Six Flags Entertainment Corp (SIX) 2007 Q4 法說會逐字稿

Good day, Ladies and Gentlemen, and welcome to the Fourth Quarter 2007 Six Flags earnings conference call.

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

We will conduct a question and answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded for replay purposes.

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

Lissa Brown.

Please proceed.

Good morning, I'm Lissa Brown, Six Flags Corporate Director of Communications.

This morning the Company released its financial and operating results for the fourth quarter and 12 months ending December 31, 2007.

A copy of the earnings release is available on the Company's website at www.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 in compliance with SEC Regulation FD, a webcast of this call is being made available to the media and 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 contents of the call will be considered fully disclosed.

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

These reconciliations are available to investors in the earnings release.

Now I'd like to turn the call over to Mark Shapiro, President and CEO.

Mark?

Thank you, Lisa and good morning, everyone.

I'm going to turn it to Jeff Speed in just a minute.

Jeff will outline for you our fourth quarter performance and our 2007 full year performance and spend much of the time detailing the 2008 financial plan.

Before I do that I want to set the stage more or less for 2008, and what the financial plan is, what the strategy is, and where we are in terms of executing on that strategy.

First and foremost, you saw last week we announced international expansion into Dubai.

I wanted to give you some color on that deal.

That deal really pays us in three different ways.

We're actually capitalizing on this new revenue stream that we've talked about on the last two phone calls and this will be a first of several announcements, but Dubai is a first and it will pay us in three different ways, beginning immediately.

First, we will get an annual payment for design and development fees from now, the actual moment that we sign the deal, through 2011, December 2011 when the Park is scheduled to open.

Second, we'll have recurring fees that will pay us for our exclusivity.

What I mean by that is with the exception of [Qatar], the country of Qatar, which we have a carve out in our deal for Qatar, we will get recurring fees so that Six Flags does not open another park in all of the UAE.

And although Qatar of course isn't in the UAE, it's close enough so we do have a carve out for Qatar.

And then third, when the park opens in December of 2011 or thereabout, we will have a recurring annual licensing fee, a royalty fee that we will be paid for the next 25 years.

I'm not going to get into any specifics financially of the Dubai deal in terms of what they're actually paying us in each of those three buckets but I will layout for you our licensing and sponsorship bucket as we refer to it, the corporate alliance bucket which includes all sponsorship fees and licensing fees the Company has paid, we will in fact give you guidance today specifically on what that number will be.

Before closing on the door on the countries, I would just mention that we are in discussion with several countries for multiple deals, nothing to speak to at this time, but in laying out the sponsorship and licensing guidance, I will tell you anything going forward that you hear about or read about in the newspapers will be included in the number I'm giving you today.

So in three weeks from now, if you hear about another deal that we announce another deal or five weeks from now, that number is already included in the guidance we're giving you today.

If the guidance is to change throughout the year, we'll update you at that time but at this time we are assuming things we already have in the bag or deals that we believe will come to fruition within the year to get us to our number that we're guiding you today.

Moving specifically to our sponsorship and licensing, let's backtrack a little bit.

Last year as you know we finished the season hitting our guidance goal of $38 million.

Again, including all of our corporate alliance sponsorships and any licensing we had as a brand primarily at that point it was just consumer products.

A lot of questions the last few months about what's falling out.

How long are your deals?

All of our deals completely differ in range of scope, scale, and size and of course term.

Some are one year, some are two years, some are five years.

We ultimately go out there trying to sign three to five year deals but if there's some brands or some advertisers that we really just want to test the waters with, we'll do one year deals so essentially every year, one deal or another is going to fall out and the one that's mostly generated much of the question on the last few calls has been the Home Depot given some of the retail problems they're facing in their business.

As we told you, we would be dropping out of the Home Depot deal with regard to exclusivity.

We might do a deal in some form that allows us to retain some of their money and some of the partnership, but we're opening up the category to several other department stores or outdoor furniture stores that might give us an opportunity that in the whole, we could garner more than the Home Depot was paying us.

So of that $38 million, what fell out, including the Home Depot, bunch of deals ranging to the tune of $7 million, so we came into the year at $31 million, and we're going to give you guidance today that has us hitting $51 million for our guidance in sponsorship and licensing.

What I would tell you really is that we're seeing a lot of traction in the marketplace.

We're generating a lot of heat.

I'm sure as you've read from a lot of the reports the up fronts and the television marketplace are looking strong and so is our advertising business.

So as I mentioned, we're looking at jumping from $38 million to $51 million.

For us internally it's really a $20 million jump because we had [$70] million fall out.

I want to address the economic climate and how that impacts our business before getting into quantitative specifics on just how our business is doing thus far, of course although early.

Remember, the first quarter accounts for only 5% of our overall attendance on the year.

As you can see from our release, we had a strong fourth quarter and I would mention that the fourth quarter was in the midst of the same economic climate we're in now.

From October 15, through the end of 2007, the stock market was down 15%, driven by the credit crunch, driven by the housing bubble, driven by oil prices, driven by a retail sector that was down really across-the-board from a Christmas standpoint and a Christmas shopping standpoint, just overall it's the same climate we're experiencing right now.

