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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
October 26, 2016
Six Flags Entertainment Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
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1-13703
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13-3995059
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(Commission File Number)
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(IRS Employer Identification No.)
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924 Avenue J East
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Grand Prairie, Texas
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75050
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(Address of Principal Executive Offices)
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(Zip Code)
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(972) 595-5000
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (
see
General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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The Six Flags Entertainment Corporaiton (the "Company") has established a program (the “Project 750 Program”) pursuant to which executive officers and other employees may be issued awards (a “Project 750 Award”) under the Six Flags Entertainment Corporation Long-Term Incentive Plan (the “Long-Term Incentive Plan”). The Project 750 Program sets an aspirational goal of attaining $750 million of Modified EBITDA (as defined in the Company’s financial statements) by 2020 and the number and timing of any issuances of common stock under the Project 750 Program will depend on progress toward the $750 million target and the timing thereof. The Project 750 Awards also provide for the grant of dividend equivalent rights equal in value equal to any dividends on the common stock from the award issuance date through the date shares, if any, are issued under the Project 750 Award. The aggregate share payout under the Project 750 Program if the $750 million target is achieved in 2020 would be 900,000 shares (not including dividend equivalent rights) but could be more or fewer shares depending on achievement and the timing thereof. The issuance date of any shares pursuant to Project 750 Awards will be after the end of the year in which the performance target is achieved. Exhibit 10.1 attached hereto sets forth the base number of shares under the Project 750 Program that each of the Company’s executive officers would receive assuming the $750 million of Modified EBITDA target is achieved in 2020. The above summary of the material terms of the Project 750 Program does not purport to be complete and is qualified in its entirety by reference to the Project 750 Program Overview and the Form of Project 750 Program Award Agreement, copies of which are filed as Exhibit 10.2 and Exhibit 10.3, respectively, to this Current Report on Form 8-K and incorporated by reference herein as well as the Long-Term Incentive Plan which was filed as Appendix A to the Company's Definitive Proxy Statement filed on March 20, 2012, which is incorporated by reference herein.
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Item 9.01
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Financial Statements and Exhibits
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10.1
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List of Project 750 Awards to Executive Officers
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10.2
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Project 750 Program Overview
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10.3
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Form of Project 750 Program Award Agreement
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99.1
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Press Release of Six Flags Entertainment Corporation, dated October 26, 2016
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SIX FLAGS ENTERTAINMENT CORPORATION
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By:
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/s/ Lance C. Balk
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Name:
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Lance C. Balk
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Title:
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Executive Vice President and General
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Counsel
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Date: October 28, 2016
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EXHIBIT INDEX
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Exhibit No.
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Description
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10.1
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List of Project 750 Awards to Executive Officers
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10.2
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Project 750 Program Overview
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10.3
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Form of Project 750 Program Award Agreement
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99.1
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Press Release of Six Flags Entertainment Corporation, dated October 26, 2016
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Exhibit 10.1
List of Project 750 Awards to Executive Officers
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Executive Officer
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Base Number
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Lance C. Balk
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17,500
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Marshall Barber
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37,500
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Mario Centola
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8,500
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John M. Duffey
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150,000
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Walter S. Hawrylak
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16,000
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Brett Petit
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16,000
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Exhibit 10.2
Project 750 Program Overview
PROJECT 750 AWARDS UNDER
SIX FLAGS ENTERTAINMENT CORPORATION
LONG-TERM INCENTIVE PLAN
The objective of the Project 750 Awards under the Six Flags Entertainment Corporation Long-Term Incentive Plan ("Project 750 Awards") is to provide management and other key employees with an equity incentive to achieve $750 million of Modified EBITDA in a calendar year (the “EBITDA Target”) by December 31, 2020. The Project 750 Awards also provide for the grant of dividend equivalent rights equal in value equal to any dividends on the common stock from the award issuance date through the date shares, if any, are issued under the Project 750 Award. An aggregate of 900,000 shares (not including dividend equivalent rights) would be issued if the EBITDA Target is achieved in calendar 2020, to the extent provided in the applicable Project 750 Award agreement.
The Project 750 Awards provide management with incentive to reach the EBITDA Target earlier by providing: (a) a 15% early achievement bonus (1,035,000 total shares) if the EBITDA Target is met for calendar year 2019 and (b) a 35% early achievement bonus (1,215,000 total shares) if the EBITDA Target is met for calendar years 2017 or 2018, all to the extent provided in the applicable Project 750 Award agreement. If the EBITDA Target is met for the first time in calendar year 2021 and there has been no early achievement bonus or partial achievement award (as described in the Project 750 Award agreement), the number of shares awarded to each participant will be equal to 50% of the base award.
