Six Flags Entertainment Corp (SIX) 2006 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Six Flags second quarter 2006 earnings conference call. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded for replay purposes.

I will now turn the presentation over to Wendy Goldberg, Senior Vice President of Communications at Six Flags.

Please proceed, ma'am.

Good afternoon.

I am Wendy Goldberg, Six Flags Senior Vice President of Communications.

This evening the Company released its financial and operating results for the second quarter and the six months ended June 30, 2006.

A copy of the earnings release is available on the Company's website at SixFlags.com under the heading Investors.

Here with me today are our President and CEO, Mark Shapiro, who assumed the leadership of Six Flags in December of 2005; and Jeff Speed, who became our Chief Financial Officer on April 1.

Before I turn the call over to them they have 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 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 2005 annual report on Form 10-K, which is also posted on its website, for a detailed discussion of these risks.

Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content in the call will be considered fully disclosed.

In accordance with SEC Regulation G non-GAAP financial measures used in the earnings release and in the Company's oral presentation today are required to be reconciled to the most directly comparable GAAP measure.

Those reconciliations are available to investors in the earnings release.

Now I would like to introduce Jeff Speed, our Executive Vice President and Chief Financial Officer since April 1.

Good afternoon everybody.

As Wendy indicated, a short while ago we announced our operating results for the quarter ended June 30, 2006.

Before getting into the details of those results, I just want to note a couple of items regarding certain changes to the income statement presentation of our results compared to the prior year.

First, our as reported results reflect the operations of certain parks as discontinued operations.

These are the parks that we have previously announced our definitive intention to sell and/or cease operating, namely our Oklahoma, Sacramento and Columbus parks.

Our Houston property is also classified as a discontinued operation, however, it had no park operations during the quarter, and we completed the sale of the land underlying that property in June.

I would also like to point out that on our income statement we have reclassified losses on fixed assets, which mainly represents the non-cash write-offs of fixed assets from other expense below the operating income line to now be included as a component of operating income.

Now to the results for the quarter.

The highlight for the quarter was definitely our per capita guest spending and total revenue per capita, which continued to show robust growth of 14% or $4.43 and 15% or $4.80, respectively, reflecting increased pricing, more staffing and new and improved offerings.

I should note, and I will come back to it later, that as we move into the peak July and August months we expected to see, and in fact are seeing, some compression of that growth.

Included in the total revenue per capita for the quarter is sponsorship revenues of 6.8 million compared to 5.8 million in the prior year.

This brings the total sponsorship revenues for the six months period to 11.5 million compared to 11.6 million in the prior year.

And our corporate alliance team remains on track.

The challenge for the quarter was clearly attendance.

As we communicated in our mid quarter call, volumes through June 18 were well below expectations.

And unfortunately the weather did not cooperate, resulting in our attendance declining an additional 600,000 during the remaining 12 days of June.

For the quarter that translated into a 14% decline in attendance, or 1.6 million, bringing our six months attendance to 10.8 million, a decrease of 1.9 million.

The majority of this decrease is explained by season pass attendance and New Orleans, as well as weather, which Mark will comment on further in a moment.

Before leaving the top of the weather, although we can't pinpoint a specific number for its impact on attendance for the quarter, I would like to share some information that may provide some insight as to the magnitude of its likely impact.

Although the percentage of what we call bad weather days was roughly in line with 2005 at 18% of our total park operating days, it is important to consider the mix of weather days between weekend and weekdays, as well as which parks were impacted.

When we do this we find that the percentage of weekend bad weather days increased 16% versus 2005, noting that we typically generate almost twice as much attendance on a typical weekend day compared to a typical weekday.

And if we go a step further and consider only our 14 Six Flags branded parks, which deliver the substantial majority of our attendance, we find that they experienced a 26% increase in the number of weekend bad weather days compared to 2005.

Based on this, it is clear that weather undoubtedly played a role in our attendance performance for the period.

Notwithstanding the disappointing attendance for the quarter, down 14%, it is actually somewhat encouraging that due to our strong per cap performance our total revenues were only down 1%, or $4.5 million.

On the cost side for the quarter, total operating costs and expenses were $307 million, an increase of $27 million, or 9%.

The increased costs were primarily driven by anticipated increases in salaries, wages, and other expenses associated with the additional staffing and services throughout the organization in order to execute our various strategic initiatives.

For the six month period, total costs and expenses increased approximately $78 million to $519 million.

If we exclude the management change costs, stock-based compensation, and loss on fixed assets, which totaled $33 million for the period, total costs and expenses increased approximately $45 million.

For the quarter our net loss applicable to common stock was 45.1 million, or $0.48 per share compared to net income of $0.06 per common share in the prior year quarter.

The net loss for the quarter includes a variety of non-cash and other items not directly related to the ongoing operation of the business of approximately $15 million, which includes a tax evaluation allowance of approximately $11 million.

Excluding these charges, net loss applicable to common stock would have been $0.32 per share compared to net income per common share of $0.03 in the 2005 quarter.

As you know, a key non-GAAP measure that we utilize for managing the business is adjusted EBITDA.

On as reported basis adjusted EBITDA for the second quarter was $63 million compared to $95 million in the prior year quarter.

As revenue for the quarter was essentially flat, down 1%, it is very important to note that the lion's share of this decline was driven by the strategic decision to increase certain discretionary costs and expenses in order to deliver an improved experience for our guests, which we believe is essential in order to position the Six Flags brand for future growth.

