ITEM 1. BUSINESS
Introduction
On November 5, 1999, two wholly-owned subsidiaries of Premier Parks Inc.
("Premier"), Premier Parks Operations Inc. (together with its subsidiaries,
"PPO" or the "Company") and Six Flags Entertainment Corporation (together with
its subsidiaries, "SFEC" or "Six Flags") merged (the "Merger") with PPO as the
surviving corporation. Premier is the largest regional theme park operator in
the world and, prior to the Merger, PPO owned or operated 21 parks and Six Flags
owned 10 parks.
The Merger was accounted for as a reorganization of interests under common
control in a manner similar to a pooling of interests. All financial and
statistical information contained herein at dates or for periods subsequent to
April 1, 1998 (the date Premier acquired SFEC) give effect to the Merger as if
it had occurred on that date. Financial and statistical information at dates or
for periods prior to April 1, 1998 relate only to PPO.
For the year ended December 31, 1999, the Company's reported total
revenue was approximately $927.0 million and its consolidated earnings before
interest, taxes, depreciation and amortization and noncash compensation
("EBITDA") was approximately $329.3 million. The 31 parks the Company
operated during the 1999 season had attendance of approximately 36.7 million.
It now operates 32 regional parks, including 13 of the 50 highest attendance
theme parks in North America, the largest paid admission theme park in Mexico
and seven theme parks in Europe. The Company's theme parks serve 8 of the
10 largest metropolitan areas in the United States.
In May 1999, the Company acquired Reino Aventura, a theme park located in
Mexico City, and Splashtown, a water park located in Houston.
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
theme park located near Dusseldorf, Germany. At the same time, the Company
entered into (i) long-term license agreements with Warner Bros. for exclusive
theme park usage in Europe and Latin and South America (including Mexico) of the
Looney Tunes, Hanna-Barbera, Cartoon Network and DC Comics characters,(1) which
complement the Company's domestic license described below and (ii) a joint
venture with Warner Bros. to design, develop and manage a new Warner Bros. Movie
World theme park scheduled to open in Madrid, Spain in 2002. See Note 2 to Notes
to Consolidated Financial Statements.
Six Flags has operated regional theme parks under the Six Flags name for
nearly forty years. As a result, Six Flags is a nationally-recognized brand
name. By virtue of Premier's acquisition of SFEC in 1998, the Company obtained
worldwide ownership of the Six Flags brand name, and in the 1998 and 1999
seasons commenced the use of the Six Flags brand name at five parks and is
adding the brand to four additional parks for the 2000 season.
As part of the Six Flags acquisition, the Company obtained the exclusive
right for theme-park
1 Looney Tunes, characters, names and all related indicia are trademarks of
Warner Bros.(C)2000, a division of Time Warner Entertainment Company, L.P.
("TWE"). Batman and Superman and all related characters, names and indicia
are copyrights and trademarks of DC Comics(C)2000, Cartoon Network and
logo are trademarks of Cartoon Network(C)2000, Six Flags and all related
indicia are federally registered trademarks of Six Flags Theme Parks
Inc.(C)2000, a subsidiary of the Company. Fiesta Texas and all related
indicia are trademarks of Fiesta Texas, Inc.(C)2000, a subsidiary of the
Company.
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usage of certain Warner Bros. and DC Comics animated characters throughout the
United States (except the Las Vegas metropolitan area) and Canada. These
characters include Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman,
Superman and others.
The Company's 32 parks at December 31, 1999, are located in geographically
diverse markets across North America and Europe. Each of the Company's theme
parks is individually themed and provides a complete family-oriented
entertainment experience. The Company's theme parks generally offer a broad
selection of state-of-the-art and traditional thrill rides, water attractions,
themed areas, concerts and shows, restaurants, game venues and merchandise
outlets.
Since current management assumed control in 1989, the Company has acquired
31 parks (including its interests in the Six Flags Marine World), and has
achieved significant internal growth.
Description of Domestic Parks
Six Flags America
Six Flags America, a combination theme and water park located in Largo,
Maryland (approximately 15 miles east of Washington, D.C. and 30 miles southwest
of Baltimore, Maryland) is the 37th largest theme park in North America.(2) The
park's primary market includes Maryland, northern Virginia, Washington, D.C. and
parts of Pennsylvania and Delaware. This market provides the park with a
permanent resident population base of approximately 6.6 million people within 50
miles and 11.0 million people within 100 miles. Based on a copyrighted 1999
survey of television households within designated market areas ("DMAs")
published by A.C. Nielsen Media Research, the Washington, D.C. and Baltimore
markets are the number 7 and number 23 DMAs in the United States, respectively.
