Six Flags Inc, et al. · S-3/A · On 3/12/98
Filed On 3/12/98 · SEC Files 333-46897, -01 · Accession Number 1047469-98-9463
As Of Filer Filing On/For/As Docs:Pgs Issuer Agent
3/12/98 Six Flags Inc S-3/A 6:130 Merrill Corp/New/- FA
Six Flags Entertainment Corp
Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction · Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3/A Pre-Effective Amendment to Registration Statement 125 668K
for Securities Offered Pursuant to a
Transaction
2: EX-12.(A) Comp Ratio Earnings Combined/5 Yr. 1 10K
3: EX-12.(B) Comp Ratio Earnings Fixed/5 Yr 1 9K
4: EX-23.B Consent of Ernst & Young 1 6K
5: EX-23.C Consent of Kpmg 1 7K
6: EX-23.(D) Consent of Carpenter Mountjoy & Bressler 1 6K
S-3/A · Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction
Document Table of Contents
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1998
REGISTRATION NO. 333-46897
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT
NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PREMIER PARKS INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 73-6137714
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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SIX FLAGS ENTERTAINMENT CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 22-313657
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
TEL: (405) 475-2500
(Address, including zip code, and telephone number, including
area code, of Registrants' principal executive offices)
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KIERAN E. BURKE
11501 NORTHEAST EXPRESSWAY
OKLAHOMA CITY, OKLAHOMA 73131
TEL: (405) 475-2500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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COPIES TO:
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JAMES M. COUGHLIN, ESQ. KIRK A. DAVENPORT, ESQ.
Baer Marks & Upham LLP Latham & Watkins
805 Third Avenue 885 Third Avenue
New York, New York 10022 New York, New York 10022-4802
Tel: (212) 702-5819 Tel: (212) 906-1200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, dated March 12, 1998
PROSPECTUS
[LOGO]
[LOGO]
$170,000,000
SIX FLAGS ENTERTAINMENT CORPORATION
Guaranteed on an Unsecured Subordinated Basis by
PREMIER PARKS INC.
% SENIOR NOTES DUE 2006
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Interest Payable and
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Six Flags Entertainment Corporation (the "Company" or "SFEC") is offering
$170,000,000 (the "Offering") in aggregate principal amount of its % Senior
Notes due 2006 (the "SFEC Senior Notes"). The SFEC Senior Notes will be
guaranteed (the "Guarantee") on an unsecured subordinated basis by Premier Parks
Inc. (collectively with its predecessor, "Premier"), which, following the Six
Flags Acquisition (as defined), will own 100% of the capital stock of the
Company.
Interest on the SFEC Senior Notes will be payable semi-annually in arrears
on and of each year, commencing on , 1998. The
net proceeds of the Offering, together with certain other funds, will be
deposited in escrow to repay in full at or prior to maturity the Company's Zero
Coupon Senior Notes due 1999 ("SFEC Zero Coupon Senior Notes"). Until such
repayment, the escrow will also be pledged as security for the repayment of
principal of the SFEC Senior Notes. See "Description of Notes--Escrow of
Proceeds." The SFEC Senior Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after , 2002, at the
redemption prices set forth herein, plus accrued and unpaid interest thereon to
the date of redemption. In addition, prior to , 2001, the Company
may redeem up to 35% of the original aggregate principal amount of the SFEC
Senior Notes at % of the principal amount thereof to the redemption date with
the net cash proceeds of one or more Public Equity Offerings (as defined) by, or
Strategic Equity Investments (as defined) in, (i) the Company or (ii) Premier to
the extent the net cash proceeds thereof are contributed to the Company as a
capital contribution to the common equity of the Company; PROVIDED, in each
case, that at least 65% of the aggregate principal amount of the SFEC Senior
Notes originally issued remains outstanding immediately after the occurrence of
each such redemption.
Upon the occurrence of a Change of Control (as defined), each holder of the
SFEC Senior Notes will have the right to require the Company to purchase all or
any part of such holder's SFEC Senior Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest to the
date of purchase. See "Description of Notes."
All of the operations of the Company are conducted through its subsidiaries,
and none of the Company's subsidiaries will guarantee the Company's obligations
under the SFEC Senior Notes. Accordingly, the SFEC Senior Notes will be
effectively subordinated to all indebtedness and other liabilities of such
subsidiaries, including borrowings under the Six Flags Credit Facility and
indebtedness outstanding under the SFTP Senior Subordinated Notes (each as
defined). As of December 28, 1997, after giving pro forma effect to the Six
Flags Transactions (as defined), the Company on a consolidated basis would have
had total outstanding indebtedness in the accreted principal amount of $1,021.0
million, including the SFEC Senior Notes and the SFEC Zero Coupon Senior Notes.
Of that amount, $689.9 million would have been indebtedness of the Company's
subsidiaries, and, at that date, the Company's subsidiaries would have had
approximately $108.6 million of other outstanding liabilities. See
"Capitalization" and "Description of Other Company Indebtedness."
Premier's obligations under the Guarantee will be subordinated to all
indebtedness of and other liabilities of Premier and effectively subordinated to
all indebtedness of and other liabilities of Premier's subsidiaries, including
borrowings under the Premier Credit Facility (as defined), indebtedness
outstanding under the Old Premier Notes and the New Premier Notes (each as
defined), and Premier's obligations under the Subordinated Indemnity Agreement
(as defined).
Concurrently with the Offering, Premier is publicly offering in the U.S. and
internationally 13,000,000 shares of its Common Stock, par value $0.05 per share
(the "Common Stock") with estimated gross proceeds of $593.2 million (assuming
the underwriters' over-allotment options for 1,950,000 shares of Common Stock
are not exercised), and 5,000,000 Premium Income Equity Securities (the
"PInES-SM-") representing interests in its % Mandatorily Convertible Preferred
Stock (the "Mandatorily Convertible Preferred Stock") with estimated gross
proceeds of $228.2 million (assuming the underwriters' over-allotment option for
750,000 PInES is not exercised). In addition, Premier is offering $280.0 million
in aggregate principal amount of its % Senior Notes (the "Premier Senior
Notes") due 2006 (the "Premier Senior Notes Offering") and $ million in
aggregate principal amount at maturity of its % Senior Discount Notes due
2008 (the "Premier Discount Notes" and, together with the Premier Senior Notes,
the "New Premier Notes") with estimated gross proceeds of $250.0 million, (the
"Premier Discount Notes Offering" and, together with the Premier Senior Notes
Offering, the "Premier Notes Offering"). The closing of the Offering is
conditioned upon the closing of the Premier Notes Offering, the offerings of
Common Stock (the "Common Stock Offering") and PInES (the "PInES Offering" and,
together with the Premier Notes Offering and the Common Stock Offering, the
"Concurrent Offerings") and the closing of each of the Six Flags Transactions.
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FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE SFEC SENIOR NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE 17.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
· Enlarge/Download Table
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
Per SFEC Senior Note........................................... % % %
Total.......................................................... $ $ $
(1) Plus accrued interest, if any, from the date of issuance to the date of
delivery.
(2) The Company and its operating subsidiaries and Premier have agreed to
indemnify the Underwriters (as defined) against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
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The SFEC Senior Notes are being offered subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to certain
conditions. It is expected that delivery of the SFEC Senior Notes will be made
in book entry form through the facilities of The Depository Trust Company, on or
about , 1998, against payment therefor in immediately available funds.
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LEHMAN BROTHERS
SALOMON SMITH BARNEY
NATIONSBANC MONTGOMERY
SECURITIES LLC
, 1998
AVAILABLE INFORMATION
The Company and Premier (the "Registrants") have filed with the Commission a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. For purposes hereof, the term "Registration
Statement" means the original Registration Statement and any and all amendments
thereto. In accordance with the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the schedules and exhibits thereto. Each statement made in this
Prospectus concerning a document filed as an exhibit to the Registration
Statement is qualified in its entirety by reference to such exhibit for a
complete statement of its provisions. For further information pertaining to the
Registrants and the securities offered hereby, reference is made to such
Registration Statement, including the exhibits and schedules thereto, which may
be inspected or obtained as provided in the following paragraph.
Upon the effectiveness of the Registration Statement, the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Premier is currently subject to the
informational requirements of the Exchange Act, and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Proxy statements, periodic reports and other information
filed by the Registrants can be inspected and copied at the public reference
facilities of the Commission's principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and the regional offices of the
Commission at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such
material can be obtained from the public reference facilities of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
at prescribed rates. In addition, the Commission maintains a Website
(http://www.sec.gov) that also contains such reports, proxy statements and other
information filed by the Registrants. The Common Stock of Premier is listed on
the NYSE. In addition, application will be made to list the PInES and the Common
Stock issuable on conversion of the Convertible Preferred Stock (as defined) on
the NYSE. Such reports, proxy statements and other information concerning
Premier can also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Premier with the Commission are
incorporated by reference into this Prospectus and made a part hereof as of
their respective dates:
1. Premier's Annual Report on Form 10-K for the year ended December 31,
1996.
2. Premier's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
3. Premier's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
4. Premier's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997.
5. Premier's Current Report on Form 8-K, dated February 6, 1997.
6. Premier's Current Report on Form 8-K, dated November 7, 1997, as amended.
7. Premier's Current Report on Form 8-K, dated December 15, 1997.
8. Premier's Current Report on Form 8-K, dated February 9, 1998.
9. The description of the shares of Common Stock contained in Premier's
Registration Statement on Form 8-A dated December 11, 1997 and filed under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
10. The description of the rights relating to the shares of Common Stock
contained in Premier's Registration Statement on Form 8-A dated January 12, 1998
and filed under the Exchange Act, including any amendment or report filed for
the purpose of updating such description.
11. The information contained in Premier's Registration Statement on Form
S-3 (No. 333-46167).
3
All documents filed by the Registrants with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the Offering shall also be
deemed to be incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to: Premier Parks
Inc., 11501 Northeast Expressway, Oklahoma City, Oklahoma 73131, Attention:
Richard A. Kipf, Corporate Secretary (telephone number: (405) 475-2500, Ext.
219).
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SFEC SENIOR NOTES
OFFERED HEREBY AT LEVELS WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
LOONEY TUNES, BUGS BUNNY, DAFFY DUCK, TWEETY BIRD and YOSEMITE SAM are
copyrights and trademarks of Warner Bros., a division of Time Warner
Entertainment Company, L.P. ("TWE"). BATMAN, BATMOBILE, GOTHAM CITY AND SUPERMAN
are copyrights and trademarks of DC Comics, a partnership between TWE and a
subsidiary of Time Warner Inc. SPORTS ILLUSTRATED is a trademark of Time Inc., a
subsidiary of Time Warner Inc. HBO is a trademark of TWE. SIX FLAGS GREAT
ADVENTURE, SIX FLAGS GREAT AMERICA and SIX FLAGS are federally registered
trademarks of Six Flags Theme Parks Inc. FIESTA TEXAS and all related indicia
are trademarks of Fiesta Texas Theme Park, Ltd.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and located elsewhere herein regarding
industry prospects and the Company's financial position are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in this Prospectus, both together with such forward-looking statements
and under "Risk Factors."
4
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD
BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. THE SFEC SENIOR NOTES WILL BE GUARANTEED ON AN UNSECURED
SUBORDINATED BASIS BY PREMIER, WHICH, FOLLOWING THE SIX FLAGS ACQUISITION (AS
DEFINED), WILL OWN 100% OF THE CAPITAL STOCK OF THE COMPANY. UNLESS OTHERWISE
INDICATED OR THE CONTEXT OTHERWISE REQUIRES, ALL INFORMATION IN THIS PROSPECTUS
HAS BEEN ADJUSTED TO GIVE EFFECT TO THE PREMIER MERGER (AS DEFINED) AND THE SIX
FLAGS ACQUISITION. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT REQUIRES
OTHERWISE, THE TERMS (I) THE "SIX FLAGS ACQUISITION" REFERS TO PREMIER'S
ACQUISITION, BY MERGER, OF ALL OF THE CAPITAL STOCK OF SIX FLAGS ENTERTAINMENT
CORPORATION ("SFEC" AND, TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES, THE
"COMPANY" OR "SIX FLAGS") WHICH WILL OCCUR CONTEMPORANEOUSLY WITH THE CLOSING OF
THE OFFERING, (II) UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "SIX FLAGS PARKS"
REFERS TO THE PARKS TO BE OPERATED BY SIX FLAGS AFTER THE DATE OF THE SIX FLAGS
ACQUISITION, AND THE "PREMIER PARKS" REFERS TO ALL OF THE PARKS OPERATED BY
PREMIER PRIOR TO THE SIX FLAGS ACQUISITION ALONG WITH THE PARKS (THE "WALIBI
PARKS") TO BE ACQUIRED IN PREMIER'S ACQUISITION (THE "WALIBI ACQUISITION") OF
WALIBI, S.A. ("WALIBI") AND (III) THE "CO-VENTURE PARKS" REFERS TO SIX FLAGS
OVER GEORGIA AND SIX FLAGS OVER TEXAS, SIX FLAGS' INTERESTS IN WHICH ARE BEING
TRANSFERRED TO PREMIER AS PART OF THE SIX FLAGS ACQUISITION. ALL PARK ATTENDANCE
INFORMATION AND RANKINGS BASED ON SUCH DATA INCLUDED IN THIS PROSPECTUS (OTHER
THAN ATTENDANCE DATA FOR THE PREMIER PARKS, THE CO-VENTURE PARKS AND THE SIX
FLAGS PARKS) ARE BASED ON INFORMATION PUBLISHED BY AMUSEMENT BUSINESS, A
RECOGNIZED INDUSTRY PUBLICATION, WHICH, ACCORDING TO SUCH PUBLICATION, INCLUDES
ESTIMATES BASED ON SOURCES IT BELIEVES TO BE RELIABLE. RANKINGS OF METROPOLITAN
AND DESIGNATED MARKET AREAS ("DMA") ARE BASED ON A COPYRIGHTED 1996-97 SURVEY OF
TELEVISION HOUSEHOLDS PUBLISHED BY A.C. NIELSEN MEDIA RESEARCH. AS USED HEREIN,
UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "PREMIER" MEANS PREMIER PARKS
INC. (OR ITS PREDECESSOR) AND ITS CONSOLIDATED SUBSIDIARIES.
ALL INFORMATION IN THIS PROSPECTUS RELATING TO THE ASSUMED PROCEEDS OF THE
OFFERINGS AND THE APPLICABLE SIX FLAGS FINANCINGS, AND THE INTEREST RATES ON
THOSE SECURITIES IS BASED ON THE ASSUMPTIONS DESCRIBED IN "UNAUDITED PRO FORMA
FINANCIAL STATEMENTS" CONTAINED ELSEWHERE HEREIN.
THE COMPANY
Prior to its acquisition by Premier, Six Flags was the largest regional
theme park company, and the second largest theme park operator, in the world,
based on 1997 attendance. After the Six Flags Acquisition, Six Flags will
operate six regional theme parks, as well as three separately gated water parks
and a wildlife safari park. The Six Flags Parks serve four of the ten largest
metropolitan areas in the country: New York, Philadelphia, Los Angeles and
Chicago. The Company estimates that over one-third of the population of the
continental U.S. lives within a 150-mile radius of the Six Flags Parks. During
1997, the Six Flags Parks (including the Co-Venture Parks) drew, in the
aggregate, approximately 68% of their patrons from within a 100-mile radius. On
a pro forma basis, Six Flags' attendance, revenue and earnings before interest,
taxes, depreciation and amortization ("EBITDA") for the year ended December 28,
1997 totaled approximately 16.5 million, $531.9 million and $154.9 million,
respectively. See "Unaudited Pro Forma Financial Statements."
Six Flags, including its predecessors, has operated regional theme parks
under the Six Flags name for over 30 years. As a result, Six Flags has
established a nationally-recognized brand name. Since 1991, Six Flags has used
certain Warner Bros. and DC Comics characters to market its parks and to provide
an enhanced family entertainment experience. These characters include BUGS
BUNNY, DAFFY DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. The
Company utilizes these characters in marketing its parks, in theming revenue
outlets and in selling character merchandise within the parks. The Company
believes that its extensive use of the Warner Bros. and DC Comics characters
promotes attendance, supports higher ticket prices, increases lengths-of-stay
and enhances in-park spending. See "Business-- Licenses."
5
The Six Flags Parks are individually themed and provide a complete
family-oriented entertainment experience. Six Flags' theme parks generally offer
a broad selection of state-of-the-art and traditional thrill rides, water
attractions, themed areas, concerts and shows, restaurants, game venues and
merchandise outlets. In the aggregate, the Six Flags Parks offer more than 234
rides, including 45 roller coasters, making Six Flags one of the leading
providers of "thrill rides" in the industry.
Premier's management believes that the Six Flags Parks benefit from limited
direct competition. The combination of limited supply of real estate appropriate
for theme park development, high initial capital investment, long development
lead-time and zoning restrictions provides each of the parks with a significant
degree of protection from competitive new theme park openings. Based on its
knowledge of the development of other theme parks in the United States,
Premier's management estimates that it would cost at least $200 million and
would take a minimum of two years to construct a new regional theme park
comparable to Six Flags' theme parks.
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million. Total attendance for the 50
largest parks in North America was 167.2 million in 1997, compared to 145.0
million in 1994, representing a compound annual growth rate of 4.9%. Premier
believes that this growth reflects two trends: (i) demographic growth in the
5-24 year old age group, which is expected to continue through 2010 and (ii) an
increasing emphasis on family-oriented leisure and recreation activities.
OPERATING STRATEGY
Premier believes there are substantial opportunities for continued internal
growth at the Six Flags Parks. Upon consummation of the Six Flags Acquisition,
Premier's management intends to apply its operating strategy to pursue growth
and margin expansion at Six Flags. Premier's operating strategy seeks to
increase revenues by increasing per capita spending, while also reducing
corporate overhead and improving cost controls at the Six Flags Parks. The
primary elements of this operating strategy applicable to the Six Flags Parks
are: (i) periodically adding marketable rides and attractions; (ii) enhancing
marketing and sponsorship programs; (iii) improving ticket pricing strategies;
and (iv) repositioning and enhancing restaurants and merchandise and other
revenue outlets. This approach is designed to exploit the operating leverage
inherent in the theme park business. Once parks achieve certain critical
attendance levels (which, in general, the Six Flags Parks have achieved),
operating cash flow margins increase because revenue growth through incremental
attendance gains and increased in-park spending is not offset by a comparable
increase in operating expenses, since a large portion of such expenses is
relatively fixed during any given year.
The Six Flags Parks generally enjoy significant market penetration. Thus,
although Premier's management plans to make targeted capital expenditures at the
Six Flags Parks to increase attendance and per capita spending levels, it
expects to increase significantly the EBITDA of these parks primarily through
increased operating efficiencies. First, and most importantly, Premier believes
that it can substantially reduce Six Flags' corporate overhead and other
corporate-level expenses. Second, Premier expects to achieve significant
improvement in park-level operating margins at the Six Flags Parks. Third, by
virtue of economies of scale, Premier believes that operating efficiencies in
areas such as marketing, insurance, promotion, purchasing and other expenses can
be realized. Finally, Premier believes that its increased size following the Six
Flags Acquisition will enable the Company to achieve savings in capital
expenditures. See "Unaudited Pro Forma Financial Statements."
EXPANSION STRATEGY
Premier may expand in the future certain of the Six Flags Parks by adding
complementary attractions, such as campgrounds, lodging facilities, new water
parks and concert venues. For example, Six Flags owns over 1,500 undeveloped
acres adjacent to Six Flags Great Adventure (located between New York City and
6
Philadelphia) suitable for such purposes. Additional acreage suitable for
development exists at several other Six Flags Parks. See
"Business--Environmental and Other Regulation."
ACQUISITION STRATEGY
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Premier believes that there are numerous
acquisition opportunities, both in the U.S. and abroad, that can expand its
business. Since 1989, Premier has pursued a strategy of acquiring and improving
regional theme parks. While Premier will continue to pursue acquisitions of
regional parks with attendance between 300,000 and 1.5 million annually, Premier
will also consider acquisitions of larger parks or chains (such as Six Flags).
Although it anticipates initially making acquisitions primarily through Premier
Operations (as defined), Premier may also make acquisitions of additional parks
through Six Flags.
PREMIER MANAGEMENT
Following the Six Flags Acquisition, SFEC will be managed by Premier's
current management. Since taking control of Premier in 1989, Premier's current
management has successfully pursued a strategy of acquiring and improving
operating performance of regional theme parks across the United States. For
example, during the year ended December 31, 1997, the 11 parks owned by Premier
for the 1997 operating season achieved same park growth in attendance, revenue
and park-level operating cash flow (representing all park operating revenues and
expenses without depreciation and amortization or allocation of corporate
overhead or interest expense) of 18.1%, 20.4% and 59.6%, respectively, as
compared to 1996. Further, during the two years ended December 31, 1997, the
three parks acquired by Premier in its 1995 acquisition of Funtime Parks, Inc.
achieved compound annual growth in attendance, revenues and park-level operating
cash flow of 9.7%, 13.7% and 24.3%, respectively. Finally, during the year ended
December 31, 1997, the five parks acquired by Premier during the fourth quarter
of 1996 and the first quarter of 1997 realized growth in attendance, revenues
and park-level operating cash flow of 36.0%, 37.0% and 199.6%, respectively,
compared to 1996.
Premier's senior and operating management team has extensive experience in
the theme park industry. Premier's six senior executive officers have over 150
years aggregate experience in the industry and its ten general managers (prior
to the Six Flags Acquisition) have an aggregate of approximately 210 years
experience in the industry, including approximately 85 years at the Premier
Parks. A number of Premier's executives and operating personnel have experience
at the Six Flags Parks.
PREMIER PARKS INC.
After giving effect to the Six Flags Acquisition, Premier will be the
largest regional theme park operator, and the second largest theme park company,
in the world, based on 1997 attendance of approximately 37 million. Including
the Six Flags Parks, the Walibi Parks and the Co-Venture Parks, it will operate
31 regional parks, including 15 of the 50 largest theme parks in North America,
based on 1997 attendance. On a pro forma basis, Premier's total revenue and
EBITDA for the year ended December 31, 1997 would have been approximately $815.3
million and $263.5 million, respectively.
The Premier Parks consist of nine regional theme parks (six of which include
a water park component) and four water parks located across the United States,
as well as six regional theme parks located in Europe and scheduled to be
acquired in March 1998 in the Walibi Acquisition.
Premier was incorporated in 1981 as The Tierco Group Inc. In 1994, Premier
changed its name to Premier Parks Inc. Premier's principal executive offices
are, and following the Six Flags Transactions, the Company's principal executive
offices will be, located at 11501 Northeast Expressway, Oklahoma City, Oklahoma
73131, (405) 475-2500 and at 122 East 42nd Street, New York, New York 10168,
(212) 599-4690.
7
THE SIX FLAGS TRANSACTIONS
The Offering is one of a series of related transactions (the "Six Flags
Transactions") all of which will be consummated immediately prior to or
concurrently with the Offering. The elements of the Six Flags Transactions are:
THE PREMIER MERGER
The company presently named Premier Parks Inc. (together with its
consolidated subsidiaries, "Premier Operations") will merge (the "Premier
Merger") with a wholly-owned subsidiary of Premier Parks Holdings Corporation in
accordance with Section 251(g) of the Delaware General Corporation Law. As a
result of the Premier Merger, holders of shares of Common Stock of Premier
Operations will become, on a share-for-share basis, holders of Common Stock of
Premier Parks Holdings Corporation, and Premier Operations will become a
wholly-owned subsidiary of Premier Parks Holdings Corporation. On the effective
date of the Premier Merger, Premier Operations will change its name to Premier
Parks Operations Inc., and Premier Parks Holdings Corporation will change its
name to Premier Parks Inc.
THE SIX FLAGS ACQUISITION
Pursuant to an Agreement and Plan of Merger dated as of February 9, 1998
(the "Six Flags Agreement"), Premier will acquire by merger all of the capital
stock of SFEC from its current stockholders (the "Sellers") for $965 million
(plus an approximate $11 million adjustment based on year-end balance sheet
adjustments and option cancellation costs). The purchase price is payable all in
cash or, at Premier's option, in cash and depositary shares (the "Seller
Depositary Shares") representing interests in up to $200.0 million (but not less
than $100.0 million) of Premier's Convertible Redeemable Preferred Stock (the
"Seller Preferred Stock"). At the date of acquisition, Six Flags' liabilities
will include approximately $192.3 million in aggregate principal amount at
maturity ($161.1 million accreted value at December 28, 1997) of SFEC Zero
Coupon Senior Notes and approximately $285.0 million in aggregate principal
amount at maturity ($269.9 million accreted value at December 28, 1997) of
12 1/4% Series A Senior Subordinated Discount Notes due 2005 (the "SFTP Senior
Subordinated Notes") of Six Flags Theme Parks Inc. (together with its
subsidiaries, "SFTP"), an indirect wholly-owned subsidiary of SFEC. In addition,
Premier will refinance all outstanding Six Flags bank indebtedness ($348.5
million at December 28, 1997) and certain other indebtedness of SFEC
(approximately $30.5 million at December 28, 1997). As part of the Six Flags
Agreement, Six Flags is transferring to Premier all of its interests in the
limited partnerships (the "Co-Venture Partnerships") that own the Co-Venture
Parks for a cash payment to SFTP of approximately $46.0 million, representing
the fair market value of such interests held directly or indirectly by SFTP. The
interests held by SFEC are being transferred as a distribution by SFEC to
Premier immediately following the Six Flags Acquisition. See "Certain
Transactions" and "Description of Six Flags Agreement."
USE OF PROCEEDS
The Company intends to place in escrow the net proceeds from the Offering,
together with certain additional funds, to provide for the repayment in full of
the SFEC Zero Coupon Senior Notes at or prior to maturity on December 15, 1999.
See "Use of Proceeds."
8
The following table sets forth a summary of the expected sources and uses
associated with such repayment.
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SOURCES
The Offering(1)................................................... $ 170,000
Additional cash(2)................................................ 11,480
---------
$ 181,480
---------
---------
USES
Deposit for repayment of SFEC Zero Coupon Senior Notes............ $ 175,030
Transaction offering fees, expenses and discounts................. 6,450
---------
$ 181,480
---------
---------
------------------------
(1) Reflects assumed gross proceeds.
