Six Flags announces improved results as company gets fresh start after bankruptcy

Posted Monday, August 16, 2010 12:08 PM | Contributed by Jeff

[Ed. note: The following is a partial but unedited press release. -J]

Six Flags Entertainment Corporation (NYSE: SIX) announced today its consolidated operating results for the second quarter and six months ended June 30, 2010.

"Our strong revenue and profitability in the quarter and year to date are a reflection of Six Flags' strong brand equity and the operational excellence of this superb team," said Jim Reid-Anderson, Chairman, President and Chief Executive Officer. "We are well positioned to leverage our base business momentum for long term success."

"I am honored to be a part of this great company, and I am pleased with the strong results we delivered in the second quarter," said Alexander Weber, Jr., Chief Operating Officer. "Six Flags has a renewed focus on its core theme park business. We remain committed to delivering a clean, safe and fun guest experience with new and exciting attractions for customers of all ages."

Three Month Results

Total revenue of $321.3 million for the second quarter increased 8% from the prior-year quarter's total of $296.8 million, reflecting $3.4 million of revenues from the Six Flags Great Escape Lodge and Indoor Waterpark (the "Lodge"), the results of which were consolidated beginning with the first quarter of 2010 as a result of adopting new consolidation accounting rules. Excluding the consolidation of the Lodge, total revenues for the quarter increased $21.1 million, or 7%, compared to the prior-year quarter, primarily reflecting increased attendance and sponsorship revenue.

Attendance for the quarter was 8.2 million, a 7% increase over the prior-year quarter's attendance of 7.7 million, reflecting strong season pass visitation and higher group sales. Per capita guest spending, which excludes sponsorship, licensing, Lodge accommodations and other fees, decreased 1% to $36.86 in the second quarter from $37.15 in the prior-year quarter, reflecting planned decreases in season pass pricing, partially offset by improved yield on single-day tickets, and the favorable exchange rate impact at our Mexico City and Montreal parks, which accounted for an $0.18 increase in per capita guest spending for the second quarter of 2010 compared to the prior-year quarter.

Cash operating expenses of $213.3 million for the second quarter decreased $11.9 million, or 5%, compared to the second quarter of 2009. Excluding the Lodge, cash operating expenses totaled $210.8 million, a decrease of $14.4 million, or 6%, from the prior-year quarter, reflecting decreased marketing costs, insurance expense, and payroll and benefits expenses, partially offset by the currency impacts at our Montreal and Mexico City parks.

Non-cash operating expenses comprised of depreciation, amortization, stock-based compensation and loss on disposal of assets increased $2.3 million in the second quarter of 2010 to $40.6 million, compared with $38.3 million in the second quarter of 2009, reflecting increased depreciation and amortization primarily as a result of increased amortizable assets due to the application of fresh start accounting and the impact of the consolidation of the Lodge, partially offset by decreased loss on disposal of assets and lower stock-based compensation expense.

Other expense decreased from $16.3 million in the second quarter of 2009 to $1.0 million in the second quarter of 2010, reflecting the prior-year loss from interest-rate swaps. The Company also incurred $16.5 million in restructuring costs in the second quarter of 2010, which reflect severance and related costs from the change in senior management and the implementation of the Company's new cost reduction strategy.

The Company's income from continuing operations in the second quarter of 2010 totaled $749.2 million compared to a loss of $96.5 million in the prior-year quarter. Reorganization items resulted in a gain of $786.9 million in the second quarter of 2010 compared to a net expense of $78.7 million in the second quarter of 2009, primarily reflecting gains from the extinguishment of debt in connection with the consummation of the Plan(5) in the second quarter of 2010. Income from continuing operations before reorganization items and income taxes for the second quarter of 2010 totaled $22.5 million, an improvement of $40.5 million over the prior year quarter's loss of $18.0 million, primarily reflecting the impact of increased revenues, reduced operating expenses, lower interest expense resulting from the cancellation of debt in connection with the confirmation of the Plan and reduced other expense, partially offset by the current-year restructuring costs. Income tax expense was $60.2 million for the second quarter of 2010 compared to a $0.2 million benefit for the second quarter of 2009, primarily reflecting the deferred income taxes that were recorded as a result of fresh start accounting.

Adjusted EBITDA for the second quarter of 2010 was $94.7 million compared to $56.4 million for the prior-year quarter, reflecting the impact of increased revenues and reduced cash operating expenses.

Six Month Results

For the six months ended June 30, 2010, total revenue increased $30.6 million, or 9%, to $378.5 million compared to $347.9 million in the six months ended June 30, 2009, reflecting $7.7 million of revenues from the Lodge in the six months ended June 30, 2010. Excluding the consolidation of the Lodge, total revenues increased $22.9 million, or 7%, for the first half of 2010 compared to the first half of 2009, reflecting increased attendance, per capita in-park spending and sponsorship revenues.

Attendance for the first six months of 2010 was 9.5 million, a 6% increase over the prior-year period's attendance of 9.0 million, reflecting strong season pass visitation and higher group sales.