The Company owns a site of 515 acres, with 131 acres currently used for
park operations. The remaining 384 acres, which are fully zoned for
entertainment and recreational uses, provide the Company with ample expansion
opportunity, as well as the potential to develop complementary operations.
Six Flags America's principal competitors are King's Dominion Park,
located in Doswell, Virginia (near Richmond); Hershey Park, located in Hershey,
Pennsylvania; and Busch Gardens, located in Williamsburg, Virginia. These parks
are located approximately 120, 125 and 175 miles, respectively, from Six Flags
America.
Six Flags AstroWorld, Six Flags WaterWorld and Splashtown
Six Flags AstroWorld, the 34th largest theme park in North America, and
the separately gated adjacent Six Flags WaterWorld, the 13th largest water park
in the United States, are located in Houston, Texas. The Houston, Texas market
provides the parks with a permanent resident population of 4.3 million people
within 50 miles and 5.2 million people within 100 miles. The Houston market is
the number 11 DMA in the United States.
In May 1999, the Company acquired Splashtown, a water park located
approximately 30 miles from Six Flags AstroWorld. The Company believes it can
increase attendance and revenues at all three Houston facilities through joint
season pass and other joint ticketing and marketing programs and can increase
operating efficiencies at the facilities through shared expenses.
The Company owns a site of approximately 90 acres used for the theme park,
approximately 14
(2) Park rankings are based on 1999 attendance as published in Amusement
Business, an industry trade publication.
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acres used for Six Flags WaterWorld and approximately 60 acres for Splashtown.
Six Flags WaterWorld and Splashtown compete with each other and with Water
Works, a nearby water park. Six Flags AstroWorld competes with Sea World of
Texas and the Company's Six Flags Fiesta Texas, both located in San Antonio,
Texas, approximately 200 miles from the park. In addition, the park competes
with Six Flags Over Texas, the Company's park located in Arlington, Texas,
approximately 250 miles from the park.
Six Flags Darien Lake & Camping Resort
Six Flags Darien Lake, a combination theme and water park, is the largest
theme park in the State of New York and the 36th largest theme park in North
America. Six Flags Darien Lake is located off Interstate 90 in Darien Center,
New York, approximately 30, 40 and 120 miles from Buffalo, Rochester and
Syracuse, New York, respectively. The park's primary market includes upstate New
York, western and northern Pennsylvania and southern Ontario, Canada. This
market provides the park with a permanent resident population base of
approximately 2.1 million people within 50 miles of the park and 3.2 million
within 100 miles. The Buffalo, Rochester and Syracuse markets are the number 39,
number 77 and number 76 DMAs in the United States, respectively.
The Six Flags Darien Lake property consists of approximately 988 acres,
including 144 acres for the theme park, 242 acres of campgrounds and 602 acres
of agricultural, undeveloped and water areas. Six Flags Darien Lake also has a
20,000 seat amphitheater. The Company has a long-term arrangement with a
national concert promoter to lease and operate the amphitheater.
Adjacent to the Six Flags Darien Lake theme park are a 164 room hotel and
a camping resort, each owned and operated by the Company. The campgrounds
include 1,180 developed campsites, including 430 recreational vehicles (RV's)
available for daily and weekly rental. The campground is the fifth largest in
the United States. In 1999, approximately 330,000 people used the Six Flags
Darien Lake hotel and campgrounds. Substantially all of the hotel and camping
visitors visit the theme park.
Six Flags Darien Lake's principal competitor is Wonderland Park located in
Toronto, Canada, approximately 125 miles from Six Flags Darien Lake. In
addition, Six Flags Darien Lake competes to a lesser degree with three smaller
amusement parks located within 50 miles of the park. Six Flags Darien Lake is
significantly larger with a more diverse complement of entertainment than any of
these three smaller facilities.
Six Flags Elitch Gardens
Six Flags Elitch Gardens is a combination theme and water park located on
approximately 67 acres in the downtown area of Denver, Colorado, next to Mile
High Stadium and the Pepsi Center Arena, and close to Coors Field. Six Flags
Elitch Gardens is the 40th largest theme park in North America. The park's
primary market includes the greater Denver area, as well as most of central
Colorado. This market provides the park with a permanent resident population
base of approximately 2.4 million people within 50 miles of the park and
approximately 3.3 million people within 100 miles. The Denver area is the number
18 DMA in the United States. Six Flags Elitch Gardens has no significant direct
competitors.
Six Flags Fiesta Texas
Six Flags Fiesta Texas, the 25th largest theme park in North America, is a
combination theme and water park located on approximately 206 acres in San
Antonio, Texas. The San Antonio, Texas market provides the park with a permanent
resident population of approximately 1.7 million people within 50 miles and
approximately 3.0 million people within 100 miles. The San Antonio market is the
number 38 DMA in the United States.
