SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for Quarterly Period Ended March 31, 1998
OR
[ ] Transaction Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transaction period from _________ to
_________
Commission File Number: 0-9789
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Premier Parks 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 X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
At May 9, 1998, Premier Parks Inc. had outstanding 37,497,566 shares of
Common Stock, par value $.05 per share.
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
Pro Forma
March 31, 1998
March 31, 1998 (Unaudited) December 31,
(Unaudited) (See Note 5) 1997
----------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents ........ $110,571,000 $ 647,904,000 $ 84,288,000
Accounts receivable .............. 11,234,000 12,750,000 6,537,000
Inventories ...................... 9,237,000 32,002,000 5,547,000
Income tax receivable ............ 995,000 995,000 995,000
Prepaid expenses ................. 6,578,000 25,624,000 3,690,000
------------ -------------- ------------
Total current assets ........... 138,615,000 719,275,000 101,057,000
Other assets:
Deferred charges ................. 20,611,000 49,766,000 10,123,000
Restricted-use investments ....... -- 321,750,000 --
Deposits and other assets ........ 4,202,000 41,966,000 3,949,000
------------ -------------- ------------
Total other assets ............. 24,813,000 413,482,000 14,072,000
Property and equipment, at cost .... 606,575,000 1,109,285,000 479,271,000
Less accumulated depreciation .... 40,663,000 40,663,000 35,474,000
------------ -------------- ------------
Total property and equipment ... 565,912,000 1,068,622,000 443,797,000
Investment in theme parks .......... 23,767,000 217,995,000 6,595,000
Less accumulated amortization .... 181,000 181,000 136,000
------------ -------------- ------------
Total investment in theme parks 23,586,000 217,814,000 6,459,000
Intangible assets .................. 78,333,000 1,450,290,000 48,876,000
Less accumulated amortization .... 3,466,000 3,466,000 2,940,000
------------ -------------- ------------
Total intangible assets ........ 74,867,000 1,446,824,000 45,936,000
------------ -------------- ------------
Total assets ................... $827,793,000 $3,866,017,000 $611,321,000
============ ============== ============
-2-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS (continued)
Pro Forma
March 31, 1998
March 31, 1998 (Unaudited)
(Unaudited) (See Note 5) December 31, 1997
----------- ------------ -----------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................ $ 14,629,000 $ 52,780,000 $ 10,051,000
Accrued expenses, other than interest ........... 19,850,000 49,119,000 13,148,000
Accrued interest payable ........................ 4,210,000 4,210,000 9,785,000
Current portion of long-term debt ............... 22,315,000 24,315,000 --
Current portion of capitalized lease obligations 765,000 765,000 795,000
--------------- --------------- -------------
Total current liabilities ..................... 61,769,000 131,189,000 33,779,000
Long-term debt & capitalized lease obligations:
Notes payable ................................... 231,500,000 1,428,732,000 215,000,000
Credit facilities ............................... 167,366,000 650,366,000 --
Capitalized lease obligations ................... 1,222,000 1,222,000 1,231,000
--------------- --------------- -------------
Long-term debt & capitalized lease obligations 400,088,000 2,080,320,000 216,231,000
Other long-term liabilities, including
minority interest ............................... 17,080,000 65,588,000 4,025,000
Deferred income taxes ............................. 31,224,000 15,303,000 33,537,000
--------------- --------------- -------------
Total liabilities ............................. 510,161,000 2,292,400,000 287,572,000
--------------- --------------- -------------
Stockholders' equity:
Preferred Stock ................................. -- 11,500 --
Common Stock .................................... 955,000 1,875,000 944,000
Capital in excess of par value .................. 362,193,000 1,617,246,500 354,235,000
Accumulated deficit ............................. (32,691,000) (32,691,000) (17,241,000)
Deferred compensation ........................... (12,825,000) (12,825,000) (13,500,000)
--------------- --------------- -------------
317,632,000 1,573,617,000 324,438,000
Less treasury stock, at cost .................. -- -- (689,000)
--------------- --------------- -------------
Total stockholders' equity .................. 317,632,000 1,573,617,000 323,749,000
--------------- --------------- -------------
Total liabilities & stockholders' equity .... $ 827,793,000 $ 3,866,017,000 $ 611,321,000
=============== =============== =============
-3-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
Revenues:
Theme park admissions............................. $3,779,000 $2,387,000
Theme park food, merchandise and other............ 3,052,000 1,877,000
----------- -----------
Total revenues.................................. 6,831,000 4,264,000
----------- -----------
Operating costs and expenses:
Operating expenses................................ 11,375,000 8,195,000
Selling, general and administrative............... 7,764,000 4,399,000
Costs of products sold............................ 137,000 52,000