A minimum achievement hurdle of $725 million applies and any overperformance above $725 million would be credited to the immediately subsequent calendar year.
The terms and conditions of the Project 750 Awards are set forth in a separate Project 750 Award agreement that shall apply in the event of any conflict with this Project 750 Program Overview.
Exhibit 10.3
Form of Project 750 Program Award Agreement
PERFORMANCE AWARD UNDER
SIX FLAGS ENTERTAINMENT CORPORATION
LONG-TERM INCENTIVE PLAN
Award
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Eligibility
: On the terms set forth below, Participant will be granted a Project 750 Award on the Grant Date after the Company achieves $750 million of Modified EBITDA in the 2017, 2018, 2019, 2020 or 2021 calendar year (“
Target EBITDA
”) provided such Participant (i) must be employed by the Company or an Affiliate on the first day of the calendar year immediately following the calendar year during which such Target EBITDA is achieved or (ii) must be employed by the Company or an Affiliate on the Project 750 Change in Control, as defined below (“
Project 750 Change in Control
”) or have had such employment terminated in anticipation of the Project 750 Change in Control.
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Target Award
: The number of Shares included in the Participant’s Project 750 Award if the Target EBITDA is achieved for the first time in calendar year 2020 and there has been no Early Achievement Award or Partial Achievement Award will be equal to _________Shares (“
Target Award
”). The number of Shares included in the Participant’s Project 750 Award if the Target EBITDA is achieved for the first time in calendar year 2021 and there has been no Early Achievement Award or Partial Achievement Award will be equal to 50% of the Target Award.
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Early Achievement Awards
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- 2017:
If Target EBITDA is achieved in calendar year 2017, then the Target Award is increased by 35% and a grant of _________
[135% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
- 2018:
If Target EBITDA is achieved in calendar year 2018 and there was no 2017 Partial Achievement Award, then the Target Award is increased by 35% and a grant of _________
[135% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
- 2019:
If Target EBITDA is achieved in calendar year 2019 and there was no 2017 Partial Achievement Award or 2018 Partial Achievement Award, then the Target Award is increased by 15% and a grant of _________
[115% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
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Partial Achievement Awards
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- 2017:
If $725 million of Modified EBITDA but not Target EBITDA is achieved in calendar year 2017, a grant of _________
[75% x 135% x Target Award]
Shares (“
2017 Partial Achievement Award
”)
will be made on the Grant Date.
The excess by which the Modified EBITDA for calendar year 2017 exceeds $725 million is referred to as “
Excess 2017 Modified EBITDA
”.
- 2018:
If no 2017 Partial Achievement Award was earned, then if $725 million of Modified EBITDA but not Target EBITDA is achieved in calendar year 2018, a grant of _________
[75% x 135% x Target Award]
Shares (“
2018 Partial Achievement Award
”)
will be made on the Grant Date.
The excess by which the Modified EBITDA for calendar year 2018 exceeds $725 million is referred to as “
Excess 2018 Modified EBITDA
”.
- 2019:
A “
2019 Partial Achievement Award
”
is:
If no 2017 Partial Achievement Award or 2018 Partial Achievement Award was earned, then if $725 million of Modified EBITDA but not Target EBITDA is achieved in calendar year 2019, a grant of _________
[75% x 115% x Target Award]
Shares will be made on the Grant Date.
If a 2017 Partial Achievement Award or a 2018 Partial Achievement Award was earned, then if Modified EBITDA in calendar year 2019 equals or exceeds (i) $725 million less (ii) the Excess 2017 Modified EBITDA or the Excess 2018 Modified EBITDA (as the case may be for the year of the Partial Achievement Award), a grant of _________
[25% x 115% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
The excess by which the Modified EBITDA for calendar year 2019 exceeds $725 million is referred to as “
Excess 2019 Modified EBITDA
”.
- 2020:
A “
2020 Partial Achievement Award
”
is:
If none of a 2017 Partial Achievement Award, a 2018 Partial Achievement Award or a 2019 Partial Achievement Award was earned, then if the Modified EBITDA in calendar year 2020 equals or exceeds $725 million of Modified EBITDA but Target EBITDA is not achieved in calendar year 2020, a grant of _________
[75% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
If a 2019 Partial Achievement Award was earned but no 2017 Partial Achievement Award or 2018 Partial Achievement Award was earned, then if Modified EBITDA in calendar year 2020 equals or exceeds (i) $725 million less (ii) the Excess 2019 Modified EBITDA, a grant of _________
[25% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
If a 2018 Partial Achievement Award was earned but no 2017 Partial Achievement Award or 2019 Partial Achievement Award was earned, then if Modified EBITDA in calendar year 2020 equals or exceeds (i) $725 million less (ii) the Excess 2018 Modified EBITDA, a grant of _________
[25% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
If a 2017 Partial Achievement Award was earned but no 2018 Partial Achievement Award or 2019 Partial Achievement Award was earned, then if Modified EBITDA in calendar year 2020 equals or exceeds (i) $725 million less (ii) the Excess 2017 Modified EBITDA, a grant of _________
[25% x Target Award]
Shares will be made on the Grant Date. No additional grants of Shares under this Performance Award would be made.