(2) Reflects a portion of the capital contribution to be made to SFEC by Premier
in connection with the Six Flags Transactions.
THE FINANCINGS
In the Offerings:
1. Premier will issue in the Common Stock Offering, 13,000,000 shares of
Common Stock with estimated gross proceeds of $593.2 million (based upon the
average closing price of Premier's Common Stock for the twenty trading days
ended February 27, 1998).
2. Premier will issue in the PInES Offering, 5,000,000 PInES representing
interests in Premier's % Mandatorily Convertible Preferred Stock (the
"Mandatorily Convertible Preferred Stock" and, together with the Seller
Preferred Stock, the "Convertible Preferred Stock") with estimated gross
proceeds of $228.2 million (based upon the average closing price of Premier's
Common Stock for the twenty trading days ended February 27, 1998).
3. Premier will issue in the Premier Discount Notes Offering, $ million
in aggregate principal amount at maturity of its Senior Discount Notes due 2008
(the "Premier Discount Notes") with estimated gross proceeds of $250.0 million.
4. Premier will issue in the Premier Senior Notes Offering, $280.0 million
in aggregate principal amount of its % Senior Notes due 2006 (the "Premier
Senior Notes" and, together with the Premier Discount Notes, the "New Premier
Notes").
5. The Company will issue (the "Offering" and, together with the Concurrent
Offerings, the "Offerings") $170.0 million in aggregate principal amount of its
% Senior Notes due 2006. The proceeds of the SFEC Senior Notes, together with
additional funds, will be deposited in escrow to repay in full at or prior to
maturity the SFEC Zero Coupon Senior Notes. See "Use of Proceeds" and
"Description of Notes."
In addition, Premier Operations is using approximately $225.0 million of
borrowings under its new senior credit facility (the "Premier Credit Facility")
to pay the cash portion of the Walibi purchase price and refinance certain
Walibi net indebtedness (which together are estimated to be $117.8 million) and
to prefund Premier Operations' capital expenditures and provide working capital
(which together are estimated to be approximately $107.2 million). SFTP will
borrow approximately $420.0 million under a new $472.0 million Six Flags senior
secured credit facility (the "Six Flags Credit Facility" and, together with the
Premier Credit Facility, the "Credit Facilities") primarily to repay bank
indebtedness of SFTP. See "Description of Other Company Indebtedness--Six Flags
Credit Facility."
9
The closing of the Offering is conditioned upon the closing of all other
elements of the Six Flags Transactions. Although the size of one or more of the
Offerings may be changed, the aggregate gross proceeds of all the Offerings is
not expected to change materially.
The following table sets forth a summary of the expected sources and uses of
funds associated with the Six Flags Transactions:
· Enlarge/Download Table
AMOUNT
(IN
SOURCES THOUSANDS)
-----------
Common Stock Offering(1)....................................................... $ 593,190
PInES Offering(1).............................................................. 228,150
Issuance of Seller Depositary Shares........................................... 200,000
Premier Discount Notes Offering(1)............................................. 250,000
Premier Senior Notes Offering(1)............................................... 280,000
The Offering(1)................................................................ 170,000
Borrowings under the Premier Credit Facility(2)................................ 107,210
Borrowings under the Six Flags Credit Facility................................. 420,000
-----------
Total...................................................................... $2,248,550
-----------
-----------
USES
Acquisition of SFEC capital stock.............................................. $ 965,000
Adjustment to purchase price of SFEC Capital Stock............................. 11,000
Deposit for repayment of SFEC Zero Coupon Senior Notes......................... 175,030
Repayment of Six Flags indebtedness............................................ 382,430
Interest escrow for Premier Senior Notes(3).................................... 76,260
Restricted Cash Account(4)..................................................... 75,000
Financing of tender offer for partnership interests in Six Flags Over
Texas(5)..................................................................... 93,700
Prefunding of capital expenditures and working capital(6)...................... 378,710
Transaction offering fees, expenses, discounts and escrows..................... 91,420
-----------
Total...................................................................... $2,248,550
-----------
-----------
------------------------
(1) Reflects assumed gross proceeds.
(2) Does not include an estimated $117.8 million (assuming a 100% tender of
publicly held shares of Walibi in the Walibi Acquisition) of borrowings to
be used to fund, in part, the Walibi Acquisition.
(3) Represents escrow to fund the first six semi-annual interest payments on the
Premier Senior Notes.
(4) Represents restricted cash to satisfy obligations under the arrangements
relating to the Co-Venture Parks and to fund dividends on the Convertible
Preferred Stock as required under the indentures that will govern the New
Premier Notes.
(5) Assumes tender of 25% of the units representing limited partnership
interests.
(6) Of such amount, Premier anticipates that approximately $117.1 million will
be held by Six Flags. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity, Capital Commitments and
Resources."
10
Following the Six Flags Transactions, the Company's and Premier's structure
will be:
Chart demonstrating Parent-Subsidiary relationships and the respective
debt/credit obligations of each such entity following the Offerings.
11
THE OFFERING
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Securities Offered................ $170,000,000 in aggregate principal amount of %
Senior Notes due , 2006.
Yield and Interest................ Interest accrues from the date of issuance and will be
payable in cash semiannually in arrears on each
and , commencing , 1998, at a rate of
% per annum.
The Offerings..................... In addition to the Offering by SFEC, Premier is
concurrently offering (i) 13,000,000 shares of its
Common Stock with estimated gross proceeds of $593.2
million, (ii) 5,000,000 PInES representing interests in
Mandatorily Convertible Preferred Stock with estimated
gross proceeds of $228.2 million, (iii) $280.0 million
in aggregate principal amount of the Premier Senior
Notes and (iv) $ million in aggregate principal
amount at maturity of the Premier Discount Notes with
estimated gross proceeds of $250.0 million. Premier also
expects to issue Seller Depositary Shares representing
interests in up to $200.0 million of Seller Preferred
Stock as part of the consideration for the Six Flags
Acquisition. See "--The Six Flags Transactions" and
"Description of Notes." The Offerings are conditioned
upon the closing of all other elements of the Six Flags
Transactions.
Use of Proceeds................... The Company intends to place in escrow the net proceeds
from the Offering, together with additional funds, to
provide for the repayment in full of the SFEC Zero
Coupon Senior Notes at or prior to maturity on December
15, 1999. See "Use of Proceeds."
Escrow............................ The net proceeds of the Offering, together with
additional funds, will be used to purchase a portfolio
of Government Securities that will be held in escrow to
provide for the payment in full of the SFEC Zero Coupon
Senior Notes and, under certain circumstances, as
security for the repayment of principal of the SFEC
Senior Notes. See "Description of Notes."
Ranking of SFEC Senior Notes...... The SFEC Senior Notes will be general obligations of the
Company, ranking PARI PASSU in right of payment with the
SFEC Zero Coupon Senior Notes (until repaid) and all
future senior indebtedness of the Company, and senior in
right of payment to all future subordinated indebtedness
of the Company. The Company is a holding company whose
primary asset is the capital stock of its subsidiaries.
The SFEC Senior Notes will not be guaranteed by such
subsidiaries. Accordingly, the SFEC Senior Notes will be
structurally subordinated to all indebtedness and other
liabilities (including trade payables) of the Company's
subsidiaries, including all borrowings under the Six
Flags Credit Facility and all indebtedness outstanding
under the SFTP Indenture (as defined). As of December
28, 1997, after giving pro forma effect to the Six Flags
Transactions, Six Flags on a consolidated basis would
have had total outstanding indebtedness in the accreted
principal amount of $1,021.0 million, including the SFEC
Senior Notes and the SFEC Zero Coupon Senior Notes (of
which $689.9 million would have been indebtedness of the
12
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Company's subsidiaries) and the Company's subsidiaries
would have had approximately $108.6 million of other
oustanding liabilities.
Ranking of Guarantee.............. Premier's obligations under the Guarantee will be
subordinated to all indebtedness of and other
liabilities of Premier Parks Inc. and effectively
subordinated to all indebtedness and other liabilities
of its subsidiaries, including borrowings under the
Premier Credit Facility, indebtedness outstanding under
the Old Premier Notes (as defined) and the New Premier
Notes, and Premier's obligations under the Subordinated
Indemnity Agreement (as defined). As of December 31,
1997, after giving pro forma effect to the Premier
Merger, the Six Flags Transactions, the Walibi
Acquisition and the Offerings, Premier, on a
consolidated basis, would have had total outstanding
indebtedness in the accreted principal amount of
$1,993.0 million (including indebtedness outstanding
under the SFEC Senior Notes and the SFEC Zero Coupon
Senior Notes) and $158.9 million of other obligations
outstanding, excluding obligations under the
Subordinated Indemnity Agreement.
Change of Control................. Upon the occurrence of a Change of Control, the holders
of the SFEC Senior Notes will have the right to require
the Company to repurchase such holders' SFEC Senior
Notes, in whole or in part, at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and
unpaid interest to the date of purchase. There can be no
assurance that the Company or Premier will be able to
raise sufficient funds to meet this obligation should it
arise. See "Risk Factors--Risks Associated with a Change
of Control" and "Description of Notes--Repurchase at the
Option of Holders--Change of Control."
Certain Covenants................. The indenture pursuant to which the SFEC Senior Notes
will be issued (the "SFEC Indenture") will contain
certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to (i) incur
additional indebtedness and issue preferred stock, (ii)
pay dividends or make certain other restricted payments,
(iii) enter into transactions with affiliates, (iv) make
certain asset dispositions, (v) merge or consolidate
with, or transfer substantially all its assets to,
another Person (as defined), (vi) create Liens (as
defined), (vii) issue or sell Equity Interests (as
defined) of the Company's subsidiaries, (viii) engage in
sale and leaseback transactions or (ix) engage in
certain business activities. See "Description of
Notes--Certain Covenants." Although it is subject to
certain covenants by virtue of the New Premier Notes,
Premier will not generally be subject to the covenants
contained in the SFEC Indenture.
Optional Redemption............... Except as described below, the SFEC Senior Notes will
not be redeemable at the Company's option prior to
, 2002. Thereafter, the SFEC Senior
Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, at the
redemption prices set forth herein plus accrued and
unpaid interest to the applicable
13
· Download Table
redemption date. In addition, at any time prior to
, 2001, the Company may on any one or
more occasions redeem up to 35% of the aggregate
principal amount of the SFEC Senior Notes at a
redemption price of % of the aggregate principal
amount thereof, with the net cash proceeds from one or
more Public Equity Offerings by, or Strategic Equity
Investments in, (i) the Company or (ii) Premier to the
extent the net cash proceeds thereof are contributed to
the Company as a capital contribution to the common
equity of the Company; PROVIDED that, in each case, at
least 65% of the aggregate principal amount of the SFEC
Senior Notes originally issued remains outstanding
immediately after the occurrence of each such redemption
(excluding SFEC Senior Notes held by the Company,
Premier or any of their subsidiaries). See "Description
of Notes--Optional Redemption."
14
SUMMARY HISTORICAL AND PRO FORMA DATA
The tables below contain certain summary historical and pro forma financial
and operating data for the Company. The following summary historical financial
and operating data, except for attendance and revenue per visitor data, for each
of the years in the three-year period ended December 28, 1997, have been derived
from the financial statements of the Company appearing elsewhere in this
Prospectus and should be read in conjunction with those financial statements
(including the notes thereto) and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The pro forma financial and
operating data give effect to the Six Flags Transactions as if they had occurred
on December 30, 1996, the first day of the Company's 1997 fiscal year. Other
historical financial and operating data (except attendance and revenue per
visitor data) have been derived from audited consolidated financial statements
of the Company which are not included herein.
· Enlarge/Download Table
YEAR ENDED
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 28, 1997
DECEMBER 26, JANUARY 1, DECEMBER 31, DECEMBER 29, ------------------------
1993 1995 1995 1996 ACTUAL PRO FORMA(1)
------------- ----------- ------------- ------------- --------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIO AND
PER VISITOR AMOUNTS)
STATEMENT OF OPERATIONS
DATA:(2)
Total revenue.......... $ 532,455 $ 556,791 $ 629,457 $ 680,876 $ 708,666 $ 531,872
Income from
operations(3)........ 53,236 54,561 66,738 67,715 79,575 77,284
Interest expense,
net.................. (54,963) (48,753) (63,282) (76,530) (84,430) (83,671)
Net loss............... (12,944) (695) (3,287) (15,249) (3,708) (24,356)
OTHER DATA:
EBITDA(4).............. 122,371 134,642 150,182 155,132 164,068 154,875
Net cash provided by
operating
activities(5)........ 111,934 100,895 124,587 128,602 110,303 100,206
Depreciation and
amortization......... 69,135 80,081 83,444 87,417 84,493 77,591
Capital expenditures... 34,057 42,039 45,578 75,627 67,675(6) 67,675(6)
Total attendance....... 19,144 19,855 21,830 22,796 22,229 16,500
Revenue per visitor.... $ 27.81 $ 28.04 $ 28.83 $ 29.87 $ 31.88 $ 32.23
Net debt/EBITDA(7)..... 4.8x
Total debt/EBITDA(7)... 5.6x
EBITDA/cash interest
expense(7)........... 3.1x
EBITDA/total interest
expense(7)........... 1.8x
Ratio of earnings to
fixed charges(8)..... (8) 1.1 x 1.1 x (8) (8) (8)
Ratio of earnings to
combined fixed
charges and preferred
stock dividends(8)... (8) 1.1 x (8) (8) (8) (8)
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DECEMBER 28, 1997
---------------------------
ACTUAL PRO FORMA(9)
----------- --------------
(UNAUDITED)
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 16,805 $ 117,100(10)
Total assets......................................................................... 864,690 2,162,276
Total long-term debt (excluding current maturities).................................. 753,369 1,062,600
Total debt........................................................................... 810,002 1,063,600
Stockholders' equity (deficit)....................................................... (22,327) 990,092
(SEE FOOTNOTES ON FOLLOWING PAGE)
15
(1) The pro forma financial and operating data for the year ended December 28,
1997 give effect to the Six Flags Transactions as if they had occurred on
December 30, 1996, the first day of the Company's 1997 fiscal year. See
"Unaudited Pro Forma Financial Statements--Unaudited Pro Forma Statement of
Operations" generally and with respect to certain assumptions used in
respect of the financings.
(2) Prior to the Six Flags Acquisition, the Company, through two subsidiaries,
was the general partner in the Co-Venture Partnerships. For the historical
periods presented, the Company accounted for the Co-Venture Parks as
co-ventures, i.e., their revenues and expenses (excluding partnership
depreciation) were included in the Company's consolidated statements of
operations and the net amounts distributed to the limited partners were
deducted as expenses. Except for the limited partnership units in the
Georgia park owned by the Company at December 28, 1997, the Company had no
rights or title to the Co-Venture Parks' assets or to the proceeds from any
sale of the Co-Venture Parks' assets or liabilities during the periods
presented. Accordingly, the Company's consolidated balance sheets do not
include any of the Co-Venture Parks' assets. The investment in Co-Venture
Parks included in the Company's historical consolidated balance sheets
represented (i) the Company's interest in the estimated future cash flows
from the operations of the Co-Venture Parks, which was amortized over the
life of the partnership agreements, and (ii) the value of limited
partnership units purchased pursuant to the 1997 tender offer relating to
the Georgia park. The Co-Venture Parks contributed revenues of $160.6
million, $152.0 million and $176.8 million to the Company in the fiscal
years 1995, 1996 and 1997, respectively. During these three fiscal years,
the Co-Venture Parks contributed EBITDA of $36.8 million, $24.3 million and
$34.7 million, respectively (after payment of $11.6 million, $8.1 million
and $21.3 million, respectively to the limited partners). In 1995, 1996 and
1997, the Co-Venture Parks produced $48.4 million, $32.4 million and $56.0
million of EBITDA, respectively. In connection with the Six Flags
Acquisition, Six Flags is transferring its interests in the Co-Venture
Parks to Premier. As a result, the Company will have no interest in the
revenue, cash flow or assets of the Co-Venture Parks following consummation
of the Offering. The pro forma financial statements give effect to the
disposition of the Company's investment in the Co-Venture Parks. See
"Unaudited Pro Forma Financial Statements."
(3) Income from operations is revenue less operating, general and
administrative expenses, costs of products sold and depreciation and
amortization.
(4) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of the 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 consolidated statements
of cash flows contained in the financial statements included elsewhere
herein.
(5) During each of the years ended December 26, 1993, January 1, 1995, December
31,1995, December 29, 1996 and December 28, 1997, the Company's net cash
used in investing activities was approximately $41.6 million, $43.8
million, $93.9 million, $81.2 million, and $149.7 million, respectively.
During these periods, net cash provided by (used in) financing activities
was approximately $(73.2) million, $(55.6) million, $10.6 million, $(52.2)
million and $10.6 million, respectively.
(6) Does not include amount expended ($62.7 million) by the Company to purchase
interests in the limited partners of the Co-Venture Partnerships.
(7) Total Debt/EBITDA and Net Debt/EBITDA include total outstanding pro forma
indebtedness of the Company (excluding the SFEC Zero Coupon Senior Notes)
in the accreted principal amount of $859.9 million. Net debt deducts from
total outstanding pro forma indebtedness $117.1 million (representing pro
forma cash and cash equivalents). See "Capitalization." EBITDA/cash
interest expense is calculated using pro forma cash interest expense of
$50.6 million. EBITDA/total interest expense is calculated using pro forma
total interest expense of $83.8 million (excluding interest on the SFEC
Zero Coupon Senior Notes).
(8) For the purpose of determining the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) before income taxes and fixed
charges. Fixed charges consist of interest expense net of interest income,
amortization of deferred financing costs and discount or premium relating
to indebtedness, and the portion (approximately one-third) of rental
expense that management believes represents the interest component of rent
expense. During the 1993, 1996 and 1997 fiscal years, the Company's
earnings were insufficient to cover fixed charges by $5.1 million, $10.1
million and $3.7 million, respectively. During the 1993, 1995, 1996 and
1997 fiscal years, earnings were insufficient to cover combined fixed
charges and preferred stock dividends by $5.1 million, $9.7 million, $36.5
million and $33.6 million, respectively. On a pro forma basis, for the year
ended December 28, 1997, the Company's earnings would have been
insufficient to cover fixed charges and combined fixed charges and
preferred stock dividends by $6.9 million and $6.9 million, respectively.
(9) The pro forma balance sheet data give effect to the Six Flags Transactions
(including the transfer of the Company's interests in the Co-Venture Parks
to Premier) as if they had occurred on December 28, 1997. Pro forma total
long term debt and total debt include the SFEC Zero Coupon Senior Notes as
well as the SFEC Senior Notes. For pro forma total long term debt and total
debt, the SFEC Zero Coupon Senior Notes and SFTP Senior Subordinated Notes
are both stated at fair market value rather than at accreted amount. See
"Capitalization" and "Unaudited Pro Forma Financial Statements--Unaudited
Pro Forma Balance Sheet."
(10) Represents amount to prefund capital expenditures and working capital. See
"Prospectus Summary--The Six Flags Transactions."
16
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS:
RISKS ASSOCIATED WITH SUBSTANTIAL INDEBTEDNESS AND OTHER OBLIGATIONS
The Company is, and following the Six Flags Transactions, Premier will be,
highly leveraged. On a pro forma basis, as of December 28, 1997, the Company on
a consolidated basis would have had total outstanding indebtedness (excluding
the SFEC Zero Coupon Senior Notes) in the accreted principal amount of
approximately $859.9 million, including: (i) $420.0 million in outstanding
borrowings under the Six Flags Credit Facility, (ii) $269.9 million in accreted
value at that date of SFTP Senior Subordinated Notes ($285.0 million in
aggregate principal amount at maturity in 2005), and (iii) $170.0 million in
aggregate principal amount of SFEC Senior Notes. Indebtedness at that date also
would have included $161.1 million in accreted value of SFEC Zero Coupon Senior
Notes, which will be repaid with the proceeds of the SFEC Senior Notes, together
with certain other funds, at or prior to maturity on December 15, 1999. Until
such repayment, the SFEC Zero Coupon Senior Notes will rank PARI PASSU with the
SFEC Senior Notes. On a pro forma basis, as of December 28, 1997, the Company
would have had stockholders' equity of approximately $990.1 million. On a pro
forma basis, for the year ended December 28, 1997, the Company's earnings would
have been insufficient to cover its fixed charges by approximately $6.9 million.
In addition the indentures relating to the SFEC Senior Notes and the SFTP Senior
Subordinated Notes (the "Six Flags Indentures") and the Six Flags Credit
Facility permit the Company to incur additional indebtedness under certain
circumstances. See "Description of Other Company Indebtedness" and "Description
of Notes--Certain Covenants."
Following the Six Flags Transactions, on a pro forma basis, as of December
31, 1997, Premier on a consolidated basis would have had outstanding
indebtedness in the accreted principal amount of approximately $1,832.0 million,
including: (i) $859.9 million of Six Flags indebtedness, as described above;
(ii) $250.0 million in accreted value at that date of the Premier Discount Notes
($ million in aggregate principal amount at maturity in 2008); (iii) $280.0
million in aggregate principal amount of Premier Senior Notes; (iv) $125.0
million in aggregate principal amount of Premier Operations' 9 3/4% Senior Notes
due 2007 (the "1997 Premier Notes"); (v) $90.0 million in aggregate principal
amount of Premier Operations' 12% Senior Notes due 2003 (the "1995 Premier
Notes" and, together with the 1997 Premier Notes, the "Old Premier Notes" and,
collectively with the SFEC Senior Notes, the New Premier Notes and the SFTP
Senior Subordinated Notes, the "Senior Notes"); (vi) $225.0 million in
outstanding borrowings under the Premier Credit Facility; and (vii) $2.0 million
of capitalized lease obligations. On a pro forma basis, as of December 31, 1997,
Premier would have had stockholders' equity of approximately $1,130.2 million.
In addition, the annual dividends (which are payable in cash, in the case of the
Seller Preferred Stock, or in cash, or by issuance of shares of Common Stock, at
the option of the Premier, in the case of the Mandatorily Convertible Preferred
Stock) on the Convertible Preferred Stock aggregate $ , and Premier is
required to offer to purchase the Seller Preferred Stock in 2010 (if not earlier
redeemed or converted). On a pro forma basis, for the year ended December 31,
1997, Premier's earnings would have been insufficient to cover its combined
fixed charges and preferred stock dividends by approximately $77.7 million. In
addition, the indentures relating to the Senior Notes (the "Indentures") permit
Premier to incur additional indebtedness under certain circumstances. See
"Capitalization," "Description of Other Company Indebtedness" and "Description
of Notes--Certain Covenants."
By reason of the Six Flags Acquisition, SFTP will be required to offer to
repurchase the SFTP Senior Subordinated Notes at a price equal to 101% of their
accreted amount (approximately $287.9 million at June 15, 1998). On March 3,
1998, the last reported sales price of these Notes was substantially in excess
of their accreted amount. SFTP has not entered into any standby arrangement to
finance the purchase of such notes and there can be no assurance that SFTP would
be able to obtain such financing in the event that it were to become necessary.
17
In addition to its obligations under its outstanding indebtedness and
preferred stock, Premier is required to (i) make minimum annual distributions of
approximately $46.2 million (subject to cost of living adjustments) to the
limited partners in the Co-Venture Parks and (ii) make minimum capital
expenditures at each of the Co-Venture Parks during rolling five-year periods,
based generally on 6% of such park's revenues. Cash flow from operations at the
Co-Venture Parks will be used to satisfy these requirements first, before any
funds are required from Premier. Premier has also agreed to purchase a maximum
number of 5% per year (accumulating to the extent not purchased in any given
year) of the total limited partnership units outstanding as of the date of the
co-venture agreements that govern the Co-Venture Partnerships (to the extent
tendered by the unit holders). SFEC and SFTP have guaranteed each of these
obligations. The agreed price for these purchases is based on a valuation for
each respective Co-Venture Park equal to the greater of (i) a value derived by
multiplying its weighted-average four year EBITDA (as defined therein) by a
specified multiple (8.0 in the case of the Georgia park and 8.5 in the case of
the Texas park) or (ii) $250.0 million in the case of the Georgia park and
$374.8 million in the case of the Texas park. Premier's obligations with respect
to Six Flags Over Georgia and Six Flags Over Texas will continue until 2027 and
2028, respectively. Six Flags has commenced a tender offer for all limited
partner units in the Texas park which is currently scheduled to close prior to
the consummation of the Six Flags Acquisition. Premier anticipates that Six
Flags will fund the tender from borrowings which must be refinanced by Premier
in connection with the Six Flags Acquisition. For purposes of this Prospectus,
Premier has assumed that 25% of these units will be tendered. In the event that
a larger number of units are tendered, Premier will be required to refinance the
additional indebtedness of Six Flags incurred by virtue thereof and,
accordingly, will have less cash to prefund capital expenditures and working
capital requirements, including capital expenditures and working capital
requirements of the Company. The guarantee by SFEC and SFTP of these obligations
will survive the transfer of their interests in the Co-Venture Parks to Premier.
As Premier purchases units relating to either Co-Venture Park, it will be
entitled to the minimum distribution and other distributions attributable to
such units, unless it is then in default under the applicable agreements with
its partners at such Co-Venture Park. Time Warner Inc. and certain of its
affiliates have guaranteed the obligations of Six Flags under these agreements.
Premier will indemnify Time Warner and such affiliates, in respect of its
guarantee pursuant to a Subordinated Indemnity Agreement (the "Subordinated
Indemnity Agreement"). See "Description of Six Flags Agreement." Premier
estimates that its maximum unit purchase obligation for 1998, when purchases are
required only for the Georgia park, will aggregate approximately $13 million
(approximately $31 million for 1999, when purchases for both partnerships are
required) and its minimum capital expenditures for 1998 at these parks will
total approximately $11 million.
