Six Flags Entertainment Corp (SIX) 2006 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth quarter and year-end 2006 Six Flags conference call.

My name is Eric and I will be your coordinator for today.

At this time, all participants are in a listen-only mode.

We will facilitate a question-and-answer session towards the end of the conference.

(OPERATOR INSTRUCTIONS).

I would now like to turn our presentation over to Ms.

Wendy Goldberg, Senior Vice President of Communications at Six Flags.

Please proceed.

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 fourth quarter and full-year ended December 31, 2006.

A copy of the earnings release is available on the Company's web site at Six Flags.com, under the heading Investors.

Here with me today are our President and CEO, Mark Shapiro and our Executive Vice President and Chief Financial Officer, Jeff Speed.

Before I turn the call over to them, they have asked me to remind you that in compliance with SEC regulation FD, a web cast of this call is being made available to the media and the general public, as well as to 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.

Results are posted on its web site for a detailed discussion of those risks.

Because the web cast 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.

I will first turn the call over to Jeff Speed, our Executive Vice President and Chief Financial Officer, and then Mark Shapiro will give an overview of how our 2007 season is shaping up now that we have five parks open, some strictly on weekends, while Magic Mountain in Los Angeles will begin daily operations on March 17.

Jeff?

Thanks, Wendy, and good afternoon, everybody.

Before I get started, I just want to note that unless I indicate otherwise, my discussion today is going to focus on the results of our continuing operations, which excludes the 10 parks that we've either sold or have been classified as held for sale in 2006, and therefore excludes the roughly $100 million loss from discontinued operations that was primarily driven by the non-cash impairment charge related to the park sale.

For 2006, we ended the year on a solid note with a quarterly revenue flat to 2005 levels, driven by a surge in our total per cap, which grew by 19%.

Our reported revenues totaled just over $104 million, and although attendance was down approximately 537,000 due to fewer park operating days, including one less Saturday during the October Fright Fest period, our total revenue per capita was up $6.15 to $37.95.

The revenue per capita growth was driven by per capita guest spending increases of $4.24, or 15%, and other revenue per capita increase of $1.91, or 70% growth.

Guest spending per cap growth was across the board and reflected increases in admission, parking, food, retail, games and rentals.

Other per cap growth was driven by sponsorship revenue increases from our new corporate alliance programs.

Adjusted EBITDA for the quarter was a loss of $6.3 million compared to a loss of $12.1 million in the prior-year quarter, and excluding costs related to the December 2005 management in both years, fourth quarter 2006 adjusted EBITDA would have been a loss of $6.1 million compared to income of $500,000 in the 2005 quarter.

Net loss applicable to common stock from continuing operations was $1.12 per share compared to $1.20 per share in the prior-year quarter, primarily reflecting the prior-year management change costs.

As to our full-year performance, 2006 revenues were approximately $946 million, down 1% to the prior year, and attendance decreased to 24.8 million, or 13%, from 28.7 million in the prior year.

On a same-park basis, which excludes the New Orleans park from our 2005 results since it did not operate in 2006, our revenues were $2 million above the prior-year record revenues, notwithstanding a decline of 3.4 million attendance, a direct result of our unprecedented total revenue per capita increase.

For the full year, total revenue per capita increased by $4.72 to $38.07, an increase of 14%.

The increase was primarily attributable to our guest spending per cap growth of $4.18, or 13%, reflecting increased spending on tickets, food and beverage, merchandise, parking and rentals and the increased spending was a function of our new and improved branded products and services, increased staffing levels and targeted price increases.

Our as-reported adjusted EBITDA for the year was $180.1 million compared to $248 million in 2005.

As revenues were relatively flat, the decline was driven by our planned increases in costs and expenses, primarily consisting of increased staffing levels.

Excluding the approximately $14 million of management cost change costs for the year, adjusted EBITDA was $194.7 million in 2006, in line with the adjusted EBITDA range of $190 to $195 million we provided earlier this year.

Our net interest expense for the year was $200 million, up from $183.5 million in 2005 due to higher interest rates on our floating-rate bank debt and higher average net debt balances compared to 2005.

Depreciation and amortization expense was $132.3 million, up from $127.6 million in 2005, reflecting our ongoing capital expenses.

On the income tax line, we showed $4.3 million of income tax expense for 2006 compared to $3.7 million in 2005.

Our tax expense in both years was impacted by non-cash valuation allowances.

Given our history of net losses, we continue to believe it's prudent to refrain from booking a tax asset related to our tax carryforwards at this time.

The valuation allowance has no effect on our limited current cash tax obligations which primarily relate to certain state and foreign income taxes and does not at all affect utilization of our tax loss carryforward to offset future taxable income generated from operations and/or gains from asset sales.

Importantly, a substantial majority of our roughly $1.7 billion of tax loss carryforwards do not begin to expire until the year 2020.

Our net loss applicable to common stock from continuing operations was $228.9 million, or $2.43 per share in 2006, compared to $130.8 million, or $1.41 per share in 2005.

