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Six Flags Entertainment Announces First Quarter 2010 Results


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Six Flags Entertainment Announces First Quarter 2010 Results

 

NEW YORK, May 17 /PRNewswire/ -- Six Flags Entertainment Corporation (formerly Six Flags, Inc.) announced today its consolidated operating results for the quarter ended March 31, 2010.(1) The first quarter historically represents approximately 5% of the Company's annual revenues.

 

Three Month Results

 

Total revenue of $57.3 million increased 12% from the prior-year quarter's total of $51.1 million, primarily reflecting $4.3 million of revenues from the Six Flags Great Escape Lodge and Indoor Water Park ("Lodge"), the results of which were consolidated in the first quarter of 2010 as a result of adopting new consolidation accounting rules (Financial Accounting Standards Board Accounting Standards Codification Topic 810, Consolidation).(2) Excluding the consolidation of the Lodge, total revenues increased $1.8 million, or 4%, reflecting increases in food, merchandise and other revenues, as well as increased attendance.

 

Per capita guest spending, which excludes sponsorship, licensing and other fees, increased 3% to $35.44 in the first quarter of 2010 from $34.27 in the prior-year quarter, reflecting increased per capita in-park spending, partially offset by decreased season pass pricing. Included in the higher guest spending is the favorable exchange rate impact at our Mexico City park in the current-year quarter, affecting U.S. dollar translated results. Exchange rates accounted for approximately $1.02 of the guest spending per capita increase for the current quarter compared to the prior-year quarter.

 

Cash operating expenses(3) for the first quarter increased $6.0 million, or 5%, to $118.7 million compared to the first quarter of 2009, reflecting increased expenses primarily due to the consolidation of the Lodge, the currency impact at our Mexico City and Montreal parks and increased insurance and operating taxes, partially offset by decreased employee benefits and advertising costs. The Lodge consolidation and the currency impact at our Mexico City and Montreal parks accounted for $4.3 million of the $6.0 million increase over the prior-year period.

 

Non-cash operating expenses comprised of depreciation, amortization, stock-based compensation and loss on disposal of assets decreased $0.1 million in the first quarter of 2010 to $37.9 million, compared with $38.0 million in the first quarter of 2009.

 

The Company's loss from continuing operations in the first quarter of 2010 increased by 32% to $180.7 million compared to $137.0 million in the prior-year quarter. The increase was driven by (i) increased interest expense primarily reflecting post-petition interest owed on the $400 million Senior Notes due in 2016, partially offset by reduced interest expense reflecting the cessation of interest accruals on the Company's debt subject to compromise as a result of the Chapter 11 Filing, and lower effective interest rates, (ii) reorganization costs associated with the Chapter 11 Filing, (iii) increased cash operating expenses, and (iv) increased income tax expense, partially offset by increased revenue.

 

Adjusted EBITDA(4) loss for the current quarter remained relatively flat at a $60.0 million loss compared to a $59.5 million loss for the prior-year quarter, reflecting the impact of increased revenues partially offset by increased cash operating expenses.

 

Recent Developments

 

On June 13, 2009, Six Flags, Inc., Six Flags Operations Inc. and Six Flags Theme Parks Inc. ("SFTP") and certain of SFTP's domestic subsidiaries (collectively the "Debtors") filed voluntary petitions for relief (the "Chapter 11 Filing") under Chapter 11 in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") (Case No. 09-12019).

 

In February 2010, in connection with the Chapter 11 Filing, the Company decided to reject the lease with the Kentucky State Fair Board relating to the Company's Louisville park and the Company no longer operates the park. The results of operations for the Louisville park were classified as discontinued operations in all periods reported.

 

On April 1, 2010, the Debtors filed with the Bankruptcy Court their Modified Fourth Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the "Plan"). On April 30, 2010 (the "Effective Date"), the Bankruptcy Court entered an order confirming the Plan and the Debtors consummated their restructuring through a series of transactions contemplated by the Plan and the Plan became effective pursuant to its terms. On the Effective Date, Six Flags, Inc. changed its corporate name to "Six Flags Entertainment Corporation."

 

As a result of the consummation of the Plan, indebtedness of approximately $2.4 billion and the PIERS obligation of $306.6 million were cancelled, and new debt of approximately $1.0 billion was issued (excluding the Company's new $120 million revolving credit facility). As a result of the lower debt burden, the Company's annual cash interest expense will be significantly reduced to approximately $77 million, based on current interest rates.

 

The common stock of Six Flags, Inc. was also cancelled, and new common stock of Six Flags Entertainment Corporation was issued to the new stockholders. The Company intends to apply to list the new common stock on the New York Stock Exchange.

 

Pursuant to the 2010 annual offer, we received "put" notices from holders of partnership units in Six Flags Over Texas and Six Flags Over Georgia (including Six Flags White Water Atlanta) with an aggregate "put" price of approximately $5.6 million, of which the general partner of the Georgia limited partnership elected to purchase 50% of a portion of the Georgia units that were "put" for a total purchase price of approximately $0.8 million. As a result, we will purchase 1.77 units of the Texas partnership and 0.83 units of the Georgia partnership for approximately $4.8 million using our available cash.

