 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. Our
senior management and the individual park personnel 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. We
have approximately 1,000 full-time employees who devote substantially all of
their time to maintaining the parks and their rides and attractions.
In addition to our maintenance and inspection procedures, our liability
insurance carrier performs an annual inspection of each park and all attractions
and related maintenance procedures. The results of insurance inspections are
written evaluation and inspection reports, as well as written suggestions on
various aspects of park operations. State inspectors also conduct annual ride
inspections before the beginning of each season. Other portions of each park are
subject to inspections by local fire marshals and health and building department
officials. Furthermore, we use Ellis & Associates as water safety consultants at
our parks in order to train life guards and audit safety procedures.
INSURANCE
We maintain insurance of the type and in amounts that we believe are
commercially reasonable and that are available to businesses in our industry. We
maintain 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 (i) occurrences at the parks acquired in the Six
Flags acquisition and (ii) occurrences on and after July 1, 1998 at our other
U.S. parks, we have no self-insured retention by Six Flags. With respect to
claims arising out of occurrences prior to July 1, 1998 at these other U.S.
parks, the self insurance retention is $50,000 per occurrence. We also maintain
fire and extended coverage,
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workers' compensation, business interruption and other forms of insurance
typical to business in this industry. The fire and extended coverage policies
insure our real and personal properties (other than land) against physical
damage resulting from a variety of hazards.
ENVIRONMENTAL AND OTHER REGULATION
Our 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 and above-ground storage tanks and the disposal
of waste and hazardous materials. In addition, our operations are subject to
other local, state and federal governmental regulations including, without
limitation, labor, health, safety, zoning and land use and minimum wage
regulations applicable to theme park operations, and local and state regulations
applicable to restaurant operations at each park. We believe that we are in
substantial compliance with applicable environmental and other laws and
regulations and, although no assurance can be given, we do not foresee the need
for any significant expenditures in this area in the near future.
In addition, portions of the undeveloped areas at certain of our parks are
classified as wetlands. Accordingly, we may need to obtain governmental permits
and other approvals prior to conducting development activities that affect these
areas, and future development may be prohibited in some or all of these areas.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
--------------------------------------- -------- ----------------------------------------------------
<S> <C> <C>
Kieran E. Burke........................ 42 Chairman and Chief Executive Officer; Director
Gary Story............................. 45 President and Chief Operating Officer; Director
James F. Dannhauser.................... 48 Chief Financial Officer; Director
Daniel P. Aylward...................... 48 Executive Vice President
John E. Bement......................... 48 Executive Vice President
Hue W. Eichelberger.................... 42 Executive Vice President
Thomas J. Iven......................... 42 Executive Vice President
Sherrie Bang........................... 45 Senior Vice President of Marketing
Brian Jenkins.......................... 39 Senior Vice President of Finance
James M. Coughlin...................... 49 General Counsel
Paul A. Biddelman...................... 54 Director
Michael E. Gellert..................... 69 Director
Francois Letaconnoux................... 49 Director
Stanley S. Shuman...................... 65 Director
</TABLE>
KIERAN E. BURKE has served as our Chief Executive Officer and a Director of
our company since October 1989 and Chairman of the Board since June 1994. From
1989 through June 1994, he was also President of our company. Mr. Burke was an
investment banker prior to becoming our President.
GARY STORY has served as our President and a Director of our company since
June 1994 and as Chief Operating Officer since January 1992. From January 1992
through June 1994, he also served as Executive Vice President of our company.
Prior to that time, he had been General Manager of Frontier City for more than
five years. From 1983 through 1984, Mr. Story served as General Manager of Luna
Park, an amusement park in Sydney, Australia, during its redevelopment as a
theme park and from 1981 through 1983 he served as General Manager of
Diversiones del Reino (now Six Flags Mexico), our theme park in Mexico City.
From 1972 through 1981, Mr. Story served in various capacities with the former
Six Flags.
JAMES F. DANNHAUSER became our Chief Financial Officer in October 1995 and
has served as a Director of our company since December 1992. From 1990 through
June 1996, Mr. Dannhauser was a managing director of Lepercq de Neuflize & Co.
Incorporated, an investment banking firm. Mr. Dannhauser is a member of the
board of directors of Lepercq and of MeriStar Hospitality Corporation.
DANIEL P. AYLWARD has served as an Executive Vice President of our company
since June 1998. Prior to that, beginning in February 1997, Mr. Aylward was
General Manager of Marine World. From January 1995 to February 1997, Mr. Aylward
was President and General Manager of Silverwood Theme Park, a small theme park
operation in Idaho. From June 1989 to January 1995 he served as General Manager
of Old Tucson Studios in Tucson, Arizona.
JOHN E. BEMENT has served as an Executive Vice President of our company
since May 1998. From January 1993 to May 1998, Mr. Bement was the General
Manager at Six Flags Over Georgia.
HUE W. EICHELBERGER has served as an Executive Vice President of our
company since 1996; prior thereto he served as General Manager of Adventure
World (now Six Flags America) since 1992.
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THOMAS J. IVEN has served as an Executive Vice President of our company
since November, 2000 and before that had been General Manager of Six Flags St.
Louis since August 1998. From 1996 to August 1998, Mr. Iven was Regional
Director of Retail Operations of the Six Flags Texas region. From 1992 to 1996,
Mr. Iven served as Vice President of Retail Operations at Six Flags Over Texas.
SHERRIE BANG has served as our Senior Vice President of Marketing since
January 2000. Prior to that, she was a regional Vice President of Marketing of
our company since April 1998. Prior thereto, she served as Vice President of
Marketing of Six Flags Magic Mountain for nearly ten years.
BRIAN JENKINS has served as our Senior Vice President of Finance since
April, 2000 and before that as our Vice President of Finance since April 1998.
Prior thereto, Mr. Jenkins served as Regional Vice President of Finance for the
former Six Flags from 1996 to 1998. Prior to joining the former Six Flags, Mr.
Jenkins served in various financial positions with FoxMeyer Health Corporation
from 1990 to 1996, most recently as Vice President of Business Development and
Corporate Planning.
JAMES M. COUGHLIN has served as our General Counsel since May 1998. Prior
to that, Mr. Coughlin was a partner at the law firm of Baer Marks & Upham LLP
since 1991.
PAUL A. BIDDELMAN has served as a Director of our company since December
1992. Since December 1997, Mr. Biddelman has been president of Hanseatic
Corporation, a private investment company. Prior to that date, he was treasurer
of Hanseatic for more than five years. Mr. Biddelman also serves as a director
of Insituform Technologies, Inc., Celadon Group, Inc., SystemOne Technologies
Inc. and Star Gas Partners, L.P.
MICHAEL E. GELLERT has served as a Director of our company since March
1989. He previously served as a Director of our company and as a Trustee of
Tierco, a Massachusetts business trust and the predecessor of our company, from
1979 until 1986. From June 1989 through June 1994, he also served as the
Chairman of the Board of our company. Mr. Gellert is a general partner of
Windcrest Partners, a private investment partnership. Mr. Gellert also serves as
a director of Devon Energy Corp., High Speed Access Corp., Humana Inc., Seacor
Smit Inc. and Smith Barney World Funds, Inc.
FRANCOIS LETACONNOUX has served as a Director of our company since June
2000. Since June 1993, Mr. Letaconnoux has been President and Chief Executive
Officer of Lepercq de Neuflize & Co. Incorporated, an investment banking firm.
He also serves as a trustee to The Lepercq Istel Fund, Tocqueville Fund and the
Asia Pacific Venture Limited II, which are investment companies, and as a
director of Pathe, S.A., a French entertainment company.
STANLEY S. SHUMAN has served as a Director of our company since June 2000.
Mr. Shuman is Executive Vice President, Managing Director and a member of the
Executive Committee of Allen & Company Incorporated, a New York based investment
banking firm. Allen & Company is one of the underwriters of this offering. Mr.
Shuman also serves as a Director of the News Corporation Limited, Bayou Steel
Corporation and SESAC, Inc.
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DESCRIPTION OF PIERS
THE FOLLOWING SECTION DESCRIBES ALL THE MATERIAL TERMS OF THE PIERS, BUT
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARE OF
CONVERTIBLE PREFERRED STOCK WHICH IS AVAILABLE BY CONTACTING US AT THE ADDRESS
PROVIDED UNDER "WHERE YOU CAN FIND MORE INFORMATION" IN THE ATTACHED PROSPECTUS.
GENERAL
At the consummation of this offering, we will issue 7,000,000 shares, or up
to 8,050,000 shares, if the underwriters exercise their over-allotment option in
full, of Preferred Income Equity Redeemable Shares, with a $25.00 liquidation
preference per share (referred to herein as "PIERS"). Each PIERS represents
beneficial ownership of one one-hundredth of a share of Convertible Preferred
Stock and entitles the holder (as evidenced by its record holding of the
depositary receipt (collectively, the "Depositary Receipts") evidencing the
PIERS) to that proportion of all the rights, preferences and privileges of the
proportionate share of Convertible Preferred Stock represented thereby. When
issued, the PIERS will be validly issued, fully paid and nonassessable.
The holders of the PIERS will have no preemptive or preferential rights to
purchase or subscribe to stock, obligations, warrants or any other of our
securities.
RANKING
The PIERS, as representative of beneficial ownership interests in the
Convertible Preferred Stock, will rank, with respect to dividend rights and upon
liquidation, winding up and dissolution:
- junior to all our existing and future debt obligations;
- junior to "senior stock," which is each other class or series of our
capital stock other than:
- our common stock and any other class or series of our capital stock the
terms of which provide that that class or series will rank junior to
the PIERS; and
- any other class or series of our capital stock the terms of which
provide that that class or series will rank on a parity with the PIERS;
- on a parity with "parity stock", which is our 7 1/2% Mandatorily
Convertible Preferred Stock and each other class or series of our capital
stock the terms of which provide that that class or series will rank on a
parity with the PIERS; and
- senior to "junior stock", which is our common stock and each class or
series of our capital stock the terms of which provide that that class or
series will rank junior to the PIERS.
The terms "senior stock", "parity stock" and "junior stock" include
warrants, rights, calls or options exercisable for or convertible into that type
of stock.
DIVIDENDS
The holders of the PIERS are entitled to receive, through the Depositary,
when, as and if declared, on the Convertible Preferred Stock represented
thereby, by our board of directors out of funds legally available for payment,
cumulative dividends per share at the annual rate of % of the $25.00
liquidation preference per share of the PIERS. The dividend rate is equivalent
to $ per share annually. The right of the holders of the PIERS to receive
dividend payments is subject to the rights of any holders of shares of senior
stock and parity stock.
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Dividends are payable on the Convertible Preferred Stock on February 15,
May 15, August 15 and November 15 of each year, beginning on May 15, 2001. If
any of those dates is not a business day, then dividends will be payable on the
next succeeding business day. Dividends will accrue from the most recent date as
to which dividends will have been paid or, if no dividends have been paid, from
the date of the original issuance of the PIERS (which issuance will be evidenced
by the initial issuance of the Depositary Receipts). The first dividend period
will begin on , 2001. Dividends will be payable on the Convertible Preferred
Stock to holders of record as they appear in our stock records at the close of
business on February 1, May 1, August 1 and November 1 of each year or on a
record date which will be fixed by our board of directors and which will be not
more than 60 days and not less than 10 days before the applicable quarterly
dividend payment date.
The Depositary (as defined herein) will be the holder of record of shares of
Convertible Preferred Stock represented by the PIERS, and dividends paid by us
in respect of such shares of Convertible Preferred Stock will, accordingly, be
paid to the Depositary. The Depositary will distribute dividends on the
Convertible Preferred Stock paid to it by us to the holders of the PIERS in
accordance with the procedures described in "Description of Depositary
Arrangements--Dividends and Other Distributions." Dividends will cease to become
payable by us to the Depositary for distribution to the holders of the PIERS
when dividends cease to accrue on the Convertible Preferred Stock represented
thereby on the Mandatory Conversion Date or on such other date of conversion of
the PIERS at the option of the holder. Dividends distributed through the
Depositary to the holders of the PIERS for any period less than a full quarterly
dividend period will be paid by us to the Depositary on the Convertible
Preferred Stock represented thereby on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in any period less than one
month.
Dividends on the Convertible Preferred Stock will accrue whether or not
there are funds legally available for the payment of such dividends and whether
or not such dividends are declared. Accrued but unpaid dividends on the
Convertible Preferred Stock will accrue as of the dividend payment date on which
they first become payable, but no interest will accrue on any accumulated but
unpaid dividends.
Subject to certain restrictions, we may generally make any payments due on
the Convertible Preferred Stock:
- in cash;
- by delivery of our common stock; or
- through any combination of cash and our common stock.
If we elect to make any dividend payment, or any portion thereof, in shares of
our common stock, such shares of our common stock shall be valued for that
purpose at 95% of the Average Market Value. Average Market Value of our common
stock means the arithmetic average of the Current Market Value of our common
stock for the 10 trading day period preceding the related record date for such
dividend. Current Market Value of our common stock means the average
volume-weighted daily trading price of our common stock as reported on the New
York Stock Exchange or such other SEC recognized securities exchange or trading
system which we may from time to time designate upon which the greatest number
of our common stock is then listed or traded, for the trading day in question.
We will give the Depositary notice (which will be forwarded to each holder
of PIERS) as to whether each dividend payment will be made (a) in cash, (b) in
common stock, or (c) if made in a combination of cash and common stock, the
portion of such payment that will be made in cash and the portion that will be
made in common stock, in each case 10 trading days prior to the record date for
such dividend.
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In the event of any consolidation, merger, sale, transfer or statutory
exchange described under "--Designated Event Put Right" or in the event of any
dividend or distribution described in either clauses (2) or (3) under
"--Adjustments to the Conversion Price," as a result of which a Reset
Transaction (as defined below) has occurred, the dividend rate on the PIERS will
be increased (but not decreased) to the rate per annum that is the arithmetic
average of the rates quoted by two Reference Dealers selected by us or our
successor as the dividend rate that the PIERS should bear so that the fair
market value, expressed in dollars, of the PIERS immediately after the public
announcement of the related Reset Transaction, after giving effect to any
adjustments described under "--Adjustments to the Conversion Price," will equal
the average closing price of a PIERS for the 20 trading days immediately
preceding the date of public announcement of such Reset Transaction.
A "Reset Transaction" is any transaction described above whereby the PIERS
are convertible on and after the effective date of such transaction into shares
(including shares of Six Flags) which either (i) had a Dividend Yield for the
four fiscal quarters immediately preceding the public announcement of such
transaction which was, or (ii) are issued by an entity (including Six Flags)
that has publicly announced a dividend policy prior to the effective date of
such transaction which policy, if implemented, would result in a Dividend Yield
on such shares for the next four fiscal quarters which would be, more than 250
basis points higher than the Dividend Yield on the common stock for the four
fiscal quarters immediately preceding the public announcement of such
transaction.
The "Dividend Yield," on any security for any period, means the dividends
paid or proposed to be paid pursuant to an announced dividend policy on such
security for such period divided by, if with respect to dividends paid on such
security, the average closing price of such security during such period, and if
with respect to dividends so proposed to be paid on such security, the closing
price of such security on the effective date of the related Reset Transaction.
"Reference Dealer" means a dealer engaged in the trading of convertible
securities.
We will not (i) declare or pay any dividend on or (ii) set apart any sum for
the payment of dividends on, any outstanding shares of convertible preferred
stock with respect to any dividend period unless we have declared and paid or
have declared and set apart a sufficient sum for the payment of all dividends on
all outstanding shares of this issue of PIERS for all preceding dividend
periods.
We will not (i) declare, pay or set apart funds for the payment of any
dividend or other distribution with respect to any junior stock or parity stock
or (ii) redeem, purchase or otherwise acquire for consideration junior stock or
parity stock through a sinking fund or otherwise, unless we have paid or set
apart funds for the payment of all accrued and unpaid dividends with respect to
the shares of this issue of PIERS and any parity stock at the time those
dividends are payable. As an exception to clause (i) of this paragraph, we will
be able to (a) declare and pay dividends on junior stock or parity stock which
are payable solely in shares of parity stock or junior stock, in the case of
parity stock, or junior stock, in the case of junior stock, or by the increase
in the liquidation value of junior stock or parity stock and (b) redeem,
purchase or otherwise acquire junior stock or parity stock in exchange for
consideration consisting of parity stock or junior stock, in the case of parity
stock, or junior stock, in the case of junior stock.
REDEMPTION AT MATURITY
On , 2009, we will be obligated to redeem all outstanding shares of
PIERS for cash, upon not less than 30 nor more than 60 days' prior notice sent
by first class mail to each holder's registered address, at 100% of the
liquidation preference per share, plus accumulated and unpaid dividends to the
date of redemption.
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LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Six Flags or a reduction or decrease in our capital stock resulting in a
distribution of all or substantially all of our assets to the holders of any
class or series of our capital stock, each holder of PIERS will be entitled to
payment out of our assets available for distribution of an amount equal to the
then effective liquidation preference per share of PIERS ($25.00 per share
initially) held by that holder, plus all accumulated and unpaid dividends on the
Convertible Preferred Stock represented thereby to the date of that liquidation,
dissolution, winding up or reduction or decrease in capital stock resulting in a
distribution of all or substantially all of our assets to holders of any class
or series of our capital stock, before any distribution is made on any junior
stock, including our common stock, but after any distributions on any of our
indebtedness or shares of our senior stock. After payment in full of the
liquidation preference and all accumulated and unpaid dividends to which holders
of PIERS are entitled, the holders will not be entitled to any further
participation in any distribution of our assets.
If, upon any voluntary or involuntary liquidation, dissolution or winding up
of Six Flags or a reduction or decrease in our capital stock resulting in a
distribution of all or substantially all of our assets to the holders of any
class or series of our capital stock, the amounts payable with respect to the
shares of Convertible Preferred Stock and all other parity stock are not paid in
full, the holders of PIERS representing the Convertible Preferred Stock and the
holders of the parity stock will share equally and ratably in any distribution
of our assets in proportion to the full liquidation preference and all
accumulated and unpaid dividends to which each such holder is entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of Convertible Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Company.
Neither the voluntary sale, conveyance, exchange or transfer, for cash,
shares of stock, securities or other consideration, of all or substantially all
of our property or assets nor the consolidation, merger or amalgamation of Six
Flags with or into any corporation or the consolidation, merger or amalgamation
of any corporation with or into Six Flags will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of Six Flags or a reduction
or decrease in our capital stock resulting in a distribution of all or
substantially all of our assets.
We are not required to set aside any funds to protect the liquidation
preference of the PIERS, although the liquidation preference will be
substantially in excess of the par value of the PIERS.
VOTING RIGHTS
The holders of shares of Convertible Preferred Stock represented by the
PIERS will not be entitled to any voting rights, except as required by the laws
of the State of Delaware and as described below:
(1) The affirmative vote of the holders of at least a majority of the
outstanding shares of Convertible Preferred Stock, voting with holders of
shares of all other series of preferred stock affected in the same way as a
single class, in person or by proxy, at a special or annual meeting called
for that purpose, or by written consent in lieu of meeting, will be required
to amend, repeal or change any provisions of the certificate of designations
in any manner which would adversely affect, alter or change the powers,
preferences or special rights of the Convertible Preferred Stock and any of
those securities affected in the same way. With respect to any matter on
which the holders are entitled to vote as a separate class, each share of
Convertible Preferred Stock is entitled to 100 votes (equivalent to one vote
for each PIERS).
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(2) If at any time the equivalent of six quarterly dividends payable on
the Convertible Preferred Stock are accrued and unpaid, whether or not
consecutive and whether or not declared, the holders of all outstanding
Convertible Preferred Stock and any parity stock or senior stock having
similar voting rights then exercisable, voting separately as a single class
without regard to series, will be entitled to elect at the next annual
meeting of our shareholders two directors to serve until all dividends
accumulated and unpaid on any of those voting shares have been paid or
declared and funds set aside to provide for payment in full. In exercising
the voting rights described in this paragraph, each share of Convertible
Preferred Stock is entitled to 100 votes (equivalent to one vote for each
PIERS).
The creation, authorization or issuance of any other class or series of our
capital stock or the increase or decrease in the amount of authorized capital
stock of any of those classes or series or of the PIERS, or any increase,
decrease or change in the par value of any class or series of capital stock,
including the PIERS, will not require the consent of the holders of the PIERS
and will not be deemed to affect adversely, alter or change the powers,
preferences and special rights of the PIERS.
See "Description of Depositary Arrangements--Voting of Convertible Preferred
Stock" for additional information regarding the voting rights of the PIERS.
