Six Flags Entertainment Corp (SIX) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2006 Six Flags, Inc. earnings conference call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. If at any time during the call you require assistance, (OPERATOR INSTRUCTIONS).

I would now like to turn the presentation over to Ms. Wendy Goldberg, Senior Vice President of Communications. Please proceed, ma'am.

Good afternoon. I'm Wendy Goldberg, Six Flags' Senior Vice President of Communications. This evening, the Company released its financial and operating results for the third quarter and the nine months ended September 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, and Jeff Speed, our Chief Financial Officer. 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 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 this 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 contents of 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 Chief Financial Officer. Jeff?

Thanks, Wendy, and good afternoon. As Wendy indicated, we just released our operating results for the third quarter ended September 30, 2006. But before getting into the specifics of those results, I would like to just take a quick moment to put the operating context for this past nine months into perspective.

This has clearly been a transitional year for the Company, a year that is seeing new management, a new strategy with new priorities, and the foundation of a new commitment to our guests, their families and friends. In order to pursue this new strategic direction, we had to make certain changes to our operational and marketing initiatives.

Our teams have been working tirelessly to improve cleanliness, offer new products and services, and promote a more family-friendly experience. This required us to invest more in our park operations as well as corporate staffing and services, while at the same time limiting and redirecting our media dollars.

The result has been fairly consistent, although our volume has been down, on a comparable park basis our revenue has remained essentially flat as guests are, in fact, spending more for a Six Flags Theme Park experience, including spending on food and beverage, merchandise, parking, as well as our new products and services.

As Mark has emphasized several times before, we believe that consistently delivering a high-quality, diversified entertainment experience will be the foundation for sustained growth. The simple motion is if we take good care of our guests, over time we will have more and more guests to care for. With that, let's move on to the results for the quarter.

As has been the case for each of the first two quarters of the year, our as-reported results for this third quarter reflect the operations of certain parks as discontinued operations. These are the parks that we have previously announced our definitive intention to sell or cease operating; namely, our Oklahoma, Sacramento, and Columbus parks.

Importantly, the parks that we announced in June that we may potentially sell are not classified as discontinued operations.

As in previous quarters this year, the highlight for our third quarter was a strong growth in per capita guest spending and total revenue per capita, which grew by 12% and 13% respectively, reflecting targeted increases in pricing, new and improved offerings, and our investment in additional staffing.

On a nominal basis, our total revenue per cap increased by $4.32 or 13%, bringing our total revenue per cap to $37.89 for the quarter compared to $33.57 in the prior-year period. Our guest spending per cap grew by $3.92 or 12% resulting in a guest spending per cap of $36.27 for the quarter.

Included in our total revenue per capita for the quarter is sponsorship revenue of $8.2 million compared to $5.6 million in the prior-year period. This brings our total sponsorship revenue for the nine month period to $19.7 million compared to $17.2 million in the prior-year quarter, and we are on pace to deliver $29 million for the full year.

On the volume front for the quarter, we're down 12% in attendance or 2 million, bringing our nine month attendance to 25.1 million, a decrease of 3.9 million or 14% compared to the 2005 period. On a comparable park basis, which excludes the currently closed New Orleans Park in 2005, our attendance declined 11% and 12% for the third quarter and nine months, respectively.

The year-to-date decline continued to be primarily driven by reduced season pass attendance of 1.1 million, group sales of 900,000, and New Orleans of 500,000. The reduced attendance reflects reductions and delays in our media spending during this transition year as well as adverse weather impacts.

Although there's really no completely objective way to put a specific number on the impact weather had on attendance during the period, I continue to think it's informative to share with you our weather day information which, at a minimum, provides directional insight as to the potential magnitude of the weather impact. For the quarter, the percentage of our total park operating days that were bad weather days was 16% compared to 14% in the prior year, a roughly 15% increase compared to 2005.

However, when we turn our focus to weekend days at our 14 branded parks which, as we've indicated before, represent a substantial majority of our revenue and attendance, the picture is noticeably different. In the third quarter of 2005, we experienced 40 -- four-zero weekend bad weather days at our 14 branded parks.

This year in our third quarter ended September 30, we saw weekend weather days at our branded parks increase by 50% from 40 days to 60 days. 20 additional weekend bad weather days in one quarter at our largest parks. Like I said, we can't put a specific number on it, but with increases like that, there's no question weather had a meaningful impact on our attendance performance compared to the prior-year period.

So that's the bad news. The good news is, fortunately, thanks to the strength of our per caps, we ended the quarter down only 1% in revenue and on a comparable park basis, we were flat against our record prior-year performance.

Our total operating costs and expenses for the quarter were $297 million, an increase of $10 million or 4%. Increased costs were primarily driven by increased staffing and services, management change costs, and stock-based compensation offset by planned reduction in pension expense as well as reduced cost of sales due to lower volumes.

For the nine month period, total cost and expenses increased approximately $88 million to $816 million. When we exclude the management change costs, stock-based compensation, depreciation and amortization, and loss on fixed assets, which collectively accounted for approximately $40 million of the increase for the period, total cost and expenses increased approximately $50 million.

We announced earlier this year that we are raising our full year cash operating expense guidance to an increase of approximately $60 million over 2005 levels. This guidance excluded management change costs and other nonrecurring or non-cash costs in both years.

Given the softness in volumes that we experienced during our peak summer season, we're now expecting our full year cash operating expenses, including nonrecurring costs, to increase by approximately $50 million. This revised expense guidance is due primarily to reduced management incentive bonuses in light of the Company's finance performance for the year.

Adjusted EBITDA for the third quarter was $253.8 million compared to $272.2 million in the prior-year quarter, a decrease of $18 million as a result of reduced attendance and increased operating costs partially offset by per capita revenue growth.

For the nine months, excluding over $14 million of management change costs, adjusted EBITDA declined to $234 million from $299 million in the prior-year period. This was due primarily to increased costs of approximately $50 million and a modest revenue decline.

We've been pleased with the results of our October Fright Fest product. The last weekend of that popular product ended last Sunday, October 29, and through that date, our month-to-date revenues had increased approximately 3% -- record revenues on a comparable park basis on the back of incredibly strong per capita revenue growth of approximately 16%.

In terms of cash and liquidity, we ended the quarter with approximately $60 million of consolidated cash, $45 million drawn on our $300 million revolving credit facility, and $50 million available on our multicurrency facility. This leaves us with cash and liquidity of approximately $365 million as we head into our low season. In addition, as we communicated last time, our financial covenants have been relaxed through the end of 2007.

I would like to conclude with just a few comments on the two topics that folks are probably most interested in at this point -- specifically 2007 guidance and the potential park sale process.

Let me start with the topic of guidance for 2007. As our parks and corporate teams are working hard to complete our detailed operating plan for 2007, we are not going to be providing guidance on this call, but we plan to be back to you on December 12 with that information. And in any event, the nature of the guidance that we intend to provide at that time is going to be a bit different than has historically been the case for Six Flags.

As we've reflected on the utility of guidance related to this business, as well as our credibility as a management team with our stakeholders, we've concluded that it isn't appropriate or productive to provide attendance guidance when there are just too many factors such as weather, gas prices, geopolitical or economic issues that are simply beyond our control. Therefore, what we do intend to provide is guidance on the key aspects of our business that we do in large part control or at least more predictable.

These will include our annual capital expenditures, our total cash operating expenses, and our total revenue per capita. Now, make no mistake about it. We're going to continue to be as candid and transparent as we've ever been. We're going to tell you what we know when we know it. We're just not going to try and predict something that we don't feel is susceptible to prediction. Now, let's turn to the potential sale of certain of our parks.

