Six Flags, Inc. (NYSE:SIX)
Q3 2008 Earnings Call
November 10, 2008 9:00 am ET
Sandra Daniels – IR
Mark Shapiro – President & CEO
Jeff Speed – EVP & CFO
David Miller – Caris & Company
Joe Stauff - CRT Capital
Susan Lee – Credit Suisse
Lance Vitanza – Knighthead Capital Group
Analyst – Babson Capital
Analyst – Barclay’s Capital
Dan Murphy – [Pantwater Capital]
[Howard Briarman] – Evergreen Investments
Good day ladies and gentlemen and welcome to the third quarter 2008 Six Flags Inc. earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today's conference, Sandra Daniels, Vice President of Communications.
Good morning, this morning the company released its financial and operating results for the third quarter and six months ended September 30, 2008. A copy of the earnings release is available on the company’s website at www.sixflags.com under the heading Investors.
Here with me today are our President and CEO, Mark Shapiro, and our Executive Vice President and Chief Financial Officer, Jeff Speed. Before I turn the call over to them, they have asked me to remind you that in compliance with SEC Regulation FD, a webcast of this call is being made available to the media and the general public as well as analysts and investors.
The company cautions you that comments made during the call will include forward-looking statements within the meaning of the Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in such statements. You may refer to the company’s 2007 Annual Report on Form 10-K which is also posted on its website for a detailed discussion of these risks.
Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all contents of the call will be considered fully disclosed. In accordance with SEC Regulation G, non-GAAP financial measures used in the earnings release and in the company’s oral presentation today are required to be reconciled to the most directly comparable GAAP measure. Those reconciliations are available to investors in the earnings release.
Now I would like to turn the call over to Mark Shapiro, our President and Chief Executive Officer.
Thank you Sandra and good morning everyone. Agenda for today is as follows, I am going to review some headlines with you, turn it over to Jeff to get into the specifics of our financials, and then I’ll come back on to discuss the balance sheet in particular.
The front-page headline for Six Flags is that through three quarters as you saw from our release this morning, we are at $270 million of adjusted EBITDA. That’s up from $190 million last year. And we expect to end the year at approximately $275 million to $280 million making us free cash flow positive for the first time in the history of this company.
We’ve grown in every which way. We’ve grown it on the top line, we’ve grown it through efficiency in our expenses, we’ve grown it through volume and we’ve grown it in this economic climate.
We’ve also grown it in park. If you recall from some of our calls earlier in the year the discussion or the banter, I guess the prognostication was that even if we could grow volume this year, nobody would spend. Well we grew volume and our in-park spending was up over 4% this year.
On the sponsorship front, corporate alliances at the beginning of the year, we guided everyone to $51 million in sponsorship and licensing. In August we took that guidance up to $56 million and we’re now going to end the year at $59 million.
So Six Flags as a solution to advertisers looking to reach people in an increasingly fragmented environment continues to be a winning solution.
Finally our brand strength has been restored. Over the last three years, you are all too familiar with the expense we put into this company to fix this company and clean up the parks. Now according to our research, delivering on expectations and delivering on the value message in particular, is resonating most with our consumers as it relates to the Six Flags brand.
Value, and delivering on expectations is now becoming a part of the Six Flags DNA. Beyond that further evidence that our brand strength has been restored points to the continued international interest we find for Six Flags’ parks all over the world.
We have announced Dubai will have another Middle East announcement in December and we’re currently in discussions with several groups in Korea. On the volume side, we were out in front of this economic climate. There’s just no two ways about it. In February, prior to anyone doing their discounting or discounting their brand, we got out front with a value message in our communications messages, and in our advertising.
And there’s no question that the singular message of everyone pay’s kids’ pricing, reflected well not only on our performance, on our business, on our brand, but in the future of our business going forward especially next summer.
Kids pricing and value resonated with the consumers as it relates to Six Flags in particular. My final note as I transition to the financials with Jeff is, keep in mind where we’re now going to end up is Six Flags will finish the year as I mentioned, free cash flow positive.
That is up from a negative $170 million last year, a swing of $170 million to positive. How we got there I’ll talk about at the end of the call.
