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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

Commission File Number:  1-13703

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)
(Exact name of registrant as specified in its charter)

1540 Broadway, 15th Fl., New York, NY 10036
(Address of principal executive offices)

Registrant’s telephone number, including area code:  (212) 652-9403

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1993.  Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.  Yes o  No x

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No x

The aggregate market value based on the average bid and asked price on the over-the-counter market of the registrant’s common stock, held by non-affiliates of the registrant was $13,250,087 as of June 30, 2009.  For purposes of this information, the outstanding shares of common stock owned by directors and executive officers of the registrant were deemed to be shares of common stock held by affiliates.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  o Yes  o No

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, par value $0.025 per share, of the registrant outstanding as of March 1, 2010 was 98,324,181 shares.  The common stock and the Preferred Income Equity Redeemable Shares are traded on the Over-the-Counter Bulletin Board under the trading symbol “SIXFQ” and “SIX FPFQ,” respectively

DOCUMENTS INCORPORATED BY REFERENCE

The information required in Part III by Item 10, as to directors, and by Items 11, 12, 13 and 14 is incorporated by reference to either the registrant’s proxy statement for the 2010 annual meeting of stockholders or in an amendment to this Annual Report on Form 10-K, which will be filed by the registrant within 120 days after the close of its 2009 fiscal year.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding (i) the adequacy of cash flows from operations and available cash and (ii) our reorganization proceedings under title 11 of the United States Code (the “Bankruptcy Code”), 11 U.S.C. §§ 101, et seq., as amended (“Chapter 11”), in the United States Bankruptcy Court for the District of Delaware.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. These risks and uncertainties include, but are not limited to, statements we make regarding: (i) our ability to develop, prosecute, confirm and consummate one or more Chapter 11 plans of reorganization (See “Chapter 11 Reorganization” herein), (ii) the potential adverse impact of the Chapter 11 filing on our operations, management and employees, (iii) customer response to the Chapter 11 filing, (iv) the adequacy of cash flows from operations, available cash and available amounts under our credit facilities to meet future liquidity needs, or (v) our continued viability, our operations and results of operations.  Additional important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and include the following:

·             factors impacting attendance, such as local conditions, events, disturbances, contagious diseases and terrorist activities;

·             accidents occurring at our parks;

·             adverse weather conditions;

·             competition with other theme parks and other entertainment alternatives;

·             changes in consumer spending patterns;

·             pending, threatened or future legal proceedings; and

·             the other factors that are described in “Risk Factors.”

Any forward-looking statement made by us in this document speaks only as of the date of this document. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

*        *        *        *        *

·              As used in this Annual Report on Form 10-K, unless the context requires otherwise, the terms “we,” “our,” “Company” or “Six Flags” refer collectively to Six Flags, Inc. and its consolidated subsidiaries, and “Holdings” refers only to Six Flags, Inc., without regard to its subsidiaries.

·              Looney Tunes characters, names and all related indicia are trademarks of Warner Bros., a division of Time Warner Entertainment Company, L.P.  Batman and Superman and all related characters, names and indicia are copyrights and trademarks of DC Comics. Cartoon Network is a trademark of Cartoon Network. Six Flags and all related indicia are registered trademarks of Six Flags Theme Parks Inc. Fiesta Texas and all related indicia are trademarks of Fiesta Texas, Inc.

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PART I

ITEM 1.                             BUSINESS

Introduction

We are the largest regional theme park operator in the world.  After giving effect to the sale of seven parks in April 2007 (the “Sale Parks”) and other park acquisitions and dispositions discussed in Note 3 to Notes to Consolidated Financial Statements, we own or operate 19 parks, including 17 operating domestic parks, one park in Mexico and one park in Canada.  In February 2010, in connection with the Chapter 11 Filing (as defined below), we decided to reject the lease with the Kentucky State Fair Board relating to our Louisville park and we will no longer operate the park.  During the second quarter of 2008, we decided that we would not re-open our New Orleans park, which sustained very extensive damage during Hurricane Katrina in late August 2005 and has not re-opened since.  During the third quarter of 2009, we mutually agreed with the City of New Orleans to terminate our lease with the City of New Orleans and to settle the related litigation, pursuant to which we, among other things, paid the City of New Orleans $3 million and transferred title to our property and equipment at the site to the City of New Orleans, including land owned by us adjacent to the leased site.  We have recorded appropriate provisions for impairment and liabilities related to the abandonment of the New Orleans park operations and the rejection of the lease for our Louisville park.  See Notes 3 and 14 to Notes to Consolidated Financial Statements.  The 20 parks we operated in 2009 (which excludes our New Orleans park and the Sale Parks) had attendance of approximately 24 million during the 2009 season.

In 1998, we acquired the former Six Flags, which had operated regional theme parks under the Six Flags name for nearly forty years and established an internationally recognized brand name. We have ownership of the “Six Flags” brand name in the United States and foreign countries throughout the world.  To capitalize on this name recognition, 17 of our parks (excluding Six Flags New Orleans, Six Flags Kentucky Kingdom and the Sale Parks) are branded as “Six Flags” parks.

We hold exclusive long-term licenses for theme park usage throughout the United States (except the Las Vegas metropolitan area), Canada, Mexico and other countries of certain Warner Bros. and DC Comics characters. These characters include Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman, Superman and others. In addition, we have certain rights to use the Hanna-Barbera and Cartoon Network characters, including Yogi Bear, Scooby-Doo, The Flintstones and others. We use these characters to market our parks and to provide an enhanced family entertainment experience. Our licenses include the right to sell merchandise featuring the characters at the parks, and to use the characters in our advertising, as walk-around characters and in theming for rides, attractions and retail outlets. We believe using these characters promotes increased attendance, supports higher ticket prices, increases lengths-of-stay and enhances in-park spending.

Our parks are located in geographically diverse markets across North America. Our theme parks offer a complete family-oriented entertainment experience. Our theme parks generally offer a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and retail outlets.  In the aggregate, during 2009 our theme parks (excluding Six Flags New Orleans, Six Flags Kentucky Kingdom and the Sale Parks) offered approximately 800 rides, including over 120 roller coasters, making us the leading provider of “thrill rides” in the industry.

We believe that our parks benefit from limited direct theme park competition, since the combination of a limited supply of real estate appropriate for theme park development, high initial capital investment, long development lead-time and zoning restrictions provides each of our parks with a significant degree of protection from competitive new theme park openings. Based on our knowledge of the development of other theme parks in the United States, we estimate that it would cost at least $300 million and would take a minimum of two years to construct a new regional theme park comparable to one of our major Six Flags-branded theme parks.

Chapter 11 Reorganization

On June 13, 2009, Holdings, Six Flags Operations Inc. (“SFO”) and Six Flags Theme Parks Inc. (“SFTP”) and certain of SFTP’s domestic subsidiaries (the “SFTP Subsidiaries” and, collectively with Holdings, SFO and SFTP, the “Debtors”) filed voluntary petitions for relief (the “Chapter 11 Filing”) under Chapter 11 in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (Case No. 09-12019).  The entities that own our interests in Six Flags Over Texas (“SFOT”) and Six Flags Over Georgia (including Six Flags White

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Water Atlanta) (“SFOG” and together with SFOT, the “Partnership Parks”) and our Canadian and Mexican parks are not debtors in the Chapter 11 Filing.

In anticipation of the Chapter 11 Filing, the Debtors entered into a Plan Support Agreement (the “Support Agreement”), dated June 13, 2009, with certain participating lenders (the “Participating Lenders”) who are parties to the Second Amended and Restated Credit Agreement, dated as of May 25, 2007 (as amended, modified or otherwise supplemented from time to time, the “Credit Agreement”), among Holdings, SFO, SFTP (as the primary borrower), certain of SFTP’s foreign subsidiaries party thereto, the lenders thereto (the “Lenders”), the agent banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”).  The Debtors thereafter proposed a joint Chapter 11 plan of reorganization (the “Original Plan”), as outlined in the Support Agreement, that had the unanimous support of the Lenders’ steering committee and the Administrative Agent.

Under the Original Plan, the holders of claims under the Credit Agreement against SFTP and certain of its wholly-owned domestic subsidiaries (“Prepetition Credit Agreement Claims”) would have converted such claims into: (i) approximately 92% of the common stock (“New Common Stock”) to be issued by Holdings following its emergence from Chapter 11 (“Reorganized SFI”) (subject to dilution by a new long-term incentive plan (the “Long-Term Incentive Plan”)); and (ii) a new term loan in the aggregate principal amount of $600 million (the “Original New Term Loan”).  Holders of Prepetition Credit Agreement Claims against SFO also would have received a new guaranty of the obligations under the Original New Term Loan by SFO following its emergence from Chapter 11 (“Reorganized SFO”).  All other secured claims against the Debtors that were allowed, if any, would have been either paid in full or reinstated, in the Debtors’ discretion.  Allowed unsecured claims against all of the Debtors other than Holdings and SFO would have been paid in full or been reinstated (but solely to the extent such claims were allowed by the Bankruptcy Court).  Claims against SFTP and SFO, respectively, based on a guaranty of the obligations of SFOG Acquisition A, Inc., SFOG Acquisition B, L.L.C., SFOT Acquisition I, Inc. and SFOT Acquisition II, Inc., each an indirect subsidiary of Holdings (the “Acquisition Parties”), and the general partners of the Partnership Parks, to Historic TW Inc. and Warner Bros. Entertainment Inc. and certain of their affiliates (collectively, “Time Warner”) under a certain promissory note and a certain subordinated indemnity agreement, dated April 1, 1998, among certain Six Flags entities, Time Warner, Inc. (“TW”) and an affiliate of TW (the “Subordinated Indemnity Agreement”) would have been discharged and exchanged for new guarantees of such obligations.  The holders of allowed unsecured claims against SFO (which includes claims arising under or related to $400 million in aggregate principal amount of SFO’s unsecured 12.25% senior notes (plus accrued and unpaid interest) due 2016 (the “2016 Notes”) issued pursuant to that certain Indenture (the “2016 Indenture”), dated as of June 16, 2008, among SFO, Holdings and HSBC Bank USA, National Association (“SFO Note Claims”)) would have converted their claims against SFO into approximately 7% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  The holders of allowed unsecured claims against Holdings (which includes claims arising under (i) Holdings’ unsecured 8.875% senior notes due 2010 (the “2010 Notes”) issued pursuant to that certain Indenture, dated as of February 11, 2002, between Holdings and The Bank of New York (“BONY”), (ii) Holdings’ unsecured 9.75% senior notes due 2013 (the “2013 Notes”) issued pursuant to that certain Indenture dated as of April 16, 2003, between Holdings and BONY, (iii) Holdings’ unsecured 9.625% senior notes due 2014 (the “2014 Notes”) issued pursuant to that certain Indenture, dated as of December 5, 2003, between Holdings and BONY, (iv) Holdings’ unsecured 4.5% convertible senior notes due 2015 (the “2015 Notes”) issued pursuant to that certain Indenture, dated as of November 19, 2004, between Holdings and BONY (collectively, the 2010 Notes, the 2013 Notes, the 2014 Notes and the 2015 Notes, “Holdings’ Notes”), and (v) the guaranty by Holdings of obligations owed to holders of the 2016 Notes under the 2016 Indenture (“SFO Note Guaranty Claim”)) would have converted their claims against Holdings into approximately 1% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  All existing equity interests in Holdings would have been cancelled under the Original Plan.  All existing equity interests in SFO would have been cancelled, and 100% of the newly issued common stock of SFO would have been issued to Holdings on the effective date of the Original Plan in consideration for Holdings’ distribution of the New Common Stock in Reorganized SFI to certain holders of allowed claims, as described above.  The existing equity interests in all Debtors other than Holdings and SFO (“Preconfirmation Subsidiary Equity Interests”) would have remained unaltered by the Original Plan.  On July 22, 2009, the Debtors filed with the Bankruptcy Court a Disclosure Statement and the Original Plan, which was amended by the Debtors and filed on August 21, 2009 to provide additional detail on the Debtors’ financial condition and business projections, although the fundamental structure and creditor treatment remained the same. On November 7, 2009, upon the filing of the Debtors’ Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, the Participating Lenders terminated the Support Agreement.

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Subsequent to the filing of the Original Plan, a variety of factors led the Debtors to conclude that the Original Plan should be modified.  As an initial matter, from the outset of these cases, and particularly since the filing of the Original Plan, the Debtors had engaged in extensive discussions with a wide variety of creditor constituencies, including the official unsecured creditors’ committee of the Debtors (the “Creditors’ Committee”), an informal committee of holders of the 2016 Notes (the “Informal SFO Committee”), certain holders of (as well as an informal committee representing holders of) the 2010 Notes, 2013 Notes, 2014 Notes and 2015 Notes (the “Informal SFI Committee”), and TW.  Through these discussions, particularly with the Informal SFO Committee, the Debtors believed that they could achieve an ultimate plan that would secure broad support, if not be entirely consensual.  In addition, in the months following the filing of the Original Plan, the Debtors managed their business operations through challenging economic conditions, mitigated the impact of those conditions through effective cost management measures and effectively navigated the business through the operational and public relations challenges posed by operating in the wake of the Chapter 11 Filing.  Moreover, following the filing of the Original Plan, the credit markets began to stabilize from the virtually unprecedented conditions that prevailed at the commencement of these cases.  Taken together, all of these factors created conditions that the Debtors believed created the opportunity to revise the Original Plan in ways that would generate equal or improved recoveries for all constituencies.  As a result, the Support Agreement was terminated by the Participating Lenders following the filing of the Second Amended Joint Plan of Reorganization with the Bankruptcy Court on November 7, 2009, and in early December 2009, the Debtors filed their Fourth Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Plan”), which amended and restated all previous plans filed.  The Plan now contemplates $980 million of committed new debt financing.

Under the Plan, the holders of Prepetition Credit Agreement Claims against SFTP, SFO and certain of their wholly-owned domestic subsidiaries will be paid in full, in cash, from the proceeds of: (i) the Exit Term Loan (as defined below) in the principal amount of $730 million; and (ii) a $450 million rights offering (the “Offering”) to the holders of certain unsecured claims (“Allowed Unsecured Claims”) specified in the Plan, against SFO (which includes certain SFO Note Claims) that are “accredited investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (“Eligible Holders”), and that vote to accept the Plan (“Accepting SFO Noteholder”); provided, however, that if the net proceeds from the Offering are less than $450 million, the parties who have agreed to backstop the Offering (the “Backstop Purchasers”) pursuant to the terms and conditions set forth in the commitment agreement executed by the Debtors and the Backstop Purchasers (the “Backstop Commitment Agreement”), will subscribe for any amount of New Common Stock offered but not purchased pursuant to the Offering.  All other secured claims against the Debtors that are allowed pursuant to certain requirements set forth in the Plan, if any, will either be paid in full or reinstated, in the Debtors’ discretion, with the consent of the Backstop Purchasers that collectively hold a majority of the aggregate commitment percentage pursuant to the Backstop Commitment Agreement (the “Majority Backstop Purchasers”), which consent will not be unreasonably withheld.  Allowed Unsecured Claims against all of the Debtors other than Holdings and SFO will be paid in full or be reinstated (but solely to the extent such claims are allowed pursuant to the Plan).

Claims against SFTP, SFO and Holdings, respectively, to the extent based on a guaranty of the obligations of the Acquisition Parties and the general partners of the Partnership Parks and, in the case of SFTP and SFO, the entities that are the limited partners in the Partnership Parks, will be affirmed and continued (as amended by agreement of the parties) by SFTP following its emergence from Chapter 11, Reorganized SFO and Reorganized SFI, respectively (collectively, the “Partnership Parks Claims”).

The holders of Allowed Unsecured Claims against SFO will convert their Claims against SFO into approximately 22.89% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  The holders of Allowed Unsecured Claims against Holdings will convert their claims against Holdings into approximately 7.34% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  Additionally, each Accepting SFO Noteholder will have the limited right to participate in the Offering to purchase up to its total principal amount of 2016 Notes held by an Eligible Holder divided by four times the aggregate principal amount of all 2016 Notes outstanding as of June 13, 2009 (the “Limited Offering Pro Rata Share”).  All existing equity interests in Holdings will be cancelled under the Plan.  All existing equity interests in SFO will be cancelled, and 100% of the newly issued common stock of SFO will be issued to Holdings on the effective date of the Plan (the “Effective Date”) in consideration for Holdings’ distribution of the New Common Stock in Reorganized SFI to certain holders of allowed claims, as described above.  The Preconfirmation Subsidiary Equity Interests will remain unaltered by the Plan, and all existing equity interests in Holdings will be cancelled under the Plan.  The Preconfirmation Subsidiary Equity Interests and the existing equity

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interests in all Debtors other than SFO (the “Preconfirmation SFO Equity Interests”) will remain unaltered by the Plan.

At present, both the Creditors’ Committee and the Informal SFI Committee have indicated that they do not support the Plan.  Although vote tabulation has yet to be concluded, Six Flags believes that the class of creditors substantially consisting of claims held by the Informal SFI Committee will vote to reject the Plan.  However, we do not believe that the support of the Creditors’ Committee or the Informal SFI Committee is required to confirm the Plan.

Chapter 11 Financing

The Plan provides for the Debtors to incur new indebtedness upon the Effective Date, consisting of a senior secured credit facility to be provided to SFTP (the “Exit Facility”) by JPMorgan Chase Bank, N.A. (“JPMCB”), J.P. Morgan Securities Inc. (“JPMSI”), Bank of America, N.A. (“BANA”), Banc of America Securities LLC (“BAS”), Barclays Bank PLC (“BBPLC”), Barclays Capital, the investment banking division of BBPLC (“BC”), Deutsche Bank Trust Company Americas (“DB”) and Deutsche Bank Securities Inc. (“DBSI,” and together with JPMCB, JPMSI and BANA, BBPLC, BC and DB, collectively, the “Commitment Parties”) and a syndicate of lenders arranged by JPMSI, BAS, BC and DBSI (the “Exit Facility Lenders”).

