Filed On 3/30/00 ˇ SEC File 33-61338 ˇ Accession Number 912057-0-14992
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
3/30/00 Six Flags Operations Inc 10-K 12/31/99 6:86 Merrill Corp/FA
Document/Exhibit Description Pages Size
1: 10-K Annual Report 62 245K
2: EX-3.(A) Articles of Incorporation/Organization or By-Laws 4 15K
3: EX-3.(B) Articles of Incorporation/Organization or By-Laws 5 15K
4: EX-3.(C) Articles of Incorporation/Organization or By-Laws 11 38K
5: EX-21 Subsidiaries of the Registrant 2 7K
6: EX-27 Financial Data Schedule 2 6K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission File Number: 333-46897-01
Premier Parks Operations Inc.
(formerly Six Flags Entertainment Corporation)
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(Exact name of Registrant as specified in its charter)
Delaware 73-6137714
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11501 Northeast Expressway
Oklahoma City, Oklahoma 73131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 475-2500
Securities registered pursuant to Sec. 12(b) of the Act: NONE
Securities registered pursuant to Sec. 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
State the aggregate market value of the voting stock held by
non-affiliates (assuming, solely for the purposes of this Form, that all the
directors of the Registrant are affiliates) of the Registrant:
None. All of the capital stock of the Company is held by its parent,
Premier Parks Inc.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest most practicable date:
The number of shares of Common Stock of the Registrant outstanding as of
March 1, 2000 was 1,000.
The Registrant meets the conditions set forth in General Instruction
I(1)(a) and (b) of Form 10-K and is therefore filing this form with reduced
disclosure format.
PART I
ITEM 1. BUSINESS
Introduction
On November 5, 1999, two wholly-owned subsidiaries of Premier Parks Inc.
("Premier"), Premier Parks Operations Inc. (together with its subsidiaries,
"PPO" or the "Company") and Six Flags Entertainment Corporation (together with
its subsidiaries, "SFEC" or "Six Flags") merged (the "Merger") with PPO as the
surviving corporation. Premier is the largest regional theme park operator in
the world and, prior to the Merger, PPO owned or operated 21 parks and Six Flags
owned 10 parks.
The Merger was accounted for as a reorganization of interests under common
control in a manner similar to a pooling of interests. All financial and
statistical information contained herein at dates or for periods subsequent to
April 1, 1998 (the date Premier acquired SFEC) give effect to the Merger as if
it had occurred on that date. Financial and statistical information at dates or
for periods prior to April 1, 1998 relate only to PPO.
For the year ended December 31, 1999, the Company's reported total
revenue was approximately $927.0 million and its consolidated earnings before
interest, taxes, depreciation and amortization and noncash compensation
("EBITDA") was approximately $329.3 million. The 31 parks the Company
operated during the 1999 season had attendance of approximately 36.7 million.
It now operates 32 regional parks, including 13 of the 50 highest attendance
theme parks in North America, the largest paid admission theme park in Mexico
and seven theme parks in Europe. The Company's theme parks serve 8 of the
10 largest metropolitan areas in the United States.
In May 1999, the Company acquired Reino Aventura, a theme park located in
Mexico City, and Splashtown, a water park located in Houston.
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
theme park located near Dusseldorf, Germany. At the same time, the Company
entered into (i) long-term license agreements with Warner Bros. for exclusive
theme park usage in Europe and Latin and South America (including Mexico) of the
Looney Tunes, Hanna-Barbera, Cartoon Network and DC Comics characters,(1) which
complement the Company's domestic license described below and (ii) a joint
venture with Warner Bros. to design, develop and manage a new Warner Bros. Movie
World theme park scheduled to open in Madrid, Spain in 2002. See Note 2 to Notes
to Consolidated Financial Statements.
Six Flags has operated regional theme parks under the Six Flags name for
nearly forty years. As a result, Six Flags is a nationally-recognized brand
name. By virtue of Premier's acquisition of SFEC in 1998, the Company obtained
worldwide ownership of the Six Flags brand name, and in the 1998 and 1999
seasons commenced the use of the Six Flags brand name at five parks and is
adding the brand to four additional parks for the 2000 season.
As part of the Six Flags acquisition, the Company obtained the exclusive
right for theme-park
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1 Looney Tunes, characters, names and all related indicia are trademarks of
Warner Bros.(C)2000, a division of Time Warner Entertainment Company, L.P.
("TWE"). Batman and Superman and all related characters, names and indicia
are copyrights and trademarks of DC Comics(C)2000, Cartoon Network and
logo are trademarks of Cartoon Network(C)2000, Six Flags and all related
indicia are federally registered trademarks of Six Flags Theme Parks
Inc.(C)2000, a subsidiary of the Company. Fiesta Texas and all related
indicia are trademarks of Fiesta Texas, Inc.(C)2000, a subsidiary of the
Company.
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usage of certain Warner Bros. and DC Comics animated characters throughout the
United States (except the Las Vegas metropolitan area) and Canada. These
characters include Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman,
Superman and others.
The Company's 32 parks at December 31, 1999, are located in geographically
diverse markets across North America and Europe. Each of the Company's theme
parks is individually themed and provides a complete family-oriented
entertainment experience. The Company's theme parks generally offer a broad
selection of state-of-the-art and traditional thrill rides, water attractions,
themed areas, concerts and shows, restaurants, game venues and merchandise
outlets.
Since current management assumed control in 1989, the Company has acquired
31 parks (including its interests in the Six Flags Marine World), and has
achieved significant internal growth.
Description of Domestic Parks
Six Flags America
Six Flags America, a combination theme and water park located in Largo,
Maryland (approximately 15 miles east of Washington, D.C. and 30 miles southwest
of Baltimore, Maryland) is the 37th largest theme park in North America.(2) The
park's primary market includes Maryland, northern Virginia, Washington, D.C. and
parts of Pennsylvania and Delaware. This market provides the park with a
permanent resident population base of approximately 6.6 million people within 50
miles and 11.0 million people within 100 miles. Based on a copyrighted 1999
survey of television households within designated market areas ("DMAs")
published by A.C. Nielsen Media Research, the Washington, D.C. and Baltimore
markets are the number 7 and number 23 DMAs in the United States, respectively.
The Company owns a site of 515 acres, with 131 acres currently used for
park operations. The remaining 384 acres, which are fully zoned for
entertainment and recreational uses, provide the Company with ample expansion
opportunity, as well as the potential to develop complementary operations.
Six Flags America's principal competitors are King's Dominion Park,
located in Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Six Flags
America.
Six Flags AstroWorld, Six Flags WaterWorld and Splashtown
Six Flags AstroWorld, the 34th largest theme park in North America, and
the separately gated adjacent Six Flags WaterWorld, the 13th largest water park
in the United States, are located in Houston, Texas. The Houston, Texas market
provides the parks with a permanent resident population of 4.3 million people
within 50 miles and 5.2 million people within 100 miles. The Houston market is
the number 11 DMA in the United States.
In May 1999, the Company acquired Splashtown, a water park located
approximately 30 miles from Six Flags AstroWorld. The Company believes it can
increase attendance and revenues at all three Houston facilities through joint
season pass and other joint ticketing and marketing programs and can increase
operating efficiencies at the facilities through shared expenses.
The Company owns a site of approximately 90 acres used for the theme park,
approximately 14
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(2) Park rankings are based on 1999 attendance as published in Amusement
Business, an industry trade publication.
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acres used for Six Flags WaterWorld and approximately 60 acres for Splashtown.
Six Flags WaterWorld and Splashtown compete with each other and with Water
Works, a nearby water park. Six Flags AstroWorld competes with Sea World of
Texas and the Company's Six Flags Fiesta Texas, both located in San Antonio,
Texas, approximately 200 miles from the park. In addition, the park competes
with Six Flags Over Texas, the Company's park located in Arlington, Texas,
approximately 250 miles from the park.
Six Flags Darien Lake & Camping Resort
Six Flags Darien Lake, a combination theme and water park, is the largest
theme park in the State of New York and the 36th largest theme park in North
America. Six Flags Darien Lake is located off Interstate 90 in Darien Center,
New York, approximately 30, 40 and 120 miles from Buffalo, Rochester and
Syracuse, New York, respectively. The park's primary market includes upstate New
York, western and northern Pennsylvania and southern Ontario, Canada. This
market provides the park with a permanent resident population base of
approximately 2.1 million people within 50 miles of the park and 3.2 million
within 100 miles. The Buffalo, Rochester and Syracuse markets are the number 39,
number 77 and number 76 DMAs in the United States, respectively.
The Six Flags Darien Lake property consists of approximately 988 acres,
including 144 acres for the theme park, 242 acres of campgrounds and 602 acres
of agricultural, undeveloped and water areas. Six Flags Darien Lake also has a
20,000 seat amphitheater. The Company has a long-term arrangement with a
national concert promoter to lease and operate the amphitheater.
Adjacent to the Six Flags Darien Lake theme park are a 164 room hotel and
a camping resort, each owned and operated by the Company. The campgrounds
include 1,180 developed campsites, including 430 recreational vehicles (RV's)
available for daily and weekly rental. The campground is the fifth largest in
the United States. In 1999, approximately 330,000 people used the Six Flags
Darien Lake hotel and campgrounds. Substantially all of the hotel and camping
visitors visit the theme park.
Six Flags Darien Lake's principal competitor is Wonderland Park located in
Toronto, Canada, approximately 125 miles from Six Flags Darien Lake. In
addition, Six Flags Darien Lake competes to a lesser degree with three smaller
amusement parks located within 50 miles of the park. Six Flags Darien Lake is
significantly larger with a more diverse complement of entertainment than any of
these three smaller facilities.
Six Flags Elitch Gardens
Six Flags Elitch Gardens is a combination theme and water park located on
approximately 67 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and the Pepsi Center Arena, and close to Coors Field. Six Flags
Elitch Gardens is the 40th largest theme park in North America. The park's
primary market includes the greater Denver area, as well as most of central
Colorado. This market provides the park with a permanent resident population
base of approximately 2.4 million people within 50 miles of the park and
approximately 3.3 million people within 100 miles. The Denver area is the number
18 DMA in the United States. Six Flags Elitch Gardens has no significant direct
competitors.
Six Flags Fiesta Texas
Six Flags Fiesta Texas, the 25th largest theme park in North America, is a
combination theme and water park located on approximately 206 acres in San
Antonio, Texas. The San Antonio, Texas market provides the park with a permanent
resident population of approximately 1.7 million people within 50 miles and
approximately 3.0 million people within 100 miles. The San Antonio market is the
number 38 DMA in the United States.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas, also
located in San Antonio. In
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addition, the park competes to a lesser degree with two Company parks: Six Flags
AstroWorld, located in Houston, Texas, and Six Flags Over Texas located in
Dallas.
Six Flags Great Adventure and Six Flags Wild Safari Animal Park
Six Flags Great Adventure, the 10th largest theme park in North America,
and the separately gated adjacent Six Flags Wild Safari Animal Park, are located
in Jackson, New Jersey, approximately 70 miles south of New York City and 50
miles east of Philadelphia. The Company is adding a separately gated water park
to the site for the 2000 season. The New York and Philadelphia markets provide
the parks with a permanent resident population of approximately 12.2 million
people within 50 miles and approximately 26.4 million people within 100 miles.
The New York and Philadelphia markets are the number 1 and number 4 DMAs in the
United States, respectively.
The Company owns a site of approximately 2,200 acres, of which
approximately 125 acres are currently used for the theme park operations, and
approximately 350 adjacent acres are used for the wildlife safari park, home to
over 1,200 exotic animals representing more than 58 species, which can be seen
over a four and one-half mile drive. The new water park will be located on
approximately 23 acres. Over 1700 acres remain undeveloped. Six Flags Great
Adventure's principal competitors are Hershey Park, located in Hershey,
Pennsylvania, approximately 150 miles from the park; and Dorney Park, located in
Allentown, Pennsylvania, approximately 75 miles from the park.
Six Flags Great America
Six Flags Great America, the 18th largest theme park in North America, is
located in Gurnee, Illinois, between Chicago, Illinois and Milwaukee, Wisconsin.
The Chicago and Milwaukee markets provide the park with a permanent resident
population of approximately 7.8 million people within 50 miles and approximately
12.0 million people within 100 miles. The Chicago and Milwaukee markets are the
number 3 and number 31 DMAs in the United States, respectively.
The Company owns a site of approximately 440 acres of which 92 are used
for the theme park operations, and approximately 106 usable acres are located in
a separate parcel available for expansion and complementary uses. Six Flags
Great America currently has no direct theme park competitors in the region, but
does compete to some extent with Kings Island, located near Cincinnati, Ohio,
approximately 350 miles from the park; Cedar Point, located in Sandusky, Ohio,
approximately 340 miles from the park; and Six Flags St. Louis, the Company's
park located outside St. Louis, Missouri, approximately 320 miles from the park.
Six Flags Hurricane Harbor
Six Flags Hurricane Harbor, the 6th largest water park in the United
States, is located in Arlington, Texas, between Dallas and Fort Worth, Texas.
The Dallas/Fort Worth market provides the park with a permanent resident
population of 4.5 million people within 50 miles and 5.6 million people within
100 miles. The Dallas/Fort Worth market is the number 8 DMA in the United
States.
The Company owns directly approximately 47 acres, of which approximately
18 acres are currently used for Hurricane Harbor and 31 acres remain
undeveloped. Six Flags Hurricane Harbor has no direct competitors in the area
other than a municipal water park.
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Six Flags Kentucky Kingdom
Six Flags Kentucky Kingdom is a combination theme and water park, located
on approximately 58 acres on and adjacent to the grounds of the Kentucky State
Fair in Louisville, Kentucky, of which approximately 38 acres are leased under
ground leases with terms (including renewal options) expiring between 2021 and
2049, with the balance owned by the Company. Six Flags Kentucky Kingdom is the
46th largest theme park in North America. The park's primary market includes
Louisville and Lexington, Kentucky, Evansville and Indianapolis, Indiana and
Nashville, Tennessee. This market provides the park with a permanent resident
population of approximately 1.4 million people within 50 miles and approximately
4.6 million people within 100 miles. The Louisville and Lexington markets are
the number 50 and number 66 DMAs in the United States.
Six Flags Kentucky Kingdom's only significant direct competitor is Kings
Island, located near Cincinnati, Ohio, approximately 100 miles from the park.
Six Flags Magic Mountain and Six Flags Hurricane Harbor
Six Flags Magic Mountain, the 17th largest theme park in North America,
and the separately gated adjacent Six Flags Hurricane Harbor, are located in
Valencia, California, in the northwest section of Los Angeles County. The Los
Angeles, California market provides the parks with a permanent resident
population of approximately 9.8 million people within 50 miles and approximately
15.8 million people within 100 miles. The Los Angeles market is the number 2 DMA
in the United States.
The Company owns a site of approximately 260 acres with 160 acres used for
the theme park, and approximately 12 acres used for the pirate-themed water
park. Six Flags Magic Mountain's principal competitors include Disneyland in
Anaheim, California, located approximately 60 miles from the park, Universal
Studios Hollywood in Universal City, California, located approximately 20 miles
from the park, Knott's Berry Farm in Buena Park, California, located
approximately 50 miles from the park, and Sea World of California in San Diego,
California, located approximately 150 miles from the park. In early 1999, a new
park, Legoland, opened approximately 120 miles from Magic Mountain. Six Flags
Hurricane Harbor's only direct competitor in the area is Raging Waters,
approximately 50 miles from the water park.
Six Flags Marine World
Six Flags Marine World, a theme park which also features marine mammals
and exotic land animals, is the 30th largest theme park in North America. Six
Flags Marine World is located in Vallejo, California, approximately 30 miles
from San Francisco, 20 miles from Oakland and 60 miles from Sacramento. This
market provides the park with a permanent resident population base of
approximately 5.2 million people within 50 miles and approximately 9.7 million
people within 100 miles. The San Francisco/Oakland and Sacramento areas are the
number 5 and number 20 DMAs in the United States, respectively.
The Company manages the operations of Six Flags Marine World under a
management agreement entered into in February 1997, pursuant to which the
Company is entitled to receive an annual base management fee of $250,000 and up
to $250,000 annually in additional fees based on park performance. In addition,
in November 1997 the Company exercised at no additional cost an option to lease
approximately 55 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the combined operations of the park after
operating expenses and debt service. Finally, the Company has the option to
purchase the entire park beginning in February 2002, which it currently expects
to exercise at that time.
Six Flags Marine World is located on approximately 136 acres and offers
various rides and other traditional theme park attractions, as well as
presentation stadiums, animal habitats and picnic areas,
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bordering a 55-acre man-made lake. The park provides for the shelter and care
for marine mammals, land animals, sharks and rays, birds and reptiles, tropical
and cold water fish and marine invertebrates, and butterflies, all featured in a
variety of exhibits and participatory attractions.
Six Flags Marine World's principal competitors are Underwater World at
Pier 39 in San Francisco, Great America in Santa Clara and Outer Bay at Monterey
Bay Aquarium. These parks are located approximately, 30, 60 and 130 miles from
Six Flags Marine World, respectively.
The Company accounts for its interest in Six Flags Marine World under the
equity method of accounting. See Notes 5 and 13 to Notes to Consolidated
Financial Statements.
Six Flags New England
Six Flags New England (formerly Riverside Park) is a combination theme and
water park, located off Interstate 91 near Springfield, Massachusetts,
approximately 95 miles west of Boston. Six Flags New England is the 40th largest
theme park in North America with a primary market that includes Springfield and
western Massachusetts, Hartford and western Connecticut, as well as portions of
eastern Massachusetts (including Boston) and eastern New York. This market
provides the park with a permanent resident population base of approximately 3.1
million people within 50 miles and 14.7 million people within 100 miles.
Springfield, Hartford/New Haven and Boston are the number 105, number 27 and
number 6 DMAs in the United States. Six Flags New England is comprised of
approximately 230 acres, with 90 acres currently used for park operations, 12
acres for a picnic grove and approximately 128 undeveloped acres.
