Six Flags Entertainment 10-Q 2005 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

ý	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly period ended September 30, 2005
OR
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from              to

Commission file number: 1-13703

SIX FLAGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3995059
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

11501 Northeast Expressway, Oklahoma City, Oklahoma 73131

(Address of Principal Executive Offices, Including Zip Code)

(405) 475-2500

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes ý  No o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At November 1, 2005, Six Flags, Inc. had outstanding 93,106,528 shares of Common Stock, par value $.025 per share.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.  Examples of forward-looking statements include, but are not limited to, statements we make regarding (i) our belief that cash flows from operations, available cash and available amounts under our credit agreement will be adequate to meet our future liquidity needs for at least the next several years and (ii) our expectation to refinance all or a portion of our existing debt on or prior to maturity.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.  Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.  Our actual results may differ materially from those contemplated by the forward-looking statements.  We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.  Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and include the following:

•factors impacting attendance, such as local conditions, events, disturbances and terrorist activities;

•accidents occurring at our parks;

•adverse weather conditions;

•competition with other theme parks and other recreational alternatives;

•changes in consumer spending patterns; and

•pending, threatened or future legal proceedings.

A more complete discussion of these factors and other risks applicable to our business is contained under the caption “Business – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2004.  See “Available Information” below.

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

Available Information

Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website (www.sixflags.com) as soon as reasonably practicable after we electronically file the material with, or furnish it to, the Securities and Exchange Commission.

2

PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

SIX FLAGS, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2005		December 31, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	116,379,000	$	68,807,000
Accounts receivable	97,982,000		22,438,000
Inventories	36,508,000		27,832,000
Prepaid expenses and other current assets	34,001,000		37,013,000
Restricted-use investment securities	—		134,508,000
Total current assets	284,870,000		290,598,000
Other assets:
Debt issuance costs	44,856,000		50,347,000
Deposits and other assets	35,798,000		46,528,000
Total other assets	80,654,000		96,875,000
Property and equipment, at cost	2,851,339,000		2,771,936,000
Less accumulated depreciation	910,804,000		819,974,000
Total property and equipment	1,940,535,000		1,951,962,000
Assets held for sale	91,022,000		94,606,000
Intangible assets, net of accumulated amortization	1,208,144,000		1,208,186,000
Total assets	$	3,605,225,000	$	3,642,227,000

See accompanying notes to consolidated financial statements.

3

	September 30, 2005			December 31, 2004
	(Unaudited)
LIABILITIES and STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	31,629,000		$	25,817,000
Accrued compensation, payroll taxes and benefits	16,827,000			8,652,000
Accrued insurance reserves	31,220,000			22,830,000
Accrued interest payable	51,692,000			37,812,000
Other accrued liabilities	44,290,000			42,583,000
Deferred income	25,817,000			9,392,000
Debt called for prepayment	—			123,068,000
Current portion of long-term debt	16,018,000			24,394,000
Total current liabilities	217,493,000			294,548,000
Long-term debt	2,131,490,000			2,125,121,000
Minority interest	79,119,000			60,911,000
Other long-term liabilities	35,788,000			38,846,000
Deferred income taxes	15,014,000			14,491,000
Mandatorily redeemable preferred stock (redemption value of $287,500,000)	283,090,000			282,245,000
Stockholders’ equity:
Preferred stock, $1.00 par value, 5,000,000 shares authorized; 111,500 issued and outstanding (representing mandatorily redeemable  preferred stock)	—			—
Common stock, $.025 par value, 210,000,000 and 150,000,000 shares authorized; 93,106,528 and 93,041,528 shares issued and outstanding at  September 30, 2005 and December 31, 2004, respectively	2,328,000			2,326,000
Capital in excess of par value	1,751,129,000			1,750,766,000
Accumulated deficit	(897,542,000		)	(909,134,000		)
Deferred compensation	(2,455,000		)	(2,709,000		)
Accumulated other comprehensive income (loss)	(10,229,000		)	(15,184,000		)
Total stockholders’ equity	843,231,000			826,065,000
Total liabilities and stockholders’ equity	$	3,605,225,000		$	3,642,227,000

See accompanying notes to consolidated financial statements.

4

SIX FLAGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

	2005			2004
Theme park admissions	$	305,662,000		$	276,074,000
Theme park food, merchandise and other	253,307,000			232,938,000
Total revenue	558,969,000			509,012,000
Operating costs and expenses:
Operating expenses	155,750,000			138,620,000
Selling, general and administrative	52,391,000			56,312,000
Noncash compensation (primarily selling, general and administrative)	166,000			160,000
Costs of products sold	47,212,000			41,549,000
Depreciation	37,263,000			35,088,000
Amortization	222,000			323,000
Total operating costs and expenses	293,004,000			272,052,000
Income from operations	265,965,000			236,960,000
Other income (expense):
Interest expense	(45,962,000		)	(46,668,000		)
Interest income	1,831,000			1,873,000
Minority interest in earnings	(25,060,000		)	(25,814,000		)
Early repurchase of debt	—			(490,000		)
Other income (expense)	(2,188,000		)	(14,803,000		)
Total other income (expense)	(71,379,000		)	(85,902,000		)
Income from continuing operations before income taxes	194,586,000			151,058,000
Income tax expense	368,000			98,673,000
Income from continuing operations	194,218,000			52,385,000
Discontinued operations, net of tax expense of $902,000 in 2005 and tax expense of $2,442,000 in 2004	1,470,000			3,982,000
Net income	$	195,688,000		$	56,367,000
Net income applicable to common stock	$	190,195,000		$	50,874,000
Weighted average number of common shares outstanding - basic:	93,107,000			93,042,000
Weighted average number of common shares outstanding - diluted:	154,051,000			106,831,000
Net income per average common share outstanding - basic:
Income from continuing operations	2.03			0.50
Discontinued operations, net of tax expense	0.01			0.05
Net income	$	2.04		$	0.55
Net income per average common share outstanding - diluted:
Income from continuing operations	1.28			0.49
Discontinued operations, net of tax expense	0.01			0.04
Net income	$	1.29		$	0.53

See accompanying notes to consolidated financial statements.

5

SIX FLAGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

	2005			2004
Theme park admissions	$	529,903,000		$	480,185,000
Theme park food, merchandise and other	447,956,000			412,976,000
Total revenue	977,859,000			893,161,000
Operating costs and expenses:
Operating expenses	378,630,000			346,029,000
Selling, general and administrative	162,813,000			166,136,000
Noncash compensation (primarily selling, general and administrative)	620,000			482,000
Costs of products sold	84,631,000			75,652,000
Depreciation	108,038,000			103,925,000
Amortization	667,000			976,000
Total operating costs and expenses	735,399,000			693,200,000
Income from operations	242,460,000			199,961,000
Other income (expense):
Interest expense	(139,670,000		)	(148,453,000		)
Interest income	5,019,000			2,635,000
Minority interest in earnings	(44,028,000		)	(41,696,000		)
Early repurchase of debt	(19,303,000		)	(31,862,000		)
Other income (expense)	(12,932,000		)	(19,354,000		)
Total other income (expense)	(210,914,000		)	(238,730,000		)
Income (loss) from continuing operations before income taxes	31,546,000			(38,769,000		)
Income tax expense	3,671,000			28,916,000
Income (loss) from continuing operations	27,875,000			(67,685,000		)
Discontinued operations, net of tax expense of $120,000 in 2005 and inclusive of tax benefit of $57,406,000 in 2004	195,000			(287,593,000		)
Net income (loss)	$	28,070,000		$	(355,278,000	)
Net income (loss) applicable to common stock	$	11,592,000		$	(371,756,000	)
Weighted average number of common shares outstanding - basic and diluted:	93,106,000			93,034,000
Net income (loss) per average common share outstanding - basic and diluted:
Net income (loss) from continuing operations	0.12			(0.90		)
Discontinued operations, net of tax	—			(3.10		)
Net income (loss)	$	0.12		$	(4.00	)

See accompanying notes to consolidated financial statements.

6

SIX FLAGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005		2004			2005			2004
Net income (loss)	$	195,688,000	$	56,367,000		$	28,070,000		$	(355,278,000	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	2,976,000		4,210,000			4,813,000			(17,363,000		)
Net change in fair value of derivative instruments	42,000		(349,000		)	(1,025,000		)	(785,000		)
Reclassifications of amounts taken to operations	—		1,440,000			1,167,000			(38,386,000		)
Comprehensive income (loss)	$	198,706,000	$	61,668,000		$	33,025,000		$	(411,812,000	)

See accompanying notes to consolidated financial statements.

7

SIX FLAGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

	2005			2004
Cash flow from operating activities:
Net income (loss)	$	28,070,000		$	(355,278,000	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	108,705,000			104,901,000
Minority interest in earnings	44,028,000			41,696,000
Partnership and joint venture distributions	(25,820,000		)	(22,748,000		)
Noncash compensation	620,000			482,000
Interest accretion on notes payable	200,000			383,000
Early repurchase of debt	19,303,000			31,862,000
Loss on discontinued operations	6,494,000			262,952,000
Amortization of debt issuance costs	6,159,000			6,081,000
Other including loss on disposal of assets	11,788,000			19,524,000
Increase in accounts receivable	(44,586,000		)	(34,632,000		)
Increase in inventories, prepaid expenses and other current assets	(5,404,000		)	(6,017,000		)
Decrease in deposits and other assets	10,732,000			1,698,000
Increase in accounts payable, deferred income, accrued liabilities and other long-term liabilities	37,272,000			45,345,000
Increase (decrease) in accrued interest payable	13,880,000			(6,527,000		)
Deferred income tax expense (benefit)	(79,000		)	24,937,000
Total adjustments	183,292,000			469,937,000
Net cash provided by operating activities	211,362,000			114,659,000
Cash flow from investing activities:
Additions to property and equipment	(137,485,000		)	(81,068,000		)
Purchase of identifiable intangible assets	—			(500,000		)
Capital expenditures of discontinued operations	(756,000		)	(3,189,000		)
Maturities of restricted-use investments	134,508,000			317,913,000
Proceeds from sale of discontinued operations	—			314,456,000
Proceeds from sale of assets	103,000			12,866,000
Net cash provided by (used in) investing activities	(3,630,000		)	560,478,000
Cash flow from financing activities:
Repayment of long-term debt	(590,316,000		)	(988,786,000		)
Proceeds from borrowings	449,525,000			411,000,000
Payment of cash dividends	(15,633,000		)	(15,633,000		)
Payment of debt issuance costs	(4,456,000		)	(2,448,000		)
Net cash used in financing activities	(160,880,000		)	(595,867,000		)
Effect of exchange rate changes on cash	720,000			—
Increase in cash and cash equivalents	47,572,000			79,270,000
Cash and cash equivalents at beginning of year	68,807,000			98,189,000
Cash and cash equivalents at end of period	$	116,379,000		$	177,459,000
Supplemental cashflow information:
Cash paid for interest	$	119,431,000		$	148,514,000
Cash paid for income taxes	$	4,365,000		$	2,894,000

See accompanying notes to consolidated financial statements.

