Six Flags: Blaming It On The Rain

This one was easy to see coming. Oh yeah, the excuses management is giving you? Ignore them.

Six Flags (SIX), which operates 21 amusement parks, reported a third-quarter net profit of $84.2 million, or 61 cents per share, compared with $159.3 million, or $1.08 per share, a year ago. The year-ago period included a one-time gain of $36.8 million from discontinued operations.

With the prior year gain subtracted, EPS in 2006 was 85 cents and 2007 EPS declined 28% on a comparable basis. Net loss for the first nine months of 2007 was $142.7 million, or $1.51 per share, compared to a net loss of $132.4 million, or $1.41 per common share last year.

Revenue fell 2% to $465.2 million. Management blamed this on bad weather in July cutting attendance at its Texas and Georgia parks, and bad publicity from an accident at its park in Kentucky. Attendance for the nine months ended September 30, 2007 was 22.1 million, flat with last year.

The total of Texas, Kentucky and Georgia parks equal 7, or 1/3 of total locations.

I'm proud of the advances we continue to make at Six Flags despite a temporary setback within the third quarter due to inclement July weather and extensive negative publicity stemming from the accident at our Kentucky park," said Mark Shapiro, Six Flags President and CEO. "With revenue per guest and consumer satisfaction scores at all-time highs and a powerful park-wide capital expansion plan on deck, we are well positioned to deliver on the promise of this company's turnaround in 2008.

Right, as long as it does not rain?

Shapiro then contradicted himself to a point in the conference call when he said "Secondly, with regard to attendance, yes, the East Coast which is where we usually have the most risks because we have so many parks really on the East Coast, we are great in East Coast. We had great weather and the parks did well with it." Now, if the weather was great there, why did Georgia and Texas matter so much?

Here is the thing. You can't blame the weather because it will always rain. The overall weather picture was not that bad this summer and as bad a they claim July was, June and August were just a good and the simple fact is they just did not "get it done" when the weather was good. We have not had a hurricane in two years now and Six Flags still cannot turn a profit. What they did not tell you was that the weather in September for almost the entire nation was the best in several years.

So, if from June to October you only have 1 bad month for 1/3 of your locations and it causes the whole house of cards to fall, things just are not working. What happens when we finally get an active hurricane season? It will happen sooner or later and they normally hit the East Coast ,where Six Flags has it "greatest risk". If they cannot turn a profit in near perfect conditions almost all summer and into fall for the vast majority of its parks, what happens when these conditions turn imperfect. Answer? More, larger losses.

Disney (DIS) just reported a 5% guest increase at its Domestic parks over 2006.

They did triumph the fact that they got more from each customer. How? Per capita guest spending increased $0.04 during the quarter to $37.13 as guests spent 3% more in-park, primarily on food and beverages, parking, and games. Yea... we know. I detailed this robbery in October.

I'll check in on the call on provide any updates of note.......

Comments

[granger:]

Keep it coming. I am starting to get interested in this company. It would take cash flow to turn positive and an actual debt reduction plan. I like the propsect of its underlying real estate, but there are so many other issues to worry about currently.

2007 Nov 13 08:58 AM

[dlsrs:]

you are an idiot, and you are once again twisting/parsing to make a point. try being objective for a change. the weather in tx and atl was noteworthy because it was so extreme, to the extent that it cxld out the benefit of good weather on east coast.

look at monthly trends - june, aug, sept, oct all solid, july only bad month in part due to pr around accident. comparing to disney apples/oranges, has so few locations, and in case you haven't noticed there is a drought in ca and to an extent in central fl. guys like you who exaggerate for effect and end up misleading people who don't go to the native source and listen/read for themselves are dangerous. this co has cash on hand, is moving towards cash flow break even (though may not happen until '09) and the only debt maturity before 2010 is the pfd which can be dealt with via specific provision in credit agreement, and billionaire investor backstopping it.

2007 Nov 13 04:06 PM

[CrossProfit:]

d357,

"you are an idiot"
You could have made your point without this.

Better yet, write an article and SA per usual will post opposing views on the same topic. If you choose to do so, we will all benefit from the discussion - on topic- between you and Todd.

As it so happens to be, we agree with your weather 'analysis', however, agree with Todd's conclusion for other reasons. SIX did not meet our performance expectations this past season.

CrossProfit
(updated evaluation line on CrossProfit [symbol SIX or www.crossprofit.com/vi...] site)

2007 Nov 15 09:18 AM

[2Cents:]

Do you live somewhere in Texas, Todd? I sure do, and I have a Six Flags park 2 miles up the road. And as far as the weather being as bad as SF says, at least in Texas, my undiscovered mold allergy and related medical bills from March '07 to present due to the excessive amount of rain we've had this year are proof that they are correct. We were quite sick of rain by May, but it wasn't nearly over then. Certain areas of Austin were hit with a deluge more than once.

Our vacation was in the middle of July and we traveled from Texas to Georgia, through SC, NC, Virginia, and back. It rained during our entire trip, with the exception of two days on the way back. And for what it's worth, this was a coaster-riding trip... Six Flags over Georgia (Atl), Carowinds (NC), and King's Dominion (VA).