CONVERSION RIGHTS
OPTIONAL CONVERSION
Each share of PIERS will be convertible at any time and from time to time
prior to , 2009, at the option of the holder, into fully paid and
nonassessable shares of our common stock. The conversion ratio will equal the
ratio, the numerator of which will be the $25.00 liquidation preference per
share and the denominator of which will be the conversion price. The initial
conversion price will be $ , subject to adjustment from time to time.
Conversion of PIERS at the option of the holders may be effected in
accordance with the procedures described in "Description of Depositary
Arrangements--Conversion Provisions--Conversion at the Option of the Holder."
If a holder of PIERS exercises conversion rights, upon delivery of the PIERS
for conversion, those dividends will cease to accrue on the underlying
Convertible Preferred Stock as of the end of the day immediately preceding the
date of redemption, but the holder will continue to be entitled to receive all
accrued dividends which the holder is entitled to receive through the last
preceding dividend payment date. Any accrued and unpaid dividends will be
payable by us through the Depositary as and when those dividends are paid to any
remaining holders or, if none, on the date which would have been the next
succeeding dividend payment date had there been remaining holders or at a later
time when we believe we have adequate available capital under applicable law to
make such a payment. However, PIERS surrendered for conversion after the close
of business on any record date for the payment of dividends declared and before
the opening of business on the dividend payment date relating to that record
date must be accompanied by a payment in cash or common stock or both (as the
case may be) equal to the dividend declared in respect of those shares.
In case any PIERS are to be redeemed, the right to convert those PIERS will
terminate at the close of business on the business day immediately preceding the
date fixed for redemption unless we default in the payment of the redemption
price.
We will at all times reserve and keep available, free from preemptive
rights, for issuance upon the conversion of PIERS a number of our authorized but
unissued shares of common stock that will from time to time be sufficient to
permit the conversion of all outstanding PIERS, if necessary. Before the
delivery of any securities which we will be obligated to deliver upon conversion
of the PIERS, we will
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comply with all applicable federal and state laws and regulations which require
action to be taken by us. All shares of common stock delivered upon conversion
of the PIERS will upon delivery be duly and validly issued and fully paid and
nonassessable, free of all liens and charges and not subject to any preemptive
rights.
MANDATORY CONVERSION
At any time on or after , 2004 we may at our option cause the
PIERS, in whole or from time to time in part, to be automatically converted into
that number of fully paid and nonassessable shares of our common stock for each
PIERS equal to $25.00 (the liquidation preference per PIERS) divided by the then
prevailing conversion price. We may exercise our conversion right only if our
common stock equals or exceeds 120% of the then prevailing conversion price for
at least 20 trading days in any consecutive 30-day trading period, including the
last trading day of such 30-day period, ending on the trading day prior to the
issuance of the press release announcing the mandatory conversion referred to
below.
To exercise this mandatory conversion, we will issue a press release
announcing such a mandatory conversion prior to the opening of business on the
first trading day following any date on which the conditions described in the
preceding paragraph are met. We will give notice of the mandatory conversion by
mail or by publication (with subsequent prompt notice by mail) to the holders of
the PIERS not more than four business days after the date of the press release
announcing our intention to convert the PIERS. The conversion date will be a
date selected by us not less than 30 nor more than 60 days after the date on
which we issue such press release.
In addition to any information required by applicable law or regulation,
notice of a mandatory conversion shall state, as appropriate, (i) the PIERS
conversion date, (ii) the number of shares of common stock to be issued upon
conversion of each share of PIERS, (iii) the number of PIERS to be converted
(and, if fewer than all of the PIERS are to be converted the number of PIERS to
be converted from such holder), (iv) the place(s) where the PIERS are to be
surrendered for delivery of shares of common stock and (v) that dividends on the
Convertible Preferred Stock represented by the PIERS to be converted will cease
to accrue on the date of such conversion (a "Mandatory Conversion Date").
The dividend payment with respect to the Convertible Preferred Stock
underlying the share of PIERS called for a mandatory conversion on a date during
the period from the close of business on any record date for the payment of
dividends to the close of business on the business day immediately following the
corresponding dividend payment date will be payable on such dividend payment
date to the record holder of such share on such record date if such share has
been converted after such record date and prior to such dividend payment date.
Except as provided in the immediately preceding sentence with respect to a
mandatory conversion, no payment or adjustment will be made upon conversion of
PIERS for accumulated and unpaid dividends or for dividends with respect to the
common stock issued upon such conversion.
On and after the Mandatory Conversion Date, dividends will cease to accrue
on Convertible Preferred Stock underlying the PIERS and all rights of holders of
such PIERS will terminate except for the right to receive the shares of our
common stock issuable upon conversion thereof.
We may not authorize or make any mandatory conversion unless, prior to
giving the conversion notice, all accumulated and unpaid dividends on the PIERS
for periods ended prior to the date of such conversion notice shall have been
paid in cash or common stock. In the event of partial mandatory conversions of
the PIERS, the shares to be converted will be determined pro rata or by lot, as
determined by us, PROVIDED that we may convert all shares held by holders of
fewer than 100 PIERS (or
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by holders that would hold fewer than 100 PIERS following such conversion) prior
to our conversion of other PIERS.
ADJUSTMENTS TO THE CONVERSION PRICE
The conversion price will be subject to adjustment from time to time as
follows:
(1) STOCK SPLITS AND COMBINATIONS. In case we, at any time or from
time to time after the issuance date of the PIERS (a) pay a dividend in
shares of our common stock to holders of our common stock, (b) make a
distribution in shares of our common stock to holders of our common stock,
(c) subdivide or split the outstanding shares of our common stock,
(d) combine or reclassify the outstanding shares of our common stock into a
smaller number of shares or (e) issue by reclassification of the shares of
our common stock any shares of our capital stock, then the conversion price
in effect immediately prior to that event or the record date for that event,
whichever is earlier, will be adjusted so that the holder of any PIERS
thereafter surrendered for conversion will be entitled to receive the number
of shares of our common stock or of our other securities which the holder
would have owned or have been entitled to receive after the occurrence of
any of the events described above, had those PIERS been surrendered for
conversion immediately before the occurrence of that event or the record
date for that event, whichever is earlier.
(2) ISSUANCE OF RIGHTS OR WARRANTS. For purposes of this paragraph and
paragraph (3), "current market price" means the average of the daily closing
prices for the five consecutive trading days selected by our board of
directors beginning not more than 20 trading days before, and ending not
later than the date of the applicable event described in this paragraph and
the date immediately preceding the record date fixed in connection with that
event. In case we issue to all holders of our common stock rights or
warrants expiring within 45 days entitling those holders to subscribe for or
purchase our common stock at a price per share less than the current market
price, the conversion price in effect immediately before the close of
business on the record date fixed for determination of shareholders entitled
to receive those rights or warrants will be reduced by multiplying the
conversion price by a fraction, the numerator of which is the sum of the
number of shares of our common stock outstanding at the close of business on
that record date and the number of shares of common stock that the aggregate
offering price of the total number of shares of our common stock so offered
for subscription or purchase would purchase at the current market price and
the denominator of which is the sum of the number of shares of common stock
outstanding at the close of business on that record date and the number of
additional shares of our common stock so offered for subscription or
purchase. For purposes of this paragraph (2), the issuance of rights or
warrants to subscribe for or purchase securities convertible into shares of
our common stock will be deemed to be the issuance of rights or warrants to
purchase shares of our common stock into which those securities are
convertible at an aggregate offering price equal to the sum of the aggregate
offering price of those securities and the minimum aggregate amount, if any,
payable upon conversion of those securities into shares of our common stock.
This adjustment will be made successively whenever any such event occurs.
(3) DISTRIBUTION OF INDEBTEDNESS, SECURITIES OR ASSETS. In case we
distribute to all holders of our common stock, whether by dividend or in a
merger, amalgamation or consolidation or otherwise, evidences of
indebtedness, shares of capital stock of any class or series, other
securities, cash or assets, other than common stock, rights or warrants
referred to in paragraph (2) above or a dividend, payable exclusively in
cash and other than as a result of a fundamental change described in
paragraph (4) below, the conversion price in effect immediately before the
close of business on the record date fixed for determination of shareholders
entitled to receive that distribution will be reduced by multiplying the
conversion price by a fraction, the numerator of which is the current
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market price on that record date less the fair market value, as determined
by our board of directors, whose determination in good faith will be
conclusive, of the portion of those evidences of indebtedness, shares of
capital stock, other securities, cash and assets so distributed applicable
to one share of common stock and the denominator of which is the current
market price. This adjustment will be made successively whenever any such
event occurs.
In respect of a dividend or other distribution of shares of capital
stock of any class or series, or similar equity interests, of or relating to
a subsidiary or other business unit, which we refer to as a "spin-off," the
adjustment to the conversion price under this paragraph (3) will occur at
the earlier of (i) 20 trading days after the effective date of the spin-off
and (ii) the initial public offering of securities pertaining to the
subsidiary or other business unit to which the spin-off relates, if that
initial public offering is effected simultaneously with the spin-off.
For purposes of a spin-off, the "fair market value" of the securities to
be distributed to holders of our common stock means the average of the daily
closing prices of those securities for the five consecutive trading days
selected by our board of directors beginning on the first day of trading of
those securities after the effectiveness of the spin-off and ending not
later than 20 trading days after effectiveness of the spin-off. Also, for
purposes of a spin-off, the "current market price" of our common stock means
the average of the daily closing prices of our common stock for the same
five consecutive trading days in determining the fair market value of the
securities being distributed in the spin-off.
If, however, an initial public offering of the securities being
distributed in the spin-off is to be effected simultaneously with the
spin-off, the "fair market value" of the securities being distributed in the
spin-off means the initial public offering price, while the "current market
price" of our common stock means the closing price of our common stock on
the trading day on which the initial public offering price of the securities
being distributed in the spin-off is determined.
(4) FUNDAMENTAL CHANGES. For purposes of this paragraph (4),
"fundamental change" means any transaction or event, including any merger,
consolidation, sale of assets, tender or exchange offer, reclassification,
compulsory share exchange or liquidation, in which all or substantially all
outstanding shares of our common stock are converted into or exchanged for
stock, other securities, cash or assets. If a fundamental change occurs, the
holder of each PIERS outstanding immediately before that fundamental change
occurred, will have the right upon any subsequent conversion to receive, but
only out of legally available funds, to the extent required by applicable
law, the kind and amount of stock, other securities, cash and assets that
holder would have received if that share had been converted immediately
prior to the fundamental change.
We will not, however, be required to give effect to any adjustment in
the conversion price unless and until the net effect of one or more
adjustments, each of which will be carried forward until counted toward
adjustment, will have resulted in a change of the conversion price by at
least 1%, and when the cumulative net effect of more than one adjustment so
determined will be to change the conversion price by at least 1%, that
change in the conversion price will be given effect. In the event that, at
any time as a result of the provisions of this section, the holder of PIERS
upon subsequent conversion become entitled to receive any shares of our
capital stock other than common stock, the number of those other shares so
receivable upon conversion of the PIERS will thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions contained in this section.
There will be no adjustment to the conversion price in case of the
issuance of any shares of our stock in a merger, reorganization,
acquisition, reclassification, recapitalization or other similar transaction
except as provided in this section.
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In any case in which this section requires that an adjustment as a
result of any event becomes effective from and after a record date, we may
elect to defer until after the occurrence of that event (a) issuing to the
holder of any shares of PIERS converted after that record date and before
the occurrence of that event the additional shares of common stock issuable
upon that conversion over and above the shares issuable on the basis of the
conversion price in effect immediately before adjustment and (b) paying to
that holder any amount in cash in lieu of a fractional share of common
stock.
If we take a record of the holders of our common stock for the purpose
of entitling them to receive a dividend or other distribution, and after
this, and before the distribution to our shareholders, legally abandon our
plan to pay or deliver that dividend or distribution, then no adjustment in
the number of shares of our common stock issuable upon conversion of PIERS
or in the conversion price then in effect will be required by reason of the
taking of that record.
Our board of directors will have the power to resolve any ambiguity or
correct any error in this section, and its action in so doing will be final
and conclusive.
DESIGNATED EVENT PUT RIGHT
A Designated Event means either a Change in Control or a Termination of
Trading.
For purposes of this section, "Change in Control" of Six Flags means the
occurrence of any of the following:
- the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Six Flags and
its Subsidiaries, taken as a whole, to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act);
- the adoption of a plan relating to the liquidation or dissolution of Six
Flags;
- the first day on which a majority of the members of the board of directors
of Six Flags are not Continuing Directors; or
- Six Flags consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, Six Flags, in any such
event pursuant to a transaction in which any of the outstanding Voting
Stock of Six Flags is converted into or exchanged for cash, securities or
other property, other than:
- any such transaction where the Voting Stock of Six Flags outstanding
immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting 50% or more of the outstanding shares of
such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance), or
- any merger solely for the purpose of changing our jurisdiction of
incorporation and resulting in a reclassification, conversion or
exchange of outstanding shares of common stock solely into shares of
common stock of the surviving entity.
A "Termination of Trading" will be deemed to have occurred if our common
stock is neither listed for trading on a U.S. national securities exchange nor
approved for trading on an established automated over-the-counter trading market
in the U.S. other than in connection with a "fundamental change."
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If a Designated Event occurs, each holder of PIERS will have the right to
require us to purchase all or any part of that holder's PIERS at a purchase
price equal to 100% of the liquidation preference of those PIERS, plus all
accumulated and unpaid dividends on those PIERS to the date of purchase. Within
30 days following any Designated Event, we will mail a notice to each holder
describing the Designated Event and offer to purchase that holder's PIERS on the
date specified in that notice, which date will be no earlier than 30 days and no
later than 60 days from the date the notice is mailed. In connection with a
Change in Control, we will have the option to pay for PIERS that have been
tendered in shares of our common stock valued at 95% of the volume-weighted
daily trading price for our common stock over a 10-day trading period preceding
the date of purchase; otherwise we will pay for tendered PIERS in cash.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent those laws and
regulations are applicable in connection with the purchase of PIERS as a result
of a change in control. To the extent that the provisions of any securities laws
or regulations conflict with any of the provisions of this section, we will
comply with the applicable securities laws and regulations and will be deemed
not to have breached our obligations under this section.
On the date scheduled for payment of the PIERS, the Depositary will, to the
extent lawful, accept for payment all PIERS properly tendered. The Depositary
will promptly mail or deliver to each holder of shares of PIERS so tendered the
applicable payment for those PIERS, and the Depositary will promptly countersign
and mail or deliver, or cause to be transferred, to each holder new PIERS equal
in liquidation preference to any unpurchased portion of the PIERS surrendered,
if any. We will publicly announce the results of our offer on or as soon as
practicable after the payment date for the purchase of the PIERS in connection
with a Designated Event.
The right of the holders of PIERS described in this section will be subject
to the obligation of Six Flags to:
- repay its debt obligations in full under its corporate credit facility;
and
- repay all of its own and its subsidiaries indebtedness that is tendered
for redemption or required to be repaid and outstanding shares of senior
stock that have been tendered for purchase in connection with a Designated
Event.
In addition, the right of the holders of PIERS described in this section
will be subject to the repurchase or repayment of our future indebtedness, which
we are required to repurchase or repay in connection with a Designated Event.
When we have satisfied these obligations then, subject to the legal
availability of funds for this purpose, we will purchase all shares tendered
upon a Designated Event.
FRACTIONAL SHARES
No fractional shares of common stock will be delivered by the Depositary
upon conversion of the PIERS. In lieu of any fractional shares otherwise
deliverable in respect of the aggregate number of PIERS of any holder that are
converted upon mandatory conversion or any optional conversion, such holder will
be entitled to receive an amount in cash equal to the same fraction of the
closing price of the common stock (a) as of the fifth trading day immediately
preceding the Mandatory Conversion Date, in the case of mandatory conversion, or
(b) as of the second trading day immediately preceding the effective date of
conversion, in the case of an optional conversion by a holder. If more than one
PIERS is surrendered for conversion at one time by or for the same holder, the
number of shares of common stock issuable upon conversion thereof will be
computed on a basis of the aggregate number of PIERS so converted.
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In addition, no fractional shares of common stock will be delivered by the
Depositary to holders of the PIERS in connection with the Depositary's
distribution of dividends on the Convertible Preferred Stock paid by us to it in
shares of common stock. In lieu of any fractional share otherwise so
deliverable, such holders will be entitled to receive an amount in cash equal to
the same fraction of the closing price of the common stock determined as of the
fifth trading day immediately preceding the dividend payment date. On the
Mandatory Conversion Date, the fractional share of common stock that any holder
of PIERS would otherwise be entitled to receive shall be determined by adding
all the fractional shares such holder would otherwise be entitled to receive on
the mandatory conversion of all PIERS held by such holder and on the payment of
the regular quarterly dividend on all PIERS held by such holder. On that date,
the Company may, at its option, deliver any resulting whole number of shares in
shares of common stock and the resulting fraction in cash.
In the event that (i) mandatory conversion of the PIERS, (ii) optional
conversions of PIERS, (iii) the Depositary's delivery of shares of common stock
as dividends to the holders of PIERS or (iv) any combination of the foregoing,
results in more than one holder of PIERS being entitled to cash in lieu of a
fractional share on the related date of conversion or dividend payment, as
applicable, the Company will deliver to the Depositary for distribution to the
holders of the PIERS cash in an amount equal to the total amount of cash to
which all holders of PIERS are entitled in lieu of fractional shares on such
date.
If payment in cash in lieu of fractional shares of common stock in
accordance with the preceding three paragraphs would result in our failure to be
in compliance with any debt instrument to which we are a party, we will be
entitled to deliver a whole share of common stock in lieu of cash to holders of
PIERS entitled to fractional shares of common stock (beginning with the holders
entitled to the largest fractional shares) until delivery of cash in lieu of
fractional shares of common stock to the remaining holders of PIERS would no
longer result in our failure to be in compliance with such debt instrument.
REACQUIRED SHARES
Convertible Preferred Stock represented by shares of PIERS issued and
reacquired will, upon compliance with the applicable requirements of law, have
the status of authorized but unissued shares of our preferred stock undesignated
as to series and may with any and all other authorized but unissued shares of
our preferred stock be designated or redesignated and issued, as part of any
series of our preferred stock.
TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT
The Bank of New York will act as transfer agent and registrar for, and
paying agent for the payment of dividends on, the PIERS and shares of
Convertible Preferred Stock.
BOOK-ENTRY ISSUANCE
The shares of Convertible Preferred Stock will be issued as one or more
global certificates registered in the name of The Depository Trust Company
("DTC") or its nominee. The custodian for the Convertible Preferred Stock will
be DTC.
CERTAIN DEFINITIONS
"CAPITAL STOCK" means:
(i) in the case of a corporation, corporate stock;
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(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the board of directors of Six Flags who: (i) was a member of such board of
directors on , 2001; or (ii) was nominated for election or elected to such
board of directors with the approval of a majority of the Continuing Directors
who were members of such board of directors at the time of such nomination or
election.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable, in each case, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which Six Flags is obligated to redeem the PIERS as set forth under the
caption "--Redemption at Maturity;" PROVIDED, HOWEVER, that any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof have
the right to require Six Flags to repurchase such Capital Stock upon the
occurrence of a change of control or a sale of assets shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that Six Flags may
not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the provisions described
above the caption "--Dividends."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
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DESCRIPTION OF DEPOSITARY ARRANGEMENTS
THE FOLLOWING SUMMARY OF THE TERMS AND PROVISIONS OF THE DEPOSITARY
ARRANGEMENTS FOR THE PIERS DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO,
AND QUALIFIED IN ITS ENTIRETY BY, THE DEPOSIT AGREEMENT, AS DEFINED BELOW (WHICH
CONTAINS THE FORM OF THE DEPOSITARY RECEIPT, AS DEFINED BELOW).
Each PIERS represents one one-hundredth of a share of Convertible Preferred
Stock deposited under a Deposit Agreement dated as of January , 2001 (the
"Deposit Agreement"), among us, The Bank of New York, as depositary (the
"Depositary"), and the holders from time to time of Depositary Receipts executed
and delivered thereunder. Subject to the terms of the Deposit Agreement, each
owner of a PIERS is entitled, proportionately, to all the rights, preferences
and privileges of the shares of Convertible Preferred Stock represented thereby
(including dividend, conversion, voting and liquidation rights), and, subject to
all of the limitations of the shares of Convertible Preferred Stock represented
thereby, contained in the Certificate of Designation and summarized under
"Description of PIERS." The corporate trust office of The Bank of New York is
located at 101 Barclay Street, New York, NY 10286.
The PIERS are evidenced by Depositary Receipts. Copies of the Deposit
Agreement, the form of which has been filed with the Registration Statement of
which this prospectus supplement is a part, are available for inspection at the
office of the Depositary listed above.