Last time we spoke, we indicated we're in the midst of signing confidentiality agreements and sending out confidential memoranda to interested parties. We're pleased with the amount of interest in the properties and we ended up sending out books to approximately 50 interested parties. We subsequently received initial indicative offers for the complete package of nine parks.

We, along with our advisors, carefully evaluated those offers and made a first cut to a number of bidders that were invited to participate in management presentations and a detailed due diligence process. That's where we find ourselves today.

Based on our current projected timing, we believe we will be in a position to announce a conclusion to the process, namely to say whether we're selling or not, and if so, to whom and for how much before the end of the calendar year.

So, just to recap, we will be back to you on December 12 to outline our 2007 specific operating plans, including new product and our marketing and entertainment initiatives. At this point I will turn the floor over to Mark Shapiro.

Thanks, Jeff. As you hear of -- the headline for us really is that the spending remained strong. The turnaround strategy is taking hold and is on pace. The park sale process is in motion. In fact, we're pleased with the amount of interest we've had in the park sale process.

The attendance stabilized for the year. If you will recall, we were trending it down 13% on a comparable park basis in attendance and that's now at -11%. The revenue, as Jeff said, grew 3% in October and spending, meaning total revenue per cap, grew 16%. Both of these are records for the Company in October. And keep in mind there was no advertising in October whatsoever. In order to keep expenses in line and keep investing and improving the operation, we spent no money in advertising.

We also had fewer discounts from last year. We also had fewer promotions than last year. One solid trend for us, of course, was that season passes lifted in August and September versus last year. I'll talk about that in a second.

So all the success here at the end of the year in the face of weather that clearly was much worse than last year. The only reason I highlight weather -- I want to continue to be consistent here. Jeff and I are not going to use weather as an excuse for good or bad performance, but we are going to outline it as Jeff did. We're going to consistently talk about how many bad weather days versus the year before and how many weekend weather days versus the year before, specifically as it relates to our sale [of] parks. The reason why I do want to keep weather, as I will continue to say, it isn't the factor, but it is a factor and it continues to be one of the most popular questions we get asked when we meet with potential investors, of course shareholders and our analysts.

We achieved our major objective this year. That was turning over the clientele from the ride-only obsessed guest to the guest that's more desirous of a wide ranging entertainment experience. That's not to say the turnaround is complete. It is not. This is a long-term turnaround, but we're successful in getting more families out here. Families that will stay longer, guests that we want and need. They build affinity with us, they stay longer and they spend more.

There were three cornerstones to our strategy. First was improve the experience. Invest in the operation while sacrificing in other areas such as media spending. As you know, we invested $45 million to $50 million in expenses to improve the operation. We cut back on marketing. We cut back almost by $10 million in just radio and television advertising, shifting it to improving the operation. We bit the bullet. It's paying off.

Our guest satisfaction scores still remain at or above five-year highs. We've increased spending almost $38 for the third quarter on total rev per cap. $40 is our objective. We've talk about that many times on this call. It is achievable -- not next year -- but it is achievable in the short-term.

And our third cornerstone and strategic mission was to maintain attendance. Now clearly we were well short in this area but it takes time to build word-of-mouth. It takes time to rebuild. It takes time to reorient, and in a transition year, folks took a wait-and-see approach with Six Flags.

Our mistake, our biggest mistake, was overestimating what we inherited. But we've licked our wounds, we've stayed the course, we stayed on strategy and given the third quarter results, given the October revenue in spending, given the season pass trends at the end of the year and next year -- which I'll talk about in a second -- giving group sales trends for next year and the building blocks we have in place, there's a lot to be encouraged about, specifically spending.

We're up over for $4 a guest and we anticipate that growing. This morning we announced our third Corporate Alliance Partner, Kodak. Kodak is going to be another big deal for us, not just in the sponsorship that it brings, but of course, in the marketing they bring. We will be running ads on their Time Square JumboTron. We are involved in their Santa Claus mall programs, which is big for us end of year November, December, to sell season passes for the coming year -- the following year. That's important because it's grassroots marketing.

We're going to have pictures developed; essentially anyone that goes to a Kodak retailer within 100 miles of our park, any of our parks, anybody that orders pictures from a Kodak retailer and has them developed, within that packet of photos they're going to get an ad for Six Flags. We anticipate reaching -- or I should say having ads in over 30 million orders as part of this deal.

Kodak invests an enormous amount of capital in our operation to give us the kind of photo equipment we need, and digital imaging equipment we need to make a difference. Kodak pays for the labor. Of course, we split revenues on the actual business that's done online and at the park, but frankly, they can run a better program than we can. They're experts at this, they've done it at Universal, they've done it at Disney, and we intend to reap the rewards of this long-term deal.

We've also -- in the process of signing a new long-term deal with Low-Q. They do our Flash Pass program. They do it better, frankly. Again, they developed the business, they developed the application, they ran the program in Atlanta this year for the first time and grew revenue for the Flash Pass by 66% year-over-year.

Our new deal, which begins next year, contemplates them running Flash Pass in all seven of the parks that currently carry Flash Pass. It won't just be in Atlanta. So they're going to do better on bringing in more revenue and educating the guests, bringing it in. We will, of course, do the marketing in the parks.

We're going to have different levels of service for the Flash Pass. There's a Flash Pass and, of course, there's a Gold Pass, which gets you even higher up in the line and gets you quicker around in your rotation of the parks.

They also have a new service that we're going to be modeling, called the V2020. This is terrific because it really brings us into the 21st century as it relates to technology. And what I mean by that is you can be standing in line for a slice of Papa John's pizza with a little electronic gizmo in your hand making reservations for the rest of the day for your rides. You no longer have to go to the rides and stick your Flash Pass application in, in order to get in line or get in place to go on the rides. You can do that simply by being in line and getting a piece of pizza or ice cream or burger or whatever it is, walking around the park. Totally electronic now and remote; wireless.

We're going to have more branded product in our parks next year. Our food per caps increased by 12% so far this year -- 12%. And much of that was built on the success of bringing in branded product like Papa John's. Papa John's has 60 or 70 stores, 60 to 70 stores in total in our Six Flags parks. And next year, we're going to bring in more branded product and on December 12, we'll have some announcements on that.

We'll have new technology with pilot programs we're launching with Kodak on PDA photos, for example. You'll get off a roller coaster and instead of just buying a photo, many -- certainly a lot of our teens today they're looking for that instant gratification on the third screen. We'll be able to have them pay on the spot and within five minutes, have e-mailed to their phone or their PDA a photo of them on the ride. So they'll have a copy electronically and they can look at with their friends, they can share with their friends. They can e-mail to their friends.

And we're going to have ride cameras -- some pilot programs for ride cameras, where you can ride a roller coaster or some of our new spinning coasters and we'll be taking -- essentially a ride camera -- footage of the entire ride. And then you'll buy a DVD right when you get off the ride.

So again, we're embracing technology with some of these new initiatives and launching these pilot programs. The characters have continued to be successful for us. We drove retail this year almost 10% and the WB licensed merchandise, Bugs Bunny and all his friends, was up in excess of 10% in revenue even though attendance was down 13%.

So, our guests are seeing the characters on the streets, in the midways, in the stores, at the rides. They're hugging them, they're getting autographs, they're taking pictures. They're building an affinity and they're walking into the store and buying licensed merchandise.

So again, our attendance is down double digits, but our retail revenue was up 10% on the strength or on the backs of WB licensed merchandise. We're going to be launching a package pickup system next year. Most of you are familiar of this with Disney. But all of our branded parks -- essentially if you're in a retail store, whatever you buy, it will be waiting up at the front of the gate when you exit the park. No more having to carry around any of the stuff you buy -- of course, unless you want to. It's optional.