Included in the increased loss for 2006 were several non-cash items, including approximately $18 million of increased depreciation, amortization and loss on disposal of property and equipment, and another $13 million from higher stock-based compensation expense that reflects the accounting change initiated at the beginning of 2006 that requires us to expense all stock options granted to employees.

Now, turning to our balance sheet, our gross debt, which excludes our outstanding preferred stock, stood at $2.2 billion and we had $24.3 million of unrestricted cash at December 31, 2006.

As you know, we have a $300 million committed revolver.

The amount outstanding on that revolver was $105 million at year-end and we are at $240 million at this point.

We also have an $87.5 million committed and available multicurrency revolver which is undrawn except for letters of credit issued under that facility.

So this leaves us with approximately $135 million of cash and liquidity before considering any proceeds from our pending park sales as we head into our 2007 operating season.

I want to conclude my comments today by taking a step back for a moment to take stock of what was accomplished in 2006, notwithstanding the soft attendance performance; a 2006 report card, if you will.

First, we decided to invest to clean up our parks, improve and diversify the entertainment offering, including bringing back our licensed Looney Tunes, Justice League and DC Comics characters; acquiring rights to new license brands, like Thomas the Tank Engine and the Wiggles, and even developing our own intellectual properties, like Operation Spy Girl.

All of this with the current and long-term goal of elevating both the Six Flags brand and the overall guest experience.

The results at this stage were that our 2006 key guest satisfaction measures came in at five-year highs.

Second, a key element of our 2006 strategy was to drive per-capita spending through new and better products and services through increased staffing levels, some pricing opportunities and a greater mix of family attendance.

The results here -- our guest spending per cap increased by over $4.00, or 13%.

Third, we set out to build a corporate alliance sales infrastructure in order to generate meaningful growth in this somewhat untapped area of our business.

The 2006 result for our continuing operations parks is that our corporate alliance team grew that business from the roughly $16 million in annual revenues that they inherited to approximately $26 million.

And finally, we stated early on that we intended to evaluate our asset base with a view to disposing of certain non-core assets in order to refocus of our management and capital resources and reduce our debt by several hundred million dollars.

The result was our sale announcement in January this year.

We'll generate almost $400 million from asset sales in less than a 12-month time frame and at double-digit EBITDA multiples.

There's no question 2006 should be characterized as a transition year for the business and our new management team, but the team is quite proud on every level of what was accomplished in 2006 and we're all extremely excited about the prospects for 2007.

With that, I will now turn the call over to Mark for his insights on the state of the business and the upcoming 2007 season.

Mark?

Thank you, Jeff and Wendy.

Thanks for joining us here today.

Don't want to spend too much time up front, I would like to get to the Q&A given the late hour of having the call as was communicated to us by one of our investors on the last call.

But quickly just wanted to give you a snapshot of 2007.

Right now, I'm in the midst of a complete park tour, which is visiting every single park before they -- pretty much for the most part, before they open, and the days usually consist -- they mimic each other.

We start at about 8 AM, and for six hours, we meet with a senior management team of each park and review the business plan -- not a lot of it's a surprise, given we've approved all the budgeted areas and initiatives and all of the marketing and all of the capital.

But we really break down into the details and talk about the financial metrics and the goals and the objectives and how we're going to get there and of course what the issues, the hurdles, the trouble spots might be and try to get some early season indicators on how we're doing in group business or how we're doing in season pass business, and of course staffing, which is still the greatest challenge I would argue for the Six Flags Company.

And I'm happy to report, we're well ahead by at least 20% on staffing than we were at this time last year.

And we're being much more selective.

We've benefited from the realization that we just have more job fairs and we're working with better outside companies and we're actually having to rely on hiring less international employees.

We're doing well in so many areas we said we would target, whether it's senior citizens or soccer moms or teachers that are working nine months out of the year and might be willing to work for us for a summer.

So I like everything I'm seeing.

In only have three parks left to go to.

We'll be in Mexico in two weeks and then we get two home games here next week in New England and New Jersey, both of which still have a few weeks before they open.

But I'm liking what I'm seeing, morale is terrific.

Usually when we finish the six hours, we go into a town meeting, we meet with all of the employees for an open session Q&A, very candid, and then we have a separate meeting after that for an hour, what I call a town meeting or a focus group where we meet with just seasonal employees.

We bring folks in that have worked at Six Flags last year or years past, and we get their feedback.

So it's a lot of Q&A and it's a lot of opinion and a lot of perspective, but I can tell you, it has done wonders for morale and I'm excited about not just where we are with our plan, but what I'm seeing at the park, how I'm seeing it materialize, from staffing to the look to capital coming online, you name it.

Speaking of the capital, as we told you, one of our priorities this year was to have all of our capital online for the most part by opening day, certainly full-time operating season, but I think that is the way the theme park industry historically works.

They're all -- they have their coasters or whatever that might be opened by May 31.

