Six Flags Entertainment Corp (SIX) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen.

Thank you very much for your patience, and welcome to the first quarter 2007 Six Flags, Inc.

earnings conference call.

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

(OPERATOR INSTRUCTIONS).

As a reminder, today's conference is being recorded for replay purposes.

I would now like to turn the call over to your host for today's presentation, Ms.

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

Please proceed, ma'am.

Good afternoon.

I am Wendy Goldberg, Senior Vice President of Communications.

This evening the Company released its financial and operating results for the first quarter ended March 31, 2007.

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 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 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 2006 annual report on Form 10-K, which is also posted on its website, for a detailed discussion of these risks.

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

In accordance with FCC 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 (technical difficulty).

Good afternoon.

Before I start let me just preface my comments today with the note that, unless I indicate otherwise, my discussion today is going to focus on the Company's results from continuing operations, which excludes a total of 10 parks that we have sold during the course of the last 12 months, including the sale of the seven parks that closed on April 6 of last month.

With that in mind, our first quarter results that we announce today showed a revenue increase of 20% over the prior year period.

This increase was driven by both volume and spending, as evidenced by the 13% increase in total revenue per capita to $41.51 and the 6% increase in attendance to 1.22 million.

Our reported revenue from continuing operations was approximately $51 million compared to $42 million for the first quarter of 2006.

While this growth is a positive sign to be sure, it is importance to remember that the first quarter historically represents less than 5% of our revenues and attendance for the full year.

Our parks historically generate approximately 85% of their revenue and volume in the second and third quarters, with a substantial majority of that business occurring in the summer vacation period between Memorial Day and Labor Day.

When we break down the components of the revenue increase, our total revenue per capita growth reflected increased sponsorship revenues, a direct result of the Company's strategy to leverage our audience base and grow our brand and its affiliation with other strong consumer brands.

The revenue increase also benefited from a 7% increase in per capita guest spending, reflecting increased ticket, food and beverage, parking and other in-park per capita spending.

The growth in per capita spending reflects the impact of pricing and product enhancements that are new this year, as well as changes made last year that weren't fully effective for all the prior year quarter.

It is also important to note that because sponsorship revenues are recognized ratably throughout the year without regard to attendance, the impact of sponsorship revenues on our total revenue per capita is much more significant in our off-peak quarters compared to our peak season and full year.

To be clear, we're not expecting to deliver a $41 per cap for the full year.

The strong growth in our guest spending per capita is a positive sign, particularly as it occurred along with a 6% increase in attendance.

Fundamental to our business strategy and ultimate success is the ability to grow volumes while maintaining a high-quality guest service that contributes to guest satisfaction and ultimately increased in-park spending.

Again, although very early, another encouraging sign is that the 6% growth in attendance came from 10%, or 18, less park operating days compared to the first quarter of 2006.

As we mentioned on prior calls, we decided to strategically reduce certain park operating days, targeting days with marginal attendance and profitability, with the intention of recapturing that attendance on other days that the parks are open in order to leverage our operating expenses.

This reduction operating days is going to continue in the second quarter, such that by the time we have our upcoming call in late June to discuss our year-to-date performance, we will have had 5% fewer park operating days.

However, in the third and fourth quarter we will pick up additional days due to improved August school vacation calendar in Dallas, and the expansion of the December Holiday in the Park product at Six Flags Fiesta Texas in San Antonio and Six Flags Discovery Kingdom in California.

For the full year we expect to be down about 50 park operating days, or 2% of the total park operating day calendar.

Now looking at the drivers of our attendance for the first quarter, we saw positive impact from our planned increase in marketing spend across multiple channels, benefiting season pass attendance, and favorable weather comparisons for our West Coast parks versus the prior year.

Increased guest spending, higher attendance and sponsorship growth were the key ingredients to our improved topline results for the quarter.

However, while Q1 revenues grew, we also kept our operating costs contained.

For the quarter we had an adjusted EBITDA loss of approximately $69 million versus approximately $77 million in Q1 of last year, excluding the non-recurring management change and severance cost in the prior year of approximately $11 million.

The $8 million reduction in the adjusted EBITDA loss reflects the current quarter's topline revenue growth, as well as flat operating costs.

