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Six Flags Entertainment Corporation (NYSE:SIX)

Q4 2013 Results Earnings Conference Call

February 19, 2014, 09:00 AM ET

Executives

Nancy A. Krejsa - Senior Vice President, Investor Relations and Corporate Communications

Jim Reid-Anderson - Chairman, President and Chief Executive Officer

John M. Duffey - Chief Financial Officer

Analysts

Afua Ahwoi - Goldman Sachs

Ian A. Zaffino - Oppenheimer & Co. Inc.

James Hardiman - Longbow Research LLC

Joel Simkins - Credit Suisse

Timothy A. Conder - Wells Fargo Securities, LLC

Barton Crockett - FBR Capital Market

Ian Corydon - B. Riley & Company

Operator

Good morning, ladies and gentlemen. Welcome to the Six Flags' Fourth Quarter and Full Year 2013 Earnings Conference Call. My name is Stephanie and I will be your operator for today's call. (Operator Instructions).

I will now turn the call over to Nancy Krejsa, Senior Vice President, Investor Relations and Corporate Communications for Six Flags.

Nancy A. Krejsa

Good morning, and thank you for joining our call. With me are Jim Reid-Anderson, Chairman, President and CEO of Six Flags; and John Duffey, our Chief Financial Officer. We'll start the call with some prepared comments, and then open call to your questions.

Our comments 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, and the company undertakes no obligation to update or revise these statements. In addition on the call, we will discuss non-GAAP financial measures. Investors can find both the detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports or other forms filed or furnished with the SEC.

At this time I will turn the call over to Jim for his prepared remarks.

Jim Reid-Anderson

Thank you Nancy and good morning. I am really proud to share that we delivered a fantastic fourth quarter and as a result 2013 became the fourth consecutive year of record performance for Six Flags. Despite some headwinds earlier in the year revenue in 2013 grew 4% to over $1.1 billion while adjusted EBITDA grew 7% on a comparable basis to $404 million a new record for the company. Simultaneously we are able to increase guest satisfaction ratings to new all-time highs, grow attendance and revenue and increased the profitability of our business to a new industry high 40% EBITDA margin by remaining focused on execution of our business strategy.

Since 2009 we have more than doubled EBITDA, almost doubled EBITDA margin and we have radically improved guest satisfaction scores. The company has great momentum. Our pricing and ticket yield model is working very nicely. And similar to 2012 we registered price improvements in every single category in 2013.

Throughout 2013 we saw strong revenue growth in all key initiatives including our flash pass virtual queuing system, our in-park culinary services and our corporate alliance program. I have been particularly pleased with our success in driving food sales through our all season dining pass program.

Multi-year initiatives such as these will provide exciting growth opportunities for the company for many years to come. And our innovation continues. On example is our new biometric system which is being rolled out to our parks in 2014. It eliminates the need for us to take photos of our guests when they process their season process and then guests can enter our parks by simply pressing their finger on a scanner. We tested the biometric system last season in San Antonio, Dallas and Chicago and it significantly reduced season pass processing time for our guest and park entry queue line.

The innovative system also reduced our labor cost. Initiatives like this will allow us to continue enhancing the guest experience and help us further improve our industry leading margin. The fourth quarter of each year is a special time at Six Flags. We delight our guests in unique ways with two of our signature offering, FRIGHT FEST, when we transformed our parks into Halloween themed scare zones; and Holiday in the Park when our parks transformed into winter wonderland with millions of sparkling holiday lights.

Both those brands have become significant brands for us and an opportunity to sell more season profits and memberships to Six Flags. In fact FRIGHT FEST 2013 was our best ever as we increased our investment in the offering and guest satisfaction rose to new heights. These types of events extend our operating season allowing us to utilize our available capacity, leverage our fixed costs and provide a diversified product offering to single day guests as well as our loyal season pass and membership base.

As a result of our constant innovation, elevated guest satisfaction and higher employee morale our return on invested capital has improved by almost 1,200 basis points since 2009 coming in at 14% for 2013. I anticipate that we will see ROIC improve further over the next few years.