Yet, we had a strong fourth quarter.

Secondly, overall I would just tell you that we have continued caution, cautionary, excuse me, optimism but we are cautiously optimistic about our year.

The reason why is that fourth quarter.

Secondly, the Company has been stable in other recessionary periods both in 1991 and in 2001.

What ends up happening historically is the long distance vacation.

The big ticket items are what gets sacrificed.

The short, close to home, convenient, affordable, those daycations usually historically ramp up.

We just believe that people are not going to stay in their house every single day.

Hell, they can't afford the air-conditioning to stay in their house every single day these days but they will not stay there every single day just twiddling their thumbs, they are going to do something.

So while it may not be a big trip to Disney or it may not be a long vacation that gets on a plane and has them jettisoning somewhere and having a Mai Tai by the pool in Hawaii it's going to be something outside their house and we believe with a strong pricing plan, a strong marketing plan, we've put ourselves in a unique position to be high on that local list of things to do.

Our capital plan, of course, with eight roller coasters and eight parks an unprecedented capital program which has us putting a new ride in every single park also positions us well.

It's no coincidence that most of the airlines, eight out of 10 airlines are predicting and forecasting that demand for travel this summer is going to be down in the skies, so again, that bodes well for us locally.

Recent results from BJ's and Costco indicate that consumers are essentially trading down from specialty stores.

They are trading down from department stores.

They are looking for lower price alternatives and we believe Six Flags is such that.

It is exactly a low price alternative and that also values us and positions us well.

We have a strong value message in Season Pass and soon to be our daily ticket announcements but essentially it costs a family of four less than $175 for a full day at Six Flags, that's everything.

That's retail, that's food, that's Flash Pass, that's tickets to get in, you name it and when you're getting a rebate check that comes out toward the end of May, right now the prediction is anywhere from May 20, to June 1, and those rebate checks are anywhere from $600 to $1200 per family again it puts us in a good position and makes for a hell of a proposition.

Our season pass sales are incredibly strong right now.

Again, we're only in the first quarter here, but up to this point, we generally see sales of 20% of our overall season passes so of the 2.2, 2.3 million season passes we sell every year generally by this time, mid March, we've sold 20% of those season passes.

And today, I will tell you we're experiencing double digit increases.

Double digit percentage increases on our season pass sales versus the same date last year.

So, for all of those reasons, fourth quarter, we had a good fourth quarter with the same economic climate.

Company has done well in recessionary periods, long distance vacations are what gets sacrificed, airline travel is predicted to be down this Summer which goes in line with the long distance vacations getting sacrificed.

Recent results of BJ's and Costco indicating consumers are trading down, a strong value message promotion for us, rebate checks coming in mail, we're already seeing season pass sales being strong and an unprecedented capital program, which I would add is unveiled on May 31, is when most of these rides are launched, we think we're uniquely positioned to capitalize.

Further on the group sales front our business is very stable.

Again, it's still early but we are not seeing corporations drop employee outings.

Haven't seen any of that whatsoever.

Given what we're seeing with job growth or lack thereof, given what you're seeing with wage increases or lack thereof, it's no coincidence that morale is very volatile right now in many companies across the country and dropping the employee outing probably wouldn't be received too well.

Therefore, it goes hand in hand, we're not seeing that happening and we're not seeing our schools and our school business makes up a lot of our group sales, we're not seeing them cancel field trips either.

Turning to other ancillary business, I would mention that Dick Clark Productions is going along well.

Of course, we had the cancellation of the Golden Globe awards for the first time in 65 years, but that's included in our guidance and our numbers that we've already given and Jeff will be updating today.

I would add that recently we've announced we're going to take an active management role in the Company.

To tell you the truth, it's really nothing different than we're already doing or we've been doing.

We're going to manage the Company on day to day basis.

We've named a President, a new President, Orly Adelson and who will be out there in Los Angeles running the business day-to-day.

She will report to me but effectively from a marketing standpoint, from a synergy standpoint, from an attendance standpoint using a lot of the Dirk Clark assets for promotions we've effectively been managing this Company already.

The difference here is we're now going to be paid a management fee.

On other business fronts at Dick Clark, we've just renewed our Academy of Country Music Awards deal with CBS for three more years and we will be getting an annual increase on the rights fee and we're moving along rather well on the synergy front, it's really working out from a content standpoint for our Six Flags TV, from a marketing standpoint where we're using the American Music Awards promotion to drive season pass sales and we're about to announce another promotion for the Academy of Country Music Awards where we're looking for the Greatest Country Music Fan in the United States and we're using that promotion also to drive attendance.

That's going very well for us and on the sponsorship front, where we're able to leverage scale, that's going well.

So I'm very pleased with the partnership so far and bullish on what will become of that partnership.

Finally, as far as first quarter attendance goes for the Company, I would reiterate, it's early.

We're 5% of our overall attendance is just in this quarter but we do have very good momentum.

We have not seen a slowdown whatsoever from the fourth quarter and from a staffing standpoint, which generally is my greatest concern for this Company, we're doing particularly well.

At least in the three seasons I've been here, this is the best we've ever done.