Six Flags Fiesta Texas' principal competitor is Sea World of Texas, also
located in San Antonio. In
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addition, the park competes to a lesser degree with two Company parks: Six Flags
AstroWorld, located in Houston, Texas, and Six Flags Over Texas located in
Dallas.
Six Flags Great Adventure and Six Flags Wild Safari Animal Park
Six Flags Great Adventure, the 10th largest theme park in North America,
and the separately gated adjacent Six Flags Wild Safari Animal Park, are located
in Jackson, New Jersey, approximately 70 miles south of New York City and 50
miles east of Philadelphia. The Company is adding a separately gated water park
to the site for the 2000 season. The New York and Philadelphia markets provide
the parks with a permanent resident population of approximately 12.2 million
people within 50 miles and approximately 26.4 million people within 100 miles.
The New York and Philadelphia markets are the number 1 and number 4 DMAs in the
United States, respectively.
The Company owns a site of approximately 2,200 acres, of which
approximately 125 acres are currently used for the theme park operations, and
approximately 350 adjacent acres are used for the wildlife safari park, home to
over 1,200 exotic animals representing more than 58 species, which can be seen
over a four and one-half mile drive. The new water park will be located on
approximately 23 acres. Over 1700 acres remain undeveloped. Six Flags Great
Adventure's principal competitors are Hershey Park, located in Hershey,
Pennsylvania, approximately 150 miles from the park; and Dorney Park, located in
Allentown, Pennsylvania, approximately 75 miles from the park.
Six Flags Great America
Six Flags Great America, the 18th largest theme park in North America, is
located in Gurnee, Illinois, between Chicago, Illinois and Milwaukee, Wisconsin.
The Chicago and Milwaukee markets provide the park with a permanent resident
population of approximately 7.8 million people within 50 miles and approximately
12.0 million people within 100 miles. The Chicago and Milwaukee markets are the
number 3 and number 31 DMAs in the United States, respectively.
The Company owns a site of approximately 440 acres of which 92 are used
for the theme park operations, and approximately 106 usable acres are located in
a separate parcel available for expansion and complementary uses. Six Flags
Great America currently has no direct theme park competitors in the region, but
does compete to some extent with Kings Island, located near Cincinnati, Ohio,
approximately 350 miles from the park; Cedar Point, located in Sandusky, Ohio,
approximately 340 miles from the park; and Six Flags St. Louis, the Company's
park located outside St. Louis, Missouri, approximately 320 miles from the park.
Six Flags Hurricane Harbor
Six Flags Hurricane Harbor, the 6th largest water park in the United
States, is located in Arlington, Texas, between Dallas and Fort Worth, Texas.
The Dallas/Fort Worth market provides the park with a permanent resident
population of 4.5 million people within 50 miles and 5.6 million people within
100 miles. The Dallas/Fort Worth market is the number 8 DMA in the United
States.
The Company owns directly approximately 47 acres, of which approximately
18 acres are currently used for Hurricane Harbor and 31 acres remain
undeveloped. Six Flags Hurricane Harbor has no direct competitors in the area
other than a municipal water park.
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Six Flags Kentucky Kingdom
Six Flags Kentucky Kingdom is a combination theme and water park, located
on approximately 58 acres on and adjacent to the grounds of the Kentucky State
Fair in Louisville, Kentucky, of which approximately 38 acres are leased under
ground leases with terms (including renewal options) expiring between 2021 and
2049, with the balance owned by the Company. Six Flags Kentucky Kingdom is the
46th largest theme park in North America. The park's primary market includes
Louisville and Lexington, Kentucky, Evansville and Indianapolis, Indiana and
Nashville, Tennessee. This market provides the park with a permanent resident
population of approximately 1.4 million people within 50 miles and approximately
4.6 million people within 100 miles. The Louisville and Lexington markets are
the number 50 and number 66 DMAs in the United States.
Six Flags Kentucky Kingdom's only significant direct competitor is Kings
Island, located near Cincinnati, Ohio, approximately 100 miles from the park.
Six Flags Magic Mountain and Six Flags Hurricane Harbor
Six Flags Magic Mountain, the 17th largest theme park in North America,
and the separately gated adjacent Six Flags Hurricane Harbor, are located in
Valencia, California, in the northwest section of Los Angeles County. The Los
Angeles, California market provides the parks with a permanent resident
population of approximately 9.8 million people within 50 miles and approximately
15.8 million people within 100 miles. The Los Angeles market is the number 2 DMA
in the United States.
