Six Flags Entertainment Corp (SIX) 2003 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

And welcome to the Six Flags second quarter earnings conference call.

At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation.

It is now my pleasure to hand the floor over to your host, Mr. Joe Mansi.

Good morning, I'm Joel Mansi, of KCSA Six Flags, investor relations advisor.

Last night the company released the if many results for the second quarter for the first six months of 2003.

A copy of the earnings release is available on the company's web site at www.sixflags.com under the heading "about us, investors" before I turn the call over to the company's executives they asked me to remind you that in compliance with SEC regulation FD, a webcast of this call is being made available to the media and the general public, as well as analysts and investors.

The company cautions you that comments made during the call 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.

You may refer to the company's 2002 annual report on form 10-K which is also posted on its web site, for a detailed discussion of these risks.

Because the webcast is open to all constituents, and prior notification has been widely unselectedly disseminate, all contents of the call will be considered fully disclosed.

In addition, in accordance with the newly adopted Regulation G, non-GAAP financial measures used in the company's oral presentation today are required to be reconciled to the most directly comparable GAAP measure.

The required reconciliations are available to investors on the company's web site, under the same heading.

References by management to EBITDA, mean EBITDA adjusted from consolidated operations, as such term is defined in the earnings release, and references to adjusted EBITDA mean adjusted EBITDA, including unconsolidated operations as so defined.

Now I would like to introduce Kieran Burke, chairman and chief executive officer of Six Flags.

Thank you, Joe.

Good morning.

Thank you for joining us on today's conference call.

Last evening we published our second quarter and six-month results and gave guidance on our full year expectation.

We're deeply disappointed with both the quarterly results and year-to-date performance, both of which trail prior year revenue and EBITDA levels.

As we've previously reported weather was clearly predominant factor constraining our performance through June, together with the continued impact of general economic weakness, particularly the significant job losses over the last two years, and consumers fears and further reductions.

Revenues at the consolidated park was down 3.9% from the same period in 2002.

The revenue decline was driven by a 3.9% decrease in attendance at the consolidated park was per capita revenues flat for the prior year.

The attendance weakness has been broad based with attendance decline to all of our parks in North America.

We saw a pickup in performance during the calendar year of July as the persistent pattern of unusually cool and extremely wet weather through late June abated, including the performance of the New Orleans park system wide attendance was up slightly for the prior year for the month and systemwide per capita revenues were up approximately 2.2%; however, performance remains uneven in the month of July and weather patterns along the eastern seaboard continue to constrain attendance.

This has prevented us from closing the gap to prior year performance which existed at the end of June to the extent we had hoped.

Through Sunday, August 3rd, on a year-to-date basis our attendance systemwide was approximately 4% behind last year.

Down 3.6% at the consolidated parks.

Year-to-date park level systemwide revenues at that date were down approximately 2.9% from the prior year, and revenues at the consolidated parks were down 2.3%, or $15.5 million.

While there's still a substantial part of our operating season remaining, we do not expect to be able to completely close the gap for the prior year.

Based on a thorough park-by-park review of attendance and per capita spending trends, season pass base and group sales booking for the balance of August and September and October, we anticipate full-year attendance at the consolidated parks after proximately 34.5 to 35 million, down 1.75 to 3% from the prior year.

And total revenues from consolidated operations of 1.025 billion, down 1.3% from prior year.

But we have continued to carefully control our variable expenses we have experienced increases which we had expected in certain fixed costs, such as insurance, advertising, pension and medical benefits.

As a result we now expect for the full year to achieve adjusted EBITDA, including unconsolidated operations of approximately $325 to $330 million, as compared to approximately $382.5 million in 2002.

In order to hit this revised full-year forecast, in addition to achieving our expense targets, systemwide park level revenues from Sunday August 10th, to the end of the year, need to exceed the balance of year systemwide park level revenues in 2002 by 2.5%.

For the month of July, systemwide park level revenues outpaced July 2002 by 2.2%.

As everyone on the call is aware, the second quarter is not the most meaningful period for us.

The third quarter is the period where we do the lion's share of our business.

In light of the disappointing performance I know all of you are most interested not just in a review of the published numbers but a thorough discussion of our year-to-date performance and full-year prospects and the initial thoughts about 2004 and beyond.

With that in mind, I will let Jim Dan Haaser review the numbers in detail, and I will focus my comments primarily on the performance trends to prior year that we are seeing and our view of the reasons for those performing trends.

First, we're not alone.

In addition to widely reported softness in a variety of leisure recreation and entertainment sectors including hotels and vacation destinations, the theme park industry as a whole appears to be suffering across the board.

The destination park routes and the other large regional players who have commented publicly on performance indicate that business is down in most markets.

And most of the individual park operators that we speak to are also privately indicating that their business is soft.

The negative impact on our performance of continued economic weakness has clearly been exacerbated by the persistent pattern of unusually cool and very wet weather we experienced in the eastern seaboard and throughout the Midwest in May and June and with extended wet weather returning in the first two weeks of August.

And analyzing our park's performances on reasonable weather days versus those impacted by weather, it is clear the unusual weather patterns alone have cost us to $20 to $25 million in EBITDA in the first six months of this year.

In addition the inclement weather in May and June contributed to a marked slowdown in season pass sales in that time period.

System wide season pass sales will trail 2002 sales by approximately 7%.

No doubt the weak economy, especially the uncertain labor market also played a hand in reduced season pass sales, as consumers continue to pull back on discretionary spending; although a season pass is a great entertainment value at an affordable price, with a pass typically paying for itself in two and a half visits or less, it still costs a family of four $200 or more to buy season passes.

While the inclement weather also affected the attendance at the spring and early summer group outings the weak economy took a bigger toll on this portion of our business.

General business conditions have forced a number of groups not to book, or to cancel outings and significant head count reductions over the past two to three years have shrunk the size of many groups that have come.

In research we conducted at five parks to determine why groups were not coming, we heard a consistent theme...

The weak economy.

And when we delved deeper into the issue, the same message emerged at each of the parks.

People are out of work or afraid they will soon be out of work.

With the decline in our school groups there were two main factors, budget cuts, and policies restricting travel-related to terror alert levels.

As a consequence, systemwide, as of August 3rd, park ticket group attendance to date and future group sales bookings taken together are approximately 2%, behind 2002 levels.

In reviewing our 2002 performance after last season, in which consolidated revenues declined by approximately 1%, resulting from a 7.8% decline in attendance at the consolidated parks offset by a 7.6% increase in total per capita spending at those parks, we were concerned that certain factors, including this allocation of capital investment too rapid an elimination of certain discount programs in several markets and too deep a reduction in media expenditures had exacerbated the impact of the economic slowdown, particularly in four or five key markets.

As part of our plan going into 2003, in order to recapture some of that lost attendance we invested approximately $130 million with significant rise in four or five markets.

We added media wave levels in certain key markets.

We did not increase the prices in most ticket categories and generally deepened our discount levels.

Leaving aside the impact of poor weather, theses have clearly not overcome the effects of the extended economic slowdown.

