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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 0-9789
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PREMIER PARKS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-6137714
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(405) 475-2500
SECURITIES REGISTERED PURSUANT TO SEC. 12(B) OF THE ACT:
SHARES OF COMMON STOCK, PAR VALUE $.05 PER SHARE
RIGHTS TO PURCHASE SERIES A JUNIOR PREFERRED STOCK
(Title of class)
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 $746,170,000 as of March 16, 1998 (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 16, 1998 was 18,873,111 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 1998, which will be filed by the Registrant within 120 days after the close
of its 1997 fiscal year.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Company(1) is a leading U.S. theme park company which, at December 31,
1997, operated thirteen regional parks. Based on 1997 attendance of
approximately eleven million visitors at these parks, the Company is the fourth
largest regional park operator. The Company's total revenue and earnings before
interest, taxes, depreciation and amortization ("EBITDA") for the twelve months
ended December 31, 1997 was approximately $193.9 million and $61.3 million,
respectively. Premier expects to acquire in March 1998 approximately 50% of the
outstanding capital stock of Walibi, which owns six theme parks and two smaller
attractions in Europe. Walibi's operations had combined 1997 attendance of
approximately 3.5 million. Following this acquisition the Company will commence
a tender offer for the remaining capital stock of Walibi. On February 9, 1998,
Premier entered into an agreement to acquire all of the outstanding capital
stock of Six Flags Entertainment Corporation ("SFEC"). SFEC, through it
subsidiaries, operates eight "Six Flags" branded regional theme parks, as well
as three separately gated water parks and a wildlife safari park, with aggregate
1997 attendance of approximately 22.2 million. The Company expects to close the
acquisition of SFEC in April 1998. See "-- Recent Developments."
The Company's thirteen parks at December 31, 1997, were located in
geographically diverse markets across the United States with concentrated
populations. During the 1997 operating season, the eleven parks then owned by
the Company drew, on average, approximately 82% of their patrons from within a
100-mile radius, with approximately 35.7% of visitors utilizing group and other
pre-sold tickets and approximately 20.6% utilizing season passes. Each of the
Company's parks is individually themed and provides a complete family-oriented
entertainment experience. The Company's theme parks generally offer a broad
selection of state-of-the-art and traditional thrill rides, water attractions,
themed areas, concerts and shows, restaurants, game venues and merchandise
outlets.
Since current management assumed control in 1989, the Company has acquired
twelve parks (including its leasehold and management interests in Marine World,
but excluding the parks to be acquired in the Walibi acquisition and the SFEC
acquisition) and has achieved significant internal growth. During the year ended
December 31, 1997, the eleven parks owned by the Company during the 1997 season
achieved same park growth in attendance, revenue and park-level operating cash
flow (representing all park operating revenues and expenses without depreciation
and amortization or allocation of corporate overhead or interest expense) of
17.3%, 21.3% and 59.5%, respectively, as compared to 1996.
DESCRIPTION OF PARKS
ADVENTURE WORLD
Adventure World is 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. The park's primary market includes Maryland, northern
Virginia, Washington, D.C. and parts of Pennsylvania and Delaware. This market
provides the park with a permanent resident population base of approximately 6.6
million
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(1) As used in this Report, unless the context requires otherwise, the terms (i)
the "1996 Acquisitions" refers to the acquisitions of Elitch Gardens, The
Great Escape, Waterworld Sacramento and Waterworld Concord (together, the
"Waterworld Parks") and Riverside Park, (ii) the "1997 Acquisitions" refers
to the acquisition of Kentucky Kingdom--The Thrill Park in Louisville,
Kentucky ("Kentucky Kingdom"), the proposed acquisition of all of the
outstanding capital stock of Walibi S.A. ("Walibi") assuming successful
completion of the Walibi Tender Offer (as defined herein), as well as the
Company's management contract, lease and purchase option with respect to
Marine World Africa USA in Vallejo, California ("Marine World") and (iii)
"Company" or "Premier" refers to Premier Parks Inc. and its consolidated
subsidiaries.
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people within 50 miles and 10.9 million people within 100 miles. Based on a
copyrighted 1996-97 survey of television households within designated market
areas ("DMAs") published by A.C. Nielsen Media Research, the Washington, D.C.
and Baltimore markets are the number 7 and number 23 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 87% of the visitors to
Adventure World in 1997 resided within a 50-mile radius of the park, and 92%
resided within a 100-mile radius.
The Company owns a site of 515 acres, with 115 acres currently used for park
operations. The remaining 400 acres, which are fully zoned for entertainment and
recreational uses, provide the Company with ample expansion opportunity, as well
as the potential to develop complementary operations, such as an amphitheater.
Adventure World'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 Adventure
World.
DARIEN LAKE & CAMPING RESORT
Darien Lake, a combination theme and water park, is the largest theme park
in the State of New York and the 38th largest theme park in the United States
based on 1997 attendance of 1.4 million. 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 3.1 million with 100 miles. The Buffalo, Rochester and Syracuse markets are
the number 40, number 75 and number 72 DMAs in the United States, respectively.
Based upon in-park surveys, approximately 62% of the visitors to Darien Lake in
1997 resided within a 50-mile radius of the park, and 79% resided within a
100-mile radius.
The Darien Lake property consists of approximately 1,000 acres, including
144 acres for the theme park, 242 acres of campgrounds and 593 acres of
agricultural, undeveloped and water areas. Darien Lake also has a 20,000 seat
amphitheater. Following the 1995 season, the Company entered into a long-term
arrangement with a national concert promoter to realize the cash flow potential
of the amphitheater. As a result, since it acquired the park, the Company has
realized substantial increases in revenues earned from concerts held at the
facility.
Adjacent to the Darien Lake theme park is a camping resort owned and
operated by the Company with 1,180 developed campsites, including 330
recreational vehicles (RV's) available for daily and weekly rental. In addition,
there are 500 other campsites available for tenting. Darien Lake is one of the
few theme parks in the United States which offers a first class campground
adjacent to the park. The campground is the fifth largest in the United States.
In 1997, approximately 310,000 people used the Darien Lake campgrounds. The
Company believes that substantially all of the camping visitors use the theme
park. The Company is constructing an economy motel at the site for the 1998
season to supplement the campgrounds.
Darien Lake's principal competitor is Wonderland Park located in Toronto,
Canada, approximately 125 miles from Darien Lake. In addition, Darien Lake
competes to a lesser degree with three smaller amusement parks located within 50
miles of the park. Darien Lake is significantly larger with a more diverse
complement of entertainment than any of these three smaller facilities.
ELITCH GARDENS
Elitch Gardens is a combination theme and water park located on
approximately 60 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and McNichols Arena, and close to Coors Field. Based on 1997
attendance of 1.5 million, Elitch Gardens is the 37th largest theme park in the
United States. The park's primary market includes the greater Denver area, as
well as most of central Colorado.
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This market provides the park with a permanent resident population base of
approximately 2.4 million people within 50 miles of the park and approximately
3.3 million people within 100 miles. The Denver area is the number 18 DMA in the
United States. Based upon in-park surveys, approximately 54% of the visitors to
Elitch Gardens in 1997 resided within a 50-mile radius of the park, and 78%
resided within a 100-mile radius.
A park in Denver under the name of "Elitch Gardens" has been in continuous
operation for over 100 years. During 1994 and 1995, the park was relocated from
its smaller location on the north side of Denver to its current location in
downtown Denver. The park was constructed at a cost of $100.0 million (including
land and equipment, as well as extensive infrastructure). The park was reopened
in 1995. Management believes that the park, as constructed, did not have
sufficient marketable rides and attractions to achieve its attendance potential.
In addition, prior to its acquisition in 1996, the park lacked theming and
landscaping, as well as creative marketing. Elitch Gardens has no 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 2.1 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 43 and number 58 DMAs in the
United States, respectively. Based upon in-park surveys, approximately 63% of
the visitors to Frontier City in 1997 resided within a 50-mile radius of the
park, and 69% resided within a 100-mile radius.
The Company owns a site of approximately 90 acres, with 60 acres currently
used for park operations. The remaining 30 acres provide the Company with the
potential to develop complementary operations, such as campgrounds or an
amphitheater. Frontier City's only significant competitor is Six Flags Over
Texas, located in Arlington, Texas, approximately 225 miles from Frontier City.
GEAUGA LAKE
Geauga Lake is a combination theme and water park, and is the 40th largest
theme park in the United States based on 1997 attendance of 1.3 million. Geauga
Lake is located in Aurora, Ohio, 20 miles southeast of Cleveland and
approximately 30, 60 and 120 miles, respectively, from Akron and Youngstown,
Ohio and Pittsburgh, Pennsylvania. This market provides the park with a
permanent resident population base of approximately 4.0 million people within 50
miles of the park and 7.4 million within 100 miles. The Cleveland/Akron,
Youngstown and Pittsburgh markets are the number 13, number 97 and number 19
DMAs in the United States, respectively. Based upon in-park surveys,
approximately 44% of the visitors to Geauga Lake in 1997 resided within a
50-mile radius of the park, and 76% resided within a 100-mile radius.
The 257-acre property on which Geauga Lake is situated includes a 55-acre
spring-fed lake. The theme park itself presently occupies approximately 116
acres. There are approximately 87 acres of undeveloped land (of which
approximately 30 acres have the potential for further development).
Geauga Lake's principal competitors are Cedar Point in Sandusky, Ohio and
Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately 90
miles and 120 miles, respectively, from Geauga Lake. There are also three small
water parks within a 50-mile radius of Geauga Lake, and Sea World, a marine
park, is located on the other side of Geauga Lake. While Sea World does, to some
extent, compete with Geauga Lake, it is a complementary attraction, and many
patrons visit both facilities. In that regard, the Company and Sea World conduct
joint marketing programs in outer market areas, involving joint television
advertising of combination passes. In addition, combination tickets are sold at
each park.
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THE GREAT ESCAPE
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George resort area, 180 miles north
of New York City and 40 miles north of Albany. The park's primary market
includes the Lake George tourist population and the upstate New York and western
New England resident population. Official statistics indicate that the area had
a visitor population of over 7.5 million people in 1995, of which over 3.5
million were overnight visitors, with an average length of stay of 4.3 days.
This market provides the park with a permanent resident population base of
approximately 800,000 people within 50 miles of the park and 3.3 million people
within 100 miles. The Albany market is the number 52 DMA in the United States.
Based upon in-park surveys, approximately 41% of the visitors to The Great
Escape in 1997 resided within a 50-mile radius of the park, and 69% resided
within a 100-mile radius.
The Great Escape is located on a site of approximately 335 acres, with 100
acres currently used for park operations. Approximately 30 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Riverside Park, the Company's park located in Springfield,
Massachusetts, approximately 150 miles from The Great Escape. In addition, there
is a smaller water park located in Lake George.
KENTUCKY KINGDOM
In November 1997, the Company acquired all of the membership interests of
the limited liability company that owns substantially all of the assets used in
the operation of Kentucky Kingdom, a combination theme and water park located in
Louisville, Kentucky, for an aggregate purchase price of $64.0 million, of which
approximately $4.8 million was paid by delivery of 121,671 shares of Common
Stock, with the balance paid in cash and by the assumption of liabilities.
Depending upon the level of revenues at Kentucky Kingdom during each of the
1998-2000 seasons, the Company may be required to issue additional shares of
Common Stock to the seller.
Kentucky Kingdom is a combination theme and water park, located on
approximately 58 acres on and adjacent to the grounds of the Kentucky State Fair
in Louisville, Kentucky, of which approximately 38 acres are leased under ground
leases with terms (including renewal options) expiring in 2049, with the balance
owned by the Company. Based on 1997 attendance of 1.1 million, Kentucky Kingdom
was the 47th largest theme park in the United States. The park's primary market
includes Louisville and Lexington, Kentucky, Evansville and Indianapolis,
Indiana and Nashville, Tennessee. This market provides the park with a permanent
resident population of approximately 1.4 million people within 50 miles and 4.6
million people within 100 miles. The Louisville and Lexington markets are the
number 50 and number 67 DMAs in the United States.
The Company believes that, although Kentucky Kingdom is outfitted with a
large number of rides and has a solid attendance base, the park has suffered
from limited available funds for investment and a lack of revenue outlets.
Premier intends to spend approximately $10 million prior to the 1998 season to
add two major new attractions and to upgrade the quality and quantity of the
merchandise outlets and restaurants. The Company also intends to implement more
professional and creative marketing, sales and promotional programs. Kentucky
Kingdom's only significant direct competitor is Paramount's Kings Island and The
Beach, located in Cincinnati, Ohio, approximately 100 miles from the park.
MARINE WORLD
Marine World, a theme park which has historically featured primarily marine
mammals and exotic land animals, is the 47th largest theme park in the United
States, based on 1997 attendance of 1.1 million. Marine World is located in
Vallejo, California, approximately 32 miles from San Francisco, 22 miles from
Oakland and 57 miles from Sacramento. This market provides the park with a
permanent resident population base of approximately 5.4 million people within 50
miles and 10.0 million people within 100 miles. The San Francisco/Oakland and
Sacramento areas are the number 5 and number 20 DMAs in the
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United States, respectively. Based upon in-park surveys, approximately 50% of
the visitors to Marine World in 1997 resided within a 50-mile radius of the
park, and 78% resided within a 100-mile radius.
In April 1997, the Company became manager of Marine World, 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
November 1997, the Company exercised an 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). The Company intends to expand
the park's entertainment component by adding 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. Premier is entitled to
receive, in addition to the management fee, 80% of the cash flow generated by
the combined operations at the park, after combined operating expenses and debt
service on outstanding debt obligations relating to the park. The Company is
currently implementing the first phase of the expansion of the entertainment
component at Marine World. 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 $52.0 million at February 2002) or the then fair market value of the
seller's interest in the park (based on a formula relating to the seller's 20%
share of Marine World's cash flow). The Company currently expects to exercise
this purchase option when it becomes exercisable.
Marine World currently consists of 105 acres comprised of various
presentation stadiums, animal habitats, visitor walkways, parking, concession
and picnic areas, bordering a 55-acre man-made lake. The park provides for the
shelter and care of over 50 marine mammals, 600 land animals, over 70 sharks and
rays, birds and reptiles, over 2,600 tropical and cold water fish and marine
invertebrates, and 500 butterflies, all featured in a variety of exhibits and
participatory attractions.
Since taking over the management of Marine World in April 1997, the Company
has stabilized the park's performance by reducing operating expenses, shortening
the operating season, and beginning to expand the park's entertainment component
by adding a themed children's area with children's rides called "Popeye's
Seaport" and the DinoSphere TurboRide, a ride simulation theatre. The Company
expects to invest between $35-$40 million at Marine World for the 1998 season to
add fourteen new rides, including a boomerang steel roller coaster, a river
rapids ride and a shoot-the-chute giant splash ride.
Marine World's principal competitors are Underwater World at Pier 39 in San
Francisco, Great America in Santa Clara and Outer Bay at Monterey Bay Aquarium.
These parks are located approximately, 30, 60 and 130 miles from Marine World,
respectively. In addition, plans for Hecker Pass, a new theme park in Gilroy,
California (approximately 100 miles from Marine World) are under development. If
developed, the Company believes that the park would not be operational for at
least two years.
RIVERSIDE PARK
On February 5, 1997, the Company acquired all of the outstanding common
stock of the owner of Riverside Park and an adjacent multi-use stadium, for a
purchase price of $22,200,000 ($1,000,000 of which was paid through issuance of
32,129 shares of the Company's common stock). Riverside Park is a combination
theme park and motor speedway, located off Interstate 91 near Springfield,
Massachusetts, approximately 95 miles west of Boston. Riverside Park's primary
market includes Springfield and western Massachusetts, and Hartford and western
Connecticut, as well as portions of eastern Massachusetts (including Boston) and
eastern New York. Based on 1997 attendance of over 1.2 million, Riverside Park
is the 43rd largest theme park in the United States. This market provides the
park with a permanent resident population base of approximately 3.1 million
people within 50 miles and 14.7 million people within 100 miles. Based upon
in-park surveys, approximately 63% of the visitors to Riverside Park in 1997
resided within a 50-mile radius of the park, and 95% resided within a 100-mile
radius. Springfield, Hartford/New Haven and Boston are the number 103, number 27
and number 6 DMAs in the United States.
Riverside Park is comprised of approximately 160 acres, with 118 acres
currently used for park operations, 12 acres for a picnic grove and
approximately 30 undeveloped acres. Riverside Park's
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Speedway is a multi-use stadium which includes a one-quarter mile
NASCAR-sanctioned short track for automobile racing which can seat 6,200 for
speedway events and 15,000 festival style for concerts.
Riverside Park's most significant competitor is Lake Compounce located in
Bristol, Connecticut, approximately 50 miles from Riverside Park. Lake Compounce
had not been in regular full-service operation for several years. However, the
prior owner of the park entered into a joint venture relationship in 1996 with
an established park operator, and the park has received a substantial investment
of private and public funds and did operate in the 1997 season. To a lesser
extent, Riverside Park competes with The Great Escape, the Company's park
located in Lake George, New York, approximately 150 miles from Riverside Park.
WATERWORLD PARKS
The Waterworld Parks consist of two water parks (Waterworld USA/Concord and
Waterworld USA/ Sacramento) and one family entertainment center (Paradise
Island).
Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.8 million people within 50 miles of the park
and 10.0 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States. Based upon in-park surveys, approximately 94%
of the visitors in 1997 resided within a 50-mile radius of the park, and 97%
resided within a 100-mile radius.
Waterworld USA/Sacramento is located on the grounds of the California State
Fair in Sacramento, California. Also located on the fair grounds is Paradise
Island, the Company's family entertainment center. The facilities' primary
market includes Sacramento and the immediate surrounding area. This market
provides the park with a permanent resident population base of approximately 2.7
million people within 50 miles of the park and 9.7 million people within 100
miles. The Sacramento market is the number 20 DMA in the United States. Based
upon in-park surveys, approximately 80% of the visitors in 1997 resided within a
50-mile radius of the park, and 96% resided within a 100-mile radius.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 29 acres, with 24 acres currently used for park
operations. The Sacramento facility is located on approximately 20 acres, all of
which is used for the park and the family entertainment center. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 100 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 40 miles
from that facility.
WHITE WATER BAY
White Water Bay is a tropical themed water park situated on 22 acres located
along Interstate 40 in southwest Oklahoma City, Oklahoma. The park is the 15th
largest water park in the United States based on 1997 attendance of
approximately 316,000. The park's primary market includes the greater Oklahoma
City metropolitan area. Oklahoma City is the number 43 DMA in the United States.
This market provides the park with a permanent resident population base of
approximately 1.2 million people within 50 miles of the park and 2.1 million
people within 100 miles. Based upon in-park surveys, approximately 80% of the
visitors to White Water Bay in 1997 resided within a 50-mile radius of the park,
and 87% resided within a 100-mile radius. White Water Bay has no direct
competitors.
WYANDOT LAKE
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property sub-leased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in
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the United States. Based on in-park surveys, approximately 85% of the visitors
to Wyandot Lake in 1997 resided within a 50-mile radius of the park, and 93%
resided within a 100-mile radius.
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 1998, but the Company expects to exercise the
first of its two five-year renewal options. The land leased by Wyandot Lake
consists of approximately 18 acres. The park shares parking facilities with the
Columbus Zoo.
Wyandot Lake's direct competitors are Paramount's Kings Island and The
Beach, each located in Cincinnati, Ohio, and Cedar Point, located in Sandusky,
Ohio. Each of these parks is located approximately 100 miles from Wyandot Lake.
Although the Columbus Zoo is located adjacent to the park, it is a complementary
attraction, with many patrons visiting both facilities.
MARKETING AND PROMOTION
The Company attracts visitors through local oriented multi-media marketing
and promotional programs for each of its parks. These programs are tailored to
address the different characteristics of their respective markets and to
maximize the impact of specific park attractions and product introductions. All
marketing and promotional programs are updated or completely revamped each year
to address new developments. Marketing programs are supervised by the Company's
Vice President for Marketing, with the assistance of the Company's senior
management and its national advertising agency.
The Company also develops partnership relationships with well-known national
and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing over 35.7% of aggregate attendance in
1997 at the eleven parks owned during that season. Each park has a group sales
and pre-sold ticket manager and a well-trained sales staff dedicated to selling
multiple group sales and pre-sold ticket programs through a variety of methods,
including direct mail, telemarketing and personal sales calls. Historically,
Premier has been successful in substantially increasing group sales and pre-sold
tickets at its existing and acquired parks.
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. The increased in-park spending which results from season passes is
not offset by incremental operating expenses, since such expenses are relatively
fixed during the operating season. During 1997, 20.6% of visitors to the
Company's eleven parks then owned utilized season passes.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, since such expenses are relatively fixed
during the operating season. In 1997, approximately 72% of patrons at the
Company's eleven parks then owned were admitted at a discount rate and, for the
year ended December 31, 1997, approximately 44.7% of the Company's revenue was
attributable to in-park spending (in-park spending does not include admissions,
sponsorship revenue or other income).
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
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offer a reduced admission price or provide some additional incentive to purchase
a ticket, such as combination tickets with a complementary location.
PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States and, after completing the Walibi acquisition, in Europe. Each of
the Company's parks is operated to the extent practicable as a separate
operating division of the Company in order to maximize local marketing
opportunities and to provide flexibility in meeting local needs. Each park is
managed by a general manager who reports to one of the Company's regional
executives (each of whom reports to its Chief Operating Officer) and is
responsible for all operations and management of the individual park. Local
advertising, ticket sales, community relations and hiring and training of
personnel are the responsibility of individual park management in coordination
with corporate support teams.
Each of the Company's 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 ten
general managers at December 31, 1997 had an aggregate of approximately 210
years experience in the industry, including approximately 85 years at parks
owned or operated by Premier.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for theme events (such as
Hallowscream and Oktoberfest). Typically, the parks charge a basic daily
admission price, which allows unlimited use of all rides and attractions,
although in certain cases special rides and attractions require the payment of
an additional fee. The Company's family entertainment center is open year-round
and does not charge an admission price.
CAPITAL IMPROVEMENTS
The Company regularly makes capital investments in the development and
implementation of new rides and attractions at its parks. The Company purchases
both new and used rides. In addition, the Company rotates rides among its parks
to provide fresh attractions. The Company believes that the introduction of new
rides is an important factor in promoting each of the parks in order to achieve
market penetration and encourage longer visits, which lead to increased
attendance and in-park spending. In addition, the Company generally adds theming
to acquired parks and enhances the theming and landscaping of its existing parks
in order to provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every three to four
years in order to enhance the park's entertainment product.
8
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, 1998, the Company had approximately 125
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 an annual inspection of each park
and all attractions and related maintenance procedures. The result of insurance
inspections are written evaluation and inspection reports, as well as written
suggestions on various aspects of park operations. State inspectors also conduct
annual ride inspections before the beginning of each season. Other portions of
each park are also subject to inspections by local fire marshals and health and
building department officials. Furthermore, the Company uses Ellis & Associates
as water safety consultants at its parks in order to train life guards and audit
safety procedures.
INSURANCE
The Company maintains insurance of the type and in amounts that it believes
are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $25.0 million per occurrence. By
virtue of self-insured retention limits, the Company is required to pay the
first $50,000 of loss per occurrence. 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. The Company's family entertainment center
competes directly with all types of recreational facilities and forms of
entertainment within its market. 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 80% of
park attendance occurring in the second and third calendar quarters and the most
active period falling between Memorial Day and Labor Day. The great majority of
the Company's revenues are collected in the second and third quarters of each
year.
9
GOVERNMENT REGULATION
Operations at the parks are subject to certain local, state and federal
governmental regulations including, without limitation, labor, health, safety
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 regulatory
standards and, although no assurance can be given, it does not foresee the need
for any significant expenditures in this area in the near future.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state and local
environmental laws and regulations governing water discharges, air emissions,
soil contamination, wetlands, the maintenance of underground storage tanks and
the disposal of waste and hazardous materials. The Company believes that it is
in substantial compliance with all such laws and regulations. At Geauga Lake,
the Company is conducting groundwater monitoring around a former on-site
landfill under the supervision of the Ohio Environmental Protection Agency. The
Company is awaiting administrative action on its request for curtailment of the
scope and duration of this monitoring, based on the sampling results to date.
The Company does not anticipate that it will be required to incur any material
costs in connection with the monitoring program or any other post-closure
activities.
Elitch Gardens is located on property that was used as a manufactured gas
plant by the Public Service Company of Colorado ("PSC"), a railroad yard for
Burlington Northern Railroad, and an auto shredding operation. Although these
operations were discontinued over 30 years ago, residual contamination related
to those operations remains in the soil and groundwater beneath the property.
Specifically, environmental investigations have documented the presence of trash
fill material, metals, hydrocarbon-contaminated soils and residual coal tars at
the site.
At the time of the construction of the park, the prior owner of the park
entered into a consent agreement with the Colorado Department of Health which
specifies the soil and groundwater management and monitoring requirements for
the site (the "Consent Agreement"). The Consent Agreement also contains a
limited release and covenant not to sue by the State of Colorado with respect to
then-known environmental conditions, subject to several conditions and
exceptions. In addition, the United States Environmental Protection Agency has
reviewed the Consent Agreement and stated that its intervention under applicable
Federal environmental statues would not be warranted, assuming compliance with
the Consent Agreement and barring a change in, or discovery of new information
about, environmental conditions relating to the property.
At the closing of the Company's acquisition of Elitch Gardens, PSC and
Trillium Corporation (successor-in-interest to Burlington Northern Railroad)
consented to the assignment to Premier by the prior owner of its rights under an
allocation agreement (the "Allocation Agreement"). Under the Allocation
Agreement, PSC and Trillium agreed to pay for 25 years, commencing in 1994, all
Contamination Expenses (as defined) with respect to the site, except that
Premier will be responsible, under certain circumstances, for a maximum of
$100,000 of such Contamination Expenses and, in all cases, for the costs of
groundwater monitoring required under the Consent Agreement. The Company does
not anticipate that it will be required to incur any material costs in
connection with the environmental condition of this site.
EMPLOYEES
At March 1, 1998, the Company employed approximately 712 full-time
employees, and the Company employed approximately 10,430 seasonal employees
during the 1997 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.
10
Commencing April 1997, the Company became the manager of Marine World.
Certain of the employees at that park are currently subject to a labor agreement
with a local chapter of a national union that expires in January 2000. The
Company has not experienced any strikes or work stoppages by its employees, and
the Company considers its employee relations to be good.
RECENT DEVELOPMENTS
WALIBI
In December 1997, the Company entered into an agreement with three of the
principal stockholders of Walibi, pursuant to which the Company expects to
purchase in March 1998 approximately 50% of the outstanding capital stock of
Walibi (the "Private Acquisition"). Following the closing of the Private
Acquisition, the Company will commence a "public takeover bid," as defined and
regulated under Belgian law (the "Walibi Tender Offer"), for the remainder of
the outstanding capital stock of Walibi.
Walibi is a corporation (societe anonyme) organized under the laws of
Belgium. Walibi's stock is currently traded on the Official Market of the
Brussels Stock Exchange. It owns six theme parks (the "Walibi Parks"), two
located in Belgium, one in The Netherlands and three in France, as well as two
smaller attractions in Belgium. Walibi's operations had combined 1997 attendance
of approximately 3.5 million.
The transaction values Walibi at approximately $139.5 million (at the
exchange rate of Belgian Francs ("BEF") 37.065 to US$1 on December 31, 1997),
based on a multiple of seven times Walibi's 1997 EBITDA. This amount includes
the assumption or refinancing of Walibi net indebtedness (total debt less cash
and cash equivalents) which aggregated approximately $54.3 million at December
31, 1997. As a result, the aggregate consideration to be paid by the Company for
the outstanding stock of Walibi (assuming the Company acquires 100% of the
outstanding Walibi capital stock pursuant to the Walibi Tender Offer) will be
$85.2 million (based on the year-end exchange rate). The purchase price in the
Private Acquisition will be paid 80% in cash in BEF and 20% in Premier Common
Stock (approximately 228,000 shares). Shares of Premier Common Stock issuable in
the Private Acquisition will not be registered under the Securities Act of 1933
and are subject to a "lock-up" agreement until 41 days after the consummation of
the Private Acquisition. The consideration offered in the Walibi Tender Offer
will be payable at the election of the holders of Walibi capital stock (i) in
cash only or (ii) in cash and shares of Premier Common Stock in the same ratio
as the Private Acquisition. The Company will fund the cash portion of the
purchase price of the Walibi acquisition (as well as the refinancing of certain
indebtedness of Walibi) from borrowings under a $300.0 million senior secured
credit facility (the "Premier Credit Facility") entered into by Premier on March
13, 1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity, Capital Commitments and Resources." In
addition, the Company will be obligated to issue additional shares of Premier
Common Stock in the event certain gross revenue targets are met for the Walibi
Parks.
Under the terms of the Walibi Agreement, the Company has agreed to invest at
least BEF 1.4 billion (approximately $38 million based on the year-end exchange
rate) in the Walibi Parks over the three years commencing with the 1999 season.
SIX FLAGS
Pursuant to an Agreement and Plan of Merger dated as of February 9, 1998
(the "Six Flags Agreement"), Premier agreed to acquire by merger all of the
capital stock of SFEC from its current stockholders for $965 million (plus an
approximate $11 million adjustment based on year-end balance sheet adjustments
and option cancellation costs). During 1997, Six Flags' attendance, revenue and
EBITDA totaled approximately 22.2 million, $708.7 million and $164.1 million,
respectively. The purchase price is payable all in cash or, at the Company's
option, in cash and depositary shares representing interests
11
in up to $200.0 million (but not less than $100.0 million) of the Company's
Convertible Redeemable Preferred Stock (the "Seller Preferred Stock"). At the
date of acquisition, Six Flags' liabilities will include approximately $192.3
million principal amount at maturity ($161.1 million accreted value at December
28, 1997) of SFEC's Zero Coupon Senior Notes due 1999 (the "SFEC Zero Coupon
Senior Notes") and approximately $285.0 million principal amount at maturity
($269.9 million accreted value at December 28, 1997) of 12 1/4% Senior
Subordinated Discount Notes due 2005 (the "SFTP Senior Subordinated Notes") of
Six Flags Theme Parks Inc. (together with its subsidiaries, "SFTP"), an indirect
wholly-owned subsidiary of SFEC. In addition, the Company will refinance all
outstanding Six Flags bank indebtedness (approximately $348.5 million at
December 28, 1997) and certain other indebtedness of SFEC (approximately $30.5
million at December 28, 1997) primarily through borrowings under a $472.0
million senior secured credit facility (the "Six Flags Credit Facility" and,
together with the Premier Credit Facility, the "Credit Facilities") to be
entered into by SFTP concurrently with the closing under the Six Flags
Agreement. The acquisition is scheduled to close in April 1998.
In connection with the Six Flags Agreement, the company presently named
Premier Parks Inc. (together with its consolidated subsidiaries, "Premier
Operations") will merge with a wholly-owned subsidiary of Premier Parks Holdings
Corporation in accordance with Section 251(g) of the Delaware General
Corporation Law. As a result, holders of shares of Common Stock of Premier
Operations will become, on a share-for-share basis, holders of Common Stock of
Premier Parks Holdings Corporation, and Premier Operations will become a
wholly-owned subsidiary of Premier Parks Holdings Corporation. On the effective
date of the merger, Premier Operations will change its name to Premier Parks
Operations Inc., and Premier Parks Holdings Corporation will change its name to
Premier Parks Inc.
The Company intends to fund the Six Flags acquisition with the proceeds of
the following public offerings (the "Offerings"):
1. The Company will issue approximately 13,000,000 shares of Common
Stock with estimated gross proceeds of $593.2 million (based upon the
average closing price of the Company's Common Stock for the twenty trading
days ended February 27, 1998).
2. The Company will issue approximately 5,000,000 Premium Income Equity
Securities ("PInES-SM-") representing interests in the Company's Mandatorily
Convertible Preferred Stock (the "Mandatorily Convertible Preferred Stock"
and, together with the Seller Preferred Stock, the "Convertible Preferred
Stock"), with estimated gross proceeds of $228.2 million (based upon the
average closing price of the Company's Common Stock for the twenty trading
days ended February 27, 1998).
3. The Company will issue Senior Discount Notes due 2008 (the "Company
Senior Discount Notes") with estimated gross proceeds of $250.0 million.
4. The Company will issue $280.0 million principal amount of its Senior
Notes due 2006 (the "Company Senior Notes" and, together with the Company
Senior Discount Notes, the "Company Notes").
5. SFEC will issue $170.0 million principal amount of its Senior Notes
due 2006 (the "New SFEC Notes") guaranteed on a fully subordinated basis by
the Company. The proceeds of the New SFEC Notes, together with additional
funds, will be deposited in escrow to repay in full at or prior to maturity
the SFEC Zero Coupon Senior Notes.
There can be no assurance that the Offerings and the Company's acquisition
of SFEC will be consummated, or, if consummated, that the terms of the
securities sold in the Offerings will conform to the proposed terms thereof
described in this Report. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity, Capital Commitments and
Resources."
12
EXECUTIVE OFFICERS OF THE REGISTRANT
AGE AS OF
NAME MARCH 1, 1998 POSITION
- ------------------------------------------ ----------------- ------------------------------------------------------
Kieran E. Burke........................... (40) 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................................ (42) 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....................... (45) 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....................... (39) Executive Vice President since February 1, 1997;
General Manager of Adventure World since May 1992;
Park Manager of White Water Bay from February 1991 to
May 1992.
Richard A. Kipf........................... (63) Secretary/Treasurer since 1975; Vice President since
June 1994.
Traci E. Blanks........................... (37) Vice President of Marketing since 1995; Vice President
Marketing for Frontier City and White Water Bay from
1992 through 1994; Director of Marketing for Frontier
City from 1986 through 1992.
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 1998.