The Company owns a site of approximately 260 acres with 160 acres used for
the theme park, and approximately 12 acres used for the pirate-themed water
park. Six Flags Magic Mountain's principal competitors include Disneyland in
Anaheim, California, located approximately 60 miles from the park, Universal
Studios Hollywood in Universal City, California, located approximately 20 miles
from the park, Knott's Berry Farm in Buena Park, California, located
approximately 50 miles from the park, and Sea World of California in San Diego,
California, located approximately 150 miles from the park. In early 1999, a new
park, Legoland, opened approximately 120 miles from Magic Mountain. Six Flags
Hurricane Harbor's only direct competitor in the area is Raging Waters,
approximately 50 miles from the water park.
Six Flags Marine World
Six Flags Marine World, a theme park which also features marine mammals
and exotic land animals, is the 30th largest theme park in North America. Six
Flags Marine World is located in Vallejo, California, approximately 30 miles
from San Francisco, 20 miles from Oakland and 60 miles from Sacramento. This
market provides the park with a permanent resident population base of
approximately 5.2 million people within 50 miles and approximately 9.7 million
people within 100 miles. The San Francisco/Oakland and Sacramento areas are the
number 5 and number 20 DMAs in the United States, respectively.
The Company manages the operations of Six Flags Marine World under a
management agreement entered into in February 1997, pursuant to which the
Company is entitled to receive an annual base management fee of $250,000 and up
to $250,000 annually in additional fees based on park performance. In addition,
in November 1997 the Company exercised at no additional cost an option to lease
approximately 55 acres of land at the site on a long-term basis and at nominal
rent, entitling the Company to receive, in addition to the management fee, 80%
of the cash flow generated by the combined operations of the park after
operating expenses and debt service. Finally, the Company has the option to
purchase the entire park beginning in February 2002, which it currently expects
to exercise at that time.
Six Flags Marine World is located on approximately 136 acres and offers
various rides and other traditional theme park attractions, as well as
presentation stadiums, animal habitats and picnic areas,
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bordering a 55-acre man-made lake. The park provides for the shelter and care
for marine mammals, land animals, sharks and rays, birds and reptiles, tropical
and cold water fish and marine invertebrates, and butterflies, all featured in a
variety of exhibits and participatory attractions.
Six Flags Marine World's principal competitors are Underwater World at
Pier 39 in San Francisco, Great America in Santa Clara and Outer Bay at Monterey
Bay Aquarium. These parks are located approximately, 30, 60 and 130 miles from
Six Flags Marine World, respectively.
The Company accounts for its interest in Six Flags Marine World under the
equity method of accounting. See Notes 5 and 13 to Notes to Consolidated
Financial Statements.
Six Flags New England
Six Flags New England (formerly Riverside Park) is a combination theme and
water park, located off Interstate 91 near Springfield, Massachusetts,
approximately 95 miles west of Boston. Six Flags New England is the 40th largest
theme park in North America with a primary market that includes Springfield and
western Massachusetts, Hartford and western Connecticut, as well as portions of
eastern Massachusetts (including Boston) and eastern New York. This market
provides the park with a permanent resident population base of approximately 3.1
million people within 50 miles and 14.7 million people within 100 miles.
Springfield, Hartford/New Haven and Boston are the number 105, number 27 and
number 6 DMAs in the United States. Six Flags New England is comprised of
approximately 230 acres, with 90 acres currently used for park operations, 12
acres for a picnic grove and approximately 128 undeveloped acres.
Six Flags New England's only significant competitor is Lake Compounce
located in Bristol, Connecticut, approximately 50 miles from Six Flags New
England. To a lesser extent, Six Flags New England competes with The Great
Escape, the Company's park located in Lake George, New York, approximately 150
miles from Six Flags New England.
Six Flags Ohio
Six Flags Ohio (formerly Geauga Lake), a combination theme and water park,
is the 49th largest theme park in North America. Six Flags Ohio is located in
Aurora, Ohio, 20 miles southeast of Cleveland and approximately 30, 60 and 120
miles, respectively, from Akron and Youngstown, Ohio and Pittsburgh,
Pennsylvania. This market provides the park with a permanent resident population
base of approximately 4.0 million people within 50 miles of the park and
approximately 7.2 million within 100 miles. The Cleveland/Akron, Youngstown and
Pittsburgh markets are the number 13, number 99 and number 19 DMAs in the United
States, respectively.
Adjacent to Six Flags Ohio are a 145 room hotel and a camping resort, each
owned and operated by the Company. The campgrounds include 300 developed
campsites, including 12 recreational vehicles (RV's) available for daily and
weekly rental. In 1999, approximately 62,000 people used the Six Flags Ohio
hotel and campgrounds.
