Six Flags Entertainment Corp (SIX) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2008 Six Flags, Inc.

earnings conference call.

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

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

We will be facilitating a question-and-answer session towards the end of this conference.

(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 conference, Ms.

Sandra Daniels, Vice President of Communications.

Please proceed.

Good afternoon.

This afternoon, the Company released its financial and operating results for the second quarter ending June 30, 2008.

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've 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 risk and uncertainties that could cause actual results to differ materially from those described in such statements.

You may refer to the Company's 2007 annual report on Form 10-K, which is also present on our website for a detailed discussion of these risks.

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

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

Those reconciliations are available to investors in the earnings release.

Now I would like to turn the call over to Mark Shapiro, our President and Chief Executive Officer.

Mark?

Thank you, Sandra, and good afternoon, everyone.

Thank you for joining us.

I will start out by really reflecting on the first six months, which we believe was a really good story for us.

We told you on our last call that we planned to be flat in attendance through May.

Then in June, internally, we knew we had difficult comps in June.

2007 was up 10% in attendance in June over 2006, and the revenue in June for 2007 was up 13% over June 2006.

So we knew we had a difficult June in front of us.

Therefore, for us to come out flat for the first six months in attendance, plus 5% in revenues and plus 3% in guest spending is extremely gratifying.

We are in a good position, so to speak, walking into July.

We knew this business, this year for us was going to be about July obviously going up against the -- I would say favorable comps we had last year with the Texas rain, which really hurt us, and of course, the accidents in our Kentucky park, which we had at the end of June last year that impacted us negatively for the month of July.

Remember, July is essentially 30% of our business and August is 20% of our business.

So July is historically the most significant month for the Company.

Like last year, we're not going to give out specific numbers about July, but what I will tell you is we had a very strong month.

In fact, we had a terrific July 4, which actually got us out of the gate.

We currently have momentum on attendance; we have momentum in park spending; and we have momentum in total revenues.

We're well positioned in our quest to be free cash flow positive at the end of this year.

I want to remind you that free cash flow positive, what that means, is approximately $270 million to $280 million in EBITDA.

We built our foundation this year on value, on close to home, on convenience, on something really for everyone -- a vacation for the entire family.

That was our message we got out of the gate.

First, we got out of the gate early and that's resonating with the consumer.

The fundamentals of our business are extremely encouraging.

Moving away from the revenues and the in-park stand and the attendance, on a corporate alliances front, our sponsorship front, and the international licensing business, that too is encouraging.

We gave you guidance at the beginning of the year that we hit $51 million in corporate alliances and international licensing.

Today, we're taking our guidance up 10% to $56 million.

As far as the season pass front goes, we're up year-to-date almost 6% in season passes.

We're up over 100,000 units sold year-to-date versus last year.

And if you'll remember from the last call, when asked specifically, was there any part of the business I saw or that we had seen was hurting or the economy was impacting us, we had told you it was advance sales.

Our online business was strong.

Our day business was very strong.

But it was our season pass, our advance sales, those season passes that we charge $59, $69, some parks $89, that's where we were hurting.

Well, we reversed that trend and are now up, as I said, almost 6% year-to-date, over 100,000 more units.

Generally, our season pass members come to the park anywhere from two to four times per year.

Our groups are still trending in our favor.

We're up marginally year-to-date, but advance sales for September and October are extremely encouraging.

On the operating expense front, I'll tell you that our real-time labor tracking system -- which we invested so much time, money, and effort into and we saw some savings in the parks that we experimented with last year -- we then rolled it out, as you know, to all of our parks this year.

And realistically and candidly, it's changed the way we do business at the park level.

Our cost of doing business is way down and yet the guest service and the guest experience is as strong as ever.

A lot of folks question us on that, when Jeff and I told everybody we were cutting out $50 million of expenses -- keep in mind a lot of that was one-time costs that you'd put in to turn around a business, to recharge a business, that wouldn't be necessarily there for the entire lifespan.

So, a lot of that $50 million wasn't tough to cut out or wasn't coming back anyway.

But everybody asked, uh oh, what's that going to do to the experience?

And as evidenced by our June guest satisfaction scores, it hasn't harmed it whatsoever.

We are at or above all-time highs on our guest satisfaction scores, ranging from overall visits, intent to visit again, intent to recommend to a friend, cleanliness, restaurant cleanliness, speed of our ride lines, speed of our food lines.

I could not be happier with the product that our parks and our park Presidents by way of leadership are putting out there.

