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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, 2000
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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 ____________
Commission File Number: 0-9789
SIX FLAGS, INC.
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(formerly Premier Parks Inc.)
(Exact name of Registrant as specified in its charter)
Delaware 13-3995059
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
11501 Northeast Expressway, Oklahoma City, Oklahoma 73131
(Address of principal executive offices)
Registrant's telephone number, including area code: (405) 475-2500
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Securities registered pursuant to Sec. 12(b) of the Act:
Title of Class Name of Each Exchange 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
Preferred Income Equity Redeemable Shares, New York Stock Exchange
representing 1/100 of a share of 7 1/4% Convertible
Preferred Stock
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Securities registered pursuant to Sec. 12(g) of the Act: NONE
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
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 $1,598.6 million as of March 1, 2001 (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, 2001 was 80,079,351 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 2001, which will be filed by the Registrant within 120 days after the close
of its 2000 fiscal year.
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PART I
ITEM 1. BUSINESS
Introduction
The Company(1) is the largest regional theme park operator in the world.
The 38 parks it now operates had attendance of approximately 46.4 million in
2000. These parks include 16 of the 50 highest attendance theme parks in North
America, the largest paid admission theme park in Mexico and seven theme parks
in Europe. The Company is also managing the development and construction of a
new theme park in Spain. The Company's theme parks serve each of the 10 largest
metropolitan areas in the United States. The Company estimates that
approximately two-thirds of the population of the continental United States live
within a 150-mile radius of one of the Company's parks.
For the year ended December 31, 2000, the Company's reported total revenue
was approximately $1,007.0 million and its consolidated earnings before
interest, taxes, depreciation and amortization and non-cash compensation
("EBITDA") were approximately $369.3 million. Adjusted EBITDA for the year was
$402.5 million. Adjusted EBITDA includes the Company's proportionate share of
the EBITDA of the parks that are less than wholly-owned by the Company and
accounted for by the equity method, i.e., Six Flags Over Georgia (including Six
Flags White Water Atlanta), Six Flags Over Texas and Six Flags Marine World (the
"Partnership Parks"). Aggregate combined revenues and EBITDA of the Company and
the Partnership Parks for 2000 were $1,215.2 million and $444.8 million,
respectively.
In 1998, the Company acquired the former Six Flags, which had operated
regional theme parks under the Six Flags name for nearly forty years and
established a nationally recognized brand name. The Company has worldwide
ownership of the "Six Flags" brand name. To capitalize on this name recognition,
since the commencement of the 1998 season and including the 2001 season, the
Company has rebranded ten of its parks as "Six Flags" parks, including three of
its international parks.
The Company holds exclusive long-term licenses for theme park usage
throughout the United States (except the Las Vegas metropolitan area), Canada,
Europe and Latin and South America (including Mexico) of certain Warner Bros.
and DC Comics characters. These characters include Bugs Bunny, Daffy Duck,
Tweety Bird, Yosemite Sam, Batman, Superman and others. In addition, the
Company's European and Latin and South American licenses with Warner Bros.
include the Hanna-Barbera and Cartoon Network characters, including Yogi Bear,
Scooby-Doo and the Flintstones.(2) The Company uses these characters to market
its parks and to provide an enhanced family entertainment experience. The
Company's licenses include the right to sell merchandise featuring the
characters at the parks, and to use the characters in its advertising, as
walk-around characters, in theming for rides, attractions and retail outlets.
The Company believes using these characters promotes increased attendance,
supports higher ticket prices, increases lengths-of-stay and enhances in-park
spending.
The Company's 38 parks are located in geographically diverse markets
across North America and Europe. Each of the Company's theme parks is
individually themed and provides a complete family-oriented entertainment
experience. The Company's theme parks generally offer a broad selection of
state-of-the-art and traditional thrill rides, water attractions, themed areas,
concerts and shows, restaurants, game venues and merchandise outlets. In the
aggregate, the Company's theme parks offer more than 800 rides,
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(1) As used in this Report, unless the context requires otherwise, "Company"
or "Six Flags" refers to Six Flags, Inc. and its consolidated
subsidiaries.
(2) Looney Tunes, characters, names and all related indicia are trademarks of
Warner Bros.(C)2001, a division of Time Warner Entertainment Company, L.P.
("TWE"). Batman and Superman and all related characters, names and indicia
are copyrights and trademarks of DC Comics(C)2001, Cartoon Network and
logo are trademarks of Cartoon Network(C)2001, Six Flags and all related
indicia are federally registered trademarks of Six Flags Theme Parks
Inc.(C)2001, a subsidiary of the Company. Fiesta Texas and all related
indicia are trademarks of Fiesta Texas, Inc.(C)2001, a subsidiary of the
Company.
-1-
including over 100 roller coasters, making the Company the leading provider of
"thrill rides" in the industry.
Since current management assumed control in 1989, the Company has acquired
37 parks (including its interests in the Partnership Parks), and has achieved
significant internal growth.
Description of Recent and Pending Acquisitions
In December 2000, the Company acquired Enchanted Village and Wild Waves, a
water park and children's ride park located near Seattle, Washington, which has
averaged approximately 500,000 in annual attendance over the last five years.
The park is located on approximately 65 acres and is the only park located
within the Seattle-Tacoma metropolitan area, which is the 12th largest
metropolitan area in the country. The park is primarily a water park and
currently lacks a full complement of rides and revenue outlets. The park also
has not benefited from significant marketing programs. As a result, the Company
believes that there is an opportunity over the next several years to increase
this park's revenue, attendance and cash flow, with relatively modest capital
expenditures.
In February 2001, the Company acquired substantially all of the assets
used in the operation of Sea World of Ohio, a 230 acre marine wildlife park
located adjacent to the Company's Six Flags Ohio theme park. The two parks are
being combined for the 2001 season under the name "Six Flags Worlds of
Adventure." The consolidation of the two parks, together with the Company's
neighboring campgrounds and hotel, enable the Company to offer a very attractive
regional destination experience. The Company believes that the combined facility
will enable the Company to increase attendance and revenue and to increase
operating efficiencies through shared expenses.
In November 2000, the Company entered into a letter of intent to acquire
La Ronde, a 146 acre theme park located near downtown Montreal on the former
site of the 1967 Montreal World's Fair. If this acquisition is completed, the
Company will acquire substantially all of the park assets for approximately U.S.
$20 million and lease the site from the City of Montreal on a long-term basis.
Although Six Flags expects to acquire the park prior to its 2001 season, the
Company does not expect to make any investment in the facility until after that
season. Since its inception, the park has been operated by a municipal authority
which contracted with third parties to operate a substantial majority of the
park's revenue outlets. Those third parties retained a significant portion of
the revenues generated by these outlets. Most of the contracts covering these
revenue outlets expire by the end of 2002. The Company also believes that it can
increase the scope and effectiveness of the park's marketing programs. As a
result, the Company believes that, if it acquires this park, Six Flags will be
able to substantially increase the park's revenue, attendance and cash flow over
the next several years. There is no assurance that the Company will be able to
complete this acquisition.
Description of Recent Financings
In January 2001, the Company consummated the public offering of 11,500,000
Preferred Income Equity Redeemable Shares ("PIERS"), each representing one
one-hundredth of a share of its 7 1/4% Convertible Preferred Stock. The Company
received net proceeds from the offering of approximately $278.1 million. A
portion of the proceeds was used to fund the acquisition of the former Sea World
of Ohio.
In January 2001, the Company also consummated an offering of $375.0
million principal amount of its 9 1/2% Senior Notes due 2009. The net proceeds
of this offering ($363.8 million) were used to refinance existing indebtedness,
including $124.7 principal amount of 9 3/4% Senior Notes due 2007 of Six Flags
Operations Inc., the Company's principal subsidiary, and $223.0 principal amount
of borrowings under the reducing multicurrency revolving portion of the
Company's senior credit facility. Amounts repaid under this facility can be
reborrowed.
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Description of Domestic Parks
Six Flags America
Six Flags America, a combination theme and water park located in Largo,
Maryland (approximately 15 miles east of Washington, D.C. and 30 miles southwest
of Baltimore, Maryland) is the 40th largest theme park in North America.(3) The
park's primary market includes Maryland, northern Virginia, Washington, D.C. and
parts of Pennsylvania and Delaware. This market provides the park with a
permanent resident population base of approximately 6.7 million people within 50
miles and 11.4 million people within 100 miles. Based on a copyrighted 2000
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 8 and number 24 DMAs in the United States, respectively.
The Company owns sites of 515 acres, with 131 acres currently used for
park operations. The remaining 384 acres, which are fully zoned for
entertainment and recreational uses, provide the Company with ample expansion
opportunity, as well as the potential to develop complementary operations.
Six Flags America's principal competitors are King's Dominion Park,
located in Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Six Flags
America.
Six Flags AstroWorld, Six Flags WaterWorld and Splashtown
Six Flags AstroWorld, the 35th largest theme park in North America, and
the separately gated adjacent Six Flags WaterWorld are located in Houston,
Texas. In May 1999, the Company acquired Splashtown, a water park located
approximately 30 miles from Six Flags AstroWorld. Splashtown is the 12th largest
water park in the United States. The Houston, Texas market provides the parks
with a permanent resident population of 4.5 million people within 50 miles and
5.4 million people within 100 miles. The Houston market is the number 11 DMA in
the United States.
The Company owns sites of approximately 85 acres used for the theme park,
approximately 14 acres used for Six Flags WaterWorld and approximately 60 acres
for Splashtown. Six Flags WaterWorld and Splashtown compete with each other. Six
Flags AstroWorld competes with Sea World of Texas and the Company's Six Flags
Fiesta Texas, both located in San Antonio, Texas, approximately 200 miles from
the park. In addition, the park competes with Six Flags Over Texas, the
Company's park located in Arlington, Texas, approximately 250 miles from the
park.
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 39th 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 44,
number 74 and number 80 DMAs in the United States, respectively.
The Six Flags Darien Lake property consists of approximately 988 acres,
including 144 acres for the theme park, 242 acres of campgrounds and 593 acres
of agricultural, undeveloped and water areas. Six
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(3) Park rankings are based on 2000 attendance as published in Amusement
Business, an industry trade publication.
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Flags Darien Lake also has a 20,000 seat amphitheater. The Company has a
long-term arrangement with a national concert promoter to lease and operate the
amphitheater.
Adjacent to the Six Flags Darien Lake theme park are a 163 room hotel and
a camping resort, each owned and operated by the Company. The campgrounds
include 1180 developed campsites, including 395 recreational vehicles (RV's)
available for daily and weekly rental. The campground is the fifth largest in
the United States. In 2000, approximately 333,000 people used the Six Flags
Darien Lake hotel and campgrounds. Substantially all of the hotel and camping
visitors visit the theme park.
Six Flags Darien Lake's principal competitor is Wonderland Park located in
Toronto, Canada, approximately 125 miles from Six Flags Darien Lake. In
addition, Six Flags Darien Lake competes to a lesser degree with three smaller
amusement parks located within 50 miles of the park. Six Flags Darien Lake is
significantly larger with a more diverse complement of entertainment than any of
these three smaller facilities.
Six Flags Elitch Gardens
Six Flags Elitch Gardens is a combination theme and water park located on
approximately 67 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and the Pepsi Center Arena, and close to Coors Field. Six Flags
Elitch Gardens is the 42nd 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 2.5 million people within 50 miles of the park and
approximately 3.4 million people within 100 miles. The Denver area is the number
18 DMA in the United States. Six Flags Elitch Gardens has no significant direct
competitors.
Six Flags Fiesta Texas
Six Flags Fiesta Texas, the 28th largest theme park in North America, is a
combination theme and water park located on approximately 206 acres in San
Antonio, Texas. The San Antonio, Texas market provides the park with a permanent
resident population of approximately 1.8 million people within 50 miles and
approximately 3.1 million people within 100 miles. The San Antonio market is the
number 37 DMA in the United States.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas, also
located in San Antonio. In addition, the park competes to a lesser degree with
two Company parks: Six Flags AstroWorld, located in Houston, Texas, and Six
Flags Over Texas located in Arlington, Texas.
Six Flags Great Adventure, Six Flags Hurricane Harbor and Six Flags Wild
Safari Animal Park
Six Flags Great Adventure, the 12th largest theme park in North America,
the separately gated adjacent Six Flags Hurricane Harbor, the 12th largest water
park in the United States, and Six Flags Wild Safari Animal Park are each
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 approximately 13.3 million
people within 50 miles and approximately 26.2 million people within 100 miles.
The New York and Philadelphia markets are the number 1 and number 4 DMAs in the
United States, respectively.
The Company owns a site of approximately 2,200 acres, of which
approximately 125 acres are currently used for the theme park operations,
approximately 45 acres are used for the water park and approximately 350
adjacent acres are used for the wildlife safari park. Over 1,600 acres are
available for future development. The animal park is home to over 1,200 exotic
animals representing more than 58 species, which can be seen over a four and
one-half mile drive. 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,
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Pennsylvania, approximately 75 miles from the park. The water park competes with
several other water parks in the market.
Six Flags Great America
Six Flags Great America, the 21st largest theme park in North America, is
located in Gurnee, Illinois, between Chicago, Illinois and Milwaukee, Wisconsin.
The Chicago and Milwaukee markets provide the park with a permanent resident
population of approximately 8.3 million people within 50 miles and approximately
12.9 million people within 100 miles. The Chicago and Milwaukee markets are the
number 3 and number 33 DMAs in the United States, respectively.
The Company owns a site of approximately 440 acres of which 92 are used
for the theme park operations, and approximately 106 usable acres are located in
a separate parcel available for expansion and complementary uses. Six Flags
Great America currently has no direct theme park competitors in the region, but
does compete to some extent with Kings Island, located near Cincinnati, Ohio,
approximately 350 miles from the park; Cedar Point, located in Sandusky, Ohio,
approximately 340 miles from the park; and Six Flags St. Louis, the Company's
park located outside St. Louis, Missouri, approximately 320 miles from the park.
Six Flags Kentucky Kingdom
Six Flags Kentucky Kingdom is a combination theme and water park, located
on approximately 58 acres on and adjacent to the grounds of the Kentucky Fair
and Exposition Center in Louisville, Kentucky. Of the 58 acres, approximately 38
acres are leased under ground leases with terms (including renewal options)
expiring between 2021 and 2049, with the balance owned by the Company. Six Flags
Kentucky Kingdom is the 49th 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 1.5 million people within
50 miles and approximately 4.7 million people within 100 miles. The Louisville
and Lexington markets are the number 48 and number 66 DMAs in the United States.
Six Flags Kentucky Kingdom's only significant direct competitor is Kings
Island, located near Cincinnati, Ohio, approximately 100 miles from the park.
Six Flags Magic Mountain and Six Flags Hurricane Harbor
Six Flags Magic Mountain, the 15th largest theme park in North America,
and the separately gated adjacent Six Flags Hurricane Harbor are located in
Valencia, California, just 30 miles north of Los Angeles. The Los Angeles,
California market provides the parks with a permanent resident population of
approximately 9.7 million people within 50 miles and approximately 16.1 million
people within 100 miles. The Los Angeles market is the number 2 DMA in the
United States.
The Company owns a site of approximately 260 acres with 160 acres used for
the theme park, and approximately 12 acres used for the pirate-themed water
park. Six Flags Magic Mountain's principal 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, Sea World of California in San Diego,
California, located approximately 150 miles from the park and Legoland in
Carlsbad, California, located approximately 120 miles away from the park. In
2001, Disney's California Adventure theme park opened up next to Disneyland
approximately 60 miles from the park.
Six Flags Hurricane Harbor's competitors include the new Soak City USA
Waterpark and Raging Waters, each located approximately 50 miles from the water
park.
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Six Flags Marine World
Six Flags Marine World, a theme park which also features marine mammals
and exotic land animals, is the 30th 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 5.5 million people within 50 miles and approximately 10.1 million
people within 100 miles. The San Francisco/Oakland and Sacramento areas are the
number 5 and number 19 DMAs in the United States, respectively.
The Company manages the operations of Six Flags Marine World under a
management agreement, 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, the Company leases 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.
Six Flags Marine World is located on approximately 136 acres and offers
various rides and other traditional theme park attractions, as well as
presentation stadiums, animal habitats and picnic areas, bordering a 55-acre
man-made lake. The park provides for the shelter and care for marine mammals,
land animals, sharks, birds and reptiles, tropical and cold water fish and
marine invertebrates, 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 attractions are located approximately 30, 60 and 130 miles
from Six Flags Marine World, respectively.
The Company accounts for its interest in Six Flags Marine World under the
equity method of accounting. See Note 4 to Notes to Consolidated Financial
Statements.
Six Flags New England
Six Flags New England is a combination theme and water park, located off
Interstate 91 near Springfield, Massachusetts, approximately 90 miles west of
Boston. Six Flags New England is the 31st largest theme park in North America
with a primary market that includes Springfield and western Massachusetts,
Hartford and western Connecticut, as well as portions of eastern Massachusetts
(including Boston) and eastern New York. This market provides the park with a
permanent resident population base of approximately 3.1 million people within 50
miles and 15.2 million people within 100 miles. Springfield, Providence,
Hartford/New Haven and Boston are the number 105, number 50, number 27 and
number 6 DMAs in the United States. Six Flags New England is comprised of
approximately 230 acres, with 90 acres currently used for park operations, 12
acres for a picnic grove and approximately 128 undeveloped acres.
Six Flags New England's only significant competitor is Lake Compounce
located in Bristol, Connecticut, approximately 50 miles from Six Flags New
England. To a lesser extent, Six Flags New England competes with The Great
Escape, the Company's park located in Lake George, New York, approximately 150
miles from Six Flags New England.
Six Flags Over Georgia and Six Flags White Water Atlanta
Six Flags Over Georgia, the 25th largest theme park in North America is
located on approximately 280 acres, 10 miles outside of Atlanta, Georgia. The
Atlanta, Georgia market provides the park with a permanent resident population
of approximately 4.0 million people within 50 miles and approximately 6.7
million people within 100 miles. The Atlanta market is the number 10 DMA in the
United States.
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In May 1999, the partnership that owns Six Flags Over Georgia purchased
White Water Atlanta, a water park and related entertainment park located
approximately 20 miles from the theme park. Six Flags White Water Atlanta, which
is the 10th largest water park in the United States, is located on approximately
69 acres. Approximately 12 acres remain undeveloped.
Six Flags Over Georgia's primary competitors include Carowinds in
Charlotte, North Carolina, located approximately 250 miles from the park,
Visionland in Birmingham, Alabama, located approximately 160 miles from the
park, and Dollywood in Pigeon Forge, Tennessee, located approximately 200 miles
from the park. Six Flags White Water's primary competitors include Sun Valley
Beach, Atlanta Beach and Lake Lanier Islands. These competitors are located
approximately 15, 40 and 45 miles away from the water park, respectively. The
Georgia Limited Partner (as defined below) owns the theme park site of
approximately 280 acres, including approximately 85 acres of undeveloped land,
all of which is leased to Six Flags Over Georgia II, L.P. (the "Georgia
Partnership").
Partnership Structure. On March 18, 1997, Six Flags completed arrangements
pursuant to which the Company will manage the Georgia park through 2026. Under
the agreements governing the new arrangements, the Georgia park is owned
(excluding real property) by the Georgia Partnership of which a Six Flags
subsidiary is the managing general partner. In the second quarter of 1997, two
subsidiaries of Six Flags made a tender offer for partnership interests ("LP
Units") in the 99% limited partner of the Georgia Partnership (the "Georgia
Limited Partner"), that valued the Georgia park at $250 million (the "Georgia
Tender Offer Price"). Six Flags purchased approximately 25% of the LP Units in
the 1997 tender offer at an aggregate price of $62.7 million.
The key elements of the arrangements are as follows: (i) the Georgia
Limited Partner (which is not affiliated with the Company except for the
Company's ownership of certain LP Units) received minimum annual distributions
(including rent) of $19.6 million in 2000, 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 of the park and, to the
extent positive, Six Flags White Water Atlanta, by 8.0; (iv) in 2027, the
Company will have the option to acquire all remaining interests in the Georgia
park at a price based on the Georgia Tender Offer Price, increased in proportion
to the increase in the cost of living between December 1996 and December 2026;
and (v) the Company is required to make minimum capital expenditures at the
Georgia park during rolling five-year periods, based generally on 6% of the
park's revenues. The Company was not required to purchase a material number of
LP Units in the 1998, 1999 and 2000 offers to purchase. Cash flow from
operations at the Georgia park is used to satisfy these requirements first,
before any funds are required from the Company. In addition, the Company is
entitled to retain its proportionate share (based on its holdings of LP Units)
of distributions made to the Georgia Limited Partner. In connection with its
acquisition of the former Six Flags, the Company entered into a Subordinated
Indemnity Agreement (the "Subordinated Indemnity Agreement") with certain Six
Flags entities, Time Warner Inc. ("Time Warner") and an affiliate of Time
Warner, pursuant to which the Company transferred to Time Warner (which has
guaranteed the Six Flags obligations under these arrangements) record title to
the corporations which own the entities that have purchased and will purchase LP
Units, and the Company received an assignment from Time Warner of all cash flow
received on such LP Units and will otherwise control such entities, except in
the event of a default by the Company of its obligations under these
arrangements. After all such obligations have been satisfied, Time Warner is
required to retransfer to the Company such record title for a nominal
consideration. In addition, the Company issued preferred stock of the managing
partner of the Georgia Partnership to Time Warner which, in the event of such a
default, would permit Time Warner to obtain control of such entity.
-7-
The Company accounts for its interests in the Georgia parks under the
equity method of accounting. See Notes 2 and 4 to Notes to Consolidated
Financial Statements.
Six Flags Over Texas and Six Flags Hurricane Harbor
Six Flags Over Texas, the 22nd largest theme park in North America, and
the separately gated Six Flags Hurricane Harbor, the 6th largest water park in
the United States, are located across Interstate 30 from each other in
Arlington, Texas, between Dallas and Fort Worth, Texas. The Dallas/Fort Worth
market provides the parks with a permanent resident population of approximately
4.8 million people within 50 miles and approximately 5.9 million people within
100 miles. The Dallas/Fort Worth market is the number 7 DMA in the United
States.