Cash EPS for the year was $2.45, an increase of 13% and we are returning all of our free-cash flow to our shareholders. We raised our dividend in the fourth quarter to $0.40 per share per quarter and use the balance of our free-cash flow plus some of the proceeds from our 2012 debt refinancing to repurchase 14% of our outstanding shares in the year.

Since we began our dividend and share repurchase programs three years ago we have collectively returned $1.2 billion to shareholders while maintaining the lowest leverage ratio in the industry. I continue to believe our shareholder repurchase program represents tremendous value for our shareholders. We will continue to use our excess cash flow to repurchase shares and also reward our shareholders with a stable and increasing cash dividend which is currently one of the highest dividend yields in the market.

In summary it was an excellent quarter and an excellent year for Six Flags. I am so very proud of my colleagues for achieving new record highs in guest satisfaction scores including the ratings for value for the money, safety and overall satisfaction, all while delivering the best ever employee satisfaction survey results and record financial performance.

At this time John Duffey is going to provide more details on our financial results. John?

John M. Duffey

Well, thank you Jim and good morning to everyone on the call. We are very pleased with how we finished the year with strong performances across the board. I'll start with a discussion of our fourth quarter performance and then provide details for the full year 2013. Revenue for the quarter increased $10.3 million or 7.1%. This increase was driven by a 1.4% growth in attendance and a 5.7% or $2.24 increase in total revenue per capita.

As Jim has mentioned earlier we view our October FRIGHT FEST and December Holiday in the Park events not only drivers of incremental attendance and guest spending but also as a key component to our success in retaining and growing our season pass and membership program. Despite being hit with uncharacteristically bad weather that affected parks in December the solid attendance growth in the quarter is a clear indication that a strategy is working well and we will continue to invest to make these events even bigger and better for our guests in 2014 and beyond.

Our strong offerings and innovations continue to provide us with the opportunity to increase pricing across all our ticket types which was evidenced by our admissions revenue per capita which grew by $1.32 or 6.6% despite a higher Season Pass and membership mix. This increase combined with a higher attendance resulted in total admission revenue increasing $5.9 million or 8.1%. We are also especially pleased with the growth we saw in in-park guest spending in the quarter, which was a direct result of the investments we made on incremental premium bright guest attractions such as our haunted houses and mazes, new guest offerings for holiday in the park and our successful all-season dining program.

In park guest spending increased $4 million or 6.8% in the quarter. In addition, we saw a nice uptick in our Great Escape lodge revenue, which was up 6.6%. Cash operating and SG&A expenses of a $107.6 million increased $3.6 million in the quarter versus prior year primarily due to increased marketing and labor cost relating to FRIGHT FEST and Holiday in the Park. The strong revenue growth resulted in adjusted EBITDA of $35.6 million versus $30 million in the fourth quarter of 2012, an 18.7% increase.

Moving to the full year 2013 performance; total revenue for the year increased $39.6 million or 3.7% over 2012, as a result of a 4.4% increase in admission revenue and a 2.6% increase in in-park revenue. For the first time ever in the history of the company, total guest per capita revenue eclipsed $40 to $40.18, an increase of $0.78 with admissions per capita up $0.62 and in-park per cap up $0.16. Both the admissions per cap and in-park per caps were dampened by the higher Season Pass and membership mix, which increased to 48% in 2013 versus 44% in 2012.

We are very pleased with our season pass strategy and in particular the membership component, which is small but continues to grow nicely and should be a key driver of guest retention. Our membership program which automatic renews members after 1 year should create a highly reliable and recurring cash flow stream for the company.

I am particularly proud of the company’s relentless focus on managing cost. Cash operating and SG&A expenses increased $5 million or less than 1% in 2013 and represented 52.2% of revenue versus 53.7% in 2012, a 147 basis points improvement. We were extremely pleased to achieve adjusted EBITDA of $404 million in 2013 representing an increase of $21.5 million or 5.6% over 2012. Adjusting for our non-controlling interest in Dick Clark Productions, which was sold in the third quarter of 2012 adjusted EBITDA grew $27 million or 7.2%.