It is expected that the Exit Facility will consist of an $830,000,000 senior secured credit facility comprised of a $100,000,000 revolving loan facility (the “Exit Revolving Loan”) and a $730,000,000 term loan facility (the “Exit Term Loan” and together with the Exit Revolving Loan, collectively, the “Exit Facility Loans”).  Interest on the Exit Facility will accrue at an annual rate equal to the London Interbank Offered Rate (“LIBOR”) + 4.25% in the case of the Exit Revolving Loan and LIBOR + 3.75% in the case of the Exit Term Loan, with a 2.00% LIBOR floor and a 1.50% commitment fee on the average daily unused portion of the Exit Revolving Loan.  The principal amount of the Exit Revolving Loan will be due and payable on June 30, 2015 and the principal amount of the Exit Term Loan will be due and payable on June 30, 2016.  The loan agreement governing the Exit Facility (the “Exit Facility Loan Agreement”) will require quarterly repayments of principal on the Exit Term Loan in an amount equal to 0.25% of the initial aggregate principal amount of the Exit Term Loan and all remaining outstanding principal being due and payable on June 30, 2016.  The Exit Facility will be guaranteed by Holdings, SFO and each of the current and future direct and indirect domestic subsidiaries of SFTP; provided that to the extent SFTP acquires any non-wholly owned direct or indirect subsidiary after the closing date such subsidiary will not be required to be a guarantor and/or pledgor of the Exit Facility (together with SFTP, collectively, the “Exit Financing Loan Parties”).  The proceeds of the Exit Term Loan together with the net proceeds from the Offering will be used to repay the outstanding amounts owed under the Credit Agreement and the Exit Revolving Loan will be used to meet working capital and other corporate needs of the Debtors, thereby facilitating their emergence from Chapter 11.  Based upon the scheduled hearing dates for the confirmation of the Plan of March 8, 2010 through March 19, 2010 and therefore an assumed emergence date in mid-April 2010, the Exit Revolving Loan will be drawn at emergence to fund normal seasonal borrowings, incremental professional fees associated with the reorganization and the confirmation litigation (estimated to be approximately $9 million per month) and additional default interest on the Credit Agreement (estimated to be approximately $1.85 million per month).  The Exit Facility will be secured by first priority liens upon substantially all existing and after-acquired assets of the Exit Financing Loan Parties.  The Exit Facility Loan Agreement will contain certain representations, warranties and affirmative covenants, including minimum interest coverage and maximum senior leverage maintenance covenants.  In addition, the Exit Facility Loan Agreement will contain restrictive covenants that limit, among other things, the ability of the Exit Financing Loan Parties to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, make capital expenditures and repurchase capital stock.  The Exit Facility Loan Agreement will contain certain events of default, including payment, breaches of covenants and representations, cross defaults to other material indebtedness, judgment, changes of control and bankruptcy events of default.  The Commitment Parties’ commitment is subject to certain customary conditions as well as confirmation of the Plan, and the retention of the existing senior management of the Debtors continuing as the senior management of Holdings following consummation of the Plan.

In accordance with the Plan, the Reorganized Debtors’ entry into the Exit Facility Loans and the incurrence of the indebtedness thereunder on the Effective Date will be authorized by the Bankruptcy Court and without the need for any further corporate action and without any further action by holders of claims against the Debtors or the existing equity interests in all Debtors.

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Shortly after the Chapter 11 Filing, Six Flags and TW entered into discussions to address the Acquisition Parties’ future obligations under the Partnership Park arrangements and the Subordinated Indemnity Agreement to purchase future “put” units.  As a result of those discussions, TW delivered to Six Flags and the Acquisition Parties an executed commitment letter and related term sheet and fee letter in November 2009, as amended (the “TW Commitment Papers”), pursuant to which TW or an affiliate of TW (the “New TW Lender”) has agreed to provide the Acquisition Parties with a $150,000,000 multi-draw term loan facility (the “New TW Loan”) on the terms and subject to the conditions summarized in the TW Commitment Papers.  Interest on the New TW Loan will accrue at a rate equal to (i) the greater of (a) LIBOR and (b) 2.50% (or to the extent that any LIBOR or similar rate floor under the Exit Term Loan (or under any senior term credit facility that amends, restates, amends and restates, refinances, modifies or extends the Exit Term Loan) is higher than 2.50%, such higher floor) plus (ii) the then “Applicable Margin” under the Exit Term Loan (or, if higher) under any successor term facility plus (iii) 1.00%.  In the event that any of the loan parties issue corporate bonds or other public debt, and the then applicable credit default swap spread is higher than the “Applicable Margin” referenced in the foregoing sentence, such “Applicable Margin” will be increased based on the applicable default swap spread then in effect, subject to a fixed cap.  Funding during the availability period under the New TW Loan will occur only on May 14th (or the immediately preceding business day) of each fiscal year (each a “Funding Date”) in which amounts required to satisfy the “put” obligations exceeds (a) for the fiscal year ending December 31, 2010, $10,000,000, (b) for the fiscal year ending December 31, 2011, $12,500,000 and (c) for each subsequent fiscal year, $15,000,000.  The principal amount of the New TW Loan borrowed on each Funding Date will be due and payable five years from such Funding Date.  The loan agreement governing the New TW Loan (the “New TW Loan Agreement”) will require prepayments with any cash of the Acquisition Parties (other than up $50,000 per year) including the proceeds received by the Acquisition Parties from the limited partnership interests in the Partnership Parks and is prepayable at any time at the option of the Acquisition Parties; provided, however, that so long as any amounts owing under the Existing TW Loan (as defined below) are outstanding, any such cash will first be applied toward mandatory prepayments of amounts owing thereunder.  The New TW Loan will be unconditionally guaranteed on a joint and several and senior unsecured basis by Holdings, SFO, SFTP and each of the current direct and indirect domestic subsidiaries of Holdings who are or in the future become guarantors under the Exit Facility (collectively, the “New TW Guarantors”) under the terms of a guaranty agreement (the “New TW Guarantee Agreement”) to be entered into by the New TW Guarantors in favor of the New TW Lender.  As set forth in the TW Commitment Papers, the New TW Loan Agreement and New TW Guarantee Agreement will contain representations, warranties, covenants and events of default on substantially similar terms as those contained in the Exit Facility.  TW’s commitment is subject to certain customary conditions as well as confirmation of the Plan and the retention of the existing senior management of the Debtors continuing as the senior management of Holdings following consummation of the Plan.  In addition, the New TW Guarantors’ payment or other binding obligations under the TW Commitment Papers would be subject to Bankruptcy Court approval.  TW has not made any commitment to provide financing to the Reorganized Debtors under any Chapter 11 plan of reorganization other than the Plan, and there can be no assurance that such financing would be available under any plan of reorganization sponsored by any party in interest other than the Debtors.

Notwithstanding the foregoing, any material changes to the New TW Loan as described in the TW Commitment Papers are subject to the approval of the Majority Backstop Purchasers.

In addition, in connection with the Plan, it is expected that (i) the Acquisition Parties will enter into an amendment (the “Amendment to Existing TW Note”) with respect to the Promissory Note dated as of May 15, 2009 (as amended, the “Existing TW Note”), evidencing the Existing TW Loan made by TW-SF LLC to the Acquisition Parties and (ii) Holdings, SFO and SFTP will enter into an amendment (the “Amendment to Existing TW Guarantee”) with respect to the Guarantee Agreement dated as of May 15, 2009 (as amended, the “Existing TW Guarantee”; together with the Existing TW Note, the “Existing TW Facility Agreements”) made by Holdings, SFO and SFTP to guarantee the obligations of the Acquisition Parties under the Existing TW Loan up to an aggregate of $10 million.  The Amendment to Existing TW Note will, among other things, extend the maturity date of the Existing TW Note to July 17, 2011.  The Amendment to Existing TW Guarantee will, among other things, amend the Existing TW Guarantee to modify the covenants to include the limitations on indebtedness, liens and restricted payment covenants contained in the Exit Facility.  The Existing TW Facility Agreements will provide for the Existing TW Note and the Existing TW Guarantee to be affirmed and continued, as amended as contemplated by the terms set forth therein, concurrently with the New TW Loan.

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Reporting Requirements

As a result of the Chapter 11 Filing, the Debtors are now required to file various documents with, and provide certain information to, the Bankruptcy Court and various third parties, including statements of financial affairs, schedules of assets and liabilities, and monthly operating reports in forms prescribed by federal bankruptcy law, as well as certain financial information on an unconsolidated basis. Such materials will be prepared according to requirements of federal bankruptcy law.  Although such materials accurately provide then-current information required under federal bankruptcy law, they are nonetheless unconsolidated, unaudited, and are prepared in a format different from that used in the Company’s consolidated financial statements filed under the securities laws.  Accordingly, the Company believes that the substance and format do not allow meaningful comparison with its regular publicly disclosed consolidated financial statements.  Moreover, the materials filed with the Bankruptcy Court are not prepared for the purpose of providing a basis for an investment decision relating to the Company’s securities, or for comparison with other financial information filed with the SEC.

Reasons for Bankruptcy

For several years, the Debtors have faced a number of challenges, most significantly their over-leveraged balance sheet, that have impaired their ability to achieve profitability.  Under the direction of the previous board of directors of Holdings and the management team, the Company had amassed more than $2.5 billion of debt and preferred income equity redeemable shares (“PIERS”) obligations by the end of 2005 in order to acquire theme parks and implement various capital expenditure programs.  Faced with a highly leveraged balance sheet, in 2006, the newly constituted board of directors approved substantial changes to senior management, including several park presidents (formerly referred to as general managers), and the new management began to effectuate a series of long-term operating initiatives.  By 2008, the new management team had achieved several key strategic objectives, including diversifying and growing revenues, and increasing operational efficiency and operating cash flows, which it had set out to achieve by the end of its third year.

In addition, the new management team also worked to reduce the Company’s debt obligations.  This was achieved by, among other means, selling ten parks for approximately $400 million in gross proceeds, entering into the Credit Agreement that reduced interest costs and extended maturities and completing an exchange offer that exchanged $530.6 million of 2010 Notes, 2013 Notes and 2014 Notes for $400.0 million of 2016 Notes, resulting in reduced debt and interest, and extended maturities.  Despite these significant achievements, the Company remained highly leveraged and had substantial indebtedness and PIERS obligations.

The PIERS required mandatory redemption by August 15, 2009 at 100% of the liquidation preference in cash, which amounted to approximately $275.4 million (after giving effect to $12.1 million of PIERS that converted to common stock in the third quarter of 2009), plus accrued and unpaid dividends of approximately $31.2 million.  The Debtors were not going to be able to satisfy this obligation and a default of the PIERS obligation would also have caused a default under the Credit Agreement.  A default under the Credit Agreement, in turn, would have permitted the lenders thereunder to accelerate the Debtors’ obligations under the Credit Agreement.  Such acceleration under the Credit Agreement would have also triggered cross-defaults under Holdings’ Notes, resulting in most, if not all, of the Debtors’ long-term debt becoming due and payable immediately.

In addition, the 2010 Notes were scheduled to mature in February 2010.  These balance sheet challenges were exacerbated by the unfavorable market conditions including diminishing availability of credit and the overall deterioration in the U.S. economy.  Due to the adverse business impact of these factors, the Company’s ability to maintain sufficient liquidity and satisfy its financial covenant requirements under the Prepetition Credit Agreement became unlikely.

Recognizing the need for a comprehensive solution for these financial issues, prior to commencing the Chapter 11 Filing, the Debtors attempted to effect out-of-court exchange offers designed to reduce unsecured debt and interest expense requirements, leave in place its favorable Credit Agreement, and improve financial and operational flexibility to allow the Company to compete more effectively and generate long-term growth (the “Exchange Offers”).  Accordingly, Holdings (i) announced the commencement of an exchange offer and consent solicitation on April 17, 2009 to exchange the 2010 Notes, 2013 Notes and 2014 Notes for common stock and (ii) announced the commencement of an exchange offer and consent solicitation on May 6, 2009 to exchange the 2015 Notes for common stock.  The consummation of the Exchange Offers with respect to such Holdings’ Notes was conditioned on, among other things, the valid participation of at least 95% of the aggregate principal amount of each issue of Holdings’ Notes.  The Exchange Offers, however, were unsuccessful for two primary reasons: (1) the

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minimum tender thresholds established for such Exchange Offers were not met; and (2) even more importantly, the Company determined that these Exchange Offers would have ultimately been inadequate to resolve its financial challenges due to significant, and unexpected, declines in financial performance and liquidity for reasons beyond management’s control (e.g., macro economic turbulence, rising levels of national unemployment, a swine flu epidemic, and adverse weather conditions), as well as higher-than-expected “put” obligations from the Partnership Parks.  Accordingly, even if the minimum tender conditions were satisfied, the Company would have continued to face significant challenges maintaining adequate liquidity and necessary financial covenant compliance under the Credit Agreement.

Holdings also contemplated soliciting consents from the holders of the PIERS to amend the terms of the PIERS to provide for the automatic conversion of the PIERS into common stock and filed a preliminary proxy statement with the SEC with respect to, among other things, the PIERS solicitation. However, because it became apparent that 95% of the aggregate principal amount of each of the 2010 Notes, 2013 Notes and 2014 Notes would not participate in the Exchange Offers, Holdings did not commence the consent solicitation with respect to the PIERS.

Notifications

Shortly after June 13, 2009 (the “Petition Date”), the Debtors began notifying current or potential creditors of the Chapter 11 Filing.  Subject to certain exceptions under the Bankruptcy Code, the Chapter 11 Filing automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date.  Thus, for example, most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the property of the Debtors, or to collect on monies owed or otherwise exercise rights or remedies with respect to a claim arising prior to the Petition Date are enjoined unless and until the Bankruptcy Court lifts the automatic stay.  Vendors are being paid for goods furnished and services provided after the Petition Date in the ordinary course of business.  Certain creditors and other parties in interest have filed motions for relief from the automatic stay with the Bankruptcy Court, although no such motions have been granted (or resolved consensually with the Debtors) on a basis that would have a material effect on the Debtors’ businesses.  Nonetheless, there can be no assurance that the Bankruptcy Court will not at some future date grant relief from the automatic stay, or other similar creditor relief, that would have a material, adverse effect on the Debtors’ businesses.

Creditors’ Committee

As required by the Bankruptcy Code, the United States trustee for the District of Delaware appointed the Creditors’ Committee.  The Creditors’ Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Debtors.  There can be no assurance that the Creditors’ Committee will support the Debtors’ positions on matters to be presented to the Bankruptcy Court in the future or on any plan of reorganization, and the Creditors’ Committee in fact has taken positions adverse to the Debtors in proceedings related to the Chapter 11 Filing.  Disagreements between the Debtors and the Creditors’ Committee could protract the court proceedings, negatively impact the Debtors’ ability to operate and delay the Debtors’ emergence from Chapter 11.

Executory Contracts — Section 365

Under section 365 and other relevant sections of the Bankruptcy Code, the Debtors may assume, assume and assign, or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property, subject to the approval of the Bankruptcy Court and certain other conditions.  Any description of an executory contract or unexpired lease in this Form 10-K, including, where applicable, the Debtors’ express termination rights or a quantification of our obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights the Debtors have under section 365 of the Bankruptcy Code.  Claims may arise as a result of rejecting any executory contract.

To date, the Debtors have rejected, or announced their intention to reject, unexpired leases and executory contracts related to the theme parks they previously operated in New Orleans, Louisiana and Louisville, Kentucky.  These actions will result in the Debtors ceasing to operate each theme park on a permanent basis, the New Orleans park having been closed since 2005 as a result of damage caused by Hurricane Katrina and the Louisville park having been operated through the 2009 operating season.  The New Orleans closure was governed by a settlement agreement with the City of New Orleans regarding related lease and contract rejection issues, which agreement has

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been approved by the Bankruptcy Court.  Matters relating to the Louisville park, including lease and contract rejection issues, remain pending in the Bankruptcy Court and we are unable to estimate precisely the rejection damages that may result.

Plan of Reorganization

In order to emerge successfully from bankruptcy, the Debtors will need to propose and obtain confirmation by the Bankruptcy Court of a plan of reorganization that satisfies the requirements of the Bankruptcy Code.  A plan of reorganization would, among other things, resolve the Debtors obligations arising prior to the Petition Date, set forth the revised capital structure of the newly reorganized entities and establish the framework for corporate governance subsequent to exit from bankruptcy.

Automatically, upon commencing the Chapter 11 Filing, the Debtors under the Bankruptcy Code had the exclusive right for 120 days after the Petition Date to file a plan of reorganization and, if they did so, 60 additional days to obtain necessary acceptances of their plan.  On November 7, 2009, the Debtors filed the Plan with the Bankruptcy Court.  On December 7, 2009, on the Debtors’ motion, the Bankruptcy Court entered an order extending the Debtors’ exclusive right to solicit acceptances of their Plan until February 8, 2010.  In light of the Bankruptcy Court’s subsequent order scheduling the confirmation hearing regarding the Plan for March 8 through March 19, 2010, the Debtors filed a motion for a further extension of their exclusive periods to solicit acceptances of the Plan, which was granted and the exclusive period was extended through April 5, 2010.  If the Debtors’ exclusivity period lapses, any party in interest will be able to file a plan of reorganization for any of the Debtors, in which case the Debtors’ ability to achieve confirmation of their Plan, or achieve their other goals outlined herein, may be materially impaired.

In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and must be approved, or confirmed, by the Bankruptcy Court in order to become effective.

A plan of reorganization will be deemed accepted by holders of claims against and equity interests in the Debtors if (1) at least one-half in number and two-thirds in dollar amount of claims actually voting in each impaired class of claims have voted to accept the plan, and (2) at least two-thirds in amount of equity interests actually voting in each impaired class of equity interests has voted to accept the plan.  Under certain circumstances set forth in Section 1129(b) of the Bankruptcy Code, however, the Bankruptcy Court may confirm a plan even if such plan has not been accepted by all impaired classes of claims and equity interests.  A class of claims or equity interests that does not receive or retain any property under the plan on account of such claims or interests is deemed to have voted to reject the plan.  The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or more impaired classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., secured claims or unsecured claims, subordinated or senior claims, preferred or common stock).  Generally, with respect to a class of claim holders, a plan may be “crammed down” even if such class receives no recovery if the proponent of the plan demonstrates that (1) no class junior to such class is receiving or retaining property under the plan, and (2) no class of claims or interests senior to the “crammed down” class is being paid more than in full.

Reorganization Costs

The Debtors have incurred and will continue to incur significant costs associated with the reorganization.  The amount of these costs, which are being expensed as incurred, are expected to significantly affect the Debtors’ results of operations.

Risks and Uncertainties

The ability of the Debtors, both during and after the Bankruptcy Court proceedings, to continue as a going concern, is dependent upon, among other things, (i) the ability of the Debtors to maintain adequate liquidity, including the generation of cash from operations, and (ii) the ability of the Debtors to confirm a plan of reorganization under the Bankruptcy Code.  Uncertainty as to the outcome of these factors raises substantial doubt about the Debtors’ ability to continue as a going concern.  The accompanying consolidated financial statements do not include any adjustments to reflect or provide for the consequences of the bankruptcy proceedings, except for unsecured claims allowed by the Bankruptcy Court.  In particular, such financial statements do not purport to show (a) as to assets, their realization value on a liquidation basis or their availability to satisfy liabilities, (b) as to

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liabilities arising prior to the Petition Date, the amounts that may be allowed for claims or contingencies, or the status and priority thereof, (c) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Debtors, or (d) as to operations, the effects of any changes that may be made in the underlying business.  A plan of reorganization would likely cause material changes to the amounts currently disclosed in the consolidated financial statements.

Negative events associated with the Chapter 11 Filing could adversely affect revenues and the Debtors’ relationship with customers, as well as with vendors and employees, which in turn could adversely affect the Debtors’ operations and financial condition, particularly if the Bankruptcy Court proceedings become more protracted.  Also, transactions outside of the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit the Debtors’ ability to respond timely to certain events or take advantage of certain opportunities.   Because of the risks and uncertainties associated with the Bankruptcy Court proceedings, the ultimate impact that events that occur during these proceedings will have on the Debtors’ business, financial condition and results of operations cannot be predicted or quantified accurately, and until such issues are resolved, there remains substantial doubt about the Debtors’ ability to continue as a going concern.