The Company's ability to make scheduled payments on, or to refinance, its
indebtedness, or to fund planned capital expenditures, and Premier's ability to
make scheduled payments on, or to refinance, its indebtedness (including the
Guarantee), to pay dividends on its preferred stock, or to fund planned capital
expenditures and its obligations under the arrangements relating to the
Co-Venture Parks, will depend on their respective future performances, which, to
a certain extent, are subject to general economic, financial, weather,
competitive and other factors that are beyond their control. Premier's
management believes that, based on current and anticipated operating results,
cash flow from operations, available cash and available borrowings under the Six
Flags Credit Facility will be adequate to meet the Company's future liquidity
needs, including anticipated requirements for working capital, capital
expenditures and scheduled debt payments, for at least the next several years.
Based on current and anticipated operating results, Premier believes that cash
flow from operations and available cash, available borrowings under the Credit
Facilities and the net proceeds of the Offerings (to the extent not used in
connection with the Six Flags Acquisition) will be adequate to meet Premier's
future liquidity needs, including anticipated requirements for working capital,
capital expenditures, scheduled debt and preferred stock dividends and its
obligations under arrangements relating to the Co-Venture Parks, for at least
the next several years. However, the Company and/or Premier may need to
refinance all or a portion of their existing debt on or prior to maturity or to
18
obtain additional financing. There can be no assurance that the Company's
business will generate sufficient cash flow from operations, that currently
anticipated cost savings will be realized or that future borrowings will be
available under the Six Flags Credit Facility in an amount sufficient to enable
the Company to service its indebtedness or to fund its other liquidity needs.
Similarly, there can be no assurance that Premier's business will generate
sufficient cash flow from operations or that future borrowings will be available
under the Credit Facilities in an amount sufficient to enable Premier to service
its indebtedness or to fund its other liquidity needs. In addition, there can be
no assurance that the Company and/or Premier will be able to effect any such
refinancing on commercially reasonable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity, Capital Commitments and Resources."
The degree to which Premier and the Company will be leveraged following the
Six Flags Transactions could have important consequences to the holders of the
SFEC Senior Notes, including, but not limited to: (i) making it more difficult
for Premier and the Company to satisfy their obligations, (ii) increasing
Premier's and the Company's vulnerability to general adverse economic and
industry conditions, (iii) limiting Premier's and the Company's ability to
obtain additional financing to fund future working capital, capital
expenditures, acquisitions and other general corporate requirements, (iv)
requiring the dedication of a substantial portion of Premier's and the Company's
cash flow from operations to the payment of principal of, and interest on, its
indebtedness and, in the case of Premier, dividends on its preferred stock,
thereby reducing the availability of such cash flow to fund working capital,
capital expenditures, acquisitions or other general corporate purposes, (v)
limiting Premier's and the Company's flexibility in planning for, or reacting
to, changes in their business and the industry, and (vi) placing Premier and the
Company at a competitive disadvantage vis-a-vis less leveraged competitors. In
addition, the Indentures and the Credit Facilities will contain financial and
other restrictive covenants that will limit the ability of Premier and the
Company to, among other things, borrow additional funds. Failure by Premier and
the Company to comply with such covenants could result in an event of default
which, if not cured or waived, would have a material adverse effect on Premier
and/or the Company. In addition, the degree to which Premier and the Company are
leveraged could prevent them from repurchasing all of the SFEC Senior Notes
tendered to SFEC upon the occurrence of a Change of Control. See "Description of
Other Company Indebtedness" and "Description of Notes--Repurchase at Option of
Holders--Change of Control."
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES
The Company has no operations of its own and derives all of its revenue from
its subsidiaries. Premier is also a holding company. Therefore, the Company's
ability to pay its obligations (including debt service on the SFEC Senior Notes)
and Premier's ability to pay its obligations (including pursuant to the
Guarantee), when due are dependent upon the receipt of sufficient funds from
their respective direct and indirect subsidiaries.
Under the terms of the indenture relating to the SFTP Senior Subordinated
Notes (the "SFTP Indenture") and the Six Flags Credit Facility, the payment of
dividends by SFTP is subject to restrictive covenants that will significantly
restrict or prohibit SFTP's ability to pay dividends or make other distributions
to SFEC. See "Description of Other Company Indebtedness" for summary of the
terms of the dividend restrictions. In addition, the terms of the SFEC Indenture
will permit SFEC's subsidiaries to incur additional indebtedness, the terms of
which could limit or prohibit the payment of dividends or the making of other
distributions by such subsidiaries to SFEC. The Six Flags Credit Facility will
prohibit the payment of dividends by SFTP to SFEC, except to provide funds to
pay dividends on the Seller Preferred Stock and to pay interest on the SFEC
Senior Notes (but in each case, only if no default has occurred and is
continuing under the Six Flags Credit Facility and subject to the satisfaction
of certain financial ratios). As a result, there can be no assurance that
dividends, distributions or loans to SFEC from its subsidiaries will be
sufficient to fund its obligations. See "Description of Other Company
Indebtedness." In addition, the Premier Credit Facility will prohibit the
payment of dividends by Premier Operations to Premier for
19
any purpose other than a one time distribution, not to exceed $20.0 million, on
the date of the Six Flags Transactions.
The SFEC Senior Notes will be effectively subordinated to all indebtedness
and other obligations of the Company's subsidiaries. On a pro forma basis, as of
December 28, 1997, the accreted principal amount of indebtedness and other
obligations of the Company's subsidiaries that would effectively rank senior in
right of payment to the obligations of the Company under the SFEC Senior Notes
would have been approximately $798.5 million. In addition, approximately $52.0
million would have been available for additional borrowings under the Six Flags
Credit Facility. If any indebtedness of any of the Company's subsidiaries were
to be accelerated, there would be no assurance that the assets of any such
subsidiary would be sufficient to repay such indebtedness. SFEC's rights to
participate in the distribution of the assets of its operating subsidiaries upon
a liquidation or reorganization of such companies will be subject to the prior
claims of their respective creditors.
The Guarantee will be subordinated to all indebtedness and other obligations
of Premier Parks Inc. and effectively subordinated to all indebtedness and other
obligations of Premier's subsidiaries, including the Senior Notes, borrowings
under the Credit Facilities and Premier's obligations under the Subordinated
Indemnity Agreement. On a pro forma basis, as of December 31, 1997, the accreted
principal amount of indebtedness and other obligations of Premier on a
consolidated basis (including the SFEC Zero Coupon Senior Notes, but excluding
the SFEC Senior Notes) that would rank or effectively rank senior in right of
payment to the obligations of Premier under the Guarantee would have been
approximately $1,982.0 million. In addition, approximately $127.0 million would
have been available for additional borrowings under the Credit Facilities. If
any indebtedness of any of Premier's subsidiaries were to be accelerated, there
would be no assurance that the assets of any such subsidiary would be sufficient
to repay such indebtedness. Premier's rights to participate in the distribution
of the assets of its operating subsidiaries upon a liquidation or reorganization
of such companies will be subject to the prior claims of their respective
creditors.
RESTRICTIVE DEBT COVENANTS
The Credit Facilities contain a number of significant covenants that, among
other things, restrict the ability of SFTP and its subsidiaries, and other
operating subsidiaries of Premier to dispose of assets, incur additional
indebtedness, pay cash dividends, repurchase stock, create liens on assets, make
investments, engage in mergers or consolidations, make capital expenditures,
engage in sale-leaseback transactions, engage in certain transactions with
affiliates or redeem or repurchase the indebtedness of such subsidiaries. In
addition, under the Credit Facilities, Premier Operations and SFTP are each
required to comply with specified financial ratios and tests, including interest
expense, fixed charges, debt service and total debt coverage ratios. The
Indentures also contain a series of restrictive covenants.
Six Flags and Premier are currently in compliance with the respective
covenants and restrictions contained in the Credit Facilities and the
Indentures. However, their ability to continue to comply with the respective
financial tests and ratios in the Credit Facilities may be affected by events
beyond their control, including prevailing economic, financial, weather and
industry conditions. The breach of any such financial covenant could result in
the termination of the applicable Credit Facility (and the acceleration of the
maturity of all amounts outstanding thereunder) and, by virtue of cross-default
and cross-acceleration provisions, the acceleration of the maturity of other
indebtedness of the borrower thereunder and its subsidiaries, including in the
case of the Six Flags Credit Facility, the SFEC Senior Notes. SFTP's ability to
pay dividends to SFEC to enable it to pay interest on the SFEC Senior Notes is
conditioned upon there being no default or event of default under the Six Flags
Credit Facility and upon satisfaction of certain financial ratios thereunder.
In addition, under the terms of the Subordinated Indemnity Agreement to be
entered into in connection with the Six Flags Transactions (which lasts until
2028), without the consent of Time Warner Inc. (collectively with its
affiliates, "Time Warner"), Premier cannot incur indebtedness at SFEC (other
20
than the SFEC Senior Notes) or any of its subsidiaries that is secured by any
assets of Premier, Premier Operations or any of its subsidiaries, or secure any
indebtedness of Premier, Premier Operations or any of its subsidiaries, with any
of the assets of SFEC or any of its subsidiaries. These covenants could inhibit
the ability of the Company or Premier to borrow in the future.
LIMITED NATURE OF PREMIER GUARANTEE
Although Premier will guarantee the payment in full of all obligations with
respect to the SFEC Senior Notes pursuant to the Guarantee, the Guarantee is
subordinated to all existing and future obligations of Premier (including those
under the Subordinated Indemnity Agreement), and the SFEC Indenture will not
restrict the ability of Premier to incur indebtedness, pay dividends, sell
assets or engage in other transactions that could adversely impact the value of
the Guarantee to holders of SFEC Senior Notes. See "Description of
Notes--Premier Guarantee."
RISKS OF ACCIDENTS AND DISTURBANCES AT PARKS; EFFECTS OF LOCAL CONDITIONS AND
EVENTS
Because substantially all of the Company's parks feature "thrill rides,"
attendance at the parks and, consequently, revenues may be adversely affected by
any serious accident or similar occurrence with respect to a ride. Six Flags'
liability insurance policies provide coverage of up to $175.0 million per loss
occurrence and require Six Flags to pay the first $2.0 million per loss
occurrence.
Other local conditions and events can also adversely affect attendance. For
example, in 1994, the Six Flags Magic Mountain park experienced significant
attendance declines and interruptions of business as a result of the Los Angeles
County earthquake centered in Northridge, California. Six Flags Over Georgia
experienced attendance declines in 1996 as a result of the 1996 Summer Olympics.
Management believes that the geographic diversity of the Company's theme parks
reduces the effects of such occurrences on the Company's consolidated results.
In addition, in view of the proximity of certain of the Company's parks to
major urban areas and the appeal of the parks to teenagers and young adults, the
Company's parks could experience disturbances that could adversely affect the
image of and attendance levels at its parks. Working together with local police
authorities, the Company has taken certain security-related precautions designed
to prevent disturbances in its parks, but there can be no assurance that it will
be able to prevent any such disturbances.
EFFECTS OF INCLEMENT WEATHER; SEASONAL FLUCTUATIONS OF OPERATING RESULTS
Because the great majority of theme parks' attractions are outdoor
activities, attendance at parks and, accordingly, the Company's revenues are
significantly affected by the weather. Additionally, the Company's water parks,
by their nature, are more sensitive to adverse weather than are theme parks.
Unfavorable weekend weather and unusual weather of any kind can adversely affect
park attendance.
The operations of the Company are highly seasonal, with more than 80% of
park attendance occurring in the second and third calendar quarters of each
year. The great majority of the Company's revenue is collected in those quarters
while most expenditures for capital improvements and significant maintenance are
incurred when the parks are closed in the first and fourth quarters.
Accordingly, the Company believes that quarter-to-quarter comparisons of its
results of operations should not be relied upon as an indication of future
performance.
HIGHLY COMPETITIVE BUSINESS
The Six Flags Parks compete directly with other theme, 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
21
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.
RISKS ASSOCIATED WITH A CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding SFEC Senior Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the date of purchase.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of the SFEC
Senior Notes tendered or that restrictions in the Six Flags Credit Facility and
the SFTP Indenture will allow the Company to make such required repurchases. In
addition, a Change of Control would constitute an event of default under the Six
Flags Credit Facility. Notwithstanding these provisions, the Company could enter
into certain transactions, including certain recapitalizations, that would not
constitute a Change of Control but would increase the amount of debt outstanding
at such time. See "Description of Notes--Repurchase at Option of Holders."
By virtue of the Six Flags Transactions, SFTP will be required to make an
offer to purchase the SFTP Senior Subordinated Notes. See "--Risks Associated
with Substantial Indebtedness and Other Obligations." Warner Bros. can terminate
the license agreement being entered into in connection with the Six Flags
Agreement if persons engaged in the movie or television industries or party to a
material judicial proceeding pending against Time Warner obtain control of
Premier. See "Business--Licenses."
ABSENCE OF PUBLIC MARKET
There is no existing trading market for the SFEC Senior Notes. The Company
does not intend to apply for listing of the SFEC Senior Notes on any securities
exchange. The Underwriters have advised the Company that they currently intend
to make a market in the SFEC Senior Notes. However, they are not obligated to do
so and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the prices or liquidity of, or
trading markets for, the SFEC Senior Notes. The liquidity of any market for the
SFEC Senior Notes will depend upon the number of holders of SFEC Senior Notes,
the interest of securities dealers in making a market in the SFEC Senior Notes,
and other factors. The absence of an active market for the SFEC Senior Notes
could adversely affect the liquidity of the SFEC Senior Notes. Even if such a
market were to develop, the SFEC Senior Notes could trade at prices that may be
lower than their initial offering price as a result of many factors, including
prevailing interest rates and the Company's operating results and financial
condition at the time. The liquidity of, and trading markets for, the SFEC
Senior Notes may also be adversely affected by general declines in the market
for non-investment grade debt.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company has completed plans to ensure year 2000 compliance
and started conversions of applications beginning in 1996. These modifications
and replacements are expected to be completed by January 1999. Costs in
connection with any such modifications are not expected to be material. However,
if such modifications are not completed in a timely manner, the Year 2000
problem may have a material adverse impact on the operations of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of Year 2000 Issue."
22
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after
deducting estimated underwriting discounts and commissions and estimated
expenses payable by the Company, will be approximately $163.6 million. The net
proceeds from the Offering, together with certain additional funds, will be
deposited in escrow to repay in full the SFEC Zero Coupon Senior Notes at or
prior to maturity on December 15, 1999. See "Description of Notes--Escrow of
Proceeds."
23
CAPITALIZATION
The following table sets forth as of December 28, 1997, (i) the actual
consolidated capitalization of the Company and (ii) the pro forma consolidated
capitalization of the Company after giving effect to the Six Flags Transactions
and other related financings. This table should be read in conjunction with the
consolidated financial statements of the Company, "Unaudited Pro Forma Combined
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
· Enlarge/Download Table
DECEMBER 28, 1997
--------------------------
ACTUAL
----------
PRO FORMA
--------------
(UNAUDITED)
(IN THOUSANDS)
Cash and cash equivalents.......................................................... $ 16,805 $ 117,100(1)
---------- --------------
---------- --------------
Restricted-use investments......................................................... $ -- $ 175,030(2)
---------- --------------
---------- --------------
Short-term debt(3)................................................................. $ 56,633 $ 1,000
---------- --------------
---------- --------------
Long-term debt (excluding current maturities):
Six Flags Credit Facility...................................................... $ -- $ 419,000
SFEC Senior Notes.............................................................. -- 170,000
Existing Credit Facility....................................................... 322,370 --
SFEC Zero Coupon Senior Notes.................................................. 161,074 170,100(2)(4)
SFTP Senior Subordinated Notes................................................. 269,925 303,500(4)
---------- --------------
Total long-term debt....................................................... 753,369 1,062,600(2)
Stockholders' equity (deficit)..................................................... (22,327) 990,092
---------- --------------
Total capitalization....................................................... $ 731,042 $ 2,052,692
---------- --------------
---------- --------------
------------------------
(1) Represents amount available to prefund capital expenditures and working
capital. See "Prospectus Summary -- The Six Flags Transaction."
(2) The pro forma amount for the SFEC Zero Coupon Senior Notes and total
long-term debt do not give effect to the repayment of the SFEC Zero Coupon
Senior Notes at or prior to maturity on December 15, 1999, from the net
proceeds of the Offering, together with additional funds. Pending such use,
the net proceeds and additional funds will be placed in escrow. See "Use of
Proceeds" and "Description of Notes -- Escrow of Proceeds."
(3) Represents short-term debt and current portion of long-term debt, including
$1.0 million pro forma in respect of the Six Flags Credit Facility.
(4) Represents fair market value of such indebtedness at December 28, 1997.
Actual accreted amounts outstanding at December 28, 1997 were $161.1 million
for the SFEC Zero Coupon Senior Notes and $269.9 million for the SFTP Senior
Subordinated Notes.
24
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following selected historical financial and operating data, except for
attendance and revenue per visitor data, of the Company as of December 29, 1996
and December 28, 1997 and for each of the three-years in the period ended
December 28, 1997 are derived from the financial statements (audited in the case
of all annual periods) of the Company appearing elsewhere in this Prospectus.
The historical and operating data include the results of the Co-Venture Parks
which are being transferred to Premier as part of the Six Flags Transactions.
The following selected pro forma financial and operating data of the Company
as of and for the year ended December 28, 1997 have been derived from the
Unaudited Pro Forma Financial Statements appearing elsewhere in this Prospectus.
The pro forma financial and operating data are presented for informational
purposes only, have been prepared based on estimates and assumptions deemed by
Premier to be appropriate and do not purport to be indicative of the financial
position or results of operations which would actually have been attained if the
relevant acquisition had occurred on the assumed date or which may be achieved
in the future.
· Enlarge/Download Table
YEAR ENDED
DECEMBER 28,
YEAR ENDED YEAR ENDED 1997
DECEMBER 31, DECEMBER 29, --------------------------
1995 1996
------------ ------------ ACTUAL PRO FORMA(1)
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIO AND PER VISITOR AMOUNTS)
STATEMENT OF OPERATIONS DATA(2):
Revenue:
Operating services.......................................... $ 366,665 $ 405,558 $ 427,569 $ 321,519
Sales of products and other................................. 262,792 275,318 281,097 210,353
------------ ------------ ----------- -------------
Total..................................................... 629,457 680,876 708,666 531,872
------------ ------------ ----------- -------------
Costs and expenses:
Operating, general and administrative....................... 388,137 419,756 443,359 299,167
Cost of products sold....................................... 91,138 105,988 101,239 77,830
Depreciation and amortization............................... 83,444 87,417 84,493 77,591
------------ ------------ ----------- -------------
Total..................................................... 562,719 613,161 629,091 454,588
------------ ------------ ----------- -------------
Income from operations(3)..................................... 66,738 67,715 79,575 77,284
Other income (expense):
Interest expense, net....................................... (63,282) (76,530) (84,430) (83,671)
Minority interest........................................... -- (1,297) 1,147 (516)
------------ ------------ ----------- -------------
Total..................................................... (63,282) (77,827) (83,283) (84,187)
------------ ------------ ----------- -------------
Income (loss) before income taxes............................. 3,456 (10,112) (3,708) (6,903)
Income tax expense............................................ 6,743 5,137 -- 17,453
------------ ------------ ----------- -------------
Net loss...................................................... $ (3,287) $ (15,249) $ (3,708) $ (24,356)
------------ ------------ ----------- -------------
------------ ------------ ----------- -------------
OTHER DATA:
EBITDA(4)..................................................... $ 150,182 $ 155,132 $ 164,068 $ 154,875
Net cash provided by operating activities(5).................. $ 124,587 $ 128,602 $ 110,303 $ 100,206
Capital expenditures.......................................... $ 45,578 $ 75,627 $ 67,675(6) $ 67,675(6)
Total attendance.............................................. 21,830 22,796 22,229 16,500
Revenue per visitor........................................... $ 28.83 $ 29.87 $ 31.88 $ 32.23
Net debt/EBITDA(7)............................................ 4.8x
Total debt/EBITDA(7).......................................... 5.6x
EBITDA/cash interest expense(7)............................... 3.1x
EBITDA/total interest expense(7).............................. 1.8x
Ratio of earnings to fixed charges(8)......................... 1.1x (8) (8) (8)
Ratio of earnings to combined fixed charges and preferred
stock dividends(8)........................................ (8) (8) (8) (8)
25
· Enlarge/Download Table
DECEMBER 28,
1997
DECEMBER 29, --------------------------
1996
------------ ACTUAL PRO FORMA(9)
(UNAUDITED)
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................................... $ 45,587 $ 16,805 $ 117,100(10)
Total assets................................................................ $ 826,767 $ 864,690 $ 2,162,276
Total long-term debt........................................................ $ 714,993 $ 753,369 $ 1,062,600
Total debt.................................................................. $ 754,910 $ 810,002 $ 1,063,600
Stockholders' equity (deficit).............................................. $ (23,571) $ (22,327) $ 990,092
------------------------------
(1) The pro forma financial and operating data for the year ended December 28,
1997 give effect to the Six Flag Transactions as if they had occurred on
December 30, 1996, the first day of the Company's 1997 fiscal year. See
"Unaudited Pro Forma Financial Statements--Unaudited Pro Forma Statement of
Operations" generally and with respect to certain assumptions used in
respect of the financings.
(2) Prior to the Six Flags Acquisition, the Company, through two subsidiaries,
was the general partner in the Co-Venture Partnerships. For the historical
periods presented, the Company accounted for the Co-Venture Parks as
co-ventures, i.e., their revenues and expenses (excluding partnership
depreciation) were included in the Company's consolidated statements of
operations and the net amounts distributed to the limited partners were
deducted as expenses. Except for the limited partnership units in the
Georgia park owned by the Company at December 28, 1997, the Company had no
rights or title to the Co-Venture Parks' assets or to the proceeds from any
sale of the Co-Venture Parks' assets or liabilities during the periods
presented. Accordingly, the Company's consolidated balance sheets do not
include any of the Co-Venture Parks' assets. The investment in the
Co-Venture Parks included in the Company's historical consolidated balance
sheets represented (i) the Company's interest in the estimated future cash
flows from the operations of the Co-Venture Parks, which was amortized over
the life of the partnership agreements, and (ii) the value of limited
partnership units purchased pursuant to the 1997 tender offer relating to
the Georgia park. The Co-Venture Parks contributed revenues of $160.6
million, $152.0 million and $176.8 million to the Company in the fiscal
years 1995, 1996 and 1997, respectively. During these three fiscal years,
the Co-Venture Parks contributed EBITDA of $36.8 million, $24.3 million and
$34.7 million, respectively (after payment of $11.6 million, $8.1 million
and $21.3 million, respectively, to the limited partners). In 1995, 1996 and
1997, the Co-Venture Parks produced $48.4 million, $32.4 million and $56.0
million of EBITDA, respectively. In connection with the Six Flags
Transactions, SFEC is transfering its interests in the Co-Venture Parks to
Premier. As a result, the Company will have no interest in the revenue, cash
flow or assets of the Co-Venture Parks following consummation of the
Offering. The pro forma financial statements give effect to the disposition
of the Company's investment in the Co-Venture Parks. See "Unaudited Pro
Forma Financial Statements."
(3) Income from operations is revenue less operating, general and administrative
expenses, costs of products sold and depreciation and amortization.
(4) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of the Company's ability to service and/or
incur debt. EBITDA is not required by GAAP and should not be considered in
isolation or as an alternative to net income, 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 consolidated statements of cash flows contained in the financial
statements included elsewhere herein.
(5) During each of the years ended December 31, 1995, December 29, 1996 and
December 28, 1997, the Company's net cash used in investing activities was
approximately $93.9 million, $81.2 million and $149.7 million, respectively.
During these periods, net cash provided by (used in) financing activities
was approximately $10.6 million, $(52.2) million and $10.6 million,
respectively.
(6) Does not include amount expended ($62.7 million) by the Company to purchase
interests in the limited partners of the Co-Venture Partnerships.
(7) Total Debt/EBITDA and Net Debt/EBITDA include total outstanding pro forma
indebtedness of the Company (excluding the SFEC Zero Coupon Senior Notes)
in the accreted principal amount of $859.9. Net debt deducts from total
outstanding pro forma indebtedness $117.1 million (representing pro forma
cash and cash equivalents). See "Capitalization." EBITDA/ cash interest
expense is calculated using pro forma cash interest expense of $50.6
million. EBITDA/total interest expense is calculated using pro forma total
interest expense of $83.8 million (excluding interest on the SFEC Zero
Coupon Senior Notes).
(8) For the purpose of determining the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income (loss) before income taxes and fixed
charges. Fixed charges consist of interest expense net of interest income,
amortization of deferred financing costs and discount or premium relating to
indebtedness and the portion (approximately one-third) of rental expense
that management believes represents the interest component of rent expense.
During the two fiscal years ended December 28, 1997, the Company's earnings
were insufficient to cover fixed charges by $10.1 million and $3.7 million,
respectively. During the three fiscal years ended December 28, 1997,
earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $9.7 million, $36.5 million and $33.6 million,
respectively. On a pro forma basis, for the year ended December 28, 1997,
the Company's earnings would have been insufficient to cover fixed charges
and combined fixed charges and preferred stock dividends by $6.9 million and
$6.9 million, respectively.
(9) The pro forma balance sheet data give effect to the Six Flags Transactions
(including the transfer of the Company's interests in the Co-Venture Parks
to Premier) as if they had occurred on December 28, 1997. Pro forma total
long term debt and total debt include the SFEC Zero Coupon Senior Notes as
well as the SFEC Senior Notes. For pro forma total long term debt and total
debt, the SFEC Zero Coupon Senior Notes and SFTP Senior Subordinated Notes
are both stated at fair market value rather than at accreted amount. See
"Capitalization" and "Unaudited Pro Forma Financial Statements--Unaudited
Pro Forma Balance Sheet."
(10) Represents amount to prefund capital expenditures and working capital. See
"Prospectus Summary--The Six Flags Transactions."
26
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") of the Company are based upon and should be read in
conjunction with the historical financial statements of the Company, which are
included elsewhere in this Prospectus.