Our flat operating costs were primarily a function of savings from reduced park operating days, and the prior year decision to freeze our pension plan, offset by our planned increase in marketing.

Our net loss from continuing operations for the first quarter decreased approximately $34 million from $195 million to $161 million.

This decrease consisted of approximately $14 million in reduced loss on fixed assets, reflecting our decision to write-off certain obsolete rides and attractions in the prior year, an $11 million reduction in expenses due to the prior year management change and severance costs, and the $9 million revenue improvement for the quarter.

On a per-share basis the net loss from continuing operations applicable to common stock was $1.76 per share compared to $2.14 per share in the prior year quarter, an 18% improvement.

Net interest expense for the quarter was $52 million, up from $48 million last year due to higher net debt levels and higher interest rates on our floating-rate debt.

With regard to our debt and liquidity at March 31, 2007, our long-term debt totaled $2.1 billion, and we had $250 million outstanding on our revolving credit line.

We had $36 million of unrestricted cash and $99 million available under our existing credit facility.

In April we continued our progress towards improved financial flexibility by closing the sale of the seven parks we announced in January, and realizing gross cash proceeds of $275 million, and the announcement of our intention to execute a new senior secured credit facility consisting of an $800 million term loan and a $300 million revolving credit line maturing in 2015 and 2013, respectively.

In the short term we have used the proceeds -- the net proceeds from the recent park sales to reduce the outstanding balance of our revolving credit line.

We currently have approximately $35 million outstanding on our $300 million line, and nothing drawn on our $82.5 million multi-currency line.

In terms of guidance for the full year, as it is too early to draw any meaningful conclusions and our peak summer season has yet to come, we're not modifying our prior guidance.

As a reminder, we're targeting total revenue per cap growth of 3%, driven by in-park per cap growth of 5% and relatively flat ticket per cap growth of 1%.

Included in the total revenue per cap of 3% is our target for sponsorship revenues of $38 million for 2007.

In terms of costs, our plan is to significantly increase our total marketing costs for the full year.

We are planning a marketing expense increased of approximately $25 million on top of the roughly $105 million that we spent in 2006, for $130 million in total.

These amounts cover not only our core radio and TV broadcasting, but also agency fees, production, online advertising and other promotional costs.

Excluding marketing and cost of sales, other cash operating expenses, including SG&A, are expected to increase by approximately $30 million, or 6%, over the 2006 level of $520 million, which excludes the prior your non-recurring costs of approximately $14 million.

This cost increase is a function of increased staffing costs for more staff and higher wages, and the full year impact of the various corporate and park level initiatives.

In terms of free cash flow, we're not targeting to be free cash flow positive in 2007, but we are looking to make meaningful progress toward that ultimate goal.

Now I will turn the call over to Mark for his commentary on the business and the upcoming season.

Good evening everyone.

The bottom line for Six Flags is that we're extremely well-positioned for a solid summer.

We are significantly better in our strongest area -- or the primary area of concern coming into the year, which is staffing.

Our employees are significantly better trained.

So we have hired more year-to-date versus last year.

And clearly since we didn't do any training last year, and it was one of our investment buckets this year, we significantly better trained those employees.

Our parks look substantially better in light of the $35 million we invested in asset maintenance.

With the exception of Thomas the Tank Engine, which is a deal we did late in the year last year, all of our rides are in the park.

They are year up.

They are online, and they are on budget.

In terms of season passes and group sales, we gave you preseason numbers, and those two season indicators continue to give us good stability versus '06.

Our marketing efforts have been well-received.

And our Web business is growing.

Our online ticket sales are up 27% over last year.

And our new website is more reflective of our brand positioning.

Finally, more touchstones.

More touchstones than ever before, meaning more places were people can access or get tickets to Six Flags.

More places to raise the awareness and create some noise on Six Flags.

And that includes the fact that we now have co-marketing sponsorships or co-marketing partnerships more likely with 35 different teams.

Teams representing the NHL, the NBA, the NFL and Major League Baseball.

Examples, Philadelphia 76ers with Great Adventure.

Our Six Flags New York Park, which is in Jackson, New Jersey, deals with the Milwaukee Brewers for our Great America Park in Gurnee, Illinois, which is Chicago, but it is really right in the middle there, and deals with Chicago Black Hawks, which of course your deal for Great America as well.