We've had a tremendous amount of online success. Our revenue online is up 33%, online revenue. 10% of Six Flags tickets are sold online. We had a 26% volume increase. Again, 26% volume increase, 33% revenue. This is all on the strength of being spearheaded by [Signus] and Ogilvy and those deals, and we expect an even greater push next year.

We're going to have a lot more offerings online next year as well. We'll be selling a VIP program which is backstage. The New York Times did an article about our pilot program in New Jersey this year and our safari. But you go backstage, you see behind the scenes, you go to the front of the line, VIP seating at the shows. You'll be able to buy that online.

Our Brunch For Bugs program -- you'll be able to buy that online. Flash Passes -- no waiting in line anymore in New Jersey. You'll be able to buy Flash Pass online. And we're going to be launching meal vouchers. Many of you are familiar with this, Universal had a successful program this year. Buy your food upfront before you ever come to the park. Buy a voucher all-you-can-eat or kid's meals, and when you get to the park, you'll have four different areas you can go to. No more waiting in line, no more pulling cash out of your pocket for food. Instead, you'll be saving all that cash for games and retail, of course. Or at least that's the hope.

We're also going to have retail inventory control systems in seven of our parks next year. What I mean by this, is currently when you walk into a Six Flags store and you want to buy a certain shirt -- let's say, a large Bugs Bunny shirt, if they're out of it, we have no way of telling you if there's more in the warehouse or there's more in another store or there's more at another park. We're launching a system, an inventory system that will increase our efficiency. We can tell you if that shirt exists in the warehouse, if the shirt exists in another store, or the shirt exists in another park and get it for you. Efficiency and, of course, an opportunity to sell more merchandise.

We're going to have credit cards at our food stands in those same seven parks. Right now, when you go to the carts you want to grab an ice cream or a water or a Coke, it's only a cash system. Next year we're launching a credit card wireless system, a POS system, in seven of our branded parks for the food stands.

We'll have more preferred and valet parking in our parks and we're just going to benefit from an overall better family mix, which is what's happening here at the end of the year.

The second part of our equation is the product. The product is going to be better, continue to be better, and it will lead to higher attendance. The guest satisfaction we received this year, the approval ratings led to word-of-mouth -- good word-of-mouth as evidenced by October.

Our security incidents in our parks for Fright Fest were down 23% this year. We had a late-season season pass hike. What I mean by that is, last time we were on this call, we told you we were trending towards 2 million or 2.1 million units of season pass. We had a strong surge in August and September. We sold a lot of season passes, folks coming to celebrate our anniversary with us, hearing the word-of-mouth, coming out to sample. I really believe it's the park experience that was driving a lot of this, and we're now trending to be just over 2.3 million season pass units. If you recall, that's again, for last year which was in the neighborhood of 2.5 to 2.6. So our season pass revenue is actually down only 4% versus last year even though units were down almost 300,000.

We're going to have better staffing next year. We're going to continue to carry the momentum we've started this year into next year. Higher quality of people in the door. We are investing in screening, recruitment, training, more full-time supervisors, better international programs, better use of seniors in our parks, more moms that are looking for part-time jobs, more incentives, and bottom-line is we're going to capitalize on a better culture at Six Flags.

We'll have capital that's geared towards families and we'll be online when we open in March -- no capital opening up in June or July like this year. We'll have more diversified and branded entertainment product. We're launching a Thursday night concert series. We just signed a deal yesterday with Cheyenne, very successful and popular singer with the younger crowds. This Thursday night concert series is a series that's going to be on Thursday nights, obviously, through the summer, concerts at all of our branded parks. Every Thursday night, June through August. That's the plan for this date. So a different group. So we sign a deal with Cheyenne and she'll do a ten-week tour where she'll hit each of the parks over ten weeks.

What we're trying to do is we're trying to build, if you will, on the ESPN dates, destination programming. We are trying to build an expectation and we're trying to move some of our attendance that's heavy on the weekends into the week to increase and ultimately give us better flow for our attendance. And if we can get -- Thursday night's popular, of course, hopefully that will translate into better flow into the weekend.

We announced yesterday the announcement of -- excuse me, the new show Operation SpyGirl, which is a stuntshow from the creator of 24. Something -- it's part of our marketable capital program that we think will take something that's popular, take something that's hot, like the show 24 and the creator, something that's original and ultimately create an offshoot. I believe it's going to, in the end, create offshoots for us in businesses -- retail, we're going to do some food products off the Operation SpyGirl series and, of course, there's going to be other media extensions once we have success with this series.

All of these kinds of things will make our product better. When we get on the phone on December 12, we'll take you through more detail of our marketing and entertainment initiatives.

Finally, marketing. The strategy for year one was to fix the product. The strategy for year two is to market that better product. We will benefit next year from a 20% increase in marketing spend. Where are we getting the money? The money is mostly coming from some of that $45 million to $60 million we've put into expenses to improve the operation. Some of that, of course, won't be recurring and that will move over to market.

We're also going to benefit from an incremental increase in actual media weight. Because of the transition last year, because we got in so late, because some of the buys were already made by our old agency, Donor, and ultimately we had to cancel a lot of them and buy at new times and later months; certainly we didn't have an efficient buy, let's put it that way.

In fact, not only did we spent $10 million less in TV and radio, we achieved 40% less weight in terms of media TRP's, because of cancellation orders, because we ordered late, because of the transition of our agencies. We're now going to benefit from a full year of having all three agencies buying upfront and actually getting incremental weight because we're buying early. We will be buying media for June and July at the end of this month.

We'll also have a full year benefit of our co-op marketing deals, as I talked about with Kodak -- selling tickets in the home Depot; obviously box-toppers and our marketing programs with Papa John's. We'll have a full year benefit of that. This year we're going to be doing some holiday advertising. Typically Six Flags doesn't do any holiday advertising, but I can't think of -- of course I'm biased, but I can't think of anything better than a season pass purchase, come the holiday time.

So we're going to be selling stocking stuffers -- season passes as stocking stuffers, and we'll be spending money to buy advertising online come November, later this month or December so we can get out ahead of those season passes. We're going to market season passes. Last year, we didn't buy any TV or radio for season pass advertising because of the late transition. Next year we will be buying advertising, running ads on television and radio in January and February for season passes.

I should say at this times -- I know there's been some reports out -- we are currently experiencing -- we're at a double-digit percentage season pass lift, meaning we've sold more season passes to date this year than last year by double-digit percentage and growing. Again, it's still low-volume at this point, but we do have a double-digit percentage lead and we're excited about that.

That's mostly being driven by the planning, the leadtime, and of course, we've launched a promotion this year called Dream Nite. Anyone that buys a season pass up until July 1st will go into a lottery, if you will, and six -- Six Flags -- six lucky winners will be chosen from each park and they win the park to themselves and 100 of their friends for a night. So it's Willy Wonka plus 100 friends. And I believe that the buzz we're getting on Dream Nite is helping to contribute to the double-digit percentage increase we're having versus last year at this time.

Group sales, we're of course going to benefit from having our entire group sales management team in place. They're in place, at this time right now, we're up double-digit percentage, again, increase on catered outings that are booked for next year versus what was booked for this year at this time last year.

So, again, planning, leadtime, getting our mailers out there. We expect to get a big kick out of group sales. If you'll recall, group sales was ultimately lead to 10 -- excuse me, had a 10% drop-off versus last year. So a million of our attendance decline came from group sales and we aim to earn all of that back next year.

