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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-9789
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PREMIER PARKS INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3995059
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 475-2500
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Securities registered pursuant to Sec. 12(b) of the Act:
Name of Each Exchange
Title of Class on Which Registered
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Shares of common stock, par value $.025 per share, New York Stock Exchange
with Rights to Purchase Series A Junior Preferred
Stock
Premium Income Equity Securities, consisting of New York Stock Exchange
Depositary Shares representing 1/500 of a share
of 7 1/2% Mandatorily Convertible Preferred Stock
Securities registered pursuant to Sec. 12(g) of the Act: NONE
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in the definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates (assuming, solely for the purposes of this Form, that all the
directors of the Registrant are affiliates) of the Registrant:
Approximately $1,952.2 million as of March 1, 1999 (based on the last sales
price on such date as reported on the New York Stock Exchange). See "Item 5. --
Market for the Registrant's Common Equity and Related Stockholder Matters."
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest most practicable date:
The number of shares of Common Stock of the Registrant outstanding as
of March 1, 1999 was 76,513,796 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The information required in Part III by Item 10, as to directors, and
by Items 11, 12 and 13 is incorporated by reference to the Registrant's proxy
statement in connection with the annual meeting of stockholders to be held in
June 1999, which will be filed by the Registrant within 120 days after the close
of its 1998 fiscal year.
PART I
ITEM 1. BUSINESS
INTRODUCTION
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The Company(1) is the largest regional theme park operator and the
second largest theme park company in the world, based on 1998 attendance of
approximately 36.1 million. It operates 31 regional parks, including 15 of the
50 largest theme parks in North America, based on 1998 attendance. The Company's
theme parks serve 9 of the 10 largest metropolitan areas in the United States.
The Company estimates that approximately two-thirds of the population of the
continental United States live within a 150-mile radius of the Company's theme
parks.
For the year ended December 31, 1998, the Company's reported total
revenue was approximately $813.6 million and its earnings before interest,
taxes, depreciation and amortization and non-cash compensation ("EBITDA") was
approximately $286.3 million. Giving pro forma effect to the acquisitions of Six
Flags and Walibi described below as if they had occurred on January 1, 1998,
revenues and EBITDA for that year would have been $838.5 million and $235.2
million, respectively, and adjusted EBITDA (which includes the Company's
proportionate share of the EBITDA of the parks that are less than wholly-owned
by the Company and accounted for by the equity method, i.e., Six Flags Over
Georgia, Six Flags Over Texas and Six Flags Marine World (the "Partnership
Parks")) would have been $258.9 million. Aggregate combined revenues and EBITDA
of the Company and the Partnership Parks for 1998, on the same pro forma basis,
were $1,047.0 million and $288.2 million, respectively.
On April 1, 1998, the Company acquired (the "Six Flags Acquisition")
all of the outstanding capital stock of Six Flags Entertainment Corporation
("SFEC" and, together with its consolidated subsidiaries, "Six Flags"). In March
1998, the Company acquired (the "Walibi Acquisition") a controlling interest in
Walibi, S.A. ("Walibi") and at December 31, 1998 owned 97% of the outstanding
capital stock of Walibi. Prior to these acquisitions, the Company operated nine
regional theme parks (six of which include a water park component) and four
water parks located across the United States.
The parks acquired in the Six Flags Acquisition consist of eight
regional theme parks, as well as three separately gated water parks and a
wildlife safari park (each of which is located near one of the theme parks).
None of the Six Flags parks are located within the primary market of any of the
Company's other U.S. parks. The Walibi parks include six regional theme parks,
two located in Belgium, one in The Netherlands and three in France. For
additional information concerning these acquisitions and the financings thereof,
see Notes 2 and 6 to Notes to Consolidated Financial Statements.
Six Flags has operated regional theme parks under the Six Flags name
for over thirty years. As a result, Six Flags has established a
nationally-recognized brand name. Premier has obtained worldwide ownership of
the Six Flags brand name, and in the 1998 season commenced the use of the Six
Flags brand name at one of the parks owned prior to the Six Flags Acquisition
and is adding the brand name to four additional parks for the 1999 season.
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1 As used in this Report, unless the context requires otherwise, "Company"
or "Premier" refers to Premier Parks Inc. and its consolidated
subsidiaries.
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As part of the Six Flags Acquisition, the Company obtained the
exclusive right for theme-park usage of certain Warner Bros. and DC Comics
animated characters throughout the United States (except the Las Vegas
metropolitan area) and Canada. These characters include Bugs Bunny, Daffy Duck,
Tweety Bird, Yosemite Sam, Batman, Superman and others.(2)
The Company's 31 parks at December 31, 1998, were located in
geographically diverse markets across the United States with concentrated
populations, as well as in Belgium, France and The Netherlands. During the 1998
operating season, the Company's domestic parks 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. Each of the Company's parks is individually themed and
provides a complete family-oriented entertainment experience. The Company's
theme parks generally offer a broad selection of state-of-the-art and
traditional thrill rides, water attractions, themed areas, concerts and shows,
restaurants, game venues and merchandise outlets. In the aggregate, the
Company's theme parks offer more than 800 rides, including over 90 roller
coasters, making the Company the leading provider of "thrill rides" in the
industry.
Since current management assumed control in 1989, the Company has
acquired 30 parks (including its interests in the Partnership Parks), and has
achieved significant internal growth.
DESCRIPTION OF PARKS
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SIX FLAGS AMERICA
Six Flags America (formerly known as Adventure World), a combination
theme and water park located in Largo, Maryland, approximately 15 miles east of
Washington, D.C. and 30 miles southwest of Baltimore, Maryland is the 50th
largest theme park in North America based on 1998 attendance. The park's primary
market includes Maryland, northern Virginia, Washington, D.C. and parts of
Pennsylvania and Delaware. This market provides the park with a permanent
resident population base of approximately 6.6 million people within 50 miles and
11.0 million people within 100 miles. Based on a copyrighted 1998 survey of
television households within designated market areas ("DMAs") published by A.C.
Nielsen Media Research, the Washington, D.C. and Baltimore markets are the
number 7 and number 24 DMAs in the United States, respectively. Based upon
in-park surveys, approximately 87.5% of the visitors to Six Flags America in
1998 resided within a 50-mile radius of the park, and 91.9% resided within a
100-mile radius.
The Company owns a site of 515 acres, with 115 acres currently used
for park operations. The remaining 400 acres, which are fully zoned for
entertainment and recreational uses, provide the Company with ample expansion
opportunity, as well as the potential to develop complementary operations.
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2 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. Six Flags Great Adventure, Six Flags Great America, Six Flags
and all related indicia are federally registered trademarks of Six Flags
Theme Parks Inc., a subsidiary of the Company. Fiesta Texas and all related
indicia are trademarks of Fiesta Texas, Inc., a subsidiary of the Company.
Popeye and all related indicia are copyrights and trademarks of King
Features Syndicate, Inc., a unit of The Hearst Corporation.
-2-
Six Flags America's principal competitors are King's Dominion Park,
located in Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Six Flags
America.
SIX FLAGS DARIEN LAKE & CAMPING RESORT
Six Flags Darien Lake, a combination theme and water park, is the
largest theme park in the State of New York and the 37th largest theme park in
North America. Six Flags Darien Lake is located off Interstate 90 in Darien
Center, New York, approximately 30, 40 and 120 miles from Buffalo, Rochester and
Syracuse, New York, respectively. The park's primary market includes upstate New
York, western and northern Pennsylvania and southern Ontario, Canada. This
market provides the park with a permanent resident population base of
approximately 2.1 million people within 50 miles of the park and 3.2 million
within 100 miles. The Buffalo, Rochester and Syracuse markets are the number 40,
number 77 and number 74 DMAs in the United States, respectively. Based upon
in-park surveys, approximately 65.7% of the visitors to Six Flags Darien Lake in
1998 resided within a 50-mile radius of the park, and 81.2% resided within a
100-mile radius.
The Six Flags Darien Lake property consists of approximately 988
acres, including 144 acres for the theme park, 242 acres of campgrounds and 593
acres of agricultural, undeveloped and water areas. Six Flags Darien Lake also
has a 20,000 seat amphitheater. Following the 1995 season, the Company entered
into a long-term arrangement with a national concert promoter to realize the
cash flow potential of the amphitheater. As a result, since it acquired the
park, the Company has realized substantial increases in revenues earned from
concerts held at the facility.
Adjacent to the Six Flags Darien Lake theme park is a 164 room hotel
and a camping resort, each owned and operated by the Company. The campgrounds
include 1,180 developed campsites, including 430 recreational vehicles (RV's)
available for daily and weekly rental. The campground is the fifth largest in
the United States. In 1998, approximately 346,000 people used the Six Flags
Darien Lake hotel and campgrounds. The Company believes that substantially all
of the hotel and camping visitors use the theme park.
Six Flags Darien Lake's principal competitor is Wonderland Park
located in Toronto, Canada, approximately 125 miles from Six Flags Darien Lake.
In addition, Six Flags Darien Lake competes to a lesser degree with three
smaller amusement parks located within 50 miles of the park. Six Flags Darien
Lake is significantly larger with a more diverse complement of entertainment
than any of these three smaller facilities.
SIX FLAGS ELITCH GARDENS
Six Flags Elitch Gardens is a combination theme and water park located
on approximately 67 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and McNichols Arena, and close to Coors Field. Based on 1998
attendance, Six Flags Elitch Gardens is the 38th largest theme park in North
America. The park's primary market includes the greater Denver area, as well as
most of central Colorado. This market provides the park with a permanent
resident population base of approximately 2.4 million people within 50 miles of
the park and approximately 3.3 million people within 100 miles. The Denver area
is the number 18 DMA in the United States. Based upon in-park surveys,
approximately 62.5% of the visitors to Six Flags Elitch Gardens in 1998 resided
within a 50-mile radius of the park, and 71.2% resided within a 100-mile radius.
Six Flags Elitch Gardens has no significant direct competitors.
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SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas, the 39th largest theme park in North America,
is located on approximately 206 acres of land in San Antonio, Texas. The San
Antonio, Texas market provides the park with a permanent resident population of
1.7 million people within 50 miles and 3.0 million people within 100 miles. The
San Antonio market is the number 38 DMA in the United States. Based upon in-park
surveys, approximately 34.8% of the visitors to the park in 1998 resided within
a 50-mile radius of the park, and 44.8% resided within a 100-mile radius.
Following the 1998 season, Premier purchased the 40% minority interest in Six
Flags Fiesta Texas and title to the park for $45.0 million in cash.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas
located in San Antonio. In addition, the park competes to a lesser degree with
Six Flags Houston, the Company's park located in Houston, Texas, approximately
200 miles from the park.
SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK
Six Flags Great Adventure, the 11th largest theme park in North
America, and the separately gated adjacent Six Flags Wild Safari Animal Park,
are located in Jackson, New Jersey, approximately 70 miles south of New York
City and 50 miles east of Philadelphia. The New York and Philadelphia markets
provide the parks with a permanent resident population of 12.4 million people
within 50 miles and 25.9 million people within 100 miles. The New York and
Philadelphia markets are the number 1 and number 4 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 53.9% of the visitors to
the parks in 1998 resided within a 50-mile radius of the park, and 86.2% resided
within a 100-mile radius.
The Company owns a site of approximately 2,200 acres, of which
approximately 125 acres are currently used for the theme park operations, and
approximately 350 adjacent acres are used for the wildlife safari park, home to
55 species of 1,200 exotic animals which can be seen over a four and one-half
mile drive. Approximately 1,640 acres remain undeveloped. Six Flags Great
Adventure's principal competitors are Hershey Park, located in Hershey,
Pennsylvania, approximately 150 miles from the park; and Dorney Park, located
in Allentown, Pennsylvania, approximately 75 miles from the park.
SIX FLAGS GREAT AMERICA
Six Flags Great America, the 19th largest theme park in North America,
is located in Gurnee, Illinois, between Chicago, Illinois and Milwaukee,
Wisconsin. The Chicago and Milwaukee markets provide the park with a permanent
resident population of 7.8 million people within 50 miles and 12.0 million
people within 100 miles. The Chicago and Milwaukee markets are the number 3 and
number 31 DMAs in the United States, respectively. Based upon in-park surveys,
approximately 66.6% of the visitors to the park in 1998 resided within a 50-mile
radius of the park, and 82.0% resided within a 100-mile radius.
The Company owns a site of approximately 440 acres of which 86 are
used for the theme park operations, and approximately 106 usable acres are in a
separate parcel available for expansion and complementary uses. Six Flags Great
America currently has no direct theme park competitors in the region, but does
compete to some extent with Kings Island, located near Cincinnati, Ohio,
approximately 350 miles from the park; Cedar Point, located in Sandusky, Ohio,
approximately 340 miles from the park; and Six Flags St. Louis, the Company's
park located outside St. Louis, Missouri, approximately 320 miles from the park.
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SIX FLAGS HOUSTON AND SIX FLAGS WATERWORLD
Six Flags Houston, the 30th largest theme park in North America, and
the separately gated adjacent Six Flags WaterWorld, are located in Houston,
Texas on the grounds of an entertainment and sports complex that includes the
Houston Astrodome. The Houston, Texas market provides the parks with a permanent
resident population of 4.3 million people within 50 miles and 5.2 million people
within 100 miles. The Houston market is the number 11 DMA in the United States.
Based upon in-park surveys, approximately 63.6% of the visitors to the theme
park in 1998 resided within a 50-mile radius of the park, and 69.9% resided
within a 100-mile radius.
The Company owns a site of approximately 90 acres used for the theme
park, and approximately 14 acres used for the water park. Six Flags Houston
indirectly competes with Sea World of Texas and the Company's Six Flags Fiesta
Texas, both located in San Antonio, Texas, approximately 200 miles from the
park. Six Flags WaterWorld competes with Splashtown and Water Works, two nearby
water parks.
SIX FLAGS KENTUCKY KINGDOM
Six Flags Kentucky Kingdom is a combination theme and water park,
located on approximately 58 acres on and adjacent to the grounds of the Kentucky
State Fair in Louisville, Kentucky, of which approximately 38 acres are leased
under ground leases with terms (including renewal options) expiring between 2021
and 2049, with the balance owned by the Company. Based on 1998 attendance, Six
Flags Kentucky Kingdom was the 42nd largest theme park in North America. The
park's primary market includes Louisville and Lexington, Kentucky, Evansville
and Indianapolis, Indiana and Nashville, Tennessee. This market provides the
park with a permanent resident population of approximately 1.4 million people
within 50 miles and 4.6 million people within 100 miles. The Louisville and
Lexington markets are the number 50 and number 67 DMAs in the United States.
Based upon in-park surveys, approximately 47.2% of the visitors to the park in
1998 resided within a 50-mile radius of the park and 78.8% resided within a
100-mile radius.
Six Flags Kentucky Kingdom's only significant direct competitor is
Kings Island and The Beach, located in Cincinnati, Ohio, approximately 100 miles
from the park.
SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 15th largest theme park in North
America, and the separately gated adjacent Six Flags Hurricane Harbor, the 15th
largest water park in the United States, are located in Valencia, California, in
the northwest section of Los Angeles County. The Los Angeles, California market
provides the parks with a permanent resident population of 9.8 million people
within 50 miles and 15.8 million people within 100 miles. The Los Angeles market
is the number 2 DMA in the United States. Based upon in-park surveys,
approximately 44.5% of the visitors to the theme park in 1998 resided within a
50-mile radius of the parks, and 67.0% resided within a 100-mile radius.
The Company owns a site of approximately 260 acres with 160 acres used
for the theme park, and approximately 12 acres used for the pirate-themed water
park. Six Flags Magic Mountain's principal competitors include Disneyland in
Anaheim, California, located approximately 60 miles from the park, Universal
Studios Hollywood in Universal City, California, located approximately 20 miles
from the park, Knott's Berry Farm in Buena Park, California, located
approximately 50 miles from the park, and Sea World of California in San Diego,
California, located approximately 150 miles from the park. In early 1999, a new
park, Legoland, opened approximately 120 miles from Magic Mountain. Six Flags
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Hurricane Harbor's only direct competitor in the area is Raging Waters,
approximately 50 miles from the water park.
SIX FLAGS MARINE WORLD
Six Flags Marine World, a theme park which historically featured
primarily marine mammals and exotic land animals, is the 32nd largest theme park
in North America. Six Flags Marine World is located in Vallejo, California,
approximately 30 miles from San Francisco, 20 miles from Oakland and 60 miles
from Sacramento. This market provides the park with a permanent resident
population base of approximately 5.2 million people within 50 miles and 9.7
million people within 100 miles. The San Francisco/Oakland and Sacramento areas
are the number 5 and number 20 DMAs in the United States, respectively. Based
upon in-park surveys, approximately 65.0% of the visitors to Six Flags Marine
World in 1998 resided within a 50-mile radius of the park, and 89.0% resided
within a 100-mile radius.
The Company manages the operations of Six Flags Marine World pursuant
to a management agreement entered into in February 1997, pursuant to which the
Company is entitled to receive an annual base management fee of $250,000 and up
to $250,000 annually in additional fees based on park performance. In addition,
in November 1997 the Company exercised at no additional cost an option to lease
approximately 55 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the combined operations of the park after
operating expenses and debt service. Finally, the Company has the option to
purchase the entire park beginning in February 2002, which it currently expects
to exercise at that time.
Six Flags Marine World currently consists of approximately 136 acres
comprised of various rides and other traditional theme park attractions, as well
as presentation stadiums, animal habitats and picnic areas, bordering a 55-acre
man-made lake. The park provides for the shelter and care of over 50 marine
mammals, 600 land animals, over 70 sharks and rays, birds and reptiles, over
2,600 tropical and cold water fish and marine invertebrates, and 500
butterflies, all featured in a variety of exhibits and participatory
attractions.
Six Flags Marine World's principal competitors are Underwater World at
Pier 39 in San Francisco, Great America in Santa Clara and Outer Bay at Monterey
Bay Aquarium. These parks are located approximately, 30, 60 and 130 miles from
Six Flags Marine World, respectively. In addition, plans for Hecker Pass, a new
theme park in Gilroy, California (approximately 100 miles from Six Flags Marine
World) are under development.
The Company accounts for its interest in Six Flags Marine World under
the equity method of accounting. See Notes 4 and 13 to Notes to Consolidated
Financial Statements.
SIX FLAGS OVER GEORGIA
Six Flags Over Georgia, the 22nd largest theme park in North America
is located in Mableton, Georgia, approximately 10 miles outside of Atlanta,
Georgia. The Atlanta, Georgia market provides the park with a permanent resident
population of 3.8 million people within 50 miles and 6.3 million people within
100 miles. The Atlanta market is the number 10 DMA in the United States. Based
upon in-park surveys, approximately 37.3% of the visitors to the park in 1998
resided within a 50-mile radius of the park, and 53.8% resided within a 100-mile
radius.
Six Flags Over Georgia's primary competitors include Carowinds in
Charlotte, North Carolina, located approximately 250 miles from the park,
Visionland in Birmingham, Alabama, located approximately 160 miles from the
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park, and Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles
from the park. The Georgia Limited Partner (as defined below) owns the site of
approximately 270 acres, including approximately 75 acres of undeveloped land,
all of which is leased to Six Flags Over Georgia II, L.P. (the "Georgia
Co-Venture Partnership").
Partnership Structure. On March 18, 1997, Six Flags completed
arrangements pursuant to which the Company will manage the Georgia park through
2026. Under the agreements governing the new arrangements, the Georgia park is
owned (excluding real property) by the Georgia Co-Venture Partnership of which a
Premier subsidiary is the managing general partner. In the second quarter of
1997, two subsidiaries of Six Flags made a tender offer for partnership
interests ("LP Units") in the 99% limited partner of the Georgia Co-Venture
Partnership (the "Georgia Limited Partner"), that valued the Georgia park at
$250 million (the "Georgia Tender Offer Price"). Six Flags purchased
approximately 25% of the LP Units in the 1997 tender offer at an aggregate price
of $62.7 million.
The key elements of the new arrangements are as follows: (i) the
Georgia Limited Partner (which is not affiliated with the Company except for the
Company's ownership of certain LP Units) received minimum annual distributions
of $18.5 million in 1997 and $18.8 million in 1998, with the minimum
distribution increasing each subsequent year in proportion to increases in the
cost of living; (ii) thereafter, the Company will be entitled to receive from
available cash (after provision for reasonable reserves and after capital
expenditures per annum of approximately 6% of prior year's revenues) a
management fee equal to 3% of the prior year's gross revenues, and, thereafter,
any additional available cash will be distributed 95% to the Company and 5% to
the Georgia Limited Partner; (iii) on an annual basis, the Company will offer to
purchase additional LP Units at a price based on a valuation for the park equal
to the greater of $250.0 million or a value derived by multiplying the weighted
average four year EBITDA (as defined therein) of the park by 8.0; (iv) in 2027,
the Company will have the option to acquire all remaining interests in the
Georgia park at a price based on the Georgia Tender Offer Price, increased in
proportion to the increase in the cost of living between December 1996 and
December 2026, and (v) the Company is required to make minimum capital
expenditures at the Georgia park during rolling five-year periods, based
generally on 6% of the park's revenues. The Company was not required to purchase
a material number of LP Units in the 1998 offer to purchase. Cash flow from
operations at the Georgia park will be used to satisfy these requirements first,
before any funds are required from the Company. In addition, the Company is
entitled to retain its proportionate share (based on its holdings of LP Units)
of distributions made to the Georgia Limited Partner. In connection with the Six
Flags Acquisition, the Company entered into a Subordinated Indemnity Agreement
(the "Subordinated Indemnity Agreement") with certain Six Flags entities, Time
Warner Inc. ("Time Warner") and an affiliate of Time Warner, pursuant to which
the Company transferred to Time Warner (who has guaranteed the Six Flags
obligations under these arrangements) record title to the corporations which own
certain entities that have purchased and will purchase LP Units, and the Company
received an assignment from Time Warner of all cash flow received on such LP
Units and will otherwise control such entities, except in the event of a default
by the Company of its obligations under these arrangements. After all such
obligations have been satisfied, Time Warner is required to retransfer to the
Company such record title for a nominal consideration. In addition, the Company
issued preferred stock of the managing partner of the Georgia Limited Partner to
Time Warner which, in the event of such a default, would permit Time Warner to
obtain control of such entity.
The Company accounts for its interests in the Georgia park under the
equity method of accounting. See Notes 2 and 4 to Notes to Consolidated
Financial Statements.
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SIX FLAGS OVER TEXAS AND SIX FLAGS HURRICANE HARBOR
Six Flags Over Texas, the 20th largest theme park in North America,
and the separately gated Six Flags Hurricane Harbor, the 7th largest water park
in the United States, are located across Interstate 30 from each other in
Arlington, Texas, between Dallas and Fort Worth, Texas. The Dallas/Fort Worth
market provides the parks with a permanent resident population of 4.5 million
people within 50 miles and 5.6 million people within 100 miles. The Dallas/Fort
Worth market is the number 8 DMA in the United States. Based upon in-park
surveys, approximately 54.6% of the visitors to the theme park in 1998 resided
within a 50-mile radius of the theme park, and 63.6% resided within a 100-mile
radius.
The Texas Limited Partner (as defined below) owns a site of
approximately 200 acres used for the theme park. Six Flags Over Texas' principal
competitors include Sea World of Texas and the Company's Six Flags Fiesta Texas,
both located in San Antonio, Texas, approximately 285 miles from the park. The
Company owns directly approximately 47 acres, of which approximately 18 acres
are currently used for Hurricane Harbor and 31 acres remain undeveloped. Six
Flags Hurricane Harbor has no direct competitors in the area other than a
municipal water park.
Partnership Structure. Six Flags Over Texas is owned (excluding real
property) by Texas Flags, Ltd. (the "Texas Co-Venture Partnership"), a Texas
limited partnership of which the 1% general partner is a wholly-owned subsidiary
of Premier, and the 99% limited partner is Six Flags Fund II, Ltd., a Texas
limited partnership (the "Texas Limited Partner") which is unaffiliated with the
Company except that the Company owns certain limited partnership units in the
Texas Limited Partner as described below. Six Flags Hurricane Harbor is 100%
owned by the Company and is not included in these partnership arrangements.
