SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for Quarterly Period Ended June 30, 1998
OR
|_| 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: 0-9789
---------------------
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 August 10, 1998, Premier Parks Inc. had outstanding 75,410,953 shares
of Common Stock, par value $.025 per share.
-1-
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1998
(Unaudited) December 31, 1997
----------- -----------------
ASSETS
Current assets:
Cash and cash equivalents ........ $ 538,540,000 $ 84,288,000
Accounts receivable .............. 46,220,000 6,537,000
Inventories ...................... 36,076,000 5,547,000
Income tax receivable ............ 995,000 995,000
Prepaid expenses ................. 21,975,000 3,690,000
-------------- --------------
Total current assets .......... 643,806,000 101,057,000
Other assets:
Deferred charges ................. 47,618,000 10,123,000
Restricted-use investments ....... 326,155,000 --
Deposits and other assets ........ 59,526,000 3,949,000
-------------- --------------
Total other assets ............ 433,299,000 14,072,000
Property and equipment, at cost ..... 1,524,672,000 479,271,000
Less accumulated depreciation .... 58,367,000 35,474,000
-------------- --------------
Total property and equipment .. 1,466,305,000 443,797,000
Investment in theme park
partnerships................... 245,706,000 6,595,000
Less accumulated amortization .... 1,687,000 136,000
-------------- --------------
Total investment in theme park
partnerships ................ $ 244,019,000 $ 6,459,000
Intangible assets ................... 1,335,421,000 48,876,000
Less accumulated amortization .... 15,807,000 2,940,000
-------------- --------------
Total intangible assets ....... 1,319,614,000 45,936,000
-------------- --------------
Total assets ..................... $4,107,043,000 $ 611,321,000
============== ==============
See accompanying notes to financial statements
-2-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS (continued)
June 30, 1998
(Unaudited) December 31, 1997
----------- -----------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ........................................ $ 77,223,000 $ 10,051,000
Accrued expenses, other than interest ................... 110,739,000 13,148,000
Accrued interest payable ................................ 35,146,000 9,785,000
Current maturities of long-term debt .................... 41,029,000 --
Current portion of capitalized lease obligations ........ 791,000 795,000
--------------- ---------------
Total current liabilities ............................ 264,928,000 33,779,000
Long-term debt & capitalized lease obligations:
Notes payable............................................ 1,425,197,000 215,000,000
Credit facilities ....................................... 618,789,000 --
Capitalized lease obligations ........................... 1,223,000 1,231,000
--------------- ---------------
Total long-term debt and capitalized lease obligations 2,045,209,000 216,231,000
Other long-term liabilities and minority interest .......... 46,785,000 4,025,000
Deferred income taxes ...................................... 147,552,000 33,537,000
--------------- ---------------
Total liabilities .................................... 2,504,474,000 287,572,000
--------------- ---------------
Stockholders' equity:
Preferred stock ......................................... 11,000 --
Common stock ............................................ 1,884,000 944,000
Capital in excess of par value .......................... 1,624,594,000 354,235,000
Accumulated deficit ..................................... (12,128,000) (17,241,000)
Deferred compensation ................................... (12,150,000) (13,500,000)
Accumulated other comprehensive income --
foreign currency translation adjustments ............ 358,000 --
--------------- ---------------
1,602,569,000 324,438,000
Less treasury stock, at cost ............................ -- (689,000)
--------------- ---------------
Total stockholders' equity ........................... 1,602,569,000 323,749,000
--------------- ---------------
Total liabilities & stockholders' equity ............. $ 4,107,043,000 $ 611,321,000
=============== ===============
See accompanying notes to financial statements
-3-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1998 1997
---- ----
Revenues:
Theme park admissions ......................... $ 169,666,000 $ 34,708,000
Theme park food, merchandise and other ........ 130,018,000 27,760,000
------------- -------------
Total revenues ............................. 299,684,000 62,468,000
Operating costs and expenses:
Operating expenses ............................ 110,201,000 24,422,000
Selling, general and administrative ........... 54,560,000 13,345,000
Costs of products sold ........................ 36,817,000 6,480,000
Depreciation and amortization ................. 31,738,000 4,284,000
------------- -------------
Total operating costs and expenses ......... 233,316,000 48,531,000
Income from operations ..................... 66,368,000 13,937,000
Other income (expense):
Interest expense, net ......................... (37,256,000) (4,451,000)
Equity in operations of theme park partnerships 12,572,000 --
Minority interest in earnings ................. (1,028,000) --
Other income (expense) ........................ 92,000 (43,000)
------------- -------------
Total other income (expense) ............... (25,620,000) (4,494,000)
Income before income taxes ................. 40,748,000 9,443,000
Income tax expense ............................ 20,185,000 3,745,000
------------- -------------
Net income ................................. $ 20,563,000 $ 5,698,000
============= =============
Net income applicable to common stock ...... $ 14,741,000 $ 5,698,000
============= =============
Per share amounts:
Net income per average share -- basic ............. $ 0.20 $ 0.16
============= =============
Net income per average share -- diluted ........... $ 0.19 $ 0.15
============= =============
Average shares outstanding -- basic ............... 74,594,870 36,601,344
============= =============
Average shares outstanding -- diluted ............. 75,870,346 37,534,150
============= =============
See accompanying notes to financial statements
-4-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1998 1997
---- ----
Revenues:
Theme park admissions ...................................... $ 173,445,000 $ 37,095,000