In comparing individual park performances in 2003, the investment of new capital or additional media has not resulted in improved performance compared to parks where we did not add rides or increase media.

And while our discount strategy has clearly led to better results in markets like Los Angeles, it is not clear that most of the parks with aggressive discount programs have achieved better revenues than parks where we remained more restrained.

What is clear, is that although in the aggregate we have held on to our per capita revenue gains from 2002, and have grown our in-park spending by 1.8%, our 2003 pricing and discount strategies which we have pursued more aggressively as the season has unfolded will have restrained total per capita revenue growth without delivering hoped for attendance increases.

Nor has new capital seemed to helped any of our competitors' parks in a material way.

Although some have had better per capita revenue growth by taking price increases or making not as aggressive discount offers available.

As the season progresses we will continue to analyze our own performance, and that of other parks, to determine the appropriate pricing strategy by market for our parks in 2004, which we assume will still be a challenging economic environment.

We've reached the decision to invest less capital in the business for the 2004 season.

Investment level probably $75 million or less.

As I mentioned there's little evidence that investment has made a material difference in any of our parks or our competitors in overcoming the economic constraints in the last two years.

We've made a very substantial investment in our parks over the last five years, and believe that the prudent course of action is to reduce investment levels for a year or two until the economy begins to recover, and increase investments can have a more meaningful impact on performance.

Of the capital we do invest for the 2004 season, we will also be looking very hard at ways to increase our in-park spending.

In terms of marketing, we commence an agency review in June which will conclude later this month.

We intend to analyze through rely all of our media and marketing expenditures and our brand positioning and creative strategy to make sure they are marketing effectively and efficiently.

Towards that end we will continue to analyze closely the advertising levels and media mix that other parks and entertainment providers are employing.

Our challenge for 2004 is to arrest the attendance decline of the past two seasons, and to begin the process of returning our parks performance levels back closer to historic averages as the economic levels begins to improve.

I think it's important to emphasize that the downturn being experienced across the theme park industry is in our view cyclical in nature.

Not a secular problem.

While there certainly are other factors impacting individual park performance, the largest factors by far appear to be extended economic downturn, particularly its impact on employment levels and consumer confidence and discretionary spending decisions, exacerbated by an unusually difficult weather year.

Even at these reduced attendance levels, theme parks this general are still an extremely popular and affordable form of entertainment.

The industry in North America is still expected to entertain nearly 300 million visitors in 2003.

In terms of Six Flags specifically, we own large well-located assets in areas of substantial population, with significant barriers to entry.

We own the most recognized brand in the regional theme park industry, one which is particularly popular with teens and young adults.

A segment of the population that will continue to grow over the next decade.

Our research indicates that our brand is strong, and we get satisfaction in the visit ratings remain high.

Nine in ten visitors express a favorable intent to return.

Nine in ten guests felt that the park exceeded or met expectations with 35% saying it was better than expected.

Our guests are highly likely to recommend the park to others, with 95% surveyed responding they would definitely or probably recommend.

In terms of guest satisfaction, the parks continue to perform well.

Over the 16 theme parks where research was conducted, every park scored an 8 or better on a scale of 1 to 10 in the categories of fun, ride safety, thrill rides, safety from crime, excitement, park cleanliness, variety of things to do, park beauty and theaming.

So we continue to have lots of strengths to build on as we seek to restore our performance to appropriate levels over the next two seasons.

With that I will turn it over to Jim Dannhauser to discuss the six month results.

Thanks.

For the six months ended June 30, revenues for the consolidated operations were $381.6 million, down $15.5 million or 3.9%.

From the 2002 period.

Cash expenses, i.e., operating expenses, administration expenses and cost of goods sold, excluding depreciation amortization and non-cash compensation expense were $363.1 million.

Up 12.4 million, or 3.5% from the year ago period.

Mostly the cost of the inclusion of the New Orleans park in 2003.

As a result, EBITDA from consolidated operations was $18.5 million, down $27.9 million from 2002.

An adjusted EBITDA including our share of the performance of the unconsolidated park was $20 million, down $30.3 million from the year ago period.

The results of our New Orleans park, which was acquired in August of 2002, were not included in the 2002 performance levels.

Excluding New Orleans from 2003, and therefore providing a view of the same park performance, 2003 revenues for the six months were $370.6 million, down $26.4 million from 2002.

Same park cash expenses were up only 1.3 million or .4% over 2002 and EBITDA and adjusted EBITDA were $18.7 million and $20.2 million respectively.

Attendance was down 3.9% year-to-date at June 30 from 2002 levels at the consolidated parks and 4.1% systemwide.

The domestic consolidated park attendance was down 4.7% at June 30, year-to-date.

International attendance was down 1.6%.

Per capita revenues were flat to the prior year at the consolidated parks, down 1.9% domestically, but up 10.4% internationally, largely as a result of favorable currency exchange rates.

The slight increase in same-park cash operating expenses for the period $1.3 million reflects continued good expense control offsetting the impact of currency swings, which increase expenses by $9 million and certain fixed cost increases in areas like insurance, real estate taxes, and benefits expense.

Net interest expense for the six months was $107.1 million, down from $116.4 million in the first six months of 2002.

Reflecting the reduction we achieved in the interest costs on our bank loan, through a reduced spread as well as an extension of our interest rate swaps.

The blended rate on our $600 million term loan is now 5.2% fixed until March of 2005.

Last year, for the first six months of the year, the blended rate was 8.44%.

In addition, interest expense in the prior year included interest on notes which were issued two months before their proceeds were used to retire an older issue of notes, which inflated the prior year interest expense by approximately $5 million.

Depreciation expense for the six months was $78.6 million, up 4.9 million.

Amortization expense was $693,000.

The equity pickup was a loss of $8.1 million, $2.9 million greater loss than the prior year period.

We also incurred a $27.6 million non-cash loss on the extinguishment of debt in the 2003 period.

Under previous accounting practice, that loss would have been characterized as an extraordinary item, net of a $10.5 million tax benefit.

Consistent with the requirements of the new accounting statement, this loss is now shown as the gross loss, before income loss from -- before income taxes and the associated income tax benefits of the loss are included in the calculation of income tax.

In keeping with the requirements of the new rule, we also reclassified the loss and associated tax benefits in 2002, which had previously been considered an extraordinary item.

This reclassification has no effect on any of our debt covenants.

Net loss applicable to chon stock was $133.4 million, as compared to $186.2 million in the prior year.

Absent the cumulative effect of the change in the accounting principle last year from the goodwill impairment that we recognized in 2002, the net loss last year would have been $125.1 million.

For the quarter, revenues from consolidated operations were $347.2 million, down $600,000 from the prior year.

On a same park basis, revenues were down $11.4 million or 3.3%.

Cash expenses were up for the quarter by $200 -- I'm sorry, cash expenses were $252.9 million, up $14.7 million from the 2002 quarter.

On a same park basis, cash expenses were $244.7 million, an increase of $6.4 million, or 2.7% from a year ago.

That increase was driven by an increase in advertising which was mostly a timing difference between the first and second quarters year-to-year.

