Six Flags Reports Second Quarter Results
Total Revenue Per Capita Up 15% as Company Continues to Improve Guest Experience
Company's Lenders Relax Loan Covenants, Providing Increased Financial
NEW YORK, Aug. 2 -- Six Flags, Inc. (NYSE: SIX) today announced operating results for its second quarter and the six months ended June 30, 2006.
Total revenue per capita for the quarter increased by $4.80, or 15%, to $36.95, reflecting the Company's ongoing strategy to rebuild its brand and price integrity by improving and diversifying the overall guest experience at its parks. Underscoring progress with this strategy, the Company said that guest satisfaction ratings reached five-year highs during the quarter, according to independent surveys conducted through June at Six Flags-branded parks.
Total revenue for the quarter declined 1%, from $360.6 million to $356.1 million, compared to the prior year period. Increased per capita revenue was offset by a decline in attendance. For the quarter, attendance declined 14% to 9.6 million from 11.2 million in the prior year quarter. The prior year quarter included 0.3 million in attendance from the New Orleans park, which is not operating in 2006 due to damage sustained from Hurricane Katrina.
The Company's net loss for the quarter was $39.6 million, compared to net income of $11.1 million in the second quarter of 2005.
Said Mark Shapiro, who was named President and Chief Executive Officer of Six Flags in December 2005, "In this transition year, we're focused on rebuilding the Six Flags brand by rebuilding the trust of our guests, particularly families. We view our investment to improve the quality of the Six Flags experience as an essential first step to position the Six Flags brand for future growth. We're encouraged by the continuing strength of our per cap spending, which was the key objective for this year, and by our guest satisfaction ratings coming in at a five-year high, which should spur attendance and restore credibility to our brand in the years to come."
Adjusted EBITDA(1) for the quarter was $63.0 million, compared to $94.9 million in the second quarter of 2005. Adjusted EBITDA includes approximately $1 million in costs associated with senior management and corporate strategy changes ("Management Change Costs"), and excludes the operations of our parks in Oklahoma City, Oklahoma; Sacramento, California; and Columbus, Ohio ("Discontinued Operations Parks") which have been classified as discontinued operations due to the Company's announced intention to dispose of those businesses(2).
The Company also announced that its lenders have agreed to waive compliance with certain financial covenants for the period ended June 30, 2006 and to relax those same covenants through December 31, 2007, thus providing the Company with increased financial flexibility.
Second Quarter Results
Second quarter 2006 total revenues were $356.1 million, compared to $360.6 million for the second quarter 2005, a decrease of $4.5 million, or 1%. Attendance for the second quarter 2006 was 9.6 million, down 14% from 11.2 million in the second quarter 2005. Attendance was impacted by a decrease in season pass attendance and by the closing of the Six Flags New Orleans park, which together accounted for roughly 0.9 million of the 1.6 million decline in attendance, as well as adverse weather.
Per capita guest spending, which excludes sponsorship and other revenues not related to guest spending, increased $4.43, or 14%, to $35.41 from $30.98 in the second quarter 2005, as guests continued to spend more on admissions, food and beverage, merchandise, rentals, games, and parking.
Total costs and expenses, including cost of sales, depreciation, amortization, stock-based compensation and loss on fixed assets were $307.1 million for the quarter, compared to $280.5 million for the second quarter of 2005, an increase of $26.6 million, or 9%. The increased costs were driven largely by anticipated and strategic increases in salaries, wages and other expenses primarily associated with additional staffing and services in order to improve the guest experience through greater character presence, increased cleanliness, employee training and other initiatives ($29.6 million), stock- based compensation ($1.5 million), Management Change Costs ($1.0 million), and offset by a reduction in loss on fixed assets ($5.5 million).
Net loss applicable to common stock in the second quarter 2006 was $45.1 million, or $0.48 per share, compared to net income applicable to common stock of $5.6 million, or $0.06 per common share in the prior year period. The increased net loss for the quarter reflects approximately $15.1 million, or $0.16 per common share, of non-cash costs and other items not directly related to the ongoing operation of the business. Excluding these charges, net loss applicable to common stock would have been $0.32 per common share, compared to net income applicable to common stock of $0.03 per common share in the prior year period. (See the attached table for a reconciliation from net income (loss) applicable to common stock to net income (loss) from continuing operations before these non-cash and other items.)