Theme park food, merchandise and other ..................... 133,070,000 29,637,000
------------- -------------
Total revenues .......................................... 306,515,000 66,732,000
Operating costs and expenses:
Operating expenses ......................................... 121,576,000 32,617,000
Selling, general and administrative ........................ 62,324,000 17,744,000
Costs of products sold ..................................... 36,954,000 6,532,000
Depreciation and amortization .............................. 37,539,000 8,257,000
------------- -------------
Total operating costs and expenses ...................... 258,393,000 65,150,000
Income from operations .................................. 48,122,000 1,582,000
Other income (expense):
Interest expense, net ...................................... (43,436,000) (8,374,000)
Equity in operations of theme park partnerships ............ 12,572,000 --
Minority interest in earnings .............................. (1,028,000) --
Other income (expense) ..................................... 82,000 (62,000)
------------- -------------
Total other income (expense) ............................ (31,810,000) (8,436,000)
Income (loss) before income taxes and extraordinary loss 16,312,000 (6,854,000)
Income tax expense (benefit) ............................... 10,411,000 (2,810,000)
------------- -------------
Income (loss) before extraordinary loss ................. 5,901,000 (4,044,000)
Extraordinary loss on extinguishment of debt,
net of income tax benefit of $526,000 .................... (788,000) --
------------- -------------
Net income (loss) ....................................... $ 5,113,000 $ (4,044,000)
============= =============
Net loss applicable to common stock ..................... $ (709,000) $ (4,044,000)
============= =============
Per share amounts:
Income (loss) per average share -- basic:
Income (loss) before extraordinary loss .................... $ 0.00 $ (0.12)
Extraordinary loss ......................................... (0.01) --
------------- -------------
Net loss ................................................... $ (0.01) $ (0.12)
============= =============
Income (loss) per average share -- diluted:
Income (loss) before extraordinary loss .................... $ 0.00 $ (0.12)
Extraordinary loss ......................................... (0.01) --
------------- -------------
Net loss ................................................... $ (0.01) $ (0.12)
============= =============
Average shares outstanding -- basic ............................ 56,292,180 34,223,924
============= =============
Average shares outstanding -- diluted .......................... 56,292,180 34,223,924
============= =============
See accompanying notes to financial statements
-5-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
Net income (loss) .................... $20,563,000 $ 5,698,000 $ 5,113,000 $(4,044,000)
Other comprehensive income (loss) --
Foreign currency translation
adjustment ...................... 358,000 -- 358,000 --
----------- ----------- ----------- -----------
Comprehensive income (loss) .......... $20,921,000 $ 5,698,000 $ 5,471,000 $(4,044,000)
=========== =========== =========== ===========
See accompanying notes to financial statements.
-6-
Item 1 -- Financial Statements (Continued)
PREMIER PARKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1998 1997
---- ----
Cash flows from operating activities:
Net income (loss) .......................................... $ 5,113,000 $ (4,044,000)
Adjustments to reconcile net income
(loss) to net cash provided by operating activities, net of
effects of acquisitions:
Depreciation and amortization .............................. 37,539,000 8,257,000
Equity of operations of theme park partnerships ............ (12,572,000) --
Minority interest in earnings .............................. 1,028,000 --
Deferred compensation ...................................... 1,350,000 --
Interest accretion on notes payable ........................ 13,971,000 --
Interest accretion on restricted-use investments ........... (4,405,000) --
Extraordinary loss on early extinguishment of debt ......... 1,314,000 --
Amortization of debt issuance costs ........................ 2,165,000 797,000
Deferred income tax expense (benefit) ...................... 8,878,000 (2,935,000)
Increase in accounts receivable ............................ (32,648,000) (10,029,000)
Increase in inventories and prepaid expenses ............... (19,398,000) (5,646,000)
(Increase) decrease in deposits and other assets ........... (515,000) 3,714,000
Increase (decrease) in accounts payable and accrued expenses (556,000) 19,097,000
Increase in accrued interest payable ....................... 24,694,000 4,951,000
--------------- ---------------
Total adjustments ....................................... 20,845,000 18,206,000
--------------- ---------------
Net cash provided by operating activities ............... 25,958,000 14,162,000
--------------- ---------------
Cash flows from investing activities:
Additions to property and equipment ......................... (141,623,000) (83,723,000)
Acquisition of theme park companies, net of cash acquired ... (1,024,775,000) (21,376,000)
Purchase of restricted-use investments ...................... (321,750,000) --
--------------- ---------------
Net cash used in investing activities .................... (1,488,148,000) (105,099,000)
--------------- ---------------
Cash flows from financing activities:
Repayment of long-term debt ................................. (659,875,000) (65,188,000)
Proceeds from borrowings .................................... 1,361,703,000 132,500,000
Net cash proceeds from issuance of preferred stock .......... 301,185,000 --
Net cash proceeds from issuance of common stock ............. 954,403,000 189,427,000
Payment of debt issuance costs .............................. (40,974,000) (5,112,000)
--------------- ---------------
Net cash provided by financing activities ................ 1,916,442,000 251,627,000
--------------- ---------------
Increase in cash and cash equivalents .................... 454,252,000 160,690,000
Cash and cash equivalents at beginning of period ............... 84,288,000 4,043,000
--------------- ---------------
Cash and cash equivalents at end of period ..................... $ 538,540,000 $ 164,733,000
=============== ===============
See accompanying notes to financial statements.
