Six Flags Profits Way Up

[ajinaz]

Good news or a bit of elixir before the surgery?

 

http://www.star-telegram.com/news/story/1028939.html

 

More people flocked to Six Flags this summer and spent more money in the parks as the company reported a 60 percent increase in its third-quarter profit.

 

Six Flags said net income grew to $143.4 million, compared to $89.6 million in the same period last year.

 

Revenues also rose 5 percent to $489.3 million, up from $464.2 million in the third quarter of 2007.

 

The New York-based theme park chain said 200,000 more guests visited their parks during the summer, taking advantage of the company's promotion where everyone paid kid's price.

 

With the strong earnings report, Six Flags executives pointed out that the company is on track to be free cash flow positive for the first time in years. However, with $2.2 billion in debt and a stock price around 45 cents, Six Flags still has several financial challenges.

 

"We cannot grow at the rate I know we're capable of growing at carrying this amount of debt. That is simply not a company I'm interested in running," chief executive Mark Shapiro told analysts on a conference call Monday morning. "The company is ready to fire once the noose of the balance sheet is cut away and cutting away that constriction is in the best interest of all of our stakeholders, so we are exploring all of our options and that is all we will say about that today."

 

Executives declined to be specific during the call on what they're considering, sidestepping questions about whether Six Flags has hired advisers or how fast they intend to clean up the balance sheet.

[SharkTums]

^Yeah that Mark Shapiro comment about 'cutting away the debt' is the scary part.

 

The only way I can see them 'cutting away' that much is to declare bankruptcy. Add to that the fact that they wouldn't comment further on that statement makes me think it might be coming.

 

Or else they can sell a crapload of parks, but who would buy them right now?

[OFortuna]

Its impossible for Six Flags to carry on without restructuring, and that means shedding more parks. They've already sold more than 20, what's 3 more? One also has to wonder just how long they can do things like sell season passes for the price of a day's admission or charge kids prices for entry and stay solvent. I mean, its not like the previous management did that and got abused endlessly for it, amirite guyz?

[kenshinmac]

^Yeah that Mark Shapiro comment about 'cutting away the debt' is the scary part.

 

The only way I can see them 'cutting away' that much is to declare bankruptcy. Add to that the fact that they wouldn't comment further on that statement makes me think it might be coming.

 

Or else they can sell a crapload of parks, but who would buy them right now?

I have to agree... There is no way they could unload parks at this point. I think the bad credit situation very likely will force them to declare bankruptcy but the real question is what happens then.

 

Honestly this economic climate is ideal for Six Flags if it wasn't for their debt load. Instead of the big trips people did in past years they will be looking to stay close to home. So if they can get protection they may very well be able to turn things around but couldn't this hurt their ability to buy rides?

[Bolliger&Mabillard]

^It will affect their ability to buy rides, which is the main reason I feel the transition of retrofitting older rides to remarket them. I'd urge anybody working at SFKK and SFA to start looking for new jobs in the mean time.

[OFortuna]

Six Flags has reverted to 1930s style tactics of "upgrading" and renaming rides while tearing down others. I would say they're probably in a position right now where wide scale investment is through until something drastically changes.

 

Any parks they do unload (especially in Chapter 11) would be done likely without the ability to "save them" as amusement facilities, but rather to whomever pays the most for the land.

[Airtime&Gravity]

Its impossible for Six Flags to carry on without restructuring, and that means shedding more parks. They've already sold more than 20, what's 3 more?

 

You do realize that most of the parks left, are the ones that make, or have the potential to make, a lot of money. The parks that have been sold were weak properties that were not worth keeping. You do also realize that every time Six Flags has sold a park that they wave taken a huge loss. The parks sold to PARC were sold for 40 million each, and SFWoA was sold at a huge loss. SFKK and SFA are the only parks in the chain that would probably be sold if parks do end up being sold, but Six Flags better get a good amount for them if they are sold.

 

Well, investors did not like the news as Six Flags stock price fell to around 28 cents. If they do not declare bankruptcy soon, I believe Six Flags will be bought out by a company like Blackstone, Candover, or Dubai World, and I believe the chain will stay intact for the most part given the profit to revenue ratio the chain has.

[OFortuna]

You do realize that most of the parks left, are the ones that make, or have the potential to make, a lot of money. The parks that have been sold were weak properties that were not worth keeping. You do also realize that every time Six Flags has sold a park that they wave taken a huge loss. The parks sold to PARC were sold for 40 million each, and SFWoA was sold at a huge loss.