The Six Flags Acquisition will be accounted for using the purchase method of
accounting. Accordingly, Premier's acquisition cost related to Six Flags has
been "pushed-down" to the assets, liabilities and equity of Six Flags. Premier
is financing the acquisition of Six Flags through issuance of Premier Common
Stock, Seller Preferred Stock and PInES, as well as issuance of New Premier
Notes. The New Premier Notes, PInES and Seller Preferred Stock are not
guaranteed by the Company and are not reflected in the accompanying Pro Forma
Financial Statements. Allocations of the purchase price have been determined
based upon estimates of fair value. The final allocation of the purchase price
may differ from these preliminary estimates due to the final allocation being
based on the completion of valuations of certain acquired assets and assumed
liabilities and evaluation of such items by Premier's management.
The unaudited pro forma statement of operations for the year ended December
28, 1997 gives effect to the Six Flags Acquisition, and the associated
financings as if they had occurred on December 30, 1996, the first day of the
1997 fiscal year of Six Flags. In connection with the Six Flags Transactions,
the Company is transferring its interests in the Co-Venture Parks to Premier.
The Pro Forma Financial Statements give effect to the transfer of the Company's
investment in the Co-Venture Parks.
The unaudited pro forma balance sheet is presented as if the Six Flags
Acquisition and the associated financings occurred on December 28, 1997, the
last day of the 1997 fiscal year of Six Flags.
The Pro Forma Financial Statements are for informational purposes only, have
been prepared based upon estimates and assumptions deemed by Premier to be
appropriate and do not purport to be indicative of the financial position or
results of operations which would actually have been attained if the acquisition
had occurred as presented in such statements or which could be achieved in the
future.
27
SIX FLAGS ENTERTAINMENT CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 28, 1997
(IN THOUSANDS, EXCEPT FOR RATIO DATA)
· Enlarge/Download Table
HISTORICAL CO-VENTURE PRO FORMA COMPANY
SIX FLAGS ADJUSTMENTS(1) ADJUSTMENTS PRO FORMA
---------- -------------- ----------- -------------
REVENUE:
Theme park admissions.................................. $ 368,139 $ (93,946) $ -- $ 274,193
Theme park food, merchandise, and other................ 340,527 (82,848) -- 257,679
---------- -------------- ----------- -------------
Total revenue...................................... 708,666 (176,794) -- 531,872
---------- -------------- ----------- -------------
OPERATING COSTS AND EXPENSES:
Operating expenses..................................... 330,033 (100,445) (12,596)(2) 216,962
Selling, general and administrative.................... 113,326 (17,474) (13,677)(3) 82,175
Costs of products sold................................. 101,239 (24,137) 728(4) 77,830
Depreciation and amortization.......................... 84,493 (12,107) 5,205(5) 77,591
---------- -------------- ----------- -------------
Total operating costs and expenses................. 629,091 (154,163) (20,340) 454,588
---------- -------------- ----------- -------------
Income (loss) from operations.......................... 79,575 (22,631) 20,340 77,284
OTHER INCOME (EXPENSE):
Interest expense, net.................................. (84,430) -- 759(6) (83,671)
Minority interest...................................... 1,147 -- (1,663)(7) (516)
---------- -------------- ----------- -------------
Total other income (expense)....................... (83,283) -- (904) (84,187)
Income (loss) before income taxes...................... (3,708) (22,631) 19,436 (6,903)
Income tax expense..................................... -- -- 17,453(8) 17,453
---------- -------------- ----------- -------------
Net income (loss)...................................... $ (3,708) $ (22,631) $ 1,983 $ (24,356)
---------- -------------- ----------- -------------
---------- -------------- ----------- -------------
EBITDA (9)............................................. $ 164,068 $ (34,738) $ 25,545 $ 154,875
---------- -------------- ----------- -------------
---------- -------------- ----------- -------------
Net cash provided by operating activities.............. $ 110,303 $ (34,738) $ 24,641 $ 100,206
---------- -------------- ----------- -------------
---------- -------------- ----------- -------------
Ratio of earnings to fixed charges..................... (10) (10)
Ratio of earnings to combined fixed charges and
preferred stock dividends............................ (10) (10)
See accompanying notes to unaudited pro forma statement of operations.
28
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 28, 1997
(IN THOUSANDS)
BASIS OF PRESENTATION
The accompanying unaudited pro forma statement of operations for the year
ended December 28, 1997, has been prepared based upon certain pro forma
adjustments to historical financial information of the Company. Premier's
acquisition of the capital stock of the Company is scheduled to be completed in
the second quarter of 1998.
The unaudited pro forma statement of operations for the year ended December
28, 1997, has been prepared assuming the Six Flags Acquisition, the related
financings, and the transfer of the Company's interests in the Co-Venture Parks
to Premier had occurred on December 30, 1996, the first day of the Company's
1997 fiscal year. The unaudited pro forma statement of operations should be read
in conjunction with the consolidated financial statements of the Company and
notes thereto included elsewhere herein.
PRO FORMA ADJUSTMENTS
(1) Represents results of the Six Flags Over Texas and Six Flags Over Georgia
theme parks. Prior to the Six Flags Acquisition, Six Flags included the
results of the Co-Venture Partnerships (excluding partnership depreciation)
in Six Flags' consolidated statements of operations and the net amounts paid
to the limited partners thereof were reflected as an operating expense. In
connection with the Six Flags Transactions, the Company is transferring its
interests in the Co-Venture Parks to Premier. The pro forma statement of
operations gives effect to the transfer of the Company's investment in the
Co-Venture Parks.
(2) Adjustments reflect anticipated reductions in park-level operating expenses
of $12,596.
(3) Adjustments reflect anticipated reductions in selling, general and
administrative expenses of $13,677 (including national advertising and
promotion expenses, insurance, and other expenses, net of reduction of
accrued restructuring costs and other non-recurring items).
(4) Adjustments reflect elimination of $728 of non-recurring benefits from
reversing previously accrued expenses at Six Flags during 1997.
(5) Adjustments reflect the elimination of historical depreciation of $58,902
and the inclusion of estimated pro forma depreciation of $25,937 and the
elimination of historical amortization of $13,484 (after reduction of
$12,107 of amortization related to the Co-Venture Partnerships) and the
inclusion of estimated pro forma amortization of $51,654. Depreciation by
Premier is based on useful lives of 20 years and intangible assets are
amortized over 25 years. The pro forma value of property and equipment is
estimated to be consistent with the historical recorded value. Thus, the net
pro forma reduction of Six Flags depreciation is a result of longer average
lives used by Premier. The increase in Six Flags net pro forma amortization
results from the increase in the pro forma amount of intangible assets and
the amortization of such costs over 25 years. The allocation of the Six
Flags purchase price to property and equipment, based on book value, and to
intangible assets based on the excess of the purchase price over the
estimated value of the acquired net assets is subject to adjustment. The
final allocation of the purchase price may differ from these preliminary
estimates due to the final allocation being based on the completion of
valuations of certain acquired assets and assumed liabilities and
management's evaluation of such items.
(6) Adjustments reflect the interest expense associated with the SFEC Senior
Notes, and the Six Flags Credit Facility net of the elimination of the
interest expense associated with the credit facility previously outstanding,
as if the purchase of Six Flags had occurred on December 30, 1996, the first
29
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 28, 1997
(IN THOUSANDS)
day of the 1997 fiscal year of Six Flags. Issuance costs associated with the
new borrowings are being amortized over the respective terms. The components
of the adjustments are as follows:
· Download Table
Interest expense on SFEC Senior Notes (assuming a 9 1/2% interest
rate)............................................................ (16,150)
Interest expense on Six Flags Credit Facility (assuming an 8.198%
interest rate)................................................... (34,432)
Interest expense from amortization of issuance costs............... (1,826)
Interest expense from commitment fee on the Six Flags Credit
Facility......................................................... (260)
Elimination of historical interest expense......................... 53,427
---------
$ 759
---------
---------
A 0.125% change in the interest rates on the SFEC Senior Notes and Six Flags
Credit Facility would increase interest expense, net, by $738.
(7) Adjustment reflects the increase of $1,663 relating to the minority interest
owner's share of operations related to anticipated net cost reductions at
Fiesta Texas reflected above.
(8) Adjustments reflects the application of income taxes to the co-venture and
pro forma adjustments, after consideration of permanent differences related
to the non-deductible pro forma amortization of the intangible assets, at a
rate of 39%.
(9) EBITDA is defined as earnings before interest expense, net, income tax
expense (benefit), depreciation and amortization and minority interest. The
Company has included information concerning EBITDA because it is used by
certain investors as a measure of the Company's ability to service and/ or
incur debt. EBITDA is not required by GAAP and should not be considered in
isolation or as an alternative to net income, 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 consolidated statements of cash flows contained in the financial
statements included elsewhere herein.
(10) On an historical basis, for the year ended December 28, 1997, the Company's
earnings would have been insufficient to cover fixed charges and combined
fixed charges and preferred stock dividends by $3.7 million and $33.6
million, respectively. On a pro forma basis for such year, earnings were
insufficient to cover fixed charges and combined fixed charges and preferred
stock dividends by $6.9 million and $6.9 million, respectively.
30
SIX FLAGS ENTERTAINMENT CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 28, 1997
(IN THOUSANDS)
· Enlarge/Download Table
HISTORICAL PRO FORMA COMPANY
SIX FLAGS ADJUSTMENTS PRO FORMA
---------- ------------ ------------
ASSETS:
Current Assets:
Cash and cash equivalents.............................................. $ 16,805 $ 402,620(1) $ 117,100
(348,325 (2)
46,000(3)
Accounts receivable.................................................... 7,258 7,258
Inventories............................................................ 14,338 14,338
Prepaid expenses and other current assets.............................. 11,899 -- 11,899
---------- ------------ ------------
Total current assets............................................... 50,300 100,295 150,595
Deferred charges....................................................... 20,171 12,350(1) 12,350
(20,171 (2)
Restricted-use investments............................................. -- 175,030(1) 175,030
Deposits and other..................................................... 26,784 25,000(2) 40,800
(10,984 (2)
---------- ------------ ------------
Total other assets................................................. 46,955 181,225 228,180
Investment in theme parks, net......................................... 78,370 (78,370 (3) --
Property and equipment, net............................................ 492,137 -- 492,137
Intangible assets, net................................................. 196,928 1,094,436(2) 1,291,364
---------- ------------ ------------
Total assets....................................................... $ 864,690 $ 1,297,586 $ 2,162,276
---------- ------------ ------------
---------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current Liabilities:
Accounts payable and accrued expenses.................................. $ 61,014 $ -- $ 61,014
Accrued interest payable............................................... 3,431 (3,431 (2) --
Current maturities of long-term debt and short term borrowings......... 56,633 1,000(1) 1,000
(56,633 (2)
---------- ------------ ------------
Total current liabilities.......................................... 121,078 (59,064) 62,014
Long-term debt......................................................... 753,369 589,000(1) 1,062,600
(279,769 (2)
Other long-term liabilities............................................ 12,570 35,000(2) 47,570
Stockholders' equity (deficit)......................................... (22,327) 22,327(2) 990,092
1,022,462(2)
(32,370 (3)
---------- ------------ ------------
Total liabilities and stockholders' equity (deficit)............... $ 864,690 $ 1,297,586 $ 2,162,276
---------- ------------ ------------
---------- ------------ ------------
See accompanying notes to unaudited pro forma balance sheet.
31
SIX FLAGS ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 28, 1997
(IN THOUSANDS)
BASIS OF PRESENTATION
The accompanying unaudited pro forma balance sheet as of December 28, 1997,
has been prepared based on certain pro forma adjustments to historical financial
information of the Company.
The unaudited pro forma balance sheet as of December 28, 1997, has been
prepared assuming the Six Flags Acquisition and the related financings occurred
on December 28, 1997. The unaudited pro forma balance sheet should be read in
conjunction with the consolidated financial statements of the Company, and notes
thereto included elsewhere herein.
PRO FORMA ADJUSTMENTS
(1) Adjustment reflects the following debt proceeds and issuance costs:
· Download Table
Debt:
SFEC Senior Notes............................................... $ 170,000
Six Flags Credit Facility....................................... 420,000
---------
590,000
Less debt issuance costs............................................ 12,350
---------
$ 577,650
---------
---------
As part of the Six Flags Transactions, the Company will be establishing
restricted-use investments of $175,030 related to the repayment of the SFEC
Zero Coupon Senior Notes.
(2) Adjustment reflects the purchase by Premier of the outstanding capital stock
of Six Flags. A $25,000 indemnity escrow will be established from the
purchase price to fund indemnification claims of Premier under the Six Flags
Agreement. The indemnity escrow is reflected as a deposit and as an other
long-term liability. As of December 28, 1997, Six Flags had $810,002 of debt
outstanding. The Company will refinance outstanding indebtedness of $379,003
($348,500 at SFTP and $30,503 at SFEC) and $3,431 of accrued interest and
assume $430,999 of long-term debt. In order to repay the debt at SFEC,
Premier intends to contribute and/or advance to SFEC cash to the extent
required. For purposes of the pro forma balance sheet it is anticipated that
$34,109 will be contributed by Premier.
The purchase price and debt repayment will be funded from proceeds of the
Premier Common Stock and PInES offerings and the proceeds from the New Six
Flags Credit Facility. The acquisition will be accounted for using the
purchase method of accounting. Accordingly, the cost of the acquisition has
been "pushed down" to the assets, liabilities and equity of the Company.
Allocation of the purchase price for purposes of the pro forma balance sheet
was based upon estimated fair values of assets and liabilities. Fair value
of assets and liabilities approximate recorded historical amounts, except
for the fair value of the assumed debt and certain other assets, investments
and deferred charges. The fair value of the assumed debt was $42,601 higher
than the recorded value (which amount is reflected as a reduction in the
repayment of long term debt of $322,370, for a net reduction in long term
debt of $279,769) and certain other assets were reduced by $31,155
(including $20,171 of deferred charges and $10,984 of deposits and other).
Additionally, $10,000 of liabilities related to changes in contractual
agreements and other obligations are reflected as other long-term
liabilities. Purchase price in excess of the estimated fair value of the
acquired net assets has been reflected as an increase in intangible assets.
(3) As part of the Six Flags Transactions, the Company will be transferring its
interests in the Co-Venture Parks to Premier. The pro forma balance sheet
reflects the receipt by the Company of $46,000 from Premier representing the
fair market value of such interests held directly or indirectly by SFTP. The
interests held by SFEC are being transferred as a distribution by SFEC to
Premier immediately following the Six Flags Acquisition. The difference
between historical recorded value and the payment is reflected as a
reduction of Premier's contribution of capital.
32
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are derived principally from the sale of tickets for
entrance to its parks, parking and corporate sponsorships (approximately 58.3%,
59.6% and 60.3% in the years ended December 31, 1995, December 29, 1996 and
December 28, 1997, respectively) and the sale of food, merchandise, gasoline,
games and attractions inside its parks and other income (approximately 41.7%,
40.4% and 39.7% in the years ended December 31, 1995, December 29, 1996 and
December 28, 1997, respectively). The Company's principal costs of operations
include salaries and wages, fringe 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.
Prior to the Six Flags Acquisition, the Company, through two subsidiaries,
was the general partner in the Co-Venture Partnerships. For the historical
periods presented, the Company accounted for the Co-Venture Parks as
co-ventures, i.e., their revenues and expenses (excluding partnership
depreciation) were included in the Company's consolidated statements of
operations and the net amounts distributed to the limited partners were deducted
as expenses. Except for the limited partnership units in the Georgia park owned
by the Company at December 28, 1997, the Company had no rights or title to the
Co-Venture Parks' assets or to the proceeds from any sale of the Co-Venture
Parks' assets or liabilities during the periods presented. Accordingly, the
Company's historical consolidated balance sheets did not include any of the
Co-Venture Parks' assets. The investment in the Co-Venture Parks included in the
Company's historical consolidated balance sheets represented (i) the Company's
interest in the estimated future cash flows from the operations of the
Co-Venture Parks, which was amortized over the life of the partnership
agreements, and (ii) the value of Limited Partnership units purchased pursuant
to the tender offer relating to the Georgia park. The Co-Venture Parks
contributed revenues of $160.6 million, $152.0 million and $176.8 million to the
Company in the fiscal years 1995, 1996 and 1997, respectively.
In connection with the Six Flags Transaction, SFEC is transferring its
interests in the Co-Venture Parks to Premier. Accordingly, cash flows from these
parks will not be available to service the debt of SFEC (including the SFEC
Senior Notes) and the Company will have no interest in the revenues or cash
flows of the Co-Venture Parks following consummation of the Offering. The
discussion below includes the results of the Co-Venture Parks which are being
transferred to Premier as part of the Six Flags Transactions.
Due to the change of control that will result from the Six Flags
Acquisition, the Company will recognize substantial noncash compensation expense
in 1998 immediately prior to Premier's purchase of the Company by virtue of the
vesting of certain restricted stock and stock options. Such expense will be
included as part of the purchase price of Premier and will not be reflected as
an expense subsequent to the Six Flags Acquisition.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 28, 1997 AND DECEMBER 29, 1996
REVENUES. Revenues aggregated $708.7 million in 1997, compared to $680.9
million in 1996. The 4.1% increase in revenues is attributable to higher
spending per guest partially offset by decreased attendance. The average ticket
spending per guest increased 8.1% as a result of selected price increases and
reductions in ticket discounts. Average in-park spending per guest increased
4.4% primarily from gains in food service, stemming from improved processes,
quality and service and increases in games, attractions and parking spending.
Attendance declined by 2.5% primarily due to the postponement of the linear
induction motor ("LIM") coasters at three of the Company's parks, poor
early-season weather and increased competition in the San Antonio market. The
declines were offset, in part, by a substantial increase in attendance in 1997
at the Georgia park after a low attendance level at that park in 1996 due
33
largely to the effects of the Atlanta Olympics during that summer. The Company
expects all three LIM's to be operational for the 1998 season.
OPERATING, GENERAL AND ADMINISTRATIVE. Operating, general and
administrative expenses were $443.4 million in 1997, compared to $419.8 million
for 1996. As a percentage of revenues, these expenses constituted 62.6% for 1997
and 61.6 % for 1996. The increase over 1996 expenses related primarily to
increased distributions to the limited partners of the Georgia park along with
higher compensation and maintenance expenses, which were partially offset by
reduced advertising costs and the reversal of expense accruals of approximately
$7.3 million during 1997 that were no longer deemed necessary. Limited partner
distributions increased as a result of the new arrangements entered into in
March 1997 with respect to the Georgia Co-Venture Partnership. The higher
compensation costs resulted from higher average seasonal wage rates, additional
operating hours in 1997, and a return to full staffing at the Georgia park after
reduced requirements in 1996. Higher maintenance costs were incurred to repair
major rides and facilities to enhance park operations. Advertising costs were
down due to lower spending by the Georgia park, which incurred much higher
advertising expense levels in 1996 as a result of the Olympics. Additionally,
the postponed opening of the LIM coasters resulted in reduced advertising costs
at three of the Company's parks.
COSTS OF PRODUCTS SOLD. Costs of products sold were $101.2 million for 1997
compared to $106.0 million for 1996. Costs of products sold as a percentage of
theme park food, merchandise and other decreased from 38.4% in 1996 to 36.0% in
1997. The $4.7 million or 4.5% decrease from 1996 resulted primarily from
centralized procurement of key food items and a shift in sales to higher margin
food products sold.
DEPRECIATION, AMORTIZATION AND INTEREST EXPENSE. Depreciation and
amortization expense was $84.5 million for 1997 as compared to $87.4 million in
1996. The decrease resulted from lower amortization of the investment in the
Co-Venture Parks related to the Georgia Co-Venture Park as a result of the
amendments in 1997 to the structure of the Georgia Co-Venture Partnership.
Interest expense, net, increased $7.9 million in 1997, as compared to 1996,
primarily due to the increased average borrowings in 1997 and higher interest
expense incurred by the Co-Venture Parks, partially offset by a decrease in
average borrowing rates.
INCOME TAXES. The relationship between income (loss) before taxes and
income tax expense is principally affected by the amortization of the excess of
costs over net assets acquired, which is non-deductible for income tax purposes.
The income tax expense recorded for 1996 principally represented a valuation
allowance on the Company's deferred tax assets.
At May 25, 1997, the Company reported that it had carryforwards of
approximately $123.0 million of net operating losses ("NOLs") for regular
Federal income tax purposes and $35.0 million for Federal alternative minimum
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, and, as a
result of the Six Flags Acquisition, the use of all of such NOLs will become,
subject to limitations on the amount of taxable income that can be offset with
such NOLs. Accordingly, no assurance can be given as to the timing or amount of
the availability of such NOLs to the Company and its subsidiaries.
YEARS ENDED DECEMBER 29, 1996 AND DECEMBER 31, 1995
REVENUES. Revenues aggregated $680.9 million in 1996, an 8.2% increase over
1995 revenue of $629.5 million. This increase was primarily attributable to the
consolidation of Fiesta Park's operations in 1996 which accounted for
approximately $52.7 million of the total increase in revenues. The resulting
decrease in comparable revenues (exclusive of Fiesta Park's revenues) was due to
lower attendance, offset in part by higher average spending per guest.
Comparable in-park attendance declined by approximately
34
5.3%, while average ticket spending per guest increased approximately 6.8% and
average in-park spending per guest increased approximately 3.9%. The decline in
comparable in-park attendance resulted primarily from unfavorable weather
experienced by several of the Company's theme parks, the adverse impact of the
1996 Summer Olympics (which were held in Atlanta) on the Georgia park and the
delayed introduction of the SUPERMAN THE ESCAPE ride at Six Flags Magic Mountain
(the "Superman Ride"). The delayed introduction of the Superman Ride resulted
from propulsion issues with the new state-of-the-art technology incorporated
into this first 100-mile per hour thrill ride. The Superman Ride opened on March
15, 1997. The increases in average ticket spending per guest and average in-park
spending per guest were due to selected price increases, improvements to
retail/food outlets and product offerings, and new pay-per-ride Skycoasters at
Six Flag Over Texas, Six Flags Over Georgia, Six Flags AstroWorld, Six Flags St.
Louis and Six Flags Magic Mountain.
OPERATING, GENERAL AND ADMINISTRATIVE. Operating, general and
administrative expenses increased from approximately $388.1 million in 1995 to
approximately $419.8 million in 1996. These expenses (as a percentage of
revenue) constituted approximately 61.6% and 61.7% during 1996 and 1995,
respectively. The acquisition of Wet'n Wild in April 1995 (which was renamed Six
Flags Hurricane Harbor (Dallas)) and the consolidation of Fiesta Park's
operations accounted for approximately $39.3 million of the total increase in
operating, general and administrative expenses. The resulting $7.6 million
decrease in comparable expenses was primarily due to lower incentive
compensation in 1996, costs accrued in 1995 in connection with the
reorganization of the Company's headquarters and the absence of costs allocated
from Time Warner (relating to employees of Time Warner who served as senior
management of the Company during 1995) subsequent to June 1995.
COSTS OF PRODUCTS SOLD. Costs of products sold increased from $91.1 million
in 1995 to $106.0 million in 1996. A large portion of the increase
(approximately 59%) was a result of the consolidation of the Fiesta Park's
operations. Cost of products sold (as a percentage of in-park product revenue)
constituted approximately 39.5% and 35.7%, during 1996 and 1995, respectively.
Excluding Fiesta Park, costs of products sold increased by 3.8% due to increased
cost for higher quality products and the mark-down/ write-off of slow moving
inventory.
DEPRECIATION, AMORTIZATION AND INTEREST EXPENSE. Depreciation and
amortization expense aggregated approximately $87.4 million in 1996 and
approximately $83.4 million in 1995. Interest expense, net, increased from $63.3
million in 1995 to $76.5 million in 1996, due to an increase in the average
outstanding debt level combined with an increase in the average cost of debt,
both of which resulted from the full year effect of the issuance of the SFTP
Senior Subordinated Notes and borrowings under Six Flags' then existing credit
facility, in each case, in June 1995.
INCOME TAXES. The relationship between income (loss) before taxes and
income tax expense is principally affected by the amortization of the excess of
costs over net assets acquired, which is non-deductible for income tax purposes.
The tax expense recorded for 1996 principally represents a valuation allowance
on the Company's deferred tax assets.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
The operations of the Company are highly seasonal, with the majority of the
operating season occurring between Memorial Day and Labor Day. Most of the
Company's revenue is collected in the second and third quarters of each year
while most expenditures for capital improvements and major maintenance are
incurred when the parks are closed or operate only on weekends during the first
and fourth quarters of each year. See "Risk Factors -- Effects of Inclement
Weather; Seasonal Fluctuations of Operating Results." The Company employs a
substantial number of seasonal employees who are compensated on an hourly basis.
The Company is not subject to Federal or certain applicable state minimum wage
rates in respect of its seasonal employees. However, the 1996 increase of $.90
an hour over two years in the Federal minimum wage rate, any future increase in
such rate and any increase in the state minimum wage
35
rates, may result over time in increased compensation expense for the Company as
it relates to these employees as a result of competitive factors.
During 1997, the Company generated $110.3 million in net cash provided by
operating activities. Net cash used in investing activities aggregated
approximately $149.7 million, $67.7 million of which represented amounts spent
for capital expenditures of the Company's wholly-owned theme parks and Fiesta
Texas and $62.7 million of which represented the amount expended to purchase
interests in the limited partners of the Co-Venture Partnerships. Net cash
provided by financing activities for 1997 aggregated $10.6 million reflecting
the net borrowings under revolving lines of credit, and proceeds from other
interim loans, partially offset by payments on term loans.
At December 28, 1997, the Texas Co-Venture Partnership had a $15.0 million
line of credit available for anticipated working capital requirements and the
Georgia Co-Venture Partnership had a $19.0 million line of credit available for
working capital, capital expenditures and partner distributions.