-7-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS
1. General -- Basis of Presentation
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).
During the first six months of 1998, the Company purchased
approximately 95% 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, together with its subsidiaries, "Six Flags") and consummated the other
transactions described in Note 3 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
referred to in conjunction with this quarterly report on Form 10-Q. The
information furnished in this report reflects all adjustments (all of which are
normal and recurring) 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 six-month period ended June 30, 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.
The accompanying consolidated financial statements for the three and six
months ended June 30, 1998 reflect the results of Riverside Park and Kentucky
Kingdom from January 1, 1998, of Walibi from March 26, 1998 and of Six Flags
from April 1, 1998. See Note 3. The accompanying consolidated financial
statements for the three and six months ended June 30, 1997 reflect the results
of Riverside Park only from its acquisition date, February 5, 1997, and do not
include the results of Kentucky Kingdom, Walibi or Six Flags for those periods.
Historical balance sheet data at June 30, 1998 include the assets and
liabilities of Walibi and Six Flags on a consolidated basis.
Comprehensive Income (Loss)
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," on January 1, 1998. SFAS
No. 130 established standards for
-8-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
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
(loss) be reported in a financial statement that is displayed with the same
prominence as other financial statements. Through March 31, 1998, the Company
had not accounted for any items included in comprehensive income that were
not already included in Premier's consolidated statement of operations. As a
result of Premier entering into foreign operations through the acquisition of
a controlling interest in Walibi in March 1998 (see Note 3), the Company has
now included a statement of comprehensive income for the period ended June
30, 1998. Since the activity only occurred in the second quarter, the three
month and six month adjustment is the same. The new statement reflects 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.
Investment in Theme Park Partnerships
The Company manages three parks in which the Company does not currently
own a controlling interest. The Company accounts for its investment in these
three parks using the equity method of accounting. The equity method of
accounting recognizes the Company's share of the activity of Six Flags Over
Texas, Six Flags Over Georgia, and Marine World in the accompanying statements
of operations in the caption equity in operation of theme park partnerships. The
equity method of accounting differs from the consolidation method of accounting
used for the theme parks in which the Company owns a controlling interest. The
activities of the controlled parks are reflected in each revenue and expense
caption rather than aggregated into one caption.
Reclassifications
Certain items in the December 31, 1997 consolidated balance sheet have
been reclassified to conform to the 1998 presentation.
Earnings (Loss) Per Share
The following table discloses the weighted average number of shares of
Common Stock used in the calculations of basic earnings (loss) per share for the
three and six-month periods ended June 30, 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 six-month period, diluted loss per share was calculated using the same
weighted average number of shares used in the basic loss per share calculation.
Additionally, the weighted average number of shares for the three or six months
ended June 30, 1998 does not include the impact of the conversion of the
Company's mandatorily convertible preferred stock into 9.4 million shares of
Common Stock as the effect of the conversion and resulting decrease in preferred
stock dividends is antidilutive.
-9-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding--basic ......................... 74,594,870 36,601,344 56,292,180 34,223,924
Effect of potential common shares issuable upon
the exercise of employee stock options ..... 1,275,476 932,806 -- --
---------- ---------- ---------- ----------
Weighted average number of common shares
outstanding--diluted ....................... 75,870,346 37,534,150 56,292,180 34,223,924
========== ========== ========== ==========
On June 9, 1998, the Company's common shareholders approved a two-for-one
stock split effective July 24, 1998. The par value of the common stock was
decreased to $.025 per share from $.05 per share. Additionally, the authorized
common shares of the Company were increased to 150,000,000. The accompanying
consolidated financial statements and notes to the consolidated financial
statements reflect the stock split as if it had occurred as of the earliest date
presented.
2. Stockholders' Equity
In connection with the Company's acquisition of SFEC on April 1, 1998,
the Company issued 36,800,000 shares of Common Stock and 5,750,000 Premium
Income Equity Securities ("PIES"), each representing one five-hundredth of
a share of the Company's mandatorily convertible preferred stock (an
aggregate of 11,500 shares of preferred stock). See Note 3. 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.