We have closed the sale of the seven parks.

Our refinancing deal will give us the runway to execute our strategy.

And we even have our '08 capital plan set in stone.

We just finalized that last week.

So the Company is now proceeding at a pace where we are looking long-term.

We're planning ahead, the way we should be.

And sponsorships, our corporate alliances, we expect them to increase, as Jeff said, to $38 million.

That is up from $46 million -- excuse me -- that is up from $26 million, which is a 46% increase.

And tomorrow morning we will be announcing our latest marketing and promotional sponsorship, and that will be with Kraft.

Through this new agreement Six Flags will offer a Play Like a Kid, Pay Like a Kid promotion on over 1 million boxes of Kraft Macaroni and Cheese.

Before we get to the Q&A, in terms of strategy for the season, I think it is important to briefly review our agenda.

First, let's build on the '06 momentum.

Let's leverage what we believe will be increased attendance this year to drive partnerships.

We need to secure more national brand relationships.

I talked about Kraft.

We will also be announcing in the next couple of weeks that we have secured a title sponsor for our Thursday night summer concert series, which is a big priority for us.

We need to leverage the reemergence of the outdoor category as it relates to advertising.

Depending on what you read, it appears that outdoor advertising will be up 8% year-over-year in this country, and we need to get our fair share of that.

Finally, we need to take advantage of the advertiser shift to nontraditional media.

The way DVRs are permeating these days, and the Web and everybody racing for their share of the clutter, there's a move to nontraditional media.

A great example this morning in the Wall Street Journal, where McDonald's talked about the fact that 80% of their budget, their marketing budget, used to be on TV ad spending.

That was in 2002.

Just five years later that now represents -- TV ad spending now represents just 65% of their total marketing budget.

Again, we are a nontraditional media.

We do have people, and we need to get our fair share of the outdoor and the nontraditional media world.

When you look at marketing, as Jeff talked about, a substantial increase in media budget to drive attendance.

There is a 25% increase overall to $130 million, but we're going to have a 40% increase in just media, meaning outdoor, digital, television and radio.

Our plan is informed by a detailed segmentation analysis.

As you know, we hired Mercer to give us an understanding of who we were talking to.

How we could price.

What demos we could attack.

The incentives and obstacles to ultimately purchase.

We needed to understand where our core segments live, work and play.

Messaging, the creative, and the media, we have now tailored all three of those to really a triple-cast, a target audience that is moms, teens and tweens.

Historically the Company has mostly been about teens, as you know.

After that was moms.

But we see the tweens as a real opportunity since the tweens are really the ones pushing the moms to make a decision when it comes to discretionary entertainment dollar.

We have supported it with a revamped website, which I talked about, that is aimed at going online sales, but just as important, in enhancing our CRM capabilities.

Mining a database, building the database, and going back to those folks who clearly drive the affinity when it comes to Six Flags.

We need to reclaim the outer markets, so we are spending more money getting the outdoor markets.

Bringing places like Memphis back to parks like St.

Louis or Atlanta.

We need to build attendance in the fringe and the weekday periods.

When I say fringe, I mean March, April, May, September.

Weekday periods, that is why we launched our Thursday night concert series, to try to drive Thursday stronger, build some must see TV there, if you will, and get that flow to spillover to the weekend.

And of course, we need to expand the season, which we're doing with our Holiday in the Park programs.

With regard to in-park spending, we need to leverage our IP and our big brand partnerships.

We have clearly found that we're selling more pizza, a lot more pizza, despite lower attendance last year, since we put Papa John's in.

Bigger brands ultimately are going to get folks to spend more money.

And it is going to be much more experiential.

In fact, in four of our parks this past weekend we opened Johnny Rockets -- Johnny Rockets stores.

And in all four parks those stores were the highest grossing food stores in the chain of those parks, individually respectively if you will.

We need to capitalize on new services like the package pick up.

The money we can pull in from valet parking.

We're now offering birthday parties at Six Flags for the first time.

We need to capitalize and expand our Brunch With Bugs program.

Our Flash Pass is up in Chicago.

It is a new Flash Pass.