Modified EBITDA margin of 40% is the company and industry high and compares to a margin of 38.9% in 2012. In four years we have grown our margins by over 1550 basis points with our focused strategy, a strategy that will deliver further margin improvement in the years to come.

Full year diluted GAAP earnings per share was a $1.18 versus $3.30 in 2012. However as we noted in the press release adjusting 2012 for non-recurring tax valuation reversal and the gain on sales of Dick Clark Productions 2012 diluted GAAP earnings per share was $0.45, representing a $0.73 or 162% increase.

Full year cash earnings per share which we believe is a better reflection of our earnings versus reported GAAP EPS due to fresh start accounting impacts and our tax loss carry forwards was $2.45 versus $2.16 in 2012, an increase of 13%. As of December 31, 2013 we had $0.8 billion of net operating loss carry forwards remaining, our total capital spending in 2013 was $102 million right on our targeted rate of 9% of revenue.

We were also pleased with the amendments to our credit facility we completed in December. The amendment allowed us to take advantage of favorable conditions in the debt market and reduce the interest rate payable on our tranche B term bond by 50 basis points resulting in $3 million of annual interest cost savings going forward. The amendment also provides us the flexibility to use over time up to $200 million of our cash on hand for share repurchases and other corporate purposes. These transactions positioned us very well as we continue to execute our strategy of optimizing shareholder returns.

Reported net debt as of December 31 was $1.23 billion, the company is in a very good position with significant cash on hand at year-end, no outstanding borrowings on its revolver and a net leverage ratio at December 31, 2013 of 3.0 times. Also in December our Board authorized an incremental $500 million of share repurchases through 2015. We repurchased $20 million or 0.5 million shares in fourth quarter which took our full year 2013 purchases to $524 million or 15.5 million shares and our year -- end of the year outstanding share count down to $94.9 million shares.

We're also very pleased with the great start to our 2014 season pass and annual membership sales as a result of our strong early momentum deferred revenue grew to $60 million as of December 31, 2013 a $7.7 million or 15% increase over prior year. In conjunction with the preparation of our 2013 income tax provision we determined an immaterial correction was needed related to December 2012 reversal of the valuation allowance we had on certain of our deferred tax assets. We have adjusted our consolidated financial statements as of and for the year ended December 31, 2012 to appropriately reflect the change in income tax expense and deferred income taxes. The impact of these adjustments is limited to the fourth quarter of 2012 and does not impact prior interim financial statements.

In summary we are extremely pleased with the fourth quarter and full year performance. For the full year we were able to increase attendance with strong marketable capital, excellent marketing and a successful season pass and membership strategy. We also increased guest spending per capita even with a higher proportion of season pass and membership attendance. And we affectively leveraged our cost infrastructure resulted in record EBITDA and excellent cash flow generation. We are well positioned as we head into 2014 and beyond.

As we look to the 2014 season I would like to remind you that Easter falls in the second quarter versus the first quarter in 2013. Many school districts schedule their spring breaks around this holiday and we operate many of our parks during the spring break week. Therefore we anticipate that approximately 300,000 of attendance will shift from Q1 into Q2 when you compare 2014 with 2013.

So now I would like to turn the call back over to Jim.

Jim Reid-Anderson

Thanks very much John. As you had mentioned our team is now focused on delivering an excellent 2014 season. The attractions we are introducing, several of which will set world records and are generating tremendous buzz are progressing as scheduled. And all of our new capital investments will help us continue to build strong business momentum.

Several initiatives are really kicking in nicely with our membership and all season dinning programs leading the way. I am confident that our strategic pricing yield and season pass initiative will continue to bear fruit for our shareholders for many years to come. On an ongoing basis we will look closely at all aspects of our business to drive growth and we are very focused on smart cost management.

In addition as you are aware we continue to explore international development opportunities and are actively looking at options to dispose of our excess land. We also remain on track to achieve our 2015 target of $500 million of modified EBITDA which equates to nearly $3 of cash earnings per share.

As CEO of the company I want you our shareholders to know that I have never been more confident in our outlook than I am today. And I can tell you after spending a week with our expanded management team our top 200 leaders I cannot imagine a more dedicated and motivated team dream big and take Six Flags to new height.