13
ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's real estate at March
1, 1998:
Adventure World, Largo, Maryland -- 515 acres (fee ownership
interest)
Darien Lake, Darien Center, New York -- 979 acres (fee ownership
interest)
Elitch Gardens, Denver, Colorado -- 60 acres (fee ownership
interest)
Frontier City, Oklahoma City, Oklahoma -- 90 acres (fee ownership
interest)
Geauga Lake, Aurora, Ohio -- 258 acres (fee ownership interest)
The Great Escape, Lake George, New York -- 335 acres (fee
ownership interest)
Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership
and leasehold interest)(1)
Marine World, Vallejo, California -- 40 acres (long-term leasehold
interest at nominal rent)
Riverside Park, Agawam, Massachusetts -- 160 acres (fee ownership
interest)
Waterworld/Concord, Concord, California -- 29 acres (leasehold
interest)(2)
Waterworld/Sacramento, Sacramento, California -- 20 acres
(leasehold interest)(3)
White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee
ownership interest)
Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest)(4)
In addition to the foregoing, at March 1, 1998, the Company 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. The Company leases
office space in New York City for which it recognized approximately $64,000 in
net rental expense during 1997 after consideration of the rental payments made
by Windcrest Partners, an affiliate of the Company, which shares office space
with the Company. The Company also leases certain of the rides and attractions
at its parks. See Notes 5 and 11 to Notes to Consolidated Financial Statements.
The Company considers its properties to be well-maintained, in good
condition and adequate for their present uses and business requirements.
ITEM 3. LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose it
to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the number of such events resulting in liability significantly increased, or if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
- ------------------------
(1) Approximately 38 acres are leased under ground leases with terms
(including renewal options) expiring in 2049, with the balance owned by the
Company.
(2) The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five- year renewal options.
(3) 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.
(4) The site is subleased from the Columbus Zoo. The lease expires in 1998 and
the Company has two five-year renewal options, the first of which will be
exercised in that year. Acreage for this site does not include approximately
30 acres of parking which is shared with the Columbus Zoo.
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been listed on the New York Stock Exchange
(the "NYSE") since December 22, 1997 under the symbol "PKS." Between May 30,
1996 and December 19, 1997, the Company's Common Stock was traded on the Nasdaq
National Market ("NASDAQ") and quoted under the symbol "PARK." Prior to May 30,
1996, trading in the Common Stock was reported on The Pink Sheets and the OTC
Bulletin Board. Set forth below in the first table are the high and low sales
prices for the Common Stock as reported by the NYSE since December 22, 1997. Set
forth below in the second table are the high and low sales prices for the Common
Stock as reported by NASDAQ from May 30, 1996 through December 19, 1997. The
third table sets forth the high and low bid quotations for the Common Stock as
reported on The Pink Sheets and the OTC Bulletin Board for the prior periods
indicated. These quotations reflect inter-dealer prices, without mark-up,
mark-down or commission and may not necessarily represent actual transactions.
Prices shown for periods prior to May 1996 have been adjusted to reflect the
Company's one-for-five reverse stock split at that time.
NEW YORK STOCK EXCHANGE
YEAR QUARTER HIGH LOW
- --------- ---------------------- --------- ---------
1998 First (through $55 1/8 $37 1/8
March 16, 1998)
1997 Fourth (beginning 40 1/2 40 1/16
December 22, 1997)
NASDAQ NATIONAL MARKET
YEAR QUARTER HIGH LOW
- --------- ---------------------- --------- ---------
1997 Fourth (through $43 3/8 $37
December 19, 1997)
Third 37 3/4 32
Second 36 7/8 26
First 32 1/8 25 7/8
1996 Fourth 32 7/8 29 3/8
Third 29 3/4 20 3/4
Second (beginning 22 1/8 19 7/8
May 30, 1996)
THE PINK SHEETS/OTC BULLETIN BOARD
YEAR QUARTER HIGH LOW
- --------- ---------------------- --------- ---------
1996 Second (through $20 $12 1/2
May 29, 1996)
First 13 3/4 10
As of March 16, 1998, there were 747 holders of record of the Company's
Common Stock. The Company paid no cash dividends during the three years ended
December 31, 1997. The Company does not anticipate paying any cash dividends on
its Common Stock during the foreseeable future. The indentures relating to the
Premier Notes limit, and following the Six Flags acquisition the indentures
relating to the Company Notes will limit, the payment of cash dividends to
common stockholders.
15
ITEM 6. SELECTED FINANCIAL DATA
1997(1) 1996(2) 1995(3) 1994 1993
---------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue......................................................... $ 193,904 $ 93,447 $ 41,496 $ 24,899 $ 21,860
Depreciation and amortization................................... 19,792 8,533 3,866 1,997 1,537
Interest expense, net........................................... 17,775 11,121 5,578 2,299 1,438
Termination fee, net of expenses(4)............................. 8,364 -- -- -- --
Provision for income tax expense (benefit)...................... 9,615 1,497 (762) 68 91
Income (loss) before extraordinary loss......................... 14,099 1,765 (1,045) 102 1,354
Extraordinary (loss), net of tax effect......................... -- -- (140 (5) -- --
Net income (loss)............................................... 14,099 1,765 (1,185) 102 1,354
Per Share:
Income (loss) before extraordinary loss:
Basic....................................................... .79 .14 (.40 (5) .04 .51
Diluted..................................................... .76 .13 (.40 (5) .04 .51
Net income (loss):
Basic....................................................... .79 .14 (.44) .04 .51
Diluted..................................................... .76 .13 (.44) .04 .51
Cash Dividends................................................ -- -- -- -- --
Net cash provided by operating activities....................... 47,150 11,331 10,646 1,060 2,699
Net cash used in investing activities........................... (217,070) (155,149) (74,139) (10,177) (7,698)
Net cash provided by financing activities....................... 250,165 119,074 90,914 7,457 2,106
Total assets.................................................... 611,321 304,803 173,318 45,539 36,707
Long-term debt and capitalized lease obligations(6)............. $ 217,026 $ 150,834 $ 94,278 $ 24,108 $ 20,821
- ------------------------
(1) The historical Statement of Operations Data for 1997 reflect the results of
Riverside Park from February 5, 1997 and Kentucky Kingdom from November 7,
1997 (the dates of their respective acquisitions).
(2) The historical Statement of Operations Data for 1996 reflect the results of
Elitch Gardens from October 31, 1996, the Waterworld Parks from November 19,
1996 and The Great Escape from December 4, 1996 (the dates of their
respective acquisitions).
(3) The historical Statement of Operations Data for 1995 reflect the results of
the parks acquired in the Company's acquisition of Funtime Parks from the
date of acquisition, August 15, 1995.
(4) Represents a termination fee (net of expenses) paid to the Company upon
termination of its prior agreement to become managing general partner of Six
Flags over Texas.
(5) During 1995, the Company incurred an extraordinary loss of $140,000, net of
income tax benefit, on extinguishment of debt in connection with the Funtime
Acquisition. This extraordinary loss is not included in income (loss) before
extraordinary loss and income (loss) before extraordinary loss per common
share for 1995.
(6) Includes current portion. Balances are at December 31 of the indicated year.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenue is derived from the sale of tickets for entrance to
its parks (approximately 52.7%, 44.0% and 48.8% in 1995, 1996 and 1997,
respectively) and the sale of food, merchandise, games and attractions inside
its parks and other income (approximately 47.3%, 56.0% and 51.2% in 1995, 1996
and 1997, respectively). The Company's principal costs of operations include
salaries and wages, employee benefits, advertising, outside services,
maintenance, utilities and insurance. The Company's expenses are relatively
fixed. Costs for full-time employees, maintenance, utilities, advertising and
insurance do not vary significantly with attendance, thereby providing the
Company with a significant degree of operating leverage as attendance increases
and fixed costs per visitor decrease.
The Company acquired three parks in August 1995 in the Funtime acquisition,
and acquired four parks during the last quarter of 1996. The Company acquired
Riverside Park in February 1997, and Kentucky Kingdom in November 1997. In
addition, the Company assumed management of Marine World in April 1997,
exercised a lease option with respect to a portion of that park in November
1997, and executed a purchase option for the entire park in September 1997. The
following discussion as it relates to 1996 includes two presentations. The first
includes the historical results of the Company (including the results of the
parks acquired in the 1996 Acquisitions (other than Riverside Park) only from
their dates of acquisition forward (October 31, 1996 for Elitch Gardens;
November 19, 1996 for the Waterworld Parks; and December 4, 1996 for The Great
Escape). The second includes both the historical results for the Company and the
results of the parks acquired in the 1996 Acquisitions for periods prior to the
dates of their respective acquisition.
The following discussion as it relates to 1997 includes the results of the
parks acquired in the 1996 Acquisitions (other than Riverside Park) for the full
year, as well as Kentucky Kingdom and Riverside Park from their dates of
acquisition forward, and includes Marine World only to the extent of the
management fee received and depreciation expense related to that park.
The Company believes that significant opportunities exist to acquire
additional theme parks. Although the Company has had discussions with respect to
several additional business acquisitions, no agreement or understanding has been
reached with respect to any specific future acquisition other than the Six Flags
and Walibi acquisitions. 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. A consummated acquisition, including, the Six
Flags and Walibi acquisitions, when consummated, may adversely affect the
Company's operating results, at least in the short term, depending on many
factors including capital requirements and the accounting treatment of any such
acquisition.
17
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
The table below sets forth certain financial information with respect to the
Company (including the 1996 Acquisitions) for the year ended December 31, 1996
and with respect to the Company and Kentucky Kingdom and Marine World for the
year ended December 31, 1997:
YEAR ENDED DECEMBER 31,
1997
YEAR ENDED DECEMBER 31, 1996 -------------------------
-------------------------------------------------------------------- HISTORICAL
HISTORICAL PREMIER
HISTORICAL 1996 (EXCLUDING
NINE MONTHS ENDED ACQUISITIONS MARINE KENTUCKY
SEPTEMBER 30, 1996 FOR PERIODS WORLD AND KINGDOM
HISTORICAL FOR 1996 SUBSEQUENT TO HISTORICAL KENTUCKY AND MARINE
PREMIER(1) ACQUISITIONS(2) SEPTEMBER 30, 1996(3) COMBINED KINGDOM)(4) WORLD(5)
----------- ------------------- --------------------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
REVENUE:
Theme park admissions....... $ 41,162 $ 34,062 $ 724 $ 75,948 $ 94,611 $ --
Theme park food, merchandise
and other................. 52,285 30,453 1,020 83,758 99,103 190
----------- ------- ------- ----------- ------------ -----------
Total revenue............. 93,447 64,515 1,744 159,706 193,714 190
----------- ------- ------- ----------- ------------ -----------
OPERATING COSTS AND EXPENSES:
Operating expenses.......... 42,425 23,204 3,116 68,745 80,307 1,049
Selling, general and
administrative............ 16,927 17,035 2,289 36,251 36,461 86
Costs of products sold...... 11,101 9,448 347 20,896 23,025 --
Depreciation and
amortization.............. 8,533 13,028 703 22,264 19,159 633
----------- ------- ------- ----------- ------------ -----------
Total operating costs and
expenses................ 78,986 62,715 6,455 148,156 158,952 1,768
----------- ------- ------- ----------- ------------ -----------
Income (loss) from
operations.................. 14,461 1,800 (4,711) 11,550 34,762 (1,578)
OTHER INCOME (EXPENSE):
Interest expense, net....... (11,121) (4,624) (517) (16,262) (17,763) (12)
Termination fee, net of
expenses.................. -- -- -- -- 8,364 --
Other income (expense)...... (78) (284) -- (362) (59) --
----------- ------- ------- ----------- ------------ -----------
Total other income
(expense)............... (11,199) (4,908) (517) (16,624) (9,458) (12)
----------- ------- ------- ----------- ------------ -----------
Income before income
taxes..................... 3,262 (3,108) (5,228) (5,074) 25,304 (1,590)
Income tax expense
(benefit)................. 1,497 1,131 -- 2,628 9,615 --
----------- ------- ------- ----------- ------------ -----------
Net income (loss)........... $ 1,765 $ (4,239) $ (5,228) $ (7,702) $ 15,689 $ (1,590)
----------- ------- ------- ----------- ------------ -----------
----------- ------- ------- ----------- ------------ -----------
HISTORICAL
PREMIER
-----------
REVENUE:
Theme park admissions....... $ 94,611
Theme park food, merchandise
and other................. 99,293
-----------
Total revenue............. 193,904
-----------
OPERATING COSTS AND EXPENSES:
Operating expenses.......... 81,356
Selling, general and
administrative............ 36,547
Costs of products sold...... 23,025
Depreciation and
amortization.............. 19,792
-----------
Total operating costs and
expenses................ 160,720
-----------
Income (loss) from
operations.................. 33,184
OTHER INCOME (EXPENSE):
Interest expense, net....... (17,775)
Termination fee, net of
expenses.................. 8,364
Other income (expense)...... (59)
-----------
Total other income
(expense)............... (9,470)
-----------
Income before income
taxes..................... 23,714
Income tax expense
(benefit)................. 9,615
-----------
Net income (loss)........... $ 14,099
-----------
-----------
- ------------------------
(1) Includes results of the 1996 Acquisitions from and after the acquisition
dates.
(2) Includes results of the 1996 Acquisitions for the nine months ended
September 30, 1996.
(3) Includes results of the 1996 Acquisitions for the respective periods
commencing October 1, 1996 and (ending) on the respective acquisition dates
(or in the case of Riverside Park, December 31, 1996).
(4) Excludes management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom for the period subsequent to the acquisition
date, November 7, 1997.
(5) Represents management fee and depreciation expense relating to Marine World
and results of Kentucky Kingdom from the acquisition date through December
31, 1997.
18
REVENUE. Revenue aggregated $193.9 million in 1997 ($193.7 million at the
eleven parks owned during the 1997 season), compared to $93.4 million in 1996,
and to combined revenue of $159.7 million in 1996. This 21.3% increase in
revenue at the same eleven parks is primarily attributable to increased
attendance (17.3%) at these eleven parks, which resulted in part from increased
season pass and group sales at several parks.
OPERATING EXPENSES. Operating expenses increased during 1997 to $81.4
million ($80.3 million at the eleven parks owned during the 1997 season) from
$42.4 million reported in 1996, and from $68.7 million combined operating
expenses for 1996. This 16.9% increase in operating expenses at the same eleven
parks is mainly due to additional staffing related to the increased attendance
levels and increased pay rates. As a percentage of revenue, operating expenses
at these parks constituted 41.5% for 1997 and 43.0% on a combined basis for
1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses at the eleven owned parks were $36.5 million in 1997, compared to $16.9
million reported, and $36.3 million combined, selling, general and
administrative expenses for 1996. As a percentage of revenues, these expenses at
the same eleven parks constituted 18.8% for 1997 and 22.7% for 1996 combined.
This increase over 1996 combined expenses relates primarily to increased
advertising and marketing expenses to promote the newly acquired parks and the
new rides and attractions at all of the parks, increased sales taxes arising
from increased volume generally and increased property taxes and professional
services, offset by significant reductions in personnel and insurance expenses.
COSTS OF PRODUCTS SOLD. Costs of products sold were $23.0 million at the
eleven parks for 1997 compared to $11.1 million reported and $20.9 million
combined for 1996. Cost of products sold (as a percentage of in-park revenue) at
these parks constituted approximately 23.2% for 1997 and 25.0% for 1996
combined. This $2.1 million or 10.2% increase over combined 1996 results is
directly related to the 18.3% increase in food, merchandise and other revenues.
DEPRECIATION AND INTEREST EXPENSE. Depreciation expense increased $11.3
million over the reported 1996 results. The increase is a result of the full
year's effect of the 1996 Acquisitions (other than Riverside Park), the purchase
price paid for the Riverside Park and Kentucky Kingdom acquisitions and the
on-going capital program at the Company's parks. Interest expense, net,
increased $6.7 million from 1996 as a result of interest on the 1997 Premier
Notes (as defined herein).
TERMINATION FEE, NET OF EXPENSES. During October 1997, the Company entered
into an agreement with the limited partner of the partnership that owns Six
Flags Over Texas to become the managing general partner of the partnership, to
manage the operations of the park, to receive a portion of the income from such
operations, and to purchase limited partnership units over the term of the
agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the park reached an agreement with the limited partnership, and the
Company's agreement was terminated. The Company received the termination fee in
December 1997 and included the termination fee, net of $2,386,000 of expenses
associated with the transaction, as income in 1997.
INCOME TAXES. The Company incurred income tax expense of $9.6 million
during 1997, compared to $1.5 million during 1996. The effective tax rate for
1997 was approximately 40.5% as compared to 45.9% in 1996. This decrease is the
result of the decline in the size of the non-deductible goodwill from the
Funtime Acquisition and the acquisition of Riverside Park relative to the
Company's income.
At December 31, 1997, the Company estimates that it had approximately $37
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
19
Company and its subsidiaries. In addition, the use of such NOLs is subject to
limitations on the amount of taxable income that can be offset with such NOLs.
Some of such NOLs also are subject to a limitation as to which of the
subsidiaries' income such NOLs are permitted to offset. Accordingly, no
assurance can be given as to the timing or amount of the availability of such
NOLs to the Company and its subsidiaries. See Note 7 to Notes to Consolidated
Financial Statements.