The Texas Limited Partner (as defined below) owns a site of approximately
200 acres used for the theme park. Six Flags Over Texas' principal competitors
include Sea World of Texas and the Company's Six Flags Fiesta Texas, both
located in San Antonio, Texas, approximately 285 miles from the park and Six
Flags AstroWorld, approximately 250 miles from the park. The Company owns
directly approximately 47 acres, of which approximately 17 acres are currently
used for Hurricane Harbor and 30 acres remain undeveloped. Six Flags Hurricane
Harbor has no direct competitors in the area other than a municipal water park.
Partnership Structure. Six Flags Over Texas is owned (excluding real
property) by Texas Flags, Ltd. (the "Texas Partnership"), a Texas limited
partnership of which the 1% general partner is a wholly-owned subsidiary of Six
Flags, and the 99% limited partner is Six Flags Fund II, Ltd., a Texas limited
partnership (the "Texas Limited Partner") which is unaffiliated with the Company
except that the Company owns certain limited partnership units in the Texas
Limited Partner as described below. Six Flags Hurricane Harbor is 100% owned by
the Company and is not included in these partnership arrangements.
In December 1997, Six Flags completed arrangements pursuant to which the
Company will manage Six Flags Over Texas through 2027. The key elements of the
arrangements are as follows: (i) the Texas Limited Partner received minimum
annual distribution (including rent) of $28.9 million in 2000, 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 must offer to purchase LP
Units at a price based on a valuation for the park equal to the greater of
$374.8 million or a value derived by multiplying the weighted-average four year
EBITDA of the park by 8.5; (v) in 2028 the Company will have the option to
acquire all remaining interests in the park at a price based on the Texas Tender
Offer Price, increased in proportion to the increase in the cost of living
between December 1997 and December 2027; and (vi) the Company is required to
make minimum capital expenditures at the Texas park during rolling five-year
periods, based generally on 6% of such park's revenues. Cash flow from
operations at the Texas park is used to satisfy these requirements first, before
any funds are required from the Company. In addition, the Company is entitled to
retain its proportionate share (based on its holdings of LP Units) of
distributions made to the Texas Limited Partner. Pursuant to the tender offer
and the 1999 and 2000 offers to purchase, the Company has purchased
approximately 35% of the LP Units at an aggregate price of $132.8 million. In
connection with the Subordinated Indemnity Agreement, the Company transferred to
Time Warner (which has guaranteed the Six Flags obligations under these
arrangements) record title to the corporations which own the entities that have
purchased and will purchase LP Units and the Company received an assignment from
Time Warner of all cash flow received on such LP Units and will otherwise
control such entities, except in the event of a default by the Company of its
obligations under these arrangements. After all such obligations have been
satisfied, Time Warner is required to retransfer to the Company such record
title for a nominal consideration. In addition, the
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Company issued preferred stock of the managing general partner of the Texas
Partnership to Time Warner which, in the event of such a default, would permit
Time Warner to obtain control of such entity.
The Company accounts for its interests in Six Flags Over Texas under the
equity method of accounting. See Notes 2 and 4 to Notes to Consolidated
Financial Statements.
Six Flags St. Louis
Six Flags St. Louis, the 33rd largest theme park in North America, is a
combination theme and water park located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of approximately 2.6 million people within 50
miles and approximately 3.8 million people within 100 miles. The St. Louis
market is the number 22 DMA in the United States.
The Company owns a site of approximately 497 acres of which approximately
132 are used for park operations. Six Flags St. Louis competes with Kings
Island, located near Cincinnati, Ohio, approximately 350 miles from the park;
Worlds of Fun in Kansas City, Missouri, located approximately 250 miles from the
park; Cedar Point, located in Sandusky, Ohio, approximately 515 miles from the
park; Silver Dollar City, located in Branson, Missouri, approximately 250 miles
from the park; and Six Flags Great America, the Company's park located near
Chicago, Illinois, approximately 320 miles from the park.
Six Flags Worlds of Adventure
Six Flags Worlds of Adventure, a combination theme, water and marine
wildlife park, represents the consolidation of Six Flags of Ohio and the
adjacent park formerly known as Sea World of Ohio. The park is located in
Aurora, Ohio, 20 miles southeast of Cleveland and approximately 30, 60 and 120
miles, respectively, from Akron and Youngstown, Ohio and Pittsburgh,
Pennsylvania. This market provides the park with a permanent resident population
base of approximately 4.0 million people within 50 miles of the park and
approximately 7.1 million within 100 miles. The Cleveland/Akron, Youngstown and
Pittsburgh markets are the number 15, number 99 and number 20 DMAs in the United
States, respectively.
Adjacent to Six Flags Worlds of Adventure are a 145 room hotel and a
camping resort each owned and operated by the Company. The campgrounds include
300 developed campsites, including 24 recreational vehicles (RV's) available for
daily and weekly rental. In 2000, approximately 73,550 people used the Six Flags
Ohio hotel and campgrounds.
The 690-acre property on which Six Flags Worlds of Adventure is situated
includes a 50-acre spring-fed lake. The theme park and the water park presently
occupy approximately 45 acres and the marine wildlife park is located on
approximately 113 acres. There are approximately 110 acres of undeveloped land
that have the potential for further development).
Six Flags Worlds of Adventure's principal competitors are Cedar Point in
Sandusky, Ohio and Kennywood in Pittsburgh, Pennsylvania. These parks are
located approximately 90 miles and 120 miles, respectively, from the park. There
are also three small water parks within a 50-mile radius of Six Flags Worlds of
Adventure.
Enchanted Village and Wild Waves
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Enchanted Village and Wild Waves is a water park and children's ride park
located in Seattle, Washington. The facility is located on approximately 65
acres. The Seattle-Tacoma market provides the park with a permanent resident
population of approximately 3.4 million people within 50 miles and approximately
4.3 million people within 100 miles. The Seattle-Tacoma is the number 12 DMA in
the United States. The park is primarily a water park and currently lacks a full
complement of rides and revenue outlets. As a result, the Company believes that
there is an opportunity over the next several years to increase this park's
revenue, attendance and cash flow, with relatively modest capital expenditures.
The park does not have any significant direct competitors.
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 2.5 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 45 and number 59 DMAs in the
United States, respectively
The Company owns a site of approximately 109 acres, with 55 acres
currently used for park operations. Frontier City's only significant competitor
is the Company's Six Flags Over Texas, located in Arlington, Texas,
approximately 225 miles from Frontier City.
The Great Escape
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George, New York resort area, 180
miles north of New York City and 40 miles north of Albany. The park's primary
market includes the Lake George tourist population and the upstate New York and
western New England resident population. This market provides the park with a
permanent resident population base of approximately 880,000 people within 50
miles of the park and 2.8 million people within 100 miles. According to
information released by local governmental agencies, approximately 9 million
tourists visited the Lake George area in 2000. The Albany market is the number
56 DMA in the United States
The Great Escape is located on a site of approximately 368 acres, with 143
acres currently used for park operations. Approximately 43 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Six Flags New England, the Company's park located in
Springfield, Massachusetts, approximately 150 miles from The Great Escape. In
addition, there is a smaller water park located in Lake George.
Waterworld Parks
The Waterworld Parks consist of two water parks (Waterworld USA/Concord
and Waterworld USA/Sacramento).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 8.0 million people within 50 miles of the park
and 10.5 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States.
Waterworld USA/Sacramento is located on the grounds of the California
State Fair in Sacramento, California. The facility's primary market includes
Sacramento and the immediate surrounding area. This market provides the park
with a permanent resident population base of approximately 2.8 million people
within 50 miles of the park and 10.1 million people within 100 miles. The
Sacramento market is the number
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19 DMA in the United States.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 21 acres. The Sacramento facility is located on
approximately 14 acres, all of which is used for the park. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 50 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 20 miles
from that facility.
White Water Bay
White Water Bay is a tropical themed water park situated on approximately
22 acres located along Interstate 40 in southwest Oklahoma City, Oklahoma. The
park's primary market includes the greater Oklahoma City metropolitan area.
Oklahoma City is the number 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 2.5 million people within 100 miles.
Wyandot Lake
Wyandot Lake is mainly a water park, but also offers traditional amusement
park attractions with 15 "dry" rides, games, shows and a large catering
facility. It 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 2.1 million people within 50 miles of the park and approximately
6.6 million people within 100 miles. The Columbus market is the number 34 DMA 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 2002, but the Company expects to
exercise its available options through 2008. The land leased by Wyandot Lake
consists of approximately 18 acres. The park shares parking facilities with the
Columbus Zoo.
Wyandot Lake's direct competitors are Kings Island, located near
Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. Each of these
parks is located approximately 100 miles from Wyandot Lake. Although the
Columbus Zoo is located adjacent to the park, it is a complementary attraction,
with many patrons visiting both facilities.
Description of International Parks
Six Flags Belgium
Six Flags Belgium (formerly know as Walibi-Wavre) is a combination theme
park and year-round indoor water park - called Aqualibi - near Brussels. The
park is being rebranded for the 2001 season with the introduction of the Looney
Tunes and other Warner Bros. characters and an expansion of the park's rides and
attractions. The park is located on 120 acres. The Company estimates that
approximately 8.3 million people live within a 50 mile radius of the park and
approximately 23.9 million people live within 100 miles. The park's primary
competitors are Bobbejaanland in Belgium, Efteling in Holland and Parc Asterix
in France. These parks are located approximately 70, 100 and 200 miles from Six
Flags Belgium, respectively. The park also competes with the Company's
Bellewaerde Park, approximately 100 miles from Six Flags Belgium.
Six Flags Holland
Six Flags Holland is a theme park located on 390 acres that features over
30 rides and numerous shows, games and food venues. The park was rebranded as a
"Six Flags" park for the 2000 season in
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conjunction with a substantial capital expansion and the introduction of the
Looney Tunes and other licensed characters. The park is located in the heart of
the Netherlands, just west of Amsterdam. This market provides the park with a
permanent resident population base of approximately 7.5 million people within a
50 mile radius of the park and approximately 28.6 million people within 100
miles. The park's primary competitor is Efteling in Holland, approximately 100
miles from the park.
Six Flags Mexico
In May 1999, the Company acquired Reino Aventura, the largest paid
admission theme park in Mexico, which was rebranded as Six Flags Mexico for the
2000 season. The park first opened in 1982 and is located on approximately 107
acres in Mexico City, which are leased on a long-term basis from the Federal
District of Mexico. More than 22 million people live within 50 miles of Six
Flags Mexico. Six Flags Mexico's principal competitors are Chapultepec and
Divertido, both amusement parks located in Mexico City.
Bellewaerde
Bellewaerde is a combination animal and theme park in Ieper, Belgium. It
lies in historic Flanders, the northern area of Belgium. The park is situated on
130 acres. The Company estimates that approximately 4.3 million people live
within a 50 mile radius of the park and approximately 16.8 million people live
within 100 miles. The park's primary competitors are Plopsaland and
Bobbejaanland, each located in Belgium. These parks are located approximately
125 and 120 miles from Bellewaerde, respectively. The park also competes with
Six Flags Belgium, approximately 100 miles from Bellewaerde.
Walibi Aquitaine
Walibi Aquitaine is a theme park located in Southwestern France between
Bordeaux and Toulouse. The park is located on approximately 74 acres.
Approximately 1.0 million people live within a 50 mile radius of the park and
approximately 5.2 million people live within 100 miles. The park's nearest
competitor is Futuroscope in Poitiers, France which is located 250 miles from
Walibi Aquitaine.
Walibi Rhone-Alpes
Walibi Rhone-Alpes is a combination theme and water park located in
eastern France in the heart of the Lyon-Geneva-Grenoble triangle. The park is
located on approximately 86 acres. Approximately 3.9 million people live within
a 50 mile radius of the park and approximately 10.5 million people live within
100 miles. The park's primary competitor is Parc Asterix in France which is
located approximately 310 miles away.
Walibi Schtroumpf
Walibi Schtroumpf is a Smurf-themed park located near Metz in northeastern
France. The park is located on approximately 375 acres. The park's main markets
include parts of France, Belgium, Luxembourg and Germany. These markets provide
the park with a permanent resident population base of approximately 2.2 million
people within a 50 mile radius of the park and approximately 4.5 million people
within 100 miles. The park's primary competitors are Europa Park in Germany and
Parc Asterix in France. These parks are located approximately 150 and 220 miles
from the park, respectively.
Warner Bros. Movie World Germany
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
"Hollywood"
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themed park located near Dusseldorf, Germany. The park is located on
approximately 148 acres of land, most of which is leased on a long-term basis
with the balance owned. Approximately 15.0 million people live within 50 miles
of the park and 35.2 million people within 100 miles. The park's primary
competitors are Phantasialand Park, located approximately 75 miles from the
park, and Efteling, located approximately 110 miles from the park.
Warner Bros. Movie World Madrid (Under Construction)
The Company is managing the development of a new park to be known as
Warner Bros. Movie World Madrid, near Madrid, Spain. The park, which is
scheduled to open in the spring of 2002, will be located on approximately 150
acres with ample room for expansion.
The park's primary market includes the metropolitan Madrid area. This
market provides the park with a permanent resident population base of
approximately 5 million people within a 50 mile radius of the park and
approximately 10 million people within 100 miles. In addition, nearly 10 million
people visit Madrid annually and thus will become part of the market potential
of this park. The park's primary competitors are Parque de Atracciones in Madrid
and Terra Mitica in Valencia. These parks are located approximately 20 and 230
miles from the park, respectively.
The Company is paid a development fee from the owner and will manage the
park on a long-term basis following its opening. The Company also holds a
minority interest in the park's ownership.
For additional financial and other information concerning the Company's
international operations, see Note 13 to Notes to Consolidated Financial
Statements.
Pending Acquisition
La Ronde
The Company has entered into a letter of intent to acquire substantially
all of the assets of La Ronde, a theme park located in the City of Montreal for
Can. $30.0 million (approximately US $20.0 million using the December 31, 2000
exchange rate). Under this arrangement, the Company has agreed to invest in the
park Can. $90.0 million (approximately US $60.0 million using that exchange
rate) over four seasons, commencing in 2002. The park is located on the 146 acre
site of the 1967 Montreal Worlds Fair. The Company will lease the land on which
the park is located on a long-term basis. Montreal has a metropolitan population
of approximately 3.3 million, with approximately 4.1 million people living
within 50 miles, is a major tourist destination. There can be no assurance that
this acquisition will be completed.
Marketing and Promotion
The Company attracts visitors through locally oriented multimedia
marketing and promotional programs for each of its parks. These programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Marketing programs are
supervised by the Company's Senior Vice President for Marketing, with the
assistance of the Company's senior management and in-house marketing staff, as
well as its national advertising agency.
The Company also develops partnership relationships with well-known
national and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
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Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance. Each park has a group sales 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.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on 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
Six Flags has the exclusive right on a long-term basis to theme park usage
of the Warner Bros. and DC comics animated characters throughout the world
except for Asia, Australia, Africa and the Las Vegas metropolitan area. In
addition, the Cartoon Network and Hanna-Barbera characters are available for use
by the Company at theme parks throughout Europe and Latin and South America. The
Company believes that the use of the Warner Bros. characters adds a new
dimension of family entertainment, helps drive attendance, lengthens visitors'
stay in the parks and increases in-park spending. The Company believes the
licensed characters are well known in Six Flags' non-U.S. markets.
Park Operations
The Company currently operates in geographically diverse markets in the
United States, Europe and Mexico. Each of the Company's parks is operated to the
extent practicable as a separate operating division of the Company in order to
maximize local marketing opportunities and to provide flexibility in meeting
local needs. Each park is managed by a general manager who reports to one of the
Company's three regional Executive Vice Presidents (each of whom reports to the
Chief Operating Officer) and is responsible for all operations and management of
the individual park. The Company also has an Executive Vice President
responsible for retail and in-park spending at all of its parks. Local
advertising, ticket sales, community relations and hiring and training of
personnel are the responsibility of individual park management in coordination
with corporate support teams.
Each of the Company's theme parks is managed by a full-time, on-site
management team under the direction of the general manager. Each such management
team includes senior personnel responsible for operations and maintenance,
marketing and promotion, human resources and merchandising. Park management
compensation structures are designed to provide incentives (including stock
options and cash bonuses) for individual park managers to execute the Company's
strategy and to maximize revenues and operating cash flow at each park.
The Company's parks are generally open daily from Memorial Day through
Labor Day. In
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addition, most of the Company's parks are open during weekends prior to and
following their daily seasons, including as a site for theme events (such as
Hallowscream, Fright Fest and Oktoberfest). Certain of the parks have longer
operating seasons. Typically, the parks charge a basic daily admission price,
which allows unlimited use of all rides and attractions, although in certain
cases special rides and attractions require the payment of an additional fee.
Capital Improvements
The Company regularly makes capital investments in the addition 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 the parks in order to achieve market penetration
and encourage longer visits, which lead to increased attendance and in-park
spending. In addition, the Company generally adds theming to acquired parks and
enhances the theming and landscaping of its existing parks in order to provide a
complete family oriented entertainment experience. Capital expenditures are
planned on a seasonal basis with most expenditures made during the off-season.
Expenditures for materials and services associated with maintaining assets, such
as painting and inspecting rides are expensed as incurred and therefore are not
included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every two to four
years in order to enhance the park's entertainment product.
The Company believes that there are ample sources for rides and other
attractions, and the Company is not dependent on any single source. Certain of
these manufacturers are located outside the United States.
Maintenance and Inspection
The Company's rides are inspected daily by maintenance personnel during
the operating season. These inspections include safety checks as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of the Company and the individual parks evaluate
the risk aspects of each park's operation. Potential risks to employees and
staff as well as to the public are evaluated. Contingency plans for potential
emergency situations have been developed for each facility. During the
off-season, maintenance personnel examine the rides and repair, refurbish and
rebuild them where necessary. This process includes x-raying and magnafluxing (a
further examination for minute cracks and defects) steel portions of certain
rides at high-stress points. At March 1, 2001, the Company had approximately
1,300 full-time employees who devote substantially all of their time to
maintaining the parks and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs a periodic inspection of each
park and all attractions and related maintenance procedures. The result of
insurance inspections are written evaluation and inspection reports, as well as
written suggestions on various aspects of park operations. Governmental
inspectors in certain jurisdictions also conduct annual ride inspections before
the beginning of each season. Other portions of each park are also subject to
inspections by local fire marshals and health and building department officials.
Furthermore, the Company uses Ellis & Associates as water safety consultants at
its parks in order to train life guards and audit safety procedures.
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Insurance
The Company maintains insurance of the type and in amounts that it
believes are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $100.0 million per occurrence.
With respect to liability claims arising out of occurrences on and after July 1,
1998, there is no self-insured retention by the Company. In addition, with
respect to claims arising out of occurrences prior to July 1, 1998 at the parks
purchased in the Six Flags acquisition, there is no self-insured retention. The
self-insurance portion of claims arising out of occurrences prior to that date
at the Company's other U.S. parks is $50,000. The Company also maintains fire
and extended coverage, workers' compensation, business interruption and other
forms of insurance typical to businesses in its industry. The fire and extended
coverage policies insure the Company's real and personal properties (other than
land) against physical damage resulting from a variety of hazards.
Competition
The Company's parks compete directly with other theme parks, water and
amusement parks and indirectly with all other types of recreational facilities
and forms of entertainment within their market areas, including movies, sports
attractions and vacation travel. Accordingly, the Company's business is and will
continue to be subject to factors affecting the recreation and leisure time
industries generally, such as general economic conditions and changes in
discretionary consumer spending habits. Within each park's regional market area,
the principal factors affecting competition include location, price, the
uniqueness and perceived quality of the rides and attractions in a particular
park, the atmosphere and cleanliness of a park and the quality of its food and
entertainment. The Company believes its parks feature a sufficient variety of
rides and attractions, restaurants, merchandise outlets and family orientation
to enable it to compete effectively.
Seasonality
The operations of the Company are highly seasonal, with more than 90% of
park attendance in 2000 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 earned 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.
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Employees
At March 1, 2001, the Company employed 3,081 full-time employees, and the
Company employed over 40,000 seasonal employees during the 2000 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 7.9% of the Company's full-time and approximately 5.7% of
its seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in January 2003 (Six Flags Over
Texas), December 2003 (Six Flags Over Georgia), December 2002 (Six Flags Great
Adventure), and January 2003 (Six Flags St. Louis). The Company has not
experienced any strikes or work stoppages by its employees, and the Company
considers its employee relations to be good.
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Executive Officers of the Registrant
Age as of
Name March 1, 2001 Position
- ---- ------------- --------
Kieran E. Burke (43) 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 (45) 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 (48) 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 (42) 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 (48) Executive Vice President since May 1998; General Manager of
Six Flags Over Georgia from January 1993 to May 1998.
Daniel P. Aylward (48) 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.
Thomas Iven (42) Executive Vice President since November, 2000; General
Manager of Six Flags St. Louis since August 1998; Regional
Director of Retail Operations of the Six Flags Texas region
from 1996 to August 1998; Vice President of Retail
Operations at Six Flags Over Texas from 1992 to 1996.
Brian Jenkins (39) Senior Vice President of Finance since April, 2000; Vice
President of Finance since April 1998; Regional Vice
President of Finance for the former Six Flags from 1996 to
1998; Served in various financial positions with FoxMeyer
Health Corporation from 1990 to 1996 most recently as Vice
President of Business Development and Corporate Planning.
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Age as of
Name March 1, 2001 Position
- ---- ------------- --------
Sherrie Bang (45) Senior Vice President of Marketing since January 2000;
Regional Vice President of Marketing from May 1998 to
January 2000; Vice President of Marketing of Six Flags Magic
Mountain and Hurricane Harbor from July 1989 to May 1998.
Richard A. Kipf (66) Secretary/Treasurer since 1975; Vice President since June
1994.
James M. Coughlin (49) General Counsel since May 1998; partner, Baer Marks & Upham
LLP from 1991 to 1998.
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 2001.