And insurance expenses, as well as currency swings which elevated reported expenses by $6.9 million.

EBITDA from consolidated operations was $94.3 million, down from $109.6 million in the 2002 quarter, adjusted EBITDA was $103.1 million, compared to $124 million last year.

For the quarter, attendance at the consolidated parks was $11.9 million, as compared to $12.1 million last year.

The breakdown was $8.84 million domestic, versus $9.15 million in '02, and $3.04 million international, versus $2.96 million last year.

Revenues for consolidated domestic operations were $281.3 million, versus $292.7 million in '02, while international revenues were $65.9 million, versus $55.1 million in 2002.

Currency movements accounted for approximately $8.5 million of this $10.8 million growth in international revenues.

Domestic park level EBITDA from consolidated operations was $82.8 million, versus $104.5 million in '02, and international park level EBITDA was $17.8 million, versus $13.2 million in 2002.

Net interest expense for the quarter was $53 million, versus $56.5 million in the prior year.

The depreciation expense was $39.5 million versus $37 million, and amortization expense was essentially flat year-to-year.

The equity pickup for the quarter was $4 million as compared to $9.9 million in the 2002 quarter.

The loss on extinguishment on debt discussed above occurred during the second quarter.

Therefore, net loss applicable to common stock was $17.8 million, versus a loss of $11.5 million last year.

As to the balance sheet, at quarter end we had a cash balance of $138.3 million.

This has now grown to in excess of $150 million as we speak.

This balance includes the previously restricted cash which became unrestricted on April 1st.

The outstanding balance on our working capital revolver at quarter end was $143 million.

That will be reduced to a total of approximately $35 million remaining outstanding at the end of this week, and we will have fully paid off the revolver within the next two weeks.

We would not expect to draw against it again until December or January at the earliest.

Total debt excluding the revolver at quarter end was $2.3 billion.

Net debt was $2.2 billion.

With the extension of our swap agreements fixing interest in our term loan to March 2005, our blended interest rate excluding the revolver was 8.36%.

With the new note issuance, we accomplished earlier this year and the retirement of the previous senior discount notes that had been outstanding our earliest debt manureity is the 9.75% in 2007 for, whos $422 million balance needs to be be retired or refinanced by the end of 2006 in order to avoid the shortening of the maturity of our $600 million term loan to that date.

As to covenant compliance, given the reduction in interest expense at the bank borrowing group and the level of discretionary capital expenditures that we had, which are included from the coverage requirements, we expect to remain in compliance with all of the covenants in our bank agreements for this year as long as we achieve approximately $295 million in adjusted EBITDA.

That contrasts with the $325 million to $330 million of adjusted EBITDA that we now expect to deliver this year.

It's also important to bear in mind that these covenants involve our bank agreements only.

There are no maintenance covenants in any of our public debt.

From a liquidity point of view, our total interest and dividend expense next year is expected to total $215 million, with over $150 million of cash currently on hand, and the cash flow to be generated next year, as well as our committed working capital revolver and backup facilities we will comfortably be able to meet these obligations.

Kieran.

Thanks, Jim.

Before opening the floor to questions, I want to emphasize that at a performance range of $325 to $330 million, or for that matter even 10% lower, we have no issues with any of the covenants in our bank debt and as you know, there are no covenants requiring us to achieve any given performance level in our public debt.

And all events we have substantial liquidity, currently over $150 million in cash, and our $300 million working capital line being paid off in full within two weeks.

Nor do we have any near-end maturities in our capital structure.

So we have ample time to improve our performance as the economy recovers.

It's my observation that we have ample time and financial flexibility to address our business slowdown without panic or rash action, should not imply complacency or a business as usual attitude.

Quite the contrary.

We are committed to the twin goals of reestablishing the equity value of our economy and deliveraging and we will explore in a thorough, careful way all appropriate steps toward that end as we head into next year.

We are engaged in a process of rigorous research, an indepth analysis of our pricing discount and marketing strategies to establish the right course for both 2004 and for the intermediate future to substantially recapture loss revenues and deliver meaningful free cash flow, and I look forward to reporting to you in the future regarding the specifics of that course.

With that, I will open the floor to questions.

Thank you.

The floor is now open for questions.

If you do have a question, please press the number one, followed by four on your touch-tone phone.

If at any time point your question has been answered, you may remove yourself from the queue by pressing the pound key.

We do ask that when you pose your question that you please pick up your hand set to provide optimum sound quality.

Once again to ask a question, please press the number one, followed by four on your touch-tone phone at this time.

Gentlemen, your first question is coming from Bishop Cheen of Wachovia.

Please go ahead with your question.

Good morning, Kieran and Jim.

Morning.

A couple of questions.

Mostly on the balance sheet.

One -- well, one expense question.

In cap ex budget of $130, is that already spent for calendar '03?

Yes.

That was expended over the course of the winter in the early spring.

Okay.

Two, the -- do you have handy the fourth quarter, the cash interest expense, how much you actually spent in cash interest?

$85.1 million.

I'm sorry what was that.

$85.1 million.

Okay.

And on taxes?

1.7 million.

Okay.

And then the cap ex --

and that is for the six months ended June 30.

That's all six month numbers?

Correct.

Okay.

Excellent.

The -- is there any wiggle room in the cap ex in the partnership part or is that already included in that 130?

Well, that -- that has been spent.

You should realize that in the --

okay.

Got it.

That -- the partnerships are in the $130 million.

Got it.

And then --

just to get -- to be clear, for the first six months of this year, our capital expenditures in the consolidated parks were about $88.4 million, because there is a prespend in the third and fourth quarters towards this year's program.

The actual capital expenditures for this calendar year will, in fact, be lower than $130 million.

How much lower?

It's lower prespend towards next year's program.

Okay.

That will depend upon the level of the prespend but I would expect to have capital expenditures, at the consolidated parks of an aggregated $100 million and total capital expenditures this year including the unconsolidated operations of about $115 to $120.

Okay.

How about the cash received from partnership partners in Q2?

Well, the six-month number from the partnership parks is $2.3 million.

All right.

And then -- bonus question.

Any color you would like to share on the anticipated ratings actions by S&P and Moody's?

Well, as you are aware, Standard & Poor's after our indication of the interim performance report had suggested that there was a possibility for a ratings action of one notch depending on what full-year performance would be.

We are, as a result, on credit watch with potential negative implications with the indication of a possibility of a one-notch decline, which, as you know, is essentially taking back the one-notch upgrade that they had given to us in the early part of 2002, in expectation of improved performance.

Moody's has also indicated, and they recently released that our liquidity ratings are quite strong.

Beyond that, I would not want to speculate as to what any potential rating agency action might be.

Although it is important to point out that there are no triggers in any of our debt instruments with respect to any ratings downgrade.

Right.

Did your price release mention the admission revenue for the quarter?

I --

I didn't see --

I don't know offhand, frankly whether the press release had the number in it or not I can tell you.

Yeah.

The admission was $191.3 million and the food merchant was $155.9 million.

Thank you very much, gentleman.

