Six Flags Entertainment Corp (SIX) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Six Flags Incorporated fourth quarter 2008 earnings conference call.

My name is Mary 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 call is being recorded for replay purposes.

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

Sandra Daniels, Vice President of Communications.

Please proceed.

Thank you, Mary, and good morning, everyone.

On March 10, 2009, the Company released its financial and operating results for the fourth quarter ended December 31, 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 have asked me to remind you that in compliance with SEC Regulation FD, a webcast of this call is being made available to the media and the general public as well as analysts and investors.

The Company cautions you that comments made during the call will include forward-looking statements within the meaning of the Federal Securities laws.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in such statements.

You may refer to the company's 2008 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 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 and on our website.

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

Mark?

Thank you, Sandra, and good morning, everyone.

As I mentioned on our third quarter earnings call, upon the installation of our current Management team in early 2006, we set out to implement a three year turnaround plan while leveraging our nearly 50 year history and internationally recognized Six Flags brand name.

Since then, we have worked tirelessly to diversify and grow revenues and increase our operational efficiency and cash flows.

As a result of these initiatives and despite a challenging economic environment in 2008, Six Flags achieved the five key strategic objectives that my team set out to achieve by the end of its third year.

In other words, we accomplished our mission.

We answered the call.

First, we cleaned up the parks, improved the overall guest experience, and repositioned the brand by diversifying the product offering.

For the second year in a row, our key guest satisfaction scores were at or above all-time highs.

We were cleaner, delivered a more broad based entertainment package, enforced the Code of Conduct for our guests and had better trained employees to deliver a better standard of service.

Our committment to safety and security was heightened as well.

Bottom line is that we succeeded in bringing the family back to Six Flags.

Secondly, we created and grew a new high margin and low capital sponsorship and licensing business that achieved annual revenues in excess of our targeted goal of $50 million.

In 2008, we achieved sponsorship and licensing revenue from these initiatives of approximately $59 million, an increase of 53% over the previous year.

Third, we exceeded our target of $40 per capita and achieved more than 20% cumulative growth from 2005.

Goal number four: We improved our modified EBITDA margin by 6.2% over 2007, but more importantly, we operated at an EBITDA margin of 30.1% in 2008 which was one of the five key strategic objectives.

Finally, fifth and last, we generated positive free cash flow for the first time in our company's history.

During 2008, we were free cash flow positive with a record adjusted EBITDA of $275.3 million, representing a 45% increase year-over-year.

This was the best year ever for the Company.

The Company has never had better performance for this portfolio of parks.

The operational side of our business is extraordinarily healthy.

I am proud of the work of our 30,000 employees who believed in our vision and executed the strategy.

Morale is strong at this Company because after a great many years of hard times, the employees of Six Flags have something to cheer about.

Turning to 2009, I don't need to remind anyone of the difficult economic environment, particularly in the area of discretionary consumer spending, yet, I remain cautiously optimistic that our 2009 plan, which is well designed to offer an exciting entertainment package at value pricing will resonate with our guests in this challenging environment.

This plan includes exciting new and improved rides including two new coasters, one at Magic Mountain in Los Angeles themed after the new Terminator Salvation movie, and one at Six Flags Mexico themed after the Dark Knight blockbuster film and two other coasters being relaunched and repackaged at Six Flags New England and Six Flags Great Adventure in New Jersey.

We've already opened a new Wiggles World in San Antonio.

We have an expansion of our popular summer concert series and our Glow in the Park parade.

We'll have an increase in our operating days and hours and an exciting marketing campaign featuring the reintroduction of our iconic Mr.

Six character and an efficient marketing campaign that is taking advantage of lower add rates in the marketplace.

Moreover, in this, the third year of our staffing initiatives, I expect us to have the best qualified, trained, and most highly motivated park staff in our company's history, designed to deliver even higher levels of guest satisfaction.

Turning to our balance sheet, first, let me give you some historical context.

When my team and I joined the Company in early 2006, we inherited a highly leveraged Company with significant associated debt service requirements as a result of poor investments by prior Management.

Since the Management change, we have sought to improve the company's balance sheet and debt profile by among other means selling non-core assets for almost $400 million, entering into a new $1 billion credit facility with much more favorable rates, covenants, and extended maturities, and completing a transaction last year in which we exchanged approximately $530 million of existing notes for approximately $400 million of new notes maturing in 2016, thus reducing debt by $130 million and further extending our debt maturities.

Despite these significant achievements, we of course remain highly leveraged.

As I mentioned on our third quarter earnings call, we are exploring all options in order to reduce debt and clean up our balance sheet once and for all.

The first step to fixing this Company was turning around the operation and restoring faith in our brand.

The next step was always the balance sheet.