Six Flags New England's only significant competitor is Lake Compounce
located in Bristol, Connecticut, approximately 50 miles from Six Flags New
England. To a lesser extent, Six Flags New England competes with The Great
Escape, the Company's park located in Lake George, New York, approximately 150
miles from Six Flags New England.
Six Flags Ohio
Six Flags Ohio (formerly Geauga Lake), a combination theme and water park,
is the 49th largest theme park in North America. Six Flags Ohio is located in
Aurora, Ohio, 20 miles southeast of Cleveland and approximately 30, 60 and 120
miles, respectively, from Akron and Youngstown, Ohio and Pittsburgh,
Pennsylvania. This market provides the park with a permanent resident population
base of approximately 4.0 million people within 50 miles of the park and
approximately 7.2 million within 100 miles. The Cleveland/Akron, Youngstown and
Pittsburgh markets are the number 13, number 99 and number 19 DMAs in the United
States, respectively.
Adjacent to Six Flags Ohio are a 145 room hotel and a camping resort, each
owned and operated by the Company. The campgrounds include 300 developed
campsites, including 12 recreational vehicles (RV's) available for daily and
weekly rental. In 1999, approximately 62,000 people used the Six Flags Ohio
hotel and campgrounds.
The 263-acre property on which Six Flags Ohio is situated includes a
50-acre spring-fed lake. The theme park itself presently occupies approximately
45 acres. There are approximately 121 acres of undeveloped land (of which
approximately 40 acres have the potential for further development).
Six Flags Ohio's principal competitors are Cedar Point in Sandusky, Ohio
and Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately
90 miles and 120 miles, respectively, from the park. There are also three small
water parks within a 50-mile radius of Six Flags Ohio, and Sea World of Ohio, a
marine park, is located on the other side of the on-site lake. While Sea World
does, to some extent, compete with Six Flags Ohio, it is a complementary
attraction, and many patrons visit both facilities. In that regard, the Company
and Sea World conduct joint marketing programs in outer market areas,
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involving joint television advertising of combination passes. In addition,
combination tickets are sold at each park.
Six Flags St. Louis
Six Flags St. Louis, the 32nd largest theme park in North America, is a
combination theme and water park located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of approximately 2.6 million people within 50
miles and approximately 3.7 million people within 100 miles. The St. Louis
market is the number 21 DMA in the United States.
The Company owns a site of approximately 497 acres of which approximately
132 are used for park operations. Six Flags St. Louis competes with Kings
Island, located near Cincinnati, Ohio, approximately 350 miles from the park;
Worlds of Fun in Kansas City, Missouri, located approximately 250 miles from the
park; Cedar Point, located in Sandusky, Ohio, approximately 515 miles from the
park; Silver Dollar City, located in Branson, Missouri, approximately 250 miles
from the park; and Six Flags Great America, the Company's park located near
Chicago, Illinois, approximately 320 miles from the park.
Frontier City
Frontier City is a western theme park located along Interstate 35 in
northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.1 million
people within 50 miles of the park and 2.1 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 43 and number 58 DMAs in the
United States, respectively
The Company owns a site of approximately 95 acres, with 60 acres currently
used for park operations. Frontier City's only significant competitor is the
Company's Six Flags Over Texas, located in Arlington, Texas, approximately 225
miles from Frontier City.
The Great Escape
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George, New York resort area, 180
miles north of New York City and 40 miles north of Albany. The park's primary
market includes the Lake George tourist population and the upstate New York and
western New England resident population. This market provides the park with a
permanent resident population base of approximately 870,000 people within 50
miles of the park and 2.9 million people within 100 miles. According to
information released by local governmental agencies, approximately 8.8 million
tourists visited the Lake George area in 1998. The Albany market is the number
55 DMA in the United States.
The Great Escape is located on a site of approximately 368 acres, with 143
acres currently used for park operations. Approximately 43 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Six Flags New England, the Company's park located in
Springfield, Massachusetts, approximately 150 miles from The Great Escape. In
addition, there is a smaller water park located in Lake George.
Waterworld Parks
The Waterworld Parks consist of two water parks (Waterworld USA/Concord
and Waterworld USA/Sacramento).
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Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.4 million people within 50 miles of the park
and 9.8 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States.
Waterworld USA/Sacramento is located on the grounds of the California
State Fair in Sacramento, California. The facility's primary market includes
Sacramento and the immediate surrounding area. This market provides the park
with a permanent resident population base of approximately 2.7 million people
within 50 miles of the park and 9.8 million people within 100 miles. The
Sacramento market is the number 20 DMA in the United States.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 21 acres. The Sacramento facility is located on
approximately 14 acres, all of which is used for the park. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 50 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 20 miles
from that facility.
White Water Bay
White Water Bay is a tropical themed water park situated on approximately
22 acres located along Interstate 40 in southwest Oklahoma City, Oklahoma. The
park's primary market includes the greater Oklahoma City metropolitan area.
Oklahoma City is the number 43 DMA in the United States. This market provides
the park with a permanent resident population base of approximately 1.1 million
people within 50 miles of the park and 2.1 million people within 100 miles.
Wyandot Lake
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property subleased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in the United States. The park
is the 14th largest water park in the United States.
The Company leases from the Columbus Zoo the land, the buildings and
several rides which existed on the property at the time the lease was entered
into in 1983. The current lease expires in 2000, but the Company expects to
exercise the first of its two five-year renewal options. The land leased by
Wyandot Lake consists of approximately 18 acres. The park shares parking
facilities with the Columbus Zoo.
Wyandot Lake's direct competitors are Kings Island, located near
Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. Each of these
parks is located approximately 100 miles from Wyandot Lake. Although the
Columbus Zoo is located adjacent to the park, it is a complementary attraction,
with many patrons visiting both facilities.
Description of International Parks
Six Flags Mexico
In May 1999, the Company acquired Reino Aventura, the largest paid
admission theme park in Mexico. The park is being rebranded as Six Flags Mexico
for the 2000 season in connection with the introduction of the Looney Tunes and
other Warner Bros. licensed characters and a substantial capital
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expansion. The park first opened in 1982 and is located on approximately 107
acres in Mexico City, which are leased on a long-term basis from the Federal
District of Mexico. More than 22 million people live within 50 miles of Six
Flags Mexico. Six Flags Mexico's principal competitors are Chapultepec and
Divertido, both amusement parks located in Mexico City.
Warner Bros. Movie World
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
"Hollywood" themed park located near Dusseldorf Germany. The park offers over
thirty rides, shows and attractions and also contains four studios for film and
television productions. The park is located on approximately 148 acres of land,
most of which is leased on a long-term basis with the balance owned. The Company
estimates that approximately 26 million people live within a 150 mile radius of
the park. The park's principal competitor is Phantasialand Park, located
approximately 50 miles from the park.
The Company has also entered into a joint venture with Warner Bros. to
design, develop and manage a new Warner Bros. Movie World park scheduled to open
in Madrid, Spain in 2002.
Walibi Parks
The Company owns approximately 98.6% of the shares of capital stock of
Walibi, S.A., and expects to acquire in 2000 all remaining shares not currently
owned. Walibi's six parks had combined 1999 attendance of approximately 3.8
million.
The Walibi parks consist of Bellewaerde, Walibi Aquitaine, Walibi Flevo,
Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre. Walibi Flevo, located
outside Amsterdam, is being rebranded as Six Flags Holland and the Warner
Bros./Looney Tunes characters are being introduced at that park for the 2000
season. The Walibi parks' primary markets include Belgium, The Netherlands,
southwestern France, eastern France and northern France. These markets provide
the Walibi parks with a permanent resident population of 23.0 million people
within 50 miles and 54.5 million people within 100 miles.
The Walibi parks' most significant competitors are Disneyland Paris,
located in France, Meli Park and Bobbeejaanland, each located in Belgium, de
Efteling, located in The Netherlands, and Parc Asterix, located in France.
For additional financial and other information concerning the Company's
international operations, see Note 15 to Notes to Consolidated Financial
Statements.
Marketing and Promotion
The Company attracts visitors through locally oriented multi-media
marketing and promotional programs for each of its parks. These programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Marketing programs are
supervised by Premier's Senior Vice President for Marketing, with the assistance
of Premier's senior management and in-house marketing staff, as well as its
national advertising agency.
The Company also develops partnership relationships with well-known
national and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
-9-
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance. Each park has a group sales and pre-sold ticket
manager and a well-trained sales staff dedicated to selling multiple group sales
and pre-sold ticket programs through a variety of methods, including direct
mail, telemarketing and personal sales calls.
The Company has also developed effective programs for marketing season
pass tickets. Season pass sales establish a solid attendance base in advance of
the season, thus reducing exposure to inclement weather. Additionally, season
pass holders often bring paying guests and generate "word-of-mouth" advertising
for the parks.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, since such expenses are relatively fixed
during the operating season.
The Company also implements promotional programs as a means of targeting
specific market segments and geographic locations not reached through its group
or retail sales efforts. The promotional programs utilize coupons, sweepstakes,
reward incentives and rebates to attract additional visitors. These programs are
implemented through direct mail, telemarketing, direct response media,
sponsorship marketing and targeted multi-media programs. The special promotional
offers are usually for a limited time and offer a reduced admission price or
provide some additional incentive to purchase a ticket, such as combination
tickets with a complementary location.
Licenses
Premier and its subsidiaries, including the Company, have the exclusive
right on a long-term basis to theme park usage of the Warner Bros. and DC comics
animated characters throughout the world except for Asia, Australia, Africa and
the Las Vegas metropolitan area. In addition, the Cartoon Network and
Hanna-Barbera characters are available for use by the Company at theme parks
throughout Europe and Latin and South America. The Company believes that the use
of the Warner Bros. characters adds a new dimension of family entertainment,
helps drive attendance, lengthens visitors' stay in the parks and increases
in-park spending. The Company believes the licensed characters are well known in
its non-U.S. markets.
Park Operations
The Company currently operates in geographically diverse markets in the
United States, Europe and Mexico. Each of the Company's parks is operated to the
extent practicable as a separate operating division of the Premier in order to
maximize local marketing opportunities and to provide flexibility in meeting
local needs. Each park is managed by a general manager who reports to one of
Premier's three Executive Vice Presidents (each of whom reports to the Chief
Operating Officer) and is responsible for all operations and management of the
individual park. Local advertising, ticket sales, community relations and hiring
and training of personnel are the responsibility of individual park management
in coordination with corporate support teams.
Each of the Company's theme parks is managed by a full-time, on-site
management team under the direction of the general manager. Each such management
team includes senior personnel responsible for operations and maintenance,
marketing and promotion, human resources and merchandising. Park management
compensation structures are designed to provide incentives (including stock
options and cash bonuses) for individual park managers to execute the Company's
strategy and to maximize revenues and operating cash flow at each park.
-10-
The Company's parks are generally open daily from Memorial Day through
Labor Day. In addition, most of the Company's parks are open during weekends
prior to and following their daily seasons, primarily as a site for theme events
(such as Hallowscream, Fright Fest and Oktoberfest). Certain of the parks have
longer operating seasons. Typically, the parks charge a basic daily admission
price, which allows unlimited use of all rides and attractions, although in
certain cases special rides and attractions require the payment of an additional
fee.
Capital Improvements
The Company regularly makes capital investments in the implementation of
new rides and attractions at its parks. The Company purchases both new and used
rides. In addition, the Company rotates rides among its parks to provide fresh
attractions. The Company believes that the introduction of new rides is an
important factor in promoting each of the parks in order to achieve market
penetration and encourage longer visits, which lead to increased attendance and
in-park spending. In addition, the Company generally adds theming to acquired
parks and enhances the theming and landscaping of its existing parks in order to
provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every two to four
years in order to enhance the park's entertainment product.
The Company believes that there are ample sources for rides and other
attractions, and the Company is not dependent on any single source. Certain of
these manufacturers are located outside the United States.
Maintenance and Inspection
The Company's rides are inspected daily by maintenance personnel during
the operating season. These inspections include safety checks as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of Premier and the individual parks evaluate the
risk aspects of each park's operation. Potential risks to employees and staff as
well as to the public are evaluated. Contingency plans for potential emergency
situations have been developed for each facility. During the off-season,
maintenance personnel examine the rides and repair, refurbish and rebuild them
where necessary. This process includes x-raying and magnafluxing (a further
examination for minute cracks and defects) steel portions of certain rides at
high-stress points. At March 1, 2000, the Company had approximately 1,100
full-time employees who devote substantially all of their time to maintaining
the parks and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs a periodic inspection of each
park and all attractions and related maintenance procedures. The result of
insurance inspections are written evaluation and inspection reports, as well as
written suggestions on various aspects of park operations. Governmental
inspectors in certain jurisdictions also conduct annual ride inspections before
the beginning of each season. Other portions of each park are also subject to
inspections by local fire marshals and health and building department officials.
Furthermore, the Company uses Ellis & Associates as water safety consultants at
its parks in order to train life guards and audit safety procedures.
-11-
Insurance
The Company maintains insurance of the type and in amounts that it
believes are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $100.0 million per occurrence.
With respect to liability claims arising out of occurrences on and after July 1,
1998, there is no self-insured retention by the Company. In addition, with
respect to claims arising out of occurrences prior to July 1, 1998 at the parks
purchased in the Six Flags acquisition, there is no self-insured retention. The
self-insurance portion of claims arising out of occurrences prior to that date
at the Company's other U.S. parks is $50,000. The Company also maintains fire
and extended coverage, workers' compensation, business interruption and other
forms of insurance typical to businesses in its industry. The fire and extended
coverage policies insure the Company's real and personal properties (other than
land) against physical damage resulting from a variety of hazards.
Competition
The Company's parks compete directly with other theme parks, water and
amusement parks and indirectly with all other types of recreational facilities
and forms of entertainment within their market areas, including movies, sports
attractions and vacation travel. Accordingly, the Company's business is and will
continue to be subject to factors affecting the recreation and leisure time
industries generally, such as general economic conditions and changes in
discretionary consumer spending habits. Within each park's regional market area,
the principal factors affecting competition include location, price, the
uniqueness and perceived quality of the rides and attractions in a particular
park, the atmosphere and cleanliness of a park and the quality of its food and
entertainment. The Company believes its parks feature a sufficient variety of
rides and attractions, restaurants, merchandise outlets and family orientation
to enable it to compete effectively.
Seasonality
The operations of the Company are highly seasonal, with more than 90% of
park attendance in 1999 occurring in the second and third calendar quarters and
the most active period falling between Memorial Day and Labor Day. The great
majority of the Company's revenues are collected in the second and third
quarters of each year.
Environmental and Other Regulation
The Company's operations are subject to increasingly stringent federal,
state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use and minimum wage regulations
applicable to theme park operations, and local and state regulations applicable
to restaurant operations at the park. The Company believes that it is in
substantial compliance with applicable environmental and other laws and
regulations and, although no assurance can be given, it does not foresee the
need for any significant expenditures in this area in the near future.
In addition, portions of the undeveloped areas at some parks are
classified as wetlands. Accordingly, the Company may need to obtain governmental
permits and other approvals prior to conducting development activities that
affect these areas, and future development may be limited in some or all of
these areas.
-12-
Employees
At March 1, 2000, the Company employed approximately 3,700 full-time
employees, and the Company employed over 34,000 seasonal employees during the
1999 operating season. In this regard, the Company competes with other local
employers for qualified student and other candidates on a season-by-season
basis. As part of the seasonal employment program, the Company employs a
significant number of teenagers, which subjects the Company to child labor laws.
Approximately 8.3% of the Company's full-time and approximately 4.9% of
its seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in December 2002 (Six Flags
Great Adventure) and January 2003 (Six Flags St. Louis). The Company has not
experienced any strikes or work stoppages by its employees, and the Company
considers its employee relations to be good.
-13-
ITEM 2. PROPERTIES
Set forth below is a brief description of the Company's material real estate at
March 1, 2000:
Six Flags America, Largo, Maryland -- 515 acres (fee ownership)
Six Flags AstroWorld, Houston, Texas -- 90 acres (fee ownership)
Six Flags Darien Lake, Darien Center, New York -- 988 acres (fee ownership)
Six Flags Elitch Gardens, Denver, Colorado -- 67 acres (fee ownership)
Six Flags Fiesta Texas, San Antonio, Texas -- 206 acres (fee ownership)
Six Flags Great Adventure & Wild Safari, Jackson, New Jersey -- 2,200 acres
(fee ownership)
Six Flags Great America, Gurnee, Illinois -- 440 acres (fee ownership)
Six Flags Holland, Biddinghuizen, The Netherlands -- 395 acres (fee ownership
and leasehold interest) (1)
Six Flags Hurricane Harbor, Arlington, Texas -- 47 acres (fee ownership)
Six Flags Hurricane Harbor, Valencia, California -- 12 acres (fee ownership)
Six Flags Kentucky Kingdom, Louisville, Kentucky -- 58 acres (fee ownership and
leasehold interest) (2)
Six Flags Magic Mountain, Valencia, California -- 248 acres (fee ownership)
Six Flags Marine World, Vallejo, California -- 136 acres (long-term leasehold
interest at nominal rent)
Six Flags Mexico, Mexico City, Mexico -- 107 acres (leasehold interest) (3)
Six Flags New England, Agawam, Massachusetts -- 230 acres (fee ownership)
Six Flags Ohio, Aurora, Ohio -- 263 acres (fee ownership)
Six Flags St. Louis, Eureka, Missouri -- 497 acres (fee ownership)
Six Flags WaterWorld, Houston, Texas -- 14 acres (fee ownership)
Bellewaerde, Ieper, Belgium -- 133 acres (fee ownership)
Frontier City, Oklahoma City, Oklahoma -- 95 acres (fee ownership)
The Great Escape, Lake George, New York -- 368 acres (fee ownership)
Splashtown, Spring, Texas -- 60 acres (fee ownership)
Walibi Aquitaine, Roquefort, France -- 74 acres (fee ownership)
Walibi Rhone-Alpes, Les Avenieres, France -- 86 acres (fee ownership)
Walibi Schtroumpf, Metz, France -- 375 acres (fee ownership)
Walibi Wavre and Aqualibi, Brussels, Belgium -- 120 acres (fee ownership)
Warner Bros. Movie World Germany, Bottrop, Germany -- 148 acres (fee ownership
and leasehold interest) (4)
Waterworld/Concord, Concord, California -- 21 acres (leasehold interest) (5)
Waterworld/Sacramento, Sacramento, California -- 14 acres (leasehold
interest) (6)
White Water Bay, Oklahoma City, Oklahoma -- 22 acres (fee ownership)
Wyandot Lake, Columbus, Ohio -- 18 acres (leasehold interest)(7)
----------
(1) A substantial portion of the land is leased from a governmental agency
with a term expiring in 2018. An undeveloped portion of the land is also
leased on a year-to-year basis. The balance is owned.