As we approach achievement of our $500 million modified EBITDA goal we will set a new long-term target for our employees and shareholders. We are laser focused and driven as a team. And it is important for us to keep setting new goals, raising the bar on quality of performance and motivating our entire employee team to deliver more and more value for our guests and our shareholders.

So Stephanie at this point I am going to open the call up for any questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Afua Ahwoi with Goldman Sachs.

Afua Ahwoi - Goldman Sachs

Hey thank you for the question. So two questions from me first on the fourth quarter was there any impact from deferred revenue in the quarter and if so where did it show up in admissions or in park, how does that work? And then second I was just curious as you think about the mix of season pass membership and then the regular day obviously season pass mix is positive how high do you think you can go and then as we think about the impact to per cap is there a time we can foresee where as you may be start to get to the upper limit of that may be as you see a better boost from pricing as we start to lap sort of I guess easier compares?

John M. Duffey

I'll take the first question on the deferred revenue. There was a slight impact associated with the deferred revenue in the fourth quarter mainly due to the shift from season passed over to membership. Typically a season pass is a pass for the season so 100% of the revenue is included in the year. And membership is an annual pass. So to the extent of someone bought an annual pass let's say in June that pass will continue to run until June of this year. So some of that revenue associated with that gets deferred into the next year.

Jim Reid-Anderson

Okay. So your second question was about the mix of season process and membership and really I think where you were going to is a limit from our perspective as to the number or percentage of season pass holders that we would have and quite frankly there is no limit that we have and we're not approaching anything that would make us uncomfortable in terms of the percentage we think we can continue to grow further.

However your second point or second question once we reach that point let's say a few years out where we feel that the mix is it right to the level you are actually right and that we would be able to accelerate pricing at that point on season passes. So right now we feel very good because as I mentioned in the narrative earlier we've taken pricing in every single category including season passes and our per cap grew while we were actually growing our overall season pass percentage. So I feel like we are in a pretty good place.

Afua Ahwoi - Goldman Sachs

And sorry, just a follow up on that what sort of sign would you see that make Easter to think you are at the limits that you will be looking out for?

Jim Reid-Anderson

Well I think we've looked at capacity utilization and you and I have talked about this before I think I've described that the company went through a detailed analysis of the capacity and also breakeven point of every park and we do that every year we take a look. But we also assess what is going on with capacity at the park on key days. And we really haven't had anything in the wave capacity issue apart from around a couple of days. And the benefit of the season park, one of the many benefits of season pass holders is that they know when to come and they come on days when the parks are less busy.

So in a sense by growing season park holders we've spread that attendance around a little bit better and have not encountered at any capacity issue. So that the key thing I would look for is capacity problem.

Afua Ahwoi - Goldman Sachs

Got it, thank you.

Operator

Your next question comes from the line of Ian Zaffino with Oppenheimer.

Ian A. Zaffino - Oppenheimer & Co. Inc.

Hi, great thank you very much, very good quarter. Question would be I guess on the land, I know you think sort of that bad. Is there a potential if you could just kind of outright is there a potential to maybe develop it or may be extract additional value from it or may be participation whatever is being built on that land. How do you talk about that and just help us out there.

Jim Reid-Anderson

As you think about the land we have lot of excess land really at three of our parks and that is New Jersey, Maryland Park Saint Louis. And we evaluate different opportunities for the use to that land but I would tell you that it's likely that we would dispose of that land. We don't have a need for any of that property for further expansion of our current parks.

Ian A. Zaffino - Oppenheimer & Co. Inc.

Okay. And then I haven't heard you speak about the land in a while, is that and you have now and I might be wrong but I would like that, may be this is maybe one of the first ones you had in while, is that because you are seeing something, is kind of the market getting better and now feel like it's kind of viable call it means of monetization now or kind of help us out there.

Jim Reid-Anderson

Yeah, Ian I understood exactly what you mean and I think you will find that as we present to investors we generally will always talk about both the land and the international opportunities but you are right in that we haven't highlighted in a while. I think that the market seems to be coming back a little bit. So we've never stopped focusing on it and we'll continue to keep the pressure on here because there is an opportunity to be able to liquidate some of those assets we will take it.