We will also benefit from the Mexico City school group problem they had last year. If you'll recall, the school groups in Mexico City could no longer go to Six Flags and have it count as a quote unquote field trip. That has been resolved. I'm not saying we're going to get all 300,000 of them back because, of course, we are out of the cycle now, but having that resolved, having schools in Mexico City now able to go to Six Flags for a field trip is certainly going to benefit us next year.

We're going to benefit from promotions. We've just closed a deal with Costco and we'll be in Costco selling season passes for the last five weeks of this year -- end of November through December. That will be at all Costco's within 100 or 150 miles of our parks. So that will be important for us. That deal will also continue through next year.

We have new deals beginning January 1st with Expedia, Travelocity and Orbitz, which reach a combined 100 million consumers. So again, more touch points here. We're just going to benefit from consistent price points, something we didn't have last year and leadtime on all of our retail partners.

The team is assembled, our Corporate Alliances is fully hired. Lou Koskovolis heads that area. We projected that we would hit $29 million in revenue in Corporate Alliances this year and we are on pace to hit that $29 million. Having a salesperson now, a Corporate Alliance member, in every park will surely benefit us next year as we strive to increase that number -- close to double-digit percentage. We'll get back to you on December 12 when we have the call and be very specific with you.

Regardless of our park sales, our big financial covenants and the [relax] that Jeff talked about through the end of '07, so we don't have that issue right now. And finally, we're going to benefit next year just from the employee mindset. Everyone is focused on operations. That's no more analysis of which parks can potentially sell. There's no more announcements and meetings with the Oklahoma City folks that the park that started it all or the office, I should say, that was the headquarters is going to be closed down. That's behind us.

There's no hiring of my senior team, there's no firing of certain people that we parted ways with at a senior level. We have stability when it comes to our employee force. The culture is changing. There's belief, there's faith from the workforce. There's (indiscernible). Transition is over. There's pure focus on execution. So we laid the foundation. I'm not looking for any hype, I'm not looking to hype what we're talking about or hype next year.

We always talked about this being a long-term play and we want to be judged by nothing else but performance. I like the trends we're seeing for next year. I'm happy about what we saw late-season August, September, October. I'm glad the spending is there. I'm glad the park operation is better. I'm glad the spending is, as I said, translating, and I'm glad that advertisers like Kodak are coming to sign up with us. We just want to build that even further.

So, that's the snapshot of where we stand and our results. At this time we'll open it up to questions.

(OPERATOR INSTRUCTIONS). David Miller, Sanders Morris Harris.

Couple of questions. Jeff, on the income tax expense line, it looks like you guys were -- you guys paid out it looks like higher cash taxes in the quarter on lower net income. If you can just sort of explain what's going on there, that would be helpful.

And then Mark, on the Alliance situation, obviously great news with the Kodak deal. What are the chances in the next year we see a deal with Microsoft? And the only reason I ask that is because there's just an obvious symbiotic relationship with Bill Gates and the Xbox and the fact that you guys don't want to abandon the teens in your park system. Why isn't there an Xbox arcade alliance deal in the Six Flags system? Thank you very much.

I'll take my question first. The good news is on that, we actually did do a deal with Xbox. We just didn't make a big public announcement of it. We entered into a deal with Xbox for Fright Fest in our Six Flags New England park with the anticipation of a bigger deal next year. We wanted to test it out, a sort of pilot program, and we promoted one of their new games coming online. We took the games out of our arcade and filled them all up with Xboxes so that it could be an interactive experience.

They booked a rock concert. MTV carried the concert on MTV. It was actually a gangbuster event. And we hope to expand that deal next year. We have, if you'll recall, at the beginning of this year, I said we'd do two to three corporate alliance big deals. When I say corporate alliance, I don't just mean a sponsorship, where they're paying us a sponsorship. There's product involved. There's marketing involved. They're comprehensive deals.

With Kodak, that gives us three. I hope to announce a fourth when we speak on December 12. I can't guarantee we'll get done with a deal, but we are in discussions and into the contract stages with a couple of different groups and hopefully we'll bring in our fourth Corporate Alliance Partner for the year.

But as it relates to Xbox, I couldn't agree with you more. I think there's real opportunity. I think there's opportunity with Nintendo as well. What we can get out there, some of these new games, some of these new consoles, we have the people, we have the team, certainly. We have the kids. We have the demo they're looking for.

We can make it interactive, give them great signage, put on a concert or a performance so that it really resonates and I think as the Xbox guys will tell you, the test program we did for Fright Fest in New England was a homerun and we'll probably expand that deal over the course of the season next year, not just Fright Fest. Jeff?

Yes, on the tax expense, for the quarter, it's an increase of about $600,000 on the expense side for the year-to-date. It's closer to $200,000 and although there's a decent degree of correlation to the actual pretax income, because our tax expense is primarily representing state taxes, which are a function of the particular park's performance as well as international, primarily Mexico, that's what drives the volatility there such as it is.

Kathy Styponias, Prudential.

Jeff, if you can give us a little bit of color on the Kodak deal, can you give us a sense of how big it is in terms of the dollars? Just looking at the calculation, you said you did $19 million in sponsorship revenues year-to-date. You did $23 million for the full year in '05, which means your comp in the fourth quarter is $4 million. If you're still on track to do $29 million for the full year, we should expect to see a minimum of a $6 million revenue increase in the fourth quarter. I guess how much of that is coming from Kodak? And/or how much of the $19 million is represented by some of the new deals you struck this year?

And then second question -- is it possible you can give us a breakdown of what operating expenses, SG&A and cost of goods sold look like for the quarter? Thanks.

Yes, in the prior year, $23 million was the total Corporate Alliance and they ended that day with $17 million through the third quarter, so it would be $6 million that they generated in the fourth quarter last year. We're ended at $19 [million] or approximately $20 [million] -- $19.7 million, call it $20 million. So we need to deliver $9 million in the fourth quarter, so it's closer to a $3 million increase year-over-year. And in that number, we don't have Kodak in there.

Kodak's not in there at all. The Kodak deal won't start until next year. And I can't speak about the fee because we're bound by confidentiality there.

And, I'm sorry, the question you had on the expense side -- could you repeat that?

In terms of the cash expenses, can you breakdown what was in COGs? What was in SG&A?

We'll be breaking that out in the Q. Right now, we've got the summarized version that we put here in the press release, we're finalizing the classification in the Q. We had increases in the quarter on both SG&A and OpEx. Reduction in cost of sales because of the lower volumes primarily, but we're going to have the Q out shortly and it will have that specific detail.

Joe Stauff, CRT Capital.

Could you clarify a little bit -- you obviously spoke about the incremental cash cost this year versus last. Obviously they're at [55], now you're saying they're 50. What were the differences again? You had said that management bonuses and something else sort of accounted for the delta of that being 15. And what was spent year-to-date? And then I got a follow-up.

Yes, the year-to-date total cost and expense increase was about $88 million, but included in that was a variety of either non-recurring or non-cash totaling about $40 million. Those were approximately $14 million, $15 million of what we call management change cost was basically, primarily severance to prior management employees that had a severance agreement as a result of the quote change of control. And so when they left, we had to pay them out bonuses. That makes up the larger share of the $14 million. And then we had a pension curtail -- when we came in, we decided we were freezing the pension and we had a $3 million pension curtailment cost that's in that $14 million.