In December 1997, Six Flags completed arrangements pursuant to which
the Company will manage Six Flags Over Texas through 2027. The key elements of
the new arrangements are as follows: (i) the Texas Limited Partner received
minimum annual distribution of $27.7 million in 1998, increasing each year
thereafter in proportion to increases in the cost of living; (ii) thereafter,
the Company will be entitled to receive from available cash (after provision for
reasonable reserves and after capital expenditures per annum of approximately
6.0% of prior year's revenues) a management fee equal to 3% of the prior year's
gross revenues, and, thereafter, any additional available cash will be
distributed 92.5% to the Company and 7.5% to the Texas Limited Partner; (iii) in
the first quarter of 1998, the Company made a tender offer for partnership units
("LP Units") in the Texas Limited Partner that valued the park at approximately
$374.8 million (the "Texas Tender Offer Price"); (iv) commencing in 1999, and on
an annual basis thereafter, Six Flags will offer to purchase LP Units at a price
based on a valuation for the park equal to the greater of $374.8 million or a
value derived by multiplying the weighted-average four year EBITDA of the park
by 8.5; (v) in 2028 the Company will have the option to acquire all remaining
interests in the park at a price based on the Texas Tender Offer Price,
increased in proportion to the increase in the cost of living between December
1997 and December 2027; and (vi) the Company is required to make minimum capital
expenditures at the Texas park during rolling five-year periods, based generally
on 6% of such park's revenues. Cash flow from operations at the Texas park will
be used to satisfy these requirements first, before any funds are required from
the Company. In addition, the Company is entitled to retain its proportionate
share (based on its holdings of LP Units) of distributions made to the Texas
Limited Partner. The Company purchased approximately 33% of the LP Units in the
1998 tender offer at an aggregate price of $117.9 million. In connection with
the Subordinated Indemnity Agreement, the Company transferred to Time Warner
(who has guaranteed the Six Flags obligations under these arrangements) record
title to the corporations which own certain entities that have purchased and
will purchase LP Units and the Company received an assignment from Time Warner
of all cash flow received on such LP Units and will otherwise control such
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entities, except in the event of a default by the Company of its obligations
under these arrangements. After all such obligations have been satisfied, Time
Warner is required to retransfer to the Company such record title for a nominal
consideration. In addition, the Company issued preferred stock of the managing
general partner of the Texas Co-Venture Partnership to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entity.
The Company accounts for its interests in Six Flags Over Texas under
the equity method of accounting. See Notes 2 and 4 to Notes to Consolidated
Financial Statements.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 36th largest theme park in North America, is
located in Eureka, Missouri, about 35 miles west of St. Louis, Missouri. The St.
Louis market provides the park with a permanent resident population of
2.6 million people within 50 miles and 3.7 million people within 100 miles. The
St. Louis market is the number 21 DMA in the United States. Based upon in-park
surveys, approximately 55.3% of the visitors to the park in 1998 resided within
a 50-mile radius of the park, and 65.1% resided within a 100-mile radius.
The Company owns a site of approximately 497 acres used for the theme
park operations. Six Flags St. Louis competes with Kings Island and The Beach,
located near Cincinnati, Ohio, approximately 350 miles from the park; Cedar
Point, located in Sandusky, Ohio, approximately 515 miles from the park; Silver
Dollar City, located in Branson, Missouri, approximately 250 miles from the
park; and Six Flags Great America, the Company's park located near Chicago,
Illinois, approximately 320 miles from the park.
FRONTIER CITY
Frontier City is a western theme park located along Interstate 35 in
northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.2 million
people within 50 miles of the park and 2.4 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 45 and number 59 DMAs in the
United States, respectively. Based upon in-park surveys, approximately 57.3% of
the visitors to Frontier City in 1998 resided within a 50-mile radius of the
park, and 65.6% resided within a 100-mile radius.
The Company owns a site of approximately 95 acres, with 60 acres
currently used for park operations. Frontier City's only significant competitor
is the Company's Six Flags Over Texas, located in Arlington, Texas,
approximately 225 miles from Frontier City.
GEAUGA LAKE
Geauga Lake is a combination theme and water park, and is the 43rd
largest theme park in North America. Geauga Lake is located in Aurora, Ohio, 20
miles southeast of Cleveland and approximately 30, 60 and 120 miles,
respectively, from Akron and Youngstown, Ohio and Pittsburgh, Pennsylvania. This
market provides the park with a permanent resident population base of
approximately 4.0 million people within 50 miles of the park and 7.2 million
within 100 miles. The Cleveland/Akron, Youngstown and Pittsburgh markets are the
number 13, number 97 and number 19 DMAs in the United States, respectively.
Based upon in-park surveys, approximately 72.3% of the visitors to Geauga Lake
in 1998 resided within a 50-mile radius of the park, and 77.0% resided within a
100-mile radius.
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The 258-acre property on which Geauga Lake is situated includes a
55-acre spring-fed lake. The theme park itself presently occupies approximately
116 acres. There are approximately 87 acres of undeveloped land (of which
approximately 30 acres have the potential for further development).
Geauga Lake's principal competitors are Cedar Point in Sandusky, Ohio
and Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately
90 miles and 120 miles, respectively, from Geauga Lake. There are also three
small water parks within a 50-mile radius of Geauga Lake, and Sea World, a
marine park, is located on the other side of Geauga Lake. While Sea World does,
to some extent, compete with Geauga Lake, it is a complementary attraction, and
many patrons visit both facilities. In that regard, the Company and Sea World
conduct joint marketing programs in outer market areas, involving joint
television advertising of combination passes. In addition, combination tickets
are sold at each park. Prior to the 1998 season, the Company purchased a
campground located on approximately 127 acres near the park with 314 campsites
and following that season purchased a 145-room hotel.
THE GREAT ESCAPE
The Great Escape, which opened in 1954, is a combination theme and
water park located off Interstate 87 in the Lake George resort area, 180 miles
north of New York City and 40 miles north of Albany. The park's primary market
includes the Lake George tourist population and the upstate New York and western
New England resident population. This market provides the park with a permanent
resident population base of approximately 870,000 people within 50 miles of the
park and 2.9 million people within 100 miles. The Albany market is the number 52
DMA in the United States. Based upon in-park surveys, approximately 45.4% of the
visitors to The Great Escape in 1998 resided within a 50-mile radius of the
park, and 70.2% resided within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with
143 acres currently used for park operations. Approximately 43 of the
undeveloped acres are suitable for park expansion. The Great Escape's only
significant direct competitor is Riverside Park, the Company's park located in
Springfield, Massachusetts, approximately 150 miles from The Great Escape. In
addition, there is a smaller water park located in Lake George.
RIVERSIDE PARK
Riverside Park is a combination theme park and motor speedway, located
off Interstate 91 near Springfield, Massachusetts, approximately 95 miles west
of Boston. Based on 1998 attendance, Riverside Park is the 35th largest theme
park in North America. Riverside Park's primary market includes Springfield and
western Massachusetts, and Hartford and western Connecticut, as well as portions
of eastern Massachusetts (including Boston) and eastern New York. This market
provides the park with a permanent resident population base of approximately 3.1
million people within 50 miles and 14.7 million people within 100 miles. Based
upon in-park surveys, approximately 60.4% of the visitors to Riverside Park in
1998 resided within a 50-mile radius of the park, and 93.7% resided within a
100-mile radius. Springfield, Hartford/New Haven and Boston are the number 103,
number 27 and number 6 DMAs in the United States.
Riverside Park is comprised of approximately 164 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 34 undeveloped acres. Riverside Park's Speedway is a multi-use
stadium which includes a one-quarter mile NASCAR-sanctioned short track for
automobile racing which can seat 6,200 for speedway events and 15,000 festival
style for concerts.
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Riverside Park's only significant competitor is Lake Compounce located
in Bristol, Connecticut, approximately 50 miles from Riverside Park. Lake
Compounce had not been in regular full-service operation for several years.
However, the prior owner of the park entered into a joint venture relationship
in 1996 with an established park operator, and the park has received an
investment of private and public funds and did operate in the 1998 season. To a
lesser extent, Riverside Park competes with The Great Escape, the Company's park
located in Lake George, New York, approximately 150 miles from Riverside Park.
WALIBI PARKS
In March 1998, Premier initially acquired approximately 50% of the
shares of capital stock of Walibi and thereafter acquired in 1998 an additional
47% of such shares. The Company expects to acquire in 1999 all remaining shares
not currently owned. Walibi, a Belgian corporation, owns six theme parks, two
located in Belgium, one in the Netherlands and three in France. During 1998,
Walibi sold its two non-theme park attractions, Mini Europe and Oceade, both
located in Brussels. Excluding those two attractions, Walibi's parks had
combined 1998 attendance of approximately 3.0 million.
The Walibi parks consist of Bellewaerde, Walibi Aquitaine, Walibi
Flevo, Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre. The Walibi parks'
primary markets include Belgium, The Netherlands, southwestern France, eastern
France and northern France. These markets provide the Walibi parks with a
permanent resident population of 23.0 million people within 50 miles and 54.5
million people within 100 miles.
The Walibi parks' most significant competitors are Disneyland Paris,
located in France, Meli Park and Bobbeejaanland, each located in Belgium, de
Efteling, located in The Netherlands, and Parc Asterix, located in France.
From and after the date of their acquisition through December 31,
1998, the Walibi parks generated aggregate revenues of $66.8 million. For
additional financial and other information concerning the Company's European
operations, see Note 15 to Notes to Consolidated Financial Statements.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld
USA/Concord and Waterworld USA/Sacramento) and one family entertainment center
(Paradise Family Fun Park).
Waterworld USA/Concord is located in Concord, California, in the East
Bay area of San Francisco. The park's primary market includes nearly all of the
San Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.4 million people within 50 miles of the park
and 9.8 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States. Based upon in-park surveys, approximately
88.0% of the visitors in 1998 resided within a 50-mile radius of the park, and
91.0% resided within a 100-mile radius.
Waterworld USA/Sacramento is located on the grounds of the California
State Fair in Sacramento, California. Also located on the fair grounds is
Paradise Family Fun Park, the Company's family entertainment center. The
facilities' primary market includes Sacramento and the immediate surrounding
area. This market provides the park with a permanent resident population base of
approximately 2.7 million people within 50 miles of the park and 9.8 million
people within 100 miles. The Sacramento market is the number 20 DMA in the
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United States. Based upon in-park surveys, approximately 81.0% of the visitors
in 1998 resided within a 50-mile radius of the park, and 93.2% resided within a
100-mile radius.
Both facilities are leased under long-term ground leases. The Concord
site includes approximately 21 acres. The Sacramento facility is located on
approximately 20 acres, all of which is used for the park and the family
entertainment center. Concord's only significant direct competitor is Raging
Waters located in San Jose, approximately 100 miles from that facility.
Sacramento's only significant competitor is Sunsplash located in northeast
Sacramento, approximately 40 miles from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on
approximately 22 acres located along Interstate 40 in southwest Oklahoma City,
Oklahoma. The park's primary market includes the greater Oklahoma City
metropolitan area. Oklahoma City is the number 45 DMA in the United States. This
market provides the park with a permanent resident population base of
approximately 1.2 million people within 50 miles of the park and 2.0 million
people within 100 miles. Based upon in-park surveys, approximately 79.3% of the
visitors to White Water Bay in 1998 resided within a 50-mile radius of the park,
and 86.8% resided within a 100-mile radius. White Water Bay has no direct
competitors.
WYANDOT LAKE
Wyandot Lake, a water park that also offers "dry" rides, is located
just outside of Columbus, Ohio, adjacent to the Columbus Zoo on property
subleased from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in the United States. Based on
in-park surveys, approximately 88.4% of the visitors to Wyandot Lake in 1998
resided within a 50-mile radius of the park, and 91.0% resided within a 100-mile
radius. The park is the 13th largest water park in the United States.
The Company leases from the Columbus Zoo the land, the buildings and
several rides which existed on the property at the time the lease was entered
into in 1983. The current lease expires in 1999, but the Company expects to
exercise the first of its two five-year renewal options. The land leased by
Wyandot Lake consists of approximately 18 acres. The park shares parking
facilities with the Columbus Zoo.
Wyandot Lake's direct competitors are Kings Island and The Beach, each
located in Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. Each of
these parks is located approximately 100 miles from Wyandot Lake. Although the
Columbus Zoo is located adjacent to the park, it is a complementary attraction,
with many patrons visiting both facilities.
MARKETING AND PROMOTION
- -----------------------
The Company attracts visitors through locally oriented multi-media
marketing and promotional programs for each of its parks. These programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Marketing programs are
supervised by the Company's Senior Vice President for Marketing, with the
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assistance of the Company's senior management and in-house marketing staff, as
well as its national advertising agency.
The Company also develops partnership relationships with well-known
national and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
Group sales and pre-sold tickets provide the Company with a consistent
and stable base of attendance, representing over 36% of aggregate attendance in
1998 at the Company's parks. Each park has a group sales and pre-sold ticket
manager and a well-trained sales staff dedicated to selling multiple group sales
and pre-sold ticket programs through a variety of methods, including direct
mail, telemarketing and personal sales calls.
The Company has also developed effective programs for marketing season
pass tickets. Season pass sales establish a solid attendance base in advance of
the season, thus reducing exposure to inclement weather. Additionally, season
pass holders often bring paying guests and generate "word-of-mouth" advertising
for the parks. During 1998, 23% of visitors to the Company's parks utilized
season passes.
A significant portion of the Company's attendance is attributable to
the sale of discount admission tickets. The Company offers discounts on season
and multi-visit tickets, tickets for specific dates and tickets to affiliated
groups such as businesses, schools and religious, fraternal and similar
organizations. The increased in-park spending which results from such attendance
is not offset by incremental operating expenses, since such expenses are
relatively fixed during the operating season.
The Company also implements promotional programs as a means of
targeting specific market segments and geographic locations not reached through
its group or retail sales efforts. The promotional programs utilize coupons,
sweepstakes, reward incentives and rebates to attract additional visitors. These
programs are implemented through direct mail, telemarketing, direct response
media, sponsorship marketing and targeted multi-media programs. The special
promotional offers are usually for a limited time and offer a reduced admission
price or provide some additional incentive to purchase a ticket, such as
combination tickets with a complementary location.
LICENSES
- --------
Pursuant to a license agreement (the "License Agreement") among Warner
Bros., DC Comics, the Company and SFTP, the Company has the exclusive right on a
long-term basis to use Warner Bros. and DC Comics animated characters in theme
parks throughout the United States (other than the Las Vegas metropolitan area)
and Canada. In particular, the License Agreement entitles the Company to use,
subject to customary approval rights of Warner Bros. and, in limited
circumstances, approval rights of certain third parties, all animated and comic
book characters that Warner Bros. and DC Comics have the right to license,
including as of the date hereof, Batman, Superman, Bugs Bunny, Daffy Duck,
Tweety Bird and Yosemite Sam, and includes the right to sell merchandise using
the characters. The license fee is fixed (without regard to the number of the
Company's parks) until 2005, and thereafter the license fee will be subject to
periodic scheduled increases and will be payable on a per-theme park basis. In
addition, the Company will be required to pay a royalty fee on merchandise that
uses the licensed characters manufactured by or for the Company where a fee has
not been paid by the manufacturer. Warner Bros. has the right to terminate the
License Agreement 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. Premier also licenses on a
non-exclusive basis certain other characters, including Popeye, for use at
certain parks.
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PARK OPERATIONS
- ---------------
The Company currently operates in geographically diverse markets in
the United States and in Europe. Each of the Company's parks is operated to the
extent practicable as a separate operating division of the Company in order to
maximize local marketing opportunities and to provide flexibility in meeting
local needs. Each park is managed by a general manager who reports to one of the
Company's three Executive Vice Presidents (each of whom reports to the Chief
Operating Officer) and is responsible for all operations and management of the
individual park. Local advertising, ticket sales, community relations and hiring
and training of personnel are the responsibility of individual park management
in coordination with corporate support teams.
Each of the Company's theme parks is managed by a full-time, on-site
management team under the direction of the general manager. Each such management
team includes senior personnel responsible for operations and maintenance,
marketing and promotion, human resources and merchandising. Park management
compensation structures are designed to provide incentives (including stock
options and cash bonuses) for individual park managers to execute the Company's
strategy and to maximize revenues and operating cash flow at each park. The
Company's 19 general managers in the United States have an aggregate of
approximately 440 years experience in the industry, including approximately 320
years at parks owned or operated by Premier.
The Company's parks are generally open daily from Memorial Day through
Labor Day. In addition, most of the Company's parks are open during weekends
prior to and following their daily seasons, primarily as a site for theme events
(such as Hallowscream and Oktoberfest). Certain of the parks have longer
operating seasons. Typically, the parks charge a basic daily admission price,
which allows unlimited use of all rides and attractions, although in certain
cases special rides and attractions require the payment of an additional fee.
The Company's family entertainment center is open year-round and does not charge
an admission price.
CAPITAL IMPROVEMENTS
- --------------------
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company purchases
both new and used rides. In addition, the Company rotates rides among its parks
to provide fresh attractions. The Company believes that the introduction of new
rides is an important factor in promoting each of the parks in order to achieve
market penetration and encourage longer visits, which lead to increased
attendance and in-park spending. In addition, the Company generally adds theming
to acquired parks and enhances the theming and landscaping of its existing parks
in order to provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to
the optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to 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.
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The Company believes that there are ample sources for rides and other
attractions, and the Company is not dependent on any single source.
Certain of these manufacturers are located outside the United States.
MAINTENANCE AND INSPECTION
- --------------------------
The Company's rides are inspected daily by maintenance personnel
during the operating season. These inspections include safety checks as well as
regular maintenance and are made through both visual inspection of the ride and
test operation. Senior management of the Company and the individual parks
evaluate the risk aspects of each park's operation. Potential risks to employees
and staff as well as to the public are evaluated. Contingency plans for
potential emergency situations have been developed for each facility. During the
off-season, maintenance personnel examine the rides and repair, refurbish and
rebuild them where necessary. This process includes x-raying and magnafluxing (a
further examination for minute cracks and defects) steel portions of certain
rides at high-stress points. At March 1, 1999, the Company had 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 the Company's maintenance and inspection procedures,
the Company's liability insurance carrier performs a periodic inspection of each
park and all attractions and related maintenance procedures. The result of
insurance inspections are written evaluation and inspection reports, as well as
written suggestions on various aspects of park operations. State inspectors also
conduct annual ride inspections before the beginning of each season. Other
portions of each park are also subject to inspections by local fire marshals and
health and building department officials. Furthermore, the Company uses Ellis &
Associates as water safety consultants at its parks in order to train life
guards and audit safety procedures.
INSURANCE
- ---------
The Company maintains insurance of the type and in amounts that it
believes are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $100.0 million per occurrence.
With respect to liability claims arising out of occurrences on and after July 1,
1998, there is no self-insured retention by the Company. However, with respect
to claims arising out of occurrences prior to July 1, 1998 at the parks
purchased in the Six Flags Acquisition, the self-insured portion is the first
$2.0 million of loss per occurrence. The self-insurance portion of claims
arising out of occurrences prior to that date at the Company's other U.S. parks
is $50,000. The Company also maintains fire and extended coverage, workers'
compensation, business interruption and other forms of insurance typical to
businesses in its industry. The fire and extended coverage policies insure the
Company's real and personal properties (other than land) against physical damage
resulting from a variety of hazards.
COMPETITION
- -----------
The Company's parks compete directly with other theme parks, water and
amusement parks and indirectly with all other types of recreational facilities
and forms of entertainment within their market areas, including movies, sports
attractions and vacation travel. Accordingly, the Company's business is and will
continue to be subject to factors affecting the recreation and leisure time
industries generally, such as general economic conditions and changes in
discretionary consumer spending habits. Within each park's regional market area,
the principal factors affecting competition include location, price, the
uniqueness and perceived quality of the rides and attractions in a particular
park, the atmosphere and cleanliness of a park and the quality of its food and
-15-
entertainment. The Company believes its parks feature a sufficient variety of
rides and attractions, restaurants, merchandise outlets and family orientation
to enable it to compete effectively.
SEASONALITY
- -----------
The operations of the Company are highly seasonal, with more than 90%
of park attendance in 1998 occurring in the second and third calendar quarters
and the most active period falling between Memorial Day and Labor Day. The great
majority of the Company's revenues are collected in the second and third
quarters of each year.
ENVIRONMENTAL AND OTHER REGULATION
- ----------------------------------
The Company's operations are subject to increasingly stringent
federal, state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use and minimum wage regulations
applicable to theme park operations, and local and state regulations applicable
to restaurant operations at the park. The Company believes that it is in
substantial compliance with applicable environmental and other laws and
regulations and, although no assurance can be given, it does not foresee the
need for any significant expenditures in this area in the near future.
In addition, portions of the undeveloped areas at some parks are
classified as wetlands. Accordingly, the Company may need to obtain governmental
permits and other approvals prior to conducting development activities that
affect these areas, and future development may be limited in some or all of
these areas.
EMPLOYEES
- ---------
At March 1, 1999, the Company employed approximately 2,300 full-time
employees, and the Company employed approximately 38,000 seasonal employees
during the 1998 operating season. In this regard, the Company competes with
other local employers for qualified student and other candidates on a
season-by-season basis. As part of the seasonal employment program, the Company
employs a significant number of teenagers, which subjects the Company to child
labor laws.
Approximately 12.6% of the Company's full-time and approximately 7.7%
of its seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in January 2000 (Six Flags Over
Texas), December 2000 (Six Flags Over Georgia), December 1999 (Six Flags Great
Adventure), January 2000 (Six Flags St. Louis) and January 2000 (Six Flags
Marine World). The Company has not experienced any strikes or work stoppages by
its employees, and the Company considers its employee relations to be good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Age as of
Name March 1, 1999 Position
- ---- ------------- --------
Kieran E. Burke (41) Director, Chairman of the Board and
Chief Executive Officer since June 1994;
Director, President and Chief Executive
Officer from October 1989 through June
1994.
Gary Story (43) Director, President and Chief Operating
Officer since June 1994; Executive Vice
President and Chief Operating Officer
from February 1992 through June 1994;
prior to such period, general manager of
Frontier City theme park for more than
five years.
James F. Dannhauser (46) Chief Financial Officer since October 1,
1995; Director since October 1992; prior
to June 1996, Managing Director of
Lepercq de Neuflize & Co. Incorporated
for more than five years.
Hue W. Eichelberger (40) Executive Vice President since
February 1, 1997; General Manager of Six
Flags America from May 1992 to 1998;
Park Manager of White Water Bay from
February 1991 to May 1992.
John E. Bement (46) Executive Vice President since May 1998;
General Manager of Six Flags Over
Georgia from January 1993 to May 1998.
Daniel P. Aylward (46) Executive Vice President since June
1998; General Manager of Six Flags
Marine World from February 1997 to June
1998; President and General Manager of
Silverwood Theme Park from January 1995
to February 1997; General Manager of Old
Tucson Studios for six years prior
thereto.
Traci E. Blanks (38) Senior Vice President of Marketing since
January 1998; Vice President of
Marketing from 1995 to January 1998;
Vice President Marketing for Frontier
City and White Water Bay from 1992
through 1994; Director of Marketing for
Frontier City from 1986 through 1992.
Richard A. Kipf (64) Secretary/Treasurer since 1975; Vice
President since June 1994.
James M. Coughlin (47) General Counsel since May 1998; partner,
Baer Marks & Upham LLP for five years
prior thereto.
Each of the above executive officers has been elected to serve in the
position indicated until the next annual meeting of directors which will follow
the annual meeting of stockholders to be held in June 1999.