EXECUTION AND DELIVERY OF DEPOSITARY RECEIPTS
We will deposit the shares of Convertible Preferred Stock represented by the
PIERS being offered hereby with the Depositary, in exchange for Depositary
Receipts, which we will deliver to the underwriters of the PIERS upon
consummation of the PIERS offering. The Deposit Agreement does not provide for
the deposit of shares of Convertible Preferred Stock and the withdrawal of
Depositary Receipts by any party other than us.
WITHDRAWAL OF CONVERTIBLE PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary, the owner of the PIERS evidenced thereby is entitled to delivery
at such office of certificates evidencing the number of shares of Convertible
Preferred Stock (but only in whole shares of Convertible Preferred Stock)
represented by such PIERS. If the Depositary Receipts delivered by the holder
evidence a number of PIERS in excess of the number of PIERS representing the
number of shares of Convertible Preferred Stock to be withdrawn, the Depositary
will at the same time deliver to such holder a new Depositary Receipt or
Receipts evidencing such excess number of PIERS. We do not expect that there
will be any public trading market for the shares of Convertible Preferred Stock
except as represented by the PIERS.
CONVERSION PROVISIONS
MANDATORY CONVERSION. As described under "Description of PIERS--Mandatory
Conversion," the PIERS are subject to mandatory conversion into shares of common
stock on the mandatory conversion date.
CONVERSION AT THE OPTION OF THE HOLDER. As described under "Description of
PIERS--Optional Conversion," the PIERS may be converted, in whole or in part,
into shares of common stock at the option of the holder at any time prior to
, 2009. To effect such an optional conversion, a holder of PIERS must
deliver Depositary Receipts evidencing the PIERS to be converted, together with
a written notice of conversion and a proper assignment of the Depositary
Receipts to us or in blank (and, if such conversion is to occur after the close
of business on a record date for any payment of declared dividends and before
the opening of business on the next succeeding dividend payment
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date, payment in cash of an amount equal to the dividend payable on such date),
to the Depositary or its agent. A holder who delivers Depositary Receipts
evidencing the PIERS to the Depositary on a record date for any payment of
declared dividends for conversion on the succeeding dividend payment date will
not be required to include payment of the dividend payable on such date upon
delivery of such Depositary Receipts. Each optional conversion of PIERS shall be
deemed to have been effected immediately prior to the close of business on the
date of which the foregoing requirements shall have been satisfied. The
conversion shall be at the conversion price in effect at such time and on such
date.
If only a portion of the PIERS evidence by a Depositary Receipt is to be
converted, a new Depositary Receipt or Receipts will be issued for any PIERS not
converted. No fractional shares of common stock will be issued to any holder
upon mandatory or optional conversion of its PIERS.
After the date fixed for conversion, the PIERS so converted will no longer
be deemed to be outstanding and all rights of the holders of such PIERS will
cease, except the right to receive the common stock and amounts payable on such
conversion and any money or other property to which the holders of such PIERS
are entitled upon such conversion, in each case, upon surrender to the
Depositary of the Depositary Receipt or Receipts evidencing such PIERS.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions (other than cash dividends or cash distributions paid by us to the
Depositary in lieu of fractional shares) and all dividends or other
distributions paid by us in shares of common stock (other than payments of whole
shares of common stock in lieu of fractional shares pursuant to the final
paragraph under "Description of PIERS--Fractional Shares") in respect of the
Convertible Preferred Stock to the record holders of Depositary Receipts in
proportion, insofar as practicable, to the number of PIERS owned by such
holders. The Depositary will distribute whole shares of common stock paid by us
to it on the Mandatory Conversion Date in lieu of cash payments for fractional
shares otherwise payable by us on the Convertible Preferred Stock to holders of
PIERS entitled to such fractional shares, beginning with the holders entitled to
the largest fractional shares.
The Depositary will distribute cash dividends or other cash distributions
received by it from us in lieu of fractional shares to a record holder of
Depositary Receipts on the basis of such holder's aggregate record holdings of
Depositary Receipts (i) on the related record date for a dividend payment or
(ii) which are to be converted into common stock on a conversion date, as
applicable, if delivering shares of common stock on that basis in payment of the
dividend or upon conversion would otherwise result in delivery of a fractional
share. The Depositary will, in any such event, deliver an amount in cash to such
record holder as set forth in "Description of PIERS--Fractional Shares." On the
Mandatory Conversion Date, the fractional share of common stock that any holder
of PIERS would otherwise be entitled to receive shall be determined by adding
all the fractional shares such holder would otherwise be entitled to receive on
the mandatory conversion of all PIERS held by such holder and on the payment of
the regular quarterly dividend on all PIERS held by such holder. If we elect to
deliver the resulting whole number of shares in shares of common stock and the
resulting fraction in cash, the Depositary will distribute shares and cash
received by it to the applicable holders of PIERS. In the event that
(i) mandatory conversion of the PIERS, (ii) voluntary conversions of PIERS,
(iii) the Depositary's delivery of shares of common stock as dividends to the
holders of PIERS, (iv) the combination of (i) and (iii) pursuant to the
preceding sentence or (v) any combination of the foregoing result in any holder
of PIERS being entitled to cash in lieu of a fractional share on the related
date of conversion or dividend payment, as applicable, we will deliver to the
Depositary for distribution to such holders cash in an amount equal to the total
amount of cash to which all such holders are entitled in lieu of fractional
shares on such date.
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In the event of a distribution other than cash or common stock in respect of
the shares of Convertible Preferred Stock, the Depositary will distribute
property received by it to the record holders of Depositary Receipts in
proportion, insofar as practicable, to the number of PIERS owned by such
holders, unless the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with our approval, adopt such
method as it deems equitable and practicable for the purpose of effecting such
distribution, including sale (at public or private sale) of such property and
distribution of the net proceeds from such sale to the holders of the PIERS.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by us or the Depositary on account of taxes.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution or any dividend to
be paid by us in shares of common stock shall become payable, any distribution
other than cash shall be made, or any rights, preferences or privileges shall be
offered with respect to the shares of Convertible Preferred Stock, or (ii) the
Depositary shall receive notice of any meeting at which holders of shares of
Convertible Preferred Stock are entitled to notice, the Depositary shall in each
such instance fix a record date (which shall be the same date as the record date
for the shares of Convertible Preferred Stock) for the determination of the
holders of Depositary Receipts (x) who shall be entitled to receive such
dividend, distribution, rights, preferences or privileges or the net proceeds of
the sale thereof or (y) who shall be entitled to give instructions for the
exercise of voting rights at any such meeting or to receive notice of such
meeting.
VOTING OF CONVERTIBLE PREFERRED STOCK
Upon receipt of notice of any meeting at which holders of shares of
Convertible Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of
Depositary Receipts. Each record holder of Depositary Receipts on the record
date (which will be the same date as the record date for the shares of
Convertible Preferred Stock) will be entitled to instruct the Depositary as to
the exercise of the voting rights pertaining to the number of shares of
Convertible Preferred Stock represented by such holder's PIERS. The Depositary
will endeavor, insofar as practicable, to vote the number of shares of
Mandatorily Convertible Preferred Stock represented by such PIERS in accordance
with such instructions, and we have agreed to take all reasonable action which
may be deemed necessary by the Depositary in order to enable the Depositary to
do so. The Depositary will abstain from voting shares of Convertible Preferred
stock to the extent it does not receive specific written instructions from the
holders of Depositary Receipts.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit Agreement
may at any time be amended by agreement between us and the Depositary. However,
any amendment that imposes any fees, taxes or other charges payable by holders
of Depositary Receipts (other than taxes and other governmental charges, fees
and other expenses payable by such holders as stated under "Charges of
Depositary"), or that otherwise prejudices any substantial existing right of
holders of Depositary Receipts, will not take effect as to outstanding
Depositary Receipts until the expiration of 90 days after notice of such
amendment has been mailed to the record holders of outstanding Depositary
Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of PIERS, subject to the conditions specified in
the Deposit Agreement, upon surrender of the Depositary Receipts evidencing such
PIERS to receive shares of Convertible Preferred Stock or, upon conversion of
the shares of Convertible Preferred Stock represented by PIERS, to receive
shares of common stock, and in each
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case any money or other property represented thereby, except in order to comply
with mandatory provisions of applicable law.
The Depositary may resign or be removed by us. Such resignation or removal
will only become effective upon the appointment of a qualified successor
depositary which expressly assumes the obligations of the Depositary under the
Deposit Agreement.
CHARGES OF DEPOSITARY
We will pay all charges of the Depositary including charges in connection
with
- the initial deposit of the shares of Convertible Preferred Stock;
- the initial execution and delivery of the Depositary Receipts;
- the distribution of information to the holders of Depositary Receipts with
respect to matters on which shares of Convertible Preferred Stock are
entitled to vote;
- withdrawals of the shares of Convertible Preferred Stock by the holders of
Depositary Receipts; and
- conversions of the shares of Convertible Preferred Stock.
We will not pay taxes (including transfer taxes, if any) and other
governmental charges and such other charges as are provided in the Deposit
Agreement to be at the expense of holders of Depositary Receipts or persons
depositing shares of Convertible Preferred Stock.
GENERAL
The Depositary will make available for inspection by holders of Depositary
Receipts at its corporate office all reports and communications from us that are
delivered to the Depositary and made generally available to the holders of the
shares of Convertible Preferred Stock.
Neither we nor the Depositary will be liable if the Depositary is prevented
or delayed by law or any circumstance beyond its control from or in performing
its obligations under the Deposit Agreement.
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DESCRIPTION OF INDEBTEDNESS
SIX FLAGS OPERATIONS CREDIT FACILITY
Borrowings under the Six Flags Theme Parks credit facility (the "Six Flags
Credit Facility"), which was entered into in November 1999, are secured by
substantially all of the assets of Six Flags Operations and its domestic
subsidiaries, and are guaranteed by such subsidiaries. The Six Flags Credit
Facility has an aggregate availability of $1.2 billion consisting of:
- a five-year $300 million revolving credit facility for working capital and
general corporate purposes (the "Revolving Credit Facility"), of which
$90.0 million was outstanding at December 31, 2000;
- a five and one half year $300 million multicurrency reducing revolver
facility ("Multicurrency Facility"); and
- a six-year $600.0 million term loan facility (the "Term Loan Facility").
At December 31, 2000, $291.0 million and $600.0 million were outstanding under
the Multicurrency Facility and the Term Loan, respectively. The interest rate on
borrowings under the Six Flags Credit Facility can be fixed at our option for
periods ranging from one to six months. The interest rate is based upon
specified levels in excess of the applicable base rate or LIBOR. At December 31,
2000, the weighted average interest rate on the borrowings was 9.6%. The
Revolving Credit Facility must be repaid in full for 30 consecutive days during
each year. The Multicurrency Facility, which permits optional prepayments and
reborrowings, requires quarterly mandatory repayments of 2.5% of the committed
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 requires quarterly repayments of 0.25% of the outstanding
amount thereof commencing on December 31, 2001 and 24.25% commencing on December
31, 2004.
SIX FLAGS 10% SENIOR DISCOUNT NOTES DUE 2008
The Six Flags 10% Senior Discount Notes due 2008 (the "Discount Notes") are
senior obligations of Six Flags in an aggregate principal amount at maturity of
$410.0 million. The Discount Notes will mature on April 1, 2008. The Discount
Notes accrete in value until April 1, 2003 at which time the accreted value will
equal 100% of their principal amount. The Discount Notes bear cash interest at
the rate of 10% per annum, commencing April 1, 2003, and are not guaranteed by
our subsidiaries.
Approximately $75.0 million of net proceeds from the sale of the Discount
Notes was deposited with the trustee to provide a fund until April 1, 2003 to
satisfy certain obligations relating to the Partnership Parks and to pay cash
dividends on our outstanding 7 1/2% Mandatorily Convertible Preferred Stock.
SIX FLAGS 9 3/4% SENIOR NOTES DUE 2007
The Six Flags 9 3/4% Senior Notes due 2007 (the "1999 Senior Notes") are
senior obligations of Six Flags, in the aggregate principal amount $430.0
million. The 1999 Senior Notes mature on June 15, 2007. The 1999 Senior Notes
bear interest at the rate of 9 3/4% per annum and are not guaranteed by our
subsidiaries.
SIX FLAGS 9 1/4% SENIOR NOTES DUE 2006
The Six Flags 9 1/4% Senior Notes due 2006, (the "1998 Senior Notes") are
senior obligations of Six Flags, in the aggregate principal amount of $280.0
million of which $70.7 million has been used to capitalize a three-year overfund
account, with respect to the 1998 Senior Notes. The 1998 Senior Notes
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mature on April 1, 2006. The 1998 Senior Notes bear interest at the rate 9 1/4%
per annum and are not guaranteed by our subsidiaries.
SIX FLAGS OPERATIONS 9 3/4% SENIOR NOTES DUE 2007
The Six Flags Operations 9 3/4% Senior Notes due 2007, (the "1997 Notes"),
are senior, unsecured obligations of Six Flags Operations, in the aggregate
principal amount $125.0 million. The 1997 Notes mature on January 15, 2007. The
1997 Notes are guaranteed on a senior, unsecured basis by the principal domestic
operating subsidiaries of Six Flags Operations.
SIX FLAGS OPERATIONS 8 7/8% SENIOR NOTES DUE 2006
The Six Flags Operations 8 7/8% Senior Notes due 2006, (the "1998 Notes"),
are senior, unsecured obligations of Six Flags Operations, in the aggregate
principal amount of $170.0 million. The 1998 Notes mature on April 1, 2006. The
1998 Notes bear interest at the rate of 8 7/8% per annum and are guaranteed by
Six Flags on a fully subordinated basis but are not guaranteed by any of our
subsidiaries.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion summarizes material U.S. Federal income tax
consequences to U.S. holders (as defined below) of the purchase, ownership, and
disposition of the shares of PIERS representing interests in Convertible
Preferred Stock and any common stock received upon its conversion. References in
this section to PIERS include the Convertible Preferred Stock represented by
such PIERS, and references to Convertible Preferred Stock shall include both the
Convertible Preferred Stock and the PIERS. Persons that are not U.S. holders are
subject to special U.S. Federal income tax considerations, only some of which
are discussed below.
This discussion is based upon the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the final, temporary and proposed Treasury
Regulations promulgated thereunder, and administrative pronouncements and
rulings and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. This summary
does not purport to deal with all aspects of U.S. Federal income taxation that
may be relevant to an investor's decision to purchase the PIERS, nor any tax
consequences arising under the laws of any state, local or foreign jurisdiction.
This summary is not intended to be applicable to special categories of
investors, such as dealers in securities, banks, insurance companies, tax-exempt
organizations, persons other than U.S. holders (except to the extent
specifically set forth below), persons that hold the PIERS or who will hold the
common stock as part of a straddle or conversion transaction, and holders
subject to the alternative minimum tax. In addition, this discussion is limited
to persons who are the beneficial owners of the PIERS and will be the beneficial
owners of the common stock and who hold the PIERS and who will hold the common
stock as "capital assets" within the meaning of Section 1221 of the Code. All
prospective purchasers of the PIERS are advised to consult their own tax
advisors regarding the Federal, state, local and foreign tax consequences of the
purchase, ownership and disposition of the PIERS or common stock.
As used in this section, a "U.S. holder" means (a) an individual that is a
citizen or resident of the United States, (b) a corporation or other entity
taxable as a corporation created or organized in or under the laws of the United
States or any political subdivision thereof, (c) an estate the income of which
is subject to U.S. Federal income taxation regardless of its source, or (d) a
trust if (i) a U.S. court is able to exercise primary supervision over the
administration of the trust and (ii) one or more U.S. persons have the authority
to control all substantial decisions of the trust. A "Non-U.S. holder" is
defined below. If a partnership holds the PIERS or common stock issued upon
conversion, the tax treatment of a partner will generally depend upon the status
of the partner and upon the activities of
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the partnership. This discussion does not discuss the tax treatment of persons
who are partners of a partnership or other pass-through entity that purchases,
owns or disposes of PIERS, and such persons should consult their tax advisor as
to the tax consequences of purchase, ownership and disposition of PIERS or
common stock through a partnership or other pass-through entity.
TREATMENT OF PIERS
Holders of PIERS will be treated for U.S. Federal income tax purposes as
owners of the Convertible Preferred Stock represented by PIERS. Accordingly, the
tax treatment of the holders of PIERS will be the same as the tax treatment of
the holders of the Convertible Preferred Stock as described below.
Upon withdrawal of shares of Convertible Preferred Stock in exchange for
Depository Receipts evidencing the ownership of PIERS as provided in the
Depository Agreement, (i) no gain or loss will be recognized by an exchanging
holder, (ii) the tax basis of the shares of Convertible Preferred Stock to an
exchanging holder will be the same as the tax basis of the PIERS exchanged
therefor, and (iii) the holding period of the shares of Convertible Preferred
Stock to the exchanging holder will include the period during which such holder
held the PIERS exchanged therefor.
U.S. TAX CONSIDERATIONS FOR U.S. HOLDERS
DISTRIBUTIONS
The amount of any distribution with respect to the Convertible Preferred
Stock or common stock will be treated as a dividend, taxable as ordinary income
to the holder, to the extent of current or accumulated earnings and profits as
determined under U.S. Federal income tax principles. We do not presently have
current or accumulated earnings and profits as determined under U.S. Federal
income tax principles. Distributions in excess of current and accumulated
earnings and profits are applied against and reduce the holder's tax basis in
the Convertible Preferred Stock or common stock, as the case may be. Amounts in
excess of the holder's tax basis are treated as capital gain.
If we pay a distribution with respect to the Convertible Preferred Stock in
the form of common stock, such distribution will be taxable in the same manner
as distributions described in the preceding paragraph. The amount of such
distribution will equal the fair market value of the common stock distributed to
a holder on the distribution date. A holder's tax basis in common stock so
received will equal the fair market value of such common stock on the
distribution date, and such holder's holding period for such common stock will
commence on the day following the distribution date.
The tax treatment of dividends with respect to the Convertible Preferred
Stock that accrue but are not paid ("Accrued Dividends") is not free from doubt.
Under certain circumstances a holder of Convertible Preferred Stock would be
required to take Accrued Dividends into account as constructive distributions at
the time they accrue, rather than at the time they are paid. We intend to take
the position that any Accrued Dividends on the Convertible Preferred Stock need
not be treated as received by a holder until such Accrued Dividends are actually
paid to such holder and we will report to the Internal Revenue Service on that
basis.
DIVIDENDS TO CORPORATE SHAREHOLDERS
As discussed above, the amount of any distribution made with respect to the
Convertible Preferred Stock or common stock, as the case may be, generally will
be treated as a dividend to the extent of our current or accumulated earnings
and profits. Although dividends made to a corporate shareholder with respect to
our Convertible Preferred Stock or common stock would generally qualify for the
70% dividends-received-deduction under the Code, we do not presently have any
current or accumulated earnings and profits, and no assurance can be given that
we will have sufficient earnings and profits in
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the future that would enable a corporate shareholder to claim a
dividends-received-deduction with respect to distributions made on the
Convertible Preferred Stock or common stock, as applicable. Dividend income that
is not subject to regular U.S. Federal income tax as a consequence of the
dividends-received deduction may be subject to U.S. Federal alternative minimum
tax. There are many exceptions and restrictions relating to the availability of
the dividends-received deduction. Consequently, corporate shareholders should
consult their own tax advisors regarding the extent, if any, to which the
dividends-received deduction will be available to them if we have current
earnings and profits in future periods.
Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059(c) of the Code, is required to reduce its
stock basis by the non-taxed portion of such dividend. Generally, quarterly
dividends that are not in arrears and that are paid to an original holder of the
shares of Convertible Preferred Stock will not constitute extraordinary
dividends under Section 1059(c) of the Code.
SALE, EXCHANGE OR OTHER DISPOSITION
Upon a sale, exchange or other disposition of the Convertible Preferred
Stock (other than a conversion of the Convertible Preferred Stock into common
stock) or of common stock that was received either upon conversion of such
Convertible Preferred Stock or as a dividend distribution, and subject to the
discussion below regarding redemption of the Convertible Preferred Stock or of
common stock, a holder will generally recognize capital gain (or loss) to the
extent that the proceeds of such disposition (not including any proceeds
attributable to any declared but unpaid dividends which will be taxable as such
to a holder of record who has not previously included such dividends in income),
net of any reasonable costs of the disposition, exceed (or are exceeded by) the
holder's adjusted tax basis in the Convertible Preferred Stock or the common
stock. This gain or loss will be long-term gain or loss if the holder's holding
period for the Convertible Preferred Stock or common stock is more than one
year.