Before concluding, I would like to provide a brief update on our July performance, our recently approved amendment to our credit facility, and the status of potential asset dispositions.

Regarding July performance, although the first half of July began to show encouraging signs of recovery in our volumes, the second half was disappointing, as storms on the East and heat waves in other parts of the country impacted business.

Through last Sunday our July attendance was down approximately 1 million, or 13%.

On the per cap front, as I alluded to earlier, we began seeing the expected compression in our ticket per caps, in part due to our summer ticket promotions, resulting in ticket per cap being up 10% for the month.

We also began to see some of the expected decline in in-park spending growth, which increased approximately 13% for the month.

This moderation of the per cap growth was expected due to the higher levels of attendance in the peak days, which make it more difficult to sustain capture rate levels compared to those achieved on the lower attendance days earlier in the season.

In addition, we also have more attendance mix from our water parks during these peak months, which have a lower overall per cap compared to our theme parks, thus further impacting the per cap growth.

The results for July through last Sunday was that total revenue declined approximately $7.5 million or 3% compared to the prior year.

When we spoke last time on our mid quarter call we indicated that based on the top line performance that we were seeing we were at risk with respect to certain financial covenants in our credit facility, and that we would be seeking amendments to those covenants.

I'm pleased to inform you today that our lenders have continued to be supportive and have agreed to provide us additional flexibility by waiving our second quarter financial covenants, as well as relaxing those same financial covenants going forward through December 2007.

With respect to the status of the potential park disposition process, I can tell you that we are in a process of entering into confidentiality agreements with numerous interested parties, and expect to be providing books to qualified interested parties in the coming days.

I should also reiterate to avoid any confusion that may exist that these parks will remain open for the season, and we have made no definitive decisions with respect to their potential disposition.

I will now turn the floor over to Mark Shapiro.

I will try to provide some color and some anecdotal insight and evidence as the second part of this.

Bottom line is that quarter two in July are not much different than what we related to you on the June 22 call.

Attendance is down double digits, and the per caps are up double digits.

In fact, really the quarter two trends continued through July, kick started by the weather.

I mean, the week after our June 22 call we lost 472,000 in attendance versus last year.

That is 472,000 in attendance in one week.

Then we actually had a strong period.

If you will recall on the 22nd we told you about June 30 our big marketing campaign was going to take off, and it did.

And we actually want on a hell of a run.

We went on a two weekend run, including July 4 and July 5, where we mimicked last weekend's attendance specifically on those two days, yet we continue to see huge increases on the per cap.

We believe that was a glimpse of things to come, crossed our fingers and got pretty excited.

Then on July 12 we had a tornado touch down in Westchester County.

That is never good.

And then the Saturdays of the 15th, 22nd and 29th, so three straight weeks in a row, three Saturdays, the biggest day of the week for us, we were severely impacted by rain on the East Coast.

And of course we have six parks on the East Coast.

So that is never good.

Then of course the heat wave.

One place I thought we were absolutely bulletproof on the heat is Dallas.

Steve Calloway and his gang live with 100 degrees just about every day out there.

At 110 though we absolutely began to see some fall off.

Clearly Los Angeles went through their 12 or 14 days of heat.

We then had a massive electrical storm in St. Louis.

In fact, today we still have 20 employees that are taking bottled water home from our parks to drink, bathe in, whatever it is.

So St. Louis took a hit.

And even Oklahoma City -- I saw something in USA Today yesterday, there were 15 days in the month of July in Oklahoma City, of course one of our smaller parks, but 15 days that was 100 degrees or more compared to two all of last year, and compared to zero in 2004 for the entire season.

Not the season, excuse me, the entire year.

That is of course before we even begin to talk about this week ending.

The heat wave clearly is going to impact us this week.

My wife pulled the kids out of camp today.

It is 101 degrees today in New York and 101 degrees in Washington D.C.

You are looking at a situation today in New Jersey where we have about 8,000 people in the theme park.

We are used to having 30,000, at least 20, 25,000 on a day like today.

So it looks like the heat is going to break here, knock on wood, Friday night, which should open up for a good, strong weekend in Chicago, New Jersey, all the East Coast.

It looks like the weather is going to be good, and of course this is before they go back to school.

So we are encouraged by that.

And Atlanta will get a extra week next week as most of the schools don't return till the week after next week, which is a week later than last year.

Bottom line is we are in our transition and investment mode, yet weather aside, we do see lots of signs of encouragement.

We are on pace on the sponsorship.

We are on pace on expenses.

All of our rides are now open.

We are encouraged by the interest in our properties thus far.

We are encouraged by the upswing in guest satisfaction, which we're monitoring weekly.

We are experiencing five-year highs in the following categories, the way guests feel about the overall visit, their intent to visit again, their intent to recommend to a friend to visit again, and just overall -- we always ask the question every year, are we exceeding your expectation for the visit, and across the system we are at five-year highs.

Getting particularly strong remarks, five-year highs, for cleanliness, character appreciation, the speed of our ride lines, and belief that are more rides and/or shows that the family can experience as a family.

Clearly we are encouraged by that guest satisfaction.

And that is the strategy taking hold.

I want to tell you personally I am very encouraged by what I am seeing out there.

I just finished a five-day tour of six parks.

My team and myself hit Great Adventure in Jersey, Marine World out in Vallejo, Magic Mountain in Los Angeles, Fiesta Texas in San Antonio, Six Flags Over Texas in Arlington and Dallas, and Six Flags St. Louis.