Thanks Mark and good morning. I’m going to spend a few minutes reviewing our results for the quarter and nine months as well as our performance through the Halloween weekend and then I’ll wrap up with a few comments regarding our full year guidance and a brief look at our cash and liquidity position. And after that some closing comments from Mark and then we’ll open it up for Q&A.
Let me start with revenues for the quarter, our quarterly revenues grew 5% compared to the third quarter of 2007. The growth reflects per capita increases of less then 1% for tickets and 4% for in-park resulting in a 2% increase in per capita guest spending.
The in-park growth was a result of increased spending on rentals, food and beverage, parking, and retail. Our revenue growth for the quarter also reflects continued increases in our sponsorship and licensing business which grew by $8 million or 67% to over $19 million for the quarter.
Attendance increased approximately 200,000 for the quarter. This increase was despite the loss of two full park operating days and a planned reduction of over 200,000 in complimentary and free promotional attendance compared to the prior year quarter.
You may recall that in the prior year we used free ticket promotions to drive sampling of the new and improved Six Flags which our customers rated at record highs in terms of satisfaction. This year we made the decision early on to ratchet back our free promotional ticket programs in favor of our value priced ticket program, namely everyone pays kids prices, that Mark referred to.
This proved to be extremely successful and was the key driver of our attendance growth. For the nine-month period our revenues increased 5% to $903 million with a 3% increase in per capita guest spending and a $16 million increase in sponsorship, licensing, and other fees which grew from approximately $29 million in the prior year period to over $45 million in the current year period.
The per capita guest spending growth was comprised of 1% ticket and 4% in-park. Our nine-month attendance increased by 184,000 to 22.2 million. Again, this performance is despite a reduction in park operating days, and over 400,000 less complimentary and free promotional attendance compared to the first nine months of 2007.
Excluding the planned reductions in free and comp tickets, our paid attendance increased over 600,000 for the nine-month period. This attendance growth was driven by our promotional, value priced ticket attendance partially offset by our group business.
The impact of weather on our attendance was somewhat mixed for the period. For the quarter we experienced weather that was on par with the prior year in terms of number of bad weather days at our parks.
For the nine-month period we experienced 9% fewer weather days in 2008, with that improvement concentrated in our three Texas parks. Excluding our Texas parks, we experienced a 7% increase in bad weather for the first nine months of 2008.
With regard to our operating costs and expenses, 2008 has certainly been an important year in terms of validating the key elements of our turn around strategy, namely to generate solid revenue growth, maintain record customer satisfaction scores while at the same time driving efficiencies throughout our cost base and our capital expense programs.
For the quarter our cash operating costs and expenses which excludes cost of sales, depreciation, amortization, stock-based compensation, and loss on fixed assets, decreased 3% or $7 million to $194 million.
The reduced costs for the quarter were primarily driven by reduced advertising as well as lower salaries, benefits, and seasonal labor. These reductions were partially offset by higher then anticipated utilities, general liability expenses, and cash based incentive compensation.
For the nine-month period, our cash operating costs and expenses decreased 7% or $37 million to $520 million. Similar to the quarter the lower costs for the nine month period were driven by planned reductions in advertising, salaries and benefits from lower full time headcount, and improved seasonal labor management as well as reduced third party service costs, repairs and maintenance, and travel related expenses.
These planned reductions totaling approximately $54 million were partially offset by higher then anticipated utilities, general liability expenses, cash based incentive comp, and the adverse impact of foreign exchange on our non-US parks.
As we continue down our income statement interest expense decreased by $4 million for the quarter and $14 million on a year-to-date basis. This reflects lower interest costs due to the prior year refinancing of our senior secured credit facility as well as swapping $600 million of our floating rate bank debt to a three-year fixed rate of approximately 5.3% earlier this year.
Minority interest in earnings for the quarter declined by $5 million primarily due to our July, 2007 acquisition of the minority interest in our Six Flags Discovery Kingdom Park. Minority interest was flat for the nine months as the benefit of the Discovery Kingdom acquisition was offset by increased distributions related to minority interests in our partnership parks in Texas and Georgia.
During the third quarter we went from approximately $13 million of other expense in 2007 to $2 million of other income for the current year period. This reflects the prior year cost of settling a California labor class action lawsuit that originated in 2005.
