<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JULY 4, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
COMMISSION FILE NUMBER: 333-46897-01
------------------------
SIX FLAGS ENTERTAINMENT CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-3136577
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
11501 NORTHEAST EXPRESSWAY, OKLAHOMA CITY, OKLAHOMA 73131
(Address of principal executive offices, including zip code)
(405) 475-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
At August 12, 1999, Six Flags Entertainment Corporation had outstanding
1,000 shares of Common Stock.
This Registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 4, 1999 JANUARY 3, 1999
---------------- ----------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 53,538,000 $ 46,112,000
Accounts receivable........................................................ 28,927,000 10,399,000
Inventories................................................................ 22,495,000 13,685,000
Prepaid expenses and other current assets.................................. 10,819,000 5,981,000
Restricted-use investment securities....................................... 188,380,000 183,342,000
---------------- ----------------
Total current assets..................................................... 304,159,000 259,519,000
Other assets:
Debt issuance costs........................................................ 11,491,000 12,346,000
Deposits and other assets.................................................. 50,425,000 51,284,000
---------------- ----------------
Total other assets....................................................... 61,916,000 63,630,000
Property and equipment....................................................... 1,057,405,000 928,420,000
Less accumulated depreciation.............................................. 61,670,000 35,507,000
---------------- ----------------
Total property and equipment............................................. 995,735,000 892,913,000
Intangible assets............................................................ 1,206,648,000 1,197,855,000
Less accumulated amortization.............................................. 59,967,000 36,914,000
---------------- ----------------
Total intangible assets.................................................. 1,146,681,000 1,160,941,000
---------------- ----------------
Total assets............................................................. $ 2,508,491,000 $ 2,377,003,000
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable........................................................... $ 39,253,000 $ 12,664,000
Accrued interest payable................................................... 5,998,000 13,547,000
Payable to affiliate....................................................... 10,901,000 --
Other accrued liabilities.................................................. 55,748,000 59,389,000
Current maturities of long-term debt....................................... 189,380,000 183,877,000
Current portion of capitalized lease obligations........................... 493,000 493,000
---------------- ----------------
Total current liabilities................................................ 301,773,000 269,970,000
Long-term debt and capitalized lease obligations:
Notes payable.............................................................. 170,000,000 491,167,000
Credit facilities.......................................................... 408,250,000 408,750,000
Capitalized lease obligations.............................................. 459,000 557,000
---------------- ----------------
Total long-term debt and capitalized lease obligations................... 578,709,000 900,474,000
Other long-term liabilities.................................................. 44,729,000 46,946,000
Deferred income taxes........................................................ 103,536,000 99,333,000
---------------- ----------------
Total liabilities........................................................ 1,028,747,000 1,316,723,000
Stockholder's equity:
Common stock............................................................... -- --
Additional paid-in-capital................................................. 1,465,393,000 1,031,598,000
Retained earnings.......................................................... 14,351,000 28,682,000
---------------- ----------------
Total stockholder's equity............................................... 1,479,744,000 1,060,280,000
---------------- ----------------
Total liabilities and stockholder's equity............................... $ 2,508,491,000 $ 2,377,003,000
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
ITEM 1--FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JULY 4, 1999, 89-DAY PERIOD ENDED JUNE 28, 1998 AND
TWO-DAY PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRE-ACQUISITION
POST-ACQUISITION 2-DAY
THREE MONTHS 89-DAY PERIOD
POST-ACQUISITION PERIOD ENDED ENDED
ENDED JUNE 28, MARCH 31,
JULY 4, 1999 1998 1998
------------ ------------ -----------
<S> <C> <C> <C>
Revenue:
Theme park admissions............................ 1$19,198,000 1$12,510,000 $ --
Theme park food, merchandise and other........... 86,778,000 80,491,000 --
------------ ------------ -----------
Total revenue.................................. 205,976,000 193,001,000 --
------------ ------------ -----------
Operating costs and expenses:
Operating expenses............................... 59,259,000 66,435,000 13,484,000
Selling, general and administrative.............. 29,321,000 29,335,000 35,150,000
Costs of products sold........................... 18,985,000 19,469,000 192,000
Depreciation and amortization.................... 25,794,000 21,514,000 0
------------ ------------ -----------
Total operating costs and expenses............. 133,359,000 136,753,000 48,826,000
------------ ------------ -----------
Income (loss) from operations.................. 72,617,000 56,248,000 (48,826,000)
------------ ------------ -----------
Other income (expense):
Interest expense................................. (22,174,000) (23,917,000) (1,246,000)
Interest income.................................. 2,685,000 2,736,000 --
------------ ------------ -----------
Total other income (expense)................... (19,489,000) (21,181,000) (1,246,000)
------------ ------------ -----------
Income (loss) before income tax and
extraordinary loss........................... 53,128,000 35,067,000 (50,072,000)
Income tax expense................................. 24,789,000 17,974,000 --
------------ ------------ -----------
Income (loss) before extraordinary loss............ 28,339,000 17,093,000 (50,072,000)
Extraordinary loss on extinguishment of debt, net
of income tax benefit of $312,000................ (469,000) -- --
------------ ------------ -----------
Net income (loss).............................. $27,870,000 $17,093,000 ($50,072,000)
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