Thank you.

Thank you.

Your next question is coming from David Miller of Sanders Morris Harris.

Please go ahead with your question.

Yeah, good morning.

Jim, I believe on the last earnings call you had mentioned that you guys have a backup $100 million revolver which had not yet been used.

Given the guidance that you purported on the press release and given mathematically that it doesn't like you will be a free cash flow generator this year, are you going to have to tap that revolver in order to fund new ride construction into 2004?

And then I have a follow-up.

Thanks.

No, we will not.

We have the full $300 million capital revolver available to us.

We have over $150 million in cash on the balance sheet.

Right.

Remember, that we had coming into this year on the balance sheet $75 million of restricted cash which has now become unrestricted.

So we will have no need to come anywhere near the backup revolver, and frankly would not expect to be any more than $175 to $200 million maximum into our working capital revolver at its peak in April and May of next year.

Okay.

Great.

And then very quickly, if you just have a domestic revenue and international revenue breakdown for the second quarter, that would be helpful, thanks.

Sure the domestic revenue for the quarter was $281.3 million.

The international was $65.9 million.

Okay.

Thanks very much.

Thank you.

Thank you.

Your next question question is comes from Kathy Styponiass of Prudential Securities.

Recognizing that forecasting into next year is extremely difficult, if not impossible, Kieran it sounded from your comments that you hoped to try to at least achieve attendance growth that is essentially flat.

I'm wondering if you can give us some color on what your expectations are for the cost side of the business.

You had some uptick because of insurance and pension, and wondering what your expectations are, or what that should look like next year.

And the -- is the attendance being flatish a function of the fact that you're planning on spending, you know, considerably less in terms of cap ex, or just a continuation of the overall economy?

And then Jim, a question for you, with respect to the '07 paper, how confident are you you can get it eventually refinanced and without tipping your hand too much, would it be reasonable to assume that would you try to do it sooner rather than later given the still low interest rates.

Let me start by saying, I -- I don't mean to imply in my comments about next year that we're assuming attendance will be flat.

I think you can appreciate, it is difficult to forecast '04 without having completed this operating season and without having the benefit to fully analyze our year's results, and to really understand carefully what impact weather was, what impact other factors.

So -- but with that said, I would expect to hopefully see an attend APC pickup next year.

It's not because I necessarily think the economy is going to be substantially better.

I don't have any better view of that, than anyone else.

My view is that I will assume the economy remains tough but I certainly Al assume that we will have more normalized weather patterns which I can't guarantee but statistically that would be reasonable assumption.

I also think that we'll have the opportunity in the course of our marketing reviews and completing our agency review to come back with a new look in our messaging and probably new approaches in terms of our advertising.

So I would hope that the combination of those things would start us back in the positive direction in terms of attendance growth and clearly across the board, you know, our parks are at levels that they haven't seen for a very, very, long time and in some cases ever before.

So I think there's a lot of room for us to recapture attendance growth and clearly this year, our strategy going in is that we were -- you know, we were discounting pretty significantly in order to stimulate demand.

It would appear that we probably have the opportunity to refine that strategy, and along with pricing decisions and what we do in parkwise to hopefully start to build back against perfect cap revenues as well.

So we're certainly looking to increase our revenues next year.

We'll clearly have a very close eye on expenses and maybe, Jim, you can give some color on that.

Yes, to help people understand our expenses for this year in terms of the forecasted results that we have provided, it would contemplate that our total cash expenses, SG&A operating expenses and cost of goods sold would be about $726 million.

Last year, that same number was about $689 million.

So there's a $37 million year-over-year increase in those expenses.

Well, New Orleans had -- was only in our numbers last year from the end of August forward.

The increase in expenses, as a result of the inclusion of New Orleans in the full year was $24 million.

On our forecast.

We also expect that currency changes will have contributed an increase of $15 million in our expenses, so that, taken alone, is $39 million of expense increases.

So in actuality, constant currency are actually lightly down on a year-over-year basis.

We achieved that in the face of some planned and expected fixed cost increases.

Coming into the year, we had, as our plan, to increase our advertising expenses.

And that plan was executed.

While it did not achieve the results that we had hoped for on the revenue side, those dollars have in fact been spent.

That was a marketing increase of approximately $7 million at the consolidated parks on a year-over-year basis.

Our insurance expense, by virtue of increases in insurance rates will, on a year-over-year basis be up by approximately $6.5 million, obviously on same-park basis.

The real estate taxes will be up by about $2.5 million, and our fringes in terms of medical benefits and pension expense will be up by about $5 million.

So that's an aggregate of approximately $21 million give or take in fixed cost increases if you say that together with New Orleans and the impact of currencies you are at $60 million when expenses were actually up by only approximately $37 million, that's why I think it's fair to say that we've done a good job of controlling the variable expenses to the extend we could.

In terms of next year, you know, we'll be looking at, as Kieran indicated what will be the appropriate advertising expense level, based upon preliminary indications we do not expect the same level of insurance cost increases as we have experienced over the last couple of years.

Similarly, we will look very hard at the benefits area.

I do believe that our pension expense will not go up at the same level because of the rise in discount rates that we will be using to calculate the present value or pension benefits obligations.

So depending upon the marketing, I would expect to see fixed cost increases heading into next year somewhere in the $5 to $10 million order of magnitude.

As it relates to the to the 2007 paper that needs to be refinanced, well, we do have a significant number of options that will be available to us over the next several years.

We will be watching quite carefully, obviously, the yields on our existing public debt, and as and when opportunities arise, we would certainly look to extend that maturity at least in part through an exercise in the public debt markets but it would be impossible to predict today exactly when that would take place, but rest assured we will be watching carefully, as the next several years unfold.

We will also expect to generate free cash flow, which we can utilize and depending upon performance levels, we will also have the opportunity to expand our bank facility in connection with.

That we are very confident that we will be able to refinance that obligation or retire it by the end of 2006.

Ma'am, does that answer your question?

Yes, it does.

Thanks.

Thank you.

Our next question is coming from Jill Krutick of Smith Barney.

Please go ahead.

Thank you very much.

Good morning.

Good morning.

I have a few questions.

First of all, I'm curious how auk assume that revenue is going to grow 2.5% from August 10th to year end given what type of performance you've had to date, and where we are sort of in the weather cycle and no other -- no other factors have changed that you've identified as factors that have weighed own your season so far.

Well, just to say that one head on, I think as we've described our season, clearly the most difficult, pervasive weather was in that late April, May and June period.

And that, you know, dug the significant portion of our -- of the hole that we're in from a revenue point of view.

If you look at the month of July, which by no means had perfect weather, we were about 2.2% ahead in terms of systemwide revenues and so what we're really saying is roughly we need to keep kind of the same pace, 2.5% to achieve the range that we've described.

As we get into the balance of this month, and into September, particularly, a lot of our attendance is a function of booked group business, and we've, at this point in the year, can analyze that business pretty carefully.

We have our season pass bases and we know what to expect in terms of usage.

And obviously, our Halloween events have continued over the last several years to be good events for us.