The first nine months of 2008 benefited from the third quarter change in other income expense as well as a net gain on debt extinguishment of $108 million from the company’s June, 2008 exchange of new senior unsecured notes that are due in 2016 for a portion of our then outstanding notes.
Our increased revenues and reduced cost base resulted in adjusted EBITDA growth for the quarter of $37 million or 19% to $236 million. For the nine months our adjusted EBITDA increased by $82 million or 44% from $188 million to $270 million.
Importantly our EBITDA margin which is our EBITDA before adjustments, divided by total revenues improved by four percentage points for the third quarter and by seven percentage points for the nine months reaching EBITDA margins of 52% and 34% respectively.
Our strong performance for the year continued into the fourth quarter as our park teams leveraged the strength of our Fright Fest product through the Halloween weekend and saw quarter-to-date revenues increase 9% over the prior year period.
The revenue growth reflects a 7% increase in attendance and a 2% growth in total revenue per capita. Our attendance for the period was positively impacted by the timing of Halloween which fell on a Friday night this year instead of last year’s Wednesday night, allowing our parks to extend the Fright Fest season an additional weekend.
On a year-to-date basis, through November 4, our attendance is up approximately 320,000 and if we exclude the reduction in free and complimentary tickets of approximately 500,000 through that date, our paid attendance increased approximately 800,000 for the period.
With regard to the balance of the year, thanks to our strong performance for the first nine months and continuing thus far in the fourth quarter, we are poised to achieve our financial objectives for the year. To that end I’d like to take a moment to revisit our full year guidance for a few items.
As Mark touched on at the outset, with respect to our sponsorship and licensing business, we originally targeted $51 million of revenues this year and we increased guidance last quarter to $56 million.
We are now expecting to reach approximately $59 million for the 2008 year which compared to approximately $38 million in 2007. On the cost side, we originally targeted $50 million in cash cost efficiencies for 2008 through reduced marketing, lower full time staffing and better seasonal labor management, removal of inefficient rides and attractions, and leveraging the Dick Clark Library in lieu of some of our live stage shows.
The good news is that we delivered over $50 million of efficiencies from those initiatives. Unfortunately due to higher then anticipated utility costs, general liability, and foreign exchange impacts, as well as having to use more cash based incentive compensation rather then stock based, we’re going to come up short of our original target.
Excluding cost of sales we ended the nine-month period at $520 million of cash costs and expenses, a $37 million reduction from the 2007 period and we’re looking for Q4 cash costs and expenses to be relatively flat to the prior year at approximately $105 million notwithstanding increased operating days in the quarter.
With respect to our capital expenditures net of proceeds from property insurance recoveries, we expect total spending to approximate $95 million for the full year consistent with our annual run rate of approximately $100 million plus or minus $10 million.
Taking the above changes into account, and subject to weather during our Holiday in the Park season, we remain well positioned to not only reach our ultimate goal of positive free cash flow for the first time in the company’s history, but also to achieve the other three financial goals that management set out to achieve by the end of its third year.
Specifically reaching total revenue per capita of $40, with cumulative growth of 20% from 2005, operating at full year EBITDA margins of at least 30%, and creating a high margin low capital sponsorship and licensing business that generates in excess of $50 million in annual revenues.
Regarding our financial position, we’re comfortable that we have sufficient cash and liquidity to fund our 2009 off season and although our $275 million revolver was paid down to zero at September 30, in early October 2008 we drew down the entire available amount or approximately $240 million to ensure the availability of funds for the 2009 off season in light of the state of the global credit markets, and potential funding concerns related to certain lenders.
And finally, as we all know, the redemption date for our mandatorily redeemable preferred stock, or [PRS] is August 2009 and we have approximately $130 million of senior unsecured notes due in February 2010.
As Mark will discuss further in a moment we intend to proactively address these upcoming obligations in the context of comprehensively addressing the overall balance sheet challenges that we inherited a few years ago.
And we would certainly hope that the company’s significantly improved financial performance can be the catalyst that enables us to achieve that objective.
I’m now going to turn the call back over to Mark to wrap up before we open the call for Q&A.
Thanks Jeff, bear with me if you will a minute, I do want to briefly lay out the goals that we set forth for this company in early spring 2006 just after Jeff came on board. First off, to get this company to free cash flow positive, which we talk about ad nauseam, but it was prime target number one for us.