Our goal is to have everything up by opening weekend.

So in San Antonio for example where they're getting a new Tony Hawk spinning coaster, a spinning Stanley coaster, our goal was to have that up and running for the opening day of spring break, which happened to be last Saturday and I'm happy to report that coaster was up and running, the most popular ride actually on the day.

So [Martin Bossier] and his staff did a terrific job in San Antonio.

The lines are incredible for that ride.

We have redone the entire boardwalk, which is an area that really has just kind of dwindled in attendance over the years and we've spruced it up with new games, new food outlets and we're endeavoring to do a deal with Johnny Rocket's where we would open a big Johnny Rocket's restaurant right next to the ride.

So I'm excited about where that is.

But just all in all for all of our capital, everything is on time and everything is on budget.

So about the only ride I think that will get up a little late is in New England.

They will have Thomas the Train up June 15, and that's just because that is an add-on.

We were putting Wiggles in New England, we weren't necessarily going to put anything else there.

We decided at the last minute to go ahead and give them two kids areas, Wiggles and Thomas the Train, and therefore, all that is involved with building the train, it will be up the first of June or shortly thereafter.

St.

Louis, we've announced that that's where the other Tony Hawk spinning coaster is going.

That is planned to be up on time April 21 when they open.

Of course all of these areas, whether it's Wiggles or Thomas the Train or Tony Hawk all come complete with a new retail store where we are selling merchandise that correlates with whatever the subject of the content is.

So for Thomas the Train, we'll have a railroad station with a whole bunch of Thomas merchandise.

The Wiggles, we'll have a Wiggles World and they will have of course DVDs and shirts and a whole bunch of interactive games for the kids.

And then for Tony Hawk as well, the coasters, they will have their own retail store.

So Thomas will be going up in New England and then we'll also have him going up in San Francisco at our Vallejo park where we have announced that.

That park opens March 24 and Thomas will be coming online shortly thereafter.

So we're doing pretty well in terms of timing.

Wiggles as well, Chicago, New Jersey and New England, everything looks good there.

Kentucky of course, the largest expansion in park history where we're putting in a new water coaster.

And the good news about this is, when it's not summertime, meaning the spring or the fall, that ride still runs, just without water.

So it's a terrific family coaster, four people can sit in it and they will be exciting certainly the best ride they've had in years.

Los Angeles has just been a great story for us.

They open as Wendy said full-time this Saturday, but we have more in advertising -- we will be spending more in advertising than we ever have in the history of Magic Mountain and we'll be spending more at that park than any other park.

So we have big plans for Magic Mountain now that it's staying in our portfolio of parks.

The free kids season pass, if you recall, we offered a marketing list where we put out this initiative where anybody that buys a season pass gets a free kids season pass -- that is going over very well.

I hate to say this, but the drought that's happening on the West Coast is actually helping us on the weekends because we have just terrific weather there.

For example, this past weekend, 85 and sunny both days.

Our guest spending just that weekend, guest spending was up 15%.

We're doing an in-park spend of $23 this past weekend in Magic Mountain.

So hopefully the weather holds and we continue to get a nice kick out of that.

Also I'm happy to report, one of the biggest criticisms of Magic Mountain over the years and rightfully so is that even though we have so many coasters, you would be hard pressed when you go out to the park to see them all working.

There's always inevitably one or two that are down and I'm proud to say that by March 30th which is one week after we officially -- or two weeks I should say after we officially open full-time, we will have all 15 coasters working.

In fact, we have also ordered two new trains for our roller coaster X, which is arguably, there's nothing like the 3-D dimensional X coaster and it has been the most popular ride at Magic Mountain ever since it was put in.

It has been just drained and maligned with technical and maintenance issues.

But we are ordering two new trains that will be online for 2008.

So we have it up and running March 30th and we have the new trains on the way.

This morning, you may have seen, we announced a new VIP program at all of our U.S.

Six Flags parks where for a premium, Louisville for example, you pay $199.

That will do wonders for our per cap, of course, but $199 and you get a total private VIP exclusive guided visit.

No lines, you go right to the front of every ride, shows that are set aside, you will have seats set aside at those shows for exclusive and private seating right up front; games, interactive stuff, food going on, merchandise available, all included in this price.

And we did a lot of research.

In fact, the guy who was running it for us we recently hired from Walt Disney.

And I can tell you, even when you compare this VIP program to Disney, Universal, Cedar Fair, there's nothing even close to like it.

And generally, we put this VIP program in because we got a lot of feedback especially at parks like New Jersey where we had a lot of folks saying they would like to come out to Six Flags but they wanted a very premium private visit.

They did not want to be -- they're willing to pay more, but they did not want to be thrown in with the masses.

So we made it a priority to put together this VIP program, we hired the right guy for it in [Brandon Hulce], and we're rolling it out in every park this year and it will be really exciting.

New Jersey of course you will get exclusive access to the safari as well where we have 1200 animals.

