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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - JANUARY 30, 2002
(Date of Earliest Event Reported)
SIX FLAGS, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0-9789
Delaware 13-3995059
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(State of Incorporation) (I.R.S. Employer Identification No.)
11501 Northeast Expressway
Oklahoma City, Oklahoma 73131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 475-2500
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ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
The information set forth in the press releases issued by Six
Flags, Inc. on January 30, 2002 and January 31, 2002, attached hereto as Exhibit
99.1 and Exhibit 99.2, respectively, is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 Press Release of Six Flags, Inc., dated January 30,
2002.
99.2 Press Release of Six Flags, Inc., dated January 31,
2002.
ITEM 9. REGULATION FD DISCLOSURE.
In connection with the proposed private offering of senior
notes by Six Flags, Inc. referred to in its press release attached hereto as
Exhibit 99.2, Six Flags, Inc. has disclosed the following updated risk factor
information:
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RISK FACTORS
RISK FACTORS RELATING TO OUR BUSINESS
MANAGEMENT OF GROWTH--WE MAY NOT BE ABLE TO MANAGE OUR RAPID GROWTH OR
INTEGRATE ACQUISITIONS.
We have experienced significant growth through acquisitions and will
continue to consider acquisition opportunities that arise. These acquisitions
could place a future strain on our operations and cash flow. Our ability to
manage future acquisitions will depend on our ability to successfully evaluate
new markets and investments, monitor operations, control costs, maintain
effective quality controls, expand our internal management and technical and
accounting systems and integrate acquired businesses into our company.
To fund future acquisitions, we may need to borrow more money or assume the
debts of acquired companies. To incur any additional debt, we must comply with
the restrictions contained in any indebtedness we may have at that time. If
these restrictions are not met and we do not receive necessary consents or
waivers of these restrictions, we may be unable to make future acquisitions.
If we do purchase additional businesses, it may negatively affect our
earnings, at least in the short term. Further, we cannot guarantee that any
future acquisition will generate the earnings or cash flow we expect. In
connection with any future acquisitions, unexpected liabilities might arise and
the planned benefits may not be realized.
RISK OF ACCIDENTS--THERE IS THE RISK OF ACCIDENTS OCCURRING AT OUR PARKS
WHICH MAY REDUCE ATTENDANCE AND EARNINGS.
Almost all of our parks feature "thrill rides." While we carefully maintain
the safety of our rides, there are inherent risks involved with these
attractions. An accident or an injury at any of our parks or at parks operated
by our competitors may reduce attendance at our parks, causing a decrease in
revenues.
We maintain insurance of the type and in amounts that we believe is
commercially reasonable and that are available to businesses in our industry. We
maintain multi-layered general liability policies that provide for excess
liability coverage of up to $100.0 million per occurrence. For incidents arising
after November 15, 2001, our self-insured retention is $1.0 million per
occurence for our domestic parks and a nominal amount per occurrence for our
international parks. For most prior incidents we have no self-insured retention.
FACTORS IMPACTING ATTENDANCE--LOCAL CONDITIONS, EVENTS, NATURAL DISASTERS,
DISTURBANCES AND TERRORIST ACTIVITIES CAN ADVERSELY IMPACT PARK ATTENDANCE.
Lower attendance may be caused by various local conditions, events or
natural disasters. In addition, since some of our parks are near major urban
areas and appeal to teenagers and young adults, there may be disturbances at one
or more parks which negatively affect our image. This may result in a decrease
in attendance at the affected parks. We work with local police authorities on
security-related precautions to prevent these types of occurrences. We can make
no assurance, however, that these precautions will be able to prevent any
disturbances. We believe that our ownership of many parks in different
geographic locations reduces the effects of these types of occurrences on our
consolidated results.