At $275 million to $280 million we will be free cash flow positive. Attaining EBITDA margins of 30% plus and really how we got to 30%, I mentioned several times in this call before, I think Cedar Fair does a terrific job of operating their business and operating their parks and even though their headquarters are in Sandusky as opposed to New York City or Dallas, so their G&A is a lot lower, their EBITDA margins are in the mid-30s which is nothing to sneeze at.
So its our goal to attain adjusted EBITDA margins of 34%. Again by hitting that $275 million to $280 million of adjusted EBITDA we’ll be at 34% EBITDA margins. Our third goal was to increase guest spending by an accumulative 20%. We wanted to get our total revenue per cap, total revenue per guest from approximately $32 which the regime was doing before we came on to over $40.
Today at approximately $40.57 through November 4, we’ve grown our total revenue per cap by that 20%. Goal number four, create a sponsorship division, corporate alliances, with a goal of bringing in $50 million by the end of 2008.
Today as Jeff mentioned our corporate alliances and licensing division will bring in approximately $60 million, $59.2 million at the end of 2008.
And finally, probably most important because you cannot accomplish the first four goals without the first goal, the one that’s paramount to all others, which is clean up the parks, the clientele, the paint, the pavement, the guest service, you name it. A total wash if you will.
With our guest satisfaction scores, which we frequently talk about, at or above all time highs across the board from cleanliness to overall satisfaction, to value for the money, we have cleaned up the parks and hit that fifth goal.
We are five for five on the three-year turnaround of this company. We’ve turned it around any way you slice it. It’s the best year ever. Its record performance, the foundation has now been laid for significant long-term growth.
We’ve diversified our revenue streams, we are simply not just a theme park company anymore. We’ve strengthened our brand with acquisitions like Dick Clark Productions and we are building an international footprint and we’ve transformed the culture throughout our entire workforce.
And we’ve proven that you can win in this business through marketing and branding and straight-up good old-fashioned customer service. When I walked into the job in December of 2005, all I heard was the theme park business is a [cap incentive] business and you need $20 million coasters to survive much less grow.
What we’ve proven is that its simply not the case. Now I say all this not to gloat, or beat ourselves on the chest, of course we’re proud but not to be arrogant about it, but simply to acknowledge the hard work of our 3,000 full time employees and 28,000 part time employees.
They believed in the vision, some reluctantly, but they got on board. They executed on the mission and they kept battling and they battle today even in the doldrums of a $0.30 stock. All that’s left for Six Flags is to clean up the balance sheet, the debt we inherited, and I intend to clean it up once and for all.
We cannot grow at the rate I know we’re capable of growing at carrying this amount of debt. That’s simply not a company I’m interested in running. And our hard working employees shouldn’t have to suffer under it any more. When you look at the management team we’ve assembled at corporate and at the parks, when you look at this year’s record performance in this particular economic climate, when you look at the turnaround overall, especially in the time period in which it was done, only two full seasons, when you look at all that, this company’s potential is extraordinary.
Enough is enough, 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’s all we will say about that today.
At this time I’d like to open it up for questions and answers.
(Operator Instructions) Your first question comes from the line of David Miller – Caris & Company
David Miller – Caris & Company
What was the Dick Clark number in the quarter? You have said in past announcements that you intend to do anything and everything at your disposal to remain listed on the New York Stock Exchange, other then a reverse stock split, I’m wondering what other alternatives you’re exploring.
On Dick Clark, obviously since its not a public company we don’t breakout its separate results, what I can say is I think we had mentioned before that on a LTM basis it was doing about $16, $17 million of EBITDA and we pick up 40% of that over the course of the year. The third quarter is one of its lighter quarters because it doesn’t have one of the core programs, it has the So You Think You Can Dance program running during that quarter.
Next quarter is the AMAs, then you’ve got New Years Rockin’ Eve, in the next quarter and then Golden Globes the next quarter and the Academy of Country Music Awards after that so the long and short is the third quarter is one of the lighter quarters for the pickup but on a run rate basis its about $7 million for the whole year so its slightly skewed to the other quarters though.