In addition, in that $88 million, we have increased depreciation and amortization which hit us for the period which is about $4 million. We also had approximately a $20 million write-off when we came in. We looked at all of the assets, basically rides and attractions, that were sitting in quote boneyards throughout the system, and we wrote those off. So again, non-cash costs there. But those three to four items accounted for about $40 million of the increase. The remaining out of the 80 would be about 48 -- call it $50 million of sort of cash OpEx increase and that's primarily labor, insurance, insurance costs, which have continued to escalate, and the repairs and maintenance. Those are the three big categories.

Obviously, the labor is spread both between the parks as well as the corporate office, given the new team we've built.

And you've incurred, like you said, 48 year-to-date in terms of the cash portion of that?

Yes, and so we expect to end the year around $50 million. So roughly flattish for the remainder of the year.

What were the differences -- I'm sorry, I mean versus your previous 65?

Yes, we had given previous guidance of $60 million of cash OpEx and what we've indicated today is that's going to be closer to $50 million, primarily because in that $60 million, we had a level of management bonuses included --

And park.

-- and park, as well and obviously, a portion of the bonuses are based on performance -- a significant portion. And so when the performance didn't deliver in the peak summer season, those bonuses have been eliminated. In addition, given the weather, we also had some modest labor savings, but a piece of that is labor savings given the weather impacts we've had.

Now, as we think about that trajectory going into full year '07, I mean, I guess how do we think about that trajectory going into '07?

On '07, Joe, and I don't want to be evasive here but we're going to come back specifically on that on December 12 with the specifics. We're working through that as we speak in terms of the operating plan. There will be an increase in the expense line. The magnitude of that is, is what we're working through right now. So I really, I don't want to sort of give you specifics on that.

We just want to get it right in the sense that next week we're kind of underwater and budget meetings. We expect to finalize our budget plans around December 10 or thereabouts. Of course, we'll have a Board meeting as well, and on December 12, first thing in the morning we're going to get on the phone with you guys and talk; update on the park sales process, take you to through budget planning, and hit you on all the specifics of the marketing, entertainment and brands that we haven't talked about yet.

One other question. You indicated six properties where the books went out in August. That does generate sort of $75 million in EBITDA in '05. How do we think about that number? Is there any sort of year-to-date EBITDA that you can give us relative to those properties versus '05? Is it a little bit down or trending a little bit down or a little bit up or flattish versus, again, that sort of 75 [bogie]?

Yes, I don't want to give a specific number for those parks except to say that they trended -- we were down this year overall, as you saw on the EBITDA line primarily as a result of increased costs. Those parks had the same general trend.

Sorry, squeeze one more in there. I appreciate the visibility on sort of the deal process and the dates and so forth associated with that. I don't know if you're going to tell me, but I'll ask the question nonetheless. Is it part of, I guess, the package or the ultimate negotiations with respect to when you will finally ultimately receive the proceeds before the beginning of the next season? That is, if in fact, you're going to sell all the properties, the six plus the two properties, would it be a fair assumption that you would require to receive those proceeds prior to effectively Memorial Day?

I'll answer it a different way which is, anybody that -- to the extent we go down the road to sell, any serious buyer is going to want to get in and operate this park so they don't run into the transition issues that, quite frankly, we had to face coming in right before the season opens. So that's, I guess, how I'll answer it which would suggest that yes, if we're going to do it, it likely closes before then.

Michael Pace, JPMorgan.

I appreciate the fact that you don't want to discuss guidance for 2007, but I guess, Mark, I'm just curious about just your general thoughts as we head into next year in terms of balancing attendance growth versus per cap spends, if you have any comments on that it would be appreciated.

Number two, again, operationally, now that you're through your peak season, I'm wondering since the last time you spoke to us, how the hiring, training, and retention of park employees is going and then one follow-up on that.

On the first one, this year was all about spending. Fixing the operation, getting better clientele, getting them to stay longer, getting them to believe in us again, getting them to spread word-of-mouth and get more people out and ultimately spend more money. That would be the focus. So we aimed for that.

We wanted double-digit increases. We're sitting now at 13% on total rev per cap, so it's mission accomplished on that end. Next year it's all about attendance. I'm not saying we're not going to go for increases on per cap spending. I think I listed out a lot of examples as to why I believe spending from Kodak and Flash Pass, of course, and continued success on the retail front; continued success on the food front, especially when we're bringing more brands; continued success online as we launch more services and continue to push consumers to online to buy their tickets and some of these other initiatives; continued success in the park and just all sorts of sales given that we're going to have retail inventory programs to make it more efficient; and just the overall family mix.

So I think what you can look for there is a single digit increase on per cap spending next year. That's where we're going. The big lump is going to come from attendance as we spend 20% more in media and more importantly, we're buying advertising in January. We're buying advertising in February. We're spending more money online. We'll have an umbrella brand campaign. We're going to do a lot more direct marketing next year to reach the mommies.

And as we do that, we're expecting to eke back some attendance. And then your second question was with regards to the staffing. We've got a lot of staffing initiatives in place. We're in thick conversations with Mercer to help us out on this end and really come up with a better labor strategy, a better labor scheduling. We're launching a whole bunch of incentive programs that I don't want to bore you to death with, but as an example, one of the things we suffered from this year, especially in August, and I remember this from when I was going to college, you hit August 1st and a lot of these kids are going back to school mid-August, and college, and it's kind of that, you know what, I'm going to take a couple weeks off before I go back to school. And you get this exodus and it just kills your operation because you end up hiring -- boosters and paying people overtime and temps to fill those spots last-second. We simply cannot succeed like that.

So we will be offering incentives -- summer is [low], don't get me wrong -- with 200, 300 hours for somebody to stay through the summer, anybody who's in the theme park industry kind of knows this is hiring and I guess retention 101, but it just wasn't happening here. We're going to be launching more incentive programs. As I said, we're going to be working with more senior groups to bring them in. We're going to be working with more mom groups that are looking for -- or dads, stay-at-home dads that are looking for part-time jobs or six month jobs.

Our international program discussions are going very well. I'm very confident about the level of staffing we're going to have next year, but make no mistake about it. It's still our biggest challenge and we will never get it just perfect. We're going to have to keep working at it. We're going to have to sustain it. We're going to have to keep investing in it, training, retention, just across the board.

But I like where we're sitting now just judging from what I saw in October. One of the reasons our security incidents were down is because we didn't have the problem that this company usually experiences with hiring people. I'm not sure what is. Maybe it's the magic of Fright Fest. We get a lot of folks that want to come out and be ghouls and ghosts and take those jobs, but we didn't have those staffing problems in October. We were at full force. We had plenty of security out there. We kept people in line. And we now have to translate the success we have in hiring and retention of Fright Fest into the core summer season. And that's our target for next year. Did you have a follow-up?

Yes, I did. And obviously this next one, I know you don't want to show your hand on a call like this, but I'm just curious, how should we think about the initial interest on your potential asset sales and maybe just in the context of leverage, should we continue to think that potential transaction is a leverage neutral-like transaction?

I'm sorry, I just don't want to give any detail there. We're not even a month away from really giving you some detail. All I can say is that it's in motion. We've had our management meetings and presentations with all of the interested parties. We're now kind of in phase 2. They're doing their due diligence. They're in the data rooms collecting detail and data of course and kind of analyzing and evaluating that, coming back to us with diligence questions. They're taking park visits. They've been out on park sites.

And I'll just say that I'm pleased with the amount of interest and unfortunately, I just, for the time being, would like to leave it at that.

Grant Jordan, Wachovia.

One follow-up question on the comment that Mark made about some of the increased offering expenses are maybe one time in nature and will be able to be shifted into marketing expenses next year. So I'm looking at this correctly, year-to-date on kind of an adjusted basis for one time items, and non-cash items it looks like you're up about $51 million in expenses year-over-year. Can you just give us some ideas of categories of what items might be one time that can be shifted? Or were some of those that you were referring to more of like the management change cost?