Depreciation and amortization..................... 5,801,000 3,973,000
----------- -----------
Total operating costs and expenses.............. 25,077,000 16,619,000
----------- ----------
Loss from operations............................ (18,246,000) (12,355,000)
Other income (expense):
Interest expense, net............................. (6,180,000) (3,923,000)
Other income (expense)............................ (10,000) (19,000)
----------- -----------
Total other income (expense).................... (6,190,000) (3,942,000)
----------- -----------
Loss before income taxes and extraordinary loss. (24,436,000) (16,297,000)
Income tax benefit................................ 9,774,000 6,555,000
----------- ----------
Loss before extraordinary loss.................. (14,662,000) (9,742,000)
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $526,000........... (788,000) --
------------ -----------
Net loss...................................... $(15,450,000) $(9,742,000)
============ ===========
Per share amounts:
Loss per average share -- basic:
Loss before extraordinary loss.................. $(0.78) $(0.61)
Extraordinary loss.............................. (0.04) ( -- )
------ -------
Net loss........................................ $(0.82) $(0.61)
====== ======
Loss per average share -- diluted:
Loss before extraordinary loss.................. $(0.78) $(0.61)
Extraordinary loss.............................. (0.04) --
------ -----
Net loss........................................ $(0.82) $(0.61)
====== ======
Average number of shares outstanding-- basic...... 18,893,000 15,910,000
========== ==========
-4-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
-------------- --------------
Cash flows from operating activities:
Net loss ................................................ $ (15,450,000) $ (9,742,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ........................... 5,801,000 3,973,000
Deferred compensation ................................... 675,000 --
Extraordinary loss on early extinguishment of debt ...... 1,314,000 --
Amortization of debt issuance costs ..................... 422,000 475,000
Deferred income taxes (benefit) ......................... (11,017,000) (6,645,000)
Decrease (increase) in accounts receivable .............. 1,012,000 (2,910,000)
Increase in inventories and prepaid expenses ............ (3,084,000) (2,738,000)
Decrease in deposits and other assets ................... 35,000 3,608,000
(Decrease) Increase in accounts payable
and accrued expenses .................................. (1,777,000) 1,329,000
Decrease in accrued interest payable .................... (5,575,000) (893,000)
------------- -------------
Total adjustments ..................................... (12,194,000) (3,801,000)
------------- -------------
Net cash used in operating activities ................. (27,644,000) (13,543,000)
------------- -------------
Cash flows from investing activities:
Additions to property and equipment ..................... (47,248,000) (31,286,000)
Acquisition of theme park companies, net of cash acquired (21,556,000) (21,376,000)
Other investments ....................................... (6,000) --
------------- -------------
Net cash used in investing activities ................. (68,810,000) (52,662,000)
------------- -------------
Cash flows from financing activities:
Repayment of long-term debt ............................. (39,000) (65,078,000)
Proceeds from borrowings ................................ 135,000,000 132,500,000
Net cash proceeds from issuance of common stock ......... -- 189,898,000
Payment of debt issuance costs .......................... (12,224,000) (4,800,000)
------------- -------------
Net cash provided by financing activities ............. 122,737,000 252,520,000
------------- -------------
Increase in cash and cash equivalents ................. 26,283,000 186,315,000
Cash and cash equivalents at beginning of period .......... 84,288,000 4,043,000
------------- -------------
Cash and cash equivalents at end of period ................ $ 110,571,000 $ 190,358,000
============= =============
-5-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
1. General.
On March 24, 1998, the company then known as Premier Parks Inc. ("Premier
Operations") merged ("the Merger") with an indirect wholly-owned subsidiary
thereof, pursuant to which Premier Operations became a wholly-owned subsidiary
of Premier Parks Holdings Corporation ("Holdings") and the holders of shares of
common stock ("Common Stock") of Premier Operations became, on a share-for-share
basis, holders of Common Stock of Holdings. On the Merger date, Premier
Operations' name was changed to Premier Parks Operations Inc., and Holdings'
name was changed to Premier Parks Inc. References herein to the "Company" or
"Premier" mean (i) for all periods or dates prior to March 24, 1998, Premier
Operations and its consolidated subsidiaries and (ii) for all subsequent periods
or dates, Holdings and its consolidated subsidiaries (including Premier
Operations).
On March 26, 1998, the Company purchased 49.9% of the outstanding capital
stock of Walibi, S.A. ("Walibi"). See Note 3 below. On April 1, 1998, the
Company purchased all of the outstanding capital stock of Six Flags
Entertainment Corporation ("SFEC") and consummated the other transactions
described in Note 6 below.