Given the current negative conditions in the economy generally, and the credit markets in particular, there is substantial uncertainty that we will be able to affect a refinancing of our debt in the near term or our preferred stock prior to its redemption date on August 15, 2009, as indicated in our 10-K filing.

We simply can't refinance our debt with the markets being what they are and we can't sell excess real estate in this environment and expect to get something even close to full value; therefore, like many other companies, we are exploring a number of alternatives which in any event is expected to include a significant debt for equity exchange and we have thus retained Houlihan Lokey as our financial advisor along with counsel for the Company and for the Board.

Together with Houlihan Lokey, we've held a number of discussions with most of our large debtholders.

While many of our debtholders have been generally supportive of our efforts to reach a consensual out of court deal, one of our principal debtholders, who holds a significant amount of our senior notes due 2010, has thus far resisted a consensual restructuring.

In fact, the Portfolio Manager of that principal who holds the 2010 has refused to even meet with me in person.

The auto companies have an easier time getting a meeting with the United Auto Workers than I do of getting a meeting with this particular portfolio fund manager.

Makes no sense.

Still, we stand ready, willing, and able to work with them towards a resolution.

In the meantime, we will continue to explore all options to right the balance sheet.

At this time, what I want to assure all of our partners, vendors, guests, and employees, all of the stakeholders at Six Flags, is that no matter what route we choose, our guests will not see a difference in our product offering this Summer.

In fact, they will only continue to see significant improvements.

As I mentioned earlier, we are full steam ahead on new rides in every park.

We will have the best concert line up nationwide that we've ever had.

New attractions, themed after movie franchises such as Terminator Salvation, the Dark Knight, the Mummy, and the upcoming feature Fame, new advertising partners such as T-Mobile and of course Mars with their new in-park M& M Emporiums, current partners that are actually expanding their relationships with us like American Express, Chrysler, Papa Johns, Johnny Rockets and Coca Cola, season pass and group sales which to date are brisk, our longest season ever at several of our parks, and our everyone pays kids pricing strategy which has deeply resonated with the consumer.

We are open at Six Flags figuratively and literally and we will be at full throttle.

Our balance sheet initiatives are purely back of house issues that deal exclusively with our holding companies and their creditors.

Our park operations are on solid footing and highly profitable.

Our brand has reemerged.

The connection between Six Flags and the consumer has been reestablished, and our 30,000 employees that have worked tirelessly over the last three years to make it all happen remain faithful and confident.

So for those of you who are visitors, those of you who have come with your friends, your children, your grandchildren, those of you who are fans, those of you who are looking for ageless entertainment that is affordable and close to home this Summer, those of you who are stakeholders of Six Flags in any way, at any level, I want you to know that regardless of what you've read or heard about the Company, regardless of what you might hear in the coming days, know that the product you witnessed us rebuild is strong and will move forward.

The guests will only see an even better experience.

Further to that point, while I've gone into great detail on our enhancements and investments to the parks this season, I'd add that we're deep into planning for our 50th Anniversary in 2011.

We will launch new major attractions in every Six Flags park for our 50th Anniversary season, and, and we will continue to clean up, rehab, and improve the portfolio of attractions we inherited when the new Management team came on Board in 2006.

Just one example to illustrate the uniqueness and comprehensive nature of our Celebration plan is that we intend to close the legendary wooden roller coaster named the Giant which was built 18 years ago at Six Flags over Texas for the entire season in 2010 so that it can undergo a $10 million renovation in time to reopen for our 50th Anniversary season in 2011.

This would be the largest ride renovation in the history of the Company.

New trains, a more comfortable ride, a faster ride with additional features, all with the intention of restoring this famed coaster to world class status.

The take away of our 50th anniversary planning process is that the business and brand of Six Flags is safe and strong and we're going to stay around.

Finally, speaking directly to all of our vendors and all of our partners, I want you to know that we ended the 2008 calendar year with over $200 million in cash.

We are on solid footing when it comes to liquidity.

Your bills are being paid and your bills will continue to be paid.

Thank you.

Turning to Jeff Speed to take you through our financials.

Thanks Mark and good morning.

By now I'm assuming you've all had adequate time to read our earnings release and 10-K that we filed last week so I'm going to quickly spend some time reviewing our results for 2008 including the fourth quarter providing some perspectives on 2009 and then we'll open the call up for Q & A.

Starting with our full year revenues, we reported a 5% or $50 million increase compared to 2007.

The revenue growth reflects continued strength in our sponsorship and licensing business which grew by over $20 million in 2008 to $59 million in revenue.

Our per capita guest spending also contributed to the revenue growth, increasing by $0.53 due to higher spending on rentals, food and beverage, parking, admissions, and retail.