Just on the operational level, I'll give you the example that -- just one, for example, that I usually throw out there, so just for consistency purposes, but it's no secret. I think I've been pretty candid about when I came on, many of the problems we had, and one of them was how some of the parks had a bit of a rundown feel to them. And what we did was throw as much as we could, but some paint in fixing those problems. You'd be surprised at what a coat of paint will do to just kind of freshen it up or make something look new or give the appearance that's it's new.

And once we've made some of that -- not that we don't need more paint, by the way, I'm not sure we're going to do it this next year, or do it a level that we did it last year. But once we've done that, that is not a recurring cost. That structure, that house, that ride, whatever it is, is painted so it will last for X many years. And that is something as an example that we would pull out and move over into the marketing expenditures.

But the roughly $50 million of -- that's excluding the sort of management change costs which are sort of one time, not operational, but one time sort of unique expenses. That's excluded from the $50 million that were increased that we're targeting for the full year this year and that we're essentially at through the end of the third quarter. So again, that $50 million increase this year, as Mark alluded to, is primarily labor, repairs and maintenance and those sort of things.

Another example for you is that if you recall, we made the photo business a major priority for us, something that hadn't been done and it's not necessarily a criticism. There were no characters to have a photo program years past. So what they did was really take a picture with your friends at the front gate. And we made that a major priority.

When we go into next year, Kodak is running that program now. They pay for the labor. Therefore, in every park where we had labor to run the photo program, we will no longer have that expense. The same goes for Flash Pass. We were running Flash Pass programs. We were doing well with it. The bottom line is Low-Q, who developed the system, who trains people on the system, who can educate our guests better on the system and be more efficient and be better salesmen as evidenced by what they did in Atlanta year-over-year, they're going to take that over. They will be on the hook for the labor and we will no longer have to employ the Flash Pass employees in the six parks where we did this year. Those are some more examples for you.

I realize you don't want to get into guidance, but in terms of like the $50 million increase, do you have kind of a feel for how much of that went into paint -- kind of one time items?

Well, I think Jeff kind of summarized that on the last question. No matter what it is that won't be recurring, it will be shifted over into marketing. We're going for the attendance next year. This is all about marketing a better product and bringing these people in. So you will see overall on the expense line, you will see growth. And on December 12, we'll be very definitive on exactly what it is you'll see.

My next question is whenever I look at your cash balance and your revolver borrowings, maybe if you could just drill down a little bit more on what some of the free cash flow factors were in the quarter.

Yes, in terms of our liquidity position, as we indicated, we're sitting in a good place going into our low season. We paid down our revolver down to the $45 million level, we had unrestricted cash, consolidated cash of about $60 million and about $50 million available on our multicurrency revolver. That's the revolver we use primarily for letters of credit.

So we're sitting at $365 million of cash and liquidity. Obviously, on the cash flow side or free cash flow side, for the period, and you'll see this obviously when we produce the Q, we generated about $95 million of cash from operating activities and the cumulative CapEx to date which obviously relates back to the '06 season is about $105 million, and as we said, we expect to spend about $130 million this calendar year on CapEx. So we'll be spending about $25-odd million over the course of the next quarter and that will be spending obviously for the '07 season.

Typically, the fourth quarter on a EBITDA basis is, since we won't have one time expenses, we don't expect in the fourth quarter like they did last year, relatively flattish in terms of fourth quarter EBITDA. So hopefully that gives you a little bit of color around that.

Jane Pedreira, Lehman Brothers.

You've mentioned, I think, in the beginning that you experienced a pretty healthy growth rate in revenues in October. Just wondering if you can comment on whether that was due to any sort of pricing policy change or marketing change or do you guys just like to eat cockroaches?

I have to tell you, the cockroaches [are a big factor], I'm not going to mislead you. Again, I want to reiterate just for those that weren't square with this. Our revenue grew 3% in October and our spending total revenue per cap grew 16%. These are records for the Company. There was no advertising. We did that on the strength of a better park experience in August, September, July -- whatever it is, all year long or maybe combined, that word-of-mouth was spreading and people came out. That's one.

Two, there's no question that our late-season season pass surge where people were buying more later in the season on the strength of our anniversary, then they came back. So that helped us as well.

And third, the cockroach, any time you can get PETA to come out against you, potentially, that's good for buzz. Whether that's what you want or not, it certainly drove watercooler talk. In this fragmented environment and universe, certainly with media, it's tough to cut through. That message cut through. It cut through on newspapers, it cut through on CNN, it cut through on local television. In our first two weeks we experienced a terrific attendance [clip]. In fact, October was soaring. We were going the last weekend of October. Our revenue was up 9% over last year. And then we got washed out the final weekend. Dependent on weather, but that's just what happened. The East Coast got totally washed out and we fell all the way back to up 4%. So that tells you how much we got washed out that last weekend. But it was park experience being better. People waited, word-of-mouth. Now they're coming out to sample and it was season pass surge. It was the cockroach stunt which picked up a lot of buzz. And I should mention as well, our whole strategy this year was family by day, fright by night. And it gave us success getting more families out in the day when they knew they could come out. It wasn't going to be as scary. It was more of a family offering. And I think that's another reason why the spending was so high because we did have more families out there.

I was very tempted to come out there, but I thought I would save the cockroaches for everyone else.

Well, remember, the cockroaches are just a nighttime thing aimed at the teen guests -- the fright part. We'd love to have you and I think we've got a couple left over in the fridge if you're interested.

Okay, I'll be right over. Thank you.

David Marsh, FBR.

A couple of things -- with regard to the marketing initiatives for next year, I think that that's clearly very important to get the bodies through the turnstile. One thing I wanted to ask you. It seems like on the season passes, you guys are giving quite a good deal relative to years past. Are you at all concerned that that might impact the per capita admissions number?

No, actually, our season passes are up. We're charging more across the board, but we're giving away a lot more as part of that package. What we're doing is we're marketing it better. We're marketing the fact that you get free bring-a-friend passes. We're marketing the fact that you get Mother's Day free and Dad's Day free and there's Dream Nite promotion of course.

What we're doing in New Jersey is an absolute homerun. If you have a season pass, you get to come an hour early in the summer. We're going to open an hour early just for season pass holders to ride the biggest, fastest, tallest steel coaster in the Kingda Ka and to ride the biggest, fastest wooden coaster in El Toro. That's special. That's unique. That's a privilege. That's exclusive just to season pass holders.

So what we've done is we've looked at every park and said, all right, if we're going to raise tickets five bucks or two bucks or three bucks or whatever we are, what more can we give them? And how can we better communicate? To if you go on sixflags.com right now it will spell out for you specifically the six or seven reasons why it's a good deal, as you say, to get a season pass now. And we are offering a lower price -- again, not lower than last year, but a lower price relative to what's coming if you buy now.

Can you give us some update with regard to season pass sales for the '07 season at this point this year versus where the season pass sales were for the '06 season at this point last year?

Double-digit increase. We are at a strong double-digit percent increase. But again, it's on very low volume this time of year. But on group sales catered outings, season pass, these are two trends that give us a lot of room for optimism. Again, I don't want to overhype this thing, but I do want to tell you we're optimistic about it.

That was actually my other question. Obviously group bookings are possibly one of the best weather defenses because even if the weather's a little off, the groups usually end up coming out because the booking is done in advance.