I'm encouraged by the impact of the increased labor.

Everywhere you turn there is a sweeper.

No wonder we are getting high marks on cleanliness.

Those parks, those midways are spic and span.

Those bathrooms are spotless.

The friendliness of the people, the training is clearly coming through.

The characters are out in abundance.

They are being spaced properly.

We are getting great reaction from the guests to the characters.

Parades are in full force, being very, very well received.

Chicago is doing two of them in fact -- very popular.

And just the overall life and energy of the park, it is there.

It is there.

In particular, Magic Mountain -- and I want to single out Magic Mountain because their numbers have just been on fire lately, and I think that they -- I don't think -- clearly they had a bad rap on our last earnings call.

When we spoke about a lot of the issues Six Flags faced as a Company, and with regard to our strategy and desire to shift the balance of our guest base, our attendance to more family and away from too many teenagers that maybe acted inappropriately at times, or a section of them, and scared people away.

We never singled out Magic Mountain.

In fact, Magic Mountain does not have that problem.

It may have had that at one time, or years ago.

And I know there's a reputation for that because of incidents that happened, but it just seemed that there was a lot of erroneous reports in the press and on the Web.

And everybody seemed to point the finger at our image problems or what we're trying to change on Los Angeles.

That is just not the case.

Our total revenue at Magic Mountain, and this is despite a fall off in attendance that we talked about, most definitively impacted because of the heat wave in Valencia, total revenues still up almost 10%.

The per cap spending at Magic Mountain is up 10%.

The Hispanic visitation, which is very important because we have a large base of Hispanic guests that hit that park.

And that is a priority for us.

We came into the year trying to target, to really own that Hispanic base.

And the Hispanic visitation is up 11% this year.

On July 16 the park set a record for the Company.

A single day, their per cap was over $50 -- $50.

So they had a bad rap, and I want to clear that up.

I'll tell you, I'm also encouraged by the other tent pole we have on the East Coast, which is Six Flags Great Adventure.

This will always be our biggest challenge.

It is the biggest park, the biggest scale, the biggest scope, a safari of course, a water park.

We're going to get it right at Great Adventure, but there's no question that is our biggest challenge.

And a couple weeks ago they too did over a $50 per cap on a Saturday.

I mention that because Jeff and I have spent a lot of time when asked, where do you guys think this can go in terms of per caps.

And we said, look, we're not going to get there this year or next year, but here we are inching up towards $37, and it is our goal sooner rather than later to get to a per cap with a 4 in front of it.

And when you look at, even though it is just one day for New Jersey, and even though it is just one day for Magic Mountain, when you look at a per cap of over $50 in one day, that tells you where this business can go.

I am encouraged by the character program.

The recognition and appreciation for the characters from our guests is up over 20% from last year, which clearly bodes well for our initiatives and our lines of business in the years to come.

Remember, everything is tied to our characters.

Brunch with Bugs is tied to it.

Even our Flash Pass is tied to it.

Our retail initiatives are tied to it.

Our guest satisfaction in terms of the shows and the parades is tied to it.

So much of it -- our marketing campaign next year might very well be tied to the strength in the equity we have in the characters.

So it is important for us to be seen that 20% increase in character recognition or appreciation from our guests.

Brunch with Bugs is growing weekly.

We just commissioned some research that came back to us, which I'm really encouraged about, because what we are seeing is that guests are spending -- when a guest says they see a character -- just they can recall seeing a character in the park and a show.

So we're not talking the rides.

We're talking about the other entertainment initiatives -- a character or a show, they are spending 48% more money than guests who don't see a show or don't see a character.

Then the guests that say they recall the park as being secure, meaning they saw security guards, they felt a secure environment, or they remember the park being clean.

Those guests are spending 20% more than those that can't say that.

So again, that speaks directly to our strategy.

When you wonder why we put such an emphasis on keeping the parks clean, friendliness, security, characters it is because these folks are going to spend more money, and our per caps are going to continue to be lifted this year, next year, years to come, as long as we continue to emphasize that strategy.

I'm encouraged that are Flash Pass, which is the program that was really started a couple of years back, but it was very minimal in just a couple of parks.

It wasn't on a lot of rides.

We came in and rebranded it, as you know.

Put The Flash on it.

Worked with Warner Brothers to use the Flash symbol to signify -- you know, buy a Flash Pass and you won't wait in lines all day.

Not only, as I told you earlier, do people believe our ride lines are better than they have been in the past five years, but our revenue on Flash Pass is up 22% year-over-year.

I'm encouraged by the progress of our Corporate Alliance division.

We told you on our first earnings call -- whenever that was, January, February -- that we would do two to three corporate alliance deals this year.

I'm not talking about the Sunkists of the world that we absolutely are grateful to that partnership, but the more expensive partnerships, the Papa John's, The Home Depot.

So we have two of those three, and I hope to announce another two by November.

So that would give us four for the year.

I'm encouraged as I get into '07 planning.

I'm knee deep right now in '07 planning.

My time -- and many shareholders ask me how I am spending my time these days.

Half of it, or one-third of it is really obviously the operation today.

We have 20% of our season in August alone.

We have 36% of our season still in front of it.

So one-third of my time is spent on today's operation to make sure we are executing against our strategy.

One-third of the time is clearly spent on marketing.

And the other -- and the corporate alliances -- and the other third of it is total '07 planning.