The 263-acre property on which Six Flags Ohio is situated includes a
50-acre spring-fed lake. The theme park itself presently occupies approximately
45 acres. There are approximately 121 acres of undeveloped land (of which
approximately 40 acres have the potential for further development).
Six Flags Ohio's principal competitors are Cedar Point in Sandusky, Ohio
and Kennywood in Pittsburgh, Pennsylvania. These parks are located approximately
90 miles and 120 miles, respectively, from the park. There are also three small
water parks within a 50-mile radius of Six Flags Ohio, and Sea World of Ohio, a
marine park, is located on the other side of the on-site lake. While Sea World
does, to some extent, compete with Six Flags Ohio, it is a complementary
attraction, and many patrons visit both facilities. In that regard, the Company
and Sea World conduct joint marketing programs in outer market areas,
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involving joint television advertising of combination passes. In addition,
combination tickets are sold at each park.
Six Flags St. Louis
Six Flags St. Louis, the 32nd largest theme park in North America, is a
combination theme and water park located in Eureka, Missouri, about 35 miles
west of St. Louis, Missouri. The St. Louis market provides the park with a
permanent resident population of approximately 2.6 million people within 50
miles and approximately 3.7 million people within 100 miles. The St. Louis
market is the number 21 DMA in the United States.
The Company owns a site of approximately 497 acres of which approximately
132 are used for park operations. Six Flags St. Louis competes with Kings
Island, located near Cincinnati, Ohio, approximately 350 miles from the park;
Worlds of Fun in Kansas City, Missouri, located approximately 250 miles from the
park; Cedar Point, located in Sandusky, Ohio, approximately 515 miles from the
park; Silver Dollar City, located in Branson, Missouri, approximately 250 miles
from the park; and Six Flags Great America, the Company's park located near
Chicago, Illinois, approximately 320 miles from the park.
Frontier City
Frontier City is a western theme park located along Interstate 35 in
northeast Oklahoma City, Oklahoma, approximately 100 miles from Tulsa. The
park's market includes nearly all of Oklahoma and certain parts of Texas and
Kansas, with its primary market in Oklahoma City and Tulsa. This market provides
the park with a permanent resident population base of approximately 1.1 million
people within 50 miles of the park and 2.1 million people within 100 miles. The
Oklahoma City and Tulsa markets are the number 43 and number 58 DMAs in the
United States, respectively
The Company owns a site of approximately 95 acres, with 60 acres currently
used for park operations. Frontier City's only significant competitor is the
Company's Six Flags Over Texas, located in Arlington, Texas, approximately 225
miles from Frontier City.
The Great Escape
The Great Escape, which opened in 1954, is a combination theme and water
park located off Interstate 87 in the Lake George, New York resort area, 180
miles north of New York City and 40 miles north of Albany. The park's primary
market includes the Lake George tourist population and the upstate New York and
western New England resident population. This market provides the park with a
permanent resident population base of approximately 870,000 people within 50
miles of the park and 2.9 million people within 100 miles. According to
information released by local governmental agencies, approximately 8.8 million
tourists visited the Lake George area in 1998. The Albany market is the number
55 DMA in the United States.
The Great Escape is located on a site of approximately 368 acres, with 143
acres currently used for park operations. Approximately 43 of the undeveloped
acres are suitable for park expansion. The Great Escape's only significant
direct competitor is Six Flags New England, the Company's park located in
Springfield, Massachusetts, approximately 150 miles from The Great Escape. In
addition, there is a smaller water park located in Lake George.
Waterworld Parks
The Waterworld Parks consist of two water parks (Waterworld USA/Concord
and Waterworld USA/Sacramento).
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Waterworld USA/Concord is located in Concord, California, in the East Bay
area of San Francisco. The park's primary market includes nearly all of the San
Francisco Bay area. This market provides the park with a permanent resident
population base of approximately 6.4 million people within 50 miles of the park
and 9.8 million people within 100 miles. The San Francisco Bay market is the
number 5 DMA in the United States.
Waterworld USA/Sacramento is located on the grounds of the California
State Fair in Sacramento, California. The facility's primary market includes
Sacramento and the immediate surrounding area. This market provides the park
with a permanent resident population base of approximately 2.7 million people
within 50 miles of the park and 9.8 million people within 100 miles. The
Sacramento market is the number 20 DMA in the United States.
Both facilities are leased under long-term ground leases. The Concord site
includes approximately 21 acres. The Sacramento facility is located on
approximately 14 acres, all of which is used for the park. Concord's only
significant direct competitor is Raging Waters located in San Jose,
approximately 50 miles from that facility. Sacramento's only significant
competitor is Sunsplash located in northeast Sacramento, approximately 20 miles
from that facility.