8

SIX FLAGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.General — Basis of Presentation

We own and operate regional theme and water parks.  As used in this Report, unless the context requires otherwise, the terms “we,” “our” or “Six Flags” refer to Six Flags, Inc. and its consolidated subsidiaries.  As used herein, Holdings refers only to Six Flags, Inc., without regard to its subsidiaries.

As of March 31, 2004, we owned or operated 39 parks. In April 2004 we sold in two separate transactions seven parks in Europe and Six Flags Worlds of Adventure in Ohio.  In late 2004, we terminated our management of a park in Madrid, Spain.  As of September 30, 2005, we owned or operated 30 parks, including 28 domestic parks, one park in Mexico and one park in Canada.  However, on September 12, 2005, we announced that we would close Six Flags AstroWorld at the end of its 2005 operating season and seek to sell the underlying 104-acre site.  We intend to transfer certain property and equipment to other parks we own or operate prior to completing the sale.  The accompanying consolidated financial statements as of and for the nine months ended September 30, 2004 reflect the assets, liabilities and results of the facilities sold in 2004 as discontinued operations.  The accompanying consolidated financial statements as of and for all periods presented reflect select assets of Six Flags AstroWorld as assets held for sale and its results as a discontinued operation.  See Note 3.

Six Flags New Orleans sustained very extensive damage in Hurricane Katrina in late August 2005 and did not reopen during the 2005 season.  See Note 5.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, which follows these notes contains additional information on our results of operations and our financial position. Those comments should be read in conjunction with these notes.  Our annual report on Form 10-K for the year ended December 31, 2004 includes additional information about us, our operations and our financial position, and should be referred to in conjunction with this quarterly report on Form 10-Q.  The information furnished in this report reflects all adjustments (which are normal and recurring except for the accounting for Six Flags New Orleans hurricane damage) which are, in the opinion of management, necessary to present a fair statement of the results for the periods presented.

Results of operations for the three- and nine-month periods ended September 30, 2005 are not indicative of the results expected for the full year.  In particular, our theme park operations contribute a significant majority of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year-round.

Basis of Presentation

The consolidated financial statements include our accounts, our majority and wholly owned subsidiaries, and limited partnerships and limited liability companies in which we beneficially own 100% of the interests.

We also consolidate the partnerships and joint ventures that own Six Flags Over Texas, Six Flags Over Georgia, Six Flags White Water Atlanta and Six Flags Marine World as we have determined that we have the most significant economic interest since we receive a majority of these entities’ expected losses or expected residual returns and have the ability to make decisions that significantly affect the results of the activities of these entities.  The equity interests owned by nonaffiliated parties in these entities are reflected in the accompanying consolidated balance sheets as minority interest.  The portion of earnings or loss from these parks owned by non-affiliated parties in these entities is reflected as

9

minority interest in (earnings) loss in the accompanying consolidated statements of operations and in the consolidated statements of cash flows.

Income Taxes

Income taxes are accounted for under the asset and liability method.  At December 31, 2004, we had recorded a valuation allowance of $153,384,000 due to uncertainties related to our ability to utilize some of our deferred tax assets, primarily consisting of certain net operating losses carried forward and tax credits, before they expire.  Due to the seasonal nature of our business and the uncertainties referred to above, we had added $63,817,000 to the valuation allowance at June 30, 2005. Since we generated net income in the third quarter of 2005, we reversed the current year addition to the valuation allowance and reduced the December 31, 2004 valuation allowance by $6,202,000.

Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to future net cash flows expected to be generated by the asset or group of assets.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.  Neither the closing of Six Flags AstroWorld and related marketing of the site (see Note 3) nor the effects of Hurricane Katrina on Six Flags New Orleans (see Note 5) have resulted in an impairment charge.

Derivative Instruments

In February 2000, we entered into three interest rate swap agreements that effectively converted $600,000,000 of the term loan component of the Credit Facility (see Note 4(a)) into a fixed rate obligation.  The terms of the agreements, as subsequently extended, each of which had a notional amount of $200,000,000, began in March 2000.  One expired in March 2005 and the other two expired in June 2005.  Our term loan borrowings bear interest based upon LIBOR plus a fixed margin.  Our interest rate swap arrangements were designed to “lock-in” the LIBOR component at rates after March 6, 2003 and prior to March 6, 2005, ranging from 2.065% to 3.50% (with an average of 3.01%) and after March 6, 2005 and prior to June 6, 2005, ranging from 3.47% to 3.50% (with an average of 3.49%). The counterparties to these transactions were major financial institutions, which minimized the credit risk.

FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.  It requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value.  If certain conditions are met, a derivative may be specifically designated as a hedge for accounting purposes.  The accounting for changes in the fair value of a derivative (that is gains and losses) depends on the intended use of the derivative and the resulting designation.

Six Flags Over Georgia and Six Flags Over Texas (the Partnership Parks) are also party to interest rate swap agreements with respect to an aggregate of $5,651,000 of indebtedness at September 30, 2005 and $9,933,000 of indebtedness at December 31, 2004.

10

During the first nine months of 2005 and 2004, we had designated all of the interest rate swap agreements as cash-flow hedges.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and our strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as cash-flow hedges to forecasted transactions. We also assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Changes in the fair value of a derivative that is effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income (loss), until operations are affected by the variability in cash flows of the designated hedged item.  Changes in fair value of a derivative that is not designated as a hedge are recorded in operations on a current basis.

During the first nine months of 2005 and 2004, there were no gains or losses reclassified into operations as a result of the discontinuance of hedge accounting treatment for any of our derivatives.

We do not hold or issue derivative instruments for trading purposes.  Changes in the fair value of derivatives that are designated as hedges are reported on the consolidated balance sheet in “Accumulated other comprehensive income (loss)” (“AOCL”).  These amounts are reclassified to interest expense when the forecasted transaction takes place.

The critical terms, such as the index, settlement dates, and notional amounts, of the derivative instruments were substantially the same as the provisions of our hedged borrowings under the Credit Facility.  As a result, no ineffectiveness of the cash-flow hedges was recorded in the consolidated statements of operations.

As of September 30, 2005, approximately $19,000 of net deferred losses on derivative instruments accumulated in AOCL are expected to be reclassified to operations during the next 12 months.  Transactions and events expected to occur over the next 12 months that will necessitate reclassifying these derivatives’ losses to operations are the periodic payments that are required to be made on outstanding borrowings.

Income (Loss) Per Common Share

The following table reconciles the weighted average number of common shares outstanding used in the calculations of basic and diluted income (loss) per share for the three periods ended September 30, 2005 and 2004, respectively.  The effect of potential common shares issuable upon the exercise of employee stock options on the weighted average number of shares on a diluted basis for the three and nine months ended September 30, 2005 did not include the effects of the potential exercise of 2,704,000 and 3,004,000 options, respectively, as the option price was in excess of the average common stock price for the period.  The effect of potential common shares issuable upon the exercise of employee stock options on the weighted average number of shares on a diluted basis for the three and nine months ended September 30, 2004 did not include the effects of the potential exercise of 6,653,000 and 6,548,000 options, respectively, as the option price was in excess of the average common stock price for the period.  Additionally, the weighted average number of shares of Common Stock on a diluted basis for the nine-month periods does not include the effect of the potential conversion of the Company’s convertible preferred stock or convertible notes as the effect of such conversion and the resulting decrease in preferred stock dividends and interest expense, as the case may be, is antidilutive.  Our Preferred Income Equity Redeemable Shares (“PIERS”), which are shown as mandatorily redeemable preferred stock on our consolidated balance sheets, were issued in January 2001 and are convertible into 13,789,000 shares of

11

common stock. The convertible notes are convertible into 47,087,000 shares of common stock, although we can satisfy conversions by delivering cash in lieu of shares.  See Note 4(g).

	Three months ended September 30,
	2005						2004
				Weighted						Weighted
				Average	Per					Average	Per
	Net			Shares	Share		Net			Shares	Share
	Income			Outstanding	Amount		Income			Outstanding	Amount
Net income	$	195,688,000					$	56,367,000
Preferred stock dividends	(5,493,000		)				(5,493,000		)
	$	190,195,000		93,107,000	$	2.04	$	50,874,000		93,042,000	$	0.55
Effect of potential common shares issuable upon exercise of employee stock options	—			68,000			—			—
Effect of dilutive securities:
Preferred stock	5,493,000			13,789,000			5,493,000			13,789,000
Convertible notes	3,591,000			47,087,000			—			—
	$	199,279,000		154,051,000	$	1.29	$	56,367,000		106,831,000	$	0.53

Stock Compensation

We apply the intrinsic-value based method of accounting prescribed by APB Opinion No. 25 and related interpretations in accounting for our stock option plans.  Under this method, compensation expense for unconditional employee stock options is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price.  For employee stock options that are conditioned upon the achievement of performance goals, compensation expense, as determined by the extent that the quoted market price of the underlying stock at the time that the condition for exercise is achieved exceeds the stock option exercise price, is recognized over the service period.  For stock options issued to nonemployees, we recognize compensation expense at the time of issuance based upon the fair value of the options issued.