We are in knee deep right now in 2007 planning, because I want to take advantage of this opportunity we have now that we didn't have last year.

As Wendy mentioned, Jeff himself didn't start until April 1.

The idea that we can plan and get ahead and lock down in advance strategies in multiple businesses will bode well for us next year.

And the good news is we're going to be entering '07 -- we're entering this planning for '07 with a much better patient on the table right now.

I am excited because we can realistically envision an '07 season with our capital plan, a capital that is tied to $100 million, capped at 100 million.

There are focuses on family rides.

It is ordered now so that those rides are up from March 1.

We are you had two family coasters that we have ordered that will be ready when the season opens, even on weekends, in March.

We have to take advantage with that running start to pick up attendance in March, April and May next year.

I'm excited because we're going to have proper leadtime for ticket pricing strategy.

We're going to have proper leadtime for our season passes.

Right now we're doing about 2.1 million season passes as opposed to the 2.5 they did last year.

Not only are we getting more money for them, but now we're going to be coming into the season where our season pass fills are going to go on sale October 1 of this year.

We've got an incredible campaign to push the urgency on season passes, that I don't want to detail right now, but we will get into it in November.

I'm excited because we're going to have lead planning time for group sales.

Our attendance -- what we're off right now -- 800,000 of that is coming from group sales.

And that is flat out attributable to the transition of the Company.

We were three or four weeks late on sending out our first group sales mailing.

I think we believed -- well, we're going to still get it out there.

We will get that attendance.

But that four weeks cost us.

And that business was lost and we're hurting there.

To have our group sales plan locked in October of this year is going to bode well for next year.

We are going to be totally in good shape with regards to staffing.

Clearly we're benefiting by the increase in labor right now.

And we just got back -- I had another trip to South Africa and it is going well to lock down two programs in South Africa with seasonal employees.

We've got a couple of other programs working.

We're not going to have the reliance that we've had on some of the past international programs we have had in the past.

We're going to be way ahead on staffing.

Clearly we're going to be ahead on training.

Retail, we're ordering right now retail for '07.

Just as an example, we're still getting in 45th anniversary retail.

We were still getting it in at the end of July.

And that is just the by-product of not hiring your retail guy and getting that strategy together until January or February.

And is just takes a while to get it in.

This is when you need to order for next season.

So I'm excited that we are going to have leadtime on that.

We are going to have leadtime clearly on our marketing and having Zimmerman on board, having our creative agency that has already begun planning for '07.

They began Monday.

We're going to have leadtime with our retail partners.

I think one of the things the Company still suffers from is we still have too many price points out there.

While we were able to cut back on some of the price points when we took on the Company, a lot of our retail deals with our partners, like food stores, fast food were already done.

We couldn't get out of them.

So we're still at about six different price points.

And jumping on it now I think we will be at four price points for next year, which will certainly improve the confusion.

We will have severe leadtime for the co-marketing partnerships we have, Home Depot selling our tickets.

Papa John's on the box toppers and the in-store promotion that they're doing.

We will have leadtime on our online strategy, which is so key because as of today 25% -- I'm sorry -- we are seeing a 25% increase over last year of people buying their tickets off the Web.

So [Oglevie's] has done a tremendous job. [Signus] has done a tremendous job there.

And having a lot of leadtime will only bode well for us next year.

And finally, even Tony Hawk -- Tony Hawk was a total success for us.

He stopped as you know at eight parks in his tour. 7 of the 8 parks he significantly lifted the attendance.

And remember, the only marketing we did for Tony Hawk was in-park, because we signed a deal much later, and of course our marketing dollars were already committed.

The idea that we can plan for next year to have a Tony Hawk tour, and a Matt Hoffman tour and plan marketing around those tours should bode well for us.

I'm encouraged by the discussions that we're having with branded licensing partners for next season.

I know that a couple of the analysts, Glen, I think you and David had comments in there about our discussions with branded licensing partners.

And we're going to have some announcements on some new branded licensing partners in our call in November.

Most of all, I'm encouraged that the families are coming back to Six Flags.

The spending is up.

The strategy is taking hold.

Bottom line, when you look at our number is the spending, while up as high it is wiping out the volume being as far off as it is.

But my position is you can get the volume back.

That is the harder of the two.

What we're really off is the 60 million that we put in to fix the business.

And I'm encouraged that the full 60 million won't all be recurring next season.

And that a heavy marketing plan, which you'll have $15 million more of television and radio than it did this year equal to last year, with a significantly improved product will restore that volume.

Maybe not all next year, but sooner than you think.

Before we open it up to Q&A, I want to mention that I did get a call yesterday from a shareholder that asked in relation to Cedar Fair's earnings call.

I think Cedar Fair had mentioned that some of their attendance fall off was because of economic conditions and gas prices.

And the question that was posed to me was, are you seeing the same thing?

Are gas prices and economic conditions hurting you?

At that time I declined to answer, saying that clearly I wanted to do that on today's call.

I do want to address that off the top.

It is tough to say exactly the number that is being affected by gas, but I do believe unfortunately with $3 at the pump it is having an impact on us.

Only two quantifiable measures, after doing extensive research that we can find.

First off was in Magic Mountain.

We did some research and we saw that there is some reluctance to take the trip all the way out to Valencia, as if it is so far.

I think it is probably a misnomer or unrealistic.

It is not that far to go out there.

No father than it is to Orange County and Disneyland.

But at least some of respondent feedback was gas prices being as high as they are, and the drive out there, sometimes it makes you pause before going out there.