The federal income tax treatment of a redemption to a holder of the
Convertible Preferred Stock or common stock will depend on the particular facts
relating to such holder at the time of the redemption. If the redemption of such
stock (i) is "not essentially equivalent to a dividend" with respect to the
holder, (ii) is "substantially disproportionate" with respect to the holder
(defined generally as a greater than 20% reduction in a holder's voting stock
interest in a corporation), or (iii) results in a "complete termination" of all
of such holder's equity interest in the corporation, then the receipt of cash or
property (other than our common stock) by such holder will be treated as an
exchange on which gain or loss will be recognized. Such exchange will be taxed
in the same manner as a sale or exchange of the Convertible Preferred Stock or
common stock discussed above. In applying these tests, certain constructive
ownership rules apply to determine stock ownership.
If none of the above tests giving rise to exchange treatment is satisfied in
respect of a redemption of the Convertible Preferred Stock or common stock, as
the case may be, the holder will be treated as having received a taxable
distribution with respect to such stock. The amount of such distribution
generally will be equal to the amount of cash and the fair market value of
property received in the redemption (other than our common stock), and will be
treated first as a taxable dividend to the extent of our current and accumulated
earnings and profits, if any, and then as a tax-free return of capital to the
extent of the holder's tax basis in the stock redeemed, with any excess treated
as capital gain from the sale or exchange of such stock.
CONVERSION OF THE CONVERTIBLE PREFERRED STOCK FOR COMMON STOCK
A holder of the Convertible Preferred Stock will generally not recognize
gain or loss by reason of receiving common stock in exchange for the Convertible
Preferred Stock upon the conversion of the
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Convertible Preferred Stock (including upon redemption of the Convertible
Preferred Stock in exchange for our common stock). The receipt, however, of cash
or common stock in payment of accrued and unpaid dividends would be treated as a
distribution as described above under "--Distributions." In addition, a holder
who receives cash in lieu of a fractional share of common stock will be treated
as having received the fractional share and exchanged it for cash in a
transaction subject to Section 302 of the Code. This exchange should result in
capital gain of loss measured by the difference between the cash received for
the fractional share and the holder's basis in the fractional share.
Generally, a holder's tax basis in the common stock received upon conversion
of shares of Convertible Preferred Stock, other than shares of common stock
taxed upon receipt, will be equal to the tax basis of the shares of the
Convertible Preferred Stock exchanged therefor (exclusive of any basis allocable
to a fractional share interest), and the holding period of common stock received
upon the conversion will include the holding period of the shares of the
Convertible Preferred Stock exchanged therefor.
ADJUSTMENT OF CONVERSION RATE
Certain adjustments (or failure to make adjustments) to the conversion price
of the Convertible Preferred Stock may, in certain circumstances, result in
constructive distributions taxable as dividends to the holders of the
Convertible Preferred Stock to the extent of current and accumulated earnings
and profits, if any. Any such dividends may constitute (and cause other
dividends to constitute) "extraordinary dividends" to corporate holders as
described above. However, adjustments to the conversion price made pursuant to a
bona fide reasonable adjustment formula which has the effect of preventing the
dilution of the interest of the holders of the Convertible Preferred Stock will
generally not be considered to result in a constructive distribution of stock.
CONVERSION OF CONVERTIBLE PREFERRED STOCK AFTER DIVIDEND RECORD DATE
If a holder of shares of Convertible Preferred Stock exercises the holder's
right to convert the shares of Convertible Preferred Stock into shares of common
stock after a dividend record date but before payment of the dividend, then,
upon conversion, the holder generally will be required to pay to us in cash or
stock or both (as the case may be) in an amount equal to the portion of such
dividend attributable to the current quarterly dividend period, which amount
would increase the tax basis of the common stock received. When the dividend is
received, the holder would recognize the dividend payment in accordance with the
rules described under "--Distributions" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING FOR U.S. HOLDERS
In general, information reporting requirements will apply to certain
noncorporate U.S. holders with respect to dividends paid on, or, under certain
circumstances, the proceeds of a sale, exchange or disposition of, the
Convertible Preferred Stock or common stock. Under the backup withholding
provisions of the Code and applicable U.S. Treasury Regulations, a U.S. holder
of the Convertible Preferred Stock or common stock may be subject to backup
withholding at the rate of 31% with respect to dividends paid on, or the
proceeds of a sale, exchange or disposition of, the Convertible Preferred Stock
or common stock unless such holder (a) is a corporation or comes within certain
other exempt categories and, when required demonstrates this fact in the manner
required or (b) within a reasonable period of time, provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. The amount of any backup withholding from a payment to a U.S.
holder will be allowed as a credit against the holder's U.S. Federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
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U.S. TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion of some of the U.S. Federal income and
estate tax consequences of the ownership and disposition of our Convertible
Preferred Stock and common stock received upon its conversion applicable to
Non-U.S. holders.
A "Non-U.S. holder" is generally an individual, corporation, estate or trust
other than:
- an individual who is a citizen or resident of the United States for U.S.
Federal income tax purposes;
- a corporation created or organized in the United States or under the laws
of the United States or of any subdivision thereof;
- an estate whose income is includible in gross income for U.S. Federal
income tax purposes regardless of source; and
- a trust subject to the primary supervision of a court within the United
States and the control of one or more U.S. persons.
This discussion does not apply to Non-U.S. holders who own or owned,
actually or constructively, more than 5% of either our Convertible Preferred
Stock or our common stock. Such holders should consult their own tax advisors
concerning the purchase, ownership and disposition of our Convertible Preferred
Stock or common stock.
DIVIDENDS
Distributions that are dividends, if any, as described under
"--Distributions" above and that are paid to a Non-U.S. holder of our
Convertible Preferred Stock or common stock upon its conversion generally will
be subject to withholding of U.S. Federal income tax at a 30% rate or at such
lower rate that an applicable income tax treaty may specify. Non-U.S. holders
should consult their tax advisors on their entitlement to benefits under a
relevant income tax treaty.
Dividends that are effectively connected with a Non-U.S. holder's conduct of
a trade or business in the U.S. are generally subject to U.S. Federal income tax
on a net income basis at regular graduated income tax rates, but are not
generally subject to the 30% withholding tax if the Non-U.S. holder files an IRS
Form W-8ECI (or successor form) with the withholding agent. Any U.S. trade or
business income received by a Non-U.S. holder that is a corporation may, under
specific circumstances, be subject to an additional "branch profits tax" at a
30% rate or at such lower rate that an applicable income tax treaty may specify.
If dividends are paid to Non U.S. holders in the form of our common stock we may
sell some of those shares to satisfy our withholding obligation with respect to
such dividends.
A Non-U.S. holder of our Convertible Preferred Stock or common stock
received upon its conversion that claims the benefit of an income tax treaty
rate generally will be required to satisfy applicable certification and other
requirements, including filing an IRS Form W-8BEN (or successor form) with the
withholding agent. In addition, a Non-U.S. holder that claims the benefit of an
income tax treaty rate may be required, in certain instances, to obtain a U.S.
taxpayer identification number which may require the Non-U.S. holder to provide
certain documentary evidence issued by foreign governmental authorities to prove
residence in the foreign country. Payments made through certain foreign
intermediaries may be subject to certain additional rules. A Non-U.S. holder of
our Convertible Preferred Stock or common stock received upon its conversion
that is eligible for a reduced rate of U.S. withholding tax under an income tax
treaty may obtain a refund or credit of any excess amounts withheld by filing an
appropriate claim for a refund with the Internal Revenue Service.
The IRS Forms W-8ECI and W-8BEN must be periodically updated.
S-57
<PAGE>
DISPOSITION OF CONVERTIBLE PREFERRED STOCK OR COMMON STOCK RECEIVED UPON ITS
CONVERSION
Subject to the discussion below under "--Information Reporting and Backup
Withholding for Non-U.S. Holders", a Non-U.S. holder generally will not be
subject to U.S. Federal income tax in respect of gain recognized on a
disposition of our Convertible Preferred Stock or common stock received upon its
conversion (including a disposition by us of common stock paid to Non U.S.
holders as a dividend on our Convertible Preferred Stock in order to satisfy our
withholding obligation with respect to such dividends) unless:
- the gain is effectively connected with a U.S. trade or business, in which
case the branch profits tax may also apply to a corporate Non-U.S. holder;
- the Non-U.S. holder is an individual who is present in the United States
for 183 or more days in the taxable year of the disposition and meets
other requirements;
- the Non-U.S. holder is subject to U.S. tax under provisions applicable to
certain U.S. expatriates (including certain former citizens or long-term
residents of the United States); or
- we are or have been a "U.S. real property holding corporation" for U.S.
Federal income tax purposes at any time during the applicable period,
which is the shorter of the five-year period ending on the date of
disposition and the Non-U.S. holder's holding period for the Convertible
Preferred Stock or the common stock, as the case may be.
The tax relating to stock in a "U.S. real property holding corporation" does
not apply to a Non-U.S. holder whose holdings, actual and constructive of
Convertible Preferred Stock and common stock at all times during the applicable
period, amount to 5% or less of each such class, provided that each such class
of stock is regularly traded on an established securities market. Generally, a
corporation is a "U.S. real property holding corporation" if the fair market
value of its "U.S. real property interests" equals or exceeds 50% of the sum of
the fair market value of its worldwide real property interests and its other
assets used or held for use in a trade or business. We have not made a
determination as to whether we have been, are, or are likely to become a "U.S.
real property holding corporation" for U.S. Federal income tax purposes and,
therefore, a Non-U.S. holder considering an investment in PIERS should consult
its U.S. tax advisor to determine whether its acquisition of such PIERS would
result in it being treated as owning five percent (5%) or more of our common
stock. In such case, a Non-U.S. holder would incur U.S. Federal income tax in
connection with the sale, exchange or other disposition of such stock if we are
or were treated as a U.S. real property holding corporation during the
applicable period as described above.
Amounts paid in redemption of Convertible Preferred Stock or common stock
may be treated as a dividend, as a return of capital or as capital gain from the
sale or exchange of such stock. See the discussion at "--Sale, Exchange or Other
Disposition." Amounts treated as a dividend will be taxed as described in "U.S.
Tax Considerations for Non-U.S. Holders--Dividends" above.
FEDERAL ESTATE TAXES
Convertible Preferred Stock or common stock received upon its conversion
that is owned or treated as owned by an individual who is a Non-U.S. holder at
the time of death will be included in the individual's gross estate for U.S.
Federal estate tax purposes and may be subject to U.S. Federal estate tax,
unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING FOR NON-U.S. HOLDERS
Under specific circumstances, the Internal Revenue Service requires
information reporting and backup withholding at a rate of 31% on specific
payments on our Convertible Preferred Stock or common stock received upon its
conversion. A Non-U.S. holder of our Convertible Preferred Stock or common stock
received upon its conversion that fails to certify its Non-U.S. holder status
under
S-58
<PAGE>
applicable U.S. Treasury Regulations or otherwise fails to establish an
exemption under applicable U.S. Treasury Regulations may be subject to
information reporting and backup withholding at a rate of 31% on payments of
dividends.
Payment of the proceeds from the disposition of the Convertible Preferred
Stock or the common stock received upon its conversion to or through the United
States office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a United States person or that the conditions of any other exemption
are not, in fact, satisfied. Payment of the proceeds from the disposition of the
Convertible Preferred Stock or common stock received upon its conversion to or
through a non-U.S. office of a non-U.S. broker will not be subject to
information reporting or backup withholding unless the non-U.S. broker has
certain types of relationships with the United States (a "U.S. related person").
In the case of the payment of the proceeds from the disposition of the
Convertible Preferred Stock or common stock received upon its conversion to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the U.S. Treasury Regulations require information reporting (but
not back-up withholding) on the payment unless the broker has documentary
evidence in its files that the owner is a Non-U.S. holder and the broker has no
knowledge to the contrary. Payments made through certain foreign intermediaries
may be subject to certain additional rules. Non-U.S. holders should consult
their own tax advisors on the application of information reporting and backup
withholding to them in their particular circumstances (including, upon their
disposition of the Convertible Preferred Stock or common stock received upon its
conversion).
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. holder will be refunded or
credited against the holder's U.S. Federal income tax liability, if any, if the
holder provides the required information to the Internal Revenue Service.
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below for whom Lehman Brothers Inc. is acting as representative. Subject to the
certain conditions, each underwriter has severally agreed to purchase from us
and we have agreed to sell to each underwriter, the number of PIERS indicated in
the following table:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF PIERS
------------ ---------------
<S> <C>
Lehman Brothers Inc.........................................
Allen & Company Incorporated................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Morgan Stanley & Co. Incorporated...........................
Salomon Smith Barney Inc....................................
---------
Total.......................................................
=========
</TABLE>
The underwriters are committed to take and pay for all of the PIERS if any
are taken.
We have been advised by the underwriters that they propose to offer the
PIERS initially at the public offering price set forth on the cover page of this
prospectus supplement and to certain selected dealers (who may include the
underwriters) at such public offering price less a concession not to exceed
$ per share. The underwriters or such selected dealers may reallow a
commission to certain other
S-59
<PAGE>
dealers not to exceed $ per share. After the initial public offering of the
PIERS, the public offering price, the concession to selected dealers and the
reallowance to the other dealers may be changed by the underwriters.
We have granted to the underwriters an option to purchase up to an
additional 1,050,000 PIERS at the initial public offering price to the public,
less the underwriting discounts and commissions, shown on the cover page of this
prospectus supplement, solely to cover over-allotments, if any. This option may
be exercised at any time up to 30 days after the date of this prospectus
supplement. If the underwriters exercise this option, each of the underwriters
will be committed (subject to certain conditions) to purchase a number of
additional PIERS proportionate to its initial commitment as indicated in the
preceding table.
The following table summarizes the underwriting discount we will pay. The
underwriting discount is equal to the public offering price less the amount paid
to us. The underwriting discount is equal to % of the public offering price.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per PIERS............................................ $ $
Total................................................ $ $
</TABLE>
We estimate that the total expenses of the offering, not including the
underwriting discount, will be approximately $ .
We, Six Flags Operations Inc. and Six Flags Theme Parks, Inc. have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the federal securities acts.
Except for the PIERS (and the Convertible Preferred Stock represented
thereby) and the common stock to be issued upon conversion of the PIERS or the
Convertible Preferred Stock, we have agreed not to offer, sell, contract to sell
or otherwise issue any shares of common stock or other capital stock or
securities convertible into or exchangeable for, or any rights to acquire,
common stock or other capital stock, with certain exceptions, prior to the
expiration of 90 days from the date of this prospectus supplement without the
prior written consent of Lehman Brothers on behalf of the underwriters. Our
executive officers and directors who beneficially hold in the aggregate
approximately 7.5 million shares of common stock (including shares issuable upon
exercise of outstanding options, warrants and restricted stock), have agreed not
to, directly or indirectly, offer, sell or otherwise dispose of shares of our
common stock or any securities convertible into or exchangeable for, or any
rights to acquire, our common stock or our other capital stock for 90 days
following the date of this prospectus supplement without the prior written
consent of Lehman Brothers.
Until the distribution of the PIERS is completed, rules of the Commission
may limit the ability of the underwriters and certain selling group members to
bid for and purchase the PIERS. As an exception to these rules, the underwriters
are permitted to engage in certain transactions that stabilize the price of the
PIERS and the common stock. Such transactions may consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the PIERS or the
common stock.
If the underwriters create a short position in the PIERS in connection with
the offering (that is, if they sell more PIERS than are set forth in the cover
page of this prospectus supplement), the underwriters may reduce that short
position by purchasing PIERS in the open market after the distribution has been
completed. The underwriters may also elect to reduce any short position by
exercising all or part of the over-allotment option described herein.
The underwriters also may impose a penalty bid on certain underwriters and
selling group members. This means that if the underwriters purchase PIERS in the
open market to reduce the underwriters' short position or to stabilize the price
of the PIERS, they may reclaim the amount of the
S-60
<PAGE>
selling concession from the underwriters and selling group members who sold
those PIERS as part of the offering.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the PIERS or the common stock. In
addition, neither we nor any of the underwriters makes any representation that
the underwriters will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
We intend to list the PIERS on the NYSE under the symbol "PKSPrB." The
common stock issuable on conversion of the Convertible Preferred Stock
represented by the PIERS has been approved for listing on the NYSE. Our common
stock is listed on the NYSE under the symbol "PKS". The Convertible Preferred
Stock will not be so listed and we do not expect that there will be any trading
market for the Convertible Preferred Stock except as represented by the PIERS.
It is expected that delivery of the PIERS will be made against payment
therefor on or about the date specified in the last paragraph of the cover page
of this prospectus supplement.
Each of Lehman Brothers Inc; Allen & Company Incorporated; Merrill Lynch,
Pierce, Fenner & Smith Incorporated; Morgan Stanley & Co. Incorporated and
Salomon Smith Barney Inc. have from time to time provided, and in the future may
provide, certain investment banking services to us and our affiliates, for which
they have received, and in the future would receive, customary fees. In
addition, each of Lehman Brothers Inc.; Allen & Company Incorporated; Merrill
Lynch, Pierce, Fenner & Smith Incorporated; Morgan Stanley & Co. Incorporated
and Salomon Smith Barney Inc. acted as an underwriter of our prior public
offerings and received customary fees in connection therewith. Furthermore, an
affiliate of Lehman Brothers Inc. is a lender under the Six Flags Credit
Facility. Lehman Brothers Inc. has agreed to provide financing to us to fund the
Sea World acquisition as necessary. Additionally, one of our directors is a
Managing Director and a member of the Executive Committee of Allen & Company
Incorporated.
LEGAL MATTERS
The validity of the PIERS offered hereby and certain legal matters in
connection with this offering will be passed upon for us by Weil, Gotshal &
Manges LLP, New York, New York. The underwriters are being represented by
Cravath, Swaine & Moore, New York, New York.
S-61
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
PROSPECTUS
$1,000,000,000
[LOGO]
PREMIER PARKS INC.
DEBT SECURITIES, COMMON STOCK,
PREFERRED STOCK, WARRANTS, UNITS
---------------------
We will offer from time to time debt securities (including senior,
subordinated and convertible debt securities), common stock, preferred stock
(including convertible preferred stock), warrants or units. We will provide
specific terms of these securities in supplements to this prospectus. You should
read this prospectus and any prospectus supplement carefully before you invest.
------------------------
Our common stock is listed on the New York Stock Exchange under the trading
symbol "PKS". Any common stock sold pursuant to a prospectus supplement will be
listed on the New York Stock Exchange. We have not yet determined whether any of
the debt securities, preferred stock, warrants or units will be listed on any
exchange or the over-the-counter market. If we decide to seek listing of any
debt securities, preferred stock, warrants or units, the related prospectus
supplement will disclose such exchange or market.
------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 8 IN THIS PROSPECTUS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE 18, 1999
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
About This Prospectus....................................... 3
Where You Can Find More Information......................... 3
Special Note on Forward-Looking Statements.................. 4
Premier Parks Inc........................................... 5
Risk Factors................................................ 8
Consolidated Ratio of Earnings to Fixed Charges and
Consolidated Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends............................. 14
Use of Proceeds............................................. 14
Unaudited Pro Forma Statement of Operations and Other
Data...................................................... 15
Description of Debt Securities.............................. 20
Description of Common Stock................................. 26
Description of Preferred Stock.............................. 28
Description of Warrants..................................... 33
Description of Units........................................ 34
Plan of Distribution........................................ 35
Legal Matters............................................... 36
Experts..................................................... 36
</TABLE>
2
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may, over the next two years, sell any combination
of the securities described in this prospectus in one or more offerings up to a
total dollar amount of $1,000,000,000.
This prospectus provides you with a general description of the securities we
may offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described immediately below
under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov. Our Common
Stock is listed on the New York Stock Exchange. Our reports, proxy statements
and other information can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
This prospectus is part of a Registration Statement on Form S-3 filed with
the SEC under the Securities Act of 1933. This prospectus omits some of the
information contained in the Registration Statement. You should refer to the
Registration Statement for further information with respect to Premier
Parks Inc. and the securities offered by this prospectus. Any statement
contained in this prospectus concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the SEC is not
necessarily complete, and in each case you should refer to the copy of the
document filed for complete information.
The SEC allows us to "incorporate by reference" the information we file with
it, which means we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be a
part of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
we sell all of the securities.
1. Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1999.
3. The audited financial statements of Six Flags Entertainment Corporation as
of December 28, 1997 and December 29, 1996 and for each of the three years
in the period ended December 28, 1997 contained in our registration
statement on Form S-3 (Registration No. 333-46897) declared effective
March 26, 1998.
4. The description of our Common Stock contained in our registration statement
on Form 8-A filed pursuant to Section 12 of the Securities Exchange Act.
5. The description of the Rights relating to the shares of Common Stock
contained in our registration statement on Form 8-A filed pursuant to
Section 12 of the Securities Exchange Act.
3
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Premier Parks Inc.