Management's Discussion and Analysis of Financial Condition and Results of
Operations which follows these notes contains additional information on the
results of operations and the financial position of the Company. Those comments
should be read in conjunction with these notes. The Company's annual report on
Form 10-K for the year ended December 31, 1997 includes additional information
about the Company, its operations and its financial position, and should be read
in conjunction with this quarterly report on Form 10-Q. The information
furnished in this report reflects all adjustments 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-month period ended March 31, 1998 are
not indicative of the results expected for the full year. In particular, the
Company's theme park operations contribute most of their annual revenue during
the period from Memorial Day to Labor Day each year, while substantial operating
and other expenses are incurred before those operations commence. In addition,
results for the first three months of 1998 do not include results of the Walibi
parks, a controlling interest in which was purchased at the end of March 1998
(see Note 3), nor the Six Flags parks acquired on April 1, 1998 (see Note 6).
However, historical balance sheet data at March 31, 1998 include the assets and
liabilities of Walibi on a consolidated basis.
-6-
Item 1 -- Financial Statements (Continued)
Comprehensive Earnings
Premier adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," on January 1, 1998. SFAS
No. 130 established standards for reporting and display of "comprehensive
income" and its components in a set of financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. Through March
31, 1998, Premier has not accounted for any items included in comprehensive
income that are not already included in Premier's statement of operations. As
such, no additional financial statement has been included in the accompanying
consolidated financial statements. As a result of Premier entering into foreign
operations through the acquisition of a controlling interest in Walibi in March
1998 (see Note 3), Premier expects to include a statement of comprehensive
earnings in future periods. The new statement will reflect the periodic change
in the foreign currency translation adjustment account which is included in the
equity section of the balance sheet and not normally reflected in the statement
of operations.
Reclassifications
Certain items in the December 31, 1997 consolidated balance sheet have
been reclassified to conform to the 1998 presentation.
-7-
Item 1 -- Financial Statements (Continued)
Loss Per Share
The following table discloses the weighted average number of shares of
Common Stock used in the calculations of basic loss per share for the
three-month periods ended March 31, 1998 and 1997, as well as the weighted
average number of shares of Common Stock on a diluted basis for each period.
Since the effect of using the weighted average number of shares on a diluted
basis was antidilutive to the diluted loss per share calculation for each
three-month period, diluted loss per share was calculated using the same
weighted average number of shares used in the basic loss per share calculation.
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
Weighted average number of common shares
outstanding -- basic............................. 18,893,000 15,910,000
Effect of potential common shares issuable upon
the exercise of employee stock options........... 588,000 454,000
----------- -----------
Weighted average number of common shares
outstanding -- diluted........................... 19,481,000 16,364,000
=========== ===========
2. Stockholders' Equity.
On April 1, 1998, the Company issued 18,400,000 shares of Common Stock and
5,750,000 Premium Income Equity Securities ("PIESSM"), each representing one
five-hundredth of a share of the Company's mandatorily convertible preferred
stock as described in Note 6 below.
3. Acquisition of Theme Parks.
On February 5, 1997, the Company purchased all of the outstanding common
stock of Stuart Amusement Company, the owner of Riverside Park and an adjacent
multi-use stadium, for a purchase price of approximately $22,200,000 ($1,000,000
of which was paid through issuance of 32,129 shares of Common Stock). The
transaction was accounted for as a purchase. As of the acquisition date and
after giving effect to the purchase, $6,623,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between the
financial statement carrying amounts and the tax basis of Stuart Amusement Co.'s
assets and liabilities. Approximately $10,484,000 of cost in excess of the fair
value of the net assets acquired was recorded as goodwill.
On November 7, 1997, the Company acquired all of the interests of a
limited liability company which owned substantially all of the theme park assets
of Kentucky Kingdom--The Thrill Park ("Kentucky Kingdom"), located in
Louisville, Kentucky, for a purchase price of $64,000,000, of which $4,831,000
was paid through the issuance of 121,671 shares of Common Stock. The Company may
be required to issue additional shares of Common Stock based upon the level of
revenues at Kentucky Kingdom during 1998, 1999 and 2000. The acquisition was
accounted for as a purchase. The purchase price was primarily allocated to
property and
-8-
Item 1 -- Financial Statements (Continued)
equipment with $4,592,000 of costs recorded as intangible assets, primarily
goodwill. The value of the additional shares, if any, will be recognized as
additional goodwill.