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ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's material real estate at
March 1, 2001:
Six Flags America, Largo, Maryland -- 515 acres (fee ownership)
Six Flags AstroWorld, Houston, Texas -- 85 acres (fee ownership)
Six Flags Belgium, Brussels, Belgium -- 120 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, Hurricane Harbor & Wild Safari, Jackson, New Jersey -
2,200 acres (fee ownership)
Six Flags Great America, Gurnee, Illinois -- 440 acres (fee ownership)
Six Flags Holland, Biddinghuizen, The Netherlands -- 390 acres (fee ownership
and leasehold interest) (1)
Six Flags Hurricane Harbor, Arlington, Texas -- 47 acres (fee ownership)
Six Flags Hurricane Harbor, Valencia, California -- 12 acres (fee ownership)
Six Flags Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership and
leasehold interest) (2)
Six Flags Magic Mountain, Valencia, California -- 260 acres (fee ownership)
Six Flags Marine World, Vallejo, California -- 136 acres (long-term leasehold
interest at nominal rent)
Six Flags Mexico, Mexico City, Mexico - 107 acres (leasehold interest) (3)
Six Flags New England, Agawam, Massachusetts -- 230 acres (substantially all fee
ownership)
Six Flags Over Georgia, Atlanta, Georgia -- 280 acres (leasehold interest) (4)
Six Flags Over Texas, Arlington, Texas -- 200 acres (leasehold interest) (4)
Six Flags St. Louis, Eureka, Missouri -- 497 acres (fee ownership)
Six Flags WaterWorld, Houston, Texas -- 14 acres (fee ownership)
Six Flags White Water Atlanta, Marietta, Georgia - 69 acres (fee ownership) (5)
Six Flags Worlds of Adventure, Aurora, Ohio -- 690 acres (fee ownership)
Bellewaerde, Ieper, Belgium -- 130 acres (fee ownership)
Enchanted Village, Seattle, Washington -- 65 acres (leasehold interest) (6)
Frontier City, Oklahoma City, Oklahoma -- 109 acres (fee ownership)
The Great Escape, Lake George, New York -- 368 acres (fee ownership)
Splashtown, Spring, Texas - 60 acres (fee ownership)
Walibi Aquitaine, Roquefort, France -- 74 acres (fee ownership)
Walibi Rhone-Alpes, Les Avenieres, France -- 86 acres (fee ownership)
Walibi Schtroumpf, Metz, France -- 375 acres (fee ownership)
Warner Bros. Movie World Germany, Bottrop, Germany - 148 acres (fee ownership
and leasehold interest) (7)
Waterworld/Concord, Concord, California -- 21 acres (leasehold interest) (8)
Waterworld/Sacramento, Sacramento, California -- 14 acres (leasehold
interest) (9)
White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee ownership)
Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest) (10)
- ----------------------------
(1) A substantial portion of the land is leased from a governmental agency
with a term expiring in 2018. An undeveloped portion of the land is also
leased on a year-to-year basis. The balance is owned.
(2) Approximately 38 acres are leased under ground leases with terms
(including renewal options) expiring between 2021 and 2049, with the
balance owned by the Company.
(3) The site is leased from the Federal District of Mexico City. The lease
expires in 2017.
(4) Lessor is the limited partner of the partnership that owns the park. The
leases expire in 2027 and 2028, respectively, at which time the Company
has the option to acquire all of the interests in the respective lessor
not previously acquired.
(5) Owned by the partnership that operates Six Flags Over Georgia.
(6) The site is leased from the prior owner. The base term of the lease
expires in 2003 and the Company has renewal options covering an additional
46 years.
(7) Approximately 7% of the site is owned. The balance is leased from multiple
landlords with lease terms in most cases ranging between 60 and 99 years.
(8) The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five-year renewal options.
(9) 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.
(10) The site is subleased from the Columbus Zoo. The lease expires in 2002 and
the Company has two renewal options with an aggregate 8 year term. Acreage
for this site does not include approximately 30 acres of parking which is
shared with the Columbus Zoo.
-20-
The Company has granted to its lenders under its $1.2 billion credit
agreement a mortgage on substantially all of its United States properties.
In addition to the foregoing, at March 1, 2001, the Company owned certain
undeveloped land in Indiana and indirectly owned real estate interests through
its non-controlling general partnership interest in 229 East 79th Street
Associates L.P., a limited partnership that converted to cooperative ownership a
New York City apartment building. In addition, the Company leases office space
and a limited number of rides and attractions at its parks. See Note 12 to Notes
to Consolidated Financial Statements.
The Company considers its properties to be well-maintained, in good
condition and adequate for their present uses and business requirements.
ITEM 3. LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose
it to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
In December 1998, a final judgment of $197.3 million in compensatory
damages was entered against Six Flags Entertainment Corporation, Six Flags Theme
Parks Inc., Six Flags Over Georgia, Inc. and TWE, and a final judgment of $245.0
million in punitive damages was entered against TWE and of $12.0 million in
punitive damages was entered against the referenced Six Flags entities. The
compensatory damages judgment has been paid and the Company has been advised
that TWE is considering an appeal to the U.S. Supreme Court of the punitive
damages judgment. The judgments arose out of a case entitled Six Flags Over
Georgia, LLC et al. v. Time Warner Entertainment Company, L.P. et al. based on,
among other things, certain disputed partnership affairs prior to the Company's
acquisition of Six Flags at Six Flags Over Georgia, including alleged breaches
of fiduciary duty.
The sellers in the Six Flags acquisition, including Time Warner, have
agreed to indemnify the Company from any and all liabilities arising out of this
litigation.
On March 21, 1999, a raft capsized in the river rapids ride at Six Flags
Over Texas, resulting in one fatality and injuries to ten others. As a result of
the fatality, a case entitled Jerry L. Cartwright, et al. vs. Premier Parks Inc.
d/b/a Six Flags Over Texas, Inc. was commenced in Tarrant County, Texas seeking
unspecified damages. The Park is covered by Six Flags' multi-layered general
liability policy that provides excess liability coverage of up to $100.0 million
per occurrence, with no self-insured retention. The Company does not believe
that this incident or the resulting lawsuit will have a material adverse effect
on the Company's consolidated financial position, operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-21-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has been listed on the New York Stock Exchange
(the "NYSE") since December 22, 1997 under the symbol "PKS." Between May 30,
1996 and December 19, 1997, the Company's Common Stock was traded on the Nasdaq
National Market and quoted under the symbol "PARK." Set forth below are the high
and low sales prices for the Common Stock as reported by the NYSE since January
1, 1999.
Year Quarter High Low
---- ------- ---- ---
2001 First (through 22.49 16.38
March 28, 2001)
2000 Fourth 17 3/16 14 3/16
Third 24 13 1/2
Second 28 1/8 20
First 28 5/16 19 1/2
1999 Fourth 30 7/16 24 1/2
Third 40 28 7/16
Second 40 1/4 33 3/4
First 37 1/4 28 1/2
As of March 1, 2001, there were 780 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, 2000. The Company does not anticipate paying any
cash dividends on its Common Stock during the foreseeable future. The indentures
relating to Six Flags, Inc.'s 9 1/2% Senior Notes Due 2009, 9 1/4% Senior Notes
Due 2006, 10% Senior Discount Notes Due 2008 and 9 3/4% Senior Notes due 2007
(the "Senior Notes") limit the payment of cash dividends to common stockholders.
See Note 6 to Notes to Consolidated Financial Statements.
-22-
ITEM 6. SELECTED FINANCIAL DATA
In the fourth quarter of 1996, the Company acquired four parks. In
February and November 1997, respectively, the Company acquired Six Flags New
England (formerly Riverside Park) and Six Flags Kentucky Kingdom (formerly
Kentucky Kingdom). In 1998, the Company acquired Six Flags and substantially all
of the capital stock of Walibi. In May 1999, the Company acquired Six Flags
Mexico (formerly Reino Aventura) and two water parks, one of which is owned by a
Partnership Park and not consolidated. In November 1999, the Company acquired
Warner Bros. Movie World Germany, the operating season of which ended prior to
the acquisition. In December 2000, the Company acquired Enchanted Village. In
each case the operations of acquired parks are reflected only for the periods
subsequent to their respective acquisition dates. See Note 2 to Notes
Consolidated Financial Statements.
(In thousands, except per share data)
-----------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Revenue........................................ $1,006,981 $926,984 $792,703 $193,904 $93,447
Depreciation and amortization.................. 179,989 154,264 109,841 19,792 8,533
Equity in operations of theme
park partnerships........................... 11,833 26,180 24,054 -- --
Interest expense, net.......................... 224,767 169,441 115,849 17,775 11,121
Income tax expense ............................ 5,622 24,460 40,716 9,615 1,497
Income (loss) before extraordinary loss........ (51,959) (19,230) 35,628 14,099(1) 1,765
Extraordinary loss, net of tax effect.......... -- (11,296) (788) -- --
Net income (loss).............................. (51,959) (30,526) 34,840 14,099(1) 1,765
Net loss - pro forma .......................... N/A N/A (51,160) N/A N/A
Net income (loss) applicable to
common stock................................... (75,247) (53,814) 17,374 14,099(1) 1,162
Per Share:
Income (loss) before extraordinary loss:
Basic..................................... (.96) (.55) .27 .39 .07
Diluted................................... (.96) (.55) .26 .38 .06
Pro forma(2).............................. N/A N/A (.98) N/A N/A
Extraordinary loss, net of tax effect:
Basic..................................... -- (.14) (.01) -- --
Diluted................................... -- (.14) (.01) -- --
Pro forma(2).............................. N/A N/A (.01) N/A N/A
Income (loss):
Basic..................................... (.96) (.69) .26 .39 .07
Diluted................................... (.96) (.69) .25 .38 .06
Pro forma(2).............................. N/A N/A (.99) N/A N/A
Cash Dividends -- Common Stock.............. -- -- -- -- --
Net cash provided by operating activities...... 176,161 197,349 119,010 47,150 11,331
Net cash used in investing activities.......... (337,063) (506,178) (1,664,883) (217,070) (155,149)
Net cash provided by financing activities...... 66,949 49,488 1,861,098 250,165 119,074
Total assets................................... 4,191,339 4,161,572 4,052,465 611,321 304,803
Long-term debt(3).............................. 2,322,313 2,204,988 2,064,189 217,026 150,834
EBITDA(4)...................................... 369,289 319,031 235,240 54,101 22,994
Adjusted EBITDA(5)............................. 402,496 363,219 258,943 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 results of operations of the former Six Flags and Walibi as if
the acquisitions and associated financings had occurred on January 1,
1998.
(3) Includes current portion. Also includes at December 31, 1998 $182.9
million of certain zero coupon notes due December 1999, which had been
defeased for covenant purposes and which have since been retired.
Excluding defeased notes, long-term debt was $1,877.8 million at December
31, 1998. Does not give effect at December 31, 2000 to the 2001 equity and
debt offerings. See "Business - General -- Recent Financings."
(4) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), noncash compensation, depreciation and amortization and
other expenses, including minority interest and gain or loss on sale of
assets. 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 (loss), 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. For 1998 only, EBITDA is shown on a pro forma basis as if the
former Six Flags and Walibi had been acquired on January 1, 1998.
(5) Adjusted EBITDA is defined as EBITDA of the Company plus the Company's
share (based on its ownership interests) of the EBITDA of the Partnership
Parks, determined on a pro forma basis for 1998 only as if the former Six
Flags, Walibi and the Company's interests in the Partnership Parks had
been acquired on January 1, 1998.
-23-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company's revenue is derived from the sale of tickets for entrance to
its parks (approximately 54.1%, 54.0%, and 53.4% in 2000, 1999 and 1998,
respectively) and the sale of food, merchandise, games and attractions inside
its parks, as well as sponsorship and other income (approximately 45.9%, 46.0%
and 46.6%, in 2000, 1999 and 1998, 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.
Results of operations for 2000 include the results of Enchanted Village
and Wild Waves only from its acquisition in December 2000. Historical results of
operations for 1999 include the results of operations of Six Flags Mexico, White
Water Atlanta and Splashtown from the dates of their respective acquisitions in
May 1999 and include the results of operations of Warner Bros. Movie World
Germany from its acquisition in November 1999 (following its 1999 operating
season). Results of Walibi and the former 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 the former Six Flags).
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.
-24-
Results of Operations
Years Ended December 31, 2000 and 1999
Revenue. Revenue in 2000 totaled $1,007.0 million compared to $927.0
million for 1999, representing an 8.6% increase. The increase over the prior
year was primarily due to increased per capita spending at the Company's
domestic parks and the inclusion for the entire 2000 year of the revenues of
Movie World Germany acquired in November 1999. The Company believes that
revenues in 2000 were adversely affected by unusually difficult weather,
particularly in June and July, in a large number of its major markets. Reported
revenues from the Company's European parks as translated into U.S. dollars were
adversely impacted by a decline in European currencies during the 2000. Revenue
growth in 2000 would have been approximately $20.0 million higher had European
currency exchange rates remained at 1999 levels.
Operating expenses. Operating expenses for 2000 increased $22.3 million
compared to actual expenses for 1999 but decreased $14.0 million from the prior
year on a same park basis (including the pre-acquisition results for 1999 of the
parks acquired in that year). The 6.3% increase in actual expenses is
exclusively attributable to the inclusion for the entire year ended December 31,
2000 of two consolidated parks acquired in May 1999 and one acquired in November
1999 (the "Acquired Parks"). If the full year results of the Acquired Parks were
included in both periods, as a percentage of revenues operating expenses would
have been 37.4% in 2000 and 39.5% in 1999.
Selling, General and Administrative; noncash compensation. Selling,
general and administrative expenses (excluding noncash compensation) for 2000
increased $2.5 million compared to expenses for 1999 but decreased $12.6 million
from the prior year on a same park basis. As a percentage of revenue (including
the Acquired Parks for both years), selling, general and administrative expenses
(excluding noncash compensation) would have been 16.5% in 2000 and 18.1% in
1999. Noncash compensation was essentially level in both years.
Costs of Products Sold. Costs of products sold in 2000 increased $5.0
million compared to 1999 actual but decreased $3.8 million on a same park basis.
As a percentage of theme park food, merchandise and other revenues, including
the Acquired Parks in both years, costs of products sold would have been 20.7%
in 2000 compared to 21.8% in 1999.
Depreciation and amortization expense; interest expense, net; other income
(expense). Depreciation and amortization expense for 2000 increased $25.7
million compared to 1999. The increase compared to the 1999 level was
attributable to the Company's on-going capital program at the previously owned
parks and from the additional expense associated with the Acquired Parks.
Exclusive of the Acquired Parks, 2000 depreciation and amortization expense
increased $14.8 million compared to 1999. Interest expense, net increased $55.3
million compared to the 1999 level. The increase resulted from higher average
interest rates on a higher average debt and reduced interest income from lower
average cash and cash equivalent balances during 2000. The $6.6 million increase
in other expense in 2000 was related to the removal and disposal of rides,
buildings and other assets at two parks that were substantially improved and
rebranded as "Six Flags" theme parks.
Equity in operations of theme parks. Equity in operations of theme park
partnerships reflects the Company's share of the income or loss of Six Flags
Over Texas and Six Flags Over Georgia (including Six Flags White Water Atlanta),
the lease of Six Flags Marine World and the management of all four parks. The
Company's ownership interests in Six Flags Over Texas (35% effective Company
ownership) and Six Flags Over Georgia (25% effective Company ownership)
commenced on April 1, 1998, the date of the acquisition of the former Six Flags.
The Company became entitled to a share of the cash flows from the lease and
management of Six Flags Marine World in 1998. Its interests in Six Flags White
Water Atlanta
-25-
commenced with its acquisition in May 1999. The $14.3 million decrease in 2000
in the equity in operations of theme park partnerships compared to 1999 was
attributable to weakened performance at certain Partnership Parks in 2000 and
the absence in the 1999 results of Six Flags White Water Atlanta's
pre-acquisition off-season operating expenses for the first four months of that
year. See Notes 2 and 4 to Notes to Consolidated Financial Statements.
Income tax expense. Income tax expense was $5.6 million for 2000 compared
to a $24.5 million expense for 1999. The Company's effective tax rate is
adversely affected from permanent differences associated with goodwill
amortization for financial purposes and the lesser amount of amortization that
is deductible for tax purposes and from nondeductible compensation expense
associated with conditional stock options and restricted stock grants.
At December 31, 2000, the Company estimates that it had approximately
$751.5 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. Although no assurance
can be given as to the timing or amount of the availability of such NOLs to the
Company and its subsidiaries, the Company anticipates that it is more likely
than not that the NOLs will be utilized prior to their expiration. See Note 8 to
Notes to Consolidated Financial Statements.
Net Loss. Net loss applicable to common stock reflects as a charge the
preferred stock dividends on the Company's Premium Income Equity Securities
("PIES"). The PIES accrue cumulative dividends at 7 1/2% per annum (1.875% per
quarter), which approximates an annual dividend requirement of $23.3 million
(approximately $5.8 million per quarter). The dividend is payable in cash or
shares of Common Stock at the option of the Company. During 2000 and 1999, the
Company elected to pay the dividend in cash. On April 2, 2001, each PIES
automatically converts into two shares of the Company's common stock.
-26-
Years Ended December 31, 1999 and 1998
The table below sets forth certain historical financial information with
respect to the Company for the years ended December 31, 1999 and 1998 and with
respect to the former Six Flags and Walibi for the three months ended March 31,
1998 (representing the pre-acquisition portion of the 1998 year).
Year Ended December 31, 1998
-------------------------------------------------------------------
Historical Historical
Six Flags Walibi for
for Period Period
Year Ended Prior to Prior to Pro
December 31, Historical April 1, March 26, Forma Company
1999 Six Flags 1998(1) 1998(2) Adjustments Pro Forma
-------------- ------------ ---------- ----------- ------------ -------------
(In thousands)
Revenue:
Theme park admissions....... $ 500,417 $ 423,461 $ 15,047 $ 883 $ -- $ 439,391
Theme park food,
merchandise and other..... 426,567 369,242 7,792 624 -- 377,658
-------------- ------------ ---------- ----------- ------------ -------------
Total revenue............. 926,984 792,703 22,839 1,507 -- 817,049
-------------- ------------ ---------- ----------- ------------ -------------
Operating costs and expenses:
Operating expenses.......... 353,728 297,266 45,679 4,626 -- 347,571
Selling, general and
administrative............ 163,526 126,985 19,278 3,407 -- 149,670
Noncash compensation........ 12,725 6,362 -- -- -- 6,362
Costs of products sold...... 90,699 82,127 2,193 248 -- 84,568
Depreciation and
amortization.............. 154,264 109,841 17,629 3,214 6,440(3) 137,124
-------------- ------------ ---------- ----------- ------------ -------------
Total operating costs
and expenses.............. 774,942 622,581 84,779 11,495 6,440 725,295
-------------- ------------ ---------- ----------- ------------ -------------
Income (loss) from
operations................ 152,042 170,122 (61,940) (9,988) (6,440) 91,754
-------------- ------------ ---------- ----------- ------------ -------------
Other income (expense):
Interest expense, net ...... (169,441) (115,849) (22,508) (889) (16,655)(4) (155,901)
Equity in operations
of theme park partnerships 26,180 24,054 -- -- (13,162)(5) 10,892
Other income (expense),
including minority interest (3,551) (1,983) -- (1) -- (1,984)
-------------- ------------ ---------- ----------- ------------ -------------
Total other income (expense) (146,812) (93,778) (22,508) (890) (29,817) (146,993)
Income (loss) before income
Taxes and extraordinary loss. 5,230 76,344 (84,448) (10,878) (36,257) (55,239)
Income tax expense (benefit)... 24,460 40,716 -- (4,786) (40,009)(6) (4,079)
-------------- ------------ ---------- ----------- ------------ -------------
Income (loss) before
extraordinary loss.......... $ (19,230) $ 35,628 $ (84,448) $ (6,092) $ 3,752 $ (51,160)
============== ============ ========== =========== ============ =============
EBITDA(7)...................... $ 319,031 $ 286,325 $ (44,311) $ (6,774) $ -- $ 235,240
============== ============ ========== =========== ============ =============
Adjusted EBITDA(8)............. $ 363,219 $ 321,733 $ (44,311) $ (6,774) $ (11,705)(9) $ 258,943
============== ============ ========== =========== ============ =============
- ----------------
(1) Includes results of the former Six Flags for the period prior to April 1,
1998, the acquisition date, adjusted to eliminate (i) results of the
Partnership Parks and (ii) the expense associated with certain one-time
option payments resulting from the purchase.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date. At that time, Walibi owned six of the Company's
international parks.
-27-
(3) Includes adjustments to eliminate the historical depreciation and
amortization for the former Six Flags and Walibi and the inclusion of
estimated pro forma depreciation and amortization for the three months
ended March 31, 1998.
(4) Includes adjustments to reflect additional interest expense associated
with the indebtedness incurred to finance the Six Flags acquisition net of
(a) the elimination of the historical interest expense associated with the
Company and Six Flags credit facilities outstanding prior to April 1, 1998
and the long term debt of Walibi and (b) the amortization of the fair
market value adjustments on certain then outstanding Six Flags
indebtedness recorded in connection with the acquisition of Six Flags.
Issuance costs associated with the borrowings are being amortized over
their respective periods.
(5) Includes adjustments to reflect the Company's share of the operations of
the Partnership Parks using the equity method of accounting.
(6) Includes adjustments to reflect the application of income taxes to the pro
forma adjustments and to the pre-acquisition operations of Six Flags and
Walibi, after consideration of permanent differences, at a rate of 38%.
(7) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), noncash compensation, depreciation and amortization and
other expenses, including minority interest. The Company has included
information concerning EBITDA because it is a component of the Company's
debt covenant ratios and is also used by certain investors as a measure of
a company's ability to service and/or incur debt. EBITDA is not required
by GAAP and should not be considered in isolation or as an alternative to
net income (loss), net cash provided by operating, investing and financing
activities or other financial data prepared in accordance with GAAP or as
an indicator of the Company's operating performance. This information
should be read in conjunction with the Statements of Cash Flows contained
in the Consolidated Financial Statements.
(8) Adjusted EBITDA is defined as EBITDA of the Company plus the Company's
share (based on its ownership interests) of the EBITDA of the Partnership
Parks.
- ----------------------
Revenue. Revenue in 1999 totaled $927.0 million ($903.2 million without
giving effect to the three Acquired Parks), compared to $792.7 million (actual)
and $817.0 million (pro forma) for 1998. The $86.2 million (10.6%) increase in
1999 revenue (excluding the Acquired Parks) compared to pro forma revenue for
1998 resulted primarily from an aggregate same park attendance increase of 3.8
million (12.9%) resulting in increased admission and in-park revenues.