In addition to its obligations under its outstanding indebtedness and
preferred stock, Premier is required to (i) make minimum annual distributions of
approximately $46.2 million (subject to cost of living adjustments) to its
partners in the Co-Venture Parks and (ii) make minimum capital expenditures at
each of the Co-Venture Parks during rolling five-year periods, based generally
on 6% of such park's revenues. Cash flow from operations at the Co-Venture Parks
will be used to satisfy these requirements first, before any funds are required
from Premier. Premier has also agreed to purchase a maximum number of 5% per
year (accumulating to the extent not purchased in any given year) of limited
partnership units outstanding as of the date the Co-Venture agreements that
govern the partnerships of these partnerships (to the extent tendered by the
unit holders). SFEC and SFTP have guaranteed each of these obligations. The
agreed price for these purchases is based on a valuation for each respective
Co-Venture Park equal to the greater of (i) a value derived by multiplying its
weighted-average four year EBITDA by a specified multiple (8.0 in the case of
the Georgia park and 8.5 in the case of the Texas park) or (ii) $250.0 million
in the case of the Georgia park and $374.8 million in the case of the Texas
park. Premier's obligations with respect to Six Flags Over Georgia and Six Flags
Over Texas will continue until 2027 and 2028, respectively. As Premier purchases
limited partnership units, it will be entitled to the minimum distribution and
other distributions attributable to such units, unless it is then in default
under its obligations to its partners at the Co-Venture Parks. In addition
Premier has established a restricted cash account pursuant to which Premier will
deposit $75.0 million of the net proceeds of the Offerings in an account, which
will be pledged as security for the Company's obligations under the Premier
Discount Notes, to satisfy obligations under the arrangements relating to the
Co-Venture Parks or the Subordinated Indemnity Agreement and to fund dividends
on the Convertible Preferred Stock as required under the indentures that will
govern the New Premier Notes. Premier estimates that its maximum unit purchase
obligation for 1998, when purchases are required only for the Georgia park, will
aggregate approximately $13 million (approximately $31 million for 1999, when
purchases for both partnerships are required) and its minimum capital
expenditures for 1998 at these parks will total approximately $11 million. The
guarantee by SFEC and SFTP of these obligations will survive the transfer of
their interests in the Co-Venture Parks to Premier.
The SFEC Senior Notes will require annual interest payments of $16.2 million
and, except in the event of a change of control of the Company or certain other
circumstances, will not require any principal payments prior to their maturity.
The net proceeds of the Offering, together with other funds, will be deposited
in escrow to repay in full SFEC Zero Coupon Senior Notes at or prior to maturity
on December 15, 1999. The SFTP Senior Subordinated Notes (accreted value of
$269.9 million at December 28, 1997) require interest payments of approximately
$34.9 million per annum, payable semi-annually commencing December 15, 1998,
and, except in certain circumstances, no principal payments are due thereon
until their maturity date, June 15, 2005. Term loan borrowings under the Six
Flags Credit Facility will mature on November 30, 2004 (with principal payments
of $1.0 million in each of 1998--2001, $25.0 million in 2002, $40.0 million in
2003 and $303.0 million at maturity). Revolving credit borrowings under this
facility ($100.0 million) mature on the fifth anniversary of the Six Flags
Acquisition. Borrowings under the Six
36
Flags Credit Facility will be guaranteed by SFEC and SFTP's domestic
subsidiaries and will be secured by substantially all of the assets of SFTP and
its domestic subsidiaries and by a pledge by SFEC of the stock of SFTP. See
"Description of Other Company Indebtedness" and "Description of Notes."
By reason of the Six Flags Acquisition, SFTP will be required to offer to
purchase the SFTP Senior Subordinated Notes at a price equal to 101% of their
accreted amount (approximately $287.9 million at June 15, 1998). On March 3,
1998, the last reported sales price of these notes was substantially in excess
of their accreted amount. SFTP does not expect to be required to purchase any
material amount of these Notes by reason of this offer. Although Premier has
entered into discussions with lenders to provide a standby arrangement to
finance the purchase of such Notes in the event any such Notes are tendered in
response to such offer, there can be no assurance that such discussions will be
successful or that Premier or SFTP will be able to obtain any other financing in
the event that it should become necessary.
The degree to which the Company will be leveraged following the Six Flags
Transactions could have important consequences to the Company. See "Risk
Factors--Risks Associated with Substantial Indebtedness and Other Obligations"
and "Description of Other Company Indebtedness."
The Company's liquidity could be adversely affected by unfavorable weather,
accidents or the occurrence of an event or condition, including negative
publicity or significant local competitive events that significantly reduces
paid attendance and, therefore, revenue at any of its theme parks.
On a pro forma basis, as of December 28, 1997, the Company had total
outstanding indebtedness (excluding the SFEC Zero Coupon Senior Notes) in the
accreted principal amount of approximately $859.9 million, including: (i) $420.0
million under the Six Flags Credit Facility, (ii) $269.9 million in accreted
value at that date of SFTP Senior Subordinated Notes ($285.0 million principal
amount at maturity in 2005), and (iii) $170.0 million in aggregate principal
amount of SFEC Senior Notes. Indebtedness at that date also would have included
$161.1 million accreted value of SFEC Zero Coupon Senior Notes, which will be
repaid with the proceeds of the SFEC Senior Notes together with certain other
funds at or prior to maturity on December 15, 1999. On a pro forma basis, as of
December 28, 1997, the Company would have had stockholders' equity of
approximately $990.1 million. On a pro forma basis, for the year ended December
28, 1997, the Company's earnings would have been insufficient to cover its fixed
charges by approximately $6.9 million. In addition, the Six Flags Indentures and
the Six Flags Credit Facility permit the Company to incur additional
indebtedness under certain circumstances. See "Description of Other Company
Indebtedness" and "Description of Notes--Certain Covenants."
The Company's ability to make scheduled payments on, or to refinance, its
indebtedness, or to fund planned capital expenditures, and Premier's ability to
make scheduled payments on, or to refinance, its indebtedness (including the
Guarantee), to pay dividends on its preferred stock, or to fund planned capital
expenditures and its obligations under the arrangements relating to the
Co-Venture Parks, will depend on their respective future performances, which, to
a certain extent, are subject to general economic, financial, weather,
competitive and other factors that are beyond their control. Premier's
management believes that, based on current and anticipated operating results,
cash flow from operations, available cash and available borrowings under the Six
Flags Credit Facility will be adequate to meet the Company's future liquidity
needs, including anticipated requirements for working capital, capital
expenditures and scheduled debt payments, for at least the next several years.
Based on current and anticipated operating results, Premier believes that cash
flow from operations and available cash, available borrowings under the Credit
Facilities and the net proceeds of the Offerings (to the extent not used in
connection with the Six Flags Acquisition) will be adequate to meet Premier's
future liquidity needs, including anticipated requirements for working capital,
capital expenditures, scheduled debt and preferred stock dividends and its
obligations under arrangements relating to the Co-Venture Parks, for at least
the next several years. However, the Company and/or Premier may need to
refinance all or a portion of their existing debt on or prior to maturity or to
obtain additional financing. There can be no assurance that the Company's
business will generate sufficient cash flow from operations, that currently
anticipated cost savings will be realized or that future borrowings
37
will be available under the Six Flags Credit Facility in an amount sufficient to
enable the Company to service its indebtedness or to fund its other liquidity
needs. Similarly, there can be no assurance that Premier's business will
generate sufficient cash flow from operations or that future borrowings will be
available under the Credit Facilities in an amount sufficient to enable Premier
to service its indebtedness or to fund its other liquidity needs. In addition,
there can be no assurance that the Company and/or Premier will be able to effect
any such refinancing on commercially reasonable terms or at all. Following the
Six Flags Acquisition, Six Flags will have approximately $117.1 million of cash
and cash equivalents available to fund capital expenditures and working capital
requirements. In addition, the Company spent approximately $18.0 million of cash
in 1997 and expects to expend $41.5 million of cash in the first two quarters of
1998, to fund capital expenditures for the 1998 operating season. See "Risk
Factors--Risks Associated with Substantial Indebtedness and Other Obligations."
NEWLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of "comprehensive
income" and its components in a set of financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
currently does not have any components of comprehensive income that are not
included in net income.
Also in June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 is effective for periods beginning after December 15, 1997.
SFAS No. 131 requires that a public entity report financial and descriptive
information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company will adopt SFAS No.
131 in 1998. However, such adoption is not expected to impact the Company's
financial disclosures because the Company's current operations are limited to
one reportable operating segment under SFAS No. 131's definitions.
In January 1997, the Commission issued Release No. 33-7386, which requires
enhanced descriptions of accounting policies for derivative financial
instruments and derivative commodity instruments in the footnotes to financial
statements. The release also requires certain quantitative and qualitative
disclosure outside financial statements about market risks inherent in market
risk sensitive instruments and other financial instruments. The requirements
regarding accounting policy descriptions were effective for any fiscal period
ending after June 15, 1997. However, because derivative financial and commodity
instruments have not materially affected the Company's consolidated financial
position, cash flows or results of operations, this part of the release does not
affect the Company's 1997 financial statement disclosures.
IMPACT OF YEAR 2000 ISSUE
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of past practices in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company has completed plans to ensure year 2000 compliance
and started conversions of applications beginning in 1996. These modifications
and replacements are expected to be completed by January 1999. Costs in
connection with any such modifications are not expected to be material. See
"Risk Factors -- Impact of Year 2000 Issue."
38
BUSINESS
GENERAL
Prior to its acquisition by Premier, Six Flags was the largest regional
theme park company, and the second largest theme park operator, in the world,
based on 1997 attendance. After the Six Flags Acquisition, Six Flags will
operate six regional theme parks, as well as three separately gated water parks
and a wildlife safari park. The Six Flags Parks serve four of the ten largest
metropolitan areas in the country: New York, Philadelphia, Los Angeles and
Chicago. The Company estimates that over one-third of the population of the
continental U.S. lives within a 150-mile radius of the Six Flags Parks. During
1997, the Six Flags Parks (including the Co-Venture Parks) drew, in the
aggregate, approximately 68% of their patrons from within a 100-mile radius. On
a pro forma basis, Six Flags' attendance, revenue and EBITDA for the year ended
December 28, 1997 totaled approximately 16.5 million, $531.9 million and $154.9
million, respectively.
The following table sets forth certain information for the Six Flags Parks:
· Enlarge/Download Table
NAME TYPE OF PARK PRIMARY MARKET 1997 ATTENDANCE ACRES(1)
---------------------------------- --------------- --------------------------------- ----------------- -------------
(IN THOUSANDS)
Six Flags AstroWorld.............. Theme Houston 1,990 90
Six Flags WaterWorld.............. Water Houston 280 14
Six Flags Fiesta Texas............ Theme San Antonio 1,640 200
Six Flags Great Adventure......... Theme New York City/Philadelphia 3,690(2) 576(2)
Six Flags Wild Safari Animal
Park.............................. Wildlife New York City/Philadelphia (2) (2)
Six Flags Great America........... Theme Chicago/Milwaukee 3,040 86
Six Flags Magic Mountain.......... Theme Los Angeles 3,270 110
Six Flags Hurricane Harbor........ Water Los Angeles 350 11
Six Flags St. Louis............... Theme St. Louis 1,690 499
Six Flags Hurricane Harbor........ Water Dallas/Fort Worth 560 49
------------------------
(1) Includes acreage currently dedicated to park usage. Additional acreage
suitable for development exists at many of the facilities.
(2) Attendance and acreage information for Six Flags Great Adventure also
includes data for the adjacent Six Flags Wild Safari Animal Park.
Six Flags, including its predecessors, has operated regional theme parks
under the Six Flags name for over 30 years. As a result, Six Flags has
established a nationally-recognized brand name. Since 1991, Six Flags has used
certain Warner Bros. and DC Comics characters to market its parks and to provide
an enhanced family entertainment experience. These characters include BUGS
BUNNY, DAFFY DUCK, TWEETY BIRD, YOSEMITE SAM, BATMAN, SUPERMAN and others. The
Company utilizes these characters in marketing its parks, in theming revenue
outlets and in selling character merchandise within the parks. The Company
believes that its extensive use of the Warner Bros. and DC Comics characters
promotes attendance, supports higher ticket prices, increases lengths-of-stay
and enhances in-park spending.
The Six Flags Parks are individually themed and provide a complete
family-oriented entertainment experience. Six Flags' theme parks generally offer
a broad selection of state-of-the-art and traditional thrill rides, water
attractions, themed areas, concerts and shows, restaurants, game venues and
merchandise outlets. In the aggregate, the Six Flags Parks offer more than 234
rides, including 45 roller coasters, making Six Flags one of the leading
providers of "thrill rides" in the industry.
Premier's management believes that the Six Flags Parks benefit from limited
direct competition. The combination of limited supply of real estate appropriate
for theme park development, high initial capital investment, long development
lead-time and zoning restrictions provides each of the parks with a significant
degree of protection from competitive new theme park openings. Based on its
knowledge of the development of other theme parks in the United States,
Premier's management estimates that it would cost at least $200 million and
would take a minimum of two years to construct a new regional theme park
comparable to Six Flags' theme parks.
39
According to AMUSEMENT BUSINESS, total North American amusement/theme park
attendance in 1997 was approximately 270 million. Total attendance for the 50
largest parks in North America was 167.2 million in 1997, compared to 145.0
million in 1994, representing a compound annual growth rate of 4.9%. Premier
believes that this growth reflects two trends: (i) demographic growth in the
5-24 year old age group, which is expected to continue through 2010 and (ii) an
increasing emphasis on family-oriented leisure and recreation activities.
OPERATING STRATEGY
Premier believes there are substantial opportunities for continued internal
growth at the Six Flags Parks. Upon consummation of the Six Flags Acquisition,
Premier's management intends to apply its operating strategy to pursue growth
and margin expansion at Six Flags. Premier's operating strategy seeks to
increase revenues by increasing per capita spending, while also reducing
corporate overhead and improving cost controls at the Six Flags Parks. The
primary elements of this operating strategy applicable to the Six Flags Parks
are: (i) periodically adding marketable rides and attractions; (ii) enhancing
marketing and sponsorship programs; (iii) improving ticket pricing strategies;
and (iv) repositioning and enhancing restaurants and merchandise and other
revenue outlets. This approach is designed to exploit the operating leverage
inherent in the theme park business. Once parks achieve certain critical
attendance levels (which, in general, the Six Flags Parks have achieved),
operating cash flow margins increase because revenue growth through incremental
attendance gains and increased in-park spending is not offset by a comparable
increase in operating expenses, since a large portion of such expenses is
relatively fixed during any given year.
The Six Flags Parks generally enjoy significant market penetration. Thus,
although Premier's management plans to make targeted capital expenditures at the
Six Flags Parks to increase their attendance and per capita spending levels, it
expects to increase significantly the EBITDA of these parks primarily through
increased operating efficiencies. First and most importantly, Premier believes
that it can substantially reduce Six Flags' corporate overhead and other
corporate-level expenses. Second, Premier expects to achieve significant
improvement in park-level operating margins at the Six Flags Parks. Third, by
virtue of economies of scale, Premier believes that operating efficiencies in
areas such as marketing, insurance, promotion, purchasing and other expenses can
be realized. Finally, Premier believes that its increased size following the Six
Flags Acquisition will enable the Company to achieve savings in capital
expenditures.
EXPANSION STRATEGY
Premier may expand in the future certain of the Six Flags Parks by adding
complementary attractions, such as campgrounds, lodging facilities, new water
parks and concert venues. For example, Six Flags owns over 1,500 undeveloped
acres adjacent to Six Flags Great Adventure (located between New York City and
Philadelphia) suitable for such purposes. Additional acreage suitable for
development exists at several other Six Flags Parks. See "--Environmental and
Other Regulation."
ACQUISITION STRATEGY
The U.S. regional theme park industry is highly fragmented with over 150
parks owned by over 100 operators. Premier believes that there are numerous
acquisition opportunities, both in the U.S. and abroad, that can expand its
business. Since 1989, Premier has pursued a strategy of acquiring and improving
regional theme parks. While Premier will continue to pursue acquisitions of
regional parks with attendance between 300,000 and 1.5 million annually, Premier
will also consider acquisitions of larger parks or park chains (such as Six
Flags). Although it anticipates making new acquisitions primarily through
Premier Operations, Premier may also make acquisitions of additional parks
through Six Flags.
40
THE THEME PARK INDUSTRY
HISTORY
Although there is a long history of traditional amusement parks, primarily
family-owned and consisting of thrill rides and midways, the opening of
Disneyland in 1955 introduced the first modern theme park. Several features of
modern theme parks distinguish them from the traditional amusement park whose
carnival atmosphere and thrill rides offer less to families and adults. Theme
parks are designed around one central or several different themes which are
consistently applied to all areas, including the rides, attractions,
entertainment, food, restaurants and landscape. Modern theme parks also
typically present a variety of free entertainment not found at old-style
amusement parks. Theme parks also offer the visitor numerous and diverse dining
establishments in order to expand length of stay and position the parks as an
all-day entertainment center. Generally, theme parks also plan nighttime
entertainment (such as fireworks) and special events, and keep certain rides
open into the night to further extend the hours of operation. As a result of
these differences, theme parks draw attendance from a wider geographic area and
attract a larger number of people from within a given market. Theme parks also
attract more families and group outings, and the average length of stay and per
capita outlay is greater.
The following table identifies the nine largest operators of theme park
chains worldwide ranked by total attendance, showing the number and type of such
parks operated by each and the aggregate attendance in 1997.
· Enlarge/Download Table
TYPE NUMBER 1997
NAME OF OPERATOR OF PARK OF PARKS ATTENDANCE
-------------------------------------------------- ------------------- ----------- -------------
(IN
THOUSANDS)
Disney............................................ Destination 8 86,000
PREMIER PARKS(1).................................. REGIONAL 31 36,700
Anheuser-Busch.................................... Regional/Destination 9 20,700
Universal Studios................................. Destination 2 14,300
Cedar Fair........................................ Regional 7 13,400
Paramount Parks................................... Regional 6 12,800
Blackpool Pleasure Beach Co.(2)................... Destination 3 8,800
The Tussauds Group(2)............................. Regional 3 7,400
Silver Dollar City................................ Regional/Destination 5 4,900
------------------------
(1) Figures for Premier Parks reflect acquisitions made by Premier during 1997,
the Walibi Acquisition and the Six Flags Acquisition as if such acquisitions
had all occurred at the commencement of the 1997 season.
(2) Does not operate parks in North America.
DESTINATION PARKS VERSUS REGIONAL PARKS
Destination parks are those designed primarily to attract visitors generally
willing to travel long distances and incur significant expense to visit the
parks' attractions as part of an extended stay. To accommodate vacationers, many
destination parks also include on-site lodging. Walt Disney World and Universal
Studios are well-known examples of this type of park. Management believes that
destination parks are typically more affected by the national economy than are
regional parks. With the exception of Six Flags Magic Mountain, located in the
same market as Disneyland and Universal Studios Hollywood, the Company does not
believe that its parks compete directly with destination parks.
Regional theme parks, such as those historically operated by the Company,
are designed to attract visitors for a full day or a significant number of
hours. Management views regional theme parks as those that draw the majority of
their patrons from within a 50-mile radius of the park and the great majority of
their visitors from within a 100-mile radius of the park. Visiting a regional
theme park may be significantly less expensive than visiting a destination park
because of lower transportation expenses, lower ticket prices
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and the lack of extended lodging expenses. The U.S. regional theme park industry
is highly fragmented with over 150 parks owned by over 100 operators.
ATTRACTIONS
Regional theme parks attract patrons of all ages. Families and young people
are attracted by the variety of major rides and attractions, children's rides
and various entertainment areas including thematic shows and concerts. Most park
admission policies are "pay-one-price," which entitles a guest to virtually
unlimited free access to all rides, shows and attractions.
Depending on the size of the property, regional theme parks typically have
between 30 and 40 attractions. These rides include roller coasters and water
rides, as well as other attractions such as bumper cars, aerial rides and
children's rides. A park may also have distinct entertainment and show areas
with specific themes such as a wild west or pirate stunt show. Games, food and
merchandise stands often reflect the theme of the particular area in which they
are located. This enhances the promotional effect of the thematic area. By
offering a variety of rides and themed areas, a park is able to target a wider
age spectrum from the surrounding population.
In addition to thrill rides, many parks offer indoor attractions and outdoor
concerts, ranging from musical skits and bands to full-scale evening concerts by
prominent entertainers. Selected concerts may require an add-on to the
admissions price, but often are part of the regular ticket price, providing
added value to visitors.
Food service offered ranges from full-service restaurants to fast food.
Young people may only be interested in a quick meal between rides while the
family may choose to relax for a picnic. Refreshment stands serve snack foods,
such as hot dogs, cotton candy and soda. In addition, game booths and
merchandise souvenir stands are dispersed throughout a park.
HISTORY
Six Flags, including its predecessors, has been in the theme park business
since 1961. Six Flags was incorporated in Delaware in 1981 under the name "Six
Flags Corporation" in connection with the acquisition by Bally Manufacturing
Corporation ("Bally") of Six Flags Corporation from Penn Central Corporation. In
1987, Bally sold its interest in Six Flags Corporation to an investor group
organized and led by Wesray Capital Corporation (the "Wesray Group"). In 1990,
Time Warner Enterprises Inc. ("Enterprises"), a subsidiary of Time Warner,
acquired a 20% interest in Six Flags Corporation. In 1991, Enterprises, together
with Blackstone Capital Partners L.P. ("Blackstone") and a limited partnership
organized by Wertheim Schroder & Co. Incorporated ("WSW"), organized SFEC, which
acquired Six Flags Corporation from the Wesray Group. As a result of such
acquisition, Enterprises owned 50% of SFEC, and Blackstone and WSW owned the
remaining 50%. In 1991, Six Flags Corporation's name was changed to its current
name "Six Flags Theme Parks Inc." In June 1992, Time Warner caused all of
Enterprises' interest in SFEC and Six Flags Corporation to be contributed to
TWE. In December 1992, Blackstone substantially reduced and WSW substantially
increased their respective interests in SFEC. In 1993, SFEC repurchased the
equity interest held by Blackstone and WSW and as a result thereof, SFEC became
a wholly-owned subsidiary of TWE. On June 23, 1995, TWE sold 51% of its interest
in SFEC to the Investor Group led by Boston Ventures Management, Inc. On
February 9, 1998, pursuant to the Six Flags Agreement, Premier agreed to
acquire, by merger, all of the capital stock of SFEC from its current
stockholders.
DESCRIPTION OF PARKS
Following the Six Flags Transaction, Six Flags will operate 10 "Six Flags"
branded theme parks in seven locations in the United States, consisting of six
major regional theme parks, as well as three separately gated water parks and
one wildlife safari park. The Six Flags Parks include:
42
SIX FLAGS ASTROWORLD AND SIX FLAGS WATERWORLD
Six Flags AstroWorld, the 28th largest theme park in the United States with
1997 attendance of 2.0 million, and the separately gated adjacent Six Flags
WaterWorld, with 1997 attendance of 283,000, are located in Houston, Texas on
the grounds of an entertainment and sports complex that includes the Houston
Astrodome. The Houston, Texas market provides the parks with a permanent
resident population of 4.3 million people within 50 miles and 5.2 million people
within 100 miles. The Houston market is the number 11 DMA in the United States.
Based upon in-park surveys, approximately 68% of the visitors to the parks in
1997 resided within a 50-mile radius of the park, and 73% resided within a
100-mile radius.
The Company owns a site of approximately 90 acres used for the theme park,
and approximately 14 acres used for the water park. Six Flags AstroWorld
indirectly competes with Sea World of Texas and the Company's Six Flags Fiesta
Texas, both located in San Antonio, Texas, approximately 200 miles from the
park. Six Flags WaterWorld competes with Splashtown and Water Works, two nearby
water parks.
SIX FLAGS FIESTA TEXAS
Six Flags Fiesta Texas (the "Fiesta Park"), the 33rd largest theme park in
the United States with 1997 attendance of 1.6 million, is located on
approximately 206 acres of land in San Antonio, Texas. The San Antonio, Texas
market provides the park with a permanent resident population of 1.6 million
people within 50 miles and 3.2 million people within 100 miles. The San Antonio
market is the number 38 DMA in the United States. Based upon in-park surveys,
approximately 43% of the visitors to the parks in 1997 resided within a 50-mile
radius of the park, and 55% resided within a 100-mile radius.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas located
in San Antonio. In addition, the park competes to a lesser degree with Six Flags
AstroWorld, the Company's park located in Houston, Texas, approximately 200
miles from the park.
PARTNERSHIP STRUCTURE. Six Flags took over management of the park in 1996.
The park is operated by San Antonio Theme Park, L.P., a limited partnership (the
"Fiesta Partnership"). Partners in the Fiesta Partnership include (i) Six Flags
San Antonio, L.P. (a limited partnership between two wholly-owned subsidiaries
of SFTP) as a 59% general partner (the "Six Flags GP"), (ii) San Antonio Park
GP, LLC (a Delaware limited liability company managed and partially owned by the
Sellers in which SFTP holds a 99% equity interest) as a 1% general partner (the
"Sellers GP") and (iii) Fiesta Texas Theme Park, Ltd (a Texas limited
partnership indirectly wholly-owned by La Cantera Development Company) as a 40%
limited partner (the "La Cantera LP"). Pursuant to the Six Flags Acquisition the
Sellers will transfer to the Company their 1% interest in the Sellers GP.
The land and most of the assets of the Fiesta Park are owned by the La
Cantera LP. The La Cantera LP leases the park to the Fiesta Partnership (the
"Fiesta Lease"). In exchange, the Fiesta Partnership pays the La Cantera LP a
nominal annual rent and is required to make certain capital improvements to and
cover all operating expenses of the park.
The Fiesta Lease has an initial term which extends through the end of fiscal
year 2005, but under certain circumstances may be extended until the end of
fiscal year 2015. If extended, the Fiesta Lease can be terminated at the end of
fiscal year 2010 at the option of either the Fiesta Partnership or the lessor.
The Fiesta Partnership has the right to terminate the Fiesta Lease effective at
the end of fiscal year 2001 if it has incurred in excess of a specified
cumulative operating loss during the 1998 to 2001 fiscal years. As long as the
Fiesta Lease continues in effect, the Fiesta Partnership has the option to
purchase the tangible and intangible assets of Fiesta Park and to buy-out the La
Cantera LP's interest in the Fiesta Partnership, during the initial term of the
Fiesta Lease, at the end of fiscal year 2010 should the lessor terminate the
Fiesta Lease and at the end of fiscal year 2015.