ITEM 1--FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JULY 4, 1999, 89-DAY PERIOD ENDED JUNE 28, 1998 AND
93-DAY PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRE-ACQUISITION
POST-ACQUISITION POST-ACQUISITION 93-DAY
SIX MONTHS 89-DAY PERIOD PERIOD ENDED
ENDED ENDED JUNE 28, MARCH 31,
JULY 4, 1999 1998 1998
-------------- --------------- ------------
<S> <C> <C> <C>
Revenue:
Theme park admissions..................... $144,358,000 $ 112,510,000 $ 15,047,000
Theme park food, merchandise and other.... 102,932,000 80,491,000 7,792,000
-------------- --------------- ------------
Total revenue........................... 247,290,000 193,001,000 22,839,000
-------------- --------------- ------------
Operating costs and expenses:
Operating expenses........................ 93,920,000 66,435,000 56,307,000
Selling, general and administrative....... 52,644,000 29,335,000 54,711,000
Costs of products sold.................... 21,910,000 19,469,000 2,193,000
Depreciation and amortization............. 49,550,000 21,514,000 17,629,000
-------------- --------------- ------------
Total operating costs and expenses...... 218,024,000 136,753,000 130,840,000
-------------- --------------- ------------
Income (loss) from operations........... 29,266,000 56,248,000 (108,001,000)
-------------- --------------- ------------
Other income (expenses):
Interest expense.......................... (44,390,000) (23,917,000) (22,585,000)
Interest income........................... 5,355,000 2,736,000 77,000
Equity in operation of theme park
partnerships............................ -- -- (13,152,000)
-------------- --------------- ------------
Total other income (expense)............ (39,035,000) (21,181,000) (35,660,000)
-------------- --------------- ------------
Income (loss) before income tax and
extraordinary loss.................... (9,769,000) 35,067,000 (143,661,000)
Income tax expense.......................... 4,093,000 17,974,000 --
-------------- --------------- ------------
Income (loss) before extraordinary loss..... (13,862,000) 17,093,000 (143,661,000)
Extraordinary loss on extinguishment of
debt, net of income tax benefit of
$312,000.................................. (469,000) -- --
-------------- --------------- ------------
Net income (loss)......................... $(14,331,000) $ 17,093,000 $(143,661,000)
-------------- --------------- ------------
-------------- --------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
ITEM 1--FINANCIAL STATEMENTS (CONTINUED)
SIX FLAGS ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JULY 4, 1999, 89 DAY PERIOD ENDED JUNE 28, 1998 AND
93 DAY PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
(NOTE 1) (NOTE 1)
SIX MONTHS ENDED 89-DAY PERIOD ENDED 93-DAY PERIOD ENDED
JULY 4, 1999 JUNE 28, 1998 MARCH 31, 1998
----------------- ------------------- -------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)..................................... $(14,331,000) $ 17,093,000 $(143,661,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 49,550,000 21,514,000 17,629,000
Extraordinary loss on early extinguishment of
debt............................................ 781,000 -- --
Equity in operations of theme park partnerships... -- -- 13,152,000
Deferred income tax............................... 4,203,000 17,974,000 --
Interest accretion on notes payable............... 2,333,000 7,571,000 11,932,000
Interest accretion on restricted-use investment... (5,038,000) (2,455,000) --
Amortization of debt issuance costs............... 1,023,000 493,000 1,027,000
(Increase) decrease in accounts receivable........ (18,528,000) (22,345,000) 1,742,000
Increase in inventories and prepaid expenses...... (13,648,000) (6,895,000) (24,852,000)
Increase in accounts payable and accrued
liabilities..................................... 14,785,000 21,152,000 68,234,000
Increase in payable to affiliate.................. 10,901,000 -- --
Other, net........................................ 859,000 (343,000) 18,000
----------------- ------------------- -------------------
Net cash provided by (used in) operating
activities.................................... 32,890,000 53,759,000 (54,779,000)
----------------- ------------------- -------------------
Cash flow from investing activities:
Additions to property and equipment................... (117,585,000) (21,520,000) (25,335,000)
Acquisition of theme park assets...................... (20,543,000) -- --
Transfer of interests in theme park partnerships to
Premier............................................. -- 208,082,000 --
Purchase of partnership parks limited partnership
units............................................... -- -- (117,652,000)
Purchase of restricted-use investments................ -- (176,028,000) --
Prepayment of SFOT partnership obligation............. -- -- (13,866,000)
----------------- ------------------- -------------------
Net cash provided by (used in) investing
activities.................................... (138,128,000) 10,534,000 (156,853,000)
----------------- ------------------- -------------------
Cash flow from financing activities:
Proceeds from borrowings.............................. -- 580,000,000 240,000,000
Repayment of long-term debt........................... (321,593,000) (588,500,000) --
Repayment of other debt............................... -- -- (30,503,000)
Payment of debt issuance costs........................ (168,000) (13,122,000) --
Contribution of equity................................ 434,425,000 13,669,000 4,000,000
----------------- ------------------- -------------------
Net cash provided by (used in) financing
activities.................................... 112,664,000 (7,953,000) 213,497,000
----------------- ------------------- -------------------
Increase in cash and cash equivalents................. 7,426,000 56,340,000 1,865,000
Cash and cash equivalents at beginning of period...... 46,112,000 18,670,000 16,805,000
----------------- ------------------- -------------------
Cash and cash equivalents at end of period............ $53,538,000 $ 75,010,000 $ 18,670,000
----------------- ------------------- -------------------
----------------- ------------------- -------------------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL--BASIS OF PRESENTATION
Six Flags Entertainment Corporation ("SFEC," and together with its
subsidiaries, the "Company" or "Six Flags") owns 100% of the common stock of
S.F. Holdings, Inc. ("SF Holdings") which owns 100% of the common stock of Six
Flags Theme Parks Inc. ("SFTP").
Prior to April 1, 1998, Six Flags operated twelve "Six Flags" branded theme
parks in eight locations throughout the United States. For all periods
presented, nine of the theme parks, Six Flags Great Adventure and Wild Safari
Animal Park (New York-Philadelphia), Six Flags Great America (Chicago-
Milwaukee), Six Flags Magic Mountain and Six Flags Hurricane Harbor (Los
Angeles), Six Flags AstroWorld and Six Flags Waterworld (Houston), Six Flags St.