On March 26, 1998, the Company purchased (the "Private Acquisition")
approximately 49.9% of the outstanding capital stock of Walibi for an aggregate
purchase price of $42,300,000, of which 20% ($8,658,000) was paid through
issuance of 224,500 shares of Common Stock and 80% was paid in cash in Belgian
Francs. The Company is obligated to make a "public takeover bid" as defined and
regulated under Belgian law at the same per share price for the balance of the
outstanding capital stock of Walibi, payable, at the election of the holders
thereof, in cash or in cash and shares of Common Stock in the same ratio as the
Private Acquisition. The Company expects to consummate such bid during the
second quarter of 1998. On the date of the Private Acquisition, Walibi's
indebtedness aggregated $71,181,000, which indebtedness is being assumed or
refinanced by the Company. The Company funded (and will fund) the cash portion
of the purchase price of all such shares (and the refinancing of any such
indebtedness) from proceeds of borrowing under its $300.0 million senior secured
credit facility (the "Premier Credit Facility") entered into in March 1998. See
Note 4(c). The Company may be required to issue additional shares of Common
Stock based on Walibi's revenues during 1999, 2000 or 2001. See Note 6 for
summary pro forma financial information.
The accompanying consolidated financial statements for the three months
ended March 31, 1998 reflect the results of Riverside Park and Kentucky Kingdom
from January 1, 1998. The accompanying consolidated financial statements for the
three months ended March 31, 1997 reflect the results of Riverside Park only
from its acquisition date, February 5, 1997, and do not include the results of
Kentucky Kingdom for that period. Operating results for both quarters exclude
results of Walibi and Six Flags.
4. Long-Term Indebtedness.
(a) In August 1995, the Company issued $90,000,000 principal amount of
senior notes (the "1995 Notes"). The 1995 Notes are senior unsecured obligations
of the Company, which mature on August 15, 2003. The 1995 Notes bear interest at
12% per annum payable semiannually on August 15 and February 15 of each year.
The 1995 Notes are redeemable, at the Company's option, in whole or part, at any
time on or after August 15, 1999, at varying redemption prices. The 1995 Notes
are guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The proceeds of the 1995 Notes were used in the acquisition by the Company
of Funtime Parks in August 1995 and in the refinancing at that time of
previously existing indebtedness.
The indenture under which the 1995 Notes were issued was amended on
January 21, 1997, in contemplation of the Company's January 1997 senior debt and
equity offerings. The indenture places limitations on operations and sales of
assets by the Company or its subsidiaries, permits incurrence of additional debt
only in compliance with certain financial
-9-
Item 1 -- Financial Statements (Continued)
ratios, and limits the Company's ability to pay cash dividends or make other
distributions to the holders of its capital stock or to redeem such stock.
The indenture, as amended, permits the Company, subject to certain
limitations, to incur additional indebtedness, including $125,000,000 of
indebtedness issued on January 31, 1997 described in Note 4(b) below and secured
senior revolving credit facility indebtedness of up to $75,000,000.
By virtue of the Merger, all obligations under the 1995 Notes and the
related indenture remained as obligations of Premier Operations and were not
assumed by Holdings.
(b) On January 31, 1997, the Company issued $125,000,000 of 9 3/4% senior
notes due January 2007 (the "1997 Notes," and together with the 1995 Notes, the
"Premier Notes"). The 1997 Notes are senior unsecured obligations of the Company
and equal to the 1995 Notes in priority upon liquidation. Interest is payable on
January 15 and July 15 of each year. The 1997 Notes are redeemable, at the
Company's option, in whole or in part, at any time on or after January 15, 2002,
at varying redemption prices. The 1997 Notes are guaranteed on a senior,
unsecured, joint and several basis by all of the Company's principal operating
subsidiaries.
The indenture under which the 1997 Notes were issued contains covenants
substantially similar to those relating to the 1995 Notes. A portion of the
proceeds were used to pay in full all amounts outstanding under the Company's
then credit facility.
By virtue of the Merger, all obligations under the 1997 Notes and the
related indenture remained as obligations of Premier Operations and were not
assumed by Holdings.