We're actually turning people away at the door, so whether that's a function of people looking for jobs or it's just Six Flags is a better place to work, and we have better incentives than we ever had or better recruiting policies that we've ever had, better retention standards than we've ever had, maybe it's a combination of all of this but our staffing is strong at every single park and we're bullish on that front that we're turning people away and getting the best of the best, tapping into more of the senior groups has certainly helped us and tapping into the soccer moms and some of the teacher programs, that has also helped us.

So, in summation I would say that we feel good about our attendance growth.

For many of the reasons we've outlined, and whether it's the improvement in the parks or the brand, and the good publicity that we're generating, our guest satisfaction scores, whether it's the capital program that's generating a lot of buzz, although those rides really won't come on line until the end of May or whether folks are just trading down in the current economic climate.

We're not 100% sure which one of those reasons is driving our business right now but we will know in a couple of months and be able to give you more clarity and either way, it gives us reason to have optimism about our business.

Lastly, Jeff, on the last call, outlined a bridge that had us needing to close the gap, on $50 million to achieve free cash flow neutral, to put us in a position to be free cash flow neutral for the first time in the Company's history, Jeff outlined a plan that had us $50 million.

We need, $50 million short, needing to generate $50 million from one of thee ways, either new international deals, our corporate sponsorship business ramping up, or of course, attendance growth, and as I turn it over to Jeff, the headline here is that we've already closed that gap to $25 million in an effort to be a free cash flow positive.

Jeff?

Thanks, Mark, and good morning, everybody.

Let me start just by recapping our quarterly and full year results for 2007 and then I'll also take a moment to explain the adoption of the new accounting pronouncement that's described in our release today.

And then finally, I'll conclude with a discussion of the financial elements of our outlet for 2008.

As a reminder the results that I'm going to be discussing today exclude the 10 parks that we've sold over the last 21 months.

Starting with the fourth quarter, our fourth quarter saw revenues increase $8 million or 7%, which reflects $1.43 increase in total revenue per capita, and a 4% increase in attendance.

The growth in our total revenue per capita included $1.17 increase in per capita guest spending which is comprised of ticket and in park spending, and increased sponsorship revenues of $2 million.

Spending on admissions, food and beverage and rentals drove the guest spending per capita increase.

Attendance for the quarter increased approximately 100,000, with both season pass and online promotional attendance contributing to the growth.

For the quarter, season pass attendance increased 5% and season pass revenues increased approximately $3 million or 19% to $17 million.

Our total operating costs and expenses for the quarter excluding non-cash items and loss on fixed assets decreased $1 million to $114 million reflecting reduced corporate and marketing costs, partially offset by increased park labor and repairs and maintenance as we continue our focus on improving the quality of the guest experience in our parks.

Adjusted EBITDA for the quarter was approximately $2 million compared to a loss of $6 million in the fourth quarter of 2006.

This $8 million improvement reflects the quarter's increased revenues and stable expenses.

For the full year, our revenues increased 3% to $973 million driven by a total revenue per capita increase of $0.99 or 3%.

The per cap increase was attributable to a $0.52 increase in per capita guest spending on food and beverage, parking, rentals, and games, and a $12 million increase to $38 million of sponsorship revenues.

Our attendance for the year reflects increased season pass and promotional attendance, partially offset by reduced group attendance.

Season pass attendance increased 5% to 6.9 million and season pass revenues increased 10% to $134 million.

We closed out the year on the weather front roughly in line with the prior year at approximately 15% weather days.

Unfortunately, with July as the single highest volume month of our operating season, adverse weather in July had a disproportionate impact on our overall operating results and as we indicated on our third quarter call, in July, over 24% of our operating days were adversely affected by weather compared to 15% in 2006, a 60% increase.

This, coupled with a tragic accident at one of our parks in late June, contributed to a loss of over 0.5 million in attendance for the month of July compared to 2006.

Total operating costs and expenses for the year excluding non-cash items and loss on fixed assets increased $25 million to $745 million.

The higher expense levels were attributable to increased marketing of $25 million and $14 million of additional park wide labor.

These were partially offset by prior year costs related to the change in management of $14 million.

Among non-cash costs, stock based compensation decreased $3 million while depreciation increased $6 million due to the Company's ongoing capital investments.

Our loss on fixed assets grew by $16 million for the year due to a largely non-cash charge in the fourth quarter of approximately $30 million related to the removal of certain inefficient rides and attractions.

Other expense increased nearly $9 million in 2007 reflecting the cost of settling a California class action lawsuit that was filed back in 2005 as well as a $4 million charge for severance and benefits costs associated with the early retirement program we implemented in the fourth quarter.

For the full year, adjusted EBITDA improved by $9 million or 5% to $190 million reflecting the 3% revenue growth, the prior year management change cost and reduced minority interest in adjusted EBITDA due to our Discovery Kingdom acquisition and Dick Clark Productions investment, partially offset by increased marketing and labor costs.

With respect to our cash and liquidity position, we ended the fourth quarter with over $28 million in unrestricted cash and $5 million drawn on our $275 million credit line.

With this successful completion of our new credit facility in the second quarter, our next debt maturity isn't until 2010 and we're benefiting from reduced interest costs and substantially less restrictive covenants.