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 64,258 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 243,342 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 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.
-10-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
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% was paid through
issuance of 448,910 shares of Common Stock and 80% was paid in cash. In June
1998, the Company purchased an additional 45.0% of the outstanding capital
stock of Walibi for an aggregate purchase price of $38,100,000, which was
paid through issuance of 347,746 shares of Common Stock and $31,400,000 in
cash. On the date of the Private Acquisition, Walibi's indebtedness
aggregated $71,181,000, which indebtedness was assumed or refinanced by the
Company. The Company funded the cash portion of the purchase price (and the
refinancing of such indebtedness) from proceeds of borrowing under its senior
secured credit facility (the "Premier Credit Facility") entered into in March
1998. See Note 4(c). As of the acquisition dates and after giving effect to
the purchases, $11,493,000 of deferred tax liabilities were recognized for
the tax consequences attributable to the differences between the financial
carrying amounts and the tax basis of Walibi's assets and liabilities.
Approximately $56,869,000 of costs in excess of the fair value of the net
assets acquired was recorded as goodwill. The Company may be required to
issue additional shares of Common Stock based on Walibi's revenues during
1999, 2000 or 2001. The value of the additional shares, if any will be
recognized as additional goodwill.
On April 1, 1998 the Company acquired (the "Six Flags Acquisition") all
of the capital stock of SFEC for $976.0 million, paid in cash. In connection
with the Six Flags Acquisition, the Company issued through public offerings
(i) 36,800,000 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 8 7/8% Senior Notes due
2006 (the "SFEC Notes"). 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 $278.1 million at April 1, 1998
(fair value of $318.5 million at that date) and (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"). As of the acquisition date and after
giving effect to the purchase, $93,644,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between
the financial carrying amounts and the tax basis of Six Flags' assets and
liabilities. Approximately $1,223,331,000 of costs in excess of the fair
value of the net assets acquired was recorded as goodwill. The amortization
period for the Six Flags goodwill is 25 years.
In addition to its obligations under 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.
-11-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
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 June 30, 1998, the Company owned
approximately 25% and 33%, respectively, of the limited partnership units in the
Georgia and Texas partnerships. The maximum unit purchase obligations for 1999
at both parks will aggregate approximately $43.75 million.
The following summarized unaudited pro forma results of operations for the
six months ended June 30, 1998, assumes that the Six Flags Acquisition, the
acquisition of Walibi and the related financings occurred as of the beginning of
that period.
Total revenues............................................. $331,398,000
Net loss................................................... (60,859,000)
Net loss per common share--basic and diluted............... (0.96)
4. Long-Term Indebtedness
(a) In August 1995, Premier Operations issued $90,000,000 principal amount
of senior notes (the "1995 Notes"). The 1995 Notes are senior unsecured
obligations of Premier Operations, which mature on August 15, 2003. The 1995
Notes bear interest at 12% per annum payable semiannually. The 1995 Notes are
redeemable, at Premier Operations' 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 Premier
Operations' principal domestic subsidiaries.
The proceeds of the 1995 Notes were used in the acquisition by Premier
Operations of Funtime Parks, Inc. in August 1995 and in the refinancing at that
time of previously existing indebtedness.
The indenture limits the ability of Premier Operations and its
subsidiaries to dispose of assets; incur additional indebtedness or liens; pay
dividends; engage in mergers or consolidations; and engage in certain
transactions with affiliates.
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, Premier Operations issued $125,000,000 of 9 3/4%
senior notes due January 2007 (the "1997 Notes"). The 1997 Notes are senior
unsecured obligations of Premier Operations and equal to the 1995 Notes in
priority upon liquidation. The 1997 Notes are redeemable, at Premier Operations'
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 Premier Operations' principal domestic
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 Premier
Operations' 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.
-12-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(c) In March 1998, Premier Operations 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 June 30, 1998, Premier Operations had borrowed $240.0
million under the Premier Credit Facility, in part to fund the acquisition of
Walibi. The Premier Credit Facility includes a five-year $75.0 million
revolving credit facility (with $40.0 million outstanding at June 30, 1998
which has since been repaid), a five-year $100.0 million term loan facility
(subsequently reduced to $75.0 million, which amount was outstanding at June
30, 1998), requiring principal payments of $10.0 million, $25.0 million,
$30.0 million and $10.0 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 June 30, 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 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.
(d) On April 1, 1998, the Company issued $410.0 million principal amount
at maturity of Senior Discount Notes and $280.0 million principal amount of
Senior Notes. The notes are senior unsecured obligations of Premier, and are not
guaranteed by Premier's subsidiaries. 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 (9 1/4% per annum) 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 notes are redeemable, at the Company's option, in whole or in part, at
any time on or after April 1, 2002 (in the case of the Senior Notes) and April
1, 2003 (in the case of the Senior Discount Notes), at varying redemption
prices.