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ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's material real estate at
March 1, 1999:
Six Flags America, Largo, Maryland -- 515 acres (fee ownership)
Six Flags Darien Lake, Darien Center, New York -- 988 acres (fee ownership)
Six Flags Elitch Gardens, Denver, Colorado -- 67 acres (fee ownership)
Six Flags Fiesta Texas, San Antonio, Texas -- 206 acres (fee ownership)
Six Flags Great Adventure & Wild Safari, Jackson, New Jersey -- 2,200 acres
(fee ownership)(3)
Six Flags Great America, Gurnee, Illinois -- 440 acres (fee ownership)(3)
Six Flags Houston, Houston, Texas -- 90 acres (fee ownership)(3)
Six Flags Hurricane Harbor, Arlington, Texas -- 47 acres (fee ownership)(3)
Six Flags Hurricane Harbor, Valencia, California -- 12 acres (fee ownership)(3)
Six Flags Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership and
leasehold interest)(4)
Six Flags Magic Mountain, Valencia, California -- 248 acres (fee ownership)(3)
Six Flags Marine World, Vallejo, California -- 55 acres (long-term leasehold
interest at nominal rent)
Six Flags Over Georgia, Atlanta, Georgia -- 270 acres (leasehold interest)(5)
Six Flags Over Texas, Arlington, Texas -- 200 acres (leasehold interest)(5)
Six Flags St. Louis, Eureka, Missouri -- 497 acres (fee ownership)(3)
Six Flags WaterWorld, Houston, Texas -- 14 acres (fee ownership)(3)
Bellewaerde, Ieper, Belgium -- 133 acres (fee ownership)
Frontier City, Oklahoma City, Oklahoma -- 95 acres (fee ownership)
Geauga Lake, Aurora, Ohio -- 258 acres (fee ownership)
The Great Escape, Lake George, New York -- 335 acres (fee ownership)
Riverside Park, Agawam, Massachusetts -- 164 acres (fee ownership)
Walibi Aquitaine, Roquefort, France -- 74 acres (fee ownership)
Walibi Flevo, Biddinghuizen, The Netherlands -- 35 acres (fee ownership)
Walibi Rhone-Alpes, Les Avenieres, France -- 375 acres (fee ownership)
Walibi Schtroumpf, Metz, France -- 375 acres (fee ownership)
Walibi Wavre and Aqualibi, Brussels, Belgium -- 120 acres (fee ownership)
Waterworld/Concord, Concord, California -- 21 acres (leasehold interest)(6)
Waterworld/Sacramento, Sacramento, California -- 20 acres (leasehold
interest)(7)
White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee ownership)
Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest)(8)
- -------------------
3 The Company has granted to its lenders under the Six Flags credit agreement
a mortgage on this property.
4 Approximately 38 acres are leased under ground leases with terms (including
renewal options) expiring between 2021 and 2049, with the balance owned by
the Company.
5 Lessor is the limited partner of the partnership that owns the park. The
leases expire in 2027 and 2028, respectively, at which time the Company has
the option to acquire all of the interests in the respective lessor not
previously acquired.
6 The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five-year renewal options.
7 The site is leased from the California Exposition and State Fair. The lease
expires in 2015 and, subject to the satisfaction of certain conditions, may
be renewed by the Company for an additional ten-year term.
8 The site is subleased from the Columbus Zoo. The lease expires in 1999 and
the Company has two five-year renewal options, the first of which will be
exercised in that year. Acreage for this site does not include
approximately 30 acres of parking which is shared with the Columbus Zoo.
-18-
In addition to the foregoing, at March 1, 1999, the Company owned
certain undeveloped land in Indiana and indirectly owned real estate interests
through its non-controlling general partnership interest in 229 East 79th Street
Associates L.P., a limited partnership that converted to cooperative ownership a
New York City apartment building. In addition, the Company leases certain office
space and also certain of the rides and attractions at its parks. See Notes 6
and 14 to Notes to Consolidated Financial Statements.
The Company considers its properties to be well-maintained, in good
condition and adequate for their present uses and business requirements.
ITEM 3. LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to
expose it to claims by visitors for injuries. Historically, the great majority
of these claims have been minor. While the Company believes that it is
adequately insured against the claims currently pending against it and any
potential liability, if the number of such events resulting in liability
significantly increased, or if the Company becomes subject to damages that
cannot by law be insured against, such as punitive damages, there may be a
material adverse effect on its operations.
In June 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. A series of lawsuits arising out of the incident have been consolidated in
California Superior Court under the name Ghilotti et al. v. Waterworld USA et
al. The Company has funded its $50,000 self-insurance retention limit in respect
of the incident under its then liability insurance policy and, although there
can be no assurances, does not expect to pay any additional amounts in
connection with this litigation.
In December 1998, a final judgment of $197.3 million in compensatory
damages was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and TWE,
and a final judgment of $245.0 million in punitive damages was entered against
TWE and of $12.0 million in punitive damages was entered against the referenced
Six Flags entities. TWE has indicated that it intends to appeal the judgments.
The judgments arose out of a case entitled Six Flags Over Georgia, LLC et al. v.
Time Warner Entertainment Company, L.P. et al. based on, among other things,
certain disputed partnership affairs prior to the Six Flags Acquisition at Six
Flags Over Georgia, including alleged breaches of fiduciary duty.
The sellers in the Six Flags Acquisition, including Time Warner, have
agreed to indemnify the Company from any and all liabilities arising out of this
litigation.
On March 21, 1999, a raft capsized in the river rapids ride at Six
Flags Over Texas, resulting in one fatality and injuries to ten others. While
the Park is covered by Premier's multi-layered general liability policy that
provides excess liability coverage of up to $100.0 million per occurrence, with
no self-insured retention, the impact of this incident on the Company's
financial position, operations or liquidity has not yet been determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-19-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been listed on the New York Stock
Exchange (the "NYSE") since December 22, 1997 under the symbol "PKS." Between
May 30, 1996 and December 19, 1997, the Company's Common Stock was traded on the
Nasdaq National Market ("NASDAQ") and quoted under the symbol "PARK." Set forth
below in the first table are the high and low sales prices for the Common Stock
as reported by the NYSE since December 22, 1997. Set forth below in the second
table are the high and low sales prices for the Common Stock as reported by
NASDAQ from January 1, 1997 through December 19, 1997. Prices shown for periods
prior to July 1998 have been adjusted to reflect the Company's two-for-one stock
split at that time.
NEW YORK STOCK EXCHANGE
Year Quarter High Low
---- ------- ---- ---
1999 First (through $34 5/16 $28 1/8
March 22, 1999)
1998 Fourth 30 1/4 15 7/16
Third 33 9/32 15 5/16
Second 33 5/16 26 15/32
First 29 19/32 18 9/16
1997 Fourth (beginning 20 1/4 20 1/32
December 22, 1997)
NASDAQ NATIONAL MARKET
Year Quarter High Low
---- ------- ---- ---
1997 Fourth (through $21 1/2 $18 1/2
December 19, 1997)
Third 18 7/8 16
Second 18 13
First 16 12 1/2
As of March 1, 1999, there were 762 holders of record of the Company's
Common Stock. The Company paid no cash dividends on its Common Stock during the
three years ended December 31, 1998. The Company does not anticipate paying any
cash dividends on its Common Stock during the foreseeable future. The indentures
relating to Premier Parks Inc.'s 9 1/4% Senior Notes Due 2006 (the "Senior
Notes") and 10% Senior Discount Notes Due 2008 (the "Senior Discount Notes")
limit the payment of cash dividends to common stockholders. See Note 6 to Notes
to Consolidated Financial Statements.
-20-
ITEM 6. SELECTED FINANCIAL DATA
Results for 1994 reflect the results of the three parks owned by the
Company during that year. In August 1995, the Company acquired three additional
parks in its acquisition of Funtime Parks, the operations of which are reflected
in 1995 results for the period subsequent to the acquisition date. In the fourth
quarter of 1996, the Company acquired four parks. In February and November 1997,
respectively, the Company acquired Riverside Park and Six Flags Kentucky
Kingdom. In 1998, the Company acquired Six Flags and substantially all of the
capital stock of Walibi. See Note 2 to Notes to Consolidated Financial
Statements.
(In thousands, except per share data)
-----------------------------------
1998 1997
---- ----
Revenue .................................... $ 813,627 $ 193,904
Depreciation and amortization .............. 109,841 19,792
Equity in operations of theme
park partnerships ....................... 24,054 --
Interest expense, net ...................... 115,849 17,775
Provision for income tax expense (benefit) . 40,716 9,615
Income (loss) before extraordinary loss .... 35,628 14,099 1
Extraordinary loss, net of tax effect ...... (788) --
Net income (loss) .......................... 34,840 14,099 1
Net income (loss) applicable to common stock 17,374 14,099 1
Per Share:
Income (loss) before extraordinary loss:
Basic ................................. .27 .39
Diluted ............................... .26 .38
Extraordinary loss, net of tax effect:
Basic ................................. (.01) --
Diluted ............................... (.01) --
Income (loss):
Basic ................................. .26 .39
Diluted ............................... .25 .38
Cash Dividends-- Common ................. -- --
Net cash provided by operating activities .. 119,010 47,150
Net cash used in investing activities ...... (1,664,883) (217,070)
Net cash provided by financing activities .. 1,861,098 250,165
Total assets ............................... 4,052,465 611,321
Long-term debt2 ............................ 2,060,725 217,026
EBITDA3 .................................... 286,325 54,101
Pro forma combined Adjusted EBITDA4 ........ 258,943 N/A
(In thousands, except per share data)
-----------------------------------
1996 1995 1994
---- ---- ----
Revenue .................................. $ 93,447 $ 41,496 $ 24,899
Depreciation and amortization ............ 8,533 3,866 1,997
Equity in operations of theme
park partnerships ..................... -- -- --
Interest expense, net .................... 11,121 5,578 2,299
Provision for income tax expense (benefit) 1,497 (762) 68
Income (loss) before extraordinary loss .. 1,765 (1,045) 102
Extraordinary loss, net of tax effect .... -- (140) --
Net income (loss) ........................ 1,765 (1,185) 102
Net income (loss) applicable to common stock 1,162 (1,714) 102
Per Share:
Income (loss) before extraordinary loss:
Basic ............................... .07 (.20) .02
Diluted ............................. .06 (.20) .02
Extraordinary loss, net of tax effect:
Basic ............................... -- (.02) --
Diluted ............................. -- (.02) --
Income (loss):
Basic ............................... .07 (.22) .02
Diluted ............................. .06 (.22) .02
Cash Dividends-- Common ............... -- -- --
Net cash provided by operating activities. 11,331 10,646 1,060
Net cash used in investing activities .... (155,149) (74,139) (10,177)
Net cash provided by financing activities. 119,074 90,914 7,457
Total assets ............................. 304,803 173,318 45,539
Long-term debt2 .......................... 150,834 94,278 24,108
EBITDA3 .................................. 22,994 7,706 4,549
Pro forma combined Adjusted EBITDA4 ...... N/A N/A N/A
- -----------------------
1 Included in determining net income for 1997 is an $8.4 million ($5.1 million
after tax effect) termination fee, net of expenses.
2 Includes current portion. Also includes in 1998 $182.9 million of certain
zero coupon notes due December 1999 which have been defeased for covenant
purposes. Excluding defeased notes, long-term debt is $1,877.8 million at
December 31, 1998.
3 EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), non-cash compensation, depreciation and amortization and
minority interest. The Company has 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 the Company's operating performance. This
information should be read in conjunction with the Statements of Cash Flows
contained in the Consolidated Financial Statements.
4 Adjusted EBITDA is defined as EBITDA of the Company plus the Company's share
(based on its ownership interests) of the EBITDA of the Partnership Parks,
determined on a pro forma basis as if Six Flags, Walibi and the Company's
interests in the Partnership Parks had been acquired on January 1, 1998.
-21-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
The Company's revenue is derived from the sale of tickets for entrance
to its parks (approximately 52.0%, 48.8% and 44.0%, in 1998, 1997 and 1996,
respectively) and the sale of food, merchandise, games and attractions inside
its parks, as well as sponsorship and other income (approximately 48.0%, 51.2%
and 56.0%, in 1998, 1997 and 1996, respectively). The Company's principal costs
of operations include salaries and wages, employee benefits, advertising,
outside services, maintenance, utilities and insurance. The Company's expenses
are relatively fixed. Costs for full-time employees, maintenance, utilities,
advertising and insurance do not vary significantly with attendance, thereby
providing the Company with a significant degree of operating leverage as
attendance increases and fixed costs per visitor decrease.
Historical results of operations for 1998 include the results of
Riverside Park and Kentucky Kingdom (each of which was acquired during 1997)
(the "1997 Acquisitions") for the entire period. Results of Walibi and Six Flags
are included in 1998 results only from the dates of their respective
acquisitions (March 26, 1998, in the case of Walibi, and April 1, 1998, in the
case of Six Flags). Historical results for 1997 reflect the results of Riverside
Park from its acquisition date (February 5, 1997), and Kentucky Kingdom from its
acquisition date (November 7, 1997) and do not include the results of Walibi or
Six Flags for those periods. In addition, 1998 historical results include in the
Company's equity in earnings the Company's share of the revenues of Marine World
under the applicable lease and related documents. Those results are not included
in the 1997 periods. With respect to 1996, historical results include the
results of the four parks (Elitch Gardens, The Great Escape, Waterworld Concord
and Waterworld Sacramento) acquired in the fourth quarter of that year (the
"1996 Acquisitions") only from their respective acquisition dates, and do not
include the results of Riverside Park, Kentucky Kingdom, Walibi, Six Flags or
Marine World.
The Company believes that significant opportunities exist to acquire
additional theme parks. In addition, the Company intends to continue its
on-going expansion of the rides and attractions and overall improvement of its
parks to maintain and enhance their appeal. Management believes this strategy
has contributed to increased attendance, lengths of stay and in-park spending
and, therefore, profitability.
-22-
RESULTS OF OPERATIONS
- ---------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
The table below sets forth certain financial information with respect
to the Company, Six Flags, Walibi and, for the period prior to its acquisition,
Kentucky Kingdom for the year ended December 31, 1997 and with respect to the
Company and, for periods prior to their respective acquisitions, Six Flags and
Walibi for the year ended December 31, 1998:
Year Ended December 31, 1998
--------------------------------------------------
Historical
Six Flags Historical
for Walibi for
Period Period Prior
Prior to to
Historical April 1, March 26, Historical
Premier 1998(1) 1998(2) Combined
------- ---------- ---------- -----------
(Unaudited) (Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ....... $ 423,461 $ 15,047 $ 883 $ 439,391
Theme park food, merchandise
and other .................. 390,166 8,356 624 399,146
--------- -------- -------- --------
Total revenue .............. 813,627 23,403 1,507 838,537
--------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Operating expenses .......... 297,266 45,679 4,626 347,571
Selling, general and
administration ........... 126,985 19,278 3,407 149,670
Noncash compensation ........ 6,362 -- -- 6,362
Costs of products sold ...... 103,051 2,757 248 106,056
Depreciation and amortization 109,841 17,629 3,214 130,684
--------- -------- -------- --------
Total operating costs
and expenses ............. 643,505 85,343 11,495 740,343
--------- -------- -------- --------
Income (loss) from operations . 170,122 (61,940) (9,988) 98,194
Equity in operations of theme
park partnerships ........... 24,054 -- -- 24,054
OTHER INCOME (EXPENSE):
Interest expense, net ....... (115,849) (21,262) (889) (138,000)
Termination fee, net of
expenses ................ -- -- -- --
Minority interest ........... (960) -- -- --
Other income (expense) ...... (1,023) -- (1) (1,984)
--------- -------- -------- ---------
Total other income
(expense) ................ (117,832) (21,262) (890) (139,984)
--------- -------- -------- ---------
Income (loss) before income
taxes and extraordinary
loss ................... 76,344 (83,202) (10,878) (17,736)
Income tax expense (benefit) 40,716 (30,377) (4,134) 6,205
--------- -------- -------- ---------
Income (loss) before
extraordinary loss ....... $ 35,628 $(52,825) $ (6,744) $ (23,941)
========= ======== ======== =========
EBITDA(6) ................... $ 286,325 $(44,311) $ (6,774) $ 235,240
========= ======== ======== =========
Year Ended December 31, 1997
--------------------------------------------
Historical Historical Historical
Premier Six flags(4) Walibi
------- ----------- ------------
(Unaudited) (Unaudited)
(In Thousands)
REVENUE:
Theme park admissions ....... $ 94,611 $ 274,193 $ 43,742
Theme park food, merchandise
and other .................. 99,293 257,679 24,101
--------- --------- --------
Total revenue .............. 193,904 531,872 67,843
--------- --------- --------
OPERATING COSTS AND EXPENSES:
Operating expenses .......... 81,356 229,588 31,629
Selling, general and
administration ........... 35,422 95,852 10,567
Noncash compensation ........ 1,125 -- --
Costs of products sold ...... 23,025 77,102 6,097
Depreciation and amortization 19,792 72,386 13,998
--------- --------- --------
Total operating costs
and expenses ............. 160,720 474,928 62,291
--------- --------- --------
Income (loss) from operations . 33,184 56,944 5,552
Equity in operations of theme
park partnerships ........... -- -- --
OTHER INCOME (EXPENSE):
Interest expense, net ....... (17,775) (84,430) (3,409)
Termination fee, net of
expenses ................ 8,364 -- --
Minority interest ........... -- 1,147 --
Other income (expense) ...... (59) -- (289)
--------- --------- --------
Total other income
(expense) ................ (9,470) (83,283) (3,698)
--------- --------- --------
Income (loss) before income
taxes and extraordinary
loss ................... 23,714 (3,708) 1,854
Income tax expense (benefit) 9,615 -- 2,373
--------- --------- --------
Income (loss) before
extraordinary loss ....... $ 14,099 $ (3,708) $ (519)
========= ========= ========
EBITDA(6) ................... $ 54,101 $ 129,330 $ 19,550
========= ========= ========
Year Ended December 31, 1997
-----------------------------------
Historical
Kentucky Historical
Kingdom(5) Combined
---------- ----------
(Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ....... $ 11,562 $ 424,108
Theme park food, merchandise
and other .................. 10,152 391,225
-------- ---------
Total revenue .............. 21,714 815,333
-------- ---------
OPERATING COSTS AND EXPENSES:
Operating expenses .......... 5,705 348,278
Selling, general and
administration ........... 5,194 147,035
Noncash compensation ........ -- 1,125
Costs of products sold ...... 2,684 108,908
Depreciation and amortization 2,344 108,520
-------- ---------
Total operating costs
and expenses ............. 15,927 713,866
--------- ---------
Income (loss) from operations . 5,787 101,467
Equity in operations of theme
park partnerships ........... -- --
OTHER INCOME (EXPENSE):
Interest expense, net ....... (3,974) (109,588)
Termination fee, net of
expenses ................ -- 8,364
Minority interest ........... -- 1,147
Other income (expense) ...... 293 (55)
-------- ---------
Total other income
(expense) ................ (3,681) (100,132)
-------- ---------
Income (loss) before income
taxes and extraordinary
loss ................... 2,106 1,335
Income tax expense (benefit) -- 11,988
-------- ---------
Income (loss) before
extraordinary loss ....... $ 2,106 $ (10,635)
======== =========
EBITDA(6) ................... $ 8,131 $ 211,112
======== =========
- -------------------
(1) Includes results of Six Flags for the period prior to April 1, 1998, the
acquisition date, adjusted to (i) eliminate off-season expense deferral of
$86,196, (ii) eliminate results of Partnership Parks, (iii) reflect
recognition of season pass revenue upon receipt, consistent with the
Company's policies and (iv) eliminate the expense associated with certain
one-time option payments made from the purchase price.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date.
(3) Includes results of Riverside Park and Kentucky Kingdom from and after
their respective acquisition dates, February 5 and November 7, 1997.
(4) Includes results of Six Flags adjusted to eliminate results of Partnership
Parks.
(5) Includes results of Kentucky Kingdom for the ten months of 1997 prior to
its acquisition by the Company.
(6) Excludes termination fee in 1997.
-23-
Revenue. Revenue aggregated $813.6 million in 1998 ($838.5 million
combined), compared to $193.9 million reported in 1997. Of reported 1998
revenue, $564.5 million represented revenues of Six Flags and Walibi (the
"Acquired Parks") which were acquired in 1998, and thus not included in reported
1997 results. Revenues generated by the Company's other twelve parks (excluding
Marine World) amounted to $249.1 million in 1998, as compared to $193.7 million
from the Company's eleven parks in 1997. Of this $55.4 million increase, $28.4
million relates to Kentucky Kingdom which was purchased in November of the prior
year, and the balance ($27.0 million) results from improved performance at the
other eleven parks. During 1998, the Company's thirteen parks (including Marine
World) experienced a 14.3% increase in attendance and a 5.0% increase in per
capita spending over the performance of those thirteen parks in the prior year.
Operating Expenses. Operating expenses increased during 1998 to $297.3
million ($347.6 million combined) from $81.4 million reported in 1997. Of
reported 1998 operating expenses, $197.4 million related directly to the
Acquired Parks. Operating expenses at the Company's other twelve parks
(excluding Marine World) increased $18.5 million, primarily reflecting an
incremental $10.3 million of operating expenses for Kentucky Kingdom which was
included for only two months in the prior year, and increased salary expense at
the parks. As a percentage of total reported revenue, reported operating
expenses were 36.5% of revenue (and combined operating expenses were 41.4% of
combined revenues) in 1998 as compared to 42.0% in 1997.
Selling, General and Administrative. Selling, general and
administrative expenses (including non-cash compensation) were $133.3 million in
1998 ($156.0 million on a combined basis), compared to $36.5 million reported
for 1997. Of reported expenses for 1998, $68.2 million related to the Acquired
Parks. Selling, general and administrative expenses at the remaining twelve
parks (excluding Marine World) increased $28.5 million over 1997 levels,
primarily reflecting an incremental $5.2 million of selling, general and
administrative expenses at Kentucky Kingdom, $5.3 million of noncash
compensation relating to restricted stock awards and conditional option grants
over amounts included in 1997, increased corporate expenses reflecting the
larger scope of the Company's operations and, to a lesser extent, increased
marketing and advertising costs and real estate taxes. As a percentage of total
reported revenue, consolidated selling, general and administrative expenses
(excluding non-cash compensation) were 15.6% of revenue (and combined selling,
general and administrative expenses (excluding non-cash compensation) were 17.8%
of combined revenues) in 1998 as compared to 18.3% for 1997. The decrease is a
result of the Company's continued ability to use operating leverage to increase
operations without having to increase administrative costs by a like percentage.
Costs of Products Sold. Costs of products sold were $103.1 million for
1998 ($106.1 million on a combined basis) compared to $23.0 million reported for
1997. Reported costs for 1998 include $75.2 million related to the Acquired
Parks. The balance of the increase ($4.9 million) over reported 1997 costs
primarily related to $2.7 million of costs of sales at Kentucky Kingdom and to
increased product sales at the parks owned in both years.
Depreciation and Interest Expense. Depreciation and amortization
expense increased $90.0 million from $19.8 million in 1997 to $109.8 million in
1998, of which $82.6 million was attributable to the recognition of depreciation
and amortization expense for the Acquired Parks, an incremental $2.9 million was
attributable to Kentucky Kingdom and the balance was attributable to the
Company's on-going capital program. Interest expense, net of interest income,
increased from $17.8 million to $115.9 million in 1998 principally as a result
of borrowings made in connection with the acquisition of Six Flags and Walibi.
See Notes 2 and 6 to Notes to Consolidated Financial Statements.
Equity in Operations of Theme Parks. Equity in operations of theme
park partnerships results from the Company's shares of the operations of Six
Flags Over Texas (33%)effective Company ownership) and Six Flags Over Georgia
-24-
(25% effective Company ownership), the lease of Six Flags Marine World and the
management of all three parks. The Company did not have the partial ownership or
lease arrangement with any of the parks prior to commencement of the 1998
operating season. See Notes 2, 4 and 13 to Notes to Consolidated Financial
Statements.
Income Taxes. Income tax expense was $40.7 million for 1998 as
compared to $9.6 million for 1997. The increase in the effective tax rate to
53.3% from 40.5% is a function of the non-deductible intangible asset
amortization associated with the Six Flags Acquisition. Approximately $10.0
million of non-deductible amortization will be recognized each quarter. The
Company's quarterly effective income tax rate will vary from period-to-period
based upon the inherent seasonal nature of the theme park business.
At December 31, 1998, the Company estimates that it had approximately
$346.1 million of net operating losses ("NOLs") carryforwards for Federal income
tax purposes. The NOLs are subject to review and potential disallowance by the
Internal Revenue Service upon audit of the Federal income tax returns of the
Company and its subsidiaries. In addition, the use of such NOLs is subject to
limitations on the amount of taxable income that can be offset with such NOLs.
Some of such NOLs also are subject to a limitation as to which of the
subsidiaries' income such NOLs are permitted to offset. Accordingly, no
assurance can be given as to the timing or amount of the availability of such
NOLs to the Company and its subsidiaries. See Note 9 to Notes to Consolidated
Financial Statements.