(2) Approximately 38 acres are leased under ground leases with terms
(including renewal options) expiring between 2021 and 2049, with the
balance owned by the Company.
(3) The site is leased from the Federal District of Mexico City. The lease
expires in 2017.
(4) Approximately 7% of the site is owned. The balance is leased from multiple
landlords with lease terms in most cases ranging between 60 and 99 years.
(5) The site is leased from the City of Concord. The lease expires in 2025 and
the Company has five five-year renewal options.
(6) The site is leased from the California Exposition and State Fair. The
lease expires in 2015 and, subject to the satisfaction of certain
conditions, may be renewed by the Company for an additional ten-year term.
(7) The site is subleased from the Columbus Zoo. The lease expires in 2000 and
the Company has two five-year renewal options, the first of which will be
exercised in 2000. Acreage for this site does not include approximately 30
acres of parking which is shared with the Columbus Zoo.
-14-
The Company has granted to its lenders under its $1.2 billion credit
agreement a mortgage on substantially all of its United States properties.
The Company considers its properties to be well-maintained, in good
condition and adequate for their present uses and business requirements.
ITEM 3. LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose
it to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
In June 1997, a slide collapsed at the Company's Waterworld park in
Concord, California, resulting in one fatality and the park's closure for twelve
days. A series of lawsuits arising out of the incident have been consolidated in
California Superior Court under the name Ghilotti et al. v. Waterworld USA et
al. The Company has funded its $50,000 self-insurance retention limit in respect
of the incident under its then liability insurance policy and, although there
can be no assurances, does not expect to pay any additional amounts in
connection with this litigation.
In December 1998, a final judgment of $197.3 million in compensatory
damages was entered against SFEC, Six Flags Theme Parks Inc., Six Flags Over
Georgia, Inc. and TWE, and a final judgment of $245.0 million in punitive
damages was entered against TWE and of $12.0 million in punitive damages was
entered against the referenced Six Flags entities. The judgments are now the
subject of appeal, which has been briefed and argued before the Georgia Court of
Appeals. The judgments arose out of a case entitled Six Flags Over Georgia, LLC
et al. v. Time Warner Entertainment Company, L.P. et al. based on, among other
things, certain disputed partnership affairs prior to the Company's acquisition
of Six Flags at Six Flags Over Georgia, including alleged breaches of fiduciary
duty.
The sellers in the Six Flags acquisition, including Time Warner, have
agreed to indemnify the Company from any and all liabilities arising out of this
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-15-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
All of the Company's Common Stock is owned by Premier, and during the
three years ended December 31, 1999, there has been no public market for the
Common Stock.
The Company paid no cash dividends during the three years ended December
31, 1999. The indentures relating to the Company's notes and the Company's bank
indebtedness limit the payment of cash dividends to Premier. See Note 7 to Notes
to Consolidated Financial Statements.
-16-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's revenue is derived from the sale of tickets for entrance to
its parks (approximately 54.0%, 53.5% and 48.8%, in 1999, 1998 and 1997,
respectively) and the sale of food, merchandise, games and attractions inside
its parks, as well as sponsorship and other income (approximately 46.0%, 46.5%
and 51.2%, in 1999, 1998 and 1997, respectively). The Company's principal costs
of operations include salaries and wages, employee benefits, advertising,
outside services, maintenance, utilities and insurance. The Company's expenses
are relatively fixed. Costs for full-time employees, maintenance, utilities,
advertising and insurance do not vary significantly with attendance, thereby
providing the Company with a significant degree of operating leverage as
attendance increases and fixed costs per visitor decrease.
Historical results of operations for 1999 include the results of
operations of SFEC for the entire year, of Six Flags Mexico and Splashtown only
from the dates of their respective acquisitions in May 1999 and of Warner Bros.
Movie World Germany only from its acquisition in November 1999 (following its
1999 operating season). Results of Walibi and Six Flags are included in 1998
results only from the dates of their respective acquisitions (March 26, 1998, in
the case of Walibi, and April 1, 1998, in the case of Six Flags). Historical
results for 1997 reflect the results of Six Flags New England (formerly
Riverside Park) only from its acquisition date (February 5, 1997), and Six Flags
Kentucky Kingdom (formerly Kentucky Kingdom) only from its acquisition date
(November 7, 1997) and do not include the results of Walibi or Six Flags for
that year. In addition, 1998 and 1999 historical results include in the
Company's equity in earnings the Company's share of the revenues of Six Flags
Marine World (formerly Marine World) under the applicable lease and related
documents. Those results are not included in the 1997 period.
The Company believes that significant opportunities exist to acquire
additional theme parks. In addition, the Company intends to continue its
on-going expansion of the rides and attractions and overall improvement of its
parks to maintain and enhance their appeal. Management believes this strategy
has contributed to increased attendance, lengths of stay and in-park spending
and, therefore, profitability.
-17-
Results of Operations
Years Ended December 31, 1999 and 1998
The table below sets forth certain historical financial information with
respect to the Company for the years ended December 31, 1999 (which includes Six
Flags for the entire year) and 1998 and with respect to Six Flags and Walibi for
the three months ended March 31, 1998 (representing the pre-acquisition portion
of the 1998 year).
[Enlarge/Download Table]
Year Ended December 31, 1998
--------------------------------------------------------------------------------
Historical Historical
Six Flags Walibi for
for Period Period
Prior to Prior to Pro
Year Ended Historical April 1, March 26, Forma Company
December 31, 1999 Company 1998(1) 1998(2) Adjustments Pro Forma
--------- --------- --------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(In thousands)
Revenue:
Theme park admissions ....................... $ 500,417 $ 423,461 $ 15,047 $ 883 $ -- $ 439,391
Theme park food,
Merchandise and other ..................... 426,567 368,338 7,792 624 -- 376,754
--------- --------- --------- --------- --------- ---------
Total revenue ............................. 926,984 791,799 22,839 1,507 -- 816,145
--------- --------- --------- --------- --------- ---------
Operating costs and expenses:
Operating expenses .......................... 353,728 297,266 45,679 4,626 -- 347,571
Selling, general and
administrative ............................ 153,249 117,634 19,278 3,407 -- 140,319
Noncash compensation ........................ -- 675 -- -- -- 675
Costs of products sold ...................... 90,699 81,563 2,193 248 -- 84,004
Depreciation and amortization ............... 153,675 109,676 17,629 3,214 6,440(3) 136,959
--------- --------- --------- --------- --------- ---------
Total operating costs
and expenses .............................. 751,351 606,814 84,779 11,495 6,440 709,528
--------- --------- --------- --------- --------- ---------
Income (loss) from operations ............. 175,633 184,985 (61,940) (9,988) (6,440) 106,617
--------- --------- --------- --------- --------- ---------
Other income (expense):
Interest expense, net ....................... (102,532) (95,410) (22,508) (889) (3,580)(4) (122,387)
Equity in operations
of theme parks ............................ 7,075 3,052 -- -- -- 3,052
Other income (expense), including
minority interest ......................... (3,551) (1,983) -- (1) -- (1,984)
--------- --------- --------- --------- --------- ---------
Total other income (expense) ................ (99,008) (94,341) (22,508) (890) (3,580) (121,319)
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary loss ...................... 76,625 90,644 (84,448) (10,878) (10,020) (14,702)
Income tax expense (benefit) ................... 44,263 46,634 -- -- (38,541)(5) 8,093
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
loss ........................................... $ 32,362 $ 44,010 $ (84,448) $ (10,878) $ 28,521 $ (22,795)
========= ========= ========= ========= ========= =========
EBITDA(6) ...................................... $ 329,308 $ 294,661 $ (44,311) $ (6,774) $ -- $ 243,576
========= ========= ========= ========= ========= =========
---------------
-18-
(1) Includes results of Six Flags for the period prior to April 1, 1998, the
acquisition date, adjusted to eliminate (i) results of the Six Flags Over
Texas and Six Flags Over Georgia (the "Partnership Parks") and (ii) the
expense associated with certain one-time option payments resulting from
the purchase. The Partnership Parks were transferred to Premier on the
acquisition date.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date.
(3) Includes adjustments to eliminate the historical depreciation and
amortization for Six Flags and Walibi and the inclusion of estimated pro
forma depreciation and amortization for the three months ended March 31,
1998.
(4) Includes adjustments to reflect additional interest expense associated
with SFEC Notes, the Premier Credit Facility and the Six Flags Credit
Facility net of (a) the elimination of the historical interest expense
associated with the Company and Six Flags credit facilities outstanding
prior to April 1, 1998 and the long term debt of Walibi and (b) the
amortization of the fair market value adjustments on the SFTP Senior
Subordinated Notes and the SFEC Zero Coupon Notes recorded in connection
with the acquisition of Six Flags. Issuance costs associated with the
borrowings are being amortized over their respective periods.
(5) Includes adjustments to reflect the application of income taxes to the pro
forma adjustments and to the pre-acquisition operations of Six Flags and
Walibi, after consideration of permanent differences, at a rate of 38%.
(6) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), noncash compensation, depreciation and amortization
and other expenses, including minority interest. The Company has
included information concerning EBITDA because it is a component of the
Company's debt covenant ratios and is also used by certain investors as
a measure of a company's ability to service and/or incur debt. EBITDA
is not required by generally accepted accounting principles ("GAAP")
and should not be considered in isolation or as an alternative to net
income, net cash provided by operating, investing and financing
activities or other financial data prepared in accordance with GAAP or
as an indicator of the Company's operating performance. This
information should be read in conjunction with the Statements of Cash
Flows contained in the Consolidated Financial Statements.
-------------------
Revenue. Revenue in 1999 totaled $927.0 million ($903.2 million without
giving effect to the three parks acquired in that year (the "Acquired
Parks")), compared to $791.8 million (actual) and $816.1 million (pro forma)
for 1998. The $87.1 million (10.7%) increase in 1999 revenue (excluding the
Acquired Parks) compared to pro forma revenue for 1998 resulted primarily
from an aggregate same park attendance increase of 3.8 million (12.9%)
resulting in increased admission and in-park revenues and from increased
in-park spending per capita at a number of parks, especially the parks
re-branded as Six Flags parks for the year.
Operating expenses. Operating expenses for 1999 increased $56.5 million
($46.4 million excluding the Acquired Parks) compared to actual expenses for
1998 and increased $6.2 million (but decreased $3.9 million excluding the
Acquired Parks) compared to pro forma expenses for 1998. The decrease
(excluding the Acquired Parks) compared to pro forma expenses for 1998
resulted primarily from operating efficiencies realized at the Six Flags
parks subsequent to their acquisition on April 1, 1998. Comparing 1999 actual
(excluding the Acquired Parks) to 1998 pro forma as a percentage of revenues,
these expenses were 38.0% and 42.5%, respectively.
Selling, General and Administrative. Selling, general and
administrative expenses (excluding noncash compensation) for 1999 increased
$35.6 million and $12.9 million, respectively, compared to the actual and pro
forma expenses for 1998. Selling, general and administrative expenses for the
Acquired Parks were $4.1 million for 1999. Advertising expenditures for 1999
increased by $23.3 million over the pro forma expense for 1998 reflecting a
return to historical advertising levels of expenditures at the Six Flags
parks and additional expenditures in support of the 1999 transition of four
original Premier parks to the Six Flags brand. Remaining selling, general and
administrative expenses in 1999 decreased by $14.5 million compared to 1998
pro forma levels primarily as a result of reduced corporate level
expenditures, including staffing, related to the closing of the former Six
Flags corporate office subsequent to the April 1, 1998 acquisition, as well
as certain other savings, including insurance. Comparing 1999 actual
(excluding the Acquired Parks) to 1998 pro forma as a percentage of revenues,
selling, general and administrative expenses (excluding noncash compensation)
were 16.5% and 17.2% respectively.
-19-
Costs of Products Sold. Costs of products sold in 1999 increased $9.1
million ($6.7 million excluding the Acquired Parks) and $6.7 million ($4.4
million excluding the Acquired Parks), respectively, compared to actual and pro
forma expenses for 1998. As a percentage of theme park food, merchandise and
other revenues, cost of products sold were 21.2% in 1999 (excluding the Acquired
Parks) compared to 22.3% pro forma in 1998.
Depreciation and amortization and interest expenses. Depreciation and
amortization expense for 1999 increased $44.0 million and $16.7 million,
respectively, compared to the actual and pro forma amounts for 1998. The
increase compared to the pro forma 1998 level was attributable to the Company's
on-going capital program at the previously owned parks and from the additional
depreciation and amortization expense associated with the Acquired Parks.
Interest expense, net increased $7.1 million compared to the actual interest
expense, net for 1998 and decreased $19.9 million compared to the pro forma
interest expense, net for that year. The decrease compared to pro forma interest
expense, net for 1998 resulted from the repayment of certain indebtedness of the
Company with the proceeds of a capital contribution by Premier. See Note 7 to
Notes to Consolidated Financial Statements.
Equity in operations of theme parks. Equity in operations of theme
parks reflects the Company's share of the income or loss of Six Flags Marine
World and its management. The Company became entitled to a share of the cash
flows from the lease and management of Six Flags Marine World in 1998. The
$4.0 million increase in the equity in operations of theme park partnerships
compared to the 1998 was attributable to improved performance at that park.
See Notes 2, 5 and 13 to Notes to Consolidated Financial Statements.
Income tax expense. Income tax expense was $44.3 million for 1999 compared
to a $46.6 million expense and a $8.1 million expense for the actual and pro
forma results, respectively, for 1998. The effective tax rate for 1999 was
effected by permanent differences associated with goodwill amortization for
financial purposes being higher than the amount of amortization that is
deductible for tax purposes. The Company's quarterly effective income tax
rate will vary from period-to-period based upon the inherent seasonal nature
of the theme park business.
At December 31, 1999, the Company estimates that it had approximately
$480.6 million of useable net operating losses ("NOLs") carryforwards for
Federal income tax purposes. The NOLs are subject to review and potential
disallowance by the Internal Revenue Service upon audit of the Federal income
tax returns of the Company and its subsidiaries. In addition, the use of such
NOLs is subject to limitations on the amount of taxable income that can be
offset with such NOLs. Some of such NOLs also are subject to a limitation as to
which of the subsidiaries' income such NOLs are permitted to offset.
Accordingly, no assurance can be given as to the timing or amount of the
availability of such NOLs to the Company and its subsidiaries. See Note 9 to
Notes to Consolidated Financial Statements.
-20-
Years Ended December 31, 1998 and 1997
The table below sets forth certain financial information with respect
to the Company, Six Flags, Walibi and, for the period prior to its acquisition,
Kentucky Kingdom for the year ended December 31, 1997 and with respect to the
Company and, for periods prior to their respective acquisitions, Six Flags and
Walibi for the year ended December 31, 1998:
[Enlarge/Download Table]
Year Ended December 31, 1998
------------------------------------------------------
Historical
Six Flags Historical
for Walibi for
Period Period Prior
Prior to to
Historical April 1, March 26, Historical
Company 1998(1) 1998(2) Combined
--------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited)
(In thousands)
Revenue:
Theme park admissions .......... $ 423,461 $ 15,047 $ 883 $ 439,391
Theme park food, merchandise
and other ..................... 368,338 7,792 624 376,754
--------- --------- --------- ---------
Total revenue ................. 791,799 22,839 1,507 816,145
--------- --------- --------- ---------
Operating costs and expenses:
Operating expenses ............. 297,266 45,679 4,626 347,571
Selling, general and
administrative ............... 117,634 19,278 3,407 140,319
Noncash compensation ........... 675 -- -- 675
Costs of products sold ......... 81,563 2,193 248 84,004
Depreciation and
amortization ................. 109,676 17,629 3,214 130,519
--------- --------- --------- ---------
Total operating costs
and expenses ................ 606,814 84,779 11,495 703,088
--------- --------- --------- ---------
Income (loss) from operations .... 184,985 (61,940) (9,988) 113,057
Equity in operations of theme
parks .......................... 3,052 -- -- 3,052
Other income (expense):
Interest expense, net .......... (95,410) (22,508) (889) (118,807)
Termination fee, net of
expenses ..................... -- -- -- --
Other income (expense) ......... (1,983) -- (1) (1,984)
--------- --------- --------- ---------
Total other income
(expense) .................... (97,393) (22,508) (890) (120,791)
--------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary
loss ....................... 90,644 (84,448) (10,878) 4,682
Income tax expense ......... ... 46,634 -- -- 46,634
--------- --------- --------- ---------
Income (loss) before
extraordinary loss .......... 44,010 $ (84,448) $ (10,878) $ (41,952)
========= ========= ========= =========
EBITDA(6) ...................... $ 295,336 $ (44,311) $ (6,774) $ 244,251
========= ========= ========= =========
Year Ended December 31, 1997
---------------------------------------------------------------------
Historical Historical
Historical Six Historical Kentucky Historical
Company(3) Flags(4) Walibi Kingdom(5) Combined
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(In thousands)
Revenue:
Theme park admissions .......... $ 94,611 $ 274,193 $ 43,742 $ 11,562 $ 424,108
Theme park food, merchandise
and other ..................... 99,293 235,813 24,101 10,152 369,359
--------- --------- --------- --------- ---------
Total revenue ................. 193,904 510,006 67,843 21,714 793,467
--------- --------- --------- --------- ---------
Operating costs and expenses:
Operating expenses ............. 81,356 229,588 31,629 5,705 348,278
Selling, general and
administrative ............... 35,422 95,852 10,567 5,194 147,035
Noncash compensation ........... 1,125 -- -- -- 1,125
Costs of products sold ......... 23,025 55,236 6,097 2,684 87,042
Depreciation and
amortization ................. 19,792 72,386 13,998 2,344 108,520
--------- --------- --------- --------- ---------
Total operating costs
and expenses ................ 160,720 453,062 62,291 15,927 692,000
--------- --------- --------- --------- ---------
Income (loss) from operations .... 33,184 56,944 5,552 5,787 101,467
Equity in operations of theme
parks .......................... -- -- -- -- --
Other income (expense):
Interest expense, net .......... (17,775) (84,430) (3,409) (3,974) (109,588)
Termination fee, net of
expenses ..................... 8,364 -- -- -- 8,364
Other income (expense) ......... (59) 1,147 (289) 293 1,092
--------- --------- --------- --------- ---------
Total other income
(expense) .................... (9,470) (83,283) (3,698) (3,681) (100,132)
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary
loss ....................... 23,714 (26,339) 1,854 2,106 1,335
Income tax expense ............. 9,615 -- 2,373 -- 11,988
--------- --------- --------- --------- ---------
Income (loss) before
extraordinary loss .......... $ 14,099 $ (26,339) $ (519) $ 2,106 $ (10,653)
========= ========= ========= ========= =========
EBITDA(6) ...................... $ 54,101 $ 129,330 $ 19,550 $ 8,131 $ 211,112
========= ========= ========= ========= =========
----------------
(1) Includes results of Six Flags for the period prior to April 1, 1998, the
acquisition date, adjusted to eliminate (i) results of the Partnership
Parks and (ii) the expense associated with certain one-time option
payments made from the purchase price.
