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Executives

Nancy Krejsa - SVP, Investor Relations and Corporate Communications

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

John Duffey - Chief Financial Officer

Six Flags Entertainment Corp. (SIX) UBS Media and Communications Conference December 6, 2011 9:00 AM ET

Unidentified Speaker

All right, we’re going to get started here. Good morning, everyone. Welcome to the Six Flags Entertainment fireside chat. Today we are very lucky to have with us a large part of the management team here, Jim Reid-Anderson, Chairman, President, CEO; and John Duffey, CFO; and Nancy Krejsa, the Head of IR and Communications.

Why don’t we start off, Jim, with just a brief overview of the company and then we will get into the questions after that.

Jim Reid-Anderson

Sure. Welcome to the conference. I am Jim Reid-Anderson, the CEO of Six Flags, and there are several copies of our investor presentation lying around the room, so that you can review that as appropriate. We are following the approach today actually having a fireside chat. So I am literally going to take four- five minutes to do a brief overview of the company. And then we are going to open up the floor to any questions that folks have.

First and foremost, let me tell you that, you’re probably wondering why you should think about investing in Six Flags. And that’s really where I want to start. Which is that I fundamentally believe that Six Flags not only has had tremendous growth in share price but I see a future whereby this company will continue to grow and see substantial share price gains over a period of time, for a number of reasons. And let me lay them out for you.

First and foremost, Six Flags is the largest regional theme park company in the world. The company operates in an industry that really is an excellent industry, somewhat misunderstood, has higher recurring revenues, strong barriers to entry. And within that industry we are extremely well positioned. We’ve got excellent business fundamentals and we have a wide range of offerings for our guests in our 19 parks across the U.S., Mexico and Canada. So we don’t just do thrill rides on rollercoasters, we have shows, we have animals, we have a safari. There is just a tremendous amount that’s going on at our parks.

And I think when you think about the sort of offering that I am describing, we believe it’s perfect in the current economic environment. Because what we offer our guests is tremendous value offering for a full day out. So in other words for what amounts to a $20 ticket per cap and roughly another $20 in spending in the park. Folks can have a whole day out with their friends or with their family and create tremendous memories that will live with them forever.

So it’s value investment. It also fits well in these tough economic times because 85% of our guests live within 150 miles of our parks. And so we are able to attract those guests and they can simply come by car and create a mini holiday for a day or for a couple of days.

So with that we have taken a new approach at the company. And the approach really focuses on innovation in two main areas. First innovation is in terms of the capital or what we provide at the park. And we have taken an approach that looks at providing news in every park every year. So we are trying to give people the reasons to come to the park on a regular basis, at all 19 parks.

Second, in terms of innovation, we have actually taken a new approach to our media. In other words how we communicate with our guests. And then send instead of broad-based, call it global advertising on the Six Flags brand, that’s centered around Mr. Six, we are taking the approach where we are telling the story of every park locally. Using not just TV, locally, but billboards, radio, internet and many other forms of communication to get directly to our guests.

The approach literally is multi-layered and multi-yeared. And we believe that we’re going to continue to see the benefits of this approach over many years. The results have been very positive. So if you look back, in 2010, we grew our EBITDA by 50%, from about $197 million to $295 million. And year-to-date our EBITDA is up 15% and we are running, as of the third quarter, at LTM EBITDA of $337 million. The company, Chris, is on track, doing very well and we are very optimistic for the future.

So with that I want to hand back to you and I think you have a series of questions.

Unidentified Speaker

Great. Thanks, Jim. Well, certainly it’s been impressive results. You guys have been on the job for about a year and half now. As you mentioned, 50% growth in 2010, 15% in ’11. Could you highlight some of the bigger structural changes that you made over that time period that really drove those results?

Jim Reid-Anderson

Yeah. You know first and most fundamentally, the company was on the wrong track. And what I mean by that, it’s very easy to critique the past and that’s not what I am trying to do. But I think you really have to pull up and say what is this company all about, what is its strength. And our strength is as a regional theme park player and we are trying to be a global entertainment company with broad-based interests.