Net Income. Net income applicable to common stock in 1998 reflects as
a charge to net income the preferred stock dividends accrued since the April 1,
1998 issuance of the Company's Premium Income Equity Securities ("PIES"). The
PIES accrue cumulative dividends at 7 1/2% per annum (17/8% per quarter), which
approximates an annual dividend requirement of $23.3 million (approximately
$5.8 million per quarter). The dividend is payable in cash or shares of Common
Stock at the option of the Company. To date, the Company has elected to pay the
dividend in cash.
-25-
YEARS ENDED DECEMBER 31, 1997 AND 1996
The table below sets forth certain financial information with respect
to the Company (including the 1996 Acquisitions) for the year ended December 31,
1996 and with respect to the Company and Kentucky Kingdom and Marine World for
the year ended December 31, 1997:
Year Ended December 31, 1997
--------------------------------------------
Historical
Premier
(Excluding
Marine World Kentucky
and Kentucky Kingdom and Historical
Kingdom)(1) Marine World(2) Premier
------- ------------ -------
(Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ............. $94,611 $ -- $94,611
Theme park food, merchandise
and other ........................ 99,103 190 99,293
--------- ------- ---------
Total revenue .................... 193,714 190 193,904
--------- ------- ---------
OPERATING COSTS AND EXPENSES:
Operating expenses ................ 80,307 1,049 81,356
Selling, general and administrative 53,336 86 35,422
Noncash compensation .............. 1,125 -- 1,125
Costs of products sold ............ 23,025 -- 23,025
Depreciation and amortization ..... 19,159 633 19,792
--------- ------- ---------
Total operating costs
and expenses ................... 158,952 1,768 160,720
--------- ------- ---------
Income (loss) from operations ....... 34,762 (1,578) 33,184
OTHER INCOME (EXPENSE):
Interest expense, net ............. (17,763) (12) (17,775)
Termination fee, net of expenses .. 8,364 -- 8,364
Other income (expense) ............ (59) -- (59)
--------- ------- ---------
Total other income (expense) ..... (9,458) (12) (9,470)
--------- ------- ---------
Income (loss) before income taxes . 25,304 (1,590) 23,714
Income tax expense (benefit) ...... 9,615 -- 9,615
--------- ------- ---------
Net income (loss) ................. $15,689 $(1,590) $14,099
========= ======= =========
EBITDA(6) ......................... $53,921 $(945) $52,976
========= ======= =========
Year Ended December 31, 1996
-------------------------------------------
Historical
Historical 1996
Nine Months Acquisitions
Ended for Period
September 30 Subsequent to
Historical 1996 for 1996 September 30,
Premier(3) Acquisitions(4) 30,1996(5)
---------- --------------- -------------
(Unaudited) (Unaudited)
(In thousands)
REVENUE:
Theme park admissions ............. $41,162 $34,062 $724
Theme park food, merchandise
and other ........................ 52,285 30,453 1,020
-------- -------- -------
Total revenue .................... 93,447 64,515 1,744
-------- -------- -------
OPERATING COSTS AND EXPENSES:
Operating expenses ................ 42,425 23,204 3,116
Selling, general and administrative 16,927 17,035 2,289
Noncash compensation .............. -- -- --
Costs of products sold ............ 11,101 9,448 347
Depreciation and amortization ..... 8,533 13,028 703
-------- -------- -------
Total operating costs
and expenses ................... 78,986 62,715 6,455
-------- -------- -------
Income (loss) from operations ....... 14,461 1,800 (4,711)
OTHER INCOME (EXPENSE):
Interest expense, net ............. (11,121) (4,624) (517)
Termination fee, net of expenses .. -- -- --
Other income (expense) ............ (78) (284) --
-------- -------- -------
Total other income (expense) ..... (11,199) (4,908) (517)
-------- -------- -------
Income (loss) before income taxes . 3,262 (3,108) (5,228)
Income tax expense (benefit) ...... 1,497 1,131 --
-------- -------- -------
Net income (loss) ................. $1,765 $(4,239) $(5,228)
======== ======== =======
EBITDA(6) ......................... $22,994 $14,828 $(4,008)
======== ======== =======
Year Ended December 31, 1996
-----------------------------
Historical
Combined
--------
(Unaudited)
(In thousands)
REVENUE:
Theme park admissions ............. $75,948
Theme park food, merchandise
and other ........................ 83,758
-------
Total revenue .................... 159,706
-------
OPERATING COSTS AND EXPENSES:
Operating expenses ................ 68,745
Selling, general and administrative 36,251
Noncash compensation .............. --
Costs of products sold ............ 20,896
Depreciation and amortization ..... 22,264
-------
Total operating costs
and expenses ................... 148,156
-------
Income (loss) from operations ....... 11,550
OTHER INCOME (EXPENSE):
Interest expense, net ............. (16,262)
Termination fee, net of expenses .. --
Other income (expense) ............ (362)
---------
Total other income (expense) ..... (16,624)
---------
Income (loss) before income taxes . (5,074)
Income tax expense (benefit) ...... 2,628
---------
Net income (loss) ................. $(7,702)
=========
EBITDA(6) ......................... $33,814
=========
- -------------------
(1) Excludes management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom for the period subsequent to the
acquisition date, November 7, 1997.
(2) Represents management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom from the acquisition date through
December 31, 1997.
(3) Includes results of the 1996 Acquisitions from and after the acquisition
dates.
(4) Includes results of the 1996 Acquisitions for the nine months ended
September 30, 1996.
(5) Includes results of the 1996 Acquisitions for the respective periods
commencing October 1, 1996 and ending on the respective acquisition dates
(or in the case of Riverside Park, December 31, 1996).
(6) Excludes termination fee in 1997.
-26-
Revenue. Revenue aggregated $193.9 million in 1997 ($193.7 million at
the eleven parks owned during the 1997 season), compared to $93.4 million in
1996, and to combined revenue of $159.7 million in 1996. This 21.3% increase in
revenue at the same eleven parks is primarily attributable to increased
attendance (8.9%) at these eleven parks, which resulted in part from increased
season pass and group sales at several parks.
Operating Expenses. Operating expenses increased during 1997 to $81.4
million ($80.3 million at the eleven parks owned during the 1997 season) from
$42.4 million reported in 1996, and from $68.7 million combined operating
expenses for 1996. This 16.9% increase in operating expenses at the same eleven
parks is mainly due to additional staffing related to the increased attendance
levels and increased pay rates. As a percentage of revenue, operating expenses
at these parks constituted 41.5% for 1997 and 43.0% on a combined basis for
1996.
Selling, General and Administrative. Selling, general and
administrative expenses (including noncash compensation) at the eleven owned
parks were $36.5 million in 1997, compared to $16.9 million reported, and
$36.3 million combined, selling, general and administrative expenses for 1996.
As a percentage of revenues, these expenses at the same eleven parks constituted
18.8% for 1997 and 22.7% for 1996 combined. This increase over 1996 combined
expenses relates primarily to increased advertising and marketing expenses to
promote the newly acquired parks and the new rides and attractions at all of the
parks, increased sales taxes arising from increased volume generally and
increased property taxes and professional services, offset by significant
reductions in personnel and insurance expenses.
Costs of Products Sold. Costs of products sold were $23.0 million at
the eleven parks for 1997 compared to $11.1 million reported and $20.9 million
combined for 1996. Cost of products sold (as a percentage of in-park revenue) at
these parks constituted approximately 23.2% for 1997 and 25.0% for 1996
combined. This $2.1 million or 10.1% increase over combined 1996 results is
directly related to the 18.3% increase in food, merchandise and other revenues.
Depreciation and Interest Expense. Depreciation expense increased
$11.3 million over the reported 1996 results. The increase is a result of the
full year's effect of the 1996 Acquisitions (other than Riverside Park), the
purchase price paid for the Riverside Park and Kentucky Kingdom acquisitions and
the on-going capital program at the Company's parks. Interest expense, net,
increased $6.7 million from 1996 as a result of interest on the Company's 9 3/4%
Senior Notes due 2007.
Termination Fee, Net of Expenses. During October 1997, the Company
entered into an agreement with the limited partner of the partnership that owns
Six Flags Over Texas to become the managing general partner of the partnership,
to manage the operations of the park, to receive a portion of the income from
such operations, and to purchase limited partnership units over the term of the
agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the park reached an agreement with the limited partnership, and the
Company's agreement was terminated. The Company received the termination fee in
December 1997 and included the termination fee, net of $2,386,000 of expenses
associated with the transaction, as income in 1997.
Income Taxes. The Company incurred income tax expense of $9.6 million
during 1997, compared to $1.5 million during 1996. The effective tax rate for
1997 was approximately 40.5% as compared to 45.9% in 1996. This decrease is the
result of the decline in the size of the non-deductible goodwill from the
-27-
Funtime Acquisition and the acquisition of Riverside Park relative to the
Company's income.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
- --------------------------------------------
At December 31, 1998, the Company's indebtedness (including $182.9
million carrying value of the pre-existing SFEC notes (the "Old SFEC Notes")
which will be repaid in full on or prior to December 15, 1999 from the proceeds
of SFEC's 87/8% Senior Notes Due 2006 ("SFEC Notes") issued in connection with
the Six Flags Acquisition, together with other funds, all of which have been
deposited as a restricted-use investment in escrow) aggregated $2,060.8 million,
of which approximately $15.2 million (excluding the prefunded Old SFEC Notes)
matures prior to December 31, 1999. Based on interest rates at December 31, 1998
for floating rate debt, annual cash interest payments for 1999 on this
indebtedness will total approximately $145.9 million, of which $25.9 million has
been deposited in a dedicated escrow account which has been classified as a
restricted-use investment. In addition, annual dividend payments on the PIES are
$23.3 million, payable at the Company's option in cash or shares of Common
Stock. See Notes 6 and 10 to Notes to Consolidated Financial Statements for
additional information regarding the Company's indebtedness.
During the year ended December 31, 1998, net cash provided by
operating activities was $119.0 million. Net cash used in investing activities
in 1998 totaled $1,664.9 million, consisting primarily of the Company's
acquisition of Six Flags and Walibi ($1,037.4 million, net of cash acquired)
and, to a lesser extent, title to and the minority interest in Six Flags Fiesta
Texas, a hotel near the Company's Geauga Lake theme park and capital
expenditures for the 1998 and 1999 seasons. Net cash provided by financing
activities in 1998 was $1,861.1 million, representing proceeds of borrowings
under the Premier and Six Flags credit facilities, and proceeds of the public
offerings of Common Stock, PIES, Senior Notes, Senior Discount Notes and SFEC
Notes issued in connection with the Six Flags Acquisition and described in Notes
2 and 6 to Notes to Consolidated Financial Statements, offset in part by debt
payments and the payment of certain debt issuance costs.
As more fully described in "Business -- Six Flags Over Georgia" and
"-- Six Flags Over Texas and Six Flags Hurricane Harbor" and in Note 2 to Notes
to Consolidated Financial Statements, in connection with the Six Flags
Acquisition, the Company guaranteed certain obligations relating to Six Flags
Over Georgia and Six Flags Over Texas (the "Co-Venture Parks"). Among such
obligations are (i) minimum distributions of approximately $47.3 million in 1999
to partners in the Co-Venture Parks (of which the Company will be entitled to
receive $14.1 million based on its present ownership interests), (ii) up to
approximately $43.75 million of limited partnership unit purchase obligations
for 1999 with respect to both parks and (iii) minimum capital expenditures for
that year at both parks of approximately $14.6 million. Cash flows from
operations at the Co-Venture Parks will be used to satisfy these requirements,
before any funds are required from the Company.
The degree to which the Company is leveraged could adversely affect
its liquidity. The Company's liquidity could also be adversely affected by
unfavorable weather, accidents or the occurrence of an event or condition,
including negative publicity or significant local competitive events, that
significantly reduces paid attendance and, therefore, revenue at any of its
theme parks.
On October 30, 1998, the Company purchased the 40% minority interest
in Six Flags Fiesta Texas and title to the park for approximately $45.0 million
in cash.
The Company believes that, based on historical and anticipated
operating results, cash flows from operations, available cash and available
amounts under the Premier and Six Flags Credit Facilities will be adequate to
meet the Company's future liquidity needs, including anticipated requirements
-28-
for working capital, capital expenditures, scheduled debt and PIES requirements
and obligations under arrangements relating to the Co-Venture Parks, for at
least the next several years. The Company may, however, need to refinance all or
a portion of its existing debt on or prior to maturity or to seek additional
financing.
MARKET RISKS AND SENSITIVITY ANALYSES
- -------------------------------------
Like other global companies, Premier is exposed to market risks
relating to fluctuations in interest rates and currency exchange rates. The
objective of financial risk management at Premier is to minimize the negative
impact of interest rate and foreign exchange rate fluctuations on the Company's
earnings, cash flows and equity. Premier does not acquire market risk sensitive
instruments for trading purposes.
To manage market risks, on a limited basis Premier has used derivative
financial instruments, exclusively foreign exchange forward contracts. These
derivative financial instruments have been held to maturity and Premier only
uses non-leveraged instruments. These contracts are entered into with major
financial institutions, thereby minimizing the risk of credit loss. Premier has
used forward contracts to "lock-in" the U.S. dollar cost of equipment to be
purchased from foreign vendors or manufacturers where the contracts related
thereto are denominated in foreign currency. See Note 5 to Notes to Consolidated
Financial Statements for a more complete description of Premier's accounting
policies and use of such instruments.
The following analyses present the sensitivity of the market value,
earnings and cash flows of Premier's financial instruments to hypothetical
changes in interest and exchange rates as if these changes occurred at
December 31, 1998. The range of changes chosen for these analyses reflect
Premier's view of changes which are reasonably possible over a one-year period.
Market values are the present values of projected future cash flows based on the
interest rate and exchange rate assumptions. These forward looking disclosures
are selective in nature and only address the potential impacts from financial
instruments. They do not include other potential effects which could impact
Premier's business as a result of these changes in interest and exchange rates.
INTEREST RATE AND DEBT SENSITIVITY ANALYSIS
At December 31, 1998, Premier had debt totaling $2,060.8 million, of
which $1,451.0 million represents fixed-rate debt and $609.8 million represents
floating-rate debt. For fixed-rate debt, interest rate changes affect the fair
market value but do not impact book value, earnings or cash flows. Conversely,
for floating-rate debt, interest rate changes generally do not affect the fair
market value but do impact future earnings and cash flows, assuming other
factors remain constant.
Assuming other variables remain constant (such as foreign exchange
rates and debt levels), the pre-tax earnings and cash flows impact resulting
from a one percentage point increase in interest rates would be approximately
$6.1 million.
EXCHANGE RATE SENSITIVITY ANALYSIS
Premier's exchange rate exposures result from its investments and
ongoing operations in Europe, specifically Belgium, France and The Netherlands,
and certain other business transactions such as the purchase of rides from
foreign vendors or manufacturers. Among other techniques, Premier utilizes
foreign exchange forward contracts to hedge these exposures. At present, Premier
does not use financial instruments to hedge against currency risks associated
-29-
with its Walibi operations. At December 31, 1998, Premier had $17.7 million
notional amount of foreign exchange contracts to hedge the risks associated with
$33.3 million firm purchase commitments.
Holding other variables constant, if there were a ten percent adverse
change in foreign currency exchange rates (i.e., a weakening of the dollar
against the applicable European currencies), the market value of foreign
currency contracts outstanding at December 31, 1998 would decrease by
approximately $1.8 million. No amount of this decrease would impact earnings
since the gain (loss) on these contracts would be offset by an equal loss (gain)
on the underlying exposure being hedged.
Assuming the Walibi parks generate the same level of earnings and cash
flow in 1999 as they did in 1998, earnings and cash flows of the Company in the
event of such ten percent adverse change would decrease by less than $100,000
and $2.5 million, respectively.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
- --------------------------------------------------------------
In June, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
an entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge. The accounting for changes in the fair value of a derivative (that is
gains and losses) depends on the intended use of the derivative and the
resulting designation. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. It is expected that the Company will
adopt the provision of SFAS No. 133 as of January 1, 2000. If the provisions of
SFAS No. 133 were to be applied as of December 31, 1998, it would not have a
material effect on the Company's financial position as of such date, or the
results of operations for the year then ended.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5). SOP 98-5 establishes standards for the financial report
of start-up costs and organization costs. It requires that those costs be
expensed as incurred. The effect of the implementation of SOP 98-5 is accounted
for as a cumulative effect of a change in accounting principle. Premier is
required to adopt the provisions of SOP 98-5 in the first quarter of 1999 and
does not anticipate that the adoption of the provision of SOP 98-5 will have a
material effect on Premier's financial position as of that date or the results
of operations for the year 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
-30-
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 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Reference is made to the information appearing under the subheading
"Market Risks and Sensitivity Analyses" under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 29-30 of this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in Item 14(a)(1) and (2)
are included in this Report beginning on page F-1.
-31-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-32-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Incorporated by reference from the information captioned "Proposal 1:
Election of Directors" included in the Company's Proxy Statement in connection
with the annual meeting of stockholders to be held in June 1999.
(b) Identification of Executive Officers
Information regarding executive officers is included in Item 1 of
Part I herein.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information captioned "Executive
Compensation" included in the Company's Proxy Statement in connection with the
annual meeting of stockholders to be held in June 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a),(b) Incorporated by reference from the information captioned
"Stock Ownership of Management and Certain Beneficial Holders" included in the
Company's Proxy Statement in connection with the annual meeting of stockholders
to be held in June 1999.
(c) Changes in Control
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information captioned "Certain
Transactions" included in the Company's Proxy Statement in connection with the
annual meeting of stockholders to be held in June 1999.
-33-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Premier Parks Inc.
and subsidiaries, the notes thereto, the related report thereon of independent
auditors, and financial statement schedules are filed under Item 8 of this
Report:
PAGE
----
Independent Auditors' Report F-2
Consolidated Balance Sheets-- December 31, 1998 and 1997 F-3
Consolidated Statements of Operations
Years ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-8
Schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are omitted because they either are
not required under the related instructions, are inapplicable, or the required
information is shown in the financial statements or notes thereto.
(a)(3) See Exhibit Index.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
See Item 14(a)(3) above.
-34-
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 1999
PREMIER PARKS INC.
By: /s/ Kieran E. Burke
---------------------------------
Kieran E. Burke
Chairman of the Board
and Chief Executive Officer
-35-
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the following capacities on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Kieran E. Burke Chairman of the Board, Chief March 31, 1999
- -------------------------------- Executive Officer (Principal
Kieran E. Burke Executive Officer) and
Director
/s/ Gary Story President, Chief Operating March 31, 1999
- -------------------------------- Officer and Director
Gary Story
/s/ James F. Dannhauser Chief Financial Officer March 31, 1999
- -------------------------------- (Principal Financial and
James F. Dannhauser Accounting Officer) and
Director
/s/ Paul A. Biddelman Director March 31, 1999
- --------------------------------
Paul A. Biddelman
/s/ Michael E. Gellert Director March 31, 1999
- --------------------------------
Michael E. Gellert
/s/ Sandy Gurtler Director March 31, 1999
- --------------------------------
Sandy Gurtler
/s/ Charles R. Wood Director March 31, 1999
- --------------------------------
Charles R. Wood
-36-
PREMIER PARKS INC.
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-2
Consolidated Balance Sheets - December 31, 1998 and 1997 F-3
Consolidated Statements of Operations - Years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows - Years ended
December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-8
F-1
Independent Auditors' Report
The Board of Directors and Stockholders
Premier Parks Inc.:
We have audited the accompanying consolidated balance sheets of Premier Parks
Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Premier Parks Inc.
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Oklahoma City, Oklahoma
March 22, 1999
F-2
PREMIER PARKS INC.
Consolidated Balance Sheets
December 31, 1998 and 1997
Assets 1998 1997
--------------- ---------------
Current assets:
Cash and cash equivalents $ 400,578,000 84,288,000
Accounts receivable 31,484,000 6,537,000
Inventories 21,703,000 5,547,000
Income tax receivable -- 995,000
Prepaid expenses and other current assets 29,200,000 3,690,000
Restricted-use investment securities 206,075,000 --
--------------- ---------------
Total current assets 689,040,000 101,057,000
--------------- ---------------
Other assets:
Debt issuance costs 45,099,000 10,123,000
Restricted-use investment securities 111,577,000 --
Deposits and other assets 73,887,000 3,949,000
--------------- ---------------
Total other assets 230,563,000 14,072,000
--------------- ---------------
Property and equipment, at cost 1,675,959,000 479,271,000
Less accumulated depreciation 104,806,000 35,474,000
--------------- ---------------
1,571,153,000 443,797,000
--------------- ---------------
Investment in theme park partnerships 294,893,000 6,595,000
Less accumulated amortization 11,373,000 136,000
--------------- ---------------
283,520,000 6,459,000
--------------- ---------------
Intangible assets, principally goodwill 1,321,616,000 48,876,000
Less accumulated amortization 43,427,000 2,940,000
--------------- ---------------
1,278,189,000 45,936,000
--------------- ---------------
Total assets $ 4,052,465,000 611,321,000
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 25,285,000 10,051,000
Accrued interest payable 33,269,000 9,785,000
Accrued compensation 6,433,000 3,110,000
Accrued insurance 28,727,000 --
Other accrued liabilities 65,446,000 10,038,000
Current portion of long-term debt 198,038,000 795,000
--------------- ---------------
Total current liabilities 357,198,000 33,779,000
Long-term debt 1,862,687,000 216,231,000
Other long-term liabilities 54,037,000 4,025,000
Deferred income taxes 151,978,000 33,537,000
--------------- ---------------
Total liabilities 2,425,900,000 287,572,000
--------------- ---------------
Stockholders' equity:
Preferred stock, 5,000,000 and 500,000 shares authorized at December 31,
1998 and 1997, respectively; 11,500 and no shares issued and
outstanding at December 31, 1998 and 1997, respectively 12,000 --
Common stock, $.025 par value, 150,000,000 and 90,000,000 shares
authorized at December 31, 1998 and 1997, respectively; 76,488,661 and
37,798,914 shares issued and 76,488,661 and 37,746,222 shares
outstanding at December 31, 1998 and 1997, respectively 1,912,000 944,000
Capital in excess of par value 1,640,532,000 354,235,000
Retained earnings (accumulated deficit) 133,000 (17,241,000)
Deferred compensation (25,111,000) (13,500,000)
Accumulated other comprehensive income 9,087,000 --
--------------- ---------------
1,626,565,000 324,438,000
Less 52,692 common shares of treasury stock, at cost at December 31, 1997 -- (689,000)
--------------- ---------------
Total stockholders' equity 1,626,565,000 323,749,000
--------------- ---------------
Total liabilities and stockholders' equity $ 4,052,465,000 611,321,000
=============== ===============
See accompanying notes to consolidated financial statements.
F-3
PREMIER PARKS INC.
Consolidated Statements of Operations
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
------------- ------------- -------------
Theme park admissions $ 423,461,000 94,611,000 41,162,000
Theme park food, merchandise and other 390,166,000 99,293,000 52,285,000
------------- ------------- -------------
Total revenue 813,627,000 193,904,000 93,447,000
------------- ------------- -------------
Operating costs and expenses:
Operating expenses 297,266,000 81,356,000 42,425,000
Selling, general and administrative 126,985,000 35,422,000 16,927,000
Noncash compensation 6,362,000 1,125,000 --
Costs of products sold 103,051,000 23,025,000 11,101,000
Depreciation and amortization 109,841,000 19,792,000 8,533,000
------------- ------------- -------------
Total operating costs and expenses 643,505,000 160,720,000 78,986,000
------------- ------------- -------------
Income from operations 170,122,000 33,184,000 14,461,000
------------- ------------- -------------
Other income (expense):
Interest expense (149,820,000) (25,714,000) (12,597,000)
Interest income 33,971,000 7,939,000 1,476,000
Equity in operations of theme park partnerships 24,054,000 -- --
Minority interest in earnings (960,000) -- --
Termination fee, net of expenses -- 8,364,000 --
Other income (expense) (1,023,000) (59,000) (78,000)
------------- ------------- -------------
Total other income (expense) (93,778,000) (9,470,000) (11,199,000)
------------- ------------- -------------
Income before income taxes 76,344,000 23,714,000 3,262,000
Income tax expense 40,716,000 9,615,000 1,497,000
------------- ------------- -------------
Income before extraordinary loss 35,628,000 14,099,000 1,765,000
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $526,000 in 1998 (788,000) -- --
------------- ------------- -------------
Net income $ 34,840,000 14,099,000 1,765,000
============= ============= =============
Net income applicable to common stock $ 17,374,000 14,099,000 1,162,000
============= ============= =============
Weighted average number of common shares
outstanding -- basic 66,430,000 35,876,000 17,206,000
============= ============= =============
Income per average common share outstanding -- basic:
Income before extraordinary loss $ 0.27 0.39 0.07
Extraordinary loss (0.01) -- --
------------- ------------- -------------
Net income $ 0.26 0.39 0.07
============= ============= =============
Weighted average number of common shares
outstanding -- diluted 68,518,000 36,876,000 17,944,000
============= ============= =============
Income per average common share outstanding -- diluted:
Income before extraordinary loss $ 0.26 0.38 0.06
Extraordinary loss (0.01) -- --
------------- ------------- -------------
Net income $ 0.25 0.38 0.06
============= ============= =============
See accompanying notes to consolidated financial statements.