Our parks buy into the vision of this Company.

They buy into the mantra of this Company, and they understand at the ground level we're rebuilding this Company on the backs of guest service.

Our target for the year is still $50 million on expense savings.

We have run into some road bumps on utilities, foreign currency, but we do expect to absorb it and $50 million is still our target.

I want to note that on the volume side, although I'm extremely encouraged, as I said, about July, we are going to lose two operating days in the third quarter.

Now, we intend to pick up that attendance in the fourth quarter with additional operating days -- it is a calendar shift -- and we'd also expect to benefit, like July 4, with Halloween falling in our favor on a Friday this year as opposed to middle of the week; last year, I believe it was on a Wednesday.

As far as other obstacles we face as we head into August, the economy, of course, continues to be ominous, so you can never rule it out.

And all the rebate checks have either gone out and been spent or gone out and been put into savings accounts.

And so you don't have that, I think, to lean back on.

So we're nowhere near being out of the woods for this Company, but we are on the right trail and we can see the end.

In line with that -- and this is really the primary reason for our encouragement, and this is very important; I want to make sure I highlight this today -- keep in mind that if our current trend continues, 5% revenue growth -- and let me reiterate, we feel good about the 5% revenue growth through our July performance; feel good about the revenue growth, 5%, through our July performance, then we will in fact be free cash flow positive at the end of the year.

That was our goal.

First thing Jeff and I said when we came in to the Company in December of '05, early '06 -- we want to clean up the parks; we want to get this Company to be free cash flow positive.

In three years -- that was the goal.

For the first time in the Company's history, by the way, if we get there, and we're on that track.

So, really -- and just judging from some of the calls we've had today, people need to stop obsessing about attendance.

We can get that 5% revenue growth from in-park spending; we can get it from new revenue streams like corporate alliances and sponsorship and international licensing.

And yes, we can get it through attendance.

But with today's current trends, we don't need attendance.

The first six months have shown we can do it without attendance growth.

I'll remind you, getting to free cash flow positive, at 275, 280, up from 190, which what we did last year, not just a motherlode jump, but it's that much more, given the economy that we're faced with in doing it.

If we can get to free cash flow positive without growing attendance, you have to ask yourself, what does that say about our business, our strategy, our brand, the turnaround, our long-term prospects?

I mean, what happens when we do grow attendance this year or any other year?

Keep in mind that in a good environment -- in 2005, a thriving economy, these parks did 27 million visitors with a bad product -- a tarnished brand.

We now have a good product.

We now have strong word of mouth.

We have terrific sampling going on right now because people are staying closer to home.

So they're getting reconnected with the new Six Flags.

We've rebuilt the business on spending, new revenue streams, cost control, and marketing the brand to families.

If we're still managing to inch higher in these trying times, just imagine what Six Flags is going to do when consumers start spending again.

So those are my opening comments for today.

I want to turn it over to Jeff to take you through the exciting part of the call -- all the details, all the numbers that we can give you.

And then I do want to come back and leave you with some closing thoughts before we jump into Q&A.

So hang with me here through this next session.

Jeff?

Thanks, Mark.

Good afternoon.

By now you've hopefully all had a sufficient time to review the press release that we issued this morning, announcing our results for the second quarter and six months ended June 30, 2008.

So I'd just like to take a few moments to go through the results, provide some additional insights into the performance, and our financial position before getting into the Q&A.

Starting with the top line.

Our revenues for the second quarter increased $2 million or 1% compared to the second quarter of 2007.

This growth reflected a 2% increase in per capita guest spending due to increased spending on admissions, food and beverage, rentals, retail and parking, as well as a strong performance from our high margin, low capital sponsorship and licensing business, which grew by over $5 million or 55% to approximately $15 million for the quarter.

Attendance for the quarter declined to 8.6 million while year-to-date attendance was flat at 10.1 million.

As we highlighted on our first quarter call, the second quarter attendance reflects fewer operating days this year, due to the Easter holiday falling in the first quarter this year as opposed to the second quarter last year.

For the first six months, our revenues increased 5% to $414 million on a 3% increase in guest spending, while sponsorship and licensing grew by $9 million or 50% to $26 million for the first six months.

As I mentioned, our six-month attendance was flat at 10.1 million.

This reflects strong promotional ticket attendance, which is comprised of our lower priced value offerings, such as everyone pays kids price, and buy one/get one free.

Growth in the promotional category of attendance was offset by lower group, season pass, and complimentary attendance compared to the 2007 period.