So I think focus is important. And in essence, we put into place a strategy that is focused solely on theme parks. Once we have that approach, and that was unanimously supported by our employees, 2000 full time employees around the company. We then took to communicating that very clearly, ensuring that the organization was in place to be able to support that. And then set the goals that we want to achieve in order to see the sort of gains that we’ve seen, and future gains that we want to try to achieve.

So we have now a situation where we are executing very effectively. We have the right targets and I think we have aligned the rewards for employees absolutely in line with rewards for shareholders. So there is total alignment across the organization. So with the setting of the strategy and then key imperatives below that, I believe those are the most fundamental changes that we have made. Now there are specific targeted, call them operating changes, that we have made that we will discuss in a minute. But the most important thing is to set a long-term vision and then lay out the path to get there.

Unidentified Speaker

So that’s a great segue into my next question. In terms of aligning incentives you had Project 350, which is much talked about and you are very close to achieving those targets and you just recently unveiled Project 500. Maybe you could talk a little bit more about that and what's going to take to get to that next aspirational level? Can you continue to just execute better on your existing strategy or will you need some sort of new strategy to get to that next level?

Jim Reid-Anderson

John, would you like to take that?

John Duffey

Sure. We had set Project 350 which was for 2011. As Jim indicated, our LTM as of the third quarter is 337. So we went through, for the first time ever the company went through a long-term plan. Five year plan earlier this year. And from that plus our strong performance, we thought it was important to set a new long-term plan. So the project 500 is our aspirational goal to hit that on or before 2015. And what it’s going to take to get there is really just continuing to execute on our current strategy. Our current strategy has been very successful. And we believe that continuing to focus on improving, particularly improving our yields, so the pricing, modest price improvement each year as well as reining in these discounts.

We will continue to focus on cost efficiency, so leveraging our current infrastructure. And then making sure that we have the right capital in place as Jim talked about, at all of our parks. So we have new news in every park, every year. And then the right marketing strategy. So really, it’s just a continuation of our current strategy. We don’t really need to do anything differently to get there, we do need to do any acquisitions or make any major changes or expansions to our parks. Just continuing to execute on the strategy that’s been successful to date.

What we have always said that this is a long-term strategy and it’s multiple years of solid growth on both EBITDA and cash flow.

Jim Reid-Anderson

Let me add that. For those of you that maybe don’t have the history and you are listening to John talk through each of these points that we’re going after. The most significant really is the area that he described as the yield. Which is in essence is your price, and then the discount. There are two major elements there. And this company has had a history, and especially over the last ten years, of no discipline around pricing. And in fact had led pricing down single-handedly.

And so over the last 18 months, what we have done is we have taken a very strict approach to pricing, even in this tough economic environment and held the line there. And we feel very good that not only have we achieved substantial growth in our per caps which is the net pricing that we get, both in terms of tickets and in terms of the in-park spending. But we also think that that will be single biggest opportunity for the future, even in this environment as long as we are reasonable in our approach to pricing and don’t get too aggressive.

Unidentified Speaker

So just to hone in one that pricing point a little bit more. It’s been a choppy economic environment, I think we can all agree upon that. But let's say next year, we actually enter into a recession, are you able to hold the line on that pricing? Or how do you achieve your firm pricing or do show more flexibility if you see broader economic weakness?

Jim Reid-Anderson

We have been through two really difficult years economically. Actually more than that if you really look back. And through that period we have managed to take modest pricing and tweak back the discounts on our tickets. And we see no reason why we can't continue to do that. The only scenario under which I think we might look at throttling back is if there is a complete economic meltdown, which we are not looking at right now. But I think we will continue to asses that. We look at it month to month. We have the ability to adjust pricing daily, hourly, literally. We can track it that closely. And at present I see no reason to adjust our strategy or approach.

Unidentified Speaker

So the revenue growth that you have experienced over the last two years. Would you characterize that more as just less discounting and not necessarily increasing the base price so much?

Jim Reid-Anderson

It’s actually both, Chris. It’s both.

Unidentified Speaker

And then to get to the Project 500 aspirational goal from a revenue perspective, what sort of increases do you need to see in that in your pricing going forward?