I have talked about it before, where you're able to secure your place in line without ever showing up for the ride.

You do it all wireless from any position in the park.

Our arcades are moving to a debit card system.

We're charging for animal interactions now.

At Six Flags Discovery Kingdom our VIP program has been well-received.

And both text messaging of still photos after you go on a ride, and DVDs of your ride experience, are two new programs we will capitalize on as well.

But at the end of the day it is about the guest experience.

And it is our aim to move the optics of this Company to one that is measured most importantly by free cash flow.

And that strategy lies in reducing our capital program, while at the same time, on a commensurate level, increasing our OpEx fund to drive labor initiatives, including those aimed at hiring, training, incentivizing, and retaining better guest facing employees.

There is more and more competition out there these days.

You can get a good job at Star Bucks which pays a lot of money and gives you benefits.

We need to be competing at that level.

Our focus is on software because it is paint, it is advertising, it is the characters, it is the shows, and it is the increased wages that are going to drive the difference for us.

When it comes to rides, as long as we put something in new, I know we can successfully market that.

We have established a guest service mantra, so every employee knows their mission.

It is four-pronged, cleanliness, friendliness, speed of service and safety.

And when it comes to the look and feel of our parks as it relates to the guest experience, we need to get back to theming, investing in theming.

These parks are about imagination and different worlds and fantasies.

And they are about storytelling.

And that is on our agenda this year, pretty much right at the top.

As I said, we need to make the rides and retail initiatives more experiential.

Our partnership with Wii is very experiential.

Folks are lining up to play the Wii consoles just as much, or just as long as lines, if you can believe that, as rides that they are lining up for.

Cold Stone Creamery, a great ice cream, but it is also an ice cream experience.

And of course the Tony Hawk partnership has brought us a roller coaster, a Tony Hawk coaster.

Big Spin is what we call it, which is also very experiential.

And finally, the fourth prong of our agenda, our strategy is technology.

But we need to embrace it.

We have seven parks receiving infrastructure upgrades this year.

We're recabling and putting in fiber to all section of the parks, all sections of them.

We're providing POS systems to all fixed retail and food locations.

So we're more efficient, we're more productive and we're getting the dollar quicker.

We plan to rollout the infrastructure upgrades to remaining parks over the next two years.

Technology is also about e-commerce.

You go to our site now you can order your meals upfront, parking vouchers.

There is merchandise sales.

The VIP program is sold there.

Our Flash Pass is sold there.

Brunch With Bugs.

We even have sweepstakes and promotions that make our brand more attractive like our Win a Wii program, which has been very successful despite the fact that it just launched a few days ago.

Finally, which is a key component to our future strategy, is Six Flags radio and Six Flags television.

We need to build a foundation for Six Flags as a pipe and a platform.

We have the visitors, we have millions of guests.

We need to build a television network, if you will.

That means outfitting our parks with radio and television capabilities, where we can not just market our messages and play content, but of course also sell advertising.

I'm happy to report that all of our branded parks this year will have Six Flags radio capabilities.

Meaning we can do all of that to difference sections of the park.

We can even regionalize.

So the Wiggles World area is playing toy commercials or kids commercials, things aimed at the younger toddlers.

And then in another area, our thrill areas, you can of course go for the high-end thrill and go more for teen advertisers or adult advertisers.

Right now we have Six Flags television in all of our Wiggles areas.

They will be in our Thomas the Tank Engine areas.

And then they are in our Tony Hawk areas.

We expect to expand that to all areas of the park.

I mean the most crowded food lines and a ride lines in 2008 and 2009.

In summary, you heard the numbers Jeff laid out.

When you break down the first quarter we were successful primarily because of increased marketing and the timing of that marketing.

It is not just that we spent more, it is that we spent more in November and December to get a leg up.

When people are buying Christmas presents and holiday presents, they are buying Six Flags season passes.

They are buying more in January.

They are buying more in February.

We are getting the momentum going earlier.

We were successful because we got a lift on the season pass sales.

We had a nice first quarter as it relates to season passes, of course driven by that increased marketing and timing.

We had favorable weather on the West Coast, which helped us with Los Angeles, helped us with Discovery Kingdom.