So, you know when I look at school calendars in many markets being back later than last year and our bookings up 1.5%, I feel that, you know, that's a fair forecast of where our revenues should come in, and so feel comfortable with that estimate.

So just --

So obviously, I'm not assuming ising some significant turn around or some, you know, big change in the patterns of the season.

I'm really looking at, you know, pretty much a continuation of where we've settled in here from July forward.

Right.

Which could prove to be somewhat optimistic, just given that the weather seems to be, you know, a real negative.

Especially for a protected period of time.

How much of the season is left?

And how long have you been working with this current marketing agency?

Just to be clear, we have not changed our marketing agency.

We are in a --

No, I realize, the one that you're --.

The one that we're with now, we have been with for nine years.

For nine years.

Okay?

Terms of how much the season is left to go, from August 10th forward, it's about 28%.

Great.

We did 28% of our park level revenues from August 10th forward.

Okay.

Thanks very much.

Thank you.

Thank you.

Your next question is coming from Michael Graves of Oppenheimer Funds.

Please go ahead with your question.

Good morning.

My first question has to do with whether you have any reading on the number of inclement days there were in the third quarter of '02, versus what you've seen so far in third quarter of '03 or if you want to broaden that, I don't know.

What I'm trying to get at, are things worse this year than last year on a weather basis.

Well, I think that's well documented.

Yeah, but by how much?

Do you know?

You can use all sorts of statistics.

I heard one coming in on the radio yesterday saying that there have been 40% of the days since July 4th in the New York market that it actually rained.

But more specifically, I mean as we've looked at our numbers we've had a substantially greater number of weather affected days and particularly early in the season, it was a substantial number of weekend days affected and that continued in a lot of markets.

So I don't think there's any question that it's a big difference compared to last year and certainly against historic averages.

Do you track something that kind of looks at zero attendance at parks?

I mean is the weather so bad that the parks in fact have be to be closed?

It is a very, very rare occurrence when we would close a park.

You know, maybe in the course of a year, maybe only a park or two might close on one day.

I mean, you know, if you might have a hurricane in one of our southeastern markets or something.

But it is quite rare.

Now have you some days where you might close early, and certainly you will have lighter attendance, you know, when you have inclement weather but we rarely are in a position where we actually close the parks.

Okay.

What I'm searching for is how much worse third quarter of this year could be in the third quarter of last year?

And then following up, were there more terrorist alerts last year in the third quarter than so far -- so far in the third quarter this year, there haven't been any, right?

Well, I think that what I was referring to, just to keep things straight, the issue with terror alerts really relates to our school business.

Mm-hmm.

And that relates primarily to that April through early June period, when we historically -- and did this year as well, you know a lot of school groups come to the park.

In a number of markets, when the government increases the terror alert to a certain level, which does not speak to a terrorist event, but just when they -- when they increase those levels, certain school districts at that point are bound not to allow their children to go on any type of trips.

And so that created over the course of this spring, a fair amount of interruption in the normal trade in our business.

The other thing, which we mentioned about the school groups again, you know, based on the economies, there's a lot of pressure on budgets, and so in many instances we would, you know have to deal with the fact that a school didn't have the funds either for the buses or to subsidize the event.

So that -- but that's primarily -- primarily -- not primarily that is completely behind us in terms of the balance of the year.

And, again, while the weather -- you know, I would just leave it to say that, you know, we've had substantially more weather days in this operating season than we did last year.

Do you --

It's not a sense of quantification.

Do you keep a count.

Yeah, we have that by park and we look at that very closely.

We have it going back, you know for entire operating history of the park.

It might be useful for people to understand that last year park level revenues from August 10th forward were about $306 million.

So to give you a sense of order of magnitude, if we were to miss this revenue forecast by 1%, it's $3 million.

Okay.

So recapping, we definitely should expect third quarter results -- I know you're doing this full year but third quarter results could be be worse this year than last year because the weather was -- was the economy perceived as being worse last year?

We already said terror was worse this year.

So we have terror and weather this year worse than last year.

Your interpretation that the economy was worse last year too.

Let me leave it this way, again to be clear, most of the issues relating to the school groups and the alerts, you know, behind us at the end of the June.

In terms of the third quarter, yeah, you know, you -- clearly we talked about the weather.

As far as the economy, I mean, I wouldn't necessarily try to say that it's better or worse.

I do think as we've done our research and as we've looked at because there's all sorts of statistics that go in different directions.

The reality is we think that the job loss, in particular, and therefore the consumers' point of view, is worse, and probably reflects just the extended period over the last two or three years of this situation, and that that's probably reflecting itself, not only in our numbers, but across both the regional and destination park business, hotels, resorts, vacation destinations, I mean, it is -- I think it is pretty clear that all of them have been impacted pretty hard, and I would -- I would sort of describe it more as the cumulative impact of an extended economic decline, and leave it to the economists to sort of decide which year was better or worse, but certainly feeling it more this year in our business.

Okay.

We all probably want to believe and have to believe that all of those items you mentioned, economy, weather and terrorism will improve.

I don't want any bad news for your company or the country.

Final question, cost structure.

I was surprised to hear Jim just say the ad budget is a fixed cost.

That --

No, no.

No.

Just to be clear, ad budgets are not a fixed cost.

That's not what Jim said.

But we set an ad budget going into the year.

And while we have some flexibility during the year to, you know, pull back on commercials, the reality is most of those doll do will a ares get committed and the dollars get spent as the season continues in the June, July period and to some extent they are relatively fixed in a given operating season but coming into next year or the beginning of any year, after we go through our planning cycle, we set those levels.

And so, obviously, with'll be looking at that next year as to what we think the appropriate level what was the return on increases in markets and the whole magilla.

It's really the other cost, property taxes, insurance and the like that are truly fixed cost increases that are somewhat -- not entirely beyond our control, but in some instances just fixed cost creep that we have to deal with.

Let me just ask the question more straight forward.

Why in any given operating -- let me ask the question more straightforward.

Why in any given operating condition can't you reduce the expenses in any operating season.

I think what Jim did was he took us through the components of the full year increase and when you consider that, a chunk of that is the additional expenses of having a full year in New Orleans along with their full revenues, the fact that just currency exchange rates so even if relative expense levels haven't changed, as the currency exchange rates bringing them across, that those alone accounted for the full increase year-to-year and that actually you then throw on where we increased our marketing dollars, $7 million, the pension and the fringes, we actually had $60 million or more of increases in all of those categories so we, frankly, did a very good job of controlling our variable costs during the year, as attendances did not materialize.

Okay.

So that was --

But just to finish the thought, but I do think that it is fair to also observe that we have done a very good job controlling our expenses over an extended period of time, and so there's not limitless room, particularly when you have to provide a certain baseline, guest experience, and obviously always operate with safety as our primary goal.

So we have been extremely cost conscious from the time we've operated this company and so it is not possible to offset dollar for dollar all of the revenue loss in a given season.

And one of the reasons that it's important for to us begin to grow our revenues.

So you do have some ability to cut back food, supplies, and personnel in the parks?

