Six Flags first quarter loss increases by $15 million compared to last year

Posted | Contributed by Jeff

From the press release:

Six Flags Entertainment Corporation (NYSE: SIX), the world’s largest regional theme park company and the largest operator of waterparks in North America, today announced first quarter 2020 earnings, and updated its response to the COVID-19 pandemic.

As previously announced, the company suspended operations of its North American parks beginning March 13, 2020, due to the spread of COVID-19. The company continues to monitor government guidelines and requirements in each geographic region in which it operates, and expects to resume operations on a park-by-park basis as soon as local conditions allow. In response to the uncertainty caused by the crisis, the company took several actions after it suspended operations to increase the company’s liquidity position and to prepare for multiple contingencies.

“I am proud of our team, who has responded with a passion for each other, our business, our guests, and our communities,” said Mike Spanos, President and CEO. “We remain focused on enhancing the strength of our North American business and are positioning ourselves to emerge stronger on the other side of the pandemic. We have taken steps to prepare for the extreme-downside scenario of a prolonged minimal revenue business, including actions to maximize our liquidity and reduce cash outflows. Our strong operating results in the quarter prior to the pandemic-driven suspension of operations demonstrate the health of our brand and the success of our targeted single-day pricing strategy and productivity initiatives. We stand ready to execute our plans to safely and profitably reopen our parks in accordance with CDC and local health guidelines.”

First Quarter Financial Results

Revenue for the first quarter of 2020 was $103 million, with attendance of 1.6 million guests. The decrease in revenue of $26 million, or 20 percent, compared to the first quarter of 2019 was primarily driven by a decrease in attendance of 584,000 guests, or 27 percent, due to the pandemic-related suspension of the company’s park operations on March 13, 2020. Prior to the suspension of park operations, attendance had increased relative to the same period in the prior year by 255,000 guests, or 19 percent. The decrease in revenue was also attributable to a $10 million reduction in sponsorship, international agreements and accommodations revenue due primarily to the termination of the company’s contracts in China and Dubai.

The company offset the majority of the decrease in revenue by cost savings measures implemented after park operations were suspended. The company’s net loss during the first quarter of 2020 was $85 million, an increased loss of $15 million compared to the prior year period. The net loss per share for the first quarter of 2020 was $1.00 compared to a net loss per share of $0.82 in the first quarter of 2019. Adjusted EBITDA1 for the first quarter of 2020 was a loss of $42 million, an increased loss of $10 million compared to the prior year period.

Total guest spending per capita for the first quarter of 2020 was $56.60, an increase of $8.12, or 17 percent, compared to the first quarter of 2019. This improvement was primarily due to recurring monthly membership revenue from members who retained their memberships on a monthly basis after their initial 12-month commitment period ended and higher guest spending per capita by single-day guests. After a member’s initial 12-month commitment period ends, the company recognizes revenue from membership payments on a monthly basis, rather than in accordance with park visitation. This tends to increase guest spending per capita when attendance is lower. Because of this effect, and to a lesser extent due to the company’s single-day guest pricing initiatives, admissions revenue per capita in the first quarter of 2020 increased $7.28 to $37.77 compared to the first quarter of 2019. In-park spending per capita increased $0.84 to $18.83 compared to the first quarter of 2019.

The Active Pass Base, which includes all members and season pass holders, decreased 10 percent as of March 31, 2020, compared to the prior year period. The decrease was primarily due to fewer season pass and membership sales caused by the pandemic-related suspension of operations of the company’s parks. Deferred revenue was $149 million as of March 31, 2020, a decrease of $29 million, or 16 percent, from March 31, 2019. The decrease in deferred revenue was primarily due to lower season pass and membership sales, as well as to a higher percentage of members whose initial 12-month commitment period ended and whose monthly membership payments have limited contribution to deferred revenue.

Response to COVID-19

As previously announced, the company has taken actions to reduce operating expenses and to defer or eliminate certain discretionary capital projects planned for 2020. The company estimates that its net cash outflow during the time its operations are fully suspended will be, on average, $30-$35 million per month2. The company is also working with its members and season pass holders to extend their usage privileges to compensate for any lost days and is offering higher-tiered benefits to members in return for maintaining their current payment schedule. The company has also offered members the option to pause payments on their current membership.

Balance Sheet and Liquidity

Prior to the suspension of operations beginning on March 13, 2020, the company paid $21 million in dividends, or $0.25 per common share, and prepaid $51 million of its 4.875 percent notes due 2024. The company also invested $51 million in new capital projects, net of property insurance recoveries, in the first quarter of 2020 in preparation for the 2020 operating season.

As previously announced, on April 8, 2020, certain of the company’s revolving credit lenders agreed to provide an incremental $131 million of revolving credit commitments to its senior secured revolving credit facility, increasing the facility from $350 million to $481 million.

On April 14, 2020, the company received sufficient consents from lenders to amend its credit facility to, among other things, suspend testing of the senior secured leverage ratio financial maintenance covenant through December 31, 2020. The company’s lenders also approved modified testing of the senior secured leverage ratio financial maintenance covenant through December 31, 2021. Through the duration of the amendment period ending December 31, 2021, the company agreed to suspend the payment of dividends and the repurchase of its common stock and to add a minimum liquidity covenant.

On April 22, 2020, the company closed a private offering of $725 million aggregate principal amount of 7.000 percent senior secured notes due 2025. It intends to use the net proceeds for general corporate purposes, including paying down the balance of the company’s revolving credit facility, paying down $315 million of its senior secured term loan, and for fees and expenses.

The company is obligated annually in April to offer to purchase the outstanding units of the partnerships that own Six Flags Over Texas, Six Flags Over Georgia and Six Flags White Water Atlanta. The tender period expired on April 28, 2020, with a cumulative unit purchase obligation of $5.0 million by the company after the general partner of each partnership exercised their right of first refusal to purchase one-half of the tendered units.

Net debt as of March 31, 2020, calculated as total reported debt of $2,264 million less cash and cash equivalents of $23 million, was $2,241 million, representing a net leverage ratio of 4.3 times Adjusted EBITDA. Pro forma for the recent balance sheet transactions, as of March 31, 2020, the company had cash on hand of $372 million and $460 million available under its revolving credit facility, net of $21 million of letters of credit, or total liquidity of $832 million. The company has no debt maturities until 2024.

As announced on April 8, 2020, the company has withdrawn its previously provided 2020 Adjusted EBITDA guidance. At this time, the company anticipates it has sufficient liquidity to meet its cash obligations through the end of 2021 in a minimal revenue environment, but would likely require additional covenant relief from its credit facility lenders if the suspension of operations lasted through the end of 2021. The company will continue to explore all options to reduce cash outflows further to be in position to respond to a more protracted suspension of operations.

Read the entire press release from Six Flags.

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