Premier Parks, Inc.

views updated

Premier Parks, Inc.

11501 Northeast Expressway
Oklahoma City, Oklahoma 73131
U.S.A.
(405) 475-2500
Fax: (405) 475-2555
Web site: http://www.sixflags.com

Public Company
Incorporated: 1994
Employees: 11,142
Sales: $193.9 million (1997)
Stock Exchanges: New York
Ticker Symbol: PKS
SICs: 7796 Amusement Parks

With its 1998 acquisition of Six Flags, Premier Parks, Inc. became the world’s largest regional theme park and the second leading amusement park operation in the United States, Walt Disney being the first. The Oklahoma City-based company runs 31 family-oriented theme parks in the United States and Europe. Premier estimates that up to 90 percent of the country’s population lives within a day’s drive of one of its 17 Six Flags parks. Premier is renowned for buying struggling parks and turning them around with expansion and aggressive marketing strategies that target families. Premier’s parks feature thrill rides, such as the 70 mph Mr. Freeze roller coaster, animal attractions, upscale restaurants, shows, merchandise outlets, elaborate picnic areas and kiddie attractions, and water slides. Premier amusement parks host about 40 million guests a year, and the average Six Flags visitor spends $30 to $35 at a park, including admission.

Humble Beginnings

Premier Parks originally operated as the Tierco Group, Inc., an Oklahoma-based real estate company. The company purchased the sleepy Frontier City theme park in Oklahoma City in 1982 for $1.2 million. Tierco had no intention of entering into the amusement park business, however. Company officials described Frontier City as “beat up” and “run down” they planned to demolish the park, subdivide the land, and build a shopping center. However, given the economic downturns prompted by an oil bust in Oklahoma, developers lost interest in the idea of converting the park into a shopping center. So in 1984 Tierco hired Gary Story as general manager of Frontier City and sunk about $39 million into improving the park.

Story began his career in the amusement park business when he was 16, when he was employed to sweep park streets at St. Louis Six Rags. After ten years of service in various capacities there, including that of manager of attractions, Story worked for amusement parks in Mexico and in Australia. As the new manager of Frontier City, he would quadruple that park’s attendance and revenues. Under his leadership, two new rides and a petting zoo were added to the park along with a new ticket booth, sales office, and improved food service.

In 1988, Tierco shifted its strategic direction from real estate to amusement parks. It sold much of its property during this time, which generated capital to reinvest in Frontier City. Once this reinvestment paid off in terms of increased business and profits, more capital became available, which meant further growth. Tierco purchased Oklahoma City’s White Water water-park in 1991 (the name later being changed to White Water Bay). The company realized the key to boosting a park’s attendance was to add new and exciting rides and make it more attractive to families. It converted White Water’s old gang slide into a dual racing slide where two two-passenger boats raced against each other and the clock. New picnic areas were added, one with a beachcomber theme, and the activity pool was converted into a pirate’s cove. Eventually, Tierco added the Blue Marlin Grill, an upscale sit-down restaurant.

Tierco acquired the financially troubled Wild World in Largo, Maryland, in 1992 and later changed that park’s name to Adventure World. With a $500,000 investment, Tierco expanded Wild World’s kiddie section and remodeled its buildings to give the park a tropical look and feel. Story was promoted to executive vice-president after the purchase of Wild World. In 1994, he was promoted again to president and chief operating officer (COO).

Since Tierco was on its way to becoming a “premier” regional theme park operator, in 1994 it changed its name to Premier Parks, Inc. Kieran E. Burke, chairman and chief executive officer (CEO), noted that the new name signified the beginning of a new era for the company. “We hope to acquire several more parks in the next few years and perhaps expand into other areas of the entertainment business,” Burke said in a December 12, 1994 article in Amusement Business.