Operating expenses. Operating expenses for 1999 increased $56.5 million
($46.4 million excluding the Acquired Parks) compared to actual expenses for
1998 and increased $6.2 million (but decreased $3.9 million excluding the
Acquired Parks) compared to pro forma expenses for 1998. The decrease (excluding
the Acquired Parks) compared to pro forma expenses for 1998 resulted primarily
from operating efficiencies realized at the Six Flags parks subsequent to their
acquisition on April 1, 1998. Comparing 1999 actual (excluding the Acquired
Parks) to 1998 pro forma as a percentage of revenues, these expenses were 38.0%
and 42.5% respectively.
Selling, General and Administrative; noncash compensation. Selling,
general and administrative expenses (excluding noncash compensation) for 1999
increased $36.5 million and $13.9 million, respectively, compared to the actual
and pro forma expenses for 1998. Selling, general and administrative expenses
for the Acquired Parks were $4.1 million for 1999. Advertising expenditures for
1999 increased by $23.3 million over the pro forma expense for 1998 reflecting a
return to historical advertising levels of expenditures at the Six Flags parks
and additional expenditures in support of the 1999 transition of four parks to
the Six Flags brand. Remaining selling, general and administrative expenses in
1999 decreased by $13.5 million compared to 1998 pro forma levels primarily as a
result of reduced corporate level expenditures, including staffing, related to
the closing of the former Six Flags corporate office subsequent to the April 1,
1998 acquisition, as well as certain other savings, including insurance.
Comparing 1999 actual (excluding the Acquired Parks) to 1998 pro forma as a
percentage of revenues, selling, general and administrative expenses (excluding
noncash compensation) were 17.7% and 18.3% respectively. Noncash compensation
increased by $6.4 million related to the issuance of restricted stock and
conditional employee stock options during 1998.
-28-
Costs of Products Sold. Costs of products sold in 1999 increased $8.6
million ($6.2 million excluding the Acquired Parks) and $6.1 million ($3.8
million excluding the Acquired Parks), respectively, compared to actual and pro
forma expenses for 1998. As a percentage of theme park food, merchandise and
other revenues, cost of products sold were 21.3% in 1999 (21.2% excluding the
Acquired Parks) compared to 22.4% pro forma in 1998.
Depreciation and amortization expense; interest expense, net. Depreciation
and amortization expense for 1999 increased $44.4 million and $17.1 million,
respectively, compared to the actual and pro forma amounts for 1998. The
increase compared to the pro forma 1998 level was attributable to the Company's
on-going capital program at the previously owned parks and from the additional
improvements associated with the Acquired Parks. Interest expense, net increased
$53.6 million compared to the actual interest expense, net for 1998 and
increased $13.5 million compared to the pro forma interest expense, net for that
year. The increase compared to pro forma interest expense, net for 1998 resulted
from higher average interest rates on a higher average debt and reduced interest
income from lower average cash and cash equivalent balances during 1999.
Equity in operations of theme parks. Equity in operations of theme park
partnerships reflects the Company's share of the income or loss of Six Flags
Over Texas and Six Flags Over Georgia (including Six Flags White Water Atlanta),
the lease of Six Flags Marine World and the management of all four parks. The
Company's ownership interests in Six Flags Over Texas (34% effective Company
ownership) and Six Flags Over Georgia (25% effective Company ownership)
commenced on April 1, 1998, the date of the Six Flags acquisition. The Company
became entitled to a share of the cash flows from the lease and management of
Six Flags Marine World in 1998. Its interests in Six Flags White Water Atlanta
commenced with its acquisition in May 1999. The $15.3 million increase in the
equity in operations of theme park partnerships compared to the pro forma level
for 1998 was attributable to improved performance at the Partnership Parks and
the inclusion of the results of White Water Atlanta. See Notes 2 and 4 to Notes
to Consolidated Financial Statements.
Income tax expense. Income tax expense was $24.5 million for 1999 compared
to a $40.7 million expense and a $4.1 million benefit for the actual and pro
forma results, respectively, for 1998. The effective tax rate was adversely
effected from permanent differences associated with goodwill amortization for
financial purposes and the lesser amount of amortization that is deductible for
tax purposes and from non deductible compensation expense associated with
conditional stock options and restricted stock grants.
Net Loss. Net loss applicable to common stock reflects as a charge the
preferred stock dividends accrued on the Company's PIES. The PIES, which were
issued in April 1998, accrue cumulative dividends at 7 1/2% per annum (1.875%
per quarter), which approximates an annual dividend requirement of $23.3 million
(approximately $5.8 million per quarter). The dividend is payable in cash or
shares of Common Stock at the option of the Company. During 1999 and 1998, the
Company has elected to pay the dividend in cash.
-29-
Liquidity, Capital Commitments and Resources
At December 31, 2000, the Company's total debt aggregated $2,322.3
million, of which approximately $99.7 million was scheduled to mature prior to
December 31, 2001. After giving effect to the January 2001 debt and equity
offerings and the use of proceeds therefrom, total debt at December 31, 2000
would have been $2,259.6 million of which $2.4 million matures prior to December
31, 2001. Based on interest rates at December 31, 2000 for floating rate debt
and after giving effect to such transactions and the interest rate swaps
described below, annual cash interest payments for 2001 on the total debt at
December 31, 2000 will aggregate approximately $149.0 million, excluding $12.8
million which has been deposited in a dedicated escrow account and classified as
a restricted-use investment and excluding cash interest paid in 2001 on
indebtedness repaid in the 2001 financings. In addition, annual dividend
payments on the PIERS issued in January 2001 are $20.8 million, payable at the
Company's option in cash or shares of Common Stock. The final dividend payment
on the PIES on April 2, 2001 will be paid in Common Stock in connection with the
mandatory conversion of the PIES on that date. See Notes 6 and 9 to Notes to
Consolidated Financial Statements for additional information regarding the
Company's indebtedness.
During the year ended December 31, 2000, net cash provided by operating
activities was $176.2 million. Net cash used in investing activities in 2000
totaled $337.1 million, consisting primarily of capital expenditures for the
2000 and 2001 seasons. Net cash provided by financing activities in 2000 was
$66.9 million, representing primarily the net borrowings under the Company's
senior credit facility, offset in part by cash dividends on the PIES.
As more fully described in "Business -- Six Flags Over Georgia and Six
Flags White Water Atlanta" and "-- Six Flags Over Texas and Six Flags Hurricane
Harbor" and in Note 2 to Notes to Consolidated Financial Statements, in
connection with the Six Flags acquisition, the Company guaranteed certain
obligations relating to Six Flags Over Georgia and Six Flags Over Texas. Among
such obligations are (i) minimum distributions (including rent) of approximately
$50.2 million in 2001 to partners in these two Partnerships Parks (of which the
Company will be entitled to receive approximately $15.4 million based on its
present ownership interests) and (ii) up to approximately $99.0 million of
limited partnership unit purchase obligations for 2001 with respect to both
parks. The Company plans to make approximately $29.5 million of capital
expenditures at these parks for the 2001 season. Cash flows from operations at
the parks will be used to satisfy the annual distribution and capital
expenditure requirements, before any funds are required from the Company. In
addition, the Company had $75.4 million in a dedicated escrow account at
December 31, 2000 (classified as a restricted-use investment) available to fund
these obligations.
The degree to which the Company is leveraged could adversely affect its
liquidity. The Company's liquidity could also be adversely affected by
unfavorable weather, accidents or the occurrence of an event or condition,
including negative publicity or significant local competitive events, that
significantly reduces paid attendance and, therefore, revenue at any of its
theme parks.
The Company believes that, based on historical and anticipated operating
results, cash flows from operations, available cash and available amounts under
the senior credit facility will be adequate to meet the Company's future
liquidity needs, including anticipated requirements for working capital, capital
expenditures, scheduled debt and PIERS requirements and obligations under
arrangements relating to the Partnership Parks, for at least the next several
years. The Company may, however, need to refinance all or a portion of its
existing debt on or prior to maturity or to seek additional financing.
-30-
Market Risks and Sensitivity Analyses
Like other global companies, Six Flags is exposed to market risks relating
to fluctuations in interest rates and currency exchange rates. The objective of
financial risk management at Six Flags is to minimize the negative impact of
interest rate and foreign currency exchange rate fluctuations on the Company's
operations, cash flows and equity. Six Flags does not acquire market risk
sensitive instruments for trading purposes.
To manage foreign currency exchange rate risks, on a limited basis Six
Flags has used derivative financial instruments, exclusively foreign exchange
forward contracts. These derivative financial instruments have been held to
maturity and Six Flags has used non-leveraged instruments. These contracts have
been entered into with major financial institutions, thereby minimizing the risk
of credit loss. Six Flags 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. At
December 31, 2000, no such contracts were outstanding. See Note 5 to Notes to
Consolidated Financial Statements for a more complete description of Six Flags'
accounting policies and use of such instruments.
In February 2001, the Company amended its three interest rate swap
agreements that for the term of the applicable amendments (ranging from December
2002 to March 2003) effectively convert the Company's $600.0 million term loan
into a fixed rate obligation. The Company's term loan borrowings bear interest
at 3.25% above the LIBOR rate. The Company's interest rate swap agreements
effectively "lock in" the LIBOR component at rates ranging from 5.925% to 6.07%
and average 5.98%. The counterparties to these agreements are major financial
institutions, which minimizes the credit risk.
The following analysis presents the sensitivity of the market value,
operations and cash flows of Six Flags' market-risk financial instruments to
hypothetical changes in interest rates as if these changes occurred at December
31, 2000. The range of changes chosen for this analysis reflect Six Flags' 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
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 Six Flags' business as a result of
these changes in interest and exchange rates.
Interest Rate and Debt Sensitivity Analysis
At December 31, 2000, Six Flags had debt totaling $2,322.3 million, of
which $1,337.8 million represents fixed-rate debt and the balance represents
floating-rate debt. After giving effect to the January 2001 equity and debt
offerings and the use of proceeds therefrom, total debt at that date would have
been $2,259.6 million, of which $1,588.1 million would have represented
fixed-rate debt. For fixed-rate debt, interest rate changes affect the fair
market value but do not impact book value, operations or cash flows. Conversely,
for floating-rate debt, interest rate changes generally do not affect the fair
market value but do impact future operations and cash flows, assuming other
factors remain constant.
Additionally, increases and decrease in interest rates impact the fair
value of the interest rate swap agreements. A decrease in thirty and ninety-day
LIBOR interest rates increases the fair value liability of the interest rate
swap agreements. However, over the term of the interest rate swap agreements,
the economic effect of changes in interest rates is fixed as the Company will
pay a fixed amount and not be subject to changes in interest rates.
Assuming other variables remain constant (such as foreign exchange rates
and debt levels), after giving effect to the 2001 financings and assuming an
average annual balance on
-31-
the Company's working capital revolver, the pre-tax operations and cash flows
impact resulting from a one percentage point increase in interest rates would be
approximately $7.0 million ($1.0 million after giving effect to the interest
rate swap agreements).
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 balance
sheet 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. The Company
adopted the provisions of SFAS No. 133 as of January 1, 2001. As a result of the
adoption, the Company recognized a liability of approximately $5.0 million and
recorded in other comprehensive income (loss) the amount (net of tax effect) as
a cumulative effect of a change in accounting principle.
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 31-32 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.
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 2001.
(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 2001.
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 2001.
(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 2001.
-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 Six Flags, 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
Consolidated Balance Sheets-- December 31, 2000 and 1999 F-3
Consolidated Statements of Operations
Years ended December 31, 2000, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity and Other
Comprehensive Income (Loss)
Years ended December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998 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
Current Report on 8-K, dated December 12, 2000.
Current Report on 8-K, dated December 27, 2000.
(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 28, 2001
SIX FLAGS, 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 28, 2001
- ---------------------------------------------- Executive Officer (Principal
Kieran E. Burke Executive Officer) and Director
/s/ Gary Story President, Chief Operating March 28, 2001
- ---------------------------------------------- Officer and Director
Gary Story
/s/ James F. Dannhauser Chief Financial Officer March 28, 2001
- ---------------------------------------------- (Principal Financial and Accounting
James F. Dannhauser Officer) and Director
/s/ Paul A. Biddelman Director March 28, 2001
- ----------------------------------------------
Paul A. Biddelman
/s/ Michael E. Gellert Director March 28, 2001
- ----------------------------------------------
Michael E. Gellert
/s/ Francois Letaconnoux Director March 28, 2001
- ----------------------------------------------
Francois Letaconnoux
/s/ Stanley S. Shuman Director March 28, 2001
- ----------------------------------------------
Stanley S. Shuman
-36-
SIX FLAGS, INC.
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-2
Consolidated Balance Sheets - December 31, 2000 and 1999 F-3
Consolidated Statements of Operations - Years ended
December 31, 2000, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity and Other
Comprehensive Income (Loss) - Years ended
December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows - Years ended
December 31, 2000, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-8
Independent Auditors' Report
The Board of Directors and Stockholders
Six Flags, Inc.:
We have audited the accompanying consolidated balance sheets of Six Flags, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and other comprehensive income
(loss), and cash flows for each of the years in the three-year period ended
December 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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 Six Flags, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Oklahoma City, Oklahoma
March 2, 2001
F-2
SIX FLAGS, INC.
Consolidated Balance Sheets
December 31, 2000 and 1999
Assets 2000 1999
--------------- ---------------
Current assets:
Cash and cash equivalents $ 42,978,000 138,131,000
Accounts receivable 40,771,000 29,208,000
Inventories 28,588,000 23,590,000
Prepaid expenses and other current assets 35,855,000 32,793,000
Restricted-use investment securities 12,773,000 24,430,000
--------------- ---------------
Total current assets 160,965,000 248,152,000
--------------- ---------------
Other assets:
Debt issuance costs 46,967,000 55,540,000
Restricted-use investment securities 75,376,000 84,464,000
Deposits and other assets 56,884,000 64,472,000
--------------- ---------------
Total other assets 179,227,000 204,476,000
--------------- ---------------
Property and equipment, at cost 2,585,927,000 2,272,419,000
Less accumulated depreciation 328,027,000 207,680,000
--------------- ---------------
2,257,900,000 2,064,739,000
Investment in theme park partnerships 386,638,000 384,637,000
Intangible assets, principally goodwill 1,354,289,000 1,352,732,000
Less accumulated amortization 147,680,000 93,164,000
--------------- ---------------
1,206,609,000 1,259,568,000
--------------- ---------------
Total assets $ 4,191,339,000 4,161,572,000
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 45,315,000 37,918,000
Accrued interest payable 24,353,000 23,566,000
Accrued compensation, payroll taxes and benefits 6,963,000 19,368,000
Other accrued liabilities 64,552,000 76,395,000
Current portion of long-term debt 2,401,000 2,055,000
--------------- ---------------
Total current liabilities 143,584,000 159,302,000
Long-term debt 2,319,912,000 2,202,933,000
Other long-term liabilities 37,937,000 41,761,000
Deferred income taxes 144,919,000 141,960,000
--------------- ---------------
Total liabilities 2,646,352,000 2,545,956,000
--------------- ---------------
Stockholders' equity:
Preferred stock, $1.00 par value, 5,000,000 shares authorized;
11,500 shares issued and outstanding
at December 31, 2000 and 1999 $ 12,000 12,000
Common stock, $.025 par value, 150,000,000 shares authorized;
80,068,826 and 78,350,771 shares issued and outstanding
at December 31, 2000 and 1999, respectively 2,001,000 1,958,000
Capital in excess of par value 1,725,890,000 1,700,305,000
Accumulated deficit (128,928,000) (53,681,000)
Deferred compensation (5,399,000) (15,255,000)
Accumulated other comprehensive income (loss) (48,589,000) (17,723,000)
--------------- ---------------
Total stockholders' equity 1,544,987,000 1,615,616,000
--------------- ---------------
Total liabilities and stockholders' equity $ 4,191,339,000 4,161,572,000
=============== ===============
See accompanying notes to consolidated financial statements.
F-3
SIX FLAGS, INC.
Consolidated Statements of Operations
Years ended December 31, 2000, 1999 and 1998
2000 1999 1998
--------------- --------------- ---------------
Theme park admissions $ 544,809,000 500,417,000 423,461,000
Theme park food, merchandise and other 462,172,000 426,567,000 369,242,000
--------------- --------------- ---------------
Total revenue 1,006,981,000 926,984,000 792,703,000
--------------- --------------- ---------------
Operating costs and expenses:
Operating expenses 376,060,000 353,728,000 297,266,000
Selling, general and administrative 165,980,000 163,526,000 126,985,000
Noncash compensation (primarily selling, general
and administrative) 12,584,000 12,725,000 6,362,000
Costs of products sold 95,652,000 90,699,000 82,127,000
Depreciation and amortization 179,989,000 154,264,000 109,841,000
--------------- --------------- ---------------
Total operating costs and expenses 830,265,000 774,942,000 622,581,000
--------------- --------------- ---------------
Income from operations 176,716,000 152,042,000 170,122,000
--------------- --------------- ---------------
Other income (expense):
Interest expense (232,336,000) (193,965,000) (149,820,000)
Interest income 7,569,000 24,524,000 33,971,000
Equity in operations of theme park partnerships 11,833,000 26,180,000 24,054,000
Other income (expense) (10,119,000) (3,551,000) (1,983,000)
--------------- --------------- ---------------
Total other income (expense) (223,053,000) (146,812,000) (93,778,000)
--------------- --------------- ---------------
Income (loss) before income taxes (46,337,000) 5,230,000 76,344,000
Income tax expense 5,622,000 24,460,000 40,716,000
--------------- --------------- ---------------
Income (loss) before extraordinary loss (51,959,000) (19,230,000) 35,628,000
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $7,530,000 in 1999
and $526,000 in 1998 -- (11,296,000) (788,000)
--------------- --------------- ---------------
Net income (loss) $ (51,959,000) (30,526,000) 34,840,000
=============== =============== ===============
Net income (loss) applicable to common stock $ (75,247,000) (53,814,000) 17,374,000
=============== =============== ===============
Weighted average number of common shares
outstanding - basic 78,735,000 77,656,000 66,430,000
=============== =============== ===============
Net income (loss) per average common share outstanding - basic:
Income (loss) before extraordinary loss $ (0.96) (0.55) 0.27
Extraordinary loss -- (0.14) (0.01)
--------------- --------------- ---------------
Net income (loss) $ (0.96) (0.69) 0.26
=============== =============== ===============
Weighted average number of common shares
outstanding - diluted 78,735,000 77,656,000 68,518,000
=============== =============== ===============
Net income (loss) per average common share outstanding - diluted:
Income (loss) before extraordinary loss $ (0.96) (0.55) 0.26
Extraordinary loss -- (0.14) (0.01)
--------------- --------------- ---------------
Net income (loss) $ (0.96) (0.69) 0.25
=============== =============== ===============
See accompanying notes to consolidated financial statements.
F-4
SIX FLAGS, INC.
Consolidated Statements of Stockholders Equity
and Other Comprehensive Income (Loss)
Years ended December 31, 2000, 1999 and 1998
Preferred Stock Common Stock Retained
--------------------------- ---------------------------- Capital in Earnings
Shares Shares Excess of (Accumulated
Issued Amount Issued Amount Par Value Deficit)
------------ ------------- -------------- ------------ ---------------- ----------------
Balances at December 31, 1997 -- $ -- 37,798,914 $ 944,000 354,235,000 (17,241,000)
Issuance of preferred stock 11,500 12,000 -- -- 301,173,000 --
Issuance of common stock -- -- 38,742,439 969,000 985,812,000 --
Amortization of deferred
compensation -- -- -- -- -- --
Retirement of treasury stock -- -- (52,692) (1,000) (688,000) --
Net income -- -- -- -- -- 34,840,000
Other comprehensive income -
foreign currency translation
adjustment -- -- -- -- -- --
Comprehensive income
Preferred stock dividends -- -- -- -- -- (17,466,000)
------------ ------------- -------------- ------------ ---------------- ----------------
Balances at December 31, 1998 11,500 12,000 76,488,661 1,912,000 1,640,532,000 133,000
Issuance of common stock -- -- 1,862,110 46,000 53,853,000 --
Amortization of deferred
compensation -- -- -- -- -- --
Stock option compensation -- -- -- -- 4,742,000 --
Tax benefit from stock options
and warrants -- -- -- -- 1,178,000 --
Net loss -- -- -- -- -- (30,526,000)
Other comprehensive loss -
foreign currency translation
adjustment -- -- -- -- -- --
Comprehensive loss
Preferred stock dividends -- -- -- -- -- (23,288,000)
------------ ------------- -------------- ------------ ---------------- ----------------
Balances at December 31, 1999 11,500 12,000 78,350,771 1,958,000 1,700,305,000 (53,681,000)
Issuance of common stock -- -- 1,718,055 43,000 22,857,000 --
Amortization of deferred
compensation -- -- -- -- -- --
Stock option compensation -- -- -- -- 2,728,000 --
Net loss -- -- -- -- -- (51,959,000)
Other comprehensive loss -
foreign currency translation
adjustment -- -- -- -- -- --
Comprehensive loss
Preferred stock dividends -- -- -- -- -- (23,288,000)
------------ ------------- -------------- ------------ ---------------- ----------------
Balances at December 31, 2000 11,500 $ 12,000 80,068,826 $ 2,001,000 1,725,890,000 (128,928,000)
============ ============= ============== ============ ================ ================
Accumulated
Other
Deferred Comprehensive Treasury
Compensation Income (Loss) Stock Total
------------- --------------- ------------ ----------------
Balances at December 31, 1997 (13,500,000) -- (689,000) 323,749,000
Issuance of preferred stock -- -- -- 301,185,000
Issuance of common stock (16,100,000) -- -- 970,681,000
Amortization of deferred
compensation 4,489,000 -- -- 4,489,000
Retirement of treasury stock -- -- 689,000 --
Net income -- -- -- 34,840,000
Other comprehensive income -
foreign currency translation
adjustment -- 9,087,000 -- 9,087,000
----------------
Comprehensive income 43,927,000
----------------
Preferred stock dividends -- -- -- (17,466,000)
------------- --------------- ------------ ----------------
Balances at December 31, 1998 (25,111,000) 9,087,000 -- 1,626,565,000
Issuance of common stock -- -- -- 53,899,000
Amortization of deferred
compensation 9,856,000 -- -- 9,856,000
Stock option compensation -- -- -- 4,742,000
Tax benefit from stock options
and warrants -- -- -- 1,178,000
Net loss -- -- -- (30,526,000)
Other comprehensive loss -
foreign currency translation
adjustment -- (26,810,000) -- (26,810,000)
----------------
Comprehensive loss (57,336,000)
----------------
Preferred stock dividends -- -- -- (23,288,000)
------------- --------------- ------------ ----------------
Balances at December 31, 1999 (15,255,000) (17,723,000) -- 1,615,616,000
Issuance of common stock -- -- -- 22,900,000
Amortization of deferred
compensation 9,856,000 -- -- 9,856,000
Stock option compensation -- -- -- 2,728,000
Net loss -- -- -- (51,959,000)
Other comprehensive loss -
foreign currency translation
adjustment -- (30,866,000) -- (30,866,000)
----------------
Comprehensive loss (82,825,000)
Preferred stock dividends -- -- -- (23,288,000)
------------- --------------- ------------ ----------------
Balances at December 31, 2000 (5,399,000) (48,589,000) -- 1,544,987,000
============= =============== ============ ================
See accompanying notes to consolidated financial statements.