White Water Bay
White Water Bay is a tropical themed water park situated on approximately
22 acres located along Interstate 40 in southwest Oklahoma City, Oklahoma. The
park's primary market includes the greater Oklahoma City metropolitan area.
Oklahoma City is the number 43 DMA in the United States. This market provides
the park with a permanent resident population base of approximately 1.1 million
people within 50 miles of the park and 2.1 million people within 100 miles.
Wyandot Lake
Wyandot Lake, a water park that also offers "dry" rides, is located just
outside of Columbus, Ohio, adjacent to the Columbus Zoo on property subleased
from the Columbus Zoo. The park's primary market includes the Columbus
metropolitan area and other central Ohio towns. This market provides the park
with a permanent resident population base of approximately 2.0 million people
within 50 miles of the park and approximately 6.4 million people within 100
miles. The Columbus market is the number 34 DMA in the United States. The park
is the 14th largest water park in the United States.
The Company leases from the Columbus Zoo the land, the buildings and
several rides which existed on the property at the time the lease was entered
into in 1983. The current lease expires in 2000, but the Company expects to
exercise the first of its two five-year renewal options. The land leased by
Wyandot Lake consists of approximately 18 acres. The park shares parking
facilities with the Columbus Zoo.
Wyandot Lake's direct competitors are Kings Island, located near
Cincinnati, Ohio, and Cedar Point, located in Sandusky, Ohio. Each of these
parks is located approximately 100 miles from Wyandot Lake. Although the
Columbus Zoo is located adjacent to the park, it is a complementary attraction,
with many patrons visiting both facilities.
Description of International Parks
Six Flags Mexico
In May 1999, the Company acquired Reino Aventura, the largest paid
admission theme park in Mexico. The park is being rebranded as Six Flags Mexico
for the 2000 season in connection with the introduction of the Looney Tunes and
other Warner Bros. licensed characters and a substantial capital
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expansion. The park first opened in 1982 and is located on approximately 107
acres in Mexico City, which are leased on a long-term basis from the Federal
District of Mexico. More than 22 million people live within 50 miles of Six
Flags Mexico. Six Flags Mexico's principal competitors are Chapultepec and
Divertido, both amusement parks located in Mexico City.
Warner Bros. Movie World
In November 1999, the Company acquired Warner Bros. Movie World Germany, a
"Hollywood" themed park located near Dusseldorf Germany. The park offers over
thirty rides, shows and attractions and also contains four studios for film and
television productions. The park is located on approximately 148 acres of land,
most of which is leased on a long-term basis with the balance owned. The Company
estimates that approximately 26 million people live within a 150 mile radius of
the park. The park's principal competitor is Phantasialand Park, located
approximately 50 miles from the park.
The Company has also entered into a joint venture with Warner Bros. to
design, develop and manage a new Warner Bros. Movie World park scheduled to open
in Madrid, Spain in 2002.
Walibi Parks
The Company owns approximately 98.6% of the shares of capital stock of
Walibi, S.A., and expects to acquire in 2000 all remaining shares not currently
owned. Walibi's six parks had combined 1999 attendance of approximately 3.8
million.
The Walibi parks consist of Bellewaerde, Walibi Aquitaine, Walibi Flevo,
Walibi Rhone-Alpes, Walibi Schtroumpf and Walibi Wavre. Walibi Flevo, located
outside Amsterdam, is being rebranded as Six Flags Holland and the Warner
Bros./Looney Tunes characters are being introduced at that park for the 2000
season. The Walibi parks' primary markets include Belgium, The Netherlands,
southwestern France, eastern France and northern France. These markets provide
the Walibi parks with a permanent resident population of 23.0 million people
within 50 miles and 54.5 million people within 100 miles.
The Walibi parks' most significant competitors are Disneyland Paris,
located in France, Meli Park and Bobbeejaanland, each located in Belgium, de
Efteling, located in The Netherlands, and Parc Asterix, located in France.
For additional financial and other information concerning the Company's
international operations, see Note 15 to Notes to Consolidated Financial
Statements.
Marketing and Promotion
The Company attracts visitors through locally oriented multi-media
marketing and promotional programs for each of its parks. These programs are
tailored to address the different characteristics of their respective markets
and to maximize the impact of specific park attractions and product
introductions. All marketing and promotional programs are updated or completely
revamped each year to address new developments. Marketing programs are
supervised by Premier's Senior Vice President for Marketing, with the assistance
of Premier's senior management and in-house marketing staff, as well as its
national advertising agency.
The Company also develops partnership relationships with well-known
national and regional consumer goods companies and retailers to supplement its
advertising efforts and to provide attendance incentives in the form of
discounts and/or premiums. The Company has also arranged for popular local radio
and television programs to be filmed or broadcast live from its parks.
