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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

Commission file number: 1-13703

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

(Exact Name of Registrant as Specified in Its Charter)

1540 Broadway, 15th Fl., New York, NY 10036

(Address of Principal Executive Offices, Including Zip Code)

(212) 652-9403

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  At November 1, 2009, Six Flags, Inc. had 98,330,013 outstanding shares of common stock, par value $0.025 per share.

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

FORM 10-Q

INDEX

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document and the documents incorporated herein by reference contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.  Examples of forward-looking statements include, but are not limited to, our ability to successfully consummate a restructuring plan.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.  Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.  Our actual results may differ materially from those contemplated by the forward-looking statements.  We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.  These risks and uncertainties include, but are not limited to, statements we make regarding: (i) our ability to develop, prosecute, confirm and consummate one or more Chapter 11 plans of reorganization (See “Chapter 11 Reorganization” herein), (ii) the potential adverse impact of the Chapter 11 filing on our global operations, management and employees, (iii) risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for us to propose and confirm a plan of reorganization, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases, (iv) customer response to the Chapter 11 filing, (v) the adequacy of cash flows from operations, available cash and available amounts under our credit facilities to meet our future liquidity needs, or (vi) our continued viability, our operations and results of operations.  Additional important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and include the following:

·                  factors impacting attendance, such as local conditions, contagious diseases, events, disturbances and terrorist activities;

·                  accidents occurring at our parks;

·                  adverse weather conditions;

·                  competition with other theme parks and other entertainment alternatives;

·                  changes in consumer spending patterns;

·                  pending, threatened or future legal proceedings; and

·                  other factors that are described in “Risk Factors,” or are included with the Company’s filings with the United States Bankruptcy Court for the District of Delaware.

A more complete discussion of these factors and other risks applicable to our business is contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008 (the “2008 Annual Report”), our Current Reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 7, 2009 and July 23, 2009 and our Quarterly Report on Form 10-Q filed with the SEC on August 14, 2009.

Any forward-looking statement made by us in this document, or on our behalf by our directors, officers or employees related to the information contained herein, speaks only as of the date of this Quarterly Report on Form 10-Q.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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Available Information

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, if applicable, are available free of charge through our website at www.sixflags.com. References to our website in this Quarterly Report on Form 10-Q are provided as a convenience and do not constitute an incorporation by reference of the information contained on, or accessible through, the website. Therefore, such information should not be considered part of this Quarterly Report on Form 10-Q. These reports, and any amendments to these reports, are made available on our website as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC. Copies are also available, without charge, by sending a written request to Six Flags, Inc., 1540 Broadway, New York, NY 10036, Attn:  Secretary.

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PART I — FINANCIAL INFORMATION

Item 1.        Financial Statements

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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Item 1.    Financial Statements (Continued)

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

See accompanying notes to condensed consolidated financial statements.

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Item 1.    Financial Statements (Continued)

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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Item 1.        Financial Statements (Continued)

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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Item 1.        Financial Statements (Continued)

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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Item 1.    Financial Statements (Continued)

SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

SIX FLAGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.                                      Chapter 11 Reorganization

As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, the terms “we,” “our,” “Company” or “Six Flags” refer to Six Flags, Inc. and its consolidated subsidiaries.  As used herein, “Holdings” refers only to Six Flags, Inc., without regard to its subsidiaries.

On June 13, 2009, Holdings, Six Flags Operations Inc. (“SFO”) and Six Flags Theme Parks Inc. (“SFTP”) and certain of SFTP’s domestic subsidiaries (the “SFTP Subsidiaries” and, collectively with Holdings, SFO and SFTP, the “Debtors”) filed voluntary petitions for relief (the “Chapter 11 Filing”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (Case No. 09-12019).  The entities that own our interests in Six Flags Over Texas (“SFOT”) and Six Flags Over Georgia (including Six Flags White Water Atlanta) (“SFOG” and together with SFOT, the “Partnership Parks”) and our Canadian and Mexican parks are not debtors in the Chapter 11 Filing.

In anticipation of the Chapter 11 Filing, the Debtors entered into a Plan Support Agreement (the “Support Agreement”), dated June 13, 2009, with certain participating lenders (the “Participating Lenders”), who are parties to the Second Amended and Restated Credit Agreement, dated as of May 25, 2007 (as amended, modified or otherwise supplemented from time to time, the “Credit Agreement”), among Holdings, SFO, SFTP (as the primary borrower), certain of SFTP’s foreign subsidiaries party thereto, the lenders thereto (the “Lenders”), the agent banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”).  The Debtors’ proposed joint Chapter 11 plan of reorganization (the “Original Plan”), as outlined in the Support Agreement, had the unanimous support of the Lenders’ steering committee and the Administrative Agent.

Under the Original Plan, the holders of claims under the Credit Agreement against SFTP and certain of its wholly-owned domestic subsidiaries (“Prepetition Credit Agreement Claims”) would have converted such claims into (i) approximately 92% of the common stock (“New Common Stock”) to be issued by Holdings following its emergence from Chapter 11 (“Reorganized SFI”) (subject to dilution by a new long-term incentive plan (the “Long-Term Incentive Plan”)), and (ii) a new term loan in the aggregate principal amount of $600 million (the “Original New Term Loan”).  Prepetition Credit Agreement Claims against SFO would have been discharged and exchanged for a new guaranty of the obligations under the Original New Term Loan by SFO following its emergence from Chapter 11 (“Reorganized SFO”).  All other secured claims against the Debtors that were allowed, if any, would have been either paid in full or reinstated, in the Debtors’ discretion.  Allowed unsecured claims against all of the Debtors other than Holdings and SFO would have been paid in full or been reinstated (but solely to the extent such claims were allowed by the Bankruptcy Court).  Claims against SFTP and SFO, respectively, based on a guaranty of the obligations of SFOG Acquisition A, Inc., SFOG Acquisition B, L.L.C., SFOT Acquisition I, Inc. and SFOT Acquisition II, Inc., each an indirect subsidiary of Holdings (the “Acquisition Parties”), and the general partners of the Partnership Parks, to Historic TW Inc. and Warner Bros. Entertainment Inc. and certain of their affiliates (collectively, “Time Warner”) under a certain promissory note and a certain subordinated indemnity agreement (the “Subordinated Indemnity Agreement”) would have been discharged and exchanged for new guarantees of such obligations.  The holders of allowed unsecured claims against SFO (which includes claims arising under or related to $400 million aggregate principal amount of SFO’s unsecured 12.25% senior notes (plus accrued and unpaid interest) due 2016 (the “2016 Notes”) issued pursuant to that certain Indenture (the “2016 Indenture”), dated as of June 16, 2008, among SFO, Holdings and HSBC Bank USA, National Association (“SFO