The impact of weather on our attendance for the six months was overall beneficial compared to last year, with the improvement, not surprisingly, concentrated in our Texas parks, given the horrendous weather we experienced at those parks last year.

Excluding our Texas parks, we experienced marginally worse weather in the first six months of 2008 compared to 2007, primarily at our Eastern and Midwest parks.

With regard to our operating costs and expenses, we have achieved significant reductions to date, while at the same time generating solid revenue growth and maintaining our record guest satisfaction scores, which is truly a testament to the hard work being put in by our park management teams and evidence of their buy-in to the mission of building demand through guest service.

For the quarter, excluding cost of sales, our cash cost and expenses -- which excludes the non-cash depreciation and amortization, stock-based comp, and loss on fixed assets -- decreased 10% or $22 million to $209 million.

The reduced cost are a result of reductions in advertising totaling $8 million; lower full-time headcount and improved seasonal labor utilization, delivering $5 million of savings; and reduced third party service costs of $3 million, primarily attributable to leveraging the Dick Clark Productions Library in lieu of live stage shows at certain venues within our parks.

Travel and entertainment costs, as well as insurance and repairs and maintenance, were also lower in the quarter.

On a year-to-date basis, excluding cost of sales, our cash costs and expenses decreased 8% or $30 million to $325 million.

The decrease includes reductions in advertising of $16 million; reduced salaries and benefits and seasonal labor efficiencies of $6 million; lower third party service costs of $3 million; as well as lower travel and entertainment, and repairs and maintenance expenses.

I'd like to note that a portion of the cost savings reflected through June 30 is due to favorable timing that will reverse in Q3, namely with respect to a small portion of marketing and repairs and maintenance costs.

As for the rest of the income statement, interest expense decreased by $5 million for the quarter, and $10 million on a year-to-date basis, reflecting lower interest costs due to the refinancing of our senior secured credit facility and repurchasing approximately $100 million of debt in the prior year, as well as the first quarter 2008 swap of $600 million of our floating rate debt to a three-year fixed rate of 5.3%.

Minority interest and earnings declined by $4 million for the quarter, and increased by $5 million for the six months ended June 30, primarily due to our July 2007 acquisition of the minority interest in our Six Flags Discovery Kingdom Park previously owned by the city of Vallejo, California.

During the second quarter, we also realized the net gain on debt extinguishment of $108 million.

This resulted from the Company's June 2008 exchange of new senior unsecured notes, due in 2016, for a portion of our outstanding notes that were originally due in 2013 and 2014.

The gain resulted from the discounted purchase price of the previously outstanding notes, net of transaction costs.

The Company also exchanged new 2016 notes for approximately $150 million in principal amount of notes due in 2010.

However, under the accounting rules, notebook gain was recognized on this portion of the debt exchange.

The benefit associated with this portion of the exchange is recognized as a premium on the Company's balance sheet, and will be reflected in the Company's income statement over the life of the new 2016 notes as a reduction to interest expense.

The bottom line -- our increased revenues and reduced costs resulted in adjusted EBITDA growth of $30 million or 52% for the quarter, and an improvement in our EBITDA margin by 7 points, from 24% to 31%.

Adjusted EBITDA for the six-month period improved by over $45 million to $34 million from a loss of $11 million in the prior-year period.

With regard to the balance of 2008 -- while we have a significant part of the season left to go, we remain optimistic that becoming free cash flow positive for the first in the Company's history is within reach, provided our positive revenue trends continue and bad weather doesn't materialize.

For the full year, we continue to target growth in guest spending of roughly 1%.

This will be primarily driven by in-park spending, as our ticket per cap growth is being impacted by the strong reception we're getting from our promotional pricing programs.

And as Mark mentioned, we've increased our full-year guidance for sponsorship and licensing revenues by 10% from $51 million to $56 million for the full year.

As for costs, while we've had good success in controlling cost so far this year, we have and continue to face ongoing cost pressures as it relates to utilities, as well as the negative impact the weak dollar is having on our foreign currency denominated expenses at our Mexican and Canadian parks.

For the six-month period ended June 30, utility costs and foreign exchange have resulted in over $3 million in increased expenses compared to the prior-year period.

Notwithstanding these cost pressures, our corporate and park teams are working hard to deliver the targeted cash expense reductions of $50 million that we laid out at the beginning of the year.

On the balance sheet front, we ended the June quarter with approximately $153 million of cash and liquidity, consisting of $66 million in cash and $87 million available on our revolver.

We have since paid down the revolver further, such that we now have approximately $150 million available.