No compensation cost has been recognized for the unconditional stock options in the consolidated financial statements since the exercise price was equal to current market price at the date of all such grants.  Had we determined compensation cost based on the fair value at the grant date for all our unconditional stock options under SFAS 123, “Accounting for Stock Based Compensation,” and as provided for under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123,” our net income (loss) applicable to common stock would have been changed to the pro forma amounts below:

12

	Three months ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(In thousands)
Net income (loss) applicable to common stock:
As reported	$	190,195		$	50,874		$	11,592		$	(371,756	)
Add: Noncash compensation	166			160			620			482
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(609		)	(706		)	(1,948		)	(1,658		)
Pro forma	$	189,752		$	50,328		$	10,264		$	(372,932	)
Net income (loss) per weighted average common share outstanding – basic:
As reported	$	2.04		$	0.55		$	0.12		$	(4.00	)
Pro forma	$	2.04		$	0.54		$	0.11		$	(4.01	)
Net income (loss) per weighted average common share outstanding – diluted:
As reported	$	1.29		$	0.53		$	0.12		$	(4.00	)
Pro forma	$	1.29		$	0.52		$	0.11		$	(4.01	)

Impact of Recently Issued Accounting Pronouncements

In December 2004, the FASB published FASB Statement No. 123 (revised 2004), “Share-Based Payment.”  Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. As a larger public entity, we will be required to apply Statement 123(R) as of the first annual reporting period that begins after June 15, 2005, which is the first quarter of 2006.  Statement 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

Statement 123(R) replaces FASB Statement No. 123, “Accounting for Stock-Based Compensation,” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.”  Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. As allowed, we have historically accounted for stock options using the accounting principles of Opinion 25. The impact of adopting the provisions of Statement 123(R) will be to increase our noncash compensation expense in future periods. We have not determined the method that we will use to estimate the fair value of stock options as part of our adoption of Statement 123(R). As disclosed above, using the Black-Scholes method of

13

determining fair value in the past would have increased our noncash compensation expense by approximately $443,000 and $1,328,000, respectively, in the three and nine months ended September 30, 2005, and by $546,000 and $1,176,000, respectively, in the three and nine months ended September 30, 2004.  The provisions of our credit facilities and outstanding notes do not include noncash compensation expenses in the determination of financial covenants. As a result, the effects of the adoption of Statement 123(R) will not have a significant impact on our financial position or results of operations.

2.Stock

Common Stock

In June 2005, our shareholders approved an amendment to our Restated Certificate of Incorporation to increase the number of our authorized common shares from 150,000,000 to 210,000,000.

Preferred Stock

In January 2001, we issued 11,500,000 PIERS for proceeds of $277,834,000, net of the aggregate underwriting discount and offering expenses of $9,666,000.  We used the net proceeds of the offering to fund our acquisition in that year of the former Sea World of Ohio, to repay borrowings under the revolving credit portion of our senior credit facility (see Note 4(a)) and for working capital.  Each PIERS represents one one-hundredth of a share of our 7¹/₄% mandatorily redeemable preferred stock (an aggregate of 115,000 shares of preferred stock).  The PIERS accrue cumulative dividends (payable, at our option, in cash or shares of common stock) at 7¹/₄% per annum (approximately $20,844,000 per annum).

Prior to August 15, 2009, each of the PIERS is convertible at the option of the holder into 1.1990 common shares (equivalent to a conversion price of $20.85 per common share), subject to adjustment in certain circumstances (the “Conversion Price”). At any time on or after February 15, 2004 and at the then applicable conversion rate, we may cause the PIERS, in whole or in part, to be automatically converted if for 20 trading days within any period of 30 consecutive trading days, including the last day of such period, the closing price of our common stock exceeds 120% of the then prevailing Conversion Price. On August 15, 2009, the PIERS are mandatorily redeemable in cash equal to 100% of the liquidation preference (initially $25.00 per PIERS), plus any accrued and unpaid dividends.

3.Disposition of Theme Parks

On September 12, 2005, we announced that we will permanently close Six Flags AstroWorld in Houston at the end of its 2005 operating season and that we had engaged Cushman & Wakefield to market the 104-acre site on which the park is located.  The sale is subject to the formal approval of our lenders under the Credit Agreement (see note 4(a)) and we intend to use the proceeds from the sale to reduce our indebtedness and for other corporate purposes.  We intend to relocate rides, attractions and other equipment presently at AstroWorld to our remaining parks for the 2006 and 2007 seasons.  Since the expected net sales proceeds for the property exceeds our carrying value, no impairment of these assets exist at September 30, 2005.  We cannot give any assurances as to the timing of any such sale or the amount of the proceeds therefrom.

On April 8, 2004, we sold substantially all of the assets used in the operation of Six Flags World of Adventure near Cleveland, Ohio (other than the marine and land animals located at that park and certain assets related thereto) for a cash purchase price of $144.3 million.  In a separate transaction, on the same date, we sold all of the stock of Walibi S.A., our wholly-owned subsidiary that directly owned

14

the seven parks we owned in Europe.  The purchase price was approximately $200 million, of which Euro 10.0 million ($12.1 million as of April 8, 2004) was received in the form of a nine and one-half year note from the buyer, and $11.6 million represented the assumption of certain debt by the buyer, with the balance paid in cash.  Net cash proceeds from these transactions were used to pay down debt and to fund investments in our remaining parks. Through September 30, 2005, approximately $248,588,000 of debt had been repaid with such proceeds, not including the debt assumed by the buyer of our European parks.  The amounts shown in the consolidated statements of comprehensive income (loss) for the 2004 periods under the caption “Reclassification of amounts taken to operations” largely related to the 2004 dispositions.

Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” our consolidated financial statements have been reclassified for all periods presented to reflect the operations and select assets of AstroWorld as discontinued operations. The assets of AstroWorld have been classified as “Assets held for sale” on the September 30, 2005 and December 31, 2004 consolidated balance sheets and consist of the following:

	September 30, 2005		December 31, 2004
	(In thousands)
Property, plant and equipment, net	$	64,492	$		68,076
Goodwill, net	26,530		26,530
Total assets held for sale	$	91,022	$	94,606

The net income (loss) from discontinued operations (including AstroWorld for all periods and the 2004 dispositions for the nine months ended September 30, 2004) was classified on the consolidated statement of operations for the three- and nine-month periods ended September 30, 2004 and 2005. Summarized results of discontinued operations are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Operating revenue	$	14,324		$	18,398		$	36,306		$	38,758
Loss on sale of discontinued operations	$	—		$	—		$	—		$	(310,281	)
Income (loss) from discontinued operations before income taxes	2,372			6,424			315			(34,718		)
Income tax (expense) benefit	(902		)	(2,442		)	(120		)	57,406
Net results of discontinued operations	$	1,470		$	3,982		$	195		$	(287,593	)

Our long-term debt is at the consolidated level and is not reflected at each individual park. Thus, we have not allocated a portion of interest expense to the discontinued operations.

15

During November 2004 we agreed with the owner of the park we managed in Spain to terminate the management agreement and to transfer our 5% investment in the equity of the park for nominal consideration. By virtue of the foregoing, we recognized losses of approximately $6.7 million and $8.3 million, representing the carrying amount of our investment in the park and certain intangible assets related to non-compete agreements and licenses, respectively. These losses were recorded in other income (expense) in the third quarter of 2004.

4.Long-Term Indebtedness

(a)           On November 5, 1999, Six Flags Theme Parks Inc. (SFTP), a direct wholly owned subsidiary of Six Flags Operations Inc., our principal direct subsidiary, entered into a senior credit facility (the Credit Facility), which was amended and restated on July 8, 2002 and further amended on November 25, 2003, January 14, 2004, March 26, 2004, November 5, 2004 and April 22, 2005.  The Credit Facility includes a $300,000,000 five-year revolving credit facility (none of which was outstanding at September 30, 2005 and 2004, respectively), a $100,000,000 multicurrency reducing revolver facility (none of which was outstanding at September 30, 2005 or 2004) and a six-year term loan ($646,813,000 and $651,725,000 of which was outstanding at September 30, 2005 and December 31, 2004, respectively). Borrowings under the five-year revolving credit facility (US Revolver) must be repaid in full for thirty consecutive days each year.  The interest rate on borrowings under the Credit Facility can be fixed for periods ranging from one to six months.  At our option the interest rate is based upon specified levels in excess of the applicable base rate or LIBOR.  At September 30, 2005, the weighted average interest rate for borrowings under the term loan was 6.36%. The multicurrency facility permits optional prepayments and reborrowings and requires quarterly mandatory reductions in the initial commitment (together with repayments, to the extent that the outstanding borrowings thereunder would exceed the reduced commitment) of 2.5% of the committed amount thereof commencing on December 31, 2004, 5.0% commencing on March 31, 2006, 7.5% commencing on March 31, 2007 and 18.75% commencing on March 31, 2008. As a result, availability under this facility as of September 30, 2005 was $90.0 million.  This facility and the U.S. Revolver terminate on June 30, 2008. The term loan facility requires quarterly repayments of 0.25% of the outstanding amount thereof commencing on September 30, 2004 and 24.0% commencing on September 30, 2008.  The term loan matures on June 30, 2009, provided however, that the maturity of the term loan will be shortened to December 31, 2008, if prior to such date our outstanding preferred stock is not redeemed or converted into common stock.  A commitment fee of .50% of the unused credit of the facility is due quarterly in arrears.  The principal borrower under the facility is SFTP, and borrowings under the Credit Facility are guaranteed by Holdings, Six Flags Operations and all of Six Flags Operations’ domestic subsidiaries and are secured by substantially all of Six Flags Operations’ domestic assets and a pledge of Six Flags Operations’ capital stock.

On November 25, 2003, we entered into an amendment to the Credit Facility pursuant to which we amended the covenants relating to the leverage ratio through 2005 and the fixed charge coverage ratio through June 30, 2007 in order to provide us with additional financial flexibility.  In addition, pursuant to the amendment we are permitted to enter into fixed-to-floating rate debt swap agreements so long as our total floating rate debt does not exceed 50% of our total debt as of the swap date. In exchange for our lenders’ consent to the amendment, we agreed to an increase of 0.25% in the interest rates we are charged on our borrowings under the Credit Facility.