Louis (St. Louis) and Six Flags Hurricane Harbor (Dallas-Ft. Worth) were owned
by Six Flags. Six Flags Fiesta Texas, located in San Antonio, Texas, is leased
by a limited partnership of which a subsidiary of Six Flags is a general partner
and manages the park. On October 30, 1998, Six Flags purchased the minority
interest in the limited partnership and title to the park. Two parks--Six Flags
Over Texas (Dallas-Ft. Worth) and Six Flags Over Georgia (Atlanta) (the
"Partnership Parks")--are owned by limited partnerships of which the managing
general partner was (prior to April 1, 1998) a wholly-owned subsidiary of Six
Flags. On April 1, 1998, Premier Parks Inc. ("Premier") purchased all of the
stock of SFEC (the "Acquisition"). At that time, Six Flags' interests in the
Partnership Parks were transferred to Premier. See Note 3.
Management's Discussion and Analysis of Financial Condition and Results of
Operations which follow these notes contains additional information on the
results of operations and the financial position of the Company. Those comments
should be read in conjunction with these notes. The Company's annual report on
Form 10-K for the year ended January 3, 1999 includes additional information
about the Company, its operations and its financial position, and should be
referred to in conjunction with this quarterly report on Form 10-Q. The
information furnished in this report reflects all adjustments (all of which are
normal and recurring) which are, in the opinion of management, necessary to
present a fair statement of the results for the periods presented.
Results of operations for the three and six-month periods ended July 4, 1999
are not indicative of the results expected for the full year. In particular, the
Company's theme park operations contribute most of their annual revenue during
the period from Memorial Day to Labor Day each year.
As discussed above, Premier purchased SFEC on April 1, 1998. In accordance
with Securities and Exchange Commission Staff Accounting Bulletin No. 54 ("SAB
No. 54"), SFEC has "pushed down" Premier's purchase price in revaluing the
assets and liabilities of SFEC. According to the provisions of SAB No. 54,
purchase transactions that result in an entity becoming substantially
wholly-owned require a new basis of accounting for the purchased assets and
liabilities. As a result of the purchase, SFEC recorded the following purchase
price adjustments as of April 1, 1998 (amounts in thousands):
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
------------------
<S> <C>
Current assets................................................................................ $ (15,621)
Debt issuance costs........................................................................... (19,597)
Property and equipment........................................................................ 322,183
Intangible assets............................................................................. 1,006,606
Deposit and other assets...................................................................... 14,299
Accrued liabilities........................................................................... 26,599
Long-term debt................................................................................ 51,592
Deferred income taxes......................................................................... 64,820
Stockholder's equity.......................................................................... 1,164,859
</TABLE>
6
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The consolidated financial statements of SFEC for the period from December
29, 1997 to March 31, 1998 reflect the accounting basis used by SFEC prior to
its acquisition by Premier. The financial statements of SFEC subsequent to April
1, 1998 reflect the accounting basis for the purchased assets and liabilities
used by SFEC subsequent to its acquisition by Premier. The vertical line that
separates the SFEC consolidated financial statements emphasizes that the new
basis of accounting used by SFEC after the purchase by Premier is not comparable
to the basis of accounting used by SFEC prior to the purchase by Premier.
RECLASSIFICATIONS
Certain items in the January 3, 1999 consolidated balance sheet and
consolidated statements of operations for the post-acquisition 89-day period
ended June 28, 1998 and the pre-acquisition 93-day period ended March 31, 1998
have been reclassified to conform to the July 4, 1999 presentation.
2. ACCOUNTING CHANGES
INVESTMENT IN THEME PARK PARTNERSHIPS
Prior to the Acquisition by Premier, Six Flags, through two subsidiaries,
was the general partner in the Partnerships Parks. Six Flags accounted for the
parks as co-ventures, I.E., the revenues and expenses (excluding partnership
depreciation) were included in Six Flags' consolidated statements of operations
and the net amounts distributed to the limited partners were deducted as
operating expenses. Except for the limited partnership units purchased by Six
Flags from unrelated limited partners, Six Flags had no rights or title to the
Partnership Parks' assets or to the proceeds from any sale of the Partnership
Parks' assets.
On April 1, 1998, Six Flags changed its method of accounting for the
Partnership Parks to the equity method of accounting as prescribed by Accounting
Principles Board Opinion 18 and related interpretations. The change was applied
retroactively to the beginning of Six Flags' 1998 fiscal year, and accordingly,
the consolidated statements of operations for the 1998 period reflects Six
Flags' interests in the operations of the Partnership Parks on the equity
method. Six Flags' interests in the Partnership Parks were transferred to
Premier on April 1, 1998 and therefore, the consolidated statements of
operations for the post acquisition periods, do not include results of Premier's
ownership interests in the Partnership Parks. Six Flags changed its accounting
for the Partnership Parks to reflect in operations revenues and costs and
expenses of only those parks controlled by Six Flags through majority ownership.
This accounting change had no cumulative effect on Six Flags' accumulated
deficit as of December 28, 1997.
ACCOUNTING FOR OFF-SEASON EXPENSES
On April 1, 1998, Six Flags changed its method of accounting for off-season
expenses related to park operations. Prior to the Acquisition by Premier, Six
Flags deferred interim period costs related to park operations and charged such
costs to interim periods based on estimated annual revenues, substantially all
of which were generated in the second and third quarters of the year. No costs
were deferred at the end of a fiscal year.