YEARS ENDED DECEMBER 31, 1996 AND 1995
The table below sets forth certain financial information with respect to the
Company and the Funtime parks for the year ended December 31, 1995 and with
respect to the Company and the 1996 Acquisitions (other than Riverside Park) for
the year ended December 31, 1996:
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
HISTORICAL FUNTIME(2) YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------ --------------------------------
SIX MONTHS HISTORICAL
ENDED FORTY-THREE PREMIER
HISTORICAL JULY 2, DAYS ENDED HISTORICAL (EXCLUDING 1996 1996
PREMIER(1) 1995 AUGUST 14, 1995 COMBINED ACQUISITIONS)(3) ACQUISITIONS(4)
----------- ----------- --------------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
REVENUE:
Theme park admissions............... $ 21,863 $ 6,195 $ 9,680 $ 37,738 $ 41,157 $ 5
Theme park food, merchandise and
other............................. 19,633 8,958 13,450 42,041 52,148 137
----------- ----------- ------- ----------- ------- -------
Total revenue......................... 41,496 15,153 23,130 79,779 93,305 142
----------- ----------- ------- ----------- ------- -------
EXPENSES:
Operating expenses.................. 19,775 10,537 6,039 36,351 40,568 1,857
Selling, general and
administrative.................... 9,272 3,459 2,533 15,264 16,534 393
Costs of products sold.............. 4,635 2,083 2,953 9,671 11,071 30
Depreciation and amortization....... 3,866 3,316 829 8,011 7,785 748
----------- ----------- ------- ----------- ------- -------
Total costs and expenses.............. 37,548 19,395 12,354 69,297 75,958 3,028
----------- ----------- ------- ----------- ------- -------
Income (loss) from operations......... 3,948 (4,242) 10,776 10,482 17,347 (2,886)
Interest expense, net................. (5,578) (2,741) (321) (8,640) (11,121) --
Other income (expense)................ (177) 4 (4) (177) (78) --
----------- ----------- ------- ----------- ------- -------
Total other income (expense).......... (5,755) (2,737) (325) (8,817) (11,199) --
----------- ----------- ------- ----------- ------- -------
Income before income taxes and
extraordinary loss.................. (1,807) (6,979) 10,451 1,665 6,148 (2,886)
Income tax expense (benefit).......... (762) (2,722) 4,076 592 2,905 (1,408)
----------- ----------- ------- ----------- ------- -------
Income (loss) before extraordinary
loss................................ $ (1,045) $ (4,257) $ 6,375 $ 1,073 $ 3,243 $ (1,478)
----------- ----------- ------- ----------- ------- -------
----------- ----------- ------- ----------- ------- -------
HISTORICAL
PREMIER
-----------
REVENUE:
Theme park admissions............... $ 41,162
Theme park food, merchandise and
other............................. 52,285
-----------
Total revenue......................... 93,447
-----------
EXPENSES:
Operating expenses.................. 42,425
Selling, general and
administrative.................... 16,927
Costs of products sold.............. 11,101
Depreciation and amortization....... 8,533
-----------
Total costs and expenses.............. 78,986
-----------
Income (loss) from operations......... 14,461
Interest expense, net................. (11,121)
Other income (expense)................ (78)
-----------
Total other income (expense).......... (11,199)
-----------
Income before income taxes and
extraordinary loss.................. 3,262
Income tax expense (benefit).......... 1,497
-----------
Income (loss) before extraordinary
loss................................ $ 1,765
-----------
-----------
- ------------------------
(1) Includes results of the Funtime acquisition from and after August 15, 1995,
the acquisition date.
(2) Represents results of the parks acquired in the Funtime acquisition from
January 1, 1995 to August 14, 1995.
(3) Excludes operating results of parks acquired in the 1996 Acquisitions, but
includes interest expense incurred by virtue of associated financings as of
the date incurred.
(4) Represents results of the parks acquired in the 1996 Acquisitions (other
than Riverside Park which was acquired in February 1997) from their
respective acquisition dates through December 31, 1996.
REVENUE. Revenue aggregated $93.4 million in 1996 ($93.3 million without
the 1996 Acquisitions), compared to $41.5 million actual in 1995, and to
combined revenue of $79.8 million in 1995. This 17.0% increase in revenue
(excluding the 1996 Acquisitions) over combined 1995 revenue at the same six
parks is attributable to increased attendance (10.3%) and per capita revenue
(6.3%) at the six parks and increased sponsorship revenue, as well as increased
season pass sales at several parks, and increased campground
20
revenue at Darien Lake and income from the new contractual arrangements for 1996
at the Darien Lake Performance Arts Center.
OPERATING EXPENSES. Operating expenses increased during 1996 to $42.4
million ($40.6 million excluding the 1996 Acquisitions) from $19.8 million
reported in 1995 and from $36.4 million combined operating expenses for 1995.
This 11.6% increase in operating expenses (excluding the 1996 Acquisitions) over
combined 1995 operating expenses is mainly due to additional staffing related to
increased attendance levels and increased pay rates, offset to some extent by a
decrease in equipment rental expense in 1996 due to the purchase of equipment
that had been leased during 1995. As a percentage of revenue, operating expenses
(excluding the 1996 Acquisitions) constituted 43.5% for 1996 and 45.6% on a
combined basis for 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $16.5 million in 1996 (excluding the 1996 Acquisitions), compared
to $9.3 million reported, and $15.3 million combined, selling, general and
administrative expenses for 1995. As a percentage of revenue, these expenses
constituted 17.7% for 1996 and 19.1% for 1995 combined. This increase over 1995
combined expenses relates primarily to increased advertising and marketing
expenses to promote the Funtime parks and the new rides and attractions at all
of the parks, increased sales taxes arising from increased volume generally and
increased property taxes and professional services.
COSTS OF PRODUCTS SOLD. Costs of products sold were $11.1 million for 1996
compared to $4.6 million reported and $9.7 million combined for 1995. Cost of
products sold (as a percentage of in-park revenue) constituted approximately
21.2% for 1996 and 23.0% for 1995 combined. This $1.4 million or 14.5% increase
over combined 1995 results is directly related to the 24.0% increase in 1996 in
food, merchandise and other revenue.
DEPRECIATION AND INTEREST EXPENSE. Depreciation and amortization expense
was $8.5 million for 1996 as compared to $3.9 million in 1995. The increase was
a result of the full year's effect of the Funtime acquisition, the $116.2
million spent during the fourth quarter of 1996 for the 1996 Acquisitions and
the on-going capital program at the Company's parks. Interest expense, net,
increased $5.5 million in 1996, as compared to 1995, as a result of interest on
the 1995 Premier Notes (as defined herein) for twelve months in 1996 as compared
to four and one-half months in 1995 and the Company's borrowings under its then-
existing senior credit facility made in connection with the 1996 Acquisitions.
INCOME TAXES. The Company incurred income tax expense of $1.5 million
during 1996, compared to a tax benefit of $762,000 during 1995. The effective
tax rate for 1996 was approximately 45.9% as compared to 42.2% in 1995. The
increase is the result of twelve months of goodwill amortization in 1996 versus
four and one-half months in 1995. The goodwill recognized for financial
reporting of the Funtime Acquisition and the 1996 Acquisitions is not deductible
for Federal income tax purposes. See Note 7 to Notes to Consolidated Financial
Statements.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
The operations of the Company are highly seasonal, with the majority of the
operating season occurring between Memorial Day and Labor Day. Most of the
Company's revenue is collected in the second and third quarters of each year
while most expenditures for capital improvements and major maintenance are
incurred when the parks are closed. The Company employs a substantial number of
seasonal employees who are compensated on an hourly basis. The Company is not
subject to Federal or certain applicable state minimum wage rates in respect of
its seasonal employees. However, the 1996 increase of $.90 an hour over two
years in the Federal minimum wage rate, and any increase in these state minimum
wage rates, may result over time in increased compensation expense for the
Company as it relates to these employees as a result of competitive factors.
21
HISTORICAL
During 1996, the Company generated net cash of $11.3 million from operating
activities. Net cash used in investing activities in 1996 totaled $155.1
million, $116.2 million of which was employed in connection with the 1996
Acquisitions (other than Riverside Park) and $39.4 million represented amounts
spent for capital expenditures, offset slightly by proceeds received from
equipment sales. Net cash provided by financing activities for 1996 totaled
$119.1 million, reflecting the net proceeds from the June 1996 public offering
described below and borrowings under the Company's senior credit facility,
offset, in part, by scheduled repayments of capitalized lease obligations.
During 1997, the Company generated net cash of $47.2 million from operating
activities. Net cash used in investing activities in 1997 totaled $217.1
million, $81.4 million of which was employed in connection with the acquisitions
of Riverside Park and Kentucky Kingdom and $135.9 million represented amounts
spent for capital expenditures at the Company's parks. Net cash provided by
financing activities for 1997 totaled $250.2 million, reflecting the net
proceeds from the January 1997 offerings of Common Stock and $125.0 million
principal amount of the Company's 9 3/4% Senior Notes due 2007 (the "1997
Premier Notes") described below, offset in part by repayment of borrowings under
the Company's senior credit facility.
In June 1996, the Company completed a public offering of approximately 3.9
million shares of Common Stock at a price to the public of $18.00 per share,
resulting in aggregate net proceeds to the Company of approximately $65.3
million. In connection with the June 1996 public offering, all of the Company's
then outstanding shares of preferred stock, together with all accrued dividends
thereon, were converted into approximately 2.6 million shares of Common Stock.
In January 1997, the Company completed two concurrent public offerings, issuing
an additional 6.9 million shares of Common Stock at a price to the public of
$29.00 per share, resulting in aggregate net proceeds to the Company of
approximately $189.5 million, and issuing $125.0 million principal amount of the
1997 Premier Notes, resulting in net proceeds of approximately $120.7 million.
On October 31, 1996, the Company acquired substantially all of the assets
used in the operation of Elitch Gardens for $62.5 million in cash. On November
19, 1996, the Company acquired substantially all of the assets used in the
operation of the Waterworld Parks for an aggregate cash consideration of $17.25
million. On December 4, 1996, the Company acquired substantially all of the
assets of The Great Escape for $33.0 million in cash. On February 5, 1997, the
Company acquired all of the capital stock of the owner of Riverside Park for
approximately $22.2 million, of which $1.0 million was paid in Common Stock with
the balance paid in cash. On April 1, 1997, the Company assumed management of
Marine World, and subsequently exercised a long-term lease option for a portion
of the park and obtained a purchase option with respect to the entire property.
In November 1997, the Company purchased substantially all of the assets used in
the operation of Kentucky Kingdom for a purchase price of $64.0 million, of
which approximately $4.8 million was paid by delivery of 121,671 shares of
Common Stock, with the balance paid in cash and by assumption of certain
liabilities. Depending on the level of revenues at Kentucky Kingdom during each
of the 1998 through 2000 seasons, the Company may be required to issue
additional shares of Common Stock to the seller.
At December 31, 1997, substantially all of Premier's indebtedness was
represented by the 1997 Premier Notes and the Company's 12% Senior Notes due
2003 (the "1995 Premier Notes," and, together with the 1997 Premier Notes, the
"Premier Notes") in an aggregate principal amount of $215.0 million, which
require aggregate annual interest payments of approximately $23.0 million.
Except in the event of a change of control of the Company and certain other
circumstances, no principal payment on the Premier Notes is due until the
maturity dates thereof, August 15, 2003 in the case of the 1995 Premier Notes
and January 15, 2007, in the case of the 1997 Premier Notes. In February 1998,
Premier terminated its $115.0 million senior secured credit facility and
obtained a commitment with respect to the Premier Credit Facility. The Company
will expense its remaining deferred charges related to the terminated facility
in the
22
first quarter of 1998. The Company entered into the Premier Credit Facility on
March 13, 1998. The Company anticipates that it will borrow 125.0 million
thereunder, in connection with the Walibi acquisition.
PRO FORMA
Upon consummation of the Six Flags transactions, the Company intends to
issue (i) approximately 13,000,000 shares of Common Stock, (ii) approximately
5,000,000 PInES(SM) (depositary shares representing approximately $200.0 million
of Mandatorily Convertible Preferred Stock), (iii) depositary shares
representing up to $200.0 million of Seller Preferred Stock, (iv) approximately
$250.0 million accreted amount of Company Senior Discount Notes, (v) $280.0
million aggregate principal amount of Company Senior Notes and (vi) $170.0
million aggregate principal amount of New SFEC Notes. The PInES(SM) will accrue
cumulative dividends (payable, at the Company's option, in cash or shares of
Common Stock), and will be mandatorily convertible into Common Stock in 2001.
The Seller Preferred Stock will accrue cumulative cash dividends and the Company
is required to offer to purchase the Seller Preferred Stock in 2010. The Company
Senior Discount Notes will not require any interest payments prior to September
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
Company Senior Notes will require annual interest payments of approximately $28
million (based on an assumed interest rate) and, except in the event of a change
of control of the Company or certain other circumstances, will not require any
principal payments prior to their maturity in 2006. The New SFEC Notes will
require annual interest payments of approximately $16 million (based on an
assumed interest rate) and, except in the event of a change of control of the
Company or certain other circumstances, will not require any principal payments
prior to their maturity in 2006. The net proceeds of the New SFEC Notes,
together with other funds, will be deposited in escrow to repay in full the SFEC
Zero Coupon Senior Notes. In addition, in connection with the Six Flags
transactions, the Company will (i) assume $285.0 million principal amount at
maturity of the SFTP Senior Subordinated Notes, which had an accreted value of
$269.9 million at December 28, 1997, (ii) refinance all outstanding SFTP bank
indebtedness with the proceeds of $420.0 million of borrowings under the Six
Flags Credit Facility, and (iii) refinance all outstanding bank debt of SFEC
with a portion of the proceeds of the Offerings. The SFTP Senior Subordinated
Notes require interest payments of approximately $34.9 million per annum,
payable semi-annually commencing December 15, 1998, and, except in certain
circumstances, no principal payments are due thereon until their maturity date,
June 15, 2005. Term loan borrowings under the Six Flags Credit Facility will
mature on November 30, 2004 (with principal payments of $1.0 million in each of
1998 through 2001, $25.0 million in 2002, $40.0 million in 2003 and $303.0
million at maturity). Revolving credit borrowings under this facility ($100.0
million) mature on the fifth anniversary of the Six Flags Credit Facility.
Borrowings under the Six Flags Credit Facility will be guaranteed by SFEC and
SFTP's subsidiaries and will be secured by a pledge by SFEC of the stock of SFTP
and by substantially all of the assets of SFTP and its subsidiaries (other than
real estate). The Premier Credit Facility includes a five-year $75.0 million
revolving credit facility, a five-year $100.0 million term loan facility (with
principal payments of $10.0 million, $25.0 million, $30.0 million and $35.0
million in the second, third, fourth and fifth years) and an eight-year $125.0
million term loan facility (with principal payments of $1.0 million in each of
the first six years and $25.0 million and $94.0 million in the seventh and
eighth years, respectively). Borrowings under the Premier Credit Facility are
guaranteed by Premier Operations' domestic subsidiaries and secured by
substantially all of the assets of Premier Operations and such subsidiaries
(other than real estate).
There can be no assurance that the Offerings and the Company's acquisition
of SFEC will be consummated, or, if consummated, that the terms of the
securities sold in the Offerings will conform to the proposed terms thereof
described in this Report.
On a pro forma basis as of December 31, 1997, the Company would have had
total outstanding indebtedness in the accreted principal amount of $1,832.0
million (excluding $161.1 million accreted value
23
of the SFEC Zero Coupon Senior Notes which will be repaid from proceeds of the
New SFEC Notes, together with other funds). Based on actual interest rates for
debt outstanding at December 31, 1997 and assumed interest rates for pro forma
debt, annual interest payments for 1998 on this indebtedness would have
aggregated $136.9 million. In addition, annual dividend payments on the
Convertible Preferred Stock at assumed dividend rates would have aggregated
$28.0 million.
By reason of the Six Flags acquisition, the Company will be required to
offer to purchase the SFTP Senior Subordinated Notes at a price equal to 101% of
their accreted amount (approximately $287.9 million at June 15, 1998). On March
16, 1998, the last reported sales price of these notes was substantially in
excess of their accreted amount. The Company does not expect to be required to
purchase any material amount of these notes by reason of this offer. Although
the Company has entered into discussions with lenders to provide a standby
arrangement to finance the purchase of such notes, there can be no assurance
that such discussions will be successful or that the Company will be able to
obtain any other financing in the event that it should become necessary.
Following the Six Flags transactions, the Company will be required to (i)
make minimum annual distributions of approximately $46.2 million (subject to
cost of living adjustments) to its partners in two Six Flags parks, Six Flags
Over Texas and Six Flags Over Georgia (the "the Co-Venture Parks"); and (ii)
make minimum capital expenditures at each of the Co-Venture Parks during rolling
five-year periods, generally based on 6% of such park's revenue. Cash flow from
operations at the Co-Venture Parks will be used to satisfy these requirements,
before any funds are required from the Company. The Company has also agreed to
purchase a maximum number of 5% per year (accumulating to the extent not
purchased in any given year) of limited partnership units outstanding as of the
date of the co-venture agreements that govern the partnerships (to the extent
tendered by the unit holders). The agreed price for these purchases is based on
a valuation for each respective Co-Venture Park equal to the greater of (i) a
value derived by multiplying its weighted-average four year EBITDA (as defined
therein) 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) $250.0 million in the case of the Georgia
park and $374.8 million 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 2026 and 2027, respectively. As the Company purchases units, it will be
entitled to the minimum distribution and other distributions attributable to
such units unless it is then in default under its obligations to its partners at
the Co-Venture Parks. The Company estimates that its maximum unit purchase
obligation for 1998, when purchases are required only for the Georgia park, will
aggregate approximately $13 million (approximately $31 million for 1999 when
purchases for both partnerships are required) and its minimum capital
expenditures at these parks for 1998 will total $11 million.