As a result of the Chapter 11 Filing, realization of assets and liquidation of liabilities are subject to uncertainty.  While operating as a debtor-in-possession under the protection of Chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements.  Further, a plan of reorganization could materially change the amounts and classifications reported in the consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

Impact on Net Operating Loss Carryforwards

Upon consummation, our proposed Plan will result in cancellation of indebtedness income that will reduce our net operating loss carryforwards (“NOLs”) under Section 108 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as an ownership change that will limit our ability to utilize our  NOLs under Section 382 of the Code.  In general, following an ownership change, Section 382 limits the amount of pre-ownership change NOLs that may be used to offset taxable income in each year following the ownership change.   Under a special rule that may be elected for an ownership change pursuant to a Chapter 11 bankruptcy reorganization, the amount of this annual limitation will be equal to the “long-term tax-exempt rate” (published monthly by the IRS) for the month in which the ownership change occurs, multiplied by the value of our stock immediately after the ownership change.  By taking into account the value of our stock immediately after consummation of the Plan, the limitation is increased as a result of cancellation of indebtedness pursuant to the Chapter 11 Filing.  Any portion of the annual limitation that is not used in a particular year may be carried forward and used in subsequent years.  The annual limitation is increased by certain built-in income and gains recognized (or treated as recognized) during the five years following the ownership change (up to the total amount of net built-in income and gain that existed at the time of the ownership change).  Built-in income for this purpose includes the amount by which our tax depreciation expense during this five-year period is less than it would have been if our assets had a tax basis on the date of the ownership change equal to their fair market value.  Because most of our assets are theme park assets, which are depreciated on an accelerated basis over a seven-year recovery period, we expect any NOL limitation for the five years following the ownership change to be substantially increased by built-in income and to result in a carryforward of excess limitation to future periods.

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Fresh Start Accounting

As required by accounting principles generally accepted in the United States (“GAAP”), we will adopt fresh start accounting on the Effective Date, in accordance with the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standard (“FASB ASC”) Topic 852, “Reorganizations” (“FASB ASC 852”).  The consolidated financial statements for the periods ended December 31, 2009 and prior do not include the effect of any changes in our capital structure or changes in the fair value of assets and liabilities as a result of fresh start accounting.

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern.  This assumes a continuing of operations and the realization of assets and liabilities in the ordinary course of business.  The consolidated financial statements do not include any adjustments that might result if we were forced to discontinue operations.  We have had a history of net losses. Our net losses are principally attributable to insufficient revenue to cover our relatively high percentage of fixed costs, including the interest costs on our debt and our depreciation expense. We also have an accumulated stockholders’ deficit of $584.2 million at December 31, 2009.  See Note 1 to Notes to Consolidated Financial Statements, regarding the impact of the Chapter 11 Filing and the proceedings in Bankruptcy Court on the Company’s liquidity and its status as a going concern.

Management and Operational Changes

Following a successful stockholder consent solicitation by Red Zone LLC, an entity managed by Daniel M. Snyder, in December 2005, Mr. Snyder became Chairman of Holdings’ Board of Directors and two persons nominated by Red Zone LLC became directors, including Mark Shapiro, who was elected President and Chief Executive Officer at that time.  In 2006, Holdings’ Board of Directors approved substantial changes to senior management, including several park presidents (formerly referred to as general managers) and new management began to effectuate a series of long-term operating initiatives.

During 2006, the first season following the change, new management concentrated on (i) improving the guest experience by improving the overall appearance and cleanliness of the parks, (ii) increasing per capita revenue, including by partnering with well known brand names such as Papa John’s and Cold Stone Creamery and (iii) building a corporate alliance team.

During 2007, we (i) implemented a capital plan designed to broaden the family offerings in our parks, such as Wiggles Worlds featuring the rides and attractions of the popular children’s entertainers “The Wiggles,” Thomas the Tank Engine attractions, Cirque Coobrila, Tony Hawk Spinning Coasters and Operation Spy Girl, (ii) implemented staffing initiatives to improve recruiting, training, retention and efficiency, all designed to further improve the guest experience, (iii) continued to grow per capita revenue by partnering with well known brand names such as Johnny Rockets and (iv) invested in information technology infrastructure designed to not only improve systems, such as ticketing, point of sale and our website, but also to improve our ability to offer more diverse entertainment and revenue streams with Six Flags television and radio within the parks.

During 2008, we (i) launched a new attraction program with seven roller coasters for seven parks, (ii) continued to roll-out Wiggles Worlds and Thomas the Tank Engine attractions at certain of our parks, (iii) developed a more efficient and targeted marketing plan, with more online focus and concentrated spending in the early portion of the season, (iv) reduced operating  expenses through a more efficient use of our full time and seasonal labor, as well as the removal or closure of certain inefficient rides and attractions and (v) continued to grow guest spending and sponsorship and international opportunities.

During 2009, we (i) launched a new attraction program featuring a new roller coaster themed after the Batman movie “The Dark Night” at Six Flags Mexico and a new wooden roller coaster themed after the Terminator Salvation™ movie at Six Flags Magic Mountain, (ii) added Wiggles World at Six Flags Fiesta Texas, (iii) substantially upgraded and relaunched the Superman Ride of Steel coaster at Six Flags New England and the floorless Medusa coaster at Six Flags Great Adventure, both of which were re-themed as Bizarro, (iv) added our “Glow in the Park” closing parade at two additional parks, (v) continued our efficient and targeted marketing strategies, focusing on our breadth of product and value proposition, (vi) maintained focus on containing our operating expenses while at the same time increasing our operating days and operating hours, (vii) improved and expanded upon our branded product offerings and guest-service focused staffing initiatives in order to continue to

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drive guest spending growth, and (viii) continued our efforts to grow sponsorship and international licensing opportunities.

Our plan for 2010 includes (i) adding a suspended looping roller coaster at La Ronde and a Tornado water attraction at Hurricane Harbor in New Jersey (ii) the addition of Thomas Town at Six Flags America, which will include eight new attractions and the Thomas the Tank Engine characters, (iii) adding a family roller coaster to Six Flags Magic Mountain, which will make this park one of the two parks with the largest number of roller coasters in the world, (iv) adding our “Glow in the Park” closing parade and the new Little Dipper family roller coaster at Six Flags Great America, (v) reducing season pass pricing at select parks, (vi) continuing our efficient and targeted marketing strategies including reducing marketing expenditures and focusing on our breadth of product and value proposition, (vii) maintaining focus on containing our operating expenses while at the same time increasing our operating days and operating hours, (viii) improving and expanding upon our branded product offerings and guest-service focused staffing initiatives in order to continue to drive guest spending growth, and (ix) continuing our efforts to grow sponsorship and international licensing opportunities.

Recent Developments

Rejection of Lease at Louisville Park

In February 2010, in connection with the Chapter 11 Filing, we decided to reject the lease with the Kentucky State Fair Board relating to our Louisville park and we will no longer operate the park.  Matters relating to the Louisville park, including lease and contract rejection issues, remain pending in the Bankruptcy Court and we are unable to estimate precisely the rejection damages that may result.  We are required to vacate the leased premises by approximately April 9, 2010, and we are in the process of removing our equipment and other personal property.  As a result, we have recorded appropriate provisions for impairment of our Louisville park operations, which is included in reorganization items in the statement of operations for the quarter ended December 31, 2009.  See Note 2(c) to Notes to Consolidated Financial Statements.

Loan to Acquisition Parties Related to 2009 Partnership Parks “Puts”

On May 15, 2009, the Acquisition Parties entered into a promissory note with TW-SF LLC, a subsidiary of TW, pursuant to which TW-SF LLC loaned approximately $52.5 million to the Acquisition Parties ($30.4 million of which was outstanding as of December 31, 2009), which are obligated to fund the “put” obligations related to the Partnership Parks (as amended, the “Existing TW Loan”).  Interest on the loan accrues at a rate of 14% per annum and the principal amount of the loan matures on March 15, 2011, which maturity date is expected to be extended until July 17, 2011 as part of the Plan.  The loan requires semi-annual prepayments with the proceeds received by the Acquisition Parties from the limited partnership units held by them in the Partnership Parks and is prepayable at any time at the option of the Acquisition Parties, without penalty.  Up to an aggregate of $10 million of the loan is guaranteed by Holdings, SFO and SFTP under the terms of a guarantee agreement entered into by the guarantors in favor of TW-SF LLC, dated May 15, 2009.

Delisting on the New York Stock Exchange

On October 6, 2008, we were notified by the New York Stock Exchange (“NYSE”) that Holdings was not in compliance with the NYSE’s continued listing criteria because the thirty-day average closing price of its common stock was less than $1.00, and on October 27, 2008, we were notified by the NYSE that Holdings was not in compliance with the NYSE’s continued listing criteria because the thirty-day average market capitalization of its common stock had been less than $75 million and, at the same time, its stockholders’ equity had been less than $75 million.  Holdings’ common stock and the PIERS traded on the NYSE under the symbol “SIX” and “SIX-PB,” respectively, through April 17, 2009, when they were delisted from the NYSE due to Holdings’ failure to meet the NYSE’s continued quantitative listing criteria.  The last trading prices of the common stock and the PIERS on the NYSE were $0.13 and $0.65, respectively, on April 17, 2009.  Holdings’ common stock and the PIERS currently trade on the over-the-counter market under the symbols “SIXFQ” and “SIXFPFQ,” respectively.

Acquisition of Minority Interests and Equity Investment

On July 31, 2007, we acquired the minority interests in Six Flags Discovery Kingdom that were held by our partner, the City of Vallejo, California, for a cash purchase price of approximately $52.8 million.  See Note 5 to Notes to Consolidated Financial Statements.

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On June 18, 2007, we acquired a 40% interest in a venture that owns dick clark productions, inc. (“DCP”) for a net investment of approximately $39.7 million.  We leverage the DCP library, which includes the Golden Globes, the American Music Awards, the Academy of Country Music Awards, So You Think You Can Dance, American Bandstand and Dick Clark’s New Year’s Rockin’ Eve, to provide additional product offerings in our parks.  In addition, we believe that our investment in DCP provides us additional sponsorship and promotional opportunities.  Red Zone Capital Partners II, L.P. (“Red Zone”), a private equity fund managed by Daniel M. Snyder and Dwight C. Schar, both members of Holdings’ Board of Directors, is the majority owner of the parent of DCP.  During the fourth quarter of 2007, an additional third party investor purchased approximately 2.0% of the interest in DCP from us and Red Zone.  As a result, our ownership interest in DCP is approximately 39.2%.

International Licensing

In March 2008, we entered into an agreement with Tatweer Dubai LLC, a member of Dubai Holding (“Tatweer”), to create a Six Flags-branded theme park in Dubai, United Arab Emirates.  Pursuant to the agreement, we are required to provide design and development services for the creation of a Dubai theme park, which will be operated and managed by Tatweer or its affiliate.  We also granted Tatweer the exclusive right to use our brand in certain countries for certain time periods including the United Arab Emirates.  As consideration for our services and the exclusivity rights granted in the agreement, we are entitled to receive license and other fees over the design and development period plus an ongoing royalty fee once the park opens.  Although this project has been delayed, Tatweer has informed us that they presently intend to construct the park.

In December 2008, we entered into an agreement with Oryx Holdings, a Qatari based diversified group (“Oryx”), to provide concept development and planning services to Oryx for the creation of a Six Flags-branded location within Qatar Entertainment City, the mixed-use development in Doha, Qatar.  Due to a variety of factors, we terminated the agreement with Oryx in June 2009 and there can be no assurance that a new agreement will be reached with Oryx in the future.

In September 2009, we entered into an agreement with The Government of Cross River State of Nigeria (“CRSG”) to develop a Six Flags-branded theme park in Calabar, Nigeria.  Pursuant to the agreement, we will provide concept development and master planning services to CRSG for the creation of the park.  We do not expect to invest any capital in connection with the provision of such services.  Once the initial phase is finalized, we intend to collaborate with CRSG on the detailed design, development and construction of the park and we will retain the right to manage the park.

Stockholder Rights Plan

In December 2008, Holdings’ Board of Directors adopted a stockholder rights plan and declared a dividend distribution of one preferred stock purchase right (a “Right”) for each outstanding share of Holdings common stock.  The distribution was paid on December 17, 2008 to stockholders of record as of the close of business on December 17, 2008.  Each Right, if and when it becomes exercisable, entitles the holder to buy 1/1000 of a share of Holdings’ preferred stock, designated as Series A Junior Preferred Stock, at a price of $1.25 per 1/1000 of a share subject to adjustment (the “Exercise Price”).  If any person or group becomes the beneficial owner of 15% or more of Holdings’ common stock at any time after the date of the plan (with certain limited exceptions), then each Right not owned by such person or group will entitle its holder to purchase, at the Exercise Price, shares of Holdings’ common stock or, in certain circumstances, common stock of the acquiring person, having a market value of twice the Exercise Price.  The description and terms of the Rights are set forth in a rights agreement between Holdings and The Bank of New York Mellon, as rights agent. Under the Plan, upon emergence from Chapter 11, Holdings’ amended and restated Certificate of Incorporation will terminate the stockholder rights plan.

Debt Refinancing

On June 16, 2008, we completed a private debt exchange in which we issued $400.0 million of the 2016 Notes, in exchange for (i) $149.2 million of the 2010 Notes, (ii) $231.6 million of 2013 Notes and (iii) $149.9 million of the 2014 Notes.  The benefits of this transaction included reducing debt principal by approximately $130.6 million, extending our debt maturities (including a majority of our nearest term debt maturity in 2010) and decreasing our annual cash interest expense.  The transaction resulted in a net gain on extinguishment of debt of $107.7 million related to the 2013 Notes and 2014 Notes (net of $3.3 million of transaction costs related to the 2010 Notes that were charged to expense immediately as the exchange of the 2010 Notes was not deemed to be a substantial modification under the guidance of EITF Issue No. 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments,” codified into FASB ASC Topic 470, “Debt”).  We also recorded a $14.1 million premium on the 2016 Notes representing the

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difference between the carrying amount of the 2010 Notes and the carrying amount of the 2016 Notes on the exchange as this portion of the exchange was not deemed a substantial modification.  This premium was expensed as part of reorganization items as a result of the Chapter 11 Filing.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Commitments and Resources.”

In May 2007, we entered into the Credit Agreement, which provides for (i) an $850 million term loan maturing in April 2015, (ii) revolving credit facilities totaling $275 million, expiring in March 2013, and (iii) an uncommitted optional term loan tranche of up to $300 million.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Commitments and Resources.”

The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including, but not limited to, a financial covenant related to the maintenance of a minimum senior secured leverage ratio in the event of utilization of the revolving facilities and certain other events, as well as limitations on the ability to dispose of assets, incur additional indebtedness or liens, make restricted payments, make investments and engage in mergers or consolidations.

Upon consummation, our proposed Plan will result in the cancellation or modification of the Debtors’ indebtedness and the incurrence of new indebtedness of the Debtors and Acquisition Parties under the Exit Facility and New TW Loan, respectively.

Park Sales

In April 2007, we completed the sale to PARC 7F-Operations Corporation of the stock of our subsidiaries that owned three of our water parks and four of our theme parks for an aggregate purchase price of $312 million, consisting of $275 million in cash and a note receivable for $37 million (the “PARC Note”). Pursuant to the purchase  agreement, we agreed to provide a limited guarantee to a creditor of the buyer related to the future results of operations of the Sale Parks of up to $10 million (the “PARC Guarantee”), decreasing by a minimum of one million dollars annually.  The parks sold were Darien Lake near Buffalo, NY; Waterworld USA in Concord, CA; Elitch Gardens in Denver, CO; Splashtown in Houston, TX; the Frontier City theme park and the White Water Bay water park in Oklahoma City, OK; and Wild Waves and Enchanted Village near Seattle, WA.

We recorded a non-cash impairment charge against assets held for sale in connection with this transaction in our consolidated financial statements for the year ended December 31, 2006 in the amount of $84.5 million.  The net proceeds from the sale were used to repay indebtedness, fund capital expenditures and acquire the minority interests in Six Flags Discovery Kingdom and DCP, as described above.

Six Flags New Orleans

Our New Orleans park sustained extensive damage in Hurricane Katrina in late August 2005 and has not re-opened since.  We have determined that our carrying value of the assets destroyed was approximately $34.0 million, for which we recorded a receivable in 2005.  This amount does not include the property and equipment owned by the lessor, which is also covered by our insurance policies.  The park is covered by up to approximately $180 million in property insurance, subject to an insurer-calculated deductible in the case of named storms of approximately $5.5 million.  The property insurance includes business interruption coverage.  The flood insurance provisions of the policies contain a $27.5 million sublimit.  In December 2006, we commenced a declaratory action in Louisiana federal district court seeking judicial determination that the flood insurance sublimit was not applicable by virtue of the separate “Named Storm” peril.  In February 2008, the court ruled in summary judgment that the flood insurance sublimit was applicable to the policies, including the Named Storm provision.  In April 2009, the U.S. Court of Appeals for the Fifth Circuit upheld the district court ruling, with the exception of one policy, the Commonwealth Insurance Company policy, which was remanded to the district court for further consideration of our claim.  In January 2010, we entered into a settlement agreement Commonwealth Insurance Company, which was approved by the Bankruptcy Court in February 2010.

We have filed property insurance claims, including business interruption, with our insurers.  We have an insurance receivable of $2.4 million at December 31, 2009, most of which has been settled, which reflects part of our claim for business interruption and the destroyed assets.  The receivable is net of $36.3 million in payments received from our insurance carriers.

In April 2009, the Industrial Development Board of the City of New Orleans and the City of New Orleans (collectively, the “New Orleans Parties”) sought to accept an offer we made years earlier to buy out of its lease with

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the New Orleans Parties for a $10 million cash payment and an exchange of contiguous real estate we owned.  When we declined to extend the same offer, the Mayor of New Orleans announced to the press that the New Orleans Parties would sue.  We were current on our lease payments to the New Orleans Parties, however, and in our view, not in default.  The New Orleans Parties filed suit in Louisiana state court on May 11, 2009, alleging that we breached the lease with the New Orleans Parties by removing rides and assets from the park property; by failing to secure the property; and by accepting interim insurance payments for Hurricane Katrina damage claims instead of designating the New Orleans Parties as loss payee.  On May 12, 2009, the New Orleans Parties obtained an ex parte state court temporary restraining order that enjoined us from: (a) removing any rides or attractions without the New Orleans Parties’ approval, (b) not properly securing the premises, and (c) “converting and/or secreting insurance proceeds received . . . as a result of Hurricane Katrina.”  We removed the action to the United States District Court for the Eastern District of Louisiana (the “Court”), and the parties stipulated to stay the federal action for sixty days, while leaving the temporary restraining order in place, with us reserving the right to contest our propriety at a later time.  In an order dated June 1, 2009, the Court imposed the agreed-upon stay but shortened the period to thirty days, until June 29, 2009.  The Court issued an order on June 22, 2009, directing the clerk to mark the action as closed due to the stay resulting from the Chapter 11 Filing, but retaining jurisdiction for restoration to the calendar should circumstances change.