On the listing, really its going, we’re clearly focused on retaining our listing. We believe we will be able to retain our listing. Obviously in terms of the dollar requirement, reverse split is certainly a mechanical alternative to resolve that particular listing standard. There’s another listing standard having to do with $75 million equity market cap and as regard to that one, that’s going to be a function of what Mark alluded to basically that its something that we will address in the context of addressing comprehensively our balance sheet.
Depending on what we do with the balance sheet the listing will take care of itself.
David Miller – Caris & Company
So that would imply though that you have something up your sleeves with regard to some sort of balance sheet mechanics sooner rather then later because the six months is coming up fairly soon, correct?
The six months only applies for the dollar stock price, first of all. The $75 million threshold is up to 18-month period.
David Miller – Caris & Company
I take it you’re not interested in issuing any sort of pronouncements on 2009 at this time.
No we’re right in the midst of our budget planning. We touched on CapEx which obviously that’s locked in and we’re looking for that to continue to be consistent with our run rate of $100 million plus or minus $10 million and probably on the lower side next year.
All I would say on that with regard to next year is clearly while no one is immune to this economic environment we have demonstrated and I believe we’ll further demonstrate that we are resilient to the economic downturn. Not immune but resilient and I think that’s what we said going into the season. When you look at next year, our season pass sales so far this year for next year are strong, which is a good indicator.
We do believe people will continue to stay close to home if you will which is also a good indicator. But at the same time there’s total uncertainty here. This is something none of us have ever seen before so saying that we’re bullish about next year would be grossly untrue.
It’s a total uncertain time. We can’t forecast it whatsoever. We’re being conservative in our estimates but I think conservative is going to win the day. I think that’s more realistic these days. And then of course a lot of our business is driven by, or our new revenue streams are driven by our sponsorships, our corporate alliances and while I like what I see so far for next year, at the same time advertising budgets are being cut everywhere.
I think some of those budgets will end up floating to us if you will, are being directed to us, out of home, non-traditional advertisers. But at the same time just a lot of uncertainty.
Your next question comes from the line of Joe Stauff - CRT Capital
Joe Stauff - CRT Capital
Sponsorship revenue, $59 million, clearly a very good number, how do we think about what percentage of that comes up for renewal next year? I know you had mentioned some Middle East interest and some Korean interest and so how do we think about what portion of that again, could swing in terms of the delta for next year?
Really you don’t think about it, when we get back on our call, our next call when we discuss year-end we’ll give you some guidance on that, its too early right now. We’ve got a lot of deals in motion. You can go back to some of our earlier transcripts and see what fell out from 2006 to 2007 but most of our deals are long-term, nevertheless each year you have some deals coming in and out.
The good news is we don’t see any Home Depots on the horizon meaning everything that is coming up for renewal we anticipate being renewed.
Joe Stauff - CRT Capital
Now you obviously give a lot of data points and so forth and I don’t mean to overly simplify again your efforts here in terms of what occurred this year, again this year being a success, but as you look at this year’s results outside of weather, was there a significant, most important variable whether it be pricing or whatever that really drove your results this year?
I break it down to two things and people ask me this all the time, in the face of the retail sector, going down the drain how are you surviving much less succeeding? I break it down two ways, word of mouth is half of it. There’s no question. You can tell everybody until you’re blue in the face, I can get on the front page of USA Today in our opening year and say we’re going to turn this into a family park. We’re going to clean it up etc.
Until you do it and then until people sample it, and then tell their friends, and that word of mouth spreads like a virus you’re not going to grow your business. And it takes a while to do that. I was asked last year in fact on one of these calls how long I thought, and I said word of mouth I thought would take three to five years.
I think half of our success this year was driven by strong word of mouth about the product. The other half was clearly driven by our everyone pays kids pricing. I think our marketing team led by Mike and Angie, they blew it out of the water. They realized early on value was the strong point. Value was the key word before you saw it in every commercial and every newspaper.
So we came out with an everyone pays kids price at the end of February last year, in time for spring break. So our Dallas Park, or our Arlington Park, just opened up in spring break to record crowds. Good weather, but actually one day was a wash out completely, but pretty much record crowds and I would say it was driven by an everyone pays kids price. That value absolutely resonated.