The Company's liquidity could be adversely affected by unfavorable weather,
accidents or the occurrence of an event or condition, including negative
publicity or significant local competitive events, that significantly reduces
paid attendance and, therefore, revenue at any of its theme parks. On June 2,
1997, a slide collapsed at the Company's Waterworld park in Concord, California,
resulting in one fatality and the park's closure for twelve days. The park
re-opened with the approval of the City of Concord on June 14, 1997. Although
the collapse and the resulting closure had a material adverse impact on that
park's operating performance for 1997, as well as a lesser impact on the
Company's Sacramento water park (which is also named "Waterworld"), located
approximately seventy miles from the Concord park, the Company's other parks
were not adversely affected. The Company has recovered all of the Concord park's
operating shortfall under its business interruption insurance. In addition, the
Company believes that its liability insurance coverage should be more than
adequate to provide for any personal injury liability which may ultimately be
found to exist in connection with the collapse.
The Company believes that, based on current and anticipated operating
results, cash flow from operations, available cash, available borrowings under
the Credit Facilities and the net proceeds of the Offerings (to the extent not
used in connection with the Six Flags acquisition) will be adequate to meet the
24
Company's future liquidity needs, including anticipated requirements for working
capital, capital expenditures, scheduled debt and preferred stock dividends and
its obligations under arrangements relating to the Co-Venture Parks, for at
least the next several years. The Company may, however, need to refinance all or
a portion of its debt on or prior to maturity or to obtain additional financing.
NEWLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of "comprehensive
income" and its components in a set of financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
currently does not have any components of comprehensive income that are not
included in net income. After the acquisition of Walibi, the only item not
currently included in the Company's consolidated statement of operations would
be the currency translation adjustment that will be reported as part of
stockholders' equity after the acquisition. The Company will adopt SFAS No. 130
in the year 1998.
Also in June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 is effective for periods beginning after December 15, 1997.
SFAS No. 131 requires that a public entity report financial and descriptive
information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company will adopt SFAS No.
131 in 1998. However, such adoption is not expected to impact the Company's
financial disclosures because the Company's current operations are limited to
one reportable operating segment under SFAS No. 131's definitions. After the
acquisition of Walibi, the Company will be required to disclose certain
financial information related to its foreign operations.
In January 1997, the Securities and Exchange Commission issued Release No.
33-7386, which requires enhanced descriptions of accounting policies for
derivative financial instruments and derivative commodity instruments in the
footnotes to financial statements. The release also requires certain
quantitative and qualitative disclosure outside financial statements about
market risks inherent in market risk sensitive instruments and other financial
instruments. The requirements regarding accounting policy descriptions were
effective for any fiscal period ending after June 15, 1997. However, because
derivative financial and commodity instruments have not materially affected the
Company's consolidated financial position, cash flows or results of operations,
this part of the release does not affect the Company's 1997 financial statement
disclosures. The quantitative and qualitative disclosures required by the
release will be initially provided in the Company's annual report on Form 10-K
for the year ending December 31, 1998.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of past practices in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company anticipates that it will be able to test its entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material.
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.
25
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 1998.
(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 1998.
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 1998.
(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 1998.
26
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 the Premier Parks Inc.
and subsidiaries, the notes thereto, the related report thereon of independent
auditors, and financial statement schedules are filed under Item 8 of this
Report:
PAGE
-----------
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets--December 31, 1997 and 1996................................................... F-3
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995............................................................ F-4
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995............................................................ F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995............................................................ 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
The Company's Current Report on Form 8-K, dated November 7, 1997, as amended.
The Company's Current Report on Form 8-K, dated December 15, 1997.
The Company's Current Report on Form 8-K, dated February 9, 1998.
(c) Exhibits
See Item 14(a)(3) above.
27
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 23, 1998
PREMIER PARKS INC.
By: /s/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
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.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board,
/s/ KIERAN E. BURKE Chief Executive Officer
- ------------------------------ (Principal Executive March 23, 1998
Kieran E. Burke Officer)
and Director
/s/ GARY STORY
- ------------------------------ President, Chief Operating March 23, 1998
Gary Story Officer and Director
Chief Financial Officer
/s/ JAMES F. DANNHAUSER (Principal Financial and
- ------------------------------ Accounting March 23, 1998
James F. Dannhauser Officer) and Director
/s/ PAUL A. BIDDELMAN
- ------------------------------ Director March 23, 1998
Paul A. Biddelman
/s/ MICHAEL E. GELLERT
- ------------------------------ Director March 23, 1998
Michael E. Gellert
/s/ JACK TYRRELL
- ------------------------------ Director March 23, 1998
Jack Tyrrell
/s/ SANDY GURTLER
- ------------------------------ Director March 23, 1998
Sandy Gurtler
/s/ CHARLES R. WOOD
- ------------------------------ Director March 23, 1998
Charles R. Wood
28
PREMIER PARKS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
-----
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets--December 31, 1997 and 1996.................................................... F-3
Consolidated Statements of Operations--Years ended December 31, 1997, 1996 and 1995........................ F-4
Consolidated Statements of Stockholders' Equity--Years ended December 31, 1997, 1996 and 1995.............. F-5
Consolidated Statements of Cash Flows--Years ended December 31, 1997, 1996 and 1995........................ F-6
Notes to Consolidated Financial Statements................................................................. F-8
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Premier Parks Inc.:
We have audited the accompanying consolidated balance sheets of Premier
Parks Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Parks Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Oklahoma City, Oklahoma
February 23, 1998
F-2
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
-------------- ------------
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 84,288,000 4,043,000
Accounts receivable............................................................... 6,537,000 1,180,000
Inventories....................................................................... 5,547,000 4,200,000
Income tax receivable............................................................. 995,000 --
Prepaid expenses and other current assets......................................... 3,690,000 3,416,000
-------------- ------------
Total current assets.......................................................... 101,057,000 12,839,000
-------------- ------------
Other assets:
Deferred charges.................................................................. 10,123,000 6,752,000
Deposits and other................................................................ 3,949,000 9,087,000
-------------- ------------
Total other assets............................................................ 14,072,000 15,839,000
-------------- ------------
Property and equipment, at cost..................................................... 485,866,000 263,175,000
Less accumulated depreciation..................................................... 35,610,000 17,845,000
-------------- ------------
450,256,000 245,330,000
-------------- ------------
Intangible assets................................................................... 48,876,000 31,669,000
Less accumulated amortization..................................................... 2,940,000 874,000
-------------- ------------
45,936,000 30,795,000
-------------- ------------
Total assets.................................................................. $ 611,321,000 304,803,000
-------------- ------------
-------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................................. $ 23,199,000 11,059,000
Accrued interest payable.......................................................... 9,785,000 4,304,000
Current portion of capitalized lease obligations.................................. 795,000 1,492,000
-------------- ------------
Total current liabilities..................................................... 33,779,000 16,855,000
-------------- ------------
Long-term debt and capitalized lease obligations:
Long-term debt:
Senior notes.................................................................... 215,000,000 90,000,000
Credit facility................................................................. -- 57,574,000
Capitalized lease obligations..................................................... 1,231,000 1,768,000
-------------- ------------
Total long-term debt and capitalized lease obligations........................ 216,231,000 149,342,000
Other long-term liabilities......................................................... 4,025,000 4,846,000
Deferred income taxes............................................................... 33,537,000 20,578,000
-------------- ------------
Total liabilities............................................................. 287,572,000 191,621,000
-------------- ------------
Stockholders' equity:
Preferred stock, 500,000 shares authorized at December 31, 1997 and 1996; no
shares issued and outstanding at December 31, 1997 and 1996..................... -- --
Common stock, $.05 par value, 90,000,000 and 30,000,000 shares authorized at
December 31, 1997 and 1996, respectively; 18,899,457 and 11,392,669 shares
issued and 18,873,111 and 11,366,323 shares outstanding at December 31, 1997 and
1996, respectively.............................................................. 944,000 569,000
Capital in excess of par value.................................................... 354,235,000 144,642,000
Accumulated deficit............................................................... (17,241,000) (31,340,000)
Deferred compensation............................................................. (13,500,000) --
-------------- ------------
324,438,000 113,871,000
Less 26,346 common shares of treasury stock, at cost.............................. (689,000) (689,000)
-------------- ------------
Total stockholders' equity.................................................... 323,749,000 113,182,000
-------------- ------------
Total liabilities and stockholders' equity.................................... $ 611,321,000 304,803,000
-------------- ------------
-------------- ------------
See accompanying notes to consolidated financial statements.
F-3
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
-------------- ------------- ------------
Revenue:
Theme park admissions................................................... $ 94,611,000 41,162,000 21,863,000
Theme park food, merchandise, and other................................. 99,293,000 52,285,000 19,633,000
-------------- ------------- ------------
Total revenue....................................................... 193,904,000 93,447,000 41,496,000
-------------- ------------- ------------
Operating costs and expenses:
Operating expenses...................................................... 81,356,000 42,425,000 19,775,000
Selling, general and administrative..................................... 36,547,000 16,927,000 9,272,000
Costs of products sold.................................................. 23,025,000 11,101,000 4,635,000
Depreciation and amortization........................................... 19,792,000 8,533,000 3,866,000
-------------- ------------- ------------
Total operating costs and expenses.................................. 160,720,000 78,986,000 37,548,000
-------------- ------------- ------------
Income from operations.............................................. 33,184,000 14,461,000 3,948,000
Other income (expense):
Interest expense, net................................................... (17,775,000) (11,121,000) (5,578,000)
Termination fee, net of expenses........................................ 8,364,000 -- --
Other income (expense).................................................. (59,000) (78,000) (177,000)
-------------- ------------- ------------
Total other income (expense)........................................ (9,470,000) (11,199,000) (5,755,000)
-------------- ------------- ------------
Income (loss) before income taxes................................... 23,714,000 3,262,000 (1,807,000)
Income tax expense (benefit).............................................. 9,615,000 1,497,000 (762,000)
Income (loss) before extraordinary loss............................. 14,099,000 1,765,000 (1,045,000)
Extraordinary loss on extinguishment of debt, net of income tax benefit of
$90,000 in 1995......................................................... -- -- (140,000)
-------------- ------------- ------------
Net income (loss)................................................... $ 14,099,000 1,765,000 (1,185,000)
-------------- ------------- ------------
-------------- ------------- ------------
Net income (loss) applicable to common stock........................ $ 14,099,000 1,162,000 (1,714,000)
-------------- ------------- ------------
-------------- ------------- ------------
Weighted average number of common shares outstanding--basic............... 17,938,000 8,603,000 3,938,000
-------------- ------------- ------------
-------------- ------------- ------------
Income (loss) per average common share outstanding--basic:
Income (loss) before extraordinary loss............................. $ .79 .14 (.40)
Extraordinary loss.................................................. -- -- (.04)
-------------- ------------- ------------
Net income (loss)................................................... $ .79 .14 (.44)
-------------- ------------- ------------
-------------- ------------- ------------
Weighted average number of common shares outstanding--diluted............. 18,438,000 8,972,000 3,938,000
-------------- ------------- ------------
-------------- ------------- ------------
Income (loss) per average common share outstanding--diluted:
Income (loss) before extraordinary loss $ .76 .13 (.40)
Extraordinary loss.................................................. -- -- (.04)
-------------- ------------- ------------
Net income (loss)................................................... $ .76 .13 (.44)
-------------- ------------- ------------
-------------- ------------- ------------
See accompanying notes to consolidated financial statements.
F-4
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
SERIES A, 7%
CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- CAPITAL IN
SHARES SHARES EXCESS OF ACCUMULATED DEFERRED TREASURY
ISSUED AMOUNT ISSUED AMOUNT PAR VALUE DEFICIT COMPENSATION STOCK TOTAL
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1994............. -- $ -- 3,398,467 $ 170,000 50,573,000 (31,920,000) -- (689,000) 18,134,000
Issuance of
preferred
stock............ 200,000 200,000 -- -- 19,800,000 -- -- -- 20,000,000
Conversion of debt
to common stock.. -- -- 1,485,433 74,000 8,888,000 -- -- -- 8,962,000
Net loss........... -- -- -- -- -- (1,185,000) -- -- (1,185,000)
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1995............. 200,000 200,000 4,883,900 244,000 79,261,000 (33,105,000) -- (689,000) 45,911,000
Conversion of
preferred stock
to common
stock............ (200,000) (200,000) 2,560,928 128,000 72,000 -- -- -- --
Issuance of common
stock............ -- -- 3,947,841 197,000 65,309,000 -- -- -- 65,506,000
Net income......... -- -- -- -- -- 1,765,000 -- -- 1,765,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1996............. -- -- 11,392,669 569,000 144,642,000 (31,340,000) -- (689,000) 113,182,000
Issuance of common
stock............ -- -- 7,506,788 375,000 209,593,000 -- (14,625,000) -- 195,343,000
Amortization of
deferred
compensation..... -- -- -- -- -- -- 1,125,000 -- 1,125,000
Net income......... -- -- -- -- -- 14,099,000 -- -- 14,099,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
Balances at
December 31,
1997............. -- $ -- 18,899,457 $ 944,000 354,235,000 (17,241,000) (13,500,000) (689,000) 323,749,000
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
--------- --------- --------- --------- ---------- ------------ ------------- ----------- ----------
See accompanying notes to consolidated financial statements.
F-5
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
-------------- -------------- --------------
Cash flows from operating activities:
Net income (loss).............................................. $ 14,099,000 1,765,000 (1,185,000)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................ 19,792,000 8,533,000 3,866,000
Deferred compensation........................................ 1,125,000 -- --
Extraordinary loss on early extinguishment of debt........... -- -- 230,000
Amortization of debt issuance costs.......................... 1,918,000 811,000 317,000
Gain on sale of assets....................................... (46,000) (51,000) --
(Increase) decrease in accounts receivable................... (5,272,000) (215,000) 5,794,000
Deferred income taxes (benefit).............................. 6,737,000 1,433,000 (808,000)
Increase in income tax receivable............................ (995,000) -- --
Increase in inventories and prepaid expenses and other
current assets............................................. (1,150,000) (2,360,000) (455,000)
(Increase) decrease in deposits and other assets............. 6,237,000 (3,947,000) 1,197,000
Increase (decrease) in accounts payable and accrued
expenses................................................... (776,000) 5,216,000 (2,366,000)
Increase in accrued interest payable......................... 5,481,000 146,000 4,056,000
-------------- -------------- --------------
Total adjustments........................................ 33,051,000 9,566,000 11,831,000
-------------- -------------- --------------
Net cash provided by operating activities................ 47,150,000 11,331,000 10,646,000
-------------- -------------- --------------
Cash flows from investing activities:
Proceeds from the sale of equipment............................ 246,000 476,000 --
Other investments.............................................. (38,000) (48,000) (63,000)
Additions to property and equipment............................ (135,852,000) (39,423,000) (10,732,000)
Acquisition of theme park assets............................... (60,050,000) (116,154,000) --
Acquisition of Stuart Amusement Company in 1997 and Funtime
Parks, Inc. in 1995, net of cash acquired.................... (21,376,000) -- (63,344,000)
-------------- -------------- --------------
Net cash used in investing activities.................... (217,070,000) (155,149,000) (74,139,000)
-------------- -------------- --------------
Cash flows from financing activities:
Repayment of debt.............................................. (66,576,000) (1,082,000) (17,487,000)
Proceeds from borrowings....................................... 132,500,000 57,574,000 93,500,000
Net cash proceeds from issuance of preferred stock............. -- -- 20,000,000
Net cash proceeds from issuance of common stock................ 189,530,000 65,306,000 --
Payment of debt issuance costs................................. (5,289,000) (2,724,000) (5,099,000)
-------------- -------------- --------------
Net cash provided by financing activities................ 250,165,000 119,074,000 90,914,000
-------------- -------------- --------------
Increase (decrease) in cash and cash equivalents................. 80,245,000 (24,744,000) 27,421,000
Cash and cash equivalents at beginning of year................... 4,043,000 28,787,000 1,366,000
-------------- -------------- --------------
Cash and cash equivalents at end of year......................... $ 84,288,000 4,043,000 28,787,000
-------------- -------------- --------------
-------------- -------------- --------------
Supplementary cash flow information:
Cash paid for interest......................................... $ 18,315,000 11,640,000 1,701,000
-------------- -------------- --------------
-------------- -------------- --------------
Cash paid (received) for income taxes (refund)................. $ 3,697,000 64,000 (22,000)
-------------- -------------- --------------
-------------- -------------- --------------
F-6
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Supplemental disclosure of noncash investing and financing activities:
1997
- The Company issued $5,813,000 of common stock (153,800 shares) as
components of theme park acquisitions.
- The Company issued restricted common stock (450,000 shares) to certain
employees valued at $14,625,000.
- The Company assumed $268,000 of capital lease obligations as a component
of a theme park acquisition.
1996
- Preferred stock (200,000 shares) was converted into common stock
(2,560,928 shares).
- The Company issued $200,000 of common stock (9,091 shares) as a component
of a theme park acquisition.
- The Company acquired certain equipment through a capital lease with an
obligation of $64,000.
1995
- Common stock (1,485,433 shares) was exchanged for $9,095,000 of debt, net
of $133,000 of costs.
- The Company acquired certain rides and attractions through capital leases
with obligations totaling $3,259,000.
See accompanying notes to consolidated financial statements.