However, as you and we are well aware, the redemption date for our mandatorily redeemable preferred stock, or PRS, is approximately one year away.

We have approximately $130 million of senior notes remaining outstanding and due in February 2010.

At this point, I'm not going to comment on the what, when, how or why regarding the strategy to deal with these obligations.

The timing and manner that we ultimately choose will be driven by a variety of factors, including our operational performance for the year and the state of the overall markets.

Our focus at this point is on delivering significantly improved performance this year.

If we are successful in doing that, we believe that it will provide an excellent catalyst for us, as we continue our work to address the balance sheet challenges that we inherited a little over two years ago.

With that, I'll turn the call back over to Mark before we get into Q&A.

Thanks, Jeff.

I thought it was important at this time to really conclude our prepared comments by underscoring the five key strategic objectives of the three-year turnaround we put in place for this Company.

Now keep in mind, I came onboard in December of '05; Jeff joined a couple of months after that.

We really inherited the capital plan for that first season.

So yes, we were stewards of the Company for that year, operating the parks.

We were there for the opening; it was my new management team.

But it was mostly a plan that we inherited -- a capital plan that consisted of approximately $120 million of capital with four huge coasters -- $20 million coasters, opening in four different parks, leaving little if anything for new attractions for the rest of the parks, not to mention the continued deferred maintenance.

So, clearly not the way we would have done things and not the way we're doing them now.

Nevertheless, we were here for that first fall season.

Anyone we met with, any call we took -- and really, this goes for the proxy side, when Dan Snyder and I went around shareholder to shareholder -- we laid out five key strategic objectives that we hoped to accomplish in the three-year turnaround plan.

And I thought it was important today to leave you by either A, introducing you to these five or reminding you of these five, or reiterating the five.

Because that's the true report card on the ultimate health of this Company.

First and foremost, we said we wanted to clean up the parks; improve the overall guest experience; reposition the brand by diversifying the product offering, making sure we brought the street entertainment back.

We brought the characters back.

And we made it about the experience and not just the rides.

Well, for the second consecutive year, the Company's key guest satisfaction scores, as I have said, are at or above record highs.

Number two -- three years, get this Company to free cash flow positive, which hasn't been achieved in the Company's history.

For 2008, if the Company maintains its current trends with regard to revenues and cost control, something we're doing through July, the Company should be free cash flow positive with an adjusted EBITDA nearing $280 million.

Number three, our whole strategy was about bringing the families back and increasing the guest spend.

Again, not obsessing about attendance; getting more people to come, getting greater families to come yet getting them to stay longer and spend more; enjoy the experience and come back and spend again.

Our goal in three years was to get 20% cumulative growth from 2005 -- 20%.

Get our revenue per capita, our total revenue per capita to $40 with approximately 1% guest spending growth and $56 million of sponsorship and licensing revenues this year, that objectives is well within reach.

Number four was to create and grow high margin, low capital sponsorship and licensing businesses and achieve annual revenues in excess of $50 million -- that was our goal.

In fact, coming into this year, we reiterated -- $50 million was our goal in three years, $100 million is our goal for six years.

Well, as you have heard from today, $56 million isn't our goal -- $56 million is what we already have in the bag for this year.

And we're still working to lift that number.

And number five was to get our EBITDA margins operate at a profit margin from modified EBITDA of at least 30%.

Jeff just told you we were at 31% for the quarter and if the Company sustains its current trends and achieves its target of being free cash flow positive for the year, then our modified EBITDA margin will likely top the 30% margin objective.

So we are in position to hit on all five.

We are in position.

We know we have a big August in front of us.

We know that the rebate checks have stopped coming out.

We know that gas prices are still above $4 in most of the places in this country.

We know the economy is still in the shape it's in.

We know that the housing situation is probably getting worse before it gets better.

We know that the markets are volatile.

We know that discretionary spending is a premium these days.

It's really a commodity.

People are careful with every dollar they spend, but we also know the brand is in a good position; our product is terrific; and the word-of-mouth is strong.

Finally, I want to leave you with this for a perspective.

Keep in mind that the best year -- the best year this Company ever had -- was $260 million in EBITDA.

In 2005, we're talking on a comparable park basis.

$260 million was what they did, yet they burned $115 million in terms of free cash flow.

So best EBITDA they ever did, comparable park basis, the same portfolio we have -- $260 million and they burned $115 million.

By the way, that was in a good economic environment.

If we get to free cash flow positive, we'll be at $275 million to $280 million.