We also repurchased a total of $92 million of debt during the year.

As you know, we have preferred stock outstanding that's mandatorily redeemable in August of 2009 for $288 million, in addition, $280 million of senior notes mature in February 2010.

Our intention is to address these financial obligations through one or a combination of refinancings, exchanges, and/or asset sales.

Before discussing our outlook for 2008 I'd like to take a few moments to discuss the change in accounting that we adopted and that will be reflected in our 2007 financials on Form 10-K.

First, and most importantly, the change does not have any economic impact to the Company, its cash flows, or its earnings.

It's merely a new accounting convention for presenting the Company's potential, and I underline potential, obligation to purchase limited partnership units related to Six Flags over Georgia and Six Flags over Texas in the event those units are put to us by the limited partners.

These potential obligations aren't new to anybody.

They have very been in existence since 1998 and have been clearly disclosed in our financials.

The new accounting creates a redeemable minority interest obligation on our balance sheet in between debt and equity, so-called mezzanine equity to highlight the potential put obligation.

The offsetting entry is a temporary charge to stockholders equity which gives rise in our case to a deficit in our stockholders equity.

The charge to equity is temporary because either the limited partners are going to put their interest to the Company before the end of the respective put option term or they won't.

In either event the charge to equity will eventually be reversed as an asset will be recorded for the eventual purchase or the put rights will lapse unexercised and the equity charge and the mezzanine equity will be reversed.

We adopted this accounting change pursuant to EITF Topic D 98 to address the concern of the Securities and Exchange Commission that obligations related to redeemable interest be recorded on the face of a Company's balance sheet.

But once again, it's important everyone understand this change in accounting does not have any impact on the Company from an economic, earnings, or cash flow perspective.

My guess is that's probably enough technical accounting discussion for a Monday morning so let's move to the 2008 financial outlook.

Back in November we provided preliminary 2008 guidance on guest spending, cash costs, and CapEx.

At that time, we weren't in a position to provide a view on growth in our sponsorship and international business, and we said we would come back to you on our year-end call.

Also at that time that time, with the targets we laid out and assuming flat sponsorship revenue, we indicated we would require a 6% or 1.5 million increase in attendance to reach positive free cash flow in 2008.

Today, assuming 2008 attendance flat to 2007 at 24.9 million, and conservatively assuming roughly 1% guest spending growth, $51 million revenue target for our sponsorship and international business, the full year benefit from our investments in Dick Clark Productions and Six Flags Discovery Kingdom of $7 million, and the low end of our cost savings range or $50 million, the result is $270 million of adjusted EBITDA compared to $190 million in 2007.

To complete the free cash flow picture, our CapEx is still projected to be $100 million, and our cash interest, dividends, and taxes are expected to come in at $195 million, $30 million less than the roughly $225 million we incurred in 2007, as we will benefit from our new credit facility, the debt repurchases during 2007, and a recent thee year swap that we entered into in February 2008 to lock in an all in rate of 5.34% on $600 million of our $850 million floating rate term loan.

Taking all of this into account, and again, assuming for this purpose, no attendance growth, we would be within $25 million of positive free cash flow.

To close this gap, with only attendance, we need to grow attendance a bit less than 3% to 25.6 million to be free cash flow positive for the first time in the Company's history.

Although early with our season pass sales pacing well, our groups stable, and exciting new ride and attraction programs set to launch, we feel like we've put ourselves in a position to realistically, reach that free cash flow milestone.

Before turning the call back to Mark, I just want to remind folks that when we report our first quarter results, we'll be benefiting from the Easter shift into March this year.

However, that's going to normalize in April when we'll have less operating days.

And, speaking of April, another reminder, that we'll be hosting an Investor Day at our Six Flags Great Adventure park in Jackson, New Jersey on April 29, and any interested investors and analysts can sign up to receive further information at sixflags.com/investors.

The only added notes I would make to what Jeff just said, addendum if you will, is when I speak about the first quarter attendance of being very solid, as was fourth quarter, really following on the fourth quarter, we haven't seen any slowdown, it's not forecasting that Easter attendance.

When Jeff talks about us benefiting from the Easter attendance moving into the first quarter, what we're seeing now in terms of some nice attendance has nothing to do with Easter because obviously we haven't hit Easter yet so we only expect that it will get better for this quarter in particular.

Secondly, I would mention that with regard to groups, when we say stable, that's not a mask or anything like that.

It's just too early right now.

We do a ton of business in the Summer of course and we do huge September business for our groups.

So we just, we're just not far enough along yet to give you any kind of a prediction or any kind of a number like we did with season pass sales where we're saying we're up double digit, but we're seeing double digit growth.

So, it's stable because nothing has fallen out and we're actually optimistic about that line item as well, but it's still too early to give you any specific numbers so with those caveats or those clarifications, I will open it up to questions.

Or none.

Operator, we're ready for questions.

(OPERATOR INSTRUCTIONS) Our first question comes from the line of David Miller with SMH Capital.

Please proceed.

Hi, guys, good morning.

Good morning, David.

A couple questions.

Mark, I'm not exactly clear on what happened with the Home Depot situation.

It seems like $7 million is sort of a rounding error to these guys.