Absolutely.

Affect their hours, their status?

It's how we're able to control our variable expenses during year and all the others.

Okay.

Final thing.

Update on your liability with respect to death in the park.

That was New Orleans, correct?

Look, I'm not going to comment on, you know the specifics of the individual case there.

I mean, I think that what I would just say, obviously, is it's a very unfortunate incident for us and one that, you know, we always take very seriously.

In terms of any of those types of events from a business perspective, in addition, obviously, making sure we take any steps to, you know, uncover anything we can do differently in our operation, which we do rigorously, and have had, you know, a very good year overall in our safety, from an insurance point of view, we have very substantial coverages and other than the deductibles that we would pick up on a given incident, you know, we're well insured.

Yeah so obviously --

It won't be material at all to our operation.

Okay.

And obviously, you're -- based on what you said, you're not yet setting up any reserves, if ever, but have you not set up any kind of reserve yet?

No, we do on a regular basis review the claims for any incidents that take place at the park.

Whether they be significant injuries or less significant occurrences, and we set up reserves regularly based upon the loss runs that we review with our insurance adjustors, as well as their third-party advisors.

Okay.

Thank you.

Thank you.

Thank you.

Your next question is coming from Mark Kaufman of Lazard.

Please go ahead with your question.

Good morning, gentlemen.

I have a question about the with the partnership interest currently .

Given from your comments about the overall decline in the park attendance and the amount that's been distributed from the partnership so far this year, it seems as though -- that those businesses are, you know, suffering -- or those parks are suffering as much, if not more, and neither of which are in the northeast .

In addition to that, I was wondering if that's the case, is there any way you can reduce those long-term obligations you have to purchase these parks or in addition to that, how long can you postpone, I believe it's currently about $180 million, you know, of the partnerships that you were to purchase?

Well, just to address performance, one of those parks in fact is on the eastern seaboard and I think fell very much in the middle of a lot of the weather.

But -- and then in looking at the three of them combined, they're frankly performing generally consistently with the -- with the balance of the portfolio; although our Dallas park is actually one of our park that is up for the year.

So -- in terms of their actual performance.

In terms of the two parks where we have obligations to offer to tender for units annually there is no manner in which to -- to change that obligation, nor would we want to and those are important parks for us that we believe will over the long haul be very consistent performers.

And maybe Jim can address a little bit more specifically.

Well, the parks are still going to be generated aggregate cash flow given the good performance in Dallas relative to last year, well in excess of the minimum annual distributions that have to be made.

The -- therefore I would not necessarily expect to see a significant modification of the rates at which limited partners choose to exercise their option to exit from the partnerships.

Remember that they are currently getting a 7.4% inflation index yield on the minimum price that they could sell us the units for and that is a set minimum price in the case of each of the partnerships.

That yield is, as I indicated comfortably covered still by park performance.

It guaranteed by Six Flags and guaranteed by AOL Time Warner.

So it continues to be our view that absent a significant change in the yield environment, and/or a change in the individual partners's liquidity requirements or from a state planning perspective, that we are not likely to see a significant number of units put to us.

We obviously will remain in a position where inside of our capital structure and our liquidity, we will keep available to us the means by which we could satisfy them if they were to come but remember, also as Kieran indicated when we buy units we are buying incremental cash flow, which will be capable during the course of the succeeding periods after the purchase of supporting a financing to restore to us the cash that we use to acquire the units.

Right.

Do you have to make the -- in 27, the case of Georgia and 28 the case of Texas is that when you with be required to make the purchase of the --

At the end of the term option is in 2027 and 2028.

Then we have an option to acquire the units.

We will also have made the last tender offer in the preceding year.

So you would not -- it's just an option.

You wouldn't actually have to research them in 2027, 2028?

No we would make the regular annual tender offer so if limited partners wish to exit, they could sell their units to us and if they chose not to, then we would have an option to buy them.

I see.

Thank you.

Thank you.

Your next question is coming from Anthony DiClemente of Lehman Brothers.

Please go ahead with your question.

Was wondering if you can provide any commentary on attendance trends after August 3, i.e. in the last week and a half, and were results in the last week and a half factored into the new guidance?

Thank you.

The attendance results were so absolutely factored into the new guidance.

As I said, in terms of hitting the balance of year, if we take from Sunday August 10th, to the end of the year, we need to exceed prior year systemwide revenues by 2.5%.

So our forecast takes into account all of the activity almost right up to this call, and, you know, it obviously was -- was not as good a week as we would have liked going into it, but it's behind us, and I think in terms of, you know, the balance of the year, as I --, you know, indicated in addressing Joe Jill Krutick's question, I think we've been very realistic about our opportunity for the balance of the year and have really looked at the trends and our bookings and season pass base.

Thanks.

And then just one more.

Can you give any commentary on -- were any specific parks well ahead or well below or were most of the parks sort of within some sort of level of performance of each other?

In other words, is there any trend that we should be aware of in terms of the major markets versus the smaller markets.

I don't think -- I don't think there were any -- you know, any -- I mean, there are obviously differences.

They are not all sort of exact but I don't think that the differences were meaningful in terms of any trend or a particular indication about some specific problem in a particular major market.

And I think that not only is consistent with our set of parks, but, again, when you follow some of what -- some of the other operators have said, you know, it's pretty consistent across the industry.

Okay.

Thank you.

Thank you.

Thank you.

Your next question is coming from Lee Olive of City Group.

Thank you.

And I appreciate all the color.

Two quick questions.

Most of them have been answered.

When we look at your -- the partner units and the parties, real quickly does AOL guaranty for the life of the agreement.

Yes.

And secondly your estimated of $175 to 200 million in peak working capital borrowings, sometime in the April, May period of '04, does that assume any puts of units?

No.

It does not.

Okay.

Great.

We have a $300 million committed working capital revolver available to us.

Right.

As well as the $100 million backup facility, whose primary purpose, frankly is to fund any limited partnership units that might be attended.

And we also have in addition substantial cash on the balance sheet.

Sure.

Sure.

Just remind me, again what was that -- the put balance in April of this year.

It was $157 million, I believe.

I'm sorry, the amount that you guys had to fund.

$5.7 million.

$5.7 million, fantastic.

And we have the information on the fixed cost increases in '04, I guess you are looking for $5 to $10 million, are you talk to some of the other -- is there any pressure on the variable wage rates on the temporary employees?

There has not been, no.

And I guess your '04 expectation is that those rates will remain relatively flat?

That would be our expectation at this time, yes.

Okay.

So then I guess to achieve sort of your EBITDA level next year, that you would hit this year, you would need a very low single digit revenue increase?

Correct.

Excellent, thanks guys.

Thank you.

Your next question is coming from Kit Spring of Stifel Nicolas.

Kit Spring.

The $75 million of cap ex seems very low to me.

I'm wondering if that is obviously more of a submaintenance level.

What do you think is the more realistic ongoing level, say 60-cent swing in free cash flow, and then secondly are there any asset sales or any assets you consider non-core that you might be willing to shed, just to give you a little bit more flexibility going further into the future?