In terms of volume, our 2008 full year attendance increased 400,000 to 25.3 million.

This was comprised of a 900,000 increase in paid attendance partially offset by planned reductions in complimentary and free promotional visits.

For the 2008 fourth quarter, our revenues also increased 5% driven by a 9% increase in attendance as well as increased sponsorship and licensing revenues.

Contributing to our fourth quarter performance was a more favorable operating calendar resulting additional park operating days for our Fright Fest and Holiday Inn the Park products compared to the fourth quarter of 2007; however I should note that the fourth quarter increase in park operating days effectively offset the loss of park operating days we experienced in our third quarter compared to last year.

Per capita guest spending decreased 7% in the 2008 fourth quarter reflecting lower spending and on admissions and in park items.

This decrease was primarily attributable to an increased mix of season pass visitation in proportion to one day visitors who tend to spend more.

Season pass visitation accounted for approximately two-thirds of the attendance increase for the quarter.

With regard to our operating costs and expenses, 2008 was a good story for us.

We achieved strong revenue growth, maintained record customer satisfaction scores while simultaneously reducing our operating costs and expenses by a meaningful amount.

For the full year 2008, our operating costs and expenses excluding depreciation, amortization, stock based comp, and loss on disposal of assets, decreased almost $30 million.

The lower costs were driven by targeted reductions in marketing as well as outside service costs, labor, supplies, and travel related expenses.

These reductions were partially offset by increased cost of sales due to higher sale volumes, incentive based comp, insurance costs and utility expenses.

As for the rest of the income statement, our interest expense decreased compared to the prior year by $7 million for the quarter and $21 million for the full year, reflecting a lower level of long term debt and reduced interest rates.

The company's 2007 refinancing of its senior secured credit facility, interest rate swaps put in place in February 2008, as well as the June 2008 exchange of new senior unsecured notes due in 2016 were the drivers of the interest expense reduction.

The refinancing transactions also drove the year-over-year change in net gain or loss on debt extinguishment, which was a net loss of $13 million in 2007 and a gain of $108 million in 2008.

During the fourth quarter we experienced a $7 million increase in other expense compared to the 2007 quarter.

The 2008 fourth quarter other expense reflects a non-cash mark-to-market charge of $15 million for an interest rate hedge that ceased to qualify for hedge accounting treatment under the accounting rules.

For the 2008 full year, other expense decreased from $20 million to $15 million, primarily due to the prior year cost of settling a California labor class action lawsuit that originated in 2005.

Also contributing to the full year change were severance and benefits costs related to the early retirement program we implemented in the prior year, partially offset by the non-cash mark-to-market charge in the current year.

Our provision for income taxes increased for the full year 2008 reflecting impact of a $111 million non-cash charge to increase the valuation allowance against our principal deferred tax asset, our tax net operating loss carryforwards.

As you may know, income tax accounting is balance shed based which means that any change in our tax valuation allowance flows directly to our income statement on a current basis.

The increased valuation allowance was a result of us no longer assuming that a tax planning strategy, such as the hypothetical sale and lease back of excess real estate, would be implemented to prevent the future expiration of net operating losses.

The change in our valuation allowance is arguably academic as any restructuring transaction that we implement will likely impose a limitation on and/or a reduction of our tax net operating loss carryforwards.

This is more fully discussed in our Form 10-K.

For ease of reference, in our earnings release we provided income loss from continuing operations and related per share information excluding the impact of the non-cash income tax charge and the non-cash mark-to-market charge that both occurred in the fourth quarter of 2008.

Clearly, the headline for our 2008 performance is that our increased revenues and reduced costs resulted in adjusted EBITDA growth of 45% to over $275 million, enabling the Company to generate positive free cash flow for the first time.

There aren't too many companies these days reporting increased revenues, significantly reduced costs and capital expenditures, a $170 million improvement in free cash flow while at the same time, improving their product and image and expanding their brand both domestically and internationally.

It's a significant accomplishment for our Company to be sure, and more than anything else, as Mark mentioned, it's a testament to the talent and committment of our 30,000 employees who have worked extremely hard to deliver this record performance, evidenced by the fact that every single one of our parks contributed to the improved performance.

Now, as we turn the page to 2009, like most companies these days, our visibility with respect to the top line remains very limited.

At this point, we're looking to remain relatively flat on ticket and in park per capita spending notwithstanding some downward pressure from foreign exchange impacts on our Mexico and Montreal park revenues.

On the sponsorship and licensing front, as you know, we're right in the midst of our selling season so we're not going to provide guidance on where we see that business going until our Q1 call in a few months.

What I can tell you is that through the end of February, which historically only comprises about 2% of our annual topline, revenues have remained stable notwithstanding the adverse foreign exchange impact in the period compared to the prior year period.