Can you talk about the initiatives that you have in place to grow group bookings for the '07 season and just give us a little bit of a progress update in terms of how group bookings are going? I guess also just a little bit of a history lesson there. Can you talk about how much the group bookings were down this year versus '05 and then how much you're hoping to grow them for '07 and where we are in that progress.

I'm not going to be specific on kind of where it was down, but as I mentioned, group sales led to one million falloff. 300,000 of that or so was due to the Mexico City school group issues and the issue surrounding that. But what I can tell you is group sales is gaining early traction for '07 with the main focus on rebooking large catered outings and special events -- Girl Scout days, Boy Scout days, Special School days. We took a big hit in special events and catered outings this year.

The results are encouraging, as I said, we're up double-digit increase in the teens versus this point last year. Our special events are way up, over 20% versus the pace at this point last year. It's not that I want to tell you -- we do have a lot of programs. We've launched a new e-mail campaign tool. We were already out there contracting consignment accounts.

So it's not that I want to tell you we're -- wow, we've just got the magic serum. The real difference is we're in office more than anything else because at this point last year, even though there was a management team in office and there was group sales going on, there was a lot of uncertainty at this Company. Employees were focused on, is this company going to be sold? Is this company going to be shut down? Many employees thought the Company was going to be bankrupt. Is the CEO still going to be the same CEO? There was nobody really driving, there was no real accountability to get out in front and see that we got the lead on season passes and group sales.

I came in on December 18, went through a three or four month transition, and we ended up where we ended up. We don't have that any more. We have total focus and everybody knows more than anything else we need to get a big lead on season passes and group sales and that's what everybody's focused on right now. And of course, having the Mexico City school issue, which we tried to get resolved all year and we were unsuccessful in doing that, having that now behind us so that we are back on the list of places that schools and teachers are allowed to travel to for field trips is huge.

Just lastly, I wanted to touch on your characters a little bit. Some of the questions that have been asked in the past have been asked about kind of the relevance of the characters, and obviously, you have a great relationship with Warner and you have a great licensing agreement there, but there hasn't been a lot done with Bugs Bunny and the Tasmanian Devil recently as opposed to what did occur back in the '80s and early '90s. We haven't had movies and things like that involving those characters. Have you done anything with regard to bringing in some new kind of more current characters that are perhaps more easy to relate to for today's younger children?

Yes, let me just say this. I really want to answer that question because I think we have some terrific developments in that area. More license product, but we are going to save that until December 12 when we have these deals that we are in deep discussion with, signed, inked and I'm allowed to announce them. But the answer to your question is yes, we will have more licensed product. We will have [other] characters in the park as it coincides with new rides and offerings we're going to have. But I want to tell you the strength will continue to build on the backs of Bugs Bunny and his friends and Justice League and Scooby Doo. Total homerun for us this year and as I mentioned, we were up 10% in retail or almost 10%, but the licensed merchandise was up in excess of 10% in revenue as it relates to WB.

So again, people were seeing Bugs this year, taking photos. It was resonating. Whether there was a movie out or not, whether there's a TV series out or not, I've often mentioned this -- at Hershey, they're hugging Mr. Goodbar. At Lego Land, they're hugging Mr. Lego. These are not necessarily characters. Kids warm up to them. They're fuzzy, they're out there, they're taking pictures, they're doing tricks, they're doing jumping jacks. You name it. You bring your kids there. My children, and of course they spend a good deal of time at the parks, it's amazing the way they light up and they're five and two. You would think they would be bored stiff at this point by Bugs and the gang. They're not. And it's driving retail.

We're going to be doing something with our food as well. Disney's had some success with a Tinkerbell drink they do, where they're essentially theming drinks or food off of some of their characters, they're trading on that equity. And we'll be doing some of that next year with our characters where it makes sense and, of course, working hand-in-hand with WB.

But I think there's a lot more to be had there. I'll tell you one of the best stats is when you go play a game, you're usually trying to win a stuffed animal. That's the biggest thing you are trying to do. Last year in games, they gave away 116,000 Warner Bros. character stuffed animals. Warner Brother related stuffed animals. That's generally what draws you to the game. This year, a year later, we gave away 232,000. We doubled the number of Warner Bros. stuffed animals that were given away, when our attendance is down 13%. People are going to the games for Warner Bros. Why? Because it's relevant again.

And so I think that there's real opportunity there, but to your point. That's not going to stop us. We're going after other big names as well, and we'll have some announcements on the 12th.

And just lastly, should we expect a pretty significant expansion of the Brunch with Bugs and similar type programs that can really drive incremental park spend?

Yes, last year we offered an incentive program at the end of the year for season passes. I should say that's another reason where I think we got a good push because our employees were incentivized in park to sell them late summer. We're going to be doing that from the beginning of this year and we're also going to offer our employees incentives on selling Brunch for Bugs. So you get to the ticket gate, 15, 16-year-old working the ticket gate, 18-year-old, whoever it is, and you will get an incentive if you sell a season pass, upgrade somebody on your hourly wages and an incentive if you sell Brunch with Bugs. Brunch with Bugs had a really good first year, it grew every single week in terms of attendance since the day we launched it and we've got to knock that out of the park next year.

Michael Pusaab, Jefferies Asset Management.

Couple questions here. On one of the previous calls I know that you talked a lot about customer surveys with regards to cleanliness and what people were seeing. Could you update us at all about the general idea of how clean your parks are in your visitor's minds?

Yes. I will do that specifically for you. As I mentioned, in the press release, right in the headline we talk about guest satisfaction scores remaining high. I talked about five-year highs in the earlier part of my update, but I want to tell you specifically, we are at or above five-year highs in the following categories -- I'm giving you tree tops here. Overall visit, park cleanliness, speed of ride lines, restaurant cleanliness, shows -- in terms of approval, people liking the shows we're putting on -- number of rides you were able to go on in one day -- that makes sense given that the speed of ride lines is up -- and costume character presence. Those are just some of them. There's other ones in terms of rides they like specifically.

But all of those areas we are at or above five-year highs. In particular, the ones I'm most excited about are park cleanliness, restaurant cleanliness and costume character presence. Significant increases in those areas.

Could we dig into the attendant shortfall a little bit more so I can understand it specifically? Do you have any metrics as to how much of the attendance shortfall is attributed to those incremental 20 bad weekend weather days?

Yes, like I said on the call, we have a view of what that represents by looking at comparative trends and on the same day, in the prior year, you didn't have a bad weather day, what you did, but it's -- I don't want to put that out there quite frankly because I don't think it's entirely objective. There's a lot of judgment that goes into that. I think what we wanted to do was just directionally give you an indication of how significant it was and we'll continue to do that, whether it's positive or negative. But to put an attendance number or revenue number on it, I'm just not comfortable doing it because I don't think it's as objective as I would like to put something out there like that.

Next, I wanted to ask about some of the excess real estate that I know exists at certain parks. And can you just give an update of sorts as to any latest thinking as to how to monetize those pieces of land?

Yes, as we had I think indicated on the last call and the mid-quarter call, in terms of other than some small parcels of property that we are exploring potential sales with respect to some properties adjacent to our Chicago property -- or some excess land adjacent to our Chicago property, some excess land adjacent to our St. Louis property, really the biggest piece of excess land other than that is in New Jersey and as we've indicated, anything we do there, and there's a sizable piece of excess land there. Call it 1600 acres, but roughly half of it is wetlands that can't be developed. So we are working through with real estate folks, Staubach & Co. to identify how that might be zoned and what the highest and best use. That's going to be a longer leadtime exercise in terms of any sort of monetization of the value of that land.

In the short term, in terms of proceeds and efforts to deleverage, it would primarily come from potentially selling those parks that we've identified as opposed to excess land deals.