That was an extensive phone survey that we did with people that have come to Six Flags in the past, former season pass holders, current season pass holders.

The other measure I would tell you is the way we're trending as we have told you, our attendance fall off at the end of year, as you break it out 1.7 million of our attendance fall off will be season pass, if we continue on this trend.

The 1.7 million is broken up not just in fewer units sold, but in fewer repeat visits.

We're actually getting -- it is just a little bit, it is not a ton -- but we're getting a few tenths of a point fewer repeat visits on our season pass holders.

These are people that already have tickets.

And while I don't have concrete evidence to tell you this, I do chalk it up that that could be impacted by the gas prices.

Finally I would just say, I really want to reemphasize what Jeff said.

And again, there is just what Jeff said.

Again, there is just some erroneous reports out there.

We're not closing parks.

We're not closing the Park at Magic Mountain.

We are not closing the Park in Darien Lake.

We're not closing the park in Denver, the Elitch Gardens.

We're not closing those parks.

They are open.

They are open for business, full business.

Denver is scoring off the charts when it comes to per cap and guest experience right now.

I'm excited about the job they're doing there.

And we just can't have bad information out there.

We're simply exploring our strategic options.

And we're going to get back to you with a clear vision on exactly where we are up in that process in November.

But until then, we're going to keep plowing away in August.

We're going to hit it hard for the weekends in September and October.

But those parks, Seattle included, Oklahoma City, the Houston Water Park, they're totally open and they are full throttle when it comes to our guest and entertainment strategic initiatives.

All right.

I think we're ready here to open it up to phone calls.

(OPERATOR INSTRUCTIONS).

Glen Reid with Bear Stearns.

I've got three questions.

First, I wonder if you could talk a little bit about the Moody's downgrade that hit the tape today.

They talked about negative free cash flow, not only this year but next year, and what that might mean.

Also from the downgrade in terms of your interest costs.

Secondly, if you could touch on the New Orleans insurance situation with the status there.

What you are kind of thinking.

Lastly, if you could maybe -- you talked a little bit about, or quite a bit about, the different anecdotes out there.

But maybe in the past month and a half which parks have shown particular improvement, given all the efforts you have put into place, and maybe which ones have deteriorated a little bit?

Obviously, unrelated to weather.

Thanks.

This is Jeff.

I will take the first two and Mark will take the last one.

On the Moody's downgrade, as you may now, they have had the Company on an outlook or a watch for quite some time.

And given the mid quarter performance that we announced in June, and obviously, they're here on the East Coast.

They have seen the weather we experienced.

It was a cause for them to review the rating.

And clearly with the performance putting pressure on the cash flow generating ability for the current year, and taking a view as to '07, although we haven't put numbers out there for '07, they chose to take action based on how they analyzed the Company.

Importantly, they have lowered the overall corporate rating, they did not lower our bank rating.

So I think that is an important fact.

What it means in terms of interest cost is in our amended credit facility, which is roughly a $645 million term loan, and the 300 million credit line, it means that we have a rating's pricing grid, which means 0.25% increase in interest cost because of that downgrade.

In terms of New Orleans and the status there, we filed our insurance claims some weeks ago, both business interruption and property damage.

Our teams are working with the adjustors to work to resolve those claims and receive the proceeds.

As you know, under our lease with the city we have an obligation to rebuild to the extent of insurance proceeds.

We have had some dialogue, some correspondence and exchange with the city to discuss what our next step should be in that regard, given the fact that that park, even before Katrina, was in decline.

And quite frankly, given where New Orleans is in their rebuilding efforts, we think it is worth having a discussion on it is questionable whether in fact New Orleans needs a theme park at this point in time.

So we are in discussions in terms of the next steps under our obligation with respect to the lease.

And that is the status of that.

On that, just a quick follow-up.

Is there any sort of range you could give us in terms of the proceeds, and if they are commensurate with whatever CapEx or rebuild requirements might be discussed?

What I can tell you is the total investment in that park, not just by us but by the folks that we bought it from out of bankruptcy, was in the neighborhood of $150 million.

Are you okay on those two?

Yes.

On the last question, I would just say I don't want to be dismissive or give you some fluff answer.

I think you know me better by now.

But I will tell you, the branded parks is where we're concentrating our efforts.

And the branded parks are showing it.

Nevermore -- we started stuffing that incremental expense in, as you know, at the very beginning of June, late May, once we saw the parks in full operation.

When I went on this -- kind of gave it three or four weeks here -- and then went on -- to tour at least six of them.

I went to -- I mentioned the ones we went to.

I can't tell you.

It was just going around and seeing them in full operation, the impact of the more labor, the impact of the characters.

Flat out, you would almost have to be there to believe me.

Just moms stopping me.

I always wear my name tag, and obviously I'm in a suit so I stand out.

And I am picking up garbage in a suit, so that makes me stand out even further.

But St. Louis -- just stopping me to talk to me about the park.

I am a season pass holder, and it hasn't looked this good -- and on and on and on.

Our safety records right now, knock on wood, are absolutely off the chart.

We have no issues of people believing -- it is probably our strongest component on guest satisfaction that people believe Six Flags is safe and secure.

And that is an increase, again, a five-year high.

And it was just one anecdote after another.

Don't get me wrong, we still have challenges.

We're not running a Disney right now.

And at the expense level that Disney runs their parks, guess what, we're never going to be.

We have never positioned ourselves that we want to be Disney.