But we are not at the point where we have anything to announce there is no news here. It's more refreshing people's memories that there are a couple of opportunities that we'll take advantage of at some point.

Ian A. Zaffino - Oppenheimer & Co. Inc.

Okay. Thank you very much again, good quarter.

Jim Reid-Anderson

Thank you.

Operator

Your next question comes from the line of James Hardiman with Longbow Research.

James Hardiman - Longbow Research LLC

Good morning, thanks for taking my call. You guys had sort of a great year, especially when we think about some of the headwinds that you guys faced over the course of the year. Now that we're heading into 2014 can you just talk, I know you hate to blame anything on weather but you had some rough weather early in the year it sounds like you had some rough weather at the end of the year. May be walk us through if not quantitatively, maybe just qualitatively over the course of the year how we should think about 2014?

And then any qualitative color you can give us on the impact that the Six Flags tragedy at Texas had on your business over the course of last year, as we start to think about how to model 2014?

Jim Reid-Anderson

Hi James. With regard to the headwinds we faced, I think there were really two major headwinds one would be the weather that you described various points in the year with a very interesting year overall and continues doesn't it into 2014. And then the second issue is obviously the tragic accident this took place at Six Flags over Texas that's clearly impacted attendance there.

With regard to both I am not going to quantify and say here is the effect, that was definitely an effect but what we found is that weather impacts pretty much every year at some point. And by the end of the year it all tends to equal out. And I don’t want to predict that 2014 will be a better year from a weather perspective we hope it will but you can't count on that.

So what we do is we work very hard to build program and activities that allow us to try to drive attendance, increases revenue increases and therefore short term cash increases even in very difficult circumstances. And I think we've showed -- we've proven with 15 record quarters that even when the weather is bad or weather very difficult circumstances that we face that we're able to manage through that and still deliver really, really strong quarters. So I really don't want to be in a position to say there were any excuses at all in 2013 we did great and we managed tough times.

And as we face issues in 2014 we'll manage our way through them. John you want to add to that as well.

John M. Duffey

No.

James Hardiman - Longbow Research LLC

That's great. And then on the cost side you guys did a great job sort of on the -- in terms of operating leverage by my math about 70% of the revenue growth flowed through to the EBITDA line. As we think about 2014 and I guess beyond is that a pretty -- in fact you did little bit better think in last year. Is that a fair number to use as we move forward and I guess more specifically, as we think about some of your initiatives, obviously the vast majority are just straight price increase fall through to the EBITDA line. But how should we think about some of the puts and takes to the leveraging in 2014 and beyond?

John M. Duffey

Yes. I think in terms of cost, obviously what we said in the past is that we like to keep our costs in-line with the inflation rate. I think there will be some additional cost that we’ll have to put in place associated with some of the cost that we took out, where we did see some adverse weather in 2013, but our goal is to always have a relevant focus on cost and where we can leverage the infrastructure.

Jim Reid-Anderson

I think John the other thing that someone going to ask so I’ll address it head on, there are certain states where there are minimum wage changes that are taking place. And given the number of seasonal workers that we have there that will definitely be some effects from that as well. And but I have to maintain what I said earlier, which is we have a brilliant line up of Park Presidents and leaders in the park who know very well how to manage cost. And it’s our one of our top priority to make sure that we’re delivering incrementally to the bottom line every extra dollar.

James Hardiman - Longbow Research LLC

Great. And just last question here I think there is been a lot of conversation within the industry, with regard to just the elasticity of demand, I mean you guys are raised prices for couple of years now. How do you think if at all that’s affected your attendance? I think a lot of us have sort of been conditioned to think about attendance and per cap independently from one another, but ultimately maybe we should just be thinking about the total top line growth. Do you think if you weren't raising prices as much as you had that attendance will be better? How should we be thinking about the interplay of those two?

John M. Duffey

It’s a really good question and James as you know no matter what answer I give you we will never know for sure, right, what would have happened. But we really believe that Six Flags historically has been kind of an unusual case, because the industry has gone about its business in its own way, but SIX specifically is as you know discounted very aggressively in kind of we took ourselves down.