In connection with Six Flags' management of Fiesta Park, the Six Flags GP
entered into a management agreement with the Fiesta Partnership (the "Fiesta
Agreement") under which it will manage and
43
operate Fiesta Park on the Fiesta Partnership's behalf. Under the terms of the
Fiesta Agreement, the Fiesta Partnership will pay the Six Flags GP an annual
management fee and intellectual property fee. For the 1996 and 1997 fiscal
years, the annual management fee payable to the Six Flags GP was 4% of the
Fiesta Partnership's Gross Revenues (as defined in the Fiesta Agreement) for
such year. Commencing with the 1998 fiscal year, the management fee is 25% of
EBITDA (as defined in the Fiesta Agreement). The intellectual property fee
payable to the Six Flags GP throughout the term of the Fiesta Agreement will be
based on the Fiesta Partnership's Gross Revenues.
SIX FLAGS GREAT ADVENTURE AND SIX FLAGS WILD SAFARI ANIMAL PARK
Six Flags Great Adventure, the 10th largest theme park in the United States,
and the separately gated adjacent Six Flags Wild Safari Animal Park, the 23rd
largest theme park in the United States with 1997 combined attendance of 3.7
million, are located in Jackson, New Jersey, approximately 70 miles south of New
York City and 50 miles east of Philadelphia. The New York and Philadelphia
markets provide the parks with a permanent resident population of 11.5 million
people within 50 miles and 25.9 million people within 100 miles. The New York
and Philadelphia markets are the number 1 and number 4 DMAs in the United
States, respectively. Based upon in-park surveys, approximately 50% of the
visitors to the parks in 1997 resided within a 50-mile radius of the park, and
80% resided within a 100-mile radius.
The Company owns a site of approximately 1,862 acres, of which approximately
221 acres are currently used for the thrill-ride based theme park operations,
and 1,641 acres remain undeveloped. Additionally, the Company owns approximately
355 adjacent acres that are used for the wildlife safari park, home to 55
species of 1,200 exotic animals which can be seen over a four and a half mile
drive. Six Flags Great Adventure's principal competitors are Hershey Park,
located in Hershey, Pennsylvania, approximately 150 miles from the park; and
Dorney Park, located in Allentown, Pennsylvania, approximately 75 miles from the
park.
SIX FLAGS GREAT AMERICA
Six Flags Great America, the 16th largest theme park in the United States
with 1997 attendance of 3.0 million, is located in Gurnee, Illinois, between
Chicago, Illinois and Milwaukee, Wisconsin. The Chicago and Milwaukee markets
provide the park with a permanent resident population of 7.6 million people
within 50 miles and 12.5 million people within 100 miles. The Chicago and
Milwaukee markets are the number 3 and number 31 DMAs in the United States,
respectively. Based upon in-park surveys, approximately 64% of the visitors to
the park in 1997 resided within a 50-mile radius of the park, and 80% resided
within a 100-mile radius.
The Company owns a site of approximately 86 acres used for the theme park
operations. Six Flags Great America currently has no direct theme park
competitors in the region, but does compete with Paramount's 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 near St. Louis, Missouri,
approximately 320 miles from the park.
SIX FLAGS HURRICANE HARBOR
Six Flags Hurricane Harbor, the 7th largest water park in the United States
with 1997 attendance of 558,000, is located across Interstate 30 from Six Flags
Over Texas 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 Unites States. Based
upon in-park surveys, approximately 70% of the visitors to the park in 1997
resided within a 50-mile radius of the park, and 77% resided within a 100-mile
radius. Six Flags Hurricane Harbor has no direct competitors in the area.
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SIX FLAGS MAGIC MOUNTAIN AND SIX FLAGS HURRICANE HARBOR
Six Flags Magic Mountain, the 12th largest theme park in the United States
with 1997 attendance of 3.3 million, and the separately gated adjacent Six Flags
Hurricane Harbor, the 11th largest water park in the United States with 1997
attendance of 351,000, are located in Valencia, California, in the northwest
section of Los Angeles County. The Los Angeles, California market provides the
parks with a permanent resident population of 9.4 million people within 50 miles
and 15.8 million people within 100 miles. The Los Angeles market is the number 2
DMA in the United States. Based upon in-park surveys, approximately 45% of the
visitors to the parks in 1997 resided within a 50-mile radius of the parks, and
64% resided within a 100-mile radius.
The Company owns a site of approximately 110 acres used for the theme park,
and approximately 11 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. Six Flags Hurricane Harbor has no
direct competitors in the area.
SIX FLAGS ST. LOUIS
Six Flags St. Louis, the 33rd largest theme park in the United States with
1997 attendance of 1.7 million, is located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of 2.6 million people within 50 miles and 3.7
million people within 100 miles. The St. Louis market is the number 21 DMA in
the United States. Based upon in-park surveys, approximately 55% of the visitors
to the park in 1997 resided within a 50-mile radius of the park, and 65% resided
within a 100-mile radius.
The Company owns a site of approximately 499 acres used for the theme park
operations. Six Flags St. Louis competes with Paramount's Kings Island, located
near Cincinnati, Ohio, approximately 350 miles from the park; Cedar Point,
located in Sandusky, Ohio, approximately 515 miles from the park; Silver Dollar
City, located in Branson, Missouri, approximately 250 miles from the park; and
Six Flags Great America, the Company's park located near Chicago, Illinois,
approximately 320 miles from the park.
THE CO-VENTURE PARKS
Prior to the Six Flags Acquisition, Six Flags, through two subsidiaries, was
the general partner in the Co-Venture Partnerships relating to Six Flags Over
Georgia and Six Flags Over Texas. Pursuant to the Six Flags Acquisition, the
Company will transfer its interests in Six Flags Over Texas and Six Flags Over
Georgia to Premier. Six Flags Over Georgia, the 20th largest theme park in the
United States with 1997 attendance of 2.8 million, is located in Mableton,
Georgia, approximately 10 miles outside of Atlanta, Georgia. Six Flags Over
Texas, the 16th largest theme park in the United States with 1997 attendance of
2.9 million is located in Arlington, Texas, between Dallas and Fort Worth. The
results of the Co-Venture Parks are included in the historical results of
operations of the Company.
MARKETING AND PROMOTION
The Company attracts visitors through national and local multi-media
marketing and promotional programs for each of its parks. The national programs
are designed to market and enhance the Six Flags brand name. Local programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Following the Six Flags
Acquisition, marketing programs for the Six Flags Parks will be supervised by
Premier's Vice President for Marketing, with the assistance of Premier's senior
management and its national advertising agency.
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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.
Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance, representing approximately 57% of aggregate
attendance for the Six Flags Parks in 1997. 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. The increased in-park spending which results from season passes is
not offset by incremental operating expenses, since such expenses are relatively
fixed during the operating season. During 1997, 21% of visitors to the Six Flags
Parks utilized season passes.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, since such expenses are relatively fixed
during the operating season. In 1997, approximately 91% of patrons at the Six
Flags Parks were admitted at a discount rate and, for the year ended December
28, 1997, approximately 48% of the Company's revenue was attributable to in-park
spending.
The Company also implements promotional programs as a means of targeting
specific market segments and geographic locations not reached through its group
or retail sales efforts. The promotional programs utilize coupons, sweepstakes,
reward incentives and rebates to attract additional visitors. These programs are
implemented through direct mail, telemarketing, direct response media,
sponsorship marketing and targeted multi-media programs. The special promotional
offers are usually for a limited time and offer a reduced admission price or
provide some additional incentive to purchase a ticket, such as combination
tickets with a complementary location.
LICENSES
Six Flags currently has, and pursuant to a license agreement among Warner
Bros., DC Comics, Premier and SFTP (the "License Agreement"), Premier will have
upon consummation of the Six Flags Acquisition, the exclusive right for a term
through 2053 to use Warner Bros. and DC Comics characters in theme parks
throughout the United States and Canada (other than the Las Vegas metropolitan
area). In particular, the License Agreement entitles Six Flags and Premier to
use, subject to customary approval rights of Warner Bros., and in limited
circumstances, approval rights of certain third parties, all animated cartoon
and comic book characters that Warner Bros. and DC Comics have the right to
license, including as of the date hereof, BATMAN, SUPERMAN, BUGS BUNNY, DAFFY
DUCK, TWEETY BIRD and YOSEMITE SAM, and will include the right to sell
merchandise using the characters. The license fee is fixed until 2005, and
thereafter, the license fee will be subject to periodic scheduled increases and
will be payable on a per-theme park basis. Six Flags is also a party to certain
additional license agreements with Warner Bros. and Time Warner concerning,
among others, HBO BACKLOT COMMISSARY and SPORTS ILLUSTRATED FESTIVAL. Warner
Bros. has the right to terminate the License Agreement under certain
circumstances, including if any persons involved in the movie or television
industries or party to a material judicial proceeding pending against Time
Warner obtain control of Premier and upon a default under the Subordinated
Indemnity Agreement.
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PARK OPERATIONS
The Company currently operates in geographically diverse markets in the
United States. After the Six Flags Acquisition, each of the Company's parks will
be operated to the extent practicable as a separate operating division of
Premier in order to maximize local marketing opportunities and to provide
flexibility in meeting local needs. After the Six Flags Acquisition, each park
will be managed by a general manager who will report to one of Premier's
regional executives (each of whom report to its Chief Operating Officer) and
will be responsible for all operations and management of the individual park.
Local advertising, ticket sales, community relations and hiring and training of
personnel are the responsibility of individual park management in coordination
with corporate support teams.
Each of the Company's parks is managed by a full-time, on-site management
team under the direction of the general manager. Each such management team
includes senior personnel responsible for operations and maintenance, marketing
and promotion, human resources and merchandising. Park management compensation
structures will be designed to provide incentives (including stock options and
cash bonuses) for individual park managers to execute Premier's strategy and to
maximize revenues and operating cash flow at each park.
The Company's parks are generally open daily from Memorial Day through Labor
Day. In addition, most of the Company's parks are open during weekends prior to
and following their daily seasons, primarily as a site for themed events (such
as Fright Fest-Registered Trademark- and Holiday in the
Park-Registered Trademark-). 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 development and
implementation of new rides and attractions at its parks. In addition, the
Company may at times rotate rides among its parks to provide fresh attractions.
Premier believes that the introduction of new rides is an important factor in
promoting each of the parks in order to promote market penetration and encourage
longer visits, which lead to increased attendance and in-park spending. In
addition, the Company utilizes theming and landscaping at its 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 support significant
attendance at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every three to four
years in order to enhance the park's entertainment product.
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 will 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. The Company has approximately 775 full-time
employees who devote substantially all of their time to maintaining the parks
and their rides and attractions.
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In addition to the Company's maintenance and inspection procedures,
following the Six Flags Acquisition, Premier's liability insurance carrier will
perform an annual inspection of each park and all attractions and related
maintenance procedures. The result of insurance inspections are written
evaluation and inspection reports, as well as written suggestions on various
aspects of park operations. State inspectors also conduct annual ride
inspections before the beginning of each season. Other portions of each park are
also subject to inspections by local fire marshals and health and building
department officials. Furthermore, Premier uses Ellis & Associates as water
safety consultants at its parks in order to train life guards and audit safety
procedures.
EMPLOYEES
The Company employs approximately 1,610 full-time employees and
approximately 18,650 seasonal employees during the 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. The Company is not subject to federal
or certain applicable state minimum wage rates in respect of its seasonal
employees. However, the recent increase in the federal or any applicable state
minimum wage rate could result over time in increased compensation expense for
the Company as it relates to these employees as a result of competitive factors.
Approximately 12% of the Company's full-time and approximately 25% of its
seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in December 1999 (Six Flags Great
Adventure) and January 2000 (Six Flags St. Louis). The Company has never
experienced any work stoppages, and believes that it has a strong relationship
with its employees and unions.
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. Six Flags maintains multi-layered general liability policies that
provide for excess liability coverage of up to $175.0 million per occurrence. By
virtue of self-insured retention limits ($500,000 per occurrence) and first
dollar coverage by a captive insurance company, Six Flags or its wholly-owned
insurance company subsidiary is required to pay the first $2 million of loss per
occurrence. Six Flags' combined cost for liability insurance and for related
self-insured claims for 1997 was $13.8 million compared to $15.9 million in 1996
and $15.8 million in 1995. 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. Following the Six
Flags Acquisition, Premier may modify the insurance coverage applicable to the
Six Flags Parks.
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 each 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.
Remediation of certain hazardous substances or petroleum products is
underway at the Company's Six Flags Great Adventure Park. The Company does not
anticipate that any environmental remediation matters, either individually or in
the aggregate, will have a material adverse effect on its financial condition or
results of operation.
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In addition, portions of the undeveloped areas at its parks may be
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 prohibited in some or all of
these areas.
LEGAL PROCEEDINGS
The nature of the industry in which the Company operates tends to expose it
to claims by visitors for injuries. Historically, the great majority of these
claims have been minor. While the Company believes that it is adequately insured
against the claims currently pending against it and any potential liability, if
the number of such events resulting in liability significantly increased, or if
the Company becomes subject to damages that cannot by law be insured against,
such as punitive damages, there may be a material adverse effect on its
operations.
On March 19, 1997, SFTP, and its wholly-owned subsidiary Six Flags Over
Georgia, Inc. (collectively, the "Six Flags Parties") commenced a declaratory
judgment action in the Superior Court of Gwinnett County, Georgia, entitled Six
Flags Over Georgia, Inc. and Six Flags Theme Parks, Inc. v. Six Flags Fund, Ltd.
and Avram Salkin, as Trustee of the Claims Trust (the "Georgia Litigation"). The
Six Flags Parties sought, among other things, a declaration and determination of
the rights and obligations of the partners of Six Flags Over Georgia, L.P., with
respect to certain disputed partnership affairs and an accounting of all
partnership affairs. On April 21, 1997, defendants Six Flags Fund, Ltd. and its
affiliates (collectively, the "SFOG Fund Parties") filed a motion to dismiss the
declaratory judgment action as well as an answer and counterclaim naming SFEC
and Time Warner Entertainment Company, L.P. as additional counterclaim-
defendants. The counterclaim seeks imposition of a constructive trust and an
accounting, compensatory damages of in excess of $250 million and unspecified
punitive damages for alleged breaches of fiduciary duty, conversion, fraud and
conspiracy allegedly committed by the counterclaim-defendants in connection with
the management of the Six Flags Over Georgia.
On June 9, 1997, the parties entered into a consent order in which they
agreed, among other things, to realign the parties. An amended complaint was
then filed by the SFOG Fund Parties as the newly-aligned plaintiffs against the
Six Flags Parties in which the same substantive claims were asserted. The Six
Flags Parties filed their answer denying liability and asserting several
affirmative defenses on July 24, 1997. The Six Flags Parties intend to
vigorously contest the allegations of the complaint.
The Sellers have agreed to indemnify Premier from any and all liabilities
arising out of the Georgia Litigation. See "Description of Six Flags
Agreement--Indemnification."
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CERTAIN TRANSACTIONS
In connection with the Premier Merger, Premier, SFEC and Premier Operations
will enter into a Shared Services Agreement pursuant to which Premier will
provide certain corporate, administrative and other general services to SFEC and
Premier Operations for their operations and the operations of their
subsidiaries. Generally, Premier will provide legal, financial, accounting,
human resources, information systems, payroll, marketing and promotion, and
other services to its subsidiaries. In addition, the purchasing, design and
implementation of capital improvements, the production of live entertainment at
the parks, as well as the purchasing of operating supplies, will generally be
done by Premier on behalf of its subsidiaries. With respect to such services
provided generally to the parks, the costs thereof, including third party costs
and appropriate corporate overhead, will generally be allocated based on each
park's percentage of Premier's revenues. Costs of services provided to
particular parks, such as costs relating to capital improvements, will be
allocated to such park and will normally include, in addition to direct costs,
an allocation of time spent and expenses incurred by corporate personnel in
providing such services. SFEC and Premier Operations will be obligated to
purchase such services only so long as they may deem such services to be
necessary or desirable for their operations and the operations of their
subsidiaries.
A tax sharing agreement will be entered into between Premier and SFEC for
the purpose of allocating to SFEC its share of any actual Federal income tax
liability of Premier's consolidated Federal income tax group that will include
SFEC and its eligible subsidiaries. Under the tax sharing agreement, SFEC will
be required to make payments to Premier shortly before Premier is required to
make tax payments, including estimated tax payments, to the Internal Revenue
Service on behalf of the consolidated group. Premier will act as agent for SFEC
and its subsidiaries with respect to Federal income tax matters and will pay to
the Internal Revenue Service the Federal income tax liability of the
consolidated group. Under the tax sharing agreement, the amount that SFEC and
its subsidiaries will owe to Premier may not exceed the tax liability that they
would have owed if they were not members of Premier's consolidated group and
instead were a separate consolidated group, but without taking into account any
of their tax attribute carrybacks or carryforwards. The tax sharing agreement
will provide for the application of similar principles to any unitary,
consolidated or combined state or local income tax filing group that includes
SFEC or any of its subsidiaries in the same group with Premier or any of its
subsidiaries other than SFEC and its subsidiaries.
As part of the Six Flags Transactions, the Company will transfer to Premier
its interests in the Co-Venture Parks. Specifically, SFTP will transfer to
Premier its interests in a subsidiary thereof that serves as the general partner
of the Texas Co-Venture Partnership and a subsidiary that holds units in the
limited partner of the Georgia Co-Venture Partnership for approximately $46.0
million, representing the fair market value of these interests. Additionally,
immediately following the Six Flags Transactions, SFEC will transfer indirectly
to Premier all of its interests in the Co-Venture Partnership, consisting of the
stock of the general partner of the Georgia Co-Venture Partnership and the stock
of two entities that own or will own units in the limited partners of both
Co-Venture Partnerships.
See Notes to Consolidated Financial Statements of SFEC for a description of
prior related party transactions between the Company and Time Warner.
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DESCRIPTION OF SIX FLAGS AGREEMENT
GENERAL
On February 9, 1998, the company currently named Premier Parks Inc., certain
wholly-owned subsidiaries of Premier, SFEC and each of the Sellers entered into
the Six Flags Agreement. The Six Flags Agreement provides for the Six Flags
Acquisition, pursuant to which Premier will acquire, by merger, all of the
capital stock of SFEC from the Sellers for $965 million (the "Capital Stock
Consideration") (plus an approximate $11 million adjustment based on year-end
balance sheet adjustments and option cancellation costs.) The Capital Stock
Consideration will be payable in cash or Seller Depositary Shares representing
interests in up to $200 million, but not less than $100 million, of the Seller
Preferred Stock, with the balance payable in cash. The net proceeds of the
Offerings will be used, in part, to fund the cash portion of the Capital Stock
Consideration. Consummation of the Six Flags Acquisition is a condition to the
Offerings.
THE MERGERS
Prior to the Six Flags Acquisition, and pursuant to the Premier Merger, the
company presently named Premier Parks Inc. will merge with a wholly-owned
subsidiary of Premier Parks Holdings Corporation in accordance with Section
251(g) of the Delaware General Corporation Law. As a result of the Premier
Merger, holders of shares of Common Stock of Premier will become, on a
share-for-share basis, holders of Common Stock of Premier Parks Holdings
Corporation, and Premier will become a wholly-owned subsidiary of Premier Parks
Holdings Corporation. On the effective date of the Premier Merger, Premier will
change its name to Premier Parks Operations Inc., and Premier Parks Holdings
Corporation will change its name to Premier Parks Inc.
In addition to the share-for-share exchange, each option or similar right
exercisable for capital stock of Premier Operations outstanding immediately
prior to the Premier Merger automatically will be converted into an option or
similar right exercisable for a number of shares of the Common Stock equal to
the number of shares of capital stock of Premier for which such option or
similar right was exercisable immediately prior to the Premier Merger.
Immediately following the closing of the Offerings, SFEC and a wholly-owned
subsidiary of Premier will be merged pursuant to the Six Flags Acquisition, with
SFEC continuing as the surviving corporation and as a wholly-owned subsidiary of
Premier. Pursuant to the Six Flags Acquisition, (i) each share of capital stock
of SFEC outstanding immediately prior to the Six Flags Acquisition, all of which
are held by the Sellers, automatically will be converted into the right to
receive a pro rata share of the Capital Stock Consideration based on the
aggregate number of such shares (together with a cash payment in lieu of any
fractional shares of Seller Preferred Stock to which the Sellers would have
otherwise been entitled as part of the Capital Stock Consideration) and (ii)
each option or similar right exercisable for capital stock of SFEC outstanding
immediately prior to the Six Flags Acquisition automatically will be cancelled
in exchange for a cash payment by SFEC (all such cash payments together, the
"SFEC Option Consideration") of all amounts necessary to fund such payments
being loaned or contributed by Premier.
CONDITIONS
The Six Flags Agreement contains customary closing conditions of the
parties. In addition, Premier's obligation to consummate the Six Flags
Acquisition is subject to the condition that Premier raise equity capital in an
amount at least equal to the difference between $900.0 million and the value of
the Seller Preferred Stock issued to the Sellers pursuant to the Six Flags
Acquisition.
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INDEMNIFICATION
The Six Flags Agreement contains customary representations, warranties,
covenants and other agreements of the parties. Each Seller has agreed to
indemnify and hold harmless Premier against certain damages, claims and
liabilities (and the cost and expenses related thereto) suffered by Premier in
respect of (i) any breach of or inaccuracy in any representation or warranty
contained in the Six Flags Agreement made by such Seller individually, or by the
Sellers collectively, and (ii) any breach or violation of any covenant or
agreement made by any Seller for itself or on behalf of SFEC or its subsidiaries
contained in the Six Flags Agreement or any documents delivered at the closing
thereunder. Premier has agreed to indemnify and hold harmless the Sellers
against certain damages, claims and liabilities (and the cost and expenses
related thereto) suffered by the Sellers in respect to (i) any breach of or
inaccuracy in any representation or warranty made by or on behalf of Premier,
and (ii) any breach or violation of any covenant made by or on behalf of Premier
in the Six Flags Agreement or any documents delivered at the closing thereunder.
Generally, no party may make a claim for indemnification for breaches of
representations and warranties and of covenants and other agreements as
described in the immediately preceding paragraph after the date (the "Claims
Termination Date") which is the earlier of (i) the 45th day following the date
on which audited annual financial statements of Premier and its consolidated
subsidiaries for the 1998 fiscal year are first made available to Premier and
(ii) April 30, 1999.
Premier may not make any claims for indemnification for breaches of any of
the Sellers' representations and warranties until the aggregate amount of the
damages suffered exceeds $5 million (the "Basket Amount"), whereupon the Sellers
are obligated to pay in full all such amounts for indemnification, including the
Basket Amount. The total maximum amount that the Sellers are required to pay for
indemnification for breaches of the Sellers' representations and warranties
under the Six Flags Agreement is $25 million. The Seller's ability to make
indemnification claims for breaches of any of Premier's representations and
warranties is subject to a corresponding Basket Amount and $25 million maximum
amount.
Upon consummation of the Six Flags Acquisition, Premier will deposit $25
million in cash into an escrow fund under a General Indemnity Escrow Agreement
to be entered into by Premier with the Sellers and certain holders of options
exercisable for capital stock of SFEC. A portion of such deposit will come from
the Capital Stock Consideration payable to the Sellers, with the balance to come
from the SFEC Option Consideration payable to the optionholders who are party to
the General Indemnity Escrow Agreement. The escrow fund will be the sole source
of payment for the Sellers' indemnification obligations to Premier for breaches
of or inaccuracies in the Sellers' representations and warranties. Any payment
as a result of breaches of or inaccuracies in an individual Seller's
representations and warranties may be limited to such individual Seller's
contribution to the escrow fund.
In addition, the Sellers have agreed to indemnify Premier, from any and all
liabilities arising out of the Georgia Litigation. See "Business--Legal
Proceedings."
AGREEMENTS RELATED TO THE SIX FLAGS AGREEMENT
Certain ancillary agreements will be entered into pursuant to the Six Flags
Agreement in connection with the Six Flags Acquisition. See
"Business--Licenses."
In addition to the ancillary agreements to be entered into in connection
with the Six Flags Acquisition that are described elsewhere herein, at the
closing of the Six Flags Transactions, Premier will enter into the Subordinated
Indemnity Agreement with Time Warner, pursuant to which Premier will indemnify
Time Warner in respect of its effective guarantee of the SFEC Zero Coupon Senior
Notes, and Premier and Six Flags will indemnify Time Warner in respect of its
guarantee of the obligations of Six Flags under the agreements relating to the
Co-Venture Parks. Pursuant to the Subordinated Indemnity Agreement,
52
Premier will transfer to Time Warner record title to the corporations which own
certain entities that have purchased and will purchase units of the limited
partners of such partnerships, and Premier will receive an assignment from Time
Warner of all cash flow received on such units and will otherwise control such
entities, except in the event of a default by Premier of its obligations under
the Subordinated Indemnity Agreement. After all such obligations have been
satisfied, Time Warner is required to retransfer to Premier such record title
for a nominal consideration. In the event of a default, the Subordinated
Indemnity Agreement allows Time Warner to acquire the stock of the entities that
purchase units of the limited partners of the Co-Venture Parks and the assets of
the Premier subsidiary which holds the general partner interests in the
Co-Venture Parks. In addition, Premier will issue preferred stock of the
managing general partners of the Co-Venture Parks to Time Warner which, in the
event of such a default, would permit Time Warner to obtain control of such
entities. The Subordinated Indemnity Agreement also limits Premier's ability to
sell the Six Flags Parks. Except in the case of the SFEC Senior Notes, under the
terms of the Subordinated Indemnity Agreement, without the consent of Time
Warner, Premier cannot incur indebtedness at SFEC or any of its subsidiaries
that is secured by any assets of (or guaranteed by) Premier, Premier Operations
or any of its subsidiaries, or secure any indebtedness of Premier, Premier
Operations or any of its subsidiaries with any of the assets of (or guaranteed
by) SFEC or any of its subsidiaries.