In terms of season pass and groups, we're much too early in the season to draw any definitive conclusions; however I can tell you they are holding relatively stable as well.

On the cash operating expense front, we're continuing to squeeze efficiencies out of Marketing where we're benefiting from attractive add buys as well as other cash expenses.

For 2009 we decided to reinvest those savings into the product and the expansion of our operating calendar and operating hours to provide even more value to our guests, particularly season passholders.

However, we will see some increases on our expense line in 2009, primarily attributable to non-discretionary items such as minimum wage, pension, and utilities cost.

As a result, we expect our 2009 cash operating expenses to increase approximately 3% over the 2008 level, and finally with respect to CapEx, we're planning to spend approximately $100 million as we continue to add marketable attractions, fulfill our annual maintenance CapEx requirements and continue to implement our multi-year IT reinvestment plan.

I should also point out that our Q1 results this year will be impacted by the timing of Easter break which was in Q1 last year and will shift to Q2 this year, which depending upon school calendars and obviously weather, can account for upwards of 200,000 to 300,000 in attendance.

With regard to our cash and liquidity position, you'll recall that in October of last year we drew the $244 million remaining available on our revolving credit facility to insure the availability of funds for the 2009 off season.

As a result, as Mark mentioned earlier, we ended 2008 with $210 million of unrestricted cash to fund our off season costs, expenses and CapEx.

With that, I'll now turn the floor back over to our host to commence the Q & A portion of the call.

(Operator Instructions).

Our first question comes from the line of Joe Stauff from CRT Capital.

Hi, good morning.

A couple questions, please.

Can you remind me just generally when the parks are officially open, I guess for the public.

That's the first question.

Second is I heard your remarks regarding sponsorship revenue and I understand that.

Are there any, with respect to the historical contracts that you have with certain sponsors, are there, simply the question is of the $59 million that you booked last year is there a certain percentage of that that reoccurs regardless just given the contract line?

Yes, Joe, it's Mark.

First off, the parks open generally our full time operating season as you know is Memorial Day to Labor Day.

Sure.

We have about five parks that are open now generally just on weekends and of course spring break periods.

The way you can look at it is Magic Mountain is pretty much year around operation although in the off months the winter months it's weekends only.

Mexico is pretty much a year around operation as well and then San Antonio, Dallas and San Francisco are open now, again just on weekends and we opened them earlier this year trying to take advantage of some expected or hopeful good weather, and then also we have Six Flags over Georgia, so basically the parks start opening in early March on the weekends and that continues gradually into the Spring, for example, at the beginning of April, that's when Great Adventure in New Jersey opens up, that's when Six Flags New England opens up and again they are open on the weekends up until for the most part Memorial Day.

We do a lot of group outings and a lot of school days up until then but full-time isn't until Memorial Day until Labor Day and then September goes weekends and then October of course is weekends for Fright Fest.

Regarding your other question, I mean, yes.

There's a lot of business that is recurring, a ton of business.

As we stated before, some sponsorship deals are one year tests, some are three years, the biggest one we have, a few of them are five year deals, but the term and the length and the deliverables vary deal by deal, so you walk into a year, usually down a few million on ones that are up for renewal or expiring and you try and renew them and then go out and get new business.

Fair enough, thanks.

Your next question comes from the line of John Brecker, Longacre Management.

Yes, thank you.

Can you give us an idea of the timing of the refinancing, that's my first question, and then secondly, talk about your marketing strategy in regards to refinancing and how you're going to convince your customers that the parks are safe and that everything is the same, how do you expect to express that message?

Yeah, this is Jeff.

In terms of the timing, obviously, the outside date is our next obligation that comes due which is the mandatory redemption date of our peers in August.

As we've indicated in our 10-K, we are certainly looking to reach resolution on the path we choose well in advance of that date and that's about as definitive as we can be at this point given we're in the midst of negotiations.

John, short answer to your second question there, the way you do it is through heavy advertising and communications blitz, bottom line.

I mean that's what you do.

You spend money, you get the word out there you're in all channels, radio, TV, social media, digital, online, out of home, print, you name it.

What I can tell you is no matter what happens the outcome, put the products aside for a second but no matter what the outcome is, the word is out on Six Flags restructuring.

Obviously big article on this past Saturday in the New York Times and clearly when something goes in the Times especially all the homework that reporter did, it's going to spread, so what I can tell you is the words out on the street and we're out there making sure people understand that this isn't going to affect our park operations, end of story, not whatsoever.

This is a back of house issue.

It's something that the parent Company is dealing with.

Something we're dealing with here in New York but all of our parks are profitable.