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Note Claims”)) would have converted their claims against SFO into approximately 7% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  The holders of allowed unsecured claims against Holdings (which includes claims arising under (i)  Holdings’ unsecured 8.875% senior notes due 2010 (the “2010 Notes”) issued pursuant to that certain Indenture, dated as of February 11, 2002, between Holdings and The Bank of New York (“BONY”), (ii) Holdings’ unsecured 9.75% senior notes due 2013 (the “2013 Notes”) issued pursuant to that certain Indenture dated as of April 16, 2003, between Holdings and BONY, (iii) Holdings’ unsecured 9.625% senior notes due 2014 (the “2014 Notes”) issued pursuant to that certain Indenture, dated as of December 5, 2003, between Holdings and BONY, (iv) Holdings’ unsecured 4.5% convertible senior notes due 2015  (the “2015 Notes”) issued pursuant to that certain Indenture, dated as of November 19, 2004, between Holdings and BONY (collectively, the 2010 Notes, the 2013 Notes, the 2014 Notes and the 2015 Notes, “Holdings’ Notes”), and (v) the guaranty by Holdings of obligations owed to holders of the 2016 Notes under the 2016 Notes Indenture (“SFO Note Guaranty Claim”)) would have converted their claims against Holdings into approximately 1% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan).  All existing equity interests in Holdings would have been cancelled under the Original Plan.  All existing equity interests in SFO would have been cancelled, and 100% of the newly-issued common stock of SFO would have been issued to Holdings on the effective date of the Original Plan in consideration for Holdings’ distribution of the New Common Stock in Reorganized SFI to certain holders of allowed claims, as described above.  The existing equity interests in all Debtors other than Holdings and SFO (“Preconfirmation Subsidiary Equity Interests”) would have remained unaltered by the Original Plan.  On July 22, 2009, the Debtors filed with the Bankruptcy Court a Disclosure Statement and the Original Plan, which was amended by the Debtors and filed on August 21, 2009 to provide additional detail on the Debtors’ financial condition and business projections, but the fundamental structure and creditor treatment remained the same.

Since the filing of the Original Plan, a variety of factors led the Debtors to conclude that the Original Plan should be modified, including extensive discussions with a wide variety of creditor constituencies, including the creditors’ committee of the Debtors (the “Creditors’ Committee”), an informal committee of holders of the 2016 Notes (the “Informal Committee”), certain holders of the 2010 Notes, 2013 Notes, 2014 Notes and 2015 Notes, and Time Warner.  As a result, on November 7, 2009, the Debtors filed with the Bankruptcy Court the Disclosure Statement (the “Disclosure Statement”) and a Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Plan”), which amended the Original Plan. The Support Agreement is expected to be terminated in the near term.

Under the Plan, the holders of Prepetition Credit Agreement Claims against SFTP, SFO and certain of its wholly-owned domestic subsidiaries will be paid in full, in cash, from the proceeds of (i) an exit term loan in the principal amount of $650 million (the “Exit Term Loan”), and (ii) a $450 million rights offering (the “Offering”) based on a $1.335 billion total enterprise value of Six Flags to the holders of allowed unsecured claims against SFO (which includes SFO Note Claims) who are “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (“Eligible Holders”), that vote to accept the Plan (“Accepting SFO Noteholder”).  The Company also entered into a backstop commitment agreement (the “Backstop Commitment Agreement”) with entities (the “Backstop Purchasers”) that agreed to subscribe for any such amount of New Common Stock not purchased pursuant to the Offering if the net proceeds from the Offering are less than $450 million.  Under the Backstop Commitment Agreement, in the event that the Debtors enter into a financing transaction with parties other than the Backstop Purchasers or do not issue the New Common Stock on the terms and subject to the conditions set forth in the Plan, the Debtors will be required to pay to the Backstop Purchasers a breakup fee equal to 5.0% of the Offering amount.  All other secured claims against the Debtors that are allowed by the Bankruptcy Court, if any, will either be paid in full or reinstated, in the Debtors’ discretion, with the consent of a majority of the Backstop Purchasers (the “Majority Backstop Purchasers”) (which consent shall not be unreasonably withheld).  Allowed unsecured claims against all of the Debtors other than Holdings and SFO will be paid in full or be reinstated (but solely to the extent such claims are allowed by the Bankruptcy Court).

Claims against SFTP, SFO and Holdings, respectively, based on a guaranty of the obligations of the

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Acquisition Parties and the general partners of the Partnership Parks and, in the case of SFTP and SFO, the entities that are the limited partners in the Partnership Parks, will be affirmed and continued by SFTP following emergence from Chapter 11 (“Reorganized SFTP”), Reorganized SFO and Reorganized SFI, respectively (collectively, the “Partnership Parks Claims”).