11501 Northeast Expressway
Oklahoma City, Oklahoma 73131
Attention: Richard Kipf, Corporate Secretary
Telephone: (405) 475-2500
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros., a division of Time Warner
Entertainment Company, L.P. ("TWE"). BATMAN AND SUPERMAN are copyrights and
trademarks of DC Comics, a partnership between TWE and a subsidiary of Time
Warner Inc.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in this
prospectus discuss our plans and strategies for our business or state other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act. The words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions are intended to identify
these forward-looking statements, but are not the exclusive means of identifying
them. These forward-looking statements reflect the current views of our
management; however, various risks, uncertainties and contingencies could cause
our actual results, performance or achievements to differ materially from those
expressed in, or implied by, these statements, including the following:
- the success or failure of our efforts to implement our business strategy
- the other factors discussed under the heading "Risk Factors" and elsewhere
in this prospectus
We assume no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. For a
discussion of important risks of an investment in our securities, including
factors that could cause actual results to differ materially from results
referred to in the forward-looking statements, see "Risk Factors." You should
carefully consider the information set forth under the caption "Risk Factors."
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in or incorporated by reference in this prospectus might not
occur.
4
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
PREMIER PARKS INC.
GENERAL DESCRIPTION OF OUR BUSINESS
We are the largest regional theme park operator and the second largest theme
park company in the world, based on 1998 attendance of approximately
38.7 million. We operate 34 regional parks, located in geographically diverse
markets with concentrated populations across the United States, as well as in
Mexico, France, Belgium and The Netherlands. Our parks include 16 of the 50 most
highly attended theme parks in North America. Our theme parks serve 9 of the 10
largest metropolitan areas in the United States. We estimate that approximately
two-thirds of the population of the continental United States live within a
150-mile radius of one of our theme parks.
Since 1992, we have made numerous acquisitions of theme parks and have
achieved significant internal growth. In April 1998, we acquired all of the Six
Flags parks, consisting of eight regional theme parks, as well as three
separately gated water parks and a wildlife safari park (each of which is
located near one of the Six Flags theme parks). In March 1998, we expanded our
operations internationally by acquiring the European-based Walibi theme park
operations, which included three parks located in France, two in Belgium and one
in The Netherlands. We have continued our expansion in 1999 by acquiring Reino
Aventura, a theme park in Mexico City, Mexico, White Water Atlanta, a water park
located near Atlanta, Georgia, and Splashtown, a water park located near
Houston, Texas. These 1998 and 1999 park acquisitions have greatly expanded our
operations, which previously consisted of nine regional theme parks (seven of
which include a water park component) and four water parks at locations across
the United States.
During the 1998 operating season, the U.S. parks we owned or operated drew,
on average, approximately 75% of their patrons from within a 100-mile radius,
with approximately 36% of visitors utilizing group and other pre-sold tickets
and approximately 23% utilizing season passes. Our parks are individually themed
and provide a complete family-oriented entertainment experience. Our 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. Our theme parks offer more than 800 rides,
including over 90 roller coasters, making us the leading operator of thrill
rides in the industry.
Six Flags has operated regional theme parks under the Six Flags name for
over thirty years and has established a nationally recognized brand name. We
have worldwide ownership of the "Six Flags" brand name. To capitalize on this
name recognition, in the 1998 season we commenced use of the Six Flags name at
one of our other parks (Six Flags Kentucky Kingdom) and we are adding the name
to four additional parks for the 1999 season (Six Flags Elitch Gardens, Six
Flags America (formerly Adventure World), Six Flags Darien Lake and Six Flags
Marine World).
As part of our Six Flags acquisition, we obtained the exclusive license for
theme park usage throughout the United States (except the Las Vegas metropolitan
area) and Canada of certain Warner Bros. and DC Comics characters. These
characters include BUGS BUNNY, DAFFY DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN,
SUPERMAN and others. Since 1991, these characters have been used to market the
Six Flags parks and to provide visitors with an enhanced family entertainment
experience. Our license, which applies to all of our current U.S. theme parks,
as well as parks we may acquire that meet certain criteria, includes the right
to sell merchandise featuring the characters at our parks, and to use the
characters in our advertising, as walk-around characters, in theming for rides
and attractions and in retail outlets. Since the Six Flags acquisition, we have
continued making extensive use of these characters at the Six Flags parks and,
commencing in 1999, we will add the characters at many of our other U.S. parks.
We believe using these characters promotes increased attendance, supports higher
ticket prices, increases lengths-of-stay and enhances in-park spending.
5
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
Since 1989, under our current management we have assumed control of 33 parks
and have achieved significant internal growth. For example, during 1998, the 13
parks which we controlled prior to the acquisitions of Six Flags, Walibi, Reino
Aventura, White Water Atlanta and Splashtown achieved same park growth in
attendance, revenue and park-level operating cash flow (representing all park
operating revenues and expenses without depreciation and amortization or
allocation of corporate overhead or interest expense) of 14.4%, 20.3% and 35.0%,
respectively, as compared to 1997.
We believe that our parks benefit from limited direct competition, since the
combination of a limited supply of real estate appropriate for theme park
development, high initial capital investment, long development lead-time and
zoning restrictions provides each of our parks with a significant degree of
protection from competitive new theme park openings. Based on our knowledge of
the development of other theme parks in the United States, we estimate that it
would cost at least $200 million and would take a minimum of two years to
construct a new regional theme park comparable to our largest parks.
Our senior and operating management team has extensive experience in the
theme park industry. Our nine senior executive officers have over 150 years
aggregate experience in the industry and our twenty-five general managers have
an aggregate of in excess of 440 years experience in the industry, including in
excess of 320 years at parks we operate.
STRATEGY
Our strategy for achieving continued growth includes pursuing growth
opportunities at our existing parks, expanding our parks, and making selective
acquisitions.
We believe there are substantial opportunities for continued growth at our
parks. We seek to increase revenue by increasing attendance and per capita
spending, while also maintaining strict control of operating expenses. The
primary elements we use to achieve these objectives are:
- adding rides and attractions and improving overall park quality
- adding the Six Flags brand name and the characters licensed from Warner
Bros. and DC Comics at selected parks
- enhancing marketing and sponsorship programs
- increasing group sales, season passes and other pre-sold tickets
- using ticket pricing strategies to maximize ticket revenues and park
utilization
- adding and enhancing restaurants and merchandise and other revenue outlets
- adding special events
Our approach is designed to exploit the operating leverage inherent in the
theme park business. Once parks achieve certain critical attendance levels,
operating cash flow margins increase because revenue growth through incremental
attendance gains and increased in-park spending is not offset by a comparable
increase in operating expenses, because a large portion of these expenses is
relatively fixed during any given year.
We have expanded several of our parks by adding complementary attractions,
such as campgrounds, lodging facilities, new water parks and concert venues, in
order to increase attendance and per capita spending. For example, for the 1998
season we constructed a hotel at our Darien Lake park to supplement the existing
campgrounds, and in 1998 we purchased campgrounds and a hotel adjacent to Geauga
Lake. Further, we are adding a water park to Six Flags St. Louis for the 1999
season and plan to add a water park to Six Flags Great Adventure (located
between New York City and Philadelphia) for the 2000 season. We own additional
acreage which is suitable for development at many of our parks. For example, we
own over
6
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
1,500 undeveloped acres adjacent to Six Flags Great Adventure and 400 acres
adjacent to Six Flags America (formerly Adventure World) suitable for additional
complementary purposes.
The regional theme park industry is highly fragmented. We believe that there
are numerous acquisition opportunities, both in the U.S. and abroad, through
which we can expand our business. While we will continue to pursue acquisitions
of regional parks with annual attendance between 300,000 and 1.5 million, we
will also consider acquisitions of larger parks or park chains.
We believe we have a number of competitive advantages in acquiring theme
parks. Operators of destination or large regional park chains, other than Cedar
Fair L.P., have generally not been actively seeking to acquire parks in recent
years. Additionally, as a multi-park operator with a track record of
successfully acquiring, improving and repositioning parks, we believe we have
numerous competitive advantages over single-park operators in pursuing
acquisitions and improving the operating results at acquired parks. These
advantages include our ability to:
- exercise group purchasing power (for both operating expenses and capital
assets)
- use the Six Flags brand name and the characters licensed from Warner Bros.
and DC Comics
- attract greater sponsorship revenue and support from sponsors with
nationally-recognized brands and marketing partners
- achieve administrative economies of scale
- recruit and retain superior management
- use our access to capital markets as well as our common stock as all or a
portion of future acquisition consideration
ADDRESS
Our executive offices are located at 11501 Northeast Expressway, Oklahoma
City, Oklahoma 73131, (405) 475-2500 and at 122 East 42nd Street, New York, New
York 10168, (212) 599-4690.
7
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER EACH OF THE FOLLOWING RISKS AND ALL OF THE
OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR
SECURITIES. SOME OF THE FOLLOWING RISKS RELATE PRINCIPALLY TO OUR BUSINESS IN
GENERAL AND THE INDUSTRY IN WHICH WE OPERATE. OTHER RISKS RELATE PRINCIPALLY TO
THE SECURITIES MARKETS AND OWNERSHIP OF OUR SECURITIES. THE RISKS AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY BELIEVE TO BE IMMATERIAL MAY ALSO ADVERSELY AFFECT OUR BUSINESS. IF
ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES DEVELOP INTO ACTUAL EVENTS, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY
ADVERSELY AFFECTED.
SUBSTANTIAL LEVERAGE--OUR HIGH LEVEL OF INDEBTEDNESS AND OTHER MONETARY
OBLIGATIONS REQUIRE THAT A SIGNIFICANT PART OF OUR CASH FLOW BE USED TO PAY
INTEREST AND FUND THESE OTHER OBLIGATIONS.
We have a high level of debt. As of December 31, 1998, Premier and its
subsidiaries owed a combined total of approximately $2,060.7 million (including
$182.9 million carrying value of notes which we will repay on or prior to
December 15, 1999 with funds already deposited in escrow). We have to pay total
interest on our debt in 1999 of approximately $145.9 million ($25.9 million of
which we will pay with funds already deposited in escrow). We also have to pay
annual dividends of $23.3 million on our mandatorily convertible preferred
stock, although we can pay these dividends either in cash or shares of common
stock. At December 31, 1998, we had approximately $400.6 million of cash and
cash equivalents to help meet our obligations.
In addition to making interest payments on debt and dividend payments on our
preferred stock, we must satisfy the following obligations with respect to Six
Flags Over Georgia and Six Flags Over Texas:
- We must make annual distributions to our partners in such parks, which
will amount to approximately $47.3 million in 1999 (of which we will be
entitled to receive $14.1 million due to our current ownership interest in
such parks) with similar amounts (adjusted for changes in cost of living)
payable in future years.
- We must spend a minimum of approximately 6% of each park's annual revenues
over specified periods for capital expenditures, which in 1999 is expected
to be approximately $14.6 million.
- Each year we must offer to purchase partnership units from our partners in
such parks, which in 1999 would, if accepted in full, amount to
approximately $43.75 million.
We will use cash flow from the operations at these parks to satisfy the
first two obligations before we use any of our other funds. In addition, we have
deposited in escrow approximately $75.0 million which can be used to satisfy
these obligations. The obligations relating to Six Flags Over Georgia continue
until 2027 and those relating to Six Flags Over Texas continue until 2028.
Further, as a result of our purchase of Walibi, S.A., we have agreed to
invest approximately $38.0 million from 1999 through 2001 to expand the six
Walibi parks.
Our high level of debt and other obligations could have important negative
consequences to us and investors in the securities. These include:
- We may not be able to satisfy all of our obligations.
- We could have problems obtaining necessary financing in the future for
working capital, capital expenditures, debt service requirements,
refinancing or other purposes.
- We will have to use a significant part of our cash flow to make payments
on our debt, to pay the dividends on preferred stock (if we choose to pay
them in cash), and to satisfy the other obligations set forth above, which
may reduce the capital available for operations and expansion.
- Adverse economic or industry conditions may have more of a negative impact
on us.
We expect to be able to meet all of our obligations with existing cash, cash
generated from the parks, and our current lines of credit. We believe that funds
from these sources will be sufficient to meet our
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
obligations and operating needs for the next several years and beyond. However,
our business is subject to factors beyond our control, such as economic
conditions, weather and competition. We cannot be sure that income from our
parks will be as high as we expect. We may have to refinance all or some of our
debt or secure new financing. We can not be sure that we will be able to obtain
such refinancing or new loans on reasonable terms or at all. We have agreed in
our loan agreements and the indentures covering certain of our outstanding notes
to limit the amount of additional debt we will incur.
If we can not meet all of our obligations, the market value and
marketability of our common stock will likely be adversely affected. In
addition, if we become the subject of bankruptcy proceedings, our creditors and
preferred stockholders will be entitled to our assets before any distributions
are made to common stockholders.
STRUCTURAL SUBORDINATION--OUR HOLDING COMPANY STRUCTURE SUBORDINATES OUR
CREDITORS INCLUDING HOLDERS OF OUR DEBT SECURITIES.
Premier Parks Inc. is a holding company with limited assets, and we conduct
substantially all of our operations through our subsidiaries. Almost all of our
income is from our subsidiaries. The securities offered by this prospectus will
be solely the obligations of Premier Parks Inc. and no other entity will have
any obligation, contingent or otherwise, to make any payments in respect of the
securities. Accordingly, we will be dependent on dividends and other
distributions from subsidiaries to generate the funds necessary to meet our
obligations, including the payment of principal and interest on the debt
securities.
The ability of our subsidiaries to pay dividends to us is subject to, among
other things, the terms of the various debt instruments already issued by our
subsidiaries and which may in the future be issued by them, as well as by
applicable law. In particular, in order for us to receive cash flow from our
original thirteen Premier parks, we must obtain the consent of our senior bank
lenders, and distributions of cash flow from our Six Flags parks is
significantly restricted by covenants in debt instruments.
Claims of holders of the debt securities will be effectively subordinated to
the notes and other credit facility obligations of our subsidiaries
(approximately $1,327.0 million at December 31, 1998, excluding $182.9 million
carrying value of notes which we will repay on or prior to December 15, 1999
with funds already deposited in escrow). Consequently, in the event of any
insolvency, liquidation, reorganization, dissolution or other winding up of our
subsidiaries, the ability of our creditors, including holders of the debt
securities, to be repaid will be subject to the prior claims of those entities'
creditors, including trade creditors.
RESTRICTIVE COVENANTS--OUR FINANCIAL AND OPERATING ACTIVITIES ARE LIMITED BY
RESTRICTIONS CONTAINED IN THE TERMS OF OUR PRIOR FINANCINGS.
The terms governing our and our subsidiaries' indebtedness impose
significant operating and financial restrictions on us. These restrictions may
significantly limit or prohibit us from engaging in certain transactions,
including the following:
- incurring additional indebtedness
- creating liens on our assets
- paying dividends
- selling assets
- engaging in mergers or acquisitions
- making investments
Our failure to comply with the terms and covenants in our and our
subsidiaries' indebtedness could lead to a default under the terms of those
documents, which would entitle the lenders to accelerate the indebtedness and
declare all amounts owed due and payable. Moreover, the instruments governing
our indebtedness contain cross-default provisions so that a default under any of
our indebtedness will be
9
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
considered a default under all other indebtedness. If a cross-default occurs,
the maturity of almost all of our indebtedness could be accelerated and become
immediately due and payable. If that happens, we would not be able to satisfy
all of our debt obligations, which would have a substantial material adverse
effect on the value of our common stock and our ability to continue as a going
concern. We cannot assure you that we will be able to comply with these
restrictions in the future or that our compliance would not cause us to forego
opportunities that might otherwise be beneficial to us.
Further, certain of our subsidiaries are required to comply with specified
financial ratios and tests, including:
- interest expense
- fixed charges
- debt service
- total debt
We are currently in compliance with all of these financial covenants and
restrictions. However, events beyond our control, such as weather and economic,
financial and industry conditions, may affect our ability to continue meeting
these financial tests and ratios. The need to comply with these financial
covenants and restrictions could limit our ability to expand our business or
prevent us from borrowing more money when necessary.
MANAGEMENT OF GROWTH STRATEGY--WE MAY NOT BE ABLE TO MANAGE OUR RAPID GROWTH
OR INTEGRATE ACQUISITIONS.
We have experienced significant growth through acquisitions and will
continue to consider acquisition opportunities that arise. Such acquisitions
could place a future strain on our operations. Our ability to manage future
acquisitions will depend on our ability to evaluate new markets and investments,
monitor operations, control costs, maintain effective quality controls and
expand our internal management and technical and accounting systems.
To fund future acquisitions, we may need to borrow more money or assume the
debts of acquired companies. In taking on any debt, we must comply with the
restrictions described above with respect to our existing indebtedness. If we do
not receive necessary consents or waivers of such restrictions, we may be unable
to make additional acquisitions.
In the past, in certain circumstances we have used shares of our common
stock to fund a portion of the price of acquisitions. In the future, we may
again fund all or part of acquisitions by issuing new shares of our common stock
or other securities which can be converted into common stock. Issuing such
additional shares or convertible securities may cause a decrease in the per
share market price of our common stock.
If we do purchase additional businesses, it may negatively affect our
earnings, at least in the short term. Further, we cannot guarantee that any
future acquisition will generate the earnings or cash flow we expect. As with
any expansion, unexpected liabilities might arise and the planned benefits may
not be realized.
RISK OF ACCIDENTS--THERE IS THE RISK OF ACCIDENTS OCCURRING AT OUR PARKS
WHICH MAY REDUCE ATTENDANCE AND EARNINGS.
Almost all of our parks feature "thrill rides." While we carefully maintain
the safety of our rides, there are inherent risks involved with these
attractions. An accident or an injury at any of our parks may reduce attendance
at that and other parks, causing a drop in revenues.
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. While the park
is covered by our existing insurance, the impact of this incident on our
financial position, operations or attendance at the park has not yet been
determined.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
We maintain insurance of the type and in amounts that we believe is
commercially reasonable and that are available to businesses in our industry. We
maintain multi-layered general liability policies that provide for excess
liability coverage of up to $100.0 million per occurrence. We have no
self-insured retention, except that the self-insurance portion of claims arising
out of occurrences prior to July 1, 1998 at our U.S. parks owned prior to the
Six Flags acquisition is $50,000 per occurrence.
FACTORS IMPACTING ATTENDANCE--LOCAL CONDITIONS, DISTURBANCES, EVENTS AND
NATURAL DISASTERS CAN ADVERSELY IMPACT PARK ATTENDANCE.
Lower attendance may also be caused by other local conditions or events. For
example:
- In 1994, fewer people attended our Six Flags Magic Mountain park because
of the Los Angeles County earthquake, and the earthquake also
significantly interrupted operation of the park.
- Six Flags Over Georgia suffered a drop in attendance in 1996 as a result
of the 1996 Summer Olympics.
In addition, since some of our parks are near major urban areas and appeal
to teenagers and young adults, there may be disturbances at one or more parks
which negatively affect our image. This may result in lower attendance at the
affected parks. We work with local police authorities on security-related
precautions to prevent such occurrences. We can make no assurance, however, that
these precautions will be able to prevent any such disturbances. We believe that
our ownership of many parks in different geographic locations reduces the
effects of such occurrences on our consolidated results.
ADVERSE WEATHER CONDITIONS--BAD WEATHER CAN ADVERSELY IMPACT ATTENDANCE AT
OUR PARKS; OUR OPERATIONS ARE SEASONAL.
Because most of the attractions at our theme parks are outdoors, attendance
at our parks is adversely affected by bad weather. The effects of bad weather on
attendance are more pronounced at our water parks. Bad weather and forecasts of
bad or mixed weather conditions can reduce the number of people who come to our
parks, which negatively affects our revenues. However, we believe that our
ownership of many parks in different geographic locations reduces the effect
that adverse weather can have on our consolidated results.
Our operations are seasonal. More than 90% of our annual park attendance
occurs during the spring, summer and early autumn months. By comparison, most of
our expenses for maintenance and adding new attractions are incurred when the
parks are closed in the mid to late autumn and winter months. For this reason, a
quarter to quarter comparison is not a good indication of our performance or of
how we will perform in the future. However, the market price of our common stock
may still fluctuate significantly in response to changes in our quarterly
results of operations.
COMPETITION--THE THEME PARK INDUSTRY COMPETES WITH NUMEROUS ENTERTAINMENT
ALTERNATIVES.
Our parks compete with other theme, water and amusement parks and with other
types of recreational facilities and forms of entertainment, including movies,
sports attractions and vacation travel. Our business is also subject to factors
that affect the recreation and leisure industries generally, such as general
economic conditions and changes in consumer spending habits. The principal
competitive factors of a park include location, price, the uniqueness and
perceived quality of the rides and attractions, the atmosphere and cleanliness
of the park and the quality of its food and entertainment.