Grant Date
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The grant date of any Project 750 Award will be the date of the Compensation Committee’s certification of the achievement of the Modified EBITDA required for the applicable Target Award, Early Achievement Award or Partial Achievement Award after completion of the Audit Committee’s review of the Company’s audited financial statements for the applicable calendar year. Such certification and grant shall occur during the calendar year following the calendar year during which the requisite Modified EBITDA was achieved. To receive a grant of Shares under the Project 750 Award based on Modified EBITDA for 2017, 2018, 2019, 2020 or 2021 (but not based on the Project 750 Change in Control Date, as defined below), the Company must have a profit for at least one of the 2017, 2018, 2019, 2020 or 2021 calendar years. To receive any grant of Shares under the Project 750 Award, unless otherwise determined by the Compensation Committee, the Participant (i) must be employed by the Company or an Affiliate on the first day of the calendar year immediately following the calendar year during which the requisite Modified EBITDA was achieved or (ii) must be employed by the Company or an Affiliate on the Project 750 Change in Control Date, or have had such employment terminated in anticipation of a Project 750 Change in Control Date.
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Project 750
Change in Control
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Upon a Project 750 Change in Control, Participant shall earn the number of Shares Participant would have earned if the Target EBITDA had been earned in the calendar year of the Project 750 Change in Control; provided, however, for purposes of calculating an Early Achievement Award, unless the Target EBITDA had already been achieved in the calendar year of the Project 750 Change in Control prior to such Project 750 Change in Control, only the Target Award shall be earned as an Early Achievement Award upon a Project 750 Change in Control. In addition, in the event of a significant transaction not expressly covered by the definition of Project 750 Change in Control, the Board shall, in its discretion, make appropriate awards and/or adjustments to award criteria to reflect any such transaction. For purposes of this Project 750 Award, Project 750 Change in Control has the same meaning as the definition of Change in Control set forth in the Long-Term Incentive Plan.
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Modified
EBITDA
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Modified EBITDA has the meaning contained in the notes to the financial statements filed with the Company’s quarterly earnings releases, subject to potential adjustments by the Compensation Committee as set forth in the following sentence. In the event of acquisitions, dispositions, extraordinary or other unusual or one-time transactions and other events set forth in Section 9(d)(ii) of the Long-Term Incentive Plan, the Compensation Committee, in consultation with the Audit Committee, shall equitably adjust the applicable Modified EBITDA level(s) necessary to earn an Early Achievement Award, Partial Achievement Award and Target Award.
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Other
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Whether a Partial Achievement Award is earned for any calendar year shall be determined prior to whether a Target Award or Early Achievement Award is earned for such calendar year. The Target Award may be earned only if no Partial Achievement Award or Early Achievement Award was earned in any calendar year. For the sake of clarity, if (i) the Target EBITDA has been achieved in any of 2017, 2018 or 2019, no additional grants of Shares under this Performance Award would be made after such Early Achievement Award, (ii) there has been a 2017 Partial Achievement Award, the number of Shares that will be issued upon achievement of the Target EBITDA in 2018 shall be determined pursuant to the rules applicable to 2018 Partial Achievement Awards, (iii) there has been a 2017 Partial Achievement Award or a 2018 Partial Achievement Award, the number of Shares that will be issued upon achievement of Target EBITDA in 2019 shall be determined pursuant to the number applicable to 2019 Partial Achievement Awards, (iv) a 2019 Partial Achievement Award is earned but no 2020 Partial Achievement Award is earned, no additional grants of Shares under this Performance Award would be made after such 2019 Partial Achievement Award, or (v) a 2020 Partial Achievement Award is earned, no additional grants of Shares under this Performance Award would be made after such 2020 Partial Achievement Award.