Most people are not familiar with our Safari New Jersey, but it's a 350-acre spread with 1200 animals.

It's the largest safari outside of Africa, so it's absolutely incredible.

In San Francisco, I mentioned our Vallejo, our Discovery Kingdom.

We're rebranding the park this year, everything is in line with that, it's not just a rename, it's a total redesign of the park.

Totally targeting families and breaking up the park into an easy navigational route, three entrances -- sea, land and sky.

Of course take advantage of the fact that we have the mammal life that we have in both the marine life and of course the land animals and then of course our coasters and our rides.

It's a unique park, three-dimensional, there's nothing like it anywhere else.

You can go to Sea World and of course get the animals and get some marine life as well, you can go to other parks and get the rides, but nowhere can you go and get all three dimensions.

So we're excited about what the park has to offer.

We've put a lot of money, $9 million specifically, just -- excuse me -- $11 million just in CapEx for that park this year.

So that's a major priority that that park does extremely well.

And of course from an advertising spend, that will be up there in the double-digits as well what we're spending in advertising.

So we're looking forward to what that has to offer.

Specifically though I would mention too at Discovery Kingdom, beyond the Thomas the Tank Engine Town we're going to have, the new rides I would say come in different forms.

We're about to announce that we will be showcasing new baby animals at that park this year; a baby kangaroo, a baby camel, a baby cougar and a baby zebra.

So we're going to get that into our advertising pretty soon here, but it should be exciting.

We were out there last week taking a look and it's new, it's refreshing and it adds a lot to the kind of animal life and zoo life that they have there are at the Discovery Kingdom, very unique.

We're launching our web site here within the next two weeks, a brand-new launch of our web site.

It's going to be more experiential, it's easier to navigate.

Most importantly, it's more buyer friendly, it's easier user to purchase tickets, it's easier to purchase VIP, you can get your food of course up front, you pay online and you redeem your food -- get your food coupons and you redeem your food once you get to the park.

Online games you will be able to play, there's virtual video at each park.

Just as importantly for us, we will be able to access our database and be able to capture CRM in a much highly more productive and efficient way than we have in the past, so that's going to work well for the future for us.

We're excited that comes up within the next two weeks.

We're also -- at four of the parks this year, we will be targeting new a pilot program.

We're totally redoing our arcades.

Most of these parks have just arcades that are dilapidated, the lighting is no good, the games are old.

That's one of the reasons I think our games per capita is as low as it is.

In four of the parks, we'll be testing, most importantly New Jersey, putting in a whole new arcade setup.

Think ESPN Zone, if you will, modernized games, very interactive, you don't pull a dollar out to get change.

Instead, you work off of a card with points.

And in fact, in these four parks that we're launching the new arcades, every visitor that comes in will get a card as they come through the turnstile with one or two free games as of course an enticement or an incentive to get them in there and try the video arcade out, so we're excited about that.

We're launching a whole new strategy as it relates to keeping the parks clean.

As Jeff mentioned, we hit our five-year high in terms of guest satisfaction on the cleanliness, but this year, we are hiring a cleanliness manager in every single park.

We already have a park services division of course that oversees cleaning and what we do there is we break out teams in certain areas.

But this year, we're specifically hiring in addition to that a cleanliness manager that will have no assigned responsibility when they come in the door.

Instead, there will be a five-man team, that manager will head up a five-man team which we call of course The Clean Team and The Clean Team will be charged with going around the park area to area and just looking for any potential trouble, anything that's dirty, anything that's there and be able to kind of wire into the Park Services unit and get it cleaned right away.

So the emphasis on keeping these parks clean is not going to be diminished whatsoever this year.

Instead, we're taking it up on to a whole new level.

And I would mention from the corporate alliance, we have [Lou Coximilus] and his team trying to sell a sponsorship for our Clean Team, so that might be the Lysol Team or the Clorox, whatever it might just be as an example hypothetically.

We are looking at using the opportunity to have these folks in shirts almost as human billboards with that sponsorship opportunity.

Our Thursday Night Concert Series is coming along very well.

We've booked six or seven of the acts that will appear over the 12 weeks of the summer in each park so we're excited about the way that is progressing.

Jeff mentioned corporate alliances.

Recently we've announce a deal with Chase, we've announced a deal with Sara Lee, of course a Nintendo Wii and we expanded our relationship with the K'NEX, the toy manufacturer.

And just overall I guess expand on the perspective Jeff put out there.

We inherited -- $19 million is what we inherited when we came on board here a year ago in sponsorship, and of course most of that was for -- it was just a few sponsors, but most of that was Coca-Cola.

When you take out the parks that are now in discontinued operations or have been sold, that number is $16 million.

Well, today, we're sitting at double that.

So we're excited about where we are at and of course we've already mentioned we're on our way to a budgeted number of $38 million.

In terms of season pass and groups sales, on the season pass front, we are up anywhere from 30% to 40%.

I know in our press release, we put about 32% that we're up versus last year year-to-date in season pass sales, but there is a lot of timing that goes in there.