(c) In March 1998, the Company entered into the Premier Credit Facility
and terminated its then outstanding $115.0 million credit facility, resulting in
a $788,000 extraordinary loss, net of tax benefit of $526,000, in the first
quarter of 1998 in respect of deferred charges related to the terminated
facility. At March 31, 1998, the Company had borrowed $135.0 million under the
Premier Credit Facility, in part to fund the Private Acquisition. The Premier
Credit Facility includes a five-year $75.0 million revolving credit facility
(with $10.0 million outstanding at March 31, 1998), a five-year $100.0 million
term loan facility (with principal payments of $10.0 million, $25.0 million,
$30.0 million and $35.0 million in the second, third, fourth and fifth years)
and an eight-year $125.0 million term loan facility (which was fully drawn as of
March 31, 1998 and requires principal payments of $1.0 million in each of the
first six years and $25.0 million and $94.0 million in the seventh and eighth
years, respectively). Borrowings under the Premier Credit Facility are
guaranteed by Premier Operations' domestic subsidiaries and secured by
substantially all of the assets of Premier Operations and such subsidiaries
(other than real estate). The Premier Credit Facility contains restrictive
covenants that, among other things, limit the ability of Premier Operations and
its subsidiaries to dispose of assets; incur additional indebtedness or liens;
pay dividends; repurchase stock; make investments; engage in mergers or
consolidations and engage in certain
-10-
Item 1 -- Financial Statements (Continued)
transactions with subsidiaries and affiliates. In addition, the Premier Credit
Facility requires that Premier Operations comply with certain specified
financial ratios and tests.
By virtue of the Merger, all obligations of the Company under the Premier
Credit Facility remained as obligations of Premier Operations and were not
assumed by Holdings.
5. Commitments and Contingencies
On June 2, 1997, a water slide collapsed at the Company's Waterworld/USA
park in Concord, California, resulting in one fatality and the park's closure
for twelve days. Although the collapse and the resulting closure had a material
adverse impact on that park's operating performance for 1997, as well as a
lesser impact on the Company's Sacramento water park (which is also named
"Waterworld/USA"), located approximately seventy miles from the Concord park,
the Company's other parks were not adversely affected. The Company has recovered
all of the Concord park's operating shortfall under its business interruption
insurance. In addition, the Company believes that its liability insurance
coverage should be adequate to provide for any personal injury liability which
may ultimately be found to exist in connection with the collapse. The Company
believes that this matter will not materially adversely affect the Company's
consolidated financial position or future results of operations.
The Company is party to various legal actions arising in the normal course
of business. Matters that are probable of unfavorable outcome to the Company and
which can be reasonably estimated are accrued. Such accruals are based on
information known about the matters, the Company's estimates of the outcomes of
such matters and its experience in contesting, litigating and settling similar
matters. None of the actions are believed by management to involve amounts that
would be material to consolidated financial condition, operations, or liquidity
after considerations of recorded accruals.
6. Subsequent Events.
On April 1, 1998 the Company acquired (the "Six Flags Acquisition") all of
the capital stock of SFEC (together with its subsidiaries, "Six Flags") for
$976.0 million, paid in cash. In connection with the Six Flags Acquisition, the
Company issued through public offerings (i) 18,400,000 shares of Common Stock
(with gross proceeds of $993.6 million), (ii) 5,750,000 PIES (with gross
proceeds of $310.5 million), (iii) $410.0 million aggregate principal amount at
maturity of the Company's 10% Senior Discount Notes due 2008 (the "Senior
Discount Notes") (with gross proceeds of $251.7 million), (iv) $280.0 million
aggregate principal amount of the Company's 9 1/4% Senior Notes due 2006 (the
"Senior Notes") and (v) $170.0 million aggregate principal amount of SFEC's
87/8% Senior Notes due 2006 (the "SFEC Notes"). The PIES accrue cumulative
dividends (payable, at the Company's option, in cash or shares of Common Stock)
at 7 1/2% per annum (approximately $23.3 million per annum) and are mandatorily
convertible into Common Stock in 2001. The Senior Discount Notes do not require
any interest payments prior to October 1, 2003, and, except in the event of a
change of control of the Company and certain other circumstances, any principal
payments prior to their maturity in 2008. The Senior Notes require annual
interest payments of approximately $25.9 million, and except in the event of a
change of control of the Company and certain other circumstances, do not require
any principal payments prior to their maturity in 2006. The SFEC Notes require
annual interest payments of approximately $15.1 million and, except in the event
of a change of control of the Company and certain other circumstances, do not
require any principal payments prior to their maturity in 2006. The net proceeds
of the SFEC Notes, together with other funds, were deposited in escrow to
provide for the repayment in full of existing notes of SFEC (with an accreted
value of $161.1 million at December 28, 1997). In addition, in connection with
the Six Flags Acquisition, the Company (i) assumed $285.0 million principal
amount at maturity of senior subordinated notes (the "SFTP Senior Subordinated
Notes") of Six Flags Theme Parks Inc. ("SFTP"), an indirect wholly-owned
subsidiary of SFEC, which notes had an accreted value of $269.9 million at
December 28, 1997 (fair value of $303.5 million at that date), (ii) refinanced
all outstanding SFTP bank indebtedness with the proceeds of $410.0 million of
borrowings under a new $472.0 million senior secured credit facility of SFTP
(the "Six Flags Credit Facility") and (iii) borrowed an additional $75.0 million
under the Premier Credit Facility and repaid $10.0 million of revolving credit
borrowings thereunder. The SFTP Senior Subordinated Notes require interest
payments of approximately $34.9 million per annum, payable semi-annually
commencing December 15, 1998, and, except in certain circumstances, no principal
payments are due thereon until their maturity date, June 15, 2005. Term loan
borrowings under the Six Flags Credit Facility mature on November 30, 2004 (with
principal payments of $1.0 million in each of 1998 through 2001, $25.0 million
in 2002, $40.0 million in 2003 and $303.0 million at maturity). Revolving credit
borrowings under this facility (up to $100.0 million) mature on
-11-
Item 1 -- Financial Statements (Continued)
the fifth anniversary of the Six Flags Credit Facility. Borrowings under the Six
Flags Credit Facility are guaranteed by SFEC, SF Holdings, Inc. ("SF Holdings")
and SFTP's subsidiaries and are secured by substantially all of the assets of
SFTP and its subsidiaries and a pledge by SF Holdings of the stock of SFTP.