Our business and financial results were adversely impacted by the terrorist
activities occurring in the United States on September 11, 2001. These
activities resulted in a significant decrease in
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attendance at our parks during the four weekends immediately following
September 11. We estimate that these activities resulted in a reduction of
approximately $25 million to $30 million in our 2001 revenue. We cannot predict
what the long-term effect of these terrorist activities or any further terrorist
activities that may occur in the future may have on our business and results of
operations.
ADVERSE WEATHER CONDITIONS--BAD WEATHER CAN ADVERSELY IMPACT ATTENDANCE AT
OUR PARKS; OUR OPERATIONS ARE SEASONAL.
Because most of the attractions at our theme parks are outdoors, attendance
at our parks is adversely affected by bad weather. The effects of bad weather on
attendance are more pronounced at our water parks. Bad weather and forecasts of
bad or mixed weather conditions can reduce the number of people who come to our
parks, which negatively affects our revenues. Although we believe that our
ownership of many parks in different geographic locations reduces the effect
that adverse weather can have on our consolidated results, we believe our 2000
operating season results were adversely affected by abnormally cold and wet
weather (particularly in June and July) at a large number of our U.S. parks and
our 2001 operating results in Europe were adversely affected by inclement
weather.
Our operations are seasonal. More than 90% of our annual park attendance
occurs during the spring, summer and early autumn months. By comparison, most of
our expenses for maintenance and costs of adding new attractions are incurred
when the parks are closed in the mid to late autumn and winter months. For this
reason, a sequential quarter to quarter comparison is not a good indication of
our performance or of how we will perform in the future.
COMPETITION--THE THEME PARK INDUSTRY COMPETES WITH NUMEROUS ENTERTAINMENT
ALTERNATIVES.
Our parks compete with other theme, water and amusement parks and with other
types of recreational facilities and forms of entertainment, including movies,
sports attractions and vacation travel. Our business is also subject to factors
that affect the recreation and leisure industries generally, such as general
economic conditions and changes in consumer spending habits. The principal
competitive factors of a park include location, price, the uniqueness and
perceived quality of the rides and attractions, the atmosphere and cleanliness
of the park and the quality of its food and entertainment.
KEY PERSONNEL--THE LOSS OF KEY PERSONNEL COULD HURT OUR OPERATIONS.
Our success depends upon the continuing contributions of our executive
officers and other key operating personnel, including Kieran E. Burke, our
Chairman and Chief Executive Officer, and Gary Story, our President and Chief
Operating Officer. The complete or partial loss of their services or the
services of other key personnel could adversely affect our business. Although we
have entered into employment agreements with Mr. Burke and Mr. Story (which end
on December 31, 2003), we cannot be certain that we will be able to retain their
services during that or any subsequent period.
INTERNATIONAL OPERATIONS--OUR INTERNATIONAL OPERATIONS HAVE ADDITIONAL
RISKS.
We operate seven parks in Europe, one park in Mexico and one in Canada. We
are also managing the development and construction of a new theme park in Spain
which is expected to open in April 2002. We also may acquire additional parks in
international locations. There are risks to which we are subject that are
inherent in operating abroad. Some examples of these risks can include:
- problems in staffing and managing foreign operations;
- fluctuations in currency exchange rates;
- impacts on attendance as a result of local economic conditions;
- political risks;
- unexpected changes in regulatory requirements; and
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- potentially detrimental tax consequences in many locations with different
tax laws.
PURPORTED CLASS ACTION LITIGATION--WE ARE A DEFENDANT IN A PURPORTED CLASS
ACTION LITIGATION RELATING TO SECURITY AND OTHER PRACTICES AT ONE OF OUR PARKS.
We are a defendant in a purported class action litigation pending in
California Superior Court for Los Angeles County. The master complaint,
AMENDAREZ V. SIX FLAGS THEME PARKS, INC., was filed on November 27, 2001,
combining five previously filed complaints. The plaintiffs allege that security
and other practices at our park in Valencia, California, disciminate against
visitors on the basis of race, color, ethnicity, national origin and/or physical
appearance, and assert claims under California statutes and common law. They
seek compensatory and punitive damages in unspecified amounts, and injunctive
and other relief. The named plaintiffs purport to represent seven "subclasses"
of visitors to the Valencia park. We have objected to the class allegations,
arguing that the lawsuit cannot appropriately be maintained as a class action,
and intend to vigorously defend this case. The case is in an early stage and
consequently we cannot predict the outcome, however, we do not believe it will
have a material adverse effect on our business or results of operations.