Spring break dates that we might have been opened last week in one place but we're open this week in another place.

So when all of that washes out and really the dates align with each other and we catch up on the calendar changes, we will probably be sitting at about a 40% increase over last year in year-to-date season passes.

So we're excited about the way that is going.

Group sales are online, doing very well there, especially in the catering front.

I thought one of the places you would be most interested in would be Mexico.

If you recall last year, Jeff and I talked a lot about groups sales being down in Mexico because of the law that essentially said that Six Flags could no longer be treated as a field trip for schools.

But technically the law was never changed.

What was changed is that they just threw Six Flags Mexico back into the lot.

So Six Flags Mexico can be considered a 'excursion' and school groups are taking advantage of that.

We already have 60,000 in bookings incremental group attendance, and we expect that to go as high as about 110,000.

We should realize that through May, between first and second semester of school.

So it will be through the end of May when we ultimately realize that attendance.

And I am glad that that's going well, specifically on Mexico because it will work well for our shift.

Basically this year, what we decided to do was kind of looking historically at what the Company had done in trying to maximize every dollar we had in expenses.

We realized that there's just too many days in the first quarter where we will have one group on one day and another group on another day and another group on another day -- just not big attendance days.

So in an effort to be more productive, more efficient, we are now doubling up.

We have closed certain days or canceled certain operating days in the first quarter so that we can start booking school groups two a day or three a day and be more efficient with our dollars.

So we actually expect that we will have less operating days here in this first quarter to the tune of 16%.

And keep in mind the fact that our overall attendance annually first quarter makes up only 5% of our annual attendance.

So I'm not talking a lot of attendance, we're talking maybe 50 to 100,000.

But it's going to certainly allow us to maximize our dollars as we shut down some of those days in March and instead make up those school groupings in April and/or September and we're already seeing the realization of those groups moving and we'll be certainly much more productive and efficient having two or three groups a day as opposed to a group of 1000 people a day.

It's just not a smart way, especially when we're trying to maximize every dollar in our operating expense budget.

Marketing -- we are out there.

We'll be spending, as we mentioned before on the call $130 million in marketing this year, as opposed to the $105 million we spent last year.

When you look at just TV and radio, we're really going from about 60 to upwards of $85 million -- $80 million to $85 million in television and radio.

It has clearly been a big driver for season passes, specifically in Dallas and San Antonio where we're open on weekends right now.

But there's five parks as Wendy mentioned that were open.

Mexico's open six days a week right now, L.A.

is open just on weekends but it opens full-time this weekend.

San Antonio is now open on weekends, Dallas is open on weekends and the fifth park is Atlanta, which is also open on weekends.

But we were running a lot of direct TV, DR TV in those markets which we have not done before, doing much more in the way of telemarketing, much more in the way of pushing our retail partners.

We've done additional direct mailings versus last year and we are seeing -- I think that's the biggest driver of our season passes.

We just have more buzz out there, early season momentum, we're making noise and the sponsors are being received very well.

We are of course targeting two totally different demos, but now we have the Dallas do it as opposed to last year.

But specifically, we have one spot aimed at moms, we have another spot that's aimed at the teens and tweens.

And I would invite you, hopefully not all at once, but over the next couple of weeks, to go onto our web site in the What's New category and you will see -- you can see both the spots.

As an example, we put Six Flags Discovery Kingdom and what that spot looks like aimed at moms, and we have also put up our team spot which is certainly going to be one of the best television spots on the air all year.

It's a CGI spot.

So we're taking advantage of technology (indiscernible).

We worked with a company called The Syndicate out on the West Coast that did the CGI for the Minority Report, directed by Steven Spielberg, and also did the Monday Night Football opening.

I hired them to do the Monday Night Football opening before I left ABC and ESPN.

We hired them for this and essentially be creative.

If you've seen War of the Worlds, think a neighborhood that over the course of 30 seconds blows up into a theme park.

So it's highly thrill-centric and I invite you to check it out under the What's New section again on the web site preferably over the next two weeks and not everybody goes there at once and blows up our web site.

Finally, I would just mention on asset maintenance side, we're just putting a lot more into cleaning up these parks.

Jeff talked about it up front and that's going to continue.

Ultimately when you look at our $100 million we're spending in CapEx this year, I thought it was important to point out, $50 million of that I would classify as asset maintenance.

It's really technically $30 million which is just hard cleaning up the parks, giving them some light, giving them some love, repaving things, fixing roofs, sprucing the place up -- landscaping, you name it.

And the other $20 million is IT, but IT (indiscernible) depending on how you look at it, IT could be classified if you do it right, especially all of the POS systems we're putting in and the inventory systems we're putting in can be looked at as a revenue generator.

But it's also an asset maintenance thing for us because it just takes us out of the dark ages technologically.

So $50 million of that is cleaning up the parks and people are going to notice a difference this year, there's no question about it.