Specifically as it relates to Magic Mountain, we were very strong.

Our season pass sales did very well.

And they were driven by a season pass promotion that we put in -- once we announced we weren't going to sell Magic Mountain, we put in a promotion that said for every season pass purchased, you get a free kid's season pass.

And we ran that promotion for about a month, approximately a month.

These are all good signs when you consider two things, one, 10% less operating days and, two, if our marketing was working, we're hopeful it is really going to work, because our blitz really starts next week.

So everybody has an understanding of how our marketing strategy plays out.

We go pretty heavy.

End of your last year, early part of the calendar this year.

And right when spring break ends we pretty much go dark.

So we have been dark the last two weeks, and we will be dark this week.

Next week it will start to ramp up.

And by the last week of May where schools are starting to let out in some areas of the country, that is when we start going with heavy, heavy media.

As Jeff said, the season for us is about the summer, Memorial Day to Labor Day.

We're excited about where we are.

We believe we are extremely well-positioned, but there is a long marathon ahead of us.

At this time I would like to open it up for Q&A.

I want to keep the Q&A specifically targeted on the first quarter.

We are -- as you know we're going to institute a call at the end of June where we're going to take you through detail by detail and year-to-date numbers.

That is a time when it is more reflective of our business, given that the volume will really be kicking in.

So this call is about the first quarter.

(OPERATOR INSTRUCTIONS).

Michael Pace, JP Morgan.

Thanks a lot.

It might be tough just to specifically focus on just the first quarter, but I will try my best here.

Can you give us an update on season passes?

I guess year-to-date would be better, but I guess through the end of the first quarter, how that has changed since the last time you updated us.

I guess I will try this.

I know April is not necessarily the most important month here, but how does April -- through April look from an attendance figure?

And just a couple follow-ups.

As I mentioned, we're going to keep this to a first quarter call.

Don't read into that.

As I said, in terms of season pass and groups, we gave you pre-season numbers.

Those two season indicators continue to give us good stability versus last year.

At this time it is just not prudent of us.

The volume is way too low.

And we will -- we have specifically instituted that call at the end of June, which we're going to have annually by the way, where we can give you year-to-date numbers on everything across the board.

The bottom line is our guidance is not changing coming into this call, and it is not changing after the call.

That is where we are.

Then just to not focus necessarily on numbers, maybe just the bigger picture.

You have spoken about Flash Pass and your VIP programs, I guess recently and over the past couple of calls.

Can you just talk about the demand for those and the potential to actually increase pricing on some of those?

And then also on hiring and staffing you mentioned that that has improved.

Is it possible for you to put some numbers behind that in terms of where you were at this time last year?

As it relates to staffing, depending on the park where you are, we are generally around 94, 95% staffed heading into the summer season at this point.

So we have got a couple of weeks to close it out.

But when you look at this point last year we were only in the 80s.

We weren't touching the '90s in most of our parks.

We were well behind.

Most of that was just due to the fact that obviously we had a transition in the Company.

We didn't have that leadtime.

But we weren't spending the money we are now on recruiting.

We weren't spending the money we are now on job fairs.

And we weren't spending the money we are now on advertising.

We are spending some money on advertising on the Web and in print to bring people to job fairs so that we can get the best hired.

We're much more selective.

That is the best news of all.

We're being much more selective.

We could -- I'm telling you, we could be at 99% right now, but we have been turning a lot of people away, which is an absolute blessing for us, because we're being much more selective about whom we hire and were hiring -- that allow us because the numbers have been strong to also have less reliance on international employees.

Of course, they still make up a percentage of our overall work force.

But if we do have to have international employees, it is not our preference.

We would rather be able to hire folks that live right there, local to home, and aren't in a new environment and don't have to travel across the country.

As it relates to our e-commerce, we're having the most success with our meal voucher program.

I'm not going to give any specific numbers again.

But meal vouchers, folks that are spending money to buy their meals online, so when they get there they just redeem them.

And we hope that of course translates into more cash being in their pocket, meaning more cash gets spent on retail and games.

The Flash Pass program is very strong.

And the VIP program, we're going to be listing prices in several markets on the VIP program because of demand.

David Miller, SMH Capital Markets.

Congratulations on the stellar results.