So I think the real benefit of the Six Flags over and above anyone else is that we are still in the early stages of getting our pricing back to where we want it to be we are not done yet. So we have the ability and having been taking pricing cuts and growing attendance at the same time. And you never know what’s going to happen in a year, right? Thinks can go wrong, but I feel reasonably confident right now that that pricing strategy will continue. And that the combination of the pricing and the Season Pass membership approach that I’ve described. And the amazing number of value offerings that we have to guests in a tougher economic environment will continue to provide us with potential upside for the long-term.

Obviously we’ll find out at the end of the year, but I’m feeling confident about the ability to do both. And by the way to do both for a number of years. I think we’re probably through this pricing program.

James Hardiman - Longbow Research LLC

Perfect, thanks guys.

Jim Reid-Anderson

Thank you James.

Operator

Your next question comes from the line of Joel Simkins with Credit Suisse.

Joel Simkins - Credit Suisse

Guys a lot of my questions have been answered. But I guess Jim maybe from a high level, if you could sort of give us you 30,000 foot view on the consumer obviously. We still continue to get a lot of mixed data on that front. And I guess also as you look sort of this from a historical attendance data you might have for all your parks, is there any sort of evidence that's sort of coming out of harsher winter and assuming a bit of a more normal weather environment that you get a little bit of benefit from sort of cabin fever?

Jim Reid-Anderson

I think let me start with your second question which is after a harsh winter I think traditionally people do see attendance hopefully boost, because people do want to get out and do something quickly. So we’re hopeful that, that will work in our favor, but again we can’t predict that. With regard to the consumer overall, I think again I think we’re little bit the special case because of our historical pricing discrepancies, but we do offer a really tremendous value to people, especially the Season Pass and membership program allow people to visit all year for a really reasonable costs.

I think the fact that we’re providing news in every single park something we didn’t do historically means that people are seeing more and more and hearing more and more about the parks. So when you confine that with our Go Big media campaign which isn't just on TV it's on radio, it's on at movie theatres it's on the Internet, we are doing so much to generate interest in our products that I think we will continue to see consumers who learn about us again coming back.

Now do they have more money to spend they're certainly spending more money on our products that I do believe that is very, very difficult for them still. And I don't see feel like we are out of the economic downturn, or the tough economic trends that we've seen over the last few years. I think we need a little bit more to be convinced to that.

Joel Simkins - Credit Suisse

And just as a follow up on some of your earlier comments on international franchisee contracts things like that, should we be thinking about 2014 being sort of a year where you do you put something on the tape in that regard or is it just sort of more of a high level here we're going to look at different opportunities?

Jim Reid-Anderson

It's funny you should ask that question Joel because Nancy actually heads up this international efforts for us. And she is just literally desperate to answer this. I am going to hand over to Nancy.

Nancy A. Krejsa

Thanks Jim. We continue to pursue what we think is a very attractive long-term opportunity for the company. I think Six Flags is in a very unique position because of our national and even international brand recognition and as much as being not the only brand out there from a regional theme park company. So we continue to believe there is long-term growth opportunity and we continue to pursue those relationships, that we think again longer term have an extension opportunity for us to better franchise outside of the Americas.

Jim Reid-Anderson

Joel I think you've heard us say this before but it's quite amazing the number of calls we get every week and as you know a large number, by far the highest percentage of them really don’t have any capability to do the sort of thing we would want to do. But there are a number that have potential and we are working on them and we'll continue to do and we'll only do something if we really think it adds long-term value for our shareholders but we are working on it.

Joel Simkins - Credit Suisse

Thank you.

Jim Reid-Anderson

Thank you.

Operator

Your next question comes from the line of Tim Conder with Wells Fargo Securities.

Timothy A. Conder - Wells Fargo Securities, LLC

Thank you. Just a couple may be little more clarifications here, Jim on the season pass mix the annual membership where is that as a percent of your season passes again you said season passes were 48% what the annual membership at this point again from a small base where is that?