Thanks.

I don't -- I would not say that $75 million is necessarily a submaintenance level of cap ex by any stretch.

I guess I would remind us all that, you know, we have held the maintenance line items by park that are in our operating expenses and so the $75 million would be truly for the capital investment, and while it is below the $130 to $150 range that we may have invested and 130 this year, I think about 145, 150 the prior year you have to recall that in this year's 130 we spent about $25 million to rebrand our New Orleans park.

So if you back that out of the number, you are already, you know, around $100 million, and so I think that given the environment, and given the fact that what we've, you know, really are looking at is that capital investment in this period, not just this year, but last year as well, you know, we -- I mentioned in my remarks we thought last year that perhaps our allocation of our investment had been a mistake, but I think now looking at the two years, and looking very hard at our competitors, it's just kind of clear that given the constraints of the economy, plus this year with the weather, that the capital really hasn't made a difference.

I mean if I look at parks in our portfolio where they haven't had capital this year or last year, I don't see a difference in their relative performances.

So I think to be more prudent in this period -- and we'll take it a year at a time.

You know, while the economy starts to recover, I think it's the right place to be, as opposed to over investing in a period where we'll probably not get the yield on it, and, you know, then we'll -- as you say, we'll look at the right level as the business turns and as markets improve.

I would not vary too much from what we've said historically, that, you know, somewhere in and around $100 million, you know, on average, it could be a little bit more in a given year with opportunities it could be occasionally less that's be probably a reasonable level.

And, you know, particularly, again, in this environment, I think that it's -- it's the appropriate thing for us to be doing.

And on the non-core assets?

You know, again, as I said, I really want to strike the right balance by -- by being clear that we are not simply shrugging this off as, well, it was just a tough year with weather and the economy.

We are extremely focused given the performance of the last couple of years of getting back on track.

And obviously, a big chunk of that is making the right decisions about the operating factors next year and the marketing, et cetera, and the pricing and cap ex.

But also, frankly to be resuing everything, and -- but we're not interested in -- we are not interested and nor are we in a position given our financial flexibility and the time frames to do, you know anything that's rash or that's not well thought out and -- and with that said, you know, we -- we clearly have some -- you know some excess land and other of those type of non-core stuff that we could potentially turn to cash and probably will, and those were, you know, steps we were exploring prior to this year's performance in any event and so, you know, clearly those are appropriate things to do.

But, you know, frankly we'll obviously be looking at lower alternatives over the longer horizon and making sure that we increase the equity value of the company and the leverage which are the two goals for us.

I really don't think at this point that it's appropriate to be speculating as to the specifics, you know, which will emerge over -- you know, over the course of the next few months.

Thank you.

Thank you.

Your next question is coming from James Heller of Richford Asset Corporation.

Please go ahead with your question.

Mr. Heller, your line is live.

[ silence ] Gentlemen, your next question is coming from Earnest Capinatro of Montauk Financial.

Yes, good morning.

Thank you.

Kieran of all the domestic parks that we have in the United States, how many total acres of land would you say the company controls or owns?

I mean because you could view the company as also a land management company.

At least 5, 6,000 acres, I guess that's off the top of my ahead.

In the 10-K I think you could see a good description of -- of park by park what the total acreage is and we own, in most cases all of our land, there's only a couple of exceptions where we lease.

So you also consider this a land management company and this land might have been valued at prices that are well below what the current market values of these properties are.

I think that's a little misleading because clearly the majority of our land is actively involved in the operation of the theme parks and I don't think that one should assume that you would somehow separate the two out, or that somehow the parks are underperforming where the sheer real estate value would be higher.

But it's possible --

I think you indicated in the last question to the extent we have excess land in markets where that land has a reasonable value, we would obviously take advantage of that, but, you know, towards your point, which is I think where you are really going is that as frustrating and disappointing as this year and the last couple of years have been, for all of our investors and ourselves, the reality is, is we do have very substantial assets that are very well located in large populated areas that have very developed entertainment assets on them, and there is an extremely high value to all of that, which, obviously, you know, is our challenge to get our growth going again and to be in a position where that gets more appropriately reflected in our stock prices.

And that's -- you know that's clearly --

So in some of the cases, especially out here in Jackson, you have a tremendous at of property that might have the potential for mixed use where you could bring in a strategic partner and develop other uses for that property in the off seasons.

Well, I mean, again, I think you put your finger on specifically, you know, the types of things that, you know, we evaluate asset-by-asset in terms of, you know what satellite highest and the best use and the ways to generate the best best returns from the particular parks and, you know, clearly Jackson is a -- is an extraordinary asset.

Jackson is referring to Jackson, New Jersey where we have our theme park and our water park, as well as our drive thru safari, and still, you know, substantial land that's all zoned and, you know fitted in the largest market in the country.

But I would suggest that in addition to obviously continuing to think through how we develop out, that asset, obviously that asset, you know, has an enormous value which is, you know, no -- by no means expressed through the total valuation of the company.

But be that as it may, you know, obviously those are all the types of things that, you know, we are looking at as we move forward.

All right.

So two brief questions what would you say your current book value is and on another scale you said your attendance, you are looking for ways to expand the per capita -- spending of customers walking through the front door.

Has the company looked at the possibility of reducing the cost of -- the secondary tertiary entertainment in the parks, for example rides -- not rides but gaming and food factors to see if you could increase your sales and perhaps increase from your margins on that product?

Well, I -- in terms of -- well, just first the --

In terms of the book value of the assets the PP & E set of depreciation is at $2.5 billion at June 30th.

In terms of looking at ways to increase spending levels, we look at everything, you know in terms of what do we think is the right pricing by category, what do we think in terms of merchandising, in terms of what types of product, whether it's food or in the shops, what are the right numbers, square footage of outlets, locations in parks, where shoping our competitors -- and I'm sure they do the same with us, in making sure that our pricing is within tolerable norms for our type of business, and stadium-type businesses, those types of things.

And clearly one of things that one looks at is how to use your pricing in terms of volumes and how to go for the best margin.

So that's, again, an exercise that we go through regularly, you know as I indicated last year, we were quite successful across the board in increasing our per caps by about 7% or more.

And actually, we held on to all of that this year and we'll probably grow modestly and I think that -- and that's notwithstanding, you know pretty aggressive discounting.

So, you know, part of it is looking at the dollars that we do invest and ultimately what is the -- the right merchandising.

So, again, rest assured those are things that we're actively looking very hard at.

Thank you.

Thank you.

Your next question is coming from Adam Bornley of Pimco.

Please go ahead with your question.

Hi.

You said on the bank covenants about $295 million was the EBITDA level this year.

Looking out into the next couple of years,what's that level?

Does it stay about the same.

It goes up slightly starting in the third quarter of next year.

Where the performance would have to be approximately $325 million of adjusted EBITDA, depending upon what level of capital is expended.

So if we are performance flat to what our expectation is this year, we're in fine condition next year.

And, again that's covenant in our bank agreement.

None of the public debt have any maintenance on it.

Okay.

Thanks.