A couple of questions.

Jeff, I noticed on your preannouncement, I guess it was ten days ago or so, you had preannounced a plus 19% revenue uptick.

It looks like you did plus 20%.

I'm just wondering if there was any other way the numbers were skewed in terms of how you reported today versus the way you preannounced it stylistically ten days ago?

Also, Mark, we were at the L.A.

Park eight weeks ago.

We had a great time.

We noticed though that the Thomas the Train ride is not in there yet.

I could tell you that there is just huge pent-up demand out here for they an attraction like that at the Los Angeles Park.

What are your plans for a Thomas the Tank platform in Los Angeles?

In terms of the preannouncement of revenues, what we had announced, and it is in -- we filed an 8-K with the presentation.

We made a presentation to investors interested in our bank loan, and we gave numbers of 18 to 20% revenue growth, given we haven't finalized the final quarter end adjustment, so we gave a range in that meeting.

And in the press release that summarize that meeting we picked the midpoint and said approximately 19% rather than putting the range in there.

There is really no difference at all in terms of how the revenue is being measured, it was just we put a range in there until the quarter was finally wrapped up.

Fair enough.

With regard to the Thomas the Tank Engine, we will not be putting Thomas the Tank Engine into Magic Mountain this year.

There is a train ride, more likely I guess better said, it is more like a monorail that exists at Magic Mountain.

And it has been down for countless number of years.

It is elevated.

It is called The Metro.

It has had a sign saying pardon our obstruction here, we're trying to clean it up and fix it.

But really they were just hiding the fact that it was going to be down and staying down for a long time.

We're going to fix that train this year.

And by the end of this season that train, that monorail, that elevated train, The Metro, will be working.

It will be in operation.

And it is a big ride because it goes to three different stops and takes you around the park.

But it is not going to be Thomas the Tank Engine because our partnership with HIT Entertainment, they really want to keep Thomas on the ground.

He is not an elevated train.

Of course we want to respect their brand attributes, so we're not going to play with that.

In terms of the futures by could we build a Thomas the Tank Engine there, or a Wiggles area there, yes we could.

And probably that is in the long-term plans, but is not on tap for 2008.

(OPERATOR INSTRUCTIONS).

Kathy Styponias, Prudential.

Just with respect to the sponsorship revenues, did they come in as expected in terms of timing or -- I guess the question I'm getting out at, is there a potential that you could come in above the $38 million that you have alluded to in your guidance?

Thanks.

In terms of the quarter, we are in line with what we expected.

And in terms of the target for the year, we're sticking with that target of $38 million.

Kit Spring, Stifel Nicolaus.

Can you tell us what percentage of your season pass and group sales that you would have sold at this time of the year?

I think last time you said season pass sales were up 30% and group sales were flat, and that you had sold about 10% or so.

I was just wondering what percentage might be normal at this point of the year?

And then secondly, can you talk about whether you think -- what you think the impact of gas prices are, if that is relevant or not?

Thank you.

In terms of season pass, by this -- in Q1 you really have sold around -- I sort of look back -- around 25% of the -- based on historical sort of numbers, about 25% of what you would have expected for the full year.

By the time you get to the end of Q2, which is why we're doing our end of quarter call, you're in the sort of 85 to call it 80 to 90% of your full year expectation.

Which is why we think that is more meaningful to have a conversation about those sort of leading indicators at that time in time.

In terms of groups, you are really a little bit less because you do have group bookings that kind of come in throughout the year, because you do a decent group business in the fall.

So it is less than that in terms of the percentage that you would have achieved at Q1 and by the end of due Q2, but it is still rather meaningful.

You're in the 40 to 50% of your group business or more by the end of June.

The only thing I would add there is the next four weeks for us are pivotal for group business.

These next four weeks are really the frame where we close a large majority of our business.

This is the period that is going to put us over the top or not in terms of the entire season.

So we are focused on that right now.

I think Jeff made a very good point with regard to the season passes, and your point about the 30%.

Given that we sell 25% of our season passes in the first quarter, nobody should be thinking we're going to be 30% up come end of year.

Just like the $41 per cap.

When you are talking about those low volumes the percentages seem very high.

Those percentages are going to come down, of course, as the volume get higher.