We need to be a better alternative.

We need to be similar to the Disney experience, because we have a leg up on Disney in the sense that we are a drive away.

Pack up the car and you go.

But I was very pleasantly surprised across the board that the branded parks -- Chicago -- the best water park in the country.

And they're running a great program there.

Dallas has just had a total resurgence this year.

Atlanta, a total resurgence this year.

San Antonio, the best show park in America.

And I am very pleased at the operation that Martin is running there.

New England and [Mark Cain] is exemplary.

Denver -- I mean, when people get out there -- we just need more of them to get out there.

But the word has got to be spreading given the guest satisfaction points we are seeing.

I don't want to ignore the nonbranded parks, because of course I think, as I mentioned in the last call, that Lake George is doing a solid job and some others.

But our concentration was putting the expenses into those branded parks.

Which was a tough message, by the way, for some of the smaller parks that didn't get that love.

You asked me the second part of that question.

And by the way, I think the branded parks are really hitting it out of the park right now.

As far as which parks are not doing it.

I would just reiterate what I said.

My biggest challenge continues to be Great Adventure.

That doesn't mean they are not doing it.

There has just been so many years of neglect there, where they got all the rides you can ever want, the greatest wooden roller coaster.

That El Toro is unbeatable.

It is my favorite ride in our entire system.

And Kingda Ka, all the problems they had last year with Kingda Ka, I'm happy to report to you we are running every day with Kingda Ka, which is no small feat.

Again, knock on wood.

So we have got the hardware.

It is just so big in there is so much scale, and there's a scope, and there's some employees that is tough to keep up that pace, and to turn it around given that the software hasn't had a kind of love that it should have.

But we are working on it.

Sorry for the long answer there.

David Miller with Sanders Morris Harris.

A couple of questions.

Mark, in past communications you have hinted that CapEx could be -- next year -- could be somewhere around 100 million.

But in other rhetoric that you have issued, sort of off-line, you have also hinted that it could be as low as somewhere between 85 and 95 million.

Are you prepared at this point, just given your prepared comments about '07 to issue a firm CapEx number for '07?

Are you prepared to just issue as concrete of a number as you have in your head?

And then I have a follow-up.

Thanks very much.

I want to stick to what I have always said, and I would give you the clarification.

We're not going to be one dime over 100 million next year in CapEx.

Given our current portfolio of parks, I think the comments with regard to -- I've had a lot of questions off-line, well, if you're not the same portfolio, if you guys do choose to sell some of those parks, where do you think you could end up?

It is way too premature to talk about that, because again we don't know if we're going to be selling those parks.

But theoretically if those parks weren't there, yes, it could be something with an 8 in front of it.

But I don't want to get hung up and committed to that number, because obviously we going to have to continue with our advance planning in two sets.

If we decide to go ahead and move on those parks what would we look like, and if we decide to keep them what are we going to look like?

Right now we are -- most of our plans that we have put together here so far in our advance planning have been the current portfolio, which is why I speak to the 100 million number.

Fair enough.

And then, Jeff, obviously the Fed has sort of a bias now towards raising possibly another 25 beads in the next meeting.

What do you have in your head there their given that with regard to financing costs via the LBO shops who are the likely customers for a patch of parks that you would put up for sale?

I guess on that one, all I can answer is sort of anecdotally, given the indications of people interested in getting the books regarding these parks.

And that there is money out there to put to work.

Yet to the extent rates go up, that money will be a little more expensive to borrow than it would have been without the increase.

However, with rates increasing because of inflation and concerns that also argues that maybe there's some in the future outlook for these parks.

And as they are thinking about growing the business, there're opportunities to further increase the pricing throughout the forecast period.

So on balance, I don't have reason to believe that that is of material impact on where we end up for these parks.

I do want to add (indiscernible).

This is more -- it is back to Glen's thing -- just as I'm thinking here.

I want to make sure everybody realizes too one of the reasons why I think we are also seeing high guest satisfaction is not just the service that we are performing while people are there, it is the follow-up.

For the first time -- for the first time in the past five years we are open for business when it comes to, if you want to write us about something -- if you want to call us about something, we have put in a universal complaint system.

And I know that sounds crazy to think that Six Flags didn't have that, but they didn't.

Six Flags knew that they were cutting expenses in years past, and they buried their heads in the sand and didn't allow the guess to be able to contact them.

They might write letters, but they didn't get a response.

If you go to our website now, what you'll find -- and this is new.

This has just come online within the last two months -- every single park is listed with a guest relations phoneline that we have installed.

General manager names are listed.

In the past all it said was, if you have an issue or whatever, you have a question, contact Six Flags.

And actually didn't give you phone numbers of parks.

Or it would give you -- I began seeing letters and letters of people saying, I would call Six Flags and I would get transferred around six times, or I would get to a voicemail, or nobody would come back to me.

Even though we had guest relations, we weren't beefed up the way we should be.

So some of the labor has gone into responding to our guests.

We have more people in guest relations.

We respond to every single letter.

We respond to every single phone call.

We have dedicated guest relations lines.

We put our GMs names front and center on the website -- other than Mexico City, and there's reasons for that.

I personally -- I spent yesterday afternoon -- a half-hour during my lunch making calls to guests that had written into me, and calling them at home.

It is kind of fun just to get the surprise and shock when they hear from me.

But I want them to know it is going to be a total personal touch.

We know we're not perfect, but we're absolutely getting there.

Getting not perfect, but improving.

