Six Flags posts loss for quarter, with increase in per cap spending

"Well yeah, any park is going to sell for a good multiple of what it brings in on any given year, duh."

Duh! Selling the park to another chain doesn't make since either. Why sell the park to someone like CF or anyone for that matter, who you'll eventually have to compete with in a state you already dominate.

This (or similar) discussion comes up at each quarterly announcement. In most every case, amusement parks are businesses. The idea of a business is to make money.

As a PKS shareholder, I am happy with what is going on. Don't confuse revenue with profit. Two very different, yet related, concepts.

I have used this analogy before, but think of your local cinema. Hate the $4 soda and the $6 popcorn, fine. But if you want a theater that is clean and has excellent sound, projection, and seating, someone has to pay for it. The $9 ticket price brings minimal cash into a cinema.

Increased customer service is expensive. If we could see the detailed line items of the PKS budget, employee training and retention are probably higher dollar figures than capital expenditures. It costs a considerable sum to properly train tens of thousands of employees, not only to push the red and green buttons, but also to provide positive customer service in the process.

Unlike other years, they have legitimate reasons for their down quarter and provide the root causes.

In regards to parks they are looking at selling, obviously SFHH at SFMM is not on the list. I can see them offloading Whitewater/American Adventures, Enchanted Village as they have received little in capital investment over the years as compared to the branded SF parks. The Great Escape would be a surprise considering it's their first indoor waterpark/hotel combo and it just opened.

I think in general they are okay with attendance drops as long as revenues increase. They have to know they will go through a transition period where the family friendly focus and increased prices will turn away parts of their customer base.

"Duh! Selling the park to another chain doesn't make since either."

Funny how all the other parks Six Flags has so far sold have gone to other operators then? Selling to someone else in the business is what USUALLY happens. In Astroworld's case Six Flags foolishly believed they could get a lot more for the land than they actually did, which was why they turned down any reasonable offers. If Six Flags really wanted to dump Astroworld to reduce their debt, they could have gotten $60m for the place surely. That would have reduced their debt more than the net $55m they ended up with and there'd still be an operating park in southeast Texas.

Sense, by the way.

The parks Six Flags has sold or is about to sell are in states where they were competing with other parks. They left Ohio, closing the one and selling something (land, park or both) in Oklahoma. They don't compete in those states. Sell Astroworld to another company and suddenly your competing with another company. SF already tried to compete with CF in one part of the country and failed miserably.

Also, chalk this mistake up to the old regime. Who knows what the Staubach report said the park was worth or if current management would keep the park open. Are you sure other amsuement park companies were interested in purchasing Astroworld? Especially with the parking issues the park was facing.

Your sounding like a disgruntled Astroworld Fanboy.

The bottom line is that the company again lost more money and brought in less revenue, one can spin per capita spending as being great news, but the co. still lost more money than the year before (it lost 241 million this quarter/$2.63per share). Can one not spin attendance has been reduced due to increased parking and admission costs??

If good news, than disney must be in just AWFUL shape as the resort's divisions made $214 million with a 17% increase in profit, and Cedar Fair also as it increased the dividendit paid to shareholders

It's a company in transition though. A turn-around isn't going to happen in one quarter, especially a quarter in which most of the parks aren't open and they need to make drastic improvements before the parks open.

And that's a big part that no one wants to look at, Jeff.

Given the circumstances this is a fine financial report.

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If Six Flags really wanted to dump Astroworld to reduce their debt, they could have gotten $60m for the place surely. That would have reduced their debt more than the net $55m they ended up with and there'd still be an operating park in southeast Texas.

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By scrapping it, they got $5m less by your estimates, but were able to add a number of "new" rides to other parks and didn't have to worry about competition for their other TX parks. That doesn't sound too bad of a bargain.

If Six Flags had sold the park intact for anywhere between $60-80m or so instead of holding out for a land sale that didn't go how they planned, they could have afforded NEW attractions for the smaller parks that received some of Astroworld's hand-me-downs, not old used hardware. Six Flags only kept 3 steel rollercoasters, two of which were already 20 years old and rather beat up, and a couple flat rides. Meanwhile several rollercoasters including the Texas Cyclone, Viper, and XLR8 were sent to the dumpster. What benefit Darian Lake, The Great Escape, St Louis etc., have gotten out of this deal is far outweighed by the damage done to Houston.