F-4
PREMIER PARKS INC.
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996
Preferred Stock Common Stock
-------------------------------- ------------------------------- Capital in
Shares Shares Excess of
Issued Amount Issued Amount Par Value
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1995 200,000 $ 200,000 9,767,800 $ 244,000 79,261,000
Conversion of preferred stock to
common stock (200,000) (200,000) 5,121,856 128,000 72,000
Issuance of common stock -- -- 7,895,682 197,000 65,309,000
Net income -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1996 -- -- 22,785,338 569,000 144,642,000
Issuance of common stock -- -- 15,013,576 375,000 209,593,000
Amortization of deferred
compensation -- -- -- -- --
Net income -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1997 -- -- 37,798,914 944,000 354,235,000
Issuance of preferred stock 11,500 12,000 -- -- 301,173,000
Issuance of common stock -- -- 38,742,439 969,000 985,812,000
Amortization of deferred
compensation -- -- -- -- --
Retirement of treasury stock -- -- (52,692) (1,000) (688,000)
Net income -- -- -- -- --
Other comprehensive income -
foreign currency translation
adjustment -- -- -- -- --
Comprehensive income
Preferred stock dividends -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1998 11,500 $ 12,000 76,488,661 $ 1,912,000 1,640,532,000
============== ============== ============== ============== ==============
Retained Accumulated
Earnings Other
(Accumulated Deferred Comprehensive Treasury
Deficit) Compensation Income Stock Total
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1995 (33,105,000) -- -- (689,000) 45,911,000
Conversion of preferred stock to
common stock -- -- -- -- --
Issuance of common stock -- -- -- -- 65,506,000
Net income 1,765,000 -- -- -- 1,765,000
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1996 (31,340,000) -- -- (689,000) 113,182,000
Issuance of common stock -- (14,625,000) -- -- 195,343,000
Amortization of deferred
compensation -- 1,125,000 -- -- 1,125,000
Net income 14,099,000 -- -- -- 14,099,000
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1997 (17,241,000) (13,500,000) -- (689,000) 323,749,000
Issuance of preferred stock -- -- -- -- 301,185,000
Issuance of common stock -- (16,100,000) -- -- 970,681,000
Amortization of deferred
compensation -- 4,489,000 -- -- 4,489,000
Retirement of treasury stock -- -- -- 689,000 --
Net income 34,840,000 -- -- -- 34,840,000
Other comprehensive income -
foreign currency translation
adjustment -- -- 9,087,000 -- 9,087,000
--------------
Comprehensive income 43,927,000
--------------
Preferred stock dividends (17,466,000) -- -- -- (17,466,000)
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1998 133,000 (25,111,000) 9,087,000 -- 1,626,565,000
============== ============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
F-5
PREMIER PARKS INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------------- --------------- ---------------
Cash flows from operating activities:
Net income $ 34,840,000 14,099,000 1,765,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 109,841,000 19,792,000 8,533,000
Equity in operations of theme park
partnerships, net of cash received (8,240,000) -- --
Minority interest in earnings 960,000 -- --
Noncash compensation 6,362,000 1,125,000 --
Interest accretion on notes payable 28,713,000 -- --
Interest accretion on restricted-use
investments (7,267,000) -- --
Extraordinary loss on early extinguishment
of debt 1,314,000 -- --
Amortization of debt issuance costs 5,351,000 1,918,000 811,000
(Gain) loss on sale of assets 920,000 (46,000) (51,000)
Deferred income taxes 38,698,000 6,737,000 1,433,000
Increase in accounts receivable (17,816,000) (5,272,000) (215,000)
(Increase) decrease in income tax
receivable 995,000 (995,000) --
Increase in inventories and prepaid
expenses and other current assets (12,154,000) (1,150,000) (2,360,000)
(Increase) decrease in deposits and
other assets (25,185,000) 6,237,000 (3,947,000)
Increase (decrease) in accounts payable
and accrued expenses (61,806,000) (776,000) 5,216,000
Increase in accrued interest payable 23,484,000 5,481,000 146,000
--------------- --------------- ---------------
Total adjustments 84,170,000 33,051,000 9,566,000
--------------- --------------- ---------------
Net cash provided by operating
activities 119,010,000 47,150,000 11,331,000
--------------- --------------- ---------------
Cash flows from investing activities:
Additions to property and equipment (205,754,000) (129,049,000) (38,995,000)
Investment in theme park partnerships (60,739,000) (6,595,000) --
Acquisition of theme park assets (50,593,000) (60,050,000) (116,154,000)
Acquisition of theme park companies, net
of cash acquired (1,037,412,000) (21,376,000) --
Purchase of restricted-use investments (321,750,000) -- --
Maturities of restricted-use investments 11,365,000 -- --
--------------- --------------- ---------------
Net cash used in investing
activities (1,664,883,000) (217,070,000) (155,149,000)
--------------- --------------- ---------------
Cash flows from financing activities:
Repayment of long-term debt (703,639,000) (66,576,000) (1,082,000)
Proceeds from borrowings 1,361,703,000 132,500,000 57,574,000
Net cash proceeds from issuance of
preferred stock 301,185,000 -- --
Net cash proceeds from issuance of
common stock 955,134,000 189,530,000 65,306,000
Payment of cash dividends (11,644,000) -- --
Payment of debt issuance costs (41,641,000) (5,289,000) (2,724,000)
--------------- --------------- ---------------
Net cash provided by
financing activities 1,861,098,000 250,165,000 119,074,000
--------------- --------------- ---------------
(Continued)
F-6
PREMIER PARKS INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------------- --------------- ---------------
Effect of exchange rate changes on cash
and cash equivalents $ 1,065,000 -- --
--------------- --------------- ---------------
Increase (decrease) in cash and cash
equivalents 316,290,000 80,245,000 (24,744,000)
Cash and cash equivalents at beginning of year 84,288,000 4,043,000 28,787,000
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 400,578,000 84,288,000 4,043,000
=============== =============== ===============
Supplementary cash flow information:
Cash paid for interest $ 92,272,000 18,315,000 11,640,000
=============== =============== ===============
Cash paid for income taxes $ 497,000 3,697,000 64,000
=============== =============== ===============
Supplemental disclosure of noncash investing and financing activities:
1998
() The Company issued $15,547,000 of common stock (805,954 shares) as
consideration for a theme park acquisition.
() The Company issued restricted common stock (920,000 shares) to certain
employees valued at $16,100,000.
1997
() The Company issued $5,831,000 of common stock (307,600 shares) as
components of theme park acquisitions.
() The Company issued restricted common stock (900,000 shares) to certain
employees valued at $14,625,000.
() The Company assumed $268,000 of capital lease obligations as a
component of a theme park acquisition.
1996
() Preferred stock (200,000 shares) was converted into common stock
(5,121,856 shares).
() The Company issued $200,000 of common stock (18,182 shares) as a
component of a theme park acquisition.
() The Company acquired certain equipment through a capital lease with an
obligation of $64,000.
See accompanying notes to consolidated financial statements.
F-7
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Policies
(a) Description of Business
Premier owns and operates regional theme amusement and water parks. As
of December 31, 1998, the Company and its subsidiaries own and operate
31 parks, including 25 domestic parks and six European parks.
On March 24, 1998, the company then known as Premier Parks Inc.
("Premier Operations") merged (the "Merger") with an indirect
wholly-owned subsidiary thereof, pursuant to which Premier Operations
became a wholly-owned subsidiary of Premier Parks Holdings Corporation
("Holdings") and the holders of shares of common stock of Premier
Operations became, on a share-for-share basis, holders of common stock
of Holdings. On the Merger date, Premier Operations' name was changed
to Premier Parks Operations Inc., and Holdings' name was changed to
Premier Parks Inc. References herein to the "Company" or "Premier"
mean (i) for all periods or dates prior to March 24, 1998, Premier
Operations and its consolidated subsidiaries and (ii) for all
subsequent periods or dates, Holdings and its consolidated
subsidiaries (including Premier Operations). As used herein, Holdings
refers only to Premier Parks Inc., without regard to its subsidiaries.
During the first six months of 1998, the Company purchased
approximately 95% of the outstanding capital stock of Walibi, S.A.
("Walibi") and as of December 31, 1998 owns approximately 97%. See
Note 2 below. On April 1, 1998, the Company purchased all of the
outstanding capital stock of Six Flags Entertainment Corporation
("SFEC" and, together with its subsidiaries, "Six Flags") and
consummated the other transactions described in Note 2 below.
The accompanying consolidated financial statements for the year ended
December 31, 1998 reflect the results of Riverside Park and Kentucky
Kingdom from January 1, 1998, of Walibi from March 26, 1998, and of
Six Flags from April 1, 1998. See Note 2. The accompanying
consolidated financial statements for the year ended December 31, 1997
reflect the results of Riverside Park only from its acquisition date,
February 5, 1997; Kentucky Kingdom only from its acquisition date,
November 7, 1997; and do not include the results of Walibi or Six
Flags. The accompanying consolidated financial statements for the year
ended December 31, 1996 reflect the results of Elitch Gardens, the two
Waterworld/USA water parks, and The Great Escape and Splashwater
Kingdom from their acquisition dates, October 31, 1996, November 19,
1996, and December 4, 1996, respectively, and do not include the
results of Riverside Park, Kentucky Kingdom, Walibi or Six Flags. In
addition, 1998 results include the Company's share of the results of
Marine World under the applicable lease and related documents. See
Note 13. Those results are not included in the 1997 and 1996 periods.
F-8
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(b) Basis of Presentation
The Company's accounting policies reflect industry practices and
conform to generally accepted accounting principles.
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, and limited partnerships and
limited liability companies in which the Company beneficially owns
100% of the interests. Intercompany transactions and balances have
been eliminated in consolidation.
The Company's investment in partnerships in which it does not own
controlling interests are accounted for using the equity method and
included in investment in theme park partnerships.
(c) Cash Equivalents
Cash equivalents of $357,984,000 and $73,694,000 at December 31, 1998
and 1997, respectively, consist of short-term highly liquid
investments with a remaining maturity as of purchase date of three
months or less, which are readily convertible into cash. For purposes
of the consolidated statements of cash flows, the Company considers
all highly liquid debt instruments with remaining maturities as of
their purchase date of three months or less to be cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and primarily consist of products for resale including
merchandise and food and miscellaneous supplies including repair parts
for rides and attractions.
(e) Advertising Costs
Production costs of commercials and programming are charged to
operations in the year first aired. The costs of other advertising,
promotion, and marketing programs are charged to operations in the
year incurred. The amounts capitalized at year-end are included in
prepaid expenses.
Advertising and promotions expense was $66,141,000, $21,600,000, and
$9,100,000 during 1998, 1997, and 1996, respectively.
(f) Debt Issuance Costs
The Company capitalizes costs related to the issuance of debt. The
amortization of such costs is recognized as interest expense under a
method approximating the interest method over the life of the
respective debt issue.
F-9
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(g) Depreciation and Amortization
Rides and attractions are depreciated using the straight-line method
over 5-25 years. Buildings and improvements are depreciated over their
estimated useful lives of approximately 30 years by use of the
straight-line method. Furniture and equipment are depreciated using
the straight-line method over 5-10 years. Amortization of property
associated with capitalized lease obligations is included in
depreciation expense in the consolidated financial statements.
Maintenance and repairs are charged directly to expense as incurred,
while betterments and renewals are generally capitalized in the
property accounts. When an item is retired or otherwise disposed of,
the cost and applicable accumulated depreciation are removed and the
resulting gain or loss is recognized.
(h) Investment in Theme Park Partnerships
The Company manages three parks in which the Company does not
currently own a controlling interest. The Company accounts for its
investment in these three parks using the equity method of accounting.
The equity method of accounting recognizes the Company's share of the
activity of Six Flags Over Texas, Six Flags Over Georgia and Six Flags
Marine World in the accompanying statements of operations in the
caption "equity in operations of theme park partnerships." The equity
method of accounting differs from the consolidation method of
accounting used for the theme parks in which the Company owns a
controlling interest. In the consolidation method of accounting, the
activities of the controlled parks are reflected in each revenue and
expense caption rather than aggregated into one caption.
(i) Intangible Assets
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over the expected period to be benefited, generally 25 years. The
Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating
cash flows of the acquisition. The amount of goodwill impairment, if
any, is measured based on projected discounted future operating cash
flows using a discount rate reflecting the Company's average borrowing
rate.
(j) Long-Lived Assets
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset or group of assets to
future net cash flows expected to be generated by the asset or group
of assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the
(Continued)
F-10
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
assets exceed the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less
costs to sell.
(k) Interest Expense Recognition
Interest on notes payable is generally recognized as expense on the
basis of stated interest rates. Capitalized lease obligations that do
not have a stated interest rate or that have interest rates considered
to be lower than prevailing market rates (when the obligations were
incurred) are carried at amounts discounted to impute a market rate of
interest cost.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date. United States deferred income taxes have not been provided on
foreign earnings which are being permanently reinvested.
(m) Income Per Common Share
Basic earnings per share is computed by dividing net income applicable
to common stock by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that would occur if the Company's outstanding stock
options were exercised (calculated using the treasury stock method).
Additionally, the weighted average number of shares for the year ended
December 31, 1998 does not include the impact of the conversion of the
Company's mandatorily convertible preferred stock into a maximum of
11,500,000 shares of common stock and a minimum of 9,554,000 shares of
common stock as the effect of the conversion and resulting decrease in
preferred stock dividends would be antidilutive.
During the first five months of 1996, the Company had convertible
preferred stock outstanding. Preferred stock dividends of $603,000,
which were paid through additional issuances of common stock, were
considered in determining net income applicable to common stock in
1996. During the last nine months of 1998, the Company's mandatorily
convertible preferred stock was outstanding. Preferred stock dividends
of $17,466,000 were considered in determining net income applicable to
common stock in 1998.
On June 9, 1998, the Company's common shareholders approved a
two-for-one stock split effective July 24, 1998. The par value of the
common stock was decreased to $.025 per share
(Continued)
F-11
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
from $.05 per share. Additionally, the authorized common shares of the
Company were increased to 150,000,000. The accompanying consolidated
financial statements and notes to the consolidated financial
statements reflect the stock split as if it had occurred as of the
beginning of the earliest year presented.
The following table reconciles the weighted average number of common
shares outstanding used in the calculations of basic and diluted
income per average common share outstanding for the years 1998, 1997
and 1996.
Year ended December 31,
------------------------------------------------------
1998 1997 1996
---------- ---------- ----------
Weighted average number of common shares
outstanding - basic 66,430,000 35,876,000 17,206,000
Dilutive effect of potential common shares issuable upon
the exercise of employee stock options 2,088,000 1,000,000 738,000
---------- ---------- ----------
Weighted average number of common shares
outstanding - diluted 68,518,000 36,876,000 17,944,000
========== ========== ==========
(n) Stock Options
For unconditional employee stock options, the Company recognizes over
the service period, compensation expense only if the current market
price of the underlying stock exceeds the exercise price on the date
of the grant. For employee stock options that are conditioned upon the
achievement of performance goals, compensation expense, as determined
by the extent that the quoted market price of the underlying stock at
the time that the condition for grant is achieved exceeds the stock
option price, is recognized over the service period. For stock options
issued to nonemployees, the Company recognizes compensation expense at
the time of issuance based upon the fair value of the options issued.
Pro forma net income and net income per share for employee stock
option grants made in and subsequent to 1995 as if the
fair-value-based method had been applied are provided in Note 10.
(o) Investment Securities
Restricted-use investment securities at December 31, 1998 consist of
U.S. Treasury securities. The securities are restricted to provide a
redemption fund for indebtedness maturing in 1999; to provide for
three years of interest payments on debt issued in 1998; and to
collateralize the Company's obligations under certain purchase
guarantees described in Note 2. The Company classifies its investment
securities in one of two categories: available-for-sale or
held-to-maturity. Held-to-maturity securities are those securities in
which the Company has the ability
(Continued)
F-12
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
and intent to hold the security until maturity. All other securities
held by the Company are classified as available-for-sale. The Company
does not purchase securities principally for the purpose of selling
them in the near term and thus has no securities classified as
trading.
Available-for-sale securities are recorded at fair value. As of
December 31, 1998, the fair value of the restricted-use investments
classified as available-for-sale was $74,000,000 which approximated
the amortized cost of the securities. Unrealized holding gains and
losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate
component of other comprehensive income until realized. Realized gains
and losses from the sale of available-for-sale securities are
determined on a specific identification basis. Held-to-maturity
securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts.
As of December 31, 1998, all of the Company's restricted-use
investment securities classified as available-for-sale had remaining
maturities of less than one year; however, these securities are
reflected as noncurrent assets as they are restricted for future use.
As of December 31, 1998, $206,075,000 of restricted-use investment
securities classified as held-to-maturity had maturities and
restricted purposes of less than one year and are reflected as current
assets. The remaining restricted-use investment securities classified
as held-to-maturity have a remaining term of less than three years.
Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security as an adjustment to yield using the
effective interest method. Dividend and interest income are recognized
when earned.
(p) Comprehensive Income
On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income consists of net
income, changes in the foreign currency translation adjustment, and
net unrealized gains (losses) on available-for-sale investment
securities and is presented in the 1998 consolidated statement of
stockholders' equity as accumulated other comprehensive income. The
Statement requires only additional disclosures in the consolidated
financial statements; it does not affect the Company's financial
position or results of operations. The Company's 1997 and earlier
financial statements do not reflect any effect from the adoption as
prior to 1998 the Company did not have foreign operations or own
significant investment securities.
(q) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported
(Continued)
F-13
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(r) Reclassifications
Reclassifications have been made to certain amounts reported in 1997
and 1996 to conform with the 1998 presentation.
(2) Acquisition of Theme Parks
On March 26, 1998, the Company purchased (the "Private Acquisition")
approximately 49.9% of the outstanding capital stock of Walibi for an
aggregate purchase price of $42,300,000, of which 20% was paid through
issuance of 448,910 shares of common stock and 80% was paid in cash. In
June 1998, the Company purchased an additional 44.0% of the outstanding
capital stock of Walibi for an aggregate purchase price of $38,100,000,
which was paid through issuance of 347,746 shares of common stock and
$31,400,000 in cash. During the remainder of the year, Premier purchased an
additional 3% of Walibi, which included the issuance of an additional 9,298
shares of common stock. On the date of the Private Acquisition, Walibi's
indebtedness aggregated $71,181,000, which indebtedness was assumed or
refinanced by the Company. The Company funded the cash portion of the
purchase price (and the refinancing of such indebtedness) from borrowings
under its senior secured credit facility (the "Premier Credit Facility")
entered into in March 1998. See Note 6(c). As of the acquisition dates and
after giving effect to the purchases, $11,519,000 of deferred tax
liabilities were recognized for the tax consequences attributable to the
differences between the financial carrying amounts and the tax basis of
Walibi's assets and liabilities. Approximately $60,118,000 of costs in
excess of the fair value of the net assets acquired were recorded as
goodwill. The Company may be required to issue additional shares of common
stock based on Walibi's revenues during 1999, 2000 or 2001. The value of
the additional shares, if any, will be recorded as additional goodwill.
On April 1, 1998 the Company acquired (the "Six Flags Acquisition") all of
the capital stock of SFEC for $976,000,000, paid in cash. In connection
with the Six Flags Acquisition, the Company issued through public offerings
(i) 36,800,000 shares of common stock (with gross proceeds of
$993,600,000), (ii) 5,750,000 Premium Income Equity Securities ("PIES")
(with gross proceeds of $310,500,000), (iii) $410,000,000 aggregate
principal amount at maturity of the Company's 10% Senior Discount Notes due
2008 (the "Senior Discount Notes") (with gross proceeds of $251,700,000)
and (iv) $280,000,000 aggregate principal amount of the Company's 9 1/4%
Senior Notes due 2006 (the "Senior Notes"), and SFEC issued $170,000,000
aggregate principal amount of its 8 7/8% Senior Notes due 2006 (the "SFEC
Notes"). In addition, in connection with the Six Flags Acquisition, the
Company (i) assumed $285,000,000 principal amount at maturity of senior
subordinated notes (the "SFTP Senior Subordinated Notes") of Six Flags
Theme Parks Inc. ("SFTP"), an indirect wholly-owned subsidiary of SFEC,
which notes had an accreted value of $278,100,000 at April 1,
(Continued)
F-14
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1998 (fair value of $318,500,000 at that date) and (ii) refinanced all
outstanding SFTP bank indebtedness with the proceeds of $410,000,000 of
borrowings under a new $472,000,000 senior secured credit facility of SFTP
(the "Six Flags Credit Facility"). As of the acquisition date and after
giving effect to the purchase, $65,619,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between
the financial carrying amounts and the tax basis of Six Flags' assets and
liabilities. Approximately $1,200,974,000 of costs in excess of the fair
value of the net assets acquired was recorded as goodwill.
In addition to its obligations under outstanding indebtedness and other
securities issued or assumed in the Six Flags Acquisition, the Company also
guaranteed in connection therewith certain contractual obligations relating
to the partnerships that own two Six Flags parks, Six Flags Over Texas and
Six Flags Over Georgia (the "Co-Venture Parks"). Specifically, the Company
guaranteed the obligations of the general partners of those partnerships to
(i) make minimum annual distributions of approximately $46,300,000 (subject
to cost of living adjustments) to the limited partners in the Co-Venture
Parks and (ii) make minimum capital expenditures at each of the Co-Venture
Parks during rolling five-year periods, based generally on 6% of such
park's revenues. Cash flow from operations at the Co-Venture Parks will be
used to satisfy these requirements first, before any funds are required
from the Company. The Company also guaranteed the obligation to purchase a
maximum number of 5% per year (accumulating to the extent not purchased in
any given year) of the total limited partnership units outstanding as of
the date of the co-venture agreements (the "Co-Venture Agreements") that
govern the partnerships (to the extent tendered by the unit holders). The
agreed price for these purchases is based on a valuation for each
respective Co-Venture Park equal to the greater of (i) a value derived by
multiplying such park's weighted-average four-year EBITDA (as defined in
the Co-Venture Agreements) by a specified multiple (8.0 in the case of the
Georgia park and 8.5 in the case of the Texas park) or (ii) $250,000,000 in
the case of the Georgia park and $374,800,000 in the case of the Texas
park. The Company's obligations with respect to Six Flags Over Georgia and
Six Flags Over Texas will continue until 2027 and 2028, respectively.
As the Company purchases units relating to either Co-Venture Park, it will
be entitled to the minimum distribution and other distributions
attributable to such units, unless it is then in default under the
applicable agreements with its partners at such Co-Venture Park. On
December 31, 1998, the Company owned approximately 25% and 33%,
respectively, of the limited partnership units in the Georgia and Texas
partnerships. The maximum unit purchase obligations for 1999 at both parks
will aggregate approximately $43,750,000.
The accompanying 1998 consolidated statement of operations reflects the
results of the Six Flags Acquisition and the Walibi acquisitions from their
respective acquisition dates.