Of course, not burning any cash -- same portfolio, better brand, much improved experience, and a broader Company with new and growing revenue streams.

We've created two new businesses that we will grow if we're doing $16 million when we inherited them, they're now at $56 million.

And in the next three years, we're going to double that $50 million and get it to $100 million.

That's how we view the Company.

Let's do some Q&A.

(OPERATOR INSTRUCTIONS).

Mike Pace, JPMorgan.

Mark, I just wanted to follow up on something you said earlier.

You mentioned that -- you said revenues through July were up 5%?

I just wanted to make sure that was correct, because I know in the press release there was a plus 5% number through June.

This is Jeff responding.

He didn't give a percentage for July.

What he said is the revenue growth trends have continued, which is to say they are equal to or better than where we are at.

Year-to-date through June?

Yes -- through July.

Through July.

The revenue trend that continues.

So they're 5% or better.

Got you.

And then just a comment on -- I mean, still given the importance of August and maybe even to a lesser degree, September, can you discuss the visibility that you have in the business?

You said advance sales were, I think you said extremely encouraging --?

Right.

How much do advance sales represent of attendance in a given quarter or really the third quarter --?

Overall, just talking on an annual basis, groups represent about 30% of our attendance.

So I'm not going to break it down by quarter.

Keep in mind, September and October -- September more so -- are heavy group months for us.

So I am extremely encouraged by the advance sales for group bookings for September and October.

And then on season pass side, as I said, we are up over 100,000 units year-to-date versus last year, which is roughly 6%.

So clearly, we are encouraged by season passes as well, which represent another 30% of our attendance.

So that is a nice built-in foundation, if you will, but at the same time, I think I laid out all the cautionaries, if you will, all the yellow lights that we still have to face in the next couple of months.

Sure.

And then just last question for Jeff.

Just when I look at your balance sheet, you're carrying I guess more cash than we thought you would, when you have outstanding revolver.

Why keep the cash on the balance sheet right now?

Well, this is not unusual for this point in the year, because approximately a few days after the close of the quarter, we have to put $60 million of cash down in the partnership parks for their distribution.

Okay, got you.

Thank you very much.

David Miller, Caris and Company.

Congratulations on the stellar results against a very tough economic environment.

I actually have a few questions.

First of all, Mark, the attendance number through the first half of the year, 10.1 million, so flat year-over-year.

What was the difference in operating days net-net January 1 through June 30?

Essentially flat; essentially stable to last year.

Obviously, between the quarters, we had less in the second quarter than the first quarter because of Easter, but essentially flat.

Okay, that's one.

And then on the sponsorship piece, Jeff, can you break out exactly what the sponsorship number was in the second quarter?

And within that, vis-a-vis the improved guidance -- will the balance of the alliance revenues achieved in the second half be pretty much evenly distributed between the third quarter and the fourth quarter?

Yes.

In the second quarter, our sponsorship revenues increased $5 million to roughly $15 million -- sponsorship and licensing combined.

We don't break each out but -- it went from -- increased $5 million to $15 million for the quarter, and increased $9 million for the six-month period from $17 million to $26 million.

Okay?

And there will be a little bit of back ending, but you wouldn't be too far off if you assumed roughly half and half for the remaining two quarters.

Okay, great.

And then finally, just rhetorically, you guys are preaching free cash flow positivity for the rest of the year.

Mathematically, that would imply, at least by my numbers, roughly $90 million in CapEx rather than what I think was guided to two quarters ago, which was $100 million.

Are you guys guiding down on CapEx?

Thanks.

Yes, there will be a reconciliation that we'll post on our website that will take you all through this in terms of what we see, in terms of our net cash interest, our cash taxes, the dividends that we did pay in the first quarter, debt issuance costs, and our CapEx -- those are the elements we take out of our adjusted EBITDA to get to free cash flow.

And the bottom line is our net CapEx is going to trend in around $95 million, given some insurance proceeds for some property damage that we have to reinvest in Mexico, D.C., as well as some New Orleans insurance proceeds that we -- under the insurance contract, we have to reinvest it in CapEx.

So, it's looking to come in around $95 million this year.

Okay, wonderful.

Thanks very much.

Lance Vitanza, Knighthead.

Congratulations on the great quarter.

I have a number of questions as well, so if I start to have too many, let me know and I'll get back in queue.

But I was really intrigued by your comments regarding -- you're going to get to cash flow positive in not the greatest year from an attendance perspective, so see what happens if we can get back to the numbers that we were putting up a few years ago.