The change was applied retroactively to the beginning of Six Flags' 1998
fiscal year to conform with Premier's accounting policy for off-season expenses.
This accounting change had the effect of increasing the net loss for the 1998
period by approximately $96,654,000.
7
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITION OF SFEC
On April 1, 1998, Premier acquired all of the outstanding capital stock of
SFEC for $976,000,000, paid in cash. In addition, Premier repaid at closing,
assumed or refinanced approximately $1,032,717,000 of Company debt (including
approximately $285,000,000 in aggregate principal amount at maturity of Six
Flags 12 1/4% Series A Senior Subordinated Discount Notes due 2005 (the "SFTP
Notes") and approximately $164,703,000 accreted value at April 1, 1998 (carrying
value of $188.4 million as of July 4, 1999) of SFEC Zero Coupon Notes (the "Old
SFEC Notes")). Premier funded the Acquisition with the proceeds of concurrent
public offerings and bank facilities (including a new $472,000,000 credit
facility of Six Flags (the "Six Flags Credit Facility") and $170,000,000 of
8 7/8% Senior Notes due 2006 of SFEC (the "SFEC Notes")). See Note 4. The
proceeds of the SFEC Notes, together with cash contributed by Premier, were
deposited in escrow and invested in restricted-use investments to provide for
the repayment in full at or prior to maturity in December 1999 of the Old SFEC
Notes. Pursuant to the Acquisition, Six Flags transferred to Premier all of its
interests in the limited partnerships that own the Partnership Parks, for
$46,000,000 in cash and Premier's payment of $165,686,000 of SFEC debt. Also in
connection with the Acquisition, Premier and Warner Bros. Consumer Products
Division entered into a long-term licensing agreement that gives Premier (and
its subsidiaries, including Six Flags and Premier Parks Operations Inc.) the
exclusive theme park usage rights in the U.S. and Canada (excluding the Las
Vegas, Nevada metropolitan area) for all Warner Bros. and DC Comics animated and
comic book characters.
The following summarized unaudited pro forma results of operations for the
six months ended June 28, 1998, assume that the Acquisition, the transfer and
sale of the interests of Six Flags in the Partnership Parks and the related
financings occurred as of the beginning of that period.
<TABLE>
<S> <C>
Total revenues................................................................ $216,404,000
Net loss...................................................................... $(36,671,000)
</TABLE>
4. LONG-TERM INDEBTEDNESS
(a) On April 1, 1998, SFEC issued $170.0 million principal amount of SFEC
Notes, which are senior obligations of SFEC. The SFEC Notes are guaranteed on a
fully subordinated basis by Premier. The SFEC Notes require annual interest
payments of approximately $15.1 million (8 7/8% per annum) and, except in the
event of a change of control of SFEC and certain other circumstances, do not
require any principal payments prior to their maturity in 2006. The SFEC Notes
are redeemable, at SFEC's option, in whole or in part, at any time on or after
April 1, 2002, at varying redemption prices. The net proceeds of the SFEC Notes,
together with other funds, were invested in restricted-use investment securities
for the repayment in full on or before December 15, 1999 of the Old SFEC Notes
(with a carrying value of $188.4 million at July 4, 1999).
The indenture under which the SFEC Notes were issued limits the ability of
SFEC and its subsidiaries to dispose of assets; incur additional indebtedness or
liens; pay dividends; engage in mergers or consolidations; and engage in certain
transactions with affiliates.
(b) The SFTP Notes were discharged in full on June 30, 1999 out of the
proceeds of a captial contribution of $320.3 million to SFEC by Premier. The
extinguishment resulted in an extraordinary loss of $0.5 million, net of a $0.3
million tax benefit. The SFTP Notes required interest payments of approximately
$34.9 million per annum (12 1/4% per annum). As a result of the application of
purchase accounting, the carrying value of the SFTP Senior Subordinated Notes
was increased to $318.5 million, which was the estimated fair value at the
acquisition date of April 1, 1998. The premium that resulted from the
8
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
adjustment of the carrying value was amortized as a reduction to interest
expense over the remaining term of the SFTP Notes, resulting in an effective
interest rate of approximately 9 3/4%.
(c) On April 1, 1998, SFTP entered into the Six Flags Credit Facility,
pursuant to which it had outstanding $409.3 million at July 4, 1999. The Six
Flags Credit Facility includes (i) a $100.0 million five-year revolving credit
facility used to refinance Six Flags bank indebtedness as of April 1, 1998 and
for working capital and other general corporate purposes (of which $38.0 million
was outstanding on July 4, 1999); and (ii) a $372.0 million term loan facility
(the "Term Loan Facility"), of which $371.3 million was outstanding on July 4,
1999. Borrowings under the Term Loan Facility will mature on November 30, 2004.
However, aggregate principal payments and reductions of $1.0 million are
required during each of the first, second, third and fourth years; aggregate
principal payments of $25.0 million and $40.0 million are required in years five
and six, respectively, and $303.0 million at maturity. Borrowings under the Six
Flags Credit Facility are secured by substantially all of the assets of SFTP and
its subsidiaries and a pledge of the stock of SFTP, and are guaranteed by such
subsidiaries and SFEC.
The Six Flags Credit Facility contains restrictive covenants that, among
other things, limit the ability of SFTP and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends, except that
(subject to covenant compliance) dividends will be permitted to allow SFEC to
meet interest obligations with respect to the SFEC Notes and to permit Premier
to meet a portion of its interest obligations with respect to the $430.0 million
principal amount of its 9 3/4% New Notes, a portion of the proceeds of which
were used to discharge the SFTP Notes (See Note 4b); repurchase stock; make
investments; engage in mergers or consolidations and engage in certain
transactions with subsidiaries and affiliates. In addition, the Six Flags Credit
Facility requires that SFTP comply with certain specified financial ratios and
tests.