But having said that, we still -- we feel good about where we are, and we have very good stability versus 2006.

With regard to your gas price question, it looks like the articles this morning, and it is changing all the time, but it looks like they're going to average around $3 for this summer, is where it is coming in.

We don't believe gas had a huge impact on us last year.

I think one of our calls we stated the only evidence we gathered was that Magic Mountain might have taken a hit because of it, because there is a perception that Valencia is way out there, and therefore they maybe think twice about going there.

So far clearly we haven't seen that in the first quarter with Magic Mountain.

Obviously first quarter gas prices weren't what they are now.

But secondly I would tell you I think the sticker shock is gone.

Last year it was a headline everywhere you looked, because we hadn't seen those kinds of prices, unless you adjust for inflation, since really 1981.

That was the last time we saw prices like that.

That is sticker shock hit last year.

I think people are not floored by it this year.

They might not like it, but they are not floored by it.

And as long as our marketing is strong, as long as we are out there creating the noise on multiple media channels, and the weather plays ball with us, I think gas won't be a big detriment to us.

Thank you.

That is good insight.

[Zvi Rhine], Boone Capital.

Mark, I just have one big picture question for you.

Not to put you on the spot, but this time last year I believe you had mentioned the story about a dissatisfied customer guest that you intended to call and inform when the parks would be in the condition that is more up to your standards going into the season.

Are we there?

Is this gentleman going to get a call from you to buy a season pass?

A great question.

Did you print out the transcript for that before you got on?

I have got a great memory.

Let's just leave it at that.

A flat-out answer for you it is I absolutely would call him.

That doesn't mean we have turned around this Company.

We haven't.

We have a long road to go.

I still believe it is a three to four year turnaround.

But without hyping this, I feel very good about where we are.

The leading indicators are strong.

The parks look terrific.

The guest service training is going very strong.

The morale is terrific.

I just finished the entire tour of all the parks.

I have met with the seasonal employees.

I have been part of some job fairs.

I have taken part in all the labor training we're doing, because we're hiring labor schedulers for the first time, a full-time labor scheduler at every single park.

And the aura, the atmosphere, the environment is good.

It is funny, we have always talked about the fact that weather is not the factor that decides our success or failure, it is just one of the factors.

But from where we sit right now, weather is becoming increasingly more important.

Why?

Because the product is good.

The service is good and the presentation is good.

And many of those problems we experienced with the parks or we inherited with the parks or what we caused with the parks, through the transition last year, those don't exist.

So we are in a good place, therefore weather almost becomes increasingly more important suffice to say.

That is exactly what I wanted to hear.

Thanks a lot guys.

Andrew Ebersole, Sentinel Asset Management.

I was hoping you could comment a bit further about how your performance played out in the first quarter versus your plan, and maybe speaking in terms of overall traffic and per capita spend, and maybe regional performance, whether or not it was up across the board, or whether there was some specific reasons that did particularly well?

Really we are in line with our plan.

Hence we are not changing guidance.

There's a few areas that we were glad to see that are up higher than they thought they would be.

Having said that, we're not putting too much stock in those.

First quarter represents historically 5% of our revenue and attendance.

So we're not reading too much into the success.

We feel good about where we are.

We have worked hard to get here.

We're well-positioned, and we have got a great team around us.

We can execute, and now we just have to go and do that.

I understand how you don't want to extrapolate out from the first quarter, but what I'm trying to get a better feel for is whether or not you guys budgeted for certain performance during the quarter, and whether or not you're matching that, or whether or not you are outperforming that.

I know you don't want to extrapolate out full year, but just getting a better sense of how you're performing this quarter versus your expectation.

I think I answered that.

With regard to the first quarter there isn't one area we underperformed.

We are either in line or above where we thought we would be.

Invariably, just to speak to the expense, invariably as we said, our expenses are going to increase $55 million.

So being flat in the quarter is not something we expect for the full year.

But that is in line with our plan.

We cut operating expenses in the first quarter a bit though through the reduced park operating days, and we're going to redeploy those expenses into the core of our season.

So again don't read too much into the flat operating expenses.

We are expecting to grow those operating expenses through the remainder of the year.

So again on that side we are in line as well.