Jim Reid-Anderson

Yeah the 48% that we referenced is a combination of the season pass and membership. And we do not break out the exactly how much of that is membership versus season.

John M. Duffey

Well I can say though Tim which I think will be helpful to you is that membership base is growing. And it's nicely growing. So I think it's a really good program and an excellent complement to the overall season pass program.

Timothy A. Conder - Wells Fargo Securities, LLC

And in the perfect world you like the season passes be 100% that membership program?

Jim Reid-Anderson

You mean membership to be 100% of the season pass, of the overall season pass holders.

John M. Duffey

I think it's good to have a mix it's appropriate to have some sort of mix and I wouldn't say it has to be 50-50 but something along those lines would not be a bad mix at all.

Timothy A. Conder - Wells Fargo Securities, LLC

Okay. and then should we anticipate the in-park to grow at a faster pace than season passes on a go-forward basis given that focus I know again you brought your all season dining in '13 but the emphasis has been long season passes and as you said there is still more opportunity there but given where we are with should we start to see in-park accelerate at this point relative to season pass growth?

Jim Reid-Anderson

Tim, we don't give guidance on future growth but I wouldn't make an assumption that in-park is going to grow faster than let's say season pass growth, I think it's be wrong to do that. We have a lot of initiatives on the in-park side some of which I described earlier. And we're very confident about the ability to continue to grow that. But you have to also remember that the question asked earlier about the consumer I mentioned the fact that it's tough out there. So we make no assumptions about the ability to grow that at faster pace.

Timothy A. Conder - Wells Fargo Securities, LLC

Okay. And then I think you had alluded in the past potentially your CapEx as a percent of your total revenues there potentially that could start to come down can you just give us a little bit update there, Jim?

Jim Reid-Anderson

Yeah I think we mentioned that we look at CapEx as many companies would look at their R&D. We have the opportunity there to spend 9% of revenue and really by doing this and building that program we try to set those basis for rest of the industry now doing. Our view is that, over a period of time, as the company continues to grow and get more scales we will be able to scale that back a little bit. We are not going to do it this year for sure but going forward that is something we could scale back as such.

Timothy A. Conder - Wells Fargo Securities, LLC

And then last question here, you have tested a weather guarantee in the Northeast in 2013, can just sort of revisit how that went and then are you looking at that as part of, as your comment before you always have to deal with weather it's always there and how you manage it. But are you looking at rolling that out elsewhere?

Jim Reid-Anderson

Actually the test is still going on, and believe it or not the results that we saw last year in New England were very, very positive, and we are leaving up to Park President this year if they would like to extend it. They have the ability to do that in their parks, but it has gone extremely well and there was not negative impact in fact guests loved it.

Timothy A. Conder - Wells Fargo Securities, LLC

Great. Thank you.

Operator

You next question comes from the line of Barton Crockett with FBR Capital Market.

Barton Crockett - FBR Capital Market

Thanks for taking the question. I was curious about the, probing a little bit more on per cap metrics which on a reported basis turned positive, much more positive than we saw in the first three quarters of the year. Obviously, this is disturbed by the members and the percentage growth. But I was wondering is this trend that we saw in the way we view the numbers on reported per caps? Is this something that looks sustainable in the next year or is this something that's really more of a function of kind of a small season and holiday some promotions that may be wouldn't be so sustainable?

Jim Reid-Anderson

Barton I think that overall if you look at the year, we had really nice forecast and attendance growth very, very difficult to do as I mentioned earlier. We don't predict what's going to happen down the road. I am not going to say per caps are going to grow again, but I would say to you that based upon what we have seen we would feel confident that we can continue to see a nice per cap improvement. Now if we see really big acceleration in the percentage of season pass guests, then that will put pressure on it. So, I can't state you it's going to be a certain percentage but we feel confident about the ability to continue to grow that nicely. So, fourth quarter was very strong, we had FRIGHT FEST and we had Holiday in the Park. We had a very strong showing then and I think that was some a really solid performance for the quarter and the year.

Barton Crockett - FBR Capital Market

Okay. And then I was curious as you know as we look out a few years in the future as you use up your NOLs, if you can update us on the current thinking about the potential to adopt up a real investment trust structures or other kind of tax advantage structures that affects. How much of an opportunity you think there is for that?