Next question.

Sorry.

Kathy Styponias with Prudential.

Actually I have a few questions.

Jeff, you talked about the per cap coming down compressing to about 10%.

Do you expect it to compress further or is that a good runrate for the third quarter?

And, Mark, a question for you.

It is 29 million still a good number for the revenues you expect to bring in for corporate alliances?

Does this fourth deal in November get you to that $29 million number?

And I have a couple of follow-ups.

I am going to take the second one first.

The 29 million number is still our number.

The third or fourth -- the third and fourth corporate alliance deals would be money that we would actually see next year.

It is going to be local deals that we're cutting to get us to the 29 million.

The third and fourth corporate alliance deals will be on next year's books.

On the per cap, the 10% I cited was the ticket per cap for July.

The actual in-park per cap was -- excluding tickets -- was 13%.

Those were -- comparing to the year-to-date through June we were at roughly 14% ticket per cap, and a little over 14% in-park guest spending.

That was the level we delivered in July.

But in terms of the quarter we're still looking to see low double-digit growth in our total guest spending per cap.

Yes, the trend will continue to hit us in August, as you have more of a mix of the water park attendance coming in the July and August periods.

And again you have your higher volume days in those two months, which does tend to have an impact in terms of the in-park side on your ability to capture the same number of spending guests compared to the earlier in the season where you have lower volume days.

No, we do not expect further compression though off the double-digit.

Jeff, a couple of questions for you further.

The 25 bips for Moody's, is that also include any increase you have to pay for getting your covenants relaxed, or is that on top of that?

That is on top of that.

And we will be filing with our -- well, actually we did put out an 8-K putting out what our proposed amendments were.

So that is out there.

We paid a consent fee, which is typical in these situations, of 25 basis points.

And then this would be in addition to the spread on the interest rate because of the down grade.

Then finally, I don't know -- Mark, I think you had a shooting or something along those lines in your Six Flags Park over Georgia -- the park in Georgia.

I was wondering if you're seeing any -- if you saw any impact to attendance because of that?

I have section here telling me what to say.

Why did you have to bring that up.

Yes, we did have that.

I want you to know Kathy that was outside of the park, totally outside the park.

At a bus stop outside the park.

But unfortunately newspapers picked it up and say, somebody was shot in the leg or something outside the park at a bus stop, and the Six Flags name gets kind of repeated on and on and on.

And to answer your question, yes.

The minute that first article came out, even though it was very factual.

It didn't say it happened in the park.

It said it was outside near Six Flags, I knew we were in trouble.

Atlanta fell off in attendance for three weeks.

It was really sad because Atlanta, just like Dallas, has really been on fire.

They have been eating the prior year numbers every day.

They went into about a three-week -- I think it was about a three-week frame where they were off of last year just about every day.

Not by much, but just about every day.

They have since come back just last week.

So it was about a three-week hit that we took on that.

But I do want to -- I know you weren't saying that, but I just want to make sure people realize that did not happen inside of a Six Flags park.

Michael Pace with JP Morgan Chase.

I am wondering if I can get a little more color on potential asset sales.

You mentioned that books are set to come out shortly.

I'm wondering are you pitching them as a group of assets, or would you consider selling them an individual basis?

And I guess if, and only if, you decide to sell these assets is there a difference in what we should expect in timing between selling them as parks, as theme parks versus selling them as land?

And a follow-up after that.

These will be positioned as a package of parks in terms of the books that we have sent out.

I think that is the right way to -- in the event we go down road to maximize value.

That they provide a nice geographic diversity, and as well as in size.

It will be as a package.

And in terms of the timing, yes, obviously to the extent there were a park or two or three where the real estate side of the process would suggest that they're more valuable as real estate, that could take a longer period of time than selling these as ongoing operations, just given potential zoning changes and those sort of things that take time -- as part of real estate due diligence, which is obviously a different timeframe then due diligence on an ongoing business.

Again, if operations or parks are sold as an ongoing operation, do you think that potential buyers would want that to take control of these parks before the 2007 operating period?

I think all things being equal, yes.

I think --.

In fact, let me interrupt I have got one thing.

I'm sorry.

One of the reasons, or the reason why we -- I guess put the notion that there that we were willing to follow through on the inquiries is because, a., the number of inquiries.

And we just needed to move into formal discussions.

There was wasn't a way we were going to avoid that.

Secondly, much of the interest is ongoing operation for all of these parks.

That is by far and large the major interest, which is the catalyst here driving it.

Most of those folks really wanted to get going because they want to be in operation for next season, if in fact we did strike a deal and sell the park.

And they need planning time to do that, which is why the urgency was there.

I appreciate it.

Then, Jeff, as it relates to your credit agreement, I have a pretty good feel for what the credit agreement says, but as you in the process of getting amendments, what does actually say in terms of asset sale proceeds?

I believe you do have flexibility for the first 300 million that does not need to go to pay down bank debt.

What is required for proceeds in excess of 300 million?

What we have retained is that we can -- in the amendment we have identified parks that we have publicly announced we're exploring options with respect to.

And what we have to do is in the event we sell those parks, we have to first offer proceeds to our bank lenders.

And they have the option of saying how much they want to pay down on their debt, and then any excess kick upstairs, or do other things with in terms of addressing other parts of our capital structure.

There's no longer this sort of -- the prior 300 million.

It is all these parks we've gotten the approval to sell.

And then we just have to offer the banks the opportunity to decide whether they want a piece of those proceeds first.