16

On January 14, 2004, we completed a $130,000,000 increase of the term loan portion of the Credit Facility and used all of the proceeds of the additional loan to redeem the remaining balance of our 9 ¾% Senior Notes due 2007 then outstanding.  See Note 4(b) below.  In March 2004, we amended the term loan in order to permit the sales of the discontinued operations.  In April 2004, we permanently repaid $75,000,000 of the term loan from a portion of the proceeds of the sale of the discontinued operations and recognized a gross loss of $1,216,000 for the write off of debt issuance costs.

On November 5, 2004, we entered into an additional amendment to the Credit Facility which further relaxed the leverage ratio through 2006 and the fixed charge coverage ratio through 2007. In exchange for our lenders’ consent to the amendment, we agreed to a further increase of 0.25% in certain circumstances in the interest rates we are charged on our borrowings under the Credit Agreement. We also agreed to pay a 1% prepayment penalty if we refinance all or any portion of the term loans outstanding under the Credit Facility prior to November 4, 2005.

On April 22, 2005 we amended the Credit Facility to permit our Canadian subsidiary that owns our Montreal park to incur up to Can $35.0 million of secured debt to finance improvements at that park and to increase from $25.0 million to $40.0 million the letter of credit capacity under the Credit Facility.

The Credit Facility contains restrictive covenants that, among other things, limit the ability of Six Flags Operations and its subsidiaries to dispose of assets; incur additional indebtedness or liens; repurchase stock; make investments; engage in mergers or consolidations; pay dividends (except that (i) dividends of up to $75,000,000 in the aggregate (of which $8,900,000 had been dividended prior to September 30, 2005) may be made from cash from operations in order to enable us to pay amounts in respect of any refinancing or repayment of Holdings’ senior notes and (ii) subject to covenant compliance, dividends will be permitted to allow Holdings to meet cash interest obligations with respect to its Senior Notes, cash dividend payments on the PIERS and its obligations to the limited partners in Six Flags Over Georgia and Six Flags Over Texas) and engage in certain transactions with subsidiaries and affiliates.  In addition, the Credit Facility requires that Six Flags Operations comply with certain specified financial ratios and tests.

(b)           On June 30, 1999, Holdings issued $430,000,000 principal amount of 9¾% Senior Notes due 2007 (the 2007 Senior Notes). In December 2002, we repurchased $7,000,000 principal amount of the 2007 Senior Notes.  In January 2004, we redeemed the 2007 Senior Notes in full from the proceeds of the December 2003 issuance of our 9 5/8% Senior Notes due 2014 (see Note 4(f) below) and the proceeds of the $130,000,000 increase in our term loan (see Note 4(a) above).  A gross loss of $25,178,000 due to the redemption of the 2007 Senior Notes was recognized in the first quarter of 2004.

(c)           On February 2, 2001, Holdings issued $375,000,000 principal amount of 9 ½% Senior Notes due 2009 (the 2009 Senior Notes). As of December 31, 2004, we had repurchased $70.3 million of the 2009 Senior Notes from a portion of the proceeds of the sale of the discontinued operations (see Note 3) and a portion of the proceeds of the November 2004 offering of our 4 ½% Convertible Senior Notes due 2015 (the Convertible Notes).  See Note 4(g).  A gross loss of $3,922,000 due to the repurchase of the 2009 Notes was recognized in 2004.  On February 1, 2005 we redeemed $123,500,000 aggregate principal amount of the 2009 Notes with a portion of the net proceeds of the Convertible Notes.  We redeemed the balance of the 2009 Notes on February 7, 2005 with the proceeds of the January 2005 offering of $195,000,000 of additional 9 5/8% Senior Notes due 2014 (see Note 4(f)).  A gross loss of $19,303,000 due to the redemptions of the 2009 Notes was recognized in the first quarter of 2005.

(d)           On February 11, 2002, Holdings issued $480,000,000 principal amount of 8 7/8% Senior Notes due 2010 (the 2010 Senior Notes). As of December 31, 2004, we had repurchased $179.7 million of the 2010 Senior Notes from a portion of the proceeds of the sale of the discontinued operations (see Note 3) and a portion of the proceeds of the November 2004 offering of our Convertible Notes (see Note 4(g)).  A gross loss of $4,599,000 due to the repurchase of the 2010 Notes was recognized in 2004. We have not repurchased or retired any additional 2010 Senior Notes since December 31, 2004.  The 2010 Senior Notes are senior unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank equal to the other Senior Notes of Holdings.  The 2010 Senior Notes require annual interest payments of approximately $26,652,000 (8 ⁷/₈% per annum) and, except in the event of a change in control of Holdings and certain other circumstances, do not require any principal payments prior to their maturity in 2010.  The 2010 Senior Notes are redeemable, at Holding’s option, in whole or in part, at any time on or after February 1, 2006, at varying redemption prices beginning at 104.438% and reducing

17

annually until maturity.  The net proceeds of the 2010 Senior Notes were used to fund the redemptions of senior notes of Holdings and Six Flags Operations.

The indenture under which the 2010 Senior Notes were issued limits our ability, among other things, to dispose of assets; incur additional indebtedness or liens; pay dividends; engage in mergers or consolidations; and engage in certain transactions with affiliates.

(e)           On April 16, 2003, Holdings issued $430,000,000 principal amount of 9 ¾% Senior Notes due 2013 (the 2013 Senior Notes). As of December 31, 2004 we had repurchased $42,000,000 principal amount of the 2013 Senior Notes.  A gross loss of $1,979,000 due to this repurchase was recognized in 2004.  We have not repurchased or retired any additional 2013 Senior Notes since December 31, 2004.  The 2013 Senior Notes are senior unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank equal to the other Holdings Senior Notes.  The 2013 Senior Notes require annual interest payments of approximately $37,830,000 (9 3/4% per annum) and, except in the event of a change in control of the Company and certain other circumstances, do not require any principal payments prior to their maturity in 2013.  The 2013 Senior Notes are redeemable, at Holdings’ option, in whole or in part, at any time on or after April 15, 2008, at varying redemption prices beginning at 104.875% and reducing annually until maturity.  The indenture under which the 2013 Senior Notes were issued contains covenants substantially similar to those relating to the other Holdings Senior Notes. All of the net proceeds of the 2013 Senior Notes were used to fund the tender offer and redemption of other senior notes of Holdings.

(f)            On December 5, 2003, Holdings issued $325,000,000 principal amount of 9 5/8% Senior Notes due 2014 (the 2014 Senior Notes). As of December 31, 2004, we had repurchased $16,350,000 principal amount of the 2014 Senior Notes.  A gross loss of $837,000 due to this repurchase was recognized in 2004.  In January 2005, we issued an additional $195,000,000 of 2014 Senior Notes, the proceeds of which were used to fund the redemption of $181,155,000 principal amount of the 2009 Senior Notes (see 4(c)). The 2014 Senior Notes are senior unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank equal to the other Holdings Senior Notes.  The 2014 Senior Notes require annual interest payments of approximately $48,476,000 (9 5/8% per annum) and, except in the event of a change in control of the Company and certain other circumstances, do not require any principal payments prior to their maturity in 2014.  The 2014 Senior Notes are redeemable, at Holdings’ option, in whole or in part, at any time on or after June 1, 2009, at varying redemption prices beginning at 104.813% and reducing annually until maturity.  The indenture under which the 2014 Senior Notes were issued contains covenants substantially similar to those relating to the other Holdings Senior Notes. All of the net proceeds of the original issuance of 2014 Senior Notes were used to redeem a portion of the 2007 Senior Notes (see Note 4(b)).

(g)           On November 19, 2004, Holdings issued $299,000,000 principal amount of Convertible Notes.  The Convertible Notes are senior unsecured obligations of Holdings, are not guaranteed by subsidiaries and rank equal to the other Holdings Senior Notes.  The Convertible Notes are convertible into our common stock at an initial conversion rate of 157.4803 shares of common stock for each $1,000 principal amount of Convertible Notes, subject to adjustment, representing an initial conversion price of $6.35 per share.  Upon conversion of the notes, we have the option to deliver common stock, cash or a combination of cash and common stock.  The Convertible Notes require annual interest payments of approximately $13,455,000 (4 ½% per annum) and, except in the event of a change in control of Holdings and certain other circumstances, do not require any principal payments prior to their maturity in 2015.  The Convertible Notes are redeemable, at Holdings’ option, in whole or in part, at any time after May 15, 2010 at varying redemption prices beginning at 102.143% and reducing annually until maturity.  The net proceeds of the Convertible Notes were used to repurchase and redeem a portion of the 2009 Senior Notes (see Note 4(c)) and repurchase a portion of the 2010 Senior Notes (see Note 4 (d)).

18

5.Commitments and Contingencies

Six Flags New Orleans sustained very extensive damage in Hurricane Katrina in late August 2005 and did not reopen during the 2005 season.  Although we have had limited access to the park since the storm, we have determined that our carrying value of the assets destroyed will be approximately $30.3 million. This amount does not include the property and equipment owned by the lessor, which is also covered by our insurance policies.  The park is covered by up to approximately $180 million in property insurance, subject to a deductible in the case of named storms of approximately $5.5 million.  The property insurance covers the full replacement value of the assets destroyed and includes business interruption coverage. Although the flood insurance provisions of the policies contain a $27.5 million sublimit, the separate “Named Storm” provision, which explicitly covers flood damage, is not similarly limited.  Based on advice from our insurance advisors, we do not believe the sublimit to be applicable.  Our preliminary estimate of wind damage, which is not subject to any sublimit, is in excess of $30 million. We have initiated both property and business interruption claims with our insurers.  Since we expect to recover therefrom an amount in excess of our cost basis in the assets impaired, we have established an insurance receivable at September 30, 2005, in an amount equal to the prior carrying value of the destroyed assets, $30.3 million.  We cannot estimate at this time when the park will be back in operation.  We are contractually committed to rebuild the park, but only to the extent of insurance proceeds received, including proceeds from the damage to the lessor’s assets.  We cannot be certain that our current estimates of the extent of the damage and the causes thereof will be correct.