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In the event of any extraordinary transaction following the date of this Performance Award and prior to the last possible issuance of any Shares, the Compensation Committee shall equitably adjust the Performance Award as it deems appropriate to preserve the value of the Performance Award to the Participant and the intended purpose of the Performance Award; provided that, notwithstanding anything to the contrary contained herein, in the event of a Project 750 Change in Control or other extraordinary transaction, the Compensation Committee may terminate and cancel this Performance Award by payment of cash in an amount equal to the Fair Market Value of Shares that would have been paid upon a Project 750 Change in Control.
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The terms of this Performance Award supersede any applicable employment or other agreement provision which might be construed to vary the terms set forth in this Performance Award or otherwise entitle the Participant to a Target Award, Early Achievement Award or Partial Achievement Award other than on the terms set forth in this Performance Award and the Participant waives any such provision as a condition to receiving this Performance Award.
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Dividend
Equivalent
Rights
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Grant
: In addition to the Shares that may be granted in accordance with the preceding provisions (“
Project 750 Performance Award
”), the Company hereby grants to Participant Dividend Equivalent Rights equal in number to the number of Shares that will be granted to Participant under the Project 750 Performance Award (including, without limitation, for any early or partial achievement). Each Dividend Equivalent Right entitles the Participant to a payment in Shares as specified below equal to the cash dividends declared on a Share on or after _________ (“
DER Grant Date
”) through the date of grant of the Project 750 Performance Award, subject to the terms and conditions set forth in this Performance Award and in the Long-Term Incentive Plan.
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Vesting
: No distributions with respect to Dividend Equivalent Rights shall be made unless and until such Dividend Equivalent Rights shall have become vested. Dividend Equivalent Rights shall vest on the dates Shares under the Project 750 Performance Award are granted (each, a “
Vesting Date
”).
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Expiration
: Unless earlier terminated in accordance with the terms and provisions of the Plan or this Award and without limitation on the distributions specified below with respect to vested Dividend Equivalent Rights, a Dividend Equivalent Right shall expire and be cancelled immediately following the earlier of (a) vesting of the Dividend Equivalent Right or (b) forfeiture or cancellation of the Project 750 Performance Award.
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Distributions
: Upon the vesting of Dividend Equivalent Rights, the Participant will be entitled to and promptly (and in no event later than 30 days after such vesting) receive a number of Shares equal to:
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(a)
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the sum of all dividends declared and paid on a Share with a record date from the DER Grant Date through, and including, the Vesting Date multiplied by the number of Dividend Equivalent Rights vesting on such Vesting Date, divided by
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(b)
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the fair market value of a Share on such Vesting Date.
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To the extent that on the Vesting Date, dividends were declared but not yet paid on a Share, the Participant will be entitled to and promptly (and in no event later than 30 days after such payment date) receive a number of Shares equal to:
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(a)
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all such dividends declared on a Share with a record date from the DER Grant Date through and including the Vesting Date but not paid until after the Vesting Date multiplied by the number of Dividend Equivalent Rights that vested on such Vesting Date, divided by
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(b)
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the fair market value of a Share on the date such dividends are paid to stockholders of the Company.
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Notwithstanding the foregoing, no fractional Shares shall be issued; the calculation of Shares to be delivered shall be rounded down to the next lowest whole number and the value of any fractional Share shall be distributed to the Participant in cash.
Terms
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The Project 750 Performance Award and the Dividend Equivalent Rights are subject to the terms and conditions of the Long-Term Incentive Plan (except as modified herein). All terms not otherwise defined in this Award have the meaning assigned to them in the Long-Term Incentive Plan.
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Exhibit 99.1
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FOR IMMEDIATE RELEASE:
Investor Relations Contacts:
Nancy Krejsa
+1-972-595-5083
nkrejsa@sftp.com
Stephen Purtell
+1-972-595-5180
spurtell@sftp.com
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New Long-Term Aspirational Goal Set by Six Flags
Company Targets $750 Million of Modified EBITDA
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by 2020
GRAND PRAIRIE, Texas — October 26, 2016 —
Six Flags Entertainment Corporation (NYSE: SIX), the world’s largest regional theme park company, today announced a new long-term financial target, which is an aspirational goal of achieving $750 million of Modified EBITDA
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by calendar year 2020.
“Based on our consistent earnings growth and business momentum, we have established a new long-term aspirational target. We believe it is important for both investors and our employees to keep their eyes set on long-term stretch goals, while continuing to deliver strong results in the near-term,” said John Duffey, President and CEO. “Our new Project 750 target will be achieved by focusing on the same key factors that drove our earnings growth over the last six years-further increasing ticket yields, growing our attendance base, increasing the penetration of our all-season dining program and developing additional international licensing opportunities.”