To that end, could you discuss the marginal profitability of an incremental visitor?

Is there any clues you can give me there?

Yes, kind of the rule of thumb -- and again, once you get to sort of certain levels of attendance, there may be a marginal increase in the labor to service that -- but the way to think about it is roughly at these kind of per cap levels, every 100,000 increase in attendance is roughly $3.5 million of EBITDA.

And Jeff, tell him the per cap percentage, because I think that gets lost -- every 1%.

Every 1% increase in per cap is roughly in the $8 million to $10 million of additional EBITDA.

And the only reason I bring that up is because again, it's I think people's obsession with this attendance.

I mean, so for every 100,000 in attendance we gain, we grab $3.5 million in EBITDA.

But for every 1% per cap growth, every 1% that Andrew Shalimar and his team can drive -- he runs all of our in-park -- it's $8 million to $10 million.

So there's no secret by guest spending, families, brand, staying longer, getting them to purchase retail and games and invest in our experience -- it's no secret why that's our recipe.

Okay, great.

And then on the attendance, last -- I got the number for Q2, but for Q1, it looks like you did about $8.9 million -- I'm sorry, for Q2 of last year, excuse me, not Q1.

Yes, we were down about 3% to last year for Q2.

Okay.

Can you provide -- I want to say in past press releases, you've given more detail with respect to admission revenue per capita and so on and so forth.

Can you review any of that detail today?

I think we did speak to the guest spending growth.

We will be filing the 10-K this evening, so it will be all that laid out for you in the morning.

But we were essentially, I can give you sort of a preview, if you will.

For the quarter, our ticket per cap was up roughly 2% -- excuse me, 1%, I'm sorry -- up roughly 1% versus '07 for the quarter.

And our in-park was up a little over 3% for the quarter.

Do you have the dollar amounts for those two?

$0.15 on a ticket per cap.

And the in-park was up a little over $0.50.

No, I meant up to what number?

Up to what number?

No, we don't break that out.

Well, the ticket we break out, but not the other stuff.

The ticket was up to $21.36 compared to $21.21 last -- in the second quarter of '07.

Okay, thanks.

And then last but not least, you mentioned that you've already paid down the revolver a fair amount subsequent to the end of the quarter.

When does that typically tend to trough?

Is that --?

Yes, it's a good question because we've gotten some comments on that -- and we've talked about this before.

We tend to get to our highest draw on the revolver right before Memorial Day weekend; as we're building up inventories and selling the season passes and spending capital -- all those sort of things.

So we were at $175 million in April.

And typically, we'll get to right around $200 million draw on the revolver at the low point.

And then you start paying it down, starting Memorial Day and thereafter.

And by the end of the third quarter, you hope to be out of it.

The reason why the revolver was I guess lower last year, Jeff.

Yes.

And some folks were doing the comparison to where we were last year in terms of cash and revolver balance, and obviously, that wasn't really a comparable year, given that we had just sold the parks for $275 million and had just redone our bank deal where we termed out our revolver in our term loan.

A more comparable year would be if you look back at 2006, at the end of the second quarter, there was $190 million drawn on the revolver compared to $160 million this year.

We have since paid the revolver down to approximately $100 million through the end of July.

Okay, that's great.

And you mentioned something about swapping floating for fixed-rate debt but I couldn't get it all down.

Could you repeat that --?

Last one here -- five to 5:00, you're going.

Okay.

Just following up on the debt balance question, you'd mentioned something on the call earlier that I just couldn't catch regarding swapping floating for fixed-rate debt?

Yes, we swapped $600 million notional amount of our term loan, our bank term loan, which is floating rate.

And we swapped it for three years to a fixed-rate all-in of 5.34%.

Thank you.

Lance, the only thing I'd say just in closing there is, in terms of your comment and more on David's as well, about being free cash flow -- we said free cash flow positive for the year.

I think David made a reference there to the last six months or the remainder of the year.

Our goal is free cash flow positive for the year.

And we are saying, if the current trends continue, 5% revenue growth, we'll get there.

Again, a lot of yellow lights that could prevent us from getting there.

And I just wanted to make sure -- I'm not making a declaration and guaranteeing that; there's too many uncontrollable items like the economy and the weather.

I'm just simply stating if these current trends continue, the same ones we're seeing through July, 5% revenue growth, we're going to get there.

Understood.

Thanks.

Susan Lee, Credit Suisse.

Just three quick questions.