 

On May 11, 2010, Alexander "Al" Weber, Jr., was named our President and Interim Chief Executive Officer, and we announced that we are retaining an executive search firm and will consider both internal and external candidates to serve as our Chief Executive Officer on a permanent basis. Effective as of May 11, 2010, Mark Shapiro is no longer serving as our President and Chief Executive Officer, and effective as of June 10, 2010, he will no longer be with the Company. In addition, Mark Jennings resigned as a member of our board of directors effective as of May 11, 2010.

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My thoughts on this article in general...

 

Things seem to be improving from a numbers standpoint largely thanks to the bankruptcy. Obviously one period of reporting following the bankruptcy hardly represents any kind of trend.

 

I am, however, extremely disappointed that Mark Shapiro is leaving the company. Personally, while I am no fan of the flood of irrelevant advertising that now floods the park, corporate sponsorships of APPROPRIATE attractions should occur. What's appropriate, however, are company's/brands/products that fit naturally with the park's themeing. You don't fit the attraction to the advertising, you fit the advertising to the attraction in a non-intrusive, theme consistent manner. Follow the lead of Walt Disney Parks.

 

The best thing Shapiro has brought to Six Flags is a clear knowledge and understanding that, from the outset, theme parks were developed as places where parents and children could enjoy the attractions together. Amusement parks, where parents sat on the bench while their kids went on the roller coaster with no rhyme or reason to the park layout (or the placement of attractions/restaurants/merchandise outlets), were the very reasons Walt developed Disneyland! Basic American demographics also tell you that the U.S. population continues to age significantly and these "older Americans" are the one's with money to spend.

 

While I had hoped that Shapiro would have had a greater level of respect for a park's "overall theme" rather than individually themed attractions, the fact that Six Flags is far less of a teenage circus atmosphere today than it was a few years ago, is a very good thing.

 

Most importantly, however, what Six Flags (and Great Adventure) really needs is a good ten year strategic plan (translate that to consistency). And I fear, with a new President/CEO (again), the company will continue on the road of inconsistent mediocrity.

 

Just my two cents!

Edited by Daved Thomson
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what Six Flags (and Great Adventure) really needs is a good ten year strategic plan (translate that to consistency). And I fear, with a new President/CEO (again), the company will continue on the road of inconsistent mediocrity.

 

Unfortunately that just has NEVER happened over time for the park or company because of the changes in management or ownership every few years. Plans are rarely even stuck to 10 months out, let alone 10 years. There's always some kind of budget cut or change in priorities as the projects near realization.

 

That's why the Busch parks are at whole other level is the management and ownership has remained consistent for such a long time. Even with the recent purchase of Busch by Blackstone the management team hasn't been replaced.

 

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Everyone seems to be in agreement that the Busch parks are excellent and at a "whole other level" than Six Flags. Why is it that Six Flags management can't seem to understand this and actually start doing what works so well at those parks. It doesn't matter who manages Six Flags, for some reason they continue to take the parks in the same direction, making them tacky, incoherently themed carnival-like atmospheres.

 

They need to stop using the "we don't have the money" excuse. They actually have spent quite a bit of money painting, re-theming rides, and making additions. The problem is that the money was spent continuing the trend of tacky, inappropriate choices.

 

If they would spend the money actually improving the atmosphere, instead of making it more tacky, more people would go to the parks and they would make more money.

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The problem is that takes REAL commitment and foresight along with a consistent approach by management.

 

To do that you can't get instant results. When it's a public company like Six Flags, investors want immediate results, and making those kind of changes takes time because yes, you can make physical changes but it takes time to change public perceptions. Right now if you asked most people over the age of 30 if they wanted to pay to go to a Six Flags park they would probably say no unless they were bringing their kids because the parks have that reputation as appealing to kids and thrillseekers. Busch parks have a reputation as being well rounded and appeal to ALL ages including senior citizens. They have built a reputation for great shows, great food , great atmosphere. While those are things will bring people back to a park, they're not things that you can really advertise to bring people into a park for the first time or for the first time after many years. Those are the things where you get some people in and then they spread the word to their friends. That doesn't happen overnight, or in a month, or even in a year.

 

Busch and Disney and Universal have had the luxury of having their parks as part of a larger company. While the parks contribute to their bottom line, they aren't the only thing they do. That means if they make an investment and it takes more time to pan out and create a return, investors don't lose patience as quickly. Six Flags and Cedar Fair investors want to see money come in for every investment within one season so their investments need to show immediate ROI or they either lose investors because the stock starts to drop or they demand a change in management. They don't get long term in most cases.

 

The best thing that could happen would be a buyout by a private equity firm so the parks were no longer beholden to the stock price or purchase by a conglomerate that would make them part of a larger company so they had time to build the brand back up to what it should be.

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