Six Flags’ previous long-term aspirational targets have helped the company achieve the following milestones:
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A 780 percent return on investment for our shareholders since May 2010 as compared to a 115 percent return for the S&P 500;
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A $4 billion increase in the company’s market capitalization from May 2010 to present, along with nearly $1 billion in dividends paid over the same time period;
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Record financial performance every year from 2010 to 2015;
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Increase in Adjusted EBITDA
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less capital expenditures from $99 million in 2009 to $369 million on a trailing twelve-month basis as of September 30, 2016
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a gain of $270 million; and
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Industry-leading Modified EBITDA and Modified EBITDA less capital expenditures margins of 41 percent and 31 percent, respectively.
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The announcement comes as the company has recognized the probable achievement of Project 600, the long-term incentive compensation program established by the company in October 2014.
About Six Flags Entertainment Corporation
Six Flags Entertainment Corporation is the world’s largest regional theme park company with $1.3 billion in revenue and 18 parks across the United States, Mexico and Canada. For 55 years, Six Flags has entertained millions of families with world-class coasters, themed rides, thrilling water parks and unique attractions. For more information, visit
www.sixflags.com
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Forward Looking Statements
The information contained in this release, other than historical information, consists of forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, among others, (i) the adequacy of cash flows from operations, available cash and available amounts under our credit facilities to meet our future liquidity needs, (ii) our ability to roll out our capital enhancements in a timely and cost effective manner, (iii) our ability to improve operating results by implementing strategic cost reductions, and organizational and personnel changes without adversely affecting our business, (iv) our operations and results of operations, and (v) the risk factors or uncertainties listed from time to time in the company’s filings with the Securities and Exchange Commission ("SEC"). In addition, important factors, including factors impacting attendance, such as local conditions, contagious diseases, events, disturbances and terrorist activities; recall of food, toys and other retail products sold at our parks; risk of accidents occurring at the company’s parks or other parks in the industry and adverse publicity concerning our parks or
other parks in the industry; inability to achieve desired improvements and financial performance targets set forth in our aspirational goals; adverse weather conditions such as excess heat or cold, rain and storms; general financial and credit market conditions; economic conditions (including customer spending patterns); changes in public and consumer tastes; construction delays in capital improvements or ride downtime; competition with other theme parks and other entertainment alternatives; dependence on a seasonal workforce; unionization activities and labor disputes; laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, and healthcare reform; pending, threatened or future legal proceedings and the significant expenses associated with litigation; cyber security risks and other factors could cause actual results to differ materially from the company’s expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will be realized and actual results could vary materially. Reference is made to a more complete discussion of forward-looking statements and applicable risks contained under the captions "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in the company’s Annual and Quarterly Reports on Forms 10-K and 10-Q, and its other filings and submissions with the SEC, each of which are available free of charge on the company’s investor relations website at
www.sixflags.com/investors
and on the SEC’s website at
www.sec.gov
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Footnotes
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1)
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“Modified EBITDA”, a non-GAAP measure, is defined as our consolidated income (loss) from continuing operations: excluding the cumulative effect of changes in accounting principles, discontinued operations gains or losses, income tax expense or benefit, restructure costs or recoveries, reorganization items (net), other income or expense, gain or loss on early extinguishment of debt, equity in income or loss of investees, interest expense (net), gain or loss on disposal of assets, gain or loss on the sale of investees, amortization, depreciation, stock-based compensation, and fresh start accounting valuation adjustments. Modified EBITDA as defined herein may differ from similarly titled measures presented by other companies.
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2)
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"Adjusted EBITDA", a non-GAAP measure, is defined as Modified EBITDA minus the interests of third parties in the Adjusted EBITDA of properties that are less than wholly owned (consisting of Six Flags Over Georgia, Six Flags White Water Atlanta and Six Flags Over Texas). Adjusted EBITDA is approximately equal to “Parent Consolidated Adjusted EBITDA” as defined in our secured credit agreement, except that Parent Consolidated Adjusted EBITDA excludes Adjusted EBITDA from equity investees that is not distributed to us in cash on a net basis and has limitations on the amounts of certain expenses that are excluded from the calculation. Adjusted EBITDA as defined herein may differ from similarly titled measures presented by other companies. Our board of directors and management use Adjusted EBITDA to measure our performance and our current management incentive compensation plans are based largely on Adjusted EBITDA. We believe that Adjusted EBITDA is frequently used by all our sell-side analysts and most investors as their primary measure of our performance in the evaluation of companies in our industry. In addition, the instruments governing our indebtedness use Adjusted EBITDA to measure our compliance with certain covenants and, in certain circumstances, our ability to make certain borrowings Adjusted EBITDA, as computed by us, may not be comparable to similar metrics used by other companies in our industry.
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