F-5
SIX FLAGS, INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998
2000 1999 1998
-------------- -------------- --------------
Cash flows from operating activities:
Net income (loss) $ (51,959,000) (30,526,000) 34,840,000
Adjustments to reconcile net income (loss) to net
cash provided by operating activities (net
of effects of acquisitions):
Depreciation and amortization 179,989,000 154,264,000 109,841,000
Equity in operations of theme park
partnerships, net of cash received 21,698,000 (8,524,000) (8,240,000)
Minority interest in earnings 132,000 (6,000) 960,000
Noncash compensation 12,584,000 12,725,000 6,362,000
Interest accretion on notes payable 30,733,000 34,402,000 28,713,000
Interest accretion on restricted-use
investments -- (6,182,000) (7,267,000)
Extraordinary loss on early extinguishment
of debt -- 18,826,000 1,314,000
Amortization of debt issuance costs 8,573,000 6,755,000 5,351,000
Loss on disposal of assets 9,987,000 3,557,000 920,000
Deferred income tax expense 2,217,000 17,146,000 38,698,000
(Increase) decrease in accounts receivable (11,558,000) 5,359,000 (17,816,000)
Decrease in income tax
receivable -- -- 995,000
Increase in inventories and prepaid
expenses and other current assets (8,011,000) (2,191,000) (12,154,000)
(Increase) decrease in deposits and
other assets 7,588,000 9,416,000 (25,185,000)
Decrease in accounts payable, accrued
expenses and other liabilities (26,599,000) (7,966,000) (61,806,000)
Increase (decrease) in accrued interest payable 787,000 (9,706,000) 23,484,000
-------------- -------------- --------------
Total adjustments 228,120,000 227,875,000 84,170,000
-------------- -------------- --------------
Net cash provided by operating activities 176,161,000 197,349,000 119,010,000
-------------- -------------- --------------
Cash flows from investing activities:
Additions to property and equipment (334,226,000) (391,655,000) (205,754,000)
Investment in theme park partnerships (23,699,000) (51,931,000) (60,739,000)
Acquisition of theme park assets -- (34,578,000) (50,593,000)
Acquisition of theme park companies, net
of cash acquired 117,000 (242,954,000) (1,037,412,000)
Purchase of restricted-use investments (18,214,000) -- (321,750,000)
Maturities of restricted-use investments 38,959,000 214,940,000 11,365,000
-------------- -------------- --------------
Net cash used in investing activities (337,063,000) (506,178,000) (1,664,883,000)
-------------- -------------- --------------
Cash flows from financing activities:
Repayment of long-term debt (316,408,000) (1,291,910,000) (703,639,000)
Proceeds from borrowings 403,000,000 1,391,024,000 1,361,703,000
Net cash proceeds from issuance of
preferred stock -- -- 301,185,000
Net cash proceeds from issuance of
common stock 3,645,000 2,801,000 955,134,000
Payment of cash dividends (23,288,000) (23,288,000) (11,644,000)
Payment of debt issuance costs -- (29,139,000) (41,641,000)
-------------- -------------- --------------
Net cash provided by financing activities 66,949,000 49,488,000 1,861,098,000
-------------- -------------- --------------
(Continued)
F-6
SIX FLAGS, INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998
2000 1999 1998
------------- ------------- -------------
Effect of exchange rate changes on cash
and cash equivalents $ (1,200,000) (3,106,000) 1,065,000
Increase (decrease) in cash and cash
equivalents (95,153,000) (262,447,000) 316,290,000
Cash and cash equivalents at beginning of year 138,131,000 400,578,000 84,288,000
------------- ------------- -------------
Cash and cash equivalents at end of year $ 42,978,000 138,131,000 400,578,000
============= ============= =============
Supplementary cash flow information:
Cash paid for interest $ 192,247,000 162,511,000 92,272,000
============= ============= =============
Cash paid for income taxes $ 66,000 220,000 497,000
============= ============= =============
Supplemental disclosure of noncash investing and financing activities:
2000
o The Company issued $19,255,000 of common stock (1,339,223 shares) as
consideration for a water and children's ride park acquisition.
1999
o The Company issued a $40,700,000 note convertible into 1,080,000 common
shares as consideration for a theme park acquisition made by a limited
partnership of which the Company is the managing general partner.
o The Company issued $10,435,000 of common stock (337,467 shares) as
additional consideration for a theme park acquisition.
1998
o The Company issued $15,547,000 of common stock (805,954 shares) as
consideration for a theme park acquisition.
o The Company issued restricted common stock (920,000 shares) to certain
employees valued at $16,100,000.
See accompanying notes to consolidated financial statements.
F-7
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(1) Summary of Significant Policies
(a) Description of Business The Company owns and operates regional theme
amusement and water parks. As of December 31, 2000, the Company and
its subsidiaries own or operate 37 parks, including 29 domestic
parks, one park in Mexico and seven parks in Europe. Six Flags is
also managing the construction and development of a theme park in
Europe.
On March 24, 1998, the company then known as Premier Parks Inc.
(Premier Operations) merged (the Merger) with an indirect wholly
owned subsidiary thereof, pursuant to which Premier Operations
became a wholly owned subsidiary of Premier Parks Holdings
Corporation (Holdings) and the holders of shares of common stock of
Premier Operations became, on a share-for-share basis, holders of
common stock of Holdings. On the Merger date, Premier Operations'
name was changed to Premier Parks Operations Inc., and Holdings'
name was changed to Premier Parks Inc. On June 30, 2000, the name of
Premier Parks Inc. was changed to Six Flags, Inc. and the name of
Premier Operations Inc. was changed to Six Flags Operations Inc.
Unless otherwise indicated, all references contained herein reflect
the name change as if it occurred prior to the earliest period
presented. References herein to the "Company" or "Six Flags" 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 Six Flags Operations). As used herein,
Holdings refers only to Six Flags, Inc., without regard to its
subsidiaries.
During December 2000, the Company purchased 100% of the capital
stock of the company that owns Enchanted Village and Wild Waves, a
water park and children's ride park located near Seattle,
Washington.
During May 1999, in separate transactions, the Company purchased
100% of the capital stock of the companies that own Reino Aventura,
a theme park located in Mexico City, and purchased the assets used
in the operation of Splashtown, a water park near Houston. In
addition, during May 1999, the limited partnership that owns Six
Flags Over Georgia purchased the assets used in the operation of
White Water Atlanta, a water park and related entertainment facility
near Atlanta. The consideration for this purchase was advanced to
the partnership by the Company through a convertible promissory
note. The Company is the managing general partner of the limited
partnership and owns approximately 25% of the limited partnership
units. On November 15, 1999, the Company purchased the partnership
that owns Warner Bros. Movie World Germany, near Dusseldorf,
Germany, and entered into a joint venture with Warner Bros. to
develop and manage a new Warner Bros. Movie World theme park
scheduled to open in Madrid, Spain in 2002. See Note 2.
During 1998, the Company purchased approximately 97% of the
outstanding capital stock of Walibi, S.A. (Walibi) and as of
December 31, 2000 owns 100%. See Note 2. On April 1, 1998, the
Company purchased all of the outstanding capital stock of Six Flags
Entertainment Corporation, (together with its subsidiaries, SFEC)
and consummated the related transactions described in Note 2.
F-8
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
The accompanying consolidated financial statements for the year
ended December 31, 2000, reflect the results of Enchanted Village
and Wild Waves only from its acquisition date, December 6, 2000. The
accompanying consolidated financial statements for the year ended
December 31, 1999 reflect the results of Reino Aventura, Splashtown,
White Water Atlanta, and Movie World Germany only from their
acquisition dates, May 4, 1999, May 13, 1999, May 25, 1999 and
November 15, 1999, respectively. The accompanying consolidated
financial statements for the year ended December 31, 1998 reflect
the results of Walibi only from March 26, 1998, and of SFEC only
from April 1, 1998.
On February 9, 2001, Six Flags purchased substantially all of the
assets used in the operations of Sea World of Ohio, a marine
wildlife park located adjacent to the Company's Six Flags Ohio theme
park, for a cash purchase price of $110,000,000. The Company funded
the acquisition from proceeds obtained through Holding's public
offering of 11,500,000 Preferred Income Equity Redeemable Shares
(PIERS). See Note 9(a). The accompanying consolidated financial
statements do not include the results of Sea World of Ohio for any
period presented as the acquisition occurred subsequent to December
31, 2000.
(b) Basis of Presentation
The Company's accounting policies reflect industry practices and
conform to accounting principles generally accepted in the United
States of America.
The consolidated financial statements include the accounts of the
Company, its majority and wholly owned subsidiaries, and limited
partnerships and limited liability companies in which the Company
beneficially owns 100% of the interests. Intercompany transactions
and balances have been eliminated in consolidation.
The Company's investment in partnerships and joint ventures in which
it does not own controlling interests are accounted for using the
equity method.
(c) Cash Equivalents
Cash equivalents of $17,347,000 and $93,083,000 at December 31, 2000
and 1999, 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 value and primarily consist of products for resale including
merchandise and food and miscellaneous supplies.
(e) Advertising Costs
Production costs of commercials and programming are charged to
operations in the year first aired. The costs of other advertising,
promotion, and marketing programs are charged to
F-9
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
operations when incurred. The amounts capitalized at year-end are
included in prepaid expenses.
Advertising and promotions expense was $105,640,000, $100,175,000
and $66,141,000 during 2000, 1999 and 1998, respectively.
(f) Debt Issuance Costs
The Company capitalizes costs related to the issuance of debt. The
amortization of such costs is recognized as interest expense under a
method approximating the interest method over the life of the
respective debt issue.
(g) Depreciation and Amortization
Rides and attractions are depreciated using the straight-line method
over 5-25 years. Land improvements are depreciated using the
straight-line method over 10-15 years. Buildings and improvements
are depreciated over their estimated useful lives of approximately
30 years by use of the straight-line method. Furniture and equipment
are depreciated using the straight-line method over 5-10 years.
Maintenance and repairs are charged directly to expense as incurred,
while betterments and renewals are generally capitalized as property
and equipment. When an item is retired or otherwise disposed of, the
cost and applicable accumulated depreciation are removed and the
resulting gain or loss is recognized.
(h) Investment in Theme Park Partnerships
The Company manages five parks in which the Company does not
currently own a controlling interest. The Company accounts for its
investment in four of the parks using the equity method of
accounting. The equity method of accounting recognizes the Company's
share of the activity of Six Flags Over Texas, Six Flags Over
Georgia, White Water Atlanta, and Six Flags Marine World in the
accompanying consolidated statements of operations in the caption
"equity in operations of theme park partnerships." The 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. The Warner Bros.
Movie World theme park being constructed in Spain is not yet in
operation. The Company accounts for its investment in this park at
cost.
(i) Intangible Assets
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over the expected period to be benefited, generally 18 to 25 years.
Other intangible assets are amortized over the period to be
benefited, generally up to 25 years. The Company assesses the
recoverability of intangible assets by determining whether the
amortization of the intangible asset balance over its remaining life
can be recovered through undiscounted future operating cash flows
from the acquisition. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating
F-10
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
cash flows using a discount rate reflecting the Company's average
borrowing rate. The assessment of the recoverability of goodwill
will be impacted if estimated future operating cash flows are not
achieved.
(j) Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an
asset or group of assets to future net cash flows expected to be
generated by the asset or group of assets. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less
costs to sell.
(k) Interest Expense
Interest on notes payable is generally recognized as expense on the
basis of stated interest rates. Notes payable assumed in an
acquisition are carried at amounts adjusted to impute a market rate
of interest cost (when the obligations were assumed).
(l) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. United States deferred income taxes have not been
provided on foreign earnings which are being permanently reinvested.
(m) Income (Loss) Per Common Share
Basic income (loss) per share is computed by dividing net income
(loss) applicable to common stock by the weighted average number of
common shares outstanding for the period. Diluted income per share
in 1998 reflects the potential dilution that would occur if the
Company's outstanding stock options were exercised (calculated using
the treasury stock method). No adjustment for stock options were
included in the 2000 and 1999 computations of diluted loss per share
because the effect would have been antidilutive. Additionally, the
weighted average number of shares for each of the years ended
December 31, 2000, 1999 and 1998 does not include the impact of the
conversion of the Company's mandatorily convertible preferred stock
into a maximum of 11,500,000 shares of common stock and a minimum of
9,554,000 shares of common stock as the effect of the conversion and
resulting decrease in preferred stock dividends would be
antidilutive.
F-11
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
During 2000, 1999, and the last nine months of 1998, the Company's
mandatorily convertible preferred stock was outstanding. Preferred
stock dividends of $23,288,000, $23,288,000 and $17,466,000 were
considered in determining net income (loss) applicable to common
stock in 2000, 1999, and 1998, respectively.
On June 9, 1998, the Company's common shareholders approved a
two-for-one stock split effective July 24, 1998. The par value of
the common stock was decreased to $.025 per share from $.05 per
share. Additionally, the authorized common shares of the Company
were increased to 150,000,000. The accompanying consolidated
financial statements and notes to the consolidated financial
statements reflect the stock split as if it had occurred as of the
beginning of the earliest year presented.
The following table reconciles the weighted average number of common
shares outstanding used in the calculations of basic and diluted
income (loss) per average common share outstanding for the years
2000, 1999 and 1998.
Years ended December 31,
----------------------------------------
2000 1999 1998
---------- ---------- ----------
Weighted average number of common
shares outstanding - basic 78,735,000 77,656,000 66,430,000
Dilutive effect of potential common
shares issuable upon the exercise of
employee stock options -- -- 2,088,000
---------- ---------- ----------
Weighted average number of common
shares outstanding - diluted 78,735,000 77,656,000 68,518,000
========== ========== ==========
(n) Stock Options
For unconditional employee stock options, the Company recognizes
compensation expense over the service period, only if the current
market price of the underlying stock exceeds the exercise price on
the date of the grant. For employee stock options that are
conditioned upon the achievement of performance goals, compensation
expense, as determined by the extent that the quoted market price of
the underlying stock at the time that the condition for exercise is
achieved exceeds the stock option exercise price, is recognized over
the service period. For stock options issued to nonemployees, the
Company recognizes compensation expense at the time of issuance
based upon the fair value of the options issued.
Pro forma net income (loss) and net income (loss) per share for
employee stock option grants made in and subsequent to 1995 as if
the fair-value-based method had been applied are provided in Note
9(c).
(o) Investment Securities
Restricted-use investment securities at December 31, 2000 and 1999
consist of U.S. Treasury securities. The securities are restricted
to provide for three years of interest payments on certain debt
issued in 1998 and to provide funds to satisfy the Company's
obligations under
F-12
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
certain guarantees of partnership arrangements 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
and intent to hold the security until maturity. All other securities
held by the Company are classified as available-for-sale. The
Company does not purchase investment securities principally for the
purpose of selling them in the near term and thus has no securities
classified as trading.
Available-for-sale securities are recorded at fair value. As of
December 31, 2000 and 1999, the fair value of the restricted-use
investments classified as available-for-sale was $75,376,000 and
$71,600,000 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, 2000 and 1999, 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, 2000 and 1999,
$12,773,000 and $24,430,000 of restricted-use investment securities
classified as held-to-maturity had maturities and restrictions of
less than one year and are reflected as current assets. As of
December 31, 1999, the remaining restricted-use investment
securities of $12,864,000 classified as held-to-maturity had a
remaining term greater than one year.
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. Interest income is recognized
when earned.
(p) Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and
changes in the foreign currency translation adjustment, and is
presented in the 2000, 1999 and 1998 consolidated statements of
stockholders' equity and other comprehensive income (loss) as
accumulated other comprehensive income (loss).
(q) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
F-13
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(r) Reclassifications
Reclassifications have been made to certain amounts reported in 1999
and 1998 to conform with the 2000 presentation.
(2) Acquisition of Theme Parks
On December 6, 2000, the Company acquired all of the capital stock of the
company operating as Enchanted Village and Wild Waves (Enchanted Village),
a water park and children's ride park located near Seattle, Washington,
for a purchase price of $19,255,000 paid through issuance of 1,339,223
shares of the Company's common stock. As of the acquisition date,
$4,471,000 of deferred tax liabilities were recognized for the tax
consequences attributable to the differences between the financial
carrying amounts and the tax basis of Enchanted Village's assets and
liabilities. Approximately $4,235,000 of costs in excess of the fair value
of the net assets acquired were recorded as goodwill. The transaction was
accounted for as a purchase.
On May 4, 1999, the Company acquired all of the capital stock of the
companies that own and operate Reino Aventura (subsequently renamed Six
Flags Mexico), a theme park located in Mexico City, for a cash purchase
price of approximately $59,600,000. The Company funded the acquisition
from existing cash. Approximately $14,575,000 of costs in excess of the
fair value of the net assets acquired were recorded as goodwill. The
transaction was accounted for as a purchase.
On May 13, 1999, the Company acquired the assets of Splashtown water park
located in Houston, Texas for a cash purchase price of approximately
$20,400,000. The Company funded the acquisition from existing cash.
Approximately $10,530,000 of costs in excess of the fair value of the net
assets acquired were recorded as goodwill. The transaction was accounted
for as a purchase.
On May 25, 1999, the limited partnership that owns Six Flags Over Georgia
acquired the assets of White Water Atlanta water park, and adjacent
American Adventures entertainment facility located near Atlanta, Georgia.
In connection with the acquisition, Six Flags issued a $40,700,000 note
that was converted into 1,080,000 shares of the Company's common stock.
The transaction was accounted for by the limited partnership as a
purchase. The Company has reflected the additional investment in the
limited partnership as investment in theme park partnerships.
On November 15, 1999, the Company purchased the partnership that owns
Warner Bros. Movie World Germany, near Dusseldorf, Germany, and entered
into a joint venture with Warner Bros. to design, develop and manage a new
Warner Bros. Movie World theme park scheduled to open in Madrid, Spain in
2002. At the same time, the Company entered into a long-term license
agreement for exclusive theme park usage in Europe, Mexico, South America,
and Central America of the Looney Tunes, Hanna-Barbera, Cartoon Network
and D.C. Comics characters. The aggregate cost of the transactions was
$180,269,000, which was funded by borrowings under the Company's 1999
credit facility (the Credit Facility). See Note 6(d). Approximately
$42,800,000 of the aggregate costs were allocated to goodwill and
intangible assets. The transaction was accounted for as a purchase.
On March 26, 1998, the Company purchased (the Private Acquisition)
approximately 49.9% of the outstanding capital stock of Walibi for an
aggregate purchase price of $42,300,000, of which 20%
F-14
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
was paid through issuance of 448,910 shares of common stock and 80% was
paid in cash. In June 1998, the Company purchased an additional 44% of the
outstanding capital stock of Walibi for an aggregate purchase price of
$38,100,000, which was paid through issuance of 347,746 shares of common
stock and $31,400,000 in cash. During the remainder of the year, Six Flags
purchased an additional 3% of Walibi, which included the issuance of an
additional 9,298 shares of common stock. During 2000 and 1999, Six Flags
purchased an additional 1.1% and 2%, respectively, of Walibi and as of
June 2000, owned 100% of the equity interests of Walibi. On the date of
the Private Acquisition, Walibi's indebtedness aggregated $71,181,000,
which indebtedness was assumed or refinanced by the Company. The Company
funded the cash portion of the purchase price (and the refinancing of such
indebtedness) from borrowings under a previously existing credit facility.
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. As a result of 2000 revenues of
Walibi exceeding levels specified in the purchase agreement, Six Flags is
required to issue the former owners of Walibi additional shares of common
stock in April 2001 with an approximate value of $2,266,000 (using
December 31, 2000 exchange rates). The Company was not required to issue
any shares as a result of the 1999 revenues. The value of the additional
shares will be recorded as additional goodwill.
On April 1, 1998 the Company acquired (the Six Flags Acquisition) all of
the capital stock of SFEC for $976,000,000, paid in cash. In connection
with the Six Flags Acquisition, the Company issued through public
offerings (i) 36,800,000 shares of common stock (with gross proceeds of
$993,600,000), (ii) 5,750,000 Premium Income Equity Securities (PIES)
(with gross proceeds of $310,500,000), (iii) $410,000,000 aggregate
principal amount at maturity of the Company's 10% Senior Discount Notes
due 2008 (the Senior Discount Notes) (with gross proceeds of $251,700,000)
and (iv) $280,000,000 aggregate principal amount of the Company's 9 1/4%
Senior Notes due 2006 (the 1998 Senior Notes), and SFEC issued
$170,000,000 aggregate principal amount of its 8 7/8% Senior Notes due
2006 (the SFEC Notes). In addition, in connection with the Six Flags
Acquisition, the Company (i) assumed $285,000,000 principal amount at
maturity of previously outstanding senior subordinated notes of Six Flags
Theme Parks Inc. (SFTP), an indirect wholly-owned subsidiary of SFEC,
which notes had an accreted value of $278,100,000 at April 1, 1998 (fair
value of $318,500,000 at that date) and (ii) refinanced all outstanding
SFTP bank indebtedness with the proceeds of $410,000,000 of borrowings
under a $472,000,000 senior secured credit facility of SFTP. During 1999,
the Company completed the determination of the value of the assets
acquired and liabilities assumed. As a result of the final determination,
the deferred income tax liability resulting from the acquisition and
goodwill were each reduced by approximately $30,000,000. As of the
acquisition date and after giving effect to the final allocation of
purchase price, $35,619,000 of deferred tax liabilities were recognized
for the tax consequences attributable to the differences between the
financial carrying amounts and the tax basis of SFEC's assets and
liabilities. Approximately $1,170,974,000 of costs in excess of the fair
value of the net assets acquired were recorded as goodwill.