Adjusted EBITDA for the second quarter of 2006 was $63.0 million, compared to $94.9 million in the second quarter 2005. Excluding Management Change Costs and including the Discontinued Operations Parks, Adjusted EBITDA for the quarter would have been $64.7 million, compared to $96.9 million in the second quarter of 2005.
Six Month Results
For the six months ended June 30, 2006 (the "First Half 2006"), total revenues declined $11.3 million, or 3%, to $398.8 million from $410.1 million in the prior year period.
First Half 2006 total revenue per capita increased $4.71, or 15%, to $36.97, from $32.26 in the prior year period. Per capita guest spending, which excludes sponsorship and other revenues not related to guest spending, increased $4.38, or 14%, to $35.02 from $30.64 in the prior year period. Attendance for the period was 10.8 million, down 15% from 12.7 million during the prior year period.
Total costs and expenses, including cost of sales, depreciation, amortization, stock-based compensation and loss on fixed assets, increased $77.5 million to $519.0 million for the First Half 2006, compared to $441.5 million in the 2005 period. The key drivers of the increased costs were Management Change Costs ($12.6 million), stock-based compensation ($10.3 million), loss on fixed assets ($10.1 million) and increases in salaries, wages, and other expenses primarily associated with additional staffing, maintenance and other services ($44.5 million) undertaken to improve the guest experience.
Net loss applicable to common stock for the First Half 2006 was $291.6 million, or $3.10 per share, compared to net loss applicable to common stock of $178.6 million, or $1.92 per common share in the prior year period. The increased net loss in First Half 2006 reflects approximately $173.9 million, or $1.85 per common share, of non-cash costs and other items not directly related to the ongoing operation of the business. Excluding these charges, net loss applicable to common stock would have been $1.25 per common share, compared to $0.88 per common share in the second quarter 2005. (See the attached table for a reconciliation from net income (loss) applicable to common stock to net income (loss) from continuing operations before these non- cash and other items.)
Adjusted EBITDA for the First Half 2006 declined from $27.1 million in the prior year period to a loss of $34.0 million, primarily as a result of increased costs. Excluding the Management Change Costs, and including the Discontinued Operations Parks, Adjusted EBITDA would have been a loss of $22.9 million, compared to $26.8 million in the prior year period.
Cash and Liquidity
As of June 30, 2006, the Company had $190 million outstanding on its $300 million revolving credit facility, no amounts drawn on its $82.5 million multi-currency revolving facility (excluding letters of credit in the amount of $32.5 million), and $83.4 million in cash.
About Six Flags
Six Flags, Inc. is the world's largest regional theme park company. Founded in 1961, Six Flags is celebrating its 45th Anniversary in 2006. It is a publicly-traded corporation (NYSE: SIX) headquartered in New York City.
Forward Looking Statements:
The information contained in this news release, other than historical information, consists of forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, among others, Six Flags' success in implementing its new business strategy. Although Six Flags believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors, including factors impacting attendance, such as local conditions, events, disturbances and terrorist activities, risk of accidents occurring at Six Flags' parks, adverse weather conditions, general economic conditions (including consumer spending patterns), competition, pending, threatened or future legal proceedings and other factors could cause actual results to differ materially from Six Flags' expectations. Reference is made to a more complete discussion of forward-looking statements and applicable risks contained under the caption "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in Six Flags' Annual Report on Form 10-K for the year ended December 31, 2005, which is available free of charge on Six Flags' website http://www.sixflags.com.
1. See the following tables and Note 2 to those tables for a discussion of
EBITDA (Modified), Adjusted EBITDA, and a reconciliation to these
amounts from net income (loss).
2. Six Flags AstroWorld in Houston, Texas is also classified as a
discontinued operation; however, it had no park operations during 2006
and the sale of its underlying land was completed in June 2006.