53
DESCRIPTION OF OTHER COMPANY INDEBTEDNESS
SIX FLAGS CREDIT FACILITY
Borrowings under the Six Flags Credit Facility, which will be entered into
on or prior to the closing of the Six Flags Acquisition, will be secured by
substantially all of the assets of SFTP and its domestic subsidiaries and by a
pledge by SFEC of the stock of SFTP and will be guaranteed by SFEC and SFTP's
domestic subsidiaries. The Six Flags Credit Facility will have an aggregate
availability of $472.0 million consisting of (i) up to $100.0 million under a
Revolving Credit Facility to be used to refinance existing outstanding Six Flags
bank indebtedness and for working capital and other general corporate purposes;
and (ii) up to $372.0 million under a term loan facility (the "Term Loan
Facility") to be used to refinance existing outstanding Six Flags bank
indebtedness and fund acquisitions and make capital improvements. The Company
anticipates that the Term Loan Facility will be fully funded in connection with
the Six Flags Acquisition. Interest rates per annum under the Six Flags Credit
Facility are equal to either (a) a base rate equal to the higher of the Federal
Funds Rate plus 1/2% or the prime rate of Citibank, N.A., in each case, plus the
Applicable Margin (as defined therein) or (b) the London Interbank Offered Rate
plus the Applicable Margin. The Revolving Credit Facility will terminate five
years from the closing of the Six Flags Acquisition. Borrowings under the Term
Loan Facility will mature on November 30, 2004. However, for the Term Loan
Facility, aggregate principal payments and reductions of $1.0 million will be
required during each of the first, second, third and fourth years; aggregate
principal payments of $25.0 million and $40.0 million are required in years five
and six and $303.0 million at maturity.
The Six Flags Credit Facility will contain restrictive covenants that, among
other things, limit the ability of SFTP and its subsidiaries to dispose of
assets; engage in mergers and consolidations; engage in certain transactions
with subsidiaries and affiliates; incur, guarantee or grant liens with respect
to additional indebtedness; pay dividends except that (subject to covenant
compliance) dividends will be permitted to allow SFEC to meet cash pay interest
obligations with respect to the SFEC Senior Notes; repurchase stock; make
investments (including loans and advances) or capital expenditures; and engage
in sale-leaseback transactions. The Six Flags Credit Facility will also limit
the ability of SFEC to grant liens. In addition, the Six Flags Credit Facility
will require SFTP to comply with certain specified financial ratios and tests,
including ratios generally requiring (i) total debt to EBITDA not to exceed 5.5
times and senior secured debt to EBITDA not to exceed 3.75 times, (ii) EBITDA to
interest expense of not less than 2.0 times and (iii) EBITDA to total fixed
charges (as defined in the Six Flags Credit Facility) of not less than 1.0
times.
Defaults under the Six Flags Credit Facility will include (i) failure to
repay principal when due; (ii) failure to pay interest within three days after
due; (iii) default in the performance of certain obligations of SFTP and its
subsidiaries under the Security Agreement (as defined thereunder); (iv) failure
to comply with certain covenants, conditions or agreements under the credit
agreement which, in certain cases, continues for 30 days; (v) default by SFTP or
any of its subsidiaries in respect of any indebtedness above specified levels;
(vi) certain events of bankruptcy; (vii) certain judgments against SFTP or any
of its subsidiaries; (viii) the occurrence of a Change in Control (as defined
thereunder); (ix) the assertion of certain Environmental Claims (as defined
thereunder); and (x) under certain circumstances, the failure by Messrs. Burke
and Story to serve as Chief Executive Officer and Chief Operating Officer of
SFTP and the failure to replace them within a specified time period.
SFTP SENIOR SUBORDINATED NOTES
The SFTP Senior Subordinated Notes are unsecured senior subordinated
obligations of SFTP, in an aggregate principal amount of $285.0 million and will
mature on June 15, 2005. The SFTP Senior Subordinated Notes accrete in value
until June 15, 1998, at which time the accreted value will equal 100% of their
principal amount. The SFTP Senior Subordinated Notes bear interest at the rate
of 12 1/4% per
54
annum, payable semiannually on June 15 and December 15 of each year, commencing
December 15, 1998. The SFTP Senior Subordinated Notes are guaranteed on a
senior, unsecured basis by the principal operating subsidiaries of SFTP.
The SFTP Senior Subordinated Notes are redeemable, at SFTP's option, in
whole or in part, at any time on or after June 15, 2000 at specified redemption
prices, together with accrued and unpaid interest, if any, to the date of
redemption. Upon the occurrence of a Change of Control (as defined in the SFTP
Indenture), SFTP is required to make an offer to repurchase the SFTP Senior
Subordinated Notes at a price equal to 101% of the accreted value thereof to the
date of repurchase. The Six Flags Transactions constitute a Change of Control
under the SFTP Indenture, and SFTP will be required to make an offer to purchase
the SFTP Senior Subordinated Notes within 30 days of the closing of the Six
Flags Transactions. SFTP does not expect that it will be required to purchase
any material amount of such Notes pursuant to such offer. See "Risk
Factors--Risks Associated with Substantial Indebtedness and Other Obligations."
The SFTP Indenture contains restrictive covenants that, among other things,
limit the ability of SFTP and its subsidiaries to dispose of assets; engage in
mergers and consolidations; engage in certain transactions with subsidiaries and
affiliates; incur or guarantee additional indebtedness; pay dividends or make
other payments or investments except that (subject to covenant compliance)
dividends are permitted to allow SFEC to meet cash pay interest obligations with
respect to the SFEC Senior Notes through a provision that allows dividends
indirectly to SFEC for the purpose of payment in cash of the interest expense on
notes incurred to refinance the SFEC Zero Coupon Senior Notes; limit the ability
of subsidiaries to make certain distributions; and engage in sale-leaseback
transactions.
Defaults under the SFTP Indenture include (i) failure to pay interest on the
SFTP Senior Subordinated Notes within 30 days after such payments are due; (ii)
failure to repay principal when due at its maturity date, upon optional
redemption, upon required repurchase, upon acceleration or otherwise; (iii)
failure to comply for 30 days after notice with SFTP's repurchase obligations
upon the occurrence of a Change of Control and failure to comply for 60 days
after notice with the other covenants contained in the Indenture; (iv) the
default by SFTP or any Significant Subsidiary (as defined in the SFTP Indenture)
in respect of any indebtedness above specified levels; (v) certain events of
bankruptcy; (vi) certain judgments against SFTP or any Significant Subsidiary;
(vii) any Note Guarantee (as defined in the SFTP Indenture) ceasing to be in
full force and effect (except as contemplated by the terms thereof); and (viii)
the denial or disaffirmation by any Note Guarantor (as defined in the SFTP
Indenture) of its obligations under the applicable indenture or any Note
Guarantee, which continues for 10 days.
SFEC ZERO COUPON SENIOR NOTES
The SFEC Zero Coupon Senior Notes are senior unsecured obligations of SFEC,
in an aggregate principal amount of $192.3 million and will mature on December
15, 1999. The SFEC Zero Coupon Senior Notes accrete in value until December 15,
1999, at which time the accreted value will equal 100% of their principal
amount. As of December 28, 1997, the accreted value of such notes was $161.1
million. There are no periodic payments on the SFEC Zero Coupon Senior Notes.
One of the Sellers, Time Warner, has effectively guaranteed the SFEC Zero Coupon
Senior Notes, and Premier has indemnified Time Warner in respect of its
guarantee. The Company will use the proceeds of the Offering, together with
other funds, to repay the SFEC Zero Coupon Senior Notes at or prior to their
maturity in December 1999. Until so used, such proceeds together with other
funds (or U.S. government obligations purchased therefrom) will be deposited in
escrow. See "Description of Notes--Escrow of Proceeds."
The SFEC Zero Coupon Senior Notes may not be redeemed prior to maturity.
From and after the consummation of the Six Flags Transactions, the
restrictive covenants contained in the indenture pursuant to which the SFEC Zero
Coupon Senior Notes were issued will generally not be applicable to SFEC or its
subsidiaries.
55
Defaults under the indenture relating to the SFEC Zero Coupon Senior Notes
include (i) the failure by SFEC or Time Warner to comply for 30 days after
written notice with any covenant in the indenture; (ii) failure to pay, when
due, upon final maturity or upon acceleration, the principal amount of any
indebtedness of SFEC or any of its subsidiaries in excess of $5.0 million, or
any indebtedness of Time Warner or any of its Material Subsidiaries (as defined
in the applicable indenture) in excess of $50 million, if such indebtedness is
not discharged within 60 days after written notice; (iii) certain events of
bankruptcy of SFEC or Time Warner; and (iv) failure to pay the principal amount
of any SFEC Zero Coupon Senior Note at its maturity date. Accordingly, after the
Six Flags Acquisition, such a default by Time Warner could result in the
acceleration of the maturity of the SFEC Zero Coupon Senior Notes.
56
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to an Indenture (the "Indenture") between
the Company and The Bank of New York, as trustee (the "Trustee"). The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture and
the Pledge and Escrow Agreement does not purport to be complete and is qualified
in its entirety by reference to the Indenture and the Pledge and Escrow
Agreement, including the definitions therein of certain terms used below. The
proposed forms of the Indenture and Pledge and Escrow Agreement have been filed
as exhibits to the Registration Statement of which this Prospectus is a part and
copies of the proposed forms of the Indenture and Pledge and Escrow Agreement
are available as set forth below under "--Additional Information." The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." For purposes of this summary, the term (i)
"Company" refers only to Six Flags Entertainment Corporation and not to any of
its Subsidiaries, (ii) "Premier" refers only to Premier Parks Inc. and not to
any of its Subsidiaries and (iii) "Notes" refers to the SFEC Senior Notes
offered hereby.
The Notes will be guaranteed by Premier, but, except as otherwise provided
herein, Premier will not be subject to the covenants set forth under the caption
"--Certain Covenants." The Notes will be general obligations of the Company and
will rank PARI PASSU in right of payment with all senior indebtedness of the
Company (including the SFEC Zero Coupon Senior Notes). However, the operations
of the Company are conducted through its Subsidiaries and, therefore, the
Company is dependent upon the cash flow of its Subsidiaries to meet its
obligations, including its obligations under the Notes. The Company's
Subsidiaries will not be guarantors of the Notes. As a result, the Notes will be
effectively subordinated to all Indebtedness and other liabilities and
commitments (including trade payables) of the Company's Subsidiaries. Any right
of the Company to receive assets of any of its Subsidiaries upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of that Subsidiary's creditors, except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, in which case the claims of
the Company would still be subordinate to any security in the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by the
Company. On a pro forma basis, as of December 28, 1997, the Company's
Subsidiaries would have had approximately $689.9 million of Indebtedness
(including the SFTP Senior Subordinated Notes and borrowings under the Six Flags
Credit Facility) and $108.6 million of other liabilities outstanding. See "Risk
Factors--Holding Company Structure; Limitations on Access to Cash Flow of
Subsidiaries."
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
ESCROW OF PROCEEDS
The Company's Obligations under the Notes will be secured pending
disbursement pursuant to the Pledge and Escrow Agreement by a pledge of the
Escrow Account (as defined). Approximately $175.0 million will be deposited in
the Escrow Account, which funds will be used to repay at or prior to maturity
the SFEC Zero Coupon Senior Notes and, prior to such repayment or a defeasance
of the SFEC Zero Coupon Senior Notes pursuant to the terms of the indenture
governing the SFEC Zero Coupon Senior Notes, to purchase a portfolio of
Government Securities that will be pledged as security for payments under the
Notes.
The Pledge and Escrow Agreement will provide for the grant by the Company to
the Trustee of a security interest in the Escrow Account for the benefit of the
Holders of the Notes. Such security interest
57
will secure the payment and performance when due of the Obligations of the
Company under the Indenture and under the Notes, as provided in the Pledge and
Escrow Agreement. The ability of Holders to realize upon such funds or
securities may be subject to certain bankruptcy law limitations in the event of
a bankruptcy of the Company.
Pending application of the funds contained in the Escrow Account to repay or
defease the SFEC Zero Coupon Senior Notes pursuant to the indenture governing
the SFEC Zero Coupon Senior Notes, such funds will be invested in Government
Securities. Upon the acceleration of the maturity of the Notes or the failure to
pay principal at maturity or upon certain redemptions and repurchases of the
Notes, the Pledge and Escrow Agreement will provide for the foreclosure by the
Trustee upon the net proceeds of the Escrow Account. Under the terms of the
Indenture, the proceeds of the Escrow Account shall be applied, first, to
amounts owing to the Trustee in respect of fees and expenses of the Trustee and
second, to the Obligations under the Notes and the Indenture.
In the event of the Company's bankruptcy, the Company, as debtor in
possession under Chapter 11 of the Bankruptcy Code, would be entitled to
petition the United States Bankruptcy Court having jurisdiction over its case
for permission, under Section 363 of the Bankruptcy Code, to use the proceeds of
the Escrow Account to fund its operations during the pendency of the
reorganization proceedings. Permission for such use is likely to be granted so
long as the interests of the Trustee, for the benefit of the Holders of Notes
and itself as Trustee, are "adequately protected." A secured creditor's interest
in cash collateral to be used by a debtor in possession may be "adequately
protected" by, among other means, the granting of liens on substitute collateral
which may be substantially less liquid than Government Securities.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE NOTES
The Notes will be limited in aggregate principal amount to $170.0 million
and will mature on , 2006. Interest on the Notes will accrue at the rate
of % per annum and will be payable semi-annually in arrears on and
of each year, to Holders of record on the immediately preceding and
. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to the Holders of the
Notes at their respective addresses set forth in the register of Holders of
Notes; PROVIDED that all payments of principal, premium and interest with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
PREMIER GUARANTEE
The Company's payment obligations under the Notes will be guaranteed (the
"Guarantee") by Premier. The obligations of Premier under the Guarantee will be
unconditional. The Guarantee will be subordinated to all Indebtedness and other
obligations of Premier, including all obligations with respect to the
Subordinated Indemnity Agreement. The operations of Premier are conducted
through its Subsidiaries and, therefore, Premier is dependent upon the cash flow
of its Subsidiaries to meet its obligations, including its obligations under the
Guarantee. As a result, the Guarantee will be effectively subordinated to all
Indebtedness and other liabilities and commitments (including trade payables) of
Premier's Subsidiaries. Any right of Premier to receive assets of any of its
Subsidiaries upon the latter's liquidation or reorganization (and the consequent
right of the Holders of the Notes to participate in those assets) will be
effectively subordinated to the claims of that Subsidiary's creditors, except to
the extent that Premier is itself recognized as a creditor of such Subsidiary,
in which case the claims of Premier would still be
58
subordinate to any security in the assets of such Subsidiary and any
indebtedness of such Subsidiary senior to that held by Premier. On a pro forma
basis, as of December 31, 1997, Premier would have had approximately $1,823.0
million of Indebtedness that would have ranked senior to the Guarantee
(including the SFEC Zero Coupon Notes, but excluding the Notes) and $158.9
million of other obligations outstanding, excluding obligations under the
Subordinated Indemnity Agreement (as defined). See "Risk Factors-- Holding
Company Structure; Limitations on Access to Cash Flow of Subsidiaries."
The Indenture will provide that Premier may not consolidate with or merge
with or into (whether or not Premier is the surviving Person), another
corporation, Person or entity whether or not affiliated with Premier unless (i)
the Person formed by or surviving any such consolidation or merger (if other
than Premier) assumes all the obligations of Premier pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes and the Indenture and (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists. Premier will not be subject
to any of the other covenants contained in the Indenture other than the covenant
set forth under the caption "--Certain Covenants--Reports."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to ,
2002. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on of the years indicated below:
· Enlarge/Download Table
YEAR PERCENTAGE
---------------------------------------------------------------------------------- -----------
2002.............................................................................. %
2003..............................................................................
2004..............................................................................
2005 and thereafter............................................................... 100.000%
Notwithstanding the foregoing, during the first 36 months after the date of
original issuance of the Notes, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of % of the principal amount
thereof on the redemption date with the net cash proceeds of one or more Public
Equity Offerings by, and/or the net cash proceeds of a Strategic Equity
Investment in, (i) the Company or (ii) Premier to the extent the net cash
proceeds thereof are contributed to the Company as a capital contribution to the
common equity of the Company; PROVIDED that in each case at least 65% of the
aggregate principal amount of Notes originally issued remains outstanding
immediately after the occurrence of each such redemption (excluding Notes held
by Premier, the Company and its Subsidiaries); and PROVIDED, FURTHER, that any
such redemption shall occur within 60 days of the date of the closing of each
such Public Equity Offering and/or Strategic Equity Investment.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
such Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption
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that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under the caption "--Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be obligated to
make an offer (the "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase. Within 30 days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Indenture will provide that the Company will fix the Change of Control
Payment Date no earlier than 30 days and no later than 60 days after the Change
of Control Offer is mailed as set forth above. Prior to complying with the
provisions of the preceding sentence, but in any event within 90 days following
a Change of Control, the Company will either repay all outstanding Indebtedness
of its Subsidiaries or obtain the requisite consents, if any, under all
agreements governing all such outstanding Indebtedness of its Subsidiaries to
permit the repurchase of Notes required by this covenant. Under the terms of the
indenture governing the SFTP Senior Subordinated Notes and the Six Flags Credit
Facility, the payment of dividends by SFTP are subject to certain specified
financial tests which will significantly restrict its ability to pay dividends
or make other distributions. If the Company does not obtain the consent of the
lenders under agreements governing outstanding Indebtedness of its Subsidiaries,
including under the Six Flags Credit Facility and the indenture governing the
SFTP Senior Subordinated Notes, to permit the repurchase of Notes or does not
refinance such Indebtedness, the Company will likely not have the financial
resources to purchase Notes and the Company's Subsidiaries will be restricted by
the terms of such Indebtedness from paying dividends to the Company or otherwise
lending funds to the Company for the purpose of such purchase. In any event,
there can be no assurance that the Company's Subsidiaries will have the
resources
60
available to pay any such dividend or make any such distribution. The Company's
failure to make a Change of Control Offer when required or to purchase tendered
Notes when tendered would constitute an Event of Default under the Indenture.
See "Risk Factors--Holding Company Structure; Limitations on Access to Cash Flow
of Subsidiaries" and "--Risks Associated with a Change of Control."
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
To the extent that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this paragraph by virtue thereof.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; PROVIDED that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinate to the Notes) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
or, in the case of the sale of Capital Stock, that are assumed by the transferee
by operation of law and (y) any securities, notes or other obligations received
by the Company or such Restricted Subsidiary from such transferee that are
promptly (subject to ordinary settlement periods) converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net Proceeds
(a) to repay or repurchase Indebtedness of a Restricted Subsidiary of the
Company (and to correspondingly reduce commitments with respect thereto in the
case of revolving credit borrowings), (b) to the acquisition of all or
substantially all of the assets of, or a majority of the Voting Stock of,
another Person (or business unit or division of such Person); PROVIDED, that the
primary business of such Person (or unit or division) is a Permitted Business,
(c) to fund obligations of the Company or any Restricted Subsidiary under the
Partnership Parks Agreements or the
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Subordinated Indemnity Agreement, (d) to the acquisition of Capital Stock of a
Restricted Subsidiary of the Company held by Persons other than the Company or
any Restricted Subsidiary, (e) to the making of a capital expenditure or (f) to
the acquisition of other long-term assets that are used or useful in a Permitted
Business. Pending the final application of any such Net Proceeds, the Company or
such Restricted Subsidiary may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all Holders of Notes
and all holders of other PARI PASSU Indebtedness of the Company containing
provisions similar to those set forth in the Indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer")
to purchase the maximum principal amount of Notes and such other PARI PASSU
Indebtedness of the Company that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
repurchase, in accordance with the procedures set forth in the Indenture and
such other Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other Indebtedness tendered into such Asset
Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes and such other Indebtedness to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer.
To the extent that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this paragraph by virtue thereof.
Under the terms of the indenture governing the SFTP Senior Subordinated
Notes and the Six Flags Credit Facility, the payment of dividends by SFTP are
subject to certain specified financial tests which will significantly restrict
its ability to pay dividends or make other distributions. See "Risk
Factors--Risks Associated with Substantial Indebtedness and Other Obligations"
and "--Holding Company Structure; Limitations on Access to Cash Flow of
Subsidiaries."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of any
Equity Interests of the Company (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of any Equity Interests of the Company in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company that is
subordinated to the Notes, except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
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(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of the Indenture
(excluding Restricted Payments permitted by clauses (ii) and (iii) of the
next succeeding paragraph) shall not exceed, at the date of determination,
the sum, without duplication, of (i) an amount equal to the Company's
Consolidated Cash Flow for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended full fiscal
quarter for which financial statements have been filed with the Commission
(the "Basket Period") LESS the product of 1.4 times the Company's
Consolidated Interest Expense for the Basket Period, PLUS (ii) 100% of the
aggregate net cash proceeds received by the Company after the date of the
Indenture as a contribution to its common equity capital or from the issue
or sale of Equity Interests of the Company (other than Disqualified Stock)
or from the issue or sale after the date of the Indenture of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company and any
sale of Equity Interests of the Company the net cash proceeds of which are
applied pursuant to clause (ii) of the immediately succeeding paragraph),
PLUS (iii) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, PLUS (iv) to the extent that
any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after
the date of the Indenture, the fair market value of the Company's or its
Restricted Subsidiary's, as the case may be, Investment in such Subsidiary
as of the date of such redesignation.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness or Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of, Equity Interests of the Company (other
than Disqualified Stock); PROVIDED that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(iv) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), (a) the purchase, redemption, retirement
or other acquisition by the Company or any Restricted Subsidiary of the Company
of partnership interests held by the partners in the limited partners of the
Co-Venture Partnerships, the co-general partner of the Co-Venture Partnerships
or, in each case, their successors, in accordance with and in the manner
required or permitted by the terms of the Partnership Parks Agreements and (b)
dividends or other distributions to Premier to enable Premier or its Restricted
Subsidiaries to purchase, redeem, retire or otherwise acquire partnership
interests held by the
63
limited partners or co-general partner in the Co-Venture Partnerships, or their
successors, in accordance with and in the manner required or permitted by the
terms of the Partnership Parks Agreements;
(v) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), (a) any transactions pursuant to or
contemplated by, and payments made in connection with, and in accordance with
the terms of, the Partnership Parks Agreements and (b) dividends or other
distributions to Premier to enable Premier or its Restricted Subsidiaries to
engage in any transactions pursuant to or contemplated by, and make any payments
in connection with, and in accordance with the terms of, the Partnership Parks
Agreements;
(vi) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), (a) any transactions pursuant to or
contemplated by, and payments made in connection with, and in accordance with
the terms of, the Subordinated Indemnity Agreement and (b) dividends or other
distributions to Premier to enable Premier or its Restricted Subsidiaries to
engage in any transactions pursuant to or contemplated by, and make any payments
in connection with, and in accordance with the terms of, the Subordinated
Indemnity Agreement;
(vii) in the event Premier issues common stock in exchange for or upon
conversion of Seller Preferred Stock or Mandatorily Convertible Preferred Stock,
dividends to Premier to allow Premier to make cash payments made in lieu of the
issuance of fractional shares of common stock, not to exceed $250,000 in the
aggregate in any fiscal year;
(viii) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), the payment of dividends or other
distributions to Premier to enable Premier to pay dividends on the Seller
Preferred Stock in accordance with the terms thereof as in effect on the date of
the Indenture;
(ix) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company from employees, former employees,
directors or former directors of the Company or any of its Restricted
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors); PROVIDED, HOWEVER, that the aggregate amount of
such repurchases shall not exceed $2.5 million in any twelve-month period;
(x) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), any payment by the Company to Premier to
permit Premier to pay any federal, state, local or other taxes that are then
actually due and owing by Premier; PROVIDED that such amounts do not exceed the
amounts that, without recognizing any tax attribute carryforwards or carrybacks,
would otherwise be due and owing if the Company were an independent taxpayer;
and
(xi) so long as no Event of Default or Default shall have occurred and be
continuing (or would result therefrom), any payment made pursuant to the Shared
Services Agreement.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; PROVIDED
that in no event shall the business currently operated by SFTP be transferred to
or held by an Unrestricted Subsidiary. For purposes of making such
determination, all outstanding Investments held by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
64
non-cash Restricted Payment shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the Trustee,
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; PROVIDED, HOWEVER, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
the Company's Restricted Subsidiaries may incur Indebtedness if the Company's
Fixed Charge Coverage Ratio at the time of incurrence of such Indebtedness or
the issuance of such Disqualified Stock after giving pro forma effect thereto as
if the same had occurred at the beginning of the most recently ended four full
fiscal quarter period of the Company for which financial statements have been
filed with the Commission, would have been at least 2.0 to 1.
The Indenture will also provide that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
PROVIDED, HOWEVER, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
additional term Indebtedness under Credit Facilities in an aggregate principal
amount at any one time outstanding not to exceed $200.0 million LESS the
aggregate amount of all mandatory or scheduled repayments of the principal of
any such additional term Indebtedness (other than repayments that are
immediately reborrowed) that have actually been made since the date of the
Indenture;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
additional revolving credit Indebtedness and letters of credit pursuant to
Credit Facilities in an aggregate principal amount (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability of
the Company and its Restricted Subsidiaries thereunder) at any one time
outstanding not to exceed the Specified Amount as of such date of incurrence,
PROVIDED, that the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (ii) is reduced to an outstanding balance of $1.0
million or less for at least 30 consecutive days in each fiscal year;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the Notes;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount not to exceed $20.0
million at any time outstanding;
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(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness and Indebtedness incurred pursuant to clauses (i) and (ii) above)
that was permitted by the Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the obligor on any
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and (ii)(A)
any subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Restricted Subsidiary thereof
shall be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of (a) Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Indenture to be incurred and (b) Currency
Agreements that do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder;
(ix) Indebtedness in respect of performance bonds, letters of credits,
surety or appeal bonds, prior to any drawing thereunder, for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business;
(x) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant (including,
without limiting the generality of the forgoing, the guarantee by any Restricted
Subsidiary of the Company of Existing Indebtedness);
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xi); and
(xii) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (xii), not to exceed $40.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to one or more of such clauses and/or pursuant to
the first paragraph hereof, as the Company shall specify. In connection with the
Six Flags Transactions occurring on the date of the Indenture, the Company shall
be permitted to incur a portion of the Indebtedness to be incurred on that date
pursuant to the Fixed Charge Coverage Ratio set forth in the first paragraph of
this covenant to the extent permitted by such Fixed Charge Coverage Ratio
calculated without regard to any Permitted Debt incurred on such date. Accrual
of interest, accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on preferred stock in the form of
additional shares of the same class of preferred stock will not be deemed to be
an incurrence of Indebtedness or an issuance of preferred stock for purposes of
this covenant; PROVIDED, in each such case, that the amount thereof is included
in Fixed Charges of the Company as accrued.