In addition to its obligations under outstanding indebtedness and other
securities issued or assumed in the Six Flags Acquisition, the Company
also guaranteed in connection therewith certain contractual obligations
relating to the partnerships that own two Six Flags parks, Six Flags Over
F-15
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Texas and Six Flags Over Georgia (the Partnership 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 annual cost of living adjustments) to the limited
partners in the Partnership Parks and (ii) make minimum capital
expenditures at each of the Partnership Parks during rolling five-year
periods, based generally on 6% of such park's revenues. Cash flow from
operations at the Partnership Parks is used to satisfy these requirements
first, before any funds are required from the Company. The Company also
guaranteed the obligation of its subsidiaries to purchase a maximum number
of 5% per year (accumulating to the extent not purchased in any given
year) of the total limited partnership units outstanding as of the date of
the agreements (the Partnership Agreements) that govern the partnerships
(to the extent tendered by the unit holders). The agreed price for these
purchases is based on a valuation for each respective Partnership Park
equal to the greater of (i) a value derived by multiplying such park's
weighted-average four-year EBITDA (as defined in the Partnership
Agreements) by a specified multiple (8.0 in the case of the Georgia park
and 8.5 in the case of the Texas park) or (ii) $250,000,000 in the case of
the Georgia park and $374,800,000 in the case of the Texas park. The
Company's obligations with respect to Six Flags Over Georgia and Six Flags
Over Texas will continue until 2027 and 2028, respectively.
As the Company purchases units relating to either Partnership Park, it is
entitled to the minimum distribution and other distributions attributable
to such units, unless it is then in default under the applicable
agreements with its partners at such Partnership Park. On December 31,
2000, the Company owned approximately 25% and 35%, respectively, of the
limited partnership units in the Georgia and Texas partnerships. The
maximum unit purchase obligations for 2001 at both parks will aggregate
approximately $99,000,000.
The following summarized unaudited pro forma results of operations for the
years ended December 31, 1999 and 1998, assume that the SFEC, Walibi, Six
Flags Mexico, White Water Atlanta, Splashtown and Movie World
acquisitions, and the related transactions occurred as of January 1, 1998.
The acquisition of Enchanted Village in December 2000 was not material to
the Company's 2000 and 1999 financial condition or results. Therefore, the
results of operations for Enchanted Village are not included in the pro
forma information presented below.
1999 1998
--------------- ---------------
(Unaudited)
(In thousands)
Total revenues $ 986,808 898,670
Loss before extraordinary loss (39,555) (66,299)
Loss per common share - basic (0.81) (1.17)
Loss per common share - diluted (0.81) (1.17)
F-16
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(3) Property and Equipment
Property and equipment, at cost, are classified as follows:
2000 1999
--------------- ---------------
Land $ 294,215,000 293,924,000
Land improvements 299,261,000 223,068,000
Buildings and improvements 540,349,000 485,303,000
Rides and attractions 1,202,149,000 1,044,252,000
Equipment 249,953,000 225,872,000
--------------- ---------------
Total 2,585,927,000 2,272,419,000
Less accumulated depreciation 328,027,000 207,680,000
--------------- ---------------
$ 2,257,900,000 2,064,739,000
=============== ===============
(4) Investment in Theme Park Partnerships
The following reflects the summarized assets, liabilities, and equity as
of December 31, 2000 and 1999, and the results of the four parks managed
by the Company for the years ended December 31, 2000, 1999 and 1998, in
the case of Six Flags Marine World, for the periods subsequent to April 1,
1998 (the date of the Six Flags Acquisition), in the case of the
Partnership Parks and for the periods subsequent to May 25, 1999, in the
case of White Water Atlanta, which was purchased on that date by the
limited partnership that owns Six Flags Over Georgia.
2000 1999
--------------- ---------------
Assets:
Current assets $ 26,530,000 33,114,000
Property and equipment, net 254,263,000 241,522,000
Other assets 35,676,000 39,179,000
--------------- ---------------
Total assets $ 316,469,000 313,815,000
=============== ===============
Liabilities and equity:
Current liabilities $ 47,685,000 32,851,000
Affiliate loans 91,107,000 89,607,000
Long-term debt 66,305,000 71,613,000
Equity 111,372,000 119,744,000
--------------- ---------------
Total liabilities and equity $ 316,469,000 313,815,000
=============== ===============
F-17
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
2000 1999 1998
------------ ------------ ------------
Revenue $208,196,000 225,274,000 201,933,000
Expenses:
Operating expenses 84,379,000 88,901,000 75,680,000
Selling, general and administrative 29,911,000 27,957,000 24,683,000
Costs of products sold 17,921,000 21,241,000 26,689,000
Depreciation and amortization 20,145,000 16,724,000 13,325,000
Interest expense, net 14,259,000 11,545,000 6,301,000
Other expense 841,000 532,000 1,451,000
------------ ------------ ------------
Total 167,456,000 166,900,000 148,129,000
------------ ------------ ------------
Net income $ 40,740,000 58,374,000 53,804,000
============ ============ ============
The Company's share of operations of the four theme parks for the years
ended December 31, 2000, 1999, and 1998 were $33,205,000, $44,187,000 and
$35,408,000, prior to depreciation and amortization charges of
$20,370,000, $15,826,000 and $9,763,000, and third-party interest expense
and other non-operating expenses of $1,002,000, $2,181,000 and $1,591,000,
respectively. A substantial difference exists between the carrying value
of the Company's investment in the theme parks and the Company's share of
the net book value of the theme parks. The difference is being amortized
over 20 years for the Partnership Parks and over the expected useful life
of the rides and equipment installed by the Company at Six Flags Marine
World. Pursuant to the Partnership Agreements, the Company, as managing
general partner of the Partnership Parks, can make affiliate loans to the
Partnership Parks. These loans are reflected in the Company's consolidated
balance sheet as an investment in theme park partnerships. As discussed in
Note 2, the Company provided the consideration for a Partnership Park to
acquire White Water Atlanta. The resulting note from the Partnership Park
to the Company is in the form of an affiliate loan. Included in long-term
debt above as of December 31, 2000 is $61,185,000 of long-term debt that
is not guaranteed by the Company. That long-term debt is an obligation of
the other parties that have an interest in Six Flags Marine World. The
remaining long-term debt shown above consists primarily of term loan debt
and capitalized lease obligations associated with rides and equipment.
In April 1997, the Company became manager of Marine World (subsequently
renamed Six Flags Marine World), then a marine and exotic wildlife park
located in Vallejo, California, pursuant to a contract with an agency of
the City of Vallejo under which the Company is entitled to receive an
annual base management fee of $250,000 and up to $250,000 annually in
additional management fees based on park revenues. In November 1997, the
Company exercised its option to lease 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 2000, 1999, and 1998,
the Company added theme park rides and attractions on the leased land,
which is located within the existing park, in order to create one
fully-integrated regional theme park at the site. The Company is entitled
to receive, in addition to the management fee, 80% of the cash flow
generated by the combined operations at the park, after combined operating
expenses and debt service on outstanding debt
F-18
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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).
(5) Derivative Financial Instruments
Prior to 2000, the Company had only limited involvement with derivative
financial instruments, entering into contracts to manage the variability
of foreign-currency exchange rates in connection with the purchase of
rides from foreign vendors. No such contracts were in effect at December
31, 2000.
In February 2000, the Company entered into three interest rate swap
agreements that effectively convert the Company's $600,000,000 term loan
component of the Credit Facility (see Note 6(d)) into a fixed rate
obligation. The terms of the agreements, each of which has a notional
amount of $200,000,000, began in March 2000 and expire from December 2001
to March 2002. The Company's term loan borrowings bear interest based upon
the LIBOR rate plus a fixed margin. The Company's interest rate swap
arrangements were designed to "lock-in" the LIBOR component at rates
ranging from 6.615% to 6.780% depending on the applicable agreement. Two
of the agreements had a feature that negated the interest rate swap for a
ninety-day period if LIBOR rates exceed 7.5%, while the remaining
agreement limited the interest rate swap at the 7.5% rate. The
counterparties to these transactions are major financial institutions,
which minimizes the credit risk.
In February 2001, the Company and the counterparties amended and extended
the interest rate swap agreements. The provisions that negated the
interest rate swap or limited the interest rate swap were removed. The
notional amounts of $200,000,000 each have been retained. Two of the
agreements expire in December 2002 and the remaining agreement expires in
March 2003. The fixed interest rates on the notional amounts range from
5.925% to 6.07% and average 5.98%.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to the 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.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires that a company recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. This statement was required to be
adopted by the Company in 2001. As of January 1, 2001, the fair value of
the interest swap agreements was a liability of $4,996,000, which was
recorded in other comprehensive income (loss) as a cumulative effect of a
change in accounting principle.
F-19
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(6) Long-Term Debt
At December 31, 2000 and 1999, long-term debt consists of:
2000 1999
-------------- --------------
Long-term debt:
1997 Notes due 2007 (a) $ 125,000,000 125,000,000
Senior Discount Notes due 2008 (b) 329,275,000 298,664,000
1998 Senior Notes due 2006 (b) 280,000,000 280,000,000
SFEC Notes due 2006 (c) 170,000,000 170,000,000
Credit Facility (d) 981,000,000 892,000,000
1999 Senior Notes due 2007 (e) 429,207,000 429,085,000
Other 7,831,000 10,239,000
-------------- --------------
2,322,313,000 2,204,988,000
Less current portion 2,401,000 2,055,000
-------------- --------------
$2,319,912,000 2,202,933,000
============== ==============
(a) On January 31, 1997, Six Flags Operations issued $125,000,000 of
senior notes due January 2007 (the 1997 Notes). The 1997 Notes are
senior unsecured obligations of Six Flags Operations. The 1997 Notes
bear interest at 9 3/4% per annum payable semiannually and are
redeemable, at Six Flags 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 Six Flags Operations' principal domestic
subsidiaries.
Prior to the amendments described below, the indenture limited the
ability of Six Flags Operations and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends;
engage in mergers or consolidations; and engage in certain
transactions with affiliates. A portion of the proceeds were used to
pay in full all amounts outstanding under Six Flags Operations' then
outstanding credit facility.
All obligations under the 1997 Notes and the related indenture
remained as obligations of Six Flags Operations and were not assumed
by Holdings after the Merger.
On January 29, 2001, Six Flags Operations commenced a tender offer
for all of the aggregate principal amount of the 1997 Notes. In
conjunction with the tender offer, noteholder consents were
solicited to effect certain amendments to the indenture governing
the 1997 notes. Six Flags Operations received tenders of notes and
related consents from holders of 99.8% of the outstanding notes. The
tendered notes were purchased and the indenture amendments became
effective on March 2, 2001. The purchase price (including consent
fee) paid was approximately $1,085 for each $1,000 principal amount
of notes plus accrued and unpaid interest up to, but not including,
the payment date. As a result of the early extinguishment of debt,
the Company will recognize a loss of approximately $8,292,000, net
of tax effect. On February 2, 2001, Holdings completed an offering
of $375 million 9 1/2% Senior Notes (the 2001 Senior Notes) due
2009. A portion of the proceeds of the 2001 Senior Notes was used to
finance the tender offer and consent solicitation. The 2001 Senior
Notes are senior unsecured obligations of Holdings, are not
guaranteed by subsidiaries and rank equal to the 1999 Senior Notes,
1998 Senior Notes and Senior Discount Notes. The indenture under
which the 2001 Senior Notes were issued contains
F-20
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
covenants substantially similar to those relating to the 1998 Senior
Notes, the Senior Discount Notes, and the 1999 Senior Notes.
(b) On April 1, 1998, Holdings issued at a discount $410,000,000
principal amount at maturity ($329,275,000 and $298,664,000 carrying
value as of December 31, 2000 and 1999, respectively) of Senior
Discount Notes and $280,000,000 principal amount of 1998 Senior
Notes. The notes are senior unsecured obligations of Holdings and
are not guaranteed by Holdings' subsidiaries. The Senior Discount
Notes do not require any interest payments prior to October 1, 2003
and, except in the event of a change of control of the Company and
certain other circumstances, any principal payments prior to their
maturity in 2008. The Senior Discount Notes have an interest rate of
10% per annum. The 1998 Senior Notes require annual interest
payments of approximately $25,900,000 (9 1/4% per annum) and, except
in the event of a change of control of the Company and certain other
circumstances, do not require any principal payments prior to their
maturity in 2006. The notes are redeemable, at the Company's option,
in whole or in part, at any time on or after April 1, 2002 (in the
case of the 1998 Senior Notes) and April 1, 2003 (in the case of the
Senior Discount Notes), at varying redemption prices.
Approximately $70,700,000 of the net proceeds of the 1998 Senior
Notes were deposited in escrow to prefund the first six semi-annual
interest payments thereon, and $75,000,000 of the net proceeds of
the Senior Discount Notes were invested in restricted-use
securities, until April 1, 2003, to provide funds to pay certain of
Six Flags' obligations to the limited partners of the Partnership
Parks. See Note 2.
The indentures under which the Senior Discount Notes and the 1998
Senior Notes were issued limit the ability of Holdings and its
subsidiaries to dispose of assets; incur additional indebtedness or
liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with affiliates.
(c) On April 1, 1998, SFEC issued $170,000,000 principal amount of SFEC
Notes, which are senior obligations of SFEC. The SFEC Notes are
guaranteed on a fully subordinated basis by Holdings. The SFEC Notes
require annual interest payments of approximately $15,100,000
(8 7/8% per annum) and, except in the event of a change of control
of Six Flags Operations (successor to SFEC) and certain other
circumstances, do not require any principal payments prior to their
maturity in 2006. The SFEC Notes are redeemable, at Six Flags
Operations' option, in whole or in part, at any time on or after
April 1, 2002, at varying redemption prices. The net proceeds of the
SFEC Notes, together with other funds, were invested in
restricted-use securities to provide for the repayment in full on or
before December 15, 1999 of pre-existing notes of SFEC (with a
carrying value of $182,877,000 at December 31, 1998). The
pre-existing notes of SFEC were paid in full using the
restricted-use securities on December 15, 1999.
The indenture under which the SFEC Notes were issued limits the
ability of Six Flags 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. In November 1999, SFEC merged into Six
Flags Operations, which assumed the obligations of SFEC under the
SFEC Notes and the related indenture.
F-21
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(d) On November 5, 1999, SFTP entered into the Credit Facility and, in
connection therewith, SFEC merged into Six Flags Operations and SFTP
became a direct wholly-owned subsidiary of Six Flags Operations. The
Credit Facility includes a $300,000,000 five-year revolving credit
facility ($90,000,000 was outstanding at December 31, 2000 and none
was outstanding at December 31, 1999), a $300,000,000
five-and-one-half-year multicurrency reducing revolver facility (of
which $291,000,000 and $292,000,000 was outstanding at December 31,
2000 and 1999, respectively) and a $600,000,000 six-year term loan
(all of which was outstanding at December 31, 2000 and 1999). A
portion of the proceeds of the 2001 Senior Notes was used in
February 2001 to make a payment of $223,000,000 on the multicurrency
facility and a portion of the proceeds of the PIERS was used in
February 2001 to fully pay advances outstanding under the revolving
facility. Borrowings under the five-year revolving credit facility
(US Revolver) must be repaid in full for thirty consecutive days
each year. The interest rate on borrowings under the Credit Facility
can be fixed for periods ranging from one to six months. At the
Company's option the interest rate is based upon specified levels in
excess of the applicable base rate or LIBOR. At December 31, 2000,
the weighted average interest rates for borrowings under the US
Revolver, multicurrency revolver, and term loan were 9.22%, 9.19%
and 9.97%, respectively. At December 31, 1999, the interest rate on
the borrowings was 8.88% and 9.38% for the multicurrency revolver
and term loan, respectively. The multicurrency facility permits
optional prepayments and reborrowings. The committed amount reduces
quarterly by 2.5% commencing on December 31, 2001, by 5.0%
commencing on December 31, 2002, by 7.5% commencing on December 31,
2003 and by 20.0% commencing on December 31, 2004. Mandatory
repayments are required if amounts outstanding exceed the reduced
commitment amount. The term loan facility requires quarterly
repayments of 0.25% of the outstanding amount thereof commencing on
December 31, 2001 and 24.25% commencing on December 31, 2004. A
commitment fee of .50% of the unused credit of the facility is due
quarterly in arrears. The principal borrower under the facility is
SFTP, and borrowings under the Credit Facility are guaranteed by
Holdings, Six Flags Operations and all of Six Flags Operations'
domestic subsidiaries and are secured by substantially all of Six
Flags Operations' domestic assets and a pledge of Six Flags
Operations' capital stock. See Note 5 regarding interest rate
hedging activities.
The Credit Facility contains restrictive covenants that, among other
things, limit the ability of Six Flags Operations and its
subsidiaries to dispose of assets; incur additional indebtedness or
liens; repurchase stock; make investments; engage in mergers or
consolidations; pay dividends, (except that (subject to covenant
compliance) dividends will be permitted to allow Holdings to meet
cash interest obligations with respect to its 1998 Senior Notes,
Senior Discount Notes, 1999 Senior Notes and 2001 Senior Notes, cash
dividend payments on its PIES and its Preferred Income Equity
Redeemable Securities (PIERS) issued in January 2001 (see Note
9(a))) and its obligations to the limited partners in the
Partnership Parks, and engage in certain transactions with
subsidiaries and affiliates. In addition, the Credit Facility
requires that Six Flags Operations comply with certain specified
financial ratios and tests.
On November 5, 1999, the Company borrowed $892,000,000 under the
Credit Facility principally to repay all amounts outstanding under
previously existing credit facilities and to provide funds to
consummate the November 1999 transactions with Warner Bros.
described in Note 2. The termination of previously existing credit
facilities resulted in an extraordinary loss in respect of the debt
issuance costs related thereto of $5,214,000, net of tax benefit of
$3,476,000.
F-22
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(e) On June 30, 1999, Holdings issued $430,000,000 principal amount of
9 3/4% Senior Notes (the 1999 Senior Notes). The 1999 Senior Notes
are senior unsecured obligations of Holdings, are not guaranteed by
subsidiaries and rank equal to the 1998 Senior Notes and the Senior
Discount Notes. The 1999 Senior Notes require annual interest
payments of approximately $41,900,000 (9 3/4% per annum) and, except
in the event of a change in control of the Company and certain other
circumstances, do not require any principal payments prior to their
maturity in 2007. The 1999 Senior Notes are redeemable, at Holding's
option, in whole or in part, at any time on or after June 15, 2003,
at varying redemption prices. The indenture under which the 1999
Senior Notes were issued contains covenants substantially similar to
those relating to the 1998 Senior Notes and the Senior Discount
Notes.
The net proceeds of the 1999 Senior Notes were used to fund the
purchase in a tender offer of $87,500,000 of previously outstanding
Six Flags Operations' 1995 Senior Notes (the 1995 Notes) and the
entire $285,000,000 principal amount of SFTP Senior Subordinated
Notes. The remaining $2,500,000 balance of the 1995 Notes was
redeemed in August 1999. An extraordinary loss of $6,082,000, net of
tax benefit of $4,054,000, was recognized from these early
extinguishments.
Annual maturities of long-term debt during the five years subsequent to
December 31, 2000, are as follows (after giving effect to the refinancing
of certain debt in February 2001):
2001 $ 2,401,000
2002 6,923,000
2003 6,760,000
2004 161,583,000
2005 and thereafter 2,144,646,000
--------------
$2,322,313,000
==============
After consideration of the issuance of the 2001 Senior Notes, use of
proceeds of the PIERS, and payment of debt, the long-term debt balance as
of December 31, 2000, would have been $2,259,582,000.
In 1998, the Company terminated a prior credit facility, which resulted in
a $788,000 extraordinary loss, net of tax benefit of $526,000.
Holdings is the issuer of the notes described in (b) and (e) above and the
2001 Senior Notes. Six Flags Operations is the issuer of the notes
described in (a) and (c) above. Holdings guarantees the SFEC Notes due
2006. The following information for Holdings includes the assets,
liabilities and equity, results of operations, and cash flows of Holdings
only and for Six Flags Operations includes the consolidated assets,
liabilities and equity, results of operations, and cash flows of Six Flags
Operations and its Subsidiaries.