Approximately $70.7 million of the net proceeds of the Senior Notes was
deposited in escrow to prefund the first six semi-annual interest payments
thereon, and $75.0 million of the net proceeds of the Senior Discount Notes
was deposited in a restricted use investment in escrow, until April 1, 2003,
to provide a fund to pay certain of Premier's obligations to the limited
partners of the Co-Venture Parks. See Note 3.
The indentures under which the notes were issued limit the ability of the
Company and its subsidiaries 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 1, 1998, SFEC issued $170.0 million principal amount of SFEC
Notes, which are senior obligations of SFEC. The SFEC Notes were guaranteed on a
fully subordinated basis by Premier. The SFEC Notes require annual interest
payments of approximately $15.1 million (8 7/8% per
-13-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
annum) and, except in the event of a change of control of SFEC and certain other
circumstances, do not require any principal payments prior to their maturity in
2006. The SFEC Notes are redeemable, at SFEC's option, in whole or in part, at
any time on or after April 1, 2002, at varying redemption prices. The net
proceeds of the SFEC Notes, together with other funds, were deposited in a
restricted use investment in escrow to provide for the repayment in full of
pre-existing notes of SFEC (with a carrying value of $178.2 million at June 30,
1998).
The indenture under which the SFEC Notes were issued limits the ability of
SFEC and its subsidiaries to dispose of assets; incur additional indebtedness or
liens; pay dividends; engage in mergers or consolidations; and engage in certain
transactions with affiliates.
(f) The SFTP Senior Subordinated Notes are senior subordinated
obligations of SFTP in an aggregate principal amount of $285.0 million. The
SFTP Senior Subordinated Notes require interest payments of approximately
$34.9 million per annum (12 1/2% per annum), with the first payment due in
December 1998, and, except in certain circumstances, do not require principal
payments prior to their maturity in 2005. The SFTP Senior Subordinated Notes
are guaranteed on a senior subordinated basis by the principal operating
subsidiaries of SFTP. The Notes are redeemable, at SFTP's option, in whole or
in part, at any time on or after December 15, 1998, at varying redemption
prices. As a result of the application of purchase accounting, the carrying
value of the SFTP Senior Subordinated Notes was increased to $318.5 million,
which was the estimated fair value at the acquisition date of April 1, 1998.
The premium that resulted from the adjustment of the carrying value will be
amortized as a reduction to interest expense over the remaining term of the
SFTP Senior Subordinated Notes and will result in an effective interest rate
of approximately 9 3/4%.
The indenture under which the SFTP Senior Subordinated Notes were issued
limits the ability of SFTP and its subsidiaries to dispose of assets; incur
additional indebtedness or liens; pay dividends; engage in mergers or
consolidations; and engage in certain transactions with subsidiaries and
affiliates.
(g) On April 1, 1998, SFTP entered into the Six Flags Credit Facility,
pursuant to which it had outstanding $410 million at June 30, 1998. The Six
Flags Credit Facility includes (i) a $100.0 million five-year revolving
credit facility to be used to refinance pre-existing Six Flags bank
indebtedness and for working capital and other general corporate purposes (of
which $38.0 million was outstanding on June 30, 1998); and (ii) a $372.0
million term loan facility (the "Term Loan Facility") which was fully drawn
on June 30, 1998. Borrowings under the Term Loan Facility will mature on
November 30, 2004. However, aggregate principal payments and reductions of
$1.0 million are required during each of the first, second, third and fourth
years; aggregate principal payments of $25.0 million and $40.0 million are
required in years five and six, respectively, and $303.0 million at maturity.
Borrowings under the Six Flags Credit Facility are secured by substantially
all of the assets of SFTP and its subsidiaries and a pledge of the stock of
SFTP, and is guaranteed by such subsidiaries and SFEC.
The Six Flags Credit Facility contains restrictive covenants that, among
other things, limit the ability of SFTP and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends, except that
(subject to covenant compliance) dividends will be permitted to allow SFEC to
meet cash pay interest obligations with respect to the SFEC Notes; repurchase
stock; make investments; engage in mergers or consolidations and engage in
certain transactions with subsidiaries and affiliates. In addition, the Six
Flags Credit Facility requires that SFTP comply with certain specified financial
ratios and tests.
-14-
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Commitments and Contingencies
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. Investment in Theme Park Partnerships
The following reflects the summarized results of the three parks
managed by the Company for the six months ended June 30, 1998, in the case of
Marine World, and for the period subsequent to April 1, 1998 (the date of the
Six Flags Acquisition), in the case of the Co-Venture Parks. Previous periods
are not presented as the general partner and limited partnership interests in
the Co-Venture Parks were purchased on April 1, 1998 and the lease agreement
with the owner of Marine World, which established a revenue sharing
arrangement in which the Company participates, became effective at the
beginning of the 1998 operating season.