The holders of allowed unsecured claims against SFO will convert their claims against SFO into approximately 22.89% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan), which amount does not attribute any value associated with the SFO Note Guaranty Claim.  The holders of allowed unsecured claims against Holdings will convert their claims against Holdings into approximately 7.34% of the New Common Stock to be issued by Reorganized SFI (subject to dilution by the Long-Term Incentive Plan), which amount includes the value attributed to the SFO Note Guaranty Claim.  Additionally, each Accepting SFO Noteholder will have the limited right to participate in the Offering to purchase its Limited Offering Pro Rata Share of up to $450 million of New Common Stock, representing approximately 69.77% of the New Common Stock (including New Common Stock to be acquired by the Backstop Purchasers in the Offering), subject to dilution by the Long-Term Incentive Plan, to be issued by Reorganized SFI.  The “Limited Offering Pro Rata Share” is (x) the total principal amount of 2016 Notes held by an Eligible Holder divided by (y) four times the aggregate principal amount of all 2016 Notes outstanding as of June 13, 2009, which is the date the Debtors commenced their Chapter 11 Filing (the “Petition Date”).

All existing equity interests in Holdings will be cancelled under the Plan.  All existing equity interests in SFO will be cancelled, and 100% of the newly-issued common stock of SFO will be issued to Holdings on the effective date of the Plan in consideration for Holdings’ distribution of the New Common Stock in Reorganized SFI to certain holders of allowed claims, as described above.  The Preconfirmation Subsidiary Equity Interests will remain unaltered by the Plan.

Based upon the Debtors’ estimate of the allowed claims as of an assumed effective date of the Plan of December 31, 2009 in the Chapter 11 Filing and the estimated range of reorganization value further detailed in the Disclosure Statement, the Plan provides for a recovery of 100.0% to holders of Prepetition Credit Agreement Claims against SFTP, a 100% recovery for the holders of all other secured claims, a 100% recovery for the holders of unsecured claims against all Debtors other than SFO and Holdings, 31.2% to 47.1% to holders of SFO unsecured claims, 3.2% to 4.8% to holders of SFI unsecured claims, and no recovery for holders of equity interests in Holdings prior to the Chapter 11 Filing.  These projections are based on assumptions described in the Disclosure Statement and are not guaranteed.  See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” contained in Item 1A of the 2008 Annual Report and Part II, Item 1A of the Quarterly Report on Form 10-Q filed with the SEC on August 14, 2009.  The Plan is supported by the Debtors and each of the Informal Committee (subject to the satisfaction of the terms and conditions set forth in the Backstop Commitment Agreement), the steering committee of the Participating Lenders and Time Warner.

Chapter 11 Financing

The Plan provides for the Debtors to incur new indebtedness upon the effective date, consisting of a senior secured credit facility to be provided to SFTP (the “Exit Facility”) by JPMorgan Chase Bank, N.A. (“JPMCB”), J.P. Morgan Securities Inc. (“JPMSI”), Bank of America, N.A. (“BANA”) and Banc of America Securities LLC (“BAS”) (together with JPMCB, JPMSI and BANA, collectively, the “Commitment Parties”) and a syndicate of lenders chosen by the Commitment Parties (together with JPMCB, the “Exit Facility Lenders”).  Such Exit Facility is described below.

The Exit Facility, as contemplated in the commitment letter and related term sheet and fee letter

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

executed by the Commitment Parties and SFTP in October 2009 (the “Commitment Parties’ Commitment Papers”), will consist of an eight hundred million dollar ($800,000,000) senior secured credit facility comprised of a $150,000,000 revolving loan facility (the “Exit Revolving Loan”) and a $650,000,000 term loan facility (the “Exit Term Loan” and together with the Exit Revolving Loan, collectively, the “Exit Facility Loans”).  Interest on the Exit Facility will accrue at an annual rate equal to LIBOR + 4.25%, with a 2.00% LIBOR floor and a 1.50% commitment fee on the Exit Revolving Loans on the average daily unused portion of the Exit Revolving Loans.  The principal amount of the Exit Revolving Loans will be due and payable five years from the closing date of the Exit Facility and the principal amount of the Exit Term Loan will be due and payable six years from the closing date of the Exit Facility.  The loan agreement governing the Exit Facility (the “Exit Facility Loan Agreement”) will require quarterly payments on the Exit Term Loan in an amount equal to 0.25% of the initial aggregate principal amount of the Exit Term Loan and the remainder of the balance will be paid in one final payment on the date that is six years after the closing date of the Exit Facility and is prepayable at any time at the option of SFTP.  The Exit Facility will be guaranteed by Holdings, SFO and each of the current and future direct and indirect domestic subsidiaries of SFTP; provided that to the extent SFTP acquires any non-wholly owned direct or indirect subsidiary after the closing date of the Chapter 11 Filing such subsidiary will not be required to be a guarantor and/or pledgor of the Exit Facility (together with SFTP, collectively, the “Exit Financing Loan Parties”).  The proceeds of the Exit Term Loan together with the net proceeds from the Offering will be used to repay the outstanding amounts owed under the Prepetition Credit Agreement and the Exit Revolving Loans will be used to meet working capital and other corporate needs of the Debtors, thereby facilitating their emergence from bankruptcy.  The Exit Facility will be secured by first priority liens upon substantially all existing and after-acquired assets of the Exit Financing Loan Parties.  The Exit Facility Loan Agreement will contain certain representations, warranties and affirmative covenants, including minimum interest coverage and maximum senior leverage maintenance covenants.  In addition, the Exit Facility Loan Agreement will contain restrictive covenants that limit, among other things, the ability of the Exit Financing Loan Parties to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, make capital expenditures and repurchase capital stock.  The Exit Financing Loan Agreement will contain certain events of default, including payment, breaches of covenants and representations, cross defaults to other material indebtedness, judgment, changes of control and bankruptcy events of default.  The Commitment Parties’ commitment is subject to certain customary conditions and market “flex” provisions as well as confirmation of the Plan and the retention of the existing senior management of the Debtors continuing as the senior management of Six Flags following consummation of the Plan.  In addition the Debtors’ payment or other binding obligations under the Commitment Parties’ Commitment Papers would be subject to Bankruptcy Court approval.

The commitment of the Commitment Parties to provide the Exit Facility Loans will expire unless the Bankruptcy Court has entered a final order approving the Commitment Parties’ Commitment Papers by 5:00 p.m. (New York time) on November 24, 2009.