And please, Houston was not really competing with Dallas and negligably with San Antonio. Those parks are 3-5 hours away, Fiesta competed with Seaworld not Astroworld. By leaving a big gap in the region Six Flags has opened the door for real competition should someone decide to ever build a NEW park down here, instead of someone else managing aging pre-existing property. If Cedar Fair has picked up Astroworld, new management was not going to draw visitors away from SFOT any time soon.

"Your sounding like a disgruntled Astroworld Fanboy."

Well, yeah, I live in Houston. We got reamed.

4:09:24 PM ***
*** This post was edited by Fierce Pancake 5/10/2006 4:10:02 PM ***

First, until Sea World builds a bunch of flat rides and adds a couple of coasters, both parks willn't compete in my book.

Second, in one way your right, Astroworld, SFOT and SFFT don't compete against each other. They were owned by the same company so any competition still benefited the company. However, Paramount or CF come in and begin agressive pricing discounts, SF would suddenly need to match what the other chain was doing. Where before they pretty much dominated the market. We see this done all of the time. Example: Food Lion and Safeway, two local Washington D.C. Grocery stores. Safeway builds a new store in one shopping center and closes the store in the other (both in the same town). Safeway continues paying the lease on the old, now vacant store to keep Food Lion from coming in and bringing competition. Another Example, Peter Angelos didn't want the D.C. Nationals to move to Washington. Why? Because he didn't want the competition from another baseball team eroding the fan base of the Baltimore Orioles. He considered Maryland, Virginia his market.

Bottom line, what I'm saying is, SF pretty much dominates the thrill ride parks in Texas. By selling the land Astroworld sits on, they control who they sell it to and keep their "monopoly" of Texas. As opposed to selling it to another chain who brings in competition to the other SF parks.By tearing down Astroworld instead of selling it, SF will be ahead of the competition by 45 years since the competition will have to build from the ground up. Unless, of course, your Disney or Universal. Then SF will be in a real battle.

*** This post was edited by coasterguts 5/10/2006 8:08:59 PM ***

In Six Flags new Annual Report the following parks are not completely owned by Six Flags Inc. - Six Flags Over Texas (patnership), Six Flags Over Georgia and Six Flags White Water/American Adventures (all patnership). The following parks are all under some type of a lease deal - Enchanted Village, Six Flags New Orleans, Six Flags Mexico, La Ronde, Six Flags Marine World, Six Flags Waterworld (Concord) and Six Flags Kentucky Kingdom (parts of the park). Both Wyandot Lake and Six Flags Waterworld (Sacremento) are under a lease which will not be renewed.*** This post was edited by SFZIP 5/10/2006 6:21:14 PM ***

In any economic class i have had, they never thought a "good" quarter was one in which you increased your debt by 241 million when you are already over 2 billion in debt, The goal would be to reduce the amount of money you are losing, not to lose even more!!

For what it's worth, if per cap revenue increased by 13 percent to $37.13,previous spending was $32.85. So the increase in spending was $4.28 a person. Is this a spectacular amount? I can't say, not having data from other parks or other years to compare.

What I do know is when I go to minor league hockey games, my spending (including admission, parking, refreshments, souvenirs) increases by about 25 percent if I decide to buy a second beer.

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Is this a spectacular amount? I can't say, not having data from other parks or other years to compare.

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That's a very good question and I have some time on my hands. (what else is new :) )

Cedar Fair reported a 3% per cap increase in 2005

Paramount Parks saw a 4% decrease in the 2nd quarter in 2004

Six Flags reported a 1.6% per cap spending increase in the 3rd quarter of 2004

Most of the other info I dug up was for these same parks/chains and 1% to 4% is pretty much the range you see in increase or decrease. I dunno. 13% seems WAY impressive.

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What I do know is when I go to minor league hockey games, my spending (including admission, parking, refreshments, souvenirs) increases by about 25 percent if I decide to buy a second beer.

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Yeah, that's a good point too, but in order for the total per cap to go up 13% that means half the people in attendence at the game have to buy that 2nd beer - and that has to happen at every game in the reporting period.

"Second, in one way your right, Astroworld, SFOT and SFFT don't compete against each other. They were owned by the same company so any competition still benefited the company. However, Paramount or CF come in and begin agressive pricing discounts, SF would suddenly need to match what the other chain was doing. "

Houston, Dallas, and San Antonio are not close enough together for this to be necessary. If a park 250 miles away is offering cheaper admission, it's not going to sway many people to foot the expense of traveling that distance to visit the cheaper park. Especially not if it was an older park with admittedly unimpressive attractions. If I were located right in the middle of Dallas and Houston I'd definitely go to SFOT anyway based on what the park offered. If Cedar or Paramount had picked up Astroworld and offered cheaper admission it wouldn't have exerted much pressure on the other side of the state. Now if Seaworld reduces admission in San Antonio, Fiesta Texas may feel an impact because they're inarguably competing in the same market.