Subsequently, however, the parties reached an agreement to settle the matter pursuant to which the New Orleans Parties and we entered into a general release of all claims against one another.  Additionally, the New Orleans Parties entered into a stipulation dismissing, with prejudice, the action pending in the United States District Court for the Eastern District of Louisiana, and dissolving the temporary restraining order obtained by the New Orleans Parties on May 12, 2009.  The New Orleans Parties also agreed not to file any proof of claim or otherwise assert any entitlement to relief in the Chapter 11 Filing.  Other material terms and conditions of the settlement are as follows:

·      Within 35 days of the Bankruptcy Court’s final approval of the final settlement agreement, which approval occurred on October 8, 2009, we were required to make, and did make a cash payment to the New Orleans Parties in the amount of $3 million;

·      We vacated and delivered to the New Orleans Parties the leased premises and 86 acres of land, including any improvements thereto in their current condition, “as is”;

·      The New Orleans Parties will be entitled to receive 25% of any net insurance proceeds we recover on our insurance claims for property damage caused by Hurricane Katrina to the extent our net recovery exceeds $65 million. We retain absolute discretion in prosecution, and any potential settlement of, claims with insurers, subject to any required Bankruptcy Court approval; and

·      All other agreements between the New Orleans Parties and us related in any way to the leased premises and any other such related agreements, were deemed terminated upon the Bankruptcy Court’s final approval of the settlement agreement.

The settlement occurred on November 12, 2009.

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Description of Parks

The following chart summarizes key business information about our parks.

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*              Based on a 2009 survey of television households within designated market areas published by A.C. Nielsen Media Research.

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Partnership Park Arrangements

In connection with our 1998 acquisition of the former Six Flags, we guaranteed certain obligations relating to the Partnership Parks.  These obligations continue until 2027, in the case of the Georgia park, and 2028, in the case of the Texas park.  Among such obligations are (i) minimum annual distributions (including rent) of approximately $62.3 million in 2010 (subject to cost of living adjustments in subsequent years) to partners in these two Partnerships Parks, (ii) minimum capital expenditures at each park during rolling five-year periods based generally on 6% of park revenues, and (iii) an annual offer to purchase a maximum number of 5% per year (accumulating to the extent not purchased in any given year) of limited partnership units at the Specified Prices described below.

After payment of the minimum distribution, we are entitled to a management fee equal to 3% of prior year gross revenues and, thereafter, any additional cash will be distributed 95% to us, in the case of the Georgia park, and 92.5% to us, in the case of the Texas park.

The purchase price for the annual offer to purchase a maximum number of 5% per year of limited partnership units in the Partnership Parks is based on the greater of (i) a total equity value of $250.0 million (in the case of Georgia) and $374.8 million (in the case of Texas) or (ii) a value derived by multiplying the weighted-average four-year EBITDA of the park by 8.0 (in the case of the Georgia park) and 8.5 (in the case of the Texas park) (the “Specified Prices”).  As of December 31, 2009, we owned approximately 29% and 52% of the Georgia Limited Partner units and Texas Limited Partner units, respectively.  The remaining redeemable units of approximately 71% and 48% of the Georgia Limited Partner and Texas Limited Partner, respectively, represent an ultimate redemption value for the limited partnership units of approximately $355.9 million at December 31, 2009. In 2027 and 2028, we will have the option to purchase all remaining units in the Georgia Limited Partner and the Texas Limited Partner, respectively, at a price based on the Specified Prices set forth above, increased by a cost of living adjustment.  The maximum number of units that we could be required to purchase for both parks in 2010 would result in an aggregate payment by us of approximately $307.8 million, representing 61% and 42% of the units of the Georgia Limited Partner and the Texas Limited Partner, respectively.

In connection with our acquisition of the former Six Flags, we entered into the Subordinated Indemnity Agreement with certain Six Flags entities, TW and an affiliate of TW, pursuant to which, among other things, we transferred to TW (which has guaranteed all of our obligations under the Partnership Park arrangements) record title to the corporations which own the entities that have purchased and will purchase limited partnership units of the Partnership Parks, and we received an assignment from TW of all cash flow received on such limited partnership units.  Pursuant to the Subordinated Indemnity Agreement, we issued preferred stock of the corporate parent of the managing partners of the partnerships to TW.  In the event of a default by us under the Subordinated Indemnity Agreement or of our obligations to our partners in the Partnership Parks, these arrangements would permit TW to take full control of both the entities that own limited partnership units and the managing partner.  If we ultimately satisfy all of our obligations, TW is required to transfer to us the entire equity interests of these entities.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Partnership Park Obligations” and Note 14 to Notes to Consolidated Financial Statements.

In 2009, we received “put” notices from holders of partnership units with an aggregate “put” price of approximately $65.5 million, of which the general partner of the Georgia limited partnership elected to purchase 50% of the Georgia units that were “put” for a total purchase price of approximately $7.0 million.  TW-SF LLC, a subsidiary of TW, provided us with a $52.5 million loan to enable us to fund our 2009 “put” obligations, of which $30.4 million was outstanding at December 31, 2009.  Until such loan is repaid, the lender is entitled to our share of the annual minimum distribution of the Partnership Parks.

Upon consummation, our proposed Plan may result in the incurrence of new indebtedness of the Acquisition Parties under the New TW Loan in connection with the Acquisition Parties’ future obligations under the Partnership Park arrangements and Subordinated Indemnity Agreement.

Marketing and Promotion

We attract visitors through multi-media marketing and promotional programs for each of our parks.  The national programs are designed to market and enhance the Six Flags brand name.  Regional and local programs are tailored to address the different characteristics of their respective markets and to maximize the impact of specific park attractions and product introductions.  All marketing and promotional programs are updated or completely

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changed each year to address new developments. Marketing programs are supervised by our Executive Vice President, Entertainment and Marketing, with the assistance of our senior management and advertising agencies.

We also develop alliance, sponsorship and co-marketing relationships with well-known national, regional and local consumer goods companies and retailers to supplement our advertising efforts and to provide attendance incentives in the form of discounts and/or premiums. We also arrange for popular local radio and television programs to be filmed or broadcast live from our parks.

Group sales represented approximately 27% of aggregate attendance in the 2009 season at our parks.  Each park has a group sales director and a sales staff dedicated to selling multiple group sales and pre-sold ticket programs through a variety of methods, including online promotions, direct mail, telemarketing and personal sales calls.

Season pass sales establish an attendance base in advance of the season, thus reducing exposure to inclement weather.  Additionally, season pass holders often bring paying guests and generate “word-of-mouth” advertising for the parks.  During the 2009 season, season pass attendance constituted approximately 30% of the total attendance at our parks.

We offer discounts on season pass and multi-visit tickets, tickets for specific dates and tickets to affiliated groups such as businesses, schools and religious, fraternal and similar organizations.

We also implement promotional programs as a means of targeting specific market segments and geographic locations not generally reached through group or retail sales efforts.  The promotional programs utilize coupons, sweepstakes, reward incentives and rebates to attract additional visitors.  These programs are implemented through online promotions, direct mail, telemarketing, direct response media, sponsorship marketing and targeted multi-media programs.  The special promotional offers are usually for a limited time and offer a reduced admission price or provide some additional incentive to purchase a ticket.

Licenses

We have the exclusive right on a long-term basis to theme park usage of the Warner Bros. and DC Comics animated characters throughout the United States (except for the Las Vegas metropolitan area), Canada, Mexico and other countries. In particular, our license agreements entitle us to use, subject to customary approval rights of Warner Bros. and, in limited circumstances, approval rights of certain third parties, all animated, cartoon and comic book characters that Warner Bros. and DC Comics have the right to license, including Batman, Superman, Bugs Bunny, Daffy Duck, Tweety Bird and Yosemite Sam, and include the right to sell merchandise using the characters. In addition, certain Hanna-Barbera characters including Yogi Bear, Scooby-Doo and The Flintstones are available for our use at certain of our theme parks.  In addition to basic license fees ($3.0 million for Warner Bros. and $0.3 million for Hannah-Barbera and other licenses in 2009), we are required to pay a royalty fee on merchandise manufactured by or for us and sold that uses the licensed characters.  The royalty fee is generally equal to 12% of the final landed cost to Six Flags of the merchandise. Warner Bros. and Hanna-Barbera have the right to terminate their license agreements under certain circumstances, including if any persons involved in the movie or television industries obtain control of us or, in the case of Warner Bros., upon a default under the Subordinated Indemnity Agreement.

In connection with our investment in DCP, we obtained a license to use stills and clips from the DCP library, which includes the Golden Globes, the American Music Awards, the Academy of Country Music Awards, So You Think You Can Dance, American Bandstand and Dick Clark’s New Year’s Rockin’ Eve, in our parks as well as for the promotion and advertising of our parks.  In certain cases, our right to use these properties is subject to the consent of third parties with interests in such properties.  The term of the license is for the longer of seven years or the date that we cease to hold 50% of our original investment in DCP.

Park Operations

We currently operate in geographically diverse markets in North America. Each park is managed by a park president who reports to a regional vice president or senior vice president in our Park Strategy and Management Group. The park president 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.

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Each park president also directs a full-time, on-site management team. Each management team includes senior personnel responsible for operations and maintenance, in-park food, beverage, merchandising and games, marketing and promotion, sponsorships, human resources and finance. Finance directors at our parks report to the Senior Vice President, Finance and Chief Accounting Officer, and with their support staff provide financial services to their respective parks and park management teams. Park management compensation structures are designed to provide financial incentives for individual park managers to execute our strategy and to maximize revenues and free cash flow.

Our parks are generally open daily from Memorial Day through Labor Day.  In addition, most of our parks are open during weekends prior to and following their daily seasons, often in conjunction with themed events (such as Fright Fest® and Holiday in the Park®).  Due to their location, certain parks have longer operating seasons. Typically, the parks charge a basic daily admission price, which allows unlimited use of all rides and attractions, although in certain cases special rides and attractions require the payment of an additional fee.

See Note 15 to Notes to Consolidated Financial Statements for information concerning revenues and long-lived assets by domestic and international categories.

Capital Improvements

We regularly make capital investments for new rides and attractions at our parks.  We purchase both new and used rides and attractions.  In addition, we rotate rides among parks to provide fresh attractions.  We believe that the selective introduction of new rides and attractions, including family entertainment attractions, is an important factor in promoting each of the parks in order to achieve market penetration and encourage longer visits, which lead to increased attendance and in-park spending.  For example, our plan for 2010 includes (i) adding a suspended looping roller coaster at La Ronde and a Tornado water attraction at Hurricane Harbor in New Jersey, (ii) the addition of Thomas Town at Six Flags America, which will include eight new attractions and the Thomas the Tank Engine characters, (iii) adding a family roller coaster to Six Flags Magic Mountain, which will make this park one of the two parks with the largest number of roller coasters in the world, and (iv) adding our “Glow in the Park” closing parade and the new Little Dipper family roller coaster at Six Flags Great America.

In addition, we generally make capital investments in the food, retail, games and other in-park areas to increase per capita guest spending.  We also make annual enhancements in the theming and landscaping of our parks in order to provide a more complete family oriented entertainment experience. In 2007, we began a multi-year initiative to improve our information technology infrastructure, which will enhance our operational efficiencies.  Capital expenditures are planned on an annual basis with most expenditures made during the off-season. Expenditures for materials and services associated with maintaining assets, such as painting and inspecting existing rides, are expensed as incurred and are not included in capital expenditures.

Maintenance and Inspection

Our rides are inspected daily by maintenance personnel during the operating season.  These inspections include safety checks, as well as regular maintenance and are made through both visual inspection of the ride and test operation. Our senior management and the individual park personnel evaluate the risk aspects of each park’s operation. Potential risks to employees and staff as well as to the public are evaluated.  Contingency plans for potential emergency situations have been developed for each facility.  During the off-season, maintenance personnel examine the rides and repair, refurbish and rebuild them where necessary.  This process includes x-raying and magnafluxing (a further examination for minute cracks and defects) steel portions of certain rides at high-stress points.  We have over 800 full-time employees who devote substantially all of their time to maintaining the parks and their rides and attractions.

In addition to our maintenance and inspection procedures, third party consultants are retained by us or our insurance carriers to perform an annual inspection of each park and all attractions and related maintenance procedures.  The results of these inspections are reported in written evaluation and inspection reports, as well as written suggestions on various aspects of park operations.  In certain states, state inspectors also conduct annual ride inspections before the beginning of each season.  Other portions of each park are subject to inspections by local fire marshals and health and building department officials.  Furthermore, we use Ellis & Associates as water safety consultants at our parks in order to train life guards and audit safety procedures.

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Insurance

We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to businesses in our industry.  We maintain multi-layered general liability policies that provide for excess liability coverage of up to $100,000,000 per occurrence.  For incidents arising after November 15, 2003, our self-insured retention is $2,500,000 per occurrence ($2,000,000 per occurrence for the twelve months ended November 15, 2003 and $1,000,000 per occurrence for the twelve months ended November 15, 2002) for our domestic parks and a nominal amount per occurrence for our international parks.  Defense costs are in addition to these retentions.  In addition, for incidents arising after November 1, 2004 but prior to December 31, 2008, we have a one-time additional $500,000 self-insured retention, in the aggregate, applicable to all claims in the policy year.  For incidents arising on or after December 31, 2008, our self-insured retention is $2,000,000, followed by a $500,000 deductible per occurrence applicable to all claims in the policy year for our domestic parks and our parks in Canada and a nominal amount per occurrence for our park in Mexico.  Our deductible after November 15, 2003 is $750,000 for workers’ compensation claims ($500,000 deductible for the period from November 15, 2001 to November 15, 2003).  Our general liability policies cover the cost of punitive damages only in certain jurisdictions.  Based upon reported claims and an estimate for incurred, but not reported claims, we accrue a liability for our self-insured retention contingencies.  We also maintain fire and extended coverage, business interruption, terrorism and other forms of insurance typical to businesses in this industry.  The fire and extended coverage policies insure our real and personal properties (other than land) against physical damage resulting from a variety of hazards. Our current insurance policies expire on December 31, 2010.  We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.

Competition

Our parks compete directly with other theme parks, water and amusement parks and indirectly with all other types of recreational facilities and forms of entertainment within their market areas, including movies, sports attractions and vacation travel.  Accordingly, our 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.  See “Risk Factors”.  Within each park’s regional market area, the principal factors affecting direct theme park 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.

Seasonality

Our operations are highly seasonal, with approximately 84% of park attendance and revenues occurring in the second and third calendar quarters of each year, with the most significant period falling between Memorial Day and Labor Day.

Environmental and Other Regulations

Our operations are subject to federal, state and local environmental laws and regulations including laws and regulations governing water and sewer discharges, air emissions, soil and groundwater contamination, the maintenance of underground and above-ground storage tanks and the disposal of waste and hazardous materials.  In addition, our operations are subject to other local, state and federal governmental regulations including, without limitation, labor, health, safety, zoning and land use and minimum wage regulations applicable to theme park operations, and local and state regulations applicable to restaurant operations at each park.  Finally, certain of our facilities are subject to laws and regulations relating to the care of animals.  We believe that we are in substantial compliance with applicable environmental and other laws and regulations and, although no assurance can be given, we do not foresee the need for any significant expenditures in this area in the near future.

Portions of the undeveloped areas at certain of our parks are classified as wetlands.  Accordingly, we may need to obtain governmental permits and other approvals prior to conducting development activities that affect these areas, and future development may be prohibited in some or all of these areas.  Additionally, the presence of wetlands in portions of our undeveloped land could adversely affect our ability to dispose of such land and/or the price we receive in any such disposition.

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Employees

At February 1, 2010, we employed approximately 2,080 full-time employees, and we employed approximately 28,500 seasonal employees during the 2009 operating season.  In this regard, we compete with other local employers for qualified students and other candidates on a season-by-season basis.  As part of the seasonal employment program, we employ a significant number of teenagers, which subjects us to child labor laws.

Approximately 16.3% of our full-time and approximately 15.7% of our seasonal employees are subject to labor agreements with local chapters of national unions.  These labor agreements expire in January 2012 (Six Flags Over Texas, Six Flags St. Louis and one union at Six Flags Great Adventure), December 2011 (Six Flags Magic Mountain and the other union at Six Flags Great Adventure) and December 2010 (Six Flags Over Georgia).  The labor agreements for La Ronde expire in various years ranging from December 2010 through December 2012.  Other than a strike at La Ronde involving five employees which was settled in January 2004, and recognitional picketing at Six Flags New England in February 2005 by 11 employees, we have not experienced any strikes or work stoppages by our employees.  We consider our employee relations to be good.

Available Information

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge through our website at www.sixflags.com.  References to our website in this Annual Report on Form 10-K are provided as a convenience and do not constitute an incorporation by reference of the information contained on, or accessible through, the website.  Therefore, such information should not be considered part of this Annual Report on Form 10-K.  These reports, and any amendments to these reports, are made available on our website as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the United States Securities and Exchange Commission (the “SEC”).  Copies are also available, without charge, by sending a written request to Six Flags, Inc., 1540 Broadway, New York, NY 10036, Attn:  Secretary.

Our website, www.sixflags.com, also includes items related to corporate governance matters including the charters of our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee, our Corporate Governance Principles, our Code of Business Conduct and our Code of Ethics for Senior Financial Management. Copies of these materials are also available, without charge, by sending a written request to Six Flags, Inc., 1540 Broadway, New York, NY 10036, Attn:  Secretary.

Executive Officers

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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 Holdings’ stockholders.  We have entered into employment agreements with each of the above executive officers.  Pursuant to the Plan, following the Effective Date, the officers listed above will serve as the initial officers of Reorganized SFI.

ITEM 1A.       RISK FACTORS

Set forth below are the principal risks that we believe are material to our business and should be considered by our security holders.  We operate in a continually changing business environment and, therefore, new risks emerge from time to time. This section contains forward-looking statements.  For an explanation of the qualifications and limitations on forward-looking statements, see “Cautionary Note Regarding Forward-Looking Statements.”

RISKS RELATED TO THE CHAPTER 11 FILING

FOR THE DURATION OF THE PROCEEDINGS RELATED TO THE CHAPTER 11 FILING, OUR OPERATIONS, INCLUDING OUR ABILITY TO EXECUTE OUR BUSINESS PLAN, WILL BE SUBJECT TO THE RISKS AND UNCERTAINTIES ASSOCIATED WITH BANKRUPTCY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND LIQUIDITY.