I can attest from personal experience in the parks, esp my home park, that on those many rainy days the park(s) was/were virtually empty. The public knows that with thunder and lightening comes ride shut-downs, and if you don't happen to be at a park with enough shows to keep you busy all day or you don't like seeing shows, you're likely not going to go to the park(s).

As far as in-park spending, with the connotation that this is due as a result of increased prices rather than more people spending money, has anyone checked the price of hot dogs, popcorn and drinks at the movie theatre, or the cost of hot dogs, chips, and beer at the major league football and baseball venues? I don't 'hear' anyone complaining about *them*.

When someone 'near' me (i.e. family, friends, co-workers) begins to complain about the season pass price, parking, or parking season pass prices going up, I remind them to put it in perspective. Where I live a season pass was $49.99 at this time last year (for 2007), and this year it's $59.99.

A one-day ticket is $46.99. How many one-day tickets did it take to pay the $49.99? It would take more than one, but less than two, to pay for a season pass.

At $59.99 how many one-day tickets would it take to cover it? What's that? More than one, less than two? BINGO.

Either way, if you plan to visit your 'local' Six Flags a minimum of two times, or twice at a comination of parks, the pass has more than paid for itself.

The same goes for the parking season pass. For 2006 the pass was $20. For 2007 it raised to $36. However, prior to the 2006 season the parking season pass was good ONLY at the park where it was purchased. For 2007 the parking season passes were good at ALL Six Flags parks- not just the one where it was purchased.

So I paid an extra $16 for this year's parking season pass. But if I wanted to go to the other Six Flags park in Texas, it would have cost me $15 for parking in 2006, since I couldn't us my pass there. But because the pass is now good at the other parks too, we've visited the other park 3 times so far this year as opposed to the one visit we made in '06.

The parking season passes are going up to $45 for '08. But you know what? We go to our local park once per week at a *minimum*, all season long. So at $36 or $45, it makes no difference. If we paid $12 once a week all season, that's $396. Which would I rather pay... $45 or $396? And how many visits would it take to pay for the parking season pass? At $36, it took 3 visits. At $45, it'll be 3.75 visits - both ar $3 or above, and less than 4.

My family won't be griping about the price increases on passes, because we're still saving an insane amount of money.

Oh... and that in-park spending? We spent an extra $25 to get the Premium Upgrade on our pass, which gave us a 25% savings on all food purchases in the restaurants. And although it doesn't bring the prices down to 'outside the park' levels, it sure gets close - as a result we *have* eaten more inside the park than ever. We're saving many more times that $25 investment, and the park's making more from us because we ARE spending more in-park. And by the way, the prices in the restaurants of the park here did not go up from last year... they are the same.

From our experience with our home park, the other Texas park, the Georgia, NC, and VA parks we visited in July, the price of gifts and souvenirs is about the same as outside the park. My park t-shirts cost me between $12.99 and $16.99, which is quite standard. Oh, and that Premium Upgrade? Saves me 25% on *those* purchases as well, in the 'home' park.

I've also been quite confused as to why people who are supposed to know how business works think that the 'new' corporate management of Six Flags can turn around in less than two years, the absolute mess the former management created during the many years of their tenure. Even a start-up business won't expect to see clear profit for 5-7 years, and we're talking about a multi-billion dollar company that was in a financial crisis. When they first took over I estimated it would take about 5-7 years for them to really turn the company around, and yet here we are barely two years later, with so many talking as though they should have already gotten things straightened out, and the stocks should already be back up to that double-digit level.

I've not heard of too many stocks that went from bottom-dollar to soaring heights "overnight". I hear many people talk about "going long" and being patient, not getting 'itchy' when there are fluctuations, but hanging on for the long haul because it *can* take time.

To see the positives requries an open mind, common sense, and the proper perspective. I'm not saying it will all work out 'in the end', there is certainly the potential right now for it to go either way.

I'm just saying let's not put them into bankruptcy in our minds before they've had a truly appropriate amount of time to put plans into place AND for those plans to produce results - before we pass judgment.

And yes, I DO own Six Flags stock. I bought at just under $6.00 a year ago. So if I can be patient.........

2007 Nov 16 04:33 AM

[2Cents:]

Do you live somewhere in Texas, Todd? I sure do, and I have a Six Flags park 2 miles up the road. And as far as the weather being as bad as SF says, at least in Texas, my undiscovered mold allergy and related medical bills from March '07 to present due to the excessive amount of rain we've had this year are proof that they are correct. We were quite sick of rain by May, but it wasn't nearly over then. Certain areas of Austin were hit with a deluge more than once.

Our vacation was in the middle of July and we traveled from Texas to Georgia, through SC, NC, Virginia, and back. It rained during our entire trip, with the exception of two days on the way back. And for what it's worth, this was a coaster-riding trip... Six Flags over Georgia (Atl), Carowinds (NC), and King's Dominion (VA).

I can attest from personal experience in the parks, esp my home park, that on those many rainy days the park(s) was/were virtually empty. The public knows that with thunder and lightening comes ride shut-downs, and if you don't happen to be at a park with enough shows to keep you busy all day or you don't like seeing shows, you're likely not going to go to the park(s).