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Group sales and pre-sold tickets provide the Company with a consistent and
stable base of attendance. Each park has a group sales and pre-sold ticket
manager and a well-trained sales staff dedicated to selling multiple group sales
and pre-sold ticket programs through a variety of methods, including direct
mail, telemarketing and personal sales calls.
The Company has also developed effective programs for marketing season
pass tickets. Season pass sales establish a solid attendance base in advance of
the season, thus reducing exposure to inclement weather. Additionally, season
pass holders often bring paying guests and generate "word-of-mouth" advertising
for the parks.
A significant portion of the Company's attendance is attributable to the
sale of discount admission tickets. The Company offers discounts on season and
multi-visit tickets, tickets for specific dates and tickets to affiliated groups
such as businesses, schools and religious, fraternal and similar organizations.
The increased in-park spending which results from such attendance is not offset
by incremental operating expenses, since such expenses are relatively fixed
during the operating season.
The Company also implements promotional programs as a means of targeting
specific market segments and geographic locations not reached through its group
or retail sales efforts. The promotional programs utilize coupons, sweepstakes,
reward incentives and rebates to attract additional visitors. These programs are
implemented through direct mail, telemarketing, direct response media,
sponsorship marketing and targeted multi-media programs. The special promotional
offers are usually for a limited time and offer a reduced admission price or
provide some additional incentive to purchase a ticket, such as combination
tickets with a complementary location.
Licenses
Premier and its subsidiaries, including the Company, have the exclusive
right on a long-term basis to theme park usage of the Warner Bros. and DC comics
animated characters throughout the world except for Asia, Australia, Africa and
the Las Vegas metropolitan area. In addition, the Cartoon Network and
Hanna-Barbera characters are available for use by the Company at theme parks
throughout Europe and Latin and South America. The Company believes that the use
of the Warner Bros. characters adds a new dimension of family entertainment,
helps drive attendance, lengthens visitors' stay in the parks and increases
in-park spending. The Company believes the licensed characters are well known in
its non-U.S. markets.
Park Operations
The Company currently operates in geographically diverse markets in the
United States, Europe and Mexico. Each of the Company's parks is operated to the
extent practicable as a separate operating division of the Premier in order to
maximize local marketing opportunities and to provide flexibility in meeting
local needs. Each park is managed by a general manager who reports to one of
Premier's three Executive Vice Presidents (each of whom reports to the Chief
Operating Officer) and is responsible for all operations and management of the
individual park. Local advertising, ticket sales, community relations and hiring
and training of personnel are the responsibility of individual park management
in coordination with corporate support teams.
Each of the Company's theme parks is managed by a full-time, on-site
management team under the direction of the general manager. Each such management
team includes senior personnel responsible for operations and maintenance,
marketing and promotion, human resources and merchandising. Park management
compensation structures are designed to provide incentives (including stock
options and cash bonuses) for individual park managers to execute the Company's
strategy and to maximize revenues and operating cash flow at each park.
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The Company's parks are generally open daily from Memorial Day through
Labor Day. In addition, most of the Company's parks are open during weekends
prior to and following their daily seasons, primarily as a site for theme events
(such as Hallowscream, Fright Fest and Oktoberfest). Certain of the parks have
longer operating seasons. Typically, the parks charge a basic daily admission
price, which allows unlimited use of all rides and attractions, although in
certain cases special rides and attractions require the payment of an additional
fee.
Capital Improvements
The Company regularly makes capital investments in the implementation of
new rides and attractions at its parks. The Company purchases both new and used
rides. In addition, the Company rotates rides among its parks to provide fresh
attractions. The Company believes that the introduction of new rides is an
important factor in promoting each of the parks in order to achieve market
penetration and encourage longer visits, which lead to increased attendance and
in-park spending. In addition, the Company generally adds theming to acquired
parks and enhances the theming and landscaping of its existing parks in order to
provide a complete family oriented entertainment experience. Capital
expenditures are planned on a seasonal basis with most expenditures made during
the off-season. Expenditures for materials and services associated with
maintaining assets, such as painting and inspecting rides are expensed as
incurred and therefore are not included in capital expenditures.
The Company's level of capital expenditures are directly related to the
optimum mix of rides and attractions given park attendance and market
penetration. These targeted expenditures are intended to drive significant
attendance growth at the parks and to provide an appropriate complement of
entertainment value, depending on the size of a particular market. As an
individual park begins to reach an appropriate attendance penetration for its
market, management generally plans a new ride or attraction every two to four
years in order to enhance the park's entertainment product.
The Company believes that there are ample sources for rides and other
attractions, and the Company is not dependent on any single source. Certain of
these manufacturers are located outside the United States.