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Risks and uncertainties associated with the Chapter 11 Filing include the following:

·      our ability to prosecute, confirm and consummate a Chapter 11 plan of reorganization;

·      the actions and decisions of our creditors and other third parties who have interests in the Chapter 11 Filing that may be inconsistent with our plans;

·      our ability to obtain court approval with respect to certain motions in proceedings related to the Chapter 11 Filing;

·      our ability to obtain and maintain financing necessary to carry out our operations, including debtor-in-possession financing if required;

·      our ability to maintain contracts and leases that are critical to our operations; and

·      our ability to utilize NOL carryforwards.

These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with the Chapter 11 Filing could (i) adversely affect our revenues, (ii) cause suppliers to attempt to cancel our contracts or restrict ordinary credit terms, require financial assurances of performance or refrain entirely from shipping goods to us, (iii) distract employees from performance of their duties or more easily attract them to other career opportunities, (iv) reduce sponsorship and international licensing revenues, or (v) cause our guests to consider spending their discretionary dollars on other entertainment alternatives during the current economic conditions, which in turn could have a material adverse effect on our business, financial condition, results of operations and liquidity, particularly if the proceedings related to the Chapter 11 Filing are protracted.  In addition, for the duration of the proceedings related to the Chapter 11 Filing, transactions outside the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond timely to certain events or take advantage of certain business opportunities.

Furthermore, as a result of the Chapter 11 Filing, realization of assets and liquidation of liabilities are subject to uncertainty.  While operating as a debtor-in-possession under the protection of the Bankruptcy Code, we may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in our financial statements, subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business.  Further, a Chapter 11 plan of reorganization could materially change the amounts and classifications reported in our consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a Chapter 11 plan of reorganization and the discharge of such liabilities.  Because of the risks and uncertainties associated with the Chapter 11 Filing, the ultimate impact of events that occur during these proceedings on our business, financial condition, results of operations and liquidity cannot be predicted or quantified accurately. Additionally, the confirmation and consummation of a Chapter 11 plan of reorganization will result in cancellation of Holdings’ common stock and the PIERS or may result in the failure of Holdings to continue as a public reporting company, which could cause any investment in Holdings to become worthless.

In light of the foregoing, trading in our securities during the proceedings related to the Chapter 11 Filing is highly speculative and poses substantial risks. Holders of Holdings’ equity securities will have their common stock and the PIERS cancelled and in return receive no payment or other consideration, and holders of our debt securities may receive a payment or other consideration that is less than the purchase price of such securities.

OPERATING UNDER BANKRUPTCY COURT PROTECTION FOR A LONG PERIOD OF TIME MAY HARM OUR BUSINESS.

A long period of operations under Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity.  So long as the proceedings related to the Chapter 11 Filing continue, our senior management will be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations.  A prolonged period of operating under Bankruptcy Court protection also may make it more difficult to retain management and other key personnel necessary to the success and growth of our business. In addition, the longer the proceedings related to the Chapter 11 Filing continue, the more likely it is that our customers and suppliers will lose confidence in our ability to reorganize our businesses successfully and will seek to establish alternative commercial relationships.

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Furthermore, so long as the proceedings related to the Chapter 11 Filing continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 Filing.  A prolonged continuation of the proceedings related to the Chapter 11 Filing would also likely require us to seek debtor-in-possession financing.  While we do not currently expect to require debtor-in-possession financing, if our emergence from the Chapter 11 Filing is delayed, we may require debtor-in-possession financing to fund operations and “put” obligations related to the Partnership Parks.  If we require debtor-in-possession financing and we are unable to obtain such financing on favorable terms or at all, our chances of successfully reorganizing our business may be seriously jeopardized, the likelihood that we instead will be required to liquidate our assets may be enhanced, and, as a result, any securities in Holdings could become further devalued or become worthless.

WE MAY NOT BE ABLE TO OBTAIN CONFIRMATION OF A CHAPTER 11 PLAN OF REORGANIZATION.

To emerge successfully from Bankruptcy Court protection as a viable entity, we must meet certain statutory requirements with respect to adequacy of disclosure with respect to a Chapter 11 plan of reorganization, solicit and obtain the requisite acceptances of such a plan and fulfill other statutory conditions for confirmation of such a plan, which have not occurred to date.  The confirmation process is subject to numerous, unanticipated potential delays, including a delay in the Bankruptcy Court’s commencement of the confirmation hearing regarding our plan, which, subject to adjournment, is currently schedule to begin on March 8, 2010.

We may not receive the requisite acceptances of constituencies in the proceedings related to the Chapter 11 Filing to confirm our Plan.  Even if the requisite acceptances of our Plan are received, the Bankruptcy Court may not confirm such a plan.  The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or more impaired classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., secured claims or unsecured claims, subordinated or senior claims, preferred or common stock).

At present, both the Creditors’ Committee and the Informal SFI Committee have indicated that they do not support the Plan.  Although vote tabulation has yet to be concluded, Six Flags believes that the class of creditors substantially consisting of claims held by the Informal SFI Committee will vote to reject the Plan.  However, we do not believe that the support of the Creditors’ Committee or the Informal SFI Committee is required to confirm the Plan.

If a Chapter 11 plan of reorganization is not confirmed by the Bankruptcy Court, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.

WE MAY BE SUBJECT TO CLAIMS THAT WILL NOT BE DISCHARGED IN THE BANKRUPTCY CASES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND PROFITABILITY.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation and specified debts arising afterwards. With few exceptions, all claims that arose prior to June 13, 2009 and before confirmation of a plan of reorganization (i) would be subject to compromise or treatment under the plan of reorganization or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the plan of reorganization. Any claims not ultimately discharged by the Bankruptcy Court could have an adverse effect on our results of operations and profitability.

OUR CHAPTER 11 PLAN WILL RESULT IN HOLDERS OF HOLDINGS’ COMMON STOCK AND THE PIERS RECEIVING NO DISTRIBUTION ON ACCOUNT OF THEIR INTERESTS AND CANCELLATION OF THEIR COMMON STOCK AND PIERS.

Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, post-petition liabilities and pre-petition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a Chapter 11 plan of reorganization.  The ultimate recovery to creditors and stockholders, if any, will not be determined until confirmation of such a plan.  No assurance can be given as to what

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values, if any, will be ascribed in the proceedings related to the Chapter 11 Filing to each of these constituencies or what types or amounts of distributions, if any, they would receive.  Our Plan will result in holders of Holdings’ common stock and the PIERS receiving no distribution on account of their interests and the cancellation of their existing stock.  If certain requirements of the Bankruptcy Code are met, our Plan can be confirmed notwithstanding its rejection by the class comprising the interests of equity security holders.  The Plan contemplates, among other things, the exchange of New Common Stock for certain claims against us and the cancellation of Holdings’ existing common stock and the PIERS.  Therefore, an investment in Holdings’ common stock or the PIERS is highly speculative and will become worthless (or be cancelled) in the future without any required approval or consent of Holdings’ stockholders.

EVEN IF A CHAPTER 11 PLAN OF REORGANIZATION IS CONSUMMATED, WE WILL CONTINUE TO FACE RISKS.

Even if a Chapter 11 plan of reorganization is consummated, we will continue to face a number of risks, including certain risks that are beyond our control, such as further deterioration or other changes in economic conditions, changes in our industry, changes in consumer demand for, and acceptance of, our services and increasing expenses.  Some of these concerns and effects typically become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the case may be completed.  As a result of these risks and others, there is no guaranty that a Chapter 11 plan of reorganization reflecting the Plan will achieve our stated goals.

In addition, at the outset of the Chapter 11 Filing, the Bankruptcy Code gave the Debtors the exclusive right to propose the Plan and prohibited creditors, equity security holders and others from proposing a plan.  We have obtained extensions of this exclusivity period from the Bankruptcy Court and retain the exclusive right to propose the Plan.  If the Bankruptcy Court terminates that right, however, or the exclusivity period expires, there could be a material adverse affect on our ability to achieve confirmation of the Plan in order to achieve our stated goals.

Furthermore, even if our debts are reduced or discharged through the Plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the proceedings related to the Chapter 11 Filing.  Irrespective of the Exit Facility, the New TW Loan and the Offering, adequate funds may not be available when needed or may not be available on favorable terms.

OUR EXIT FACILITY, THE NEW TW LOAN AND THE EXISTING TW FACILITY AGREEMENTS WILL INCLUDE FINANCIAL AND OTHER COVENANTS THAT WILL IMPOSE RESTRICTIONS ON OUR FINANCIAL AND BUSINESS OPERATIONS.

As part of the Plan, we expect to enter into the Exit Facility with various lenders from whom we have received commitments.  The Exit Facility will contain financial covenants that will require us to maintain a minimum interest coverage ratio and a maximum senior secured leverage ratio.  In addition, our Exit Facility will restrict our ability to, among other things, incur additional indebtedness, incur liens, make investments, sell assets, pay dividends, repurchase stock or engage in transactions with affiliates.  These covenants may have a material impact on our operations.  In addition, if we fail to comply with the covenants in the Exit Facility and are unable to obtain a waiver or amendment, an event of default would result under the Exit Facility.

We also expect to enter into the New TW Loan with the New TW Lender.  The New TW Loan Agreement and New TW Guarantee Agreement will contain covenants and events of default on substantially similar terms as those contained in the Exit Facility.  In addition, the Existing TW Facility Agreements also contain covenants and events of default that will impose restrictions on our operations.

The Exit Facility, the New TW Loan Agreement and the Existing TW Facility Agreements will also contain other events of default customary for financings of this type, including cross defaults to certain other indebtedness, cross acceleration to other indebtedness (with respect to the New TW Loan) and certain change of control events. If an event of default were to occur, the lenders under the applicable facility could declare outstanding borrowings under these agreements immediately due and payable.  We cannot provide assurance that we would have sufficient liquidity to repay or refinance borrowings under the Exit Facility, the New TW Loan and/or

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the Existing TW Loan if such facilities were accelerated upon an event of default. In addition, an event of default or declaration of acceleration under these facilities could also result in an event of default under other indebtedness.

HISTORICAL FINANCIAL INFORMATION MAY NOT BE COMPARABLE.

If a Chapter 11 plan of reorganization reflecting the Plan is consummated, our financial condition and results of operations from and after the Effective Date may not be comparable to the financial condition or results of operations reflected in our historical financial statements, which among other effects, could limit investment in Holdings’ common stock.

OUR RESTRUCTURING WILL HAVE OTHER ACCOUNTING IMPLICATIONS.

As a result of our restructuring under Chapter 11 of the Bankruptcy Code, our financial statements will be subject to the accounting prescribed by FASB ASC Topic 852, “Reorganizations.”  Given that Holdings’ existing stockholders will end up with less than 50% of Holdings’ voting shares after we emerge from Chapter 11, we will apply “Fresh-Start Reporting,” in which our assets and liabilities will be recorded at their estimated fair value using the principles of purchase accounting contained in FASB ASC Topic 805, “Business Combinations” (“FASB ASC 805”) with the difference between our estimated fair value and our identifiable assets and liabilities being recognized as goodwill.  Any increase in the valuation of our long lived assets as a result of the application of those accounting principles could result in additional impairments in future periods.

RISKS RELATED TO OUR SUBSTANTIAL INDEBTEDNESS AND COMMON STOCK

WE HAVE A HISTORY OF NET LOSSES, AN ACCUMULATED STOCKHOLDERS’ DEFICIT AND PENDING OBLIGATIONS FOR WHICH WE DO NOT CURRENTLY HAVE SUFFICIENT LIQUIDITY.  ACCORDINGLY, WE HAVE STATED IN OUR FINANCIAL STATEMENTS INCLUDED HEREIN THAT THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN UNLESS A SUCCESSFUL RESTRUCTURING OCCURS.

We have had a history of net losses.  Our net losses are principally attributable to insufficient revenue to cover our relatively high percentage of fixed costs, including the interest costs on our debt and our depreciation expense.  We also have an accumulated stockholders’ deficit of $584.2 million at December 31, 2009.  In addition, the PIERS required mandatory redemption by August 15, 2009 at 100% of the liquidation preference in cash, which amounted to approximately $275.4 million (after giving effect to $12.1 million of PIERS that converted to common stock in the third quarter of 2009), plus accrued and unpaid dividends of approximately $31.2 million.  We were not able to satisfy this obligation.  Under the Fourth Amended Joint Plan of Reorganization, the PIERS are considered an unsecured equity interest subject to compromise and the holders of such instruments are expected to receive no recovery.  In accordance with the guidance provided in FASB ASC Topic 480, “Distinguishing Liabilities from Equity” and FASB ASC 852, as of December 31, 2009 we classified the $275.4 million redemption value of PIERS plus accrued and unpaid dividends of approximately $31.2 million in liabilities subject to compromise, as the PIERS became an unconditional obligation as of August 15, 2009.

Our auditors, KPMG LLP, have also included an explanatory paragraph in their opinion on our consolidated financial statements that there is substantial doubt about our ability to continue as a going concern.  See page F-4.

OUR MONETARY OBLIGATIONS REQUIRE THAT A SIGNIFICANT PART OF OUR CASH FLOW BE USED TO PAY INTEREST AND FUND THESE OTHER OBLIGATIONS.

We must satisfy the following obligations with respect to the Partnership Parks:

·    We must make annual distributions to our partners in the Partnership Parks, which will amount to approximately $62.3 million in 2010 with similar amounts (adjusted for changes in cost of living) payable in future years.

·    We must spend a minimum of approximately 6% of each park’s annual revenues over specified periods for capital expenditures.

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·             Each year we must offer to purchase a specified maximum number of partnership units from our partners in the Partnership Parks, which number accumulates to the extent units are not tendered.  The maximum number of units that we could be required to purchase in 2010 would result in an aggregate payment by us of approximately $307.8 million.  The annual incremental unit purchase obligation (without taking into account accumulation from prior years) aggregates approximately $31.1 million for both parks based on current purchase prices.  As we purchase additional units, we are entitled to a proportionate increase in our share of the minimum annual distributions.  In 2009, we received “put” notices from holders of partnership units with an aggregate “put” price of approximately $65.5 million, of which the general partner of the Georgia limited partnership elected to purchase 50% of the Georgia units that were “put” for a total purchase price of approximately $7.0 million.  TW-SF LLC, a subsidiary of TW, provided us with a $52.5 million loan to enable us to fund our 2009 “put” obligations, of which $30.4 million was outstanding at December 31, 2009.  Until such loan is repaid, the lender is entitled to our share of the annual minimum distribution of the Partnership Parks.  In future years, we may need to incur indebtedness under the New TW Loan to satisfy such unit purchase obligations.

We expect to use cash flow from the operations at the Partnership Parks to satisfy all or part of our annual distribution and capital expenditure obligations with respect to these parks before we use any of our other funds.  The two partnerships generated approximately $24.3 million of cash in 2009 from operating activities after deduction of capital expenditures and excluding the impact of short-term intercompany advances from or repayments to Holdings. At December 31, 2008 and December 31, 2009, we had total loans outstanding of $198.5 million and $233.0 million, respectively, to the partnerships that own the Partnership Parks, primarily to fund the acquisition of Six Flags White Water Atlanta, working capital and capital improvements.  The obligations relating to Six Flags Over Georgia continue until 2027 and those relating to Six Flags Over Texas continue until 2028.

Although we are contractually committed to make approximately CAD$4.5 million of capital and other expenditures at La Ronde no later than May 1, 2011, the vast majority of our capital expenditures in 2010 and beyond will be made on a discretionary basis, although such expenditures are important to the parks’ ability to sustain and grow revenues.  We spent $98.7 million on capital expenditures for all of our continuing operations in the 2009 calendar year (net of property insurance recoveries) and we plan on spending approximately $91.0 million on capital expenditures in 2010 (net of property insurance recoveries).

Upon emergence from Chapter 11, our high level of debt under our Exit Facility, the New TW Loan, the Existing TW Loan and our other obligations could have important negative consequences to us and investors in our securities. These include the following:

·             We may not be able to satisfy all of our obligations, including, but not limited to, our obligations under the instruments governing our outstanding debt, which may cause a cross-default or cross-acceleration on other debt we may have incurred.

·             We could have difficulties obtaining necessary financing in the future for working capital, capital expenditures, debt service requirements, refinancing or other purposes.

·             We could have difficulties obtaining additional financing to fund our annual Partnership Park obligations if the amount of the New TW Loan is not sufficient.

·             We will have to use a significant part of our cash flow to make payments on our debt and to satisfy the other obligations set forth above, which may reduce the capital available for operations and expansion.

·             Adverse economic or industry conditions may have more of a negative impact on us.

We cannot be sure that cash generated from our parks will be as high as we expect or that our expenses will not be higher than we expect.  Because a large portion of our expenses are fixed in any given year, our operating cash flow margins are highly dependent on revenues, which are largely driven by attendance levels, in-park spending and sponsorship and licensing activity. A lower amount of cash generated from our parks or higher expenses than expected, when coupled with our debt obligations, could adversely affect our ability to fund our operations.

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RESTRICTIVE COVENANTS—OUR FINANCIAL AND OPERATING ACTIVITIES WILL BE LIMITED BY RESTRICTIONS CONTAINED IN THE TERMS OF OUR EXIT FACILITY, THE NEW TW LOAN AND THE EXISTING TW LOAN.

The terms of the Exit Facility Loan Agreement, the New TW Loan Documents and the Existing TW Facility Agreements will impose significant operating and financial restrictions on us. These restrictions may significantly limit or prohibit us from engaging in certain types of transactions, including the following:

·             incurring additional indebtedness;

·             creating liens on our assets;

·             paying dividends;

·             selling assets;

·             engaging in mergers or acquisitions; and

·             making investments.

Events beyond our control, such as weather and economic, financial and industry conditions, may affect our ability to continue meeting our financial covenant ratios under the Exit Facility and the New TW Loan. The need to comply with these financial covenants and restrictions could limit our ability to execute our strategy and expand our business or prevent us from borrowing more money when necessary.

If we breach any of the covenants contained in the Exit Facility Loan Agreement, the New TW Loan Agreement or the Existing TW Facility Agreements, the principal of and accrued interest on the debt outstanding thereunder could become immediately due and payable. In addition, that default could constitute a cross-default under the instruments governing other indebtedness we may incur. If a cross-default occurs, the maturity of almost all of our indebtedness could be accelerated and the debt become immediately due and payable. If that happens, we may not be able to satisfy our debt obligations, which would have a material adverse effect on our operations and the interests of our creditors and stockholders.

We can make no assurances that we will be able to comply with these restrictions in the future or that our compliance would not cause us to forego opportunities that might otherwise be beneficial to us.

CHANGES IN OUR CREDIT RATINGS MAY ADVERSELY AFFECT THE PRICE OF HOLDINGS’ COMMON STOCK AND NEGATIVELY IMPACT OUR ABILITY TO REFINANCE OUR REMAINING DEBT.

Credit rating agencies continually review their ratings for the companies they follow, including us.  In January 2010, Moody’s Investors Service initiated coverage of Six Flags and assigned a (i) corporate credit rating of “(P)B1” and (ii) the debt rating of the Exit Credit Facility of “(P)B1”.  Moody’s has placed our ratings on “stable outlook.”  Standard and Poor’s Rating Service is expected to rate us upon our emergence from Chapter 11.  A further negative change in our ratings or the perception that such a change could occur may further adversely affect the market price of our securities, including Holdings’ common stock and public debt.