As far as in-park spending, with the connotation that this is due as a result of increased prices rather than more people spending money, has anyone checked the price of hot dogs, popcorn and drinks at the movie theatre, or the cost of hot dogs, chips, and beer at the major league football and baseball venues? I don't 'hear' anyone complaining about *them*.

When someone 'near' me (i.e. family, friends, co-workers) begins to complain about the season pass price, parking, or parking season pass prices going up, I remind them to put it in perspective. Where I live a season pass was $49.99 at this time last year (for 2007), and this year it's $59.99.

A one-day ticket is $46.99. How many one-day tickets did it take to pay the $49.99? It would take more than one, but less than two, to pay for a season pass.

At $59.99 how many one-day tickets would it take to cover it? What's that? More than one, less than two? BINGO.

Either way, if you plan to visit your 'local' Six Flags a minimum of two times, or twice at a comination of parks, the pass has more than paid for itself.

The same goes for the parking season pass. For 2006 the pass was $20. For 2007 it raised to $36. However, prior to the 2006 season the parking season pass was good ONLY at the park where it was purchased. For 2007 the parking season passes were good at ALL Six Flags parks- not just the one where it was purchased.

So I paid an extra $16 for this year's parking season pass. But if I wanted to go to the other Six Flags park in Texas, it would have cost me $15 for parking in 2006, since I couldn't us my pass there. But because the pass is now good at the other parks too, we've visited the other park 3 times so far this year as opposed to the one visit we made in '06.

The parking season passes are going up to $45 for '08. But you know what? We go to our local park once per week at a *minimum*, all season long. So at $36 or $45, it makes no difference. If we paid $12 once a week all season, that's $396. Which would I rather pay... $45 or $396? And how many visits would it take to pay for the parking season pass? At $36, it took 3 visits. At $45, it'll be 3.75 visits - both ar $3 or above, and less than 4.

My family won't be griping about the price increases on passes, because we're still saving an insane amount of money.

Oh... and that in-park spending? We spent an extra $25 to get the Premium Upgrade on our pass, which gave us a 25% savings on all food purchases in the restaurants. And although it doesn't bring the prices down to 'outside the park' levels, it sure gets close - as a result we *have* eaten more inside the park than ever. We're saving many more times that $25 investment, and the park's making more from us because we ARE spending more in-park. And by the way, the prices in the restaurants of the park here did not go up from last year... they are the same.

From our experience with our home park, the other Texas park, the Georgia, NC, and VA parks we visited in July, the price of gifts and souvenirs is about the same as outside the park. My park t-shirts cost me between $12.99 and $16.99, which is quite standard. Oh, and that Premium Upgrade? Saves me 25% on *those* purchases as well, in the 'home' park.

I've also been quite confused as to why people who are supposed to know how business works think that the 'new' corporate management of Six Flags can turn around in less than two years, the absolute mess the former management created during the many years of their tenure. Even a start-up business won't expect to see clear profit for 5-7 years, and we're talking about a multi-billion dollar company that was in a financial crisis. When they first took over I estimated it would take about 5-7 years for them to really turn the company around, and yet here we are barely two years later, with so many talking as though they should have already gotten things straightened out, and the stocks should already be back up to that double-digit level.

I've not heard of too many stocks that went from bottom-dollar to soaring heights "overnight". I hear many people talk about "going long" and being patient, not getting 'itchy' when there are fluctuations, but hanging on for the long haul because it *can* take time.

To see the positives requries an open mind, common sense, and the proper perspective. I'm not saying it will all work out 'in the end', there is certainly the potential right now for it to go either way.

I'm just saying let's not put them into bankruptcy in our minds before they've had a truly appropriate amount of time to put plans into place AND for those plans to produce results - before we pass judgment.

And yes, I DO own Six Flags stock. I bought at just under $6.00 a year ago. So if I can be patient.........

2007 Nov 16 04:33 AM

[joeykid13:]

You must have had a deprived childhood. Everyone knows that a day at the theme park is subject to the weather. This is a great brand with nationwide access to many families that can't afford the bargain $1600/Week at Disney. (Walt is turning in his liquid nitrogen capsule). In any case despite what you say, this company will survive & even flourish as the economy continues to decline, whereas your big money ripoff theme park (DIS) will suffer.

2007 Nov 18 04:12 PM

[todd su:]

GUYS/GALS,

if everything you are saying is true, why are they in so much trouble? you CANNOT blame the raid\n because IT WILL ALWAYS rain somewhere.

they just are not performing, having bad weather in two states for one month CANNOT lead to annual losses. if it does, they will always lose money.

do they need a nationwide drought to make $$?

2007 Nov 19 09:31 AM

[todd su:]

GUYS/GALS,

if everything you are saying is true, why are they in so much trouble? you CANNOT blame the raid\n because IT WILL ALWAYS rain somewhere.

they just are not performing, having bad weather in two states for one month CANNOT lead to annual losses. if it does, they will always lose money.

do they need a nationwide drought to make $$?

2007 Nov 19 09:31 AM