Revenue........................................................ $83,032
Expenses:
Operating expenses.......................................... 30,240
Selling, general and administrative......................... 13,229
Costs of products sold...................................... 10,854
Depreciation and amortization............................... 4,337
Interest expense, net....................................... 4,001
Other expense............................................... 167
------
Total.................................................... 62,828
------
Net income..................................................... $20,204
------
------
The Company's share of operations of the three theme parks for the three
and six months ended June 30, 1998 was $13,733,000, prior to depreciation and
amortization charges of $1,161,000. There is a substantial difference between
the carrying value of the Company's investment in the theme parks and the net
book value of the theme parks. The difference is being amortized over 28 years
for the Co-Venture Parks (which is the remaining term of the management and
lease agreements) and being amortized over the expected useful life of the rides
and equipment installed by the Company at the Marine World theme park.
-15-
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 six months ended June 30, 1998
include the results of Riverside Park and Kentucky Kingdom (each of which was
acquired during 1997) for the entire period. Results of Walibi and Six Flags
are included in 1998 results only from the dates of their respective
acquisitions (March 26, 1998, in the case of Walibi, and April 1, 1998, in the
case of Six Flags). Results for the three and six months ended June 30, 1997
reflect the results of Riverside Park only from its acquisition date, February
5, 1997, and do not include the results of Kentucky Kingdom, Walibi or Six
Flags for those periods. In addition, 1998 results do not include the
Company's share of the revenues of Marine World under the applicable lease and
related doucments since the park does not generate sufficient revenues to
provide a participation to the Company until the third quarter.
Results of operations for the six-month period ended June 30, 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.
Six months ended June 30, 1998 vs. Six months ended June 30, 1997
Revenues in the first six months of 1998 increased $239.8 million, from
$66.7 million in the comparable 1997 period. Of this increase, $222.7 million
represented revenues of Six Flags and Walibi (the "Acquired Parks") which were
acquired in 1998 and thus, not included in 1997 results. Revenues generated by
the Company's other 13 parks (including Marine World) amounted to $83.8
million in the first six months of 1998, as compared to $66.7 million from the
Company's 11 parks in the 1997 period. The 13 parks experienced a 5.7%
increase in attendance, a 6.4% increase in per capita spending and a 32.6%
increase in season pass sales over the prior period.
Operating expenses increased $89.0 million in the first six months of
1998, of which $81.3 million related directly to the Acquired Parks. Operating
expenses at the Company's other 12 parks (excluding Marine World) increased
$7.6 million, primarily reflecting increased staffing levels and wage rates
and $4.8 million of operating expenses for Kentucky Kingdom.
Selling, general and administrative expenses were $62.3 million in the
1998 period as compared to $17.7 million in 1997. Of this increase, $28.1
million related to the Acquired Parks. Selling, general and administrative
expenses at the remaining twelve parks increased $16.5 million over 1997
levels, primarily reflecting $3.9 million of selling, general and
administrative expenses at Kentucky Kingdom, increased corporate expenses
reflecting the larger scope of the Company's operations and increased
marketing and advertising costs, as well as an earlier expenditure of such
amounts as compared to the prior year. As a percentage of total revenue,
selling, general administrative expenses were 20% of revenue in 1998 as
compared to 27% for the same period in 1997. The decrease is a result of the
Company's continued ability to use operating leverage to increase operations
without having to increase administrative costs by a like percentage.
Costs of products sold increased $30.4 million, of which $29.1 million
related to the Acquired Parks. The balance of the increase primarily related
to increased product sales at the parks owned in both years and costs of sales
at Kentucky Kingdom.
-16-
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Depreciation and amortization expense increased $29.2 million from $8.3
million in the 1997 period to $37.5 million in 1998, of which $25.3 million
was attributable to the recognition of depreciation and amortization expense
for the Acquired Parks, $1.1 million was attributable to Kentucky Kingdom and
the balance was attributable to the Company's on-going capital program.
Interest expense, net increased from $8.4 million to $43.4 million
principally as a result of borrowings made in connection with the acquisition
of Six Flags and Walibi. See Note 3 to the Consolidated Financial Statements.
Equity in operations of theme park partnerships results from the Company's
shares of the operations of Six Flags Over Texas (33% effective Company
ownership) and Six Flags Over Georgia (25% effective Company ownership), the
lease of Marine World and the management of all three parks. The Company did not
have the partial ownership or lease arrangement with any of the parks prior to
commencement of the 1998 operating season. See Notes 1 and 6 to the Consolidated
Financial Statements.
Income tax expense was $10.4 million for the 1998 period as compared to a
benefit of $2.8 million for the same period in 1997. The increase in the
effective tax rate to 63.8% from 41.2% is a function of the non-deductible
intangible asset amortization associated with the Six Flags Acquisition.