On February 5, 1997, the Company acquired all of the outstanding common
stock of Stuart Amusement Company (Stuart), the owner of Riverside Park and
an adjacent multi-use stadium, for a purchase price of $22,200,000
($1,000,000 of which was paid through issuance of 64,278 of the Company's
common shares). The transaction was accounted for as a purchase. As of the
acquisition
(Continued)
F-15
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
date and after giving effect to the purchase, $6,623,000 of deferred tax
liabilities were recognized for the tax consequences attributable to the
differences between the financial statement carrying amounts and the tax
basis of Stuart's assets and liabilities. Approximately $10,484,000 of cost
in excess of the fair value of the net assets acquired was recorded as
goodwill.
On November 7, 1997, the Company acquired Kentucky Kingdom--The Thrill Park
(Kentucky Kingdom) for a preliminary purchase price of $64,000,000 of which
$4,831,000 was paid through the issuance of 243,342 shares of the Company's
common stock. As a result of 1998 revenues exceeding levels specified in
the purchase agreement, Premier is required to issue the former owners of
Kentucky Kingdom an estimated additional 336,000 shares of common stock in
April of 1999, of which 76,000 shares will be placed in an escrow account
to offset potential pre-acquisition claims by the Company. The Company may
be required to issue additional shares of common stock based upon the level
of revenues at Kentucky Kingdom during 1999 and 2000. The acquisition was
accounted for as a purchase. The purchase price was primarily allocated to
property and equipment with $12,546,000 of costs recorded as goodwill. The
value of the additional shares to be issued relative to 1999 or 2000
revenue levels, if any, will be recognized as additional goodwill.
The accompanying 1998 and 1997 consolidated statements of operations
reflect the results of Stuart and Kentucky Kingdom from their respective
acquisition dates.
On October 31, 1996, the Company acquired Elitch Gardens for $62,500,000 in
cash. The transaction was accounted for as a purchase. In addition, the
Company entered into a five-year non-competition agreement with the
president of Elitch Gardens Company's general partner. Based upon the
purchase method of accounting, the purchase price was primarily allocated
to property and equipment with $4,506,000 of costs recorded as intangible
assets, primarily goodwill. The general partner and a principal limited
partner of Elitch Gardens Company have agreed severally to indemnify the
Company for claims in excess of $100,000 in an amount up to $1,000,000 per
partner.
On November 19, 1996, the Company acquired the two Waterworld/USA water
parks and a related family entertainment center for an aggregate cash
purchase price of approximately $17,250,000, of which $862,500 was placed
in escrow to fund potential indemnification claims by the Company. The
transaction was accounted for as a purchase. Based upon the purchase method
of accounting, the purchase price was primarily allocated to property and
equipment with $5,110,000 of costs recorded as goodwill.
On December 4, 1996, the Company acquired The Great Escape and Splash Water
Kingdom for a cash purchase price of $33,000,000. The transaction was
accounted for as a purchase. In connection with the acquisition, the
Company entered into a non-competition agreement and a related agreement
with the former owner, providing for an aggregate consideration of
$1,250,000. In addition, as a component of the transaction, the Company
issued 18,182 shares of its common stock ($200,000) to an affiliate of the
former owner. Based upon the purchase method of accounting, the purchase
price was primarily allocated to property and equipment with $9,221,000 of
costs recorded as goodwill.
F-16
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The accompanying 1998, 1997 and 1996 consolidated statements of operation
reflect the results of the Elitch Gardens, Waterworld/USA, and The Great
Escape and Splash Water Kingdom acquisitions from their respective
acquisition dates.
The following summarized unaudited pro forma results of operations for the
years ended December 31, 1998 and 1997, assume that the Six Flags
Acquisition, the acquisition of Walibi, the acquisition of Kentucky
Kingdom, and the related financings occurred as of January 1, 1997.
1998 1997
--------------------------
(Unaudited)
(In thousands)
Total revenues $ 838,537 815,333
Income (loss) before extraordinary loss (53,121) (56,497)
Income (loss) per common share - basic (1.01) (1.06)
Income (loss) per common share - diluted (1.01) (1.06)
The following summarized unaudited pro forma results of operations for the
year ended December 31, 1997 and 1996, assume that the Stuart, the Kentucky
Kingdom, the Elitch Gardens, The Great Escape and Splash Water Kingdom, and
the Waterworld/USA acquisitions, and the related transactions occurred as
of January 1, 1996.
1997 1996
--------------------------
(Unaudited)
(In thousands)
Total revenues $ 215,620 175,224
Net income 15,210 12,436
Income per common share - basic .40 .33
Income per common share - diluted .39 .32
F-17
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(3) Property and Equipment
Property and equipment, at cost, are classified as follows:
1998 1997
-------------- --------------
Land $ 281,403,000 40,099,000
Buildings and improvements 492,654,000 159,661,000
Rides and attractions 796,654,000 248,374,000
Equipment 105,248,000 31,137,000
-------------- --------------
Total 1,675,959,000 479,271,000
Less accumulated depreciation 104,806,000 35,474,000
-------------- --------------
$1,571,153,000 443,797,000
============== ==============
(4) Investment in Theme Park Partnerships
The following reflects the summarized assets, liabilities, and equity as of
December 31, 1998 and the results of the three parks managed by the Company
for the year ended December 31, 1998, in the case of Six Flags Marine
World, and for the period subsequent to April 1, 1998 (the date of the Six
Flags Acquisition), in the case of the Co-Venture Parks. Previous periods
are not presented as the general partner and limited partnership interests
in the Co-Venture Parks were purchased on April 1, 1998 and the lease
agreement with the owner of Six Flags Marine World, which established a
revenue sharing arrangement in which the Company participates, became
effective at the beginning of the 1998 operating season.
Assets:
Current assets $ 34,055,000
Property and equipment, net 189,632,000
Other assets 24,289,000
------------
Total assets $247,976,000
============
Liabilities and equity:
Current liabilities $ 34,189,000
Long-term debt 120,244,000
Equity 93,543,000
------------
Total liabilities and equity $247,976,000
============
F-18
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Revenue $202,183,000
------------
Expenses:
Operating expenses 75,680,000
Selling, general and administrative 24,933,000
Costs of products sold 26,689,000
Depreciation and amortization 13,325,000
Interest expense, net 6,301,000
Other expense 1,451,000
------------
Total 148,379,000
------------
Net income $ 53,804,000
============
The Company's share of operations of the three theme parks for the year
ended December 31, 1998 was $35,408,000, prior to depreciation and
amortization charges of $9,763,000 and interest expense of $1,591,000. A
substantial difference exists between the carrying value of the Company's
investment in the theme parks and the Company's share of the net book value
of the theme parks. The difference is being amortized over 20 years for the
Co-Venture Parks and being amortized over the expected useful life of the
rides and equipment installed by the Company at Six Flags Marine World.
Included in long-term debt above is $68,590,000 of long-term debt that is
not guaranteed by the Company. The long-term debt is an obligation of the
other parties that have an interest in Six Flags Marine World. The
remaining long-term debt is that of the Co-Venture Parks, of which the
Company serves as the managing general partner for each park and such debt
includes approximately $27,407,000 of long-term debt owed to the Company,
with the remainder consisting of primarily capitalized lease obligations
associated with rides and equipment.
(5) Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments, entering into contracts only to manage foreign-currency
exchange rate risks.
Foreign currency forward-purchase agreements are used to reduce the
potential impact of changes in foreign currency exchange rates on the cost
of rides and equipment purchased from European suppliers. At December 31,
1998, the Company was a party to two forward purchase agreements of
European currencies with terms expiring in 1999. The agreements require the
Company to purchase European currencies from the counterparties (an
investment bank and a large financial institution), at specified intervals,
for approximately $17,679,000. The specified transaction intervals coincide
with the dates that payments are due to the manufacturer of the rides and
equipment.
F-19
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The fair value of the forward purchase agreements was $577,000 at December
31, 1998. The fair value is estimated using values provided by the
counterparties based upon quoted exchange rates for forward purchases.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its forward purchase agreements. The Company
anticipates, however, that counterparties will fully satisfy their
obligations under the contracts. The Company does not obtain collateral to
support its financial instruments but monitors the credit standing of the
counterparties.
(6) Long-Term Debt
At December 31, 1998 and 1997, long-term debt consists of:
1998 1997
-------------- -----------
Long-term debt:
1995 Notes due 2003 (a) $ 90,000,000 90,000,000
1997 Notes due 2007 (b) 125,000,000 125,000,000
Premier Credit Facility (c) 200,000,000 --
Senior Discount Notes (d) 270,895,000 --
Senior Notes (d) 280,000,000 --
SFEC Notes (e) 170,000,000 --
SFEC Zero Coupon Notes (e) 182,877,000 --
SFTP Senior Subordinated Notes (f) 321,167,000 --
Six Flags Credit Facility (g) 409,750,000 --
-------------- -----------
Other 11,036,000 2,026,000
2,060,725,000 217,026,000
Less current portion, in 1998
primarily the SFEC Zero
Coupon Notes (carrying
value of $182,877,000 as of
December 31, 1998) which
have been prefunded with
restricted-use investments
See note (e) 198,038,000 795,000
-------------- -----------
$1,862,687,000 216,231,000
============== ===========
(a) In August 1995, Premier Operations issued $90,000,000 principal amount
of senior notes (the "1995 Notes"). The 1995 Notes are senior
unsecured obligations of Premier Operations, which mature on August
15, 2003. The 1995 Notes bear interest at 12% per annum payable
semiannually. The 1995 Notes are redeemable, at Premier Operations'
option, in whole or part, at any time on or after August 15, 1999, at
varying redemption prices. The 1995 Notes are guaranteed on a senior,
unsecured, joint and several basis by all of Premier Operations'
principal domestic subsidiaries.
F-20
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The proceeds of the 1995 Notes were used in the acquisition by Premier
Operations of Funtime Parks, Inc. in August 1995 and in the
refinancing at that time of previously existing indebtedness.
The indenture limits the ability of Premier Operations and its
subsidiaries to dispose of assets; incur additional indebtedness or
liens; pay dividends; engage in mergers or consolidations; and engage
in certain transactions with affiliates.
All obligations under the 1995 Notes and the related indenture
remained as obligations of Premier Operations and were not assumed by
Holdings after the Merger.
(b) On January 31, 1997, Premier Operations issued $125,000,000 of senior
notes due January 2007 (the "1997 Notes"). The 1997 Notes are senior
unsecured obligations of Premier Operations and equal to the 1995
Notes in priority upon liquidation. The 1997 Notes bear interest at 9
3/4% per annum payable semiannually and are redeemable, at Premier
Operations' option, in whole or in part, at any time on or after
January 15, 2002, at varying redemption prices. The 1997 Notes are
guaranteed on a senior, unsecured, joint and several basis by all of
Premier Operations' principal domestic subsidiaries.
The indenture under which the 1997 Notes were issued contains
covenants substantially similar to those relating to the 1995 Notes. A
portion of the proceeds were used to pay in full all amounts
outstanding under Premier Operations' then credit facility.
All obligations under the 1997 Notes and the related indenture
remained as obligations of Premier Operations and were not assumed by
Holdings after the Merger.
(c) In March 1998, Premier Operations entered into the Premier Credit
Facility and terminated its then outstanding $115,000,000 credit
facility, resulting in a $788,000 extraordinary loss, net of tax
benefit of $526,000, in the first quarter of 1998 in respect of debt
issuance costs related to the terminated facility. At December 31,
1998, Premier Operations had borrowed $200,000,000 under the Premier
Credit Facility, in part to fund the acquisition of Walibi. The
Premier Credit Facility includes a five-year $75,000,000 revolving
credit facility (none of which was outstanding at December 31, 1998),
a five-year $100,000,000 term loan facility (subsequently reduced to
$75,000,000, which amount was outstanding at December 31, 1998),
requiring principal payments of $10,000,000, $25,000,000, $30,000,000
and $10,000,000 in the second, third, fourth and fifth years, and an
eight-year $125,000,000 term loan facility (which was fully drawn as
of December 31, 1998 and requires principal payments of $1,000,000 in
each of the first six years and $25,000,000 and $94,000,000 in the
seventh and eighth years, respectively). Borrowings under the Premier
Credit Facility are guaranteed by Premier Operations' domestic
subsidiaries and secured by substantially all of the assets of Premier
Operations and such subsidiaries (other than real estate). The Premier
Credit Facility contains restrictive covenants that, among other
things, limit the ability of Premier Operations and its subsidiaries
to dispose of assets; incur additional indebtedness or liens; pay
dividends; repurchase stock; make investments; engage in mergers or
consolidations and
F-21
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
engage in certain transactions with subsidiaries and affiliates. In
addition, the Premier Credit Facility requires that Premier Operations
comply with certain specified financial ratios and tests.
All obligations of the Company under the Premier Credit Facility
remained as obligations of Premier Operations and were not assumed by
Holdings after the Merger
(d) On April 1, 1998, Holdings issued at a discount $410,000,000 principal
amount at maturity ($270,895,000 carrying value as of December 31,
1998) of Senior Discount Notes and $280,000,000 principal amount of
Senior Notes. The notes are senior unsecured obligations of Holdings,
and are not guaranteed by Holdings' subsidiaries. The Senior Discount
Notes do not require any interest payments prior to October 1, 2003
and, except in the event of a change of control of the Company and
certain other circumstances, any principal payments prior to their
maturity in 2008. The Senior Notes require annual interest payments of
approximately $25,900,000 (9 1/4% per annum) and, except in the event
of a change of control of the Company and certain other circumstances,
do not require any principal payments prior to their maturity in 2006.
The notes are redeemable, at the Company's option, in whole or in
part, at any time on or after April 1, 2002 (in the case of the Senior
Notes) and April 1, 2003 (in the case of the Senior Discount Notes),
at varying redemption prices.
Approximately $70,700,000 of the net proceeds of the Senior Notes were
deposited in escrow to prefund the first six semi-annual interest
payments thereon, and $75,000,000 of the net proceeds of the Senior
Discount Notes were invested in restricted-use securities, until April
1, 2003, to provide funds to pay certain of Premier's obligations to
the limited partners of the Co-Venture Parks. See Note 2.
The indentures under which the Senior Discount Notes and the Senior
Notes were issued limit the ability of Holdings and its subsidiaries
to dispose of assets; incur additional indebtedness or liens; pay
dividends; engage in mergers or consolidations; and engage in certain
transactions with affiliates.
(e) On April 1, 1998, SFEC issued $170,000,000 principal amount of SFEC
Notes, which are senior obligations of SFEC. The SFEC Notes were
guaranteed on a fully subordinated basis by Holdings. The SFEC Notes
require annual interest payments of approximately $15,100,000 (8 7/8%
per annum) and, except in the event of a change of control of 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
securities to provide for the repayment in full on or before December
15, 1999 of pre-existing notes of SFEC (with a carrying value of
$182,877,000 at December 31, 1998).
F-22
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
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.
(f) The SFTP Senior Subordinated Notes are senior subordinated obligations
of SFTP in an aggregate principal amount of $285,000,000. The SFTP
Senior Subordinated Notes were issued at a discount and effective in
1999 require interest payments of approximately $34,900,000 per annum
(12 1/2% per annum). The first interest payment was paid in December
1998. Except in certain circumstances, no principal payments are
required prior to their maturity in 2005. The SFTP Senior Subordinated
Notes are guaranteed on a senior subordinated basis by the principal
operating subsidiaries of SFTP. The Notes are redeemable, at SFTP's
option, in whole or in part, at any time on or after June 15, 2000, at
varying redemption prices. As a result of the application of purchase
accounting, the carrying value of the SFTP Senior Subordinated Notes
was increased to $318,500,000, which was the estimated fair value at
the acquisition date of April 1, 1998. The premium that resulted from
the adjustment of the carrying value will be amortized as a reduction
to interest expense over the remaining term of the SFTP Senior
Subordinated Notes and will result in an effective interest rate of
approximately 9 3/4%.
The indenture under which the SFTP Senior Subordinated Notes were
issued limits the ability of SFTP and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends; engage
in mergers or consolidations; and engage in certain transactions with
subsidiaries and affiliates.
(g) On April 1, 1998, SFTP entered into the Six Flags Credit Facility,
pursuant to which it had outstanding $409,750,000 at December 31,
1998. The Six Flags Credit Facility includes (i) a $100,000,000
five-year revolving credit facility used to refinance Six Flags bank
indebtedness as of April 1, 1998 and for working capital and other
general corporate purposes (of which $38,000,000 was outstanding on
December 31, 1998); and (ii) a $372,000,000 term loan facility (the
"Term Loan Facility") which was fully drawn on December 31, 1998.
Borrowings under the Term Loan Facility will mature on November 30,
2004. However, aggregate principal payments and reductions of
$1,000,000 are required during each of the first, second, third and
fourth years; aggregate principal payments of $25,000,000 and
$40,000,000 are required in years five and six, respectively, and
$303,000,000 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 cash pay interest obligations
with respect to the SFEC Notes); repurchase stock; make investments;
engage in mergers or consolidations and engage in certain transactions
with
(Continued)
F-23
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
subsidiaries and affiliates. In addition, the Six Flags Credit
Facility requires that SFTP comply with certain specified financial
ratios and tests.
Annual maturities of long-term debt and capitalized lease obligations,
during the five years subsequent to December 31, 1998, are as follows:
1999 $ 198,038,000
2000 25,924,000
2001 32,330,000
2002 24,510,000
2003 and thereafter 1,779,923,000
--------------
$2,060,725,000
==============
As discussed in (a) to (g), the long-term debt of the Company has been
issued by both Holdings and by several of its subsidiaries. The
following table provides information as of and for the year ended
December 31, 1998 of the assets held by, and the results of operations
and cash flows of, each of the consolidating groups that have issued
registered debt.
Holdings is the issuer of the notes described in (d) above. The
information presented below for Holdings contains the assets,
liabilities, results of operations and cash flows of Holdings. SFEC is
the issuer of the notes described in (e) above with the SFEC Notes
guaranteed on a subordinated basis by Holdings. The information for
SFEC contains the assets, liabilities, results of operations and cash
flows of SFEC. SFTP is the issuer of the notes that are described in
note (f) above. The subsidiaries of SFTP guarantee the notes on a
full, unconditional, and joint and several basis. The information for
the SFTP contains the assets, liabilities, results of operations, and
cash flows of SFTP and its subsidiaries. Premier Operations is the
issuer of the notes described in notes (a) and (b) above. The domestic
subsidiaries of Premier Operations guarantee the notes on a full,
unconditional, and joint and several basis. The information for
Premier Operations contains the assets, liabilities, results of
operations and cash flows of Premier Operations and its domestic
subsidiaries. The non-guarantor group is comprised of the assets,
liabilities, results of operations and cash flows of Premier
Operations' foreign subsidiaries that are not guarantors of any of the
debt described in (a) through (g) above.
F-24
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Premier Non-
Holdings SFEC SFTP Operations Guarantors Eliminations Total
----------- ----------- ----------- ----------- ----------- ------------ -----------
(Dollars in thousands)
Assets:
Cash and cash equivalents $ 320,411 709 45,403 13,763 20,292 -- 400,578
Restricted-use investment securities 22,734 183,341 -- -- -- -- 206,075
Other current assets 38,067 -- 30,065 23,340 8,377 (17,462) 82,387
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total current assets 381,212 184,050 75,468 37,103 28,669 (17,462) 689,040
Intercompany receivables (payables) -- -- -- 864 (864) -- --
Other assets 133,333 30,867 32,764 85,469 747 (52,617) 230,563
Investment in subsidiaries 1,432,883 1,223,369 -- 104,852 -- (2,761,104) --
Investment in theme park partnerships 226,324 -- -- 57,196 -- -- 283,520
Property and equipment, net 23,758 -- 892,913 531,029 123,453 -- 1,571,153
Intangible assets, net 3,624 -- 1,189,765 45,049 68,575 (28,824) 1,278,189
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets $ 2,201,134 1,438,286 2,190,910 861,562 220,580 (2,860,007) 4,052,465
=========== =========== =========== =========== =========== =========== ===========
Liabilities and equity:
Current portion of long-term debt $ -- 182,877 1,000 8,173 21,084 (15,096) 198,038
Other current liabilities 22,888 4,107 81,986 35,956 16,589 (2,366) 159,160
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total current liabilities 22,888 186,984 82,986 44,129 37,673 (17,462) 357,198
Long-term debt 550,896 170,000 729,917 407,224 57,267 (52,617) 1,862,687
Other long-term liabilities 568 25,000 22,502 2,412 4,123 (568) 54,037
Deferred income taxes 217 (4,547) 132,704 35,763 16,665 (28,824) 151,978
Stockholders' equity 1,626,565 1,060,849 1,222,801 372,034 104,852 (2,760,536) 1,626,565
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and equity $ 2,201,134 1,438,286 2,190,910 861,562 220,580 (2,860,007) 4,052,465
=========== =========== =========== =========== =========== =========== ===========
Revenue:
Theme park admissions $ -- -- 256,316 125,160 41,985 -- 423,461
Theme park food, merchandise
and other 340 -- 241,412 123,642 24,772 -- 390,166
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenue 340 -- 497,728 248,802 66,757 -- 813,627
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating costs and expenses:
Operating expenses -- -- 172,750 101,235 23,281 -- 297,266
Selling, general and administrative 9,351 -- 61,471 45,341 10,822 -- 126,985
Noncash compensation 5,687 -- -- 675 -- -- 6,362
Costs of products sold -- -- 69,643 27,879 5,529 -- 103,051
Depreciation and amortization 166 -- 71,895 27,092 10,688 -- 109,841
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating costs and expenses 15,204 -- 375,759 202,222 50,320 -- 643,505
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income from operations (14,864) -- 121,969 46,580 16,437 -- 170,122
----------- ----------- ----------- ----------- ----------- ----------- -----------
F-25
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Premier Non-
Holdings SFEC SFTP Operations Guarantors Eliminations Total
----------- ----------- ----------- ----------- ----------- ------------ -----------
(Dollars in thousands)
Other income (expense):
Interest expense $ (41,031) (19,243) (49,559) (38,702) (3,171) 1,886 (149,820)
Interest income 20,593 7,277 2,866 4,621 500 (1,886) 33,971
Equity in operations of theme park
partnerships 21,002 -- -- 3,052 -- -- 24,054
Minority interest in earnings -- -- 36 -- (996) -- (960)
Other income (expense) -- -- (151) (703) (169) -- (1,023)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total other income (expense) 564 (11,966) (46,808) (31,732) (3,836) -- (93,778)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes (14,300) (11,966) 75,161 14,848 12,601 -- 76,344
Income tax expense (benefit) (5,918) (4,547) 39,060 5,926 6,195 -- 40,716
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary loss (8,382) (7,419) 36,101 8,922 6,406 -- 35,628
Extraordinary loss on extinguishment
of debt, net of income tax benefit -- -- -- (788) -- -- (788)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) $ (8,382) (7,419) 36,101 8,134 6,406 -- 34,840
=========== =========== =========== =========== =========== =========== ===========
Net income (loss) applicable
to common stock $ (25,848) (7,419) 36,101 8,134 6,406 -- 17,374
=========== =========== =========== =========== =========== =========== ===========
Cash flow information:
Operating cash flows $ (17,367) (10,357) 98,051 27,145 21,538 -- 119,010
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment (23,970) -- (56,415) (105,309) (20,060) -- (205,754)
Investment in theme park partnerships (217,641) -- -- (51,180) -- 208,082 (60,739)
Sale of assets to Holdings -- 162,082 46,000 -- -- (208,082) --
Acquisition of theme park assets -- -- (45,049) (5,544) -- -- (50,593)
Acquisitions of theme park companies (1,000,065) -- -- (68,629) -- 31,282 (1,037,412)
Investment in subsidiaries (39,030) -- -- -- -- 39,030 --
Purchase of restricted-use investments (145,675) (176,075) -- -- -- -- (321,750)
Maturities of restricted-use
investments 11,365 -- -- -- -- -- 11,365
----------- ----------- ----------- ----------- ----------- ----------- -----------
(1,415,016) (13,993) (55,464) (230,662) (20,060) 70,312 (1,664,883)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term debt -- (165,686) (423,750) (119,340) (47,480) 52,617 (703,639)
Proceeds from borrowings 531,703 170,000 410,000 250,000 52,617 (52,617) 1,361,703
Net cash proceeds from issuance
of stock 1,256,319 -- -- -- -- -- 1,256,319
Capital contributions -- 25,856 6,611 6,563 -- (39,030) --
Payment of preferred dividends (11,644) -- -- -- -- -- (11,644)
Payment of debt issuance costs (23,584) (6,472) (7,354) (4,231) -- -- (41,641)
----------- ----------- ----------- ----------- ----------- ----------- -----------
1,752,794 23,698 (14,493) 132,992 5,137 (39,030) 1,861,098
Effect of exchange rate changes
on cash -- -- -- -- 1,065 -- 1,065
----------- ----------- ----------- ----------- ----------- ----------- -----------
Increase in cash and cash equivalents $ 320,411 (652) 28,094 (70,525) 7,680 31,282 316,290
=========== =========== =========== =========== =========== =========== ===========
F-26
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
The debt indentures or credit facility agreements generally restrict the
ability of the obligors to distribute assets to parent companies or in
the case of Holdings to shareholders. The following table discloses the
amounts available for distribution (other than permitted payments in
respect of shared administrative and other corporate expenses and tax
sharing payments) at December 31, 1998 by each debt group based upon the
most restrictive applicable limitation. The terms of the Premier
Operations credit facility require approval by the lender for any
distributions. As such, the net assets of Premier Operations are
considered to be fully restricted.