On the cost side, I think Jeff, I kind of missed your comments there in terms of the variable timing for the marketing spend.

And I think you guys mentioned before also, I think the $50 million was split between marketing and OpEx, is that correct?

That's correct.

Yes, we had laid out the $50 million -- roughly $25 million from marketing, and through the first six months, there was $16 million of savings.

So if you just sort of annualize that, you would suggest that we were going to get to $32 million of marketing savings, which isn't the case.

There's some timing reflected in that $16 million of savings through the first half.

That was really the only point there.

We're still on target for a $25 million reduction in marketing.

Okay.

And then secondly, I think you guys kind of commented on the call about sponsorship revenue growing towards $100 million.

I guess on longer-term thinking, what are you thinking about timing for that?

Well, we stated at the beginning of the year that in three to five years, we expected to hit $100 million out of our sponsorship and international licensing, so.

And then we stated three years ago, we'll get to $50 million in three years and we'll get to $100 million within six years.

So that's what we're sticking to.

So basically three to four years from now.

And then just lastly, do you guys have any updates on your [assets the other thing is] you're talking before about selling excess land.

And then also separately, I just want to ask a question if there's updates on the New Orleans insurance proceeds?

Yes, there's no -- both of them, there really is no updates.

We're not -- in this real estate market, we're certainly not selling any land.

We don't have any parks that are currently up for sale or being marketed.

And the New Orleans insurance settlement is still going through its legal phases and we don't expect to hear anything on that for the next 12 to 24 months.

Barrett Eynon, Brownstone Asset Management.

Just a question on the sponsorships.

I know at the beginning of the year you'd said that sponsorship and licensing are basically -- provide an incremental $13 million of revenue.

What is that now?

Is that $18 million or is it higher than that?

I'm lost.

From --?

In your reconciliation, you get to your 2008 numbers from 2007, your sponsorship and licensing of $13 million?

We did $38 million last year in '07, came into the year saying we're going to do $51 million, which actually was a bigger increase because we had some that weren't coming back.

I think we almost had $4 million or $5 million, maybe even $6 million that we had to renew.

So we had to kind of get back to the $38 million, then get another $13 million to get it to $51 million.

But anyway, long story to your short question.

$38 million to $51 million and then we're taking $51 million today up to $56 million.

Okay, thanks.

And then on the OpEx side, so you guys are still on track for the $50 million of total savings for the year?

Yes, we're still on track although battling against a couple of challenges on -- with given the weak dollar and energy costs.

But we're still working towards that $50 million.

Okay, then final question.

In terms of -- obviously your momentum is very positive now.

If you guys actually hit your $280 million number for the year, how are you thinking about addressing the peers in basically '09, because I know you can't do a cash settlement, right?

Given that the Delaware law, because you guys have a negative income or whatever -- negative shareholders equity?

There's nothing else we're going to say about that that Jeff didn't already say in his opening prepared comments.

We clearly have to have some conversations with those -- with the [Pierce] holders and not sure when that's going to take place.

All right, thanks.

(OPERATOR INSTRUCTIONS).

Howard Wang, Ares Management.

Congrats on the quarter.

Most of my questions have been answered, but just a couple more.

In terms of 2Q, I know for the last couple of years you guys have been really promoting for the families and spending more time in the parks, and we've been seeing the increase in the per caps.

But in this particular quarter, was there -- were there any initiatives that were unique to this year?

Like more price points or -- were you seeing more of the higher, I guess, demographic customer that you might not have seen in previous years?

Yes, very good question, Howard.

In fact, let me riff on a couple of different things here.

I think that the -- really the big score for us has really been twofold.

And again, it's still early; I'm not counting my chickens yet.

We've got a big August in front of us.

But what I will tell you is the everyone-pays-kids-prices was just a tremendous campaign for us.

We got out early with the everyone-pays-kids-prices campaign well before Subway was going to $5 subs and Taco Bell was going to their value menu.

Our communications team across the board, our marketing folks, our advertising campaign -- it really resonated.

We generated a lot of publicity that Six Flags was going to be about value, more for your money, convenience, close to home, so much so that everyone pays kids prices.

We extended operating hours.

We looked, in the later part of this year, November/December, we added operating days.

We added free concerts.

You name it, we really tried to build a value proposition.

And everyone-pays-kids-prices has really resonated.

On top of that, Jeff and I outlined at the beginning of the year how important our capital program was, which was really six new coasters and six parks, headlined by the Dark Knight.

And much the way the Dark Knight has been a big hit in the movie theaters, it too has been a big hit for us now for a couple of months in our parks.