Jim Reid-Anderson

We actually don’t give guidance as to how much individual elements of our, call it the financial paradigm, are going to go up. All we do is we set a long-term goal and then work to that. And so the only detail that I will give you is that pricing will from a very important element of that achievement. Now to put it into perspective. What we are really talking about is in the region of a dollar on the ticket price. And then reducing the discount a little bit or fencing it in time wise so that we don’t give away tickets all year and only give them away when we really want or need the extra people in the park.

Unidentified Speaker

Right.

John Duffey

And just to add on that. If you think about this business, really the power of pricing and I will call it yield, is that for every dollar that you can improve on the yield is $24 million-$25 million that drops to the bottom line. So to the extent that we can take these modest price increases and rein in the discounts. There’s pretty solid growth there. And if you look at our admission per caps compared to others in the industry. There’s pretty sizable gap where we are lower than others within the industry. And even if you look at the true competition in our markets, whether it be sporting events, movie theaters etcetera. We have a lower, I would say value cost and so we believe that we have tremendous ability to continue to take that up over multiple years.

Jim Reid-Anderson

One last point and then, Chris, we can move on to the next question, I apologize, we keep adding. But I think it is actually important that you understand that even in this tough year, we have taken pricing up. Actually for the last year and a half our guest satisfaction scores have gone up through record levels measured independently and value perception, guest value perception is at an all time high. So you can do it. You just have to be thoughtful about the way you do it.

Unidentified Speaker

Earlier, John, you mentioned that in order to hit your goals you don’t have to make any acquisitions. So maybe we could just spend a little bit of time talking about your thoughts around consolidation within the industry. There are several large properties owned by private equity currently which may come into place. There are other potential partners that you could see mergers happening with within the space.

Is this a sector that, where synergies could be meaningful. What are your thoughts on consolidation and synergies and how that could fit into the plan?

John Duffey

Well, I think consolidation is interesting but let me start by saying that fundamentally, if you remember where I started this discussion with the fire side chat, I talked about focus. And part of the issue for the company historically has been the lack of focus. So our focus is 100% on making sure that we optimize the assets that we have and drive the business and don’t get lost on other areas that may appear to be interesting but can easily take you off course. So, Chris, I need to start there because it’s really important.

However, at the end of the day if there is an opportunity either buying or at selling, that is right for our shareholders, we will take that step. And we will always be open to that. It never makes sense to shut down. But it would be -- in that scenario it would be limited, handful of people who would work on that in order not to get the organization defocused. Now your specific question was, with regards to consolidation, are their synergies? Yes, there are. They are not the same as they might be in some other traditional manufacturing type. However, there are synergies. They primarily relate to areas such as headquarters, purchasing, capital spending, how you do that.

So there is an opportunity there. But remember you are talking, in our case, about 19 parks that are located pretty much away from any other competitive park except maybe in the case of California. So it’s not like you can say I am going to take two parks, make them one and save all that money. It doesn’t quite work that way.

Unidentified Speaker

Great. Thanks. May be we would circle back to your strategy about news in every park. And, from my understanding is there is a focus on smaller attractions and not necessarily adding large scale attractions every year. Maybe you could get a little bit more specific in terms of some concrete examples of how you do that and not stress your CapEx budget. And then also how you have adjusted your marketing to dove tail at that strategy?

Jim Reid-Anderson

Okay. Nancy, do you want to talk about capital?

Nancy Krejsa

Sure. We have always modified our strategy in how we invest capital, I think historically it’s been larger capital expenditures, primarily focused in a handful of properties. And if you think back to the statistic that John provided where 80% to 85% of our guests come within a 150 miles. It’s important that we have new and exciting rides, shows and attractions in all of our parks to be able to reach out and draw in the guests that live around the perimeter of those parks. And so as part of our long range planning process that we went through earlier this year, we determined that we wanted to spend about 9% of our revenue on capital each year. About 60% of that is on new capital because that really is the innovation and life blood of the company.

And I would argue -- a lot of people say we are spending doing smaller rides, I would argue we have just as exciting type of rides that are coming in. But because we have a five year plan and because we can negotiate more effectively with our vendors, and we are more efficient in how we install those rides. I think we still have a lot of big new exciting rides. First of their kinds that came, that we implemented in 2011 and plan to implement in 2012. But we have enough capital that we can allocate something to all of our parks. So that is our strategy going forward that we have capital in all of our parks.