The Debtors have executed documents evidencing the same together with other documents that the Exit Facility Lenders have required to consummate the Exit Facility and the transactions contemplated thereby.  In accordance with the Plan, the Reorganized Debtors’ entry into the Exit Facility Loans and the incurrence of the indebtedness thereunder on the effective date will be authorized without the need for any further corporate action and without any further action by holders of claims or Preconfirmation Equity Interests.

Notwithstanding the foregoing, the Majority Backstop Purchasers will have the right to (i) approve any term or provision in the Exit Facility Loan Documents that constitutes a material change to any term or condition set forth in the Commitment Parties’ Commitment Papers, and (ii) approve all terms and conditions of the Exit Facility not set forth, or left as “to be determined,” “customary” or

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

similar descriptions therein, in the Commitment Parties’ Commitment Papers.

Further, shortly after the Chapter 11 Filing, Six Flags and Time Warner entered into discussions to address the Acquisition Parties’ future obligations under the Partnership Park arrangements and the Subordinated Indemnity Agreement, as applicable, to purchase future “put” limited partnership units in the Partnership Parks (“Partnership Park LP Interests”).  As a result of those discussions, Time Warner delivered to Six Flags and the Acquisition Parties an executed commitment letter and related term sheet and fee letter in October 2009 (the “TW Commitment Papers”), pursuant to which Time Warner or an affiliate of Time Warner (the “New TW Lender”) has agreed to provide the Acquisition Parties with a $150,000,000 multi-draw term loan facility (the “New TW Loan”) on the terms and subject to the conditions summarized in the TW Commitment Papers.  Interest on the New TW Loan will accrue at a rate equal to (i) the greater of (a) LIBOR and (b) 2.50% (or to the extent that any LIBOR or similar rate floor under the Exit Term Loan (or under any senior term credit facility that amends, restates, amends and restates, refinances, modifies or extends the Exit Term Loan) is higher than 2.50%, such higher floor) plus (ii) the then “Applicable Margin” under the Exit Term Loan (or, if higher) under any successor term facility plus (iii) 1.00%.  In the event that any of the loan parties issue corporate bonds or other public debt, and the then applicable credit default swap spread is higher than the “Applicable Margin” referenced in the foregoing sentence, such “Applicable Margin” will be increased based on the applicable default swap spread then in effect, subject to a fixed cap.  Funding during the availability period under the New TW Loan will occur only on May 14th (or the immediately preceding business day) of each fiscal year (each a “Funding Date”) in which amounts required to satisfy the “put” obligations exceeds (a) for the fiscal year ending December 31, 2010, $10,000,000, (b) for the fiscal year ending December 31, 2011, $12,500,000 and (c) for each subsequent fiscal year, $15,000,000.  The principal amount of the New TW Loan borrowed on each Funding Date will be due and payable five years from such Funding Date.  The loan agreement governing the New TW Loan (the “New TW Loan Agreement”) will require prepayments with any cash of the Acquisition Parties (other than up $50,000 per year) including the proceeds received by the Acquisition Parties from the Company-owned Partnership Park LP Interests and is prepayable at any time at the option of the Acquisition Parties.  However, as long as any amounts owing under the existing TW Loan are outstanding, any such cash will first be applied toward mandatory prepayments of amounts owing thereunder.  The New TW Loan will be unconditionally guaranteed on a joint and several and senior unsecured basis by Holdings, SFO, SFTP and each of the current direct and indirect domestic subsidiaries of Holdings who are or in the future become guarantors under the Exit Facility (collectively, the “New TW Guarantors”) under the terms of a guaranty agreement (the “New TW Guarantee Agreement”) to be entered into by the New TW Guarantors in favor of the New TW Lender.  As set forth in the TW Commitment Papers, the New TW Loan Agreement and New TW Guarantee Agreement will contain representations, warranties, covenants and events of default on substantially similar terms as those contained in the Exit Facility but will be modified, as agreed to by New TW Lender and the New TW Guarantors, to provide additional flexibility to the New TW Guarantors from the covenants in the Exit Facility that are commensurate with the different positions of the Exit Facility and the New TW Loan Agreement in the capital structure of Six Flags.  The Exit Facility will contain terms and conditions that (a) are not in conflict with the terms of the New TW Loan Agreement and do not directly or indirectly restrict the ability of the Acquisition Parties and New TW Guarantors to perform their obligations under the New TW Loan Agreement, the Subordinated Indemnity Agreement, the Partnership Parks arrangements or certain license agreements with Warner Bros., and (b) contain terms and conditions that are no more onerous (as determined by the New TW Lender) to the Acquisition Parties and New TW Guarantors than those set forth in the in the TW Commitment Papers.  TW’s commitment is subject to certain customary conditions as well as confirmation of the Plan and the retention of the existing senior management of the Debtors continuing as the senior management of Six Flags following consummation of the Plan.  In addition, the New TW Guarantors’ payment or other binding obligations under the TW Commitment Papers would be subject to Bankruptcy Court approval.

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SIX FLAGS, INC.

(DEBTOR-IN-POSSESSION as of June 13, 2009)

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The commitment of the New TW Lender to provide the New TW Loan will expire unless the Bankruptcy Court has entered a final order approving the TW Commitment Papers by 5:00 p.m. (New York time) on November 24, 2009.

Notwithstanding the foregoing, any material changes to the New TW Loan as described in the TW Commitment Papers are subject to the approval of the Majority Backstop Purchasers.

Reporting Requirements

As a result of the Chapter 11 Filing, the Debtors are now required to file various documents with, and provide certain information to, the Bankruptcy Court, including statements of financial affairs, schedules of assets and liabilities, and monthly operating reports in forms prescribed by federal bankruptcy law, as well as certain financial information on an unconsolidated basis. Such materials will be prepared according to requirements of federal bankruptcy law.  While they accurately provide then-current information required under federal bankruptcy law, they are nonetheless unconsolidated, unaudited, and are prepared in a format different from that used in Six Flags, Inc.’s consolidated financial statements filed under the securities laws.  Accordingly, the Company believes that the substance and format do not allow meaningful comparison with its regular publicly-disclosed consolidated financial statements.  Moreover, the materials filed with the Bankruptcy Court are not prepared for the purpose of providing a basis for an investment decision relating to the Company’s securities, or for comparison with other financial information filed with the SEC.