All upcoming operating seasons, all seeing season passes selling, all seeing sponsorships selling, all seeing group outings renew and even new groups coming on Board in this economy where group outings are being cut back, had a strong weekend this past weekend in those parks that didn't have any inclement weather and despite the press reports that are out there, our 10-K and everything else, so we're open for business, we're at full throttle, we're going to stay that way and I would argue our product will not only be better because that's our goal to make it better every year, but it will be that much more dynamic for two reasons: one we know guests are staying closer to home.

In this economy just less travel, and you can see that in future bookings in hotels and of course, airlines and secondly, because of the buzz of restructuring that's out there, we have to work that much harder to deliver great product so that it spawns terrific word of mouth.

I just have one other question.

Given the economy, do you expect you'll have to be more promotional than in the past to drive traffic into your parks?

No.

As Jeff mentioned, again it's just the first two months.

We don't do much business, it's 2% of our topline but so far so good.

This business is a resilient business.

This business is akin to the movie theatres and as you've seen, gross receipts are up 12% through this weekend, more important attendance at the movie theatres is up 15%.

People are staying close to home, they are looking for value, they are looking for affordability, they are looking for convenience, they are looking for something for all ages.

When you go to Six Flags over Georgia, one of our top parks, with a terrific reputation, been around for almost 50 years actually, and guess a season pass for the longest season ever with more hours than ever for $49.99, you just simply can't beat that value, so it's up to us, the onus is on us, to get that word out there.

We feel very good about our everyone pays kids pricing strategy but more importantly, we feel even better about the value that comes with the daily ticket strategy and the value especially that comes with our season pass package.

Thank you.

Thank you.

Your next question comes from the line of [Steve Jadulmo, Bertress Capital.] Please proceed, sir.

Yeah, hi.

A couple more, can you hear me okay?

Of course.

Okay, good.

Earlier, your first statement was that basically the Portfolio Manager of the largest holder of the '10s would not, refused to meet with you.

Should I assume I'm just going by the holdings list here, that that's Fidelity.

Is that the group not talking to you?

Well I think I said one of our largest or one of our principal holders.

I'm not going to confirm or deny anything that was written in the New York Times on Saturday.

I didn't see that story so I apologize.

Did they mention Fidelity?

Yes, they did.

Well, I mean, Fidelity as an institutional owns 90 million shares at Disney.

Could that be the strategy of this Portfolio Manager that sort of within the house of Fidelity to bring you guys down so they can improve the value of their holdings at Disney and if that's the case, then that would probably be an actionable item from any number of stakeholders here at Six Flags.

Steve, again, I would just underscore for you that I'm not hanging anybody out there.

I'm trying to be candid about--

I'm prepared to hang the guy out there.

I mean I'm putting in my words.

I'll take the full brunt of that, but I'm just saying from your standpoint, I mean, to the extent that is the case then you really should be beating this drum much more publicly and taking this directly to, I mean Fidelity is basically a public institution.

They have basically the funding from millions of Americans, many of whom are out of work right now because of people on the investment side taking advantage of their good auspices to put you guys into bankruptcy because of the gross negligence of a single individual manager, that's something that needs to be brought to the public attention and put this guy under the white hot poker of scrutiny, don't you think?

Two things I would say beyond all the folks that are unemployed out there in this environment, we have 30,000 employees ourselves, so no matter who it is and again I'm not going to talk about any one institution, if there's an out of court deal that can be done that clearly is in the best interest of all of the stakeholders and the employees of the Company, we should be rushing to that.

Our operations are in good shape, our cash situation is in good shape, so our employees are safe and sound, but certainly nobody needs this cloud over their head, and we don't need any kind of long term damage that could potentially be done by this whole process.

Secondly, I think most importantly, I just want to underscore for you and anyone else is that while we sit out here trying to get an out of court deal done, one that easily could have been done in January and quite frankly we expected to get done, that was our goal in January/February to come to some lock ups with our lenders, we're out there spending and making interest payments, interest payments we really shouldn't have had to make, interest payments that are tightening up the cash position, so while we're in good shape with the cash position, we're still spending money we shouldn't have to spend and the longer that goes and the more cash we spend, ultimately our options get diminished.

Right.

I mean and let me just add to your 30,000 employees there are also 25 million Americans that basically do attendance at your parks and I would assume that a good chunk of those 25 million are basically people that put money into Fidelity Investment Funds either on the stock or equity side including those shares of Disney that they seem to be in love with, so I think you should be much more visible with this, much more public with it, and I think it's a travesty personally and I think, I mean I would just say that my understanding is if you start putting this guy under scrutiny, I can't imagine he can withstand this level of public scrutiny.

It's unconscionable what's going on if he's not even taking your calls.