So overall that is where we sit for 2007.

Very, very early.

I would caution everybody just on season pass not get too excited.

It's still very early.

Spring break is just getting going for us so there's no real attendance figures to give out.

I would close with just telling you, we are going to give a call or have a call I would say.

We'll have one of course for the end of first with at some point in May.

But the big call will be in June.

We will do a call around June 20.

Somewhere around that time, we will give you a full update and you will be able to get a real clean look at where we are from an attendance perspective and from a spending perspective.

So we're excited about that, I just wanted to get the news out there right now that June would be the call and that will be the first strong indicator of how the business is progressing.

But we're optimistic and at the same time, we know it's early.

At this point, I would like to open it up to some Q&A.

(OPERATOR INSTRUCTIONS).

David Miller, Sanders Morris Harris.

Mark, obviously you would not institute the VIP program unless you thought it would materially pick up the revenue per cap.

So with that, it's kind of a loaded question.

Obviously you're not going to guide higher on revenue per cap.

We're obviously modeling the 39 that you guys have alluded to in previous discourse, but can you talk qualitatively about what you expect the VIP program to do to your overall revenue per cap?

And then I have a follow-up.

Thanks.

I'm sorry, one thing David.

When you mentioned -- what are you saying about 39?

I just wanted to make sure we got our numbers right.

What did you say about 39?

The total revenue per cap that you (MULTIPLE SPEAKERS).

I would just talk qualitatively to your point.

It takes us to another level.

Here we are, we're preaching friendliness, we're preaching cleanliness, we're preaching the characters are here, we've added more content, whether it's Operation Spy Girl or it's the Wiggles or it's Thomas the Tank Engine.

We're preaching family friendly all over the place, that we're clean, that our speed of service is going to be better.

And we have to put the on-the-ground support behind it so that ultimately gets realized the better service which will keep them coming back which is essential to us.

But at the same time, I am more likely to spend because we're just more efficient and we're more productive.

I think putting in the new intellectual property is going to draw more people out in New England for sure.

I live in Fairfield County, Connecticut, and I think most people don't even know that Six Flags New England exists, they're too used to going to New Jersey.

And instead now we have this whole family friendly offering, not just one, but Thomas the Tank Engine as well.

And those two categories really target the two to six-year-old range which for us is going to get the whole family out.

Of course, no kids that age are coming by themselves and it plays right into our family-friendly strategy.

So I think IP is essential and of course the IT investment we have made is going to help us with this speed of service, is going to helps us be more efficient and productive.

Having POS at some of these parks that never have point-of-sale never, having never had point of sale at all so we can determine what's hot, what's not, where it's moving.

It's going to help us with loss prevention, which I think is one of the biggest problems in the theme park industry; the cash that's being stolen that we don't even know about.

Of course we have LP, but it takes LP to a higher level.

So I think both -- I'm not sure if you said IP or IT, but I think of those are going to be a strong contributor to our revenue per guest taking an uptick.

I think on our last call, we talked about going up 3% is what we're targeting, total revenue per cap for '07.

And surely we're not going to have every weekend like we just did in Los Angeles last weekend, but 15% in one weekend and those folks beating their attendance each day by about 3000 was a good story for us.

Okay.

And just a quick follow-up.

Jeff, obviously with the windfall in place and the $352 million that you have to play with, you have to offer the bulk of those proceeds to your banks first.

If I have my timing right, you still have about five weeks before you have to make a decision.

Is there any bias that you can glean from the banks as to whether or not they will take the money or whether or not they will just refuse the cash on the grounds that they just want to keep getting their interest payments?

And what are your feelings about how deep into the capital structure you will go to pare down this debt?

Sure.

Just clarifying the timing, what happens, the sequencing is, we need to obviously close the transaction and then we get the cash element of the purchase price, the $275 million -- that's what we have to offer to our bank group, and we have to offer it within 45 days of closing.

Obviously, we're going to offer it as soon as we close and they have to determine the extent of any prepayment within two days.

So we'll know that in relatively short order.

I think in terms of gleaning where the banks are, our bank loans are still trading above par, and so I think that would suggest to you that they're probably not lining up to get repaid with these proceeds.

But obviously, we have to go through the process and figure that out.

In terms of any excess, as we have said, we're going to be rather opportunistic.

We have obviously various pieces of the capital structure that are yielding anywhere from 9% to 10%-plus and we are going to be very opportunistic in terms of how we deploy those proceeds to bring down our cost of capital.

Thanks and much.

David, I would just mention one more note for you.

Part of the reason why we've gone onto this new IP, whether we've licensed it or created it --.

Mark, the question was about the VIP program.

Oh, VIP, I'm sorry.

Let me make this point anyway because I think you'll find it fascinating.

The whole point of bringing in new content is of course it's more attractive to folks and they come out and sample us and then hopefully return and recommend to a friend, etc.

In our business, it's word-of-mouth.

We can advertise all we want, but we really need to get the word-of-mouth going if there's a change if there's new air at Six Flags.

