I have two daughters and last week I took a vacation day to take them to Six Flags Great America, just north of Chicago. In years past, I have followed the amusement park industry as a potential investment, but I have never pulled the trigger. Good thing I haven't; this industry looks like a disaster and Six Flags (NYSE:SIX) is the poster child.
I am a frugal shopper and check online and find a buy one admission get one free deal that runs through July 3rd. So with that discount (and a $3.00 delivery fee) my tickets are ONLY $90 (note tongue firmly lodged in cheek).
We get to the park and have two choices for parking $15 for the back lot or $25 for the front lot. Dad alone with his two girls and heavy potential for whining during a long walk to the gate -- I go with the $25.
We stayed at the park for 8 hours (12-8Pm), so we needed lunch and dinner. Again I was frugal and my girls split their lunch and dinner since the portions were huge -- still the bill for lunch and dinner was just over $50!!
Then you have the games -- of course we have to try to win the oversized stuffed animal that will end up in a garage sale 12-18 months from now. I was lucky, I only spent $20 to get to decent sized animals (BTW, go with the guess your weight or age game -- it is the easiest to win).
Of course, dad is a sucker, and I end up buying the animated drawings of each of the girls. The pricing is $15 for just a head in black and white, $20 for head and body and $25 with color. Now who is going to buy just a head -- I mean really...a floating head? Throw in the mats to keep them safe on the way home and we are at $76.
Lastly, there are the incidentals. You have to buy some ice cream, a couple of bottled waters and a churros or two -- call it another $20.
Total ring -- $281. Ouch.
That is ridiculous. Even if you take out the animated head shots, the total ticket was $205 for 3 of us. Surprisingly, we were not the only ones there yesterday. It was quite crowded with waits of at least 20-30 minutes on most rides. There are not many US families that can afford to do that more than once per summer. With food and energy prices soaring, that number is going down every week.
Now here is the truly amazing thing that adds insult to injury...in spite of those prices, this company does not make money. In fact, they lost over $200 million in 2007, and that will definitely increase this year. Now, a lot of that loss can be attributed to debt, but even so, their recurring operating income was only $76 million in 2007.
The Company has over $2.4 billion of debt with revenues of $972 million in 2007. The market cap on the stock at $1 is only about $105 million, but with all that debt the Enterprise Value is about $2.5 billion.
It definitely looks like this company needs a balance sheet restructuring probably through a bankruptcy process. I am not sure how they can charge what they charge and still lose money. Maybe they should consider cutting back on the amount of rides and options to reduce costs and then reduce ticket prices to drive demand. They probably also need to shutter a couple of these parks since there are just too many of them.
Overall the industry looks broken and strained. Consumers just cannot afford a $200 to $300 day at an amusement park!