By reason of the Six Flags Acquisition, on April 30, 1998 the Company made
an offer to repurchase the SFTP Senior Subordinated Notes at a price equal to
101% of their accreted amount (approximately $286.9 million). On that date, the
last reported sales price of these notes was substantially in excess of their
accreted amount. The Company has not entered into any standby arrangement to
finance any required repurchase of such notes.
In addition to its obligations under its outstanding indebtedness and
other securities issued or assumed in the Six Flags Acquisition, the Company
also guaranteed in connection therewith certain contractual obligations relating
to the partnerships that own two Six Flags parks, Six Flags Over Texas and Six
Flags Over Georgia (the "Co-Venture Parks"). Specifically, the Company
guaranteed the obligations of the general partners of those partnerships to (i)
make minimum annual distributions of approximately $46.2 million (subject to
cost of living adjustments) to the limited partners in the Co-Venture Parks and
(ii) make minimum capital expenditures at each of the Co-Venture Parks during
rolling five-year periods, based generally on 6% of such park's revenues. Cash
flow from operations at the Co-Venture Parks will be used to satisfy these
requirements first, before any funds are required from the Company. The Company
also guaranteed the obligation to purchase a maximum number of 5% per year
(accumulating to the extent not purchased in any given year) of the total
limited partnership units outstanding as of the date of the co-venture
agreements that govern the partnerships (to the extent tendered by the unit
holders). The agreed price for these purchases is based on a valuation for each
respective Co-Venture Park equal to the greater of (i) a value derived by
multiplying such park's weighted-average four-year EBITDA (as defined) 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. The Company's obligations with
respect to Six Flags Over Georgia and Six Flags Over Texas will continue until
2027 and 2028, respectively.
As the Company purchases units relating to either Co-Venture Park, it will
be entitled to the minimum distribution and other distributions attributable to
such units, unless it is then in default under the applicable agreements with
its partners at such Co-Venture Park. On April 30, 1998, the Company owned
approximately 25% and 33%, respectively, of the limited partnership units in the
Georgia and Texas partnerships. The unit purchase obligations for 1998, when
purchases are required only for the Georgia park, will be immaterial. The
maximum unit purchase obligations for 1999 at both parks will aggregate
approximately $31 million. The Company's minimum capital expenditures for 1998
at these parks will total approximately $11 million.
The following summarized unaudited pro forma results of operations for the
three months ended March 31, 1998, assumes that the Six Flags Acquisition, the
Private Acquisition and the related financings occurred as of the beginning of
that quarter.