HOLDING COMPANY STRUCTURE—ACCESS TO CASH FLOW OF MOST OF HOLDINGS’ SUBSIDIARIES IS LIMITED.

Holdings is a holding company whose primary assets consist of shares of stock or other equity interests in its subsidiaries, and Holdings conducts substantially all of its current operations through its subsidiaries.  Almost all of its income is derived from its subsidiaries.  Accordingly, Holdings is dependent on dividends and other distributions from its subsidiaries to generate the funds necessary to meet its obligations.  We had $164.8 million of cash and cash equivalents on a consolidated basis at December 31, 2009, of which $0.1 million was held at Holdings.

Other than Holdings’ interests in the Partnership Parks, all of Holdings’ current operations are conducted by subsidiaries of SFO, Holdings’ principal direct wholly-owned subsidiary.  Holdings may, in the future, transfer other assets to SFO or other entities owned by Holdings.  The Exit Facility the New TW Loan and the Existing TW Loan will limit the ability of SFO to pay dividends or make other distributions to Holdings.

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CANCELLATION OF EQUITY—THE PRICE OF HOLDINGS’ COMMON STOCK WILL DECLINE DUE TO THE CANCELLATION OF THE COMMON STOCK AND ISSUANCE OF SHARES OF NEW COMMON STOCK IN ANY RESTRUCTURING OR AS A RESULT OF THE CHAPTER 11 FILING.

As of March 1, 2010, there were approximately 98.3 million shares of Holdings’ common stock outstanding, all of which are transferable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by our affiliates.

The price of Holdings’ common stock will be adversely affected by the Chapter 11 Filing and the confirmation of the Plan, which will result in the cancellation of Holdings’ common stock and the PIERS.

ANTI-TAKEOVER PROVISIONS—PROVISIONS IN HOLDINGS’ CORPORATE DOCUMENTS AND THE LAW OF THE STATE OF DELAWARE AS WELL AS CHANGE OF CONTROL PROVISIONS IN CERTAIN OF OUR DEBT AND OTHER AGREEMENTS COULD DELAY OR PREVENT A CHANGE OF CONTROL, EVEN IF THAT CHANGE WOULD BE BENEFICIAL TO STOCKHOLDERS, OR COULD HAVE A MATERIALLY NEGATIVE IMPACT ON OUR BUSINESS.

Certain provisions in Holdings’ Restated Certificate of Incorporation, the Exit Facility, the New TW Loan and the Existing TW Facility Agreements may have the effect of deterring transactions involving a change in control of us, including transactions in which stockholders might receive a premium for their shares.

Holdings’ Restated Certificate of Incorporation provides for the issuance of up to 5,000,000 shares of preferred stock, and, under the Plan, upon emergence from Chapter 11, Holdings’ amended and restated Certificate of Incorporation will provide for the issuance of up to a specified amount of preferred stock, with such designations, rights and preferences as may be determined from time to time by Holdings’ board of directors.  The authorization of preferred shares empowers Holdings’ board of directors, without further stockholder approval, to issue preferred shares with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Holdings’ common stock.  If issued, the preferred stock could also dilute the holders of Holdings’ common stock and could be used to discourage, delay or prevent a change of control of us.

If, following emergence from Chapter 11, Holdings’ common stock is listed on a national securities exchange or held of record by more than 2,000 holders, Holdings would be subject to the anti-takeover provisions of the Delaware General Corporation Law, which could have the effect of delaying or preventing a change of control in some circumstances.  These provisions may have the effect of delaying or preventing a change of control.  All of these factors could materially adversely affect the price of Holdings’ common stock.

On December 2, 2008, Holdings’ board of directors adopted a stockholder rights plan and declared a dividend distribution of one preferred stock purchase right (a “Right”) for each outstanding share of Holdings’ common stock.  The distribution was paid on December 17, 2008 to stockholders of record as of the close of business on December 17, 2008.  Each Right, if and when it becomes exercisable, entitles the holder to buy 1/1000 of a share of preferred stock at a price of $1.25 per 1/1000 of a share subject to adjustment (the “Exercise Price”).  If any person or group becomes the beneficial owner of 15% or more of Holdings’ common stock at any time after the date of the plan (with certain limited exceptions), then each Right not owned by such person or group will entitle its holder to purchase, at the Exercise Price, shares of Holdings’ common stock or, in certain circumstances, common stock of the acquiring person, having a market value of twice the Exercise Price.  The description and terms of the Rights are set forth in a rights agreement between us and The Bank of New York Mellon, as rights agent.  Under the Plan, upon emergence from Chapter 11, Holdings’ amended and restated Certificate of Incorporation will terminate the stockholder rights plan.

The Exit Facility Loan Agreement, the New TW Loan Agreement and the Existing TW Facility Agreements will contain provisions pursuant to which it would be an event of default under the Exit Facility Loan Agreement, the New TW Loan Agreement and the Existing TW Facility Agreements if any “person” becomes the beneficial owner of more than 35% of Holdings’ common stock.  This could deter certain parties from seeking to acquire us and if any “person” were to become the beneficial owner of more than 35% of Holdings’ common stock, we would not be able to repay such indebtedness.

We have the exclusive right to use certain Warner Bros. and DC Comics characters in our theme parks in the United States (except in the Las Vegas metropolitan area), Canada, Mexico and other countries.  Warner Bros. can terminate these licenses under certain circumstances, including the acquisition of us by persons engaged in the movie or television industries. This could deter certain parties from seeking to acquire us.

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WE MAY BE REQUIRED TO RECOGNIZE CANCELLATION OF INDEBTEDNESS INCOME AND OUR ABILITY TO UTILIZE OUR NET OPERATING LOSS CARRYFORWARDS MAY BE LIMITED IF WE SUCCESSFULLY CONSUMMATE A PROPOSED PLAN OF REORGANIZATION.

For U.S. federal income tax purposes, Holdings is the common parent of an affiliated group of corporations (the “Six Flags Group”) of which join in the filing of a consolidated federal income tax return.  We estimate that as of December 31, 2009, the Six Flags Group has consolidated NOLs of approximately $2.0 billion.

Pursuant to the Plan, our aggregate outstanding indebtedness will be substantially reduced.  In general, the discharge of a debt obligation for cash and property (including New Common Stock) having a value less than the amount owed gives rise to the cancellation of debt (“COD”) income.  However, exception is made for COD income arising in a bankruptcy proceeding.  Under this exception, the taxpayer does not include the COD income in its taxable income, but must instead reduce the following tax attributes, in the following order, by the amount of COD income: (i) NOLs (beginning with NOLs for the year of the COD income, then the oldest and then next-to-oldest NOLs, and so on), (ii) general business tax credits (in the order generally taken into account in computing tax liability), (iii) alternative minimum tax credits, (iv) net capital losses (beginning with capital losses for the year of the COD income, then the oldest and then next to oldest capital losses, and so on), (v) passive activity losses, and (vi) foreign tax credits (in the order generally taken into account in computing tax liability).  Alternatively a debtor may elect to first reduce the basis of its depreciable and amortizable property.  The debtor’s tax attributes are not reduced until after determination of the debtor’s tax liability for the year of the COD income.  Any COD income in excess of available tax attributes is forgiven, but may result in excess loss account recapture income.  We will not expect to have COD income that exceeds our available tax attributes.

The issuance of New Common Stock to creditors pursuant to the Plan will cause an “ownership change” under section 382 of the Internal Revenue Code.  If a corporation undergoes an “ownership change,” the amount of its pre-change losses and certain other tax attributes that may be utilized to offset future taxable income will be subject to an annual “Section 382 limitation” (unless the Bankruptcy Exception, discussed below, applies).  Any NOLs that are not utilized in a given year because of the Section 382 limitation remain available for use in future years until their normal expiration date, but are subject to the Section 382 limitation.  Subject to certain adjustments, the Section 382 limitation generally is equal to the value of the corporation’s equity immediately before the ownership change multiplied by the applicable “long-term tax-exempt bond rate,” which is published monthly by the Internal Revenue Service.  However, under one of two special rules for companies in bankruptcy proceedings, the value of the corporation’s equity for purposes of computing the Section 382 limitation is increased to reflect cancellation of debt in the bankruptcy reorganization.  Under this rule, the value of the equity will be the lesser of the value of the New Common Stock immediately after the ownership change or the value of our assets immediately before the ownership change.

The Section 382 limitation is increased by certain built-in income and gains recognized (or treated as recognized) during the five years following an ownership change (up to the total amount of built-in income and gain that existed at the time of the ownership change).  Built-in income for this purpose includes the amount by which tax depreciation and amortization expenses during the five-year period is less than it would have been if our assets had a tax basis on the date of the ownership change equal to their fair market value at such time.  Because most of our assets are theme park assets, which are depreciated on an accelerated basis over a seven-year recovery period, it is expected that any NOL limitation for the five years following the ownership change will be substantially increased by built-in income.  To the extent the Section 382 limitation exceeds taxable income in a given year, the excess is carried forward and will increase the Section 382 limitation in succeeding taxable years.

An alternate bankruptcy exception applies if qualified creditors acquire 50% of the New Common Stock in exchange for their Claims (the “Bankruptcy Exception”).  If the Bankruptcy Exception applied, our use of pre-change losses would not be subject to the Section 382 limitation.  Instead, our NOLs would be reduced by the amount of interest deducted, during the taxable year that includes the Effective Date and the three preceding taxable years, on claims exchanged for New Common Stock.  In addition, if the Bankruptcy Exception applied and a second ownership change occurred during the two years following the Effective Date, our NOLs at the time of the second ownership change would be effectively eliminated.  This Bankruptcy Exception will not provide a favorable result and we therefore expect to make an election for the Bankruptcy Exception not to apply.

Alternative minimum tax (“AMT”) is owed on a corporation’s AMT income, at a 20% tax rate, to the extent the AMT exceeds the corporation’s regular U.S. federal income tax.  In computing taxable income for AMT purposes, certain deductions and beneficial allowances are modified or eliminated.  One modification is a limitation

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on the use of NOLs for AMT purposes.  Specifically, no more than 90% of AMT income can be offset with NOLs (as recomputed for AMT purposes).  Therefore, AMT will be owed in years we have positive AMT income, even if all of our regular taxable income for the year is offset with NOLs.  As a result, our AMT income (before AMT NOLs) in those years will be taxed at a 2% effective U.S. federal income tax rate (i.e., 10% of AMT income that cannot be offset with NOLs multiplied by 20% AMT rate).  The amount of AMT we pay will be allowed as a nonrefundable credit against regular federal income tax in future taxable year to the extent regular tax exceeds AMT in such years.

HOLDINGS HAS NOT PAID CASH DIVIDENDS ON ITS COMMON STOCK AND DOES NOT CURRENTLY ANTICIPATE DOING SO IN THE FORESEEABLE FUTURE.

Holdings has not paid cash dividends to date on its common stock and does not currently anticipate paying any cash dividends on its common stock in the foreseeable future.  The terms of the Exit Facility, the New TW Loan and the Existing TW Loan will restrict Holdings’ ability to pay cash dividends on Holdings’ common stock and repurchase shares of Holdings’ common stock.

HOLDINGS’ STOCK IS NO LONGER LISTED ON A NATIONAL SECURITIES EXCHANGE. IT WILL LIKELY BE MORE DIFFICULT FOR STOCKHOLDERS AND INVESTORS TO SELL THEIR COMMON STOCK OR TO OBTAIN ACCURATE QUOTATIONS OF THE SHARE PRICE OF HOLDINGS’ COMMON STOCK.

Effective April 17, 2009, the NYSE suspended trading in Holdings’ common stock and the PIERS. Holdings’ common stock and the PIERS are now traded on the over-the-counter market under the symbols “SIXFQ” and “SIXFPFQ,” respectively. The trading of Holdings’ common stock and the PIERS on the over-the-counter market may negatively impact the trading price of Holdings’ common stock and the PIERS and the levels of liquidity available to Holdings’ stockholders.  In addition, we can provide no assurance that following our emergence from Chapter 11, we will be able to list Holdings’ common stock on a national securities exchange.

RISKS RELATED TO OUR BUSINESS

GENERAL ECONOMIC CONDITIONS AND THE GLOBAL RECESSION MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND FINANCIAL CONDITION THAT WE CURRENTLY CANNOT PREDICT.

General economic conditions and the global recession may have an adverse impact on our business and our financial condition.  The current negative economic conditions affect our guests’ levels of discretionary spending. A decrease in discretionary spending due to decreases in consumer confidence in the economy or us, a continued economic slowdown or further deterioration in the economy, could adversely affect the frequency with which our guests choose to visit our theme parks and the amount that our guests spend on our products when they visit. This could lead to a decrease in our revenues, operating income and cash flows.

Additionally, general economic conditions and the global recession could impact our ability to obtain supplies, services and credit as well as the ability of third parties to meet their obligations to us, including, for example, payment of claims by our insurance carriers and/or the funding of our lines of credit.

VARIOUS FACTORS—LOCAL CONDITIONS, EVENTS, NATURAL DISASTERS, DISTURBANCES, CONTAGIOUS DISEASES, AND TERRORIST ACTIVITIES—CAN ADVERSELY IMPACT PARK ATTENDANCE.

Lower attendance at our parks may be caused by various local conditions, events, weather, contagious diseases, or natural disasters.  In addition, since some of our parks are near major urban areas and appeal to teenagers and young adults, there may be disturbances at one or more parks which negatively affect our image. This may result in a decrease in attendance at the affected parks.  We work with local police authorities on security-related precautions to prevent these types of occurrences.  We can make no assurance, however, that these precautions will be able to prevent any disturbances.  We believe that our ownership of many parks in different geographic locations reduces the effects of these types of occurrences on our consolidated results.

Our business and financial results were adversely impacted by the terrorist activities occurring in the United States on September 11, 2001.  Terrorist alerts and threats of future terrorist activities may adversely affect

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attendance at our parks.  We cannot predict what effect any further terrorist activities that may occur in the future may have on our business and results of operations.

RISK OF ACCIDENTS—THERE IS A RISK OF ACCIDENTS OCCURRING AT OUR PARKS OR COMPETING PARKS WHICH MAY REDUCE ATTENDANCE AND NEGATIVELY IMPACT OUR OPERATIONS.

Almost all of our parks feature “thrill rides.”  While we carefully maintain the safety of our rides, there are inherent risks involved with these attractions.  An accident or an injury (including water-borne illnesses on water rides) at any of our parks or at parks operated by our competitors, particularly accidents or injuries that attract media attention, may reduce attendance at our parks, causing a decrease in revenues.

We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to businesses in our industry.  We maintain multi-layered general liability policies that provide for excess liability coverage of up to $100,000,000 per occurrence.  For incidents arising after November 15, 2003, our self-insured retention is $2,500,000 per occurrence ($2,000,000 per occurrence for the twelve months ended November 15, 2003 and $1,000,000 per occurrence for the twelve months ended November 15, 2002) for our domestic parks and a nominal amount per occurrence for our international parks.  Defense costs are in addition to these retentions.  In addition, for incidents arising after November 1, 2004 but prior to December 31, 2008, we have a one-time additional $500,000 self-insured retention, in the aggregate, applicable to all claims in the policy year.  For incidents arising on or after December 31, 2008, our self-insured retention is $2,000,000, followed by a $500,000 deductible per occurrence applicable to all claims in the policy year for our domestic parks and our parks in Canada and a nominal amount per occurrence for our park in Mexico.  Our deductible after November 15, 2003 is $750,000 for workers’ compensation claims ($500,000 deductible for the period from November 15, 2001 to November 15, 2003).  Our general liability policies cover the cost of punitive damages only in certain jurisdictions.  Based upon reported claims and an estimate for incurred, but not claims, we accrue a liability for our self-insured retention contingencies.  We also maintain fire and extended coverage, business interruption, terrorism and other forms of insurance typical to businesses in this industry.  The fire and extended coverage policies insure our real and personal properties (other than land) against physical damage resulting from a variety of hazards. Our current insurance policies expire on December 31, 2010.  We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.

ADVERSE WEATHER CONDITIONS—BAD WEATHER CAN ADVERSELY IMPACT ATTENDANCE AT OUR PARKS.

Because most of the attractions at our theme parks are outdoors, attendance at our parks is adversely affected by bad weather and forecasts of bad weather.  The effects of bad weather on attendance can be more pronounced at our water parks.  Bad weather and forecasts of bad or mixed weather conditions can reduce the number of people who come to our parks, which negatively affects our revenues.  Although we believe that our ownership of many parks in different geographic locations reduces the effect that adverse weather can have on our consolidated results, we believe that our operating results in certain years were adversely affected by abnormally hot, cold and/or wet weather in a number of our major U.S. markets.  In addition, since a number of our parks are geographically concentrated in the eastern portion of the United States, a weather pattern that affects that area could adversely affect a number of our parks.  Also, bad weather and forecasts of bad weather on weekend days have greater negative impact than on weekdays because weekend days are typically peak days for attendance at our parks.

SEASONALITY—OUR OPERATIONS ARE SEASONAL.

Our operations are seasonal.  Approximately 84% of our annual park attendance and revenue occurs during the second and third calendar quarters of each year.  As a result, when conditions or events described in the above risk factors occur during the operating season, particularly during the peak season of July and August, there is only a limited period of time during which the impact of those conditions or events can be mitigated.  Accordingly, such conditions or events may have a disproportionately adverse effect on our revenues and cash flow.  In addition, most of our expenses for maintenance and costs of adding new attractions are incurred when the parks are closed in the mid to late autumn and winter months.  For this reason, a sequential quarter to quarter comparison is not a good indication of our performance or of how we will perform in the future.

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As a result of our Chapter 11 Filing, we no longer have access to borrowings under our revolving facilities to fund off-season expenses.  Our ability to borrow under the Exit Revolving Loan will be dependent upon compliance with certain conditions, including a senior secured leverage ratio and the absence of any material adverse change in our business or financial condition.  In October 2008 and the third quarter of 2009, we borrowed $244.2 million and $27.6 million, respectively, under the revolving facility portion of the Credit Agreement to ensure the availability of liquidity to fund our off-season expenditures given difficulties in the global credit markets, and at December 31, 2009, we had $164.8 million in unrestricted cash.  If we emerge from Chapter 11 as a going concern and if we were to become unable to borrow under the Exit Revolving Loan, we would likely be unable to pay in full our off-season obligations and may be unable to meet our repurchase obligations (if any) with respect to repurchases of partnership units in the Partnership Parks.

COMPETITION—THE THEME PARK INDUSTRY COMPETES WITH NUMEROUS ENTERTAINMENT ALTERNATIVES.

Our parks compete with other theme, water and amusement parks and with other types of recreational facilities and forms of entertainment, including movies, home entertainment options, sports attractions and vacation travel.  Our business is also subject to factors that affect the recreation and leisure time industries generally, such as general economic conditions, including relative fuel prices, and changes in consumer spending habits.  The principal competitive factors of a park include location, price, the uniqueness and perceived quality of the rides and attractions, the atmosphere and cleanliness of the park and the quality of its food and entertainment.