(2) Includes results of Walibi for the period prior to March 26, 1998, the
acquisition date.
(3) Includes results of Riverside Park and Kentucky Kingdom from and after
their respective acquisition dates, February 5 and November 7, 1997.
(4) Includes results of Six Flags adjusted to eliminate results of Partnership
Parks.
(5) Includes results of Kentucky Kingdom for the ten months of 1997 prior to
its acquisition by the Company.
(6) Excludes termination fee in 1997.
-21-
Revenue. Revenue aggregated $791.8 million in 1998 ($816.1 million
combined), compared to $193.9 million reported in 1997. Of reported 1998
revenue, $523.9 million represented revenues of Six Flags and Walibi (the "1998
Acquired Parks") which were acquired in 1998, and thus not included in reported
1997 results. Revenues generated by the Company's other twelve parks (excluding
Marine World) amounted to $249.1 million in 1998, as compared to $193.7 million
from the Company's eleven parks in 1997. Of this $55.4 million increase, $28.4
million relates to Kentucky Kingdom which was purchased in November of the prior
year, and the balance ($27.0 million) results from improved performance at the
other eleven parks. During 1998, the Company's thirteen parks (including Marine
World) experienced a 14.3% increase in attendance and a 5.0% increase in per
capita spending over the performance of those thirteen parks in the prior year.
Operating Expenses. Operating expenses increased during 1998 to $297.3
million ($347.6 million combined) from $81.4 million reported in 1997. Of
reported 1998 operating expenses, $197.4 million related directly to the 1998
Acquired Parks. Operating expenses at the Company's other twelve parks
(excluding Marine World) increased $18.5 million, primarily reflecting an
incremental $10.3 million of operating expenses for Kentucky Kingdom which was
included for only two months in the prior year, and increased salary expense at
the parks. As a percentage of total reported revenue, reported operating
expenses were 36.5% of revenue (and combined operating expenses were 41.4% of
combined revenues) in 1998 as compared to 42.0% in 1997.
Selling, General and Administrative. Selling, general and
administrative expenses (including noncash compensation) were $118.3 million
in 1998 ($141.0 million on a combined basis), compared to $36.5 million
reported for 1997. Of reported expenses for 1998, $68.2 million related to
the 1998 Acquired Parks. Selling, general and administrative expenses at the
remaining twelve parks (excluding Marine World) increased $13.6 million over
1997 levels, primarily reflecting an incremental $5.2 million of selling,
general and administrative expenses at Kentucky Kingdom, and, to a lesser
extent, increased marketing and advertising costs and real estate taxes. As a
percentage of total reported revenue, consolidated selling, general and
administrative expenses (excluding noncash compensation) were 14.9% of
revenue (and combined selling, general and administrative expenses (excluding
noncash compensation) were 17.2% of combined revenues) in 1998 as compared
to 18.5% for 1997. The decrease is a result of the Company's continued
ability to use operating leverage to increase operations without having to
increase administrative costs by a like percentage.
Costs of Products Sold. Costs of products sold were $81.6 million for 1998
($84.0 million on a combined basis) compared to $23.0 million reported for 1997.
Reported costs for 1998 include $54.3 million related to the 1998 Acquired
Parks. The balance of the increase ($4.3 million) over reported 1997 costs
primarily related to $2.7 million of costs of sales at Kentucky Kingdom and to
increased product sales at the parks owned in both years.
Depreciation and Amortization and Interest Expenses. Depreciation and
amortization expense increased $89.9 million from $19.8 million in 1997 to
$109.7 million in 1998, of which $82.6 million was attributable to the
recognition of depreciation and amortization expense for the 1998 Acquired
Parks, an incremental $2.9 million was attributable to Kentucky Kingdom and
the balance was attributable to the Company's on-going capital program.
Interest expense, net of interest income, increased from $17.8 million to
$95.4 million in 1998 principally as a result of borrowings made in
connection with the acquisition of Six Flags and Walibi. See Notes 2 and 7 to
Notes to Consolidated Financial Statements.
Income Taxes. Income tax expense was $46.6 million for 1998 as compared to
$9.6 million for 1997. The increase in the effective tax rate to 51.4% from
40.5% is a function of the non-deductible intangible asset amortization
associated with the Six Flags acquisition. Approximately $10.0 million of
non-deductible amortization will be recognized each quarter. The Company's
quarterly effective income tax
-22-
rate will vary from period-to-period based upon the inherent seasonal nature of
the theme park business.
Liquidity, Capital Commitments and Resources
At December 31, 1999, the Company's indebtedness aggregated $1,197.2
million, of which approximately $2.1 million matures prior to December 31, 2000.
Based on interest rates at December 31, 1999 for floating rate debt and after
giving effect to the interest rate swaps described below, annual cash interest
payments for 2000 on this indebtedness will total approximately $119.7 million.
See Note 7 to Notes to Consolidated Financial Statements for additional
information regarding the Company's indebtedness.
During the year ended December 31, 1999, net cash provided by operating
activities was $198.9 million. Net cash used in investing activities in 1999
totaled $516.6 million, consisting primarily of the Company's acquisition of the
three parks acquired in 1999 ($277.5 million, net of cash acquired) and capital
expenditures for the 1999 and 2000 seasons. Net cash provided by financing
activities in 1999 was $358.7 million, representing the refinancing by Premier
of its bank debt with a new $1.2 billion credit facility as well as the
refinancing of public debt of the Company with the proceeds of capital
contributions by Premier. See Notes 2 and 7 to Notes to Consolidated Financial
Statements.
In addition to its obligations under its outstanding indebtedness, the
Company has guaranteed the obligations of certain subsidiaries of Premier to
(i) make minimum annual distributions of approximately $48.6 million (subject
to annual cost of living adjustments) to the limited partners in the
Partnership Parks, (ii) make minimum capital expenditures at each of the
Partnership Parks during rolling five-year periods, based generally on 6% of
such park's revenues, and (iii) purchase at specified prices a maximum number
of 5% per year (accumulating to the extent not purchased in any given year)
of limited partnership units outstanding (to the extent tendered by the unit
holders). At December 31, 1999, Premier had $71.6 million in a dedicated
escrow account available to fund those obligations.
The degree to which the Company is leveraged could adversely affect its
liquidity. The Company's liquidity could also be adversely affected by
unfavorable weather, accidents or the occurrence of an event or condition,
including negative publicity or significant local competitive events, that
significantly reduces paid attendance and, therefore, revenue at any of its
theme parks.
The Company believes that, based on historical and anticipated operating
results, cash flows from operations, available cash and available amounts under
the New Credit Facility will be adequate to meet the Company's future liquidity
needs, including anticipated requirements for working capital, capital
expenditures and scheduled debt for at least the next several years. The Company
may, however, need to refinance all or a portion of its existing debt on or
prior to maturity or to seek additional financing.
Market Risks and Sensitivity Analyses
Like other global companies, the Company is exposed to market risks
relating to fluctuations in interest rates and currency exchange rates. The
objective of financial risk management at Premier is to minimize the negative
impact of interest rate and foreign currency exchange rate fluctuations on the
Company's earnings, cash flows and equity. Premier does not acquire market risk
sensitive instruments for trading purposes. The foreign currency and interest
rate risks that the Company is exposed to at December 31, 1999 are greater than
those at December 31, 1998 in that the Company has added operations in Germany
and Mexico and has increased its total debt balance. In 1999 and 1998 Premier
purchased foreign exchange forward contracts to minimize foreign currency risk
related to purchases of rides and equipment denominated in foreign currency.
Prior to February 2000, the Company had not entered into financial instruments
to manage interest rate risks.
To manage foreign currency exchange rates risks, on a limited basis the
Company has used derivative financial instruments, exclusively foreign exchange
forward contracts. These derivative financial instruments have been held to
maturity and the Company only uses non-leveraged instruments. These contracts
are entered into with major financial institutions, thereby minimizing the risk
of credit loss. The Company has used forward contracts to "lock-in" the U.S.
dollar cost of equipment to be purchased from foreign vendors or manufacturers
where the contracts related thereto are denominated in foreign currency. See
Note 6 to Notes to Consolidated Financial Statements for a more complete
description of the Company's accounting policies and use of such instruments.
-23-
In February 2000, the Company entered into three interest rate swap
transactions that for the term of the applicable agreements (ranging from
December 2001 to March 2002) effectively converted the Company's $600.0 million
term loan into a fixed rate obligation. The Company's term loan borrowings bear
interest at 3.25% above the LIBOR rate. The Company's interest rate swap
arrangements effectively "lock-in" the LIBOR component at rates ranging from
6.615% to 6.780% depending on the applicable agreement. The counterparties to
these transactions are major financial institutions, which minimizes the credit
risk. See Note 6 to Notes to Consolidate Financial Statements.
The following analyses present the sensitivity of the market value,
earnings and cash flows of the Company's financial instruments to hypothetical
changes in interest and exchange rates as if these changes occurred at December
31, 1999. The range of changes chosen for these analyses reflect the Company's
view of changes which are reasonably possible over a one-year period. Market
values are the present values of projected future cash flows based on the
interest rate and exchange rate assumptions. These forward looking disclosures
are selective in nature and only address the potential impacts from financial
instruments. They do not include other potential effects which could impact the
Company's business as a result of these changes in interest and exchange rates.
Interest Rate and Debt Sensitivity Analysis
At December 31, 1999, the Company had debt totaling $1,197.2 million,
of which $301.7 million represents fixed-rate debt and the balance represents
floating-rate debt. For fixed-rate debt, interest rate changes affect the
fair value but do not impact the recorded fixed-rate debt amount, earnings or
cash flows. Conversely, for floating-rate debt, interest rate changes
generally do not affect the fair value of the floating-rate debt but do
impact future earnings and cash flows, assuming other factors remain constant.
Assuming other variables remain constant (such as foreign exchange
rates and debt levels) after giving effect to the Company's interest rate
swaps and assuming an average annual balance of $150.0 million on the
Company's working capital revolver, the pre-tax earnings and cash flows
impact resulting from a one percentage point increase in interest rates would
be approximately $4.5 million.
Exchange Rate Sensitivity Analysis
The Company's exchange rate exposures result from its investments and
ongoing operations in Belgium, France, The Netherlands, Germany and Mexico
and certain other business transactions such as the purchase of rides from
foreign vendors or manufacturers. Among other techniques, Premier, on the
Company's behalf, utilizes foreign exchange forward contracts to hedge these
exposures. At present, neither Premier nor the Company uses financial
instruments to hedge against currency risks associated with its international
operations. At December 31, 1999, Premier had $63.3 million notional amount
of foreign exchange contracts to hedge the risks associated with ride
purchase and construction commitments. The dates of foreign exchange forward
contracts run through early 2000, with the last contract settling in July
2000.
Maintaining other variables constant, if there were a ten percent adverse
change in foreign currency exchange rates (i.e., a weakening of the dollar
against the applicable foreign currencies), the fair value of foreign currency
contracts outstanding at December 31, 1999 would increase by approximately $5.4
million. No amount of this decrease would impact earnings since the gain (loss)
on these contracts would be offset by an equal loss (gain) on the underlying
exposure being hedged.
Assuming the Company's international parks generate the same level of
earnings and cash flow in 2000 as they did in 2000, earnings and cash flows of
the Company in the event of such ten percent adverse
-24-
change would decrease by less than $1.0 million and $3.0 million, respectively.
Impact of Recently Issued Accounting Standards Not Yet Adopted
In June, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge. The accounting for changes in the
fair value of a derivative (that is gains and losses) depends on the intended
use of the derivative and the resulting designation. A subsequent
pronouncement, SFAS No. 137, was issued in July 1999 that delayed the
effective date of SFAS 133 until fiscal years beginning after June 15, 2000.
The Company will adopt the provision of SFAS No. 133 as of January 1, 2001.
The Company has entered into two types of derivative instruments. To
the extent that the fair value of the Company's foreign exchange forward
contracts varies prior to settlement, the amount of the change will be
reflected as an asset or liability, with a corresponding change in other
comprehensive income. At settlement date, the foreign currency will be used
to meet property and equipment purchase commitments and the gain or loss will
be recognized as a component of the Company's historical cost of the asset.
Likewise the fair value of the Company's interest swap agreements will be
reflected as an asset or liability, with a corresponding change in other
comprehensive income. Since the interest rate swap and the contractual
interest rate have the same basis, then as the Company settles its interest
rate swap agreements, the proceeds or payment will be
reflected as a reduction or increase in interest expense. As such, if rates
remain below the maximum amounts in the interest swap agreements, the Company
has fixed its interest rate on the amount of long-term debt that has been
hedged for the term of the interest rate swap agreements. As such, the
Company does not believe that the adoption of SFAS No. 133 will have a
material impact on its financial position or future results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Reference is made to the information appearing under the subheading
"Market Risks and Sensitivity Analyses" under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 23-25 of this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in Item 14(a)(1) and (2) are
included in this Report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
-25-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Premier Parks Inc. and
subsidiaries, the notes thereto and the related report thereon of independent
auditors are filed under Item 8 of this
Report:
PAGE
Independent Auditors' Report F-2
Consolidated Balance Sheets-- December 31, 1999 and 1998 F-3
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-8
Schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are omitted because they either are
not required under the related instructions, are inapplicable, or the required
information is shown in the financial statements or notes thereto.
(a)(3) See Exhibit Index.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Item 14(a)(3) above.
-26-
PREMIER PARKS OPERATIONS INC.
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-2
Consolidated Balance Sheets - December 31, 1999 and 1998 F-3
Consolidated Statements of Operations - Years ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Stockholder's Equity - Years ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows - Years ended
December 31, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-8
Independent Auditors' Report
The Board of Directors and Stockholder
Premier Parks Operations Inc.:
We have audited the accompanying consolidated balance sheets of Premier Parks
Operations Inc. and subsidiaries (a wholly owned subsidiary of Premier Parks
Inc.) as of December 31, 1999 and 1998, and the related consolidated statements
of operations, stockholder's equity, and cash flows for each of the years in the
three-year period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Premier Parks
Operations Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
Oklahoma City, Oklahoma
March 14, 2000
F-2
PREMIER PARKS OPERATIONS INC.
Consolidated Balance Sheets
December 31, 1999 and 1998
[Enlarge/Download Table]
Assets 1999 1998
--------------- ---------------
Current assets:
Cash and cash equivalents $ 118,011,000 80,167,000
Accounts receivable 26,728,000 28,842,000
Inventories 23,590,000 21,704,000
Prepaid expenses and other current assets 13,391,000 11,236,000
Restricted use investment securities -- 183,342,000
--------------- ---------------
Total current assets 181,720,000 325,291,000
--------------- ---------------
Other assets:
Debt issuance costs 27,388,000 23,511,000
Deposits and other assets 64,416,000 56,256,000
--------------- ---------------
Total other assets 91,804,000 79,767,000
--------------- ---------------
Property and equipment, at cost 2,259,195,000 1,651,990,000
Less accumulated depreciation 207,040,000 104,595,000
--------------- ---------------
2,052,155,000 1,547,395,000
--------------- ---------------
Investment in theme parks 92,332,000 57,196,000
Intangible assets, principally goodwill 1,346,102,000 1,318,286,000
Less accumulated amortization 92,997,000 43,721,000
--------------- ---------------
1,253,105,000 1,274,565,000
--------------- ---------------
Total assets $ 3,671,116,000 3,284,214,000
=============== ===============
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 36,572,000 30,689,000
Accrued interest payable 15,387,000 26,712,000
Accrued compensation, payroll taxes, and benefits 11,228,000 11,115,000
Accrued insurance 13,211,000 28,727,000
Other accrued liabilities 54,948,000 39,028,000
Payable to parent company 100,291,000 --
Current portion of long-term debt 2,055,000 198,038,000
--------------- ---------------
Total current liabilities 233,692,000 334,309,000
Long-term debt 1,195,184,000 1,315,256,000
Other long-term liabilities 41,760,000 50,574,000
Deferred income taxes 158,650,000 154,568,000
--------------- ---------------
Total liabilities 1,629,286,000 1,854,707,000
--------------- ---------------
Stockholder's equity:
Common stock, $.05 par value, 1,000 shares authorized, issued
and outstanding at December 31, 1999 and 1998 -- --
Capital in excess of par value 2,012,506,000 1,394,439,000
Retained earnings 47,047,000 25,981,000
Accumulated other comprehensive income (loss) (17,723,000) 9,087,000
--------------- ---------------
Total stockholder's equity 2,041,830,000 1,429,507,000
--------------- ---------------
Total liabilities and stockholder's equity $ 3,671,116,000 3,284,214,000
=============== ===============
See accompanying notes to consolidated financial statements.