KEY PERSONNEL--THE LOSS OF KEY PERSONNEL COULD HURT OUR OPERATIONS.
Our success depends upon the continuing contributions of our executive
officers and other key operating personnel, including Kieran E. Burke, our
Chairman and Chief Executive Officer, and Gary Story, our President and Chief
Operating Officer. The complete or partial loss of their services or the
services of other key personnel could adversely affect our business. Although we
have entered into employment agreements (which end on December 31, 1999) with
Mr. Burke and Mr. Story, we cannot be
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
certain that we will be able to retain their services during that or any
extension period. If we were to lose the services of both Messrs. Burke and
Story and are unable to replace them within a specified period of time we would
be in default under our credit facilities.
INTERNATIONAL OPERATIONS--OUR INTERNATIONAL OPERATIONS HAVE ADDITIONAL
RISKS.
Through our Walibi parks, we conduct some of our operations in Europe. We
also may make further acquisitions of parks in other international locations.
There are risks to which we are subject that are inherent in operating abroad.
Some examples of these risks can include:
- problems in staffing and managing foreign operations
- fluctuations in currency exchange rates
- political risks
- unexpected changes in regulatory requirements
- potentially detrimental tax consequences in many locations with different
tax laws
SHARES ELIGIBLE FOR FUTURE SALE--THE PRICE OF OUR COMMON STOCK MAY DECLINE
DUE TO POSSIBLE SALES OF SHARES.
As of March 1, 1999, there were 76,513,796 shares of our common stock
outstanding, all of which are transferable without restriction or further
registration under the Securities Act of 1933, except for any shares held by our
affiliates. In addition, we have reserved and registered under the Securities
Act approximately 5,000,000 shares for currently outstanding management-held
options, 5,550,000 shares for future option issuances, 9,550,000 shares issuable
pursuant to our mandatorily convertible preferred stock, and approximately
70,000 shares for currently outstanding consultant-held options.
Our officers, directors and their affiliates together hold approximately
17.9 million shares of common stock (including shares issuable upon exercise of
outstanding options and warrants and shares of outstanding restricted stock, in
each case subject to vesting). They can sell these securities in the public
market (subject, in certain cases, to the resale conditions imposed by
Rule 144). In addition, other stockholders who own approximately 7.5 million
shares of common stock have the right to require us to register their shares for
sale under the Securities Act. If future revenues at Kentucky Kingdom and Walibi
reach certain levels, we are required to issue additional shares of common
stock. In that connection in 1999, as a result of 1998 revenue levels at that
park, we issued approximately 211,065 shares of common stock to the former
owners of Kentucky Kingdom (excluding certain escrowed shares). We may also
issue additional shares of common stock to pay quarterly dividend payments on
our mandatorily convertible preferred stock (which dividends total
$46.6 million over two years). The sale or expectation of sales of a large
number of shares of common stock or securities convertible into common stock in
the public market at any time after the date of this prospectus might negatively
affect the market price of the common stock.
ANTI-TAKEOVER PROVISIONS--ANTI-TAKEOVER PROVISIONS LIMIT THE ABILITY OF
STOCKHOLDERS TO EFFECT A CHANGE IN CONTROL OF PREMIER.
Certain provisions in our Certificate of Incorporation and in our debt
instruments and those of our subsidiaries may have the effect of deterring
transactions involving a change in control of Premier, including transactions in
which stockholders might receive a premium for their shares.
Our Certificate of Incorporation provides for the issuance of up to
5,000,000 shares of preferred stock with such designations, rights and
preferences as may be determined from time to time by our board of directors.
The authorization of preferred shares empowers our board of directors, without
further stockholder approval, to issue preferred shares with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of our common stock. If issued, the
preferred stock could be used to discourage, delay or prevent a change of
control of Premier.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
We have no current plans to issue any preferred stock, except to the extent we
may determine to do so under this prospectus.
In addition, we have a rights plan which gives each holder of our common
stock the right to purchase a share of junior preferred stock in certain events
which would constitute a change of control. The rights plan is designed to deter
third parties from attempting to take control of Premier.
In addition, we are subject to the anti-takeover provisions of the Delaware
General Corporation Law, which could have the effect of delaying or preventing a
change of control of Premier. Furthermore, upon a change of control, the holders
of substantially all of our outstanding indebtedness are entitled at their
option to be repaid in cash. These provisions may have the effect of delaying or
preventing changes in control or management of Premier. All of these factors
could materially adversely affect the price of our common stock.
As part of the Six Flags acquisition, we obtained the exclusive right to use
certain Warner Bros. and DC Comics characters in our theme parks in the United
States (except in the Las Vegas metropolitan area) and Canada. Warner Bros. can
terminate this license under certain circumstances, including the acquisition of
Premier by persons engaged in the movie or television industries. This could
deter certain parties from seeking to acquire Premier.
DIVIDENDS--WE ARE NOT LIKELY TO PAY CASH DIVIDENDS ON OUR COMMON STOCK.
We have not paid dividends on our common stock during the last three years,
and we do not anticipate paying any cash dividends on such stock in the
foreseeable future. Our ability to pay cash dividends is restricted under the
indentures relating to our notes.
YEAR 2000 ISSUE--OUR OPERATIONS COULD BE ADVERSELY AFFECTED BY DATA
PROCESSING FAILURES AFTER DECEMBER 31, 1999.
Many computer systems, software applications and other electronics currently
in use worldwide are programmed to accept only two digits in the portion of the
date field which designates the year. The "Year 2000 problem" arises because
these systems and products cannot properly distinguish between a year that
begins with "20" and the familiar "19." If these systems and products are not
modified or replaced, many will fail or create erroneous results and/or may
cause other related systems to fail. Our failure to correct a material Year 2000
problem could result in an interruption in or failure of certain of our normal
business operations or activities. This could result in a system failure or
miscalculations causing disruptions of operations, including, but not limited
to, a temporary inability to process transactions.
Our Year 2000 Project (the "Project") is in process. We have undertaken
various initiatives intended to ensure that our computer equipment and software
will function properly with respect to dates in the Year 2000 and thereafter. In
planning and developing the Project, we have considered both our information
technology ("IT") and our non-IT systems. The term "computer equipment and
software" includes systems that are commonly thought of as IT systems, including
accounting, data processing, telephone systems, scanning equipment and other
miscellaneous systems. Those items not to be considered as IT systems include
alarm systems, fax machines, monitors for park operations or other miscellaneous
systems. Both IT and non-IT systems may contain embedded technology, which
complicates our Year 2000 identification, assessment, remediation and testing
efforts. Based upon our identification and assessment efforts to date, we are in
the process of replacing the computer equipment and upgrading the software it
currently uses to become Year 2000 complaint. In addition, in the ordinary
course of replacing computer equipment and software, we plan to obtain
replacements that are in compliance with Year 2000.
We have initiated correspondence with our significant vendors and service
providers to determine the extent such entries are vulnerable to Year 2000
issues and whether the products and services purchased from such entities are
Year 2000 compliant. We expect to receive a favorable response from such third
parties and it is anticipated that their significant Year 2000 issues will be
addressed on a timely basis.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
We anticipate that the Project will be completed in November 1999.
As noted above, we are in the process of replacing certain computer
equipment and software because of the Year 2000 issue. We estimate that the
total cost of such replacements will be no more than $1.5 million. Substantially
all of the personnel being used on the Project are our employees. Therefore, the
labor costs of our Year 2000 identification, assessment, remediation and testing
efforts, as well as currently anticipated labor costs to be incurred by with
respect to Year 2000 issues of third parties, are expected to be less than
$0.8 million.
We have not yet developed a most reasonably likely worst case scenario with
respect to Year 2000 issues, but instead have focused our efforts on reducing
uncertainties through the review described above. We have not developed Year
2000 contingency plans other than as described above, and do not expect to do so
unless merited by the results of our continuing review.
We presently do not expect to incur significant operational problems due to
the Year 2000 issue. However, if all Year 2000 issues are not properly and
timely identified, assessed, fixed and tested, there can be no assurance that
the Year 2000 issue will not materially impact our results of operations or
adversely affect our relationships with vendors or others. Additionally, there
can be no assurance that the Year 2000 issues of other entities will not have a
material impact on our systems or results of operations.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND
CONSOLIDATED RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth our consolidated ratio of earnings to fixed
charges and our consolidated ratio of earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---- ---- ---- -------- ----
Ratio of earnings to fixed charges.......................... 1.5x 2.3x 1.3x -- 1.1x
Ratio of earnings to combined fixed charges
and preferred stock dividends............................... 1.2x 2.3x 1.2x -- 1.1x
</TABLE>
For the purpose of calculating the consolidated ratios of earnings to fixed
charges and of earnings to combined fixed charges and preferred stock dividends,
earnings consist of income (loss) before extraordinary loss and before income
taxes, minority interest in earnings, equity in operations of theme park
partnerships not distributed to Premier and fixed charges. Fixed charges consist
of interest expense, amortization of deferred financing costs and discount or
premium relating to indebtedness and the portion (approximately one-third) of
rental expense that management believes represents the interest component of
rent expense. Preferred Stock dividend requirements have been increased to an
amount representing the before-tax earnings which would have been required to
cover such dividend requirements. For the year ended December 31, 1995,
Premier's earnings were insufficient to cover fixed charges by $1,738,000 and
were insufficient to cover combined fixed charges and preferred stock dividends
by $2,620,000.
USE OF PROCEEDS
We will use the net proceeds from the sale of the securities for our general
corporate purposes, which may include, repaying indebtedness, making additions
to our working capital, funding future acquisitions or for any other purpose we
describe in the applicable prospectus supplement.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
The following unaudited pro forma statement of operations and other data of
Premier is based upon and should be read in conjunction with the historical
financial statements of Premier and Six Flags, which are incorporated herein by
reference.
The unaudited pro forma statement of operations and other data for the year
ended December 31, 1998 gives effect to the acquisitions of Six Flags and Walibi
and the financings associated with the transactions (including the issuance of
mandatorily convertible preferred stock and common stock) as if they had
occurred on January 1, 1998 (except in the case of Six Flags, which was treated
as if it occurred December 29, 1997, the first day of the 1998 fiscal year of
Six Flags).
The pro forma statement of operations and other data is for informational
purposes only, has been prepared based upon estimates and assumptions deemed by
Premier to be appropriate and does not purport to be indicative of the results
of operations which would actually have been attained if the acquisitions had
occurred as presented in the statement or which could be achieved in the future.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
PREMIER PARKS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
YEAR ENDED DECEMBER 31, 1998
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL WALIBI FOR
SIX FLAGS FOR PERIOD PRIOR TO
HISTORICAL PERIOD PRIOR TO MARCH 26, COMBINED PRO FORMA COMPANY
PREMIER APRIL 1, 1998(1) 1998(2) COMPANY ADJUSTMENTS PRO FORMA
----------- ---------------- --------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Theme park admissions....... $ 423,461 $ 15,047 $ 883 $439,391 $ -- $ 439,391
Theme park food, merchandise
and other................. 390,166 8,356 624 399,146 -- 399,146
----------- --------- ------- --------- -------- -----------
Total revenue............. 813,627 23,403 1,507 838,537 -- 838,537
----------- --------- ------- --------- -------- -----------
OPERATING COSTS AND EXPENSES:
Operating expenses.......... 297,266 56,307 4,626 358,199 (10,628)(3) 347,571
Selling, general and
administrative............ 126,985 54,711 3,407 185,103 (35,433)(3) 149,670
Noncash compensation........ 6,362 -- -- 6,362 -- 6,362
Costs of products sold...... 103,051 2,757 248 106,056 -- 106,056
Depreciation and
amortization.............. 109,841 17,629 3,214 130,684 6,440 (4) 137,124
----------- --------- ------- --------- -------- -----------
Total operating costs and
expenses................ 643,505 131,404 11,495 786,404 (39,621) 746,783
----------- --------- ------- --------- -------- -----------
Income (loss) from
operations................ 170,122 (108,001) (9,988) 52,133 39,621 91,754
----------- --------- ------- --------- -------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net....... (115,849) (22,508) (889) (139,246) (16,655)(5) (155,901)
Equity in operations of
theme park partnerships... 24,054 (13,152) -- 10,902 -- 10,902
Minority interest........... (960) -- -- (960) -- (960)
Other expense............... (1,023) -- (1) (1,024) -- (1,024)
----------- --------- ------- --------- -------- -----------
Total other income
(expense)............... (93,778) (35,660) (890) (130,328) (16,655) (146,983)
----------- --------- ------- --------- -------- -----------
Income (loss) before income
taxes..................... 76,344 (143,661) (10,878) (78,195) 22,966 (55,229)
Income tax expense
(benefit)................. 40,716 -- (4,786) 35,930 (38,038)(6) (2,108)
----------- --------- ------- --------- -------- -----------
Income (loss) before
extraordinary loss........ $ 35,628 $(143,661) $(6,092) $(114,125) $ 61,004 $ (53,121)
=========== ========= ======= ========= ======== ===========
Net income (loss) applicable
to common stock........... $ 18,162 (7) (7) (7) $ (76,409)(7)
=========== ===========
Net income (loss) per common
share..................... $ 0.27 (7) (7) (7) $ (1.01)(7)
=========== ===========
Weighted average shares..... 66,430,000 75,617,000 (7)
=========== ===========
OTHER DATA:
EBITDA(8)..................... $ 286,325 $ (90,372) $(6,774) $189,179 $ 46,061 $ 235,240
=========== ========= ======= ========= ======== ===========
Adjusted EBITDA(9)............ $ 321,733 $(102,077) $(6,774) $212,882 $ 46,061 $ 258,943
=========== ========= ======= ========= ======== ===========
Net cash provided by (used in)
operating activities........ $ 119,010 $ (54,779) $(7,663) $ 56,568 $ 38,478 $ 95,046
=========== ========= ======= ========= ======== ===========
</TABLE>
16
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
YEAR ENDED DECEMBER 31, 1998
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
BASIS OF PRESENTATION
The accompanying unaudited pro forma statement of operations and other data
for the year ended December 31, 1998 has been prepared based upon certain pro
forma adjustments to historical financial information of Premier and the
pre-acquisition historical financial information of Six Flags and Walibi.
Premier acquired Six Flags on April 1, 1998 and Walibi on March 26, 1998.
The unaudited pro forma statement of operations and other data for the year
ended December 31, 1998 has been prepared assuming the acquisitions and the
related financings (including the issuance of mandatorily convertible preferred
stock and common stock) occurred on January 1, 1998 (except in the case of the
acquisition of Six Flags, which was treated as if it was acquired on
December 29, 1997, the first day of the 1998 fiscal year of Six Flags). The
unaudited pro forma statement of operations should be read in conjunction with
the financial statements of Premier, which are incorporated herein by reference.
PRO FORMA ADJUSTMENTS
1. The results of Six Flags included herein represent the operations of Six
Flags for the period from December 29, 1997 to March 31, 1998, prior to
Premier's acquisition of Six Flags.
2. The results of Walibi included herein represent the operations of Walibi for
the period from January 1, 1998 to March 26, 1998, prior to Premier's
acquisition of Walibi. The results of Walibi are in Belgium Francs ("BEF")
and are accounted for using generally accepted accounting principles of
Belgium. The following table reflects the adjustment of the Walibi statement
of operations for the period January 1, 1998 to March 26, 1998 to conform to
U.S. generally accepted accounting principles and U.S. dollars (using an
average exchange rate for the period of 37.500 BEF to US$1):
<TABLE>
<CAPTION>
AMOUNT ACCOUNTING ADJUSTED AMOUNT
(IN BEF) ADJUSTMENTS AMOUNT (IN US $)
-------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Revenue:
Theme park admissions............................... 33,122 -- 33,122 $ 883
Theme park food, merchandise and other.............. 23,296 112 23,408 624
-------- ------- -------- --------
Total revenue....................................... 56,418 112 56,530 1,507
-------- ------- -------- --------
Operating costs and expenses:
Operating expenses.................................. 184,288 (10,800) 173,488 4,626
Selling, general and administrative................. 127,774 -- 127,774 3,407
Costs of products sold.............................. 9,310 -- 9,310 248
Depreciation and amortization....................... 120,678 (149) 120,529 3,214
-------- ------- -------- --------
Total operating costs and expenses.................. 442,050 (10,949) 431,101 11,495
-------- ------- -------- --------
Income (loss) from operations....................... (385,632) 11,061 (374,571) (9,988)
-------- ------- -------- --------
Other income (expense):
Interest expense, net............................... (33,324) -- (33,324) (889)
Other expense....................................... (14) -- (14) (1)
-------- ------- -------- --------
Total other expense................................. (33,338) -- (33,338) (890)
-------- ------- -------- --------
Income (loss) before taxes.......................... (418,970) 11,061 (407,909) (10,878)
Income tax expense (benefit)........................ (175,066) (4,398) (179,464) (4,786)
-------- ------- -------- --------
Net income (loss)................................... (243,904) 15,459 (228,445) $ (6,092)
======== ======= ======== ========
</TABLE>
17
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
YEAR ENDED DECEMBER 31, 1998
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
3. Adjustments reflect the elimination of compensation expense associated with
stock option payments resulting from the acquisition of Six Flags that were
recognized during the pre-acquisition period from December 28, 1997 to
March 31, 1998.
4. Adjustment reflects the elimination of historical depreciation and
amortization of $20,819 for Six Flags and Walibi and the inclusion of
estimated pro forma depreciation of $14,647 and amortization of $12,612.
5. Adjustment reflects additional interest expense associated with debt
incurred by Premier in connection with the acquisitions, net of (a) the
elimination of the historical interest expense associated with Premier and
Six Flags credit facilities previously outstanding and the long term debt of
Walibi, and (b) the amortization of the fair value adjustments for Six Flags
long-term debt assumed as a result of the Six Flags acquisition. Issuance
costs associated with the borrowings are being amortized over their
respective terms. The components of the adjustments are as follows:
<TABLE>
<S> <C>
Interest expense on Premier credit facility for the period
prior to April 1, 1998 (at an 8.0% interest rate)......... $ (4,400)
Interest expense on Six Flags credit facility for the period
prior to April 1, 1998 (at an 8.0% interest rate)......... (8,200)
Interest expense on the Six Flags zero coupon notes for the
period prior to April 1, 1998 (at a 6.5% interest rate)... (2,600)
Interest expense on the Six Flags Theme Parks Inc. 12 1/4%
senior subordinated notes (at a 10.3% interest rate)...... (7,337)
Interest expense on the Six Flags 8 7/8% senior notes for
the period prior to April 1, 1998 (at an 8 7/8% interest
rate)..................................................... (3,772)
Interest expense on Premier 10% senior discount notes prior
to April 1, 1998 (at a 10% interest rate)................. (6,293)
Interest expense on Premier 9 1/4% senior notes prior to
April 1, 1998 (at a 9 1/4% interest rate)................. (6,475)
Interest expense from the amortization of issuance costs.... (1,570)
Interest expense from commitment fees on Premier and Six
Flags credit facilities................................... (773)
Interest expense on Walibi indebtedness..................... (1,570)
Elimination of historical interest expense--Premier......... 2,785
Elimination of historical interest expense--Six Flags....... 22,661
Elimination of historical interest expense--Walibi.......... 889
--------
$(16,655)
========
</TABLE>
6. Adjustment reflects 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. Net income (loss) applicable to common stockholders is adjusted to reflect
$5,822 of additional dividends payable to the holders of Premier's 7 1/2%
mandatorily convertible preferred stock for the period prior to issuance on
April 1, 1998.
18
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
PREMIER PARKS INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
YEAR ENDED DECEMBER 31, 1998
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Net income (loss) per common share and weighted average common share data
are not presented for Six Flags and Walibi as the information is not
meaningful.
The calculation of pro forma weighted average shares outstanding for the
year ended December 31, 1998 is as follows:
<TABLE>
<S> <C>
Pro forma weighted average number of common shares
outstanding excluding Premier's April 1, 1998 common stock
offering and the Walibi acquisition....................... 38,020,000
Common shares issued in Premier's April 1, 1998 common stock
offering, as if issued on January 1, 1998................. 36,800,000
Common shares issued as partial consideration for the Walibi
acquisition, as if issued on January 1, 1998.............. 797,000
----------
Pro forma weighted average number of common shares
outstanding............................................... 75,617,000
==========
</TABLE>
8. EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization, equity in operations of
theme park partnerships, minority interest, and noncash compensation.
Premier has included information concerning EBITDA because it is used by
certain investors as a measure of Premier'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 Premier's operating
performance. This information should be read in conjunction with the
Statement of Cash Flows contained in the financial statements incorporated
by reference.
9. Adjusted EBITDA includes Premier's share of the EBITDA from the three
partnership parks which are not consolidated--Six Flags Over Texas, Six
Flags Over Georgia and Six Flags Marine World.