Reasons for Bankruptcy

For several years, the Debtors have faced a number of challenges, most significantly their over-leveraged balance sheet, which have impaired their ability to achieve profitability.  Under the direction of the previous board of directors of Holdings and the management team, the Company had amassed more than $2.5 billion of debt and preferred income equity redeemable shares (“PIERS”) obligations by the end of 2005 in order to acquire theme parks and conduct various capital expenditure programs.  Faced with a highly leveraged balance sheet, in 2006 the newly constituted board of directors approved substantial changes to senior management, including several park presidents (formerly referred to as general managers), and new management began to effectuate a series of long-term operating initiatives.  By 2008, the new management team achieved several key strategic objectives, including diversifying and growing revenues, and increasing operational efficiency and operating cash flows, which it had set out to achieve by the end of its third year.

In addition, the new management team also worked to reduce the Company’s debt obligations.  This was achieved by, among other means, selling ten parks for approximately $400 million in gross proceeds, entering into the Credit Agreement that reduced interest costs and extended maturities and completing an exchange offer that exchanged $530.6 million of Holdings’ Notes for $400.0 million of 2016 Notes, resulting in reduced debt and interest, and extended maturities.  Despite these significant achievements, the Company remained highly leveraged and had substantial indebtedness and PIERS obligations.

The PIERS required mandatory redemption by August 15, 2009 at 100% of the liquidation preference in cash, which amounted to approximately $275.4 million (after giving affect to $12.1 million of PIERS that converted to common stock in the third quarter of 2009), plus accrued and unpaid dividends of approximately $31.2 million.  Because the Debtors were not going to be able to satisfy this obligation and a default of the PIERS obligations would also have caused a default under the Credit Agreement, the Debtors sought to refinance or restructure the PIERS before the mandatory redemption

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date.  A default under the Credit Agreement, in turn, would have permitted the lenders thereunder to accelerate the Debtors’ obligations under the Credit Agreement.  Such acceleration under the Credit Agreement would have also triggered cross-defaults under Holdings’ Notes, resulting in most, if not all, of the Debtors’ long-term debt becoming due and payable immediately.

Recognizing the need for a comprehensive solution for these financial issues, prior to commencing the Chapter 11 Filing, the Debtors attempted to effect out-of-court exchange offers designed to reduce unsecured debt and interest expense requirements, leave in place its favorable Credit Agreement, and improve financial and operational flexibility to allow the Company to compete more effectively and generate long-term growth (the “Exchange Offers”).  Accordingly, Holdings (i) announced the commencement of an exchange offer and consent solicitation on April 17, 2009 to exchange the 2010 Notes, 2013 Notes and 2014 Notes for common stock and (ii) announced the commencement of an exchange offer and consent solicitation on May 6, 2009 to exchange the 2015 Notes for common stock.  The consummation of the Exchange Offers with respect to such Holdings’ Notes was conditioned on, among other things, the valid participation of at least 95% of the aggregate principal amount of each issue of Holdings’ Notes.  The Exchange Offers, however, were unsuccessful for two primary reasons: (1) the minimum tender thresholds established for such Exchange Offers were not met; and (2) even more importantly, the Company determined that these Exchange Offers would have ultimately been inadequate to resolve its financial challenges due to significant, and unexpected, declines in financial performance and liquidity for reasons beyond management’s control (e.g., macro economic turbulence, rising levels of national unemployment, a swine flu epidemic, and adverse weather conditions), as well as higher-than-expected “put” obligations from the Partnership Parks.  Accordingly, even if the minimum tender conditions were satisfied, the Company would have continued to face significant challenges maintaining adequate liquidity and necessary financial covenant compliance under the Credit Agreement.

Holdings also contemplated soliciting consents from the holders of the PIERS to amend the terms of the PIERS to provide for the automatic conversion of the PIERS into common stock and filed a preliminary proxy statement with the SEC with respect to, among other things, the PIERS solicitation.  However, because it became apparent that 95% of the aggregate principal amount of each of the 2010 Notes, 2013 Notes and 2014 Notes would not participate in the Exchange Offers, Holdings did not commence the consent solicitation with respect to the PIERS.

Notifications

Shortly after the Petition Date, the Debtors began notifying current or potential creditors of the Chapter 11 Filing.  Subject to certain exceptions under the Bankruptcy Code, the Chapter 11 Filing automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date.  Thus, for example, most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the property of the Debtors, or to collect on monies owed or otherwise exercise rights or remedies with respect to a claim arising prior to the Petition Date are enjoined unless and until the Bankruptcy Court lifts the automatic stay.  Vendors are being paid for goods furnished and services provided after the Petition Date in the ordinary course of business.  The deadline for the filing of proofs of claims against the Debtors has not yet been established by the Bankruptcy Court.

Creditors’ Committee

As required by the Bankruptcy Code, the United States Trustee for the District of Delaware appointed the Creditors’ Committee.  The Creditors’ Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Debtors.  There can be no assurance that the Creditors’ Committee will support the Debtors’ positions on matters to be presented to the Bankruptcy Court in the future or on any plan of reorganization.  Disagreements between the Debtors and the Creditors’ Committee could protract the court proceedings, negatively impact the Debtors’ ability to operate and delay the Debtors’ emergence from bankruptcy.

Executory Contracts — Section 365

Under Section 365 and other relevant sections of the Bankruptcy Code, the Debtors may assume, assume and assign, or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property, subject to the approval of the Bankruptcy Court and certain other

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conditions.  Any description of an executory contract or unexpired lease in this Form 10-Q, including where applicable, the Debtors’ express termination rights or a quantification of our obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights the Debtors have under Section 365 of the Bankruptcy Code.  Claims may arise as a result of rejecting any executory contract.