On April 1, 1998 we acquired all of the capital stock of Six Flags Entertainment Corporation for $976,000,000, paid in cash.  In addition to our obligations under outstanding indebtedness and other securities issued or assumed in the Six Flags acquisition, we also guaranteed in connection therewith certain contractual obligations relating to the partnerships that own the two Partnership Parks, Six Flags Over Texas and Six Flags Over Georgia.  Specifically, we guaranteed the obligations of the general partners of those partnerships to (i) make minimum annual distributions of approximately $54,915,000 (as of 2005 and subject to annual cost of living adjustments thereafter) to the limited partners in the Partnership Parks and (ii) make minimum capital expenditures at each of the Partnership Parks during rolling five-year periods, based generally on 6% of such park’s revenues.  Cash flow from operations at the Partnership Parks is used to satisfy these requirements first, before any funds are required from us.  We also guaranteed the obligation of our subsidiaries to purchase a maximum number of 5% per year (accumulating to the extent not purchased in any given year) of the total limited partnership units outstanding as of the date of the agreements (the “Partnership Agreements”) that govern the partnerships (to the extent tendered by the unit holders).  The agreed price for these purchases is based on a valuation for each respective Partnership Park equal to the greater of (i) a value derived by multiplying such park’s weighted-average four-year EBITDA (as defined in the Partnership Agreements) by a specified multiple (8.0 in the case of the Georgia park and 8.5 in the case of the Texas park) or (ii) $250.0 million in the case of the Georgia park and $374.8 million in the case of the Texas park.  Our obligations with respect to Six Flags Over Georgia and Six Flags Over Texas will continue until 2027 and 2028, respectively.

As we purchase units relating to either Partnership Park, we are entitled to the minimum distribution and other distributions attributable to such units, unless we are then in default under the applicable agreements with our partners at such Partnership Park.  On September 30, 2005, we owned approximately 25.3% and 37.5%, respectively, of the limited partnership units in the Georgia and Texas partnerships. No units were tendered in April 2004 or 2005. The maximum unit purchase obligations for 2006 at both parks will aggregate approximately $246,569,000.

We maintain multi-layered general liability policies that provide for excess liability coverage of up to $100,000,000 per occurrence.  For incidents arising after November 15, 2003, our self-insured retention is $2,500,000 per occurrence ($2,000,000 per occurrence for the twelve months ended November 15, 2003 and $1,000,000 per occurrence for the twelve months ended on November 15, 2002) for our domestic parks and a nominal amount per occurrence for our international parks.  Our deductible after November 15, 2003 is $750,000 for workers compensation claims ($500,000 for the period from November 15, 2001 – November 15, 2003).  For most incidents prior to November 15, 2001, our policies did not provide for a self-insured retention or deductible.  Based upon reported claims and an estimate for incurred, but not reported claims, we accrue a liability for our self-insured retention contingencies.  Substantially all of our current policies expire on December 31, 2005.

19

We are party to various other legal actions arising in the normal course of business.  Matters that are probable of unfavorable outcome to us and which can be reasonably estimated are accrued.  Such accruals are based on information known about the matters, our estimate of the outcomes of such matters and our experience in contesting, litigating and settling similar matters.  None of the legal actions are believed by management to involve amounts that would be material to our consolidated financial position, results of operations, or liquidity after consideration of recorded accruals.

In December 2004, we guaranteed the payment of a $31.0 million construction term loan incurred by HWP Development LLC (a joint venture in which we own a 41% interest) for the purpose of financing the construction and development of a hotel and indoor water park project to be located adjacent to our Great Escape park near Lake George, New York. At September 30, 2005, $15,431,000 was outstanding under the loan.  One of our partners in the joint venture also guaranteed the loan.  Our guarantee will be released upon full payment and discharge of the loan, which matures on December 17, 2009. As security for the guarantee, we have posted an $8.0 million letter of credit.  We have entered into a management agreement to manage and operate the project upon its completion.

6.Minority Interest, Partnerships and Joint Ventures

Minority interest represents the third parties’ share of the assets of the four parks that are less than wholly-owned, Six Flags Over Texas, Six Flags Over Georgia (including Six Flags White Water Atlanta which is owned by the partnership that owns Six Flags Over Georgia) and Six Flags Marine World. Minority interest in loss shown includes depreciation and other non-operating expenses of $1,220,000 and $1,371,000, respectively, for the quarters ended September 30, 2005 and 2004 and $3,660,000 and $4,113,000, respectively, for the nine months ended September 30, 2005 and 2004.

In April 1997, we became manager of Marine World (subsequently renamed Six Flags Marine World), then a marine and exotic wildlife park located in Vallejo, California, pursuant to a contract with an agency of the City of Vallejo under which we are entitled to receive an annual base management fee of $250,000 and up to $250,000 annually in additional management fees based on park revenues.  In November 1997, we exercised our option to lease approximately 40 acres of land within the site for nominal rent and an initial term of 55 years (plus four ten-year and one four-year renewal options).  We have added theme park rides and attractions on the leased land, which is located within the existing park, in order to create one fully-integrated regional theme park at the site.  We are entitled to receive, in addition to the management fee, 80% of the cash flow generated by the combined operations at the park, after combined operating expenses and debt service on outstanding third party debt obligations relating to the park.  We also have an option through February 2010 to purchase the entire site at a purchase price equal to the greater of the then principal amount of the debt obligations of the seller (expected to aggregate $52,000,000) or the then fair market value of the seller’s interest in the park (based on a formula relating to the seller’s 20% share of Marine World’s cash flow).

See note 5 for a description of the partnership arrangements applicable to the Partnership Parks.

7.Business Segments

We manage our operations on an individual park location basis.  Discrete financial information is maintained for each park and provided to our management for review and as a basis for decision making.  The primary performance measure used to allocate resources is earnings before interest, tax expense, depreciation and amortization (“EBITDA”).  All of our parks provide similar products and services through a similar process to the same class of customer through a consistent method.  As such, we have only one reportable segment - operation of theme parks.  The following tables present segment financial information and a reconciliation of the primary segment performance measure to income (loss) from continuing operations before

20

income taxes.  Park level expenses exclude all noncash operating expenses, principally depreciation and amortization, and all non-operating expenses.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(In thousands)
Theme park revenue	$	558,969		$	509,012		$	977,859		$	893,161
Theme park cash expenses	(249,324		)	(230,269		)	(603,844		)	(568,099		)
Aggregate park EBITDA	309,645			278,743			374,015			325,062
Minority interest in earnings - EBITDA	(26,280		)	(27,185		)	(47,688		)	(45,809		)
Corporate expenses	(6,029		)	(6,212		)	(22,230		)	(19,718		)
Non-cash compensation	(166		)	(160		)	(620		)	(482		)
Other income (expenses)	(2,188		)	(15,293		)	(32,235		)	(51,216		)
Minority interest in earnings – depreciation and other expense	1,220			1,371			3,660			4,113
Depreciation and amortization	(37,485		)	(35,411		)	(108,705		)	(104,901		)
Interest expense	(45,962		)	(46,668		)	(139,670		)	(148,453		)
Interest income	1,831			1,873			5,019			2,635
Income (loss) from continuing operations before income taxes	$	194,586		$	151,058		$	31,546		$	(38,769	)

After giving effect to the discontinued operations, all of our parks are located in the United States except one park located in Mexico and one located in Canada.  The following information reflects our long-lived assets and revenue by domestic and international categories as of and for the first nine months of 2005 and 2004.

	(In thousands)
2005	Domestic		International		Total
Long-lived assets	$	3,010,080	$	138,599	$	3,148,679
Revenue	910,011		67,848		977,859
	(In thousands)
2004	Domestic		International		Total
Long-lived assets	$	3,049,054	$	129,610	$	3,178,664
Revenue	838,213		54,948		893,161

Long-lived assets include property and equipment and intangible assets.

21

8.Pension Benefits

As part of the 1998 acquisition of the former Six Flags, we assumed the obligations related to the SFTP Defined Benefit Plan (the Plan).  The Plan covered substantially all of SFTP’s employees.  During 1999 the Plan was amended to cover substantially all of our domestic full-time employees.  During 2004, the Plan was further amended to cover certain seasonal workers, retroactive to January 1, 2003.  The Plan permits normal retirement at age 65, with early retirement at ages 55 through 64 upon attainment of ten years of credited service.  The early retirement benefit is reduced for benefits commencing before age 62.  Plan benefits are calculated according to a benefit formula based on age, average compensation over the highest consecutive five-year period during the employee’s last ten years of employment and years of service.  Plan assets are invested primarily in common stock and mutual funds.  The Plan does not have significant liabilities other than benefit obligations.  Under our funding policy, contributions to the Plan are determined using the projected unit credit cost method.  This funding policy meets the requirements under the Employee Retirement Income Security Act of 1974.

In December 2003, FASB Statement No. 132 (revised), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” was issued.  Statement 132 (revised) prescribes employers’ disclosures about pension plans and other postretirement benefit plans; it does not change the measurement or recognition of those plans.  It also requires additional annual and quarterly disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other post retirement benefit plans.  The following disclosures incorporate the requirements of Statement 132 (revised).

Components of Net Periodic Benefit Cost

	Three Months Ended September 30,						Nine Months Ended September30,
	2005*			2004			2005*			2004
	(In thousands)
Service cost	$	1,524		$	1,339		$	4,578		$	3,955
Interest cost	2,315			2,058			6,912			6,210
Expected return on plan assets	(2,199		)	(2,079		)	(6,609		)	(6,053		)
Amortization of prior service cost	140			76			420			226
Recognized net actuarial loss	1,143			643			2,516			1,969
Net periodic benefit cost	$	2,923		$	2,037		$	7,817		$	6,307

Weighted-average assumptions to determine net cost

Discount rate	5.875	%	6.125	%	5.875	%	6.125	%
Rate of compensation increase	3.750	%	3.750	%	3.750	%	3.750	%
Expected return on plan assets	8.500	%	8.750	%	8.500	%	8.750	%

*The pension cost shown reflects the actual pension cost for 2005.  In previous interim filings for 2005, the amount disclosed was an estimate.

Employer Contributions

We expect to contribute approximately $9,432,000 to the Plan during fiscal year 2005.  During the nine months ended September 30, 2005, we made a pension contribution of approximately $8,085,000.