CUSTOMER PRIVACY—IF WE ARE UNABLE TO PROTECT OUR CUSTOMERS’ CREDIT CARD DATA, WE COULD BE EXPOSED TO DATA LOSS, LITIGATION AND LIABILITY, AND OUR REPUTATION COULD BE SIGNIFICANTLY HARMED.

In connection with credit card sales, we transmit confidential credit card information securely over public networks and store it in our data warehouse.  Third parties may have the technology or know-how to breach the security of this customer information, and our security measures may not effectively prohibit others from obtaining improper access to this information.  If a person is able to circumvent our security measures, he or she could destroy or steal valuable information or disrupt our operations.  Any security breach could expose us to risks of data loss, litigation and liability and could seriously disrupt our operations and any resulting negative publicity could significantly harm our reputation.

LABOR COSTS—INCREASED COSTS OF LABOR, PENSION, POST-RETIREMENT AND MEDICAL AND OTHER EMPLOYEE HEALTH AND WELFARE BENEFITS MAY REDUCE OUR RESULTS OF OPERATIONS.

Labor is a primary component in the cost of operating our business.  We devote significant resources to recruiting and training our managers and employees.  Increased labor costs, due to competition, increased minimum wage or employee benefit costs or otherwise, would adversely impact our operating expenses.  In addition, our success depends on our ability to attract, motivate and retain qualified employees to keep pace with our needs. If we are unable to do so, our results of operations may be adversely affected.

With more than 2,000 full-time employees, our results of operations are also substantially affected by costs of retirement and medical benefits.  In recent years, we have experienced significant increases in these costs as a result of macro-economic factors beyond our control, including increases in health care costs, declines in investment returns on pension plan assets and changes in discount rates used to calculate pension and related liabilities.  At least some of these macro-economic factors may continue to put pressure on the cost of providing pension and medical benefits.  Although we have actively sought to control increases in these costs (including our decision in February 2006 to “freeze” our pension plan, effective March 31, 2006, eliminate required 401(k) employer matching beginning in 2010, and certain revisions to our employee health and welfare benefits), there can be no assurance that we will succeed in limiting cost increases, and continued upward pressure, including as a result of any new legislation, could reduce the profitability of our businesses.

ITEM 1B.                    UNRESOLVED STAFF COMMENTS

We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our 2009 fiscal year and that remain unresolved.

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ITEM 2.                             PROPERTIES

Set forth below is a brief description of our material real estate at March 1, 2010. See also “Business—Description of Parks.”

Six Flags America, Largo, Maryland—523 acres (fee ownership)

Six Flags Discovery Kingdom, Vallejo, California—138 acres (fee ownership)

Six Flags Fiesta Texas, San Antonio, Texas—224 acres (fee ownership)

Six Flags Great Adventure, Hurricane Harbor & Wild Safari, Jackson, New Jersey—2,200 acres (fee ownership)

Six Flags Great America, Gurnee, Illinois—304 acres (fee ownership)

Six Flags Hurricane Harbor, Arlington, Texas—47 acres (fee ownership)

Six Flags Hurricane Harbor, Valencia, California—12 acres (fee ownership)

Six Flags Magic Mountain, Valencia, California—250 acres (fee ownership)

Six Flags Mexico, Mexico City, Mexico—110 acres (occupied pursuant to concession agreement) (1)

Six Flags New England, Agawam, Massachusetts—284 acres (substantially all fee ownership)

Six Flags Over Georgia, Atlanta, Georgia—290 acres (leasehold interest) (2)

Six Flags Over Texas, Arlington, Texas—217 acres (leasehold interest) (2)

Six Flags St. Louis, Eureka, Missouri—497 acres (fee ownership)

Six Flags White Water Atlanta, Marietta, Georgia—69 acres (fee ownership) (3)

La Ronde, Montreal, Canada—146 acres (leasehold interest) (4)

The Great Escape, Lake George, New York—351 acres (fee ownership)

(1)     The concession agreement is with the Federal District of Mexico City. The agreement expires in 2017.

(2)             Lessor is the limited partner of the partnership that owns the park. The Six Flags Over Georgia and Six Flags Over Texas leases expire in 2027 and 2028, respectively, at which time we have the option to acquire all of the interests in the respective lessor that we have not previously acquired.

(3)             Owned by the Georgia Partnership.

(4)             The site is leased from the City of Montreal. The lease expires in 2065.

We have granted to our lenders under the Credit Agreement, and will grant to the lenders under the Exit Facility, a mortgage on substantially all of our United States properties.

In addition to the foregoing, we own approximately 20 acres of land in Louisville, Kentucky on which our Six Flags Kentucky Kingdom park formerly operated.  We also lease office space and a limited number of rides and attractions at our parks.  See Note 14 to Notes to Consolidated Financial Statements.

We consider our 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 we operate tends to expose us to claims by visitors, generally for injuries.  Accordingly, we are party to various legal actions arising in the normal course of business, including the proceedings discussed below.  Historically, the great majority of these claims have been minor.  To the extent any such claims were asserted against a Debtor, they are now stayed with respect to such Debtor as a result of the Chapter 11 Filing.

In 2005, certain plaintiffs filed a complaint on behalf of a purported class of current and former employees against us in the Superior Court of California, Los Angeles County alleging unpaid wages and related penalties and violations of law governing employee meal and rest breaks related to our current and formerly owned parks in California between November 2001 and December 18, 2007.  While we denied any violation of law or other wrongdoing, we settled the case in 2007 and deposited into escrow $9,225,000 to be applied to the initial settlement fund, which was recorded in other expense.  In April 2009, we paid approximately $255,000 (which was recorded in other expense as of December 31, 2008) into the settlement fund based on our meeting certain performance criteria in 2008.  We do not expect to pay any further amounts under this obligation based on our 2009 operating results.  This action has been stayed as a result of the Chapter 11 Filing.

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On February 1, 2007, Images Everywhere, Inc. and John Shawn Productions, Inc. filed a case against SFTP and Event Imaging Solutions, Inc. in the Superior Court of the State of California County of Los Angeles, Central District.  The plaintiffs provided photographic services to certain of our parks under license agreements and/or under a consulting arrangement.  In October 2006, Six Flags terminated its business relationship with the plaintiffs and thereafter entered into a settlement agreement with John Shawn Productions, Inc. regarding certain of the license agreements.  As a result of this termination, the plaintiffs brought suit claiming an unspecified amount in “excess of” $20 million in damages, which they later revised to two alternative theories in the respective amounts of approximately $15 million or $11 million.  The plaintiffs claimed that their services were wrongfully terminated and asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. The plaintiffs brought separate claims against defendant Event Imaging Solutions, Inc. for intentional interference with contractual relations.  In a summary judgment ruling on December 19, 2007, the Court dismissed additional claims against Six Flags for breach of fiduciary duty, constructive fraud and punitive damages.  The case was tried before a jury during the two-week period from March 17 to March 28, 2008, and the jury rendered a verdict in the Company’s favor, dismissing the claim.  The plaintiffs filed a motion for a new trial, which was dismissed by the Court on May 12, 2008.  On May 28, 2008, the plaintiffs filed a notice of appeal with the Court of Appeal of the State of California, Second Appellate District.  This action has been stayed as a result of the Chapter 11 Filing.

On March 1, 2007, Safety Braking Corporation, Magnetar Technologies Corp. and G&T Conveyor Co. filed a Complaint for Patent Infringement (the “Patent Complaint”) in the United States District Court for the District of Delaware naming Holdings, SFTP, and certain of our other subsidiaries as defendants, along with other industry theme park owners and operators.  The Patent Complaint alleges that the Company is liable for direct or indirect infringement of United States Patent No. 5,277,125 because of its ownership and/or operation of various theme parks and amusement rides.  The Patent Complaint does not include specific allegations concerning the location or manner of alleged infringement.  The Patent Complaint seeks damages and injunctive relief.  On or about July 1, 2008, the Court entered a Stipulation and Order of Dismissal of Safety Braking Corporation.  Thus, as of that date, only Magnetar Technologies Corp. and G&T Conveyor Co. remain as plaintiffs.  The Company has contacted the manufacturers of the amusement rides that it believes may be impacted by this case, requiring such manufacturers to honor their indemnification obligations with respect to this case.  The Company tendered the defense of this matter to certain of the ride manufacturers.  This action has been stayed with respect to the Debtors as a result of the Chapter 11 Filing.

On October 31, 2008, a civil action against Holdings and one of its subsidiaries was commenced in the District Court of Bexar County, Texas.  The plaintiff is seeking damages for personal injuries as a result of an accident while attempting to board a ride at Six Flags Fiesta Texas.  The ride manufacturer is a co-defendant in the litigation.  This action has been stayed as a result of the Chapter 11 Filing.

On January 6, 2009, a civil action against certain subsidiaries of Holdings was commenced in the State Court of Cobb County, Georgia.  The plaintiff sought damages for personal injuries, including an alleged brain injury, as a result of an altercation with a group of individuals on property next to Six Flags Over Georgia on July 3, 2007.  Certain of the individuals were employees of the park and were off-duty at the time the altercation occurred.  The plaintiff, who had exited the park, claims that the Company was negligent in its security of the premises.  Four of the individuals who allegedly participated in the altercation are also named as defendants in the litigation.

We are party to various other legal actions arising in the normal course of business.  We do not expect to incur any material liability by reason of such actions.

ITEM 4.     [RESERVED]

PART II

ITEM 5.                         MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

On October 6, 2008, we were notified by the NYSE that Holdings was not in compliance with the NYSE’s continued listing criteria because the thirty-day average closing price of its common stock was less than $1.00, and

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on October 27, 2008, we were notified by the NYSE that Holdings was not in compliance with the NYSE’s continued listing criteria because the thirty-day average market capitalization of its common stock had been less than $75 million and, at the same time, its stockholders’ equity had been less than $75 million.  Holdings’ common stock and the PIERS traded on the NYSE under the symbol “SIX” and “SIX-PB,” respectively, through April 17, 2009, when they were delisted from the NYSE due to Holdings’ failure to meet the NYSE’s continued quantitative listing criteria.  Holdings’ common stock and the PIERS currently trade on the over-the-counter market under the symbols “SIXFQ” and “SIXFPFQ,” respectively.  The following table shows, for the periods indicated, the high and low sales prices for Holdings’ common stock:

As of March 1, 2010, there were 1,237 holders of record of Holdings’ common stock, which does not reflect holders who beneficially own common stock held in nominee or street name.  We paid no cash dividends on Holdings’ common stock during the three years ended December 31, 2009.  We do not anticipate paying any cash dividends on Holdings’ common stock during the foreseeable future.  See Note 1 to Notes to Consolidated Financial Statements.

Securities Authorized for Issuance Under Equity Compensation Plans

Set forth below is information regarding our equity compensation plans at December 31, 2009:

See Note 2(r) to Notes to Consolidated Financial Statements.

(1)             Plans permit, in addition to grant of stock options and stock appreciation rights, the issuance of shares of common stock.  We expect that as of the Effective Date we will implement a new management incentive plan for management, selected employees and directors of Reorganized SFI, providing incentive compensation in the form of stock options and/or restricted stock in Reorganized SFI equal to 10% of the New Common Stock, determined on a fully diluted basis.  The existing plans and outstanding stock options will be cancelled pursuant to the Plan.  See Note 2(r) to the Consolidated Financial Statements.

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Performance Graph

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.

The following graph shows a comparison of the five-year cumulative total stockholder return on Holdings’ common stock (assuming all dividends were reinvested), The Standard & Poor’s (“S&P”) 500 Stock Index, The S&P Midcap 400 Index and The S&P Entertainment Movies & Entertainment Index.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Six Flags, Inc., The S&P 500 Index,

The S&P Midcap 400 Index And The S&P Movies & Entertainment Index

*$100 Invested on 12/31/04 in stock on index, including reinvestment of dividends. Fiscal year ending December 31.

Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

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ITEM 6.                             SELECTED FINANCIAL DATA

The selected financial data below as of and for each of the years in the five-year period ended December 31, 2009 are derived from our audited financial statements.  Our audited financial statements for the three-year period ended December 31, 2009 are included elsewhere in this report.

Our audited financial statements for the three-year period ended December 31, 2009 included herein and the following selected historical financial data for the five-year period ended on that date reflect the effects of our reclassification of the results of twelve parks, including the Sale Parks and Six Flags New Orleans, as discontinued operations.

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(1)             Excludes restricted cash.

(2)             Includes debt classified in liabilities subject to compromise at December 31, 2009.

(3)             Reflects accounting change related to the adoption FASB ASC 480 in all periods presented.  See Note 2(x) to Notes to Consolidated Financial Statements.

(4)             Includes balance sheet impact of FASB ASC 470, classified in liabilities subject to compromise at December 31, 2009, as well as $15.6 million of accrued dividends in arrears for each of 2009 and 2008.

ITEM 7.                 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis presents information that we believe is relevant to an assessment and understanding of our consolidated financial position and results of operations.  This information should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8.  Our consolidated financial statements and this discussion and analysis reflect the effects of our reclassification of the assets, liabilities and results of parks previously divested including the Sale Parks and our New Orleans park, as discontinued operations.

In February 2010, in connection with the Chapter 11 Filing, we decided to reject the lease with the Kentucky State Fair Board relating to our Louisville park and we will no longer operate the park.  Matters relating to the Louisville park, including lease and contract rejection issues, remain pending in the Bankruptcy Court and we are unable to estimate precisely the rejection damages that may result.  We are required to vacate the leased premises by approximately April 9, 2010, and we are in the process of removing our equipment and other personal property.  As a result, we have recorded appropriate provisions for impairment of our Louisville park operations, which is included in reorganization items in the statement of operations for the year ended December 31, 2009.  See Note 2(c) to Notes to Consolidated Financial Statements.

In late September 2009, a severe storm caused water damage to portions of Six Flags Over Georgia.  Nevertheless, the park opened the following weekend and remained open for the balance of the 2009 season.  The Company expects to submit an insurance claim of up to $16 million.

On June 13, 2009, the Debtors filed the Chapter 11 Filing (Case No. 09-12019) and on December 18, 2009, the Debtors filed with the Bankruptcy Court the Plan, which contemplates the Exit Facility, the New TW Loan and the Offering in connection with their emergence from Chapter 11.  Under the Plan, the holders of Prepetition Credit Agreement Claims against SFTP, SFO and certain of their wholly-owned domestic subsidiaries will be paid in full, in cash. All other secured claims against the Debtors that are allowed pursuant to certain requirements set forth in the Plan, if any, will either be paid in full or reinstated, in the Debtors’ discretion, with the consent of Majority Backstop Purchasers (which consent will not be unreasonably withheld).  Allowed Unsecured Claims against all of the Debtors other than Holdings and SFO will be paid in full or be reinstated (but solely to the extent such claims are allowed pursuant to the Plan).  Partnership Parks Claims will be affirmed and continued (as amended by agreement of the parties) by SFTP following its emergence from Chapter 11, Reorganized SFO and Reorganized SFI, respectively.  The holders of Allowed Unsecured Claims against SFO will convert their claims against SFO into approximately 22.89% of the New Common Stock to be issued by Reorganized SFI (subject to dilution

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by the Long-Term Incentive Plan).  The holders of Allowed Unsecured Claims against Holdings will convert their claims against Holdings into approximately 7.34% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  Additionally, each Accepting SFO Noteholder will have the limited right to participate in the Offering to purchase its Limited Offering Pro Rata Share of up to $450 million of New Common Stock, subject to dilution by the Long-Term Incentive Plan, to be issued by Reorganized SFI.  All existing equity interests in Holdings will be cancelled under the Plan.  All existing equity interests in SFO will be cancelled, and 100% of the newly issued common stock of SFO will be issued to Holdings on the Effective Date in consideration for Holdings’ distribution of the New Common Stock in Reorganized SFI to certain holders of allowed claims, as described above.  The Preconfirmation Subsidiary Equity Interests will remain unaltered by the Plan, and all existing equity interests in Holdings will be cancelled under the Plan.  The Preconfirmation Subsidiary Equity Interests and the Preconfirmation SFO Equity Interests will remain unaltered by the Plan.  See Note 1 to the Consolidated Financial Statements.

Beginning in the second quarter of 2009, the emergence of the H1N1 influenza strain (commonly known as “swine flu”) had a significant adverse impact on attendance at our Mexico City park, resulting in it being closed for thirteen days, and also affected group outings at our Texas parks due to school closures.

On May 15, 2009, the Acquisition Parties entered into a promissory note with TW-SF LLC, a subsidiary of TW, pursuant to which TW-SF LLC loaned approximately $52.5 million to the Acquisition Parties ($30.4 million of which was outstanding as of December 31, 2009), which are obligated to fund the “put” obligations related to the Partnership Parks.  Interest on the loan accrues at a rate of 14% per annum and the principal amount of the loan matures on March 15, 2011, which maturity date is expected to be extended until July 17, 2011 as part of the Plan.  The loan requires semi-annual prepayments with the proceeds received by the Acquisition Parties from the limited partnership units held by them in the Partnership Parks and is prepayable at any time at the option of the Acquisition Parties, without penalty.  Up to an aggregate of $10 million of the loan is guaranteed by Holdings, SFO and SFTP under the terms of a guarantee agreement entered into by the guarantors in favor of TW-SF LLC, dated May 15, 2009.

On October 6, 2008, we were notified by the NYSE that Holdings was not in compliance with the NYSE’s continued listing criteria because the thirty-day average closing price of its common stock was less than $1.00, and on October 27, 2008, we were notified by the NYSE that Holdings was not in compliance with the NYSE’s continued listing criteria because the thirty-day average market capitalization of its common stock had been less than $75 million and, at the same time, its stockholders’ equity had been less than $75 million.  Holdings’ common stock and the PIERS traded on the NYSE under the symbol “SIX” and “SIX-PB,” respectively, through April 17, 2009, when they were delisted from the NYSE due to Holdings’ failure to meet the NYSE’s continued quantitative listing criteria.  The last trading prices of the common stock and the PIERS on the NYSE were $0.13 and $0.65, respectively, on April 17, 2009.  Holdings’ common stock and the PIERS currently trade on the over-the-counter market under the symbols “SIXFQ” and “SIXFPFQ,” respectively.

On July 31, 2007, we acquired all of the assets of Six Flags Discovery Kingdom (formerly Six Flags Marine World) that were owned by the City of Vallejo, California, our joint venture partner, for a cash purchase price of $52,777,000.  The purchase price was allocated to the acquisition of the land that the park is situated on ($22,100,000), the real and personal property that was acquired ($9,146,000) and the elimination of the minority interest liability related to the joint venture ($11,513,000).  The remaining costs in excess of the fair value of the assets that were acquired ($10,018,000) were recorded as goodwill, which is deductible for tax purposes.