The next topic is that on the preferred, you guys have been out there saying you don't have the $298 million of cash to redeem them, but they're trading at $0.50 and there's basically 11.5 million shares.

Please tell me that you have some sort of plan other than the redemption in August and that you guys are moving forward because personally I would say if you hung out there a tender or a tender thing where people can tender in and get a dollar in cash for example, I mean, you would have plenty of tenders like today, so I'd encourage you and your financial Advisors to put a bucket out there that people can go tender into and you can get your 51% or 50.1% much faster.

That one I would say is on your financial advisors for not doing and being more proactive on that side.

Yes, Steve, let me just comment on that.

The fact of the matter is even if one assumes that we could address the peers at some highly discounted level, even equitize them in some way, shape, or form, the fact of the matter is even when you take that out of the equation we're at $2.1 billion of debt, even off of our record performance in 2009, that's nine times levered.

Long are the days that that's an appropriate amount of leverage on any Company let alone a Company that has to continue to reinvest in its business each year.

Yeah, that's fair but we're just talking about you guys have been out there the last week or so talking about the August short-term issue and my point is that if you solve the August issue then it becomes a Fidelity January issue and if you solve that issue then it becomes an '13 issue and by that time, we probably don't have a problem.

Again, we've made the decision and our Board has made the decision that given like I said the magnitude of leverage even taking the peers, even taking the stub 2010s off the table, you're eight to nine times levered, it's just not a sustainable capital structure.

We are looking to address this balance sheet issue comprehensively once and for all and not kick the can and potentially run the risk of having to do it next year and the year after.

That's the approach we're taking.

Especially, Steve, when you figure and again, we feel pretty confident about our position right now as we did last Summer when everybody said we were in trouble because of gas prices and the economy was going south and I guess they went south to us, but at the same time, there's still so much uncertainty about this Summer and this year so put aside restructuring, there's just uncertainty with the economy and discretionary spending overall then I don't want to put this Company in a position where you think you fixed the situation as you indicated or suggested for the short-term and then you go ahead and have a bad season and you find yourself right back in the mix.

Right.

I mean on that topic, I mean do you think the general year-over-year decline in gas prices will be a benefit to you guys?

I honestly can't tell you that it will because, to be consistent, other than one of our parks where we had research that showed high gas prices were having an adverse impact on one of our parks, I specifically said it was Magic Mountain in Los Angeles who by the way had a terrific year last year, fantastic park and the efforts of Jay Thomas and his team has done to turn around that park, and of course we reengineered a big coaster last year which drew a lot of attendance but really it never played out.

Gas prices are high, okay, so that made airline tickets very expensive and people started traveling less, but still driving within 50-miles, which is is where we get 75 to 80% of our attendance for a day at Six Flags, cheap night stay at a hotel nearby, get a two day stay, take advantage of a season pass at a low price, we didn't see any adverse impact by the gas prices and more importantly, we didn't see any adverse impact on our in park spending which of course went up and that's holding true this year.

Granted it's very early, we're only open on weekends in some warm weather parks but when we have good weather and we see the attendance and when we have good weather we're still seeing spending.

We've guided to be much more conservative in these uncertain times but nevertheless the business is sound.

The business is healthy.

Once we get this balance sheet taken care of this Company will fly.

Right.

I agree with you and just one last question just from a perspective.

I've been in a number of your parks but as many of the guys on the call are close in the New York area.

Where do you rank that Great Adventure park?

You mentioned Magic Mountain is one of your best parks.

Is the Great Adventure in the middle, best, worse, how would you rate that one so we understand the experience on a national level?

Well, we came on three years ago, we internally set up a sort of an in house Oscars if you will.

We wanted to give out kind of national corporate awards for each of our parks every year so we have an off site in January where the senior leaders of the Company come together, senior leaders from each park, we get on the same page, strategy, session, go through the plan, go through the blueprint, talk about what we're doing poorly, talk about what we can do better, talk about what we're doing well, we share best practices, I'm sure you've been through a million of these in your career and we host what we call the Golden Flag Awards which is essentially our Oscars, and we have nominations that come out a month in advance and we give out our awards where people are measured by certain financial metrics but also qualitative metrics, and we have categories ranging from Park President of the year.

to the best park of the year.

to the cleanest park of the year to the best guest service of the year to the best operations team of the year, the best foods team of the year, you name it.

I mean these parks compete and you can imagine how competitive it gets.

So the answer to your question and we give out big trophies, it's a star studded event, full suit and tie you name it.

and the winner last year for the park of the year was Great Adventure, which I take great pride in.

and by the way I don't vote on this, our corporate staff goes out, we do audits and then they vote hidden ballot if you will, and I take great pride in this because I will tell you candidly, this park was in arguably the worst shape of any park we inherited, which is so sad of the value that was destroyed given just the location of the park and the fact that it draws from not only New York, New Jersey, but Philadelphia and Connecticut as well.