So those two factors, word of mouth about our product which clearly is being driven and improved by the terrific array of Park Presidents we’ve assembled and the everyone pays kids price value messaging. Those two factors drove our business more then anything else.
I’m not touching on weather because of course that’s a no-brainer and you mentioned that up front. You’ve got to have good weather, you’ve got to have the weather to play ball, but as I’ve often said before it’s a significant factor but its one of the many significant factors to driving your business.
Your next question comes from the line of Susan Lee – Credit Suisse
Susan Lee – Credit Suisse
You mentioned that you were exploring options on the balance sheet and probably not going to give much detail on that now, but I just wanted to confirm what’s the availability under the [inaudible] notes, I think the [incurrence] is about 6.5x and them on the credit facility, can you provide the number that you drew on and does that also account for the exposure that you had and then do you have any other further updates on the New Orleans insurance proceeds?
Incurrence, the incurrence through the $400 million 2016 notes, its 6.5x and in our press release we note that the leverage ratio under that note we’re currently at on an LTM basis, 5.23x. So we basically have a turn and a quarter of capacity there.
Importantly though that’s a turn and a quarter of EBITDA at that level so it would exclude our partnership parks which generally are a reduction from our consolidated EBITDA of around $10 to $20 million depending upon the year.
That’s the capacity we have there. So call it another $200 plus million. On the revolver, we drew down $240 million which was the available amount on the revolver. We drew that down in early October. The reason the total amount is $275 under the revolver but we have about $30 odd million that we generally have outstanding on a recurring basis for LCs.
New Orleans, the update there, nothing new to report. We’re still in the midst of litigation. We’re appealing a summary judgment opinion that was handed down earlier in the year and really hard to project when that will ultimately come to an end given we’re subject to the [inaudible] of the judicial process.
Your next question comes from the line of Analyst
Given your outperformance in 2008 do you believe you’ll hit that $100 million target on the shorter end of your previous three to five year range that you gave previously?
No, as I mentioned you can’t answer that question and we’ll give you further guidance as we get to the early part of next year, on our next call, but that’s really what it is. People should just stick to the $100 million we’ve guided to and what did we say, three to five years at the beginning of this year.
I don’t think we’re going to hit it earlier only because I’m not sure yet how next year is going to play out. I think I’ll have more clarity once we get through next year. Its just so many deals are in flux right now and in motion right now and advertising dollars specifically in the spot market are moving all over the place and we think we’re going to be able to capture some good advertising during the television up-fronts next year as those dramatically change.
There’s just too much in flux right now to make any kind of predictions about hitting our bogey earlier. But the answer is really that we’re going to stick to that guidance of three to five years to hit on the $1 million and this would be the first year completed on that three to five year calendar.
It seemed as if there was a slight acceleration in per guest spending excluding sponsorships from the mid-August update that you gave, through the third quarter now, and was there a discernable change in your guests’ behavior as gas prices fell during September and October?
No, not at all. We were really strong all summer long. The other thing that benefited us, we nailed the stimulus package. We saw the stimulus package was coming. Those checks as you know are sent out over really a four-week period maybe longer, and we knew it was coming and people would have more money.
We didn’t think people we’re going to go spend it immediately like they had during the last recession, they might put it in a bank, they might use to pay off bills, if they were smart they’d put the cash under their mattress for today’s climate, but maybe they were going to spend some of it.
And in the hopes that they would spend some of it, we doubled our advertising spend for four weeks during the economic stimulus distribution. And that paid off for us and then when the people came into the parks on good weather, they stayed long and they spent and that really helped us out.
The big brand strategy has clearly paid off for us and I would tell you as well, [Low Q] which is the company that does our flash pass system, they’re unbelievable. They really drove our business and their numbers were up significantly year-over-year. In fact they’ve been up significantly year-over-year since the year I arrived and we began to expand the usage of our flash pass system in all of our parks.
We had one million more people use the system this year then last year and you remember flash pass is what gets you a premium and you get an electronic device that brings you to the front of the line so you don’t have to wait in line.
And because of the positive response we’re seeing, we’re planning to install in another two parks next year so that nearly every Six Flags park will have the system and flash pass works because really it drives revenue in two ways. One the premium they pay for the flash pass, so the revenue is generated that way. And then of course, by not being trapped in line, the guests spend so much more time moving about the park, enjoying other facilities, spending and giving us further revenue in those ways.
