UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 10, 2007
-------------------------------
Six Flags, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-13703 13-3995059
- --------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
1540 Broadway; 15th Floor
New York, New York 10036
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 652-9403
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
------------------------------------------
On January 10, 2007, Six Flags Theme Parks Inc., Funtime, Inc., Elitch
Garden Holdings G.P., Frontier City Properties, Inc., SF Splashtown GP Inc., SF
Splashtown Inc. and Spring Beverage Holding Corp. (collectively, the "Sellers"),
each a subsidiary of Six Flags, Inc. (the "Company"), entered into a Securities
Purchase Agreement (the "Agreement") with PARC 7F-Operations Corporation
("PARC").
Pursuant to the terms of the Agreement, the Sellers will sell to PARC all
of the securities of the subsidiaries that own three of the Company's water
parks and four of its theme parks for an aggregate purchase price of $312
million, consisting of $275 million in cash and a note receivable for $37
million. The note will have a 10 year term and will pay interest at 7.5% for the
first two years and interest at 8.5% for the remaining term. The seven parks are
Six Flags Darien Lake in Buffalo, NY; Waterworld USA in Concord, CA; Six Flags
Elitch Gardens in Denver, CO; Splashtown in Houston, TX; Frontier City and the
White Water Bay water park in Oklahoma City, OK; and Wild Waves and Enchanted
Village in Seattle, WA. The purchase price will be increased for (i) marketing
expenses over $1 million and capital expenditures over $650,000 spent or made
between October 1, 2006 and the closing date on behalf of the parks being sold;
(ii) the consolidated cash of the parks being sold as of the closing date of the
transaction; and (iii) all prepaid expenses and deposits made on behalf of the
parks being sold, and will be decreased by (i) the revenues received by the
parks being sold from sales or renewals of season passes, group bookings and
promotions for the 2007 season; (ii) cash received by or on behalf of the parks
being sold under sponsorship agreements for the 2007 season; and (iii) the
excess, if any, of $650,000 over the capital expenditures made between October
1, 2006 and the closing date on behalf of the parks being sold. The sale is
subject to satisfaction of customary closing conditions, including the receipt
of required third party consents. The transaction is expected to be completed in
March 2007.
Simultaneous with the execution of the Agreement, PARC entered into an
asset purchase agreement with CNL Income Properties Inc., a Florida-based real
estate investment trust ("CNL"), pursuant to which CNL will acquire the assets
of the seven parks for an aggregate purchase price of $312 million, consisting
of $290 million in cash and a note receivable for $22 million. CNL will enter
into a series of agreements to leaseback the properties to affiliates of PARC,
which affiliates will then operate the parks.
In connection with the leaseback agreements to be entered into between
PARC and CNL, the Company has agreed to enter into a limited rent guaranty
pursuant to which the Company will unconditionally guarantee the payment of rent
by the PARC tenants in an amount up to $9,999,999, which amount will be
decreased by $1 million on January 1 of each year. Affiliates of the PARC
tenants have also agreed to enter into a limited rent guaranty pursuant to which
they will unconditionally guarantee the payment of rent by the PARC tenants in
an amount up to $10 million. The Company will not become obligated to make
payments under its guaranty unless the affiliates of the PARC tenants (i) fail
to pay the rent due under the leases or (ii) have made guaranty payments in an
amount equal to $10 million. The promissory note to be delivered to Sellers
pursuant to the Agreement will be subordinate to the leases for the parks and
PARC's working capital facility.
The foregoing description of the sale and the terms of the Agreement is
qualified in its entirety by reference to the Agreement, which is attached
hereto as Exhibit 10.1 and incorporated herein by reference. A copy of the press
release announcing the sale is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
Item 2.06 Material Impairments.
--------------------
The estimated combined net assets of the subsidiaries being sold (the
"Subsidiaries"), as described in Item 1.01 above, as of December 31, 2006 (i.e.,
assets less liabilities, excluding allocable deferred tax assets and
liabilities) approximate $365 million, of which goodwill comprises $145 million.
As the net assets of the Subsidiaries were considered held for sale and the
estimated carrying amount of the Subsidiaries was more than the contracted sales
price, on December 31, 2006, the Company's management concluded that the Company
will be required to record a non-cash impairment charge against assets held for
sale in its consolidated financial statements for the year ended December 31,
2006 under Statement of Financial Accounting Standards No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets" (SFAS 144). The amount of the
non-cash impairment charge to be reflected in the results of discontinued
operations is expected to be between $70 million and $110 million, depending on
the estimated fair value of the Subsidiaries less selling costs. The estimated
fair value will consider the anticipated cash proceeds from the sales
transaction, the valuation of the note receivable from PARC, and other
appropriate appraisal considerations.
The anticipated accounting for the sale of the Subsidiaries assumes that
the Company would not be required to consolidate PARC under Financial Accounting
Standards Board Interpretation No. 46(R) "Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51" (FIN 46R).