Jim Reid-Anderson

Let me first talk to the NOL. So as I mentioned we has approximately $800 million tax loss carry forward for federal purposes even more than for state purposes, and based upon our projections we anticipate that, that will take us through at least the end of 2017, so would be 2018 at a minimum before we actually are paying U.S. tax. Barton we look at all kinds of different opportunities in terms of evaluating ways even from a structural standpoint or others that we may be able to reduce the amount of tax that we pay once those NOLs are I think exhausted. REIT is one of these things that we're evaluating as well.

John M. Duffey

Just to be clear because I think there were some questions previously. There was no reason we could not become a REIT so that's something we could do. It's obviously a function of getting approval for that but that is something that we could do in time. We have no mean to do anything right now with the NOLs.

Jim Reid-Anderson

With the NOLs, yeah. And when we say we have the ability to drive the company on its own does not qualifies the REIT. What we would have to do is put into two companies similar to what you have seen with other REIT conversions recently.

Barton Crockett - FBR Capital Market

Okay, great. And reduction if I could ask just a one final question. As you approach your 500 modified EBITDA target for '15, there is some stocks in the sense of management as you achieved that. If you can update us on what it would take to reach that and how that would kind of affect these in terms of income statement and what potential is to see that in 2014, Halloween event in 2015?

Jim Reid-Anderson

I'll let John talk about specific impact on the financial statements. I think that if were to get to the target in 2014 which is at risk obviously I think all shareholders will be very happy because the performance of the company would be so strong. You asked some specific questions and there is a target award for achievement of what we described this project 500 and that would equate to about 2.65 million shares if the plan is achieved in 2015. And it could be up to 3 million shares if we were to hit that target earlier in 2014. John, you want to have on financials?

John M. Duffey

Of which half of that would actually be granted in 2014 and the rest if we hit the 500 in 2015 on that 3 million.

Barton Crockett - FBR Capital Market

Okay, great. Thank you.

Jim Reid-Anderson

I just want to add on one point and I referenced this and I think this is where you have the question from, we would not talk, I think that, as we come close enough to the $500 million target to make it reasonably likely that we would achieve it, we will be setting a new long-term target for the company and for our employees, and I think again this should be very beneficial for our shareholders. Sorry Stephanie I interrupted you.

Operator

You next question come from the line of Ian Corydon with B. Riley Company.

Ian Corydon - B. Riley & Company

Thank you. I am just curious what you have plan in terms of the number of operating days in 2014 versus 2013?

Jim Reid-Anderson

The operating days will be very similar to what we saw in 2013. No material increase or decrease.

Ian Corydon - B. Riley Company

Okay. And in terms of the price test promotion growing out from here is that more about more premium attractions and better marketing in order to grow that this year given that it's sounds like operating days to be kind of flattish.

Jim Reid-Anderson

Operating days will be flattish but I think we Ian we never stop innovating in terms of offering itself and I think we have mentioned that we have invested quite aggressively behind FRIGHT FEST and what we are seeing is continued investment in that both FRIGHT FEST and Holiday in the Park, and we are seeing building momentum in terms of not only the brand recognition but building momentum in terms of tandem. So we feel pretty good about the ability to continue to strive both of those products in the fourth quarter.

Ian Corydon - B. Riley Company

Great. My other questions were asked. Thanks.

Jim Reid-Anderson

Thanks Ian.

Operator

At this time we have reached the allotted time for questions. I will turn it back over to management for closing remarks.

Jim Reid-Anderson

Thanks very much Stephanie. I would like to thank you all for your time this morning and for your ongoing support of our company and the management team. Even in my comments, we remain singularly focused on building shareholder value in the years ahead. Please make sure though that you buy your season passed early, you can visit our amazing park and ride our new record-breakers like zoom-and-jar the tallest drop ride in the world and Goliath the tallest fastest and steepest wooden coaster on the planet, among many of exciting new attractions. Take care. That's the end of the call Stephanie.

Operator

Thank you. This does conclude today's conference call and you may now disconnect.

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