Plan of Reorganization

In order to successfully emerge from bankruptcy, the Debtors will need to propose and obtain confirmation by the Bankruptcy Court of a plan of reorganization that satisfies the requirements of the Bankruptcy Code.  A plan of reorganization would, among other things, resolve the Debtors obligations arising prior to the Petition Date, set forth the revised capital structure of the newly reorganized entities and provide for corporate governance subsequent to exit from bankruptcy.

Automatically, upon commencing the Chapter 11 Filing, the Debtors under the Bankruptcy Code have the exclusive right for 120 days after the Petition Date to file a plan of reorganization and, if they do so, 60 additional days to obtain necessary acceptances of their plan.  On November 7, 2009, the Debtors filed the Plan with the Bankruptcy Court.  If the Debtors’ exclusivity period lapsed, any party in interest would be able to file a plan of reorganization for any of the Debtors.  In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and must be approved, or confirmed, by the Bankruptcy Court in order to become effective.

A plan of reorganization will be deemed accepted by holders of claims against and equity interests in the Debtors if (1) at least one-half in number and two-thirds in dollar amount of claims actually voting in each impaired class of claims have voted to accept the plan, and (2) at least two-thirds in amount of equity interests actually voting in each impaired class of equity interests has voted to accept the plan.  Under certain circumstances set forth in Section 1129(b) of the Bankruptcy Code, however, the Bankruptcy Court may confirm a plan even if such plan has not been accepted by all impaired classes of claims and equity interests.  A class of claims or equity interests that does not receive or retain any property under the plan on account of such claims or interests is deemed to have voted to reject the plan.  The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or more impaired classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., secured claims or unsecured claims, subordinated or senior claims, preferred or common stock). Generally, with respect to common stock interests, a plan may be “crammed down” even if the stockholders receive no recovery if the proponent of the plan demonstrates that (1) no class junior to the common stock is receiving or retaining property under the plan, and (2) no class of claims or interests senior to the common stock is being paid more than in full.

Reorganization Costs

The Debtors have incurred and will continue to incur significant costs associated with the reorganization.  The amount of these costs, which are being expensed as incurred, are expected to significantly affect the Debtors’ results of operations.  See Note 2d “Reorganization Items” below for additional information.

Risks and Uncertainties

The ability of the Debtors, both during and after the Bankruptcy Court proceedings, to continue as a going concern, is dependent upon, among other things, (i) the ability of the Debtors to maintain

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adequate liquidity, including the generation of cash from operations, and (ii) the ability of the Debtors to confirm a plan of reorganization under the Bankruptcy Code.  Uncertainty as to the outcome of these factors raises substantial doubt about the Debtors’ ability to continue as a going concern.  The accompanying condensed consolidated financial statements do not include any adjustments to reflect or provide for the consequences of the bankruptcy proceedings, except for unsecured claims allowed by the Bankruptcy Court.  See Note 2d “Reorganization Items” below for additional information. In particular, such financial statements do not purport to show (a) as to assets, their realization value on a liquidation basis or their availability to satisfy liabilities, (b) as to liabilities arising prior to the Petition Date, the amounts that may be allowed for claims or contingencies, or the status and priority thereof, (c) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Debtors, or (d) as to operations, the effects of any changes that may be made in the underlying business.  A plan of reorganization would likely cause material changes to the amounts currently disclosed in the condensed consolidated financial statements.

Negative events associated with the Chapter 11 Filing could adversely affect revenues and the Debtors’ relationship with customers, as well as with vendors and employees, which in turn could adversely affect the Debtors’ operations and financial condition, particularly if the Bankruptcy Court proceedings are protracted.  Also, transactions outside of the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit the Debtors’ ability to respond timely to certain events or take advantage of certain opportunities.   Because of the risks and uncertainties associated with the Bankruptcy Court proceedings, the ultimate impact that events that occur during these proceedings will have on the Debtors’ business, financial condition and results of operations cannot be accurately predicted or quantified, and until such issues are resolved, there remains substantial doubt about the Debtors’ ability to continue as a going concern.

As a result of the Chapter 11 Filing, realization of assets and liquidation of liabilities are subject to uncertainty.  While operating as a debtor-in-possession under the protection of Chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the condensed consolidated financial statements.  Further, a plan of reorganization could materially change the amounts and classifications reported in the consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

Impact on Net Operating Loss Carryforwards

Upon consummation, our proposed Plan of bankruptcy reorganization will result in cancellation of indebtedness income that will reduce our net operating loss carryforwards (“NOLs”) under Section 108 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as an ownership change that will limit our ability to utilize our NOLs under Section 382 of the Code.  In general, following an ownership change, Section 382 limits the amount of pre-ownership change NOLs that may be used to offset taxable income in each year following the ownership change.   Under a special rule that may be elected for an ownership change pursuant to a chapter 11 bankruptcy reorganization, the amount of this annual limitation will be equal to the “long-term tax-exempt rate” (published monthly by the IRS) for the month in which the ownership change occurs, multiplied by the value of our stock immediately after the ownership change.  By taking into account the value of our stock immediately after the Chapter 11 Filing, the limitation is increased as a result of cancellation of indebtedness pursuant to the Chapter 11 Filing.  Any portion of the annual limitation that is not used in a particular year may be carried forward and used in subsequent years.  The annual limitation is increased by certain built-in income and gains recognized (or treated as recognized) during the five years following the ownership change (up to the total amount of

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net built-in income and gain that existed at the time of the ownership change).  Built-in income for this purpose includes the amount by which our tax depreciation expense during this five year period is less than it would have been if our assets had a tax basis on the date of the ownership change equal to their fair market value.  Because most of our assets are theme park assets, which are depreciated on an accelerated basis over a seven-year recovery period, we expect any NOL limitation for the five years following the ownership change to be substantially increased by built-in income and to result in a carryforward of excess limitation to future periods.