SUBSTANTIAL LEVERAGE--OUR HIGH LEVEL OF INDEBTEDNESS AND OTHER MONETARY
OBLIGATIONS REQUIRE THAT A SIGNIFICANT PART OF OUR CASH FLOW BE USED TO PAY
INTEREST AND FUND THESE OTHER OBLIGATIONS.
We have a high level of debt. As of September 30, 2001, together with our
subsidiaries we had a combined total of approximately $2,226.3 million of
indebtedness. After giving effect to this offering and the use of proceeds
therefrom, our indebtedness, as of September 30, 2001, would have been
approximately $2,256.3 million. In addition, as of January 31, 2002, our
subsidiaries had borrowed an additional $50.0 million under the working capital
revolving credit facilities of the Credit Agreement. The total cash interest on
our debt in the twelve months ended December 31, 2001 was approximately
$179.1 million ($13.0 million of which we paid with funds already deposited in
escrow). In addition, the annual dividend requirements on the PIERS totals
approximately $20.8 million, which we can, at our option, pay either in cash or
shares of our common stock and we are required to redeem all outstanding PIERS
on August 15, 2009 (to the extent not previously converted into shares of our
common stock) for cash at 100% of the liquidation preference, plus accrued and
unpaid dividends.
At September 30, 2001, we had approximately $123.5 million of unrestricted
cash and cash equivalents and $75.4 million of restricted cash (as discussed
below). As of September 30, 2001 and January 31, 2002, we had $600.0 million and
$542.5 million, respectively, available under the Credit Agreement.
In addition to making interest payments on debt and dividend payments on our
preferred stock, we must satisfy the following obligations with respect to Six
Flags Over Georgia and Six Flags Over Texas, which we refer to as the
partnership parks:
- We must make annual distributions to our partners in the partnership
parks, which amounted to approximately $50.2 million in 2001 (of which we
received $15.9 million in 2001 as a result of our ownership interest in
the parks) with similar amounts (adjusted for changes in cost of living)
payable in future years.
- We must spend a minimum of approximately 6% of each park's annual revenues
over specified periods for capital expenditures.
- Each year we must offer to purchase a specified maximum number of
partnership units from our partners in the partnership parks, which in
2001 resulted in an aggregate payment by us of approximately
$1.1 million. The maximum amount that we could be required to purchase in
2002 would be approximately $128.9 million.
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We expect to use cash flow from the operations at these parks to satisfy our
annual distribution and capital expenditure obligations with respect to the
partnership parks before we use any of our other funds. In addition, at
September 30, 2001 we had deposited in escrow until April 2003 approximately
$75.4 million which can be used to satisfy these obligations. The obligations
relating to Six Flags Over Georgia continue until 2027 and those relating to Six
Flags Over Texas continue until 2028.
Our high level of debt and other obligations could have important negative
consequences to us and investors in our securities. These include:
- We may not be able to satisfy all of our obligations, including those
relating to the notes.
- We could have difficulties obtaining necessary financing in the future for
working capital, capital expenditures, debt service requirements,
refinancings or other purposes.
- We will have to use a significant part of our cash flow to make payments
on our debt, to pay the dividends on preferred stock (if we choose to pay
them in cash), and to satisfy the other obligations set forth above, which
may reduce the capital available for operations and expansion.
- Adverse economic or industry conditions may have more of a negative impact
on us.
We cannot be sure that cash generated from our parks will be as high as we
expect or that our expenses will not be higher than we expect. We may have to
refinance all or some of our debt or secure new financing. We cannot be sure
that we will be able to obtain the refinancing or new financing on reasonable
terms or at all. We have agreed in the Credit Agreement and the indentures
covering our outstanding notes to limit the amount of additional debt we will
incur.