One of the other ways we're going to do that beyond advertising which I think is pivotal for people to know about is when Jeff and I and the new management team came onboard a year ago, we essentially had four touch points in the marketplace and I've often talked on these calls about the need for more touch points.

So we had four partners beyond the Internet, the Six Flags web site, that you could go to get tickets -- Coca-Cola, Dannon Spring Water, which is a part of Coca-Cola; Wendy's and Blockbuster.

Those are the four marketing partners.

And as we sit here today, we have Coke, we have Blockbuster, we have Dannon Water still, Papa John's, Coldstone, American Express, Chase, The Home Depot, Kodak, Sara Lee, Nintendo, K'NEX, McDonald's, which has opened up opportunities for us as their Disney partnership is in fluctuation -- AAA, Orbitz, Expedia, Costco, Best Buy, Wal-Mart, E-vite, Travelocity, and the U.S.

Postal Service.

So when you talk about where is the attendance going to go or what do we think about the attendance, one of the key metrics is touch points -- getting our name, getting our brand, getting us out there in the public, getting the consciousness out there so that people are more likely to buy tickets.

And as you can see we're making great progress.

Quickly I would just tell you, on the VIP, it's something we have to do.

It's something we have to do to differentiate ourselves from our competitors.

We have demand for it as evidenced by the research we're getting in our parks and some of the areas, especially New Jersey where it's so close to New York City and there's a lot of business folks that want to bring their families but don't want to have to deal with the lines and are willing to pay.

We have tested through Mercer what we thought would be a good price point that people would be willing to suck up, and that is where we're coming out, anywhere from $199 to $250.

So while we can't quantify how that's going to go, what we can tell you qualitatively, it's going to raise the level of our service and ultimately it's going to bode well for the brand.

And of course, depending on how popular it gets will determine just how much of an impact it has on our revenue per cap.

Sorry about the long-winded answer, but I wanted to give you that.

Rebecca Kramer, Prudential Equity Group.

I'm calling in for Kathy Styponias.

I just have two questions.

The first is, is the VIP program, is that cost going to be -- is that already in the cost guidance system provided for 2007?

Yes it is.

Okay.

And also just, Jeff, I just wanted to see when you guys were planning to file the 10-K.

It should be available to you when you get in tomorrow morning.

Great, thank you.

Pat Dyson, Credit Suisse.

Two questions.

Mark, you talked about group sales being 'online' and I just wanted to compare that comment as to your comment on the January 12 call that group sales were up at that point 34%.

So if you could just clarify where group sales are.

And then Jeff, I think you stated liquidity position is $135 million.

First, I just wanted to make sure that was accurate.

And I assume you're talking about as of today as compared to -- as of the end of December, so if you could clarify that as well.

I will take your last question first.

Yes, what I indicated in the comments was we had $105 million outstanding on the revolver at year-end, and as of today, we have about $240 million outstanding on the revolver, about $20 million in cash.

So when you take into account the additional 60 on our 320 revolver and the amount available on our multicurrency, that puts you at roughly $135 million at this point in time.

Just on the group sales front, I guess you could say conveniently I want to refrain from -- right now we're in our absolutely heavy group booking season.

For example, just in the last 24 hours, we booked the University of Mexico in Mexico City which is going to comprise 20,000 students incremental to what we had last year.

So we're totally in fluctuation right now in that it's changing every day because it's just our heavy season.

So come May, more importantly June, we'll be able to give you a better stand on where we are.

I think just ultimately in order to give you some kind of number, we're targeting to be anywhere from 5 to 10% up on group bookings by the end of the year, and that's kind of what we're aiming for.

I don't want to give you any numbers that might seem so high right now, to be honest with you, but it's just because volume is very low right now.

So I don't want people to think we are so way high that that's going to all of a sudden have such a material impact on our attendance.

I think that, given that the volumes are so low, I would like to refrain on just talking about where we're and instead give you 'guidance' on the group.

I appreciate it.

Thanks.

Zvi Rhine, Boone Capital.

Keeping with the evening games and NCAA tournament, I will keep -- there's just one question, and -- well actually, a clarification on the season pass sales.

I might have missed this earlier, but is that up until today, or exactly what time frame is that?

The season pass sales would be up for -- not today, but would be up there like Tuesday, two days ago.

And then you did mention --.

That doesn't fluctuate as much.

Don't get me wrong, we're constantly, we're selling season passes every day, specifically at the five parks that are 'open', but generally the delta versus last year or even 2005 is not going to be as great or as volatile as groups is.

I follow you.

And then you mentioned the sponsorship revenue.

Obviously you've done a fantastic job in growing that and you have provided a target out there of $38 million as of the last call, and since then, you have had a number of sponsorship agreements that have been concluded.

So basically, were those factored into 38 for the most part?

And if so, are there any more sponsorships that are factored in 38, or what you have announced to date comprises of 38, and anything incremental to that would raise that number?