F-3
PREMIER PARKS OPERATIONS INC.
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997
[Enlarge/Download Table]
1999 1998 1997
------------- ------------- -------------
Theme park admissions $ 500,417,000 423,461,000 94,611,000
Theme park food, merchandise and other 426,567,000 368,338,000 99,293,000
------------- ------------- -------------
Total revenue 926,984,000 791,799,000 193,904,000
------------- ------------- -------------
Operating costs and expenses:
Operating expenses 353,728,000 297,266,000 81,356,000
Selling, general and administrative 153,249,000 117,634,000 35,422,000
Noncash compensation -- 675,000 1,125,000
Costs of products sold 90,699,000 81,563,000 23,025,000
Depreciation and amortization 153,675,000 109,676,000 19,792,000
------------- ------------- -------------
Total operating costs and expenses 751,351,000 606,814,000 160,720,000
------------- ------------- -------------
Income from operations 175,633,000 184,985,000 33,184,000
------------- ------------- -------------
Other income (expense):
Interest expense (115,733,000) (108,969,000) (25,714,000)
Interest income 13,201,000 13,559,000 7,939,000
Equity in operations of theme parks 7,075,000 3,052,000 --
Termination fee, net of expenses -- -- 8,364,000
Other income (expense), including minority interest (3,551,000) (1,983,000) (59,000)
------------- ------------- -------------
Total other income (expense) (99,008,000) (94,341,000) (9,470,000)
------------- ------------- -------------
Income before income taxes 76,625,000 90,644,000 23,714,000
Income tax expense 44,263,000 46,634,000 9,615,000
------------- ------------- -------------
Income before extraordinary loss 32,362,000 44,010,000 14,099,000
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $7,530,000 in 1999
and $526,000 in 1998 (11,296,000) (788,000) --
------------- ------------- -------------
Net income $ 21,066,000 43,222,000 14,099,000
============= ============= =============
See accompanying notes to consolidated financial statements.
F-4
PREMIER PARKS OPERATIONS INC.
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1999, 1998 and 1997
[Enlarge/Download Table]
Common Stock Retained
---------------------------------- Capital in Earnings
Shares Excess of (Accumulated
Issued Amount Par Value Deficit)
-------------- -------------- -------------- --------------
Balances at December 31, 1996 22,785,338 $ 569,000 144,642,000 (31,340,000)
Issuance of common stock 15,013,576 375,000 209,593,000 --
Amortization of deferred
compensation -- -- -- --
Net income -- -- -- 14,099,000
-------------- -------------- -------------- --------------
Balances at December 31, 1997 37,798,914 944,000 354,235,000 (17,241,000)
Amortization of deferred compensation -- -- -- --
Reorganization of interests under
common control - 1998 merger (37,797,914) (944,000) (12,570,000) --
Reorganization of interests under
common control - 1999 merger -- -- 999,131,000 --
Contributions by Holdings -- -- 53,643,000 --
Net income -- -- -- 43,222,000
Other comprehensive income - foreign
currency translation adjustment -- -- -- --
Comprehensive income
-------------- -------------- -------------- --------------
Balances at December 31, 1998 1,000 -- 1,394,439,000 25,981,000
Contributions by Holdings -- -- 618,067,000 --
Net income -- -- -- 21,066,000
Other comprehensive loss - foreign
currency translation adjustment -- -- -- --
Comprehensive loss
-------------- -------------- -------------- --------------
Balances at December 31, 1999 1,000 $ -- 2,012,506,000 47,047,000
============== ============== ============== ==============
Accumulated
Other
Deferred Comprehensive Treasury
Compensation Income Stock Total
-------------- -------------- -------------- --------------
Balances at December 31, 1996 -- -- (689,000) 113,182,000
Issuance of common stock (14,625,000) -- -- 195,343,000
Amortization of deferred
compensation 1,125,000 -- -- 1,125,000
Net income -- -- -- 14,099,000
-------------- -------------- -------------- --------------
Balances at December 31, 1997 (13,500,000) -- (689,000) 323,749,000
Amortization of deferred compensation 675,000 -- -- 675,000
Reorganization of interests under
common control - 1998 merger 12,825,000 -- 689,000 --
Reorganization of interests under
common control - 1999 merger -- -- -- 999,131,000
Contributions by Holdings -- -- -- 53,643,000
Net income -- -- -- 43,222,000
Other comprehensive income - foreign
currency translation adjustment -- 9,087,000 -- 9,087,000
--------------
Comprehensive income 52,309,000
-------------- -------------- -------------- --------------
Balances at December 31, 1998 -- 9,087,000 -- 1,429,507,000
Contributions by Holdings -- -- -- 618,067,000
Net income -- -- -- 21,066,000
Other comprehensive loss - foreign
currency translation adjustment -- (26,810,000) -- (26,810,000)
--------------
Comprehensive loss (5,744,000)
-------------- -------------- -------------- --------------
Balances at December 31, 1999 -- (17,723,000) -- 2,041,830,000
============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
F-5
PREMIER PARKS OPERATIONS INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
[Enlarge/Download Table]
1999 1998 1997
--------------- --------------- ---------------
Cash flows from operating activities:
Net income $ 21,066,000 43,222,000 14,099,000
Adjustments to reconcile net income to net
cash provided by operating activities (net
of effects of acquisition):
Depreciation and amortization 153,675,000 109,676,000 19,792,000
Equity in operations of theme parks,
net of cash received (6,184,000) (6,227,000) --
Minority interest in earnings (6,000) 960,000 --
Noncash compensation -- 675,000 1,125,000
Interest accretion on notes payable 6,157,000 9,521,000 --
Interest accretion on restricted-use
investments (8,908,000) (7,267,000) --
Extraordinary loss on early extinguishment
of debt 18,826,000 1,314,000 --
Amortization of debt issuance costs 3,490,000 3,354,000 1,918,000
(Gain) loss on sale of assets 3,557,000 920,000 (46,000)
Deferred income taxes 36,949,000 45,142,000 6,737,000
(Increase) decrease in accounts receivable 5,197,000 (8,947,000) (5,272,000)
(Increase) decrease in income tax
receivable -- 995,000 (995,000)
Increase in inventories and prepaid
expenses and other current assets (752,000) 5,809,000 (1,150,000)
(Increase) decrease in deposits and
other assets (8,159,000) (7,554,000) 6,237,000
Decrease in accounts payable, accrued
expenses and other liabilities (14,725,000) (71,651,000) (776,000)
Increase (decrease) in accrued interest payable (11,328,000) 16,927,000 5,481,000
--------------- --------------- ---------------
Total adjustments 177,789,000 93,647,000 33,051,000
--------------- --------------- ---------------
Net cash provided by operating activities 198,855,000 136,869,000 47,150,000
--------------- --------------- ---------------
Cash flows from investing activities:
Additions to property and equipment (402,401,000) (181,784,000) (129,049,000)
Investment in theme parks (28,925,000) (50,737,000) (6,595,000)
Transfer of interests in theme park
partnerships to Premier -- 208,082,000 --
Acquisition of theme park assets (34,578,000) (50,593,000) (60,050,000)
Acquisition of theme park companies, net
of cash acquired (242,954,000) (56,017,000) (21,376,000)
Purchase of restricted-use investments -- (176,075,000) --
Maturities of restricted-use investments 192,250,000 -- --
--------------- --------------- ---------------
Net cash used in investing activities (516,608,000) (307,124,000) (217,070,000)
--------------- --------------- ---------------
Cash flows from financing activities:
Repayment of long-term debt (1,291,910,000) (703,639,000) (66,576,000)
Proceeds from borrowings 962,000,000 830,000,000 132,500,000
Capital contributions 607,632,000 56,766,000 --
Net proceeds from issuance of common stocks -- -- 189,530,000
Increase in payable to parent company 100,291,000 -- --
Payment of debt issuance costs (19,310,000) (18,058,000) (5,289,000)
--------------- --------------- ---------------
Net cash provided by financing activities 358,703,000 165,069,000 250,165,000
--------------- --------------- ---------------
F-6 (Continued)
PREMIER PARKS OPERATIONS INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
[Enlarge/Download Table]
1999 1998 1997
--------------- --------------- ---------------
Effect of exchange rate changes on cash
and cash equivalents $ (3,106,000) 1,065,000 --
--------------- --------------- ---------------
Increase (decrease) in cash and cash
equivalents 37,844,000 (4,121,000) 80,245,000
Cash and cash equivalents at beginning of year 80,167,000 84,288,000 4,043,000
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 118,011,000 80,167,000 84,288,000
=============== =============== ===============
Supplementary cash flow information:
Cash paid for interest $ 117,411,000 76,110,000 18,315,000
=============== =============== ===============
Cash paid for income taxes $ 220,000 497,000 3,697,000
=============== =============== ===============
Supplemental disclosure of noncash investing and financing activities:
1999
o The Company received $10,435,000 of parent common stock (337,467
shares) and then used the parent stock as additional consideration
for a theme park acquisition.
1998
o The Company received $15,547,000 of parent common stock (805,954
shares) and then used the parent stock as consideration for a theme
park acquisition.
1997
o The Company issued $5,831,000 of common stock (307,600 shares) as
components of theme park acquisitions.
o The Company issued restricted common stock (900,000 shares) to
certain employees valued at $14,625,000.
o The Company assumed $268,000 of capital lease obligations as a
component of a theme park acquisition.
See accompanying notes to consolidated financial statements.
F-7
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) Summary of Significant Policies
(a) Description of Business
Premier Parks Operations Inc. owns and operates regional theme
amusement and water parks. As of December 31, 1999, the Company and
its subsidiaries own or operate 32 parks, including 24 domestic
parks, one park in Mexico and seven parks in Europe. The Company is
also managing the construction and development of a theme park in
Europe.
On March 24, 1998, the company then known as Premier Parks Inc.
("Premier Operations") merged (the "1998 Merger") with an indirect
wholly owned subsidiary thereof, pursuant to which Premier
Operations became a wholly owned subsidiary of Premier Parks
Holdings Corporation ("Holdings") and the holders of shares of
common stock of Premier Operations became, on a share-for-share
basis, holders of common stock of Holdings. On the 1998 Merger date,
Premier Operations' name was changed to Premier Parks Operations
Inc., and Holdings' name was changed to Premier Parks Inc.
On April 1, 1998, Holdings purchased all of the outstanding capital
stock of Six Flags Entertainment Corporation ("SFEC" and, together
with its subsidiaries "Six Flags") and consummated the other
transactions described in Note 2 below. On November 5, 1999, SFEC
and Premier Operations consummated a merger (the "1999 Merger"), in
which Premier Operations was the surviving corporation. References
herein to the "Company," or "Premier Operations" mean for all
periods or dates, Premier Operations and its consolidated
subsidiaries. As used herein, Holdings refers only to Premier Parks
Inc., without regard to its subsidiaries.
In connection with the 1998 Merger, Premier Operations and Holdings,
entered into a shared services agreement pursuant to which certain
corporate, administrative and other general services provided by
Holdings are charged to Premier Operations, either on the basis of
their respective revenues or on other relative bases. Allocation of
these charges are reflected in the accompanying consolidated
financial statements.
During May 1999, in separate transactions, the Company purchased
100% of the capital stock of the companies that owned Reino
Aventura, a theme park located in Mexico City, and purchased the
assets used in the operation of Splashtown, a water park near
Houston. On November 15, 1999, the Company purchased Warner Bros.
Movie World Germany, near Dusseldorf, Germany, and entered into a
joint venture with Warner Bros. to develop and manage a new Warner
Bros. Movie World theme park scheduled to open in Madrid, Spain in
2002. See Note 2.
During 1998, the Company purchased approximately 97% of the
outstanding capital stock of Walibi, S.A. ("Walibi") and as of
December 31, 1999 owns approximately 99%. See Note 2.
During February 1997, the Company purchased 100% of the common stock
of the company that owned Riverside Park and in November 1997
purchased 100% of the equity interests of the company that owned
Kentucky Kingdom.
F-8 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
The accompanying consolidated financial statements for the year
ended December 31, 1999 reflect the results of Reino Aventura,
Splashtown, and Movie World Germany only from their acquisition
dates, May 4, 1999, May 13, 1999, and November 15, 1999,
respectively. The accompanying consolidated financial statements
for the year ended December 31, 1998 reflect the results of
Walibi only from March 26, 1998, and of Six Flags only from April
1, 1998. The accompanying consolidated financial statements for
the year ended December 31, 1997 reflect the results of Riverside
Park only from its acquisition date, February 5, 1997 and
Kentucky Kingdom only from its acquisition date, November 7,
1997. In addition, 1999 and 1998 results include the Company's
share of the results of Six Flags Marine World under the
applicable lease and related documents. See Note 13. Those
results are not included in the 1997 period.
(b) Basis of Presentation
The Company's accounting policies reflect industry practices and
conform to generally accepted accounting principles.
The 1997 financial statements are the historical financials of
Premier Parks Inc. The 1998 financial statements include the results
of operations and cash flows of Premier Parks Inc. through the 1998
Merger date and the operations and cash flows of Premier Operations
for the period from the 1998 Merger date through December 31, 1998.
In addition, the 1998 financial statements also include the results
of SFEC for the period from April 1, 1998, the date of the Six Flags
acquisition, through December 31, 1998. The 1999 financial
statements include the results of SFEC and the results of Premier
Operations for the complete year. The 1999 Merger and the 1998
Merger were accounted for as reorganizations of interests under
common control in a manner similar to a pooling of interests. The
effect of the 1999 Merger was to reflect the assets and liabilities
of Six Flags as if contributed to Premier Operations by Holdings on
April 1, 1998, the purchase date.
The consolidated financial statements include the accounts of the
Company, its majority and wholly owned subsidiaries, and limited
partnerships and limited liability companies in which the Company
beneficially owns 100% of the interests. Intercompany transactions
and balances have been eliminated in consolidation.
(c) Cash Equivalents
Cash equivalents of $80,370,000 and $52,678,000 at December 31, 1999
and 1998, respectively, consist of short-term highly liquid
investments with a remaining maturity as of purchase date of three
months or less, which are readily convertible into cash. For
purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with remaining
maturities as of their purchase date of three months or less to be
cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and primarily consist of products for resale including
merchandise and food and miscellaneous supplies.
F-9 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(e) Advertising Costs
Production costs of commercials and programming are charged to
operations in the year first aired. The costs of other advertising,
promotion, and marketing programs are charged to operations when
incurred. The amounts capitalized at year-end are included in
prepaid expenses.
Advertising and promotions expense was $99,241,000, $62,642,000, and
$21,600,000 during 1999, 1998, and 1997, respectively.
(f) Debt Issuance Costs
The Company capitalizes costs related to the issuance of debt. The
amortization of such costs is recognized as interest expense under a
method approximating the interest method over the life of the
respective debt issue.
(g) Depreciation and Amortization
Rides and attractions are depreciated using the straight-line method
over 5-25 years. Buildings and improvements are depreciated over
their estimated useful lives of approximately 30 years by use of the
straight-line method. Furniture and equipment are depreciated using
the straight-line method over 5-10 years.
Maintenance and repairs are charged directly to expense as incurred,
while betterments and renewals are generally capitalized as property
and equipment. When an item is retired or otherwise disposed of, the
cost and applicable accumulated depreciation are removed and the
resulting gain or loss is recognized.
(h) Investment in Theme Parks
The Company manages two parks in which the Company does not
currently own a controlling interest. The Company accounts for its
investment in these two parks using the equity method of accounting.
The equity method of accounting recognizes the Company's share of
the activity of Six Flags Marine World in the accompanying
consolidated statements of operations in the caption "equity in
operations of theme parks." The Warner Bros. Movie World theme park
being constructed in Spain is not yet in operation. The equity
method of accounting differs from the consolidation method of
accounting used for the theme parks in which the Company owns a
controlling interest. In the consolidation method of accounting, the
activities of the controlled parks are reflected in each revenue and
expense caption rather than aggregated into one caption.
(i) Intangible Assets
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over the expected period to be benefited, generally 18 to 25 years.
Other intangible assets are amortized over the period to be
benefited, generally up to 25 years. The Company assesses the
recoverability of intangible assets by determining whether the
amortization of the intangible asset balance over its remaining life
can be
F-10 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
recovered through undiscounted future operating cash flows of the
acquisition. The amount of goodwill impairment, if any, is measured
based on projected discounted future operating cash flows using a
discount rate reflecting the Company's average borrowing rate.
(j) Long-Lived Assets
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset or group
of assets to future net cash flows expected to be generated by the
asset or group of assets. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(k) Interest Expense
Interest on notes payable is generally recognized as expense on the
basis of stated interest rates. Notes payable assumed in an
acquisition are carried at amounts adjusted to impute a market rate
of interest cost (when the obligations were assumed).
(l) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. United States deferred income taxes have not been
provided on foreign earnings which are being permanently reinvested.
Effective with the 1998 Merger, the Company and Holdings entered
into a tax-sharing agreement (which was amended in connection
with the 1999 Merger), whereby the Company pays to Holdings, the
Company's portion of Holding's current tax expense. Holdings files
a consolidated United States tax return which includes all of the
Company's domestic operations.
(m) Investment Securities
Restricted-use investment securities at December 31, 1998 consisted
of U.S. Treasury securities. The securities were restricted to
provide funds for the repayment of indebtedness which matured in
1999. The Company classifies its investment securities as
held-to-maturity. Held-to-maturity securities are those securities
in which the Company has the ability and intent to hold the security
until maturity. There are no other securities held by the Company.
Premiums and discounts are amortized or accreted over the life of
the related held-to-maturity security as an adjustment to yield
using the effective interest method. Dividend and interest income
are recognized when earned.