Thank you.

Your next question is coming from Andrew Burke of Financial Management.

Please go ahead with your question.

Yeah what was the cap ex in the second quarter?

And what do you expect to spend for the rest of this fiscal year through December?

For the six months ended June 30, we had spent about $88 -- it was exactly $88.4 million in addition to property, plant and equipment.

The level that we expect to expend for the full year is $100 million.

Okay.

And when do you expect that figure to be roughly $100 million for the 12 months in 2004?

We would -- that would probably be lower than $100 million in calendar year 2004.

It would probably be $75 million.

Okay.

Would it make more sense to perhaps cut the payments you make on the preferred stock to have more cash to invest in cap ex?

As we said, it's not a liquidity issue.

We have $150 plus million in cash on the balance sheet today.

We have $300 million committed working capital revolver.

The decision about the capital expenditures is not being driven by liquidity.

It's being driven by our view of what's the prudent level to spend based upon this year's results, the fact that we have, into this year, a substantial investment level, and for the last several years have invested significantly in the parks and therefore, have a very good set of rides and attractions that should be able to enable us to grow our attendances next year.

As you reviewed the advertising, what point do you think you guys will come to a decision as to whether or not to replace existing advertising needs and proceed with the new one.

We are within two weeks of our decision regarding that.

We'll have our four finalists presenting next week.

Okay.

And lastly, the guidance you've been giving for the rest of this year is premised on 2.5% revenue growth and a lot of people have questioned you why that is the right number and why it is not I don't want to go at that.

Let me go at it from a different angle.

Let's assume you have 0 growth off of last years levels, from the August 10th forward, which I think is what the 2.5%.

At zero growth from last year's numbers where would that put the numbers.

Revenue decline from $7.5 to $8 million and most of that would fall to the EBITDA.

90%.

Okay.

Thank you.

Thank you.

Your next question is coming from Don Schneller of DM Knot.

Thank you for taking my call and I apologize if this sounds decidedly negative it sounds like you're managing for growth.

What sort of thoughts do you have in terms of the potential for just a shift in secular demand for the theme park visitation?

You know, the weather is going to do what the weather will do but terrorism I think is here to stay, in our present for quite a while, unfortunately and that may put a downward pressure on visitation.

I'm have just wondering, what are your thoughts on potentially just a continued secular decline in top line?

And how are you managing -- how can you manage the business given your fixed cost levels?

Well, again, I would -- I would not take issue with the fact that we have been through an extended period of difficult external operating conditions with the economy, with terrorism and the ripple effects that that has had and so, you know, clearly across the board in the theme park industry, and in just about every other recreational, leisure-type activities you see varying degrees of decline.

And it's not a function of just being overly optimistic but I do not believe that -- that those issues will constrain us from growing from the levels we're at.

It is a different issue as to, you know, what level of long-term performance each asset will achieve, but clearly given the levels that we're at, across the board, even if the alerts remain with us as a reality and somewhat constrain some of the school group business, the fact that, you know, I'm figuring that businesses are going to recover unduly quickly over the next 12 months or so, it's -- there's just no question that we still have plenty of room for recovery as you have more normalized economic conditions whenever they come.

And I think it's more a function of what is the timing of that recovery.

So it's a when, not if.

I think that it's why we are somewhat conservative with our investment levels because we don't see a rapid snap back and we think there are ways that we can regain some -- some attendance without over capitalizing the business, and clearly we'll remain religious about our expense levels, and there are other options available to us, but I think, you know, time will tell which of the factors affecting the business have longer term implications and which are more cyclical and will fade as -- as time goes on.

Okay.

Just to -- a somewhat related question, a discussion with Jim in the past had been that you will always look to put -- or doctor or you always have to look to keep the door open putting growth on the books.

That comment was framed in response to a question about acquisitions.

You haven't mentioned acquisitions.

I'm assuming that you are -- I'm hoping that you are no longer looking to acquire assets at whatever value.

I know you've got some liquidity here, and you've got to -- you know working capital line, et cetera, but with the enormous amount of debt that you have on the books, however far out it's been pushed, I'm assuming that you are not looking to acquire additional assets.

Is that --

I think in the near to intermediate term that's by no means something that we should be spending any time worrying about, but I'm not going to start making claims about, you know, when markets return and when our performance returns and what becomes available, but I -- I think you're absolutely spot on, that given the circumstances and everything we've discussed that that's not something that we're looking at at this point.

Does intermediate term include '05?

You know, again, I really I mean, probably not in any material way and I think the more important thing to say is that as we said on many other occasions, there is not any single park acquisition that is going to dramatically change the nature of our company, so given what's going on over the next two to three years, it's just not going to be any kind of a focus for us to be really worrying about acquisitions.

Our focus is going to be really inward looking at improving our operations, growing our existing assets.

But, you know, speculating as to when markets turn, when our performance comes back, you know, I -- I'm not going to try to identify, you know, a date, you know on that.

I'm not hedging.

I'm just saying, you know, I -- I'm not sure when the economy comes back, I'm not sure, you know, when opportunities present themselves.

But I think what you are worrying about is not where we'll be.

We are not going be to be out looking aggressively to do acquisitions.

Okay.

I'm worried about what all the other questions are revolving around, liquidity crunch and I know you have 155 dah-dah-dah, liquidity crunch and especially use of assets.

I'm worried that some opportunity, a park goes chapter, a private park or what not and it is a very attractive asset and they are basically handing the keys if you pick up the payments.

You know, my worry is that as long-term investors that we get to a point if we have bad weather next year and more terrorism, dah -dah-dah that you hit a liquidity crunch problem.

That you trip the $295 million covenant, that attendance is down, et cetera, and that sort of revolves around my question for managing for negative.

We are not taking steps to increase our exposure further to those risks.

We're obviously managing the business to decrease those risks.

And we'll -- and will for the foreseeable future.

Just one last question.

Management compensation, do you have a bonus structure in place, both at the senior level and then the individual park management park level and what are those bonuses generally contingent upon, assuming it's in place.

There are bonus programs at both levels.

Most of the bonus opportunity at the corporate level with the exception of certain contractual bonus plans are discretionary.

At the park levels they are based on hitting individual park EBITDA targets.

The discretionary component is you have a compensation committee at the board level?

Right.

Okay.

Thank you.

Thank you.

Our last question is coming from Michael Rabadam of JP Morgan.

Please go ahead with your question.

Hi, most of my questions have been answered but what was your working capital outstanding balance currently?

I think it was $143 at the end of the quarter.

It will be $35 million at the end of this week and we'll be completely out of the revolver in the next two weeks.

You'll have excess of $100 -- you know, $115 or so?

No.

Because we're generating cash from operations, in the meanwhile, I expect that we'll have a cash balance of over $150 million.

Okay, great.

Thanks very much.

Thank you.

Well, thanks for joining us on the call.

Again, obviously disappointed with our results and certainly committed to improving them beyond obviously hitting the targets of the balance of the year as we go into '04.

And we will be communicating with you as we get deeper into the year as to -- as to that.

So thanks very much.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.