And then coinciding with that, is our marketing plan which previously have been nationally focused. Again, not really efficient because we were spending money in markets where we didn’t have a park and we have a dancing Mr. Six that really didn’t talk to our guests around why they should come to our parks. And so now we have a nationally branded campaign but it’s implemented very locally. So as local content, it talks about the specific parks that are there and it’s customized by markets. So the ad you would see in this market for our New Jersey park would be very different than what you would see in Southern California or in Atlanta.

Jim Reid-Anderson

So, Chris, you said what about some examples. Let me put it into perspective for all of you. If we are spending 9% of sales, roughly on innovation, we know that that about 60%-65% of that goes in terms of true new product and 35% or so goes in terms of the backbone infrastructure. The in-park services, restaurants etcetera. So if you think about innovation in that sense then you’ve got in the region of $60 million roughly. I am picking a number to spend on new rides, excitement shows etcetera.

So in the past, the company may have invested in a thrill ride such as Kingda Ka, which in reality costs about $50 million to $55 million to put in. And in that situation you’ve got no money left to do anything else elsewhere. So as practical example, in 2010 we really had no new product. Nothing to speak off, because of investments that had been made previously. So in 2011, we actually had something in every single park. And we had, in the case of Magic Mountain in Los Angeles, three new products, that made that park coaster capital of the world again with 18 thrill rides. There is no park anywhere that has as many thrill rides.

So we can then go out and market that aggressively. In the case of smaller investments, we have a ride called the Sky Screamer in two parks that we put in 2011 for $2 million-$3 million. You can get a ride, it takes you up 200 or 300 feet in the air and spins you around. Very scary, very exciting. Teens, families, everybody loves this ride. So what it is, is it’s a full approach to how you spend your money. And it’s planning ahead five years rather than just planning ahead of one year.

In 2012, I think we have even bigger lineup. As an example, in Chicago, we are putting in X-Flight. And in the U.S. today no one else has a winged coaster like X-Flight, where you literally hangout over the wings and you drop 3000 feet going straight down. It’s so exciting. You are in a position now where we can tell people why they should buy their season ticket early; whey they should come back to the park.

In the case of Magic Mountain, again we are going to have a new product, Lex Luthor Drop of Doom that will attached to our Superman ride and drop the people 400 feet straight down, very fast. Again, another reason for people to come back to our park. And we can do all of this with our existing budget. We have no need to spend more money or to go over our budget. We feel very comfortable with that. It’s all about discipline, planning and then execution like a military operation. That’s what we do.

Unidentified Speaker

Great. And just to focus in on coasters for a second because you did, you are speaking of a new coaster that you have got, X-Flight. Where do you see, is it going to be increasingly difficult to put these, pushing the limits of rides in parks. Is there certain theoretical limits at what bodies can take and what you can do from a engineering standpoint making these rides more thrilling or dangerous kind of. How do see it technologically in terms of how that, are we coming up against limits in terms continuing to push that ride for it?

Jim Reid-Anderson

We have not -- I don’t think we are coming up against limits. We will always do the right thing from a safety perspective. And I need to start with that by just saying, safety is the foundation for what we do. That’s the reason that people come to our parks. They know that they can come and have an exciting time. But they know that it’s safer, believe it or not, than playing golf. Or sitting in a lawn chair. You know if you come to one of our parks, that’s what the safety statistics say. And we need to keep it that way. And keep people perceiving it that way.

But we will also look at exciting new rides and innovation to make people feel like they are going out on the edge. And to really enjoy their visit. So X-Flight does that, Lex Luthor does that. And in fact innovation is core for us. So in 2011, Six Flags new ride which is called the New Texas Giant, won the best new rollercoaster award at IAPPA, which is the top show. And we won that for innovation.

Nancy Krejsa

I think the only thing that I would add is we always think that it always has to be bigger, faster, taller. And creating that thrill is important for a good deal of our guests. About half of our guests are families and kids. So when we think about innovation and how we spend our capital, there is also a lot of rides that we are trying to target for smaller thrill seekers. So it’s not always that we have to be putting in big coasters at every single park. And in fact, I think when you look at 2012, our lineup is specifically targeted in some parks to get at those guests.