F-11 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(n) Comprehensive Income (Loss)
On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its
components in a full set of financial statements. Comprehensive
income (loss) consists of net income (loss) and changes in the
foreign currency translation adjustment, and is presented in the
1999 and 1998 consolidated statements of stockholder's equity as
accumulated other comprehensive income (loss). The Statement
requires only additional disclosures in the consolidated financial
statements; it does not affect the Company's financial position or
results of operations. The Company's 1997 and earlier financial
statements do not reflect any effect from the adoption of SFAS 130
as prior to 1998 the Company did not have foreign operations or own
significant investment securities.
(o) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(p) Reclassifications
Reclassifications have been made to certain amounts reported in 1998
and 1997 to conform with the 1999 presentation.
(2) Acquisition of Theme Parks
On May 4, 1999, the Company acquired all of the capital stock of the
companies that own and operate Reino Aventura (subsequently renamed Six
Flags Mexico), a theme park located in Mexico City, for a cash purchase
price of approximately $59,600,000. The Company funded the acquisition
from existing cash. Approximately $14,575,000 of costs in excess of the
fair value of the net assets acquired were recorded as goodwill. The
transaction was accounted for as a purchase.
On May 13, 1999, the Company acquired the assets of Splashtown water park
located in Houston, Texas for a cash purchase price of approximately
$20,400,000. The Company funded the acquisition from existing cash.
Approximately $10,530,000 of costs in excess of the fair value of the net
assets acquired were recorded as goodwill. The transaction was accounted
for as a purchase.
On November 15, 1999, the Company purchased the partnership that owns
Warner Bros. Movie World Germany, near Dusseldorf, Germany, and entered
into a joint venture with Warner Bros. to design, develop and manage a
new Warner Bros. Movie World theme park scheduled to open in Madrid,
Spain in 2002. At the same time, the Company entered into a long-term
license agreement for exclusive theme park usage in Europe, Mexico,
South America, and Central America of the Looney Tunes, Hanna-Barbera,
Cartoon Network and D.C. Comics characters. The aggregate cost of the
transactions was $180,269,000, which was funded by borrowings under the
Company's 1999 credit facility (the "New Credit Facility"). See Note
7(g). Approximately $42,800,000 of the aggregate
F-12 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
costs were allocated to goodwill and intangible assets. The transaction
was accounted for as a purchase.
On March 26, 1998, the Company purchased (the "Private Acquisition")
approximately 49.9% of the outstanding capital stock of Walibi for an
aggregate purchase price of $42,300,000, of which 20% was paid through
issuance of 448,910 shares of Holdings' common stock and 80% was paid in
cash. In June 1998, the Company purchased an additional 44% of the
outstanding capital stock of Walibi for an aggregate purchase price of
$38,100,000, which was paid through issuance of 347,746 shares of
Holdings' common stock and $31,400,000 in cash. During the remainder of
the year, the Company purchased an additional 3% of Walibi, which included
the issuance of an additional 9,298 shares of Holdings' common stock.
During 1999, the Company purchased an additional 2% of Walibi. On the date
of the Private Acquisition, Walibi's indebtedness aggregated $71,181,000,
which indebtedness was assumed or refinanced by the Company. The Company
funded the cash portion of the purchase price (and the refinancing of such
indebtedness) from borrowings under its senior secured credit facility
(the "Premier Credit Facility") entered into in March 1998. See Note 7(c).
As of the acquisition dates and after giving effect to the purchases,
$11,519,000 of deferred tax liabilities were recognized for the tax
consequences attributable to the differences between the financial
carrying amounts and the tax basis of Walibi's assets and liabilities.
Approximately $60,118,000 of costs in excess of the fair value of the net
assets acquired were recorded as goodwill. Holdings was not required to
issue any shares as a result of the 1999 revenues. Holdings may be
required to issue additional shares of common stock based on Walibi's
revenues during 2000 or 2001. The value of the additional Holdings shares,
if any, will be recorded as additional goodwill.
On April 1, 1998 Holdings acquired (the "Six Flags Acquisition") all of
the capital stock of SFEC for $976,000,000, paid in cash. In connection
with the Six Flags Acquisition, SFEC issued $170,000,000 aggregate
principal amount of its 8 7/8% Senior Notes due 2006 (the "SFEC Notes").
In addition, in connection with the Six Flags Acquisition, the Company (i)
assumed $285,000,000 principal amount at maturity of senior subordinated
notes (the "SFTP Senior Subordinated Notes") of Six Flags Theme Parks Inc.
("SFTP"), an indirect wholly owned subsidiary of SFEC, which notes had an
accreted value of $278,100,000 at April 1, 1998 (fair value of
$318,500,000 at that date) and (ii) refinanced all outstanding SFTP bank
indebtedness with the proceeds of $410,000,000 of borrowings under a new
$472,000,000 senior secured credit facility of SFTP (the "Six Flags Credit
Facility"). See Note 7(f). Pursuant to the Acquisition, Six Flags
transferred to Holdings all of its interests in the limited partnerships
that own Six Flags Over Texas and Six Flags Over Georgia ("the Partnership
Parks"), for $46,000,000 in cash and Holdings' payment of $165,686,000 of
SFEC debt. During 1999, the Company completed the determination of the
value of the assets acquired and liabilities assumed. As a result of the
final determination, the deferred income tax liability resulting from the
acquisition and goodwill were each reduced by approximately $30,000,000.
As of the acquisition date and after giving effect to the final allocation
of purchase price, $35,619,000 of deferred tax liabilities were recognized
for the tax consequences attributable to the differences between the
financial carrying amounts and the tax basis of Six Flags' assets and
liabilities. Approximately $1,170,974,000 of costs in excess of the fair
value of the net assets acquired were recorded as goodwill.
On February 5, 1997, the Company acquired all of the outstanding common
stock of Stuart Amusement Company ("Stuart"), the owner of Riverside Park,
for a purchase price of $22,200,000 ($1,000,000 of which was paid through
issuance of 64,278 of Holdings' common shares). The
F-13 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
transaction was accounted for as a purchase. As of the acquisition date
and after giving effect to the purchase, $6,623,000 of deferred tax
liabilities were recognized for the tax consequences attributable to the
differences between the financial statement carrying amounts and the tax
basis of Stuart's assets and liabilities. Approximately $10,484,000 of
costs in excess of the fair value of the net assets acquired were recorded
as goodwill.
On November 7, 1997, the Company acquired Kentucky Kingdom--The Thrill
Park ("Kentucky Kingdom") for a preliminary purchase price of $64,000,000
of which $4,831,000 was paid through the issuance of 243,342 shares of
Holdings' common stock. As a result of 1998 revenues exceeding levels
specified in the purchase agreement, the Company was required to issue the
former owners of Kentucky Kingdom an additional 337,000 shares of
Holdings' common stock in April 1999, of which approximately 126,000
shares of Holdings' common stock were placed in an escrow account to
offset potential pre-acquisition claims by the Company. The Company would
have been required to issue additional shares of Holdings' common stock
based upon the level of revenues at Kentucky Kingdom during 1999 and 2000.
During 1999, the Company and the sellers of Kentucky Kingdom reached a new
agreement pursuant to which the Company agreed to pay the sellers
$4,300,000, of which $1,250,000 was placed in escrow. A portion of this
payment represented proceeds of the sale of the 126,000 shares of
Holdings' common stock previously placed in escrow. In consideration of
the foregoing, the sellers released the Company from any further
obligations under the acquisition agreement, including the obligation to
issue additional shares of Holdings' common stock based on 1999 and 2000
revenues of Kentucky Kingdom. The acquisition was accounted for as a
purchase. The purchase price, as adjusted, was primarily allocated to
property and equipment with $16,306,000 of costs recorded as goodwill.
The following summarized unaudited pro forma results of operations for the
years ended December 31, 1999 and 1998, assume that the Six Flags, Walibi,
Reino Aventura, Splashtown and Movie World acquisitions, and the related
transactions occurred as of January 1, 1998.
1999 1998
------------- -------------
(Unaudited)
(In thousands)
Total revenues $ 975,859 897,766
Income (loss) before extraordinary loss 8,650 (32,300)
The following summarized unaudited pro forma results of operations for the
years ended December 31, 1998 and 1997, assume that the Six Flags
Acquisition, the acquisition of Walibi, the acquisition of Kentucky
Kingdom, and the related financings occurred as of January 1, 1997.
1998 1997
------------- -------------
(Unaudited)
(In thousands)
Total revenues $ 816,505 793,467
Income (loss) before extraordinary loss (22,795) (28,209)
F-14 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(3) Fair Value of Financial Instruments
The recorded amounts for cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, and payable to parent company
approximate fair value because of the short maturity of these financial
instruments. As of December 31, 1998, the fair value of the Company's
restricted-use investments was approximately $184,930,000. The fair value
was determined using quoted market prices. The fair value estimates,
methods, and assumptions relating to the Company's debt financial
instruments are discussed in Note 7.
(4) Property and Equipment
Property and equipment, at cost, are classified as follows:
1999 1998
-------------- -------------
Land $ 332,942,000 273,723,000
Buildings and improvements 680,545,000 464,981,000
Rides and attractions 1,058,918,000 788,753,000
Equipment 186,790,000 124,533,000
-------------- -------------
Total 2,259,195,000 1,651,990,000
Less accumulated depreciation 207,040,000 104,595,000
-------------- -------------
$2,052,155,000 1,547,395,000
============== =============
(5) Investment in Theme Parks
The following reflects the summarized assets, liabilities, and equity as
of December 31, 1999 and 1998 and the results of Six Flags Marine World.
Previous periods are not presented as the lease agreement with the owner
of Six Flags Marine World, which established a revenue sharing arrangement
in which the Company participates, became effective at the beginning of
the 1998 operating season. The following information does not include
results of the Warner Bros. Movie World theme park being constructed in
Spain as it is not yet in operation.
1999 1998
------------ ------------
Assets:
Current assets $ 16,888,000 18,640,000
Property and equipment, net 116,042,000 94,793,000
Other assets 23,336,000 24,277,000
------------ ------------
Total assets $156,266,000 137,710,000
============ ===========
Liabilities and equity:
Current liabilities $ 12,467,000 13,191,000
Long-term debt 61,985,000 68,950,000
Equity 81,814,000 55,569,000
------------ ------------
Total liabilities and equity $156,266,000 137,710,000
============ ===========
F-15 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
1999 1998
----------- ----------
Revenue $57,654,000 48,094,000
----------- ----------
Expenses:
Operating expenses 24,375,000 20,611,000
Selling, general and administrative 9,401,000 9,209,000
Costs of products sold 6,071,000 5,597,000
Depreciation and amortization 4,614,000 6,691,000
Interest expense, net 4,753,000 4,780,000
Other expense 551,000 1,422,000
----------- ----------
Total 49,765,000 48,310,000
----------- ----------
Net income (loss) $ 7,889,000 (216,000)
=========== ==========
The Company's share of operations of Six Flags Marine World for the years
ended December 31, 1999 and 1998 were $10,651,000 and $4,567,000, prior to
depreciation and amortization charges of $3,576,000 and $1,515,000,
respectively. A substantial difference exists between the carrying value
of the Company's investment in the theme parks and the Company's share of
the net book value of the theme parks. The difference is being amortized
over the expected useful life of the rides and equipment installed by the
Company at Six Flags Marine World. The long-term debt reflected above is
an obligation of the other parties that have an interest in Six Flags
Marine World and is not guaranteed by the Company.
(6) Derivative Financial Instruments
Holdings and the Company historically have had only limited involvement
with derivative financial instruments, entering into contracts to manage
the variability of foreign-currency exchange rates.
Foreign currency forward purchase agreements are used to reduce the
potential impact of changes in foreign currency exchange rates on the cost
of rides and equipment purchased from European suppliers. As of December
31, 1999 and 1998, Holdings had entered into forward purchase agreements
for the benefit of the Company. At December 31 1999, Holdings was a party
to forward purchase agreements of European currencies with terms expiring
in 2000. The agreements require Holdings to purchase European currencies
from the counterparties (three large financial institutions) at specified
intervals, for approximately $63,255,000. The specified transaction
intervals coincide with the dates that payments are expected to be made
related to the capital expenditures being paid through use of a foreign
currency. At December 31, 1998, Holdings was a party to two forward
purchase agreements of European currencies with terms that expired in
1999. The agreements required Holdings to purchase European currencies
from the counterparties (an investment bank and a large financial
institution), at specified intervals, for approximately $17,679,000. The
specified transaction intervals coincided with the dates that payments
were expected to be made related to the capital expenditures being paid
through use of a foreign currency.
The fair value of the forward purchase agreements was $58,000 and $577,000
at December 31, 1999 and 1998, respectively. The fair value is estimated
using values provided by the counterparties based upon quoted exchange
rates for forward purchases.
F-16 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
In February 2000, the Company entered into three interest rate swap
agreements that effectively convert the Company's $600,000,000 term
loan component of the New Credit Facility (see Note 7(g)) into a fixed
rate obligation. The terms of the agreements, each of which has a
notional amount of $200,000,000, begin March 2000 and expire from
December 2001 to March 2002. The Company's term loan borrowings bear
interest based upon the LIBOR rate. The Company's interest rate swap
arrangements are designed to "lock-in" the LIBOR component at rates
ranging from 6.615% to 6.780% depending on the applicable agreement.
Two of the agreements have a feature that negates the interest rate
swap for a ninety-day period if LIBOR rates exceed 7.5%, while the
remaining agreement limits the interest rate swap at the 7.5% rate. The
counterparties to these transactions are major financial institutions,
which minimizes the credit risk.
Holdings and the Company are exposed to credit losses in the event of
nonperformance by the counterparties to the forward purchase and interest
rate swap agreements. Holdings and the Company anticipate, however, that
counterparties will fully satisfy their obligations under the contracts.
Holdings and the Company do not obtain collateral to support their
financial instruments but monitors the credit standing of the
counterparties.
(7) Long-Term Debt
At December 31, 1999 and 1998, long-term debt consists of:
[Enlarge/Download Table]
1999 1998
-------------- -------------
Long-term debt:
1995 Notes due 2003 (a) $ -- 90,000,000
1997 Notes due 2007 (b) 125,000,000 125,000,000
Premier Credit Facility (c) -- 200,000,000
SFEC Notes (d) 170,000,000 170,000,000
SFEC Zero Coupon Notes (d) -- 182,877,000
SFTP Senior Subordinated Notes (e) -- 321,167,000
Six Flags Credit Facility (f) -- 409,750,000
New Credit Facility (g) 892,000,000 --
Other 10,239,000 14,500,000
-------------- -------------
1,197,239,000 1,513,294,000
Less current portion, in 1998 primarily the SFEC Zero Coupon Notes
(carrying value of $182,877,000 as of December 31, 1998) which had
been prefunded with restricted-use investments (which also matured in 1999) 2,055,000 198,038,000
-------------- -------------
$1,195,184,000 1,315,256,000
============== =============
(a) In August 1995, Premier Operations issued $90,000,000 principal
amount of senior notes (the "1995 Notes"). In June 1999, a capital
contribution from Holdings was utilized to repurchase and redeem
these notes. An extraordinary loss of $5,778,000, net of tax benefit
of $3,852,000, was recognized from the early extinguishment. The
1995 Notes were senior unsecured obligations of Premier Operations,
and were scheduled to mature on August 15, 2003. The 1995 Notes
accrued interest at 12% per annum payable semiannually and were
guaranteed on a senior, unsecured, joint and several basis by all of
Premier Operations' principal domestic subsidiaries.
F-17 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(b) On January 31, 1997, Premier Operations issued $125,000,000 of
senior notes due January 2007 (the "1997 Notes"). The 1997 Notes are
senior unsecured obligations of Premier Operations and were equal to
the 1995 Notes in priority upon liquidation. The 1997 Notes bear
interest at 9 3/4% per annum payable semiannually and are
redeemable, at Premier Operations' option, in whole or in part, at
any time on or after January 15, 2002, at varying redemption prices.
The 1997 Notes are guaranteed on a senior, unsecured, joint and
several basis by all of Premier Operations' principal domestic
subsidiaries.
The indenture limits the ability of Premier Operations and its
subsidiaries to dispose of assets; incur additional indebtedness or
liens; pay dividends; engage in mergers or consolidations; and
engage in certain transactions with affiliates. A portion of the
proceeds were used to pay in full all amounts outstanding under
Premier Operations' then outstanding credit facility.
All obligations under the 1997 Notes and the related indenture
remained as obligations of Premier Operations and were not assumed
by Holdings after the 1998 Merger.
(c) In March 1998, Premier Operations entered into the Premier Credit
Facility and terminated its then outstanding $115,000,000 credit
facility, resulting in a $788,000 extraordinary loss, net of tax
benefit of $526,000, in the first quarter of 1998 in respect of
debt issuance costs related to the terminated facility. The
Premier Credit Facility was terminated in November 1999 in
connection with the New Credit Facility. See Note 7(g). At
December 31, 1998, Premier Operations had borrowed $200,000,000
under the Premier Credit Facility, in part to fund the
acquisition of Walibi. The Premier Credit Facility included a
five-year $75,000,000 revolving credit facility (none of which
was outstanding at December 31, 1998), a five-year $100,000,000
term loan facility (subsequently reduced to $75,000,000) and an
eight-year $125,000,000 term loan facility (which was fully drawn
as of December 31, 1998). Borrowings under the Premier Credit
Facility were guaranteed by Premier Operations' domestic
subsidiaries and secured by substantially all of the assets of
Premier Operations and such subsidiaries (other than real estate).
(d) On April 1, 1998, the Company issued $170,000,000 principal
amount of SFEC Notes, which are senior obligations of the
Company. The SFEC Notes are guaranteed on a fully subordinated
basis by Holdings. The SFEC Notes require annual interest
payments of approximately $15,100,000 (8 7/8% per annum) and,
except in the event of a change of control of the Company and
certain other circumstances, do not require any principal payments
prior to their maturity in 2006. The SFEC Notes are redeemable, at
the Company's option, in whole or in part, at any time on or after
April 1, 2002, at varying redemption prices. The net proceeds of
the SFEC Notes, together with other funds, were invested in
restricted-use securities to provide for the repayment in full on
or before December 15, 1999 of pre-existing notes of SFEC (with a
carrying value of $182,877,000 at December 31, 1998). The
pre-existing notes of SFEC were paid in full using the
restricted-use securities on December 15, 1999.