5. COMMITMENTS AND CONTINGENCIES
In December 1998, a final judgment of $197.3 million in compensatory damages
was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and Time Warner
Entertainment Company, L.P. ("TWE"), and a final judgment of $245.0 million in
punitive damages was entered against TWE and of $12.0 million in punitive
damages was entered against the referenced Six Flags entities. TWE has appealed
the judgments. The judgments arose out of a case entitled SIX FLAGS OVER
GEORGIA, INC. AND SIX FLAGS THEME PARKS, INC. V. SIX FLAGS FUND, LTD., AND AVRAM
SALKIN, AS TRUSTEE OF THE CLAIMS TRUST based on certain disputed partnership
affairs prior to the Acquisition at Six Flags Over Georgia, including alleged
breaches of fiduciary duty. The sellers in the Acquisition, including Time
Warner Inc., have agreed to indemnify the Company against any and all
liabilities arising out of this litigation.
The Company is party to various other legal actions arising in the normal
course of business. Matters that are probable of unfavorable outcome to the
Company and which can be reasonably estimated are accrued. Such accruals are
based on information known about the matters, the Company's estimates of the
outcomes of such matters and its experience in contesting, litigating and
settling similar matters.
None of the other actions are believed by management to involve amounts that
would be material to the Company's consolidated financial condition, operations
or liquidity after consideration of recorded accruals.
6. BUSINESS SEGMENTS
Both previous and current management managed the Company's operations on an
individual park location basis. Discrete financial information is maintained for
each park and provided to the Company's management for review and as a basis for
decision-making. The primary performance measure used to
9
<PAGE>
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
allocate resources is earnings before interest, tax expense, depreciation and
amortization ("EBITDA"). All of the Company's parks provide similar products and
services through a similar process to the same class of customer through a
consistent method. As such, the Company has only one reportable segment--
operation of theme parks. The following tables present segment financial
information, a reconciliation of the primary segment performance measure to
income (loss) before income taxes and a reconciliation of theme park revenues to
consolidated total revenues. Park level expenses exclude all noncash operating
expenses, principally depreciation and amortization.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
<S> <C> <C> <C> <C>
JULY 4, JULY 4,
1999 JUNE 28, 1998 1999 JUNE 28, 1998
----------- ------------- ----------- -------------
<CAPTION>
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Theme park revenue....................................... 205,976 193,001 247,290 226,008
Theme park cash expenses................................. 105,559 163,788 162,864 243,267
----------- ------------- ----------- -------------
Aggregate park EBITDA.................................... 100,417 29,213 84,426 (17,259)
Third-party share of EBITDA from parks accounted for
under the equity method................................ -- -- -- --
Amortization of investment in theme park partnerships.... -- -- -- (819)
Unallocated net expenses, including corporate and other
expenses from park acquired after completion of
operating season....................................... (2,006) (277) (5,610) (7,684)
Depreciation and amortization............................ (25,794) (21,514) (49,550) (39,143)
Interest expense......................................... (22,174) (25,163) (44,390) (46,502)
Interest income.......................................... 2,685 2,736 5,355 2,813
----------- ------------- ----------- -------------
Income (loss) before income taxes........................ 53,128 (15,005) (9,769) (108,594)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
Theme park revenue....................................... 205,976 193,001 247,290 226,008
Theme park revenue from parks accounted for under the
equity method.......................................... -- -- -- (10,168)
----------- ------------- ----------- -------------
Consolidated total revenue............................... 205,976 193,001 247,290 215,840
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
10
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
Prior to the Acquisition, the Company was the general partner in the limited
partnerships that owned the Partnership Parks. For the historical periods prior
to the Acquisition, the Company accounted for the Partnership Parks as
co-ventures, I.E., their revenues and expenses (excluding partnership
depreciation) were included in the Company's consolidated statements of
operations and the net amounts distributed to the limited partners were deducted
as expenses.
In connection with the Acquisition, the Company transferred its interests in
the Partnership Parks to Premier for cash and assumption of debt. Accordingly,
cash flows from these parks will not be available to service the debt of the
Company (including the SFEC Notes and borrowings under the Six Flags Credit
Facility) and the Company has no continuing interest in the revenues or cash
flows of the Partnership Parks. However, the Company is a guarantor of certain
obligations to the limited partners of the Partnership Parks. Historical results
for the first quarter of 1998 of the Company include the results of the
Partnership Parks which were transferred to Premier as part of the Acquisition.
Results of operations for the three-month and six-month periods ended July
4, 1999 are not indicative of the results expected for the full year. In
particular, the Company's theme park operations contribute most of their annual
revenue during the period from Memorial Day to Labor Day each year.