2.                                      General — Basis of Presentation

We own and operate regional theme and water parks.  Of the 20 parks we own or operate, 18 are located in the United States. Of the other two, one is located in Mexico City, Mexico and the other is located in Montreal, Canada.  During the second quarter of 2008, we decided that we would not re-open our New Orleans park, which sustained very extensive damage during Hurricane Katrina in late August 2005 and has not re-opened since.  During the third quarter of 2009, the Company and the City of New Orleans mutually agreed to terminate the Company’s lease with the City of New Orleans and to settle the related litigation, pursuant to which the Company agreed, among other things, to pay $3 million and to transfer title to the Company’s property and equipment at the leased site to the City of New Orleans, including land owned by the Company adjacent to the site.  We have recorded appropriate provisions for impairment and liabilities related to discontinuing the New Orleans park operations.  The condensed consolidated financial statements as of and for all periods presented reflect the assets, liabilities and results of the facilities sold and held for sale as discontinued operations.  See Notes 3 and 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, which follows these notes, contains additional information on our results of operations and our financial position. That discussion should be read in conjunction with the condensed consolidated financial statements and these notes.  Our 2008 Annual Report includes additional information about us, our operations and our financial position, and should be referred to in conjunction with this Quarterly Report on Form 10-Q.  The information furnished in this report reflects all adjustments (which are normal and recurring) that are, in the opinion of management, necessary to present a fair statement of the results for the periods presented.

Results of operations for the three-month and nine-month periods ended September 30, 2009 are not indicative of the results expected for the full year.  In particular, our park operations contribute a majority of their annual revenue during the period from Memorial Day to Labor Day each year, while expenses are incurred year round.

The accompanying condensed consolidated financial statements do not purport to reflect or provide for the consequences of our Chapter 11 Filing.  In particular, the financial statements do not purport to show (1) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities, (2) as to liabilities arising prior to the Petition Date, the amounts that may be allowed for claims or contingencies, or the status and priority thereof, (3) as to stockholders’ equity accounts, the effect of any changes that may be made in our capitalization, or (4) as to operations, the effect of any changes that may be made to our business.

a.              Consolidated U.S. GAAP Presentation

Our accounting policies reflect industry practices and conform to U.S. generally accepted accounting principles.

The condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries.

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We also consolidate the partnerships and joint ventures that own SFOT and SFOG, as we have determined that we have the most significant economic interest since we receive a majority of these entities’ expected losses or expected residual returns and have the ability to make decisions that significantly affect the results of the activities of these entities.  The equity interests owned by non-affiliated parties in SFOT and SFOG are reflected in the accompanying condensed consolidated balance sheets as redeemable noncontrolling interests.  The portion of earnings or loss from each of the parks attributable to non-affiliated parties is reflected as net income (loss) attributable to noncontrolling interests in the accompanying condensed consolidated statements of operations.

While operating as debtors-in-possession, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as permitted in the ordinary course of business.  These dispositions and settlements may be in amounts other than those reflected in the condensed consolidated financial statements. Further, a plan of reorganization could materially change the amounts and classifications in the condensed consolidated financial statements.

b.     Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern.  This assumes a continuing of operations and the realization of assets and liabilities in the ordinary course of business.  The condensed consolidated financial statements do not include any adjustments that might result if we were forced to discontinue operations.  See Note 1 “Chapter 11 Reorganization” regarding the impact of the Chapter 11 Filing and the proceedings in Bankruptcy Court on the Company’s liquidity and its status as a going concern.

c.     Accounting for the Chapter 11 Filing

We follow the accounting prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 852, “Reorganizations” (“FASB ASC 852”).  This accounting literature provides guidance for periods subsequent to a Chapter 11 filing, among other things, the presentation of liabilities that are and are not subject to compromise by the Bankruptcy Court proceedings, as well as the treatment of interest expense and presentation of costs associated with the proceedings.

In accordance with FASB ASC 852, debt discounts or premiums as well as debt issuance costs should be viewed as valuations of the related debt.  When the debt has become an allowed claim and the allowed claim differs from the carrying amount of the debt, the recorded amount should be adjusted to the allowed claim.  We have written-off costs that are associated with unsecured debt that is included in liabilities subject to compromise at September 30, 2009.  See Note 2d “Reorganization Items”.  Premiums and discounts as well as debt issuance cost on debts that are not subject to compromise, such as fully secured claims, have not been adjusted.

Because Holdings’ existing stockholders are expected to own less than 50% of the voting shares after Holdings emerges from bankruptcy, we expect to apply “Fresh-Start Reporting,” in which our assets and liabilities will be recorded at their estimated fair value using the principles of purchase accounting contained in FASB ASC Topic 805, “Business Combinations.”  The difference between our estimated fair value and our identifiable assets and liabilities will be recognized as goodwill.

d.     Reorganization Items

FASB ASC 852 requires separate disclosure of reorganization items such as realized gains and losses from the settlement of liabilities subject to compromise, provisions for losses resulting from the

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reorganization and restructuring of the business, as well as professional fees directly related to the process of reorganizing the Debtors under the Bankruptcy Code.  The Debtors’ reorganization items consist of the following:

Costs and expenses directly related to the reorganization primarily include fees associated with advisors to the Debtors, certain creditors and the Creditors’ Committee.

Net cash paid for reorganization items, entirely constituting professional fees, as of September 30, 2009 totaled $13,641,000.

e.     Liabilities Subject to Compromise

Liabilities subject to compromise refers to unsecured obligations that will be accounted for under a plan of reorganization.  Generally, actions to enforce or otherwise effect payment of liabilities arising before the date of filing of the plan of reorganization are stayed.  FASB ASC 852 requires liabilities that are subject to compromise to be reported at the claim amounts expected to be allowed, even if they may be settled for lesser amounts.  These liabilities represent the estimated amount of claims expected to be allowed on known or potential claims to be resolved through the bankruptcy process, and remain subject to future adjustments arising from negotiated settlements, actions of the Bankruptcy Court, rejection of executory contracts and unexpired leases, the determination as to the value of collateral securing the claims, proofs of claim, or other events.  Liabilities subject to compromise also include certain items that may be assumed under the plan of reorganization, and as such, may be subsequently reclassified to liabilities not subject to compromise.  The Company has not included the Credit Agreement obligations, and swap obligations secured ratably therewith, as liabilities subject to compromise as these secured liabilities are expected to be fully recovered by the Lenders.  The Bankruptcy Court has granted final approval of many of the Debtors’ “first day” motions covering, among other things, human resource obligations, supplier relations, insurance, customer relations, business operations, certain tax matters, cash management, post-petition utilities, case management and retention of professionals.  Obligations associated with these matters are not classified as liabilities subject to compromise.