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Item 1 -- Financial Statements (Continued)
Total revenues..................................................... $31,714,000
Net loss........................................................... (88,105,000)
Net loss per common share-- basic and diluted...................... (2.52)
The March 31, 1998 pro forma consolidated balance sheet accompanying the
Company's March 31, 1998 and December 31, 1997 historical consolidated balance
sheets is presented to give pro forma effect, including preliminary application
of the purchase method of accounting, resulting from the following transactions
that occurred on April 1, 1998:
o The issuance of 18,400,000 shares of Common Stock with aggregate gross
proceeds of $993.6 million;
o The issuance of 5,750,000 PIES with aggregate gross proceeds of $310.5
million;
o The issuance of $410.0 million aggregate principal amount at maturity of
the Senior Discount Notes with aggregate gross proceeds of $251.7 million;
o The issuance of $280.0 million of the Senior Notes;
o The issuance of $170.0 million of the SFEC Notes;
o The borrowing of an additional $65.0 million (net) under the Premier
Credit Facility;
o The borrowing of $410.0 million under the Six Flags Credit Facility;
o The establishment of $321.8 million of restricted-use investment accounts
to pre-fund interest requirements on the Senior Notes, to provide for the
repayment at or prior to maturity of the pre-existing SFEC Notes due in
1999 and to establish a fund to provide for certain obligations relating
to the Co-Venture Parks;
o The payment of debt issuance costs associated with the Senior Discount
Notes, the Senior Notes and the SFEC Notes;
o The purchase of 100% of the outstanding capital stock of SFEC for
approximately $976.0 million, together with $10.0 million of
transaction-related costs;
o The repayment of $590.2 million of borrowings of SFEC and its
subsidiaries;
o The establishment of $25.0 million of escrow deposits to provide a fund
for indemnification claims by Premier pursuant to the agreements between
Premier and SFEC's prior owners relating to the Six Flags Acquisition; and
o The accrual of $10.0 million of liabilities recognized as a result of the
Six Flags Acquisition and resulting changes in personnel and contracts.
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Part 1 -- FINANCIAL INFORMATION (Continued)
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS
Three months ended March 31, 1998 vs. Three months ended March 31, 1997
Operating revenues were $6.8 million in the first quarter of 1998 compared
to $4.3 million in the first quarter of 1997. Of this increase, $0.9 million is
attributable to revenues generated by Kentucky Kingdom, which was acquired in
November 1997 and was therefore not included in the 1997 quarter. Operating
revenues at the eleven parks owned for the full 1997 year (including Riverside
Park which was acquired in February 1997) increased by $1.6 million in the 1998
quarter as a result of increased sponsorship income and increased season pass
sales at certain of those parks. Operating expenses increased during the first
quarter of 1998 from $8.2 million in 1997 to $11.4 million. Of this increase,
$1.7 million relates directly to expenses incurred by Kentucky Kingdom, an
additional $0.8 million relates to Riverside Park (reflecting in part the
ownership of that park for the entire 1998 quarter as compared to two months in
the 1997 quarter) and $0.7 million relates to increased expenses at the ten
parks owned during all of the applicable quarters. Selling, general and
administrative expenses increased from $4.4 million in the first quarter of 1997
to $7.8 million during the first quarter of 1998. Of this increase, $0.8 million
relates to costs incurred by Kentucky Kingdom and the balance represents
increased expenses at Riverside Park and the other parks owned in both periods.
Depreciation expense increased $1.8 million primarily as a result of the
recognition of depreciation and amortization expense at Kentucky Kingdom and as
a result of the ongoing capital program at the Company's theme parks. Interest
expense increased $2.3 million in the 1998 period representing interest on the
1997 Notes for the entire 1998 period (as compared to two months of the 1997
period), interest on borrowings during the first quarter of 1998 under the
Premier Credit Facility, and reduced interest income in 1998 resulting from
lower levels of available cash. The effective tax rate used to calculate the
provision for income tax benefit was approximately 40% in the first quarter of
each year. The extraordinary loss of $788,000 (net of income tax benefit of
$526,000) in the 1998 period represents deferred charges on the Company's
previous credit facility which was terminated during the period. See Note 4(c)
to the Company's consolidated financial statements.
Because of the seasonal nature of the Company's theme park operations,
most of the Company's revenues are generated from Memorial Day to Labor Day.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
Historical
At March 31, 1998, the Company's indebtedness (including capitalized
leases) aggregated $423.2 million, of which approximately $71.2 million
represented indebtedness of Walibi which was consolidated for balance sheet
purposes. Approximately $23.1 million of total
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Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
indebtedness at that date (including $22.3 million of indebtedness of Walibi but
excluding outstanding revolving credit borrowings under the Premier Credit
Facility repaid in full subsequent to such date) matures prior to March 31,
1999.
During the three months ended March 31, 1998, the Company used net cash of
$27.6 million in operating activities. Included in the net cash used in
operating activities for this period was $11.5 million of interest payments on
the Premier Notes made in the quarter. The remainder of the net cash used in
operating activities related to the Company's annual maintenance and park
pre-opening operating expenses. Net cash used in investing activities in the
first quarter of 1998 increased to $68.8 million, consisting of capital
expenditures and the Company's acquisition, net of cash acquired, of
approximately 49.9% of the capital stock of Walibi in March 1998. Net cash
provided by financing activities in the 1998 period was $122.7 million,
representing proceeds of borrowings in March 1998 under the Premier Credit
Facility, offset in part by the payment of certain debt issuance costs in
connection with April 1998 debt issuances.