This is a park that once did 4 million in attendance in a single year.

I mean when Bob Pitman was running this park, or had the oversight of it, it was one of the best, and I'm proud to say that Mark Caine was the park President there and his team has elevated right back to at least the award gave it the best park in our portfolio.

Okay, so when we go and see that experience, that's how the other parks are being measured against?

No question.

And as an investor or a stakeholder in anyway I'd extend the invitation to meet Mark Caine and have him take you around some of the changes.

Yeah, we've spoken.

The first year of this park, I used to spend people to Six Flags New England when they asked about well, Mark, can we get an idea, what you're doing in the turnaround and what represents your vision?

And I would steer them clear of Great Adventure because Great Adventure needed a turnaround, needed a lot of investment and a lot of training, a lot of hiring and a lot of firing and it took two years, but last year, they just exceptional and that's just going to get better each year.

Great.

Well Mark and Jeff, you guys are doing a great job.

Thanks so much and really my final comment will be I think you being way too generous and passive to the guys at Fidelity.

You should really be much more aggressive.

Thanks, Steve.

The next question comes from the line of Barrett Eynon from Brownstone Asset Management.

Hi.

What's your average ticket price now if you walk up to the gate the day of?

Well, they vary day-to-day if you will.

Excuse me, park to park, excuse me, but it's different depending on what region you go to but with our everyone pays kids pricing, which is how most people buy, online or in market if you will at the grocery store or fast food, we're synced up with $29.99 across-the-board.

Okay and then are there anything you can provide on the reorganization plan?

I know it's preliminary but I keep seeing things come out through the press, I've seen the 85% equity for all of the bond holders but is there anything beyond that you can disclose right now?

Yeah, we really can't.

As I mentioned, we're in the midst of discussions, negotiations, and it just wouldn't be appropriate to comment or to validate what's been reported out there given the position we're in right now but certainly as soon as we have something definitive to say, we'll obviously be out with it promptly.

Okay.

And are asset sales part, I know you aren't going to find any distressed prices, but asset sales, do you still contemplate given the right multiple?

Yeah, asset sales are not part of the equation.

The portfolio of parks that we have right now we're very comfortable with, as you may know when we came on board, since we've come on board we got rid of about 10 parks, non-core parks, got a nice multiple on those parks, almost 11 times, $400 million worth of proceeds, and we're comfortable with the portfolio we have.

We do have excess land but as you know, the real estate market is just not receptive to any sort of value that would make sense for that.

We'll always listen, Barrett.

That's our responsibility but we aren't actively out there pursuing any asset sales.

Okay and then on the sponsorship revenues for '09 did you guys disclose what you expect those to be?

We're going to give you guidance on our Q1 call.

Lou [Coskavalis] and his team are right in the heart of their selling season, renewals and new business, and we'll have a better gauge on where we'll come out on our Q1 call.

Okay.

And then last question, do you expect to be free cash flow positive in '09 given you had a great year last year but it's much more challenging this year do you expect to have the same sort of success?

We're not going to give out the EBITDA guidance just as we didn't last year.

What I would tell you is it's interesting to be in this restructuring phase, yet our business is on the way up.

The momentum is very clear but it's such an uncertain economy, I just honestly couldn't forecast it right now.

We have concerns, there's no question, and that's why our guidance is as flat as it is with regard to in park spending.

Okay but you do expect you said OpEx you have 3% year-over-year?

Right.

We do expect OpEx to be up which obviously last year we had a $30 odd-million reduction in OpEx and this year we're getting hit with primarily non-discretionary items in terms of minimum wage, impact on our pension given what's gone on within the marketplace as well as utility costs, so we got that nut to overcome and at the same time there's uncertainty on both the volume and spending front as we look forward; however to date, things have remained relatively stable on the topline.

Why are utility costs going up?

Well we had multi-year contracts at several of our large parks that were three and four year contracts, so we obviously benefit from those contracts for the last several years and even though this year we expect utility costs to be down from last year these parks were benefiting from a long term contract such that the costs were going to be higher versus the contract rate.

And pension, how much is that going to hurt you this year?

Well it depends on ultimately where the asset values go but we have to fund 75% to the 75% level by September of this year, if you just look at our end of year '08 values that would suggest somewhere close to $5 million to $10 million.

Okay, thank you.

Thank you.

Your next question comes from [John Huang], Trust Company of the West.

Hi guys.

Thanks for taking my question.

I think most of my questions were answered.

Can you just provide a little update on your expansion opportunities into Dubai and Qatar and I guess in light of everything that's going on, what impact if anything that's made on a future opportunity?