F-7
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES
DESCRIPTION OF BUSINESS
Premier Parks Inc. (the Company) owns and operates regional theme amusement
and water parks. As of December 31, 1997, the Company and its subsidiaries own
and operate twelve parks: Adventure World, a combination theme and water park
located in Largo, Maryland; Darien Lake & Camping Resort, a combination theme
and water park with an adjacent camping resort and performing arts center,
located between Buffalo and Rochester, New York; Elitch Gardens, a theme park
located in Denver, Colorado; Frontier City, a western theme park located in
Oklahoma City, Oklahoma; Geauga Lake, a combination theme and water park located
near Cleveland, Ohio; The Great Escape and Splash Water Kingdom, a combination
theme and water park located in Lake George, New York; Kentucky Kingdom--The
Thrill Park, located in Louisville, Kentucky; Riverside Park, a theme park
located near Springfield, Massachusetts; two water parks operated under the name
Waterworld/USA, located in Northern California; White Water Bay, a tropical
water park located in Oklahoma City, Oklahoma; and Wyandot Lake, a water park
which also includes "dry rides" located in Columbus, Ohio. The Company also
manages Marine World Africa USA in Vallejo, California.
BASIS OF PRESENTATION
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles.
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries, and limited partnerships and limited liability
companies in which the Company beneficially owns 100% of the interests.
Intercompany transactions and balances have been eliminated in consolidation.
The Company's investment in a partnership in which it does not own a
controlling interest is accounted for using the equity method and included in
other assets.
CASH EQUIVALENTS
Cash equivalents of $73,694,000 and $2,753,000 at December 31, 1997 and
1996, 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
original maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and primarily consist of products for resale including merchandise and food and
miscellaneous supplies including repair parts for rides and attractions.
F-8
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
ADVERTISING COSTS
Production costs of commercials and programming are charged to operations in
the year first aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the year incurred. The amounts capitalized
at year-end are included in prepaid expenses.
Advertising and promotions expense incurred was $21,600,000, $9,100,000, and
$5,700,000 during 1997, 1996, and 1995, respectively.
DEFERRED CHARGES
The Company capitalizes all costs related to the issuance of debt with such
costs included in deferred charges in the consolidated balance sheets. 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. As
of December 31, 1996, approximately $626,000 of costs associated with the
Company's January 1997 debt and equity offerings (notes 5 and 8) were also
included in deferred charges.
DEPRECIATION AND AMORTIZATION
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. Rides
and attractions are depreciated using the straight-line method over 5-25 years.
Amortization of property associated with capitalized lease obligations is
included in depreciation expense in the consolidated financial statements.
Maintenance and repairs are charged directly to expense as incurred, while
betterments and renewals are generally capitalized in the property accounts.
When an item is retired or otherwise disposed of, the cost and applicable
accumulated depreciation are removed and the resulting gain or loss is
recognized.
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited, generally 25 years. Impairment of goodwill is assessed
whenever events or changes in circumstances indicate that the carrying amount of
goodwill may not be recoverable.
LONG-LIVED ASSETS
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
January 1, 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have an impact on the
Company's consolidated financial position or results of operations in 1996.
F-9
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
INTEREST EXPENSE RECOGNITION
Interest on notes payable is generally recognized as expense on the basis of
stated interest rates. Capitalized lease obligations that do not have a stated
interest rate or that have interest rates considered to be lower than prevailing
market rates (when the obligations were incurred) are carried at amounts
discounted to impute a market rate of interest cost. Total interest expense
incurred was $25,714,000, $12,597,000, and $6,074,000 in 1997, 1996 and 1995,
respectively. Interest expense in the accompanying consolidated statements of
operations is shown net of interest income.
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.
INCOME (LOSS) PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." SFAS No. 128
revised the previous calculation methods and presentations of earnings per
share. The statement requires that all prior-period earnings per share data be
restated. The Company adopted SFAS No. 128 in the fourth quarter of 1997 as
required by the statement. The effect of applying SFAS No. 128 was not material
to the Company's prior period's earnings per share data. The previously reported
amounts for earnings per share were replaced by basic earnings per share and
diluted earnings per share. Basic earnings per share for the second quarter of
1997 and for the year 1996 are $.01 per share higher than the previously
reported primary earnings per share amounts.
The Company issued convertible preferred stock in 1995. Preferred stock
dividends of $603,000 and $529,000, which were paid through additional issuances
of common stock, were considered in determining net income (loss) applicable to
common stock in 1996 and 1995, respectively.
Under the provisions of SFAS No. 128, basic earnings 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 earnings per share
reflects the potential dilution that could occur if the Company's outstanding
stock options were exercised (calculated using the treasury stock method).
The following table reconciles the weighted average number of common shares
outstanding used in the calculations of basic and diluted income per average
common share outstanding for the years 1997 and 1996. The Company incurred a
loss in 1995 and the effect on diluted loss per average common share
F-10
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT POLICIES (CONTINUED)
outstanding of all contingently issuable common shares was antidilutive.
Therefore, there is no difference in the number of shares used in the basic and
diluted calculations for the year 1995.
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
------------ ----------
Weighted average number of common shares outstanding--basic............................ 17,938,000 8,603,000
Dilutive effect of potential common shares issuable upon the exercise of employee stock
options.............................................................................. 500,000 369,000
------------ ----------
Weighted average number of common shares outstanding--diluted.......................... 18,438,000 8,972,000
------------ ----------
------------ ----------
STOCK OPTIONS
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB No. 25, "Accounting for Stock Issued to Employees," whereby
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. Companies which
continue to apply the provisions of APB No. 25 are required by SFAS No. 123 to
disclose pro forma net earnings and net earnings per share for employee stock
option grants made in 1995, 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB No. 25, and has provided the pro forma
disclosures required by SFAS No. 123 in note 8.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Reclassifications have been made to certain amounts reported in 1996 and
1995 to conform with the 1997 presentation.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts for cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses, and accrued interest payable approximate
fair value because of the short maturity of these financial instruments. The
fair value estimates, methods, and assumptions relating to the Company's other
financial instruments are discussed in note 5.
F-11
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(3) ACQUISITION OF THEME PARKS PRIOR TO JANUARY 1998
Pursuant to a merger agreement, on August 15, 1995, the Company acquired
Funtime Parks, Inc. (Funtime), a company owning three regional theme parks, for
an initial purchase price of approximately $60,000,000 in cash, with an
additional amount of approximately $5,400,000 paid to the former shareholders as
a postclosing adjustment related to the operating cash flows of the former
Funtime parks after the acquisition date. The acquisition was accounted for as a
purchase. As of the acquisition date and after giving effect to the purchase,
$18,030,000 of deferred tax liabilities were recognized for the tax consequences
attributable to the differences between the financial statement carrying amounts
and the tax basis of Funtime's assets and liabilities. Approximately $13,500,000
of cost in excess of the fair value of the net assets acquired was recorded as
goodwill.
The accompanying 1997, 1996 and 1995 consolidated statements of operations
reflect the results of Funtime from the date of acquisition (August 15, 1995).
On October 31, 1996, the Company acquired all of the interests of a
partnership which owned substantially all of the assets used in the operation of
Elitch Gardens for $62,500,000 in cash. Thereupon, the partnership dissolved by
operation of law. As a result, the assets were then directly owned by the
Company. The transaction was accounted for as a purchase. In addition, the
Company entered into a five-year non-competition agreement with the president of
Elitch Gardens Company's general partner. Based upon the purchase method of
accounting, the purchase price was primarily allocated to property and equipment
with $4,506,000 of costs recorded as intangible assets, primarily goodwill. The
general partner and a principal limited partner of Elitch Gardens Company have
agreed severally to indemnify the Company for claims in excess of $100,000 in an
amount up to $1,000,000 per partner.
On November 19, 1996, the Company acquired all of the interests of two
partnerships which owned substantially all of the assets used in the operation
of the two Waterworld/USA water parks and a related family entertainment center
for an aggregate cash purchase price of approximately $17,250,000, of which
$862,500 was placed in escrow to fund potential indemnification claims by the
Company. Thereupon, the partnerships dissolved by operation of law. As a result,
the assets were then directly owned by the Company. The transaction was
accounted for as a purchase. Based upon the purchase method of accounting, the
purchase price was primarily allocated to property and equipment with $5,110,000
of costs recorded as intangible assets, primarily goodwill.
On December 4, 1996, the Company acquired all of the interests in a limited
liability company which owned substantially all of the assets used in the
operation of The Great Escape and Splash Water Kingdom for a cash purchase price
of $33,000,000. The transaction was accounted for as a purchase. In connection
with the acquisition, the Company entered into a non-competition agreement and a
related agreement with the former owner, providing for an aggregate
consideration of $1,250,000. In addition, as a component of the transaction, the
Company issued 9,091 shares of its common stock ($200,000) to an affiliate of
the former owner. Based upon the purchase method of accounting, the purchase
price was primarily allocated to property and equipment with $9,221,000 of costs
recorded as intangible assets, primarily goodwill.
The accompanying 1997 and 1996 consolidated statement of operations reflects
the results of the Elitch Gardens, Waterworld/USA, and The Great Escape and
Splash Water Kingdom acquisitions from their respective acquisition dates.
F-12
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(3) ACQUISITION OF THEME PARKS PRIOR TO JANUARY 1998 (CONTINUED)
On February 5, 1997, the Company acquired all of the outstanding common
stock of Stuart Amusement Company (Stuart), the owner of Riverside Park and an
adjacent multi-use stadium, for a purchase price of $22,200,000 ($1,000,000 of
which was paid through issuance of 32,129 of the Company's common shares). The
transaction was accounted for as a purchase. As of the acquisition date and
after giving effect to the purchase, $6,623,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between the
financial statement carrying amounts and the tax basis of Stuart's assets and
liabilities. Approximately $10,484,000 of cost in excess of the fair value of
the net assets acquired was recorded as intangible assets, primarily goodwill.
On November 7, 1997, the Company acquired all of the interests of a limited
liability company which owned substantially all of the theme park assets of
Kentucky Kingdom--The Thrill Park (Kentucky Kingdom), located in Louisville,
Kentucky, for a purchase price of $64,000,000 of which $4,831,000 was paid
through the issuance of 121,671 shares of the Company's common stock. The
Company may be required to issue additional shares of common stock based upon
the level of revenues at Kentucky Kingdom during 1998, 1999, and 2000. The
acquisition was accounted for as a purchase. The purchase price was primarily
allocated to property and equipment with $4,592,000 of costs recorded as
intangible assets, primarily goodwill. The value of the additional shares, if
any, will be recognized as additional goodwill.
The accompanying 1997 consolidated statement of operations reflects the
results of Stuart and Kentucky Kingdom from their respective acquisition dates.
The following summarized pro forma results of operations assumes that for
the year ended December 31, 1997, the Stuart and Kentucky Kingdom acquisitions
and related transactions occurred as of the beginning of 1997 and for the year
ended December 31, 1996, assumes that these acquisitions, the Elitch Gardens,
The Great Escape and Splash Water Kingdom, and Waterworld/USA acquisitions, and
the related transactions occurred as of the beginning of 1996.
1997 1996
-------------- --------------
(UNAUDITED)
(IN THOUSANDS)
Total revenues............................................... $ 215,620 175,224
Net income................................................... 15,210 12,436
Income per weighted average common share
outstanding--basic......................................... .81 .66
F-13
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(4) PROPERTY AND EQUIPMENT
Property and equipment, at cost, are classified as follows:
1997 1996
-------------- -------------
Land.......................................................... $ 40,099,000 27,760,000
Buildings and improvements.................................... 159,661,000 106,302,000
Rides and attractions......................................... 254,969,000 112,379,000
Equipment..................................................... 31,137,000 16,734,000
-------------- -------------
Total......................................................... 485,866,000 263,175,000
Less accumulated depreciation................................. (35,610,000) (17,845,000)
-------------- -------------
$ 450,256,000 245,330,000
-------------- -------------
-------------- -------------
Included in property and equipment are costs and accumulated depreciation
associated with capitalized leases as follows:
1997 1996
------------ ----------
Cost............................................................... $ 6,386,000 6,069,000
Accumulated depreciation........................................... (826,000) (577,000)
------------ ----------
$ 5,560,000 5,492,000
------------ ----------
------------ ----------
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
At December 31, 1997 and 1996, long-term debt and capitalized lease
obligations consist of:
1997 1996
-------------- -------------
Long term debt:
Senior notes due 2003 (a)................................... $ 90,000,000 90,000,000
Senior notes due 2007 (b)................................... 125,000,000 --
Credit facility (c)......................................... -- 57,574,000
-------------- -------------
Total long-term debt........................................ 215,000,000 147,574,000
Capitalized lease obligations:
Capitalized lease obligations maturing 1998 through 2000,
requiring aggregate annual lease payments ranging from
approximately $20,000 to $548,000 including implicit
interest at rates ranging from 9.875% to 14% and secured
by equipment with a net book value of approximately
$5,560,000 as of December 31, 1997........................ 2,026,000 3,260,000
-------------- -------------
Total................................................... $ 217,026,000 150,834,000
-------------- -------------
-------------- -------------
F-14
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
- ------------------------
(a) The notes are senior unsecured obligations of the Company, with a
$90,000,000 aggregate principal amount, and mature on August 15, 2003. The notes
bear interest at 12% per annum payable semiannually on August 15 and February 15
of each year, commencing February 15, 1996. The notes are redeemable, at the
Company's option, in whole or part, at any time on or after August 15, 1999, at
varying redemption prices. Additionally, at any time prior to August 15, 1998,
the Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. These notes are
guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The proceeds of the notes were used in the Funtime acquisition and in the
refinancing of previously existing indebtedness. The Company recognized a
$230,000 loss on early extinguishment of debt during 1995. The loss was
recorded, net of tax effect, as an extraordinary item.
The indenture under which the notes were issued was amended January 21, 1997, in
contemplation of the Company's January 1997 senior debt and equity offerings.
The indenture places limitations on operations and sales of assets by the
Company or its subsidiaries, permits incurrence of additional debt only in
compliance with certain financial ratios, and limits the Company's ability to
pay cash dividends or make other distributions to the holders of its capital
stock or to redeem such stock.
The indenture, as amended, permits the Company, subject to certain limitations,
to incur additional indebtedness, including the $125,000,000 of indebtedness
issued January 31, 1997 described below and secured senior revolving credit
facility indebtedness of up to $75,000,000.
All of the Company's subsidiaries, except for one indirect wholly owned
subsidiary, Funtime-Famous Recipe, Inc., are full, unconditional, and joint and
several guarantors of the notes. The assets and operations of Funtime-Famous
Recipe, Inc. are inconsequential to the Company and its consolidated financial
position and results of operations. Condensed financial statement information
for the guarantors is not included herein, as the Company does not believe such
information would be material to the understanding of the Company and its direct
and indirect subsidiaries.
(b) On January 31, 1997, the Company issued $125,000,000 of 9 3/4% senior
notes due January 2007. The notes are senior unsecured obligations of the
Company and equal to the Company's 2003 notes in priority upon liquidation.
Interest is payable on January 15 and July 15 of each year, commencing July 15,
1997. The notes are redeemable, at the Company's option, in whole or in part, at
any time on or after January 15, 2002, at varying redemption prices.
Additionally, at any time prior to January 15, 2000, the Company may redeem in
the aggregate up to 33 1/3% of the original aggregate principal amount of notes
with the proceeds of one or more public equity offerings at a redemption price
of 110% of the principal amount. The notes are guaranteed on a senior,
unsecured, joint and several basis by all of the Company's principal operating
subsidiaries.
The indenture under which the notes were issued places limitations substantially
similar to those of the Company's senior notes due in 2003. A portion of the
proceeds were used to fully pay amounts outstanding under the Company's Credit
Facility.
F-15
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
(c) In connection with the 1996 acquisitions described in note 3, in October
1996 the Company entered into a senior secured credit facility (the "Credit
Facility") with a syndicate of banks. The Credit Facility had an aggregate
availability of $115,000,000 of which (i) up to $30,000,000 under the revolving
credit facility (the "Revolving Credit Facility") was for working capital and
general corporate purposes; (ii) up to $25,000,000 ("Facility A") was to finance
capital expenditures prior to April 30, 1998; and (iii) up to $60,000,000
("Facility B") was to finance certain acquisitions by the Company (including the
acquisitions described in note 3), provided that at least 50% of the
consideration for any such acquisition or improvements under Facility A or
Facility B (collectively, the "Term Loan Facility") was required to have been
funded by the Company. Interest rates per annum under the Credit Facility were
equal to a base rate equal to the higher of the Federal Funds Rate plus 1/2% or
the prime rate of Citibank N.A., in each case plus the Applicable Margin (as
defined thereunder) or the London Interbank Offered Rate plus the Applicable
Margin. Commitment fees approximated $620,000 and $53,000 in 1997 and 1996,
respectively. The Revolving Credit Facility was to terminate October 31, 2002
(reducing to $15,000,000 on October 31, 2001) and borrowings under the Term Loan
Facility were to mature October 31, 2001; however, aggregate principal payments
of $7,500,000, $20,000,000 and $25,000,000 were to be required under the Term
Loan Facility during 1998, 1999 and 2000, respectively. Borrowings under the
Revolving Credit Facility were required to be fully paid for at least 30 days
each year and were secured by substantially all of the Company's assets (other
than real estate) and guarantees of the Company's principal subsidiaries.