The indenture under which the SFEC Notes were issued limits the
ability of the Company and its subsidiaries to dispose of assets;
incur additional indebtedness or liens; pay dividends; engage in
mergers or consolidations; and engage in certain transactions with
affiliates. In November 1999, SFEC merged into Premier Operations,
which assumed the obligations of SFEC under the SFEC Notes and the
related indenture.
F-18 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(e) The SFTP Senior Subordinated Notes were senior subordinated
obligations of SFTP in an aggregate principal amount of
$285,000,000. In June 1999, a capital contribution from Holdings was
used to repurchase and retire these notes. An extraordinary loss of
$304,000, net of tax benefit of $202,000, was recognized from the
early extinguishment. The SFTP Senior Subordinated Notes were issued
at a discount and effective in 1999 required annual interest
payments of approximately $34,900,000 per annum (12 1/4% per annum).
The first interest payment was paid in December 1998. As a result of
the application of purchase accounting, the carrying value of the
SFTP Senior Subordinated Notes was increased to $318,500,000, which
was the estimated fair value at the acquisition date of April 1,
1998. The premium that resulted from the adjustment of the carrying
value was amortized as a reduction to interest expense and resulted
in an effective interest rate of approximately 9 3/4%.
(f) On April 1, 1998, SFTP entered into the Six Flags Credit Facility.
The facility was terminated in November 1999 in connection with the
New Credit Facility. See Note 7(g). The Six Flags Credit Facility
included (i) a $100,000,000 five-year revolving credit facility used
to refinance Six Flags bank indebtedness as of April 1, 1998 and for
working capital and other general corporate purposes and (ii) a
$372,000,000 term loan facility. Borrowings under the Six Flags
Credit Facility were secured by substantially all of the assets of
SFTP and its subsidiaries and a pledge of the stock of SFTP, and
were guaranteed by such subsidiaries and SFEC.
(g) On November 5, 1999, SFTP entered into the New Credit Facility and,
in connection therewith, SFEC merged into Premier Operations and
SFTP became a subsidiary of Premier Operations. The New Credit
Facility includes a $300,000,000 five-year revolving credit facility
(none of which was outstanding at December 31, 1999), a $300,000,000
five-and-one-half-year multicurrency reducing revolver facility (of
which $292,000,000 was outstanding at December 31, 1999) and a
$600,000,000 six-year term loan (all of which was borrowed at
December 31, 1999). Borrowings under the five-year revolving
credit facility must be repaid in full for thirty consecutive days
each year. The interest rate on borrowings under the New Credit
Facility can be fixed for periods ranging from one to six months. At
the Company's option the interest rate is based upon specified
levels in excess of the applicable base rate or LIBOR. At December
31, 1999, the interest rate on the borrowings was 8.88%. The
multicurrency facility, which permits optional prepayments and
reborrowings, requires quarterly mandatory repayments of 2.5% of the
outstanding amount thereof commencing on December 31, 2001, 5.0%
commencing on December 31, 2002, 7.5% commencing on December 31,
2003 and 20.0% commencing on December 31, 2004. The term loan
facility requires quarterly repayments of 0.25% of the outstanding
amount thereof commencing on December 31, 2001 and 24.25% commencing
on December 31, 2004. A commitment fee of .50% of the unused credit
of the facility is due quarterly in arrears. The principal borrower
under the facility is SFTP, and borrowings under the New Credit
Facility are guaranteed by Holdings, Premier Operations and all of
Premier Operations' domestic subsidiaries and are secured by
substantially all of Premier Operations' domestic assets. See Note 6
regarding interest rate hedging activities.
The New Credit Facility contains restrictive covenants that, among
other things, limit the ability of Premier Operations and its
subsidiaries to dispose of assets; incur additional indebtedness or
liens; repurchase stock; make investments; engage in mergers or
consolidations; pay dividends, except that (subject to covenant
compliance) dividends will be permitted to allow Holdings to meet
cash interest obligations with respect to its long-term debt
($1,007,749,000 as of
F-19 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
December 31, 1999), cash dividend payments on its preferred stock
($23,288,000 in 2000) and its obligations to the limited partners in
the Partnership Parks, and engage in certain transactions with
subsidiaries and affiliates. In addition, the New Credit Facility
requires that Premier Operations comply with certain specified
financial ratios and tests.
On November 5, 1999, the Company borrowed $892,000,000 under the New
Credit Facility principally to repay all amounts outstanding under
the Premier Credit Facility and the Six Flags Credit Facility and to
provide funds to consummate the November 1999 transactions with
Warner Bros. described in Note 2. The termination of the Premier and
Six Flags Credit Facilities resulted in an extraordinary loss in
respect of the debt issuance costs related thereto of $5,214,000,
net of tax benefit of $3,476,000.
Annual maturities of long-term debt during the five years subsequent
to December 31, 1999, are as follows:
2000 $ 2,055,000
2001 9,834,000
2002 43,464,000
2003 72,518,000
2004 and thereafter 1,069,368,000
----------------
$ 1,197,239,000
================
The fair value of the Company's long-term debt is estimated by using
quoted prices or discounted cash flow analyses based on current
borrowing rates for debt with similar maturities. Under the above
assumptions the estimated fair value of long-term debt at December
31, 1999 and 1998 is approximately $1,196,015,000 and
$1,531,047,000, respectively.
Premier Operations is the issuer of the 1997 Notes described in (b)
above. The domestic subsidiaries of Premier Operations guarantee the
1997 Notes on a full, unconditional, and joint and several basis.
The information for Premier Operations contains the assets,
liabilities, results of operations and cash flows of Premier
Operations and its domestic subsidiaries as if the merger of SFEC
into Premier Operations had occurred on January 1, 1999. The
non-guarantor group is comprised of the assets, liabilities,
results of operations and cash flows of Premier Operations'
foreign subsidiaries that are not guarantors of any of the debt
described in (a) through (g) above.
F-20 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
[Enlarge/Download Table]
Premier Non-
Operations Guarantors Eliminations Total
---------- ---------- ---------- ----------
(in thousands)
Assets:
Cash and cash equivalents $ 97,724 20,287 -- 118,011
Other current assets 47,655 16,054 -- 63,709
---------- ---------- ---------- ----------
Total current assets 145,379 36,341 -- 181,720
Other assets 299,677 796 (208,669) 91,804
Investment in subsidiaries 158,076 -- (158,076) --
Investment in theme parks 92,332 -- -- 92,332
Property and equipment, net 1,694,710 357,445 -- 2,052,155
Intangible assets, net 1,159,161 93,944 -- 1,253,105
---------- ---------- ---------- ----------
Total assets $3,549,335 488,526 (366,745) 3,671,116
========== ========== ========== ==========
Liabilities and stockholder's equity:
Current portion of long-term debt $ 1,376 679 -- 2,055
Payable to parent company 59,519 40,772 -- 100,291
Other current liabilities 83,159 48,187 -- 131,346
---------- ---------- ---------- ----------
Total current liabilities 144,054 89,638 -- 233,692
Long-term debt 1,190,978 212,875 (208,669) 1,195,184
Other long-term liabilities 39,736 2,024 -- 41,760
Deferred income taxes 132,737 25,913 -- 158,650
Stockholder's equity 2,041,830 158,076 (158,076) 2,041,830
---------- ---------- ---------- ----------
Total liabilities and stockholder's equity $3,549,335 488,526 (366,745) 3,671,116
========== ========== ========== ==========
Revenue:
Theme park admissions $ 445,046 55,371 -- 500,417
Theme park food, merchandise
and other 385,532 41,035 -- 426,567
---------- ---------- ---------- ----------
Total revenue 830,578 96,406 -- 926,984
---------- ---------- ---------- ----------
Operating costs and expenses:
Operating expenses 311,903 41,825 -- 353,728
Selling, general and administrative 137,226 16,023 -- 153,249
Costs of products sold 81,887 8,812 -- 90,699
Depreciation and amortization 135,637 18,038 -- 153,675
---------- ---------- ---------- ----------
Total operating costs and expenses 666,653 84,698 -- 751,351
---------- ---------- ---------- ----------
Income from operations 163,925 11,708 -- 175,633
---------- ---------- ---------- ----------
F-21 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
[Enlarge/Download Table]
Premier Non-
Operations Guarantors Eliminations Total
----------- ----------- ----------- -----------
(in thousands)
Other income (expense):
Interest expense $ (114,512) (6,238) 5,017 (115,733)
Interest income 18,022 196 (5,017) 13,201
Equity in operations of theme parks 7,075 -- -- 7,075
Other income (expense) (4,119) 568 -- (3,551)
----------- ----------- ----------- -----------
Total other income (expense) (93,534) (5,474) -- (99,008)
----------- ----------- ----------- -----------
Income before income taxes 70,391 6,234 -- 76,625
Income tax expense 40,133 4,130 -- 44,263
----------- ----------- ----------- -----------
Income before extraordinary loss 30,258 2,104 -- 32,362
Extraordinary loss on extinguishment
of debt, net of income tax benefit (11,296) -- -- (11,296)
----------- ----------- ----------- -----------
Net income $ 18,962 2,104 -- 21,066
=========== =========== =========== ===========
Cash flow information:
Operating cash flows $ 167,492 31,363 -- 198,855
----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment (369,136) (33,265) -- (402,401)
Investment in theme parks (28,925) -- -- (28,925)
Acquisition of theme park assets (26,701) (7,877) -- (34,578)
Acquisitions of theme park companies (63,090) (180,653) 789 (242,954)
Investment in subsidiaries (158,743) -- 158,743 --
Maturities of restricted-use
investments 192,250 -- -- 192,250
----------- ----------- ----------- -----------
(454,345) (221,795) 159,532 (516,608)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term debt (1,286,792) (19,801) 14,683 (1,291,910)
Proceeds from borrowings 962,000 162,769 (162,769) 962,000
Capital contributions 607,632 10,657 (10,657) 607,632
Increase in payable to parent company 60,383 39,908 -- 100,291
Payment of debt issuance costs (19,310) -- -- (19,310)
----------- ----------- ----------- -----------
323,913 193,533 (158,743) 358,703
Effect of exchange rate changes
on cash -- (3,106) -- (3,106)
----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents $ 37,060 (5) 789 37,844
=========== =========== =========== ===========
F-22 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(8) Termination Fee
During October 1997, the Company entered into an agreement with the
limited partner of the partnership that owned the Six Flags Over Texas
theme park. The general terms of the agreement were for the Company to
become the managing general partner of the partnership, to manage the
operations of the park, to receive a portion of the income from such
operations, and to purchase limited partnership units over the term of the
agreement. The provisions of the agreement also granted the Company an
option to purchase all of the partnership interests in the partnership at
the end of the agreement.
The agreement was non-exclusive and contained a termination fee of
$10,750,000 payable to the Company in the event the agreement was
terminated. Subsequent to the Company's agreement with the limited
partners, the prior operator of the theme park also reached an agreement
with the limited partners. The Company received the termination fee in
December 1997 and has included the termination fee, net of $2,386,000 of
expenses associated with the transaction, as a component of other income
(expense) in the accompanying 1997 consolidated statement of operations.
(9) Income Taxes
Income tax expense (benefit) allocated to operations for 1999, 1998 and
1997 consists of the following:
Current Deferred Total
------------ ---------- ----------
1999:
U.S. federal $ (683,000) 35,462,000 34,779,000
Foreign 1,058,000 3,072,000 4,130,000
State and local (591,000) 5,945,000 5,354,000
------------ ---------- ----------
$ (216,000) 44,479,000 44,263,000
============ ========== ==========
1998:
U.S. federal $ (564,000) 34,734,000 34,170,000
Foreign 1,049,000 5,146,000 6,195,000
State and local 1,007,000 5,262,000 6,269,000
------------ ---------- ----------
$ 1,492,000 45,142,000 46,634,000
============ ========== ==========
1997:
U.S. federal $ 2,505,000 6,060,000 8,565,000
State and local 373,000 677,000 1,050,000
------------ ---------- ----------
$ 2,878,000 6,737,000 9,615,000
============ ========== ==========
F-23 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
Recorded income tax expense allocated to operations differed from amounts
computed by applying the U.S. federal income tax rate of 35% in 1999, 1998
and 1997 to income before income taxes as follows:
[Enlarge/Download Table]
1999 1998 1997
----------- ----------- -----------
Computed "expected" federal income tax expense $26,819,000 31,725,000 8,300,000
Amortization of goodwill 11,973,000 9,970,000 327,000
Other, net 1,131,000 (128,000) 200,000
Effect of foreign income taxes 1,215,000 1,645,000 --
Effect of state and local income taxes, net of
federal tax benefit 3,125,000 3,422,000 788,000
----------- ----------- -----------
$44,263,000 46,634,000 9,615,000
=========== =========== ===========
An income tax benefit of $7,530,000 was allocated to extraordinary loss
for 1999. The U.S. federal benefit component was $6,539,000 and the state
and local benefit component was $991,000. There were no foreign
extraordinary losses in 1999. An income tax benefit of $526,000 was
allocated to extraordinary loss for 1998. The U.S. federal benefit
component was $457,000 and the state and local benefit component was
$69,000. There were no foreign extraordinary losses in 1998.
Substantially all of the Company's future taxable temporary differences
(deferred tax liabilities) relate to the different financial accounting
and tax depreciation methods and periods for property and equipment. The
Company's net operating loss carryforwards, alternative minimum tax
credits, accrued insurance expenses, and deferred compensation amounts
represent future income tax deductions (deferred tax assets). The tax
effects of these temporary differences as of December 31, 1999 and 1998,
are presented below:
[Download Table]
1999 1998
------------ ------------
Deferred tax assets before valuation allowance $174,374,000 162,401,000
Less valuation allowance 1,196,000 1,196,000
------------ ------------
Net deferred tax assets 173,178,000 161,205,000
Deferred tax liabilities 331,828,000 315,773,000
------------ ------------
Net deferred tax liability $158,650,000 154,568,000
============ ============
The Company's deferred tax liability results from the financial carrying
amounts for property and equipment being substantially in excess of the
Company's tax basis in the corresponding assets. The majority of the
Company's property and equipment is depreciated over a 7-year period for
tax reporting purposes and a longer 20- to 25-year period for financial
purposes. The faster tax depreciation has resulted in tax losses which can
be carried forward to future years to offset future taxable income.
Because most of the Company's depreciable assets' financial carrying
amounts and tax basis difference will reverse before the expiration of the
Company's net operating loss carryforwards and taking into account the
Company's projections of future taxable income over the same period,
management believes that the Company will more likely than not realize the
benefits of these net future deductions.
F-24 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
As of December 31, 1999, the Company has approximately $484,000,000 of net
operating loss carryforwards available for federal income tax purposes
which expire through 2019. Included are net operating loss carryforwards
of $3,400,000 which are not expected to be utilized as a result of an
ownership change that occurred on October 30, 1992. A valuation allowance
for the pre-October 1992 net operating loss carryforwards has been
established. Additionally at December 31, 1999, the Company had
approximately $7,537,000 of alternative minimum tax credits which have no
expiration date.
The Company has experienced ownership changes within the meaning of the
Internal Revenue Code Section 382 and the regulations thereunder. The
Company experienced an additional ownership change on June 4, 1996, as a
result of the issuance of shares of common stock and the conversion of
preferred stock into additional shares of common stock. This ownership
change limits the amount of the Company's post-October 1992 through June
1996 net operating loss carryforwards that can be used in any year.
Included in the Company's tax net operating loss carryforward amounts are
approximately $249,353,000 of net operating loss carryforwards of Six
Flags generated prior to its acquisition by the Company. Six Flags
experienced an ownership change on April 1, 1998 as a result of the Six
Flags Acquisition. Due to this ownership change, no more than $49,200,000
of pre-acquisition net operating loss carryforwards may be used to offset
taxable income in any year; however, it is more likely than not that all
of the Company's carryforwards generated subsequent to October 1992 and
all of the Six Flags' carryfowards will be fully utilized by the Company
before their expiration.
During 1999, the Company reduced goodwill by approximately $1,700,000
for the tax benefit from certain reimbursed costs arising from
contingencies related to the Six Flags Acquisition.
The Company and Holdings have entered into a tax-sharing agreement whereby
the Company pays to Holdings the Company's portion of Holdings' current
tax expense. No amounts were paid to Holdings during each of the years
ended December 31, 1999 or 1998.
(10) Stockholders' Equity
Common Stock
Subsequent to the 1998 Merger, the Company has authorized 1,000 shares of
common stock, par value $0.05 per share, with 1,000 shares outstanding,
all of which are held by Holdings.
(11) Pension Benefits
As part of the acquisition of Six Flags by Holdings on April 1, 1998, the
obligations related to the Six Flags Defined Benefit Plan (the "Benefit
Plan") were assumed. The Benefit Plan covered substantially all of Six
Flags' full-time employees. During 1999 the Benefit Plan was extended to
cover substantially all of the Company's domestic full-time employees. The
Benefit Plan permits normal retirement at age 65, with early retirement at
ages 55 through 64 upon attainment of ten years of credited service. The
early retirement benefit is reduced for benefits commencing before age 62.
F-25 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
Benefit Plan benefits are calculated according to a benefit formula based
on age, average compensation over the highest consecutive five-year period
during the employee's last ten years of employment and years of service.
Benefit Plan assets are invested primarily in common stock and mutual
funds. The Benefit Plan does not have significant liabilities other than
benefit obligations. Under the Company's funding policy, contributions to
the Benefit Plan are determined using the projected unit credit cost
method. This funding policy meets the requirements under the Employee
Retirement Income Security Act of 1974.