Approximately $10.9 million of non-deductible amortization will be recognized
each quarter. As a result the Company's quarterly effective income tax rate will
vary from period-to-period based upon the inherent seasonal nature of the theme
park business.
Net loss applicable to common stock in 1998 reflects as a charge to net
income the preferred stock dividends accrued since the April 1, 1998
issuance of the PIES. The PIES accrue cumulative dividends at 7 1/2% per
annum (1 7/8% per quarter), which approximates an annual dividend requirement
of $23.3 million (approximately $5.8 million per quarter). The dividend is
payable in cash or shares of Common Stock at the option of the Company.
Three months ended June 30, 1998 vs. Three months ended June 30, 1997
Revenues in the second quarter of 1998 increased $237.2 million, from
$62.5 million in the comparable 1997 period. Of this increase, $222.7 million
represented revenues of the Acquired Parks. Revenues from the twelve other
parks (excluding Marine World) increased $14.5 million primarily from
inclusion of Kentucky Kingdom ($12.4 million). Attendance at the Six Flags
parks declined in the 1998 quarter as compared to the 1997 period. The
Company believes this decline was primarily attributable to capital and
marketing decisions for the 1998 season implemented by former management.
Operating expenses increased $85.8 million in the second quarter of
1998, of which $81.3 million related directly to the Acquired Parks.
Operating expenses at the other twelve parks increased $4.5 million,
primarily as a result of the inclusion of the operating expenses at Kentucky
Kingdom ($3.1 million). Operating expenses at the Six Flags parks during the
post-acquisition 89 day period ended June 28, 1998 decreased by $16.5 million
from operating expenses in the 1997 second quarter.
Selling, general and administrative expenses were $54.6 million in the
1998 period as compared to $13.3 million in 1997. Of this increase, $28.1
million related to the Acquired Parks. Selling, general and administrative
expenses at the remaining twelve parks increased $13.2 million as a result of
the inclusion of Kentucky Kingdom ($3.1 million), an increase in corporate
expenses reflecting the larger scope of the Company's operations, increases
in advertising expenditures and an acceleration of such expenditures as
compared to the prior year. Selling, general and administrative expenses at
the Six Flags parks decreased by $17.7 million during the 89 day period ended
June 28, 1998 as compared to selling, general and administrative expenses in
the 1997 second quarter. As a percentage of total revenue, selling, general
and administrative expenses were 18% of revenue in 1998 as compared to 21%
for the same period in 1997. The decrease is a result of the Company's
continued ability to use operating leverage to increase operations without
having to increase administrative costs by a like percentage.
Costs of products sold increased $30.3 million, of which $29.1 million
related to the Acquired Parks. The remaining increases primarily related to
increased sales at the parks owned in both years.
17
Depreciation and amortization expense increased from $4.3 million in
the 1997 period to $31.7 million in 1998, of which $25.3 million was
attributable to the recognition of depreciation expense for the Acquired
Parks, $0.6 million was attributable to Kentucky Kingdom, and the balance was
attributable to the Company's on-going capital program. Interest expense, net
increased from $4.5 million to $37.3 million principally as a result of
borrowings made in connection with the acquisition of Six Flags and Walibi.
See Note 3 to the Consolidated Financial Statements.
Equity in operations of theme park partnerships results from the Company's
share of the operations of Six Flags Over Texas (33% effective Company
ownership) and Six Flags Over Georgia (25% effective Company ownership), the
lease of Marine World and the management of all three parks. The Company did not
have the partial ownership or lease arrangements with any of the parks prior to
commencement of the 1998 operating season. See Notes 1 and 6 to the Consolidated
Financial Statements.
Income tax expense was $20.2 million for the 1998 period as compared to
$3.7 million for the same period in 1997. The increase in the effective tax rate
to 49.5% from 39.6% is a function of the non-deductible intangible asset
amortization associated with the Six Flags Acquisition. Approximately $10.9
million of non-deductible amortization will be recognized each quarter. As a
result, the Company's quarterly effective income tax rate will vary from
quarter-to-quarter based upon the inherent seasonal nature of theme park
business.
Net income applicable to common stock in 1998 reflects as a charge to
net income the quarterly preferred stock dividend payable July 1, 1998. The
Company's PIES accrue cumulative dividends at 7 1/2% per annum (1 7/8% per
quarter), which approximates an annual dividend of $23.3 million ($5.8
million per quarter), The dividend is payable in cash or shares of Common
Stock at the option of the Company
-18-
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
At June 30, 1998, the Company's indebtedness (including $178.2 million
carrying value of the pre-existing SFEC notes which will be repaid in full
from the proceeds of the SFEC Notes, together with other funds, all of which
have been deposited in escrow) aggregated $2,087.0 million, of which
approximately $41.8 million matures prior to June 30, 1999 ($1.8 million after
giving effect to the repayment of revolving credit indebtedness subsequent to
June 30, 1998). See Note 4 to the Company's Consolidated Financial Statements
for additional information regarding the Company's indebtedness.