At March 31, 1998, substantially all of the Company's indebtedness was
represented by the Premier Notes in an aggregate principal amount of $215.0
million, which require aggregate annual interest payments of approximately $23.0
million, $135.0 million of borrowings under the Premier Credit Facility and
$71.2 million of indebtedness of Walibi. Except in the event of a change of
control of the Company and certain other circumstances, no principal payment on
the Premier Notes is due until the maturity dates thereof, August 15, 2003 in
the case of the 1995 Notes and January 15, 2007, in the case of the 1997 Notes.
Borrowings under the Premier Credit Facility at March 31, 1998 aggregated $135.0
million, including $10.0 million under the revolving credit facility thereunder
(which was repaid in full subsequent to such date) with the balance constituting
eight-year term loans. See Note 4(c) to the Company's consolidated financial
statements. The Company intends to refinance the Walibi debt upon its
acquisition of the balance of the Walibi capital stock.
Pro Forma
After giving effect to the Six Flags Acquisition and the related
financings described in Note 6 to the Company's consolidated financial
statements, on a pro forma basis as of March 31, 1998, the Company would have
had total outstanding indebtedness in the accreted principal amount of $2,052.7
million (including $164.8 million accreted value of the pre-existing SFEC notes
which will be repaid in full from the proceeds of the SFEC Notes, together with
other funds). Based on actual interest rates for debt outstanding at March 31,
1998 and actual interest rates for pro forma debt, annual interest payments for
1998 on this indebtedness would have aggregated approximately $134.0 million. In
addition, annual dividend payments on the PIES total $23.3 million.
By reason of the Six Flags Acquisition, the Company has offered to
purchase the SFTP Senior Subordinated Notes at a price equal to 101% of their
accreted amount (approximately $286.9 million). Unless extended by the Company,
this offer expires in early June 1998. On
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Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
April 30, 1998, the last reported sales price of these notes was substantially
in excess of their accreted amount. The Company does not expect to be required
to purchase any material amount of these notes by reason of this offer. The
Company has not entered into any standby arrangement to finance the purchase of
such notes, and there is no assurance that the Company will be able to obtain
any financing therefor in the event that it should become necessary.
As more fully described in Note 6 to the Company's consolidated financial
statements, in connection with the Six Flags Acquisition, the Company guaranteed
certain obligations relating to the Co-Venture Parks. Cash flows from operations
at the Co-Venture Parks will be used to satisfy these requirements, before any
funds are required from the Company.
The degree to which the Company is leveraged following the Six Flags
Acquisition could adversely affect its liquidity. The Company's liquidity could
also be adversely affected by unfavorable weather, accidents or the occurrence
of an event or condition, including negative publicity or significant local
competitive events, that significantly reduces paid attendance and, therefore,
revenue at any of its theme parks.
The Company believes that, based on historical and anticipated operating
results, cash flows from operations, available cash and available amounts under
the Premier and Six Flags Credit Facilities will be adequate to meet the
Company's future liquidity needs, including anticipated requirements for working
capital, capital expenditures, scheduled debt and PIES requirements and
obligations under arrangements relating to the Co-Venture Parks, for at least
the next several years. The Company may, however, need to refinance all or a
portion of its existing debt on or prior to maturity or to seek additional
financing.
Item 3
Not applicable.
-16-
Items 1 -- 5
Not applicable
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
(i) The Company's Current Report on Form 8-K, dated March 23, 1998
(filed on March 26, 1998).
(ii) The Company's Current Report on Form 8-K/A, dated December 15,
1997 (filed on March 24, 1998).
(iii) The Company's Current Report on Form 8-K, dated February 9,
1998 (filed on February 12, 1998).
(iv) The Company's Current Report on Form 8-K/A, dated November 7,
1997 (filed on January 21, 1998).
(v) The Company's Current Report on Form 8-K, dated December 15,
1997 (filed on January 15, 1998).
(vi) The Company's Current Report on Form 8-K/A, dated February 9,
1998 (filed on April 9, 1998).
(vii) The Company's Current Report on Form 8-K/A, dated December 15,
1997 (filed on April 9, 1998).
-17-
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.
Date: May 15, 1998
PREMIER PARKS INC.
------------------------------------------
(Registrant)
/s/ Kieran E. Burke
------------------------------------------
Chairman and Chief Executive Officer
/s/ James F. Dannhauser
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Chief Financial Officer
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