THREE MONTHS ENDED JULY 4, 1999 VS. THREE MONTHS ENDED JUNE 28, 1998
The table below sets forth certain financial information with respect to the
Company for the three months ended July 4, 1999 and for the aggregate three
month period ended June 28, 1998 and on a pro forma basis for the 1998 period,
as if the Acquisition had occurred on the first day of 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 28, 1998
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POST-ACQUISITION POST-ACQUISITION PRE-ACQUISITION
THREE MONTHS 89-DAY PERIOD TWO DAY PERIOD
ENDED ENDED ENDED PRO FORMA COMPANY
JULY 4, 1999 JUNE 28, 1998 MARCH 31, 1998 ADJUSTMENTS (1) PRO FORMA
--------------- --------------- ----------------- --------------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Theme park admissions......... $ 119,198 $ 112,510 $ -- $ -- $ 112,510
Theme park food, merchandise
and other................... 86,778 80,491 -- -- 80,491
--------------- --------------- -------- --------------- -----------
Total revenue................. 205,976 193,001 -- -- 193,001
--------------- --------------- -------- --------------- -----------
Operating costs and expense:
Operating expenses............ 59,259 66,435 13,484 (10,628) 69,291
Selling, general and
administrative.............. 29,321 29,335 35,150 (35,433) 29,052
Costs of products sold........ 18,985 19,469 192 -- 19,661
Depreciation and
amortization................ 25,794 21,514 -- -- 21,514
--------------- --------------- -------- --------------- -----------
Total operating costs and
expenses.................... 133,359 136,753 48,826 (46,061) 139,518
--------------- --------------- -------- --------------- -----------
Income (loss) from
operations.................. 72,617 56,248 (48,826) 46,061 53,483
--------------- --------------- -------- --------------- -----------
Other income (expense):
Interest expense, net......... (19,489) (21,181) (1,246) -- (22,427)
--------------- --------------- -------- --------------- -----------
Total other income
(expense)................... (19,489) (21,181) (1,246) -- (22,427)
--------------- --------------- -------- --------------- -----------
Income (loss) before taxes.... 53,128 35,067 (50,072) 46,061 31,056
Income tax expense
(benefit)................... 24,789 17,974 -- (1,511) 16,463
--------------- --------------- -------- --------------- -----------
Net income (loss) before
extraordinary item.......... $ 28,339 $ 17,093 $ (50,072) $ 47,572 $ 14,593
--------------- --------------- -------- --------------- -----------
--------------- --------------- -------- --------------- -----------
</TABLE>
11
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
- ------------------------------
(1) Adjustments eliminate the compensation expense arising by virtue of the
vesting of certain restricted stock and stock options resulting from the
Acquisition in the 1998 Pre-Acquisition Period. Also excludes additional
depreciation and amortization and interest expense resulting from the
Acquisition.
Revenue in the second quarter of 1999 totaled $206.0 million compared to
$193.0 million for the second quarter of 1998. The $13.0 million (6.7%) increase
in 1999 revenue compared to the second quarter of 1998 resulted primarily from
an increase in season pass sales of approximately $5.4 million, an increase in
other ticket revenues of $8.5 million and an increase in in-park revenues of
approximately $3.7 million, partially offset by a $4.6 million decrease in
sponsorship and other income. The increase in other ticket revenues and in-park
spending resulted from a 17.4% increase in attendance. The decline in
sponsorship and other income is a timing difference.
Operating expenses for the second quarter of 1999 decreased $10.0 million
compared to pro forma expenses for the second quarter of 1998. As a percentage
of revenues, operating expenses were 28.8% in the 1999 quarter and 35.9% in 1998
(pro forma). The 14.5% decrease compared to pro forma expenses for 1998 resulted
primarily from operating efficiencies realized at the Six Flags parks subsequent
to their acquisition by Premier on April 1, 1998.
Selling, general and administrative expenses for the second quarter of 1999
were flat compared to pro forma expenses for the second quarter of 1998. As a
percentage of revenues, these expenses were 14.2% in 1999 and 15.1% in 1998 (pro
forma). Advertising expense increased by approximately $5.3 million, offset by a
decrease in other selling, general and administrative expenses of $5.3 million.
The increase in advertising expenditures reflects a return to historical
advertising levels and timing of expenditures at the Six Flags parks. The $5.3
million decrease in remaining selling, general and administrative expenses in
the 1999 period resulted from reduced corporate level expenditures, including
staffing, related to the closing of the former Six Flags corporate office
subsequent to the April 1, 1998 acquisition.
Costs of products sold in the 1999 period decreased $0.7 million compared to
expenses for the second quarter of 1998. As a percentage of food, merchandise
and other spending, cost of goods sold represented 21.9% in 1999, as compared to
24.4% in 1998 (pro forma).
Depreciation and amortization expense for the second quarter of 1999
increased $4.3 million compared to the second quarter of 1998, primarily
attributable to the Company's ongoing capital program. Interest expense, net
decreased $2.9 million compared to the second quarter of 1998, primarily as a
result of lower effective interest rates.
Income tax expense was $24.8 million for the second quarter of 1999 compared
to $16.5 million for the second quarter of 1998. The effective tax rate for the
second quarter of 1999 was 46.7% compared to 53.0% for the second quarter of
1998. The Company's quarterly effective tax rate will vary from period-to-period
based upon the inherent seasonal nature of the theme park business, as a result
of permanent differences associated with goodwill amortization for financial
purposes and the non-deductible portion of the amortization for tax purposes.
SIX MONTHS ENDED JULY 4, 1999 VS. AGGREGATE SIX MONTHS ENDED JUNE 28, 1998.