Right now on our way to 38, Zvi, includes everything we have announced.

So you guys will be the first to know once and if we pass the 38 million threshold.

But we have 30 to 35 deals that are kind of working as we call it.

That doesn't mean they're going to close, but we're in some stage of discussion.

But anything we have announced now, that is included in our goal of 38.

Sounds very promising.

Congratulations, guys, and it seems to be a good start.

Thank you.

We hope so.

[Jeremy Kinney], CIBC World Markets.

Just a bigger picture question.

With all of the moving pieces last year as you came on board and implemented all of these different strategies, I was wondering if you could talk a little bit about what you had learned about the business and about the different nuances and what you might do differently, and also what opportunities you have seen for the future?

I could sit here for an hour on that one.

I would love to give you a private meeting on that one actually.

There's a ton that we have learned.

We are a year in, and anything from pricing strategy to the capital strategy and how the Company was hurt last year with the capital strategy to what it was going to take from the park president standpoint park to park and a staffing standpoint to run these parks the way we thought they needed to be run.

Our whole marketing campaign and the kinds of dollars we thought we would need to spend to move the needle and our ability ultimately to attract the teen as well as the family, how long it would take to get those families back.

You name a sector and there's something we've taken from it.

I like to think that '06 is behind us.

What I do know is that we are knee-deep in '07 right now, we're out of the gates.

The parks are open.

So I don't really have -- I'm not going to focus too much on '06, I'm going to focus on what I know, and what I know right now is that we have a very robust marketing campaign from a creative standpoint and from a spending standpoint that is going to make some noise in the marketplace, especially early on.

We're going to get a lot of early season momentum because we're out there now.

Mind Share has bought all of our media so we have terrific pricing because we spent well in advance.

It's a multi-tiered approach from radio, television, outdoor, online, direct, and we're heavy with the retail partners.

I think that's something we learned last year is just the power of those retail partners and we have to spend more money to support them if we expect to realize the attendance.

I know that having the capital online when we opened in the spring as opposed to the summer is essential and pivotal for the business and I'm proud to say that we are there.

I know from a group perspective, certainly myself, I have to be more involved personally with selling the big group outings.

That's why last week, I flew to Louisville to personally pitch the Toyota plant there, 20,000-person event to move their business over to Six Flags Kentucky Kingdom, and we'll see how that turns out within the next week, just having more I guess hands-on play with our groups.

I write letters and make phone calls, but making some appearances for the big ones is a good use of my time.

From a sponsorship standpoint, I think that we have learned just how non-traditional we can be.

The Papa John's of the world, that's a product deal.

The Sara Lee of the world, that is a product deal.

And while I love those deals because they bring us money, but they also bring us marketing opportunities on pack or in store, we've learned how to get really creative on the local front.

It's kind of a joke, the nitty-gritty little bit, but as an example, I talked about Discovery Kingdom in San Francisco and we have a lot of animals and we give elephant rides.

It's one of the most popular attractions there is we give elephant rides.

But every two hours, if you will, we have to wash down the elephants.

They have to take a bath.

Well, we just went out last week and sold a sponsorship for a car wash company to sponsor the elephant baths.

And while it's funny if you think about it, those are the kinds of opportunities we learned that we can look under every single rock, everything single stone, there's something to be sold.

If Nike came to me and said I want to sponsor all of the shirts that your employees work -- or I'm sorry -- that they wear.

So there's 3000 employees in every single park, for the most part, and we have a shirt and on the back of the shirt, it says -- please help keep our park clean.

If Nike said to me, we want your folks to be human billboards and make it -- please help keep our park clean, just do it -- and put the swoosh on it, we would sell it.

So I think from a sponsorship standpoint, we're learning just how much is out there on the local scene, how much is available to us and I think how much we can capitalize on it.

We've learned that the parks last year they were in a state of disrepair and it's going to take a lot of money and we've learned that we're going to have to put the money in such as the $50 million we're putting into asset maintenance and IT to clean up the parks.

And we've learned how much training we need, a lot more training and a lot more money towards recruitment and retention and just getting out of the gate with more job fairs and seeing that we get ahead of the game on some of this hiring.

And that's why we've raised wages and we took the expenses to where they are because we believe that if get out in front of the game, we're going to get a better quality employee and we're not going to have to rely as much on temp agencies and boosters like we did last year.

So long answer.

I could go into a whole other set of metrics, but I think we gained a lot from it last year and we're optimistic of where we stand and we're excited about what's ahead.

Hopefully somebody from Nike was listening.

Thanks a lot.

So that wraps it up for today.

Of course, Jeff and I are always available for phone calls or meetings and just thought we would give you beyond the '06 results and fourth-quarter results, we would give you sort of a snapshot of where we stand and we look forward speaking with you in May, but most importantly in June when you get a real feel for how we're doing.

Thank you everybody, enjoy the games.

Thank you for your participation in today's conference.

This concludes our presentation.

You may now disconnect.

Have a good day.