Unidentified Speaker

Right. Maybe we would spend a second on sponsorship revenue. You have said publicly that you don’t expect that to grow going forward, at least for another year or so. And so what are you doing there? Are you actually still trying to get new sponsors or are you just focusing on ones that are profitable and expanding those. What's the strategy?

John Duffey

The sponsorship is strategic for us. And let me step back, the sponsorship is where other companies will basically pay us to advertise in our park or have product in our park. And it’s been extremely successful over the last several years and we have built that business into a very good driver of growth. When this management team came on board, we looked at every single one of the sponsorship deals that we had out there. And to be honest with you, there were some deals, as you looked at it, made sense just from a top line perspective.

But as peel back the onion and you looked at other things, like other commitments that we had to do to buy product from them or have them actually provide product in our park. We looked at some deals and said, these are either unprofitable deals or very low profit deals. So we made the conscious decision to walk away from some of those deals in 2011. So you’ve actually seen a decline in our sponsorship revenue because of that. But they were decisions that we made.

So we will continue to see that towards kind of the first half of next year. But then after that we expect our sponsorship revenue to grow. We still believe that there are great legs to sponsorship and we can continue to see growth. So we are actively out there looking for new sponsors every day. So it won't be the same type of driver of growth that Jim talked about as it relates to the opportunities that we have on the yield side. But, going forward, it will be a driver of growth.

Jim Reid-Anderson

I want to mention that it’s really important that you all understand where we are coming from on this. We love revenue. But you have to have profitable revenue. And you have to generate cash from that revenue. And so if you look at the decisions we will make, they will be made with one goal and one goal only, to drive shareholder value. And so we literally have taken out unprofitable deals where we lose money, but they looked good on the top line.

And so if you look at our margin expansion, over the last 15-18 months, we have picked up 1300, 1400 basis points. We are talking about huge margin expansion because that’s the right sort of paradigm change in this business. You get business to the right point, then you can start driving revenue in other ways. So we feel that that’s the most fundamental decision that we have to make. It’s doing the right thing for our shareholders and we will continue to do that.

Unidentified Speaker

Speaking of growing revenue, you have mentioned that you’re going to plan, or you say you're going to test a Holiday in the Park in certain of your parks. Is that -- how do think that’s going to play out. Could this be another paradigm shift in certain terms of keeping your parks open year around? What, maybe you could speak more about that initiative.

Jim Reid-Anderson

Its’ a great question. Nancy, you want to take this?

Nancy Krejsa

Sure. So holiday, we have two special events tied around different times of the year. One is our Fright Fest which occurs in October and it's centered around Halloween and it’s a tremendous brand for us and all of our parks participate in that. Holiday in the Park is around the December Christmas holidays and we post that in three of our parks currently. Obviously, not all of our parks are conducive to doing that because of the weather conditions and the snow. So it’s not something that we would expand to our entire park portfolio.

However, there are opportunities for us to potentially expand that into other southern parks that don’t participate today and to continue to grow that event even today where we already have that opportunity. So that will be a -- it’ll be a good growth opportunity for us.

Jim Reid-Anderson

It plays again into what we were talking about earlier with regard to margins. Obviously, if you can be open and you really think you can get the attendance, you want to be open. But if you are opening simply for the sake of it, to say that you are open and you only get a couple of thousand people visiting, you end up losing money. And so what we’re doing is being very thoughtful about how we approach this. Holiday in the Park works very well. It works very well especially in the warmer climates where we can ensure that we have enough people in the park to be way past of our breakeven point. Because we’ve lowered the breakeven point fairly dramatically in the last year and a half. We want to make sure that we are well over that. So we are making money whenever we open rather than just saying we are going to be open all year around.

Unidentified Speaker

Makes sense. So you’ve spoken a lot about margins over the last couple of questions. You know margins I think are around 40% right now. So do you see a lot more opportunity to grow those margins further or is this more of a incremental revenue story going forward.