Borrowings under the Term Loan Facility were secured by the assets acquired with
the proceeds thereof, and limited guarantees of the Company's principal
subsidiaries. The Credit Facility contained restrictive covenants that, among
other things, limited the ability of the Company and its subsidiaries to dispose
of assets; incur additional indebtedness or liens; pay dividends; repurchase
stock; make investments; engage in mergers or consolidations and engage in
certain transactions with subsidiaries and affiliates. In addition, the Credit
Facility required that the Company comply with certain specified financial
ratios and tests, including ratios of total debt to earnings before interest,
taxes and depreciation and amortization (EBITDA), interest expense to EBITDA,
and fixed charges to EBITDA.
On January 31, 1997, the Company and the syndicate of banks agreed to amend the
Credit Facility. The $30,000,000 Revolving Credit Facility has a maturity date
of December 31, 2001 (without reduction prior to that date). Additionally,
following repayment of amounts that were then outstanding under the Term Loan
Facility through the use of proceeds from the Company's January 1997 debt and
equity offerings, the Term Loan Facility was converted into an $85,000,000
reducing revolving credit facility. The Term Loan Facility, as amended, will be
available to fund acquisitions and make capital improvements. The amount
available under the Term Loan Facility reduces to $75,000,000 on December 31,
1999, to $45,000,000 on December 31, 2000, and matures on December 31, 2001.
Borrowings under the amended Credit Facility are secured by substantially all
the assets of the Company and its subsidiaries (other than real estate) and are
guaranteed by the Company's operating subsidiaries. The restrictive covenants
are essentially the same as those of the original October 1996 credit facility.
On February 9, 1998, the Company terminated the Credit Facility. No amounts
were outstanding as of December 31, 1997 or as of the termination date.
F-16
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
Annual maturities of long-term debt and capitalized lease obligations,
adjusted to reflect the payment of the amounts outstanding under the Credit
Facility through use of proceeds of the January 1997 note issuance, during the
five years subsequent to December 31, 1997, are as follows:
1998.......................................................... $ 795,000
1999.......................................................... 412,000
2000.......................................................... 723,000
2001.......................................................... 67,000
2002 and thereafter........................................... 215,029,000
-----------
$217,026,000
-----------
-----------
The fair value of the Company's long-term debt is estimated by using quoted
prices or discounted cash flow analyses based on current borrowing rates for
debt with similar maturities. Under the above assumptions the estimated fair
value of long-term debt and capitalized lease obligations at December 31, 1997
and 1996, is approximately $236,000,000 and $160,000,000, respectively.
(6) TERMINATION FEE
During October 1997, the Company entered into an agreement with the limited
partner of the partnership that owns the Six Flags Over Texas theme park. The
general terms of the agreement were for the Company to become the managing
general partner of the partnership, to manage the operations of the park, to
receive a portion of the income from such operations, and to purchase limited
partnership units over the term of the agreement. The provisions of the
agreement also granted the Company an option to purchase all of the partnership
interests in the partnership at the end of the agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was terminated.
Subsequent to the Company's agreement with the limited partnership, the prior
operator of the theme park also reached an agreement with the limited
partnership. The Company received the termination fee in December 1997 and has
included the termination fee, net of $2,386,000 of expenses associated with the
transaction, as a component of other income (expense) in the accompanying 1997
consolidated statement of operations.
F-17
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(7) INCOME TAXES
Income tax expense (benefit) allocated to operations for 1997, 1996 and 1995
consists of the following:
CURRENT DEFERRED TOTAL
------------ ---------- ----------
1997:
U.S. Federal............................................................ $ 2,505,000 6,060,000 8,565,000
State and local......................................................... 373,000 677,000 1,050,000
------------ ---------- ----------
$ 2,878,000 6,737,000 9,615,000
------------ ---------- ----------
------------ ---------- ----------
1996:
U.S. Federal............................................................ -- 1,335,000 1,335,000
State and local......................................................... 64,000 98,000 162,000
------------ ---------- ----------
$ 64,000 1,433,000 1,497,000
------------ ---------- ----------
------------ ---------- ----------
1995:
U.S. Federal............................................................ (44,000) (508,000) (552,000)
State and local......................................................... -- (210,000) (210,000)
------------ ---------- ----------
$ (44,000) (718,000) (762,000)
------------ ---------- ----------
------------ ---------- ----------
Recorded income tax expense (benefit) allocated to operations differed from
amounts computed by applying the U.S. federal income tax rate of 35% in 1997 and
34% in 1996 and 1995 to pretax income (loss) approximately as follows:
1997 1996 1995
------------ ---------- ----------
Computed "expected" federal income tax expense (benefit)................... $ 8,300,000 1,109,000 (614,000)
Amortization of goodwill................................................... 327,000 180,000 78,000
Other, net................................................................. 200,000 87,000 (68,000)
Effect of state and local income taxes, net of federal tax benefit......... 788,000 121,000 (158,000)
------------ ---------- ----------
$ 9,615,000 1,497,000 (762,000)
------------ ---------- ----------
------------ ---------- ----------
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting and tax
depreciation methods and periods for property and equipment. The Company's net
operating loss carryforwards, alternative minimum tax carryforwards, and
deferred compensation amounts represent future income tax deductions (deferred
tax assets). The tax effects of these temporary differences as of December 31,
1997 and 1996, are presented below:
1997 1996
------------- ------------
Deferred tax assets before valuation allowance....................................... $ 21,891,000 11,496,000
Less valuation allowance............................................................. 1,196,000 1,196,000
------------- ------------
Net deferred tax assets.............................................................. 20,695,000 10,300,000
Deferred tax liabilities............................................................. 54,232,000 30,878,000
------------- ------------
Net deferred tax liability........................................................... $ 33,537,000 20,578,000
------------- ------------
------------- ------------
F-18
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(7) INCOME TAXES (CONTINUED)
The Company's deferred tax liability results from the financial carrying
value for property and equipment being substantially in excess of the Company's
tax basis in the corresponding assets. The Company's property and equipment are
being depreciated primarily 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 value and tax basis difference will reverse before
the expiration of the Company's net operating loss carryforwards and taking into
account the Company's projections of future taxable income over the same period,
management believes that it will more likely than not realize the benefits of
these net future deductions.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. As a result of
the ownership changes, net operating loss carryforwards generated before the
ownership changes can be deducted in subsequent periods only in certain limited
situations. Accordingly, it is probable that the Company will not be able to use
most of the net operating loss carryforwards generated prior to October 30,
1992. A valuation allowance for the pre-October 1992 net operating loss
carryforwards has been established. The Company experienced an additional
ownership change on June 4, 1996, as a result of the issuance of shares of
common stock and the conversion of preferred stock into additional shares of
common stock. This ownership change may limit the use of the Company's November
1992 through June 1996 net operating loss carryforwards in a given year;
however, it is more likely than not that the post-October 1992 carryforwards
will be fully utilized by the Company before their expiration.
As of December 31, 1997, the Company has approximately $36,709,000 of net
operating loss carryforwards available for federal income tax purposes which
expire through 2012. Included in that total are pre-October 30, 1992, net
operating loss carryforwards of which $3,400,000 are not expected to be
utilized. Additionally, the Company has approximately $4,370,000 of alternative
minimum tax credits which have no expiration date.
(8) STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company has authorized 500,000 shares of preferred stock, $1 par value.
During 1995, the Company issued 200,000 shares of Series A, 7% cumulative
convertible preferred stock at $100 per share. During June 1996, the shares,
including all dividends thereon, were converted into 2,560,928 common shares.
The Company has agreed to provide the former preferred stockholders certain
registration rights relative to the common stock issued upon conversion of the
preferred stock.
Holders of Series A preferred stock were entitled to receive cumulative
dividends at an annual rate of $7 per share. At the Company's election,
dividends were payable in cash and/or in additional Series A preferred stock.
The terms of the Company's senior notes and credit facility limit the Company's
ability to pay cash dividends. All dividends paid to the preferred stockholders
were made by additional issuances of common stock at the time of the conversion
into shares of common stock as described above.
All shares of preferred stock rank senior and prior in right to all of the
Company's now or hereafter issued common stock with respect to dividend payments
and distribution of assets upon liquidation or dissolution of the Company.
F-19
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
In August 1995, the Company issued 1,175,063 common shares in full exchange
for the Company's $7,000,000 senior subordinated convertible notes and 310,370
common shares in full exchange for the Company's $2,095,000 junior subordinated
term loan. The Company has agreed to provide the stockholders certain
registration rights in the future.
On April 4, 1996, a majority of the Company's common and preferred
shareholders and the Company's board of directors approved a one-for-five
reverse stock split effective May 6, 1996. The par value of common stock was
increased to $.05 per share from $.01 per share. Additionally, the authorized
common shares of the Company were changed to 30,000,000. The accompanying
consolidated financial statements and notes to the consolidated financial
statements reflect the reverse stock split as if it had occurred as of the
earliest date presented.
On June 4, 1996, and June 6, 1996, the Company issued 3,425,000 and 513,750,
respectively, of its common shares resulting in net proceeds to the Company of
$65,306,000. Additionally, on June 4, 1996, the Company exchanged 2,560,928 of
its common shares for all 200,000 shares of its previously outstanding preferred
stock.
On January 31, 1997, the Company issued 6,900,000 of its common shares
resulting in net proceeds to the Company of approximately $189,530,000.
STOCK OPTIONS AND WARRANTS
In 1996, 1995, 1994, and 1993, certain members of the Company's management
were issued seven-year options to purchase 337,500, 248,000, 36,000, and 145,200
of its common shares, at an exercise price of $22.00, $8.25, $7.50, and $5.00
per share, respectively, under the Company's 1996, 1995 and 1993 Stock Option
and Incentive Plans (the Plans). No stock options were issued during 1997. Stock
options are granted with an exercise price equal to the stock's fair market
value at the date of grant. These options may be exercised on a cumulative basis
with 20% of the total exercisable on date of issuance and with an additional 20%
being available for exercise on each of the succeeding anniversary dates. Any
unexercised portion of the options will automatically and without notice
terminate upon the seventh anniversary of the issuance date or upon termination
of employment.
At December 31, 1997, there were 503,300 additional shares available for
grant under the Plans. The per share weighted-average fair value of stock
options granted during 1996 and 1995 was $14.97 and $5.56 on the date of grant
using the Black--Scholes option-pricing model with the following
weighted-average assumptions: 1996--expected dividend yield 0%, risk-free
interest rate of 6.25%, and an expected life of 5 years; 1995--expected dividend
yield 0%, risk-free interest rate of 5.5%, and an expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options
F-20
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) STOCKHOLDERS' EQUITY (CONTINUED)
under SFAS No. 123, the Company's net income (loss) would have been changed to
the pro forma amounts indicated below:
1997 1996 1995
------------- ---------- -----------
Net income (loss) applicable to common stock:
As reported $ 14,099,000 1,162,000 (1,714,000)
Pro forma 13,325,000 390,000 (1,880,000)
Income (loss) per average common share
outstanding--basic:
As reported $ .79 .14 (.44)
Pro forma .74 .05 (.48)
Pro forma net income (loss) applicable to common stock reflects only options
granted in 1996 and 1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in the pro forma net
income (loss) amounts presented above because compensation cost is reflected
over the options' vesting period of 4 years and compensation cost for options
granted prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
----------- -----------------
Balance at December 31, 1994........................................................ 181,200 $ 5.50
Granted........................................................................... 248,000 8.25
Exercised......................................................................... -- --
Forfeited......................................................................... -- --
Expired........................................................................... -- --
----------- ------
Balance at December 31, 1995........................................................ 429,200 7.09
Granted........................................................................... 337,500 22.00
Exercised......................................................................... -- --
Forfeited......................................................................... -- --
Expired........................................................................... -- --
----------- ------
Balance at December 31, 1996........................................................ 766,700 13.65
Granted........................................................................... -- --
Exercised......................................................................... -- --
Forfeited......................................................................... (2,000) 5.00
Expired........................................................................... -- --
----------- ------
Balance at December 31, 1997........................................................ 764,700 $ 13.67
----------- ------
----------- ------
At December 31, 1997, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.00 to $22.00 and 5.01
years, respectively.
F-21
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1997, 1996, and 1995, the number of options exercisable was
455,800, 304,460 and 151,120, respectively, and weighted-average exercise price
of those options was $11.25, $10.01 and $6.30, respectively.
In 1989, the Company's current chairman was issued a ten-year warrant to
purchase 26,346 common shares (currently being held as treasury stock) at an
exercise price of $1.00 per share and a ten-year warrant to purchase 18,693
common shares at an exercise price of $1.00 per share.
SHARE RIGHTS PLAN
On December 10, 1997, the Company's board of directors authorized a share
rights plan. 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 voting shares outstanding,
or (b) the commencement or announcement of a person's or group's intention to
commence a tender or exchange offer that could result in a person or group
owning 15% or more of the voting shares outstanding.
Each right entitles its holder (except a holder who is the acquiring person)
to purchase 1/100 of a share of a junior participating series of preferred stock
designated to have economic and voting terms similar to those of one share of
common stock for $250.00, subject to adjustment. In the event of certain merger
or asset sale transactions with another party or transactions which would
increase the equity ownership of a shareholder who then owned 15% or more of the
Company, each right will entitle its holder to purchase securities of the
merging or acquiring party with a value equal to twice the exercise price of the
right.
The rights, which have no voting power, expire in 2008. The rights may be
redeemed by the Company for $.01 per right until the right becomes exercisable.
RESTRICTED STOCK GRANT
The Company has issued 450,000 restricted common shares to members of the
Company's senior management. The restrictions on the stock lapse ratably over a
six-year term commencing January 1, 1998, generally based upon the continued
employment of the members of management. The restrictions also lapse if any or
all members are terminated without cause or if a change in control of the
Company occurs. The fair value of the restricted shares, as determined at the
date of grant, approximated $14,625,000 and will be recognized as an expense
over the vesting term.
(9) 401(K) PLAN
The Company has a qualified, contributory 401(k) plan (the Plan). All
regular employees are eligible to participate in the Plan if they have completed
one full year of service and are at least 21 years old. The Company matches 100%
of the first 2% and 25% of the next 6% of salary contributions made by
employees. The accounts of all participating employees are fully vested. The
Company recognized approximately $377,000, $150,000 and $32,000 of expense in
the years ended December 31, 1997, 1996 and 1995, respectively.
F-22
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(10) MARINE WORLD
In April 1997, the Company became manager of Marine World, a marine and
exotic wildlife park located in Vallejo, California, pursuant to a contract with
an agency of the City of Vallejo under which the Company is entitled to receive
an annual base management fee of $250,000 and up to $250,000 annually in
additional fees based on park performance. 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). At December 31, 1997, the Company is in the process
of adding theme park rides and attractions on the leased land, which is located
within the existing park, in order to create one fully-integrated regional theme
park at the site. The Company is entitled to receive, in addition to the
management fee, 80% of the cash flow generated by the combined operations at the
park, after combined operating expenses and debt service on outstanding debt
obligations relating to the park. The Company also has an option to purchase the
entire site commencing in February 2002 at a purchase price equal to the greater
of the then principal amount of certain debt obligations of the seller (expected
to aggregate $52.0 million at February 2002) or the then fair market value of
the seller's interest in the park (based on a formula relating to the seller's
20% share of Marine World's cash flow). The Company currently expects to
exercise this purchase option when it becomes exercisable.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases office space under a lease agreement which expires April
30, 2001. The lease requires minimum monthly payments over its term and also
escalation charges for proportionate share of expenses as defined in the lease.
An affiliate of the Company shares office space with the Company and has agreed
to pay 50% of the rental payments. Rent expense recognized by the Company (after
deduction of amounts paid by the affiliate) for the years ended December 1997,
1996 and 1995, aggregated $64,000, $64,000, and $68,000, respectively.
The Company leases the sites of Wyandot Lake and each of the two
Waterworld/USA locations with rent based upon percentages of revenues earned by
each park. During 1997, 1996, and 1995, the Company recognized approximately
$1,110,000, $385,000 and $100,000, respectively, of rental expense under these
rent agreements.
Total rental expense, including office space and park sites, was
approximately $2,229,000, $1,227,000, and $550,000 for the years ended December
31, 1997, 1996, and 1995, respectively.
On June 2, 1997, a water slide collapsed at the Company's Waterworld/USA
park in Concord, California, resulting in one fatality and the park's closure
for twelve days. Although the collapse and the resulting closure had a material
adverse impact on that park's operating performance for 1997, as well as a
lesser impact on the Company's Sacramento water park (which is also named
"Waterworld/USA"), located approximately seventy miles from the Concord park,
the Company's other parks were not adversely affected. The Company has recovered
all of the Concord park's operating shortfall under its business interruption
insurance. In addition, the Company believes that its liability insurance
coverage should be adequate to provide for any personal injury liability which
may ultimately be found to exist in connection with the collapse.
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
F-23
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
outcomes of such matters and its experience in contesting, litigating and
settling similar matters. None of the actions are believed by management to
involve amounts that would be material to consolidated financial condition,
operations, or liquidity after consideration of recorded accruals.
(12) CERTAIN TRANSACTIONS
During 1995, in connection with the acquisition of Funtime and the issuance
of the $90,000,000 senior notes, the Company paid investment banking and
financial advisory fees in the amount of $800,000 and $475,000 to Lepercq, de
Neuflize & Co. Incorporated (Lepercq) and Hanseatic Corporation (Hanseatic),
respectively. Two directors of the Company are director and treasurer,
respectively, of Lepercq and Hanseatic.