66
SALE AND LEASEBACK TRANSACTIONS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; PROVIDED that the Company or a Restricted Subsidiary of the Company
may enter into a sale and leaseback transaction if (i) the Company could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Additional Indebtedness and Issuance of
Preferred Stock" or pursuant to clause (vi) of the second paragraph of such
covenant and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described below under the caption "--Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
or such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Asset Sales."
LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing trade payables, Attributable Debt or
Indebtedness on any asset now owned or hereafter acquired, except Permitted
Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indenture, (b) the Partnership Parks Agreements, the
Marine World Agreements or the Subordinated Indemnity Agreement, (c) the Six
Flags Credit Facility as in effect on the date of the Indenture, (d) Eligible
Indebtedness that was permitted to be incurred pursuant to the provisions of the
covenant described above under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;" PROVIDED that such Eligible Indebtedness is no
more restrictive, taken as a whole, with respect to such dividends and other
payment restrictions than those contained in the Six Flags Credit Facility, as
the same was in effect on the date of the Indenture, (e) the Indenture and the
Notes, (f) applicable law, (g) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (h) customary non-assignment provisions in leases, licenses or
other contracts entered into in the ordinary course of business, (i) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (j) any agreement for the sale of a Restricted Subsidiary
that restricts distributions by that Restricted Subsidiary pending its sale, (k)
obligations otherwise permitted to be incurred pursuant to the provisions of the
covenant described above under the caption "--Liens" that limits the right of
the obligee to dispose of the assets securing such obligations, (l) provisions
with respect to the disposition or
67
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, (m) Permitting
Refinancing Indebtedness so long as such Permitted Refinancing Indebtedness is
no more restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in the Indebtedness refinanced thereby
and (n) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes, the Indenture and the Pledge and Escrow Agreement
pursuant to a supplemental Indenture in form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction; PROVIDED that this
clause (A) shall not apply to a merger of the Company with or into its direct
parent or with or into a Wholly Owned Subsidiary of its direct parent and (B)
will, both at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, or any
68
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment or indemnification
arrangements, stock options and stock ownership plans approved by the Board of
Directors, or the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise employees of the Company or its Restricted Subsidiaries, (iv) loans or
advances to employees in the ordinary course of business, (v) Restricted
Payments that are permitted by the provisions of the Indenture described above
under the caption "--Restricted Payments," (vi) transactions pursuant to or
contemplated by, and in accordance with, the terms of the Subordinated Indemnity
Agreement, (vii) transactions pursuant to or contemplated by, and in accordance
with the terms of, the Shared Services Agreement, (viii) transactions pursuant
to or contemplated by, and in accordance with the terms of, the Tax Sharing
Agreement, (ix) transactions pursuant to and payments in connection with, and,
in each case, in accordance with, the terms of the Partnership Parks Agreements
and (x) transactions pursuant to or contemplated by, and in accordance with, the
Marine World Agreements.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indenture will provide that the Company (i) will not, and will not
permit any Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary
of the Company to any Person (other than the Company or a Restricted Subsidiary
of the Company and other than transactions contemplated by the Partnership Parks
Agreements and the Subordinated Indemnity Agreement), unless (a)(1) such
transfer, conveyance, sale, lease or other disposition is of all the Equity
Interests in such Restricted Subsidiary or (2) after giving effect thereto, such
Restricted Subsidiary will still constitute a Restricted Subsidiary and (b) the
cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "--Repurchase at the Option of Holders--Asset Sales," and (ii) will
not permit any Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or a
Wholly Owned Restricted Subsidiary of the Company if, after giving effect
thereto, such Restricted Subsidiary will not be a direct or indirect Subsidiary
of the Company.
BUSINESS ACTIVITIES
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
REPORTS
The Indenture will provide that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, each of the
Company and Premier will furnish to the Holders of Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company and Premier were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its
69
consolidated Subsidiaries and Premier and its consolidated subsidiaries,
respectively (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company), and, with respect to the annual
information only, a report thereon by the Company's and Premier's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company and Premier were
required to file such reports, in each case within the time periods specified in
the Commission's rules and regulations. In addition, whether or not required by
the rules and regulations of the Commission, the Company and Premier will file a
copy of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default with respect to the Notes: (i) default for 30 days in the payment
when due of interest on the Notes; (ii) default in payment when due of the
principal of or premium, if any, on the Notes; (iii) failure by the Company to
comply for (a) 30 days with the provisions described under the captions
"--Escrow of Proceeds" and "--Repurchase at the Option of Holders" and (b) 30
days after notice with the provisions described under the caption "-- Certain
Covenants" (in each case, other than a failure to purchase Notes); (iv) failure
by the Company or Premier for 60 days after notice to comply with any of the its
other agreements in the Indenture, the Guarantee, the Pledge and Escrow
Agreement or the Notes; (v) the failure by the Company or any Restricted
Subsidiary to pay Indebtedness within any applicable grace period after final
maturity or the acceleration of any Indebtedness by the holders thereof because
of a default and the total amount of such Indebtedness unpaid or accelerated at
any time exceeds $10.0 million; (vi) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) if the Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or Premier or any Person acting on behalf of Premier shall deny or
disaffirm Premier's obligations under the Guarantee; (viii) material breach by
the Company of any representation or warranty set forth in the Pledge and Escrow
Agreement, or a material default by the Company in the performance of any
covenant set forth in the Pledge and Escrow Agreement, or repudiation by the
Company of its obligations under the Pledge and Escrow Agreement, or the
unenforceability of the Pledge and Escrow Agreement against the Company for any
reason and (ix) certain events of bankruptcy or insolvency with respect to the
Company, any Restricted Subsidiary that constitutes a Significant Subsidiary or
any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Restricted Subsidiary of the
Company that constitutes a Significant Subsidiary or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the
70
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to , 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to , 2002,
then the premium specified for the twelve months commencing on such date in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"), except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such
71
opinion of counsel shall confirm that, the Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Restricted Subsidiaries is a
party or by which the Company or any of its Restricted Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes or the Pledge and Escrow Agreement may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for such Notes), and any
existing default or compliance with any provision of the Indenture, the Notes or
the Pledge and Escrow Agreement may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount
72
thereof and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "-- Repurchase at the
Option of Holders"), (viii) except in accordance with the Indenture, release
Premier from its obligations under the Guarantee, or change the Guarantee in any
manner that would adversely affect the Holders, or (ix) make any change in the
foregoing amendment and waiver provisions. In addition, any amendments to the
Pledge and Escrow Agreement or the provisions of the Indenture governing the
Pledge and Escrow Agreement will require the consent of the Holders of at least
75% in aggregate principal amount of Notes then outstanding if such amendment
would adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Pledge and Escrow Agreement to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or substantially
all of the Company's assets, to make any change that would provide any
additional rights or benefits to the Holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will not be under an
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Six Flags Entertainment Corporation, 11501
Northeast Expressway, Oklahoma City, Oklahoma 73131, Attention: Corporate
Secretary.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be sold as set forth
herein will initially be issued in the form of one or more Global Notes (the
"Global Notes"). The Global Notes will be deposited on the date of the closing
of the sale of the Notes offered hereby (the "Closing Date") with, or on behalf
of, The Depository Trust Company (the "Depositary") and registered in the name
of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated
73
Securities, such Certificated Securities may, unless all Global Notes have
previously been exchanged for Certificated Securities, be exchanged for an
interest in the Global Note representing the principal amount of Notes being
transferred, subject to the transfer restrictions set forth in the Indenture.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the
Underwriters), banks and trust companies, clearing corporations and certain
other organizations. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only thorough
the Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Notes and (ii) ownership of the Notes evidenced
by the Global Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depositary (with respect to
the interests of the Depositary's Participants), the Depositary's Participants
and the Depositary's Indirect Participants. Prospective purchasers are advised
that the laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced by the
Global Notes will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest on any
Notes registered in the name of the Global Note Holder on the applicable record
date will be payable by the Trustee to or at the direction of the Global Note
Holder in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor any Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
74
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if (i) the Company notifies the Trustee in writing that
the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder and
the Depositary identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest , if any) be
made by wire transfer of immediately available next day funds to the accounts
specified by the Global Note Holder. With respect to Certificated Securities,
the Company will make all payments of principal, premium, if any, interest , if
any, by wire transfer of immediately available funds to the accounts specified
by the Holders thereof or, if no such account is specified, by mailing a check
to each such Holder's registered address. The Company expects that secondary
trading in the Certificated Securities will also be settled in immediately
available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(PROVIDED that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the
75
provisions of the Indenture described above under the caption "--Certain
Covenants--Change of Control" and/or the provisions described above under the
caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Restricted Subsidiaries of Equity Interests of any of the
Company's Restricted Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $5.0 million or (b) for net proceeds in
excess of $5.0 million. Notwithstanding the foregoing, the following items shall
not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary, (iii) the
transfer of Equity Interests in any Restricted Subsidiary pursuant to the
Subordinated Indemnity Agreement or the Partnership Parks Agreements, (iv) the
issuance of Equity Interests by a Restricted Subsidiary to any employee thereof
or as consideration for the acquisition of all or substantially all of the
assets of, or a majority of the Voting Stock of, any Person (or a business unit
or division of such Person) provided that the primary business of such Person
(or such unit or division) is a Permitted Business and (v) a Restricted Payment
that is permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"ASSET VALUE" of any asset, as of the date of determination thereof, means
the greater of the depreciated book value (as of the end of the fiscal quarter
ended immediately prior to such date of determination as to which financial
statements are available) and the appraised value of such asset; PROVIDED,
HOWEVER, that any such appraisal (i) shall not have been made more than two
years prior to such date of determination and (ii) shall have been made by a
qualified, independent and nationally recognized appraiser.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars or foreign currency, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any lender
party to the Credit Facilities or with any commercial bank having capital and
surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than thirty days
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within one year after the date of acquisition, (vi)
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securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory, the securities of which state, commonwealth,
territory, political subdivision or taxing authority (as the case may be) are
rated at least "A" by Standard & Poor's Corporation or "A" by Moody's Investors
Service, Inc. and (vii) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (vi)
of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, or Premier and its Subsidiaries, taken as a whole, to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than, in case
of the Company, to Premier or a Wholly-Owned Subsidiary of Premier, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company or
Premier, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35%
of the Voting Stock of Premier, (iv) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that Premier ceases to be the direct or indirect owner of less than 75% of
the voting power of the outstanding Equity Interests of the Company or (v) the
first day on which a majority of the members of the Board of Directors of the
Company or Premier are not Continuing Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) Consolidated
Interest Expense of such Person and its Restricted Subsidiaries for such period,
to the extent that any such expense was deducted in computing such Consolidated
Net Income, plus (iii) depreciation, amortization (including any depreciation or
amortization arising out of purchases by the Company or any Restricted
Subsidiary of Equity Interests in the partners of the Co-Venture Partnerships
and amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (iv) non-cash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP (other than accrual of income in
the ordinary course of business in respect of a future cash payment).
Notwithstanding any other provision of the Indenture to the contrary,
"Consolidated Cash Flow" of the Company for any period will be deemed to include
100% of the cash distributions to the Company or any of its Restricted
Subsidiaries in respect of such period from the Co-Venture Partnerships,
directly or indirectly, out of the Consolidated Cash Flow of the Co-Venture
Partnerships in respect of such period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization or original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such
77
period, and (iii) any interest expense on Indebtedness or Attributable Debt of
another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon).
The term "Consolidated Interest Expense" shall not include the consolidated
interest of any Person with respect to (i) any obligations in respect of the
SFEC Zero Coupon Senior Notes so long as (x) the Pledge and Escrow Agreement is
in full force and effect and the Trustee maintains a valid and perfected
security interest in cash or Government Securities in an amount sufficient to
pay the aggregate principal amount at maturity of the SFEC Zero Coupon Senior
Notes pursuant to the terms thereof or (y) the SFEC Zero Coupon Senior Notes
shall have been defeased in accordance with the indenture governing the SFEC
Zero Coupon Senior Notes or (ii) any obligations of the Company or any
Restricted Subsidiary under the Partnership Parks Agreements, the Marine World
Agreements or the Subordinated Indemnity Agreement.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, and prior to any deduction in respect
of dividends on any series of preferred stock of such Person, determined in
accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a Wholly
Owned Restricted Subsidiary thereof; (ii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iii) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity (including stated capital, additional
paid-in capital and retained earnings) of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CO-VENTURE PARTNERSHIPS" means (i) Six Flags Over Georgia, Ltd., a Georgia
Limited Partnership, (ii) Texas Flags, Ltd., a Texas Limited Partnership and
(iii) Fiesta Texas Theme Park, Ltd., a Texas Limited Partnership.
"CREDIT FACILITIES" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Six Flags Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
78
"CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; PROVIDED, HOWEVER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"--Certain Covenants-- Restricted Payments."
"ELIGIBLE INDEBTEDNESS" means any Indebtedness for money borrowed incurred
by one or more Restricted Subsidiaries of the Company, PROVIDED that such
Indebtedness for money borrowed is (other than as permitted by the Six Flags
Credit Facility) contractually PARI PASSU with and secured equally and ratably
with all other Indebtedness for money borrowed of such Restricted Subsidiaries.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ESCROW ACCOUNT" means the Escrow Account for the initial deposit of
approximately $175.0 million dollars of the net proceeds from the sale of the
Notes and cash in hand under the Pledge and Escrow Agreement.
"EXISTING INDEBTEDNESS" means up to $ million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Six Flags Credit Facility) in existence on the date of
the Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the Consolidated Interest Expense of such Person and
its Restricted Subsidiaries for such period and (ii) the product of (a) all
dividend payments, whether or not in cash, on any series of preferred stock of
such Person or any of its Restricted Subsidiaries, other than dividend payments
on any such preferred stock payable solely in Equity Interests of the Company or
such Restricted Subsidiary (other than Disqualified Stock) or to the Company or
a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person for the fiscal year
immediately preceding the date of such calculation, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of (a) the Consolidated Cash Flow of such Person for such
period to (b) the Fixed Charges of such Person for such period. In the event
that the referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including
79
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (ii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged. "guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness. The term
"Indebtedness" shall not include (i) any obligations in respect of the SFEC Zero
Coupon Senior Notes so long as (x) the Pledge and Escrow Agreement is in full
force and effect and the Trustee maintains a valid and perfected security
interest in cash or Government Securities in an amount sufficient to pay the
aggregate principal amount at maturity of the SFEC Zero Coupon Senior Notes
pursuant to the terms thereof or (y) the SFEC Zero Coupon Notes shall have been
defeased in accordance with the indenture governing the SFEC Zero Coupon Senior
Notes or (ii) any obligations of the Company or any Restricted Subsidiary under
the Partnership Parks Agreements, the Marine World Agreements or the
Subordinated Indemnity Agreement.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other
80
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees and any deposit or advance made
pursuant to any contract entered into in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company (other
than pursuant to the terms of the Partnership Parks Agreements or the
Subordinated Indemnity Agreement) such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"MARINE WORLD" means the Marine World Joint Powers Authority or any
successor thereto.
"MARINE WORLD AGREEMENTS" mean (i) the Parcel Lease, dated November 7, 1997,
between Marine World and Park Management Corp. ("PMC"), (ii) the Reciprocal
Easement Agreement, dated November 7, 1997, between Marine World and PMC, (iii)
the Revenue Sharing Agreement, dated November 7, 1997, among Marine World, PMC
and the Redevelopment Agency of the City of Vallejo (the "Agency"), (iv) the
Purchase Option Agreement, dated as of August 29, 1997, among Marine World, the
Agency, the City of Vallejo and PMC and (v) the 1997 Management Agreement, dated
as of February 1, 1997, between Marine World and PMC, as amended, in each case,
as the same may be modified or amended from time to time after the date of the
Indenture, PROVIDED such modification or amendment does not adversely affect the
interests of the Holders in any material respects.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) and (ii) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit
81
(upon notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARTNERSHIP PARKS AGREEMENTS" means (i) the Overall Agreement, dated as of
February 15, 1997, among Six Flags Fund, Ltd. (L.P.), Salkin Family Trust, SFG,
Inc., SFG-I, LLC, SFG-II, LLC, Six Flags Over Georgia, Ltd., SFOG II, Inc., SFOG
II Employee, Inc., SFOG Acquisition A, Inc., SFOG Acquisition B, L.L.C., Six
Flags Over Georgia, Inc., Six Flags Services of Georgia, Inc., Six Flags Theme
Parks Inc. and Six Flags Entertainment Corporation and the Related Agreements
(as defined therein), (ii) Overall Agreement, dated as of November 24, 1997,
among Six Flags Over Texas Fund, Ltd., Flags' Directors, L.L.C., FD-II, L.L.C.,
Texas Flags, Ltd., SFOT Employee, Inc., SFOT Acquisition I, Inc., SFOT
Acquisition II, Inc., Six Flags Over Texas, Inc., Six Flags Theme Parks Inc. and
Six Flags Entertainment Corporation and the Related Agreements (as defined
therein), and, (iii) the Lease Agreement with Option to Purchase, dated as of
March 9, 1996, among Fiesta Texas Theme Park, Ltd., a Texas Limited Partnership,
San Antonio Theme Park, L.P., and Six Flags San Antonio, L.P. and the
Transaction Documents (as defined therein), in each case, as the same may be
modified or amended from time to time after the date of the Indenture, provided
such modification or amendment does not adversely affect the interests of the
Holders in any material respect.
"PERMITTED BUSINESS" means any business related, ancillary or complementary
to the businesses of the Company and its Restricted Subsidiaries on the date of
the Indenture.
"PERMITTED INVESTMENTS" means an Investment by the Company or any Restricted
Subsidiary in (i) cash or Cash Equivalents, (ii) the Company, a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such
Restricted Subsidiary is a Permitted Business; (iii) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets (or the assets
of any business unit or division of such Person) to, the Company or a Restricted
Subsidiary; PROVIDED, HOWEVER, that such Person's (or such unit's or division's)
primary business is a Permitted Business; (iv) another Person if the aggregate
amount of all Investments in all such other Persons does not exceed $15.0
million at any one time outstanding (with each Investment being valued as of the
date made and without giving effect to subsequent changes in value); PROVIDED,
HOWEVER, that such Person's primary business is a Permitted Business; (v)
promissory notes received as consideration for an Asset Sale which are secured
by a Lien on the asset subject to such Asset Sale; PROVIDED that the aggregate
amount of all such promissory notes at any one time outstanding does not exceed
$5.0 million; (vi) non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" (vii) assets
acquired solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (viii) receivables owing to the Company or
any Restricted Subsidiary, if created or acquired in the ordinary course of
business; (ix) payroll, travel and similar advances that are made in the
ordinary course of business; (x) loans or advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; and (xi) stock, obligations or securities received
in settlement of debts created in the ordinary course of business and owing to
the Company or any Restricted Subsidiary or in satisfaction of judgments.
"PERMITTED LIENS" means (a) Liens to secure the Six Flags Credit Facility;
(b) Liens to secure Eligible Indebtedness that was permitted to be incurred
pursuant to the provisions of the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock;"
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(c) Liens existing on the Issue Date; (d) Liens on property or shares of Capital
Stock of another Person at the time such other Person becomes a Restricted
Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such other
Person becoming such a Restricted Subsidiary; PROVIDED FURTHER, HOWEVER, that
such Lien may not extend to any other property owned by such Person or any of
its Restricted Subsidiaries; (e) Liens on property at the time such Person or
any of its Restricted Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into such Person or a
Restricted Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not
created, incurred or assumed in connection with, or in contemplation of, such
acquisition; PROVIDED FURTHER, HOWEVER, that the Liens may not extend to any
other property owned by such Person or any of its Restricted Subsidiaries; (f)
Liens securing Indebtedness or other obligations of a Restricted Subsidiary of
such Person owing to such Person or a Restricted Subsidiary of such Person; (g)
Liens securing Hedging Obligations so long as the related Indebtedness is, and
is permitted to be under the Indenture, secured by a Lien on the same type of
property securing such Hedging Obligations; (h) Liens to secure any Permitted
Refinancing Indebtedness; PROVIDED, HOWEVER, that (x) such new Lien shall be
limited to all or part of the same property that secured the original Lien (plus
improvements on such property) and (y) the Indebtedness secured by such Lien at
such time is not increased to any amount greater than the sum of (A) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness refinanced at the time the original Lien became a Permitted Lien
and (B) an amount necessary to pay any fees and expenses, including premiums,
related to such refinancing, refunding, extension, renewal or replacement;
(i)(a) mortgages, liens, security interests, restrictions or encumbrances that
have been placed by any developer, landlord or other third party on property
over which the Company or any Restricted Subsidiary of the Company has easement
rights or on any real property leased by the Company and subordination or
similar agreements relating thereto and (b) any condemnation or eminent domain
proceedings affecting any real property; (j) pledges or deposits by such Person
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Indebtedness) or leases to which such Person is a
party, or deposits to secure public or statutory obligations of such Person or
deposits of cash or United States government bonds to secure surety or appeal
bonds to which such Person is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case incurred in the
ordinary course of business; (k) Liens imposed by law, such as carriers',
warehousemen's and mechanic's Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be proceeding with an appeal or other proceedings for review; (l) Liens for
property taxes not yet due or payable or subject to penalties for non-payment or
which are being contested in good faith and by appropriate proceedings; (m)
minor survey exceptions, minor encumbrances, easements or reservations of, or
rights of others for, licenses, rights of way, sewers, electric lines, telegraph
and telephone lines and other similar purposes, or zoning or other restrictions
as to the use of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were not
incurred in connection with Indebtedness and which do not in the aggregate
materially impair the use of such properties in the operation of the business of
such Person; (n) Liens securing Purchase Money Indebtedness; PROVIDED, HOWEVER,
that (i) the Indebtedness secured by such Liens is otherwise permitted to be
incurred under the Indenture, (ii) the principal amount of any Indebtedness
secured by any such Lien does not exceed the cost of assets or property so
acquired or constructed and (iii) the amount of Indebtedness secured by any such
Lien is not subsequently increased, (o) Liens arising out of the transactions
contemplated by the Partnership Parks Agreements, the Marine World Agreements,
the Subordinated Indemnity Agreement or the Six Flags Agreement; and (p) Liens
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed $10.0 million at any
one time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew,
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replace, defease or refund other Indebtedness of the Company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness); PROVIDED that:
(i) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses, including premiums, incurred in connection therewith); (ii)
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PLEDGE AND ESCROW AGREEMENT" means the Pledge, Escrow and Disbursement
Agreement, dated as of the date of the Indenture, by and between the Company and
the Trustee governing the disbursement of funds from the Escrow Account, as
amended from time to time in accordance with the Indenture.
"PREMIER" means Premier Parks Inc., a Delaware corporation.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
common stock of any Person pursuant to an effective registration statement under
the Securities Act.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of the Company
of such asset, including additions and improvements; PROVIDED, HOWEVER, that any
Lien arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached; and PROVIDED FURTHER, that such Indebtedness is Incurred within 180
days after such acquisition, addition or improvement by the Company or
Restricted Subsidiary of such asset.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SHARED SERVICES AGREEMENT" means the Shared Services Agreement among the
Company, Premier and Premier Operations as the same may be modified or amended
from time to time after the date of the Indenture, PROVIDED such modification or
amendment does not adversely affect the interests of the Holders in any material
respect.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"SPECIFIED AMOUNT" means, as of any date, the product of (a) the
Consolidated Cash Flow of the Company for the most recently four-quarter period
for which financial statements have been filed with the Commission determined on
a pro forma basis after giving effect to all acquisitions or Asset Sales made by
the Company and its Restricted Subsidiaries from the beginning of such
four-quarter period through and
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including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period, TIMES (b) 0.75.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"STRATEGIC EQUITY INVESTMENT" means a cash contribution to the common equity
capital of any Person or a purchase from any Person of common Equity Interests
(other than Disqualified Stock), in either case by or from a Strategic Equity
Investor and for aggregate cash consideration of at least $25.0 million.
"STRATEGIC EQUITY INVESTOR" means, as of any date, any Person (other than an
Affiliate of the Company) engaged in a Permitted Business which, as of the day
immediately before such date, had a Total Equity Market Capitalization of at
least $1.0 billion.
"SUBORDINATED INDEMNITY AGREEMENT" means the Subordinated Indemnity
Agreement, dated as of the date of the consummation of the Six Flags
Acquisition, among Premier, SFEC and its subsidiaries, Time Warner Inc., Time
Warner Entertainment Company, L.P. and TW-SPV Co., as the same may be modified
or amended from time to time after the date of the Indenture, PROVIDED such
modification or amendment does not adversely affect the interests of the Holders
in any material respect.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% (49% in the case of
Walibi, S.A.) of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership or limited
liability company (a) the sole general partner or the managing general partner
(or equivalent) of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement between
Premier, the Company and the other parties named therein as the same may be
modified or amended from time to time after the date of the Indenture, PROVIDED
such modification or amendment does not adversely affect the interests of the
Holders in any material respect.
"TOTAL EQUITY MARKET CAPITALIZATION" of any Person means, as of any day of
determination, the sum of (i) the product of (A) the aggregate number of
outstanding primary shares of common stock of such Person on such day (which
shall not include any options or warrants on, or securities convertible or
exchangeable into, shares of common stock of such Person) multiplied by (B) the
average closing price of such common stock listed on a national securities
exchange or the Nasdaq National Market System over the 20 consecutive business
days immediately preceding such day, plus (ii) the liquidation value of any
outstanding shares of preferred stock of such Person on such day.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than SFTP or any
successor to SFTP) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent
that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b)
is not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or
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otherwise directly or indirectly PROVIDED credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote by the holder thereof in the
election of the Board of Directors (or comparable body) of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
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