John Duffey

We have seen, as Jim indicated, very good growth in our margins. And as you think about the strategy that we have talked about, which is a multiyear strategy, have continued to focus on yields, leveraging our cost infrastructure. We believe that there is further opportunity around margins. And so we will be pushing to increase our margins further. We have seen, I think tremendous growth in the margins over the last 15 to 18 months because we had some pretty big opportunities, particularly on the cost side.

And so as we move forward, we expect to see margin increase. It won't be the same type of increase that we have seen over the last 15 to 18 months. But clearly we believe there is further expansion the margin side.

Unidentified Speaker

Okay. Great. And keeping on the theme of the expansion. Could you see yourself expanding domestically in terms of opening a new park? Or is that really not something that is in the cards?

Jim Reid-Anderson

Chris, I think it’s important that folks have a bit of background on what it takes to open a park. If someone tried to replicate Six Flags today. If someone said, okay I am going to open up the equivalent of the 19 Six Flag locations. They would have to invest in the region of $5 billion to $6 billion, which is a huge amount of money. And that assumes that they would get regulatory and local approvals to be able to do show, which we doubt very much. Where parks have opened domestically, most of them have struggled with the exception of Lego that’s done very well. New parks have struggled and some of them have shut down.

So I would find it -- it would be very unusual, very unlikely that we would ever open a new park. Now what we could do, is look at more along the lines of the consolidation question you asked earlier. There might be one or two family based parks or larger group of parks that might benefit from consolidation further. And we would asses those on a case by case basis.

Unidentified Speaker

What about international? Is there an opportunity to grow internationally in terms of new parks? Maybe the dynamics are different than domestic. Could you do I through some other means in terms of partnering or licensing? How do you think about international?

Jim Reid-Anderson

Chris, I think it’s a great question and it really is a different market. And I am going to have Nancy address that question in terms of international. But just at a high level, and I said this at the beginning, we do have a park in Mexico and we have a park in Montreal, Canada. And they are both great parks doing very well. Would we go into these markets and build new parks? Very unlikely. More likely to be a partnership situation internationally, and Nancy can address that.

Nancy Krejsa

Yeah one of the -- I think Six Flags is in a very unique situation in that we have very strong brand recognition around the world and we have weekly, if not daily, requests from people to ask us to come open a park. Certainly a lot of those requests come from outside the United States and obviously a lot of them are not worth pursuing. But we are very proactively looking, particularly in the Asia market. Specifically in China but some other Middle Eastern countries as well to work with developers and other financial partners to be able to have them provide the bulk or majority of the capital or all of the capital. And what we would provide is the ability to license our brand, to be able to help them design and develop the park and operate the park on an ongoing basis.

So it’s definitely something we think is longer term opportunity for the company. Jim talked about the magnitude of building a new park. So in addition to the funds required to do that, it typically takes a couple of years, but we definitely think that’s in the longer term growth opportunity for the company.

Jim Reid-Anderson

And, Chris, I want to add to what Nancy is saying, by again bringing us back to where we started which is the strategy to be the leading regional theme park player. You know you have got to think in chunks, right. I really believe that this company has huge legs long-term. And I think it has legs globally. But you’ve got to make sure you take one step at a time. So the last 18 months or so has really been about making sure that the strategy is understood and that the key imperatives, four or five things that we have to do, we do right. And we drive the basic change in the paradigm, which we are successfully doing and we still have room to grow.

But from there, there were so many options, right, long-term. Nancy described one, but there’s lots of room for growth with a fantastic brand like Six Flag that really just has not been exploited. We just have to do it in a rational step by step way. And that will come.

Unidentified Speaker

Maybe I will ask one more question and then we can open it up to the room for additional questions. But with $300 million of cash on hand currently, what are your priorities in terms of short-term and long-term usages of cash?

John Duffey

Yeah, as we think about this business, it is a seasonal business. So it is important to make sure that we maintain a certain level of cash on hand. One of the reasons, I’ll honest with that, we have as much cash as we do is because we have been limited under our current debt covenants in terms of usage of that cash. And so we, earlier this year we instituted a dividend program as well as a share repurchase program. We’ve been executing on that over the year.