During the six months ended June 30, 1998, net cash provided by operating
activities was $26.0 million. Net cash used in investing activities in the first
six months of 1998 totaled $1,488.1 million, consisting primarily of the
Company's acquisition of Six Flags and Walibi and to a lesser extent capital
expenditures. Net cash provided by financing activities in the 1998 period was
$1,916.4 million, representing proceeds of borrowings under the Premier and Six
Flags Credit Facilities, and proceeds of the public offerings of Common Stock,
PIES, Senior Notes, Senior Discount Notes and SFEC Notes described in Note 3,
offset in part by debt payments and the payment of certain debt issuance costs.
As more fully described in Note 3 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.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In February, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. It standardizes
the disclosure requirements for pensions and other postretirement benefits to
the extent practicable, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures that are no longer as
useful as they previously were. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997. The Company will adopt the new disclosure
requirements in its annual financial statements for the year ending December 31,
1998.
-19-
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
In June, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 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
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge. 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. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. It is expected that the Company will
adopt the provision of SFAS No. 133 as of January 1, 2000. If the provisions of
SFAS No. 133 were to be applied as of June 30, 1998, it would not have a
material effect on the Company's financial position as of such date, or the
results of operations for the six-month period then ended.
Impact of Year 2000 Issue
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company has not completed plans to ensure year 2000
compliance. The Company anticipates that it will be able to test its entire
system using its internal programming staff and outside computer consultants and
intends to make any necessary modifications to prevent disruption to its
operations. Costs in connection with any such modifications are not expected to
be material. However, if such modifications are not completed in a timely
manner, the Year 2000 problem may have a material adverse impact on the
operations of the Company.
Item 3
Not applicable.
-20-
PART II -- OTHER INFORMATION
Items 1--3 and 5
Not applicable.
Item 4 -- Submission of Matters to a Vote of Securityholders
On June 9, 1998, the Company held its Annual Meeting of Stockholders. The
number of shares of Common Stock represented at the Meeting either in person or
by proxy, was 32,410,432 shares (86.43% of the outstanding shares of Common
Stock). Three proposals were voted upon at the Meeting. The proposals and voting
results were as follows:
1. Proposal 1 -- Election of Directors
The following persons were elected as directors as follows:
Name For Against
---- --- -------
Paul A. Biddelman 28,395,447 4,014,985
Kieran E. Burke 28,395,667 4,014,765
James F. Dannhauser 28,395,667 4,014,765
Michael E. Gellert 28,395,572 4,014,860
Arnold S. Gurtler 28,394,189 4,016,243
Gary Story 28,395,667 4,014,765
Charles R. Wood 28,394,592 4,015,840
2. Proposal 2 -- Amendment of Article IV of the Company's Certificate
of Incorporation to effect a 2 for 1 stock split of the Company's
Common Stock
For Against Withheld
--- ------- --------
32,383,386 11,671 15,375
3. Proposal 3 -- Approval of amendment to Certificate of Incorporation
of the Company to increase the number of authorized shares of the
Company's Common Stock from 90,000,000 "old" shares to 150,000,000
"new" shares and to increase the number of authorized shares of the
Preferred Stock from 500,000 to 5,000,000 shares
For Against Withheld Not Voted
--- ------- -------- ---------
21,441,425 6,051,174 19,106 4,898,727
4. Proposal 4 -- Ratification of selection by the Company's Board of
Directors of KPMG Peat Marwick LLP as independent public accountants
of the Company for the year ending December 31, 1998
For Against Withheld
--- ------- --------
32,403,200 2,511 4,721
-21-
Item 4 -- Submission of Matters to a Vote of Securityholders (Continued)
5. Proposal 5 -- Approval of the adoption of the Company's 1998 Stock
Option and Incentive Plan
For Against Withheld
--- ------- --------
21,809,633 10,596,869 3,930
6. Proposal 6 -- Re-approval of the Company's 1996 Stock Option and
Incentive Plan
For Against Withheld Not Voted
--- ------- -------- ---------
26,319,909 1,861,040 28,883 4,200,600
7. Proposal 7 -- Approval of payment of "independent" directors' fees
in shares of Common Stock
For Against Withheld
--- ------- --------
32,260,289 20,050 130,093
Item 6 -- Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule - June 30, 1998
27.2 Financial Data Schedule - June 30, 1997
(b) Reports on Form 8-K
(i) The Company's Current Report on Form 8-K/A, dated February 9,
1998 (filed on April 9, 1998).
(ii) The Company's Current Report on Form 8-K/A, dated December 15,
1997 (filed on April 9, 1998).
-22-
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: August 13, 1998
PREMIER PARKS INC.
------------------------------------
(Registrant)
/s/ Kieran E. Burke
------------------------------------
Kieran E. Burke
Chairman and Chief Executive Officer
/s/ James F. Dannhauser
------------------------------------
James F. Dannhauser
Chief Financial Officer
-23-