19
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities (the "Debt Securities"). The prospectus supplement will describe the
specific terms of the Debt Securities offered through that prospectus supplement
and any differences in such Debt Securities from the terms described below. The
Debt Securities will be issued under an indenture (the "Indenture") between
Premier and one or more commercial banks to be selected as trustees
(collectively, the "Trustee").
We have summarized certain terms and provisions of the Indenture. The
summary is not complete. If we refer to particular provisions of the Indenture,
the provisions, including definitions of certain terms, are incorporated by
reference as a part of this summary. A copy of the form of Indenture is filed as
an exhibit to the registration statement of which this prospectus is a part, and
is incorporated by reference. You should refer to the Indenture for the
provisions which may be important to you. The Indenture is subject to and
governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
GENERAL
The Indenture will not limit the amount of Debt Securities which we may
issue. We may issue Debt Securities up to an aggregate principal amount as we
may authorize from time to time. The applicable prospectus supplement will
describe the terms of any Debt Securities being offered, including:
- the designation, aggregate principal amount and authorized denominations;
- the maturity date;
- the interest rate, if any, and the method for calculating the interest
rate;
- the interest payment dates and the record dates for the interest payments;
- any mandatory or optional redemption terms or prepayment, conversion,
sinking fund or exchangeability or convertability provisions;
- the place where principal and interest will be payable;
- if other than denominations of $1,000 or multiples of $1,000, the
denominations the Debt Securities will be issued in;
- whether the Debt Securities will be issued in the form of Global
Securities (as defined below) or certificates;
- additional provisions, if any, relating to the defeasance of the Debt
Securities;
- the currency or currencies, if other than the currency of the United
States, in which principal and interest will be payable;
- whether the Debt Securities will be issuable in registered form or bearer
form ("Bearer Securities") or both and, if Bearer Securities are issuable,
any restrictions applicable to the exchange of one form for another and
the offer, sale and delivery of Bearer Securities;
- any applicable United States federal income tax consequences;
- the dates on which premium, if any, will be payable;
- the right, if any, of Premier to defer payment of interest and the maximum
length of such deferral period;
- any listing on a securities exchange;
- the initial public offering price; and
20
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
- other specific terms, including any additional events of default or
covenants provided for with respect to the Debt Securities.
As described in each prospectus supplement relating to any particular series
of Debt Securities being offered, the Indenture may contain covenants limiting:
- the incurrence of additional debt (including guarantees) by Premier and
certain of its subsidiaries and affiliates;
- the making of certain payments by Premier and certain of its subsidiaries
and affiliates;
- business activities of Premier and certain of its subsidiaries and
affiliates;
- the issuance of preferred stock of certain of its subsidiaries and
affiliates;
- certain asset dispositions;
- certain transactions with affiliates;
- a change of control of Premier;
- the incurrence of liens; and
- certain mergers and consolidations involving Premier and its subsidiaries.
BOOK-ENTRY SYSTEM
Unless otherwise specified in a prospectus supplement, Debt Securities of
any series may be issued under a book-entry system in the form of one or more
global securities (each, a "Global Security"). Each Global Security will be
deposited with, or on behalf of, a depositary, which will be The Depository
Trust Company, New York, New York (the "Depositary"). The Global Securities will
be registered in the name of the Depositary or its nominee.
The Depositary has advised Premier that it is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York banking law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. The Depositary
was created to hold securities of its participants ("Direct Participants") and
to facilitate the clearance and settlement of securities transactions among its
Direct Participants through electronic book-entry changes in accounts of the
Direct Participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, a number of which (and/or their representatives) own the
Depositary, together with the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depositary's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants" and, together with Direct Participants, the
"Participants").
When a Global Security is issued in registered form, the Depositary will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by each Global Security to
the accounts of Direct Participants. The underwriters, dealers or agents, if
any, will designate the accounts to be credited, or Premier, if Debt Securities
are offered and sold directly by Premier. Ownership of beneficial interests in
the Global Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in the Global
Security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by Participants. The laws of some
jurisdictions may require that certain purchasers of securities take
21
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
physical delivery of such securities in definitive form, which may impair the
ability to transfer beneficial interests in a Global Security.
So long as the Depositary or its nominee is the owner of record of a Global
Security, the Depositary or its nominee will be considered the sole owner or
holder of the Debt Securities represented by such Global Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have the Debt Security
represented by a Global Security registered in their names, and will not receive
or be entitled to receive physical delivery of Debt Securities in definitive
form and will not be considered the owners or holders of the Debt Securities.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of the Depositary. Beneficial owners must rely on the
procedures of the Participant through which it owns its interest in order to
exercise any rights of a holder of record of the Debt Securities. Premier
understands that under existing industry practices, if Premier requests any
action of holders or if any owner of a beneficial interest in a Global Security
desires to give or take any action which a holder is entitled to give or take
under the Indenture, the Depositary would authorize the Direct Participants
holding the relevant beneficial interests to give or take such action, and the
Direct Participants would in turn authorize beneficial owners owning through
them to give or take such action or would otherwise act upon the instruction of
beneficial owners holding through them.
Payments of principal of, premium, if any, and interest on Debt Securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to the Depositary or nominee as the registered owner of
such Global Security. None of Premier, the Trustee or any other agent of Premier
or agent of the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in such Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Premier has been advised by the Depositary that the Depositary will credit
Direct Participants' accounts with payments of principal, premium, if any, or
interest on the payment date thereof in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depositary. Premier expects that payments by
Participants to owners of beneficial interests in the Global security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
Participants.
A Global Security may not be transferred except as a whole by the Depositary
to a nominee or successor of the Depositary or by a nominee of the Depositary to
another nominee of the Depositary. A Global Security representing all but not
part of an offering of Debt Securities is exchangeable for Debt Securities in
definitive form of like tenor and terms if:
- the Depositary notifies Premier that it is unwilling or unable to continue
as depositary for the Global Security or if at any time the Depositary is
no longer eligible to be or in good standing as a clearing agency
registered under the Exchange Act, and a successor depositary is not
appointed by Premier within 90 days after Premier receives notice; or
- Premier in its sole discretion at any time determines not to have all of
the Debt Securities represented in an by a Global Security and notifies
the Trustee.
If a Global Security is exchangeable, then it is exchangeable for Debt
Securities registered in the names and in authorized denominations as the
Depositary directs.
PAYMENTS OF PRINCIPAL AND INTEREST
The applicable prospectus supplement will describe how the payment of
principal of, premium, if any, and interest on the Debt Securities will rank
with respect to outstanding indebtedness of Premier.
22
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
EVENTS OF DEFAULT
The Indenture will provide that each of the following constitutes an Event
of Default with respect to any series of Debt Securities: (i) default for
30 days in the payment when due of interest on the Debt Securities;
(ii) default in payment when due of the principal of or premium, if any, on the
Debt Securities; (iii) default in the performance or breach of certain covenants
after any notice or applicable grace period; (iv) the failure by Premier or any
Restricted Subsidiary (as defined in the Indenture) to pay Indebtedness (as
defined in the Indenture) within any applicable grace period after final
maturity or the acceleration of any Indebtedness by the holders thereof because
of a default and the total amount of such Indebtedness unpaid or accelerated at
any time exceeds $10.0 million; (v) failure by Premier or any of its Restricted
Subsidiaries to pay final judgments aggregating at any time in excess of
$10.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; and (vi) certain events of bankruptcy or insolvency with respect to
Premier, any Restricted Subsidiary that constitutes a Significant Subsidiary (as
defined in the Indenture) or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary.
The applicable prospectus supplement will describe any additional Events of
Default.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Debt Securities of a
series may declare all Debt Securities of such series to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to Premier,
any Restricted Subsidiary of Premier that constitutes a Significant Subsidiary
or any group of Restricted Subsidiaries of Premier that, taken together, would
constitute a Significant Subsidiary, all outstanding Debt Securities will become
due and payable without further action or notice. Holders of the Debt Securities
may not enforce the Indenture or the Debt Securities except as provided in the
Indenture. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding Debt Securities may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
Debt Securities notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Debt
Securities then outstanding by notice to the Trustee may on behalf of the
holders of all of the Debt Securities of such series waive any existing Default
or Event of Default and its consequences under the Indenture, except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Debt Securities.
MODIFICATION AND WAIVER
From time to time, Premier, when authorized by resolutions of its Board of
Directors, and the Trustee, without the consent of the holders of Debt
Securities of any series, may amend, waive or supplement the Indenture and the
Debt Securities of such series for certain specified purposes, including, among
other things:
- curing ambiguities, defects or inconsistencies,
- to provide for the assumption of Premier's obligations to holders of the
Debt Securities of such series in the case of a merger or consolidation,
- to make any change that would provide any additional rights or benefits to
the holders of the Debt Securities of such series,
- to add Guarantors with respect to the Debt Securities of such series,
- to secure the Debt Securities of such series,
- to maintain the qualification of the Indenture under the Trust Indenture
Act, or
- to make any change that does not adversely affect the rights of any
holder.
23
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
Other amendments and modifications of the Indenture or the Debt Securities
issued thereunder may be made by Premier and the Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Debt Securities of each series affected thereby (each series voting
as a separate class); PROVIDED, THAT no such modification or amendment may,
without the consent of the holder of each outstanding Debt Security affected
thereby:
(1) reduce the principal amount of, or extend the fixed maturity of the Debt
Securities, or alter or waive the redemption provisions of the Debt
Securities (other than, subject to clause (7) below, provisions relating to
repurchase of Debt Securities upon the occurrence of an Asset Sale (as
defined in the Indenture) or a Change of Control (as defined in the
Indenture));
(2) change the currency in which any Debt Securities or any premium or the
accrued interest thereon is payable;
(3) reduce the percentage in principal amount outstanding of Debt Securities of
any series which must consent to an amendment, supplement or waiver or
consent to take any action under the Indenture or the Debt Securities of
such series;
(4) impair the right to institute suit for the enforcement of any payment on or
with respect to the Debt Securities;
(5) waive a default in payment with respect to the Debt Securities or any
Guarantee;
(6) reduce the rate or extend the time for payment of interest on the Debt
Securities;
(7) following the occurrence of an Asset Sale or a Change of Control, alter the
obligation to purchase the Debt Securities of any series as a result thereof
in accordance with the Indenture or waive any default in the performance
thereof;
(8) adversely affect the ranking of the Debt Securities of any series; or
(9) release any Guarantor from any of its obligations under its guarantee or the
Indenture, except in compliance with the terms of the Indenture.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that Premier may not consolidate or merge with or
into (whether or not Premier is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) Premier is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation or merger
(if other than Premier) or to which such sale, assignment, transfer, conveyance
or other disposition shall have been made is a corporation organized or existing
under the law of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than Premier) or the entity or Person to which
such sale, assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of Premier under the Debt Securities and the
Indenture pursuant to supplemental indentures in forms reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of Premier with or into
a Wholly Owned Restricted Subsidiary (as defined in the Indenture) of Premier,
Premier or the entity or Person formed by or surviving any such consolidation or
merger (if other than Premier), or to which such sale, assignment, transfer,
lease conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth (as defined in the Indenture) immediately after the
transaction equal to or greater than the Consolidated Net Worth of Premier
immediately preceding the transaction and (B) will, both at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the applicable debt
incurrence test.
24
<PAGE>
ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Premier may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Debt Securities ("Legal
Defeasance"), except for (i) the rights of Holders of outstanding Debt
Securities to receive payments in respect of the principal of, premium, if any,
and interest on such when such payments are due from the trust referred to
below, (ii) Premier's obligations with respect to the Debt Securities concerning
issuing temporary Debt Securities, registration of Debt Securities, mutilated,
destroyed, lost or stolen Debt Securities and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and Premier's
obligations in connection therewith, and (iv) the Legal Defeasance provisions of
the Indenture. In addition, Premier may, at its option and at any time, elect to
have the obligations of Premier released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
failure to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Debt Securities. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Debt Securities.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) Premier must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Debt Securities, cash in U.S. dollars, non-callable
Government Securities (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Debt Securities, on the stated maturity
date, and Premier must specify whether the Debt Securities are being defeased to
maturity or to a particular redemption date; (ii) in the case of Legal
Defeasance, Premier shall have delivered to the Trustee an opinion of counsel in
the United States reasonably acceptable to such Trustee confirming that
(A) Premier has received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) since the date of the Indenture, there has been
a change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the holders
of the outstanding Debt Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, Premier shall have delivered
to the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that the holders of the outstanding Debt Securities,
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which Premier or
any of its Restricted Subsidiaries is a party or by which Premier or any of its
Restricted Subsidiaries is bound; (vi) Premier must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) Premier must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by Premier with the intent of
preferring the holders of Debt Securities over the other creditors of Premier
with the intent of defeating, hindering, delaying or defrauding creditors of
Premier or others; and (viii) Premier must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
DESCRIPTION OF COMMON STOCK
GENERAL
The following summary of certain provisions of Premier's common stock (the
"Common Stock") does not purport to be complete and is subject to, and qualified
in its entirety by the provisions of Premier's Certificate of Incorporation,
which is included as an exhibit to the registration statement of which this
prospectus is a part, and by the provisions of applicable law.
COMMON STOCK
Premier's authorized capital stock includes 150,000,000 shares of Common
Stock, par value $0.025 per share. As of March 1, 1999, there were 76,513,796 of
Common Stock outstanding. Each share of Common Stock entitles the holder thereof
to one vote. Holders of the Common Stock have equal ratable rights to dividends
from funds legally available therefor, when, as and if declared by the Board of
Directors and are entitled to share ratably, as a single class, in all of the
assets of Premier available for distribution to holders of Common Stock upon the
liquidation, dissolution or winding up of the affairs of Premier. Holders of
Common Stock do not have preemptive, subscription or conversion rights. However,
each outstanding share of Common Stock currently has attached to it one right (a
"Right") issued pursuant to an Amended and Restated Rights Agreement (the
"Rights Agreement"). Each Right entitles its registered holder to purchase
one-thousandth of a share of a junior participating series of Preferred Stock
designated to have economic and voting terms similar to those of one share of
Common Stock, as described under "--Rights Plan" below.
The outstanding shares of Common Stock are listed on the New York Stock
Exchange under the symbol "PKS". Bank One Trust Company, N.A., Oklahoma City,
Oklahoma, is the transfer agent and registrar for the Common Stock.
RIGHTS PLAN
Each outstanding share of Common Stock currently has attached to it one
Right issued pursuant to the Rights Agreement. Each Right entitles its
registered holder to purchase one one-thousandth of a share of a junior
participating series of Preferred Stock designated to have economic and voting
terms similar to those of one share of Common Stock, for $250.00, subject to
adjustment (the "Rights Exercise Price"), but only after the earlier to occur of
(i) the tenth day following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership of 15% or
more of the outstanding voting stock of Premier (an "Acquiring Person"), or
(ii) the tenth business day (or such later date as may be determined by the
Board of Directors prior to such time as any person becomes an Acquiring Person)
after the date (the "Flip-in Date") of the commencement or announcement of a
person's or group's intention to commence a tender or exchange offer whose
consummation will result in the ownership of 15% or more of Premier's
outstanding voting stock (even if no shares are actually purchased pursuant to
such offer) (in either case, the "Separation Time"). The Rights will not trade
separately from the shares of Common Stock unless and until the Separation Time
occurs.
The Rights Agreement provides that an Acquiring Person does not include
(A) Premier, (B) any subsidiary of Premier, (C) any employee benefit plan or
employee stock plan of Premier, or any trust or other entity organized,
appointed, established or holding Common Stock for or pursuant to the terms of
any such plan, or (D) any person whose ownership of 15% or more of the shares of
voting stock of Premier then outstanding results solely from (i) any action or
transaction approved by the Board of Directors before such person acquires such
15% beneficial ownership, or (ii) a reduction in the number of issued and
outstanding shares of voting stock of Premier pursuant to a transaction or
transactions approved by the Board of Directors; PROVIDED, HOWEVER, that any
person that does not become an Acquiring Person by reason of clause (i) or
(ii) above shall become an Acquiring Person upon his acquisition of any
additional
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
1% of Premier's voting stock unless such acquisition of additional voting stock
will not result in such person becoming an Acquiring Person by reason of such
clause (i) or (ii).
The Rights will not be exercisable until the business day following the
Separation Time. The Rights will expire on the earlier of (i) the close of
business on December 10, 2007, and (ii) the date on which the Rights are
redeemed or terminated as described below. The Rights Exercise Price and the
number of Rights outstanding, or in certain circumstances the securities
purchasable upon exercise of the Rights, are subject to adjustment upon the
occurrence of certain events.
Once any person becomes an Acquiring Person, unless the Rights are earlier
redeemed or exchanged as described below, if
(i) Premier were to be merged into or consolidated with another entity
(whether or not related to a 15% stockholder),
(ii) Premier were to merge with another entity (whether or not related to a
15% stockholder) and be the surviving corporation, but any shares of
Premier's Common Stock were changed into or exchanged for other
securities or assets, or
(iii) more than 50% of Premier's assets or earning power were to be sold in
one or a series of related transactions,
each Right then outstanding would "flip-over" and would require that its
holder be entitled to buy, at the Rights Exercise Price, that number of shares
of common stock of the acquiring company which at the time of the merger or sale
would have a market value of two times the Exercise Price of the Right (I.E., a
discount of 50%). Any business combination not providing for the issuance of
common stock of the acquiring company in compliance with such provisions would
be prohibited.
Unless the Rights are earlier redeemed or exchanged as described below, if a
person or group becomes the beneficial owner of 15% or more of Premier's voting
stock, each Right not owned by such stockholder would become exercisable, at the
Rights Exercise Price, for that number of shares of Preferred Stock which at the
time of such transaction would have a market value of two times the Rights
Exercise Price.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
voting stock of Premier and before the acquisition by a person or group of 50%
or more of the outstanding voting stock of Premier, the Board of Directors may
elect to cause Premier to exchange the Rights (other than Rights owned by such
person or group which have become void), in whole or in part, at an exchange
ratio of one share of Premier's Common Stock per Right, subject to adjustment.
The Rights are redeemable by Premier by a vote of a majority of the Board of
Directors at a price of $0.01 per Right at any time prior to the close of
business on the Flip-in Date (or at such later date as may be authorized by the
Board of Directors and a majority of the Continuing Directors (as defined in the
Rights Agreement)). The Rights may be redeemed after the time that any person
has become an Acquiring Person only if approved by a majority of the Continuing
Directors. The Rights have no voting rights, and they are not entitled to
dividends.
The Rights will not prevent a takeover of Premier. The Rights, however, may
cause substantial dilution to a person or group that acquires 15% or more of the
Common Stock unless the Rights are first redeemed or terminated by the Board of
Directors of Premier. Nevertheless, the Rights should not interfere with a
transaction that, in the judgment of the Board of Directors, is in the best
interests of Premier and its stockholders because the Rights can be redeemed, as
hereinabove described, before the consummation of such transaction.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference as an exhibit to the registration
statement of which this prospectus is a part, and the foregoing description is
qualified in its entirety by reference thereto. A copy of the Rights Agreement
can be obtained upon written request to the Company.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
prospectus supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any prospectus supplement will be described in such
prospectus supplement. The description of certain provisions of the Preferred
Stock set forth below and in any prospectus supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to
Premier's Certificate of Incorporation and the certificate of designations
relating to each series of the Preferred Stock which will be filed with the
Securities and Exchange Commission and incorporated by reference in the
registration statement of which this prospectus is a part at or prior to the
time of the issuance of such series of the Preferred Stock.
Premier has authority to issue 5,000,000 shares of Preferred Stock, $1.00
par value per share. As of December 31, 1998, Premier had 11,500 shares of
Preferred Stock outstanding.
PREFERRED STOCK
Prior to issuance of shares of each series, the Board of Directors is
required by the Delaware General Corporation Law (the "GCL") and the Certificate
of Incorporation to adopt resolutions and file a certificate of designation with
the Secretary of State of the State of Delaware, fixing for each such class or
series the designations, powers, preferences and rights of the shares of such
class or series and the qualifications, limitations or restrictions thereon,
including, but not limited to, dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences as are permitted by the GCL. The Board of Directors could authorize
the issuance of shares of Preferred Stock with terms and conditions which could
have the effect of discouraging a takeover or other transaction which holders of
some, or a majority, of such shares might believe to be in their best interests
or in which holders of some, or a majority, of such shares might receive a
premium for their shares over the then-market price of such shares.
Subject to limitation prescribed by the GCL, the Certificate of
Incorporation and the Bylaws of Premier, the Board of Directors is authorized
without further stockholder action to provide for the issuance of up to
5,000,000 shares of Preferred Stock of Premier, in one or more series, with such
voting powers, full or limited, and with such designations, preferences and
relative participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated in the resolution or
resolutions providing for the issuance of a series of such stock adopted, at any
time or from time to time, by the Board of Directors (as used herein the term
"Board of Directors" includes any duly authorized committee thereof).