It's not really a ride for teens so much so -- I mean, it's a good ride for teens -- but it's an indoor, in-the-dark roller coaster, heavily themed, heavily branded, a lot of storytelling, and the parents and the tweens have really reacted favorably to it.

And that's been a big win for us.

So it's really been a combination of good word-of-mouth about our product; capital; the six coasters and six parks; and everyone-pays-kids-prices has been a terrific campaign, without -- as Jeff mentioned -- without impacting our ticket per cap in a negative way.

Okay.

And even with the success of the movie, you're still -- which, I presume would have the similar demographic as your tween customers, you haven't seen any kind of degradation or anything in terms of attendance?

No.

I mean, first of all, I would encourage those of you on the call -- I'm not a movie critic, but I'm not sure tweens should be seeing that movie.

It's given me a few nightmares already and I've seen it a couple of times; probably should stop seeing it.

But our ride is more for the tween.

I think the movie is clearly more for the -- I don't know who it's for.

It's clearly a very dark movie, but a very good movie, obviously.

And no, the movie hasn't impacted us in a negative way.

And we tried to do some marketing tie-ins with them, so we're definitely trailing on the success of their movie.

Our drawback, really -- which is a good sign for the Company -- has just been when the weather is hitting, we're really hitting.

And as you'd imagine, when the weather is having its problems, we take a hit.

This past weekend was a difficult weekend for us with the weather on the East Coast.

Still did pretty well to last year, but we thought we were going to have a banner weekend and then we got a lot of rain on the East Coast.

And as you know, when it rains on the East Coast, you're attacking, what?

-- five, six of our parks.

So that's tough for us.

This Dallas Sheets has been very interesting as of late.

We're doing very well in San Antonio.

In fact, one of our better performing parks this year.

And Dallas is doing extremely well vis-a-vis last year.

But the last two or three weeks -- 107 degrees, 108 degrees; we just can't survive in that.

So, weather is always a fascinating thing with this Company.

Too much rain and you hurt and now, too much heat.

It's hysterical.

We're having a ball of fun with that weather.

And then lastly, just sort of longer-term in regards to your sponsorship efforts, I mean, obviously you guys have done an impressive job starting from essentially $0 to get to $56 million plus this year.

Is this something in the broader scheme that you could see sort of a -- I guess it become its own segment within like a Six Flags media, which maybe result in an incremental revenue stream?

Because it sounds like some of your -- or at least one of your regional park competitors looks like they want to get in on the sponsorship action.

And I'm sure your team is gifted enough to help other companies.

Yes.

That's humorous that you mentioned that, because I would say yes.

We've had tremendous success here.

I mean, the success and the credit goes to Lou Koskovolis and his team, and Andrew Schleimer on the international licensing front and their two staffs.

I mean, these guys are hungry, they're aggressive.

And they're charismatic in their own ways.

I mean, the countries are kind of lighting up to the opportunities that Andrew presents them.

And certainly the advertisers are lighting up to the opportunities that Lou and Randy Gerstenblatt and [David McKellips] and the opportunities that they're presenting on the advertising front.

We feel great about this business.

I mean, we've got just terrific momentum.

And the ad model is swinging; more and more digital is the way to go.

More and more out-of-home is the way to go; outdoors is the way to go.

And we call it in-person advertising.

We've had some third party folks come to us -- some movie theaters, in fact.

Internationally, we've had some companies in Mexico, some consumer companies, come to us about tailing on.

And as far as we're concerned, come one, come all.

I'm not really sure why Cedar Fair went to a third party; nobody does it better than our team.

We've got 20 parks.

Now you add in Cedar Fair's parks, that's a hell of a selling proposition.

And I can tell you, nobody is going to come close to knocking our guys off a ledge.

So, we're very open to that.

We want to grow the business.

We want to continue to aggregate or amass more third party customers.

And anybody who's interested, we'll take them on and that will just help us get to our $100 million or more.

Okay, great.

Thanks and good luck for the rest of the year.

Thanks, Howard, we need it.

That concludes the Q&A session.

I would now like to turn the call back over to management.

All right, well, thank you, everyone, for joining us late in the day here.

As we said at the top, we're on track for our three-year turnaround; good second quarter; strong July, but a lot in front of us.

A lot of challenges and we're ready to face them, hoping that the weather and everything else takes care of itself.

Thank you very much and have a nice day.

That concludes the presentation.

Thank you for your participation.

You may now disconnect.

Have an excellent week.