No, the $7 million is not Home Depot.

I want to be very clear about anybody that heard that.

I wasn't saying specifically what the Home Depot was paying us.

I'm saying that every year, we're going to have a range of deals, a bucket of deals that come in and come out.

Some renew, some don't.

Some you chase, some you get increases, some you get decreases, some fall out all together.

The Home Depot was just one of many deals that fell out for this coming year.

And I'm not also putting the blame on them, we really wanted to open up the category because we believe with the Sears of the world, the Macy's of the world, and all of the folks out there, department stores that are looking for increases in their business in what are trying times, we believe we can be an advertising solution, so that's why we opened up the category.

At the end of the day it sounds like Home Depot fell out too late in the season for you guys to basically replace the revenues.

Would that be fair?

No.

They were in last year and as I mentioned on the last call they weren't going to be coming back exclusively, so they still may come back at a certain level.

I'm not sure what that will be right now, but we've already been negotiating with many of their competitors to take their place for this season, so, we made that decision for them to fall out way early on so that we would be able to open up that category and capitalize on that category.

Fair enough and then Mark, I think it might have been three earnings calls ago you were talking about gas prices a little bit, I remember your reaction was that sort of the cat's out of the bag, sticker shock is already out there and yet gas prices keep going higher and I'm wondering and maybe Jeff if you want to chime in on this as well what does your market research say in terms of what's the ceiling out there on gas prices, where people finally throw up their hands and say I'm just not going to drive that 50 miles to a Six Flags park.

If you guys care to comment that would be great.

Here is my take on that.

Don't get me wrong, having oil up in what many are predicting today could be $110 a barrel, I don't think is good for any kind of retail business, but we don't have any evidence or research to show that we've been greatly hit or impacted by gas prices.

We're not, and I don't mean to slam them in any way, but we're not like Cedar Point whereby Detroit so much of the business is coming from Detroit where they have to make that long drive.

80% of our visitors or 75 to 80% of our visitors are traveling 50 miles or less to come to Six Flags.

We don't rely on a major metropolitan area that's 100, 200, 300 miles away for the bulk of our business.

So, I think that when the gas prices first started going haywire back in 2006 I think there was sticker shock.

I'm not saying people are immune to it especially as it goes up to $4 which many are predicting this year but I think folks have already discounted that $4 into their thinking thus far.

And we just don't think people are going to stay home and play stickball all day.

Just not going to happen.

They're going to be looking for entertainment options and whether that's a movie or that's a bowling alley or Six Flags, we're on that list, and with a value message program, and all of our pricing, and all of our marketing is geared towards value, value, value, and a strong capital program, eight coasters in eight parks and strong buzz about the Company, and our renewed and reenergized guest service, I think we go to the top, the top of that list or near the top of that list.

I also don't think it hurts us that the movies this summer, you can pick up today's USA Today, are not predicted to be what they were last year when you had Spiderman and you had Pirates of the Caribbean, outside of Indiana Jones, there aren't a lot of big titles coming out this Summer and historically, this Company does very well on the years where the movie business is static or down, and it gets hurt as it did last couple years when the movie business is strong, and last year of course was the most successful movie Summer ever.

Okay and then just one last one, in terms of the international expansion and just sort of the licensing opportunities there, can you detail Mark, just other than the Middle East what regions of the world you might be interested in and which governments you might be negotiating with in terms of doing similar deals.

I can't give any specifics on the negotiations because in many territories we've got two or three people that were bidding against each other but I will tell you the structure of the Dubai deal will essentially mimic future deals where we're looking for money now, not when the park opens.

We're looking for a fee for our know how and expertise, our design and development capabilities which we do in house.

We're looking for exclusivity to lock us out or hold us up in a region, and of course, we're looking for that ongoing revenue stream in the form of licensing or royalties.

What I will tell you is we're being very aggressive in this area and from anywhere from Malaysia to Korea, we're in the market either marketing ourselves or we have folks chasing us and I'm not trying to hype that up.

Dubai may be the only deal you hear about this year, but we can conceivably cut deals for exclusivity only and what I mean by that, David, is we have a number of different developers in certain countries that aren't sure necessarily they're ready to launch a theme park but they don't want Six Flags being on the market so they will pay us an exclusivity fee just to holdup our rights, to warehouse our rights for a certain period of time, until they make that decision.

Right.

For us that's a one-time hit, don't get me wrong, but if it leads to an actual, the actual development of a park, thereby, it becomes an ongoing revenue stream for us.

So, international growth, we're not only bullish about but it's clearly been for the last 18 months to two years a primary growth driver for us and we're just now beginning to see the realization of that growth.

Okay, thank you.

Thank you.

Our next question comes from the line of Zvi Rhine with Boone Capital.

Please proceed.

--Dade, has this growth been--.

Zvi, we just lost you.

Can you start over?

Absolutely.

I was saying how would you attribute your success in season passes today?

Has this growth been more driven by the sweepstakes and promotions via your Dick Clark acquisition or by guests who experienced -- or who enjoyed their experience last year?

It's a good question.

First and foremost, I will tell you we didn't raise prices whatsoever on our season passes.