The following table sets forth the aggregate funded status of the Benefit
Plan and the related amounts recognized in the Company's consolidated
balance sheets:
[Enlarge/Download Table]
1999 1998
------------ ------------
Change in benefit obligation:
Benefit obligation, January 1, 1999 and April 1, 1998 $ 74,658,000 68,712,000
Service cost 3,644,000 2,444,000
Interest cost 5,459,000 3,808,000
Plan amendments 2,723,000 --
Actuarial loss (12,587,000) 757,000
Benefits paid (1,708,000) (1,063,000)
------------ ------------
Benefit obligation at December 31 72,189,000 74,658,000
------------ ------------
Change in plan assets:
Fair value of assets, January 1, 1999 and April 1, 1998 87,270,000 85,236,000
Actual return on plan assets 4,396,000 3,097,000
Benefits paid (1,708,000) (1,063,000)
------------ ------------
Fair value of assets at December 31 89,958,000 87,270,000
------------ ------------
Plan assets in excess of benefit obligations 17,769,000 12,612,000
Unrecognized net actuarial loss 5,891,000 3,317,000
Unrecognized prior service cost 2,463,000 --
------------ ------------
Prepaid benefit cost (included in deposits and other assets) $ 14,341,000 15,929,000
============ ============
Net pension expense of the Benefit Plan for the year ended December 31,
1999 and the nine-month period ended December 31, 1998, included the
following components:
[Download Table]
1999 1998
------------ ------------
Service cost $ 3,643,000 2,444,000
Interest cost 5,459,000 3,808,000
Expected return on plan assets (7,773,000) (5,657,000)
Amortization of prior service cost 260,000 --
------------ ------------
Net periodic benefit cost $ 1,589,000 595,000
============ ============
F-26 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation in 1999 and 1998 was
7.75% and 6.75%, respectively. The rate of increase in future compensation
levels was 4.75% and 4.5% in 1999 and 1998, respectively. The expected
long-term rate of return on assets was 9% each year.
(12) 401(k) Plan
The Company has a qualified, contributory 401(k) plan (the "401(k)
Plan"). All regular employees are eligible to participate in the 401(k)
Plan if they have completed one full year of service and are at least
21 years old. The Company matches 100% of the first 2% and 25% of the
next 6% of salary contributions made by employees. The accounts of all
participating employees are fully vested upon completion of four years
of service. The Company recognized approximately $1,718,000, $395,000,
and $377,000 of expense in the years ended December 31, 1999, 1998 and
1997, respectively.
As part of the acquisition of Six Flags by Holdings, the Company assumed
the administration of the Six Flags' savings plan. Under the provisions of
the Six Flags' savings plan, all full-time and seasonal employees of Six
Flags completing one year of service (minimum 1,000 hours) and attaining
age 21 were eligible to participate and could contribute up to 6% of
compensation as a tax deferred basic contribution. Each participant could
also elect to make additional contributions of up to 10% of compensation
(up to 4% tax deferred). Tax deferred contributions to the savings plan
could not exceed amounts defined by the Internal Revenue Service ($10,000
for 1999). Both the basic and additional contributions were at all times
vested. Six Flags, at its discretion, could make matching contributions of
up to 100% of its employees' basic contributions. Six Flags made $743,000
in contributions for the 1998 plan year. During the first quarter of 1999,
the Six Flags' savings plan was merged into the Company's 401(k) Plan.
(13) Six Flags Marine World
In April 1997, Premier Operations became manager of Marine World
(subsequently renamed Six Flags Marine World), then a marine and exotic
wildlife park located in Vallejo, California, pursuant to a contract with
an agency of the City of Vallejo under which the Company is entitled to
receive an annual base management fee of $250,000 and up to $250,000
annually in additional management fees based on park revenues. In November
1997, the Company exercised its option to lease approximately 40 acres of
land within the site for nominal rent and an initial term of 55 years
(plus four ten-year and one four-year renewal options). In 1999 and 1998,
the Company added theme park rides and attractions on the leased land,
which is located within the existing park, in order to create one
fully-integrated regional theme park at the site. The Company is entitled
to receive, in addition to the management fee, 80% of the cash flow
generated by the combined operations at the park, after combined operating
expenses and debt service on outstanding debt obligations relating to the
park. The Company also has an option to purchase the entire site
commencing in February 2002 at a purchase price equal to the greater of
the then principal amount of certain debt obligations of the seller
(expected to aggregate $52,000,000 at February 2002) or the then fair
market value of the seller's interest in the park (based on a formula
relating to the seller's 20% share of Marine World's cash flow).
F-27 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(14) Commitments and Contingencies
The Company leases the sites of Wyandot Lake, Six Flags Mexico, and each
of the two Waterworld/USA locations. The Company also leases portions of
the sites of Six Flags Kentucky Kingdom, Six Flags Holland, and Movie
World Germany. In certain cases rent is based upon percentage of the
revenues earned by the applicable park. During 1999, 1998, and 1997, the
Company recognized approximately $2,045,000, $1,002,000, and $1,110,000,
respectively, of rental expense under these rent agreements.
Total rental expense, including office space and park sites, was
approximately $7,060,000, $7,817,000, and $2,229,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
In connection with the acquisition of Six Flags by Holdings in 1998,
Holdings and the Company entered into a license agreement (the "License
Agreement") pursuant to which it obtained the exclusive right for a
term of 55 years to theme park use in the United States and Canada
(excluding the Las Vegas, Nevada metropolitan area) of all animated,
cartoon and comic book characters that Warner Bros. and DC Comics have
the right to license for such use during the term of the agreement.
Under the License Agreement, Holdings pays an annual license fee of
$2,500,000 through 2005. Thereafter, the license fee will be subject to
periodic scheduled increases and will be payable on a per-theme park
basis.
In December 1998, a final judgment of $197,300,000 in compensatory damages
was entered against SFEC, SFTP, Six Flags Over Georgia, Inc. and Time
Warner Entertainment Company, L.P. (TWE), and a final judgment of
$245,000,000 in punitive damages was entered against TWE and $12,000,000
in punitive damages was entered against the Six Flags entities. The
judgements are now the subject of an appeal, which has been briefed and
argued before the Georgia Court of Appeals. The judgments arose out of a
case entitled Six Flags Over Georgia, LLC et al v. Time Warner
Entertainment Company, LP et al based on certain disputed partnership
affairs prior to the Six Flags Acquisition at Six Flags Over Georgia,
including alleged breaches of fiduciary duty. The sellers in the Six Flags
Acquisition, including Time Warner, Inc., have agreed to indemnify the
Company from any and all liabilities arising out of this litigation.
In June 1997, a water slide collapsed at the Company's Waterworld/USA park
in Concord, California, resulting in one fatality and the park's closure
for twelve days. A series of lawsuits arising out of the incident have
been consolidated in California Superior Court under the name Ghilotti, et
al. v. WaterWorld USA, et al. The Company has funded its $50,000
self-retention limit in respect of the incident under its then liability
insurance policy and, although there can be no assurance, does not expect
to pay any additional amounts in connection with this litigation.
The Company is party to various legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the
Company and which can be reasonably estimated are accrued. Such accruals
are based on information known about the matters, the Company's estimates
of the outcomes of such matters and its experience in contesting,
litigating and settling similar matters. None of the actions are believed
by management to involve amounts that would be material to consolidated
financial position, operations, or liquidity after consideration of
recorded accruals.
F-28 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(15) Business Segments
The Company manages its operations on an individual park location basis.
Discrete financial information is maintained for each park and provided to
the Company's management for review and as a basis for decision-making.
The primary performance measure used to allocate resources is earnings
before interest, tax expense, depreciation, and amortization (EBITDA). All
of the Company's parks provide similar products and services through a
similar process to the same class of customer through a consistent method.
As such, the Company has only one reportable segment - operation of theme
parks. The following tables present segment financial information, a
reconciliation of the primary segment performance measure to income before
income taxes and a reconciliation of theme park revenues to consolidated
total revenues. Park level expenses exclude all non-cash operating
expenses, principally depreciation and amortization and all non operating
expenses.
[Enlarge/Download Table]
1999 1998 1997
--------- --------- ---------
(Amounts in thousands)
Theme park revenues $ 984,638 839,392 193,531
Theme park cash expenses (613,859) (514,001) (133,302)
--------- --------- ---------
Aggregate park EBITDA 370,779 325,391 60,229
Third-party share of EBITDA from park
accounted for under the equity method (7,356) (4,730) --
Amortization of investment in theme parks (3,376) (1,515) --
Unallocated net expenses, including
corporate and expenses from parks
acquired after completion of the
operating season (27,215) (23,416) (7,312)
Termination fee, net of expenses -- -- 8,364
Depreciation and amortization (153,675) (109,676) (19,792)
Interest expense (115,733) (108,969) (25,714)
Interest income 13,201 13,559 7,939
--------- --------- ---------
Income before income taxes $ 76,625 90,644 23,714
========= ========= =========
1999 1998 1997
--------- --------- ---------
(Amounts in thousands)
Theme park revenues $ 984,638 839,392 193,531
Theme park revenues from parks
accounted for under the equity
method (57,654) (47,593) --
Other revenues -- -- 373
--------- --------- ---------
Consolidated total revenues $ 926,984 791,799 193,904
========= ========= =========
F-29 (Continued)
PREMIER PARKS OPERATIONS INC.
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
Seven of the Company's parks are located in Europe and one is located in
Mexico. The Mexico park was acquired in May 1999 and one of the European
parks was acquired in November 1999. The following information reflects
the Company's long-lived assets and revenue by domestic and foreign
categories for 1999 and 1998 (the Company did not have foreign operations
prior to March 1998):
Domestic Foreign Total
-------- -------- --------
(Amounts in Thousands)
1999:
Long-lived assets $ 2,955,667 441,925 3,397,592
Revenues 830,578 96,406 926,984
1998:
Long-lived assets $ 2,690,330 188,826 2,879,156
Revenues 725,042 66,757 791,799
F-30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 2000
PREMIER PARKS INC.
By: /s/ Kieran E. Burke
-----------------------------------
Kieran E. Burke
Chairman of the Board
and Chief Executive Officer
-27-
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the following capacities on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Kieran E. Burke
-----------------------
Kieran E. Burke Chairman of the Board, Chief Executive March 28, 2000
Officer (Principal Executive Officer)
and Director
/s/ Gary Story
-----------------------
Gary Story President, Chief Operating March 28, 2000
Officer and Director
/s/ James F. Dannhauser
-----------------------
James F. Dannhauser Chief Financial Officer March 28, 2000
(Principal Financial and Accounting
Officer) and Director
-28-
[PPO]
EXHIBIT INDEX
Page
----
(3) Articles of Incorporation and By-Laws:
*(a) Certificate of Incorporation of Registrant dated March 25, 1998.
*(b) Certificate of Ownership and Merger of Six Flags Entertainment
Corporation into Registrant, dated November 5, 1999.
*(c) By-laws of Registrant.
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
(a) Indenture dated as of August 15, 1995, among the Registrant, the
subsidiaries of the Registrant named therein and United States Trust
Company of New York, as trustee (including the form of Notes) -
incorporated by reference from Exhibit 4(2) to the registration
statement on Form S-1 (Registration No. 33-62225) of Premier Parks
Inc. ("Premier") declared effective on November 9, 1995 (the
"Registration Statement").
(b) Form of First Supplemental Indenture dated as of November 9, 1995 -
incorporated by reference from Exhibit 4(2.1) to the Registration
Statement.
(c) Form of Indenture dated as of February 1, 1997, among the Registrant
and The Bank of New York, as trustee (including the form of Notes) -
incorporated by reference from Exhibit 4(l) to Premier's
Registration Statement on Form S-2 (Reg. No. 333-16763) declared
effective on January 27, 1997.
(d) Form of Second Supplemental Indenture dated January 21, 1997 -
incorporated by reference form Exhibit 4(n) to Premier's
Registration Statement on Form S-2 (Reg. No. 333-16763) declared
effective on January 27, 1997.
(e) Indenture dated as of April 1, 1998 between Premier, Registrant and
The Bank of New York, as Trustee with respect to Registrant's 8 7/8%
Senior Discount Notes due 2006 - incorporated by reference from
Exhibit 4(q) to Premier's Registration Statement on Form S-3 (No.
333-45859) declared effective on March 26, 1998.
(10) Material Contracts:
(a) Agreement of Limited Partnership of 229 East 79th Street Associates
LP dated July 24, 1987, together with amendments thereto dated,
respectively, August 31, 1987, October 21, 1987, and December 21,
1987 - incorporated by reference from Exhibit 10(i) to Form 10-K of
Premier for year ended December 31, 1987.
(b) Agreement of Limited Partnership of Frontier City Partners Limited
Partnership, dated October 18, 1989, between Frontier City
Properties, Inc. as general partner, and the Registrant and Frontier
City Properties, Inc. as limited partners - incorporated by
reference from Exhibit 10(g) to Premier's Current Report on Form 8-K
dated October 18, 1989.
-1-
[PPO]
(c) Lease Agreement dated December 22, 1995 between Darien Lake Theme
Park and Camping Resort, Inc. and The Metropolitan Entertainment
Co., Inc. - incorporated by reference from Exhibit 10(o) to Form
10-K of Premier for the year ended December 31, 1995.
(d) Consulting and Non-Competition Agreement, dated October 30, 1996,
between Registrant and Arnold S. Gurtler - incorporated by reference
from Exhibit 10(u) to Premier's Registration Statement on Form S-2
(Reg. No. 333-16573) declared effective on January 27, 1997.
(e) Non-Competition Agreement, dated as of October 30, 1996 between the
Registrant and Ascent Entertainment Group, Inc. - incorporated by
reference from Exhibit 10(s) to Premier's Registration Statement on
Form S-2 (Reg. No. 333-16573) declared effective on January 27,
1997.
(f) Consulting Agreement, dated December 4, 1996, between the Registrant
and Charles R. Wood - incorporated by reference from Exhibit 10(b)
to Premier's Current Report on Form 8-K, dated December 13, 1996.
(g) Non-Competition Agreement dated as of December 4, 1996 between the
Registrant and Charles R. Wood - incorporated by reference from
Exhibit 10(c) of Premier's Current Report on Form 8-K, dated
December 13, 1996.
(h) Stock Purchase Agreement dated as of December 4, 1996, among the
Registrant, Stuart Amusement Company, Edward J. Carroll, Jr., and
the Carroll Family Limited Partnership - incorporated by reference
from Exhibit 10(y) to Premier's Registration Statement on Form S-2
(Reg. No. 333-16573) declared effective on January 27, 1997.
(i) 1997 Management Agreement Relating to Marine World, by and between
the Marine World Joint Powers Authority and Park Management Corp,
dated as of the 1st day of February, 1997 - incorporated by
reference from Exhibit 10 (aa) to Form 10-K of Premier for year
ended December 31, 1997.
(j) Purchase Option Agreement among City of Vallejo, Marine World Joint
Powers Authority and Redevelopment Agency of the City of Vallejo,
and Park Management Corp., dated as of August 29, 1997 -
incorporated by reference from Exhibit 10 (ab) to Form 10-K of
Premier for year ended December 31, 1997.
(k) Letter Agreement, dated November 7, 1997, amending 1997 Management
Agreement Relating to Marine World, by and between the Marine World
Joint Powers Authority and Park Management Corp., dated as of the
1st day of February, 1997 - incorporated by reference from Exhibit
10 (ac) to Form 10-K of Premier for year ended December 31, 1997.
(l) Reciprocal Easement Agreement between Marine World Joint Powers
Authority and Park Management Corp., dated as of November 7, 1997 -
incorporated by reference from Exhibit 10 (ad) to Form 10-K of
Premier for year ended December 31, 1997.
(m) Parcel Lease between Marine World Joint Powers Authority and Park
Management Corp., dated as of November 7, 1997 - incorporated by
reference from Exhibit 10 (ae) to Form 10-K of Premier for year
ended December 31, 1997.
-2-
[PPO]
(n) Stock Purchase Agreement dated as of September 26, 1997, among
Registrant, Kentucky Kingdom, Inc., Hart-Lunsford Enterprises, LLC,
and Edward J. Hart - incorporated by reference from Exhibit 10.1 to
Premier's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
(o) Stock Purchase Agreement dated as of December 15, 1997, between the
Registrant and Centrag S.A., Karaba N.V. and Westkoi N.V. -
incorporated by reference from Exhibit 10.1 to Premier's Current
Report on Form 8-K dated December 15, 1997.
(p) Agreement and Plan of Merger dated as of February 9, 1998, by and
among the Registrant, Six Flags Entertainment Corporation and others
- incorporated by reference from Exhibit 10(a) to Premier's Current
Report on Form 8-K dated February 9, 1998.
(q) Agreement and Plan of Merger dated as of February 9, 1998 by and
among Premier Parks Inc., Premier Parks Holdings Corporation and
Premier Parks Merger Corporation - incorporated by reference from
Exhibit 2.1 to Premier's Current Report on Form 8-K dated March 25,
1998.
(r) Subordinated Indemnity Agreement dated February 9, 1998, among
Premier, the subsidiaries of the Registrant named therein, Time
Warner Inc., the subsidiaries of Time Warner Inc. named therein, Six
Flags Entertainment Corporation and the subsidiaries of Six Flags
Entertainment Corporation named therein - incorporated by reference
from Exhibit 2(b) to Premier's Registration Statement on Form S-3
(No. 333-45859) declared effective on March 26, 1998.
(s) Sale and Purchase Agreement dated as of October ___, 1998 by and
between Premier and Fiesta Texas Theme Park, Ltd.- incorporated by
reference to Exhibit 10(at) to Premier's Form 10-K for the year
ended December 31, 1998.
(t) Credit Agreement, dated as of November 5, 1999, among Premier,
Registrant, certain subsidiaries named therein, the Lenders from
time to time party thereto, The Bank of New York, as Syndicate
Agent, Bank of American, N.A. and The Bank of Nova Scotia, as
Documentation Agents, Lehman Brothers Inc. and Lehman Brothers
International (Europe) Inc., as Advisors, Lead Arrangers and Bank
Managers and Lehman Commercial Paper Inc., as Administrative Agent -
incorporated by reference to Exhibit 10.1 to Premier's Form 10-Q for
the quarter ended September 30, 1999.
*(21) Subsidiaries of the Registrant.
*(27) Financial Data Schedule
--------
* Filed herewith.
-3-
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