22

9.Recent Events

On August 17, 2005, Red Zone LLC (“Red Zone”), an investment vehicle controlled and managed by Daniel M. Snyder, publicly announced its intention to solicit consents from our stockholders to remove, without cause, Kieran Burke, James Dannhauser and Stanley Shuman as directors of the Company and to replace them with a slate of nominees selected by Red Zone. In addition, Red Zone and Mr. Snyder have announced their intention to solicit consents to make certain amendments to our Bylaws (the “Bylaws”) in order to promote the ability of Red Zone to implement its changes to our Board. Specifically, Mr. Snyder, through Red Zone, is asking our stockholders to (i) fix the number of directors of the Company at seven, (ii) require a unanimous vote of the Board to further amend the number of directors, (iii) require that vacancies on the Board created as a result of the removal of the current directors by the Company’s stockholders be filled only by a majority vote of the stockholders, and (iv) repeal any amendments to the Bylaws adopted by the Board after September 13, 2004 (the “Red Zone Proposals”). The Board has set October 24, 2005 as the record date (the “Record Date”) for the determination of our stockholders who are entitled to execute, withhold or revoke consents relating to Red Zone’s consent solicitation. Only holders of record as of the close of business on the Record Date may execute, withhold or revoke consents with respect to Red Zone’s consent solicitation.

Red Zone also stated that if its consent solicitation is successful, it will commence a tender offer to increase its ownership of the Company to up to 34.9% of the common stock at a price of $6.50 per share, but, as presently described by Red Zone, only if at any time during the ninety days following the date its nominees are seated on the Board, our stock closes at a price at or lower than $6.50 per share for five consecutive trading days. Red Zone’s public filings state that its proposed tender offer will, however, be subject to a number of conditions, including (i) the adoption by our stockholders of the Red Zone Proposals, (ii) the installment of Mr. Snyder as Chairman of the Board and Mark Shapiro, another of Red Zone’s Board designees, as our Chief Executive Officer, (iii) the amending of our stockholder rights plan to make the rights issued thereunder inapplicable to Red Zone’s offer, (iv) the Board taking all actions so that restrictions contained in Section 203 of the Delaware General Corporation Law applicable to a “business combination” will not apply to any business combination involving the Company, on the one hand, and Red Zone or any of its affiliates, on the other hand, and (v) there not having occurred any events which, in Red Zone’s reasonable judgment, would have a material adverse effect on our business.

On August 25, 2005, we announced that our Board of Directors had unanimously determined that Red Zone’s actions, taken as a whole, are not in the best interests of all of the Company’s stockholders. The Board’s position and the reasons therefor are described more fully in the Company’s Consent Revocation Statement dated October 25, 2005, a copy which is on file with U.S. Securities & Exchange Commission.

On that date, we also announced that the Board had unanimously determined to seek proposals from third parties regarding a possible sale of the entire Company. The process initiated by our Board of Directors is designed to result in the receipt of full and fair value by all of our stockholders for all of their shares, and is being led by our financial advisors, Lehman Brothers Inc. and Allen & Company LLC, subject to the direction of the Board of Directors. Recently, we received initial bids from a number of financial and strategic bidders and are targeting the receipt of final bids in the early part of December.  While we remain confident that we will end up with an attractive transaction that we will be recommending to stockholders before the end of December, there can be no assurance that any such transaction will be completed or, if completed, the terms thereof.

23

Item 2 — Management’s Discussion and Analysis of

Financial Condition and Results of Operations

RESULTS OF OPERATIONS

General

Results of operations for the three- and nine- month periods ended September 30, 2005 are not indicative of the results expected for the full year.  In particular, our theme park operations contribute a significant majority of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year-round.

As of March 31, 2004, we owned or operated 39 parks.  In April 2004 we sold in two separate transactions seven parks in Europe and Six Flags Worlds of Adventure in Ohio.  In November 2004 we agreed with the owner of the park that we managed in Spain to terminate the management agreement at that time.  As of September 30, 2005, we owned or operated 30 parks, including 28 domestic parks, one park in Mexico and one park in Canada. However, on September 12, 2005, we announced that we would close Six Flags AstroWorld at the end of its 2005 operating season and seek to sell the underlying 104-acre site on which the park is located. The sale is subject to the approval of our lenders under the Credit Agreement (see Note 4(a) to Notes to Consolidated Financial Statements) and we intend to use the proceeds from the sale to reduce our indebtedness and for other corporate purposes.  We intend to relocate rides, attractions and other equipment presently at AstroWorld to our remaining parks for the 2006 and 2007 seasons.  Since the expected sales proceeds for the property exceeds our carrying value, no impairment of these assets exists at September 30, 2005.  We can not give any assurances as to the timing of any such sale or the amount of the proceeds therefrom.

The accompanying consolidated financial statements as of and for the three and nine months ended September 30, 2004 reflect the assets, liabilities and results of the facilities sold in 2004 as discontinued operations.  The accompanying consolidated financial statements as of and for all periods presented reflect select assets of Six Flags AstroWorld as assets held for sale and its results as a discontinued operation.

Six Flags New Orleans sustained very extensive damage in Hurricane Katrina in late August 2005 and did not reopen during the 2005 season.  Although we have had limited access to the park since the storm, we have determined that, the carrying value of the assets destroyed will be approximately $30.3 million. This amount does not include the property and equipment owned by the lessor, which is also covered by our insurance policies. The park is covered by up to approximately $180 million in property insurance, subject to a deductible in the case of named storms of approximately $5.5 million.  The property insurance covers the full replacement value of the assets destroyed and includes business interruption coverage. Although the flood insurance provisions of the policies contain a $27.5 million sublimit, the separate “Named Storm” provision, which explicitly covers flood damage, is not similarly limited.  Based on advice from our insurance advisors, we do not believe the sublimit to be applicable.  Our preliminary estimate of wind damage, which is not subject to any sublimit, is in excess of $30 million.  We have initiated both property and business interruption claims with our insurers.  Since we expect to recover therefrom an amount in excess of our cost basis in the assets impaired, we have established an insurance receivable at September 30, 2005, in an amount equal to the carrying value of the destroyed assets, $30.3 million.  We cannot estimate at this time when the park will be back in operation.  We are contractually committed to rebuild the park, but only to the extent of insurance proceeds received, including proceeds from the damage to the lessor’s assets.  We cannot be certain that our current estimates of the extent of the damage and the causes thereof will be correct. See Note 5.

Our revenue is primarily derived from the sale of tickets for entrance to our parks (approximately 54.2% of revenues in the first nine months of 2005) and the sale of food, merchandise, games and attractions inside our parks.  Revenues in the first nine months of 2005 increased 9.5% over the comparable period of 2004.  The revenue increase was driven by a 5.6% increase in attendance, coupled with a 3.6% increase in per capita revenue.

24

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

We expect to make approximately $125 million of capital expenditures for the 2006 season to add a wide array of new rides, attractions and revenue outlets at many of our parks.

Recent Events

See Note 9 to Notes to Consolidated Financial Statements for a discussion of the consent solicitation commenced by Red Zone and the decision of our Board of Directors to seek proposals for a possible sale of our Company.

Critical Accounting Policies

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Our Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 Form 10-K”) discussed our most critical accounting policies.  During the three months ended September 30, 2005, as a result of and to the extent of our profitable operations year to date, we decreased our valuation allowance in respect of income taxes as described in Note 1 to Notes to Consolidated Financial Statements.  Except for the foregoing, there have been no material developments with respect to any critical accounting policies discussed in the 2004 Form 10-K since December 31, 2004.

25

Summary of Operations

Summary data for the three and nine months ended September 30 were as follows (in thousands, except per capita revenue):

	Three Months Ended September 30,						Percentage		Nine Months Ended September 30,						Percentage
	2005			2004			Change		2005			2004			Change
Total revenue	$	558,969		$	509,012		9.8	%	$	977,859		$	893,161		9.5	%
Operating expenses	155,750			138,620			12.4		378,630			346,029			9.4
Selling, general and administrative	52,391			56,312			(7.0	)	162,813			166,136			(2.0	)
Non-cash compensation	166			160			3.8		620			482			28.6
Costs of products sold	47,212			41,549			13.6		84,631			75,652			11.9
Depreciation and amortization	37,485			35,411			5.9		108,705			104,901			3.6
Income (loss) from operations	265,965			236,960			12.2		242,460			199,961			21.3
Interest expense, net	(44,131		)	(44,795		)	(1.5	)	(134,651		)	(145,818		)	(7.7	)
Minority interest	(25,060		)	(25,814		)	(2.9	)	(44,028		)	(41,696		)	5.6
Early repurchase of debt	—			(490		)	N/M		(19,303		)	(31,862		)	(39.4	)
Other expense	(2,188		)	(14,803		)	(85.2	)	(12,932		)	(19,354		)	(33.2	)
Income (loss) from continuing operations before income taxes	194,586			151,058			28.8		31,546			(38,769		)	N/M
Income tax expense	368			98,673			(99.6	)	3,671			28,916			(87.3	)
Income (loss) from continuing operations	$	194,218		$	52,385		270.8		$	27,875		$	(67,685	)	N/M
Other Data:
Attendance	16,957			16,297			4.0	%	30,096			28,489			5.6	%
Per capita revenue	$	32.96		$	31.23		5.5		$	32.49		$	31.35		3.6

N/M means not meaningful

Three months ended September 30, 2005 vs. three months ended September 30, 2004

Revenue in the third quarter of 2005 totaled $559.0 million compared to $509.0 million for the third quarter of 2004, representing an 9.8% increase.  The increase in the 2005 period results primarily from a 4.0% increase in attendance, together with a 5.5% increase in per capita revenue.  We believe the attendance increase was largely the result of our strategic initiatives put in place in the latter part of 2003, including a renewed focus on improving the guest experience, as well as the new attractions added for 2005, the second year of our advertising campaign and generally more favorable weather conditions than in the comparable 2004 period.

Operating expenses for the third quarter of 2005 increased $17.1 million (12.4%) compared to expenses for the third quarter of 2004.  The increase primarily reflects planned increases in salary, wage

26

and benefit expense ($11.7 million), and utilities expense ($2.5 million), as well as an increase in repair and maintenance expenditures ($1.0 million).