Amount
Available
--------------
(in thousands)
Holdings $158,037
SFEC 111,220
SFTP 3,772
(7) Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1998 and 1997. The
fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties.
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- -------------- ------------ ------------
Financial assets (liabilities):
Restricted-use investment securities $ 317,652,000 320,059,000 -- --
Long-term debt (2,060,725,000) (2,094,807,000) (217,026,000) (236,000,000)
Foreign currency forward-purchase
agreements -- 577,000 -- --
The carrying amounts shown in the table are included in the consolidated
balance sheets under the indicated captions, except for the foreign
currency forward-purchase agreements (Note 5) which are not reflected in
the consolidated balance sheets.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
() The fair value of cash and cash equivalents, accounts receivable,
accounts payable, and other accrued liabilities approximate fair value
because of the short maturity of these instruments.
F-27
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
() Restricted-use investment securities: The fair values of debt
securities (both available-for-sale and held-to-maturity investments)
are based on quoted market prices at the reporting date for those or
similar investments.
() Long-term debt: The fair value of the Company's long-term debt is
estimated by discounting the future cash flows of each instrument at
rates currently offered to the Company for similar debt instruments of
comparable maturities by the Company's investment bankers or based
upon quoted market prices.
(8) Termination Fee
During October 1997, the Company entered into an agreement with the limited
partner of the partnership that owned the Six Flags Over Texas theme park.
The general terms of the agreement were for the Company to become the
managing general partner of the partnership, to manage the operations of
the park, to receive a portion of the income from such operations, and to
purchase limited partnership units over the term of the agreement. The
provisions of the agreement also granted the Company an option to purchase
all of the partnership interests in the partnership at the end of the
agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was
terminated. Subsequent to the Company's agreement with the limited
partnership, the prior operator of the theme park also reached an agreement
with the limited partnership. The Company received the termination fee in
December 1997 and has included the termination fee, net of $2,386,000 of
expenses associated with the transaction, as a component of other income
(expense) in the accompanying 1997 consolidated statement of operations.
(9) Income Taxes
Income tax expense allocated to operations for 1998, 1997 and 1996 consists
of the following:
Current Deferred Total
------------ ---------- ----------
1998:
U.S. federal $ (564,000) 32,318,000 31,754,000
Foreign 1,049,000 5,146,000 6,195,000
State and local 1,007,000 1,760,000 2,767,000
------------ ------------ ------------
$ 1,492,000 39,224,000 40,716,000
============ ============ ============
F-28
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Current Deferred Total
------------ ------------ ------------
1997:
U.S. federal $ 2,505,000 6,060,000 8,565,000
State and local 373,000 677,000 1,050,000
------------ ------------ ------------
$ 2,878,000 6,737,000 9,615,000
============ ============ ============
1996:
U.S. federal $ -- 1,335,000 1,335,000
State and local 64,000 98,000 162,000
------------ ------------ ------------
$ 64,000 1,433,000 1,497,000
============ ============ ============
Recorded income tax expense allocated to operations differed from amounts
computed by applying the U.S. federal income tax rate of 35% in 1998 and
1997 and 34% in 1996 to income before income taxes as follows:
1998 1997 1996
------------ ------------ ------------
Computed "expected" federal
income tax expense $ 26,720,000 8,300,000 1,109,000
Amortization of goodwill 10,825,000 327,000 180,000
Other, net (328,000) 200,000 87,000
Effect of foreign income taxes 1,645,000 -- --
Effect of state and local
income taxes,
net of federal tax benefit 1,854,000 788,000 121,000
------------ ------------ ------------
$ 40,716,000 9,615,000 1,497,000
============ ============ ============
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting and
tax depreciation methods and periods for property and equipment. The
Company's net operating loss carryforwards, alternative minimum tax
carryforwards, accrued insurance expenses, and deferred compensation
amounts represent future income tax deductions (deferred tax assets). The
tax effects of these temporary differences as of December 31, 1998 and
1997, are presented below:
F-29
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1998 1997
------------ ------------
Deferred tax assets before valuation allowance $172,227,000 21,891,000
Less valuation allowance 1,196,000 1,196,000
------------ ------------
Net deferred tax assets 171,031,000 20,695,000
Deferred tax liabilities 323,009,000 54,232,000
------------ ------------
Net deferred tax liability $151,978,000 33,537,000
============ ============
The Company's deferred tax liability results from the financial carrying
amounts for property and equipment being substantially in excess of the
Company's tax basis in the corresponding assets. The majority of the
Company's property and equipment is depreciated over a 7-year period for
tax reporting purposes and a longer 20- to 25-year period for financial
purposes. The faster tax depreciation has resulted in tax losses which can
be carried forward to future years to offset future taxable income. Because
most of the Company's depreciable assets' financial carrying amounts and
tax basis difference will reverse before the expiration of the Company's
net operating loss carryforwards and taking into account the Company's
projections of future taxable income over the same period, management
believes that the Company will more likely than not realize the benefits of
these net future deductions.
As of December 31, 1998, the Company has approximately $346,086,000 of net
operating loss carryforwards available for federal income tax purposes
which expire through 2018. Included in that total are net operating loss
carryforwards of $3,400,000 which are not expected to be utilized as a
result of an ownership change on October 30, 1992. A valuation allowance
for the pre-October 1992 net operating loss carryforwards has been
established. Additionally, the Company has approximately $7,537,000 of
alternative minimum tax credits which have no expiration date.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. The
Company experienced an additional ownership change on June 4, 1996, as a
result of the issuance of shares of common stock and the conversion of
preferred stock into additional shares of common stock. This ownership
change may limit the use of the Company's post-October 1992 through June
1996 net operating loss carryforwards in a given year; however, it is more
likely than not that the post-October 1992 carryforwards will be fully
utilized by the Company before their expiration.
Included in the Company's tax net operating loss carryforward amounts are
approximately $249,353,000 of net operating loss carryforwards of Six Flags
generated prior to acquisition by the Company. Six Flags experienced an
ownership change on April 1, 1998 as a result of the Six Flags Acquisition.
Due to this ownership change, no more than $49,200,000 of such net
operating loss carryforwards may be used to offset taxable income of Six
Flags and no more than the taxable income of the Company in any year;
however, it is more likely than not that all of the Company's
(Conitnued)
F-30
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
carryforwards generated subsequent to October 1992 and all of the Six
Flags' carryfowards will be utilized by the Company before their
expiration.
(10) Stockholders' Equity
(a) Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock, $1.00
par value per share. During 1995, the Company issued 200,000 shares of
Series A, 7% cumulative convertible preferred stock at $100 per share.
During June 1996, the shares, including all dividends thereon, were
converted into 5,121,856 common shares. The Company has agreed to
provide the former preferred stockholders certain registration rights
relative to the common stock issued upon conversion of the preferred
stock.
In connection with the Company's acquisition of SFEC on April 1, 1998,
the Company issued 5,750,000 PIES, each representing one
five-hundredth of a share of the Company's mandatorily convertible
preferred stock (an aggregate of 11,500 shares of preferred stock).
See Note 2. The PIES accrue cumulative dividends (payable, at the
Company's option, in cash or shares of common stock) at 7 1/2% per
annum (approximately $23,300,000 per annum) and are mandatorily
convertible into shares of common stock on April 1, 2001. Holders can
voluntarily convert the PIES into shares of common stock at any
time prior to April 1, 2001.
Prior to April 1, 2001, the PIES are convertible at the option of the
holder into 1.6616 common shares. On April 1, 2001, the PIES will
mandatorily convert into common shares based upon the average of the
closing quoted market price of the common stock for the last twenty
days prior to the conversion. If the average market price of the
common stock is equal to or less than $27 per common share, each
PIES share would convert into two shares of common stock. If the
average market price of the common stock is equal to or more than
$32.50 per common share, each PIES share would convert into 1.6616
common shares. If the average market price of the common stock is
between $27 and $32.50 per common share, each PIES share converts
into a declining number of common shares based upon the proportional
excess of the average market price over $27 per common share until
the 1.6616 conversion rate is achieved at the average market price
of $32.50. Any conversion is also adjusted for dividends that have
accumulated, but not yet paid in cash or common stock.
All shares of preferred stock rank senior and prior in right to all of
the Company's now or hereafter issued common stock with respect to
dividend payments and distribution of assets upon liquidation or
dissolution of the Company.
F-31
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(b) Common Stock
In August 1995, the Company issued 2,350,126 common shares in full
exchange for the Company's $7,000,000 senior subordinated convertible
notes and 620,740 common shares in full exchange for the Company's
$2,095,000 junior subordinated term loan. The Company has agreed to
provide the stockholders certain registration rights.
On June 4, 1996, and June 6, 1996, the Company issued 6,850,000 and
1,027,500, respectively, of its common shares resulting in net
proceeds to the Company of $65,306,000. Additionally, on June 4, 1996,
the Company exchanged 5,121,856 of its common shares for all 200,000
shares of its previously outstanding preferred stock.
On January 31, 1997, the Company issued 13,800,000 of its common
shares resulting in net proceeds to the Company of approximately
$189,530,000.
In connection with the Company's acquisition of SFEC on April 1, 1998,
the Company issued 36,800,000 shares of Common Stock resulting in net
proceeds to the Company of $954,542,000.
On June 9, 1998, the Company's common shareholders approved a
two-for-one stock split effective July 24, 1998. The par value of the
common stock was decreased to $.025 per share from $.05 per share.
Additionally, the authorized common shares of the Company were
increased to 150,000,000. The accompanying consolidated financial
statements and notes to the consolidated financial statements reflect
the stock split as if it had occurred as of the earliest date
presented.
(c) Stock Options and Warrants
In 1998, 1996, 1995, 1994, and 1993, certain members of the Company's
management were issued seven-year options to purchase 3,437,000,
705,000, 496,000, 72,000 and 290,401 of its common shares, at an
exercise price of $17.50, $11.00, $4.13, $3.75, and $2.50 per share,
respectively, under the Company's 1998, 1996, 1995 and 1993 Stock
Option and Incentive Plans (collectively, the "Option Plans"). No
stock options were issued during 1997. Under the Option Plans, stock
options are granted with an exercise price equal to the underlying
stock's fair value at the date of grant. Except for the 1,531,000
conditional options issued in 1998, options may be exercised on a
cumulative basis with 20% of the total exercisable on date of issuance
and with an additional 20% being available for exercise on each of the
succeeding anniversary dates. Any unexercised portion of the options
will automatically terminate upon the seventh anniversary of the
issuance date or following termination of employment. The conditional
stock options issued in 1998 have the same vesting schedule as the
unconditional stock options, except that no conditional option can be
exercised until after the conditions restricting the stock option are
met. Generally, the conditions related to these stock options will be
determined by the end of 1999.
F-32
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
In 1998, the Company also issued to certain consultants options to
purchase 70,000 common shares, of which the option to purchase 20,000
shares are conditional. The options have substantially the same terms
and conditions as the options granted under the Option Plans. The
Company has recognized the fair value of the options issued to the
consultants as an expense in the accompanying 1998 statement of
operations.
At December 31, 1998, there were 5,543,599 additional shares available
for grant under the Option Plans. The per share weighted-average fair
value of stock options granted during 1998 and 1996 was $12.74 and
$7.74, respectively, on the date of grant using the Black--Scholes
option-pricing model with the following weighted-average assumptions:
1998--expected dividend yield 0%, risk-free interest rate of 4.5%,
expected volatility of 84%, and an expected life of 5 years;
1996--expected dividend yield 0%, risk-free interest rate of 6.25%,
expected volatility of 92%, and an expected life of 5 years.
No compensation cost has been recognized for the unconditional stock
options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the grant date
for all its unconditional stock options, the Company's net income
would have been as indicated below:
1998 1997 1996
-------------- ------------- ------------
Net income applicable to
common stock
As reported $ 17,374,000 14,099,000 1,162,000
Pro forma 11,212,000 13,325,000 390,000
Income per average
common share
outstanding - basic:
As reported .26 .39 .07
Pro forma .17 .37 .02
Pro forma net income applicable to common stock reflects only options
granted in 1998, 1996 and 1995. Therefore, the full impact of
calculating compensation cost for stock options is not reflected in
the pro forma net income amounts presented above because compensation
cost is reflected over the options' vesting period of 4 years and
compensation cost for options granted prior to January 1, 1995 is not
considered.
F-33
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Stock option activity during the periods indicated is as follows:
Weighted-
Average
Number of Exercise
Shares Price
---------- ----------
Balance at December 31, 1995 858,401 $ 3.55
Granted 705,000 11.00
Exercised -- --
Forfeited -- --
Expired -- --
---------- ----------
Balance at December 31, 1996 1,563,401 6.91
Granted -- --
Exercised -- --
Forfeited (4,000) 2.50
Expired -- --
---------- ----------
Balance at December 31, 1997 1,559,401 6.92
Granted 3,507,000 17.50
Exercised (216,485) 3.52
Forfeited -- --
Expired -- --
---------- ----------
Balance at December 31, 1998 4,849,916 $ 14.72
========== ==========
At December 31, 1998, the range of exercise prices and
weighted-average remaining contractual life of outstanding options was
$2.50 to $17.50 and 5.97 years, respectively.
At December 31, 1998, 1997, and 1996, the number of options
exercisable was 1,366,700, 891,600 and 608,900, respectively, and
weighted-average exercise price of those options was $9.83, $5.63 and
$5.00, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant
to purchase 52,692 common shares at an exercise price of $.50 per
share and a ten-year warrant to purchase 37,386 common shares at an
exercise price of $.50 per share.
(d) Share Rights Plan
On December 10, 1997, the Company's board of directors authorized a
share rights plan. The plan was subsequently amended on February 4,
1998. Under the plan, stockholders have one right for each share of
common stock held. The rights become exercisable ten business days
after
(Continued)
F-34
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(a) an announcement that a person or group of affiliated or associated
persons has acquired beneficial ownership of 15% or more of the voting
shares outstanding, or (b) the commencement or announcement of a
person's or group's intention to commence a tender or exchange offer
that could result in a person or group owning 15% or more of the
voting shares outstanding.
Each right entitles its holder (except a holder who is the acquiring
person) to purchase 1/1000 of a share of a junior participating series
of preferred stock designated to have economic and voting terms
similar to those of one share of common stock for $250.00, subject to
adjustment. In the event of certain merger or asset sale transactions
with another party or transactions which would increase the equity
ownership of a shareholder who then owned 15% or more of the Company,
each right will entitle its holder to purchase securities of the
merging or acquiring party with a value equal to twice the exercise
price of the right.
The rights, which have no voting power, expire in 2008. The rights may
be redeemed by the Company for $.01 per right until the right becomes
exercisable.
(e) Restricted Stock Grants
The Company issued 900,000 restricted common shares with an estimated
aggregate value of $14,625,000 to members of the Company's senior
management in July 1997. The restrictions on the stock lapse ratably
over a six-year term commencing January 1, 1998, generally based upon
the continued employment of the members of management. The Company
issued an additional 920,000 restricted common shares with an
estimated aggregate value of $16,100,000 to members of the Company's
senior management in October 1998. The restrictions of the stock lapse
ratably over a three-year term commencing on January 1, 1999. The
restrictions also lapse if any or all members are terminated without
cause or if a change in control of the Company occurs. Compensation
expense equal to the aggregate value of the shares will be recognized
as an expense over the vesting period.
(11) Pension Benefits
As part of the acquisition of Six Flags by the Company on April 1, 1998,
the Company assumed the obligations related to the Six Flags Defined
Benefit Plan (the "Benefit Plan"). The Benefit Plan covers substantially
all of Six Flags' full-time employees. Subsequent to December 31, 1998, the
Benefit Plan was extended to cover substantially all of the Company's
full-time employees. The Benefit Plan permits normal retirement at age 65,
with early retirement at ages 55 through 64 upon attainment of ten years of
credited service. The early retirement benefit is reduced for benefits
commencing before age 62. Benefit Plan benefits are calculated according to
a benefit formula based on age, average compensation over the highest
consecutive five-year period during the employee's last ten years of
employment and year of service. Benefit Plan assets are invested primarily
in common stock and mutual funds. The Benefit Plan does not have
significant liabilities other than benefit obligations.
(Continued)
F-35
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
Under the Company's funding policy, contributions to the Benefit Plan are
determined using the projected unit credit cost method. This funding policy
meets the requirements under the Employee Retirement Income Security Act of
1974.
The following table sets forth the aggregate funded status of the Benefit
Plan and the related amounts recognized in the Company's consolidated
balance sheets:
Change in benefit obligation:
Benefit obligation, at date of
acquisition of Six Flags $ 68,712,000
Service cost 2,444,000
Interest cost 3,808,000
Actuarial loss 757,000
Benefits paid (1,063,000)
------------
Benefit obligation at December 31, 1998 74,658,000
------------
Change in plan assets:
Fair value of assets, at date of
acquisition of Six Flags 85,236,000
Actual return on plan assets 3,097,000
Benefits paid (1,063,000)
------------
Fair value of assets, at December 31, 1998 87,270,000
------------
Plan assets in excess of benefit obligations 12,612,000
Unrecognized net actuarial loss 3,317,000
------------
Prepaid benefit cost (included in deposits
and other assets) $ 15,929,000
============
Net pension expense of the Benefit Plan for the nine-month period ended
December 31, 1998 included the following components:
Service cost $ 2,444,000
Interest cost 3,808,000
Expected return on plan assets (5,657,000)
------------
Net periodic cost $ 595,000
============
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation in 1998 was 6.75%. The
rate of increase in future compensation levels was 4.5%. The expected
long-term rate of return on assets was 9%.
F-36
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(12) 401(k) Plan
The Company has a qualified, contributory 401(k) plan (the "401(k) Plan").
All regular employees are eligible to participate in the 401(k) Plan if
they have completed one full year of service and are at least 21 years old.
The Company matches 100% of the first 2% and 25% of the next 6% of salary
contributions made by employees. The accounts of all participating
employees are fully vested. The Company recognized approximately $417,000,
$377,000 and $150,000 of expense in the years ended December 31, 1998, 1997
and 1996, respectively.
As part of the acquisition of Six Flags by the Company, the Company assumed
the administration of the Six Flags' savings plan. Under the provisions of
the Six Flags' savings plan, all full-time and seasonal employees of Six
Flags completing one year of service (minimum 1,000 hours) and attaining
age 21 are eligible to participate and may contribute up to 6% of
compensation as a tax deferred basic contribution. Each participant may
also elect to make additional contributions of up to 10% of compensation
(up to 4% tax deferred). Tax deferred contributions to the savings plan may
not exceed amounts defined by the Internal Revenue Service ($10,000 for
1998). Both the basic and additional contributions are at all times vested.
Six Flags, at its discretion, may make matching contributions of up to 100%
of its employees' basic contributions. Six Flags made $743,000 in
contributions for the 1998 plan year. Six Flags matching contributions to
the savings plan are made in the first quarter of the succeeding year.
During the first quarter of 1999, the Six Flags' savings plan was merged
into the 401(k) Plan.
(13) Marine World
In April 1997, the Company became manager of Marine World (subsequently
named Six Flags Marine World), then a marine and exotic wildlife park
located in Vallejo, California, pursuant to a contract with an agency of
the City of Vallejo under which the Company is entitled to receive an
annual base management fee of $250,000 and up to $250,000 annually in
additional fees based on park revenues. In November 1997, the Company
exercised its option to lease approximately 40 acres of land within the
site for nominal rent and an initial term of 55 years (plus four ten-year
and one four-year renewal options). In 1998, the Company added theme park
rides and attractions on the leased land, which is located within the
existing park, in order to create one fully-integrated regional theme park
at the site. The Company is entitled to receive, in addition to the
management fee, 80% of the cash flow generated by the combined operations
at the park, after combined operating expenses and debt service on
outstanding debt obligations relating to the park. The Company also has an
option to purchase the entire site commencing in February 2002 at a
purchase price equal to the greater of the then principal amount of certain
debt obligations of the seller (expected to aggregate $52,000,000 at
February 2002) or the then fair market value of the seller's interest in
the park (based on a formula relating to the seller's 20% share of Marine
World's cash flow). The Company currently expects to exercise this purchase
option when it becomes exercisable.
F-37
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(14) Commitments and Contingencies
The Company leases the sites of Wyandot Lake and each of the two
Waterworld/USA locations with rent based upon percentages of revenues
earned by each park. During 1998, 1997, and 1996, the Company recognized
approximately $1,002,000, $1,110,000, and $385,000 respectively, of rental
expense under these rent agreements.
Total rental expense, including office space and park sites, was
approximately $7,918,000, $2,229,000 and $1,227,000 for the years ended
December 31, 1998, 1997, and 1996, respectively.
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
$245,000,000 in punitive damages was entered against TWE and of $12,000,000
in punitive damages was entered against the referenced Six Flags entities.
TWE has indicated that it intends to appeal 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
Six Flags Acquisition at Six Flags Over Georgia, including alleged breaches
of fiduciary duty. The sellers in the Six Flags Acquisition, including Time
Warner, Inc., have agreed to indemnify the Company from any and all
liabilities arising out of this litigation.
On June 2, 1997, a water slide collapsed at the Company's Waterworld/USA
park in Concord, California, resulting in one fatality and the park's
closure for twelve days. Although the collapse and the resulting closure
had a material adverse impact on that park's operating performance for
1997, as well as a lesser impact on the Company's Sacramento water park
(which is also named "Waterworld/USA"), located approximately seventy miles
from the Concord park, the Company's other parks were not adversely
affected. The Company has recovered all of the Concord park's operating
shortfall under its business interruption insurance. The Company has paid
the self-retention limit on its liability insurance and believes that such
liability insurance coverage should be adequate to provide for any
additional personal injury liability which may ultimately be found to exist
in connection with the collapse.
On March 21, 1999, a raft capsized in the river rapids ride at Six Flags
over Texas, one of the Company's Co-Venture parks, resulting in one
fatality and injuries to ten others. While the Co-Venture park is covered
by the Company's multi-layered general liability insurance coverage of up
to $100,000,000 per occurrence, with no self-insured retention, the impact
of this incident on the Company's financial position, operations, or
liquidity has not yet been determined.
The Company is party to various legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the
Company and which can be reasonably estimated are accrued. Such accruals
are based on information known about the matters, the Company's estimates
of the outcomes of such matters and its experience in contesting,
litigating and settling similar matters.
(Continued)
F-38
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
None of the actions are believed by management to involve amounts that
would be material to consolidated financial condition, operations, or
liquidity after consideration of recorded accruals.
(15) Business Segments
The Company manages its operations on an individual park location basis.
Discrete financial information is maintained for each park and provided to
the Company's management for review and as a basis for decision-making. The
primary performance measure used to allocate resources is earnings before
interest, tax expense, depreciation, and amortization (EBITDA). All of the
Company's parks provide similar products and services through a similar
process to the same class of customer through a consistent method. As such,
the Company has only one reportable segment - operation of theme parks. The
following tables present segment financial information, a reconciliation of
the primary segment performance measure to income before income taxes and a
reconciliation of theme park revenues to consolidated total revenues. Park
level expenses exclude all non-cash operating expenses, principally
depreciation and amortization.