F-23
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Six Flags
Holdings Operations Eliminations Total
------------ ------------ ------------ ------------
December 31, 2000 (In thousands)
Assets:
Cash and cash equivalents $ 1,028 41,950 -- 42,978
Restricted-use investment securities 12,773 -- -- 12,773
Other current assets 5,358 99,856 -- 105,214
------------ ------------ ------------ ------------
Total current assets 19,159 141,806 -- 160,965
Intercompany receivables (payables) (4,150) 4,150 -- --
Deferred income taxes 47,492 -- (47,492) --
Other assets 99,707 79,520 -- 179,227
Investment in subsidiaries 2,108,685 -- (2,108,685) --
Investment in theme park partnerships 286,049 100,589 -- 386,638
Property and equiment, net 31,846 2,226,054 -- 2,257,900
Intangible assets, net 10,570 1,196,039 -- 1,206,609
------------ ------------ ------------ ------------
Total assets $ 2,599,358 3,748,158 (2,156,177) 4,191,339
============ ============ ============ ============
Liabilities and stockholders' equity:
Current portion of long-term debt $ -- 2,401 -- 2,401
Other current liabilities 15,889 125,294 -- 141,183
------------ ------------ ------------ ------------
Total current liabilities 15,889 127,695 -- 143,584
Long-term debt 1,038,482 1,281,430 -- 2,319,912
Other long-term liabilities -- 37,937 -- 37,937
Deferred income taxes -- 192,411 (47,492) 144,919
Stockholder's equity 1,544,987 2,108,685 (2,108,685) 1,544,987
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 2,599,358 3,748,158 (2,156,177) 4,191,339
============ ============ ============ ============
Revenue $ 386 1,006,595 -- 1,006,981
Operating costs and expenses:
Operating expenses 172 375,888 -- 376,060
Selling, general and administrative 14,010 164,554 -- 178,564
Costs of products sold 15 95,637 -- 95,652
Depreciation and amortization 2,092 177,897 -- 179,989
------------ ------------ ------------ ------------
Total operating costs and expenses 16,289 813,976 -- 830,265
------------ ------------ ------------ ------------
Income (loss) from operations (15,903) 192,619 -- 176,716
------------ ------------ ------------ ------------
F-24
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Six Flags
Holdings Operations Eliminations Total
------------ ------------ ------------ ------------
(In thousands)
Other income (expense):
Interest expense $ (102,618) (129,718) -- (232,336)
Interest income 5,600 1,969 -- 7,569
Equity in operations of theme park --
partnerships 7,775 4,058 -- 11,833
Other income (expense) -- (10,119) -- (10,119)
------------ ------------ ------------ ------------
Total other income (expense) (89,243) (133,810) -- (223,053)
------------ ------------ ------------ ------------
Income (loss) before income taxes
taxes (105,146) 58,809 -- (46,337)
Income tax expense (benefit) (36,169) 41,791 -- 5,622
------------ ------------ ------------ ------------
Net income (loss) $ (68,977) 17,018 -- (51,959)
============ ============ ============ ============
Cash flows from operating activities:
Operating cash flows $ (38,030) 214,191 -- 176,161
------------ ------------ ------------ ------------
Cash flows from investing activities:
Additions to property and equipment (1,232) (332,994) -- (334,226)
Investment in theme parks
partnerships (4,787) (18,912) -- (23,699)
Acquisitions of theme park companies 117 -- -- 117
Investment in subsidiaries (80,703) -- 80,703 --
Purchase of restricted-use investments (18,214) -- -- (18,214)
Maturities of restricted-use investments 38,959 -- -- 38,959
------------ ------------ ------------ ------------
(65,860) (351,906) 80,703 (337,063)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Repayment of long-term debt -- (316,408) -- (316,408)
Proceeds from borrowings -- 403,000 -- 403,000
Net cash proceeds from issuance of
stock 3,645 -- -- 3,645
Capital contributions -- 80,703 (80,703) --
Advances to subsidiaries 104,441 (104,441) -- --
Payment of cash dividends (23,288) -- -- (23,288)
------------ ------------ ------------ ------------
84,798 62,854 (80,703) 66,949
Effect of exchange rate changes on cash -- (1,200) -- (1,200)
------------ ------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents $ (19,092) (76,061) -- (95,153)
============ ============ ============ ============
F-25
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Six Flags
Holdings Operations Eliminations Total
------------ ------------ ------------ ------------
December 31, 1999 (In thousands)
Assets:
Cash and cash equivalents $ 20,120 118,011 -- 138,131
Restricted-use investment securities 24,430 -- -- 24,430
Other current assets 21,882 63,709 -- 85,591
------------ ------------ ------------ ------------
Total current assets 66,432 181,720 -- 248,152
Intercompany receivables (payables) 100,291 (100,291) -- --
Deferred income taxes 16,690 -- (16,690) --
Other assets 112,672 91,804 -- 204,476
Investment in subsidiaries 2,042,400 -- (2,042,400) --
Investment in theme park partnerships 292,305 92,332 -- 384,637
Property and equiment, net 12,584 2,052,155 -- 2,064,739
Intangible assets, net 6,463 1,253,105 -- 1,259,568
------------ ------------ ------------ ------------
Total assets $ 2,649,837 3,570,825 (2,059,090) 4,161,572
============ ============ ============ ============
Liabilities and stockholders' equity:
Current portion of long-term debt $ -- 2,055 -- 2,055
Other current liabilities 25,901 131,346 -- 157,247
------------ ------------ ------------ ------------
Total current liabilities 25,901 133,401 -- 159,302
Long-term debt 1,007,749 1,195,184 -- 2,202,933
Other long-term liabilities 571 41,760 (570) 41,761
Deferred income taxes -- 158,650 (16,690) 141,960
Stockholder's equity 1,615,616 2,041,830 (2,041,830) 1,615,616
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 2,649,837 3,570,825 (2,059,090) 4,161,572
============ ============ ============ ============
Revenue $ -- 926,984 -- 926,984
Operating costs and expenses:
Operating expenses -- 353,728 -- 353,728
Selling, general and administrative 23,002 153,249 -- 176,251
Costs of products sold -- 90,699 -- 90,699
Depreciation and amortization 589 153,675 -- 154,264
------------ ------------ ------------ ------------
Total operating costs and expenses 23,591 751,351 -- 774,942
------------ ------------ ------------ ------------
Income (loss) from operations (23,591) 175,633 -- 152,042
------------ ------------ ------------ ------------
(Continued)
F-26
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Six Flags
Holdings Operations Eliminations Total
------------ ------------ ------------ ------------
(In thousands)
Other income (expense):
Interest expense $ (78,232) (115,733) -- (193,965)
Interest income 11,323 13,201 -- 24,524
Equity in operations of theme park --
partnerships 19,105 7,075 -- 26,180
Other income (expense) -- (3,551) -- (3,551)
------------ ------------ ------------ ------------
Total other income (expense) (47,804) (99,008) -- (146,812)
------------ ------------ ------------ ------------
Income (loss) before income taxes
taxes (71,395) 76,625 -- 5,230
Income tax expense (benefit) (19,803) 44,263 -- 24,460
------------ ------------ ------------ ------------
Income before extraordinary loss (51,592) 32,362 -- (19,230)
Extraordinary loss on extinguishment of
debt, net of income tax benefit -- (11,296) -- (11,296)
------------ ------------ ------------ ------------
Net income (loss) $ (51,592) 21,066 -- (30,526)
============ ============ ============ ============
Net income (loss) applicable to
common stock $ (74,880) 21,066 -- (53,814)
============ ============ ============ ============
Cash flows from operating activities:
Operating cash flows (1,506) 198,855 -- 197,349
------------ ------------ ------------ ------------
Cash flows from investing activities:
Additions to property and equipment 10,746 (402,401) -- (391,655)
Investment in theme parks
partnerships (23,006) (28,925) -- (51,931)
Acquisitions of theme park assets -- (34,578) -- (34,578)
Acquisitions of theme park companies -- (242,954) -- (242,954)
Investment in subsidiaries (607,632) -- 607,632 --
Purchase of restricted-use investments -- -- -- --
Maturities of restricted-use investments 22,690 192,250 -- 214,940
------------ ------------ ------------ ------------
(597,202) (516,608) 607,632 (506,178)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Repayment of long-term debt -- (1,291,910) -- (1,291,910)
Proceeds from borrowings 429,024 962,000 -- 1,391,024
Capital contributions -- 607,632 (607,632) --
Advances to subsidiaries (100,291) 100,291 -- --
Net cash proceeds from issuance of
stock 2,801 -- -- 2,801
Payment of cash dividends (23,288) -- -- (23,288)
Payment of debt issuance costs (9,829) (19,310) -- (29,139)
------------ ------------ ------------ ------------
298,417 358,703 (607,632) 49,488
Effect of exchange rate changes on cash -- (3,106) -- (3,106)
------------ ------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents $ (300,291) 37,844 -- (262,447)
============ ============ ============ ============
F-27
SIX FLAGS, INC.
Notes to Consolidated Statements of Operations
Years ended December 31, 2000, 1999 and 1998
Six Flags
Holdings Operations Eliminations Total
------------ ------------ ------------ ------------
December 31, 1998 (in thousands)
Revenue 904 791,799 -- 792,703
------------ ------------ ------------ ------------
Operating costs and expenses:
Operating expenses -- 297,266 -- 297,266
Selling, general and administrative 15,038 118,309 -- 133,347
Costs of products sold 564 81,563 -- 82,127
Depreciation and amortization 165 109,676 -- 109,841
------------ ------------ ------------ ------------
Total operating costs and expenses 15,767 606,814 -- 622,581
------------ ------------ ------------ ------------
Income from operations (14,863) 184,985 -- 170,122
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (40,851) (108,969) -- (149,820)
Interest income 20,412 13,559 -- 33,971
Equity in operations of theme park partnerships 21,002 3,052 -- 24,054
Other income (expense), including MI -- (1,983) -- (1,983)
------------ ------------ ------------ ------------
Total other income (expense) 563 (94,341) -- (93,778)
------------ ------------ ------------ ------------
Income (loss) before income taxes (14,300) 90,644 -- 76,344
Income tax expense (benefit) (5,918) 46,634 -- 40,716
------------ ------------ ------------ ------------
Income (loss) before extraordinary loss (8,382) 44,010 -- 35,628
Extraordinary loss on extinguishment of debt,
net of income tax benefit -- (788) -- (788)
------------ ------------ ------------ ------------
Net income (loss) $ (8,382) 43,222 -- 34,840
============ ============ ============ ============
Net income (loss) applicable to
common stock $ (25,848) 43,222 -- 17,374
============ ============ ============ ============
Operating cash flows (17,859) 136,869 -- 119,010
------------ ------------ ------------ ------------
Cash flows from investing activities:
Additions to property and equipment (23,970) (181,784) -- (205,754)
Investment in theme park partnerships (218,084) (50,737) 208,082 (60,739)
Transfer of interests in theme park partnerships -- 208,082 (208,082) --
Acquisition of theme park assets -- (50,593) -- (50,593)
Acquisition of theme park companies (981,395) (56,017) -- (1,037,412)
Investment in subsidiaries (56,766) -- 56,766 --
Purchase of restricted use investments (145,675) (176,075) -- (321,750)
Maturities of restricted use investments 11,365 -- -- 11,365
------------ ------------ ------------ ------------
(1,414,525) (307,124) 56,766 (1,664,883)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Repayment of long-term debt -- (703,639) -- (703,639)
Proceeds from borrowings 531,703 830,000 -- 1,361,703
Capital contributions -- 56,766 (56,766) --
Advances to subsidiaries -- -- -- --
Net cash proceeds from issuance of stock 1,256,319 -- -- 1,256,319
Payment of cash dividends (11,644) -- -- (11,644)
Payment of debt issuance costs (23,583) (18,058) -- (41,641)
------------ ------------ ------------ ------------
1,752,795 165,069 (56,766) 1,861,098
Effect of exchange rate changes on cash -- 1,065 -- 1,065
------------ ------------ ------------ ------------
Increase in cash and cash equivalents $ 320,411 (4,121) -- 316,290
============ ============ ============ ============
F-28
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
The debt indentures and credit facility agreement 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, 2000 by each debt group, excluding
restrictions eliminated by the indenture amendments related to the 1997
Notes, based upon the most restrictive applicable limitation.
Amount
available
-------------
(In thousands)
Holdings $201,634
Six Flags Operations 844,811
(7) Fair Value of Financial Instruments
The following table and accompanying information presents the carrying
amounts and estimated fair values of the Company's financial instruments
at December 31, 2000 and 1999. The fair value of a financial instrument is
the amount at which the instrument could be exchanged in a current
transaction between willing parties.
2000 1999
----------------------------------- -----------------------------------
Carrying amount Fair value Carrying amount Fair value
-------------- -------------- -------------- --------------
Financial assets (liabilities):
Restricted-use investment
securities $ 88,149,000 88,138,000 108,894,000 108,782,000
Long-term debt (2,322,313,000) (2,271,779,000) (2,204,988,000) (2,183,636,000)
Foreign currency forward
purchase agreements -- -- -- 59,000
Interest rate swap agreements -- (4,996,000) -- --
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 and the interest rate swap 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:
o The fair value of cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities approximate fair value
because of the short maturity of these instruments.
o 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.
F-29
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
o 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.
o Derivative financial instruments: The fair value of the Company's
derivative financial instruments is determined by the counterparty
financial institution.
(8) Income Taxes
Income tax expense (benefit) allocated to operations for 2000, 1999 and
1998 consists of the following:
Current Deferred Total
------------ ------------ ------------
2000:
U.S. federal $ (10,000) (2,211,000) (2,221,000)
Foreign 3,792,000 4,388,000 8,180,000
State and local (377,000) 40,000 (337,000)
------------ ------------ ------------
$ 3,405,000 2,217,000 5,622,000
============ ============ ============
1999:
U.S. federal $ (683,000) 18,338,000 17,655,000
Foreign 1,058,000 3,072,000 4,130,000
State and local (591,000) 3,266,000 2,675,000
------------ ------------ ------------
$ (216,000) 24,676,000 24,460,000
============ ============ ============
1998:
U.S. federal $ (564,000) 32,318,000 31,754,000
Foreign 1,049,000 5,146,000 6,195,000
State and local 1,007,000 1,760,000 2,767,000
------------ ------------ ------------
$ 1,492,000 39,224,000 40,716,000
============ ============ ============
F-30
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Recorded income tax expense allocated to operations differed from amounts
computed by applying the U.S. federal income tax rate of 35% in 2000, 1999
and 1998 to income (loss) before income taxes as follows:
2000 1999 1998
------------ ------------ ------------
Computed "expected" federal income tax
expense (benefit) $(16,218,000) 1,830,000 26,720,000
Amortization of goodwill 13,643,000 11,973,000 9,970,000
Nondeductible compensation 3,779,000 6,786,000 656,000
Other, net 499,000 864,000 (129,000)
Effect of foreign income taxes 4,145,000 1,215,000 1,645,000
Effect of state and local income taxes,
net of federal tax benefit (226,000) 1,792,000 1,854,000
------------ ------------ ------------
$ 5,622,000 24,460,000 40,716,000
============ ============ ============
There were no extraordinary losses in 2000. An income tax benefit of
$7,530,000 was allocated to extraordinary loss for 1999. The U.S. federal
benefit component was $6,539,000 and the state and local benefit component
was $991,000. There were no foreign extraordinary losses in 1999. An
income tax benefit of $526,000 was allocated to extraordinary loss for
1998. The U.S. federal benefit component was $457,000 and the state and
local benefit component was $69,000. There were no foreign extraordinary
losses in 1998.
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting
and tax depreciation methods and periods for property and equipment. The
Company's net operating loss carryforwards, alternative minimum tax
credits, accrued insurance expenses, and deferred compensation amounts
represent future income tax deductions (deferred tax assets). The tax
effects of these temporary differences as of December 31, 2000 and 1999,
are presented below:
2000 1999 1998
------------ ------------ ------------
Deferred tax assets before valuation allowance
$286,098,000 213,244,000 172,227,000
Less valuation allowance 1,196,000 1,196,000 1,196,000
------------ ------------ ------------
Net deferred tax assets 284,902,000 212,048,000 171,031,000
Deferred tax liabilities 429,821,000 354,008,000 323,009,000
------------ ------------ ------------
Net deferred tax liability $144,919,000 141,960,000 151,978,000
============ ============ ============
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
F-31
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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, 2000, the Company has approximately $751,468,000 of net
operating loss carryforwards available for federal income tax purposes
which expire through 2020. Included are net operating loss carryforwards
of $3,400,000 which are not expected to be utilized as a result of an
ownership change that occurred on October 30, 1992. A valuation allowance
for the pre-October 1992 net operating loss carryforwards has been
established. Additionally at December 31, 2000, the Company had
approximately $7,537,000 of alternative minimum tax credits which have no
expiration date.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. The
Company experienced an ownership change on June 4, 1996, as a result of
the issuance of shares of common stock and the conversion of preferred
stock into additional shares of common stock. This ownership change limits
the amount of the Company's post-October 1992 through June 1996 net
operating loss carryforwards that can be used in any year.
Included in the Company's tax net operating loss carryforward amounts are
approximately $249,353,000 of net operating loss carryforwards of SFEC
generated prior to its acquisition by the Company. SFEC experienced an
ownership change on April 1, 1998 as a result of the Six Flags
Acquisition. Due to this ownership change, no more than $49,200,000 of
pre-acquisition net operating loss carryforwards may be used to offset
taxable income in any year; however, it is more likely than not that all
of the Company's carryforwards generated subsequent to October 1992 and
all of the SFEC's pre-acquisition carryfowards will be fully utilized by
the Company before their expiration.
During 1999, the Company reduced goodwill by approximately $1,700,000 for
the tax benefit from certain reimbursed costs arising from contingencies
related to the Six Flags Acquisition.
(9) Preferred Stock, Common Stock and Other Stockholders' Equity
(a) Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock,
$1.00 par value per share. 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.
PIES
In connection with the Company's acquisition of SFEC on April 1,
1998, the Company issued 5,750,000 PIES for gross proceeds of
$310,500,000, each representing one five-hundredth of a share of 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
$23,288,000 per annum) and are mandatorily convertible into shares
of common stock
F-32
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
on April 1, 2001. Holders can voluntarily convert the PIES into
shares of common stock at any time prior to April 1, 2001.
Prior to April 1, 2001, each of the PIES is convertible at the
option of the holder into 1.6616 common shares. On April 1, 2001,
the PIES will mandatorily convert into common shares based upon the
average of the closing quoted market price of the common stock for
the last twenty days prior to the conversion. If the average market
price of the common stock is equal to or less than $27 per common
share, each PIES share will convert into two shares of common stock.
If the average market price of the common stock is equal to or more
than $32.50 per common share, each PIES share will convert into
1.6616 common shares. If the average market price of the common
stock is between $27 and $32.50 per common share, each PIES share
will convert into a declining number of common shares based upon the
proportional excess of the average market price over $27 per common
share until the 1.6616 conversion rate is achieved at the average
market price of $32.50. Any conversion is also adjusted for
dividends that have accumulated, but have not yet been paid in cash
or common stock.
PIERS
In January 2001, the Company issued 11,500,000 Preferred Income
Equity Redeemable Shares (PIERS), for proceeds of $278,530,000, net
of the underwriting discount of $8,970,000. See Note 1(a) for
description of the use of the proceeds. Each PIERS represents one
one-hundredth of a share of the Company's 7 1/4% manditorily
redeemable preferred stock (an aggregate of 115,000 shares of
preferred stock). The PIERS accrue cumulative dividends (payable, at
the Company's option, in cash or shares of common stock) at 7 1/4%
per annum (approximately $20,844,000 per annum). Holders can
voluntarily convert the PIERS into shares of common stock at any
time prior to August 15, 2009.
Prior to August 15, 2009, each of the PIERS is convertible at the
option of the holder into 1.1990 common shares (equivalent to a
conversion price of $20.85 per common share), subject to adjustment
in certain circumstances (the Conversion Price). At any time on or
after February 15, 2004 and at the then applicable conversion rate,
the Company may cause the PIERS, in whole or in part, to be
automatically converted if for 20 trading days within any period of
30 consecutive trading days, including the last day of such period,
the closing price of the Company's common stock exceeds 120% of the
then prevailing Conversion Price. On August 15, 2009, the PIERS are
manditorily redeemable in cash equal to 100% of the liquidation
preference (initially $25.00 per PIERS), plus any accrued and unpaid
dividends.
The PIERS rank on a parity with the PIES. The PIERS are not
reflected in the Company's December 31, 2000 consolidated balance
sheet as the PIERS were issued on January 23, 2001.
(b) Common Stock
On June 9, 1998, the Company's common shareholders approved a
two-for-one stock split effective July 24, 1998. The par value of
the common stock was decreased to $.025 per share from $.05 per
share. Additionally, the authorized common shares of the Company
were increased to 150,000,000. The accompanying consolidated
financial statements and notes to the consolidated financial
statements reflect the stock split as if it had occurred as of
January 1, 1998.
F-33
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(c) Stock Options and Warrants
Certain members of the Company's management and professional staff
have been issued seven-year options to purchase common shares under
the Company's 1998, 1996, 1995 and 1993 Stock Option and Incentive
Plans (collectively, the Option Plans). Under the Option Plans,
stock options are granted with an exercise price equal to the
underlying stock's fair value at the date of grant. Except for
conditional options issued in 1998, options may be exercised on a
cumulative basis with 20% of the total exercisable on the date of
issuance and with an additional 20% being available for exercise on
each of the succeeding anniversary dates. Any unexercised portion of
the options will automatically terminate upon the seventh
anniversary of the issuance date or following termination of
employment. There were 1,531,000 conditional stock options granted
in 1998. These options have the same vesting schedule as the
unconditional stock options, except that no conditional option could
be exercised until after the conditions of the stock option were
met. The conditions related to the exercise of these stock options
were met during December 1999.
In 1999 and 1998, the Company also issued to certain consultants
options to purchase 40,000 and 70,000 common shares, respectively.
The options have substantially the same terms and conditions as the
options granted under the Option Plans. The Company has recognized
the fair value of the options issued to the consultants as an
expense in the accompanying 1999 and 1998 consolidated statements of
operations.
At December 31, 2000, there were 2,102,199 additional shares
available for grant under the Option Plans. The per share
weighted-average fair value of stock options granted during 2000,
1999 and 1998 was $13.65, $17.43 and $12.74, respectively, on the
date of grant using the Black--Scholes option-pricing model with the
following weighted-average assumptions: 2000 - expected dividend
yield 0%, risk-free interest rate of 6.28%, expected volatility of
80%, and an expected life of 5 years. 1999 - expected dividend yield
0%, risk-free interest rate of 5.5%, expected volatility of 84%, and
an expected life of 5 years; 1998 - expected dividend yield 0%,
risk-free interest rate of 4.5%, expected volatility of 92% and an
expected life of 5 years.
No compensation cost has been recognized for the unconditional stock
options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the grant
date for all its unconditional stock options, the Company's net
income (loss) would have been as indicated below:
2000 1999 1998
-------------- -------------- --------------
Net income (loss) applicable to common stock:
As reported $ (75,247,000) (53,814,000) 17,374,000
Pro forma (97,049,000) (74,617,000) 11,212,000
Net income (loss) per weighted average common share outstanding
- basic:
As reported (0.96) (0.69) 0.26
Pro forma (1.23) (0.96) 0.17
F-34
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Stock option activity during the years indicated is as follows:
Weighted-
Average
Number of Exercise
Shares Price
---------- ----------
Balance at December 31, 1997 1,559,401 $ 6.92
Granted 3,507,000 17.50
Exercised (216,485) 3.52
Forfeited -- --
Expired -- --
----------
Balance at December 31, 1998 4,849,916 14.72
Granted 3,440,000 25.00
Exercised (354,565) 7.30
Forfeited (93,600) 17.50
Expired -- --
----------
Balance at December 31, 1999 7,841,751 19.55
Granted 151,000 20.00
Exercised (377,501) 9.70
Forfeited (183,400) 21.52
Expired -- --
----------
Balance at December 31, 2000 7,431,850 $ 20.11
========== ==========
At December 31, 2000, the range of exercise prices and
weighted-average remaining contractual life of outstanding options
was $2.50 to $25.00 and 5.04 years, respectively.