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a prospectus
supplement relating to a particular series of the Preferred Stock. Reference is
made to the prospectus supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including (i) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (ii) the amount of liquidation preference per share; (iii) the
initial public offering price at which such Preferred Stock will be issued;
(iv) the dividend rate (or method of calculation), the dates on which dividends
shall be payable, the form of dividend payment and the dates from which
dividends shall commence to cumulate, if any; (v) any redemption or sinking fund
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
provisions; (vi) any conversion or exchange rights; and (vii) any additional
voting, dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. The rights of the holders of each series of the
Preferred Stock will be subordinate to those of Premier's general creditors.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors, out of funds of Premier
legally available therefor, cash or payment in kind dividends on such dates and
at such rates as set forth in, or as are determined by the method described in,
the prospectus supplement relating to such series of the Preferred Stock. Such
rate may be fixed or variable or both. Each such dividend will be payable to the
holders of record as they appear on the stock books of Premier on such record
dates, fixed by the Board of Directors, as specified in the prospectus
supplement relating to such series of Preferred Stock.
Such dividends may be cumulative or noncumulative, as provided in the
prospectus supplement relating to such series of Preferred Stock. If the Board
of Directors fails to declare a dividend payable on a dividend payment date on
any series of Preferred Stock for which dividends are noncumulative, then the
right to receive a dividend in respect of the dividend period ending on such
dividend payment date will be lost, and Premier will have no obligation to pay
any dividend for such period, whether or not dividends on such series are
declared payable on any future dividend payment dates. Dividends on the shares
of each series of Preferred Stock for which dividends are cumulative will accrue
from the date on which Premier initially issues shares of such series.
Unless otherwise specified in the applicable prospectus supplement, so long
as the shares of any series of the Preferred Stock are outstanding, unless
(i) full dividends (including if such Preferred Stock is cumulative, dividends
for prior dividend periods) have been paid or declared and set apart for payment
on all outstanding shares of the Preferred Stock of such series and all other
classes and series of preferred stock of Premier (other than Junior Stock (as
defined below)), and (ii) Premier is not in default or in arrears with respect
to any mandatory or optional redemption or mandatory repurchase or other
mandatory retirement of, or with respect to any sinking or other analogous funds
for, any shares of Preferred Stock of such series or any shares of any other
preferred stock of Premier of any class or series (other than Junior Stock),
Premier may not declare any dividends on any shares of Common Stock of Premier
or any other stock of Premier ranking as to dividends or distributions of assets
junior to such series of Preferred Stock (the Common Stock and any such other
stock being herein referred to as "Junior Stock"), or make any payment on
account of, or set apart money for, the purchase, redemption or other retirement
of, or for a sinking or other analogous fund for, any shares of Junior Stock or
make any distribution in respect thereof, whether in cash or property or in
obligations of stock of Premier, other than in Junior Stock which is neither
convertible into, nor exchangeable or exercisable for, any securities of Premier
other than Junior Stock.
LIQUIDATION PREFERENCES
Unless otherwise specified in the applicable prospectus supplement, in the
event of any liquidation, dissolution or winding up of Premier, whether
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of Premier available for distribution
to stockholders, before any distribution of assets is made to the holders of
Common Stock or any other shares of stock of Premier ranking junior as to such
distribution to such series of the Preferred Stock, the amount set forth in the
prospectus supplement relating to such series of the Preferred Stock. If, upon
any voluntary or involuntary liquidation, dissolution or winding up of Premier,
the amounts payable with respect to the Preferred Stock of any series and any
other shares of Preferred Stock of Premier (including any other
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
series of the Preferred Stock) ranking as to any such distribution on a parity
with such series of the Preferred Stock are not paid in full, the holders of the
Preferred Stock of such series and of such other shares of preferred stock of
Premier will share ratably in any such distribution of assets of Premier in
proportion to the full respective preferential amounts to which they are
entitled. After payment to the holders of the Preferred Stock of each series of
the full preferential amounts of the liquidating distribution to which they are
entitled, unless otherwise provided in the applicable prospectus supplement, the
holders of each such series of the Preferred Stock will be entitled to no
further participation in any distribution of assets by Premier.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of Premier, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the prospectus supplement
relating to such series. Shares of the Preferred Stock redeemed by Premier will
be restored to the status of authorized but unissued shares of Preferred Stock
of Premier.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) or by any other method as
may be determined by Premier in its sole discretion to be equitable. From and
after the redemption date (unless default is made by Premier in providing for
the payment of the redemption price plus accumulated and unpaid dividends, if
any) dividends will cease to accumulate on the shares of the Preferred Stock
called for redemption and all rights of the holders thereof (except the right to
receive the redemption price plus accumulated and unpaid dividends, if any) will
cease.
Unless otherwise specified in the applicable prospectus supplement, so long
as any dividends on shares of any series of the Preferred Stock or any other
series of preferred stock of Premier ranking on a parity as to dividends and
distribution of assets with such series of the Preferred Stock are in arrears,
no shares of any such series of the Preferred Stock or such other series of
preferred stock of Premier will be redeemed (whether by mandatory or optional
redemption) unless all such shares are simultaneously redeemed, and Premier will
not purchase or otherwise acquire any such shares; PROVIDED, HOWEVER, that the
foregoing will not prevent the purchase or acquisition of such shares pursuant
to a purchase or exchange offer made on the same terms to holders of all such
shares outstanding.
CONVERSION AND EXCHANGE RIGHTS
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted into shares of Common Stock, another series of
Preferred Stock or any other security of Premier will be set forth in the
prospectus supplement relating thereto. Such terms may include provisions for
conversion, either mandatory, or at the option of the holder or at the option of
Premier, in which case the number of shares of Common Stock, the shares of
another series of Preferred Stock or the amount of any other securities to be
received by the holders of Preferred Stock would be calculated as of a time and
in the manner stated in the prospectus supplement.
VOTING RIGHTS
Except as indicated below or in the prospectus supplement relating to a
particular series of Preferred Stock, or except as expressly required by the
laws of the State of Delaware or other applicable law, the holders of the
Preferred Stock will not be entitled to vote. Except as indicated in the
prospectus supplement relating to a particular series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of the Preferred Stock are entitled to vote. However, as more fully
described below under "Depositary Shares," if Premier elects to issue Depositary
Shares representing
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
a fraction of a share of a series of Preferred Stock, each such Depositary Share
will, in effect, be entitled to such fraction of a vote, rather than a full
vote. Because each full share of any series of Preferred Stock shall be entitled
to one vote, the voting power of such series, on matters on which holders of
such series and holders of other series of preferred stock are entitled to vote
as a single class, shall depend on the number of shares in such series, not the
aggregate liquidation preference or initial offering price of the shares of such
series of Preferred Stock.
DEPOSITARY SHARES
GENERAL. Premier may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In the event such
option is exercised, Premier will issue to the public receipts for Depositary
Shares, each of which will represent a fraction (to be set forth in the
prospectus supplement relating to a particular series of Preferred Stock) of a
share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
Premier and a bank or trust company selected by Premier having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000 (the "Depositary Bank"). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the Preferred Stock
represented thereby (including dividend, voting, redemption and liquidation
rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. If Depositary
Shares are issued, copies of the forms of Deposit Agreement and Depositary
Receipt will be incorporated by reference in the Registration Statement of which
this prospectus is a part, and the following summary is qualified in its
entirety by reference to such documents.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary Bank may, upon the written order of Premier, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts,will be
exchangeable for definitive Depositary Receipts at Premier's expense.
WITHDRAWAL OF PREFERRED STOCK. Upon surrender of the Depositary Receipts to
the Depositary Bank, the owner of the Depositary Shares evidenced thereby is
entitled to delivery at such office of the number of whole shares of Preferred
Stock represented by such Depositary Shares. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of Preferred
Stock to be withdrawn, the Depositary Bank will deliver to such holder at the
same time a new Depositary Receipt evidencing such excess number of Depositary
Shares. Owners of Depositary Shares will be entitled to receive only whole
shares of Preferred Stock. In no event will fractional shares of Preferred Stock
(or cash in lieu thereof) be distributed by the Depositary Bank. Consequently, a
holder of a Depositary Receipt representing a fractional share of Preferred
Stock would be able to liquidate his position only by sale to a third party (in
a public trading market transaction or otherwise), unless the Depositary Shares
are redeemed by Premier or converted by the holder.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Depositary Bank will distribute all
cash dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
In the event of a distribution other than in cash, the Depositary Bank will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary Bank determines that it is not feasible
to make such distribution, in which case the Depositary Bank may, with the
approval of Premier, sell such property and distribute the net proceeds from
such sale to such holders.
REDEMPTION OF DEPOSITARY SHARES. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary Bank resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary Bank. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of Preferred Stock. Whenever Premier redeems shares of Preferred
Stock held by the Depositary Bank, the Depositary Bank will redeem as of the
same redemption date the number of Depositary Shares representing the shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary Bank.
VOTING THE PREFERRED STOCK. Upon receipt of notice of any meeting at which
the holders of Preferred Stock are entitled to vote, the Depositary Bank will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
Bank as to the exercise of the voting rights pertaining to the amount of
Preferred Stock represented by such holder's Depositary Shares. The Depositary
Bank will endeavor, insofar as practicable, to vote the amount of Preferred
Stock represented by such Depositary Shares in accordance with such
instructions, and Premier will agree to take all action that may be deemed
necessary by the Depositary Bank in order to enable the Depositary Bank to do
so. The Depositary Bank may abstain from voting shares of Preferred Stock to the
extent it does not receive specific instructions from the holders of Depositary
Shares representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between Premier and
the Depositary Bank. However, any amendment that materially and adversely alters
the rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
Premier or the Depositary Bank only if (i) all outstanding Depositary Shares
have been redeemed, or (ii) there has been a final distribution in respect of
the Preferred Stock in connection with any liquidation, dissolution or winding
up of Premier and such distribution has been distributed to the holders of
Depositary Receipts.
CHARGES OF DEPOSITARY BANK. Premier will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. Premier will pay charges of the Depositary Bank in connection with
the initial deposit of the Preferred Stock and any redemption of the Preferred
Stock. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges, including any fee for the
withdrawal of shares of Preferred Stock upon surrender of Depositary Receipts,
as are expressly provided in the Deposit Agreement to be for their accounts.
MISCELLANEOUS. The Depositary Bank will forward to holders of Depository
Receipts all reports and communications from Premier that are delivered to the
Depositary Bank and that Premier is required to furnish to the holders of
Preferred Stock.
Neither the Depositary Bank nor Premier will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of Premier and the
Depositary Bank under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
any legal proceeding in respect of any Depositary Shares or Preferred Stock
unless satisfactory indemnity is furnished. They may rely upon written advice of
counsel or accountants, or upon information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Receipts or other persons
believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY BANK. The Depositary Bank may resign
at any time by delivering to Premier notice of its election to do so, and
Premier may at any time remove the Depositary Bank, any such resignation or
removal to take effect upon the appointment of a successor Depositary Bank and
its acceptance of such appointment. Such successor Depositary Bank must be
appointed within 60 days after delivery of the notice of resignation or removal
and must be a bank or trust company having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000.
DESCRIPTION OF WARRANTS
GENERAL
Premier may issue Warrants to purchase Debt Securities ("Debt Warrants")
and/or Warrants to purchase Preferred Stock or Common Stock ("Equity Warrants")
(together, the "Warrants"). Warrants may be issued independently or together
with any securities and may be attached to or separate from such Securities. The
Warrants are to be issued under warrant agreements (each, a "Warrant Agreement")
to be entered into between Premier and a bank or trust company, as warrant agent
(the "Warrant Agent"), all as shall be set forth in the prospectus supplement
relating to Warrants being offered pursuant thereto. A copy of the proposed form
of Warrant Agreement has been filed as an exhibit to the registration statement
of which this prospectus is a part.
DEBT WARRANTS
The applicable prospectus supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the Debt Warrant certificates representing such Debt Warrants ("Debt Warrant
Certificates"), including the following: (1) the title of such Debt Warrants;
(2) the aggregate number of such Debt Warrants; (3) the price or prices at which
such Debt Warrants will be issued; (4) the designation, aggregate principal
amount and terms of the Debt Securities purchasable upon exercise of such Debt
Warrants, and the procedures and conditions relating to the exercise of such
Debt Warrants; (5) the designation and terms of any related Debt Securities with
which such Debt Warrants are issued, and the number of such Debt Warrants issued
with each such Debt Security; (6) the date, if any, on and after which such Debt
Warrants and the related Debt Securities will be separately transferable;
(7) the principal amount of Debt Securities purchasable upon exercise of each
Debt Warrant; (8) the date on which the right to exercise such Debt Warrants
will commence, and the date on which such right will expire; (9) the maximum or
minimum number of such Debt Warrants which may be exercised at any time;
(10) information with respect to book-entry procedures, if any; (11) a
discussion of any material federal income tax considerations; and (12) any other
terms of such Debt Warrants and terms, procedures and limitations relating to
the exercise of such Debt Warrants.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the prospectus supplement. Prior to the exercise of their Debt Warrants, holders
of Debt Warrants will not have any of the rights of holders of the Debt
Securities purchasable upon such exercise and will not be entitled to payment of
principal of or any premium, if any, or interest on the Debt Securities
purchasable upon such exercise.
EQUITY WARRANTS
The applicable prospectus supplement will describe the following terms of
Equity Warrants offered thereby: (1) the title of such Equity Warrants; (2) the
securities (I.E., Preferred Stock or Common Stock)
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
for which such Equity Warrants are exercisable; (3) the price or prices at which
such Equity Warrants will be issued; (4) if applicable, the designation and
terms of the Preferred Stock or Common Stock with which such Equity Warrants are
issued, and the number of such Equity Warrants issued with each such share of
Preferred Stock or Common Stock; (5) if applicable, the date on and after which
such Equity Warrants and the related Preferred Stock or Common Stock will be
separately transferable; (6) if applicable, a discussion of any material federal
income tax considerations; and (7) any other terms of such Equity Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Equity Warrants.
Holders of Equity Warrants will not be entitled, by virtue of being such
holders, to vote, consent, receive dividends, receive notice as stockholders
with respect to any meeting of stockholders for the election of directors of
Premier, or any other matter, or to exercise any rights whatsoever as
stockholders of Premier.
The exercise price payable and the number of shares of Common Stock or
Preferred Stock purchasable upon the exercise of each Equity Warrant will be
subject to adjustment in certain events, including the issuance of a stock
dividend to holders of Common Stock or Preferred Stock or a stock split, reverse
stock split, combination, subdivision or reclassification of Common Stock or
Preferred Stock. In lieu of adjusting the number of shares of Common Stock or
Preferred Stock purchasable upon exercise of each Equity Warrant, Premier may
elect to adjust the number of Equity Warrants. No adjustments in the number of
shares purchasable upon exercise of the Equity Warrants will be required until
cumulative adjustments require an adjustment of at least 1% thereof. Premier
may, at its option, reduce the exercise price of the Equity Warrants at any
time. No fractional shares will be issued upon exercise of Equity Warrants, but
Premier will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger, or sale or
conveyance of the property of Premier as an entirety or substantially as an
entirety, the holder of each outstanding Equity Warrant shall have the right to
the kind and amount of shares of stock and other securities and property
(including cash) receivable by a holder of the number of shares of Common Stock
of Preferred Stock into which such Equity Warrant was exercisable immediately
prior thereto.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase such principal amount of
the underlying securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the prospectus supplement relating
to the Warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the prospectus supplement
relating to the Warrants offered thereby. After the close of business on the
expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the prospectus supplement relating
to the Warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the prospectus supplement,
Premier will, as soon as practicable, forward the Securities purchasable upon
such exercise. If less than all of the Warrants represented by such warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining Warrants.
DESCRIPTION OF UNITS
Premier may issue Units consisting of two or more other constituent
securities, which Units may be issuable as, and for the period of time specified
therein may be transferable as, a single security only, as distinguished from
the separate constituent securities comprising such Units. Any such Units will
be offered pursuant to a prospectus supplement which will (i) identify and
designate the title of any series of Units; (ii) identify and describe the
separate constituent securities comprising such Units; (iii) set forth the price
or prices at which such Units will be issued; (iv) describe, if applicable, the
date on and after which the constituent securities comprising the Units will
become separately transferable; (v) provide
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
information with respect to book-entry procedures, if any; (vi) discuss
applicable United States Federal income tax considerations relating to the
Units; and (vii) set forth any other terms of the Units and their constituent
securities.
PLAN OF DISTRIBUTION
Premier may sell the securities in or outside the United States in any of
three ways (or in any combination thereof): (i) through underwriters or dealers;
(ii) directly to a limited number of purchasers or to a single purchaser; or
(iii) through agents. The prospectus supplement with respect to any securities
will set forth the terms of the offering of such securities, including (a) the
name or names of any underwriters, dealers or agents and the respective amounts
of such securities underwritten or purchased by each of them, (b) the initial
public offering price of such securities and the proceeds to Premier and any
discounts, commissions or concessions allowed or reallowed or paid to dealers,
and (c) any securities exchanges on which such securities may be listed. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any securities, such securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. Such securities may be either offered to the public through underwriting
syndicates represented by managing underwriters, or directly by underwriters.
Unless otherwise set forth in the applicable prospectus supplement, the
obligations of the underwriters to purchase such securities will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all of such securities if any are purchased.
The securities may be sold directly by Premier or through agents designated
by Premier from time to time. Any agent involved in the offer or sale of the
securities in respect of which a prospectus supplement is delivered will be
named, and any commissions payable by Premier to such agent will be set forth,
in the prospectus supplement. Unless otherwise indicated in the prospectus
supplement, any such agent will be acting on a best effort basis for the period
of its appointment.
If so indicated in the applicable prospectus supplement, Premier will
authorize underwriters, dealers or agents to solicit offers by certain
purchasers to purchase the securities from Premier at the public offering price
set forth in the prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth the commission payable
for solicitation of such contracts.
Some or all of the securities may be new issues of securities with no
established trading market. Any underwriters to whom securities are sold by
Premier for public offering and sale may make a market in such securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of or the trading markets for any securities.
In order to facilitate the offering of the securities, any underwriters or
agents, as the case may be, involved in the offering of such securities may
engage in transactions that stabilize, maintain or otherwise affect the price of
such securities or any other securities the prices of which may be used to
determine payments on such securities. Specifically, the underwriters or agents,
as the case may be, may overallot in connection with the offering, creating a
short position in such securities for their own account. In addition, to cover
overallotments or to stabilize the price of such securities or any such other
securities, the underwriters or agents, as the case may be, may bid for, and
purchase, such securities or any such other securities in the open market.
Finally, in any offering of such securities through a syndicate of underwriters,
the underwriting syndicate may reclaim selling concessions allotted to an
underwriter or a dealer for distributing such securities in the offering if the
syndicate repurchases previously distributed
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ON JUNE 30, 2000 PREMIER PARKS INC. CHANGED ITS NAME TO SIX FLAGS, INC.
securities in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of the securities above independent market levels. The underwriters
or agents, as the case may be, are not required to engage in these activities,
and may end any of these activities at any time.
Agents and underwriters may be entitled under agreements entered into with
Premier to indemnification by Premier against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Certain agents and underwriters may be customers of, engage in
transactions with, or perform services for Premier in the ordinary course of
business.
LEGAL MATTERS
Our counsel, Thelen Reid & Priest LLP of New York, New York, will issue an
opinion to us on certain legal matters relating to the securities.
EXPERTS
The consolidated financial statements of Premier Parks Inc. and subsidiaries
as of December 31, 1998 and 1997 and for each of the years in the three-year
period ended December 31, 1998, have been incorporated by reference herein in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon authority of said firm as experts in
accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Six Flags Entertainment Corporation as of December 28, 1997 and
December 29, 1996 and for each of the three years in the period ended
December 28, 1997 included in our Registration Statement on Form S-3 (File
No. 333-46897), as set forth in their report, which is incorporated by reference
in this prospectus and elsewhere in the registration statement. Six Flags
Entertainment Corporation's financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
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7,000,000 PREFERRED INCOME EQUITY
REDEEMABLE SHARES(SM) ("PIERS(SM)")
SIX FLAGS, INC.
[LOGO]
CONSISTING OF DEPOSITARY SHARES
EACH REPRESENTING ONE ONE-HUNDREDTH OF A SHARE
OF % CONVERTIBLE PREFERRED STOCK
------------------
PROSPECTUS SUPPLEMENT
, 2001
------------------------
LEHMAN BROTHERS
ALLEN & COMPANY INCORPORATED
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
<PAGE>