Six Flags has been advertising Fiesta and Dallas a little bit here in Houston, but really when you factor the distance, the price of gas, and the bitterness towards Six Flags around here I can't imagine they're getting much spillover from Houston. Quarterly results that indicate a drop in attendance overall do little to suggest the Houston market has been re-absorbed. And this is a large, top-ten market down here. There's no other metropolitan area in the US so large lacking a real amusement park within a couple hours drive.

In the long run, Six Flags has opened up the possibility of having more competition in the south because there's no a big gaping void where there used to be large parks in Houston and New Orleans. Astroworld's existance discouraged anyone building anything down here, and even if the park had changed hands it was full of old hardware that didn't measure up well against the attractions at Over Texas and Fiesta. Anyone who builds down here is going to now need to actually put in NEW rides and offer something different. Unfortunately for us, that could take a decade to happen and we have nothing down here in the meanwhile. Six Flags had the region under control but short-sightedly gave that up for a pretty unimpressive one time payment.

Percentage increases or decreases don't really mean that much unless you know the baseline they're being compared to. The double digit percentage increase in spending amounts to a little over $4.00 per person. Granted, a five dollar increase in parking fees can be divided depending on the number of people in the vehicle. But for most families, that's over a dollar apiece right there. Raise admission here, charge more for food there, and it's pretty difficult NOT to get people to pay more per person on a visit to the park.

Another way to look at it-- for Six Flags to maintain the same revenue this quarter compared to last year with the fewer people they counted, would have required an additional $5.50 in spending per person, or almost $10.00 a person compared to last year-- that's more than a 30 percent increase.

It's fine if they want to serve fewer but "higher quality" customers, but they will have to find the balance between not only the per capita spending, but also the number of people in the park to spend their money.

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It's fine if they want to serve fewer but "higher quality" customers, but they will have to find the balance between not only the per capita spending, but also the number of people in the park to spend their money.

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Exactly.

The per cap is moving and I suspect will continue to move. $37.13 is still a long way to go to those 'ridiculous' prices they set and like I said a little up the page, SP pricing will probably follow. The money side of things is well into motion.

The other half is getting people to come. I think that's been set in motion as well. All the additional staffing, characters, promotions (Brunch with Bugs, The Carrothead Club) in addition to the exposure from the deals with places like Papa John's and Home Depot. It all adds up and it's all things Burke and company didn't do.

I still think these numbers are nice. Admittedly, these really aren't 100% Red Zone numbers. The fact that they moved per cap that far in such little time (they only took control 2 weeks before the quarter started, let alone the timing in implimenting the changes) still impresses me. The 2nd quarter will be more telling. The 3rd even more and so on.

As far as attendance, I fully expect the slide put into place over the years by the old guys to be in effect. I have no doubt that attendance will be down compared to last year. Rome wasn't built in a day.

I'd afford the same transitional period to this as I would to CF in the case of GL. There's a ton of damage to undo.

Maybe I'm considering the 'big picture' too much? I mean, if I looked at something as short as a "two-year plan" then this is a huge first step - people are spending more money at the parks. That's a pretty good step when running a company that has put itself two billion dollars in debt prior to your takeover.

I get the feeling that a lot of the SF bashers are basing their opinions off of what other people tell them or is posted on coaster web sites. Personally, I haven't been to any of the SF parks, but, it is not because of anything anyone has told me. Rather, I just have to find the time and $$$$ to make a trip because the two that I really want to visit are in NJ and California and I am in Ohio. I hope that these recent trends mean that the whole chain is turning around. Good for them and good luck. I also agree with what was said earlier in that people are not being patient when it comes to turning a park around. I still hear people griping about Geauga Lake and it seems to me that GL is finally headed in the right direction. I can't wait for a few more years to see where CF is going to take GL. I see the huge changes being made around GL not to mention that the number one and most important change is the fact that their rides seem to be running more consistently than ever before. How can you not like that?

"It's a company in transition though. A turn-around isn't going to happen in one quarter, especially a quarter in which most of the parks aren't open and they need to make drastic improvements before the parks open."

Jeff - You are EXACTLY right!! One of Shapiro's biggest points is that these changes won't happen overnight. 2006 is gonna be a tough year for Six Flags, and the company will face a lot of negative feedback from its patrons probably for the entire year. However, these changes will most likely benefit the chain when 2007 rolls around.