From a specific park performance, the same thing that they are all performing in line?

There wasn't any outliers either better or worse?

I think for us the big story so far has been Six Flags Discovery Kingdom.

As you know, we relaunched the park.

It used because Six Flags Marine World.

We did not think that was representative of what the park had to offer.

It is a a triple prong.

It's got land animals, it has got marine life, and it's got tremendous rides.

It is well situated.

It has never tapped into the San Francisco market.

And it is never penetrated the Oakland market the way it should.

So we went out and we more than double the advertising budget.

We rebranded the park.

We put anywhere 9 or $10 million of capital into the park to make the appearance better, to fix things up, to traffic the park better.

It is now -- ultimately you go to the park, it is designed to be three portals, land, sea and sky.

So you get a better feel for what the park is.

It plays into our strategy of theming.

It plays into our strategy of storytelling.

And it plays into our strategy of interactivity.

Because the minute you get there, the first thing you see is an elephant out on the street on the midway, and birds and folks walking around with different animals.

So we're making memories really from the get go.

And the advertising and the buzz from the rebrand of that park has been sensational.

The weather has helped as well.

That's great.

Good luck over the coming months.

John Maxwell, Merrill Lynch.

Mark, just a quick question again on the labor front.

I think last year you talked about one of the issues you had were seasonal employees either leaving earlier in August to go back to school or what have you.

Has the training -- and I assume that is part of the $30 million increase in staffing as well -- is that geared towards -- are you comfortable that that doesn't replicate this year with the new training methods that you put in place?

Very, very comfortable.

I will tell you the one area I am concerned with in a minute.

But I'm very comfortable because in many places, as you know -- you had spoken to $30 million -- we have increased wages.

So that has been a big score for us.

And word-of-mouth has gotten around, which has allowed us to have more people showing up for jobs.

And then ultimately that is translated into more selective hiring.

We also have an incredible incentive program across the board to get them to stay longer and into the season, to get them to upsell more of our services and products, everything from preferred parking to season passes to Brunch With Bugs when you get there.

We are doing surprise checks on these folks where we send management out to the parks, and we have them test each of ticket booths.

Nobody knows when or if we are coming.

And if anyone is caught not up selling, they are moved out of the ticket booth.

That doesn't mean they are fired, they're just moved out of the ticket booth.

But they have great incentives.

We want our best salesmen, our best outgoing personalities in those ticket booths or out in the parking lot for preferred parking.

Again, the quality is better.

The quantity is better.

And with the incentives I believe the morale will be better, and the folks will stay longer because we're putting retention bonuses as well.

The one area we're having some difficulty with right now is life guards.

The good news about that is in most of our parks we don't water areas, or we don't have a water park that is adjacent, or a water park that is built into the theme park.

So this is really just for a select number of theme parks.

But those parks that do have a big water area concentrated in the park or adjacent to the park, they're having some difficulties.

And the reason why is we're still under wage, I would tell you, with regard to what we pay lifeguards.

For the most part.

We have taken some increases, but we're still under when you compare us locally to what the local pools are paying.

Does this also help you for next year and going out longer term that maybe you don't have to just keep replacing new workers every year?

Or is that is going to be function of the issue of dealing with a seasonal labor force?

Yes, it does help us.

We are instituting loyalty programs for our employees.

We are instituting bonuses and ticket bonuses for their families when they come back for a second year or third year.

We are starting in many of our parks what we call the Seasonal Hall of Fame where we're inducting certain seasonal employees into the Hall of Fame that truly represent our brand and the service that we intend to give to our guests.

And that is going to encourage them to come back as well.

We're putting a lot of programs, not just money, but a lot of programs into our parks that will keep these folks coming back.

And more importantly keep the morale where it needs to be.

Yes, this should be the gift that keeps on giving, if we do it right.

That concludes your question and answer session for today.

I would like to turn the call back over to our speakers for any closing remarks they may have.

Thank you everyone for joining us today.

And we will see you at the end of June when we give you a year-to-date update.

Let's all cross our fingers for good weather.

Thank you.

Thank you very much, sir.

And thank you, ladies and gentlemen, for your participation in today's conference call.

This concludes your presentation, and you may now disconnect.

Have a good day.