Selling, general and administrative expenses for the third quarter of 2005 decreased $3.9 million compared to comparable expenses for the third quarter of 2004.  The decrease primarily relates to lower advertising expense ($2.1 million) and insurance expense ($4.0 million) offset in part by increased salary and wage expense ($1.2 million).

The slight increase in the 2005 quarter in noncash compensation reflects the expense associated with the grant in January 2005 of an aggregate of 65,000 shares of restricted stock to our Chief Executive Officer and Chief Financial Officer pursuant to their employment agreements.

Costs of products sold in the 2005 period increased $5.7 million compared to costs for the third quarter of 2004, reflecting primarily the increase in in-park revenues.  As a percentage of our in-park sales, cost of sales remained relatively constant in the two quarters.

Depreciation and amortization expense for the third quarter of 2005 increased $2.1 million compared to the third quarter of 2004.  The increase compared to the 2004 level was attributable to our on-going capital program.

Interest expense, net decreased $0.7 million compared to the third quarter of 2004, reflecting the benefit of the lower interest rate convertible notes issued in November 2004 to refinance other higher interest rate debt, offset in part by an increase in the interest cost associated with our floating rate debt.

Minority interest in earnings reflects the third party share of the operations of the parks that are not wholly-owned by us, Six Flags Over Georgia (including White Water Atlanta), Six Flags Over Texas and Six Flags Marine World.

The expense in the third quarter of 2004 for early repurchase of debt reflects the debt repayments in that quarter from a portion of the proceeds of the sales of our Ohio park and European division in April 2004.  See Notes 3 and  4 to Notes to Consolidated Financial Statements.

Other expense in the third quarter of 2005 decreased approximately $12.6 million compared to the prior-year period.  The 2004 period expense included $14.4 million of expense associated with the termination of our involvement with the Madrid park.

Income tax expense was $0.4 million for the third quarter of 2005 compared to a $98.7 million expense for the third quarter of 2004.  The reduction in tax expense for the third quarter of 2005 was primarily the result of the reduction in the valuation allowance that had been established in prior periods and is described in Note 1 to Notes to Consolidated Financial Statements.  The reduction is related to our profitable operations year to date.  We anticipate establishing an additional allowance in the fourth quarter of 2005.

Nine months ended September 30, 2005 vs. nine months ended September 30, 2004

Revenue in the nine months of 2005 totaled $977.9 million compared to $893.2 million for the first nine months of 2004, representing a 9.5% increase.  The increase in the 2005 period results primarily from a 5.6% increase in attendance, together with a 3.6% increase in per capita revenue.  We believe the attendance increase was largely the result of our strategic initiatives put in place in the latter part of 2003, including a renewed focus on improving the guest experience, as well as the new attractions added for 2005, the second year of our advertising campaign and generally more favorable weather conditions than in the comparable 2004 period.

27

Operating expenses for the first nine months of 2005 increased $32.6 million (9.4%) compared to expenses for the first nine months of 2004.  The increase primarily reflects planned increases in salary and wage and benefit expense ($18.5 million) and repair and maintenance expenditures ($4.2 million), as well as an increase in utilities expense ($3.4 million).

Selling, general and administrative expenses for the first nine months of 2005 decreased by $3.3 million compared to comparable expenses for the first nine months of 2004.  The decrease primarily relates to lower insurance ($5.0 million) and advertising expense ($6.0 million), offset in part by increases in salary and wage expense ($4.2 million).

The increase in the 2005 period in noncash compensation reflects the expense associated with the grant in January 2005 of an aggregate of 65,000 shares of restricted stock to our Chief Executive Officer and Chief Financial Officer pursuant to their employment agreements.

Costs of products sold in the 2005 period increased $9.0 million compared to costs for the first nine months of 2004, reflecting primarily the increase in in-park revenues.  As a percentage of our in-park sales, cost of sales remained relatively constant for the two nine-month periods.

Depreciation and amortization expense for the first nine months of 2005 increased $3.8 million compared to the first nine months of 2004.  The increase compared to the 2004 level was attributable to our on-going capital program.

Interest expense, net decreased $11.2 million compared to the first nine months of 2004, reflecting primarily the benefit of the lower interest rate convertible notes issued in November 2004 to refinance other higher interest rate debt.

Minority interest in earnings reflects the third party share of the operations of the parks that are not wholly-owned by us, Six Flags Over Georgia (including White Water Atlanta), Six Flags Over Texas and Six Flags Marine World.  The increase in the 2005 period reflects improved performance at Six Flags Marine World compared to the prior-year period and the annual increase in the distributions to limited partners of Six Flags Over Georgia and Six Flags Over Texas.

The expense in the first nine months of 2005 for early repurchase of debt reflects the redemption in February 2005 of our 2009 Senior Notes.  The expense in the first nine months of 2004 for early repurchase of debt reflects the redemption in January 2004 of our 2007 Senior Notes and debt repayments in the 2004 period, including a $75 million payment on our term loan, from a portion of the proceeds from the sales of our Ohio park and European division in April 2004.  See Notes 3 and  4 to Notes to Consolidated Financial Statements.  We refinance our public debt primarily to extend maturities.

Other expense in the first nine months of 2005 decreased $6.4 million compared to the prior-year period, primarily reflecting increased retirement of assets in connection with our 2005 capital program, offset in part by the recognition in 2004 of the loss associated with the termination of our involvement in the Madrid park.

Income tax expense was $3.7 million for the first nine months of 2005 compared to a $28.9 million expense for the first nine months of 2004.  The decrease in tax expense for the 2005 period was primarily the result of the reduction in the valuation allowance that had been established in prior periods and is discussed in Note 1 to Notes to Consolidated Financial Statements.  The reduction is related to our profitable operations year to date.  We anticipate establishing an additional allowance in the fourth quarter of 2005.

28

Results of Discontinued Operations

On September 12, 2005, we announced that we will permanently close Six Flags AstroWorld in Houston at the end of its 2005 operating season and that we had engaged Cushman & Wakefield to market the 104-acre site.  The sale is subject to the approval of our lenders under the Credit Agreement (see Note 4(a) to Notes to Consolidated Financial Statements) and we intend to use the proceeds from the sale to reduce our indebtedness and for other corporate purposes.  We intend to relocate rides, attractions and other equipment presently at AstroWorld to our remaining parks for the 2006 and 2007 seasons.  Since the expected net sales proceeds for the property exceeds our carrying value, no impairment of these assets exists at September 30, 2005.  We can not give any assurances as to the timing of any such sale or the amount of the proceeds therefrom.

On April 8, 2004, we sold substantially all of the assets used in the operation of Six Flags World of Adventure near Cleveland, Ohio (other than the marine and land animals located at that park and certain assets related thereto) for a cash purchase price of $144.3 million.  In a separate transaction, on the same date, we sold all of the stock of Walibi S.A., our wholly-owned subsidiary that directly owned the seven parks we owned in Europe.  The purchase price was approximately $200 million, of which Euro 10.0 million ($12.1 million as of April 8, 2004) was received in the form of a nine and one-half year note from the buyer, and $11.6 million represented the assumption of certain debt by the buyer, with the balance paid in cash.  Net cash proceeds from these transactions were used to pay down debt and to fund investments in our remaining parks. Through September 30, 2005, approximately $248,588,000 of debt had been repaid with such proceeds, not including the debt assumed by the buyer of our European parks.  The amounts shown in the consolidated statements of comprehensive income (loss) for the 2004 periods under the caption “Reclassification of amounts taken to operations” largely related to the 2004 dispositions.

Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” our consolidated financial statements have been reclassified for all periods presented to reflect the operations and select assets of AstroWorld as discontinued operations. The assets of AstroWorld have been classified as “Assets held for sale” on the September 30, 2005 and December 31, 2004 consolidated balance sheets and consist of the following:

	September 30, 2005		December 31, 2004
	(In thousands)
Property, plant and equipment, net	$	64,492	68,076
Goodwill, net	26,530		26,530
Total assets held for sale	$	91,022	$	94,606

The net income (loss) from discontinued operations (including AstroWorld for all periods and the 2004 disposition for the nine months ended September 30, 2004) was classified on the consolidated statement of operations for the three- and nine-month periods ended September 30, 2004 and 2005 as “Discontinued operations, inclusive of tax.” Summarized results of discontinued operations are as follows:

29

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Operating revenue	$	14,324		$	18,398		$	36,306		$	38,758
Loss on sale of discontinued operations	$	—		$	—		$	—		$	(310,281	)
Income (loss) from discontinued operations before income taxes	2,372			6,424			315			(34,718		)
Income tax benefit	(902		)	(2,442		)	(120		)	57,406
Net results of discontinued operations	$	1,470		$	3,982		$	195		$	(287,593	)

Our long-term debt is at the consolidated level and is not reflected at each individual park. Thus, we have not allocated a portion of interest expense to the discontinued operations.

During November 2004 we agreed with the owner of the park we managed in Spain to terminate the management agreement and to transfer our 5% investment in the equity of the park for nominal consideration. By virtue of the foregoing, we recognized losses of approximately $6.7 million and $8.3 million, representing the carrying amount of our investment in the park and certain intangible assets related to non-compete agreements and licenses, respectively. These losses were recorded in other income (expense) in the third quarter of 2004.

LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES

General

Our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand.  Our principal uses of cash include the funding of working capital obligations, debt service, investments in parks (including capital projects and acquisitions), preferred stock dividends and payments to our partners in the Partnership Parks.  We did not pay a dividend on our common stock during 2004, nor do we expect to pay such dividends in 2005.  We believe that, based on historical and anticipated operating results, cash flows from operations, available cash and available amounts under our credit agreement will be adequate to meet our future liquidity needs, including anticipated requirements for working capital, capital expenditures, scheduled debt and preferred stock requirements and obligations under arrangements relating to the Partnership Parks, for at least the next several years.  Our current and future liquidity is, however, greatly dependent upon our operating results, which are driven largely by overall economic conditions as well as the price and perceived quality of the entertainment experience at our parks.  Our liquidity could also be adversely affected by unfavorable weather, accidents or the occurrence of an event or condition, including terrorist acts or threats, negative publicity or significant local competitive events, that significantly reduces paid attendance and, therefore, revenue at any of our theme parks.  See “Business – Risk Factors,” contained in the 2004 Form 10-K.  In that case, we might need to seek additional financing. In addition, we expect to refinance all or a portion of our existing debt on or prior to maturity and to seek additional financing.  The degree to which we are leveraged and conditions in the debt markets generally could adversely affect our ability to obtain any new financing or to effect any such refinancing.  See “Cautionary Note Regarding Forward-Looking Statements.”