Per capita guest spending, which excludes sponsorship, licensing, Lodge accommodations and other fees, remained relatively flat at $36.67 in the first half of 2010 compared to $36.76 in the same period of the prior year, reflecting planned decreases in season pass pricing, partially offset by improved yield on single day tickets, and a favorable exchange rate impact attributable to our Montreal and Mexico City parks, which accounted for a $0.29 increase in per capita guest spending for the first half 2010 compared to the same prior-year period.

Cash operating expenses of $332.0 million for the first six months of 2010 decreased $5.8 million, or 2%, compared to the same period of 2009. Excluding the Lodge, cash operating expenses totaled $326.7 million, a decrease of $11.2 million, or 3%, from the prior-year period, reflecting decreased marketing costs, insurance expense, and payroll and benefits expenses, partially offset by the currency exchange rate impacts at our Montreal and Mexico City parks.

Non-cash operating expenses comprised of depreciation, amortization, stock-based compensation and loss on disposal of assets increased $2.3 million in the first six months of 2010 to $78.5 million, compared with $76.3 million in the same period of 2009, reflecting increased depreciation and amortization primarily as a result of increased amortizable assets due to the application of fresh start accounting and the impact of the consolidation of the Lodge, partially offset by decreased loss on disposal of assets and lower stock-based compensation expense.

Other expense decreased from $17.9 million in the first half of 2009 to $0.4 million in the first six months of 2010, reflecting the prior-year loss from interest rate swaps. The first half of 2010 results for the Company also reflect the restructuring costs recognized in the second quarter of 2010.

The Company's income from continuing operations in the first half of 2010 totaled $568.5 million compared to a loss of $233.6 million in the first half of 2009. Reorganization items resulted in a gain of $766.5 million in the first six months of 2010 compared to a net expense of $78.7 million in the first half of 2009, primarily reflecting gains from the extinguishment of debt from the confirmation of the Plan in the current period. Loss from continuing operations before reorganization items and income taxes for the first half of 2010 totaled $136.8 million, an improvement of $21.2 million over the loss of $158.0 million in the first half of 2009. This improvement primarily reflected the impact of increased revenues, reduced operating expenses and reduced other expense, partially offset by the restructuring costs in the first half of 2010 and increased interest expense. Higher interest expense was related to post-petition interest on the $400 million Senior Notes that were originally due in 2016, partially offset by reduced interest expense related to the debt that was canceled in connection with the consummation of the Plan.

Income tax expense was $61.1 million for the first six months of 2010 compared to a $3.2 million benefit for the first six months of 2009, primarily reflecting the deferred income taxes that were recorded as a result of fresh start accounting.

Adjusted EBITDA for the first half of 2010 was $34.7 million compared to a loss of $3.1 million for the prior-year period, reflecting the impact of increased revenues and reduced cash operating expenses.

Recent Developments

On June 13, 2009, Six Flags, Inc., Six Flags Operations Inc., 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). 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 Company's obligation of $306.6 million under its preferred income equity redeemable shares (the "PIERS") 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 $75 million, based on current interest rates.

Pursuant to the Plan, the common stock of Six Flags, Inc. was cancelled, and new common stock of Six Flags Entertainment Corporation was issued. The Company's new common stock is traded on the New York Stock Exchange under ticker symbol "SIX." In addition, Six Flags has moved its corporate headquarters to Dallas. The Company anticipates that the relocation and reorganization of the corporate office, along with related corporate operating expense savings, will generate annualized cost savings of approximately $16.0 million, not including severance and other associated costs

Due to the Company's solid results and significant liquidity, including approximately $210 million in cash at August 1, 2010 and the availability of its undrawn $120 million revolving credit facility, the Company made an unscheduled principal payment on its first lien term loan of $25 million on August 5, 2010. On August 13, 2010, the Company announced the appointment of a new Chairman of the Board, President and Chief Executive Officer, James Reid-Anderson. Alexander Weber, Jr., who had served as the President and Interim Chief Executive Officer, is now the Chief Operating Officer.

Fresh Start Accounting

In connection with the Company's emergence from Chapter 11 on April 30, 2010, and the application of fresh start reporting upon emergence in accordance with ASC Topic 852, "Reorganizations," the results for the two-month period ended June 30, 2010 (we refer to the Company during such period as the "Successor") and the results for the one-month and four-month periods ended April 30, 2010 (we refer to the Company during such periods as the "Predecessor") are presented separately. This presentation is required by United States generally accepted accounting principles ("GAAP"), as the Successor is considered to be a new entity for financial reporting purposes, and the results of the Successor reflect the application of fresh-start reporting.

Accordingly, the Company's financial statements after April 30, 2010, are not comparable to its financial statements for any period prior to its emergence from Chapter 11. For illustrative purposes in this earnings release, the Company has combined the Successor and Predecessor results to derive combined results for the three- and six-month periods ended June 30, 2010. However, because of various adjustments to the consolidated financial statements in connection with the application of fresh-start reporting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor are not comparable to those of the Predecessor. The financial information accompanying this earnings release provides the Successor and the Predecessor GAAP results for the applicable periods, along with the combined results described above. The Company believes that subject to consideration of the impact of fresh start reporting, the combined results provide meaningful information about revenues and costs, which would not be available if the current year periods were not combined to accommodate analysis.

Read the entire press release on PR Newswire.

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