At December 31, 2000, 1999 and 1998, options exercisable were
4,101,500, 3,245,800 and 1,366,700, respectively, and
weighted-average exercise price of those options was $18.25, $15.23
and $9.83, respectively.
In 1989, the Company's current chairman was issued a ten-year
warrant to purchase 52,692 common shares at an exercise price of
$.50 per share and a ten-year warrant to purchase 37,386 common
shares at an exercise price of $.50 per share. The warrants were
exercised during 1999 prior to their expiration.
(d) Share Rights Plan
On December 10, 1997, the Company's board of directors authorized a
share rights plan. The plan was subsequently amended on February 4,
1998. Under the plan, stockholders have one right for each share of
common stock held. The rights become exercisable ten business days
after (a) an announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of 15% or more
of the Company's voting shares outstanding, or (b) the commencement
or announcement of a person's or group's intention to commence a
tender or exchange offer that could result in a person or group
owning 15% or more of the voting shares outstanding.
F-35
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Each right entitles its holder (except a holder who is the acquiring
person) to purchase 1/1000 of a share of a junior participating
series of preferred stock designated to have economic and voting
terms similar to those of one share of common stock for $250.00,
subject to adjustment. In the event of certain merger or asset sale
transactions with another party or transactions which would increase
the equity ownership of a stockholder who then owned 15% or more of
the voting shares of the Company, each right will entitle its holder
to purchase securities of the merging or acquiring party with a
value equal to twice the exercise price of the right.
The rights, which have no voting power, expire in 2008. The rights
may be redeemed by the Company for $.01 per right until the rights
become exercisable.
(e) Restricted Stock Grants
The Company issued 900,000 restricted common shares with an
estimated aggregate value of $14,625,000 to members of the Company's
senior management in July 1997. The restrictions on the stock lapse
ratably over a six-year term commencing January 1, 1998, generally
based upon the continued employment of the recipient. The Company
issued an additional 920,000 restricted common shares with an
estimated aggregate value of $16,100,000 to members of the Company's
senior management in October 1998. The restrictions on the stock
lapse ratably over a three-year term commencing January 1, 1999. The
restrictions also lapse upon termination of the executive without
cause or if a change in control of the Company occurs. Compensation
expense equal to the aggregate value of the shares is being
recognized as an expense over the vesting period.
(10) Pension Benefits
As part of the Six Flags Acquisition, the Company assumed the
obligations related to the SFTP Defined Benefit Plan (the Benefit
Plan). The Benefit Plan covered substantially all of SFTP's
full-time employees. During 1999 the Benefit Plan was extended to
cover substantially all of the Company's domestic full-time
employees. The Benefit Plan permits normal retirement at age 65,
with early retirement at ages 55 through 64 upon attainment of ten
years of credited service. The early retirement benefit is reduced
for benefits commencing before age 62. Benefit Plan benefits are
calculated according to a benefit formula based on age, average
compensation over the highest consecutive five-year period during
the employee's last ten years of employment and years of service.
Benefit Plan assets are invested primarily in common stock and
mutual funds. The Benefit Plan does not have significant liabilities
other than benefit obligations. Under the Company's funding policy,
contributions to the Benefit Plan are determined using the projected
unit credit cost method. This funding policy meets the requirements
under the Employee Retirement Income Security Act of 1974.
F-36
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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:
2000 1999
------------ ------------
Change in benefit obligation:
Benefit obligation, January 1 $ 72,189,000 74,658,000
Service cost 3,309,000 3,644,000
Interest cost 5,952,000 5,459,000
Plan amendments -- 2,723,000
Actuarial (gain) loss 4,872,000 (12,587,000)
Benefits paid (2,009,000) (1,708,000)
------------ ------------
Benefit obligation at December 31 84,313,000 72,189,000
------------ ------------
Change in plan assets:
Fair value of assets, January 1 89,958,000 87,270,000
Actual return on plan assets 312,000 4,396,000
Benefits paid (2,009,000) (1,708,000)
------------ ------------
Fair value of assets at December 31 88,261,000 89,958,000
------------ ------------
Plan assets in excess of benefit obligations 3,948,000 17,769,000
Unrecognized net actuarial (gain) loss 6,668,000 (5,891,000)
Unrecognized prior service cost 2,203,000 2,463,000
------------ ------------
Prepaid benefit cost (included in deposits and other assets) $ 12,819,000 14,341,000
============ ============
Net pension expense of the Benefit Plan for each of the years ended
December 31, 2000 and 1999 and the nine-month period ended December 31,
1998, included the following components:
2000 1999 1998
----------- ----------- -----------
Service cost $ 3,309,000 3,644,000 2,444,000
Interest cost 5,952,000 5,459,000 3,808,000
Expected return on plan assets (7,999,000) (7,774,000) (5,657,000)
Amortization of prior service cost 260,000 260,000 --
----------- ----------- -----------
Net periodic benefit cost $ 1,522,000 1,589,000 595,000
=========== =========== ===========
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation in 2000, 1999 and 1998
was 7.50%, 7.75% and 6.75%, respectively. The rate of increase in future
compensation levels was 4.50%, 4.75% and 4.5% in 2000, 1999 and 1998,
respectively. The expected long-term rate of return on assets was 9% in
each year.
(11) 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
F-37
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
contributions made by employees. The accounts of all participating
employees are fully vested upon completion of four years of service. The
Company recognized approximately $1,730,000, $1,874,000 and $417,000 of
related expense in the years ended December 31, 2000, 1999 and 1998,
respectively.
As part of the acquisition of Six Flags by the Company, the Company
assumed the administration of SFEC's savings plan. Under the provisions of
the SFEC's savings plan, all full-time and seasonal employees of SFEC
completing one year of service (minimum 1,000 hours) and attaining age 21
were eligible to participate and could contribute up to 6% of compensation
as a tax deferred basic contribution. Each participant could also elect to
make additional contributions of up to 10% of compensation (up to 4% tax
deferred). Tax deferred contributions to the savings plan could not exceed
amounts defined by the Internal Revenue Service ($10,000 for 1998). Both
the basic and additional contributions were at all times vested. SFEC, at
its discretion, could make matching contributions of up to 100% of its
employees' basic contributions. SFEC made $743,000 in contributions for
the 1998 plan year. During the first quarter of 1999, the SFEC's savings
plan was merged into the Company's 401(k) Plan.
(12) Commitments and Contingencies
The Company leases the sites of Wyandot Lake, Enchanted Village, Six Flags
Mexico, and each of the two Waterworld/USA locations. The Company also
leases portions of the sites of Six Flags Kentucky Kingdom, Six Flags New
England, Six Flags Holland, and Warner Bros. Movie World Germany. In
certain cases rent is based upon percentage of the revenues earned by the
applicable park. During 2000, 1999 and 1998, the Company recognized
approximately $3,883,000, $2,045,000 and $1,002,000, respectively, of
rental expense under these rent agreements.
Total rental expense, including office space and park sites, was
approximately $9,274,000, $7,352,000 and $7,918,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Future obligations under operating leases, including site leases, at
December 31, 2000, are summarized as follows (in thousands):
Year ending December 31,
------------------------
2001 $ 4,123
2002 3,769
2003 3,454
2004 3,241
2005 and thereafter 66,856
-------
$81,443
=======
In connection with the acquisition of SFEC by the Company in 1998, the
Company entered into a license agreement (the License Agreement) pursuant
to which it obtained the exclusive right for a term of 55 years to theme
park use in the United States and Canada (excluding the Las Vegas, Nevada
metropolitan area) of all animated, cartoon and comic book characters that
Warner Bros. and DC Comics have the right to license for such use during
the term of the License Agreement.
F-38
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
Under the License Agreement, the Company pays an annual license fee of
$2,500,000 through 2005. Thereafter, the license fee will be subject to
periodic scheduled increases and will be payable on a per-theme park
basis.
On March 21, 1999, a raft capsized in the river rapids ride at Six Flags
Over Texas, one of the Company's Partnership Parks, resulting in one
fatality and injuries to ten others. As a result of the fatality, a case
entitled Jerry L. Cartwright, et al vs. Premier Parks, Inc. d/b/a Six
Flags Over Texas, Inc. was commenced seeking unspecified damages. The
Partnership Park is covered by the Company's multi-layered general
liability insurance coverage of up to $100,000,000 per occurrence, with no
self-insured retention. The Company does not believe that the impact of
this incident or the resulting lawsuit will have a material adverse effect
on the Company's consolidated financial position, operations, or
liquidity.
In December 1998, a final judgment of $197,300,000 in compensatory damages
was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and Time
Warner Entertainment Company, L.P. (TWE), and a final judgment of
$245,000,000 in punitive damages was entered against TWE and $12,000,000
in punitive damages was entered against the Six Flags entities. The
compensatory damages judgment has been paid and the Company has been
advised that TWE is considering an appeal to the United States Supreme
Court of the punitive damages judgment. The judgments arose out of a case
entitled Six Flags Over Georgia, LLC et al v. Time Warner Entertainment
Company, LP et al based on certain disputed partnership affairs prior to
the Six Flags Acquisition at Six Flags Over Georgia, including alleged
breaches of fiduciary duty. The sellers in the Six Flags Acquisition,
including Time Warner, Inc., have agreed to indemnify the Company from any
and all liabilities arising out of this litigation.
The Company is party to various legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the
Company and which can be reasonably estimated are accrued. Such accruals
are based on information known about the matters, the Company's estimates
of the outcomes of such matters and its experience in contesting,
litigating and settling similar matters. None of the actions are believed
by management to involve amounts that would be material to the Company's
consolidated financial position, operations, or liquidity after
consideration of recorded accruals.
(13) Business Segments
The Company manages its operations on an individual park location basis.
Discrete financial information is maintained for each park and provided to
the Company's management for review and as a basis for decision-making.
The primary performance measure used to allocate resources is earnings
before interest, tax expense, depreciation, and amortization (EBITDA). All
of the Company's parks provide similar products and services through a
similar process to the same class of customer through a consistent method.
As such, the Company has only one reportable segment - operation of theme
parks. The following tables present segment financial information, a
reconciliation of the primary segment performance measure to income (loss)
before income taxes and a reconciliation of theme park revenues to
consolidated total revenues. Park level expenses exclude all non-cash
operating expenses, principally depreciation and amortization and all non-
operating expenses.
F-39
SIX FLAGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
2000 1999 1998
----------- ----------- -----------
(In thousands)
Theme park revenues $ 1,215,177 1,152,258 994,296
Theme park cash expenses (746,841) (712,111) (612,827)
----------- ----------- -----------
Aggregate park EBITDA 468,336 440,147 381,469
Third-party share of EBITDA from parks accounted for
under the equity method (41,827) (40,761) (41,064)
Amortization of investment in theme park partnerships (20,370) (15,826) (9,763)
Unallocated net expenses, including corporate and
expenses from parks acquired after completion of
the operating season (47,720) (54,625) (28,608)
Depreciation and amortization (179,989) (154,264) (109,841)
Interest expense (232,336) (193,965) (149,820)
Interest income 7,569 24,524 33,971
----------- ----------- -----------
Income (loss) before income taxes $ (46,337) 5,230 76,344
=========== =========== ===========
Theme park revenues $ 1,215,177 1,152,258 994,296
Theme park revenues from parks accounted for under the
equity method (208,196) (225,274) (201,933)
Other revenues -- -- 340
----------- ----------- -----------
Consolidated total revenues $ 1,006,981 926,984 792,703
=========== =========== ===========
Seven of the Company's parks are located in Europe and one is located in
Mexico. The Mexico park was acquired in May 1999 and one of the European
parks was acquired in November 1999. The following information reflects
the Company's long-lived assets and revenues by domestic and foreign
categories for 2000, 1999 and 1998:
Domestic Foreign Total
---------- ---------- ----------
(In thousands)
2000:
Long-lived assets $3,346,733 504,414 3,851,147
Revenues 839,251 167,730 1,006,981
1999:
Long-lived assets $3,267,019 441,925 3,708,944
Revenues 830,578 96,406 926,984
1998:
Long-lived assets $2,944,036 188,826 3,132,862
Revenues 725,946 66,757 792,703
F-40
(14) Quarterly Financial Information (Unaudited)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 2000 and 1999:
2000
---------------------------------------------------------------------------------
First Second Third Fourth Full
quarter quarter quarter quarter year
---------------- ----------- ----------- ----------- -------------
Total revenue $ 30,893,000 341,079,000 547,439,000 87,570,000 1,006,981,000
Net income (loss) applicable to
common stock (119,714,000) 9,932,000 128,828,000 (94,293,000) (75,247,000)
Net income (loss) per weighted
average common share outstanding:
Basic (1.53) 0.13 1.64 (1.19) (0.96)
Diluted (1.53) 0.12 1.49 (1.19) (0.96)
1999
---------------------------------------------------------------------------------
First Second Third Fourth Full
quarter quarter quarter quarter year
---------------- ----------- ----------- ----------- -------------
Total revenue $ 38,580,000 314,142,000 495,404,000 78,858,000 926,984,000
Net income (loss) applicable to
common stock (99,222,000) 12,273,000 125,809,000 (92,674,000) (53,814,000)
Net income (loss) per weighted
average common share outstanding:
Basic (1.29) 0.16 1.61 (1.18) (0.69)
Diluted (1.29) 0.15 1.46 (1.18) (0.69)
F-41
EXHIBIT INDEX Page
------------- ----
(3) Articles of Incorporation and By-Laws:
(a) Certificate of Designation of Series A Junior Preferred Stock of
Registrant -- incorporated by reference from Exhibit 2(1.C) to
Registrant's Form 8-A dated January 21, 1998.
(b) Restated Certificate of Incorporation of Registrant dated March 25,
1998 -- incorporated by reference from Exhibit 3 to Registrant's
Current Report on Form 8-K filed on March 26, 1998.
(c) 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.
(d) Certificate of Amendment of Certificate of Incorporation of
Registrant dated July 24, 1998 -- incorporated by reference from
Exhibit 3(p) to Registrant's Form 10-K for the year ended December
31, 1998.
(e) Certificate of Amendment of Certificate of Incorporation of
Registrant dated June 30, 2000 -- incorporated by reference from
Exhibit 3.1 to Registrant's Form 10-Q for the quarter ended June 30,
2000.
(f) Certificate of Designation, Rights and Preferences for 7 1/4%
Convertible Preferred Stock of Registrant -- incorporated by
reference from Exhibit 5 to Registrant's Current Report on Form 8-K
filed on January 23, 2001.
(g) Amended and Restated By-laws of Registrant -- incorporated by
reference from Exhibit 3.2 to Registrant's Form 10-Q for the quarter
ended June 30, 2000.
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) 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.
(b) 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.
(c) 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. (d) Form of
Depository Receipt evidencing ownership of Registrant's Premium
Income Equity Securities-- incorporated by reference from Exhibit
4(k) to Registrant's Registration Statement on Form S-3 (Reg. No.
333-45859) declared effective on March 26, 1998.
(e) Indenture dated as of April 1, 1998 between Registrant and The Bank
of New York, as Trustee, with respect to Registrant's 10% Senior
Discount Notes due 2008 -- incorporated by reference from Exhibit
4(o) to Registrant's Registration Statement on Form S-3 (Reg. No.
333-45859) declared effective on March 26, 1998.
(f) Indenture dated as of April 1, 1998 between Registrant and The Bank
of New York, as Trustee, with respect to Registrant's 9 1/4% Senior
Discount Notes due 2006 -- incorporated by reference from Exhibit
4(p) to Registrant's Registration Statement on Form S-3 (Reg. No.
333-45859) declared effective on March 26, 1998.
(g) Indenture dated as of April 1, 1998 between Registrant and The Bank
of New York, as Trustee, with respect to Registrant's 8 7/8% Senior
Discount Notes due 2006 -- incorporated by reference from Exhibit
4(q) to Registrant's Registration Statement on Form S-3 (Reg. No.
333-45859) declared effective on March 26, 1998.
(h) Deposit Agreement dated as of April 1, 1998 among Registrant, The
Bank of New York and the holder from time to time of depositary
receipts executed and delivered thereunder -- incorporated by
reference from Exhibit 4(u) to Registrant's Registration Statement
on Form S-3 (Reg. No. 333-45859) declared effective on March 26,
1998.
(i) Indenture and First Supplemental Indenture dated as of June 30, 1999
between Registrant and The Bank of New York with respect to
Registrant's 9 3/4% Senior Notes due 2007 -- incorporated by
reference from Exhibits 4.1 and 4.2 to Registrant's Current Report
on Form 8-K dated July 2, 1999.
99.1 *(j) Indenture dated as of February 2, 2001 between Registrant and The
Bank of New York with respect to Registrant's 9 1/2% Senior Notes
due 2009.
(k) Form of Deposit Agreement dated as of January 23, 2001 among
Registrant, The Bank of New York, as Depositary, and owners and
holders of depositary receipts -- incorporated by reference from
Exhibit 12 to Registrant's Form 8-A12B filed on January 23, 2001.
(l) Form of Depository Receipt evidencing ownership of Registrant's
Preferred Income Equity Redeemable Securities -- incorporated by
reference from Exhibit 13 to Registrant's Form 8-A12B filed on
January 23, 2001.
(m) Form of 7 1/4% Convertible Preferred Stock Certificate --
incorporated by reference from Exhibit 14 to Registrant's Form
8-A12B filed on January 23, 2001.
(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) 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
Registrant's Form 10-K for the year ended December 31, 1995.
(d) 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.
(e) Non-Competition Agreement, dated as of October 30, 1996 between
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.
(f) Consulting Agreement, dated December 4, 1996, between Registrant and
Charles R. Wood -- incorporated by reference from Exhibit 10(b) to
Registrant's Current Report on Form 8-K, dated December 13, 1996.
(g) Non-Competition Agreement dated as of December 4, 1996 between
Registrant and Charles R. Wood -- incorporated by reference from
Exhibit 10(c) of Registrant's Current Report on Form 8-K, dated
December 13, 1996.
(h) Registrant's 1996 Stock Option and Incentive Plan -- incorporated by
reference from Exhibit 10(z) to Registrant's Form 10-K for the year
ended December 31, 1997.
(i) 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 Registrant's Form 10-K for the year
ended December 31, 1997.
(j) 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 Registrant's Form
10-K for the year ended December 31, 1997.
(k) 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 Registrant's Form 10-K for the year ended December 31,
1997.
(l) 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 Registrant's Form
10-K for the year ended December 31, 1997.
(m) 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 Registrant's Form 10-K for the year
ended December 31, 1997.
(n) Employment Agreement, dated as of July 31, 1997, between Premier
Parks Inc. and Kieran E. Burke -- incorporated by reference from
Exhibit 10(af) to Registrant's Form 10-K for the year ended December
31, 1997.
(o) Employment Agreement, dated as of July 31, 1997, between Premier
Parks Inc. and Gary Story -- incorporated by reference from Exhibit
10(ag) to Registrant's Form 10-K for the year ended December 31,
1997.
(p) Employment Agreement, dated as of July 31, 1997, between Premier
Parks Inc. and James F. Dannhauser -- incorporated by reference from
Exhibit 10(ah) to Registrant's Form 10-K for the year ended December
31, 1997.
(q) 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 Registrant's Current
Report on Form 8-K dated December 15, 1997.
(r) 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 Registrant's Current
Report on Form 8-K dated December 15, 1997.
(s) 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 Registrant's
Current Report on Form 8-K dated February 9, 1998.
(t) 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 Registrant's Current Report on Form 8-K dated March
25, 1998.
(u) 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 Registrant's Current Report on Form 8-K dated
December 15, 1997, as amended.
(v) Registrant's 1998 Stock Option and Incentive Plan -- incorporated by
reference from Exhibit 10(ap) to Registrant's Form 10-K for the year
ended December 31, 1998.
(w) Subordinated Indemnity Agreement dated February 9, 1998 among
Registrant, the subsidiaries of 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.
(x) Sale and Purchase Agreement dated as of October , 1998 by and
between Registrant and Fiesta Texas Theme Park, Ltd. -- incorporated
by reference from Exhibit 10(at) to Registrant's Form 10-K for the
year ended December 31, 1998.
(y) Overall Agreement dated as of February 15, 1997 among Six Flags
Fund, Ltd. (L.P.), Salkin II Inc., SFOG II Employee, Inc., SFOG
Acquisition A, Inc., SFOG Acquisition B, Inc., Six Flags Over
Georgia, Inc., Six Flags Series of Georgia, Inc., Six Flags Theme
Parks Inc. and Six Flags Entertainment Corporation-- incorporated by
reference from Exhibit 10(au) to Registrant's Form 10-K for the year
ended December 31, 1998.
(z) Overall Agreement dated as of November 24, 1997 among Six Flags Over
Texas Fund, Ltd., Flags' Directors LLC, FD-II, LLC, Texas Flags
Ltd., SFOT Employee, Inc., SFOT Parks Inc. and Six Flags
Entertainment Corporation -- incorporated by reference from Exhibit
10(av) to Registrant's Form 10-K for the year ended December 31,
1998.
(aa) Credit Agreement dated as of November 5, 1999 among Registrant,
certain subsidiaries named therein, the Lenders from time to time
party thereto, The Bank of New York, as Syndicate Agent, Bank of
America, N.A. and The Bank of Nova Scotia, as Documentation Agents,
Lehman Brothers Inc. and Lehman Brothers International (Europe)
Inc., as Advisors, Lead Arrangers and Bank Managers, and Lehman
Commerical Paper Inc., as Administrative Agent-- incorporated by
reference from Exhibit 10.1 to Registrant's Form 10-Q for the
quarter ended September 30, 1999.
99.2 *(bb) Stock Purchase Agreement dated as of December 6, 2000 among
Registrant, EPI Realty Holdings, Inc., Enchanted Parks, Inc., and
Jeffrey Stock.
99.3 *(cc) Asset Purchase Agreement dated as of January 8, 2001 between
Registrant and Sea World, Inc.
99.4 *(dd) Amendment to Employment Agreement dated as of January 1, 2000
between Registrant and Kieran E. Burke.
99.5 *(ee) Amendment to Employment Agreement dated as of January 1, 2000
between Registrant and Gary Story.
99.6 *(ff) Amendment to Employment Agreement dated as of January 1, 2000
between Registrant and James F. Dannhauser.
*(21) Subsidiaries of the Registrant.
*(23.1) Consent of KPMG LLP.
- ----------
*Filed herewith.