I think only San Antonio saw an increase but other than that everybody else stayed flat so in this trying economy, to see the same price you were offered last year I think was a good sign for us, especially when you're combining that message with the fact that our guest service is better than ever, the parks look better than ever and each of the parks have great new capital coming online, so that was kind of our marketing message.

Most of the research we're showing, Zvi, is essentially in line with what I was talking about today.

The parents are saying, look, we're not going to be traveling.

I know a number of different parents that Spring Break is usually a time for their kids or, excuse me, the winter break holiday where people take a trip in February here, that stayed home, and many of these folks make those decisions in January and February, what they're going to do in the Summer and some of the research coming back to us is they aren't going to travel, but having said that, they still need to entertain their kids.

So, again, whether that's a movie or buying a pool pass or buying a season pass to Six Flags, we're on that list.

We're in that dialogue.

We're creating those discussions and the positive press we're generating about our offering, about our product is putting us front and center.

So I think driving it more than anything else is new capital program, getting buzz, flat pricing, value messaging, and third of course, the close to home, close to home opportunity, the affordable close to home opportunity that we provide.

Okay.

And then have you guys firmed up your operating days in '08 versus '07 excluding the two parks you've decided to keep open later into the Fall and can you break that down between the second and third quarters?

Well, just overall, we tell you in terms of operating days we're generally flat to where we were last year.

We still have some moves we're making on the calendar but we've posted most of our calendar dates online.

Of course our third quarter is and second quarter, we're the same because we're open all the time at that point, but.

With the one exception as we mentioned about, we'll lose some operating days in April in our second quarter because of the shift to Easter.

Okay.

In March.

But overall, you can expect it to come out just about flat.

And then last in regards to the 150 million insurance claim you filed for the New Orleans park, what is the time frame for the litigation and any proceeds if you're successful and if you are successful, are those proceeds required to be spent on rebuilding the park or can you use them to address the preferred maturity?

Yes.

The litigation is ongoing.

We were hopeful to have -- get a favorable summary judgment.

That did not occur so the litigation is ongoing and really hard to say when that will come to fruition and what levels of appeal ultimately this thing may need to go.

To answer your second question, the proceeds under the insurance we're entitled to the value of the replacement value of the damage and provided we reinvest the proceeds in any attraction throughout any of our parks.

Now, under the lease agreement with the city, we're obligated to rebuild to the extent of the insurance proceeds, rebuild in New Orleans.

We've obviously indicated that we don't view that as in our best interest nor necessarily in their best interest, so under the lease agreement we do have an obligation to rebuild there, but that's not our intention.

We've already started pulling rides out of there as you know and we'll continue to do that, there's still rides specifically a tower ride in New Orleans that we'll probably move somewhere else next year and New Orleans has no plans on us coming back by the way.

They're developing, they're looking at opportunities, they're running P&Ls, so we have a long term lease but ultimately it's a discussion that we'll continue to have with the elected officials there in determining how we best get out of that lease and when.

Okay, thanks, guys.

Our next question comes from the line of [Howard Bryman] with Evergreen Investments.

Yes, good morning.

Can you tell us what the amount of the obligation related to the limited partnerships is going to be on the balance sheet and what the terms are, what the put terms are, when does it become putable or how does it become putable to Six Flags?

Yes, Howard, I mean, it's all described in our 10-K, what happens is ultimately, the maximum amount when all the puts are actually able to be exercised, the maximum amount under the formulaic put price is a little over $400 million.

We currently have a little over $30 million on the balance sheet as minority interest, so the net charge, if you will, to shareholders equity is $383 million, but what's exercisable, what's as of 2008, when we have our next, the next put period is roughly $300 million.

And again, it's a formulaic put price that is the greater of a single digit multiple of earnings between 8 and 8.5 times depending on which partnership you're using or a fixed stated price for each partnership.

Again, I think just to put this in perspective, although cumulatively about $300 million worth of partnership units could be put to us.

Since 1998, a grand total of $18 million has been put to us.

Again, these limited partnership (inaudible) pay a nice preferred return and we really don't expect that situation to change in the near future in terms of the magnitude of the puts.

Right, and in a simple way my understanding was that the limited partnerships yield a certain percentage and the reason they haven't been put back to you is because that yield is still attractive to those limited partners.

Do you know what that yield is on those limited partnerships?

Yes, they have a preferred return that's upwards of 9, 9.5% and it increases by CPI each year.

Plus they have all the residual value because the assets get distributed when the partnerships come to fruition in 2027 and 2028 so they're getting a current return and they have residual value.

So you've hit it on the head.

They get an incredible return and that's why they don't put it to us.

Right.

And that return, by the way, is guaranteed by us, as well as two entities of Time Warner going back to the original ownership by Time Warner.

Does Time Warner guarantee the payment?

Yes.

To the limited partner.

So that 300 million was put to you, would Time Warner be on the hook for that obligation?

If we did not honor our obligation.

Oh, okay.

We are the primary guarantor.

Again it's what $18 million?

Yes, since 1998.

That kind of return, you're not going to be seeing that put happen.

Okay, good.

And then just shifting gears to the preferred and the notes that the come due in '09, you said there were obviously several different options for refinancing, sale of assets, or I guess renegotiation of one or both of those obligations.