If we breach any of the covenants contained in the indenture that will
govern the notes, we would be in default under the indenture. In that case, the
principal and accrued interest of the notes would become due and payable. In
addition, if we default under the indenture, that default could constitute a
cross-default under the instruments governing our other indebtedness. In that
case, substantially all of our other indebtedness would also become due and
payable. We may not be able to repay all those amounts, and the lenders could
initiate legal proceedings against us.
HOLDING COMPANY STRUCTURE--ACCESS TO CASH FLOW OF SOME OF OUR SUBSIDIARIES
IS LIMITED, AND THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO THE DEBT OF OUR
SUBSIDIARIES.
We are a holding company whose primary assets consist of shares of stock or
other equity interests in our subsidiaries, and we conduct substantially all of
our current operations through our subsidiaries. Almost all of our income is
derived from our subsidiaries. The notes will be solely the obligations of our
company and no other entity will have any obligation, contingent or otherwise,
to make any payments in respect of the notes. Accordingly, we will be dependent
on dividends and other distributions from our subsidiaries to generate the funds
necessary to meet our obligations, including the payment of principal and
interest on the notes.
Other than our holdings in the partnership parks, all of our current
operations are conducted by subsidiaries of Six Flags Operations, our principal
direct wholly owned subsidiary. We may, in the future, transfer other assets to
Six Flags Operations or other entities owned by us. The Credit Agreement limits
the ability of Six Flags Operations to pay dividends or make other distributions
to us. Under the Credit Agreement, cash distributions to us by Six Flags
Operations and its subsidiaries generally are limited to an amount equal to the
sum of:
- cash interest payments on the notes issued under the Six Flags indentures,
including these notes;
- payments we are required to make under our agreements with our partners at
the partnership parks; and
- cash dividends on the PIERS.
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In addition, Six Flags Operations and its subsidiaries may not make cash
distributions to us unless they are in compliance with the financial and other
covenants set forth in the Credit Agreement and they are not otherwise in
default thereunder.
The total cash interest on our debt in the twelve months ended December 31,
2001 was approximately $179.1 million, $13.0 million of which we paid with funds
already deposited in escrow. In addition, the annual dividend requirements on
the PIERS total approximately $20.8 million, which we can pay in cash or shares
of our common stock.
Claims of holders of our debt securities, including the notes, will be
effectively subordinated to indebtedness and other obligations of our
subsidiaries, which was approximately $1,342.1 million at September 30, 2001
(after giving effect to the use of proceeds of this offering), as follows:
- indebtedness under the Credit Agreement, which is guaranteed by us and
secured by our assets (other than our interests in the partnership parks)
and guaranteed by our domestic subsidiaries and secured by their assets;
- the notes issued by Six Flags Operations, which will be redeemed from a
portion of the proceeds of this offering; and
- other obligations of our subsidiaries.
The notes are not guaranteed by our subsidiaries. Creditors of a subsidiary
are entitled to be paid amounts due them before assets of the subsidiary become
available for creditors of its parent. Therefore, even liabilities which are not
senior indebtedness of our subsidiaries will, in effect, be prior in right of
payment to the notes with regard to the assets of those subsidiaries. This can
substantially reduce the portion of our consolidated assets which are available
for payment of the notes. Consequently, in the event of any insolvency,
liquidation, reorganization, dissolution or other winding up of our
subsidiaries, the ability of our creditors, including holders of these notes, to
be repaid will be subject to the prior claims of those entities' creditors,
including trade creditors.
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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 hereunto duly authorized.
SIX FLAGS, INC.
By: /s/ James F. Dannhauser
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Name: James F. Dannhauser
Title: Chief Financial Officer
Date: January 31, 2002
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release, dated January 30, 2002.
99.2 Press Release, dated January 31, 2002.