 

If they go into chapter 11 bankruptcy, while they are protected from being entirely liquidated, the fact is that in order to pay off the debts that will be demanded of them they will need to create some paper. Their only assets as a company are amusement parks and the intellectual properties of American Bandstand. You can act in denial if you'd like to. I'm not the first person on the internet right now saying that Six Flags was openly interested in selling parks this offseason prior to this statement, nor am I likely to be the last. The fact that there are specific parks being named only furthers it.

 

Well, investors did not like the news as Six Flags stock price fell to around 28 cents. If they do not declare bankruptcy soon, I believe Six Flags will be bought out by a company like Blackstone, Candover, or Dubai World, and I believe the chain will stay intact for the most part given the profit to revenue ratio the chain has.

 

If you're Blackstone, why do you buy Six Flags? Why not anticipate it going into full liquidation/Chapter 7 and buy specific pieces without assuming the debt load of the company?

[ajinaz]

As a publicly traded company does anyone know if their financials are available anywhere online? It would be interesting to see the breakdown by property.

 

Here is another story with more info:

 

http://www.bizjournals.com/albany/stories/2008/11/10/daily12.html

 

I found this line to be interesting:

 

Per capita guest spending was up 2 percent to $38.67 due to higher rentals, food and beverage, parking, admissions, and retail revenues.

 

Only $38.67 including admission? That just sounds low to me.

[Airtime&Gravity]

^^It would be smart to wait until chapter 7 if that happens, but as was seen with the report, the chain can turn a profit. In a moment of writing without thinking, I also forgot that they would assume the debt load if Blackstone bought out the chain.

 

I'm not in denial about the possibility of selling parks, and I wouldn't mind seeing SFKK or SFA being sold. It is just that the other parks in the chain are fairly successful for the most part, and I think Six Flags would want to hold on to them.

[OFortuna]

What killed Six Flags before is that they spent like crazy while they had no idea how to get money to come in. The difference with Red Zone behind the wheel is that they've cut the spending accordingly; removing rides, selling parks, reducing money sunk into yearly improvements, outsourcing aspects of their business when applicable, etc. This can work to a degree, but if the economic climate continues to sour (which it assuredly will), that will affect the interest of potential partners in joining in some semblance, whether its running food stands, advertising in park, and so on.

 

Ultimately, when we talk about paying off the debt and the "long term implications", it belies the the greater issue. If Six Flags cannot pay their debts (and they still can't, btw, as solid as this all is), they will go out of business. And if they must cut off the arm to save the body, they may pick a park that is a potential "winner".

[larrygator]

Don't expect SFKK to be sold. SF only owns 20 of the 58 acres. Even if it was sold for $50 Million that doesn't really make a dent in $2 Billion of debt.

[OFortuna]

$50 million coming right now is more than SFKK is going to make over the next 5-6 years, more than likely, assuming it even makes anything in its present form. And for a company on the verge of not existing anymore, its $50 million that could be vastly useful to prevent collapse.

 

Besides, if they go into Chapter 11, the creditors will never get the full $2B. Never works that way. They'll get a percentage of that which is considered reasonable enough compensation without dooming Six Flags. In order to start getting that paid, again, we return to the fact that a company with nothing but its own infrastructure for assets is not going to have a choice in the matter about how, when, and really what they drop.

[robbalvey]

Six Flags has reverted to 1930s style tactics of "upgrading" and renaming rides while tearing down others.

What are you talking about??? This is pretty much all Disneyland has been doing for the past 10 years!

 

Tarzan Treehouse, Autopia, Subs, Space Mountain, etc. Even at Walt Disney World with Tower of Terror 1 through 4. Or Busch Gardens with "Floorless SheiKra..." The list can go on and on...

 

Open your eyes. This isn't something of the "1930s style tactics" as you so call put it, this is a trend of the NOW!

 

Disney has been getting away with it for over a decade...why can't Six Flags do it too? Personally, I think it's a GREAT idea when parks put more money to fix up an older ride.

 

--Robb

[coasterdude5]

I think I gave my economics teacher a heart-attack last week when I showed him Six Flags' stock for our quarter project. He said he'd never seen shares that low. But that's great that profits are up, I hope they can get things under control. I'd hate to see them sell more parks. Eventually there will only be a few parks left, we'll have Six Flags West and Six Flags East.

[robbalvey]

I'd hate to see them sell more parks.