If you had to rely strictly on asset sales, could you, would you be able to raise enough cash to pay down both obligations, which back of the envelope is about $560 million.

Absolutely.

But we're not in a liquidating mode right now.

We don't need to liquidate.

We have cash on hand.

We're cautiously optimistic about the season.

We put this Company in a good place to grow into this capital structure, and to achieve the long term health and benefit that we believe are at our finger tips, but to answer your question, we absolutely could and there isn't a week that goes by, we don't have a phone call about a certain cluster of parks, but we're not marketing any parks right now, we're not going to sell anything because we don't have a gun to our head, and we don't expect that that gun will ever be pulled out of the holster given the season that's in front of us.

Okay, and hopefully credit markets will become more vibrant by then.

I certainly can't imagine them getting much worse.

Plus you got a number of things that the could play out, you got New Orleans that's going to play out, you got as you said, you could always pursue certain asset sales if you needed to, you got a credit market that hopefully wakes back up.

You got an optional term loan.

Got an optional term loan, got operating performance where we think that's going to be, and you've also got new partnerships that we're building every single day, and you never know who might come to the table to bail you out.

Bottom line is we feel like we've got a lot of optionality in terms of the ways in which we can deal with those obligations as well as again, improved business performance and improved markets.

Right.

Okay, just can you just clarify one thing, two last questions.

And I haven't been able to do a good job of explaining it.

Obviously, you guys are doing a great job and the family theme is one that's significant, but we keep reading in the papers about the return to the teenager and I'm not, it almost sounds to the layperson a little bit contradictory.

Can you just firm up the strategy and why we keep talking about teenagers?

Absolutely.

All I will tell you, Howard, it's really on two fronts.

As we said from day one, we're first choice when it comes to the teenagers.

We have more, we have just about more coasters combined at Six Flags than the entire industry combined.

We're known if you're looking -- if the thrill seeker is looking for entertainment, then Six Flags is the priority.

It's first on the list.

All our research shows that teens see us as hip, they see us as relevant.

Just today in USA Today, there's a full, in the money section, I believe, the cover story is about Tony Hawk, where he's essentially this year, he has been announced that he's the number one known and recognized athlete in the entire world, number one in front of Shaquille O'Neal, in front of Lebron James, now coincidentally we have a roller coaster deal where we brand new coasters under Tony Hawk's name and certainly with his creative know how.

We're out there, we're relevant, we're hip and we're first choice for many teenagers.

We don't want to lose our teenager base.

Our whole strategy is founded upon bringing the families back to Six Flags without alienating or losing the teenagers.

We want to keep the teenager base.

We want to grow the teenager base but we want the families to understand we've now cleaned up the parks.

We've now put training in.

We've now made guest service a priority so that there is a code of conduct we enforce in terms of behavior and dress code and language.

There is a code of conduct that we enforce with regard to no smoking so that we've created a clean, safe, family friendly environment that doesn't turn away the teenagers but is more inviting to the families the way it used to be when Time Warner had this Company 10 years ago and that's what the strategy is based on.

Bring in the families, bring in the packs, three, four, five people, the families that spend money and spend time and hours, the families that our advertisers are chasing, the moms that our advertisers are chasing to make their products number one on mom's shopping list.

But at the same time, keep the quotient of teens up there high, so that by the way, they can ride these big coasters that the Company has spent so much money putting in.

Well, okay, I get it now but it's kind of a delicate balance isn't it?

If I'm going to be standing and I walked Jackson with your park President and it had a really, the day I was there, it had a really nice family theme to it, but if I'm going to be waiting on a line and there's going to be a pack of six teenagers in front of me that the are even though they're your good teens if you will, for lack of a better way to describe them, if they're being teens and making a ruckus and a lot of noise, it may detract from my experience, so I hear what you're saying now but it is somewhat of a delicate balance isn't it?

But that's the entire entertainment sector.

That's the balance everybody walks.

I went to a movie on Saturday, I sat in a crowd, and I must have heard three cell phones going off.

They tell you 20 times before the movie, turn your cell phones off and I hear the talking, yet you hear the cell phone, and you look at these teens like they're the problem.

The teens aren't the problem.

It's the company that doesn't enforce their policy and all we've done at Six Flags is establish a code of conduct standard and we enforce it.

That's why there's a no tolerance policy.

You smoke in an area you're not supposed to smoke in, you will be thrown out of the park.

You cut lines when you're not supposed to cut lines, you will be thrown out of the park.

We doubled the number of security officers we have in our parks.

The number of ejections at our parks from 2006 have tripled so what we've done is we retrained, we've reconditioned behavior so when you're in that line and you see family friendly like you said in midway, you'll also see it in our line.

That balance is what's really what it comes down to when it comes to winning the game and we're seeing that happen and by the way, the teens aren't put off.

Our research is showing that teens aren't put off by the code of conduct.

The teens aren't put off by the increased security measures.

The teens aren't put off by the no smoking and the teens aren't put off by the family friendly capital attractions or improvements we've made in the sense of bringing in the Wiggles and bringing in Thomas the Tank Engine.