The table below sets forth certain financial information with respect to the
Company for the six months ended July 4, 1998 and for the aggregate six month
period ended June 28, 1998 and on a pro forma basis for such period with respect
to (i) the transfer of the Company's interest in the Partnership Parks, (ii)
changes in certain accounting policies to match those followed by Premier,
including the elimination of the deferral of off-season expenses and a change in
acquisition of season pass revenue, and (iii) the
12
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
elimination of deferred compensation expenses arising out of the exercise of
stock options in connection with the Acquisition, in each case as if the
Acquisition had occurred on December 29, 1997:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 28, 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POST-ACQUISITION POST-ACQUISITION PRE-ACQUISITION
SIX MONTHS 89-DAY PERIOD 93-DAY PERIOD
ENDED ENDED ENDED PRO FORMA COMPANY
JULY 4, 1999 JUNE 28, 1998 MARCH 31, 1998 ADJUSTMENTS(1) PRO FORMA
--------------- --------------- -------------- --------------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Theme park admissions........... $ 144,358 $ 112,510 $ 15,047 $ -- $ 127,557
Theme park food, merchandise and
other......................... 102,932 80,491 7,792 -- 88,283
--------------- --------------- -------------- --------------- -----------
Total revenue................... 247,290 193,001 22,839 -- 215,840
--------------- --------------- -------------- --------------- -----------
Operating costs and expense:
Operating expenses.............. 93,920 66,435 56,307 (10,628) 112,114
Selling, general and
administrative................ 52,644 29,335 54,711 (35,433) 48,613
Costs of products sold.......... 21,910 19,469 2,193 -- 21,662
Depreciation and amortization... 49,550 21,514 17,629 -- 39,143
--------------- --------------- -------------- --------------- -----------
Total operating costs and
expenses...................... 218,024 136,753 130,840 (46,061) 221,532
--------------- --------------- -------------- --------------- -----------
Income (loss) from operations... 29,266 56,248 (108,001) 46,061 (5,692)
--------------- --------------- -------------- --------------- -----------
Other income (expense):
Interest expense, net........... (39,035) (21,181) (22,508) -- (43,689)
Equity in operations of theme
park partnerships............. -- -- (13,152) 13,152 --
--------------- --------------- -------------- --------------- -----------
Total other income (expense).... (39,035) (21,181) (35,660) 13,152 (43,689)
--------------- --------------- -------------- --------------- -----------
Income (loss) before taxes...... (9,769) 35,067 (143,661) 59,213 (49,381)
Income tax expense (benefit).... 4,093 17,974 -- (32,077) (14,103)
--------------- --------------- -------------- --------------- -----------
Income (loss) before
extraordinary item............ $ (13,862) $ 17,093 $ (143,661) $ 91,290 $ (35,278)
--------------- --------------- -------------- --------------- -----------
--------------- --------------- -------------- --------------- -----------
</TABLE>
- ------------------------------
(1) Adjustments reflect the transfer of the Company's interest in the
Partnership Parks and eliminate the compensation expense arising by virtue
of the vesting of certain restricted stock and stock options resulting from
the Acquisition in the 1998 Pre-Acquisition Period. Also excludes additional
depreciation and amortization and interest expense resulting from the
Acquisition.
Revenue in the first six months of 1999 totaled $247.3 million compared to
$215.8 million for the first six months of 1998. The $31.5 million (14.6%)
increase in 1999 revenue compared to pro forma revenue for the first six months
of 1998 resulted primarily from an increase in season pass sales of
approximately $12.8 million, an increase in other ticket revenues of $4.2
million and an increase in in-park revenues of approximately $10.5 million. The
increases in other ticket revenues and in-park spending resulted from a 22.4%
increase in attendance.
Operating expenses for the first six months of 1999 decreased $18.2 million
compared to pro forma expenses for the first six months of 1998. As a percentage
of revenues, operating expenses were 38.0% in 1999 and 51.9% in 1998 (pro
forma). The 16.2% decrease 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.
Selling, general and administrative expenses for the first six months of
1999 increased $4.0 million compared to the pro forma expenses for the first six
months of 1998, resulting from increased advertising expense of $12.9 million
partially offset by a $8.9 million decrease in other selling, general and
administrative expenses. As a percentage of revenues, these expenses were 21.3%
in 1999 and 22.5% in 1998 (pro forma). The increase in advertising expenditures
reflects a return to historical advertising levels of
13
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
expenditures at the Six Flags parks. The $8.9 million decrease in remaining
selling, general and administrative expenses in the 1999 period resulted from
reduced corporate level expenditures, including staffing, related to the closing
of the former Six Flags corporate office subsequent to the April 1, 1998
acquisition.
Costs of products sold in the 1999 period increased $0.2 million compared to
pro forma expenses for the first six months of 1998. As a percentage of food,
merchandise and other spending, cost of products sold represented 21.3% in 1999,
as compared to 24.5% in 1998 (pro forma).
Depreciation and amortization expense for the first six months of 1999
increased $10.4 million compared to the pro forma amount for the first six
months of 1998. The increase compared to the pro forma 1998 level was
attributable to the Company's on-going capital program. Interest expense, net
decreased $4.6 million compared to pro forma interest expense, net for the first
six months of 1998, reflecting interest income earned on investment securities
in the first six months of 1999, which investments were made during the 1998
Post-Acquisition period.
Equity in operations of theme park partnerships for the first quarter of
1998 reflected the Company's share of the loss of Six Flags Over Texas and Six
Flags Over Georgia. The Company's ownership interests in Six Flags Over Texas
and Six Flags Over Georgia were transferred to Premier on April 1, 1998, as part
of the Acquisition.
Income tax expense was $4.1 million for the first six months of 1999
compared to an $14.1 million benefit for the pro forma results for the first six
months of 1998. The Company's effective tax are 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
purposes and the non-deductible portion of the amortization for tax purposes.
Prior to the Acquisition, the recoverability of deferred tax assets, including
net operating loss carry-forwards, was assessed as not probable. Thus, no income
tax benefit was recognized in the 1998 Pre-Acquisition period.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
At July 4, 1999, the Company's indebtedness (including $188.4 million
carrying value of the pre-existing SFEC notes which will be repaid in full from
the proceeds of the SFEC Notes, together with other funds, all of which have
been deposited in escrow) aggregated $768.6 million, of which approximately
$189.9 million (including $188.4 million carrying value of the pre-existing SFEC
Notes) matures prior to July 4, 2000. See Note 4 to the Company's Consolidated
Financial Statements for additional information regarding the Company's
indebtedness. In addition, the Company guaranteed certain obligations relating
to the Partnership Parks. Cash flow from operations at the Partnership Parks
will be used to satisfy these requirements before any funds are required from
the Company.