Many of you many have seen, we recently launched a refinance process of our existing debt facility. That will give us more flexibility in terms of what we can do around use of cash, particularly as it relates to restricted payments. So our strategy and our goal going forward will be to continue to look at things like dividends and share repurchase, take a balanced approach towards that. And we are, as Chris said, this company is extremely fortunate to be able to deliver a significant amount of cash flow each year. And I think we have shown that with the right performance, the right focus on profitability and the right CapEx spending. We believe that we can continue to expand that going forward.

Jim Reid-Anderson

I do want to just build on John’s last point, which is cash. And, Chris, give us a minute to talk through this, because a lot of people who invest in more traditional companies might not think in terms of cash being as important and I want to take a minute and explain why for us it’s so important. We went through a bankruptcy. Now we’ve had experience with this before in terms of bringing a company through bankruptcy, date bearing, which ultimately was tremendously successful and grew the equity tenfold.

And with six flags, there are great similarities. The similarities are there because when you come through bankruptcy there are certain things that happen all obviously. One of those things is this step up in assets, which means you can't look at traditional EPS. You need to really look at cash EPS, to be able to see what the real sort of cash generating power of a company is. We, I think to date, what's our cash EPS John?

John Duffey

Our free cash flow EPS, cash EPS, is in excess of $3 a share.

Jim Reid-Anderson

So it’s well above $3 a share trending upwards. And if you were to model out our Project 500 goal that John talked about earlier, you are looking at around $5 a share in cash EPS. And so we generate a tremendous amount of cash. And in addition, because of the bankruptcy and that process we went through, we are sitting on about $1.2 billion-$1.3 billion in NOL, that really traditional methods wouldn’t count. So you have to think about that because the company won't be paying the sort of taxes that other companies who haven’t been through that process would pay.

We also have some assets that we own that people don’t generally think about. We have that 1200 acres of land across our different parks that we could sell if the environment was a little better. So we’re being patient in waiting on that. We have an asset in Dick Clarke, where we own about 40% of the company, its’ non-core to us. At some point we will realize the value of that asset. And so not only do does the basic organic business look great, generating a lot of cash, but we have also got other benefits that lead you to say, this company is just in a tremendous position, cash wise and so the future.

Unidentified Speaker

Great. Why don’t we open it up to the floor here, for questions. Just put up your hand and the mic will come around.

Question-and-Answer Session

Unidentified Speaker

Could you just give maybe a little more color on how the refi process is going? Any interest cost saves that you might expect, other covenant relief away from restricted payments. And then with regard to restricted payments and share repurchases etcetera, what is the minimum amount of cash for the seasonality. And the second question is, could you just comment on how the October season went.

Jim Reid-Anderson

I will take the second one first and then John will take the first one. We don’t comment mid-quarter on how the quarter has gone. We have to wait until the actual fourth quarter results come out and we will obviously provide full feedback. I know there are many people who would like to know, we have had that question many times, but we just don’t disclose it.

Unidentified Speaker

Okay.

John Duffey

As it relates to the refinance process, I can't share all of the details around the process, obviously that’s not public. And we will be in a position I think when we close on this, later on this month to be able to share more details. But to just kind of talk at a high level, the process is going very well. This is good credit and so there is a lot of strong interest in that debt. Just some high level aspects to the refinance. We are keeping our debt levels the same, so we are not increasing or decreasing the debt. Keeping that same as what it is today. And really the goals from the refinance perspective is, number one, to get better pricing. Number two is to get more flexible covenants. And if you look at our existing credit agreement, there was a credit agreement that was designed around the company that was coming out of a restructure.

So there is not a lot of flexibility on specific covenants, particularly things like restricted payments. So through the -- with the refinance, we are looking at improving our covenants. And then the third thing is to improve our liquidity. And so we will be looking at expanding our revolver and improving our overall liquidity. So there is kind of like the high level but to date the refinances are going well, we just need to make sure that we maintain stability in the debt markets until we close.

Unidentified Speaker

(Question Inaudible)

Jim Reid-Anderson

The question was what would the minimum level of cash be to take care of seasonality. We do not disclose that. I think we are being cautious right now because the markets, as you know, are fairly unstable. We want to get through the process of refinancing. Hopefully close that, as John said, later this month. And then on our fourth quarter call we will be able to give a lot more color on this thank you.