So that was a big driver of our guest spending this year as well.
We’ve discussed how you emphasize the value package proposition at Six Flags which obviously resonated well this year, but do you plan to adjust that strategy and message further given the deteriorating economic environment, in essence, come February what message are you going to come out with to get ahead of the environment that we’re in, similar to what you did in 2008.
We’re going to put value on steroids. More hours, more days, longer days, longer season, in every park then ever before. I’m not going to get into what our specific advertising creative is going to be but we’re going to be creative on our pricing. We’re going to be out early in our advertising. We’re going to continue to diversity the way we market, really on all platforms and through all vehicles and using all tools specifically on the digital platform.
But we’re going to be offering more then ever before and that’s the message I want to continue to further cement in the minds of our consumers.
Your next question comes from the line of Lance Vitanza – Knighthead Capital Group
Lance Vitanza – Knighthead Capital Group
I know you mentioned you’re not going to say much but on the balance sheet, you said you were exploring all options, did you also say you’d hired advisors or no?
We said we intend to clean up the balance sheet once and for all, and we’re exploring all of our options. That’s it.
Your next question comes from the line of Analyst – Babson Capital
Analyst – Babson Capital
I just wanted to follow-up on that last question, I’m trying to figure out the timing of when you’re going to address this balance sheet because obviously with fantastic results you still have stock at $0.30 and bonds trading at 30, so I would think the faster the better. I’m just trying to get a sense of what you think the timing is and whether you’ve spoken to any of the bondholders yet.
To echo Mark’s comment, we’re really not going to get into any degree of specifics around timing or exactly what we’re thinking. The headline is that it’s the last piece of the turnaround that we have to address and we’re going to address it proactively.
Your next question comes from the line of Analyst – Barclay’s Capital
Analyst – Barclay’s Capital
Regarding the balance sheet, it just doesn’t seem like you’re giving any specifics, but more importantly I’m just trying to figure out again obviously the economy is bad, there’s a lot of stress in the consumer side and it does probably make sense for you to address it prior to the 2Q 2009 results. Can you give any indication with regard at least from that point of view that you agree? Every million dollars of EBITDA translates at around 6.5 through the mid core level.
We appreciate the advice and we’re exploring all of our options as we speak with alacrity.
Your next question comes from the line of Dan Murphy – [Pantwater Capital]
Dan Murphy – [Pantwater Capital]
Given your new increased cash flow what is your off-season working capital needs now?
Our working capital generally remains relatively constant given our revised CapEx from what we inherited that we’re running at about $100 million of CapEx, we generally use around $180 to $200 million generally speaking of cash need to the low season which basically gets us up through Memorial Day, that’s when we tend to have the highest use of cash and working capital as we’re building up inventories and so forth. So its around $180 to $200 million at the low point.
Obviously to the extent you generate positive cash from the previous season that reduces the amount you need on the revolver to fund that.
Dan Murphy – [Pantwater Capital]
What is your ability to repurchase bonds, how much is that? It was previously $255 I believe when you did 92 last year? What is the amount under the credit agreement and the new indenture that allows you to repurchase bonds?
We don’t have capacity at this point to repurchase bonds. We had asset sale proceeds that allowed us to repurchase bonds last year. And then we have a refinancing exception to refinance bonds because we’re north of six times levered up at our parent company. We can’t repurchase bonds other then at maturity or refinancing indebtedness.
Your final question comes from the line of [Howard Briarman] – Evergreen Investments
[Howard Briarman] – Evergreen Investments
Are there any restrictions on the $250 million that was drawn down or $240 million that was drawn down on the revolver? Can that be used for any purposes?
Like I said it can’t be used to buy back debt because we have restricted payment covenants, its going to be used for working capital to ensure that we have the funds to go through the off season. Again, our revolver we had reason to believe had been traded and participated out to various hedge funds and we wanted to ensure given lack of transparency related to certain types of investors, that we were going to be able to have those funds and ensure we had those funds through our low season. That was the purpose.
Thank you for your time today and look forward to speaking to you again with our end of year results.
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