During the six months ended July 4, 1999, net cash provided by operating
activities was $32.9 million. Net cash used in investing activities in the first
six months of 1999 totaled $138.1 million, consisting primarily of capital
expenditures. Net cash provided by financing activities in the first three
months of 1999 was $112.7 million, primarily representing capital contributions
from Premier, net of the extinguishment of the SFTP Notes (with a carrying value
of $318.4 million as of the extinguishment date).
The degree to which the Company is leveraged could adversely affect its
liquidity. The Company's liquidity could also be adversely affected by
unfavorable weather, accidents or the occurrence of an event or condition,
including negative publicity or significant local competitive events, that
significantly reduce paid attendance and, therefore, revenue at any of its theme
parks.
14
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company believes that, based on historical and anticipated operating
results, cash flows from operations, available cash, available amounts under the
Six Flags Credit Facility and contributions by Premier will be adequate to meet
the Company's future liquidity needs, including anticipated requirements for
working capital, capital expenditures and scheduled debt for at least the next
several years. The Company may, however, need to refinance all or a portion of
its existing debt on or prior to maturity or to seek additional financing.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain
recognition of all derivatives as either assets or liabilities in the balance
sheet and measurement of those instruments at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge. The accounting
for changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and whether it qualifies as a
hedge. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. A subsequent pronouncement, SFAS 137 was issued
in July 1999 that delayed the effective date of SFAS No.133 until the fiscal
year beginning after June 15, 2000. The Company plans to adopt the provisions of
SFAS No.133 in the first quarter of the year ending December 31, 2001. If the
provisions of SFAS No. 133 were to be applied as of June 30, 1999, they would
not have a material effect on the Company's financial position as of such date,
or the results of operations for the three-month and six-month periods then
ended.
IMPACT OF YEAR 2000 ISSUE
The Company's Year 2000 Project (the "Project") is in process. The Project
is addressing the Year 2000 issue caused by computer programs being written
utilizing two digits rather than four to define an applicable year. As a result,
the Company's computer equipment, software and devices with embedded technology
that are time sensitive may misinterpret the actual date beginning on January 1,
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, but not limited to, a temporary inability
to process transactions.
The Company has undertaken various initiatives intended to ensure that its
computer equipment and software will function properly with respect to dates in
the Year 2000 and thereafter. In planning and developing the Project, the
Company has considered both its information technology ("IT") and its 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 technology 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 the Company's Year
2000 identification, assessment, remediation and testing efforts. Based upon its
identification and assessment efforts to date, the Company is in the process of
replacing the computer equipment and upgrading the software it currently uses to
become Year 2000 compliant. In addition, in the ordinary course of replacing
computer equipment and software, the Company plans to obtain replacements that
are in compliance with Year 2000.
The Company has initiated correspondence with its significant vendors and
service providers to determine the extent such entities are vulnerable to Year
2000 issues and whether the products and services purchased from such entities
are Year 2000 compliant. The Company expects to receive a
15
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
favorable response from such third parties and it is anticipated that their
significant Year 2000 issues will be addressed on a timely basis.
With regard to IT, non-IT systems and communications with third parties, the
Company anticipates that the Project will be completed in November 1999.
As noted above, the Company is in the process of replacing certain computer
equipment and software because of the Year 2000 issue. The Company estimates
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 existing
Company employees. Therefore, the labor costs of its Year 2000 identification,
assessment, remediation and testing efforts, as well as currently anticipated
labor costs to be incurred by the Company with respect to Year 2000 issues of
third parties, are expected to be less than $0.8 million.
The Company has not yet developed a most reasonably likely worst case
scenario with respect to Year 2000 issues, but instead has focused its efforts
on reducing uncertainties through the review described above. The Company has
not developed Year 2000 contingency plans other than as described above, and
does not expect to do so unless merited by the results of its continuing review.
The Company presently does 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, remediated and tested, there can be no
assurance that the Year 2000 issue will not materially impact the Company's
results of operations or adversely affect its 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 the Company's systems or
results of operations.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Item 7A of the Company's January 3, 1999 Form 10-K. There have been no
material changes in the Company's exposure to market risk since January 3, 1999.
16
<PAGE>
PART II--OTHER INFORMATION
ITEMS 1--5
Not applicable.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule--July 4, 1999
(b) Reports on Form 8-K
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIX FLAGS ENTERTAINMENT CORPORATION
(Registrant)
Kieran E. Burke
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
James F. Dannhauser
CHIEF FINANCIAL OFFICER
Date: August 17, 1999
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JUL-04-1999
<CASH> 53,538
<SECURITIES> 0
<RECEIVABLES> 28,927
<ALLOWANCES> 0
<INVENTORY> 22,495
<CURRENT-ASSETS> 115,779
<PP&E> 1,057,405
<DEPRECIATION> 61,670
<TOTAL-ASSETS> 2,508,491
<CURRENT-LIABILITIES> 301,773
<BONDS> 578,250
0
0
<COMMON> 0
<OTHER-SE> 1,479,744
<TOTAL-LIABILITY-AND-EQUITY> 2,508,491
<SALES> 247,290
<TOTAL-REVENUES> 247,290
<CGS> 21,910
<TOTAL-COSTS> 21,910
<OTHER-EXPENSES> 143,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,035
<INCOME-PRETAX> (9,769)
<INCOME-TAX> 4,093
<INCOME-CONTINUING> (13,862)
<DISCONTINUED> 0
<EXTRAORDINARY> 469
<CHANGES> 0
<NET-INCOME> (14,331)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