On June 18, 2007, we acquired a 40% interest in a venture that owns DCP for a net investment of approximately $39.7 million.  We use the DCP library, which includes the Golden Globes, the American Music Awards, the Academy of Country Music Awards, So You Think You Can Dance, American Bandstand and Dick Clark’s New Year’s Rockin’ Eve, to provide additional product offerings in our parks.  In addition, we believe that our investment in DCP provides us additional sponsorship and promotional opportunities.  Red Zone, a private equity fund managed by Daniel M. Snyder and Dwight C. Schar, both members of Holdings’ Board of Directors, is the majority owner of the parent of DCP.  During the fourth quarter of 2007, an additional third party investor purchased approximately 2.0% of the interest in DCP from us and Red Zone.  As a result, our ownership interest is approximately 39.2%.

In April 2007, we completed the sale to PARC 7F-Operations Corporation of the stock of subsidiaries that owned three of our water parks and four of our theme parks for an aggregate purchase price of $312 million, consisting of $275 million in cash, the PARC Note and the PARC Guarantee.  The Sale Parks included Darien Lake near Buffalo, NY; Waterworld USA in Concord, CA; Elitch Gardens in Denver, CO; Splashtown in Houston, TX;

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Frontier City and the White Water Bay water park in Oklahoma City, OK; and Wild Waves and Enchanted Village near Seattle, WA.

In March 2007, we reversed $1.1 million of the $84.5 million non-cash impairment charge that we recorded against assets held for sale in connection with the Sale Parks in our consolidated financial statements for the year ended December 31, 2006.  The net proceeds from the sale were used to repay indebtedness, fund capital expenditures and acquire the minority interests in Six Flags Discovery Kingdom and DCP.

During the first quarter of 2006, we exercised our right to terminate the ground lease at our Sacramento, California water park following the 2006 season.  In March 2007, we sold substantially all of the assets of the water park for approximately $950,000.  The net proceeds from the sale of the Sacramento assets were used to repay indebtedness.

Our New Orleans park sustained extensive damage in Hurricane Katrina in late August 2005 and has not re-opened since.  We have determined that our carrying value of the assets destroyed was approximately $34.0 million, for which we recorded a receivable in 2005.  This amount does not include the property and equipment owned by the lessor, which is also covered by our insurance policies.  The park is covered by up to approximately $180 million in property insurance, subject to an insurer-calculated deductible in the case of named storms of approximately $5.5 million.  The property insurance includes business interruption coverage.  The flood insurance provisions of the policies contain a $27.5 million sublimit.  In December 2006, we commenced a declaratory action in Louisiana federal district court seeking judicial determination that the flood insurance sublimit was not applicable by virtue of the separate “Named Storm” peril.  In February 2008, the court ruled in summary judgment that the flood insurance sublimit was applicable to the policies, including the Named Storm provision.  In April 2009, the U.S. Court of Appeals for the Fifth Circuit upheld the district court ruling, with the exception of one policy, the Commonwealth Insurance Company policy, which was remanded to the district court for further consideration of our claim.  In January 2010, we entered into a settlement agreement with Commonwealth Insurance Company, which was approved by the Bankruptcy Court in February 2010.

We have filed property insurance claims, including business interruption, with our insurers.  We have an insurance receivable of $2.4 million at December 31, 2009, most of which has been settled, which reflects part of our claim for business interruption and the destroyed assets.  The receivable is net of $36.3 million in payments received from our insurance carriers.

In April 2009, the New Orleans Parties sought to accept an offer we made years earlier to buy out of its lease with the New Orleans Parties for a $10 million cash payment and an exchange of contiguous real estate we owned.  When we declined to extend the same offer, the Mayor of New Orleans announced to the press that the New Orleans Parties would sue.  We were current on our lease payments to the New Orleans Parties, however, and in our view, not in default.  The New Orleans Parties filed suit in Louisiana state court on May 11, 2009, alleging that we breached our lease with the New Orleans Parties by removing rides and assets from the park property; by failing to secure the property; and by accepting interim insurance payments for Hurricane Katrina damage claims instead of designating the New Orleans Parties as loss payee.  On May 12, 2009, the New Orleans Parties obtained an ex parte state court temporary restraining order that enjoined us from: (a) removing any rides or attractions without the New Orleans Parties’ approval, (b) not properly securing the premises, and (c) “converting and/or secreting insurance proceeds received . . . as a result of Hurricane Katrina.”  We removed the action to the Court, and the parties stipulated to stay the federal action for sixty days, while leaving the temporary restraining order in place, with us reserving the right to contest our propriety at a later time.  In an order dated June 1, 2009, the Court imposed the agreed-upon stay but shortened the period to thirty days, until June 29, 2009.  The Court issued an order on June 22, 2009, directing the clerk to mark the action as closed due to the stay resulting from the Chapter 11 Filing, but retaining jurisdiction for restoration to the calendar should circumstances change.

Subsequently, however, the parties reached an agreement to settle the matter pursuant to which the New Orleans Parties and we entered into a general release of all claims against one another.  Additionally, the New Orleans Parties entered into a stipulation dismissing, with prejudice, the action pending in the United States District Court for the Eastern District of Louisiana, and dissolving the temporary restraining order obtained by the New Orleans Parties on May 12, 2009.  The New Orleans Parties also agreed not to file any proof of claim or otherwise assert any entitlement to relief in the Chapter 11 Filing.  Other material terms and conditions of the settlement were as follows:

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·                  Within 35 days of the Bankruptcy Court’s final approval of the final settlement agreement, which approval occurred on October 8, 2009, we were required to make, and did make, a cash payment to the New Orleans Parties in the amount of $3 million;

·                  We vacated and delivered to the New Orleans Parties the leased premises and 86 acres of land, including any improvements thereto in their current condition, “as is”;

·                  The New Orleans Parties will be entitled to receive 25% of any net insurance proceeds we recover on our insurance claims for property damage caused by Hurricane Katrina to the extent our net recovery exceeds $65 million.  We retain absolute discretion in prosecution, and any potential settlement of, claims with insurers, subject to any required Bankruptcy Court approval; and

·                  All other agreements between the New Orleans Parties and us related in any way to the leased premises and any other such related agreements, were be deemed terminated upon the Bankruptcy Court’s final approval of the settlement agreement.

The settlement occurred on November 12, 2009.

General

Our revenue is primarily derived from the sale of tickets for entrance to our parks (approximately 53.6% of revenues in 2009), the sale of food, merchandise, games and attractions inside our parks as well as sponsorship, licensing and other fees.  Revenues from sponsorship, licensing and other fees can be impacted by the term, timing and extent of services and fees, which can result in fluctuations from year to year.  Total revenue per capita is defined as total revenue divided by attendance.

Our principal costs of operations include salaries and wages, employee benefits, advertising, outside services, maintenance, utilities and insurance.  A large portion of our expenses is relatively fixed.  Costs for full-time employees, maintenance, utilities, advertising and insurance do not vary significantly with attendance.

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Results of Operations

Summary data for the years ended December 31 were as follows (in thousands, except per capita revenue):

Year ended December 31, 2009 vs. Year ended December 31, 2008

Revenue. Revenue in 2009 totaled $912.9 million compared to $1,021.3 million in 2008, representing an 11% decrease.  The decrease is attributable to a 1.5 million (6%) decrease in attendance coupled with a $1.94 (5%) decrease in total revenue per capita.  The attendance reduction was driven by a decline in group sales, reflecting cutbacks in outings by companies, schools and other organizations, as well as reduced complimentary and free promotional tickets.  The reduction in total revenue per capita reflects decreased guest spending on admissions, food and beverages, games and merchandise and other in-park revenues, as well as decreased licensing and other fees.  Per capita guest spending, which excludes sponsorship, licensing and other fees, decreased $1.39 (4%) to $36.58 from $37.97 in 2008.  Admissions revenue per capita decreased $0.53 (3%) in 2009 compared to the prior year, and was driven by the exchange rate impact on admissions revenue at our parks in Mexico and Canada ($0.27) as well as price and ticket mix (e.g., season pass, main gate, group sales and other discounted or complimentary tickets).  Decreased revenues from food and beverages, games, retail, and other in-park offerings resulted in an $0.86 (5%) decrease in non-admissions per capita guest spending in 2009 compared to 2008, of which approximately ($0.26) was attributable to the exchange rate impact at the Company’s parks in Mexico and Canada.

Revenues for 2009 were also impacted by a decline in international licensing and other fees of $16.9 million compared to the prior year.  The 2009 results reflect the overall negative macroeconomic environment, the Chapter 11 Filing and adverse weather compared to the prior-year period.  In addition, attendance in Mexico and Texas was adversely affected by the second quarter outbreak of the swine flu.

Operating Expenses. Operating expenses for 2009 increased $6.1 million (1.5%) compared to operating expenses in 2008, reflecting an increase in salaries, wages and benefits ($10.6 million) primarily due to the impact of minimum wage increases as well as increased costs related to our pension plan that was frozen in March 2006 and increased workers compensation costs, partially offset by a reduction in cash-based incentive compensation and stock-based compensation, and a decrease in expenses related to the exchange rate impact at our parks in Mexico and Canada ($5.1 million).

Selling, general and administrative. Selling, general and administrative expenses for 2009 decreased $17.5 million (8.1%) compared to 2008.  The reduction primarily reflects decreases in (i) salaries, wages and benefits ($8.2

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million) primarily due to a reduction in cash-based incentive compensation and stock-based compensation, (ii) insurance related expenses ($5.0 million), (iii) expenses related to the exchange rate impact at our parks in Mexico and Canada ($3.2 million), (iv) legal expenses ($1.5 million) and (v) property taxes ($1.5 million), partially offset by increased operating tax expenses ($1.8 million).

Costs of products sold. Costs of products sold in 2009 decreased $9.6 million (11.0%) compared to costs for 2008, primarily due to (i) the decrease in food and beverage, games and merchandise sales, and (ii) a decrease in cost of sales related to the exchange rate impact at our parks in Mexico and Canada.  As a percentage of our in-park guest spending, cost of products sold was flat in 2009.

Depreciation and amortization. Depreciation and amortization expense for 2009 increased $6.3 million (4.5%) compared to 2008.  The increase was primarily attributable to our on-going capital program partially offset by a decrease in depreciation expense related to the exchange rate impact at our parks in Mexico and Canada.

Loss on disposal of assets. Loss on disposal of assets decreased by $5.3 million (30.1%) in 2009 compared to 2008 primarily due to the write-off of several assets no longer being utilized in park operations in 2008, coupled with the gain recognized in 2009 on the sale of a ride at SFOG and the gain recognized from the insurance proceeds received in the third quarter of 2009 for certain assets that were destroyed by a fire at our Mexico park in 2008.

Interest expense, net. Interest expense, net, for 2009 decreased $77.6 million (42.4%) compared to 2008 primarily reflecting the cessation of interest accruals and the write-off of discounts, premiums and deferred financing costs on our unsecured debt which is subject to compromise as a result of the Chapter 11 Filing, as well as lower effective interest rates.

Other expense. Other expense increased $2.7 million (18.3%) in 2009 primarily due to the exchange rate impact at our Mexico and Canada parks ($1.6 million) and the settlement of certain contingencies in 2008.

Income tax expense. Income tax was $2.9 million for 2009 compared to a $116.6 million expense for 2008, primarily reflecting a 2008 non-cash income tax expense of approximately $110.8 million resulting from an increase in our tax valuation allowance for deferred tax assets, which consists primarily of net operating loss (“NOLs”) carryforwards.  The tax expense was affected by the valuation allowance applied to our U.S. net deferred tax assets during both years.  The current period valuation allowance was $620.2 million at December 31, 2009 and $596.3 million at December 31, 2008.  See “Critical Accounting Policies” and Note 2(p) to Notes to Consolidated Financial Statements.

At December 31, 2009, we estimated that we had approximately $1,958.4 million of NOLs carryforwards for federal income tax purposes and substantial state net operating loss carryforwards.  The NOLs are subject to review and potential disallowance by the income tax regulators upon audit of our income tax returns and those of our subsidiaries.  See “Risk Factors We May Be Required To Recognize Cancellation Of Indebtedness Income And Our Ability To Utilize Our Net Operating Loss Carryforwards May Be Limited If We Successfully Consummate the Proposed Plan of Reorganization.”  See Note 10 to Notes to Consolidated Financial Statements.

Year ended December 31, 2008 vs. Year ended December 31, 2007

Revenue. Revenue in 2008 totaled $1,021.3 million compared to $970.8 million for 2007, representing a 5.2% increase.  The increase arose out of a $1.31 (3.4%) increase in total revenue per capita coupled with a 0.4 million increase in attendance.  Total revenue per capita growth reflects increased sponsorship, licensing and other fees, increased ticket revenue and increased rentals, food and beverage, parking, merchandise and other in-park revenues.  Per capita guest spending, which excludes sponsorship, licensing and other fees, increased $0.54 (1.4%) to $37.97 from $37.43 in 2007.  Admissions revenue per capita increased $0.06 (0.3%) in 2008 compared to 2007, driven primarily by price and ticket mix.  Increased revenues from rentals, food and beverage, parking, merchandise and other guest services resulted in a $0.48 (3.0%) increase in non-admissions guest spending in 2008 compared to 2007.

Operating Expenses. Operating expenses for 2008 decreased $10.9 million (2.5%) compared to expenses for 2007.  The decrease includes: (i) a reduction in non-performance based salary and wage expense and benefit costs primarily from lower full-time headcount, improved seasonal labor management and reduced workers’ compensation expenses ($7.5 million), (ii) a decrease in repairs and maintenance costs ($4.9 million) and (iii) a reduction in contract shows ($3.2 million) related to our decision to replace select shows with DCP library content, partially offset by (i) an increase in utility costs ($3.0 million), (ii) an increase in performance based compensation expense ($1.4 million) and (iii) an increase in credit card transaction fees ($1.1 million) related to an increase in on-line ticket and season pass sales.

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Selling, general and administrative. Selling, general and administrative expenses for 2008 decreased $29.5 million (12.1%) compared to 2007.  The decrease primarily reflects (i) a decrease in marketing expenses ($33.7 million) related to our more efficient and targeted marketing plan, with more online focus and concentrated spending in the early portion of the season, (ii) a reduction in consulting and legal fees ($4.2 million) and (iii) a reduction in travel related costs ($3.3 million) partially offset by (i) higher insurance expenses primarily related to current year adverse development in general liability claims from prior years ($6.5 million), (ii) an increase in salary, wage and benefit costs ($2.8 million) driven by an increase in performance-based compensation, partially offset by other reductions and (iii) costs related to our international development projects and fluctuations in foreign currency exchange rates related to expenses at our parks located in Mexico and Canada ($2.9 million).

Costs of products sold. Costs of products sold in 2008 increased $5.0 million (6.1%) compared to costs for 2007, primarily related to the increase in food and beverage, merchandise and games sales along with an increase in product and freight costs.  As a percentage of our in-park guest spending, costs of products sold increased slightly in 2008.

Depreciation and amortization. Depreciation and amortization expense for 2008 increased $1.7 million (1.2%) compared to 2007. The increase was attributable to our on-going capital program.

Loss on disposal of assets. Loss on disposal of assets decreased $21.6 million (54.9%) in 2008 compared to 2007 primarily related to management’s decision to write off and dispose of certain inefficient rides and attractions in 2007.

Interest expense, net. Interest expense, net decreased $21.1 million (10.3%) compared to 2007, reflecting lower outstanding long-term debt and lower interest rates in 2008 versus 2007.

Other expense. Other expense in 2008 decreased $5.5 million (27.3%) to $14.6 million in 2008 primarily related to (i) the settlement that occurred in the third quarter of 2007 for a class action lawsuit related to our California parks ($9.6 million), (ii) the severance and medical costs, that occurred in the fourth quarter of 2007, related to a reduction in our full-time workforce through an early retirement program and select layoffs ($3.6 million), (iii) amounts that were accrued in the third quarter of 2007 for certain contingencies, net of reversals ($3.4 million) and (iv) the change in fair value of the interest rate swaps that occurred during the first quarter of 2008 when the swaps had not yet been designated as hedges and the change in fair values of the interest rate swaps that occurred in the fourth quarter of 2008 because we no longer qualified for hedge accounting.

Income tax expense. Income tax expense was $116.6 million for 2008 compared to a $6.2 million expense for 2007, primarily reflecting a non-cash income tax charge of $110.8 million due to an increase in our valuation allowance for deferred tax assets, which consists primarily of NOLs carryforwards. The tax expense was affected by the valuation allowance applied to our U.S. net deferred tax assets during both years. The current period valuation allowance was $596.3 million at December 31, 2008 and $470.9 million at December 31, 2007.  See “Critical Accounting Policies” and 2(p) to Notes to Consolidated Financial Statements.

At December 31, 2008, we estimated that we had approximately $1,781.3 million of NOLs carryforwards for Federal income tax purposes and substantial state net operating loss carryforwards.  The NOLs are subject to review and potential disallowance by the income tax regulators upon audit of our income tax returns and those of our subsidiaries. See “Risk Factors We May Be Required To Recognize Cancellation Of Indebtedness Income And Our Ability To Utilize Our Net Operating Loss Carryforwards May Be Limited If We Successfully Consummate the Proposed Plan of Reorganization.”  See Note 10 to Notes to Consolidated Financial Statements.

Results of Discontinued Operations

The consolidated balance sheets and the consolidated statements of operations for all periods presented reflect select assets of the parks that have been sold, including the New Orleans park, as assets held for sale, select liabilities as liabilities from discontinued operations and the operating results as results of discontinued operations.  See Note 3 to Notes to Consolidated Financial Statements.

Liquidity, Capital Commitments and Resources

General

Our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand.  Our principal uses of cash include the funding of working capital obligations, debt service,

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investments in parks (including capital projects), preferred stock dividends (to the extent declared) and payments to our partners in the Partnership Parks.  Holdings did not pay a dividend on its common stock during 2009, nor does it expect to pay any such dividend in 2010.

As of December 31, 2009, we had unrestricted cash of $164.8 million.  Based on the final orders by the Court with respect to the use of cash, we do not currently expect we will require debtor-in-possession financing during the Chapter 11 Filing.  However, if our emergence is delayed beyond mid-April, we may require such financing to fund operations and “put” obligations related to the Partnership Parks.

If the Plan is confirmed, we believe that, based on historical and anticipated operating results, cash flows from operations, available cash and borrowings under the Exit Facility and New TW Loan, we will have adequate long-term liquidity to meet our needs, including anticipated requirements for working capital, capital expenditures and scheduled debt and obligations under arrangements relating to the Partnership Parks.

Our current and future liquidity is greatly dependent upon our operating results, which are driven largely by overall economic conditions as well as the price and perceived quality of the entertainment experience at our parks.  Our liquidity could also be adversely affected by disruption in the availability of credit as well as unfavorable weather, accidents or the occurrence of an event or condition at our parks, including terrorist acts or threats, negative publicity or significant local competitive events, that could significantly reduce paid attendance and, therefore, revenue at any of our parks.  Furthermore, our liquidity has been and will be directly affected by the Chapter 11 Filing and the resolution of the Chapter Filing.  See “Risk Factors.”