Future opportunities?

So far so good, John.

I'm not going to say cross my fingers because luck has nothing to do with this, a lot of hard work has gone into this through Andrew Schleimer and his team, they run our international division and they are out there pounding the pavement.

I've just returned from personally with Andrew a trip, really a four country swing.

First we went to Dubai to meet with our partners there.

No news, I know people are asking and wondering about is the park going to happen or delay and I just want to tell you nothing definitive yet.

We're for sure continuing with the park.

We don't have any definitive delays there yet.

I expect we probably will maybe 12 months or so but nothing definitive yet.

We're still in our design and development phase so no decision really has to be made there yet but I like what I see there, obviously, I mean Dubai has tons of issues, but I like what I see with regard to Six Flags and on Qatar, we're still in our design stage there but I believe that a waterpark theme park and first Six Flags hotel/resort is in the cards for the future after Qatar, we went to South Africa, but we're in discussions on a 250,000 square foot Six Flags complex if you will, also a theme park, hotel and waterpark and I think we'll have something to announce there by the Summer and finally, Korea which is really the most imminent, we're in discussions on a design arrangement for a park in South Korea, not sure if we'll actually end up building it but we're in discussions on closing a contract where we would design a bunch of concepts and they would lock up the Six Flags name for the next 12 months while they try to finish putting the money together to build a park there, so, so far the restructuring conversations haven't had any adverse impact on our international expansion and we're just out there pounding the pavement.

I will tell you of all the parts of our business that's not the most, that's not just the most active but on the most optimistic about that area.

Right.

Okay.

Thank you very much.

(Operator Instructions).

Your next question comes from the line of Howard Bryerman, Evergreen Investments.

Yes, thank you.

Hello Mark and Jeff.

Hello, Howard.

I'm sure you guys are working with restructuring experts who understand financial engineering much better than I do, and maybe this is a naive question but the 8 7/8 which seems to be the problem security here and I'll make the assumption that that is the hurdle that you're trying to get over in terms of getting an out of court restructuring complete, is only $131 million and it's apparently callable so whoever this Manager is, why not just, I realize it's expensive and this Manager probably bought these things cheap, but why not just circumvent them completely and I realize you'll have to burn some cash, maybe you could even get some assistance from, in terms of capital contribution from some of the people you're negotiating with, why not just take the 8 7/8 in and move around this guy and move--

For $0.20 on the dollar?

Pardon me?

For $0.20 on the dollar?

No.

They are currently callable.

Obviously there's a windfall here.

Howard that was really my answer.

Howard, we've got--

Mark, just one question.

If you're confronted with bankruptcy versus moving forward, I don't think you can look at what the market value of your bonds are.

Howard, we've got $870 million of bonds at our parent Company that all rank with that 2010 bond, okay?

They're all trading about $0.20 on the dollar.

It would make absolutely no sense, zero, to spend $130 million of our cash to take out a stub maturity that's trading at $20 million.

It would make absolutely no sense.

We're not going to do it.

Okay, I understand that.

Plus when you say staring at restructuring of this nature, Howard, I'm just curious.

Staring at it?

We're in it.

I mean we're in it.

When you get headlines the way we're getting, we're being forced into this position.

We shouldn't even be seeing headlines like this.

Our 10-K should have read very differently.

We've been at this for a long time.

There's a lot of games, I can imagine, who knows what it is, bluffing, negotiating I'm not sure but at this point, it's absurd given what would happen not just to us but to the 2010 in an in court process.

Can you buy bonds in the open market?

Do you have the latitude to do that?

No.

Okay.

I mean, I'm just, I realize what I'm saying and I realize what you're looking at, it just seems that the headlines always seem to be binary.

It's restructuring or bankruptcy which to me is it's not that black and white, but anyway, I mean you made your point.

You explained why you're not going to go after these.

Yes.

Liquidity is key too for us.

Yeah, I hear that too.

All right, because to reiterate Steve's comments and not to stroke you too much, but it's clear, you guys have done a phenomenal job on the operating side of it.

It's just time to get the capital structure fixed and moved on already, and--

I'm in.

All right.

And one kind of pat on the back for Mark Caine who I've met a number of times.

He's done a great job.

He's a phenomenal manager, he's done a great job.

I'm not going to be able to fit his head into the park after this call.

It's great.

Thank you.

All right I wish you guys luck.

Thanks Howard.

Appreciate it.

Thank you.

There are no other questions at this time.

I would like to hand the call to Mark Shapiro for closing remarks.

I want to thank everyone for joining us and we will not only make ourselves available today and of course the coming days but we will keep you abreast as timely and candidly as things play out.

Have a great week.

Thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Have a great day.