Then, Mark, I guess as it relates to the cost side of things, how much of the 60 million of increased cost had you spent through June 30?

And then just to clarify something you said earlier about those costs falling off next year, can you give us a little bit of a breakdown of what is a recurring cost here and what may fall off?

First off, through June 30, --.

Through June 30, the sort of cash OpEx was about 45 million of that 60 million.

An important point that beyond June 30 we will have some savings items attributable to our pension freeze, as well as the fact that New Orleans is not operating.

And that is about 10 million of savings versus last year.

So in fact that is a total of 25 million of increased spend over last year to get you to the 60 million for the full year cash OpEx.

And I just want to add -- and I really can't get into today.

We will give you more clarity in November, specifically what the number is on the fall off of the 6 million, or the increased expenses for next year.

But as we told you, we were going to improve the product this year and then market it hard last year.

And some of that increase, just one example for you, was a lot of painting we did.

Painting that we are not going to need to do next year, other than move that money -- move that money is going to fall to the bottom line.

I can't really speak right now to specifics exactly how much that is or itemize it for you until we get further into our advanced planning for 2007.

Z. Ryan with [Boone Capital].

I'm going to start with Jeff, building on the assets sales.

Assuming those do go forward, do you have a priority as to what you would like to do with that, assuming that the bank group allows you to take some of the money outside of it?

Would you look at retiring some of your senior bonds, or would you rather maintain your flexibility and maybe continue just to pay down your bank debt?

Quite frankly our strategy is, first of all we've got to decide whether we are selling the parks or not.

Assuming we do, and get the right price, and we decide to go forward on that, the proceeds are clearly, from our perspective after, having offered whenever amount the bank lenders would like paid on their loans, we really are going to be opportunistic with any additional proceeds, and trying to manage both cost of capital and maturity risk on our debt.

Without knowing where the various tranches of debt are trading at that point in time, where equity is trading, because we had a convertible out there, a target answer definitively, but we're going to look across the capital structure from the a cost of capital perspective, as well as maturity, and decide where the right place is to attack with any proceeds.

Then in regards to the partnership park obligations, when do those come up, and when do hear about if people want to have those redeemed or not?

Is that --?

Those are in the spring.

Okay, the springtime.

And this past year we put it in our K is a half a unit was put to us, less than $500,000.

That historically has been the case that those puts have not been exercised at really any significant degree, due largely to the fact that the holders of the interest in those partnerships have a preferred return that increases by CPI, which we are on the hook for and it has a guaranty behind it of Warner -- Time Warner.

And therefore it is not a bad piece of paper with the put protection.

Barring anything sort of that we don't expect happening over the next several years, you shouldn't -- we don't expect that there is going to be any material puts there.

Shifting, Mark, maybe you can help me with this.

In regards to your guest satisfaction report, is there any signs from the surveys you have had that the people that are highly satisfied with their experience there have an inclination to maybe purchase a season pass next year -- might be able to insulate you from weather patterns and what not?

No, the answer is that we don't have a specific question -- maybe we will add it now -- that says specifically is we are really exceeding your expectations, what are the chances that you'll buy a season pass?

Usually there is a correlation to that.

Unfortunately over the last years we haven't had a big number on exceeding the expectations of folks when they came there.

But I will tell you there's a lot of articles out there that's speak to raising prices or not raising prices.

And there is this perception out there that we raise prices so dramatically, which we didn't do.

We took them where we could take them.

We said it was always going to be a gradual lift.

We cut out some of the discounts.

But we put it back into the operation.

It is good to see here that, even though folks perceive to be paying more money, we are exceeding their expectations, which is always a tough thing to do.

Are you getting value for the money you are putting up?

And the fact that overall visit is a five-year high.

The intent to visit, the intent to recommend to a friend, exceeding expectation of visits.

I think that bodes well for a strong season pass strategy.

And I'm telling you, going into next year, I can already tell you right now, there will be significant marketing put against giving us a big number so that we have that security blanket going in.

That is why we are already prepared today to launch a website, a in-park advertising strategy to begin selling season passes hard on October 1, with a huge campaign tied to something that we are going to be -- a grand prize we're going to be giving away for the guests.

I don't want to give any more specifics, but it is an exciting campaign.

It is going to be hard on October 1, and we want to have that lift.

And it is going to run all the way through July 4 of next year.

Ladies and gentlemen, this now concludes the question-and-answer session.

At this time I will turn the call over to Mark Shapiro for closing remarks.

I will thank you one and all for your time today and the questions.

Of course, Jeff and I are always available for follow-up calls after this -- meetings, whatever it might be.

Bottom line for me is I'm sitting in a position where we are fully staffed.

Our rides are totally up.

Our guest spending is exactly where we want it to be, which is a significant improvement over last year.

Our covenant situation is resolved.

Our asset disposition strategy is in full flux.

The guest satisfaction surveys are coming out tremendous, and holding, by the way -- holding.

July is our biggest month.

Despite the weather problems we had, it still is our biggest month, and it is holding.

And those per caps our holding soundly as well.

Right now we want to get the heat wave past us.

Get about finishing up our business, having a strong August, doing some strong weekends in September and October.

But we are very much into the '07 planning.

And we will begin to share details with you as time allows we move forward.

But '07 is our focus right now.

Thank you very much.

Thank you for your participation in today's conference.

Ladies and gentlemen, this concludes the presentation.

You may all disconnect, and have a good day.