They just want us to keep investing in thrill rides and I can tell you we're going to continue to do that.

Okay, great.

I get it.

That's a good point.

Last final question, I think that you guys do have a phenomenal opportunity in terms of capitalizing on the increased cost of everything, and maybe people don't want it, or have to cut back on their trip to Disney or whatever destination resort they're going to take the kids to.

Have you built that concept into your advertising copy?

Am I going to turn the TV on and see you really pound away at -- you don't need to spend that much money.

Get in the car and come to Six Flags and it's only going to cost you a small amount for a good day.

You don't need to go to Disney this time.

Yes.

First of all where are you, Howard, New York?

I'm in Philadelphia.

Philadelphia.

Okay.

But my heart is still in New York.

Well here is what I would tell you.

You already, you aren't seeing a lot of advertising right now in New York because and that's a good point to make by the way, folks.

We're seeing this increase in our season pass sales and we haven't even started advertising for the most part yet.

Remember, we shrunk our marketing budget so we've compressed it so essentially it really gets going at the end of this month, so we're seeing increases in our season pass sales to the tune of double digit percentage before our advertising has really taken hold, and then at the end of this month is when it gets going and it ramps up heavily and conveniently, just at the right time in May when people are getting their rebate checks, but in answer to Howard's question, absolutely.

Our whole season pass advertising campaign is based on all that you get with the season pass.

For one price and generally it's about $59.99, you can come to Six Flags from March through November as many times as you want, it pays for itself in less than two visits, plus that season pass gets you into every other Six Flags park across the country including Mexico, Canada, and soon to be Dubai, free of charge.

It comes with the same, it's one of the benefits of getting a season pass.

Plus you get five free tickets for friends, one day single admission tickets if you buy a season pass plus you get a coupon book that gives you $300 in savings on buying merchandise and food related items in the park.

So, the whole season pass advertising campaign is built on value.

Value message and then when we get to selling one day passes, we have an entire advertising campaign that just really pushes really beginning in May, single day admission, single day admission, single day admission, you'll see a promotion that's specifically based on the fact that we're more convenient and we're closer to home and much more affordable for families so long answer to your short question, but the short answer is yes.

Have you been able to partner with and this will be the last, I promise, have you been able to partner with Costco and BJ's being that you've singled them out as kind of targeting your customer base?

All of our corporate alliance deals, or you can't be a corporate alliance partner, you are just a sponsorship partner.

All of our corporate alliance partners all come with some form of marketing, co-marketing agreements, some form of co-marketing benefits so that whether it's on pack, in store, on the website, part of their media, you name it, there's always a co-marketing tie.

Okay, thank you very much, gentlemen.

Thank you.

Our next question comes from the line [Barrett Eynon] with Brownstone Asset Management.

Can you provide any sort of numbers around the fees you expect from Dubai?

Because I thought, maybe I misheard you, I thought you said you might provide some guidance around some of them later in the call and I didn't hear it if you did.

No.

Specifically, I said we aren't going to break out, just like we don't with our corporate alliance deals, we're not going to break out specifically who is paying what, and there's two reasons for that, primarily.

One is we're negotiating with other markets at the current time, and other developers, and we don't want there to be any sort of transparency on what one group is paying us versus another, because of course that would hurt our negotiating position.

Secondly, as happened, it really was the case last year, as it relates to our advertising deals we don't want to be specific about what we're getting because often you guys will ask us, well in that 51 million, where are you right now currently?

What do you have in house and when we're specific and we answer that, it leaves a delta that other advertisers or in this case, other international developers know we have to hit to hit our guidance and it hurts our negotiating position.

So we're not going to be transparent whatsoever with regard to how much each of our partners are paying us.

When will we start to see it in the numbers from Dubai?

Obviously, we'll extract some of that when you start seeing your quarterly numbers, right?

Yes.

You'll start seeing it this year.

What we are also looking to do starting this year is on our revenue break out in our Q's and K's is create a separate line item of revenue that would be sponsorship and licensing and so we would be reporting that revenue on a separate line item so you can track it.

And I am assuming it's going to be material contribution from Dubai?

Material, no, I mean, we're going from 38 to 51.

That includes Dubai.

Oh, it does, okay.

And we're not saying what portion of that is Dubai and what portion is sponsorship.

Okay and I don't know if I caught this earlier, you mentioned the season pass sales up double digits.

What percent are in so far this year?

Generally at this time we sell 20%, we've sold 20% of what we expect our full bogey to be.

So, we sell around 2.2, 2.3 million season passes every year and at this point we've sold, we generally sell about 20% of that 2.2, 2.3.

All right, thank you.

Thank you.

Just in closing, in summary, I'd say that we're focused on the consumer, and renewing the health of our brand, the momentum we have with the brand, the value message we have out there, the capital program we have out there, the guest service marks we're getting should continue to put us relatively high on the local list of options, and that local list of options takes on even greater importance this Summer as families look and seek out the best option for them, with regard to being close, being affordable, being convenient and getting the value for their money, so we think we're well positioned, so far the numbers back us up, and we'll be back in May to let you know how our first quarter went.

Thank you for joining us today.

This concludes the presentation, you may now disconnect.

And have a great day.