The Debtors may reject pre-petition executory contracts and unexpired leases with respect to the Debtors’ operations, with the approval of the Bankruptcy Court.  Damages resulting from rejection of executory contracts and unexpired leases are generally treated as general unsecured claims and will be classified as liabilities subject to compromise.  Holders of such pre-petition claims will be required to file proofs of claims by a bar date to be determined by the Bankruptcy Court.  A bar date is the date by which claims against the Debtors must be filed if the claimants wish to receive any distribution in the Chapter 11 Filing.  The Debtors will notify all known claimants subject to the bar date of their need to file a proof of claim with the Bankruptcy Court.  Differences between liability amounts estimated by the Debtors and claims filed by creditors will be investigated and, if necessary, the Bankruptcy Court will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated

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cannot be made until the Bankruptcy Court approves a plan of reorganization. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

Liabilities subject to compromise consist of the following:

Liabilities subject to compromise, at September 30, 2009, include trade accounts payable of approximately $20.9 million related to purchases prior to the Petition Date, which generally have not been paid.  As a result, the Company’s cash flows from operations were favorably affected by the stay of payments related to these liabilities.

In accordance with the guidance provided in FASB ASC Topic 480, “Distinguishing Liabilities from Equity” and FASB ASC 852, during the third quarter of 2009 we reclassified the $275.4 million redemption value of PIERS plus accrued and unpaid dividends of approximately $31.2 million from mezzanine equity to liabilities subject to compromise, as the PIERS became an unconditional obligation as of August 15, 2009.  In the current Plan, the PIERS are considered an unsecured equity interest subject to compromise and the holders of such instruments are expected to receive no recovery.

f.      PARC Note

We recorded the $37.0 million note that we received pursuant to the sale of seven parks in April 2007 (the “PARC Note”) at an estimated fair value of $11.4 million, reflecting the risk of collectability due to the PARC Note’s subordination to other obligations.  We will not recognize interest income from the PARC Note until the entire carrying amount has been recovered, in accordance with the guidance of FASB ASC Topic 310, “Receivables.”  As of September 30, 2009, we have collected payments in the amount of $7.5 million leaving the PARC Note receivable balance at $3.9 million.  See Note 7.

g.     Income Taxes

Income taxes are accounted for under the asset and liability method.  At December 31, 2008, we had recorded a valuation allowance of $598,510,000 due to uncertainties related to our ability to utilize some of our deferred tax assets before they expire.  The valuation allowance was increased by $58,062,000 through September 30, 2009, in respect of the net loss before income taxes generated during the first nine months of 2009.  In addition, we decreased the valuation allowance by $3,555,000 through September 30, 2009 related to other comprehensive income (loss).

We classify interest and penalties attributable to income taxes as part of income tax expense.  As of September 30, 2009, we have a liability of approximately $4,466,000 accrued for interest and penalties.

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h.     Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to future net cash flows expected to be generated by the asset or group of assets.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

i.      Derivative Instruments and Hedging Activities

We account for derivatives and hedging activities in accordance with FASB ASC Topic 815, “Derivatives and Hedging” (“FASB ASC 815”).  This accounting guidance establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.  It requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value.  If certain conditions are met, a derivative may be specifically designated as a hedge for accounting purposes.  The accounting for changes in the fair value of a derivative (e.g., gains and losses) depends on the intended use of the derivative and the resulting designation.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and our strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as cash-flow hedges to forecasted transactions. We also assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Changes in the fair value of a derivative that is effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income (loss), until operations are affected by the variability in cash flows of the designated hedged item.  Changes in fair value of a derivative that is not designated as a hedge are recorded in other expense in our condensed consolidated statements of operations on a current basis.

During the fourth quarter of 2008, we discontinued hedge accounting treatment for the interest rate swaps, as they no longer met the probability test as detailed in FASB ASC 815.  See Note 4.

j.      Income (Loss) Per Common Share

The effect of potential common shares issuable upon the exercise of employee stock options on the weighted average number of shares on a diluted basis for both the three and nine months ended September 30, 2009 does not include 6,500,000 options, and for the three and nine months ended September 30, 2008 does not include 6,884,000 options, as the effect of the exercise of these options would be antidilutive.  Additionally, the weighted average number of shares of common stock on a diluted basis for the nine-month periods ended September 30, 2009 and 2008 does not include the effect of the potential conversion of the PIERS and for the nine-month period ended September 30, 2009 does not include the effect of the potential conversion of the 2015 Notes, as the effect of such conversion and the resulting decrease in preferred stock dividends and interest expense, as the case may be, is antidilutive.  The PIERS, which are included in the liabilities subject to compromise as of September 30, 2009 and are shown as mandatorily redeemable preferred stock on our consolidated balance sheet as of December 31, 2008, were issued in January 2001 and are convertible into 13,209,000 (after giving affect to 483,000 PIERS that converted to common stock in the third quarter of 2009) and 13,789,000 shares of common stock as of August 15,

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2009 and September 30, 2008, respectively.  The 2015 Notes are convertible at the option of the holder into 44,094,000 shares of common stock, although we can satisfy conversions by delivering cash in lieu of shares. The following table reconciles the weighted average number of shares of common stock outstanding used in the calculations of basic and diluted income per share for the three and nine months ended September 30, 2009 and 2008.