1998 1997 1996
----------- ----------- -----------
(Amounts in thousands)
Theme park revenues $ 1,015,470 193,531 93,305
Theme park cash expenses 634,001 133,302 65,413
----------- ----------- -----------
Aggregate park EBITDA 381,469 60,229 27,892
Third-party share of EBITDA from
parks accounted for under the
equity method (41,064) -- --
Amortization of investment in theme
park partnerships (9,763) -- --
Unallocated net expenses, including
corporate and expenses from parks
acquired after completion of the
operating season (28,608) (7,312) (4,976)
Termination fee, net of expenses -- 8,364 --
Depreciation and amortization (109,841) (19,792) (8,533)
Interest expense (149,820) (25,714) (12,597)
Interest income 33,971 7,939 1,476
----------- ----------- -----------
Income before income taxes $ 76,344 23,714 3,262
=========== =========== ===========
F-39
PREMIER PARKS INC.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1998 1997 1996
----------- ----------- -----------
(Amounts in thousands)
Theme park revenues $ 1,015,470 193,531 93,305
Theme park revenues from parks
accounted for under the equity
method (202,183) -- --
Other revenues 340 373 142
----------- ----------- -----------
Consolidated total revenues $ 813,627 193,904 93,447
=========== =========== ===========
Six of the Company's locations are located in Europe. The following
information reflects the Company's assets and revenue by domestic and
European categories for 1998 (the Company did not have any foreign
operations prior to March 1998):
Domestic European Total
----------- ----------- -----------
Long-lived assets $ 3,831,885 220,580 4,052,465
Revenue 746,870 66,757 813,627
(16) Quarterly Financial Information (Unaudited)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1998 and 1997:
1998
---------------------------------------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------------- -------------- -------------- -------------- --------------
Total revenue $ 6,831,000 299,684,000 446,381,000 60,731,000 813,627,000
Net income (loss) applicable to common (15,450,000) 14,741,000 94,934,000 (76,851,000) 17,374,000
stock
Income (loss) applicable to common stock
per share:
Basic (0.82) 0.20 1.26 (1.00) .26
Diluted (0.82) 0.19 1.24 (1.00) .25
1997
---------------------------------------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------------- -------------- -------------- -------------- --------------
Total revenue $ 4,264,000 62,468,000 120,014,000 7,158,000 193,904,000
Net income (loss) applicable to common (9,742,000) 5,698,000 27,237,000 (9,094,000) 14,099,000
stock
Income (loss) applicable to common stock
per share:
Basic (0.31) 0.16 0.74 (0.24) 0.39
Diluted (0.31) 0.15 0.72 (0.24) 0.38
F-40
EXHIBIT INDEX
PAGE
----
(3) Article of Incorporation and By-Laws:
(a) Certificate of Incorporation of Registrant
dated March 24, 1981 - incorporated by
reference from Exhibit 3 to Form 10-Q of
Registrant for the quarter ended June 30, 1987.
(b) Plan and Agreement of Merger of Registrant and
Tierco, a Massachusetts business trust, dated
March 31, 1981 - incorporated by reference from
Exhibit 3 to Form 10-Q of Registrant for the
quarter ended June 30, 1987.
(c) Certificate of Amendment of Certificate of
Incorporation of Registrant dated April 14,
1985 - incorporated by reference from Exhibit 3
to Form 10-Q of Registrant for the quarter
ended June 30, 1987.
(d) Certificate of Amendment of Certificate of
Incorporation of Registrant dated May 8, 1987 -
incorporated by reference from Exhibit 3 to
Form 10-Q of Registrant for the quarter ended
June 30, 1987.
(e) Certificate of Amendment of Certificate of
Incorporation of Registrant dated June 11,
1987- incorporated by reference from Exhibit 3
to Form 10-Q of Registrant for the quarter
ended June 30, 1987.
(f) Certificate of Amendment of Certificate of
Incorporation of Registrant dated April 30,
1991 - incorporated by reference from Exhibit
3(f) to Form 10-K of Registrant for the year
ended December 31, 1991.
(g) Certificate of Amendment of Certificate of
Incorporation of Registrant dated June 30, 1992
- incorporated by reference from Exhibit 3(g)
to Form 10-K of Registrant for the year ended
December 31, 1992.
(h) Certificate of Amendment of Certificate of
Incorporation of Registrant dated June 23, 1993
- incorporated by reference from Exhibit 3(a)
to Form 10-Q of Registrant for the quarter
ended June 30, 1993.
(i) Certificate of Amendment to Certificate of
Incorporation dated October 7, 1994 -
incorporated by reference from Exhibit 3(i) to
Form 10-K of Registrant for the year ended
December 31, 1994.
(j) Certificate of Designation of Series A 7%
Cumulative Convertible Preferred Stock (the
"Preferred Stock") of Registrant - incorporated
by reference from Exhibit 3(10) to Registrant's
Registration Statement on Form S-1 (Reg. No.
33-62225) declared effective on November 9,
1995 (the "Registration Statement").
(k) By-laws of Registrant, as amended -incorporated
by reference from Exhibit 3(k) to Form 10-K of
Registrant for the year ended December 31,
1996.
(l) Certificate of Amendment to Certificate of
Incorporation dated May 6, 1996 - incorporated
by reference from Exhibit 3(l) to Form 10-K of
Registrant for the year ended December 31,
1996.
(m) Certificate of Designation of Series A Junior
Preferred Stock of Registrant - incorporated by
reference from Exhibit 2(1.C) to Registrant's
Registration Statement on Form 8-A dated
January 21, 1998.
(n) Certificate of Amendment to Certificate of
Incorporation dated June 16, 1997 --
incorporated by reference from Exhibit 3(n) to
Form 10-k of Registrant for year ended December
31, 1997.
(o) Certificate of Designation, Rights and
Preferences for 7 1/2% Mandatorily Convertible
Preferred Stock of Registrant -incorporated by
reference from Exhibit 4(s) to Registrant's
Registration Statement on Form S-3 (No. 333-
45859) declared effective on March 26, 1998.
*(p) Certificate of Amendment of Certificate of
Incorporation of Registrant dated July 24,
1998.
i
(4) Instruments Defining the Rights of Security Holders,
Including Indentures:
(a) Indenture dated as of August 15, 1995, among
the Registrant, the subsidiaries of the
Registrant named therein and United States
Trust Company of New York, as trustee
(including the form of Notes) - incorporated by
reference from Exhibit 4(2) to the Registration
Statement.
(b) Form of First Supplemental Indenture dated as
of November 9, 1995 - incorporated by reference
from Exhibit 4(2.1) to the Registration
Statement.
(c) Purchase Agreement, dated August 10, 1995,
among the Registrant, the subsidiaries of the
Registrant named therein and Chemical
Securities Inc. -incorporated by reference from
Exhibit 4(3) to the Registration Statement.
(d) Exchange and Registration Rights Agreement,
dated August 15, 1995, among the Registrant,
the subsidiaries of the Registrant named
therein and Chemical Securities Inc. -
incorporated by reference from Exhibit 4(4) to
the Registration Statement.
(e) Form of Subscription Agreement between the
Registrant and each of the purchasers of shares
of Preferred Stock - incorporated by reference
from Exhibit 4(10) to the Registration
Statement.
(f) Convertible Note Purchase Agreement, dated as
of March 3, 1993, between the Registrant and
the purchasers named therein (including forms
of Senior Subordinated Convertible Note and
Registration Rights Agreement) - incorporated
by reference from Exhibit 4(i) to Form 10-K of
the Registrant for the year ended December 31,
1992.
(g) Form of Subscription Agreement, dated October
1992, between the Registrant and certain
investors -incorporated by reference from
Exhibit 4(a) to the Registrant's Current Report
on Form 8-K dated October 30, 1992.
(h) Stock Purchase and Warrant Issuance Agreement,
dated October 16, 1989, between The Tierco
Group, Inc. and Kieran E. Burke - incorporated
by reference from Exhibit 4(i) to Form 10-K of
Registrant for the year ended December 31,
1989.
(i) Warrant, dated October 16, 1989, to purchase
131,728 shares of Common Stock issued by The
Tierco Group, Inc. to Kieran E. Burke -
incorporated by reference from Exhibit 4(k) to
Form 10-K of Registrant for the year ended
December 31, 1989.
(j) Warrant, dated October 16, 1989, to purchase
93,466 shares of Common Stock issued by The
Tierco Group, Inc. to Kieran E. Burke -
incorporated by reference from Exhibit 4(1) to
Form 10-K of Registrant for the year ended
December 31, 1989.
(k) Form of Common Stock Certificate - incorporated
by reference from Exhibit 4(l) to Registrant's
Registration Statement on form S-2 (Reg. No.
333-08281) declared effective on May 28, 1996.
(l) Form of Registration Rights Agreement among
Registrant, Edward J. Carroll, Jr. and the
Carroll Family Limited Partnership -
incorporated by reference from Exhibit 4(m) to
Registrant's Registration Statement on Form S-2
(Reg. No. 333-16763) declared effective on
January 27, 1997.
(m) Form of Indenture dated as of February 1, 1997,
among the Registrant and the Bank of New York,
as trustee (including the form of Notes) -
incorporated by reference from Exhibit 4(l) to
Registrant's Registration Statement on Form S-2
(Reg. No. 333-16763) declared effective on
January 27, 1997.
(n) Form of Second Supplemental Indenture dated
January 21, 1997 - incorporated by reference
form Exhibit 4(n) to Registrant's Registration
Statement on Form S-2 (Reg. No. 333-16763)
declared effective on January 27, 1997.
(o) Form of Depositary Receipt evidencing ownership
of Registrant's Premium Income Equity
Securities -incorporated by reference from
Exhibit 4(k) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared
effective on March 26, 1998.
(p) Indenture dated as of April 1, 1998 between
Premier Parks Inc. and The Bank of New York, as
Trustee with respect to the Registrant's 10%
Senior Discount Notes due 2008 incorporated by
reference from Exhibit 4(o) to Registrant's
Registration Statement on Form S-3 (No. 333-
45859) declared effective on March 26, 1998.
ii
(q) Indenture dated as of April 1, 1998 between
Premier Parks Inc. and The Bank of New York, as
Trustee with respect to the Registrant's 9 1/4%
Senior Notes due 2006 incorporated by reference
from Exhibit 4(p) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared
effective on March 26, 1998.
(r) Indenture dated as of April 1, 1998 between
Premier Parks Inc., Six Flags Entertainment
Corporation and The Bank of New York, as
Trustee with respect to Six Flags' 8 7/8%
Senior Notes due 2006 incorporated by reference
from Exhibit 4(q) to Registrant's Registration
Statement on Form S-3 (No. 333-45859) declared
effective on March 26, 1998.
(s) Deposit Agreement dated as of April 1, 1998
among the Registrant, the Bank of New York, and
the holders from time to time of depositary
receipts executed and delivered thereunder
incorporated by reference from Exhibit 4(u) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26,
1998.
*(t) Indenture dated as of June 25, 1995 between Six
Flags Theme Parks Inc. and United States Trust
Company, as Trustee with respect to SFTP's 12
1/4% Senior Subordinated Discount Notes due
2005.
(10) Material Contracts:
(a) Agreement of Limited Partnership of 229 East
79th Street Associates LP dated July 24, 1987,
together with amendments thereto dated,
respectively, August 31, 1987, October 21,
1987, and December 21, 1987 - incorporated by
reference from Exhibit 10(i) to Form 10-K of
Registrant for year ended December 31, 1987.
(b) Agreement of Limited Partnership of Frontier
City Partners Limited Partnership, dated
October 18, 1989, between Frontier City
Properties, Inc. as general partner, and the
Registrant and Frontier City Properties, Inc.
as limited partners - incorporated by reference
from Exhibit 10(g) to the Registrant's Current
Report on Form 8-K dated October 18, 1989.
(c) Asset Purchase Agreement, dated December 10,
1990, between Registrant and Silver Dollar
City, Inc., - incorporated by reference from
Exhibit 10(c) to the Registrant's Current
Report on Form 8-K dated February 6, 1991.
(d) Asset Purchase Agreement, dated December 16,
1991, among the Registrant, Tierco Maryland,
RWP, John J. Mason and Stuart A. Bernstein -
incorporated by reference from Exhibit 10(a) to
the Registrant's Current Report on Form-8K
dated January 31, 1992.
(e) Asset Transfer Agreement, dated as of June 30,
1992, by and among the Registrant, B&E Holding
Company and the creditors referred to therein -
incorporated by reference from Exhibit 10(a) to
the Registrant's Current Report on Form 8-K
dated July 20, 1992.
(f) Purchase Agreement, dated September 30, 1992,
among the Registrant, Palma Real Estate
Management Company, First Stratford Life
Insurance Company and Executive Life Insurance
Company - incorporated by reference to Exhibit
2(a) to the Registrant's Current Report on Form
8-K dated September 30, 1992.
(g) Lease Agreement, dated January 18, 1993, among
Registrant, Frontier City Partners Limited
Partnership and Fitraco N.V. - incorporated by
reference from Exhibit 10(k) to Form 10-K of
Registrant for the year ended December 31,
1992.
(h) Lease Agreement, dated January 18, 1993, among
Registrant, Tierco Maryland, Inc. and Fitraco
N.V. - incorporated by reference from Exhibit
10(l) to Form 10-K of Registrant for the year
ended December 31, 1992.
(i) Security Agreement and Conditional Sale
Contract, between Chance Rides, Inc. and Tierco
Maryland, Inc. and Guaranty of Registrant in
favor of Chance Rides, Inc. - incorporated by
reference from Exhibit 10(m) to Form 10-K of
Registrant for the year ended December 31,
1992.
iii
(j) Registrant's 1993 Stock Option and Incentive
Plan - incorporated by reference from Exhibit
10(k) to Form 10-K of Registrant for the year
ended December 31, 1993.
(k) Agreement and Plan of Merger, dated as of June
30, 1995 among the Registrant, Premier Parks
Acquisition Inc., Funtime Parks, Inc.
("Funtime") and its shareholders - incorporated
by reference from Exhibit 10(11) to the
Registration Statement.
(l) Escrow Agreement, dated as of August 15, 1995,
among the Registrant, certain shareholders of
Funtime and First National Bank of Ohio, Trust
Division - incorporated by reference from
Exhibit 10(12) to the Registration Statement.
(m) Consulting Agreement, dated as of August 15,
1995, between Registrant and Bruce E. Walborn -
incorporated by reference from Exhibit 10(13)
to the Registration Statement.
(n) Consulting Agreement, dated as of August 15,
1995, between Registrant and Gaspar C. Lococo -
incorporated by reference from Exhibit 10(14)
to the Registration Statement.
(o) Lease Agreement dated December 22, 1995 between
Darien Lake Theme Park and Camping Resort, Inc.
and The Metropolitan Entertainment Co., Inc. -
incorporated by reference from Exhibit 10(o) to
Form 10-K of Registrant for the year ended
December 31, 1995.
(p) Asset Purchase Agreement dated August 23, 1996,
among the Registrant, a subsidiary of the
Registrant, Storytown USA, Inc., Fantasy Riders
Corporation and Charles R. Wood - incorporated
by reference from Exhibit 10(p) to Registrant's
Registration Statement on Form S-2 (Reg. No.
333-16573) declared effective on January 27,
1997.
(q) Asset Purchase Agreement dated September 23,
1996, among the Registrant, a subsidiary of the
Registrant, Elitch Gardens Company, Hensel
Phelps Construction Co. and Chilcott
Entertainment Company - incorporated by
reference from Exhibit 10(a) to the Company's
Current Report on Form 8-K, dated November 13,
1996.
(r) Asset Purchase Agreement dated as of October
10, 1996, among the Registrant, a subsidiary of
the Registrant, FRE, Inc. (Family Recreational
Enterprises, Inc.) ("FRE") and the shareholders
of FRE listed on the signature page thereof -
incorporated by reference from Exhibit 10(r) to
Registrant's Registration Statement on Form S-2
(Reg. No. 333-16573) declared effective on
January 27, 1997.
(s) Asset Purchase Agreement dated as of October
10, 1996, among the Registrant, a subsidiary of
the Registrant, FRE, Concord Entertainment
Company, R&B Entertainment, LLC, the
shareholders of FRE listed on the signature
page thereof and the members of R&B listed on
the signature page thereof- incorporated by
reference from Exhibit 10(s) to Registrant's
Registration Statement on Form S-2 (Reg. No.
333-16573) declared effective on January 27,
1997.
(t) Amended and Restated Credit Agreement, dated as
of January 31, 1997, among the Registrant, the
Subsidiary Guarantors thereof, the lenders
party thereto and the Bank of New York, as
Administrative Agent and Issuing Lender -
incorporated by reference from Exhibit 10(t) to
Form 10-K of Registrant for the year ended
December 31, 1996.
(u) Consulting and Non-Competition Agreement, dated
October 30, 1996, between Registrant and Arnold
S. Gurtler - incorporated by reference from
Exhibit 10(u) to Registrant's Registration
Statement on Form S-2 (Reg. No. 333-16573)
declared effective on January 27, 1997.
(v) Non-Competition Agreement, dated as of October
30, 1996 between the Registrant and Ascent
Entertainment Group, Inc. - incorporated by
reference from Exhibit 10(s) to Registrant's
Registration Statement on Form S-2 (Reg. No.
333-16573) declared effective on January 27,
1997.
(w) Consulting Agreement, dated December 4, 1996,
between the Registrant and Charles R. Wood -
incorporated by reference from Exhibit 10(b) to
the Registrant's Current Report on Form 8-K,
dated December 13, 1996.
(x) Non-Competition Agreement dated as of December
4, 1996 between the Registrant and Charles R.
Wood -incorporated by reference from Exhibit
10(c) of the Registrant's Current Report on
Form 8-K, dated December 13, 1996.
iv
(y) Stock Purchase Agreement dated as of December
4, 1996, among the Registrant, Stuart Amusement
Company, Edward J. Carroll, Jr., and the
Carroll Family Limited Partnership-
incorporated by reference from Exhibit 10(y) to
Registrant's Registration Statement on Form S-2
(Reg. No. 333-16573) declared effective on
January 27, 1997.
(z) Registrant's 1996 Stock Option and Incentive
Plan--incorporated by reference from Exhibit
10(z) to Form 10-K of Registrant for year ended
December 31, 1997.
(aa) 1997 Management Agreement Relating to Marine
World, by and between the Marine World Joint
Powers Authority and Park Management Corp,
dated as of the 1st day of February, 1997--
incorporated by reference from Exhibit 10(aa)
to Form 10-K of Registrant for year ended
December 31, 1997.
(ab) Purchase Option Agreement Among City of
Vallejo, Marine World Joint Powers Authority
and Redevelopment Agency of the City of
Vallejo, and Park Management Corp., dated as of
August 29, 1997 --incorporated by reference
from Exhibit 10(ab) to Form 10-K of Registrant
for year ended December 31, 1997.
(ac) Letter Agreement, dated November 7, 1997,
amending 1997 Management Agreement Relating to
Marine World, by and between the Marine World
Joint Powers Authority and Park Management
Corp., dated as of the 1st day of February,
1997 --incorporated by reference from Exhibit
10(ac) to Form 10-K of Registrant for year
ended December 31, 1997.
(ad) Reciprocal Easement Agreement between Marine
World Joint Powers Authority and Park
Management Corp., dated as of November 7, 1997
--incorporated by reference from Exhibit 10(ad)
to Form 10-K of Registrant for year ended
December 31, 1997.
(ae) Parcel Lease between Marine World Joint Powers
Authority and Park Management Corp., dated as
of November 7, 1997 --incorporated by reference
from Exhibit 10(ae) to Form 10-K of Registrant
for year ended December 31, 1997.
(af) Employment Agreement, dated as of July 31,
1997, between Premier Parks Inc. and Kieran E.
Burke --incorporated by reference from Exhibit
10(af) to Form 10-K of Registrant for year
ended December 31, 1997.
(ag) Employment Agreement, dated as of July 31,
1997, between Premier Parks Inc. and Gary Story
--incorporated by reference from Exhibit 10(ag)
to Form 10-K of Registrant for year ended
December 31, 1997.
(ah) Employment Agreement, dated as of July 31,
1997, between Premier Parks Inc. and James F.
Dannhauser --incorporated by reference from
Exhibit 10(ah) to Form 10-K of Registrant for
year ended December 31, 1997..
(ai) Stock Purchase Agreement dated as of September
26, 1997, among Registrant, Kentucky Kingdom,
Inc., Hart-Lunsford Enterprises, LLC, and
Edward J. Hart - incorporated by reference from
Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1997.
(aj) Employment Agreement dated as of November 7,
1997, between Registrant and Edward J. Hart -
incorporated by reference from Exhibit 10.2 to
the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
(ak) Rights Agreement dated as of January 12, 1998
between Premier Parks Inc. and Bank One Trust
Company, N.A., as Rights Agent - incorporated
by reference from Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated
December 15, 1997.
(al) Stock Purchase Agreement dated as of December
15, 1997, between the Registrant and Centrag
S.A., Karaba N.V. and Westkoi N.V. -
incorporated by reference from Exhibit 10.1 to
the Registrant's Current Report on Form 8-K
dated December 15, 1997.
(am) Agreement and Plan of Merger dated as of
February 9, 1998, by and among the Registrant,
Six Flags Entertainment Corporation and others
- incorporated by reference from Exhibit 10(a)
to the Registrant's Current Report on Form 8-K
dated February 9, 1998.
v
(an) Agreement and Plan of Merger dated as of
February 9, 1998 by and among Premier Parks
Inc., Premier Parks Holdings Corporation and
Premier Parks Merger Corporation incorporated
by reference from Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated
March 25, 1998.
(ao) Amended and Restated Rights Agreement between
Premier Parks Inc. and Bank One Trust Company,
as Rights Agent incorporated by reference from
Exhibit 4.1 to the Registrant's Current Report
on Form 8-K dated December 15, 1997, as
amended.
*(ap) Registrant's 1998 Stock Option and Incentive
Plan.
(aq) Subordinated Indemnity Agreement dated February
9, 1998, among the Registrant, the subsidiaries
of the Registrant named therein, Time Warner
Inc., the subsidiaries of Time Warner Inc.
named therein, Six Flags Entertainment
Corporation and the subsidiaries of Six Flags
Entertainment Corporation named therein
incorporated by reference from Exhibit 2(b) to
Registrant's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26,
1998.
*(ar) Credit Agreement dated as of April 1, 1998 by
and among Six Flags Theme Parks Inc., Six Flags
Entertainment Corporation, S.F. Holdings, Inc.,
the subsidiary guarantors named therein, the
lender parties thereto and the Bank of New
York, as Administrative Agent and Lehman
Brothers Inc. as Advisor, Arranger, and
Syndication Agent
*(as) Credit Agreement dated as of March 13, 1998 by
and among The Registrant, the subsidiary
guarantors named therein, the lender parties
thereto and Lehman Commercial Paper Inc., as
Administrative Agent and Lehman Brothers Inc.,
as Advisor, Arranger and Syndication Agent
*(at) Sale and Purchase Agreement dated as of October
20, 1998 by and between the Registrant and
Fiesta Texas Theme Park, Ltd.
*(au) Overall Agreement dated as of February 15, 1997
among Six Flags Fund, Ltd. (L.P.), Salkin
Family Trust, SFG, Inc., SFG-I, LLC, SFG-II,
LLC, Six Flags Over Georgia, Ltd., SFOG II
Inc., SFOG II Employee, Inc., SFOG Acquisition
A, Inc., SFOG Acquisition B, Inc., Six Flags
Over Georgia, Inc., Six Flags Series of
Georgia, Inc., Six Flags Theme Parks, Inc., and
Six Flags Entertainment Corporation.
*(av) Overall Agreement dated as of November 24, 1997
among Six Flags Over Texas Fund, Ltd., Flags'
Directors, LLC, FD-II, LLC, Texas Flags, Ltd.,
SFOT Employee, Inc., SFOT Acquisition I, Inc.,
SFOT Acquisitions II, Inc., Six Flags Over
Texas, Inc., Six Flags Theme Parks Inc., and
Six Flags Entertainment Corporation.
*(21) Subsidiaries of the Registrant
*(23) Consent of KPMG LLP
*(27) Financial Data Schedule
___________
* Filed herewith.
vi