Maintenance and Inspection
The Company's rides are inspected daily by maintenance personnel during
the operating season. These inspections include safety checks as well as regular
maintenance and are made through both visual inspection of the ride and test
operation. Senior management of Premier and the individual parks evaluate the
risk aspects of each park's operation. Potential risks to employees and staff as
well as to the public are evaluated. Contingency plans for potential emergency
situations have been developed for each facility. During the off-season,
maintenance personnel examine the rides and repair, refurbish and rebuild them
where necessary. This process includes x-raying and magnafluxing (a further
examination for minute cracks and defects) steel portions of certain rides at
high-stress points. At March 1, 2000, the Company had approximately 1,100
full-time employees who devote substantially all of their time to maintaining
the parks and their rides and attractions.
In addition to the Company's maintenance and inspection procedures, the
Company's liability insurance carrier performs a periodic inspection of each
park and all attractions and related maintenance procedures. The result of
insurance inspections are written evaluation and inspection reports, as well as
written suggestions on various aspects of park operations. Governmental
inspectors in certain jurisdictions also conduct annual ride inspections before
the beginning of each season. Other portions of each park are also subject to
inspections by local fire marshals and health and building department officials.
Furthermore, the Company uses Ellis & Associates as water safety consultants at
its parks in order to train life guards and audit safety procedures.
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Insurance
The Company maintains insurance of the type and in amounts that it
believes are commercially reasonable and that are available to businesses in its
industry. The Company maintains multi-layered general liability policies that
provide for excess liability coverage of up to $100.0 million per occurrence.
With respect to liability claims arising out of occurrences on and after July 1,
1998, there is no self-insured retention by the Company. In addition, with
respect to claims arising out of occurrences prior to July 1, 1998 at the parks
purchased in the Six Flags acquisition, there is no self-insured retention. The
self-insurance portion of claims arising out of occurrences prior to that date
at the Company's other U.S. parks is $50,000. The Company also maintains fire
and extended coverage, workers' compensation, business interruption and other
forms of insurance typical to businesses in its industry. The fire and extended
coverage policies insure the Company's real and personal properties (other than
land) against physical damage resulting from a variety of hazards.
Competition
The Company's parks compete directly with other theme parks, water and
amusement parks and indirectly with all other types of recreational facilities
and forms of entertainment within their market areas, including movies, sports
attractions and vacation travel. Accordingly, the Company's business is and will
continue to be subject to factors affecting the recreation and leisure time
industries generally, such as general economic conditions and changes in
discretionary consumer spending habits. Within each park's regional market area,
the principal factors affecting competition include location, price, the
uniqueness and perceived quality of the rides and attractions in a particular
park, the atmosphere and cleanliness of a park and the quality of its food and
entertainment. The Company believes its parks feature a sufficient variety of
rides and attractions, restaurants, merchandise outlets and family orientation
to enable it to compete effectively.
Seasonality
The operations of the Company are highly seasonal, with more than 90% of
park attendance in 1999 occurring in the second and third calendar quarters and
the most active period falling between Memorial Day and Labor Day. The great
majority of the Company's revenues are collected in the second and third
quarters of each year.
Environmental and Other Regulation
The Company's operations are subject to increasingly stringent federal,
state and local environmental laws and regulations including laws and
regulations governing water discharges, air emissions, soil and groundwater
contamination, the maintenance of underground storage tanks and the disposal of
waste and hazardous materials. In addition, its operations are subject to other
local, state and federal governmental regulations including, without limitation,
labor, health, safety, zoning and land use and minimum wage regulations
applicable to theme park operations, and local and state regulations applicable
to restaurant operations at the park. The Company believes that it is in
substantial compliance with applicable environmental and other laws and
regulations and, although no assurance can be given, it does not foresee the
need for any significant expenditures in this area in the near future.
In addition, portions of the undeveloped areas at some parks are
classified as wetlands. Accordingly, the Company may need to obtain governmental
permits and other approvals prior to conducting development activities that
affect these areas, and future development may be limited in some or all of
these areas.
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Employees
At March 1, 2000, the Company employed approximately 3,700 full-time
employees, and the Company employed over 34,000 seasonal employees during the
1999 operating season. In this regard, the Company competes with other local
employers for qualified student and other candidates on a season-by-season
basis. As part of the seasonal employment program, the Company employs a
significant number of teenagers, which subjects the Company to child labor laws.
Approximately 8.3% of the Company's full-time and approximately 4.9% of
its seasonal employees are subject to labor agreements with local chapters of
national unions. These labor agreements expire in December 2002 (Six Flags
Great Adventure) and January 2003 (Six Flags St. Louis). The Company has not
experienced any strikes or work stoppages by its employees, and the Company
considers its employee relations to be good.
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