And then lastly -- I'm sorry, did you have anything else?

No. I'm sorry. Go ahead.

Lastly, do you care to comment at all as to the group that's currently going through the books and looking at the different parks? Or does that group consist of both financial and strategic buyers or --?

It does consist of both.

Great. Thanks guys.

John Maxwell, Merrill Lynch.

Basically the only thing I have left is, Mark, would you characterize -- are there any parks that you have that are lagging where you want them to be? So when you start and start rolling into the '07 marketing campaign that -- was there anybody that still is in a catchup mode from what you wanted to see in '06?

That's a good question, John. The first thing -- again, I want to reiterate for everybody. I don't want to get off this call with anybody thinking our work is done. I know you're not insinuating that, by the way, or that our turnaround is complete or magically we're done and we've done it and we've fixed it and wow, look at these guest satisfaction numbers, these parks are where we want them to be. We have more work to do. Leave it at that.

I still believe that the most work we have to do is at our New Jersey park which is our biggest park, our most sprawling park. Our best, in terms of diversified entertainment, the best offerings of any park in terms of the best coasters, the biggest wooden, fastest wooden, the biggest steel, fastest deal, a dolphin show which is very successful, sold out every weekend day since we launched it, Flash Pass, it did $3 million in revenue this year -- $3 million in revenue came just from New Jersey, given the thrill rides over there, Bugs Bunny National Park, which was well-received this year. On and on, I could go on and on. But a lot of history there. The safari which we're going to invest in next year. It's so big there's 4,000 employees.

There's still a great deal of work to be done. I'll tell you, it's a large mountain to climb and it has been for every CEO before me, whether that was Kieren or Bob Pittman or whomever it was. But I will tell you, I've got Mark Kane there. I take my GM from New England.

Yes, I saw that.

He's a big year. He's a strong GM. He's a great motivator. He inspires people like very few others. He knows the parks. He spent a lot of years working there in retail in some of his earlier days. Totally his work ethic is second to none. Then I'm creating an Allstar team around him. I've done reorganization, where I don't have one head of maintenance, I have two heads of maintenance and their roles are very, very defined.

The general manager from Montreal, he's a general manager of the park. He's come back to be the Finance Director. Most general managers, when you become a GM, you're trying to figure out how to become a GM at a bigger park. Len Turtora, who was the GM in Montreal used to work in New Jersey as well. He's quote unquote stepped back, but in many ways it's not a step back. We're trying to make this an Allstar park. We've got a lot of work to do and we need an A Team to do it.

And Len took the job and he's moving his family back from Montreal to New Jersey to be the Finance Director. And I'm not done. I'm going to continue to surround Mark Kane over the next 45 days with the best team I can put together so we can really do some damage, and when I say damage I mean have a real big impact on a Great Adventure next year.

(OPERATOR INSTRUCTIONS). Joe Galzerano, Murray Capital.

I'm glad I could make it under the wire. I have a question. I think you had said before that you had $10 million of lower expenses because of the decline in attendance. Is that correct? Or you held back $10 million of expenses. Is that about right?

Yes. We reduced our guidance that we had -- we had upped our expense guidance on our mid-quarter call, if you were a participant in that, and took it up to $60 million full-year Cash OpEx increase. And given the obviously inherent in those increases, we're assumed bonus levels. And given the performance, the financial performance, during the summer months, we're not going to pay a significant piece of those bonuses as you might expect. And therefore, that $10 million reduction in our guidance, a big chunk of that, the majority of it is bonus reduction. The other piece of it is some labor savings. Given the adverse weather, you obviously don't have to staff when you only have a few thousand people in the park when it's pouring down rain.

So is it fair then to say that if you had reached those attendants -- if you were flat to last year on attendants. So $2 million more in attendants times 37.5, that's $75 million, right? Less the 10 million your net on those $2 million would be $65 million?

Yes, that would be about the math. If you hit the -- if you were flat to last year on attendance.

And so then we can carry that forward and say -- and I'm not asking for any numbers, Mark, I'm not searching for them, I'm just trying to get an understanding of kind of variable and fixed cost and so forth, but your $4 million less in attendance year-to-date, if all these things that you're talking about come through, even if you got 50% higher, so even if you made up $2 million, right? You'd be looking at another $75 million, $65 million of EBITDA. That --?

That assumes no expense increase which we said we are -- we still have more work to do. We're going to put more money into marketing next year and continue to put some more money back into the park. So you are -- but -- assuming flat expense which isn't going to be reality, that's the simple math.

Right. But I'm just trying to get a sense of operational leverage, right?

Yes, you're on the track there. I would just add, of course that's on a comparable park basis of which even if we do or don't sell the six parks, we have a small Sacramento waterpark and again these are small numbers, but that's going to be closed down next year. The Columbus waterpark, of course, isn't coming back. Again, that's small, but I just want to say it would be comparable.

And I think again, that's the salient point with this business -- the fact that we have been able to, in essence, achieve a somewhat step change in the per cap, given it's a relatively fixed cost business, the cost leverage is very, very powerful and like you said, assuming sort of flat cost, you only have to get back about half of that attendance you lost, given the per cap increase.

Right. And I assume that as the president of the firm -- of the Company, and the weather that you had, you would expect more than -- getting back $2 million as we go into next year, but I guess I'll do more --

We really don't want to give guidance.

I know. I'm just --

I hear you. Yes. We have to go [eat] some attendance back, there's no question about it. We have to do it through marketing, we have to do it with our continued improved operation. We have to do it through continued word-of-mouth. We have to do it with -- to your point -- with weather and all that cooperating with us. And of course, marketable capital which we haven't even gotten into, we're going to do on December 12. What is it, Mark? Speaking to myself here -- that we're going to be launching that's going to make noise? We announced 24, the creator of 24 launching a new Operation SpyGirl show in Chicago next year that we think will create a lot of buzz and be a terrific show and also, give birth to new retail opportunities and food and bev revenue operating opportunities, on and on and on. But we're going to go through with you kind of park by park some of the new rides and shows and characters and (indiscernible) that we're going to be adding that we believe will help us in our advertising make some noise and ultimately draw in consumers.

The last question I have, in the beginning you made a comment when you were talking about the sales of parks? Then you said you'd be back to us kind of at the end of the year and I think that took me by surprise, I guess, a little bit when you said if -- we'll tell you if we're selling them or if we're not selling them. So I was surprised by the if we're not selling them comment.

Yes, we've been very clear that this is a process where we're exploring our options and we are in no way committed to sell. If we don't see proper value put on the table of what we think these properties are worth, and help us to achieve our objectives on the balance sheet side, we're not going to sell. And we've made that very clear from the outset.

And is that all of them, though? I thought there was a handful that were definitely being --

Well, Sacramento and Columbus waterpark, those were leased parks and we're out of those parks. Those aren't in the package. And when I say sell all of the parks, we've put the Oklahoma parks in the package. One way or another we're going to unload those whether they're part of this process or a separate process. So if that's what you were getting to.

And then New Orleans, we don't know where we're going to end up there because we're in the midst of insurance claims. But does that make it a little more clear?

Yes. Thank you.

This concludes the Q&A portion of the call. I would now like to turn the call over to Mark Shapiro for closing remarks. Please precede.

I want to thank everybody for joining us today in Q&A and your attention and hopefully your continued interest. We'll be back to you on December 12 where we're going to highlight the -- before the market opens, our marketing and entertainment initiatives, our budget details and we'll have an update on the park sale process. Thank you very much.

This concludes the presentation. You may all now disconnect. Good day.