A Decade of Growth

During the next few years, Premier picked up speed. The company acquired the following three parks in 1995 from Fun-time Parks, Inc.: Geauga Lake in Cleveland, Ohio; Wyandot Lake in Columbus, Ohio; and Darien Lake, near Buffalo, New York. In 1996 Premier added the following parks to its portfolio: Elitch Gardens in Denver, Colorado; Waterworld USA waterparks in Sacramento and Concord, California; and Great Escape and Splashwater Kingdom at Lake George, New York.

Premier went public in 1996 and raised nearly $70 million through an initial offering at $18 a share. The company planned to use the money to expand its ten parks and acquire new ones. In 1997, Premier purchased Riverside Park, near Boston; Kentucky Kingdom, in Louisville, Kentucky; and Marine World, near San Francisco. A second public offering at $29 a share raised an additional two million dollars. Nearly 8.8 million people visited Premier’s parks in 1996, making it the second largest chain in the world by attendance.

Burke explained the company’s success in the February 24, 1997 issue of Amusement Business: “We built a strong base with Frontier City in the 1980s, and based on that, we were able to raise $50 million in private equity to acquire our first three parks.” Burke said that the success of Premier’s first three parks propelled it into its public offering, which raised the capital the company needed to purchase the additional parks.

In December 1997, Premier entered a definitive agreement to purchase Walibi Family Parks in Europe. Walibi owned three parks in France, two in Belgium, and one in the Netherlands. The transaction was valued at $140 million for all six parks. After the acquisition of the Walibi parks, Premier controlled 20 parks with a combined 1997 attendance of approximately 14.5 million and became the third largest regional theme park in the world.

The 1998 Purchase of Six Flags

In 1998 Premier purchased the 12-park Six Flags chain from Times Warner and Boston Ventures. The $1.9 billion purchase was the largest acquisition in amusement park history. Forty-nine percent of Six Flags was owned by Times Warner and 51 percent by Boston Ventures, a private investment firm. Premier agreed to assume a daunting $890 million in debt to purchase the parks. Amusement park officials were stunned by the purchase and referred to Premier’s move as “bold” and “gutsy.” Some worried Premier had grown too large too fast and wondered whether the company could generate enough profits to cover its debt.

With the Six Flags parks in its possession, Premier was the largest regional theme park chain in the world and the second largest amusement park operator in the United States. The acquisition was considered second in industry importance only to the opening of Disneyland in 1955, an event that redefined the future of the amusement park industry. Premier’s attendance base was nearly 40 million in 1997—Disney’s was 86 million.

As part of the Six Flags transaction, Premier received a long-term licensing agreement giving it exclusive theme park rights in the United States and Canada for all Warner Brothers and DC comics animated cartoons and comic book characters, including Bugs Bunny, Batman, Superman, Daffy Duck, and the Looney Toons characters. The company also owned the worldwide rights to the Six Flags moniker—the most recognized theme park brand name in the world next to Disney. Premier officials felt the Six Flags name was the common thread that would unite all of its parks together. Premier converted Kentucky Kingdom to a Six Flags park in June 1998, as well as four more parks in 1999: Six Flags Marine World, Six Flags Elitch Gardens, Six Flags Darien Lake, and Six Flags America, formerly Adventure World. Any park without Six Flags as part of its name was designated “Six Flags Properties.” The company hoped to covert more parks to Six Flags in the future.’ ’It has been proven that the addition of the Six Flags name helps grow business,” Story told Amusement Business in November 1998. Management decided to keep Premier Parks as the company’s legal name, however, and to trade the company’s stocks under Premier Parks (PKS) on the New York Stock Exchange.

Although Premier’s value was rocketing skyward, its journey was not without a few twists and turns. A few months after the purchase of Six Flags, rumors spread that the company’s cash flow for the parks was below expectations, and Premier’s stock tumbled 35 percent. Premier executives referred to the stock drop as a “huge overreaction” and pointed out that the original 13 Premier Parks were exceeding expectations. They claimed that the problems with the Six Flags Parks were a result of missteps made by previous management. Prior to its acquisition by Premier, Six Flags had started to languish as part of a conglomerate. According to the 1997 year-end issue of Amusement Business, only two of the nine Six Flags amusement parks had an attendance increase from 1996. Premier believed that a lack of capital growth had stagnated Six Flags and the company had mistakenly targeted most of its advertising toward teens when it should have focused on families. “We know in this business, mothers tend to be the gatekeepers for seven out often of our visitors,” Story said in an article in the Fort Worth Star-Telegram. In response, Premier redesigned the Six Flags marketing strategy so that its ads also targeted women aged 18 to 49.