Such an assumption depends on a variety of factors, including the capitalization
of PARC and the expected future performance of the Subsidiaries' businesses. The
Company is in the process of evaluating these factors. If PARC was required to
be consolidated by the Company under FIN 46R, then the transaction would not be
expected to result in an impairment charge under SFAS 144 in the Company's
consolidated financial statements for the year ended December 31, 2006. However,
the Subsidiaries' assets and liabilities would likely become part of a separate
reporting unit for purposes of evaluating the recoverability of goodwill under
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets," which could result in a non-cash write-off of all or a
portion of the $145 million of goodwill attributable to the Subsidiaries.
Item 5.02 Departure of Directors of Principal Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
--------------------------------------------------------------------
(e) Employment Agreement. On January 16, 2007, the Company entered into an
employment agreement with James M. Coughlin (the "Coughlin Agreement"), the
Company's General Counsel. The Coughlin Agreement is for a term of three years.
Pursuant to the Coughlin Agreement, Mr. Coughlin will receive (i) an annual
salary of $503,928; (ii) a discretionary annual bonus; and (iii) discretionary
grants of stock options or other equity awards. If Mr. Coughlin's employment is
terminated without Cause or for Good Reason, as such terms are defined in the
Coughlin Agreement, then Mr. Coughlin will be entitled to (i) receive (a) the
unpaid balance of his annual salary, (b) any earned but unpaid bonus for the
prior fiscal year, (c) any benefits due under any employee benefit plan and any
payments due under the terms of any Company program, arrangement or agreement,
excluding any severance plan or policy and (d) a lump sum severance payment
equal to his then applicable base salary for the period commencing on the date
of termination and ending on the last day of the term of the Coughlin Agreement;
and (ii) full vesting of all previously granted equity awards granted on or
after the effective date of the Coughlin Agreement.
The Coughlin Agreement also contains a confidentiality provision and a
one-year non-compete agreement. A copy of the Coughlin Agreement is attached
hereto as Exhibit 10.4 and is incorporated herein by reference.
Equity Awards. On January 16, 2007, the Company made the following stock
option grants: Mark Shapiro, President and Chief Executive Officer--750,000
stock options, Jeffrey R. Speed, Chief Financial Officer--200,000 stock options
(50,000 of which were made pursuant to Mr. Speed's employment agreement), James
M. Coughlin, General Counsel--50,000 stock options and John E. Bement, Jr.,
Senior Vice President, In-Park Services--10,000 stock options. The stock options
have an exercise price equal to $6.24, have an eight-year term and will vest
according to the following schedule: (i) 20% were exercisable on the date of
grant and (ii) an additional 20% will become exercisable on each of the first
four anniversaries of the date of grant. The stock option grants were made
pursuant to board authorizations which required that the exercise price be the
higher of (i) the average of the high and low sale price of common stock on
November 20, 2006, the date of the initial authorization by the Board of
Directors, and (ii) such average on the second business day following the
Company's announcement of the results of the process undertaken to sell certain
parks.
On January 16, 2007, the Company also made the following awards of
restricted stock: Mark Shapiro--250,000 shares, which will vest on January 1,
2011, and Jeffrey R. Speed--50,000 shares, one-third of which will vest on each
of January 1, 2008, January 1, 2009 and January 1, 2010 (such grant made
pursuant to Mr. Speed's employment agreement).
Item 9.01 Financial Statements and Exhibits.
---------------------------------
(d) Exhibits
10.1 Securities Purchase Agreement by and among Six Flags Theme Parks
Inc., Funtime, Inc., Elitch Garden Holdings G.P., Frontier City
Properties, Inc., SF Splashtown GP Inc., SF Splashtown Inc., Spring
Beverage Holding Corp. and PARC 7F-Operations Corporation, dated as
of January 10, 2007.
10.2 Form of Unsecured Subordinated Promissory Note.
10.3 Form of Limited Rent Guaranty (Six Flags).
10.4 Employment Agreement, dated as of January 1, 2007, by and between
James M. Coughlin and Six Flags, Inc.
99.1 Press Release, dated January 11, 2007.
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/ Jeffrey R. Speed
--------------------------------------
Name: Jeffrey R. Speed
Title: Executive Vice President and
Chief Financial Officer
Date: January 17, 2007
EXHIBIT INDEX
Paper (P) or
Exhibit No. Description Electronic (E)
------------ ------------------------------------------ --------------
10.1 Securities Purchase Agreement by and among E
Six Flags Theme Parks Inc., Funtime, Inc.,
Elitch Garden Holdings G.P., Frontier City
Properties, Inc., SF Splashtown GP Inc.,
SF Splashtown Inc., Spring Beverage
Holding Corp. and PARC 7F-Operations
Corporation, dated as of January 10, 2007.
10.2 Form of Unsecured Subordinated Promissory E
Note.
10.3 Form of Limited Rent Guaranty (Six Flags). E
10.4 Employment Agreement, dated as of January E
1, 2007, by and between James M. Coughlin
and Six Flags, Inc.
99.1 Press Release, dated January 11, 2007. E