(13) PROPOSED ACQUISITIONS OF ADDITIONAL THEME PARKS
On December 15, 1997, the Company entered into an agreement with the
majority shareholders of Walibi, S.A. (Walibi), to purchase the outstanding
stock of Walibi held by the majority shareholders. The purchase agreement
commits the Company to tender for the remaining stock. The estimated aggregate
purchase price of the Walibi common stock plus the debt of Walibi to be assumed
by the Company will approximate $140,000,000. The acquisition will be accounted
for using the purchase method of accounting and is expected to be completed in
March 1998.
On February 9, 1998, the Company agreed to purchase 100% of the capital
stock of Six Flags Entertainment Corporation for $965,000,000 (subject to
adjustment) and the assumption of approximately $770,000,000 of indebtedness.
The purchase price is payable in cash or, at the Company's option, cash and up
to $200,000,000 of preferred stock. The Company has filed registration
statements to offer equity and debt securities to fund the cash portion of the
purchase price. The acquisition will be accounted for using the purchase method
of accounting and is expected to be completed in April 1998.
If the agreement to purchase Six Flags is terminated, except as a result of
legal or governmental restrictions or by mutual consent, the Company may be
required to pay a termination fee of $25,000,000.
F-24
PREMIER PARKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1997 and 1996:
1997
----------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------- ------------ ------------- ----------- -------------
Revenue......................................... $ 4,264,000 62,468,000 120,014,000 7,158,000 193,904,000
Net income (loss) applicable to common stock.... (9,742,000) 5,698,000 27,237,000 (9,094,000) 14,099,000
Net income (loss) applicable to common stock per
share:
Basic..................................... $ (.61) .31 1.49 (.48) .79
Diluted................................... $ (.61) .30 1.45 (.48) .76
1996
-------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------ ------------ ------------ ----------- ------------
Revenue..................................... $ 2,430,000 26,953,000 60,409,000 3,655,000 93,447,000
Net income (loss) applicable to common
stock..................................... (5,584,000) (744,000) 16,238,000 (8,748,000) 1,162,000
Net income (loss) applicable to common stock
per share:
Basic................................. $ (1.15) (.11) 1.43 (.77) .14
Diluted............................... $ (1.15) (.11) 1.39 (.77) .13
F-25
EXHIBIT INDEX
PAGE
---------
(3) Article of Incorporation and By-Laws:
(a) Certificate of Incorporation of Registrant dated March 24, 1981 -- incorporated by
reference from Exhibit 3 to Form 10-Q of Registrant for the quarter ended June 30, 1987.
(b) Plan and Agreement of Merger of Registrant and Tierco, a Massachusetts business trust,
dated March 31, 1981 -- incorporated by reference from Exhibit 3 to Form 10-Q of
Registrant for the quarter ended June 30, 1987.
(c) Certificate of Amendment of Certificate of Incorporation of Registrant dated April 14,
1985 -- incorporated by reference from Exhibit 3 to Form 10-Q of Registrant for the
quarter ended June 30, 1987.
(d) Certificate of Amendment of Certificate of Incorporation of Registrant dated May 8, 1987
--incorporated by reference from Exhibit 3 to Form 10-Q of Registrant for the quarter
ended June 30, 1987.
(e) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 11,
1987 -- incorporated by reference from Exhibit 3 to Form 10-Q of Registrant for the
quarter ended June 30, 1987.
(f) Certificate of Amendment of Certificate of Incorporation of Registrant dated April 30,
1991 -- incorporated by reference from Exhibit 3(f) to Form 10-K of Registrant for the
year ended December 31, 1991.
(g) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 30,
1992 -- incorporated by reference from Exhibit 3(g) to Form 10-K of Registrant for the
year ended December 31, 1992.
(h) Certificate of Amendment of Certificate of Incorporation of Registrant dated June 23,
1993 -- incorporated by reference from Exhibit 3(a) to Form 10-Q of Registrant for the
quarter ended June 30, 1993.
(i) Certificate of Amendment to Certificate of Incorporation dated October 7, 1994 --
incorporated by reference from Exhibit 3(i) to Form 10-K of Registrant for the year ended
December 31, 1994.
(j) Certificate of Designation of Series A 7% Cumulative Convertible Preferred Stock (the
"Preferred Stock") of Registrant -- incorporated by reference from Exhibit 3(10) to
Registrant's Registration Statement on Form S-1 (Reg. No. 33-62225) declared effective on
November 9, 1995 (the "Registration Statement").
(k) By-laws of Registrant, as amended --incorporated by reference from Exhibit 3(k) to Form
10-K of Registrant for the year ended December 31, 1996.
(l) Certificate of Amendment to Certificate of Incorporation dated May 6, 1996 --
incorporated by reference from Exhibit 3(l) to Form 10-K of Registrant for the year ended
December 31, 1996.
(m) Certificate of Designation of Series A Junior Preferred Stock of Registrant --
incorporated by reference from Exhibit 2(1.C) to Registrant's Registration Statement on
Form 8-A dated January 21, 1998.
*(n) Certificate of Amendment to Certificate of Incorporation dated June 16, 1997.
PAGE
---------
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and United States Trust Company of New York, as trustee
(including the form of Notes) -- incorporated by reference from Exhibit 4(2) to the
Registration Statement.
(b) Form of First Supplemental Indenture dated as of November 9, 1995 -- incorporated by
reference from Exhibit 4(2.1) to the Registration Statement.
(c) Purchase Agreement, dated August 10, 1995, among the Registrant, the subsidiaries of the
Registrant named therein and Chemical Securities Inc. -- incorporated by reference from
Exhibit 4(3) to the Registration Statement.
(d) Exchange and Registration Rights Agreement, dated August 15, 1995, among the Registrant,
the subsidiaries of the Registrant named therein and Chemical Securities Inc. --
incorporated by reference from Exhibit 4(4) to the Registration Statement.
(e) Form of Subscription Agreement between the Registrant and each of the purchasers of
shares of Preferred Stock -- incorporated by reference from Exhibit 4(10) to the
Registration Statement.
(f) Convertible Note Purchase Agreement, dated as of March 3, 1993, between the Registrant
and the purchasers named therein (including forms of Senior Subordinated Convertible Note
and Registration Rights Agreement) -- incorporated by reference from Exhibit 4(i) to Form
10-K of the Registrant for the year ended December 31, 1992.
(g) Form of Subscription Agreement, dated October 1992, between the Registrant and certain
investors --incorporated by reference from Exhibit 4(a) to the Registrant's Current
Report on Form 8-K dated October 30, 1992.
(h) Stock Purchase and Warrant Issuance Agreement, dated October 16, 1989, between The Tierco
Group, Inc. and Kieran E. Burke -- incorporated by reference from Exhibit 4(i) to Form
10-K of Registrant for the year ended December 31, 1989.
(i) Warrant, dated October 16, 1989, to purchase 131,728 shares of Common Stock issued by The
Tierco Group, Inc. to Kieran E. Burke -- incorporated by reference from Exhibit 4(k) to
Form 10-K of Registrant for the year ended December 31, 1989.
(j) Warrant, dated October 16, 1989, to purchase 93,466 shares of Common Stock issued by The
Tierco Group, Inc. to Kieran E. Burke -- incorporated by reference from Exhibit 4(1) to
Form 10-K of Registrant for the year ended December 31, 1989.
(k) Form of Common Stock Certificate -- incorporated by reference from Exhibit 4(l) to
Registrant's Registration Statement on form S-2 (Reg. No. 333-08281) declared effective
on May 28, 1996.
(l) Form of Registration Rights Agreement among Registrant, Edward J. Carroll, Jr. and the
Carroll Family Limited Partnership -- incorporated by reference from Exhibit 4(m) to
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16763) declared effective
on January 27, 1997.
ii
PAGE
---------
(m) Form of Indenture dated as of February 1, 1997, among the Registrant and the Bank of New
York, as trustee (including the form of Notes) -- incorporated by reference from Exhibit
4(l) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-16763) declared
effective on January 27, 1997.
(n) Form of Second Supplemental Indenture dated January 21, 1997 -- incorporated by reference
form Exhibit 4(n) to Registrant's Registration Statement on Form S-2 (Reg. No. 333-16763)
declared effective on January 27, 1997.
(10) Material Contracts:
(a) Agreement of Limited Partnership of 229 East 79th Street Associates LP dated July 24,
1987, together with amendments thereto dated, respectively, August 31, 1987, October 21,
1987, and December 21, 1987 -- incorporated by reference from Exhibit 10(i) to Form 10-K
of Registrant for year ended December 31, 1987.
(b) Agreement of Limited Partnership of Frontier City Partners Limited Partnership, dated
October 18, 1989, between Frontier City Properties, Inc. as general partner, and the
Registrant and Frontier City Properties, Inc. as limited partners -- incorporated by
reference from Exhibit 10(g) to the Registrant's Current Report on Form 8-K dated October
18, 1989.
(c) Asset Purchase Agreement, dated December 10, 1990, between Registrant and Silver Dollar
City, Inc., -- incorporated by reference from Exhibit 10(c) to the Registrant's Current
Report on Form 8-K dated February 6, 1991.
(d) Asset Purchase Agreement, dated December 16, 1991, among the Registrant, Tierco Maryland,
RWP, John J. Mason and Stuart A. Bernstein -- incorporated by reference from Exhibit
10(a) to the Registrant's Current Report on Form-8K dated January 31, 1992.
(e) Asset Transfer Agreement, dated as of June 30, 1992, by and among the Registrant, B&E
Holding Company and the creditors referred to therein -- incorporated by reference from
Exhibit 10(a) to the Registrant's Current Report on Form 8-K dated July 20, 1992.
(f) Purchase Agreement, dated September 30, 1992, among the Registrant, Palma Real Estate
Management Company, First Stratford Life Insurance Company and Executive Life Insurance
Company -- incorporated by reference to Exhibit 2(a) to the Registrant's Current Report
on Form 8-K dated September 30, 1992.
(g) Lease Agreement, dated January 18, 1993, among Registrant, Frontier City Partners Limited
Partnership and Fitraco N.V. -- incorporated by reference from Exhibit 10(k) to Form 10-K
of Registrant for the year ended December 31, 1992.
(h) Lease Agreement, dated January 18, 1993, among Registrant, Tierco Maryland, Inc. and
Fitraco N.V. -- incorporated by reference from Exhibit 10(l) to Form 10-K of Registrant
for the year ended December 31, 1992.
iii
PAGE
---------
(i) Security Agreement and Conditional Sale Contract, between Chance Rides, Inc. and Tierco
Maryland, Inc. and Guaranty of Registrant in favor of Chance Rides, Inc. -- incorporated
by reference from Exhibit 10(m) to Form 10-K of Registrant for the year ended December
31, 1992.
(j) Registrant's 1993 Stock Option and Incentive Plan -- incorporated by reference from
Exhibit 10(k) to Form 10-K of Registrant for the year ended December 31, 1993.
(k) Agreement and Plan of Merger, dated as of June 30, 1995 among the Registrant, Premier
Parks Acquisition Inc., Funtime Parks, Inc. ("Funtime") and its shareholders --
incorporated by reference from Exhibit 10(11) to the Registration Statement.
(l) Escrow Agreement, dated as of August 15, 1995, among the Registrant, certain shareholders
of Funtime and First National Bank of Ohio, Trust Division -- incorporated by reference
from Exhibit 10(12) to the Registration Statement.
(m) Consulting Agreement, dated as of August 15, 1995, between Registrant and Bruce E.
Walborn -- incorporated by reference from Exhibit 10(13) to the Registration Statement.
(n) Consulting Agreement, dated as of August 15, 1995, between Registrant and Gaspar C.
Lococo --incorporated by reference from Exhibit 10(14) to the Registration Statement.
(o) Lease Agreement dated December 22, 1995 between Darien Lake Theme Park and Camping
Resort, Inc. and The Metropolitan Entertainment Co., Inc. -- incorporated by reference
from Exhibit 10(o) to Form 10-K of Registrant for the year ended December 31, 1995.
(p) Asset Purchase Agreement dated August 23, 1996, among the Registrant, a subsidiary of the
Registrant, Storytown USA, Inc., Fantasy Riders Corporation and Charles R. Wood --
incorporated by reference from Exhibit 10(p) to Registrant's Registration Statement on
Form S-2 (Reg. No. 333-16573) declared effective on January 27, 1997.
(q) Asset Purchase Agreement dated September 23, 1996, among the Registrant, a subsidiary of
the Registrant, Elitch Gardens Company, Hensel Phelps Construction Co. and Chilcott
Entertainment Company -- incorporated by reference from Exhibit 10(a) to the Company's
Current Report on Form 8-K, dated November 13, 1996.
(r) Asset Purchase Agreement dated as of October 10, 1996, among the Registrant, a subsidiary
of the Registrant, FRE, Inc. (Family Recreational Enterprises, Inc.) ("FRE") and the
shareholders of FRE listed on the signature page thereof -- incorporated by reference
from Exhibit 10(r) to Registrant's Registration Statement on Form S-2 (Reg. No.
333-16573) declared effective on January 27, 1997.
iv
PAGE
---------
(s) Asset Purchase Agreement dated as of October 10, 1996, among the Registrant, a subsidiary
of the Registrant, FRE, Concord Entertainment Company, R&B Entertainment, LLC, the
shareholders of FRE listed on the signature page thereof and the members of R&B listed on
the signature page thereof -- incorporated by reference from Exhibit 10(s) to
Registrant's Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective
on January 27, 1997.
(t) Amended and Restated Credit Agreement, dated as of January 31, 1997, among the
Registrant, the Subsidiary Guarantors thereof, the lenders party thereto and the Bank of
New York, as Administrative Agent and Issuing Lender -- incorporated by reference from
Exhibit 10(t) to Form 10-K of Registrant for the year ended December 31, 1996.
(u) Consulting and Non-Competition Agreement, dated October 30, 1996, between Registrant and
Arnold S. Gurtler -- incorporated by reference from Exhibit 10(u) to Registrant's
Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective on January 27,
1997.
(v) Non-Competition Agreement, dated as of October 30, 1996 between the Registrant and Ascent
Entertainment Group, Inc. -- incorporated by reference from Exhibit 10(s) to Registrant's
Registration Statement on Form S-2 (Reg. No. 333-16573) declared effective on January 27,
1997.
(w) Consulting Agreement, dated December 4, 1996, between the Registrant and Charles R. Wood
-- incorporated by reference from Exhibit 10(b) to the Registrant's Current Report on
Form 8-K, dated December 13, 1996.
(x) Non-Competition Agreement dated as of December 4, 1996 between the Registrant and Charles
R. Wood --incorporated by reference from Exhibit 10(c) of the Registrant's Current Report
on Form 8-K, dated December 13, 1996.
(y) Stock Purchase Agreement dated as of December 4, 1996, among the Registrant, Stuart
Amusement Company, Edward J. Carroll, Jr., and the Carroll Family Limited Partnership --
incorporated by reference from Exhibit 10(y) to Registrant's Registration Statement on
Form S-2 (Reg. No. 333-16573) declared effective on January 27, 1997.
*(z) Registrant's 1996 Stock Option and Incentive Plan.
*(aa) 1997 Management Agreement Relating to Marine World, by and between the Marine World Joint
Powers Authority and Park Managment Corp, dated as of the 1st day of February, 1997.
*(ab) Purchase Option Agreement Among City of Vallejo, Marine World Joint Powers Authority and
Redevelopment Agency of the City of Vallejo, and Park Management Corp., dated as of
August 29, 1997.
*(ac) Letter Agreement, dated November 7, 1997, amending 1997 Management Agreement Relating to
Marine World, by and between the Marine World Joint Powers Authority and Park Managment
Corp., dated as of the 1st day of February, 1997.
v
PAGE
---------
*(ad) Reciprocal Easement Agreement between Marine World Joint Powers Authority and and Park
Management Corp., dated as of November 7, 1997.
*(ae) Parcel Lease between Marine World Joint Powers Authority and and Park Management Corp.,
dated as of November 7, 1997.
*(af) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and Kieran E.
Burke.
*(ag) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and Gary
Story.
*(ah) Employment Agreement, dated as of July 31, 1997, between Premier Parks Inc. and James F.
Dannhauser.
(ai) Stock Purchase Agreement dated as of September 26, 1997, among Registrant, Kentucky
Kingdom, Inc., Hart-Lunsford Enterprises, LLC, and Edward J. Hart -- incorporated by
reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
(aj) Employment Agreement dated as of November 7, 1997, between Registrant and Edward J. Hart
-- incorporated by reference from Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
(ak) Rights Agreement dated as of January 12, 1998 between Premier Parks Inc. and Bank One
Trust Company, N.A., as Rights Agent -- incorporated by reference from Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated December 15, 1997.
(al) Stock Purchase Agreement dated as of December 15, 1997, between the Registrant and
Centrag S.A., Karaba N.V. and Westkoi N.V. -- incorporated by reference from Exhibit 10.1
to the Registrant's Current Report on Form 8-K dated December 15, 1997.
(am) Agreement and Plan of Merger dated as of February 9, 1998, by and among the Registrant,
Six Flags Entertainment Corporation and others -- incorporated by reference from Exhibit
10(a) to the Registrant's Current Report on Form 8-K dated February 9, 1998.
*(21) Subsidiaries of the Registrant.
*(23) Consent of KPMG Peat Marwick LLP
- ------------------------
* Filed herewith.
vi