At September 30, 2005, our total debt aggregated $2,147.5 million, of which approximately

30

$16.0 million was scheduled to mature prior to September 30, 2006.  Based on interest rates at September 30, 2005 for floating rate debt, annual cash interest payments for 2005 on non-revolving credit debt outstanding at September 30, 2005 and anticipated levels of working capital revolving borrowings for the year will aggregate approximately $173.8 million.  In addition, annual dividend payments on our outstanding preferred stock total $20.8 million, payable at our option in cash or shares of common stock.  We expect to make approximately $125 million of capital expenditures for the 2006 season to add a wide array of new rides, attractions and revenue outlets at many of our parks.  At September 30, 2005, we had approximately $116.4 million of cash and $359.4 million available under our credit facility.

Due to the seasonal nature of our business, we are largely dependent upon our $300.0 million working capital revolving credit portion of our credit agreement in order to fund off season expenses.  Our ability to borrow under the working capital revolver is dependent upon compliance with certain conditions, including financial ratios and the absence of any material adverse change.  We are currently in compliance with all of these conditions.  If we were to become unable to borrow under the facility, we would likely be unable to pay in full our off-season obligations.  The working capital facility expires in June 2008.  The terms and availability of our credit facility and other indebtedness would not be affected by a change in the ratings issued by rating agencies in respect of our indebtedness.

During the nine months ended September 30, 2005, net cash provided by operating activities was $211.4 million. Since our business is both seasonal and involves significant levels of cash transactions, factors impacting our net operating cash flows are the same as those impacting our cash-based revenues and expenses discussed above. Net cash used in investing activities in the first nine months of 2005 was $3.6 million, consisting primarily of capital expenditures, offset by maturities of restricted-use investments (representing the net proceeds from our November 2004 offering of the Convertible Notes, which had been held in escrow to fund a portion of the redemption in February 2005 of the 2009 Senior Notes).  Net cash used in financing activities in the first nine months of 2005 was $160.9 million, representing primarily the proceeds of the January 2005 issuance of $195.0 million principal amount of additional 2014 Senior Notes and $254.5 million in borrowings under the revolving credit portion of our credit facility and the separate working capital facilities of the Partnership Parks, offset by the payment of $590.3 million for the repayment of debt and the payment of preferred stock dividends as well as debt issuance costs.

Long-term debt and preferred stock

Our debt at September 30, 2005 included $1,489.5 million of fixed-rate senior notes, with staggered maturities ranging from 2010 to 2015, $646.8 million under our credit facility and $11.2 million of other indebtedness, including $6.5 million of indebtedness at Six Flags Over Texas and Six Flags Over Georgia.  Except in certain circumstances, the public debt instruments do not require principal payments prior to maturity.  Our credit facility includes a term loan ($646.8 million of which was outstanding at September 30, 2005); a $100.0 million multicurrency reducing revolver facility (none of which was outstanding at September 30, 2005) and a $300.0 million working capital revolver (none of which was outstanding at that date).  The working capital facility must be repaid in full for 30 consecutive days during each year and terminates on June 30, 2008. The multicurrency reducing revolving credit facility, which permits optional prepayments and reborrowings, requires quarterly mandatory reductions in the initial commitment (together with repayments, to the extent that the outstanding borrowings thereunder would exceed the reduced commitment) of 2.5% of the committed amount thereof commencing on December 31, 2004, 5.0% commencing on March 31, 2006, 7.5% commencing on March 31, 2007 and 18.75% commencing on March 31, 2008.  As a result, availability under this facility as of September 30, 2005 was $90.0 million. This facility terminates on June 30, 2008. The term loan facility requires quarterly repayments of 0.25% of the outstanding amount thereof commencing on September 30, 2004 and 24.0% commencing on September 30, 2008.  The term loan

31

matures on June 30, 2009.  Under the credit facility, the maturity of the term loan will be shortened to December 31, 2008, if prior to such date our outstanding preferred stock is not converted into common stock or redeemed.  All of our outstanding preferred stock ($287.5 million liquidation preference) must be redeemed on August 15, 2009 (to the extent not previously converted into common stock).  See Notes 2 and 4 to Notes to Consolidated Financial Statements for additional information regarding our indebtedness and preferred stock.

Partnership Park Obligations

In connection with our 1998 acquisition of the former Six Flags, we guaranteed certain obligations relating to Six Flags Over Georgia and Six Flags Over Texas.  These obligations continue until 2027, in the case of the Georgia park and 2028, in the case of the Texas park.  Among such obligations are (i) minimum annual distributions (including rent) of approximately $54.9 million in 2005 (subject to cost of living adjustments in subsequent years) to partners in these two Partnerships Parks (of which we will be entitled to receive in 2005 approximately $17.7 million based on our present ownership of 25% of the Georgia partnership and 37% of the Texas partnership), (ii) minimum capital expenditures at each park during rolling five-year periods based generally on 6% of park revenues, and (iii) an annual offer to purchase a maximum number of 5% per year (accumulating to the extent not purchased in any given year) of limited partnership units at specified prices.

We made approximately $6.9 million of capital expenditures at these parks for the 2005 season, an amount in excess of the minimum required expenditure.  We were not required to purchase any units in the 2005 offer to purchase.  Because we have not been required since 1998 to purchase a material amount of units, our maximum unit purchase obligation for both parks in 2006 is an aggregate of approximately $246.6 million, representing approximately 45.0% of the outstanding units of the Georgia park and 36.1% of the outstanding units of the Texas park.  The annual unit purchase obligation (without taking into account accumulation from prior years) aggregates approximately $31.1 million for both parks based on current purchase prices.  As we purchase additional units, we are entitled to a proportionate increase in our share of the minimum annual distributions.

Cash flows from operations at these Partnership Parks will be used to satisfy the annual distribution and capital expenditure requirements, before any funds are required from us. The two partnerships generated approximately $58.7 million of aggregate net cash provided by operating activities during 2004.  At September 30, 2005, we had total loans outstanding of $131.1 million to the partnerships that own these parks, primarily to fund the acquisition of Six Flags White Water Atlanta and to make capital improvements.

Off-balance sheet arrangements and aggregate contractual obligations

In December 2004, we guaranteed the payment of a $31.0 million construction term loan incurred by HWP Development LLC (a joint venture in which we own a 41% interest) for the purpose of financing the construction and development of a hotel and indoor water park project to be located adjacent to our Great Escape park near Lake George, New York.  The hotel is scheduled to open in early 2006; accordingly, we have not yet received any revenues from the joint venture but had advanced the joint venture approximately $1.6 million at September 30, 2005.  We acquired our interest in the joint venture through a contribution of land and a restaurant, valued at $5.0 million

The loan was also guaranteed by one of our venture partners.  The guarantee will be released upon full payment and discharge of the loan, which matures on December 17, 2009. As security for the guarantee, we have posted an $8.0 million letter of credit. At September 30, 2005, approximately $15.4 million was outstanding under the construction term loan. In the event we are required to fund amounts under the guarantee, our joint venture partners either must reimburse us for their respective pro rata

32

share (based on their percentage interests in the venture) or their interests in the joint venture will be diluted or, in certain cases, forfeited.  We have entered into a management agreement to manage and operate the project upon its completion.  As of September 30, 2005, we were not involved in any other off-balance sheet arrangements.

Other obligations

In addition to the debt, preferred stock, lease obligations applicable to several of our parks and our commitments to the partnerships that own Six Flags Over Texas and Six Flags Over Georgia discussed above, our contractual commitments include commitments for license fees to Warner Bros. and commitments relating to capital expenditures.  License fees to Warner Bros. for our domestic parks aggregate $2.5 million annually through May 2005.  Effective June 1, 2005, the license fee is payable based upon the number of domestic parks utilizing the licensed characters. Based on current usage, the annual fee increased to approximately $4.0 million at that time. In addition to the license fee, we also pay a royalty fee on merchandise sold using the licensed characters, generally equal to 12% of the cost of the merchandise. We expect to make contributions of approximately $9.4 million in 2005 in respect to our pension plan and $2.3 million in 2005 to our 401(k) plan.  Our estimated expense for employee health insurance for 2005 is $16.3 million.

Although we are contractually committed to make specified levels of capital expenditures at selected parks, the vast majority of our capital expenditures in 2005 and beyond will be made on a discretionary basis.  In 2004 and 2005, we made approximately $145 million of capital expenditures for the 2005 season, adding a wide array of new rides, attractions and revenue outlets at many of our parks.

During the three years ended December 31, 2003, insurance premiums and self-insurance retention levels increased substantially. However, as compared to the policies that expired in 2004, the current policies, which expire in December 2005, cover substantially the same risks (neither property insurance policy covered terrorist activities), do not require higher aggregate premiums and do not have substantially larger self-insurance retentions (liability insurance retentions increased from $2.0 million to $2.5 million per occurrence and workers’ compensation deductibles increased from $500,000 to $750,000).  We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks, such as terrorism.

We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on the prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.  The amounts involved may be material.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The information included in “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of our 2004 Form 10-K is incorporated herein by reference.  Such information includes a description of our potential exposure to market risks, including interest rate risk and foreign currency risk.  As of September 30, 2005, there have been no material changes in our market risk exposure from that disclosed in the 2004 Form 10-K.

33

Item 4.Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2005.  Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2005.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended September 30 2005, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

34

PART II — OTHER INFORMATION

Items 1 – 5

Not applicable.

Item 6 - Exhibits

(a)	Exhibits
	Exhibit 31.1	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.2	Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SIX FLAGS, INC.

(Registrant)

/s/ Kieran E. Burke

Kieran E. Burke

Chairman and Chief Executive Officer

/s/ James F. Dannhauser

James F. Dannhauser

Chief Financial Officer

Date:  November 9, 2005

36