Unidentified Speaker

Given your focus on innovation and local as well as increasing margins, how would you view an opportunity to create first solar powered park in the world and have substantial cost savings, no CapEx and no land required from the company?

Jim Reid-Anderson

Can I ask who you are, just out of interest?

Unidentified Speaker

I am a land-owner, happen to be adjacent to one of your parks.

Jim Reid-Anderson

Okay.

Unidentified Speaker

My name is [Shawn Hermanion]

Jim Reid-Anderson

Okay. Do you mind if we take it offline and have that conversation.

Unidentified Speaker

Absolutely.

Jim Reid-Anderson

We are obviously always looking at how we can reduce our costs to make ourselves more efficient, and maybe we’ll just have a separate conversation.

Unidentified Speaker

Excellent.

Jim Reid-Anderson

Thank you.

Unidentified Speaker

Good morning, Jim. So the last time we spoke was on the cusp of I think your refinancing. So just to extrapolate that further. Is this, given a stable economic environment, say if we were to look two or three years down the line, is your current capital structure that you are refinancing to you think appropriate for the long run or would you guys look to modify the capital structure in addition to where you are now. That’s my first question. Second was, how do you benchmark your ticket pricing other than just moving pricing up until your yield starts suffering. I was just curious if you have an actual hard benchmark, what that is and what the difference is right now between where you are and where the benchmark is?

Jim Reid-Anderson

Sure. Two great questions and I will answer question two first and then, John, maybe you talk about capital structure, if you don’t mind. With regard to benchmarking, I think I talked earlier about the fact that we have picked over 1000 basis points in 18 months on margin. A large chunk of that has come through cost reductions but probably even greater has come through our pricing initiatives that I described and we feel there is room for growth. So some of you would pull up and say, well, if you’ve grown that much, how can you keep growing this? Why you think you can do this?

But the reality is that if you breakdown the margin improvement, there is a very good cost growth. Very good growth in terms of reduced cost, in other words benefit that’s come from reduced cost. There is very good improvement in our in-park spending by guests where we are absolutely world class. So our costs are world class, our in-park spending is world class. But we do know that versus our main regional competitor, the ticket pricing element is in the $2 to $3 range lower than them. And we are in the top ten DMAs whereas they are not necessarily. And so there is no logical reason that there should be that benefit that they have or that advantage that they have.

And the reason that there is that gap is because Six Flags has aggressively led the charge in discounting over many years. So the answer to your question is, though there is a comparable out there, we have been working against that comparable. Now in margin terms, we are the top in the industry having been several 100 basis points off their level historically. But the price difference, ticket price, they still have an advantage and we are going to work to close that. So if you simply took $3 and use John’s equation earlier over a 3,4,5 year period, that’s $75 million in EBITDA right there.

John Duffey

And as it relate to the capital structure, if you look at the history of this management team, we understand what it takes to drive shareholder value and the importance of driving shareholder value. And it starts obviously with making sure that you can consistently deliver on performance. But it’s also making sure that you have the right strategy and execution in place as it relates to capital structure. So that’s one of the reasons why we are going through this refinance process is to deal with some restrictions around what we can do. So that’s step number one.

Once we get through that process then the board will be in a position to discuss other areas around the capital structure, dividend, share repurchase etcetera. And I think at that time we will be in a position to share more details around that. But I just want to make sure it’s absolutely clear that this management team understands what drives shareholder value and what the right strategy is around capital structure.

Unidentified Speaker

Great. We probably have time for one, maybe two more questions, if there is any more from the floor. Please raise your hand. Otherwise I will turn it back over to Jim, if you want to make any closing remarks.

Jim Reid-Anderson

First of all I really appreciate folks coming to listen to us and those of you online who are listening. We really appreciate it. We hope that you will, if you haven’t already looked at Six Flags, look it up. We are really a great company in a strong industry, high recurring revenue. Not only good profit growth recently, we think more growth to come and on top of that high cash generation to the future. And just a great brand. So appreciate the support. Look forward to seeing you, maybe later today or at future conferences. Take care. Thank you.

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