Company Perspectives:

Premier Parks’ mission is to be the very best theme park company in the world by focusing our attention on our guests’ experiences and striving to create family fun and fond memories.

To remedy the troubles at Six Flags, Premier planned to cut costs and expand and improve its new parks. The company shut down Six Flags’ Parsippany, New Jersey, headquarters, eliminating 450 full-time positions. Premier has only 35 employees at the corporate level, most of them at its headquarters in Oklahoma City. Known as a lean corporation with a risk-taking mentality, Premier’s small but efficient corporate staff believed that the company’s trim managerial structure, with only a few levels of management, helped streamline communication between upper management and consumers. Premier also cut staff at the park level. Since amusement parks are seasonal, management did not see the need for a large, year-round staff.

In 1999, Premier announced that it was going to invest $200 million in improvements for its 25 domestic parks. Some of the beneficiaries included Six Flags Great Adventure in Jackson, New Jersey; Six Flags Fiesta Texas in San Antonio, Texas; Six Flags St. Louis; and Six Flags Over Texas in Dallas. The largest expansions took place at Six Flags Great Adventure. Its $42 million in renovations there represented the largest single-year investment ever made at the park. The addition of 25 new rides increased the number of rides at the park by 50 percent. “We declare war on lines. Our guests will have more rides to ride and, with the increased capacity, they will be able to more fully enjoy the Park’s extensive entertainment presentation. The scope of the overall expansion is nothing short of spectacular,” Burke commented in a 1999 press release. Premier unveiled “Medusa, the world’s first “floorless” roller coaster, at Six Flags Great Adventure in 1999. The high-intensity thrill attraction was a giant “supercoaster” that plunged through twists, turns, and sudden drops at over 60 mph. Unlike traditional roller coasters in which passengers ride above or below the track, riders on Medusa were suspended between tracks with nothing above or below them. With the addition of Medusa, Six Flags Great Adventure had 13 roller coasters, more than any other park on the East Coast.

Hurricane Harbor, in Fort Worth, Texas, also underwent substantial renovations to create a haven for families at the park. Premier spent $3 million on a massive interactive play area and a Caribbean-themed area in the largest capital investment ever at the park. The main addition for 1999 was Hook’s Lagoon. The 40,000 square-foot attraction included a pirate shop, three pools, and a five-story “treehouse.”

As the century drew to a close, executives at Premier were confident that the company was back on track. Premier stock ended 1998 with a 49 percent gain. Premier officials claimed that, even if the company never acquired another park, its internal growth would completely satisfy its stockholders. While Premier has grown into a world-class corporation, Story insisted the company had no intention of relocating its Oklahoma headquarters: “It’s where we started. We have a great team of people from Oklahoma. It’s a great community with a high quality of life.... There’s no reason to contemplate going anywhere else,” he said, adding “I call Oklahoma the best kept secret in America.”

Principal Divisions

Six Flags America; Six Flags Astro World and Waterworld; Six Flags Darien Lake; Six Flags Elitch Gardens; Six Flags Fiesta Texas; Six Flags Great Adventure; Six Flags Great America; Six Flags Kentucky Kingdom; Six Flags Magic Mountain and Hurricane Harbor; Six Flags Marine World; Six Flags Over Georgia; Six Flags Over Texas and Hurricane Harbor; Six Flags St. Louis; Frontier City Theme Park and White Water Bay; Geauga Lake Amusement Park; The Great Escape and Splash-water Kingdom; Riverside Theme Park; Waterworld USA; Wyandot Lake Adventure Park; Walibi Group (Belgium; France; The Netherlands).