But if they sell them to a company like Parc Management is it really that big of a deal? I mean, Darien Lake didn't seem ANY different to me under their management than they did under Six Flags.

 

In fact, I think "Ride of Steel" actually ran BETTER!

 

--Robb

[ebl]

"Six Flags Profits Way Up"

 

See? I knew those $1 ride lockers were a good idea!

 

Eric

[THE ONE]

Six Flags has reverted to 1930s style tactics of "upgrading" and renaming rides while tearing down others.

What are you talking about??? This is pretty much all Disneyland has been doing for the past 10 years!

 

Tarzan Treehouse, Autopia, Subs, Space Mountain, etc. Even at Walt Disney World with Tower of Terror 1 through 4. Or Busch Gardens with "Floorless SheiKra..." The list can go on and on...

 

Open your eyes. This isn't something of the "1930s style tactics" as you so call put it, this is a trend of the NOW!

 

Disney has been getting away with it for over a decade...why can't Six Flags do it too? Personally, I think it's a GREAT idea when parks put more money to fix up an older ride.

 

--Robb

 

I think it's a good idea what SF is doing I just hope it finds it's way to SFGAM for Iron Wolf, new sit down trains from B&M would be a start.

 

If any park needs a ride make over it's SFGAM god only knows Iron Wolf needs it badly.

[coasterdude5]

I'd hate to see them sell more parks.

But if they sell them to a company like Parc Management is it really that big of a deal? I mean, Darien Lake didn't seem ANY different to me under their management than they did under Six Flags.

 

In fact, I think "Ride of Steel" actually ran BETTER!

 

--Robb

 

You're right, but I'm saying that more for sentimental reasons rather than anything else. When I was a kid I was always amazed by how many Six Flags parks there were, I guess I want to keep it that way forever.

[speedracer]

Wouldn't at all be surprised to see the return of the SF ride rotation program too. I call dibs on Freeze or Jinx for SFDK!

[Bolliger&Mabillard]

Wouldn't be able to get many rides with that height restriction.

[OFortuna]

What are you talking about??? This is pretty much all Disneyland has been doing for the past 10 years!

 

Well, that and opening a new gate, and then electing to spend a billion dollars on said gate after its construction and 6 years of improvements didn't get it to the level they wanted. Many of those examples weren't made as the headline capital improvements for the fiscal year either. I mean, its gonna be tough for Six Flags to start marketing that their S&S towers are running a shot and drop program and expect any sort of spike.

 

Is it a bad idea? No. I mean, really, what else are they gonna do? And if the end user gets a better product that's successful, then we're all better off.

[ginzo]

Disney has been getting away with it for over a decade...why can't Six Flags do it too? Personally, I think it's a GREAT idea when parks put more money to fix up an older ride.

 

Yep, it certainly beats the "let it rot" method. Poor Six Flags can't win. First they're criticized for neglecting their existing assets. Now they're criticized for not neglecting their rides.

 

I'm really happy about the work they're doing to SFNE SROS because I DESPISE the restraints they've been using. Jamming a giant metal bar into my shins doesn't make me happy. But now that they're going to fix that I'm going to make it a priority to get out there next season. Also, Lake Compounce has apparently done some work to Boulder Dash, which will give me further incentive to travel out that way.

 

So, yeah, I can't see how fixing up old rides is a bad thing at all.

[larrygator]

$50 million coming right now is more than SFKK is going to make over the next 5-6 years, more than likely, assuming it even makes anything in its present form. And for a company on the verge of not existing anymore, its $50 million that could be vastly useful to prevent collapse.

 

$50 million is a very liberal figure. In today's landscape SF would be lucky to get $15 million.

 

However, it could be possible that there is a clause in the leasing agreement whereby SF is not allowed to sell park.

[Capitalize]

I did my part by spending the extra money to put my bag in a locker at essentially every ride at SFGAdv.

 

My problem with the idea of selling parks is obviously SFA is the first or second one brought up and at this point it seems more likely that it would be a SFAW type sale where the park gets destroyed and eventually years later developed on. I strongly doubt Wild One would be saved, and that would just be too depressing for me.

 

Its hard to really say what will happen in the end, though. Are there any sources that indicate a property by property cash flow? I'd like to see which if any parks aren't making ends meet before saying one park or another is going away. Seems if any of the remaining parks were hemorrhaging money horribly they would have already been sold years ago. Time will tell, in the meantime the 800,000 SF is selling two face for will certainly help....